copyright © 2019 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: aurelija.burinskiene@vgtu.lt use of dynamic regression model for reduction of shortages in drug supply aurelija burinskienė* vilnius gediminas technical university, vilnius, lithuania received 2 october 2019; accepted 19 november 2019 abstract. the study is given to the use of dynamic regression model for reduction of shortages in drug supply: purpose – the use of a dynamic regression model to identify the influence of lead-time on the reduction of time delays in drugs supply. to reach the goal, the author focuses on the improvement of drugs availability and the minimisation of time delays in drugs supply. research methodology  – the application of dynamic regression method to minimise shortage. the author suggests a dynamic regression model and accompanies it with autocorrelation and heteroskedasticity tests: breush-godfrey serial correlation lm test for autocorrelation and arch test for heteroskedasticity. findings – during analysis author identifies the relationship between lead-time and time delays in drugs supply. the author delivers a specific regression model to estimate the effect of deterministic lead-time on shortage. probability f and probability chi-square of this testing show that there is no significant autocorrelation and heteroskedasticity. research limitations  – the research is delivered for a one-month time frame. for the future, the study could review other periods. the author has incorporated the lead-time component in shortage reduction study by leaving capacity uncertainty component unresearched. the future studies could incorporate both elements into shortage reduction case analysis. practical implications – presented framework could be useful for practitioners, which analyse drug shortage reduction cases. the revision of supply time table is recommended for pharmacies aiming to minimise the shortage level. originality/value – the analysis of deterministic lead-time and identification that the periodicity of shortage is evident each eight days. the study contributes to lead-time uncertainty studies where most of the authors analyse the stochastic lead-time impact on shortages. keywords: supply, shortage, drugs, delays, regression, causes. jel classification: c20, l65. business, management and education issn 2029-7491 / eissn 2029-6169 2019 volume 17 issue 2: 218–231 https://doi.org/10.3846/bme.2019.11297 https://doi.org/10.3846/bme.2019.11297 https://creativecommons.org/licenses/by/4.0/ mailto:aurelija.burinskiene@vgtu.lt business, management and education, 2019, 17(2): 218–231 219 introduction shortages of medicines put patients at risk to get the most efficient health improvement. it is crucial to ensure the rights of patients and patients’ accessibility to health care, the right of access to preventive health care and the right to benefit from medical treatment. each of the national health systems of the eu countries manifests quite different realities concerning patients’ rights. however, there are political, economic, historical, environmental and other reasons causing shortage. the disruption of supply has negative impact for all supply chain actors. many pharmaceutical manufacturers import raw components from india, china and europe. if some of these foreign suppliers have supply disruption (newman, 2016) due to political, economic, historical (coomber, moyle, & south, 2016), environmental issues, this could cause shortage. delays in the supply of raw materials lead to overcrowding on the production when raw materials are received. for economic reasons, manufacturers may reduce their production volumes or cease the production. there are more cases where some manufacturers withdraw drugs from the market because they are less than profitable, or demand is higher than the available capabilities of manufacturer. by stating above mentioned reasons in studies, authors usually face the problem that it is not easy to provide solution which could help to minimize the impact on patients. author selects single component for the study and proposes solution for shortage reduction in paper below, which could result into better drug’s accessibility for patients. the study consists of three parts. the first part is dedicated to the literature review and criticality of lead-time as supply parameter. the second part of the paper presents the methodology. it constructs a dynamic regression model. finally, the author applied the proposed regression model. a case study is presented here and options for shortage reduction. the results showed the tendencies of shortage cases appearance and bring a solution for their minimization. 1. literature review there are many inventory policies, but these do not consider supply constraints. in the literature, shortage causes are analyzed under the models dedicated to various activities: collection, production, inventory and delivery. a review of contemporary literature in the area of operations research and management science was presented by snyder et al. (2016). their study focuses on supply chain disruptions and models present in the literature. authors snyder et al. (2016) review 180 papers on the topic and identify five categories affecting supply disruptions: inventory, flexibility, sourcing, facility location, and interaction with partners. some of these causes are presented below (see table  1). most of them are linked with distribution factors or human work aspects. the models presented in the literature seek to plan an inventory considering internal supply parameters such as capacity and lead-time. several forms of supply uncertainty are discussed by researchers. there are models with supply uncertainty, which include different period versions: single-period and multi-period. 220 a. burinskienė. use of dynamic regression model for reduction of shortages in drug supply there are models considering uncertainty, where demand is stochastic but is having continuous distribution. other models assume probability that a supplier delivers the order with the highest reliability. when a supplier is unreliable, the disruption affects the lead-time  – if disruption occurs with a fixed probability, the standard lead-time is increased by a stochastic delay. when likelihood is random, i.e. the quantity delivered or produced is a random variable, i.e. the supply quantity depends on order quantity. researchers focus on probability, and they identify that the current period is influenced by supplier performance in the previous period. models with capacity uncertainty are treating capacity as a random variable, which is independent of order quantity. for supply uncertainty analysis, authors, which are identified in table 1, use linear regression, simulation techniques, markov process, bayesian model and other methods (azghandi, griffin, & jalali, 2018). in these models, regression results are often transmitted directly into causal analysis or causal implications (e.g., searching for improvement of overall outcome). the authors point the attention that some studies with multiple regression analysis, had table 1. a literature review on shortage causes shortage causes models authors production lead-time the stochastic aggregate production planning model mirzapour al-e-hashem, baboli, and sazvar (2013) nonconforming items stochastic integrated manufacturing and remanufacturing model with a shortage moshtagh and taleizadeh (2017) supplier fault a deteriorating item inventory model with a shortage rau, wu, and wee (2004) lack of integration in planning integrated production and maintenance planning model with time windows and shortage najid, alaoui-selsouli, and mohafid (2011) a decision was taken by a single supply chain partner an integrated inventory model for deteriorating items under a multiechelon supply chain rau, wu, and wee (2003) incoordination three-echelon supply chain model heydari, mahmoodi, and taleizadeh (2016) inventory management vendor managed inventory of multi-item economic order quantity model under shortage nia, far, and niaki (2014) bullwhip effect information hub model lee and whang (2000) expiration of products an inventory model for deteriorating items with expiration dates tiwari, cárdenas-barrón, goh, and shaikh (2018) complexity in perishable supply chain quantitative models in the blood supply chain osorio, brailsford, and smith (2015) limited warehouse space optimal lot-sizing model of integrated multi-level multi-wholesaler supply chain hoseini shekarabi, gharaei, and karimi (2019) business, management and education, 2019, 17(2): 218–231 221 multicollinearity which appeared due to high correlations among independent variables and led to unreliable results (schmitt, kumar, stecke, glover, & ehlen, 2017). among supply uncertainty topic, researchers investigate lead-time uncertainty and capacity uncertainty due to the modelling and managerial differences between them, as first one focus on period aspects and the second one – the lack of resources. below author is presenting the analysis of lead-time component for drug shortage reduction. author has selected single component for empirical research as very important component to be studed. 1.1. a lead-time component in shortage studies lead-time plays a vital role in many areas, including the drug supply chain. the time component is investigated by authors lacerda, xambre, and alvelos (2015), rivera and chen (2007), dinis-carvalho et al. (2015), cuatrecasas-arbos, fortuny-santos, and vintro-sanchez (2011) as a critical operational profile. lead-time uncertainty represents stochasticity in order processing. these authors analyse lead-time (or time from order-to-delivery) component of different nature: as stochastic, flexible, random, and randomly interruptible lead-time. paul and venkateswaran (2017) analysis lead-time component in drug production. there are studies, which focus on lead-time fluctuations, for example, those, which pay attention to ripple effect (sawik, 2017). the lead-time component could be classified into two types: 1. stochastic lead-time means that lead-time is a random variable; 2. deterministic lead-time means that lead-time is fixed. many authors study the drug inventory problem with stochastic lead-time. the authors incorporating deterministic lead-time into their studies, assuming the lead-time is shortlasting. in the study below, the author focusses on the deterministic lead-time case, as the one to which was not given enough attention in previous studies. let’s assume that order is placed at the beginning of the planning horizon (t), and under normal conditions, the supply from the supplier is expected on (t+1), where (t+1) represents lead-time required for production and transportation. this lead-time is the minimum delivery time from the supplier. in unnormal conditions, the maximum delivery lead-time is given for supply. this case of supply is disbalancing products’ demand and leads to a shortage. when a product runs out of stock shortage appears. it is evident that lead-time is strong component in inventory management and ordering. it is vital for ordering cycle time t, which is a period from one ordering point to another ordering point (i.e. time from order-to order). and in case ordering and delivering points are fixed and specified by concrete weekdays, it consists time table. the author in the study is giving attention to existing ordering and delivering time table and its effect on drug shortages. 2. methodology aiming to identify if order and the delivering point is selected correctly, the author investigates the occurrence of shortage. the author performs systematic shortage analysis aiming to 222 a. burinskienė. use of dynamic regression model for reduction of shortages in drug supply identify shortage causes. the shortage of trendline for various products is analyzed, aiming to identify a shortage of days. the author uses period analysis, where each period has n number of order days, m number of delivery days, and z number of drugs availability days. aiming to investigate if supply time table is directly linked with shortage, a dynamic regression method is used. shortly about the method. let’s say that we need to predict x(t+1) given x(t). then the source and target variables will look like as follows (see table 2): table 2. dynamic regression database for t+1 period x(t) x(t+1) 1 2 2 3 3 4 4 5 dataset would look like rolling windows of variables that follow a precedent one in succession (see table 3). table 3. dynamic regression database for periods interval between t-2 and t+1 x(t-2) x(t-1) x(t) x(t+1) 1 2 3 4 2 3 4 5 3 4 5 then, the author uses the transformed dataset to figure out the autocorrelation coefficients from x(t-2) to x(t). the author delivers a regression model, which general formulation is as follows: 0 3 t sh sh t dot dot tsh l dot l= β + θ +β + θ + ε . (1) variables: tsh – a shortage of period t; shl – lags operator for shortages; tdot – delivery on time of period t; dotl – lags operator for delivery on time; shθ – a matrix of coefficients for the lag operator of shortages; dotθ – a matrix of coefficients for the lag operator of shortages; tε – an error term (iid). the dynamic regression has testing statistics: breush-godfrey serial correlation lm test for autocorrelation and arch test for heteroskedasticity. business, management and education, 2019, 17(2): 218–231 223 the application of constructed regression model is revised in the case study analysis, where the ordering cycle time is of 7 days. for the analyse non-prescription drugs are selected. in study case the data is collected from pharma enterprise database and is analysed by calendar days and weekdays. the main data about 235 non-prescription drugs and 10 pharmacies is identified in the study, in such presentation: product id, pharmacy id, supplier id, order day, order quantity, delivery day stated in order, actual delivery day, delivery quantity and quantity in stock at the end of particular day. for the statistical analysis eviews software is applied. 3. results of the research according time table, most of the deliveries are on thursday and friday, and most of the shortage is on monday and wednesday. this inforces the revision of suppliers time table and slight reschedule of delivery days. the average lead-time for products is 4.1 day (see table 4). the number of generated orders per week is 1444 orders (or 6.1 orders per product), and the reliability of suppliers is 97 percentage, i.e. the supply performance of these orders. this shows that the orders are generated continuously, and that the reliability of suppliers is quite high. table 4. lead-time parameters (4 weeks’ time period) number of products generated orders a week average-lead time (from order day to delivery day) reliability of suppliers (quantity delivered vs quantity ordered) 235 6.14 4.1 97 percentage statistical analysis shows that the number of pharmacies facing drug shortage is almost constant. in part of pharmacies which do not receive delivery from a supplier and has no buffer stock, the shortage is evident, and in another part of pharmacies, which have the buffer stock the shortage is not be present. moller’s junior 45 pieces, neuromed 15 tablets (e.g. figure 1), carbon 300 mg 20 tablets (e.g. figure 2), a+e 30 tablets and super validol 60 mg 10 tablets have the same shortage trend at the beginning of the month, and it is evident at the 2nd part of the month, such is not common only for magnis+b6 complex and humer 150 ml cases. there is also systematic shortage, which appears at 2nd and 3rd day of the month for sample products. there is also systematic shortage which increases at 10th day of the month for some products (following are evident in figure 1 and figure 2). moreover, the supplier could revise delivery schedules from the producer as at the same time; various pharmacies struggle with a high level of shortage if they do not have a buffer for problematic products. the author has investigated that ordering cycle time is directly linked with shortages. from table  4 parameters analysis, we could see that minimisation of lead-time, especially at the beginning of the month, is the priority. the highest shortage occurs on weekend days when there are no deliveries from suppliers. in case the supplier is delivering less than ordered, a new order is processed only after one day. 224 a. burinskienė. use of dynamic regression model for reduction of shortages in drug supply the author finds out the probabilities of events: the likelihood that shortage lasts two days is 38.7 percentage. the possibility of delivery is 82 percent on the day of shortage. the probability of facing shortage next day after delivery is 23.4 percentage. below the application of dynamic regression model is provided. the application of dynamic regression techniques gives interesting results. below is the chart presenting values of normalised variables (e.g. figure 3) and main statistics attributes. the correlation coefficient is equal to 0.65, and the r squared of the regression is 0.6. the author delivered a specific regression model, which formulation is: 0 1 1 2 8 3 3 1t t t t t tsh sh sh dot dot− − −= β +β +β +β +β + ε . (2) this dynamic regression delivered results as follows: 1 8 10,095 0,583 0,056 0,148 0,07 t t t t tsh sh sh dot dot− − −= + + + − . (5.69) (19.72) (2.54) (15.61) (–6.7) figure 2. shortage trendline for carbon 300 mg 20 tablets 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% fe b 1 fe b 2 fe b 3 fe b 4 fe b 5 fe b 6 fe b 7 fe b 8 fe b 9 fe b 10 fe b 11 fe b 12 fe b 13 fe b 14 fe b 15 fe b 16 fe b 17 fe b 18 fe b 19 fe b 20 fe b 21 fe b 22 fe b 23 fe b 24 fe b 25 fe b 26 fe b 27 fe b 28 figure 1. shortage trendline for neuromed 15 tablets 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% fe b 1 fe b 2 fe b 3 fe b 4 fe b 5 fe b 6 fe b 7 fe b 8 fe b 9 fe b 10 fe b 11 fe b 12 fe b 13 fe b 14 fe b 15 fe b 16 fe b 17 fe b 18 fe b 19 fe b 20 fe b 21 fe b 22 fe b 23 fe b 24 fe b 25 fe b 26 fe b 27 fe b 28 carbon 300 mg business, management and education, 2019, 17(2): 218–231 225 the equation is presenting t-statistic. the equation shows that if the shortage appears, it lasts for one period more (t+1). the periodicity of shortage is each eight days. having the data starting from monday, the statistical significance of 8th lagged value, which means that shortages occur after each weekend. this is the evidence of not enough supplies that occur periodically. such a period cycle is very closely linked with a delivery time table. the dynamic regression model is presented graphically in figure 4. figure 3. dynamic regression results where: on the x-axis – number of time series, on the primary y-axis (on the left) – delivery in calendar days, on the secondary y-axis (on the right) – the appearance of normalised shortage event figure 4. dynamic regression results where: on the x-axis – number of time series, on the primary y-axis (on the left) – output of regression model, on the secondary y-axis (on the right) – the appearance of shortage event 226 a. burinskienė. use of dynamic regression model for reduction of shortages in drug supply in figure 4, the red line represents the original shortage, while the green line demonstrates the modelled shortage according to the estimated equation; the blue line shows residuals of the dynamic regression model. the author provides also testing statistics for autocorrelation and heteroskedasticity. main tests are provided for autocorrelation analysis – breusch-godfrey, for heteroskedasticity analysis  – arch test and ml arch  – normal distribution (bfgs / marquardt steps) test. probability f and probability chi-square of these testing statistics show that there is no significant autocorrelation and heteroskedasticity. the more detailed results of the dynamic regression analyses are presented in the annex of this paper. the author obtains the evidence that ordering cycle time is directly linked with the number of shortage cases. according to the research results, it is possible to shorten ordering cycle time by one day aiming to reduce the number of shortage cases. author suggests the reduction of ordering cycle time to 6 days, instead of the existing one with 7 days. the provided solution formulation could be treated as shortage research framework evaluating shortage cases. conclusions the case study shows that lead-time component must be revised in drug supply. also, the drug supply chain must be tightened up, as in most of the cases. according to the literature time constrain is main attribute for shortage avoidance. the author researches the lead-time component for shortage reduction purposes. to respond to studies with unsuccessful multi-regression analysis, the author selects dynamic regression technique and constructed the model. the model is applied for pharmaceutical supply chain case study. the case study shows that if shortage appears a day before, then is the probability of 38.7% that it will occur on the next day. the equation shows that on the day of shortage the likelihood of delivery is 82%. which means that those deliveries come at the end of a day not at the beginning thereof and the lead-time between ordering and delivering is too long. if delivery occurs, it diminishes probability on shortage next day by 23.4%. the empirical part of the study confirms a dynamic regression model and proves that time table improvement could help to minimize drug shortages. the performed practical assessment shows that the suggested framework is applicable for the delivery of drug shortage reduction. the findings suggest future research directions. the study results also give insights on the necessity to have more frequent deliveries for products. the action to be taken for supplier time table revision aiming to increase the number of deliveries and minimize shortage at the beginning of the month. also, future studies may include capacity attribute as playing important role for shortage minimization, into these studies. references azghandi, r., griffin, j., & jalali, m. s. 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(2018). joint pricing and inventory model for deteriorating items with expiration dates and partial backlogging under two-level partial trade credits in supply chain. international journal of production economics, 200, 16-36. https://doi.org/10.1016/j.ijpe.2018.03.006 appendix formation of equation (1) https://doi.org/10.1016/j.rcim.2007.02.013 https://doi.org/10.1016/j.omega.2016.07.004 https://doi.org/10.1080/00207543.2016.1249432 https://doi.org/10.2139/ssrn.1689882 https://doi.org/10.1016/j.ijpe.2018.03.006 business, management and education, 2019, 17(2): 218–231 229 analysis of autocorrelation (ac and pac values are lower than 0,1) 230 a. burinskienė. use of dynamic regression model for reduction of shortages in drug supply autocorrelation analysis: breusch-godfrey test heteroskedasticity analysis: arch test business, management and education, 2019, 17(2): 218–231 231 heteroskedasticity analysis: ml arch – normal distribution test this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university on the failure and systemic risk of innovation cluster: copula approach laura gudelytė* department of financial engineering, faculty of business management, vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania received 12 may 2020; accepted 04 september 2020 abstract. in order to assess and parameterize the risk of innovation activity implemented by innovation clusters, it is necessary to determine the reliable tools of measuring of systemic risk. purpose – to propose an adequate approach to evaluate the systemic risk with regard to the impact of interlinkages between cluster entities and other external factors. research methodology – general overview of research papers and documents presenting concepts and methodologies of evaluation of systemic risk and performance of networked structures as approach to evaluate the systemic risk with regard to the impact of interlinkages between cluster entities and other external factors, applied research. findings – it is suggested to develop the further parameterization of intensity. modelling of the tail dependence and asymmetric dependence between pairs of networked positions remains an important task. research limitations – the lack of information concerning the structure and types of interactions and relationship between the members of innovation cluster. there are made some additional assumptions related to reduced-form approach of credit risk modelling. practical implications – proposed conceptual model of evaluation of systemic risk should be useful for understanding and further treatment of measuring risk in a case of innovation management. originality/value – the concept of the measuring the systemic risk in innovation cluster as a joint probability of correlated failure of commercialization of innovative activity results is proposed and analysed in this paper. keywords: correlation, dependence structure, systemic risk, failure. jel classification: d85. introduction the innovation cluster is an entity that unifies different entities to achieve the same goal  – usually successful commercialization of innovations. the meaning of establishing and operating of business clusters creating innovations is based on the synergy effect (for more details, see e.g., valuzis & gudelyte, 2017). business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 1: 24–33 https://doi.org/10.3846/bmee.2021.12708 *corresponding author. e-mail: laura.gudelyte@vilniustech.lt https://doi.org/10.3846/bmee.2021.12708 business, management and economics engineering, 2021, 19(1): 24–33 25 during the assessment of cluster performance and innovative activity it is important to figure out how and whether the right is the result of activity (its compliance to set purposes), and the need to more accurately quantify the level of measurable parameters and to set qualitative settings of creation and deployment of innovations by expert evaluation. on the other hand, the concentration of business entities and production in a certain location per se is not sufficient condition to determine high rates of innovative activity (beaudry & breschi, 2000). the success of commercialization of innovation is impacted by many various factors, some of which are not even observable or known, i.e. a large and unknown complex of uncertainties. as a result, the activities of an innovation cluster are inherently riskier than in a usual business plan. what are the factors that cause problems in the innovation cluster? what is the probability of an innovation cluster collapsing? these issues are important for the analysis of the activities of the individual innovation cluster as well as for the policy of promoting innovation at national level. therefore, quantitative analysis and mathematical methods must be developed, which enable the objects in question to give a specific meaning and produce unambiguous, uniformly understandable and comparable results. a major cause of innovation risk and cluster risk management is the unusually high uncertainty and occurrence of many failures of different business entities, a risk which is linked to the structure of networking and the dependence between failures. innovation cluster as entities that face with high uncertainty as a whole tend toward instability and leads to the concerns of investors about the stability of financial system and risk contagion among cluster, this is due to the fragile nature of their entities (also see, e.g., kleinow & moreira, 2016), complex transfer of technology, inevitably accompanied by information asymmetry, numerous additional risks associated with the demand for the commercialized product, technologies, etc., technological risks (potential competitors create more advanced technology or applied new technologies can be pirated, etc.). in networked structure with intensive collaboration of business entities individual lifetime distributions are affected by the defaults of other entities. the channels of contagion within networked structure create and maintain systemic risk, meaning the danger that an initial shock can be amplified and spread when innovation cluster entities react and further transfer it to other entities within the cluster, so that the total effect proliferates largely from the initial default or another unfavorable shock. these contagion phenomena rely on complex network effects since collaborating entities of innovation cluster are interlinked by their diverse claims with business partners within the cluster and with external entities. on the other hand, the default of one entity puts more stress on the other entities (see also, e.g., guzmics & pflug, 2019). specific sources of systemic crisis within the cluster are failures of separate entities, liquidity crisis and contagion due to interrelationship and collaboration. dependence between failures stems from at least two non exclusive sources. the financial state of a business entity and individual failure in commercialization of innovations varies with randomly fluctuating macroeconomic factors. dependence between the failures of commercialization of innovation exists because different business entities are affected by common macroeconomic factors. correlation of failures with respect to multiple counterparties is highly relevant for the efficiency of performance of innovation cluster and for commercialization of innovation. in addition, management of innovation risk can only be successful if an adequate risk model is 26 l. gudelytė. on the failure and systemic risk of innovation cluster: copula approach in place that can quantify the relevant risk factors. in this paper, the correlation of failures means that all stochastic processes, describing the value of firm’s asset and risky investment value are correlated. the networked structure of innovation cluster implies that dependence between failures is caused by direct and non-direct economic relations between business entities that can lead to cascade of defaults. the impact of the failure of some entity on the conditional failure probability of other cluster entities can arise via different channels (gersbach & lipponer, 2003). in addition, the synergy effect is influenced by the individual links between members of the cluster type. on the other hand, uncertainty implying business risk is not easily explained, it makes sense to apply an intensity function that summarizes the effect of all sheer forces on the innovation cluster. measuring methods based on the elements of graph theory are not sufficient to fully describe the distribution of risk and loss in an innovation cluster. the copula function helps to measure the common level of riskiness of whole innovation cluster and also to characterize the dependence structure of multivariate cases. in this paper, the generalized conceptual framework of the evaluation of innovation cluster performance and ways of assessment of relations within network is proposed. in the first part of the paper, the concept of failure of commercialization of innovation performed by innovation cluster is established, in the second part, the general approach based on copula techniques to describe the joint probability of failure of innovative activity is introduced. 1. concept of the failure of cluster innovative activity one of the most pervasive aspects of the contemporary networked structures is the rich network of interconnections among entities. although the financial liabilities owed by one entity to another one are usually modeled as unidirectional obligations de-pendent on the financial health only, in reality, the liability structure of corporate obligations is invariably much more intricate. assumption that innovation clustering allows intense resource sharing in order to realize complementarity and achieve positive synergy in innovation cluster mean a flexible manufacturing and design of business ideas. usually improvement of quality and sharpened ability to utilize many advantageous conditions of cluster with change of market and appearance of new added value chain become a competitive power and optimal allocation of resource. improving resource utilization efficiency is possible when fully realizing complementarities within cluster. development and coordination among cluster entities, strengthening of complementarities of each company and effective information dissemination and communication can ensure optimal resource sharing, zero inventory and quality management in an all-round way, making more full use of social resource. the other is outsourcing. after comparing internal production and organization expense with market trading cost, guidance of cluster development and division and coordination benefit urge enterprise to outsource part of its own activity to other enterprise and enlarge production scale or lower cost by use of social resource through outsourcing and in such way fully exploit the potential of partners within innovation cluster. in addition, a strong specialization of cluster entity also means that the company assumes a significant risk, because if technology or specialization suddenly becomes unnecessary, then it would either the collapse of that company or the active entities of the cluster. business, management and economics engineering, 2021, 19(1): 24–33 27 assume that the project of innovation commercialization of ith cluster entity matures at time 0it > , 1,...,i n= and is 1min( ,..., )nt t t= the maturity of commercialization of innovation. the behavior of the gap between the value of commercialized innovation and financial liabilities and the risks arising from it can be treated as an option. in this case, the exercise price of an option is understood as the volume of investment. the same benefit structure is typical for european put option at the time of exercise, which is equal to the difference between the market value of the underlying asset and the pre-agreed price, whichever is lower, or zero otherwise: ( ) max( ( ) ( ),0) 0, ( ) ( ); ( ) ( ), ( ) ( ). f t v t d t v t d t v t d t v t d t = − =  ≤   − > (1) the processes of the value of commercialized innovations and attracted investments are stochastic. the commercialization of innovation is considered unsuccessful if the value of the innovation falls below a certain threshold, e.g., the value of invested capital. this threshold can be set in various ways. for example, it is often treated as a measure of the balance sheet liability of a given business enterprise, and the failure corresponds to a state in which the value of the innovation created by the cluster entities becomes less than the capital invested in its creation and commercialization. without losing the generality, assume that the maturity of innovation project is t. if these terms for each business entity were different, they would be correlated to the lowest maturity, and if the borrowing entity repaid it on time, the liabilities of other ones will be executed after the first repayment would be treated as uncorrelated loan. also, if the borrowing business entity were to become insolvent, it would not completely change the nature of the task. in the case of innovation cluster, interest is concentrated on a networked structure of individual companies for each of which there is defined a point event, occurring after some random period. let us introduce a random variable called the time-until-default, to denote this length of time: { } { }inf : ( ) ( ) inf : ( ) ( ) , . , ( ) ( ). , ( ) ( ) i i i i i t v t d t t v t d t v t d t v t d t  = =   τ = τ =   +∞ ≠ +∞ ≠  , (2) where 1 ( ) ( ) n i i d t d t = = ∑ is the amount of investment to the project of commercialization of innovation, 1 ( ) ( ) n i i v t v t = = ∑  – the created value of innovation project (respectively di(t) and vi(t) are the same parameters for ith cluster entity, 1,...,i n= ) that can be characterized by respective geometric wiener processes. this random variable is the basic for the valuation of cash flows subject to failure. the substance of this exercise is to understand the structure of failure of commercialization of innovation. this task can be transformed into an exercise for finding the distribution function of equivalents (in the sense of stopping moments), i.e., the time when the amount of financial liabilities first falls below the value of the business entity’s assets. 28 l. gudelytė. on the failure and systemic risk of innovation cluster: copula approach high stability of networking may be favourable for mutual trust and efficiency of exploitation, but it is not favourable for exploration. it is necessary to maintain variety in order of exploration. wasserman and faust (1994) stated that the performance of enterprises, capture of resources and other actions can be treated as the function where the enterprises lie in the innovation network. following xihong et  al. (2010), different network positions represent different opportunities to acquire new knowledge and resources. owen-smith and powell (2004) also stated that enterprises occupying preponderant network positions can link different network nodes through their positions to acquire resources and control resources. such relevance of business entity in networked structure treated in graph theory terms as centrality in some literature reflects the level of opportunities within cluster and coordination of cooperation. 2. modelling of the probability of failure of cluster innovative activity a suitable risk measure for systemic risk should capture many different facets that describe the importance of a given entity on networked structure (benoit et al., 2013; adrian & brunnermeier, 2011). the suitability of modeling the dependence structures between financial variables using copula models have been recognized by previous studies on several types of dependence such as serial dependence, cross-dependence and cross-interdependence in stock markets (ab razak & noriszura, 2019). systemic risk can occur as a consequence of an aggregate negative shock affecting all entities in the network such as a common exposure to a macroeconomic factor: economic output, unemployment, inflation; or a common exposure to fluctuations in interest rates, foreign exchange rates, drop in market prices, etc. another source of systemic risk is the contagion of financial distress in the system (moussa, 2011). hirshleifer et al. (1994) state that the sequential nature of information arrival has a significant impact on trading decisions. they revealed that investors who receive common and private information before others do, become short-term “profit-takers” and have a tendency to trade the same group of stocks. in addition, on the other hand, analysing another networked structure -banking sector and financial markets, acharya and yorulmazer (2007, 2008) argue that banks have a strong incentive to herd in order to maximize their probability of bail out. this type of behaviour increases the likelihood of a crisis due to systemic risk. contagion and systemic risks provide a natural field for applications of copulas because such topics involve joint and conditional distributions. in a certain sense, contagion is a particular way of analysing dependence (fermanian, 2017). segoviano and goodhart (2009) propose a methodology to capture inter-linkages effects between banks, which is based on a copula formula and it is a non-parametric method, which extracts the link between events rather than predetermining laws of motion. the objective of this methodology is to find the joint distribution, which best fits a prior joint distribution according to the information criteria and is consistent with the probability of distress for each bank. it is possible to treat the activity of an innovation cluster and its value as an investment portfolio behaviour. in this case, similar tasks remain to describe, as closely as possible, the likelihood of success or failure and the relationship between the level of risk and rate of business, management and economics engineering, 2021, 19(1): 24–33 29 return and, finally, the interactions and influence of the components on the final valuation results. which means that the business of a company is affected by business cycles and so on. these models are useful for assessing the credit risk of a loan portfolio  – changing the intensity of corporate insolvency cases makes it easier to model uneven changes in the value of a loan portfolio. reduced models require less information on a firm’s assets and its financial liabilities because they use data available to all market participants, if available in the market. in addition, the reduction model assumes that the structure of financial liabilities is not a continuous process, although debt repayment is an observable process (elizalde, 2006). an important feature of reduced credit risk models is that, in the case of a company’s insolvency, the intensity parameters can change over time, which means that the company’s performance is affected by business cycles and so on. these models are useful for assessing the credit risk of a loan portfolio  – changing the intensity of corporate insolvency cases makes it easier to model uneven changes in the value of a loan portfolio. reduced models require less information on a firm’s assets and its financial liabilities because they use data available to all market participants, if available in the market. in addition, reduced models assume that the structure of financial liabilities is not a continuous process, although debt repayment is an observable process. one of the most important reasons for the application of default models to describe the probability of failure of innovation cluster is the fact that the specification of full joint default probabilities is too complex (schönbucher, 2000). in analysis of the probability of single default the time of default in reduced form models is not determined via the value of the company firm, but it is the first jump of an exogenously given jump process. describing the failure of innovation commercialization aims to establish a generalized parameter for measuring cluster success, i.e. the likelihood that the cluster’s overall commercialization of innovation will reach a certain level (in line with investor expectations) or not. the changes of this indicator could provide more information about innovation cluster performance and its recent developments and probability of default. in that case, it makes sense to run a copula technique. copulas offer economic agents facing uncertainty a powerful and flexible tool to model dependence between random variables and are preferable to the traditional, correlation-based approach (for more details, see giesecke, 2004; kole et al., 2005). copulas are needed to determine the impact of internal and external factors, characterized by a common intensity function, on the overall performance of an innovation cluster. this attempts to establish a generalized parameter for measuring the success of a cluster, i.e. the likelihood that the cluster’s overall commercialization of innovation will reach a certain level (in line with investor expectations) or not. consider the innovation failure times of each cluster member τ1,..., τn as the marginal random variables whose joint distribution function is determined by a copula function. assume that y is a random variable with distribution function f. then u = f(y) is a uniform [0,1] random variable. the probability of failure would be the probability of an event that the random variable τ is less than the investment maturity t: ( )p tτ ≤ . also, there exists an n-dimensional copula c such that 1 1 2 2( ) ( ) ( ( ), ( ),..., ( ))n np t f t c f t f t f tτ ≤ = = , 1 2( , ,..., ) n ny y y r∈ . (3) 30 l. gudelytė. on the failure and systemic risk of innovation cluster: copula approach to estimate a joint probability distribution of failure times, one can start by estimating the marginal probability distributions of individual defaults, and then transform these marginal estimates into the joint distribution using a copula function (neftci, 2001). in addition, if each distribution function fi, i = 1,…, n is continuous, then the copula c is unique (nelsen, 1999). on the other hand, the marginal distribution of the individual failure time τi can be given by following formula: 1 ( ) ( ,,..., ,..., ) ( ,,..., ,..., ) (1,..., ( ),..,1), 1,..., . i i i i i i i i i f t f t p t c f t i n = ∞ τ ≤ ∞ = τ ≤ ∞ τ ≤ τ ≤ ∞ = = (4) the structure of dependence between the marginal distributions related by copula is characterized by the choice of the copula. if one applies the normal copula function, then 1 1 1 1 1 2 2( ) ( ( ( )), ( ( )),..., ( ( )))n n np t f t f t f t − − −τ ≤ = φ φ φ φ , (5) where φn is the n – dimensional normal cumulative distribution function with the respective matrix of correlation coefficients σ and φ–1 is inverse of one-dimensional standard normal distribution. the copula function provides the level of dependence and dependence structure of multivariate cases. also, copulas are invariant to transformations of data (ning, 2010). in addition, copulas ensure the scale-free measures of dependence and the flexibility that it offers in modeling multivariate data allows to separately model the marginal distribution of each variable and the dependence structure. on addition, the copula function can provide tail dependence index and captures the asymmetric dependence which are often created from the fat tail problems in multivariate cases (ab razak & noriszura, 2019). the reduced-form approach models the conditional failure arrival rate per unit time and do not consider the relation between the failure and business entity’s value in an explicit manner. in this class of models the impact of defaults on the default intensities of surviving firms is exogenously specified; the joint distribution of the default times is then endogenously derived. this leads to intuitive parameterization of dependence between defaults (frey & backhaus, 2004). intensity approach introduces correlation in the failures intensities making them dependent on a set of common variables and on a entity-specific factor. the gaussian copula model has been extensively criticized mainly for its inability to generate scenarios with simultaneous failures or failure cluster. several alternatives to the gaussian copula have been suggested in the financial literature: gumbel, clayton, cauchy or t-copula models (moussa, 2011). besides the well-known risk structure determined by the regulators financial sector, there exist additional sources of risk in the innovation industry, namely, higher than usual uncertainty and volatility in an innovative case. this is namely what determines the involvement of venture capitalists and the attitude towards the business they create as a high-risk and fast-growing investment opportunity. all of these risks can, to an appropriate extent, lead to systemic risk in the innovation cluster. on the other hand, common market shocks to balance sheets may exacerbate contagion, thus takes into account common and independent market shocks to balance sheets as well as counterparty risk through mutual exposures. in such cases business, management and economics engineering, 2021, 19(1): 24–33 31 a copula with tail dependence can be applied to determine the joint distribution of market shocks, which allows to generate clusters of large magnitude market shocks. dependence of failures using copulas can be implemented by applying the approach of schönbucher and schubert (2001). their general idea is to link the failure thresholds expressed as uniform [0,1] random variables u1,..., un with a copula. technically it is implemented by combining the pseudo default intensities based on simulation of respective marginal distributions of individuals failures and the copula function with real intensities which links the default thresholds. the difference between pseudo and real intensities means that real intensities, in addition to all the information considered by pseudo intensities, include information about the failure status of all related business entities. the pseudo intensity includes information about the state variables and the failure situation of ith business entity, and only coincides with the “real” intensity in cases of independent failure or when the information of the market is restricted. it is possible to characterize “real” intensity of ith business entity using the techniques of logistic regression (or other discrete choice approach): exp{ ( )} ( ) , 1 exp{ ( )} i i i w x h x w x = + (6) where hi is the intensity function defined for ith cluster entity, ( ) ' ( )i iw x x t= β = 0 1 1( ) ... ( ) ( ), i i i i i m m ix t x t tβ +β + +β + ε 0 1 2( , , ,..., )m′β = β β β β are parameters of regression, 1 2'( ) (1, ( ), ( ),..., ( )) i i i i mx t x t x t x t ′=   – factors of ith cluster entity’s innovative performance, 2( )~ (0, )i i itε φ σ . the parameters governing this hazard rate are inferred from market data. in addition, reduced-form models can incorporate correlations between failures by allowing hazard rates to be stochastic and correlated with macroeconomic variables. to introduce correlation between defaults, one would typically introduce correlation between the intensity processes. however, the problems begin when one attempts to estimate them. these problems are due, in part, to the lack of adequate respective data from which to extract information about the dependence structure of the credit risk of the firms under consideration. within the reduced-form approach, it is possible to define failure dependence applying copulas. following schönbucher and schubert (2001), applying reduced form approach the failure of innovation cluster can be treated as a jump process with an exogenous intensity. various reduced-form models differ from each other in their choices of the state variables and the processes they follow. on the other hand, there are some disadvantages of applying correlation approach: in some situations this is appropriate, however, more often correlation is used in a manner which is inconsistent with its actual meaning. correlation as a measure of dependence does not necessarily uniquely define the joint distribution and can be distorted by outliers and nonlinearities (staudt, 2010). in addition, despite that the correlation coefficient has developed as the most natural measure of dependence and its widespread use, the correlation fails to capture the important tails behaviour of the joint probability distribution (see, e.g., embrechts et al., 2002; bernardi & catania, 2015). 32 l. gudelytė. on the failure and systemic risk of innovation cluster: copula approach conclusions this paper proposes to treat the activity of an innovation cluster and its value as an investment portfolio behavior with respective measuring of risk. the proposed model of assessment of systemic risk is in theoretical exploration stage. the stochastic variable time-untilfailure to define strictly the concept of the failure of innovative activity of innovation cluster is introduced. also, some additional assumptions related to reduced-form approach of credit risk modeling are made. it is possible to characterize intensity functions defining the individual failure by discrete choice approach. on the other hand, the limitations of this analysis may be the object of further research and further improvement (for example, when incorporating the jumps in the value processes). the lack of information concerning the structure and types of interactions and relationship between the members of innovation cluster means that it is necessary to search efficient statistical methods to evaluate parameters of unobservable process. in addition, the proposal to introduce a more general approach of evaluation system of innovation clusters performance and its applications need additional information (in particular – on the cluster of mutual assistance and liabilities). due to the lack of real data, there is no possibility for exhaustive empirical research. the opportunities of parameterization of systemic risk and to create and to generalize compatible dependence structure between innovation cluster entities defining the impact of cooperation relations in networked structure are analyzed in this paper. in the future, it is necessary to develop the further parameterization of intensity. also, due to the problems that cannot be eliminated by application of correlations, modeling of the tail dependence and asymmetric dependence between pairs of networked positions remains an important task. references ab razak, r., & noriszura, i. 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(2010). do entrepreneurial social networks boost enterprise growth? evidence from the pearl river delta in china. frontiers of business research in china, 4(3), 498–513. https://doi.org/10.1007/s11782-010-0108-x https://doi.org/10.1017/cbo9780511615337.008 https://doi.org/10.3390/econometrics5030034 https://doi.org/10.1111/1468-036x.00225 https://doi.org/10.1016/s0378-4266(03)00129-8 https://doi.org/10.1515/demo-2019-0002 https://doi.org/10.1111/j.1540-6261.1994.tb04777.x https://doi.org/10.1016/j.intfin.2016.01.002 https://doi.org/10.7916/d8t159mh https://doi.org/10.1007/978-1-4757-3076-0 https://doi.org/10.1016/j.jimonfin.2009.12.002 https://doi.org/10.1287/orsc.1030.0054 https://doi.org/10.2139/ssrn.301968 http://hdl.handle.net/10419/78427 https://doi.org/10.5089/9781451871517.001 https://doi.org/10.20472/bmc.2017.005.014 https://lib.ugent.be/catalog/rug01:000343905 https://doi.org/10.1007/s11782-010-0108-x copyright © 2020 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18: 1–13 https://doi.org/10.3846/bme.2020.10292 *corresponding author. e-mail: supramono@uksw.edu does tax amnesty influence intention to comply?: if students are taxpayers already theresia woro damayanti 1, pambayun kinasih yekti nastiti 2, supramono supramono 3* 1department of accounting, faculty of economics and business, universitas kristen satya wacana, indonesia 2, 3department of management, faculty of economics and business, universitas kristen satya wacana, salatiga, indonesia received 9 may 2019; accepted 17 december 2019 abstract. purpose – the implementation of the tax amnesty program in indonesia is expected to increase the intention to comply. however, the effectiveness of the program is likely to depend on the intention of taxpayer compliance. the purpose of this study is to examine differences in the intention of taxpayer compliance based on perceived justice and the taxpayer’s attitude of the government. research methodology – primary data was obtained through experimental research involving 117 students who were enrolled in the taxation class. to ensure that participants understand their role as taxpayers in an experiment, a role test is performed and this also acts as a test of internal validity. findings – the results showed that there was a difference in the intention to comply based on perceived justice over the implementation of tax amnesty and taxpayers’ attitudes of government. further analysis indicated that if taxpayers feel justice and have a positive attitude towards the government, it will lead to the highest intention to comply. research limitations – the relationship between the justice variable on tax amnesty and the intention to comply is also possibly influenced by the existence of other variables such as feelings of disappointment. therefore, in the future, it is necessary to do a study involving feelings of distress as a moderating variable in the relationship between justice and tax amnesty to comply. practical implications – the government should continue to improve the performance and taxation system in order to create a positive attitude among taxpayers so that they will eventually comply with their tax obligations. originality/value – there are no previous studies that examined the interaction effect between the perceived justice of tax amnesty and taxpayer’s attitudes towards the government on intentions to comply. keywords: intention to comply, perceived justice on tax amnesty, taxpayer’s attitudes towards the government. jel classification: h26. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bme.2020.10292 https://orcid.org/0000-0002-4065-3562 https://orcid.org/0000-0002-0210-7798 https://orcid.org/0000-0002-2110-0671 2 t. w. damayanti et al. does tax amnesty influence intention to comply?: if students are taxpayers already introduction the issue of factors affecting tax compliance has attracted many researchers. several studies have discovered factors affecting taxpayers’ agreement, which includes income levels, tax rates, audit possibilities (alm et al., 1992). other factors such as respectful treatment of tax offices (feld & frey, 2007), taxpayer attitudes towards taxation systems also affect taxpayers’ compliance. furthermore, it is also influenced by the attitude of taxpayers for treatments by tax authorities (misu, 2011), tax knowledge, educational level, and social groups (engida & baisa, 2014). correspondingly, factors such as government attitudes (damayanti et  al., 2015) and equity perceived in tax amnesty influence taxpayers’ compliance (gerger, 2012; rechberger et al., 2010). many countries, including indonesia, show serious attention regarding efforts to improve tax compliance, one of which is to run the tax amnesty program in 2016. the main purpose of this tax amnesty implementation is to improve tax compliance (laborda & rodrigo, 2003; rechberger et  al., 2010; sari & nuswantoro, 2017). however, the implementation of a tax amnesty that causes a sense of injustice could reduce tax compliance (baer & borgne, 2008; gerger, 2012; saracoglu & caskurlu, 2011). attitudes of injustice in the implementation of tax amnesty are also acknowledged in indonesia (said, 2018). tax amnesty was implemented in indonesia in 2016 preceded by tax payers consultative year in 2015 (tpcy 2015). this program was designed to be followed by law enforcement in 2016. only in the tpcy 2015, the government will provide a policy on the annulment of tax administration fines for taxpayers who have not reported their tax obligations or are willing to correct tax calculation reports. taxpayers who participated in the tpcy 2015 believed that the indonesian government would implement the law enforcement plan in 2016. however, the government decided that tax amnesty applied to all taxpayers including taxpayers who did not participate in the consulting program. the government also agreed that the effective tax rate charged to taxpayers in tpcy 2015 to be higher than at the time of the tax amnesty. injustice from the implementation of tax amnesty could lead to taxpayer disappointment and in turn, will be able to affect the level of taxpayer compliance. tax compliance refers to taxpayers who fulfil their tax responsibilities (güzela el al., 2019). taxpayers compliance also can be understood as a person’s behaviour to comply regarding their tax obligation based on tax law and administration. in a self-assessment system as in indonesia, the intention to comply is regarded as having an essential role in maintaining tax compliance. nurwanah et al. (2018), salman and harjono (2013), sudiartana and mendra (2018) obtained empirical evidence suggesting that the intention to comply has a positive and significant influence on tax compliance. therefore, it is interesting to analyse further the factors that influence the intention to comply in the context of tax amnesty implementation. previous research found that the perceived justice of tax amnesty played an essential role in increasing the intention to comply (rechberger et al., 2010). moreover, the taxpayer’s attitude of the government regarding the use of tax revenue is also likely to affect the intention to comply. does the government use it for development purposes or is it misused? in line with this view, studies conducted by damayanti et  al. (2015) and razak & adafula (2013) showed that taxpayer attitudes on the government played an essential role in increasing the business, management and education, 2020, 18(1): 1–13 3 intention to comply. furthermore, there may be differences in the level of intention to meet based on the interaction between justice and the taxpayer’s attitude of the government. if the taxpayer has the understanding that he has been treated relatively concerning fulfilling his tax responsibilities and the government has used tax revenue as it should, then the taxpayer will likely have a higher intention to comply. however, previous studies have not analysed interactions of the three variables simultaneously (alm et  al., 1992; damayanti et  al., 2015; engida & baisa, 2014; feld & frey, 2007; misu, 2011). this study aims to examine: (a) differences in taxpayer intention to comply based on perceived justice regarding the application of tax amnesty; (b) differences in taxpayer intention to meet based on the taxpayer’s attitude towards the government; (c) differences in taxpayer intention to comply based on the interaction between justice and the taxpayer’s attitude towards the government. the results of this study contribute to filling the gap in previous studies, especially in the interaction between the perceived justice of tax amnesty, the taxpayer’s attitude towards the government and intentions to comply with using an experimental approach. moreover, it also contributes to government policy regarding efforts to increase tax compliance. 1. literature review and hypotheses development 1.1. fiscal psychology theory the fiscal psychology theory was introduced by schmolders (1959). this theory emphasises the lack of motivation to pay taxes because there is no real benefit received by taxpayers from tax payments. the theory combines economic and psychological approaches to explain tax compliance (hasseldine & bebbington, 1991). the procedures reveal economic approaches dominated additional tax compliance factors that previously are. based on these approaches factors such as income levels (misu, 2011), possibilities for auditing (alm & mckee, 2006; palil et  al., 2013; liu, 2014) taxes (palil et  al., 2013; misu, 2011), fines and penalties (liu, 2014; misu, 2011; sanders et al., 2008) influence tax compliance. the economic approach assumes that taxpayers are individuals who seek to maximise their utility. thus, if the benefits received from their tax payment are not proportional to the cost incurred, the taxpayers tend to avoid tax or become non-compliance. however, the fiscal psychology theory provides arguments that taxpayers compliance is not only influenced by the goal of maximising benefits but also by attitudes, behaviours, and beliefs which established as part of the interaction and response to social norms (hasseldine & bebbington, 1991; james and alley, 2002; rousseau & parks, 1993). previous studies found these factors are associated with taxpayer compliance (damayanti et al., 2015; feld & frey, 2007). 1.2. hypotheses development perceived justice is often used to explain taxpayer compliance (engida & baisa, 2014; feld & frey, 2007; misu, 2011; rechberger et  al., 2010). taxpayers are increasingly obedient in 4 t. w. damayanti et al. does tax amnesty influence intention to comply?: if students are taxpayers already paying taxes as long as they feel the existence of justice. however, the existence of a tax amnesty might impair a sense of justice, because compliance taxpayers could feel that they are treated no better than non-compliance taxpayers. the result is in line with saracoglu and caskurlu (2011), suggesting that taxpayers who are compliance taxpayers tend to see tax amnesty as a tribute to tax evaders, which would later affect their compliance. rechberger et al. (2010) examined the attitude of justice after tax amnesty and concluded that if taxpayers have a perceived justice in tax amnesty, then the taxpayers are willing to be more obedient in the next reporting period. conversely, if taxpayers to feel injustice, then it might cause taxpayers to become non-compliant in the next reporting period. observation on compliance behaviour is based on the intention to comply, as one of the elements (nurwanah et al., 2018; sudiartana & mendra, 2018). accordingly, the research hypothesis is: h1: taxpayers who feel justice in the application of tax amnesty will have the intention to comply higher than the taxpayers who feel the injustice feld and frey (2007) suggested that the benefit received by the taxpayers is not only related to the availability, quality, and public services but also about how the tax authorities treat the taxpayers. thus, treatment from the tax office also can be a factor affecting tax compliance. in the meantime, perumal (2008), razak and adafula (2013), saad (2009) identified that one of the variables that affect the intention to comply is the attitude of the taxpayer on the government. similar results by kogler et  al. (2013), turner (2005) showed that tax compliance is more influenced by taxpayers‘ confidence in government, particularly concerning the taxation system. furthermore, taxpayers believe in government will enhance voluntary to comply. nevertheless, taxpayers will tend to avoid paying taxes if they have a negative attitude of the government (richardson, 2008). if the compliance behaviour is based on the intention of taxpayers to comply, the hypothesis is as the following: h2: taxpayers who have a positive attitude of the government will have the intention to comply higher than the taxpayers who have negative attitudes rechberger et  al. (2010) found that understanding justice by taxpayers from tax amnesty has a positive effect on taxpayers’ compliance. similar evidence also put forward by baer and borgne (2008) and saracoglu and caskurlu (2011). the results of the study even the taxpayer‘s attitude towards the government can influence taxpayers’ intention to comply (damayanti et al., 2015; perumal, 2008; razak & adalufa, 2013; saad, 2009). the taxpayer’s positive attitude of the tax authorities can encourage taxpayers to be more obedient voluntarily (kogler et al., 2013). the interaction between the perceived fairness of tax amnesty and positive attitudes toward the government is expected to increase tax compliance further. this interaction shows that taxpayers feel justice and trust in the government at the same time. if taxpayers feel that there is justice in the implementation of tax amnesty and have a positive attitude towards the government because they believe the government will manage tax revenue properly, the taxpayers would likely have increasing intention to comply. thus, the next hypothesis is: h3: taxpayers who feel fair about the application of tax amnesty and have a positive attitude of the government will have the highest level of intention to comply. business, management and education, 2020, 18(1): 1–13 5 2. research methods 2.1. experiment design saunders, lewis, and thornhill (2016) revealed that behavioural studies (including tax compliance) are more precisely analysed using experimental methods because they have advantages in terms of high internal validity, the experimenter can accurately detect tax avoidance or compliance (choo et  al., 2016). this research uses an experimental design based on factorial 2 x 2 between subjects. the first factor is the perceived justice in the application of tax amnesty consisting of two levels, taxpayers who feel justice in the implementation of tax amnesty and taxpayers who feel injustice in the program. the second factor is the taxpayers’ attitude of the government which consists of positive and negative attitudes. table 1. experiment matrix attitude of government positive negative attitude of justice in the implementation of tax amnesty feel justice cell 1 cell 2 feel injustice cell 3 cell 4 notes: cell 1: feel justice and positive attitude; cell 2: feel justice and negative attitude; cell 3: feel injustice and positive attitude and cell 4: feel injustice and negative attitude. 2.2. research instrument rechberger et al. (2010) argue that tax amnesty programs relate to retributive justice. a person considers justice by the punishment which is caused by not complying with applicable regulations. however, wenzel (2003) explains that there is a concept of justice that includes procedural, distributive and retributive justice. based on the phenomena that occurred in indonesia with the application of tax amnesty as a substitute for the tax law enforcement year can cause a sense of injustice for taxpayers who have followed the tax consultative year. therefore, the instruments in this study besides involving retributive justice, also encompass distributive and procedural justice. the variable taxpayer’s attitudes towards the government refer to how social groups give appreciation or not to the fundamental tax system (edlund, 1999). the indicator of the taxpayer’s attitude variable to government is modified from damayanti et al. (2015). finally, variable taxpayer compliance intentions can be seen from the three tax compliance criteria, according to brown and mazur (2003). taxpayers will determine the probability (scale 10 to 100) to comply in the next reporting period. indicators of each variable are in table 2. 6 t. w. damayanti et al. does tax amnesty influence intention to comply?: if students are taxpayers already table 2. indicators variables sub-variables indicators attitude of justice distributive justice justice based on equality of the results obtained. procedural justice justice based on process and procedure to achieve an objective. retributive justice justice based on punishment received because of noncompliance. taxpayer’s attitudes towards the government a belief that tax is for national development. a belief that tax payment received is free from tax fraud intention to comply the probability of reporting tax on time. the probability of paying tax liability correctly the probability of paying all tax liability. 2.3. participants participants of this study were bachelor’s degree students enrolled in the taxation class, in the faculty of economics and business of satya wacana christian university, indonesia. students in this class were selected as participants in this study based on the argument that they relatively understood the rules and practices of taxation compared to those who had not taken tax classes. because in the taxation class not only taxes about the laws of the applicable regulations but also cases or practices of taxation in indonesia and other countries so that they are expected to be able to express their opinions or provide an assessment of some matters relating to tax compliance.. internal validity tests are carried out with performance tests to ensure that participants understand their role as taxpayers in the experiment. in the case of an experiment having high internal validity, student participants and taxpayer participants will have the same response to the treatments given (bloomquist, 2009; alm et  al., 2015). a total of 117 students volunteered to be the participants. the age range of participants was between 18 and 22 years old, and most are 19 years old. as many as 70.9% of participants are women, and the majority of participants have a gpa above 3.0. 2.4. procedures before the experiment, a pilot test was conducted to obtain an experimental rigour instrument. participants were also debriefed by an explanation regarding the purpose and objective of the study. then, to refresh students’ knowledge about tax amnesty, the participant was given material on the implementation of the tax amnesty in indonesia to read for a while. followed by, four modules containing narrative research instruments were distributed randomly to the participants. each participant received a module with the possibility of manipulation, as shown in the experimental matrix, table 1. before receiving manipulation participants were also provided information about its role as a taxpayer and the conditions encountered. to ensure that participants understand their business, management and education, 2020, 18(1): 1–13 7 role as taxpayers in an experiment, a role test is performed and this also acts as a test of internal validity. if the results show high internal validity, student participants and taxpayer participants will have the same response to the experiments given (bloomquist, 2009; alm et al., 2015). a total of 117 participants were divided into four cells, with the number of participants assigned to each cell almost equal, as shown in table  3. participants that understand their role if they were able to answer at least two of the three questions presented correctly. the result showed 100% of participants in each cell following the experiment was declared to have passed the test. for the effectiveness of randomisation, the influence of demographic characteristics on the variable of compliance intention was examined by using one-way anova. the analysis results show age (f-test = 1.053; sig. = 0.414); gender (f-test = 0.696; sig = 0.271) and academic achievement index (f-test = 0.143; sig = 0.784) did not show any significant difference. accordingly, the results of the analysis in the cells will be entirely due to the manipulation of each cell. further tests are conducted to ensure that participants have received sound manipulation through independent sample t-test. then, the taxpayer’s perceived justice manipulation is conducted by positioning the participants as if they evaluate justice on the application of tax amnesty. the information was presented in the module. the attitude of taxpayer manipulation was given through news taxrelated phenomena footage of and government actions that could form a positive or negative attitude of the government. besides, to analyse the association with mandatory compliance intentions, participants were asked to provide an assessment concerning the three statements as indicators for intention to comply. finally, the participants were requested to give an evaluation related to the manipulation by giving a score of 10 to 100. table 4 shows that the group who felt justice has a higher intention to comply score than the group who felt injustice. likewise, the group with positive attitudes of the government has a higher average intention to comply score than the other groups. with a significance level of less than 5%, the results showed that the perceived manipulation of justice over the application of tax amnesty and the attitude of the government successfully implemented. table 3. participants distribution and the test result cell justice felt on the implementation of tax amnesty attitude of the government number of participants number of participants passed the test n % n % 1 2 3 4 1 justice positive 30 25.64 30 100 2 justice negative 30 25.64 30 100 3 injustice positive 29 24.79 29 100 4 injustice negative 28 23.93 28 100 total participant 117 100 117 8 t. w. damayanti et al. does tax amnesty influence intention to comply?: if students are taxpayers already 3. results and discussion 3.1. results this section presents results from data analysis. the differences in the intention to comply with justice in the implementation of tax amnesties could be determined by comparing the scores of intentions to abide by those who feel justice and who feel injustice. table 5 shows the mean score of participants’ intentions who felt fairness is 81.47. this score is higher than those who felt injustice in the implementation of tax amnesty, with an average score of intention to comply by 70.56. then the significance test is done through an independent sample t-test. with the significance value of 0.000, this result indicated that there was a significant difference between the intention of participants who felt justice with those who felt injustice in the application of tax amnesty. therefore, the first hypothesis is accepted. the next analysis was to obtain the difference of the perceived effect on the government, by comparing the score of participants’ intention to comply with positive and negative attitude. table  5 shows that the mean score of participants’ intention with a positive attitude of the government is higher, 82.88 than the average score of participants’ intentions with a negative attitude, 69.31. with the signification value of 0.003, the second hypothesis suggesting that positive attitudes toward the government will encourage intention to comply within the next reporting period is accepted. table  5 also shows that the results of the interaction between perceived justice variables and taxpayer’s attitudes towards the government on the intentions to comply. on the table 4. manipulation test for justice and attitude on government results variable average t-test sig justice on tax amnesty implementation justice 77.17 18.426 0.001 injustice 31.58 attitude on government positive 82.37 45.132 0.000 negative 37.24 table 5. hypothesis testing results hypothesis variable compliance rate mean t-test/ f-test sig 1 justice in implementation of tax amnesty justice 81.47 3.385 0.000 injustice 70.56 2 attitude on government positive 82,88 4.836 0.003 negative 69.31 3 interaction of justice in the implementation of tax amnesty and attitude on government justice-positive 87.43 13.447 0.000 justice-negative 74.40 injustice-positive 78.17 injustice-negative 62.68 business, management and education, 2020, 18(1): 1–13 9 one hand, the average score of intention to comply for participants who feel justice in the implementation of tax amnesty, and has a positive attitude, generating the highest value of 87.43. on the other hand, participants who felt injustice and had a negative attitude of the government showed the lowest score of intention to comply (62.68). interaction testing using two-way anova showed significant results (0.000). thus, the third hypothesis is accepted. table 6 shows participants’ intentions who feel justice and have positive attitudes of government (cell 1) differ significantly with participants who feel injustice and have a negative attitude of government (cell 4). however, the results show that there is no significant difference in intentions for a participant who feel justice with negative attitudes (cell 2) with those who feel injustice but have positive attitudes (sig 0.770 > 0.05). further, participants’ intention in cell four, showing the perceived injustice and the negative view of the government is different from the participants in other cells. in summary, table 7 shows the level of intention to comply based on justice in the implementation of tax amnesty and the attitude of the government. 3.2. discussion the experimental results show that if taxpayers feel justice in the implementation of tax amnesty, then it will encourage taxpayers’ intention to comply in the next reporting period. the results are in line with feld and frey (2007), rechberger et al. (2010) concluded that if table 6. results of testing the difference of intention to comply between cells justice-attitude interaction coefficient sig cell 1 justice-positive cell 2 justice-negative cell 3 injustice-positive cell 4 injustice-negative 13.03 9.26 24.75 0.006 0.089 0.000 cell 2 justice-negative cell 1 justice-positive cell 3 injustice-positive cell 4 injustice-negative –13.03 –3.77 11.72 0.006 0.770 0.019 cell 3 injustice-positive cell 1 justice-positive cell 2 justice-negative cell 4 injustice-negative –9.26 3.77 15.49 0.089 0.770 0.001 cell 4 injustice-negative cell 1 justice-positive cell 2 justice-negative cell 3 injustice-positive –24.75 –11.72 –15.49 0.000 0.019 0.001 table 7. summary of the level of intention to comply positive attitude of the government negative justice in the implementation of tax amnesty feel justice high intention to comply moderate intention to comply feel injustice moderate intention to comply low intention to comply 10 t. w. damayanti et al. does tax amnesty influence intention to comply?: if students are taxpayers already taxpayers increasingly feel justice towards the amnesty of tax, then they will be more obedient in the next reporting period. although some studies show that tax amnesty could have implications for decreasing compliance rates of taxpayers (baer & borgne, 2008; saracoglu & caskurlu, 2011). nevertheless, if the application of tax amnesty is made fairly then it can increase taxpayer intentions to comply. the implementation of the tax amnesty in indonesia was less appropriate if it was implemented for the taxpayers who participated in the taxpayers consultative year in 2015 when the government encouraged taxpayers to follow the consultative program and announced that 2016 would be the year of tax law enforcement. however, what happened was not tax law enforcement but the implementation of tax amnesty. if the taxpayers would have known that the tax amnesty program would be implemented, the taxpayers could certainly choose to follow the tax amnesty program rather than the consultative year program. positive taxpayers’ attitude of the government will also encourage their intention to comply. taxpayers’ relationship with tax authorities (government) is no longer a transactional relationship but an emotional relationship. thus, psychological factors contribute to influencing the behavior of taxpayers to comply or not comply. this relationship is following the theory of fiscal psychology and supported by previous research concerning the attitude of the government and taxpayer obedience intentions (damayanti et al., 2015). taxpayer attitudes of government can be influenced by how the system of taxation in a country works. if the taxpayer feels that the tax system is poorly executed, then the taxpayers will tend to avoid paying taxes (richardson, 2008; turner, 2005). on the contrary, if the taxpayer has confidence in the government, then they could comply voluntarily (kogler et al., 2013). the interaction between perceived justice over the application of tax amnesty and attitudes of government was exhibited in this study. taxpayers can have the highest intention to comply, in the condition where the taxpayers feel justice over the application of tax amnesty and having a positive attitude of the government. these results can be interpreted that the intention of compliance will be higher if the taxpayers felt justice in the application of tax amnesty (rechberger et al., 2010) and composed with a positive attitude of taxpayers on the government (damayanti et al., 2015). conclusions this study presents whether the tax amnesty policy is able to increase tax compliance intentions from the perspective of students who will later become taxpayers. in line with the results of previous studies, this study also finds evidence that if students who act as taxpayers feel justice in the implementation of the tax amnesty, then they have higher compliance intentions than the taxpayers who feel the injustice. moreover, taxpayers who have a positive attitude of the government will have the intention to comply higher than taxpayers who have negative views of the government. other findings are complementary to previous research on the effects of interaction between justice and the attitude of the government on the taxpayers’ compliance intentions. taxpayers who feel justice over the implementation of the tax amnesty and having a positive view of the government will show the highest level of intention to comply. business, management and education, 2020, 18(1): 1–13 11 this study implies the tax amnesty in indonesia must be directly followed by law enforcement to provide a deterrent effect for taxpayers who are not compliant after the implementation of tax amnesty policy. the application of the tax amnesty in 2016 could lead to injustice because the government previously planned the year of tax law enforcement. besides, the government needs to improve the performance and tax system to generate a positive attitude from the taxpayers, which would also form a positive attitude in society. the limitation of this study is the relationship between the justice variable on tax amnesty, and the intention to comply is also possibly influenced by the existence of other variables such as disappointment. taxpayers who have participated in the year of taxpayer coaching, they may feel that they are being mistreated by the government with the presence of a tax amnesty policy so that they create feelings of disappointment that can cause them to have no intention to comply. thus, future research can include feelings of distress as a moderating variable in the relationship between justice and tax amnesty to comply. disclosure statement authors declare that they have no competing financial, professional, or personal interests from other parties. references alm, j., bloomquist, k. m. & mckee, m. 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(2003). tax compliance and the psychology of justice: mapping the field. in v. braitwaite (ed.), taxing democracy: understanding tax avoidance and tax evasion (pp. 41–69). ashgate. https://doi.org/10.2308/jata.2008.30.2.1 https://doi.org/10.15294/jda.v9i2.11991 https://doi.org/10.26905/jkdp.v22i2.1561 https://doi.org/10.1002/ejsp.244 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: vaidas.jurkevicius@mruni.eu business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 1: 1–11 https://doi.org/10.3846/bmee.2021.12808 civil liability of companies for anonymous comments posted on their sites: a criterion of potential consequences of liability vaidas jurkevičius *, jūratė šidlauskienė institute of private law, law school, mykolas romeris university, vilnius, lithuania received 24 may 2020; accepted 28 may 2020 abstract. purpose – the purpose of this study is to investigate a criterion of potential consequences of liability of an internet portal for unlawful comments of its visitors and set certain general waymarks, which would apply to cases of this kind. research methodology – the european court of human rights has ruled in four cases (delfi as v. estonia, mte & index v. hungary, pihl v. sweden and tamiz v. the united kingdom) on whether civil liability can be justified to the website operators for anonymous comments made on their portals that violate the right to privacy.  one of the criteria of such evaluation was the possible negative consequences of the civil liability of these entities, but its content and meaning have not been thoroughly studied in the doctrine. therefore the authors analyse the content of this criterion on the basis of a comparative method. taking into account the legal context of this study, specific methods of legal interpretation are used in this article (such as, systemic, teleologic, histrorical). findings – authors conclude that addressing the civil liability of website operators  for damages caused by anonymous comments violating the right to privacy must consider not only the financial, and not only ad hoc, shortand long-term adverse effects of the website operators in general, but the impact of the ruling on the concept of free media and other property and non-material consequences for a democratic society as a whole. research limitations – this article deals with one criteria for the application of civil liability of website operators for the infringement of an individual’s right to privacy by anonymous comments, that is – the possible negative consequences of the civil liability of these entities. that is the continuation of the authors’ research on the topic of website operator’s liability for unlawful anonymous comments. practical implications – the research reveals that the consequences of applying the civil liability to the website operator are conditions for assessment of extent of the already existing civil liability; therefore, the criteria of the consequences that arose and / or could arise to website operator are not to be considered as factors justifying the application of civil liability, but rather as factors determining, i.e. extending or limiting, the extent of civil liability. originality/value – the vacuum of a consistent concept of assessing the behavior of website operators in response to unlawful comments poses a threat not only to the sustainability of website operators as business or public interest entities, but also to the stability of the legal system as a whole. it is therefore important to disclose the content of elements of assessment of the necessity of restricting the freedom of expression of website operators in a democratic society, which are unregulated and formulated only http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 https://doi.org/10.3846/bmee.2021.12808 https://orcid.org/0000-0002-1443-3427 https://orcid.org/0000-0002-8692-820x 2 v. jurkevičius, j. šidlauskienė. civil liability of companies for anonymous comments posted... in the case law of the ecthr, and which have been applied in national courts for horizontal civil liability claims for anonymous comments. there are no previous research that would focus on these issues. keywords: delfi as v. estonia, mte & index v. hungary, pihl v. sweden, tamiz v. the united kingdom, website operator’ liability, liability for anonymous comments, unlawful comments, potential consequences of the civil liability. jel classification: k12, k20. introduction freedom of expression in various international and national legislation – article 10 (1) of the european convention for the protection of human rights and fundamental freedoms (echr), article 11 (1) of the charter of fundamental rights (2016), article 19 of the universal declaration of human rights (2006), article 4 (1) of the republic of lithuania law on public information (1996) – generally defined as the right to freely express one’s opinion, thoughts and beliefs and to freely gather, receive and impart information and ideas. in the modern information society, it is often implemented by publishing anonymous comments publicly and completely freely on various websites. on the other hand, website operators who make them available for publication are simultaneously recognized as exercising their freedom of expression (geiger & izyumenko, 2016). the limits of freedom of expression in private law for both actual commentators and website operators are determined by (in addition to the categories of state security, constitutional order or public protection, territorial integrity, public order, human health and morality which are provided by law and indispensable in a democratic society) the dynamic and multifaceted nature of the right to privacy (oster, 2015), the breach of which may result in civil liability (norkūnas, 2013). increasingly, the right to privacy is violated by the anonymous comments of internet visitors (meškauskaitė, 2015), whose authors cannot be identified (for example, as in the cases of delfi as v. estonia, mte & hungary, tamiz v. the united kingdom) or the cost of finding them is prohibitive (as in the case of pihl v. sweden). thus, victims have started to claim redress for the damage they cause as a result from the generally more easily identifiable and accessible managers of the websites where these anonymous comments are published (even in the united states: sartor, 2017; martin & fargo, 2015; sang & anderson, 2012). however, the managers are not the authors of unauthorized comments (stalla-bourdillon, 2017), and the legislation does not oblige them to monitor all comments posted, which raises the question of when civil liability for anonymous comments infringing the privacy rights of third parties applies specifically may be legally justified for website operators (van der sloot, 2016). neither international or european union law nor the law of individual countries contain any criteria for the application of civil liability of website operators for the infringement of an individual’s right to privacy by anonymous comments. therefore, irrespective of the choice of tort law model, the issue of their civil liability for anonymous comments violating the right to privacy is generally resolving in case-law ad hoc. paradoxically, it is for national courts to balance the rights and obligations of webmasters, internet users and addressees (third business, management and economics engineering, 2021, 19(1): 1–11 3 parties) in a generally acceptable manner under national tort law, otherwise risking breach of international obligations, including the echr. the ecthr, examining in specific cases whether national civil liability claims for anonymous comments made by third parties for breach of the right to privacy of third parties, has struck the right balance between the right to respect for private life and freedom of expression in articles 8 and 10 of the echr evaluates whether the restriction on the freedom of expression of website operators is compatible with the criteria for restricting that freedom set out in article 10 (2) of the echr, that is: (a) does the restriction pursue a legitimate aim; (b) such a restriction is provided for by law; or (c) it is necessary and proportionate in a democratic society. in essence, this means analyzing, in a vertical relationship, whether the state has exercised its discretion in a fair, reasonable and prudent manner in the application of standards consistent with the principles enshrined in article 10 of the echr and in assessing relevant facts. in this category of cases, the ecthr has formulated elements for assessing the necessity of restricting the freedom of expression of webmasters in a democratic society, which have not been directly regulated by law and now are applied in national courts to resolve horizontal civil liability claims against anonymous comments by third parties. in this way, the aspects of proportionality of the restriction of the freedom of expression of website operators in civil law highlighted by the ecthr have become a set of criteria justifying the application of their civil liability for damages caused by anonymous visitors’ comments to third persons. however, civil liability is applied between equal persons and only when all the necessary conditions for its application (unlawfulness, fault, damage and causal relationship between the person’s conduct and the resulting consequences) are established (koziol, 2015; principles, definitions and model rules of european private law, 2009; principles of european tort law, 2005; unification of tort law: wrongfulness, 1998). this raises the question of how the elements of proportionality in restricting the freedom of expression of webmasters as formulated by the ecthr in vertical disputes are to be understood in the context of the civil liability of webmasters for damages caused by anonymous visitors’ comments violating the right to privacy of third persons. the question also arises as to their content from the point of view of civil liability, where the ecthr case-law itself rules for assessing the necessity of restricting the freedom of expression of website operators in a democratic society, if the rules of the ecthr case-law to assess the necessity of restricting the freedom of expression of website operators in a democratic society are too abstract and doctrinally criticized for their lack of legal certainty (van der sloot, 2015; gasser & schulz, 2015; van der sloot, 2016; lavi, 2018). this vacuum of a consistent concept of assessing the behavior of website operators in response to unlawful comments poses a threat not only to the sustainability of website operators as business or public interest entities, but also to the stability of the legal system as a whole. there is still a significant risk that the limits on the civil liability of website operators for the third parties’ privacy violations by anonymous comments on webpages may be set too wide or too narrow each time, thereby violating the balance between the rights to privacy and freedom of expression enshrined in articles 8 and 10 of the echr and the private interests of civil law subjects. it is therefore important to disclose the content of elements of assessment of the necessity of restricting the freedom of expression of website operators in a democratic society, which are unregulated and formulated only in the case law of the ecthr, and which have been applied in national courts for horizontal civil liability claims for anonymous comments. 4 v. jurkevičius, j. šidlauskienė. civil liability of companies for anonymous comments posted... this article is the continuation of the authors’ research on the topic of website operator’s liability for unlawful anonymous comments (šidlauskienė & jurkevičius, 2017; šidlauskienė, 2017; jurkevičius & šidlauskienė, 2018). the object of the article – the judgements of the echr in the cases delfi as v. estonia, mte & index v. hungary, pihl v. sweden and tamiz v. the united kingdom. the aim of this article is to investigate a criterion of potential consequences of liability of an internet portal for unlawful comments of its visitors and set certain general waymarks, which would apply to cases of this kind. 1. criteria formulated in ecthr case law for the liability of website operators for anonymous comments in breach of the right to privacy criteria for assessing the limits of the freedom of expression of website operators for the first time and, at the same time, civil liability for unauthorized comments (or even failure to take preventive measures) by third parties (internet users), have been internationally recognized in the highly-publicized ecthr case delfi as v. estonia in 2013 and 2015. in the present case, the ecthr, relying on delfi as v. estonia slightly modified and adapted the rules on the assessment of restrictions on media freedom in other cases (axel springer ag v. germany (2012) and von hannover v. germany (2012) (no. 2) to the internet space, and for the first time distinguished such an assessment of the proportionality (ie necessity in a democratic society) of the civil liability of an website operator: (a) context of comments, (b) preventive or expeditious removal of comments by the website operator, (c) possibility of genuine commentary liability as an alternative to website operator’s liability, and (d) consequences applicable to website operator in national law. although the ecthr did not justify the choice of these criteria, on june 16, 2013, the ecthr grand chamber by majority (15: 2) upheld the ecthr ruling of october 10, 2013, thereby definitively recognizing that the estonian courts had rightly classified as a journalist the activity of delfi as, and delfi as itself, as publishing comments, and has been subject to proper civil liability for the consequences of a third party’s non-immediate removal of comments of its own initiative. thus, in delfi v. estonia has become the first international case to formulate criteria for limiting the freedom of the website operators of all echr members. at the same time, the criteria for civil liability for the immediate non-removal of anonymous comments that could harm third parties have been developed; this case also became the first legal basis to distinguish such criteria in general. however, just after six months – this is february 2, 2016 – the ecthr for the first time applying the criteria for assessing the civil liability of website operator in delfi as v. estonia (weinert, 2016), in their circumstances in a similar case mte & index v. hungary (magyar tartalomszolgáltatók egyesülete and index.hu zrt v. hungary (2016)), slightly modified and supplemented them. the judgment itself, in addition to the context of the comments, assessed the content of the comments themselves and also distinguished two new criteria for non-comment liability on website operators, namely (a) the behavior of the victim and (b) the consequences of the comment to the victim. in doing so, the ecthr recognized the hungarian courts by failing to strike a balance between the right to freedom of expression enshrined in article 10 of the echr and the right to respect for business, management and economics engineering, 2021, 19(1): 1–11 5 private life enshrined in article 8 of the echr and held that under hungarian tort law, the website operator was unreasonably subject to strict liability. in addition, although the reasoning behind the delfi as v. estonia case was expressis verbis decoupled from websites of a different nature (such as online discussion forums, bulletin boards and others where users can freely post their ideas on any subject without the input of a forum moderator, or social media platforms whose moderator does not provide any content and where the content provider may be an individual who owns a website or blog as a hobby), in mte & index v. hungary the ecthr also assessed the civil liability of mte under public law in accordance with the same criteria. one year later, that is, on 7 february 2017, the rules formulated in the judgments in above mentioned cases (i.e. delfi as v. estonia and mte & index v. hungary) were also used in pihl v. sweden case (rolf anders daniel pihl v. sweden. (2017)), assessing the possibility of a non-commercial website manager being held liable for comments posted after a blog is biased and biased. on september 19, 2017, the criteria justifying the need to restrict the freedom of expression of website operators in a democratic society and, at the same time, the civil liability for the consequences of anonymous comments violating the right to privacy were applied by analogy to tamiz v. the united kingdom case (payam tamiz v. the united kingdom (2017)), which in general analyzed the liability of a potential information society intermediary. thus, while the ecthr supports the interpretation of the criteria for limiting the freedom of expression of the context-sensitive webmaster to make civil liability for anonymous comments, the reasoning behind the delfi v. as estonia case was expressis verbis decoupled from the other nature of webmaster liability, the foregoing, and the fact that the technical means of disseminating information (for example, by television, radio, internet, etc.) does not lead to other forms of protection of individual rights, implies that all of the above criteria apply mutatis mutandis to the liability of various types of webmasters and, by analogy, of intermediary information society service providers or even, as in the lithuanian courts, of factual commentators (judgment of klaipėda regional court of 27 february, 2014, civil case no. 2a-142-538 / 2014). in the light of the continuity of their research, the authors in the following paragraph disclose one of the elements of proportionality in the application of the civil liability of a website operator to the damage caused to a third party by its visitors through unlawful comments: this is the criterion for the consequences of the liability imposed on the website operator by national law which is assesed by the institution of civil liability. 2. a criterion of potential consequences of liability of an internet portal for unlawful comments of its visitors while the doctrine rightly states that changing the behavior of online marketers requires clear standards of good conduct and not responsibility for the actions of visitors to their uncontrolled sites (pappalardo, 2014), even in deontological literature, the behavior of website operators is usually measured from the perspective of consequences rather than from the means through which they are achieved (thompson, 2016). there are two 6 v. jurkevičius, j. šidlauskienė. civil liability of companies for anonymous comments posted... reasons for this: first, website operators are best placed to prevent online malpractice because of their capabilities, and secondly, applying liability to them would help solve the problem of redress (rustad & koenig, 2005a, 2005b). this trend is also reflected in the ecthr case-law that justifies the civil liability of webmasters for the damage caused by anonymous comments – namely, the consequences of civil liability for anonymous comments posted on its web site that infringe the privacy of third parties. from the point of view of civil law, the content of this criterion is examined in individual ecthr cases. in the delfi as v. estonia case, the following property and non-property aspects of the consequences were analyzed in order to assess the possible adverse consequences of the application of civil liability for anonymous comments violating the privacy of third parties to delfi as. the property aspects of determining consequences are: a) absolute amount of compensation for non-pecuniary damage suffered by the victim: eur 320; b) relative amount of compensation applied as a proportion of the sanction to the website manager’s position. delfi as is a professional manager of one of the largest news portals in estonia and therefore such a minor sanction can in no way be regarded as inappropriate for the infringement committed by the ecthr; c) additional operating costs as a result of court decisions. following the ruling of the ecthr, delfi as has set up a special team of moderators to monitor and delete all comments appearing on www.delfi.ee, the cost of which was undoubtedly high (ie additional funds). the property aspects of determining consequences are: d) impact of national court decisions on the business model chosen by the website operator. as a result, delfi as did not change its business model, and during the delfi as v. estonia case before the ecthr, anonymous comments continued to dominate, in the first place, comments from registered users, primarily to readers; e) change in readership (popularity): www.delfi.ee continues to be one of the largest estonian news websites in estonia and so far the most popular with the ever-growing number of comments; f ) following delfi as v. estonia case, the subsequent case law of estonia on the liability of other website operators. later, in estonia, there were other cases that recognized the possibility of civil liability of the website operator for unlawful comments by visitors (judgment of the tallinn court of appeal of 21 february 2012, civil case no. 2-0876058; judgment of the tallinn court of appeal of 27 june 2013, civil case no. 2-1046710). thus, the decisions of other estonian internet portal managers in the delfi as case of national courts and the ecthr did not have any negative consequences. the ecthr, after considering that delfi as had sufficient control over the comments posted on its portal and finding, in accordance with the above criteria, that delfi as was not adversely affected by the estonian courts, found that delfi as recognized an obligation to remove unlawful, hateful, and violent comments are not a disproportionate restriction on freedom of expression. on the other hand, following the ruling on the delfi as v. estonia case, there was business, management and economics engineering, 2021, 19(1): 1–11 7 a debate among scientists about the unjustified imposition of an absolute obligation to monitor all comments that appear (caddell, 2016a, 2016b), for which delfi as was forced to set up a dedicated team of moderators on www.delfi.ee. it has also been feared that this proactive imposition of comment obligations threatens to strike a fair balance between the rights and legitimate interests of online market participants and inevitably leads to private censorship (brunner, 2016; frosio, 2017). paradoxically, a similar obligation imposed on webmasters of the hungarian courts by the judgment in the mte & index v. hungary case was seen as an exaggeration and an infringement of the right to free information sharing on the internet. although in the present case mte and index, which manage the websites, were not ordered to pay non-pecuniary damage, they were ordered to pay the costs, including the costs of the applicant’s representation in court. in the latter case, in assessing the consequences of civil liability for webmasters, the ecthr considered the substantive, negative and decisive effect of the decisions of hungarian courts to be not so much the award of specific redress as the way in which web portals are held liable for the further legal disputes in which damages will already be awarded. the ecthr emphasized in particular the crucial role of the media in a democratic society (as it did in the de haes and gijsels v. belgium case) and noted that the hungarian constitutional court also ruled that the management of internet portals allowing comment without prior editing was a medium for the exercise of freedom of expression. the ecthr noted that the hungarian courts did not assess that the applicants were part of free electronic media and did not analyze how the application of liability to the managers of these two different websites would affect freedom of expression on the internet. thus, according to the ecthr, the imposition of such objective liability on the website operator for the comments of visitors, even without seeking a balance between the rights and obligations of the applicant and the defendants, may have a foreseeable negative impact on the web commenting environment. for example, encouraging the general withdrawal of comments and restricting the exercise of freedom of expression on the internet, which, in the ecthr’s view, could have a direct or indirect negative impact on freedom of expression on the internet, would be extremely damaging to non-commercial websites such as mte. according to the ecthr, the mere fact that, in apportioning the burden of liability, the courts did not even seek a balance of rights and obligations between the plaintiff and the defendants casts doubt on the adequacy of the protection of applicants’ freedom of expression under national law. in pihl v. sweden case, the non-civil liability of the blogging association did not have any negative consequences to it, but the ecthr reiterated its earlier position in the mte & index v. hungary case that liability for third party comments could have adverse consequences for the commenting in internet and thereby reduce enforcement of online freedom. such effects can be particularly damaging to a non-commercial website. in the tamiz v. united kingdom case, google inc. nor did it have any negative consequences, but it is also noted in this case that the crucial role of internet service providers such as google inc. must be taken into account when deciding on civil liability for website operators in order to take into consideration the role of facilitating access to information and debate on a variety of political, social and cultural topics. member states have a wide margin of discretion in this regard in order to achieve a fair treatment of the applicant’s right to privacy under article 8 of the echr and the balance between 8 v. jurkevičius, j. šidlauskienė. civil liability of companies for anonymous comments posted... the right to freedom of expression guaranteed to google inc. and end-users of the internet (this reasoning should be seen as a continuation of the ecthr’s max rufus mosley v. the united kingdom (2011). ecthr in the tamiz v. the united kingdom case, also identified two factors to be taken into account in defining the limits of the state’s discretion in such cases: the nature of the action, including the seriousness of the interference with the right to private life; the existence or absence of safeguards. in summary, in assessing the civil liability of website operators for their comments on third parties’ privacy violations, the ecthr in delfi as assessed the amount of damages awarded to delfi as (eur 320) for non-pecuniary damage. at the time, in the mte & index v. hungary case, while index’s legal status in the latter case was analogous to that of delfi as, the very fact of applying liability was recognized as legally unacceptable and dangerous to freedom of expression. as the fact of applying liability and the extent of liability already applied are not the same, this position of the ecthr does not appear to be consistent and does not explicitly answer the question of whether national courts, when assessing the effects of a decision on the exercise of freedom of expression, should consider the legal consequences of the imposition of liability or its magnitude. however, from the ecthr’s reasoning in subsequent pihl v. sweden and tamiz v. the united kingdom cases, which highlight the potentially negative consequences of third party commentary liability on a non-commercial website and the potential for restricting freedom of expression and reducing the scope for expression, suggest that the ecthr, by analyzing the consequences of civil liability on website operators, focuses in particular on the fact of civil liability for the effects of anonymous comments as (a) a circumstance that may limit freedom of expression and (b) a precedent for future litigation that will address the specific amount of civil liability rather than justification. the foregoing implies that the question of justifying the civil liability of a web portal manager must be weighed against (a) not only the financial and (b) the ad hoc short-term and (c) the long-term adverse effects and (d) the possible effects of the judgment on the concept of free media in general, and other (e) property and non-material consequences for the democratic society as a whole, in particular, which could adversely affect freedom of expression. although this criterion of the ecthr is broadly formulated in public law in its analysis of the proportionality of the application of civil liability to webmasters, whether or not it has been imposed, civil liability in national courts courts dealing with the effects of the right to privacy, despite the fact that the criterion of negative consequences for the webmaster neither confirms nor denies his civil liability and is not related to the fact of civil liability in private law. while making civil liability for website operators responsible for anonymous comments violating the privacy rights of third parties, courts should certainly take into account the potential property and non-property consequences of such civil liability, but because civil matters do not address the question of the expediency and objectivity of statutory regulation, the criterion of the consequences for the website operator of the civil liability for the effects of anonymous comments should be regarded as a condition for assessing the extent of the civil liability that has already arisen and should not be regarded as justifying but extending or limiting its scope. in addition, the principle of disposition, which prevails in civil business, management and economics engineering, 2021, 19(1): 1–11 9 proceedings, requires that website operator should submit a request to take into account the extremely negative consequences of the civil liability. to sum up, the consequences criterion must be interpreted in a broad sense and should be related in general to the justification for civil liability on the part of the website operator for the consequences of anonymous comments (ie the possibility of applying it). at the time, in private law, this criterion due to the principles of civil and civil procedural law (disposition, adversarial, equality of parties, binding only on the parties to the case, etc.) must be interpreted more narrowly and qualify as a factor defining the scope of civil liability. conclusions in assessing whether the liability of website operator for anonymous comments on its website for violation of the privacy of third parties can be justified, it is necessary to consider not only the financial, but also the other ad hoc short and long term negative effects for the individual website operator, also the consequences of this precedent for analogous entities, and the potential impact of the judgment on the concept of free media in general. the other property and non-property consequences for a democratic society as a whole must also be taken into account, in particular with regard to their impact on freedom of expression. public law criteria of the consequences that arise or might arise for website operator civil liability must necessarily be integrated into the civil liability application process. however, it does not deny the existence of civil liability conditions of private law and is not relevant to the fact that a third party is liable to a third party for damages arising from an infringement of their right to privacy by anonymous comments from website visitors. the criterion of the consequences arising from and / or likely to arise from civil liability is to be classified as a condition for assessing the extent of of already existing civil liability. therefore, in civil law, it must be regarded not as justifying the application of civil liability, but as determining its scope – i.e. an expanding or restrictive factor, taking into account the specificities of the regulation of tort law in each individual state. disclosure statement 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(2016). met v hungary: the first european court of human rights ruling on liability for user comments after delfi as v estonia. entertainment law review, 27(4), 135–139. https://doi.org/10.1515/bjlp-2017-0012 https://doi.org/10.1007/978-3-319-47852-4_15 https://doi.org/10.1177/1023263x1602300304 copyright © 2020 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the impact of influencers on the decision-making process regarding the purchase of the brand product lubica gajanova *, jana majerova , margareta nadanyiova department of economics, faculty of operation and economics of transport and communications, university of zilina, zilina, slovakia received 29 april 2020; accepted 14 may 2020 abstract. purpose – the aim of this paper is to study the impact of influencers on the decisionmaking process regarding the purchase of the brand product. research methodology – the method of collecting data through a questionnaire and the contingency analysis to process the data were chosen for this research. findings – the research revealed quite a degree of distrust of slovak consumers in influencer marketing. this may be partly explained by the singularity of slovaks and partly by the limitations of research. research limitations – the limitation of research may be the fact that it is not possible to draw clear conclusions solely from the perspective of consumers because their actual view may differ from reality. to remove limitations of this kind it is advisable to repeat the questioning on another sample of respondents. practical implications – the results are anticipated to enhance and deepen the understanding of previous practice of brand managers. the findings should be beneficial for improving the attractiveness of marketing communication and thus higher competitiveness. originality/value – the research population has been surveyed not only on flat-rate basis because the segments vary significantly in their perception of influencers’ impact. keywords: influencer marketing, brand product, marketing research. jel classification: m31, m37. business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 2: 282–293 https://doi.org/10.3846/bme.2020.12608 *corresponding author. e-mail: lubica.gajanova@fpedas.uniza.sk introduction traditional media still have a strong presence in today’s world. new media, online and digital, are building and strengthening their market position very quickly, especially among the young target group (kicova et al., 2020; kral & janoskova, 2019). the generation will evolve and one day the current young generation will become economically strong. it will be very https://orcid.org/0000-0001-9242-5898 https://orcid.org/0000-0002-9770-2521 https://orcid.org/0000-0002-4379-6972 https://doi.org/10.3846/bme.2020.12608 business, management and education, 2020, 18(2): 282–293 283 important to communicate with this generation in its language and to know its consumer behavior (kicova et  al., 2018). the internet has become an integral part of the daily lives of most people around the world, especially for communication, sharing and searching for information, entertainment, and, last but not least, for shopping (lizbetinova et  al., 2019). due to this fact, online marketing is undergoing constant development. social networks like facebook, instagram and youtube are also evolving, giving everyone the opportunity to share their experiences, ideas or opinions and become a content creator or influencer if they have built their audience, which is not just a narrow circle of friends. by publishing content, these people can influence the opinions of their fans, and it is no wonder that this phenomenon is also noticed by brands that try to reach potential customers and increase the number of relevant potential customers who would buy their product. in today’s very competitive environment it is important to be seen and influencer marketing is one of the innovative effective ways for companies to gain a great competitive advantage (lichtarski & trenkner, 2018). there are many foreign surveys that unequivocally confirm the benefits of influencer marketing (oppenheim, 2016; kirkpatrick, 2016a, 2016b; krasniak, 2016; garcia, 2017; kádeková & holienčinová, 2018; forrester, 2019; influencer marketing hub, 2020). obviously, in the western part of the world the influencer marketing is considered to be one of the most effective extensions of content marketing. this is despite the fact that in the recent past it has experienced busy times with fake followers or misleading covert advertising of influencers. in slovakia, however, we are a bit behind and we can say with certainty that influencer marketing is still in the development stage in our country (content agency, 2020). this situation together with the research results by nielsen admosphere slovakia (2018), showing that almost half of slovak users of social networks identify the influencers’ posts with advertisements as bothering, which was the impetus for our research. the aim of this paper and research is to study the impact of influencers on the decision-making process regarding the purchase of the brand product. an assumption in order to achieve the objective has been established as follows: marketing communication of brand product using influencers is perceived by consumers as more convincing than the marketing communication in its traditional form. for the relevant assessment of the assumption, the data obtained by the questionnaire survey were used, with the help of which the attitudes of slovak customers within the researched issues were ascertained. thus, the determined initial sample (statistics population) may be considered as a limitation of the paper. however, the parochialism of slovaks can be demonstrated only by this form. the outcome of this paper is based on primary data. it may represent another limitation of research. conclusions are deduced only on the basis of the statements of respondents who, according to hendl and remr (2017), for certain reasons may report a partially distorted response. 1. literature review influencer marketing is growing and gaining popularity, and this is reflected in earnings allocated to it. in 2016 the industry was valued at $ 1.7 billion, rising to $ 3 billion in 2017. growth continued in 2018, reaching $ 4.6 billion. for 2019, the market value was $ 6.5 billion. 284 l. gajanova et al. the impact of influencers on the decision-making process regarding... according to the study, the influencers marketing earnings should be as high as $ 9.7 billion in 2020 (influencer marketing hub, 2020). influencer marketing delivers great results. most (55%) of respondents said they have a standalone budget for content marketing. the remaining respondents fund these marketing activities from the general marketing budget by the ad hoc system. almost 79% of respondents intend to spend part of their budget on influencer marketing. two thirds of respondents intend to increase their influencer marketing budgets over the next 12 months, with 17% expecting their budget to remain the same. only 4% of respondents plan to reduce the budget for influencer marketing. of course, not all respondents have control over their budgets, which is likely reflected in a relatively high percentage of those who are unsure how their organizations’ spending will change (influencer marketing hub, 2020). this kind of marketing is so tempting nowadays because thanks to online social networks, everybody, who has an audience that listens to him/her, can become an influencer. marketers, thus, have a choice of a large number of influencers who address different target groups. along with the number of influencers, the number of formats by which companies can reach people has increased (sammis et  al., 2016). in addition, consumers expect a different approach from brands on online social networks. they do not want them to talk to them, but talk with them. they do not want companies to sell something to them, they want to be entertained (levin, 2019; moravcikova & kicova, 2018). and online influencers are ideal for this purpose. influencer marketing also benefits from the fact that people lose confidence in advertising, which is manifested for example by clicking less on banners or skipping advertising videos (sammis et  al., 2016). the average population faces 10,000 advertising messages a day. therefore, people create a certain shield called banner or ad blindness (potter, 2018; rodgers & thorson, 2017). consumers, therefore, not only have less confidence in classical advertising, but have also learned to ignore it or block it directly with tools such as adblock (odabasi, 2019). according to sammis et al. (2016) consumers still believe in recommendations of friends and family. and thanks to the personal approach of online influencers, their audience considers them to be friends. according to the acumen report: constant content research, people aged 13–24 have described youtubers as people who are like them, understand them, have the best advice for them, so people trust them. at the same time, they are not trying to be perfect, they are honest, and have the same interests as them (defy media, 2015). the effectiveness of personal referral was proven by mckinsey research, which shows that sales from this advertising method are twice as high as through a paid campaign. at the same time, consumer recurrence rates are higher, specifically by 37% (wong, 2014). 2. methodology the survey was conducted in december 2019 by means of the cawi method on a representative sample of the slovak population of 470 respondents. the cawi method (computer assisted web interviewing) is interviewing using websites, portals and also emails. the answers are recorded in electronic form, which allows them to be processed quickly and efficiently (kozel, 2006). the size of the representative sample was determined by the following equation: business, management and education, 2020, 18(2): 282–293 285 ( )2 2 1t p p n d α × × − ≥ , (1) where: n – the minimum number of respondents; tα – the critical value of the normal distribution at significance level α = 0.05; p – the likely sample proportion, expressed as a decimal; d – the confidence interval, expressed as a decimal (moravcikova et al., 2017). the confidence level was set at 95%. the critical value of the normal distribution at confidence level α = 0.05 was 1.96. this is based on the fact, that % of the area of the normal distribution is within 1.96 standard deviations of the mean. for those cases where the likely sample proportion was not known, p was set at 50%. the confidence interval was set at 5% (palus et al., 2014). in order to conduct a marketing survey of the impact of influencers on the decision-making process regarding the purchase of the brand product in the slovak republic it is necessary to provide a sample of at least 385 respondents. for the sake of understanding, the terms “influencer” and “traditional advertising” have been defined in the questionnaire to ensure overall validity of the research. the term influencer has been defined as an individual with at least 1,000 followers on a particular social network, blog or other internet social platform. the term traditional advertising was defined as any advertising other than that created by influencers and communicated through their channels. to confirm or refute our assumption, we used a questionnaire to find out consumer attitudes to these assertions: the traditional form of advertising of branded product is trustworthy, advertising of branded product which includes an influencer on social networks instills more confidence than traditional forms of advertising, the traditional form of advertising is more trustworthy if an influencer is part of it. respondents were asked to respond based on a five-point likert scale from strongly agree to strongly disagree. the research population has been surveyed not only on flat-rate basis because the segments vary significantly in their perception of influencers’ impact. thanks to these aspects this kind of knowledge should be beneficial for business practice for improving the attractiveness of marketing communication and thus higher competitiveness (sroka et al., 2014). psychographic segmentation criteria divide consumers into different clusters based on different lifestyles (kotler & armstrong, 2004). lifestyle as one of the characteristics of market behavior can be tracked and analyzed from many different viewpoints, often in combination with other segmentation factors. for purpose of the research we used lifestyle generational market segmentation (michman et al., 2003). understanding generation values and motivations has become essential because each generations is driven by unique ideas about the lifestyle it aspires to (smith & clurman, 1997). each generation represents a different set of unique expectations, experiences, generational history, lifestyles, values, and demographics that influence their buying behaviors. there are many studies, which identify and analyze differences in consumer behavior according to the customer generations (reicher, 2018; mccrindle & wolfiger, 2010; schewe & meredith, 2004; bourcier-bequaert & barnier, 2010; rentz & reynolds, 1991; reeves & oh, 2008; noble & schewe, 2003; sima, 2016; dealmeida et al., 2016; chakraborty & balakrishnan, 2017; diaz-sarmiento et al., 2017). for the purposes of this contribution, respondents are segmented into five classifications by their generational cohort: (the baby boomers; silent generation; generation x; generation y and generation z). 286 l. gajanova et al. the impact of influencers on the decision-making process regarding... contingency analysis was chosen to process the data obtained by the questionnaire. there were also other statistical characteristics used, such as arithmetic mean, modus, median (valaskova & krizanova, 2008). due to the low number of respondents belonging to the category of silent generation and baby boomers, the paper focuses on data only from people who do not belong to these groups. in addition to the percentage comparison in the work, we analyze the data more comprehensively, using an index, an expression that measures each value based on its relative significance to the other values in the table. the index indicates the relative significance of a particular value in a pivot table cell (nij) relative to other cells and the total number of responses (n). the index calculates the weigh that an item contributes to the overall total. the index compares each value to its row total, its column total, and the overall total, using a weighted average (dalgleish, 2007). put simply, the index expresses the degree of protrusion or backwardness in a given sample. that is, how much the index for a particular cell loses to or exceeds number 1. if all values in the pivot table were equal, each value would have an index of 1. if an index is less than 1, itis of less importance in its row and column. if an index is greater than 1, it is of greater importance in its row and column (dalgleish, 2008). the formula for calculating the index is as follows: . . nij n index n j ni × = × , (2) where: nij – frequencies in the pivot table; n – sum of all frequencies in the pivot table; n.j – is sum of frequencies in pivot table rows; ni – sum of frequencies in pivot table columns (dalgleish, 2007). 3. results table 1 provides an overview of the number of responses (n) in a specific target group for a particular item on the likert scale. it also presents the percentage (%) of responses compared to other age groups. data is the respondents’ response to the statement the traditional form of advertising of branded product is trustworthy. table 1. responses to the first assertion (source: author’s compilation) generation x generation y generation z total n % n % n % n strongly agree 6 4% 7 5% 8 5% 21 agree 27 17% 41 27% 44 28% 112 neither agree nor disagree 54 34% 39 25% 65 41% 158 disagree 56 36% 51 33% 29 18% 136 strongly disagree 14 9% 16 10% 13 8% 43 total 157 100% 154 100% 159 100% 470 business, management and education, 2020, 18(2): 282–293 287 generation x disagreed (36%), or were unsure (34%), with the statement that the traditional form of advertising of branded product is trustworthy. a substantial part of generation x agreed with the statement (27%), one third of the respondents expressed disagreement, and one quarter of this generation could not assess the statement. the highest uncertainty rate (41%) and the lowest level of disagreement (18% and 8%) were reported by generation z. table 2 shows the results of the calculated index. table 2. indexes of responses to the first assertion (source: author’s compilation) generation x generation y generation z strongly agree 0.855 1.017 1.126 agree 0.722 1.117 1.161 neither agree nor disagree 1.023 0.753 1.216 disagree 1.233 1.144 0.630 strongly disagree 0.975 1.136 0.894 index greater than 1 is of greater importance in its row and column. according to the results, several evaluations show the relative significance compared to other values and the total number of responses, especially in generation y. the index with the highest value for each generation is highlighted in the table. in this case, these indices correlate with the highest percentages in table 1. table 3 provides an overview of the number of responses (n) in a specific target group for a particular item on the likert scale. it also presents the percentage (%) of responses compared to other age groups. data is the respondents’ response to the statement advertising of branded product which includes an influencer on social networks instills more confidence than traditional forms of advertising. table 3. responses to the second assertion (source: author’s compilation) generation x generation y generation z total n % n % n % n strongly agree 9 6% 12 8% 8 5% 29 agree 22 14% 68 44% 27 17% 117 neither agree nor disagree 18 11% 19 12% 54 34% 91 disagree 82 52% 39 25% 49 31% 170 strongly disagree 26 17% 16 10% 21 13% 63 total 157 100% 154 100% 159 100% 470 generally the respondents responded rather negatively to the claim that they believe in advertising through influencers more than in traditional advertising. in the responses, generations x and y clearly expressed their differing views. generation x contradicts (opposes) the statement that advertising of a branded product instills more confidence than the traditional one (52%). on the contrary, generation y clearly affirms the aforementioned 288 l. gajanova et al. the impact of influencers on the decision-making process regarding... statement (44%). generation z again demonstrates the highest uncertainty rate (34%). table 4 shows the results of the calculated index. table 4. indexes of responses to the second assertion (source: author’s compilation) generation x generation y generation z strongly agree 0.931 1.266 0.812 agree 0.564 1.778 0.679 neither agree nor disagree 0.587 0.632 1.760 disagree 1.447 0.702 0.848 strongly disagree 1.238 0.777 0.981 according the indices the strongest tendency towards a positive opinion was from people of generation y (indices greater than 1 in opinion agree and strongly agree). generation z, compared to the others again stood out in uncertainty to incline to the agreeing or disagreeing answers (index greater than 1 in opinion neither agree nor disagree). the oldest respondents (generation x) had the greatest tendency to a negative response, the index with strong disagreement was the highest (1.447). index greater than 1 (1.238) was also in opinion strongly disagree. in this case, indices also correlate with the highest percentages in table 1. table 5 provides an overview of the number of responses (n) in a specific target group for a particular item on the likert scale. it also presents the percentage (%) of responses compared to other age groups. data is the respondents’ response to the statement the traditional form of advertising is more trustworthy if an influencer is part of it. table 5. responses to the third assertion (source: author’s compilation) generation x generation y generation z total n % n % n % n strongly agree 1 1% 1 1% 1 1% 3 agree 24 15% 22 14% 20 13% 66 neither agree nor disagree 37 24% 33 21% 26 16% 96 disagree 76 48% 68 44% 86 54% 230 strongly disagree 19 12% 30 19% 26 16% 75 total 157 100% 154 100% 159 100% 470 according the number and percentage of responses all generations mostly disagree with the statement that the traditional form of advertising is more trustworthy if an influencer is part of it (generation x – 48%, generation y – 44% and generation z – 54%). table 4 shows the results of the calculated index. in this case indices do not correlate with the highest percentages in table 5. in the context of the complete sample in terms of the index, the options disagree and strongly disagree led in the generation z. in part, this also correlates with the percentage results for generation z. however, there are some inequalities when comparing indices and percentages for the business, management and education, 2020, 18(2): 282–293 289 remaining generations. according the index in table  6, which calculates the weigh that an item contributes to the overall total, generation y shows the highest value for the strongly disagree response, but index values greater than one also occur for other responses on the other side of the rating scale. this suggests inconsistent generation y responses. generation x focused on the neither agree nor disagree option. conclusions research has shown that respondents do not have much confidence in the traditional form of advertising. percent analysis in pivot tables showed that within the whole sample just over 28% of respondents believe in advertising messages. a third expressed their uncertainty, while the remaining 38% disagreed with the statement, that the traditional form of advertising of branded product is trustworthy. the highest level of confidence (33%) was among those interviewed from the z generation, which was confirmed by the index. the results showed that the slovaks believe in advertising in the traditional form much less than the rest of the world according the results of other foreign surveys suggest (nielsen, 2015; herhold, 2017; burstein, 2017). it was also investigated whether the advertising of a branded product, which includes an influencer in social networks, is more trustworthy than traditional forms of advertising. only 32% of respondents agreed with this statement, more than 49% expressed their disagreement, and 20% were uncertain. the most noticeable level of accord was in the y generation. according to theoretical evidence, younger internet users, i.e. generation z, should show stronger confidence in advertising of a branded product, which includes an influencer in social networks (morning consult, 2019). generation z, the youngest respondents, however, were most hesitant with their answers (34%). the results again point to the fact that slovak consumers largely do not trust advertising via influencers. again, this contradicts several world surveys. according to nielsen, 92% of consumers believe recommendations from friends and family over all forms of advertising. advertisers are trying to capitalize on this by communicating their messaging through social media influencers, who are trusted nearly as much as a friend. according to a joint study by twitter and the analytics firm annalect, 56% of users surveyed said they rely on recommendations from friends, while 49% said they rely on influencers (woods, 2016; donovan, 2020). table 6. indexes of responses to the third assertion (source: author’s compilation) generation x generation y generation z strongly agree 0.998 1.017 0.985 agree 1.089 1.017 0.896 neither agree nor disagree 1.154 1.049 0.801 disagree 0.989 0.902 1.105 strongly disagree 0.758 1.221 1.025 290 l. gajanova et al. the impact of influencers on the decision-making process regarding... another intention of the research was to verify whether traditional advertising conveys higher level of trust from the perspective of respondents when a certain influencer appears in it. more or less, all groups have rather negative attitude about the link between the trust in traditional advertising with the influencer. 65% of all interviewees were against the assumption that the traditional form of advertising is more trustworthy if an influencer is a part of it. the least sure of the answers were respondents from generation x. the situation in individual groups can be simply described as follows: distrust ruled the youngest category – generation z. in the y generation there was the greatest positive tendency towards confidence in traditional advertising with the influencer. and the oldest group surveyed reacted largely negatively to the assumption that the traditional form of advertising is more trustworthy if an influencer is a part of it. quite surprising was the response in the youngest age group, where a total of 70% of the respondents were negative towards this assumption. the mentioned results may be justified by the difference of slovaks in the perception of the brand described by kliestikova and janoskova (2017). they say that slovak customer is from the psychological point of view still conservative, with strong tendencies to the historical socio-political heritage and although accelerating globalization and related processes and phenomena, he is not aware of it. this postulate is proven by practice of foreign and domestic brands applying either their original branding patterns or patterns copied from foreign effective practice of brand value building and managing what leads to opposite effect – undesirable decline in brand value. the research in this paper revealed quite a degree of distrust of slovak consumers in influencer marketing. this may be partly explained by the singularity of slovaks and partly by the limitations of the research. the limitation of research may be the fact that it is not possible to draw clear conclusions from the perspective of consumers. the actual view may differ from reality. sometimes it happens that the respondent deliberately conceals or does not admit some facts (hendl & remr, 2017) for various reasons in the questionnaire, even anonymous, which results in an idealized and partially distorted response. to remove limitation of this kind, it is advisable to repeat the questioning on another sample of respondents. the questionnaire survey was conducted only in the presence of a geographically limited population. this was done to find out the parochialism of slovaks, and thus confirm or refute the assumption. from a certain point of view, it may represent another limitation to this paper. it can be removed if the research results will be subsequently verified and compared in an international environment. if these barriers were removed, more accurate results could be achieved. funding this paper is an output of scientific project vega no. 1/0718/18: the impact of psychographic aspects of pricing on the marketing strategy of companies across products and markets. business, management and education, 2020, 18(2): 282–293 291 author contributions lg and jm were responsible for the design of the data analysis. mn executed data collection. lg wrote the original draft and was responsible for analysis and data interpretation. mn reviewed and edited the draft. jm was responsible for project administration. disclosure statement the authors declare no conflict of interest. references 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accepted 26 november 2019 abstract. purpose – the purpose of this study is to analyse the impact of the recent economic crisis on the network topology structure of pakistan stock market. since stock market is considered a core financial market for the development of an economy, it is often used as benchmark to measure a country`s progress. policymakers often forecast tendency of share prices, that is dependent on several foreign and local macroeconomic factors. therefore, the aim of this study is to investigate how rising inflation, higher interest rates, and trade and budgetary deficits affect the network structure of blue-chip 96 companies listed on the karachi stock exchange (kse-100) index of pakistan stock market. research methodology  – this study follows the methodology proposed by mantegna and stanley and uses cross-correlation in the daily closing price of kse 100 index companies to compute minimum spanning tree (mst) structures. additionally, we also apply time-varying topological property of average tree length to extract dynamic features of the mst networks. findings – we construct eight monthly msts that show the instability of the network structure and significant differences in the topological characteristics due to economic crisis of pakistan. furthermore, the time-varying topological property of average tree length reveals contraction of the networks due to tight correlation among stocks. research limitations  – this study focuses on correlation-based network construction of mst. the scope of the study can be widened by constructing partial correlation-based msts and comparison of different networks structures accordingly. practical implications – the network properties and findings of this paper will help policymakers and regulators in setting right policies, regulatory framework, and risk management for the stock market. originality/value  – no previous studies have performed mst based network analysis examining macroeconomic events. therefore, we fill the research gap and thoroughly analyse structural change and dynamics of pakistan stock market during the turbulence of current economic crisis of pakistan. keywords: stock market, minimum spanning tree, network topology, macroeconomic indicators, crisis. jel classification: c18, e44, g19. business, management and education issn 2029-7491 / eissn 2029-6169 2019 volume 17 issue 2: 269–285 https://doi.org/10.3846/bme.2019.11394 *corresponding author. e-mail: bmemon1@yahoo.com; bmemon27@gmail.com http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://orcid.org/0000-0002-0527-302x https://doi.org/10.3846/bme.2019.11394 mailto:bmemon1@yahoo.com mailto:bmemon27@gmail.com 270 b. a. memon et al. network analysis of pakistan stock market during the turbulence of economic crisis introduction stock markets have been considered a significant financial market of a country for centuries. any uncertainties and crisis spreading among these markets exert partial or significant implications on the economy. over the past many decades, the world economy absorbed several crises initiated from financial particularly stock markets (garber, 1990). therefore, regulators and policymakers critically monitor their local stock exchanges in order to take timely actions against any irregularity. there are many factors that drive daily fluctuation in stock prices. among most primary factors that drive daily fluctuations of stock markets are economic and political events (darrat & mukherjee, 1986; kwon & shin, 1999; husain & mahmood, 2001; yusoff, salleh, ahmad, & idris, 2015; sajid nazir, younus, kaleem, & anwar, 2014; yao & memon, 2019). conversely, it is also observed that stock markets are complex in nature and that the investors are not only influenced by direct macroeconomic conditions, external events of financial and economic crisis can exert fear among investors and influence the stock prices (horta, lagoa, & martins, 2014; anagnostidis, varsakelis, & emmanouilides, 2016; jin, 2016; memon & yao, 2019). however, investors are directly affected by country`s macroeconomic determinants, and they take decisions in stock market based on the favourability of economic environment of a country. in this study, we fill the research gap and thoroughly analyse structural change and dynamics of pakistan stock market during the current economic crisis of pakistan. as a result of current economic crisis, pakistan is experiencing a record inflation1 level which is ongoing, and shown an increase from 4.19 in the month of may-2018 to 9.41 in the month of march-2019, presented in figure 1. conversely, a decline in inflation rate boosts investors’ confidence and generates a positive impact on the stock markets (omran & pointon, 2001). 4.19 5.21 5.83 5.84 5.12 6.78 6.5 6.17 7.19 8.21 9.41 0 1 2 3 4 5 6 7 8 9 10 figure 1. monthly inflation rate of pakistan business, management and education, 2019, 17(2): 269–285 271 in addition, government of pakistan took additional measures of pakistan rupee depreciation to curb balance of payment crisis and to maintain its foreign exchange reserves. figure 2 shows monthly trade data and disparity among imports and exports value2 of pakistan. pakistan stock market has been an exceptional emerging market and reclassified as morgan stanley capital international (msci) emerging markets index in month of may-2017. presently, there are 559 companies listed on the pakistan stock exchange3 (psx). the karachi stock exchange (kse) 100 index (comprises top 100 companies) is the benchmark index of psx, representing 85% of the entire stock market capitalisation. since psx stages a vital role for the expansion of the country, researchers in the past have employed various methods to examine the impact of macroeconomic variables on pakistan stock market (see e.g. nishat & shaheen, 2004; sohail & zakir, 2010; shahbaz, 2013; ahmed, vveinhardt, streimikiene, & fayyaz, 2017). however, many studies have adopted network science theories to analyse a complex system such as stock market. these theories unfolds many exciting aspects of stock markets, such as: significant influencers, community detections, forecasting future movements, analysis and prediction of an upcoming crisis, and so on (see e.g. namaki, shirazi, raei, & jafari, 2011; yang, li, & zhang, 2014; creamer, ren, & nickerson, 2013; nobi, lee, kim, & lee, 2014; yin, z. liu, & p. liu, 2017; memon & yao, 2019). in a typical stock market network, stocks are taken as nodes of the network, and their edges are described by pearson correlation coefficient (liu & tse, 2012; kazemilari, mohamadi, mardani, & streimikis, 2019; yao & memon, 2019). we further employ a useful method of minimum spanning tree (mst), a filtering tool of extracting relevant information from a stock market network (mantegna, 1999). network formed through mst is useful in examining topological properties of the network, and is widely applied in numerous areas of scientific investigations, see e.g. portfolio analysis (onnela, chakraborti, kaski, & kertiész, 2002), trade network (maeng, choi, & lee, 2012), systematic risk assessment (song, ko, & chang, 2018), commodity market (lee & nobi, 2018), foreign exchange market (jang, lee, & chang, 2011), and so on. it is due to this interest of scientific community mst serve as a prime network mapping tool, and a useful method for event study (yao & memon, 2019). therefore, this paper focuses on – 1 000 2 000 3 000 4 000 5 000 6 000 exports (value) imports (value) figure 2. monthly trade data of pakistan 272 b. a. memon et al. network analysis of pakistan stock market during the turbulence of economic crisis applying mst method to examine structural change and dynamics of pakistan stock market during economic crisis of pakistan. the remaining paper is structured as follows. section 1 presents relevant literature. section 2 describes the data and methodology of constructing mst. section 3 presents empirical results and discussions. finally, last section concludes the paper. 1. literature review the existing literature offers numerous stock market correlation-based networks to determine its possible structure. the initiating work is suggested by (mantegna, 1999), who presented a filtering tool to examine stock correlation networks called minimum spanning tree (mst). after that, numerous methods have been proposed to study interdependency and dynamics evolution of financial markets, for example, threshold network (ct) (boginski, butenko, & pardalos, 2005), planar maximally filtered graph (tumminello, aste, di matteo, & n mantegna, 2005), etc. (tse, liu, & lau, 2010) studied correlation structure of us stock market by dividing timeline into two periods and found influential role of financial sector for the us stock market, and all stocks obeying a power-law degree distribution. gilmore, lucey, and boscia (2008) applied mst on eu stock markets from the year 1999 to 2006 and found an important central node of french stock market. (gałązka, 2011) formed correlation network of polish stock market, and after applying mst he found few compelling stocks dominating and influencing the entire stock market. previous research on pakistan stock market has applied various methods to investigate the impact of economic factors. for example, butt, ur rehman, khan, and safwan (2010) found influence of major economic factors in influencing stock returns of 32 companies from two industry sectors of pakistan between 1998 and 2008. their results suggested significant influence of major economic factors on industry level in comparison with the firm-level stock returns. besides, they found that pakistan banking sector is more vulnerable to changes in economic variables compared to textile industry sector. finally, their results mentioned that rising inflation rate adversely affects the stock returns of pakistan. ali, rehman, yilmaz, khan, and afzal (2010) explored association among macro-economic indicators of inflation, exchange rate, balance of trade, money supply, and industrial production on karachi stock exchange (kse) index from the period 1990 to 2008. after applying the granger causality test, their results found no causal association among macro-economic indicators and kse. on the contrary, nishat and shaheen (2004) applied vector error correction model and found cointegration and “causal” relationship among macroeconomic factors and pakistan stock prices. additionally, their result also shows inflation as a negative determinant of stock prices in pakistan. however, this study analyses stock market structural change and dynamics during deteriorating macroeconomic indication and economic crisis of pakistan. about country and region-specific economic and political crises, dimitrios and vasileios (2015) constructed correlation threshold network of greek stock market and to study the impact of economic crisis by dividing the timeline into two yearly periods of pre and post-crisis between 2007 and 2012. their results found a weak stock market that can be manipulated by large investors or economic climate. dias (2013) applied mst to examine the impact of the business, management and education, 2019, 17(2): 269–285 273 figure 3. kse-100 index value figure 4. kse-100 index return eurozone crisis and found clear segregation between two groups of countries. radhakrishnan, duvvuru, sultornsanee, and kamarthi (2016) measured the effect of various crises including thai currency and asian financial crisis by comparing correlation-based mst and phase synchronise mst on thai currency and stock market data. their results found lower values of mean distance for both msts during crises. while analysing the impact of brexit on london stock market, yao and memon (2019) constructed a network of ftse 100 index companies, and found stable mst and an expansion in the mst during post-referendum period. all of these studies indicate a thorough examination of stock market structural change and evolution due to events of economic and financial crisis from within or outside world. 2. data and methodology we thoroughly examine the time series of the daily closing prices of 96 companies of pakistan stock market blue-chip index, the karachi stock exchange (kse) 100 index from august 2018 to march 2019. pakistan is going through severe economic crisis post general elections of 2018, due to deteriorating country’s foreign exchange reserves, high inflation, and current account deficits were among few factors accumulating a crisis for pakistan. the international monetary fund (imf) predicted lowest economic growth rates for pakistan4 to 2.4% for the year 2019 and 2.6% until 2023 due to internal macroeconomic, and external challenges. the benchmark kse-100 index value has witnessed a gradual decline specially from may 2018 onwards and presenting a turbulent market index in figure 3. additionally, large fluctuations in the kse-100 market index returns can be witnessed in figure 4, showing sign of economic uncertainty. 274 b. a. memon et al. network analysis of pakistan stock market during the turbulence of economic crisis we select all the top 96 companies of pakistan stock market and build correlation network by applying minimum spanning tree (mst) method on monthly basis. in this way, we construct 8 mst structures and study the dynamic topological evolution of pakistan stock market during the current economic crisis of pakistan. we describe daily closing price of stock returns i to be ( ) ( )( ) ( )( )ln ln 1i i ir t p t p t= − − , here ( )ip t and ( )1ip t − are closing prices of stock i on time t and 1t − . after that, we calculate cross-correlation among all pairs of daily returns of the 96 stocks listed on kse-100 index. the formula of calculating pearson correlation between stocks i and j is given below: ( ) ( )2 2 2 2 i j i j ij i i j j r r r r c r r r r − 〈 〉 = − − . (1) in the above formula, ir and jr are returns of stocks i and j, and ..〈 〉 is the mean of the period under investigation. in the next, we calculate distances among all the pairs of stocks in the correlation matrix, by following (mantegna, 1999; mantegna & stanley, 2000), and in our case the distance matrix of (96×96) can be obtained using following formula: ( )2 1ij ijd c= − . (2) the mst is formed by combining all the stocks in a graph specified by the shortest distance among stocks; then the graph contains 1n − links. we apply (kruskal, 1956) algorithm to an undirected graph ( ), , g n e w= in formation of mst. to analyse the dynamics of mst network, we calculate the size of the tree specified by the average tree length (atl) of the minimum spanning tree. the atl of mst can be calculated as nobi, maeng, ha, and lee (2015): ( ) , 1 mst ij i j l t d n = ∑ . (3) 3. results and discussions this section presents eight msts (figures 5 to 12) of sizeable 96 companies5 listed on the karachi stock index (kse-100) of pakistan stock market. while assessing these msts we can notice that companies working in a similar branch of production tend to cluster. in figure 5, for the month of aug-18 when inflation was 5.84%, we identified one key node of international steels (isl) having 7 number of connections, followed by dg khan cement (dgkc) having 5 direct number of connections. the most influencing node belonging to the engineering sector and cement sector highlight importance of concentration of kse-100 index companies in these sectors during this period. the average correlation among all the stocks during this period remains at 0.127. the minimum distance of 0.411 has been observed between pioneering cement (pioc) and maple leaf cement (mlcf). similarly, the highest distance of 1.125 and subsequent lowest correlation has been observed among shell petroleum (shel) and pak suzuki motors (psmc). business, management and education, 2019, 17(2): 269–285 275 figure 5. mst map of pakistan stock market (august 2018) figure 6. mst map of pakistan stock market (september 2018) 276 b. a. memon et al. network analysis of pakistan stock market during the turbulence of economic crisis figure 6 shows sep-18 minimum spanning the tree of 96 companies of the kse-100 index network. we immediately observe a hub node of fauji foods (ffl) having eight number of direct connections, followed by important node of kohat cement (kohc) with 6 connections. such configuration of mst has been found by several researchers in the past for emerging markets (tabak, serra, & cajueiro, 2010; majapa & gossel, 2016; memon & yao, 2019). additionally, we observe reconfiguration of mst due to replacement of crucial nodes of isl and dgkc and taken over by hub node of ffl. this reconfiguration possibly reflecting varied investor preferences, due to stock market decline. figure 7 shows that during the month of oct-18 the critical node of ffl has dropped from eight number of connections to only one degree of connection, and has been replaced by commercial banks sector node askari bank (akbl) with six degrees of connections, highest in the mst network. during this period, mst presents a tree-like flat structure which is common due to crisis-related shocks where index shades its value (wilinski, szewczak, gubiec, kutner, & struzik, 2014; memon & yao, 2019). the most essential node during this period is askari bank (akbl) having six degrees of connections, followed by five other nodes of allied bank (abl), byco petroleum (byco), dawood hercules (dawh), lucky cement (luck), and mari petroleum (mari) having five degree of connections. hence, mst during the month of oct-18 is more concentrated, having more significant linkages among stocks (brida, matesanz, & seijas, 2016). figure 8 shows the mst structure of pakistan stock market for the month of nov-18. we can observe almost similar configuration in terms of degree of connections. however, key node of commercial banks sector akbl has dropped from six connection to one degree of connection, similar to node ffl in the previous month. the most important node in-terms figure 7. mst map of pakistan stock market (october 2018) business, management and education, 2019, 17(2): 269–285 277 figure 8. mst map of pakistan stock market (november 2018) figure 9. mst map of pakistan stock market (december 2018) 278 b. a. memon et al. network analysis of pakistan stock market during the turbulence of economic crisis of connectivity for the month of nov-18 is bank al-habib (bahl) with six direct connections, followed by four nodes of bank of punjab (bop), international steels (isl), lucky cement (luck), and maple leaf cement (mlcf) having five degree of connections. the lowest distance and maximum correlation during this period are observed between two cement sector nodes of mlcf and dgkc. the mst for the month of dec-18 is presented in figure 9. the kse-100 index value continued to decline during this time period and closed at a low value of 37,066.67 on last trading day of dec-18. similar, reflection has been witnessed in the mst structure that is showing a weak structure during this time. in terms of connectivity, pioneering cement (pioc) remained as key node with six degrees of connections, followed by only three stocks of adamjee insurance (aicl), engro fertilisers (efert), and honda atlas cars (hcar) having five degrees of connections each. it is also observed that significant nodes of commercial banking sector of pakistan are scattered throughout mst and does not form a cluster, such as habib bank (hbl), national bank (nbp), muslim commercial bank (mcb), allied bank (abl), askari bank (akbl) and so on, are connected with companies of other sectors. figure 10 shows a fragile mst structure of pakistan stock market for the month of jan-19. the most important node in the mst is pak elektron (pael) with only five degrees of connections. we observed a significant decrease in the degree of connections per node, and mst again presents a tree-like structure. however, figure 11 shows slight difference in the mst structure, due to an increase in the degree of connections per node, and appearance of key figure 10. mst map of pakistan stock market (january 2019) business, management and education, 2019, 17(2): 269–285 279 figure 11. mst map of pakistan stock market (february 2019) figure 12. mst map of pakistan stock market (march 2019) 280 b. a. memon et al. network analysis of pakistan stock market during the turbulence of economic crisis nodes. the most essential nodes during the month of feb-18 are byco petroleum (byco) and glaxosmithkline consumer health (gskch) belonging to refinery and pharmaceutical sector, both having seven degrees of connections in the mst. simultaneously, lowest distance of 0.257 and highest correlation of 0.967 during this period is observed among cement sector nodes of mlcf and dgkc (similar to nov-18 month). the inflation during the first month of year 2019 was recorded at high level of 7.19%, which continuously climbed and reached the highest level of 9.41% in the month of mar-19. the uncertainty and crisis are well translated given the fragile mst structures of pakistan stock market. the most influential company for the month of mar-19 is karachi electric company (kel) belonging to power generation and distribution sector, directly connecting with 6 other companies in the network, presented in figure 12. moreover, we observed that stocks do not mostly tend to form a cluster, but arbitrarily link with the stocks of other sectors. the frequency of degree distribution of the dynamic msts is presented in figure 13. we observed varied topological characteristics of pakistan stock market in almost all of the mst structures. mainly, there is no single dominant stock, as the configuration of key nodes changes with time. highest connectivity in the mst of a single node is observed during the month of sep-18, but most of the nodes have a degree equals to one and two. this is common phenomena of scale-free networks as described by (barabási & albert, 1999), that have a great extent of nodes with low degrees but limited and few nodes with higher degree of connections. such nodes that have higher degree of connections is referred to as hub nodes. however, appearance of major hub nodes in the pakistan stock market during the current economic crisis of pakistan is not evident, and the structure of pakistan stock market change massively. such phenomena of frequent change in the network structure of stock market are common during the crisis period (nobi et al., 2015). 4. average tree length 0 10 20 30 40 50 60 1 2 3 4 5 6 7 8 f re q u e n c y degree k aug-18 sep-18 oct-18 nov-18 dec-18 jan-19 feb-19 mar-19 figure 13. frequency of degree distribution of dynamic msts business, management and education, 2019, 17(2): 269–285 281 in order to assess the dynamics of pakistan stock market network, the topological property of average tree length (atl) of the eight msts is presented in figure 14. the results show an overall network contraction, with the lowest being in the month of oct-18. however, the atl is recorded at 0.84 during two months of aug-18 and jan-19, in comparison with a shrink in the mst networks for the rest of months. the average atl for all the periods is recorded at 0.79. the lower atl values of pakistan stock market for majority of time represents tight correlation among stocks, which has been observed during economic or financial crises (wang, xie, & stanley, 2018; yao & memon, 2019). the micro and macro-economic indicators of pakistan have witnessed a decline during economic crisis of pakistan, the currency has been devalued exerting chaos among investors, and this behaviour was transmitted to pakistan stock market that resulted in higher correlation among stocks. conclusions in this study, the behaviour of 96 top stocks belonging to kse-100 index of pakistan stock market are thoroughly examined through network analysis approach. by using daily closing prices of stocks, we formed the correlation matrices for eight sub-sample sliding windows. the main aim of this paper was to analyse the impact of economic crisis of pakistan on the network structure; therefore we obtained eight different msts and discussed their properties. we also presented frequency of degree distribution and average tree length of these msts. our results revealed inconsistency in the key nodes of all the msts, and structural change is visible showing sign of severe economic crisis hit for the stock market. the eight key stocks that appeared in the dynamic msts of pakistan stock market with a high degree of connections are isl, ffl, akbl, bahl, pioc, pael, byco, and kel. among these nodes only ffl was connected directly with eight nodes during september, highest degree of connection during entire period of study. therefore, all the msts present tree-like flat structures due uncertainty and panic among investors that lead to varied preferences in their stock positions. 0.84 0.78 0.69 0.82 0.78 0.84 0.74 0.80 0.65 0.67 0.69 0.71 0.73 0.75 0.77 0.79 0.81 0.83 0.85 aug-18 sep-18 oct-18 nov-18 dec-18 jan-19 feb-19 mar-19 figure 14. time-varying average tree length (atl) of msts 282 b. a. memon et al. network analysis of pakistan stock market during the turbulence of economic crisis moreover, stocks from same economic sector do not tend to cluster but connect mostly with stocks of other industry sectors. which is a reflection of different reactions of the stock market participants to the risks posed by negative macroeconomic factors in the form of rapid increase in the inflation level on monthly basis, rupee depreciation, and depleting foreign exchange reserves of pakistan? furthermore, time-varying topological property of average tree length (atl) reveals network contraction and tight correlation among stocks due to economic crisis of pakistan. to sum up, the results show that pakistan stock market remains structurally vulnerable due to economic crisis of pakistan. this vulnerability is mostly a consequence of the reduced investor confidence in the prospects of pakistan’s economy. however, it can be averted by devising policies conducive to sustainable long-term growth that will restore business and consumer confidence, and bring regularity to the stock market. the information about structural changes and topological properties revealed in this study might assist regulators and practitioners in right trading strategies about stock markets formation. further work may explore impact of macroeconomic indicators on the network topology structure of developed country’s stock markets. acknowledgements this work was supported by the national natural science foundation of china no. 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accepted 28 september 2021 abstract. purpose – the article aims at discovering classes and clusters of eu member-states considering their levels of economic development and gender equality to foster the enhancement of eu cohesion policy. research methodology – the methodology includes the grouping by two parameters, economic development and gender equality, and the cluster analysis, the “far neighbor principle”, agglomerative hierarchical classification algorithm and the usual euclidean distance as the distance between objects. findings – there are no gender equality laggards among eu member-states. more developed countries belong to gender equality leaders, while there are two gender equality leaders and one gender equality adopter among transition countries. the group of less developed countries consists of six gender equality leaders and seven gender equality adopters. research limitations – the results of cluster analysis may be impacted by off-shore activity of ireland and luxembourg. practical implications – the eu supranational bodies can use our results to develop more efficient cohesion policy tools to ensure the adherence to the principle of gender equality. originality/value  – the study is a pioneer one in determining nine classes and five clusters of eu member-states considering their levels of economic development and gender equality, as well as in introducing three types of countries depending on their level of gender equality, namely gender equality leaders, adopters, and laggards. keywords: cluster analysis, economic development, eu member-states, gender equality, gdp per capita. jel classification: c38, d63, j16. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2021.15382 https://orcid.org/0000-0002-4360-0933 https://orcid.org/0000-0002-1879-5855 374 o. vinska, v. tokar. cluster analysis of the european union gender equality and economic development introduction ensuring equality between men and women is the eu fundamental value aiming at fostering socioeconomic progress for benefits of all members of the society. as stated in the treaty on the functioning of the european union, integrated european nations strive to eliminate inequalities (european union, 2021) making the eu one of the global leaders in female economic, social and political emancipation. this unique regional block demonstrates a significant progress in unlocking women’s potential. promoting gender equality in europe goes back to the treaty of rome in 1957, which ensured the principle of equal pay for male and female workers for equal work or work of equal value. however, only the adoption of “strategy for equality between women and men 2010–2015”, “european pact for gender equality 2011–2020”, and “strategic engagement for gender equality 2016–2019” gave the additional momentum for ensuring gender equality in eu member-states (jacquot, 2020), but the progress is not homogeneous among them and there are a lot of institutional efforts ahead to reach the universal emancipation of european women. the eu doesn’t have a specialized separate gender equality policy, but it follows the gender equality strategy 2020–2025 aimed at building the union of equality till 2025. the above-mentioned strategy has an integrative approach consisting of intersectionality and gender mainstreaming. the gender equality will be introduced to all spheres of interior and exterior life, common actions and policies of eu member-states and partner countries. therefore, there is a high demand for applied research on issues related to gender equality in terms of determining specialized approach to each country considering its social, economic and cultural peculiarities. our hypothesis is that there is a definite interplay between levels of gender equality and economic development of eu member-states. the novelty of our research resides on the combination of cluster analysis and grouping with developing appropriate classifying terminology for countries of interest. thus, the article aims at discovering classes and clusters of eu member-states considering their levels of economic development and gender equality to foster the enhancement of eu cohesion policy. 1. literature review there is a wide range of publications on gender equality and economic development. for instance, altuzarra et  al. (2021) display the effects of gender gaps in terms of education, labor market and institutional representation on economic growth. they analyze 105 developing countries in 1990–2017 leaving without attention european peculiarities useful for implementing efficient tailor-made policies in this region. mitra et  al. (2015) explored the impact of gender equality on economic growth, namely the role of equality of economic opportunities and equality in economic and political outcomes for economic development. these authors found that economic growth of developed countries result from equality in outcomes, while developing ones mostly depend on gender equality in opportunity. however, some developed countries demonstrate different tendencies, for instance, bulgaria and luxembourg proving the necessity for detailed investigation of eu member-states. kabeer and natali (2013) shed light on asymmetrical inter-influence of gender equality and economic growth showing that gender equality in education and employment business, management and economics engineering, 2021, 19(2): 373–388 375 substantially fosters economic growth, but economic growth by itself doesn’t lead to fast elimination of gender inequality in healthcare, human rights and well-being. it means that governments must focus on gender policy and efficient redistribution tools to ensure equal benefits for women and men. however, such a shift from the meritocratic principle of gender equal opportunities to gender equal results may cause social and political tensions. applying panel data analysis rodríguez (2017) demonstrated that the growing female participation in labor markets has no or little effect on economic development of five latin american countries implicating low productivity of female labor force probably due to comparatively low-productivity sectors of economy or limited amount of countries analyzed. similarly, baerlocher et  al. (2021) did not discover any evidence of economic growth due to high productivity of women engaged in labor markets. using the linear model based on neoclassical production function, these authors suggested that gdp grew only thanks to a greater parcel of working population resulting in a moderate increase of living standards. the limitations of this model include the underestimation of higher employment rates of males compared with female ones, as well as gender gap in education and training. minasyan et  al. (2019) pointed out that there is a positive correlation between gender equality in education, especially initial one, and economic growth. however, borgonovi and han (2021) highlighted the problem of higher fear of failure among female students compared with male ones in developed countries preventing them from selection of certain highly-qualified and accordingly payed occupations that probably partially explains gender pay gaps and the lack of women in stem. rai et  al. (2019) emphasized the importance of including female second shifts at home, namely, house chores and childcare duties ignored by gdp, into un social development goal 8 focusing on productive employment and decent jobs, but economic theory is still in the process of developing adequate methodology for calculating economic value of male and female reproductive inputs that could be to some extent substituted by the government. for example, employing policy modeling and its gender impact, ilkkraracan et al. (2021) discovered that early childhood education and care program in turkey generated over million new jobs (females took 57% of them), decreased female unpaid time in households decreased by one third, and, therefore, resulted in improved living standards of women in general and the ones with small children in particular. the overall positive impact for gender equality was substantial, however, high budget expenses involved make such programs unbearable for many developing countries at least in the nearest future. barth et  al. (2021) used decennial census of the united states and the longitudinal employer household dynamics (lehd) data to show how the gender earnings gap changes considering career advancement within one company and gains changing employers for college educated workers and for those without a degree. they stated that career advancement within one company is the main driver of gender pay gap mainly caused by marriages. therefore, regardless of education, a personal choice of creating a family undermines female careers and leads to the growing gender pay gap. kennedy et al. (2017) proved that there is an interplay between economic prosperity and decreasing the gender wage inequality. using data for labor productivity and wage gap for 1986–2013 in australia, they discovered that the reduction of gender pay gap by 10% results 376 o. vinska, v. tokar. cluster analysis of the european union gender equality and economic development in 3% increase in per capita output emphasizing the economic efficiency of eliminating gender pay gap. shehu et al. (2017) observed that that poor economic conditions hit women harder than men, e. g., us companies tend to provide lower compensations for women compared to men during harsh economic conditions with the exception of ceos treated equally regardless of gender. moreover, brzezinski (2021) demonstrated that pandemics affected women more than men causing the increase in gender inequality, especially in terms of employment rates. finally, kovalenko and töpfer (2021), using us data for 1979–2019 and structural vector auto-regression model to analyze the cyclical dynamics and gender pay gap, showed that gender pay gaps are diminished by bargaining power in the short-run period and technology shocks in the medium-run one. however, they found a link between the decrease in gender pay gap and increase in unemployment rates. it is worth mentioning, that innovations and technology shifts could also increase the gender pay gap. for example, aksoy et  al. (2021) found out that robotization in analyzed 20 european countries enlarges earnings of employees of both genders, however it increases the gender pay gap due to the gender composition of the workforce, namely men accounting for the lion’s share of employment in stem. analyzing the efficiency of introducing student loans in chile to fight labor market gender disproportions, didier (2021) argued that this funding tool increased female labor market participation and lowered gender pay gap, but intensified the glass ceiling raising the actuality of further research of expediency of implementing gender quotas to shatter the glass ceiling. morsy (2020) used the world bank global findex database for 141 countries considering ownership structure of banks and variables on gender gaps such as gender gap in education, income, and labor market participation to disclose conditions of limiting the access to finance for women. the worst situation is observed in countries where there is an insignificant share of foreign banks, prevalence of state-owned banks, non-transparent credit information and huge gender gaps in education. dheer et  al. (2019) stressed the importance of female business contribution to the economic growth, but noticed that women are less likely to create a new business, because of social and cultural peculiarities regarding understanding of the essence of masculinity and femininity, as well as traditional institutions preventing from equalizing opportunities. 2. methodology considering findings presented in the publication of vinska and tokar (2017) focused on gender gaps in economic opportunities and participation in the eu, we would like to determine groups of eu member-states in terms of levels of gender equality and economic development using the gdp per capita at current market prices in euros in 2016–2020, as well as the level of gender equality evaluated by the gender equality index developed by the european institute for gender equality [eige]. the eige fosters the pursuing the gender mainstreaming. it arranges gender equality training, assesses policies and actions via prism of their gender impact, advances institutional business, management and economics engineering, 2021, 19(2): 373–388 377 transformation towards gender inclusiveness, provides guidance on gender equality in academia and research (helping to develop gender equality plans in research organizations), assists the european and national parliaments in making their procedures gender sensitive and makes sure that gender budgeting is one of the priorities in management of the eu funds. its significant expertise was used to develop the gender equality index, which is an important tool for countries’ bench-marking on their levels of gender equality. the eige provides researchers with valuable statistical data for conducting investigations and enables policy makers to use research findings for fine-tuning measures on ensuring gender equality. moreover, european union intends to launch annual monitoring of gender equality based on the data withdrawn from the gender equality index. the gender equality index consists of six core main domains each in its turn including several indicators (european institute for gender equality, 2021): 1. work – participation, segregation and quality of work; 2. money – financial resources, economic situation; 3. knowledge – attainment and participation, segregation; 4. time – care activities, social activities; 5. power – political, economic, social; 6. health – status, behavior, access. firstly, for further elaboration of recommendations aimed at tackling the gender gaps problem in europe, we use the eu nuts classification of more developed, transition and less developed regions (eurostat, 2021) and adapt it to determine groups of the eu member-states considering the level of gender equality assessed by the gender equality index: – gender equality leaders – countries with the level of gender equality more than 90% of the eu average; – gender equality adopters – countries with the level of gender equality ranging from 75% to 90% of the eu average; – gender equality laggards – countries with the level of gender equality less than 75% of the eu average. secondly, we apply the “far neighbor principle” of cluster analysis and the microsoft excel data mining add-in for conducting computations. we use the agglomerative hierarchical classification algorithm. we will take the usual euclidean distance as the distance between objects: ( ) ( )2i, j i,l j,ip x = x x−∑ , (1) where: l – attributes; k – number of attributes. the combination of two above-mentioned methods provides new opportunities for the eu member-states and supranational policy-makers to implement the union of equality by 2035 via developing more tailor-made programs. moreover, it is appropriate to expand this approach to the global context including advance and developing nations all over the world applying similar indices’ databases for calculations, for instance, the global gender gap index. 378 o. vinska, v. tokar. cluster analysis of the european union gender equality and economic development 3. results cluster analysis table  1 indicates that the average growth of gdp per capita at current market prices in eu member-states equaled 11.6% in 2016–2020. ireland showed the maximum relative increase – 29.1%, while greece, italy, spain, and sweden experienced decline. table  1. gdp per capita in eu member-states at current market prices in 2016–2020, in euros (own calculations based on source: eurostat, 2021) period 2016 2017 2019 2020 average change, % ranking austria 40920 41990 44780 42300 42498 3.4 6 belgium 37960 39130 41460 39110 39415 3.0 9 bulgaria 6820 7400 8780 8750 7938 28.3 27 croatia 11170 11920 13340 12170 12150 9.0 25 cyprus 22230 23410 25270 23400 23578 5.3 14 czech republic 16790 18330 21140 20120 19095 19.8 18 denmark 49420 51140 53370 53600 51883 8.5 3 estonia 16670 18130 21220 20440 19115 22.6 17 finland 39580 41080 43510 42940 41778 8.5 7 france 33430 34250 36140 34040 34465 1.8 10 germany 38070 39440 41510 40120 39785 5.4 8 greece 16170 16470 17110 15490 16310 –4.2 19 hungary 11830 12960 14950 13940 13420 17.8 23 ireland 57020 62550 72260 73590 66355 29.1 2 italy 28210 28940 29980 27780 28728 –1.5 11 latvia 12940 13890 15900 15430 14540 19.2 22 lithuania 13560 14950 17470 17510 15873 29.1 21 luxembourg 93930 95170 102200 101640 98235 8.2 1 malta 23190 25010 26920 24630 24938 6.2 12 netherlands 41590 43090 46880 45870 44358 10.3 5 poland 11110 12170 13900 13640 12705 22.8 24 portugal 18060 19020 20800 19660 19385 8.9 16 romania 8630 9580 11510 11290 10253 30.8 26 slovakia 14920 15540 17220 16770 16113 12.4 20 slovenia 19590 20820 23170 22010 21398 12.4 15 spain 23980 24970 26430 23690 24768 –1.2 13 sweden 46990 47730 46390 45850 46740 –2.4 4 average 27955 29225 31615 30584 29845 11.6 x business, management and economics engineering, 2021, 19(2): 373–388 379 table  2 shows that the level of gender equality in eu member-states increased by 4.7 points in 2010–2018. table  2. levels of gender equality in eu member-states in 2010–2018 (own calculations based on source: european institute for gender equality, 2021) period 2010 2012 2015 2017 2018 average change ranking austria 58.7 61.3 63.3 65.3 66.5 63.0 7.8 12 belgium 69.3 70.2 70.5 71.1 71.4 70.5 2.1 6 bulgaria 55 56.9 58 58.8 59.6 57.7 4.6 16 croatia 52.3 52.6 53.1 55.6 57.9 54.3 5.6 22 cyprus 49 50.6 55.1 56.3 56.9 53.6 7.9 23 czech republic 55.6 56.7 53.6 55.7 56.2 55.6 0.6 20 denmark 75.2 75.6 76.8 77.5 77.4 76.5 2.2 2 estonia 53.4 53.5 56.7 59.8 60.7 56.8 7.3 18 finland 73.1 74.4 73 73.4 74.7 73.7 1.6 3 france 67.5 68.9 72.6 74.6 75.1 71.7 7.6 5 germany 62.6 64.9 65.5 66.9 67.5 65.5 4.9 11 greece 48.6 50.1 50 51.2 52.2 50.4 3.6 27 hungary 52.4 51.8 50.8 51.9 53 52.0 0.6 26 ireland 65.4 67.7 69.5 71.3 72.2 69.2 6.8 7 italy 53.3 56.5 62.1 63 63.5 59.7 10.2 13 latvia 55.2 56.2 57.9 59.7 60.8 58.0 5.6 15 lithuania 54.9 54.2 56.8 55.5 56.3 55.5 1.4 21 luxembourg 61.2 65.9 69 69.2 70.3 67.1 9.1 9 malta 54.4 57.8 60.1 62.5 63.4 59.6 9.0 14 netherlands 74 74 72.9 72.1 74.1 73.4 0.1 4 poland 55.5 56.9 56.8 55.2 55.8 56.0 0.3 19 portugal 53.7 54.4 56 59.9 61.3 57.1 7.6 17 romania 50.8 51.2 52.4 54.5 54.4 52.7 3.6 25 slovakia 53 52.4 52.4 54.1 55.5 53.5 2.5 24 slovenia 62.7 66.1 68.4 68.3 67.7 66.6 5.0 10 spain 66.4 67.4 68.3 70.1 72 68.8 5.6 8 sweden 80.1 79.7 82.6 83.6 83.8 82.0 3.7 1 average 59.8 61.0 62.4 63.6 64.5 62.2 4.7 x applying by analogy the nuts approach (eurostat, 2021) we receive the following groups of eu member-states considering gdp per capita and levels of gender equality (table 3). 380 o. vinska, v. tokar. cluster analysis of the european union gender equality and economic development table 3. groups and classes of eu member-states considering gdp per capita at current market prices in 2016–2020 and applying nuts classification approach (own calculations based on source: eurostat, 2021) eu memberstate ratio of gdp per capita to the eu average one, % type ratio of a level of gender equality to the eu average one, % type class austria 142 more developed country 101 gender equality leader 1 belgium 132 more developed country 113 gender equality leader 1 bulgaria 27 less developed country 93 gender equality leader 7 croatia 41 less developed country 87 gender equality adopter 8 cyprus 79 transition country 86 gender equality adopter 5 czech republic 64 less developed country 89 gender equality adopter 8 denmark 174 more developed country 123 gender equality leader 1 estonia 64 less developed country 91 gender equality leader 7 finland 140 more developed country 118 gender equality leader 1 france 115 more developed country 115 gender equality leader 1 germany 133 more developed country 105 gender equality leader 1 greece 55 less developed country 81 gender equality adopter 8 hungary 45 less developed country 84 gender equality adopter 8 ireland 222 more developed country 111 gender equality leader 1 italy 96 more developed country 96 gender equality leader 1 latvia 49 less developed country 93 gender equality leader 7 lithuania 53 less developed country 89 gender equality adopter 8 luxembourg 329 more developed country 108 gender equality leader 1 malta 84 transition country 96 gender equality leader 4 netherlands 149 more developed country 118 gender equality leader 1 poland 43 less developed country 90 gender equality leader 7 portugal 65 less developed country 92 gender equality leader 7 business, management and economics engineering, 2021, 19(2): 373–388 381 eu memberstate ratio of gdp per capita to the eu average one, % type ratio of a level of gender equality to the eu average one, % type class romania 34 less developed country 85 gender equality adopter 8 slovakia 54 less developed country 86 gender equality adopter 8 slovenia 72 less developed country 107 gender equality leader 7 spain 83 transition country 111 gender equality leader 4 sweden 157 more developed country 132 gender equality leader 1 table 4 contains 9 potential classes of eu member-states depending on combination of their types of economic development (gdp per capita at current market prices) and level of gender equality. table 4. classes of eu member-states considering gdp per capita at current market prices and levels of gender equality (own elaboration) class number and title gdp per capita gender equality amount of eu member-states 1 more developed countries gender equality leaders 11 2 gender equality adopters 0 3 gender equality laggards 0 4 transition countries gender equality leaders 2 5 gender equality adopters 1 6 gender equality laggards 0 7 less developed countries gender equality leaders 6 8 gender equality adopters 7 9 gender equality laggards 0 however, there are only 5 classes determined according to our calculations. moreover, there are no gender equality laggards among eu member-states. more developed countries belong to the group of gender equality leaders. there are 2 gender equality leaders and 1 gender equality adopter among transition countries. finally, we see 6 gender equality leaders and 7 gender equality adopters among less developed countries. therefore, we strongly recommend to introduce the special gender prism for the eu funding allocated to croatia, czech republic, greece, hungary, lithuania, romania, and slovakia. considering 5 classes found by our calculations, we apply the cluster analysis using formula (1) and receive: ( ) ( ) ( ) 2 2 1,2 63.02 70.05 42498 39415 3083.01p x = + =− −∑ ; end of table 3 382 o. vinska, v. tokar. cluster analysis of the european union gender equality and economic development ( ) ( ) ( ) 2 2 1,3 63.02 57.66 42498 7938 34560p x = + =− −∑ ; ( ) ( ) ( ) 2 2 1,4 63.02 54.3 42498 12150 30348p x = + =− −∑ . we put the received data into a table (distance matrix). from the distance matrix it follows that objects 6 and 8 are closest (p6,8  = 20.04) and combined into one cluster. when forming a new matrix of distances, we select the largest value from the values of objects no. 6 and no. 8. as a result, we have 26 clusters: s (1), s (2), s (3), s (4), s (5), s (6,8), s (7), s (9), s ( 10), s (11), s (12), s (13), s (14), s (15), s (16), s (17), s (18), s (19), s (20), s (21), s (22), s (23), s (24), s (25), s (26), s (27). repeating the same procedures several times, finally, we receive the following five clusters (table 5). table 5. clusters of eu member-states based on levels of gender equality and economic development (own calculations) clusters 1, 9, 2, 11, 20, 27, 10 3, 23, 4, 21, 13, 16, 12, 24, 17 5, 19, 26, 15, 6, 8, 22, 25 7, 14 18 1, 9, 2, 11, 20, 27, 10 0 38802.008 27645.013 31890 63770 3, 23, 4, 21, 13, 16, 12, 24, 17 38802.008 0 20790 58417.001 90297 5, 19, 26, 15, 6, 8, 22, 25 27645.013 20790 0 47260.002 79140.001 7, 14 31890 58417.001 47260.002 0 46352.001 18 63770 90297 79140.001 46352.001 0 table  6 shows that cluster 1 consists of 9 countries, namely bulgaria, croatia, greece, hungary, latvia, lithuania, poland, romania, and slovakia. the levels of gender equality are within 50.4–58.0 with the average value equaling 54.4. gdps per capita are within 7938– 16310 euros with the average value equaling 13255.8 euros. table 6. cluster 1 of eu member-states (own calculations) eu member-states gender equality gdp per capita bulgaria 57.7 7938.0 croatia 54.3 12150.0 greece 50.4 16310.0 hungary 52.0 13420.0 latvia 58.0 14540.0 lithuania 55.5 15873.0 poland 56.0 12705.0 romania 52.7 10253.0 slovakia 53.5 16113.0 average 54.4 13255.8 minimum 50.4 7938.0 maximum 58.0 16310.0 business, management and economics engineering, 2021, 19(2): 373–388 383 table  7 shows that cluster 2 consists of 8 countries, namely cyprus, czech republic, estonia, italy, malta, portugal, slovenia, and spain. the levels of gender equality are within 53.6–68.8 with the average value equaling 59.7. gdps per capita are within 19095–28728 euros with the average value equaling 22625.6 euros. table 7. cluster 2 of eu member-states (own calculations) eu member-states gender equality gdp per capita cyprus 53.6 23578.0 czech republic 55.6 19095.0 estonia 56.8 19115.0 italy 59.7 28728.0 malta 59.6 24938.0 portugal 57.1 19385.0 slovenia 66.6 21398.0 spain 68.8 24768.0 average 59.7 22625.6 minimum 53.6 19095.0 maximum 68.8 28728.0 table  8 shows that cluster 3 consists of 7 countries, namely austria, belgium, finland, france, germany, netherlands, and sweden. the levels of gender equality are within 63.0–82.0 with the average value equaling 71.4. gdps per capita are within 34465–46740 euros with the average value equaling 41291.3 euros. table 8. cluster 3 of eu member-states (own calculations) eu member-states gender equality gdp per capita austria 63.0 42498.0 belgium 70.5 39415.0 finland 73.7 41778.0 france 71.7 34465.0 germany 65.5 39785.0 netherlands 73.4 44358.0 sweden 82.0 46740.0 average 71.4 41291.3 minimum 63.0 34465.0 maximum 82.0 46740.0 table  9 shows that cluster 4 consists of 2 countries, namely denmark and ireland. the levels of gender equality are within 69.2–76.5 with the average value equaling 72.9. gdps per capita are within 51883–66355 euros with the average value equaling 59119.0 euros. 384 o. vinska, v. tokar. cluster analysis of the european union gender equality and economic development table 9. cluster 4 of eu member-states (own calculations) eu member-states gender equality gdp per capita denmark 76.5 51883.0 ireland 69.2 66355.0 average 72.9 59119.0 minimum 69.2 51883.0 maximum 76.5 66355.0 table 10 shows that cluster 5 consists of luxembourg only with the level of gender equality – 67.1, and gdp per capita equaling 98235.0 euros. table 10. cluster 5 of eu member-states (own calculations) eu member-states gender equality gdp per capita luxembourg 67.1 98235.0 table 11 indicates that there are substantial discrepancies in the results of grouping of eu member-states applying the cluster analysis and comparison with the average values of gdp per capita and gender equality due to the abnormally high levels of gdp per capita of some countries sometimes referred to as the inner off-shores within the eu, namely, ireland and luxembourg. it is especially obvious, when there are no large differences in gender equality levels, while gpds per capita differ to the large extent. table  11. clusters and classes of eu member-states considering gdp per capita and level of gender equality (own elaboration) # cluster class 1 bulgaria, croatia, greece, hungary, latvia, lithuania, poland, romania, and slovakia less developed countries – gender equality adopters: croatia, czech republic, greece, hungary, lithuania, romania, and slovakia 2 cyprus, czech republic, estonia, italy, malta, portugal, slovenia, and spain less developed countries – gender equality leaders: bulgaria, estonia, latvia, poland, portugal, and slovenia 3 austria, belgium, finland, france, germany, netherlands, and sweden transition countries – gender equality adopters: cyprus 4 denmark and ireland transition countries – gender equality leaders: malta, spain 5 luxembourg more developed countries – gender equality leaders: austria, belgium, denmark, finland, france, germany, ireland, italy, luxembourg, netherlands, and sweden we think that less developed countries which are gender equality adopters should fall under the special gender lens while receiving funds from the eu budget. european institutions should pay particular attention to the issue of gender equality fostering the economic business, management and economics engineering, 2021, 19(2): 373–388 385 progress of theses eu member-states. the improperly tailored financial support under the cohesion policy may result in widening the gender gap contradicting the aim of the eu to build a union of equality by 2025. for example, cyprus despite of economic progress does not distribute achieved benefits following the principle of gender equality. 4. discussion our results somewhat support the findings of altuzarra et al. (2021) when it comes to influence of gender gaps in terms of education, labor market and institutional representation on economic growth. however, even though we have used a more comprehensive index it covers only the eu member-states. analogically, considering that we have used the index containing wage and education dimensions, our conclusions are in harmony with the ones of minasyan et al. (2019) highlighting a positive correlation between gender equality in education and economic growth, as well as, kennedy et al. (2017) pointing out an interplay between economic prosperity and decreasing the gender wage inequality. we also agree with mitra et al. (2015) that economic growth of developed countries result from equality in outcomes. however, our research has not included developing countries, therefore, we can neither prove nor reject the idea that developing countries mostly depend on gender equality in opportunity. our findings concord with kabeer and natali (2013) showing that economic growth by itself doesn’t lead to fast elimination of gender inequality in healthcare, human rights and well-being. the first limitation of our research is connected with inner eu off-shore zones, namely ireland and luxembourg. their distorted indicators of gdp per capita influence the cluster analysis. however, in our grouping both countries fall into the group of more developed gender equality leaders, therefore, we can state that our methodology has weakened this limitation. moreover, the ongoing process of global corporate tax harmonization will lessen, if not eradicate, this limitation in the future. the second limitation is caused by the nature of the gender equality index used for calculations in our research. as any other index containing both quantitative and qualitative data, the gender equality index is not totally free from subjective influence of experts’ opinions. however, the strict procedures for selecting experts within eige minimize any potential bias, therefore, our results adhere to strict standards of reliability. conclusions combining the levels of economic development (more developed countries, transition countries, and less developed countries) and gender equality (gender equality leaders, gender equality adopters, and gender equality laggards), we introduce nine potential classes of eu member-states, five of them were found in the eu according to the results of our calculations, namely: eight less developed countries – gender equality adopters (croatia, czech republic, greece, hungary, lithuania, romania, and slovakia), six less developed countries  – gender equality leaders (bulgaria, estonia, latvia, poland, portugal, and slovenia), one transition country – gender equality adopter (cyprus), two transition countries – gender equality leaders (malta and spain), and eleven more developed countries  – gender equality leaders 386 o. vinska, v. tokar. cluster analysis of the european union gender equality and economic development (austria, belgium, denmark, finland, france, germany, ireland, italy, luxembourg, netherlands, and sweden). all more developed countries are gender equality leaders supporting women’s emancipation. there are no gender equality laggards proving that the cohesion policy has a positive impact on gender equality. five clusters significantly differ from the above-mentioned classes due to the striking discrepancies in economic development of eu member-states, including the inner off-shores, ireland and luxembourg. therefore, there is a need for fine-tuning european policies. there should be a special gender prism applied to the eu funding allocated to less developed countries – gender equality adopters (croatia, czech republic, greece, hungary, lithuania, romania, and slovakia) to ensure their gender sensitivity, while financial support for cyprus should focus on combination of its economic progress and distribution of benefits following the principle of gender equality. we think that the strengthening of gender budgeting and suspension of eu financing in case of missing targets on female emancipation will result in improved levels of gender equality in eu member-states. the applied dimensions of designed methodology include the assessing progress of less developed eu member states in their advancement towards gender equality and economic prosperity. the prospects for further pieces of research include the wide range of analytical investigations of eu and global structural analysis of groups and clusters considering levels of gender equality in various social and economic sectors for elaborating applied measures to improve the status quo. the eu and global economic systems move towards a new technological edge with the dominance of science, technology and innovations. thus, we suppose that the retrospective approach can be turned into perspective one if to concentrate on female empowerment in stem. author contributions oksana vinska and volodymyr tokar conceived the study and were responsible for the design and development of the data analysis. volodymyr tokar was responsible for data collection and analysis. oksana vinska and volodymyr tokar were responsible for data interpretation. oksana vinska and volodymyr tokar wrote the first draft of the article. disclosure statement the authors do not have any competing financial, professional, or personal interests from other parties. references aksoy, c. g., özcan, b., & philipp, j. 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(2017). economic growth and gender inequality: an analysis of panel data for five latin american countries. cepal review, 122, 79–106. https://doi.org/10.18356/73d010ed-en shehu, e., shahzad, k., rubbaniy, g., & perveen, a. (2017). gender premium and economic downswings. journal of behavioral and experimental, 14, 5–13. https://doi.org/10.1016/j.jbef.2017.03.001 vinska, o., & tokar, v. (2017). economic opportunity and participation gender gap in eu member-states. economic space, 118, 16–24. http://srd.pgasa.dp.ua:8080/xmlui/bitstream/handle/123456789/540/ vinska.pdf ?sequence=1 https://doi.org/10.18356/73d010ed-en https://doi.org/10.1016/j.jbef.2017.03.001 http://srd.pgasa.dp.ua:8080/xmlui/bitstream/handle/123456789/540/vinska.pdf?sequence=1 http://srd.pgasa.dp.ua:8080/xmlui/bitstream/handle/123456789/540/vinska.pdf?sequence=1 copyright © 2020 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: arvydas.kregzde@mif.vu.lt introduction during 30 years of independence, the baltic states were focusing their economic policy on catch up with the developed nordic and other west european countries. one of the main indicators of the development of the country is gdp and gdp per capita. in order to converge towards the west european countries, the real gdp growth of the baltic countries should be significantly higher. business cycles synchronisations in the baltic countries arvydas kregždė * institute of applied mathematics, faculty of mathematics and informatics, vilnius university, vilnius, lithuania received 10 march 2020; accepted 30 march 2020 abstract. purpose  – the purpose of the paper is to investigate the level of real business cycles synchronisation between the baltic and the nordic countries and between the baltic countries and the euro area. research methodology  – wavelet analysis was employed to evaluate the level of synchronisation for different periods and time. quarterly data from 1995 q2 to 2019 q4 was used. findings – we discover the influence of several essential events in economies of the baltic countries on the synchronisation: accession to the eu in 2004, the introduction of the euro in the baltic countries and some external shocks. research limitation  – a lack of reliable long-term data from the baltic countries does not allow performing calculation for other important financial variables. practical implications  – results of the research are important for forecasting and implementing flexible economic policies of the baltic countries. originality/value – business cycles synchronisation between the baltic countries themselves and between the baltic countries, the nordic countries and the euro area countries across time and various frequency dimensions was investigated for the first time. keywords: synchronisation, business cycle, wavelet, baltic, nordic, the euro area. jel classification: c32, e30, e32. business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 1: 127–141 https://doi.org/10.3846/bme.2020.12254 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 https://orcid.org/0000-0001-8041-6898 https://doi.org/10.3846/bme.2020.12254 128 a. kregždė. business cycles synchronisations in the baltic countries during the early years of sovereignty, economic links of the baltic countries with the eastern countries were powerful. the task to reorient economies towards the west became crucial in the light of the russian crisis in 1998. increasing links to the western countries made the baltic countries exposed to the economic cycles of these countries. currently, real economies and especially financial sectors of the baltic countries are connected to the west and particularly to the nordic countries very closely. therefore, events in western countries have a spillover effect on the baltic countries. due to the membership in the eu since 1 may 2004 and participation in the common market, the relationship of the economic cycles of the baltic countries with the economic cycles of the eu is of great interest. currently, after joining the eurozone, the baltic countries run a unanimous monetary policy and synchronisation of the real business cycle with the eurozone countries has become crucial. sweden and denmark, not members of the eurozone, are critical business partners and investments from these countries to the baltic states are growing. therefore, synchronisation of the economies of the baltic countries in the light of the catch up is of great interest. economic cycles and synchronisation of the cycles are analysed by a number of authors. introduction of the common currency, the euro, in 1999/2002 increased the importance of studies on financial and real cycles of economies in the eurozone. the monetary policy of ecb is based on a prediction of economic indicators for all the countries of the eurozone. in order to accept the right decision, which is suitable for the majority of the countries, gdp cycles should be in the same trend. estimations of cyclical commonalities provide essential input for the conduct of monetary policy and are also relevant for macroprudential policy. therefore, research on the business cycles of the eurozone countries receives continuous attention. a number of mathematical models have been used for this analysis. we chose the wavelet analysis for our analysis of business cycles synchronisation. the reason for it was an intention to find changes in synchronisation not only in time but also in the frequency dimension. we had the interest to understand the length of periods of synchronised (or not synchronised) behaviours of the real economic changes. the scientific papers analysing the baltic gdp cycles are mostly based on the classical econometric approach. nekhili et  al. (2002) stress that widely used parametric models like the random walk with garch, random walk with stochastic volatility, jump-diffusion processes, etc. have been found insufficient in explicating the underlying dynamics of the financial variables across all frequency levels. berdiev and chang (2015) emphasize the importance of examining the strength of business cycle synchronisation by using a time-frequency framework. they demonstrate that the synchronisation of growth cycles may be high at long-run developments. in contrast, there may be a low degree of co-movement at short-run fluctuations for a particular sample period. we contribute to the existing literature in several ways. business cycles synchronisation between the baltic countries themselves and between the baltic countries, the nordic countries and the euro area countries across time and various frequency dimensions have been investigated for the first time. the frequency dimension added enables us to discover the time when the coherence changes and to find the frequencies at which the co-movements are concentrated. in addition, we discover the influence of several essential events in economies of the baltic countries on the synchronisation: accession to the eu in 2004, the introduction of the euro in the baltic countries and some external shocks. business, management and education, 2020, 18(1): 127–141 129 1. literature review globalization or the world itself affects various aspects of economic activity. increasing trade links, financial relations, international investments and other kinds of cooperation have an impact on the country’s development. financial markets react immediately to the events in any country and a spillover effect on the global financial market has been determined by a number of researches (e.g. gallegati et  al., 2014; syllignakis & kouretas, 2011; kregzde, 2018; adam & merkel, 2019). dependence of the country’s output on external events is not evident, and there are different views on it. for example, akin, 2012 studied real gdp correlations for 51 countries including 27 emerging markets for the periods of 1970–2008 and concluded that “on average, global financial integration has no significant effect on output synchronisation. however, for developed country pairs and developed and emerging market pairs, financial integration lowers business cycle synchronisation, whereas, for emerging markets, financial integration increases synchronisation”. bordo and helbling (2011), investigated 16 industrial countries over 120 years. they stated that business synchronisation was increasing, and shocks and crises made the most significant impact on synchronisation. artis and okubo (2009) generally found a high level of cross-correlations for the industrial countries in the period from 1960 to 2001. beirne (2020) stated that business cycles were partially synchronised globally. the result was based on analysis of 38 advanced and emerging economies in latin america, asia and eastern europe. beck, 2019 investigated 43 possible determinants of business cycles synchronisation. according to martinez-martin et  al. (2018), after the introduction of the euro in 1999/2002, studies on the synchronisation of financial and business cycles of the eurozone countries became a pertinent research question. aguiar-conraria and soares (2011) studied business cycle synchronisation across eu-15 and eu-12 countries. their research revealed that germany and france were the most synchronised with the rest of the european countries. the authors used wavelet analysis in their research. a number of studies have been performed on the impact of the common currency, the euro, on the synchronisation of economies. grigoraş and stanciu (2016) concluded that “previous to the world financial crisis the european business cycle has been constantly enforced by formal or informal cohesion between eu member states, but in the post-crisis period show signs of a great disconnect, both within europe and between europe and the us”. montoya and de haan (2008) investigated regional business cycles of the eurozone countries. they indicated that on the average, regional business cycles synchronisation increased for the period of 30 years (1975–2005) for the countries. furceri and karras (2011) found that the eu countries were better synchronised with the emu-wide economy in the post-emu period than they were before the euro. lehwald (2013) compared the pre-euro period (1991–1998) to the euro period (2000–2010) and discovered that co-movement of the key macroeconomic variables increased for the core eurozone countries from the first to the second period, while it decreased for the most peripheral economies. oman (2019) found that financial cycles were less synchronised than business cycles, and business cycle synchronisation had increased while financial cycle synchronisation had decreased in the eurozone. 130 a. kregždė. business cycles synchronisations in the baltic countries there is a number of papers studying financial cycles within the countries dimension. scharnagl and mandler (2019) focused on the analysis of credit and house price cycles. they revealed that these cycles were closely linked to domestic cycles in real activity, showing financial and real economic cycles as interconnected phenomena. germany was an exception. rünstler and vlekke (2018) estimated trend and cyclical components in gdp, credit volumes and house prices for the u.s. and the five largest european economies. kurowski and rogowicz (2018) suggested that the pre-crisis period was one of the internal synchronisations between financial and output cycles across countries, while the post-crisis period had been marked by international synchronisation. balfoussia et al. (2018) stated that gdp appeared to be subject to fluctuations at both business-cycle and medium-term frequencies, and gdp fluctuations at medium-term frequencies were strongly correlated with the cycles in credit and house prices. miles and vijverberg (2018) investigated changes of synchronisation since the euro adoption. they made a conclusion that adopting the common currency might increase synchronisation for the nations ready for the common currency, but it could lower synchronisation for the nations that were far from synchronised before the monetary unification. loannou (2018) analysed features of credit, housing price, and output cycles in lithuania during 1995–2017. a number of authors analysed synchronisation of central and eastern europe and the eurozone countries. darvas and szapary (2008) analysed synchronisation of business cycles between new and old eu member states. they discovered that hungary, poland and slovenia had achieved a high degree of synchronisation for gdp, industry and exports, but not for consumption and services. njegić et  al. (2017) indicated that the business cycles of ceec’s were generally synchronised with the eu-15 business cycles. in contrast, distinct differences existed before, during, and after the financial crisis (2008–2009) and during the european sovereign debt crisis (2010–2011). they demonstrated that powerful business cycles synchronisation occurred in almost all ceecs during crisis periods and at higher wavelet scales, while only moderate synchronisation was recorded in relatively tranquil periods at higher frequencies. hanus and vacha (2018) indicated an increasing co-movement of the visegrad four countries with the european union after the countries had accessed the european union. heller and warzala (2019) compared the major economic indicators of relatively new eu member states who had joined the eurozone with the polish macroeconomic indicators. they discovered that macroeconomic indicators of stabilization could be observed after their accession to the eurozone. a few papers investigated synchronisation of business cycles focusing on the baltic and eu countries. valentinaitė and snieška (2005), revealed that symmetry among the business cycles in the baltic states and other eu countries was low, while lithuania had the highest correlation with the eu ‘core’ and the entire eurozone. di giorgio (2016) noted that the indications of business cycle synchronisation between ceecs (central and eastern european countries) were quite high in the recession regime, but lower in normal and high growth regimes. hegerty (2017) investigated common cycles and baltic-nordic economic integration. his key result revealed that each of the baltic countries behaved differently from one another. while regional differences were quite considerable, they made it harder to describe the baltic region as a single unit. business, management and education, 2020, 18(1): 127–141 131 2. methodology we apply wavelet transform analysis for the time series of quarterly gdp changes. wavelet transform analysis uses little wavelike functions known as wavelets (see addison, 2017). a family of wavelets ( ), s tτψ is defined by using the basic wavelet functions ( ), tψ called a mother wavelet, in the following way: ( ), 1 – ( )s t t ss τ τ ψ = ψ , where, variable s (dilation parameter) is the scale and τ (translation parameter) is the time. the scale s is proportional to the inverse of the frequency. the continuous wavelet transformation (cwt) of a time series x(t) is defined through the following formula: ( ) ( ) *, – ,x sw s x t ∞ τ ∞ τ = ψ∫ (t)dt, where ψ* denotes the complex conjugate of ψ. we face discreet time series x(t), therefore for t = 1,…n cwt is calculated as follows: ( ) ( ) ( )*, 1 , n x s t w s x t tτ = τ = ψ∑ . cwt is used to transform the initial time series x(t) into another representation, separating time τ and scale (frequency) s. the cross-wavelet spectrum of two-time series x(t) and y(t) with wavelet transforms ( ),xw sτ and ( ),yw sτ is defined as ( ) ( ) ( )*, , ,xy x yw s w s w sτ = τ τ . it captures the covariance between two-time series in the time-frequency space. we define the wavelet transformation squared coherence coefficient (wtc) or simply coherency of two-time series x(t) and y(t) in the way as it is described by torrence & compo, 1998 by the following formula: 2r ( )( ) ( )( ) ( )( ) –1 2 –1 2 –1 2 s , ( , ) s , s , xy x y s w s s s w s s w s τ τ = τ τ │ │ │ │ │ │ , where s(•) is a smoothed (see torrence & compo, 1998) operator and s is the wavelet scale. it allows us to estimate the presence of a simple cause-effect relationship between the phenomena recorded in the time series. coherency is the analogy of the correlation coefficient. a value of the coherence close to zero shows a weak correlation, while values close to one indicate a strong correlation. noteworthy, r2(τ, s) is always nonnegative; therefore, positive and negative correlation could have the same value. following torrence and compo (1998), we introduce the coherence phase difference, which is defined as follows: ,x y ϕ 1( , )s tan−τ = ( )( ) ( )( ) –1 –1 s , s , xy xy im s w s re s w s          τ  τ        , where re and im are real and imaginary parts of the complex number. the sign of phase difference together with the sign of im indicates whether the series are positively or negatively correlated. 132 a. kregždė. business cycles synchronisations in the baltic countries we use a complex morlet as mother wavelet, which is defined as follows: ( ) 2 0 1 – 4 2 t i tt e e − ωψ = π . this way, the morlet wavelet mother function consists of the multiplier ( ) ( )0 0 0cosi te t isin tω = ω + ω which is a periodic function with a period of 0 2 π ω and the gaussian envelope 2 – 2 t e which tends to zero as t . → ±∞ we fix 0 6ω = , because it provides for a good balance of time and frequency (see grinsted et al., 2004). 3. research findings 3.1. descriptive statistics we use eurostat data for seasonally and calendar adjusted quarterly gdp from the first quarter (q1) of 1995 to the fourth quarter (q4) of 2019. the data is recalculated for real gdp growth from q2 of 1995 to q4 of 2019. the starting date of 1995 is taken based on the fact that the baltic data is reliable from this year only. during the period from 1995 q2 to 2019 q4 real gdp growth was variable from country to country. the data on gdp growth is presented in table 1. table 1. change of real gdp from 1995 q2 to 2019 q4 estonia latvia lithuania eurozone denmark finland sweden 164% 153% 172% 49% 48% 71% 82% annual average 6.7% 6.4% 6.9% 2.7% 2.6% 3.7% 4.1% as we see from table 1, the average gdp growth rate of the baltic countries is about two times higher than that of finland and sweden and almost three times higher than the rate of the eurozone and denmark. the higher growth rate in the baltic countries is the consequence of a significantly lower gdp in 1995 and a catch-up process during the later years. gdp growth rate has not been uniform for all the countries. a standard deviation of the quarterly growth of real gdp is presented in table 2. table 2. standard deviation of quarterly gdp growth. estonia latvia lithuania eurozone denmark finland sweden 1.9% 2.2% 1.8% 0.5% 0.8% 1.2% 0.8% table 2 shows that volatility of the quarterly gdp growth in the baltic countries is almost twice as high as that in the rest of the countries. one of the main reasons thereof is described by almansour et al. (2015). they note that emerging markets are more sensitive to external shocks than developed markets are. in addition to the influence from outside, during the period of consideration, the baltic countries faced some political challenges and important business, management and education, 2020, 18(1): 127–141 133 changes in their monetary policy. first of all, the baltic countries joined the eu in 2004 and introduced the euro (estonia in 2011, latvia in 2014 and lithuania in 2015). before joining the eurozone, lithuania re-pegged its national currency from the us dollar in 2002 and latvia re-pegged its national currency from sdr basket to the euro in 2004. the changes in political and economic policy had an impact on the economy and real gdp growth as well. 3.2. interconnection of gdp growth in the baltic countries because the growth rate is changing in time and the length of cycles is different, we investigate the gdp growth rate in time and frequency scales. the wavelet approach is a very suitable instrument for this purpose. we convert frequency into time units (years), ranging from the highest frequency, which corresponds to the period of 0.25 years to the lowest frequency corresponding to the period of 5 years. the minimal scale of 0.25 corresponds to 0.25 years or a quarter, and the maximum scale corresponds to 5 years or 20 quarters. the phase differences for the coherences greater than 0.5 are illustrated by arrows. the arrow in the 1 or 4 (2 or 3) quadrants indicates that the series is positively (negatively) correlated. figure 1 presents coherence (wtc) of the gdp growth rate in the baltic countries. the x-axis refers to time, and the y-axis refers to period or frequency. light colour shows high coherence between the variables and dark colour represents low coherence. when looking at the time scales in figure 1, we can find an obvious commonality between the baltic gdp growth rates (the white colour is dominant). the interdependence of the economies is exceptionally high for lithuania and estonia. for the periods exceeding two figure 1. coherence between estonian, latvian and lithuanian business periods 134 a. kregždė. business cycles synchronisations in the baltic countries years, the coherence between lithuania and estonia is very high during all the time intervals under consideration, except for the years of 2001–2003 and 2012–2016. the coherence of gdp growth is increased for the highest frequencies (periods of 0.25 years) during 1997– 1999 and 2008–2010. the first period coincides with the russian crisis, which has resulted in the russian government and the russian central bank devaluing the national currency and defaulting on its debt in 1998. the second period is related to the global financial crisis, which started in the usa and then spread across the world later on (hereinafter the world financial crisis). the period of the financial crisis in the usa started in december 2007 and lasted until june 2009, as defined by the national bureau of economic research (nber). the arrows indicate that correlation between lithuania and estonia for the periods of 0.25 and 0.5 years is negative during 2008–2012. the behaviour of latvian gdp growth is slightly different from the situation in lithuania and estonia. figure 1 shows that coherence between latvian and estonian as well as latvian and lithuanian gdp growth is different from the coherence of lithuania and estonia. we do not see any higher synchronisation during the crisis period as it was in the case of lithuania and estonia. synchronisation appears to be slightly increased only for the periods exceeding two years and is high for the periods exceeding 3.5 years. the different behaviour is also mentioned by njegić et al. (2017). they raise a hypothesis that latvian economy has a higher resistance to external systematic shocks. our view is that this hypothesis is valid in the case of the russian crisis. our analysis reveals that correlation between latvia and lithuania as well as between latvia and estonia is negative for short periods during the russian crisis (arrows appear in the second quadrant). in our opinion, latvian economy has faced even a higher effect of the world financial crisis and thus the cycle to rebound is longer. therefore, gdp cycles in latvia are less synchronised with the other baltic countries during the crisis. noteworthy, decreased commonalities are observed between the baltic countries for the periods of 2 years and longer during 2012–2016. the above can be explained by the fact that economies react quickly to a crisis, yet recovery cycles are different and synchronisation during the recovery period is weak. we do not find any impact of the accession to the eu or to the eurozone on synchronisation between the baltic countries. the reason for it can be the same date as the accession to the eu for all the baltic countries and close dates for joining the eurozone. 3.3. interconnection between lithuania and the nordic countries and between lithuania and the euro area figure 2 presents coherence (wtc) of the gdp growth rate of lithuania and the nordic countries and lithuania and the euro area. when looking at the time scales in figure 2, we can find that similarities between lithuanian and finnish business cycles have changed dramatically after lithuania had joined the eu. the business cycles are highly synchronised for business periods exceeding 2 years. during the world financial crisis, the interdependence of the growth cycles of the economies became close even for a very short period exceeding 0.25 year. starting from 2009 to 2014, coherence between lithuanian and finnish economies remains high for the periods exceeding two years. for shorter periods, coherence is not high and returns to the level of 2004. business, management and education, 2020, 18(1): 127–141 135 the pierson correlation coefficient between lithuanian and finish gdp growth is equal to 0.65, which is higher than the correlation coefficients between lithuanian and swedish and lithuanian and danish gdp growths. coherence between the business cycles of lithuania and the euro area are similar to those between lithuania and finland. coherence is lower between lithuania and sweden and between lithuania and denmark. for the periods shorter than 3 years, coherences between lithuanian and swedish as well as lithuanian and danish business cycles remain weak, except for the years during the world financial crisis. noteworthy, the effect of the world financial crisis is not so deeply reflected as in the case of finland and the euro area. the pierson correlation coefficient between lithuanian and swedish gdp growth is equal to 0.31, which is twice lower than the one between lithuania and finland. 3.4. interconnection between estonia and the nordic countries and between estonia and the euro area figure 3 presents coherence of the gdp growth rate of estonia and the nordic countries and of estonia and the euro area region. from figure 3 we do not see any essential difference of interdependence between lithuania and finland and between estonia and finland, except that the business cycle during the world financial crisis is very close for lithuania and finland even for short periods. figure 2. coherence between business periods of lithuania and finland, sweden, denmark and the euro area 136 a. kregždė. business cycles synchronisations in the baltic countries figure 3. coherence between business periods of estonia and finland, sweden, denmark and the euro area noteworthy, estonia was not affected by the european sovereign debt crisis in 2010, which to some extent had an impact on lithuania and finland, and the correlation between estonia and finland for short periods around 2010 is negative (arrows appear in the second quadrant). for estonia, similarly, as for lithuania, interdependence with the nordic countries and the euro area gradually decreased from 2010 to 2014 in the periods from 2 to 3–3.5 years. it can be explained by the fact that recovery from the world financial crisis depends on individual circumstances in the country, which have reduced interdependence. for the periods exceeding four years, coherence between growth rate cycles remains high after the crisis. coherence between the gdp growth of estonia and sweden as well as of estonia and denmark is higher than that of lithuania. 3.5. interconnection between latvia and the nordic countries and between latvia and the euro area figure 4 presents coherence of the gdp growth rate of latvia and the nordic countries and latvia and the euro area. our calculations reveal that latvian synchronisation with the other nordic countries is not as high as lithuanian and estonian. when looking at figure four, we see that synchronisation of latvian gdp growth with the euro area is a bit higher than that with the nordic countries, but remains low. noteworthy, even during the world financial crisis, synchronisation of latvia with other countries in the periods shorter than two years is very low. business, management and education, 2020, 18(1): 127–141 137 the above indicates that the latvian economy is somewhat dependent on internal conditions and is out of synchronisation with the other countries. the difference of latvia from the other baltic countries is also noted by hegerty (2017) and njegić et  al. (2017). nonetheless, we see a slightly positive impact of the accession to the eu on synchronisation with the nordic countries and the euro area. for lithuania and estonia, the impact of the accession to the eu is far more significant. latvian economy is more related to finnish economy than to swedish and danish economies, but not as strongly as estonian and lithuanian economies are related. the synchronisation of the latvian economy with the danish economy is quite low. 3.6. main outcomes from the analysis there is an apparent commonality between lithuanian, latvian and estonian gdp growth rates. the interdependence of business cycles is exceptionally high for lithuania and estonia. for the periods exceeding two years, the interconnection between gdp growth of lithuania and estonia is very high, except for the years of 2001–2003 and 2012–2016. the coherence of gdp growth increased for the highest frequencies (periods of 0.25 years) during 1997–1999 and 2008–2010, which coincide with the russian crisis and the world financial crisis. commonalities of gdp growth between lithuania and latvia as well as between lithuania and estonia are lower. we do not see any strong explicit synchronic reaction to the crises for these economies, as it is in the case of lithuania and estonia. the synchronisation is slightly increased only for the periods exceeding two years. noteworthy, decreased commonalities figure 4. coherence between business periods of latvia and finland, sweden, denmark and the euro area. 138 a. kregždė. business cycles synchronisations in the baltic countries are observed between lithuania and latvia as well as estonia and latvia for the periods of 2 years and longer during 2010–2016. the above can be explained by the fact that economies react quickly to a crisis, yet recovery cycles are different and synchronisation during the recovery period is weak. we do not find any impact of the accession to the eu or to the eurozone on synchronisation between the baltic countries. the reason for it can be the same date as the accession to the eu for all the baltic countries and close dates for joining the eurozone. the picture of commonality of the lithuanian gdp growth rate and that of the nordic countries and the euro area is different. we see a significant impact of the accession to the european union in 2004. before the accession to the eu, synchronisation between lithuania and sweden and between lithuania and denmark is almost absent even for more extended periods (4–5 years). after the accession, commonality of the gdp growth cycles becomes higher. during the world financial crisis, synchronisation becomes strong for the periods shorter than two years. an unusually high level of synchronisation is observed between lithuania and finland and between lithuania and the euro area countries during the world financial crisis. commonality is observed even between the cycles in very short periods (0.25 years). after the crisis, lithuanian and finish gdp growth rates remain synchronised for the periods exceeding two years. commonalities between lithuania and denmark as well as between lithuania and sweden decrease after the crisis. weak synchronisation reached its peak in 2014. later on, the synchronisation becomes higher. the above can be explained by different policies and circumstances to overcome consequences of the crisis. noteworthy, the russian crisis has increased synchronisation of lithuanian gdp growth with the nordic and the euro area gdp growths. this is particularly evident for finland and the euro area. the synchronisation of estonia with the nordic region and the euro area countries is similar to that of lithuania. interestingly, estonian and finnish synchronisation is lower than lithuanian and finish synchronisation despite very strong relations between estonia and finland. we observe that during the world financial crisis and afterwards, synchronisation between lithuania and finland is stronger than between estonia and finland. the reason for the above can be the fact that estonia was not affected by the european sovereign debt crisis in 2010, which to some extent had an impact on lithuania and finland. coherence between the gdp growth of estonia and sweden as well as of estonia and denmark is higher than that of lithuania. our calculations reveal that latvian synchronisation with the other nordic countries is not as high as lithuanian and estonian. the highest synchronisation of latvian gdp growth is observed with the euro area countries. noteworthy, even during the world financial crisis, synchronisation of latvia with other countries in the periods shorter than 2 years is very low. the above indicates that latvian output is rather dependent on internal conditions, and the level of synchronisation with the other countries is low. we do not see any impact of the introduction of the euro on the synchronisation of business cycles between the baltic countries and between the baltic and the nordic countries. accession to the eu has had no impact on the synchronisation of business cycles between the baltic countries. nevertheless, it has had a tremendous impact on synchronisation between the baltic countries and the nordic countries and between the baltic countries and the euro area. business cycles during the period of recovery from the world financial crisis are very different for all the countries. business, management and education, 2020, 18(1): 127–141 139 conclusions business cycles synchronisation between the baltic countries themselves and between the baltic countries, the nordic countries and the euro area countries across time and various frequency dimensions was investigated for the first time. the five main findings were discovered in the current study. first, the study revealed no impact of the introduction of the euro on the synchronisation of business cycles between the baltic countries themselves, between the baltic countries and the nordic countries, and between the baltic countries and the euro area. second, accession to the eu had no impact on the synchronisation of business cycles between the baltic countries themselves. however, it had a significant impact on synchronisation between the baltic countries and the nordic countries and between the baltic countries and the euro area. third, synchronisation of the baltic countries, the nordic countries and the euro area increased during the world financial crisis. in contrast, synchronisation between the baltic countries themselves increased to a lesser extent. fourth, business cycles in the period of recovery from the world financial crisis were very different for all the countries. fifth, the latvian synchronisation with the other countries was not as high as the lithuanian and the estonian. a lack of reliable long data from the baltic countries does not allow performing a calculation on synchronisation for other important financial variables. calculations were made by applying morlet wavelet 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https://doi.org/10.3846/bme.2020.12631 teacher training and education programs in latvia: are e-competences included? kristine uzule * faculty of management and economics, transport and telecommunication institute, rīga, latvia received 03 may 2020; accepted 18 may 2020 abstract. purpose – the purpose of this research is to review the contents of latvian teacher training and education programs in order to identify if the development of students’ e-competences is included into these programs as an important objective and value. the importance of the development of these competences has been stressed in various eu documents and scientific literature. the scientific importance of the paper lies in gathering evidence for the inclusion of e-competences into teacher training and education curricula and demonstrating that e-competences have not yet acquired a value status in teacher training and education programs. research methodology – the methodology included the keyword in context and concordance analysis of self-assessment reports and program descriptions, which were run in the software antconc. findings – out of 190,000 word tokens, the kwic analysis identified only 75 entries related to e-competences, most of which included basic skills of information and communication technologies. other more advanced concepts, such as virtual reality, artificial intelligence, adaptive spaces, e-competences, e-education and e-learning, were hardly mentioned. research limitations – one limitation of this research is the focus on latvian teacher training and education programs without their comparison to similar european programs, which would allow for determining the competitiveness of such latvian programs in europe. practical implications – the obtained results suggest that the development of e-competences has not been perceived as value in teacher training and education programs in latvia, and in order to bridge this gap, programming and artificial intelligence courses should be introduced into the curricula of such programs. originality/value – the research has demonstrated that the eu aim of boosting the competitiveness of the european education through the development of e-competences is yet to be implemented into teacher training and education programs in latvia. keywords: e-competences, e-education, e-learning, education programs. jel classification: i21, i23. https://doi.org/10.3846/bme.2020.12631 https://orcid.org/0000-0002-2633-6069 business, management and education, 2020, 18(2): 294–306 295 introduction much of human life, including education and business activities, has moved to e-platforms and the recent covid-19 crisis has proven it with many countries in the world having fully moved to e-learning both in school and higher education teaching. such an education mode requires a particular set of competences not only from students but also from teachers, as the e-learning environment, be it the main or complementary mode of education, is characterized by its unique features and principles of operation pertaining to more advanced digital skills and the knowledge of the rudiments of computer-human interaction, which both constrain and expand teacher opportunities to conduct teaching effectively. the efficiency of teaching in e-education is associated, at least in part, with the teacher’s knowledge of e-learning and e-education components as well as teacher’s abilities to be productive and creative in such environment. creativity is certainly one of the higher-level competences, which emerge as a result of the mastery of skills across a variety of contexts, including new ones. therefore, e-competences might be defined as advanced skills allowing to freely use and interact with computer technologies. there might be a problem with the development of such skills without proper training particularly for students who do not specialize in computer technologies. in fact, there is a well-known phenomenon called the computer anxiety, which refers to the increased anxiety levels, which surfaces as negative thoughts, distractibility, avoidance and even physiological features of the changed heart rate, higher blood pressure when completing tasks on computers (matsumura & hann, 2004). for example, matsumura and hann (2004) determined the effect of computer anxiety on writing skills of japanese students in their english writing classes. to be able to better understand emotional aspects of human interaction with computers, which certainly affects cognitive performance, there has even emerged a field of affective computing (wang et al., 2015). the findings of affective computing have been used to design e-learning curricula and adaptive learning spaces (wang et al., 2015). thus, the computer-human interaction process is complex and to make it more productive, students should receive sufficient and regular training because more individual experience with computers has been found to decrease computer anxiety (eryilmaz & cigdemoglu, 2018). since the purpose of education is to develop students’ knowledge and skills, it is logical to assume that higher education programs should be able to develop computer skills sufficient for productive professional activities not only on the current market but also on the future markets. this is the foundation of lifelong learning. therefore, contemporary higher education programs might be expected to provide such training even in programs that do not focus on computer technologies, for example, in teacher training and education programs. for this reason, it is essential to determine if contemporary teacher training and education programs provide computer technology training sufficient for the development of e-competences essential for current and future professional activities. the aim of this research, therefore, is to review the description of teacher training and education programs in order to identify if aspects of competences related to more advanced computer technologies are included in program curricula. the country of investigation is latvia because latvia, as a small nation with limited natural and financial resources, needs to focus on the development of human capital perhaps even more than other nations, which do not have such limitations. obviously, 296 k. uzule. teacher training and education programs in latvia: are e-competences included? human capital can be developed in many ways, however, one of the most affordable ways to boost competitiveness of human capital on the current market and in the foreseeable future is to develop digital skills of a broad spectrum of professionals. their knowledge of computer systems and operations should be comparable to that of administrators of computer systems and possibly basic-level programmers. the outcomes of this review are research-based recommendations on integrating more advanced computer skills into the curricula of latvian teacher training and education programs. as any research, this one has limitations. one limitation is the lack of comparison of descriptions of latvian teacher training and education programs with similar european higher education programs. such a study would help to account for the current level of integration of computer technology skills into local curricula and would indicate whether latvian programs are in need of urgent transformation in order to be abreast of european programs or whether they still have time to prepare for future higher education initiatives which will require more advanced computer skills as a result of continuous evolution of computer technologies. 1. literature review: e-learning, e-education and e-competences in contemporary education there are various terms pertaining to learning and education conducted via electronic platforms, also referred to as e-platforms. the two most frequently used terms are e-learning and e-education. although e-learning might have various definitions, emphasizing various aspects of the phenomenon, the broad definition postulates that e-learning represents “the integration of technology and education” (al-fraihat et al., 2020, p. 67). as for e-education, it can be defined as education incorporating the concepts of e-learning, mobile learning, flexible learning, blended learning or virtual learning (jung & latchem, 2011). both terms will be used in this paper. considering the current and future development of economies, e-learning and e-education should be integrated at more advanced levels into higher education curricula because technologies have permeated human activities. therefore, it should not come as a surprise that e-learning has been integrated into the strategies of development of national education programs both at macroand micro-levels. thus, with pertinence to the macro-level, in 2000 the european commission designed the initiative “elearning: designing tomorrow’s education” and in 2001 “elearning action plan”. both documents emphasized the importance of developing e-learning as one of the key components of competitiveness of european education (coulon et  al., 2004). in 2004 in the report “e-learning for teachers and trainers”, commissioned by the european center for the development of vocational training, coulon et al. (2004) indicated the necessity to develop e-learning competences in teachers. more recently, in 2018, the council of the european union published “recommendations on lifelong learning”, which identified digital skills as a key priority in education competences. as for micro-levels, the implementation of e-learning on the market, both in businesses and educational settings, has been underway for many years now. schweizer (2004), morenoger et al. (2008) and carril et al. (2013) confirm the rapid growth of e-learning in business business, management and education, 2020, 18(2): 294–306 297 contexts, which, according to schweizer (2004), is fueled by shorter business cycles, faster reorganizations at companies and the need to quickly and more elastically transform business operations in order to sustain competitiveness on the market, which is partly linked to the development of new skills of employees. these new skills are more advanced computer skills, which many european businesses lack in their employees (fonstad & lanvin, 2009). to be able to deliver e-learning in business settings and for employees to be productive receivers of e-learning, both instructors and employees should have some e-skills and e-competences, in other words, skills that ensure productive teaching and learning in e-environments. such skills are important not only for specific enterprises but for the overall national competitiveness on the global scale (moranska, 2016). as for educational settings, e-learning and e-education have become an integral part of education (al-frahait et  al., 2020). e-learning and e-education represent the computerassisted learning and education. along with the emergence of new computer technologies, e-learning and e-education continue to transform. in fact, new technologies restructure education to satisfy the needs of economies and societies (abdykhalykova, 2019). universities, as training providers, play a crucial role in ensuring that students, who are the workforce of the present and of the future, acquire sufficient computer skills to meet the demands of the digitalization of the workplace (fonstad & lanvin, 2009). to be able to develop higherlevel skills in students, teachers should have broader and more advanced knowledge of new technologies. moranska (2016) argues that because teachers develop students’ intellectual abilities under the pressure of continuous expansion of computer knowledge, teachers should be fluent in using contemporary computer technologies as professionals, not as mere users. e-learning and e-education play a crucial role in developing higher education institutions. namely, e-education offer more opportunities to deliver education to a significantly vaster student population at the reduced costs. e-education offers opportunities to engage not only in lectures but also in case studies by solving problem-solution puzzles and witnessing real time professional practice, for example, a surgery accompanied by explanations (lau & bates, 2004). tavangarian et al. (2004) argue that e-education is suitable even for constructivism approach in education. consistent with this approach, knowledge is constructed by each individual and therefore learning should be personalized, in other words, should take into account students’ individual differences in abilities, interests, aims and prior experience. ghilay (2018) found out that the model “comprehensive technology-based learning”, which included not only materials available online, but also short-term regular feedback and the long-term forecast of learner difficulties was highly evaluated by students because it satisfied students’ personalized needs, offered flexibility in learning and offered various tools for copying with learning difficulties. the platform of this model is created by new computer technologies. as for latvia, e-learning has been integrated into higher education programs in a variety of ways. there are distance learning programs offering specific courses and degrees. all university colleges and universities have e-learning platforms, such as moodle or e-studijas. as for school education, the education portal called “uzdevumi.lv”1 is officially used by latvian 1 www.uzdevumi.lv http://www.uzdevumi.lv 298 k. uzule. teacher training and education programs in latvia: are e-competences included? schools to engage students in independent learning. students review theory, complete assignments and pass tests on this e-platform. the recent initiative of the latvian national center for education called “skola2030”2 has emphasized the importance of the development of computer skills in the currently transformed school education of latvia. the effectiveness of e-learning is often evaluated at multiple levels, as e-learning embodies the integration of human experience with the capabilities of technologies (al-frahait et al., 2020). carril et al. (2013) argue that one of the key components in e-education is the course design and assessment. regmi and jones (2020) argue that the course design in e-learning is complicated because of the need to stimulate self-directed learning in students, which is not an easily attainable objective and controllable action over distance. hattinger and eriksson (2020) emphasize the importance of the course contents, in other words, the delivered knowledge, is of great importance and that it should promote collaboration of various domains, for example, such as business and academia. thus, not only the knowledge of the taught subject, the ability to integrate it with other disciplines but also the knowledge of abilities and limitations of technologies used to deliver the subject constitute the efficiency of the course, which, at least in part, is created by the teacher, who is a course creator and/or administrator. in fact, lwoga (2014) found that the course satisfaction is linked to the efficiency of the teacher. babic (2012), in her review of blended learning in higher education, which is based on integration of traditional classroom teaching with e-teaching, argues that the efficiency of e-education, in other words, its quality, is linked to and can be measured through e-competences of teachers. in the context of e-learning, e-competences might be defined as a specific set of competences allowing for efficient teaching and productive creation and use of resources for teaching purposes in e-environments. so, what elements could such e-competences include? according to duh et  al. (2012), e-competences include digital skills necessary for conducting e-education and e-learning and which require continuous upgrade due to the continuous evolution of technologies. in this paper, the definition e-competences is expanded to include the above mentioned elements as well as more advanced general computer skills of programming, technical knowledge of rudiments of artificial intelligence, virtual reality and adaptive spaces that are currently embedded or will be embedded into future e-education platforms. e-competences can be referred as competences only when learners have reached the level at which they can use the acquired skills creatively in new professional situations for new professional purposes. in this paper it is proposed to refer to e-competences in the context of e-learning and e-education as e-aspects of a course that represent additional competences to the very standard ones required of teachers not using or minimally using e-learning opportunities. carril et  al. (2013) have identified both roles and competences of teachers working in e-learning. many of these roles and competences are traditional, such as the teacher is an instructor, manager, evaluator and researcher of the course and should have in-depth knowledge of the taught subject, assessment methodology etc. however, some of the competences and roles are clearly e-learning-specific (see table 1). 2 https://www.skola2030.lv/lv/par-projektu https://www.skola2030.lv/lv/par-projektu business, management and education, 2020, 18(2): 294–306 299 on such grounds, the teacher conducting e-learning must have comprehensive knowledge of digital resources, which includes their conceptual creation, their creation on e-platforms, their blending with other e-resources, if required, modification of already existing resources on e-platforms and in other contexts of virtual reality, their administration and assessment. if assessment is conducted by the e-system, teachers should enter a range of answers into it, which in some cases, such as open-ended answers, essays or other types of creative work, might have endless variations as these answers are produced by human thought. in such cases, teachers should be able to teach the software to look for key aspects in the submitted item and train this software to recognize these patterns. obviously, this might be plausible if machine learning, which is a component of artificial intelligence, is embedded into software. but even if it is not yet present on all e-education platforms today, it will certainly be in the future. to be able to engage in such activities, teachers must have more advanced knowledge computer skills at a deeper level. in fact, this type of knowledge was promoted as one of the key teacher competences within the approach of information and communication technologies (hereinafter referred to as ict) (awouters & jans, 2009). however, in the past the knowledge required for integrating ict into teaching was not as sophisticated as the knowledge of technologies that might be expected today. in his doctoral dissertation on e-learning, defended at the university of the west of england in bristol, hammad (2018) lists two subtypes of e-learning – technology enhanced learning and webbased learning, which are implemented using more advanced electronic tools, such as the learning management systems, virtual learning environment and adaptive e-learning systems. obviously, the present and future in computer technologies are associated with artificial intelligence, virtual realities and the internet of things, to name just a few areas. the development of e-learning environments that has been observed over the last 20 years clearly indicates that with time the demand for more advanced computer knowledge is going to increase. table 1. key teacher roles and competences specific to e-learning and e-education (sources: regmi & jones, 2020; hammad, 2018; carril et al., 2013; awouters & jans, 2009) role competences teacher – development of digital resources; – development of teaching in different modes; – stimulation of self-directed learning in students in e environments. technologist – technical knowledge essential for the development of multimedia resources and their adaptation to e-platforms; – knowledge of new software essential for teaching on e-platforms; – technical knowledge of operations of e-platforms, e-resources, e-tools; – information and communication technology (hereinafter referred to as ict) competences; – knowledge of virtual realities; – knowledge of adaptive e learning systems; – knowledge of artificial intelligence. personal – positive attitudes, dedication to education in the e environment; – ability to pay attention to nuances in online communication. 300 k. uzule. teacher training and education programs in latvia: are e-competences included? such development is partially stimulated by ongoing commercialization of all aspects of microand macro-level economic development. consistent with moreno-ger et  al. (2008), the development of e-systems that create and support e-learning is sustained by commercial competition of those creating such e-systems. this competition is often based on the idea of offering more options, which goes hand in hand with the increasing demand for teachers to manage more and more technological options of e-platforms. furthermore, the idea of elearning offering more personalized teaching stirs the expectation that teachers will be able to modify their content and design courses on e-platforms so that each individual or small groups of individuals feel their learning needs have been accommodated. obviously, this requires at least rudimentary programming skills and data analysis skills. this along with one of the key principles of modern education emphasizing not only the competences applicable at the moment but also the ones that will facilitate lifelong learning, thus, stimulating the acquisition of new knowledge years, if not decades, ahead, makes it clear that more advanced computer skills and potentially the knowledge of data analysis tools might be required today and more likely will be expected in the future. the data analysis knowledge might be expected because it would help teachers to analyse current trends in technologies and education and the individual needs of their students in more structured and scientific ways and because data analysis is conducted using various software, which requires the application of computer skills. however, do teacher training and education programs, not focusing on computer or engineering or similar areas, have computer and data analysis competences and knowledge, in other words, e-competences, embedded in their programs as the skills that need to be developed in teacher trainees, in particular in their curricula and course descriptions? the aim of this paper is to review current teacher training and education programs in order to determine if these areas have been incorporated into these programs. thus, the subject of this research is e-competences and their components, such as computer and data analysis knowledge, skills and competences, whereas the object is the course descriptions of teacher training and education programs in latvia. 2. methodology of the current research the chosen research method was document analysis. the selected documents were course descriptions of teacher training and education programs. the teacher training and education programs were taken from the list of the accredited programs available from the academic information centre of latvia. these programs were accredited under the study direction education, pedagogy and sports. this list included only the programs accredited until 2019, which is the limitation of this research (see table  2). the range of the initial accreditation of these programs under this direction varied from 1998 to 2004, which points to their own history of development and the available time for program modification. another set of information for document analysis were the most recent self-assessments reports of universities within the given study direction to conduct document analysis, the keyword and concordance approach was chosen. to analyze course descriptions and self-assessment reports, the antconc software was used, business, management and education, 2020, 18(2): 294–306 301 which was applied to the processing of keywords, key phrases and their concordances only with relevance to the development of students’ computer skills, data analysis skills and students’ skills for work in e-learning environments and other possible environments including e-competences, in other words, the keywords in context analysis (hereinafter referred to as kwic) was used. other instances of the use of these words were excluded. this list of keywords and key phrases was compiled based on the digital and e-learning skills necessary for teachers, based on the earlier mentioned research, as well as the recent european e-competence framework 3.0 (european commission, 2014), which, even though was developed for ict professionals, can apply for teachers, too, perhaps not at the very deep level. at the same time, this list of competences points towards the developments of the markets and possible future expectations of professionals. obviously, the initial list of competences, associated with ict for teachers, was excluded as somewhat out-date as the majority of users nowadays are familiar with how to upload, download or merge files, how to use available functions of e-platforms for education, such as moodle or blackboard. the resulted list is provided in table 3. table 2. teacher training programs in latvia: universities and program names university, city study programs university of daugavpils, daugavpils – teacher; – education; – career counselor and youth specialist; – pedagogy. university of latvia, rīga – pedagogy (two programs); – diversity in pedagogical solutions; – educational sciences; – preschool education teacher; – social pedagogue; – teacher (three programs). latvian academy of sport education, rīga – education and sport specialist; – pedagogy; – sport sciences (three programs). jāzeps vītols latvian academy of music, rīga – general education music teacher; – teacher of professional music subjects. latvia university of life sciences and technologies, jelgava – pedagogy (two programs); – professional education teacher. university of liepāja, liepāja – teacher; – career consultant; – pedagogy. rezekne academy of technology, rezekne – teacher; – social pedagogue; – special education teacher; – pedagogy; – career consultant; – special education; – religious pedagogy; – pedagogy. 302 k. uzule. teacher training and education programs in latvia: are e-competences included? table  3. keywords of e-competences and advanced computer skills (sources: european commission, 2014; regmi & jones, 2020; hammad, 2018; carril et al., 2013; awouters & jans, 2009) skill area keywords and key phrases it – programming (e.g. skills, language); – software (e.g. administration, development); – digital (e.g. knowledge, skills, competences, architecture design); – artificial intelligence; – virtual reality; – adaptive spaces; – e-competences; – ict; – e-learning/distance learning; e-education – application (e.g. development and management); – information technology, or computer, component integration. data analysis – data analysis (e.g. tools, methods); – data management (e.g. tools, methods); – information processing. 3. results of the current research overall, the documents analysed in the paper yielded 190,000 word tokens, however, the total kwic results displayed 75 word items (see table 4). on the one hand, the fact that 75 kwic items were identified in the collected corpus points to that fact that university programs in education and teacher training in latvia have been designed with the awareness of the importance of the development of computer skills in their students. on the other hand, the overall context of almost 190,000 words suggest that the development of computer skills at deeper levels is not considered to be particularly important in these programs, which means that the development of e-competences is not viewed as an important objective. further review of the context of using these word items support this claim. firstly, no specifics of computer technologies were identified; in other words, the context in which these ideas were mentioned was mostly general, and thus, pointing to quite general knowledge of computer technologies, rather than specialized one, which would point to a more in-depth approach to the acquisition of computer knowledge. one exception, though, might refer to using information technologies for data analysis. secondly, such key concepts in contemporary computer science as artificial intelligence, virtual realities and adaptive spaces were hardly mentioned, which suggests that computer skills developed within these programs hardly inform students on the structure, application, modification and integration of realities created by these entities, which are not only the future reality but is already transforming the present. thirdly, the minimal usage of digitalization concepts supports the idea of superficial integration of computer technologies into such programs. finally, no concordances were identified around the idea of developing skills specific for e-learning and e-teaching. thus, e-education and e-competences do not yet constitute an important objective for teacher training and education programs in latvia. business, management and education, 2020, 18(2): 294–306 303 table 4. the obtained results of kwic analysis keywords the number of concordance hits key concordance samples (the number of samples if more than 1) ict 43 – know the basic principles of usage of technologies; – students choose a computer course (6); – programs include an ict course (8); – using computers in work with people with special needs (2); – using computers in work/studies (5) or development of new and necessary competences; – following application of technologies to real life contexts (4); – computers in pedagogy (7); – technologies must fully be used in teaching (2); – able to use technologies to identify regularities / patterns (2); – to use technologies for construction and development of new knowledge in students (5). data analysis (e.g. tools, software, technologies) 8 – research methods contain data analysis; – while conducting data analysis (2); – software used for data analysis; – frequently used methods in data analysis; – use data analysis technologies (3). software 7 – apply practical skills of using software (e.g. spss); – using relevant/specific software (4), students completed tasks; – learning a new software; – develop knowledge of software applicable to specialization. digital (e.g. knowledge, skills, competences, architecture design) 7 – development of digital resources; – digital learning environment; – development of digital competences; – legal and ethical aspects of digital environments; – cross-cutting skills include digital skills; – the regularities that must be considered when working in the digital environment; – in the era of globalization and digitalization the diversity is an integral part of daily life. data processing 5 – using the methodology of data processing; – research tasks include data processing; – develop knowledge of data processing; – develop knowledge of data processing technologies; – data processing and result analysis. programming 2 – an opportunity to acquire (the knowledge of ) programming; – acquire basic principles of programming. virtual reality 2 – know how to function in the virtual reality; – know how to use the opportunities of the virtual reality. artificial intelligence 1 – know how to function in the context of the artificial intelligence. the results for adaptive spaces, e-competences, e-learning/distance learning, e-education, applications, it component integration and data management did not yield any hits. 304 k. uzule. teacher training and education programs in latvia: are e-competences included? conclusions teachers’ expertise is one of the key components of effective education, including e-education (babic, 2012; bjekic et al., 2010). e-education and e-learning might be considered an integral part of the information society, which the current civilization has been aiming for decades (fukuyama, 2000). the very notion of information society implies a fluent use of computer technologies. e-education is going to continue to develop similarly to businesses and other activities that have been moving into e-environments and which have already been undergoing transformations in such environments as a result of the evolution of these environments. these environments have been created by various software and are currently being enhanced by artificial intelligence, virtual reality and adaptive space functions. many areas of education, not initially associated with computer technologies, have already implemented more advanced computer technology components in their training. for example, psychology trainees in the uk are often trained to conduct programming to study their cases and they learn programming languages in order to create their own e-environments to satisfy their own professional needs and the expectations of the market. the review of the current teacher training and education programs in latvia has demonstrated that computer skills have been introduced into training curricula, however, mostly at the rudimentary level. basic knowledge of computer technologies was perhaps sufficient a decade ago but might be insufficient at present and in the future. it is important to understand that basic computer skills form only a small fraction of e-competences because the definition of competences presupposes creativity and the ability to productively use the acquired skills in new contexts for new purposes. the review has shown that the lexical concepts that are associated with e-competences were not identified in the selected corpus of texts. therefore, it can be concluded that at present e-competences are not considered a value in latvian teacher training and education programs; otherwise, they would be included into academic curricula. to understand why e-competences have not yet been included into academic curricula of these programs, the research of similar european programs should be conducted to figure out if this is a latvian culture-specific developmental path of higher education or rather a european one, in which case it would point to the lack of the required conceptual frame on the european scale. such a study would be the extension of this research and therefore is its current limitation. as a result of this study, it can be suggested that latvian higher education programs in teacher training and education should introduce more advanced computer technology courses into their curricula. current computer technology courses in such programs should develop e-competences including rudiments of programming and the basic technical knowledge of artificial intelligence, virtual reality and adaptive space, the knowledge of which would provide teachers with basic programming skills required to design e-courses on eeducational platforms of the present and future. the reason is such that e-education and e-learning of the future will certainly be carried out in interaction with artificial intelligence, virtual reality and adaptive spaces. additionally, more advanced computer knowledge would allow for more options to personalize training for students, which is students’ aspiration (shearer et  al., 2020). within the current trends of higher education development, which business, management and education, 2020, 18(2): 294–306 305 include not only the delivery of proper knowledge to students but also satisfying students’ expectations, personalization of learning should be implemented. the development of e-competences is important to sustain lifelong learning skills and to adapt to various labour market transformations. more advanced e-competences, associated with more advanced computer skills, might significantly boost teachers’ competitiveness on the latvian and global education markets and on the overall latvian employment market which will certainly welcome specialists capable of completing tasks in e-environments. already now there are higher education programs integrating education and humanities with new technologies. for example, there are master’s and doctoral programs in education at illinois college of education, usa, which offer specialization in elearning in higher education3. the university of maryland administers a master’s program called “distance education and e-learning”4. university college london has a master’s program in digital humanities5, whereas the university of washington has a program in digital history6. in such a context, having more advanced courses on computer technologies incorporated into teacher training and education programs might boost competitiveness of latvian education programs. in fact, the preliminary steps in that direction have already been taken by riga technical university, which has opened as master’s program in digital humanities7. references abdykhalykova, a. 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(2020). a systematic review of the factors – enablers and barriers – affecting e-learning in health sciences education. bmc medical education, 20, 1–18. https://doi.org/10.1186/s12909-020-02007-6 schweizer, h. (2004). e-learning in business. journal of management education, 28(6), 674–692. https://doi.org/10.1177/1052562903252658 shearer, r. l., aldemir, t., hitchcock, j., resig, j., driver, j., & kohler, m. (2020). what students want: a vision of a future online learning experience grounded in distance education theory. american journal of distance education, 34(1), 36–52. https://doi.org/10.1080/08923647.2019.1706019 tavangarian, d., leypold, m. e., nolting, k., roser, m., & voigt, d. (2004). is e-learning the solution for individual learning? electronic journal of e-learning, 2(2), 273–280. wang, r., ryu, h., & katuk, n. (2015). assessment of students’ cognitive-affective states in learning within a computer-based environment: effects on performance. journal of ict, 14, 153–176. https://doi.org/10.32890/jict2015.14.9 https://doi.org/10.1080/10494820.2018.1522652 https://doi.org/10.2478/jec-2018-0016 https://doi.org/10.24251/hicss.2020.011 https://doi.org/10.1111/j.1467-8535.2009.00987.x https://doi.org/10.1023/b:joms.0000021522.30587.ff https://doi.org/10.1111/j.0026-7902.2004.00237.x https://doi.org/10.1016/j.chb.2008.03.012 https://doi.org/10.1186/s12909-020-02007-6 https://doi.org/10.1177/1052562903252658 https://doi.org/10.1080/08923647.2019.1706019 https://doi.org/10.32890/jict2015.14.9 copyright © 2020 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: lukasz.brzezicki@ug.edu.pl business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 1: 73–87 https://doi.org/10.3846/bme.2020.11982 introduction higher education in 2018 has undergone another reform aimed at increasing quality. it is, therefore, reasonable to assess the effects of the previous system changes in higher education in 2011. the assumptions to the act on higher education of 2011 indicated that “the measurement of efficiency of didactic activities of public universities of technology in poland: directional distance function with undesirable output approach łukasz brzezicki 1*, robert rusielik 2 1 university of gdansk, gdansk, poland 2 west pomeranian university of technology in szczecin, szczecin, poland received 23 january 2020; accepted 09 march 2020 abstract. purpose – the conducted research aimed at estimating the technical efficiency of didactic activity in the group of universities of technology in poland using the non-parametric data envelopment analysis (dea) method. research methodology – the measurement was based on the model of directional distance function with undesirable output under variable return-to-scale and output-oriented (ddf badoutput-v-o). findings  – the research allowed to group universities in 2010 and 2015 into three categories, i.e. efficient universities and universities above and below the average efficiency. it has been shown that it is justified to use alternative models of efficiency measurement covering different perspectives. the application of the model from a financial and employment perspective showed significant differences in performance levels in some cases. research limitations – this study only looks at universities of technology, so the future study should be extended to other universities and compare efficiency of higher education with the level of study effectiveness (dropout rate education, graduation rates). practical implications – the use of the ddf model with undesirable output allowed to obtain results closer to the actual conditions of teaching in public universities than in the case of using classic dea models, wich only take the desired output into accoount. originality/value  – the originality of the work lies in the use of a more general and flexible ddf approach than the classical dea models, which made it possible to estimate the efficiency of universities taking into account the desirable (positive) and undesirable (negative) output. keywords: higher education, efficiency, dea, ddf, undesirable output. jel classification: i22, i23. http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 https://doi.org/10.3846/bme.2020.11982 https://orcid.org/0000-0002-0761-1109 https://orcid.org/0000-0001-9821-4047 74 ł. brzezicki, r. rusielik. measurement of efficiency of didactic activities of public universities... proposed changes are primarily of a pro-quality nature and lead to an improvement in the efficiency of spending public funds on higher education” (ministerstwo nauki i szkolnictwa wyższego [mnisw], 2009, p. 22). the aforementioned problem has still not been adequately resolved because, in the justification to the draft law on higher education and science from 2017, attention is drawn, inter alia, on “unsatisfactory quality of higher education” (mnisw, 2017, p. 3). in addition, it is indicated that (mnisw, 2017, p. 1) “systemic problems in the area of higher education (...) negatively affect (...) the level of education of students and doctoral students. this is a premise for the reform (...), including changes in the functioning of the system, management, financing and assessment of the quality of the university’s activities”. nor can one disagree with leja (2002, p. 16), who emphasizes that “assessing institutional efficiency in higher education is necessary primarily because the financial (public) funds are allocated on the basis of indicators characterizing university achievements and activities”. the above-selected assumptions of the two reforms of the academic education system correspond to the requirements for management control of public entities in terms of efficiency and effectiveness of operations in accordance with art. 68 of the public finance act (ustawa z 27 sierpnia 2009 r.). these considerations indicate that the problem of measuring the effectiveness of higher education in the field of education is very important and requires in-depth research in this field. the purpose of this research was to assess the level of technical efficiency of teaching activities of universities of technology using the dea method, taking into account the desired and undesirable output of the educational process. the article consists of six parts. after the introduction, the second part reviewed the literature on the study of the efficiency of higher education. the next methodical part presents both the essence of measuring efficiency using dea models that were used in the research and characterizes the empirical research. the fourth part presents the variables adopted for the study, and the next section presents the results of empirical research. the article concludes with conclusions and proposals for further research within the considered topic. 1. review of the scientific literature a query in polish and foreign literature shows that the non-parametric dea (data envelopment analysis) method (charnes et al., 1978; banker et al., 1984) is primarily used to measure the efficiency of higher education. the parametric sfa (stochastic frontier analysis) method is much less frequently used, which dates back to the late 1970s (aigner et al., 1977; meeusen & van den broeck, 1977). both methods determine the level of efficiency of the audited entity in relation to the efficiency limit. it should be remembered, however, that dea, unlike sfa, is a deterministic method and does not include the so-called random component, making it more susceptible to measurement errors. besides, dea estimates the level of efficiency based on other units in the study group, rather than an independent model in the form of production functions or costs, as in the case of sfa (brzezicki & prędki, 2018). nevertheless, the multitude of models that make up the dea methodology makes it most commonly used to measure efficiency in higher education. therefore, when reviewing the business, management and education, 2020, 18(1): 73–87 75 literature on the subject, the focus was mainly on this method. studies on the efficiency of higher education using the dea method are carried out at several levels: from international comparisons of higher education systems (wolszczak-derlacz, 2015), to the national level of all 59 public universities (ćwiąkała-małys, 2010; świtłyk, 2013) or selected groups universities (rusielik, 2010; szuwarzyński & julkowski, 2014; brzezicki & wolszczak-derlacz, 2015; brzezicki, 2017), up to the faculties of one (pietrzak & brzezicki, 2017) or several universities (pietrzak, 2016). it is widely accepted that the main areas of activity of universities include: didactics and the scientific sphere. however, more and more often you can see that universities from scientific and culture-forming institutions “(...) they are clearly transforming into enterprises and even industrial universities” (czerepaniak-walczak, 2013, p. 11). therefore, the literature on the subject began to use the concept of “entrepreneurial university” to define a university that functions in many areas, actively and flexibly adapt to the changing market and its needs, is constantly looking for new development opportunities and treats its stakeholders as clients (wójcicka, 2006). according to the entrepreneurial university paradigm, the university’s areas of activity are teaching, research and cooperation with the socio-economic environment. bearing these areas in mind, it can be seen in the literature that some of the authors only deal with research on the efficienty of didactics (e.g. brzezicki & wolszczak-derlacz, 2015; świtłyk, 2013), and some analyse both didactics and scientific research (e.g. wolszczak-derlacz & parteka, 2011). however, more and more often, the authors try to capture data from all three areas of higher education (e.g. pietrzak & brzezicki, 2017). in the case of analysing didactic activity, the number of students, graduates (ćwiąkałamałys, 2010) was included on the results side, and for scientific activity the number of publications, citations (wolszczak-derlacz, 2013), and in relation to activities for the socioeconomic environment the number of research projects, the value of grants (pietrzak & brzezicki, 2017; wolszczak-derlacz, 2013). however, expenditures were assumed to include the number of academic teachers (brzezicki & wolszczak-derlacz, 2015; pietrzak & brzezicki, 2017; wolszczak-derlacz & parteka, 2011), other employees (brzezicki & wolszczak-derlacz, 2015; rusielik, 2010), the value of revenues (brzezicki & wolszczak-derlacz, 2015; wolszczak-derlacz & parteka, 2011) and various types of costs, e.g. consumption of materials and energy, external services, etc. (rusielik, 2010; świtłyk, 2013). however, the most commonly used input variables in the field of teaching include the number of academic teachers, other employees, the number of students, graduates and various financial categories. as has already been mentioned earlier, various statistical and financial data were used to test efficient using the dea method. however, it should be noted that in the case of didactic activity, the carrier of non-material educational services are people, while the very effect of the educational process is stretched in time, which is why it is subject to various perturbations (see pietrzak, 2016). this causes some problems when defining the effects of the area related to education because depending on the purpose of the analysis, students (e.g. rusielik, 2010) and once graduates (e.g. wolszczak-derlacz, 2013) were accepted as the product of the activity. 76 ł. brzezicki, r. rusielik. measurement of efficiency of didactic activities of public universities... however, as emphasized by brzezicki (2017), graduates are naturally identified with the final education process, so their choice is logical and closer to the actual assessment of teaching activities. at the same time, one cannot disagree with szuwarzyński (2006, p. 217–218), who indicates that “it is often assumed that a product is a graduate, but no one specifies how he obtained the diploma. is it by the deadline or a year or two later? (...) these are also products that can be compared with defective products in a production company. they entail specific costs ... ”. considering the fact that the ministry of science and higher education is both the owner of public universities and the main one financing the education service by means of a didactic subsidy, it is very important for as many people as possible to complete education in the nominal time provided for the education process and be able to move from the educational to the economic sphere by undertaking work. taking into account both the perspective of the ministry of science and higher education, which expends specific public funds, including for didactic activities and for the universities themselves, which resources are used in the education process, it should be assumed that the most important thing is that the expenditure allocated for this purpose is used rationally and effectively (in accordance with the assumptions of management control) in the nominal time foreseen for studies for a given educational cycle. when analysing methodologically the research conducted using the dea method, devoted to polish higher education, a particular relationship was noticed. two standard radial ccr and bcc models (e.g. ćwiąkała-małys, 2010; świtłyk, 2013) are usually used for the study, with few exceptions in the form of, e.g. sbm (rusielik, 2010; szuwarzyński & julkowski, 2014; brzezicki, 2017), non-radial sbm network model (pietrzak & brzezicki, 2017), hybrid model with undesirable output (brzezicki, 2018). meanwhile, studies in foreign literature are increasingly appearing in which a new approach is used to assess efficiency using the directional distance function model (ddf), or the idea is used as the basis for building a new, much more advanced research methodology. among the works in this area, it is worth mentioning (barra & zotti, 2016; daraio et al., 2015; yang et al., 2018; villano & tran, 2019). however, only barra and zotti (2016), using the function of directional distance, drew attention in their research to the so-called undesirable effects of didactic activity, taking into account a simple relational indicator of student resignation between the first and second year of study. according to the authors’ knowledge, the aforementioned problem signalled theoretically by szuwarzyński (2006) regarding the time of obtaining a diploma by higher education graduates, and the related issue of undesirable output of didactic activity, were first taken in poland empirically by brzezicki and rusielik (2017), who included the number of students after the last year without a diploma, similar to brzezicki (2018). this topic was also developed by szuwarzyński (2018), who adopted the student resignation rate between the first and second year of studies as an undesirable output, adopting the research convention of barra and zotti (2016). however, all the quoted studies do not fully cover the issue of the undesirable output of teaching in higher education. this gaps in knowledge found the authors will try to fill empirically later in the article. to date, no analysis has been made in poland of the issue to which szuwarzyński (2006) drew attention, using a new approach to efficiency testing using the directional distance business, management and education, 2020, 18(1): 73–87 77 function. in addition, delimiting this to the desired output of teaching activities when the graduate graduated in regular time and undesirable (negative) output of these activities if he exceeded the nominal period of study, which is a practical fulfilment of the assumptions of management control. 2. research methodology as noted in the previous part of the work, the dea method is used to study the efficienty of higher education more often than other methods. the beginnings of the dea method go back to the article by charnes, cooper and rhodes (1978), which presents the first dea model called ccr, from initials of authors’ surnames, assuming a constant return to scale. however, the paper (banker et  al., 1984) presents the second, basic bcc model, in which variable return to scale was adopted. the progress in measuring efficiency, caused by the use of a more general and flexible approach, which is the directional distance function (ddf), has made this approach increasingly used to measure the efficiency of business entities under the dea methodology. färe and grosskopf (2000), presenting the relationship between the shephard distance function (1953, 1970), whose idea is used in radial models, and the directional distance function proposed by chambers, chung, and färe (1996), indicate that it is an important tool in production theory. the shephard distance function is a special case of the directional distance function. färe and primont (2006) argue that the functions of directional distance can be considered as an alternative to appropriate concepts for measuring radial efficiency. as already mentioned, the function of the directional distance was formally presented for the first time by chambers, chung, and färe (1996, 1998), who used the work of luenberger (1992a, 1992b, 1995) and redefined his benefit function and shortage function as measures of efficiency, introducing a new distance function for this purpose, which they called the directional distance function. in addition, they demonstrated the fact that the directional distance function covers other classic cases, including shephard’s entry and exit functions. the advantage of the directional distance function is that it can be estimated using the same linear programming techniques that are used in the dea methodology. the classic approach within the dea methodology allows determining the effectiveness of the tested unit based on the efficiency criterion assuming that the production of a larger number of products (regardless of whether they meet expectations or not), using smaller resources is better than generating a smaller number of products. however, the above principle does not quite work in business practice because it does not include undesirable (defective) products of activity that occur during the production process. most often, the company tries to produce as many desired products as possible and the least undesirable (e.g. due to a production error) that do not meet expectations. therefore, the economic unit, called dmu (decision making unit), whose production technology allows to generate more desirable products, in line with expectations and less undesirable (defective), using fewer resources, will be more efficient. only chung (1996) and chung, färe, and grosskopf (1997) presented the possibilities of using the directional distance function in the situation of both desirable and undesirable 78 ł. brzezicki, r. rusielik. measurement of efficiency of didactic activities of public universities... output of the enterprise’s activity. the model of the directional distance function with undesirable output (ddf badoutput) is based on the assumption that each dmu unit subjected to the test produces both the desired and unwanted output from the given inputs. this means that three groups of variables are used to estimate efficiency, i.e. input as well as desirable and undesirable (defective) output. the following symbols have been adopted: input vector in the form of nx r+∈ , undesirable output jb r+∈ , and desired my r+∈ , then the production technology can be described as: ( ) ( ){ }, , : can produce ,t x y b x y b= . (1) the directional distance function is based on scaling the relevant directional vectors ( ), , i s kx y bg g g g r r r+ + += − − ∈ × × , which correspond to the individual variables, i.e. inputs ( xg− ) and desirable ( yg ) and undesirable ( bg− ) outputs. the directional distance is determined by the formula (barra & zotti, 2016, p. 171): ( ) ( ){ }, , , , , : , , x y b x y bd x y b g g g sup x g y g b g t= β −β +β −β   , (2) where β represents the distance between the observation for a given unit and the point on the efficient frontier, taking into account the direction vector determining the direction in which efficiency is measured. the directional distance function with undesired output, assuming a variable return to scale (badoutput-v), can be estimated within the framework of the dea methodology, for the object number o = 1, ..., n, as follows: max oβ ; 1 n jo ij io xio j x x g = λ ≤ −β∑ ; 1 n jo sj so yso j y y g = λ ≥ +β∑ ; 1 n jo kj ko bko j b b g = λ = −β∑ ; (3) 1 1 n jo j= λ =∑ ; 0, 1, , ; 1, , ; 1, , ; 1, ,jo i i s s j n k kλ ≥ = … = … = … = … , where joλ is the intensity factor. however, the condition 1 1 n jo j= λ =∑ indicates that the measurement of efficiency will take place under the assumption of a variable return to scale. the β value is a measure of the inefficiency of the dmu being assessed. therefore, if for a given dmu unit, the value β = 0 means that the tested entity is efficient, while the measure β > 0 indicates the inefficiency of the object. in order to determine the unit’s efficiency as suggested by ray (2008), subtract the inefficiency index (β) calculated using the directional distance function (ddf), i.e. the level of efficiency = (1–β), from a value of 100% efficiency. the procedure presented by ray (2008) was used in this study. business, management and education, 2020, 18(1): 73–87 79 the model (3) in general is characterised by a lack of orientation (non-oriented), unlike many “classic” dea models, including ccr and bcc. by adapting for the purposes of this article the research convention of barra and zotti (2016), consisting in taking into account relevant desirable and undesirable output of didactic activity, it was decided to use the so-called output-oriented radial ddf model with the variable return to scale [ddf badoutput-v-o]. the lack of orientation, which characterises the initial model, is therefore abandoned (3). this is a particular case of the model (3), which assumes ( ) ( ), , 0, , :x y b o og g g g y b= − − = − max oβ ; 1 n jo ij io j x x = λ ≤∑ ; ( ) 0 1 1 n jo sj s j y y = λ ≥ +β∑ ; ( ) 1 1 n jo kj ko j b b = λ = −β∑ ; (4) 1 1 n jo j= λ =∑ ; 0, 1, , ; 1, , ; 1, , ; 1, ,jo i i s s j n k kλ ≥ = … = … = … = … . in order to properly perform the test using the dea method, it is necessary to both determine the appropriate number of decision units (in relation to the total number of inputs and output), as well as to select them correctly to ensure the homogeneity of the analysed group of objects. therefore, purposeful selection of objects subjected to analysis was made, adopting a group of 18 public technical universities supervised by the ministry of science and higher education (mnisw): u1 – west pomeranian university of technology in szczecin, u2 – warsaw university of technology, u3 – białystok university of technology, u4 – university of technology and humanities in bielsko-biała, u5  – częstochowa university of technology, u6 – gdańsk university of technology, u7 – silesian university of technology in gliwice, u8  – kielce university of technology, u9  – koszalin university of technology, u10  – cracow university of technology tadeusza kościuszki, u11  – agh university of science and technology, u12 – lublin university of technology, u13 – łódź university of technology, u14 – opole university of technology, u15 – poznan university of technology, u16  – kazimierz pulaski university of technology and humanities in radom, u17  – rzeszow university of technology, u18 – wroclaw university of technology. 3. variables adopted for empirical study the basis for the selection of variables for the study was the purpose of this work to analyse the efficiency of teaching activities in a situation of both positive and negative output. in addition, attention was also paid to data used in the literature by other authors. the primary resources of universities include financial resources and employees. therefore, they focused 80 ł. brzezicki, r. rusielik. measurement of efficiency of didactic activities of public universities... on defining inputs. thus, the number of academic teachers (full-time and part-time) converted into full-time jobs was assumed as the first circulation  – x1. the second and last expenditure was the total value of teaching income in a given year – x2. turning to the effects of teaching, two output were adopted, one desired (positive) and the other undesirable (negative). the total number of students (full-time and part-time) after the last year without a diploma who did not complete education in the nominal period, was used to define the undesirable output of didactic activity  – b1. however, the total number of graduates (full-time and part-time, including foreigners) – y1, who are naturally identified with the final education product, was adopted as the desired output of the educational process. two empirical models (m-1, m-2) were adopted for the study, consisting of one input and two output (table 1). only the number of academic teachers (x1) was assumed for expenditure in the first empirical model (m-1), while the second model (m-2) included only the total value of teaching income (x2). the adoption of such a research convention results from the fact that the highest share in teaching income is a subsidy from the state budget, the amount of which depends, among others on the number of teaching staff. therefore, there is a certain correlation between variables, so to eliminate it, one variable was adopted in both empirical models. on the other hand, the same variables characterizing the undesirable and desired output of didactic activities were adopted as output in the considered models, in the form of the number of students after the last year without a diploma (b1) and the number of graduates (y1). it was assumed that a higher education institution whose production technology allows it to obtain more good output and less undesirable in terms of didactic activity is more technically efficient than other units. table 1. accepted inputs and output in empirical models (source: authors’ calculations) name of the variable m-1 m-2 x1 – number of academic teachers (full-time and part-time) + – x2 – total value of teaching income – + b1 – number of students (full-time and part-time) after the last year without a diploma + + y1 – number of graduates (full-time and part-time) + + statistical data used in the study were taken from the publication “higher education – basic data” (mnisw, 2010, 2015) published by the ministry of science and higher education, and financial data from reports on the implementation of the material and financial plan of individual universities published in the public judicial and economic monitor (ms, 2010–2015). the adoption of data from 2010 and 2015, makes it possible to illustrate the situation before and after the introduction of the reform of higher education in poland in 2011. business, management and education, 2020, 18(1): 73–87 81 4. results and discussion table  2 presents a summary of results of measuring the efficiency of teaching activities in 2010 and 2015 for the m-1 model (regarding the number of employees) and the m-2 model (related to the total value of teaching income). table 2. the efficiency of educational activities of public technical universities in 2010 and 2015 (source: authors’ calculations) year 2010 2015 2010 2015 model m-1 m-2 m-1 m-2 difference [(m-1)– (m-2)] u1 0.87 0.87 0.50 0.50 –0.01 0.00 u2 0.95 0.95 0.71 0.71 0.00 0.00 u3 1.00 1.00 0.64 0.66 0.00 –0.03 u4 1.00 1.00 1.00 1.00 0.00 0.00 u5 1.00 1.00 0.58 0.79 0.00 –0.21 u6 0.62 0.60 0.83 0.77 0.02 0.06 u7 1.00 1.00 0.89 0.90 0.00 –0.01 u8 0.74 0.58 0.89 0.97 0.16 –0.08 u9 1.00 1.00 0.68 0.84 0.00 –0.16 u10 0.76 0.76 0.73 0.75 0.00 –0.02 u11 0.78 0.78 1.00 1.00 0.00 0.00 u12 0.55 0.56 0.71 0.70 0.00 0.01 u13 0.71 0.71 0.58 0.55 0.00 0.03 u14 1.00 0.99 1.00 1.00 0.01 0.00 u15 1.00 1.00 0.88 0.90 0.00 –0.02 u16 0.92 1.00 1.00 1.00 –0.08 0.00 u17 0.88 0.81 1.00 1.00 0.06 0.00 u18 1.00 1.00 0.87 0.84 0.00 0.03 minimum 0.55 0.56 0.50 0.50 average 0.88 0.87 0.81 0.83 maximum 1.00 1.00 1.00 1.00 std. deviation 0.15 0.16 0.17 0.16 the average technical efficiency in 2010 was 0.88 for the m-1 model, while for the m-2 model, it was 0.87. in turn, in 2015 it was respectively 0.81 for the m-1 model and 0.83 for the m-2 model. it can be stated that in 2015 the overall level of efficiency decreased by a few percentage points. in 2010, the lowest efficiency indicators for both models were recorded at the lublin university of technology, while in 2015 it was the west pomeranian university of technology. analysing the differences between the model covering the number of academic teachers (m-1) and the model covering the value of teaching income (m-2), it can be stated that in 2010 in three universities these differences were significant. the biggest difference between 82 ł. brzezicki, r. rusielik. measurement of efficiency of didactic activities of public universities... the analysed models was found at the kielce university of technology, and it was about 16%. in turn, at the university of technology and humanities in radom this difference was  –8%, and at the rzeszów university of technology 6%. generally, it can be stated that the differences between the analysed models (apart from the cases mentioned) are small. this confirms the calculated average efficiency level of both models. it is worth noting that only in the case of the university of technology and humanities in radom the m-2 model had a higher indicator level than the m-1 model. in turn, in 2015, the differences between the two models were definitely larger. the level of performance indicators for the m-2 model is higher than for the m-1 model. in some cases, these differences are very significant, e.g. at the częstochowa university of technology, they amounted to  –21%, and at the koszalin university of technology  –16%. it can be stated that 2015 is definitely more diverse in this respect than in 2010. in the next step, an attempt was made to group the analysed universities in terms of the efficiency indicator level. the universities were divided into three groups. group a, i.e. efficient universities where the level of the efficiency ratio is 1.0. group b, where the level of efficiency is above the average for a given year and model, and group c where the efficiency is below this average. the results of the grouping are included in table 3. table 3. grouping of public technical universities in 2010 and 2015 (source: authors’ calculations) model m-1 m-2 m-1 m-2 year 2010 2015 u1 c b c c u2 b b c c u3 a a c c u4 a a a a u5 a a c c u6 c c b c u7 a a b b u8 c c b b u9 a a c b u10 c c c c u11 c c a a u12 c c c c u13 c c c c u14 a b a a u15 a a b b u16 b a a a u17 b c a a u18 a a b b group numerosity a 8 8 5 5 b 3 3 5 5 c 7 7 8 8 business, management and education, 2020, 18(1): 73–87 83 based on the grouping results, it was noticed that there are differences in the level of efficiency between the analysed years. in 2010, there were eight efficient universities, three colleges in group a and seven colleges in group b. in 2015, there were five efficient colleges, in group b there were also five colleges and eight universities in group c. only one university was recorded, which was fully efficient both in the case of two empirical models and in both analysed years. this university was the university of technology and humanities in bielsko-biała. there were also three universities, which in each of the analysed cases belonged to group c. they were the university of technology in: cracow, lublin and łódź. only two universities, i.e. białystok university of technology and częstochowa university of technology “fell” from the efficient a group to the least efficient c group between the analysed years. you can also include the koszalin university of technology. however, in the case of agh, there was a transition from group c to group a. a similar situation occurred at the rzeszów university of technology. in other cases, transfers between the groups occurred from group a to b or from group b to c. comparing the analysed years; one can notice a tendency to move to a lower efficiency category. conclusions in this study, the level of efficiency of teaching activities of universities in individual years has been analysed. the use of the ddf model with undesirable output allowed to obtain results closer to the actual conditions of teaching in public universities than in the case of using classic dea models, which take into account only the desired output. on the other hand, the use of two alternative models, in which in one case the number of teachers (m-1) was adopted as an input, and in the other the value of teaching income (m-2) allows to determine the differences in the results obtained for some universities. this indicates the validity of using alternative models to assess the efficiency of individual universities. such extended analysis, carried out from different perspectives, gives a complete picture of the examined level of efficiency. the analysis showed that the average level of the efficiency ratio in 2015 decreased compared to 2010 by 4–6 percentage points. the number of universities considered efficient also decreased. among the analysed universities, only the university of technology and humanities in bielsko-biała showed full technical efficiency in all analytical variants. on the other hand, three universities were noted, which in all analyses were below average efficiency. future research directions should take into account the quality of academic education and the links between education and the labour market. the second important research direction should be analysis, which affects the efficiency of studying and reducing the number of people who do not finish education in the nominal duration. acknowledgements the authors thank the ministry of science and higher education in poland for providing the data necessary to conduct this study. 84 ł. brzezicki, r. rusielik. measurement of efficiency of didactic activities of public universities... funding this work was not supported by any funding agency. author contributions łb developed the research concept and wrote the following parts of the article: introduction, review of the scientific literature, research methodology, variables adopted for empirical study. łb was responsible for data acquisition and 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(2018). measuring the inefficiency of chinese research universities based on a two-stage network dea model. journal of informetrics, 12, 10–30. https://doi.org/10.1016/j.joi.2017.11.002 https://doi.org/10.1016/j.joi.2017.11.002 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 1: 34–48 https://doi.org/10.3846/bmee.2021.13167 *corresponding author. e-mail: perdana.wahyu@yarsi.ac.id macroeconomic indicators and yield curve of indonesian government bond perdana wahyu santosa * faculty of economics and business, yarsi university, jl. letjen, suprapto, cempaka putih, 10510 jakarta, indonesia received 14 july 2020; accepted 01 october 2020 abstract. purposes  – indonesian government bond (known as sun) plays an essential role in financing sustainable development in indonesia and is a fixed income investment vehicle that attracts foreign investors. this study aims to examine the effect of macroeconomic factors or macro-risk on the yield curve of the sun bond. methodology – the type of data used in this study is secondary data in the form of bi rate, inflation, exchange rate, foreign exchange reserves, current account deficit, and crude oil prices in the 2010–2019 period. this study used the error correction model (ecm) method. the primary sources of data are some government bodies such as the bank indonesia website (www.bi.go.id) and the indonesian site bond market directory (www.idx.co.id). findings  – the results showed that the exchange rate had a positive effect in the long run, while the foreign exchange reserves effect inversely on the yield curve. the bi rate, inflation rate, and oil price have a positive effect on yield significantly. furthermore, the current account deficit has no significant impact on the yield curve for the long term and short term. implications  – there are some managerial and policy implications to maintain an efficient, fixed income market. the authorities need to promote gdp growth, pursue fiscal efficiency, keep up the credit rating and risk of current account deficit, keep a relatively low bi rate and expected inflation rate. the yield curve fluctuation is influenced by changes in some macro-monetary factors above, which should consider in making sun investment decisions. limitations  – this study has two limitations. firstly, the future model could use a re-specification analysis that employs the vecm method that can result in impulse response function with a shock and period study; secondly, this study could be adding some variables including budget policy and political dynamics. originality – this study contributes to the literature by examining the yield curve using the current account deficit related to government debt and macroeconomic factors that affect the bond yield curve. these findings can arrange a strategy to develop the bond market and obtain funding with a low cost of debt funds. keywords: investment, fixed income, yield, government bond, macro-risk, monetary, indonesia. jel classification: e43, e44. https://doi.org/10.3846/bmee.2021.13167 https://orcid.org/0000-0002-0221-3910 http://www.bi.go.id http://www.idx.co.id business, management and economics engineering, 2021, 19(1): 34–48 35 introduction one of the most critical indonesian domestic financing by issuing government bonds (sun). with the issuance of bonds, the government has helped shape and advance indonesia’s bond market significantly so far (pitoyo & afriany, 2019). the government considers it necessary to continuously develop the bond market in indonesia through the directorate general of debt management and ojk. this policy is reflected in the government’s efforts to gradually expand the bond market by preparing the rule of law and supporting infrastructure for the market to achieve liquid and efficient bond market conditions. the government annually issues bonds for funding that impact increasing government bonds’ outstanding bonds in the domestic bond market (santosa & sihombing, 2015). the bond market is an alternative source of state funding, especially for emerging markets that need debt in the current economic growth era. after the 1997 asian financial crisis and the subprime mortgage financial market crisis, the government has neutralized bonds as the primary source of long-term financing to strengthen the national financial system and reduce the risk of future financial crisis shocks (santosa & sihombing, 2015; sihombing et al., 2014). at present, the indonesian government’s attitude is increasingly intense and sees the need to cover the budget deficit through loans sourced from within and outside the country through the sun’s issuance. however, due to high levels of flexibility and dependencies on foreign donor countries, the indonesian government has begun to shift to domestic financing (apriadi et al., 2016; utama & agesy, 2016). meanwhile, in terms of the foreign exchange rate, a factor that can increase the risk of default from government bonds is the liquidity crisis, where foreign exchange reserves measure the level of liquidity (huang et al., 2019; paramita & pangestuti, 2016). regarding world oil prices, if world oil prices rise, there will be an increase in funding requirements for the procurement of oil for importing countries, encouraging an increase in interest rates. based on these explanations, that soaring oil prices will cause inflation and increasing interest rates. therefore, the bond market responds to this by lowering bond prices and rising bond yields (sihombing et al., 2013). the current account deficit (cad) is one indicator that can project rupiah exchange rate movements and investment risk. so far, the risk of investing in the indonesian debt market is still high. this risk can be seen from the level of default risk or credit default swap (cds). bond yields reflect the government’s default risk or debt issuing country in paying interest and principal debt at a predetermined time (santosa & sihombing, 2015). a yield curve is formed from the bond yield relationship with different maturity periods that can move parallel or not parallel, up or down (simu, 2017; utama & agesy, 2016). the yield curve movement is influenced by changes in bond yields that are contributors to the influence of macroeconomic factors that occur. the development financing policy, which uses treasury bills, causes the government bond market to grow significantly throughout the research period (sihombing et al., 2013). this circumstance also increases the bond market’s liquidity and makes domestic and foreign investors invest in government bonds. the indonesian economic condition that continues to grow causes government bonds’ yield curve trend to decrease periodically (kahlert, 2017; kurniasih & restika, 2015). this condition shows that investors already see the indonesian economic fundamentals as better and investment risks in indonesia, decreasing over time. 36 p. w. santosa. macroeconomic indicators and yield curve of indonesian government bond this paper purposes of generalizing the statistics and experts’ opinions about the government yield curve in indonesia. besides, this study fulfills the research gap explained above; especially macroeconomic indicators included the two controlling variables. the macro indicators involved monetary factors, such as the bi-7 day repo rate, inflation rate, exchange rates, reserved assets, controlling variables, global variables like world oil prices, and fiscal factors such as cad. the reason applied cad is that it becomes a more critical variable because it increases year-on-year continuously and one of the fiscal weaknesses. this paper provides some guidance as to which criteria should be used and users of the yield curve belong to indonesia, and so they address different issues and have different goals. compared to other time series analysis, the advantage of the used method is the short-term effect and long-term effect on the yield curve. 1. literature and hypothesis yield curves are usually estimated using annualized discount bond yields, calculated using the continuously compounded interest rate method. the yield curve cannot be directly observed due to the absence of discount bonds with a sustainable maturity date. consequently, the yield curve is usually estimated by applying the time structure method that forms bonds that have coupons with different maturities. there are 4 (four) theories that explain the formation of the yield curve (fabozzi, 2016; brigham & houston, 2016; elton et  al., 2014), namely: the pure expectations theory (short-term fluctuations), the pure risk premium theory, and there are two versions in describing the form of premium risk namely the liquidity premium and the preferred habitat. the liquidity premium states that investors are more interested in maintaining bonds with a more extended maturity period hoping that the bonds provide a high rate of return (at a particular risk level premium) to balance the high volatility of the bonds. the preferred habitat stated that the conditions of investor liabilities influence investors in liquidating their investments. furthermore, in the market segmentation theory, there are several categories of investors in the market with the condition that each investor invests in specific segments under their liabilities without ever moving to another segment. furthermore, the biased expectations theory is a combination of pure expectations theory and risk premium theory. this theory concludes that the yield curve reflects market expectations of future interest rates with variable levels of liquidity over time (fabozzi, 2016; bodie et  al., 2019; elton et al., 2014; ross et al., 2013). previous studies discussed the determinants of yield spread in developing countries and foreign debt (favero et al., 2010; santosa & sihombing, 2015; verner & herbrik, 2017). yield spreads, which reflect risk premiums, are needed to encourage debtors to lend to borrowers, usually modeled as a function of default probabilities and anticipated losses. this yield, in turn, will relate to fundamental conditions that can be classified into three categories, such as macroeconomic, external shocks, and capital flows. in general, previous literature found support for each determinant of yield spread (simu, 2017; arshada et  al., 2018). moreover, kurniasih and restika (2015) and sihombing et al. (2013) analyzes the determinants of bond yield spreads in indonesia period 2005 to 2012. they conclude that domestic and external fundamental factors largely determine access to foreign markets (khan et al., 2017). business, management and economics engineering, 2021, 19(1): 34–48 37 some previous research has been conducted to test the yield curve, banking industry, and monetary policy, such as by (sihombing et al., 2013, 2014; santosa & sihombing, 2015; tjandrasa, 2017; strassberger, 2012). the results show that the yield curve was affected by some macroeconomic indicators at various levels of significance depending on the coupon and maturity term (sihombing et  al., 2014). they concluded that yield curve fluctuation in the government bonds (sun) has a relationship with liquidity, solvency, macro-monetary indicators, external shock, and market risk factors (apriadi et al., 2016). when linked to bond yields, rising interest rates encourage investors to ask for higher yields on the risk of uncertainty in the future, so bond yields will increase and trigger a decline in bond prices (siklos, 2011). the inflation rate is one of the crucial factors determining the benchmark interest rate’s determination, which has a close relationship with sun coupons (huang et al., 2019). these events will cause price increases in general and continuously. fluctuating inflation will affect investment in various other securities, including bonds. inflation continues to increase, causing overall price increases, so investment in securities such as bonds will be felt increasingly risky. as a result, investors will expect higher yields on their investments (kurniasih & restika, 2015; santosa & sihombing, 2015). therefore, it is recommended that developing countries wishing to seek greater access to the international bond market must improve their macroeconomic fundamentals, especially monetary stability and fiscal discipline (pramana & nachrowi, 2016). santosa and sihombing (2015) conducted a study of indonesian government bonds (sun) using data from 2003 to 2012. the study found a down-trend in indonesian government bonds’ yield spread during the study period due to well-preserved indonesian economic fundamentals. macroeconomic factors of the consumer price index (cpi) have a positive effect on the yield spread of indonesian government bonds, and bank indonesia’s interest rates (bi-7 day rr) effect negatively on the yield spread (pramana & nachrowi, 2016). moreover, siklos (2011) emphasized the importance of external factors in addition to the fundamental elements in market sentiment analysis. 1.1. hypothesis development 1.1.1. influence of bi rate on bond yields the interest rate is an attraction for investors to invest their investments in deposits or sbi so that investments in other forms such as shares will be competed (sundoro, 2018). an increase in the sbi interest rate will increase the commercial interest rate and positively impact yield curve movements for long-term and short-term bonds (sihombing et  al., 2013). this finding is in line with research conducted by kurniasih and restika (2015) and sundoro (2018), which state that a tight monetary policy that causes a decrease in the bi rate can cause bond yields also to fall. also, yuliawati and suarjaya (2017) and tjandrasa (2017) stated that the interest rate has a positive and significant effect on government bond yield (sun). in their research, pramana and nachrowi (2016) and santosa & sihombing (2015) concluded interest rates have a positive and significant effect on government bond yields on the indonesia stock exchange because the higher interest rates will offer large yields to attract investors to invest in their funds on bonds. h1: bi rate has a positive effect on government bond yields (+). 38 p. w. santosa. macroeconomic indicators and yield curve of indonesian government bond 1.1.2. influence of inflation on bond yields the bond market will generally be attractive if economic conditions tend to decline because a declining economy is usually triggered by rising inflation. in economic conditions that have increased inflation, interest rates will tend to increase. so when investors estimate an increase in inflation, they will ask for compensation in the form of a higher yield (fabozzi, 2016). hsing and hsieh (2012) stated that inflation is one of the essential factors affecting bond yields. inflation has a positive effect on bond yields, supported by tjandrasa (2017), which states that inflation in the percentage of cpi has a positive and significant impact on changes in the yield of 10-year government bonds. sihombing, siregar, manurung, and santosa (2014) state that the cpi will increase consumer spending and slow down the pace of economic improvement. this increases the risk premium and yield curve. h2: inflation has a positive effect on government bond yields (+). 1.1.3. effect of exchange rate on bond yields several previous studies support the suggestion that the real exchange rate has a positive and significant effect on bond yield in the long run. pramana and nachrowi (2016) stated similarly that the exchange rate positively and significantly affected government bond yields in us dollars. the results of research from paramita and pangestuti (2016) found that the exchange rate had a significant positive effect on government bond yields. sihombing et al. (2013) also said that the nominal exchange rate was responded positively by a 1-year tenor yield and yield on a 5-year tenor. however, kurniasih and restika (2015) suggested that the usd-idr exchange rate, in the long run, affects sbn yield negatively. they also stated the same thing that the exchange rate has a negative and significant effect on government bond yields h3: the exchange rate has a positive effect on government bond yields (+/–). 1.1.4. effect of reserved assets on bond yields the risk of default is reflected in the ability of bond issuers to pay coupons for their investors. one indicator used to determine bond investments’ security is through liquidity ratios (brigham & houston, 2016). sihombing et al. (2014) explain that a factor that increases the risk of default on government bonds is the liquidity crisis, where foreign exchange reserves are critical measures of liquidity. the explanation stated in the bank of indonesia newsletter also states that when the amount of foreign exchange reserves is adequate, investors will not be in a hurry to transfer their funds abroad. utama and agesy (2016) research states that foreign exchange reserves negative effect on bond yields received in indonesia and thailand but were rejected in malaysia and the philippines. simu (2017) and sihombing et al. (2014) predict the movement of bond yields with several indicators. their findings conclude that the bond market does take into account macroeconomic fundamentals when determining bond yields. however, other factors, such as external and liquidity factors, in this case, foreign exchange reserves, also play an important role in bond yield changes. h4: reserved assets negatively affect government bond yields (–). business, management and economics engineering, 2021, 19(1): 34–48 39 1.1.5. the relationship between crude oil price with bond yields the increase in world crude oil prices also affects interest rates, making investment more attractive to bonds. sihombing et  al. (2014) and arshada et  al. (2018) found that world oil prices significantly affect government bond yields. paramita and pangestuti (2016) also state that world oil prices positively affect bond yields received in the four countries studied, both indonesia, malaysia, thailand, and the philippines. moreover, siklos (2011) and sundoro (2018), in his research on the determinant model of bond yields, concluded that the world oil price significantly affected government bond yield. the association between oil prices and stock returns in china relies on policy uncertainty. it is necessary for policymakers to organize such strategies to reduce oil shocks’ harmfulness on the financial market (khan et al., 2019). h5: crude oil prices have a significant positive effect on bond yields (+). 1.1.6. effect of current account deficit on bond yields the current account balance is one indicator that measures the direction and magnitude of international loans. the large current account deficit shows that the economy is very dependent on funds from abroad (sihombing et  al., 2013). the persistent current account deficit causes growth in foreign debt, leading to financial instability in the long run. it also causes a higher risk of default that increases the bond yield. according to pramana and nachrowi (2016) and kahlert (2017), the lower the current account deficit, the lower the bond yield. this result indicates that the cad has a positive effect on government bond yield. meanwhile, huang et al. (2019) and maltritz and molchanov (2013) found that the current gdp account had a significant effect on the bond index spread. h6: cad has a positive effect on government bond yields (+). 2. data and methodology 2.1. data collecting and sources first of all, this study collected data from the main sources. the type of data used in this study is secondary data in the form of bi rate, inflation, exchange rate, foreign exchange reserves, current account deficit, and crude oil prices in 2010–2019, quarterly period. sources of data were obtained from the central statistics agency (bps), indonesia central securities depository (ksei), indonesia bond pricing agency (ibpa), bank indonesia (bi) website, and the indonesia capital market institute (ticmi). data collection uses documentation techniques from the bank indonesia website (www.bi.go.id), the central statistics agency website (www.bps.go.id), the indonesia bond pricing agency website (www.ibpa.co.id), the indonesian site bond market directory (www.idx.co.id), bloomberg website (www.bloomberg.com) and the indonesian ministry of finance website (www.djppr.kemenkeu.go.id). the used datasets were collected in a legitimate manner, completely obeying all sources’ terms of service. 2.2. variables description the second step to prepare all variables in this study, several measurement scales can be used as follows (see table 1). http://www.bi.go.id http://www.bps.go.id http://www.ibpa.co.id http://www.idx.co.id http://www.bloomberg.com http://www.djppr.kemenkeu.go.id 40 p. w. santosa. macroeconomic indicators and yield curve of indonesian government bond table 1. variables description name of variable notation measurement unit expected dependent: bond yield ytm yield to maturity (sun) percent independent: the bi rate bir bi-7 day reverse repo percent + inflation rate inf cpi inflation rate percent + exchange rate exr jisdor (idr-usd) idr +/– reserved assets dev reserved assets usd – control variable: current account deficit cad amount of cad idr + oil prices oil world crude oil price usd + 2.3. long-term regression model the long-term equation model used in this model as the third step, as follow (pramana & nachrowi, 2016; santosa & sihombing, 2015; simu, 2017; maltritz & molchanov, 2013; ijaz et al., 2020): 0 1 2 3 4 5 6 + + t t t t t t t tytm bir inf exr dev oil cad e= β +β +β +β +β β +β , (1) where ytm – government bond yield (sun); bir – bi rate; inf – inflation; exr – ln exchange rate; dev – ln reserved assets; cad – ln current account deficit; oil – ln crude oil price; t – period (quarterly); and e – error term. to test the cointegration for all variables in this study, we used the residual-based test method. this method was conducted using the adf statistical test by looking at the stationary cointegration regression residual. if the adf value is smaller than the critical value, then the equation model above was cointegrated. conversely, if not, the equation model was not cointegrated (gujarati & porter, 2013). 2.4. error correction model (ecm) specification finally, this research is a time-series data study using the error correction model (ecm) approach. ecm is a model used to correct the regression equation of variables that are individually not stationary in order to return to its equilibrium value in the long run, with the primary condition in the form of a cointegration relationship between its constituent variables (santosa & hidayat, 2014). ecm uses residuals from the cointegrated equation, where the residual is used as an error correction term that affects the short-term equation. ecm specification as follow (utama & agesy, 2016; sihombing et al., 2014; che-yahya et al., 2017; maltritz & molchanov, 2013):   ( ) ( ) ( ) ( ) ( ) ( ) ( ) 0 1 2 3 4 5 6 , t t t t t tt t exr devd ytm d bir d inf d d d oil d cad ect = α + α + α + α α ++ + α + α (2) business, management and economics engineering, 2021, 19(1): 34–48 41 where d(ytm)  – δytm (sun); d(bir)  – δbi-7 days rr; d(inf)  – δinflation rate; d(exr)  – δ exchange rate; d(dev)  – δreserved assets; d(oil)  – δworld crude oil price; d(cad) – δcurrent account deficit; α0 – constant; α1, α2, ..., α6 – ecm coefficient (shortterm); ect – error correction term (ect), the representation of actual adjustments to go to equilibrium when an imbalance condition occurs; t – period (quarterly). the error correction model (ecm) approach is used in time-series data to be able to find out short-term and long-term dynamic movements. meanwhile, to identify the existence of a long-term relationship between the dependent variable and the independent variable, the cointegration approach is used. the ecm model can help researchers solve the problem of spurious regression and time-series data that is not stationary (santosa & hidayat, 2014). 3. empirical results 3.1. statistics description descriptive statistical results in this study are shown in table 2, with the sample characteristics used in this study include: the number of samples (n = 280), the mean, the maximum value (max), the minimum value (min), as well as the standard deviation for each variable. data of observations on fixed rate series of government bonds registered on the indonesian bond market from 2010 to 2019, quarterly. table 2. statistics description variables mean max min std.dev. bir 2.7800 3.1582 2.5682 0.1940 inf 1.9018 2.4001 1.3547 0.3172 exr 9.3774 9.5495 9.1116 0.1482 dev 11.607 11.764 11.448 0.0762 oil 4.9762 5.5924 4.2239 0.5361 cad 8.5438 9.2228 7.4899 0.4128 ytm 7.6057 9.7991 5.5803 1.0342 3.2. estimation of error correction model 3.2.1. test of stationarity data testing the stationarity of data to avoid spurious regression caused by false regression makes the statistical testing of each coefficient invalid and challenging to be used as a guideline. the emc formation can be done if the dependent variable is not stationary. the study uses a unit root test to test whether the time series data is stationary or not. the stationary test results are as follows. 42 p. w. santosa. macroeconomic indicators and yield curve of indonesian government bond table 3. unit root test variables level 1st difference 2nd difference adf prob adf prob adf prob ytm –2.2976 0.1813 –4.2321 0.0038 –3.5504 0.0203 bir –0.7962 0.8004 –2.3638 0.1626 –4.5289 0.0021 inf –1.5257 0.5030 –3.8601 0.0094 –5.0557 0.0009 exr –1.9537 0.3032 –1.9755 0.3032 –4.8790 0.0016 dev –1.2435 0.6361 –3.3591 0.0240 –7.2208 0.0000 oil –0.7716 0.8088 –4.5395 0.0019 –8.3642 0.0000 cad –3.1942 0.0382 –4.2640 0.0044 –5.4467 0.0003 table 3 shows the unit root test results that at the level of all variables are not stationary, which indicates that all variables have a root unit. to prove whether the data is stationary, then the degree of integration test is then performed at the 1st difference level. in table 3, the bi rate, inflation, and exchange rate variables are not stationary. next, the test is repeated at the 2nd difference level. from these tests, it was found that all variables were stationary, with a significant probability level at α = 5%. 3.2.2. cointegration test a cointegration test is a test conducted to detect the stability of long-term relationships between variables. this test to identify scenarios that two or more non-stationary time series are integrated together in the long term, and they cannot deviate from equilibrium (gujarati & porter, 2013).  before conducting this test, the first thing to do is to create a long-term regression equation model. here are the results of the long term regression equation. table 4. results of long-term regression variable coefficient std. error t-statistic prob. c –3.1080 28.495 –0.1090 0.9174 bir –0.1819 1.1002 –0.1653 0.8726 inf –0.1984 0.6045 –0.3283 0.7566 exr 8.0246 2.0876 3.8438 0.0043 dev –5.8827 2.3936 –2.4576 0.0250 oil 1.1880 0.6381 1.8617 0.0800 cad –0.1499 0.3041 –0.4931 0.6287 r-squared 0.8615 prob(f-statistic) 0.0015 adjusted r-squared 0.7885 s.d. dependent var 1.0842 table 4 shows that in the long-term estimation, the exchange rate variable has a significant positive effect; the variable reserved assets have a significant adverse effect on government bond yield (sun). after conducting a long-term regression estimation test, the next is business, management and economics engineering, 2021, 19(1): 34–48 43 the formation of residuals must be stationary at the level. from the data processing results obtained in table 5 as follows: table 5. cointegration test t-statistic prob.* augmented dickey-fuller test statistic –6.5482  0.0000 test critical values: 1% level –3.7897 5% level –3.0045 10% level –2.6742 note: *mackinnon (1996) one.sided p-values. 3.3. error correction model a good and valid ecm model must have a significant ect (error correction term) can be seen beside the t-statistic value, which is then compared with the t-table, it can also be seen from the probability. if the t-statistic value is higher than the t-table, the coefficient is significant. if the ect probability is smaller than 0.05, then the ect coefficient is significant. table 6 presents the model’s ect coefficient values that are significant for the estimation of government bond yields (sun). the ect coefficient value of 0.9838 means that the difference between the value of the government bond yield (sun) and the balance value is 0.9983, which will be adjusted within one year. the following ecm (short-term estimates) results. table 6. results of error correction model variable coefficient std. error t-statistic prob. c 18.785 26.732 0.7028 0.4899 d(bir) 5.9923 2.7735 2.1607 0.0492 d(inf) 2.0310 0.6904 2.9431 0.0167 d(exr) –0.7323 4.7106 –0.1554 0.8739 d(dev) –5.0892 3.9829 –1.2779 0.2372 d(oil) 1.7586 0.7138 2.4637 0.0339 d(cad) –0.0273 0.3447 –0.0793 0.7552 ect 0.9838 0.2161 4.5490 0.0016 r-squared 0.7221 adjusted r-squared 0.7018 prob(f-statistic) 0.0091 the above equation can be said to be valid by proven by a significant probability at the 5% test level of 0.0005 and a coefficient value of λ of 0.9591 (0 < λ <1). with the results of r2 of 0.7221, or other words the independent variables bi rate, inflation, exchange rate, foreign exchange reserves, world oil prices, and current account deficits explain 72.21 percent variations in the government bonds yield (sun). 44 p. w. santosa. macroeconomic indicators and yield curve of indonesian government bond 4. discussion 4.1. bi rate and government bond yield the first hypothesis states that the bi rate has a positive and significant relationship to acceptable government bond yields because the probability of t in the estimated short-term ecm regression is 0.0490 < 0.05. if the bi rate has increased, then in the short-term, government bond yield will increase. this study’s results are consistent with the results of research from sundoro (2018) and tjandrasa (2017), who stated that when government bond yields on all tenors have increased, the bi rate will also increase. yuliawati and suarjaya (2017) found interest rates to positively and significantly affect government bond yields because the higher interest rates, bond issuers will offer larger coupons to attract investors to invest or invest their funds in bonds. moreover, in their research, santosa and sihombing (2015) also stated that interest rates have a positive impact on the yield of government bonds with different tenors. to further strengthen the results of this study, 4.2. inflation and government bond yield the hypothesis states that inflation has a positive and significant effect on the yield of government bonds (sun) is rejected because the probability of t in the estimated short-term ecm regression is 0.0164 < 0.05 with a negative effect. if inflation has decreased, then in the short term, government bond yields will increase. pramana and nachrowi (2016) and strassberger (2012) state that inflation in the percentage of cpi has a positive and significant effect on bond yield changes. moreover, kurniasih and restika (2015) and santosa and sihombing (2015) also stated the similar thing that inflation affects the yield of government bonds. the cpi would increase consumer spending and slow the rate of economic improvement. this condition will increase the risk premium, which will increase the yield curve that confirmed that inflation had a significant positive effect on government bond yield (bernoth & erdogan, 2012; klepsch, 2011). 4.3. exchange rate and government bond yield the third hypothesis proposed states that the exchange rate has a positive and significant effect on government bond yields that can be accepted because the probability of t in the longterm regression estimation is 0.0013 < 0.05. if the exchange rate has increased, in the short term, government bond yield will increase. these results are consistent with paramita and pangestuti (2016) findings and arshada et al. (2018) that suggest the exchange rate has a positive and significant effect on the bond yield curve in the long run. pramana and nachrowi (2016) and paramita and pangestuti (2016) stated similarly that the exchange rate positively and significantly affected government bond yields in us dollars. santosa and sihombing (2015) also say that an increase in the exchange rate or depreciation of the domestic currency against foreign currencies (in this case, the idr against the usd) will cause inflation. the inflation will be responded positively by the yield curve. business, management and economics engineering, 2021, 19(1): 34–48 45 4.4. reserved assets and government bond yield the fourth hypothesis proposed states that foreign exchange reserves negatively affect government bond yields acceptable because the probability of t in the long-term regression estimation is 0.0250  <  0.05. if foreign exchange reserves decline, in the long-term, government bond yields will increase. some previous study state also supports this finding that foreign exchange reserves inversely effect on bond yields. the research results in indonesia and thailand proved that foreign exchange reserves have a negative and significant effect on government bond yields (sihombing et al., 2014; hsing & hsieh, 2012). strassberger (2012) and huang et al. (2019), in their research, also said that foreign exchange reserves or foreign reserves negatively affect on bond yield and proved that a significant adverse effect between foreign exchange reserves on government bond yields. 4.5. crude oil prices and government bond yield the fifth hypothesis states that world oil prices have a positive and significant effect on acceptable government bond yields because the probability of t in the estimation of the shortterm ecm regression is 0.0359 < 0.05, then the hypothesis is not rejected. if world crude oil prices increase, in the short term, government bond yield will increase. this study’s results are consistent with some previous research that stated crude oil prices have a significant positive effect on government bond yields. besides, the result shows that when world oil prices increase, it will be followed by an increase in government bond yields in emerging countries (sultan et  al., 2019; utama & agesy, 2016; kurniasih & restika, 2015). moreover, santosa and sihombing (2015) also stated that high oil prices would increase government bond yield. this statement proved the determinant model of government bond yields resulting in the conclusion the world oil prices had a significant positive effect on government bond yields. 4.6. current account deficit and government bond yield the sixth hypothesis states that the current account deficit (cad) has a positive and significant effect on government bond yield; the hypothesis is rejected. from the research results, the probability of t in the short term is 0.9385  >  0.05. the cad has a negative but insignificant effect in the long run and short run on the yield of government bonds (sun). the research results from favero et  al. (2010) and simu (2017) found that the current account balance of gdp has a negative influence on government bond yields. however, these results contradict the findings of naidhu, goyari, and kamaiah (2016) and utz, weber, and wimmer (2016) that the cad has a positive effect on government bond yield. conclusions and recommendation this paper has analyzed the macroeconomic determinants of the yield curve of indonesian government bonds (sun) based on the sample during 2010-q1–2019-q4. the ecm model is employed in empirical estimation. the main findings can be summarized as follows. first, a more bi rate, inflation, foreign exchange, and crude oil price, a higher yield curve of sun in 46 p. w. santosa. macroeconomic indicators and yield curve of indonesian government bond the short-term. second, whereas the reserved assets negatively affect on yield curve of sun. this insignificant result of the relationship between cad and yield curve indicates that the government’s bonds have not sufficiently reduced the cad deficit. third, in general, the findings presented in this study suggest that the government bond, macroeconomic indicators, and the issuer bond rating quality are the major issuer characteristics that differentiate the yield curve from one another. whereas, government bond yield is the main issue characteristic that plays a significant role in pricing the corporate bond in indonesia. there are some managerial and policy implications to maintain a robust fixed income market. the authorities need to promote gdp growth, pursue fiscal efficiency, keep up the credit rating, risk current account deficit, keep a relatively low bi rate and expected inflation rate. in conducting fiscal policy and monetary control, the ministry of finance and the central bank need to aware of the significant positive relationship between the yield curve and interest rate, inflation rate, exchange rate, reserved asset, and crude oil price. however, if cad continues to rise beyond a specific critical level, its effect will become positive on sun’s yield because of budget risks. a practical guideline used by investors and market participants to monitor the development of the value of the portfolio of government bonds owned is to watch the shift in term structure interest rate. then, an analysis of the shift in term structure interest rate or the yield curve becomes vital to be understood by investors and market participants to improve their investment portfolios’ performance. acknowledgements i am grateful to the reviewers for their valuable suggestions and comments and the editors, which led to a significant improvement in the article. special thanks to rachel himalita, who prepared some data-set for this study, and yarsi university for computational lab supporting. funding any institution has not funded this study. disclosure statement the author declares has no competing financial, professional, or personal interests from other parties. references apriadi, i., sembel, r., santosa, p. w., & firdaus, m. 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(2017). pengaruh umur obligasi, tingkat suku bunga, dan inflasi pada imbal hasil obligasi pemerintah di bei. e-jurnal manajemen universitas udayana, 6(11), 6187–6215. this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: archil.chochia@taltech.ee business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 2: 358–372 https://doi.org/10.3846/bmee.2021.14755 promoting fintech financing for sme in s. caucasian and baltic states, during the covid-19 global pandemic vakhtang charaia 1, archil chochia 2*, mariam lashkhi 3 1faculty of business and technology, university of business and technology, tbilisi, georgia 2school of business and governance, department of law, tallinn university of technology, tallinn, estonia 3faculty of business administration, georgian aviation university, tbilisi, georgia received 13 april 2021, accepted 11 august 2021 abstract. purpose – to analyse the digitalization trends in the central caucasian (georgia, azerbaijan and armenia) and baltic states with the aim of reducing a financial gap for the small and medium size enterprises in georgia, azerbaijan and armenia. research methodology  – comparative analysis between baltic and caucasian countries are made to analyse the basic positions and farther development opportunities for georgia, azerbaijan and armenia. findings of the given paper  – while sme sector crucially important contributor to employment, diversification and productivity in any country of the world and especially in developing ones, they still face significant credit constraints through traditional credit providing institutions. however, the trend is changing and modern digital technologies from the fintech area are providing new alternatives, which already had been widely used in baltic, but still are waiting their chance in georgia, azerbaijan and armenia, with different level of progress and readiness. research limitations – some statistical data does not exist for all six countries or were possible to obtain for different periods of time. lack of academic literature on fintech in caucasian countries. practical implications – it can provide a useful perspective for researchers, academics, investors, investment managers, decision-makers, and scientists. originality/value  – the paper analyses three advanced european union member state’s (lithuania, latvia and estonia) fintech positions and perspectives as a model of development for three developing caucasian states (georgia, azerbaijan and armenia). keywords: small and medium-sized enterprises, fintech, caucasian states, baltic states, financial gap, alternative financing. jel classification: g23, m21, e44. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ mailto:archil.chochia@taltech.ee https://doi.org/10.3846/bmee.2021.14755 https://orcid.org/0000-0003-1531-2763 https://orcid.org/0000-0003-4821-297x https://orcid.org/0000-0002-1519-320x business, management and economics engineering, 2021, 19(2): 358–372 359 introduction small and medium enterprises (smes) all over the world are considered to be an essential segment of any economy (lu, 2018), no matter it is developed or developing. smes play a crucial role in terms of employment, stable salaries, tax revenues, inclusiveness, sustainable economic development and etc. which is essential for any country’s progress. especially when considering the global pandemic and/or constant regional, political and economic conflicts all over the world (shatakishvili, 2021). despite sme’s crucial role in the economy, still they face huge challenges, especially in developing countries as georgia, with some better grounds in developed economies as estonia. however, standard sme challenges in both of them and at any other country worldwide are nowadays stressing a huge extra problem in face of coronomic crisis (papava & charaia, 2020). on the other hand, any challenge or even a problem could be used as a great turning moment, which seems to be realistic in this case through fintech. despite the fact that financing of sme sector has never been an easy task, especially in developing countries and extremely complicated outside the regional centers of those developing countries, global pandemic has almost shut down the cooperation between the banking and sme sector even further. unfortunately, other sources of financing has never been developed at any significant level in those developing countries, such as georgia, armenia or azerbaijan. thus development and popularization of the fintech industry as an alternative way of sme financing and as a diversification instrument for financial sector are considered as specifically important to analyze, to guarantee the sustainable economic development ground. popularity and success of innovative source of crediting in developed countries, including baltic states could be explained by different aspects, but most importantly: probability of getting a credit at a lower interest rate (baber, 2020; lee & shin, 2018); faster loan processing speed, in comparison to traditional sources (sangwan et  al., 2019); lower operating costs (ozili, 2018); more comfort in credit getting process, especially in remoted areas with necessity to travel to the nearest bank; less bureaucracy; and etc. while, on the other hand the lenders side is also benefiting from, the fact that fintech companies in general are backed by investor’s and not company’s own money (anagnostopoulos, 2018); decreasing credit risks based on specific big data analysis software (lu, 2018), thus being on profit end and satisfying both donors and borrowers with lower risks and lower interest rates, as well as the economy in general with more financial (and not only) activates which most likely would not happen in other case. based on the sme financing shortages, especially under the covid-19 pandemic period and having a recent success story of fintech industry from different countries, including baltic states, creates a hypothesis that s. caucasian states could also benefit from such innovative technologies. however, first of all the level of readiness in those countries, to implement the fintech methodology should be studied. to study the fintech readiness in selected countries, the prism of gross expenditure on r&d, high-tech net exports as percent of total trade, non-cash transaction trend and other valuable observations were made; as well as analysing current capacities and the progress for the last years through the data of global innovation index. the last, but not the least importantly it was made a comparison on availability of alternative financing sources and its amount in absolute numbers on per capita bases for each selected country. 360 v. charaia et al. promoting fintech financing for sme in s. caucasian and baltic states... 1. literature review smes are the leading form of enterprise globally, accounting for approximately 99 percent of all firms in the organisation for economic co-operation and development [oecd] area and guaranteeing: around 70 percent of total employment, 50 percent value creation and 60 percent of all value added on average (oecd, 2016). while in emerging economies contributing up to 45 percent of total employment and 1/3rd of gdp (oecd, 2017). at the same time, in the context of informal businesses smes contribute to more than 1/2 of employment and constitute from 30 to 60 percent of various countries’ gdp, irrespective of income levels (cornelli et al., 2019). however, they receive merely 17 percent of bank credits for instance in uk, while the rest goes to large corporations (lu, 2018). with significant existing problems in finance access from the banks (international finance corporation [ifc], 2010; global findex database [gfd], 2017) and constant regulations strengthening procedures by national banks all over the world, innovative digital solutions could be seen as a paradigm solving for sme’s financial challenges. berger and udell (2006) study shows, that smes regularly expression financing restrictions due to: poor transparency, irregular financial management, and especially lack of collateral, which in case of developing countries usually exceeds double time of the loan amount itself. however, while richer economies has significantly improved their enjoinment, poorer ones still suffer from: lack of diversified financing sources; poorer it infrastructure; immature innovative digital technology opportunities and etc. however, progress is also tangible, even in developing countries. while many studies claim that in general bank loans are still dominant financing source (schweitzer & barkley, 2017); and considering that literature on innovative digital financing resources is still limited (hua et al., 2019); some studies already show, that the knowledge and popularity of financing through innovative digital technologies called  – fintech (walden, 2020), which started in 2000th and progressed after the last global financial crisis of 2008–2009 years, significantly advancing in the last decade (jakšič & marinč, 2019; cornell university, insead, the world intellectual property organization [gii], 2020), and step by step is becoming a trusted and desired credit source for smes. fintech role in the fourth industrial revolution is crucial, but what is more important is that it has a huge impact on sme development (chang et  al., 2020). but, its own role in fintech popularization have also played covid-19 global pandemic, providing an un-substitutable credit getting opportunity in fintech already popular countries and desire for such instrument in not yet fintech-ed economies. however, there are some risks as well, which should be considered at a highest level, those including: the biggest threat in face of cybersecurity risk; financial and business illiteracy; challenges with online data protection; difficulties with internet connectivity and usage, especially in developing countries; regulatory frameworks, which should be updated, but could have opponents from the local financial sector, mainly banking lobbyist and etc. (g20, 2020). therefore, strong supportive measures should be guaranteed by the local governments to protect the best interests of sme sector. business, management and economics engineering, 2021, 19(2): 358–372 361 2. research methodology fintech is a relatively new trend in business financing all over the world, which is already highly popular in developed economies, but has a great room for development and improvement in developing s. caucasian economies, such as georgia, armenia and azerbaijan. while analyzing those country’s potential, experience of baltic states is taken as a success story. outside s. caucasian and baltic states, an overall global experience and trends in fintech industry are also taken into account. for the goals of this paper a qualitative research was carried out. collection of information was done by analyzing different sources providing data for all six countries, including those from scientific articles, international rankings, international financial institutions, statistical offices and other valuable and trust-worse sources. unfortunately, not all interesting data was available for all six selected countries, thus making impossible to analyze them. the paper is structured in a way to observe overall global trends and especially concentrates on baltic states experience, since in many publications this countries are named as one of the top reformers and fintech achievers, which could be a great orientation for the three s. caucasian states which still have much to reform and achieve, starting from the basic fintech infrastructure and continuing with relatively complicated legislative and technical procedures, as well as readiness of the system to the novelty. to better understand the role of sme sector for the local economy, both in developed and developing states, we analyzed it from different angles, including employment, tax generation, amount of value added and etc. an analysis of the digital infrastructure and its role in the financial system of selected countries and some other players globally, helped to better understand the gaps among them, thus to better understand the needs of developing states to follow those outperformers. 3. sme and fintech global trends number of different indicators important for fintech development and strengthening varies around the world and even between inside the continents and country groups like baltic and caucasian states. however, it has a solid ground already with the 57% of world population with the internet users, 69% of population with the bank accounts, making online purchases or paying their bill online around 1/3 of the world population (see table 1). table 1. different statistical data important for fintech promotion (source: datareportal, n.d.) number of active internet users internet users as a percent of population number of active mobile internet users mobile internet users as a percent of population has an account with the financial institution has a credit card makes online purchases or pays bills online world average 4.388 bln 57% 3.986 bln 52% 69% 18% 29% 362 v. charaia et al. promoting fintech financing for sme in s. caucasian and baltic states... sme sector is the main driver for job creation and diversified economic activities in the most developing and developed economies, while having a significant role globally at any country’s economy. sme sector is often a goal for those are not able to start a job elsewhere, but motivated to create workplace themselves, in most cases hiring others and benefiting local economy with employment, taxes and often even decreasing import dependence, especially in developing world, which has a desperate need in investments (charaia et al., 2020). despite global data fragmentation and differences in methodologies, still it could be concluded that formal and informal smes account for around 60 to 70 percent of the gdp, in low, middle and even in high income countries. this type of company’s represent more than 9 out of 10 businesses and employs ½ of all employees globally (g20, 2020), thus making those companies essential for any country. however, smes still receive a disproportionately small share of credits in comparison to bigger companies (arzeni & akamatsu, 2014), which hinders both smes and the whole economy’s potential at large. moreover, because of tightened capital and liquidity regulations, especially after the financial crisis of 2008, banks are encouraged to scrutinize and charge higher interest rates (bucă & vermeulen, 2017), in contrast to bigger businesses (yoshino & yamagami, 2017). however, the difference between developed and developing countries is still huge and one of the most important aspect here is the issue of collateral, which is a must in developing world, while for instance in europe smes are getting credits mainly in the form of credit lines that are typically uncollateralized (see columba et  al. 2010 for the italian case). theoretically the capital market could play an important role in avoiding complicated banking procedures and higher interest rates for smes (thompson et  al., 2018). however, unlike developed economies the capital markets in developing countries are seldom at a point to guarantee massive fdi inflow for inclusive economic growth (charaia, 2014, 2017) and/ or to substitute the banking sector even partially. reason here could be different, starting with the negative experience of providing money to any private company and finishing with systemic and legal problems (lashkhi & charaia, 2017). in the path of modern digital technologies development providing one of the most important elements for economic development (benashvili, 2017), a key role is devoted to the number of adults with a bank account (table 2), which varies hugely starting from little bit more then 1/10th and finishing with total 100 percent success, usually with better results in developed countries. table  2. adults with the banking account (percent) in different countries (source: the global findex database, 2017) country percent country percent country percent central african republic 14% romania 58% greece 85% pakistan 21% ukraine 63% uae 88% morocco 29% turkey 69% israel 93% egypt, arab rep. 33% hungary 75% korea, rep. 95% albania 40% russian federation 76% canada 100% business, management and economics engineering, 2021, 19(2): 358–372 363 according to the capgemini (2020) financial services analysis, only in the last five years (before pandemic year) from 2015 to 2019 the volume of non-cash transactions globally has been increased by almost 62 percent, while the forecast from 2019 to 2023 goes as far as 54% higher, despite the solid basic ground of 2019. in absolute numbers, grows is even more impressive with growth from 2015th 437.4 million transactions to almost 1.1 billion in 2023 (figure 1). these numbers say, that fintech ground is becoming more and more solid, especially in apac and europe area, which could finally end in higher sme access to finance in this regions through digital technologies. to go more into details, msme sector financial gap to gdp all over the world is significant, despite the country’s economic development and income level being it: high income (hi), upper middle income (umi) or lower middle income (lmi) (figure 2). therefore, the ground for alternative crediting sources is a great tool for the problem solving. moreover, introduction and adoption of new digital technologies in last decades and especially in the prism of its extreme global popularization, as well as new business models created based on them, has led to the double-digit growth rates for digital payment transactions over the last five years, with emerging economies showing the greatest results (mckinzey, 2019). 106 127 154 195 244 278 319 391 493 140 155 171 192 216 229 247 273 308 141 151 161 170 179 185 192 196 198 39 41 44 49 53 56 59 63 66 11 11 13 15 17 19 22 25 29 2015 2016 2017 2018 2019 2020 2021f 2022f 2023f apac europe north america figure 1. worldwide volume of non-cash transactions (billions), 2015–2023 (source: capgemini, 2020) figure 2. msme finance gap to gdp (percent), in different countries and regions (source: sme finance forum, 2021) 13 18 18 19 20 22 24 34 36 39 0 5 10 15 20 25 30 35 40 45 s o u th a si a a ll d e v e lo p in g c o u n tr ie s e a st a si a & p a c if ic e u ro p e & c e n tr a l a si a l a ti n a m e ri c a & c a ri b b e a n s u b -s a h a ra n a fr ic a m id d le e a st & n o rt h a fr ic a b e la ru s (u m i) u k ra in e ( l m i) c z e c h r e p u b li c ( h i) 364 v. charaia et al. promoting fintech financing for sme in s. caucasian and baltic states... the growth in non-cash transactions while popular globally, has different growth trends in different parts of the world, with the apac region only third in 2015, growing to the top leader in 2020 and keeping the dominance for 2023, with india and china expected to drive the region’s remarkable +21.1% compound annual growth rate between 2020–23, overcoming european aware more than two times (10.34%). at the same time, europe continues to be the second biggest for the whole given period of time, especially based on central and eastern european countries activity. the growth in general could be explained by the unprecedented e-commerce and the availability of mobile payment solutions globally. significant advances in technology are shaping the future of not only big companies, but also smes. fintech popularity is not based only on its own advantages, but supported by the global trends such as: – by 2023, several countries launching digitization initiatives with ultimate goal of eliminating cash from circulation (ford & joliet, 2020); – by 2024, mobile proximity payment users worldwide doubling to around 2 billion units, in comparison to less than 1 billion in 2019 (ford & joliet, 2020); – global fdi growth trend, guaranteeing globalisation’s economic benefits not only for developed, but also developing countries (charaia et  al., 2018) and thus global innovations diffusion need. at the same time as for nowadays, credit cards are still the dominant source for nonpayments (72%), however new and new local and regional payment systems appearing all over the world (capgemini, 2020), will probably change the situation soon, most probably decreasing the role of banking system and benefiting the fintech industry bigger than ever before. above to all challenges for sme industry always had, coronomic crisis all over the world put an extra experiment to the sectors, leading to global recession in 2020, with even harder predictions that it will be needed several more years to return at least to 2019 parameters in case vaccination process will be smooth. moreover, causing mass global supply chain changes (charaia & lashkhi, 2020) and public debt growth, which theoretical could hinder sme sector development in post pandemic period (papava & charaia, 2021). in other worlds sme sector globally has faced an unprecedented challenges, which lead to mass unemployment, bankruptcy and lack of possibility to cooperate with traditional sources of crediting. the situation is especially hard in those developing countries, where government’s financial and other sources of support to their businesses is extremely limited, especially through modern digital technologies. on the other hand, despite pandemic challenges, the latest research done in 114 jurisdictions all over the world shows that regulators observed a strong up rise of fintech services since the global pandemic start, in particular: digital payments, remittances, digital banks, digital savings or deposits use has been raised the most in the economies affected by global pandemic the most (world bank [wb] & cambridge centre for alternative finance [ccaf], 2020). as it could be easily guessed covid-19 has boosted fintech grow globally. however, the impact of coronomic crisis on market performance is varying across geographic jurisdictions. transactions growth through fintech companies has been more successful and consequently reached the top amounts in the countries with more severe lockdowns. also, relatively high charges for traditional ways of sme financing during the global pandemic has become more and more heavy burden for the sector from one side, while making it more complicated to business, management and economics engineering, 2021, 19(2): 358–372 365 finance such business at a times of lockdowns from the bank’s perspective, on the other. however, at the same time, growing benefits were accompanied by increased risks related toward cybersecurity (wb & ccaf, 2020). 4. sme and fintech in the caucasian and baltics adaptation of innovative digital technologies, as well as fintech elements appearance in the caucasian countries is already a fact, which has already been much faster developed in baltic states. at the same time, unlike developed economy’s with online channels expected to supplant phone and in-person for sme sales, which is already a fact for us and/or uk markets (mckinzey, 2020), experience shows that in developing countries as georgia, armenia and azerbaijan, customers still prefer a traditional forms of in person purchasing, which is closely related to the share of adults with bank account and corresponding products among local population. varying among different countries, with an average 69 percent globally (demirgüç-kunt et al., 2017), in comparison to the 46 percent in caucasian and 91.3 percent in baltic states. statistical data shows that internet and banking related issues, such as number of active internet users, having an account at financial institution, making online financial activities and etc. (see table 3) are better developed in baltic states, rather than in c. caucasian. at the same time difference in between those baltic and c. caucasian states is also significant with estonia being the leader in both of them in not in absolute, but in percent of total population being involved in those activities. this number could be further increased in all states pushed by the pandemic reality and necessity, which most probably will continue for the next years. table 3. specific parameters in caucasian and baltic states (source: datareportal, n.d.) estonia latvia armenia lithuania georgia azerbaijan number of active internet users 1.28 mln 1.66 mln 2.13 mln 2.6 mln 2.7 mln 8 mln internet users as a percent of total population 98% 87% 72% 91% 69% 80% total number of active mobile internet users 1.09 mln 1.43 mln 1.82 mln 2.29 mln 2.4 mln 5.16 mln mobile internet users as a percent of total population 83% 74% 62% 80% 61% 52% has an account with the financial institution 98% 93% 48% 83% 61% 25% has a credit card 29% 17% 8.1% 16% 15% 5.3% makes online purchases or pays bills online 75% 61% 15% 56% 14% 9.4% 366 v. charaia et al. promoting fintech financing for sme in s. caucasian and baltic states... despite the fact of having more or less the same structure of sme within the local economies, through the number of enterprises, employment and value added created in all baltic and caucasian countries (table  4), perspectives of sme business development in the given regions and even inside those regions are different. those numbers pf sme sector most probably will be changed as a result of covid-19 effect on those countries, but will not lose their dominance anyway. different is the financial gap to gdp in baltic and caucasian countries, with the lowest number in latvia (5%) and highest in estonia (23%) and azerbaijan somewhere in between (13%). which needs further detailed research (figure 3). thanks to the capacity of innovation and adaptation to fast-changing global and local challenges (including global pandemic) in caucasian and baltic states, smes are a key to shift towards modern diversified economies, guaranteeing a higher-quality workplaces and sustainable growth, higher than ever before. while in the caucasian countries, despite having a huge potential, the reality is different, basing on low levels of labor productivity in comparison to eu level, which on its turn causes sme concentration on low value added sectors of wholesale, retail and seldom manufacturing, consequently limiting their integration into global value chains and lagging behind the real potential. unlike armenia with all its significant political changes in last years and ambitious plans toward sme development; as well as azerbaijan’s systemic economic challenges in regard to oil prices, however still big plans on sme direction; georgia is the true leader of caucasian countries from the eastern partnership perspective, with already a solid ground in 2016 and improvements made in the area of sme sector development with: the adoption of the sme development strategy and respective action plans, the simplification of business registration table 4. sme sector statistics in baltic and caucasian countries (source: oecd, 2020) azerbaijan georgia estonia armenia lithuania latvia number of enterprises 97.9 99.7 99.7 99.8 99.8 99.8 employment 42.9 64.2 78.2 66.3 75.9 79.4 value added 13.4 60.5 76.7 60 69.4 71.1 no data 5 11 13 18 23 0 5 10 15 20 25 lithuania (hi) latvia (hi) armenia (umi) azerbaijan (umi) georgia (umi) estonia (hi) figure 3. msme finance gap to gdp (percent), in caucasian and baltic states (source: sme finance forum, 2021) business, management and economics engineering, 2021, 19(2): 358–372 367 and the increase in e-government services have significantly strengthened the operational environment for smes and in general the business environment (oecd, 2020). for smes to stay competitive in developed countries (versus developing ones), its obligatory to maintain and increase a higher level of innovation (hogeforster, 2014), since they usually are on the weak side in terms of labor force price, higher taxes and more complicated regulations. thus, advantages need systemic and systematic financing. caucasian countries are doing relatively poor in terms of gerd as percent of gdp and percent of innovative smes (or enterprises), in comparison to eu average, where baltic states are positioning above the middle line (oecd, 2020). both for caucasian and baltic states to be discovered as top economies (except azerbaijan), in terms of alternative finance per capita volumes is promising. with latvia and estonia, number 3 and number 4 correspondingly, for in the global ranking. also, some baltic platforms contributing not only to their domestic markets, but together with others, also supporting the developments in the caucasian region, finally positioning armenia (5 foreign and 0 local based platforms operating) and georgia (6 and 0 local based platforms operating) on the first and second places correspondingly, among the upper middle income countries (ccaf, 2020) and becoming one of the top international performers globally (figure 4). but with no direct sme support line, but just in terms of fintech development. baltic states leading in global innovative index are much further their caucasian pears, showing higher rankings, higher spending and higher high-tech export (figure 5). based on their success not only regionally, but also at a global scale baltic states experience could play a huge positive impact on caucasian countries, especially in legislative reform making, practical approaches and business to government cooperation prism. lat estlit arm geo aze 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 –20 0 20 40 60 80 100 120 140 160 g d p p e r c a p it a , p p p ( c u rr e n t in te rn a ti o n a l $ ) alternative finance per capita (usd) figure 4. alternative finance per capita volumes by countries relative to gdp per capita ppp (source: wb & ccaf, 2020) 368 v. charaia et al. promoting fintech financing for sme in s. caucasian and baltic states... 5. discussion of the results smes sector all over the world is considered to be an essential part of any economy, no matter it is a developed or developing state. sme plays a crucial role in terms of employment, tax revenues, economic development and etc. however, smes still receive a disproportionately small share of credits in comparison to bigger companies, which hinders both smes and the whole economy’s development potential, especially under the global pandemic circumstances. popularity of digital and innovative source of credit are based on: probably of getting a credit at a lower interest rate; faster loan processing speed, in comparison to traditional sources; lower operating costs; more comfort in credit getting process; less hierocracy; and etc. such advantages made it desirable all over the world, however to implement the fintech methodologies, countries should have a certain level of infrastructural, legislative, digital and etc. readiness, which showed to be a great challenge for small, developing countries, such as armenia, georgia and azerbaijan. at the same time, there are several risk factors, which should be considered at a highest level: cybersecurity risk; financial and business illiteracy; challenges with online data protection; difficulties with internet connectivity and usage, especially in developing countries; regulatory frameworks and etc. therefore, strong supportive measures should be guaranteed by the local governments to protect the best interests of sme sector. during last decade, the volume of non-cash transactions globally has increased significantly, with almost 62 percent only in last 5 year, with the forecast of further 54% growth in next five years, making up to 1.1 billion transactions for 2023. this will provide a solid ground for fintech development all over the world, increasing sme sector opportunities as well and decreasing msme sector financial gap to gdp all over the world. fintech role in the fourth industrial revolution is crucial, which has a huge impact on sme development. among other solid reasons, fintech popularization also has been increased gii ranking and progress in caucasian and baltic states, 2015–2020 gross expenditure on r&d and high-tech net exports as % total trade armenia azerbaijan georgia estonia latvia lithuania 0 10 20 30 40 50 60 -5 0 5 10 15 sc or e/ va lu e in g ii 20 20 progress in gii ranking 2011–2020 armenia azerb… georgia estonia latvia lithuania 0 10 20 30 40 50 60 70 80 90 100 0 50 100 150 h ig hte ch ne te xp or ts , % to ta l tr ad e gross expenditure on r&d, % gdp figure 5. different data for the baltic and caucasian countries (source: insead [gii], 2011; gii 2020; authors calculations) business, management and economics engineering, 2021, 19(2): 358–372 369 through covid-19 global pandemic. above to all challenges for sme industry always had, coronomic crisis all over the world put an extra experiment to the sector. on the other hand, despite pandemic challenges, researches shows that regulators observed a strong up rise of fintech services since the global pandemic start, in particular: digital payments, remittances, digital banks, digital savings or deposits use has been raised the most in the economies affected by global pandemic the most. as it could be easily guessed covid-19 has boosted fintech growth globally. however, the impact of coronomic crisis on market performance is varying across geographic jurisdictions. transactions growth through fintech companies has been more successful and consequently reached the top amounts in the countries with more severe lockdowns. despite the fact of having more or less the same structure of sme within the local economies, through the number of enterprises, employment and value added created in all baltic and caucasian countries, perspectives of sme business development in the given regions and even inside those regions are different. use of innovative digital technologies, as well as fintech elements appearance in the caucasian countries is already a fact, which has already been much faster developed in baltic states, guaranteeing more stable and sustainable way of economic development; and even contributing not only to their domestic markets, but also supporting the progress in the s. caucasus, finally positioning armenia and georgia on the first and second places correspondingly, among the upper middle income countries. different analysis provided in the paper, show the unlike baltic states, caucasian countries has much to work on the fintech infrastructure first, to be ready for its full-fledged implementation. basic digital infrastructure, innovative legislation and diversification of financial market and its products, will be vital to get the maximum results from fintech promotion in georgia, armenia and azerbaijan. conclusions covid-19 global pandemic has played a significant role in fintech industry boost all over the world. raise of interest toward fintech in caucasian states was predictable, if considering the financial sector limitations and the financial gap for sme businesses in these countries. however, progress is still limited due to low development of modern financial technologies within those countries. baltic states leading in different international rankings related to the fintech industry development and strengthening issues, such as global innovative index, has much higher progress and thus better performance in contrast to their caucasian pears. showing higher rankings, higher spending and higher high-tech export, baltic states are a good example for georgia, azerbaijan and armenia in fintech development direction. based on their success not only regionally, but also at a global scale baltic states experience could play a huge positive impact on caucasian countries, especially in legislative reform making, practical approaches and business to government cooperation prism. further fintech popularization in georgia, azerbaijan and armenia, based on baltic states achievements could lead to lower financial gap for sme sector and overall better economic performance of those countries, thus achieving more stable and sustainable economic 370 v. charaia et al. promoting fintech financing for sme in s. caucasian and baltic states... growth. however, the sufficient preliminary work should be done to meet the standards where fintech industry will be able to operate freely and successfully. development of alternative financing resources, improving digital infrastructure, updating/creating 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(2017). monetary economics: practice and theory. keio university press (in japanese). http://www.worldsmeforum.org/wp-content/uploads/2016/10/entrepreneurshipataglance.pdf http://www.worldsmeforum.org/wp-content/uploads/2016/10/entrepreneurshipataglance.pdf https://www.oecd.org/industry/c-min-2017-8-en.pdf https://doi.org/10.1016/j.bir.2017.12.003 https://doi.org/10.2139/ssrn.3572124 https://ssrn.com/abstract=3773635 https://doi.org/10.1108/sef-07-2019-0270 https://www.smefinanceforum.org/data-sites/msme-finance-gap https://www.smefinanceforum.org/data-sites/msme-finance-gap https://doi.org/10.26509/frbc-wp-201701 https://doi.org/10.47119/ijrp100771520211963 copyright © 2020 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: justo.dejorge@uah.es relationship between university education in strategic management and chess in a both learning process: an approach across learning paths♦ justo de jorge-moreno * department economics and business, faculty of economic, business and tourism, university of alcalá, plaza de la victoria s/n, madrid, spain received 31 march 2020; accepted 07 may 2020 abstract. purpose – in this work, a reflexive experiential learning process is collected, which relates concepts the strategic management and learning the game of chess in a flipped classroom and blending learning process for the 2017/18 and 2018/19 courses. research methodology – the method followed has been the initial approach of the learning curves and the time series of the analysis of learning patterns in the game of chess. also, for the study of the relationship between the game of chess and its analogy with strategic management, we used a questionnaire, and we apply cluster and network analysis. findings  – the main results reveal the existence of different learning patterns (linear, quadratic, random walk), associated with the various skills of the students. likewise, different learning groups have been identified concerning the times and learning levels by activities. the underlying idea is the motivation that the game of chess exerts on students to foster greater understanding. research limitations – the limitations are related to the size of the classroom and the different initial levels of chess knowledge, which have been a real challenge to carry out this work. finally, the combination of activities, between chess and strategic management knowledge is complicated to handle, requiring large doses of planning. these limitations are perhaps challenging to solve, although possible help could be associated with more teachers being involved in the process. practical implications – the simultaneous learning of chess with the consequent increase of cognitive skills and strategic management concepts could intensify the motivation of the student and generate a virtuous circle that drives both areas. originality/value – this new experience in spain contributes to filling a perhaps significant gap in the literature. in parallel, the practice of chess in the classroom has corroborated a level of commitment and motivation of students in the knowledge of the concepts of strategic management. the results achieved could suggest the incorporation of chess practice as a motivating factor in management subjects. keywords: chess, strategic management, individual differences, learning path, university education. jel classification: a22, m19, i23. business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 2: 226–246 https://doi.org/10.3846/bme.2020.12369 ♦ this work has been presented in the xi meeting of innovation in university teaching “turning the teaching and learning processes upside down: reverse classroom and other challenges of higher education”. university of alcalá, may 2019. https://orcid.org/0000-0002-8326-3046 https://doi.org/10.3846/bme.2020.12369 business, management and education, 2020, 18(2): 226–246 227 introduction on 13 march 2012, the european parliament promoted chess as a pedagogical tool in the education system. in spain, this action is reflected in the congress of deputies in 2015. there is abundant literature that demonstrates, as kazemi et  al. (2012) mention, the influence of chess on the development of mathematical skills or problem-solving, the increase of intelligence or creativity milat (1997). in this sense, graber (2009) mentions the importance of deep and long-term thinking, which is associated with chess and business. this would reduce the short-sightedness of short-term profits, reduce investment in r&d and employee training costs, among other things. cannice, (2013, p. 25) points out that many strategic and general concepts can be easily understood on a superficial level, but alternatively teaching methods can be used to include these concepts to students better. in this sense, as mentioned by johnson and proctor (2017), how skills and abilities are acquired and maintained, as well as the factors affecting qualified performance, are issues of high interest to both academia and the professional world. although there are no conclusive results on which the best pedagogical methods for the acquisition of skills and abilities are, some authors, such as farashahi and tajeddin (2018), have recently demonstrated that students perceive the simulation method as the most effective compared to the case studies or lectures method. in this work, a process of reflexive experiential learning is collected, which relates concepts in the context of strategic management and the teaching of the game of chess simultaneously. therefore, as mentioned (osgerby et al., 2018) in line with the constructivist hypothesis, students accumulate their knowledge through continuous active cognitive processes that adapt to changing circumstances. within the consideration of the constructivist method, from which students acquire competences and construct knowledge as opposed to memoiristic learning, this work initially relies on the pedagogical model of the “flipped classroom” (hereinafter fl), which refers to an inverted classroom, made known by lage et al. (2000). subsequently, as artero escartin and domeneque claver (2018) mention, it was bergmann and sams (2012), who consolidated the “inverted classroom” or “reverse classroom” methodology according to talbert (2012). the objective of this is based on considering the student in the central core of the learning process, through the promotion of self-learning, interaction with the teacher, in the planning of activities, which includes the preparation of an appropriate environment, the use of multimedia media and an appropriate and accepted evaluation system. some authors such as gonzález-fernández and huerta (2019) indicate that this methodology relates concepts of lessons learned and blended learning whose contribution is related to the development of skills related to self-disciplined teams. likewise, they consider that students develop text-mindedness, and the development of spatial and visual skills, being the process of learning by solving problems, factors that define them. in general, the teaching-learning process is related to information technologies, and to the application of games in this process. as mentioned by fernández-mesa et  al. (2016), gamification is related to the incorporation of elements of the game, in our case chess, to a non-ludic computer program with the aim of increasing their motivation (dominguez et al., 2013). 228 j. de jorge-moreno. relationship between university education in strategic management and chess... during the process of knowledge of chess, the students carry out a group research project, in the relationship of the subject of strategic management of the company. the students carry out a proactive process of learning by doing, with the tutoring of the teacher and specific masterclasses, for conceptual or methodological explanations. as a consequence with this process (understanding and/or application a particular concept or methods), and in line with (vanschenkhof et al., 2018) the experiential learning is an appropriate methodology, because of that combine experiences, perception, cognition and behaviour (kolb, 1984). on the one hand, it seeks to take advantage of the process of reflective learning in the classroom, as proposed by hedberg (2009). authors as minocha et  al. (2017) make an exciting development of an experiential process, where they try to argue that much of business school practice and pedagogy is still rooted in content rather than context, where priority is given to academic knowledge in favour of practice intelligence. in this work we are also interested in addressing and developing the concept of practice intelligence, as mentioned by minocha et al. (2017) is defined as the capability of managers to analyses, make sense of, reflect upon and shape a response to complex problem contexts and includes the aspects as; problem-solving, the relevance of creativity, imagination in the approach of future scenarios. on the other hand, and in line with howard (2014), cannice (2013), among others, implementing a process of experiential learning, where the practice of the game of chess, with strategic deductive and inductive approaches, the discovery of new knowledge and its linkage with those related to strategic management make up the development structure and the mechanisms of discussion and analysis. the contribution of this work focuses on the simultaneous learning process of chess and the concepts of the strategic management field in an experiential learning process, employing the methodologies mentioned in courses 2017/18 and 2018/19 in the only subject of the fourth year of the business administration career. except for error, this is the first experience carried out in spain in the university context. the simultaneous learning of chess with the consequent increase of cognitive skills and strategic management concepts could intensify the motivation of the student and generate a virtuous circle that drives both areas. to determine the results achieved from the pedagogical innovation carried out, the concept of the learning curve is used. according to howard (2014) the validity and generality of this law is debatable and subject to different considerations both in the field of psychology and economics. learning, in this context, refers to the functional relationship between the time required to improve the performance of an activity and the repetition activity wright’s, (1936). as mentioned by grosse et  al. (2015) learning (or experience) curves assume that performance (output) improves as a task is repetitively performed, which is attributed to experience that is accumulated by the individual or group performing the task. these authors make an in-depth study of the works that use learning curves in the last three decades. the work is organised as follows: the material and methods are set out in the following section. the third section deals with the leading results. finally, the fourth section presents the main conclusions. business, management and education, 2020, 18(2): 226–246 229 1. material and methods 1.1. participants the learning process has been carried out with 121 students from the fourth year of the business administration and management studies in the morning and afternoon shifts, in the subject of strategic management. the learning process has been carried out in academic years 2017/18 and 2018/19, in the career of business administration in the subject of fourth-year strategic management, as mentioned. table 1 shows the composition of students per year and the percentage of them who said whether they play chess. table 1. characteristics of the sample (source: own elaboration) course nº of students play chess 2017/18 64 (55% female, 45% male) 52.0% 2018/19 57 (53% female, 47% male) 47.4% in order to know the level of chess knowledge of the students, different ways were used; 1) a small questionnaire was carried out, where among other things, the students were asked if they knew how to play chess 2) the students who answered yes were suggested to download the app chess live (https://chess-live.uptodown.com/android) and to be classified in one of the six existing levels. the information or process data has been collected by direct measurement from questionnaires and exercises provided to students during the four months from late january to early may 2018 and 2019. the characteristics of the student sample tested are shown in table 2. table 2. characteristics of the student sample (source: own elaboration) 2017/18 2018/19 population 83 78 sample size 64(79.5%) 57(70.3%) sampling error 5.90% 6.78% confidence interval 95% p = q = 0.5 p = q = 0.5 analysis unit student 4th strategic management student 4th strategic management geographical scope university of alcala (madrid-spain) university of alcala (madrid-spain) type of sampling convenience convenience measuring instrument anonymous survey anonymous survey date of realisation may-2018 may-2019 230 j. de jorge-moreno. relationship between university education in strategic management and chess... the duration of the activities in the classroom is interrupted since they are two days a week (plus the student’s activity outside the classroom) and continued during the term. the type of learning is a motor learning and cognitive learning. motor learning, since learning is a chance, resulting from practise or a novel experience, in the capability for responding adams (1971). cognitive learning, since students learning both by himself and by the group. 1.2. materials as cannice (2013) mentions, it is difficult to decide when and how to carry out the simultaneous teaching of chess and sm. the strategic management subject is taught two days a week in 1.5 and 3-hour classes on tuesdays and wednesdays (morning and afternoon) respectively (not including tutorial classes). the time devoted to chess (average 18.75 hours/week in and out of the classroom and de = 7.30) the classes were compatible with the activities of the subject. the students were free to choose the layout of the activities, which included tutoring by the teacher and quality control of the work. the material provided to the students consisted of movement and play comprehension exercises that are detailed in table 3 and the appendix. the students were provided with pieces and boards by groups (most frequently in the academic year 2017/18), and they also used chess software such as www.chess.com (most often in the academic year 2018/19). in the exercises to be developed, they were asked about the time of the activities (in 2017/18), degree of understanding and the group to which they belonged. later, the questionnaires were collected with the keys that they chose. at the end of each class (or in the following week’s class), the exercises were corrected. table  3 shows the 51 activities carried out (column 1). activity 0 corresponds to a previous introduction to chess; its history (including chess and cinema, chess and mathematics), the board and movements of pieces through a website created by the author of this work. the activities were composed of sub-activities (2 or 3). these activities were delivered on paper, with which the board and practice pieces were made available to the student. students recorded the time spent per activity, as well as the degree of understanding of the activity. the grouping of activities is based around eight levels of difficulty. the definition of the activities is structured from the basic knowledge of movements and pieces, the openings, the intermediate development, and the endings. the last column shows the resources used. regarding the average degree of comprehension of the activities between 0 and 100%, it was 80.40%, distributed according to levels; #1 = 90.8%; #2 =77.3%; #3 = 75.7%; #4=89.4%; #5 = 88.8%; #6 = 81.2%; #7 = 70.7; #8 = 68.9. 1.3. methodology 1.3.1. methodology of the analysis of learning patterns in the game of chess (2017/18) the method followed has been the initial approach of the learning curves, however, and given the heterogeneity of game levels observed since the beginning of the experiment and the different possible learning patterns, an automatic detection process is used (lower value of the akaike information criterion) of the time series by activity with both statgraphics and gretl software, which in addition to including the usual learning curves (power, exponential, logarithmic or quadratic) allows detecting other models such as arima. http://www.chess.com business, management and education, 2020, 18(2): 226–246 231 table  3. description of activities in 2017/18 and resources used 2017/18 and 2018/19 (source: own elaboration) variable n um be r of su bac tiv iti es le ar ni ng le ve ls m ea n (t im e in m in .) st an da rd d ev ia tio n m in m ax definition of the activity used resources activity_0 presentation* 1)https://justodejorge. wixsite.com/ justodejorge activity_1 2 1 0.56 2.56 0 20 chess board_i 2) boards and physical pieces provided activity_2 2 1 0.70 1.43 0 10 chess board_ii activity_3 2 1 2.10 2.41 0 15 box names (algebraic notation) 3) exercises and games on paper activity_4 2 1 0.48 1.04 0 5 movements of the pieces_1 activity_5 2 1 0.56 1.23 0 5 movements of the pieces_2 activity_6 2 1 0.65 1.40 0 5 movements of the pieces_3 activity_7 2 1 0.59 1.24 0 5 movements of the pieces_4 activity_8 2 1 0.72 1.55 0 8 movements of the pieces_5 activity_9 2 2 5.82 4.32 0.3 20 tactical and strategic gameplay 1) exercises and games on paper activity_10 1 2 5.61 4.84 0.1 20 fast checkmate study_i 2) projection of the results by transparencies activity_11 1 2 7.68 5.64 0.1 20 fast checkmate study_ii 3) www.jinchess.com/ chessboard/composer activity_12 1 2 7.31 5.04 0.1 20 concept of sacrifice and combinations 4) chess_diagram_ maker.html www. svg_experimenten. deds.nl/chessboard/ activity_13 2 2 8.25 7.05 0.1 30 strategy and vision of the game_i 5) boards and physical pieces provided activity_14 3 2 3.43 2.37 0.1 15 strategy and vision of the game_ii 6) www.chessgame. com activity_15 3 2 4.05 2.86 0.2 12 openings and development_i activity_16 3 2 5.73 3.99 1.5 25 openings and development_ii 232 j. de jorge-moreno. relationship between university education in strategic management and chess... variable n um be r of su bac tiv iti es le ar ni ng le ve ls m ea n (t im e in m in .) st an da rd d ev ia tio n m in m ax definition of the activity used resources activity_17 3 2 7.36 5.15 0.3 25 openings and development_iii activity_18 3 2 5.95 4.09 0.3 20 intermediate game movements_i activity_19 3 2 7.21 5.16 0.2 25 intermediate game movements_ii activity_20 3 3 7.72 4.90 1.3 20 intermediate game movements_iii activity_21 3 3 10.39 8.11 2 45 intermediate game movements_iv activity_22 3 3 6.12 4.52 1 20 intermediate game movements_v activity_23 3 3 6.11 5.22 1 25 intermediate game movements_vi activity_24 3 3 5.81 4.50 1.2 25 intermediate game movements_vii activity_25 3 3 4.91 2,74 0.5 13 intermediate game movements_viii activity_26 3 4 3.64 2.5 0.5 10 final game moves_i activity_27 3 4 3.79 2.5 1 10 final game moves_ii activity_28 3 4 4.39 3.4 0.3 15 final game moves_iii activity_29 3 4 3.48 2.5 0.4 10 final game moves_iv activity_30 3 4 4.39 2.5 1 10 final game moves_v activity_31 3 5 3.59 2.2 1 10 final game moves_vi activity_32 3 5 3.96 2.5 1 10 final game moves_vii activity_33 3 5 3.99 3 1 15 final game moves_viii activity_34 3 5 4.36 2.4 5 10 final game moves_ix continue table 3 business, management and education, 2020, 18(2): 226–246 233 variable n um be r of su bac tiv iti es le ar ni ng le ve ls m ea n (t im e in m in .) st an da rd d ev ia tio n m in m ax definition of the activity used resources activity_35 3 5 4.67 3.1 1 15 final game moves_x activity_36 3 6 6.02 5.7 1 27 checkmate in 1 move activity_37 3 6 4.29 3.1 1 20 checkmate in 1 move activity_38 3 6 4.23 2.5 0.3 10 checkmate in 1 move activity_39 3 6 4.25 4.7 0.4 20 checkmate in 1 move activity_40 3 6 9.24 5.4 2 20 checkmate in 1 move activity_41 3 6 12.64 6.8 2 25 checkmate in 1 move activity_42 2 7 11.8 11 2 60 checkmate in 2 move activity_43 2 7 16.45 16 1 60 checkmate in 2 move activity_44 2 7 18.09 18 3 60 checkmate in 2 move activity_45 2 7 19.71 17 3 60 checkmate in 2 move activity_46 2 7 18.28 17 4 60 checkmate in 2 move activity_47 2 7 18.81 17 2 60 checkmate in 2 move activity_48 2 8 18.89 19 3 60 checkmate in 2 move activity_49 2 8 21.28 20 1.5 60 checkmate in 3 move activity_50 2 8 24.73 21 5 60 checkmate in 3 move activity_51 2 8 19.13 18 1.5 60 checkmate in 3 move end of table 3 234 j. de jorge-moreno. relationship between university education in strategic management and chess... in addition, the methodological proposal of (box & jenkins, 1973) has been considered. the analyses and results that will be presented in the following section have been carried out fundamentally on an individual basis per student and per group according to three levels; i) 25th percentile, middle and 75th percentile level. 1.3.2. methodology of the analysis of the relationship between the game of chess and its analogy with strategic management (2017/18 and 2018/19). with the aim of capturing the relationship between the game of chess and the strategic management, a questionnaire was carried out in 2017/18 with two groups of questions, the first group of twenty questions (see table  5) that pose analogies with the strategic management and the second group of three additional issues related to the feasibility of interrelating the game of chess with the strategic management, with business management in a broad sense and with continuity of the teaching of chess in future courses. each question in the first group could contain two or more proposals and the possibility of the student, including a different one. a five-position likert scale was used to show the student’s degree of agreement. in the academic year 2018/19, the analogies were to be interpreted by the students and therefore, only the left column of table  5 (chess side analogy) was provided, and they had to complete it with their interpretation of the concepts explained in the subject (sm side analogy). to distinguish the relationship, a network analysis was applied. besides, three additional questions were included, relating to their level of satisfaction with the experience with the association between chess and sm. in order to obtain the information from the surveys, a descriptive analysis of means and a cluster analysis was carried out, which will be described in the following section. 2. results 2.1. results of learning patterns in the game of chess table  3 showed some characteristics of the activities carried out, including time by activity (see also appendix). figure 1 shows the evolution of the meantime, 25th and 75th percentile. as can be seen, the time spent on activities 40 to 51 is increasing, the most sophisticated levels (6 to 8). growth between activities 9 to 13 and 18 to 21 is also marked). a higher level of detail of the time used is shown in figure 2, where three groups can be seen. the group#1 with the least time is made up of 15% of the sample (10 students), groups #2 and #3; 59% (38 students) and 26% (16 students) respectively. for simplicity, only the times of some students have been shown in the figure; the rest oscillate between the maximum and minimum values of each group. in the case of group #3, the times are even higher than the 60 minutes that the y-axis picks up. in more detail, the violin graphs of the times of some activities in figure 3 clearly show the existence of different groups when analysing the exterior part of the charts (kernel distributions). for example, the two or three modes in levels 5, 6 and 8. business, management and education, 2020, 18(2): 226–246 235 figure 1. times per activity (2017/18) (source: own elaboration) figure 2. times by activity according to groups (2017/18) (source: own elaboration) 236 j. de jorge-moreno. relationship between university education in strategic management and chess... figure 3. violin graphs of the times of the selected activities and levels. (2017/18) (source: own elaboration) table  4 shows the results of the estimations of the learning trajectories for the whole group in their average values, 25th and 75th percentile, and in an individualised way for nine students as an example, according to their belonging to the previously established time groups. the classification of the models estimated in table 4, and shown in figure 4, represent in a similar way to the absent ones; exponential smoothing, arima, random walk and linear or quadratic models. table 4. group and individual learning trajectories (2017/18) (source: own elaboration) función components rsme aic classroom mean random walk 2.09 1.47 25th random walk 1.32 0.55 75th arima (1,1,2) ar (1) –0.88(–5.40)** ma(–0.82)** –ma(2) –5.43(– 4.16)** 4.11 1.48 business, management and education, 2020, 18(2): 226–246 237 función components rsme aic students group #1 student #1 cuadratic function –0.803 +0.504 t – 0.007 t2 2.64 2.01 student #2 simple exponential smoothing α = 0.562 1.48 0.82 student #3 simple exponential smoothing α = 0.434 1.96 1.38 student #4 lineal function 0.534275 + 0.0829955 t 1.86 1.32 student #5 simple exponential smoothing α = 0.51 1.48 0.82 student #6 simple exponential smoothing α = 0.24 3.59 2.59 student #7 simple exponential smoothing α = 0.65 1.41 0.73 group #2 student #8 arima (1,1,1) ar (1) 0.44(3.31)** ma(1) 1.00(102.1)** 6.41 3.79 student #9 simple exponential smoothing α = 0.37 3.99 2.81 student #10 arima (1,0,2) ar (1) 1.05(57.6)**ma(1) 0.42(3.15)**ma(2) 0.40(3.05)** 3.66 2.71 student #11 simple exponential smoothing α = 0.58 3.46 2.52 student #12 arima (1,1,2) ar (1) –0.65(–3.26)**ma(1) –0.31(-98.01)**1.81)ma(2) 0.61(5.66)** 4.81 3.26 student #13 simple exponential smoothing α = 0.59 4.26 3.67 group #3 student #14 random walk 3.45 3.45 student #15 random walk 8.4 4.25 student #17 simple exponential smoothing α = 0.69 7.66 4.11 student #16 arima (2,1,2) ar (1) 0.008(0.07) ar(2) –0.66(–5.91)** ma(1) –0.02(– 27.9) ma(2) –1.05(–27.9)** 4.83 3.3 note: ** p < 0.01; *p <0 .05 rsme = root mean squared error; aic = akaike information criterium. end of table 4 238 j. de jorge-moreno. relationship between university education in strategic management and chess... figure 4. learning paths (2017/18) (source: own elaboration) 2.2. results of the relationship between the game of chess and its analogy with the sm course 2017/18 to determine the relationship between the game of chess and the analogy with the business world, through the strategic management, and under the methodology set out in section 2.3, table  5, the results are shown. the fourth column shows the average values and the mode of the grade according to the proposed analogy. in the fifth column, the analogy is sorted according to the values in the fourth column. in general, high values of the degree of the agreement are observed, the global average is 3.97(sd = 0.41), being the maximum average and mode value of 4.62(5), corresponding to item 9.1 relating to the movements of the queen and the bishop in their diagonals and the analogy with the optimisation of resources. the minimum value is in item 6.3, with 3.02(3) mean and mode respectively, related to the tactical process of destruction of the opponent’s defense and control of squares and diagonals and its analogy with the reduction of the field of activity (product-market). therefore, a wide range of analogies between chess and strategic management are internalised by the students. these associations were previously discussed with the students throughout the classes. business, management and education, 2020, 18(2): 226–246 239 table 5. strategies of the chess game and its analogy with the strategic management (2017/18) (source: own elaboration) item questions analogies with sm mean (mode) order nº 1 the analogy of the chess board and its pieces, and how to tactically deploy resources is related to the sm in terms of 1.1 resources and capabilities of the firm 1.2 understanding the environment 4.20(4) 3.88(4) 18 30 2 the moves made by the pieces in chess are related to the strategic management, in terms of …. 2.1 how managers deploy their resources 2.2 how ceo’s manage hr, technology 4.08(5) 3.72(4) 3 35 3 in chess they move white pieces first, then black. if both players had a perfect game. white’s pieces advantage in moving first gives it the victory. 3.1 the leader firm in innovation is the most competitive 3.2 concept of creative destruction 4.05(4) 3. 23(3) 22 48 4 in the first moves you try to dominate the center of the board, if you play with the white pieces. if you dominate the center, you control the board. 4.1 leader firm dominate the sector 4.2 following companies could dominate the sector 4.46(5) 3.35(3) 9 47 5 the double attack involves the simultaneous execution of two or more simultaneous attacks that the opponent cannot counteract at the same time, usually due to weaknesses, this is related in sm to 5.1 product and market development (diversification) 5.2 product and process innovation 5.3 vertical integration processes and investment in r&d 3.77(4) 3.74(4) 3.71(4) 33 34 37 6 the destruction of the defense is a tactical process, it is achieved when a rival piece is directly eliminated, which controls important lines or squares, this is related in sm with 6.1 organisational restructuring 6.2 the reorientation of the activity 6.3 the reduction of the field of activity 3.85(4) 3.57(4) 3.02(3) 32 41 50 7 the diving is another of the tactical processes in chess. this is the immobilisation of an attacked piece that would leave, if moved, another piece of greater value unprotected. if this piece is the king, the dive is absolute and the total immobilisation, this is related in sm to 7.1 launching of fictitious or simulated signals in strategies of fusion, internationalisation, etc. that seek wear and tear 7.2 presence of causal ambiguity 3.72(4) 3.42(3) 36 46 240 j. de jorge-moreno. relationship between university education in strategic management and chess... item questions analogies with sm mean (mode) order nº 8 deviation is a tactical process that consists of forcing a rival piece to leave its current position, giving our pieces access to decisive squares or lines, this is related in sm to. 8.1 market counter-segmentation 8.2 exclusive access to suppliers with new technology 8.3 product/process differentiation 3.45(4) 3.97(5) 4.03(5) 45 24 23 9 when you move the queen or your bishops, you consider doing it in wide range diagonals, to take full advantage of the capabilities of this resource, this is related in strategic management to. 9.1 optimization of resources 9.2 limited rationality 4.62(5) 3.12(3) 1 49 10 sometimes, incorrect movements of the own pieces block the king’s movements, making it easier for the opponent to checkmate. 10.1 power and influence of stakeholders towards management 10.2 conflict of interest and balance for survival 3.58(3) 4.28(4) 40 11 11 attack on discovery, it is that when a piece moves and discovers the action of another that is behind it, it can create a threat between the two. sometimes, it can be a double check, this is related in sm to 11.1 integration of the supplier in the value chain 11.2 strategic alliances with other companies by national or international markets 3.46(3) 4.17(5) 43 19 12 in processes of opening and development of games, the disposition and movement of pawns is fundamental, their capacities increase, if it is done properly, this is related in sm to 12.1 coordination of activities can provide competitive advantages (complementarity of resources) 12.2 leadership / efficient management turn weak points into strong points (weak resources into strong ones) 4.23(4) 4.25(5) 16 13 13 when a crown pawn (reaches the other side of the board) becomes another piece much more powerful, this is related in sm to 13.1 an effective hr leader develops hr skills 13.2 efficient leadership / management turn weaknesses into strengths and strategies 3.97(4) 4.57(5) 25 3 14 by castling in chess, the king is protected, but the king can be a key player in the attack. 14.1 the protection of a valuable resource prevents appropriateness 14.2 protecting a valuable resource prevents substitutability, imitability and transferability 14.3 the protection of a valuable resource, leads to causal ambiguity 3.68(3) 3.89(5) 3.62(3) 38 29 39 continue table 5 business, management and education, 2020, 18(2): 226–246 241 item questions analogies with sm mean (mode) order nº 15 when you perform a movement and development of a piece, do you think about the purpose you are pursuing? perhaps you are more interested in eliminating a rival piece, than any other option, this is related in sm to 15.1 vision, purpose and objectives of the company 15.2 strategic planning 4.25(5) 4.58(5) 14 2 16 before making a move, the player evaluates his opportunities and threats due to the opponent’s positioning, this is related in sm to 16.1 analysis of the specific environment of the company 16.2 metodología de las cinco fuerzas de porter 4.52(5) 4.32(5) 5 10 17 before making a move, the player evaluates and uses his strengths and reflects on how to cover the weaknesses of his positioning, this is related in sm to 17.1 internal firm analysis (value chain) 17.2 vertical and horizontal links 17.3 coordination and optimisation activities 4.52(5) 3.46(3) 4.14(5) 6 44 20 18 in chess, it is necessary to study the present in depth and evaluate alternate moves for the following moves, this is related in sm to 18.1 scenery analysis 18.2 decision trees 4.55(5) 4.25(5) 4 15 19 in chess the anticipation of the opponent’s move involves developing inductive and deductive procedures (each move follows a plan, our plan induces our move while from the opponent’s move we must try to deduce his plan), this is related in sm to guerras martín and navas lópez (2007) 19.1 change management and strategic thinking 19.2 leadership 4.49(5) 3.55(3) 8 42 20 chess players often analyse their own moves to correct mistakes and design strategies. 20.1 strategic implementation 20.2 organisational adjustment and change 20.3 knowledge management (learning by doing, proactivity) 20.4 evaluation and selection of strategies 20.5 strategic adaptation (relationship between strategy and the company’s mission and objectives) 20.6 strategic feasibility (possibility of implementing a strategy) 20.7 strategic acceptability (consequences of choosing a strategy) 3.97(5) 4.23(5) 4.51(5) 4.28(4) 3.94(4) 3.88(4) 3.97(4) 26 17 7 12 28 31 27 end of table 5 242 j. de jorge-moreno. relationship between university education in strategic management and chess... course 2018/19 in the second year of the experience analysed instead of providing the associated analogy of chess with the strategic management, so that it would be valued by the students, it was they who should look for such a connection, as it was commented. in order to interpret the results of the analysis, a network analysis was applied. figure 5 shows the network analysis associating 69% (37) of the students who performed the analogy test (henceforth ana#). the left side of figure 5 shows the network, where six ann# have an important representation; ana#20; ana#4; ana#1; ana#3; ana#14 and ana#9. while ana#8 or ana#12 among others has the minimum density with the association of only one student. on the right side of figure 5, two of the students, stu#32 and stu#5, are shown with the highest ratio in the recognition of a total of nine analogies. 2.3. cluster analysis 2017/18 and 2018/19 by means of cluster analysis, applying the ward grouping method (ward, 1963) and the euclidean distance squared, three groups of students have been obtained for each year. the groups are defined according to the average values of their degree of valuation according to; the association of chess with the strategic management, with business management in general and the recommendation to continue using chess in future courses. table 6 and 7 show the results of the cluster and discriminant analyses, respectively. the average values of each group and year are usually high, for the three items, with the exception of group #3 of course 2018/19, which shows the lowest values. table 6 shows the high percentages of successes in the classification, 100% and 98.1% of the 2017/18 and 2018/19 courses of the students in each group according to the discriminant analysis, as well as the values of the tests and the statistical significance of the classification functions. finally, figure 6 shows the clouds of words, wherewith greater size, those more referenced appear, from the opinions of the students for the two courses, analysed. figure 5. network analysis (source: own elaboration) stud#5 business, management and education, 2020, 18(2): 226–246 243 2017/18 2018/19 figure 6. word clouds (source: own elaboration) discussion and conclusions the aim of this study was to describe a process of learning and deep thinking of the game of chess and its connection with the knowledge of the subject of strategic management, with university students in their final year of career for the academic years 2017/18 and 2018/19. the students learned to play chess in a flipped classroom and bleding learning process and developed a research group work for the subject. figure 5. network analysis (source: own elaboration) stud#5 table 6. interrelationship questions by cluster (source: own elaboration) item curso % (stud.) group #1 group #2 group #3 test (pvalor) it is possible to interrelate the game of chess and the sm 2017/18 32.8(21) 4.61 3.93 4.71 63.5(0.00) 2018/19 51.8(28) 4.10 4.71 2.58 32.5(0.00) it is possible to interrelate the game of chess and business management in general. 2017/18 24.6(16) 4.38 3.81 4.60 5.90(0.00) 2018/19 25.9(14) 3.82 4.98 2.83 66.6(0.00) i would recommend the teacher to continue with the introduction of chess in the st 2017/18 43.0(28) 4.71 3.62 4.67 14.1(0.00) 2018/19 22.2(12) 4.50 4.85 2.66 40.1(0.00) table 7. test of discriminant analysis (source: own elaboration) wilks lambda test (pvalor) % of successes 2017/18 function#1 0.006 183.5(0.000) 100 function#2 0.115 78.7(0.004) 2018/19 function#1 0.154 93.4(0.000) 98.1 function#2 0.723 16.1(0.000) https://universidaddealcala-my.sharepoint.com/personal/justo_dejorge_uah_es/documents/libro1.xlsx?web=1 244 j. de jorge-moreno. relationship between university education in strategic management and chess... the main results reveal the existence of different learning groups in relation to the times and levels of difficulty by activities in 2017/18. likewise, different learning patterns have been identified; given that, as howard (2014) mentions, there are no unique forms of learning curves for the full range of skills and abilities of individuals. in general terms, an increase in the level of learning in the game of chess is detected, with the predictions made by the different models despite the degree of difficulty of the levels, especially the seventh and eighth levels. 64% of the students would keep time constant for future activities, 12% would reduce time, and the remaining 24% would share proportionally an increase or oscillation of time in the above-mentioned course. one of the main contributions of the work relates to the association of the game of chess with the concepts of the sm. the underlying idea is the motivation that the game of chess exerts on students to foster greater understanding. in the academic year 2017/18, analogies were proportionate, and students evaluated the grade according to them. in spite of the results achieved with high values on a likert scale in that year (as shown in table 5), in the academic year 2018/19, it was the students who had to look for this relationship in an autonomous way, looking for a greater process of connection with the concepts. the network analysis shows a satisfactory result where at least 69% of the students recognise between 1 and 9 analogies, and none of them remains unrecognised. the simultaneous learning of chess with the concepts in management could have a kind of virtuous circle by means of which the increase of cognitive abilities could be related to the domain in the field of management and vice versa. this new experience in spain contributes to filling a perhaps significant gap in the literature. in parallel, the practice of chess in the classroom has corroborated a level of commitment and motivation of students in the knowledge of the concepts of strategic management, as well as the concept of practical intelligence, especially in terms of problem-solving, creativity and future scenarios. the results achieved could suggest the incorporation of chess practice as a motivating factor in management subjects. limitations and future research directions possible extensions of this work could relate to the introduction of time limit monitoring in activities or sub-activities. also, a different sequencing to that maintained in this work, reducing the number of levels in the degree of complexity. in relation to the limitations, the size of the classroom and the different initial levels of knowledge of chess, have been a real challenge to carry out this work. finally, the combination of activities, between chess and the experience of strategic management are complicated to manage, requiring large doses of planning. these limitations are perhaps challenging to solve, although possible help could be associated with a higher number of teachers involved in the process. acknowledgements the author of this study appreciates the participation and consent to make public the results, to the students of the courses 2017/18 and 2018/19. also, to rebeca de jorge huertas and milagros huertas de lucas for their help in the development of multimedia media and databases. any error is the sole responsibility of the author of this work. business, management and education, 2020, 18(2): 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(1936). factors affecting the cost airplanes. journal aeronautics science, 3(4), 122–128. https://doi.org/10.2514/8.155 appendix table a1. example of activities http://chessedu.org/wp-content/uploads/role_chess_education.pdf http://chessedu.org/wp-content/uploads/role_chess_education.pdf https://doi.org/10.1016/j.ijme.2017.08.002 https://doi.org/10.1016/j.ijme.2018.04.006 http://scholarworks.gvsu.edu/colleagues/vol9/iss1/7 https://doi.org/10.1016/j.ijme.2017.12.003 https://amstat.tandfonline.com/doi/abs/10.1080/01621459.1963.10500845 https://doi.org/10.2307/2282967 https://doi.org/10.2514/8.155 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: pbiskupec@bak.hr business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 1: 79–95 https://doi.org/10.3846/bmee.2022.15738 the macroprudential measures for mitigating the effects of the pandemic crisis in tourism economies petra popek biškupec *, suzana herman , ivan ružić university of applied sciences baltazar, zaprešić, croatia received 06 october 2021; accepted 18 march 2022 abstract. purpose – the paper evaluates the applied macroprudential measures in selected countries by testing their efficiency in tourism and reducing the revenue gap in tourism sector during the pandemic crisis. research methodology – the effects of macroprudential policy were tested using the granger causality test and pvar model. the research used data from the period 2019 to 2022 by quarters. the impulse response function evaluated the long run impact of macroprudential policy on performance of tourism entities. findings – the results confirm the positive effect of systemically important institutions buffer (sib) on reducing the losses in tourism. the impulse response showed the significant impact of sib on revenue gap (rg) reduction. research limitations – the research has limitations regarding to the short period of observation. the additional variables can be entered into the model. practical implications  – the results serve the policy makers for shaping the measures for recovery policies and maintaining long-term economic stability. the findings are useful as they can serve as a guide in designing measures to help the tourism recovery. originality/value – the contribution of this study is reflected in providing scientific evidence of macroprudential measures effectiveness for several countries and routing policies for tourism recovery. keywords: macroprudential policy, pandemic, tourism economy. jel classification: c33, e58, g21, z33. introduction the unexpected disturbance caused by pandemic crisis has caused shocks in economies all over the world. disabling the flow of people influenced the tourism sector and caused huge losses. as the economies of tourism-oriented countries depend on revenues gained through taxes on tourism-related income and foreign exchange inflow (the commonwealth, 2021), http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ mailto:pbiskupec@bak.hr https://doi.org/10.3846/bmee.2022.15738 https://orcid.org/0000-0003-4783-5251 https://orcid.org/0000-0001-5941-7765 https://orcid.org/0000-0001-7504-5244 80 p. popek biškupec et al. the macroprudential measures for mitigating the effects of the pandemic... it is highly important for policy makers to design the efficient measures and instruments for helping the tourism sector recovery. the main purpose of this paper is to test the applied measures at macroeconomic level in tourism-depended eu countries. the research question relates to verification whether the macroprudential policy is well designed to help the economy. the research tests the following hypothesis: the macroprudential tools positively affect the economic recovery in tourismdependent countries. when pandemic hit the world, the tourism economies in european union had still been recovering after the consequences that global financial crisis left. the problem of tourism dependent countries is the high sensitivity to shocks that cause a reduction of demand for nonessential goods such as travel and leisure use. according to their specifications in economy and industrial structure, several countries have been extremely affected by pandemic crisis. countries in eu with the share of tourism in gdp higher than 10% that have experienced major shock caused by the pandemic crisis are croatia, greece, italy, cyprus, malta, portugal, and spain. these are countries of comparable and similar characteristics regarding the dominant form of tourism that provide mostly tourism oriented to the sun, sea, and outdoor activities primarily in period of summer vacation (see subsection 1.1). according to the world travel and tourism council (2021) the tourism sector faced a loss more than us$ 4.7 trillion in 2020 and 62 million jobs were lost. the global trade in services with travel and tourism sector included, for eu area, in november 2020 remained at 27% below its level at the end of 2019 (european central bank, 2021a). due to the pandemic crisis, most touristic facilities were closed and still they are not yet operating in full profile. the tourism sector has experienced a restructure of demand and some forms of tourism have become more attractive than before crisis. the new trends in tourism refer to increase in preference of domestic destinations and individual forms of tourism that include areas not affected by mass tourism (niestadt, 2020). huge scale of losses for economies required application of all measures and instruments available, in fiscal, monetary and macroprudential domains. as macroprudential policy is complementary to prudential supervision of the financial system, macroprudential policy tools should be used in coordination with monetary and fiscal policy (popek biškupec & bilal zorić, 2017). the macroprudential policy is specially designed for decreasing the effects of crisis by providing the necessary liquidity for financial system. the central banks have been applying variety of macroprudential tools for helping the financial and real sector through encouraging credit activity and boosting the credit and business cycle. although macroprudential instruments contribute to the overall financial stability it could cause the deterioration of bank’ credit activity if the regulators do not provide appropriate framework and coordination with other public policies (popek biškupec & herman, 2021). andries et al. (2021), de schryder and opitz (2021), conducted studies referring to banks’ credit activity, and their studies confirmed the positive impact of macroprudential tools on stability of financial and banking sector. the pandemic has proven that the application of macroprudential measures can be broader and have positive effects if it is applied selectively to targeted stakeholders in the economy. the holistic character of macroprudential policy enables a wider range of actions and makes business, management and economics engineering, 2022, 20(1): 79–95 81 it easier to achieve balance at the macroeconomic level. most research has dealt with a limited sample or tested impacts on a smaller number of countries. this study covers seven countries with similar characteristics and proves the effect of macroprudential policy in a wider range of instrument applications for the tourism sector recovery. the aim of this paper is to analyse macroprudential measures (see table  1) for helping the selected tourism-oriented countries in eu to decrease the pandemic shock and to revive tourism. given that covid-19 pandemic is a new phenomenon, this research greatly contributes to new knowledge about the effectiveness of measures to help the economy. it is especially important for each country to implement the policies, measures and activities that achieve high efficiency in the shortest possible time and without high costs. the importance of this paper is reflected in the fact that due to the relatively short period of pandemic; the effectiveness of policies has not yet been sufficiently researched at the professional and scientific level. this research confirmed the effectiveness of macroprudential mechanisms and its scientific significance is reflected in testing measures at the international level and conducting research for eu countries that have similar macroeconomic policies. the panel var model confirmed that macroprudential instrument (systemically important institutions buffer  – sib) reduce the revenue gap of entities in touristic sector. the revenue gap (rg) was obtained according to the losses caused by corona crisis. the impulse response function confirmed that macroprudential policy diminish rg and in the long run it can diminish losses in touristic sector. the findings are useful for future macroeconomic policies to mitigate effects of future possible crisis. 1. literate review and macroprudential framework for the tourism and revenue gaps recovery the macroprudential policy framework encompasses a comprehensive approach to the economy and is aimed at preserving overall macroeconomic stability. the main research question of this study deals with evaluation of the efficiency of applied macroprudential measures on tourism recovery during pandemic crisis. although macroprudential policy is putting huge accent to the system stability, the easing of macroprudential measures, such as lowering sib, are proved to be an effective tool in improving the economic recovery, especially for tourism-dependent countries. 1.1. macroprudential policy for recovery tourism economies monetary and fiscal policies are the most dominant in designing measures and instruments for real sector, both to ensure the optimal amount of money in circulation as well as to provide an adequate framework for the efficient operation of the enterprise. after last global financial crisis, many countries have felt the limited effects of monetary policy tools. to preserve macroeconomic stability, monetary and fiscal policy needed to be strengthened by introducing additional prudential measures and instruments. for this reason, many countries, especially southern and south-eastern europe, have introduced macroprudential 82 p. popek biškupec et al. the macroprudential measures for mitigating the effects of the pandemic... policies to preserve financial and overall economic stability. due to the limited efficiency of monetary policy, central banks had started to use macroprudential crisis management tools. macroprudential policy measures and instruments serve to reduce the procyclicality of the financial system and they are very effective in reducing the amplitudes of ups and downs of credit and business cycles in times of crisis (popek biškupec, 2015). latest research shows that macroprudential measures have effects on real gdp, the price level and credit that are very similar to those of monetary policy impacts, but the transmission of these two policies is different. macroprudential policy aims to the broad spectrum of entities and monetary policy is focused to the credit institutions (kim & mehrotra, 2019). cao et  al. (2021) analysed the interaction of monetary and macroprudential policy for reducing the impact of foreign monetary shocks. the results confirmed that macroprudential policy helped to mitigate the effects of foreign monetary shocks. after global pandemic had aroused, countries were adopting policies of quantitative easing. takats and temesvary (2021) tested the impact of macroprudential easing on macroeconomic balance. the study showed that macroprudential easing in uk caused the negative impact of us monetary policy restrictions on usd-denominated cross-border that provided uk banks as lending outflows. the macroprudential policy response of european central bank (2021b) to corona crisis include mostly banks’ lending channel. macroprudential easing allowed banks to use capital to absorb losses and provide credit activity, specially to the most vulnerable sectors, as tourism. the macroprudential policy of european central bank (european central bank, 2021b) is divided in several main fields targeting banks; a) capital and liquidity buffer relief, b) the additional flexibility of treatment of non-performing loans (npls), c) the emergency purchase programme, d) long-term loans at favourable conditions and collateral easing, e) remaining dividends in banks below 15% of cumulated 2019-20 profits. the detailed specification is presented in table 1. table  1. the macroprudential tools of european central bank for euro area countries during corona crisis (source: authors according to european central bank, 2021b) macroprudential tools description measures and instruments capital and liquidity buffer relief the main characteristic of macroprudential policy is the principle of countercyclicality. during the period of welfare, the macroprudential policy is restrictive, while during the recessions and crises period, the macroprudential policy allows quantitative easing. banks can use capital buffers up to €1.8 trillion in new loans to households and businesses the additional flexibility of treatment of non-performing loans (npls) the pandemic crisis has caused a deterioration in the credit image of debtors. for non-performing loans, bank needs to ensure additional money for the protentional losses and decrease new credit activity. banks have been given more flexibility when they are classifying loans that are backed by public guarantees business, management and economics engineering, 2022, 20(1): 79–95 83 macroprudential tools description measures and instruments the emergency purchase programme due to the ensuring enough funds, central bank is buying bonds from banks for boosting spending, investments and supporting economies. ecb is buying several kinds of assets under the €1,850 billion pandemic emergency purchase programme until at least the end of march 2022 long-term loans at favourable conditions and collateral easing banks can ask for long-term loans at very favourable conditions from centra bank to keep up their lending to most needed sectors. ecb is applying less strict rules on the assets banks must give as insurance remaining dividends in banks below 15% of cumulated 2019-20 profits banks are asked to remain dividends below 15% of cumulated 2019-20 profits. ecb requested banks not to pay out dividends or buy back stocks due to the characteristics of bank-centric system for all selected countries, monetary and macroprudential measures and instruments have a strong impact on the tourism sector through the credit channel. in the period of pandemic, it is predicted that domestic tourism will have a share of 75% of the tourism economy in oecd countries. (bhuiyan et al., 2021) strengthening the share of domestic tourism contributes to the effectiveness of domestic public policies, which will strengthen the impact of domestic macroprudential instruments. 1.2. key-characteristics of selected countries related to the tourism sector macroeconomic characteristics of the country define policy measures and instruments to achieve the main strategic goals and development plans. selected mediterranean countries have similar tourist characteristics, which are also the main carriers of their economies. each country combines macroprudential instruments (see table 1) according to its characteristics. the key-characteristics of the selected countries are presented below. croatia implements a classic tourist model of “sun and sea” with a seasonal concentration on coastal areas. before the pandemic caused by covid 19 the share of foreign exchange income of tourism activities was approximately 24% of the country’s gdp, and after the pandemic shock, it fell to 10% of gdp (see table  2). the world bank (2022) shows that 60.021.000 international tourists visited croatia in 2019, while in 2020 the figure fell to approximately 21.608.000. greek tourism is a growing economy-leading service sector offering sun, sea, and sand (papatheodorou & arvanitis, 2014). the contribution of the greek tourism industry in total gdp in 2019 was 20% while in 2020 this percentage fell to 8.7% (see table 2). international arrivals of tourists according to the world bank (2022) in 2019 amounted 34.005 000, while in 2020 arrivals fell drastically to 7.406.000 international arrivals. italy’s tourism activities represent an important contribution to the italian economy and are one of the world’s leading cultural destinations, following a significant number of unique unesco world heritage sites (oecd, 2011). italy’s tourism sector generated 13% of the country’s gdp in 2019, while in a pandemic year this percentage dropped to 7% (see end of table 1 84 p. popek biškupec et al. the macroprudential measures for mitigating the effects of the pandemic... table  2). according to the world bank (2022), international tourist visits to italy in 2019 amounted 60.021,000, while in 2020 that number dropped to 38.419.000 visits. the key pillar of cyprus’s economy is tourism where tourism supply focuses on the “sun and sea” policy. dependence on tourism is also evident in the share of foreign exchange income of the country where cyprus recorded a total of 14% in 2019, and in the following pandemic year this percentage fell to 3.7% (see table 2). international tourist arrivals in 2019 for cyprus were record-breaking, amounting to 4.117.000 according to the world bank (2022), while the following year that number dropped dramatically to approximately 632.000 international arrivals. malta’s tourism sector is the main driver of its economy (national tourism policy, 2015). the focus of tourist activities is “the sun and sea” concept. according to the world bank (2022), the islands of malta recorded 3.519.000 international arrivals in 2019, while in 2020 only 718.000 were recorded. the contribution of tourism to state gdp in 2019 was 15.9% while in 2020 maltese tourism recorded a 5.4% (see table 2). one of portugal’s main social-economic activities is tourism. the strong link between portuguese culture, the country’s geographical location and history is positively reflected through international tourist arrivals (oecd, 2020a). in 2019, the share of foreign exchange income generated from tourism was 17% of gdp, while in 2020 this percentage fell by more than half (see table 2). according to the world bank (2022), international arrivals of tourists in 2019 recorded 17.283.000 while this figure fell to 4.208.000 arrivals in the following 2020. the driver of spain’s economic and social development is tourism (oecd, 2020b), with using heritage as new proximity tourism routes (martínez-hernández et al., 2021). the share of foreign exchange income generated from tourism in 2019 amounted 14% of gdp, while the following year it recorded a big drop to only 5% (see table 2). according to the world bank (2022), in 2019, the international tourist recorded 126.170.000, while in 2020, recorded only 36.410.000 visitors. the tourism-oriented countries designed various models to mitigate the negative impact of pandemic. motevalli-taher and paydar (2021) proposed model for minimizing the number of tourist patients by closing the entry points of specific region. they used multiobjective model for decreasing total costs and minimizing the tourist patients. this approach could serve to encourage the tourism. to cope with the crisis, each country should apply several key methods; efficient, coordinated and not fragmented crisis management and appropriate communication between all relevant institutions in the tourism sector (mikac & kravaršćan, 2021). as neoliberalism became inefficient to face unexpected shocks and crisis, robina-ramírez et al. (2021) propose sustainable model of tourist governance which includes coordinated effects for reducing the unexpected effects of the pandemic crisis in tourism sector. the proposed model consists of collaboration of private and public plans for local tourism communities, promoting the common goods and healthy environment. the answer of economy to the pandemic could be designing resilience model as a crisis management tool to address disruptive events affecting tourism-sector developed by aldao et  al. (2021) and applying operational crisis management practices of small and medium enterprises in tourism sector proposed by kukanja et al. (2020). one of the prior suggestions is to focus on increasing revenues instead on reducing operational costs. business, management and economics engineering, 2022, 20(1): 79–95 85 1.3. performance indicators in tourism for selected countries it is evident that tourism contributes in south and southern-eastern european countries in a significant way and provides a significant number of beneficial economic impacts on the country. the selected eu countries have been putting huge effort to increase tourism supply and they are focused on increasing the flow of visitors (đorđević et al., 2017). according to the world travel and tourism council annual research (2021) selected analysed countries have suffered huge losses due to the pandemic crisis. both, total contribution of travel and tourism to gdp and total contribution of travel and tourism to employment show decrease due to the year 2019. table 2 presents data for selected countries. table 2. total contribution of travel and tourism to gdp (source: authors according to world travel and tourism council, 2021) total contribution of travel and tourism to gdp (%) total contribution of traveland& tourism to employment (% of total employment) 2019 2020 2019 2020 croatia 24.3 10.2 22.2 19.0 cyprus 13.4 3.7 13.4 13.1 greece 20.3 8.7 21.1 19.8 italy 13.1 7.0 15.0 13.8 malta 15.9 5.4 21.3 18.1 portugal 17.1 8.1 20.7 17.7 spain 14.1 5.9 14.4 13.3 2. data the analysis was performed for 7 european countries (croatia, greece, italy, cyprus, malta, portugal and spain) with similar economic and tourism characteristics in which the pandemic caused similar disturbances. the analysed period refers to the period 2019 to 2021 on quarterly basis. data were collected from central banks of selected countries, european central bank (2021d) and eurostat database (2021). the selected countries have used macroprudential measures and instruments regarding the structure of the economy. during the application of the macroprudential instruments, all selected countries have in common monetary and macroprudential easing. all analysed countries put the biggest accent to the capital-based measures as countercyclical capital buffer, systemic risk buffer, other systemically important institutions buffer and combined buffer requirement. macroprudential easing could approximated as reducing the systemically important institutions buffer. sib refers to capital buffer whose purpose was to create a protective layer that could be used in future crisis periods (european central bank, 2021c). the detailed specification of used tools is presented in table 3. 86 p. popek biškupec et al. the macroprudential measures for mitigating the effects of the pandemic... table 3. implemented macroprudential measures in selected eu (source: european central bank, 2021c and central banks of selected countries, 2021) country countercyclical capital buffer other systemically important institutions buffer systemic risk buffer combined buffer requirement croatia 0% 7 banks: 0.5–2% all banks: 1.5% 4–6% cyprus 0% 6 banks: 0.25–1% – 2.5–3.5% greece 0% 4 banks: 0.5% – 2.5–3% italy 0% 4 banks: 0.19–1% – 2.5–3.5% malta 0% 4 banks: 0.06–2% – 2.5–4.5% portugal 0% 6 banks: 0.19–0.75% – 2.5–3.25% spain 0% 4 banks: 0.25–1% – 2.5–3.5% most of the countries have been relaxing macroprudential liquidity requirements and set the capital-based macroprudential requirements at lowest point. also, most of the countries have decreased buffer rates for some systemically important institutions (eller at al., 2021). systemically important institutions are defined as institutions of great importance in relation to the whole economy. due to their share in the domestic economy, they could trigger negative trends into the system and contribute to market distortions if they experience bad business performance. from that point of view, the whole macroeconomic stability could be jeopardized (european banking authority, 2021). 3. research methodology the paper tests the effectiveness of macroprudential policy in selected eu countries through a panel vector autoregressive model (pvar). this study tests the following panel var: the macroprudential tools positively affect the economic recovery in tourism-dependent countries. the research was conducted using pvar model, granger causality test and impulse reaction function. based on the panel analysis, the effectiveness of the measures used in countries with similar characteristics was observed and the effect of macroprudential easing on the performance of entities in the tourism sector was tested. the paper provides the granger causality test for macroprudential measures and revenue indicator of subjects in tourism. finally, the impulse response function tested the long run positive impact of macroprudential policy on business performance of tourism entities. this study uses the panel var data method developed by love and zicchino (2006). the panel var was selected to examine the impact and effectiveness of the central bank’s business, management and economics engineering, 2022, 20(1): 79–95 87 macroprudential measures in closing the tourism revenue gap. the specificity of the panel var model is that two components are combined. the traditional var approach and the panel data method, treats the variables in the system as endogenous. the research provides undetected individual heterogeneity by introducing fixed effects resulting in better consistency of the love and zicchino (2006) assessment. the key benefit of this method is to exploit individual time series and variations of cross-sectional data and to avoid bias related to crosssectional regressions considering a country-specific fixed effect (traoré, 2018). the research is carried out using stata program. the dependent variable in the model represents revenue gap (lnrg) while an independent variable is systemically important institutions buffer (sib), control variable of the model is gross domestic product (lngdp). logarithmic transformations represent a convenient means of converting a highly distorted variable into one that is approximately normal (benoit, 2011). for determination of the distribution data, a histogram was created for each variable. logarithm is applied both to the dependent variable (lnrg), and control variable that refers to lngdp. variable sib belongs to the string variable category. in case of a string variable (sib), it is necessary to make transformation into a numerical number. the transformation was provided using the help of encode in stata. the variables used in the model and their descriptive statistics are shown in table 4. table 4. description statistics for variables (source: author’s calculation, 2021) variables mean std. dev. min max observations lnrg overall –.0223288 .9029781 –3.497192 3.813526 62 between .294906 –.5051116 .3489366 within .8594729 –3.014409 3.44226 sib overall 5.84127 1.393607 1 7 63 between .8792466 4.222222 6.888889 within 1.126418 .952381 7.619048 lngdp overall 10.45921 1.751801 7.984054 13.07121 63 between 1.875663 8.094944 12.96418 within .0681486 10.30259 10.63832 first, the unit root tests were conducted. the non-stationaryness of data is very common in economic data, that is, the situation that the variable does not have a clear tendency to return to a constant value or linear trend (atems & jones, 2014). there are several tests to examine the presence of unit root tests in the panel data: (1) fischer test with extended dickey-fuller (adf), (choi, 2001); (2) test levin-lin-chu (levin et al., 2002); (3) im, pesaran and shin (2003); (4) harris-tzavalis (harris & tzavalis, 1999); (5) hadri (2000) lm test. the test that was applied in this study was a harris-tzavalis test (see table  5) because it is designed to be applied to data that are fixed and relatively short over a period. to provide accurate corrections for low values, the harris-tzavalis test strictly limits the model to exclude an increase in lag. if the panel data is balanced it will remain according to the calculation. table 5 shows the results of the harris tzavalis test. 88 p. popek biškupec et al. the macroprudential measures for mitigating the effects of the pandemic... table 5. harris-tzavalis unit-roots test (source: author’s calculation stata program, 2021) stationary at variables statistics z values p value(s) level with time trend included lnrg 0.0193 –2.0625 0.0196 level with time trend included sib –0.0147 –2.2970 0.0108 level with time trend included lngdp 0.0675 –1.7295 0.0419 the autoregressive parameter in the model is common, as well as the time trend. according to this, they both were included as panel elements. the null hypothesis of the selected test is panels contain unit-roots. the results of the applied test shown in table 5 are similar to research conducted by simionescu (2015) and show that all variables included in the model are stationary. due to the test, the null hypothesis could be rejected, and it could be concluded that sib (see table 1), rg and gdp were not auto-correlated at the significant level 1%. the next step was the assessment of lags. to choose the appropriate model, the test for lags determination provided an answer to the question of how many lags would be optimized for panel var. the applied test, according to the hansen’s (1982) j statistics, corresponding p-value, and the criteria for selecting the model developed by andrews and lu (2001) based on j statistics, gives the information on the overall model determination coefficient. criteria based on hansen j statistics require the number of moments conditions to be higher than the number of endogenous variables in the model. code pvarsoc uses the estimation sample of the least restrictive panel vector autoregressive model. table 6. panel var optimal moment and model selection criteria (varsoc) (source: author’s calculation stata program, 2021) lag cd j j p-value mbic maic mqic 1 .9999229 15.18316 .6493543 -48.8131 –20.81684 –30.48114 2 .9999555 6.067474 .7331467 –25.93066 –11.93253 –16.76468 3 .9999172 . . . . . note: mqic  – modified hannan–quinn information criteria; maic  – modified akaike information criteria; mbic – modified bayesian criteria. the first-order panel var model was fitted by using the first three lags of endogenous variables (andrews & lu, 2001). based on the selection criteria of the three models (andrews & lu, 2001) and the total coefficient of determination, a first lag pvar model was selected. the reason of selecting the first lag model is the lowest values of mbic, maic and mqic (abrigo & love, 2016), the first order lag minimizes mbic, maic and mqic to the greatest extent. the results of this testing shown in table  6, together with post-assessment testing, confirm that the first lag model is more stable than the models of other potential systems. panel var model was selected for three reasons (bayraktar-sağlam & sayek böke, 2017): (1) panel var approach allows the investigation of endogenous interaction between rg and sib, allows to highlight the residual effects of sib on rg, both as to check if feedback is business, management and economics engineering, 2022, 20(1): 79–95 89 generated from the sib on the rg; (2) panel granger causation analysis allows to identify the direction of involution between sib and rg, which provides a discussion on a possible twoway relationship; (3) impulse response function (irf) helps to assess dynamic links between sib and rg. the equation for the applied model is (abrigo & love, 2016): 1 1 2 2 1 1it it it it p p it p it i ity y a y a y a y x b u e− − − + − −= + +…+ + + + + + ; { } { }1,2, , , 1,2, , ii n t t∈ … ∈ … , (1) where is ity ( )1xk dependent variable vector, itx ( )1xk vector of exogenous coquetries, i itu i e are ( )1xk vectors of dependent variables of specific panels of fixed effects and errors, ( )kxk matrix 2a , ( )2 1, pa a i ixk−… matrix b are the parameters to be assessed. according to the previous tests, the panel var regression model was defined. the panel var model is determined by one lag due to the helmert transformation (the default) and with the first tree lags as instrument using gmm-style estimation. for this purpose the code pvar lnrg sib lngdp, instlags(1/4) gmmstyle were used. results of regression were shown in table 7. table  7. panel vector autoregression  – gmm estimation (source: author’s calculation using stata programme, 2021) coef. std. err. z p>|z| [95% conf. interval] lnrg lnrg l1. .4784958 .103002 4.65 0.000 .2766156 .6803759 sib l1. –.5873236 .1593696 –3.69 0.000 –.8996823 –.2749649 lngdp l1 5.762813 1.815889 3.17 0.002 2.203736 9.32189 sib lnrg l1. –.7669388 .1307822 –5.86 0.000 –1.023267 –.5106105 sib l1. 3.216131 .507109 6.34 0.000 2.222216 4.210046 lngdp l1 –10.7574 5.38105 –2.00 0.046 –21.30407 –.2107396 lngdp lnrg l1. .0678922 .0194434 3.49 0.000 .0297839 .1060006 sib l1. .0210669 .0181445 1.16 0.246 –.0144956 .0566294 lngdp l1 .9242046 .2200633 4.20 0.000 .4928884 1.355521 note: instruments: 1(1/4). (lnrg sib lngdp). for the estimation of the pvar model the involving rebound effects had to be applied, especially in the case of conclusive samples. for that reason, the assessment process of gmm (holtz-eakin et al., 1988) was used. results of panel vector autoregression model with gmm estimation are shown in table  7. these results confirmed the impact of sib to rg. results showed that the first lag (l1.) of sib has the negative impact on variable rg at the significant 90 p. popek biškupec et al. the macroprudential measures for mitigating the effects of the pandemic... level of 5% (p>|z| = 0.000). also, the first lag of control variable gdp has positive impact on variable rg at the significant level of 5% (p>|z| = 0.002). after applying the panel var, it was necessary to check whether past values of variables e.g., x are useful in predicting the value of another variable y, depending on past values of variable y, or whether x “granger cause” y (granger, 1969). the chi-squared statistics, which was obtained from granger and wald tests, indicated the short run causal effects. this was done via the pvargranger command using the wald test with the null hypothesis stating that the coefficients on all residues of the endogenous variable together are equal to zero, so the coefficients can be excluded from the equations of the panel var model. the results of the test are shown in table 8. table  8. panel var-granger causality wald test (source: author’s calculation using stata programme, 2021) equation \ excluded chi2 df prob >chi2 lnrg sib 13.581 1 0.000 lngdp 10.071 1 0.002 all 14.783 2 0.001 sib lnrg 34.389 1 0.000 lngdp 3.997 1 0.046 all 34.390 2 0.000 lngdp lnrg 12.193 1 0.000 sib 1.348 1 0.246 all 13.897 2 0.001 the null hypothesis of wald test is that sib does not granger-cause of rg. looking at results, prob >chi2 = 0.000, the null hypothesis can be rejected, and it could be concluded that sib does granger-cause rg. the same conclusion refers to gdp, so it could be concluded that gdp does granger-cause rg. the test of overidentifying restriction shows that the j statistic is significant at the 5% significance level (hansen’s j chi2(27) = 37.940173 (p = 0.079)), so it could be concluded that the model is misspecified. in panel var models, insight into dynamic relationships between variables is provided by methods of innovation analysis: impulse response function and variance decomposition (dvc) (bahovec & erjavec, 2009). the impulse response method measures the reaction of each variable to the unit shock of another variable. the decomposition of the variance determines the level of the variability of a particular variable due to the shock in the variable itself. also, it shows the level of shock in another variable in the model. impulse response functions monitors the dynamic impact of a “shock” system or a change on input. although impulse response functions are used in many fields, they are particularly useful in economics and finance for several reasons: they allow aggregate supply shocks to have lasting effects on output. for example, blanchard and quah (1989) demonstrated the use of long-run constraints in structural var to monitor the impact of aggregate supply and aggregate demand shocks on output and unemployment. business, management and economics engineering, 2022, 20(1): 79–95 91 figure 1. estimate impulse-response functions (source: author’s calculation stata program, 2021) estimation of impulse-response function (see figure 1) confirmed that sib reduces rg. the impulse-response function presents the behaviour of economic variables rg in response to shocks of introducing sib for the time from 2019 till 2021, assuming no further shocks. the direct effect of the sib initial shock is comparable for all selected countries. the initial impact on rg is negative for selected countries. 4. discussion this paper presents the macroprudential measures that tourism-dependent countries with similar characteristics (croatia, italy, spain, greece, malta, portugal, and cyprus) have used to reduce negative shocks and help the tourism sector. the panel var analysis tested the effect of the macroprudential instrument sib on reducing the losses of tourism entities. the results confirmed the hypothesis that the macroprudential tools positively affect the economic recovery in tourism-dependent countries. results of panel var model with gmm estimation (see table 7) confirmed the impact of sib to rg. the analysis confirmed that first lag (l1.) of sib has the negative impact on variable rg at the significant level of 5% (p>|z| = 0.000). according to the expectation, the first lag of control variable gdp has positive impact on variable rg at the significant level of 5% (p>|z| = 0.002). every selected country applied similar intensity of macroprudential level using similar macroprudential tools. the results confirm the high impact of sib for stabilizing the tourism-dependent economies. the results confirm the positive effect of sib and the hypothesis that the macroprudential tools positively affect the economic recovery in tourism-dependent 92 p. popek biškupec et al. the macroprudential measures for mitigating the effects of the pandemic... countries. the macroprudential instruments ensured the adequate level of liquidity of the financial sector that supported the financing the tourism sector by minimizing the illiquidity gap. the impulse response function confirms the effect of sib on rg reduction. the results confirmed the positive impact of macroprudential instruments to decrease the amplitude in tourism performance of entities in economies that have significant share of tourism in gdp. the analysis of the macroprudential measures speaks in favor of the effectiveness of the macroprudential approach and holistic approach to economic stability. in bank-oriented systems, such as the european union’s bank-centric system, monetary and macroprudential policies have a strong impact on the real sector using credit institutions channel. macroprudential policy, unlike monetary policy, combines broader economic effects. due to the interconnectedness of entities, cross-border spill overs and business integration, all public policies have to be coordinated to stimulate credit cycles and rise in the business cycle. the findings in this paper confirmed the thesis that macroprudential policy can stabilize economy and has positive effect on the tourism sector. although the model has limitations regarding to the short period of observation, covering nine quarters, the results are extremely useful, and they can serve as a guide for further strategies to design measures to help the economy. the paper contribution is reflected in the testing of current measures and instruments using scientific methods, which have proven the effectiveness of macroprudential tools. it is recommended to test the effectiveness of the tools in further periods when more observations will be available. also, additional variables can be entered into the model, and their effectiveness can be tested according to the same principles. in the coming periods, the results will be even more robust, as more time will pass in the application of certain macroprudential measures and instruments. conclusions the pandemic has caused a stalemate in global economic flows. due to the cessation of all physical contacts and the introduction of social distance, all sectors that involve human physical interaction stopped to operate. after restricting travel for business and private purposes, the tourism sector experienced a huge business collapse. negative shocks have particularly affected tourism-dependent countries. in such countries, the failure of the tourist season has had a negative impact on the overall economy. after economies were already exhausted by the global financial crisis, the pandemic crisis caused even greater structural difficulties. by introducing macroprudential instruments, countries have tried to act to reduce negative shocks and help the tourism sector through various macroprudential support measures. central banks, through monetary impulses, acted on financial institutions for the purpose of tourism recovery. the results of this study may serve the policy makers for shaping the measures in the adoption of recovery policies and maintaining long-term economic stability. the findings are extremely useful as they can serve as a guide for further designing measures to help the tourism recovery. the contribution of this study is reflected in providing scientific evidence of macroprudential measures effectiveness for several countries and routing policies for recovery of tourism sector. business, management and economics engineering, 2022, 20(1): 79–95 93 references abrigo, m. r., & love, i. 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(2022). international tourism number of arrivals. https://data.worldbank.org/indicator/ st.int.arvl?end=2020&locations=hr-cy-mt-gr-it-pt-es&start=2005 https://doi.org/10.22598/zefzg.2017.1.31 https://hrcak.srce.hr/149149 https://hrcak.srce.hr/149149 https://doi.org/10.1051/shsconf/20219207050 https://doi.org/10.1007/s10668-021-01707-3 https://journal.cea.org.mk/files/journals/1/articles/27/public/27-106-1-pb.pdf https://journal.cea.org.mk/files/journals/1/articles/27/public/27-106-1-pb.pdf https://doi.org/10.1016/j.jinteco.2021.103521 https://thecommonwealth.org/sites/default/files/inline/mapping_a_way_forward_for_small_states_updf.pdf https://thecommonwealth.org/sites/default/files/inline/mapping_a_way_forward_for_small_states_updf.pdf https://thecommonwealth.org/sites/default/files/inline/mapping_a_way_forward_for_small_states_updf.pdf https://ideas.repec.org/p/hal/wpaper/hal-01940506.html https://wttc.org/research/economic-impact https://wttc.org/research/economic-impact https://data.worldbank.org/indicator/st.int.arvl?end=2020&locations=hr-cy-mt-gr-it-pt-es&start=2005 https://data.worldbank.org/indicator/st.int.arvl?end=2020&locations=hr-cy-mt-gr-it-pt-es&start=2005 copyright © 2019 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. business, management and education issn 2029-7491 / eissn 2029-6169 2019 volume 17 issue 2: 94–110 https://doi.org/10.3846/bme.2019.10409 *corresponding author. e-mail: supramono@uksw.edu the determinants of working capital management: the contextual role of enterprise size and enterprise age pambayun kinasih yekti nastiti, apriani dorkas rambu atahau, supramono supramono* universitas kristen satya wacana, indonesia received 29 may 2019; accepted 10 july 2019 abstract. purpose – working capital management plays a vital role in determining the continuity of enterprises’ business activities. enterprises should manage their working capital efficiently to avoid excessive working capital investments and at the same time, to maintain their liquidity. this study aims to examine the determinants of working capital management and to test the different effects of the determinants of working capital management based on enterprise size and enterprise age. research methodology – the sample consists of 117 manufacturing enterprises listed at the indonesian stock exchange for the years 2010–2017. panel data regression was used to test the hypothesis. findings  – the findings reveal that sales growth and economic growth determine working capital management. however, the effects of the determinants of working capital management differ depending on enterprise size and enterprise age. specifically, economic growth is the only determinant that exhibits different effects on working capital management between different enterprise size and enterprise age subsamples. meanwhile, besides economic growth, capital expenditure, and operating cash flow are the other enterprise-specific determinants that exhibit different effects on working capital management between the two enterprise age subsamples. research limitations  – this study only measures enterprise size with total assets. thus, we advise future studies to complement this proxy with other measures such as market value and the listing size criterion (main board vs development board). further, it is necessary to analyse the non-linear relationship between leverage and working capital management to explain the positive effect of leverage on working capital management. practical implications  – the empirical results suggest that manufacturing enterprises must focus more on their sales growth because it affects their ability to manage their working capital efficiently. besides, younger manufacturing enterprises need to shorten their cash cycles that are longer relative to old enterprises. originality/value  – no previous studies have analysed the determinants of working capital management based on enterprise characteristics, especially enterprise size and age. specifically, in the scientific literature, enterprise size and enterprise age mainly act as the dependent variables. keywords: working capital management, sales growth, economic growth, enterprise size, enterprise age. jel classification: g31, g39, c23. https://doi.org/10.3846/bme.2019.10409 business, management and education, 2019, 17(2): 94–110 95 introduction working capital management is an essential element of enterprises’ day-to-day operational activities (marobhe, 2015) because it determines the continuity of enterprises’ business activities (adamu & hussaini, 2015). working capital management is also a crucial issue because working capital is a part of short-term investments (bhunia, 2010). efficient working capital management likely avoids enterprises from excessive working capital investments while at the same time, secures their liquidity. previous studies empirically show that working capital management affects liquidity (attom, 2016; adekola, samy, & knight, 2017), enterprises’ profitability (deloof, 2003; tran, abbott, & jin-yap, 2017; nastiti, atahau, & supramono, 2019; a.  t.  h. nguyen & t.  v.  nguyen, 2018) and enterprise value (kieschnick, laplante, & moussawi, 2013; wasiuzzaman, 2015; ahangar & shah, 2017). thus, it is understandable that financial managers pay much attention to efficient working capital management (deloof, 2003; abuzayed, 2012; li, dong, chen, & yang, 2014). to optimise the efficiency of working capital management, it is vital to analyse the determinants of working capital management itself to help financial managers improve their working capital management. several previous studies demonstrate enterprise-specific and macroeconomic factors that affect working capital management, albeit inconsistently. these enterprise-specific factors include leverage, enterprise growth, size, and age (gill, biger, & mathur, 2010; zariyawati, annuar, taufiq, & sazali, 2010; palombini & nakamura, 2012; goel, 2015; wasiuzzaman, 2015; haron & nomran, 2016), and capital expenditure and operating cash flow (appuhami & department, 2008; gill et al., 2010; abbadi & abbadi, 2013; ilyas, 2014). however, other studies suggest that age (koralun-bereźnicka, 2014; azami & tabar, 2016), leverage and capital expenditure (mansoori & muhammad, 2012; fatimatuzzahra & kusumastuti, 2017) do not affect working capital management. in a similar vein, previous studies also show inconsistent results for the macroeconomic factors. for example, some studies indicate that gdp and inflation affect working capital management (zariyawati et  al., 2010; mansoori muhammad, 2012; salawu & alao, 2014) while others (abbadi & abbadi, 2013; goel, 2015; fatimatuzzahra & kusumastuti, 2017) do not find such effects. we then argue that previous studies show inconsistent results mainly because they use enterprise-specific characteristics such as enterprise size and age as the determinants of working capital management rather than as the contextual factors that help explain the different effects of the independent variables on working capital management. in other words, the results of the determinants of working capital likely depend on specific enterprise characteristics. we base our arguments on the findings of previous literature that investigates the relationship between financing sources and working capital management. several previous studies demonstrate that more significant and older enterprises exhibit better financing ability because they can access financing sources more efficiently and with lower costs (koh, duran, dai, & chang, 2015; agustini, 2016). on the contrary, smaller and younger enterprises tend to experience financing constraints (beck & demirguq-kunt, 2005; hadlock & pierce, 2010; ponikvar, zajc kejzar, & morec, 2013). thus, when confronted with leverage, enterprise growth, capital expenditure, operating cash flow, and macroeconomic condition problems, smaller and younger enterprises are more likely to manage their working capital 96 p. k. y. nastiti et al. the determinants of working capital management: the contextual role... efficiently by shortening their receivable and inventory turnovers than more substantial and older enterprises that are better able to secure financing sources. this study aims to (1) examine the determinants of working capital management and (2) to test whether there are different effects of the determinants of working capital management based on enterprise size and age in indonesian manufacturing enterprises. from 2010 to 2017, the proportion of manufacturing enterprises’ working capital management to their total assets was 52.62%, where the percentage of account receivables and inventory were 18.57% and 20.01%, respectively. indonesian manufacturing enterprises play a strategic role in the national economy as indicated by their significant contributions to gdp (20.16%) and export (75.99%). this study contributes to the working capital management literature in at least two aspects. firstly, this study focuses on the determinants of working capital management, a research issue that is relatively understudied. as suggested by singh and kumar (2014) in their review on previous working capital management studies, scholars mainly focus on the relationship between working capital and profitability. secondly, ours is the first that investigates the different effects of the determinants of working capital management based on enterprise size and age. previous studies operationalise enterprise size (gill et  al., 2010; zariyawati et al., 2010; wasiuzzaman, 2015) and age (koralun-bereźnicka, 2014; goel, 2015) as the independent variables. from the practical point of view, this study contributes by demonstrating the specific areas related to working capital management that need to be optimised further by enterprises regarding their size and age. 1. literature review 1.1. working capital management working capital management is related to the efficiency of the management of various working capital components (onaolapo & kayjola, 2015). cash conversion cycle (ccc) is the leading efficiency indicator of working capital management (deloof, 2003; quayyum, 2011; padachi, howorth, & narasimhan, 2012). ccc measures an enterprise’s inventory turnover period, a receivable collection period, and an outstanding payable period. a shorter ccc indicates that more cash is available to finance an enterprise’s operations, and a longer ccc may cause enterprises to have a liquidity problem (ademola, 2014). several theories, such as cash conversion cycle theory, operating cycle theory, and pecking order theory explain the behaviour of working capital management. developed by richards and laughlin in 1980, cash conversion theory explains that a cash cycle starts with cash disbursements to acquire raw materials and then followed by sales of goods, the collection of receivables, and finally cash receipts. a shorter cash cycle indicates more efficient working capital management. several studies have used cash cycles as the indicator of working capital management (raheman, afza, & qayyum, 2010; abuzayed, 2012; vural, 2012). according to operating cycle theory as introduced by park and gladson in 1963, enterprises that loosen their credit policies to their customers will likely increase their receivables and accelerate their inventory turnover but at the same time experience cash deficiency that will lead to liquidity risk. while conversion cycle theory analyses the whole aspects of working capital management (current assets and liabilities), operating cycle theory only focuses business, management and education, 2019, 17(2): 94–110 97 on inventory and receivable in analysing working capital management (aminu & zainudin, 2015). another approach is the pecking order theory that was introduced by myres and majluf in 1984. this theory is often used to explain enterprises’ financing decisions. according to this theory, enterprises should prioritise internal financing over external financing due to its lower cost. thus, working capital management is closely related to the use of internal funding to satisfy enterprises’ needs in working capital. as it was mentioned above, this study focuses on the determinants of working capital management that have been analysed by previous studies, namely enterprise-specific factors such as leverage, sales growth, capital expenditure, operating cash flow and macroeconomic factors such as economic growth or inflation. as suggested by pecking order theory, highly leveraged enterprises rely less on internal financing and need less capital to finance their daily operations (singh & kumar, 2017). these enterprises then tend to invest in less working capital (salawu & alao, 2014; elbadry, 2018) to reduce costs due to receivables, inventories, and short-term liabilities and to fulfil matured obligations (palombini & nakamura, 2012). thus, these enterprises need to manage their working capital more efficiently. by analysing 2,796 publicly listed brazilian enterprises for the years 2001–2008, palombini and nakamura (2012) demonstrate that highly leveraged enterprises exhibit more efficient working capital management as indicated by shorter cash conversion cycles. thus, we propose the following hypothesis: h1: leverage negatively affects the cash conversion cycle. enterprise growth likely increases the needs in working capital investments and the ability to shorten cash cycles. by investigating 186 actively traded enterprises at the nigerian stock exchange from the period of 2000–2009, salawu and alao (2014) find that increased sales motivate enterprises to invest more working capital in supporting the increased sales. in their analysis of small and medium indian enterprises, singh and kumar (2017) also show similar results. on the contrary, it is also likely that enterprises with high sales growth produce shorter cash conversion cycles that generate more efficient working capital management. this argument is supported by naser, nuseibeh, and al-hadeya (2013), who study 67 abu dhabian enterprises from 2010 to 2011. their study demonstrates that sales growth is negatively related to the cash conversion cycle. based on these arguments, the following is the second testable hypothesis: h2: sales growth negatively affects the cash conversion cycle. capital expenditure measures investments in fixed assets. when experiencing constrained financial conditions, enterprises have the choices of investing in fixed assets or working capital. if they opt for more capital expenditure, they will reduce their working capital investments (cuong & nhung, 2017) that shorten their cash cycles. by using 94 publicly listed singaporean enterprises for eight years since 2003, mansoori and muhammad (2012) investigate the determinants of working capital management and reveal that capital expenditure has a negative influence on the efficiency of enterprises’ working capital management. thus, we propose the following hypothesis: h3: capital expenditure negatively affects the cash conversion cycle. pecking order theory suggests that enterprises prioritise internal financing sources because of the lower cost of capital relative to alternative external financing sources (myers & 98 p. k. y. nastiti et al. the determinants of working capital management: the contextual role... majluf, 1984). cash flow generated from operating activities is an internal financing source on which enterprises can rely. thus, enterprises with more operating cash flow have more significant opportunities to manage more working capital. further, enterprises do not have to be too aggressive in managing their working capital because of sufficient cash availability (abbadi & abbadi, 2013). enterprises that generate higher cash flow likely increase their investments in working capital that eventually will lengthen their cash cycles (palombini & nakamura, 2012). accordingly, we propose the following hypothesis: h4: operating cash flow positively affects the cash conversion cycle. gdp is often used to measure the economic condition of a country. when the economic situation of a country declines or fluctuates, enterprises tend to increase their working capital to ensure the continuity of their production processes (marobhe, 2015). however, enterprises often find it difficult to generate cash or to access financing sources (salawu & alao, 2014), and they tend to manage their working capital to shorten their cash cycles. for example, mansoori and muhammad (2012) find that gdp is negatively related to working capital management. however, by analysing 119 publicly listed malaysian enterprises for the period of 2000–2009, zariyawati et  al. (2010) demonstrate that gdp positively affects the cash conversion cycle. economic growth will boost enterprises’ growth and enable enterprises to secure more financing sources for their working capital investments. based on these arguments, the following is our proposed hypothesis: h5: gdp positively affects the cash conversion cycle. samuelson and nordhaus (2010) define inflation as a situation in which prices of goods and services and production factors of a country tend to increase during a specified period. during the inflation period, enterprises arguably contain the costs of their receivables and inventory investments by accelerating their cash conversion cycles, although they have elastic demand condition. zariyawati et al. (2010) show the negative relationship between inflation and cash conversion cycle. in their analysis of 127 pakistani enterprises that are listed at the karachi stock exchange for the period of 2011–2012, tahir and anuar (2016) also reveal similar results. accordingly, we propose the following hypothesis: h6: inflation negatively affects the cash conversion cycle. this study also investigates whether the effects of the determinants of working capital management differ for different enterprise size. dang, li, and yang (2018) identify three measures of enterprise size that are commonly used in the corporate finance literature: total assets, total sales, and market value of equity. enterprise size indicates enterprises’ reputation and growth (waluyo, 2017). larger enterprises arguably exhibit better reputation and growth. consequently, they have better financing ability than smaller enterprises. in this respect, smaller enterprises likely have more significant financing constraints than larger enterprises (beck & demirguq-kunt, 2005; hadlock & pierce, 2010; ponikvar et  al., 2013). creditors often consider larger enterprises more creditworthy than smaller enterprises because of sufficient collateral (maina & ishmail, 2014; mule, mukras, & nzioka, 2015) that cause larger enterprises to enjoy more convenient access to financing sources and lower costs of capital than smaller enterprises (kurshev & strebulaev, 2015). besides, larger enterprises can incur lower charges of capital than smaller enterprises because they disclose more information that reduces information asymmetry and eventually estimated risks (embong, business, management and education, 2019, 17(2): 94–110 99 mohd-saleh, & hassan, 2012). on the contrary, smaller enterprises exhibit more severe information asymmetry problems and have fewer analyst following (elbadry, 2018). because of more significant financing constraints relative to larger enterprises, smaller enterprises tend to rely on their internal financing sources that are more limited. thus, smaller enterprises experiencing high leverage, high sales growth, more significant needs for capital expenditure, lower operating cash flow, and worse macroeconomic conditions tend to manage their working capital more efficiently by shortening their cash cycles than larger enterprises. based on these arguments, the following are the proposed hypotheses related to enterprise size: h7a-f: leverage, enterprise growth, capital expenditure, gdp, and inflation affect the cash conversion cycle differently depending on enterprise size. similar to the previous arguments related to enterprise size, we also predict that there are different effects of the determinants of working capital management based on enterprise age that refers to the length of an enterprise operates. two proxies measure enterprise age, namely, the year difference between an enterprise was founded and the current year and the year difference between the year an enterprise went public and the current year (kieschnick & moussawi, 2018). in general, empirical studies that investigate the effect of enterprise age compare old and young enterprises (coad, holm, krafft, & quatraro, 2017). as suggested by berger and udell (1998), older enterprises are better able to secure financing sources than their younger counterparts because they can access external financing sources more quickly and with lower costs. previous studies also indicate the advantages of older enterprises in securing financing sources but with different arguments. for example, more former enterprises are more reputable (petersen & rajan, 1994), exhibit lower business failure (koh et al., 2015), have more experience and better ability to negotiate their debt capital (matemilola, bany-ariffin, nassir, & azman-saini, 2017). these factors enable older enterprises to access financing sources more efficiently and at lower costs. besides exhibiting superiority in obtaining financing sources, banõs-caballero, garcía-teruel, and martínez-solano (2010) also find that older enterprises generate more cash flow. on the contrary, younger enterprises exhibit more considerable cash flow uncertainties, higher growth, and cash constraints (withisuphakorn & jiraporn, 2016). external stakeholders, such as creditors and suppliers, are arguably more reluctant to interact with new enterprises (rafiq, salim, & smyth, 2016) that hampers new enterprises in accessing financing sources. when facing greater financing constraints, younger enterprises are more likely to rely on internal financing than older enterprises. thus, younger enterprises experiencing high leverage, high sales growth, more significant needs for capital expenditure, low operating cash flow, and worse macroeconomic conditions tend to shorten their cash cycles. based on these arguments, we propose the following hypotheses that are related to enterprise age: h8a-f: leverage, enterprise growth, capital expenditure, gdp, and inflation affect the cash conversion cycle differently depending on enterprise age. 2. research methods this study involves all manufacturing enterprises listed at the indonesian stock exchange (idx) from 2010 to 2017. after screening for the data availability, our final sample is 117 100 p. k. y. nastiti et al. the determinants of working capital management: the contextual role... enterprises and 749 enterprise-year observations. we generate our data from enterprises’ official websites, the website of the indonesian stock exchange (http://www.idx.co.id) and thomson reuters eikon. the research variables consist of the dependent variable (working capital management) and the independent variables (leverage, enterprise growth, capital expenditure, operating cash flow, gdp, and inflation). we proxy working capital management by using cash conversion cycle not only because previous studies mostly rely on this proxy, but also this measure is the direct consequence of enterprises’ working capital management (lazaridis & tryfonidis, 2006; tran, abbott, & yap, 2015). further, we operationalise our independent variables as follows. first, we measure leverage with the ratio between total debts to total assets. next, the proxy for enterprise growth is sales growth that indicates the degree of increased or decreased sales. we then proxy capital expenditure with total investments in fixed assets divided by sales. further, cash flow generated from routine operational activities is the proxy for operating cash flow and is measured with after-tax net income plus depreciation expenses divided by total assets. for the macroeconomic factors, gdp is the most reliable economic indicator and is estimated with gdp growth while the measurement of inflation relies on consumer price index (cpi). this study uses enterprise age and enterprise size as the variables that explain the different impacts of the determinants of working capital management. we measure enterprise size with the natural logarithmic value of total assets that are commonly used in previous studies (gill et al., 2010; wasiuzzaman & arumugam, 2013; goel, 2015; cuong & nhung, 2017). another variable, enterprise age, is measured with operating years. numerous studies have used this proxy (ezeoha, 2009; kieschnick, laplante, & moussawi, 2013; rafiq, salim, & smyth, 2016; isik & unal, 2017). specifically, the following are the operationalisation of our variables: ccc  = cash conversion cycle  = account receivable period + inventory holding period – account payable period to measure working capital management lev = total debts/total assets cep = capital expenditure = total fixed assets/sales ocf = operating cash flow//total assets sg = sales growth = (sales t – sales t-1) / sales t-1 gdp = gross domestic product = change in ln gdp cpi = consumer price index size = ln (total asset) age = ln (enterprise age) 2.1. model analysis this study uses the panel quantitative research design to analyse both cross-sectional and longitudinal data (gujarati, 2003). further, to respond to our first research objective, this study empirically estimates the following panel regression model: ccci,t = β0 + β1levi,t + β2sgi,t + β3cepi,t + β4ocfi,t + β5gdpi,t + β6cpii,t + β7sizei,t + β8agei,t + β9ccci,t-1 + εi,t , http://www.idx.co.id business, management and education, 2019, 17(2): 94–110 101 where β0 is the enterprise-specific intercept, β1-9 are regression coefficients, and εi,t is the usual error term for enterprise i at time t. to estimate the effects of enterprise size and age on the determinants of working capital management, we follow embong et  al. (2012) by classifying these 117 enterprises into two subsamples based on the median values of enterprise age and size. enterprises with size above (below) the median value of enterprise size are classified as large (small) enterprises. similarly, enterprises with age above (below) the median value of enterprise age are classified as old (young) enterprises. this study follows the standard procedures in analysing the data. the descriptive analysis aims to indicate the data distribution. to test these hypotheses, we initially determine the best regression model between pooled ols, fixed effect, and random effects by running the chow test, breusch-pagan lm test (lm test) and hausman test. next, to analyse the effects of enterprise size and age, we test the changes in coefficient values and significance for each subsample (large vs small; old vs new). thus, this study employs five models to test the hypotheses: model 1 for all enterprises, model 2 for large enterprises, model 3 for small enterprises, model 4 for old enterprises, and model 5 for young enterprises. 3. results and discussion 3.1. descriptive statistics as shown by table 1, the descriptive statistics suggest that indonesian manufacturing enterprises exhibit relatively long average ccc, especially for small enterprises (155 days). a likely explanation of the findings is that indonesian manufacturing enterprises operate with a high level of inventories to ensure the continuity of their production processes. uncertainties regarding the availability of inventories and imported raw materials motivate enterprises table 1. descriptive statistics all enterprises n = 749 observations large n = 371 observations small n = 378 observations old n = 385 observations young n = 364 observations mean s.d mean s.d mean s..d mean s.d mean s..d ccc 121.36 93.05 89.45 60.12 154.84 108.58 129.15 93.85 112.82 91.55 lev 28.91 20.22 28.39 18.10 28.20 22.52 27.73 22.04 28.87 18.27 sg 8.76 20.22 10.12 16.38 7.34 23.50 9.37 18.43 8.12 21.96 cep 1.28 9.27 0.70 0.55 1.86 13.07 0.95 3.90 1.63 12.67 ocf 0.07 0.14 0.08 0.13 0.05 0.15 0.08 0.12 0.06 0.17 gdp 4.57 7.19 4.49 7.72 4.65 7.22 4.57 7.20 4.57 7.20 cpi 4.97 2.18 4.98 2.19 4.96 2.18 4.97 2.18 4.97 2.18 ccct-1 120.12 90.43 90.11 60.56 151.32 104.77 127.23 90.35 112.44 90.02 size 21.32 1.64 22.57 1.22 20.06 0.83 age 3.46 0.40 3.74 0.22 3.17 0.34 102 p. k. y. nastiti et al. the determinants of working capital management: the contextual role... to maintain higher inventories. from the perspective of enterprise age, enterprises in the old subsample exhibit slightly longer ccc (129 days) than young enterprises (113 days). besides, the leverage level of indonesian manufacturing enterprises, both for large and small subsamples or old and young subsamples, is relatively low with the overall average value of only 28.91%. 3.2. the determinants of working capital management before using panel data regression to test the hypotheses regarding the determinants of working capital management, we initially have to determine which model (common, fixed, or random effect) is suitable for our analysis using chow test, hausman test, and lagrange multiplier. table 2 demonstrates that overall chow test and hausman test suggest that fixed effect is the suitable panel data regression for this research. specifically, we use a fixed effect robustness model to mitigate the classical assumption problems such as multicollinearity, autocorrelation, and heteroskedasticity and to ensure the robustness of our results. based on the results of the panel data regression, table  3 demonstrates that only sales growth and economic growth are the determinants of working capital management efficiency. specifically, sales growth negatively affects enterprises’ ccc (p-value=0.000 < 0.01), indicating that higher sales growth leads to more efficient working capital management. the results support naser, nuseibeh, and al-hayeda (2013) who find similar results. further, gdp positively affects ccc, implying that increased gdp motivates enterprises to invest more in working capital. our findings are in line with zariyawati et  al. (2010), who find that gdp positively affects working capital management. economic growth increases the demands of manufacturing enterprises’ products. consequently, enterprises are motivated to invest more in working capital. it is worth noting that although the effect of leverage is significant (p-value=0.029 < 0.05), but the sign is negative that contradicts our prediction. thus, greater leverage implies longer enterprises’ cash cycles. the findings are not in line with our argument that highly leveraged enterprises tend to shorten their ccc by limiting their investments in receivables and inventories (salawu & alao, 2014; elbadry, 2018). previous studies (e.g., palombini & nakamura, 2012) also demonstrate the negative effect of leverage on ccc. we explain our findings by arguing that indonesian manufacturing enterprises still exhibit a relatively low leverage level that does not disrupt their needs for short-term investments. if their leverage continues to increase until a certain level that they consider unfavourable, they are likely to table 2. panel data regression test test model 1 model 2 model 3 model 4 model 5 chow 3.5 fixed effect 4.3 fixed effect 3.7 fixed effect 2.8 fixed effect 4.5 fixed effect hausman 267.1 fixed effect 144.4 fixed effect 112.4 fixed effect 105.8 fixed effect 173.1 fixed effect note: model 1 for all enterprises, model 2 for large enterprises, model 3 for small enterprises, model 4 for old enterprises, and model 5 for young enterprises. business, management and education, 2019, 17(2): 94–110 103 shorten their ccc. thus, the effect of leverage on ccc is potentially non-linear. further, we do not find the significant effects of other enterprise-specific factors on working capital management, namely capital expenditure (p-value=0.896 > 0.1) and operating cash flow (pvalue=0.520 > 0.1). they are turning to the macroeconomic factors, although inflation significantly affects working capital management (p-value=0.091 < 0.1), but the effect positive. thus, our hypothesis is not supported. the findings also do not support previous studies (e.g., zariyawati et al., 2010; tahir & amar, 2016) that show the significant adverse effect of inflation on working capital management. on the contrary, this study indicates that the general increases in prices motivate enterprises to operate with a long cash cycle continuously. we explain our results by proposing that manufacturing enterprises experience only moderate inflation rates that encourage them to continue granting long credit sales terms to increase their sales. this policy eventually causes cash cycles to be longer. table 3. hypothesis testing (regression results) dv: ccc model 1 (all enterprises) iv : coefficient p-value hypothesis result lev 0.943 0.029 ** h1 not supported sg –0.634 0.000 *** h2 supported cep –1.165 0.896 h3 not supported ocf 28.248 0.520 h4 not supported gdp 0.652 0.008 *** h5 supported cpi 1.597 0.091 * h6 not supported size –8.274 0.375 controlled variable age 41.310 0.179 controlled variable ccct-1 0.274 0.017 ** controlled variable rsquare 0.475 f 3.430 0.001 *** *significant at 10%, ** significant at 5%, *** significant at 1%. 3.3. the effects of enterprise size and age on the determinants of working capital management to analyse whether the effects of the independent variables on working capital management differ depending on enterprise age and enterprise size, we divide the sample observations into two subsamples based on their size (early and large) and their age (old and young). table  4 informs that large and small enterprises exhibit significantly different values for all research variables, except leverage. meanwhile, old and young enterprises only demonstrate significantly different values for ccc and operating cash flow. thus, the enterprise-specific characteristics of large and small enterprise subsamples are mainly different, while the young and old subsamples exhibit relatively indifferent enterprise-specific characteristics. 104 p. k. y. nastiti et al. the determinants of working capital management: the contextual role... table 4. mean comparison and t-test result variables: mean large and small enterprises mean old and young enterprises large small t-score p-value old young t-score p-value ccc 89.45 154.84 –9.9135 0.0000 *** 129.15 112.82 2.3601 0.0185 ** lev 28.39 28.20 0.1139 0.9094 27.73 28.87 –0.7102 0.4779 sg 10.12 7.34 1.8372 0.0667 * 9.37 8.12 0.8284 0.4077 cep 0.70 1.86 –1.7068 0.0887 * 0.95 1.63 –0.9783 0.3285 ocf 0.08 0.05 2.1628 0.0309 ** 0.08 0.06 1.8997 0.0587 * ccct-1 90.11 151.32 –9.6517 0.0000 *** 127.23 112.44 2.2015 0.0280 ** *significant at 10%, ** significant at 5%, *** significant at 1%. table  5 displays the results of our test that analyses the effects of the determinants of working capital management for each subsample using the t-test. only cep and gdp variables exhibit significantly different effects for both large and small enterprise subsamples. specifically, gdp is significant only for small enterprises the (β  = 0.79; p-value  = 0.056). meanwhile, although capital expenditure has a significant effect on small enterprises, the direction is not as predicted (β = 42.47; p-value = 0.062). the analysis reveals rather different results for our enterprise age subsamples. leverage (β  = 1.11; p-value  = 0.033), capital expenditure (β = –15; p-value = 0.099, operating cash flow (β = 69.54; p-value = 0.025) and gdp (β = 96.54; p-value = 0.008) exhibit significantly different impacts on working capital management for old and young enterprises. however, the direction of leverage is different from the predicted one. the findings suggest that only gdp that has different impacts on working capital management for large and small indonesian manufacturing enterprises. as a macroeconomic indicator, gdp positively affects working capital management only for small enterprises. it is worth noting that capital expenditure has a positive effect on ccc only for small enterprises. the results suggest that although small enterprises are more likely to have financing problems (beck & demirguq-kunt, 2005; hadlock & pierce, 2010; ponikvar et al., 2013), but their ccc becomes longer when these enterprises allocate higher capital expenditure. our descriptive statistics reveal that the average cash cycle is 155 days for small enterprises and only 89 days for large enterprises. the figures do not only imply that small enterprises are less efficient in managing their working capital than large enterprises but may also indicate that small enterprises implement a profit-increasing strategy by loosening their credit policy to increase sales when they raise their capital expenditure. from the enterprise age perspective, several determinants of working capital management exhibit different impacts for old and young enterprise subsamples. capital expenditure negatively affects ccc only for old enterprises. the results indicate that although old enterprises are superior in accessing financing sources (berger & udell, 1998), they are still motivated to manage their working capital more efficiently when they allocate more significant capital expenditure. further, operating cash flow positively affects ccc only for young enterprises. the findings confirm abbadi and abbadi (2013) and palombini and nakamura (2012) who business, management and education, 2019, 17(2): 94–110 105 table 5. regression result comparisons panel a. based on enterprise size independent variable model 2: large enterprise model 3: small enterprise hypothesis result coef p-value coef p-value lev 0.96 0.054* 1.41 0.004*** 7a not supported sg –0.53 0.002*** –0.78 0.004*** 7b not supported cep 13.94 0.158 42.74 0.062* 7c not supported ocf 72.65 0.12 67.22 0.173 7d not supported gdp 0.36 0.312 0.79 0.056* 7e supported cpi 0.34 0.753 2.51 0.148 7f not supported ccct-1 0.25 0.024** 0.38 0.004*** controlled variable r2 0.392 0.435 f 3.28 0.005*** 5.66 0.000*** panel b. based on enterprise age independent variable model 4: old enterprise model 5: young enterprise coef p-value coef p-value lev 0.92 0.141 1.11 0.033** 8a not supported sg –0.67 0.006*** –0.65 0.011** 8b not supported cep –15.35 0.099* 7.38 0.577 8c supported ocf –68.13 0.607 69.54 0.025** 8d supported gdp 0.96 0.008*** 0.31 0.378 8e supported cpi 1.80 0.150 1.05 0.477 8f not supported ccct-1 0.34 0.100 0.23 0.028** controlled variable r2 0.561 0.4108 f 4.04 0.001** 4.76 0.000*** *significant at 10%, ** significant at 5%, *** significant at 1%. suggest that operating cash flow determines the length of ccc. however, the effect does not exist for old enterprises. we explain our findings by suggesting that the efficiency of old enterprises’ working capital management does not necessarily depend on the availability of internal financing sources from their operating cash flow because they have better access to external financing sources at lower cost of capital (matemilola, bany-ariffin, nassir, & azman-saini, 2017; berger & udell, 1998). with more significant constraints to external financing sources (rafiq, salim, & smyth, 2016), the availability of operating cash flow is 106 p. k. y. nastiti et al. the determinants of working capital management: the contextual role... crucial for young enterprises to manage their working capital efficiently. young enterprises that manage (fail) to generate higher operating cash flow are likely to increase (decrease) their investments in working capital that eventually will lengthen (shorten) their ccc (singh & kumar, 2017). our results related to the effect of gdp for old enterprises are similar to zariyawati et al. (2010), who show that gdp is the determinant of working capital management. economic growth encourages old manufacturing enterprises to invest more in working capital to facilitate sales growth. conclusions and implication this study offers two main contributions. firstly, this study investigates the determinants of working capital management as a research issue that is relatively understudied. we demonstrate that sales growth and economic growth are the determinants of indonesian manufacturing enterprises’ working capital management. as predicted, higher sales growth will shorten the cash cycle, while higher economic growth lengthens the cash cycle. this study also shows impressive results. individually, for indonesian manufacturing enterprises, higher leverage and inflation rate do not motivate enterprises to shorten their cash cycle or to manage their working capital more efficiently. on the contrary, enterprises tend to lengthen their cash cycle when leverage and inflation rate are higher probably because indonesian manufacturing enterprises emphasise their sales growth. secondly, this study tests the different effects of the determining factors on working capital management based on enterprise size and age. we conclude that there are no different effects of the enterprise-specific factors on working capital management between large and small enterprises. however, economic growth as a macroeconomic factor positively affects working capital management only for small enterprises. for enterprise age, several determinants of working capital management (capital expenditure, operating cash flow, and economic growth) exhibit significantly different impacts for old and young enterprise subsamples. this study suggests that previous studies that demonstrate the effects of economic growth (zariyawati et  al., 2010), capital expenditure (mansoori & muhammad, 2012) and operating cash flow (abbadi & abbadi, 2013; palombini & nakamura, 2012) on working capital management must be interpreted cautiously because the effects of these independent variables depend on enterprise characteristics such as enterprise size and age. for example, economic growth significantly affects working capital management only for small enterprises, but not for larger ones. similarly, other enterprise-specific factors, such as capital expenditure, only have a significant impact on working capital management for young enterprises. besides, this study offers several practical implications, such as the crucial role of sales growth for manufacturing enterprises to manage their working capital efficiently. moreover, young manufacturing enterprises need to shorten their cash cycles because that are relatively longer than older enterprises’. although this study contributes to the literature by providing a better understanding of the effects of enterprise size and age on the determinants of working capital management that are relatively understudied in previous research, it is not without limitations. we only measure enterprise size with total assets. accordingly, we advise future studies to complement this proxy of enterprise size with market value and the listing size criterion (main board business, management and education, 2019, 17(2): 94–110 107 vs development board). further, it is necessary to analyse the different relationship between leverage and working capital management (such as the non-linear relationship) and the use of different proxies for leverage. such studies will potentially help explain the positive effect of leverage on ccc. disclosure statement authors declare that they have no competing financial, professional, or personal interests from other parties. references abbadi, s. m., & abbadi, r. t. 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(2010). determinants of working capital management: evidence from malaysia. international conference on financial theory and engineering, 190-194. https://doi.org/10.1109/icfte.2010.5499399 https://doi.org/10.1080/1331677x.2013.11517639 https://doi.org/10.5539/ijbm.v7n1p58 https://doi.org/10.1016/j.econmod.2016.04.003 https://doi.org/10.2307/3665310 https://doi.org/10.1108/ribs-03-2017-0027 https://doi.org/10.1007/s11135-015-0166-4 https://doi.org/10.1108/jsbed-05-2016-0070 https://doi.org/10.1177/0972150915581098 https://doi.org/10.14453/aabfj.v7i2.5 https://doi.org/10.1080/13504851.2015.1071464 https://doi.org/10.1109/icfte.2010.5499399 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 1: 59–78 https://doi.org/10.3846/bmee.2022.15300 *corresponding author. e-mail: sebestova@opf.slu.cz competency models in business students and business owners: a cross-national case study of czechia and romania jarmila duháček šebestová 1, radek kowala 1, ana iolanda vodă 2 , ana-maria bercu 3 1department of business economics and management, silesian university in opava, school of business administration in karviná, karviná, czech republic 2department of interdisciplinary research – humanities and social sciences, alexandru ioan cuza university of iasi, iasi, romania 3faculty of economics and business administration, alexandru ioan cuza university of iasi, iasi, romania received 16 july 2021; accepted 04 april 2022 abstract. purpose – the main goal is to compare and contrast the expectations of millennials, which skills will be needed for business in contrast to the entrepreneurial experience of the focus group of eight successful entrepreneurs from each country. research methodology – a cross-national case study is made, based on two focus groups per country (80 business students and eight entrepreneurs from the czech republic and romania), qualitative research findings are presented. findings – two competency models were evaluated, when the romanian model is mostly motivation-oriented and the czech model is performance-oriented. research limitations – future studies should use an extended research sample and compare various methods for teaching entrepreneurship to students from different study areas and compare the impact of education on their mind-set before and after business courses finish. practical implications  – the development of competency models in cooperation with experienced entrepreneurs would have the potential to increase students’ willingness to start up and prepare tailored business education. possibility to create own generic models. originality/value  – the originality could be seen in comparison of two focus groups  – students and entrepreneurs – which have not been done before from a conflict comparison point of view. keywords: competencies, millennials, entrepreneurship, employment. jel classification: l26, m53. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2022.15300 https://orcid.org/0000-0002-7493-0759 https://orcid.org/0000-0002-4250-5694 https://orcid.org/0000-0003-2306-0172 https://orcid.org/0000-0001-8954-8520 60 j. duháček šebestová et al. competency models in business students and business owners: ... introduction the youth labour market is closely connected with the concept of heterogeneous labour market structure (ahmad et  al., 2010; perciun & balan, 2013; bell & blanchflower, 2011; šebestová et  al., 2018, 2019; vodă et  al., 2021). a biannual study by the oecd (oecd & european union, 2019) showed that more than 40 per cent of young people (20–29 years old) were interested in starting up but never did so. more than adults reported that they did not have entrepreneurial skills. these studies show that while young people are willing to start a business, they are not starting. surprisingly, according to the labour force survey (eurostat, 2019), romania reports 10.5% of unemployed young people compared to 4.5% in the czech republic. these figures make both countries an exciting contrast, although they have similar educational systems and economic development from the central plan economy. both have pretty similar historical roots – both were a part of economies in transformation after an “open” economy replaced the communist regime, and both are new members of the european union accepted in 2004 (czechia) and 2007 (romania). the main goal is to compare and contrast the expectations of young people, which skills will be needed for the success of start-up businesses. primary and secondary data analysis was provided to find similarities or differences in those countries as a reason for the different development of youth entrepreneurship. the paper contributes to the current state of research by conducting a literature review that connects competencies and expectations with business start-up. therefore, implications and valuable recommendations for practitioners are provided based on preliminary research results. considering the results of the paper and the size of the student and entrepreneur sample, we should point out the limitations of the study: first, the sample size consists of only 80 students and eight entrepreneurs; second, sample composition favoured students studying a business degree. the development of competency models in cooperation with entrepreneurs would have the potential in entrepreneurship education to increase the student’s self-confidence to start a company. 1. review of the literature and research subject we must first define the target group of students who belong to the group of millennials and then define the competencies that include not only managerial skills for business – they include knowledge, skills, and behaviour. 1.1. millennials and self-business activity active entrepreneurial activities for each age group are determined not only by the generations in which they were born, but also by the significant role they play in their environment, values and motivations. each generation is different in behaviour, sometimes it is difficult to understand it and motivate it properly (eken, 2017) not only to start up but also to be business, management and economics engineering, 2022, 20(1): 59–78 61 a “good” employee. these days, most entrepreneurs as potential employees come from the generation of baby boomers and generation x, when generation y, mostly called “millennials”, is on the supply-side of the labour market. when most entrepreneurs came from two generations (mainly baby boomers and generation x), it is necessary to define their primary values, and they will probably expect the same behaviour from future employees (generation y). baby boomers are highly motivated in making a “stable career” with salary, title, and recognition. they are also an independent, goal-oriented generation because they believe in power, responsibility, and authority in the workforce. rather than that, generation x is characterized as pessimistic, independent, selfreliant, and sceptical. they enjoyed the first computers or the internet, making them more adaptable than other generations (gorman et  al., 1997; lancaster & stillman, 2002; eken, 2017). millennials at work are multitaskers, and they can use their skills and talents simultaneously to learn new things according to their personal skills. in their future job, millennials expect supervision and mentoring. they seek to be graded, evaluated, and ranked (lancaster & stillman, 2002; kamau et al., 2014; twenge et al., 2012). they need to develop an entrepreneurial spirit because they have a strong self-starter mentality. they prefer to work without micromanagement because they prefer to work in open and co-working spaces (maize, 2017; visser, 2018). the tension between highly experienced baby boomers approaching retirement and the ambitious, technologically educated, and collaborative millennials who will replace them has been a subject of intense discussion. 1.2. competency models in entrepreneurship practice in general, competences are often reviewed in literature and are primarily dealt with differently by researchers in terms of their definition of meaning, composition, and achievement. according to pickett (1998), it is the sum of the experience, knowledge, abilities, values and attitudes we have acquired during our lives. these traits include general or specific knowledge, physical and intellectual abilities, personality traits, motives, and self-knowledge (klemp & mcclelland, 1986; šebestová & rylková, 2011; bercu & lupu, 2020). generally, a “pack of competencies” is knowledge, networking, customer orientation, strategic thinking, risk taking, negotiation, integrity and action. they could be divided into hard skills, which can be learned and improved, they can be measured relatively easily (bednář, 2012), in the opposite of soft skills, which are mostly are interpersonal and intrapersonal skills and they objectively identified with a person’s emotional intelligence quotient (iland, 2013). in particular, knowledge is closely linked to innovation, export direction, and networks. (moen, 1999; braunerhjelm, 2008; matthews & brueggemann, 2015). competences can also be described as the behaviour of individuals to achieve a goal (mitchelmore & rowley, 2010; markman, 2007). a large number of authors try to define competencies at their discretion and use different justifications. the origins of the competence model are the entrecomp competency model (bacigalupo et al., 2016), which places the main emphasis on business resource and optimization. table 1 summarizes the work of academics according to key terms used to describe competencies. 62 j. duháček šebestová et al. competency models in business students and business owners: ... table 1. a summary of competency definitions (source: authors review) competencies definition authors experience, knowledge, skills, values, attitudes pickett (1998) properties, knowledge, abilities, personality traits, motives, selfknowledge kanungo and misra (1992) behaviour, attitudes, personality characteristics, knowledge, skills mitchelmore and rowley (2010) skills / abilities, knowledge / experience, attitudes / personality traits bartlett and ghoshal (1997) basic, personnel, managerial competencies abraham et al. (2001) skills brightman (2004), hofener (2000) skills versus competency kanungo and misra (1992), mckenna (2004) characteristics, knowledge, skills, personality traits man et al. (2002) knowledge, motives, features, own images, social roles, skills bird (1995) traits, personality, attitudes, social roles, self-knowledge, skills, knowledge, experience man and lau (2005), bercu and lupu (2020) a combination of hard and soft skills šebestová and lejková (2020), šebestová et al. (2018) successful entrepreneurial role models boldureanu et al. (2020) entrepreneurial and managerial competencies penchev and salopaju (2011) innovation, knowledge management, and intellectual capital development popescu (2020) audretsch et al. (2008) systemic, professional, and disciplinary competencies ferreras-garcia et al. (2021) this review shows a different mixture of competence definition and growth of interest in entrepreneurial competencies. more recent authors propose a concrete set of hard and soft skills which could be used in entrepreneurial practice. soft versus hard skills. soft skills, or so-called soft skills, do not only represent communication skills. these competencies are primarily personal and interpersonal skills and are closely related to eq, i.e. the individual’s emotional quotient (bradberry & greaves, 2007; šebestová et al., 2018). it is a “package” of abilities and skills related to personal development, which mainly includes socialising, communication and language skills, personal habits, assertiveness, friendly, and last but not least, happy relationships with other people. therefore, soft skills can be applied not only in professional life, but also in personal and family life. hard skills can be acquired and improved through education and they can be measured relatively easily (jogaratnam, 2002). competency models. the competency model is created based on the identification of competencies. it is a set of competencies that are important for the management of the company. the business competence model should meet two aspects. one aspect is a description of the types of competency. in essence, different entrepreneurial competencies are associated with both different aspects of human behaviour and the individual’s ability to exhibit such behaviour. the second aspect is the level of competencies. the existence of each competence is business, management and economics engineering, 2022, 20(1): 59–78 63 at different levels within the individual. therefore, each of the competencies can exist within the individual at different levels. on the unconscious level, there are the individual’s motives in contrast to the self-assessment that exists on the conscious level. (boyatzis, 1982; šebestová et al., 2019; šebestová & lejková, 2020). the success of an entrepreneur depends mainly on their attitude and on the competencies that relate to them (frederick et  al., 2007; lukeš & zouhar, 2016; von graevenitz et al., 2010; stokes et al., 2010; schneider & albornoz, 2018). in light of the literature review above and in line with the objective of this article, the key research questions of this article are: – rq1. what are the characteristics that entrepreneurs use the most to choose the competency model? – rq2. are there differences between competence models within czechia and romania? 2. research methodology and description of country data our previous research confirmed the differences between entrepreneurship theory and the expectations of the millennials when comparing these two groups. in this research phase, improved methods were implemented to integrate the same variables into the competency model and become internationally comparable. mixed research methods have been used for that case studies, when a fully mixed sequential dominant status research design was used. it means that in the first phase a qualitative approach was used, then a form of questionnaires was applied, but qualitative evaluation is predominant (leech & onwuegbuzie, 2009), when main variables were in a line with blenker et  al. (2014) and barba-sánchez et  al. (2016) or boldureanu et al. (2020) and cardenas-gutierrez et al. (2021). secondary country data analysis about young entrepreneurs was performed before primary research. 2.1. primary research design this research was designed in three phases (see figure 1). the first two phases are connected with data collection from two different groups (entrepreneurs as business owners and the students), and final phase was dedicated to the development of competence models. both phases were implemented from december 2019 to march 2020, when personal meetings were possible. figure 1. the research framework phase 1 • focus group of business owners • standardized values for competency model phase 2 • focus group of students • opposite values to be compared in phase 3 phase 3 • comparison of standardized (required) values with student́ s results output • suggestion of the model and control values 64 j. duháček šebestová et al. competency models in business students and business owners: ... phase one. a checklist was introduced for focus group evaluation (see appendix). to be able to compare within countries, a table with all variables has to be standardized. a likert scale was used for consensus evaluation to obtain information about the importance of the competence model (presented by mode value). in the first step, eight entrepreneurs were randomly selected for cooperation to meet the criteria for the focus group discussion (mishra, 2016). in that meeting, we introduced a list of items based on theoretical review introduced in table  1, divided into following dimensions: (a) motivation to start up, (b) knowledge of processes, and (c) knowledge of financial issues. the responses were recoded to the likert scale (1 – strongly agree, 5 – strongly disagree). both samples consist of four female and four male entrepreneurs (in the role of business owners). the average age was 41 to 55 years (37.5%) and they hold a university degree of 62.5%. a significant descriptive factor was their business experience; most of them spent more than ten years in business (75%). in the second step, the panellist evaluation weights developed to summarize each competency group in one number. the evaluation, by panel consensus, was according to the likert scale as: – likert scale 1 – i strongly agree, the weight of 1. – likert scale 2 – i agree, the weight of 0.75. – likert scale 3 – i do not know, the weight of 0.5. – likert scale 4 – i disagree, the weight of 0.25. – likert scale 5 – i strongly disagree, the weight of 0.05. each variable was planned to be finally recalculated as weight multiplied by scale in phase three. phase two. the same checklist was introduced for a student evaluation focus group. the size of the group was 80 in each university (one in czechia / one in romania) when just one condition was set: a student is not involved in business, and it is studying business economics or entrepreneurship. this research was primarily performed quantitatively when students tick their preferences into personal competency checklists. data collection was done anonymously without personal data collection. due to diversity of millennials profiles from delloite (2018a) study, we expected quite different final competency model requirements in the phase three. phase three. researches developed competence models and evaluate significant ties between variables, using spearman correlation in p-value of 0.05. output: the standardized value for each variable will be possible to use for the next research. 2.2. cross-country comparison a group of millennials represents a significant group of potential entrepreneurs in the future. the labour force survey (2019) indicated that self-employed young people in the czech republic were 9.1% of their population when the unemployment rate was 4.5% (versus romania 11.3% self-employed young people and 10.5% of youth unemployment). it seems that a country with a higher youth unemployment rate has a higher self-employed young generation, mainly necessity driven entrepreneurs (dvouletý et al., 2018). business, management and economics engineering, 2022, 20(1): 59–78 65 in the population of adult self-employed in the czech republic, the situation is mostly stable (18.8% of the total population). the number of young men in the entrepreneurial population is declining (from 11.6% in 2009 to 7.9% in 2018). opposite to that, romanian statistics do not offer evaluation according to male and female entrepreneurship. the youth entrepreneurship rate is lower than in the czech republic (4.7%), which is correlated with the total active population of adults (6.93% in 2018). when the proportion in education groups in the czech republic is mostly the same in both groups (adults and youth), at least 68% with secondary education and 26% with tertiary education, in the romanian case, employees have a higher level of education than active entrepreneurs – most of them 42% have primary education completed to 52% of secondary educated and 6% with university level (eurostat, 2019). 2.2.1. young millennials in the czech republic czech millennials seek work on job portal sites to find out large employers. consistent with that, the delloite survey (2018a) confirmed most of the previous findings. significant is the growth of millennials who want to move abroad (75.3%), which is alarming for domestic employers to get millennials into their companies. on the other hand, the growth is in their expectation in work position initially as most of them want to be managers, with almost 44% of those surveyed telling us they are aiming for either a mid-level or a high-management position. notable is that they plan to be managers, but on the other side, they do not like to take a risk to establish a company (7.6% only). second, they believe that their personal development is only in the company’s hands, and they are not personally responsible for taking care of their competence (53%). in the case of generation diversification, millennials want to work in a diverse environment, particularly in the age diversity, when 94% view older colleagues as a source of valuable knowledge for those who are younger and less experienced, what is a positive way, how to deal with multigenerational teams. 2.2.2. young millennials in romania a share of 43.5% of young romanian university graduates want to work in a big corporation, and only 17.3% want to become entrepreneurs. they prefer to be educated, as 75% of romanian students wish to continue their education to a post-graduate level, compared to 39% in central and eastern europe (furnea, 2018), because they feel that they would have more skills which will be appreciated by potential employers (analytical skills, decision-making skills, teamwork). millennials prefer teamwork or are active in csr activities to have a good relationship with the company and feel the social impact of their work (business review, 2017). against that, stamule and todea (2017) described them as ethnocentric, when they prefer foreign goods than domestic product, which influence their motivation to work for multinational companies. unlike czech millennials, they prefer to be an expert in their field, and they are hard workers. the primary motivation to work for the company is not a salary for czech millennials, but a space for development (59.7%). in addition, they reported being more entrepreneurial (17.3%). the same problem is that they see a job opportunity abroad and in a large company (delloite, 2018b). 66 j. duháček šebestová et al. competency models in business students and business owners: ... 3. results of cross-national evaluation the competency model is created based on the identification of competencies. it is a set of essential competencies for the company’s management, both from the point of view of entrepreneurs and from the point of view of students. the first part presents the focus group of entrepreneurs (in the role of business owners) from both countries, their evaluation of the three groups of competencies that they would expect from millennials to do business successfully or to motivate them to start their own business. 3.1. czech and romania business owners’ competence model as already mentioned, the competency model consists of three parts and each of the groups chose the importance of the individual element proposed by the compromise method. tables 2 to 4 will present the individual sections related to motivation, financial indicators, and business processes. table 2. motivation to start-up competencies (source: survey data, compromise solution values, differences are in bold) factor czechia romania financial stability of the family 1 1 self-employed family members 2 2 friends who have own business 4 2 education 2 1 the desire for freedom and success 1 1 social background from which i came 4 2 personal attitudes to life (working longer, being reliable, etc.). 1 1 practical skills related to business 1 1 table  2 shows the fundamental differences in the perception of business motivation, where panels of entrepreneurs (in role of business owners) differ in three areas, namely the influence of friends, social background, or education. influential entrepreneurs consider education for business to be less critical (mark 2), but there is a big difference in the influence of social background or friends, who do not consider it at all as motivators or drivers of starting a business. therefore, according to their attitude, it could be missing in the czech competence model. in the next part, indicators related to financial issues and the need for their use were evaluated (table  3). differences were found in four indicators, where two according to the evaluation of romanian entrepreneurs would not even be in the competency model (mark 4 – claims, stock planning). in other cases, the mark differed slightly (costs and productivity); otherwise, the evaluation was the same. business, management and economics engineering, 2022, 20(1): 59–78 67 table 3. financial issues – importance (source: survey data, compromise solution values, differences are in bold) factor czechia romania profit 1 1 costs 1 2 business outcomes 1 1 cash-flow 2 2 profitability 1 1 liquidity 2 2 commitment structure 2 2 types of claims 2 4 stock planning 2 4 sales 1 1 quality 1 1 planning working time 2 2 productivity 2 1 the third part (table  4) focused on critical processes, revealed what is not popular or used in business practice. in both panels, both in czech and romanian, we can observe agreement on the significance of processes up to three of them, which czech entrepreneurs would not include in their competencies, namely non-standard forms of employment, outsourcing, and business agenda (mark 4). table  4. key processes for business  – hard skills (source: survey data, compromise solution values, differences are in bold) factor czechia romania non-standard forms of employment (home office, part time jobs) 4 2 outsourcing 4 2 personnel processes 2 2 internal logistics 2 2 reverse logistics 4 4 distribution logistics 2 2 recovery of machinery (investments to machinery, technology) 2 2 maintenance 2 2 business agenda 4 2 those values and results (tables 2 to 4) are treated in the final step as the level requested for each competency in the national model. to evaluate the differences in the thinking of business owners, the relationships between individual evaluations were compared. their relationship was expressed using the spearman correlation coefficient at the level of significance α = 0.05. 68 j. duháček šebestová et al. competency models in business students and business owners: ... although czech entrepreneurs did not prefer a business agenda or the influence of social background on future business in the model, these links nevertheless proved to be statistically significant in the model in connection with other variables. social background has a positive correlation with personnel processes (0.609), maintenance (0.660), and business agenda (0.656). this means an influence of social background on business behaviour. in case of romanian business owners, three essential groups of ties were found based on examples of family members, working time planning, and logistics. the members of the entrepreneurial family as an example influenced the relationship with friends, who provided the business (0.954) and their attitude toward sales (0.629) and negatively toward reverse logistics (–0.698). 3.2. cross-national student competency model the same process was repeated for students who individually decided on the importance of individual hard and soft skills for business and the necessary knowledge of business economics. tables 5 to 7 present differences in their evaluation. in the motivation (table 5), four differences were noted, two insignificant (only a slight change in preference, mark 2) in the area of education and financial stability of the family. a very opposite reaction was observed among czech students when evaluating the impact of social environment or friends on business, where items would not play a significant role in the model (mark 4). table 5. motivation to start-up – a student view (survey data mode values, differences are in bold) factor czechia std.dev romania std.dev financial stability of the family 2 1.067187 1 1.594261 self-employed family members 2 1.171863 2 1.414883 friends who have own business 4 1.368672 2 1.560036 education 2 1.142609 1 1.197377 the desire for freedom and success 1 0.986013 1 0.977008 social background from which i came 4 1.274074 2 1.488593 personal attitudes toward life (working longer. being reliable. ...) 1 0.866025 1 1.0234 practical skills related to business 1 1.01977 1 0.98377 in financial issues, czech students are more profit-oriented than romanian students (grade 1, four indicators), while romanian students exclude types of claims and stock planning (grade 4) from the model. otherwise, the evaluations are identical. the area of key processes offers a very controversial comparison (table  7). differences were found in most indicators. although in most cases, there was only a slight deviation in the evaluation (marks 1 and 2) in two cases, opposite opinions on the given competence were found. these are nonstandard employment and reverse logistics forms, which romanian students would completely exclude from the model (mark 4). business, management and economics engineering, 2022, 20(1): 59–78 69 table 6. financial issues – a student view (survey data mode values, differences are in bold) factor czechia std.dev romania std.dev profit 1 0.433013 2 0.658568 costs 1 0.45453 2 0.950478 business outcomes 1 0.406116 2 1.197377 cash-flow 1 0.702179 2 0.913908 profitability 1 0.433013 1 0.889757 liquidity 2 1.01977 2 1.223197 commitment structure 2 1.053269 2 1.252271 types of claims 1 1.067187 4 1.297579 stock planning 1 0.978058 4 1.436141 sales 1 0.866025 1 1.153059 quality 1 0.865022 1 1.000947 planning working time 2 0.953794 2 1.07485 productivity 1 0.745356 1 0.795346 table 7. key processes – a student view (survey data mode values, differences are in bold) factor czechia std.dev romania std.dev non-standard forms of employment 2 1 4 1.386488 outsourcing 2 0.934486 2 0.819969 personnel processes 1 0.840593 2 0.97215 internal logistics 1 0.702179 2 1.253027 reverse logistics 2 1.165922 4 1.197377 distribution logistics 1 0.702179 2 1.225518 recovery of machinery (investments to machinery. technology) 1 0.862007 2 1.245446 maintenance 1 1.306368 2 1.202113 business agenda 1 1.414214 2 1.231684 to evaluate the differences in entrepreneurial thinking, the relationships between individual evaluations were compared. their relationship was expressed using the spearman correlation coefficient at the level of significance α = 0.05. by evaluating the answers of czech students, we concluded that they show more focus on the performance of the company, where significant statistical links were demonstrated with competencies in the field of commitment structure, business agenda, and logistics. a commitment structure has a positive relationship with the types of claim (0.720) and “planning working time” (0.676). this process continues by the influence of planning working time on liquidity vs. (0.660). when students prefer to use the business agenda, two connected variables were found such as stock planning (0.570) and maintenance (0.712). finally, a logical link 70 j. duháček šebestová et al. competency models in business students and business owners: ... between internal and reverse logistics was confirmed (0.659). unlike czech students, romanian students showed a connection between motivation and other business factors, especially the influence of the role of financial stability of the family and the desire for their business success. financial stability of the family has a positive relationship with friends who have their own business as a positive influence (0.536), but negative ties were confirmed with practical skills related to business (–0.483), a need to find their own path to success. costs (–0.469) and personnel processes (–0.435) also indicate the need for freedom, without any influence on family. 3.3. a conflict between expectation and business experience in the last step, the results were compared internationally and between students and entrepreneurs. to standardize the significance of individual evaluations, they were assigned to individual weight values (ws) according to the explanation in the section 2.1. 3.3.1. development and evaluation the model of czech entrepreneurs as business owners (ent) and students (s) highlights areas where both groups differ in their views on the issues under consideration. as can be seen in table 8, the most different view is on business processes, where students focus on lean business, that is, not to waste time on activities that are not directly related to their own business and use outsourcing or cooperation with others through alternative forms of employment (which entrepreneurs rated by a mark 4). table 8. evaluation of the czech competencies model (source: survey data mode values, differences are in bold, ws/sweighted score students, ws/eweighted score entrepreneurs) factor ent ws/e s ws/s ent ws/e s ws/s start-up – factors (sup) key processes (kp) financial stability of the family 1 1 2 1.5 non-standard forms of employment 4 1 2 1.5 self-employed family members 2 1.5 2 1.5 outsourcing 4 1 2 1.5 friends who have own business 4 1 4 1 personnel processes 2 1.5 1 1 education 2 1.5 2 1.5 internal logistics 2 1.5 1 1 the desire for freedom and success 1 1 1 1 reverse logistics 4 1 2 1.5 social background from which i came 4 1 4 1 distribution logistics 2 1.5 1 1 personal attitudes to life 1 1 1 1 recovery of machinery 2 1.5 1 1 practical skills related to business 1 1 1 1 maintenance 2 1.5 1 1 business, management and economics engineering, 2022, 20(1): 59–78 71 factor ent ws/e s ws/s ent ws/e s ws/s – – – – business agenda 4 1 1 1 final score 1 2 2.12 1.12 1.18 final score 2 1.53 1.23 1.26 1.11 financial issues (f) profit 1 1 1 1 commitment structure 2 1.5 2 1.5 costs 1 1 1 1 types of claims 2 1.5 1 1 business outcomes 1 1 1 1 stock planning 2 1.5 1 1 cash-flow 2 1.5 1 1 sales 1 1 1 1 profitability 1 1 1 1 quality 1 1 1 1 liquidity 2 1.5 2 1.5 planning working time 2 1.5 2 1.5 final score 3 2.88 1.33 1.27 1.16 productivity 2 1.5 1 1 standardization and summarization of the individual parts of the model were performed using the geometric mean of the individual evaluations to obtain a single mark for each area. moreover, by this, we compared the importance of individual areas for both groups. the behaviour of individual groups can be written according to individual scores, when entrepreneurs have kp (1.23) ≤ f (1.33) ≤ sup (2.12), which means that czech entrepreneurs are mostly performance-oriented. in contrast to them, the students’ competency model prefers a balanced model in each area kp (1.11) ≤ f (1.16) ≤ sup (1.18), but still we could still evaluate it as performance or process-oriented. 3.3.2. development and evaluation in contrast, the romanian model does not show significant differences in opinion on the competencies presented, and many do not differ in the opinion of entrepreneurs and students. motivation factors are identical, and minor differences are only in the processes and key financial indicators (table 9). table 9. evaluation of romanian competencies model (source: survey data mode values, differences are in bold, ws/sweighted score students, ws/eweighted score entrepreneurs) factor ent ws/e s ws/s ent ws/e s ws/s start-up – factors (sup) key processes (kp) financial stability of the family 1 1 1 1 non-standard forms of employment 2 1.5 4 1 self-employed family members 2 1.5 2 1.5 outsourcing 2 1.5 2 1.5 friends who have own business 2 1.5 2 1.5 personnel processes 2 1.5 2 1.5 education 1 1 1 1 internal logistics 2 1.5 2 1.5 end of table 8 72 j. duháček šebestová et al. competency models in business students and business owners: ... factor ent ws/e s ws/s ent ws/e s ws/s the desire for freedom and success 1 1 1 1 reverse logistics 4 1 4 1 social background from which i came 2 1.5 2 1.5 distribution logistics 2 1.5 2 1.5 personal attitudes to life 1 1 1 1 recovery of machinery 2 1.5 2 1.5 practical skills related to business 1 1 1 1 maintenance 2 1.5 2 1.5 – – – – business agenda 2 1.5 2 1.5 final score 1 1.37 1.18 1.37 1.18 final score 2 2.22 1.44 2.44 1.38 financial issues (f) profit 1 1 2 1.5 commitment structure 2 1.5 2 1.5 costs 2 1.5 2 1.5 types of claims 4 1 4 1 business outcomes 1 1 2 1.5 stock planning 4 1 4 1 cash-flow 2 1.5 2 1.5 sales 1 1 1 1 profitability 1 1 1 1 quality 1 1 1 1 liquidity 2 1.5 2 1.5 planning working time 2 1.5 2 1.5 final score 3 1.84 1.19 2 1.26 productivity 1 1 1 1 the marks were standardized for further comparison. business preferences in the model we could evaluate as sup (1.18) ≤ f (1.19) ≤ kp (1.44). it indicates a preference of motivated entrepreneurs, rather than performance. the students’ point of view copies the general entrepreneurial meaning of sup (1.18) ≤ f (1.26) ≤ kp (1.38). discussion czech entrepreneurs would prefer in the competency model (according to rq1) mostly financial indicators such as profit, costs, business outcomes, sales, quality and profitability to the competence model. in second place as motivational factors they prefer the desire for freedom and success, personal attitudes to life, and practical skills related to business. in line with that, romanian entrepreneurs (following rq2) prefer financial stability of the family, education, the desire for freedom and success, personal attitudes to life, and practical skills related to business. in the area of business economics, they prefer to include profit, profitability, sales, quality, and productivity. the international comparison (cz / ro) shows a difference in the preferences of individual types of competencies, where the romanian focus group prefers motivation to do business, which supports the results of the oecd survey on entrepreneurship out of necesend of table 9 business, management and economics engineering, 2022, 20(1): 59–78 73 sity in case of high youth unemployment and high involvement in entrepreneurship (oecd & european union, 2019; dvouletý et al., 2018). furthermore, the finding that education for entrepreneurship makes sense and impacts young people’s willingness to start a business has been confirmed, supported by the boldureanu et al. (2020) and šebestová et al. (2019) studies. due to the developed standardization of competence evaluation is possible to continue in other cross-national studies. we also confirmed the study of cardenas-gutierrez et  al. (2021), where operations and marketing competencies were the most important in the study of spain (n = 237), unfortunately in our study financial indicators were more important than in the mentioned study. conclusions the conclusions of the study can be divided into three areas of practical use. the first is the perspective of policy makers. thanks to this analysis, it is possible to find out which factors are considered by entrepreneurs (in the role of owners) to be important for entrepreneurship and can motivate them to adapt entrepreneurship education so that they can get as close as possible to the requirements of practice. the second area is the individual point of view. thanks to the checklist, everyone can easily carry out a self-evaluation and find their own level of business competencies. by consulting entrepreneurs with long experience, it can be said that they can help personal development and strengthen the commitment to entrepreneurship. the third dimension can be the evaluation of employees by the entrepreneur. thanks to the recommended values of the model, as well as the method of its creation, he can set his own set of criteria with an evaluation scale and the recommended value that the employee should have in the selected position. simplicity and replicability is just a big added advantage of these generic competency models. funding the paper was supported by the student grant system of silesian university in opava under grant [sgs/14/2021], named “smart dashboards in business practice”. author contributions jds and aiv conceived the study and were responsible for the design and development of the data analysis. rk, aiv and amb were responsible for data collection and analysis. jds and aiv were responsible for data interpretation. jds, rk wrote the first draft of the article. aiv and amb revised the paper and added conclusion. final version was made by jds, aiv, rk and amb. disclosure statement all authors declare that they do not have any competing financial, professional, or personal interests from other parties. 74 j. duháček šebestová et al. competency models in business students and business owners: ... references abraham, s. e., karns, l. a., shaw, k., & mena, m. a. 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(2011). evaluating entrepreneurship education. springer. https://doi.org/10.1007/978-3-8349-3654-7 appendix a checklist of competencies evaluate how important are those competencies for business processes and economics. please use the scale from 1 to 5 (1 – i am strongly agree to 5 – i am strongly disagree). motivation to start-up factor your score financial stability of the family self-employed family members friends who have own business education the desire for freedom and success social background from which i came personal attitudes to life (working longer, being reliable, etc.). practical skills related to business financial issues factor your score profit costs business outcomes cash-flow profitability liquidity commitment structure types of claims stock planning sales quality planning working time productivity https://doi.org/10.1080/22243534.2018.1501957 https://doi.org/10.1504/ejim.2021.118569 https://doi.org/10.1016/j.jebo.2010.02.015 https://doi.org/10.1007/978-3-8349-3654-7 78 j. duháček šebestová et al. competency models in business students and business owners: ... key processes factor your score non-standard forms of employment outsourcing personnel processes internal logistics reverse logistics distribution logistics recovery of machinery (investments to machinery, technology) maintenance business agenda copyright © 2020 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 1: 88–105 https://doi.org/10.3846/bme.2020.12067 *corresponding author. e-mail: mate.domician@eng.unideb.hu the nexus of e-government and increased productivity relative to income level comparison gul faid 1, majeed muhammad tariq 2, ahmad ishtiaq3, vahid lorestani zeynvand 4, daniel francois meyer 5, domicián máté 6* 1, 3department of management sciences, national university of modern languages (numl), islamabad, pakistan 2school of economics, quaid-i-azam university, islamabad, pakistan 4ihrig károly doctoral school of economics and business management, university of debrecen, h-4028 debrecen, hungary 5trade research entity, faculty of economic and management sciences, north-west university, south africa 6department of engineering management and entrepreneurship, faculty of engineering, university of debrecen, h-4028 debrecen, hungary received 06 february 2020; accepted 29 march 2020 abstract. purpose – this study aims to determine the influence of e-government on productivity in the case of different countries comparing by income level. research methodology – static (fixed and random) and dynamic (gmm) panel regression. findings – a disaggregated analysis reveals that middle-income countries are driving global productivity growth by implementing icts infrastructure in the public sector. research limitations  – this study focuses on severe developed and developing economies, whereas each country may not benefit from e-government implementation as gains might be offset with the enormous costs of implementation. practical implications  – the government may rely more on online services in the provision of its responsibilities because it enhances the efficiency of public sectors. originality/value  – the study is a novel measure of e-government that covers additional multiple dimensions. keywords: electronic government, productivity growth performance, icts, trust, developed and developing countries, panel data. jel classification: d02, o17, p31. https://doi.org/10.3846/bme.2019.10409 mailto:mate.domician@eng.unideb.hu https://orcid.org/0000-0002-9169-4524 https://orcid.org/0000-0001-9374-5025 https://orcid.org/0000-0003-4860-2900 https://orcid.org/0000-0001-6715-7545 https://orcid.org/0000-0002-4995-7650 business, management and education, 2020, 18(1): 88–105 89 introduction the adoption of novel and innovative industry technologies is essential to the economic development processes, which include, i.e. devices, machines, and production modules that can independently exchange, trigger information, and control such actions, thus enabling an intelligent business environment (weyer et  al., 2015). several empirical studies have examined the relationship between the economic environment and the implementation of novel technologies. however, there is still no agreement about how have icts become the source and essential factors of cross-countries differences. economists have still extensively debated these pressing questions. zhu, kraemer, and xu (2003) found a positive influence of competition on the application of new technologies can be found since they give the chance to outperform competitors. however, these technological driven changes implied serious effects on economic development, an adverse correlation is also revealed between competition and the adoption of online technologies (rodríguezardura & meseguer-artola, 2010). the industrial revolutions had a strong influence on industrial processes, allowing increased productivity (gdp per capita) and efficiency through disruptive technological developments, i.e. steam engine, electricity or digital technology (ślusarczyk, 2019). industry 4.0, which may eventually represent a fourth industrial revolution, is a complex technological system that has been widely discussed and researched and has a significant influence in the industrial sector since it introduces relevant advances that are related to smart and future factories (pereira & romero, 2017). whereas investment in physical capital is considered a fundamental element of productivity growth, recently researchers are increasingly paying attention to discover how companies operating the phenomenon of industry 4.0, internet of things (iot), etc. tools to support their processes, and what critical issues they face during icts adaptation (nagy et al., 2018). levine (1997) emphasizes that icts improves access to information, which facilitates investment and economic performance. in another study, bai and yuen (2002) suggest it increases awareness, knowledge, skills, and consumer sophistication. furthermore, the implementation and adaption in the public sector have also attracted the attention of worldwide researchers and policymakers. the usage of icts by the government is referred to as e-government (chen et al., 2009). icts in the public sector also noted as “dealing and sharing” of public information and services for the citizens (undesa, 2003). majeed and shah (2018) argue that the quality of public service depends upon the adaption of ict in the public sector. countries with a high level of e-government tend to provide quality public services. however, some other studies highlight the importance of e-government to overcome malpractices and bribery by improving transparency and accountability of economic transactions (haigh, 2004; zhao et al., 2015). however, understanding the process and the transformative impacts of digitalisation on public administration is scarce and myth play important roles in policymaking (bekkers & homburg, 2007). andersen et al. (2010) also demonstrated a substantial shift in the nature and directions of impacts in comparison to earlier studies. however, empirical studies have just focused on icts, ignoring its implementation in the government sector. these studies 90 g. faid. the nexus of e-government and increased productivity relative to income level comparison do highlight the importance of icts for the public sector but not provide empirical evidence, mostly country-specific and generally focus only developed ones. since the experience of e-government can also depend upon development level, it is necessary to conduct as well as disaggregated global analysis. this study aims to contribute to the empirical literature by investigating e-government and productivity growth nexus at income level comparison. this study focuses directly on how the access to and usage of the e-government, and the adoption of telecommunication technologies, human capital are related to the pace of productivity change. the rest of this paper is divided into additional sections. the next section briefly describes the conceptual literature framework and background of this research topic. section 3 describes the data and methodologies. moreover, this approach attempts to address the potential endogenous and complex nature of e-government. sensitivity analysis is also performed to check the robustness of the results. finally, the paper ends with some conclusions and implications based on the empirical results. 1. the linkage of e-government and productivity performance the empirical research on the determinants of productivity growth has generally concluded favourable outcomes of investment in icts and environment sustainability (majeed, 2018). ma, chung, and thorson (2005) highlight the importance of the e-government initiative in the case of china. they argue that e-government boosts transparency and fiscal decentralization, thereby supporting economic development. moreover, e-government provides information to the government to improve efficient monitoring and to steer economic activities. the literature suggests various mechanisms to explain the effects of e-government. it facilitates fight against corruption by facilitating efficient monitoring of economic transactions and lowering transaction costs of accessing information (batchelor et al., 2005). in the presence of information communication technology in the public sector, the discretionary power of public officials lower as they have fewer interactions with the citizens. e-government facilitates the dissemination of information of public sector in the economy, which motivates citizens to question “arbitrary and unfair procedures” in the public sector, thereby improving check and balances on public officials (piatkowski, 2006). therefore, e-government has enough power to control for many possible opportunities for corruption supporting productivity by lowering malpractices. recently, majeed (2018) found a negative impact of e-government on corruption in a sample of 147 countries over the period 2003–2012. corruption hinders development by escalating economic inefficiencies, weakening institutions, eroding the incentive systems, which are essential for productivity growth and sustainable development (meyer et al., 2017). trust is another institutional factor that matters in the case of e-government and productivity performance (oláh et  al., 2019b). trust lowers transaction costs, increases investment, and gdp per capita growth (goergen et  al., 2013; oláh et  al., 2019a). e-government improves communication between citizens and government. welch, hinnant, and moon (2005) suggested that increasing usage of government websites improve the relationship between people and government and people trust on government. likewise, tolbert and mossberger (2006) business, management and education, 2020, 18(1): 88–105 91 claimed that government citizens would trust more when the government provides efficient services through icts infrastructure. however, some survey studies do not confirm these proposed relationships. for instance, in a case study of singapore, teo, srivastava, and jiang (2009) analysed the data of 214 government websites and concluded that citizens could trust more on government when public policies work effectively rather than the usage of technology by the government. environmental degradation is another spillover channel that explains the relationship between e-government and economic performance. the implementation of e-government in the public sector inversely affects the movement of the vehicle, which lower the burden on the environment and resources. krishnan and teo (2012) provided evidence that e-government improves economic growth by lowering corruption and improving environmental quality, employing an unbalanced panel data of 105 economies over the period 2004–2008. e-government also improves the productivity of labour inputs, such as the performance of public officials. using a sample of oecd countries, czernich et al. (2011) found a positive impact of broadband subscriptions. mahyideen, ismail, and hook (2012) confirmed the positive impact of icts of asean countries over the period 1976–2010. bhuiyan (2010) explored the gains from the implementation of icts infrastructure in the public sector in the case of kazakhstan and concluded that e-government had improved the gdp per capita growth by, i.e. lowering supervisory costs, controlling malpractices, decreasing disguised unemployment and improving international relationships. kpodar and andrianaivo (2011) argued that e-government improves productivity growth by facilitating capital accumulation, increasing financial inclusion, improving rural sector development and lowering market imperfections. a positive effect of icts for 44 african countries found over the period 1988–2007. another group of studies suggest adverse effects of icts, particularly in the case of developing countries. maurseth (2018) found evidence of an unfavourable effect of e-government using a panel of 217 countries. the developing countries are argued to lack resources, and low implementation of e-government will divert resources from essential services, i.e. health, education, clean water and electricity (morawczynski & ngwenyama, 2007). moreover, the benefits of icts largely depend upon complementary factors, such as technical skills and back up of finance to maintain different costs linked to icts (ngwenyama et al., 2006). 2. data and methodologies a unique database has been constructed by the world bank (the world bank, 2019) and the penn world table (pwt, 2018) last available release to support the gathering of relevant, high-quality, and internationally comparable statistics. this study has employed an unbalanced panel data set of 168 countries across the world bank’s databank from 2003 to 2015. the explained variable is per capita gdp measured by “natural log of gdp per capita at 2005 constant prices”. the explanatory variables are initial gdp per capita, human capital, labour participation, physical capital, and e-government. for the sake of sensitivity analysis, the suggested control variables are inflation, trade openness and government consumption (poór et al., 2018). 92 g. faid. the nexus of e-government and increased productivity relative to income level comparison gross domestic product (gdp) per capita (productivity) is based on purchasing power parity (ppp) and converted to constant 2005 dollar ($) prices. gdp is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. it is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. the e-government comprises of three components based on the global e-governance reports (united nations, 2019). (1) web connection and online service component estimate the existing web content accessibility of a country and growing online presence in simple websites, which improves information provision by the arrangement of multimedia content, bilateral interactions between government and citizens and online transaction service. (2) telecommunication service is based on the number of personnel computers, mobile phone and fixed telephone subscription and internet users. (3) human capital measures the “adult literacy rate and gross enrollment of primary, secondary and tertiary education”. hence, the e-government variable is the “weighted average” of web connectivity and online service of the government, human capital and telecommunication infrastructure. the data ranges from 0 to 1: where the highest one shows the best quality of e-government and the lowest (zero) one indicates the worst one. the indicator of physical capital is measured by gross capital formation as a ratio of gdp. it consists of “outlays on additions to the fixed assets of the economy plus net changes in the level of inventories. fixed assets include land improvements (i.e. fences, ditches, drains, etc.); plant, machinery, and equipment purchases; and the construction of roads, railways, and the like, including schools, offices, hospitals, private residential dwellings, and commercial and industrial buildings. inventories are stocks of goods held by firms to meet temporary or unexpected fluctuations in production or sales, and work in progress”. the indicator of human capital is measured by school enrollment, secondary (% gross). it is the “ratio of total enrollment, regardless of age, to the population of the age group that officially corresponds to the level of education shown. secondary education completes the provision of basic education that began at the primary level, and aims at laying the foundations for lifelong learning and human development, by offering more subject or skill-oriented instruction using more specialized teachers”. the indicator of labor force is measured by the labor force participation rate. it is the “proportion of the population ages 15 and older that is economically active: all people who supply labor for the production of goods and services during a specified period”. general government final consumption expenditure is measured as a ratio of gdp. it includes “all current government expenditures for purchases of goods and services (including compensation of employees). it also includes most expenditures on national defense and security, but excludes government military expenditures that are part of government capital formation”. urban population refers to “people living in urban areas as defined by national statistical offices. it is calculated using world bank population estimates and urban ratios from the united nations world urbanization prospects. aggregation of the urban and rural population may not add up to the total population because of different country coverages”. the indicator of fixed telephone lines is measured as a ratio per 100 inhabitants (the world bank, 2019). the data sources and description of other control variables are given in appendix. business, management and education, 2020, 18(1): 88–105 93 table  1 illustrates some descriptive statistics, as the maximum and minimum values of the data of variables. the quality of e-government is high in most of the european countries and poor in the case of the african ones. the highest mean value of e-government (0.65) belongs to the high-income countries, while the lowest mean value (0.22) belongs to lowincome ones. table 1. summary statistics of the data requirements (source: authors’ calculation) variable observations mean std. dev. min max gdp(y) per capita 1448 12066.49 14946.42 181.75 136311.00 labor 1376 63.54 10.54 38.60 89.60 capital 1330 22.45 7.62 2.00 67.73 human capital 1091 78.45 28.79 7.35 159.15 e-government 1256 .42 .20 .00 .93 trade 1448 89.74 47.72 1.80 433.05 government exp 1448 11.97 8.98 .90 55.25 urban 1400 14.61 2.32 8.53 20.31 fix_ telephone 1408 18.83 17.91 .01 73.03 online service 1266 .32 .24 .00 1.00 telecom infra 1263 .20 .21 .00 .86 high-income countries gdp(y) per capita 401 30752.75 16510.02 5411.61 136311.00 labor 393 62.48 7.71 48.20 86.80 capital 389 22.92 6.91 9.75 67.73 human capital 351 102.73 11.72 28.19 159.15 e-government 351 .65 .15 .00 .93 trade 401 102.45 62.94 24.16 433.05 government exp 401 7.33 3.12 2.56 26.50 urban 393 14.57 2.34 8.53 19.35 fix_telephone 401 39.82 15.30 1.48 73.03 online service 351 .54 .23 .00 1.00 telecom infra 351 .48 .19 .01 .86 middle-income countries gdp(y) per capita 776 6271.56 4379.40 491.95 32300.08 labor 712 60.49 9.51 38.60 80.00 capital 688 23.55 7.75 5.37 63.05 human capital 572 75.36 22.43 7.57 119.72 e-government 670 .38 .13 .00 .71 trade 776 91.88 38.58 21.02 267.81 government exp 776 13.83 10.41 3.06 55.25 94 g. faid. the nexus of e-government and increased productivity relative to income level comparison variable observations mean std. dev. min max urban 760 14.73 2.38 9.60 20.31 fix_telephone 753 13.39 10.46 .18 46.97 online service 678 .27 .18 .00 .82 telecom infra 675 .12 .09 .00 .77 low-income countries gdp(y) per capita 272 1026.10 788.54 181.75 5627.73 labor 272 73.06 11.13 47.70 89.60 capital 254 18.80 7.21 2.00 48.60 human capital 169 38.59 22.84 7.35 99.50 e-government 236 .22 .09 .00 .45 trade 272 64.80 34.41 1.80 190.04 government exp 272 13.47 7.92 .90 47.15 urban 248 14.32 2.05 10.04 17.56 fix_telephone 255 1.91 3.68 .01 21.04 online service 238 .12 .10 .00 .39 telecom infra 238 .02 .02 .00 .13 table  2 shows that there is a positive correlation between e-government and gdp per capita. the e-government components, such as online service and telecom infrastructure, are positively correlated with per capita income. table 2. correlation matrix of independent variables 1 (source: authors’ calculation) variables 1 2 3 4 5 7 8 9 10 11 labor –.362 capital .060 –.037 hc .693 –.471 .132 e-government .707 –.296 .077 .739 trade .234 –.227 .121 .259 .252 govern. exp. –.305 .087 .089 –.302 –.432 –.075 urban .073 –.114 .032 .171 .152 –.065 –.155 fix_telephone .753 –.448 .184 .744 .688 .240 –.303 .115 online service .519 –.202 .055 .469 .827 .113 –.394 .189 .463 tele. infra. .745 –.374 .132 .652 .771 .309 –.327 .050 .762 .540 note: the link-test results confirm the correct functional form as well (see appendix, table a2). the “variance inflating factor” (vif) test is applied to check tmulticollinearity. the values of vif range from 1.29 to 2.33, which indicates that the problem is not detected in the model (appendix). end of table 1 business, management and education, 2020, 18(1): 88–105 95 the empirical model relies on an extended cobb-douglas production function (mankiw et al., 1992). there are three primary sources of production, namely labour, physical capital, and human capital:         it it itɤ it it it it ity a k hc l � �� . (1) note that i stands for cross-section units, i  = 1,2,3 ... n and t denotes time period, t = 1,2,3 ... t. equation (1) is transferred by taking natural of both input and output variables: 1 2 3log log log log logit it it it ity a k hc l= +β +β +β , (2) where y refers to the growth rate of gdp per capita, k represents the stock of physical capital, l indicates the labour force, and hc refers to human capital. the term ‘a’ substitutes the given state of technological progress and known as the total factor productivity. technological developments are the principal source of economic growth over time. equation (3) represents the exponential form of the technology level: ( ) 0 it ia a e θ= . (3) applying natural log on both sides of equation (3) gives the following equation: 0log log ita= +∅ . (4) the symbol ∅ represents the growth rate of technology in an economy. e-government is an important source of economic growth and advances sources of knowledge, access to information, investment in research and development. ∅ can be described as follows: 1 2 _it ite government∅ = α +α . (5) substitute equation (5) in equation (4): 0 1 2log _it ita e government= α + α +α (6) equation (6) is substituted into equation (2) as a regression formula: 0 1 2 3 4log _ log log log it it it it it ity e government k hc l e= β +β +β +β +β + (7) where e is the error term. since economic growth depends upon initial conditions of growth (barro, 1991), initial gdp per capita is also incorporated into the neoclassical growth model: 0 1 1 2 3 4 5 5 log _ log _ log _ log log it it it it it it it it y y e government physical capital human capital labor x e −= β +β +β +β + β +β +β + (8) the robustness of our results is also checked by using control variables. xit is the matrix of additional control variables, i.e. inflation, government consumption, and trade openness. 2. empirical findings of e-government and productivity nexus the baseline parameter estimates are drawn using the fixed effects approach of estimation. this approach is better than ols as it takes care of the time-invariant characteristics of each cross-sectional unit. moreover, it controls unobserved heterogeneity in a model by allowing 96 g. faid. the nexus of e-government and increased productivity relative to income level comparison separate intercept for each cross-sectional unit in the panel data. baltagi (2013) argues that the presence of time-invariant characteristics in panel data give bias results with ols. the empirical findings reported in table 3 show that e-government has a positive and significant impact on productivity growth. the coefficient also suggests that with one unit increase in e-government increases gdp per capita by 0.10 percentage points. columns (1–4) indicate that the coefficient on e-government remains significant and positive in all examined regressions. in order to analyze the strength of results, additional controls of trade, government consumption and human capital added, respectively are incorporated in columns (2–4). the coefficient of trade is positively and significantly associated with productivity growth, which is consistent with majeed and shah (2018). in column 2, the influence of government consumption is negative and significant. in column 4, the effect of human capital is positive, as theoretically expected. columns (4–8) report the results of estimated regressions for the high-income countries, where e-government positively correlated with productivity growth, but insignificantly. table 3. fixed effects results for global sample and high-income countries models/ (1) (2) (3) (4) (5) (6) (7) (8) variables global sample high-income countries y(t-1) .801*** .799*** .797*** .745*** .677*** .638*** .632*** .665*** (.014) (.014) (.014) (.017) (.040) (.040) (.035) (.035) labor –.115 –.124 –.107 –.046 .481** .516** .520*** .437** (.076) (.076) (.076) (.071) (.223) (.216) (.195) (.184) capital .037*** .028*** .039*** .075*** .064*** .050*** .053*** .151*** (.008) (.008) (.008) (.010) (.019) (.019) (.017) (.019) e-govern. .109*** .093*** .101*** .119*** .010 .005 –.053 –.016 (.032) (.032) (.032) (.033) (.050) (.049) (.044) (.042) trade .057*** .185*** (.015) (.045) gov. exp. –.056*** –.307*** (.014) (.036) hc .020 –.101 (.017) (.070) constant 2.058*** 1.902*** 2.183*** 2.091*** 1.132 .597 2.088*** 1.656** (.324) (.324) (.322) (.303) (.740) (.727) (.656) (.712) observations 972 972 972 760 287 287 287 256 r-squared .827 .830 .831 .823 .716 .736 .784 .821 countries 168 168 168 154 49 49 49 47 note: standard errors in parentheses *** p < .01, ** p < .05, * p < .1”. business, management and education, 2020, 18(1): 88–105 97 table 4. fixed effects results for middle-income and low-income countries models/ (1) (2) (3) (4) (5) (6) (7) (8) variables middle-income countries low-income countries y(t-1) .829*** .829*** .824*** .759*** .743*** .742*** .743*** .679*** (.017) (.017) (.017) (.022) (.035) (.035) (.036) (.062) labor –.229** –.261*** –.225** –.171** .110 .143 .110 .059 (.093) (.092) (.092) (.085) (.186) (.188) (.186) (.206) capital .024** .017 .024** .061*** .037*** .031** .037*** .027 (.012) (.012) (.011) (.014) (.014) (.015) (.014) (.025) e-govern. .154*** .126*** .148*** .211*** .195** .173* .195** .151 (.047) (.047) (.047) (.049) (.095) (.097) (.095) (.123) trade .074*** .024 (.021) (.024) gov. con –.043** .0001 (.019) (.023) human cap 0.0314 .052 (0.0299) (.032) constant 2.276*** 2.115*** 2.405*** 2.375*** 1.139 .931 1.139 1.68* (.409) (.406) (.411) (.386) (.805) (.830) (.808) (.934) observations 495 495 495 378 191 191 191 127 r-squared .876 .880 .878 .863 .789 .790 .789 .771 countries 88 88 88 79 32 32 32 29 note: standard errors in parentheses *** p < .01, ** p < .05, * p < .1”. empirical findings reported in table 4 show that e-government exerts a significant and positive influence on gdp per capita growth in middle-income countries (columns 1–4). the coefficient of e-government suggests that if e-government increases by one unit, then productivity growth will increase by 0.15 percentage points. thus, comparatively the influence of e-government on gdp per capita growth is stronger in the case of middle-income countries. the coefficient for low-income countries is also positively associated with productivity. the magnitude implies that if e-government index increases by one unit, then the growth rate will increase by 0.09 percentage points. since fixed effects model allows a separate intercept for each country, many degrees of freedom is consumed. it might exacerbate the problem of multicollinearity in the model because of the dummy variables trap. therefore, the results are also obtained using random effects model (rem) in table  5. our baseline findings remain consistent. the impact of e-government is robustly significant and positive in all regressions. however, the magnitude of the coefficient slightly falls, implying that fem results are overestimated. 98 g. faid. the nexus of e-government and increased productivity relative to income level comparison table 5. random effects results for global sample and high-income countries models/ (1) (2) (3) (4) (5) (6) (7) (8) variables global sample high-income countries y(t-1) .989*** .988*** .988*** .984*** .974*** .970*** .971*** .981*** (.003) (.003) (.003) (.004) (.010) (.010) (.011) (.010) labor –.027* –.025* –.029* –.039** .032 .037 .023 .002 (.015) (.015) (.015) (.019) (.041) (.042) (.046) (.041) capital .027*** .025*** .027*** .028*** .038** .035** .035** .088*** (.006) (.006) (.006) (.008) (.015) (.016) (.016) (.016) e-govern. .028 .030*** .025 .038*** –.006 .003 –.0078 –.026 (.020) (.020) (.021) (.024) (.030) (.031) (.033) (.031) trade .010** .013 (.005) (.009) gov. con –.006 –.016 (.005) (.015) human cap .008 .032 (.009) (.031) constant .142** .101 .169** .197** .034 –.001 .143 –.202 (.070) (.074) (.073) (.096) (.153) (.160) (.185) (.219) observations 972 972 972 760 287 287 287 256 r-squared 0.82 0.83 0.82 0.81 0.70 0.71 0.71 0.79 countries 168 168 168 154 49 49 49 47 note: standard errors in parentheses *** p < .01, ** p < .05, * p < .1”. table 6 reports the results estimated using random effects method for middle, columns (1–4), and low-income, columns (5–8), countries. all columns indicate that the influence of e-government adaption on the productivity performance of middle-income countries is consistently positive and significant. this finding implies that middle-income economies can significantly benefit from the adaption and implementation of icts in the public sector. table 6 also reports the results for low-income countries. in this case, the effect of e-government is positive, but insignificant, suggesting that the growth effect of e-government is sensitive to the estimation. in the case of the lag dependent (yi-t) variable on the right side of the equation, ols, fe and re techniques of estimation may produce biased findings. in such a condition, the generalized method of moments (gmm) estimation is more appropriate. it tackles endogeneity in the model by using the instrumental variables for each endogenous variables. arellano and bond (1991) proposed a gmm model by employing condition lies between lag dependent variable and error term in order to get the instruments to resolve the endogeneity problem. business, management and education, 2020, 18(1): 88–105 99 table 6. random effects results for middle-income and low-income countries models/ (1) (2) (3) (4) (5) (6) (7) (8) variables middle-income countries low-income countries y(t-1) .980*** .979*** .980*** .964*** .984*** .985*** .983*** .996*** (.006) (.006) (.006) (.010) (.011) (.011) (.011) (.013) labor –.015 –.014 –.015 –.038 –.046 –.041 –.044 –.044 (.021) (.021) (.021) (.029) (.036) (.037) (.036) (.040) capital .009 .007 .009 .011 .035*** .034*** .035*** .018 (.008) (.009) (.008) (.011) (.010) (.010) (.010) (.015) e-govern. .088*** .088*** .089*** .107*** .047 .037 .045 .062 (.033) (.033) (.034) (.042) (.064) (.067) (.064) (.082) trade .008 .006 (.008) (.012) gov. con .001 –.006 (.007) (.010) human cap .017 –.012 (.015) (.014) constant .203** .177* .203* .353** .217 .168 .237 .213 (.100) (.107) (.104) (.141) (.185) (.208) (.189) (.217) observations 495 495 495 378 191 191 191 127 r-squared 0.87 0.87 0.87 0.85 0.78 0.78 0.78 0.76 countries 88 88 88 79 32 32 32 29 note: standard errors in parentheses *** p < .01, ** p < .05, * p < .1”. it is also possible that the installation of e-government applications depend on the gdp per capita of an economy that will cause a problem of reverse causation. comin and hobijn (2004) noted that developed economies initially adopted twenty leading technologies of the world. in order to address these problems, the baseline model estimated by using arrelanobond (ab), dynamic model. the “fixed telephone lines and initial urban population” are used as external instruments. czernich et  al. (2011) used “fixed telephone lines” as instruments for broadband because broadband access is possible through cable-tv and fixed telephones lines. according to urban density theory (udt) cost of icts gradually decreases as the urban population increases due to knowledge spillover and availability of other complementary tools of icts (andersen, 2009). the empirical results of ab model (table  7) also confirm the positive influence of e-government on gdp per capita growth. the coefficient on e-government is consistently positive and significant in all regressions. table 8 also reports ab results for middle and lowincome countries. the results remain consistent with the baseline findings. 100 g. faid. the nexus of e-government and increased productivity relative to income level comparison table 7. arrelano-bond results for global sample and high-income countries models/ (1) (2) (3) (4) (5) (6) (7) (8) variables global sample high-income countries y(t-1) .978*** .968*** .911*** .870*** .916*** .919*** .921*** .965*** (.007) (.007) (.010) (.011) (60.07) (59.05) (62.43) (67.07) labor –.010 –.011 –.784*** –.625*** .145* .157** .117 .116 (.019) (.018) (.076) (.0594) (1.858) (1.998) (1.550) (1.293) capital .173*** .158*** .244*** .097*** .111*** .105*** .116*** .193*** (.012) (.012) (.014) (.017) (4.381) (4.019) (4.728) (8.295) e-govern. .078* .127*** .299*** .185*** .148*** .151*** .146*** .026 (.042) (.043) (.054) (.047) (3.675) (3.754) (3.779) (.658) trade .034*** .0157 (.009) (1.100) gov. con –.003 –.089*** (.023) (–3.159) human cap .229*** .061 (.026) (.984) constant –.309*** –.340*** 3.175*** 2.397*** –.159 –.299 .057 –1.001** (.116) (.114) (.328) (.274) (–.578) (–.988) (.208) (–2.454) observations 927 927 927 730 281 281 281 250 countries 162 162 162 150 48 48 48 46 note: z-statistics in parentheses *** p < .01, ** p < .05, * p < .1”. table 8. arrelano-bond results for middle-income and low-income countries models/ (1) (2) (3) (4) (5) (6) (7) (8) variables middle-income countries low-income countries y(t-1) .960*** .960*** .961*** .937*** .939*** .901*** .940*** .983*** (129.70) (130.10) (125.30) (116.40) (56.51) (46.80) (48.84) (42.03) labor –.022 –.018 –.023 .014 –.003 –.142 –.003 –0.120 (–1.177) (–.930) (–1.179) (.748) (–.041) (–1.637) (–.033) (–1.427) capital .031** .028** .031** .014 .132*** .162*** .133*** .076*** (2.494) (2.085) (2.435) (1.167) (8.512) (9.238) (8.003) (2.789) e-govern. .195*** .194*** .195*** .030 .348*** .318*** .350*** .139 (4.998) (4.987) (4.982) (.608) (3.850) (3.307) (3.807) (1.215) trade .009 .081*** (.828) (5.004) gov. con .002 .002 (.140) (.096) business, management and education, 2020, 18(1): 88–105 101 3. discussion the extant literature has primarily focused on the relationship between icts and productivity growth. an equally important issue of whether icts adaption in the public sector leads to high growth in developing countries has still received less attention. this study contributes to the existing literature by empirically examining the effect of e-government on gdp per capita growth by utilizing an extensive panel data set of income level comparison over the period 2003–2015. the study is a novel measure of e-government that covers additional multiple dimensions. fixed effects, random effects and gmm methods of estimation, validate the empirical results. the results confirm a positive and significant impact of e-government on gdp per capita growth. a disaggregated analysis reveals that middle-income countries are driving global economic growth by implementing icts infrastructure in the public sector. findings of the study are robust to different specifications, alternative methods of estimation and endogeneity problem. in the light of empirical findings, it is recommended that government may rely more on online services in the provision of its responsibilities because it enhances the efficiency of public sectors. conclusions though findings of the study are aligned with the theory, it has certain limitations. this study focuses on severe developed and developing economies, whereas each country may not benefit from e-government implementation as gains might be offset with the enormous costs of implementation. the data set is not available over a long period. moreover, the sensitivity analysis for this research is based on a few additional control variables future researchers need to extend this analysis for other groups of countries, such as regional groups of countries or group of emerging economies. this research highlights positive dimensions of e-government, whereas future research may focus on its potential downside as well. for instance, developing economies are abundant with low-skilled labour force, and unemployment remains a major issue. the increasing implementation of e-government may aggravate this phenomenon by reducing job opportunities for workers in the public sector. moreover, income distributional consequences of e-government also need to be estimated. models/ (1) (2) (3) (4) (5) (6) (7) (8) variables middle-income countries low-income countries human cap .103*** –.019 (5.879) (–.925) constant .286** .241* .283** .016 –.013 .438 –.030 .471 (2.375) (1.823) (2.318) (.136) (–.033) (1.003) (–.068) (1.105) observations 481 481 481 365 166 166 166 116 countries 86 86 86 77 29 29 29 28 note: z-statistics in parentheses *** p < .01, ** p < .05, * p < .1”. end of table 8 102 g. faid. the nexus of e-government and increased productivity relative to income level comparison acknowledgements this research was funded by the national research, development, and innovation fund of hungary. project no. 130377 has been implemented with the support provided by the national research, development and innovation fund of hungary, financed under the kh_18 funding scheme. author contributions conceptualization, g.f., m.m.t., a.i. and d.m.; methodology, g.f. and m.m.t.; validation, g.f. and d.m.; formal analysis, g.f., m.m.t., and a.i; investigation, m.m.t; resources, g.f. and d.m.; data curation, m.m.t., and a.i.; writing-original draft preparation, g.f., m.m.t., and v.l.z.. writing-review and editing, g.f., m.m.t., and a.i.; visualization, m.m.t; d.f. m and v.l.z.; supervision, g.f. and d.m.; project administration, g.f.; funding acquisition, d.m. all authors have read and agreed to the published version of the manuscript. disclosure statement the authors declare no conflict of interest. references andersen, k. n., henriksen, h. z., medaglia, r., danziger, j. n., sannarnes, m. k., & enemærke, m. 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[2] online service “extent of the online availability of the government”. [2] telecom service “extent of telecom infrastructure of the government”. [2] human capital “gross secondary school enrollment of the total population”. [3] physical capital “gross fixed capital formation in the percentage of gdp”. [3] labour force “share of labour force participation in the total population”. [3] government expenditure “government spending in the share of gdp at 2005 constant prices”. [1] urban population “natural log of urban population”. [3] fix_telephone “fixed telephone lines per 100 inhabitants”. [4] table a2. results of link-test (source: authors’ estimation) all countries y coef. std. err. t p > t [95% conf. interval] _hat 1.020 .014 72.38 .000 .993 1.048 _hatsq –.001 .001 –1.44 .151 –.003 .0004 _cons –.084 .060 –1.41 .158 –.201 .033 high income countries y coef. std. err. t p > t [95% conf. interval] _hat –1.482 3.061 –.48 .629 –7.504 4.540 _hatsq .123 .1511 .81 .418 –.175 .420 _cons 12.553 15.501 .81 .419 –17.939 43.046 middle income countries y coef. std. err. t p > t [95% conf. interval] _hat 1.122 .056 20.21 .000 1.013 1.232 _hatsq –.007 .003 –2.21 .028 –.014 –.001 _cons –.504 .229 –2.20 .029 –.955 –.053 low-income countries y coef. std. err. t p > t [95% conf. interval] _hat 1.027 .078 13.13 .000 .873 1.182 _hatsq –.002 .006 –.35 .725 –.013 .009 _cons –.094 .269 –.35 .728 –.625 .438 table a3. the highest rate of variance inflating factor in each group of models (source: authors’ estimation) samples all countries high-income countries middle-income countries low-income countries mean vif 2.33 1.29 1.39 1.34 copyright © 2019 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. business, management and education issn 2029-7491 / eissn 2029-6169 2019 volume 17 issue 2: 309–326 https://doi.org/10.3846/bme.2019.11213 *corresponding author. e-mail: dorota.kuchta@pwr.edu.pl introduction  the subject of this paper are r&d (research and development) projects, which will be understood here as either research projects (i.e. projects undertaken with the objective of acquiring or generating new knowledge) or research and development projects (projects which realistic planning of research and development projects  dorota kuchta* faculty of computer science and management, wrocław university of science and technology, wybrzeże wsypaińskiego 27, 50-370 wrocław, poland received 17 september 2019; accepted 26 november 2019 abstract. purpose  – the purpose of the article is to propose a more flexible approach to the planning of research and development projects, especially for the needs of project calls. in those calls, financial means are often refused to projects with a high level of uncertainty. the proposal should support a positive assessment of the most pathbreaking projects and a flexible reaction to the failure or partial failure of such projects. research methodology  – in the proposal type 1 and type 2 fuzzy sets are applied. the proposal will is using case studies. findings  – the results will modify the way research and development project are planned and controlled. research limitations – the proposal has not been verified in practice, for which many more case studies and cooperation with financing institutions would be necessary. also, it does not use up all the modelling possibilities of uncertainty and dependencies between various uncertain elements of the project plan. practical implications – the results might be used in the design of forms used by various financing institutions (e.g. european commission or national research funding institutions) in project calls. originality/value  – the proposal presents an entirely different way research and development projects should be planned and described. type 2 fuzzy sets are used for the description, where various elements of the project plan (e.g. objectives, methods, tasks) are assigned a possibility degree (of attainment, of usage etc.) keywords: research project, r&d project, project plan, project uncertainty, fuzzy set. jel classification: o31, o32. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bme.2019.11213 310 d. kuchta. realistic planning of research and development projects use the existing knowledge in order to create new products or processes (klaus-rosińska, 2019)). r&d projects are inherently linked to uncertainty. while doing research, we are asking questions to which we naturally do not know answers beforehand, we are searching for substances which do not exist yet and of which it is not known whether they can be created, or for archaeological findings of which we do not know whether they have been preserved and if they have, where they are located. we try to prove theorems of which we do not know whether they are right and try to construct machines with functionalities of which we do not whether they are able to be achieved. naturally, r&d activities need financial resources, and often in substantial quantities. researchers apply for them in project calls, using forms which they have to fill in in such a way that the reviewers are persuaded that their projects deserve funding. they have to present their projects precisely according to the imposed format. this format requires them to specify, among others, the research objectives, methods and research tasks. however, these elements are often not wholly known or cannot be described precisely before the project is started (which is explicitly shown, e.g. in shenhar (2001) or kuchta and skowron (2016)). as shown, e.g. in kuchta et  al. (2017a), in numerous research projects, especially the most innovative and path-breaking ones, only few elements can be regarded as known. thus a researcher who applies for money has three alternatives: he or she describes uncertain elements of his or her projects as if they were satisfied, hoping that they will be accomplished to a sufficient degree in order to get the final report accepted by respective authorities, he or she does the research without funding and applies at the moment when the results are already known, or he or she does not apply at all, feeling that the application forms and generally the calls are too narrow for the innovation and uncertainty inherent in their projects. thus the aim of this paper is to propose another approach, in our opinion a more realistic one, to r&d project planning, to be used mainly, but not exclusively in application forms in various r&d project calls. this approach should allow planning each r$d project, even a highly path-breaking one, in a manner fulfilling the following conditions: – the researcher will be able to present his or her actual knowledge about the project without the risk to be punished by reviewers for an incomplete or too general project description; – the financing institution will be able to finance the project dynamically and flexibly, depending on the continuous reporting of the results; – such (today popular (kuchta et al. 2017a)) phenomena as financing of r&d projects which have lost their “raison d’être”, straining the project description to the formal requirements, distorting project results in order to fit the original project goal, refusal to finance highly innovative, path-breaking projects characterized by a high uncertainty and lack of knowledge will be substantially reduced. we will attempt to reach this objective through the use of a formal tool called type 1 and type 2 fuzzy sets. they are helpful in case of uncertainty and lack of knowledge. being a mathematical notion, they can be used in a more user-friendly form – in that of linguistic expressions, borrowed from human language. the structure of the paper is as follows: in section 1 we review the state of art of the existing research on uncertainty in r&d projects. in section 2 we describe the results of our recent research where researchers expressed their opinion about the high uncertainty inherbusiness, management and education, 2019, 17(2): 309–326 311 ent in their projects, and we present an example of a real-world application form. in section 3 we describe type 1 and type 2 fuzzy numbers and their linguistic-based versions. then, in section 4.1, we propose a change in the application forms for r&d project calls, consisting mainly of introducing a unique structure for the description of research objectives and tasks. in section 4.2 we illustrate the problem and the proposed approach utilising two real-world case studies. we close our paper with some conclusions. 1. uncertainty in r&d projects – state of the art so-called traditional project management (project management institute, 2018; wysocki, kaikini, & sneed, 2014) sets that projects should be defined according to specific rules. for example, the project goals should be described respecting the smart principle: they should be specific, measurable, attainable, realistic and time-related. these principles have proven to be useful, e.g. engineering projects. however, it has to be underlined that generally r&d projects differ substantially from engineering projects. in the latter the goal (e.g. building a bridge) can and should be defined specifically (we know exactly what kind of bridge will be built), in a measurable way (all the bridge elements are measured), inevitably, the goal is attainable (the engineers know the bridge can be constructed), also the engineering knowledge assures that such a goal is realistic and for the same reason the time, methods and materials needed to build a bridge can be estimated within precise tolerances, but fairly precisely (if we deal with considerable delays in construction projects, they are usually due instead to human than to engineering problems). the traditional project management principles also require the list of project tasks to be defined, with resources and deadlines assigned, etc. – in short, detailed planning should be done before the project is started. in r&d projects (but also in many it projects) the situation is more complicated. it is difficult to imagine that the invention of the wheel could have happened within a project with a smart objective. of course, this example is exaggerated, but many of the most valuable r&d projects follow a somewhat fuzzy goal, which may be achieved or not, and even if it is achieved, the final form of the project product is often difficult to predict and may differ sharply from the initial plans. also, an exact plan, with a complete list of project tasks scheduled on the time axis, is in many r&d projects merely impossible to be produced beforehand. many research activities can be undertaken only after experiments and their form or even their possibility to be performed depend strongly on the unknown experiment result. r&d activities are by their mere nature very different from engineering activities. in the literature various project typologies are considered, various project typology criteria are used. one of them is the presence and source of uncertainty for the project goal and the methods to achieve it. shenhar (2001) and kuchta and skowron (2015) has introduced the following project classification: table 1. project classification (kuchta & skowron, 2016) project type a b c d project goal well defined before the project start yes no no yes methods to achieve the goal well defined the project start no yes no yes 312 d. kuchta. realistic planning of research and development projects in table 1, we can see that there are four types of projects. the mentioned example of a bridge project would belong to category d. in projects of types a, b, c not both the elements of the couple “project goal/methods to achieve the goal” are well defined. in these projects we may not know the ultimate goal, and even if we do know it, we may not know which methods will lead us to the (maybe still unknown) goal. many r&d (and it projects) are of a,b or c type. in kuchta, gładysz, skowron, and betta (2015) we can find results of a research on polish r&d projects where the percentage of r&d projects in various domains of science and various types of research institutions are given in which the ultimately achieved goal was different from the planned one. we can notice in table 2 that the percentage of r&d projects achieving a different goal than the planned one is relatively high. the exact numbers depend on the field of research and the type of research institutions. the especially high value of a non-achievement of the original project goal can be noticed in life sciences (88% of projects). these results show that it may be very limiting to expect from a researcher to define his or her research goal exactly in the phase of applying for financing. even if we assume that the project goal can be defined or that its certain equivocality or fuzziness is accepted, we have another problem on the level of research tasks. as it is described by kuchta (2014), in r&d projects, there may exist a high level of non-determinability of research tasks. like the case of one prominent car manufacturer shows (courtot, 1998), in the moment of r&d project planning the following elements may be not fully known: – the list of tasks that will be executed (there may exist a list of potential tasks, but it may be unknown which ones will be executed or not). for example, there may be several tests, out of which only one will be performed, depending on a future result. – the content of individual tasks (i.e. what the task will actually consist in  – this may follow only from other tasks). for example, a test may use various methods, depending on the result of another test. table  2. percentage of r&d projects where the achieved goal was the same/different as/from the planned one (kuchta et al., 2015) fields of science institution th e hu m an iti es a nd s oc ia l sc ie nc es ec on om ic s ci en ce s li fe s ci en ce s m ed ic al s ci en ce s m at he m at ic al , p hy si ca l, ch em ic al , a nd e ar th s ci en ce s te ch ni ca l s ci en ce s in st itu tio ns im pl em en tin g pu re r es ea rc h in st itu tio ns im pl em en tin g ap pl ie d re se ar ch an d ex pe ri m en ta l de ve lo pm en t another goal (%) 0.64 0.82 0.88 0.47 0.50 0.61 0.67 0.41 identical goal (%) 0.36 0.18 0.13 0.47 0.40 0.35 0.31 0.53 business, management and education, 2019, 17(2): 309–326 313 – the competences needed for the execution of a task (this may follow from the exact task content, which will be known only in the future); – the duration of the task (it may depend on various factors, but especially firmly on the content); – the number of times the task will be repeated (this may depend on the results of the task performance). for example, an experiment may be repeated as many times as it is necessary to verify or rejects a hypothesis. kuchta (2014) proposed a new description form for r&d tasks, in which the above lack of knowledge is clearly expressed. this form will be used in the following, but here fuzzy numbers will be applied (the description proposed in (kuchta, 2014) is purely linguistic). holzmüller-laue and göde (2011), dowling (2014), kuchta et al. (2017a), solak, clarke, johnson, and barnes (2010), and song, d.-h. lee, y.-g. lee, and chung (2007) point out to other uncertainty sources in r&d projects, which support the thesis that the uncertainty in r&d projects may be substantial. 2. uncertainty in r&d projects – research results within a research project (the project manager was the author of this paper) we interviewed 70 managers of r&d projects, implemented at polish or french universities. the in-depth interviews were based on an interview sheet. two questions in the sheet referred to the uncertainty in r&d projects: in one question the interviewees were asked about the features that, according to them, distinguish r&d projects from, e.g. engineering projects and in another one about the exactness/stability/certainty of the goals of their projects. 80% of interviewees indicated a substantially high degree of uncertainty at the moment of project defining. here are the most representative statements, together with the project domain (one statement may represent more projects, in case of similar statements a representative one was selected): – “there is high uncertainty in r&d project definition because it is unknown how big the actual sample used in experiments will be” (medicine, economy); – “an exact definition of the expected project product is impossible because it depends on the experiments’ results” (biology, telecommunication); – “project goals have to be formulated prudently, in a rather imprecise way, because it is unknown what the project will lead to or whether the formulated theses will be possible to verify” (biology, computer science, robotics, economy, archaeology, psychology); – “some research projects remind a wild goose chase, and their goal are extremely uncertain” (biology, robotics); – “it is common practice to have ready results before applying for a project; otherwise there would be a too high uncertainty as to the attainability of the goals which have to be stated precisely in the application forms” (economy); – “in r&d projects we verify a theoretical model in order to construct a fully new solution in practice; thus the uncertainty is high” (economy); – “r&d project goals cannot be formulated very precisely, because their attainment is achieved iteratively” (management); – “in humanities, it is impossible to foresee project outcomes in a precise way. a negative answer is also a valuable answer. in my project we formulated the goals with the lowest possible detail degree” (linguistics, philosophy); 314 d. kuchta. realistic planning of research and development projects – “the achievement of project goals in r&d projects depends strongly on hypotheses verification” (physics); – “research projects should only indicate new research directions and not necessarily lead to concrete products” (physics); – “in the imposed project duration (maximal 5 years) it is possible only to attain a very rough objective, to lay a foundation for further research, which should take 10–15 years” (archaeology). we can thus see that in the phase of r&d project definition in numerous cases, a lot of well-justified uncertainty exists. moreover, it has to be underlined that financing institutions which finance a substantial part of university-based projects require a great deal of certainty/ detail while applying for funding. let us use as an example the polish national science centre, whose form for project application is as follows: the information required in the form presented in table  3 is relatively precise; all the elements sp, wp and rm require an exact formulation of the project goals (objectives). on top of that, wp is based on an exact list of tasks to be performed, together with the necessary human and financial resources. rm needs the knowledge of all the methods which will be used in the project implementation. as the above considerations, presented in this and the previous section indicate, such a description is often not possible in r&d projects. in many r&d projects, it is unknown which objective will be ultimately pursued (e.g. in archaeological projects) and which methods will be used – requiring that applicants declare the objectives and the methods and tasks constitute in many cases an obstacle to innovativeness. in the above-cited research some interviewees told us they do not apply to funding agencies because they know that with the imposed maximal project duration (usually 3–5 years) they are not able to achieve with a reasonable probability any goal in a way that would be accepted by these agencies. a possibility to solve this problem would be to persuade research funding agencies to introduce new, more flexible formats to use in project applications. one proposal would be table 3. research project application form (national science center) form element notation form element name form element description rpo research project objectives research problem aimed to be solved by the applicant, project’s research hypotheses sp significance of the project state of the art, the justification for tackling specific scientific problems by the proposed project, pioneering nature of the project, the impact of the project results on the development of the research field, and scientific discipline wp work plan outline of the work plan, critical paths, state of preliminary and initial research indicating the feasibility of research objectives rm research methodology underlying scientific methodology, data reduction and treatment schemes, type and degree of access to the equipment to be used in the proposed research business, management and education, 2019, 17(2): 309–326 315 to allow the format of an agile project definition (kuchta, 2014; kuchta & skowron, 2017). another proposal would be to allow (and at the same time to force) the applicants to indicate explicitly the uncertainty degree of each element of the proposal, thus of the elements of table 3. here we would like to propose to use in project definition fuzzy sets. their idea will be described in the next section. 3. type 1 and 2 fuzzy numbers and sets – basic information fuzzy sets, introduced by zadeh (1965), are meant to express preferences or uncertainty. here their latter usage will be considered: uncertainty modelling and measurement. definition 1: a type 1 fuzzy set a is a couple ( ), aµaz , where az is a set of objects and aµ is a function (called membership function) defined on az with values in the interval [0,1]. value ( )a zµ for z ∈ az can be interpreted in various ways, among others, as the possibility of the occurrence of z . the higher ( )a zµ , the higher the possibility that element az ∈ z will occur. values ( )a zµ are given by experts. the core of a fuzzy set ( ), aµaz will be the element(s) of az with the highest membership function value. it will be denoted as ( )cor a . ( )cor a may be one element or a set of more elements. when it is obvious that it is one element, the symbol ( )cor a will be used as a number, in other cases as a set. a special case of type 1 fuzzy sets is fuzzy numbers. the following simplified definition will be assumed here: definition 2: a fuzzy number is a type 1 fuzzy set where a where az ⊆  (where  stands for the set of real numbers). in case of fuzzy numbers aµ may be a continuous function. usually, special types of fuzzy numbers are considered, especially triangular fuzzy numbers. in case of triangular fuzzy numbers the membership function has a triangular shape. a triangular fuzzy number can be defined as a triple ( )1 2 3, ,a a a , where 1 2 3, ,a a a are such real numbers that 1 2 3a a a< < . such a fuzzy number represents a quantity which – according to the knowledge or belief of the decision-maker in the very moment – will take on the value a2 with the possibility degree 1, values smaller than or equal a1 and greater than or equal a3 with the possibility degree 0, and the other values with the possibility degree between 0 and 1  – the smaller the possibility degree, the greater the distance from a2. this can be represented by the following figure 1. type 1 fuzzy sets, although they are widely used in decision modelling and management, have proven to be insufficient in some cases, for example when experts do not agree on the values of aµ . that is why type 2 fuzzy sets were introduced, which are a generalisation of type 1 fuzzy sets (mendel & john, 2014; mendel, 2015). definition 3 (kuchta, 2019a): a type 2 fuzzy set 2a is a couple ( ), aµaz , where az is a set of objects and aµ is a function defined on az with values in the set , where is the set of all fuzzy numbers. 316 d. kuchta. realistic planning of research and development projects the following example illustrates the difference between type 1 and 2 fuzzy sets: example 1: let az be the set of four (independent) project objectives: { }1 2 3 4, , ,o o o o=az . a type 1 fuzzy set a would be the couple ( ), aµaz , where aµ would model the degree to which, according to the experts, the attainment of the corresponding project objective is possible: ( )1 0,2a oµ = , ( )2 0,4a oµ = , ( )3 0,7a oµ = , ( )4 0,8.a oµ = the values of aµ are given by experts. these values mean that the experts feel that the attainment of o1 is nearly impossible  – the possibility degree is here close to 0, while the attainment of o4 is held as fairly possible, although not completely possible (the attainment degree is close to 1, but not equal 1). a type 2 fuzzy set would be used in this case if the experts were not ready to give concrete possibility values or if there were more experts who would not find a crisp consensus and they would prefer to give rough or fuzzy possibility degrees, like “about 0.2”. then we would deal with a type 2 fuzzy set 2a = ( ), aµaz , where for example we would have: ( ) ( )1 0,1, 0,2, 0,3a oµ = , ( ) ( )2 0,1, 0, 4, 0,6a oµ = , ( ) ( )3 0,5, 0,7, 0,9a oµ = a n d ( ) ( )4 0,8, 0,9, 1 a oµ = . we can see that in case type 2 fuzzy sets are used the possibility degrees of various objectives overlap each other, because the experts have specified, for each objective, a range of various degrees of attainment possibility with various degrees of truth. for example, for objective o3 the attainment degree whose truth degree is the highest is 0.7, but it is also possible (according to the experts) that the possible degree of the attainment of this objective will be higher or lower, within the range [0.5, 0.9]. it has to be underlined that when type 2 fuzzy sets are used, it may be impossible to rank he objectives according to their attainment possibility. this is due to the fact that fuzzy numbers ranking is generally not unequivocal (hanss, 2010). for example, we cannot say definitely (which was possible in case type 1 fuzzy sets were used) that the attainment posfigure 1. a triangular fuzzy number and its membership function p y g , g 2 p y 1 2 1 3 business, management and education, 2019, 17(2): 309–326 317 sibility of o2 is lower than that of o3. this reflects the complex nature of uncertainty we often face in reality. here we will use a special type of type 2 fuzzy sets, with possibility degrees being socalled fuzzy possibility degrees. definition 4: a type 1 fuzzy number a will be called a fuzzy possibility degree iff ⊆az [0,1]. in the following example, we present selected examples of fuzzy possibility degrees, based on korol (2012). example 2: let us consider the following fuzzy possibility degrees (their membership functions are presented in figure 2): vl = (0, 0, 0.25) – very low l = (0, 0.25, 0.5) – low m = (0.25, 0.5, 0.75) – middle h = (0.5, 0.75, 1) – high vh = (0.75, 1, 1) – very high. the fuzzy possibility degrees “very small”, “small”, “medium”, “high” and “very high” presented in figure 2 represent notions which are not crisp in human understanding. we can see here the overlapping mentioned above: value 0.875 is considered to be both high and very high to the degree 0.5. the fuzzy possibility degrees will be applied to the definition of the special type 2 fuzzy sets that will be used in the following part of the paper: definition 5: a type 2 linguistic fuzzy set 2a is a couple ( ), aµaz , where az is a set of objects and aµ is a function defined on az with values being fuzzy possibility degrees. example 3: let us return to example 1 and example 2. a type 2 linguistic fuzzy set would be the set of objectives { }1 2 3 4, , ,az o o o o= with attainment possibilities as follows: ( )1 smalla oµ = , ( )2 higha oµ = , ( )3 very smalla oµ = and ( )4 very higha oµ = . 0 0.2 0.4 0.6 0.8 1 1.2 very small small medium high very high figure 2. examples of fuzzy possibility degrees 318 d. kuchta. realistic planning of research and development projects fuzzy numbers can be manipulated like crisp numbers: they can be among others added to each other und multiplied with a crisp number (zadeh, 1965). we will use here the following definitions: definition 6: let ( ), and aµaz ( ), bµbz be two type 1 fuzzy numbers and s a crisp nonnegative number. then (zadeh, 1965) we define: a) ( ), as ⊗ µaz = ( ), sas µaz , where { }: such that and s x z x sz z= ∃ = ∈a az z and ( ) ( )sa asz zµ = µ ; b) ( ) ( ), ,a bµ ⊕ µa bz z will be defined as such ( ), cµcz that = +c a bz z z (i.e. { } : , , , , x y z y z x y z∃ ∈ ∈ = +a bz z ) and ( ) ( ) ( )( ), :max min , .c a by z x y zx y z= +µ = µ µ example 4: let us consider two fuzzy numbers  ( ) ( ) { } { }, and , , 3, 4 , 1,2 , the corresponding possibility values a b a bzµ µ = =a bz z z being (for az ) 0,2 and 0,3 and (for ) 0,1 and 0, 4. thenbz a) ( ) ( )3 , , ,a c⊗ µ = µa cz z where cz is composed of elements 9 (with the possibility degree 0,2) and 12 (with the possibility degree 0,3): b) ( ) ( ) ( ), , ,a b cµ ⊕ µ = µa b cz z z , where cz is composed of the elements 4 (with the possibility degree 0.1), 5 (with the possibility degree 0.2) and 6 (with the possibility degree 0.3). let us now pass on to the main proposal of this paper. 4. application of type 1 and type 2 fuzzy sets to r&d project definition 4.1. general concept the general concept we propose (sketched by kuchta, 2019b) would be to allow type 1 and type 2 fuzzy sets to describe various attributes of r&d project goals and tasks. as the above research indicates, the uncertainty inherent in r&d projects is so high that in many cases it is impossible to state that a specific goal will be achieved or a task will be performed and how. we think it is better not to force applicants for r&d research support to create fiction, but it would be better to allow them to apply for clearly uncertain projects, with unknown outcomes or even unknown methods and tasks. in our opinion it is a unique way to encourage researchers with exciting or even groundbreaking ideas to apply for research support, which would make it possible for them to give a try to their cutting-edge ideas. type 1 and type 2 fuzzy sets, especially linguistic type 2 fuzzy sets, should be used to describe the elements of table  3. here we will assume linguistic type 2 fuzzy sets, but the other types of fuzzy sets would also be possible. the first requirement is that the financing of r&d projects will not be definitely decided in the moment of project application. the financing decision for r&d projects should be stepwise, taken only preliminarily at the beginning and adjusted in the course of project execution (this includes the possibility of breaking the project). thus, the financing institution should define, for each project p, moments in time ( )1 0pt t= = , … pjt ,…, ptt , where t= 1 pt = 0 is the moment of project application and ptt is a moment where no more changes in the project financing will be possible, in which project budget will be reconsidered. pt will stand for the financial resources assigned to project p in the moment t. business, management and education, 2019, 17(2): 309–326 319 the project forms at the moment t = 0 should contain the following elements (apart from the (obviously always required) text description sp): – rpo  – set of projects objectives, expressed preferably as a linguistic type 2 fuzzy set ( ), pµpz , where pz is the set of potential objectives of the project in question (denoted as p) ( { }1 , , , , )pp p pi no o o= … …pz and pµ expresses in linguistic terms the possibility (assessed in moment t  = 0, being the moment of presenting the project application) of the objective attainment; – wp – composed of the set { }1 , , , , pp p pi mt t t= … …pt of potential project tasks, given as a linguistic type 2 fuzzy set ( ), tpµpt , where tpµ represents in linguistic terms the possibility degree (assessed in moment t = 0) that the respective task will be performed and for each task pit , 1, , pi m= … , the following linguistic type 2 fuzzy sets: ( ), idpµpic , where { },,1 , ,, , , , i pp p pi i j i mcc c c= … …pic is the set of possible con tents (expressed as text passages) of the respective tasks and icpµ expresses (in linguistic terms) the possibility degree (assessed in moment t = 0) that the task will have the respective content. ( ), idpµpid , where { },,1 , ,, , , , i pp p pi i j i mdd d d= … …  pid is the set of possible times (expressed as fuzzy numbers) needed to perform the respective tasks and idpµ expresses (in linguistic terms) the possibility degree (assessed in moment t = 0) that the task takes the respective time. here, like in the next item, the objects for which a fuzzy possibility degree is defined are fuzzy numbers; ( ), ibpµpib , where { },,1 , ,, , , , i pp p pi i j i mbb b b= … …  pib is the set of possible financial resources quantities needed to perform the respective tasks, expressed as fuzzy numbers and i bpµ expresses (in linguistic terms) the possibility degree (assessed in moment t = 0) that the task cost will be equal to the very value; ( ), irpµpir , where { },,1 , ,, , , , i pp p pi i j i mrr r r= … …pir is the set of possible teams that will be needed to perform the respective tasks and ibpµ express (in linguistic terms) the possibility degree (assessed in moment t = 0) that the task in question will need the very team; ( ), impµpim , where { },,1 , ,, , , , i pp p pi i j i mmm m m= … …pim is the set of possible methods that will be needed to perform the respective tasks and ibpµ express (in linguistic terms) the possibility degree (assessed in moment t  = 0) that the task in question will need the respective methods; the estimated moment of task start expressed as an interval ( )1, , 1, , 1p pj jt t j t+ = … − . the dependencies between the sets ( ), idpµpic , ( ) ( ), , ,i idp bpµ µ p pi id b , ( ) , irpµpir , ( ) , impµpim should be explained as far as known. typically, the task financial needs are a function of task content, duration, project resources and methods used; also the project duration may be a function of the other elements. the decision (in moment t = 0) whether the project should be accepted for financing should be made mainly based on the attractiveness of the objectives { }1 , , , , pp p pp i nz o o o= … … , independently of their attainment possibilities (in order not to block projects with highly attractive, but somewhat risky  – in terms of attainment  – objectives) and on the estimated 320 d. kuchta. realistic planning of research and development projects budget of project p. the budget in moment t  = 0 will be highly imprecise, because of the numerous uncertainties, but its average value can be approximated, for example as follows: definition 7: let us use definition 6. a) for the i-th task we calculate an estimation of the needed budget as ( ) ( )( ) , , , 1 i pmb p i p p i j bp i j j b i b cor b = = ⊕ µ∑   . ( )b i would be a fuzzy number; b) for the whole project estimation of the needed budget pb would be another fuzzy number, defined in the following way: ( ) ( )( )1 1 pm p p p tp i b b i cor t = = ⊗ µ∑   . however, the actual transfer of fonds should regard only those tasks for which the projected starting time is in the interval ( )1 2, . p pt t the concrete amounts can be negotiated, in case of doubts it may me equal to  ( )( ){ }: pmax x x cor b i∈  . before each moment pjt the information listed above has to be updated and another transfer, for the tasks to be started in the following interval ( )1,p pj jt t + , corrected by the information of the financial means remaining form the hitherto project execution, should be transferred. if in any moment the project manager feels the most attractive project goals cannot be attained, a breakup of the project should be considered, in order to free the financial means for other potentially attractive projects. 4.2. case studies we will here use two real-world r&d projects where the author of the paper held the role of project manager. the first project belonged to the domain of management and regarded the development of a costing system for a polish university (called here university x) which would serve as a basis for the development of a costing system for other polish universities. it has to be underlined that costing methods presently used at most universities do not deliver reliable managerial information. the complexity of processes existing today at universities has made the traditional costing methods inadequate. the costing methods which do deliver reliable managerial information are generally very difficult to implement in the university context (cropper & cook, 2000). on the whole, it can be said that the project was almost a failure. in our opinion, this is partial since its objectives, tasks and methods had to be described in detail before the project start, although the team writing the proposal had no access to data or financial services of the university. this access was promised (by the university management) to be granted once the funding is given and the project is started. furthermore, it was only once the project started that the actual attitudes of numerous stakeholders and above all the actual state of available data became known. in table 4 we present the objectives of the project as they were described in the application for funding. business, management and education, 2019, 17(2): 309–326 321 table 4. research project application form for the case study project objective project objective description o1 the project will lead to a model of cost calculation for universities and its pilot implementation in a selected area of university x. o2 the project will lead to a costing system concept which will constitute a direct input to a computer implementation of a professional university costing system. o3 the project will indicate methods of cost of research and teaching processes at universities – which will deliver information useful for university managers o4 the project will deliver, for university x, true cost of individual students, specialisations, classes, faculties and of other units whose cost should be known to university managers. o5 the project will lead to a detailed requirement specification for a costing system for polish universities. objective o1 was achieved only partially: a model was elaborated, but the implementation was rudimentary. this was due to the fact the accounting department and its employees were not interested in the implementation and they did not cooperate. also objective o2 was realised only partially, because, due to the resistance of the employees, but also to the lack of order in the existing data, it was impossible to get acquainted with the present university costing system and its nuances or disadvantages. for the same reason the realisation of the objective o3 was limited to theoretical considerations. objective o4 was hardly achieved at all, because the respective information about the organisation of the university was not available. the same can be said about objective o5. also, the planned research tasks partially could not be implemented and not all research methods (like interviews, case study) were able to be applied. most of the negative phenomena described above were foreseen in the risk analysis conducted before the project start. however, it was not possible to integrate the risk (or uncertainty) analysis with project objectives, to indicate to the reviewers of the application that individual project objectives from the beginning were linked to a high uncertainty (the possibility of attaining the individual objectives would have been estimated in the range [0.2, 0.5]), but that despite this it was still essential to give it the project a try. it is true that the final outcome of the project can be seen as an almost failure and it is only thanks to the indulgence of the evaluators of the final report that the project was accepted. on the other hand, even if the project can be seen as a failure in the present form of its description (the one with objectives formulated like in table  4, without any reference to uncertainty), the project manager and the project team do not see it as a complete failure: it allowed us to gain a deeper understanding of university administration mentality and it gave rise to other management projects we applied or are applying for. a project which followed directly from the project described here, for which we were given the funding and which finished with substantial success, was a project about success factors of r&d projects at universities. it is only having understood these success factors that is possible to implement an innovative r&d project regarding university management with success. without the almost failed project we would not have understood that and we would not have applied for the other project, whose success and whose outcomes constitute for us a huge source of new research ideas. 322 d. kuchta. realistic planning of research and development projects here we will present (post factum, attempting to recall the state of our knowledge from the moment before the projects start), the application form we think it would have been desirable to have in reality, in order to prepare a realistic project plan and to optimise the financial resources usage at the background of project objectives. table 5. proposed rpo for the case study in the form of a linguistic type 2 fuzzy set project task possibility degree of attainment justification o1 high the project team has the knowledge of numerous costing models and is composed of persons employed at the university in question, who will have access to the necessary data. o2 middle the team may have limited access to other universities and may thus have too little knowledge to create a general concept. o3 high the project team is knowledgeable about various costing methods. o4 high the project team will have access to the data from their university and has the necessary knowledge of their university functioning. o5 middle like for o2 as can be seen from table 5, we were aware of the fact that some objectives were not very probable to be attained. furthermore, still, they were in our opinion attractive from the point of view of the theory and practice of university cost management, especially those whose attainment was assessed as low. thus, we think it was necessary to attempt to implement the project, even if today we know that this attempt was not successful. let us now pass to the project tasks. below we present their original list, from the project application form. in that form, the tasks names together with the number and scientific title of the required resources, the quantity of required financial resources and the realisation starting and ending moment had to be given. table 6. the original list for the case study project tasks project task description t1 preparation phase, identification of necessary data and contact persons. t2 analysis of the functioning of the university, of its organisational structure, of the current costing system. definition of potential data sources. t3 elaboration of the model concept, definition of basic model elements, including cost object structure, processes/activities to be costed, cost drivers, resources drivers, variability drivers. construction of a conceptual model of cost flow. validation of the assumed concept. t4 analysis of the computer environment. analysis of the current state of the computerisation of polish universities. definition of requirements concerning the computer environment. review of the existing software fulfilling the defined requirements. recommendations and a development plan for a university computer environment in the context of cost management. t5 implementation of the elaborated model on the example of one area of the university. selection of the area and preparation of the implementation. adaptation of the model to the selected area. implementation in a selected computer environment. business, management and education, 2019, 17(2): 309–326 323 in our opinion these tasks should have been described more thoroughly, using the proposal from section 4.1. let us illustrate the idea of this approach, not recurring to the formalism defined in section 4.1. let us start with the task t3 from table 6. – task content: the content of the task might have been a simple model (possibility degree small), a fairly difficult model (possibility degree high) and a very complicated model, too complicated for the project team to accomplish (possibility degree very low); – methods used: for a simple and a fairly complicated model basic text editing systems would have been sufficient, for a very complicated model computer-aided design software would have been necessary; – resources needed: for the complicated system special computer and design competences would have been needed. let us now consider task t4 from table 6. this task might have a content easy to manage for the project team (possibility degree very small), possible to manage for the project team (possibility degree very high) and impossible to manage for the project team (possibility degree small). according to the option, less or more persons would have to be involved, and less or more direct visits at other universities or online contacts would have been necessary, as for project task t5, in the moment of application for project funds, several content scenarios were possible, with various possibility degrees. the selected area might have been a department, a faculty or a smaller team, each of them representing various disciplines and thus requiring various competences. the highest possible degree would have been assigned to the departments represented by the members of the project team. it has to be underlined that with the project implementation our initial views on the project objectives and task were changing profoundly. we saw that many assumptions were not fulfilled, many university units and data sources were not available and that each time to most complicated version was the true one. thus, already 2–3 months after the project start we would have been happy to limit the project and its financing and transfer the financial and human resources to other projects. unfortunately, because of the rigid system of project financing we had to continue the project whose most attractive objectives had turned out to be practically unattainable. the second project’s basic objective was to find the way the researchers define research and development project success and to identify the main r&d projects success factors. here, in the moment of preparing the project application, the uncertainty consisted mainly in: – not knowing how many researchers would consent to participate wholeheartedly in the interviews and/or questionnaires; – not knowing which length of interviews and questionnaires would be acceptable; – not knowing whether the best – according to our opinion – research method for the project, workshops simulating and assessing the course of a real project would be able to apply at least once (it was not); – not knowing whether it would be possible to differentiate the research tools depending on project and research organisation types. it has to be underlined that initial promises and declarations from many potential research participants in many cases turned out to be vain or the responses were given without the necessary reflection. the reason was usually the lack of time, of conviction that the project makes sense or of understanding of management approach to projects. all this was 324 d. kuchta. realistic planning of research and development projects becoming clear during the project course, and a more flexible financing and control system would have allowed limiting the cost of the project without deteriorating the main results. conclusions  we propose here a new approach to r&d project definition, which in our opinion should be used in grant application by r&d supporting agencies. r&d activities should open entirely new ways and territories, and this is not possible without a high level of uncertainty. this uncertainty should be revealed openly in grant applications, should be justified and measured. this truth is supported in the paper by statements of r&d projects managers who often feel a discrepancy between the nature of the projects they should or want to implement and the application forms they have to fill in in order to apply for funding. in numerous cases this discrepancy leads to frustration because it makes it more and more challenging to obtain funding for groundbreaking research ideas. here we propose the utilisation of fuzzy sets for the description and quantification of uncertainty. each application for r&d project funding could then be measured for its uncertainty, which should be compared with the originality and innovativeness of the research proposal. fuzzy sets, both those of type 1 and type 2, might be helpful to attain this objective. it would be necessary to combine the proposed approach with the iterative or agile approach (kuchta, l’ebraly, & marchwicka, 2017b). it is not following the nature of r&d projects that the initial proposal is not systematically updated. the updating procedure should also concern the fuzzy evaluations of uncertainty. in most projects, the uncertainty will diminish as the project continues, but in some r&d projects it may increase, according to the rule “the more i know, the less i understand”. in this paper, two case studies were deeper analysed. they were r&d projects in which the initial goals were hardly or weakly attained – in one of the projects the final project report was on the verge of being rejected. this was due to the high uncertainty inherent in this project, which unfortunately materialised during project implementation. moreover, still the project manager and the project team feel that this project attained other objectives; above all it gave the project team a deeper understanding of certain phenomena. furthermore, it is thanks to this deeper understanding that new r&d projects arose and were implemented, this time with success. however, we feel that it would have been more advantageous to be more flexible and limit the projects, which would have allowed assigning financial means to other exciting projects. naturally, further research, above all further case studies and research on uncertainty modelling employing fuzzy sets in the context of r&d projects are needed in order to elaborate proposals which could be implemented in the practice of r&d projects calls. notably, the proposal presented in this paper has to be added more structure. dependencies between individual type 2 fuzzy sets used in the project description, mentioned in the present paper, are usually very strong, and they should be modelled formally, using a kind of networks. they still need to be designed. also, depending on the project, there may be many more elements that have to be taken into account in the project description (e.g. the number of task repetitions, the learning and experience factor, the problem of competences description business, management and education, 2019, 17(2): 309–326 325 and assessment, etc.). type 1 and type 2 fuzzy sets also have their extensive theory (including the ranking and comparing procedures, the operations of average, similarity) etc, which could also be used, remembering at the same time that the resulting system should not be too formal, as it has to be used in the practice of calls for research and development projects. acknowledgements the interviews were conducted by kuchta d., betta j., jastrzębska j., frączkowski k., gładysz b., prałat e., marchwicka e., rola p., walecka-jankowska k., ropuszyńska-surma e., skomra a., ryńca r., klaus-rosińska a. & mrzygłocka-chojnacka j. funding  this work was supported by the national science center (poland), under grant 394311: “selected methods supporting project management, taking into consideration various stakeholder groups and using type-2 fuzzy numbers”. disclosure statement  i do not have any competing financial, professional, or personal interests from other parties. references  cropper, p., & cook, r. 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(1965). fuzzy sets. information and control, 8(3), 338-353. https://doi.org/10.1111/radm.12158 https://doi.org/10.1007/978-3-319-62386-3_11 https://doi.org/10.1111/radm.12112 https://dona.pwr.edu.pl/szukaj/default.aspx?nrewid=285825 https://doi.org/10.1007/s00287-015-0927-4 https://doi.org/10.1109/91.995115 https://doi.org/10.1287/mnsc.47.3.394.9772 https://doi.org/10.1016/j.ejor.2010.04.032 https://doi.org/10.1016/j.jengtecman.2007.05.001 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 1: 180–197 https://doi.org/10.3846/bmee.2021.14653 *corresponding author. e-mail: milena.medineckiene@vilniustech.lt building information modelling: procurement procedure vladimir popov , milena medineckienė *, tatjana grigorjeva , arūnas remigijus zabulėnas vilnius gediminas technical university, vilnius, lithuania received 26 march 2021; accepted 20 april 2021 abstract. traditional construction planning is being replaced by the building information modelling (bim) approach, which seeks to digitalise all the construction procedures, including procurement. successful implementation of bim on the market requires the preparation of appropriate procurement documents. purpose  – to suggest the most suitable set of documents for public procurement in the context of bim by analysing the documents that are necessary for implementing the stages of the building life cycle. research methodology – in order to achieve the aim of the research, the in-depth analysis of different countries’ procurement methodological documents and analysis of the scientific articles have been implemented. the methodology also includes expert interviewing, which was done in order to analyse the investigated standards. findings – after analysing the procurement procedures of norway, spain, france, poland, the united kingdom, the netherlands, and finland, a set of documents, including employer’s information requirements (eir), bim execution plan (bep) and bim protocol, was considered as the most suitable for bim-based procurement processes. in addition, the basic principles of iso 19650-2:2018 do not reflect the specific conditions of each country, so it is appropriate to examine the possibility of providing guidance in individual national annexes that reflects the peculiarities of national procurement. research limitations – some research limitations were related to the challenges to access the literature, particularly the regulatory documentation associated with the public procurement procedure in a singular country. also, the difficulties with and accessing the document in the english language. however, in most of these cases, the document overview was analysed or translated from the native language. originality/value  – existing related studies are mainly oriented on a particular region/country, and no general overview of european countries regarding bim procurement procedures has been implemented. additionally, a significant scientific contribution of this research is the review of the fundamental standards, which includes the general specification for information management in construction projects using bim. implemented analysis can serve as a basis for other authors to implement their research concerning their region, to suggest the most appropriate and suitable set of documents. https://doi.org/10.3846/bmee.2021.14653 https://orcid.org/0000-0003-4884-9313 https://orcid.org/0000-0002-2919-115x https://orcid.org/0000-0002-4574-2185 https://orcid.org/0000-0003-3347-9874 business, management and economics engineering, 2021, 19(1): 180–197 181 practical implications  – this study contributes to the preparation of the lithuanian market for the implementation of bim and could help policy-makers to prepare the most appropriate procurement documents. keywords: building information modelling (bim), bim standards, employer’s information requirements (eir), bim execution plan (bep), public procurement. jel classification: o3, r3. introduction europe is about to adopt building information modelling bim for public contracting, as was promoted by the european union public procurement directive (maltese et al., 2017). hence, bim is being analysed by different governments and public procurers as it has been treated as a “strategic enabler for cost, quality and policy goals” (osello et al., 2019). there are scholars who investigate global transformation to digitise public procurement procedures, including bim procurement (ermolli & de toro, 2017; vornicu, 2019). other scholars examine the methods of public procurement (bergmann & schenkel, 2018; porwal & hewage, 2013). however, a limited number of scientific studies analyse the public procurement documents with a clear pathway towards the bim approach. it is noteworthy that bim is a relatively new concept; hence, there are not many countries that have already implemented bim, and the most significant ones are european countries. for instance, austria, the netherlands, the united kingdom prepared bim or digital modelling standards (austrian standards, 2015; kosandiak & philip, 2018; ministerie van binnenlandse zaken en koninkrijksrelaties, 2012). other countries, such as france, ireland, portugal, developed roadmaps for a transition to bim (european construction sector observatory, 2017; national bim council, 2017). there are countries where bim is already mandatory. for example, in spain, bim is mandatory for public building tenders (ineria management, 2019). moreover, many countries are about to make bim mandatory in the nearest future. for instance, in germany, bim became compulsory by the end of 2020 for all transportation projects (cobuilder, 2016). lithuania is not an exception. the application of bim methods will be mandatory in the design, construction and installation of public sector buildings and mobile facilities (electricity networks, gas pipelines, communication lines, cables and their duct systems). the first phase of digitisation started from 2021 january 1 (the ministry of the republic of lithuania, 2020). however, in lithuania, a clear bim public procurement procedure is not defined yet, and the necessary documents are not prepared. hence, the current study aims at making a review of the procurement procedures, white papers and other related documents of the countries that have already adopted bim and identify the most appropriate procurement documents for the lithuanian market. 1. review of procurement documents of european countries using bim public procurement plays an essential role in stimulating the broader use of bim, as well as renewing innovation and sustainable growth, involving small and medium-sized enterprises (smes), and spending taxpayers’ money more cost-effectively. public procurers are the main 182 v. popov et al. building information modelling: procurement procedure drivers of change, with the public sector being the largest single customer in the construction industry. this non-competitive, transparent and non-discriminatory group of principals can invest public funds and ensure higher value for taxpayers and stimulate the market through public procurement (eubim, 2017). below is provided with an in-depth analysis of several european countries, which actively started or already implemented the procurement methodological documents for bim. the main idea of the analysis was to identify the most appropriate methodology for the lithuanian market. norway. in 2017, new public procurement laws and regulations came into force in norway based on the european union public procurement directives 2014/23/eu, 2014/24/eu, 2014/25/eu (the european parliament and the council of the european union, 2014a, 2014b, 2014c) as norway is a part of the european economic area (eea). the aforementioned directives were incorporated into national legislation, which is aligned with the existing eu legislation. one crucial point to be taken into consideration is article 22(4) of directive 2014/24/eu: “member states may require the use of specific electronic tools, such as of building information electronic modelling tools…”. in such cases, the contracting authorities shall offer alternative means of access […] until those tools become generally available […]” (the european parliament and the council of the european union, 2014b). according to international comparative legal guides [iclg] (2020), public procurement in norway is governed by the public procurement act and related legislation: the public procurement regulation for the public sector and utility regulation; defence and security regulation. in addition, regulation on concessions was adopted based on directive 2014/23/eu (iclg, 2020). in norway, two standard contracts are used (iclg, 2019; standards norway, 2011, 2018): i) ns 8405:2008 norwegian building and civil engineering contract; ii) ns 8407:2011 general conditions of contract for design and build contracts. bim is not covered by public procurement law, but there is a bim statsbyyg manual for public procurement (statsbygg, 2013). that is, the preparation of all tender documents should follow the bim requirements as outlined in statsbyyg building information modelling manual, which describes the bim concept for visualisation, area size measurement, and energy performance analysis. united kingdom (uk). according to the uk bim program (isikdag et  al., 2012), one of the most important decisions taken was the recognition that in order to change the industry, the first and foremost step that is required is to change project requirements. standards frameworks alone were not sufficient to promote the restructuration of the entire sector. proper actions for communication helped establish the necessary contacts with the industry, but the primary strategic tool has been public procurement according to the uk bim program. in 2011, under the framework of the uk bim program announcement was made that from 2016 all public construction projects funded by the central government would require the use of bim. between 2012 and 2015, the value of publicly funded projects that meet the bim maturity level 2 requirements has increased significantly from around 100 million gbp to over 9 billion gbp (eubim, 2017). this gradual increase in the number of public projects requiring bim maturity level 2 was necessary to increase the supply chain’s capacity and the public sector customers. the next step was for bim public procurement business, management and economics engineering, 2021, 19(1): 180–197 183 guidelines’ development and training within the united kingdom bim work group, public sector contracting organisations, and industry. the continuous and increasing use of public procurement has been a useful tool in driving a change in industry behaviour to bring out the digital transformation. there was no minimum threshold for the size of projects for which bim requirements would apply and, as believed, helped promote smes’ participation and the sector as a whole. a wide variety of assets were used in the early stages to ensure that learning activities could cover the entire built environment (eubim, 2017). the uk department of justice uses the two-stage open book as a critical strategic procurement document (cabinet office, 2012). the two-stage open book defines a so-called two-stage approach that combines the client, consultant, cost adviser, contractor and core supply chain into one team with the common goal of delivering the best possible product for the best budget (mosey, 2014). the client provides a brief estimate of costs and invites the suppliers to the tender and bidding process according to the framework contract. in the first phase, several contractor teams compete for a contract. teams are selected based on their ability, competencies, financial stability, experience and financial capacity. in the second phase, the chosen team develops an open book proposal that meets the customer’s requirements and costs. this process involves independent peer review to check essential aspects, such as whether the scope of work is well defined or the risks of the results are presented. (udom, 2012). if improvements are necessary, the principal and contractor are asked to review the submitted bids (udom, 2012). the main objective of this model should be to further reduce the costs of contractors for the bidding (procurement) phase (cabinet office, 2012). this saves costs and fosters efficiency before construction begins. other relevant bim documents are government soft landings and project bank accounts (ministry of justice of the uk, 2014). project bank accounts are also part of the government construction strategy and discuss a new way of paying for supply chain members. below is an example of bim procurement based on a two-stage open book. first, the project team develops a bim model from existing 2d documents for the purpose of the competition (bim task group, 2013). tenderers are invited to a bim planned procurement seminar, usually in the ministry of justice, to familiarise themselves with the tender process (bim task group, 2013). during the competition, the client assists the bidders, for example, by extracting construction operations building information exchange and finally asks for his initial model proposal (bim task group, 2013). the principal then selects the main contractor and signs the project partner agreement. finally, the price is agreed upon, and a contract is signed (ministry of justice of the uk, 2014). based on the uk analysis, it was found that the most commonly used bim procurement documents are: employer’s information requirements (eir); bim project execution plan; bim protocol (annex to the contract) and other documents. more details about it in the section about standards. denmark. denmark is considered to be one of the leaders among eu countries in terms of implementing bim as bim requirements are put in public procurement law since 2007 (european commission, 2019). according to the public procurement act, the danish government adopted a regulation (1365), which was approved in 2007 (supplemented by the ict (information and communication technologies) regulation 1381 in 2011 and the ict 184 v. popov et al. building information modelling: procurement procedure regulations 118 and 119 in 2013). these regulations aim to promote the integration of ict into the construction sector, thus increasing its productivity. in practice, the use of bim in public sector renovation projects has been mandatory since 2008 january 1, and in statesupported social housing projects  – from 2009 january 1 since 2011 june the danish parliament has extended the necessary use of bim to all local and regional projects with an investment amount of more than € 2.7 million. and a lower threshold of € 677000 was set for public projects (hore et al., 2017). since 2013 in april, bim has been mandatory in the implementation of national, regional, municipal projects, including projects related to social housing (byggeri informationsteknologi produktivitet samarbejde [bips], 2014). the danish government has involved academia and industry in the drafting of regulations through consultations and pilot projects. this has helped to ensure that bim requirements are relevant and applicable to the industry, which can play a vital role in the implementation of bim (mcauley et al., 2016). spain. spain has a bim commission, supported by the ministry of public works, for bim industry, which are applied to buildings from 2018, and for infrastructure from 2019. the country report spain for european commission about the environmental implementation (2019) (european commission, 2019) states that in 2008 the national action plan for green public procurement was adopted, with a target of 25–100% of green public procurement (gpp), depending on the product group and the implementation phase. green procurement criteria have been developed at the national level for the following product groups: construction and maintenance, energy, transport, office equipment, paper and publications, furniture, cleaning products and services, and events. on the 7th of december, 2018, the council of ministers approved the government’s second green public procurement (gpp) national action plan 2019–2025 (office of prime minister, 2011). the plan includes 20 products, works, and service groups, including building construction and management, road construction and maintenance, electricity supply, printing equipment and computers, cleaning products and services, air conditioning systems and transportation. france. the french government has taken a different path, suggesting the optional 2015 plan for the digital switchover in the construction industry (hereinafter referred to as the plan). by not imposing a “bim” requirement in their public procurement law, the french government sought to ensure that small and medium-sized enterprises (smes) (with limited access to bim) did not hinder access to public procurement (architecs.org, 2018). the plan aims to promote bim as a useful construction sector measure for sustainability and limit construction costs. in this way contributing to the needs of the construction industry to build and renovate cheaper and faster. the plan includes a 20 million eur budget from the building insurance compensation fund (“fonds de compensation de l’asurance construction”) (rakennustieto, 2001), which led to its implementation. this plan was drawn up for three years and applied to all construction companies operating in france (european commission, 2019). poland. the polish government has taken a binding but flexible approach to implementing bim. in 2016 an amendment to the public procurement law had been announced, stating that “the contracting authority may require the use of electronic data modelling tools or similar tools when awarding construction contracts. in that case, the project owner must business, management and economics engineering, 2021, 19(1): 180–197 185 allow the use of such tools until such tools become publicly available” (rics, 2018). therefore, the polish government, unlike the danish government, does not systematically require bim. since the announcement of the amendment, the polish government (including its agencies) has announced few tenders related to bim. in 2017 the polish national highway agency (the generalna dyrekcja dróg krajowych i autostrad gddkia) launched the pilot projects requiring the use of bim for the development of the zatory bypass on the national roads dk28 and dk44. the polish state railways (polskie koleje państwowe pkp) also actively consults with the industry on the use of bim in national railway infrastructure (europtima, 2018). the netherlands. the dutch public procurement law focuses on large contracting entities working with bim. these institutions use bim as an asset management and maintenance tool, so their bim requirements are different from those used as a design tool or collaboration tool. these contracting authorities use employer’s information requirements (eirs) to provide their bim requirements, specifying what data they need, how they want it, and when. other large dutch employers who work with bim are usually hospitals and schools. however, whether those hospitals and schools are required to comply with the procurement act depends on whether they are contracting authorities within the meaning of the directive (the european parliament and the council of the european union, 2014b). most schools in the netherlands are considered to be contracting authorities within the definition of the procurement act and the procurement directive (lexology, n.d.). however, if the authorities are not considered to be a contracting authority within the definition of the directive, in some cases, they use forms known as “private” procurement by the dutch. in such cases, the procurement documents, as well as the principles and rules set out in those specifications, will determine whether the rules of the public procurement directives and the law on procurement will apply. an example of a private purchase with a bim component can be found in the dutch case “rechtbank zeeland west brabant” (bruggeman, 2018a, 2018b, 2019; de rechtspraak, 2016). finland. almost all construction contracts in finland are based on the general conditions for building contracts (korpiola & sipilae, 1998), and the consultancy contracts are based on the general conditions for consulting kse 2013 (holmberg, 2014). the most commonly used purchasing methods for building construction are the following (halonen & kovarskyte, 2017): fixed price contract; complete turnkey contract; project management contract with a guaranteed maximum price. the most common form of contracting and purchasing is the contract between the client and the general contractor for the work. a general contractor usually invites a variety of subcontractors. it is also widespread to use split contracts. under them, the client employs several contractors under separate contracts. divided contract structures can also be combined under the supervision of a prime contractor by subordinating contracts in cases where the construction work is split into two or more simultaneous contracts (for example, prime contractor and subordinate air conditioning contractor). subordination means an arrangement whereby the client delegates tasks related to joint management, site and schedule management to a prime contractor under a three-party subordination agreement. 186 v. popov et al. building information modelling: procurement procedure in addition, the following contracts and models are used in finland in the context of bim (bolpagni, 2013; halonen & kovarskyte, 2017; lahdenperä, 2012; petäjäniemi & lahdenperä, 2012): – integrated project delivery (ipd) or alliance contracts are a relatively new and rapidly growing trend in major projects. the alliancing (pa) project, also known as “alliance contracting”, is a contract based on a “multilateral” agreement between the project partners with parties taking joint responsibility for design and construction, and the works are implemented through so-called a “joint organisation”, with all parties taking responsibility for both positive and negative risks. – engineer procure construct (epc) or engineer procure construction management (epcm) contracts are commonly used in industrial construction projects. – in the energy sector, a very specific “mankala” company model is commonly used. the mankala model is a special cost model where an energy-generating company is jointly owned by several parent companies, which share together the operating costs of the subsidiary proportionally. the subsidiary then sells the generated heat and electricity to its shareholders on a non-profit basis. contractual arrangements. the building information foundation (rts) of finland is a private non-profit foundation dedicated to promoting proper planning, sound construction methods, and good asset management practices (rakennustieto, 2001). the fund’s projects, which become profitable independent businesses, are transferred to its parent company  – building information ltd, which also operates as a publishing house. together, the foundation and the company form construction information group. the building information group provides contract templates that are principally used in construction and design work. the templates are based and commonly used in conjunction with the widely used finnish general terms of construction contracts (yse 1998) (korpiola & sipilae, 1998). these terms and conditions of the yse 1998 are drawn up in cooperation with most of the central finnish building societies and are annexed to most finnish building contracts. they are also applied in the field of design, where the finnish general terms of consultation (kse 1995) (holmberg, 2014) are equivalent to the general terms of yse 1998. international projects often use standard forms developed by the international federation of consulting engineers (fidic). local and international projects use standard finnish contract forms published by the building information group as well as the general terms and conditions of yse 1998 and kse 1995 (jaeger & hök, 2010). fidic contract forms are generally used only in cases where the project is partly or totally outside finland or in the case of an energy sector construction project in finland. despite the fact, that bim is accepted or about to be accepted in different countries, it should be remembered that there are not only advantages but also disadvantages that need to be addressed. the table of advantages and disadvantages of bim is presented below (see table 1). an analysis of other european countries’ procurement guidance documents shows that not all countries that implement bim have standard legal documents that allow them to meet maturity level 2 requirements. still, the vast majority have bim procurement guidelines in place. an absolute majority of the examined countries use a standard contract, which is usually accompanied by an annexe with eirs drawn up. by imposing the level of maturity business, management and economics engineering, 2021, 19(1): 180–197 187 requirements defined in legal documents, the lithuanian market could be subject to a standard contract with an annexe specifying the eir, as is the case in many other foreign countries. the reviewed countries, in terms of guidance on bim, use the same duplicate documents and their elements (eir, bep, bim protocol, bim maturity levels). 2. bim information management in the procurement stage according to the specification pas 1192-2:2013 in may 2011, the uk government developed a strategy for the digital transformation of the construction sector, which aimed to reduce the cost of public sector assets by 20% by 2016. the strategy calls for “a fundamental change in the relationship between public institutions and the construction sector so that government transactions are always good and the country receives the long-term socio-economic infrastructure it needs” (uk government, 2011). the development of harmonised design and construction information is a time-based process, independent from the form of the used procurement procedure. each task needs to be performed in a certain order to the benefit of all parties involved. this is also called “collaborative work”. in a collaborative work environment, teams are asked to provide information using standardised processes and agreed on standards and methods to ensure uniform format and quality of information, and the information can be used and reused without modification or interpretation. that is the purpose of the document pas 1192-2:2013 (the british standards institution, 2013), which provides specific guidance on information management requirements for projects using bim. the requirements in pas 1192-2:2013 start from the technical specification table  1. bim advantages and disadvantages (source: reizgevičius, 2016; sotham engineering, n.d.; eastman et al., 2011; bolpagni, 2013; li et al., 2020, added by authors) bim advantages bim disadvantages – better planning; – 3d modelling visual capabilities for better decision making; – increased complexity of design for better quality and proneness of decisions; – clash detection; – better project change/addition management; – less risk for the errors; – free software for partners; – reduced resulting time on design and construction; – reduced resulting cost for design and construction; – resources saving on design and construction; – reduced expenditure on energy use; – sustainable design and construction; – the end-user receives all the information by the end of the project life cycle; – improved building performance. – significant investment in the initial bim system, including implementation costs; – lack of trust and cooperation; – customer non-involvement in all design processes; – no explicit regulation on the ownership of bim data; – increased pressure on building process; – high cost; – instability in temperature; – low conversion efficiency and complex motor operation. 188 v. popov et al. building information modelling: procurement procedure of the needs of the new object or the assessment point of the existing object. this is followed by a series of steps in the information delivery cycle and is completed by presenting an information model for future maintenance. figure 1 provides the information management cycle described in pas 1192-2:2013. the procurement phase, separated from the entire information delivery cycle, will be examined in detail further in this article. the first stage according to the pas 1192-2:2013 process scheme begins with a needs assessment, during which, among other activities, an employer information requirements (eir) package is prepared, a consolidated document setting out what information, in what form, and at what time, must be prepared and submitted to the employer by the project delivery team. eir is included in the tender documents so that potential service providers can assess their ability and capacity to meet eir requirements and present their proposed way of carrying out the project. the ways of information exchange and cooperation requirements are specifically described in correspondent parts of the eir. after assessing the client’s needs, procurement procedures are executed. during the main contractor selection process, bidders must provide details of their approach to the creation and management of project information to demonstrate their proposed approach, team capabilities, capacity and competence to comply with and implement the employer information requirements (eir). to this end, tenderers must prepare a preliminary bim project execution plan (bep-i), which is a tool for the employer to determine whether the information requirements set by him/her can be met. figure 1. information presentation cycle diagram, basing on pas 1192-2:2013 (source: prepared by the author) business, management and economics engineering, 2021, 19(1): 180–197 189 it should be added that according to the recommendations of pas 1192-2:2013, the bim project implementation plan (bep) is developed in two stages. the aforementioned preliminary version (bep-i) is being put out to tender to present the information management capabilities of each potential supplier. subsequently, after announcing the winner of the tender, the company prepares a detailed version of the plan (bep-ii), which explains in detail the supplier’s methodology for carrying out the project using bim; its purpose is to draw up and implement the project program. the pre-competitive bep-i includes all the items required by the eir, which are formulated in the project implementation plan (pip). potential providers are also required to submit three forms to be completed by all organisations in the service supply chain. provider’s building information management (bim) assessment form(s). its aim is to reveal the understanding, bim competencies and experience of the project team. provider’s information technologies (it) assessment form(s). its purpose is to reveal the project team’s ability and capacity to create and manage information model to assess the suitability of their it infrastructure to perform these tasks. provider’s resource assessment form(s). it is used to assess the human resources of project teams in terms of the abilities and capacities of the bim services they provide. after evaluating the submitted procurement documents, the winner of the tender will be announced, with whom the contract will be signed. according to the recommendations of pas 1192-2:2013, a specific annex to the contract – bim protocol – must be attached to the contract, which makes the minimum necessary amendments to the contractual agreements of existing construction projects, taking into account the specifics of the bim project. the main task of the protocol is to create conditions for the preparation of information models of buildings in the defined stages of the project. at the same time, the protocol aims to help project teams apply effective collaborative practices. once the winner, the project service provider, has been identified, the company prepares and submits to the client a consolidated master information delivery plan (midp) on behalf of the entire supply chain, which is based on the team information delivery plan (tidp) submitted by each member of the supply chain, enclosing their information management responsibility matrix (rmx) indicating the relations between the representatives of the subject areas (disciplines) and the information they prepare. figure 2 presents the relationship between the documents used in the information management process. once the project team has been selected, and the midp and tidp have been prepared, the mobilisation phase takes place. mobilisation is important because it allows the project team to ensure that the information management solution pays off before design begins. this includes ensuring that the required documents have been prepared and agreed upon, information management processes are in place, the team has the necessary skills and competencies, and technology supports and enables information management in accordance with pas 1192-2:2013. thus, it can be stated that the specification for information management document pas 1192-2:2013 (assessing the essential contribution of the standard bs 1192:2007+a2:2016 (the british standards institution, 2016) collaborative production of architectural, engineering and 190 v. popov et al. building information modelling: procurement procedure construction information. code of practice) provides a good basis for forming a set of rules for information exchange in the bim project, determines the logic of providing this information to project stakeholders, defines the main bim dossiers, which must be followed during the exchange of information, planning during the development and implementation of the construction project before its final assessment and commissioning. however, this document lacks a more flexible interface with the processes and stages of a building’s life cycle and the activities and procedures that take place during the mentioned processes and stages, that would allow access to these processes and the information flows generated during their activities to formulate rules and standards for their management. 3. bim information management in the procurement stage according to the standard iso 19650-1,-2:2018 a series of international standards known as iso 19650-1, iso 19650-2 (international organization for standardization, 2018a, 2018b) “organization of information about construction works  – information management using building information modelling. part 1: concepts and principles and part 2: delivery phase of asset” was developed to adopt the best practices of the bs / pas 1192 series of british standards and bim normative documents including other national standards. figure 2. relationships between documents used in information management (source: prepared by the author) business, management and economics engineering, 2021, 19(1): 180–197 191 the first part of iso 19650-1:2018 provides general concepts and defines the essential principles for how information should be developed, delivered and managed during the life cycle of assets built or under construction, using building information modelling bim. it is intended for persons involved in the planning, design, construction and subsequent operation of the assets, the so-called appointing and appointed parties at various levels. an important part of the standard is the definitions of information requirements (ir) and the information models (im) developed in accordance with these requirements and the hierarchy between them, on the stages of the asset life cycle, illustrated in the figure below (see figure 3). it should be noted that in order to specify the requirements for the information exchange, the authors of the standard use the term “exchange information requirements” for short, the eir, which immediately brought confusion to the definitions. moreover, all the classes of information requirements (ir) set out in the standard are: organisational information requirements (oir); asset information requirements (air); project information requirements (pir) are none other than the well-known subclass of pas 1192-2:2013 employer information requirements (eir) and such duplication of abbreviations brings a lot of ambiguity and confusion. in turn, the “exchange information requirements” are the general technical, organisational and management aspect of all the above information requirements, which must be formulated according to the requirements of the employer/client (appointing party). in this case, it would be appropriate to define the information requirements for the exchange in another abbreviation, e.g. xir, where x stands for “exchange”. the sixth chapter of the standard describes in general terms, and in some places too technically and too in detail, the information delivery cycle, harmonised with the asset life cycle, setting of information requirements and planning for information delivery. admittedly, this standard lacks clarity in the information life cycle description based on the scheme like in pas 1192-2. additionally, the scheme itself, which illustrates the concept and principles given in figure 11 of chapter 13 („overview and illustration of the information management figure 3. hierarchy of information requirements 192 v. popov et al. building information modelling: procurement procedure process“), but does not bring any further clarity. what is also interesting, the planning of information delivery is again, but already in other words described in chapter 10. the content of figure 8 (“example of information being provided by whole delivery teams”) and figure 9. (“example of information delivery through information exchange to support key appointing party decisions”) is almost repetitive and could be represented in a single illustration. the same can be said about the contents of figures 6 and 7. chapter 8 describes the information about “delivery team capability and capacity”. all it gives the impression that this chapter is a very compromising one, but at the same time not a complete part of the standard. it is full of declarative and fictional moments, unfinished places and repetitions of the text; at the same time, there are many small and sometimes duplicative details. almost all chapters from 7 to 12 of the standard (ch.7. project and asset information management roles; ch.8. container-based collaborative working; ch.11. managing the collaborative production of information; ch.12 common data environment (cde) solution and workflow) could be assigned to one topic  – project and asset information management functions and methods using common data environment (cde) solutions and workflow principles. it should be noted that this part of the standard also lacks the clarity and logic of another well-known “bim standard”, referring to bs 1192:2007+a2:2016. in the form given in iso 19650-1, this part of the cde description is not suitable for practical application without a detailed explanation in a national annex, similarly as it is done in bs en iso 196501:2018 national annex document. this also applies to the entire iso 19650-1:2018 standard. it is not enough to have a version translated into the national language (eg. lst en iso 19650-1:2018), a clear and logical commentary on this standard adapted to local practices and legislation is required – a national annex of lst en iso 19650-1:2018 standard. the second part of the standard, iso 19650-2:2018, is much more specific and clear. it sets out specific principles for information management during delivery phase of assets to enable the contracting authority to establish (employer) information requirements (eir) and to create the right business conditions and collaboration environment for the assigned parties to develop the information efficiently and effectively. the information management process related to the asset delivery phase is applied according to the project development stages, which the client and the project teams intend to apply in a coordinated manner. the information management process (see figure 4) must be applied to each assignment, regardless of the stage of the project. figure 4. process of information management. (source: prepared by authors) business, management and economics engineering, 2021, 19(1): 180–197 193 figure 4 illustrates the procurement activities for each assignment. attention should be paid to the first four activities: 1 – needs assessment; 2 – call for proposals; 3 – submission of a proposal; 4 – appointment. the first activities include preparation for procurement: appointment of responsible persons to perform information management functions, determination of project information requirements (pir); preparation of the project’s information delivery milestones; an indication of project information standards; identification of methods and procedures for the development of project information; identification of project cde; and some other key activities. in activity 2, specific procurement documents – a call for tenders – are prepared, taking into account the specific project and procurement procedures. they also formulate qualification requirements for the supplier based on the eir. in activity 3, the submission of a proposal, during which the supplier submits the initial project implementation plan (bep-i) mainly in response to the employers pir and provides documents proving its compliance with the required competence, capacity, and qualifications. activity 4 – designation, where a contract is awarded to the supplier who has submitted a valid tender after the final evaluation. all activities in the first four (and all other phases) are identified in a quite detailed manner, simply sub-items in iso 19650-2:2018. however, the legislation and procedures governing their implementation depend on the specific nature of the project, its complexity, the form and method of chosen project’s implementation. in addition, although the principles are similar, public procurement is regulated differently in each country. it is, therefore, necessary to consider the differences of the framework in separate regions. considering this – it is appropriate to develop national guidelines and recommendations for procurement procedure in bim implementation. as mentioned above, it is appropriate to follow the standard iso 19650-2:2018 when organising public procurement, which is carried out at the phase of property delivery. while maintaining the basic principles of the standard, it is appropriate to draw up national annexes containing the necessary guidelines adapted to specific local conditions and legislation, summarising the peculiarities of public procurement in each country. guidelines could also provide individual case studies for the preparation of inherent procurement programs, depending on the nature and complexity of the projects to be implemented. conclusions the current paper aimed at analysing the procurement documents of different countries in order to choose the most appropriate that could be considered for use in lithuania in the context of bim procurement. the following countries were investigated in the study: norway, the uk, the netherlands, and finland. the way governments have incorporated (or excluded) bim requirements into their procurement laws reflects their and sometimes the interests of the industry. although the governments of each of the countries have taken different approaches to the inclusion of bim requirements in public procurement, they have all played a key role in promoting the first stages of bim implementation. the implementation 194 v. popov et al. building information modelling: procurement procedure of bim methodology, whether mandatory or non-compulsory, has dramatically accelerated, with governments showing their initiative and willingness for the construction industry to implement bim. an overview of bim methodological documents in european countries showed that there are three primary procurement methodological documents: – a standard legal document used in the uk, norway, and lithuania (usually adapted on the particular region); – bim procurement guidelines published in the uk; – standard contract and annex, which exist in most countries except lithuania. after comparing the methodological documents of the selected countries, the list of procurement documents suitable for the lithuanian market is proposed: – employee information requirements (eir) standard form; – model standard annex to the contract (bim protocol) and guidance document on its application to public procurement; – guidance document on the development and use of bim implementation plan (bep) in public procurement. notwithstanding the clear guiding principles of iso 19650-2:2018, it is appropriate to develop national annexes containing the necessary guidelines adapted to specific local conditions and legislation, summarising the particularity of public procurement in each country. they could also provide individual examples of how to develop appropriate procurement programs and a balanced package of procurement documents for this purpose, taking into account the nature of the projects, their complexity, the stage and the chosen form of project implementation. after analysing the literature review, existing related studies are mainly oriented on particular region/country, and no general overview of european countries regarding bim procurement procedures has been implemented. in this research, a comprehensive overview is done, and a list of procurement documents suitable for the lithuanian market has been proposed. additionally, a significant scientific contribution is the review of the fundamental standards, which includes the general specification for information management in construction projects using bim. implemented analysis can serve as a basis for other authors to implement their research concerning their region, to suggest the most appropriate and suitable set of documents. to sum up, this study contributes to the preparation of the lithuanian market for the implementation of bim and could help policy-makers to prepare the most appropriate procurement documents references architecs.org. 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accepted 31 december 2020 abstract. purpose  – this article examines volatility spillovers, cross-market correlation, and comovements between selected developed and former communist emerging stock markets in the european union. modelling the behavioural dynamics of european stock markets represents a vital topic in a fascinating context, but also a current challenge of great interest. research methodology – we propose to estimate and model volatility using garch family models for selected european markets. we aim to explore volatility movement, presence of leverage effect/ asymmetry in selected financial markets. findings – the econometric approach includes garch (1, 1) models for the sample period from 1, january 2000 to 12, july 2018. the empirical results revealed that exists a significant presence of volatility clustering in all selected financial markets except poland and croatia. the empirical analysis also indicates that both recent and past news generate a considerable impact on present volatility. research limitations  – our empirical study has certain limitations regarding the relatively small number of only eight stock markets. practical implications  – it can provide a useful perspective for researchers, academics, investors, investment managers, decision-makers, and scientists. originality/value – the empirical analysis is focused on 8 european stock markets, which are classified as developed (spain, uk, germany, and france) and emerging (poland, hungary, croatia, and romania). keywords: volatility spillover, garch family models, stock market dynamics, investor behaviour, diversification, news. jel classification: c58, g15, d53. https://doi.org/10.3846/bmee.2021.13588 https://orcid.org/0000-0002-3909-9496 https://orcid.org/0000-0003-1638-4291 business, management and economics engineering, 2021, 19(1): 70–90 71 introduction the global financial crisis of 2007–2008, which, according to many experts, one of the biggest crises in the world since the crisis of the 1930s affected not only the american economy but also the economies of many countries. hence, it has been likened to a huge tsunami that started in the united states and gradually spread to european countries and then to other parts of the world, and in the meantime, even affected the economies of small countries (park & mercado, 2014). following this economic crisis, various financial institutions were declared bankrupt and bought by the government or rival companies. the price index in the world’s major and small stock exchanges fell sharply. lending and liquidity to financial institutions declined sharply. also, with the spread of the crisis to the real sector of the economy, economic growth decreased, and the unemployment rate in the world increased. the global financial crises of 2007–2009 revealed that increasing stress in financial markets is of great importance for analyzing and forecasting economic activity and can experience severe adverse effects on the real activity of the economy in terms of production, employment, and welfare. many researchers have examined the methods and extent to which financial stress is associated with most cases before economic contractions. following this crisis, the economy witnessed the bankruptcy of various financial institutions and their purchase by the government or rival companies. the price index in large and small stock exchanges of the world decreased significantly. lending and liquidity to financial institutions declined sharply. also, with the spread of the crisis to the real sector of the economy, economic growth decreased and the unemployment rate in the world increased. mehdiabadi et al. (2020) suggested that global economy is constantly changing, so innovation and technological development represent essential pillars in terms of sustainability. financial markets are hardly represented in macroeconomic models. the history of financial markets shows that financial crises are often followed by a widespread and continuous decline in real economic activity. memon et  al. (2019) argued that uncertainty and crises which spread among the stock markets highlight a minor or major impact on economies. modelling the behaviour of european stock markets represents a current challenge of great interest. a quantitative approach focused on modelling stock volatility, and asset returns lead to the identification of investment opportunities based on the international diversification of the portfolio. spulbar et al. (2020) argued that portfolio diversification is a significant investment strategy used in order to manage stock market risks. in literature, various empirical comparative studies on “co-movements” have been represented in various ways by scholars and academics. in this research paper, co-movements reflect the comparative survey of randomly selected european markets. it focuses on volatility movement pattern (in a comparative manner) within stock chosen markets. none of the selected european stock markets attempted to correlate with other stock markets not covered in this study. instead, this paper explores changes in different level of volatility within the same time-period and captures the risk parameter of selected markets. our contribution to the related existing literature also includes new empirical evidence based on a cluster of 8 european stock markets, which are classified as developed (spain, uk, germany, and france) and emerging (poland, hungary, croatia, and romania). there is no similar evidence based on 72 j. trivedi et al. modelling volatility spillovers, cross-market correlation and co-movements between... previous contributions. most empirical studies that analyze the behaviour of european stock markets also include an essential stock market such as us or china. lane (2007) analyzed the connection between the former communist states and the european union and suggested that the collapse of the former communist regimes, and the subsequent transformation of their political, economic and social systems, determined a significant change in their international linkages. moreover, paczoski et al. (2019) examined the issues of general government debt (ggd), government deficit (gd), and economic growth rate in the case of post-communist european union member states, and concluded that the baltic countries have the most favourable position, while all other countries were generally stable, except hungary, croatia, and slovenia. hanousek and kočenda (2011) investigated the existence of spillovers in a cluster of emerging eu stock markets, i.e. the czech republic, hungary, and poland, and concluded that these rather new eu stock markets are strongly determined by mature stock markets as well as the macroeconomic news originating thereby for the sample period 2004–2007. hassan et al. (2006) examined correlations among several emerging markets in europe, and the empirical results denote the existence of autocorrelation while sample european emerging markets overall are unpredictable. tilfani et  al. (2019) investigated the issue of integration in central and eastern european stock markets and concluded that stock markets in czech republic, hungary, croatia, poland, and romania are the most integrated, while the stock markets in bosnia, montenegro, serbia, and slovakia are less integrated. rim and setaputra (2018) investigated the co-movements between stock markets in asia, europe, and north america and the empirical results revealed that selected stock markets in these regions had not been fully integrated, and they still exist potential diversification benefits to be exploited by investors. we have employed several garch family models to investigate the behaviour of selected stock markets and their long-run volatility dynamics. however, not all of these models could be applied to selected datasets. certain models are not suitable for simultaneous modelling of the selected daily financial dataset, which includes the sample period from 1, january 2000 to 12, july 2018. the asymmetric power arch model is also known as aparch encloses both tgarch and gjr models. the threshold garch also is known as the tgarch model was developed by zakoian (1994) and glosten et al. (1993) and it is equivalent to the gjr garch model (el jebari & hakmaoui, 2018). 1. literature review the literature on garch family models and their empirical implications are very broad and diversified. becker et al. (2018) consider that multivariate volatility modelling literature continues to be an active field of research. whitelaw (1994) conducted an empirical study and concluded that there is an asymmetric relation between conditional mean and volatility. also, silvennoinen and teräsvirta (2009) stated that understanding the co-movements of financial returns has a significant practical relevance considering multivariate garch (mgarch) models. marquering and de goeij (2002) suggested that conditional volatility and the existence of (co)variances between asset returns play an important role in the allocation process business, management and economics engineering, 2021, 19(1): 70–90 73 and risk management in the case of financial systems. duffee (2005) argued that when stock market wealth reaches a high level relative to consumption, it turns out that both the conditional covariance and correlation are high. king et al. (1994) pointed out that “observable economic variables” determine only an insignificant part of the time-variation in covariances between stock markets, the main effect being generated by “unobservable economic variables”. uğurlu (2014) applied garch, egarch, tarch and parch models to forecast the volatility of the emerging stock market in romania (bet index) and argued that the egarch model is the most suitable model for modelling the behaviour of sample stock returns considering that has also identified the presence of leverage effect. pagan and schwert (1990) conducted a comparative research study using the garch, egarch, markov regime switching model, and certain nonparametric models to forecast the monthly volatility of the us stock-market returns. the empirical findings revealed that the garch model followed in second place by the egarch model were the most suitable models, while the other applied models provided low accuracy results. czapkiewicz and wójtowicz (2017) suggested that international portfolio diversification and global investors have an essential contribution to the process of interconnection and generating short and long-term linkages between different stock markets from all around the world. živkov et al. (2018) investigated the inter-linkages between the developed stock market in germany and several eastern european emerging stock markets, such as czech republic, poland, hungary, and romania, and revealed the existence of a high level of integration between selected stock markets. harrison and moore (2009) examined co-movements between emerging stock markets in central and eastern europe and developed stock markets in western europe using time-varying realized correlation ratios, cointegration statistics, and multivariate generalized autoregressive conditional heteroscedasticity (mgarch) models. alberg et  al. (2008) suggested that conditional changing variance models such as garch family models exhibit a forecasting performance accuracy rather similar to younger asymmetric gjr and aparch models. moreover, horvath and petrovski (2013) investigated international stock market co-movements between central western europe (czech republic, hungary, and poland) and south-eastern europe (croatia, macedonia, and serbia) by applying multivariate garch models in the sample period 2006–2011 and concluded that the global financial crisis had not affected the degree of stock market integration between these clusters of countries. egert and kocenda (2007) analyzed high-frequency co-movements between selected european union stock markets, i.e. czech republic, hungary, poland, germany, france, and the uk from mid-2003 to early 2005 and detected the presence of bidirectional causality for stock returns and volatility series, but also higher correlations in the case of daily data than in the case of high-frequency data. dedi, yavas, and mcmillan (2016) analyzed the interconnections between stock returns and volatility spillovers in the case of germany, united kingdom, china, russia, and turkey using marma, garch, garch-in-mean, and exponential garch (egarch) models, and revealed the existence of volatility spillovers from other stock markets for germany, china, russia, except for uk and turkey. drachal (2017) used garch family models, including garch-m and asymmetric t-garch, e-garch, gjr-garch, and aparch models with generalized error 74 j. trivedi et al. modelling volatility spillovers, cross-market correlation and co-movements between... distribution for modelling volatility clustering and leverage effects on emerging stock markets in central and eastern europe, and concluded that garch-m, tgarch, and e-garch models are the most suitable. savva and aslanidis (2010) examined stock market integration between selected eu member states in eastern europe and the euro-zone and suggested that a high level of correlation is not the effect of global financial integration, but the result of eu-related developments. ben slimane et al. (2013) argued that interrelationship between stocks markets in europe registered an increasing trend during the global financial crisis, including by severe accentuation of volatility spillovers. tripathi (2012) investigated co-movement among sample stock markets from asia, europe, and the usa based on the correlation technique and observed an intensification of interdependence between a significant number of developed and emerging stock markets primarily in the context of extreme financial events. syriopoulos (2007) investigated interconnections between emerging european union stock markets (poland, czech republic, hungary, slovakia) and developed stock markets (germany, usa) and empirical results indicated stronger linkages with germany rather than with the usa despite its global influence. forbes and rigobon (2002) investigated co-movements and contagion across the stock market, and they proposed a new research direction by analyzing, in particular, the causes that generate a high integration between the stock markets both during the periods of relative stability and financial crisis or extreme turmoils. however, the authors suggested that cross-market linkages include the following categories, i.e., correlation of asset returns, crossmarket correlation coefficients, and transmission of shocks or volatility, but if such stock linkages are permanently maintained at high levels both before and after a shock, there is no financial contagion, just interdependence. goetzmann et al. (2005) argued that the structure of global correlations is significantly reshaped over time because investment opportunities based on the international portfolio diversification are influenced by the constantly growing share of stock markets all over the globe and reduced average correlation between available stock markets. pinto et al. (2020) suggested that stocks with low historical volatility exhibit superior risk-adjusted returns and higher absolute returns over high volatility stocks. engle (2002) examined the predictive accuracy of the new dynamic conditional correlation (dcc) family models and concluded that they have the adaptability of univariate garch models coupled with parsimonious parametric models for the correlations, but the results are more robust and accurate, whether the criterion is mean absolute error, diagnostic tests, or tests based on the value at risk calculations. spulbar et al. (2020) examined abnormal volatility transmission patterns between selected emerging and developed stock markets based on 12 major stock indices such as ibex 35 index (spain), djia index (usa), ftse 100 (uk), tsx composite index (canada), nikkei 225 (japan), dax index (germany), cac 40 (france) and five selected emerging stock market indices, i.e. bet index (romania), wig 20 index (poland), bse index (india), sse composite index (china) and bux index (hungary) from january 2000 to june 2018. the empirical results revealed that us stock index exhibits the highest transmitting pattern in volatility, while most emerging stock markets follow the movement pattern of essential developed stock markets, such as the us market (dow jones or s&p 100 stock indices are significant in this regard). moreover, spulbar and birau (2019) implied that volatility does not diverge to infinity, while it seems to react rather different for high positive or high negative stock returns. business, management and economics engineering, 2021, 19(1): 70–90 75 2. research methodology this paper aims to estimate volatility spillovers in selected european developed and emerging financial markets. the data divided into two parts, i.e. the cluster of developed stock markets and former communists emerging stock markets by using 4630 daily observations. the cluster formed by ftse 100 index, ibex35 index, cac40 index, and dax index represents the selected developed stock market indices of the uk, spain, france, and germany. the other cluster represents european emerging markets based on the daily closing price of the wig20 index (poland), bux index (hungary), crobex index (croatia), and bet index (romania). moreover, poland, hungary, croatia, and romania are former communists european emerging countries. moreover, emerging economies are characterized by certain stylized facts such as pro-cyclical policies, a high rate of economic growth or vulnerability to foreign currency volatility movements (shakila et al., 2020). we propose to employ symmetric and asymmetric garch models, i.e. garch (1, 1) by bollerslev and exponential garch by engle (2002) to model symmetric and asymmetric volatility of selected european stock markets. for comparative volatility estimation, we employ bollerslev (1986) garch (1, 1) to series returns. the data is converted into log-returns and first log difference considered using the following formula: ( ) ( )1 1 ln ln ln .tt t t t p r p p p −−   = = −     further to test the normality, augmented dickey-fuller test is used. ( ) ( )01 1 1 .t t il y y− = β + α − − + ε in the process of the first equation, rt represents logarithmic daily return in selected european indices for time t, where pt represents the closing price at time t and pt-1 represents the corresponding price in a period of time t-1. second equation (adf test) used to justify normality in series returns. to examine the nature of volatility and relationship between volatility and return among developed and emerging markets, garch (1, 1) model is used. the model introduced by bollerslev in 1986 that contains conditional variance represented as a linear function of lags. arch coefficient (a1) suggests that there is a significant impact of previous period volatility shocks on the current period. where the other coefficient garch (βi) measures the impact of previous period variance on present volatility and also indicates the presence of volatility clustering in series returns. garch (1, 1) by bollerslev (1986) represented by following: 2 1 1 1 1t t th u h− −= ω+ α +β . formula process contains mean equation and variance equation represented as the following: mean equation is the following: t tr = µ + ε . variance equation is the following: 2 2 21 1 1t t t t− −σ = ω+ αε +βσ . garch (1, 1) model examines the dynamics of volatility and suggests that if the sum of coefficient (arch and garch) terms equals to 1 in that case any shock (negative or 76 j. trivedi et al. modelling volatility spillovers, cross-market correlation and co-movements between... positive) can lead to creating perpetual change in all future values. in another case, a shock to conditional variance identified as persistent in nature. european actual series returns and volatility shocks and comparative asset returns are presented in graphs and details explained. this study examines detail empirical analysis of the movement of volatility pattern of selected european markets where each markets being addressed provided impact of volatility for the same time-duration stretching the risk and return factor. the correlation matrix is being applied to selected samples attempting to demonstrate co-movements within selected european financial markets. hence, the co-movements is being demonstrated to focus on capturing relativity of market movement pattern within european stock markets. standard garch (1, 1) model designed by bollerslev (1986) suggests that shock in εt−1 has the same effect regardless of whether εt−1  >  0 or εt−1  <  0. however, a typical feature of financial data is that negative shocks generate more volatility compared to positive shocks. in order to capture asymmetry in return, an extension of garch required that need not to depend on non-negative restrictions. aiming to incorporate this asymmetrical effect in financial data, nelson (1991) proposed exponential generalized autoregressive conditional heteroscedasticity (egarch) model or exponential garch. in the egarch specification, γ is the asymmetry parameter measuring leverage effect, where, α is the size parameter measuring the magnitude of shocks, and persistency is captured through β. an important feature of the egarch specification is that conditional variance is an exponential function that allows rejection for non-negative restrictions which were restricted by in earlier garch specifications. the egarch model, which was developed by nelson (1991) captures asymmetric responses of time-vary variances to volatility shocks and also ensures that variance is always positive. ( ) ( )2 2 1 2 log log | | . p q t t i i tj i j i t i t i i yi n i t− −− − ε − − ε − σ = ω+ β σ + α − σ σ −∑ ∑ 3. empirical results we process analysis of descriptive statistics first to understand the value of investor’s return in selected developed and emerging stock markets for the sample period from 1, jan 2000 to 12, july 2018. detail study of figure 1 suggests a marginal change in asset price of european developed financial markets considering the uk, spain, france and germany. however, asset returns of spain and france trading even lower index level than on january 2000. ftse 100 index represents to the uk financial market generated marginal returns for investors as asset price trading 15% higher from the beginning of data. germany, one of best return provider amongst developed european market group, provided almost double asset price within over 18 years. poland, hungary, croatia and romania were selected as former communists european emerging stock markets where returns seem highly escalated within selected time range except poland where asset return is less than 10% in the selected period. at the same time, croatia index price is marginally more than double from its starting point 888.50 to 1744.40. business, management and economics engineering, 2021, 19(1): 70–90 77 romania financial market represented by bet provided highest asset price returns exceeding 17 times or 1700 percentage, which found the highest return among emerging as well as developed financial markets from selected samples. followed by hungary where asset price returns exceed 4 times or 400 percent return makes index move from 8715.49 to 35373,59. observation of figure  1 suggests that poland and france are stock markets reacted least compared to other selected observations during the global financial crisis. financial market movement of bux, i.e. hungary, provides sharp growth during the selected time period. the exponential growth of hungary appears significant and much different while compared with the rest of the selected specimen markets. the following figure 2 presents the trend of selected stock market indices. movement change in volatility transmitting pattern for developed european market represents different pattern compared to emerging european markets for the selected period. ftse 100, a european developed market specimen index for the uk financial market indicates down trading trend approaching 3500 as low level twice from about 6500 whereas ibex35 marked level of 6000 from almost 12000. financial market specimen of france cac40 created low traded level at the same time almost 2.5 times of 25 percent almost double fall compared to the ftse 100 index and ibex35 index. dax index, a german specimen index, falls historically lower amongst developed financial markets, which is almost 2000 from 8000, which is four times slip and lost 400 percent of market capitalization. the index movement pattern for emerging european markets (eem) represents much higher volatility during ups and downs. for instance, wig20 index (poland) first fall 1.5 times of 150 percent as a negative trend and jumped to a new level of 3500 from 1000 making 3.5 times positive movement. followed by a higher rate as observed in bux series returns of 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 ukftse100 spainibex35 francecac40 germanydax polandwig20 hungarybux croatiacrobex romaniabet figure 1. comparative graph between european developed and former communists emerging market series returns (source: author’s computation) 78 j. trivedi et al. modelling volatility spillovers, cross-market correlation and co-movements between... 3000 3500 4000 4500 5000 5500 6000 6500 7000 7500 8000 2001 ukftse100 4000 6000 8000 10000 12000 14000 16000 2001 spainibex35 2000 2500 3000 3500 4000 4500 5000 5500 6000 6500 7000 2001 francecac40 2000 4000 6000 8000 10000 12000 14000 2001 germanydax 500 1000 1500 2000 2500 3000 3500 4000 2001 polandwig20 5000 10000 15000 20000 25000 30000 35000 40000 45000 2001 hungarybux 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 2001 croatiacrobex 0 2000 4000 6000 8000 10000 12000 2001 romaniabet figure 2. the trend of selected stock market indices (source: author’s computation) -0.1 –0.08 –0.06 –0.04 –0.02 0 0.02 0.04 0.06 0.08 0.1 2001 d_l_ukftse100 –0.15 –0.1 –0.05 0 0.05 0.1 0.15 2001 d_l_spainibex35 –0.1 –0.05 0 0.05 0.1 0.15 2001 d_l_francecac40 –0.08 –0.06 –0.04 –0.02 0 0.02 0.04 0.06 0.08 0.1 0.12 2001 d_l_germanydax –0.1 –0.08 –0.06 –0.04 –0.02 0 0.02 0.04 0.06 0.08 0.1 2001 d_l_polandwig20 –0.15 –0.1 –0.05 0 0.05 0.1 0.15 2001 d_l_hungarybux –0.15 –0.1 –0.05 0 0.05 0.1 0.15 2001 d_l_croatiacrobex –0.15 –0.1 –0.05 0 0.05 0.1 0.15 2001 d_l_romaniabet figure 3. volatility scale for developed and former communists emerging european stock markets (source: author’s computation) business, management and economics engineering, 2021, 19(1): 70–90 79 hungary making capitalization loss 50%, i.e. 10000 to 5000 and approached to new high level of 30000 making six times or 600 percent positive movement. financial index of croatia, i.e. crobex and romania bet shows different movement at the same time where other stocks are falling; both indexes remained constant. both of these indexes moved positively were other european markets falling. crobex, a specimen index for croatia moved five times or 500 percent return where specimen index for romania bet treaded index level of almost 1000 making 17 times growth for the same period. volatility sketches appear in figure  3 indicates positive and negative shocks for all developed and emerging european markets from january 2000 to 12, july 2018. hungary bux shows major positive jumps that escalated trading index level to a new high, which too with significantly positive shocks, noticed at least 2.6 times higher than the movement of negative market patterns. emerging markets, particularly crobex index (croatia) and bet index (romania) respectively created a maximum number of positive shocks at high to very high magnitude level (see figure  4). further, the property of summary of statistics also suggests the movement of each index along with the risk involved in asset movement. figure 5 is based on the property of minimum and maximum index level from the summary of statistics. it indicates histograms for negative and positive market movement. it is seen that all financial markets have doubled the asset investment overtime period from low trading level to high trading level. bux, an emerging economy, hungary breached highest index trading level 41000 compared to the rest of european markets. however, bet, a romanian financial market has grown 17 times from its lower trading level to high trading level. –0.15 –0.1 –0.05 0 0.05 0.1 0.15 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 d_l_ukftse100 d_l_spainibex35 d_l_francecac40 d_l_germanydax d_l_polandwig20 d_l_hungarybux d_l_croatiacrobex d_l_romaniabet figure 4. comparative volatility sketches for selected developed and former communists emerging european markets (source: author’s computation) 80 j. trivedi et al. modelling volatility spillovers, cross-market correlation and co-movements between... table 1 presents the summary of statistics using observations for the sample period, as follows: table 1. summary of statistics using observations for the sample period (source: author’s computation) variable mean median minimum maximum uk_ftse100 2.99511e-005 0.000292808 –0.0926557 0.0938434 spain_ibex35 –3.27050e-005 0.000663476 –0.131852 0.134836 france_cac40 –2.61478e-005 0.000272142 –0.0947154 0.105946 germany_dax 0.000134564 0.000746166 –0.0743346 0.107975 poland_wig20 1.36839e-005 0.000141028 –0.0844276 0.0815484 hungary_bux 0.000302628 0.000335632 –0.126489 0.131777 croatia_crobex 0.000145740 0.000204938 –0.107636 0.147790 romania_bet 0.000614499 0.000543984 –0.131168 0.105645 variable std. dev. c.v. skewness ex. kurtosis uk_ftse100 0.0117927 393.731 –0.139631 6.38786 spain_ibex35 0.0147716 451.662 –0.0830107 6.01698 france_cac40 0.0145275 555.590 –0.0359500 5.00974 germany_dax 0.0149532 111.123 –0.0205531 4.30730 poland_wig20 0.0149155 1090.00 –0.162087 2.63795 hungary_bux 0.0153084 50.5848 0.0939871 6.69502 croatia_crobex 0.0116245 79.7617 –0.0834989 18.6688 romania_bet 0.0152629 24.8380 –0.508121 9.18279 ukftse100 spainibex35 francecac40 germanydax polandwig20 hungarybux croatiacrobex romaniabet 0 10000 20000 30000 40000 50000 minimum maximum figure 5. minimum and maximum index level analysis (source: author’s computation) business, management and economics engineering, 2021, 19(1): 70–90 81 property of summary of statistics indicates that mean return is positive, suggesting that asset price is increased over the period except for spain and france. the property also shows that returns are negatively skewed except bux – hungary index. degree of excess kurtosis is exceeding normality level of 3 except the case of poland financial market. crobex, croatia financial market represents the highest degree of kurtosis, creating a leptokurtic impact on series return, making the fat tail. selected european developed and emerging markets confirmed volatility clustering and scattered return over the period. further investment gained returned over the period except for spain and france financial market. volatility clustering is confirmed with return series and stationarity using augmented dickey-fuller test. the study objected to best fit of garch (1, 1) to selected developed and emerging european financial markets. result of garch (1, 1) model property following vcv robust method shown in table 2. the result of garch (1,1) property indicates that coefficient α1and β1 are statistically significant except the case of wig20 and crobex, emerging financial markets of poland and croatia. the further result also within a parametric restriction and suggesting a greater impact of shocks on volatility. arch coefficient (α1) found 0.108, 0.100, 0.095, 0.089, 0.071 and 0.194 representing details of uk, spain, france, germany, hungary and romania respectively indicates that derived position of (α1) indicates the significant impact of previous period shocks on present period volatility. result statistics property shows a maximum of 19.44% impact in the financial market of romania, followed by 10.8% uk. it means that given value indicates the impact of yesterday volatility on today. another garch coefficient (β1) processes the impact of yesterday’s variance on today’s volatility. it also indicates the presence of volatility clustering and suggests that negative asset price changes impose further negative shocks on asset returns and vice versa. the higher degree of (β1) indicates a larger memory of shock. the sum of arch (α1) and garch (β1) provides a degree of the extent at which volatility shock is persistent over time for selected european developed and emerging markets. the garch (1, 1) model property also indicates the sum of arch and garch terms (see table 2) showing significantly the highest degree of volatility persistent table 2. the empirical results for garch (1, 1) model (source: author’s computation) variable constant omega alpha beta alpha+beta uk_ftse100 0.00035 1.65e-06 0.108437 0.879646 0.988083 spain_ibex35 0.00053 2.46e-06 0.100655 0.891055 0.99171 france_cac40 0.000496075 2.02e-06 0.095298 0.896818 0.992116 germany_dax 0.000712442 2.21e-06 0.089057 0.900906 0.989963 poland_wig20* 0.00025441 1.72e-06 0.0553 0.93695 0.99225 hungary_bux 0.00070009 3.63e-06 0.071882 0.913364 0.985246 croatia_crobex* 0.000121315* 7.29e-07 0.085462 0.915459 1.000921 romania_bet 0.000746296 4.03e-06 0.194475 0.80575 0.9994 note: *provided statistical property is significant at 1% to selected european financial markets except financial market of poland (wig20) and croatia (crobex) where garch (1, 1) not fitted. 82 j. trivedi et al. modelling volatility spillovers, cross-market correlation and co-movements between... for the emerging european market of romania (bet index) approaching 0.999 followed by france (cac40 index) and spain (bex35 index). the property of the table provides detail statistical information about significance or fitness of values to garch class models. in the following table 3 we have included the empirical results of egarch model: table 3. the empirical results for egarch (1,1) model log_ukftse100, (t = 4630), vcv method: robust conditional mean equation coefficient std. error z p-value const 8.72867 0.0167890 519.9 0.0000 *** omega –1.31418 0.0961173 –13.67 1.48e-042 *** alpha 1.08839 0.0699990 15.55 1.63e-054 *** gamma –0.0259631 0.0155655 –1.668 0.0953 * beta 0.945124 0.00956002 98.86 0.0000 *** llik: 4200.35701 aic: -8390.71401 bic: –8358.51245 hqc: –8379.38382 log_spain_ibex35, (t = 4630), vcv method: robust conditional mean equation coefficient std. error z p-value const 9.23318 0.00339488 2720 0.0000 *** omega –1.30044 0.0855659 –15.20 3.64e-052 *** alpha 1.09662 0.0668458 16.41 1.75e-060 *** gamma –0.0183073 0.00701352 –2.610 0.0090 *** beta 0.944597 0.00759750 124.3 0.0000 *** llik: 3537.10383 aic: –7064.20765 bic: –7032.00609 hqc: –7052.87746 log_francecac40, (t = 4630), vcv method: robust conditional mean equation coefficient std. error z p-value const 8.39337 0.0456270 184.0 0.0000 *** omega –1.15027 0.298184 –3.858 0.0001 *** alpha 0.970756 0.236454 4.105 4.03e-05 *** gamma –0.00675849 0.0162363 –0.4163 0.6772 beta 0.948662 0.0163740 57.94 0.0000 *** llik: 3015.03172 aic: –6020.06343 bic: –5987.86187 hqc: –6008.73324 d1_log_poland_wig20, (t = 4629), vcv method: robust conditional mean equation coefficient std. error z p-value const 0.000126534 0.000163322 0.7747 0.4385 business, management and economics engineering, 2021, 19(1): 70–90 83 omega –0.186319 0.0284426 –6.551 5.73e-011 *** alpha 0.117934 0.0125637 9.387 6.18e-021 *** gamma –0.0334085 0.00779986 –4.283 1.84e-05 *** beta 0.988922 0.00273595 361.5 0.0000 *** llik: 13379.06454 aic: –26748.12909 bic: –26715.92861 hqc: –26736.79915 log_hungary_bux, (t = 4630), vcv method: robust conditional mean equation coefficient std. error z p-value const 9.99769 0.428367 23.34 1.78e-120 *** omega –0.977351 2.31181 –0.4228 0.6725 alpha 0.905494 1.53280 0.5907 0.5547 gamma –0.00906108 0.255536 –0.03546 0.9717 beta 0.965984 0.314666 3.070 0.0021 *** llik: 254.94282 aic: –499.88565 bic: –467.68408 hqc: –488.55545 log_croatia_crobex, (t = 4630), vcv method: robust conditional mean equation coefficient std. error z p-value const 7.50055 0.00398506 1882 0.0000 *** omega –1.32413 0.0748643 –17.69 5.27e-070 *** alpha 1.21357 0.0661205 18.35 3.07e-075 *** gamma –0.00107110 0.00632996 –0.1692 0.8656 beta 0.965382 0.00458996 210.3 0.0000 *** llik: 3873.13284 aic: –7736.26568 bic: –7704.06412 hqc: –7724.93549 log_romania_bet, (t = 4630), vcv method: robust conditional mean equation coefficient std. error z p-value const 8.84818 0.00325332 2720 0.0000 *** omega –1.26235 0.119710 –10.55 5.35e-026 *** alpha 1.20328 0.111373 10.80 3.29e-027 *** gamma –0.0249973 0.00937252 –2.667 0.0077 *** beta 0.972410 0.00686335 141.7 0.0000 *** llik: –566.83713 aic: 1143.67426 bic: 1175.87582 hqc: 1155.00445 the property of table  3 indicates the fitness of asymmetry model, i.e. egarch (1, 1) indicating the presence of leverage effect. ftse100, ibex35 and bet of the uk, spain and romania fitted well. results indicate that those fitted markets react significantly for negative end of table 3 84 j. trivedi et al. modelling volatility spillovers, cross-market correlation and co-movements between... shocks than positive. the financial series of selected european developed and emerging stock market have been processed for adf test and stationary test. we have also applied exponential garch (egarch) designed by nelson (1991) to selected emerging and developed european markets. ftse100 index (uk) consisting of 4630 daily observations fitted using log-returns. the empirical findings indicate the  significance level of 1% except for asymmetry, which is also significant at 10%. the negative sign of gamma indicates the presence of leverage effect in sample financial series returns. in the case of spain, the model fitted perfectly for a significance level of 1%. p-value indicates the significance level at 0.009 for (y), which indicates the presence of leverage effect in financial series return. in the case of the uk and spain, the stock markets react more on negative shocks and less on positive shocks. egarch model outcome for selected financial series returns of france and poland indicates significance level for asymmetry in the case of france and insignificant constant value for poland based on daily stock returns of selected stock market indices. selected groups of european markets clearly define volatility transmitting as well as movement pattern of shocks at the same period of time. volatility pattern found relatively more effective in case of financial markets of the uk and spain when considered for negative movements (without any impact of news), where other markets observed comparative least negative or positive movements. correlation matrix indicates the movement pattern of selected european markets for the same time. it suggests inter-relationship and similarity of movements for the selected time period. above statistical property indicates that stock markets of germany (dax index) and croatia (crobex index) exhibit contrast co-movements for the same time period. insignificant empirical results have been identified in the case of stock market returns of the bux index (hungary) and crobex index (croatia). it is well established after considering test up to ar-1, ar-2, ar-3, ar-4 and ar-5 in case of financial stock market returns of france, poland, hungary and croatia. it is evident that autoregressive coefficients of the lagged dependent variable represented insignificant value in case of wig20 index (poland) financial series returns. nevertheless, the coefficient of garch model components provided statistically insignificant value for the cac40 index (france), bux index (hungary) and crobex index (croatia). on the other hand, the bet index (romania) fitted well and achieved table 4. correlation matrix for selected efm ftse ibex cac dax wig bux crobex bet correlation 1.00 0.44 0.62 0.89 0.53 0.62 0.10 0.63 uk 1.00 0.55 0.26 0.81 0.38 0.61 0.63 spain 1.00 0.48 0.36 0.17 0.15 0.23 france 1.00 0.33 0.73 –0.06 0.61 germany 1.00 0.45 0.61 0.79 poland 1.00 0.35 0.79 hungary 1.00 0.57 croatia 1.00 romania business, management and economics engineering, 2021, 19(1): 70–90 85 statistical significance at the level of 1%. the egarch model property results derived using log series and considering all sample european stock markets based on akaike information criterion (aic) and bayesian information criterion (bic). moreover, bet index (romania) represents the perfect fit for asymmetric egarch model. in other cases, the coefficient of lagged squared residual is negative and statistically insignificant, which indicates that positive shocks do not affect conditional volatility. property of table 4 indicates a correlation of selected markets with each other, in particular considering ftse100 of the uk as a base financial market. it is observed that only german financial market follows movement pattern of ftse100 almost a degree of 90%, and the other strong correlation of market movement identified between spain and poland which contributes merely 50% as an average together during the following pattern of the uk. we found a negative correlation between market movement pattern of croatia and germany, where croatia contributed or follows only 10% similar movement to ftse, contrasting movement of germany that follows over 89% to the movement of ftse. this simplifies that financial market of croatia is no longer adopting changes to relative changes or least contribute to volatility transmitting pattern. it suggests possibility observing financial market of croatia tends to be positive despite negative movements in ftse and vice-versa. such statistical property also invites arguments considering contrasting changes in the index level of ftse and bet over the period of study. bet is no longer trading even anywhere near to the trading level that noticed at the start of the study period, where ftse does. it gives the idea that either bet followed only positive changes of ftse and that too with high magnitude of impact, or least followed negative changes, probably with least magnitude of negative impact. bet is significantly correlated to ftse at least not lower than 63% correlation. the study on selected developed, and emerging financial markets of europe reveals that the volatility is significantly high and persistent. in a particular financial market of poland identified highly volatile amongst other specimen financial markets. in addition to positive movements, bux, the financial market of hungary, escalates trading level with three major positive shocks at different levels. the movement of changes in asset prices with changes in index level provides different impacts over the same period of time. for instance, financial markets of wig20, and crobex indicates changes and impact on asset prices at highest magnitudes at changes in indices over 93 and 91 percentages respectively. further, it appears on bux and dax at the level of 91 and 90 percentages. many researchers do not accept changes or impact of alpha – considering any relative arguments for having a positive effect. we proposed assumptions based on considering the presence of alpha  – directing signifies the possibility of positive news. in the same arguments, the financial market of bet of romania found with the highest level of alpha, approaches to over 19 percentages having over 80 percent of impact changes in asset prices with the movement of the index. only ftse100 and ibex35 of spain found with the level of alpha over 10% and with asset price movement with indices percentile to 89 & 87 respectively. in case such effect of alpha provides the probability of positive movements, the financial market which identified as highest effective in terms of capturing transmitting pattern of volatility across the selected european market, wig20 of poland identified with least presence of alpha that is less than 6 percentage, amongst the lowest. 86 j. trivedi et al. modelling volatility spillovers, cross-market correlation and co-movements between... otherwise, considering probability to test whether the value of alpha really even exists or works, we provide the outcome of statistical property that incidentally indicates that “higher the value of alpha, higher the trading point of index”. to add supportive arguments, we consider the level of base index points of all selected european financial markets at the start of the study period. ftse index (uk) is being traded almost above 6000 and gained about 15% in over 18 years in case only changes considered from first and last trading levels. during the same period of time, spain, france and poland did not generate any positive returns from a period of over 18 years. instead, ibex35 specimen of spain is being traded even at lower trading level, i.e. below 10000 that it was actually in the year 2000. cac40 or france and wig20 of poland shares same trading terminology, being traded to a lower point than it was achieved eighteen years ago. almost above 100% index trading point gain is delivered by dax of germany and crobex of croatia during the same period. further, over five hundred percent growth noticed in bux of hungary, where the trading level of index escalated to fivefold during the period of eighteen years. at the same time,the highest gain across all selected market is being noticed only in the financial market of romania, bet. the index movement escalated to over 9000 trading points from below 500 of trading levels during the same period. bet financial index is also amongst the one that is having a positive alpha sign to merely 20 percentages, which is found highest from the alpha level of the rest of selected european stock markets. conclusions garch (1, 1) model revealed that stock of wig20, specimen index of poland reacts upmost, followed by crobex specimen of croatia and bux of hungary. on the other side, stock prices of bet, a specimen of romania financial market found to at least 13% less effective compared to the movement of index and impact on stock prices. that indicates that along with the movement of the index, listed stocks also moving aggressively in case of wig20, crobex and bux. exponential garch (egarch) reveals the presence of leverage effects in selected european stock markets, indicating a significant signal that negative shocks dominate markets. our empirical study on selected developed, and emerging financial markets of europe reveals that the volatility is significantly high and persistent. series returns exhibit characteristics like volatility clustering, series movement pattern and persistent of volatility in their daily return considering from january 2000 to july 2018. the study finds that there exists a significant presence of volatility clustering in all selected financial markets except poland and croatia (where the model did not fit series returns). further, it indicates that both recent and past news create an impact on present volatility. the study further examines that there is an insignificant relationship between volatility, volatility pattern and asset return over a period of time. the movement of asset price indicates that an emerging market of europe (bet index) specimen of romania having a significantly high degree of volatility in persistent and delivered over 17 times asset returns. none alike, asset return from one of developed european financial market, i.e. france (cac40 index) found the second highest volatility is persistent, delivered negative returns. it is clear that hungary, (bux) consist of more substantial exponential impact for positive and negative movements. while contrasting with bux, the business, management and economics engineering, 2021, 19(1): 70–90 87 dax of germany indicates much stable and more robust positioning to perceive and react over the news. the study also found that higher positioning of the value of alpha impacts on the trading pattern of indices over a period of time. for instance, bet, the financial market of romania found being shifting their trading point from below 500 (the base point at the start of the study period) to over 9000 at the end of the study. such escalation of the trading level is not observed with the rest of the selected financial markets. further, the study clearly provides understanding about the existence of volatility, cluster impact, the persistence of yesterday’s volatility, and the reaction of the market in a negative trend. out of the study, financial markets of romania and hungary have provided best returns to investors over a period of time. at the same time, well developed financial markets such as financial markets of the uk and france provided stability of investment over a period of time. however, any dividend over investment either for a short or long tenure, is highly solicited by any category of investors, and probably will be a primary element for investors across the world. the main limitations of our research study is due to the relatively small number of only 8 selected european countries (4 developed and 4 emerging) for the sample period from 1, january 2000 to 12, july 2018. a future extension of this research study will include a much larger number of countries, not just members of the european union. another objective will focus on extending the analysis period, so as to also include significant events such as brexit or the covid-19 pandemic. unlike the current research study which for daily data were collected from the official websites of individual stock markets of each sample countries, for the future research study we will obtain daily data for selected countries from datastream database. modern portfolio theory assigns tremendous importance to portfolio diversification strategies in order to minimize risk. however, in globalized stock markets, co-movements and correlations represent a challenge of great interest for international investors and financial decision-makers. stock market dynamics depends on the time domain and frequency domain. a future direction of this research study will focus on investigating co-movements and correlation between selected stock markets based on wavelet analysis. as an effective alternative to garch approach, we will analyze the new time-series information based on a different methodology and will examine the following aspects: individual power spectrum, wavelet coherence and cross wavelet transforms. funding this research received no external funding. conflicts of interest the authors declare no conflict of interest. author contributions all authors contributed equally to this research work. all authors discussed the results and contributed to the final manuscript. all authors read and approved the final manuscript. 88 j. trivedi et al. modelling volatility spillovers, cross-market correlation and co-movements between... references alberg, d., shalit, h., & yosef, r. 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(2018). interrelationship between dax index and four largest eastern european stock markets. romanian journal of economic forecasting, 21(3), 88–103. https://doi.org/10.2139/ssrn.2170019 https://doi.org/10.1111/j.1540-6261.1994.tb05150.x https://doi.org/10.1016/0165-1889(94)90039-6 copyright © 2019 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: lsalazar@wtamu.edu introduction according to the national association of colleges and employers (nace) (2016) employers in today’s job market continue to expect business alumni to possess problem-solving skills and statistical analytical skills. as such, employers expect employees to apply statistics and exploring the effect of coloring mandalas on students’ math anxiety in business statistics courses leslie ramos salazar* west texas a&m university, canyon, usa received 30 july 2019; accepted 25 september 2019 abstract. purpose  – the purpose of this article is to review a quasi-experiment study examining whether business students’ math anxiety is reduced after participating in mandala coloring activities. research methodology – the research methodology integrated quantitative methods including independent t-tests and anovas in a non-random convenient sample of 106 undergraduate students in 2018 in texas, united states. findings – results from the one-way anova and t-test analyses revealed that anxiety levels differed across groups, such that after coloring a pre-drawn mandala, math anxiety was significantly reduced in comparison to the control (doodling) group. paired sample t tests also demonstrated that when comparing the anxiety levels at the baseline and post-treatment, math anxiety was reduced after performing both the pre-drawn and free-coloring mandala activities. additionally, an independent sample t-test and a two-by-two factorial anova demonstrated that males experienced a significant reduction in their math anxiety than the females did after performing the mandala coloring activity. research limitations – the study used a convenient sample, self-reported items, and a math anxiety measurement. also, the findings found short-term evidence of math anxiety. practical implications  – the findings of this study suggest that business statistics instructors who integrate a mandala coloring activity in anxiety-provoking undertakings may help to reduce their students’ math anxiety. originality/value – this study is the first to investigate mandala coloring to reduce math anxiety in business students. unlike previous studies that focus on anxiety in general, this study examines the benefit of mandala coloring on students’ math anxiety. keywords: business statistics, math anxiety, mandala art therapy, college students. jel classification: co2. business, management and education issn 2029-7491 / eissn 2029-6169 2019 volume 17 issue 2: 134–151 https://doi.org/10.3846/bme.2019.11024 https://doi.org/10.3846/bme.2019.11024 business, management and education, 2019, 17(2): 134–151 135 data analysis as part of their jobs as business professionals (phillip & schultz, 1994). to fulfill this expectation, accredited colleges of business across the united states integrate business statistics as part of their curriculum to develop students’ critical thinking, analytical, and problem solving skills (palocsay & markham, 2014). however, often times, students perceive business statistics courses to be irrelevant to their majors and careers, and as a result, avoid applying statistics and data analysis in their everyday jobs upon graduation (philip & schultz, 1994; swanson, meinert, & swanson, 1994). students’ performance in business statistics courses is low in comparison to other business courses such as business communication because the course appears to be too difficult, unpleasing, and intimidating (swanson, meinert, & swanson, 1994). undergraduate students often experience math anxiety in business statistics courses, which impact their overall performance in the course (zanakis & valenzi, 1997). cruise and colleagues (1985) define math anxiety as the “feelings of anxiety encountered when taking a statistics course or doing statistical analyses, that [includes] gathering, processing, and interpreting data.” math anxiety occurs when individuals experience fear when thinking or doing mathematical activities and applications in academic contexts (ashcraft, 2002). for example, math anxiety can be induced when calculating and solving mathematical problems, and when manipulating numbers (luttenberg, wimmer, & paechter, 2018). math anxiety continues to be prevalent in four-year institutions with 25% of university students reporting experiencing high levels of math anxiety (yeager, 2012). as such, business statistics instructors face challenges in coping with their students’ math anxiety toward business statistics courses, which negatively impacts the learning process. several research studies have examined math anxiety in statistics courses in higher education. correlational studies have found an inverse link between statistical test anxiety and students’ gpa and performance in statistics courses (benson, 1989; zeidner, 1991). additionally, math anxiety has been shown to be inversely correlated to statistical test anxiety (sime, ansorge, olson, parker, & lukin, 1987). also, a study by zanakis and valenzi (1997) found that high math anxiety was linked to poor grades in statistics courses. students’ negative attitudes and math anxiety toward business statistics courses also impact their overall final course grade, for instance, students with high math anxiety earn lower grades (lalonde & gardner, 1993). to add, students’ anxiety toward math experiences in business statistics courses result in poor confidence and low motivation to participate in the course (k. d. hopkins,  b.  r. hopkins, & glass, 1996). students who suffer from math anxiety also tend to procrastinate adopting effective learning activities (e.g., studying for exams, reading), which could make them successful in statistics courses (onwuegbuzie, 2004). thus, math anxiety has been shown to have negative learning outcomes in students enrolled in statistics courses. to reduce individuals’ anxiety, an innovative art therapy approach has been implemented using mandalas in the fields of fields of psychology, art education, counselling, nursing, and the medical field. a mandala is a sacred circle with various designs derived from tibetan buddhism to promote “psychological healing and integration” in individuals (p. 149). in psychology, carl jung used the act of drawing a mandala to calm and heal patients that have dealt with trauma or traumatic incidents (jung, 1973). jung’s (1973) mandala approach is supported by the psychoanalytic theory, which states that engaging in a creative process by drawing and/or coloring a symmetrical mandala induces positive cognitive and emotional 136 l. ramos salazar. exploring the effect of coloring mandalas on students’ math anxiety in business... benefits because of its ability to calm the “inner chaos” of individuals’ emotional states. studies have shown that mandala drawing and coloring has led to reduced anxiety in a variety of contexts in individuals that have faced dissociative disorders (cox & cohen, 2000), adhd (smitherman-brown & church, 1996), dementia (couch, 1997), and post-traumatic stress disorder (ptsd) (henderson, rosen, & mascaro, 2007). in higher education contexts, several experiments have been conducted to determine mandalas’ calming effect on university students. for instance, curry and kasser (2005) examined the effectiveness of mandala coloring, plaid coloring, and free-form/unstructured coloring on undergraduate psychology students, and found that both mandala and plaiddesign coloring significantly reduced the anxiety of the students because engaging in an art therapy activity (i.e., structured coloring of a complex and symmetrical geometric pattern) may induce a meditative state. after this study, small (2006) extended curry and kasser’s work by implementing the concept of spirituality by having participants engage in a brief synopsis of a religious ritual across different religions (i.e., buddhism, hinduism) along with the mandala coloring activity among other conditions (mandala coloring, plaid-design coloring, and free-coloring/unstructured condition), and found that both traditional mandala coloring and spiritual ritual mandala coloring reduced students’ anxiety. additionally, kersten and van der vennet (2010) performed a single-subject experiment by inducing students’ anxiety using a brief writing exercise, and then having students color a pre-drawn or structured mandala to reduce their anxiety. in a replication of these previous studies, van der vennet and serice (2012) compared 50 undergraduate and graduate psychology students that colored the predrawn or structured mandala and colored a plaid design, and found that college student participants that colored the pre-drawn mandala reported reducing their anxiety. another study also found that coloring pre-drawn mandalas reduced undergraduate students’ state and trait anxiety levels (sandmire, gorham, rankin, & grimm, 2012). additionally, a total of 93 counseling students enrolled in graduate school reported significantly reducing their situational anxiety levels after completing a mandala coloring activity, suggesting that engaging in the creative process may play a role in anxiety reduction (duong, stargell, & mauk, 2018). in nursing, medical, and psychology health education, studies have found that mandala coloring may enhance students’ mental states and positive psychological attributes. for example, mahar, iwasiw, and evans (2012) examined first-year undergraduate nursing students who completed a mandala coloring activity, and students reported learning to be more reflective of their inner emotions, and indicated positive mood improvement and self-awareness. another study found that medical students benefited psychologically and emotionally from the mandala coloring process by being able to navigate difficult emotions such as fear and being able to manage stress more effectively through achieving a state of mindfulness and awareness (potash, yun chen, & yan tsang, 2016). another medical study by powell, alcorn, and lindsay (2017) found that coloring a structured mandala was more effective at reducing university students’ stress levels than traditional coloring. more recently, chen, liu, chiou, and lin (2019) examined the role of mindfulness and flow during the mandala coloring process among 76 university students, who were split into two conditions, high-skill and low-skill in teamwork, and students performed three mandala conditions (i.e., structured mandala, freeform/unstructured mandala, and cooperative mandala) in sequence form, and business, management and education, 2019, 17(2): 134–151 137 found that the mandala activities did not enhance students’ mindfulness, but it did improve their flow state. the study also found that the low-skilled group struggled with the free-form mandala activity, but they greatly benefited from engaging in teamwork as they worked together in a cooperative mandala (chen et al., 2019). to date; however, no study has examined whether coloring mandalas has an effect on students’ math anxiety levels in business statistics courses. thus, the purpose of this study is to investigate whether math anxiety is reduced by engaging in an art therapy activity such as free coloring an unstructured mandala or coloring a pre-drawn (structured) mandala. 1. literature review 1.1. mandala art therapy and anxiety reduction mandalas have been used as an art therapy tool to help individuals reduce their own anxieties. carl jung (1973) used drawing mandalas or “sacred circles” as a healing, calming behavior among his patients who suffered from traumatic events. after this discovery, art psychotherapists have been adopting mandala art therapy to calm and reduce anxiety of individuals with several psychological conditions including adhd, depression, and schizophrenia (cox & cohen, 2000; smitherman-brown & church, 1996). in 2005, curry and kasser examined the effect of mandala drawing in reducing individuals’ anxiety levels using mandala-drawing and plaid-form drawing intervention activities, and found that mandala drawing reduced individuals’ anxieties. another experimental study found that anxiety and trauma levels were reduced by drawing and coloring a mandala in comparison to random drawing on a blank sheet of paper (control condition) (henderson, rosen, & mascaro, 2007). follow up replication studies also confirmed that coloring pre-drawn mandalas reduced individuals’ anxiety (kersten & van der vennet, 2010; van der vennet & serice, 2012). moreover, sandmire, gorham, rankin, and grim (2012) performed a similar mandala intervention study, but using undergraduate university students a week prior to final examinations. the study found a significant decrease in both state and trait anxiety levels in the free-form coloring mandala group (sandmire et al., 2012). other mindfulness studies have examined mandala coloring and its impact on anxiety with additional mindfulness tasks. for instance, mantzios and giannou (2018) examined whether a mindfulness guided mandala coloring activity would have an effect on anxiety, and found that college students reduced their anxiety after coloring a structured mandala as a guide instructed them about the coloring process, but it did not enhance their mindfulness state given the distraction of having an instructional guide. also, cross and brown (2019) found that coloring a structured mandala, free-drawing, and engaging in a focused breathing exercise significantly improved students’ mindfulness and positive affect, and they also reduced participants’ anxiety levels. additionally, studies have found a link between mandala coloring and the reduction of test anxiety. first, carsley, heath, and fajnerova (2015) found that the mandala pre-drawn coloring intervention reduced elementary students’ test anxiety in comparison to the free doodling control condition. next, carsley and heath (2019) assessed the pre-posttest scores 138 l. ramos salazar. exploring the effect of coloring mandalas on students’ math anxiety in business... of university students’ test anxiety and state mindfulness, and found that after performing the pre-drawn (structured) mandala coloring activity, it decreased university students’ test anxiety, and increased their state mindfulness. additionally, burton and baxter (2019) found that when comparing coloring a mandala for 20 minutes to visiting with other participants (control group), occupational therapy students in the coloring group significantly reduced their test anxiety in comparison to the control group. most recently, researchers have been investigating the physiological effects of mandalas on anxiety. for example, muthard and gilbertson (2016) examined the physiological effects (e.g., blood pressure, pulse) of mandala coloring paired with a breathing exercise on undergraduate students’ negative affect, state anxiety, and psychological stress, and results showed that both negative affect and state anxiety were significantly reduced in the predrawn mandala-coloring experimental group in contrast to the control group, which sat quietly for seven minutes. additionally, lee (2018) conducted an experimental study using physiological measures (e.g., pulse rate) comparing the effects of freely coloring a mandala, coloring a mandala with present colors, free drawing a mandala within a preset circle, and coloring a rectangular grid with preset colors. results from the physiological data showed that that the three mandala conditions were more effective at anxiety reduction in comparison to coloring the rectangular figure due to the “centering effect,” or the mindfulness state that occurs when coloring within a circle (lee, 2018). as demonstrated by prior research, there is clear evidence that mandala coloring may reduce individuals’ anxiety levels. while researchers have conducted intervention studies to reduce math anxiety in university students, no previous research has examined the effect of mandala coloring on math anxiety in university-level business students in business statistics courses. previously, research findings have found that math anxiety reduction strategies such as expressive writing (park, ramirez, & beilock, 2014), visualization (henslee & klein, 2017), positive thinking (arem, 2009), and relaxation (husni, 2007) have been effective at reducing math anxiety in university students. the literature; however, has not addressed whether coloring mandalas is an effective strategy to reduce math anxiety. to address this gap in the literature, this study will replicate the experimental methodology of previous studies (e.g., curry & kasser, 2005; sandmire et al., 2012) by examining the effects of a) coloring a pre-drawn mandala, b) coloring a freeform mandala using a blank circle, and c) free doodling on a white sheet of paper (control condition) on math anxiety. as such, the following hypothesis will be examined. h1: students participating in the pre-drawn and coloring mandala conditions will reduce their math anxiety to a higher extent than those in the control condition. 1.2. mandala art therapy, sex, and anxiety reduction for the past three decades, the literature has been controversial in regards to sex differences in math anxiety among university students. early cross-sectional studies confirmed that female students exhibited more anxiety about statistics courses than the male students did (benson, 1989; zeidner & safir, 1989). later studies also found that females experienced higher levels of anxiety regarding the mathematical components of statistics courses in comparison to males (bradley & wygant, 1998; hembree, 1990; onwuegbuzie, 1995, 1998; royse business, management and education, 2019, 17(2): 134–151 139 & rompf, 1992; zeidner, 1991; pèrez-tyteca, castro martínez, rico romero, & castro martínez, 2011; alacam, 2018). however, a handful of studies have found no sex differences in anxiety levels in statistics courses (baloğlu, 2001, 2003; howard & warnick, 2016). as such, while both males and females experience math anxiety, there is some evidence that females experience anxiety toward math to a higher extent. interestingly, studies that state sex differences, report specific differences in math anxiety in statistics courses, such as calculating with statistical formulas and solving problems with numbers (hembree, 1990). cognitive-based studies have found that one explanation for the sex differences in math anxiety in statistics courses is due to a cognitive difference in spatial processing ability, which involves mental rotation abilities in working with numbers or nonlinguistic symbols (gardner, 1983; maloney, waechter, risko, & fugelsang, 2012; sokolowski, hawes, & lyons, 2019). another study surveyed university students about their math anxiety regarding specific mathematics activities such as adding, subtracting, multiplying, and working with arithmetic equations, and found that males had lower math anxiety than did the females; yet reported more positive attitudes toward solving mathematical problems than the females did (rubinsten, bialik, & solar, 2012). additionally, other studies that that found evidence of math anxiety sex differences indicated that the reason might be that females are more likely to self-report anxiety in comparison to males (ashcraft & faust, 1994; zettle & hougton, 1998; bieg, goetz, wolter, & hall, 2015). a more recent study by fullerton and umphrey (2016) found that female university students majoring in advertising were more aversive and anxious toward statistics and mathematics in comparison to males, in part because of self-perceived gender stereotypes about the mathematical problem-solving process. also, females might also be likely to suffer from the stereotype threat effect that suggests that females are socialized to believe that females are not “good at math,” and as a result, suffer from math anxiety and poor math performance (pèrez-garín, bustillos, & molero, 2017). while multiple studies have documented sex differences across statistics courses in areas of psychology, sociology, education, and mathematics, there is a need to examine sex differences of undergraduate business students in business statistics courses. to date, only two studies have examined gender differences in math anxiety in business students. currie (2014) found that female undergraduate business students exhibited higher math anxiety levels in comparison to male business students. more recently, alacam (2018) examined undergraduate students by major (including business), and found that female business students exhibited higher math anxiety levels and higher emotional negativity toward mathematics in comparison to male business students. despite this initial evidence across undergraduate studies, math anxiety continues to be understudied in the area of business statistics education. as a result, this study seeks to examine sex differences among business students enrolled in business statistics courses after participating in a mandala coloring activity including coloring a pre-drawn mandala and a free-coloring a mandala. it is expected that business students’ math anxiety will be reduced after the mandala coloring activity; however, given prior research, it is expected that even after the mandala coloring activity, sex differences in math anxiety in business statistics courses will remain. as such, the following hypothesis is posed. h2: women will report higher math anxiety levels than the men do after participating in a mandala coloring activity. 140 l. ramos salazar. exploring the effect of coloring mandalas on students’ math anxiety in business... 2. method 2.1. mandala art therapy and anxiety reduction participants of this quasi-experimental study were a nonrandom convenient sample consisting of 106 (64 men, 42 women) undergraduate students enrolled in statistics for business and economics, an entry-level business statistics course at a medium-sized university in the u.s. southwest. participants’ age ranged between 18 to 45 years of age (m  = 21.03, sd  = 0.49). the ethnic identification of the participants included 56.6% caucasian, 32.1% hispanic, 4.7% african-american, 3.8% asian-american, and 2.8% other. the academic majors of participants included 18.9% accounting, 1.9% economics, 22.6% finance, 10.4% computer information systems, 17.9% management, 12.3% marketing, 9.4% general business, and 6.6% other. of the participants 31.1% indicated being first generation students. upon institutional review board approval, participants were recruited with the permission of three business statistics for business and economics courses. instructors provided a small portion of extra credit to the students whom agreed to participate in the study. students from these three courses were surveyed and placed into three, non-random groups: control (n  = 40), pre-drawn mandala (n  = 35), and free-coloring mandala (n  = 31). each group participated in a writing assignment, which served to induce math anxiety in students. 2.2. procedures this study employed similar procedures implemented by the research protocol of previous researchers including curry and kasser (2005) and van der vennet (2012). this quasi-experiment was designed to measure students’ math anxiety during the baseline (time 1), then an anxious mood about mathematics was induced using a writing exercise. after the exercise, students were measured for math anxiety (time 2). afterwards, participants participated in a coloring activity depending on their treatment group (control, coloring mandala) and their math anxiety was measured after the coloring activity (time 3). after securing institutional review board approval, instructors who were currently teaching statistics for business and economics were contacted from the college of business via email. once instructors’ approval was obtained, the researcher administered the paper-based questionnaire in their face-to-face classrooms at the end of their class session. the interested participants were asked to sign an informed consent form. then, students completed a 30-minute six-part questionnaire. first, participants completed their demographic information in three minutes. second, participants completed the math anxiety questionnaire for another four minutes. third, participants participating a four minute free writing exercise that enabled students to write about a time they felt high levels of math anxiety at school. participants were encouraged to elaborate on their feelings about the experience. fourth, participants completed the math anxiety questionnaire once again for another four minutes. fifth, depending on the treatment group, participants were told to engage in a 15-minute coloring activity using a sheet of paper using coloring pencils. in the control condition, participants were told to doodle anything they wanted on the blank sheet of paper. in the pre-drawn mandala condition, participants were told to color the pre-drawn (structured) business, management and education, 2019, 17(2): 134–151 141 mandala that included a complex, symmetrical geometric pattern using colored pencils (see figure 1). in the free-coloring (unstructured) mandala condition, participants were told to create their own mandala by coloring within a blank and black circle using colored pencils (see figure 2). sixth, participants completed the math anxiety assessment for four minutes after the completion of the coloring activity. the conceptual process of the mandala approach along with its connection to university students’ anxiety levels is illustrated in figure 3. also, a small amount of extra credit was provided to the participants by their instructors in exchange for participating in the study. 2.3. instrumentation the math anxiety rating scale-revised (mars-r) developed by hopko (2003) was used to measure students’ math anxiety in business statistics courses. this 12-item scale has been revised and validated amongst other anxiety-related instruments such as the learning math anxiety (lma) and math evaluation anxiety (mea) scales (hopko, 2003). sample items include, “having to use the tables in the back of a math book,” “being told how to interpret probability statements,” and “reading and interpreting graphs or charts.” participants assess figure 1. pre-drawn structured mandala design (retrieved from www.colormandala.com) figure 2. free-coloured unstructured mandala (student coloured on a blank circle) figure 3. conceptualization of the mandala approach on students’ anxiety in university courses http://www.colormandala.com 142 l. ramos salazar. exploring the effect of coloring mandalas on students’ math anxiety in business... each statement using a scale between 0 (no anxiety) to 4 (high anxiety). this assessment was used for the baseline, pre-, and posttest measures. the alpha reliability of the baseline test was .82, the pre-test was .85, and the post-test was .85. to induce participants’ anxiety after the baseline assessment of the mars-r, a 4-minute writing exercise developed by curry and kasser (2005) was adopted to stimulate students’ anxiety prior to the control and experimental conditions. participants wrote about a previous negative math experience they had encountered in the past. 3. results independent t-tests identified no baseline differences of math anxiety between the pre-drawn mandala (t = 1.97, p = 0.05) and the free-colored mandala (t = 1.94, p = .06) conditions. the descriptive results between baseline, math anxiety manipulation, and condition based on math anxiety levels are displayed in table 1. a paired sample t test comparing the baseline (time 1) with the anxiety induction (time 2) was conducted to determine if the induction as effective. results indicated that math anxiety increased after the written induction activity, t (102) = 25.99, p < .001. a one-way anova also confirmed that the anxiety levels after the anxiety induction at time 2 did not differ, f(2, 104) = 2.61, p = 0.08, which demonstrated the effectiveness of the math anxiety induction across treatments. previous research has implemented a similar 4-minute written anxiety induction approach, and in this study, the stimuli was shown to be an effective method to induce university students’ math anxiety (curry & kasser, 2005; van der vennet & serice, 2012). after the written induction activity, a one-way anova revealed that anxiety levels differed across groups, f(2, 104) = 3.01, p < 0.05. to test the hypothesis, t tests were conducted to determine the math anxiety level post-treatment differences across the treatments. the pre-drawn (structured) group had a greater reduction of math anxiety (m = 1.50, sd = 0.76) than the (doodling) control group (m  = 1.95, sd  = 0.67), t (102) = 2.18, p < .01. as such, coloring a structured mandala was more effective at reducing math anxiety than doodling on a white sheet of paper with a mean decrease of 0.45. this finding is consistent with previous analytical findings supporting the theoretical assumption that coloring a structured mandala is an effective mindfulness approach to reduce university students’ anxiety in comparison to doodling (control condition) (curry & kasser, 2005; van der vennet & serice, 2012; carsley & heath, 2018). however, in the study no significant differences were found in math anxiety levels when comparing the pre-drawn (structured) group and the coloring of the mandala table 1. descriptives of math anxiety levels at t1, t2, and t3, and changes from t3 to t2 group t1 t2 t3 t3 -t2 n m sd m sd m sd m sd pre-drawn mandala 35 1.67 0.71 1.74 0.69 1.59 0.75 –0.15 0.06 free color mandala 31 1.65 0.79 1.7 0.74 1.58 0.83 –0.12 0.09 control group 40 1.99 0.69 2.01 0.68 1.95 0.67 –0.06 0.01 business, management and education, 2019, 17(2): 134–151 143 group, t (102) = –.062, p = .47. interestingly, this finding is inconsistent with a previous study by carsley, heath, and fajnerova (2015) suggesting that pre-drawn (structured) mandalas are more effective than free-coloured (unstructured) mandalas. yet, van der vennet and serice (2012) suggested that the centering effect occurs as long as participants are coloring within a circle, whether structured or unstructured. results of this study also showed that free coloring (unstructured) mandala group participants (m = 1.58, sd = 0.82) reduced their math anxiety more than the (doodling) control group (m = 1.95, sd = 0.67), t (102) = 25.99, p < .001. participants that completed the unstructured mandala activity by free-coloring within circle reduced their math anxiety with a mean decrease of 0.37 than those who doodled on a sheet of paper. this finding is supported by the previous literature that has found that using an unstructured mandala, or coloring within a black circle, is more effective than the control condition (e.g., doodling) (sandmire, gorham, rankin, & grimm, 2012). being able to color within a circle has been shown to produce a meditative or mindfulness state because students are able to express themselves through self-created symbols and shapes within the context of a circle (sandmire, gorham, rankin, & grim, 2012; carsley & heath, 2019). paired sample t tests were used to compare the anxiety levels between the baseline (time 1) and post-treatment (time 3) across the groups. results demonstrated that the free-coloring of the (unstructured) mandala group reduced participants’ math anxiety when comparing the baseline (m = 1.65, sd = 0.79) with the anxiety levels after performing the mandala coloring activity (m  = 1.58, sd  = 0.82), t (30) = 10.65, p < .001. additionally, participants reduced their math anxiety when comparing the baseline results (m  = 1.66, sd  = 0.71) with the math anxiety after performing the pre-drawn (structured) mandala coloring activity (m = 1.60, sd = 0.75), t (34) = 13.43, p < .001. however, when comparing the baseline math anxiety levels with the control (doodling) activity, participants’ math anxiety levels were not statistically significant, t (34) = 11.99, p  = 0.54. these findings are consistent with previous scholarship that has compared baseline and post-mandala intervention anxiety levels, and found that performing a coloring mandala activity (structured or unstructured) reduced students’ anxiety levels given its ability to trigger a meditative or healing state that can calm anxious feelings (carsley & heath, 2019; lee, 2018; noor, saleem, azmat, & arouj, 2017; van der vennet & serice, 2012). previous research suggests that the process of coloring a mandala (structured or unstructured) itself is a healing process that enables individuals to better manage negative emotions through creativity, visualization, and flow (green, drewes, & kominski, 2013; potash, yun chen, & yan tsang, 2016). to determine if there were sex differences in math anxiety levels after the treatments (e.g., coloring mandala), an independent samples t-test was conducted. results showed that males (m = 1.61, sd = 0.74) reduced their math anxiety to a higher extent than did females (m  = 1.90, sd  = 0.75), t (104) = 1.91, p < .05. this finding suggests that when comparing individuals by sex performing a mandala activity (structured or unstructured) may be more applicable to the reduction of males’ math anxiety, and this is illustrated in figure 4. this finding is consistent to the t-test performed by carsley and heath (2018), who also found that males reduced their anxiety more so than the women did, in part because males’ motor skills may have helped them perform better in the mandala coloring activities. 144 l. ramos salazar. exploring the effect of coloring mandalas on students’ math anxiety in business... additionally, a two-by-two factorial anova was used to explore the effect of sex and activity type (e.g., coloring vs. not coloring) on participants’ preto post-activity change in math anxiety levels. there was no significant interaction between sex and activity type on math anxiety levels, f(3, 106) = 4.13, p = 0.52. however, a main effects analysis revealed that sex contributed to the variation in the preto post-activity change in math anxiety. additionally, a main effect analysis revealed that participating in an activity type contributed to the variation in the preto post-activity change in math anxiety (see table 2). the interaction finding of this study is inconsistent to carsley and colleagues’ (2015) study that found an interaction effect between gender and condition, such that in the free coloring mandala condition male decreased anxiety more in comparison to females. however, in the analysis of sandmire et al. (2012), they found a similar main effect for activity type; however, in their study they did not find interaction effects between sex and activity, nor a main effect for sex. also, in the analytical results of carsley, heath, and fajnerova (2015) they did not find a main effect for gender or activity, nor an interaction effect between sex and condition. table 2. 2x2 anova for preto post-activity change in math anxiety source ss df ms f p sex (female/male) 3.25 1 3.25 6.12 0.02 activity (coloring/no coloring) 4.51 1 4.51 8.48 0.01 sex x activity 0.22 1 0.22 0.41 0.52 error 54.23 102 0.53 4. discussion the purpose of this study was to examine the effectiveness of mandala coloring on reducing business students’ math anxiety levels, after participating in a math anxiety written exercise in business statistics courses. results of this study supported the hypothesis that coloring a figure 4. post-treatment math anxiety mean comparisons by sex with 95% confidence intervals business, management and education, 2019, 17(2): 134–151 145 pre-drawn or structured mandala with complex, symmetrical geometric patterns and free coloring an unstructured mandala circle for fifteen minutes reduced participants’ math anxiety (post-treatment) in comparison to the doodling. the findings of this study replicated curry and kasser’s (2015) findings, which also reduced participants’ anxiety in comparison to doodling on a blank sheet of paper. previously, sandmire and colleagues (2012) demonstrated that coloring structured mandalas reduce anxiety in college students, and this study’s findings extends this research by providing initial evidence that coloring mandalas may reduce math anxiety in business undergraduate students. previous studies have confirmed that coloring mandalas calms individuals’ anxieties due to its therapeutic and meditative nature (henderson, rosen, & mascaro; 2007; sandmire et al., 2012). mandala art activities are effective because they enable individuals to express their inner conflicting emotions and psychological trauma through the expression of symbols, which are often difficult to disclose about with other people, which supports jung’s psychoanalytic theory (henderson, rosen, & mascaro, 2007; jung, 1973). to add, several studies suggest that coloring mandalas enhance the state of mindfulness; thereby supporting the mindfulness approach, which enables individuals to pay attention and focus on the present moment, which is beneficial in cognitive-based tasks educational contexts (carsley, heath, & fajnerova, 2015; chen et al., 2019; potash, yun chen, & yan tsang, 2016). as such, the findings of this study suggest that coloring mandalas has a short-term effect on students’ math anxiety levels; however, additional research needs to continue to examine mandalas’ effects on business students. additionally, this study provided support of sex differences on the math anxiety levels after performing a mandala coloring activity. in particular, males reduced their math anxiety to a greater extent than did the females after coloring a free-form and pre-drawn mandala than females did. this finding is consistent with carsley, heath, and fajnerova (2015) who found sex differences in anxiety levels among elementary children pre-to-post treatment (e.g., coloring a mandala). moreover, the math anxiety literature has documented sex differences in university students taking statistics courses (currie, 2014; maloney et al., 2012). one reason males might benefit more from coloring mandalas may be due to their ability to become attentive during the coloring process and their ability to achieve a meditative-like state, which helped them reduce their math anxiety levels (curry & kasser, 2005). also, males are more likely to make more coloring mistakes (e.g., coloring outside of the lines); however, they do not judge themselves during the art-creating activity; whereas females are more cautious about making coloring mistakes, which might have contributed to their anxiety levels (curry & kasser, 2005). to add, females might have suffered from the stereotype threat effect, which may have impacted their ability to reduce their math anxiety (pèrez-garín et al., 2017). because females are socialized to be nurturing and are stereotyped to struggle with mathematics, reducing females’ math anxiety might be more difficult in comparison to reducing males’ math anxiety (pèrez-garín et al., 2017). 5. limitations and future research the findings of this study need to be interpreted cautiously given the study’s limitations. firstly, this study used a convenient sample of undergraduate business students in statistics 146 l. ramos salazar. exploring the effect of coloring mandalas on students’ math anxiety in business... courses, which do not make the findings generalizable to other undergraduate students or courses. it is important to examine whether mandalas’ effect on math anxiety applies to other math-based courses in the curriculum of business schools such as finance, accounting, and economics, and other stem-based schools such as science, technology, engineering and mathematics. additionally, this study only included the students’ anxiety perceptions, and not the instructors’ anxiety perceptions. while few studies have examined the effectiveness of coloring mandala activities in the reduction of teachers’ stress and anxiety, among their long-lasting teaching experience, mandalas might be beneficial for educators as well (vitolo, 2018). future research can begin to implement mandala activities to investigate their effect on teachers’ anxiety as well, and among seasoned educators. secondly, this study’s sample was an american or western region sample, and the findings need to be interpreted with caution because the findings cannot be directly generalized to the educational contexts of other developing countries around the world. future studies may conduct a cross-cultural analysis to determine whether the findings of this study can be replicated in other developing countries. thirdly, this study only self-reported items to examine math anxiety, which might be affected by the social desirability bias, in particular, to avoid confessing inner anxiety about math. future research may integrate physiological measures such as blood pressure and pulse, to determine whether individuals were physiologically anxious about mathematics in business statistics courses. fourthly, this study only found initial evidence of the shortterm effect on math anxiety. future researchers may adopt longitudinal designs at different periods within the semester to determine if performing mandala art activities maintain their effect on math anxiety over time. fifthly, this study was limited in measures, while the only measure of interest in the study was math anxiety, future studies may conduct a mandala intervention along with other similar anxiety constructs such as statistics anxiety, computer anxiety, and test anxiety. sixthly, researchers may examine whether there are differences in performance by test grades or course grade in business statistics courses by examining preto-post anxiety levels. 6. practical implications several implications can be drawn from the findings of this study. to start, business statistics educators may implement a mandala coloring activity in their business statistics or math-based courses to reduce students’ math anxiety levels in their students. for instance, instructors may implement the activity before a test or a quiz to reduce their anxieties about the math problem-solving process. instructors can also include mandala participation assignments within their syllabus. however, implementing the mandala activity at the curriculumlevel may be more challenging given the rigid educational curricula of different college and department standards. for instance, business and engineering colleges that are accredited via aascb and/or abet might not be able to adapt mandala activities across the curriculum without proper assessment, and without having the mandala activity being linked to a specific course learning objective. besides, the applicability of the mandala activity has been shown to be most useful to the age threshold of university students between 18 to 59 years of age (van der vennet & serice, 2012), and studies have documented the mean age range business, management and education, 2019, 17(2): 134–151 147 of participants to be between 18.8 to 34.2 years of age (henderson, rosen, & mascaro, 2007; van der vennet & serice, 2012). as such, the mandala activity is beneficial to university-aged students within those age thresholds. moreover, given that sex differences were found in math reduction in the treatment groups, business educators need to recognize the alleviating effect it may have on males in comparison to females. because females struggle with math anxiety in business courses, educators may need to be mindful of these sex differences in their courses. furthermore, even though math anxiety continues to be prevalent in business statistics courses, not enough applications are being offered to help students manage their anxiety. finally, by exploring anxiety-reduction activities such as mandala coloring, students may be better equipped to manage their anxiety, and this may help them overcome perceived cognitive and performance challenges. conclusions because the prevalence of math anxiety continues to be high in undergraduate students (yeager, 2012; zanakis & valenzi, 1997), adopting a short intervention may help students cope with their anxieties in business statistics courses. the findings of this study provide initial support that introducing an art therapy intervention such as a mandala coloring activity may yield positive benefits such as math anxiety reduction in business students. instructors of face-to-face business statistics courses may consider adopting an art therapy activity within their course, or prior to anxiety-inducing course activities such as quizzes or exams to help students manage their math anxiety. given that math anxiety has been shown to be correlated to negative course outcomes such as low motivation and confidence, poor course grades, and a low gpa (k.  d.  hopkins,  b.  r. hopkins, & glass, 1996; lalonde & gardner, 1992; zeidner, 1991), additional research needs to examine whether reducing math anxiety with mandala activities prevent negative course performance outcomes. also, future research is needed to explore factors that might explain why sex differences occurred in this study despite participating in a mandala coloring activity. business instructors need to be aware of the potential perceived differences in math anxiety among their students, even after a short art therapy intervention. moreover, the findings of this study warrant future research examinations that investigate whether mandala coloring influences business students’ math anxiety and 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http://connection.ebscohost.com/c/articles/490287/relationship-between-mathematics-anxiety-social-desirability-as-function-gender copyright © 2019 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mails: k1271217@kingston.ac.uk; vincent_ajayi@yahoo.com comparing multivariate models’ forecasts of inflation for brics and opec countries olaoluwa vincent ajayi * department of economics, kingston university, london, penrhyn road, kt1 2ee, united kingdom received 25 june 2019; received in revised form 19 august 2019; accepted 26 september 2019 abstract. purpose  – this study identifies the most appropriately selected multivariate model for forecasting inflation in different economic environments. in specifying the multivariate models, the study test for the orders of integration of variables and for those that are nonstationary. for nonstationary variables, this study examines whether they are cointegrated. engle and granger (1987) establish that a cointegrating equation can be represented as an error correction model that incorporates both changes and levels of variables such that all of the elements are stationary. however, vars estimated with cointegrated data will be misspecified if all of the data are differenced because long-run information will be omitted, and will have omitted stationarity inducing constraints if all the data are used in levels. further, including variables in both levels and differences should satisfy stationarity requirements. however, they will omit cointegrating restrictions that may improve the model. of course, these constraints will be satisfied asymptotically; but efficiency gains and improved multi-step forecasts may be achieved by imposing the constraints (engle and granger 1987, p. 259). therefore, this study test for order of integration and compare inflation forecasting performance of different multivariate models for brics and opec countries. research methodology  – the following approaches were considered; the first approach is to construct a var model in differences (stationary form) to forecast inflation. the second approach is to construct a vecm without imposing cointegrating restrictions. the third approach is to construct a vec that imposes cointegrating restrictions on the vecm. this will help to understand whether imposing cointegrating restrictions via a vec improves long-run forecasts. research limitation – the proposed multivariate models focused on differencing and cointegrating restrictions to ensure the stationarity of the data, the available variables were combined and specified based on their level of integration to forecast inflation. for instance, a var model is estimated based on differenced variables i(0); the same holds true for vecm and vec models, where differenced variables and linear combinations of i(i) covariates are stationary. in future, multivariate models guided by economic theory rather than the order of integration of variables are suggested. findings – the result shows that the forecast performance of inflation depends on the nature of the economy and whether the country experiencing higher inflation or low inflation. for instance, the model that includes long-run information in the form of a specified cointegrated equation generally improves the inflation forecasting performance for brics countries and one opec country (saudi arabia) that has a history of low inflation. practical implications – this research will improve the policy makers decision on how to select appropriate model to forecast inflation over different economic environment. business, management and education issn 2029-7491 / eissn 2029-6169 2019 volume 17 issue 2: 152–172 https://doi.org/10.3846/bme.2019.10556 mailto:k1271217@kingston.ac.uk mailto:vincent_ajayi@yahoo.com https://orcid.org/0000-0001-8122-0061 https://doi.org/10.3846/bme.2019.10556 business, management and education, 2019, 17(2): 152–172 153 introduction previous studies clearly indicates that performance of inflation forecasting depends on the type of model in use, monetary policy regime, the sample period, the variables included in the model, transformations applied to the data for stationarity and structural breaks as well as the length of the forecasting horizon (lee, 2012, ozkan & yazgan, 2015). buelens (2012) and stock and watson (2008) stated that the accuracy of a forecasting model depends on the sample period in which they are estimated and evaluated. for example, the appropriate forecasting model to be used prior to the economic crisis may be different from that during the economic crisis. fanchon and wendel (1992) observed that the predictive performance of var and vec models depends on the length of the forecasting horizon. for instance, the multivariate vec model outperformed the var model 11 and 13 months ahead forecasting horizons. also, stock and watson (1999) argued that the phillips curve produced a better forecast when estimated with real economic variables (gdp) than when estimating the phillips curve with the unemployment variable. multivariate specifications based on vars and cointegration have been extensively used for modelling and forecasting macroeconomic variables in developed countries (especially, europe and the united states) that have a history of low inflation (hoffman, anderson, & rasche, 2002; shoesmith, 1992, 1995a, 1995b; timothy & thoma, 1998). however, these methods have not been used to forecast inflation in many emerging economies such as opec and brics countries despite the importance of many of these countries to the global economy. this study fills this gap by evaluating the forecasting performance of inflation using multivariate var and cointegrating models for opec and brics countries. brics countries comprise brazil, russia, india, china and south africa. in recent times, they have emerged to form an international organisation body that will influence global financial trade and form a serious competitor to western economies. accordingly, there are many common features between brics nations. for instance, they are fast developing nations with one of the largest economies in their regions. china has the largest economy in asia and is second only to america in the world. russia is a member of the g8 advanced leading countries in the world, and india has the third-largest economy in asia. south africa has the second-largest economy in africa after nigeria, while brazil has the largest economy in south america (world economic outlook, 2019). global sherpa (2014) found brics countries ranked among countries in the world with largest and most influential economies in the 21st century. they account for 25% of world gdp, over a quarter of the world’s land area and more than 40% of the global population. they control almost 43% of global foreign originality/value  – these methods have not been used to forecast inflation for many emerging economies such as opec and brics countries despite the importance of many of these countries to the global economy. this study fills this gap by evaluating the forecasting performance of inflation using multivariate var and cointegrating models for opec and brics economies. keywords: inflation forecasting, cointegrating and stability tests. jel classification: b22, c12, c22, c52, c53, e31. 154 o. v. ajayi. comparing multivariate models’ forecasts of inflation for brics and opec countries exchange reserves, and their share keeps rising (the goldman sachs group, 2007; agtmael, 2012). the organisation of petroleum exporting countries (opec) comprise iran, iraq, kuwait, saudi arabia, venezuela, qatar, angola, indonesia, libya, united arab emirates, algeria and nigeria. opec has a rich diversity of cultures, languages, religions and united by their shared status as oil-producing developing countries. many of these countries heavily depend on exportation of petroleum, which has contributed to the higher percentage of their export earnings. for example, nigeria earned 70% of its total export revenue from crude oil, kuwait derived almost 60% of its gross domestic product and  93% of export revenue from crude oil, libya acquired almost 95% of its government revenues. in qatar, oil and natural gas accounted for 60% of the country’s gross domestic product and around 85% of export earnings. in saudi arabia, the oil and gas  sector contributed to  50% of the gross domestic product and 90% of export earnings and in venezuela, oil revenues accounted for about 95% of export earnings and 25% of gross domestic product (organization of the petroleum exporting countries, 2019). in total, the opec members produce almost 40% of the world’s crude oil, which represents almost 60% of the total petroleum traded internationally, produces about a third of the world’s daily consumption of 90 million barrels of crude oil, and controls 78% of the world’s crude oil reserves (energy information administration, 2013). this paper forecast inflation using different multivariate specifications. in particular, it is aims to identify the most appropriately selected multivariate model for forecasting inflation in different economic environments. in specifying the multivariate models, this study faced different decisions, namely the variables to be included and how to deal with the nonstationarity variables. for non-stationary variables, this study test for the orders of integration and examine whether they are cointegrated. modelling and forecasting any series that is not stationary may lead to spurious results. engle and granger (1987) establish that a cointegrating equation can be represented as an error correction model that incorporates both changes and levels of variables such that all of the elements are stationary. however, “ vars estimated with cointegrated data will be misspecified if all of the data are differenced because long-run information will be omitted, and will have omitted stationarity inducing constraints if all the data are used in levels. further, including variables in both levels and differences should satisfy stationarity requirements. however, they will omit cointegrating restrictions that may improve the model. of course, these constraints will be satisfied asymptotically; but efficiency gains and improved multi-step forecasts may be achieved by imposing the constraints ” (engle & granger, 1987, p. 259). this study considers different multivariate specifications using differencing and cointegrating restrictions to ensure stationarity and to produce forecasts. the following approaches were considered, two of which are discussed by timothy and thomas (1998). the first approach is to construct a var model in differences (stationary form) to forecast inflation. the second approach is to construct a vecm without imposing cointegrating restrictions. the third approach is to construct a vec that imposes cointegrating restrictions on the vecm. this will help understand whether imposing cointegrating restrictions via a vec improves long-run forecasts. the empirical analysis addresses the following issues: which of these models produces the best forecasting performance for each country? is there a generbusiness, management and education, 2019, 17(2): 152–172 155 ally best performing specification across countries or for different forecasting horizons? is it better to treat the oil price as endogenous or exogenous in multivariate models? are models that use unemployment to capture the phillips curve effect preferred to those that employ the output gap (when both variables are available)? lastly, this study investigates whether each of the multivariate model (var, vecm and vec) is structurally stable. if not, what is the implication of the instability for forecasting future inflation and what forecasting methods work well in the face of instability? 1. literature review there is a growing consensus that theoretical models are more accurate in forecasting when the economy is weak, especially during periods of economic crises, compared with arima, naïve and var models (buelens, 2012; dotsey, fujita, & stark, 2011; onder, 2004). for example, onder (2004) used quarterly data between 1987: q1 and 1999: q4 to forecast turkish inflation with the phillips curve, arima, vector autoregression (var), vecm and naive models. the evidence revealed that the phillips curve model outperformed other models for one-quarter ahead forecasts and the prediction of the 2001 financial crisis. this result is similar to the study of pretorious and rensburg (1996) who forecasted south african inflation and compared the forecasting abilities of different theoretical models (phillips curve model, traditional monetarist and money demand specifications) with the time series model (arima) for the period 1991:q1‒ 1995:q3. the estimation period was divided into two different samples to reflect periods of stable and higher inflation. the study found that during the periods of higher inflation, the forecast produced by the money demand, phillips curve and traditional monetarist forecast models generated the lowest rmse and mae compared to the arima model. however, the arima models outperformed other multivariate models and theoretical model during periods of stable and low inflation. a few studies also found multivariate var model produce a better forecast than alternative models over the long horizon (canova, 2007; onder, 2004; fritzer, moser, & scharler, 2002; fanchon & wendel, 1992). for example, gupta, eyden, and waal (2015) examine whether the global vector autoregressive (gvar) approach forecasts better than a vector error correction model (vecm) and a bvar model for two key south african variables, gdp output and inflation between the period 1979q2‒2009q4. evidence revealed that the global multivariate var (gvar) model outperforms vecm in forecasting inflation, especially at longer forecast horizons (more than four quarters ahead). however, the bvar model was found to performs better than the best vecm when forecasting the output. similarly, fanchon and wendel (1992) specified different multivariate var models (vector error correction (vec), var and bayesian var models) to forecast cattle prices between the period of 1970‒1989. the vec model differenced the data to achieve stationarity and used an errorcorrection term to model the long-run information. the performance of all the estimated models was compared. the result shows that the var model generated the lowest mean square error for the 58‒ month horizon forecast. the vec model outperformed the var model for 11 and 13-month horizons. the var and vec models outperformed the bayesian var models. they concluded that the performance of var and vec models depend on the length of the forecast horizon. 156 o. v. ajayi. comparing multivariate models’ forecasts of inflation for brics and opec countries recent literature indicates the forecasting by a multivariate model (either by var or vecm) generally better than that of an alternative model (arima and naive model). for example, shan and ghonasgi (2016) forecasted indian inflation over a 24-period horizon and compared the predictive performance of the var with arima models between 1994–2008. the var model has better forecasting performance than the arima model. also, kelikume and salami (2014) applied the arima and var models to forecast inflation for nigeria between january 2003 and december 2012 and found the var model outperformed the arima specification. the conclusion from this section is that the theoretical model, especially the phillips curve, more accurately forecasts inflation when the economy is weak, especially during the economic crises, compared with the univariate arima model. in contrast, the arima models outperform other multivariate models and theoretical model (phillips curve) during periods of stable and low inflation (dotsey & fujita, 2011; lee, 2012; mitra & rashid, 1996; nadal-de simone, 2000; pretorious & rensburg, 1996). when comparing var models with vecm models, the former outperformed the latter over the longer horizon (more than four quarters ahead) (fanchon & wendel, 1992; gupta et al., 2015). this study compares the forecasting performance of multivariate var-based specifications and the naïve model for selected opec and brics countries. there have been very few such studies for these countries, especially for samples covering the recent period. 2. empirical methods this section describes the process of modelling with vector autoregression (var) based specifications and the naïve model. var is a stochastic process model that captures linear interdependencies among multiple time series and is estimated using differenced stationary data. the vecm model can be distinguished from the var model by including an error‒correction term and is estimated with the nonstationary series that is known to be cointegrated. the vec model imposes a cointegrating restriction on vecm. the unrestricted var approach models every endogenous variable in the system as a function of the lagged values of all of the endogenous variables in the system and can be specified as: ty = 1 1ta y − +….+ p t pa y − + tbx + te , (1) where ty is a k vector of the endogenous variables, tx is a d vector of exogenous variables, 1a ,….., pa and b are matrices of coefficients that need to be estimated, and te is a vector of innovations that may be contemporaneously correlated however they are uncorrelated with their own lagged values. the vecm representation of (1) is: ty∆ = δ + tbx + 1ty −π + 1 1ty −γ ∆ +….+ 1 1p t py− − +γ ∆ + te , (2) where, iγ , i =1 ,…, 1p − , (which are functions of ia ) reflect the short-run dynamic relationship. ty are independent ( )1i variables, ∆ = ( )1 l− while l is the lag operator, δ is the intercept, π is the matrix containing long-run information and te is the residual. the granger representation theorem indicates that if the matrix π has reduced rank r < k it can be decomposed as π = ′αβ . the dimension of α and β is r x k . the number of cointegrating equations is r, where β is the cointegrating vector and α is the speed of adjustment to the long-run equilibrium defined by the cointegrating relationships, which is determined business, management and education, 2019, 17(2): 152–172 157 primarily by the likelihood ratio (lr) trace test. imposing r cointegrating equations on (2) gives the vec representation. in this study, 1r = for all our vec specifications. in var modelling, the first step is to estimate a var model with an appropriate lag length sufficient to capture the full dynamics of the system. the choice of appropriate lag order (p) is important because too short a lag length may not be able to remove the autocorrelation in the residuals and too long a lag length may reduce the precision (efficiency) of the estimates due to a reduction of degrees of freedom (lack, 2006). this research chooses the maximum possible lag length (p*) as 10 for all countries except where only lower orders can be estimated. different maximum lag lengths will be considered when the experimentation reveals a lag length below 10 cannot reject the hypothesis of no autocorrelation. also, the akaike information criterion (aic) and schwarz criterion (sc) will be employed to determine the initial lag length p**. if there is no evidence of autocorrelation (of orders 1, 2, … 10), this initial lag length is selected. however, if there is evidence of autocorrelation, the var model is re-estimated using a lag length of p**+1. the process is repeated until the var model cannot reject the hypothesis of noautocorrelation at the 5% level. further, atkeson and ohanian (2001) argued that an inflation forecasting model based on some hypothesised economic relationship cannot be considered a useful guide for policy if its forecasting performance is not better than a simple naïve model. this study estimates the naïve model as a benchmark model and compares its forecasting performance with the best selected multivariate models. the naïve model can be estimated by equating the observed value in the last quarter of the estimation period to forecast the present quarter, that is: t hy + = ty , (3) where t hy + is the h period ahead forecast and ty is the observed data in the last period of the estimation sample. 3. data and variable selection quarterly and annual data are collected from the world bank, united nation (un data), organisation for economic co-operation and development (oecd) and international financial statistics (ifs) published by the international monetary fund (imf). in selecting variables for the multivariate model, this study focuses on those commonly and mostly used to explain and forecast inflation in the literature as well as where the data is available (because there are some data constraints). an eclectic theoretical approach is considered in the sense of combining variables from different economic theories in the var specification. the approach follows in this study includes the following steps: the var model is first specified based on variables available at quarterly frequency across the whole sample for any particular country. the variable may include money supply, interest rates and consumer prices (from which inflation can be generated). the ability of var model based on these variables are examined to forecast inflation. to avoid model misspecification (in particular omitted variable issues), additional information is incorporated, that is, added variables that are available only annually over the available sample and use frequency conversion tools to generate quarterly series. in this case, the var models, including all the available inflation determinants for each country are considered. in particular, the vars are based on (a subset of ) consumer prices, money supply, interest rates, real effective exchange rates, the output gap (or, alternatively the 158 o. v. ajayi. comparing multivariate models’ forecasts of inflation for brics and opec countries unemployment rate) as well as the world oil price. in addition, the index of industrial production or real output measured by real gdp is used to construct the output gap. when estimating output gap, this study follows stock and watson (1999) and use the hodrick-prescott (hp) filter. the general features of selected macroeconomic variables, shown in table 1, were identified in each country by mainly focusing on seasonality and stationary characteristics to avoid the issue of seasonal integration. for each series, the autocorrelation functions of each series were plotted and if this indicated seasonality, the data was adjust seasonally using the census x13 method. the seasonal indices obtained from the adjustment process were saved and used to reintroduce seasonality into the forecasts produced by this study. this study also employs the df-gls, augmented dickey-fuller (adf), phillips and perron (pp) and kwiatkowski–phillips– schmidt–shin (kpss) unit root tests to identify the variables’ orders of integration (vogelsang & perron, 1998; perron, 1989). a summary of the data employed for each country and whether the data is seasonally adjusted or not as well as the orders of integration of these variables is given in table 1, 2 and 3, respectively. all variables are transformed using natural logarithms except for the interest rate, unemployment and output gap. table 1. summary of data availability for all the countries countries sample variables brazil 1999q4 2012q4 p, m, r, ree, un, gap and oilp russia 2003q2 2012q4 p, m, r, ree, un, gap and oilp india 1963q1 2012q4 p, m, r, gap and oilp china 1992q1 2012q4 p, m, r, ree, gap and oilp south africa 1995q2-2012q4 p, m, r, ree, gap and oilp algeria 1999q2 2012q4 p, m, r, ree, gap and oilp angola 2002q4 2012q4 p, m, r, gap and oilp nigeria 1998q4 2012q4 p, m, r, ree, gap and oilp saudi arabia 1983q1 2012q4 p, m, r, gap and oilp p = consumer price, m = money supply, ree = real exchange rate, gap = output gap, r = interest rate, un = unemployment and oilp = oil price. table 2. summary of whether the data is seasonally adjusted or not countries / variables bra rus ind chi sou nig alg ang sau p un sa sa un un sa sa un un m sa un un un un un un sa un r un un un un un un un un ree un un un un un un un u un sa oilp un un un un un un un un un gap un sa un un un un un un un sa indicates seasonally adjusted series and un indicates unadjusted series. blank indicates where the data is unavailable for the variable in that particular country. the country is represented by its first three letters. business, management and education, 2019, 17(2): 152–172 159 table 3. orders of integration of the data variables/countries bra rus ind chi sou nig alg ang sau p i(1) i(1) i(1) i(1) i(1) i(1) i(1) i(1)** i(1) m i(1) i(1) i(2) i(1) i(1) i(1) i(1) i(1) i(1) r i(1) i(0) i(0) i(1) i(1)* i(1) i(1) i(1)* ree i(1) i(1) i(1) i(1) i(1) i(1) i(1) u i(1) i(1) oilp i(1) i(1) i(1) i(1) i(1) i(1) i(1) i(1) gap i(0) i(1) i(0) i(0) i(0) i(0) i(0) i(0) i(0) * indicates a variable that may be stationary around a structural break while ** denotes a variable that may be i(1) around a structural break. 4. model specifications based on the orders of integration of the data reported in table 3, the following three multivariate models are estimated: first, an unrestricted var model that includes variables only in stationary form (typically through differencing); second, a vecm that includes all i(1) variables as endogenous. a test is conducted to determine whether a linear combination of the nonstationary variables is cointegrated, and if cointegrated the model is used to produce forecasts for inflation. third, a vec model is constructed that imposes a single cointegrating equation on the vecm to forecast inflation. based on this analysis, the forecasting performance of all three multivariate specifications (var, vecm and vec) are compared to the naïve model and to identify the best inflation forecasting model. for the unrestricted var, four different variants for brazil and russia are estimated.1 the first var model includes the output gap and excludes unemployment with all other available variables included. the second var includes unemployment and excludes the output gap with all other available variables included. the aim of these two vars is to consider whether the var that includes the output gap provides superior forecasts to the var model that includes unemployment. the remaining two vars are the same as the first two vars, except the oil price is treated as exogenous because international oil prices are best regarded when determined outside the system for some countries  – although, for oil producing countries or large oil-consuming countries, such as china, the assumption of endogeneity may be more appropriate. that is, these vars considers oil price exogenous and all other available variables endogenous. the motivation behind the latter two vars is to examine the impact of treating oil prices as exogenous on the inflation forecasts. for the remaining countries (china, south africa, algeria, angola, nigeria and saudi arabia), two vars were estimated. the first var model considers all variables as endogenous. the second var model treats the oil price as exogenous and all other available variables as endogenous. all var models consider the intercept to be exogenous. the model 1 these two countries have two substitute variables for the economic activity measure (output gap and unemployment). 160 o. v. ajayi. comparing multivariate models’ forecasts of inflation for brics and opec countries where oil prices are specified as exogenous, the oil price forecast produced between 2013q1and 2014q4 based on an arimax forecasting method is considered. a summary of the valid var, vecm and vec models that are free from evident autocorrelation are available in table 4 and 5 for stability test. 5. stability tests for multivariate models the stability of each multivariate model in table  4 and 5 were determined to understand whether they have stable coefficients across the entire estimation sample. if not, the implications of the instability on forecasting inflation and type models that work well in the face of instability were examined. this study performs a cusum test for stability tests. the cusum test is based on the cumulative sum of the recursive residuals. if the line of the cusum test statistics fluctuates within the two 5% critical lines, the estimated models are said to be stable. in contrast, the models are unstable if the line of the cusum test goes outside the area between the 5% critical lines. the summarised results of the stability tests are available in tables 4 and 5 for brics and opec countries, respectively. table 4. summary of the stability tests for brics countries model cusum test results brazil var(gap) unstable var(un) unstable var(gap)_exo stable var (un)_exo stable vecm(un) stable vecm(un)_exo stable vec(un) unstable vec(un)_exo stable russia var(un) stable var(un)_exo unstable vecm (un) stable vecm(gap) stable vecm(gap)_exo stable vecm(un)_exo stable vec(un) unstable vec(gap) unstable vec(gap)_exo unstable vec(un)_exo stable business, management and education, 2019, 17(2): 152–172 161 model cusum test results india var stable var_exo stable vecm stable vecm_exo stable vec unstable vec_exo unstable china var unstable var_exo unstable vecm stable vecm_exo stable vec unstable vec_exo unstable south africa var unstable var_exo stable vecm stable vecm_exo stable vec unstable vec_exo unstable stable  = result of the cusum test where the lines of cusum tests lie within the two critical lines. unstable = result of the cusum test where the lines of cusum tests lie outside the two critical lines; var = var model that considers all variables endogenous; vecm = multivariate model estimated with all nonstationary variables that consider all variables endogenous; vec = multivariate model imposes cointegrating restrictions on the vecm and considers all variables endogenous.2 2 var_exo = var model that considers oil price exogenous and other variables endogenous; vecm_exo = vecm specification that considers oil price as exogenous and other variables as endogenous; vec_exo = vec model that considers oil price as exogenous and other variables as endogenous. for brazil and russia, where the unemployment and output gap variables are available; var(un) = var, where all variables are considered endogenous except output gap, which is excluded; var(gap) = var where all variables are considered endogenous except the unemployment variable, which is excluded; var(un)_exo  = var where oil price is specified as exogenous and all other variables as an endogenous variable, except for output gap; var (gap)_exo = var where oil price is specified as exogenous and all other variables as endogenous variables, except for the unemployment variable; vecm(un) = vecm that considers all variables endogenous except for the output gap; vecm(un)_exo  = vecm where oil price is specified as exogenous and all other variables as endogenous variables, except for the output gap, which is excluded; vecm(gap) = vecm that considers all variables endogenous except for the unemployment variable; vecm(gap)_exo = vecm where oil price is specified as exogenous and all other variables as endogenous variables, except for the unemployment variable, which is excluded; vec(un) = vec, where all variables are considered endogenous except for the output gap, which is excluded; vec(gap) = vec, where all variables are considered endogenous except for the unemployment variable, which is excluded; vec(un)_exo = vec, where oil price is specified as exogenous and all other variables as endogenous except for output gap; vec(gap)_exo = vec, where oil price is specified as exogenous and all other variables are endogenous variables except the unemployment variable. 162 o. v. ajayi. comparing multivariate models’ forecasts of inflation for brics and opec countries table 5. summary of the stability tests for opec countries model cusum test results algeria var stable var_exo stable vecm stable vecm_exo stable vec unstable vec_exo unstable angola var unstable var_exo unstable vecm unstable vecm_exo stable vec unstable vec_exo unstable nigeria var unstable var_exo stable vec unstable vec_exo unstable saudi arabia var stable var_exo stable vecm stable vecm_exo stable vec unstable vec_exo unstable note: see table 4. for the brics countries (table  4), the cusum test suggests evidence of instability for all models except the following: all vecm models for all selected countries, all vars specification for india, south africa and brazil (except for the var where all variables included as endogenous except the unemployment variable, which is excluded, the var where all variables are considered endogenous except output gap, which is excluded for brazil and the var model that considers all variables endogenous for south africa). the following models are also structurally stable: the vec model where the oil price is specified as exogenous and all other variables included as endogenous variable except output gap for brazil and russia. business, management and education, 2019, 17(2): 152–172 163 for opec countries (table  5), all models show evidence of structural instability except the var and vecm specifications, which consider all variables endogenous for saudi arabia, the vecm model that specifies oil price as exogenous for angola, as well as the var and vecm specifications for algeria. in general, the cusum test indicates evidence of instability in the coefficients for the var, vecm and vec for both brics and opec countries (except vecm for brics). this study produces forecasts for all models presented in table 4 and 5 despite the evidence of structural instability for many of these specifications because the literature suggests that models being subject to structural instability may or may not affect their forecasting performance (clark & mccacken, 2006; stock & watson, 1999). hence, it will be interesting to see whether models with evident instabilities have poor forecasting performance in either absolute or relative terms. 6. forecast performance and evaluation the m-step ahead forecasts are made for the valid var, vec and vecm models reported in table 4 and 5. following sarantis and stewart (1995), alles and horton (2002); ogunc et al. (2013) and garcia, medeiros, and vasconcelos (2017); the forecasting performance were compared using rolling regressions. first, a series of rolling regressions were conducted and out-of-sample forecasts calculated for all the multivariate models free from autocorrelation. each model is estimated over the sample period available for each country with the period ending in 2012q4 (the start of the estimation period varies across models and countries). these models are used to produce forecasts over the ex-post forecasting period 2013q1– 2014q4. these produce 1-step ahead forecasts for 2013q1, 2-step ahead forecasts for 2013q2 and so on up to 8-step ahead forecasts for 2014q4. the identified models were then re-estimated by adding one observation to the end of the sample, hence the models are estimated over a period ending in 2013q1. these estimated models are used to produce 1-step ahead forecasts for 2013q2, 2-step ahead forecasts for 2013q3 and so on up to 7-step ahead forecasts for 2014q4. this process is then repeated with one observation being added to the estimation period (with the last rolling regression’s sample period ending in 2014q3), and m-step ahead forecasts produced up to the end of the forecast period. these rolling regressions produce eight 1-step ahead forecasts, seven 2-step ahead forecasts, six 3-step ahead forecasts, five 4-step ahead forecasts and so on up to one 8-step ahead forecast for each estimated model. second, the forecasting performance of each model over the different step ahead forecasting horizons using the root mean squared error (rmse), mean absolute percentage error (mape) and theil’s inequality coefficient (u) are calculated. the best forecasting model over any horizon will have the lowest value of these forecasting performance measures. to avoid space, only the forecast produced by the naïve model with the best forecasting multivariate models for each country were recorded, shown in the tables 6 and 7 (the details of the forecast produced by the var, vecm and vec are available on request). 164 o. v. ajayi. comparing multivariate models’ forecasts of inflation for brics and opec countries table 6. summary of the best forecasting multivariate models for opec countries 1-step 2-step 3-step 4-step 5-step 6-step 7-step 8-step algeria naïve model rmse 0.012 0.017 0.019 0.029 0.020 0.016 0.016 0.017 mape 76.740 111.200 108.200 136.000 147.200 55.960 30.380 38.770 u 0.173 0.267 0.265 0.243 0.266 0.195 0.1670 0.168 var_ exo rmse 0.007* 0.012* 0.017* 0.027 0.027 0.025 0.016* 0.0003* mape 44.074* 101.566* 102.855* 257.60 207.500 94.940 29.649* 30.555* u 0.098* 0.180* 0.255* 0.338 0.313 0.263 0.157* 0.003* vec (gap)_ exo rmse 0.012 0.016 0.019 0.021* 0.016* 0.014* 0.016 0.029 mape 66.931 114.508 111..534 132.570* 112.274* 38.803* 30.550 48.950 u 0.157 0.240 0.274 0.207* 0.232* 0.185* 0.204 0.324 angola naïve model rmse 0.007 0.013 0.017 0.022 0.022 0.015 0.013 0.013 mape 18.100 20.050 20.730 21.680 29.990 30.640 27.600 16.970 u 0.094 0.116 0.117 0.194 0.147 0.148 0.130 0.088 var rmse 0.007* 0.008* 0.007* 0.006* 0.009* 0.009* 0.008* 0.005* mape 7.203* 12.626* 19.545* 20.047* 27.366* 18.621* 17.984* 16.308* u 0.047* 0.085* 0.111* 0.136* 0.138* 0.097* 0.091* 0.079* saudi arabia naïve model rmse 0.004 0.007 0.011 0.014 0.017 0.020 0.025 0.026 mape 10.980 21.810 36.910 50.880 62.060 72.960 87.830 92.610 u 0.070 0.128 0.238 0.342 0.450 0.574 0.771 0.862 vecm rmse 0.002* 0.003* 0.003* 0.003* 0.003* 0.002* 0.001* 0.001* mape 7.828* 10.060* 10.930* 10.270* 12.710* 9.188* 2.891* 2.427* u 0.046* 0.061* 0.064* 0.058* 0.063* 0.046* 0.015* 0.012* nigeria naïve model rmse 0.025 0.044 0.066 0.078 0.086 0.090 0.099 0.123 mape 21.830 48.040 72.650 92.760 101.500 107.800 116.500 153.000 u 0.139 0.218 0.296 0.330 0.350 0.359 0.377 0.433 var rmse 0.021 0.036 0.048* 0.050* 0.037* 0.027* 0.024* 0.013* mape 19.121 38.90 54.872* 59.583* 37.772* 29.997* 28.762* 17.152* u 0.111 0.182 0.220* 0.242* 0.193* 0.147* 0.112* 0.079* var_ exo rmse 0.019* 0.033* 0.051 0.053 0.041 0.031 0.025 0.044 mape 18.075* 37.632* 56.531 63.63 47.18 36.42 29.73 49.690 u 0.105* 0.169* 0.238 0.248 0.204 0.159 0.133 0.199 see table 6 for definition of each model. the best multivariate forecasting model is identified by measure (rmse, mape and u) and asterisk* for each forecasting horizon (1, 2, …, 8 steps ahead). business, management and education, 2019, 17(2): 152–172 165 table 7. summary of the best forecasting multivariate models for brics countries 1-step 2-step 3-step 4-step 5-step 6-step 7-step 8-step brazil naïve model rmse 0.005 0.006 0.006 0.004 0.004 0.027 0.028 0.002 mape 6.699 9.612 8.738 4.885 5.417 9.859 12.310 13.014 u 0.040 0.052 0.049 0.029 0.025 0.053 0.066 0.015 var(un) rmse 0.006 0.012 0.013 0.011 0.015 0.020 0.014* 0.001* mape 8.533 17.66 18.470 17.650 23.510 28.970 12.090* 12.440* u 0.046 0.090 0.097 0.085 0.110 0.143 0.002* 0.011* vec(un) rmse 0.004 0.007 0.006 0.004 0.009 0.019 0.017 0.011 mape 5.181 10.100 6.880* 4.906 9.919 24.460 24.110 18.080 u 0.029 0.056 0.045* 0.029 0.066 0.137 0.133 0.083 vec (un)_exo rmse 0.004* 0.006* 0.005* 0.003* 0.003* 0.013* 0.019 0.017 mape 5.084* 7.054* 7.304 4.479* 3.542* 9.830* 29.040 28.860 u 0.021* 0.044* 0.052 0.025* 0.022* 0.012* 0.134 0.126 russia naïve model rmse 27.111 49.350 48.790 54.980 73.400 51.870 47.930 85.540 mape 23.760 45.730 44.610 49.940 65.090 52.180 55.600 112.600 u 0.116 0.196 0.194 0.218 0.285 0.218 0.212 0.360 var(gap) rmse 0.008 0.015* 0.0185 0.013 0.017 0.031 0.042 0.053 mape 8.867 14.690* 19.313 16.138 19.918 37.316 49.234 56.152 u 0.058 0.100* 0.124 0.085 0.122 0.227 0.320 0.394 var(un) rmse 0.009 0.019 0.015* 0.012* 0.051 0.022 0.027* 0.031* mape 8.208 15.218 15.205* 14.408* 23.698 24.699 28.006* 33.366* u 0.063 0.130 0.106* 0.086* 0.104 0.155 0.187* 0.200* var(un)_ exo rmse 0.009 0.022 0.022 0.019 0.013* 0.019* 0.034 0.059 mape 9.095 20.789 21.252 20.689 0.150* 22.815* 40.623 62.371 u 0.064 0.153 0.148 0.124 0.088* 0.131* 0.251 0.453 vec(gap) rmse 0.007* 0.015 0.022 0.021 0.025 0.037 0.045 0.056 mape 7.940* 18.103 23.916 25.771 27.892 43.893 51.781 58.632 u 0.049* 0.105 0.150 0.147 0.186 0.285 0.349 0.414 vec (gap)_exo rmse 0.009 0.021 0.0273 0.027 0.0279 0.039 0.056 0.077 mape 11.667 26.099 33.324 32.166 28.511 47.853 65.972 80.493 u 0.057 0.100 0.192 0.197 0.209 0.312 0.479 0.674 india naive model rmse 10.701 17.570 22.240 17.730 19.090 19.770 29.290 37.020 mape 15.215 24.670 18.810 29.760 28.570 29.400 33.610 48.740 u 0.152 0.133 0.132 0.182 0.188 0.193 0.141 0.196 vec rmse 0.012* 0.018* 0.018* 0.021* 0.017* 0.017* 0.016* 0.014* mape 14.620* 20.910* 17.490* 28.760* 26.560* 26.660* 23.870* 28.890* u 0.066* 0.104* 0.110* 0.132* 0.117* 0.124* 0.122* 0.126* 166 o. v. ajayi. comparing multivariate models’ forecasts of inflation for brics and opec countries 1-step 2-step 3-step 4-step 5-step 6-step 7-step 8-step china naïve model rmse 1.541 2.360 2.806 3.720 5.423 7.522 10.660 11.250 mape 7.191 13.788 15.915 19.417 23.848 27.91 39.005 61.91 u 0.086 0.770 0.132 0.129 0.122 0.173 0.344 0.363 var rmse 0.006 0.011 0.010 0.013 0.016 0.017* 0.023* 0.030* mape 10.281 16.464 14.271 18.873 22.643 25.104* 38.205* 51.647* u 0.057 0.091 0.093 0.121 0.154 0.168* 0.240* 0.348* vec rmse 0.004* 0.007* 0.010* 0.012* 0.016* 0.022 0.026 0.033 mape 5.001* 11.636* 12.310* 18.109* 22.292* 30.721 42.81 55.378 u 0.034* 0.067* 0.089* 0.113* 0.114* 0.214 0.282 0.382 south africa naïve model rmse 4.512 10.640 12.950 11.040 4.355 4.579 2.757 10.560 mape 10.041 13.900 14.43 9.856 8.077 12.816 18.175 12.350 u 0.118 0.112 0.091 0.043 0.047 0.059 0.061 0.078 vec rmse 0.006 0.009 0.011* 0.006* 0.005* 0.007* 0.007* 0.003* mape 9.001 12.676 13.350* 8.706* 6.174* 10.260* 10.085* 5.751* u 0.057 0.060 0.061* 0.040* 0.045* 0.040* 0.058* 0.029* vec_exo rmse 0.006* 0.009* 0.011 0.007 0.007 0.011 0.011 0.006 mape 8.716* 12.199* 15.098 12.280 12.280 16.500 15.631 10.681 u 0.057* 0.078* 0.093 0.066 0.076 0.093 0.088 0.056 see table 6 for definition of each model. the best multivariate forecasting model is identified by measure (rmse, mape and u) and asterisk* for each forecasting horizon (1, 2, …, 8 steps ahead). 7. empirical results table  6 summarises the best forecasting multivariate models for opec countries in each forecasting horizon while table  7 summarises the best forecasting models for the brics nations in each forecasting horizon. a general impression from the tables is that there is no single model that dominates across all countries. it was generally found that while both unemployment and the output gap are available as indicators of the phillips curve (for brazil and russia), models including unemployment outperform those that use output gap. this view is contrary to the studies of bjornland, jore, smith, and thorsrud (2008) and stock and watson (1999), who argue that models including output gap contain the most valuable information in inflation forecasting rather than models based on alternative indicators (unemployment). the var model often produces the best forecasting performance for opec countries except in saudi arabia, which has a history of relatively low inflation. var models have superior forecasting performance over all forecasting horizons for algeria (except over the 4 to 6 step-ahead horizons), angola and nigeria. in contrast, the var model rarely produced the best forecasts for brics countries. var models were only favoured over the 7 to 8 step ahead horizons for brazil, 6 to 8 step-ahead horizons for china and the 2 to 8 step ahead horizons for russia. vecm was only favoured for 1 out of the 4 selected opec countries business, management and education, 2019, 17(2): 152–172 167 (saudi arabia over all forecasting horizons) and was never favoured for brics countries. the vec models have better forecasts over all forecasting horizons for all brics countries with the following exceptions: china over the 6 to 8 step ahead horizons, brazil over the 7 to 8 step ahead horizons and russia over the 2 to 8 step ahead horizons. however, the vec model is rarely favoured for the selected opec countries (vec is only favoured over the 4 to 6 step ahead horizon for algeria). the naïve model was never favoured. in general, the results of this study indicate that var models have the best forecasting performance for opec countries while the vec model produces better forecasts for brics countries. the forecasting performance of the vec model for brics countries and possibly the vecm for saudi arabia may be because inflation in many of these countries is relatively moderate and kept in check by good monetary policy, especially when compared with opec countries. as noted earlier, forecasts are most likely to improve by applying error-correction techniques if the data strongly supports the cointegration hypothesis (engle & yoo, 1987). the vec specification can also minimise the effect of model misspecification and thus avoid the long-run information lost due to non-differentiating a stationary variable (see christoffersen & diebold, 1998; sa-ngasoongsong, bukkapatnam, kim, iyer, & suresh, 2012). also, the evidence of good forecast performance of the unrestricted var models for opec countries may not be surprising because these var models have been estimated using the stationary series. the model estimated using first differencing (stationary data) has the ability to capture different characteristics of instability in high inflation economy such as oepc countries. indeed, the results of this study generally support the view that the inclusion of cointegrating equations improve the inflation forecasting performance for brics countries and saudi arabia (both have a history of low inflation). notably, the naïve benchmark models were never favoured over the best forecasting multivariate models for each country. this result contrasts with that of atkeson and ohanian (2001) who found that the naïve model produces superior forecasts than the multivariate var-based models. whether the inclusion of oil prices as exogenous or endogenous improves forecasting performance differs substantially according to the form of model employed and the country under consideration. for both brics and opec countries, the model that considers the oil price endogenous generally secures better forecasting performance than the model that considers the oil price exogenous. exception include algeria over all forecasting horizons, brazil over the 1 to 6 step ahead horizons, russia over the 5 to 6 step ahead horizons and over the 1 to 2 step ahead horizons for both south africa and nigeria. this is interesting because both brics and opec countries dependent heavily on oil import for domestic consumption and/or oil export for revenue (organization of the petroleum exporting countries, 2019). therefore, increases or decreases in the global oil price will directly affect the government revenue and expenditure in many of these countries. however, the impact of oil shock on inflation in few economies especially algeria, brazil, south africa, russia and nigeria, over a few steps may not be a surprise because many of these countries have recently implemented good monetary policies to manage their inflationary pressures. therefore, it is possible good monetary policy can help to minimise the impact 168 o. v. ajayi. comparing multivariate models’ forecasts of inflation for brics and opec countries of changes in the global oil price for this country.3 this view is supported by the findings of hooker (2002), taylor (2000), cologni and manera (2008), chen (2009), leblance and chinn (2004), mandal, bhattcharya, and bhoi (2012) and dedeoglu and kaya (2014) who indicate that the effect of the oil price on inflation is weaker when adequate monetary policies are implemented. the range of the mape values for all favoured models for brics and opec countries is above 20 percentage points except for south africa (5% to 14%), brazil (5% to 13%) and saudi arabia (2%–13%) that have a history of the lower inflation. this suggests that countries with higher inflation will likely have higher mape values. the stability test indicates that the stability of a model can enhance inflation forecasting performance for a few countries. for example, structurally stable models produce the best forecasts for 3 out of 4 selected opec countries. in particular, the favoured var specification is stable and produces the best forecasting performance for algeria and nigeria (at least 2 steps ahead). the favoured vecm specification that is structurally stable produces the best forecast over all horizons for saudi arabia. in contrast, all the best forecasting multivariate models for brics countries are structurally unstable. the good forecasting performance of the structurally unstable models for brics countries is consistent with the observations of stock and watson (2003), rossi (2012) and gabrielyan (2016) in the sense that structural instability does not necessarily imply poor forecasting performance, especially in out-ofsample. rossi (2012) documents that out-of-sample forecast comparisons are robust to model instabilities because their procedures can minimise the effect of structural breaks on the forecasting model. conclusions and summary this research utilised explanatory variables commonly employed to model and forecast inflation subject to data availability. the order of integration and seasonally adjusting the data were carried out to avoid issues involving seasonal unit roots. the motivation for considering a range of var-based dynamic models is as follows: models involving non-stationary series may lead to problems of spurious regression that can adversely affect forecasting accuracy. therefore, this study conducted differencing and cointegration restrictions to transform nonstationary series into stationary variables. vars estimated with cointegrated data will be misspecified if all of the data were found to be different because the long-run information will be omitted and will have omitted stationarity inducing constraints if all of the data are used in levels. therefore, the order of integration of all the considered variables were tested for cointegration. based upon this analysis, the forecasting performance of the following three 3 for example, brazil launched a growth acceleration program in 2007 to provide tax incentive and reduce energy costs, strengthen its investment through foreign participation and restructure its oil royalty payment to increase revenue and provide more capital to the private sector. similarly, algeria government has recently imposed a policy that reduces licensing of importation of luxury furniture’s. also, government has approved the quantitative easing of printing almost 570 billion dinars (about 5 billion dollars) to help the central bank lend money to public treasury. in addition, government has also approved the plan to diversify its economy by boosting domestic engineering, petrochemical and pharmaceutical and food industries to make them more globally competitive (the reuter, 2016). business, management and education, 2019, 17(2): 152–172 169 multivariate specifications with the benchmark model (naive model) was compared ‒ first, the var model with only (difference) stationary variables; second, vecm without imposing cointegrating restrictions; and third, the vec that imposes a single cointegrating equation on the vecm. the main results in this paper confirm no single model can dominate across all the countries. the forecast performance of inflation depends on the nature of the economy and whether the country experiencing higher inflation or low inflation. for instance, the model that includes long-run information in the form of a specified cointegrated equation generally improves the inflation forecasting performance for brics countries and one opec country (saudi arabia) that has a history of low inflation. an explanation for this result is that country with moderate inflation tend to have low instability and may not require further differencing of macroeconomic variables. this is consistent with previous findings that stated that forecasts are most likely to be improved by applying error-correction techniques if the data strongly supports the cointegration hypothesis (see, timothy & thomas, 1998; christoffersen & diebold, 1998). this study also showed that the unrestricted var model has a superior inflation forecast than cointegrating models and naïve model for opec countries that have a history of higher inflation. as noted earlier, that first differencing (stationary data) can capture different characteristics of instability in high inflation economy such as opec countries. further, areas where both unemployment and the output gap are available as indicators of the phillips curve, models including unemployment outperform those that use the output gap because unemployment indicator contains the most valuable information in inflation forecasting rather than models based on alternative indicators (output) for the selected countries. the evidence also revealed that the model that considers oil price endogenous appears to secure better forecasting performance than the model that considers the oil price as exogenous for both brics and opec countries. this is not surprising because opec countries export oil while the brics countries (except russia) import oil. therefore, increases or decreases in the global oil price will directly affect government revenue and expenditure in many of these countries. lastly, the application of structural stability tests provides evidence that using stable models enhances inflation forecasting performance for some opec countries. in contrast, all the favoured forecasting models for brics countries are structurally unstable. the performance of the favoured unstable forecasting models is consistent with the study of (stock & watson, 2003; rossi, 2012) who argued that an unstable theoretical model could mislead the favoured out-of-sample forecasting. finally, some limitations of this study are worth mentioning. first, the proposed multivariate models focused on differencing and cointegrating restrictions to ensure the stationarity of the data, where available variables were combined and specified based on their level of integration to forecast inflation. for instance, a var model is estimated based on differenced variables i(0); the same holds true for vecm and vec models, where differenced variables and linear combinations of i(i) covariates are stationary. in future, multivariate models guided by economic theory rather than the order of integration of variables are suggested. also, this study only compares the forecasting performance of different multivariate models (var, vecm and vec) with a naive model. therefore, more non-linear models and dynamic 170 o. v. ajayi. comparing multivariate models’ forecasts of inflation for brics and opec 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https://www.imf.org/external/datamapper/ngdpd@weo/oemdc/advec/weoworld copyright © 2019 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: jurgita.raudeliuniene@vgtu.lt business, management and education issn 2029-7491 / eissn 2029-6169 2019 volume 17 issue 2: 248–268 https://doi.org/10.3846/bme.2019.11284 impact of knowledge oriented leadership on knowledge management processes in the middle eastern audit and consulting companies jurgita raudeliūnienė *, mirna kordab business technologies and entrepreneurship department, business management faculty, vilnius gediminas technical university, saulėtekio al. 11, 10223, vilnius, lithuania received 29 september 2019; accepted 24 october 2019 abstract. purpose – this article aims to evaluate the influence of knowledge oriented leadership on knowledge management processes and the influence of those processes on the performance of the middle eastern audit and consulting companies. research methodology  – analysis of scientific literature, structural equation modelling and expert evaluation (structured questionnaire) were used in order to create hypotheses and research model, to collect data from the audit and consulting companies’ experts and to test research model and related hypotheses. findings  – the results of this research supported eight out of ten suggested hypotheses. empirical evidence shows that leadership has a positive impact on knowledge acquisition, storage, and sharing processes in the middle eastern audit and consulting companies and knowledge management processes (creation, acquisition, sharing, storage and application) have positive influence on organizational performance. research limitations – conducting the research in the middle eastern audit and consulting companies limits the possibility of generalizing the results to other types of businesses sectors as well as other geographical areas. practical implications  – conducted research results have practical value for audit and consulting companies as this study analyses the concept of knowledge oriented leadership and its impact on knowledge management processes and organizational performance. originality/value – this research investigated one of rare studies in the middle east business sector, where the audit and consulting companies’ performance affected by the knowledge management processes was assessed considering knowledge oriented leadership as an influential factor that affects the knowledge management processes implementation. keywords: leadership, knowledge oriented leadership, knowledge management processes, organizational performance. jel classification: m1, d8, l25. https://doi.org/10.3846/bme.2019.11284 https://orcid.org/0000-0003-4003-0856 business, management and education, 2019, 17(2): 248–268 249 introduction organizations seeking to create uniqueness and market leadership tend to focus not only on employees with unique competencies (knowledge, skills and abilities) and ability to apply competences, but also on employee motivation. however, many middle eastern audit and consulting companies face challenges in properly motivating the organization’s employees to apply their unique competence through knowledge management principles, the latter which create greater value for the organization itself, its employees, and its users. the concept of employees’ motivation and its role in efficiently applying knowledge management principles in a dynamic and uncertain environment with limited organization resources has been widely explored in knowledge management theories and implemented in practice through a processbased knowledge management cycle. knowledge management can be defined as the purposeful and systematic management of processes, methods, and tools, making full use of the organisation’s knowledge potential to form goals, make efficient decisions, create and implement the uniqueness and value of the organization. scientists, when examining the process approach to knowledge management, distinguish between different combinations of knowledge management processes (wiig, 1993; meyer & zack, 1996; mcelroy, 1999; probst, raub, & romhardt, 2000; rollett, 2003; becerra-fernandez, gonzalez, & sabherwal, 2004; lin & lee, 2005; franco & mariano, 2007; supyuenyong, islam, & kulkarni, 2009; sun, 2010; dalkir, 2011; o’dell & hubert, 2011; pinho, rego, & pina e cunha, 2012; rusly, corner, & sun, 2012; wee & chua, 2013; agarwal & islam, 2014; bigliardi, galati, & petroni, 2014; obeidat, masa’deh, & abdallah, 2014; ranjbarfard, aghdasi, lópez-sáez, & lópez, 2014; chang & lin, 2015; hegazy & ghorab, 2015; garcía-fernández, 2015; tubigi & alshawi, 2015; wahba, 2015; costa & monteiro, 2016; hwang, 2016; kianto, vanhala, & heilmann, 2016; nowacki & bachnik, 2016; acar, tarim, h. zaim, s. zaim, & delen, 2017; bican, guderian, & ringbeck, 2017; chhim, somers, & chinnam, 2017; koohang, paliszkiewicz, & goluchowski, 2017; yusr, mokhtar, othman, & sulaiman, 2017; dzenopoljac, alasadi, zaim, & bontis, 2018; hashemi, khadivar, & shamizanjani, 2018; park & kim, 2018; gomes, oliveira, & chaves, 2019; mahdi, nassar, & almsafir, 2019). this study will explore knowledge management processes such as creation, acquisition, storage, sharing and application. for the aim of efficiently motivating the middle eastern audit and consulting companies’ employees to create, acquire, store, share and apply knowledge within the organization, seeking greater mutual value and uniqueness in the market, researchers propose knowledge oriented leadership to address this type of problems (donate & de pablo, 2015; shujahat et al., 2017; ramezani, safari, hashemiamin, & karimi, 2017; naqshbandi & jasimuddin, 2018; sadeghi & rad, 2018; shariq, mukhtar, & anwar, 2019; shamim, cang, & yu, 2019). knowledge oriented leadership style is defined as supportive, oriented to employee’s competence development, providing vision, mentoring, consulting, delegating, facilitating, recognizing, stimulating knowledge management practice, rewarding and so on (donate & de pablo, 2015; shujahat et al., 2017; ramezani et al., 2017; naqshbandi & jasimuddin, 2018; sadeghi & rad, 2018; shariq et al., 2019; shamim et al., 2019). 250 j. raudeliūnienė, m. kordab. impact of knowledge oriented leadership on knowledge management... in order to verify if knowledge oriented leadership can positively influence knowledge management processes and organizational performance, this article aims to evaluate the influence of knowledge oriented leadership on knowledge management processes and the influence of those processes on the performance of the middle eastern audit and consulting companies. to conduct the research, analysis of scientific literature, structural equation modeling and expert evaluation (structured questionnaire) were applied. 1. theoretical framework and hypothesis many scientists and business practitioners argue that efficient knowledge management has a positive impact on the overall performance of an organization and relate it to direct (value creation, return on investment) and indirect (economies of scale and scope, uniqueness and market leadership) aspects of influence (becerra-fernandez, gonzalez, & sabherwal, 2004; anand, kant, patel, & singh, 2015; akbari & ghaffari, 2017; archer-brown & kietsmann, 2018; adeinat & abdulfattah, 2019; bloodgood, 2019; campanella, derhy, & gangi, 2019). furthermore, knowledge management enhances organizational processes such as the decision-making process, innovation and collaboration (adeinat & abdulfattah, 2019). according to scientists, knowledge management can be described as a set of strategies, activities and processes that the organization implements in order to create new knowledge and benefit from the available knowledge in increasing innovation, and improving the organization’s performance, which depends on employees motivation and commitment to create value in organization (henttonen, kianto, & ritala, 2016; muthuveloo, shanmugam, & teoh, 2017; hosseini, tekmedash, karami, & jabarzadeh, 2019). knowledge management in organizations is implemented through a process-based knowledge management cycle. researchers distinguish different sets and combinations of knowledge management processes (wiig, 1993; meyer & zack, 1996; mcelroy, 1999; probst et al., 2000; rollett, 2003; becerra-fernandez, gonzalez, & sabherwal, 2004; lin & lee, 2005; franco & mariano, 2007; supyuenyong et al., 2009; sun, 2010; dalkir, 2011; o’dell & hubert, 2011; pinho et al., 2012; rusly et al., 2012; wee & chua, 2013; agarwal & islam, 2014; bigliardi et al., 2014; obeidat et al., 2014; ranjbarfard et al., 2014; chang & lin, 2015; hegazy & ghorab, 2015; garcía-fernández, 2015; tubigi & alshawi, 2015; wahba, 2015; costa & monteiro, 2016; hwang, 2016; kianto et  al., 2016; nowacki & bachnik, 2016; acar et  al., 2017; bican et al., 2017; chhim et al., 2017; koohang et al., 2017; yusr et al., 2017; dzenopoljac et al., 2018; hashemi et al., 2018; park & kim, 2018; gomes et al., 2019; mahdi et al., 2019). on the basis of the conducted scientific research (raudeliūnienė, 2017; raudeliūnienė, davidavičienė, & jakubavičius, 2018), it was found that scientists study such knowledge management processes as knowledge creation, knowledge acquisition, knowledge storage, knowledge sharing, and knowledge application, which will be used in this study. the knowledge creation process is defined by scientists as the process of knowledge transformation through different levels of learning (garcía-fernández, 2015; känsäkoski, 2017; claver-cortes et al., 2018), the development of existing or new competence within the organization (probst et al., 2000; ceptureanu & popescu, 2018; mahdi et al., 2019), the dynamic interaction of tacit and explicit knowledge and the transformation of individual knowledge business, management and education, 2019, 17(2): 248–268 251 into organizational context (nonaka & toyama, 2004; sun, 2010; rusly et  al., 2012; wee & chua, 2013; wahba, 2015; little & deokar, 2016), the ability of an organization to generate new and useful ideas and solutions (sangari, hosnavi, & zahedi, 2015; henttonen et  al., 2016; kianto et al., 2016) in order to improve processes, identify new opportunities, develop innovation (wee & chua, 2013; ranjbarfard et  al., 2014; little & deokar, 2016), increase knowledge created value (rusly et al., 2012; claver-cortes et al., 2018), and preserve or gain a competitive advantage (mehralian, nazari, akhavan, & rasekh, 2014; little & deokar, 2016; sirorei & fombad, 2019). knowledge creation is defined as the development of existing and new organizational competence (knowledge, abilities and skills) in order to implement knowledge strategy, achieve organizational performance outcomes, create mutual value, and increase uniqueness and leadership in the market. the knowledge acquisition process is related to organizational practices, activities and processes during which existing knowledge is used and new knowledge is accumulated (lin, 2007; dang & mckelvey, 2016; henttonen et al., 2016; pandey, dutta, & nayak, 2018), when decisions are made in the context of both external and internal interactions within an organization to eliminate internal knowledge gaps (probst et  al., 2000; gold, malhotra, & segars, 2001; kianto et al., 2016) in order to perform work activities, to solve various types of problems and improve their performance (henttonen et al., 2016; dzenopoljac et al., 2018; pandey et al., 2018). knowledge acquisition can be described as a process that takes place in the context of external and internal interactions within an organization to form and make decisions related to the elimination of knowledge gaps in order to implement a knowledge strategy and to achieve organizational performance outcomes. the knowledge storage process is seen as turning an individuals’ and experts’ knowledge into a resource for the organization (kotnour & proctor, 1996; sumbal, tsui, see-to, & barendrecht, 2017; ceptureanu & popescu, 2018; mahdi et  al., 2019), by capturing and “wrapping” knowledge (edvardsson & durst, 2013), by selecting, accumulating and updating knowledge (probst et al., 2000; acharya & mishra, 2017; dzenopoljac et al., 2018; sirorei & fombad, 2019), and by using information technology tools (sumbal et  al., 2017), in order to protect knowledge value from loss (probst et al., 2000; edvardsson & durst, 2013; kianto et al., 2016) and to access knowledge for decision making (sangari et al., 2015). in defining the process of knowledge storage, researchers note the importance of organizational memory (easterby-smith & lyles, 2011; sangari et al., 2015; kianto et al., 2016). scientists differentiate between internal and external memory types. the internal memory type refers to the knowledge, abilities and skills of the members of the organization. the external memory type is associated with codified and explicit organizational knowledge, procedures, and documents management (easterby-smith & lyles, 2011). knowledge storage can be described as selection, accumulation and update of valuable knowledge of an organization by using various methods and tools in order to implement a knowledge strategy and to achieve organizational performance outcomes. the knowledge sharing process is described as the transfer and dissemination of explicit and tacit knowledge between individuals (probst et  al., 2000; lin & lee, 2005; kamasak & bulutlar, 2010; rusly et al., 2012; lee, shiue, & chen, 2016; hosseini & akhavan, 2017; matoskova & smesna, 2017; alshamsi & ajmal, 2018; marques, la falce, marques, de muylder, 252 j. raudeliūnienė, m. kordab. impact of knowledge oriented leadership on knowledge management... & silva, 2019) in order to efficiently manage and execute the process through integrating organizational and technical tools (probst et  al., 2000; kianto et  al., 2016; lee et  al., 2016; matoskova & smesna, 2017), to generate new knowledge (garcía-fernández, 2015) which would allow the organization to gain competitive advantage (wee & chua, 2013; le & lei, 2018; rafique, hameed, & agha, 2018; dzenopoljac et al., 2018). knowledge sharing can be defined as collaboration based on trust, whereby explicit and tacit knowledge is shared and accessed using the available knowledge potential to implement the knowledge strategy and to achieve organizational performance outcomes. the knowledge application process is defined as the amount of gained knowledge (qasrawi, almahamid, & qasrawi, 2017), the implementation stage of the knowledge management cycle (probst et  al., 2000; wahba, 2015; chhim et  al., 2017; pandey et  al., 2018), the exploration and usage of resources, the adaptation and changes of environment, learning (garcía-fernández, 2015), and the consolidation of newly created knowledge through different processes (qasrawi et  al., 2017), in order to access organization’s knowledge easier (gold et  al., 2001; qasrawi et  al., 2017), to transform new knowledge (garcía-fernández, 2015) into concrete performance (probst et  al., 2000), to develop dynamic skills (hesamamiri, mahdavi mazdeh, jafari, & shahanaghi, 2015), to solve work-related problems, and to improve operational processes (lin, 2007; martelo-landroguez et  al., 2016; chhim et  al., 2017; dzenopoljac et al., 2018; pandey et al., 2018). knowledge application can be described as transforming knowledge into concrete activity’s results and applying it to problem solving, process improvement, knowledge strategy implementation, and organizational performance outcomes achievement. among different organizational factors that would influence the knowledge management cycle within organizations, scientists have identified the knowledge oriented leadership as a crucial factor (donate & de pablo, 2015; shujahat et al., 2017; ramezani et al., 2017; naqshbandi & jasimuddin, 2018; sadeghi & rad, 2018; shariq et al., 2019; shamim et al., 2019) that impacts knowledge creation, acquisition, storage, sharing, and application processes which are related to achievement of desired organizational performance outcomes. similarly, leadership has been recognized as an essential research object in business management and organizational behaviour where different leadership theories, practices, styles and techniques were analysed in order to motivate employees to improve their competence, product (service) quality, create innovation, to achieve knowledge strategy and organizational performance outcomes (lashari & rana, 2018; waris, khan, ismail, adeleke, & panigrahi, 2018; al ahbabi, singh, balasubramanian, & gaur, 2019). leadership can be described as the combination of figurative, inventive, inspiring leadership, emotional and moral values, individualized attention (sholikhah, wang, & li, 2019) that build and improve employees’ abilities and skills, guide and encourage them to increase their commitment to the organization, motivate them to keep involved aiming towards achieving organizational goals (xiao, zhang, & de pablos, 2017; waris et  al., 2018). leadership can empower individuals to achieve the desired goals (heldal & antonsen, 2014; waris et al., 2018), and to raise innovation and creativity (mubarak & noor, 2018). leadership is considered as a key factor that contributes to the success of the team’s work through supportive and encouraging relationship with the team which leads to the improvement of the business, management and education, 2019, 17(2): 248–268 253 organization’s performance (heldal & antonsen, 2014; mubarak & noor, 2018). summing up scientists’ insights, leadership can be defined as the power and the process by which leaders influence, guide, empower and encourage individuals through maintaining supportive relationship with them and facilitating their activities (heldal & antonsen, 2014; waris et  al., 2018; mubarak & noor, 2018) in order to raise innovation and creativity (li et  al., 2019) which lead to accomplishing the organization’s desired objectives and to improve the organization’s overall performance (heldal & antonsen, 2014; najmi, a. r. kadir, & m. i. a. kadir, 2017; mubarak & noor, 2018; waris et al., 2018; sholikhah et al., 2019). the aspirations of leaders should be to build an environment that encourages employees to innovate, experiment, generate new ideas and create new knowledge (millar, chen, & waller, 2017). in the scientific literature such leadership styles as transformational, transactional, authentic, and laissez-faire are analysed (waris et  al., 2018). transformational leaders influence other individuals through promoting mutual trust, which is an important factor in the relation between the leaders and their subordinates. transformational leaders encourage employees to be more creative, innovate and to make independent decisions leading to accomplish the organizational desired performance (le & lei, 2018; park & kim, 2018; breevaart & zacher, 2019; li et al., 2019; jada, mukhopadhyay, & titiyal, 2019). transformational leaders communicate clearly the organizational vision and goals, and encourage employees to improve their skills seeking new opportunities for the development of the organization and accomplishment of its vision (le & lei, 2018; guhr, lebek, & breitner, 2018). they also create an empowered and motivating working environment through being role models who inspire their followers (park & kim, 2018). transformational leadership influences positively both individuals and organizations’ outcomes (breevaart & zacher, 2019). transactional leaders motivate other individuals by fulfilling their interest through providing the deserved rewards against achieving the desired goals. transactional leaders control their followers’ behaviors by rewarding them for high performance and punishing them for their mistakes after defining their expectations and clarifying the organization’s goals (waris et  al., 2018; guhr et  al., 2018). authentic leaders help other individuals inside the organization to get involved and make good relationships at work in order to confront with the work environment. authentic leaders are characterized by their self-regulation system of values, their ethical decision-making process, their understanding of the strengths and weaknesses they possess, and their knowledge sharing among their followers (mubarak & noor, 2018; seidel, saurin, tortorella, & marodin, 2019; adigüzel, & kuloğlu, 2019). laissez-faire leaders have no influence over other individuals in the organization since they do not interact with the employees and do not set clear the goals and the expectations to them as well (guhr et al., 2018; breevaart & zacher, 2019). this form of leadership is considered less effective than other forms because of the lack of information communicated to the employees from the leaders, which result in negative consequences such as reduction of employees’ satisfaction and increase in work conflicts (breevaart & zacher, 2019). transformational leadership is the most studied form by the researchers recently because of its positive impact on employees and organizational performance. while scientists were previously concerned about transformational and transactional leadership styles, knowledge oriented leadership is considered as a combination of both styles 254 j. raudeliūnienė, m. kordab. impact of knowledge oriented leadership on knowledge management... which emphasizes the leaders communication of the organization main goals and objectives to the employees and motivating them to work towards achieving those goals through the integration of knowledge management processes (donate & de pablo, 2015; naqshbandi & jasimuddi, 2018; shamim et  al., 2019). knowledge oriented leadership is a transformed leadership concept, which integrates both good traditional leadership practice and new leadership concept based on knowledge management theories and practice. knowledge oriented leadership style can be described as supportive and oriented to employee’s competence development, focused on providing vision, mentoring, consulting, delegating, facilitating, recognizing, stimulating and rewarding knowledge management practices (donate & de pablo, 2015; naqshbandi & jasimuddi, 2018; shariq et  al., 2019; shamim et  al., 2019), in order to encourage employees efficiently to implement a knowledge strategy and to achieve organizational performance outcomes. according to scientists, knowledge management cycle (knowledge creation, acquisition, storage, sharing, and application) intends to result in an efficient implementation of knowledge management processes in order to implement knowledge strategy and to achieve the desired organizational performance outcomes (chugh, chugh, & punia, 2015; shahzad, bajwa, siddiqi, ahmid, & raza sultani, 2016; dzenopoljac et  al., 2018; raudeliūnienė et  al., 2018; raudeliūnienė & szarucki, 2019; al ahbabi et al., 2019; hosseini et al., 2019). evaluating organizational performance has always been the main concern for scientists and business practitioners (jenatabadi, 2015; tubigi & alshawi, 2015; najmi et  al., 2017; lashari & rana, 2018). organizational performance is the outcome and combination of strategies, ongoing activities and processes applied in organization which is reflected through employees’ motivation, social responsibilities, customer satisfaction, financial returns, leadership, and uniqueness in the market (al rubaiee, alzubi, hanandeh, & al ali, 2015; jenatabadi, 2015; najmi et al., 2017; al ahbabi et al., 2019). organizational performance measurements depend on different specifications such as the region, business sector, and variety of business activities that each organization is engaged in (al rubaiee et  al., 2015; al hakim & hassan, 2015; jenatabadi, 2015). summing up scientists’ research, organizational performance measurement can be divided into non-financial (innovation, quality service delivery and operational efficiency, customer satisfaction and retention) and financial measurements (financial performance, profitability, sales growth, market share) (english, guthrie, broadbent, & laughlin, 2010; al hakim & hassan, 2012; al rubaiee et al., 2015; jenatabadi, 2015; tubigi & al shawi, 2015; najmi et  al., 2017; lashari & rana, 2018; al ahbabi et  al., 2019). this study focuses on three main dimensions for measuring impact of knowledge management processes on organizational performance: knowledge strategy effectiveness (the relation between knowledge strategy and performance), resources’ efficiency (the relation between organization resources and performance), and leadership (the relation between organization’s leadership in the market and performance). in this research, both the effect of knowledge oriented leadership on the knowledge management processes and the effect of the latter on organizations’ performance in the middle eastern audit and consulting companies are investigated (figure 1). business, management and education, 2019, 17(2): 248–268 255 the following hypotheses are formulated in the attempt to test the research model: h1a: knowledge oriented leadership positively influences knowledge creation process h1b: knowledge oriented leadership positively influences knowledge acquisition process h1c: knowledge oriented leadership positively influences knowledge storage process h1d: knowledge oriented leadership positively influences knowledge sharing process h1e: knowledge oriented leadership positively influences knowledge application process h2: knowledge creation positively influences private sector organizational performance h3: knowledge acquisition positively influences private sector organizational performance h4: knowledge storage positively influences private sector organizational performance h5: knowledge sharing positively influences private sector organizational performance h6: knowledge application positively influences private sector organizational performance 2. research methodology this study aims to assess two main relationships in the middle eastern audit and consulting sector: (1) the relationship between knowledge oriented leadership, which characterizes the independent variable, and the knowledge management processes, which consist of knowledge creation, acquisition, storage, sharing, and knowledge application, and which characterize the dependent variables; (2) the relationship between knowledge management processes and the organizations’ performance. figure 1. research model (created by the authors) 256 j. raudeliūnienė, m. kordab. impact of knowledge oriented leadership on knowledge management... a structured questionnaire was disseminated among the members of the lebanese association of certified public accountants who are certified auditors, either owners of local audit companies or working for multinational audit companies operating in lebanon and the middle east countries, in order to collect the data required for this research. the experts’ evaluation (structured questionnaire) was conducted in march-april 2019. while 500 auditors were contacted, 210 responded by filling up the questionnaire, resulting in a 42% response rate which constitutes the sample size of the study. experts’ evaluation involved (75.72%) of males and (24.28%) of females, aged between 25 years and 35 years (45.24%) and between 35 years and 45 years (21.43%), holding a master’s degree (37.14%) and certified public accountants (34.76%), operating in upper management positions (31.9%) and in senior positions (26.67%), working in local companies (72.86%) and multinational forms (27.14%) (table 1). the questions were based on a five-point likert-scales ranging from “1” meaning “strongly disagree” to “5” meaning “strongly agree”. the elements used to evaluate the variables were obtained from scientific studies. knowledge creation process was assessed through generation of best practices, seek for new opportunities and delivery of new services (lin, 2007; wu & chen, 2014; ali, musawir, & ali, 2018). knowledge acquisition process was assessed table 1. demographic characteristics of respondents (created by the authors) category frequency percentage (%) age < 25 10 4.76% ≥ 25 and < 35 95 45.24% ≥ 35 and < 45 45 21.43% ≥ 45 60 28.57% gender male 159 75.72% female 51 24.28% education bachelor 58 27.62% master 78 37.14% certified public accountant (cpa) 73 34.76% other 1 0.48% job position junior level 39 18.57% middle level 48 22.86% senior level 56 26.67% upper management 67 31.90% type of organization local 153 72.86% multinational 57 27.14% business, management and education, 2019, 17(2): 248–268 257 through the ability to acquire knowledge for developing specific programs, and the process of acquiring expertise (ali et al., 2018). knowledge storage process was assessed through the availability of customer databases and the availability of knowledge databases (lin, 2007; ramachandran, chong, & ismail, 2009; yusr et  al., 2017). knowledge sharing process was assessed through the ability to share knowledge with colleagues, the ability to share knowledge among business units and with stakeholders (casimir, ng, & cheng, 2012; fullwood, rowley, & delbridge, 2013; mura, lettieri, radaelli, & spiller, 2013; dijk van, hendriks, & romo-leroux, 2016; ali et  al., 2018). knowledge application process was assessed through converting knowledge into action plans, and using knowledge efficiently to solve problems and reach specific goals (lin, 2007; ramachandran et al., 2009; casimir et al., 2012; fullwood et al., 2013; dijk van et al., 2016; ali et al., 2018). knowledge oriented leadership was assessed through the encouragement of employees to create, acquire, store, share and apply knowledge (fullwood et al., 2013; donate & de pablo, 2015; yusr et  al., 2017; naqshbandi & jasimuddi, 2018; shariq et  al., 2019; shamim et  al., 2019). organizational performance was assessed through knowledge strategy effectiveness (the relation between knowledge strategy and performance), resources’ efficiency (the relation between organization resources and performance), and leadership (the relation between organization’s leadership in the market and performance) (lin, 2007; english et al., 2010; al hakim & hassan, 2012; al rubaiee et  al., 2015; jenatabadi, 2015; tubigi & al shawi, 2015; najmi et al., 2017; yusr et al., 2017; ali et al., 2018; lashari & rana, 2018; al ahbabi et al., 2019). in this study, correlation and structural equation modeling (sem) techniques, which use various types of models to depict relationships among observed variables, were used, in order to provide quantitative results for the proposed hypotheses. 3. research results and discussion research results show the mean values of each variable pertaining to each indicator including knowledge creation, acquisition, storage, sharing, and application in addition to knowledge oriented leadership factor and organizational performance indicators. if the average is more than or equal to 3.75 then the respondents have highly agreed to the statement. if the average is between 2.75 and 3.74 then the respondents were on a medium agreement with the statement and if the average is below 2.75 then respondents were on a low agreement with the statement. knowledge oriented leadership relation with the knowledge management processes results in the following averages: storage of knowledge (3.85), creation of new knowledge (3.87), sharing of knowledge (3.90), acquisition of new knowledge (3.92), and application of knowledge in an efficient way (3.99). all results are greater than 3.75, which means experts highly agreed with the analysed statements and application of knowledge in an efficient way is the most valuable statement in this relation (table 2). experts highly agreed to knowledge management processes statements from each group as: organization quickly uses new opportunities to serve clients (4.06, highest mean from knowledge creation group); organization has the ability to acquire knowledge which is used 258 j. raudeliūnienė, m. kordab. impact of knowledge oriented leadership on knowledge management... table 2. descriptive statistics of the indicators and variables (created by the authors) variable mean standard deviation knowledge creation 3.92 0.682 our organization generates best practices from previous projects to improve future projects 3.85 0.80 our organization quickly uses new opportunities to serve our clients 4.06 0.73 our organization provides new services depending on the market demands 3.85 0.83 knowledge acquisition 3.78 0.812 our organization has the ability to acquire knowledge which is used to develop specific programs 3.87 0.87 our organization has a clear process for acquiring expertise 3.78 0.94 our organization has a clear process for acquiring intelligence 3.69 0.88 knowledge storage 3.95 0.696 in our organization we often write case notes on all executed projects 3.78 0.77 in our organization we keep a customer information database that is easy to access 4.06 0.84 in our organization we have knowledge database that is easy to access 4.02 0.91 knowledge sharing 4.01 0.764 we personally share with our colleagues the knowledge necessary for projects on hand 4.21 0.77 our organization always shares its knowledge with its stakeholders 3.76 1.06 our organization has the capability to share relevant knowledge among business units 4.07 0.71 knowledge application 4.03 0.675 our organization has processes for converting knowledge into action plans 3.88 0.91 our organization has processes for matching sources of knowledge to problem solving 4.12 0.73 our organization applies knowledge efficiently to reach its goals 4.09 0.65 knowledge oriented leadership 3.90 0.964 in our organization managers at all levels actively encourage employees to create new knowledge 3.87 1.00 in our organization managers at all levels actively encourage employees to acquire new knowledge 3.92 0.96 in our organization managers at all levels actively encourage employees to store their knowledge 3.85 0.98 in our organization managers at all levels actively encourage employees to share their knowledge 3.90 0.96 in our organization managers at all levels actively encourage employees to use knowledge in an efficient way 3.99 0.92 organizational performance 4.10 0.47 the organization provides high quality services 4.34 0.61 the organization provides quality services with low cost 3.60 0.96 the organization provides quality services with high speed 4.09 0.68 the organization performs well in improving effectiveness of services delivered 4.13 0.88 the organization adopts quickly to unanticipated changes 4.04 0.75 the organization ensures compliance to customer needs through processes that are designed to deliver the right skills and capacities 4.19 0.54 the organization is able to adopt new services opportunities 4.25 0.72 the organization is able to compete in the current market 4.23 0.61 the organization is considered profitable in the market 4.04 0.69 business, management and education, 2019, 17(2): 248–268 259 to develop specific programs (3.87, highest mean from knowledge acquisition group); employees keep a customer information database that is easy to access (4.06, highest mean from knowledge storage group); employees personally share with colleagues the knowledge necessary for projects on hand (4.21; highest mean from knowledge sharing group); and organization has processes for matching sources of knowledge to problem solving (4.12; highest mean from knowledge application group) (table 2). almost all of the respondents rated the indicators of the organizational performance as high agreement such as providing high quality services (4.34), ability of the organization to adopt new service opportunities (4.25), ability to compete in the current market (4.23), ensuring compliance to customer needs through processes that are designed to deliver the right skills and capacities (4.19), performing well in improving effectiveness of services delivered (4.13), providing quality services with high speed (4.09), adoption of unanticipated changes (4.04), and consideration of profitability in the market (4.04). however, experts were in a medium agreement with the idea that the organization provides quality services with low cost (3.60) (table 2). knowledge oriented leadership has a strong association with knowledge storage (0.6014), medium-strength correlation with knowledge creation (0.5253), acquisition (0.4430) and sharing (0.4829), and a weak correlation with knowledge application (0.3093) (table 3). organizational performance is significantly correlated with knowledge creation, acquisition, storage, sharing and application. strength of association varied between each component, where organizational performance shows a medium-strength correlation with knowledge creation (0.5304), knowledge acquisition (0.5774), knowledge sharing (0.4215) and knowledge application (0.5743), and a weak correlation with knowledge storage (0.3450) (table 3). knowledge management processes including creation, acquisition, storage, sharing and application as well as the knowledge oriented leadership factor were assessed using factor analysis. factor loadings were determined for all the processes. followed by factor analysis, regression analysis was used to test each hypothesis under the relevant indicators. results show that all of the processes are positively and significantly associated with organizational performance with p-value of less than 0.05 (table 4). table  3. pearson correlation of knowledge oriented leadership factor and organizational performance with the relevant indicators of knowledge management processes (created by the authors) factors creation acquisition storage sharing application knowledge oriented leadership 0.5253 knowledge oriented leadership 0.4430* knowledge oriented leadership 0.6014* knowledge oriented leadership 0.4829* knowledge oriented leadership 0.3093 organizational performance 0.5304* 0.5774* 0.3450* 0.4215* 0.5743* note: * represents values that are significant at p-values less than 0.05. 260 j. raudeliūnienė, m. kordab. impact of knowledge oriented leadership on knowledge management... knowledge oriented leadership factor is in positive association with knowledge storage, knowledge acquisition, and knowledge sharing because p-value is less than 0.05, accordingly the hypotheses h1b, h1c, and h1d are supported. in the contrary, the hypotheses h1a and h1e, knowledge oriented leadership association with knowledge creation and knowledge application, are not supported, because p-value is greater than 0.05 (table 4). cronbach alpha is used to measure internal consistency and when cronbach alpha possesses a value greater than or equal to 0.9, then the internal consistency is excellent and items within each factor are closely related and are well combined as a group. when cronbach alpha possesses a value, which is greater than or equal 0.8 and less than 0.9, then the internal consistency is very good and when cronbach alpha value is less than 0.8 then the internal consistency is average. table 5. cronbach alpha for the indicators (created by the authors) indicators cronbach alpha knowledge creation 0.8282 knowledge acquisition 0.8844 knowledge storage 0.7387 knowledge sharing 0.8625 knowledge application 0.8495 knowledge oriented leadership 0.9084 the indicators under knowledge oriented leadership factor are in excellent correlation with each other and thus predicting the variables perfectly with an internal consistency coefficient greater than 0.9 (table  5). the indicators under knowledge creation, acquisition, sharing and application show very good correlation with each other whereas the indicators under knowledge storage shows an average internal consistency. table 4. structural equation modelling with the research proposed hypotheses (created by the authors) research hypotheses standardized coefficient t-value p-value empirical evidence h1a 0.402 7.47 0.088 not supported h1b 0.378 6.51 0.032 supported h1c 0.372 6.66 0.003 supported h1d 0.355 6.13 0.041 supported h1e 0.422 7.13 0.058 not supported h2 0.365 9.02 <0.001 supported h3 0.334 10.20 <0.001 supported h4 0.236 5.30 0.002 supported h5 0.259 6.70 0.001 supported h6 0.399 10.12 <0.001 supported business, management and education, 2019, 17(2): 248–268 261 conclusions considering the important role of knowledge oriented leadership and its influence on employees’ motivation to achieve goals, develop and improve organizational performance, this research studied the influence of knowledge oriented leadership on knowledge management processes which consist of knowledge creation, acquisition, storage, sharing, and application as well as the influence of these processes on the organizational performance in the middle eastern audit and consulting companies. in this study knowledge oriented leadership is described as supportive and oriented to employee’s competence development, focused on providing vision, mentoring, consulting, delegating, facilitating, recognizing, stimulating and rewarding knowledge management practices in order to encourage employees to implement a knowledge strategy and to achieve organizational performance outcomes more efficiently. a structural equation modelling and expert evaluation (structured questionnaire) were used to collect the data needed for analysis, and based on the results of this study, knowledge oriented leadership has been proved as an organizational factor that influences positively the knowledge acquisition, storage, and sharing processes in the middle eastern audit and consulting companies. the research results show that all five processes affect positively the organizational performance: knowledge strategy effectiveness (the relation between knowledge strategy and performance), resources’ efficiency (the relation between organization resources and performance), and leadership (the relation between organization’s leadership in the market and performance). however, knowledge oriented leadership does not have positive influence on knowledge creation and knowledge application in the middle eastern audit and consulting companies. the main problematic areas why knowledge oriented leadership practice does not have the same influence on the knowledge creation are related to lack of generation of best practices from previous projects in order to improve future projects and provision of new services depending on the market demands. the main gaps related to knowledge oriented leadership influence on knowledge application process are lack of processes and procedure for converting knowledge into action plans. accordingly, the organizations especially the middle eastern audit and consulting companies are recommended to apply knowledge oriented leadership practice in order to improve procedure for converting knowledge into action plans, enhance project management, and develop new services that will lead to increase organizational performance (knowledge strategy effectiveness, resources’ efficiency, and leadership in the market). references acar,  m.  f., tarim, m., zaim, h., zaim, s., & delen, d. 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(2017). does interaction between tqm practices and knowledge management processes enhance the innovation performance? international journal of quality & reliability management, 34(7), 955-974. https://doi.org/10.1108/ijqrm-09-2014-0138 https://doi.org/10.1353/jda.2015.0173 https://doi.org/10.1088/1755-1315/140/1/012094 https://doi.org/10.1108/jkm-04-2013-0163 https://doi.org/10.1108/jkm-05-2014-0192 https://doi.org/10.1108/jkm-03-2017-0120 https://doi.org/10.1108/ijqrm-09-2014-0138 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university *corresponding author. e-mails: nishi.uiams@pu.ac.in; jmdnishi@yahoo.com business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 2: 189–206 https://doi.org/10.3846/bmee.2022.16344 impact of covid-19 on long run and short run financial integration among emerging asian stock markets nikhil bhardwaj 1, nishi sharma 2*, anupreet kaur mavi3 1des-mdrc, panjab university, chandigarh, india 2,3uiams, panjab university, chandigarh, india received 20 january 2022; accepted 27 april 2022 abstract. purpose –the study aims at exposing any possible impact of covid-19 on short-run and long-run financial integration among five emerging asian economies viz., china, south korea, india, indonesia and taiwan. research methodology – daily closing indices of selected countries have been analyzed from january 2010 – september 2021. the integration among the selected economies has been examined for long-run and short-run through johansan co-integration and granger causality tests respectively. findings – the analysis revealed that coronavirus weakened integration among nations. the absence of long-run integration was observed after the onset of covid-19. during pre-covid period, unidirectional as well as bi-directional causal relations were present, but after the outbreak of covid-19, only south korea and china reported short-term linkage. research limitations – the results are subject to the limitation of limited data and reference period. further, daily returns of different stock markets are subject to domestic shock which has not been analyzed in the present study. practical implications  – since the absence of integration indicates an ample opportunity for risk minimization through international diversification of the portfolio, the results are expected to be very useful for investors, researchers and regulators. originality/value – in present times, researchers are showing keen interest to know the possible impact of covid-19 on linkages of international financial markets. however in spite of being rapidly growing economies, countries selected in the present study have not been explored much. the present study aims to bridge this research gap. keywords: covid-19, emerging asian countries, financial integration and stock markets. jel classification: g15. introduction with the advent of economic and financial reforms during 1990s indian economy paved the door for globalization. the concept of liberalization and globalization heralded integration http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ mailto:nishi.uiams@pu.ac.in mailto:jmdnishi@yahoo.com https://doi.org/10.3846/bmee.2022.16344 https://orcid.org/0000-0003-3482-8511 https://orcid.org/0000-0002-5561-331x 190 n. bhardwaj et al. impact of covid-19 on long run and short run financial integration among... of indian stock market with global stock markets. broadly, financial market integration occurs in three dimensions, nationally, regionally and globally (raj & dhal, 2006). the present study considers the global form of financial market integration that refers to the opening of domestic markets for cross border flow of capital. the integration of stock market delineated a steady growth. the concept of global financial integration was scant during 1970s due to the conservativeness of stock markets. however, with an advent of technological developments and financial liberalization, the financial markets, especially the stock markets, for developing and developed markets have now become more closely interlinked (chattopadhyay & behera, 2006). in context of india, initially the stock market integrated with few major capital markets but gradually it established integration with almost all other countries. the rising graph of cross border capital movements, foreign investments, international mergers and acquisition witness the same. many researchers (dhal, 2009; mandal & bhattacharjee, 2012; ardliansyah, 2012; bhunia & ganguly, 2015; verma & rani, 2016) observed short run and long run interlinkages of indian stock market with international stock markets. it has already been substantiated that stock market integration can lead to several benefits to investors and has far reaching implications for policy makers. but the magnitude of possible return from financial integration depends upon the amount of correlation among financial markets. american economist  harry markowitz  in his pioneer work on portfolio selection adduced that diversification of portfolio in uncorrelated economies may lead to giant gains as low co-movement among stock prices will provide a cushion unsystematic risk of the economy. but at the same moment of time, it is imperative to mention that linkage of financial market can be a powerful media to spread the contagious risk of market failure and volatility spillover. investors and policy makers have already witnessed the risk of contagion, information spillovers, disruption of economic activity and much more. therefore, in present globalized world, it is essential to know the degree of linkage of a country with other developing and developed nations to reap the benefits of diversification as well as to initiate precautionary measures for risk management. recognizing the importance of financial market integration for investors and policy makers, many researchers made an attempt to establish/reject the integration between the markets in different time periods. in context of india, initially studies have been undertaken to explore the linkage of indian stock market with developed and major global economies. but india’s global ascendancy across the economic landscape of the world led to financial integration of indian market with other developing and emerging nations also. many studies (like sehgal et  al., 2019; kumar & aurora, 2020; tripathy & mishra, 2021) tried to explore the possibility of financial integration of indian market with selected emerging markets. but unfortunately, researchers could not get any consensus. some of the studies found good evidence to assume the correlation while some other rejected the possibility of any sort of market linkages. there are two prominent reasons that are responsible for such divergent conclusion viz., difference in time span of the study and difference in the sample i.e., the nations selected for the study. further the impact of market shocks like crisis, pandemic also contributed to the irreconcilability of the findings of different studies. in this reference, the present study aims at exploring the short run as well as long run integration of indian stock market with four emerging economies of asia viz., china, taiwan, business, management and economics engineering, 2022, 20(2): 189–206 191 indonesia and south korea. further, since in recent past, the outbreak of covid-19 changed the entire scenario of international trade and cross-capital flow, the present study will also examine the impact of covid-19 over this integration. the study is expected to be very fruitful for the investors as well as policy makers. 1. literature review investigation of inter-linkage among financial markets has always been a matter of great interest for researchers because financial integration of a country with other countries may seriously influence economic growth of the country. in context of india also researchers anatomized the possible integration and co-movement of indian stock market with other countries. till last decade the focus of many studies was to explore the integration if indian market with developed nations like usa, canada, europe and japan and little work has been done to investigate the inter‐linkages between the nations from asia. but last decade witnessed good number of studies aiming at investigation of market linkage with emerging and developing countries. like bodla and sharma (2011) investigated inter-linkages between stock markets of indian, pakistan and sri lanka. the data over a period of seven years from january 2003 to june 2010 was analyzed through granger casualty and var models. the study concluded the presence of unidirectional causality. the results reported that indian market uni-directionally granger causes the markets of pakistan and sri lanka. in contrast of this the findings of study conducted by iqbal et al. (2011), established no integration between india and pakistan. the study covered a span of seven years from january 2003 – dec 2009. the results of granger causality concluded that there is granger causality only from us stock market to indian and pakistani markets. the correlation and causal relation of indian stock market with major asian economies namely japan, hong kong, indonesia, malaysia and korea were observed to be weak by gupta and aggarwal (2011). however, the financial integration in 10 emerging asian markets using both quantity and price-based measures through garch model witnessed global integration (park & lee, 2011). the study recommended diversification to maximize investment gains and risk management. bhunia and das (2012) found long-run and short-run association among china, indonesia, taiwan, south korea, india, singapore, hong kong and malaysia. the study examined daily stock indices from 2002 to 2011 to explore co-integration and granger causality among selected markets. similarly, patel (2012) investigated the interdependence of indian stock market with some selected asian markets including the markets of pakistan, korea, malaysia, china, taiwan, singapore, sri lanka and japan. monthly data over a period from july 1997 to september 2012 was used. the study applied johansen trace test, granger causality test and vector error correction model for analysis. the results reveal that indian stock market is positively correlated and is being affected by pakistan, sri lanka, malaysia, korea and singapore. potharla (2012) also established the co-integration between indian stock market and stock market off selected asian economies (china, indonesia, japan, south korea, malaysia, hong kong). monthly indices were taken from january 2000 to december 2010. the results of variance decomposition divulge low impact of asia-pacific stock markets on indian stock market. the study of kharka et  al. (2012) analyzing the integration of indian stock market 192 n. bhardwaj et al. impact of covid-19 on long run and short run financial integration among... with south asian markets (bhutan, pakistan, nepal, bangladesh) through weekly data from january 2006 to december 2011 found no such market integration in long run. the results were obtained through unit root test and johansen trace test. the market linkages expose the volatility spillover among markets. diebold and yilmaz (2012) test for volatility spillover effects among selected markets and concluded that singapore was the most dominant market based in terms of returns as well as volatility spillovers. palamalai et al. (2013) reported integration among stock markets of asia-pacific economies, viz. india, malaysia, hong kong, singapore, south korea, taiwan, japan, china and indonesia. the results of johansen co-integration test, variance decomposition analysis and granger casualty test established the integration among selected stock markets. the variance decomposition analysis also revealed stock market interdependencies. but sharma et al. (2013) while exploring inter-linkages among brics nations over a period of five years from april 2005 to march 2010 suggested that though some countries have influence over others but in aggregate terms it is not much significant. the study recommends portfolio diversification among the stock exchange of brics. similarly, rajwani and mukherjee (2013) reported that indian stock market is not co-integrated with any of the selected asian stock market in long run. the study analyzed the secondary data of china, japan, malaysia, south korea, indonesia and taiwan and reported that diversification can minimize the portfolio risk. but the study of bhunia and ganguly (2015) conducted over a period of 22 years from 1991 to 2013 reported the long run integration and bi-directional causality among selected asian stock market indices. babu et  al. (2016) also examined inter-linkages among asian pacific markets viz. india, australian stock exchange, shanghai, tokyo and hong kong stock exchange by using daily data from april 2009 to march 2014. the findings suggest that there is only uni-directional relationship among the markets. the study of brics nations by verma and rani (2016) also reported that brazilian market has a unidirectional relation with indian stock market and indian stock market has a uni-directional relation with south korea. the results of variance decomposition mode revealed shocks emerging in other stock markets do no influence returns in indian stock market. but kumar and dhankar (2017) found significant short run and long run spillover effects of international instability on stock returns of emerging south asian stock market (india, sri lanka, pakistan). the results were based on generalized autoregressive conditional heteroscedastic (garch) model and granger causality test. bhowmik and wang (2018) investigated volatility linkage among emerging asian stock markets (india, china, bangladesh, malaysia, south korea, philippine) and developed stock markets (us, uk, japan and singapore). the results of garch, var model and causality test confirmed the linkage among the returns as well as volatility of selected stock markets. but narayan and rehman (2018) while examining the possible benefits of portfolio diversification for a period spanning from 2000 to 2013 found asian region as good investment destination. the study concluded that portfolio investment in asian countries might lead to greater diversification gains than a portfolio without involvement of asian countries. in the study of regional and global stock market integration in asia, caporale et  al. (2019) concluded that asian stock markets were integrated both globally and regionally. analyzing the three big asian economies japan, china and india, bhullar (2019) observed relationship between india and japan business, management and economics engineering, 2022, 20(2): 189–206 193 but no integration could be observed between india and china. sehgal et al. (2019) also gave hybrid result while exploring stock market linkages among selected 12 asian stock markets over a period jan 2000 to june 2017. results were given by employing garch model. since every financial activity is highly prone to market risks caused by random shocks, researchers have shown a great interest to investigate the impact of shocks over the co-integration and spillover of volatility among different nations. in this context, in recent last two years, the shock that has influenced each and every economic activity all over the world and has been proved as the most brutal pandemic of last few decades i.e., covid-19 fetched the attention of researchers. the coronavirus has spread all over the world within no time and left no scope for the economies to isolate themselves from this pandemic. that is the reason why researchers probe into the possible consequences of this pandemic over the market integration. however, most of the research work has been conducted with reference to developed nations like song et  al. (2021) examined the volatility spillover between usa and china in pre-covid period and during covid crises. egarch results confirmed asymmetric volatility spillover effect from china to us. similarly, another study was conducted by youssef et al. (2021) who concluded that stock markets of china, france, uk, us, russia, spain, italy and germany were connected during the entire period of covid-19 and there were volatility spillover effects to all selected stock markets except from italy. chaudhary et  al. (2020) investigated influence of covid-19 on volatility of stock market for top 10 countries on the basis of gdp. the results of garch model observed covid as an exogenous variable was found to be significant for all nations and volatility was high for all the selected economies. ali et al. (2020) also tried to examine the volatility spillover effects from china to europe and then to us. the results of arch and garch test confirms that earlier china was the epicenter but due to association between the nations in later stages as pandemic got transferred to europe and then us causing a decline in the value of assets and stock markets. in contradiction to above mentioned studies zhang et al., (2021a) by using tgarch model concluded that china had volatility spillover effects to most advanced nation of the world (uk, sweden, netherlands, switzerland) but no significant impact of chinese stock market returns was observed on us stock market volatility. gao et  al. (2021) compared the impact of covid-19 and volatility spillover between china and us. the results of wavelet approach concluded that both the markets responded to covid differently a loose interest rate policy of us suppressed volatility to a great extent. pinglin et  al. (2020) investigated impact of covid-19 across different sectors of chinese stock market. results show that some sectors like transportation, mining, environmental industries, heating and electrical sectors were affected greatly. the study reported that on one hand the pandemic had a negative impact on stock prices of shanghai stock exchange but at the same time it created an opportunity for development of high-tech industries. similarly, mazur et al. (2021) observed equities in petroleum, real estate, hospitality and entertainment fell drastically. however, health care, natural gas and software sectors have demonstrated positive returns. thus, we can say that while exploring the integration of indian stock market with other developing and developed countries, different researchers have obtained different findings that are very much subject to specific time. however, we did not find much work to explore 194 n. bhardwaj et al. impact of covid-19 on long run and short run financial integration among... the market integration during post-covid period. further researchers unveil that market shocks may influence the degree integration among market for an instance global financial crisis affected market integration (dhanaraj et al. 2013). similarly other innovations/shocks may have their own implications over market integration. in recent two years the entire world experienced a novel shock in terms of emergence of covid-19. the novel coronavirus has shaken the entire world. there is no single economy that could remain isolated during the turbulence caused by this deadly pandemic. in this context, the present study aims at investigating the impact of covid-19 over the short run and long run linkages of indian economy with other asian countries. 2. research design 2.1. statement of problem with ever increasing volatility spillovers across global markets, the understanding of stock market linkages became inevitable. recent financial crises clearly demonstrate how a crisis emanating from one nation gets transferred to another nation leading to a situation of global crises. now the novel coronavirus also caused great oscillations across the world. some researchers found substantial evidence of significant impact of coronavirus on developed markets (ali et al., 2020; zhang et al., 2021b; song et al., 2021; youssef et al., 2021; gao et al., 2021). but studies aimed at investigating the impact of covid-19 on the international linkages of indian stock market with other countries are in dearth. in this context, the present study makes an attempt to analyze the integration among five emerging asian countries viz., china, south korea, india, indonesia and taiwan. the study is important due to two reasons. firstly, only a few studies have been conducted to explore the market integration of indian stock market with other countries during post-covid period. secondly though as per the world economic outlook (international monetary fund [imf], 2020), the selected countries are asia’s rapidly emerging and growing economies yet somehow have got less attention of the researchers. on this backdrop, the present study will tend to answer the following research questions: – is there any long-run co-integration among the selected stock markets? if yes, whether the same has got influenced by covid-19 or not. – is there any unidirectional or bidirectional causal relation among selected markets in short run or not? if yes, whether the same has got influenced by covid-19 or not. 2.2. rationale of selected emerging economies the present study aims at investigating impact of covid-19 on the integration among five asian countries viz., china, india, indonesia, south korea and taiwan. though these countries are rapidly growing economies of asia-pacific region in terms of gdp yet the linkage among these remain unattended in the previous studies. the present study relates two asian giants i.e., indian and china having a market capitalization of 3.6 usd trillion and 7.2 usd trillion respectively (imf, 2020). besides these two prominent asian countries, three rapidly growing and emerging economies of asia have also been included. divecha et  al. (1992) pointed out that there are three criterions to be fulfilled by a market in order to be eligible business, management and economics engineering, 2022, 20(2): 189–206 195 to get recognized as an emerging market. these criterions are – firstly the country must have an organized market for trading securities and foreign investors should be allowed to invest in these economies. secondly, the country or stock market should have a reliable source of database for its investors and lastly the country should not have the status of developed nation. to ensure the first and second condition we checked the online status of markets and for the last condition, the report of msci emerging markets asia index (msci, 2021) has been referred. keeping in view of the pre-stated criterion, three counties i.e., taiwan, indonesia and south korea have been included in the analysis. taiwan with a market capitalization of 1.1 usd trillion is a major trading partner of indian with a trade of 7 billion us dollars. south korea is one of the biggest markets for exports of india and has a market capitalization of 2.3 usd trillion. indonesian stock market is also regarded as one of the biggest equity markets in south east asia. further it is one of the largest trading partners in asean group. 2.3. objectives the present study has following four objectives: – to investigate the long run market integration among selected countries. – to investigate the short run causality relation among selected countries. – to investigate the impact of covid-19 over long run market integration among selected countries. – to investigate the impact of covid-19 over the short run causality relation among selected countries. 3. research methodology 3.1. data the paper attempts to investigate the short run and long run linkages among the financial markets of selected countries. to represent the financial markets, closing daily data of leading indices of respective countries have been taken for analysis. the selected stock indices are shanghai se composite index (china), s & p bse sensex (india), jakarta composite index (indonesia), kospi composite index (south korea) and tsec weighted index (taiwan). daily closing values of all indices have been taken from 1st january 2010 to 9th september 2021. in total 2430 observations for each index i.e., 12,150 observations have been analyzed. further as the study aims at examining the impact of covid-19 over short run and long run market integration, the entire time-period is segregated in two sub-periods viz., pre-covid period (1st january 2010 to 31st december 2019) and post-covid period (since 1st january 2020). the period has been sub-divided on the ground of first reported case of covid-19 across the globe. 3.1.1. descriptive statistics at the outset, descriptive statistics related with all indices have been explored. but as the closing indices of different countries have been denominated in their local currency, the logarithmic returns have been computed from each index. these returns have been used for com196 n. bhardwaj et al. impact of covid-19 on long run and short run financial integration among... paring the descriptive statistics about the market. average, standard deviation, skewness and kurtosis have been computed for the purpose of comparative analysis. to explore the possible relationship among returns, correlation has been computed. the coefficient of provides an insight about the strength of association and magnitude of relationship between two countries. 3.1.2. unit root test before proceeding for any statistical tool to draw inferences about market integration, it is pertinent to check the presence of unit root in the time series. the unit root test examines whether mean and variance of a time series are constant over the time or not. in order to be stationary (i.e., in case of absence of unit root), the data does not move away from the mean value rather it revolves around it’s mean value. one of the most popular tests for checking unit root is augmented dickey fuller (adf) test and the same has been employed in this study. since the study has been divided into sub-periods, following three null hypotheses have been framed: – h01: the individual time series i.e., india/china/jakarta/south korea/taiwan does not have unit root i.e., the series is not stationary at level during total study period. – h02: the individual time series (i.e., india/china/jakarta/south korea/taiwan) does not have unit root i.e., the series is not stationary at level during pre-covid period. – h03: the individual time series i.e., india/china/jakarta/south korea/taiwan does not have unit root i.e., the series is not stationary at level during post-covid period. 3.1.3. long-run integration among markets through co-integration test the results of unit root test indicate the presence of unit root at level and reported that all series are integrated at first difference. in the light of this result, johansen cointegration test has been conducted for examining the long run association among the selected time series. if selected indices are found to be co-integrated there exists a long run equilibrium relation among the selected markets. johansen cointegration is based upon two test statistics viz., trace test and maximum eigen value test. the results are based on a rule of thumb if test statistics is more than the critical value, null hypothesis of no co-integration is rejected. the null hypotheses for the test are as follows: – h04: there are no significant co-integrating equations among selected markets during total study period. – h05: there are no significant co-integrating equations among selected markets during pre-covid period. – h06: there are no significant co-integrating equations among selected markets during post-covid period. 3.1.4. short-run integration between markets through granger causality test: granger causality test has been used to examine the possible short-term causal relation among the selected countries. the test was proposed by clive granger in 1969 to predict the values of one time series on the basis of prior values of another time series. granger causality is an indicator of cause-and-effect relation between two time series. the presence of granger causality indicates that any change in one series will bring change in another series. in contrast of correlation, granger causality is a dynamic concept that considers the lag-lead business, management and economics engineering, 2022, 20(2): 189–206 197 relationship. the presence of correlation simply implies that two time series are related with each other but causal relation enables us to predict the possible change in one series in future due to the current change in another series. in the present study, granger causality has been used to test the following null hypotheses: – h07: there is no significant granger causal relation between markets during total period. – h08: there is no significant granger causal relation between markets during pre-covid period. – h09: there is no significant granger causal relation between markets during post-covid period. 4. results and discussion the selected stock markets experienced a turbulent time period during pandemic. the year 2020 witnessed a drastic dip in stock indices of all selected countries but by the mid of 2021 the indices gradually started to maintain resilience. to divulge whether this market fall is a repercussion of covid-19 or not, the logarithmic returns of all selected markets have been analyzed for total period as well two sub-periods viz., january 2010  – december 2019 i.e., pre-covid period and january 2020  – september 2021, i.e., post-covid period. the use of logarithmic returns enables to compare the returns of different countries without having any possible dependence of changes in stock prices. the comparative analysis of returns reveals that during the entire study period, the average stock return observed to be highest in india (0.049) and lowest in china (0.005). during the pre-covid period, the returns revealed that chinese stock market registered a negative return during 2015-16 that may be attributed to the stock bubble in china that burst out with the beginning of 2016. till december 2019, the highest average returns accounted for indonesia (0.043) followed by india at (0.042). but the brutal impact of covid-19 on indonesia turned the market returns to be negative during post-covid period. the country’s stock market has also experienced downturn, with jakarta composite index dropping at its lowest point on 23 march 2020, only 21 days after the first government officially confirmed covid-19 cases (utomo & hanggraeni, 2021). the standard deviation of taiwan and south korea (0.011) indicates that these markets are less volatile in comparison to other selected markets when total time period is examined. the outbreak of covid-19 enhanced the standard deviation of returns of india, indonesia and south korea. table 1 depicts the descriptive statistics of these returns in percentage terms. the descriptive statistics of stock returns reveals the skewness and kurtosis of stock returns. a normally distributed return series should have a zero value of skewness with a kurtosis value equal to three. however, in the present study, all returns have been observed to be negatively skewed during the total period. the skewness of stock returns is often used as a risk measurement tool and a negative skewness indicates high volatility accompanied with less returns. the negativity of skewness gesticulates the infusion of any shock into the stock market(s) and possible information spillovers among the selected nations. after the outbreak of covid-19 the positively skewed returns from indian stock turned out to be negative. here it is interesting to note that the return from indonesia exhibited a distinct behaviour. the return from indonesian stock market was negatively skewed during pre-covid period but transposed 198 n. bhardwaj et al. impact of covid-19 on long run and short run financial integration among... ta bl e  1. d es cr ip tiv e st at is tic s (s ou rc e: a ut ho r’s c al cu la tio n) pa rt ic ul ar s to ta l p er io d pr eco vi d pe ri od po st -c ov id p er io d c hi na in di a in do ne si a so ut h k or ea ta iw an c hi na in di a in do ne si a so ut h k or ea ta iw an c hi na in di a in do ne si a so ut h k or ea ta iw an a ve ra ge 0. 00 5 0. 04 9 0. 03 5 0. 02 5 0. 03 1 –0 .0 02 0. 04 2 0. 04 3 0. 01 2 0. 01 9 0. 05 0. 10 –0 .0 1 0. 10 0. 10 m ax im um 6. 80 11 .5 7 9. 70 8. 25 6. 17 6. 80 5. 31 7. 01 4. 90 4. 46 5. 55 11 .5 7 9. 70 8. 25 6. 17 m in im um –1 1. 97 –1 4. 10 –9 .3 0 –8 .7 7 –7 .7 0 –8 .8 7 –6 .1 2 –9 .3 0 –6 .4 2 –6 .4 2 –1 1. 97 –1 4. 10 –6 .8 1 –8 .7 7 –7 .7 0 st an da rd d ev ia tio n 0. 01 5 0. 01 2 0. 01 2 0. 01 1 0. 01 1 0. 01 5 0. 01 0 0. 01 1 0. 01 0 0. 01 0 0. 01 0. 02 0. 02 0. 02 0. 01 sk ew ne ss –0 .7 9 –0 .5 7 –0 .2 9 –0 .3 0 –0 .6 7 –0 .6 55 0. 00 8 –0 .4 51 –0 .4 44 –0 .6 39 –1 .8 2 –1 .0 6 0. 14 –0 .1 5 –0 .7 3 k ur to si s 9. 70 18 .6 8 10 .4 3 10 .4 0 8. 60 8. 31 5. 59 9. 26 6. 66 7. 10 22 .0 4 17 .9 8 10 .2 2 9. 31 8. 89 ta bl e  2. c or re la tio n m at ri x (s ou rc e: a ut ho r’s c al cu la tio n) c ou nt ry to ta l p er io d pr ec ov id p er io d po st -c ov id p er io d in di a c hi na in do ne si a so ut h k or ea ta iw an in di a c hi na in do ne si a so ut h k or ea ta iw an in di a c hi na in do ne si a so ut h k or ea ta iw an in di a 1 0. 25 0. 48 0. 48 0. 47 1 0. 25 0. 49 0. 49 0. 48 1 0. 40 0. 64 0. 60 0. 57 c hi na 1 0. 28 0. 34 0. 37 1 0. 28 0. 35 0. 38 1 0. 43 0. 48 0. 52 in do ne si a 1 0. 53 0. 51 1 0. 53 0. 52 1 0. 62 0. 57 so ut h k or ea 1 0. 72 1 0. 73 1 0. 76 ta iw an 1 1 1 business, management and economics engineering, 2022, 20(2): 189–206 199 to be a positively skewed return during pre-covid. the finding reiterates the observations of other researchers (esteves & sussman, 2020; sugandi, 2020) claiming that indonesia was less penalized during the covid-19 pandemic as compared to the 2008 global financial crisis. the kurtosis remained very high during both sub-periods so it can be said that the distribution is peak topped and follows leptokurtic distribution. high values of kurtosis of stock returns indicate the presence of outliers and manifest that during the study period investors were exposed to heavy oscillations. to examine how far the changes taking place in one market are associated with other markets, at the outset correlation between the selected markets has been examined (table 2). the outbreak of covid-19 improved the correlation between the stock markets. the correlation coefficient of indian return enhanced from 0.25 to 0.40, which is quite apparent form the fact that china was the largest trading partner of india during first half of 2020–2021. the correlation of indian returns with indonesian returns also increased from 0.49 to 0.64 that can be accounted to trade relation between india and indonesia that reached to us$10.41 billion during 2020. further in 2020 south korea’s foreign direct investment to india worth of $6.94 billion also made interrelation stronger during post-covid period as compared to previous time periods. the correlation between south korea and taiwan observed to be highest throughout the study period. this reflects the lesser possibility of risk minimization through portfolio diversification by a south korean investor in taiwan stock market and vice-versa. however, the correlation between china and india observed to be lowest which  paves the way for risk minimization through portfolio diversification. the results are in confirmation to the findings of younis et al. (2020). as the pre-condition of testing co-integration among stock indices is to examine whether all variables are stationary of same order or not, the stationarity of all indices has been checked through adf unit root test. the test examines the null hypothesis that there is no unit root in the series and data is stationary. to test the null hypothesis, the probability of test statistics will be compared with 0.05. if the probability is more than 0.05, the null hypothesis cannot be rejected. however, if probability is less than 0.05, the null hypothesis will be rejected i.e., data will be presumed to be stationary. the test results have been reported in table 3. the results depict that at original level, null hypothesis cannot be rejected for any of the indices. in other words, all the stock indices are non-stationary at levels. but the probability after first differencing is less than 0.05, which indicates absence of unit root. in other words, all series are observed to be integrated of order 1. now johansen co-integration test has been applied at 1 lag length (as suggested by lag length criterions) to analyze possible long run cointegration among the selected economies. johansen co-integration test gives estimates about trace statistics and max-eigen statistics. if these statistics are more than their respective critical values at 5% level of significance, the hypothesis cannot be rejected and vice-versa. results of the same have been reported in table 4. during the total study period, the trace statistics and maximum eigen statistics reject the possibility of no co-integrated equation as well at most 4 cointegrated equations among the selected indices at 5% level of significance. thus, it can be concluded that there is a presence of long run co-integration among the stock indices and at most there can be three cointegrating equations. the presence of cointegrating equation indicates that selected stock markets 200 n. bhardwaj et al. impact of covid-19 on long run and short run financial integration among... ta bl e  3. r es ul ts o f u ni t r oo t t es t ( so ur ce : a ut ho r’s c al cu la tio n) pa rt ic ul ar s to ta l p er io d pr ec ov id p er io d po st -c ov id p er io d o ri gi na l l ev el fi rs t d iff er en ci ng o ri gi na l l ev el fi rs t d iff er en ci ng o ri gi na l l ev el fi rs t d iff er en ci ng tst at pr ob ab ili ty tst at pr ob ab ili ty tst at pr ob ab ili ty tst at pr ob ab ili ty tst at pr ob ab ili ty tst at pr ob ab ili ty c hi na –2 .1 3 0. 23 2 –2 2. 62 0. 00 00 –2 .2 9 0. 17 5 –2 0. 38 0. 00 00 –1 .3 0 0. 63 18 –1 8. 36 39 0. 00 00 in di a 1. 51 0. 99 9 –5 0. 32 0. 00 01 0. 23 0. 97 4 –4 2. 68 0. 00 00 0. 30 07 0. 97 81 –2 0. 68 53 0. 00 00 ja ka rt a –2 .1 6 0. 22 2 –4 7. 92 0. 00 01 –1 .7 6 0. 40 0 –2 9. 24 0. 00 00 –1 .3 95 9 0. 58 47 –1 8. 35 21 0. 00 00 so ut h k or ea –0 .6 4 0. 85 9 –4 9. 04 0. 00 01 –2 .5 8 0. 09 7 –4 4. 44 0. 00 01 –0 .5 69 8 0. 87 39 –1 9. 36 89 0. 00 00 ta iw an 1. 13 0. 99 8 –4 8. 31 0. 00 01 –0 .6 84 0. 84 9 –4 3. 43 0. 00 00 –0 .2 96 8 0. 92 24 –1 9. 19 64 0. 00 00 ta bl e  4. r es ul ts o f j oh an se n co -i nt eg ra tio n (s ou rc e: a ut ho r’s c al cu la tio n) h yp ot he si ze d nu m be r of c oi nt eg ra te d eq ua tio n( s) to ta l p er io d pr ec ov id p er io d po st -c ov id p er io d c ri tic al v al ue s tr ac e st at is tic m ax -e ig en st at is tic tr ac e st at is tic m ax -e ig en st at is tic tr ac e st at is tic m ax -e ig en st at is tic tr ac e st at is tic m ax -e ig en st at is tic n on e 78 .8 6* 38 .5 1* 84 .8 7* 31 .5 4 73 .5 3 33 .2 3 79 .3 4 37 .1 6 a t m os t 1 40 .3 6 19 .6 9 53 .3 3 24 .3 8 40 .3 0 20 .9 1 55 .2 5 30 .8 2 a t m os t 2 20 .6 6 9. 30 28 .9 5 14 .0 9 19 .3 9 11 .8 5 35 .0 1 24 .2 5 a t m os t 3 11 .3 7 6. 45 14 .8 6 10 .9 8 7. 54 6. 16 18 .4 0 17 .1 5 a t m os t 4 4. 92 * 4. 92 * 3. 88 * 3. 88 * 1. 38 1. 38 3. 84 3. 84 n ot e: * h yp ot he si s re je ct ed a t 5 % le ve l o f s ig ni fic an ce . business, management and economics engineering, 2022, 20(2): 189–206 201 follow a common trend in long run and are driven by some common force. the results are in confirmation to previous studies by palamalai et al. (2013), agarwal et al. (2021), potharla (2012) that reported long-run integration among asian economies. during the pre-period also, the possibility of at most four equations have been rejected by trace statistics as well as max eigen statistics. further, the hypothesis of absence of any cointegrating equation has also been rejected by trace statistics. thus, it can be concluded that at most there can be three cointegrating equation during pre-covid period. however, during the post-covid period, no hypothesis could be rejected. this kind of result is possible under two circumstances either the time period is not sufficient enough to comment upon the long run behaviour of the markets or there does not exist any long run relationship among the market indices. to examine the possible short-run relationship among sock markets, granger causality test (1969) has been used. the test determines the direction of causation between the selected stock market. the null hypothesis is that country ‘x’ does not granger cause country ‘y’ i.e. x ↛ y. the null hypothesis will be accepted if the probability of f-statistics is more than 0.05. in such a case no causality will be assumed. however, if probability of f-statistics is less than 0.05, the null hypothesis will be rejected and it will be concluded that there is a causal relation between the two stock markets. table 5 represents the results of granger causality test. table 5. results of granger causality tests (source: author’s calculations) null hypotheses total period pre-covid period post-covid period f-statistics result fstatistics result fstatistics result china ↛ india 2.3 accepted 3.9 rejected 0.42 accepted china ↛ indonesia 4.21 rejected 4.77 rejected 0.29 accepted china ↛ south korea 0.7 accepted 0.52 accepted 0.26 accepted china ↛ taiwan 4.56 rejected 5.69 rejected 0.13 accepted india ↛ china 3.99 rejected 2.2 accepted 2.52 accepted india ↛ indonesia 8.35 rejected 5.69 rejected 2.24 accepted india ↛ south korea 11.46 rejected 14.33 rejected 1.03 accepted india ↛ taiwan 11.28 rejected 14.76 rejected 1.32 accepted indonesia ↛ china 4.72 rejected 3.74 rejected 0.73 accepted indonesia ↛ india 1.09 accepted 0.76 accepted 2.94 accepted indonesia ↛ south korea 3.93 rejected 2.91 accepted 0.93 accepted indonesia ↛ taiwan 2.13 accepted 1.7 accepted 0.5 accepted south korea ↛ china 6.81 rejected 3.67 rejected 3.2 rejected south korea ↛ india 3.32 rejected 0.22 accepted 2.21 accepted south korea↛ indonesia 2.64 accepted 1.11 accepted 2.44 accepted south korea ↛ taiwan 1.77 accepted 3.99 rejected 0.15 accepted taiwan ↛ china 6.56 rejected 3.67 rejected 2.36 accepted taiwan ↛ india 3.06 rejected 0.4 accepted 1.26 accepted taiwan ↛ indonesia 4.3 rejected 0.94 accepted 2.46 accepted taiwan ↛ south korea 5.1 rejected 3.07 rejected 1.41 accepted 202 n. bhardwaj et al. impact of covid-19 on long run and short run financial integration among... the results depict that when total time period is considered a unidirectional causal relation can be seen running from india to china, south korea to china, indonesia to india, indonesia to south korea and taiwan to indonesia. the unidirectional relation running from x country to y country simply represents that crisis emanating from country x may transmit to country y. further, some bi-directional relations have been observed running from indonesia to china, taiwan and china and taiwan and south korea, which indicate that both the nations are associated with each other. in other words, any oscillation in one country will cause turbulence in other country also. therefore, a risk averse investor should not choose the respective county to hedge risk through portfolio diversification in that country. during pre-covid period, unidirectional causal relation was observed running from china to india. babu et  al. (2016) also noticed the uni-directional relation between india and chinese market however, bhullar (2019) concluded no casual relation exists between india and chinese stock markets. further unidirectional causal relation was observed running from south korea to china; india to indonesia; india to south korea and india to taiwan. however, no casual relation could be seen to flow between south korea and indonesia and taiwan and indonesia. gupta and aggarwal (2011) also observed very low casual relation among indonesia, malaysia, india and korea. narayan and rehman (2018) also reported poor relationship among asian economies leading to the immense opportunities for investors to diversify their portfolio and reduce risk. the absence of causal relationship suggests that during pre-covid period, investors could have diversified their portfolio to reap the benefits from diversification. the results indicate bi-directional causality between indonesia and china; between taiwan and china; between taiwan and south korea. reddy (2010) and rizwanullah et  al. (2020) also reached at the same conclusion. the bi-directional causality between the nations has taken place on accounts of growing foreign trade relation during past few years. the presence of short-run causal relation reveals that for an investor exploring for some international stock markets to park the saving, the respective country may not prove to be a good choice. some varied and interesting results have been noticed in post-covid period where no causality was observed between india and china; indonesia and india; india and south korea; india and taiwan whereas during pre-covid period there was unidirectional causality from china to india; india to indonesia; india to south korea; india to taiwan respectively. further no causality was observed between indonesia and china; taiwan and china; taiwan and south korea whereas during pre-covid period there was bidirectional causality between the same. the results illustrate that short-run causality between the nations has been highly influenced due to the outbreak of covid-19. after the pandemic, unidirectional causality has been observed running from south korea to china only. the study is expected to be fruitful for the policy makers and economic agents as it fills the research gap of dearth of studies aiming at exploring integration among selected nations viz., taiwan, china, india, south korea and indonesia further it is interesting to note that during post covid period no nation has causation with other nation except south korea and china despite which  paves the ways for diversification to investors. business, management and economics engineering, 2022, 20(2): 189–206 203 conclusions this paper examines co-integration between indian stock market and emerging asian economies. the study is conducted for a time period spanning from january 2010 to september 2021. to examine the impact of covid-19, the entire period was divided into two sub-periods viz., pre-covid period (1st january 2010 to 31st december 2019) and post-covid period (since 1st january 2020). long run and short-run inter-linkages have been investigated by using various econometric tools co-integration test and granger causality test respectively. the analysis revealed that all stock market indices are stationary at first level and are integrated of order one. the results of co-integration conclude the presence of long run integration among all the selected emerging asian economies. it could be said that all the markets are governed by a common trend and will converge to equilibrium in long run. therefore, it could be said that the benefits of portfolio diversification among asian nations may get limited. further, efficient market hypothesis (fama, 1970) was also violated which concluded that financial market returns follow a random pattern and cannot be predicted. but the results show that markets are integrated in long run and the integration among markets can be used for forecasting purposes. with respect to short-run causality, it has been observed that few countries have bidirectional causality during pre-covid period (like between indonesia and china; between taiwan and china; between taiwan and south korea) but the same disappeared during post-covid period. another important observation is that when causality for total time period was observed chinese stock market does not granger caused indian stock market but there was a uni-directional causality flowing from india to china. but when pre-covid period was examined, the relation was reversed. it was china that granger caused indian stock market. during post-covid period there was no causality between india and china. also, there was no causal relation between any other stock markets during post-covid period. therefore, it can be inferred that with the emergence and spread of covid financial markets limited themselves from being associated or affected by other selected stock markets. only one unidirectional relation existed where south korea had causation with china. therefore, it can be concluded that short-run causality between the nations have been highly influenced due to the outbreak of covid-19. with the advent of globalization, better international relations ever increasing trade among nations, financial interdependence and association among countries have become very common. the linkages among different countries have increased the volatility of stock markets and posed a serious threat to potential investors. major historical events like sub-prime mortgage crises (2008), chinese stock market bubble (2015); asian crises (1997) are some examples of it. in this reference the present study made an attempt to analyze the linkages among few selected asian countries during pre-covid as well as post-covid period. the results of present study are expected to be fruitful for investors intending to diversify their portfolio through international investments. also the present study is expected to be fruitful for policy makers and regulatory bodies to better understand the interdependence among economies and to closely monitor the functioning of other stock market particularly during the time of any turbulence in one economy. in contemporary integrated global scenario, it becomes inevitable to identify those economies, which might have an immediate effect on functioning of domestic stock market. the findings of present study offer a line of thought with reference to possible integration 204 n. bhardwaj et al. impact of covid-19 on long run and short run financial integration among... among selected countries so that respective regulatory bodies can design policies in order to safeguard the interest of foreign investors. further, it highlights the possible destination points for international investments to reap the benefits from portfolio diversification. however, it is pertinent to mention here, that the results are subject to the limitation of non-consideration of domestic shocks of different countries. in order to increase the scope and domain of the study, some macroeconomic variables like fdi, fii, gdp that influence the functioning of stock market may be considered in future studies.further, the present paper examines only short-run causality and co-integration among selected emerging markets however, in future work, variance decomposition analysis can be applied to see the degree of exogeneity and to what extent selected variables have influence on other set of variables. also, the impulse responsive function can be applied to measure sensitivity or reaction of selected variables in response to shocks. references agarwal, p. k., nandan, t., & singh, a. p. 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accepted 03 november 2021 abstract. purpose – to analyse the main borrowing alternatives available to lithuanian households and the credit market as a whole, focusing on its peer-to-peer (p2p) segment, the forecast of its growth, and possible challenges. research methodology  – the research methods applied were scientific literature analysis, statistical data analysis, comparative analysis, correlation-regression analysis, linear trend forecasting method. findings – the prevailing borrowing alternative for lithuanian households still remain bank credits. besides, borrowing from p2p market is becoming more and more popular. although the macroeconomic environment for all the credit market segments is the same, the p2p segment is developing significantly faster. if this trend remains unchanged, the whole credit market is likely to face challenges, such as the growth of overdue loans, insolvent customers, the rising share of non-performing-loans (npl), etc., that may affect its overall stability. research limitations – the empirical study relies on the country’s macroeconomic indicators that influence household borrowing. such factors as borrower’s age, income level, marital status and others were not taken into account in this study. the forecast of the p2p segment growth of the consumer credit market and comparison with its banking segment is based on the analysis of 4 years of real monthly statistics for both segments. practical implications – the performed analysis and its results can be useful for the future research within the household borrowing trends, especially in peer-to-peer platforms, and specifically for the central bank, the ministry of finance and other institutions that regulate the credit market, as it provides information on modern borrowing trends and the challenges it might bring. also, for p2p platforms themselves, planning and further developing their activities and adjusting lending conditions with the aim to attract higher-quality customers. originality/value – household borrowing, the credit market and the p2p platforms are widely analysed by both academics and financial institutions, such as central banks. however, it is mainly limited to the analysis of statistical data and does not pay attention to possible market development issues. this study focuses on the analysis of the growth trends of the p2p market and the potential challenges that may arise thereafter. keywords: household borrowing, modern borrowing trends, credit market, commercial banks, p2p segment, overdue loans, non-performing loans. jel classification: d10, d53, g17, g21, c12, c15, c32. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2021.13986 https://orcid.org/0000-0003-3273-8467 https://orcid.org/0000-0002-6990-0790 390 k. taujanskaitė, i. karklytė. borrowing alternatives for households in lithuania: current situation... introduction household needs are unlimited, as opposed to their financial capacity to meet them, so households often lack money. therefore, households tend to borrow. many papers and researches have been analysing the household borrowing process: what are households as credit receivers, why do they borrow, what are the borrowing purposes and opportunities, how changes of interest rate might influence households borrowing process, etc. (dorfleitner et al., 2021; cloyne et al., 2020; oh et al., 2020; loukoianova et al., 2019; gilchrist & mojon, 2018; faia & paiella, 2017; fuster & willen, 2017; zabai, 2017). not only researchers analyse household borrowing, but also international organisations investigate related topics as well (oecd, 2021; european central bank, 2021a, 2021b; the world bank, 2021; federal reserve bank, 2021; federal reserve bank of new york, 2021; uk parliament, 2021; bloomberg, 2021; international monetary fund, 2019, etc.). the financial services market is nowadays becoming very dynamic due to newly emerged it technologies and technology-based innovative business ideas, which among other services offer new borrowing possibilities. as a result, households can borrow not only from traditional financial institutions, like commercial banks, but also from such fast-growing alternative sources as peer-to-peer (p2p) platforms. foo et al. (2017) described peer-to-peer (p2p) lending as a fast-growing financial technology (fintech) trend that can displace traditional retail banking. this issue is being analysed by other scientists as well (lenz, 2016; navaretti et  al., 2018a). however, some researches, as de roure et  al. (2018); tang (2019) claim that p2p platforms serve a low-quality borrower segment that is underserved by banks and is a risky business model. fintech based p2p credit market has grown rapidly around the world in recent years, but its size still varies greatly across economies. differences reflect economic development and financial market structure: the higher the country’s income and less competitive its banking system, the larger is fintech credit activity (claessens et  al., 2018). demirgüç-kunt et  al. (2017) claim that p2p market growth depends on a country’s economic growth, its level of economic and financial development, and the quality of its legal and other institutions. feginn et al. (2019) empirically found a negative relationship between the economies macroeconomic condition and the default rate on p2p loans. these findings show that p2p lending does not appear to be less risky in the future. the future development perspectives of the p2p platforms are thus the subject of many researches as well. interesting that development forecasts vary widely depending on the author. valuates reports (2020) foresees growth of volume to ~0.5 tn $ by 2027, while expectations in robocash (2019) are that the aggregate volume should reach $0.9 tn by 2024. notable that the capitalisation of world banking was ranging from $7 to 8 tn over the past 3–4 years demonstrating relative stability of the sector, which may mean a kind of “standstill” before a possible reversal of the trend line”. they note that given the active development of alternative lending, there will hardly be a rapid rise. deficiency of researches with the latest data on loan volumes in the peer-to-peer platforms (p2p) and its dependency of macroeconomic indicators, is noticeable, especially in lithuania, as there is not much research done in this area. the central bank of lithuania business, management and economics engineering, 2021, 19(2): 389–411 391 (2021c) collects statistical data on the p2p market in the country. however, there is a lack of scientific papers analysing the future development of the credit market and the correlation of the volume of loans issued to households by mutual borrowing platforms (p2ps) operating in lithuania, with the main country’s macroeconomic indicators such as gdp, wages and unemployment rate. besides, it would be relevant to compare peer-to-peer platform indicators with the ones in commercial banks and to forecast p2p market future development. the requirements to financial soundness of households applied by the p2p platforms appears to be less stringent than in commercial banks, therefore it might be that peer-to-peer platforms are issuing loans to financially vulnerable households. detailed analysis of statistics on nonperforming loans and the latest trends would provide an opportunity to better perceive the situation, however information on this subject is currently very limited. therefore, the purpose of this research is to analyse the main borrowing alternatives available to lithuanian households and the credit market as a whole with a focus on its peerto-peer (p2p) segment, the forecast of its growth trends, and possible challenges. methods applied in the research comprise analysis of scientific literature and statistical data, comparative and correlation-regression analysis and linear trend forecasting method. the latest information submitted by the creditors as well as the statistical data for the period of years 2016–2020 was used for the analysis and performed statistical calculations. the performed analysis could be useful for future research within the household borrowing trends in peer-to-peer platforms, and specifically for the central bank, the ministry of finance and other financial institutions that regulate the credit market, as the results of the research provide information on the latest borrowing trends and the challenges it might bring. also, for p2p platforms themselves, planning and further developing their activities and adjusting lending conditions to attract higher-quality customers. 1. review of related scientific investigations on household borrowing and the main borrowing alternatives household (hh) borrowing process is examined in numerous of scientific papers. lusardi (2008) analysed the importance of teaching financial literacy from an early age and its relationship with personal finance management habits in the future. lusardi and mitchell (2014) examined the impact of hh financial literacy on economic decision-making in the united states and other countries and its connection with borrowing process. angelucci et  al. (2015) has analysed why, how much and how people borrow and has evaluated the efficiency of choices according to the debt terms, etc. situation in lithuania has been analysed by alisauskaite-seskiene et  al. (2015). the authors examined, what factors influence households to borrow from financial institutions such as commercial banks. murauskas and kregždė (2015) analysed which factors influence the size of the interest rate that is offered for households. fuster and willen (2017) researched how current low interest rates affect the level of households borrowing in financial institutions. zabai (2017) has pointed out that household borrowing has direct impact on country’s financial system and its stability: “the way in which household indebtedness affects the sensitivity of aggregate expenditure matters for both macroeconomic and financial stability. financial institutions can suffer balance 392 k. taujanskaitė, i. karklytė. borrowing alternatives for households in lithuania: current situation... sheet distress from both direct and indirect exposure to the household sector.” gilchrist and mojon (2018) analysed how commercial banks had to tighten credit rating criteria after the 2008 crisis and how this affected household financial condition. cloyne et al. (2020) analysed how households respond to changing interest rates. some researchers point to the growing trend of household indebtedness. almenberg et al. (2020) has found that household indebtedness is high in many countries, and continues to rise. people, who feel comfortable with debts, have more of them. their parents were comfortable with debt as well. son and park (2019) have presented the research about the issues of household debt sustainability in south korea and noted that according to various macroeconomic scenarios, “the ratios of vulnerable households over total indebted households, which has been growing since 2012, will likely expand”. federal reserve bank of new york (2021) notes that “according to the latest quarterly report on household debt and credit, total household debt rose by $313 billion (2.1%) to reach $14.96 trillion in the second quarter of 2021. mortgage balances  – the largest component of household debt  – rose by $282 billion and auto loans increased by $33 billion”. in lithuania, the credit market situation is quite similar. according to the central bank of lithuania (2021b), despite the fact that loans for hh with a term less than 1 year has declined by 13% (from 318 million eur 2020 q1 to 279 million eur 2020 q4), but there is a clear 7% growth in loans for hh with a term more than 1 year (from 10964 million eur 2020 q1 to 11742 million eur 2020 q4). nowadays households have many alternatives from where to borrow. these can be not only commercial banks, but also credit unions, peer-to-peer (p2p) platforms, etc. the latest incarnation of information technology has led to a “fintech revolution” where banks face new competitors with different – more specialised – business models forcing a disaggregation of the value chain. with technology-driven solutions they offer alternatives to key banking services including payments and lending (boot, 2017). peer-to-peer (p2p) lending, which matches borrowers and lenders directly without reliance on deposits and eliminates an intermediating bank, has gained traction in recent years in both europe and the u.s (de roure et al., 2018). fintech start-ups “are nimble piranhas, each focusing on a small part of a bank’s business model to attack” (financial times, 2015). fintechs, such as p2p platforms, in reality provide the same services as banks, but possibly more efficiently because of technologies, and in a different and unbundled way. yet, differently from banks, the information they use is based on big data not on long term relationships; access to services is only decentralised through internet platforms; risk and maturity transformation is not carried out; lenders and borrowers or investors and investment opportunities are matched directly without the intervention of bankers (navaretti et al., 2018b). recently a number of studies has emerged, which compare commercial banks with p2p platforms and admit an increasing competition between them in the area of settlement and consumer loans. de roure et al. (2017) examined, whether p2p loans to hhs can replace consumer loans provided by commercial banks, faia and paiella (2017) analysed how increased management risk of commercial banks affects the lending volumes of p2p platforms. zeng et al. (2017) analysed the borrowing process on p2p platforms. ding et al. (2018), dorfleitner et  al. (2021) analysed how credit recipients are evaluated on p2p platforms. navaretti et  al. (2018b) claim that “fintechs enhance competition in financial markets, provide services that business, management and economics engineering, 2021, 19(2): 389–411 393 traditional financial institutions do less efficiently or do not do at all, and widen the pool of users of such services. but they will not replace banks in most of their key functions. in most cases, fintechs provide a more efficient way to do the same old things”. this idea is also confirmed by other authors yeo and jun (2020), who claim that “p2p lending platforms operate in the low-credit segment and banks’ involvement in p2p lending is restricted – so that the growth of p2p lending is not adverse for bank stability”. some researches state that p2p loans are riskier than bank loans and less profitable. de roure et al. (2018) investigated the consumer credit market in germany and proved that “when banks are faced with higher regulatory costs, the riskiest bank loans will migrate to p2p lenders first, causing both a decline in average risk in bank lending as well as a decline in overall bank lending, and that this happens more when the unaffected banks in the region are not financially strong, and consumers are more aware of p2p lending”. tang (2019) claim that p2p platforms complement banks by addressing a low-quality borrower segment underserved by banks. “in that case, the borrower pool of p2p platforms is of worse quality than banks. upon the shock to bank credit supply, the borrowers switching from banks to p2p platforms will improve the quality of the p2p borrower pool. as a result, the average p2p borrower quality will increase, and the quantiles of the distribution of p2p borrower quality shift right”. wright and feng (2020) highlight that “economic fallout from the covid-19 outbreak now threatens to intensify the financial risks arising from the increase in household borrowing, with implications for financial stability, consumption growth, and the broader economy”. therefore, it might happen that peer-to-peer platforms are issuing loans to financially vulnerable households. analysts, such as de roure et al. (2018) remark that “p2p lending is substituting the banking sector for high-risk consumer loans since banks are unwilling or unable to supply this slice of the market”, also claim that “p2p lending increases and total bank lending declines when some banks face higher regulatory costs. besides, p2p borrowers are riskier and less profitable than bank borrowers”. there are many studies conducted in the field of peer-to-peer lending in different countries: ding et al. (2021) reviewed the rise of peer-to-peer (p2p) in china and the prospects for its future, kurniasari and utomo (2021) analysed peer-to-peer lending growth in indonesia in line with the advanced of digital technology, siemionek-ruskań and fanea-ivanovici (2021) portrayed evolution, trends in p2p lending and legislation in europe, chishti (2016) analysed p2p sector growth in great britain. vives (2018) proved that p2p lending is growing fast in the united states, china, united kingdom, germany, france and other countries. papoušková and hajek (2020) argue that p2p lending platforms are one of the fastest growing segments in finance industry. compared to many other countries, the household borrowing field in lithuania seems to be under researched and obviously needs to be paid more attention. the growth rate of p2p segment can serve as an indicator of specific qualitative changes in the lending market and as a tool for forecasting. consequently, analysis of p2p segment and non-performing loan indicator would provide an opportunity to analyse the current situation and to forecast the future development and challenges of this segment. thus, in this study an attempt was made to investigate the dynamics of the development of credit market and what challenges these trends may bring in the future. 394 k. taujanskaitė, i. karklytė. borrowing alternatives for households in lithuania: current situation... 2. current situation and trends in the lithuanian credit market 2.1. overview of the credit market in lithuania, households can borrow from commercial banks, credit unions, p2p platforms and other financial institutions. according to the central bank of lithuania (2021a), assets of financial corporations engaged in lending activities is growing and comparison of years 2016 and 2020, indicates the growth rate of 49%. the total volume of loans is also increasing significantly (figure 1). during the period 2016–2020, it has increased by 46%. in particular, the share of loans granted to households grew even faster. in 2020, compared to 2016, it has increased by as much as 91%. remarkably rapid growth was registered in 2019, where the increase has reached 33%. the onset of the coronavirus pandemic somewhat corrected the rapid growth. the increase in 2020 went down to 6% compared to 2019. thus, it can be reasonably stated that the volume of loans issued to households is still growing, but the growth rate is no longer as sharp and high as it was in previous years. the total household loan volume expressed in eur in 2019 made 2.25 billion and has increased to 2.39 billion in 2020. 0 2000 4000 6000 8000 10 000 12 000 2016 2017 2018 2019 2020 m ill io n, e u r dynamics of loan volumes in lithuanian credit market asset of �nancial corporations engaged in lending activities, million eur loans in total, million eur loans for households, million eur figure 1. dynamics of the total loan volume in lithuanian credit market 2016–2020 (created by authors, according to the central bank of lithuania, 2021b) on the other hand, if we analyse the loan dynamics by quarters, we see that the volume in the first quarter of 2021 is 19% higher than in the same quarter of 2020 (figure 2). 0 100 200 300 400 500 600 700 800 2019 q1 2019 q2 2019 q3 2019 q4 2020 q1 2020 q2 2020 q3 2020 q4 2021 q1 m ill io n, e u r loans for households, million eur figure 2. dynamics of loans for households 2019–2021 (created by authors, according to the central bank of lithuania, 2021a) business, management and economics engineering, 2021, 19(2): 389–411 395 according to the banking review of the central bank of lithuania (2021b), the total assets of the banking sector amount to 38.3 billion eur, where 75.2% belong to 3 major banks – swedbank (38.1%), ab seb bankas (26.5%), ab siauliu bankas (8.2%) and the rest 24.8% to branches of foreign banks and small local banks. 500 000 1000 000 1500 000 2000 000 2500 000 3000 000 3500 000 2013 2014 2017 2018 2019 2020 (q1 + q2) u ni ts number of consumer credits, units figure 3. the number of consumer credits in 2013–2020 (created by authors, according to the central bank of lithuania, 2021c) the different situation is with consumer credits. although, the total number according to statistics is decreasing, its volume, instead, is slightly growing. figure 3 shows that the highest number of issued consumer credits was in 2014, but from 2017 it started to shrink. it has decreased by approx. 40% in 2019 compared to 2014. peer-to-peer (p2p) segment of the consumer credit market. p2p segment represents a part of the consumer credit market. mutual lending or p2p is a process that takes place on a platform where, through an information system, payments are made directly, without intermediaries, between those who have free funds and those who lack them (hartmann et  al., 2019). according to zagunis (2018), a member of the board of seb bank, there is a modern tendency that hhs start borrowing for smaller expenses from modern institutions, such as mutual lending platforms, because the lending procedure is much faster compared to commercial banks. according to the central bank of lithuania (2019), 6 mutual lending platforms have been registered in lithuania and have been granted the central bank of lithuania’s permission to operate as crowdfunding platform operators: uab bendrasis finansavimas or savy (2014), ab neo finance or paskolų klubas (2014), uab finansų bite or finbee (2016), uab lsv intergroup or eurocredit (the year since the company officially started to operate as a p2p platform is not provided), uab oz finance (2019), uab procentas (2019). it is relevant to compare the registration period of p2p platforms in other countries as well. united kingdom was the first country, which set up a system of mutual lending platforms and launched the first platform in 2005. later, these institutions have been developed in other countries too. according to p2p market data (2021), p2p platform “zopa” in the united kingdom was registered in 2005; “lending club” in usa – 2006; “finansinspektionen” in sweden – 2007; “societyone” in australia – 2012; “harmoney” in new zeland – 2014; “mintos” in latvia – 2015; “welab” in china – 2016. it’s worth noting that in latvia, the first platform was registered even a year later than in lithuania, but its mintos platform 396 k. taujanskaitė, i. karklytė. borrowing alternatives for households in lithuania: current situation... has been growing very fast and is now considered to be one of the largest lending platforms (p2p market data, 2021) on international scale. the two longest operating p2p platforms in lithuania are “savy” and “paskolų klubas”, therefore analysis in this study will be based on their data. statistics show (the central bank of lithuania, 2020) that the number of both borrowers and investors on lithuanian p2p platforms is permanently growing, see figure 4. 10 639 17 254 23 335 32 543 37 016 5436 9147 14 458 18 198 20 840 0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 2016 12 31 2017 12 31 2018 12 31 2019 12 31 2020 06 30 u ni ts number of lenders, units number of consumer credit recipients, units figure 4. the popularity of p2p platforms in lithuania (created by authors according to tarasevičienė, 2019; the central bank of lithuania, 2020) figure 4 shows that during the period from 2016 till 2020, both the number of lenders and the number of credit recipients in p2p platforms have increased 4–5 times, while the number of loans and volume (figure 5) rose 2.5–3 times and 6–8 times respectively. so, it is clear that hhs are increasingly choosing p2p platforms as credit providers. 0 100 200 300 400 500 600 700 800 900 20 15 -1 201 20 16 -0 301 20 16 -0 601 20 16 -0 901 20 16 -1 201 20 17 -0 301 20 17 -0 601 20 17 -0 901 20 17 -1 201 20 18 -0 301 20 18 -0 601 20 18 -0 901 20 18 -1 201 20 19 -0 301 20 19 -0 601 20 19 -0 901 20 19 -1 201 20 20 -0 301 20 20 -0 601 20 20 -0 901 20 20 -1 201 r el at iv e gr ow th , % number and volume of consumer loans issued total loans, number total loans, volume p2p loans, number p2p loans, volume figure 5. the growth of consumer loans in the whole credit market and p2p segment (created by authors, according to the central bank of lithuania, 2021c) business, management and economics engineering, 2021, 19(2): 389–411 397 it is obvious that the growth rate of p2p segment is much higher than the rest of the market, therefore the consequences of such a development need to be analysed in order to predict its possible impact specifically on the p2p segment and the whole consumer credit market as well. according to the central bank of lithuania (2021c), in 2019 the volume of consumer loans issued to households made 520 million eur, while loans in p2p platforms were 34 million eur or approximately 6.5%. in 2020 under the influence of covid-19 pandemic the situation has changed significantly – the share has increased from 6.5% to 9% (total volume has decreased to 390 mln eur, while in p2p platforms increased to 35 mln eur). 2.2. issues with borrowing in p2p platforms when analysing the p2p lending sector, the share of non-performing loans (npl) should be used as a key indicator of the soundness of the borrowing process. european central bank (2020) describes that “a loan becomes non-performing when the bank considers that the borrower is unlikely to repay, or when the borrower is 90 days late on a payment”. according to hartmann et  al. (2019), platforms such as p2p tend to provide credits to those hhs that commercial banks refuse to serve because their credit recipient’s evaluation criteria is not met. therefore, the consequences of such attitude of p2p’s should be carefully analysed. figure 6 illustrates the trend of the npl indicator in banks operating in lithuania during years 2008–2020. 6.08 23.99 18.84 11.59 4.95 3.18 1.04 1.3 0 5 10 15 20 25 30 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 % npl % figure 6. dynamics of non-performing loans (npl) in lithuanian banking sector 2008–2020 (created by authors according to the world bank, 2020a; ceic data, 2021) figure 6 shows that the level of npl in lithuania’s banks market increased sharply during the crisis in 2008–2009. in 2009, the indicator reached 23.99%. however, after a gradual recovery of the economy, this indicator decreased and in 2020 reached only 1.3% (ceic data, 2021). the level of non-performing loans in p2p sector is not included in figure 6 since p2p platforms, which operate in lithuania, do not share their npl indicator. figure 7 presents a comparison of share of total overdue loans in p2p and banking segments of the consumer credit market indicating a permanent growth of overdue loans in the p2p segment contrary to its decrease in the whole credit market. overdue loans include all the loans that are due to pay more than 30 days. 398 k. taujanskaitė, i. karklytė. borrowing alternatives for households in lithuania: current situation... 23 22 17 17 16 15 15 15 13 14 13 13 11 13 14 17 15 15 15 15 15 16 16 17 18 18 19 20 22 22 5 10 15 20 25 20 16 -1 201 20 17 -0 201 20 17 -0 401 20 17 -0 601 20 17 -0 801 20 17 -1 001 20 17 -1 201 20 18 -0 201 20 18 -0 401 20 18 -0 601 20 18 -0 801 20 18 -1 001 20 18 -1 201 20 19 -0 201 20 19 -0 401 20 19 -0 601 20 19 -0 801 20 19 -1 001 20 19 -1 201 20 20 -0 201 20 20 -0 401 20 20 -0 601 % overdue loans, whole market, % overdue loans, p2p segment, % figure 7. overdue loans in p2p platforms and commercial banks, % (created by authors according to the central bank of lithuania, 2021c) figure 7 highlights that during the period 2016–2020 overdue loans ratio in the whole credit market has been shrinking, but the different situation is in p2p segment  – this ratio from 2018 is increasing quite fast. it is obvious that in this segment the share of clients, who face financial problems and take the liabilities less responsibly, is higher than in the rest of the market. the share of households with vulnerable budgets is subject to the macroeconomic situation of the country. this was evidently demonstrated during the 2008-10 financial crisis. figure 8 shows how the npl level in % was changing in several countries, including lithuania. 24.0 14.8 1.3 15.9 4.6 3.1 5.4 0.40.6 0.5 1.2 0 5 10 15 20 25 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 % lithuania latvia estonia sweden uk figure 8. npl in eu countries % (created by authors according to the world bank, 2020b) a review of npl trends in various countries shows that previous crisis had an impact on npl’s in almost all of them, although its range was quite different. given the current economic uncertainty because of covid-19 pandemic, it is likely that the volume of borrowing by hhs may increase in all the market and especially in p2p platforms, where requirements for the borrowers seem to be less stringent than in commercial banks. talking about available statistics, it has been observed that p2p platforms do not distinguish clearly the npl rate as a separate indicator, providing instead the data on loan overdue time – 30, 60 or 90 days. this makes it complicated to judge unambiguously on the business, management and economics engineering, 2021, 19(2): 389–411 399 soundness of lending as it leaves space for interpretations. given the growing risk that hh may have financial difficulties because of the pandemic, potentially increasing the burden of financial obligations on households, it is important to analyse not only the current overall level of the country’s npl, but also to predict how this indicator might change in the future. 3. methodology of the research relationship between the performance indicators of p2p and the banking segments of the consumer credit market with the main factors that influence their dynamics in this research was established by using correlation-regression analysis tools, while ms trend tool was used for the forecast of development trends in both segments. there is a consensus about the link between macroeconomics and household consumption – growing economy triggers optimism about the future, consumption starts growing too followed by increased borrowing. the state of the economy is determined by certain macroeconomic indicators such as gdp, unemployment rate, wage growth, inflation, and so on. therefore, any changes in gdp, wages and unemployment rate are expected to affect the volume of loans issued. consequently, these factors have been selected as independent variables for further analysis. research steps: 1. setting research limitations: in this study, household borrowing is linked only to macroeconomic indicators. other relevant factors, such as the age of the borrower, income level, gender, place of residence, the purpose of the loan, etc., were not taken into account in this study. these indicators could be used for further investigations in the future. also, the forecast of the p2p segment growth of the consumer credit market and comparison with its banking segment is based on the analysis of 4 years of real monthly statistics for both segments. 2. correlation-regression analysis in order to determine the correlation between the selected macroeconomic indicators and the dynamics of the volume of loans issued for households in commercial banks and p2p. 3. construction of regression equation using the set regression coefficients. 4. forecast of loan volume till 2025 in commercial banks and p2p segment by using the designed regression equation and the selected macroeconomic indexes, calculated by using ms excel trend function. trend function was used as a universal tool applicable for the calculation of both current and future trends. data used: a) statistical data about consumer credits from two commercial banks: swedbank (2021) and seb (2021), and two p2p platforms: savy (2021) and paskolų klubas [pk] (2021), each representing as a key market player in own segment. b) actual statistical data on the selected key macroeconomic indicators: gdp, wages and unemployment rate; c) 48 time series were used for each institution (two banks and two p2p platforms) and each indicator (gdp, wage, unemployment). total 192 data lines were used for 400 k. taujanskaitė, i. karklytė. borrowing alternatives for households in lithuania: current situation... the regression analysis (monthly data from 2016 01 till 2019 12) for each financial institution. d) the predicted values of these indicators from 2020-01 were calculated by using ms trend function. e) to verify the creditworthiness of the prediction, the predicted and actual values of the volume of issued loans were compared for 2020 in both the p2p and bank segments. 5. identifying potential threats and issues to the whole credit market based on the obtained forecast results. in the research, two hypotheses were raised: h1: p2p platforms can replace commercial banks in the credit market over time. this hypothesis is accepted or rejected based on the data obtained from the forecast. to make a forecast, the results of the correlation-regression analysis will be calculated using the statistical spss program. if the correlation between the analysed data of p2p platforms and commercial banks is relatively strong with macroeconomic indicators, such as gdp, wages and unemployment rates, the obtained coefficient of determination will be greater than 0.2, student’s p value less than 0.05 (cekanavicius & murauskas, 2014), there will be no multicollinearity problem between the data, there will be no exceptions, the graphs and performed tests will show that the standardised residual satisfy the standards, then it will be possible to make a data prediction. the received results will be presented in the graph, which will show the probable change of hh modern borrowing trends in p2p platforms and commercial banks. this will allow to confirm or reject the first hypothesis. it is also important to analyse and compare the npl indicator in those institutions from which hhs borrow the most  – these are commercial banks and the increasingly popular p2p platforms. in the second section of the paper, it was mentioned that the npl indicator of p2p platforms is not publicly available. therefore it is useful to calculate it and evaluate how this indicator differs in comparison with commercial banks. this leads to the second hypothesis: h2: the npl level of p2p platforms is much higher than that of commercial banks. during the analysis, the indicator of the npl in p2p segment will be calculated by using formula (1) (european central bank, 2017) based on the collected statistical data. according to the calculations and general statistics from commercial banks, this hypothesis will be accepted or rejected. ( ) 100 non performing loans non performing loan npl total loans − − = × . (1) the obtained results should show the current situation in the credit market, what percentage of loans hhs are not able to repay. if the performed calculations show that in the analysed p2p platforms, the npl ratio will be higher than in commercial banks, the second hypothesis will be accepted. otherwise, it will be rejected. the accepted or rejected hypothesis will allow to draw conclusions about the reliability of such lending platforms compared to commercial banks and what challenges such situation may bring in the future. business, management and economics engineering, 2021, 19(2): 389–411 401 4. the forecast of p2p segment development in lithuania and related issues using the correlation regression analysis, it was found out how the volume of loans (eur) issued for hh by two mutual lending platforms, savy and paskolų klubas (pk), and two commercial banks, swedbank and seb, depends on the main macroeconomic indicators: gross domestic product (gdp, eur), wages (gross, eur) and the unemployment rate (%). during the analysis, statistical problems were encountered as multicollinearity, exceptions in the data and insignificance of statistical regressors. high multicollinearity between gdp and unemployment rate was observed. since gdp p-value was identified as not significant, it was removed from the analysis. the final results, with processed data, are shown in table 1. table 1. results of correlation – regression analysis (source: authors) savy pk swedbank seb correlation coefficients wage 563.24 unemployment rate –51912.97 wage 1352.20 unemployment rate –338689.95 wage 50457.42 unemployment rate –4209637.78 wage 66492.78 unemployment rate –14878427.9 coefficients of determination r2 = 0.828 r2 = 0.905 r2 = 0.853 r2 = 0.898 anova p-value p < α = 0.05 p < α = 0.05 p < α = 0.05 p < α = 0.05 multicollinearity vif < 2 vif < 2 vif < 2 vif < 2 cook’s measure 0.204 0.100 0.114 0.099 standardised residual normality satisfied normality satisfied normality satisfied normality satisfied kolmogorov–smirnov and shapiro–wilk tests p ≥ 0.05 p ≥ 0.05 p ≥ 0.05 p ≥ 0.05 the received coefficients of correlation and determination of the final models were obtained large enough, the regressors which were left in the equations were statistically significant, multicollinearity indicator was obtained less than 2 and received data of residuals showed that the assumptions of model normality are satisfied. based on the received results, it can be stated that the amount of loans issued by the p2p platform savy for hh is most influenced by wages. unemployment is also a significant regressor, dependence is reversed. the correlation between the amount of issued loans by the pk and the regressors was received as quite strong, the coefficient of determination  – very high (value of r2 are very close to 1 (cekanavicius & murauskas, 2014)), and residual errors of the data did not contradict the assumption of normalcy when exceptions were removed. based on the results, the amount of loans issued by the pk depend quite strongly on both variables: wages and unemployment rate. in commercial banks, swedbank and seb, wages were the most significant variable. coefficients of determination were admitted as reliably high. the obtained regression equations are presented in table 2. 402 k. taujanskaitė, i. karklytė. borrowing alternatives for households in lithuania: current situation... table 2. regression equations (source: authors) financial institution regression equations savy y = 270102.790 + 563.241 w ages – 51912.975 unemployment pk y = 1934598.175 + 1352.198 w ages – 338689.951 unemployment swedbank y = 217555903.6 + 50457.417 w ages – 4209637.781 unemployment seb y = 245882656.5 + 66492.785 w ages – 14878427.9 unemployment regression equations (table 2) show the relationship between the volume of issued loans and wages, unemployment rates. forecast of loan volume dynamics in commercial banks and p2p segment was performed by using the designed regression equations (table 2) and ms excel trend function, based on the expected macroeconomic indicators. this ms function projected wages and the unemployment rate for the next six years, starting from 2020 to 2025. all predicted values of the variables were inserted into regression equations (table  2). the obtained results of p2p platforms are shown in figure 9, and the results of commercial banks are presented in figure 10. the forecast line is highlighted in blue colour (figures 9, 10). according to the data provided, the number of loans issued by commercial banks will grow from 2016 until 2025: swedbank by 38%, seb by 64%. meanwhile, the numbers of p2p platforms will grow faster. savy from 2016 until 2025 will grow by 304% and pk by 1156%. it is noticeable that the volume of loans issued by pk grew the fastest until 2020, therefore such a further growth trend is probable in future. to verify the creditworthiness of the prediction of macroeconomic indicators by using the ms excel trend function, the predicted and actual values of the volume of issued loans were compared for 2020 in both the p2p and bank segments. the obtained results of p2p platforms are presented in figure 11 and the results of commercial banks in figure 12. – 5 10 15 20 25 30 35 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 v ol um es o f i ss ue d lo na s, m ln . e u r savy, mln. eur paskolu klubas, mln. eur figure 9. forecast of the volume of issued loans by p2p platforms (source: authors) business, management and economics engineering, 2021, 19(2): 389–411 403 – 500 1000 1500 2000 2500 3000 3500 4000 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 v ol um es o f i ss ue d lo an s, m ln . e u r swedbank, mln. eur seb, mln. eur figure 10. forecast of the volume of issued loans by commercial banks (source: authors) – 5 10 15 20 25 2016 2017 2018 2019 2020 v ol um e of is su ed lo an s, m ln . eu r savy, mln. eur (forecast for 2020) pk, mln. eur (forecast for 2020) savy, mln. eur (actual for 2020) pk, mln. eur (actual for 2020) figure 11. comparison of forecasted and actual volumes of issued loans by p2p platforms for year 2020 (source: authors) – 500 1000 1500 2000 2500 3000 3500 4000 2016 2017 2018 2019 2020 v ol um e of is su ed lo an s, m ln . e u r swedbank, mln. eur (forecast for 2020) seb, mln. eur (forecast for 2020) swedbank, mln. eur (actual for 2020) seb, mln. eur (actual for 2020) figure 12. comparison of forecasted and actual volumes of issued loans by commercial banks for year 2020 (source: authors) 404 k. taujanskaitė, i. karklytė. borrowing alternatives for households in lithuania: current situation... a satisfactory or almost identical (e.g. savy and seb) correlation of the forecasted and actual volumes of loans issued by p2p platforms and commercial banks for the year 2020 supports the legitimacy of the selected methodology of the research. thus, the first hypothesis was accepted. for the second hypothesis, npl indicator was calculated based on the given formula (1). once the npl indicator on p2p platforms was obtained, it was compared to the ones in commercial banks. the total amount of loans issued by the pk over six years makes 40,775,185.00 eur. more than half of all issued loans are not overdue and repaid  – 67.59%. overdue loans account for 32.41% of all issued loans (details are provided in table  3). currently, the largest amount of loans are issued for persons with b credit rating (savy.lt, 2021; pk, 2021). credit ratings are given to prospective borrowers and show if a person is able to meet financial commitments. the credit rating system is ranked from a (high level of creditworthiness) to d (has a high degree of risk) (miknevicius, 2021). table 3. overdue loan statistics of pk (created by authors according to statistics of pk, 2021) delay percentage calculated on all p2p platform overdue loans 1–30 days 7.98% 31–60 days 2.30% 61–90 days 1.05% 91–720 days 13.13% >720 days 7.95% the level of non-performing loans at pk is calculated based on data given in table 3 and equation (1). the obtained result shows that the npl level of the pk reaches about 32%. the total amount of loans issued by savy during six years seek 42,981,662.00 eur. non overdue and repaid loans account for as much as 69.4 percent of all loans issued. overdue loans account for 30.6% of all loans issued. details are provided in table 4. table 4. overdue loan statistics of savy (created by authors according to statistics of savy, 2021) delay percentage calculated on all p2p platform overdue loans >210 days 30.6% it was noted that savy does not allocate the amount of overdue loans in the standard way, which is a detailed allocation of how many loans are overdue by 30 or 90 days (a nonperforming loan in savy is considered to be overdue for 210+ days). the obtained results show that the level of savy npl reaches 31 percent. the npl indicators on p2p platforms were ~24 times higher compared to the general level of the lithuanias’ npl indicator (in 2020 it reaches 1.3% (ceic, 2021)). all counted results are presented in table 5. business, management and economics engineering, 2021, 19(2): 389–411 405 table 5. npl of financial institutions (created by authors according to the results of analysis) financial institutions npl, % pk 32% savy 31% swedbank 1.3% seb 1.4% the results of the analysis showed that the npls rates between p2p platforms and banks differ a lot. the most important remark is that savy and pk platforms have ~22–24 times higher rate of non-performing loans compared to swedbank and seb. therefore, the second hypothesis was accepted. using ms excel trend function and statistical data of lithuanian npl indicator, the forecast of change of this indicator was made. prognosis was made from 2021 to 2026. the obtained results are presented in figure 13. 3.66 3.18 2.27 1.90 1.28 2.16 1.90 1.81 1.79 1.92 1.86 0 1,5 3 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 % figure 13. forecast of non-performing loans (npl) level change in lithuania, % (created by authors according to the results of analysis) the forecast curve in figure 13 is coloured in two colours. actual npl data are presented in blue, and from 2020, the colour of the curve is chosen to be yellow, which shows the results obtained during the forecast. the npl rate is expected to increase in 2021. this change seems realistic given the uncertainty of the economic situation in the current period. from 2021, the indicator should start to decrease again and reach 1.86% in 2026. it should be noted that data of p2p platforms are not presented in this indicator, as the data is not published. npl indicator on p2p platforms that is available today can only be calculated, and it was done in this paper. 5. discussion in this research, an attempt was made to analyse the most popular borrowing alternatives available for households in lithuania, such as commercial banks and p2p platforms. the article focuses on the prediction of the growth trends of p2p market for the future period until 2025 and what challenges accelerated growth can bring, particularly for this segment and the whole credit market. 406 k. taujanskaitė, i. karklytė. borrowing alternatives for households in lithuania: current situation... analysis shows that p2p market in lithuania is still limited by its volume and made 6.5% in 2019 and 9% in 2020 of the consumer credit market. despite of this, the forecast indicates that there is a clear trend for the sharp growth of this segment in the future. if this growth rate comes true in reality, problems that are relevant to this market segment now, such as a much higher non-performing loan ratio than in commercial banks, could become a problem for all the credit market. the growth of the number of insolvent clients could stimulate the need to borrow more from other financial institutions and it may affect the whole credit market and its stability, if market monitoring system is not efficient enough. there are many discussions in scientific literature, whether and how the growth of p2p market could affect the whole credit market and commercial banks. for example, in the world economic forum (2017), there was a discussion on this topic, and the main idea was that “fintech is “disruptive”, “revolutionary” and armed with “digital weapons”, that will “tear down” barriers and traditional financial institutions”. alternatively, navaretti et al. (2018a) note that fintech companies, such as p2p platforms, provide the same services for customers as commercial banks, but in a more effective and modern way. as a result, p2p platforms enhance competition in the credit market, widen the pool of customers, but they will not supplant commercial banks in future. these predictions are consistent with the results of this study that show that despite the sharp growth of p2p segment, commercial banks still will have a fairly solid market share. other authors pay attention to the fact that p2p market is much more risky than other credit market sectors and it can reduce financial stability. the analysis made by de roure et al. (2017) showed that p2p platforms are servicing customers that are neglected by banks. usually, these are high-risk and small-sized loans. the main idea of these authors was that “p2p lending is substituting the banking sector for high-risk consumer loans since banks are unwilling or unable to supply this slice of the market. the study serves to show where the institutionalisation of credit provision has left a slice of the market unsupplied”. these results fit to the general idea of this article that p2p segment is much riskier, as a result there are much more overdue loans. it is possible that unrespectable clients tend to borrow not from commercial banks, but from p2p platforms. there are scientists that highlight the importance of more regulation in the p2p segment. josé manuel mansilla-fernández (2018) analysed the regulation of p2p market and highlighted that p2p platforms escape prudential supervision, thus this fact reduces financial stability. financial stability board (2017) has analysed the implications of the current fintech sector and has not found a reason to worry about financial stability at this stage, because this sector is small in size, but demertzis et al. (2018) note that despite the fact that fintech sector is quite small in european union, “the fundamental question is whether fintech can disrupt europe’s financial system”. other authors, such as ferrarini and macchiavello (2017) note that “moreover, a further question is whether the disruption will follow at the european union level or at the national”. according to the results in this article, it was identified that npl ratio in p2p segment is 22–24 times higher than in the whole market and it means that credit market regulators should pay close attention to this and, if necessary, tighten up the relevant regulations. business, management and economics engineering, 2021, 19(2): 389–411 407 xavier vives (2018) has analysed the fintech sector, and one of his research conclusions was that “fntech has a large and potentially welfare-enhancing disruptive capability. however, for the new technology to deliver the benefits for consumers and firms without endangering financial stability, regulation needs to rise to the challenge”. taking everything into account, it is obvious that the borrowing process nowadays is much more dynamic. households can borrow not only from commercial banks, but also from p2p platforms. the emergence of platforms is driving competition in the credit market, making the borrowing process faster and more efficient, however, there are some threats. the development of p2p is significant and more attention should be paid to the market regulation. otherwise, the growth of p2p can affect the stability of the credit market as a whole. conclusions the study aims to clarify the current situation of the credit market, trends and the prospects for future development in lithuania. according to the research results, the most popular alternatives for lithuanian households from where to borrow are commercial banks and p2p platforms. although the macro environment is the same for all market segments, the p2p growth rate is the highest in all the credit market, and it shows the growing popularity for households to borrow from p2p platforms. this could be explained by the fact that p2p platforms have lower requirements for the borrowers, the borrowing process is faster and much easier. as the p2p market is characterised by rapid growth, this should be noted by other market participants in the credit market. it is obvious that it is becoming more attractive for households to borrow not from a universal commercial bank, but from a new player who has recently appeared on the market and offers more favourable conditions. compared to banks, p2p platforms do not have a well-developed regulatory framework, the p2p platform acts more as an intermediary between the borrower and the lender, and the latter themselves “ensure” their own solvency opportunities when signing contracts. the results of the forecast suggest that p2p market will grow faster than the commercial bank sector in future. if the projected growth rates remain at this level and will be confirmed in reality, it is likely that this segment may gain a significant market share in the future and may bring some threats not only to the p2p market, but also to the consumer credit market as a whole. it is likely that there will be not only a growing number of new clients, but also the growth of insolvent customers and non-performing loans. investors who lend money through the platform may face losses. development in p2p segment could affect the other sectors and overall stability of the credit market. the performed analysis could be useful for the future research related to the household borrowing in peer-to-peer platforms, specifically for the central bank, the ministry of finance and other institutions responsible for setting rules that regulate the credit market, as well as for p2p platforms themselves and other players within the credit market, who plan their activities and adjust lending conditions with the aim to attract higher quality customers. the study highlights problematic issues within the loan sector that need future research and further in-depth analysis. 408 k. taujanskaitė, i. karklytė. borrowing alternatives for households in lithuania: current situation... references alisauskaite-seskiene, i., remeikiene, r., & gaspareniene, l. 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https://rhg.com/research/china-household-debt/https://data.worldbank.org/indicator/fs.ast.prvt.gd.zs https://rhg.com/research/china-household-debt/https://data.worldbank.org/indicator/fs.ast.prvt.gd.zs https://doi.org/10.3390/su12156107 https://www.seb.lt/naujienos/2018-12-21/penki-lietuviu-skolinimosi-ypatumai https://www.seb.lt/naujienos/2018-12-21/penki-lietuviu-skolinimosi-ypatumai https://doi.org/10.1371/journal.pone.0184242 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university empowering women at the higher institutional level: analysis of business education and leadership training program summra khalid 1*, wang dan 2, amir sohail 3, wahid raza 4 , bushra khalid 5, ahmad-ur-rehman 6 1, 2, 3college of business administration, liaoning technical university, hulodao, china 4department of management sciences, government college of management sciencs,wana, south waziristan, pakistan 5, 6department of management science, national textile university, faisalabad, pakistan received 12 august 2020; accepted 05 january 2021 abstract. purpose – the research study aims to assess the women’s business education and leadership training program at a higher institutional level in order to examine how the program impacts and contributes to women’s empowerment. further, this research sought to explore women’s leadership training aspect that has not explicitly elucidated. besides, this study looks upon women’s self-perception by empowering them with skills and leadership capabilities to change hard-core gender stereotypes in society. research methodology – the sample size comprised of 82 enrolled female students in the training program. the qualitative statistics (i.e., three focus groups) evaluated with the kirkpatrick model. the wilcoxon signed-rank test was applied to compare pre-and post-training quantitative data (i.e., questionnaire). effect size is measured to check the effectiveness of the training program. findings – the post-training evaluation revealed higher scores in knowledge, tools, and leadership skills. the training program encouraged women to bring change in self-perception and gain confidence for transformative changes in society. findings support the effectiveness of leadership education and training programs. research limitations – this research conducted in a pakistani patriarchal cultural context and one region of pakistan (punjab). hence the results are carefully generalised. the long term outcomes of this leadership training program and women’s performance in the job market are not studied. practical implications – findings suggest that a training program positively affects women’s learning, knowledge, and behaviour. training programs empower women with practical tools for self and business development. the program encouraged women to gain better insight into work-life challenges and enhance personal competencies to gain equal rights. originality/value – this research will significantly contribute to the relatively scarce literature on the effectiveness of women’s business education and leadership training programs at a higher institutional level in the pakistani context for women empowerment. keywords: business education, empowerment, kirkpatrick model, leadership, program evaluation, training effectiveness. jel classification: i23, i24, i25. *corresponding author. e-mail: summrakhalid@yahoo.com business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 1: 150–169 https://doi.org/10.3846/bmee.2021.13355 https://orcid.org/0000-0001-8415-3212 https://orcid.org/0000-0002-0940-471x https://orcid.org/0000-0003-1474-2112 http://orcid.org/0000-0002-3162-1577 https://orcid.org/0000-0002-4585-4128 https://orcid.org/0000-0001-6084-633x https://doi.org/10.3846/bmee.2021.13355 business, management and economics engineering, 2021, 19(1): 150–169 151 introduction this research work summarises a case study’s findings related to women’s education and leadership training programs and analyses its impact on women students. today, a globalised economy promoting the imperative of equitable education, gender equity, continuous learning, and identity-reforming opportunities to empower women through knowledge. pakistan has decided on several vital international commitments for women’s education, rights, and gender equality on different international forums-united nations’ sustainable development goals, beijing platform for action, the universal declaration of human rights, convention about the elimination of all types of discrimination against women (batool & batool, 2018). the notion behind all national and international commitment is to focus on women’s education and empowerment to enhance women and society’s personal, communal, political, or financial power. despite the commitments and women’s empowerment and education being the heart of un women’s 2030 agenda in pakistan, pakistan remains among the world’s lowest-ranked countries in gender equality and women’s rights (chaudhry et al., 2012). according to the “2018 global gender gap index”, pakistan ranked 148th among 149 countries in gender parity. among the four worst performers, pakistan ranked second-worst globally as the sum of women’s supervisory posts is the lowest in numbers (statista, 2018). pakistan is categorised as the least performer in the south asian region as very closed to 55% in terms of gender equity against india 72% and bangladesh 68%. one of the geneva-based organisation’s annual reports traced gender inequalities among four major sectors (educational sector, health sector, financial opportunities, and politically empowering) in all countries (united nations development programme, 2019). the low index of the education sector and gender inequality is almost homogeneous in all worst-performing countries (elvish et al., 2014). un aimed at escalating economic, and social development, women’s empowerment through education is indispensable. women’s need to acquire a set of skills and competencies pertinent to diverse circumstances along with professionalism (united nations, 2015). the united nations summit in 2015 outlined the 2030 agenda of sustainability, empowerment, and development through education. women’s education, empowerment, and gender equality are some of the objectives incorporated in the un agenda’s sustainability and development goals (united nations population fund, 2015). for economic development and sustainability, 17 goals of development were initiated, which required prompt action by all countries. one of the essential principles of un programs and procedures is to capitalise on feminine talent and equal job opportunities at all management levels of governmental and monetary policymaking for females (unesco, 2017). un’s objective is to endorse gender parity in education as a behavioural learning goal. in pakistani society, gender roles affect women’s perception of their capabilities, selfawareness, esteem, and future ambitions, and they perceive themselves not as competent. in developing countries like pakistan attaining education commitment, women’s empowerment is among the subjects where the government tries to achieve the desired outcomes (salik & zhiyong, 2014). women’s business education and leadership training are crucial for the empowerment, behavioural development, and economic growth of the country as women comprise 49% of the country’s overall population (hameed et al., 2014). article 37(b) and (c) 152 s. khalid et al. empowering women at the higher institutional level: analysis of business education... of the pakistani constitution states that technical and professional education is equally associated with all at the higher education level based on merit (khan et al., 2013). much of the research literature has documented no development without business education, gender parity, and practical training (aelterman et al., 2013). these areas have been a long-determined preference for the united nations, un women in pakistan, and many state-owned organisations (miotto et al., 2019). however, no research study results have been collected, mainly related to women’s educational and leadership training in pakistan. women leadership and leadership training areas were not elucidated before. however, in the past, comprehensive research studies were undertaken on leadership behaviours and education. nevertheless, the present study is related to more specific aspects of education, particularly women leadership training, because, in the past, most studies conducted by the ngos or agencies were about women’s economic condition or education. hence this research study is essential to know these programs’ results and how they influence and improve women’s image and societal development. to achieve international and national commitments and agenda for women’s education and equality, different public sector training, and development programs were launched in pakistan. pakistan’s public sector development program has outlined the agenda to strengthen women’s capacity in the socio-political and business world by acquiring the necessary skills to deal with negative stereotypes centred around female leadership behaviours. hence, the research study aims to assess the women’s business education and leadership training program at a higher institutional level in order to examine how the program impacts and contributes to women’s empowerment. further, this research sought to explore women’s leadership training aspect that has not explicitly elucidated. besides, this study looks upon women’s self-perception by empowering them with skills and leadership capabilities to change hard-core gender stereotypes in society. business education and leadership training programs certainly benefit pakistani society is changing hard-core gender stereotypes and achieving the un agenda for women’s rights. as this research work base on a case study approach; thus, the primary objectives drawn from this research paper illustrate the training program results. this research study was structured to assess the training and its impact on women participants’ skills, learning, and behaviour. hence the paper used the mixed-method approach. in the quantitative approach, a self-administrated survey instrument used to determine students’ self-assessment in terms of skills, knowledge, and training program satisfaction. zoho sheets and microsoft excel used to manage data, and various statistics applied by using spss v.25 software to compile the results before and after training. qualitative methods were applied to evaluate women’s self-perception by conducting three focus groups after training. kirkpatrick’s model is used to grasp participants’ perceptions of behaviour change deeply. the research findings support the expediency of the leadership training program for women. after the training, female students’ self-assessed ratings showed a significant increase in the level of knowledge about leadership from pre to post-training. they obtained skills and learned practical tools for future use. the training program encouraged them to bring change in self-perception, and they found increased confidence to break down the barriers mentioned in the literature. the subsequent section of the article explained research methods and statistical analysis further, and ultimately, the research study includes results, discussion, conclusion, and limitations. business, management and economics engineering, 2021, 19(1): 150–169 153 1. literature review for developing countries, reducing gender parity, economic development, and women’s empowerment in society is indispensable without the educational program (noureen, 2015). the business education and training programs aim to highlight the impediments women face in employment and how they can enhance their self-belief, improve their communication skills, and develop other positive transformation competencies. since many of the women’s empowerment projects and educational programs in pakistan have stimulated development in attaining specialised skills, focus on learning methods, and stressing the value of business education for skills and individual growth in a fast-paced global village (khurshid & saboor, 2013). according to wef, pakistan has improved wage equality and the educational sector for the fiscal year 2018 (countryeconomy, 2018). however, women are understating in the field of science and technology, engineering, and analytical skills. empowerment is a development cycle of increasing folks’ skills to make selections and convert those selections into desired outcomes (jumani et  al., 2013). a woman is said to be fully empowered if she has the opportunity to get substantial resources, equal employment, political participation, legal rights, health services, and quality education. women’s empowerment, skills, competencies, capacities, abilities, and expertise are fundamental aspects that need to acquire through education (sohail, 2014). leadership is related to collaboration, provision, teamwork, authorisation, and association (dalati & alchach, 2018). collaboration, problem-solving, critical and analytical thinking, and decision-making are general skills and competencies required for empowerment and leadership (paulienė, 2012). regarding leadership theory, previous literature identified two types of behavioural orientations. task-oriented leaders are resolute, determined, and own a work style with clearly defined priorities and agenda (poultney & fordham, 2018). task-oriented leaders have clear objectives, established procedures, issues, distinct goals, and implements a compensation structure (raudeliūnienė & kordab, 2019). transformational leadership is more likely to influence, team-oriented, pragmatic, and based on interpersonal communication abilities (riaz et  al., 2012). transformational leaders are more likely inspirational, influential, and intellectual stimulators (turnbull et al., 2012). for development in fast-paced economies, survival in globalisation, and changing dynamics in organisations, women need to empower with education for transformational leadership, as this leadership style is related to women (keitsch, 2018). furthermore, considering leadership ability, problem handling, communication skills, self-awareness, experience, and decisiveness is mandatory for professional advancement (yousaf et  al., 2019). previous literature has shown that women tend to be more socially accountable, possess a more responsible attitude for the environment, and consciously fulfil corporate duty (showunmi & kaparou, 2017). corporate social responsibility, better transparency, a more significant exhibition of ethics, innovative initiatives, and diversity would increase in the workplace if women received opportunities to serve at managerial levels (setó-pamies, 2015). besides this, education, empowerment, and gender equality are elementary areas for legislative to reduce differences (alba-hidalgo et al., 2018). despite that, so-called glass-ceiling exists in females’ access to higher hierarchal positions in all the world’s countries’ political, economic, and educational sectors, including pakistan (jabbar & imran, 2013). education forms an apogee 154 s. khalid et al. empowering women at the higher institutional level: analysis of business education... of empowerment, self-realisation, economics, and self-development in the arena of sustainability and leadership. business education is the most crucial issue of the modern era that needs to vow to ensure women’s rights for equal employment opportunities and administrative positions (khatri, 2016). according to the data of the world economic forum 2018, females’ access to managerial level is just 34% and less than 7% in the four least performing states (pakistan, yemen, saudi arabia, egypt) (world economic forum, 2018). the un’s statistics show that females possess only 19.8% of political leadership and top management positions (un women, 2018). the south asian region was the second least scoring area in the year 2018 according to the indexing of global gender gap about an average gender difference of 34.2%, as above to middle-eastern and north-african region, while behind sub-sahar african region (cann, 2018). according to the economic survey of pakistan, in the public-sector specialised institutes and public universities, the 246757 total students were enrolled with 30% women and 70% men. during the fiscal year 2018–2019, minor improvements were observed in pakistan’s educational sector as 185 higher academic institutes were functional. overall, assessing the educational sector enrolment level increased by 7.9% during 2018–2019 compared to 2017– 2018 (economic survey of pakistan, 2019). concerning year-by-year growth, pakistan has increased the education sector index by taking many initiatives about women’s education compared to previous years. many research literature identifies the impediments that create hindrances in women’s access to managerial positions worldwide (bustamante-gavino et  al., 2011). many of the generic thematic problems lie in pakistani culture like norms, discriminatory institutional and structural impediments, status quo, and discordancy of the work-family life balance (khurshid, 2016). the previous literature stated that many cultural norms consider women inferior to men and perceive effective leadership as men’s attributes (afzal et  al., 2009). most human capital literature and theories explained the impediments to women’s access to supervisory level is due to stereotypes persist in culture, lack of specific training and development, business education, unawareness of own capacities, and lack of self-trust (carmona et al., 2018). in a typical societal structure, women are scared to disrupt the status quo and allow the social norms to create hindrance in empowerment. recent research studies also highlighted many gender-specific barriers at workplaces (hafeez et  al., 2019). harassment, unfair recruiting, unequal wage structure, glass ceiling are some of the barriers that make it hard for females to excel at the workplace or have fair compensation for their job (nawaz, 2009). for women, obstacles in obtaining leadership capabilities are decodes into inadequate job market opportunities (patel & nayak, 2013). hence, business education becomes a primary means for professional development and empowerment. work-related practices and providing professional training and tools to resolve issues that are likely to arise during managerial jobs might be related to leadership development (bagieńska, 2016). some programs that specifically emphasise women’s leadership must equip females to deliver an appropriate reaction to circumstances and situations they will probably encounter in a professional career (ariani, 2015). as an example, communication is considered a critical leadership quality. however, in asian culture, women are considered introvert, emotional, and less decisive (nie & xing, 2019). business, management and economics engineering, 2021, 19(1): 150–169 155 in contrast, men are considered less emotional, authoritarian, and more direct in communication (tamim, 2013). in terms of gender labels, leadership linked with masculine abilities such as supervisors, high self-esteem, decisiveness, intellectual aptitude, strong communication, and emotional stability (kumar, 2016). hence, social structure and norms have linked all these traits with masculinity and considered women not suitable for leadership as females’ vocal style is considered uncertain, anxious, and less authoritarian (shimamoto & gipson, 2015). consequently, shared societal roles and environment forecast the degree by which both genders perceive as skilled and capable of administrative positions in their management (permanyer & boertien, 2018). the stereotype thinking, lack of self-trust, and lack of institutional trust in women showed enough why females are far behind in career enhancement and empowerment (faiz et al., 2017). to conclude, gender stereotypes, considering women incompetent and absent of training and development programs, require concrete steps towards women leadership programs at government, organisational, and higher academic levels (windscheid et  al., 2018). economic and sustainable development goals can only attain if women’s education receives the same consideration as a man (bushra & nasra, 2015). the steps taken for business education could create women’s social empowerment, result in career promotion, and help them communicate their role for organisation and society (rieckmann, 2012). over the last few decades, to nurture females’ self-trust to develop leadership capabilities, many types of training and development programs were launched in pakistan, such for political leadership in the different region of pakistan to increase the participation of women in leadership roles and for good governance (khan & rahman, 2018). at the national level, the government launched different women empowerment initiatives to increase women’s economic empowerment (aziz et al., 2011). these programs aim to portray women as a privileged leader who is inspired, talented, self-confident, and assertive to participate in all tiers of economic and political structure. the shared agenda of all these programs was to develop the insight of self-motivation, enhance self-confidence, educate women to make them decisive, empower them by the acquisition of leadership skills and competencies. the first section of the study provided the introduction, research background, program background, study objectives, methods, and sample. the second section of the paper summarises the findings, discussions, and conclusions. 2. material and methods 2.1. program background the current research study emphasises the women’s business education and leadership training program’s outcomes, which took place during the 2019 period. three training events of the same program conducted at three different public sector universities within the sothern punjab region of pakistan. this training program aimed to develop leadership competencies among female students to empower them through business education. the training program tried to provide insight and solution through case studies, coaching sessions, executive’s practical experiences, networking plate forms, and provide one-on-one dialogues, interactive learning sessions for balancing work life, self-management, decision making, and confidencebuilding to overcome barriers. at all the training events, the admission procedure completed 156 s. khalid et al. empowering women at the higher institutional level: analysis of business education... through the selection method. all three public universities ensured that enrolled female’ students in this business education and leadership training program join from educational fields, either technical or non-technical but do not have any business studies background. in the program, the females were encouraged to draw their concept of transformational leaders and competencies by the collaboration of community development trust and society, different foundations, and resource centres. because of the shared agenda, in each selected university, the leadership program modules focused on robust training, theory classes, case studies, tours of organisations, dialogues, coaching and mentoring by parliamentarians, managers, influencing public speakers, and practitioners from different spheres of life. this research study covered the following areas of the program (see figure 1). each university training program offered a theoretical module including theoretical subjects (named leadership, foster team and business, women rights media networking and public communication), a practical module, and other interactive learning approaches. the evaluation was completed based on how much previous, practical, and theoretical knowledge about leadership and courses. how training program helped women’s personal development? does training programs meet women’s expectations? does training programs meet women’s expectations? how practical and conducive were the training approaches and the environment? each university offered the same theoretical and practical content. hence, researchers concluded the course’s name to generalise ideas about the survey instrument’s theoretical content. all these theoretical modules include a specific type of projections about females in the job market. 2.2. study design and sampling strategy in this study, necessary information conducted at three training events of the same program. the training held at three different public sector universities within the sothern punjab region of pakistan. first, every university from where women were getting training considered leadership foster teams & business public communication women rights & media networking (s e lf -a ss e ss m e n t o f th e o re ti c a l k n o w le d g e fo r tr a in in g c o u rs e s) training approaches meet expectation previous knowledge personal development business education & leadership training program advance practical tools e n v iro n m e n t practical knowledge theoretical knowledge theoretical courses overall program assessment in term of satisfaction students’ self-evaluation on skills and knowledge figure 1. a summary of the program’s study profile business, management and economics engineering, 2021, 19(1): 150–169 157 as a cluster. the target population was female students drawn from these three universities. all those women got selected for this study which mainly enrolled for leadership training from these universities. based on a purposive sample, researchers select the entire population as a sample because of the relatively small population size, which permitted the exploration of the success or effectiveness of training programs for women who participated in the leadership development program. a mixed-method approach used in this study includes both qualitative and quantitative methods. the quantitative approach used to assess the business education and leadership training program’s performance at each university – a self-administered survey instrument designed on each theoretical and practical module’s common grounds. the survey instrument includes a seven-point likert scale about a module’s practical and theoretical subjects to elicit female participants’ valuable opinions. the researchers conducted a pre-training survey at the beginning of the program and a post-training study after the training to analyse knowledge, skills, and behaviour changes. the final sample instrument’s female student respondent was 82 female students who completed training and positively responded as no one declined to answer. the majority of females were graduate students, and they all were from diverse education fields (see table 1). a qualitative approach also used for the evaluation of the outcomes in this research study. at the end of the training, the focus group assesses the program’s performance, business knowledge they acquired, and personality transformation. the arranged discussion and interview method was applied to collect the data from individuals. among 82 women respondents, ten women (total 30) from each university participated in the focus group. kirkpatrick’s four-level framework was applied to measure reaction, learning, behavioural change, and outcomes (topno, 2012). the qualitative technique’s primary objective is to fully comprehend the women’s perception if either the business education and training program has triggered any change in their performance or if their concept about business and leadership competencies has transformed. table 1. profile of research participants variables variables 1. age n = 82 percentage 3. educational field n = 82 percentage 18–20 9 10.98% agriculture 18 21.95% 21–23 32 39.03% engineering 15 18.29% 24–26 19 23.17% social sciences 26 31.71% 27–29 14 17.07% law 14 17.07% 30–32 5 6.09% other fields 9 8.54% 33–35 3 3.66% 2. education level n = 82 percentage 4. participants from each university n = 82 percentage graduate 47 57.32% university 1 29 35.367% master 26 31.71% university 2 26 31.71% m.phil. 9 10.97% university 3 27 32.93% 158 s. khalid et al. empowering women at the higher institutional level: analysis of business education... 2.2.1. survey instrument validity in this study, to ensure content validity in general, the researcher met several professional trainers and academics to point out any drawback or modification needed in questionnaire content. afterwards, the researchers contacted the program trainers from selected three universities, who were starting implementing training programs at that time, asking them to allow the distribution of the questionnaire to female students at the beginning and end of training programs – the distribution and collection of surveys completed by the three authors themselves and kept confidential. 3. results 3.1. quantitative data analysis for this study, the quantitative data analysed by classical means of descriptive approach. zoho sheets and microsoft excel used to create a database. the spss v.25 software used for the evaluation of mean, standard deviation, and variance. the quantitative data analysed the nine general aspects related to training programs. before and after training, the quantitative data results analysed by using the median, upper-lower quartile, and non-parametric statistics. wilcoxon signed-rank test was applied to compare self-assessment rating about skills and knowledge pre-post training. cohen’s d value use to measure the effect size. firstly, the rating of this training program regarding overall satisfaction showed that training had done tremendously. evaluation of a training program was interesting related to women’s personal development and skills building. the assessment rating on overall personal development and meeting expectations shows satisfaction as mean 6.33 and 6.16, respectively. it is not because of the training program’s agenda but also due to mentors, managers, organisational insights, and the collective efforts of all participants and instructors. the theoretical course content aspect of the training program scored better as the mean is 5.90. students also rated the environment and training approaches 5.43 and 5.33, which showed satisfactory evaluation of training programs (see table 2). the wilcoxon’s signed-rank test (table  3) provides the evaluation of pre-post training ratings of female participants. the analysis showed the overall significant improvement in theoretical, practical knowledge gained and future tools learned in the training program. table 2. overall program assessment in term of participant’s satisfaction the dimension of overall program satisfaction n mean sd variance 1. meet expectation 82 5.43 1.054 1.112 2. training approaches 82 5.33 1.361 1.853 3. environment 82 5.90 1.096 1.200 4. personal development 82 6.33 1.066 1.137 5. theoretical course 82 6.16 1.116 1.246 note: rating scale: 7 – exceptionally satisfied, 6 – satisfied, 5 – relatively satisfied, 4 – neither satisfied or dissatisfied, 3 – relatively dissatisfied, 2 – dissatisfied, 1 – exceptionally dissatisfied. business, management and economics engineering, 2021, 19(1): 150–169 159 before leadership training (p  <  0.001)). the quartile ranges of rating related to theoretical course content were 4 to 6 before training. after the training, all the items quartile range increased from 5 to 7. the practical knowledge aspect and advanced future tools showed a higher gain in knowledge. while self-assessed theoretical and previous knowledge marginally increased. notably, all four items’ scores reached up to 7, which showed a tremendous gain. survey items related to useful tools for problem handling in the future rated high as values increased before and after training. overall training program rated on the following dimensions: theory, practicality, satisfaction, and self-development of students. above all, women rated leadership training and business knowledge program in satisfactory manners and gave more weight to the practical aspect, and future tool learned in the training program. moreover, the mean scores of practical knowledge and advanced future tools are significantly higher after the training (means = 6.01, 6.18, respectively) than before (means = 4.83, 5.17, respectively). the cohen d related to change depicted the large substantial effect as effect size is more significant than 0.8 (d = 1.149, d = 0.998 respectively) in pre-post training of these two items. theoretical and previous knowledge items’ mean scores have improved (means = 5.85, 5.48, respectively) from (means = 4.90, 4.83, respectively). table 3. wilcoxon signed ranked analysis of pre-post training about skills and knowledge test statistics theoretical knowledge practical knowledge previous knowledge advance future tools pre-training m (25 ̴ 75)a 5(4 ̴ 6) 5(4 ̴ 6) 5(4.75 ̴ 6) 5(4 ̴ 5) post-training m (25 ̴ 75)a 6(5 ̴ 7) 6(5.75 ̴ 7) 5(5 ̴̴ 6) 6(6 ̴ 7) z-value –5.009 –6.179 ¢4.481 –5.156 note: a rating measure: 7 – well adept to apply both efficiently, 6 – know how to apply knowledge and skills, 5 – possess complete relevant knowledge and skills, 4 – possess some skills and some knowledge, 3 – posses some knowledge, 2 – heard about it, 1 – know nothing, m – median, 25 – first quartile range, 75 – third quartile range, all p-values < 0.001. table 4. students’ pre-post training self-evaluation on skills and knowledge descriptive statistics items n pre-training post-training effect size cohen damean std. deviation mean std. deviation theoretical knowledge 82 4.90 1.213 5.85 .957 0.86 practical knowledge 82 4.83 1.184 6.01 .839 1.14 previous knowledge 82 4.62 1.224 5.48 1.068 0.74 advance future tools 82 5.17 1.163 6.18 .833 0.99 note: cohen d value 0.20 measured small, 0.50 represents moderate, and 0.80 value considered large, a revealed the standardised difference of two means. 160 s. khalid et al. empowering women at the higher institutional level: analysis of business education... the cohen d showed that women’s theoretical and previous knowledge about subject matters was not so much as this training program increased their level (d = 0.869, d = 0.748 respectively) significantly. the overall pre-training and post-training scores provided in table 4. the subjects incorporated to enhance their theoretical base and practical knowledge about business and leadership were media networking, public communication, leadership, self-image branding, women’s rights and law, fosters teams, and business. among all these, public communications, media networking, and personal brand image got the highest score in terms of outlined objectives and content to enhance their knowledge base. hence post training score is different from pre-training, which showed the effectiveness of the training program. this training’s main agenda was to get information, either programs and courses have contributed to women living or not, have they developed their capabilities and knowledge base for business and leadership? table  5 provides the overall improvement in course content as the first and third quartile range (pre-training) overall increase from (1 ̴ 3) to (4 ̴ 7) after the training. again, the wilcoxon signed ranks test was applied to measure results to corroborate the vigorousness of descriptive statistical examination. moreover, the value these courses added to women’s life related to skills and business knowledge. the survey instrument provided better information about the effectiveness of content women learned in this training program: pre and post-training descriptive statistical results of all the courses provided in table 5. courses evaluated in terms of content and skills development. as can be seen, personal brand image, media networking, and leadership courses were the top-rated among other courses of training because of a higher rating. all the items ranged increased (up to 7) after the training. the value of a significant difference among these should be p  <  0. 001. considering the: public communication, women’s rights and law, foster team, and business were the least rated courses. despite all, table  6 provides the descriptive statistical analysis of data, the variance, means, and standard deviation gave us a more accurate picture. furthermore, a cohen d test helped to analyse the differences before and after training. post-training scored significantly improved the knowledge base as cohen d value is tremendously outsized (above 0.80) table 5. result of wilcoxon signed ranked analysis of pre-post training courses effectiveness test statistics media networking public communication leadership selfimage women rights and law foster team and business pre-training m (25 ̴ 75)a 2(2 ̴ 3) 2(2 ̴ 3) 2(2 ̴ 3) 2(1 ̴ 3) 2(2 ̴ 3) 2(1.75 ̴ 3) post-training m (25 ̴ 75)a 6(5 ̴ 6) 6(4 ̴ 7) 5(5 ̴ 6) 7(5 ̴ 7) 5(4 ̴ 6) 4(4 ̴ 6) z-value –7.619 –6.863 –6.781 –7.848 –7.574 –7.071 note: a rating measure: 7 – well adept to apply both efficiently, 6 – know how to apply knowledge and skills, 5 – possess complete relevant knowledge and skills, 4 – possess some skills and some knowledge, 3 – posses some knowledge, 2 – heard about it, 1 – know nothing, m – median, 25 – first quartile range, 75 – third quartile range, all p-values < 0.001. business, management and economics engineering, 2021, 19(1): 150–169 161 in all the generalised courses. all the subjects gained more scores after training. however, media networking and personal brand image got higher scores than other subjects after the training (mean  =  5, 5.01, respectively) than before (mean 3.39, 2.87 respectively). public communication and leadership courses also showed significant improvement in knowledge as a pre-training self-assessed rating (m  =  3.60, 3.18) increased to (m  =  4.80, 4.90 respectively). women’s rights and law, foster team, and business subject least rated courses in the list (mean = 4.65, 4.45 respectively). 3.2. qualitative results in this section, the estimated results discussed after the completion of training. the focus group method applied for the flexible enquiring and synergetic effect of group discussion. furthermore, the focus group allows direct interaction between females and researchers to uncover the hidden feelings and in-depth thoughts. researchers interviewed three focus groups (fg) of women from three universities. females assessed their self-performance, and the change they found in their personality was analysed. the inductive analysis generated two categorised theories grounded on verbal and documented data. the first identified category through content analysis was the program category (about course performance), and the second category was self-awareness (how the training program changed or improved their capacities at personal and social levels). for the self-awareness category, the kirkpatrick model used (reaction, learning, behavioural outcomes, and results) for evaluation. kirkpatrick’s model provides a systematic framework for the assessment of the training program. this model concentrated on four levels of training results: reaction of the female students about overall training program and satisfaction, learning in terms of knowledge and skills, behavioural changes, and inclusive results, which showed the impact of training on female students. the feedback of female students, according to kirkpatrick’s model, is summarised in table 7. table  6. comparison of the program’s courses effectiveness pre-post training in term of knowledge 2017–2018 courses n pre-training post-training effect size cohen damean sd mean sd media networking 82 3.39 1.368 5.00 1.324 1.19 public communication 82 3.60 1.098 4.80 1.535 0.89 leadership 82 3.18 1.398 4.90 1.193 1.32 self-image branding 82 2.87 1.184 5.01 1.160 1.82 women rights and law 82 2.52 .933 4.65 1.391 1.79 foster team and business 82 2.95 1.236 4.45 1.090 1.28 note: a cohen d value 0.20 measured small, 0.50 represent moderate, and 0.80 value considered large. cohen d value revealed the standardized difference of two means. 162 s. khalid et al. empowering women at the higher institutional level: analysis of business education... table 7. respondent feedback in term of kirkpatrick’s model kirkpatrick’s model focus group 1 focus group 2 focus group 3 reaction 1. environment, course content speakers, and professionals from the real business world were quite motivational in the training program (fg1). 2. the diversity of mentors, professionals, and instructors inspired and encourage us to develop our skills and enhance knowledge (fg1). 1. interactive, diverse environments, learning approaches, and trainers were quite inspiring (fg2). 2. recruitment, the registration process was very convenient. institute infrastructure food quality and services were up to standards (fg2). 3. classroom facilities, multimedia technology, and sitting arrangements made the whole ambience inductive for learning (fg2). 1. interaction with different females from diverse backgrounds was stimulating (fg3). 2. the environment was interactive and full of learning (fg3). 3. many managers and dedicated practitioners from different fields act as catalysts of change to motivate us and develop a personality to change all stereotypes (fg3). learning 1. each course’s learning content, objectives, and material provided in the learning module were effective (fg1). 2. now, we had more business knowledge about personal brand image, verbal communication, and more skills to deal with people (fg1). 3. on personal level, i learned more about technology and professional tools, for example, how to write a professional assignment on how to work on them, how to develop presentations and use technology (fg1). 1. i learned leadership theories that help us analyse which approaches best suit developing leadership styles, e.g., such as trait, behavioural, situational, and transformational or authoritarian types (fg2). 2. i discovered my style of leadership and competencies (fg2). 3. now, i have more information about our legal rights (fg2). 1. this program has opened my eyes to rights and law, which gave women equal privileges in society. 2. the training program has provided me with the business knowledge and skills to disrupt the stat quo and work to break the glass ceiling concept (fg3). 3. the training program has provided us with the business knowledge and skills to disrupt the stat quo and break the glass ceiling concept (fg3). behaviour 1. i agreed that this program sought to help me determine their professional esteems and focus on life’s goal achievement (fg1). 2. the program facilitated me on how to control emotions and react to work-life situations, particularly (fg1). 3. there were many things about work-family conflict and how to create a balance between them (fg1). 4. the program gave me business knowledge by discussing real-life business examples (fg1). 1. this program facilitated me to be aware of emotions and to discriminate between emotions of others and use business knowledge to control the thinking process, emotional behaviour of oneself and others in decision making(fg2). 2. i re-evaluated my behavioural options to become committed to transforming my personality(fg2). 1. training program gave me the strength to work against the discriminatory institutional and structural impediments(fg3). 2. the program has empowered me and served to enhance my level of self-esteem (fg 3). 3. this training program helped me develop selftrust, esteem, intrinsic motivation, and a strong determination to change my life (fg 3). outcome 1. i agree that the major hurdle females face exists deep down inside our heads; our inclination to misjudge our aptitude, worries of risk and uncertainties. the training program helps me to scale all these hurdles, which not an easy task was (fg1). 1. the training success factor was to know women’s rights and motivate me to fight in the future against social inequality prevailing in society (fg2). 1. this program served me personally and made me know about the merits and demerits of work-life (fg 3). 2. i got the confidence and self-esteem to change the gender label “male as a leader”. business, management and economics engineering, 2021, 19(1): 150–169 163 overall, women who participated revealed that the training program had a very substantial impact on their lives. all the leadership training and development program’s female participants shared that they had gained knowledge, learned many tactics to deal with people, learned verbal communication patterns, and polished many future competencies. one of the shreds of evidence is that they would spread positive words of mouth to encourage other young girls about the program and its effectiveness. all the women showed a high level of intrinsic motivation to remove gender labels, enhance self-esteem and business knowledge to deal with future monetary challenges. they mostly gave weightage to the following: – their opinion showed that they valued the opportunity to meet with the leaders and aspirants of different fields; to know the real-life problems and challenges, which were not usually discussed before. furthermore, they got aware of the inevitable challenges they might face in a professional career. – all women valued the practical knowledge given to them, especially knowledge about useful tools that help them deal with daily life situations and work-life challenges. – they highly appreciate the course content and materials provided to them. – all the females get aware of the type of leadership they have and, they focused on the aspects which needed most to develop or enhance their traits to nurture leadership personality. – the program helped them to know better about themselves relative to their employment field and family-work life balance. active participation in various activities performed during the training session made female students more empowered. some women expressed that they got inspiration from other professional women, which urge them to demand their work rights at their current job. from real administrators’ experiences, every task or activity performed led toward a situation where women become asked to handle it with skill. besides, the confidence they gained commenced from the selection process, and it encourages them a lot that they got selected from a large pool of candidates. all the women got a long term perspective to motivate themselves. even though participants may not immediately apply this training, but in a career, they had a positive frame of mind to cope with every challenge. 4. discussion united nations goals for sustainability and development consider education for all countries of the world. they were especially emphasising women’s business education and equitable rights in developing and underdeveloped countries. in this scenario, business education and leadership training play a vital role in removing gender labels, mainly helping women get equitable employment opportunities and access to managerial positions. the research literature has previously described women’s incompetence, lack of education, training, skills, abilities, and self-trust to become leaders. literature also emphasised the barriers for women to excel in the workplace and gain authoritarian positions. the present research study analyses women’s participation, and subjectively assessed women’s leadership training programs’ outcomes. the study dealt with the design of leadership and business courses, the content of classes, women’s participation, mentors and managers’ experiences, and evaluation of the program and its success. the female participants who attended the leadership training program gave a 164 s. khalid et al. empowering women at the higher institutional level: analysis of business education... strongly positive assessment in a quantitative study. women showed their appreciation for the training environment and approach used. the training program helped them in personal development. they positively rate the theoretical courses after the training. however, they were satisfied with the self-brand image, media networking, leadership, and public communication courses to enhance their knowledge. many women indicate their previous unawareness about these subjects before training assessment and specify that they had learned theories and tools that provided them with a new sense of gaining capabilities and empowerment. thus, this training program might have changed the negative societal concepts and tried to break the glass ceiling concept, which the literature highlighted many times. lack of leadership skills reduced by providing leadership training (teamwork, collaboration, decision-making, interpersonal communication, networking, self-branding, motivation) and tools to make them active entities in society’s social and political structure. the training organiser’s particular stressed involving female participants from diverse fields and backgrounds. as literature highlighted the specific involvement of engineering students, agricultural students have the least possibilities of getting authoritarian positions in information technology, the economic, and public sectors. an in-depth interview of the focus group revealed the changes in the participant’s skills, capabilities, and self-trust. the exploratory study has exposed that women have low self-esteem, no focused ambition for the future, unawares with the leadership competency they possessed, self-inflicted barriers, and low perceptions of their minds as well developed by society. kirkpatrick’s model feedback showed that the training program positively impacted females’ skills, knowledge, and behaviour in a qualitative study. the program inspired them to believe in themselves, change their attitude, and gave them new windows of opportunity. a program inspired them to show courage at the workplace, raise voices against gender inequality, and demand equal labour rights. more importantly, women said that the program was helpful to showcase their skills in real-life situations as a conflict handler and the challenges they might face in future business activities. in the tight socio-economic structure of pakistan, women must scale higher in their ambitions and business career. other than external hurdles, women expressed that the biggest hurdle existed in their minds before training: fear of failure. this training program helps them embrace change within themselves, broaden their horizon, and challenge the societal norms and status quo. the participants who have attended the program indicate that training has unleashed their talent for leadership. the qualitative results showed that women started thinking big and promised to stop playing safe. the outcomes revealed that leadership training and business knowledge have a tremendous impact on students’ personalities and could help women advocate themselves. finally, the training program fulfils the requirements of a good training program on an aggregated basis. women who participated recognised that their level of aptitude, skills, and acquaintance has improved. conclusions leadership training and education are still in the embryonic stage in pakistan. the present study is mainly carried out to evaluate the business education and leadership training program at the higher institutional level. the qualitative and quantitative results of the business, management and economics engineering, 2021, 19(1): 150–169 165 study exhibited that training has well received. training program showed the effectiveness of education and skills for women to improve the self-perception. furthermore, taking the participants’ suggestions and opinions showed that the program’s organisers and applicants achieved their intended leadership training purpose. this program’s outcomes indicated the effectiveness of course activities, coaching, interactive sessions, and the program’s real-life experiences. finally, women’s education, especially business education, empowerment, and gender equity, are the universal issues prevailing in every society and culture of the world. the current research study tried to highlight the significance of females’ knowledge to develop their skills, competencies, tools, and leadership abilities to gain self-identity. a robust and dedicated effort to organise leadership development programs is the need for time for pakistani society. this commitment of higher education commission, ngo’s, and the government will help to break down the critical situation of employment barriers obstacles in procurement. higher academic and training institutions facilitate education, design leadership courses and programs to build an equitable gender legacy, a strong business, and a sustainable economy for future endeavours. women’s leadership is still an embryonic stage in pakistan. the finding shows that leadership training programs will significantly contribute to women’s empowerment and lift social and cultural barriers. research work supported women’s education and leadership for the economic growth of the country. the current situation about leadership, education, and women empowerment may be bleak, but higher education commission initiatives from the last few decades will speed up women’s awareness. the present study emphasised the relevance of leadership education for women to build their confidence, strengthen their tools and capabilities for breaking the stereotyping in the pakistani business world and society. higher academic institutions are better places to expedite women’s leadership education, equal rights, and create an opportunistic legacy for future endeavours. limitations and future recommendations despite all, several limitations have been identified that open the paths and gave a new perspective for future research. first, it might be possible that the generalizability and social desire could have influenced participants’ responses and opinions. however, the analysis of qualitative outcomes showed that this kind of effect was not significant. the current research study may replicate by using another context. moreover, another training program aims to hold, which will help assess the leadership and business program after two years. subsequently, the result could corroborate by analysing all the female students’ situations and backgrounds after selecting the business and employment industry. after that, an additional research study needs to conduct to evaluate the real effect. whether women are more productive, decisive, and efficient in their workplaces, such a study explores whether participants have altered their philosophies or shifted in behaviour. for evaluating the real effectiveness of training, a survey study needs to conduct. furthermore, a comparative analysis needs to conduct the selection process of participants in the training program. in the future, researchers could repeat this research study with a larger sample size by applying a longitudinal method, as the current study dealt with small 166 s. khalid et al. empowering women at the higher institutional level: analysis of business education... sample data. besides this, the male-only program needs to design to create awareness about gender equality in society. this women leadership program could create an opportunity to expand this plan on men to observe whether women empowerment happens similarly, as they are working and training alone. another form of qualitative research, “autoethnography”, could be applied for development in future training programs and improvement in the research’s results to explore the applicant’s anecdotal and individual experience. acknowledgements the author of this research study expresses gratitude to the instructors, academic staff for support, and the students of this training program for their full cooperation. funding the authors received no specific funding for this work. author contributions paper conceptualized by sk and wg. sk were responsible for the introduction, study design. as were responsible for research background. sk, aur, and bk were responsible for data collection and discussions. sk and as performed data analysis and interpretation. bk and sk wrote the first draft of the article. wg and aur were responsible for critical review and editing. disclosure statement 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https://www.eea.europa.eu/data-and-maps/indicators/global-and-european-temperature-8/un-2015b-transforming-our-world https://www.eea.europa.eu/data-and-maps/indicators/global-and-european-temperature-8/un-2015b-transforming-our-world https://doi.org/10.1007/s10551-016-3292-6 https://www.weforum.org/ https://doi.org/10.3846/bme.2019.11176 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: valentinadiana.ig@gmail.com business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 1: 119–138 https://doi.org/10.3846/bmee.2022.16732 financial performance – determinants and interdependencies between measurement indicators mihaela brindusa tudose 1, valentina diana rusu 2*, silvia avasilcai 3 1,3faculty of industrial design and business management, engineering and management department, gheorghe asachi technical university of iasi, iasi, romania 2institute of interdisciplinary research, department of social sciences and humanities, alexandru ioan cuza university of iasi, iasi, romania received 22 march 2022; accepted 11 april 2022 abstract. purpose – the study has a dual purpose. first, to assess the impact of the most important determinants of financial performance, which have been measured through four generations of indicators. in addition, the study provides the first quantification of interdependencies between different financial performance measures: profit margin (pm), profit growth rate (pgr), return on assets (roa), return on equity (roe), and economic value added (eva). research methodology  – the primary data was collected from the amadeus database. empirical research was conducted on a relatively homogeneous sample from the automotive industry, using the panel data method for the period 2010–2019. two models were tested. the first model highlights the relationships between performance measures and selected determinants. the second model highlights the relationship between the different performance measures and the determinants used in the first model. findings  – the determinants analysed have different influences on the selected performance measures. for example, in the first model, the results statistically significant indicated the following. the current ratio has a positive influence on roa, but a negative one on roe and eva. gearing has a negative influence on pm and roa, but a positive one on eva. the growth rate of sales has a positive influence on pm, but a negative one on roa and eva. the size of the company has a positive influence on three performance measures (pm, roa, and eva). regarding the relationships between the different performance measures (second model), the research indicates that eva is negatively influenced by pgr and roa. in this model, the determinants analysed maintain their meaning and intensity of influences. research limitations – the article has several limitations. the representativeness of the results is valuable only at the level of the researched industry. in addition, it should be noted that the analyses are focused only on financial performance, assessed by accounting measures. the authors are considering conducting comparative analyses at the level of fields/branches of activity to capture not only the impact of determinants on financial performance but also to assess organizational resilience. practical implications  – the research provides clues to managers and financial decision-makers to increase the financial performance of the companies they lead. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2022.16732 https://orcid.org/0000-0003-0927-1846 https://orcid.org/0000-0002-5974-9150 https://orcid.org/0000-0002-5718-7625 120 m. b. tudose et al. financial performance – determinants and interdependencies between... originality/value – the originality of the study lies in the presented methodological approach. unlike previous research, which usually evaluated performance on only one indicator, this paper aims to assess the impact of the most important determinants on five performance measures. in addition, the analysis of the interdependencies between the different performance measures is another novelty of this research. keywords: financial performance, determinants, economic value-added, automotive industry. jel classification: c58, g30, g32, l25. introduction the automotive industry is an important performer in both national and global economies (adane & nicolescu, 2018). the success of companies in this field attracts the attention of investors, who evaluate performance based on an indicator or a set of indicators considered relevant. at the same time, the success of companies in this field was a point of interest for researchers, who sought to assess financial performance (herciu & ogrean, 2013; safaei ghadikolaei et al., 2014; pelloneova & stichhauerova, 2019) or to identify its main determinant factors (majtan et al., 2017; an & kim, 2019; sabbagh et al., 2019; zainudin et al., 2021). in the research conducted, the performance profile was determined either based on information from the financial statements of the companies, based on information provided by the capital market, or based on perception measures (determined by survey). the gap in the literature on defining and measuring performance is the first research issue that underpinned this article. concerning the agreed financial performance indicators, the literature notes that stakeholder preferences have changed over time. we have thus witnessed a shift from the use of simpler, short-term relevant indicators to more complex, long-term relevant indicators. the importance of the research problem is supported by the fact that the correct measurement is a precondition for improving performance. moreover, the selection of the most appropriate performance measures is of the utmost importance because there is evidence of the interdependence between the quality of management tools and techniques used and the recorded organizational performance (afonina, 2015). in terms of determinants of financial performance, a review of the existing literature has shown that research abounds in mixed results. the complexity of the performance, the diversity of the determinants, the samples, the processed data, the indicators used, and the applied analysis models make that the research results cannot be generalized. for this reason, this research focuses on the analysis of financial performance and its determinants for a sample of companies in the automotive industry. therefore, empirical research was conducted on a sample from the automotive industry (89 companies), using the panel data method (for the period 2010–2019) and secondary data. motivated by the lack of convergence of the results of previous research, this paper aims to provide: a) an image of the progress made in terms of defining and measuring performance; b) a comprehensive analysis of the relationship between financial performance and its determinants, relevant to the automotive industry; c) an analysis of the interdependencies between the different performance measures. the ultimate goal is to facilitate the definition of some performance strategies which can ensure business sustainability. unlike previous research, business, management and economics engineering, 2022, 20(1): 119–138 121 which evaluated performance (and the impact of its determinants) on only one indicator, this paper aims to assess the impact of the most important determinants on five performance measures. in addition, another novelty of this research is the contribution to the advancement of knowledge on the line of interdependencies between different performance measures. to meet the objectives assumed, the research was organized as follows: reviewing the literature and establishing research hypotheses, detailing the methodology, presenting the results and discussing them, respectively, concluding about the results obtained. the research has important theoretical and practical implications. it provides a scientific basis for integrative performance management and can also serve as a guide for decision-makers to increase the financial performance of the companies they lead, taking into account the interests of all stakeholders involved. 1. theoretical background and hypothesis 1.1. financial performance and its measures performance management and financial performance management, are intensely debated but still current topics. the proof is the multitude of studies published over the years. for example, in our search on the web of science platform (for the period march 1, 2021  – march 1, 2022), using the keywords financial performance management, it was found that in just twelve months about 2300 studies were published (in october 2021 there were over 22.5 thousands of papers, of which more than 17 thousand were assigned to relevant fields, such as management, business, and economics). maintaining interest in these research topics is justified by the fact that common and convergent ideas on defining and measuring financial performance have not yet been reached. summarizing the debates on performance, we identified the following: – in the early stages of research, the concept of performance, considered a vital goal of any company, was defined from the perspective of achieving or not achieving organizational goals; subsequently, the pillars that explained performance were: efficiency, effectiveness, and value creation for stakeholders (lupton, 1977); – after several decades of performance research, few studies use consistent definitions and measures (kirby, 2005); – 10 years later, the literature shows a lack of understanding or sufficient clarification in defining the concept of performance (jenatabadi, 2015), which makes the results of research remain inconclusive both in terms of measuring instruments and their determinants (ayako et al., 2015); – current research (golubeva, 2021) indicates that opinions on defining and measuring performance are weakly convergent, with the recommendation of taking a more comprehensive and creative approach. the difficulty of defining the concept of performance derives from its multidimensional character (prahalathan & ranjany, 2011), integrating aspects related to management, finance, accounting, corporate governance, microeconomics, and more. for example, hamann and schiemann (2021) indicate that organisational performance has four dimensions: profitability, liquidity, growth, and stock market performance. therefore, the internal architecture of the concept of financial performance is represented by various components that may (or may not) 122 m. b. tudose et al. financial performance – determinants and interdependencies between... be interdependent. to argue the tendency to abandon the concerns of defining the concept, it has been acknowledged that “performance is so important in management research that its structure and definition are rarely explicitly justified” (richard et al., 2009). taking into account the opinions of predecessors, but also the difficulty of defining the concept, it was admitted that performance can be considered an artifact based on which the success of an organization is appreciated (tudose & avasilcai, 2020). the arguments in favour of this classification are explained below. first of all, performance is a result of human creation, managerial decisions being attributed exclusively to the human factor. secondly, the achievement of performance (reaching a certain level of performance) involves specific actions (different from one organization to another, without the possibility of replication), the result of the actions being an original one (like a work of art). third, past actions can be adapted to the present to achieve superior performance in the future. approached from a financial perspective, the performance was assessed based on the financial results obtained by a company in a given period. therefore, to admit that a company is financially successful, its monetary outputs must be higher than the expenses related to its realization. the latest definitions of financial performance integrate aspects such as the efficiency and effectiveness of a company in the use of resources (egbunike & okerekeoti, 2018; mahrani & soewarno, 2018) and in achieving objectives (suhadak et  al., 2019). therefore, financial performance reflects a company’s ability to create economic value (orozco et  al., 2018) and to attract and generate returns for investors (al-sa’eed, 2018). the dynamism of the economies, the changes at the level of the business environment or the level of the organizational strategy oblige to re-evaluate the usefulness of the performance measures. concerns about the development of performance measurement systems/models have intensified in the last century. analysing the research on the evaluation of financial performance, the authors opined that evaluation systems have developed in two stages (rajnoha et  al., 2016): in the first stage the focus was on profit, profitability, and productivity; in the second stage, as a result of changes in the world market, performance evaluation focused more on strategic priorities, the indicators of quality (of products/services) and business flexibility becoming important in gaining and maintaining competitive advantage. summarizing the research on financial indicators, other authors (pavelková & knapková, 2005) noted the substantiation and use overtime of four generations of financial performance indicators: 1. profit margin; 2. profit growth rate; 3. return on assets (roa), return on equity (roe), return on investment (roi); 4. added value for the company and shareholders. 1. the profit margin reflects a company’s ability to generate profit based on sales (brigham & huston, 2012; nguyen et al., 2020). this indicator was considered important to follow because a significant decrease may generate the risk of bankruptcy (husna & desiyanti, 2016). other authors point out that one of the challenges faced by financial managers is identifying the conditions under which profit growth does not significantly affect a firm’s competitive advantage (nguyen et  al., 2021). it has been recognized that careful profit margin management can be a solution to avoid or anticipate declining profits, with a positive future effect on the company (by controlling competitiveness and minimizing the risk of bankruptcy). imhanzenobe (2020) showed that the profit margin is an indicator of short-term performance appreciation (reflecting the company’s net revenue per unit of sales), being different from the business, management and economics engineering, 2022, 20(1): 119–138 123 indicators that report the profit to the elements recoverable over more than one year (such as roa or roe). 2. the evaluation of performance based on the rate of increase of profit marked the transition from static measurement to the dynamic measurement of financial performance. the profit growth rate was associated with the growth rate of the company (from the perspective of sales dynamics) to highlight sustainable development. relatively recent research (izquierdo, 2015) has been concerned with explaining why some companies grow faster than others, in a context that shows that the relationship between profitability and growth is neither universal nor generally reciprocal. analysing the dynamics of the profit growth rate, some authors (endri et  al., 2020) have shown that an increase in the profits of listed companies can be obtained if they operate efficiently (with increasing revenues and profit margins) and carefully manage current liquidity, precisely to encourage higher sales growth. 3. profitability rates describe the extent to which the use of a company’s resources and funds generates profit. the most used rates of return are: return on assets (roa) and return on equity (roe). a high level of the two performance measures indicates the efficiency of a company in the use of its resources and funds. also included in this category is the return on investment (roi), which balances net profit and total investment value, being used to assess the level of efficiency of the company as a whole (siahaan et al., 2021). due to the easy way of determining (but also due to the ease of interpretation), financial rates were considered useful tools to assess and monitor financial position (demmer, 2015), as also trend analysis, cross-sectional analysis, and comparative analysis (sebastian & siauwijaya, 2021). the main criticisms of these performance measures were: the use of historical information, the evaluation of performance at a given time, and the priority treatment of the consequences and not of the causes that determined a certain performance (kiseľáková et al., 2016). 4. the limitations of profit margin measurement systems, profit growth, and profitability rates have led researchers to focus on increasing the value of the company, i.e. increasing value for shareholders. thus, there is a fourth generation of indicators that measure the economic added value, both for the company (through economic value added – eva – or market value added) and for shareholders, investors, or other interested parties (by shareholder’s valueadded, free cash flow or cash flow return on investment). by balancing the net operating profit and the opportunity cost of the invested capital, the eva analysis makes it possible to interrelate two areas often approached separately: operational management and financing management (focusing on the cost of these financing). due to the complexity of the determination, eva was considered one of the most appreciated performance evaluation indicators, as it involves all the resources used (and implicitly all the costs of running a business) and allows decentralization of decision making (morard & balu, 2010). 1.2. financial performance determinants. review of the literature and hypothesis in general, the determinants of performance are grouped into two levels – micro and macroeconomic, respectively, internal and external. to find out the current state of knowledge on the determinants of financial performance, tudose and avasilcăi (2020) identified two groups of determinants: financial and non-financial. the results of the bibliographic research 124 m. b. tudose et al. financial performance – determinants and interdependencies between... conducted on this topic are summarized in table 1. the methodological framework for assessing the interdependencies between financial performance and its determinants is shown in figure 1. the researchers noted that few studies are addressing the organization’s problems, and they stated that more attention was needed for this category of determinants. this is why, in this paper, we focus on the most representative internal factors that impact financial performance. in their research, the authors opt for a set of indicators, associated with one or more categories of determinants (detailed in table  1). regardless of whether they are company/ industry/country-level analyses, there is a preference of researchers for certain internal determinants. relevant indicators from the literature are used for these determinants, such as table 1. determinants of financial performance (source: elaborated by the authors) internal determinants (specific to the company, its activities, and products/services) financial determinants: business liquidity (khidmat & rehman, 2014; husna & desiyanti, 2016; durrah et al., 2016; egbunike & okerekeoti, 2018; kanakriyah, 2020; imhanzenobe, 2020; endri et al., 2020; batrancea, 2021); capital structure (dinu & vintilă, 2017; nenu et al., 2018; muthoni, 2019; mehmood et al., 2019; dinh & pham, 2020); sales volume and dynamics (humera et al., 2011; burja, 2011; margaretha & supartika, 2016; husna & desiyanti, 2016; dinh & pham, 2020; endri et al., 2020; le thi kim et al., 2021); company size, assessed by a number of employees or volume of assets, (al-jafari & al samman, 2015; margaretha & supartika, 2016; ichev & marinc, 2018; fuertes-callén & cuellar-fernández, 2019; dinh & pham, 2020; golubeva, 2021), nature of assets, capital investment intensity, working capital (bolek, 2014; al-jafari & al samman, 2015), market share (capon et al., 1990; izquierdo, 2015), financial sustainability (imhanzenobe, 2020; orazalin et al., 2019). nonfinancial determinants: tqm practices (sabbagh et al., 2019); shareholder and structure or size of the board (al-sa’eed, 2018; ayako et al., 2015; orozco et al., 2018); the number of employees (an & kim, 2019); dividend policy (kanakriyah, 2020; sebastian & siauwijaya, 2021); corporate lobby (lin, 2019); leadership practices (suriyankietkaew & avery, 2016); research and development, diversification (an & kim, 2019; zainudin et al., 2021); competitive advantage (nguyen et al., 2021); product/service quality, corporate social responsibility (mahrani & soewarno, 2018; garcía-sánchez & martínezferrero, 2019); business sustainability (imhanzenobe, 2020); management practices, innovation capacity (fuertes-callén & cuellar-fernández, 2019; nguyen et al., 2020); corporate governance (humera et al., 2011). external determinants specific to the economic environment: industry size, concentration, or industry affiliation (izquierdo, 2015; margaretha & supartika, 2016; nguyen & nguyen, 2020; golubeva, 2021); capital investment, advertising, business ecosystems (micheli & muctor, 2021); legal framework, market specificity, barriers to entry, consumer/user behaviour (capon et al., 1990); competitiveness (herciu & ogrean, 2013). specific to the economic context: economic growth (dinu & vintilă, 2017; golubeva, 2021; asimakopoulos et al., 2009); economic cycle (vu et al., 2019), crisis (batrancea, 2021); interest rate, inflation rate, exchange rate and the gross domestic product growth rate (egbunike & okerekeoti, 2018); stock market performance (hamann & schiemann, 2021); internationalisation (zainudin et al., 2021), consumer price index, cost of financing (money and financial market); the degree of development of financial markets, the degree of openness of national economies, the balance of trade, exchange rate volatility. business, management and economics engineering, 2022, 20(1): 119–138 125 the current ratio as an expression of business liquidity; gearing ratio or levier, which reflects the influence of financial structure on performance; the growth rate of sales, as an expression of business growth; company size, admitting that the larger ones have a higher competitive power compared to the smaller ones; this is because they have higher market shares, have easier access to the capital market and demonstrate operational experience and efficiency (ichev & marinc, 2018; golubeva, 2021). the results obtained are not convergent due to the diversity of samples, the periods for which the analysis is performed, and the indicators used (for dependent/independent/control variables). for example, some studies (focused on financial performance) report a positive impact on liquidity (khidmat & rehman, 2014; durrah et al., 2016; dinu & vintilă, 2017; nenu et al., 2018; egbunike & okerekeoti, 2018; imhanzenobe, 2020), financial structure (al-jafari & al samman, 2015; muthoni, 2019; dinh & pham, 2020), sales growth (endri et  al., 2020; dinh & pham, 2020; humera et  al., 2011; le thi kim et al., 2021) and size company (egbunike & okerekeoti, 2018; fuertes-callén & cuellar-fernández, 2019; kanakriyah, 2020; dinh & pham, 2020; golubeva, 2021). other studies find negative influences on performance, when they introduce in the analysis the current ratio (fuertes-callén & cuellar-fernández, 2019; endri et  al., 2020), the gearing ratio, or the levier (khidmat & rehman, 2014; dinu & vintilă, 2017; nenu et al., 2018; mehmood et al., 2019; le thi kim et al., 2021), the sales growth rate (khidmat & rehman, 2014; margaretha & supartika, 2016) and the company size (khidmat & rehman, 2014; margaretha & supartika, 2016; nenu et al., 2018). in the light of those presented, two hypotheses are assumed in this study: h1: current ratio, gearing, turnover growth rate and size of the company from the automotive industry have a direct influence on the financial performance assessed by the profit margin, profit growth rate, returns on assets, return on equity and economic value-added. h2: there are relationships of direct determination between different measures of financial performance. according to research predecessors (leończuk, 2016), performance measurement should be done in a particular context. this is why, in the present study, the analysis is limited to one field of activity (automotive industry) and covers the pre-pandemic period. the formulation of the hypotheses was based on the three benchmarks that underlie the performance assessment: effectiveness (which highlights the relationship between the results obtained and the objectives pursued), efficiency (which highlights the relationship between resource consumption and added value), and satisfaction of stakeholders. accounting or market measures dependent variables financial perfromance internal determinants external determinants return on assets (roa), return on equity (roe), return on sales (ros), return on investment (roi), earnings per share (eps), net profit margin (npm), economic value added (eva), operating cash flow (cf); tobinsq, market value. independent (explanatory) variables figure 1. the causal model between financial performance and its determinants (source: elaborated by the authors) 126 m. b. tudose et al. financial performance – determinants and interdependencies between... 2. methodology this study is based on hypothetical-deductive reasoning. the aim is to predict an explanatory theoretical model which will further be the subject of empirical research. the choice for this research strategy was justified by the fact that the literature provides evidence that the relationships between determinants and business performance are not always clear. the methodological framework of the research is presented in figure 2. research variables model 1 model 2 current ratio, gearing, turnover growth rate, size 2. profit growth rate 3. roa, roe 4. eva dependent variables eva (economic value added) independent variables dependent variables 1. profit margin profit margin, profit growth rate, roa, roe, current ratio, gearing, turnover growth rate, size independent variables hypothesis 1 hypothesis 2 figure 2. the framework of methodology (source: elaborated by the authors) although considered first-generation indicators, profit margin and profit growth rate are often used in research over the last decade (al-jafari & al samman, 2015; durrah et al., 2016; husna & desiyanti, 2016; mahdi & khaddafi, 2020; endri et al., 2020). more intensely, roa and roe (considered third-generation indicators) are used in research focused on assessing the financial performance of companies (khidmat & rehman, 2014; al-jafari & al samman, 2015; durrah et  al., 2016; kanakriyah, 2020). considering that financial rates are not sufficient to assess performance in today’s competitive economy (safaei ghadikolaei et al., 2014), the literature has focused on measures based on economic added value. eva, considered a fourth-generation indicator, has come to the attention of researchers by allowing managers to perform four types of interventions (kijewska, 2016; tudose et al., 2021): a) increase the net profit margin (expression of increased efficiency activity); b) increase in sales; c) diminution of the value of the invested capital when it is not fully capitalized; d) optimization of the capital structure. as shown in figure 2 for realizing the empirical analysis we focused on two models. the first model considers five variables in turn that define the financial performance of companies, and four determining factors. the equations tested for model 1 are presented below: 1. performance analysis, evaluated based on the first generation indicator – pm: pmit = crit β1 + git β2 + grsit β3 + sit β4 + uit . (1) 2. performance analysis, evaluated based on the second generation indicator – pgr: pgrit = crit β1 + git β2 + grsit β3 + sit β4 + uit . (2) 3. performance analysis, evaluated based on third-generation indicators – roa & roe: roait = crit β1 + git β2 + grsit β3 + sit β4 + uit , (3) roeit = crit β1 + git β2 + grsit β3 + sit β4 + uit . (4) business, management and economics engineering, 2022, 20(1): 119–138 127 4. performance analysis, evaluated based on the fourth-generation indicator – eva: evait = crit β1 + git β2 + grsit β3 + sit β4 + uit . (5) the variables included in the models described above are defined in table 2. table 2. independent and dependent variables (source: elaborated by the authors) variables symbol formulas profit margin pm net profit / sales profit growth rate pgr net profit n / net profit200x (200x is the base year) return on assets roa gross profit / total assets return on equity roe net profit / shareholder’s equity economic value added eva net operating profit after taxes –invested capital x cost of capital current ratio cr current assets / current liabilities gearing g total debt / total financing the growth rate of sales grs turnover n / turnover200x (200x is the base year) size of the company s total assets for the second model, we proposed to test the interdependencies between the performance indicators considered in the first model. thus, the equation we intend to test is: evait = pmit β1 + pgrit β2 + roait β3 + roeit β4 + crit β5 + git β6 + grsit β7 + sit β8 + uit , (6) where i represents the firm, t is the time; β1, β2… β8 represent the coefficients; uit is the error term. from the perspective of the objective assumed and transposed in this second model, it is necessary to specify that no similar research strategy has been found in the literature, to assess the interdependencies between the measures of financial performance assigned to different generations. the searches in this direction of research indicated that research was limited to analysing the interdependencies between two performance indicators, namely: net profit margin and firm value (mulyadi et al., 2020); profit growth rate and net profit margin (endri et al., 2020); roa and net profit margin (imhanzenobe, 2020); eva and roa (sliman, 2017; agustina et al., 2020; tudose et al., 2020). as an exception to the above, the research of safaei ghadikolaei et al. (2014) proposed a hybrid approach to assessing the financial performance of companies in the automotive industry, in which context they ranked (companies) according to financial performance, introducing accounting measures and economic values in a process of fuzzy analysis. besides the theoretical aspect of the study, we focused also on quantitatively testing a set of hypotheses. thus, the main purpose of the empirical part is to find out which are the determinant factors of the financial performance of firms and also to identify the interdependencies between them. for reaching this purpose we have selected the data for the firms from the amadeus database. the data were selected only for romanian companies, for companies in the automotive industry (caen codes related to group 29 manufacturing of 128 m. b. tudose et al. financial performance – determinants and interdependencies between... motor, trailers, and semitrailers). on the first search, the platform indicated the existence of 607 companies, of which only 571 companies are active. in order to ensure representativeness, out of the 571 companies, only large and very large companies were selected, therefore remained only 118 companies. out of the 118 companies, realizing the cleaning of the database we gave up to 5 companies that did not have data transmitted for the last year (2019); 4 companies that did not have operational income/employees in the first years (2010–2011); 20 companies for which data were not available for more than 4 consecutive years. thus, the resulting final sample consists of 89 companies. the study is mainly based on secondary financial data for a period of ten years, 2010–2019. as empirical methods of analysis we used correlation and regression analysis. because our analysis focuses on a set of 9 indicators, for 89 companies, over ten years, we use panel data models. eviews programme was used for performing econometric analysis. thus, the first step in the analysis was to test the variables for the existence of a unit root. also, because eva appears in absolute size, we calculated the natural logarithm for this variable. the next step is to analyse the descriptive statistics, followed by testing the correlation and regression models with panel data. we run three different models: ols adapted to panel data, fixed effects, and random effects. and then tested to see which of these models fit best. the tests performed (hausman test and redundant fixed effects test) showed that the model with fixed effects is the most suitable for our data. therefore, the regression analysis consisted in applying the fixed effects. 3. results and discussions the results obtained after running the descriptive statistics are described in table  3. thus, they point out that the companies considered in the sample are very varied, so we have companies that have high performance but also companies at the other extreme with poor performance, with negative results for the indicators measuring performance. the highest standard deviation is obtained for return on equity followed by profit growth rate and return on assets. table 3. descriptive statistics of the variables (source: authors’ own calculations) variables mean max. min. std. dev. obs. profit margin 6.109 54.910 –5.828 10.364 854 profit growth rate 0.006 37.547 –6.136 22.613 852 return on assets 9.511 99.915 –4.239 15.351 870 return on equity 16.925 434.210 –6.130 55.755 833 economic value added 7.073 11.930 –1.397 1.798 809 current ratio 1.825 14.286 0.039 1.703 872 gearing 73.265 926.180 0.000 110.805 708 the growth rate of sales 2.128 714.348 0.000 24.764 843 size of the company 9.843 14.591 2.314 1.531 872 business, management and economics engineering, 2022, 20(1): 119–138 129 for independent variables, the largest variation is recorded for gearing rate and growth rate of sales. also, the average value for gearing of 73% shows the high degree of indebtedness of the companies included in the study. for the growth rate of sales, although the maximum value is high, the average is relatively low, showing that many of the companies considered have low sales growth rates. the values obtained for the size of the company show that our sample consists of an increased proportion of very large companies. the different values obtained for the number of observations for each variable show us that some variables lack data for certain years. in table 4 we have centralized the results obtained after running the regression analyses for the two proposed models. thus, the results obtained for model 1, point out that a part of the variables considered have a significant influence on the financial performance of the firms from the automotive industry. therefore, the current ratio resulted in positively determining roa and negatively determining roe and economic value-added. when a company has higher liquidity, and greater capacity to cover the short-term liabilities will determine an increase in roa. this result is in line with the findings of crespo and clark (2012), khidmat table 4. regression analysis results (source: authors’ own elaborations) model 1 model 2 dependent variable profit margin profit growth rate roa roe economic value added economic value added current ratio 0.604 (0.640) 0.109 (0.180) 0.749** (0.245) –1.522* (0.910) –0.140*** (0.032) –0.139*** (0.322) gearing –0.014*** (0.003) –0.007 (0.005) –0.021*** (0.002) 0.004 (0.047) 0.001** (0.001) 0.001*** (0.001) growth rate of sales 1.673* (0.842) 0.001 (0.001) –4.214*** (1.062) 2.426 (6.593) –0.195*** (0.051) –0.247*** (0.065) size of the company 1.950*** (0.576) 0.009 (0.407) 1.390* (0.802) –4.363 (4.509) 0.788*** (0.090) 1.039*** (0.087) intercept –13.912 (6.650) 1.073 (4.597) –4.199 (8.040) 6.756 (4.561) –0.410 (0.936) –2.663*** (0.204) profit margin – – – – – 0.004 (0.005) profit growth rate – – – – – –0.006*** (0.001) return on assets – – – – – –0.007*** (0.002) return on equity – – – – – 0.001 (0.003) obs. 695 697 696 696 683 681 r-squared 0.667 0.131 0.724 0.434 0.931 0.861 r-squared adjusted 0.615 0.005 0.680 0.345 0.920 0.859 f-statistic 12.722*** 0.961 16.616*** 4.858*** 84.104*** 86.146*** note: *, ** and *** represent that the values are significant at 1%, 5%, respectively 10%. standard errors in parenthesis. 130 m. b. tudose et al. financial performance – determinants and interdependencies between... and rehman (2014), and durrah et  al. (2016). contrary to these findings, bolek (2014) – analysing the issue of return on current assets and return on working capital, correlated with the cost of equity – showed that in a conservative working capital management strategy the influence on roe can be negative. regarding the link between the current ratio and eva, previous research confirms the negative relationship (agustina et al., 2020) or signals a lack of statistical representativeness for this link (tudose et al., 2020). the gearing ratio resulted in negatively determining profit margin and roa and positively determining the economic value-added. these results can be explained by the fact that when a firm has higher debt it will need more resources for paying this debt, with negative effects on its performance measured by profit margin and/or roa. similar results were obtained by asimakopoulos  et  al.  (2009), al-jafari and al samman (2015), and kanakriyah (2020). at the same time, supplementary debt can be translated into a good investment, which will then increase performance (burja, 2011; humera  et  al., 2011). al-sa’eed (2018) showed that the gearing ratio has a significant positive impact on performance measured by roa and a significant negative impact on performance measured by roe and net profit margin. regarding the gearing ratio and eva, studies confirm the positive relationship (agustina et al., 2020). the variable growth rate of sales positively influences profit margin and negatively roa and eva. the positive link between sales growth and profit margin is supported by the fact that both indicators use sales volume as the main variable. increasing sales from one period to another (highlighted by an increasing growth rate) will generate higher profits. when the profit growth rate is higher than the sales growth rate, the profit margin will increase. previous studies (rice, 2016) confirm the positive relationship, arguing that sales revenues materialize into actual or potential cash inflows (when they take the form of credit receivables/sales). according to other researchers (endri et  al., 2020), the increase in sales from one period to another reflects the success of the business and the foundation for predicting future profit growth. when the growth rate of gross profits will be lower than the growth rate of assets, the increase in sales revenue will result in a deterioration of the roa. this situation is specific to companies that are expanding their production capacity (marking an increase in the volume of assets held). to better capture this situation, some authors have proposed the use of a composite indicator – asset turnover. based on this composite indicator, determined as the ratio between total revenue and total assets, the literature provides evidence of the positive and consistent impact on financial sustainability (imhanzenobe, 2020). other research (agustina et al., 2020) provides evidence on the lack of statistical significance of the link between asset turnover ratio and eva. to understand the interdependencies between the growth rate of sales and eva, it is important to identify the relationship between two indicators: eva = nopat – ic x wacc, (7) and nopat = sales – operational expenses – adjustments – corporate income tax, (8) where, nopat  – net operation profit after tax; ic  – invested capital; wacc  – weighted average cost of capital. business, management and economics engineering, 2022, 20(1): 119–138 131 according to the relationship presented, the increase in sales is a precondition for the increase in eva. still, when the growth rate of noapt is lower than the growth rate of invested capital, the tendency is to decrease eva. evidence of this is provided by pramanik and sahoo (2016), who showed that an increase in investment in fixed assets can have a negative impact on the performance assessed by eva. the size of the company resulted to be positively related to the financial performance of firms measured by profit margin, roa and economic value-added. this shows that larger firms have higher effects on their potential investors, creditors, stakeholders, and even consumers. our results are in line with the findings of other studies in the literature (stierwald, 2009; vijayakumar, 2011; ayele, 2012; erasmus, 2013; al-jafari & al samman, 2015; kanakriyah, 2020; nguyen & nguyen, 2020). contrary to these findings, other authors have provided evidence of the negative relationship between firm size and roe (dinh & pam, 2020) respectively roa (margaretha & supartika, 2016; imhanzenobe, 2020). other authors have confirmed that the size of the company does not influence the rate of profit growth (endri et al., 2020; vu et al., 2019). the value of r-squared adjusted is different according to the variable considered for measuring the performance of the companies. therefore, looking at the values from table 4 we can affirm that 61% of the variation of the profit margin of the considered companies can be explained by the variation of the variables included in the analysis. also, 68% from the variation of roa, 34% from the variation of roe, and 92% from the variation of eva can be explained by the variation of the independent variables considered. for model 2 we observe that eva is negatively related to current ratio, growth rate of sales, profit growth rate, and roa, and positively related to gearing ratio and the size of the company. the negative relationship between the current ratio and the growth rate of sales, on the one hand, and eva, on the other hand, have been detailed in the context of the model 1 debates. the arguments presented can be considered valid to explain the negative relationship between profit growth rate and roa. the interpretation from the perspective of the research sample can be attributed to the fact that during the 11 years (2010–2019), companies made investments in fixed assets (figure 3), which had a negative impact on the performance assessed by eva (pramanik & sahoo, 2016). regarding the positive relationship between the gearing ratio and the size of the company, on the one hand, and eva, on the other hand, our research provides evidence that eva increases if: a) the rate of increase of remuneration claimed by financiers is lower than the growth rate of net operating profit; b) there is a consensus of financiers on the reduction of 3000 5000 7000 9000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 figure 3. dynamic of assets (thousand euros) (source: elaborated by the authors) 132 m. b. tudose et al. financial performance – determinants and interdependencies between... the current level of remuneration in favour of future higher financial remuneration (tudose et al., 2020). this is also the reason why the literature (safaei ghadikolaei et al., 2014) considers that measures based on economic added value are more important compared to measures based on financial rates. subsequently, taking into account the situation identified in the primary analysis data (for one of the sampled companies the roa was negative during the analysed period while eva was positive) it is confirmed that eva reflects the true economic profit of a business (orazalin et al., 2019). model 2 resulted to be statistically significant and the value of r-squared adjusted shows that 85% of the variation of the economic value-added can be explained by the variation of the independent variables. conclusions due to the multidimensional nature of performance, the diversity of its determinants, as well as the diversity of methods, techniques, and tools used for evaluation, performance research has been and remains a topic of interest. the central idea around which the studies on this topic revolved was to identify the most appropriate performance measures, which provide a true picture of reality and allow for resilience and business sustainability. this study aimed to comply with one of the rigors of scientific research, according to which research must provide both theoretical and practical knowledge to facilitate the overcoming of organizational problems. for this, both rational thinking and creative thinking were used (to ensure originality in research). at the same time, it was intended that the paradigm questions (which facilitated the understanding of the brilliant scientific achievements and the construction of a cognitive transcript) take precedence over the method questions. the objectives assumed in this study are subsequent. highlighting the advancement of knowledge on the definition and measurement of performance is followed by two analyses: one focused on the relationship between financial performance and its determinants and one focused on the interdependencies between different performance measures. the bibliographic research carried out allowed the formulation of the following conclusions: the difficulty of defining the concept of performance is maintained; progress has been made in substantiating and implementing performance measures (the option for a specific set of measures depends on the preferences of stakeholders); evidence was provided on the interdependence between the quality of the management tools and techniques used and the organizational performance; analyses at the level of performance determinants implement causal models between a dependent variable (financial performance) and one or more explanatory variables (financial or non-financial). the success of companies in the automotive industry has been a point of interest for researchers, who have sought to assess financial performance or identify its main determinants. however, the literature review provided evidence that the relationships between determinants and firm performance are not always clear. to shed more light, two causality models are defined and tested in this study: the first model evaluates the interdependencies between different performance measures and a set of determinants; the second model evaluates the business, management and economics engineering, 2022, 20(1): 119–138 133 links between the different performance measures. as signals were identified that performance analysis differed by period, country, and industry, interdependencies were tested on a relatively homogeneous sample of 89 large and very large companies in the automotive industry; the construction of a representative database for 9 indicators, for 11 years allowed the cross-sectional analysis, based on the panel data methods. the results of the analyses at the level of the first causality model proved to be statistically significant and indicated that the current ratio has a positive influence on roa, but a negative one on roe and eva; gearing has a negative influence on pm and roa, but positive on eva; the growth rate of sales appears as a significant determinant in the models that evaluate the financial performance through roa and eva; company size has a positive influence on pm and eva. as shown in the results and discussion section, the vast majority of them confirm the results of previous research. the results of the analyses at the level of the second causality model proved to be statistically significant and scientifically important. the output of this research increases in value because (from the perspective of those consulted so far) previous research has limited themselves to analysing only the interdependencies between two performance measures. the results of the interdependence analysis of the 4 performance measures, calibrated according to four control variables (current ratio, gearing, growth rate of sales, size of the company), confirm the results of the first model tested, in the sense that eva is negatively related to current ratio, the growth rate of sales, pgr and roa and positively correlated with gearing ratio and the size of the company. the situation was explained by the fact that in the period 2010–2019 the companies in the automotive industry intensely financed the investments in assets, which diminished the performance related to the analysed period, but created a foundation for the expansion/growth/development of the business. from the perspective of the results obtained, this study contributes to the advancement of knowledge (because it assesses the current state of research and proposes an original methodology that better captures the multidimensional nature of performance) and has important practical implications. knowing the impact of different variables on financial performance (evaluated through the prism of several indicators), managers have a wider range of activities to achieve the objectives assumed by the company. although much of the results of the existing literature have been valued in the elaboration of this paper, the study is not intended to be exhaustive. in future research, we consider overcoming the limitations of this research (related to the representativeness of the data only at the level of the researched sample) and identifying and including in the empirical analysis some new determinants relevant to the selected samples. at the same time, we are considering conducting comparative analyses at the level of fields/branches of activity to capture not only the impact of determinants on financial performance but also to assess organizational resilience. references adane, t. f. & nicolescu, m. 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(2021). internationalisation and financial performance: in the case of global automotive firms. review of international business and strategy, 31(1), 80–102. https://doi.org/10.1108/ribs-04-2020-0039 https://doi.org/10.1007/978-3-030-44711-3_17 https://doi.org/10.3390/jrfm14030102 https://doi.org/10.13106/jafeb.2019.vol6.no4.53 https://doi.org/10.1108/ribs-04-2020-0039 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: vida.navickiene@vilniustech.lt business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 2: 337–357 https://doi.org/10.3846/bmee.2021.14870 university management solutions during the covid-19 pandemic: a case study of lithuania vida navickienė1*, gražina droessiger 2, ilona valantinatė 3, vaidotas trinkūnas 4, arūnas jaras5 1,3department of philosophy and cultural studies, faculty of creative industries, vilnius gediminas technical university, vilnius, lithuania 2language studies centre, faculty of creative industries, vilnius gediminas technical university, vilnius, lithuania 4department of construction management and real estate, faculty of civil engineering, vilnius gediminas technical university, vilnius, lithuania 5department of applied mechanics, faculty of civil engineering, vilnius gediminas technical university, vilnius, lithuania received 05 may 2021; accepted 11 august 2021 abstract. purpose  – the article is aimed at analyzing university management decisions during the covid-19 pandemic thus emphasizing the impact of the decisions made on the effective management of the situation. research methodology  – to achieve the established goal, research methodology  involved the qualitative research strategy applying the semi-structured interview method and scientific literature analysis. the article is of a theoretical and empirical nature. the empirical part presents its individual research on implementing strategies in the field of adapting appropriate areas of the university as an important part of the study implementation process. the study involved 15 experts  – 12 men and 4 women. the research results are the basis for developing practical guidelines for higher education institutions. findings – research findings have disclosed that successful management decisions fall into eight categories: management actions, the collaboration between the different levels of authorities and the academic community, the development and maintenance of a technical base, timely and continuous academic support for teaching staff, multipurpose support for students, control over the studying process, security assurance, solutions at the level of study programs. the article demonstrates a holistic approach to making the required decisions. research limitations  – research limitations impose conducting a study in a specific culture and the organizational context of lithuania. practical implications – practical implications suggest that the conducted research helps the leaders of various levels at educational establishments make the most useful necessary decisions for the institution in an emergency. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ mailto:vida.navickiene@vilniustech.lt https://doi.org/10.3846/bmee.2021.14870 https://orcid.org/0000-0002-7549-6149 https://orcid.org/0000-0002-1398-3099 https://vilniustech.lt/creative-industries/departments/department-of-philosophy-and-cultural-studies/55100?lang=2 https://vilniustech.lt/civil-engineering/departments/department-of-applied-mechanics/284382?lang=2 338 v. navickienė et al. university management solutions during the covid-19 pandemic: a case study... introduction higher education is an integral part of developing a modern state and society. thus, chou et al. (2017) single out several reasons one of which is the massive scale of higher education. the second one is related to the increased role of science in certain areas of policy such as societal challenges of climate change, aging, etc., thus expecting relevant research on higher education and suggested solutions. the need for society to seek a guarantee of a career and better quality of life at university in the future has introduced some measurements to university life at all levels. this has caused both tension and additional management work and is widely discussed in the scientific discourse. “the demand for counting, measuring, ranking, quantifying, evaluating and judging work done by universities (along with those who labor and study in educational establishments) haunts virtually all aspects of our work […]” (peseta et al., 2017). olssen and peters (2005) analyzed the ideas of neoliberalism in higher education and emphasized the focus of universities on high efficiency and strategic planning assessing anything and everything that could be measured. strategic planning is a vital management tool that has switched from business practice to higher education to achieve organizational effectiveness (gerulaitis et al., 2012). strategy implementation has to be a holistic system (segatto et al., 2013). thus, higher education management has been a widely researched topic in recent years. chou et al. (2017) distinguish two research trends. the first one includes policy actors such as ministries and organized sectoral interests. the second one embraces the importance of the existing political-management structures. the authors of the article contribute to the development of the second trend of research and analyze the decisions made by university authorities to help with managing the challenges of the covid-19 pandemic. the research problem is working out effective university management solutions during the covid-19 pandemic. the research object is management decisions made by university authorities during the covid-19 pandemic. it should be noted that this is the first lithuanian-wide study revealing management decisions made by national universities during the pandemic. the situation country-wide has not been analyzed from a historical perspective. the above-mentioned facts support the study of the article as a unique investigation. the analysis of qualitative data described in the article complements the theoretical considerations of scientists with the practical examples of emergency management, which encourages further scientific discussions, the supplementation of the available management theory, and other types of developing management science. originality/value – the uniqueness of the conducted research lies in the first attempt to show management solutions worked out by the universities in lithuania during the covid-19 pandemic. keywords: university management solutions, online studies, studies during the covid-19 pandemic. jel classification: i23. business, management and economics engineering, 2021, 19(2): 337–357 339 scientific sources provide various models for classifying higher education management methods. capano (2011) summarizes and distinguishes four methods, including hierarchical, procedural, steering at a distance, and self-governance. in recent decades, higher education policy in western countries has been reformed and characterized by the steering at an online mode, however, strong national interpretations of this mode have remained, and significant national diversity in the methods of higher education management has been observed to date (capano, 2018). diversity has been under the effect of the previously inherited higher education system and the peculiarities of the national policy. dobbins (2017) points out three larger, historically based types of higher education management: a state-centered model, an academic self-governance model, and a “marketized” model. the law on science and studies of the republic of lithuania (2016) defines the autonomy and accountability of higher education institutions as follows: “a higher education institution has an autonomy that includes academic, management, economic and financial management activity based on the principles of self-governance and academic freedom”. among other rights, higher education institutions may determine the order of studies, an individual structure, internal work order, etc. thus, universities in lithuania have much space to solve internal issues. the responsibility for the management of each university is shared by the university council, the university senate, and the rector who is the university’s chief executive officer. hence, during the lockdown, lithuanian higher education institutions have autonomously analyzed the problems and challenges of organizing online learning and decisions made at the institutional level. higher education institutions are integrated establishments the activities of which cover teaching, science, and service provision. universities must respond to the needs of students, faculty members, and external actors such as the representatives of the government, industry, and societal stakeholders (wise et al., 2020). thus, university management poses some challenges. proper university management has been proved to have a significant effect on the teaching quality of staff and student satisfaction (muhsin et al., 2020). kok and mcdonald (2017) single out eight elements determining the successful work of academic departments: change management, leadership, communication, departmental dynamics and culture, direction, strategy and shared values, staffing, and mentoring, rewards, research, and teaching, organization, and structure. the research performed by the authors of the article demonstrates that successfully operating departments are open to changes, have more clarity of trends and goals, foster a culture of collegiality, trust in and frequently communicate with the head of the department, employees feel autonomous, etc. however, all the research on the conditions for successful management of higher education institutions until now has focused on normal life and work circumstances, while this article is aimed at analyzing university management decisions during the covid-19 pandemic. the study carries the significance of the decision-making of university authorities, aiming to achieve a quality study process and making decisions regarding the overall expansion of distance learning. 340 v. navickienė et al. university management solutions during the covid-19 pandemic: a case study... 1. literature review. transition to online teaching: key issues and challenges living under conditions of social isolation has affected all areas of life, including the education sector. unesco (n.d.) provides that until 1 april 2020 schools and higher education institutions were closed in 185 countries thus affecting 1,542,412,000 or 89.4% of all learners worldwide. the covid-19 pandemic and announced quarantine forced educational institutions to reorganize work and switch to online and teaching and training in a short time. the emergency prompted the urgent search for solutions ensuring a different but uninterrupted work process. in march–april 2020, the international association of universities conducted a survey (marinoni et al., 2020) that involved the representatives of faculties, the authorities of institutions, and the members of department management teams from 424 higher education establishments from 109 countries all around the world. two-thirds of the respondents stated that the studying process had moved to online learning, and the main challenges that accompanied the induced changes covered technical infrastructure, online teaching competencies, and pedagogy, and specific requirements for the fields of study. thus, educational technologies turned into an integral part of the studying process in every higher education institution in the last decade. the application of modern technology in studies has become particularly relevant during the covid-19 pandemic. higher education institutions transferred the studying process to the online mode, which resulted in the increased need for hardware like computers, microphones, webcams, various software, lms, etc. ali (2020) notes that to ensure successful online learning, higher education (he) institutions must possess the basic ict infrastructure, and teaching staff must own ict tools and have access to software and teaching platforms. the he institutions that had not acquired the above-introduced instruments were forced to choose ed-tech services and tools, which has created a sellers’ market where ed-tech companies have eagerly jumped on the opportunity to provide their services’ (teräs et al., 2020). plentiful supply has become a challenge for the institutions to choose appropriate online work tools in line with varying criteria. however, the technical side of online learning has become a serious problem for individual users, teaching staff, and students involved in the studying process, working from home and frequently using personal equipment. the internet connection, for example, may have a strong impact on the course of a lecture, because “online learning in its entirety is dependent on technological devices and the internet” (adedoyin & soykan, 2020). a slow or broken internet connection may significantly degrade the quality of an online lecture. it should also be noted that the acquisition or upgrade of hardware has become a substantial financial burden for higher education institutions, and therefore the limited financial resources and a large budget deficit of universities are identified as another challenge of online learning (almaiah et al., 2020). having sufficient technical resources is not enough, as the ability to use them properly and effectively both technically and methodologically plays a crucial role. a large proportion of teaching staff lacked online teaching experience before the pandemic. stukalo and simakhova (2020) point to 86% of such teachers in ukraine. a quantitative study conducted by the authors of the article revealed a significantly smaller percentage of such teachers in business, management and economics engineering, 2021, 19(2): 337–357 341 lithuania thus making 51%. the gained experience shows that for ensuring effective online teaching, training sessions on online education methods for teaching staff are required (stukalo & simakhova, 2020). the methods for active student involvement online have become a burning issue, and therefore highly relevant “flipped classroom” and other similar methods suitable for online learning have started to be extensively used. promoting ict application competencies of both teaching staff and students is another highly important prerequisite. although the use of ict in universities is hardly accepted as a novelty, the pandemic has shown that this aspect has posed considerable challenges for some participants in the studying process. the survey of the students learning abroad was conducted on the www.educations.com website and showed that as many as 41.5% of the respondents feared a lack of experience for teaching staff to teach remotely. kedraka and kaltsidis (2020) presented a study on students 61.3% of which agreed that e-learning was negatively affected by the teaching staff problems of managing an e-learning platform. it seems that an insufficient ability to apply modern technology may have several reasons. on the one hand, it should be mentioned that the teaching staff who previously had not worked online did not shift a strong emphasis on the need for employing technologically more sophisticated tools or learning platforms. on the other hand, it may also be related to individual character traits. based on the research carried out by heinonen et al. (2019), four types of teaching staff are distinguished considering the approach to the application of educational technologies. the first category is represented by active developers, the so-called enthusiasts, or initiators, who willingly apply technology personally or together with their colleagues to try new hardware. the second category involves adaptive developer practitioners who look pragmatically at the benefits of ed-tech. the third category brings together cautious developers having less experience, in no hurry to apply ed-tech, and waiting for convincing evidence that the employed technology will bring the benefit of teaching students. the fourth category stands for reluctant developers who are resilient to changes, skeptical, negative, and cynical about the application of technology. the authors mainly conclude that “if teaching staff view themselves as competent and confident technology users, they also view technology as compatible with their practices and value for themselves and/or their students and the circumstances for development as supportive” (heinonen et al., 2019). the third possible reason may provide that educational technology used in higher education often carries a top-down character, whether at the national or institutional level: “... most internal processes regarding digitization might be recognized as top-down initiatives and most likely management-led rather than influenced by academic staff ”(tømte et al., 2019). although the authors point out that digitization is also going the other way around, i.e. under the initiative of “bottom-up” academic staff, a frequent top-down process is likely may lead to a reluctance to use ed-tech, i.e. a certain rejection reaction. student ict application competencies have been found to cause less concern during the pandemic: “as expected, this emergency e-learning experience showed that student digital skills seemed to be far exceeding most of their instructor proficiencies” (osman, 2020). however, various sources point out that barely all students of digital natives demonstrate a high level of digital competence, and low digital competencies of both teaching staff and http://www.educations.com 342 v. navickienė et al. university management solutions during the covid-19 pandemic: a case study... students are liable to lack behind in online learning (adedoyin & soykan, 2020). daniela et al. (2018) notice that teaching staff frequently believe students are well versed in modern technology, however, the application of technology in the studying process discloses that student digital competencies are not sufficiently developed. the global student survey shows this also depends to a large extent on a geopolitical region because students differently assess their computer skills, the ability to use online learning platforms in particular: the students of oceania and north america fully trust, while those of africa lack trust in their competencies (aristovnik et al., 2020). as mentioned above, specific requirements for the areas of study or course units were the third obstacle to transition to online learning. a survey conducted by times higher education (n.d.). revealed the reasons why hardly all high schools switched to online learning during the first lockdown in 2019. 60% of the surveyed respondents noted the main reason was a few course units that could not be taught online. the course units such as computer science, business, management, and social studies were found to be more appropriate. however, engineering and technology, medicine and dentistry, biological sciences, agriculture, and related subjects, etc. were assessed as little suitable or completely unsuitable for online learning. zawacki-richter (2020) points out that “particularly in subjects with a high proportion of laboratory work and internships, a rapid switch to digital is hardly feasible”. undoubtedly, the problems of teaching itself and assessing student performance were encountered: “the assessment of student performance in online environments remains to be a challenge to both instructors and students, particularly the assessment of practical skills, technical competencies, and teaching practicum” (osman, 2020). in general, although technology is an integral part of online learning, still, it does not play a key role in the enhancement of online studying quality in both a pandemic and safe environment: “ensuring quality in online education is not primarily a question of it support, but of academic strategy and educational design” (gamage et al., 2020). an important point is to make the e-learning strategy a part of an overall institutional strategy covering pedagogical models and innovations. “the other quality elements of the institutional e-learning policy embrace institutional support, course unit development and structure, teaching and learning, student support, faculty support with compulsory e-learning training for the new members of teaching staff, technological infrastructure, student assessment (learner authentication, work authorship, and examination security) and certification and electronic security measures” (huertas et al., 2018). actually, university authorities must regularly monitor faculty and student satisfaction with online education organizations (stukalo & simakhova, 2020) and identify and meet the needs of teaching staff and students (ali, 2020). 2. methodology of the current research to conduct a qualitative study, the phenomenographic research methodology was employed. the devised strategy is based on the view that people understand and perceive phenomena differently but their perceptions are interrelated. the goal of the strategy is to present a business, management and economics engineering, 2021, 19(2): 337–357 343 variety of aspects describing the experience of a particular phenomenon (žydžiūnaitė & sabaliauskas, 2017). the article is aimed at analyzing university management decisions during the covid-19 pandemic thus emphasizing the impact of the decisions made on the effective management of the situation. research methods include the analysis of scientific literature and qualitative content analysis. a semi-structured in-depth interview method was used. research questions were developed by the authors of the article to analyze the attitude of experts to the decisions made to manage the situation during the covid-19 pandemic. during the semi-structured in-depth interview, the experts were asked questions covering nine areas: 1) goals set by university authorities in an emergency; 2) actions ensuring the studying process; 3) actions that assisted in handling an emergency; 4) reaction of the academic community (students, teaching and management staff ) to changes in work organization before, during and after the quarantine; 5) encountered problems and adopted solutions for organizing online teaching/ learning; 6) success and factors in determining achievements; 7) changes in the decisions made after the recurrence of the quarantine; 8) impact of work experience under quarantine conditions on the organization of the forthcoming studying and training process; 9) collaboration with companies and other institutions. the critical selection of informants was utilized for demonstrating a deep understanding of the phenomenon. the qualitative research involved the three largest lithuanian universities two of which were located in different cities and were technical universities and the third one was a classical institution. the aim of using such selection criteria was to obtain the widest possible coverage of the information. the interviewees were university authorities, including vice-rectors for studies, the directors of studies and online studying, the deans of different faculties, and a vice-dean. thus, the study involved 15 experts  – 12 men and 4 women. all experts were awarded a master’s and the majority  – a doctor’s degree. the experience of the management work of the surveyed respondents made at least 10 years. research data were obtained in line with research ethics and summarized hiding information on respondent affiliation to the city, a university s/he represented or the current position held. a qualitative study was conducted in july 2020. survey data were collected using the zoom video conferencing platform. analyzing the data, the answers of the experts were grouped according to the meaning and respective categories were created. data analysis identified descriptive categories and the outcome space of the concept expressed by a network of logically related, hierarchically organized, and systematized categories (akerlind, 2005; reed, 2006). the analysis of phenomenographic research was carried out in the following 7 stages: familiarisation, compilation, reduction, grouping, preliminary comparison of categories, the naming of categories, contrastive comparison (dahlgren & fallsberg, 1991). 3. results of the current research and discussion the analyzed data on qualitative research hierarchically established the categories of solutions describing university management and the outcome space of the concept (table 1). 344 v. navickienė et al. university management solutions during the covid-19 pandemic: a case study... table 1. categories describing university management decisions made during the covid-19 pandemic (created by authors based on qualitative research) categories management decisions made by the university research focus / a question to be raised by university authorities management actions to centrally allocate a preparatory period at the institution level for planning online studies, draft documents regulating temporary studies, respond flexibly to changes in the circumstances of work and study. what are the management actions taken by university authorities in the event of a pandemic? collaboration between the different levels of management and the academic community decision-making should be conducted in line with the principles of autonomy, accountability, systematicity, and partnership through a collaboration between university authorities and the faculty management team in response to the experience gained by the full academic community throughout the online studying process. what is the basis for the decisions made by university authorities? development and promotion of the technical base university authorities must create/ improve the technical base in collaboration with the it department. what initial decisions should be made to pursue online studying? timely and continuous academic support for teaching staff teaching staff should be trained in the use of online teaching tools during preparation and online learning processes inviting experts and encouraging the exchange of good practice between teaching staff. what support should be given to the academic community? miscellaneous support for students university authorities should pay close attention to additional student support measures. control over the studying process university authorities should ensure and encourage teaching staff to deliver lectures in consonance to the established study schedule excluding the possibility for students of selfdirected learning. what forms of control should be employed for ensuring the online teaching process? ensuring security university authorities should strive to ensure the security of human health, personal data, and communication. what forms of security should be ensured? 4. management actions centralized preparation/transition to online learning. the critical situation caused by the covid-19 pandemic forced national universities to transform the studying process and work in the classroom to the online mode. two options were selected: the authorities of the majority of universities decided to take a two-week break for preparation, while some carried on their studies without any groundwork. noga (2018) provides that defined goals and task business, management and economics engineering, 2021, 19(2): 337–357 345 preparation are the essential stages of the successful management and implementation of the planned objectives. piekarz (2008) mentions three functions, including planning, organizing, and control, important for the implementation procedure. thus, the results of the study show that a more effective plan included the centralized preparation of online studying on a university-wide basis. most of the experts emphasized the importance of the two-week preparatory stage in changing the format of studies and work: “in a two week-time time, we’ve really come up with a very thorough plan, main points, communication methods, feedback to teaching staff, training courses, issued orders, etc. it was obligatory” (13inf). the preparation period was first needed to adapt emotionally because everyone felt great anxiety about the uncertainty of the future. second, centralized decisions on necessary equipment (including testing) were made, changes in the academic calendar of the school year were induced, and additional training and adding material to the moodle system was followed to have a sufficient amount of support material to ensure the studying process. besides, the specificity of studies and the organization of laboratory work had to be considered when making decisions. moreover, one of the developed solutions was the redistribution of human resources: “plenty of inquiries were made, and therefore several people instead of a single person were employed to respond to the questions and solve problems encountered by certain students” (2inf). thus, a judgment on managing the situation to make decisions and adhere to the issues centrally at the university level proved to be worthwhile: “possibly the good management of university authorities assisting faculties and departments creates centralized management which is one of the reasons for managing studies” (5inf). “the effective implementation of the strategy is pivotal for the development of the company and is one of the most important challenges faced by managers to solve any evolving organizational problems” (szarucki, 2015). the universities that failed to have a break to commence the preparation period experienced reduced quality studies as a consequence. 11inf stated that “it looked like the reached decision made the studying process uninterrupted because university authorities realized that in the case of the announced two-week holiday the situation would remain the same and take a form of two-week delay”. management decision-making. timely decisions made by the executives managing studies played a substantial role due to “the rapid mobilization of the staff who coordinated the process and did training” (11inf). centralized management at the senate level: “we accepted that some of senate powers could be handed over to the rector. however, the senate refused and decided to meet when needed to make timely decisions” (8inf). rectorate meetings were held weekly and “most of the questions were specifically devoted to studies” (2inf). departments of studies also planned ahead. for decision-making, some members of the department management team considered the experience of foreign universities: “another point is the examples of foreign universities because we had to attend meetings with the colleagues from foreign universities and our other networks we had been involved” (11inf). all faculties and other departments of higher education institutions should follow the decisions made by university authorities without interpreting or adapting them to individual cases to reduce confusion about online learning under emergency conditions. 346 v. navickienė et al. university management solutions during the covid-19 pandemic: a case study... preparing study documents. some documents regulating studies were prepared. a large number of legal acts, mostly temporary legislation regulating changes in the studying process, were drafted. the final theses were the biggest challenge, and therefore these papers were given serious attention in the process of preparing documents. some universities followed the subordination principle. the most important documents and decisions related to the studying process were made by the senate, although the rector might also adopt temporary procedures, “which allowed changing university legislation that was within senate competence related to the organization of the studying process. the legal acts were adopted and amended by the senate that attentively and sincerely worked almost every week to discuss and make decisions” (8inf). a few faculties of the universities preferred the second option and adapted the central order on an individual basis: “we issued the instructions already based on the guidelines of the central administration” (6inf). such decisions shall not be considered effective and shall constitute a breach of the general procedure. hence, in the event of an emergency, the authorities of higher education institutions should approve the documents regulating the procedure for temporary online studying in line with the principle of collegiality. this means that the documents approved by legislation or supplementary recommendations would cover the specificity of all faculties, which would ensure a smooth and uniform studying process throughout the higher education institution. the harmonization of flexible work methods during the quarantine. piekarz (2008) claims that the flexibility of actions must be ensured in the implementation area. during the quarantine period, university authorities sought to ensure the quality of the studying process, made exceptions centrally or at the faculty level, and provided safe conditions for teaching staff to work on university premises. safety was ensured by pre-scheduling arrival (2inf), providing face masks, protective shields, and disinfectant fluid (15inf). work on university premises took place for two reasons; first, special hardware was required for delivering lectures; second, teaching staff did not have working conditions at home due to technical internet disruptions or family circumstances. in addition, other solutions were flexibly sought to achieve the intended learning outcomes. the organization and execution of laboratory and work practices posed many challenges, and therefore appropriate decisions were made. one of the experts explained that “some members of teaching staff moved laboratory work to another term, while others introduced new software [...]” (14inf). there were cases when “some projects were replaced with written assignments or a format available online” (7inf). performing practices were subject to type and specificity. for cognitive internships, some found alternative and creative solutions: “either company acted online to show a certain video and make a presentation, or teaching staff did presentations and gave students an assignment to search for the learning material themselves and perform related tasks” (2inf). most career internships were transferred to the next term in exchange for other course units, except for the practice of medical students. 5. collaboration between the different levels of management and the academic community communication between management teams and the community. effective management during the covid-19 pandemic was greatly influenced by centralized management, the ability business, management and economics engineering, 2021, 19(2): 337–357 347 to cooperate in decision-making, and the communication of authorities with the community. szarucki (2013) claims it is important to organize hierarchical, functional, technical, and information relationships between departments and units, which is emphasized by all experts naming different addressees and the means or goals of communication. first, communication between the different levels of management includes university authorities, the deans and vice-deans of faculties, and the heads of departments. the experts provide that efforts have been made to manage the flow of information to avoid unverified information and unweighted decisions and to cause less panic among employees. under the guidance of others, there is a need for constant interaction: “i personally talked to the heads of departments because it was important that no one would be left forgotten under conditions of working online” (5inf). communication between managers at different levels was based on the principle of accountability when decisions and information dissemination took place from the top to the bottom and vice versa. bartkutė and kraujutaitytė (2007) discuss that in the anticipation of high-quality higher education, it is vital to model management strategies for an academic organization in line with the categories of institutional autonomy, operational efficiency, and accountability. the findings of the study show this also promoted collaboration between different faculties that exchanged or provided support to each other with the necessary hardware: “we gave a part of laptops to the faculty of chemistry because we had the unused ones” (15inf). second, communication between university authorities and teaching staff is crucial in explaining the importance of decision-making. moreover, the deans of some faculties put a lot of effort into communication with teaching staff: “we had many meetings and were online together every week to share the gained experience and discuss various issues” (5inf). communication covered explaining solutions, exchanging good practices, ensuring a positive psychological climate, and maintaining team spirit, and established traditions to show that the community might always expect support. ullah et al. (2020) notice that a focus on motivated employees is very important because pro-socially motivated employees are a source of higher performance and productivity. erum et al. (2019) propose that called employees flourish at the workplace and are more engaged in their work. when employees feel their call to a particular job, they experience congruence between their interests, skills, and the job position (hagmaier & abele, 2015), which leads to greater job and life satisfaction and reduces frustration, regret, and dissatisfaction (berg et al., 2010). from the organizational perspective, managers always look for employees who are satisfied, committed, creative, and achieve high performance (gruman & saks, 2011; rothbard & patil, 2012). third, staying in touch with the students online learning for which also posed considerable challenges was accepted as a serious issue. students were informed mostly by e-mail, although meetings were held employing zoom. apart from various recommendations for online learning being developed, interaction with students finds relevant explaining the decisions made and clear communication on the questions that are not completely clear, why this is the case when more accurate information is available, and other various recommendations for online learning. the authorities of higher education institutions should make use of video conferencing and collaborate closely and systematically with the heads of units at the different levels of the 348 v. navickienė et al. university management solutions during the covid-19 pandemic: a case study... institution and the academic community, particularly teaching staff, to explain the expediency of the decisions made at the level of the higher education institution. the heads and management staff of faculties should also regularly be in touch with the teaching staff of the faculty and students, in particular, to provide them with the expediency of the universitywide admitted documents, explain emerging difficulties and coordinate/organize support for offering technical facilities or other types of academic assistance. management support for the community. ullah et al. (2020) research results indicate that perceived organizational support and proactive personality are the drivers of prosocial motivation. organizations should always provide support for their employees that encourage them to show more desire to help their colleagues in the working environment and foster their commitment towards their organization. one of the forms of collaboration includes management providing support for the academic community. certainly, technical support has also been mentioned, however, this is accepted as a direct function of managers to provide employees with appropriate hardware. still, the analyzed results of the survey show that more than half of the experts emphasized the creation of an additional online block/page/section on the website publishing all required and constantly updated information. one of the experts discusses “methodological and technical information for teaching staff, advice for students, information for researchers, managers, and all members of the community. relevant questions are systematically presented and updated in order people can have a single access point  – one box” (11inf). besides, some universities offered another format of communication that allowed teaching staff to be guided over the phone: “we tried to respond to as many calls as possible, more intensively communicate with teaching staff, identify their problems and promptly solve the issues so that the others should avoid asking the same questions” (3inf). authority consideration for community views. successful quality studies during the quarantine were determined by the fact that university authorities or faculty management responded to the opinion of teaching staff conducting online learning, quickly solved the encountered problems, and carried out prevention. “following each lecture, teaching staff [...] identified problems” (1inf). “nevertheless, studies vary in different faculties, and therefore it was very important to consider the nature of studies” (2inf). this provision of teaching experience to university authorities ensured the preparation of temporary documents regulating the studying process and covering a wide range of study programs offered by different faculties. an important point is that other activities concerning community opinions were carried out at the university. for example, 8inf states that “they took into account a very strong desire of the community to have a live diploma award process”. the students also agreed it was a really special celebration. we preserved the tradition and, on the other hand, received positive external feedback and increased the visibility of the university. work done by vice-deans in faculties. to properly analyze management-made decisions on the studying process, the contribution of vice-deans for studies should be emphasized to ensure smooth online learning throughout the quarantine period. this situation was highlighted by around half of the experts who affirmed the inter-collaboration of vice-deans for studies, their ability to manage information received through virtual meetings from deans or university authorities, share it with teaching staff and students, and provide feedback to business, management and economics engineering, 2021, 19(2): 337–357 349 management and university authorities. one of the experts confirms that “the arrangement of studies at faculties depended strongly on vice-deans for studies. the work done was smooth” (8inf). “we immediately formed groups through teams with vice-deans for studies and kept in touch constantly to find out the situation at the faculty, including the preparation of teaching staff and management members, types of assistance that might be required for teaching staff, etc.” (13inf). 6. development and promotion of the technical base technical supply for the members of the community. during the covid-19 pandemic, lithuanian higher education institutions provided all kinds of assistance, including technical, academic, informational, psychological, and financial, to the academic community. the creation of/advancements in the technical base was one of the main activities intensively carried out by universities during a two-week preparatory period and throughout the online studying process at the later stage. first, decisions were made and zoom video conferencing software licenses were purchased, which created the opportunity to deliver 40 minute-long lectures with no interruption. second, other types of hardware the need for which was learned from faculties was offered. to indicate the need, surveys were conducted for both teaching staff and students: “all students of all faculties were asked to indicate the need for the internet or computers” (15inf). in full measure, a part of the hardware was purchased, and most of the available equipment was distributed for work at home in line with the analyzed need: “we shared tablets and even desktop computers” (6inf). “the provision of technical facilities in the home environment for everyone who needed it was ensured” (5inf). third, the authorities of some universities decided to set up additional lecture halls to record lectures for faculty needs: “we bought hardware and made two recording studios – one on x street where we owned our houses and the other at the university to make it easier for teaching staff to record lectures” (6inf). thus, concerning bartkutė and kraujutaitytė (2007), quality assurance of applying information and communication technologies is one of the crucial parts of high-quality studies. 7. timely and continuous academic support for teaching staff the analyzed research data indicate two trends – first, support was offered to teaching staff through centralized decision-making, and second, the initiative was supported by the staff of online learning centers. thus, joint decision-making is more effective due to systematicity, feedback, and obtaining information through joint management meetings. lithuania’s progress strategy “lithuania 2030” (lietuvos respublikos seimas, 2012) emphasizes the importance of learning, and therefore modern and dynamic society ready for the challenges of the future and able to operate in the constantly changing world. hence, the pandemic particularly strengthened the development of educational competencies and the introduction of innovations in the studying process, which was endorsed by university authorities. 350 v. navickienė et al. university management solutions during the covid-19 pandemic: a case study... teacher training in working online. most of the experts highlighted the significance of providing initial and, subsequently, ongoing assistance to teaching staff in mastering online learning tools during the preparation period. the experts assume “there was a constant support for teaching staff, including a large number of instructions and intense teaching staff training. all possibilities for calling and immediately receiving advice, even during the lecture, were created” (5inf); “the e-learning technology center conducted training on how to use tools and prepared instructions for zoom, teams every week, sometimes twice a week” (13inf). providing didactic assistance for teaching staff. in addition to teaching staff training, information was sent by e-mail, through various recommendations and recordings that should help prepare or conduct online lectures. recommendations were wide-ranging: “material such as guidelines on zoom, moodle, etc. arrived very quickly. later, instructions and short video reports helped a lot. i had not been granted any credits using moodle before, but found all methodological material online, easily made tests, and managed to administer exams” (4inf). farashahi and tajeddin (2018) demonstrated that student learning was more effective when applying active studying methods. the majority of authors (lage et al., 2000; bergmann & sams, 2012; artero escartin & domeneque claver, 2018; gonzález-fernández & huerta, 2019; et al.) suppose that online, partially online, or mixed learning processes are most frequently related to the inverted class method. however, regardless of the selected online learning method, the most important points of the online learning process are student through promotion self-learning, interaction with teaching staff, and planning activities, including the preparation of an appropriate environment, the use of multimedia, and a proper and accepted evaluation system. in general, the teaching-learning process is related to information technologies and the application of games in this process (de jorge-moreno, 2020). exchanging a good practice among the members of the teaching staff. the exchange of good practice was another decision on assisting teachers. this was done either on a university-wide basis or within the faculty. the importance and positive impact of the decision on studies were emphasized by several experts: “it was done inside the faculty, i.e. on the initiative of our teaching staff members advanced in the use of technology” (14inf). the majority of the experts agreed that such sharing was very effective: “meetings on exchanging experiences were the most effective methods” (5inf). it should be noted that if the general issues of training in online work most frequently were discussed at the beginning of the quarantine, the exchange of good practice was usually organized later thus deepening teaching staff competencies. student assessments were agreed to be a critical issue for all members of teaching staff: “most members of the teaching staff were actively involved in sharing with each other information on how to organize assessments and testing” (15inf). thus, during the quarantine period, management encouraged and supported sharing a good practice, which is an innovative format of competence development. it should be noted that both teaching staff and other members of the academic community used to share a personal experience: “library staff quite intensively exchanged information about the latest international sources because a large number of different repositories were open” (10inf). consequently, to ensure quality studies, timely and systematic academic (ict, didactic, business, management and economics engineering, 2021, 19(2): 337–357 351 psychological) support is required for all members of the teaching staff at both the institutional and international level, which is a duty of the academic, didactic, etc. department flexibly considering the emerging needs of teaching staff across the higher education institution. 8. miscellaneous support for students developing additional support measures for students. during the quarantine period, university authorities paid special attention to the students of the higher education institution applying several measures. it should be noted that providing hardware was only one of the forms of support, while other methods concentrated on academic and financial assistance. some experts acknowledged that the application of the single access point principle assisted students with acquiring all basic information in one place. first, in terms of academic support, “unified questions-answers were developed on the website in order as many people as possible could access and read the necessary information. a common mail was created for the students who were able to apply at the very beginning of the quarantine period. each problem was addressed directly both in the quarantine dormitory and other places” (2inf). second, if needed, students were granted a social allowance as a form of financial support: “everyone was informed about the possibility of receiving social allowances” (11inf). in addition, “our decision encouraged students to reach personal verdicts. for example, non-vilnius residents could stay with their parents at home and be sure it would not require additional funds. those living in dormitories terminated their contracts and were back home to their parents” (8inf). in the event of an emergency, the authority/faculty management of the higher education institution should work closely with the members of the student body and respond to the expressed reasoned opinion. psychological assistance. psychological help could be singled out as a separate form of support for students. this was emphasized by some chief executives of the universities: “we had two psychologists, and therefore asked to make recommendations for both students and teaching staff ” (13inf). apart from these key factors, attention should be paid to miscellaneous support for students, including international students, the revision, adaptation, and/or preparation of study resources for online learning, opportunities, and methods for ensuring the academic integrity of assessments. 9. control over the studying process online lectures monitored by faculty management members. considering control over the studying process, academic freedom as the essential philosophical value of universities should be mentioned. nevertheless, control over the quality of the studying process is one of the procedures for ensuring quality studies. noga (2018) argues that control over the implementation process for managing changes is treated as one of the crucial processes of managing strategically planned situations. still, process control was mentioned only by a few experts. however, the analysis of the obtained research results in various sections shows that control over the studying process pays off under severe study conditions. thus, students are hardly left to work independently and are offered the traditional format of contact learning 352 v. navickienė et al. university management solutions during the covid-19 pandemic: a case study... online. 5inf: “the faculty decided to check schedules for the first two weeks. although we found it drastic, we realized that teaching staff perfectly understood instructions, and therefore later stopped checking” (5inf). “the heads of departments followed the process, and i sometimes inspected whether people were online for their lectures at the scheduled time or whether they announced zoom sessions” (4inf). 10. ensuring safety three types of security to which university authorities paid particular attention were identified. ensuring the safety of human health. the first objective primarily focused on ensuring the safety of people by eliminating their contacts employing various security measures: “students were not allowed to enter university premises. the quarantine itself sets the tone for special security, the distance between people, disinfection, etc. certainly, it was assured and pursued there would be no gathering of people. room space was used by a single person only. masks were obligatory. all above introduced national-level recommendations were followed all the time” (2inf). where possible, innovative technological security measures were employed: “the life sciences centre has good technical conditions for restricting access to certain individual spaces or premises, i.e. regulating flows, properly monitoring work schedule and habits, etc. laboratory work did not completely stop and was done on schedule. thus, in the case of an infection, it could be traced very accurately” (8inf). communication security. ensuring communication security was of utmost importance, although only very few problems were encountered: “there were cases of strangers connecting, but nothing threatening happened” (13inf). “later, a problem with zoom and security vulnerabilities broke out. as soon as university authorities found out about the problems, we were recommended to appraise the situation and choose a safer option if possible” (7inf). conclusions the analysis of scientific sources has shown that having sufficient technical resources, improving the ict application competencies of the academic staff, and further developing the study process and its potential adaptability based on the specific study area or subject requirements are vital for a successful transition to distance learning during the pandemic. nevertheless, the quality of distance learning remains most dependent on academic strategy and educational design. e-learning strategy must be part of the overall institutional strategy. the analyzed researched results show that to ensure quality studies at the level of higher education institution, four factors are of crucial importance: it is relevant to follow the decisions made by the authorities of the higher education institution (rector, vice-rectors, department of studies) and closely collaborate between different management levels of the institution and the academic community. certainly, developing and providing a technical base for online learning is a vital issue along with timely and continuous academic support for teaching staff in improving their ict competencies and expanding their educational approach via the application of the acquired competencies in the studying process. apart from the above introduced key factors, the major focus should be switched onto support for international teaching staff, business, management and economics engineering, 2021, 19(2): 337–357 353 miscellaneous support for students, the revision, adaptation, and/or preparation of study resources, making the required adjustments to the study program in the redistribution of course units, ensuring the academic integrity of student assessment and control over the studying process. for assuring quality studies, the conducted research has disclosed auxiliary factors such as the security of employees, communication, and personal data. the results of qualitative research demonstrate that in the event of an emergency, the online studying process is best managed under the concentration of university authorities and department management teams and systematic communication between them. online teaching experience accumulated before an emergency by both teaching staff and the department that manages and organizes online learning and provides support for the academic community during the quarantine has also exerted a huge impact. human resources (university authorities, faculty management members, chairpersons of study programs, the student body, teaching staff ) seem to be a firmer guarantee of success than the technical part of the institution. a valid point is that in line with the study performed during the quarantine period, online teaching and work have changed the attitude of the academic community thus concentrating effort on learning outcomes, problem-solving and close communication between teaching staff and students rather than complaining about the situation or creating obstacles. the emergence situation provides that transitioning from direct to online learning and work and/or a mixed way of studies must ensure the continuity and quality of the studying process, the safety, and health of people, and proper care of community well-being within the studies. it has to be emphasized that the obtained research results are of value for the study process not only during times of the pandemic. a part of the described processes, such as collaboration between the different levels of management and the academic community, timely and continuous academic support for teaching staff, miscellaneous support for students, is paramount for a quality study process under varying work conditions and forms. the heightened prevalence of distance learning and work during the pandemic will not only retain its current value but will also expand with a growing supply and availability of such studies. therefore, the results of the research may become the basis for university authorities in organizing the study processes at their universities. upon summarizing the obtained research results, the following recommendations for higher education institutions operating during emergency periods can be derived: – the heads of higher education institutions are recommended to approve documents, which regulate the temporary study procedures of distance learning. – the management should be using video conferencing to cooperate closely and systematically with the heads of different levels of the institution and the academic community, especially the teaching staff, to detail the decisions made and their appropriateness at the institutional level. – all faculties and other bodies of the higher education institution should adhere to the decisions made by the top-level management to reduce the confusion of distance learning under emergency conditions. – faculty leaders and the administration should also maintain constant remote contact with the teaching staff and, especially, the students of their faculty and provide them 354 v. navickienė et al. university management solutions during the covid-19 pandemic: a case study... with information about the appropriateness of the documents approved at the university level, assist with ensuing difficulties, and coordinate and/or organize support. several limitations were encountered during the study and its analysis. first, concerning the governance context of lithuanian universities, their autonomy, size, and specificity, some of the research results may not apply to specific universities or other types of higher education institutions, e.g., colleges. it can also be foregrounded that, rather than directly, which is more common in conducting in-depth interviews, the research data were collected using the video conferencing tool zoom. the subjectivity factor should also be noted, as this might have affected the research results when analyzing the qualitative data. the conducted study reflects the situation of higher education institutions in lithuania during the emergency period. further research of similar nature could compare the experiences of different countries or geopolitical regions. it would be worthwhile to repeat the study three and five years from now 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(2017). kokybiniai tyrimai. principai ir metodai. vaga. https://doi.org/10.1080/13538322.2019.1603611 https://doi.org/10.3846/bme.2020.12189 https://en.unesco.org/covid19/educationresponse https://en.unesco.org/covid19/educationresponse https://doi.org/10.1080/03075079.2018.1525698 https://doi.org/10.1002/hbe2.238 copyright © 2020 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 1: 157–182 https://doi.org/10.3846/bme.2020.11578 *corresponding author. e-mail: m.petrova@ts.uni-vt.bg assessment of the development of foreign trade in high-tech production of ukraine under the association with the eu igor matyushenko 1, serhii hlibko 2, mariana mateeva petrova 3*, maryna serhiivna pasmor 4, maryna loktionova 5 1, 4karazin kharkiv national university, sq. svobody 6, 61022 kharkiv, ukraine 2scientific research institute of providing legal framework for the innovative development of the national academy of legal science of ukraine, chernyshevska str. 80, 61002 kharkiv, ukraine 3st. cyril and st. methodius university of veliko tarnovo, 5000 t. tarnovski 2 str., veliko tarnovo, bulgaria 5deloitte & touche llc, ukraine business center“prime”, 48, zhylyanska str. 50a, 01033 kyiv, ukraine received 21 november 2019; accepted 15 april 2020 abstract. purpose – the purpose of article should assess the main factors affecting the development of trade in high-tech products of ukraine in the context of association with the eu and the spread of a new industrial revolution. research methodology – the scheme of research of trade of high-tech products of ukraine from the eu on the basis of qualitative and quantitative economic-statistical analysis, analysis of comparative advantages and correlation-regression analysis. findings – the results of the analysis show that the main factors determining the low presence of ukraine in the world market of high-tech products are the outdated structure of production, a low level of r&d costs, and a decrease in the innovative activity of ukrainian enterprises. the article presents the author’s recommendations on improving the effectiveness of foreign trade in high-tech products of ukraine in the eu market. research limitations – the absence of a state development strategy for the production of hightech products does not make it possible to accurately determine indicators of scientific research of the potential of ukraine. practical implications  – correlation-regression analysis results can be used in the private and state sectors of the economy of ukraine. originality/value – the original combination of schemes and methods allowed us to identify new critical places for export development in the context of the association of ukraine with the eu. keywords: high-tech products, export-import, comparative advantages of export, eu-ukraine association. jel classification: c150, f130, f170, o140, o240, o520, o570. http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 https://doi.org/10.3846/bme.2020.11578 https://orcid.org/0000-0001-9866-9025 https://orcid.org/0000-0003-3398-9276 https://orcid.org/0000-0003-1531-4312 https://orcid.org/0000-0002-3788-5688 https://orcid.org/0000-0002-2413-7533 158 i. matyushenko et al. assessment of the development of foreign trade in high-tech production... introduction the relevance of the chosen topic of the study is explained by the fact that the development of disruptive production technologies is increasingly determining the future of the world as a whole and the european union and ukraine in particular. given the rather ambiguous state of development of the high-tech industry in ukraine, the problem arises of assessing the peculiarities of the development of foreign trade in high-tech products in the context of the challenges of the new industrial revolution. today, society is in the middle of the fourth wave of technological progress: the rise of a new digital industrial technology known as industry 4.0. industries 4.0 combining the factors of smart temp (t (technology) – smart technology; e (environment) – smart environment; m (manufacturing) – smart manufacturing; p (products) – smart products), creating new markets and industries that promote productivity growth, increase the competitiveness of individual sectors and national economies. according to forecasts by 2030, world-renowned institutions (oecd, world bank) and international industry associations can launch a revolution in industrial production only through the introduction, first and foremost, of high-tech industries, called “breakthroughs”, underlining “breakthroughs”. in assessing the impact of regulatory authorities on the foreign trade of high-tech products in ukraine, scientists note the possibility of using cause-effect relationships between indicators characterizing the market’s business processes and state regulatory tools that can be quantified (bacho et  al., 2019; sushchenko & trunina, 2016; koval et al., 2019). however, according to the modern classification of the organization for economic co-operation and development (oecd), high-tech industries include the aerospace industry, the pharmaceutical industry, the production of computers and office equipment, information and communications industry and instrumentation (emerging trends report, 2013). this revolution is connected with the problem of levelling and improving the eu’s economic performance. the dynamics of europe’s future development will depend on the quality of its science and technological innovation. together with the us and japan, the european union is now a leading player in innovation and research, accounting for 24% of global r&d spending and 32% of patients in 2015 (rifkin, 2014). as a result, the urgent task is to study the features of the development of foreign trade in high-tech products of ukraine in the context of association with the eu and the launch of a new industrial revolution (labunska et al., 2017; gryshova et al., 2019). 1. analysis of recent research this problem is the subject of study bya number of reputable organizations: unido (2014), oecd (2015), kpmg (2015), mit (2013), wilson centre (2012). moreover, many researchers have studied this problem, who investigated the issues of development of advanced production technologies and the corresponding structural transformation of exports of leading countries in the conditions of the new industrial revolution. business, management and education, 2020, 18(1): 157–182 159 in the works of scientists industry 4.0. was studied both in the sectoral and territorial aspects. in terms of industry 4.0. territorial competitiveness in the eu has a strong regional dimension, which analysis at the national level does not adequately reflect in the eu. regional competitiveness indicators should stimulate discussion of the harmfulness of competitiveness gaps in the eu’s national competitiveness and in which extent appropriate regulation can be eliminated (annoni & dijkstra, 2013). the advantages of industry-specific innovation development and the provision of financing for innovation in a competitive environment are proved by pukala (2019). matt et al. (2020) opeed up the new challenges, opportunities and requirements of industry 4.0, which have tobe examined specifically for smes, thus paving the way for the digital transformation oftraditional smes into smart factories. emerson and movchan (2016) noted that since april 2013 the eu has almost completely opened own market to duty-free imports from ukraine. however, the technical requirements for entering the eu market are high and rigid, but they are applied in a professional and fair manner without any (unlike other) geopolitical manipulation (emerson &movchan, 2016). аctually based on technical restructuring requirements yegorov, odotyuk and salihova prove the need to strengthen the personnel and technical components of the research process of high technology development in ukraine, legislative support for the reproduction of highly qualified personnel and attract specialists to carry out scientific and scientific-technical work (yegorov et  al., 2016). at the same time, the research proves that the network organization of modern ecosystems allows you to maintain a dominant position with reduced individual costs, and such a network organization can be used to implement research processes in the production of high-tech products (mussapirov et al., 2019). and for the proper preparation of human resources, it is necessary to use the current state of reforms in education and make greater use of the potential of regional budgets and educational institutions in ukraine (pukala & petrova, 2019). dragan (2012), rifkin (2014), ross (2016), and schwab (2016a) predict the irreversible changes caused by the use of technology from industry 3.0. and moving to industry 4.0: 1) internet technologies and renewable energy are merging; 2) robotics and artificial intelligence, cybersecurity, genomics commercialization will be the most important economic future. at the same time, technology will increasingly allow citizens to express their thoughts, coordinate their efforts in a new way, and possibly circumvent state surveillance, or new surveillance technology will give rise to overly powerful public authorities. at the theoretical level, an understanding of the industrial revolution is offered on the basis of the combination of convergent nbic technologies with the key factors of smart temp’s advanced production system. at an empirical level, analysis of forecasts of the development of scientific, technical and innovative activities of developed countries  – technological leaders and developing countries, has established that photonics, biotechnology, nanotechnology, microtechnology, ict in production systems, advanced materials, additive manufacturing are the most promising for solving global problems, energy and environmental technology (matyushenko, 2017). features of functioning of markets of high technologies and high-tech goods are covered in works of some well-known researchers. barancheiev and kleimenov (2001) reveal the 160 i. matyushenko et al. assessment of the development of foreign trade in high-tech production... relationship of creating marketing value chains and enhancing the competitive advantages of a company manufacturing high-tech products. christensen (2020) says that for success it is important to understand what drives customers to make their choice. usually, all product changes occur through trial and error: functionality is added, the appearance is modified, and then you can only hope that it works. in fact, innovation can be much more predictable, and much more profitable. therefore, it is necessary to understand the tasks of customers in order to predict the success of innovations in business. burnett and moriarty (1998) focused on the wide range of areas included in marketing communication and the tools and techniques needed to create an integrated approach. international examples acknowledge that integrated marketing communication exists and is practised throughout a global community. real-world profiles of young executives describe a variety of jobs, career paths, and views on how to get ahead in marketing communication. chesbrough (2003) argues that in today’s dynamically changing market, which is becoming increasingly global, one of the key competitive advantages is the company’s ability to creatively innovate, bring them to commercial use and make high profits. breley (2005) explains how to integrate various strategies for entering the market and development strategies into a series of solutions that reflect the interaction of the international marketing environment, technological forces, strengths and weaknesses of the company. moreover, the study is truly international and written from the point of view of a company competing in international markets, regardless of country of origin. features of marketing activity and specificity of application of marketing mechanisms in commodity markets of technological innovations are widely covered in the writings of economists such as shanklin and ryans (1984), stiglitz (2012), moore et al. (2016) provide an opportunity for researchers to develop working knowledge in the field of data production and interpretation in the context of business and economics, providing practical tools that are necessary for making informed business and economic decisions. paterson (2010) develops a new, critical approach to global environmental politics and argues that the major power structures of world politics are deeply problematic in ecological terms and that they cannot be easily used to resolve major environmental challenges such as global warming. instead of simply advocating the construction of new international institutions to respond to such challenges, therefore, he argues that the use of new technologies and the construction on their basisof alternative social and political structures in necessary. ramaswamy et  al. (2017) said that the erosion of us manufacturing isn’t a foregone conclusion. the decade ahead  – with increased demand, new technology, and value chain optimization  – will give the sector a chance to turn around. the united states could take advantage of rising demand and new industry 4.0 technologies to revitalize its entire manufacturing sector. the key priorities will be raising productivity in the nation’s supplier base, broadening participation in exports, ramping up a national program, and making the longterm investment needed to upgrade plants and equipment for digital readiness. at the same time, all these studies do not provide a clear methodology for assessing the development of foreign trade in high-tech goods, the nomenclature of which can significantly change under the influence of the key growing technologies of industry 4.0. https://www.google.com.ua/search?hl=uk&tbo=p&tbm=bks&q=inauthor:%22david+moore%22 business, management and education, 2020, 18(1): 157–182 161 kyzym and matyushenko (2014), khaustova (2015) – emphasize that ukraine buys more in eu countries than sells. over the last 17 years, the negative balance has increased almost tenfold with a sixfold increase in turnover. but in that period of research, scientists have not yet set the task of strengthening the stimulation of the export of high-tech products, mainly ways of integration of ukrainian manufacturers of existing industries are considered (kyzym & matyushenko, 2014). and it is precisely for calculating the priorities of industry 4.0 that the advantages and disadvantages in shaping the economic policy are determined, for which purpose the methodology for assessing and analyzing the export potential of ukraine proposed by melnik is used (melnik, 2008). however, in the conditions of the new industrial revolution, the problem of the development of foreign trade in high-tech products in ukraine needs further study, taking into account the association with the eu. the purpose of the investigation is to evaluate the development of trade in high-tech ukrainian products in the context of association with the eu and the launch of a new industrial revolution. 2. methodology in the process of researching the export of products of high-tech industries of the eu and ukraine within the framework of a comprehensive approach, such general scientific methods of cognition as induction and deduction, analysis and synthesis, methods of generalization of theoretical and factual material, by comparison, qualitative and quantitative economicstatistical analysis, as well as comparative analysis are used. to identify prospects for the development of trade in high-tech goods, a mathematical model using correlation-regression analysis was constructed (cook & seiford, 2009). following the developments of the organization for economic cooperation and development, in cooperation with eurostat (2005), a final list of high-tech products produced by high-tech industries was agreed. thus, based on the standard international trade classification (united nations, 2006), the following product groups are appropriate for the high-tech industries, which should be classified as high-tech (subject to the limitation of calculations by the three-digit level of product subgroups and certain simplifications) oecd (2011), eurostat (n.d.a, n.d.b, n.d.c): – aerospace industry (792  – aircraft and accessories, spacecraft and launch vehicles, spare parts; 714 – non-electric engines (jet, gas turbines, etc.)); – pharmaceutical industry (541  – medical and pharmaceutical products other than medicines; 542 – medicines (including veterinary medicines)); – office equipment industry (751  – office equipment; 752  – electronic computers for data processing; 759 – parts and accessories (not housing caps, packing box, etc.) for machines 751 and 752)); – telecommunication equipment industry (761  – tvs; 762  – radios; 763  – recording and reproducing apparatus, video recording apparatus; 764  – telecommunications equipment, spare parts, accessories to 76); – instrument making (774 – electromedical and radiological apparatus; 776 – thermionic devices, circuits, transistors, cathodes, diodes and the like; 871 – optical instruments 162 i. matyushenko et al. assessment of the development of foreign trade in high-tech production... and apparatus; 872 – instruments and appliances for medical and veterinary sciences; 873  – meters and counters; 874  – instruments, apparatus for measuring, checking, analyzing and checking). in figure 1 shows a scheme of research of trade in high-tech products of ukraine and the eu. to study the main comparative advantages of high-tech trade in ukraine, it is proposed to use such methodology and to analyse the following indicators (caves et al., 1982): 1) the ratio of goods exports to gdp or export quota of the country; 100%eq gdp e = × , (1) where е – total export of the country for a certain year; gdp – the gross domestic product of the country for the relevant year; 2) the ratio of exports of high-tech goods to the country’s gdp; 100%hqhq e qe gdp = × , (2) where hqe – total exports of high-tech goods for a certain year; gdp – the gross domestic product of the country for the relevant year; development of recommendations for increasing the efficiency of trade in high-tech goods of ukraine systematisation and analysis of statistical data on export/import by industries of high-tech goods in ukraine and the eu identification of the comparative advantage in the industries of high-tech goods of ukraine export performance evaluating import performance evaluating instrument making telecommunication equipment industry office equipment industry pharmaceutical industry aerospace industry construction of the trade model in high-tech goods on the basis of regrassion-correlation analysis of ukraine ratio of research costs to gdp share of researchers in total employment export quota the ratio of high-tech goods export to gdp instrument making telecommunication equipment industry office equipment industry pharmaceutical industry aerospace industry figure 1. scheme of research on trade in high-tech products of ukraine with the european union (source: own scheme of research) business, management and education, 2020, 18(1): 157–182 163 3) the ratio of the employees number involved in the implementation of scientific research and development to the employment of the country’s population: htsemployees 100% occupiedpopulationofthecountry × ; (3) 4) the ratio of the research cost to the gdp of the country calculated respectively as: rdexpenses 100% gdpofthecountry × ; (4) 5) the indicator of the relative (comparative) advantage of the country by commodity group is an indicator that reflects the country’s relative superiority in the export of a particular product group, or whether its partners benefit from this advantage: кpіj = ln [(exij/imij) / (exi/imi)], (5) where kpij is an indicator of the comparative advantage of the i-th country for the j-th commodity; exi, imi – export and import of the second country; exij, imij – export and import of j-th goods of the countries. 3. results of research the world bank annually generates a country rating on two indicators: (1) a country’s r&d spending on gdp; (2) the ranking of countries by the volume of high-tech exports in the structure of industrial exports of the country (the world bank, n.d.c). these indicators highlight how much countries are earning on their innovative products and the return on investment in research and innovation. indices of expenditure on gdp research and high-tech exports of eu and ukraine for 2005–2015 are given in appendix, tables a1, a2. according to the world bank’s (n.d.a, n.d.b, n.d.c, n.d.d) rating, sweden (with an average of 3.4% of gdp) spend the most on science and research among eu countries, followed by finland, austria, denmark and germany, with almost 3%. countries such as latvia, romania and cyprus have the lowest funding rates (about 0.5% of gdp). the eu average is about 2% of gdp. malta (~ 30%), ireland (~ 27%), france (~ 27%), united kingdom (~ 21%), germany (~ 17%) have the highest indicators of high-tech exports of all industrial exports of the analyzed countries. the eu average is around 17%. at the same time, ukraine spends 0.7% of gdp on science (which is much less than in developed countries), and exports of high-tech products account for ~ 6–7% of industrial exports. in 2016, high-tech exports totalled the eu $ 16.3 billion, equivalent to 16.3% of total eu exports for the year. however, the eu has recorded a deficit in high-tech trade as imports amounted to about 22 billion euros more than exports (eurostat). germany accounts for over a quarter of alligh-tech exports, and three countries  – germany, the netherlands and france  – account for more than 50% of all high-tech eu exports. this situation shows that the contribution of individual countries to the export of high technology is absolutely uneven. 164 i. matyushenko et al. assessment of the development of foreign trade in high-tech production... in figure 2 the structure of exports of high-tech products of eu-28 and ukraine in 2018is shown. the leading position in the structure of exports of eu countries is made by telecommunication equipment  – 34%, and in ukraine, these products occupy the secondplace  – 19%. in 2018, ukraine made the largest exports of aerospace products  – 56%, and in the eu structure, these products ranked second among high-tech industries –30%. office equipment is t lowest in the structure of both ukrainian and european exports  – only 3% and 4% regardingly. table  1 shows the structure and volume of export-import of high-tech products of ukraine in 2018 according to uncomtrade data. to determine the components of hightech products, the international standard trade classification (istc) was taken as the basis (united nations commodity trade statistics database, n.d.; official site of the state statistics service of ukraine, n.d.). according to the data in the above table, it is worth noting that exports of high-tech goods groups are significantly lower than their imports and their balance in 2018 is –5106,130 mil25 37 5.4 7.5 25.1 0 5 10 15 20 25 30 35 40 ae ro sp ac e ph ar m ac eu �c al o ffi ce e qu ip m en t te le co m m un ic a� on eq ui pm en t in st ru m en t m ak in g eu28 30 18 4 34 14 0 5 10 15 20 25 30 35 40 ae ro sp ac e ph ar m ac eu �c al o ffi ce e qu ip m en t te le co m m un ic a� on eq ui pm en t in st ru m en t m ak in g ukraine figure 2. comparison of export structure of high-tech products of eu-28 and ukraine in 2018 (source: united nations commodity trade statistics database, n.d.) table  1. volume of export-import of high-tech products of ukraine in 2018 (source: united nations commodity trade statistics database, n.d.) branch export,million us$ imports, million us$ balance, million us$ aerospace 361,353 108,865 252,488 pharmaceutical 218,668 2031,169 –1812,501 office equipment 44,354 821,664 –777,31 telecommunication equipment 402,492 1551,141 –1148,649 instrument making 164,867 1785,025 –1620,158 total 1191,734 6297,864 –5106,130 business, management and education, 2020, 18(1): 157–182 165 lion us$. if we analyze in detail the structure of export and import of high-tech goods of ukraine in 2018, it can be noted that only the products of the aerospace industry are characterized by a positive balance of $ 252,488 million us$. thus, ukraine is today, first and foremost, an importer in the world market of high-tech products, because foreign trade in high-tech goods is characterized by low shares of high-tech goods in total exports and a large negative balance. the main reason for ukraine’s low presence in the world market for high-tech products and the tendency for its further decline is the outdated structure of production, which in turn is a consequence of the low level of r&d expenditures in ukraine and the decline in innovation activity of ukrainian enterprises (the global competitiveness report 2016–2017 (schwab, 2016b)). let us evaluate the comparative advantages and export performance indicators of the main industries of high-tech products of ukraine using the methodological approach outlined above in terms of: 1) the ratio of goods exports to gdp or the country’s export quota; 2) the ratio of exports of high-tech goods to the country’s gdp; 3) the ratio of the number of employees involved in the implementation of research and development to the employed population of the country; 4) the ratio of research expenditures to the country’s gdp; 5) an indicator of relative advantage or comparative advantage. the calculations used foreign trade indicators for the major high-tech industries of ukraine in 2011–2015, given in table 2. 1. the ratio of a country’s export to gdp or an export quota showing the established output and exports of certain goods. indicators in the dynamics of ukraine’s gdp and ukraine’s exports (table 3) were used for the calculations. figure 3 shows that ukraine’s export quota does not exceed 52.6% and has an average of 46.5%, which indicates a certain impact of exports on ukraine’s gdp. table  2. dynamics of foreign trade in high-tech goods of ukraine for 2011–2018, mln. us$. (source: united nations commodity trade statistics database, n.d.) industry export, mln. us$ imports, mln. us$ 2011 2012 2013 2014 2015 2016 2017 2018 2011 2012 2013 2014 2015 2016 2017 2018 aerospace 1103 1857 1364 1155 857 478 437 361 192 231 150 127 89 80 56 108 pharmaceutical 201 259 270 266 162 188 196 219 2948 3374 3177 2553 1435 1675 1836 2031 office equipment 57 66 55 43 43 47 50 44 383 431 460 495 416 598 738 822 telecommunication equipment 573 761 616 511 289 322 354 402 1540 1630 1623 1155 910 1034 1378 1551 instrument making 307 318 312 251 171 163 173 165 1227 2263 1824 883 609 827 1130 1785 total 2241 3261 2617 2226 1522 1198 1210 1191 6290 7929 7234 5213 3459 4214 5138 6297 166 i. matyushenko et al. assessment of the development of foreign trade in high-tech production... 2. the ratio of exports of high-tech goods to the gdp of ukraine. the initial data and calculation results are given in table 4. table  4. output data for calculating the ratio of exports of high-tech goods to the gdp of ukraine (source: united nations commodity trade statistics database, n.d.) indexes 2011 2012 2013 2014 2015 2016 2017 2018 gdp of ukraine, billion dollars usa 163,160 175,781 183,310 133,503 91,031 93,356 112,190 130,832 exports of high-tech products of ukraine, billion us$ 2,241 3,260 2,618 2,225 1,523 1,198 1,210 1,191 results of calculating the ratio of export of high-tech products to gdp of ukraine,% 1.37 1.85 1.43 1.67 1.67 1.28 1.08 0.91 table 3. output data for calculating the export quota of ukraine for 2011–2018 (source: united nations commodity trade statistics database, n.d.) indexes 2011 2012 2013 2014 2015 2016 2017 2018 gdp of ukraine, billion us$ 163,160 175,781 183,310 133,503 91,031 93,356 112,190 130,832 exports of ukraine, billion us$ 81,280 62,254 78,744 64,873 47,880 46,023 53,867 59,149 population of ukraine, million people 45,706 45,593 45,489 45,271 45,154 45,005 44,831 44,622 results of calculation of export quota 49,816 35,415 42,957 48,593 52,598 49,298 48,014 45,210 49.8 35.4 43.0 48.6 52.6 49.3 48.0 45.2 r² = 0.0862 0.0 10.0 20.0 30.0 40.0 50.0 60.0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 % figure 3. dynamics of changes in ukraine’s export quota (source: united nations commodity trade statistics database, n.d.) business, management and education, 2020, 18(1): 157–182 167 figure 4 shows that the export quota of high-tech products of ukraine does not exceed 1.85% (in 2012) and has an average of 1.41%, which indicates that the export of high-tech products has little impact on the gdp of ukraine and requires the introduction of effective measures to expand the export quota high-tech products in the country’s economy. 3. the ratio of the number of employees involved in the implementation of research and development to the employed population of working age. the initial data and the calculation results are given in table 5. table  5. output data for calculating the employees’ number ratio involved in the implementation of research and development to the occupied population. (source: united nations commodity trade statistics database, n.d.) indexes 2011 2012 2013 2014 2015 2016 2017 2018 the number of employees involved in the implementation of research and development, thousand people 175.3 164.3 155.4 136.1 122.5 97.7 94.3 88.1 employed population of able-bodied age, thousand persons 19231.1 19261.4 19314.2 18073.2 16276.9 16276.9 16156.4 16360.9 results of the calculation of the ratio of the number of employees involved in innovation activity to the employed population of working age,% 0.91 0.85 0.80 0.75 0.75 0.60 0.58 0.54 1.37 1.85 1.43 1.67 1.67 1.28 1.08 0.91 r² = 0.4786 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 % figure 4. dynamics of changes in the ratio of exports of high-tech goods to the gdp of ukraine (source: united nations commodity trade statistics database, n.d.) 168 i. matyushenko et al. assessment of the development of foreign trade in high-tech production... figure 5 shows that the number of employees involved in the implementation of research and development decreases every year, as does the overall employment of the population due to the social, political and economic situation in the country. it is also a consequence of the low level of r&d expenditures in ukraine and the decrease in innovation activity of ukrainian enterprises. 4. the ratio of research expenditures to the country’s gdp. this indicator indicates the return on investment in research and innovation in the country. the output is given in table 6. as we can see in figure 6 expenditure on r&d in ukraine is on average 0.61% of gdp and tends to decline. as a result of such financial support, science in ukrainian society plays predominantly cognitive and sociocultural functions, because it is known from the world practice that the possibility of the influence of science on the level of economic development arises if its financing exceeds 0.9% of gdp. 0.91 0.85 0.80 0.75 0.75 0.6 0.58 0.54 r² = 0.9619 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 % figure 5. dynamics of the ratio of the number of employees involved in an innovative activity to the employed population of working age (source: own calculations based on official site of the state statistics service of ukraine, n.d.) table 6. output data to calculate the ratio of research costs to the gdp of the country (source: scientific and innovative activity of ukraine, n.d., the world bank, n.d.) indexes 2011 2012 2013 2014 2015 2016 2017 2018 gdp of ukraine, billion dollars usa 163.160 175.781 183.310 133.503 91.031 93.356 112.190 130.832 research expenditures, billion dollars usa 1.204 1.322 1.397 0.868 0.560 0.451 0.503 0.616 results of the calculation of the ratio of the cost of research to the gdp of the country,% 0.738 0.752 0.762 0.650 0.615 0.483 0.448 0.471 business, management and education, 2020, 18(1): 157–182 169 5. indicator of the revealed relative (comparative) advantage of ukraine in high-tech industries. the results of the calculation of the formula for comparative advantage for ukraine by major high-tech industries of ukraine in 2011–2015 are given in table 7. table 7. the value of the comparative advantage for ukraine by the main high-tech industries in 2011– 2018 (source: united nations commodity trade statistics database, n.d.) 2011 2012 2013 2014 2015 2016 2017 2018 aerospace 1.87 2.55 2.40 2.28 2.30 1.92 2.20 1.38 pharmaceutical –2.56 –2.10 –2.27 –2.19 –2.15 –2.06 –2.09 –2.05 office equipment –1.78 –1.41 –1.92 –2.38 –2.23 –2.41 –2.54 –2.75 telecommunication equipment –0.86 –0.30 –0.77 –0.75 –1.11 –1.04 –1.21 –1.18 instrument making –1.26 –1.50 –1.57 –1.19 –1.23 –1.49 –1.73 –2.21 0.74 0.75 0.76 0.65 0.62 0.48 0.45 0.47 r² = 0.8802 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 % figure 6. dynamics of the ratio of research expenditures to the country’s gdp (source: own calculations based on scientific and innovative activity of ukraine, n.d.) 1.87 2.55 2.40 2.28 2.30 1.92 2.2 1.38 –2.56 –2.10 –2.27 –2.19 –2.15 –2.06 –2.09 –2.05–1.78 –2.38 –2.23 –2.41 –2.54 –2.75 –0.86 –0.30 –0.77 –0.75 –1.11 –1.04 –1.21 –1.18 –1.26 –1.50 –1.57 –1.19 –1.23 –1.49 –1.73 –2.21 –4.00 –3.00 –2.00 –1.00 0.00 1.00 2.00 3.00 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 aerospace pharmaceutical office equipment telecommunication equipment instrument making figure 7. ukraine’s comparative advantages in major high-tech industries (source: own calculations based on the world bank, n.d.) 170 i. matyushenko et al. assessment of the development of foreign trade in high-tech production... as can be seen from figure 7, the comparative advantage for the aerospace industry is the highest (2.55 in 2012) but tends to decline. telecommunication equipment has the second place in terms of the indicator of the revealed relative advantage in the export of high-tech goods of ukraine (–0.30 in 2012), but as for other industries, this indicator is negative and shows that the comparative advantage in the export of these goods has foreign partners. at the same time, the realized export potential of the aerospace industry is several times higher than the potential of other industries. only the instrument industry has a tendency to increase comparative advantage, which is associated with significant efforts to reform and increase investment in the industry in recent years. the average comparative advantage figures calculated for five groups of high-tech goods in ukraine for the period 2011–2018 are shown in figure 8 and also indicate a significant comparative advantage in the export of aerospace. as shown by the calculations, relatively small comparative competitive advantages in the markets of foreign countries among high-tech products of ukraine have only aircraft, spacecraft and their parts. however, today the state of the aerospace industry is characterized by the presence of systemic problems associated with adaptation to market conditions, fierce competition in the world market against the background of low demand for a domestic and significant shortage of working capital of enterprises. the purpose of the simulation is to establish and characterize the relationship between the following factors: export quota; the share of high-tech exports in total industrial exports; gdp research and development costs; the share of scientists in the total employment of the population, and the identification of the impact of these indicators on foreign trade in high-tech goods of our country. based on the table of baseline data for these indicators in the period 2014–2018 (table  8). a correlation analysis was conducted, the results of which are presented in table 9. 2.1 –2.2 –2.2 –0.9 –1.5 aerospace pharmaceutical office equipment telecommunication equipment instrument making figure 8. average values of comparative advantage indicators for ukraine by major high-tech industries in 2011–2018 (source: own calculations based on scientific and innovative activity of ukraine, n.d.) business, management and education, 2020, 18(1): 157–182 171 table  8. output data for modelling of foreign trade of high-tech goods of ukraine in the period of 2014–2018 (source: own calculations based on scientific and innovative activity of ukraine, n.d.) years export quota, % export ratio high-tech products to industrial country export, % ratio of r&d expenditures to gdp of the country, % ratio of number of scientific and technical staff to the able-bodied population, % y x1 x2 x3 2014 48.593 7.530 0.650 0.753 2015 52.598 8.524 0.615 0.753 2016 49.298 7.218 0.483 0.600 2017 48.014 6.252 0.448 0.584 2018 45.210 5.406 0.471 0.538 table  9. correlation dependence of 4 indicators across ukraine (source: own calculations based on scientific and innovative activity of ukraine, n.d.) export quota, % (y) the ratio of exports high-tech products up to industrial exports, % (x1) the ratio of r&d expenditure to gdp, % (x2) the ratio of the number of scientific and technical staff to the able-bodied population, % (x3) export quota, % (y) 1.000 the ratio of exportshightech products for industrial exports, % (x1) 0.950 1.000 ratio of r&d expenditure to gdp, % (x2) 0.564 0.766 1.000 the ratio of the number of scientific and technical staff to the working population, % (x3) 0.746 0.887 0.958 1.000 the close relationship between the indicators and the share of high-tech exports can be explained by the impact of side factors, namely the rate of decline in exports that continues as a result of the political and economic crisis, and the depreciation of the hryvnia (according to tables 10–12). as can be seen from the table  9, the coefficient of the export quota (0.950) and the ratio of the number of scientific and technical staff to the working population of the country (0.887) is the largest factor in the ratio of the export of high-tech products to the industrial exports of the country. in addition, a very close direct link is found between the cost of research and development and the share of scientists in the total employment of the population (0.958). in other words, the more the state spends its money on r&d and the more scientific and technical staff in the country, the more exports of high-tech products will be in ukraine. the next step in the analysis is to calculate the regression. consider the y factor of the ratio of high-tech exports to industrial exports of the country and see what other coefficients 172 i. matyushenko et al. assessment of the development of foreign trade in high-tech production... table  10. characteristics of the tightness of the link between the indicators (source: own calculations based on scientific and innovative activity of ukraine, n.d.) indicators symbolic correlation value correlation coefficient value communication characteristic tightness export quota, % the ratio of high-tech exports to industrial, % у ↔ х1 0.950 the connection is very tight export quota, % ratio of r & d expenditures, % of gdp у ↔ х2 0.564 medium tightness relationship (moderate) export quota, % the ratio of the number of scientific and technical staff to the able-bodied population, % у ↔ х3 0.746 relationship is tight (strong) the ratio of high-tech exports to industrial, % ratio of r & d expenditures, % of gdp х1 ↔ х2 0.766 relationship is tight (strong) the ratio of high-tech exports to industrial, % the ratio of the number of scientific and technical staff to the able-bodied population, % х1 ↔ х3 0.887 the connection is very tight r & d expenditures, % of gdp: the share of scientists in the total employment of the population х2 ↔ х3 0.958 the connection is very tight table 11. matrix of output data ratio of high-tech exports to industrial exports of the countries under consideration and ukraine, % (source: united nations commodity trade statistics database, n.d.) years ukraine germany poland romania eu y x1 x2 x3 х4 2013 6.711 17.386 8.850 7.364 17.493 2014 7.530 17.280 10.250 8.387 17.404 2015 8.524 17.893 11.018 9.415 18.009 2016 7.218 18.064 11.037 10.392 18.215 2017 6.252 15.902 10.894 9.823 16.689 table  12. the results of the factor regression analysis of the high-tech exports share in the industrial sector (source: united nations commodity trade statistics database, n.d.) germany poland romania eu r-square 0.497 0.110 0.008 0.471 f 2.963 0.372 0.024 2.670 significance f 0.184 0.585 0.886 0.201 coefficient a –5.142 4.032 6.663 –10.250 standard error, a 7.205 5.289 3.770 10.713 coefficient b 0.716 0.309 0.064 0.996 standard error b 0.416 0.506 0.412 0.610 p-value, a 0.527 0.501 0.175 0.409 p-value, b 0.184 0.585 0.886 0.201 business, management and education, 2020, 18(1): 157–182 173 of the considered and how they affect it. in this case, we consider the impact of export quota indicators (x1), the ratio of researchers to the country’s population (x2), and the ratio of r&d expenditures to country’s gdp (x3), and the ratio of high-tech exports to country exports (b). to complete the study, a multivariate regression analysis of the impact of all three factors on the (b) share of high-tech exports in industrial was conducted. in table 13 presents the results of a multivariate regression analysis of the impact of all three factors on the share of high-tech exports in industrial. table 13. results of multivariate regression analysis r-square 0.98010 f 16.41689 the significance of f 0.17902 the coefficient of y –12.75732 standard error, y 5.52315 the coefficient of x1 0.36408 standard error x1 0.15787 the coefficient of x2 5.99830 standard error x2 10.59619 the coefficient of x3 –1.86226 standard error, x3 12.03845 the r-squared value describes the degree of accuracy of the process model description. r-square  –0.98010, or 98.01%. in our case, the degree of approximation is high and it can be concluded that these factors have a significant impact on the level of high-tech exports in ukraine. then the regression equation takes the form: y = –12,75732 + 0,36408x1 + 5,99830x2 – 1,86226x3. (6) next, we calculate the correlation-regression model and find out the degree of dependence of the high-tech export indicator of ukraine on the same indicator of other countries. we selected germany, poland, romania and the eu as a whole for analysis. table 13 shows the output matrix of this metric. table  14 shows the correlation between the ratio of high-tech exports to industrial exports of the countries under consideration and ukraine. table 14. correlation of high-tech ratio indicator exports to the industrialexports of the countries under consideration and ukraine ukraine (y) germany (x1) poland (x2) romania (x3) eu (х4) (y) 1.000 (x1) 0.705 1.000 (x2) 0.332 0.010 1.000 (x3) 0.090 0.007 0.931 1.000 (х4) 0.686 0.978 0.177 0.204 1.000 174 i. matyushenko et al. assessment of the development of foreign trade in high-tech production... the calculations show that a strong direct link is a factor in the share of high-tech exports in industrial exports found between almost all countries, as all countries are important trading partners for each other. however, a moderate inverse relationship exists between the selected countries and romaniaand a weak inverse between romania and the eu (0.204). this means that only in the case of reduced exports of high-tech products to other countries will romania have a chance to increase its share of high-tech exports. the reliability of these calculations is also underlined by the results of the regression analysis was presented in tables 11–12. 4. results and recommendations as a result of the analysis of trends in the market for high-tech products, as well as the technological gap between ukraine and the developed countries of the eu, there is a need to identify priority state actions to support the growth of production of high-tech products in ukraine. firstly, it is necessary to increase the share of investments both from the state and from foreign investors in the fixed capital and the share of the expenses for innovations in the total volume of industrial production, increase of scientific and technical potential, including due to the expansion of state funding of basic science, research. and development as well as education. it is important now to improve the business climate in the country and create favourable conditions for attracting foreign investment. besides, it is necessary to create an effective system of access to financing, which implies increasing the availability of credit resources for high-tech enterprises by creating special lending programs, improving and updating the legislative and regulatory support of venture funds and crowdfunding platforms. secondly, it is necessary to solve the problem of the workforce, namely the “drain of minds”. unfavourable working conditions lead to the migration of skilled workers to other countries in search of a better life and the possibility of self-realization, leaving their own country without developing its potential. therefore, the state needs to develop incentive measures to retain specialists at home. first and foremost, it should be the creation of a state program to encourage scientists and researchers through the provision of grants and funding for research projects, awards for achievement. third, the government’s important task is to harmonize national standards in high-tech industries with international standards, simplify the certification process for ukrainian-made products, and simplify the patenting of intellectual property for start-ups and small and medium-sized enterprises, which are a driving force today development of innovations. fourth, integration of ukraine into the world scientific and technical information space is required, which requires deepening of relations between ukraine and developed countries (in particular, israel, canada, china, korea, usa, switzerland, sweden, japan, etc.) through review and / or signing bilateral agreements on scientific and technical cooperation, as well as facilitating the participation of ukrainian scientists in international scientific conferences, internships, exchange programs, scientific projects. most importantly, focus on clearly identifying priorities from ukraine’s involvement in international integration processes within the business, management and education, 2020, 18(1): 157–182 175 eu, which would first and foremost take into account the orientation of ukraine’s economy by the high-tech vector (pagliacci, 2014). table 15 presents the author’s recommendations for improving the efficiency of high-tech trade between ukraine and the eu, taking into account the results of the analysis carried out during the study. table 15. the author’s recommendations on the development of high-tech trade between ukraine and the eu (source: own recommendations) metric/type of analysis the result of the analysis recommendations r&d expenditure,% of gdp 0.471 in 2018 gdp below the eu level (2.05%) 1. increase r&d expenditure (grants, patents, etc.); 2. financial support and stimulation of development of production and technological clusters. 3. creation of “technological infrastructure”; 4. establishment of specialized universities in enterprises (mutual benefit from the implementation of experimental studies). high-tech exports, % in industrial 5.4 in 2018 below eu level (7%) 1. creation of conglomerates based on domestic industrial giants, granting of privileges; 2. preferential taxation, low-interest long-term credits for exporters and importers of high-tech goods; 3. initiation of programs for technology exchange, production experience with further development of real projects, calculation of their profitability, implementation in production. 4. development of own analogues of foreign technologies; 5. determining the development of high-technology exports by a strategic national priority. comparative advantages for groups 2.1 for the aerospace industry 1. to develop export of this high-tech industry in all directions –2.2 for pharmaceutical and office equipment 1. it is necessary to constantly reform and increase capital investment in these sectors, as it is promising for ukraine and has a tendency to grow. correlation analysis, ratio of high-tech exports to industrial (x1) export quota (y) – the connection is very tight 1. increasing the volume of all types of production, especially those for which a comparative advantage is found; 2. diversification of export markets to reduce dependency and minimize the risk of a sharp drop in exports. the ratio of r&d expenditures to gdp (x2) is tight (strong) 1. increase the cost of research and development (grants, patents, etc.); 2. financial support and stimulation of development of production and technological clusters. the ratio of the number of scientific and technical staff to the able-bodied population (x3) is very tight 1. creation of “technological infrastructure”; 2. establishment of specialized universities in enterprises (mutual benefit from the implementation of experimental studies). 3. increasing the prestige of the profession of a scientist at the expense of decent wages 176 i. matyushenko et al. assessment of the development of foreign trade in high-tech production... metric/type of analysis the result of the analysis recommendations regression analysis, ratio of high-tech exports to industrial exports (y) the ratio of researchers to the population of the country (x2) y = –12.75732 + 5.99830 * x2 1. increasing the share of scientists in total employment by 1% will lead to an increase in exports of high-tech products by 5.99%, therefore, it is necessary to ensure an increase in the number of scientists through the creation of university-based research centers directly involved in the implementation of production projects. ratio of r&d expenditure to gdp (x3) y = –12.75732 – 1.86226 * x3 1. increase in r&d expenditures by 1% will result in a 1.86% increase in exports of high-tech products, therefore, effective and efficient public funding programs for r&d need to be developed correlation analysis, ukraine (y), variables – eu countries high-tech exports,% in industrial – communication is very close 1. increasing the competitiveness of ukrainian goods, starting from state support of exporters by methods approved by international standards, and finishing with the modernization of production; 2. focus on developing the capacity of such high-tech products as aircraft, aircraft and spacecraft. only the combined action of the ukrainian government, domestic producers and academia can bring ukrainian high-tech products to a high level of competitiveness. 5. discussion with the other scientists/papersand prospects for further research in his work, kyzym (2011) examined the problems of assessing the readiness of high-tech clusters in ukraine to trade their products with eu countries, although he assessed the possibility of forming innovative clusters even before the concept of a new industrial revolution appeared. in her work, haustova (2015) also assessed the possibility of developing trade in products of innovative clusters of ukraine on the example of enterprises in the electrical industry working in the kharkov region. however, she did not consider the prospects for developing trade in high-tech products in association with the eu. yegorov et al. (2016), and salihova (2012) examined the impact on the foreign trade of ukraine of the results of the introduction of high technologies in the ukrainian economy, and also evaluated the development indicators of ict, biotechnology, nanotechnology, new materials and nuclear technologies. moreover, in the studies of all these authors, there was no comprehensive analysis of comparative advantages in the trade-in high-tech products of ukraine and the eu as a whole. fedulova (2011) also used many indicators to assess the prospects for foreign trade in hightech products, as well as to justify the national priorities of the country’s socio-economic development on an innovative basis, although it determined only the general opportunities for trade in high-tech products of ukrainian industry without taking into account the factors of the new industrial revolution. duginec (2018) in his work analyzed ukraine’s place in global value chains, in particular, determined the imperative of transformation of foreign end of table 15 business, management and education, 2020, 18(1): 157–182 177 trade flows of the ukrainian economy, substantiated the need for innovative development of the economy as a competitive advantage in global production, and also simulated the country’s participation in global value chains. however, these authors did not have a comprehensive approach to the development of a methodology for studying ukraine’s readiness for innovation in association with the eu. therefore, as the prospect of their research, the authors of this article see an assessment of the possibilities for developing foreign trade in high-tech products of ukraine and the eu within the framework of the formation of common value chains in an association. conclusions the results of the assessment of the state of the high-tech sector of ukraine’s economy in the conditions of the formation of a new industrial revolution and association with the eu allow us to draw the following conclusions: 1. it is revealed that the main trend in the modern world is the transition to a new technological way and convergent technologies, on which the fourth industrial revolution is built. the introduction of advanced technologies in ukraine is conditioned by the need to increase the competitiveness of domestic producers in foreign and domestic markets in the conditions of deep integration of the country, first of all, with the countries of the european union, and implementation of the association agreement between ukraine and the eu. 2. the reason for ukraine’s low presence in the world market for high-tech products and the tendency for its further decline is the outdated structure of production, which in turn is a consequence of the low level of r&d expenditures in ukraine and the decrease of innovative activity of ukrainian enterprises. 3. comparative analysis shows that the largest indicator of comparative advantage among high-tech industries is the aerospace industry  – (2.55 in 2012). for other industries, this indicator is negative and indicates that foreign partners have a comparative advantage in exporting these goods. 4. the regression analysis shows that export quota (0.950) and the ratio of the number of scientific and technical staff to the working population of the country (0.887) are most influenced by high-tech exports of the country. 5. given that ukraine has great export potential and competitive technologies, it is necessary to focus on clearly identifying priorities from ukraine’s involvement in international integration processes within the eu, which would first take into account the orientation of the ukrainian economy’s growth by the high-tech vector. acknowledgements the authors would like to express his appreciation towards to m.o. kyzym, professor, dr.sc. of economics. his knowledge and experience was invaluable during the above work. 178 i. matyushenko et al. assessment of the development of foreign trade in high-tech production... funding all studies, the results of which are presented in this article, were carried out by the authors on their own at their own expense. author contributions conceptualization, i.m. and s.h.; data curation, m.m.p.; funding acquisition, s.h.; methodology, m.s.p., and m.l.; software, m.m.p.; validation, m.l.; visualization, m.m.p.; writing – original draft, i.m. and s.h.; writing – review & editing, i.m. disclosure statement the authors declare no conflict of interest. references annoni, p., & dijkstra, l. 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(n.d.a). research and development expenditure (% of gdp). https://data.worldbank. org/indicator/gb.xpd.rsdv.gd.zs?locations=ua&view=chart the world bank. (n.d.b). research and development expenditure (% of gdp). https://data.worldbank. org/indicator/gb.xpd.rsdv.gd.zs?locations=ua-at-be-gb-gr-dk-ee-ie-es-it-cy-lv-ltlu-mt-nl-de-pl-pt-ro-sk-si-hu-fi-fr-hr-cz-se-eu&name_desc=false the world bank. (n.d.c). high-technology exports (% of manufactured exports). http://data.worldbank. org/indicator/tx.val.tech.mf.zs/countries the world bank. (n.d.d). research and development expenditure (% of gdp). http://data.worldbank. org/indicator/gb.xpd.rsdv.gd.zs united nations commodity trade statistics database. (n.d.). http://comtrade.un.org/db/mr/ rfcommoditieslist.aspx?px=s4&cc= wilson center. (2012). emerging global trends in advanced manufacturing. alexandria. https://www. wilsoncenter.org/sites/default/files/emerging_global_trends_in_advanced_manufacturing.pdf yegorov, i., odotyuk, i. & salihova, o. (eds.). (2016). implementatsiya vysokykh tekhnolohiy v ekonomiku ukrayiny [implementation of high technologies in the economy of ukraine]. nas of ukraine. https://doi.org/10.1051/e3sconf/201910504034 https://doi.org/10.1051/e3sconf/201910504034 https://doi.org/10.1051/matecconf/201929708002 https://www.mckinsey.com/global-themes/americas/making-it-in-america-revitalizing-us-manufacturing https://www.mckinsey.com/global-themes/americas/making-it-in-america-revitalizing-us-manufacturing http://www.nonfiction.ru/sites/default/files/books/view/revolution_list.pdf http://www3.weforum.org/docs/gcr2016-2017/05fullreport/theglobalcompetitivenessreport2016-2017_final.pdf http://www3.weforum.org/docs/gcr2016-2017/05fullreport/theglobalcompetitivenessreport2016-2017_final.pdf http://www.ukrstat.gov.ua/operativ/operativ2005/ni/ind_rik/ind_u/2002.html http://www.ukrstat.gov.ua/operativ/operativ2005/ni/ind_rik/ind_u/2002.html https://unstats.un.org/unsd/publication/seriesm/seriesm_34rev4e.pdf https://unstats.un.org/unsd/publication/seriesm/seriesm_34rev4e.pdf http://www3.weforum.org/docs/media/gac14/future_of_manufacturing_driving_capabilities.pdf http://www3.weforum.org/docs/media/gac14/future_of_manufacturing_driving_capabilities.pdf https://data.worldbank.org/indicator/gb.xpd.rsdv.gd.zs?locations=ua&view=chart https://data.worldbank.org/indicator/gb.xpd.rsdv.gd.zs?locations=ua&view=chart https://data.worldbank.org/indicator/gb.xpd.rsdv.gd.zs?locations=ua-at-be-gb-gr-dk-ee-ie-es-it-cy-lv-lt-lu-mt-nl-de-pl-pt-ro-sk-si-hu-fi-fr-hr-cz-se-eu&name_desc=false https://data.worldbank.org/indicator/gb.xpd.rsdv.gd.zs?locations=ua-at-be-gb-gr-dk-ee-ie-es-it-cy-lv-lt-lu-mt-nl-de-pl-pt-ro-sk-si-hu-fi-fr-hr-cz-se-eu&name_desc=false https://data.worldbank.org/indicator/gb.xpd.rsdv.gd.zs?locations=ua-at-be-gb-gr-dk-ee-ie-es-it-cy-lv-lt-lu-mt-nl-de-pl-pt-ro-sk-si-hu-fi-fr-hr-cz-se-eu&name_desc=false http://data.worldbank.org/indicator/tx.val.tech.mf.zs/countries http://data.worldbank.org/indicator/tx.val.tech.mf.zs/countries http://data.worldbank.org/indicator/gb.xpd.rsdv.gd.zs http://data.worldbank.org/indicator/gb.xpd.rsdv.gd.zs http://comtrade.un.org/db/mr/rfcommoditieslist.aspx?px=s4&cc http://comtrade.un.org/db/mr/rfcommoditieslist.aspx?px=s4&cc https://www.wilsoncenter.org/sites/default/files/emerging_global_trends_in_advanced_manufacturing.pdf https://www.wilsoncenter.org/sites/default/files/emerging_global_trends_in_advanced_manufacturing.pdf business, management and education, 2020, 18(1): 157–182 181 аppendix table a1. expenditures on research activities of eu countries and ukraine (% of gdp) (source: author’s own elaboration based on the worldbank) country year 2011 2012 2013 2014 2015 2016 2017 austria 2.67 2.91 2.95 3.08 3.05 3.13 3.16 belgium 2.16 2.27 2.33 2.39 2.46 2.55 2.59 bulgaria 0.53 0.60 0.64 0.79 0.96 0.78 0.75 uk 1.66 1.59 1.64 1.66 1.67 1.68 1.66 greece 0.67 0.70 0.81 0.83 0.96 0.99 1.13 denmark 2.94 2.98 2.97 2.91 3.05 3.12 3.06 estonia 2.31 2.12 1.72 1.43 1.47 1.25 1.29 ireland 1.56 1.56 1.57 1.50 1.19 1.17 1.04 spain 1.33 1.29 1.27 1.24 1.22 1.19 1.20 italy 1.21 1.27 1.31 1.34 1.34 1.37 1.35 cyprus 0.46 0.44 0.48 0.51 0.48 0.53 0.55 latvia 0.70 0.66 0.61 0.69 0.63 0.44 0.51 lithuania 0.90 0.89 0.95 1.03 1.04 0.84 0.89 luxembourg 1.46 1.27 1.30 1.26 1.28 1.30 1.26 malta 0.67 0.83 0.77 0.71 0.74 0.57 0.54 netherlands 1.88 1.92 1.93 1.98 1.98 2.00 1.99 germany 2.80 2.87 2.82 2.87 2.91 2.92 3.02 poland 0.75 0.88 0.87 0.94 1.00 0.96 1.03 portugal 1.46 1.38 1.33 1.29 1.24 1.28 1.32 romania 0.50 0.48 0.39 0.38 0.49 0.48 0.50 slovak republic 0.66 0.80 0.82 0.88 1.17 0.79 0.88 slovenia 2.42 2.57 2.58 2.37 2.20 2.01 1.86 hungary 1.19 1.26 1.39 1.35 1.36 1.20 1.35 finland 3.64 3.42 3.29 3.17 2.89 2.74 2.76 france 2.19 2.23 2.24 2.28 2.27 2.24 2.19 croatia 0.75 0.75 0.81 0.78 0.84 0.86 0.86 czech republic 1.56 1.78 1.90 1.97 1.93 1.68 1.79 sweden 3.25 3.28 3.30 3.14 3.26 3.27 3.33 eu 1.97 2.00 2.01 2.03 2.04 2.04 2.06 ukraine 0.74 0.75 0.76 0.65 0.61 0.48 0.45 182 i. matyushenko et al. assessment of the development of foreign trade in high-tech production... table a2. high-tech exports from the eu and ukraine (% of industrial exports) (source: author’s own elaboration based on the world bank) country year 2011 2012 2013 2014 2015 2016 2017 austria 13.26 14.58 15.41 15.53 15.08 14.51 12.87 belgium 10.55 11.86 12.03 13.36 13.65 13.05 10.70 bulgaria 7.83 8.05 8.29 7.36 8.19 8.87 9.53 uk 23.58 23.80 23.88 22.47 22.67 23.98 23.03 greece 11.15 10.06 8.38 11.40 12.81 13.62 11.99 denmark 15.29 15.84 15.85 15.72 17.19 16.68 13.88 estonia 22.16 20.45 20.54 23.33 22.44 22.02 17.56 ireland 24.80 25.48 24.84 24.78 28.20 32.72 29.03 spain 6.82 7.36 8.08 7.43 7.58 7.45 7.74 italy 8.07 7.67 7.91 7.82 8.29 8.37 7.91 cyprus 30.31 16.59 13.08 14.59 13.14 13.43 14.05 latvia 9.32 11.25 15.22 17.69 18.83 17.14 17.50 lithuania 10.64 11.06 11.06 11.16 12.81 12.72 12.57 luxembourg 9.05 8.68 6.85 5.97 7.11 7.97 7.14 malta 47.55 46.13 38.77 34.78 30.45 21.99 .. netherlands 25.07 25.50 25.98 25.79 24.15 23.90 22.67 germany 16.45 17.36 17.39 17.28 17.89 18.06 15.90 poland 6.62 7.89 8.85 10.25 11.02 11.04 10.89 portugal 4.11 4.48 4.68 4.86 5.06 5.78 5.96 romania 11.63 8.13 7.36 8.39 9.41 10.39 9.82 slovak republic 7.38 9.58 11.02 11.14 11.15 10.74 11.80 slovenia 6.21 6.65 6.73 6.41 7.00 7.14 6.50 hungary 25.15 21.20 19.36 16.68 .. 17.47 17.30 finland 11.11 10.52 9.09 10.13 10.21 10.06 9.56 france 25.32 26.85 27.28 27.61 28.36 28.08 26.09 croatia 8.72 11.89 12.63 10.55 10.79 14.70 8.80 czech republic 18.71 18.59 17.35 17.40 17.79 16.99 17.90 sweden 18.76 18.00 18.00 17.98 18.13 18.28 15.38 eu 16.94 17.45 17.49 17.40 18.01 18.21 16.69 ukraine 5.00 6.91 6.71 7.53 8.52 7.22 6.25 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: journaltm@ukr.net business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 2: 244–271 https://doi.org/10.3846/bmee.2021.14472 influence of internal and external factors on the structural changes of national economy: an example of ukraine uliana nikonenko 1, olena khalina 2, tanina kazyuk 3, viktor paliukh 4, serhiy shevchenko 5 1,2faculty of media communications and entrepreneurship, ukrainian academy of printing, lviv, ukraine 3national academy for public administration under the president of ukraine, lviv, ukraine 4national university of civil protection of ukraine, kharkiv, ukraine 5lviv regional institute for public administration, national academy for public administration under the president of ukraine, lviv, ukraine received 24 february 2021; accepted 01 may 2021 abstract. purpose – the purpose of our article is to study structural changes in the national economy using a portfolio model of sectors with different returns and, on this basis, processing the methodology for identifying the current state and instrumental factors of economic policy. research methodology – the methodology of empirical research includes methods of grouping, abstraction, comparison, systems analysis, synthesis and generalization, graphical methods and regression analysis. to analyze the nature of the relationship between the index of structural changes and the dynamics of gdp, which determines the comparative profitability of the resource and non-resource sectors and the current position of the current structure relative to the equilibrium value, we used error-corrected models (ecms). findings – using regression models with error correction, a favourable longand short-term relationship between structural changes in favour of non-resource exports and ukraine’s gdp has been empirically confirmed. using the index of structural changes, considering the ratio of raw materials and non-raw materials exports, the necessity of applying administrative measures is substantiated. research limitations – the study concerned mainly the national economy of ukraine, but in the future, attention should be paid to the application of the results of our study in other countries of eastern europe. in the future, the results obtained can be adapted for other countries of the world. the research was based on the use of specific mathematical methods, and not all mathematical possibilities were used. practical implications – the model can be used in the practical activities of state economic structures in the future, it is possible to change key indicators and further expand the field of use of the model. originality/value – the novelty of the study lies in the development of a methodology for identifying the current state and instrumental factors of economic policy that can speed up economic growth based on favourable structural shifts (in favour of the non-resource export sector). keywords: raw materials sector, exports, structural changes, terms of trade, exchange rate. jel classification: d51, f63, e60. mailto:journaltm@ukr.net https://doi.org/10.3846/bmee.2021.14472 https://orcid.org/0000-0002-6015-6248 https://orcid.org/0000-0002-4086-6314 https://orcid.org/0000-0002-5003-4896 https://orcid.org/0000-0001-9429-2013 https://orcid.org/0000-0002-5522-3258 business, management and economics engineering, 2021, 19(2): 244–271 245 introduction the aim of this work is to study the structural changes in the ukrainian economy using a portfolio model of sectors (raw and non-raw materials) and, on this basis, processing the methodology for identifying the current state and instrumental factors of economic policy, which provides for three stages: 1) the choice of the structural equilibrium index, since certain industries combine raw materials and non-raw materials; 2) identification of the structural state of the economy; 3) an assessment of the factors of economic policy, capable of accelerating economic growth based on favorable structural changes. the research task is to explain the structural changes in the ukrainian economy using a sectoral model with two sectors – raw materials and non-raw materials. for this we use the index of structural equilibrium (structural change). this is important, because certain industries combine raw materials and non-raw materials. for example, this applies to metallurgy. a practical substitute for the “real” structural equilibrium index can be an index based on the structure of exports. in fact, there is no reason to believe that the “real” and export structures of the economy are significantly different. our next step is to identify the structural state of the economy. we are talking about the nature of the relationship between the selected structural index and the dynamics of gdp, which determines the comparative profitability of the raw materials and non-resource sectors and the current position of the current structure relative to the equilibrium value. in such a context, error correction models (ecms) provide a convenient toolkit. the final stage is the assessment of economic policy factors that can accelerate economic growth based on favorable structural shifts. first, we are talking about a standard set of tools for fiscal and monetary policy, as well as the problem of choosing the exchange rate. in a broader sense, the set of independent variables should contain variables that characterize the quality of economic policy and the scale of institutional change (error correction models – ecms). in this article, we investigate the structural changes of the national economy, which mean qualitative changes in the structure of domestic exports, taking into account the above factors, which will increase the level of gdp. it is advisable to stimulate structural changes in favor of the non-resource sector (non-resource exports) by strengthening the monetary unit, attracting foreign direct investment and limited government intervention, primarily to prevent the transfer of resources to the raw materials sector (infrastructure modernization, human capital development). it is interesting that the feasibility of the policy of administrative incentives for the transfer of production resources to the non-resource sector only increases in the event of structural shocks. in particular, this can be expected from a sustained deterioration in the terms of trade in world commodity markets. a powerful obstacle to such a development of events can be the inflow of foreign investment, because in this case, the incentives for internal redistribution of resources in favor of the raw materials sector are offset by the increased profitability of foreign investment in the country-raw materials exporter compared to the host country. the instrumental factor is the possibility of using the “underestimated” labour force and other advantages, which, possibly, are associated with the availability of raw materials. 246 u. nikonenko et al. influence of internal and external factors on the structural changes of national... 1. literature review it is necessary to assess the export orientation of the ukrainian economy at the present stage from the standpoint of the well-known hypothesis of the “life cycle of industry” proposed by the american economist j. cornwell (1977). according to this theory, economic growth begins with the export of raw materials. subsequently, income growth and technological changes in traditional industries modifiesthe structure of the economy in favor of technology sectors. the main macroeconomic indicators of such changes are growth in: 1) final domestic consumption in gdp and 2) the share of high-tech products in total exports (wei et al., 2019). the key element of the industrial cycle hypothesis is the formation of net savings with added value created in export industries as a source of financing for economic restructuring (ertz & leblanc-proulx, 2018). such scientists as danylchuk et  al. (2019) and kazunobu (2017), based in their works on the existing model of three sectors, investigated the main structural changes that occur in the national economy of ukraine, while highlighting and focusing on the importance of separating external and internal factors of influence on the main indicators of the national economy. the increase in employment can be taken as a criterion of optimal economic policy, does not contradict the widespread perception of the ukrainian economy which is characterized by an excess oflabour in comparison with capital. in particular, korablin (2017), kiselakova et al. (2018), koziuk (2018a, 2018b), braun and toth (2020), antoniuk (2017) and sijabat (2019) argue that the share of ukraine in the global labor force (0.65%) is 5–8 times higher than the share in the gross accumulation of global capital (0.08%) and the production of world gdp (0.12%) testifies in favor of the dominance of labor-intensive, not too technological and capital-intensive industries. experts shynkaruk et  al. (2015) and ginevicius et  al. (2020) also believe that the structure of employment in the ukrainian economy is not optimal, does not meet the requirements of a post-industrial society and characterizes the processes of labour deindustrialization. the domestic service sector is primarily trade, hotel and restaurant business, although recent employment in the information and communication sector has been growing (holian, 2016). in general, the position of vashkiv (2017) and cui et al. (2019) is logical, which believes that the analysis of sectoral structural shifts significantly benefits, if not limited to the share of each of the sectors in gdp, but also to study the share of employed workers in each of them. based on this assumption, we formalized the main relationships between the raw materials and non-resource sectors. at the same time, despite a large number of publications indicating the feasibility of structural shifts in favor of the non-resource sector for a specific ukrainian case, there is a lack of empirical estimates of 1) the impact of the structural change index on the dynamics of ukraine’s gdp as a country-exporter of raw materials, 2) economic policies that can accelerate economic growth based on favorable structural changes. business, management and economics engineering, 2021, 19(2): 244–271 247 2. theoretical model to explain the structural changes in the national economy, it is appropriate to use a sectoral model with two sectors – raw materials and non-raw materials (nikonenko, 2018). both sectors compete for labour and investment, are characterized by free movement of resources, and can export their products without hindrance. the main functional dependencies are as follows equations (1)–(6): 1 1 2 1 (1 ) (1 ) (1 ) (1 ) ; t t t t t t t t t t t t t t t t t t t t q l k g f ca b e l l a e k k+ + = α + −α + − g + −h + −ρ −    − − − + ξ    (1) 1 1 2 1 (1 ) ; s s s t t t t t t s s s s t t t t t t t q l k g f ca a e l l a e k k+ + = β + −β + g + h +ρ −    − − − + ε    (2) *(1 )( ) ;s tt t t t t t tp y e p q p q= −ϕ + ϕ (3) *(1 )( ) ;s tt t t t te p q p q−ϕ = ϕ (4) * (1 ) ( )t t t t t tg e p p p y g + − g = t  ; (5) * *, , ,tt t t t e p f ca y y p   =      (6) where stq and t tq , s tl and topd , s tk and t tk – production volumes, employment and means of capital in the raw and non-raw (technological) sectors, respectively, 1 s t te l + and 1 s t te k + , 1 t t te l + and 1 t t te k + – employment expectations and investment volumes in the raw materials and non-resource (technological) sectors, s tl and s tk , t tl and t tk – equilibrium values of labour and capital in the raw materials and non-resource (technological) sectors, respectively, gt – budget balance, ft – volumes of foreign investments, * tp and tp – the level of prices for raw materials and technological goods, respectively, et – nominal exchange rate (value of foreign currency in the national currency), yt – income (gross domestic product), t – share of tax revenues in gdp. equations (1) and (2) describe the production function in the commodity and noncommodity sectors, respectively. production volumes depend on labour and capital inputs, government spending, foreign investment, and overseas demand. correction mechanisms in the labour and financial resources markets provide that in case of expectations of excess sectoral employment and reinvestment in physical capital, there will be a corrective decrease in employment and investment. it can be conditionally assumed that the share of labour force prevails in the non-resource sector ( 1 )α > −α , while the opposite relationship is observed in the commodity sector ( 1 )β < −β . government spending and foreign investment are divided between both sectors – raw materials and non-resource, and the corresponding ratio is determined by the coefficients g and h. for simplicity, the current account balance is assumed to be symmetric in both sec248 u. nikonenko et al. influence of internal and external factors on the structural changes of national... tors – qt and qs, although in a more general case, the balance of exports-imports may be individual for each of the sectors. equation (3) provides an expression for income (gdp) in the prices of goods in the nonresource sector. the value of commodity products is determined by world market prices and the exchange rate. the devaluation of the monetary unit creates incentives in favour of the commodity sector. the coefficient f characterises the non-price component of structural changes and may reflect the characteristics of the institutional environment. preferences in favour of the non-resource sector (this implies an increase in values f) can neutralise the impact of both the rise in prices for raw materials on world markets and the devaluation of the monetary unit. the strengthening of the monetary unit in response to the rise in prices for raw materials will have a similar impact. equation (4) defines the sectoral equilibrium condition when price and non-price factors do not create advantages in favour of one sector. this is logical in the absence of institutional barriers to employment and investment in both sectors. equation (5) defines the budget constraint. it is assumed that tax revenues ( )t tp yt suffice to finance government spending in the primary and non-primary sectors. equation (6) defines the balance of payments with equilibrium. in a somewhat simplified way, the current account balance is balanced by the inflow of foreign capital. the functional dependencies of the current account are defined in a standard way, namely: this indicator improves in the event of a decrease in the exchange rate and an increase in the income of trading partner countries; the opposite effect is an increase in own gdp. taking into account the equilibrium condition (equation (5)), from equations (1) and (2) for the equilibrium state, we obtain that equation (7): { } * * * * * * * 1 (1 )(1 ) (1 ) (1 ) (1 ) (1 ) (1 ) (1 ) (1 ) (1 ) , t t t t t t t t t t t t t t t t t t l e p p k p e p e p p g e p p f e p p ca  = −f −β −f −α + fα − −f β    −f g −f − g + −f h −f −h +     −f ρ −f −ρ + ε −ξ  (7) where l* and k* – are the equilibrium values of the means of labour and capital. it is not difficult to find a condition for the implementation of structural changes in favor of the non-resource sector, providing for an increase in the exchange rate equation (8): { } * * * * 1 (1 )(1 ) (1 ) (1 ) (1 ) (1 ) (1 ) (1 ) (1 ) (1 ) . t t t t t t t t t l k p p e p e p g f ca ∂ = −f −β −f −α +       ∂ fα − −f β             −f g −f − g + −f h−f −h +       −f ρ−f −ρ + ε −ξ   (8) a fairly high value 1−β , combined with a low value 1−α and low share of non-primary goods in gdp, provides investment in physical favourable capital when the share of nonprimary goods increases. low value f enhances the corresponding stimulus for government spending, foreign investment and net exports. business, management and economics engineering, 2021, 19(2): 244–271 249 the main ideas for econometric modeling: to investigate the nature of the relationship between the index of structural changes and the dynamics of gross domestic product; explore the impact of terms of trade and policy instruments on structural shifts in favor of the nonresource export sector. 3. methods and data methodologically, identification of the current state and instrumental factors of economic policy involves three stages: 1. choice of the index of structural equilibrium. 2. identification of the structural state of the economy. 3. assessment of economic polic y factors capable of accelerating economic growth based on favorable structural shifts. based on the engle and granger (1991) methodology, the presence of cointegration of two indicators containing the so-called unit root i (1) allows us to estimate the long-term relationship between them (in levels) equation (9): ,t t ty x= α +β + ε (9) and then use the resulting residuals to assess the short-term dynamics of the dependent variable (in the first differences) equation (10): 0 1 ,t t t ty x −d = d + gd −dε + ξ (10) where yt – dependent variable, tx – vector of independent variables, tε and tξ – stochastic factors. in equation (10), the lags value of the residuals from equation (9) is added to the list of independent variables. the coefficient d characterises the rate of return of the dependent variable to the equilibrium value based on deviations from long-term equilibrium. it should be noted that if there is over one cointegration equation between several variables, it is necessary to use the alternative var/vec procedure (alogoskoufis & smith, 1991; tang et al., 2015). it is also important that predictions for short-term rates may differ in principle from estimates for long-term relationships. the list of independent variables may also differ. to assess the peculiarities of the relationship between gdp and the structural characteristics of the domestic economy, the index of structural changes based on export commodity groups was used (figure 1). to assess the peculiarities of the relationship between gdp and the structural characteristics of the domestic economy, the index of structural changes based on export commodity groups was used (figure 1). raw material exports include: agricultural products, mineral products, products of the chemical and related industries, timber and wood products, pulp made of wood or other fibrous cellulose materials, products made of stone, gypsum, cement, ceramics, glass. according to non-commodity exports, the rest of the exports are credited: finished food products, polymeric materials, plastics and rubber, leather and fur raw materials and products from them, textiles and textile products, footwear, hats, umbrellas, products from ferrous and non-ferrous metals, machines and mechanisms materials and their parts, 250 u. nikonenko et al. influence of internal and external factors on the structural changes of national... devices for recording and reproducing images and sound, vehicles and road equipment, optical instruments and apparatus, medical or surgical apparatus; clock; musical instruments, various goods and products. metallurgy classification issues may seem controversial, because quite often metallurgy is considered a raw materials and mediumor low-tech industry. in any case, references to the hypertrophied development of the mining and metallurgical complex as one of the reasons for the structural problems of the domestic economy are quite common. regardless of the classification of the metallurgical industry, a constant decrease in the share of mechanical engineering can be considered a sign of an increase in the raw materials orientation of production and exports to ukraine and an increased dependence on the situation in external raw materials markets, although some researchers believe that official statistics underestimate the export volumes of technological exports (bitsyura, 2016). to assess the peculiarities of the relationship between gdp and the structural characteristics of the domestic economy, the index of structural changes based on export commodity groups was used. raw materials exports include: agricultural products, mineral products, products of the chemical and related industries, timber and wood products, wood pulp or other fibrous cellulosic materials, products made of stone, plaster, cement, ceramic, glass. according to non-commodity exports, the remaining exports are included: finished food products, polymeric materials, plastics and rubber, leather and fur raw materials and products from them, textiles and textile products, footwear , hats, umbrellas, products made of ferrous and non-ferrous metals, machines and mechanisms, electrical equipment and their parts, devices for recording and reproducing images and sound, vehicles and road equipment, optical instruments and apparatus, medical or surgical apparatus; clock; musical instruments, various goods and products (korablin, 2017). metallurgy classification issues may seem controversial, because quite often metallurgy is considered a raw material and mediumor low-tech industry. references to the hypertrophied development of the mining and metallurgical complex as one reason for the structural problems of the domestic economy are quite common. regardless of the classification of the metallurgical industry, a constant decrease in the share of mechanical engineering can be 0 2 4 6 8 10 12 14 16 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 0 0.5 1 1.5 2 2.5 3 3.5 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 a) volume of commodity and non-commodity exports b) index of structural changes figure 1. ukraine export structural characteristics, 1998–2017 (source: developed by authors) business, management and economics engineering, 2021, 19(2): 244–271 251 considered a sign of an increase in the raw materials orientation of production and exports to ukraine and an increased dependence on the situation in external raw materials markets, although some researchers believe that official statistics underestimate the volumes of nonresource (technological) exports. the index of structural changes (structural equilibrium index, structural index) is the ratio between non-primary and primary exports. considering causality t tstr y⇒ there are grounds for such a system of two equations (11), (12): 0 1 1 1 , n m t i t i i t j t t i j y a y b str crisis− − = = = α + + + α + ε∑ ∑ ; (11) 0 1 1 1 1 , n m t i t i i t j t t t i j y c y d str crisis− − − = = d = β + d + d +β + dε + ξ∑ ∑ (12) where yt – gdp, strt – index of structural changes, crisist – crisis-related dummy (1 for 2000q1, 2004q3:2004q4, 2008q3:2009q4, 2013q1:2015q4, 0 – for the rest of the quarters). thus, it is assumed that the situation at the beginning of 2000 had its own influence. it is associated with the inertia of the deep currency crisis of 2008–2009. a short period of financial destabilisation at the end of 2004, caused by the orange revolution, the events of the global financial crisis in 2008–2009 and the most recent acute crisis in 2014–2015. it is assumed that the crisis phenomena appeared in early 2013 and ended by the end of 2015, although the restoration of the pre-crisis economic dynamics continues to this day. since we are talking about ukraine as a country with a raw material orientation of exports, the sample of the years 2000–2010 and 2000–2018 was made considering the volatility of prices for raw materials (in the early 2000s – a sharp increase in prices for raw materials, 2009 – a slight decrease and in 2010 – prompt resumption of growth). by crises it is assumed that the situation at the beginning of 2000 had its own influence; a short period of financial instability at the end of 2004, caused by the orange revolution; events of the world financial crisis of 2008–2009, and the most recent acute crisis in 2014– 2015. (it is assumed that the crisis phenomena appeared at the beginning of 2013 and ended by the end of 2015, although the restoration of the pre-crisis economic dynamics continues to this day). the chosen division of the time sample is primarily due to considerations of checking the stability of the obtained estimates to a change in the time period. at the same time, the choice of a short sample of 2000–2010 provides for the inclusion of one of the major crisis periods (2008–2009), but in such a way that the so-called marginal effects do not occur, when the data of the last few years, estimates obtained (this explains the inclusion of 2010 data). the time sample of 2000–2013 does not differ much from the sample of 2000–2018, which does not allow us to check the stability of the estimates obtained. the choice of a dummy variable to take into account the possible impact of crisis phenomena or, more precisely, periods with a significant decrease in gdp below the equilibrium trend is a standard procedure and does not provide for an in-depth study of the reasons for such a decline (internal or external, monetary or non-monetary, assumed or unpredictable, etc.) 252 u. nikonenko et al. influence of internal and external factors on the structural changes of national... in our case, the inclusion of the crisis variable was intended to “cleanse” the impact of the str variable on gdp from crisis phenomena, regardless of the main reasons (for example, the crisis events of the second half of 2004 were not as economic as political in origin) and could affect the long-term trajectory of gdp or short-term changes this indicator. since the periodization of crisis phenomena or periods with a significant decline in production was made, it turned out to be an important factor in the long-term trajectory of income (in levels) the corresponding coefficient is statistically significant at the level of 5%, which means that regardless of the nature, events in these periods had an intuitively expected negative impact on the trajectory domestic gdp. at the same time, no such influence was found for short-term dynamics; it is easier to explain by the effectiveness of mechanisms for correcting deviations from the long-term trend (coefficient d). the results obtained can be interpreted in such a way that, regardless of origin, any significant production downturns in ukraine negatively affect the long-term growth trajectory. the mechanisms of such influence will be clarified by us in future studies. in particular, the prime candidates are investments, which recover very slowly after significant production downturns, whereas during unproblematic economic growth there is no proportional increase in investments that should compensate for the losses of the investment process during even short downward “episodes”. crisis is a dummy variable that takes into account only the exogenous impact of crisis phenomena. the basic statistical model assumes that structural shifts in favour of the non-resource sector depend on the terms of trade and economic policy instruments (nikonenko, 2018): , , 0 1 1 2 1 2 1 3 4 5 ln ln 2 , n a b c t i t t t t t i t t t str a str b tot b fdi c g c rer c m c debt c crisis − = = α + + + + + + + + + ε ∑ (13) where , ,a b cttot – calculated intersectoral terms of trade, fdit – direct foreign investments (% gdp), rert – real exchange rate (іndex, 2010 = 100), gt – government spending (% gdp), m2t – monetary aggregate м2 (million uah), debtt – external public debt (% gdp). data on world prices for raw materials of foreign direct investment, rer and m2 money supply are obtained from the imf database (international monetary fund, n.d.). data on the volume of external public debt was obtained from the relevant statistics of the nbu (national bank of ukraine, 2021). under the logic of the model (1)–(6), the intersectoral terms of trade are calculated as the ratio of prices for raw materials and non-primary exports. three separate indexes are used (nikonenko, 2018): / , a t t ttot praw metal= ; (14a) 1 2/( ), b t t t ttot praw w metal w pfood= + ; (14b) 1 2 3/( ), ñ usppi t t t t ttot praw w metal w pfood w p= + + (14c) where usppitp – us wholesale price index (index 2005 = 100), w1, w2, w3 – weighting factors. the first of the indices is determined by the ratio of world prices for agricultural raw materials and metal products. in a simplified way, it is assumed that the price index for agricultural products characterises raw materials, and the metal price index characterises non-raw materials. the second of the indices considers the share of metal products and food products business, management and economics engineering, 2021, 19(2): 244–271 253 in export volumes. finally, the third of the indices considers the inflation of wholesale prices in the united states – this indicator can be considered an approximate characteristic of other non-primary exports, except for metal products and food products. 4. results and discussion 4.1. using tests for stationarity and to identify the fact of cointegration to characterize endogenous variables to determine the characteristics of endogenous variables, the augmented dickey-fuller test or the phillips-perron test are used, and the johansen cointegration test is used to identify the fact of cointegration. both dickey-fuller (adf) and phillips-perron (pp) tests show the non-stationary of the yt and strt levels, while the first differences of both indicators are stationary (table  1). this means that both indicators have a unit root i (1), and, the basis for studying their cointegration. table 1. stationarity tests for gdp and structural change index (source: own calculations based on data of the national bank of ukraine, 2021) variable sample adf pp levels the first differences levels the first differences yt 2000–2010 –1,64 (0,75) –4,31 (0.0***) 1,03 (0,92) –4,31 (0,0***) 2000–2018 –1,90 (0,64) –5,71 (0.0***) –1,61 (0,77) –5,69 (0,0***) strt 2000–2010 –2,57 (0,29) –8,07 (0.0***) –2,68 (0,24) –8,09 (0,0***) 2000–2018 –3,09 (0,11) –4,08 (0.0***) –3,21 (0,08*) –10,55 (0,0***) johansen’s test confirms the presence of one cointegration equation at a statistical significance level of at least 5% according to four out of five test assumptions (table 2). an error-corrected model (alogoskoufis & smith, 1991) can apply to the gdp and structural change index. table 2. johansen test for cointegration of gdp and structural change index (source: own calculations) model м1 м2 м3 м4 м5 trend no no linear linear quadratic test type without a constant with constant with constant with constant with constant without trend without trend without trend with trend with trend trace r = 0 16.34** 27.16*** 28.15*** 32.18*** 29.41*** r = 1 0.05 4.94 4.43** 5.45 2.29 max eigen r = 0 16.28** 22.21*** 21.71*** 27.34*** 27.11*** r = 1 0.05 4.94 4.43** 5.45 3.34 note: *** means rejection of the hypothesis of no causality at the 1% statistical significance level (** at the 5% level, * at the 10% level). 254 u. nikonenko et al. influence of internal and external factors on the structural changes of national... visual analysis of these indices reveals the differences are relatively insignificant (figure 2). 0 0.5 1 1.5 2 2.5 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 tot-a tot-b tot-c figure 2. ukraine: sectoral terms of trade, 1998–2017 (calculated according to the state statistics service of ukraine, n.d.) 4.3. empirical estimates for longand short-term coefficients of the influence of the index of structural changes on gdp the statistical model (11) assumes that gdp depends on the index of structural changes, which, for its part, reflects the ratio between the primary and non-primary sectors. if 1 0, m i j b = >∑ the economy is in line with the assumption of higher profitability in the non-commodity sector qt; otherwise, the commodity sector has a higher return on investment qs. empirical estimates for longand short-term coefficients of the influence of the index of structural changes on gdp are given in table 3. quite predictably, the coefficient of determination r2 is much higher for estimates of long-term coefficients, but its value for estimates of short-term coefficients is also quite high as for the first differences. for a brief sample of 2000–2010. the included variables explain 48% of changes in gdp dynamics, and for the 2000–2018 sample this figure drops to 41%. in all cases, the adf test detects the stationarity of the residues and allows an adequate interpretation of the results obtained long-term coefficients provide estimates for data in levels and concerning long-term dependencies, they turn out only over time, but short-term coefficients are estimated for data in the first differences, they are dynamic in nature and technically consider the effect of residuals for long-term equations (coefficient d), which allows us to establish the nature of the influence of long-term factors on short-term dependencies, as well as the rate of convergence to an equilibrium state. estimates for long-term ratios show a direct favourable relationship between structural changes in favour of non-primary exports. the corresponding coefficient for strt becomes smaller for the 2000–2018 samples, which may mean approaching a certain equilibrium value of qt/qs over the past few years. however, there is no reason to deny the assumption of the highest return on non-resource sector products. business, management and economics engineering, 2021, 19(2): 244–271 255 ukrainian gdp exaggeratedly reacts to changes in the previous period, because the coefficients at yt–1 exceed 1. the correction occurs with a lag of two quarters, despite that, based on the sum of two quarters, domestic gdp looks very inertial. as might have been expected, the crisis phenomena were reflected in a decrease in gdp. estimates for short-term coefficients confirm the favourable nature of structural shifts in favour of non-primary goods (with a lag per quarter), and the corresponding coefficient at dstrt–1 becomes larger for the 2000–2018 sample. the nature of the autoregressive dependence is also confirmed, when the increase in the dynamics of gdp growth with a lag of one quarter is further corrected with a lag of two quarters. since no confirmation has been found for the destructive impact of crisis phenomena in the short term, this leads to the assumption of their long-term nature. finally, the correction factor d exhibits a very prompt correction of long-term dependencies with some “overshoot”. this structural feature corresponds to a situation where higher profitability of activities in the commodity sector leads to the opposite reaction. the obtained functional dependencies can be considered quite stable, because the estimates of the regression coefficients for the periods 2000–2010 and 2000–2018 practically do not differ. 4.3. estimates of the factors of structural changes in ukrainian exports as provided by the theoretical model (1)–(6), an increase in profitability in the commodity sector should be expected from an improvement in the sectoral terms of trade, should reduce the index of structural changes, but at the same time the equilibrium value of qt/qs rises, which objectively strengthens long-term incentives for investment in non-commodity table 3. estimates of the dependence of gdp on structural changes in ukrainian exports (source: own calculations) independent variable long-term coefficients independent variable short-term coefficients dependent variable yt dependent variable dyt 2000–2010 2000–2018 2000–2010 2000–2018 yt–1 1.203 (7.93***) 1.220 (10.37***) dyt–1 1.394 (5.16***) 1.311 (5.08***) yt–2 –0.226 (–1.50) –0.230 (–1.95*) dyt–1 –0.487 (–2.86***) –0.359 (–2.49**) strt 0.415 (2.26**) 0.263 (2.20**) dstrt–1 1.112 (2.90***) 1.348 (3.74***) crisist –0.625 (–1.95**) –0.457 (–2.21**) – – – – – – d –1.110 (–3.64***) –1.045 (–3.72***) r2 0.97 0.97 r2 0.48 0.41 adf –4.10*** –8.30*** adf –6.34*** –8.42*** 256 u. nikonenko et al. influence of internal and external factors on the structural changes of national... sector. however, the weakness of this trend in the context of significant foreign investment, motivated by the logic of “pushing out” and targeted policy of government stimulation of the non-resource sector, gives reason to hope for a standard dependence, when the rise in prices for raw materials is accompanied by a deterioration in the qt/qs ( 1( 0)b < . since in ukraine foreign investors do not have wide access to the raw material sector, including agriculture, and assembly plants and the service sector have received increased attention, it can be expected that the structural proportions in the economy will improve 2( 0)b > . if government spending is concentrated primarily in the primary sector which can be explained by both profitability considerations and lobbying activities, this will lead to a deterioration in structural ratios, but it is possible that targeted support for the non-primary sector will have the exact opposite effect 1( 0)c <> . at first glance, the impact of rer does not differ from the effects of changing trading conditions, but at least three features need to be considered. first, the rer considers changes in domestic prices and the exchange rate, which do not always correlate with changes in world market prices. secondly, it should be borne in mind that the price level p for noncommodities is only conditionally correlated with the level of domestic prices, because noncommodities can also be exported or serve as substitutes for imports. perhaps ep * commodity prices correlate much more closely with world market prices than non-commodity prices. third, the exchange rate policy creates its own influence, which may be aimed at inflation targeting or the exchange rate itself. combined with the above arguments for the terms of trade, this significantly weakens the intuitive argument that lowering the rer should stimulate the expansion of the commodities sector. in general, the impact of rer on the structural proportions between the raw and non-raw sectors is not unambiguous 2( 0)c <> . in conditions of a fixed exchange rate, an increase in the money supply should be accompanied by an increase in the price level p, which should contribute to the expansion of the non-resource sector, but in an economy with strong devaluation expectations, it is more realistic to hope for an imminent devaluation of the monetary unit. there are incentives to expand the commodity sector. for a floating exchange rate, the consequences of an increase in the price level p are potentially offset by the devaluation of the monetary unit, so one can hope for the neutrality of the money supply regarding the price ratios between the commodity and non-commodity sectors. more precisely, in price inertia in the non-resource sector, a short-term “flight” of the exchange rate downward should be accompanied by a temporary decrease in rer, which is likely to contribute to an increase in the share of the commodity sector. arguments for worsening structural relationships look more convincing (c3 < 0). the accumulation of public external debt is likely to contributing to the raw material specialisation of the economy, as obtained in many studies, but this possibility is not uncontested. if the accumulation of public debt creates a “gap” between domestic consumption i production (agénor, 2016) or reflects overly optimistic expectations about the terms of trade (senhadji, 1997), it is more likely to hope for increased demand for non-primary goods more complementary to domestic demand. however, this does not apply to agricultural products, it is predominantly of a raw material nature and can not only be exported but also consumed in the domestic market. in this case, it is rather difficult to determine the direction of the resulting structural changes. the situation becomes more transparent if external borrowing business, management and economics engineering, 2021, 19(2): 244–271 257 of the public sector is carried out for reasons of reducing the cost of excessive public debt and/or insufficient domestic savings. the devaluation of the monetary unit usually creates a negative balance effect, and this requires a prompt restoration of the balance of payments equilibrium, it is easier to implement by increasing the volume of exports of raw materials. according to the accumulation of external public debt, it becomes a factor of structural changes in favour of the raw materials sector (c4 < 0). similarly, crisis phenomena require an immediate improvement in the balance of export-import of goods and services, objectively strengthens the position of the raw materials sector (c5 < 0). since there is one cointegration equation between the studied indicators, the estimates of the 2sls statistical model with error correction were used. the use of three indices of sectoral terms of trade yielded similar results, primarily for assessing long-term coefficients, but from the point of view of the statistical significance of the obtained short-term coefficients, the specification with the index bttot (table 4). table  4. estimates of factors of structural changes in ukrainian exports, taking into account government spending independent variable long-term coefficients independent variable short-term coefficients dependent variable strt dependent variable dstrt 2000–2010 2000–2018 2000–2010 2000–2018 strt–1 0.433 (3.08***) 0.502 (4.62***) dstrt–1 0.380 (2.26**) 0.408 (2.61***) strt–2 0.216 (1.57) 0.206 (2.02**) – – – 1 b ttot − –0.505 (–2.22**) –0.360 (–2.33**) 1 b ttot −d –0.318 (–1.12) –0.258 (–1.11) fdit–1 0.033 (1.88*) 0.019 (1.95*) dfdit–1 0.025 (2.01**) 0.014 (1.88*) gt 0.008 (0.43) 0.020 (2.32**) dgt 0.014 (0.92) 0.014 (1.64*) rert 1.234 (4.13***) 0.936 (4.77***) drert 0.080 (0.33) 0.724 (1.82*) m2t –0.373 (–3.48***) –0.314 (–4.93***) – – – debtt –0.012 (–1.56) –0.011 (–3.13***) – – – crisist –0.211 (–2.94***) –0.160 (–3.55***) – –0.081 (–1.45) –0.158 (–1.78*) – – – d –1.149(–4.61***) –1.017 (–4.88***) r2 0.74 0.92 r2 0.43 0.34 adf –7.37*** –8.41*** adf –6.34*** –7.11*** note: ***, ** and * denote statistical significance at the 1%, 5% and 10% levels, respectively. calculated by the authors. 258 u. nikonenko et al. influence of internal and external factors on the structural changes of national... the results obtained show the inertial nature of the calculated index of structural changes, which has increased somewhat over the past few years. besides recognising the quite natural inertia of processes in the real sector, this may mean significant institutional factors that are not considered by the specification of the assessed statistical model. according to the results of two quarters, over 2/3 of long-term structural changes are determined by their own dynamics. for short-term dynamics, the inertia remains at a sufficiently high level. it is quite predictable that an improvement in the terms of trade in favour of the commodity sector worsens the structural proportions of qt/qs in ukrainian exports, although the corresponding influence has been weakening over the past few years, as provided by the comparison of long-term coefficients 1 b ttot − for the 2000–2010 and 2000–2018 sample. (both ratios are statistically significant at the 5% level.) no short-term impact of cross-sectoral terms of trade on structural change has been identified (the corresponding coefficient at 1 b ttot −d is negative, but lacks statistical significance). foreign-invested enterprises are stimulating action on both dimensions: longand shortterm. this means that the attraction of foreign capital takes place mainly in the non-resource sector. a certain discomfort is created because the coefficients for fdit–1 і dfdit–1 become smaller for the 2000–2018 sample, because this implies a weakening of the favourable functional dependence in recent years. the decline in rer is accompanied by an increase in the share of non-primary exports, which is mainly of a long-term nature. in the short term, the decrease in rer affects the structural proportions much weaker, and this effect is of relatively recent origin. the beneficial effect of a decrease in rer can be explained by the insignificant dependence of production in the non-primary sector on imported components, but this may be a sign of its low innovativeness. corrective factor d shows a prompt correction of long-term dependencies. this means that structural changes in favour of non-resource exports, which are driven by long-term dependencies, take little time to translate into practice. thus, in order to improve the structural proportions in the ukrainian economy (for example, the export sector), it is necessary to more actively attract fdi, maintain a decrease in rer, prevent an excessive increase in the money supply, refrain from increasing public external debt (the relationship with domestic public debt has not been studied) and crisis phenomena. the resulting relationship suggests that government spending stimulates an improvement in the qt/qs ratio in ukrainian exports, but this should occur without increasing external public debt. government spending should be funded from tax and other budget revenues. the direct relationship between budget revenues and structural shifts in favour of the nonresource sector has empirical confirmation (table 5). estimates of the statistical model (13) with the variable of budget revenues tt (% of gdp) instead of government expenditures show that an increase in budget revenues improves structural relationships in favour of the non-resource sector in the long run, without having an adverse short-term impact. this result can be explained by the observance of the intertemporal budgetary constraint, as provided by equation (5), but other causal mechanisms are sufficient. business, management and economics engineering, 2021, 19(2): 244–271 259 changes to the specification of the regression model did not affect changes in other functional dependencies. almost the only difference concerns the appearance of the influence of the current account balance cat (% of gdp) on the short-term dynamics of structural changes (with a lag of two quarters). the corresponding positive coefficient at dcat–2 provides for an improvement in structural proportions because of an improvement in the current account balance. the effect of the current account balance is not seen for long-term ratios. similarly, including this variable has no statistically significant effect in the previous specification with government spending. this feature can be explained because budget revenues largely depend on customs payments. since changes in the structure of production (exports) can be endogenous, not only depend on internal and external factors but also influence them, functional dependencies were studied using two var models, considering the influence of: price ratios between non-commodity table 5. estimates of the factors of structural changes in ukrainian exports, taking into account budget revenues (source: calculated by authors) independent variable long-term coefficients independent variable short-term coefficients dependent variable strt dependent variable dstrt 2000–2010 2000–2018 2000–2010 2000–2018 strt–1 0.418 (3.44***) 0.462 (4.48***) dstrt–1 0.342 (2.30**) 0.401 (2.85***) strt–2 0.203 (1.74*) 0.204 (2.12**) – – – 1 b ttot − –0.521 (–2.61**) –0.382 (–2.18**) 1 b ttot −d –0.297 (–1.17) –0.248 (–1.18) fdit–1 0.033 (2.14**) 0.016 (1.67*) dfdit–1 0.026 (2.30**) 0.012 (1.71*) tt–1 0.005 (0.34) 0.017 (2.11**) dtt–1 0.004 (0.18) 0.010 (1.10) rert 1.218 (4.51***) 0.929 (5.04***) drert –0.145 (–0.19) 0.553 (1.43) m2t –0.356 (–4.21***) –0.282 (–5.07***) – – – debtt –0.011 (–1.53) –0.011 (–3.41***) – – – crisist –0.206 (–3.10***) –0.149 (–3.56***) – –0.080 (–1.63) –0.061 (–2.05**) – – – dcat-2 0.015 (1.87*) 0.010 (1.76*) – – – d –1.113(–5.01***) –1.038 (–5.50***) r2 0.73 0.92 r2 0.44 0.37 adf –7.24*** –8.48*** adf –6.36*** –7.32*** note: ***, ** and * denote statistical significance at the 1%, 5% and 10% levels, respectively. 260 u. nikonenko et al. influence of internal and external factors on the structural changes of national... and commodity exports, fdi, rer, money supply (monetary aggregate m2), income (gdp), and one of the fiscal variables – government spending or budget revenues. assuming the presence of cointegration between dependent (endogenous) variables, the following causality is used: “tot ⇒ fdi ⇒ g (t) ⇒ m2 ⇒ rer ⇒ str ⇒ y”. the price ratios between commodity and non-commodity exports are considered to be an independent (exogenous) variable in the current period that determines the volume of fdi. in the future, this affects the level of government spending or budget revenues. fiscal indicators determine the supply of money supply, which should affect the rer. in the current period, the structural proportions in exports and gdp are considered because of the remaining endogenous variables. 4.4. graphic visualization of the factors of influence of individual endogenous variables on the structure of domestic exports the results obtained confirm the powerful influence of structural changes in favour of nonresource exports as a factor in increasing gdp (figure 3). –0.5 –0.3 –0.1 0.1 0.3 0.5 0.7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 tot g m2 rer str y –1.5 –1 –0.5 0 0.5 1 1.5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 tot fdi m2 rer str y –0.04 –0.03 –0.02 –0.01 0 0.01 0.02 0.03 0.04 0.05 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 –0.03 –0.02 –0.01 0 0.01 0.02 0.03 0.04 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 а) foreign direct investment b) government spending c) money supply d) rer figure 3. to be continue business, management and economics engineering, 2021, 19(2): 244–271 261 decomposition of the residuals shows that changes in tot determine up to 13% of changes in gdp, while changes in fdi account for up to 10%, and structural changes determine from 21 to 17% of changes in gdp, and the significance of this factor comes with time. considering the structural and investment factors, the dependence of gdp on the instruments of economic policy becomes marginal (figure 4, table 6). –0.08 –0.06 –0.04 –0.02 0 0.02 0.04 0.06 0.08 0.1 0.12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 tot fdi g m2 rer y –0.5 –0.3 –0.1 0.1 0.3 0.5 0.7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 e) str f ) gdp note: the effects of shocks on the endogenous variable are shown with a confidence level of ±2 standard deviations. figure 3. graphic visualisation of the factors of influence of individual endogenous variables on the structure of domestic exports (built by the authors) –0.04 –0.02 0 0.02 0.04 0.06 0.08 0.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 tot fdi g m2 rer str y –0.5 0 0.5 1 1.5 2 2.5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 tot fdi g m2 rer str y а) intersectoral b) foreign direct investment figure 4. to be continue 262 u. nikonenko et al. influence of internal and external factors on the structural changes of national... –1.5 –1 –0.5 0 0.5 1 1.5 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 tot fdi g m2 rer str y –0.04 –0.03 –0.02 –0.01 0 0.01 0.02 0.03 0.04 0.05 0.06 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 –0.04 –0.03 –0.02 –0.01 0 0.01 0.02 0.03 0.04 0.05 0.06 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 tot fdi g m2 rer str y –0.1 –0.05 0 0.05 0.1 0.15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 tot fdi g m2 rer str y –0.5 –0.3 –0.1 0.1 0.3 0.5 0.7 0.9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 c) government spending terms of trade (totcom2) d) money supply e) rer f ) str g) gdp note: consequences of shocks on the endogenous variable shown in confidence ± 2 standard deviations. figure 4. graphic visualisation of the factors of influence of individual endogenous variables on the structure of domestic exports (vecm-1) business, management and economics engineering, 2021, 19(2): 244–271 263 table 6. decomposition of vecm residuals of mutual influence of export structure and terms of trade, foreign direct investments, government spending, money supply, rer and gdp, 2000–2019 (source: calculated by the authors) impulse response to changes forecast horizon (quarters) impulse response to changes forecast horizon (quarters) 4 8 12 16 4 8 12 16 sectoral terms of trade (tot) tot 83 81 79 78 real exchange rate (rer) tot 3 15 23 27 fdi 2 3 4 4 fdi 12 20 24 26 g 4 3 3 3 g 0 0 0 0 m2 2 1 1 1 m2 1 1 1 1 rer 7 8 9 10 rer 75 51 37 25 str 0 0 0 0 str 2 2 2 2 y 1 2 3 3 y 8 11 13 14 foreign direct investment (fdi) tot 4 4 3 3 structural change index (str) tot 12 18 18 18 fdi 80 72 69 66 fdi 4 6 6 6 g 1 3 4 5 g 0 0 0 0 m2 5 4 3 3 m2 2 3 4 5 rer 6 14 17 19 rer 42 48 50 51 str 2 2 3 3 str 37 24 20 18 y 1 1 1 1 y 2 2 1 1 budget receipts (t) tot 8 10 10 10 gdp (y) tot 7 11 12 13 fdi 18 23 24 25 fdi 7 9 10 10 g 44 30 26 23 g 0 1 1 1 m2 5 3 2 1 m2 3 2 1 1 rer 6 8 8 8 rer 1 1 2 2 str 15 21 24 25 str 21 18 18 17 y 4 5 6 7 y 61 57 56 55 monetary aggregate м2 (м2) tot 0 2 4 5 fdi 1 2 3 3 g 15 15 14 14 m2 61 49 42 39 rer 2 5 7 8 str 8 9 9 9 y 12 18 20 21 similar to the 2sls estimates, there is no objection to improved structural proportions resulting from fdi inflows and lower rers. similarly, the 2sls and var / vec estimates agree that the deterioration in str is because of the improved terms of trade in favour of commodity exports and an increase in money supply. the rer factor determines about half of the str changes, while the share of tot gradually grows from 12 to 18%. the weight of fdi and money supply is relatively insignificant – only 6%. 264 u. nikonenko et al. influence of internal and external factors on the structural changes of national... the growth in the share of non-commodity exports helps to attract foreign direct investment (however, the weight of strt in the decomposition of fdit balances is not high), a decrease in government spending (the weight in the decomposition of gt balances gradually increases to 25%), and an increase in the money supply (the weight in the decomposition of м2t balances is 8–9%). this functional influence only strengthens the argument in favour of improving the quality structure of domestic exports. among other functional dependencies, a decrease in rer is a significant factor in encouraging fdi (the weight in the fdi decomposition gradually increases from 6 to 19%), does not contradict the logic of attracting foreign investment to improve the structure of domestic exports. the rest of the factors are less important (the weight of each of them does not exceed 5%), although based on the analysis of the impulse function, one can expect an increase in fdi in the event of a restriction in the supply of money supply, an increase in government spending and a deterioration in tot. there are signs of direct dependence of fdi on economic growth and do not create grounds for assumptions about the “attraction” of foreign investment by economic dynamics within ukraine. it is noted that fdi inflows are accompanied by an increase in government spending (the weight of the factor in the gt decomposition reaches 25%). this may mean that fdi inflows are accompanied by an increase in government spending on projects of oligarchic structures that have a significant influence on political decision-making. in this case, there is a mutual reinforcement between fdi and government spending, but note that the decomposition of the residuals reveals the primacy of the inflow of foreign investment. it is logical to assume that fdi comes in first, and only then government spending grows. another, more optimistic scenario assumes that fdi inflows (not related to the activities of oligarchic structures) are accompanied by an increase in government spending on infrastructure development or excessive optimism, which inclines to an increase in consumer spending. government spending increases with an increase in the money supply, but the influence of this factor in the decomposition of gt balances is insignificant (only 5%). besides structural shifts in favour of non-resource exports, lower government spending is also supported by improved tot, lower rers and higher income. although the weight of each of these factors in the decomposition of the residual gt is relatively low, in total they account for 56 to 77% of changes in government spending. in contrast to the standard “textbook” designs, government spending is quite endogenous in the system of major macroeconomic indicators. the improvement in price ratios in favour of raw material exports is reflected in the supply’s restriction of money supply. however, the weight of tot in changes in the monetary aggregate m2 is insignificant, which does not allow overestimating the importance of the causality of “тот⇒м2”. all other endogenous factors result in an increase in the supply of money supply. if an increase in the money supply in response to an increase in income is quite natural from the point of view of meeting the higher demand for money, then such dependence on government spending means supporting fiscal policy through monetary policy. there was no reaction to the decrease in rer during the first two quarters, but in the future, an increase in the supply of money supply is observed. true, the rer weight in the decomposition of m2 residues is 8%. an improvement in price ratios in favour of non-commodity exports leads to a significant decrease in rer, and the weight of tot in the decomposition of the residuals of this business, management and economics engineering, 2021, 19(2): 244–271 265 indicator gradually increases to 27%. equally important is the dependence on fdi inflows, which increases the rer (the weight of fdi in the decomposition of residuals gradually increases from 12 to 26%). it is most likely that the growing demand for money becomes a factor in the increase in rer, because the consequences of an increase in gdp are similar (the weight of the factor in the decomposition of residuals is 14%). at the same time, rer does not depend on government spending and money supply. if instead of indicator government spending we use the indicator of budget revenues, the important result practically does not change, an increase in the share of non-primary exports is reflected in gdp growth, and the main drivers of favourable structural changes are the rise in prices for non-primary exports and a decrease in rer. the optimising effect of fdi on str and income remains, but the weight of this factor in the decomposition of the residuals of both variables remains low. with the change in the vecm specification, the negative impact of the money supply on str is weakening. the increase in budget revenues reduces the share of non-primary goods in total exports (figure 5, table 7). –0.04 –0.02 0 0.02 0.04 0.06 0.08 0.1 0.12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 tot fdi t m2 rer str y –1 –0.5 0 0.5 1 1.5 2 2.5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 tot fdi t m2 rer str y –1 –0.5 0 0.5 1 1.5 2 2.5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 tot fdi t m2 rer str y –0.04 –0.02 0 0.02 0.04 0.06 0.08 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 а) intersectoral b) foreign direct investment c) government spending terms of trade (totcom2) d) money supply figure 5. to be continue 266 u. nikonenko et al. influence of internal and external factors on the structural changes of national... –0.04 –0.03 –0.02 –0.01 0 0.01 0.02 0.03 0.04 0.05 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 tot fdi t m2 rer str y –0.1 –0.05 0 0.05 0.1 0.15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 tot fdi t m2 rer str y –0.5 –0.3 –0.1 0.1 0.3 0.5 0.7 0.9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 e) rer f ) str g) gdp note: the effects of shocks on the endogenous variable are shown with a confidence level of ±2 standard deviations. figure 5. graphic visualization of the factors of influence of individual endogenous variables on the structure of domestic exports (vecm-2) table 7. decomposition of vecm balances of the interaction of the structure of exports and trade conditions, fdi, budget revenues, money supply, rer and gdp, 2000–2019 (source: calculated by the authors) impulse response to changes forecast horizon (quarters) impulse response to changes forecast horizon (quarters) 4 8 12 16 4 8 12 16 sectoral terms of trade (tot) tot 84 79 77 75 real exchange rate (rer) tot 1 11 17 20 fdi 1 2 2 2 fdi 10 18 22 24 t 2 3 3 3 t 20 15 12 11 m2 4 8 5 5 m2 1 1 1 1 rer 8 10 11 12 rer 63 46 37 31 str 0 1 1 1 str 1 2 4 5 y 1 1 2 2 y 5 7 8 8 business, management and economics engineering, 2021, 19(2): 244–271 267 the revision of the vecm specification does not change the conclusion on the increase in rer from fdi inflows and the increase in income. similarly, the money supply decreases after commodity prices rise, while the opposite occurs with higher incomes, lower rers, and improved export patterns. certain differences lie because fdi does not respond to rer, and the negative feedback of m2 on the increase in fdi also disappears. the inflow of fdi increases budget revenues, does not differ from the nature of the impact on government spending, but the weight of fdi in the decomposition of t balances is three times lower – 4–8%. a similar symmetry is characteristic of the dependence of government spending and budget revenues on str, but in the second case, the weight in the decomposition of residuals t is also approximately half as much – 10–13%. growing revenues to the budget are reflected in an increase in rer (the weight of t in the decomposition of residuals is initially 20% and eventually decreases to 11%), which differs from the neutrality of government spending on rer. also, with an increase in budget revenues, the resulting decrease in str becomes more expressive. impulse response to changes forecast horizon (quarters) impulse response to changes forecast horizon (quarters) 4 8 12 16 4 8 12 16 direct foreign investments (fdi) tot 0 1 1 1 structural change index (str) tot 11 20 23 24 fdi 82 78 77 77 fdi 2 4 4 5 t 13 16 17 17 t 4 5 6 6 m2 0 0 0 0 m2 1 1 1 1 rer 1 2 2 2 rer 41 50 53 54 str 3 2 2 2 str 36 17 11 8 y 1 1 1 2 y 4 3 2 2 budget receipts (t) tot 1 2 4 4 gdp (y) tot 4 9 12 14 fdi 4 6 7 8 fdi 4 7 9 9 t 78 74 72 70 t 4 3 2 2 m2 0 0 0 0 m2 1 1 1 1 rer 4 4 3 3 rer 1 2 3 4 str 10 11 12 13 str 23 17 14 12 y 4 3 3 2 y 63 61 59 58 monetary aggregate м2 (м2) tot 1 3 5 6 fdi 4 5 6 7 t 0 0 0 0 m2 82 75 71 69 rer 0 2 3 3 str 4 4 3 3 y 8 11 11 12 end of table 7 268 u. nikonenko et al. influence of internal and external factors on the structural changes of national... structural changes (in favour of the non-resource export sector of the domestic economy) will give us the opportunity to attract foreign investment, preferably the capital of the largest industrial companies with a worldwide reputation (in ukraine, foreign investors do not have wide access to the raw materials sector, including agriculture, and assembly plants received increased attention and service industry). to improve the structural proportions in the ukrainian economy, it is worth: maintaining a depreciation of the exchange rate, but this does not mean the devaluation of the monetary unit is advisable, but rather the need to maintain low inflation (the beneficial effect of the depreciation of the exchange rate can be explained by the insignificant dependence of production in the non-resource sector on imported components) to limit the supply of monetary mass and accumulation of external public debt and avoid crises. government spending should occur without increasing the external public debt, that is, they should be financed from tax and other budget revenues. budget revenues, which largely depend on customs duties, improve the structural balance in favour of the non-resource sector in the long run, without having an adverse short-term impact. this result can be explained by the observance of the intertemporal budgetary constraint, but other causal mechanisms are sufficient. thus, we have empirically proved that an increase in the share of non-primary exports is reflected in gdp growth, and the main drivers of favourable structural changes are the rise in prices for non-primary exports and a depreciation of the exchange rate. summing up, we find that for structural changes in favour of more technological (nonresource) exports, it is necessary to attract more fdi, preferably the capital of the largest industrial companies with a worldwide reputation, to limit the supply of money supply and the accumulation of external public debt, and also to avoid crisis phenomena. a decrease in rer is desirable, but this does not mean the advisability of devaluing the currency, but the need to maintain low inflation. conclusions the novelty of the study lies in the development of a methodology of identifying the current state and instrumental factors of economic policy that can speed up economic growth based on favorable structural shifts (in favor of the non-resource export sector). it has been empirically proven that the structural proportions in favor of non-resource (technological) exports are improving due to: a) the rise in prices for metal products and food products compared to agricultural products, b) foreign direct investment receipts, c) a decrease in the exchange rate, d) an increase in the share of government spending in gdp, e) reduction of external public debt, f ) reduction of excess money supply during crises, structural proportions deteriorate. the increase in government spending stimulates non-resource exports, but should occur without accumulating external public debt. an increase in tax and other budget revenues also improves the structural ratios in favour of the non-resource sector in the long run, without having an adverse short-term impact. additional verification of the obtained results for sustainability using the alternative var/ vec methoddoes not refute: an improvement in structural proportions because of inflows of foreign direct investment, deterioration of the terms of trade in favour of commodity exports business, management and economics engineering, 2021, 19(2): 244–271 269 and a decrease in the money supply. a depreciation of the exchange rate is desirable, but this does not mean the devaluation of the monetary unit is advisable, but rather shows the need to maintain low inflation. an increase in income (gdp) does not provide an evolutionary improvement in the structure of exports. var/vec estimates confirm the powerful impact of structural changes in favour of nonresource exports as a factor in increasing gdp. foreign direct investment has a similar beneficial effect. an increase in the money supply has a short-term positive impact, such as a monetary “surprise” that gradually diminishes. a depreciation of the exchange rate initially leads to a decrease in income, but later it becomes expansionary. government spending and an increase in budget revenues have some adverse effects, but the most negative factor is the improvement in the terms of trade in favor of agricultural raw materials. the growth in the share of non-resource exports helps to attract foreign direct investment, reduce government spending and increase the money supply. this functional influence only strengthens the arguments in favor of improving the quality structure of domestic exports. based on the analysis of the decomposition of vecm balances, it was found that: a) attracting foreign direct investment contributes to a decrease in the exchange rate, b) inflows of foreign direct investment are accompanied by an increase in government spending, c) a decrease in government spending contributes to an improvement in the terms of trade, a depreciation of the exchange rate and an increase in income (although the weight of each of these factors in the decomposition of the residuals gt is relatively low, but in total they account for 56 to 77% of changes in government spending), d) an increase in government spending leads to an increase in the of money supply, e) the dynamics of the exchange rate depends significantly on world prices for raw materials and foreign direct investment. at the time of this writing, the authors did not have official 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(2019). factors that influence sharing behaviors in sharing economy based on the theory of social capital and social exchange: example of taiwan-based uspace. in 2019 ieee international conference on industrial engineering and engineering management (ieem) (pp. 659–663). ieee. https://doi.org/10.1109/ieem44572.2019.8978908 http://global-national.in.ua/archive/16-2017/27.pdf https://doi.org/10.1109/ieem44572.2019.8978908 copyright © 2020 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: natashasaman20@gmail.com the impact of perceived organizational support and proactive personality on affective commitment: mediating role of prosocial motivation ihsan ullah , natasha saman elahi *, ghulam abid , matti ullah butt school of business administration, national college of business administration & economics, lahore, pakistan received 27 february 2020; accepted 10 april 2020 abstract. purpose – the main objective of this study is to examine the effect of perceived organizational support and proactive personality on prosocial motivation. furthermore, it looks upon the influence of prosocial motivation on affective commitment. the indirect effect of perceived organizational support and proactive personality on affective commitment through prosocial motivation is also examined. research methodology – the self-administered survey questionnaires are utilised for collecting the data from the service sector employees. data were analyzed by using process macros on an actual sample of 221. findings – results indicate that perceived organizational support and proactive personality are the drivers of prosocial motivation. likewise, prosocial motivation is positively associated with affective commitment. besides, the indirect effect of perceived organizational support and proactive personality on affective commitment through prosocial motivation is significant. research limitations – this study is conducted in the specific culture and the organizational context of pakistan (lahore). data of all study variables are collected from the employees (single source) and at one point in time. practical implications – the study findings suggested that organizations should always provide support to their employees that encourage them to show more desire to help their colleagues in the working environment and fosters their commitment towards their organization. originality/value – it is the first study that examines the indirect impact of pos and proactive personality on affective commitment via prosocial motivation. keywords: perceived organizational support, proactive personality, affective commitment, prosocial motivation. jel classification: d23,o15, q56. business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 2: 183–205 https://doi.org/10.3846/bme.2020.12189 introduction the notion of prosocial motivation is a desire to help others has attracted extensive attention in the field of positive organizational scholarship, and organizational behaviour due to its http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 mailto:natashasaman20@gmail.com https://orcid.org/0000-0003-2115-1345 https://orcid.org/0000-0001-7029-783x https://orcid.org/0000-0002-3271-9082 https://orcid.org/0000-0003-0793-8715 https://doi.org/10.3846/bme.2020.12189 184 i. ullah et al. the impact of perceived organizational support and proactive personality... favourable outcomes (grant & berg, 2010; grant & sumanth, 2009) such as abid, sajjad, elahi, and farooqi (2018) found the prosocial motivation is the contributor to work engagement, and thriving at work.  grant (2007), shao, cardona, ng, and trau (2017) demonstrated  that  employee’s commitment towards people and their organization is formed by prosocial motivation. voet, steijn, and kuipers (2017) revealed that prosocial motivation positively influences commitment. literature also shows that employee performance, persistence, productivity, and organizational citizenship behaviour are the outcomes of prosocial motivation (grant, 2007; korsgaard, meglino, & lester, 1997; rioux & penner, 2001).  cai, huo, lan, chen, and lam (2019) noted that prosocial motivation is the predictor of taking charge. prosocially motivated employees are important assets of any organization because they help others within the organization (rioux & penner, 2001), take the initiative (de dreu & nauta, 2009), give more preference to the goals of their colleagues (meglino & korsgaard, 2004), involved in creativity  (grant & berry, 2011),  accept negative feedback  for self improvement (korsgaard et  al., 1997), complete their task persistently, perform better (grant, 2008a) and involved in the inclusive behaviour (nelissen et al., 2016). contrary, prosocial motivation has negative association with knowledge hiding (babič et al., 2018) and subjective wellbeing (kibler et al., 2018). prosocial motivation creates beneficial individual and organizational outcomes in an excellent and supportive working environment. the beneficial outcomes can diminish with over a period of time without proper work setting (shao et  al., 2017). therefore, it is essential to investigate those factors and conditions that enable the employees to help their beneficiaries such as co-workers, supervisors, and customers, and also prompt the organization by creating a supportive and pleasant working environment that can take the advantages of the beneficial outcomes. thus, the main aim of the present study is to inspect those factors that lead to employee prosocial motivation. although prosocial motivation is an essential construct in the organizational setting, but in the literature, only some studies have investigated the contextual factors that prompt the positive influence of prosocial motivation on job outcomes. past studies examine that relation of contextual factors, for example, organizational trust (koçak, 2020), workplace spirituality (otaye-ebede et al., 2019), family-supportive behaviour (bosch et al., 2018), job characteristics (i.e. tasks significance, task identity and autonomy) and social characteristics (i.e. interaction with insides) with the prosocial motivation (grant, 2007). zhu and akhtar (2014) found that leaders can influence the helping behaviour of employees by using numerous approaches that depend on their prosocial motivation tendency. when prosocially motivated employees recognize that their supervisors are trustworthy and honest, and then they carry out all tasks in effective manners  (grant & sumanth, 2009). in the previous studies, the influence of contextual factor, such as perceived organizational support (pos) on prosocial motivation is not examined. therefore, the focus of our study is to empirically test the relationship between perceived organizational support and prosocial motivation. besides, we suggest in our study prosocial motivation is influenced by personal characteristics such as proactive personality. in the literature, the relationship between proactive personality and prosocial motivation is not examined yet for the best of our knowledge. therefore, we propose in our study, proactive personality employees have a desire to help other people. moreover, the supervisor’s prosocial motivation promotes organizational commitment towards has been tested empirically in the past literature (shao et al., 2017). while researchers do not consider the association between employees prosocial motivation and business, management and education, 2020, 18(2): 183–205 185 affective commitment towards their organization. therefore, our study postulates that employees are emotionally attached to their organization and goals when they are prosocially motivated. likewise, in this study, we have examined the indirect effect of perceived organizational support and proactive personality on the employee’s affective commitment towards their organization through prosocial motivation. the mediating role of prosocial motivation among the perceived organizational support, proactive personality and affective commitment were not examined because previous studies have focused on examining the moderating effect of prosocial motivation (butt et al., 2018; škerlavaj et al., 2018). in this study, we have taken an affective commitment as criterion variable because  it is one of the components of organizational commitment that has attained a lot of attention as compared to normative commitment and continuous commitment. affective commitment is defined by as “employee’s desire to stay as a member of the organization, an intention to make an effort for the organization, a belief in the values and norms of the organization” (glazer & kruse, 2008). it explained the relationship between the employee and the organization (mowday & sutton, 1993). from a theoretical view, we want to examine how prosocially motivated employees will emotionally attach to their organizations when they have a proactive personality and also when they perceive that their organizations are more supportive for them. from the practical perspective, affective committed employees are satisfied, perform better, involve in the voluntary behaviour (meyer & herscovitch, 2001; meyer et al., 2002), and transfer their knowledge among other employees (marques et al., 2019). employees who are emotionally committed to the organization have a higher degree of performance (in-role job performance), are more loyal to the organization, have intrinsic motivation, obtained the organizational goal with enthusiasm, and always want to stay with their organization (harrison-walker, 2001; meyer & allen, 1991; lee et al., 2008). in addition, employees who are affectively committed show less intention to leave (alkhateri et  al., 2018; haque et  al., 2019) and withdrawal behaviours, i.e. lateness, absenteeism and turnover (kim & beehr, 2019. therefore, the major goals of the current study are 1) to examine the association among pos, proactively personality and prosocial motivation, 2) to study relationship prosocial motivation and affective commitment, 3) to examine the intervening role of prosocial motivation between pos and affective commitment, and also proactive personality and affective commitment. all relationships are summarized in figure 1. h4 h5 h2 ���������� ��������������� �� ��� ���������� ����������� ���������� ��������� �������� ���������� h1 h3 figure 1. proposed model 186 i. ullah et al. the impact of perceived organizational support and proactive personality... 1. literature review and hypotheses development 1.1. perceived organizational support and prosocial motivation prosocial motivation refers to “as the desire to spend efforts or benefit out of concern for other people or groups” (grant, 2007, 2008b). prosocial denotes “benefits of others”, and motivation means “desire to act” (oxford english dictionary, 2009). prosocially motivated people to have characteristics of cooperation, amicability, sympathetic and value the others (grant & berry, 2011). batson, ahmad, powell, and stocks (2008) stated that prosocially motivated personnel’s could help other people because they have concern for them, and they want to continue their relationship within the value group. by doing so, they think that they are doing the right things for long term relationship with other colleagues and hence support the organization. by doing all such, they think positively about themselves. grant (2008b) stated that prosocial motivation is differentiated from intrinsic motivation on the basis of three-facet (i) goal-directedness, (ii) temporal focus and (iii) self-regulation. prosocial motivation is less autonomous and whereas intrinsic motivation is fully autonomous in term of self-regulation. prosocial motivation depends on other-oriented values, goals and focused on producing outcomes that could be beneficial in the long run, while intrinsic motivation is mainly based on the task that focused on finishing it only at the present time in the term of self-directedness and temporal focus (grant & berry, 2011). perceived organizational support (pos) is defined by eisenberger, huntington, hutchison, and sowa (1986) as the “degree to which employees believed that their organizations value their contributions, and cares about their well-being and fulfils their socioemotional needs such as affiliation, social support, and esteem”. hakkak and ghodsi (2013) defined pos as “a kind of cooperation or support that is necessary to perform a job effectively”. pos is social, not merely a psychological process that is intended through the information that employees acquire from their social setting. both the organizational support theory and social exchange theory are considered for a theoretical foundation of perception of organizational support. eisenberger and his colleagues have developed the organizational support theory in 1986. this theory stated that employees form a general belief with respect to how much their organization values their contribution and thinks about their socio-emotional and well being; furthermore, to what extent their loyalty and performance to the organization is rewarded (eisenberger et al., 1986). employees are always committed to supportive organizations (malatesta & tetrick, 1996). besides, social exchange theory alluded that reciprocity is an essential facet of social life and the relationship of the employee and the organization. according to gouldner (1960), reciprocity is a vital concept that is linked to pos. when personnel perceived that their organization is more supportive with them and care about their well-being, the norms of reciprocity (gouldner, 1960) propel them to assist their organizations in its goal accomplishment (eisenberger et al., 1986). it also enables them to repay their organizations in the form of more favorable job outcomes, for example, higher organizational commitment and job performance, and less negative behaviours such as deviance, absenteeism, voluntary turnover, tardiness emotional exhaustion and psychometric strain (caesens et  al., 2017) as compared to those employees who have a low level of pos (mohamed & ali, 2015). business, management and education, 2020, 18(2): 183–205 187 on the basis of organizational support theory (ost) and social exchange theory (set), a perception of organizational support creates with many positive outcomes, for example, job satisfaction (alder et al., 2012), organizational commitment, felt obligation, in-role job performance (arshadi, 2011), affective commitment (meyer et al., 2002), organizational citizenship behaviour (asgari et  al., 2020), task performance (miao, 2011), work engagement (murthy, 2017),  work performance (miao & kim, 2010), change in readiness, trust in management (gigliotti et  al., 2019), job embeddedness (akgunduz, & sanli, 2017), employees  favourable orientation toward their work and organization, their helping behaviour and psychological wellbeing (rhoades & eisenberger, 2002), voice (bergeron & thompson, 2020), ideal commitment, innovative behaviour (li & huan, 2019) and also have a negative association with the turnover intention (arshadi, 2011), and burnout (alder et al., 2012). furthermore, a study of harris and kacmar (2018) affirmed that higher commitment, higher performance and lower deviance are outcomes of perception of organizational support. a meta-analysis of kurtessis, eisenberger, ford, buffardi, stewart, and adis (2017) found that pos enhance job satisfaction, subjective wellbeing, performance, self efficacy, organizational identification, work-family balance, organizational citizenship behaviour, job organizational based self-esteem, also lower stress, work family conflict and withdrawal behaviours of employees. a recent cross-cultural meta analysis also indicated that pos is the predictor of many desirable attitudinal and behavioural outcomes such as job involvement, in role job performance, ocb (organizational citizenship behaviour) and lower turnover intention (rockstuhl et al., 2020). employees perceived that their organizations are more supportive to them,  accomplished their socio-emotional and material needs and also care about their well-being (rhoades & eisenberger, 2002), as a result of it, they are likely more involved in the prosocial motivation. on the basis of the above discussion, we proposed in the context of perceived organizational support employees will be prosocially motivated. so, our hypothetical statement is: hypothesis 1: perceived organizational support is positively related to prosocial motivation. 1.2. prosocial motivation and affective commitment an important component of loyalty and dedication is an affective commitment; it is defined by  allen and meyer (1996) “employee’s emotional attachment to the organization, and its goals.” it is also defined by glazer and kruse (2008) as “employee’s desire to stay as a member of the organization, an intention to make an effort for the organization, a belief in the values and norms of the organization”. affective commitment is influenced by many factors and researchers have characterized these factors in main categories, for example (i) job characteristics, (ii) work experiences, (iii) structural characteristics, (iv) personal characteristics, (v) organizational factors (allen & meyer, 1990). job characteristics are comprised of job stress, management style, responsibility degree and award system (sayğan, 2011). work experiences consisted of the organizational rewards, supervisor support and procedural justices (meyer & allen, 1997). decentralization, the degree of control, organization size, wage systems, formalization degree, working hours, and opportunities of career are included in the structural characteristics (meyer & allen, 1997;  sayğan, 2011).  job structure is the key indicator of affective organizational commitment, while the intrinsic job satisfaction and job enrichment identified as job structure features also determined the affective commitment 188 i. ullah et al. the impact of perceived organizational support and proactive personality... (oyinlade, 2018). a study of bouraoui, bensemmane, ohana, and russo (2019) illustrated that affective organizational commitment is an outcome of corporate social responsibility. meyer and allen (1997) indicated that affective commitment is strongly influenced by work experiences as opposed to personal and structural characteristics. organizational factor consisted of the perceived organizational support and leadership styles. affective commitment is strongly influenced by the perceived organizational support (sharma & dhar, 2016). jang and kandampully (2018) explained in their research servant leadership based on ethical behaviours, and employee growth can contribute to enhancing the affective commitment of employees towards their organization. hendryadi, suratna, suryani, and purwanto (2019) found that empowering leadership is a strong contributor to affective organizational commitment. a study by lee, woo, and kim (2018) revealed that transformational leadership and affective commitment are linked in a positive manner with each other, as a result of it, committed employees involved in the extra role activities, i.e. organizational citizenship behaviour. kooij and boon (2017) indicated that perception of hpwp (high performance work practices) creates an emotional attachment among the employees in the organizational setting. erum, abid, conteras, and islam (2020) empirically demonstrated that employees developed an emotional connection to the organization when they receive respect in the workplace (civility) and perceive their job as a way to support their families (family support). previous studies showed that affective commitment influenced by personal characteristics, for example, gender, age, tenure, education, personality, values, a desire to success (sayğan, 2011; meyer et al., 2002). st-hilaire, and de la robertie (2018) revealed the positive link of affective commitment with job challenges, workload and internal motivation to remain on the job. employees create positive feelings and stronger affective commitment towards their organization (ko & choi, 2020), when they perceive compassionate behaviours from other members of the organizations. individuals who view their work as meaningful appear to recognize pleasant job experience and greater affective commitment (jiang, & johnson, 2018). chordiya, sabharwal, and goodman (2017) noted that positive feeling of employees about their job enables them to show more commitment to the organizations. in this study, we have focused on the personal characteristic such as prosocial motivation that influenced the employee’s emotional attachment towards (affective commitment) their organization. shao et al. (2017) found that employees’ prosocial motivation and perception of supervisor prosocial motivation is the strongest predictor of organizational commitment. likewise, the study of ong, tan, villareal, and chiu (2019) found that prosocial motivation has a positive association with organizational commitment. in line with these assumptions, we assumed employee prosocial motivation and affective commitment (one element of organizational commitment) are linked within a positive way. prosocial motivation is intimately related to integrity, such as sincerity and social justice (meglino & ravlin,  1998), and benevolence, such as concern for well being of others (marcus, lee, & ashton, 2007). a study of cullen, parboteeah and victor (2003) has found a positive association between the ethical climate of benevolence (concern for well being of others) and organizational commitment. employees with a greater prosocial motivation are more interested in placing themselves in the role of others, recognizing the needs of others and perceiving the world in a considerate manner, as a consequence of which they are engaged in helping behaviour. alternatively, business, management and education, 2020, 18(2): 183–205 189 employees with low prosocial motivation do not worry about other people’s expectations and needs; they focus on their objectives; therefore, they lack the opportunities to impact positively on others (shao et al., 2019). prosocially motivated employees perceived that their goals and values are aligned with prosocially motivated supervisors (dirks & ferrin, 2002; zhang et al., 2012) and co-worker. this configuration will cultivate the advancement of better-shared connections and understanding and also urge them to look out of their organizations and other people (dirks & ferrin, 2002; gerstner & day, 1997; zhang et  al., 2012). prosocially motivated employees to display more commitment towards their organization when they perceive that their goals diverge with the goals of supervisors (shao et al., 2017). thus, in this study, we expected that prosocially motivated personnel’s would emotionally be attached to the organization and its goals. the hypothetical statement is: hypothesis 2: prosocial motivation is positively related to affective commitment. based on hypothesis 1 and hypothesis 2, we propose that prosocial motivation intervenes between the perception of organizational supports and affective commitment relationship. the employee will be prosocially motivated when they perceive that their organization and supervisors are more supportive. as a result of prosocial motivation, they show affective commitment towards their organization. thus we propose that: hypothesis 3: prosocial motivation mediates the relationship between perceived organizational support and affective commitment. 1.3. proactive personality and prosocial motivation proactive personality is described as “dispositional tendency to take an individual initiative within a wide range of situations and activities”. the archetypal proactive personality is defined as “someone who is relatively unrestrained through situational forces and who effect the change in environment” (bateman & crant, 1993). grant and ashford (2008, p. 8) refers proactive personality as “anticipatory the action that employees take to impact themselves and/or their environments”. crant (2000) considers that proactive behaviour is the main contributor to proactive personality. past empirical studies revealed that proactive personality is a complex and multidimensional concept. it creates many significant and positive outcomes for an organization as well as for an individual; such as individual job performance (andri et  al., 2019; crant, 1995), leadership effectiveness (crant & bateman, 2000), work team performance (kirkman & rosen, 1999), innovation-related behaviour (ng & feldman, 2013), entrepreneurship (becherer & maurer, 1999), thriving at work (jiang, 2017), employee altruism (lv et  al., 2018), job search (brown et  al., 2006), employee creativity (kim et  al., 2009), job crafting (zhang et  al., 2018), increase in salary, promotion (seibert et  al., 1999), lxm quality and voice behaviour (wijaya, 2018), career satisfaction (joo & ready, 2012), citizenship behaviour (hua et  al., 2019), training outcomes, i.e. behavioural intention and motivation (major et  al., 2006), motivation to learn and transfer intention (roberts et  al., 2018), change in job satisfaction (kuo et  al., 2019), innovative performance (rodrigues & rebelo, 2019), work engagement (dikkers et al., 2010; lv et al., 2018; tisu et al., 2020), and life satisfaction (wang et  al., 2018). proactive personality has also been directly linked to career success. proactive personality enhances job performance, work interference in family and reduce the interference of family in work (altura et al., 2020). 190 i. ullah et al. the impact of perceived organizational support and proactive personality... the research demonstrated that proactive individuals as compared to reactive individuals select, create, and influence work situations that increase the likelihood of career success (seibert et al., 1999). newman, schwarz, cooper, and sendjaya (2017) demonstrate that employee with strong proactive personality is more likely to respond to positive leadership behaviours. servant leadership and organizational citizenship behaviour link can be fortified by proactive personality. proactive personality individuals take part in initiatives of the organization (parker, 1998). they have a capacity of tolerating the stress that presents in a challenging job (parker & sprigg, 1999). in addition, people with highly proactive personality are actively engaged in taking the initiative, influence the change in environment, identify the different opportunities, carry out the goals with persistence (bateman & crant, 1993), have a different approach towards finding jobs and career (crant, 1995), energetically solve the obscurity and ratify the change (allen et  al., 2005). in addition, proactive personnel’s are better able to engage in creation (crant, 2000), propagation and execution of the idea. proactive people can lessen uncertainties more rapidly because of three eminent traits of proactive personality: change orientation, self-inception, and future core interest (parker et al., 2010). they continue and recognize new opportunities such as the acquisition of knowledge and skill for their self-improvement that will help them in future encouragement. proactive individuals challenge the status quo while reactive individuals sustain the status quo because they react to the change rather than the formation of change (seibert et al., 1999). people with a proactive personality welcome social connections as compared to reactive individuals (yang et al., 2011). social connections influence the attitudes and behaviours of individuals (brass et al., 2004). people who inserted in social connections positively associated with helping behaviour (sparrowe et  al., 2001) because prosocial motivation (helping behaviour) is considered as the outcome of interpersonal interactions (bolino et  al., 2002) and continual interactions between the members of the organizations can enhance the helping behaviour (perlow et al., 2004). so, we posit that individuals with a proactive personality have more desire to help their co-workers and also assist them in their tasks while exchanging their information and knowledge. likewise, those employees who have a proactive personality are prosocially motivated because of their secure connection with other people. employees showed emotional attachments towards their organization when they are prosocially motivated. thus, on the basis of the above discussion, we posit that: hypothesis 4: proactive personality is positively related to prosocial motivation. hypothesis 5: prosocial motivation mediates the relationship between proactive personality and affective commitment. 2. methodology 2.1. sample and procedure the current study was descriptive and correlational in nature because the aim of the current study was to examine the association among the study variables. the targeted population was working employees of the service sector, particularly banking employees and educational institutes located in a large metropolitan city in south asia. the service sector is the most critical sector because it significantly contributes to the country gdp and economic growth, that is why this sector has been selected for this study. we used the purposive sampling techbusiness, management and education, 2020, 18(2): 183–205 191 nique for the study data collection process. the self-administered questionnaire was used for the collection of primary data from the respondents by following the cross-sectional research design in the non-contrived setting. the survey questionnaire consists of 22 measuring items and split into two parts. the first section deals with the demographic characteristics of employees, such as gender, tenure, and marital status. the second section contains questions related to the study variables (i.e. 8-items of perceived organizational support, 6-items of proactive personality, 5-items of prosocial motivation, and 3-items of affective organizational commitment). for all the banks and educational institutes, the method of data collection was similar at each level as the first author was personally met the higher management of banks and educational institutes and told them about the purpose of our research. a cover letter was also provided to give ascertain that their information would remain confidential because they feel hesitated to give information to someone. the survey was conducted only with management approval, cooperation and willingness of employees in the whole process. after that, questionnaires were circulated to the respondents by researchers. total 300 survey questionnaires were distributed to the employees in the banking and educational employees; we received back 221 completed questionnaires. after receiving these questionnaires, we have screened these questionnaires for the identification of missing responses, but none of them was found with this problem. the actual response rate is 73.66%, which is suitable for organizational research (baruch & holtom, 2008). in this study majority of participants were male 125 (56.6%) while 96 (43.4%) were female. concerning marital status, about 105 (52.5%) participants were single, while 116 (47.5%) were married. the distribution of research participant’s marital status by their gender indicated that 75(33.9%) male are single, 50 (22.6%) are married, while 30(13.6%) female are single, and 66 (29.9%) female are married. furthermore, the 63 (28.5%) participants (male = 31(14%), female, 32(14.5%)) have 1–5 years of tenure, 84(38%) participants (male = 48(21.7%), female = 36(16.3%)) have 6–10 years working tenure, and 44 (19.9%) participants (male = 27(12.2%), female = 17(7.7%)) have 11–15 years of working tenure, and 30 (13.6%) participants (male = 19(8.6%), female = 11(5%)) have above 15 years of experience with the employing organization. 2.2. measures the well-established measures were used for the measurement of variables in this study. all constructs used 7point likert scale items, ranging from (1 = entirely disagree to 7 = mostly agree).  perceived organizational support was assessed with 8-item came from eisenberger et  al. (1997). a sample includes “my organization strongly considers my goals and values”. proactive personality was measured by a scale of bateman and crant’s (1993). this scale consisted of the 6-items. a sample item is “if i see something i don’t like, i fix it”. the prosocial motivation was assessed with the 5-items scale of grant and sumanth (2009). a sample item is “i get energized by working on tasks that have the potential to benefit others”. the affective commitment was assessed with a 3-items scale of mowday et  al. (1979). a sample item is “i am proud to tell people whom i work for”. in this study, we have obtained the employee’s demographic information (gender, marital status and working tenure). although these variables are not incorporated in the theoretical model, we have controlled the effect of these demographic variables. 192 i. ullah et al. the impact of perceived organizational support and proactive personality... 3. results 3.1. descriptive analysis a mean, standard deviation, internal consistency and bivariate pearson correlation analysis among all the study variables (perceived organizational support, proactive personality, prosocial motivation, and affective commitment) and demographic characteristics (gender, marital status and tenure with the current organization) was performed before hypotheses testing by using spss 24.  the correlation coefficients are in anticipated directions and provide initial support for study stipulated hypothetical relationship. in line with our proposed hypothetical relationships, correlation analysis demonstrated that perceived organizational support has a positive and significant association with prosocial motivation (r  = 0.263,  p  < 0.01), and employees’ prosocial motivation and affective commitment are positively and significantly related to each other (r = 0.319, p < 0.01). both the relationships are in accordance with h1 and h2, respectively. the correlation analysis also showed that proactive personality has a significant and positive association with prosocial motivation (r = 0.442, p < 0.01). this relationship is in accordance with h4. in addition, correlation analysis has not found any association among study variables and demographics (see table 1). table 1. means, standard deviations, and correlation analysis variables m sd 1 2 3 4 5 6 7 1. gender 1.43 0.49 – 2. marital status 1.52 0.50 0.285** – 3. tenure 3.25 0.59 –0.310** –0.39** – 4. pos 5.89 0.54 –0.141* –0.10 0.11 (0.73) 5. proactive personality 6.04 0.58 –0.11 –0.02 0.10 0.34** (0.74) 6. prosocial motivation 6.17 0.58 –0.07 –0.05 0.07 0.26** 0.44** (0.72) 7. affective commitment 5.93 0.94 –0.05 –0.08 0.08 0.27** 0.29** 0.31** (0.72) note: n = 221, alpha values are on the diagonal in parenthesis. ** p < 0.01 level, * p < 0.05 level. 3.2. confirmatory analysis amos 24 was used for the assessment of the fit indices of measurement model and alternative models. the outcomes indicated that the fit indices value of four factor model (measurement model), such as gf1 = 0.90, χ2/(df ) = 1.56, , ifi = 0.91, cfi = 0.90, agfi = 0.86, rmsea = 0.05, rmr = 0.04 best fit to our data set because all values of fit indices exceed the acceptable values of agfi > 0.86, (χ2/(df ) < 3, cfi > 0.90, rmsea < 0.08, srmr < 0.05, tli > 0.90, gf1> 0.90, ifi > 0.90 (hu & bentler, 1999) as compared to alternate models, for example ist alternate model (2 factor model) in which we have combined prosocial motivation and perceived into one factor, and affective commitment and proactive personality into another factor. the outcomes indicated that values fit indices (gf1 = 0.76, χ2/ (df ) = 3.45, ifi = 0.58, rmsea = 0.11, cfi = 0.57, rmr = 0.08, agfi = 0.71) of two factor model wore opposed to measurement model. business, management and education, 2020, 18(2): 183–205 193 the 2nd alternate model (3 factor model) in which we have combined proactive personality and prosocial motivation into one factor. the outcome of this alternative model was also not as good as the measurement model, (χ2/ (df ) = 2.42, gf1 = 0.83, ifi = 0.76, cfi = 0.75, agfi = 0.79, rmsea = 0.08, rmr = 0.06). in the final alternative we have combined all factors (perceived organizational support, proactive personality, prosocial motivation and affective commitment) into one factor, outcome, (χ2/ (df ) = 3.69, gf1 = 0.75, ifi = 0.54, cfi = 0.53, agfi = 0.69, rmsea = 0.11, rmr = 0.09) this alternate model again was not good as values of measurement model. thus, measurement model is accepted because it has adequate value of fit indices. while alternate models were not best fit to the data due their poor fit indices values (table 2). 3.3. hypotheses testing results process macros analysis technique by andrew hayes (hayes & preacher 2013) was used for  testing the  hypothetical model because it was known as a strong and robust technique to detect the significance of the conditional indirect effect relying on bootstrap sampling (abid et  al., 2019). two simple meditation models were estimated because there are two independent variables, i.e. (perceived organizational support and proactive personality) in our study. the first simple mediation model was run to test h1, h2, and h3 hypotheses. the second simple mediation model tested hypotheses h4, h5. the outcomes of process show that pos positively impact prosocial motivation (β = 0.28, p < 0.001, r2 = 0.07, llci = 0.16, ulci = 0.39) therefore, our h1  is strongly supported. results also showed that  prosocial motivation is positively impacting affective commitment (β = 0.43, p < 0.001, r2  = 0.14, llci = 0.26, ulci = 0.61) when controlling for pos, thus h2 is supported. pos is positively and significantly influence affective commitment (β = 0.35, p < 0 .001, r2 = 0.14, llci = 0.17, ulci = 0.54) when controlling for prosocial motivation. these outcomes provide support for mediation. results of a simple mediation model specified that pos has an indirect effect on affective commitment through prosocial motivation. this indirect effect was positive (β = 0.12) and significant (sobel z = 2.82, p < 0.001) because bootstrapping results and sobel test result are consistent with each other, as 90% ci (0.06, 0.23) around indirect effect exclude the zero point. therefore, h3 was supported (table 3). table 2. fit indices of factor models models χ2 df χ2/df gfi ifi cfi agfi srmr rmsea full measurement model 272.85 174 1.56 0.90 0.91 0.90 0.86 0.04 0.05 2 factor model a 649.61 188 3.45 0.76 0.58 0.57 0.71 0.08 0.11 3 factor model b 450.23 186 2.42 0.83 0.76 0.75 0.79 0.06 0.08 1 factor model c 698.31 189 3.69 0.75 0.54 0.53 0.69 0.09 0.11 notes: a prosocial motivation and perceived organizational support combined into one factor, proactive personality and affective commitment combined into another factor. b prosocial motivation and proactive personality combined into one factor. c all construct are combined into one factor. 194 i. ullah et al. the impact of perceived organizational support and proactive personality... table 3. simple mediation results regressing pos as a predictor variables β se t p direct and total effects affective commitment regressed on perceived organizational support 0.47 0.11 4.20 0.00 prosocial motivation regressed on perceived organizational support 0.28 0.07 4.03 0.00 affective commitment regressed on prosocial motivation, controlling for perceived organizational support 0.43 0.11 4.08 0.00 affective commitment regressed on perceived organizational support, controlling for prosocial motivation 0.35 0.11 3.31 0.00 value se ll 90% ci ul 90% ci z p indirect effect and significance using the normal distribution sobel 0.12 0.05 0.06 0.23 2.82 0.00 m se ll 90% ci ul 90% ci bootstrap results for indirect effect effect 0.12 0.04 0.06 0.23 note: n = 221. β (unstandardized regression coefficient); se (standard error); bootstrap sample size (1000); ci (confidence interval); ll( lower limit); ul (upper limit). table 4 shows the results of the second estimated model. results indicated that proactive personality has a positive impact on prosocial motivation (β = 0.44, p < 0.001, r2  = 0.20, llci = 0.34, ulci = 0.54) therefore, our h4  is supported. results showed that  prosocial motivation significantly impact affective commitment (β = 0.38, p < 0.001, r2  = 0.13, llci = 0.19, ulci = 0.57) when controlling for proactive personality. proactive personality has significantly impacted affective commitment too (β = 0.31, p < 0.001, r2 = 0.13, llci = 0.12, ulci  = 0.5) when controlling for prosocial motivation. these outcomes provide support for mediation. the results of this simple mediation model showed that proactive personality has an indirect effect on affective commitment through prosocial motivation. this indirect effect was positive (β = 0.1) and significant (sobel z = 3.00, p < 0.001). the bootstrapping results favour the sobel test, as 90% ci (0.09, 0.27) around indirect effect excluding the zero. so, h5 was supported. 4. discussion the present research is a unique attempt to look at the impact of contextual (perceived organizational support) and personal factor (proactive personality) on the affective commitment through the intervening role of prosocial motivation in the different service sectors of (educational and banking, lahore), pakistan. the current study is fundamental because it is the first study that examines the direct impact of pos and proactive personality on prosocial and also examines the direct association between prosocial motivation and affective commitment. business, management and education, 2020, 18(2): 183–205 195 additionally, this study examines the mediating role of prosocial motivation between pos and affective commitment and also between proactive personality and affective commitment in the organizational context. all results of this study favour our proposed model. first, this study finds that pos and proactive personality are positively and significantly impact prosocial motivation. second, these results find that prosocial motivation has a significant impact on affective commitment. lastly, our study found that prosocial motivation mediates the relationship between two predictors (pos and proactive personality) and affective commitment. 4.1. theoretical contributions the present study contributed to the current literature in the following ways. first, this is the first study that examined the association between pos, proactive personality and prosocial motivation. prosocial motivation has attracted significant attention in the practice and research (batson et al., 2008; grant & mayer, 2009; grant & sumanth, 2009). past studies have only focused on investigating the potential outcomes of prosocial motivation  (grant, 2007; korsgaard et al., 1997; rioux & penner, 2001; voet et al., 2017). while there are few studies, have examined the factors that prompt the employees to help their colleagues (kocak, 2020). therefore, there is a need to investigate those factors that encourage prosocial motivation. in order to contemplate this gap, our study has introduced the two new antecedents (pos and proactive personality) that boost prosocial motivation among employees. this is a first study that has examined the pos, proactive personality and prosocial motivation relationship. the findings of our study suggested contextual factor such as pos is contributors to prosocial table 4. simple mediation results regressing proactive personality as a predictor variables β se t p direct and total effects affective commitment regressed on proactive personality 0.48 0.10 4.57 0.00 prosocial motivation regressed on proactive personality 0.44 0.06 7.29 0.00 affective commitment regressed on prosocial motivation, controlling for proactive personality 0.38 0.11 3.32 0.00 affective commitment regressed on proactive personality, controlling for prosocial motivation 0.31 0.11 2.72 0.00 value se ll 90% ci ul 90% ci z p indirect effect and significance using the normal distribution sobel 0.17 0.05 0.09 0.27 3.00 0.00 m se ll 90% ci ul 90% ci bootstrap results for indirect effect effect 0.17 0.06 0.09 0.27 note: n = 221. β (unstandardized regression coefficient); se (standard error); bootstrap sample size (1000); ci (confidence interval); ll ( lower limit); ul (upper limit). 196 i. ullah et al. the impact of perceived organizational support and proactive personality... motivation by favouring the assumptions of prior studies which indicated that prosocial motivation is influenced by contextual factors (bosch et al., 2018; otaye-ebede et al., 2019; erum et  al., 2020). the desire of employees to help their colleagues at work is those who perceived that their organization is more supportive to them value their contribution and fulfill their socio-emotional needs. similarly, our study found that personal factor (proactive personality) also influenced the prosocial motivation; this means that employees who have a proactive personality are more prosocially motivated. second, this study empirically validates the positive association between prosocial motivation and affective commitment; it gives the support on advantageous outcomes of prosocial motivation in the working context as reported by many scholars (abid et  al., 2018;  grant, 2007; korsgaard et al., 1997; rioux & penner, 2000; shao et al., 2017). this study also found that prosocial motivation and affective commitment (one element of organizational commitment) is positively linked like organizational commitment (ong et al., 2019). lastly, this is the first study that examines the mediating role of prosocial motivation between pos and affective commitment and between proactive personality and affective commitment. previous studies have examined the moderating role of prosocial motivation (butt et al., 2018; grant & berry, 2011; rofcanin et al., 2018; shao et al., 2019). 4.2. managerial implications the current study offers significant implications for  practitioners by offering novel recommendations on how they create and enhance affective commitment among their employees. for this purpose,  the organizations should invest in the human capital with the focus on enhancing the employee emotional attached to their organization and its goals rather than just concentrating on their performance and productivity enhancement. higher levels of affective commitment among employees is a vital concern for any organizations because these committed employees are more satisfied, perform better, involve involuntary behaviour, and also show less intention to leave (fazio et al., 2017) and absenteeism (meyer & herscovitch, 2001; meyer et  al., 2002), and they have stronger ability to realize, produce, and promote ideas (innovative job performance; al-abbadi, 2018), the study findings indicated that pos is closely associated with prosocial motivation. employees who perceived that their organization is more supportive of them also value their contribution as a result of it; they show more willingness to help their colleagues in the working environment. so that is why organizations should always care their employees’ wellbeing, rewards their contributions and efforts, also fulfil their socioemotional needs such as esteem and affiliation. this is because pos is a source of many potential and organizational outcomes. besides, this study also empirically confirmed that employees with a proactive personality have the desire to help others by interacting and communicating with them. for this purpose, human resource managers should carefully recruit such individuals who have a proactive personality because they are change-oriented, identify the new opportunities and create a high-quality relationship with their peers. the present study revealed that when employees help their colleagues at the workplace then they display a higher affective commitment to the organization. organizations can increase and promote the employee’s prosocial motivation through socialization and mentoring. business, management and education, 2020, 18(2): 183–205 197 4.3. limitations and directions the present research meaningfully extended and contributed to the literature of organizational behaviour; this empirical work is not free from some potential limitations. first, this study is first that investigates the association among pos, proactive personality, prosocial motivation and affective commitment. however, this research is conducted in the specific culture and the organizational context of pakistan. therefore, future studies may conduct in the developed countries for the validation of the findings of the current study. the generalizability of the study in a different setting could be challenged because of the context and culture. also, the attitude of employees in pakistan is distinctive from developed countries such as north america and europe. second, in this study, the relationship between the study variables was examined relying on the cross-sectional study design. the causality among the study variables cannot be drawn from it. the only longitudinal study would propose this possibility. therefore, the future study may attempt to test the causality among the study variables by longitudinal and experimental study designs. third, in the present study, we have collected data of predictor, mediator and criterion variables from the employees (single source) and at one point in time through self-administered survey questionnaires that may arise the issue of common method variance. also, the association among variables can be inflated or deflated (podsakoff et al., 2003). so, future studies may try to collect the data from the different source and also collected the data on the predictor, mediator, and a criterion on a different point in time with a temporal gap in order to address this issue (podsakoff et al., 2003). fourth, in this study sample, respondents are selected from different service sector of lahore city (pakistan). thus, these results may not be representative of other cities and sector of pakistan. the future may attempt to generalize these findings to the other cities and different sectors. sixth, in this study, the majority of respondents were male, which challenge the generalizability of findings for both genders. therefore, future studies try to examine this present model by employing the dominant female sample. seventh, in this study data, have been collected from the participants through purposive sampling, future studies may use the probability sampling technique for the data collection. lastly, we study the influence of employee prosocial motivation; the future study may try to investigate supervisor prosocial motivation in this study. future studies may try to explore the mediating role of prosocial motivation between other contextual and personal factors. conclusions the key objectives of this present research to inspect the direct influence of perception of organizational support and proactive personality on employees’ prosocial motivation; as well the direct impact of prosocial motivation on affective commitment. this study also examined the indirect influence pos on the affective commitment by incorporating prosocial motivation as a mediator in the service sector, i.e. banking and educational sectors in the lahore, pakistan. by using process macros on an actual sample of 221 results confirmed that pos and proactive personality directly influence the prosocial motivation. similarly, this result shows that prosocial motivation has a positive association with affective commitment. furthermore, these results indicate that prosocial motivation intervenes between pos 198 i. ullah et al. the impact of perceived organizational support and proactive personality... and affective commitment, and proactive personality on affective commitment relationship. besides, this research has provided several implications for the practitioners and managers. organizations should focus on the prosocially motivated employees via pos and proactive personality in today’s competitive era because the prosocially motivated employees are a source of higher performance and productivity. our study contributes to the literature of organizational behaviours by introducing new predictors such as perceived organizational support and proactive personality of prosocial motivation. references abid, g., contreras, f., ahmed, s., & qazi, t. 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(2014). how transformational leadership influences follower helping behaviour: the role of trust and prosocial motivation.  journal of organizational behaviour,  35(3), 373–392. https://doi.org/10.1002/job.1884 https://doi.org/10.3390/su11082271 https://doi.org/10.1108/pr-01-2014-0007 https://doi.org/10.1108/jkm-05-2017-0179 https://doi.org/10.1177/1038416217744215 https://doi.org/10.2307/3069458 https://doi.org/10.1016/j.paid.2019.109644 https://doi.org/10.1080/14719037.2016.1183699 https://doi.org/10.1007/s10902-018-0056-2 https://doi.org/10.1177/0893318918804890 https://doi.org/10.1108/02683941111181806 https://doi.org/10.1002/pchj.214 https://doi.org/10.5465/amj.2009.0865 https://doi.org/10.1002/job.1884 copyright © 2019 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. business, management and education issn 2029-7491 / eissn 2029-6169 2019 volume 17 issue 2: 232–247 https://doi.org/10.3846/bme.2019.11326 *corresponding author. e-mail: e.stremousova@mail.ru introduction the civilised world is entering a new phase of development that is focused on the consumption of products of the fourth industrial revolution: nanotechnology, biomedicine, information technology and cognitive science. the new technical and technological conditions create a new living environment. at the present stage, the most common ones are digital some approaches to evaluation macroeconomic efficiency of digitalisation elena stremousova 1*, olga buchinskaia 2 1department of economic theory and economic policy faculty of school economics and management, ural federal university, ekaterinburg, russia 2department of global economics faculty of economics, ural state university of economics, ekaterinburg, russia received 9 october 2019; accepted 27 november 2019 abstract. purpose  – the purpose of the article is to study the effect of digitalisation development indicators on per-capita gdp growth. research methodology – the basic research method is the fixed-effects panel regression that describes the effect of the digitalisation development indicators on per-capita gdp between 1999 and 2017. findings  – research showed the most critical factors for per-capita gdp growth are the ones that linked with fixed and mobile subscriptions. research limitations  – the limitations of the research stem from the limitations of analysis as the method that has been employed makes it possible to measure the effect of the selected variables on per-capita gdp, but further research requires a detailed analysis of the factors being studied in application to each country. practical implications – the findings can be used as a basis for choosing areas of more detailed factor analysis of the digitalisation process effectiveness and can support investment decision-making. originality/value – the study enables one to identify the most and the least important factors that are reflected by digitalisation indicators that have an impact on the per-capita gdp. keywords: digitalisation, industry 4.0, new industrialisation, high technology exports ict technologies. jel classification: o11, o33, o57. https://doi.org/10.3846/bme.2019.11326 https://orcid.org/0000-0002-5351-7332 https://orcid.org/0000-0002-5421-2522 business, management and education, 2019, 17(2): 232–247 233 technologies that form the basis for information and cognitive technologies which drive the overhaul of industrial production and services. over the past few years, digitalisation as a category and a process has been researched in various areas of science, hence the different criteria assigned to the concept. placing digitalisation in the socio-economic context, many scholars agree that the process will be accompanied by a transformation of the economic model (negroponte, 1995; tapscott, 2014). there is some approaches to defining the new model of socio-economic development. the most common ones are industrie 4.0, neo-industrialisation, network economy, and the digital economy. there is, however, no single term to describe it yet. nor has a recognised model for assessing the economic effects of the introduction, growth, and development of digital technologies been presented to the public yet. at the same time, the last few decades have seen plenty of studies in the subject of the impact of digital transition on specific industries and various processes in the economy. a review of the literature shows methods that are in use today, usually assess the impact of digital technologies on labour productivity growth and employment. in recent years, several authors have studied the impact of digitalisation on gdp, including per capita gdp. however, their research focused on digital empowerment (evangelista, guerrieri, & meliciani, 2014). this study aims to investigate the effect of indicators defining the level of the development of digital technologies on per-capita gdp growth as an integral macroeconomic indicator of the development of a national economy adjusted for population size. in line with the above, the following tasks were designed: – review the existing indicators that measure the penetration and advancement of digital technologies in the economy and the techniques that are employed to assess them; – select countries for analysing and evaluating the impact of factors influencing the development of digital technologies on macroeconomic indicators and substantiate the choice; – analyse the impact of some indicators describing digitalisation on per-capita gdp and evaluate the results. our search for a research method that would suit best our objectives led us to the panel research method that makes it possible to reveal a link between the dependent variable (percapita gdp) and independent variables describing digitalisation and to evaluate their importance. we would like to note that this article presents only one segment of a much broader study in terms of its goals, tasks and methodology. we, however, believe that this segment is significant because it reveals the link between the resulting indicator  – per-capita gdp that is internationally recognised as an integral macroeconomic indicator – and the regressors under study. considering the fact that today countries, industries and enterprises are in different starting positions on the path to digitalisation and that there is no internationally recognised measure of the economic effect of digital technology adoption and development, we do not at the present time propose a method of comprehensive integral assessment of the socio-economic effect of the digital transition. we examine the impact of digitalisation factors on the national economic development indicator with consideration for demography. our contribution at the present stage is the identification and study of the impact of the key indicators that describe the advancement level of digitalisation on per-capita gdp growth not only at this moment but also over some time. this assessment enables one to 234 e. stremousova, o. buchinskaia. some approaches to evaluation macroeconomic efficiency... identify the most and the least significant factors concerning the countries being analysed and allows for more detailed analyses to be carried out later. the paper is structured as follows: the first part of the article presents an overview and analyses of earlier research on the subject of the effect of digitalisation on national economies. part 2 covers the methodological aspects of our study, explains the principle of grouping the selected countries for the purposes of the study, and describes the variables and the econometric model being used. part 3 presents the results of the econometric study for three highlighted groups of countries and their analysis and the outlook for digitalisation in individual countries. the conclusion part summarises the key findings of the research and final observations and makes suggestions for future research. 1. previous research in the contemporary literature, various terms have been coined to refer to processes accompanying the adoption and development of information and communication technology such as “knowledge-based economy”, “borderless economy”, “network economy”, “digital economy”, industrie 4.0. some of these terms describe specific processes in the economy, some describe structural changes, and the other characterises evolving needs. emerging electronic markets cause new approaches to management (grewal, chakravarty, & saini, 2010). under the influence of new technologies and the internet, the business environment is transforming. in commerce, the share of e-commerce is growing (davidavičienė, paliulis, sabaitytė, &davidavičius, 2016). the increasing importance of internet marketing for both the b2b and b2c sectors is explained by the development of electronic markets, an increase in the number of new generation consumers (sabaityte & davidavichiene, 2018). success in this area requires new specific knowledge (raudeliūnienė, davidavičienė, tvaronavičienė, & radeckytė, 2018). the development of e-business is directly related to innovative activity in the commercial sector, financing, development of legislation protecting property rights, consumer rights, etc. (kunešová & eger, 2017). the term “knowledge-based economy” is used to comprehensively define the above processes. the knowledge-based economy is a type of economy that focuses on the creation of smart products that reduce labour intensity and in which intellectual property is regarded as one of the most valuable resources and commodities (kefela, 2010; stepaniuk, 2017). the term “industry 4.0” got wide acceptance after the german government published the plattform industrie 4.0  – an updated industrial development strategy  – in 2012. the action plan defines the transition to industry 4.0 as a reflection of the concept of the digital transition of products and services that implies the shrinking of manual labour. the term “industry 4.0” is often considered as a synonym of “the fourth industrial revolution”. some authors (schwab, 2017) define industry 4.0 as a process of fully automated digital production managed by smart systems in a real-time mode in constant interaction with the external environment. such production goes beyond one company and has the capacity for merging into a global industrial network of things and services. cetrulo and nuvolari (2019) address industry 4.0 as a complex and long-run process of transformation based on the development business, management and education, 2019, 17(2): 232–247 235 and strengthening of ict technologies. while respecting the authors’ approach, we shall propose a slightly different interpretation of the category “industry 4.0”. we define it as an integral model that is based on the convergence of nanotechnology, biomedicine, information technology and cognitive science (nbic). that is why the digitisation of production is only one of the critical elements of the new model and does not fully reflect the essence of the new revolution in science and technology. the term “digitalisation” refers to the process of digital transformation (polozhikhina, 2018) as a process of the transformation of information into a digital form at the global level and predominantly in all spheres of activity. the goal of digitalisation ist o reduce costs and provide new opportunities to the entire population. digitalisation is the backbone of the fourth industrial revolution (porokhovskiy, 2019). digitalisation is a wider-embracing concept that also covers the transformation to a digital economy. in the present-day context, the term “digital economy” has various definitions. some scholars use the term to denote the growing role of digital information and digital technology in all spheres of economic activity (tapscott, 1995; negroponte, 1995). others interpret digital economy as a convergence of communication, computing and content (evangelista et al., 2014). some researchers estimate the number of materials published online on the subject of digital economy at several dozen million, but they can be divided into two groups – those exploring the subject of “digital economy” and focusing on “digital economics” (polozhikhina, 2018). the digital economy is a type of economic activity. it was officially declared in russia that digital economy is a particular system of economic, social and cultural relations, implemented through the use of digital ict (kapranova, 2018). in our research (stremousova, & buchinskaia, 2018), we used the terms “digitalisation” and “digital economy” as non-conflicting. at the same time, researchers have identified both positive and undesirable or non-beneficial impacts of digitalisation on society or production. for example, berghäll (2016) supposes that digitalisation does not matter much for spurring innovation in smes. innovation in small businesses is already quite intense in terms of research and development activities so technological changes requiring additional investment would hinder research and development. hirsch-kreinsen (2016) posits that intelligent production systems might have limited prospects because there are technical, economic and social barriers that are difficult to overcome. pfeiffer (2017) argues that there is no single industrie 4.0. it is hard to say which innovations will be adopted, which companies will benefit from that innovations since it depends on the specific factors including but not limited to the degree of  automation, product complexity, value chains, and production technology. according to klimova et al. (2018), some segments of the population are not ready to use new technologies.  kovacs (2018) highlights the negative consequences of the transition to industry 4.0, such as cybersecurity issues, less attention to qualitative than quantitative indicators, and the transformation of labour and investment markets. such conclusions raise doubts about the pressing need for and possibility of the development of digitalisation and a transition to the digital economy as a whole and in individual countries. in this regard, it is necessary to estimate the effectiveness of digitalisation processes and determine the potential for transforming a country to the conditions of a digital 236 e. stremousova, o. buchinskaia. some approaches to evaluation macroeconomic efficiency... economy. there is sufficiently large number of methods for testing the digitalisation. most of them are based on the definition of an integral indicator characterising the development of digital technologies and their impact on the economy. the integral indicator is presented in the form of an index that enables one to build a ranking scale. the most common are the methods of calculating are the digital evolution index (dei), information and communication technology development index (idi  – ict development index), digital economy country assessment (deca). the itu (international telecommunication union) has developed and introduced the ict development index (idi), a composite index that measures the accessibility of the internet and communication technology (kravchenko, bobylev, valieva, & fedorov, 2013). the annually measured index shows that nearly 50% of the world’s population has internet access, but not all of them are active internet users. in developed countries, lack of or inadequate ict skills are a significant impediment for people to access the internet. in developing countries, lack of adequate telecommunications infrastructure and high cost of ict services prevent more extensive use of the internet (biggs, 2017). the ict development index (idi) is calculated as a combination of 11 indicators that reflect access to ict infrastructure, availability of internet devices and internet literacy skills. the index has proved useful as an instrument of comparative analysis at a global, regional and national level (dobrota, jeremic, & markovic, 2012). a large number of methods has been developed internationally to evaluate the development level of digital technologies and their impact on the economy. the digital evolution index (dei) was presented for evaluating the digital development of economies. the index is a composite indicator measuring four drivers that govern a country’s digitisation (chakravorti, tunnard, & chaturvedi, 2017): – supply conditions, such as access infrastructure, electronic payment methods etc.; – demand conditions that are in most cases determined by consumer behaviour; – innovation (including the entrepreneurial, technological and funding ecosystems, presence and extent of disruptive forces and the presence of a start-up culture and mindset); – digital economy institutions and their effectiveness (for example, governance efficiency and government role in business regulation; the legal environment and facilitatory institutions). the existing methodologies contain plenty of secondary and indirect indicators, which makes it more challenging to calculate indices the process of collecting and processing information is time-consuming. sometimes methodologies become outdated too soon and require a revision. even the idi method had to be updated in 2018 (koroivuki, 2018). all too often, methodologies of testing the effectiveness of digital economies lack an objectiveness. the dei, idi indices have proven to be useful tools for comparative analysis of the development of digital technologies and the market for information and communication services at the global, regional and national levels. these techniques define technical, technological and organisational processes of digitalisation, the share of digital products in gdp but they do not cover the indicators of the economic effectiveness and impact of digitalisation on the economy as a whole. business, management and education, 2019, 17(2): 232–247 237 loh and chib (2019) noted the high impact of ict technology skills on the likelihood of employment in singapore. it presumes that the employee’s ability to use ict technologies has a double effect on the national economy. it increases the production capacity, and at the same time, it affects the income of the population and, accordingly, its purchasing power. at the macro level, richmond and triplett (2018) draw a similar conclusion by examining the effect of ict on the gini index. strohmaier, schuetz, and vannuccini (2019) analysed the impact of digitalisation on the socioeconomic performance index, exploring groups of asian and european countries. the study showed the substantial, albeit the uneven, impact of digitalisation on the economies of the countries studied. however, in this study, it is troublesome to separate the influence of digitalisation on social indicators from the impact on economic development. digitalisation can also lead to qualitative changes that do not affect gdp estimates; watanabe, tou, and neittaanmäki (2018) provide an assessment of this aspect and propose a change in approaches to calculating gdp. recently, remarkable studies have been published in which attempts are made to analyse the impact of digitalisation indicators on gdp. evangelista et al. (2014) included indicators of development, use, and empowerment of digitalisation in assessing the impact on percapita gdp; however, in general, the study was more focused on the study of the impact of digitalisation on the process of employment. g. karnitis, virtmanis, and e. karnitis (2019) present an assessment of the impact of some of the desi index indicators on gdp per capita. the result of their study was the conclusion that only 7 out of 31 desi indicators have a significant impact on gdp per capita. however, among the desi indicators, there are no indicators of ict trade in goods and services, which suggests that the impact of the export and import of high-tech goods and services on economic development can be estimated. 2. methodological basis of the assessment of economic effectiveness of digital economy while appreciating the significance and timeliness of switching the national economy to digital technology, one has to keep in mind the factor of investment efficiency in digitalisation. a fixed-effects regression model was chosen as the primary research technique. we look at this method as a rapid method which makes it possible to highlight significant factors influencing the digitalisation process. for a more detailed analysis of each country, an individual assessment of the influence of significant factors on the dependable variable should be carried out. this method allows one: – to use an internationally recognised, available statistical base; – to reduce the complexity of calculations and time costs. this technique can be attributed to the rapid methods underlying the subsequent indepth analysis. the results make it possible to identify the factors that determine the transition to a digital economy, have a high significance for reaching the goals of analysis and to determine insignificant factors, which enables one to determine priority areas of action to focus on. 238 e. stremousova, o. buchinskaia. some approaches to evaluation macroeconomic efficiency... the hypothesis: the economic effect of digitalisation, characterised by per-capita gdp change, depends on the level of development of information and communication technologies, including internet coverage, and the level of export and import of ict goods and services. at stage one, we had the task of selecting the indicators that reflect the economic efficiency of a digital economy. when dealing with it, we considered the following conditions: – availability of digital technologies and their competitive advantages in the sectoral market; – availability of technical means supporting digital technologies; – trends in the digital services market; – forms of the state regulation of the industry. all the above factors except state regulation could be both external and internal. to produce a general integral estimation of the digital economy the method of panel data models was used. gdp per capita was selected as a predictable outcome. among macroeconomic measures that are used to compare countries’ development results, gross domestic product (gdp) is widely used as the key economic indicator in any country. it appears reasonable to use per-capita gdp for a transnational comparative analysis because gdp data is easy to find in statistical datasets. yakunina and bychkov (2015) analysing the relationship between indicators such as gdp per capita, human development index (hdi), ict development index, showed a high correlation between the ict development index and hdi, which would entail the appearance of the multicollinearity problem in the studied model. in this regard, we chose to use per-capita gdp as an indicator less correlated with the development of ict technologies. additionally, the correlation between per-capita gdp and (hdi) in the groups of countries studied is 0.85–0.88, which shows a very strong relationship between the indicators. like any other value indicator, per-capita gdp has certain drawbacks, but it nonetheless serves as one of the commonly recognised integral indicators that measure the volume of all final goods and services produced in an economy per capita per year. gdp illustrates the per-capita cost of goods and services produced in a country and is a measure of the development of the national economy. it is also one of the three indicators of quality of life. a country’s self-sufficiency in terms of digital technology and digital equipment is determined by the level of digital imports and exports, which means net digital exports of digital goods and services have an impact on per-capita gdp. the accessibility of modern communication means is a factor of their availability in the domestic market, the possibility of their daily use and maintenance, and the capacity of economic agents to purchase and use these means of communication. a country’s self-sufficiency in terms of digital technology and digital equipment is determined by the level of digital imports and exports, which means net digital exports of digital goods and services have an impact on per-capita gdp. the accessibility of modern communication means is a factor of their availability in the domestic market, the possibility of their daily use and maintenance, and the capacity of economic agents to purchase and use these means of communication. we suggest that the purchasing power of economic agents be measured by their ability to use mobile and broadband communications and buy information and communication services. business, management and education, 2019, 17(2): 232–247 239 per-capita gdp can, therefore, help measure the impact of information and communication products on the development of the national economy through the following indicators that are used as input variables: – mobile is mobile cellular subscriptions (per 100 people); – communicationsexportbop is communications, computer, etc. (% of service exports, bop); – communicationsimportbop is communications, computer, etc. (% of service imports, bop); – computerservicexp is computer, communications and other services (% of commercial service exports); – computerserviceimp is computer, communications and other services (% of commercial service imports); – fixedsubs is fixed broadband subscriptions (per 100 people); – ictservexportsdoll is ict service exports (bop, current us$); – ictgoodsexports is ict goods exports (% of total goods exports); – ictgoodsimports is ict goods imports (% total goods imports); – ictserviceexp is ict service exports (% of service exports, bop). – gdppercap is gdp per capita (current us$). an analysis of the model showed that it would be optimal to use logarithm functions of the selected variables. consequently, the model can assess the impact of the incremental growth of the variables on per-capital gdp growth. clusterization of the data by indicator was done using statistical reports by the world bank for the period 1999–2017 in 28 countries (world bank, 2019). as the study de facto aims to assess the impact of digitalisation on economics, the criteria for selecting the countries are the size of their population and the level of economic development characterized by gdp per capita. table 1 presents three groups of countries that were selected for analysis. table 1. groups of countries selected for analysis, by population size in 2017 (world bank, 2019) group 1 group 2 group 3 c ou nt ry po pu la tio n, th ou sa nd pe op le g d p pe r ca pi ta , $ c ou nt ry po pu la tio n, th ou sa nd pe op le g d p pe r ca pi ta , $ c ou nt ry po pu la tio n, th ou sa nd pe op le g d p pe r ca pi ta , $ china 1386395 8826 germany 82695 44469 netherlands 17132 48223 india 1339180 1942 turkey 80745 10546 czech republic 10591 20368 usa 325719 59531 france 67118 38476 sweden 10067 53442 pakistan 197015 1547 uk 66022 39720 switzerland 8466 80189 brazil 209288 9821 argentina 44271 14398 norway 5282 75504 nigeria 190886 1968 ukraine 44831 2639 singapore 5612 57714 bangladesh 164669 1516 poland 37975 13863 finland 5511 45703 russia 144495 10743 australia 24598 53799 lithuania 2827 16680 mexico 129163 8910 latvia 1940 15594 japan 126785 38428 estonia 1315 19704 240 e. stremousova, o. buchinskaia. some approaches to evaluation macroeconomic efficiency... group 1 consists of countries with the largest population. among them, only one country  – the usa  – boasts high values of gdp per capita. group 2 consists of countries with a population between 20m and 100m. of them, four countries have high gdp per capita. group 3 consists of developed countries with a small population and high and very high gdp per capita. each group was subjected to hausman test and breusch-pagan test to discover the best assessment method between the pooled ols, fixed effect, and random effect panel data estimators. the testing showed that the most appropriate one was a fixed-effect model. estimation of the impact of regressors on the dependent (result) variable (indicator) in the study can be described by eq. (1). ( )1 1 1 n t t i ti i lngdp a b lngdp c x− = = + ⋅ + + ε∑ where: ln gdpt is the logarithm of gdp per capita in the current year (indicates gdp growth over the period of observation), t – time period, ln gdpt -1 is the logarithm of gdp per capita over the previous time period (indicates gdp growth in the previous time period), х ti is the i-regressor (exposure) over the current time period, ε – value of the impact of other factors that are not included in the model; a, b, с are coefficients: – а determines the shift of the function; – b determines the effect of the value of the indicator over the previous period on its current value; – с tells about the magnitude of the relationship between the dependent variable and regressors: the higherr the coefficient, the stronger the relationship. the fixed-effects model is, therefore, a model of choice for the purposes of quick analysis. the model enables one to choose the resultant (dependent) variable, determine factors that have a certain effect on it and identify factors that will be insignificant with the resultant indicator. 3. results of quick assessment of socio-economic effectiveness of digital economy a quick assessment of the effectiveness of the digital economy was conducted for the entire sampling of 28 countries (number of observations equal to 457) and three groups of countries ranked by population (table  1). group 1 consists of countries with a population exceeding 100 m. only two countries in the group  – usa and japan  – rank high by the standard of living. for this group of countries, the formula for assessing per-capita gpd growth (eq. (1)) looks like this (eq. (2)) lngdppercapt = 1.38636 + 0.846579lngdppercapt-1 + 0.0183758lnfixedsubst-1 + ε (2) the calculation results are presented in table 2. business, management and education, 2019, 17(2): 232–247 241 table 2. results of panel analysis of indicators of information and communication technologies on percapita gdp growth in countries with largest population (authors’ calculations) coefficient std. error t-ratio p-value const 1.38636 0.479929 2.889 0.0202** l_fixedsubs_1 0.0183758 0.00723249 2.541 0.0347** l_gdppercap_1 0.846579 0.0554816 15.26 <0.0001*** note: *, **, *** significant at the 10%, 5%, 1% level respectively. the analysis results show that an autoregressive model in which per-capita gdp growth in the current year is attributed to the gdp growth per-capita in the previous year and the positive impact of the expansion of wired communication networks at 5% has the maximum significance for the countries in this group. the insignificance of other indicators might be due to low quality of life in the countries except the usa and japan. this hampers the widespread use of information and communication technologies and makes it impossible to increase industrial output through the adoption of software technologies. for example, india is a leading export of it services, but it is agriculture with predominately manual labour and low wages that makes up a large share of the economy. in general, the model shows that the calculation results are pretty close to the actual data, especially in the usa and japan. at earlier stages of the observation, other countries exhibit some deviations from the values that disappear in later years. this is due to the much slower development of broadband internet access in countries with low per-capita gdp. the analysis of the second group of countries shows that along with the per-capita gdp growth in the previous year another growth variable – computer, communications and other services  – had a low significance of 1%. this variable has a negative impact, which is due to the per-capita gdp growth in these countries is accompanied by a much slower growing, and, in some cases, a decreasing share of computer, communications, and other services in total exports. widespread use of computer and communication services for personal purposes and commercial and financial deals. this proves the fact that the variable of mobile user growth has a positive impact on per-capita gdp growth with a significance of 5%. consequently, for the second group of countries eq. (1) will have the following appearance (eq. (3)): lngdppercapt = 3.05065 + 0.643094lngdppercapt-1 + 0.205753lnmobilet −0.144016 lncomputerservicexpt + ε. (3) the calculation results are summarised in table 3. table 3. results of panel analysis of indicators of information and communication technologies on percapita gdp growth in countries with moderate population (authors’ calculations) coefficient std. error t-ratio p-value const 3.05065 0.613108 4.976 0.0016*** l_mobile 0.205753 0.0677497 3.037 0.0189** l_computerservicexp −0.144016 0.0349250 −4.124 0.0044*** l_gdppercap_1 0.643094 0.0744851 8.634 <0.0001*** note:  *, **, *** significant at the 10%, 5%, 1% level respectively. 242 e. stremousova, o. buchinskaia. some approaches to evaluation macroeconomic efficiency... the positive impact of mobile communication services and their strong significance in comparison to broadband internet access can be attributed to the fact that in those countries, except ukraine, people’s incomes are relatively high and a large share of the population can afford modern communication means and digital services. the low impact of information and communication technologies in per-capita gdp growth in those countries might be due to the lack of information about large companies and multinationals that apply new digital technologies in production and have subsidiaries that are registered and operate in other countries. the analysis of the third group of countries indicated the significance of both types of communication services, with the significance of mobile internet services being at 1% and broadband services at 5%. the latter is a sign of stronger dependence. in group 3 countries, the per-capita gdp growth model (eq. (1)) is calculated using eq. (4): lngdppercapt = 2.93333 + 0.602359lngdppercapt-1 + 0.228099lnmobilet + 0.0411065lnfixedsubst + ε. (4) the calculation results are summarised in table 4. table 4. results of panel analysis of indicators of information and communication technologies on percapita gdp growth in countries with relatively small population (authors’ calculations) coefficient std. error t-ratio p-value const 2.93333 0.383879 7.641 <0.0001 *** l_mobile 0.228099 0.0671415 3.397 0.0079 *** l_fixedsubs 0.0411065 0.0138351 2.971 0.0157 ** l_gdppercap_1 0.602359 0.0251797 23.92 <0.0001 *** note:  *, **, *** significant at the 10%, 5%, 1% level respectively. the mobile growth indicator and the broadband growth indicator have a positive impact on per-capita gdp growth due to the fact that both people and manufacturing businesses are able to use available digital technologies and do so. it is worth noting that the coefficients before both variables are more significant than their values found in group one and two; the stronger impact of these indicators on gdp in group three is due to the fact that in a peaceful situation, countries with small populations that have well-developed manufacturing industries and/or specialize in global financial services that provide a wide range of economic opportunities for business as well as citizens, are capable of adopting new research-intensive technologies both in production and at home. however, the values of the indicator of it service exports in the balance of payments (in monetary terms) and their share in total exports is lower than in some less developed countries. this is a cause of concern about the national economy’s ability to preserve its sovereignty in case of a digital transition because these countries do not export a lot of information and communication products and services produced domestically. a relatively high coefficient of determination is an indicator of the quality of the applied econometric model. the model delivers a high level of comparability between the calculated and actual indicators across all countries in each group. business, management and education, 2019, 17(2): 232–247 243 the model that has been employed for analysis and forecast shows a clear link between the regressors and the variable being explained. the maximum effect for the growth of percapita gdp comes from such regressors as ict exports, the imports of computer, communication and other services as a percentage of the volume of commercial services, mobile phone penetration. at the same time, the analysis shows that the share of exports of ict services in the cost of exported services grows insignificantly, so it does not have a considerable positive effect on the gdp per capita growth. the analysis results were used for compiling a ranking of countries for which the share of ict services exports in monetary value and as a percentage of total services exports has the best effect on the growth of gdp per capita. (figures 1, 2). since 2005, india has significantly outpaced all other countries as the biggest ict exporter. in 2017, india’s ict exports were nearly usd 8 billion, which is a lot more than other countries’ (figure 1). 0.00e+00 1.00e+10 2.00e+10 3.00e+10 4.00e+10 5.00e+10 6.00e+10 7.00e+10 8.00e+10 9.00e+10 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 usa ind deu chn gbr fra nld swe che sgp 0 10 20 30 40 50 60 ind fin ukr swe pak cze arg bgd chn lva usa figure 1. evaluation of exports of ict services by balance, in us dollars at current prices (compiled by the authors. source: world bank, 2019) figure 2. the share of exports of ict services in total exports of services, % (compiled by the authors. source: world bank, 2019) 244 e. stremousova, o. buchinskaia. some approaches to evaluation macroeconomic efficiency... some experts attribute the fast-paced development of digital technologies in india to “the size of government procurement in this field. scientific and technical programs and projects serve as target guidelines for india’s state policy” (biryukova & matyukhina, 2016). however, india holds a low spot in the standard of living rankings that rank countries by, among other things, per-capita gdp (table 1). this might be since india has a much bigger population than other countries (table  1), while the level of industrial development and employment is not sufficiently high (stremousova & buchinskaia, 2018). one can, therefore, assume that india meets its internal demand for ict services and produces information and communication technologies for export. starting from 2010 there was an absolute decrease in the share of ict services in national exports, but the trend is projected to resume in 2019. in general, the forecasting model of quick assessment of socio-economic return on investment in digital technology proposed by the authors shows that a transition to a digital economy is likely to happen quicker in those countries where there is demand for ict services. a sustained impact of ict services exports on per-capita gdp growth also works as a driver of the digital economy because ict services exports add to national income growth and redistribution, including expenditures on welfare programs. 4. discussion the study of some approaches to the assessment of the social and economic effectiveness of the transition to a digital economy has shown that there is still no clear concept of digital economy, nor is there a clear understanding of what makes it different from digitalisation, industry 4.0 or network economy. the internationally adopted methodologies for assessing the development of digital technologies are primarily concerned with technical and technological and communication capabilities of national economies. such globally utilised indicators as dei and idi are essential tools for comparative analysis of the progress of digitalisation. these and the deca methodology help to characterise the technical and technological capabilities of each country to make a transition to digital technology. all the above-mentioned indices do not characterise the opportunities of the transition to the digital economy, and they do not integrate the influence of digitalisation processes, economic opportunities with the results of economic activity. however, techniques that are being designed now or have been upgraded recently contain numerous indirect and secondary indicators. some of the indicators suggested by the methodologies require score-based assessment. as a result, they are too laborious and not objective enough. the authors are not aware of any techniques, including quick assessment methods, aimed at assessing digitalisation as an economic process of profit-making. as our study aims to identify the key factors indicating the future socio-economic effectiveness of digitalisation processes, the authors opted to use a fixed effects regression model as the primary research method. an advantage of the method is that the values of indicators could be retrieved from an internationally recognised and open-source statistical database. the technique allows for the reduction of labour and time costs. the obtained results of indicator processing help identify factors of high significance to the resulting indicators as business, management and education, 2019, 17(2): 232–247 245 well as non-significant factors. the analysis of the obtained results enables one to determine priority areas of action for achieving the set goal. in order to test the method, several countries were selected and divided into three groups by size of their population: countries with large populations, countries that have mid-sized populations, and with small populations (table 1). the per-capita gdp growth was chosen as a composite indicator that integrates the socio-economic efficiency of economic activity and defines living standards. this technique uses this indicator as the predicted variable. eight indicators were selected as regressors. the study identified three factors that have the most significant impact on the predicted indicator and factors that have a negative impact on the development of a digital economy in a country. of the 28 sampled countries, only 10 were found to manifest a high degree of preparedness for the transition to a digital economy. the research shows that the fixed effects regression model could be employed for carrying out a quick assessment of the preparedness and effectiveness of the transition to a digital economy. for the purpose of drafting national programs and strategies for transitioning to a digital economy, more detailed country-specific factor analysis needs to be performed. 5. limitations the analysis method allows researches to determine the influence of the factors studied on per capita gdp growth taken as a critical indicator. however, the evaluation results require further detailed analysis of the factors studied for each country. we also associate limitations with the lack of statistics for some countries over a long period. the development of the international statistical database using unified data processing methods will solve this problem. conclusions economic digitalisation is an inevitable process in all countries. the tempo of economic transformation into a digital model will determine the further course of economic development in national economies. therefore, it is crucial to identify factors that influence the process of conversion into the digital economy.this article examines the factors characterising the level of digitalisation, which can influence the indicator of macroeconomic development of the national economy – gdp per capita. to assess the economic impact of digitalisation on per-capita gdp growth, we used indicators, characterising the type of internet connections, export, and import of ict services and goods. some indicators reflected the actual use of ict and the internet, while others reflected participation in the international market. the primary outcome of this study was the fact, what the most significant factors for per capita gdp growth are the mobile and fixed broadband subscriptions. however, indicators of different types of exports and imports of information and communication goods and services do not have a direct effect on per capita gdp. thus, the research confirmed our hypothesis only partially: the economic effect of digitalisation depends on the level of development of the internet connection. the dependence of gdp per capita growth on the level of exports and imports of ict products and trade has not 246 e. stremousova, o. buchinskaia. some approaches to evaluation macroeconomic efficiency... been confirmed. the possible negative impact on the dependent variable of the indicator of the share of ict technology exports in total service exports may be explained by a slowdown in the growth of ict technology exports in 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https://doi.org/10.1016/j.techsoc.2018.05.004 https://databank.worldbank.org/data/reports.aspx?source=world-development-indicators https://databank.worldbank.org/data/reports.aspx?source=world-development-indicators https://databank.worldbank.org/data/reports.aspx?source=world-development-indicators copyright © 2020 the author(s). published by vilnius tech press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. introduction in the twenty-first century, the russian government realized several initiatives aimed at developing the system of higher education. these included the creation and development of federal universities (a special category of universities that consolidate major scientific and analysis of the relations between scientometric and economic indicators of russian universities’ performance daniil sandler , dmitry gladyrev * graduate school of economics and management, ural federal university, ekaterinburg, russia received 14 june 2020; accepted 10 july 2020 abstract. purpose – the study focuses on the relationship between universities’ publication activity and such indicators of their economic performance as revenues from extrabudgetary sources and revenues from research. research methodology – the study relies on the economic, structural and scientometric data of 49 large russian universities in a four-year period obtained from the monitoring of the efficiency of higher education institutions and the analytical tool scival. the research method is a regression analysis with panel data models. findings – the study has brought to light some interesting relations between scientometric and economic indicators: among other things, it was shown that higher rates of internationally coauthored publications are positively related with the share of universities’ revenues from extrabudgetary sources. the rates of citation of universities’ publications in journals indexed in major international databases are positively associated with revenues from research. interestingly, there was a negative relationship between the share of nationally co-authored and the revenue from research. practical implications – the results can be used for the strategic management of universities and for developing national policies in the sphere of higher education and science. originality/value – apart from the most frequently used scientometric indicators such as the number of publications and citations, the following indicators were also included in the analysis: the share of internationally and nationally co-authored (domestic) publications, the share of publications in economics and management, in physics, arts and humanities. keywords: economics of universities, higher education management, scientometrics, internationalization of universities, russia, higher educational institutions, heis. jel classification: i22, i23, i28, h52, f65. *corresponding author. e-mail: d.a.gladyrev@urfu.ru business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 2: 331–343 https://doi.org/10.3846/bme.2020.12955 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 https://orcid.org/0000-0002-5641-6596 https://orcid.org/0000-0001-5746-0495 https://doi.org/10.3846/bme.2020.12955 332 d. sandler, d. gladyrev. analysis of the relations between scientometric and economic indicators... educational activities of regions), the program of national research universities (the status assigned to universities with a big research output), 5–100 russian academic excellence project (a large-scale project focused on the promotion of selected universities in major world universities rankings) and some other projects like “universities as centres of innovation” and “flagship universities”. analysis of the target models and figures described by these universities’ programs shows that these initiatives and programs heavily rely on one key assumption – the assumption that academic performance (publication activity) and economic efficiency of universities are closely tied (sandler et al., 2019). the indicators specified in federal universities’ programs of development include the indicators related to publication activity, for example, the rate of publications in journals indexed in major international databases per 100 faculty members, and the indicators related to economic performance such as universities’ revenues from extrabudgetary sources1. the same goals can be found in research universities’ programs and in programs for the enhancement of international competitiveness of universities. nevertheless, practice shows that the connection between these indicators is not as straightforward as one might think due to the severe time lag and the fact that a rise in publication activity has but an indirect effect on the economic performance of universities. it should be noted, however, that the majority of federal initiatives prioritize scientometric indicators (sandler et al., 2019). these initiatives are parts of national projects, and in 2020 they are going to enter a new stage, which is what makes the analysis of the relationship between these indicators particularly relevant. moreover, a better understanding of these relations can be useful for designing and updating university development programs. this study is aimed at identifying the objective connections between academic performance and human potential, on the one hand, and economic efficiency of universities, on the other. the study places a special emphasis on scientometric indicators, including those that have so far been underexplored in the research literature. 1. literature review due to the historical, structural and conceptual peculiarities of the russian higher education system, it is quite difficult to extend the results of international studies to the russian context. nevertheless, since in russia, the research on this topic is relatively scarce, in this paper, we are going to rely primarily on international findings. many studies of the relationship between universities’ research performance and their economic results either focus on specific cases (smith, 1999) or take a more general perspective, discussing major trends and drivers in universities’ economic activities (geiger, 2004). salmi’s model of a world-class university explicitly relies on the connection between the university’s economic potential and economic parameters (salmi, 2009). 1 methodological guidelines for the development and updating of development programs for universities classified as a “federal university” or “national research university” № ак-20/05-вн of 13.03.2015 business, management and education, 2020, 18(2): 331–343 333 a large-scale study of european universities revealed the factors that affected the number of university patents and spin-offs (riviezzo et  al., 2019). the majority of the factors characterizing the contributions of different research fields were not proved to be significant with the only exception of the medical field, which exhibited a positive relationship with the number of patents. another factor that affected the number of patents was the average faculty age (inverse relationship). the number of spin-offs generated by a university is positively related to the size of the university and the home country’s overall expenditures on research. another study based on oecd data used the number of patents, spin-offs and research contracts as dependent variables. among the variables characterizing the contributions of different research fields, the majority of variables were not proved to be significant, except for engineering, which had a positive relationship with the number of patents. in all the models, the variable of the number of wos publications was significant (its significance, however, was weaker for the number of spin-offs) (van looy et al., 2011). a number of other studies demonstrated a positive relationship between the publication and entrepreneurial activities of universities (calderini & franzoni, 2004; meyer, 2006; van looy et  al., 2006; azoulay et  al., 2007; czarnitzki et  al., 2007; stephan et  al., 2007; fabrizio & di minin, 2008; d’este et  al., 2010). it can be supposed that the number of patents, the amount of research and the number of publications are related with the same variable which can be referred to as “research effort and competencies” (breschi et al., 2005). another factor that determines the success of a university’s entrepreneurial activities is the number of research collaborations (bozeman et al., 2013). some studies, however, show that the relationship between research collaborations and the economic performance of universities is more complex and less straightforward than it may seem (franklin et  al., 2001; dietz & bozeman, 2005). a comprehensive analysis of the use of scientometric and economic indicators in world university rankings’ methodologies was conducted by polikhina and trostyanskaya (2018). 2. data and methodology this study relies on economic, structural and scientometric data of 49 russian universities in a 4-year period (2015–2018). the sample (see table 1) includes all federal universities (except for the crimean federal university), all national research universities (nrus) (except for st.  petersburg academic university  of the  russian academy of sciences), all participants of the 5–100 project, and other universities included in world rankings qs and the. most of the data were obtained from the monitoring of the efficiency of higher education institutions2. we selected three variables characterizing a university’s economic performance: – revenues from commercial activities per faculty-member; – revenue from research (excluding state budget funds and funds from state programs for science support) per faculty member; – share of the university’s revenues from extrabudgetary sources. 2 monitoring of the efficiency of higher education institutions http://indicators.miccedu.ru/monitoring/?m=vpo http://indicators.miccedu.ru/monitoring/?m=vpo 334 d. sandler, d. gladyrev. analysis of the relations between scientometric and economic indicators... table 1. russian universities included in the sample university 5-100 federal universities nrus 1 immanuel kant baltic federal university + + 2 belgorod state national research university + 3 voronezh state university 4 higher school of economics + + 5 far eastern federal university + + 6 irkutsk national research technical university + 7 kazan federal university + + 8 kazan national research technical university + 9 kazan national research technological university + 10 ogarev mordovia state university + 11 moscow aviation institute + 12 moscow state institute of international relations (mgimo) 13 moscow state university of civil engineering + 14 bauman moscow state technical university + 15 moscow state university 16 moscow institute of physics and technology + + 17 moscow power engineering institute + 18 national university of science and technology (misis) + + 19 national research university’ moscow institute of electronic technology’ + 20 national research university of information technologies, mechanics and optics (itmo) + + 21 national research nuclear university mephi + + 22 lobachevsky state university of nizhny novgorod + + 23 novosibirsk state technical university 24 novosibirsk state university + + 25 i.m. sechenov first moscow state medical university + 26 perm state university + 27 perm national research polytechnical university + 28 gubkin russian state university of oil and gas + 29 russian presidential academy of national economy and public administration 30 pirogov russian national research medical university + 31 peoples’ friendship university of russia + 32 plekhanov russian university of economics 33 samara national research university named after academician s.p. korolev + + 34 st.petersburg mining university + business, management and education, 2020, 18(2): 331–343 335 university 5-100 federal universities nrus 35 st.petersburg state university 36 st.petersburg electrotechnical university’ leti’ + 37 peter the great st. petersburg polytechnic university + + 38 saratov state university n.a. n.g.chernyshevsky + 39 northern (arctic) federal university + 40 north-eastern federal university + 41 north-caucasus federal university + 42 siberian federal university + + 43 tomsk state university + + 44 tomsk polytechnical university + + 45 tyumen state university + 46 ural federal university + + 47 financial university under the government of the russian federation 48 south ural state university + + 49 southern federal university + end of table 1 to explain these variables, a set of factors were selected, including 16 variables in two categories: variables based on the data from the monitoring of the efficiency of higher education institutions 1. average use score of full-time state-funded students admitted to bachelor’s and specialist’s programs (except for students admitted following the quotas of target admission and students with privileged admission status) – measures the quality of admissions. 2. share of students holding a bachelor’s, specialist’s or master’s degree earned at another university and enrolled in master’s, phd, residency training, assistantship and traineeship programs in the total number of students enrolled in master’s, phd, residency training, assistantship and traineeship programs – measures the university’s ability to attract young researchers from other organizations. 3. share of faculty without a candidate or doctoral degree below the age of 30; share of faculty holding a candidate degree below the age of 35; and the share of faculty holding a doctoral degree below the age of 40 in the total number of faculty – measures the research potential of the younger faculty. 4. share of faculty who defended their candidate and doctoral dissertations in the reporting period in the total number of faculty – measures the faculty’s participation in professional development. 336 d. sandler, d. gladyrev. analysis of the relations between scientometric and economic indicators... 5. number of journals, including electronic journals, published by the university – measures the university’s performance in research and publishing. 6. number of grants received by the university in the reporting year per 100 faculty members – measures the university’s performance in competition for grants. 7. share of international graduates from bachelor’s, specialist’s, and master’s programs in the total number of students – measures the university’s ability to attract international students. 8. share of international faculty in the total number of faculty – measures the university’s ability to attract international faculty. 9. ratio of the faculty’s average salary (from all sources) to the average wage level in the region – measures the salary level at the university. 10. share of faculty members holding a candidate or doctoral degree in the total number of faculty (excluding part-time faculty and short-term contract faculty) – measures the faculty quality. 11. number of citations of scopus articles published in the last five years per 100 faculty members. ii. scientometric variables from scival, a research impact analysis tool 12. percentage of internationally co-authored scopus publications. 13. percentage of nationally co-authored scopus publications. 14. percentage of scopus publications in arts and humanities. 15. percentage of scopus publications in physics and astronomy. 16. percentage of scopus publications in economics, econometrics and finance and business, management and accounting. although the monitoring of the efficiency of higher education institutions was launched in 2013, the first two reports used different sets of indicators, which made them difficult to use. therefore, for our analysis, we used the data for the period between 2015 and 2018. the primary method of research is regression analysis with panel data models. we did not consider lagged variables since, due to the small number of observations, they would have negatively affected the sample’s representativeness. regression analysis involved building three panel data models with three economic variables as dependent variables – revenues from commercial activities per faculty-member, revenue from research per faculty member and share of the university’s revenues from extrabudgetary sources. 3. results in all the models, hausman and wald’s tests have shown that the panel data model with fixed effects is the optimal model type, which reflects the distinctive nature of russian universities. first model. revenue from commercial activities per faculty-member in the first model (see table 2) we built, only four factors exhibited a high level of significance (at 1 and 5%). we found that there is an explicit connection between a university’s revenues and the ratio of the average faculty salary to the average wage in the region. a possible explanation is that higher pay increases the faculty’s productivity due to greater motivation. business, management and education, 2020, 18(2): 331–343 337 table 2. model for the variable of a university’s revenues from commercial activities per faculty member dependent variable: revenues from commercial activities per faculty-member average use score of full-time state-funded students admitted to bachelor’s and specialist’s programs (except for students admitted in accordance with the quotas of target admission and students with privileged admission status) 9.67 (13.58) share of students holding a bachelor’s, specialist’s or master’s degree earned at another university and enrolled in master’s, phd, residency training, assistantship and traineeship programs in the total number of students enrolled in master’s, phd, residency training, assistantship and traineeship programs –1.32 (1.14) share of faculty without a candidate or doctoral degree below the age of 30; share of faculty holding a candidate degree below the age of 35; and the share of faculty holding a doctoral degree below the age of 40 in the total number of faculty 8.58 (6.43) share of faculty who defended their candidate and doctoral dissertations in the reporting period in the total number of faculty –83.3** (34.8) number of journals, including electronic journals, published by the university 14.72 (9.84) number of grants received by the university in the reporting year per 100 faculty members 19.26** (8.66) share of international graduates from bachelor’s, specialist’s, and master’s programs in the total number of students –15.52 (14.85) share of international faculty in the total number of faculty 29.86 (25.07) ratio of the faculty’s average salary (from all sources) to the average wage in the region 7.79*** (1.21) share of faculty members holding a candidate or doctoral degree in the total number of faculty (excluding part-time faculty and short-term contract faculty) 18.56** (9.39) number of citations of scopus articles published in the last five years per 100 faculty members 0.04 (0.049) percentage of internationally co-authored scopus publications 1.99 (7.69) percentage of nationally co-authored scopus publications –1.62 (6.81) percentage of scopus publications in arts and humanities –5.00 (7.96) percentage of scopus publications in physics and astronomy –4.53 (5.10) percentage of scopus publications in economics, econometrics and finance and business, management and accounting 0.30 (5.50) intercept –2142.599 (1131.538) notes: fixed effects regression. standard errors are in parentheses. *** significant at 1%, ** significant at 5%, * significant at 10%. 338 d. sandler, d. gladyrev. analysis of the relations between scientometric and economic indicators... another finding worth considering is the positive relationship between a university’s revenues and the number of grants per 100 faculty members won in the reporting year. we may suppose that the number of grants won by a university reflects its level of research and the efficiency of its management. the rest of our findings may seem quite paradoxical: for example, there is a positive relationship between the share of faculty holding degrees and the universities’ revenues and a negative relationship between the revenues and the share of faculty who defended their dissertations in the current year. the reason behind this result could be that the preparation and defence of a dissertation is a timeand resource-consuming process, both for the researcher and his or her department. thus, all other conditions being equal, having faculty who defend dissertations in the reporting year may negatively affect the university’s revenues. all scientometric variables in this model were not proved to be significant, possibly because the education component prevails over research in the structure of the leading universities’ activities and revenues. second model. revenues from research (excluding state budget funds and funds from state programs for science support) per faculty member in the second model (see table  3), seven factors exhibited a high level of significance (at 1 and 5%). the positive relationship between the revenue from research and the ratio of the average salary at the university to the average wage in the region may be explained by higher faculty motivation. the paradoxical result that we observed for the previous model was reinforced: the percentage of young researchers and the faculty holding degrees has a positive relationship with the revenue from research. in contrast, for the percentage of faculty who have defended their dissertations in the reporting year, the relationship is negative. the explanation, in this case, can be the same as for the previous model: a large number of defences requires professors and their departments to spend more resources. interestingly, we found that the number of academic journals published by a university has a positive relationship with its revenues from research, which could be explained by the fact that the number of academic journals reflects the university’s level of research excellence. moreover, universities engaged in the publication of journals may become centres of academic activity both on the national and international levels. the reputation for academic excellence thus gained can affect external stakeholders’ choice of the university as a site for research and development. two scientometric indicators displayed a positive relationship with revenues from research. we found a positive relationship between citation rates of papers indexed in international databases and universities’ revenues from research, which could be explained as follows: high citation rates and related factors are among the criteria of professors’ eligibility for participation in research projects. another more surprising result was the negative relationship between revenues from research and the number of nationally co-authored articles. it could be explained by looking at the reasons behind the high rates of such publications: high rates of nationally co-authored publications may be caused by the low levels of research activity at certain universities, which means that their faculty are simply unable to publish independently in scopus-indexed journals. business, management and education, 2020, 18(2): 331–343 339 table 3. model for the variable of the revenue from research per faculty member dependent variable: revenues from research (excluding state budget funds and funds from state programs for science support) per faculty member average use score of full-time state-funded students admitted to bachelor’s and specialist’s programs (except for students admitted in accordance with the quotas of target admission and students with privileged admission status) 2.51 (6.67) share of students holding a bachelor’s, specialist’s or master’s degree earned at another university and enrolled in master’s, phd, residency training, assistantship and traineeship programs in the total number of students enrolled in master’s, phd, residency training, assistantship and traineeship programs –1.01* (0.56) share of faculty without a candidate or doctoral degree below the age of 30; share of faculty holding a candidate degree below the age of 35; and the share of faculty holding a doctoral degree below the age of 40 in the total number of faculty 6.86** (3.16) share of faculty who defended their candidate and doctoral dissertations in the reporting period in the total number of faculty –35.61** (17.10) number of journals, including electronic journals, published by the university 10.89** (4.83) number of grants received by the university in the reporting year per 100 faculty members 3.71 (4.25) share of international graduates from bachelor’s, specialist’s, and master’s programs in the total number of students –0.19 (7.29) share of international faculty in the total number of faculty –11.80 (12.32) ratio of the faculty’s average salary (from all sources) to the average salary in the region 3.66*** (0.60) share of faculty members holding a candidate or doctoral degree in the total number of faculty members (excluding part-time faculty and short-term contract faculty) 10.78** (4.62) number of citations of scopus articles published in the last five years per 100 faculty members 0.06** (0.02) percentage of internationally co-authored scopus publications –4.23 (3.78) percentage of nationally co-authored scopus publications –8.00** (3.34) percentage of scopus publications in arts and humanities 0.0004 (3.91) percentage of scopus publications in physics and astronomy 1.78 (2.50) percentage of scopus publications in economics, econometrics and finance and business, management and accounting –0.19 (2.70) intercept –1062.90 (1131.54) notes: fixed effects regression. standard errors are in parentheses. *** significant at 1%, ** significant at 5%, * significant at 10%. 340 d. sandler, d. gladyrev. analysis of the relations between scientometric and economic indicators... third model. share of the university’s revenues from extrabudgetary sources the third model (see table 4), like the previous ones, shows the negative relationship between a university’s revenue and the percentage of faculty who have defended their dissertations in the reporting year at the highest level of significance. this time, however, neither the share of faculty holding a degree nor the share of young researchers is significant. the model also shows the negative relationship between a university’s revenue and the share of master’s and phd students with degrees earned at other heis, probably because such mobility is more typical of those disciplines where development is not closely linked to substantial extrabudgetary revenues. at the same time, all the variables corresponding to specific research fields were not proved to be significant. one of the most significant variables is the ratio of the faculty’s average salary to the average wage in the region: it has a positive relationship with the university’s revenue from extrabudgetary sources, which could be explained in terms of the higher motivation of the faculty and their involvement in various development projects. yet another result, which is quite similar to the one we obtained for the variable of revenues from research, is the positive relationship with the number of academic journals published by the university. the number of academic journals published by a university reflects its level of research activity and its role as a platform for communication and exchange of ideas with the national and international academia. this, in turn, makes the university more attractive for external stakeholders as a site for research and development, resulting in higher revenues, including those from tuition and fees. another impressive result was the negative influence of the share of international students, although the significance level was 10%, which means that this finding maybe not as accurate as the others mentioned above. table 4. model for the variable of the share of a university’s revenues from extrabudgetary sources dependent variable: share of the university’s revenues from extrabudgetary sources average use score of full-time state-funded students admitted to bachelor’s and specialist’s programs (except for students admitted in accordance with the quotas of target admission and students with privileged admission status) 0.19 (0.25) share of students holding a bachelor’s, specialist’s or master’s degree earned at another university and enrolled in master’s, phd, residency training, assistantship and traineeship programs in the total number of students enrolled in master’s, phd, residency training, assistantship and traineeship programs –0.04** (0.02) share of faculty without a candidate or doctoral degree below the age of 30; share of faculty holding a candidate degree below the age of 35; and the share of faculty holding a doctoral degree below the age of 40 in the total number of faculty 0.02 (0.12) share of faculty who defended their candidate and doctoral dissertations in the reporting period in the total number of faculty –1.72*** (0.64) number of journals, including electronic journals, published by the university 0.45** (0.18) number of grants received by the university in the reporting year per 100 faculty members 0.05 (0.16) business, management and education, 2020, 18(2): 331–343 341 dependent variable: share of the university’s revenues from extrabudgetary sources share of international graduates from bachelor’s, specialist’s, and master’s programs in the total number of students –0.49* (0.27) share of international faculty in the total number of faculty –0.57 (0.46) ratio of the faculty’s average salary (from all sources) to the average wage level in the region 0.06*** (0.02) share of faculty members holding a candidate or doctoral degree in the total number of faculty (excluding part-time faculty and short-term contract faculty) 0.10 (0.17) number of citations of scopus articles published in the last five years per 100 faculty members 0.0014* (0.0009) percentage of internationally co-authored scopus publications 0.35** (0.14) percentage of nationally co-authored scopus publications 0.14 (0.12) percentage of scopus publications in arts and humanities –0.07 (0.15) percentage of scopus publications in physics and astronomy 0.01 (0.09) percentage of scopus publications in economics, econometrics and finance and business, management and accounting 0.04 (0.10) intercept –4.73 (20.71) notes: fixed effects regression. standard errors are in parentheses. *** significant at 1%, ** significant at 5%, * significant at 10%. conclusions our study has shown that some scientometric variables affect such economic indicators as revenues from research and the share of revenues received from extrabudgetary sources. for instance, we found a positive relationship between the number of citations per 100 faculty members and universities’ economic performance. the findings related to publications written in collaboration are particularly interesting in this respect: we found that international collaborations have a positive effect on the share of extrabudgetary revenues of universities while national collaborations have a negative impact on the level of revenues from research per faculty member. in all likelihood, the economic effect is not created by these indicators but by the underlying mechanisms. to achieve the desired economic impact, it may, therefore, be productive to stimulate these mechanisms by addressing the indicators discussed above. on a practical level, our study has also identified those target indicators that can be combined in the university’s development and correspond to its current strategic priorities. it is essential that the goals set by universities should not contradict each other and create a synergistic effect. end of table 4 342 d. sandler, d. gladyrev. analysis of the relations between scientometric and economic indicators... we would not go as far as to recommend to increase the share of internationally coauthored publications in order to boost universities’ revenues from extrabudgetary sources. nevertheless, our findings suggest that internationalization in the research sphere and an increase in extrabudgetary revenues usually go hand in hand. as for the negative relationship between the number of nationally co-authored publications and the revenue from research, it does not mean that any specific measures are required to address this situation, but it does mean that the existing russian collaborations need some considerable revision and rebuilding. it may also signify that an efficient university usually has authors who are able to publish their research independently in international journals, which means that a viable strategy would be to attract, foster and build talent. as our model has shown, a growth in publication activity of universities usually accompanies an increase in their revenues from research, which may mean that both of these processes are linked to the realization of the same strategic task. remarkably, the variables characterizing the contributions of specific research fields were not proved to be significant in all models. this result can be interpreted in the following way: mechanisms of achieving economic goals are universal for all university types and can be used by universities specializing in stem, economics or humanities alike. the analysis of non-scientometric data also brought some impressive results. one of these findings may seem quite paradoxical at first sight: the share of faculty holding a degree (for all models) and the share of young researchers (for the model of revenue from research) have a positive influence on the given economic variables while the share of faculty who defended their dissertations in the reporting year, a negative impact. such contradiction may be explained by the time it takes for a university to start benefiting from the dissertations defended by its faculty: the faculty spending time, effort and resources on their professional development in the current period may distract them from other spheres, for instance, contract research, which explains the negative relationship between this indicator and the university’s economic performance. it should be noted that the relations we discovered may be characteristic only of russian universities, more precisely, large russian universities (this may be due to the fact that we used a panel data model with fixed effects). this does not, however, 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under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university modeling the process of risk management response to the negative impact of risks as the basis for ensuring economic security svitlana kryshtanovych 1*, viktoriya gutsulyak 2, ivanna huzii 3, tetiana helzhynska 4, valentyna shepitchak5 1,2department of pedagogy and psychology, state university of physical culture named after ivan bobersky, lviv, ukraine 3,4department of pedagogy and innovative education, lviv polytechnic national university, lviv, ukraine 4department of finance, banking and insurance, central ukrainian national technical university, kropyvnytskyi, ukraine 5department of english philology and methods of teaching english, ternopil volodymyr hnatiuk national pedagogical university, lviv, ukraine received 21 april 2021; accepted 17 june 2021 abstract. purpose – the main purpose of the article is to form a methodological approach to counteract risks that most negatively affect the system of ensuring the economic security of engineering enterprises. research methodology – the research methodology involves the application of the theory of graph connections, modeling from idef0. findings  – the main risks that most negatively affect the system of ensuring the economic security of engineering enterprises were identified, modeling of the main stages of response to their impact was carried out. research limitations – the article has a number of limitations and this applies to the area of the study. the emphasis was on the engineering industry. in addition, it should be noted that there are other modeling methods for mapping the stages of response to the negative impact of risks. practical implications – practical application of our methodological approach can be suitable for engineering enterprises. originality/value – the originality of the study lies in the presented methodological approach to identifying the risks that most negatively affect the system of economic security of engineering enterprises and modeling the process of responding to this impact. keywords: risk, engineering enterprises, theory of graph connections, idef0 functional model, economic security. jel classification: d81, l53, o12 *corresponding author. e-mail: skrischtanovich@gmail.com business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 2: 289–302 https://doi.org/10.3846/bmee.2021.14798 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 https://orcid.org/0000-0002-2147-9028 mailto:skrischtanovich@gmail.com https://doi.org/10.3846/bmee.2021.14798 290 s. kryshtanovych et al. modeling the process of risk management response to the negative impact... introduction in modern economic conditions, it is important for an enterprise to avoid possible threats and timely eliminate the harmful consequences of negative phenomena. riskiness is an integral part of entrepreneurial activity, uncertainty is seen as a primary phenomenon, and risk is secondary. the greater the uncertainty in making a business decision, the greater the degree of risk. it is impossible to eliminate risks related to the activities of business entities, since they are an element of objective reality. the main difference between risk and uncertainty is the ability to measure and estimate: uncertainty cannot be measured, while risk can be estimated. so, risk, as opposed to uncertainty, can be managed. risk management is a systematic use of the methods, tools and techniques available to managers to solve problems related to risks: setting the context, analysis (identification and assessment), influence, monitoring and communication. in the enterprise management system, the risk management system is designed to become an integral part of the organization’s management subsystem, that is, it should be integrated into its general policy, work plans and activities. when this condition is met, the application of the risk management system is an effective process. risk management is associated with both negative and positive consequences. the essence of risk management is to identify potential deviations from planned results and to manage these deviations to improve prospects, reduce losses and improve the soundness of decisions made. risk management means defining perspectives and identifying opportunities for improvement, as well as preventing or reducing the likelihood of undesirable developments. foreign practice shows that company leaders successfully use the risk management system both in individual segments and in general. according to a survey conducted by the federation of european risk management associations: 79% of surveyed enterprises carry out risk mapping, while 44% of them identified risk management as a subsystem of enterprise management. in connection with the development of market relations, entrepreneurial activity in ukraine has to be carried out in the conditions of the growing uncertainty of the situation and the variability of the economic environment. it becomes difficult to obtain the expected end result, and therefore, the risk increases, that is, the danger of failure, unforeseen losses. this is especially inherent in the initial stages of the development of entrepreneurship. there is no business without risk. this is due to the fact that the goal of its implementation is to maximize profit, and the greatest profit, as a rule, is brought by market transactions with increased risk. the entrepreneur is forced to assume the risk by the uncertainty of the economic situation and the conditions of the political and economic state and the prospects for changing these conditions. the greater the uncertainty of the economic situation of decisionmaking, the higher the degree of risk. the implementation of entrepreneurship in any of its forms, which is associated with risk, is usually called economic, or entrepreneurial. in the process of countering the negative impacts aimed at engineering enterprises, the management of this enterprise pays less attention to risks, since in their opinion they are the least threatening. that is why this problem has acquired particular relevance today, given that risks can potentially turn into a threat or danger. an example of this can be called the business, management and economics engineering, 2021, 19(2): 289–302 291 fact that at the beginning of last year there was only the risk of a pandemic lockdown, which quickly turned into uncontrollable threats and dangers. it is because of the low attention to risk management and risks in general that we have chosen this topic. risk management is the management of the enterprise as a whole, taking into account the impact of risks on the basis of the process of their identification, assessment and analysis, as well as the choice and use of methods to neutralize their consequences in order to achieve an optimal balance between the level of risk and the strategic capabilities of the enterprise. accordingly, risk management is aimed at finding the optimal balance between a high level of risk, which can lead to the collapse of the enterprise, and a complete rejection of it, which leads to a loss of competitiveness. today, the issue of forming a methodological approach is extremely relevant, which will allow top managers of the enterprise to better organize the negative impact of risks, with the aim of its subsequent elimination. considering the above, the main goal of the article is to form a methodological approach to an adequate response and counteraction to risks that most negatively affect the system of ensuring the economic security of engineering enterprises. the structure of the article provides for a review of specialized literature, which became the basis for the study, a description of the methodology used in the course of the study (the research methodology involves the application of the theory of graph connections, modeling from idef0); the results of the research and discussion, which included the identification of risks and the construction of a model of response to them, a description of how our research differs from the existing ones and the conclusions. the proposed methodological approach to modeling the management process is suitable for engineering enterprises. in the future, this model is planned to be used at one of the leading engineering companies in the western region of ukraine for its practical verification. 1. literature review ensuring economic security at enterprises today is becoming a priority area of scientific research. at the same time, risk management and mitigation of their negative impact plays a special role (parfitt & barnes, 2020). an effective tool for responding to changes in the economic environment of an enterprise is risk management, which is defined as a set of integrated management actions aimed at identifying, analyzing and regulating risks. within the framework of the proposed approach, risk management can be considered as a process of influencing a business object, which provides the widest possible range of coverage of possible risks, preventive actions, their reasonable accounting when making management decisions and reducing the degree of influence of the identified risks to the minimum limits. studies of modern conceptual approaches to risk management have made it possible to form a set of methods and methods of an integrated risk management system. the issue of ensuring the optimal operation of enterprises and ensuring economic security, in the context of risk management, is the subject of interest of a large number of scientists. for example, in the work of pauliukevičius and skusevičienė (2013), the basis for the formation of an effective system of combating risks that affect the functioning of the 292 s. kryshtanovych et al. modeling the process of risk management response to the negative impact... enterprise is to improve the institutional system of the country, while shynkar et al. (2020) and pushak et al. (2021) believe that the main role is played by the formation of a powerful internal risk management system. risk management problems have been of interest to the scientific community for more than a decade. modern technologies and the impact of globalization in general significantly affect changes in the activities of enterprises and therefore more and more groups of risks arise and, as a result, new problems that need to be addressed. risk management is the subject of interest of leading scientists in the field of security at the enterprise. the ambiguity and inaccuracy of today’s risk management systems are highlighted in kim (2020) work, which determines the relationship between inaccuracies and imperfections in risk management systems and the performance of an enterprise. for example, the basic concepts of the essence of such a phenomenon as “risk” were considered by aven (2012) and head (2009). however, our research is more methodological in nature and aims to identify and respond to them. what risk concepts may exist and which subspecies and how they may differ has been explored by belles-sampera et  al. (2013), chatterjee et  al. (2003) and regan and patècornell (1997). of course, concepts and theoretical analysis are very important, but we strive to demonstrate how it is possible to depict the process of counteracting negative influences through modeling. stasytyte and aleksienė (2015) and korombel (2012) examined the specifics of operational risks that are encountered in smes. we take into account certain operational risks in our research, but strive to cover the negative impact of others. the very process of organizing the work of the risk management system is well described in the works of di serio et al. (2011), verbano and venturini (2013) and islam et al. (2006). according to some scientists, risk management can be part of other enterprise management systems. for example, in the work of wu and meng (2019), risk management is part of management security. in our opinion, today risks play one of the most important roles in the system of enterprise functioning, taking into account this risk, management should act as an independent functional management system at the enterprise. risk management and its role in the activities of the enterprise has always been accompanied by a certain element of surprise and uncertainty. the specifics of the process of risk management activities were investigated by tohidi (2011) and tamošiūnienė and savčuk (2007). we took into account the specifics of the risk management activity process for our research and its reflection in the proposed model. of course, human resources and plant personnel are at the greatest risk, an issue actively explored by thevendran and mawlesley (2004) and zhi-qiang and tao (2008). features of the hierarchical ordering of risks can be found in the works of kmec (2011) and knight (2002), however, our research is based on significant changes that have occurred in the world and the impact of globalization to significantly change the modern risks that a significant number of enterprises face every day. regarding the methodology we use, it should be noted that sylkin et  al. (2019) have already applied a similar methodological approach for their own research, but then it concerned anti-crisis management and the financial security system. our research combines several methods and focuses primarily on risk management. business, management and economics engineering, 2021, 19(2): 289–302 293 paying tribute and taking into account the scientific contribution of a significant number of scientists to the development of solving the problems of the risk management system at the enterprise, the issue of highlighting the main risks that most negatively affect the system of ensuring the economic security of engineering enterprises and modeling the process of responding to this influence is still relevant. 2. methodology the basis of our research is the methods that will allow us to determine and streamline the level of influence of the main risks on the activities of enterprises and to ensure economic security in general, and to simulate the process of responding to them. to do this, we used the following methods: 1. formation of a model for hierarchical ordering of the main risks that negatively affect the engineering enterprises of ukraine. to do this, it is necessary to apply a graph of connections between risks, which are formed on the main use of graph theory. it should be noted that graph theory is one of the key branches of mathematics that studies the properties of graphs. in general, a graph is a geometric configuration that includes points connected by lines. the use of graph theory is found in scientific papers in various fields, it can be informatics, management and logistics, including in economics. as an example, in the field of economic research, we use the theory of networked systems. a network is a generalization of the concept of a graph and is a graph where each edge is assigned a certain number, which is called the “edge weight” and this number has a certain meaning, for example: price, profit, income, etc. today graph theory is one of the best predictive models used in scientific circles. an example of such use can be considered the work of davahli et al. (2021), who, using this model, formed a predictive model of the distribution and risks of covid-19. the list of risks that have the most negative impact on the activities of engineering enterprises and their system of economic security are presented in table 1. table 1. the list of risks that have the most negative impact on the activities of engineering enterprises and their system of economic security mathematical notation risks mnemonic name z1 the risk of loss of property as a result of theft, which entails constant technical and financial costs (for ukraine, this is a very common phenomenon) rls z2 risks associated with loss due to delayed payments rdp z3 risks related to inflationary factors in the country and the bank’s discount rate rri z4 risks arising from the highly volatile exchange rate in ukraine rhv z5 risks arising from problems of legislative support rls z6 risks associated with the wrong choice of capital investment method, type of securities for investment rwc z7 risks associated with abuse of their powers in the company rpc 294 s. kryshtanovych et al. modeling the process of risk management response to the negative impact... separately, we note that to determine those risks that have the most negative impact on the activities of engineering enterprises in ukraine and their system of economic security, we apply an expert method of interviewing employees of three leading engineering enterprises, who provided a detailed answer, which risks negatively affect the activities of their company. unfortunately, the respondents asked to remain anonymous and this right remains with them. despite the covid-19 pandemic, the peer review method was conducted through remote communication using email and video chats. at each of the three enterprises, at least 10 representatives were involved in the survey, whose duties include ensuring economic security at their enterprise. all employees who took part in the survey have at least 5 years of experience in the enterprise in the field of ensuring economic security. 2. since the process of risk management’s response to the negative impact of certain and hierarchically ordered risks is, in its essence, it is a certain process that involves the implementation of actions at certain stages. so, for this you need to depict these stages, clearly demonstrate to the risk management team their visions for responding to the negative impact of risks and ensuring economic security in the company. in our opinion, the functional modeling and graphical description of processes (idef0) methodology can be well suited for this. it allows you to better understand the very objectivity of the field of study. it should be noted that the objects of functional modeling and structural analysis according to the idef0 methodology are just organizational and economic systems. the key parameters of our functional model of the process of responding to the negative impact of risks on the economic security system are the following, shown in table 2. table 2. parameters of the functional model of the process of responding to the negative impact of risks on the system of ensuring the economic security of engineering enterprises parameter definition the purpose of modeling form an idef0 model to reflect the process of responding to the negative impact of risks on the system of economic security view top management team, risk management and security entities in the company the audience our model is aimed at security subjects and the risk management team, who must possess information technologies for the development and adoption of optimal management decisions aimed at responding to risks context of the model list of functions and objects of diagrams of functional model idef0 modeling technology idef0 functional modeling methodology software application for building vector diagrams 3. results of research suppose that the set of certain threats is a certain set 1 2{ , ,..., }nz z z z= . from this aggregate, we will select z1 ∈ z2 a number of significant threats. for clarity, we will supplement the mathematical designation of each factor with its mnemonic name (table 1). business, management and economics engineering, 2021, 19(2): 289–302 295 at the first stage, the subset of threats z1 and possible interrelationships between them, we represent in the form of a directed graph (figure 1), at the vertices of which the elements of the subset z1 are located, the arcs connect the sum of the pairs of vertices (zi, zj) for which the connection is defined. it indicates a certain dependence of one threat (beginning of the arrow) on another (end of the arrow). figure 1 shows a graph of the relationship of the set z1 with other z, ie the relationship of z1-risk with other selected risks. the use of a graph of connections is a prerequisite for using graph theory. �1 �2 �3 �4 �5 �6 �7 figure 1. graph connections between certain risks that have the most negative impact on the activities of engineering enterprises and their system of economic security based on the constructed graph, we construct a binary dependence matrix a for the set of vertices z1 as follows (1): aij=  1, if the criterion (vertex) i does depend on the criterion (vertex) j;  0, if the criterion (vertex) i does not depend on the criterion (vertex) j. (1) we place the matrix a of 7 × 7 elements in the table, adding to it an information row and a column with the names of risks (table 3). table 3. binary dependency matrix 1 2 3 4 5 6 7 rls rdp rri rhv rls rwc rpc 1 rls 0 0 0 0 1 0 0 2 rdp 1 0 1 1 1 0 1 3 rri 1 0 0 0 0 0 0 4 rhv 0 0 0 0 0 0 0 5 rls 0 0 0 0 0 0 0 6 rwc 1 0 0 0 1 0 1 7 rpc 1 0 0 0 0 0 0 296 s. kryshtanovych et al. modeling the process of risk management response to the negative impact... based on the matrix a, we build the reachability matrix. we form a binary matrix (i + a), where i is the identity matrix. as a result, the reachability matrix must satisfy condition (2): –1 1( ) ( ) ( )k k ki a i a i a ++ ≤ + = + . (2) the actual construction of a binary matrix is reduced to filling in the table (table 4). table 4. reachability matrix 1 2 3 4 5 6 7 rls rdp rri rhv rls rwc rpc 1 rls 1 0 0 0 1 0 0 2 rdp 1 1 1 1 1 0 1 3 rri 1 0 1 0 0 0 0 4 rhv 0 0 0 1 0 0 0 5 rls 0 0 0 0 1 0 0 6 rwc 1 0 0 0 1 1 1 7 rpc 1 0 0 0 0 0 1 the vertex zj is reached from the vertex zi if there is a path in the graph (figure 1) that leads from the vertex zi to the vertex zj. such a top is called reachable. we denote the subset of such vertices by s (zi). similarly, the vertex zi is in front of the vertex zj if it reaches its vertex. let the number of predecessor vertices form a subset p (zi). finally, a section of subsets of reachable and predecessor vertices, that is, subset (3): r(z1) = s(z1) ∩ p(z1). (3) the vertices that are not reached from any of the vertices of the set z1, the remaining ones, determine a certain level of the hierarchy of the priority of the action of the influence of risks assigned to these vertices. an additional condition in this case is to ensure equality (4): p(z1) = r(z1). (4) performing the combination of the above actions gives the first level (the lowest in terms of the importance of influencing the process under study) of the hierarchy of risks. to determine it on the basis of a preliminary matrix, we build a table 5. table  5. calculation table for building a model of the hierarchy of risk influence in the activities of engineering enterprises і s(zi) р(zi) s(z1) ∩ p(z1) 1 1, 5 1, 2, 3, 6, 7 1 2 1, 2, 3, 4, 5, 7 2 2 3 1, 3 2, 3 3 4 4 2, 4 4 5 5 1, 2, 5, 6 5 6 1, 5, 6, 7 6 6 7 1, 7 2, 6, 7 7 business, management and economics engineering, 2021, 19(2): 289–302 297 the second column of this table is the numbers of the unit elements of the corresponding rows of the access matrix, the third is the numbers of the unit elements of the columns of this matrix. equality (4) is fulfilled for 2 – risks associated with loss due to delayed payments and 6 – risks associated with the wrong choice of capital investment method, type of securities for investment, these risks refer to a low priority level of impact on the activities of engineering enterprises. further table 5 we remove lines 2 and 6, and in the i-th columns we delete numbers 2 and 6. next, the second iteration is calculated, etc. without further calculations, it can be argued that the highest level of the hierarchy will be occupied by 1 – the risk of loss of property as a result of theft, which entails constant technical and financial costs (for ukraine, this is a very common phenomenon) and 5 – risks arising from problems of legislative support. arranging risks at certain levels, we obtain a hierarchically structured model (figure 2), simulating the priority of their impact on the activities of engineering enterprises and their system of economic security. the next step will be to form a methodological approach to reflecting the decomposition of the risk management response process and the negative impact of the above risks on the activities of engineering enterprises. for this, we will apply the methodology of functional modeling and graphical description of processes (idef0). let’s build a tree of nodes, a list of functions and objects with appropriate explanations will become the initial basis for their creation (figure 3). note that each block in the idef0 functional model diagrams implements the process of converting input to outputs through certain mechanisms. for our task, it is enough just to talk about the transformation of information objects and streams. integrally, the entire system we simulate is denoted by the a-0 block. in accordance with this, all inputs, outputs, controls and mechanisms will be connected to the block by limit arrows and codes in figure 4. figure 4 has several mathematical notations that cover the basic problem. so, input – in (n = 1), control – cn (n = 1, 2), output – on (n = 1, 2), mechanism – mn (n = 1, 2). figures 5 show the decomposition of the first of the three levels of the context diagram of the idef0 functional model of responding to the risk of negative impact of risks. z2 z1 3 2 1 z5 z4 z7z3 z 6 figure 2. model of the hierarchy of the impact of risks on the activities of engineering enterprises and their system of economic security 298 s. kryshtanovych et al. modeling the process of risk management response to the negative impact... provide an adequate response to the negative impact of risks а0 а3 а2 а1 determination of the risks carrying out the most negative injection forming a team that will react determination of the main ways to counter negative influence reacting according to the hierarchy of influence а4 figure 3. hierarchy of blocks of the functional model idef0 of the response process risk management negative impact of risks provide an adequate response to the negative impact of risks с1 м1 і1 regulatory documents information from stakeholders choosing the optimal strategic solution technical means financial and human resources а0 с2 м2 decision maker о1 о2 information on the state of the negative impact of risks figure 4. comprehensive model diagram idef0 of the response process risk management negative impact of risks subprocess progress information а2 subprocess progress information а3 subprocess progress information а4 determination of the risks carrying out the most negative injection forming a team that will react determination of the main ways to counter negative influence reacting according to the hierarchy of influence а1 а2 а3 а4 м2м1 directives to ensure subprocess а2 directives to ensure subprocess а3 directives to ensure subprocess а4 hierarchical ordering results variants of antidia results of counteraction to influence с1 с2 і1 о2 о1 figure 5. decomposition of the context diagram of the idef0 of the response process risk management negative impact of risks business, management and economics engineering, 2021, 19(2): 289–302 299 based on the decomposition constructed by us in figure 5, we should consider in detail the list of functions that are depicted by blocks in the model diagram: a1 – according to our proposed model, the manager must form a model for hierarchical ordering of the main risks that negatively affect their company. this will help streamline the negative impact of existing risks. a2 – when the negative impact is identified, an appropriate team of managers, specialists in risk management should be formed to provide an appropriate response to this negative impact. a3 – the formation of basic ideas for the implementation of decisions on the provision of responses to counter the negative impact of risks on the activities of engineering enterprises. a4  – selection and implementation of the selected option to counteract the negative impact of risks on the activities of engineering enterprises. 4. discussions we would like to acknowledge the work of kryshtanovych et al. (2020) and merigó (2014), which have brought significant developments in addressing security and risk management issues. first, note the fact that the results of the study by kryshtanovych et  al. (2020), also apply the modeling method through idef0; however, our study suggests its application to map the process of risk management’s response to the negative impact of certain and hierarchically ordered risks. in contrast to the work of merigó (2014) and stasytytė (2013), we focused on how, due to the use of the link graph, to form a model for the hierarchical ordering of the main risks that negatively affect engineering enterprises. in the work of drobyazko et  al. (2020), the identification of risks was carried out using kohonen maps, which should form a full assessment of the level of protection against risks. this assessment model is complex and requires the construction of a separate map for each impact factor, in addition, it is necessary to deduct the integral indicator and the impact coefficient. graph theory and functional model are much easier to use, so they can be used at the level of any enterprise. so, the main difference from such studies and, together, the originality of our article lies in the presented methodological approach to identifying risks, most negatively affect the system of ensuring the economic security of engineering enterprises and modeling the process of responding to this influence. conclusions based on the results of our research, we have identified the main risks that affect most negatively to the system of ensuring the economic security of engineering enterprises, and we have modeled the main stages of response to their impact. the company needs to form its own risk management system, which should contain potential sources for financing losses that the company may incur as a result of the negative realization of the risk. the choice of a mechanism for risk management should be aimed at 300 s. kryshtanovych et al. modeling the process of risk management response to the negative impact... finding the optimal, expedient and cost-effective method of influence in a particular situation. as a result, the enterprise will be able to form a comprehensive risk management strategy, that is, the ability to make decisions focused on financial, labor, material resources, distribute tasks among managers, consult with specialists, and the like. in general, the adopted mechanism for minimizing risks largely determines the effectiveness of the enterprise’s risk management and, as a consequence, the success of the results of activities and competitiveness in the market. the present requires from the heads of enterprises to constantly monitor risk-generating factors to create an effective and flexible management system in a market environment and limited resources, which leads to the need for a risk management system, all its aspects, basic principles and management methods. enterprise risk management should be organized in such a way as to provide continuous introspection and self-control. the more detailed the monitoring process, the less the need for additional checks on the activities of the enterprise. an important aspect of enterprise risk management is the choice of an effective mechanism for preventing and minimizing, eliminating or accepting risks that determine the efficiency of the enterprise. ignorance of the enterprise’s propensity to take risks can lead to unpredictable consequences, crisis and bankruptcy. the formation of a risk management system at the enterprise should become a condition for the effective operation of an enterprise in a changing uncertain environment. risk management is a risk management system based on the process of their identification, assessment and analysis, as well as the choice and use of methods to neutralize their consequences, aimed at achieving the necessary balance between the strategic capabilities of the enterprise and the level of risk, as well as finding the optimal balance between the high level of risk, which can lead to bankruptcy of the enterprise, and complete rejection of it, which leads to a loss of competitiveness. the risk management system is designed to become an integral part of the organization’s management subsystem. the development of risk management standards indicates that a change in the business environment leads to the emergence of new dangers and risks that require timely optimization. the aim of the study was to form a methodological approach to dealing with risks that may affect the economic security of an engineering enterprise. as a result of the expert assessment, we have identified the main risks affecting the economic security of an engineering enterprise. thanks to the use of the graph connections, we have formed models for the hierarchical ordering of the main risks that negatively affect the engineering enterprises of ukraine. due to the use of the methodology of functional modeling and graphical description of processes (idef0), we have depicted the process of risk management’s response to the negative impact of certain and hierarchically ordered risks. of course, our research has limitations. the article has a number of limitations and this applies to the area of the study. the emphasis was on the engineering industry. in addition, it should be noted that there are other modeling methods for mapping the stages of response to the negative impact of risks. in the end, we can conclude that the results obtained in the course of the study indicate the effectiveness of the existing model of the response of the risk management system to the negative impact of risks. in the 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unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: algimantas.laurinavicius@evaf.vu.lt business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 2: 265–281 https://doi.org/10.3846/bme.2020.12683 impact of income inequality on emigration: case of lithuania and other new eu member states algimantas laurinavičius 1*, antanas laurinavičius 1, alfredas laurinavičius 2 1finance department, faculty of economics and business administration, vilnius university, lithuania 2vilnius gediminas technical university, vilnius, lithuania received 10 may 2020; accepted 15 june 2020 abstract. purpose – the objective of the article is to analyse how income inequality affects population decisions on emigration. research methodology – correlation and regression analysis are used to determine the relationship between the analysed social phenomena. firstly, the correlation between income inequality (its change) and emigration rates is calculated. secondly, the static and dynamic aspect is evaluated, as well as the influence of data delay (lag) on decision-making. finally, a regression equation is constructed, showing how one variable affects the other. findings – the analysis identifies the conditions and severity of population income inequality that may influence their emigration decisions. on the one hand, the impact is more substantial in the crisis and post-crisis period, and, on the other, in the new eu member states. research limitations – sensibility of emigration to different conditions like accessibility (i.e. the opportunity to emigrate freely, such as being a member of the schengen area) and the income gap between countries of origin and destination is a major limitation of the article which should be examined more closely in later works. practical implications – the analysis of emigration problem and the identification of its possible links with income inequality would allow economists to assess a priori potential of various measures suggested in practice and, consequently, would allow for the more targeted formulation of the state economic policy. originality/value – the novelty of the article is defined by insufficient scientific research of relationships between income inequality and emigration as socio-economic phenomena within the new eu member states. a scientific analysis of the problem of emigration and the identification of its possible links with income inequality would contribute to a more detailed study of the scientific aspects of emigration and income inequality. keywords: income inequality, emigration, subjective well-being. jel classification: d63, d86, o15. http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 https://doi.org/10.3846/bme.2020.12683 https://orcid.org/0000-0003-0145-2386 https://orcid.org/0000-0002-7983-2779 https://orcid.org/0000-0001-8520-0906 266 a. laurinavičius et al. impact of income inequality on emigration: case of lithuania and other... introduction the admission of lithuania as well as the other eastern and central european countries to the european union consolidated the principle of the rule of law, enhanced the processes of establishing democratic principles and civil society and significantly accelerated the economic development of the country. the average monthly salary in the national economy has increased by 5 times in the last 20 years (and even by 15 times in the previous 25 years) (statistics lithuania, 2020). gross domestic product per capita has increased by six times over the same period (20 years) while the ratio of gross domestic product per capita to the eu average has more than doubled in 20 years: that is from about 20% in 1995 up to 47% in 2018 at nominal value or from 36% in 1995 and up to 81% in 2018 in pps (eurostat, 2020). considering this indicator, lithuania lagged behind the eu average over the period 1995–2018 the most, while estonia came second and latvia ranked third. however, despite strong income growth, mistrust in public institutions has increased. under the european values study in 2016, only 40% of lithuanians expressed confidence in their country’s parliament and 31% of the population expressed their confidence in political parties while the other european countries surveyed averaged respectively 56% and 40% (european values study, 2016). such low levels of confidence in lithuania indicate that the significant institutes of democratic civil society as the government, political parties and parliament have lost public confidence. it might be the cause of continued and even accelerated emigration from lithuania despite impressive economic achievements (laurinavičius et al., 2018). french philosopher and educator j.-j. rousseau in the 18th century pointed out that emigration may be caused by a crisis of confidence and growing inequality when citizens terminate their social contract with the state. “if, however, non-contributors appear in the making of a treaty, their non-participation does not destroy the treaty, but merely distinguishes them from there. they are foreigners between the citizens. once the state is established, consent is in residence to live in the territory, and thus to surrender to sovereignty.” (rousseau, 2018b). together in the 18th century the writer also gives one of the reasons leading to the termination of social contract that is to say emigration: “if you want to give the state some stability, bring the extreme angles as close together as possible, do not stand nor rich nor ragged. these two castes, inherent in nature, are equally disastrous for the common good, the panders of tyranny come out of one, and the tyrants come out of another caste. the freedom is traded between them: one sells it, and another buys it.” (rousseau, 2018a). moreover, not only these tips have not lost their relevance for more than two and a half centuries, they are just given to our state! (although j.-j. rousseau’s work was entitled “considerations on the government of poland and on its proposed reformation”, it was addressed to the republic of the two nations (the kingdom of poland and the grand duchy of lithuania). thus, the objective of the article is to analyse whether income inequality has a statistically significant impact on emigration and how necessary change of income inequality is. answers to these questions would not only allow for the more targeted formulation of the state economic policy, but it would also help to identify the most effective measures in reducing income inequality and its economic harm. business, management and education, 2020, 18(2): 265–281 267 thomas piketty (2013) explores income inequality extensively in his fundamental work “capital”. however, his book focuses more on the united states, western europe and other developed countries while we foremost examine the impact of income inequality in lithuania and other new member states of the european union. thus, scientific importance and the problem of the article is defined by insufficient scientific research of relationships between income inequality and emigration as socio-economic phenomena in the new eu member states. a scientific analysis of emigration problem and the identification of its possible links with income inequality would allow scientists and economists, on the one hand, to assess a priori the potential of various measures suggested in practice and, on the other hand, to contribute to a more detailed study of emigration and income inequality. in the article correlation and regression analysis are used to determine the relationship between the analysed social phenomena. the research starts with the analysis of links between the gini coefficient of equivalized disposable income and emigration rates in 31 european countries (eu-28 and efta countries iceland, norway, switzerland). it is then narrowed to the countries of 2004 eu enlargement wave as these countries belong to the schengen area since 21 december 2007 (this has had a major impact on emigration from these countries as visa-free access opened the internal eu borders for their citizens). the research is performed in 3 stages. firstly, the correlation between income inequality (its change) and emigration rates is calculated. secondly, the static and dynamic aspect is evaluated, as well as the influence of data delay (lag) on decision-making. finally, a regression equation is constructed, showing how one variable affects the other. the analysis identifies the conditions and severity of population income inequality that may influence their emigration decisions. on the one hand, the impact is stronger in the crisis and post-crisis period, and, on the other, in the new eu member states. the phenomenon of this period is intended to be studied more closely in later works. the sensibility of emigration to different conditions like accessibility (i.e. the opportunity to emigrate freely, such as being a member of the schengen area) and the income gap between countries of origin and destination is a major limitation of the article which should be examined more closely in later works. 1. background: income inequality, subjective well-being, and emigration it is often believed that the higher the income of the population is the happier they will be when the other factors are being constant. however, as income and wealth increase, the happiness of the population does not increase proportionally, and often not at all. that is evident from the findings of the long-standing household surveys conducted by institutions in the usa, uk and germany (weimann et al., 2015). it appears that happiness (measured as a subjective perception of well-being) is not increasing along with growing income during the long period and it is even decreasing in certain periods (probably in relation to other circumstances). ifcher et al. (2019), amendola et al. (2019), yan and wen (2020) show that subjective well-being and quality of life decrease due to income inequality. in fact, happiness is more correlated to equality of income (relative wealth) than the increase of income (absolute wealth). 268 a. laurinavičius et al. impact of income inequality on emigration: case of lithuania and other... citizens of different countries have different levels of tolerance when it comes to inequality. the scandinavians are traditionally considered to be supporters of a state which redistributes welfare; meanwhile, the americans tend to agree with a significant index of inequality. for this reason, it is evident that changes in inequality would probably have a different impact on the quality of life in different countries and this is precisely why international comparisons are problematic (weimann et al., 2015). nevertheless, alesina et al. (2004) found a significant negative correlation between inequality of income and life satisfaction in the usa and even more significant negative correlation in europe. detailed study findings indicate that poor citizens and voters supporting the left-wing politicians demonstrate higher intolerance of inequality, while more productive citizens and voters supporting the right-wing politicians are more indifferent to the distribution of income. as subjective well-being and quality of life decrease due to income inequality, some of the population may select to emigrate. this happened in lithuania at the beginning of the 21st century. since entering the eu (2004), lithuania has lost almost half a million people (or 14% of the population), and over a quarter of a century, the nation decreased almost by one fourth (laurinavičius & laurinavičius, 2017). what causes emigration if the country’s growing economic prosperity does not stop its population? it is claimed that emigration is influenced by issues of trust and subjective wellbeing and that the latter is primarily linked to relative well-being, that is equality (or inequality), and not absolute wealth (or absolute income). this theoretical assumption can be justified by empirical data. the eu countries which have lost the most of their population also had the highest income inequality (laurinavičius et al., 2018). regarding the data of 21 july 2017 released by a charity organisation “oxfam” and a financial organisation “development finance international”, lithuania had the worst position in a fight with income inequality across the eu. in this study, lithuania ranked out 83 position of 152 surveyed countries (latvia – 46, estonia – 38, poland – 35) (laurinavičius et al., 2018). the list has been based on countries’ expenditure on education, health and social security, taxes and labour market policies. the destructive impact of the market on social justice is aptly emphasised by us political philosopher sandel (2012): “if wealth were the only benefit of being able to buy yachts, sports cars, or luxury vacations, income and wealth disparities would not matter much. however, as things become affordable, such as political power, better health care, homes in a safe neighbourhood, [...] access to an elite rather than a regular school, the gap between income and wealth becomes more and more important. when all good things become goods, money determines everything”. recent studies show that apart from the increased emigration greater inequality diminishes people’s confidence in a fair, equal opportunity society and weakens the sense of community. greater inequality also has a negative impact on the economy through lower productivity, efficiency, growth and greater instability (almeida, 2020; marchand et  al., 2020; schraff, 2020). lower economic growth has been demonstrated by analysing data from many countries over the long term (stiglitz, 2013). in regard to data of oishi et  al. (2011) (us data from 1972 to 2008) inequality makes people unhappy because of the lack of trust and justice. less confidence and a weaker sense of justice undermine people’s life satisfaction in times of higher income inequality. business, management and education, 2020, 18(2): 265–281 269 quite a few recent articles analyse the reasons and the effects of international emigration from the developing countries to the rich ones (franc et  al., 2019; phyo et  al., 2019; ivlevs et al., 2019). however, just a few pieces of research investigate whether inequality within one country is a cause for emigration. among these, there is a study of kumpikaitė-valiūnienė and žičkutė (2017) analysing emigration of 1980–2015 from lithuania. a qualitative analysis (conducted as a questionnaire on the internet) was presented in this study. it revealed the main reasons for emigration, and income inequality has been mentioned among other factors, such as too low wages in general, price policies and unemployment rates. some studies analyse an inverse causality: how the emigration affects income inequality. the study of galiano and romero (2018) examined 215 countries within the period of 1987–2012 and showed that the brain drain seemed to improve the equality in the distribution of income for (some of ) the poorest countries in their sample, while for relatively richer countries skilled emigration increased the inequality in the distribution of income. it has been found out that the brain drain could increase per capita income in the native country, while it increased the inequality in the distribution of income. uprety (2019) used a panel of 110 developing countries within the period of 1980–2010 and found robust results to different econometrics specifications and subsamples that highskilled migration increased income inequality in the short-run, while there appeared to be no effect of low-skilled migration on inequality. 2. methodology: data and model to make sure the assumptions described in the previous section are correct, the empirical study has been conducted between income inequality, measured as the gini coefficient, and emigration rates in european countries. the study estimated the correlation between gini coefficient of equivalized disposable income and emigration rates in 31 european countries, all eu (including the united kingdom) and efta countries (iceland, norway, switzerland). the wave of 2004 eu enlargement has been selected for further analysis. all those countries since 21 december 2007 belong to the schengen area. being a member of schengen area has a significant impact on emigration as visa-free access opens the internal eu borders. between 10 eu member states from the enlargement of 2004, only cyprus, due to its split, is not in schengen area. however, it has not been excluded from the analysis as the whole 2004 eu enlargement wave was selected to be analysed. the gini coefficient measures the inequality among values of a frequency distribution (for example, levels of income). the zero gini coefficient expresses perfect equality, where all values are the same (for example, where everyone has the same income). a gini coefficient of one (or 100%) expresses maximal inequality among values (e.g., for a large number of people, where only one person has all the income or consumption, and all others have none, the gini coefficient will be very close to one) (silber, 1999). happiness, life satisfaction and subjective well-being will not be additionally assessed in this study. those variables will be represented by income inequality. factor analysis is needed to be performed in further studies to ascertain what additional relationships exist between these variables. https://en.wikipedia.org/wiki/frequency_distribution https://en.wikipedia.org/wiki/income 270 a. laurinavičius et al. impact of income inequality on emigration: case of lithuania and other... the emigration rate, in turn, is calculated by dividing the number of long-term emigrants per year by the number of permanent residents of that country at the beginning of the same year. the numbers of gini coefficient, long-term emigrants and permanent residents are taken from the eurostat database. the survey uses the period from 2008 to 2017 (most recent published emigration data). in order to determine whether there is a relationship between income inequality and emigration rates in european countries, we first calculate a linear pearson correlation coefficient which ranges from –1 to 1. –1 and 1 indicate no functional relationship, 0 indicates no relationship, and values between –1 and 0 and 0 and 1 indicate negative or positive dependence. the dependency is considered to be averagely strong if the correlation coefficient is higher than 0.5 (or less than –0.5) and very strong if it is greater than 0.7 (or less than –0.7 respectively) (huber, 2004). later, a coefficient of determination is calculated to show what part of the dispersion of one phenomenon (emigration) is explained by another phenomenon (income inequality). the coefficient of determination is obtained by squaring the correlation coefficient. correlation analysis is carried out in two aspects that can relatively be called dynamic (time series analysis) and static (cross-sectional analysis): 1. the dynamic dimension of the analysis aims to assess the correlation between income inequality and emigration in the analysed countries, taken individually (hereafter referred to as individual countries) for the whole period of 2008–2017, for example, what was the correlation between income inequality and emigration in lithuania in the 2008–2017 period. 2. the static dimension of the analysis calculates the correlation between inequality and emigration in the countries under analysis, taken collectively (hereafter referred to as all countries), for a given year, e.g. the relationship between income inequality and emigration in all european countries under analysis in 2010. the analysis is subsequently expanded to use change in income inequality in place of income inequality. this tests the assumption if emigration is more strongly correlated with income inequality or its change measured in percentage points (or percentage), for example, if last year’s income inequality was 25 and this year’s it is 26, the change would be one percentage point (26 – 25 = 1) or 4% ((26 – 25) / 25 = 0.04). the aim is then to assess which year of income inequality (or change in income inequality) has a greater impact on emigration, current year or earlier? in other words, the aim is to assess the effect of delay (or lag) in income inequality (its change) on emigration rates. once the strongest correlation between income inequality and emigration rates is found for a particular group of countries, all the steps of analysis described above are repeated with the target group of countries. the final step in the study is regression analysis, the determination of the regression equation and the construction of the predictive model. income inequality is considered as the independent variable, and emigration rate is dependent. the hypothesis is tested on how emigration changes as income inequality changes. for that purpose, the calculation is first carried out on average income inequality in individual countries and average annual emigrabusiness, management and education, 2020, 18(2): 265–281 271 tion within the period from 2008 to 2017. these two variables are then set up in a regression equation (huber, 2004). finally, the significance of the regression is tested. the student’s t-test is used for this. the aim is to determine whether the calculated value of t is less than 0.05. if so, the resulting regression is statistically significant, if not, it is insignificant (huber, 2004). 3. results and discussion 3.1. correlation analysis in european countries initially, the dynamics of income inequality and emigration rates in individual countries for the whole period of 2008–2017 were analysed. it was determined that in the period of 2008–2017 the correlation between income inequality and emigration rates was positive in 19 countries and negative in 12 countries out of 31 european countries surveyed (table 1). a strong positive (more than 0.7) correlation occurred in 6 countries, a strong negative (less than –0.7) in only 1, a medium-strong positive (from 0.5 to 0.7) in another 5, and mediumstrong negative (from –0.5 to –0.7) in 2 countries. the correlation was weaker (positive or negative) (see appendix for detailed results) in the remaining countries. analysis of the dependence between the same indicators in all countries for a given year, the correlation coefficients are positive but weak (ranging from 0.1 to 0.31) in all studied years (2008–2017). it means that the relationship between income inequality and emigration is regular and not accidental. it can also be questioned that emigration is not influenced by income inequality itself but by its change. for that purpose, correlation coefficients between changes in income inequality (in percentage points and percentage) and emigration in individual countries have been calculated. the results obtained are shown in table 1. first of all, the results are very similar, regardless of how a change in income inequality is measured in percentage points or in percentage (table 1). second, in both cases, the correlation is weaker than calculating the correlation simply between income inequality and table 1. correlation coefficients between income inequality (or its change) and emigration in 2008– 2017 in 31 european countries correlation coefficient positive strong positive medium positive weak negative weak negative medium negative strong 0.7 to 1 0.5 to 0.7 0 to 0.5 0 to –0.5 –0.5 to –0.7 –0.7 to –1 gini and emigration number of countries 6 5 8 9 2 1 gini change pp and emigration 1 2 14 12 1 1 gini change % and emigration 0 3 14 12 2 0 272 a. laurinavičius et al. impact of income inequality on emigration: case of lithuania and other... emigration, so it cannot be claimed that not income inequality itself but its change would have any additional effect on emigration. moreover, if we calculate not the correlation between the change in income inequality and emigration in individual countries for the whole period of 2008–2017, but the correlation between the change in income inequality and emigration in all countries for a given year (static analysis rather than dynamic), we see that, in contrast to the correlation between income inequality and emigration, which, as mentioned above, was positive but weak in every year under analysis (2008–2017), the change in income inequality (however measured in percentage points or percentage) does not have such an unambiguous effect on emigration. the correlation was positive only in 4 years out of 10 years analysed, and in the remaining six years, it was negative. in addition, correlation coefficients were weak in all years except two. therefore, in a static analysis as in a dynamic one, it cannot be stated that the change in income inequality (in percentage points and percentage) would provide any additional explanation for emigration. another question to ask is how quickly income inequality (or change in income inequality) affects people’s decisions about emigration. it is quite likely that it will take some time to make a decision, so it is appropriate to analyse how emigration is affected by income inequality (or its change) of the previous year. for that purpose, correlation coefficients between individual countries’ income inequality (its change) and emigration rates have been calculated by taking data from previous year’s income inequality (its change) and current year’s emigration indicators. the obtained results are shown in table 2. analysing the impact of income inequality of previous year on the emigration of the current year the correlation coefficients are high or medium-strong (both positive and negative) in more than a half of countries (table 2). this is why it can be stated that residents’ decisions about emigration are influenced by current and previous year’s income inequality. on the other hand, the effect of changes in income inequality of previous years (both in percentage points and in percentage) on emigration in most countries is weak, much like evaluating previously discussed data of the current year. table 2. correlation coefficients between income inequality (or its change) lagged by 1 year and emigration in 2008–2017 in 31 european countries gini coefficient lagged by 1 year correlation coefficient positive strong positive medium positive weak negative weak negative medium negative strong 0.7 to 1 0.5 to 0.7 0 to 0.5 0 to –0.5 –0.5 to –0.7 –0.7 to –1 gini and emigration number of countries 7 4 9 5 3 3 gini change pp and emigration 1 4 17 8 1 0 gini change % and emigration 1 4 17 8 1 0 business, management and education, 2020, 18(2): 265–281 273 for maintaining the consistency of the analysis, it is necessary to discuss the static rather than the dynamic dimension of the analysis by calculating the correlation between income inequality (its change) and emigration in all countries for a given year. the results show that, similarly to the correlation between current year’s income inequality and emigration, the correlation between previous year’s income inequality and emigration of the current year in each of the ten years analysed (2008–2017) was positive but weak. the change in income inequality of the previous year (measured in percentage points or percentage) had no unambiguous effect on emigration. out of 10 analysed years, the correlation was positive in 6 years and negative in the remaining 4 years. in addition, in all years, except two, correlation coefficients were weak. finding out that the delay (lag) in the income inequality data does not have a significant effect on the study results, it can be focused on the differences between the group of countries where income inequality (does not matter whether of the current year or previous) had a strong impact on emigration and other groups of countries where this impact was weak. it is seen that there were 14 countries where the effect of income inequality on emigration in 2008–2017 was medium or very significant (table 1). in 11 of them the effect was positive in 3 it was negative. it is interesting that 6 of those countries are new members of the eu. in other words, six countries of the 13 new eu members experienced the medium or very strong impact of income inequality on emigration. this effect is even more pronounced when analysing the impact of income inequality of the previous year on the emigration of the current year (table 2). a highly and medium-strong correlation was found in 17 countries (11 positives and six negatives) and nine countries out of those, 17 were the new eu members. in other words, even 9 out of 13 new eu members had a high or medium-strong correlation between income inequality of the previous year and emigration of the current year. this phenomenon is worth to be examined more precisely. applying a static rather than a dynamic dimension of the analysis, i.e. calculating the correlation between income inequality (its change) and emigration in all new eu member states for a given year shows that as it was stated in the case of all countries the same is for the new eu members: positive correlation coefficients are obtained in each of the ten years (2008–2017). however, in contrast to all countries where all correlation coefficients were weak (ranged from 0.1 to 0.31), the correlation coefficients of the new eu members were much higher and ranged from 0.33 to 0.71. even in 4 years out of 10, the correlation coefficients were highly or medium strength and all of those years were consecutive and covered the crisis and post-crisis period (2008–2011). thus, it is expedient to examine the phenomenon of this period in separate scientific works. this study will confine itself to the preliminary conclusion that the effect of inequality on emigration can only be strong in certain limits. for example, factor analysis (also analysing the impact of gdp change) would help to determine at what times (or under what conditions) the effect of income inequality on emigration is significant and when not so much. by supplementing the analysis with the aforementioned data lag, we would not obtain further conclusions in this case. 274 a. laurinavičius et al. impact of income inequality on emigration: case of lithuania and other... 3.2. correlation analysis in new eu member states we will take a closer look at the impact of income inequality on emigration in the new eu member states, i.e. the group of countries where the correlation between income inequality and emigration was strongest. the wave of 2004 eu enlargement has been selected for further analysis as all those countries since 21 december 2007 belong to the schengen area while the other three countries (romania, bulgaria, croatia which entered the eu later) are not yet schengen area members. after all, being a member of the schengen area has a major impact on emigration as visa-free access opens the eu borders. only cyprus, due to the split, is not in schengen area out of the ten new eu members being in the bloc from 2004. however, it has not been excluded from the analysis as the whole 2004 eu enlargement wave was selected to be analysed. maintaining the consistency of the previous analysis, the correlation coefficients for these ten discussed countries were calculated. first of all, it is worth noting the static aspect of the analysis when calculating the correlation between income inequality (its change) and emigration in all countries for a given year. the results show that the correlation between income inequality and emigration in each of the ten years analysed (2008–2017) was positive. even in 9 years out of 10 analysed years, the correlation was medium or highly strong (the weakest was in 2014, and it was 0.49). the correlation coefficients for the whole period are shown in table 3: table 3. correlation coefficients between income inequality and emigration in 2008–2017 in 10 new eu member states (enlargement of 2004) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 correlation coef. 0.55 0.66 0.78 0.68 0.53 0.54 0.49 0.65 0.67 0.65 the situation is similar when analysing data with delay but the correlation coefficients are slightly weaker (table 4): table 4. correlation coefficients between income inequality lagged by 1 year and emigration in 2008– 2017 in 10 new eu member states (enlargement of 2004)   2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 correlation coef. lagged by 1 year 0.37 0.69 0.74 0.83 0.46 0.44 0.47 0.62 0.65 0.67 thus, in the new eu member states, in contrast to the previously analysed group of 31 european countries, the correlation between income inequality and emigration was strong not only within the crisis and post-crisis period, but in the whole analysed period (2008– 2017) (table 3). in addition, emigration was affected not only by income inequality of the current year but also by income inequality of the previous year (table 4). the correlation coefficient between average income inequality and emigration rates in 10 new eu member states have been further analysed. for that purpose, rates of average income inequality of the ten new eu members from 2008 to 2017 have been calculated at first. they are presented in figure 1: business, management and education, 2020, 18(2): 265–281 275 it can be seen that highest average income inequality in 2008–2017 was recorded in baltic states and the lowest was in visegrad group countries and slovenia (figure 1). then the total emigration rates (note: the correlation will be the same as with the average emigration rates) of the 10 new eu members were calculated for the period of 2008–2017. the results are presented in figure 2: 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% cyprus lithuania latvia malta slovenia poland estonia czechia hungary slovakia figure 2. cumulative emigration in 10 new eu member states (enlargement of 2004) in 2008–2017 in percentage of total population figure 2 shows the proportion of the population of the ten new eu member states that emigrated in 10 years. together it means that by dividing the above numbers by 10 an average annual emigration rate would have been received. it can be seen that the highest total (and at the same time average annual) emigration was observed by two of the three baltic states. lowest emigration was in the countries of the visegrad group. it is clear that a similar 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 latvia lithuania estonia cyprus poland malta hungary czechia slovakia slovenia figure 1. average income inequality in 10 new eu member states (enlargement of 2004) in 2008–2017 measured by gini coefficient 276 a. laurinavičius et al. impact of income inequality on emigration: case of lithuania and other... distribution of countries in the diagrams of average income inequality and total (or average) emigration (figures 1 and 2) leads to a strong correlation coefficient between the two variables, respectively. as already mentioned, calculating the correlation with income inequality is irrelevant, which emigration indicator – average or total – will be used. the result will be the same: a strong positive correlation is received with a correlation coefficient of 0.67. squared the correlation coefficient, we get a coefficient equal to 0.45 (determination coefficient), which shows that even 45% of average annual emigration can be explained by using only income inequality data. 3.3. regression analysis the relationship between both measures, the average income inequality in 2008–2017 measured by the gini coefficient and the average annual emigration in the ten new eu members over the same period, is shown in figure 3: 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% 20.0 22.0 24.0 26.0 28.0 30.0 32.0 34.0 36.0 38.0 a v e ra g e a n n u a l e m ig ra ti o n , % gini coefficient figure 3. average income inequality and average annual emigration in 10 new eu member states (enlargement of 2004) in 2008–2017 with this data, we construct a regression equation in which the independent variable is the average income inequality, and the dependent variable is the average annual emigration. we get: y = 0.08x – 1.6, (1) where: y is average annual emigration in percentage; x is average income inequality measured as gini coefficient. the regression equation shows that as income inequality increases by one percentage point (under gini), average annual emigration increases by 0.08 percentage point. in other words, out of every million of the country’s population, this represents an additional loss of 800 inhabitants a year. on the contrary, when income inequality is reduced by one percentage point (under gini), average annual emigration is reduced by 0.08 percentage point. thus, the equation also suggests that emigration would stop when the gini coefficient reached 20% meaning if business, management and education, 2020, 18(2): 265–281 277 emigration depended solely on income inequality (figure 4). emigration, certainly, also depends on other conditions as the already mentioned accessibility (i.e., in this case, emigration is facilitated by countries belonging to the schengen area and open borders) and a significant difference in income between the countries of origin and destination. those assumptions will be analysed in further researches. student’s t-test (two-sided) has been used to determine the significance of the regression. the value equal to 3.28 × 10–14, indicating that the regression is statistically significant is obtained. conclusions findings of multiple analysed articles show that happiness is more correlated to equality of income (relative wealth) than the increase of income (absolute wealth). this is why income inequality as a measure of relative wealth can have an impact on different aspects of life regarding people happiness, life satisfaction, subjective well-being, and incentives to emigrate. in the article correlation and regression analysis are used to determine the relationship between the analysed social phenomena. the research starts with the analysis of links between the gini coefficient of equivalized disposable income and emigration rates in 31 european countries (eu-28 and efta countries iceland, norway, switzerland). it is then narrowed to the countries of 2004 eu enlargement wave as these countries belong to the schengen area since 21 december 2007 (this has had a major impact on emigration from these countries as visa-free access opened the internal eu borders for their citizens). the research was performed in 3 stages. firstly, the correlation between income inequality (its change) and emigration rates was calculated. secondly, the static and dynamic aspect was evaluated, as well as the influence of data delay (lag) on decision-making. finally, a regression equation was constructed, showing how one variable affects the other. 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% 20.0 22.0 24.0 26.0 28.0 30.0 32.0 34.0 36.0 38.0 a v e ra g e a n n u a l e m ig ra ti o n , % gini coefficient figure 4. average income inequality and average annual emigration in 10 new eu member states (enlargement of 2004) in 2008–2017: linear trend 278 a. laurinavičius et al. impact of income inequality on emigration: case of lithuania and other... the results of the study show that the correlation between change of income inequality (in percentage points or percentage) and emigration is weaker than calculating the correlation just between income inequality and emigration. therefore, it cannot be stated that change in income inequality would have any additional effect on emigration. the analysis of the dependency of income inequality and emigration indicators in all countries for a given year (a static aspect of the analysis), it is seen that the correlation coefficients are positive but weak (ranging from 0.1 to 0.31) in all studied years. it means that the relationship between income inequality and emigration is regular and not accidental. in contrast to the case of all countries, the correlation coefficients of the 13 new eu members are much higher and range from 0.33 to 0.71. in addition, even in 4 out of 10 years correlation coefficients were highly or medium-strong. all those years were consecutive and covered the crisis and post-crisis period (2008–2011). the phenomenon of this period is intended to be studied more closely in later works keeping in mind the conclusion that the impact of inequality on emigration can be strong only within certain limits. the usage of previous year’s income inequality data calculating correlation with rates of current year’s emigration did not significantly influence the study results either. this is why it can be stated that residents’ decisions about emigration are influenced by current and previous year’s income inequality. correlation between average income inequality and average annual emigration in the new eu member states (2004 enlargement wave) within 2008–2017 is strong and positive, and the correlation coefficient is 0.67. squared the correlation coefficient, we get a coefficient of determination of 0.45, showing that even 45% of average annual emigration can be explained by using only income inequality data. consequently, in the new eu member states, in contrast to the group of 31 european countries analysed previously, the correlation between income inequality and emigration was strong not only in the crisis and post-crisis period but throughout all the analysed period (2008–2017). in the group of new eu member states, the same as in the group of 31 european countries analysed earlier; emigration was affected not only by income inequality of the current year but also by the income inequality of previous year. highest average income inequality in 2008–2017 was recorded in baltic states, and the lowest was in visegrad group countries and slovenia. it can be seen that the highest total (and at the same time average annual) emigration was observed in two of the three baltic states (lithuania and latvia). lowest total emigration was in the countries of the visegrad group. the similar distribution of countries in terms of average income inequality and total (or average) emigration results in a strong correlation coefficient between the two variables, respectively. the regression equation shows that when income inequality in the new eu member states (2004 enlargement wave) increases by 1 percentage point (under gini), average annual emigration increases by 0.08 percentage point. it can also be stated that emigration would stop when the gini coefficient reached 20% value, providing that emigration depended solely on income inequality. factor analysis (also analysing the impact of gdp change) in later works would help to determine at what times (or under what conditions) the effect of income inequality on business, management and education, 2020, 18(2): 265–281 279 emigration is significant and when it is not so meaningful, either, how accessibility affects emigration (i.e. the opportunity to emigrate freely, such as being a member of the schengen area) and the income gap between countries of origin and destination. finally, more detailed analysis of the emigration problem and its possible links to income inequality would allow economists to assess a priori the potential of various measures suggested in practice and would also contribute to a more detailed study of the scientific aspects of emigration and income inequality. references alesina, a., di tella, r., & macculloch, r. 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(2020). income inequality, corruption and subjective well-being. applied economics, 52(12), 1311–1326. https://doi.org/10.1080/00036846.2019.1661953 appendix correlation coefficients in 31 european countries between income inequality measured as gini coefficient (and its change in percentage points and percentage) and emigration in 2008–2017 are shown in table a1. table a1. correlation coefficients in 31 european countries between income inequality (and its change in percentage points and percentage) and emigration in 2008–2017 2008–2017 correlation coefficients gini and emigration gini change pp and emigration gini change % and emigration belgium –0.68 –0.44 –0.44 bulgaria 0.83 0.54 0.52 czechia 0.37 0.18 0.18 denmark 0.67 –0.18 –0.19 germany 0.34 –0.18 –0.18 estonia 0.23 –0.49 –0.49 ireland 0.20 0.19 0.19 greece 0.81 0.50 0.51 spain 0.16 –0.23 –0.23 https://doi.org/10.1177/0956797611420882 https://doi.org/10.1111/rode.12577 https://doi.org/10.1111/jcms.13027 https://osp.stat.gov.lt/ https://doi.org/10.1111/npqu.11358 https://doi.org/10.1111/imig.12661 https://doi.org/10.7551/mitpress/10036.001.0001 https://doi.org/10.1080/00036846.2019.1661953 business, management and education, 2020, 18(2): 265–281 281 2008–2017 correlation coefficients gini and emigration gini change pp and emigration gini change % and emigration france –0.58 –0.36 –0.38 croatia –0.85 0.28 0.27 italy 0.77 –0.04 –0.04 cyprus 0.86 0.44 0.45 latvia 0.55 –0.33 –0.32 lithuania 0.37 –0.15 –0.16 luxembourg 0.66 0.23 0.23 hungary 0.90 –0.05 –0.06 malta 0.59 0.05 0.03 netherlands –0.46 0.50 0.49 austria –0.10 0.05 0.04 poland –0.44 0.10 0.09 portugal –0.39 0.69 0.68 romania 0.12 –0.68 –0.67 slovenia –0.40 –0.45 –0.45 slovakia –0.33 –0.16 –0.15 finland –0.48 0.26 0.26 sweden –0.33 –0.56 –0.54 united kingdom 0.68 0.18 0.17 iceland 0.77 0.02 0.02 norway 0.16 0.31 0.30 switzerland –0.49 0.23 0.23 end of table a1 copyright © 2020 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: zivile.tuncikiene@vgtu.lt business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 2: 247–264 https://doi.org/10.3846/bme.2020.12712 solutions for improving the partnership between airport and airline companies živilė tunčikienė*, romanas katinas department of management, faculty of business management, vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania received 13 may 2020; accepted 02 june 2020 abstract. purpose – for every country’s economy, air transport is strategically and vitally important. for improving the quality of air transport services provision, partnerships between airports and airlines need to be encouraged more. the application of partnerships leads to quality improvements of services provided by companies and raises the efficiency of used practices. a number of the factors, which determine the effective partnership between organisations operating in the aviation sector, is examined on the basis of specialised literature. the study addresses the question of how organisations interact with each other and what factors determine the need for partnership. having identified common factors in the organisation’s operational interface and the need for it in the aviation sector and having analysed the practical examples of partnerships, the ways to enhance these factors are explored in order to achieve effective partnerships between airports and airlines. research methodology – consists of comparative analysis, methods of logical analysis and abstraction, multi-criteria evaluation. findings – the solution to the problem is expressed by identifying the factors of an effective partnership between the airports and the airlines and selecting the criteria for the assessment of the favourable effects of airport cooperation activities, and their hierarchical schemes from the positions of the airlines. practical implications – using multi-criteria assessment methods is easy to construct matrices of initial estimates, calculate final estimates and thus decide which airport is the most appropriate partner for an airline or vice versa. originality/value – a unique and, at the same time, a universal system of criteria, the application of which provides the preconditions for the development of the partnership, is created. research limitations – the availability of data is limited to determine the reasonable values of the partnership criteria. keywords: aviation sector, airports, airlines, partnership, criteria, multi-criteria evaluation. jel classification: m10, m14, m30, l14, l26. http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 https://doi.org/10.3846/bme.2020.12712 248 ž. tunčikienė, r. katinas. solutions for improving the partnership between airport and airline companies introduction the prospect of the air transport sector is rightly regarded as a factor in the development of the country‘s economy. air transport is a strategic and vital sector for the european union’s economy, generating some 65.5 million direct and indirect jobs, the sector contributes to around 2.7 trillion eur in european gdp, which is 3.6% (industry high level group, 2018). one of the ways to efficiently provide and improve air transport services is the partnership principle between airports and airlines and its implementation. air transport has been developed with the support and control of national authorities. the entire aviation market has been progressively liberalised through new sets of management tools, which have restricted access to the market to licensed entities that can fully meet their obligations. requirements have been set which must be meet by air carriers wishing to start or continue operations, they must be owned and effectively controlled by the member states and/or national of member states, be in an excellent financial standing and have the professional capacity and organisational structure necessary to operate in accordance with the regulations in force. the airlines are competing with each other and seeking to gain as much market share as possible, thereby reaching better agreements with airports, ground-handling companies. meanwhile, airports are competing with each other to attract better, more profitable carriers to their airport. equal access to airports and airport services shall be ensured in accordance with regulations (eeb) no. 95/93, which provides for the allocation of slots at congested airports (i.e. permits to land or take off at a specific time of the day) to an airline in an equitable, nondiscriminatory and transparent manner (coito et al., 2019). directive 2009/12/eb defines the basic principles for the collection of airport charges for the use of airport infrastructure and services (coito et al., 2019). airports address the challenge of attracting the most attractive air carriers to meet the development goal, while air carriers vice versa choose the most suitable airport for them. it is the partnership application that is debatable, and the answer is sought how to improve the quality of services provided by such companies, increase operational efficiency, increase financial performance while ensuring high safety standards. the purpose of this study is to reveal the totality of the factors on which effective partnership in the aviation sector depends. to achieve this goal, the following tasks have been set: – to reveal the aviation sector as a system for specifying the content and the relationships between its elements; – to justify the need for a partnership in the aviation sector by revealing its role for each other and in general; – to analyse and evaluate the determinants of partnerships between key players in the aviation sector. the research methodology consists of comparative analysis and evaluation of scientific literature sources, synthesis and generalisation, multiple criteria decision-making (mcdm). 1. specifics of the aviation sector: a systematic approach to a management object the aviation sector is a complex system that connects not only people, cultures but also business across all continents (international civil aviation organization [icao], 2017). one thousand three hundred commercial airlines and nearly 32,000 aircraft used by them in 2017 business, management and education, 2020, 18(2): 247–264 249 executed 41.9 million flights from more than 3,700 airports, transporting 4.1 billion passengers on 45,000 routes (air transport action group, 2018). the main organisations active in the aviation sector are: – airports; – airlines; – ground handling companies; – air navigation service providers; – educational institutions; – aircraft manufacturers; – insurance and leasing companies. all of these (airports, airlines, ground handling companies, air navigation service providers, etc.) are interdependent and form a complex network at a global level that requires effective partnership management. according to icao secretary general dr fan liu, the aviation system has evolved over several decades to become an indispensable global network connecting the global economy and cultures. more than three million people are directly employed by airlines, air navigation service providers and airports (icao, 2017). gradually, an aviation network has emerged that considers airports, routes and airlines as nodes and critical edges. in complex networks, several key nodes and critical edges play a vital role. if these core nodes are damaged or malfunctioning, it affects the stability and performance of the entire network structure. li et  al. (2019) emphasise that the identification of key nodes and critical edges is always a hot topic in complex networks. this is also the case in the aviation network, where other players (airlines, passengers) suffer from the inefficiency of the core node (for example, an airport). the effectiveness of the network grows in proportion to its focus on core competencies and relevance, ensuring the consistency of its members’ goals (ribačonka & kasnauskė, 2014). thus, network modelling becomes a multi-criteria decision-making problem involving a variety of and interrelated parameters (kucuk yilmaz et al., 2018). many airports and airlines in the world suffer from the climate (storms, volcanic eruptions). these critical airports and airlines must support the stable operation of the aviation network. according to li et al. (2019), by monitoring vital airports, routes, and airlines, we can quickly understand the operation of the air traffic network. besides, supervisory resources can be reasonably allocated to ensure stable operation of the entire network at the lowest cost. given that aviation is a global system where various stakeholders interact, the costs and benefits of environmental policies, capacity building and other interventions need to be assessed in this area (dray et al., 2019). thus, it is reiterated the need for all stakeholders and partners to work together to maximise the benefits of air transport and sustain sustainable aviation growth by connecting more and more people (icao, 2017). all of these organisations are directly or indirectly dependent on each other and act on each other. the growth of the aviation industry has a positive impact on passengers through the creation of multiple travel directions. according to dožić (2019), in general, each stakeholder (airlines, airports, air traffic management (atm), aircraft manufacturers) creates many jobs in the air transport system and thus contributes to the economic development of the country. kucuk yilmaz et  al. (2018) emphasise that in order for economic growth, key players – airlines, airports, air navigation system providers and system oversight bodies – need to work together and be interconnected. according to icao general secretary dr fang 250 ž. tunčikienė, r. katinas. solutions for improving the partnership between airport and airline companies liu, the results of collaboration in air transport provides prosperity to everyone interested in a very large and inclusive global community (icao, 2017). airlines develop their strategy to decide which business model to choose from: whether to become a low-cost airline, to which airports to fly (big or small), to buy or rent aircraft, to train pilots themselves or to hire trained pilots and many other aspects. according to dziedzic and warnock-smith (2016), the strategic choice of low-cost carriers is the choice of primary or secondary airports, where the most important criteria for selecting the operating airport are price, demand and efficiency. on the other hand, airports need to decide what to do if they need to choose a location, determine the appropriate level of service, or improve their performance or competitive position in the market (dožić, 2019). it is the job of air navigation service providers to ensure an adequate level of safety when dealing with aircraft congestion. according to dožić (2019), air traffic management problems include problems related to safety problems and human factors (stress due to workload, human error, etc.) to sum up, all the organisations operating in the aviation sector, such as airports, ground-handling companies, air navigation service providers, aircraft manufacturers and training institutes, it can be concluded that the primary objective of all stakeholders is not profit, but rather safety. all these organisations must cooperate to ensure overall safety in the aviation sector. 2. interaction between airports and airlines there are two main types of organisation operating in the aviation sector: airports and airlines. in order to uncover the interplay between airports and airlines, it is first necessary to examine how they are interdependent and what powers they may have with respect to each other. according to stephenson (2015), airports and airlines have similar challenges and opportunities in terms of travel experiences (as cited in eyefortravel, 2015). good or bad experience in one country affects the brand and reputation of the other, requiring airlines and airports to work together. 2.1. the needs and objectives of airlines and their implementation schemes one of the major goals of airlines is to match capacity and demand in prevailing market conditions, which has a direct impact on profitability gains and cost reductions (dožić, 2019). as many of the authors under study point out, the primary purpose of the airline market is to meet passengers’ expectations. airlines need to consider many aspects in order to achieve their goals. dožić (2019) highlights the following aspects: – technical / technological; – economic; – passengers; – environmental. it can be noted that research is dominated by technical/technological and economic aspects – objectives. regional airlines often opt for lcc’s business model of profitability management and pricing: relocating to smaller airports that tend to promote new routes, co-finance, and thus lower entry barriers (efthymiou et al., 2016). each year, as the demand business, management and education, 2020, 18(2): 247–264 251 for air transport grows, airlines must decide which aircraft to operate on a particular route, what level of passenger service seems satisfactory, which route to take, and which strategic partner to choose (dožić, 2019). evaluates the impact of strategic airline alliances, through which airlines do not only cooperate in marketing (such as loyalty programs), for travellers, and thus for better utilisation of the airlines and their partners’ capacity, while reducing costs (oum et al., 2019). dožić (2019) emphasises that in order to remain competitive and maintain or even strengthen its market position in a time of steady growth in air transport, an airline must identify the key factors that make it competitive and force its customers to choose that particular airline. airlines select and/or value partners for future cooperation. most airlines select an alliance for a strategic partnership based on various criteria/sub-criteria. in the us aviation industry, for example, almost all regional airlines have contracts with one or more network airlines (gillen et  al., 2015). airlines need the right approach to make the right decision when choosing an outsourcing provider and gain additional benefits. it is then essential to determine how much the business plans of the potential partners fit together in the present and in the future (dožić, 2019). different methods are used to evaluate the quality of service criteria. the most commonly used methods are mcdm. most airlines opt for an alliance for a strategic partnership. 2.2. airport operational models, goals and their implementation schemes airports are one of the most critical parts of the aviation chain, which also includes airlines, aircraft manufacturers, air navigation service providers and global distribution systems and travel agents (tretheway & markhvida, 2014). as emphasised (donnet et al., 2018), airports are a vital component of a state’s or region’s ability to create sustainable competitive advantages in pursuit of economic and societal goals. airport representatives, as the largest group of respondents, identified a number of challenges, including those related to politics, alignment of common goals, lack of knowledge and cooperation, and negotiation skills (spasojevic et  al., 2019). the development of airport routes, also known as the development of air services in some countries, is the process of attracting, developing and maintaining air services at airports (halpern & regmi, 2013). private airport ownership helps these airports operate more efficiently than state-owned airports (kutlu & mccarthy, 2016). thelle and sonne (2018) defined ard (air route development) activities as “airport marketing activities aimed at attracting new routes, such as attending route planning conferences, offering incentive schemes, meeting with airlines, producing special reports for airlines. the most obvious purpose of the ard is to encourage airlines to operate additional routes from a particular airport (halpern & graham, 2015). the same about routing policies is also emphasised by lin and huang (2015) that airports usually use active and targeted forms of personal sales to report routing opportunities, such as attending route networking events to meet airlines at their offices and introduce them (lin & huang, 2015). two key areas of business have a significant positive impact on performance: collaboration (through strategic marketing partnerships and collaboration with other airports) and active and targeted forms of personal sales (inviting targeted airlines to visit the airport and attend networking events) (lin & huang, 2015). 252 ž. tunčikienė, r. katinas. solutions for improving the partnership between airport and airline companies the incentive theme is most noticeable at smaller airports because it is important for them to attract airlines (halpern & graham, 2015). the growth of airports should benefit both the region and the airport. however, if the airport operator forms a partnership, the emphasis may be on maintaining routes that appear to offer the region the greatest economic benefit rather than the highest profit potential. thus, it can be argued that the airport will increase business connectivity or inbound tourism by promoting routes (halpern & graham, 2015). increasing demand in an aviation system where the capacity of major airports is limited may lead to the increased airport and airspace congestion, which in turn may lead to increased delays and airline costs (dray et al., 2019). although there is a clear interest in close cooperation between airports and airlines, a less understood and discussed aspect of this process is the interest of tourism authorities, both locally and nationally (spasojevic et  al., 2019). the influence of air transport on tourism is not a one-way relationship (farmaki & papatheodorou, 2015). the main purpose of airports is to provide safe, fast and pleasant passenger service. to achieve this, the airport must be competitive with other airports. it has to attract the airlines you want. however, they often lead to market distortions and, for example, are dominated only by low-cost airlines. 2.3. case study of partnerships between airports and airlines the partnership is a hot topic, as evidenced by the abundance of articles. spasojevic et  al. (2019) emphasised the need for all major stakeholders to cooperate. partnership, as the most critical attribute of leadership, is the key to successful stakeholder engagement. closer and long-term partnerships are vital for successful stakeholder engagement. specific partnerships involving certain stakeholders could be divided into the following categories: – airports – airlines – tourism organizations; – airports – local entities (e.g. shopping malls, conference centres, visitor offices); – airports – government – tourism organisations; – a city couple approach (airport-airport) (spasojevic et al., 2019). the overall objective of airlines and airports should be to carry passengers safely, comfortably and pleasantly from door to door. often the problem is that not all parts of this journey are well connected. that is why the subjects are working to address this problem through partnership. pernilla edelsvärd, head of digital services at scandinavian airlines, says the goal is to have a seamless travel experience from discovering customers’ travel to reaching their final destination. here airlines and airports need to define common key performance indicators and a common approach to technology development to reduce costs for both parties. here are the opportunities for improvement on both sides, with a greater focus on passengers rather than aircraft turnaround, a new concept for airline-airport collaboration and common standardisation and development. so, airlines and airports are working together to increase efficiency and passenger convenience with iata’s business simplification program, ranging from electronic tickets, common-use self-service (cuss) kiosks and barcodes. these three tools offer a tremendous opportunity to enhance the passenger experience on fast travel further. fast travel is a self-service package that improves travel efficiency from check-in to luggage, implemented through a partnership between airlines and airports, including sas and copenhagen airport, the first to implement all five fast travel projects (iata, 2011). business, management and education, 2020, 18(2): 247–264 253 partnering with stakeholders such as airports and airlines working together on a marketing campaign can help define market strategies. according to lohmann and vianna (2016), if these strategies fail, no other action is taken to avoid the stopping of the route. the symbiotic relationship between airlines and airports and the close involvement of private and public services lead to successful partnerships (spasojevic et al., 2019). spasojevic et al. (2019) also point out that successful partnerships require a ‘strong leader’. outsourcing, as one of the restructuring measures, is very common in the airline industry (maintenance, ground handling, ticketing, catering) (dožić, 2019). for example, close cooperation between government agencies, airports and airlines in singapore and dubai has led to the transformation of these air hubs into world-leading tourist destinations (spasojevic et al., 2019). according to iata director t. tyler (iata, 2011), building infrastructure to manage airport growth is a challenge that can best be solved by working closely with airports and airlines to their mutual benefit. this includes collaborating on joint airport planning to ensure that investments are made that meet the needs of the airlines. he highlighted london heathrow airport, where dialogue between the airport operator and the airline helps, among other things, to promote capacity development, optimise existing capacity, take advantage of advancing technologies to reduce noise and emissions. other airlines are improving the processes at the airport to ensure that customers do not encounter obstacles during their journey. a great example is jetblue. back in 2014, jetblue automated the check-in process, and customers no longer had to wait in line to pick up their ticket or luggage. smooth travel creates a positive image for both the airport itself and the airlines it serves. the smoothness of travel depends to a large extent on the partnership between airlines and airports: hotels, travel sharing services, car rental companies. also, the smoothness of the journey depends on the partnership between the airport and the airline, which often allows faster and more convenient passenger service. in this way, airports and airlines can optimise operations, improve decision-making, and enhance cross-selling (general loyalty program). by integrating systems and digital automation, for example, airports and airlines can easily exchange information. this allows them to remove obstacles at the airport, from check-in to security check-in and boarding. with such information, airports and airlines can direct offers to travellers, ensuring they get what they need and want quickly and easily (natividad, 2017). one of the key points of all this collaboration is data sharing. according to stephenson, they believe gatwick is the market leader in offering other organisations free access to operational data via the api. this free data exchange will benefit both airports and airlines by channelling relevant services to passengers with common needs. the idea of discussing plans with airline partners comes from scandinavian airlines, which works with airports to find reciprocal growth opportunities, and emphasises the need for cooperation. the company would like airports to share their expansion plans and use the expertise of airlines to develop self-service solutions and automation enhancements further. both airports and airlines want to meet passengers’ expectations as much as possible and are working to create comfortable rest areas. by working together in this field, airports and airlines are working together to improve their image in the market. today, an example of such a partnership is the collaboration between brussels airlines, brussels airport and other partners in the development of the new brussels airport flagship leisure service, the loft (eyefortravel, 254 ž. tunčikienė, r. katinas. solutions for improving the partnership between airport and airline companies 2015). brussels airport has teamed up with microsoft and designit europe to “create a new passenger experience”. according to lars redeligx, cco at brussels airlines, this partnership allows guests to borrow a laptop computer in the lounge during their stay. using the app, they have access to the brussels airlines digital lounge assistant program, where they can book a shower room, see for snacks or book a meeting room (eyefortravel, 2015). although it is publicly known that specific agreements between airports and (low cost) airlines are widespread (e.g. the polish example) (huderek-glapska & nowak, 2016), their provisions are generally considered business secrets. the partnership helps stakeholders achieve better results. to achieve this, airlines and airports need to work together to achieve a high quality of service. both airports and airlines want to meet passengers’ expectations to the best of their ability, and they try to achieve this in a variety of ways: creating comfortable rest areas, fast digital climbing, fast luggage delivery, it systems installation, and more. 3. methodological potential for investigating the problem of partnership between organisations multiple criteria decision-making (mcdm) methods are currently being developed and widely used to assess partnership problems. regarding mcdm methods, dožić (2019) observed that the combination of anp and dematel was used in four works (liou, 2012; liou & chuang, 2010; liou et  al., 2011b; rezaei et  al., 2014), the fuzzy analytic hierarchy process (fahp) in three (chao & kao, 2015; garg, 2016; rezaei et al., 2014). promoting the effectiveness of the partnership between airports and airlines, which can be expressed and analysed according to criteria, allowing you to evaluate the partnership objectives and level of implementation, offers the opportunity to achieve better overall and personal results (both financial and qualitative). researchers focus on service quality (sq), partners, fleet, competition, financial performance, safety and other specific goals. different goals and topics can be distinguished from table 1. the article thus examines the factors of an effective partnership between airports and airlines by analysing the most important criteria for providing these services. the evaluation of the partnership is expressed through the criteria of service provision, the compatibility of the partners. airline planners often use a variety of mcdm techniques to balance several criteria. the analysed articles deal with different topics and specific objectives, and the compatibility between different aspects, as shown in table  1. the evaluation criteria were established by analysing the literature of foreign authors, which examined the factors of a partnership between airports and airlines. as one of the effective tools for evaluating partnerships, can be highlighted peer reviews because many aspects to be evaluated are qualitative. topsis and ahp methodologies are used to evaluate and select strategic partners. the topsis method is a method for determining the rationality of variants in the proximity of an ideal point. in other words, topsis is used for ranking the alternatives and identifying the most important one (kraujalienė, 2019). the essence of the topsis method is to determine the relative distance of each alternative to the “ideally worst” variant. the greater the distance, the better the alternative under consideration is for the decision-maker. the formulas used to calculate such distance according to the topsis method are described in the specialised literature (zavadskas et al., 2016; jurevičienė et al., 2020). business, management and education, 2020, 18(2): 247–264 255 table 1. airline goals, topics and applied methods in special literature (created by authors) no author specific purpose topics applied methods 1 chang and yeh (2004) safety ranking / evaluation fmadm 2 hsu et al. (2010) safety management system evaluation dematel, anp, gra 3 torlak et al. (2011) competitiveness of the airlines ranking ftopsis 4 liou (2012) strategic alliance partner selection dematel, anp, fpp 5 hsu and liou (2013) mro suppliers selection dematel; anp; saw 6 rezaei et al. (2014) supplier selection selection / evaluation fahp 7 bruno et al. (2015) aircraft evaluation ahp, fuzzy set theory 8 yoon and park (2015) competitiveness selection / evaluation ahp 9 zhang et al. (2015) service quality evaluation non-aditive mca method, choquet integral 10 garg (2016) strategic alliance partner selection / evaluation ahp, ftopsis 11 huang and hsu (2016) service requirements evaluation fahp, gap 12 kurtulmuşoğlu et al. (2016) service quality selection smaa-2 13 lau et al. (2016a) customer profitability evaluation fahp, topsis, abc 14 lau et al. (2016b) service quality identification fahp, topsis 15 ozdemir and basligil (2016) aircraft selection fanp, fahp 16 singh (2016) service quality measurement ahp, comparative analysis 17 deveci et al. (2017) route selection selection 2 fuzzy topsis 18 dinçer et al. (2017) airline performance evaluation fdematel, fanp, moora 19 keshavarz ghorabaee et al. (2017) service quality evaluation topsis, copras, waspas, edas 20 görener et al. (2017) supplier performance evaluation interval type-2 fahp, interval type-2 ftopsis 21 li et al. (2017) service quality evaluation fahp, 2-tuple fuzzy linguistic method 22 barak and dahooei (2018) safety ranking / evaluation fsaw, ftopsis, fvikor, aras-f, copras-f, fuzzy multimoora, fuzzy dea 23 chen (2018) service quality evaluation vikor, pythagorean fuzzy set 24 gudiel pineda et al. (2018) financial results improvement vikor, danp, drsa 25 tsafarakis et al. (2018) service quality improvement musa 256 ž. tunčikienė, r. katinas. solutions for improving the partnership between airport and airline companies first of all, based on the literature analysis, the specific goals of the airlines were identified, their compatibility and the methods used to balance several criteria. the second phase, based on the study of the literature, identifies the factors, on which effective partnerships depend. the third phase uses the topsis method. the topsis approach makes it easier for airlines to choose a strategic partner (airport). in order to get a universal model, you would also need to do some analysis from the airport side, that is, what requirements and expectations the airport have for attracting one or the other partner (airlines). 3.1. determination of criteria one of the most studied topics is the choice of partners. this paper examines how airlines select and value partners for future collaboration. the application of different mcdm methods from the airline position will be analysed. keeping in mind that the data in the aviation industry very often lack or very expensive, the mcdm approach is chosen accordingly. specifically, some methods require specific data, some require paired data comparison, and some may use inaccurate data or inaccurate comparisons (dožić, 2019). partnership selection criteria must be based on the needs and operational strategy of the organisation. the evaluation criteria were established by analysing the literature, which examined the factors of the partnership between airports and airlines. according to the analysed literature, effective partnership depends on the following key factors (garg, 2016): – marketing and service (advertising, loyalty programs, brands, code sharing) (chao & kao, 2015; goh & yong, 2006; liou et al., 2011a; merkert & morrell, 2012; zhang et al., 2004); – finance (profit, economy, investment, total expense) (bilotkach & hüschelrath, 2012; chao & kao, 2015; evans, 2001); – integration and network (flight and route expansion, more frequent flights, overall coverage) (bilotkach & hüschelrath, 2012; chao & kao, 2015; liou et  al., 2011a; zhang et al., 2004); – it systems (integrated systems, information sharing, standard operating procedures) (chao & kao, 2015; evans, 2001; liou et al., 2011a); – logistics and resources (shared terminals, shared offices, transportation) (chao & kao, 2015; liou et al., 2011a; morrish & hamilton, 2002; zhang et al., 2004). the authors use different criteria/sub-criteria to support the appropriate selection of a strategic partner for future collaboration. according to dožić (2019), depending on the partner and the type of cooperation with the airline (strategic alliance, freight forwarder or outsourcing company), four aspects can be identified that could cover all criteria: economic, compatibility, strategy and risk, and product. these aspects include all types of partners and aspects of their cooperation with airlines. economic aspects include profitability, investment, income, pricing and so on. strategy and risk aspects are different aspects that can positively or negatively impact the cooperation between an airline and a potential partner (dožić, 2019) (see table 2). these aspects (economic, compatible, strategic and risk, products) show how the different activities of partners overlap. according to dožić (2019) compatible aspects of sustainability business, management and education, 2020, 18(2): 247–264 257 in the baseboard, potentially in the partner’s field of activity (information system, equipment, ancillary services), product aspects evaluated against criteria for quality and design. by the way, it is sensible to determine how many potential partners business plans can be with each other and in the present and beyond (dožić, 2019). it is worth noting that the data related to the above criteria if collected from a potential partner, could be used to assess whether the partnership was justified or not. the low-cost airline requirements for airports are (barrett, 2004): low airport charges, fast 25 min turnaround time, single deck airport terminals, quick check-in, good catering and shopping at the airport, good ground transportation, such as business class sites. the choice of airports among many factors such as traffic convenience between airports and service cities, distances between these cities, the attractiveness of airports, level of airport rates, the material incentive for airlines, efficiency of apron providers, sole terminology companies, etc. (pandey et al., 2018). airlines are convinced that the number of passengers at airports is higher, the number of passengers is higher, the average number of passengers and the average number of passengers. airlines take into account specific criteria, reasonably using the best airport and taking into account the various criteria offered by partners in making informed cooperative decisions, offering unified and universal criteria such as airlines and airports, the precise establishment and development of businesses that have long-term prospects (see figure 1). table 2. criteria used for a specific objective partner (dožić, 2019) author economic aspects compatibility aspects strategy and risk aspects product aspects hsu and liou (2013) cost savings, flexibility in payment relationships, flexibility, information sharing trade union, loss of management control, information security knowledge skills, customer satisfaction with time rezaei et al. (2014) price, financial stability csr delivery, product quality, assortment garg (2016) finance general equipment, it system marketing and services, integration and networking partner image and experience, logistics and resources görener et al. (2017) pricing policy (spare parts and services price policy, price policy expert flexibility, volume discount policy) flexibility (flexible payment plans, refund policy expert opinion, emergency resolution, complaint expert feedback) delivery (delivery time, delivery time reliability, customs service documentation, expert opinion, delivery reliability), communications (response time, customer service) 258 ž. tunčikienė, r. katinas. solutions for improving the partnership between airport and airline companies according to the proposed system of criteria, compatibility of partners is to be considered as an integrated criterion. it can be directly measured against the level 1 criteria (defined by summarising the factors in the literature that determine effective partnership). each of the criteria is detailed into indicators. adequacy of the partner’s approach to business development (in terms of how the partner presents himself or herself – in other words, the strategic attractiveness of the partner) involves the development philosophy (for example, what behaviour is unacceptable at all – trade-offs), favorability of goals and actions, the flexibility of the business development strategy – adequacy of changes, periodicity of changes. the latter can be further elaborated on the flexibility of the behavioural model in emergencies. the attractiveness of the product and its marketing and realisation aspects – 3 criteria are highlighted here, they can be further elaborated at a lower level, for example, product exclusivity in partner interactions can be treated through product complementarity, product quality in the union includes separate procedures (for example, from registration to boarding) performance time, etc. favorability of the economic aspects is related to the attractiveness of the pricing policy, the potential for cost reduction, the stability of the investment in operations, the adequacy of the technical, technological solutions – these are the information management related and so on. in order to systematically evaluate the object of the research, it is logical to combine the criteria system with the criteria allowing to determine the attractiveness of the external context as an activity space. based on the limited data, the study determined which airport is the most favourable for the airline to choose. the pilot test for the application of the developed criteria system is based on secondary data on the factors that determine the potential of the partnership, taking into account the aspects of airport performance assessed by users. table 3 shows how people rate airports according to certain criteria. based on the limited data, the study determined which airport is the most favourable for the airline to choose according to the criteria. the topsis multi-criteria evaluation method figure 1. a system of criteria for deciding on cooperation (created by authors) business, management and education, 2020, 18(2): 247–264 259 table 3. airport assessment from a flying perspective (flightradar24 ab, 2020) n um be r of ra tin gs tr av el to th e ai rp or t (c he ck -i n) te rm in al in fr as tr uc tu re se cu ri ty ch ec k w if i fo od a nd re ta il lo un ge c us to m s b ag ga ge re tr ie va l a1 – brussels (bru) 133 79% 81% 79% 77% 66% 69% 71% 63% 65% a2 – franfurt (fra) 452 81% 82% 80% 75% 73% 75% 70% 73% 68% a3 – miunich (muc) 245 77% 83% 81% 85% 76% 79% 77% 72% 73% a4 – london getwick (lgw) 276 79% 80% 76% 63% 80% 73% 63% 74% 70% a5 – oslo (osl) 146 85% 83% 80% 78% 72% 73% 69% 63% 72% a6 – copenhagen (cph) 169 84% 82% 81% 79% 73% 76% 65% 73% 65% a7 – helsinki (hel) 127 84% 86% 85% 82% 84% 81% 76% 71% 78% a8 – paris cdg (cdg) 382 73% 72% 75% 73% 68% 66% 62% 68% 66% a9 – rome fiumicino (fco) 198 75% 77% 75% 78% 68% 72% 63% 67% 64% a10 – amsterdam (ams) 396 87% 85% 83% 86% 79% 78% 82% 74% 74% table 4. calculated distances to the “ideal” version* (compiled by the author) c1 c2 c3 c4 si+ sipi position a1 0.042 0.067 0.000 0.102 0.147 0.078 0.347 9 a2 0.116 0.095 0.000 0.105 0.120 0.145 0.547 3 a3 0.077 0.081 0.000 0.092 0.132 0.103 0.439 7 a4 0.077 0.050 0.000 0.135 0.135 0.115 0.459 5 a5 0.005 0.020 0.000 0.051 0.202 0.000 0.000 10 a6 0.049 0.075 0.014 0.127 0.127 0.105 0.453 6 a7 0.035 0.072 0.010 0.098 0.143 0.077 0.352 8 a8 0.117 0.109 0.115 0.124 0.011 0.198 0.949 1 a9 0.071 0.081 0.011 0.129 0.117 0.120 0.506 4 a10 0.115 0.101 0.094 0.118 0.028 0.179 0.863 2 v+ 0.117 0.109 0.115 0.135 v0.005 0.020 0.000 0.051 note: *c1–4 – criterion; a1–10 – alternative; si+ – distance to an ideal positive decision; si– – distance to an ideal negative solution (v–); pi – relative closeness of each location to the ideal solution (v+). was chosen for this study. the topsis method evaluates the minimum distance from the ideal solution and the maximum distance from the ideal negative decision for each alternative. according to the values obtained, the alternatives are ranked from best to worst. in this method, the decision matrix is first normalised using vector normalisation. obtaining a normalised matrix yields comparable values that can be used for further calculations. a weighted matrix is then constructed. each matrix value is multiplied by the assigned weight given in table 3. 260 ž. tunčikienė, r. katinas. solutions for improving the partnership between airport and airline companies in order to evaluate the results, the “positive ideal” and “negative ideal” options v+ and v– need to be identified. based on these values, in the following calculations, we estimate the distance of each alternative solution to the “positively ideal” si+ and to the “negatively ideal” si–. in the last step, we calculate pi, which shows the distance from the “ideal” solution. table 4 gives the results. the results show that paris cdg airport would be the most profitable choice for airlines based on the criteria compared to other airports. this is due to the fact that paris cdg airport carries the largest number of passengers (c1) compared to other airports and has the highest capacity (c2) (it operates the most flights per hour). the fact that paris cdg carries the largest number of air passengers does not mean that it will be suitable for new airlines. maybe it’s already overcrowded with other carriers. thus, in order to choose an airport, airlines need to perform complex multi-criteria calculations, evaluate endless aspects, harmonise them and only then decide which airport to choose. conclusions the aviation sector is a complex system that connects people, cultures, businesses worldwide. this complex network consists of airports, airlines, ground handling companies, air navigation service providers and others. managing this network requires a partnership basis. the overarching aim of airlines and airports is to carry passengers safely, comfortably and comfortably from door to door. the dilemma is to match the capabilities and demand of different organisations to the prevailing market conditions and at the same time to exceed the expectations of passengers. airlines and airports are working together to solve this problem through partnerships. partnership as the most critical attribute of leadership to successfully engage and engage with stakeholders is a central theme. partnership selection criteria must be based on the needs and operational strategy of the organisation. the study found that the key factors for an effective partnership in the aviation sector are: marketing and service, finance, integration and networking, it systems, logistics and resources. there are four aspects that could be covered by all the partnership criteria: economic, compatibility, strategy and risk and product. the key to achieving an effective partnership is that the strategies of the airport and the airlines coincide now and in the future. it is clear that partner selection is a multi-criteria task. so airlines need complex multicriteria calculations to choose an airport (or vice versa for airports), evaluate endless aspects, fine-tune them, and only then make a partner choice decision methods such as topsis. it is worth noting that every application of the partnership is subject to slightly different criteria and models, as each cooperation between the airport and the airline has its own aspects that need to be taken into account. references air transport action group. 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reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: mf0077@ukr.net peculiarities of implementing governance in the system of social security myroslav kryshtanovych 1*, petro petrovskyi 2 iryna khomyshyn 3, ivan bezena 4, iryna serdechna 5 1department of pedagogy and social management, lviv polytechnic national university, lviv, ukraine 2department of public administration, lviv regional institute of public administration, lviv, ukraine 3department of administrative and information law, lviv polytechnic national university, lviv, ukraine 4department of social and humanitarian education, candidate of philosophy, dnipropetrovsk regional institute of public administration of the national academy of public administration under the president of ukraine, dnipro, ukraine 5department of civil law and process, leonid yuzkov khmelnytskyi university of management and law, khmelnytskyi, ukraine received 26 february 2020; accepted 30 march 2020 abstract. purpose – the primary purpose of the study is to identify the main threats to the process of ensuring social security and finding ways to establish a connection between economic and social security. research methodology  – the methodological basis is a system of complementary philosophical, general scientific and unique methods of cognition of socio-political phenomena, in particular systemic-structural, comparatively retrospective, institutional and structural-functional, diagnostics and forecasting, general methods of analysis and synthesis, etc. findings – our results made it possible to establish which particular threats most affect the social security of the countries of eastern europe and the calculation results will help establish the country needs a connection between economic and social security. research limitations – we did not take into account a significant number of indicators characterising the state of social security of the state. the threats we have highlighted are compassionate. in the future, it is necessary to pay considerable attention to the process of assessing the level of social security of the state in order to determine whether it is necessary to state which government measures or not. practical implications – сertain threats and models can be used by countries of eastern europe to form the necessary measures to counter them; originality/value – the study covers one of the least explored areas, namely social security, which has not been explored for a long time in the context of identifying threats. social security model idef0 formed. keywords: governance, management, security, social security, threats. jel classification: a14, g18, h11. business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 12: 142–156 https://doi.org/10.3846/bme.2020.12177 mailto:mf0077@ukr.net https://orcid.org/0000-0003-1750-6385 https://orcid.org/0000-0001-8521-2384 https://orcid.org/0000-0002-6180-3478 https://orcid.org/0000-0002-7169-2038 https://orcid.org/0000-0002-6417-7249 https://doi.org/10.3846/bme.2020.12177 business, management and education, 2020, 18(1): 142–156 143 introduction the social component of national security is gaining weight in one of the dominant and pressing issues of modern scientific research. social security as an essential component of national security is one of the key elements of the entire national security system. it implements the interests of the state, society, family, as well as social groups. it is here that the strength and harmony of social relations between the state and the population are checked. because of this, social security means the optimal balance of interests of the state, the whole society and the population in the implementation of their social needs. it should be noted that the attitude of citizens to ongoing reforms, to state institutions, and finally to statehood and independence, depends on the effectiveness of the process of implementing state policy to ensure social security. the image of the country in the eyes of the european and world democratic public will also largely depend on the quality and dynamics of resolving these issues. background and related work social security is a universal scientific, political, legal, educational, legal, social, managerial, medical and psychological category. which side does not consider it, it is vital – like water, air, heat, food, etc. a person in danger loses health and satisfaction with life, needs protection from dangers, from violation of human rights and freedoms. dangers in human life change his worldview, primary needs become a priority, and everything related to development is postponed for a certain period or not realised at all. a deformation of consciousness occurs, and circumstances arise when a person, through the non-elimination of social security conditions, faces a choice  – to continue living in these conditions or to change these conditions, or to leave their homes, to move to safer and more favourable conditions for themselves and their families. it is useless to expect significant successes in human and social development from people who live in constant danger. today, more and more scientists are paying attention to the problems of ensuring social security. recent problems in the social sphere of european countries require the search for new ways to form a social security system. social security is a universal scientific, political, legal, educational, legal, social, managerial, medical and psychological category. on which side it is not to be considered, it is vitally important – like water, air, heat, food. a person in danger loses health and satisfaction with life, needs protection from dangers, from violation of human rights and freedoms. dangers in a person’s life change his worldview, primary needs become a priority, and everything related to development is postponed for a certain period or not realised at all. events that have taken shape in the world require active research into the problems of ensuring social security. the novelty of the study is the formation of a social security model idef0 and the formation of a model of the impact of threats on social security. 144 m. kryshtanovych et al. peculiarities of implementing governance in the system of social security 1. literature review today, scientists interpret the concept of “social security” in different ways: as a state of guarantee of legal and institutional protection of the vital social interests of a person, society and the state from external and internal threats (gnibidenko et  al., 2006); one of the most important internal components of national security, characteristic the degree of social stability of society (andrushchenko, 2002), the state of society, which ensures the normal reproduction of society as a demographic population, as a nation, as a people (buddychuk & ishchenko, 2010), etc. in particular, palamarchuk (1999) in social security determines the prevention of conditions that led to an unacceptable decline in the standard of living of the main layers of the population and individual social groups, determines social degradation, as well as providing conditions for maintaining a social perspective for all segments of the population. novikova (1997), who implemented a comprehensive study of social security, social security defines as the state of protection of the social interests of the individual and society from threats, they are affected by national security. a significant number of researchers have studied social security issues (hama, 2017; dushi et al., 2017; afonso, 2019; ndiaye & mckay, 2019). the features of the social security system have a number of problems which can be seen in the scientific works of rappeport (2019), aarts (2019), ekici (2019), reichenstein (2019). sillaste (2001) defines social security as a state of security of an individual, social group, community from threats of violation of their vital interests, social rights and freedoms. some scientists, in particular minaev (2009) define social security as the protection of the social sphere of society and the state from threats that could destroy or result in its degradation; as the protection of the interests of society from external and internal threats, covering the economic and social way of life of society, the public domain and property, public institutions and organisations, national customs and traditions, and the sphere of living. libanova (2004), when revealing the essence of social security, are of the opinion that the state of security or the security of an individual is the result of the implementation of a social protection policy. they define social security as one of the components of national security, interpreting it as a state of protection against threats to social interests. lemak (2016) believes that social security is the security of every person living in ukraine. moreover, any danger of society is automatically a national danger. besides, according to the scientist, an equal sign between these concepts will eliminate the difference in their interpretation, such as that security is associated only with power decisions, and social security only with the social (civil, peaceful) position of citizens in the state. according to vlasyuk (2016), the social security of ukraine is scientifically based calculations of the minimum consumer budget, adequate ideas about a decent person’s lifestyle, the introduction of wages, which made the implementation of such a consumer budget. therefore, as the scientist notes, social security requires the corresponding development of the non-market sector of the economy, first of all, a radical revision of the traditional attitude to health care and education, on which the future of ukrainian society directly depends, gathering the nation’s gene pool, improving the quality of the workforce, ensuring ukrainian ability to perceive and implement the most significant achievements of modern civilisation. business, management and education, 2020, 18(1): 142–156 145 kolenda (2013) examined social security and its main components, conducted by the author of the study, made it possible to understand the very essence of this process better and to study all the components in detail. haaga and johnson (2012) investigated the basic elements that most characterise the growth and development of social security in the country. it should also be noted that studies of social security in the scientific literature (purcell, 2016; meyer, 2013; rohardt, 2020; onischenko, 2011) are constantly ongoing and more and more often you can find new scientific works of scientists. the study of social security conducted by the authors was considered more theoretically, and there was little lack of practical application. as a result of the analysis of scientific sources, we came to the conclusion that it is necessary to carefully review modern approaches to social security, highlight the main threats and propose a new approach to ensure it. we use the method that is associated with the formation of the idef0 model. it is widely used in the areas of business process management and control. for example, godlevskyi, orlovskyi and kopp (2018) used this method to optimise business processes. when sylkin, kryshtanovych, zachepa, bilous and krasko (2019) used idef0 simulations for crisis management of an enterprise. however, given the prevalence of the use of the idef0 method, its application is practically absent from the social security system. 2. theoretical framework and hypothesis any social system is continuously faced with the problem of balance in achieving social goals and the resource capabilities of their provision. the social direction of development is constantly faced with economic constraints or, in the presence of economic resources, with the priority of their investments not in favour of social priorities. social spending from the budget does not balance with economic opportunities. they can be either excessive through political leverage, or used for further economic priorities without taking social goals into account. directions for achieving a safe state in the social and economic spheres do not correlate with each other, are not coordinated and are not regulated, which causes contradictions between the achievement of economic and social goals. the social orientation of the economy and its importance is growing under the current conditions of the economic crisis, which negatively affects in the medium and long term economic activity and the growth of the welfare of the population. foreign experience of the leading countries of the world indicates the advisability of increasing the role of the state, specifying its functions in the implementation of social policy and expanding the range of socialisation of the economy. social security in scientific literature is interpreted from three perspectives: – this is a state of social stability and the ability to withstand social threats; – this is the legal protection of human rights and freedoms, the vital social interests of the individual and society from internal and external threats; – this is the appropriate level of financial support for officially established social standards and guarantees that determine the quality of life of a person and society. so, social security is a universal scientific, political, legal, educational, legal, social, managerial, medical and psychological category. it is a combination of types of security, due to the 146 m. kryshtanovych et al. peculiarities of implementing governance in the system of social security structure of human life in its various fields. social security reflects the state of protection of the social interests of individuals, social groups, society, as well as the state. ensuring normal living conditions of society, the population, preventing the degradation of certain social groups, as well as the overall survival of the ukrainian nation, depends on social security. in current conditions, social tension in ukraine is increasing, welfare and living standards of the population are declining. negative trends in the social sphere and accumulated social problems pose threats to national security and the further development of society, which may become the reasons for the imbalance and stability. therefore, it is relevant to study the state of ensuring social security to develop preventive measures and prevent threats that can destabilise the social and other spheres. the primary purpose of state policy to ensure social security is the safe existence of society because it is the safety that is its main task. our main point of view on which we strive to identify threats to social security consists in their further introduction and counteraction to their negative impact in order to improve the state social policy for the countries of eastern europe. the implementation of the state policy on ensuring social security obviously requires continuous updating of such activities, which require the reproduction of: the resource base for ensuring social security; conditions of constructive security, which cover the necessary organisational, managerial, legal, ideological aspects; strengthening the relationship between all participants in its support (figure 1). figure 1. structure of components and factors of social security (created by the authors) employment and the labor market; unemployment; environmental and technogenic safety; epidemiological situation; social partnership; demographic situation; labor migration; social and labor relations social environment; social insurance; gender policy; prevention and resolution of labor conflicts; the fight against poverty; ethno-national and religious relations; education of patriotism the state of society social security of man the quality of life standard of living health care; food; clothing; housing and living conditions; family and childhood; education; culture and art; communications and communication; free movement, travel, tourism; free access to information; leisure and rest indicators of social development; cost of living; minimum and average, nominal and real wages; income and expenditure of the population; rising consumer prices; payroll arrears business, management and education, 2020, 18(1): 142–156 147 state social policy should be aimed at realising the following interests of the country’s population: – maintaining employment with an average unemployment rate of not more than 5–6%; – providing opportunities for all non-disabled people to earn money for completing their needs; – a clear definition of the circle of people who need to provide state social guarantees and distinctions in connection with this social insurance and social assistance will help reduce consumer sentiment in society; – development and implementation of social programs that cover certain k-categories of the population; – introduction of a new mechanism for financing the social sphere. h1: the standard of living of the population is one of the most critical indicators for ensuring social security. social security is closely linked to economic and national security and is very sensitive to changing functioning environments. 3. methodology the methodological basis of the study is a system of complementary philosophical, general scientific and special methods of cognition of socio-political phenomena, in particular system-structural, comparatively retrospective, institutional and structural-functional, dozens of diagnostics and forecasting, general methods of analysis and synthesis, etc. of the components of the systematic methodology of analysis of state policy on social security is a synergistic approach, the application of which allows examining the national security as a dynamic process capable of self-organisation and improvement. the following methods were used to identify and justify ways to improve social security: induction and deduction, comparison and systematisation  – when studying the essential characteristics of the state of social security in individual countries of eastern europe; synthesis and analysis – the rationale for the formation of a model of social security; morphological analysis  – to complement the structural elements of social security; mathematical  – for modelling using idef0; graphic  – for visualisation of theoretical and methodological material; abstract-logical  – for theoretical generalisations and conclusions of the study. in most cases, the methodology used by us is qualitative. of particular importance for the diagnosis of social security is the subjective assessment of citizens. it provides an opportunity to see and feel the whole range of problems that most concern a person, which cause her unfavourable sensations, traumatise her and do not provide conditions for a healthy existence and grounds for development. statistical estimates of social status are also critical. they allow you to analyse in dynamics, make comparisons, track trends and see the place of the object of analysis in the national and international observation system. the best option for assessing social phenomena is the use of sociological and statistical information. nevertheless, the unsystematic conduct of sociological surveys of the country’s population limits the possibilities for their simultaneous use. in this regard, of particular importance are the qualitative methods of sociological research, among which the method of expert assessments occupies a special place. 148 m. kryshtanovych et al. peculiarities of implementing governance in the system of social security to build the idef0 model of social security for eastern european countries, we use methods to form the highest a-0 chart. using the methods of the node tree, we form blocks of the functional model (figure 2). the entire system we simulate is denoted by block a-0. following this, all inputs, outputs, controls and mechanisms will be connected to the block by green arrows and codes of figure 3. ensure the social security а0 а3а2а1 improve public administration form the proper informational support of social policy develop social security management solutions ensure the social security с1 с2 с3 о1 о2 м3м2м1 і2 і1 legislation and regulatory documents models experience of foreign countries decision making information options for management decisions private structures state structures technical means social status information financial resources а0 figure 2. the hierarchy of blocks of the functional model idef0 to ensure social security (created by the authors) figure 3. comprehensive social security idef0 model diagram (created by the authors) business, management and education, 2020, 18(1): 142–156 149 in figure 3 there are several mathematical notations that cover the main task – to ensure social security. so, the input is in (n = 1, 2), the control is cn (n = 1, 2, 3), the output is on (n = 1, 2), the mechanism is mn (n = 1, 2, 3 ). in the next stage, the data presented in figure 3 will be used to form the idef0 model. 4. results and discussions social policy needs serious modernisation, primarily in its functional manifestations, which should be more clearly aimed at bringing social development in selected countries of eastern europe (for example, ukraine) with high european standards in the context of the apparent need to strengthen the use of budgetary instruments, in particular with to prevent dispersal of state funding and its concentration on the implementation of the most important social programs. today, social financing is different in different countries of the world. for example, the financing of the social security system in germany is carried out from the contributions of insured employees and employers, from the state budget, as well as through a combination of both types of financing. the guarantor of the fulfillment of social obligations is the state, redistributing part of the funds to cover expenses in the form of state subsidies. the main source of financing the social security system in france is insurance premiums for workers and employers. the exception is unemployment insurance and family benefits, the share of state subsidies in which is significantly higher than in other sectors of social security, as well as accident insurance, which is funded exclusively from the employer’s funds. negative trends in the economy and accumulated social problems pose significant threats to the national security of the state and the further development of society. taking into account the current state of the country’s development requires an assessment of its social security in order to determine measures to prevent and eliminate them. we have involved experts and specialists on the issue of ensuring social security in order to determine which particular threats constitute the greatest influence on the social security of european countries in the current development environment (figure 4). we have recruited experts from the republic of poland, ukraine, bulgaria and the czech republic. the state of social security as one of the components of national security is exceptionally relevant precisely at this stage. objective diagnosis of the social condition of ukrainian society indicates that the main social risks – poverty, property differentiation of the population, the exclusion of a significant number of citizens from public life, the narrowing of their access to education, medicine and culture  – have reached scales that can pose a real threat to the national security of the state. in our opinion, there are two ways to counteract the threats presented in figure 4: adaptation of the social security system to their negative impact and direct counteraction. not all threats and risks are possible to control and carry out specific actions against them; sometimes, it is merely necessary to adapt to new changes. however, as far as social security is concerned, it is all the more possible to counteract. for example, when the level of poverty and the outflow of qualified specialists, public administration can fight and take measures that will help improve this situation. 150 m. kryshtanovych et al. peculiarities of implementing governance in the system of social security both internal and external threats to social security do not arise without good reason. experts were asked to determine the causes of internal threats to the social security of european countries based on the eighteen alternative answers presented for assessment with the right to supplement with other reasons. among the causes of threats to social security in the opinion of 66.4% of respondents, the indifference of the authorities to the social needs of the population and the lack of balanced interests between the government and society turned out to be significant. such an assessment of experts, put in the first place the reason for the imperfection of public relations due to the indifference of the authorities to the social needs of the population, as well as the lack of balance of interests between the government and society, was unexpected and extremely important. indeed, the comprehensive statistical analysis could not establish the root cause of the emergence of threats and social and national security, which has a qualitative characteristic of the interaction between the government and society. the dangers and threats themselves that were assessed by the respondents are already a consequence of the imperfection of governance in the system of public relations, where civil society remains an object, and not an equal subject of social relations if its interests are not presented and defended. this abyss interferes with the country’s successful development beyond the significance of threats to social security. indicator type of economic security risks and risks in the social sphere the ratio of the minimum pension to the subsistence minimum the ratio of the average salary to the cost of living stratification of the population by income, deepening poverty among the elderly growth in the level of poverty and the outflow of highly qualified specialists abroad unemployment rate reducing the purchasing power of the population, reducing the number of taxpayers, exacerbating the criminal situation the availability of housing on average per person deterioration of living conditions, their inconsistency with modern comfort requirements volume of consolidated budget expenditures on education leveling the value of learning outcomes, degradation of society the amount of consolidated health care expenditures the growing number of diseases, the health crisis and the deterioration in the quality of medical personnel figure 4. impact of threats and risks on the status of social security indicators (created by the authors) business, management and education, 2020, 18(1): 142–156 151 social security is characterised by indicators of the quality of life of the population, its material wellbeing, living conditions, the state of the social environment, level of education, health, environmental situation, demographic situation, and the like. the indicators used to assess the level and quality of life at the international level can be divided into quantitative and qualitative: quantitative include gnp or national income per capita, income level and its distribution in society, level of consumption of various material goods and services by classes of goods, employment rate, etc. qualitative indicators of quality of life include indicators of working conditions, life and leisure of a person and the like. the economist intelligence unit (the economist group) methodology calculates a corresponding quality of life index for 111 countries based on a regression model, based predominantly (80%) on the results of sociological surveys. along with the subjective quality of life assessments obtained from surveys of respondents of different ages, who ranked satisfaction with different areas of quality of life on a 5-point scale, this methodology takes into account individual objective determinants. most attention has been paid to gdp per capita purchasing power parities (table 1). obviously, social security is closely related to the performance of state institutions and the quality of life of the population. proved using econometric methods, the growth of corruption, shadowing, the excessive influence of political cycles increase the level of social tension (therefore, the indicators of social security decrease), reduce the incomes of the population (or, rather, redistribute them in favor of a small part of society) and inhibit socio-economic development the state as a whole, reducing the quality of life in the country. the latter is confirmed by the results of a study using non-linear programming tools (sinusoidal model, curxpt 5.0 statistical package) of the relationship between the level of social security and the quality of life index (1) (figure 5). y = 4.43 + 0.67cos (0.15x–3.02), (1) where y is the quality of life index; x – the level of social security. table 1. the economist intelligence unit methodology: guidelines and indicators for assessing quality of life (created by the authors) quality of life health life expectancy at birth, years family life divorce rate (per 1,000 population), converted into index of 1 to 5 community life (taking value 1 if country has either high rate of churchattendance or trade-union membership; zero otherwise material wellbeing (gdp per person, at ppp in $ political stability and security (political stability and security ratings climate and geography latitude, to distinguish between warmer and colder climes job security unemployment rate, % political freedom average of indices of political and civil liberties. scale of 1 (completely free) to 7 (unfree) gender equality ratio of average male and female earnings 152 m. kryshtanovych et al. peculiarities of implementing governance in the system of social security taking into account the projected data, if the level of social security drops to 48%, the quality of life index will decrease from 5,032 in 2015 to 4,154 – in 2018, which corresponds to the indicators of the third world countries (figure 6). for example, for the country of eastern europe selected in the study, according to the analysis, state social policy should be aimed at realising the following interests of the country’s population: – maintaining employment with an average unemployment rate of not more than 5–6%; – providing opportunities for all able-bodied people to earn money to meet their needs; – a clear definition of the circle of people who need to provide state social guarantees and distinctions in connection with this social insurance and social assistance will help reduce consumer sentiment in society; – development and implementation of social programs that cover specific categories of the population; – introduction of a new mechanism for financing the social sphere. the final stage is the construction of the idef0 model for ensuring social security for the countries of eastern europe according to the established data figure 2 and figure 3. the model itself is shown in figure 7. figure 5. the relationship between the level of social security and the quality of life index in a single country in eastern europe, 2001–2018, of components and factors of social security (created by the authors) figure 6. the relationship between the level of social, economic security and the shadow economy in a single country in eastern europe, 2000–2018 (created by the authors) business, management and education, 2020, 18(1): 142–156 153 our proposed social security model idef0 provides only rental costs and the maintenance of an appropriate specialist who specialises in mathematical modelling. we offered free of charge a separate state institution to the countries of eastern europe in order to put our approach into practice, and we established an increase in the effectiveness of the social security management system after its implementation (figure 8). state policy to ensure social security is one way or another included in all spheres of ensuring national security of the state. it provides: promoting the social independence of the subprocess progress information а2 subprocess progress information а3 improve public administration form the proper informational support of social policy develop social security management solutions а1 а2 а3 formrr thtt e proper infoff rmrr atiaa onal supuu portrr of social policy а2 м2м1 directives for security subprocess а2 directives for security subprocess а3 social policy analysis social security analysis с1 с2 с3 і2 і1 м3 о2 о1 figure 7. decomposition of the social security idef0 model (created by the authors) 0% 5% 10% 15% 20% 25% 30% the period of operation before applying the model the period after using the model effectiveness of social security management, % figure 8. changing the level of effectiveness of the public safety management system in a single institution in eastern europe (created by the authors) 154 m. kryshtanovych et al. peculiarities of implementing governance in the system of social security state; development of a system of social protection and its improvement; raising the level and quality of life, the level of unemployment, the compliance of the minimum wage with a living wage; ensuring the necessary level of social security and social insurance of the population; determining the fate of the unemployed as part of the working population; improving the situation of the population below the poverty line; increase in his living wage. conclusions the study presents the main features of public administration in the context of ensuring social security. thus, in ensuring the conditions of the necessary level of ensuring social security, the decisive role today belongs to the state, whose policy should be aimed at implementing a package of priority reforms aimed at improving the welfare of the population, stimulating its activity and desire for social progress, improvement of living conditions; reforming social infrastructure, the sphere of social protection of the population. in general, it should be noted that the control over the social security processes has not yet been completely lost, and the main levers of influence remain in the hands of the legislative and executive authorities; therefore, the total influence on the development of society in the country is decisive. implications the consequences of our study were to establish the importance of creating a social security system. theoretical analysis has allowed forming a structure of components and factors of social security. having secured the support of leading experts in the field of social policy and security, we identified precisely which threats and risks significantly affect the social security system. as a result of applying the idef0 model, we have formed social security decompositions. a connection was established between the levels of social security and the standard of living, economic security and the level of the tinnin economy. limitations the study is not without limitations. basically, we did not take into account a significant number of indicators characterising the state of social security of the state. the threats we have highlighted are compassionate. in the future, it is necessary to pay considerable attention to the process of assessing the level of social security of the state in order to determine whether it is necessary to state which government measures or not. future work the study of social security and its improvement is a complicated and lengthy process that requires a large number of activities. we have taken several steps to achieve a common goal. in the future, it is necessary to pay considerable attention to the study of social security in individual regions and institutions. business, management and education, 2020, 18(1): 142–156 155 disclosure statement authors declare that they have no competing financial, professional, or personal interests from other parties. reference aarts, l. 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(2016). national security: the evolution of domestic politics: choice. sciences. labor. nisi. https://www.nytimes.com/2019/04/22/us/politics/social-security-medicare-insolvency.html https://doi.org/10.3905/jor.2019.1.051 https://www.researchgate.net/publication/338740689_from_security_to_social_security https://www.researchgate.net/publication/338740689_from_security_to_social_security https://doi.org/10.3846/btp.2019.41 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: jelena.titko@eka.edu.lv business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 1: 170–179 https://doi.org/10.3846/bmee.2021.14201 analysis of students performance in relation to the results of state unified exam: the case of russian university anna svirina 1, aleksey lopatin 2, jelena titko 3* 1, 2kazan national research technical university named after a.n. tupolev, kazan, russia 3eka university of applied sciences, riga, latvia received 08 january 2021; accepted 28 january 2021 abstract. purpose  – considering the limited number of studies covering the topic, the goal is to check the existence of the correlation between the results of russia’s unified state exam and performance at the university. research methodology  – the article uses quantitate analysis (regression) of the student performance on a sample of 4664 students. to provide statistical evaluation, the authors use spss statistics software. findings – the research suggests, that results of unified state exam and individual students scores, awarded by the university under restrictions, are non-efficient in terms of predicting student performance. on the opposite, students’ performance during their first semester is a good predictor for the whole period of academic studies. as existing results of testing such hypotheses are inconsistent, the research provides value to the field of educational research. research limitations – data for research refer to only kazan national research technical university named after a. n. tupolev (knrtu-kai). practical implications – the research clearly indicate, that the universities cannot rely solely on the unified state exam during admission; they are to use different assessment tools to ensure future academic performance and lower dropouts rate. originality/value – there is a gap in the investigation the link between secondary education and higher education performance. keywords: students’ performance, admission criteria, russia unified state exam. jel classification: i21, i23. introduction prediction of students’ performance is quite a popular topic for investigation because this information can help “to design effective mechanisms that improve academic results and avoid dropout” (rastrollo-guerrero et  al., 2020), “to reach the highest level of quality in mailto:jelena.titko@eka.edu.lv https://doi.org/10.3846/bmee.2021.14201 https://orcid.org/0000-0001-8598-558x https://orcid.org/0000-0003-4806-097x https://orcid.org/0000-0003-1333-0941 business, management and economics engineering, 2021, 19(1): 170–179 171 the higher education system” (sembiring et  al., 2011), to properly “select among candidates” (tatar & düştegör, 2020), as well as to evaluate institutional performance (alyahyan & düştegör, 2020). besides, predicting students’ performance “creates opportunities to improve educational outcomes” (hellas et  al., 2018) and also can help “potentially weak students in overcoming educational challenges” (tatar & düştegör, 2020). this, in turn, will allow reducing the dropout rate in higher education. in europe, the question about reducing the number of early leavers is on the current agenda. the current goal of the european commission within the strategic framework for european cooperation in education and training (european commission, 2020), among others, is “the rate of early leavers from education and training aged 18–24 should be below 10%” (european commission, 2020). this indicator in the eu varies from 3.0% to 17.3% in 2019 (eurostat, 2019). in turn, in russia the rate of early university dropouts is limited by the ministry of higher education – the university can lose not more, than 10% of its students (gruzdev et al., 2010), and it makes the task of recruiting the “right students” even more challenging. various predictors of students’ performance have been investigated by researchers (sulphey et  al., 2018; hellas et  al., 2018; zivcic-becirevic et  al., 2017). in the current study, the authors look at the relationship between admission criteria and students’ results. the case of the russian educational system, in particular regarding russia’s unified state exam, has been considered. the goal of the research is to check the existence of the correlation between the results of russia’s unified state exam and performance at the university. the research was based on data about more than 6000 students representing different study programmes at kazan state technical university named after a. n. tupolev (knrtu-kai). students’ performance was proxied by the grade point average in each particular study semester and for the whole study period. the null hypothesis is stated, as follows: h0: there is a statistically significant positive relationship between the results in russia’s unified state exam and students’ performance. the authors assume that other factors should also be taken into consideration for making a reliable forecast. to process the data, the authors have used spss statistics software 22.0 to run simple and multiple regression analysis alongside with the graph analysis of the interrelation between student’s academic performance and the results of unified state exam on entering the university. as it appeared from the undertaken analysis, the hypothesis is not supported. though the influence of the unified state exam results onto students’ performance at the kazan national research technical university is statistically significant, it is very low. thus, one can’t consider such results as a good predictor of future student’s academic performance. 1. exploratory measures to predict students’ performance a comprehensive review on predicting students’ performance was made by shahiri et  al. (2015), and the results yielded several groups of most important factors, such as students’ demographic attributes, psychometric factors, extra-curricular activities, social interaction 172 a. svirina et al. analysis of students performance in relation to the results of state unified exam... network. the authors also mentioned the grade point average (gpa) as the most frequently used variable for predicting students’ performance. hellas et al. (2018) group performance predictors into five categories: demographic (e.g., age, gender), personality (e.g., self-efficacy, self-regulation), academic (e.g., high-school performance, course performance), behavioral and institutional (e.g., high-school quality, teaching approach). students’ demographic attributes (gender, age, family background) concerning performance are investigated in many studies (sembiring et  al., 2011; aziz & awlla, 2019). some researchers also highlight such factors, as time efforts and students’ attitude towards study process (sembiring et  al., 2011), students’ self-efficacy and motivation (beharu, 2018), personal traits, such as extraversion, social adjustment and others (zivcic-becirevic et al., 2017), parents’ occupation (ramesh et  al., 2013; khan et  al., 2015), disabilities and study habits (olufemi et  al., 2018). hughes et  al. (2017) stated that “students who are wage-earning or self-employed on admission … are more likely to succeed”. another factor affecting students’ performance is a schedule of examination – van der vinne et al. (2015) investigated the correlation between students’ chronotype and examination performance. the academic interest of the authors of the paper is to reveal or confirm the non-existence of the link between the admission criteria and students’ academic performance. according to oecd survey “national/central examinations, taken towards the end of upper secondary education … are the most widely used examinations/tests for entry into first-degree tertiary programmes” (oecd, 2017). the attempts to investigate the link between examination results at secondary school and students’ performance have been made (silva et  al., 2020; goldstein & thomas, 1996). however, it should be mentioned that most of the studies have been conducted in the field on medical education (curtis et al., 2007; al-rukban et al., 2010; yousafzai & jamil, 2019). the authors of the paper agree with silva et al. (2020) in their statement that “the link between secondary education and higher education achievements remains understudied”. in particular, this gap exists in the field of business education. besides, from the authors’ viewpoint, admission results should not be solely dependent on examination scores. there is a piece of empirical evidence showing that students’ personal traits, such as organisational skills, intrinsic motivation (zivcic-becirevic et al., 2017) are very important for educational success. for instance, harvard admission officers take into account personality, intellectual curiosity, character, intelligence, perspective, and skill set of the candidates. in cambridge, the applicants are expected to be able “to think critically and independently”, and to have “selfdiscipline, motivation, commitment…” (university of cambridge, 2020). one of the main findings presented in the report from the council of graduate schools (kent & mccarthy, 2016) is that “graduate institutions are calling for more data that demonstrate the link between admissions criteria and student success”. the authors of the current research strongly believe that there is a need for such data also in the russian federation, and this paper contributes to the formation of such a database. business, management and economics engineering, 2021, 19(1): 170–179 173 2. admission process russian universities russian educational system includes three educational levels. the first one is the school level (11 years of education), which is required for everyone. after the 9th year of school education, a person can transfer to the professional education institutions (mainly colleges and professional schools. after completion of the school level, a graduate can enter higher education institutions based on results of the unified state exam. a schoolchild can choose as many exams as he or she wishes, and 3 positive results (above the given threshold) are required to be admitted competing with other applicants to become an undergraduate student in s certain university. after completion of undergraduate studies, a person can continue education on the post-graduate level, choosing any educational program on the master level. the unified state exam can be taken once in a year, and the first attempt has to happen during the last year of school studies (in the 11th grade). after checking the results, they are inserted in a state record system, and after application each university requests those results to check if this person is eligible to enrol in higher educational programs – if the results are below the specific threshold, a person is automatically withdrawn from enrollment. since 2009 russian universities are obliged to use unified state exam results as almost the only prerequisite to admission  – each school graduate needs to submit 3 scores of this exam to the university (usually, two of them are mathematics and russian language). those 3 scores are summarised, and the enrolment list reflects the rank of the student based on this sum. the ones, who have a higher integral score, are admitted to the university; the others are left out. the exception from this rule exist, but are rare  – for instance, a conservatory can arrange a preliminary audition, or a theater or art academy can add a so-called “creative exam” where is the ability of a candidate to perform or draw will be checked out. this system is more or less the same for all post-soviet countries with an exception to the baltic states (semyonov et al., 2015). as this system has been a subject for criticism, later the universities could add 10 points to this integral score, based on the personal achievements of the potential student. these 10 points do not change the situation significantly (the integral unified state exam score can be 300 points, 100 per each of 3 exams), but in case of equal scores, it allowed universities to make a choice based on their own criteria. yet, the argument around continues and the higher education system does not have a consensus on how good or bad is the unified state exam based admission system. russian researchers have attempted to investigate the link between the results of russia’s unified state exam (use) and students’ performance (stanko et al., 2016; khavenson & solovyova, 2014; zamkov & peresetsky, 2013). these studies confirmed a predictive capacity of use. based on these studies, almost every russian monitoring and ranking system assesses average entry use point as one of the measures for the university’s quality of performance. however, the number of investigations is quite limited to judge the reliability, leaving a room for this study. 3. research methodology the current study is based upon the admission and performance data collected longitude by one of the leading russian technical universities, kazan national research technical university. the data sample included average use point submitted in the process of admission 174 a. svirina et al. analysis of students performance in relation to the results of state unified exam... to the university, the individual points (up to 10) awarded by the university upon admission, performance during each exam session (twice a year) and overall university performance. this data was collected for 4664 students of kazan national research technical university, who are enrolled in their 2–4 years of studies on the offered undergraduate programs. the sample is balanced in terms of program structure within the university  – 1336 are the students of aviation, transport and energy institute (the biggest one), 653  – in the automation and electronic equipment building institute, 1063  – in the technical cybernetics and information security institute, 465  – in the engineering economics and entrepreneurship institute, 995 – in the radioelectronics and telecommunication institute and 152 – in physics and mathematics faculty. the study used regression analysis (chatterjee et al., 2000) performed by spss statistics software, alone with graph analysis implemented with the same software. by these means, the authors have tested the following three hypotheses. 1. students with higher unified state exam results at the point of admission to the university demonstrate better performance at the university. 2. students with higher individual points awarded by the university upon admission demonstrate better performance at the university. 3. students with the higher performance during the first university exam session, demonstrate better performance at the university. regression models have used average performance rate at the university during the exam sessions throughout education process as the dependent variable, while average unified state exam result, individual points and average result during the first session were used as independent variables. 4. results the results of testing the first hypothesis in accordance with the described procedure indicate that results of use can explain, on average, only 6% of the variance in individual student’s performance at the university. the variance explained by the individual points, received by the student during the admission process (hypothesis 2) is also low – 7.5% – though it is a bit higher than in case of use. when hypothesis 1 and 2 were combined, and the authors performed multiple linear regression analysis, model accuracy increased, and together these two factors explain 21% of the variance in student’s performance at the university. still, as the university has to enrol student based solely on these two factors, 21% seems not enough to predict future student performance; thus, hypotheses 1 and 2 are not supported in case of kazan national research technical university (though the results appeared to be statistically significant). on the opposite, hypothesis 3 was supported. student’s performance during the first university exam session explains 53.2% of the variance in overall performance at the university. this is 8.5 times higher than the quality of predictions made on the basis of use results, and 2.5 times more accurate in case one uses multiple regression model with use results and individual points as independent variables. based on this finding, one can argue that academic success at the university requires something different compared to the successful business, management and economics engineering, 2021, 19(1): 170–179 175 completion of the unified state exam, and these qualities are a better predictor for future students’ academic success. it also seems no exaggeration to mention, that university educational system is solid in terms of creating student competence, and if the student understands the requirements during the first 4 months, it is highly likely he or she would be academically successful – no matter how high or low they have scored at use. to confirm these findings, the authors further detailed the study by assessing the hypothesis that the predictive power of use results would increase if only higher scores would be taken into account. to test this hypothesis, the sample was analysed for different use scores with a range of 5 points on a 100-point scale. the results are in table  1, both use scores, and university academic performance variance explained. the results indicate, that use score serves best as a predictor of future (low) academic performance when the future student passed the unified exam and earned a great that is just slightly above the threshold. on the opposite, the higher is use admission score, the lower is the probability that student’s quality of the performance would be the same at the university level. the graph in figure 1 illustrates this finding. table  1 also indicates that the quality of individual points as a predictor of future academic performance leads to the same results as we have described above with the use score (independent variable). this hypothesis was tested for each amount of individual points (from 1 to 10), and variance explained was in each case below 10%. though for a score, that changes the chance of a person to be admitted to the university, by 3%, the predictive power of up to 10% is relatively high; still, in the context of this research the authors are to reject hypothesis 2, and confirm, that both use score and individual points can’t be considered a good predictor of academic performance. it is also interesting, that for high score use students the first exam session is a much worse predictor of their academic performance, than table 1. regression analysis of use results (independent variable) as a predictor of university academic performance (dependent variable) – by use score use score academic performance variance explained (by predicting factor, linear regression) average use score individual points average performance during 1st exam session above 45 16.3% 7.6% 51.7% above 50 12.5% 6.8% 48.9% above 55 9.1% 6.0% 47.7% above 60 7.2% 5.5% 47.8% above 65 5.9% 4.8% 48.0% above 70 4.5% 3.5% 50.5% above 75 3.7% 3.3% 51.7% above 80 1.9% 3.8% 53.6% above 85 3.6% 3.4% 53.3% above 90 0.1% 1.6% 44.3% above 95 0% 0% 19.7% 176 a. svirina et al. analysis of students performance in relation to the results of state unified exam... figure 1. variation of student performance in relation to use score upon admission table 2. regression analysis of use results (independent variable) as a predictor of university academic performance (dependent variable) – by institute institute/faculty academic performance variance explained (by predicting factor, linear regression) average use score individual points average performance during 1st exam session aviation, transport and energy institute 2.1% 7.1% 57.4% automation and electronic equipment building institute 0.6% 12.3% 45.5% engineering economics and entrepreneurship institute 3.1% 0.9% 58.4% technical cybernetics and information security institute 6.6% 11.9% 59.6% radio electronics and telecommunication institute 2.1% 3.8% 51.6% physics and mathematics faculty 1.3% 18.5% 68.1% for their academic peers with lower scores – if their use score upon admission is above 95, the predictive power of their first exam session results drops down to 19.7%. finally, it seemed logical to test the achieved results for consistency in terms of chosen study programs. to do so, the authors had split the sample by the institute, chosen by the students (see table 2). business, management and economics engineering, 2021, 19(1): 170–179 177 the table clearly indicates that use predictive power differs 10 times across institutes – while for those choosing aviation, transport and energy institute it is average and explains about 2% of the variation, for it-majors use results would be three times more accurate to predict performance. same is true for the individual points, where the predictive power is very low in case of economists (0.9%) and is twenty times higher for physics and mathematics majors (18.5%). yet, those numbers are still low, and the fact that hypotheses 1 and 2 are not supported, are confirmed. at the same time, as we have seen before, the results of the first exam session are a very good predictor of academic performance throughout a student’s life at the university. with the exception of just one institute, the results demonstrated during the first semester determine final academic success by more than 50%. thus, hypothesis 3 was supported. conclusions the results achieved by this study support some existing findings. first, we have proven, that academic success during the first semester encourages students to do well throughout the university, and vice versa, and it confirms findings by both hellas et al. (2018) and tatar and düştegör (2020). it seems significant that the universities should clearly indicate to the students, that for their academic success on the tertiary level it is almost irrelevant, how good or bad they were during their school years. from the practical point of view, encouraging students to get on track in the university from the very beginning should lead to reduced dropout rate, which fits into the goals of national education strategies – both in europe and in post-soviet countries. also, the study had confirmed some of the previous findings, including such factors, as time efforts and students’ attitude towards study process (sembiring et al., 2011), study habits (olufemi et al., 2018; hughes et al., 2017). other findings of this research differ from that one can find in existing literature. first of all, the predictive power of the unified state exam was confirmed to be low, and these results differ from those achieved by stanko et al. (2016), khavenson and solovyova (2014) or zamkov and peresetsky (2013). hence, using use results as the major admission indicator can possibly drive out best performing students – as use predictive power drops even more for the students with high scores. same is true for individual points, awarded based on objective results. though individual points are a better predictor of academic performance, than use scores, the relevance to future performance is still low. this may be a consequence of the restrictions applied to russian universities when they choose what they can award points for. finally, as soon as the students is enrolled, the university seems to be consistent in developing his or her skills throughout the study process. though university requirements seem to be inconsistent with what is required on school level, the first semester in the university clearly defines how well will the student do later – with the exception of those with extremely high use scores. based on these findings, the authors of the paper suggest that policymakers revise admission criteria that are now solely based on the unified state exam results. the successful examples provided by worldwide known universities, such as harvard business school and cambridge. tertiary education requires skills and motivation which is different from the one relevant at the school level; due to that; it seems logical that the universities which have 178 a. svirina et al. analysis of students performance in relation to the results of state unified exam... more freedom in defining their admission procedures do better than the ones who experience such restrictions. the current research has a big potential for expansion, using the data on the academic performance of students’ at other russian universities. references al-rukban,  m.  o., munshi,  f.  m., abdulghani,  h.  m., & al-hoqail, i. 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accepted 23 march 2022 abstract. purpose  – change management depends on the type and extent of the implemented change. the aim of the paper is to identify management model of changes in slovak enterprises and to define conditions of effective change management for the prevailing type of changes. research methodology  – the main method of the research was primary quantitative research via questionnaires. outputs from the questionnaires were evaluated by statistical methods, pivot tables, and chi-square test. findings – slovak enterprises apply functional approach to change management based on financial improvement. mostly performed changes are operative. the success of changes can increase focus on improvement of internal processes, force field optimization and project elaboration via log frame. research limitations – the limitations of the research consist in a chosen quantitative method which doesn’t enable discovery of a qualitative and psychological sides of managing changes and the research sample including mostly small sized enterprises in slovakia. practical implications – the detected conditions of an effective change management can inspire the enterprises to increase the success by implementation of changes. originality/value  – new empirical knowledge concerning change management in the practise of slovak enterprises, identification of the applied model by managing the changes and conditions for an effective management of changes. keywords: change, change management model, incremental changes, enterprise. jel classification: m10, o3. introduction current changing business environment forces the enterprises to be able perform changes anytime. how to successfully achieve change during economic crises is being asked by many organizations (ashurst & hodges, 2010). digital technologies are breaking down industry barriers, destroying long-successful business models making the traditional competitive advantage deteriorate rapidly by rometty (2016), weill and woerner (2015). change http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2022.15397 https://orcid.org/0000-0002-1447-8641 https://orcid.org/0000-0003-0374-2926 24 a. sujová, ľ. simanová. management models of changes – the empirical study in slovak companies management as a managerial skill, has been marked as a critical competency in executive surveys (mccauley, 2006). the importance of change management in the present pandemic crisis was higlighted by several authors (fusch et al., 2020; hartmann & lussier, 2020; zainol et al., 2021). many authors have suggested methods to implement change; nevertheless, in recent years, it has become more recognized that one or even two methods to change cannot cover the vastly different change situations (burnes & jackson, 2011). the general process for managing the change and types of changes were described by several authors (hiatt, 2006; kotter, 2012; kubíčková & rais, 2012; ashkenas, 2013). according to aljohani (2016), the process of change is driven by strategic considerations that include the need for improving business processes and integrating ways of working. such considerations result in well-structured change management programs based on the assumption that the management of change would be done with limited interventions that are objective, linearly manageable and measurable in a short period of time. the research results of yaqub et  al. (2017) indicate that the relationship between the speed of strategic change and bottom-up learning is weakened by resource flexibility but strengthened by coordination flexibility; the inverted u-shaped linkage of bottom-up learning on the magnitude of strategic change is positively moderated by both resource flexibility and coordination flexibility. implementation of a successful change program is full of challenges. achieving goals and positive effects of changes remains complicated. the success factors by leading the changes were examined in several studies (zainol et  al., 2021; kotter, 2012; dobrovič & timková 2017; sung & kim, 2021; biggane et  al., 2017). most of success factors are common and relate to human factor, learning and communication activities during implementing changes. the changes focused on business processes and the management of changes based on process principles were emphasized in previous research of paper’s authors (sujová et  al. 2018). research results confirmed a positive influence of changes in business processes on corporate performance (remeň & sujová, 2018). to reach higher performance is possible by using modern process methods and indicators (sujová et al., 2019). review of existing literature showed that methodology and process for management of individual types of change has been solved insufficiently. moreover, research studies didn’t examine the relationships between aspects of change management. different impulses or goals of changes can lead to different types of changes. we suppose that each type of change has its own specifics, and it requires a different approach and methods. it led us to focus our research on finding the management and implementing changes in practical conditions of enterprises. research findings also enable identification of best practises as success factors by managing changes in slovak enterprises. the aim of the paper is to identify the types of performed changes and approach to their management in slovak enterprises and to define the conditions of effective change management for the prevailing type of changes. the absence of the results of the examining the relations within aspects of change management and the aim to identify the management models of changes in slovak enterprises were impulses to establish following research hypotheses: business, management and economics engineering, 2022, 20(1): 23–40 25 ha: there is a relationship between the main goal of implementing change and the enterprise size in slovak companies hb: there is a relationship between the types of change and impulses to the implementation of change in slovak companies hc: there is a statistically significant relationship between the types of change and the analyses taken to before implementing the changes in slovak companies. the research results extend existing knowledge in findings how management of changes requires different approach depending on impulses and type of change. the proposed conditions of successful changes respect the most often changes implemented in enterprises and reflect best practises of slovak enterprises. they are derived from the research results. the proposal represents the practical implication of the research for an effective management of the changes mostly implemented in small enterprises. 1. literature review there are many reasons and causes that can lead to changed conditions in the environment of a firm, and thus, to changes in the requirements or demand structures of customers (abdulai et  al., 2020). some changes can, if not recognized and interpreted, lead to obsolescence of existing technologies and products, and thus, shake firms to their very foundations (furukawa, 2013). recent reports suggest that executives believe only one out of three planned organizational change interventions succeed (hussey, 2000; jarrel, 2017). to understand and minimize negative consequences, organizational change research has started to focus on the role of employees’ change appraisals (biggane et al., 2017). mclaughlin (2017) and kane et  al. (2018) pointed out that the digital transformation represents an organisational change process. there is developing new ways to use technology to build innovation in products, services, and business processes. authors puaschunder (2019), bowen and morosan (2018), liu and zawieska (2017), furman and seamans (2018) note that the rapid development of new digital technologies such as artificial intelligence, robotic machines and quantum mechanics will bring about such changes that people will be replaced by machines and artificial intelligence in many parts of routine work in manufacturing, retail, banking, services, and hospitality. the authors of iakymenko et al. (2020) focused on examining change management strategies, procedures, and tools in different production environments. the authors karasvirta and teerikangas (2022) present a framework for assessing the maturity of organizations for societal change, research on the typology of change, change teams and individual changes involving different dimensions in eleven large finnish companies. zainol et al. (2021) pointed to existing indications that demonstrate a strong relationship between effective management and their significant impact on the successful management of the organization, as well as its practical application in the future direction of companies. fusch et al. (2020) reaffirmed the importance of implementing change management in response to the covid-19 global pandemic, in which business leaders must swiftly implement change and address breakthrough innovations by adopting new technologies, mitigating resistance to change, fostering a sense of stakeholder and impact on employees. hartmann and lussier (2020), states that these 26 a. sujová, ľ. simanová. management models of changes – the empirical study in slovak companies changes are intended to protect the customers, employees, and communities in which the organization operates, as well as to transform new business as usual to grow and survive. the importance of supporting leadership and communication is a key success factor. kubíčková and rais (2012) divide changes into incremental (gradual), radical (transformational, stepwise) and changes based on a combination of the previous two methods. mikuš (2010) states that in an enterprise the process of change can take place in several ways: incrementally (gradually), transitionally (by leap) and transformational (forced). the most well-known change model is the model according to kotter (2012) based on an 8-point procedure, which must be implemented gradually and thoroughly. the implementation of the change goes through several phases at once, too fast a procedure or omitting one step can lead to a problem. kotter uses lewin’s knowledge and divides the individual steps of his model into three phases – thawing (steps 1–4), shifting (steps 5–7) and freezing (steps 8). another model according to hiatt (2006) – adkar is a practically oriented model of change, consisting of five consecutive steps: awareness of the need for change, desire and willingness to change, knowledge of how to change, ability to implement change. the results of a study by sung and kim (2021) in the public sector showed that effective change management (organizational goal, transformational leadership, education training, participation, and communication) for public organizations can change the characteristics of members’ implementation of change and ultimately achieve organizational innovation. conversely, if change management activities are not carried out effectively, increasing their critical tendency to change, and increasing performance through future changes will be more difficult. dobrovič and timková (2017) say that enterprises often face obstacles with change management such as inadequate planning of changes, absence of employee training, lack of time needed to adapt to implement the change, defending employees against change, an inappropriate culture of the company or not implementing checks and verifications into the process of change that can easily disrupt the smooth implementation of the change itself. 2. materials and methods relevant data from the field of change management and information from enterprises in the slovak republic were obtained through an online research questionnaire. the core sample for the research was a database of 524 enterprises. according to the calculation of the minimum statistical research sample via the online application at www.raosoft.com, this is a representative sample with 92% confidence and 8% standard deviation. the questionnaire consists of 5 general, classification questions and 30 business-area management issues. the questionnaire was published online, and the data collection was in the first half of year 2018. enterprises were also interviewed directly through employees and indirectly via e-mail communication. this paper analyses partial results of the questionnaire survey of slovak enterprises focused on main aspects of change management. mathematical  – statistical methods were used to examine and evaluate the interrelationships and individual factors in the management and implementation of changes. in the research, we used descriptive statistics for one variable in the analyses, such as absolute, business, management and economics engineering, 2022, 20(1): 23–40 27 relative, and cumulative abundances, pie, and bar graphs. the evaluation of the questionnaire was carried out using the software program statistica 12 cz  – stat soft. inc. (2013), where the imported database was created in ms excel. pivottables for statistical analysis were used. a pivottable is a method of organizing and analysing data by groups, categories, or classes that allows them to be compared. it combines the frequency distribution of two variables and represents an extension of a simple frequency table (pacáková et  al., 2018). the results of the analysis of pivottables consist of selected statistical indicators, namely pearson’s chisquare and the level of statistical significance “p”. pearson’s chi-square is the most common test of the significance of the relationship between qualitative variables. the test is since we can calculate the expected abundances (i.e., the abundances we expected if there were no relationship between the variables). the chi-square test of independence can be used to test the significance of contingency coefficients. the precondition for the use of the chi-square test is the rule that the expected frequencies must not be very small, less than 5. the level of significance (p-value) was chosen at the level of 5%. the comparison of found and theoretical frequencies is the basic idea of the χ2-test of good agreement: ( )2 2 1 1 s r ij ij ijj i o e e= = − χ = ∑∑ , (1) where: eij – expected abundances, oij – observed abundances. pearson contingency coefficient: 2 2 c n χ = + χ , (2) where: χ2 – calculated test criterion, n – total number of measurements. it follows from the relationship that for the zero value of a square contingency, the pearson contingency coefficient acquires a value of zero. approaching the value of the contingency coefficient to the value of 1 signal an increasing intensity of the dependence between the characters a and b. 3. results in the research sample the most of enterprises were small sized (86%). official slovak statistics (statistical office of the slovak republic, 2021) in 2018 reported 98% of small enterprises, where 78% are micro sized up to 19 employees. it can be concluded that the research sample represents the slovak business environment. the subject of activity was trade and services in 59% and production in 36% of surveyed companies. the most of companies have a  domestic owner. in achieved values of roe, 48% of companies reached values up to 4% and 22% companies up to 7%. the chosen research results that enabled identification of change management models applied in slovak enterprises are presented in following text. from the results of the questionnaire survey in figure 1, can be seen that the most frequent changes were made in the organizational structure by 49.81% of respondents and in 28 a. sujová, ľ. simanová. management models of changes – the empirical study in slovak companies the production program by 41.22% of respondents. production technologies and information systems were areas mentioned by respondents from 30.73–33.21%. in the areas of management systems and methods and business processes, respondents reported the implementation of changes ranging from 12.17% to 15.85% of respondents. 10.50% of respondents did not make any changes. according to contingency analysis it was found out that the number of implemented changes is not influenced by enterprise size. it cannot be stated that several changes implemented in more areas depends on number of employees. the results of the research presented in figure 2 showed the types in which companies most often implemented changes in the last 10 years. among the most common types of changes were gradual optimization changes in 53.63% of respondents. emergent, unplanned but necessary types of changes made by 21.53% of respondents and the implementation of financial restructuring was reported by 21.18% of respondents. 19.27% of respondents did not make any changes. the smallest percentages reached the answers of the respondents with a transformational restructuring change of 8.56% and a radical reengineering change of 6.49%. or ga niz ati on al str uc tur e pr od uc tio n p ro gr am 0 10 20 30 40 50 60 m an ag em en t s yst em an d m eth od s bu sin ess pr oc ess es in for ma tio n s yst em no ch an ge s ot he r r el at iv e m ul tip lic ity [% ] �e areas �e areas of change pr od uc tio n t ec hn olo gie s figure 1. areas of change (source: own processing) fin an cia l r est ru ctu rin g tr an sfo rm ati on al res tru ctu rin g c ha ng es gr ad ua l o pt im iza tio n ch an ge s em erg en t c ha ng es an y c ha ng es ra dic al ree ng ine eri ng ch an ge s 0 10 20 30 40 50 60 r el at iv e m ul tip lic ity [% ] �e types of changes �e types of implemented changes figure 2. types of changes (source: own processing) business, management and economics engineering, 2022, 20(1): 23–40 29 figure 3 shows the results of the examination of the main impulses and the reasons for the implementation of the change. the most frequent impulses included a change in customer needs and requirements with 48.09% and competitive pressure with 42.37%. impulses such as the existence of market opportunities were reported by 27.86% of respondents, financial problems by 22.14% of respondents, and legislative changes by 20.23% of respondents. customer dissatisfaction, dysfunctional processes, and low efficiency and product quality were impulses by respondents ranged from 13.93–16.98%. other impulses were given by 3.05% of respondents. figure 4 shows the results of question concerning the main goal of the change. these results showed that in the current period, in terms of increasing business performance, process changes are coming to the fore to increase customer satisfaction by 53.24% and to increase quality by 50.38%. the graph also shows that gaining a competitive advantage is an important 0 10 20 30 40 50 60 r el at iv e m ul tip lic ity [% ] �e impulses �e impulses to change fin an cia l p ro ble ms lo w e� cie nc y a nd qu ali ty pr od uc tio n de fec tiv e p ro ce sse s le gis lat ive ch an ge s co mp eti tiv e p res su re ch an gin g c us tom er ne ed s a nd re qu ire me nt s ot he r ex ist en ce of m ark et op po rtu nit ies cu sto me r d iss ati sfa cti on figure 3. impulses to change (source: own processing) 0 10 20 30 40 50 60 r el at iv e m ul tip lic ity [% ] the main goal in cre asi ng th e e �c ien cy of th e u se of inp ut s the main goal co st red uc tio n im pr ov ing qu ali ty im ro vin g p ro ce ss pe rfo rm an ce in cre asi ng cu sto me r sat isf ac tio n ot he r ga ini ng a co mp eti tiv e ad va nt ag e im ro vin g � na nt ial pe rfo rm an ce figure 4. the main goal of the change (source: own processing) 30 a. sujová, ľ. simanová. management models of changes – the empirical study in slovak companies goal of implementing changes, which was started by 33.59% of respondents. other goals that companies consider important in the category of goals were to improve the performance of processes in 28.63% of respondents and to improve financial performance in 25.38% of respondents. answers to question “which of the following steps do you take to implement changes in your business processes? were focused on the following eight steps: the first step – aanalyses of the initial situation, the second step – identification of necessary changes and analysis of the change request, the third step – defining the goal and identifying the necessary resources to implement the change, the fourth step – build a project team and an agent (team leader) change, the fifth step – preparation of variants of the change project and action plan for the implementation of the proposed changes, the sixth step – financial and economic evaluation of the proposed changes, the seventh step – monitoring the effects of change, and the eighth step – we do not perform any of these steps. as can be seen from the research results in figure 5, the largest percentage of the response was 34.35% in the second step in identifying the required changes and analysing the change requirements, and in the sixth step in the financial and economic evaluation of the proposed changes 34.16%. the third step  – defining the goal and identifying the necessary resources for implementation was mentioned by 25.76% of respondents and approximately the same percentage of 23.28% of respondents stated that they use the first step – introducing the initial situation when introducing changes in business processes. 16.60% of respondents attach importance to the seventh step  – monitoring the effect of changes. 11.07% of respondents answered that, among other steps, they pay attention to the fourth step – setting up a project team including an agent (team leader) of change and 8.21% of respondents that they are preparing variants of the change project and action plan for implementing proposed changes. 15.84% of respondents do not perform any of these steps. the average number of answers to this question with the possibility of multiple answers was 1.7, which means that companies took 1–2 steps in the implementation of changes. research findings on question concerning analyzes performed before the change in figure 6 showed that 46.57% of respondents carry out an analysis of customer satisfaction and needs before implementing a change in its preparation. the financial analysis is performed 0 5 10 15 20 25 30 35 40 �e �rst step �e second step �e third step �e fourth step �e ��h step �e sixth step �e seventh step �e eighth step r el at iv e m ul tip lic ity [% ] �e steps �e steps for implementing changes figure 5. the steps for implementing changes (source: own processing) business, management and economics engineering, 2022, 20(1): 23–40 31 before the change is implemented by 40.27% of respondents and the competition analysis was provided by 33.40% of respondents. 19.08% of respondents analyze business processes. lower percentages in the responses were achieved in the swot analysis of 17.75%, in the portfolio analysis of 12.98%, and in the analysis of the force 7.63%. the average number of answers to this question was 1.81, which shows that companies performed 1–2 analyzes before implementing the change in its preparation. monitoring of achieved effects of changes after implementation is provided by 360 enterprises, that is 68.7%. the used indicators by monitoring the effects of changes were financial indicators, customer satisfaction index in 40.46% and production productivity in 24% of surveyed enterprises. in the second part of our research the relationships between variables were observed via pivot tables. the table  1 analyses relationship between enterprise size and the goals of the change. from the results can be seen that in 61% of enterprises with 11–50 employees the main goal of the change was the cost reduction, and the second goal was the quality improvement. in the quality improvement were interested large sized companies with more than 250 employees, which was proved by 68.12% of answers. the improvement of process performance was the goal in the large sized companies the most. generally, it can be stated that with rising number of employees, the call on goals of changes in particular areas were higher. the table  2 shows relationship between performed type of change and impulses to change. the results show that 58.82% of enterprises implemented reengineering changes because of changes in customer requirements, 41.18% because of competition pressure and 35.35% because of a market opportunity. the competition pressure was the main impulse to financial restructuration in 47.75% of surveyed enterprises. the existence of a  market opportunity was the reason for realization of transforming restructuring change in the most of enterprises. it can be concluded that impulses to change affect the type of change performed in the enterprise. table  3 analyses the relationship between type of change and analyses which were carried out before change. in both cases it was possible to mark more options by answers. from the results can be seen that the most analyses before change by its preparing were carried co mp eti tio n a na lys is co st red uc tio n po rtf oli o a na lys is fo rce �e ld an aly sis an aly sis of bu sin ess pr oc ess es ot he r an aly sis of cu sto me r sat isf ac tio n a nd ne ed s fin an cia l a na lys is 0 10 20 30 40 50 r el at iv e m ul tip ic ity [% ] �e analyzes �e analyzes before implementing the change figure 6. the analyses before implementing changes (source: own processing) 32 a. sujová, ľ. simanová. management models of changes – the empirical study in slovak companies table 1. pivot table for enterprise size and goal of change (source: own processing) goal of change realization number of employees sum 0–10 11–20 21–50 51–250 over 250 cost reduction 102 43.04% 40 61.54% 45 60.81% 38 48.10% 27 39.13% 252 quality improvement 107 45.15% 32 49.23% 40 54.05% 39 49.37% 47 68.12% 265 process performance improvement 60 25.32% 14 21.54% 21 28.38% 29 36.71% 26 37.68% 150 improvement of financial performance 58 24.47% 16 23.08% 19 25.68% 20 25.32% 20 28.99% 133 improvement of effectiveness by utilization of inputs 14 5.91% 8 12.31% 15 20.27% 13 16.46% 14 20.29% 64 increase of customer satisfaction 123 51.90% 30 46.15% 35 47.30% 45 56.96% 45 65.22% 278 achievement of a competitive advantage 83 35.02% 16 2.62% 21 28.38% 29 36.71% 27 39.13% 176 other 5 2.11% 1 1.54% 0 0.00% 1 1.27% 1 1.45% 8 sum 552 157 196 214 207 1326 relative frequency 41.63% 11.84% 14.78% 16.14% 1.61% 100% table 2. pivot table for type of change and impulses to change (source: own processing) impulses to change type of change sum fi na nc ia l re st ru ct ur atio n tr an sf or m atio n ch an ge r ee ng in ee rin g ch an ge g ra du al op tim iz in g ch an ge s em er ge nt ne ce ss ar y ch an ge s n o ch an ge s pe rf or m ed financial problems 32 28.8% 13 28.89% 6 17.6% 56 19.9% 27 23.89% 17 16.83% 151 low production efficiency and quality 25 22.5% 12 26.7% 13 38.2% 58 20.6% 19 16.8% 5 4.95% 132 non-functioning processes 24 21.6% 11 24.44% 12 35.3% 50 17.8% 11 9.73% 6 5.94% 114 customer dissatisfaction 22 19.8% 9 20.0% 9 26.5% 39 13.9% 15 13.27% 5 4.95% 99 legislative changes 23 20.7% 11 24.44% 7 20.6% 69 24.6% 23 20.35% 17 16.83% 150 competition pressure 53 47.7% 19 42.22% 14 41.2% 131 46.6% 35 30.97% 36 35.64% 288 change in customer needs and requirements 51 45.9% 21 46.67% 20 58.8% 143 50. 9% 57 50.44% 41 40.59% 333 existence of a market opportunity 29 26.1% 15 33.33% 11 32.3% 87 30.9% 34 30.09% 27 26.73% 203 other 1 0.90% 1 2.22% 1 2.94% 1 0.36% 3 2.65% 1 0.99% 8 sum 260 112 93 634 224 155 1478 relative frequency 17.6% 7.58% 6.29% 42.9% 15.16% 10.49% 100% business, management and economics engineering, 2022, 20(1): 23–40 33 out by gradual optimizing changes (562 answers), by emergent change (242 answers) and by financial restructuration (232 answers). an interesting finding can be seen by optimization changes, where the frequent analyses was swot analysis, typical for transformation or reengineering change. by reengineering change the most of enterprises carried out analyses of a customer satisfaction, competition, and internal processes. by financial restructuration the enterprises carried out the same analyses as by reengineering. financial analysis was carried out by all types of changes. it can be stated, that by each type of change was used a combination of three analyses, which were dominated, and they affected the choice of type of the change. the second part of table 3 shows the expected frequencies and results of chi square test. according to calculated p-value, p  = 1.94e-19 it can be stated that between type of change and analyses carried before change a significant statistical dependence exists. table 3. pivot table for type of change and analyses carried out before change (source: own processing) analyses carried out before change type of change sa pa ffa fa ca aip csa other sum rel. freq. financial restructuration 22 18 12 59 47 20 54 0 232 17% transformation change 17 15 4 21 12 9 17 1 96 7% reengineering change 12 9 2 12 15 14 18 0 82 6% gradual optimization 63 42 18 139 100 69 129 2 562 42% emergent changes 23 18 9 58 40 36 56 2 242 18% no changes 3 3 6 20 28 8 48 16 132 10% expected frequencies p = 0.05 chi square test: 1.94e-19 analyses carried out before change type of change sa pa ffa fa ca aip csa other sum rel. freq. financial restructuration 24.1 18.1 8.8 53.3 41.7 26.9 55.5 3.6 232 17% transformation change 10.0 7.5 3.6 22.0 17.3 11.1 23.0 1.5 96 7% reengineering change 8.5 6.4 3.1 18.8 14.7 9.5 19.6 1.3 82 6% gradual optimization 58.5 43.8 21.3 129.0 101.0 65.1 134.4 8.8 562 42% emergent changes 25.2 18.9 9.2 55.6 43.5 28.0 57.9 3.8 242 18% no change s 13.7 10.3 5.0 30.3 23.7 15.3 31.6 2.1 132 10% sum 140 105 51 309 242 156 322 21 1346 relative frequencies 10% 8% 4% 23% 18% 12% 24% 2%  100% expected value is lower than a real one expected value is higher that a real one notes: sa – swot analysis, pa – portfolio analysis, ffa – force field analysis, fa – financial analysis, ca – competition analysis, aip – analysis of internal processes, csa – customer satisfaction analysis. the results of managing changes in the most successful enterprises in the research (reached roe over 10%) are presented in table 4. 34 a. sujová, ľ. simanová. management models of changes – the empirical study in slovak companies table 4. aspects of change management in enterprises with roe over 10% (source: own processing) aspect items of aspect/relative frequency (%) impulse financial problems low production quality nonfunctioning processes customer needs legislative changes competition pressure market opportunity 8.6 13.8 19.0 72.4 32.8 36.2 31.0 analysis swot portfolio force field financial competition internal processes customer 15.5 17.2 25.9 36.2 48.3 60.3 53.4 type gradual optimization financial restructuring emergent change reengineering change transformation change 50.0 36.2 29.3 12.1 10.3 goal cost reduction quality increase higher process performance higher financial performance increasing effectiveness of inputs utilization customer satisfaction increase competitive advantage 37.9 63.8 37.9 19.0 32.8 69.0 32.8 area organization structure production program production technologies management systems business processes information system 51.7 48.3 29.3 20.7 34.5 44.8 steps 1st 2nd 3rd 4th 5th 6th 7th 20.7 51.7 29.3 8.6 12.1 36.2 13.8 the results of the best enterprises in the research in table  4 showed that this group of enterprises pay more attention to business processes. non-functioning process was the impulse for change in 19%, the analysis of internal processes was carried out in 60.3% and the change was focused on business processes improvement in 34.5% of enterprises. it means that changes in more areas were performed through process improvement to reach different goals. whereas in the sample of all enterprises the main impulse and goal of change the financial results were, in this part of the sample, the customer satisfaction (69%), quality increase (64%) and process performance improvement (38%) were the goals of changes. this group of enterprises carried out 2 analyses and at least 2–3 steps in process of change (identification of needed changes, goal and resources needed and economic evaluation of the proposed changes). as for analyses, the higher attention is paid to force field analysis, in 26% of enterprises. the most frequent change is gradual optimization in 50% and then financial restructuring in 36% of the sample. emergent changes were performed in 29% of enterprises. the changes were carried out especially in organization structure, production program, information systems and business processes. 3.1. management models of change applied in slovak enterprises based on research findings it can be stated that slovak companies perform smaller operative changes in crisis by financial problems as also by aim to improve performance and to business, management and economics engineering, 2022, 20(1): 23–40 35 develop the business activities. models of change management applied in slovak enterprises can be identified as follows: – incremental model: series of gradual small changes focused on optimization. – emergent model: solution of critical financial situation and changes due to external market and legislative changes. process by management of changes in slovak companies can be described as it is depicted in figure 7. monitoring the e�ects of change fiancial results (sales and pro�t) production productivity financial and economic evaluation of change determination of area of change de�nition of the goal of change higher customer satisfaction cost reduction quality improvement identi�cation of needed changes optimizing gradual change finacial restructuring emergent change analysis of the intial situation analysis of customer satisfaction and needs analysis of competition and market financial analysis organization structure production program & technology information system figure 7. the process by implementing changes in slovak companies (source: own processing) the process presented in figure 7 includes all steps by managing changes used in surveyed enterprises and the most frequent analyses, type of change, goals defined for changes, areas of performed changes that were found out in the empirical research. it is the real situation in slovak enterprises in the field of change management. some important parts for successful implementation of changes are missing in slovak enterprises. 3.2. conditions of the effective change management efficient, i.e., successful change management allows the company to acquire the ability for change, which in the current globalized market of constant change is considered a competitive advantage of the company. considering the scientific knowledge and the results of slovak enterprises involved in the research, conditions for an effective management of changes can be identified regarding operative, optimizing changes, that are predominant in slovak enterprises as follows (see figure 8). 36 a. sujová, ľ. simanová. management models of changes – the empirical study in slovak companies – early capture of the signal to change because the company needs to change faster than the surroundings and competition to maintain its competitive position on the market. early impulse capture allows the use of systematic methods of searching for and anticipating changes (e.g. patching method based on constant monitoring of the conditions of the business environment). – creating a favourable force field, which means that the forces supporting change are stronger than the forces blocking change. to create a favourable force field, it is necessary to mitigate blocking forces by eliminating fear of change and overcoming resistance to change through intensive communication, awareness of upcoming changes and their objectives, education, and involvement of people in change. – preparation and implementation of the change project: change management must be understood as a project. thorough project preparation and detailed analysis of the starting point are important. the application of the principles of process management and focusing on changes in business processes is highly recommended. – monitoring the achieved effects of the change: implemented changes need to be stabilized, compliance with changed procedures, processes should be constantly monitored and possibilities for further improvement can be designed. monitoring can then create a corporate culture supporting changes. early capture of signals to change monitoring e�ects of change achieved change project elaboration force �eld optimization systematic methods for monitoring and anticipating changes elimination of fear/resistance to change getting people involved in change principles of project/process management focus on internal processes creating corporate culture open to changes change ability = competitive advantage figure 8. the conditions of an effective change management (source: own processing) the key success factor by management of operative optimizing and emergent changes, the fast preparation of change is. the project of change must be simple, clear, and enforceable so that implementation of changes will be successful. an effective and recommended method for creating a model of change is the logical framework of the project, the so-called log frame. the logical framework describes the unambiguous link cause-effect, allowing a logical plan to be compiled very quickly. 4. discussion the research results can be summarized as follows. the enterprises carried out changes in two areas in average, the most frequent areas were organization structure, product portfolio, business, management and economics engineering, 2022, 20(1): 23–40 37 production technology and information systems. companies with the highest performance were focused on product innovations. 10% of surveyed companies didn’t carry out changes at all, mostly small sized companies which achieved the lowest performance. as for the type of change, the prevailing changes were gradual optimizing and financial restructuration. companies performed one or two changes at average. reengineering changes were noticed in area of production, supply, and logistics. the impulses leading to change were mostly external market factors concerning customer needs, competition pressure and a new market opportunity. the next frequent impulse was financial critical situation especially in companies with a low roe value. the enterprises stated 2 or 3 goals of change at average. small sized companies aimed the cost reduction, middle and large sized companies preferred higher customer satisfaction and product quality. by implementing the changes, the companies carried out two steps at average: identification of needed changes and financial evaluation of a change. the number of carried out steps corresponds the number of analyses carried out before change. the least of analyses were focused on processes and a force field. the type of analysis depends on type of change. it was statistically proved that each type of change required different analyses. the weakness or default of slovak enterprises by managing changes can be seen in negative attitude of managers to changes, absence of the force field analysis and its optimization. the second default is insufficient preparing the changes via projects. only 8% of surveyed companies prepare variants of the change project and action plan for implementing proposed changes. it corresponds with results of dobrovič and timková (2017) who claimed that insufficient preparation of people to realization of changes as also inadequate planning of changes cause the failure in implementation process. the next factor that can decrease the desired results of implemented change is attention to processes. only successful slovak enterprises with reached roe over 10% pay attention to analysis and changes in internal processes. the results of previous authors’ research also confirmed the importance of process approach to changes. the research results allow to identify conditions of effective change management. creation of a favourable force field including preparing people to change, and elaboration of the change project are the most important success factors. compared to a study by abdelouahab and bouchra (2021), similar success factors for the implementation of change were identified and revealed. the process of change according to kotter (2012) and hiatt (2006) models emphasize the basic common principles of involving people in change from the very beginning, working with their feelings of change and supporting change through good behaviour in communication and cooperation. these aspects of change management were not possible to evaluate due to quantitative methods used in the research. the limitation of the research consists in a chosen quantitative method which doesn’t enable discovery of a qualitative and psychological sides of managing changes. the second limitation is seen in the research sample which includes mostly small sized enterprises. the proposed model for managing changes will be useful for small businesses at most. the limitation also stems from the conduct of the research under conditions of slovakia. 38 a. sujová, ľ. simanová. management models of changes – the empirical study in slovak companies conclusions the change is an integral part of an existence and working of enterprises. successful managers need to understand the need of change and take their realization into obligations. general framework of managing changes was provided by several authors. however, the model for change management can be different in relation to type and range of the change. the research revealed relations between impulses, goals, type of change and methodology by managing changes. the findings brought new empirical knowledge concerning the models, weaknesses, and success factors by managing changes in slovak enterprises. slovak business environment as also the research sample is represented mainly by small sized enterprises. mostly performed changes are simple, operative that don’t require using complicated methods and tools. more gradual optimizing changes carried out in enterprise led to successful implementation and a higher performance. the research results have shown that slovak enterprises apply mainly traditional, functional approach to management of changes based on financial results improvement. it appears to be remaining barrier of reaching more positive effects by change implementation. however, if the enterprises are interested in achievement of a higher performance, they should pay more attention to internal processes and their innovations. this fact is followed by the enterprises reaching the highest performance. the success of changes implemented can also increase the force field optimization and better preparation of each change via project. the contribution of the paper is new empirical knowledge of a change management from the practise of slovak enterprises and identification of the applied model by managing the changes. the research findings lead to following recommendation for successful change management in slovak smes: realization of several small gradual changes; focus on business process improvement; emphasis on preparing people to change and creation of a positive force field; monitoring the situation and effects after change. the detected conditions of an effective change management can inspire especially the small sized enterprises to increasing the effectiveness of a change management and the success by implementation of changes. to overcome existing limitations of presented research described in discussion part, the future research will be focused on qualitative factors by leading the changes using appropriate qualitative research methods, and a research sample will be extended to all sized enterprises evenly and to more countries. acknowledgements authors are grateful for the support of the kega agency, slovakia – the project no. 005tu z-4/2020 and the vega agency, slovakia – the project no. 1/0333/22. author contributions as conceived the study and was responsible for the design, development of the data analysis and data interpretation. ls was responsible for data collection and analysis. as and ls wrote the first draft of the article. business, management and economics engineering, 2022, 20(1): 23–40 39 disclosure statement authors declare that they have no competing financial, professional, or personal interests from other parties. references abdelouahab, e., & bouchra, l. 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(2021). managing organizational change through effective leadership: a review from literature. international journal of academic research in business and social sciences, 11(1), 1–10. https://doi.org/10.6007/ijarbss/v11-i1/8370 https://doi.org/10.4018/978-1-5225-6155-2.ch008 https://sloanreview.mit.edu/projects/coming-of-age-digitally/ https://sloanreview.mit.edu/projects/coming-of-age-digitally/ https://doi.org/10.1080/14697017.2021.2018722 https://doi.org/10.15358/9783800646159 https://doi.org/10.1007/s10676-017-9443-3 https://doi.org/10.1504/ijmtm.2017.082014 https://doi.org/10.2139/ssrn.3398470 https://doi.org/10.2478/emj-2018-0015 https://doi.org/10.2478/emj-2019-0015 http://slovak.statistics.sk http://slovak.statistics.sk http://www.statsoft.com https://doi.org/10.3390/su13042079 https://doi.org/10.1016/j.giq.2017.11.001 https://doi.org/10.6007/ijarbss/v11-i1/8370 copyright © 2020 the author(s). published by vilnius tech press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: khannaruchi8080@gmail.com business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 2: 344–362 https://doi.org/10.3846/bme.2020.11999 re-explore the viability and authenticity of gallup workplace audit in private university ruchi khanna * school of management, babu banarsi das university, lucknow, india received 23 february 2020; accepted 27 july 2020 abstract. purpose  – employee productivity is directly affected by the employee engagement. researchers have continuously been focused on whether people working in the organisation are satisfied with the work or not. the gallup 12 workplace audit is an instrument used to measure employee engagement. the purpose of this study is to re-explore the viability of this instrument in an educational context. the secondary objective of this study is to find out if the gallup work audit instrument, which is an international survey, can be used in the educational sector in the context of india for measuring faculties’ engagement. research methodology – a cross-sectional analysis with grab sampling was used. descriptive statistics, such as frequency counts, were used to describe the sample. acceptable internal consistency was reached through exploratory factor analysis. findings – first results showed that none of the items needed to be eliminated from the scale and that the scale had very high reliability. acceptable internal consistency was reached through an exploratory factor analysis which resulted in a one-factor model of work engagement. research limitations – the data collection for the study was limited to one major university, therefore generalisation the results must be done with great care. implications – this study helps universities to identify their critical drivers of employee engagement, and gives them a clear understanding of their construct. originality  – this study is one of the first attempts to re-explore the viability and authenticity of gallup workplace audit in educational institution (university level). keywords: gallup, employee engagement, private university, kaiser-meyer-olkin (kmo) measure of sampling adequacy (msa) and bartlett’s test of sphericity. jel classification: m00, m1, m10, m12. introduction today’s organisations are facing the challenge of remaining competitive (koyuncu et  al., 2006). this creates performance pressure on the organisation to introduce technological advances in their operations and management, progressively increase workforce diversity and mailto:khannaruchi8080@gmail.com https://doi.org/10.3846/bme.2020.11999 https://orcid.org/0000-0002-9873-1172 business, management and education, 2020, 18(2): 344–362 345 business globalisation (burkea & ngbe, 2006). organisation leaders clearly have seen that human resources are vital in improving organisational productivity in comparison to other resources like money, merchandises and technology (lawler, 2003; burke & cooper, 2005). traditionally organisation measures their performance on the basis of financial and business measures. (koyun-cu et al., 2006). no doubt such financial measures like revenue, cash flow and profitability were an important index of measuring the performance of the business. apart from these so-called “soft” leaders who are people-oriented and measures like employees’ attitude, their perception and well-being are also widely recognised (müller & turner, 2010). that is employee engagement becomes a part of strategic management in an organisation. deloitte conducts a survey of 531 employees of south african descent around the world to identify the staff issues faced by the companies (de beer, 2007). majority of the respondents said that employees were very important for the organisations’ performance, especially in strategic challenges. according to demerouti and cropanzano (2010), job satisfaction is associated with employee engagement. a gallup organisation conducted a meta-analysis and deduces that companies profitable work units have people who do what they do best, they work with those people whom they like and have a good sense of psychological ownership of the outcomes of their work (shuck, 2011). the concept of employee engagement basically measures the happiness of employees with their respective jobs, the environment of work and performance level efficiency. to manage high morale among employees can be beneficial to any organisation. high morale leads to loyalty among workers towards the organisation. dynamically engaged workers are productive for the company. those organisations that have a high level of employee engagement are more productive and profitable than those who do not have high levels of employee engagement. every organisation wants that their employees gave their best to the organisation and remained in the organisation; for that purpose a conducive environment is developed and created, where every employee gives his/her best to the organisation and contributes to the overall success of the organisation. as per the gallup institute, merely 15% of employees can be called completely engaged in their work worldwide, and the remaining 85% are disengaged or we can say that actively not engaged in their work (gallup, 2017). as per forbes 2014, the reason for “disengagement crisis” depends on the lack of support to employees in accomplishing which they perceive they get for themselves when they get meaningful results. company returns and profitability declined due to low level of employee engagement, teresa amabile of the harvard business school, cited in forbes (2014). in great britain, it has also been confirmed by the department for business, innovation and skills (2009) that low level of engagement of employees negatively affect the uk economy. therefore there is a need to understand employee engagement and its impact. employee engagement is a key factor which contributes to organisational productivity, performance and long term survival (e.g., nowack, 2006; hewitt associates, 2004). employee productivity and overall productivity of the organisation is directly affected by the engaged employees. this is also true for the educational institution because they are profoundly human resource-driven. 346 r. khanna. re-explore the viability and authenticity of gallup workplace audit in private university engaged and qualified teachers are an asset in any educational system. teachers are helpful in transforming an individual. teachers are lampposts for the future generation. they contribute to making learned individual, and these individuals contribute to creating india. 1. employee engagement: a perspective there are the various authors who define employee engagement from various perspectives. one of them, goffman (1961), lay out that the notion of engagement is embedded in the role theory. he defined engagement as the “spontaneous involvement in the role” and the “visible investment of attention and muscular effort” (as cited in wildermuth & pauken, 2008). csikszentmihalyi (1982) defined a flow concept of employee engagement, wherein flow is a complete consciousness which employees experience when they are fully involved in their work. kahn (1990) postulated three aspects of employee engagement (1) cognitive aspect (employee satisfaction, belief in the value system of the organisation), (2) emotional aspect (type of attitude towards the organisation and its leadership/top management level, pride), and (3) behavioural aspect (commitment towards the discretionary aspects of the job, willingness to work overtime). the demand for the author is extensively acknowledged in academic literature. various researcher use this particular definition in their research work (alfes & truss, 2013; badal & harter, 2014; kim & koo, 2017; rahman et al., 2017; zhong et al., 2016). according to schaufeli et al. (2002) engagement means “an affirmative, satisfying, workrelated state of mind that is categorised by vigour, dedication and absorption”. several researchers have used the particular definitions in their research work (akhtar et al., 2016; bal & de lange, 2015; eldor & harpaz, 2016; eldor, 2017, etc.). kahn’s model has been tested by may et al. (2004) and they found that the psychological conditions of meaningfulness, safety and availability are positively connected to engagement. in the words of robinson et al. (2004), engagement is one step forward of commitment. employee engagement means employees’ positive approach towards their organisation and its values, where employees know very well the business context and what work they perform which improves job and effectiveness of the organisation. his study focused the two-way nature of employee engagement. an 18-item scale developed by hewitt associates (2004) is used to measure employee engagement. they measured three primary behaviours and described engagement as “the condition in which individuals are intellectually and emotionally dedicated to the organisation or group. the three primary measures are: say (employees speak or communicate positively about the organisation from inside and outside), stay (employees show strong wish to be a member of the organisation) and strive (employees put additional effort and involve those behaviours that add to business success)”. say, stay and strive these three behaviours are demonstrated by engaged employees. fleming and asplund (2007, p. 2) went one step further and introduced engagement as an employee: “ability to capture the head, heart and souls of your employees, to create an inner desire and passion for excellence”, further noting that the employees who want their organization to succeed feel emotionally, socially, and even spiritually attached to its mission, vision, and purpose. business, management and education, 2020, 18(2): 344–362 347 in the words of newman and harrison (2008) engagement is the concurrent existence of three behaviours in employees, namely, the job performance, involvement and citizenship behaviour. robertson-smith and markwick (2009) define engagement as an important however complex challenge, but in spite of this, there is a greater chance of the discussion of various approaches. simpson (2009) reviewed various literature and highlighted the four lines of engagement research and concentrated on the determinants and significances of engagement at work. bijaya kumar sundaray (2011) concentrated on several features or issues which lead to employee engagement and what company should do to elicit engagement in employees. appropriate consideration on strategies of engagement will increase the effectiveness of organisation in terms of higher productivity, quality, profits, employee retention, customer satisfaction, and increased adaptability. cook (2012) defines engagement as “how positively the employee thinks about the organisation, feels about the organisation and is proactive in relation to achieving organisational goals for customers, colleagues and other stakeholders”. 2. literature review extensive literature is found which shows the benefits of employee engagement. purcell et al. (2003) underlined that if there is a proper sharing of responsibility among workers and management over the issues of substance then only employee engagement is meaningful. their study also shows that the job is affected by the involvement of employees in decisions making, and was highly related or connected with high levels of employee engagement thus indicating it is an important driver. harter, schmidt and hayes (2002) found in their study that productivity, profitability and customer satisfaction is positively influenced by the employee engagement and also discovered that employee turnover is reduced through employee engagement. in 2004, harter, asplund and flemming found in their study that there is a positive correlation between employee engagement and business revenue. perrin (2007) found in his study that there is a positive association between employee engagement and company financial performance that is operating income and per share earnings. earlier in 2004 the same kind of study published by hewitt associates and by the american society for training and development in 2007 exhibited there is positive impact of employee engagement on shareholder return. evidence is also available that suggests that higher levels of organisational profits achieved as a result of employee engagement get translated into higher pay, perks and promotions for the employees (konrad, 2006). therefore, employee engagement benefits all stakeholders – shareholders, top management and employees. in 2000, klein and kozlowski revealed that role played by a supervisor creates an environment of belief, open communication, respect and cordiality. this study shows that an environment significantly increases employee engagement. pinto and prescott (1988) conducted a study and their results confirmed by the labianca et  al. (2000) and they included role clarity in the driver list of employee engagement. harter et al. (2002) found in their study that employee satisfaction was significantly hypothesised with employee engagement. they 348 r. khanna. re-explore the viability and authenticity of gallup workplace audit in private university also found that safety measures have a significant impact on employee engagement. harter et  al. (2004) subsequently conducted a study and recognised that industry to industry the drivers of employee engagement differ and significantly dependent on the type of job performed and the image of the organisation. further, pfeffer (2003) advised that a community culture be nurtured by teamwork and association. in such a culture, employees are expected to develop a sense of belonging that increases involvement and engagement (pfeffer, 2003). cropanzano and mitchell (2005) found out in their study that quality of supervision, trust in leadership, job components, pay system and reward all of these drivers engaged employees. in the year 2005, latham and pinder recognised fairness of the reward system and cooperation of employer as important factors of employee engagement. heger (2007), identified in their study supervisor and leadership support, personal recognition, career and skill advancement opportunities, teamwork and an ethical work culture as key drivers of employee engagement (heger, 2007). ruck and trainor (2012) considered that open and clear communication can foster employee engagement. bakker, demerouti and ten (2012) separated the emotional drivers (personal influence) of employee engagement from its rational drivers (pay, perquisites, promotions). witemeyer (2013) figured out quality of supervision, rational communication, belief amongst employees and management, security of job, training and development, recognition, and satisfaction of job as determinants of employee engagement. rasheed, khan and ramzan (2013) found in their study that organisational justice, supervisor support and organisational support significantly increase employee engagement in service industry. a.  a.  albdour and i.  i.  altarawneh (2014) finding showed that employees of frontline who possess high level of engagement in job and organisation have high level of emotional and normative commitment. meanwhile employees who have high level of job engagement evocatively affect maintenance commitment of employees. in their study they examine the connectivity between the two measurements of employee engagement that is job engagement and organisational engagement, and organisational commitment assessed by three important measurements that are as follows: affective (emotional) commitment; continuance (maintenance) commitment; and normative commitment. badal and harter (2014) found in their study that at the business unit level, employee engagement and gender diversity forecast financial performance individualistically. anitha (2014) found in her study that all the recognised factors were forecasters of employee engagement and relationship between team and co-worker and working environment had major effect on employee engagement. shuck and zigarmi (2015) found in their study that there was a positive association between self-determination theory (sdt) and engagement. benn et  al. (2015) showed in their study that involvement in environmental activities is related directly with employee engagement at greater level with the organisation, higher grading of their organisation’s environmental performance, and minimal desire to leave the organisation. this study also emphasised on other aspects of ecological initiatives that may affect attitudes of employees. bal and de lange (2015) found in their study that engagement mediated the associations between accessibility of flexibility in human resource management and job performance. besides, their study partially support the moderating role of age of workers in the connection of human resource management flexibility with the outcomes. business, management and education, 2020, 18(2): 344–362 349 mozammel and haan (2016) found in their study that there is a positive impact on resources and compensation on employee engagement. these results are mirrored in the work of ghosh, rai, chauhan, baranwal and srivastava (2016). mishra and mohanty (2016) found in their study that there is an impact of company reputation, work environment, senior leadership, process and manager on employee engagement. jaewon (2016) found in his study that there is a significant positive correlation between perceived customer participation and employee engagement. osman and mehmet (2016) found in their study that there is positive impact of support of organisation and mission fulfilment of organisation on employee engagement. akhtar et al. (2016) found in their study all the variables positively related with each other. high performance work practices had positive and significant effect on the engagement and performance of employees. it also shows that employee engagement mediated the association between employee performance and high performance work practices. eldor and harpaz (2016) found during their work that employee engagement mediates the association between the perceived learning climate and extra role performance behaviours. obeidat (2016) found in his study, organisational performance positively and significantly associated with internal and external corporate social responsibility and employee engagement (potency, attentiveness, and commitment). it was also revealed that there was a significant positive association between employee engagement and internal/external corporate social responsibility. lin et al. (2016) showed that engagement mediated the associations amongst future work self-salience and both supervisor-rated and archival sales performance. it was also found that fwss was positively associated with employees’ report of engagement, and which was positively associated with employees’ supervisor-rated performance and sales performance records of company. reijseger et  al. (2017) showed a direct negative connectivity between engagement and counter productivity and indirectly positive connectivity through open mindedness, here open mindedness act as a mediator. eldor (2017) conducted his study in israel organisation and found that organisational politics’ perceptions strengthen the associations between employee engagement and their behaviours. engaged employees are more innovative, adaptive and practical when they recognise their workplace to be political, and they are ready to share their knowledge with their peers. for some employees who are actively indulged and engaged in their jobs, politics becomes opportunity and a challenge for them. bailey et  al. (2017) found in their study there were five factors  – leadership, organisational and team factor, psychological states, organisational intervention, and job design – that served as antecedents. it was also found that morale of the individual, performance of the task, extra-role performance and performance of the organisation are positively related with engagement but at the same time it was also seen that evidence was most vigorous in relation to task performance. kim and koo (2017) showed that innovative behaviour and job engagement is significantly influenced by lmx, but organisation engagement was not significantly affected by lmx. innovative behaviour and organisation engagement significantly affected by job engagement, but job performance was not significantly influenced by job engagement. job performance significantly influenced by organization engagement, but innovative behaviour was not significantly affected by organisation engagement. innovative behaviour significantly influence job performance. 350 r. khanna. re-explore the viability and authenticity of gallup workplace audit in private university suhartanto and brien (2018) conducted his research study in front line retail employees and his result showed that organisational engagement and job engagement are key determinants of retail store performance and he also found the relationship between these engagements. salahudin et al. (2019) research results showed no significant differences amongst the different demographics of the bankers, in relations of employee engagement and intentions of employees turnover, except income level. it was also found that there was a significant impact of employee engagement on turnover intentions among the respondents. 2.1. measuring employee engagement in the year 2002 the phrase employee engagement was used to convey that it is not only the case of being satisfied with the work and the organisation, but also gives best effort on day to day or regular basis and planning to stay (branham, 2006). consulting firms like gallup, hewitt and others used this definition and developed survey of employee engagement. this survey gives insight to companies to know or assess what percentage of employees are actually enthusiastic, devoted and loyal – in other words how engaged they are in the company. from 2006 number of companies replace old concept of “satisfaction” survey to “engagement” surveys (branham, 2006). branham (2006, p. 1) is convinced that as a tool of measuring “employee engagement” is much better as compared to “employee satisfaction”, because it fixed a more advance standard of what the companies wish and hope to receive from the employees”. there are two methodologies on the subject of employee engagement as per the employee engagement report 2006 (blessingwhite, 2006), which included research on 714 surveys across north america, europe, and asia-pacific: – programmatic – employee engagement is done through committed programmes. surveys of employee engagement and distinctive index scores are used, that concentrate on the items of the lowermost performing surveys. – philosophical  – employee engagement is a management philosophy. its concerns are human resource practices. it emphasises bringing results in definite business primacies. it has been seen that the companies who have devoted, engaged employees are using custom made surveys of engagement for measuring engagement level of employees (46%) rather than those who opine that engagement is an overall philosophy (10%). 8% of the first group said that probably they do not assess levels of engagement. in comparison to small organisations big organisations (above ten thousand employees) properly measure employee engagement. 81% of respondents of big organisations said that for measuring employee engagement levels either they used custom made employee engagement survey or usual employee survey. 60% of respondents of small organisations said that they are using surveys for this objective. the employee engagement report (2006) found that respondents who measured engagement were more likely to report higher engagement levels. one-quarter said that their employees were, on average, “highly engaged”, compared to only half that percentage of those who did not measure engagement. similarly, 32% of respondents who did not measure engagement estimated their engagement levels as low; only 15% of those measuring did the same. it is clear from the above discussion, it can be stated that those organisations who have hard facts are more likely to see high engagement levels, and less likely to see low engagement levels. if the organisations want to engage their employee, it is advisable to measure employee engagement levels. business, management and education, 2020, 18(2): 344–362 351 2.2. the development of the workplace audit (gwa) the gallup organisation decided in the mid 1980s that an exceptional opinion-based feedback process needs to be designed for employers of big and small organisation. the main objective of this tool was to find out and measure the employees’ engagement factors, which were associated with the better organisation outcomes like productivity, value generations, sales, etc. it started with focus group interviews in different companies across different industries. employees of productive departments were involved in every focus group. from above gallup has been conducting thousands of such group interviews. comprehensive surveys were developed through the focus group interview, which comprises of questions, associated with all facets of employees work experience. then these surveys were conducted to over a million of workforce (buckingham & coffman, 1999). firstly five elements were developed: 1. work environment/procedures: it is concerned with the physical condition of organisation such as office temperature, equipment, salary, companies guidelines, health and safety, and welfare facilities. 2. immediate supervisor: it concerns those issues related to the employees’ behaviour toward their immediate supervisor, such as selection, acceptance, faith, development, consideration and discipline. 3. team/co-worker: it concerns issues related to the views of employees towards their team members, like teamwork, faith, confidence, shared goals and communication. 4. overall company/senior management: it concerns those issues related to the initiative taken by the company leaders, like the employees’ trust in the mission and policy of the company’s, or leader’s competence. 5. individual commitment/service intention: it concerns issues related to the commitment of employees towards their company and its stakeholders, like the employees’ wish to stay the entire career period in the organisation, take pride in the company, wish to provide outstanding services to their customers and suggest the company as a place to work to friends and relatives. afterwards numerous regression analyses were completed on the figures, the purpose being to find certain influential questions from the data set. as a result, 12-question surveys were developed. through this 12-question survey, respondents are requested to rate their feedback to every question on one to five likert scale (see buckingham & coffman, 1999). then confirmatory factor analyses are applied to these 12 questions. these questions look like a cliff in which employees want to rise from the moment (time) employee expects a current role or performance and to the time or stage when they are fully indulged in or committed to that role or performance. the mount has four stages: 1. base camp: “what do i get?” in this phase employees want to know what the company expects from them when they start a new role and what they will get in return for this role. 2. camp 1: “what do i give?” in this phase employees concentrate more or put an effort to a singular input and are more concerned with others’ perception about themselves, meaning whether others give importance to their work or not. 352 r. khanna. re-explore the viability and authenticity of gallup workplace audit in private university 3. camp 2: “do i belong here?” in this phase employees ask themselves whether they are suitable for the role or job or performance or not. 4. camp 3: “how can we all grow?” this is one of the most progressive phases of the employees. in this phase employees become impatient for learning and growth. they learn, grow and innovate, emphasising on making things better. gallup has empirically proven that employee engagement is a significant predictor of needed outcome of organisation (luthans & peterson, 2002, p. 377), like satisfaction of customers, customers retention, output and viability (see buckingham & coffman, 1999). 3. objective of the study – the purpose of this study is to re-explore the viability of this instrument in educational context. – the objective of this study is to find whether the gallup work audit instrument, which is an international survey, can be used in educational sector in the context of india for measuring faculties’ engagement. 4. research methodology 4.1. participants the target population of this study was the faculties of private university in uttar pradesh. a total of 328 faculty members from different departments were selected using simple random sampling. 4.2. procedures or data collection questionnaire were distributed electronically to the faculties engaged in graduates, postgraduate and doctoral courses and having internet access. they returned their responses through the mail. it gives assurance to the respondents that their identity is hidden and no one can change their responses. those faculties that did not have their email ids, were given printed questionnaire and the responses were collected. then all the responses are collected into one set of data. it is used for analysis purpose. 4.3. measuring instrument the variable measured in this study is employee engagement and the tool used was the gallup q12. the questionnaires for this study included a five-point likert-type scale with strongly disagree to strongly agree. 4.4. data analysis technique all statistical analyses were performed with the 20.0 version of the spss. to define the sample descriptive statistics were used. kaiser-meyer-olkin measure of sampling adequacy and bartlett’s test of sphericity were used to measure sampling adequacy and sphericity the underlying structure of the questionnaire was determined by principal component analyses with varimax rotation. business, management and education, 2020, 18(2): 344–362 353 4.5. reliability to determine the reliability of measurement, a reliability analysis of the gwa was conducted. to measure the internal consistency reliability of the instruments cronbach’s alpha coefficient was used. if the cronbach’s alpha coefficient is 0.70 or greater than it is considered to be satisfactory (cortina, 1993). the table  1 clearly demonstrated that cronbach’s alpha is .82. it shows the reliability of gallup instrument. the table 2 also shows that all the items of the gallup had acceptable alphas because all the items have greater than .70 alphas. table 1. reliability statistics cronbach’s alpha cronbach’s alpha based on standardised items n of items .818 .816 12 table 2. item-total statistics sc al e m ea n if it em d el et ed sc al e v ar ia nc e if it em d el et ed c or re ct ed it em -t ot al c or re la tio n sq ua re d m ul tip le c or re la tio n c ro nb ac h’s a lp ha if it em d el et ed q 5. i know what is expected of me at work. 39.09 38.970 .275 .162 .818 q 6. i have the materials and equipment i need to do my work right. 39.58 36.046 .431 .307 .808 q 7. at work i have the opportunity to do what i do best every day. 39.59 34.632 .556 .446 .797 q 8. in the last seven days i have received recognition or praise for doing good work. 40.20 33.103 .562 .426 .796 q 9. my head or someone at work seems to care about me as a person. 39.52 36.466 .363 .276 .814 q 10. there is someone at work who encourages my development. 39.55 35.137 .521 .335 .800 q 11. at work my opinions seem to count. 39.71 34.936 .574 .385 .796 q 12. the mission or purpose of my institutions makes me feel my job is important. 39.66 34.359 .582 .416 .795 q 13. my associates or fellow employees are committed to doing quality work. 39.55 35.582 .494 .332 .803 q 14. i have a best friend at work. 39.66 37.694 .250 .161 .824 q 15. in the last six months someone at work has talked to me about my progress. 39.76 35.800 .443 .306 .807 q last year i have had opportunities at work to learn and grow. 39.67 33.272 .574 .449 .795 354 r. khanna. re-explore the viability and authenticity of gallup workplace audit in private university 5. results all employees of the university were targeted. a total of 328 questionnaires were returned, with all found usable for data analysis. as for the demographic analysis of the company, the questionnaire only made provision for the insertion of information on the individual’s gender, designation, qualification and department. this analysis is shown in the table 3. table 3. characteristics of the participants frequency percentage q.1 gender valid 43 13.1 female 144 43.9 male 141 43.0 total 328 100.0 q 2. designation valid 2 .6 assistant professor 257 78.4 associate professor 61 18.6 professor 8 2.4 total 328 100.0 q 3. qualification assistant professor 3 .9 graduation 24 7.3 others: net/gate/slet 27 8.2 ph.d. 68 20.7 post-graduation 206 62.8 total 328 100.0 q 4. department applied science 28 8.5 architecture 1 .3 b. arch 18 5.5 bca 6 1.8 biotechnology 1 .3 bjmc 6 1.8 civil engineering 27 8.2 computer science 32 9.8 ece 11 3.4 education 3 .9 electrical 2 .6 hotel management 2 .6 legal studies 15 4.6 mechanical engineering 17 5.2 pharmacy 20 6.1 school of management 139 42.4 total 328 100.0 business, management and education, 2020, 18(2): 344–362 355 before factor analysis can continue it is essential to execute the kaiser-meyer-olkin (kmo) measure of sampling adequacy (msa) and the bartlett’s test of sphericity (coetsee, 2006). kmo and bartlett’s test of sphericity outcome are shown in the table  4. it is clear from the table 4 measure of sampling adequacy (msa) is .82 and bartlett’s test of sphericity is 1, making it significant. the kaiser-meyer-olkin (kmo) measure of sampling adequacy (msa) must be higher than .70 and here it is .82, deeming it acceptable. in this case a reasonable basis factor analysis is present. table 4. kmo and bartlett’s test kaiser-meyer-olkin measure of sampling adequacy. .823 bartlett’s test of sphericity approx. chi-square 1007.051 df 66 sig. .000 firstly, a matrix of intercorrelations was set up amongst the 12 items. a principal component analysis was conducted on the next level. the result is shown in the table 5. the table 5 of the total variance showed that there are four components whose eigenvalues is larger than 1. the first component explains 34.29% of total variance; second component explains 10.42% of total variance, and third component explains 8.92% of total variance and fourth component explain 8.42% of total variance. table 5. total variance explained component initial eigenvalues extraction sums of squared loadings rotation sums of squared loadings total % of variance cumulative % total % of variance cumulative % total % of variance cumulative % 1 4.114 34.287 34.287 4.114 34.287 34.287 2.578 21.480 21.480 2 1.250 10.416 44.703 1.250 10.416 44.703 1.830 15.254 36.734 3 1.070 8.917 53.620 1.070 8.917 53.620 1.688 14.067 50.801 4 1.010 8.419 62.040 1.010 8.419 62.040 1.349 11.238 62.040 5 .840 7.001 69.040 6 .791 6.595 75.635 7 .638 5.316 80.951 8 .631 5.260 86.211 9 .471 3.925 90.136 10 .440 3.669 93.806 11 .378 3.150 96.955 12 .365 3.045 100.000 extraction method: principal component analysis. 356 r. khanna. re-explore the viability and authenticity of gallup workplace audit in private university in this study it was decided to specify the four components because earlier studies (langford, 2009; havenga et  al., 2011) confirmed a four-factor solution for gallup work instrument. a principal component analysis with a varimax rotation with kaizer normalisation was used to analyse the factor structure of the gwa. the result is shown in the table 6. the table 6 makes it clear that four components were extracted. on the basis of clustering of the items classification may be done. 1. first component comprising of the following items (clarity of company mission and acknowledgement towards individual growth): in the last six months someone at work has talked to me about my progress .760; in the last seven days i have received recognition or praise for doing good work .723; the mission or purpose of my institutions makes me feel my job is important .676; at work, my opinions seem to count .489. 2. second component comprising of the following items (role and work clarity): i have the materials and equipment i need to do my work right .748; i know what is expected of me at work .744; at work i have the opportunity to do what i do best every day .670. 3. third component comprising of the following items (quality and growth concern): my head, or someone at work seems to care about me as a person .873; last year i have had opportunities at work to learn and grow .639. my associates or fellow employees are committed to doing quality work .504. 4. fourth component comprising of the following items (advancement and relation oriented): i have a best friend at work .890; there is someone at work who encourages my development .570 table 6. rotated component matrixa component 1 2 3 4 q 15. in the last six months someone at work has talked to me about my progress. .760 q 8. in the last seven days i have received recognition or praise for doing good work. .723 q 12. the mission or purpose of my institutions makes me feel my job is important. .676 q 11. at work my opinions seem to count. .489 q 6. i have the materials and equipment i need to do my work right. .748 q 5. i know what is expected of me at work. .744 q 7. at work i have the opportunity to do what i do best every day. .438 .670 q 9. my head or someone at work seems to care about me as a person. .873 q 16. last year i have had opportunities at work to learn and grow. .507 .639 q 13. my associates or fellow employees are committed to doing quality work. .504 q 14. i have a best friend at work. .890 q 10. there is someone at work who encourages my development. .570 extraction method: principal component analysis. rotation method: varimax with kaiser normalization. note: a. rotation converged in 5 iteration. business, management and education, 2020, 18(2): 344–362 357 6. discussion the objective of this study was to re-explore the viability and authencity of gallup workplace audit as a measure of employee engagement in educational context. a cross-sectional analysis study with grab sampling n  = 328 was used. exploratory factor analysis was used in this study which resulted in a one factor model of employee engagement. it showed adequate internal reliability. through the literature review it was clear that construct itself has a number of explanations or meanings, measurement approaches and model. as per verwey (2007), the level of engagement is where the employees are committed to the organisation emotionally or logically, to something or someone in the organisation and as a result of this commitment how long they stay in the organisation and work hard. to understand employee satisfaction and dimensions of organisational performance, employee engagement is one of the most important and significant variable. this research was done in a single university in india; it was good because it eliminate the impact of those factors on employee engagement which may be created the variations due to the differences in organisational culture, leadership style and other factors. firstly the reliability of the item was done. the result made it clear that none of the items required removing from the scale because the scale has high reliability (.82 cronbach’s alpha) and it has been confirmed through earlier studies (harter, 1999; janse van rensburg, 2005; vale, 2011). the next factor analysis was done to determine if it is really the items reflected gwa four-factor model. analysis of the questionnaire revealed that it is based on only one factor and has not provided any rationale for gwa. therefore four components extracted. result showed that the four components singled out in this study are quite different from four factors measured by gallup workplace audit. they were clarity of company mission and acknowledgement towards individual growth, role and work clarity, quality and growth concern and advancement and relation oriented. conclusions and practical implication the first objective of the study is to re-explore the viability of this instrument in educational context. it is clear that gallup workplace audit can be used effectively in educational context in india. it is reliable and valid instrument for measuring employee engagement. the second objective of this study is to find if the gallup work audit instrument, which is an international survey, can be used in educational sector in the context of india for measuring faculties’ engagement. it also confirms the study that an international survey can be applied or use effectively in indian educational context. this study was the leading possibility in india in educational context. it formed an important point of leaving for related research in this country. it is not just that the results merely approve the construct validity of the gwa approach to the definition and measurement of employee engagement; but it shows the possibility or opportunities for further research and makes it interesting and hypothetically valuable. from a researcher viewpoint, it also suggested that any methodology to employee engagement call for more thinking which confirm that the measurement and definition of employee engagement are appropriate to the educational institutions and context in question. for educational institution that desire to assess employee engagement, the practical implications of the results are that on the first level there is a need for them to have a clear 358 r. khanna. re-explore the viability and authenticity of gallup workplace audit in private university understanding of their own construct, and on the second level it is good that institute itself find the key drivers of employee engagement because the national culture is quite different, even institutional culture too. the notion that employee engagement is a universal concept with the same sense across the entire organisation or institutions or universities may not be true, because the measurement of engagement with an international instrument possibly will not give an accurate explanation of engagement in india. therefore organisation must consider their key drivers of employee engagement. for this it is necessary that they have a clear understanding of their own construct. recommendation for future research after commenting on the practical implication of the study there is a need for more research which compares or analyses different measurement methods of employee engagement. what is more identifying the extent or factors through which employee engagement is influenced by institutional practices, their culture and national culture is advisable. through this it may be clear that employee engagement is an institutional construct and it is a function of institutional culture or national culture. in this study there is only one factor of gallup workplace audit has identified in one sample university, therefore the recommendations are as follows: – for determining whether the construct of engagement is similar across universities or not it should be suggested to test the consistency and rationality of the gwa in various universities. – a quantitative study should be conducted to accumulate an engagement survey more pertinent to the context of india. limitation firstly the sample size is small and it limits the generalisation of results. it is advisable that future studies should be done with larger sample size, which increases the generalisation of results. secondly, there is a need for more research which compare or analyse 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(2016). job engagement, perceived organisational support, high‐ performance human resource practices, and cultural value orientations: a cross‐level investigation, journal of organizational behavior, 37(6), 823–844. https://doi.org/10.1002/job.2076 https://doi.org/10.1007/s10869-016-9435-z https://doi.org/10.1023/a:1015630930326 https://doi.org/10.1016/j.ijnurstu.2008.05.003 https://doi.org/10.1177/1534484311410840 https://doi.org/10.1108/ejtd-08-2014-0061 https://doi.org/10.1108/ijppm-03-2017-0065 https://doi.org/10.1108/00197850810868603 https://doi.org/10.1002/job.2076 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university factors determining the development of intelligent transport systems laima okunevičiūtė neverauskienė 1,2*, marta novikova 1, eglė kazlauskienė1 1department of economic engineering, vilnius gediminas technical university, vilnius, lithuania 2lithuanian centre for social sciences, vilnius, lithuania received 29 july 2021; accepted 12 august 2021 abstract. purpose – foreign and lithuanian researchers analyse the benefits of its (intelligent transport systems) application and development opportunities in various aspects. due to the rapid development of technology, most authors emphasise the need for new or at least repeated research on intelligent transport systems its. the aim of this article is to evaluate the factors determining the development of its after theoretical substantiation. research methodology – the primary data was collected from the following databases: eurostat, oecd, world bank. this study uses the analysis of scientific literature, expert survey, multicriteria assessment (saw and copras methods). findings – the results of this article indicate which factors determine the development of its the most: investments, the aim to increase road safety, well-developed infrastructure. it also identifies which of the chosen for analaysis countries has the greatest potential for developing of its – germany. research limitations – firstly, due to the lack of statistics only eight countries are included and the period of analysis is only two years. another limitation is that experts from only two countries completed the survey. practical implications – research on the development of its is carried out in order to analyse the country that has the biggest opportunity to develop its and the factors affecting the mentioned development. the results can be beneficial for ministries of transport in different countries for planning the application of its. originality/value – current study contributes to the existing literature by examining the specific factors affecting the development of its that were not analysed earlier. this article differs from others as includes some northern ,western european and baltic countries. findings can be used by government in planning the installation of its to get the maximum benefit from it. keywords: intelligent transport systems, congestion, safety, development of intelligent transport systems, multi-criteria evaluation. jel classification: f63, f64, o33, o44, q01, q53, q55, q58, r11, r41, r42. business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 2: 229–243 https://doi.org/10.3846/bmee.2021.15368 *corresponding author. e-mail: laima.okuneviciute.neverauskiene@vilniustech.lt http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 https://orcid.org/0000-0002-7969-3254 https://orcid.org/0000-0002-0388-3166 https://doi.org/10.3846/bmee.2021.15368 230 l. okunevičiūtė neverauskienė et al. factors determining the development of intelligent transport systems introduction with increasing globalisation and an evolving economy, the demand of high-quality transportation services increases (rodrigue, 2020). in 2019, 74.9 million cars were sold worldwide, which makes personal vehicles one of the most popular modes of transport (statista, n.d.). large number of personal vehicles in use causes problems in the transport system, such as increased accidents, prolonged congestion duration. according to the world health organization, about 1.35 million people die on the world’s roads every year. for this reason, some countries lose around 3% of gdp (world health organization, 2015). its are used in various countries to solve problems in the transport system and increase the efficiency of transportation. increasing cooperation between countries in the implementation of its and the encouragement of global institutions to apply them requires to complete additional research on the development, benefits and significance of intelligent transport systems for countries. research problem: what factors determine the development of its? the object of research is intelligent transport systems. the aim of this article is to evaluate the factors determining the development of intelligent transport systems after theoretical substantiation. the first part of the article contains a scientific literature analysis of its including principles of classification, advantages and importance of its, principles of application of its globally. in the second part a system of fifteen factors determining the development of its based on the methodology of the factors determining the development of its is created. moreover, used expert evaluation, saw and copras methods are described. in the third part the results of completed expert evaluation and multi-criteria assessment are presented. according to experts, the most its development is determined by investments, high accident rates, well-developed infrastructure and the least by tourism development, internet speed. the results of saw and copras methods are similar and state that the most opportunities and reasons to develop its out of the analysed countries has germany. 1. theoretical aspects of intelligent transport systems intelligent transport systems affect infrastructure and vehicles and are beneficial for the transport system and drivers or passengers (perallos et  al., 2016). intelligent transport systems (its) increase the efficiency of the transport system and infrastructure, which leads to faster dissemination of information on a global scale (haseeb, 2017). its benefits passengers by helping to shorten travel times and increase safety (haseeb, 2017). increasing globalisation and technological development are also expanding the number of scientific research on intelligent transport systems. researchers study the use of its, the principles of classification, analyse and evaluate the factors determine the development of its. there is no single official definition of the concept of its, and various authors define it in their research based on documents, standards and other research related to the transport system and its. almost every its definition identifies its as an information and communication technology, which is located in infrastructure or vehicles and performs specific functions (traffic management, safety enhancement, reduction of pollution and congestion, improvement of transport system efficiency and quality of service) (janušová & čičmancová, 2016; sarkar & jain, 2018). business, management and economics engineering, 2021, 19(2): 229–243 231 1.1. classification of intelligent transport systems the scientific literature presents different its classification methods. for example, its are categorized by scope (hassanpour et al., 2016; janušová & čičmancová, 2016), mode of transport (hassanpour et al., 2016; janušová & čičmancová, 2016), management (katerna, 2019), location (małecki et al., 2014), functions performed and services provided (jarašūnienė, 2007; giannopoulos et al., 2012; janušová & čičmancová, 2016; sarkar & jain, 2018). jarašūnienė (2007) and janušová and čičmancová (2016) state that its are deployed either in infrastructure or in vehicles. this is one of the simplest ways of classifying its, as it does not delve into the functions performed by its, the nature of its operation. thus, there is no formal its classification model. countries, cities or its associations can classify intelligent transport systems at its discretion. the scientific literature provides models for its classification by scope, mode of transport, management, its location, functions performed and services provided. the authors do not indicate the most appropriate way of its grouping; yet seek for new its classification techniques. 1.2. the importance of the application of intelligent transport systems in the transport system its collect, process and provide data in a high-quality and efficient way, reduce traffic congestion, increase safety by quickly detecting accidents and removing obstacles on the road, inform drivers about the traffic situation and help them to choose the optimal route, facilitate parking and e-payment (road network operations & intelligent transport systems, n.d.). its benefits users of the transport system: road users, passengers, public transport passengers, people with reduced mobility, institutions involved in transport activities (road network operations & intelligent transport systems, n.d.). toulouki et  al. (2017) conducted a study on the benefits of its in greece. the authors used a survey method and found that most respondents believed that the application of its could increase the personal income of the population, shorten travel time and encourage them to choose a more environmentally friendly way to travel. the authors also argue that its can improve the quality of public transport services (toulouki et al., 2017). in terms of economic benefits, its can reduce the cost of producing and trading goods and services, can have a positive impact on real estate value, rent and annual income, create new jobs (toulouki et al., 2017). in order to assess the economic benefits of its, it is important to identify the financial damage caused by problems in the transport system that its are expected to solve. the main costs in the transport sector are caused traffic jams and traffic accidents, and policy makers seek to reduce their impact on society (vencataya et al., 2018). janušová and čičmancová (2016) note that its are used to solve problems in the transport system and increase passenger safety, reduce travel time and fuel consumption. with the necessary information collected and processed by its, the most effective solutions on transport system services can be offered to road users (janušová & čičmancová, 2016). in terms of the economic benefits of individual its systems, the electronic road toll system in the us has been found to increase mobility and generate around 1 billion usd per year, and red-light cameras increase safety, which can be valued at around 1 billion usd 232 l. okunevičiūtė neverauskienė et al. factors determining the development of intelligent transport systems per year (united states department of transportation, n.d.). it has also been found that a traffic management system in the us increases mobility and the economic benefits of this system can be estimated at 276.5 million usd per year, and the driver information system increases mobility, which can be estimated at 543.1 million usd (united states department of transportation, n.d.). this means that intelligent transport systems can provide the necessary real-time information on traffic, reduce the number of accidents, congestion, greenhouse gas emissions, increase the quality of services, expand exports, as well as encourage passengers to choose public transport or other environmentally friendly modes of transport. 1.3. application of intelligent transport systems in the context of globalisation globalisation is defined as a worldwide phenomenon characterised by the convergence of trade, production, labour and other links between different countries, the absence of economic borders (merriam-webster, n.d.). this process is dependent on bridging distances through technology and affects the environment, culture, political systems, economic development and the quality of life of people in societies around the world (brondoni, 2014). its is an innovation that brings social and economic benefits to countries and users of transport systems in different parts of the world. the size of the global its market in 2018 was estimated at 23 billion usd (global market insights, n.d.) and at 26.58 billion usd at 2019 (grand view research, n.d.). the overall annual growth rate of the global its market is projected to increase more than 5 percent in a period from 2019 to 2025 (global market insights, n.d.). it is also projected that in 2025 the its market will reach 34 billion usd (global market insights, n.d.) and in 2027 – 37.6 billion usd (grand view research, n.d.). it is stated that north america in the forecast period 2019–2025 will be the first in the world market (global market insights, n.d.). such growth is expected due to the application of its in various countries around the world in order to reduce traffic congestion and due to the development of the internet of things, automation of transport systems (global market insights, n.d.). the development of the global its market is also determined by the accidents around the world – 1.35 million of people die on the roads every year, which costs 518 billion usd (centers for disease control and prevention, n.d.). the application of its is accelerating because of the passengers and drivers wanting to know the traffic situation in different regions and public authorities using innovative and advanced traffic data analysis technologies to help increase traffic efficiency (grand view research, n.d.). its are also being deployed worldwide due to the need for reduction of the negative environmental impact made by vehicles. the positive results of its application encourage the countries around the world to deploy them within their own country. however, the transport system and infrastructure of some countries are not suitable for new technologies, and countries do not have sufficient funds to upgrade the infrastructure and vehicle fleet (wang et  al., 2016). weak economies and institutional policies hinder its deployment in developing countries (khan et al., 2014). high unemployment and low income per capita lead to a lack of public support for its and new technologies deployment (khan et al., 2014). also according to khan et al. (2014), business, management and economics engineering, 2021, 19(2): 229–243 233 investment in its deployment is usually at the bottom of the priority list. due to weak institutional support in developing countries, there is a lack of competent specialists required for the planning, design and operation of its infrastructure (khan et al., 2014). the wide variety of its also makes it difficult to choose the most effective its solution. purchasing inferior equipment results in a loss of financial resources and does not provide the expected benefits. also, due to a large number of its manufacturers, some entities prefer their own domestic manufacturer, in which case foreign companies do not receive revenue, or choose products offered by the world’s leading company. therefore domestic companies suffer economically. another problem in global application of its is the inefficient cooperation between countries, lack of information sharing (sampson et al., 2019). although global its congresses are held annually, not all participants are sufficiently motivated to make changes in their country. the development of its in the context of globalisation may be hampered by the lengthy process of systems deployment. also, if an its is deployed in a country by a company from another country, data protection is essential. properly developed laws and documentation are important for the development of its in the context of globalisation (sampson et al., 2019). the adoption of different standards or laws may restrict trade between countries and reduce the number of possible alternatives of its (sampson et al., 2019). to conclude, the problems related to the global development of its are experienced and must be solved by the countries planning to install its, their institutions, its deployment companies, its development investors, its users, and road users. 2. methodology on implementation of intelligent transport systems development an analysis of the scientific literature found that the authors used different methods to evaluate the development and benefits of its. for example, toulouki et  al. (2017) used a survey method in their study of the benefits of its, and plaksin et al. (2015), vencataya et al. (2018) calculated the cost of congestion. a cost-benefit analysis is often used to assess the socioeconomic profitability of investments in its development (öörni, 2019). this approach also makes it possible to compare investments in its with investments in other activities (öörni, 2019). in order to perform a cost-benefit analysis, separate methods are needed to assess safety, pollution, traffic efficiency and to determine the monetary benefits (öörni, 2019). some countries determine the value of human life, the economic damage caused by a person injured or killed in a traffic accident (öörni, 2019). veryard (2016) argues that cost-benefit analysis alone is not sufficient enough to determine the impact of its on the economy at the macroeconomic level (veryard, 2016). the cost-benefit analysis has certain limitations, such as the inability to take into account certain impacts that cannot be determined by any methods (öörni, 2019). consequently, in the economic and social evaluation of its, the cost-benefit analysis must be combined with other methods – an example of a multi-criteria analysis is provided (öörni, 2019). 234 l. okunevičiūtė neverauskienė et al. factors determining the development of intelligent transport systems thus, the existing studies on the economic impact of its lack of research into comparison of possibilities of its installation in different countries. the most important thing in research is to collect all the necessary data, and most authors suggest completing surveys, traffic monitoring, or data collection from its. some authors argue that the impact of its on the economy is manifested through the impact on safety, the environment and the efficiency of the transport system. this also encourages the development of its. most of the authors used cost-benefit analysis and correlation regression analysis to analyse specific cases of its application in a certain territorial unit. in this study, based on scientific literature, a system of factors determining the development of its is created. for the analysis of main factors saw and copras methods based on multi-criteria utility theory are used. the weighting factors for the coefficients of its development are determined by expert evaluation. 2.1. expert evaluation method the expert assessment is performed by interviewing its experts. the selected experts must meet the following criteria: have a bachelor’s or master’s degree, work in the field of its for at least three years, have experience in cooperation with foreign countries in the field of its (table 1). table 1. eligibility of experts (source: compiled by the authors) experts i ii iii iv v vi vii viii ix bachelor’s degree + + + + + + + + + master’s degree + + + + + + + duration of work in its area in years 3 15 7 5 12 9 6 12 7 during the research, based on scientific literature, a system of factors determining the development of its is formed (table 2). according to the authors, these factors are the main indicators of the development of its as they are essential installation of its, their frequency of use and prevalence in a global environment. experts rate factors from one to ten in order of importance. the survey was sent to experts in its area in different countries, however, answers from nine its experts from lithuania and latvia were received. since more than three experts are interviewed, the kendall concordance coefficient is calculated, which will indicate the degree of agreement between the opinions of several experts (podvezko, 2005): ( )2 3 12s w k n n = −  ; (1)    ( ) 2 2 1 2 1 1 1 2 n n n j j i i k nr r r s r r n= =    ++ + + = − = −         ∑ ∑   . (1.1) in the formula  jr is the sum of the j ranks, n is the sample size, k is the number of experts. business, management and economics engineering, 2021, 19(2): 229–243 235 the closer the value of the concordance coefficient w is to 1, the more consistent the opinions of the experts are (podvezko, 2005). 2.2. saw method saw method is used in this article to find the factor that is an essential reason for each country to develop its. the simple additive weighting method is one of the simplest and most widely used methods based on weighted average (george et al., 2018). the advantage of this method is that it is a proportional transformation of the primary data (george et al., 2018). to apply the saw method, a weight must be assigned to each factor (george et  al., 2018). after completing a survey, the obtained expert data are nornalised according to the formula: 1 , ij ij ij r ijj r r r = = ∑ (2) where rij – the value of the i indicator for the j object (ginevičius & podvezko, 2008). later, weighting factors w are assigned, the sum of which must be equal to 1 (ginevičius & podvezko, 2008): table 2. list of factors determining the development of intelligent transport systems (source: compiled by the authors) factors determining the development of its authors, citing relevant factors 1. internet speed brondoni (2014), choosakun et al. (2021) 2. investments wang et al. (2016), choosakun et al. (2021), sampson et al. (2019), united nations (2017) 3. development of cross-border trade brondoni (2014), sampson et al. (2019) 4. labour movement brondoni (2014) 5. the aim to reduce traffic congestion taie and elazb (2016), khan et al. (2014), hasegawa (2015) 6. the aim to increase road safety centers for disease control and prevention (n.d.), khan et al. (2014), hasegawa (2015) 7. tourism development taie and elazb (2016) 8. the aim to reduce the negative impact of transport on the environment grand view research (n.d.) 9. the increasing number of research studies wang et al. (2016), choosakun et al. (2021) 10. effective international cooperation on intelligent transport systems sampson et al. (2019), wang et al. (2016), united nations (2017), hasegawa (2015) 11. success stories (good practices) united nations (2017), wang et al. (2016) 12. documentation, strategies focused on smart mobility sampson et al. (2019), choosakun et al. (2021), lu et al. (2018), european commission (2016) 13. well-developed infrastructure wang et al. (2016) 14. active involvement of the public and private sectors lu et al. (2018), choosakun et al. (2021), european commission (2016) 15. a large number of specialists khan et al. (2014) 236 l. okunevičiūtė neverauskienė et al. factors determining the development of intelligent transport systems 1 1 m i i w = =∑ . (3) the significance of the indicator is calculated by dividing the sum of the average indicators by the average evaluation value of each indicator according to the formula (ginevičius & podvezko, 2008): 1 n jj j t t =∑ . (4) sj is the value of the multi-criteria evaluation of the j alternative according to the formula (ginevičius & podvezko, 2008): 1 m j i ij i s w r = = ∑ . (5) the highest value of sj obtained is the best (george et  al., 2018). according to the obtained sj values, the sample sizes are ranked from the best (highest sj value) to the worst (lowest sj value). 2.3. copras method copras method is used in this article for ranking alternatives of its develompent in different countries. this means, that the country with the biggest opportunity to develop its and the factors determining this development the most are selected. copras (complex proportional assessment) is a complex of complex proportionality assessment and multi-objective decision-making methods used to determine the effectiveness of alternatives (karaca et  al., 2019). the copras method is simply applicable, allows the calculation of both maximum and minimum criteria, indicates the degree of utility (organ & yalçın, 2016). alternatives can be compared and the best and worst of them can be identified. the principle of the method is that the relative significance qi of the comparative alternatives is determined according to their positive (s+i) and negative (s-i) properties (simanavičienė, 2011). the higher the value of qi is, the more effective is the alternative (simanavičienė, 2011). 1 ij i j n ijj r w s r = = ∑ . (6) in this formula, wi is the weight of the i indicator, rij is the normalised value of the i indicator for the j object. using the copras method, the significance, degree of utility and priority of the options considered can be determined (organ & yalçın, 2016). in the first stage, data is normalised according to the formula: 1 ij i ij n ijj x q d x = ⋅ = ∑ , (7) where: xij is the value of criteria i in solution variant j; m – number of criteria; n – number of variants to be compared; qi is the significance of criteria i. the sum of the dimensionless business, management and economics engineering, 2021, 19(2): 229–243 237 estimated values dij obtained for each criteria xi is always equal to the significance qi of this criteria (viteikiene & zavadskas, 2007): 1 n i ij j q d = = ∑ . (8) in the second stage, the sums of minimising (their lower value is better) s–j and maximising (their higher value is better) s+j estimated and normalised indicators are calculated (viteikiene & zavadskas, 2007). they are calculated according to the formula (viteikiene & zavadskas, 2007): 1 m j ij i s d+ + = = ∑ ; (9) 1 m j ij i s d− − = = ∑ . (10) in any case, the sums of the s+j and the s–j of all objects are always respectively equal to the sum of the maximasing and minimising criteria (viteikiene & zavadskas, 2007): 1 1 1 n m n j ij j i j s s d+ + + = = = = = ⋅∑ ∑ ∑ ; (11) 1 1 1 n m n j ij j i j s s d− − − = = = = = ⋅∑ ∑ ∑ . (12) in the third stage, the relative significance of the compared options is determined. it is determined on the basis of the positive s+j and negative s–j properties that characterise them (viteikiene & zavadskas, 2007). in the fourth stage, the objects are prioritised . the higher the qj, the higher the efficiency (priority) of the variant is (simanavičienė, 2011). qj is calculated according to the formula (viteikiene & zavadskas, 2007): min 1 min 1 n jj j j n j j j s s q s s s s − −= + − − = = ⋅ = + ⋅ ∑ ∑ . (13) in the fifth stage, the efficiency nj of the variant aj is determined according to the formula (viteikiene & zavadskas, 2007): max 100% j j q n q   = ⋅     . (14) depending on the degree of utility obtained, sample sizes are ranked from largest to smallest (karaca et al., 2019). expert survey will contain fifteen factors that determine the development of its, while only quantitative factors will be used for saw and copras methods. the period of analysis is 2018–2019 years. this selection is based on the latest horizon 2020 work programme 238 l. okunevičiūtė neverauskienė et al. factors determining the development of intelligent transport systems (2018–2020), which is concentrated on establishment of smart, green and integrated transport, and the presence of data. the countries for the analysis where chosen according to the cooperation in application of its globally, location (regions). 3. results 3.1. expert evaluation of the factors affecting the development of its a questionnaire listing all the factors affecting the its development was created during this study. its experts were asked to rate each factor on a scale from one to ten (1 – the factor is not important at all for development of its, 10 – the factor is very important for development of its). estimates of the factors affecting its development are presented in figure 1. analysing the results of the survey, it is possible to determine which factors, according to experts, have the greatest impact on the development of its in the context of globalisation. the experts gave the highest rates to the following factors: success stories, active involvement of the public and private sectors, investments, effective international cooperation on its, the aim to increase road safety, well-developed infrastructure. according to experts, the least its development is determined by the following factors: tourism development, a large number of specialists, internet speed. the calculation of the kendall concordance coefficient showed that the expert opinions were consistent (a value of 0.704 was obtained). subsequently, only quantifiable factors were selected and their significance was calculated in order to perform calculations using the saw and copras methods. 0 1 2 3 4 5 6 7 8 9 10 in te rn et s pe ed in ve st m en ts d ev el op m en t o f c ro ss bo rd er tr ad e la bo ur m ov em en t th e ai m to re du ce tr af fic co ng es tio n th e ai m to in cr ea se ro ad sa fe ty to ur is m d ev el op m en t th e ai m to re du ce th e ne ga tiv e im pa ct o f t ra ns po rt on th e en vi ro nm en t th e in cr ea si ng n um be r o f re se ar ch s tu di es ef fe ct iv e in te rn at io na l co op er at io n on in te lli ge nt tra ns po rt sy st em s su cc es s st or ie s (g oo d pr ac tic es ) d oc um en ta tio n, s tra te gi es fo cu se d on s m ar t m ob ili ty w el l-d ev el op ed in fr as tru ct ur e a ct iv e in vo lv em en t o f t he pu bl ic a nd p riv at e se ct or s a la rg e nu m be r o f sp ec ia lis ts expert i expert ii expert iii expert iv expert v expert vi expert vii expert viii expert ix figure 1. results of the survey of experts determining the factors affecting the development of its (source: compiled by the authors) business, management and economics engineering, 2021, 19(2): 229–243 239 3.2. saw method application the following indicators describing the factors affecting the its development were selected for the analysis: internet speed (x1 – average internet speed), investment (x2 – foreign direct investment), development of cross-border trade (x3 – export of goods and services), labour movement (x4 – number of immigrants), the aim of reducing congestion (x5 – hours lost due to congestion), the aim of increasing road safety (x6 – the number of credible accidents), tourism development (x7 – the number of tourists), the aim of reducing the negative impact of transport on the environment (x8 – co2 emissions in the transport sector), the increasing number of research studies (x9 – number of students), well-developed infrastructure (x10 – length of motorways). primary data (2018–2019) was collected in the following databases: eurostat, oecd, world bank. table 3 shows the calculations performed using saw method using different coefficients w. the values of sj obtained are ranked from highest to lowest. it can be said that the country with the highest sj value has the most opportunities for its development. with different coefficients, germany is in first place, while latvia is in the last. calculations with the same coefficients gave very similar results (figure 2). in this case, germany is in the first place, while lithuania is in the last. table 3. normalised values of factors determining the development of its and results of saw method (sj values) using different coefficients (source: compiled by the authors) country x1 x2 x3 x4 x5 x6 x7 x8 x9 x10 sj rank 1. germany 0.098 0.111 0.542 0.637 0.128 0.904 0.319 0.396 0.499 0.614 0.433 1 2. norway 0.143 0.044 0.045 0.034 0.128 0.011 0.047 0.131 0.046 0.028 0.066 5 3. latvia 0.127 0.038 0.006 0.008 0.126 0.012 0.067 0.013 0.129 0.009 0.044 8 4. denmark 0.122 0.071 0.061 0.046 0.113 0.009 0.266 0.213 0.050 0.062 0.093 4 5. sweden 0.145 0.382 0.075 0.094 0.135 0.042 0.061 0.044 0.069 0.100 0.132 2 6. finland 0.126 0.053 0.032 0.022 0.095 0.013 0.027 0.049 0.047 0.043 0.050 7 7. netherlands 0.129 0.255 0.226 0.138 0.108 0.002 0.162 0.122 0.142 0.129 0.130 3 8. lithuania 0.109 0.046 0.013 0.021 0.167 0.009 0.050 0.032 0.019 0.015 0.051 6 w 0.03 0.17 0.04 0.05 0.16 0.16 0.03 0.16 0.04 0.16 0 0.1 0.2 0.3 0.4 0.5 germany norway latvia denmark sweden finland netherlands lithuania results of the saw method using the same coef ficients results of the saw method using different coefficients figure 2. results of the saw method in the analysis of the factors affecting the development of its (source: compiled by the authors) 240 l. okunevičiūtė neverauskienė et al. factors determining the development of intelligent transport systems thus, the saw method was used to identify the countries with the highest and lowest its development potential. in both cases, germany was in first place, while latvia and lithuania were in the last. 3.3. copras method application the same data was used for the calculations using copras method. the previously calculated coefficients w are used. the data is normalized and it is determined which factors increase the development of its and which decrease it. subsequently, further calculations are performed according to the formulas presented in the methodology section: the significance q of each alternative is calculated and the degree of utility nj of each country is determined. according to the obtained results, the countries are ranked from the best value of the degree of utility nj to the worst (table 4). table 4. results of the copras method in the study of the factors affecting the development of its (source: compiled by the authors) country calculations using different coefficients calculations using the same coefficients significance of the alternative degree of utility (%) priority significance of the alternative degree of utility (%) priority 1. germany 0.43281705 100.00 1 0.42459424 100.00 1 2. norway 0.06632158 15.32 5 0.06573722 15.48 5 3. latvia 0.04391646 10.15 8 0.05352005 12.60 6 4. denmark 0.09326894 21.55 4 0.10127889 23.85 4 5. sweden 0.13203673 30.51 2 0.11470350 27.01 3 6. finland 0.05026559 11.61 7 0.05075755 11.95 7 7. netherlands 0.13034610 30.12 3 0.14140653 33.30 2 8. lithuania 0.05102750 11.79 6 0.04800199 11.31 8 analysing the results of the degree of utility, it can be stated that the country with the greatest value has the most opportunities for its development. with different coefficients, germany is in the first place, while latvia is in the last (figure 3). 0 0.1 0.2 0.3 0.4 0.5 germany norway latvia denmark sweden finland netherlands lithuania results of the copras method using the same coefficients results of the copras method using different coefficients figure 3. the results of the copras method in the analysis of the factors affecting the development of its (source: compiled by the authors) business, management and economics engineering, 2021, 19(2): 229–243 241 after completing calculations with the same coefficients, germany is in the first place, lithuania is in the last place. this research complements the results of existing articles by analysis of specific countries and factors which were not explored earlier. many authors concentrate on the economic benefits of its in certain cities or countries, however, there is a deficiency of comparison of different countries in global its development. the future model could contain more descriptive indicators for analysis and examine the indicators of its benefits, which will make it possible to identify the area that will benefit most from its development. secondly, more countries could be selected for analysis for more accurate results. current research focuses only on opinions of experts, for this reason, the future model could use more statistical data on its. conclusions 1. an analysis of the scientific literature has identified the problems arising in the field of its in the current conditions of globalisation. the difficulties are mainly faced by companies selling its and countries planning to install its. the problems are caused by high competitiveness, migration, insufficient funds for its application and insufficient cooperation with other countries around the world in the implementation and application of its. 2. on the basis of the reviewed scientific works, it was determined that other authors offer to use a multi-criteria evaluation method for the analysis of its development. based on the scientific literature, a list of factors determining the development of its has been compiled. 3. the value of the kendall concordance coefficient w obtained from the expert assessment of the factors determining the development of its in the context of globalisation indicates that the expert opinions are mutually consistent. consequently, the experts have been properly selected and their estimates can be used in further calculations. 4. a completed multi-criteria assessment of the factors of its development using the saw method has identified the countries with the highest and lowest its development potential. with both different and equal coefficients, germany is in the first place, while latvia (when the coefficients are different) and lithuania (when the coefficients are the same) are in the last. 5. the copras method has been used to identify the strongest country in terms of its development. it was found that the country with the most its development opportunities with both different and the same coefficients is germany, and the weakest  – in the first case is latvia, in the second – lithuania. references brondoni,  s.  m. 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https://www.who.int/violence_injury_prevention/road_safety_status/2015/executive_summary_gsrrs2015.pdf https://www.who.int/violence_injury_prevention/road_safety_status/2015/executive_summary_gsrrs2015.pdf this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: asaurbie@walshcollege.edu business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 1: 131–149 https://doi.org/10.3846/bmee.2021.12629 modelling the stakeholder environment and decision process in the u.s. higher education system ann saurbier * management department, walsh college, troy, michigan, u.s.a. received 31 december 2020; accepted 16 january 2021 abstract. purpose  – as higher education continues to be buffeted by challenges, college and university leaders must find a way to respond to these environmental forces. in the united states, accreditation plays an increasing role in the quality control and improvement process. the goal of this research is to gain a deeper understanding of this decision environment, and the stakeholders within that system, such that american higher education institutions may set and achieve goals more effectively. research methodology – grounded theory is utilized to create a conceptual framework depicting the american higher education stakeholder system. in addition to placing the actors within the system, this research is also designed to generate a stakeholder-focused institutional decision process model. findings – when viewed in a systemic context, the accreditation process assumes a unique placement among the other critical stakeholders. with this understanding, higher education leaders may better understand, balance, and integrate the concerns of their various stakeholders, in a stakeholder-focused decision process. research limitations – while integrating multiple theories, to depict the american higher education stakeholder system and a stakeholder-focused decision process, this research does not operationalize or undertake the empirical testing of these theoretical models. practical implications  – the influence of the dynamic external environment and the accreditation process combine to create extremely challenging decision-making conditions for higher education leaders. the ability to improve and balance the quality and ethical nature of decisions that impact their various stakeholders may assist these leaders in more accurately meeting both their institutional goals and the public good goals of higher education. originality/value – this study specifically seeks to integrate multiple theoretical constructs within the american higher education environment and accreditation process. the creation of a theoretical model that depicts not only the stakeholder environment but also a stakeholder-focused decision process may assist all higher education institutions. keywords: higher education, accreditation, quality, stakeholder theory. jel classification: i23. http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 mailto:asaurbie@walshcollege.edu https://doi.org/10.3846/bmee.2021.12629 https://orcid.org/0000-0003-4723-4288 132 a. saurbier. modelling the stakeholder environment and decision process in the u.s. ... introduction the 21st century has created increasingly challenging decision conditions for higher education leaders. in the face of increased globalization, technological change, rising costs, and decreases in governmental subsidization, colleges and universities must still create and deliver a quality education. this complex and dynamic environment has complicated not only the determination of what quality is within the higher education context, but also how that quality is adapted and enhanced in these turbulent conditions. in american post-secondary education, quality has historically been assessed through the accreditation process (young, et al., 1983). initially created to delineate reputable institutions more than a century ago the accreditation process remains “the central means by which quality is maintained and improved in american higher education” (wolff, 1993, p. 91; young et al., 1983). accreditation may be seen as a quality control process when viewed with a business and management theory lens. as such, increasingly the argument has been advanced that business theory and solutions may assist higher education leaders in managing the environmental complexity (hou, 2010). a review of the literature however reveals that where there are benefits, the direct application, or even indirect translation, of these processes to the unique higher education context is more difficult than it seems on the surface. the goal of this study is to integrate systems theory, stakeholder theory, ethical theory and consumer theory within the american higher education environment to more appropriately model the role the accreditation process plays in the quality management decision process. by gaining a deeper understanding of not only who the various stakeholders are, but importantly where the various stakes converge and diverge, higher education decisionmakers may be able to increase the effectiveness and efficiency of decisions related to educational quality. further, within this decision environment, it is critical for higher education leaders to examine their purposes, the likely the courses of actions to be taken to achieve those purposes and the ultimate impact of those decisions on the various stakeholder groups. as a result, the aim of this study is the development of a conceptual framework that integrates stakeholder, systems, ethical, and consumer theory to depict the american higher education stakeholder environment more completely. in addition to placing the actors within the system, this research is also designed to illustrate the stakeholder-focused institutional decision-making framework. grounded theory methodology is utilized to detect emergent themes from the existing literature on each theoretical construct and its application within the american higher education environment. these themes enable the creation of a theoretical model of not only the stakeholder environment, uniquely placing the accreditation process within that system, but also the creation of a stakeholder-focused decision process model. thus, as a result of this research, these newly created theoretical frameworks may assist higher education leaders in both mapping their current stakeholder environments, and in making decisions that not only further the mission, strategy and goals of an individual institution but more importantly assist all institutions in achieving the public good goals of higher education as well. business, management and economics engineering, 2021, 19(1): 131–149 133 1. literature review 1.1. the changing american education and accreditation landscape 1.1.1. higher education the complex and dynamic global landscape possesses unprecedented challenges for higher education. where the external environment of post-secondary education had remained stable, with many elements virtually unchanged since inception, the dramatic pace of change in the late 20th and 21st centuries has presented an entirely new set of circumstances to be managed. in the united states, these challenges include population shifts, employability requirements, technology applications, and a declining perception in the value of a college education. across the next several decades, population shifts, and demographic changes will impact the college-going populace. although the united nations department of economics and social affairs (2015) predicts the population worldwide will to continue to increase, the united states census bureau predicts a decline in the percentage of the population under the age of 18 by 2060 (colby & ortman, 2015). an additional decrease in the working population, aged 18–64 by 2060 is also predicted. the percentage of those currently attending a college or university has already begun to decline, with enrolment in the united stated down 26% since 2010 (education data, 2020). where international migration to the united states is expected to result in an overall net increase to the population by 2060, it is predicted that the majority of the foreign-born population emigrating to the u.s. will be adults. currently, 2.3 million students, or 11% of the 21.8 million students studying in the u.s. are foreign born (education data, 2020). an additional impact of international migration is an increase in the diversity of the american population. a majority/minority cross-over in the racial and ethnic composition of the u.s. population is predicted by 2044, such that by 2060 there will be no single group as a majority (colby & ortman, 2015). in this way, the united states will have become a “plurality” of racial and ethnic groups. this shift in the composition of the united states population also has an impact on what has been in the past viewed as the “traditional” college student, usually aged 18–21. data from the national center for education statistics reveals that currently close to half of the students attending colleges and universities are 25 years old or older (shapiro et  al., 2017). further, almost half are enrolled part-time and dependent on income from their parental households (shapiro et  al., 2017). currently, women make up the majority enrolled in colleges and universities and 35% of students are the first in their families to attend a higher education institution (shapiro et  al., 2017). combined, these demographic factors will significantly impact college enrolment levels, positively in some cases and negatively in others. a further external environmental influence colleges and universities must manage is the shifting demands of employers. these demands, including the desire for graduates to be immediately “job ready”, are becoming increasingly difficult to meet. in these days of rapidly changing technology, colleges and universities are often in the nearly impossible position of training students for jobs that have not yet been created. a 2018 study conducted by the national association of colleges and employers [nace] found marked differences between 134 a. saurbier. modelling the stakeholder environment and decision process in the u.s. ... the perceptions graduates and employers in terms of “career readiness”, with employer giving graduates poor marks in the categories of professionalism/work ethic, oral/written communication, critical thinking/problem solving, leadership, career management and global/ intercultural fluency (nace, 2018). busteed (2019) identified a pew research study that found young adults in the u.s. today (15–21 years old) are substantially less likely to have held a paid summer job before entering college than any previous generation. yet, while employers increasingly require candidates to possess undergraduate or graduate degrees, access to higher education may be seen as a critical component of employability. where advanced education as consistently been found to provide both personal and economic benefits, access to higher education has been negatively impacted by a dramatic increase in its cost (u.s. department of education, 2006). a comparison of the relative increase reveals that where the rate of inflation has risen approximately 115% since 1986, college and university tuition rates have increased by almost 500% over the same period (wadsworth, 2011). this has resulted in a substantial increase in the accumulated student loan debt in the u.s., a total of $1.68 trillion in 2020 (education data, 2020). this total outstanding debt has grown 6 times faster than the national economy leaving the average student holding an average personal debt balance of between $30k and $50k (education data, 2020). this tremendous increase in the overall cost of college attendance has resulted in lower completion rates, with only 57% of students enrolled finishing their degrees within six years (fain, 2017: shapiro et al., 2017). as a result, approximately 30% of the united states population has attained a bachelor’s degree and only 4% hold an advanced degree (huffman, 2009; u.s. bureau of labor statistics, 2012). finally, technological advancement has had a pervasive impact on higher education. computers, audio, and video communication technologies have extended the reach of the traditional classroom, providing far greater access to information than any other time in history. this has supported an increase in the accessibility pathway to higher education for both traditional and non-traditional students. in addition, the application of robotics and other production-based technology has been a driver in the shift from a manufacturing-based economy to a knowledge-based economy, resulting in the demand for a very different type of ‘skilled’ worker in the information age (freeman, 2004; o’neill, 2009; u.s. bureau of labor statistics, 2012). the need to equip knowledge workers with technical skills, but also “softer skills”, such as the ability to think critically and creatively, work collaboratively, embrace complexity, appreciate diversity, and synthesize volumes of information speaks to the need for a more diverse curriculum for 21st century higher education (erickson, 2010; tapscott & williams, 2010). a 2019 review by the society of human resource managers (shrm) found 3 of 4 employees lack soft skills, and more than half of those employers believe the education system have not been able to address this skill shortage (wilkie, 2019). while american sentiments remain high on the perception that post-secondary education prepares individuals for success, many are much less apt to believe that higher education is “worth the cost” (fishman et al., 2017). moguluwa and ewuzie (2013) studied the exchange relationship between the student, as a consumer, and higher education institutions as provider or producer. they found that “consumer’s expectations, desires, needs, and wants are business, management and economics engineering, 2021, 19(1): 131–149 135 the same whether consuming manufactured products or educational services”, and as a result, colleges and universities must “assess and define quality and value … along the consumers’ line” (p. 32). thus, where students do perceive wide and diverse value in higher education, the perceptions of price – in all its forms; total cost, psychic costs, and annoyances – are seen to be out of line (moguluwa & ewuzie, 2013). the interconnected nature of these forces of change, and the difficulty in managing all effectively as well as simultaneously, has led to a decrease in the perceived value of higher education (fishman et al., 2017). as a result, the reductive, siloed, discipline-specific knowledge transmission processes of the past may no longer be sufficient to equip today’s college student for the contemporary challenges and conditions and has increasingly been called into question as an effective business model. this shift in the perceived value, and by extension the quality of higher education, has had a clear impact on the accreditation process as well. 1.1.2. the american accreditation process the origins of the american accreditation process can be traced to the foundational purpose of delineating college-level institutions from schools of all other types (young et  al., 1983). building from this base, the process has evolved over the last century to delineate reputable institutions, facilitate the transfer of coursework between institutions, and establish benchmarks of acceptable performance (harvey, 2003; nettles et  al., 1997). more recently, the preparation of a qualitative self-study enabled accrediting agencies to assist institutions in improving quality, as opposed to merely certifying to a predetermined level of quality (gillen et al., 2010). as a result, currently the accreditation process is one that is both complex and decentralized, having evolved as a system of institutional quality review that is both able to mirror and respect the vast diversity of the of the thousands of unique post-secondary institutions and programs of study (saurbier, 2013). uniquely, in the united states, the accreditation process is voluntary and may be conferred to either an entire institution or to a specific program and may be assigned by a private, a non-profit, a regional or a national accrediting body (saurbier, 2013). it is clear therefore that visible transformations have taken place in the predominant role of the accreditation process. across the last century, the accreditation process has emphasized quality identification, quality improvement, quality assurance, and finally quality assessment and accountability in turn (gillen et  al., 2010). importantly, this transition has not been merely evolutionary, with one goal replacing the next, but rather an additive process, with the current accreditation process having expanded to subsume and enact all previous and current roles and goals (gillen et al., 2010). this additive process has been motivated by the changing conditions, both external and internal, in the higher education industry (gillen et  al., 2010). unfortunately, this process evolution has created conflicting views as well as criticism of what is, and should be, the emphasis of the contemporary accreditation process. the current process is frequently criticized for being complex, bureaucratic, secretive, predominately based on institutional inputs as opposed to outputs, dependent on the volunteer peer reviewers, and consequently generates institutional feedback that meets neither the information needs of the colleges and universities reviewed nor the public (dickeson, 2006; schray, 2006). 136 a. saurbier. modelling the stakeholder environment and decision process in the u.s. ... the use of multiple, regionally based accrediting agencies has also complicated the u.s. accreditation process. by promoting diversity among the nation’s institutions and dispersing the review of these institutions among six distinct review agencies, inconsistency between the regional standards and charges that some standards are more rigorous than others exists (dickeson, 2006; schray, 2006). where the promotion of institutional diversity and independence has historically been a strength of the u.s. accreditation process overall, gillen et  al. (2010) notes this does allow for variety to be introduced into the quality assurance review process, such that the accountability and control goals may be diminished. within the united states system of accreditation, the process is one that has remained independent, non-governmental, and self-regulating (nettles et al., 1997). that status however is increasingly called into question due to the extreme dependence of contemporary colleges and universities on both state and federal funds (schray, 2006). the current outlay of federal funds to higher education exceeds $100 billion on an annual basis (woodhouse, 2015). as a result, schray (2006) indicated that increasingly accreditation is less seen as voluntary and more a “requirement for doing business in higher education” (p. 2). with respect to institutional decisions regarding academic and institutional quality, the multiple and often conflicting purposes of the contemporary accreditation process complicates the accreditation process further (saurbier, 2013). whereas many believe an overriding purpose of accreditation is the improvement of quality in education, the lack of clearly defined performance objectives complicates the accreditors’ ability to provide consistent counsel, promote programmatic diversity and academic freedom, as well as assist individual institution in making decisions that will advance rather than diminish effectiveness (young et al., 1983). as a result, the american accreditation process has in turn emphasized quality identification, quality improvement, quality assurance, as well as quality assessment and accountability (gillen et  al., 2010). importantly, one role has not replaced the other, but rather the evolution has been one that is additive. gillen et  al. (2010) stated where accreditation agencies primarily view their own role as one of providing counsel for quality improvement, many external stakeholders view quality assurance and accountability as the primary roles of the accreditation process. 1.2. education as a public good – or merely good for the public? 1.2.1. public and private goods samuelson (1954) defined public goods as possessing two essential components: nonrivalrous and non-excludable. marginson (2011) clarifies these terms, indicating that a public good, such as the light emanating from a lighthouse, may be consumed by a wide number of people without being diminished (non-rivalrous) and at the same time consumption may not be restricted to a selected set of buyers or consumers (non-excludable). marginson additionally states that many goods meet one but not the other criteria of non-rivalrousness and non-excludability, and those goods that meet neither criteria are considered private goods. business, management and economics engineering, 2021, 19(1): 131–149 137 1.2.2. evaluating higher education as a public or private good the need to educate widely, to achieve both functional and altruistic ends, is seen across history. as a result, formal systems of education have developed, evolved, and played a significant role in shaping and advancing not only societies across time, but also the current processes by which individuals learn. while it is clear there are tremendous benefits associated with universal access and the massification of education, to individuals, nations, and society as a whole, these noble objectives come at a cost. the significant role of nations and governments across time, in both constructing and guiding education, speaks to the higher purposes and broader aims of education. as a result, many view higher education as a public good. there are however substantial differences between the economic definition of a public good and those things that are merely good for the public. the reductive and dichotomous definition of a public good limits the ability to differentiate clearly and cleanly goods that are public or private, education among them. tilak (2008) states that higher education may be seen as a public good, since the provision of education to one does not diminish its provision to others, and individual consumption of education also does not restrict it’s consumption by others. further, tilak indicates that higher education may be seen as producing the public good of newly created knowledge, simultaneously benefiting both the individual and society as a whole. cooper (2017) on the other hand, states, a result of the strict and specific economic considerations, “higher education is unambiguously not a public good”. higher education is excludable, with the requirement to pay tuition, and there is a limit to the scalability of students in a classroom, after which the quality of education will be diminished, impacting the nonrivalrousness (cooper, 2017). using public sidewalks as an example, cooper notes that as a public good, consumers are not charged for their usage or consumption and numerous consumers can take advantage of that good at the same time without adversely affecting others usage or enjoyment, but this argument does not hold for higher education. as a result, what many identify, but incorrectly label, as a public good are the positive externalities of higher education. positive externalities exist when both the consumer and society at large benefit simultaneously from a good. the increases in knowledge, skills, and wages that accrue to the individual benefit society when that student graduates and becomes a productive part of the national economy (cooper, 2017). marginson (2011) as well notes that as a public good, higher education must be viewed in both the contextual and political space it occupies. in context, the impact of globalization, political, social, and technological change may be seen as drivers of the commoditization and marketization of higher education as a good for private sale rather than a public good. williams (2016) concurred noting, “the acquisition and creation of new knowledge is very expensive and those who acquire or create it need to be reimbursed” (p. 131). marginson (2011) also questioned the actual level of “public-ness” or public good of higher education, as it may be diminished by competition-inducing activities such as the published hierarchical institutional ranking systems. as a status-conferring process, these rankings serve to both strengthen an individual institution’s market-based competitive efforts as well as potentially weaken the underlying altruistic motives. 138 a. saurbier. modelling the stakeholder environment and decision process in the u.s. ... finally, where the government’s substantial investment in higher education may enable it to be viewed as a public good, the actual treatment of higher education institutions and their need to be accountable for the receipt of those funds, may also be seen to diminish the public good aspects. as an example, a 2017 survey by the columbia university teachers college on the “public good” of higher education found that 76% of the 3,000 americans surveyed believed that the use of public funds was an excellent or good investment, these returns on that investment were quantified as “personal enrichment and growth, and the wealth and success that a college diploma can bring” (teachers college newsroom, 2017). while this data does support the study’s claim, that where americans generally see the “personal benefits to individuals, such as jobs, salaries or return to individuals on their investment of tuition and lost income,” as well as a general benefit to society for the value of higher education, it is clear that these results speak to the idea that higher education is good for the public  – but does not address the economic definitional considerations of a true public good (teachers college newsroom, 2017). 1.2.3. evaluating accreditation as a public or private good dickeson (2006) noted two distinct categories of purpose for the accreditation process, institutional and public. the institutional purposes of accreditation include assisting individual colleges and universities on an ongoing basis in the processes of planned institutional and programmatic improvement, providing the information necessary to increase the quality of inputs into the organization, and the establishment of a foundation for the equitable, interinstitutional transfer of students and credit hours (dickeson, 2006). the public purposes, however, aim primarily toward consumer protection. in this way, the accreditation process may be seen to accumulate, scrutinize, and communicate information to various stakeholders on the operations of an institution and return on investment metrics (dickeson, 2006). in support of this point, kelderman (2011) stated both the public and policy makers do expect the accreditation process to “serve as a stamp of financial stability; a fire wall against fraud and abuse; a barometer of basic academic performance; and a tool for parents of prospective students to compare the value of different colleges” (p. 1). in addition, as the american accreditation process has worked to achieve the dual and often conflicting purposes of assuring and improving quality, peer reviewers are tasked with both providing recommendations to improve quality as well as provide assurance to the public that the institution complies with all stated accreditation criteria (higher learning commission, 2020). as part of these dual roles, evaluators must determine the specific stakeholders and to and for whom quality should be assessed, improved, controlled, and communicated (saurbier, 2013). as noted, due to the extreme institutional dependence on federal and state funds, accreditation may be seen more as a “requirement for doing business in higher education” (schray, 2006, p. 2). in this way, accreditation itself may be seen as a private good rather than a public good. gillen et al. (2010) stated institutional accreditation across the decades has become a “marketable asset” (p. 3). however, as the process developed to certify, maintain, and advance quality system-wide, it is as clear that accreditation does in fact serve a broader public good. at the national level, business, management and economics engineering, 2021, 19(1): 131–149 139 the accreditation can be seen to meet the definition of a public good. the accreditation of one institution does not diminish that of another and the “consumption” of accreditation by one institution does not limit the ability of any of the six regional accrediting bodies to confer accreditation on another. as a result, the argument for accreditation as a public good may be advanced, however, identifying higher education, and the accreditation process, as a purely public good may not be possible. 1.3. applying management theory to higher education: benefits and difficulties 1.3.1. systems theory while it may not be possible to cleanly qualify higher education or accreditation as a purely public good, there are definite public service benefits associated with education. as servicebased organizations, colleges and universities today are facing increased competition for scarce resources, population declines, and technological advances in online learning. combined, these forces are creating global enrolment rivalry. as a result, higher education institutions are more easily viewed as businesses and applying management theory insights as institutions work to manage the dynamic external environment offers the potential to address these challenges in a more efficient and effective manner (hou, 2010). it is clear that the formerly stable and predictable environment of higher education has been replaced by a more diverse, dynamic, and complex context (davies et  al., 2001; greenfield, 2005). according to davies et al. (2001), universities today must view their missions more broadly, with connections to the marketplace, as opposed to the vision of old, which was merely discovering and transmitting knowledge. senge’s (1990) assertion, that a paradigm shift toward systems thinking enables a more accurate response to environmental complexity and uncertainty, may also be seen to apply equally well to higher education institutions. systems theory is grounded in the contention that organizations interact with their environments (checkland, 1999; kast & rosenweig, 1972; senge, 1990; von bertalanffy, 1969). as a result, higher education, and the american accreditation process, may be seen to serve both boundary-spanning and environmental scanning functions (sambamurthy & subramani, 2005; yip et  al., 2011). consequently, a systems perspective may help higher education leaders to not only gain a better understanding of the macro and micro level issues they must address, but importantly manage the systemic connections between those issues. 1.3.2. stakeholder theory viewing both higher education and the associated accreditation process in a systemic context then requires consideration of all elements associated with the system. by expanding the unit of analysis, from merely the individual college or university organization, to include a broader array of context-specific elements, systems thinking and systems theory provides the setting for a more complete and synthetic assessment of all issues facing an organization and all constituents (ackoff, 1974). in this way, any and all stakeholders, by freeman’s (1984) definition, “any group or individual who can affect, or is affected, by the achievement of an organization’s objectives” may be – and potentially should be – included in the analysis (p. 46). 140 a. saurbier. modelling the stakeholder environment and decision process in the u.s. ... an important component of freeman’s (1984) stakeholder theory, which was created as a response to both the production view of the firm and friedman’s (1962) stockholder perspective, is the moral and ethical implications. according to friedman (1962), “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it … engages in open and free competition, without deception or fraud”. in this way, obeying the law becomes the driving force behind organizational decisions and actions. freeman (1984) however, citing the enormous impact of external environmental change on organizations, disputed this perspective noting, “if you want to manage effectively, then you must take your stakeholders into account in a systemic fashion” (p. 48). as a result, the impact of an organization’s decisions on those both within and outside the organization becomes an important consideration in the decision-making process. building forward from these divergent views, the application of the stakeholder theory’s broader perspective has the ability to assist institutions in accomplishing education’s morally grounded public good objectives. 1.3.3. ethical theory ethical theory generally includes three dimensions: actions  – the processes used to achieve a goal; agents  – those taking action; and ends  – the desired goal or endpoint (wicks et  al., 2010). in all actions, there are decisions, purposes, and consequences. in an organizational setting, wicks et al. (2010) assert the need for a moral foundation to decisions and purposes, in order to achieve favourable consequences for all stakeholders. in this way, moral guidelines drive the considerations of means and ends, allowing the decisions made to be defensible to all stakeholders and less swayed by self-interest, especially in the face of increasing external pressures and demands (wicks et al., 2010). 1.3.4. consumer theory where a clear identification of who the stakeholders to both higher education and accreditation are may seem on the surface to be uncomplicated, a specific classification under freeman’s (1984) model becomes less straightforward. consumer theory states that a rational customer will allocate their scarce resources to achieve maximum utility (koutsoyiannis, 1975). the identification of the “customer” in higher education however is problematic (houston, 2008). where students are most often identified as the customer, they may well be better thought of as the consumer. the customer is generally viewed as the party paying for a product or service, whereas the consumer makes use of the product or service (french, 2015). students, parents, institutions in the form of scholarships, employers in the form of tuition reimbursements, and governments in the form of subsidies or student loans all may fund a student consumer’s educational endeavour. as a result, bailey and bennet (1996) consider a student’s future employer to be the most important customer. this separation of customer and consumer add tremendous complexity in clarifying and classifying those who are, and who are not, the customer. similarly, the classification of the organizational production process elements as inputs, transformation, and outputs in the education space becomes equally problematic. however, combining and adapting both the systems perspective and stakeholder theory to higher education may assist both higher educational institutions and the accreditation process in decisions associated with educational quality. business, management and economics engineering, 2021, 19(1): 131–149 141 2. methodology the goal of this study is the development of a conceptual framework that integrates stakeholder and systems theory to depict the american higher education stakeholder environment more completely. in addition to placing the actors within the system, this research is also designed to illustrate the stakeholder-focused institutional decision-making framework. 2.1. grounded theory to accomplish this research objective, grounded theory is utilized to create a conceptual framework that represents a theoretical system of actors and flows. astalin (2013) notes that qualitative research is “probably the most flexible of the various experimental techniques”, and allows both meaning and theory to “emerge organically from the research context” (p.  118). in grounded theory, rather than beginning the research process “with a predetermined theory in mind, the formulation of theories stem from the data that allows one to explain … [and develop] new theory through the collection and analysis of data about a phenomenon” (p.  121). as a result, this research methodology generates outcomes that extend beyond mere explanation, instead generating new insight that can form the foundation of new theory (astalin, 2013). as grounded theory methodology is deployed to generated new theory through the researcher’s recognition of emergent themes (astalin, 2013), saunders et al. (2015) clarify that new theory goes beyond merely referring to existing theory. instead, grounded theory research should generate a novel but logical case that draws from and extends existing concepts, relationships, and explanations. this research study aims to utilize grounded theory to generate a conceptual framework depicting the american higher education stakeholder system. data in grounded theory research may be obtained from a wide variety of sources. most often interviews with individual subjects are conducted, however, saunders et al. (2015) remind that “observation although literature review and relevant documentary analyses make important contributions” (p. 121). the systematic evaluation of either primary or secondary data allows the researcher to create a reasoned theoretical explanation for the observed phenomenon which can be presented either textually or diagrammatically. in this study, the data utilized include the existing literature on stakeholder, systems, ethical and consumer theory as well as literature on the current state of higher education and the american accreditation process. these existing theoretical constructs are integrated to generate a conceptual framework that not only more accurately depicts the multiple system actors and distinctive context of the overall accreditation process, but also that illustrates the unique role accreditors play as part of the quality decision process. 2.2. modelling the generation of new theory briggs (2007) notes where there is wide acceptance of the practice of modelling with statistical data, the modelling of qualitative data is less prevalent. arguing that the practice is equally powerful when qualitative data are analysed, she further states this technique is an effective methodology in the exploration of a phenomena. as glaser and strauss (1999) state 142 a. saurbier. modelling the stakeholder environment and decision process in the u.s. ... grounded theory methodology, an inductive qualitative research technique, can be utilized to discover theory from systematically obtained data these techniques may be combined to produce a visual representation of a newly discovered theoretical model that portrays the adaptation and integration of existing theories to a new context. this research study is only concerned with the conceptual development phase of the theory building process. designed to produce only an initial theoretical model of the higher education stakeholder environment and a stakeholder-focused quality decision framework, the goals of this study do not seek to operationalize the resultant framework for empirical testing. future research studies may be generated and tasked with both the operationalization of these conceptual frameworks and the production of process knowledge through the framework’s application. 3. results 3.1. a conceptual model of the american higher education stakeholder system as the direct application of stakeholder, systems, ethical and consumer theory individually to american higher education and the accreditation process is problematic, this study employs grounded theory methodology to review the critical literature and develop a conceptual framework that integrates these theoretical constructs. freeman’s (1984) initial graphical depiction of the stakeholder perspective placed the firm at the centre and constituents including customers, consumer advocates, owners, local community organizations, governments, suppliers, environmentalists, employees, management, media, and competitors radiating outward. over time, the image of that stakeholder system has been adapted to include context-specific elements, and in many cases to call stockholders and/or investors out separately. wicks et  al. (2010) adapted this framework to depict those elements within the firm, and those outside, representing an even broader and more systemic view of the involved stakeholders. further, the application of systems theory to higher education requires each individual institution to understand the broader context in which they operate. although not exhaustive, the immediate stakeholders of an american higher education institution may be seen to include the institution’s students and faculty, the immediate community and the graduate’s eventual employers. houston (2008) as well asserts the existence of a wide variety of both individuals and groups who hold a stake the educational process and added the post-secondary education industry, governments, national economic stability, and society in general as higher education stakeholders. using this framework as a foundation, an analysis of the literature on the current higher education environment and the american accreditation process reveals the existence of the following possible stakeholders: institutions, students, employers, faculty, local communities, accreditors, state and federal governments, national economies, the higher education industry, and society overall. where additional specific subsets within each of these major groups exist, this list represents these constituencies at the macro-level. a further review of the literature reveals the following themes as concerns of each of these stakeholder groups (table 1). business, management and economics engineering, 2021, 19(1): 131–149 143 table 1. american higher education stakeholder concerns (source: author’s compilation) students higher education industry – value for price – changing traditional student – part-time college attendance – women attending college – cost of college attendance – student debt loads – access to college – complex and dynamic eternal environment – population and demographic shifts – global migration – access to college for the public good – access to/use of technology for instruction – increasing cost of college attendance employers government – degree requirements for jobs – “job ready” graduates – need for ‘soft-skills’ – knowledge based economy – changing technology – substantial state and federal funds invested – defaults on student loans – accountability to the public for the effective use of funds institutions faculty accreditation national economy – complex and dynamic eternal environment – population and demographic shifts – global migration – access to college for the public good – access to/use of technology for instruction – increasing cost of college attendance – meeting ‘consumer’ expectations – increased use of technology in the classroom – knowledge based economy curriculum demands – demand to train for jobs that do not yet exist – demands to train for soft skills as well as curriculum content – meeting ‘consumer’ expectations – additive evaluation roles – quality identification, improvement, assurance, and accountability – process criticisms – regional standard differences – public good value of accreditation – meeting ‘consumer’ expectations – tech-savvy and job ready workforce needed to advance economic growth – inflationary pressures on the price of college attendance – knowledge based economy – changing technology requirements community society – job ready students needed in the local economy – decreasing demand for traditional college education negatively impacts local economies – job ready students needed in the global economy – knowledgeable citizens needed to participate in and advance society 144 a. saurbier. modelling the stakeholder environment and decision process in the u.s. ... with these higher education stakeholders and their concerns codified, the theoretical constructs associated with existing literature on stakeholder, systems, ethical and consumer theory, related to the current higher education environment and the american accreditation process, may be synthesized and integrated with this data to generate a conceptual framework. the goal of this theoretical framework is to not only more accurately depicts the multiple system actors, and the distinctive context of the overall accreditation process, but also to illustrates the unique role accreditors play as part of the quality decision process. as a stakeholder group, the american higher education accrediting bodies must be seen as a part of this system as they fulfil their function of reviewing and assisting each institution in continuous quality improvement. however, within the larger external higher education industry context these bodies fill a unique, boundary spanning role (saurbier, 2013). consisting of a voluntary corps of peer reviewers, the individual u.s. accreditation evaluators are each part of their own home institution. fulfilling the assessment and accountability auditor role on behalf of the federal government however may be seen to designate these evaluators as agents of the government. further, as an external quality control process, the accreditation evaluation is performed by peer reviews who are placed outside of an individual institution’s system, but within the larger higher education system. as a result, the unique role of the accreditation process and the peer reviewers must be accounted for as a part of the larger american higher education system. figure  1© depicts a conceptual framework of the system that integrates these various american higher education stakeholders. figure 1. conceptual framework of the american higher education stakeholder system © business, management and economics engineering, 2021, 19(1): 131–149 145 3.2. a conceptual model of a stakeholder-focused institutional decision-making process with the stakeholders and their concerns identified, it is important for leaders of higher education institutions to determine where these concerns align and diverge as they contemplate decisions related to educational quality. in this action, higher education institutions must examine the ethical imperatives of ends, means, and actions. with their stakeholders and the concerns of each in mind, wicks et al. (2010) pose the following questions to be considered across all stakeholders and stakeholder groups: – which purposes are most important, to which stakeholders, and are there any clear priorities? – which actions will best serve the critical purposes of the firm? – will any stakeholders be harmed, feel negatively affected, or seek to hurt the firm in response? – can natural alliances – positive or negative – be developed among stakeholders? – are there alternative courses of action that would both meet organizational objectives and assist key stakeholders? (pp. 13–14). the address of these questions generates the information necessary to consider not only the systemic impacts of the decisions facing an institution, but also embeds the stakeholder concept into the strategic management process of the organization. in this way, institution-level decisions relating to educational quality may be made giving consideration to not only the institution’s unique individual context, mission, and public good aims, but also the impact that those decisions may have on the array of institutional stakeholders. synthesizing these elements, a conceptual framework that integrated not only the systems and stakeholder theories, but prominently depicts the three dimensions of ethical theory – actions, agents, and ends, but also the decisions, purposes, and consequences embedded within the actions may be created (wicks et  al., 2010). by overtly giving prominence to the moral foundation of the decisions and purposes, favourable consequences for all stakeholders may be achieved. in this way, moral guidelines drive the considerations of means and ends, allowing the decisions made to be defensible to all stakeholders and less swayed by self-interest, especially in the face of increasing external pressures and demands (wicks et al., 2010). figure 2© depicts a conceptual framework that integrated these elements as a part of a stakeholder-focused institutional decision-making process. figure 2. conceptual framework of a stakeholder-focused institutional decision-making process © 146 a. saurbier. modelling the stakeholder environment and decision process in the u.s. ... rather than uniquely applicable to higher education institutions, this morally grounded stakeholder focus can be applied to the american accreditation process. at the national level, the accrediting bodies may integrate not only the individual institutional concerns, but also the concerns of their multiple, and often conflicting objectives of quality identification, improvement, assurance, and accountability, as they seek to meet the institutional and public good aims simultaneously (gillen et al., 2010). conclusions the potential for selected business and management theory-based solutions, to assist not only higher education institutions but also the accreditation process designed to determine and advance quality is clear, but not straightforward. the unique context of higher education necessitates the adaptation of both theory and practice to create an appropriate response to the challenges these institutions face. where, on the surface, the american system of higher education may appear to be a simple and relatively stable system, this appearance of order and predictability may be misleading. as a complex and dynamic system, involving numerous elements, interacting in a nonlinear fashion, and without clear cause-and-effect relationships, the failure to appreciate the unique qualities differentiating education from businesses will result in the enactment of inappropriate solutions to many problems, the management of quality within the system among them. the construction of a new model, one that integrates applicable business and ethical theory, to more effectively model both the unique stakeholder environment and the stakeholder-connected decision processes within the american higher education accreditation process may assist both institutions and the regional accrediting bodies in better managing the complex environment and its associated challenges. in addition, this model may also help both address the moral and ethical aims of ensuring access to, and quality within, higher education. finally, the interdisciplinary framework presented outlines the architecture of a comprehensive, stakeholder-inclusive approach that may lead to the realignment the american higher education accreditation process, such that quality of the member institutions is determined, assessed, reported, and advanced more efficiently and effectively. as this study was only concerned with the conceptual development of this model, this research is limited by the fact that this theoretical model has not yet been operationalized to empirically test its efficacy. presented with a conceptual model, further research may continue to explore and expand on this framework. disclosure statement no monetary or other competing financial, professional, or personal interests from other parties were a part of this study. business, management and economics engineering, 2021, 19(1): 131–149 147 references ackoff, r. 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https://www.insidehighered.com/news/2015/06/12/study-us-higher-education-receives-more-federal-state-governments https://www.insidehighered.com/news/2015/06/12/study-us-higher-education-receives-more-federal-state-governments http://www.ccl.org/leadership/pdf/research/boundaryspanningleadership.pdf copyright © 2019 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. business, management and education issn 2029-7491 / eissn 2029-6169 2019 volume 17 issue 2: 173–193 https://doi.org/10.3846/bme.2019.10379 *corresponding author. e-mail: hafeeziqra@yahoo.com impact of workplace environment on employee performance: mediating role of employee health iqra hafeez1, 2 *, zhu yingjun1 , saba hafeez1, rafiq mansoor1 , khaliq ur rehman3  1school of management, huazhong university of science and technology, wuhan china 2comsats university, islamabad, pakistan 3school of management, wuhan university of technology, wuhan china received 24 may 2019; accepted 05 august 2019 abstract. purpose  – purpose of current study is to explore, impact of workplace environment i.e physical environmental factors and behavioral environmental factors on employee productivity (ep) through mediating role of employee health (eh). research methodology  – this study adopted questionnaire survey method and data was collected from 250 employees working in software houses in pakistan. data has been analysed using spss and amos software. reliability and correlation analysis was performed by using spss while; path analysis was performed using amos. findings  – results revealed that one unit variance in pef incorporates 35% change in eh, 33% change in eh is caused by one unit increase in bef and one unit increase in eh leads to 80% increase in ep. physical and behavioural environmental factors are positively affecting eh and eh is positivity affecting ep. results of the study revealed that: employee health is mediating the relationship between workplace environment factors and employee performance. research limitations – we used working environment factors to determine employee health; future studies can consider compensation practices, insurance plans and health benefits by the organisation, a large sample or increased number of mediating variables can be used. the current study has adopted cross-sectional design while future studies can consider longitudinal design. practical implications – organisations must maintain a better environment in order to enhance employee productivity as, employee performance and workplace environment have direct and positive relationship, employees productivity and physical as well as behavioural environment are linked through employee health. originality/value  – however, most of the previous studies in this field only highlighted positive dynamic indicators of these indicators and neglected the quantitative changes, the current study is an attempt to obtain a quantitative measure of responses in the given context. keywords: physical environment factors (pef), behavioural environment factors (bef), employee health (eh), employee performance (ep), and it industry. jel classification: i12, j81, k32, m10. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bme.2019.10379 https://orcid.org/0000-0002-0985-1720 https://orcid.org/0000-0002-6518-3560 174 i. hafeez et al. impact of workplace environment on employee performance: mediating role... introduction in a typical working environment, significant components are physical and behavioural constituents. elements which are associated with employee’s aptitudes to attach physically with the office environment are called as physical environment. while the office occupier etiquettes with each other are interconnected through the behavioural environmental components. office environment positively affects the behaviour of individual employees. thus, the excellence of working environment act as an essential function in determining the level of employee and worker motivation, productivity, and performance (sharma, dhar, & tyagi, 2016). how well employees are affiliated to an organisation, affects how employees behave within an organization settings including: their motivation level, innovative behavior, abseenteesm, interaction with other employees and job retention. employee productivity is the most significant interest nowadays, and it is affected by the working environment in many ways (mwendwa, mcauliffe, uduma, masanja, & mollel, 2017). it can play a positive or negative role depending on prevailing physical conditions in the working environment. in developing countries, most of the workplace environment in industries is insecure and harmful. healthy and safe working environment can take a very central role in increasing productivity; unfortunately, most of the employers consider it as an extra cost and do not spend much on maintaining comfortable working environment (thobaben & woodward, 1996). furniture design, ventilation, noise, light, supervisor support, workspace, communication, fire safety measures affect employee productivity (eberendu, akpan, ubani, & ahaiwe, 2018). software houses are the companies, where main workings are related to computer or mobile applications designing and development. software development requires highly skilled employees with technical expertise in understanding the requirements. the world leading software organisations include microsoft, hp, apple, and oracle corporation, which develops software and distribute worldwide. there are also a lot of international and local software organisations as well. as a rising group software houses engineers, developers perform the crucial role in the new technological industry, so they need to have a working place with open decision-making environments where they have a prosperous role in decisions (kaur & sood, 2015). on behalf of the business dictionary, work environment and all its surrounding which influence the employees in the working position, and it primarily means working condition, which has two main components: physical environment and behavioural environment. a well-structured and grand organisation looks after and maintains the needs of their employees. vigorous workers in grand organisations achieve peak performance and maintain the organisation value (kiyatkin & baum, 2012). employees are working in insecure and unhealthy environment pretentious occupational disease due to the negative influences of the environment on their performance, which affects the overall productivity of the organization (chandrasekar, 2011). employees are facing grave environmental troubles in their related workplace, especially in the software industry, which causes complexity in supplying essential amenities to ameliorate their level of performance. in a recent study, we have evaluated the performance of software houses employees of pakistan in the existence of such workplace physical and behavioural environmental factors. the consequence of chosen factors has been tested on their physical health condition that eventubusiness, management and education, 2019, 17(2): 173–193 175 ally influence their performance. thus the primary goal of the research is to investigate the components of working and behavioural environment which have influences on employee performance and to understand impact of both working environment and behavioural factors, on employee health in it industry. this research has also evaluated the employee health impact on workers performance. however, in most previous works on this topic, only the fact of the positive dynamics of these indicators is noted, but not their quantitative changes. the novelty of the article under consideration is an attempt to obtain a quantitative measure of responses. in major cities of pakistan, especially islamabad and rawalpindi, there are many familiar software houses. mostly the environment of these software houses play an imperative role in determining employee performance. this study has followed the working condition defined as the work-place environment and has set terms, and conditions characteristics of the employees which are associated to employees (samaranayake & gamage, 2012). in 2002 software industry under the ministry of broadcasting and information emerged. available statistic up to 2007 illustrates that there were total 11,000 professionals of it and 1,105 registered number of software houses. in 2006, the country was taken economic benefit up-to us $1050 million from it services while the local it industry reached revenue up to us$ 1,150m and the returns from business process outsourcing (bpo) was us $1,200m (raheem et al., 2014). as per entire valuables statistical figures (kaur & sood, 2015), the entire information technology (it) and information technology enabled services (ites) diligence per year, producing revenue of about us$ 2 billion. in 1996 the first time after introducing the internet, the software market grown up at very rapid pace and became one of the improvement factors in pakistan it industry. besides, for the establishment of it industry, organisation of pakistan software export board (pseb) established in 1995 and pakistan software houses association was started in 1992 (hasan, moin, & pasha, 2019). while in march 1997, the sandit (software and information) was declared as a separate industry which has played an important role in advancement of the of it industry in pakistan. in 2017 the undocumented it export of pakistan was about up to little over $ 2.8 billion. main objectivesof the proposed study are: to explore what are the componenets of physical components of working environment and what are it’s behavioural components; to study the effect of physical and behavioural environment factors on employee health; to find the relationship between consequences of working environment and employee performance; to examine the moderating role of employee health on the relationship of workplace environment and employee performance; and to develop scale for measuring consequences of interrelationship between employee working environment and their employee performance. 1. literature review workplace environment: workplace environment is an important component of work life for employees as employees spend significant part of their time at work, and it affects them in one way or the other. it is concluded that the employees who are satisfied from their work environment can lead towards more positive work outcomes (kamarulzaman, saleh, hashim, hashim, & abdul-ghani, 2011). previous researchers found that, several environmental 176 i. hafeez et al. impact of workplace environment on employee performance: mediating role... factors such as noise, colour, temperature, workplace design and use of indoor plants influence employee performance and well-being. they also have suggested that future researches can be carried on the relationship using working environment and employee productivity. they also suggested that comparative studies can be conducted between the office environment of government and private offices. they found that working environment is essential, as in a comfortable environment employee can focus on their job correctly, and it leads to a better employee performance, which leads to improved organisational productivity (kamarulzaman et al., 2011). an environment that focuses people and has stirred them to be in its workforce, provide them the prospect to perform efficiently, is called attractive environment or supportive environment and it helps to produce recruitment and keep on in occupation (awan & tahir, 2015). attractive work atmosphere and supportive environment give increase to the circumstances in which employees put together their preeminent use of skills, competences, and knowledge to execute efficiently. organisations sould invest more in providing quality services to the customers (mbembati, mwangu, muhondwa, & leshabari, 2008). modern workplaces of it and software houses physical environment is surrounded by computers, printer, machines, and different types of machines. due to constant interaction with technology, an employee’s brain is filled with sensor information. in an organisation, it is made sure that there has a conduciveness of physical environment according to organisation requirements for facilitating informality, privacy, crosses disciplinarily, familiarity, and communication: these factors motivate employees to achieve higher level of organizational commitment, that ultimalely leads the organization towards improved performance (iqbal, 2008). employee performance: employees within an organization can be motivated in different ways in order to get maximum output and productivity, these rewards can be intrinsic or extrinsic. internal rewards are usually for accomplishing challenging assignments, and internal rewards are given for accomplishing challenging assignments, and external rewards cover honorable recognition or sophisticated compensation (chandrasekar, 2011). motivating employees for goal setting is another essential tool (goerg, 2015). this form of employee motivation eventually improves their performance and enhances the productivity level of the organisations. there are two primary purposes of goal setting, one is to improve the individual’s behaviour, and second is to motivate them at a high level further that they perform well with effectiveness. the specific goal is more effective than generalised goals. furthermore, high performance is achieved through challenging goals as compared to an easy goal. with acceptance,practical goals, existences encourage and open communication (joshi & sarda, 2011). another essential component of the behavioural factor is attitude and organisational justice. prior researches have demonstrated the three most crucial eminent dimension of the organisation. first, one called interaction justice is defined as justice between the employees and communication way of the employee to each other in work time, politeness, respect, and dignity have defined the different degree of treatment with each other. second called procedural justice concerning the fairness making in the decision taken. the last one is distribution justice, regarding perceived fairness in rewards and costs sharing among the team members in connections of equity and equality (chotikamankong, 2019; vimalanathan & babu, 2013). business, management and education, 2019, 17(2): 173–193 177 workplace environment and productivity: based on previous researches, it can be determined that in the organisation, the working environment is significant and has a high impact on employees with different aspects. if organisation environment doesnot attract the employees and they have a negative perception of different workplace environment elements like absenteeism, performance, stress-related illness, and productivity, then eventually their obligation has reduced to a low level which in turn affects the organisation productivity and augmentations (cottini & ghinetti, 2012). however, if the organisation environment is friendly, safe, and trusted, it impacts employees positively and their performance, creativity, productivity, commitment, and financial health drive high, which also influences the organisation augmentations. hence, bhatti (2018); mattson, melder, and horowitz (2016), illustrated that the environment of the workplace had enhanced consequences by motivating employees. physical and behavioural environment factors: the office environment has been defined in two main categories, i.e. physical and behavioural environment. work of various researchers and their consequences are given in the subsequent paragraphs. gunaseelan and ollukkaran (2012) worked on manufacturing sector and found that components of working environment affects employee performance. they took employee performance as the dependent variable and other factors like an interpersonal relationship, monetary benefits, employee welfare, safety, security and training and development, formalisation and standardisation, participative management, objective and rationality, supervision, and scope of advancement as independent variables. they used a random method of sampling for selecting of target respondent. from 100 employees, primary data was collected using 5 points likert scale questionnaires, and percentage analysis was applied. the analysis concluded that employees are less attracted to place more efforts for enhancing productivity without the appropriate prospect of promotion in the organisation. further, the results revealed that other factors like a safe working environment, monetary packages, and the impact of rewards, training facility, recognitions, and job security have positively influenced employee’s performance. naharuddin and sadegi (2013) found in their research that the workplace environment significantly impacts the performance of the employees. they used survey-based data collection method from 139 employees and revealed that supervisor behaviour is not enough for the improvement of employe, a well-organised workplace physical environment and additional benefits including different kinds of job aids significantly influence employee performance. naharuddin and sadegi (2013) studied the interrelationship between job performance, job aids and physical working environment and supervisor support. they used the stratified random sampling technique and picked different employees from numerous departments and levels of the organisation including: head quarters, tooling plant and stamping plant. data from 139 participants among, 200 was collected and regression analysis was performed for testing three aforementioned measured variables. the analysis results of beta, negative relationship was found between the supervisor support and the employee performance, which showed that there was not much significant effect of supervisor on employees. leblebici (2012) conducted their research on a foreign bank in turkey and analyzed the working environment conditions in relation to employee productivity, they carried out their research using secondary data. workplace environment consists of physical 178 i. hafeez et al. impact of workplace environment on employee performance: mediating role... and behavioral environmental factors. they considered physical components consisting of: natural light, cleanliness, ventilation, heating/cooling facilities, comfortable working environment, informal meeting area, office layout, working desk/ area and general and personal storage space. behavioural components included: creative physical environment, distraction, social interaction and office layout in terms of ease of working. they found that healthy behavioural workplace condition yields positive consequences on employees even if physical environmental conditions are unfavourable, another finding of the study was: behavioural components of working environment affect employee performance more significantly than physical components. haynes (2008a) argued that organization productivity can be improved 5% to 10% by upgrading physical design of workplace, this increased organizational performance is actualy a result of enhanced employee performance. a number of researches have been conducted on the investigation of effects of physical environment on employee participation towords work, employee performance and loyality towards organization. samaranayake and gamage (2012) found that positive correlation exists between job satisfaction and personal judgement of effectiveness with reference to perceived relevance to work employee health: kelloway, weigand, mckee, and das (2013) have a focus on working related health issues to software developer professionals of india and usa and resulted that factors like rest break time, working hours, and exercise is the main issues that influence the health of employees. they further revealed that the most crucial health problems faced by employees in both india and the usa are eye strain, headache, general fatigue, and back pain. shahzad, iqbal, and gulzar (2013) in a survey-based research study, analysed how organisational culture affects employees work performance. they conducted their study on different software houses in pakistan. they carried out their research by collecting primary data on organizational culture by using five aspects of organizational culture including: innovation and risk taking, customer services, reward systems, communication systems and employee participation. they analysed the data by performing correlation and regression analysis. spss software was used for data analysis, sample size was 110. results of the study revealed that there is positive relationship between organizational culture and employee performance and there exists positive relation between job performance and working environment. study also revealed that, employee commitment and participations leads towards enhanced organizational performance (shahzad, iqbal, & gulzar, 2013). a summary of the literature review has been given in table 1: ecological systems theory: ecological systems theory also known as person-in-environment theory states that:an individual in a specific environment hasa vibrant relationship with their social, physical and natural environment (barnett & gareis, 2006) and this theory also suggests that work and life are interconnected, one part has its effect on the other part in terms of processes, time, context and time characteristics (grzywacz & bass, 2003). social exchange theory: motivational process in organisations is carried out with the help of different social exchanges (cook, cheshire, & gerbasi, 2006) social exchange theory (emerson, 1976) support from managers builds employee trust and as a result employees will be motivated which helps in developing positive attitude towards work and employee commitment level is enhanced as a result of which performance is enhanced. first-line managers business, management and education, 2019, 17(2): 173–193 179 table 1. aanalysis of existing literature author year target methodology conclusion (gunaseelan & ollukkaran, 2012) investigated working environment factors which influence employee performance – sample size (100) – random sampling – 5 points likert scale – data collected through questionnaire – adequate promotion opportunity influence performance of employees – factors, i.e. job security, facility of training, monetary packages, rewards and safe condition of working also influence employee performance (naharuddin & sadegi, 2013) examined the impact of factors of workplace environment on performance of employees – sample 139 – data collected through questionnaire – data analysis using spss – no significant impact of supervisor support was found on employees performance – physical environment factors and job aid have significant influence on performance. (imran, fatima, zaheer, yousaf, & batool, 2012) working environment, trans-formational leadership – sample 215, – data collected using questionnaire – data analysis spss – the conclusion resulted that work environment and transformational leadership have significantly positive impact on employee performance. (mokaya, musau, wagoki, & karanja, 2013) focuses on kenya hotel industry and have checked the influence of working conditions on job satisfaction – explanatory resaech – stratified sample (n = 84) – survey method – data analysis using spss – for improving employees working skill, there must have development provision and opportunities for training from management to employees. (mcguire & mclaren, 2009) physical environment have impact on employee commitment – sample size (65) – data collection tool questionnaire – data analysis – spss – the study determined that for increasing the employee’s commitment, with other physical environment working factors employees wellbeing needs to be measured (shahzad et al., 2013) cultural influence on employee performance – sample size (110) – data collection through questionnaire – data analysis using – spss – organisation culture has significantly affects employee performance. (leblebici, 2012) explored the workplace condition’s impact on employee performance – questionnire was used for data collection – sample size (50) – the study result revealed that unhappy employees due to the environment of work, have not better remarkable satisfactory results. 180 i. hafeez et al. impact of workplace environment on employee performance: mediating role... usually manage human resources; they manage human recourses with the ultimate objective of attaining organisational performance. social exchange is a process between organisation and employees in which organisation values employee contribution and provide them with the necessary care and makes sure that their well-being level is achieved (eisenberger, fasolo, & davis-lamastro, 1990). 2. research methodology while exploring the element of job satisfaction, working environment again becomes a crucial factor. there are many elements of the workplace, including person-job fit, supervisor support, incentive plan, workload, training and development, which are considered as contributing factors (raziq & maulabakhsh, 2015). a mixed-method study was initially done by a descriptive cross-sectional with survey pursued through a qualitative approach, and it was found that there are many factors including work pressure, working teams absence, social support, erudition of employee, safety, recognition were concluded as significant factors and work environment resulted as the main causative factor towards job satisfaction between the health employees (aziz, kumar, rathore, & lal, 2015; fadlallh, 2015). chandrasekar (2011) have studied the working environment by considering various types of public sector organisations. in their research, they have a focus on employee level of performance in an interactive work environment of the organisation. they divided the organisation types into three different categories, engineering category, administration category, and shop floor category. data were collected from 285 understudy employees by stratified random sampling method. analysis results that they recognised seven factors which affect employee’s attitude towards works at the workplace. according to their results, the first factor is emotional factors which have a high impact on the attitude of employees towards working environment, the others were an interpersonal relationship, job assignment, control over the environment, extensive work, shift, and the less effective one is above time duty. they further found that second category which affects employee performance is workplace physical aspect, like, office space, furniture’s, materials and storages, and the last one, the working place interior space. the overall conclusion of their research resulted that to drive the employee’s performance at peak, managers and supervisor should consider all aspects of the critical factors at work. based on the literature hypothesis 1 of the study will be: hypotheses of the study: the current study contains and tested the following hypothesis, which has derived from the previous literature and is also justified in the literature review. h1: physical factors of the workplace environment are positively associated with employee health. to improve the performance of the employees for getting better commitment and results, assurance of the adequate facilities must be provided to employees. it results that at the workplace due to the harmful physical environment and inadequate equipment leaves terrible effects on employee’s commitment and staying with the organisation for a long time due to affecting job satisfaction of employees and fairness perception in the organisation for employee’s compensation. the conviction that works settings design, innovations and creativity have stronger influences on businesses and organisations improvement. hedge business, management and education, 2019, 17(2): 173–193 181 (1982) concluded that an open work environment creates more significant team interaction by providing a high level of flexibility due to the easiness of communication and access to interpersonal work sharing as compared to closed and reserved offices. the glowing working environments have helped in the collaboration among the staff member and higher productivity of the organisation, as well as with increased positive attitude towards job and job satisfaction (dozie ilozor, love, & treloar, 2002). employee performance is also improved by taking participation in organisational decision-making processes. different training and development programs also help the employee for creating new innovative ideas through which they are involved in the new methods of experimentation. according to (gunaseelan & ollukkaran, 2012) employee’s performance is improved by paying them according to their expertise and experience. hypothesis 2 is given as: h2: behavioural factors of workplace environment are positively associated with employee health. das (2012) explored and discussed the prominent health related issues commonly faced by software developers during their professional field. recent studies described the factors badly affecting the developers health, common factors are tea breaks, gym classes for exercise etc. because the study was related to sub-continent so more than 60 developers from different sub-continent countries were selected and the observations show that the most common issues in developer’s health are eye strain, fatigue and backbone pain. similarly recent studies show that blood pressure, cholesterol and diabetes are having not much concern at this point of time. from the recent studies it is very clear that number of overlapping of symptoms in health related issues (gorin, badr, krebs, & das, 2012). based on the literature on employee health and productivity hypothesis 3 of the study is driven as under: h3: employee’s health positively influences employee performance. shahzad (2014) studied the impact of organisational culture on the work performance of software houses in pakistan. the author has focused on five various aspects of the reward system, innovation, employee contribution and communication system, customer services, and risk in organisational culture. they found that the performance of employees have a positive relationship with organisational culture and especially with the organisational environment. they further revealed that employee participation and commitment play a vital role in enhancing organisational performance. samaranayake and gamage (2012) have worked on the perception of employees associated with electronic monitoring of employees in the working environment and their influences on job satisfaction of software houses employees in sri lanka. they concluded a positive correlation of individual judgment of effectiveness with perceived significance to work and job satisfaction. hypothesis 4 and 5 are given below: h4: employee health mediates the relationship between physical environmental factors and employee performance. h5: employee health mediates the relationship between behavioural environmental factors and employee performance. current research is survey-based and has used primary data; formal, informal form of interview and questionnaire are used for the collection of data. for research, both environmental factors, physical and behavioural are considered with employee’s health condition, and employees work performance. the sample size of data is 250, and by using spps25 182 i. hafeez et al. impact of workplace environment on employee performance: mediating role... and amos software, the correlation and regression method and path analysis are used for analysis. research model: this research work has focused on the relationship between the working environment and employee performance. the study based on the relationship among the working environment and the performance of employee. we took two main factors of working environment; the 1st factor that we considered is physical location in which (office lights, surroundings of office building, sitting arrangements of employee in office) and the 2nd factor behavioral (tea time environment, over time bonuses etc) in this study we calculated the effect of these factors on the developers life by gathering data from different software houses of pakistan. the framework of the research is depicted in figure 1 given above. research design: self administered structured questionnaires have been used to collect quantitative data. the unit of analysis was employees in software houses in rawalpindi and islamabad. it is a cross-sectional study. a sample of 250 employees from software houses was selected following a systematic random sampling technique. data collection: a questionnaire-based survey has been adapted for collection of data. the questionnaire was in english and translated to urdu and then again translated back to english with different three independent professional translators to ensure consistency (hui & triandis, 1985). the survey has been conducted through a self-administrative method from different software houses in rawalpindi and islamabad. personally administered questionnaire technique was used to achieve maximum response. for analysis, spss software was used while for verification of the model path analysis (sem) method in amos has been used. 3. results reliability analysis: before conducting actual data analysis, reliability analysis was performed by collecting data from fifty respondents. results of the reliability analysis were significant (table 2). according to hair, ringle, and sarstedt (2011) instrument is considered as reliable if it achieves the value of 0.70. all values fall in acceptance range and hence the study fulfils cleanliness seating light noise physical environmental factors lunch & friendly environment involuntary over employee health behavioral environmental factors employee productivity figure 1. proposed research model business, management and education, 2019, 17(2): 173–193 183 reliability criteria. a pilot study is very crucial as it identifies a potential problem in the data before doing actual analysing and getting final results. for scale reliability, cronbach’s alpha has been used. cronbach’s alpha is termed as a coefficient of internal consistency, and it is used to measure scale reliability. it is not considered a statistical test however, its results are used as a measure for scale reliability or internal consistency. if the value of cronbach’s alpha is less than 0.6, it is considered less reliable. if the vale is between 0.6–0.8, it s considered as moderately reliable and if it is between 0.8–1. in the current study, the sample size is 237. all four variables were used in reliability analysis. physical environmental factors (pef) consists of 16 items, and its cronbach’s (alpha) value is 0.972. behavioural factors (bf) contains six items, and cronbach’s (alpha) is 0.937. employee health (eh) having seven items and cronbach’s (alpha) value is 0.958. employee performance having seven items and cronbach’s (alpha) value is 0.904. it is confirmed that the instrument is highly reliable with all the variables having reliability values over 0.8. table 2. reliability statistics variable items cronbach’s alpha(pilot study) cronbach’s alpha (actual study) physical environmental factors 16 0.701 0.972 behavioural factors 6 0.732 0.937 employee’s health 7 0.755 0.958 employees performance 6 0.719 0.904 correlation: in the current study, pearson’s correlation has been applied as data was interval scale data. pearson’s correlation is defined as the covariance of two variables divided by the product of their standard deviations. correlation values are given in table 3. value of coefficient of pearson’s correlation between behavioural factors (bf) and physical environmental factors (pef) is 0.130, and this value is significant at p  = 0.05. between employee health (eh) and behavioural factors (bf), it is 0.382, and it is significant at p = 0.000. pearson’s correlation value for employee performance (ep) and behavioural factors (bf) is 0.331, and the results are significant at p = 0.000. correlation value between physical environment factors (pef) and employee health (eh) is 0.404 and is significant at p = 0.000. correlation between physical environmental factors (pef) and employee performance (ep) is 0.342, and it is significant at p  = 0.000 level of significance and correlation between employee health (eh), and employee performance (ep) is 0.815, and it is significant at p = 0.000. table 3. correlations behavioural factors physical environmental factors employees’ health physical environmental factors 0.130* 1 employees’ health 0.382** 0.404** 1 employees’ performance 0.331** 0.342** 0.815** *. correlation is significant at the 0.05 level (2-tailed) **. correlation is significant at the 0.01 level (2-tailed). 184 i. hafeez et al. impact of workplace environment on employee performance: mediating role... path analysis: as discussed earlier spss has been used for fundamental analysis and model has been tested using amos-22 and path analysis (sem) has been applied. path analysis is a technique used for multivariate analysis for testing the relationship among variables. it is also considered as a part of regression analysis and a part of structural equation modelling. figure 2 explains the relationship of variables via path analysis. in the current model value of chi-square is 10.721 and df is 6 while probability is 0.097. value of chi-square is crucial in the model, and the small value indicates that the proposed model/ theory arecorrect. the acceptable ratio of fit between chi-square and the degree of freedom is 3:1. in the current model, the minimum value of chi-square is 4.511 with probability = 0.211 and with degrees of freedom = 3. model fit summary. summary of model fit is given in table 4. table 4. model fit summary model npar cmin df p cmin/df default model 11 4.511 3 0.211 1.504 saturated model 14 0.000 0 independence model 8 337.155 6 0.000 56.192 values of degree of freedom 3 and p = 0.211 exhibit that results current model proved the goodness of fit. the current study is a structural equation modeling technique with multivariate data analysis, in this kind of studies if the value of p is insignificant, it is considered as a good fit, unlike other multivariate techniques. the acceptable range for the value of cmin/df is 1 to 3. results show that the value of cmin/df is 1.504, and it lies in an acceptable range and signifies the goodness of fit and cmin corresponds to chi-square value, which is 4.511. table 5. baseline comparisons model nfiδ11 rfiρ1 ifiδ12 tliρ2 cfi default model 0.987 0.973 0.995 0.991 0.995 saturated model 1.000 1.000 1.000 independence model 0.000 0.000 0.000 0.000 0.000 figure 2. path analysis of proposed model business, management and education, 2019, 17(2): 173–193 185 for checking the goodness of fit, we applied normed fit index (nfi), rfi, incremental fit index (ifi) tucker-lewis fit index (tli) and comparative fit index (cfi). it can be observed from table 5 that the value of normed fit index (nfi) 0.987 which is greater than the recommended value of 0.9, rfi value is 0.973, and its recommended value is 0.9 (bentler & bonett, 1980). incremental fit index (ifi) value is 0.995. according to bentler and bonett (1980) cut off criteria for ifi index is 0.95. tucker lewis fit (tli) index results show its value is 0.991 according to criteria its value should be closer to 1 for a better-fitted model (tucker & lewis, 1973). all the above results are falling in an acceptable range, and it can be concluded that the goodness of fit shows that the proposed model is a good fit. pnfi and pcfi are proximity adjusted measures there is 0.493 and 0.498, and its recommended value is 0.5, actual and recommended values are very close again. details are given in table 6. table 6. parsimony-adjusted measures model pratio pnfi pcfi rmsea lo 90 hi 90 pclose default model 0.500 0.493 0.498 0.046 0.000 0.127 0.432 saturated model 0.000 0.000 0.000 0.000 0.000 0.000 0.000 independence model 1.000 0.000 0.000 0.484 0.440 0.528 0.000 root mean square error of approximation (rmsea) is another widely used measure of absolute fit. for the goodness of fit, its value lies between 0.03 and 0.08. in the current study rmsea value is 0.046, given in table 6 which indicates that the model is a good fit. table 7. regression weights estimate standardized estimate s.e c.r p eh <— pef 0.347 0.367 0.053 6.504 *** eh <— bf 0.328 0.341 0.054 6.046 *** ep <— eh 0.796 0.810 0.038 21.230 *** table 7 shows that value of the coefficient of regression for physical environmental factors (pef) and employee health (eh) is 0.347 at p = 0.00, and it is considered as significant while standardized estimate is 0.367. the values show that there is a positive and significant relationship between physical environmental factors (pef) and employee health (eh) hence, h1 is accepted. regression coefficient value between behavioural factors (bf) and employee health (eh) is 0.328, p = 0.000, and it is significant. the standardised estimate is 0.341. it means that a positive and significant relationship exists between physical environmental factors (pef) and employee health (eh) and h2 is accepted. regression coefficient between employee health (eh) and employee productivity (ep) is 0.796 at p = 0.00 while the standardised estimate is 0.810 which is also significant and indicates that there is a positive and significant relationship between employee health (eh) and employee productivity (ep) and h3 is also accepted. the goodness of fit of has exhibited that employee health (eh) play mediating role between physical environmental factors (pef) and employees performance 186 i. hafeez et al. impact of workplace environment on employee performance: mediating role... (ep) and also between behavioural factors (bf) and employee performance (ep) hence, h4 and h5 are accepted. path analysis findings show that all five hypotheses of the study are accepted. table 8. intercepts: (default model) estimate s.e c.r p eh 1.515 0.274 5.526 *** ep 0.485 0.150 6.046 0.001 intercept or constant value for eh is 1.515, and for ep, it is 0.485 (table  8). according to hair et al. (2011), covariance value should be zero between two independent variables. in table number 9 we can see the value of covariance between pef and bf is 0.000. table 9. total, direct and indirect effects bf standardized bf pef standardized pef eh standardized eh eh 0.328 0.341 0.347 0.367 0 0 ep 0.261 0.276 0.276 0.297 0.796 eh 0.328 0.341 0.347 0.367 0 0 ep 0.261 0 0 0 0.796 0.81 eh 0 0 0 0 0 0 ep 0.261 0.276 0.276 0297 0 0.81 discussion path analysis results indicated that one unit change in physical environmental factors (pe) generates 35% change in employee health. there is a significant positive relationship between pef and eh, so h1 is accepted. path diagram also explains that behavioural factors (bf) has a positive influence on employee health (eh) and one unit change in bf creates 33% change in eh. there is a positive and significant relationship between bf and eh, and h2 is accepted. 80% change in employee productivity (ep) is caused by a unit change in employee health (eh), and we can conclude that employee health is a strong predictor of employee productivity and there a strong and positive relationship between them, h3 is also accepted. results have also revealed that there is a mediating role of employee health (eh) between pef and ep as well as between bf and ep. productivity is measured in term of absenteeism (sullivan, baird, & donn, 2013) addressing health issues faced by employees helps in determining absentees of employees and health issues of employees directly or indirectly affects absentees rates in employees (ronald, 2003). unhealthy working environment and discomfort at the workplace creates health issues in employees, which lead to increased absentees and hence, productivity is decreased (danielsson & bodin, 2008). this confirms the study of peterson and beard (2004), ellison schriefer (2005) who stated that optimum balance is achieved by physical environment by helping business, management and education, 2019, 17(2): 173–193 187 workers in moving from one mode to another. also, productivity is determined by promoting social and behavioural environmental factors. the results are supported by haynes (2008b), peterson and beard (2004), haynes (2007). van der voordt (2004a, 2004b) stated that physical environment helps in creating different work settings which help employees in performing their individual as well as group tasks. in today’s competitive and challenging environment, the physical health of the workforce is vital, and current study has explored the relationship of various environmental and behavioural factors with employee health, which in turns leads organisations towards productivity. supportive work environment motivates employees (earle, 2003). little emphasis has been given to employee health, about productivity, especially on mediating role of for employee health between environmental factors and productivity and findings have shown that the relationship proposed in the model (figure 1) has been proved. healthy working environment and managerial support (bell, 2008; ramlall, 2003) open communication between employees and supervisors (earle, 2003) leads to improved performance and helps in retaining employees. participation of employees in critical decisions, competitive compensation practices, pleasant relations between managers and employees (gberevbie, 2010) career development and employee empowerment leads to enhanced employee performance (kundu & gahlawat, 2016). results of the study are also consistent with social exchange theory. social exchange is a process between organisation and employees in which organisation values employee contribution and provide them with the necessary care and makes sure that their well-being level is achieved (eisenberger et al., 1990). the current study provides guidelines for practitioners and business managers for finding ways for improving the working environment and helping employees in maintaining good health. hr practitioners need to put more efforts in providing support to employees and improving managerial behaviour to accomplish employees as well as organisational performance goals (agarwala, 2003). study results confirms that pef, bf and eh are determinants of ep also eh play mediating role between pef and ep as well as bf and eh. results of sem proved the significance of the model and confirmed all the five hypotheses of the study. we can conclude that the model fitted enough and it is imperative for an organisation to consider pef, bf and eh for improving performance. conclusions working environment is one of the most important components which influence employee performance within an organizational settings. in today’s competitive business environment, monetory benifita alone are not enough for employees in order achieve higher performance levels. however, a combination of monetary and nonmonetary rewards is more effective in achieving higher levels of employee performance, which leads towards achievement of organizational goals. employees working in software houses needs attractive, peaceful and cooperative working environment in order to achieve higher performance level. a happy, industrious employee is vital for it industry and adequated lightning, noise free and clean office, comfortable seating are the factors of physical envirinment, considered in current study. study revealed that, all these factors are vital in affecting employee health. tea and lunch breaks, 188 i. hafeez et al. impact of workplace environment on employee performance: mediating role... involuntary overtome and friendly working environment were taken as components of behavioral environmental factors. it has been found these factors help in improving employee health and a healthy mind and healthy body leads towards enhanced employee performance. organisations must maintain a better physical environment in order to enhance employee productivity as employee performance has a direct relationship with workplace environment and employees productivity and physical as well as behavioural environmental are linked through employee health. improving physical and behavioural factors will improve employee health and healthy employees can be more productive; 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(2013). impact of environment ergonomics on the productivity of office workers. australian journal of basic and applied sciences, 7(4), 366-374. appendix survey questionnaire dear sir/madam, i am a student of phd management, and this research is a partial requirement of my phd. purpose of this research is to investigate about working environment and productivity, through mediating role of employee health. your participation will be highly appreciated and your response will be kept confidential. if you have any questions regarding this research in general or the survey in particular, please feel free to contact me through email: hafeeziqra@yahoo.com. https://doi.org/10.1108/13527590410569887 https://doi.org/10.4324/9780203885383 https://doi.org/10.1016/s2212-5671(15)00524-9 https://doi.org/10.1016/j.tele.2011.08.003 https://doi.org/10.1108/ijcoma-07-2012-0046 https://doi.org/10.1016/j.apnr.2015.01.010 https://doi.org/10.1177/108482239600800611 https://doi.org/10.1007/bf02291170 https://doi.org/10.1108/02632770410555959 https://doi.org/10.1108/14630010410812306 mailto:hafeeziqra@yahoo.com 192 i. hafeez et al. impact of workplace environment on employee performance: mediating role... part-i general information gender: male □ female □ age group you fall into? under 20 □    21 – 30 years □    31 – 40 years □ 41–50 years □ 50–60 years □ 60 and above □ what is your highest education? matriculation □ intermediate □ bachelor □    masters □    mphil □ work area? programmer analyst graphic designer system designer data base administrate work experience? <1 year 1–2 years 2–3 years 3–4 years 5 years and more what is your brief job description? _________________________________________________ part-ii *please tick (√) on any of the response categories mentioned against the following statements showing your degree of agreement or disagreement. 1. strongly disagree 2. disagree 3. neither agree nor disagree 4. agree 5. strongly agree sr. variables 1 2 3 4 5 1 my furniture is flexible to adjust, rearrange or reorganize my workspace. 2 my furniture is comfortable enough so that i can work without getting tired during long hours. 3 i have adequate and comfortable in my office. 4 my work environment is quiet. 5 i am able to have quiet and understand time alone. 6 my workspace has many noise distractions. 7 my workplace is dusty and not cleared properly. 8 sweeper also cleans the office during office hours without disturbing any work of employee. 9 my workspace is provided with efficient lighting. 10 do you control over the lighting on your desk (i.e adjustable desk light on desk)? 11 ample amount of natural light comes into my office. 12 number of windows in my work area complete my fresh air and light need. 13 my office branch is open enough to see my colleagues working. 14 my work area is sufficiently equipped for my typical needs (normal, storage, movements, etc). business, management and education, 2019, 17(2): 173–193 193 sr. variables 1 2 3 4 5 15 i am satisfied with the amount of space for storage and displaying important materials. 16 my workspace serves multi-purpose functions for informal and instant meetings. 17 my job tends to directly affect my health. 18 i work under a great deal of tensions. 19 i have felt fidgety or nervous as a result of my job. 20 if had a different job, my health would probably improve. 21 problems associated with my job have kept me awake at night. 22 i have felt nervous before attending meetings in the company. 23 i often take my job home with me in the sense that i think it when doing other things. 24. have you experience any sickness during your employment? yes/no 25. what type of sickness/ health problem you suffer during the employment. a. headache b. back pain c. nerve problem d. eye side problem e. blood pressure f. carpal tunnel syndrome g. other h. none of above 26. would you choose the same profession if a chance is given again? yes/no 27. do you think you can enjoy healthy life with this profession? yes/no 28. do you live with family during the week? yes/no 29. how many hours do you spend with your family daily? yes/no < hour 1 hour 2 hours 3 hours 4 hours *reserve coding questions. once again thank you very much for your valuable time! copyright © 2020 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: humaira.erum@outlook.com business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18: 14–32 https://doi.org/10.3846/bme.2020.11430 the calling of employees and work engagement: the role of flourishing at work humaira erum1*, ghulam abid1 , francoise contreras2 1national college of business administration & economics, lahore, pakistan 2universidad del rosario, bogota, colombia received 29 october 2019; accepted 11 december 2019 abstract. purpose – both the researchers and practitioners believe that engaged, energetic and focused employees provide sustainable competitive advantage to the organization. therefore, the aim of this study was to explore whether the calling of the employees is related to work engagement and to observe if flourishing at work exerts a mediating role in this proposed relationship. research methodology  – the time-lag method was followed to collect data from a sample of 101 employees working in different organizations from service industry. findings – results showed that calling is a critical psychological driver of work engagement explaining about 30% variance and it is valuable in shaping the employees orientation. limitations – the data collection for the study was restricted to one major city so care must be taken in generalizing the results. moreover, the use of cross sectional data may not completely capture the true nature of the psychological constructs like calling, flourishing and engagement. implications  – this study helps human resources managers to hire individuals who feel “called” to the job and devise training programs that shape their work orientation in order to engage and retain them. originality – the current study considered work engagement as a psychological state and empirically tested psychological driverscalling as the work orientation and flourishing. the proposed relationships, to the best of our knowledge, were not empirically tested previously. keywords: calling at work, work engagement, flourishing at work, work orientation, self determination theory, positive organizational outcomes. jel classification: m19. introduction “...no company, small or large, can win over the long run without energized employees who believe in the mission and understand how to achieve it.” jack welch, former ceo of ge mailto:humaira.erum@outlook.com https://doi.org/10.3846/bme.2020.11430 business, management and education, 2020, 18(1): 14–32 15 the modern era of technology is dynamic, highly demanding and challenging for companies. coping successfully with this complex business environment will constitute a competitive advantage for organizations (abid et  al., 2016). under these conditions, companies are trying to explore new ways to be more competitive sometimes investing a lot of money. however, it has been recognized that the best way to gain competitive advantage is recruiting and retaining capable, dedicated and engaged employees (abid et al., 2016; kular et al., 2008). for this reason, the work engagement of employees has become an important topic of interest for researchers and practitioners in the field of positive organisational behavior (abid et al., 2018a; cooper-thomas et al., 2014; kolodinsky et al., 2018; macey & schneider, 2008; mahon et  al., 2015; rich et  al., 2010) as a result, substantial progress has been made in the last decades, to define, conceptualize and distinguish this concept from other related notions, exploring its antecedents and analyzing its outcomes (abid et al., 2016; bakker et al., 2008; de crom & rothmann, 2018; kahn, 1990; mahon et al., 2015; rothbard & patil, 2012). according to the literature, work engagement improves employee performance and organizational effectiveness (gruman & saks, 2011), increases employee job satisfaction, increases commitment, lowers absenteeism and decreases turnover intentions (albrecht et  al., 2015). other organizational outcomes of the employee’s work engagement includes business growth, increasing productivity, more adaptability with the changing environment, more creativity and high profitability (macey & schneider, 2008; rich et  al., 2010; rothbard & patil, 2012; saks, 2006). therefore, researchers and practitioners are highly interested in identifying the antecedents of work engagement. according to the previous studies it can be asserted that personal vision, positive moods, emotional intelligence, positive organizational support (mahon et al., 2015), job characteristics, rewards, positive feedback, good relationship with colleagues and supervisors, training and growth opportunities (kolodinsky et. al., 2018; krishnaveni & monica, 2016) are significant drivers of employee engagement at the workplace. despite increasing interest and the academic progress achieved in this area, still more research should be done to identify and explore the factors associated with the work engagement of employees (smithikrai, 2019; saks & gruman, 2014). even more, the antecedents and consequences of the work engagement of employees remain unclear, pointing out that it is necessary to address more empirical research that allows to have a concept rigorously delimitated and empirically validated (mecey & schneider, 2008; suomäki et al., 2019; saks, 2006). mahon et al. (2014) suggested that the psychological antecedents of work engagement need to be explored. similarly, wiedemann (2019) feels that it is vital for scholars working on work engagement, to explore the conditions that are necessary for employees to be able to tap into the instinctive drive for personal growth and purpose, not only for their own health and well-being, but for the health and well-being of their organizations. therefore, this study investigates the psychological factors that influence the work engagement of employees, we focus specifically on employee’s calling orientation to work as an important antecedent of work engagement. existing literature refers to the concept of calling, describing it as an ability to fulfill one’s core values at work. this ability allows viewing one’s work more as a meaningful mission than as a means to earn resources, therefore motivating to engage (kolodinsky et  al., 2018; ziedelis, 2019). this study is based on the self-determination theory 16 h. erum et al. the calling of employees and work engagement: the role of flourishing at work (sdt) (ryan & deci, 2000) to emphasize the role of intrinsic motivation in explaining the mechanism through which an employee’s calling orientation to work is connected to his/her work engagement. when employees have a calling to their work they find themselves more adjusted for their job and are more likely to feel passion towards it, they are intrinsically motivated to perform it thus deriving happiness in their workplace. these positive emotions of joy, interest and happiness shape the attitude towards work. limited literature exists that empirically tested if the calling to work is related to employee work engagement. moreover, this study also explores the mediator role of flourishing at work in the proposed relationship between calling at work and work engagement. despite its potential impact on firm performance, calling at work has been scarcely studied (duffy et al., 2018; lysova et al., 2019). according to the literature there is some research with musicians, nurses and frontline employees in hotels (ziedelis, 2019; dobrow, 2013; hagmaier & abele, 2015; lee, 2016). the purpose of this study is to provide new empirical evidence about this topic proposing new relationships. supported in the sdt, we hypothesize that calling at work is related to work engagement and that this relationship could be mediated by flourishing at work in a group of south asian employees. according to the aforementioned, the objectives of this study are 1) to examine the direct relationship between calling at work, flourishing and work engagement and 2) to examine the mediator role of flourishing at work in the proposed relationship between calling at work and work engagement. this study tries to provide new useful evidence for both practitioners and researchers who are aware that engaged employees are the main asset for any organization and constitute a competitive advantage for companies in current days (abid et  al., 2016). moreover, the importance of engaged employees in enhancing organizational performance and improving employee productivity cannot be denied. if employees are unhappy and dissatisfied then they may find it very difficult to concentrate on their work and put less effort to achieve their work goals. this state of demotivation can have undesirable consequences such as high absenteeism, high turnover and poor quality performance which implies substantial costs for the organization (park & shaw, 2013). on the contrary, employees who have calling orientation towards their work are expected to go further having exceptional performance, using their whole potential pursuing their profession as their passion (duffy et al., 2014), all of these being characteristics of work engagement. therefore, it is crucial for the organizational behavior field to identify and understand the underlying mechanism that could influence the work engagement of employees. 1. literature review and hypotheses development 1.1. work engagement and calling at work the seminal work of kahn (1990) has laid foundations for research on work engagement as a psychological state which was defined initially as “the harnessing of organization members’ selves to their work roles” (kahn, 1990, p. 694). most of researchers consider that work engagement is a psychological presence that captures the degree to which employees are attentive, engrossed and focused to their work role activities (bakker et al., 2008; rothbard & patil, 2012). these authors suggest that work engagement is a multidimensional construct business, management and education, 2020, 18(1): 14–32 17 that comprises of both physical and cognitive components. based on the seminal kahn’s work, rothbard and patil (2012) conceptualized work engagement on the basis of three critical elements: attention, absorption and energy. attention refers to material resources within a person that can be applied to a given task. absorption refers to the capacity and ability to apply these resources intensely and energy means the physical effort that employees put forth towards task accomplishment. this research takes into account the definition proposed by kahn (1990). many researchers have tried to explore models of work-engagement (also often viewed as work engagement, job engagement, or simply engagement), like, christian, garza, and slaughter’s (2011) meta-analysis showed evidence for their proposed model, a model of engagement antecedents and consequences. literature for engagement antecedents were found for job characteristics (e.g., autonomy, task significance, and social support), for leadership (transformational leadership and leader-member exchange factors), and for dispositional characteristics (conscientiousness, positive affect, and proactive personality). as regards to the consequences of work engagement, they found evidence for both task performance and for contextual (i.e., extra-role, prosocial) performance. they also make a clear case for engagements discriminant validity from other common attitudinal constructs – job satisfaction, organizational commitment, and job involvement (kolodinsky et al., 2018). traditionally, calling refers to the meaningful call towards activities that are ethical, social and personally significant. calling is considered unique to a person and it includes activities that the individual feels he must do to fulfill the purpose of his life. researchers have viewed calling as a religious entity, as work orientation and in secular perspectives (wrzesniewski, 2012). as a religious entity it is considered as people who are called by god to a particular occupation to serve society (weber, 1993). as work orientation calling is considered as the duty and destiny to express a personal passion. called employees feel identified with their work and strive to make a social contribution through their work (bunderson & thompson, 2009). the secular perspective emphasizes that the calling is originated from within an individual, identified through introspection, meditation or relational activities and serves selfactualization needs of a person (hagmaier & abele, 2012). a called person recognizes his or her interest for a particular profession and tries to adopt that profession to satisfy himself or herself. moreover, there is a consensus among scholars that calling is action oriented, prosocially focused and advocates a meaning or mission (elangovan et al., 2010). seminal research on the meaning of work suggests that different people describe work in a different way, some of them as a job, they focus on financial earnings, others as a career with focus on progression in it, and others as a calling which focuses on self-actualization from socially constructed work (wrzesniewski et al., 1997). individuals with calling orientation of work identify themselves with their work and express their passion and excitement through their work. called people experience both self-congruence and outer congruence. self-congruence means coherence between the ideal and real self, that is, “i am what i want to be”, whereas outer congruence refers to compatibility between an individual’s interests, required job skills and job related tasks (hagmaier & abele, 2015). some studies have shown many positive outcomes of calling at work, among them, higher level of satisfaction (dobrow, 2006; wrzesniewski et  al., 1997), reduced absenteeism (wrzesniewski et  al., 1997), greater passion and identification with work (bunderson & thompson, 2009) and lower levels of 18 h. erum et al. the calling of employees and work engagement: the role of flourishing at work depression and stress (oates et  al., 2005). still, the conditions and mechanism that when calling leads to positive and/or negative outcomes are poorly understood (lysova et al., 2019). based on the sdt (ryan & deci, 2000), our study is focused in the component of intrinsic motivation towards work that allows calling to work. sdt emphasizes that people are motivated because of autonomous or controlled motives. autonomous motives refer to that the intrinsic motivation makes people do an activity because they find it fascinating and derive an instant pleasure, happiness and contentment from that activity (ryan & deci, 2000), whereas, controlled motives are externally regulated, for example, meeting supervisor’s expectations (gagné & deci, 2005). in the first case, when an employee is self-motivated to work without being pressurized by external factors, he uses his or her strengths to get engaged in learning. this learning leads to greater confidence, self-efficacy, satisfaction and thereby better job performance (hagmaier & abele, 2015; hirschi, 2012). thus, called employees find their work as an expression of their passion and identity, something that allows them to experience fulfillment through their job (bunderson & thompson, 2009; hagmaier & abele, 2015; hirschi, 2018). moreover, they experience a perfect fit between their job requirements and their aptitude, talent and interest (de crom & rothmann, 2018; hagmaier & abele, 2015). to experience calling at work allows to people to have a clear and strong work goal orientation and thus they feel a stronger commitment to pursue those goals for self-actualization (duffy et al., 2014). limited previous literature has confirmed that the relationship between perceived calling and work engagement exist. hirschi (2012) found a moderate relationship between the two variables and xie, xia, xin, and zhou (2016) in time lagged survey study found that perceived calling, measured at time 1, was predictive of later work engagement. similarly, ziedelis (2019) in a survey study with 351 nurses under controlled demographic and work environment factors found that calling was significantly related to dedication and energy componets. based on sdt (ryan & deci, 2000), we argue that called people find themselves intrinsically motivated and passionate towards their work and their work gives them identity. thereby, they try to utilize their full potential and resources (attention, absorption) and put in their full effort to carry out their passion (energy). thus, we hypothesize that: h1: calling at work is positively related to the work engagement of employees. 1.2. calling at work and flourishing the flourishing of employees refers to those employees who are self-motivated, booming, successful, happy and continuously learning at the workplace (bono et  al., 2012). flourishing at work means an employee’s sought-after well-being state, attained through positive experiences and the efficient management of job-related factors (rautenbach, 2015). this construct is related but different to thriving, well-being, and work engagement. researchers have identified hedonic and eudemonic aspects of flourishing. the hedonic aspect relates to a positive mind set, the presence of enjoyment, pleasure and life contentment and absence of negative emotions (i.e: distress) (disabato et  al., 2016; deci & ryan, 2008), in other words, hedonism implies to maximize the experience of pleasure (peterson et  al., 2005). on the other hand, the eudemonic aspect (initiated by aristotle) focuses on the way of functioning when facing life challenges and includes authenticity, meaning, growth and excellence (huta business, management and education, 2020, 18(1): 14–32 19 & waterman, 2014). under this concept lies the theory of self-actualization (maslow, 1970), psychological well-being (ryff & singer, 1996) and sdt (ryan & deci, 2000), the latter, used in this study. a fundamental part of human flourishing is recognizing one’s purpose in life. in eudaimonist philosophy, it is living in agreement with one’s true self, and struggling to grasp one’s highest potential. in maslow’s theory of motivation, an individual’s purpose is to do what he is meant for (wiedemann, 2019). called individuals identify themselves with their work, experience high selfconfidence, feel satisfied and believe in the positive contribution of their work, which in turn, translates into higher career and life satisfaction (hirschi & herrmann, 2012; lee, 2016). calling gives a meaningfulness and sense of purpose to one’s work for a positive contribution towards society that in turn enhances life satisfaction, happiness, joy, positive emotions and thereby relating to flourishing (dik et  al., 2012; duffy et al., 2014; hagmaier & abele, 2012; huta & waterman, 2014). in contrast, those who miss their callings undergo a psychological state of regret, unfulfillment, frustration and stress because of a non-congruence of the inner and outer self (berg et al., 2010). so far researchers have identified several sources of flourishing among them, the work itself, the leader’s behavior, workplace relationships and even personality traits (bono et al., 2012). under this framework, we suppose that calling at work may lead to the flourishing of employees at the workplace, thus we hypothesized: h2: calling at work is positively related to the flourishing of employees. 1.3. flourishing and work engagement human behaviors are influenced by emotions (fredrickson, 2001; weiss & cropanzano, 1996). emotions trigger interest, allow concentration, shape perception, motivate action and lead to adaptability and creativity (fredrickson, 2001). in the work context, employee emotions are critical in shaping employee behaviors and perception towards their work roles and organizations. the affective events theory (aet) by weiss and cropanzano (1996) suggests that work events may provoke positive emotions and moods at the workplace resulting in positive outcomes like job satisfaction and in-role job performance. when employees flourish at work, they should be less inclined to consider parting with their institution, and enrich their performance, both within and beyond the limits of their job description (redelinghuys et al., 2019). it indicates that employees are most probably engaged with work when they flourish at the workplace. as discussed earlier, work engagement is defined in literature as a psychological presence in the work role (bakker et al., 2008; kahn, 1990; rich et  al., 2010). since work engagement is represented by the employee’s level of psychological focus and presence in work role, factors like moods, aspirations, and hopes must be empirically validated as antecedents of work engagement (mahon et al., 2015). the broaden and build theory by barbara fredrickson (2001) points out that “…experiences of positive emotions broaden people’s momentary thought-action repertoires, which in turn serve to build their enduring personal resources, ranging from physical and intellectual resources to social and psychological resources”. these resources in turn lead to positive outcomes at individual and organization levels. based on aet (weiss & cropanzano, 1996) and the broaden and build theory (fredrickson, 2001), it is comprehensible to say that 20 h. erum et al. the calling of employees and work engagement: the role of flourishing at work when an employee experiences positive emotions like happiness, satisfaction and thriving at the workplace, they use their full potential to carry out their work tasks and use their full energy to focus on their work roles. therefore, based on the above arguments, we argue that flourishing at the workplace is a critical driver of work engagement and therefore we propose the following hypothesis: h3: flourishing at work is positively related to employee work engagement. 1.4. flourishing as a mediator literature shows that happiness, well-being and positive moods have a significant role as mediator to explain and predict positive outcomes. for example, happiness mediates organizational virtuousness and affective commitment relationships, that is to say, the development of organizational virtues (through respect, honesty, compassion and forgiveness) improve employees’ well-being and encourage a more dedicated workforce (rego et al., 2011). hopes and positive affects play a significant mediating role in increasing employee creativity by promoting authentic leadership (rego et al., 2014). according to scholars of human flourishing, people have an inner drive to expand their capacities and connections; they want to learn, grow, and make an impact (wiedemann, 2019). there is a consensus in the literature that called people feel self-congruent, recognize their work as their passion and destiny, feel identified and take it as a positive contribution in society as a whole. without being externally pressurized, they are intrinsically motivated to do their work and their job becomes self-satisfying and an enjoyable activity for them (hagmaier & abele, 2012, 2015; lee, 2016). this, in turn, allows them to put their full energy and skills to perform their work roles (mahon et al., 2015). in contrast, if an employee feels that “i am not fit to do this job”, feels frustrated, depressed or burned out, this will restrict him to concentrate on his tasks. therefore, it is comprehensible to assume that one’s “call” is a source of positive emotion and satisfaction and hence lead to a focused attention, an intense absorption and an exertion of full energy in carrying out work tasks. hence, we hypothesize that; h4: flourishing mediates the relationship between calling at work and work engagement. figure 1 shows the theoretical model and hypothesized relationships. calling at work h1 h3h2 h4 (mediation) flourishing work engagement figure 1. theoretical model business, management and education, 2020, 18(1): 14–32 21 2. methodology the objective of the study is to test the mediating role of flourishing at work between calling and work engagement using a positivist approach (the paradigm of quantitative research). according to the positivist approach, science is about to find out the truth and to understand the world thoroughly, carefully and meritoriously so that we could forecast and control it (sachdeva, 2009). bryman and bell (2007) stated that this perspective supports the application of natural science methodologies to study the shared reality. in order to understand the reality, scholars generally depend to practice the scientific methods like observations, interviews, surveys and experiments to attain rigorous results (neuman, 1997). positivists believe in the empiricism of the idea, observation, experiment and measurement, which are considered the cores of scientific endeavor. 2.1. participants and procedures employees of service sector companies located in lahore (pakistan) were targeted to collect data through convenience sampling during the first quarter (january-march) of 2018. a self-administered survey was conducted. researchers introduced the purpose of research and asked the respondents for their informed consent to participate in this research. the anonymity and confidentiality of this survey was ensured to the employees. the reliable and validated instruments were applied in two sessions (timelagged) separated by approximately 14 days to reduce common method bias as suggested by podsakoff et al. (2003). at the time period 1 (t1), a total of 250 questionnaires were distributed to obtain data about demographic variables and calling at work. out of those 198 completed questionnaires were received (a response rate of 79.2%). the respondents were asked to write a self-identifiable code on the questionnaire for matching data at time 2 (t2). at t2, questionnaires were distributed to all 198 participants who responded at t1 to provide data regarding flourishing (mediator) and work engagement (criterion variable). out of the 198 who responded at t1, only 127 participants responded at t2. after eliminating the incomplete and wrong questionnaires, we had an actual sample of 101 (a response rate of 51%). thus, the sample was composed of 101 employees from the service sector with manager positions. as we targeted diverse sample so the total population size is unknown. as regards to the adequacy of sample size, in behavioral research, sample size of between 30 and 500 is recommended (see for example, roscoe, 1975, p. 163 or abranovic, 1997, p. 307–308). as a rule of thumb, roscoe (1975) indicates the sample size of 10 to 15 respondents per variable should be considered in multivariate analysis. in our study, we have 3 variables, hence, our sample should be at least 15 × 3 = 45. according to kline (2015), sample size for multivariate analysis should be around 200. therefore, we targeted the sample of 250 at t1 which finalized at 101 employees. of the total 101 employees, 84 of them were males (83%) and 17 were females (17%). the average age of the sample was 34 years (sd  = 10.8). most of the participants were holding postgraduate or higher degree (37.6%), followed by professional degree holders (34.6%). the average tenure in the organization of respondents was 8.12 years (see table 1). 22 h. erum et al. the calling of employees and work engagement: the role of flourishing at work table 1. sample profile gender frequency percent female 17 16.8% male 84 83.2% marital status single 40 39.6% married 61 60.4% qualification graduate 28 27.8% masters 20 19.8% mphil/ms 18 17.8% others 35 34.6% age below 30 42 41.6% 30–39 33 32.7% 40–49 13 12.9% 50–59 10 9.9% above 60 3 3.0% tenure in current organization less than 5 years 56 55.4% 6–10 18 17.8% 11–15 11 10.9% more than 15 years 16 15.8% 2.2. measurement calling. the calling of the employees was assessed using the scale developed by dobrow and tosti-kharas (2011) having 12 items such as “i am passionate about what i currently do for work” and “i feel a sense of destiny about what i currently do for work”. the response to these items is taken on a 6 point likert scale ranging from 1 = very strongly disagree to 6 = very strongly agree. in the psychological tests, the 6-point likert’s type scale has a higher trend of discrimination and reliability than the 5-point likert’s type scale (chomeya, 2010). the reliability of the scale was assessed using cronbach’s alpha. for the current study, the estimated internal consistency of this scale was α = 0.851. this measure is shown valid and reliable in previous studies (e.g. cao et al., 2019; cain et al., 2018) with α > 0.70. flourishing. we used the scale developed by schotanus-dijkstra, peter, drossaert, pieterse, bolier, walburg, and bohlmeijer (2016). the scale consists of 8 items. sample items from this scale were “i actively contribute to the happiness and well-being of others” and “i am a good person and live a good life”. respondents were requested to indicate their response on a 6-point itemized rating scale (1= very strongly disagree to 6 = very strongly agree). for the current study, the estimated internal consistency of this scale was α  = 0.881. this measure business, management and education, 2020, 18(1): 14–32 23 is shown valid and reliable in previous studies (e.g. compton, & hoffman, 2019; abid et al., 2018b) with α > 0.80. work engagement. the three dimensions of this variable were assessed through two different scales. to measure attention and absorption, the scale of rothbard (2001) was used. the third dimension, energy was measured using the scale developed by rich, lepine, and crawford (2010). a total of 15 items were used to measure all three dimensions of work engagement. sample items include “i exert my full effort to my job” and “when i am working, i am completely engrossed in my work”. respondents were requested to provide their assessment for all items on the 6-point likert scale (1 = never to 6 = always). for the current study the estimated internal consistency of this scale was α  = 0.86. this measure is shown valid and reliable in previous studies (e.g. dumas, & perry-smith, 2018; lupano et al., 2017) with α > 0.70. age, gender and employee tenure in the organization were taken as the controls in this study. literature supports that age, gender and education level have significant association with flourishing (huppert & so, 2013; momtaz et  al., 2016). however, work engagement indicated a non significant correlation (bakker et al., 2012; runhaar et al., 2013; sonnentag, 2003) with age, gender and tenure in the organization. 3. results before testing the association among study variables, construct validity was tested. it assured whether the instrument taps the concepts as theorized. construct validity is tested through convergent and discriminant validity (bagozzi & yi, 1988). convergent and discriminant validity of the measures were tested, as well as the inte-correlation among variables. spss version 20 was used for the analysis. regarding convergent validity, tabachnick and fidell (2001) suggested the correlations between the factors of a particular construct should be higher (greater than 0.5 is acceptable). to assess the discriminant validity, correlations between factors of distinct construct should be low (should be less than 0.5). the results show that the correlation between factors of different constructs ranged from 0.002 to 0.459 whereas the correlation between factors of the same constructs ranged from 0.496 to 0.701. table 2. confirmatory factor analysis models χ2 f 2/df tli ifi cfi gfi rmsea full measurement model 297.67 223 1.33 0.89 0.90 0.90 0.80 0.05 model aa 408.25 229 1.78 0.74 0.77 0.76 0.74 0.09 model bb 701.14 229 3.06 0.31 0.40 0.38 0.52 0.14 a flourishing and work engagement combined into one factor. b calling and flourishing combined into one factor. 24 h. erum et al. the calling of employees and work engagement: the role of flourishing at work confirmatory factor analyses (cfa) revealed that the hypothesized three factor model (χ2 = 297.67 with df = 223; rmsea = 0.05; cfi = 0.90; ifi = 0.90, gfi= 0.80) substantially fits the data better than the two-factor model a (χ2 = 408.25 with df = 229; rmsea = 0.09; cfi = 0.76; ifi = 0.77, gfi= 0.74) and the two factor model b (χ2 = 701.14 with df = 229; rmsea = 0.14; cfi = 0.38; ifi = 0.40, gfi= 0.52) (see table 2). 3.1. preliminary analysis initial support for proposed hypotheses is solicited using bivariate correlation among the variables. table  3 shows the descriptive statistics and correlation among variables which provides support for further hypothesis testing. table 3. descriptive analysis and correlations variable mean sd 1 2 3 4 5 calling 4.34 0.53 flourishing 4.58 0.74 0.392** work engagement 4.47 0.54 0.555** 0.388** age 34.67 10.83 0.195 0.006 0.122 gender – – –0.129 0.106 0.182 –0.169 tenure 6.36 8.12 0.142 –0.048 0.008 0.732** –0.229* note: **p < 0.01; *p < 0.05. positive and significant correlation was found among variables. calling is positively and significantly related to work engagement (r = 0.555) which provides support to h1. correlation analysis also shows a positive and significant relationship between calling and flourishing (r  = 0.392) which provides support to h2. moreover, a significant correlation between flourishing and work engagement (r = 0.388) was found which provided support to h3. age, gender, and employee tenure in an organization are considered as controls and were checked for their correlation. none of the control showed significant correlation with the study variables so these were not considered for further analysis. table  4 shows the results of regression analysis for proposed hypotheses. regarding h1, predicting the relationship between calling and work engagement, β  = 0.564, p < 0.05 (table 4) shows support for the hypothesis. h2 indicates the impact of the em ployee’s calling on their flourishing at the workplace. the β = 0.547 and p < 0.05 provides support to h2. as h3 predicted that the flourishing of employees is positively associated to work engagement, the β = 0.151(table 4) provides supporting our h3. table 4. regression analysis relationship r square coefficient se p-value h1. calling à work engagement 0.308 0.564 0.085 0.000*** h2. calling à flourishing 0.153 0.547 0.129 0.000*** h3. flourishing à work engagement 0.151 0.283 0.067 0.000*** note: ***p < 0.05. business, management and education, 2020, 18(1): 14–32 25 h4 was related to the mediated mechanism and predicted that flourishing at work mediates the relationship between calling and work engagement. to assess the mediating effect of flourishing on the relationship between calling and work engagement, a process by adrew hayes (2013), model 4 was used with 1000 bootstrapping. the results are shown in table 5. the r² = 0.342 shows that the proposed model explains 34.2% variance in work engagement. regression of work engagement is predicted from both calling (h2) and flourishing (h3). results show that calling significantly predicts work engagement even with flourishing in the model, β = 0.483, t = 5.34, p < 0.001; flourishing also significantly predicts work engagement, β = 0.064, t = 2.26, p = 0.02. the positive b value for calling indicates that as calling increases, work engagement also increases. similarly, as flourishing goes up, work engagement is also enhanced. for the indirect effect β = 0.081 falls between 0.0025 and 0.161. this range does not include zero, therefore, the indirect effect is valid and it is inferred that flourishing mediates the relationship between calling and work engagement. both the direct and indirect effects are significant so the relationship between calling and work engagement is mediated by flourishing and therefore, h4 is supported. table 5. mediation analysis outcome: work engagement model summary r r2 mse f df1 df2 p 0.58 0.34 0.19 25.54 2.00 98.00 0.000 model coeff se t p lcci ulci constant 1.69 0.39 4.32 0.000 1.04 2.34 flourishing 0.14 0.06 2.26 0.02 0.04 0.25 calling 0.48 0.09 5.34 0.000 0.33 0.63 direct effect of x on y effect se t p lcci ulci calling 0.48 0.09 5.34 0.000 0.33 0.63 indirect effect of x on y effect boot se boot llci boot ulci flourishing 0.08 0.04 0.002 0.16 4. discussion work engagement is a psychological state that allow employees to enjoy their work, hence results in achieving higher performance constitute a competitive advantage for organizations. the drivers of work engagement need to be further studied because knowledge in this regard is still scarce. this study, supported in the self-determination theory (ryan & deci, 2000) proposed that calling at work is a critical predictor of work engagement and contributes to extend the literature by specifying that flourishing as a linking factor through which the employee’s calling orientation to work is related to work engagement. in line with previous studies that substantiate positive outcomes of calling like greater passion for work 26 h. erum et al. the calling of employees and work engagement: the role of flourishing at work and strong identification with work (kolodinsky et. al., 2018; ziedelis, 2019; bunderson & thompson, 2009), the results indicate that called employees are better engaged to their work roles. employees who experience calling at work consider themselves a contributing source for society which enhances their self-efficacy and leads them to higher confidence levels and better job performance. therefore they feel energized ftowards their work and utilize their full potential and resources in carrying out their task activities. moreover, the results supported that called employees flourish at the workplace which is also mirrored in literature. the literature supports that calling leads to a higher level of life, work satisfaction and enhanced self-congruence (de crom & rothmann, 2018; duffy et al., 2014; hagmaier & abele, 2015; wrzesniewski et al., 1997). employees find themselves self-congruent with their work, satisfying their self-actualization needs so they feel happy and satisfied and therefore they flourish at the workplace. furthermore, calling at work explained a 30.8% variance in work engagement (see table 4). this means that work by itself satisfies other important needs of employees such as self-fulfillment, self-actualization and well-being apart from financial and security needs as theorized (hagmaier & abele, 2015; hirschi et al., 2018). this finding reinforces that calling is a critical driver of work engagement and it is valuable in shaping the employees orientation. as it was pointed out in the literature, positive emotions trigger the employees interest in their work allowing their concentration (fredrickson, 2001). the results of this study support that flourishing allows employees to be engaged to their work roles. according to the results, the proposed relationship between calling at work and work engagement is supported, as well as the meditational role of flourishing. these findings are in line with the existing literature which asserts that called people fit their job and derive happiness and satisfaction from it. these employees are involved and engaged to their work putting all their capacities to achieve high performance (hagmaier & abele, 2012; lee, 2016; wiedemann, 2019). the current study gains strength by adopting methodological measures to reduce common method bias as suggested by podsakoff et al. (2003). first, the anonymity was assured by assigning a self-identifiable code to the respondents. secondly, different anchoring was used for scales of different variables and thirdly, the data for different variables was collected at two time periods separated by 14 days. moreover, the herman single factor was conducted to check common method bias. the result shows that a single factor extracted using spss explained the 26.7% variance. since it is less than 50%, we can safely say that our data set does not suffer from common method bias (harman, 1976). moreover the current study used regression analysis for preliminary hypotheses support which is in line with current literature studies (like de crom & rothmann, 2018; kolodinsky et al., 2018; ziedelis, 2019) and futher used process by hayes (2013) for mediation analysis which is considered as latest technique as compared to baron and kenny (1986). conclusion and implications theoretically, this study adds to the body of literature by testing calling as the driver of work engagement and explains how the flourishing of employees mediates the relationship between calling at work and work engagement. the current study considered work engagebusiness, management and education, 2020, 18(1): 14–32 27 ment as a psychological state and to enhance the understanding of the construct further, this study empirically tested psychological drivers – calling as the work orientation and flourishing. the objectives of this study were 1) to examine the direct relationship between calling at work, flourishing and work engagement and 2) to examine the mediator role of flourishing at work in the proposed relationship between calling at work and work engagement. the results showed that calling and flourishing explained 34% variance in work engagement and flourishing partially mediated the relationship between calling and work engagement. in line with objectives of the study, the results confirm that called employees are better engaged to work. moreover, those employees who feel called towards their work, usually flourish which further ehance their work engagement. from the individual perspective, the results of this study show that called employees flourish at the workplace and are more engaged to their work. when employees feel their call to a particular job, they experience a congruence between their interests, skills and the job position (hagmaier & abele, 2015) which leads to greater job and life satisfaction and reduces frustration, regret and dissatisfaction (berg et al., 2010). from the organizational perspective, managers are always looking for employees who are satisfied, committed, creative and achieve high performance (gruman & saks, 2011; rothbard & patil, 2012). moreover, organizations are also interested to employ those people who tend to remain in the firm and display low or no absenteeism (albrecht et  al., 2015). considering the positive outcomes discussed above, managers need to shape the employees work orientation so that they consider work as a useful, enjoyable, and satisfying activity to get engaged to it. practically, this study is helpful to human resource managers to devise training programs that can change work perception, attitudes and behavior patterns of employees. moreover, calling orientation could serve as important criteria in recruiting to evaluate the applicant’s work orientation. managers can clarify how the employees’ work fits with the organization mission and contribute socially to inspire their calling orientation. in addition, based on the results of this study, we argue that the employee’s calling orientation to work represents a mutual benefit as it leads to work engagement, that in turn translates into positive organizational outcomes and at the same time satisfies self-actualization needs of employees to create a win-win situation for both parties. this study recommends employees to sense their call in order to flourish at work and stay committed to their work role. it will help them become a useful member of the organization and society. limitations and future directions although the findings supported all the hypotheses, the study has some limitations. first, a relatively small sample size limits the generalizability of results. future studies should be done with a larger sample, selected through a probability sampling design to enhance the generalizability. secondly, the use of cross sectional data may not completely capture the true nature of the constructs like calling, flourishing and engagement as they represent a personal perception, an emotional and psychological state respectively. longitudinal data is more suitable for checking the psychological nature of constructs. 28 h. erum et al. the calling of employees and work engagement: the role of flourishing at work regarding future research, more empirical and longitudinal studies are required to enhance a deeper understanding of calling by explaining why and how callings influence our work experience. moreover, the possible darker side of callings such as the consequences of missing one’s call needs to be examined. similarly and regarding work engagement, future studies should focus how each of the sub components, attention, absorption and energy are affected over time. in addition, there is a need to study the predictors and consequences of work engagement at group and organizational levels. further research on flourishing should be oriented to understand how the behaviors, attitudes and actions of flourishing employees influence the organization and what kind of virtues an personal strengths allow them to be flourishing. moreover, moderators such as the psychological capital, organization support and supervisory behaviors may be taken into account in future studies. in order to extend the domain of the theory, future studies may take into account different sectors such as education, medical and defense services. the use of longitudinal data and experimental design is recommended for future studies to check causal and reciprocal relationships between the studied constructs. disclosure statement the authors declare that they have no competing financial, professional or personal interests from other parties. references abid, g., zahra, i., & ahmed, a. 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(2019). perceived calling and work engagement among nurses. western journal of nursing research, 41(6), 816–833. https://doi.org/10.1177/0193945918767631 https://doi.org/10.1016/j.jvb.2016.02.011 https://doi.org/10.1177/0193945918767631 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: zrinka.blazevic@vuv.hr business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 1: 41–58 https://doi.org/10.3846/bmee.2022.15919 the influence of media on impulsive buying in the era of the covid-19 pandemic zrinka blažević bognar *, nikolina pleša puljić department of economic, virovitica university of applied sciences, virovitica, croatia received 10 november 2021; accepted 18 march 2022 abstract. purpose  – with the appearance of covid-19, epidemiological measures were implemented which significantly changed the customer behaviour. media became an important source of information. the fear phenomena in the lockdown era compelled consumers to buy impulsively. therefore, this paper determines the changes in consumer behaviour in the era of the pandemic and the influence of media on consumer’s impulsive buying during lockdown. research methodology – the research was carried out with a questionnaire (n = 298). the descriptive, multivariate, and correlation analysis, and the t-test were used to process primary data to confirm changes in consumer behaviour. findings  – the research results show that impulsive buying does exist during a lockdown and is influenced by media. such indicators give a clear direction for creating marketing campaigns in future crises. research limitations  – the research sample was random so, to prove hypothesis h2, the database of the intensity of buying in lockdown needed to be filtered out so only impulsive buyers could be selected (n = 89). practical implications  – the findings could help in the creation of future marketing campaigns in crises. originality / value – this research gives a new look at consumer behaviour in crises, the intensity of fear influence, and the influence of media on consumer behaviour. keywords: consumer behaviour, impulsive buying, media, covid-19 pandemic. jel classification: m31. introduction changes in the environment drastically affect buying habits, directly influencing consumer decisions and behaviour. this is why consumer behaviour has been the focus of researchers for a very long time (kesić, 2006), and the significance of such research has even more intensified in the era of the covid-19 pandemic when substantial changes. with the beginning of 2020 and the appearance of the covid-19 pandemic, significant changes in consumer http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2022.15919 https://orcid.org/0000-0002-0515-6915 https://orcid.org/0000-0002-6986-6393 42 z. blažević bognar, n. pleša puljić. the influence of media on impulsive buying in the era... behaviour were also noticed (xiao et  al., 2020). epidemiological measures were intended to reduce physical contact between people and introduce a higher degree of hygiene and disinfection. this is why from 19th march 2020, the lockdown was put into place in the republic of croatia, which meant that most types of jobs were prohibited (or they were done from home). in addition, unnecessary movements and public gatherings were also forbidden, including travelling which was only possible with travel permits issued by the local headquarters of civil protection. the aforementioned measures lasted until 11th may 2020, after which they were slightly alleviated. all of the above had drastically changed consumer behaviour, which was under the influence of societal factors in the newly emerged situation. it was paramount to avoid shopping unless absolutely necessary, so consumers started to plan the dates when they went shopping, which became rarer, but quantity-wise they bought more products and mostly impulsively. impulsive buying emerged because of different factors, such as the fear of missing out on certain products, fear of shortages, societal influence, and the influence of social media (islam et al., 2021; jurčić, 2017). it is important to emphasize that because of the relevance of the topic it was not possible to rely on earlier equivalent research, so the theory is based on behavioural analyses in past pandemics (spanish flu etc.) and on the nielsen research conducted in march and april 2020 on consumer behaviour in croatia during the covid-19 pandemic (nielsen, 2020). since this topic is relatively unexplored, this empirical research analyses the consumer behaviour during the covid-19 crisis with an emphasis on the intensity of impulsive buying in the first lockdown period, as well as further down the line of the pandemic, and determine which factors had led to this situation (hua & shaw, 2020). the expected scientific contribution mainly entails identifying the key factors of impulsive buying, all to predict future patterns of consumer behaviour in similar crises.  therefore, this paper has the goal of answering whether consumers did actually buy impulsively and whether the media were the cause of this. considering the goal of the research, the following hypotheses are put forward: hypothesis 1. consumers were buying impulsively at the beginning of the covid-19 crisis. hypothesis 2. the media had an intensive influence on impulsive buying during the covid-19 crisis. the empirical research was carried out on the results of the primary survey on a sample of 298 respondents. 1. literature review consumer behaviour is focused on how people decide and manage their resources when buying products. or, in other words, what, when, where, what incites them, and how often do individuals buy certain products, and use what they bought (schiffman & kanuk, 2004). therefore, to be successful on the market, marketing experts need answers to all of the above questions, meaning they need to gather all available information on consumer behaviour (solomon, 2017). “consumer behaviour is a study of individuals, groups, or organisations, and all the activities which involve buying, using, and disposing of goods and services. it involves the consumers’ emotional and mental reactions and their behaviour before and after business, management and economics engineering, 2022, 20(1): 41–58 43 the aforementioned activities” (kardes et al., 2014, according to matohanca, 2018, p. 2). the literature most often mentions three crucial activities studied by consumer behaviour: buying, consumption and the activities after buying something. in addition, marketing experts also evaluate the reactions of consumers to all of these activities. the reactions of consumers can be emotional, mental and behavioural (kardes et al., 2014). “in modern business, there is an ever-increasing need to establish marketing strategies in the business planning phase” (ribić & pleša puljić, 2020, p. 160), but to discover marketing tactics that lead to an increase in sales, one has to be familiar with the psychology of human beings. the main goal of all of these types is to provoke the consumer to buy a product they initially had no plans of buying (kotler et al., 2014). unfortunately, “most consumers are not aware to what extent they are victims of company strategies” (kotler et al., 2014, according to blažević bognar et al., 2017, p. 592). 1.1. consumer behaviour consumer behaviour distinguishes between two types of purchases: routine and impulsive (kesić, 2006). the routine consumer behaviour mainly involves the consumer making a decision based on their knowledge of the product, or finding further information about the product, but they will not take “more time than required, nor will this influence the direction of their decision” (soče kraljević et al., 2016, p. 28). one mainly focuses on the person’s previous experience with the actual product or service (čičić et al., 2009). on the other hand, impulsive buying is characterised by unplanned purchases, which are happen at the spur of the moment, or in other words, the consumers make their purchasing decision without any preparation. therefore, impulsive buying can be defined as an emergence of a sudden, strong, and irresistible need to buy something as an unplanned purchase, or as a feeling that a purchase is urgent, or as an urge which cannot be resisted by the individual (barbić & lučić, 2018, according to živković 2020, p. 2). 1.2. impulsive buying behaviour impulsive buying behaviour is defined as behaviour that necessarily relies on instant gratification, or in other words, satisfying a strong urge to buy something (mihić & kursan, 2010). impulsive buying is frequently connected with the feeling of anxiety, and the results are low levels of self-control. a lack of self-control in consumers, especially if it is caused by stress, intensifies significantly the impulsiveness of purchases. it is important to mention that when people lack self-control they are more susceptible to environmental stimuli which further contributes to impulsive buying. rook and hock (1985) highlight five crucial characteristics of impulsive buying which is manifested in spontaneous desire for doing something without control, psychological conflicts and reduction of cognitive evaluation involving irrational spending. likewise, indicators for this type of purchases are emotions such as joy, fear, love, sexuality, hope, fantasy, etc. the rational thought process is present to a much lesser degree, and affective activities are emphasized (živković, 2020). the classical phases of making purchasing decisions do not exist in impulsive buying, considering that the purchase happens immediately after the need is established. the phases which involve seeking information and 44 z. blažević bognar, n. pleša puljić. the influence of media on impulsive buying in the era... alternatives are under the influence of external and internal factors. “external factors could be the marketing activities of companies, and the internal factor is the individual’s personality” (ban, 2018, p. 10). 1.3. previous research on consumer behaviour during the covid-19 pandemic the beginning of 2020 marked the appearance of the covid-19 virus which had started suddenly spreading worldwide. to combat the virus, world governments implemented different epidemiological measures which affected all aspects of life. most countries started implementing lockdowns to prevent physical contact between people, which caused changes in consumer behaviour (insead, 2020). the nielsen agency carried out a survey (during march and april 2020) on consumer behaviour in croatia during the covid-19 pandemic and determined six phases in customer behaviour (nielsen, 2020). the first and second phases which began at the end of february were characterised by proactive and reactionary purchasing, with an emphasis on health. after the appearance of the covid-19 virus, an increase in the purchasing of canned foods, pasta, flour, and rice was noticed in croatia compared to the previous year. the third phase involved preparing supplies, which occurred between 9th and 15th march 2020. retail chains detected an average increase of 65% in the purchase of food and toiletries compared to the same period of the previous year. in the abovementioned week in croatia, a record increase of purchasing was noted for the following top three food products: flour (+410%), rice (+303%), bakery products (yeast, baking powder, pudding +221%), while the top three toiletries were soaps (+232%), toilet paper (+162%), toilet cleaners (+165%) (nielsen, 2020). in the same period shortly before the lockdown, according to global surveys, the most commonly bought products were also food products rich in carbohydrates, canned food, disinfectants, and even toilet paper (martin-neuninger & ruby, 2020).  this phase was marked by fewer shopping trips, but an excessive amount of products in the cart. it can be concluded that a specific purchasing pattern of one or more consumers can encourage the rest of the population to behave identically. this is what exactly happened during the pandemic, where a vast majority of consumers followed the purchasing patterns of their peers, whether they were shopping offline or online (kim & su, 2020). “we can observe that the largest influence on an individual’s behaviour have been reference groups” (kesić, 2006, p. 102). images of long lines at cash registers in supermarkets and empty shelves for certain products had been seen worldwide through media, causing the rest of consumers to rush to shops to buy supplies (iyer et al., 2020; addo et al., 2020). oberst et al. (2017) claim that biased behaviour begins in the part of the brain responsible for impulsive decisions (kaur & sharma, 2020), which is also responsible for emotions, and which was during the pandemic under the substantial influence of 24-hour media reporting (crabbe, 2020; addo et al., 2020). based on previous research (nielsen, 2020; kaur & sharma, 2020), a research gap on impulsive buying in the covid-19 period in the croatia was observed. hypothesis h1 was created from the mentioned research problem. business, management and economics engineering, 2022, 20(1): 41–58 45 1.4. the role of media during the pandemic the role of media during the pandemic was considerable, especially when it comes to influencing the development of negative emotions, spreading fabricated news and fear. the spread of the covid-19 pandemic led to more time spent at home, which caused longer periods spent consuming media content. social media have become the primary source of information for most people (addo et al., 2020), despite contributing a lot of disinformation (zhang et  al., 2019). the research that had been carried out have confirmed that there is a positive correlation of the influence of media on consumer behaviour (kalaitzandonakes et al., 2004). also, survival psychology indicates that people change their behaviour due to crises (forbes, 2017). this leads to the emergence of phenomena such as panic buying, herd mentality, supply hoarding, and impulsive buying. this type of buying is influenced by the individuals’ perception of the health crisis, fear caused by negative emotions, changes in consumer behaviour due to the need to alleviate anxiety and take control, social-psychological (yuen et al., 2020) and societal factors (li et al., 2020; wang et al., 2020). consumers make decisions more easily once they see the experiences of their acquaintances, unknown people, or even influencers, whose adverts consumers consider to be reliable and convincing, especially when it comes to a very popular influencer (blažević bognar et  al., 2019). impulsive buying occurs when consumers experience an intensive impulse to buy something right away (parsad, 2020), where the purchasing decision is not part of a deep thought process (suryaningsih, 2020; zafar et  al., 2019), but rather is under the influence of emotions, or in other words, people buy products that make them feel good or have some emotional value (husnain et al., 2016, according to iriani et  al., 2021). impulsive buying is characterised by unplanned purchases which are based on irrational thought, (chan et  al., 2017, according to iriani et  al., 2021) and which can be induced by external stimuli such as economic conditions, personality, time, place etc. (wu et al., 2016, according to iriani et al., 2021) but also the phenomena of fear in the lockdown which had prompted consumers to buy without thinking (wiranata & hananto, 2020; kim, 2020; addo et al., 2020). the fourth phase, marked by preparation for life in quarantine, came just before the complete lockdown which began in the republic of croatia on 19th march 2020, where problems in the supply chain started to appear, leading to empty shelves. despite the government efforts to warn against irrational behaviour, most people started panic buying (turkalj, 2021). impulsive buying of essential and non-essential products had suddenly increased (crabbe, 2020). this type of buying was characterised by a disproportional purchasing of disinfectants, toilet paper, hygiene items, protective masks (turkalj, 2021), flour and yeast. many shops could not satisfy all the consumer needs, which lead to a short term breakdown in the supply chain, and all of the above resulted in even greater panic among consumers (kim & su, 2020; rajan et al., 2020), which again resulted in more panic and impulsive buying (kim, 2020). this type of consumer behaviour, including impulsive and panic buying, can even further deepen scarcity (zafar et al., 2019; bergel & brock, 2019). fear overpowers the capacity for rational thought (witte & allen, 2000), and this is why some surveys have already suggested that fear is an important mediator in impulsive buying (iyer et  al., 2020; addo et  al., 2020; przybylski et al., 2013). to alleviate fear and uncertainty, consumers started hoarding supplies 46 z. blažević bognar, n. pleša puljić. the influence of media on impulsive buying in the era... to gain a feeling of safety and preparedness (mathes et al., 2017). the above is confirmed by loxton et al. (2020) who claim that the behaviour of consumers during the pandemic, where they consumed essential products, reflects the satisfaction criteria of the lower-level needs of maslow’s hierarchy. consequently, consumers were relentless in satisfying lower-level needs until the crisis was over. during the aforementioned state of the market, consumers started looking for alternative channels for obtaining supplies, whereby they mostly used internet shopping and products from local manufacturers. based on previous research (kim & su, 2020; iyer et  al., 2020; addo et  al., 2020), a research gap was observed on the influence of the media on impulsive buying in the period of covid-19. hypothesis h2 was created from the mentioned research problem. the fifth phaselimited living, was marked by a growth in online shopping, which became dependant on high delivery standards, while the sixth phaselife in the new normal, entailed consumers returning to formal buying habits but with a focus on newly adopted hygiene habits (nielsen, 2020). 2. research methodology the overview of the literature unquestionably shows that the era of the covid-19 pandemic has led to certain changes in consumers’ buying habits. the largest number of surveys discuss panic and impulsive buying that had been influenced by the feeling of fear and information from the media. previous studies indicate that perceived excitement leads to a purchasing decision (malhotra, 2010; sneath et al., 2009). for example, wu et al. (2020) have discoverd that scarcity is positively correlated with perceived excitement which affects impulsive buying. the research that was conducted during the beginning of the covid-19 crisis also indicates that fear and panic caused by scarcity has raised customer stress, i.e. has caused high levels of excitement which affected impulsive and obsessive buying (islam et al., 2021). therefore, this paper has the goal of answering whether consumers did actually buy impulsively and whether the media were the cause of this. considering the goal of the research, the following hypotheses are put forward: hypothesis 1. consumers were buying impulsively at the beginning of the covid-19 crisis. due to the great uncertainty of the situation, consumers were encouraged to continuously search for information and spend their cognitive resources which frequently leads to information overload (farooq et al., 2020; hua & shaw, 2020), i.e. negative emotions are continuously stimulated (moors et  al., 2013). previous studies have indicated that information anxiety could be stimulated by a perceived information overload (hwang et al., 2019), which leads to impulsive buying (liu et  al., 2019; yi, 2012). xiao et  al. (2020) conducted a study during the beginning of the covid-19 pandemic and have determined that the uncertainty of the situation has led to information overload and information anxiety which consequently has caused impulsive buying. therefore, the following hypothesis is put forward: hypothesis 2. the media had an intensive influence on impulsive buying during the covid-19 crisis. business, management and economics engineering, 2022, 20(1): 41–58 47 the empirical research was carried out on the results of the primary survey. the survey was carried out on a sample of 298. the main survey tool was a questionnaire that consisted of closed multiple-choice questions, where the likert scale was used with five levels of intensity. the first part of the questionnaire contained general information about the purpose of the survey, and also the anonymity of the questionnaire was emphasised in this part. the first set of questions involved the social-demographic characteristics of the respondents. the second, third, and fourth set of questions examined with the likert scale whether consumers were buying impulsively before the pandemic, just before the pandemic, and after the lockdown. the fifth set of questions examined which factors had influenced impulsive buying in the lockdown, while the last set of questions examined which information sources had been used by consumers. the survey was carried out over the internet during june and july 2021. the descriptive statistical analysis, multi-variant statistical analysis (multiple regression method), correlation analysis and the t-test were used in primary data analysis to determine the direction and strength of the correlation between the observed variables and to confirm the differences in behaviour. the descriptive analysis was carried out to create profiles of the buyers and analyse their behaviour before, after and during the lockdown. to prove h1, the differences in behaviour in these three periods were tested with the t-test. to analyse h2, a sample of consumers who acted impulsively (n = 89) in lockdown was derived (with the help of the descriptive analysis) from the general sample. the goal was to analyse which factors affected this behaviour and to determine the strength of the correlation between consumers and the factors that affected this behaviour. next, the correlation analysis determined the direction and strength of the connection between the information sources that the user used during the lockdown and the impulsiveness of their purchases. this was done to determine the influence of media on impulsive buying. the multi-variant regression demonstrates the intensity of the influence of each factor on impulsive buying. in addition to the data analysis method which was carried out in the excel programme package, the method used for presenting results is done in the form of tables and graphs. descriptive statistics were performed on all variables to describe the observed differences clearly, and when it comes to differential statistics, the level of statistical significance was determined to be 5% (p < 0.05). to evaluate the formulated hypothesis, the dominant method used was the correlation method which measured the inter-dependency of observed variables in the conceptual model. in this paper, this correlation was used to determine the direction, intensity and significance of the analysed connections. 2.1. sociodemographic indicators this survey used a sample size of n = 298. the survey sample was random and the structure of the survey sample is presented in table 1. 48 z. blažević bognar, n. pleša puljić. the influence of media on impulsive buying in the era... table 1. sociodemographic characteristics of respondents (source: prepared by authors) sample characteristics, n = 298 % gender female male 76.85 23.15 age 15–18 19–25 26–40 41–60 61 and more 8.39 38.59 37.25 12.75 3.02 qualifications lower expertise medium expertise higher expertise high expertise 2.35 27.85 48.32 21.48 note: n – number of participants, % – percentage of participants. the main limitation of the survey was the random survey sample, which would mean the survey sample contained a population that did not have a pronounced impulsiveness in their purchases, which might have made the sample inadequate. therefore, to prove hypothesis h1, the entire survey sample was used to prove that there was a change in behaviour of the entire population before, during and after the lockdown. however, to prove h2, the database needed to be filtered out according to the intensity of buying during the lockdown, meaning that certain consumers were selected who stated that during lockdown they bought essential products (masks, flower and yeast, toilet paper, and disinfectants) despite having already supplies, indicating they behaved impulsively during the lockdown. this sample contained 89 respondents. below is a graphical overview that shows the intensity of purchases of products in the era of the covid-19 pandemic. 16.75 11.63 10.46 6.95 6.58 2.12 6.58 8.71 9.22 6.95 14.05 0.00 2.00 4.00 6.00 8.00 10,00 12.00 14.00 16.00 18.00 protective masks flour and yeast toilet paper meat fruit milk bread oil pasta coffee/tea disinfectant percentage pr od uc ts figure 1. products that were bought immediately before the lockdown which began on 1.4.2020. (source: prepared by the authors) business, management and economics engineering, 2022, 20(1): 41–58 49 from the figure 1 it can be seen that consumers exhibited the highest demand for protective masks (16.75%), disinfectants (14.05%), flour and yeast (11.63%) and toilet paper (10.46%), which coincides with the already previously mentioned surveys (martin-neuninger & ruby, 2020). it is important to mention that the beginning of the lockdown was the time when the craze for these products had begun in shopping malls, which caused shortages of these products on shelves, and fear in buyers they would not be able to buy these products. this situation influenced impulsive buying, which is why the part of the sample which emphasised they had bought all four of the mentioned products can be considered a population that was impulsively buying due to the fear of scarcity. 3. survey results and discussion the survey’s primary intention was to give insight into the opinions of consumers and their buying habits during the lockdown, and the differences in their behaviour before and after the lockdown. therefore, the following hypothesis was put forward: hypothesis 1. consumers were buying impulsively at the beginning of the covid-19 crisis. to prove the hypothesis, factors which characterise impulsive buying (unplanned purchases, lack of rational thought, not postponing shopping, and in the event of a crisis, hoarding supplies) were analysed, and these factors were presented to respondents in the form of statements to which they could express their agreement or disagreement with a likert scale (from 1 to 5). respondents had to express their agreement for the identical statements 3 times, for the period before, during, and after the lockdown. to determine user behaviour, the statements were summarised into one indicator (named consumer behaviour) which was compared to identical indicators with a t-test, but in different periods (before, during, and after lockdown). table  2. results of the t-test for the period before (<2020), during (2020), and after the lockdown (>2020) (source: prepared by authors) t-test: paired two sample for means variable <2020 variable 2020 variable 2020 variable >2020 variable <2020 variable >2020 mean 3.166107383 2.833053691 2.833053691 3.194630872 3.166107383 3.194630872 variance 0.547231261 0.463407142 0.463407142 0.522597338 0.547231261 0.522597338 observations 298 298 298 298 298 298 pearson correlation 0.300551849 0.176575735 0.322225659 hypothesized mean difference 0 0 0 df 297 297 297 t stat 6.833220856 –6.925863224 –0.578207553 p(t<=t) one-tail 2.35415e-11 1.34359e-11 0.281781077 t critical onetail 1.650000301 1.650000301 1.650000301 p(t<=t) two-tail 4.7083e-11 2.68718e-11 0.563562154 t critical two-tail 1.967983525 1.967983525 1.967983525 50 z. blažević bognar, n. pleša puljić. the influence of media on impulsive buying in the era... from the table  2 it can be clearly seen that there is a statistically significant difference in consumer behaviour before and during lockdown (in april 2020), which is proven with the t-test (t (298) = 2.35415e-11, p < 0.05). this issue is also confirmed by previous research nielsen (2020) and kaur and sharma (2020). a significant contribution of this research lies in comparing behavioural changes during and after lockdown. in addition, there is a statistically significant difference during the lockdown and after (t (298) = 1.34359e-11, p < 0.05), but slightly less pronounced than in the previous comparison. the results indicate that there was a significant change in behaviour during the lockdown, which is confirmed by the fact that there was not a statistically significant difference between the before and after lockdown indicators for consumer behaviour (t (298) = 0.281781077, p > 0.05). the indicators confirm hypothesis  h1: consumers were buying impulsively at the beginning of the covid-19 crisis,  as well as indicating that impulsiveness decreased after lockdown, meaning that behaviour returned to its pre-lockdown level. all of the above points to the fact that the amount of information and level of fear during lockdown had a drastic impact on changes in consumer behaviour and had intensified impulsive buying, which will be analysed further in the paper. considering that the factors of impulsive buying are: unplanned purchases, lack of rational thought, not postponing shopping, and in the event of a crisis hoarding supplies, these factors were also analysed in this survey. the factors are shown on the figure 2, where consumers could express their agreement/disagreement for all three periods. it is evident that consumers had been planning their purchases before the pandemic, but in lockdown, planning became considerably rarer, and after the lockdown, it became more common. they were questioning their purchasing decisions before and after the lockdown, while during lockdown they were not questioning their decisions but were making them impulsively. moreover, 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 planned purchase rational thinking about buying postponing shopping hoarding supplies p e rc e n ta g e period < 2020 2020 2020 > figure 2. changes in consumer behavior and in the impulsiveness of purchases in the period before, during and after lockdown (source: prepared by authors) business, management and economics engineering, 2022, 20(1): 41–58 51 another important determinant of impulsive buying is postponing shopping until the prices are discounted. it is without a doubt that the respondents of this survey were not postponing their shopping during the lockdown, as they were known to do before and after. in the end, they were hoarding certain products in large quantities, while they had not been exhibiting this behavioural pattern before and after the lockdown. all of the above confirms once more that consumers had undoubtedly changed their behavioural patterns during the lockdown and that they were buying impulsively (which also analysed iyer et  al., 2020), therefore hypothesis h1: consumers were buying impulsively at the beginning of the covid-19 crisis can be accepted fully. something key for further analysis is to determine which factors had contributed to these type of purchases, or in other words, which factors had affected purchases will be analysed using the multi-variant regression further below. for this analysis, a sample of consumers who behaved impulsively during lockdown (n = 89) was selected (using the descriptive analysis method) from the total sample. the goal was to analyse which factors had affected their behaviour and to determine the strength of the correlation between consumer behaviour and the factors which had affected their behaviour. the multi-variant regression demonstrates the intensity of influences of each of these factors on impulsive buying. from the table  3 it can be seen how users react substantially to the fear of missing products on shelves, to the present (empty shelves), as well as to the future (closed borders, table 3. results of multi-variant regression (source: prepared by authors) summary output regression statistics multiple r 0.84261 r square 0.709992 adjusted r square 0.696182 standard error 0.396563 observations 89 anova df ss ms f significance f regression 4 32.34053 8.085133 51.41179 8.13e-22 residual 84 13.21003 0.157262 total 88 45.55056 coefficients standard error t stat p-value lower 95% upper 95% lower 95.0% upper 95.0% intercept –0.5812 0.3759 –1.5462 0.1258 –1.3286 0.1663 –1.3286 0.1663 lockdown 0.3633 0.0978 3.7149 0.0004 0.1688 0.5578 0.1688 0.5578 people’s recommendations 0.1052 0.0969 1.0849 0.2810 –0.0876 0.2980 –0.0876 0.2980 empty shelves 0.2077 0.1037 2.0032 0.0484 0.0015 0.4139 0.0015 0.4139 economic breakdown 0.4163 0.0984 4.2304 0.0001 0.2206 0.6119 0.2206 0.6119 52 z. blažević bognar, n. pleša puljić. the influence of media on impulsive buying in the era... hindered market trading, and economic breakdown), and to a new potential lockdown. to be more concrete, the intensity of impulsive buying will increase by 0.4163, with a significance level of 5%, if the fear of a potential long-term shortage of products due to closed borders, hindered market trading, and economic breakdown increases by one point, with the rest of the variables remaining unchanged. with this, it can be determined that potential shortages of products in the future have the most intensive influence on impulsive buying in the covid-19 pandemic era. it is also important to mention the influence of the lockdown on impulsive buying. namely, if the fear of lockdown grows by one point, with the rest of the variables remaining unchanged, then the intensity of impulsive buying will increase by 0.3633, with a significance level of 5%. and in the end, if the fear of empty shelves grows by one point, with the rest of the variables remaining unchanged, then the intensity of impulsive buying will increase by 0.2077, with a significance level of 5% furthermore, the results of the group f test (f  = 8.13e-22) indicate that the regression model is meaningful with a significance level of 5%. the value of the multiple correlation coefficient (r = 0.84261) indicates that there is a strong connection between impulsive buying as the dependent variable and independent variables. the 71% variance of impulsive buying on the observed 89 respondents was interpreted using the above values. accordingly, it can be stated that the regression analysis has confirmed the strong connection between the components which cause fear in users during the covid-19 pandemic and impulsive buying. consequently, it is necessary to determine whether media influenced consumer behaviour during the pandemic and to determine the strength of the correlation between consumer behaviour and factors that had influenced it. the intensity of the influence of each factor on impulsive buying is presented using the multi-variant regression method. the direction and strength of the connection between the information sources the user used during the lockdown and the impulsiveness of their purchases was determined using correlation analysis, intending to determine the influence of media on impulsive buying, i.e. to test the hypothesis hypothesis 2. the media had an intensive influence on impulsive buying during the covid-19 crisis. the regression analysis of the influence of information sources on impulsive buying is given below. from the table 4, it can be seen that users react significantly to information received from media (this is also confirmed by previous research by kaur and sharma (2020), kim and su (2020), addo et al. (2020)), but they also gather information from their families. to put it more concretely, if the amount of information received from headquarters of civil protection is increased by one point with the rest of the variables remaining unchanged, the intensity of impulsive buying will increase by 0.4476, with a significance level of 5%, with which it can be determined that headquarters of civil protection had the most intensive influence on impulsive buying during the covid-19 pandemic. it is also important to mention the influence of tv news on impulsive buying. namely, if we increase the amount of information about covid-19 from tv news by one point, with the rest of the variables remaining unchanged, the intensity of impulsive buying will increase by 0.2517, with a significance level of 5%. it is interesting to note that the influence of information gathered from facebook is significant, so if the intensity is increased by one point, the intensity of impulsive buying will increase by 0.1921, with a significance level of 5%. business, management and economics engineering, 2022, 20(1): 41–58 53 furthermore, the results of the group f test indicate that the regression model is meaningful with a significance level of 5%. the value of the multiple correlation coefficient (r  = 0.8056911) means there is a strong connection between impulsive buying as the dependant variable and the information sources. the test is valid since the 65% variance of impulsive buying of the observed 89 respondents was interpreted using these aforementioned factors, hence it can be stated the regression analysis has confirmed the strong connection between the above-mentioned information sources of users during the covid-19 pandemic and impulsive buying, with especially strong connections between media and impulsive buying, which confirms hypothesis h2. in order to even further confirm the thesis that media influences impulsive buying, a correlation matrix was made which consisted of information sources during the pandemic and indicators of impulsive buying in users. the results are shown below. the correlation matrix shows the strength and direction of the connection between individual variables. according to the table  5, it is interesting to note that a negative correlation was not observed in any analysis. this is why it can be stated that the information table 4. results of multi-variant regression (source: prepared by authors) summary output regression statistics multiple r 0.8056911 r square 0.6491381 adjusted r square 0.6188167 standard error 0.4441938 observations 89 anova df ss ms f significance f regression 7 29.5686 4.2240864 21.40858 4.633e-16 residual 81 15.98196 0.1973081 total 88 45.55056 coefficients standard error t stat p-value lower 95% upper 95% lower 95.0% upper 95.0% intercept –2.4506 0.5941 –4.1249 0.0001 –3.6326 –1.2685 –3.6326 –1.2685 facebook 0.1921 0.1223 1.5705 0.1202 –0.0513 0.4356 –0.0513 0.4356 tv news 0.2517 0.0796 3.1602 0.0022 0.0932 0.4101 0.0932 0.4101 friends 0.0740 0.0871 0.8496 0.3981 –0.0993 0.2472 –0.0993 0.2472 family 0.2743 0.1062 2.5831 0.0116 0.0630 0.4857 0.0630 0.4857 headquarters 0.4476 0.1325 3.3793 0.0011 0.1841 0.7112 0.1841 0.7112 newspaper 0.1640 0.0901 1.8199 0.0725 –0.0153 0.3433 –0.0153 0.3433 radio 0.0989 0.0708 1.3977 0.1660 –0.0419 0.2397 –0.0419 0.2397 54 z. blažević bognar, n. pleša puljić. the influence of media on impulsive buying in the era... sources and the information gathered had a positive influence on impulsive buying. the strongest connection was discovered in the information from headquarters of civil protection (0.6590), which confirms that, during the lockdown, headquarters of civil protection had the largest influence on the attitudes and behaviour of consumers. a medium-strong connection was found between impulsive shopping and the information that was gathered from peers (0.5212) and family (0.4760) so it can be stated that, besides media, information also came from those sources that had also influenced consumer behaviour. it is important to mention that a strong positive connection was found between impulsive buying and information gathered from newspapers (0.5440), facebook (0.5275), tv news (0.4684) and radio (0.4504), which indicates that media influenced impulsive buying, which once again confirms hypothesis h2: the media had an intensive influence on impulsive buying during the covid-19 crisis. conclusions epidemiological measures were implemented to supress physical contact between people which disturbed the market. the obtained information (either from media or surrounding individuals) instilled even more fear in individuals. all of the above had influenced significant changes in behaviour during the lockdown, which this research proved with hypothesis h1. impulsive buying emerged because of fear of missing out on certain products and of scarcity. surrounding individuals and society, in general, had a strong influence on this behaviour, yet this survey shows that media had the strongest influence of them all. the survey has indicated that the most influential information on impulsive buying had come from headquarters of civil protection, which were transmitted by the media, and there was also a strong connection between impulsive buying and news from tv, newspapers, radio, and facebook, which confirmed hypothesis h2. the empirical research proved there had existed a significant intensity of impulsive buying during the first lockdown, as well as further along the pandemic, and that media had had a significant influence on this behaviour. therefore, indicators from this survey can help in table 5. results of correlation matrix (source: prepared by authors) impulsive buying facebook tv news peers family headquarters newspaper radio impulsive buying 1 facebook 0.5275 1 tv news 0.4684 0.2861 1 peers 0.5212 0.5703 0.4123 1 family 0.4760 0.4279 0.0538 0.3780 1 headquarters 0.6590 0.3492 0.3019 0.3636 0.3989 1 newspaper 0.5440 0.4371 0.2564 0.3771 0.2511 0.4860 1 radio 0.4504 0.2039 0.1902 0.2522 0.1344 0.5161 0.4294 1 business, management and economics engineering, 2022, 20(1): 41–58 55 identifying the key factors of impulsive buying, with the goal of predicting future consumer behavioural patterns in similar crises. this research had a couple of limitations. firstly, due to the limited financial resources, the gathered data only encompassed the republic of croatia. in subsequent surveys on this topic, it would be worthwhile to involve more respondents, and to compare data to data from other countries, as well as data from previous crises, to gain a clearer picture of consumer behaviour in times of crises/ pandemics and the influence of media on it.  secondly, the data was collected online with a survey due to still existing epidemiological measures. this leaves more space for other studies, which can be conducted with other methods. finally, this research was conducted on a random population sample, so to prove hypothesis 2, the database had to filtered out according to the buying intensity, so that only impulsive buyers could be analysed (n = 89). it would also be important to analyse the population that has gone through some previous crisis periods, in which there was a shortage or fear of a lack of tested products (such as war, smallpox, spanish flu...) and analyse the impact of previous experience on the impulsiveness of buying today, but also potentially in future periods. from the above analysis, the behaviour of users in the following crisis periods could be assumed. the practical implication of this paper is mainly related to governments, consumers and media providers. firstly, in similar crises it will be necessary for governments to find a system which will disprove false information spread by media, so that information anxiety is mitigated on time. secondly, a higher media and information literacy is necessary for consumers to overcome potential information anxiety and thus 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accepted 24 january 2021 abstract. purpose – the purpose of this research is to explore factors influencing syrian female academic researchers’ experience in academic research in the field of business and economics studies. research methodology – the research methodology follows a qualitative approach. the methodology is based on conducting focus groups with female academic researchers selected from syrian public and private universities, to clarify any potential factors, which may be influencing women researchers’ experience. subsequently, a semi-structured interview protocol is designed to be applied to this target group. a judgement-sampling technique is selected at syrian public and private universities. findings  – the research findings indicate that personality traits, passion for research, marital and maternal status are important micro-level factors are influencing female researchers’ experience. academic work overload, an organisational culture of the institution, need for networking support with the business sector, are identified as meso factors. finally, social culture and norms of the middle eastern societies, stereotyping and interpretation of religion are crucial factors at a macrolevel. the research develops a theoretical framework of dimensions, which may be influencing female academic researchers in the field of business and economics. research limitation/implications – the research limitation is associated with sampling size and geographical scope. future studies could investigate a larger sample with representative geographical scopes, and employs theory testing approaches. future research could also extend its investigation to examine further disciplines including science, mathematics, engineering and technology. practical implications – the study provides practical advice to decision and policymakers examining employment and hiring structure and suggests evaluating policies associated with support with childcare providing on-campus childcare. the study advises introducing support mechanisms for improving the reward system and compensations schemes for academic researchers, encouraging the development and production of scientific research. originality/value – there is no prior research on women researchers in syria. this research is considered as a new perspective of women researchers in syria during a sensitive time, which characterises syria. the study provides a theoretical contribution associated with experiences of female researchers at faculties of business and economics in syrian higher education. keywords: female researchers, inductive approaches, qualitative analysis, semi-structured interviews, higher education, faculties of business and economics. jel classification: j12, j16, i24. http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 mailto:s-dalati@aiu.edu.sy mailto:serene.dalati@gmail.com https://doi.org/10.3846/bmee.2021.13232 https://orcid.org/0000-0002-4523-4068 92 s. dalati. factors affecting syrian female researchers’ experience during crisis: inductive approach introduction the status of female academic researchers is increasingly becoming a subject of interest as it is still under-researched and the subject of female academic presence and influence in the middle east is still unexplored topic (alberti-alhtaybat & aazam, 2018; kaw & ahmad, 2014). prior academic research indicates challenges associated with social, cultural, economic and gender issues which generally impair women from pursuing career advancement (sidani et  al., 2015; al-lamky, 2007; tlaiss & kauser, 2010, 2011; karam & afiouni, 2014; moghadam, 2013; dalati, raudeliuniene, and davidaviciene, 2020). the situation of female academics in the middle east requires further exploration where research gap clearly exists (karam & afiouni, 2014; alberti-alhtaybat & aazam, 2018; al-asfour et al., 2017). the purpose of this study is to develop an understanding of factors, which may be affecting syrian female academic researchers’ experience and attitudes at the faculties of business and economics in syrian universities. however, there exists a research gap on the topic of women researchers in higher education, as there is no adequate research investigation on syrian women in academia. this study aims to bridge the literature gap, which has not been investigated previously investigated. syrian women academic researchers can play an essential role in the implementation of sustainable development goals and creating creative solutions for problems in different aspects (dalati et al., 2020). syrian female researchers have significant roles in transforming and lifting research higher education in syria, and in so doing, they would be lifting up syria as a whole. understanding the factors which influence syrian women academic researchers’ experience, both positively or negatively will enable higher education experts, policy and decision-makers to develop rewards, incentives and policies supporting the advancement of female academic researchers and boosting a culture of achievement and egalitarianism at syrian higher education. the examination of this study is not only specific to the middle east; instead, it is a general phenomenon, under investigation in both developed and developing regions. the unesco institute for statistics (uis) presents facts sheets on the status of women in science, indicating that women are identified as a minority of the world’s researchers in the field of research and development (unesco, 2017). a study, which is conducted on female researchers in kashmir, which was a conflict zone between india and pakistan, emphasises that women researchers have faced many obstacles and challenges in the pursuit of their research path, mainly surrounded by male-dominated environments (kaw & ahmad, 2014). although there is a growing demand for cross-national statistics on female researchers, at a national level, the statistics indicate lower percentages. the unesco fact sheet (2017) indicates that the regional averages of the percentages of female researchers based on available data only for 2014 are 28.8% for the world, 39.9% for arab states, 39.6% for central and eastern europe, 47.2% for central asia, 22.9% for east asia and the pacific, 44.7% for latin america and the caribbean, 32.2% for north america and western europe, 19.0% for south and west asia and 30.4% for sub-saharan africa. as indicated earlier, arab states account for 39.6% for female researcher representation, and this is considered as an adequate comparison with other regions. tunisia accounts for business, management and economics engineering, 2021, 19(1): 91–110 93 53.9%, egypt 42.2%, sudan 40.0%, algeria 34.8%, morocco 32.1%, libya 24.8%, bahrain 39.0%, iraq 37.50%, kuwait 37.3%, jordan 22.5%, qatar 21.9%, saudi arabia 4.0%, and no available data on syria, lebanon and yemen. turkey has 36.9% of female researchers. 1. women in research and career advancement challenges and barriers affecting women in academic research have been studied. these challenges include individual, demographic, institutional and socio-cultural factors inhibiting women in the academic sector from pursuing a research career. studies have been developed in the us, eu and australia on women researchers and research productivity across gender (cole & zuckerman, 1987; hensel, 1991; davis & astin, 1987; menges & exum, 1983; sax et al., 2002; blättel-mink, 2008; ramsay, 2001). however, and to the best of the researchers’ knowledge, there is little research examining female academic researchers in the middle east region. 1.1. individual and demographic factors prior studies on women career advancement emphasise the importance of individual factors including personality traits, maternal, marital status and family responsibility (lobel & clair, 1992; greenhaus & parasuraman, 1993; aycan, 2004). personality traits include self-efficacy, self-confidence, strong desire to excel, outstanding career identities, contrasted with family identities, internal attribution to success and positive attitudes to mobility. individual and demographic factors explore how marital, and maternal status are implicated in the research process (frost & holt, 2014). a female researcher maternal status as a mother or non-mother is affecting research choice and methodology. female researcher’s ability to create a balanced life between work and family and household responsibility, making a difference to the society and passion for academic work, are factors under examination (reynolds et al., 2018). in countries where women are expected to work and participate in public life, these women were not relieved of their traditional duties as wives and mothers; and consequently, they faced a double burden of being an employee and household manager (adler, 1993). studies in the us reveal different examinations on the effect of marriage, motherhood, and family, on female academic’s productivity and career advancement (cole & zuckerman, 1987; hensel, 1991; davis & astin, 1987; menges & exum, 1983; sax et al., 2002). whereas cole and zuckerman (1987) indicate that us women researchers are generally less productive than male counterparts, marriage and family obligations do not generally account for the gender disparity. the study argues that married women researchers with children, publish as frequently as single women researchers no children. in contrast, davis and astin (1987) found that there are no differences in productivity between male and female us researchers in the quality or quantity of work. sax et  al. (2002) examined the effect of marriage, children, and ageing parents on faculty research productivity on a sample selected from 57 universities in the us and found no significant difference in factors affecting faculty research productivity between men and women. the study reveals that family-related variables exhibit little or no effects on research productivity. 94 s. dalati. factors affecting syrian female researchers’ experience during crisis: inductive approach a strong argument is that research on women or by women is underestimated by male counterparts, and women’s family and child care responsibilities may account for female academics’ lower levels of promotion and career advancement (hensel, 1991; kaw & ahmad, 2014). 1.2. institutional factors institutional factors which may impair women researchers from career advancement and academic representation in top-level professorship positions include lack of networking abilities, absence of informal training, the limited process of modelling on a successful and experienced career, and a lower level of research development, as compared to their male counterparts (gardiner, 2005; reynolds et al., 2018; kaw & ahmad, 2014). the existence of gender inequality at higher education is denoted in us and eu studies, indicating that higher education institutions have been dominated by male perspective in developing policy and performance evaluation (hensel, 1991; blättel-mink, 2008). barriers associated with australian female researchers development are associated with research scholarship programs and financial support, lack of female role models and mentors, lack of supportive research environment, problems with supervision, and higher education institutions’ inflexibility to accommodates part-time research degrees (ramsay, 2001). 1.3. socio-cultural factors aycan (2004) examined the causes of women underrepresentation at senior organisational levels in turkey and indicated the effect of socio-cultural factors, identifying gender-role stereotypes and perceptions towards women career advancement. at middle eastern culture, there exist societal practices institutionalising negative discrimination concerning women, often codified in laws that prohibit women from participating in much of public life or fully competing in the labour market. this zone is characterised by the low status of women in general, high fertility rates coupled with low age at first marriage, high maternal and infant mortality rates, higher rates of female illiteracy, lower levels of female educational enrolment, low female labour force participation, and the lack of women’s political participation and political rights (moghadam, 2003; caldwell, 1982, 2004; littrell & bertsch, 2013; afiouni et al., 2019). 2. research context of syria during crisis syria is in the middle east nearby the mediterranean sea, surrounded by turkey, lebanon, jordan and iraq. the middle eastern and arabic culture is examined as based on high power distance and gender inequality which stems from a patriarchal and tribal arabic society (hofstede, 1994; bjerke & al-meer, 1993; caldwell, 1982, 2004; littrell & bertsch, 2013, moghadam, 2013). the patriarchal society is examined in prior research as culture, which fundamentally supports the practice of arranged marriages, dutiful daughters and obedient wives. these values and practices are also emphasised in islamic traditional values and practices. the business, management and economics engineering, 2021, 19(1): 91–110 95 patriarchal society expects women to play the role of housewives maintaining the household, taking care and bring up the children and accommodate the needs of husbands (littrell & bertsch, 2013). the prevalent social culture, which characterises arabic nations, is based on high power distance and gender inequality (littrell & bertsch, 2013; house et al., 2004). the turbulent political environment in syria, which goes back approximately to the past ten years, has created a catastrophic situation on different levels. the population of syria, which was about 22.1 million in 2010, is estimated to have decreased by at least 20% since march 2011. more than 250,000 people have been killed as a result of the fighting (gobat & kostial, 2016). the prevalent organisational environment of higher education sector in syria could be generally characterised by traditional management approaches with strong bureaucratic and male-dominated environment, application of traditional methodologies, lack of individual recognition and effective encouragement of outstanding performance, limited collaboration with international partners and networks, and lack of effective empowerment program schemes dedicated to research development (dalati & al hamwi, 2016; dalati, 2016; dalati et al., 2017; azmeh, 2019). the turbulent political environment in syria has created a threat and an opportunity for syrian women academics to endeavour to take significant roles in various fields of both academic and administrative features at universities in syria. many syrians lost their jobs, properties and in the worst cases their lives. many people left syria, including students and academics seeking safer zones and better standards of life (dalati & alchach, 2018). 3. research problem and objectives the purpose of this research is to explore factors affecting syrian female academic researcher’s perceived experience in scientific research development in the scope of business and economics. the study examines the following research question: “what are the factors which are affecting female syrian academic researchers’ experience in academic research in the field of business and economics?” the original motivation for exploring factors influencing the situation of syrian women researcher’s experience in academia is associated with the minimal representation of syrian female researchers who exist on the international research map. a national study illustrates that only 8% of top syrian international researchers are women (khalifa et  al., 2015, p.  23). understanding factors related to women researchers’ attitudes and experience in the field of business and economics would enable us to develop organisational mechanisms and policies to empower and support them to develop their capacities as academics and researchers. for example, networking abilities and experiences have been highlighted by the literature as an important factor, which represents an area of further development for women in academia. in the business field, this dimension represents a crucial success factor for academic researchers establishing networks with the business sector and linking academia to business. to the best of the researcher knowledge, there is little research developed on syrian women in academia in the field of business and economics. it would be very interesting to explore the research question in syrian academic women researchers’ lenses. 96 s. dalati. factors affecting syrian female researchers’ experience during crisis: inductive approach 4. research methodology the research methodology follows a qualitative approach, aiming to develop a theory of syrian female academic researchers experience at faculties of business and economics. exploring research problem, a qualitative research approach is employed, particularly because the researcher seeks to develop a thoughtful understanding of a phenomenon through the detailed description (zikmund et  al., 2013; yin, 2018; bryman & bell, 2015; cooper & schindler, 2014). an inductive approach was employed performing interviews with individuals involved with the problem and its possible solution. an inductive approach starts with observation and findings, assumes, and infers the implication of their findings that introduced the theory. the findings of the research are fed back to the theory. with the inductive approach, the theory is the outcome of the research (bryman & bell, 2015). figure  1 clarifies inductive approaches. 4.1. research sampling strategy a judgment sampling technique is applied based on the researcher’s judgment about the appropriate characteristics required of a sample unit of analysis to satisfy a specific purpose (zikmund et  al., 2013). in this research, a judgment sample is selected to realise a specific purpose. a judgment sampling is a non-probability sample technique, where the researcher selects units based on their knowledge and personal judgement. a non-probability sampling strategy is an approach where the sample is gathered in a process that does not allow all elements in the population equal chances of selection (cooper & schindler, 2014). sampling strategy identified main public and private syrian universities operating in damascus, syria. the sample unit of study is a female academic researcher who is a phd holder and who has conducted at least one research work or on the process of working a research work. the number of women researchers at faculties of business and economics at damascus, syria is limited. therefore securing a larger sample size is challenging taking into consideration the scope of study and the geographical location, which is business and economics. �eory observation/finding inductive approach figure 1. deductive and inductive approaches (source: bryman, 2013) business, management and economics engineering, 2021, 19(1): 91–110 97 the difference between public and private universities in syria is crucial, in terms of size, governance, legal nature and organisational structure. however, many female academics who are employed in public universities have also part-time teaching work in private universities. faculties of business and economics were identified, and female academic researchers were selected based on phd degree and field of academic study. the reason for identifying a female academic researcher as phd holder is related to characteristic qualities of a phd holder as an individual experienced with research philosophy, activities, process, fieldwork and ethics. research participants were identified taking into account gender, marital and maternal status, the field of research, type of institution, and religion. the sampling approach is best described as judgement sampling strategy. in one occasion, a female participant recommended another female colleague who worked at the same institution. consequently, this individual academic researcher was interviewed later. this approach is associated with snowball sampling (cooper & schindler, 2014; zikmund et  al., 2013). semi-structured interviews were conducted with ten female participants selected from public and private universities located in damascus, syria. the interviews were conducted between may and june 2017. 4.2. research instrument and data collection design research instrument and data collection design comprise of two stages. the first stage is based on conducting focus groups with female participants selected from universities operating in damascus, syria. the second stage is based on conducting semi-structured interviews with syrian female researchers selected from public and private institutions operating in damascus, syria. the purpose of the focus group is to clarify potential factors, which may be influential. the reason and justification of this stage are to explore the potential factors which may be significant to include when designing the interview protocol. the group consisted of five female academics, two fulltime staff at a private university, and three full-time staff at a public higher education institution. participants identified individual and demographical factors, including marital and maternal status, personality traits, motivation, empowerment within the family and spousal support. institutional factors are also identified, including academic workload, time pressure related to hours of teaching, financial incentives, regulations, networking with stakeholders and socio-cultural factors. the abovementioned factors were employed as the foundation for developing designing a research framework and instrument for understanding factors, which may be influencing syrian female researcher’s experience. the focus groups were documented by voice recording. participants’ informed consent was obtained. the focus groups are conducted in the arabic language. the second stage is based on developing a semi-structured interview protocol and conducting semi-structured interviews with syrian female researchers selected from public and private higher education institutions operating in damascus, syria. semi-structured interview protocol is developed to explore factors which may be influencing female researchers’ perception and experience. open-ended questions were designed to explore themes developed in the focus group. individual in-depth interviews were performed with 12 female participants, investigating three levels of examination. consequently, ten interviews were employed. the 98 s. dalati. factors affecting syrian female researchers’ experience during crisis: inductive approach first set of factors corresponds to the micro-level identifying individual, demographical and family-work related questions. at this level personality traits, motivation for research, family background, and family responsibilities were identified for exploration. the second set of factors corresponds to the meso-level identifying institutional and regulation questions. at this level, factors associated with organisational culture, networking with business sectors, and regulation factors were identified for examination. the third set of factors correspond to macro-level identifying socio-cultural dimensions. at this level, factors associated with the social perception of women, stereotype issues concerning the role of women, and the perspective of religion were identified for scrutiny. figure  2 illustrates research process applying a specific-general approach which starts with a research question, leading research to exploration and observation applying research instrument, and analysis procedure, to infer implication of findings to introduce a theory. 4.3. semi-structured interview protocol an interview protocol is a list of questions, which are designed to clarify research topics and themes. the interview protocol guideline was designed identifying broad themes and categories investigated in the interview process, and the questions relevant to each of the outlined categories. the interview protocol is designed according to the following structure. 1. demographical factors questions about participants’ date of birth, marital status, maternal status, religion, faculty, department, the field of research and institution were listed in the interview protocol. 2. personality and motivation factors questions on personality traits and motivators for female researchers. an example of a question in this category is what motivates you to develop research? 3. work-family responsibilities factor questions on the perspective of the researcher’s family and possible inhibitors, which may impair female researcher from pursuing an academic researcher career. 4. institutional factors questions about networking with research business sector. an example of a question in this category is “what barriers and challenges associated with networking with research business sector?” ��������� �������� ����������������� ���������� ��������� ������ ������� ����������� � ����������� ����������������� ��������������� ����������� ��������� ������������ ��������� �������� ����� �������������� � ����������� ���� ��� �������� ��������� ��������������� ������������ ����������������� ���� �������� ����� �������� �� ��� ����������������� � ���������� ������������� �������������� ����� � �������� ����������� � ��������������� ��������������� ������ � �������� � ����� figure 2. research process business, management and economics engineering, 2021, 19(1): 91–110 99 5. socio-cultural factors are listing questions on socio-cultural perception of female genderrole stereotypes and perceptions towards women career advancement, the perspective of religion towards women playing a role in academic research fields. an example of a question on this factor is “what is the perspective of religion towards women playing a role in the academic research fields?” the interview protocol comprised of essential questions, extra questions, throw away questions and probing questions (berg, 2001). developing interview protocol is a dynamic process, which enables the researcher to improve the interview protocol guidelines during the interviews process. the research identifies the following female researchers, which are assigned pseudo names for anonymity and confidentiality issues. table 1 illustrate participants profile identifying their age, marital status, religion, the field of research, and type of sector. the semi-structured interviews were conducted in arabic and were documented by voice recording. consequently, the interviews were written following a verbatim format. since the interviews were in the arabic language, the original verbatim report was prepared in arabic. consequently, the direct quotes employed in the research analysis were translated from arabic to english by the researcher who is proficient in english. interview data were analysed by performing content analysis identifying keywords, themes and subthemes, examining concepts, collecting examples of the concepts, and analysing them to research commonalities. the interviews transcripts are broken to data sections, performing a sentence-by-sentence analysis. the second stage of analysis comprises of open coding phase where researcher allocates codes for each sentence, eventually making a list of all codes. the third stage of analysis comprises closed coding, where the researcher identifies primary sub-themes, which categorises the open codes. finally, final themes are identified reflecting relationships between themes and subthemes and quotes from the interview transcript. table 1. female research participants profile in semi-structured interviews (source: compiled by author) code name age group marital and maternal status field of research institution lisa 50–55 single / child free economics public sally 50–55 widow / mother organization development public brooklyn 40–45 married / mother human resources management public maya 40–45 married / mother human resources management private harriet 40–45 married / mother marketing public rachel 40–45 married / mother applied statistics public pamela 40–45 divorced /mother accounting public sandi 40–45 married / mother finance public amy 35–40 single / child free economics public sabrina 35–40 single / child free marketing private 100 s. dalati. factors affecting syrian female researchers’ experience during crisis: inductive approach 5. research results a set of factors at different levels were identified as maybe influencing syrian female researchers’ experience in the field of business and economics. these factors are derived from the conceptual structure of the semi-structured protocol and are identified and classified as micro, meso and macro levels. direct quotes from interviews narrative are employed. 5.1. micro-level at the micro-level, personality traits, motivation for research, family and social background, spousal support, education, marital and maternal status and work-family responsibility, are emphasised as crucial factors. female researchers emphasised a number of personality traits including self-independence, self-esteem, self-confidence and acceptance of constructive criticism. the importance of family background and education has been emphasised. the discussion indicates that social and family background and childhood upbringing are crucial shapers of personality. sally emphasises that her family background, the primary and secondary education she received is the strong shaper of personality and career: i studied at american and british schools until the tenth grade, and then i acquired my syrian baccalaureate. my parents’ work was at the un, and we changed locations and countries due to my parents’ work; that is why my primary and secondary schooling was mainly at american schools. i always felt different from others. our british and american teachers always encouraged us to express ones’ opinion. i was brought up in a liberal family and schooling environment where i would express my view freely. i think this affected my personal abilities and personality in developing analytical skills. both intrinsic and extrinsic motivation for developing research is highlighted by research participants. motivational factors considered social esteem, self-esteem, self-actualisation, passion for research, field and innovation for research. when asked on the motives for research, sandi reflects on two motivational factors, which she believes are the main source of motivation to do research: there are two factors, which cause motivation for research, one it is a passion for my field of academic work, as i have followed a field of expertise i have passion for. i always believed that passion for work is a major prerequisite for success. i find myself in academic research [for business and economics]. two, it is a sense of belonging to the institutions i work for. we have a very good organisational environment at my institution. we have a very good research infrastructure. i do not distinguish the great difference in quality between the research lab at the eu institution where i studied and our present institution. it is a similar environment. when i read an article in my field of expertise, i spend hours without sense the passing of time. time passes so quickly. reviewing one article would lead to another, and so on. in addition, my field of research is applied where the practical application is feasible. for example, with microeconomics application is a very practical discipline, whereas with macroeconomics, in as much as it is an interesting discipline, i cannot find myself in the direct application of it. maya, on the other hand, discussed the nature of motivation for research indicating both intrinsic and extrinsic motivators, related to financial rewards and academic promotion. business, management and economics engineering, 2021, 19(1): 91–110 101 there are two types of motivation for academic research: intrinsic and extrinsic. extrinsic research is related to financial rewards allocated by our institution accordingly taking into consideration the budget and time allocated for research. intrinsic motivation is associated with the academic promotion and academic ranking of academics. marital and maternal status are considered as significant factors shaping female researcher experience. the majority of participants interviewed indicated that marital situation affects female researcher productivity taking into account the social environment in syria, which is male-dominated and stereotypical assigning gendered roles and responsibilities to men and women. when asked about the condition of combining research with family responsibility, maya indicated the importance of time management and creating a balance between academic research and social life. definitely, marriage and family responsibility have an effect on female researcher productivity as it can consume the time available for research. however, if a women researcher can organise and manages time and give up on social activities, she could succeed. sandi also emphasises the importance of spousal support and work affiliation: had my husband not been in the same work domain of higher education, my marriage would have never lasted. i finish work at 4:00 pm, i take my work home with me, i have students’ senior projects and thesis, i work late, and i have to prepare for next morning lectures. all this, cannot be understood or appreciated by someone out of the higher education sector, particularly in a patriarchal society, which places men in the first place. there are household and family responsibilities. comparing single and married women researchers, single women would be more creative and successful. harriet also emphasised marriage and family responsibility as one of the barriers of woman researcher abilities and career advancement: i lock myself in my bedroom. i work on my academic work sometimes for 5 or 6 hours nonstop. my daughter asks me “mom, when are you going to finish and join us?” my daughter is six years old. this is stressful. especially if we want to compare roles of men and women across cultures. in western societies, there is better flexibility in allocating roles of men and women. in our society, it is demanding and obligatory for a mother to spend time with children, but a father does not experience the same obligation and stress. lisa reflects on combining work with household and family responsibilities indicating the question of gender equality at work in syria: women have more duties than men taking into consideration household work and family responsibility. in syria, we are discussing that women have achieved gender equality at work outside the house. however, what about equality in the house? she has achieved equality outside the household, but inside they are not equal, as he [husband] is not working inside the house. whereas the micro-level factor explores individual dimensions emphasising personality traits, attitudes and motivation for research, the next level will explore organisational factors, which will be categorised under the meso-level. 102 s. dalati. factors affecting syrian female researchers’ experience during crisis: inductive approach 5.2. meso level there immerges a set of factors on an organisational level, influencing the female experience researchers and creating barriers on female academic researcher productivity. these factors are associated with academic work overload, the organisational culture of the institution, need for networking training with business sector and stakeholder. as for academic work overload, 9 out of 10 female participants emphasised academic teaching overload as a factor, which is impairing them concentration on scientific research, particularly for female academic at private universities. amy reflects on this topic: in private universities, we teach for 14 hours on weekly bases, as directed by ministry of higher education in syria, which could be an overwhelming number of teaching hours. this teaching overload requires extensive work and academic preparation. this extensive time and work overload should have been employed in academic research[instead]. academic teaching overload in private universities in syria is a major factor, which impairs the production of research. maya also emphasises teaching overload as a major barrier impairing her from performing research: i teach for five sections in one course. there are 30 students on average at each section. this means marking paper quizzes, midterm, and final exams. i started working on research then stopped because i could not cope, as there is a lack of time, and it is exhausting. i take my work at home with me. i have to prepare for lectures; i have to update the course curriculum. my academic work does not end at work; i have to take it with me at home. clearly, there is overlap between academic work overload and family and household responsibility for a female academic researcher. the effect of academic teaching work overload is interrelated with combing household work and family responsibility with academic work responsibility. although teaching overload is a barrier, which could be impairing both men and women from producing and engaging in research, women academics are more vulnerable to this factor, as they are also confronted with family and household work, mainly at arabic and middle eastern societies. lack of networking with business sector and stakeholders is emphasised as a challenging factor, which impairs women researchers from achieving their full potential. in addition, the need for networking training is emphasised. female networking with the business sector and stakeholders is limited due to the nature of the business, which is male-dominated in syria. lisa reflects: the majority of syrian businesses are male-dominated. in syria, business [networking] is not based on institutions and corporations in as much as it is on personal efforts, and networking. the problem is the lack of institutionalisation and much emphasis on personal networking. in our society, women have limitations with regard to networking. apart from a problematic reputation for a woman who is behaving outside the frame of social stereotype, i am personally incapable of engaging with businessmen networking environment in syria, which advocates late business dinners or meetings. women are very venerable when it comes to their reputation and interaction in the social environment. business, management and economics engineering, 2021, 19(1): 91–110 103 male-dominated organisational cultures are one of the factors at a meso level, which is stressed in the interviews. a general belief by research participants is that there is a deliberate covert attitude of excluding women from senior management positions and career advancement. this is due to woman femininity (marriage, maternity), and to male perception and stereotyping of women as incompetent, and less effective than men as managers. pamela who is a head of department argues that she often is exposed to such expression as “it is a woman way of management” indicating stereotypical perception men academics hold of women in management positions in the higher education sector. this attitude towards women in academia leads to a situation where female academics face lower status positions of responsibility and earning lowers financial income. therefore, higher education institution leadership is male-oriented because female influence over important academic and institutional approaches is very limited. while organisational dimensions, including academic work overload, need for networking and organisational cultures, are explored at the meso-level, the next section explores, socio-cultural factors and interpretation of religion. 5.3. macro-level at a macro-levels, there immerges a set of factors creating influencing barriers for women. these barriers stem from the social culture and norms, which characterise the general perception of women and perceived roles and responsibilities and assigned to both men and women in the frame of middle eastern and patriarchal societies. these factors are identified as the social perception of women, and religion and its interpretation. social perception of women is discussed by all-female participants and is reflected in the perception of women as wives and mothers whose primary duty is to become a housewife, bring and raise children. therefore, women’s primary role and responsibility are becoming a wife and a mother, not pursuing a professional or academic career or becoming an academic researcher. harriet reflects: the perspective of [arabic] society would favour perceiving women as wives and mothers spending the majority of their time raising their children. maya discusses the effect of social perception of women and its impact on their career advancement: we are a middle eastern society, which you could also define as a patriarchal society. therefore, women are perceived with negative and inferior thoughts, whether she is a researcher or an ordinary woman. the patriarchal society expects women to be assigned in certain roles and responsibilities, which do not exist in other societies. for example, in syria, women are expected to play different roles and responsibilities in addition to their work as a professional. married women have duties and responsibilities as wives and mothers, in addition to their roles in the extended family. brooklyn reflects on her personal experience emphasising the effect of social environment and perception: i finished my undergraduate study in 1997 and travelled for my phd study in 2001. my mother’s wish has always been to finish my phd studies. “that is enough” she would say, “you should get married and make a family!” 104 s. dalati. factors affecting syrian female researchers’ experience during crisis: inductive approach they [our parents] are concerned about a girl who travels abroad on her own. maybe they are concerned about a girl ageing in the sense that studying for postgraduate courses and phd would require time and dedication, and a girl might lose her chances of marriage. sabrina also reflects on the same notion: some families in our society do not encourage female education, as ultimately girl’s final destiny and purpose is marriage and family. we hear this notion around us that girls are ultimately destined for marriage, no matter how she advances in her education, ultimately she will end up in marriage [as a housewife and mother]. religion and its interpretation is another factor influencing women and their progression and advancement. the majority of research participants that the interpretation of religion by social norms is creating barriers for women advancement. there is no clear verse in the holy books, which discourages women from pursuing knowledge. on the other hand, female mobility is directed under specific restriction under strict religious laws; in the sense that she is not allowed to travel on her own, rather she is to be with a company a “mahram” (brother, son, uncle, nephew), husband, or female counterparts. with the modernisation of arabic societies and cultures, women in middle eastern are travelling with flexibility and not being restricted to this rule. racheal, for example, says that, that she was not allowed by her parents and family to travel abroad to pursue postgraduate studies: i was not allowed [by my parents and family] to travel abroad on my own. after i got married, my husband said, if i had known your wish i would have accompanied you. i do not have a problem with you pursuing your phd study’. 6. theory building approach this study suggests a theory based on the multi-levels theoretical framework. the microlevel presents individual factors influencing women researchers exploring both intrinsic and extrinsic motivation particularly higher needs (social esteem and self-esteem, self-actualisation). for the majority of female participants interviewed in this study, passion for research, social esteem, self-esteem, and self-actualisation are important dimensions. researcher’s personality traits is emphasised identifying self-independence, self-esteem, self-confidence and acceptance of others’ opinion and constructive criticism. family background, education and support are also suggested as a crucial dimension in shaping female academic researcher personality and experience. academic work overload, limited networking with business stakeholders, and maledominated organisational cultures are emphasised as critical elements, at higher education environment in syria. the need for empowering and training women researchers on how to network and create professional is critical for female researcher success. factors associated with social culture in syria is highlighted. syrian culture is mainly arabic and influenced by patriarchal values, which assign roles and responsibilities for women as well as men. women are still perceived and favoured as wives and mothers, rather than highbusiness, management and economics engineering, 2021, 19(1): 91–110 105 level professional and academic researchers. the interpretation of religion is also interesting and problematic as it goes back to more than 1400 years when male religious scholars who existed in that era interpreted the holy book. it is interesting to note that different interpretation and understanding of religion exist and reflect crucial differences in understanding. figure 3 illustrate 7. discussion the current research study explored multiple dimensions studied as affecting female academic researchers at universities in syria. the study identifies micro-level factors emphasising personal characteristics and traits as self-independence, self-esteem and openness to constructive criticism. attitudes and values demonstrated by participants include high selfesteem, desire for achievement, and positive attitudes towards excellence. the research findings are consistent with prior research which identified the importance of individual factors influencing women career advancement (tharenou & conroy, 1994; aycan, 2004; greenhaus & parasuraman, 1993). the study emphasises the importance of parental and spousal support and family-work responsibility. these situational factors are strongly emphasised in this study are either motivators or barriers for academic research career advancement. for example, parental support, particularly mother, was strongly highlighted as a motivator, as well as the role of supportive and understanding spouse. on the other hand, family and household responsibilities, combined with work, create serious conflict in an academic researcher’s career advancement. this research finding is also consistent with previous studies which highlighted the significance of family – work factors (davidson & cooper, 1987; aycan, 2004). �������������� ��������� ��������������� � ����������� ��������� ���� �������������������� ������������ ��������� ��� �� ������� � ����� ���������������������������� � ����������������������� ��� ������������������������ ���� �������������� �� ���� ����������� ������ ������� ����������� ���� ��������� �� ������������������ ������� ������ ��������������������������� figure 3. theory of female academic researchers in business and economics in syria 106 s. dalati. factors affecting syrian female researchers’ experience during crisis: inductive approach at the meso-level, the study emphasises on the existence of male-dominated organisational cultures, which undermines the success of women through the stereotypical perception of women as incompetent, less effective and subservient, rather that competent and independent. the current study indicates the existence of networking challenges, which impair women from achieving their full potential in male-dominated cultures. the research finding is consistent with results by previous research which indicated male-dominated cultures is an obstacle to women success (adler, 1993). the findings of the study are consistent with previous research emphasising barriers female professionals experienced in communicating and networking in male-dominated organisational cultures (aycan, 2004). at a macro-level, research study findings indicate the existence of socio-cultural highlighting social norms and gender roles as factors shaping attitudes towards women pursuing a professional career. there are undeniably social barriers shaping women academics researchers’ career advancement and success. these barriers stem from a social culture which perceives women primary role and sacred duty as wives and mothers while putting lesser importance on the role of women as professionals, or equal work partners. the research findings are strongly consistent with previous research studies which studied the effect of socio-cultural norms on women career advancement and the effect of patriarchal societies on women career advancement and effective professional participation (caldwell, 1982, 2004; littrell & bertsch, 2013; moghadam, 2013; tlaiss & kauser, 2010; sidani et al., 2015; aycan, 2004). the research findings indicate the significance of religion and its interpretation by social norms. wherein the teachings and communications of prophet mohammad of islam, there is an emphasis on seeking knowledge and learning for both men and women, the interpretation of religion by traditional male muslim scholars is causing limitation for women’s career advancement. female mobility is restricted under traditional islamic sharia, which could create constraints for muslim women to pursue their studies abroad, for example. previous studies conducted in the middle east indicate that whereas the original values of islam are viewed as supportive of women taking part in the different aspect of life, cultural practices impair arab women to function as freely as their male counterparts (naguib & jamali, 2015; sidani, 2005). however, as indicated previously, with women education, modernisation of middle eastern societies and with a comprehensive and flexible understanding of islam, women are pursuing their personal, educational and career goals. 8. research limitation and future research the main research limitation is related to sampling size and geographical scope. with the size and geographical scope of the sample, research results could not be generalised. however, research findings provide an adequate basis for building theory, which requires testing in future research. future studies could investigate a larger sample with representative geographical scope examining further syrian cities, employing the same qualitative methodology. future studies could also employ a theory-testing approach. quantitative approaches could be developed to examine empirical evidence and statistical approaches to factors affecting syrian female researchers in the fields of business and economics. future research could also extend its investigation to examine further fields including science, medicine, engineering and technology. business, management and economics engineering, 2021, 19(1): 91–110 107 conclusions and recommendation in conclusion, this research develops a theory examining factors, which may be influencing syrian female academic researchers in business and economics. the theory is based on a multi-level study examining micro, meso and macro levels. this current research study should be beneficial to female academics exploring factors affecting their research experiences and career prospects and advancement in academia. the study provides practical advice to decision and policymakers at higher education institutions and the ministry of higher education. the study examines a set of recommendations and policy advice examining employment and hiring structure at higher education institutions to investigate any direct or indirect inequality. the study suggests evaluating policies related to providing parents support related to childcare to eliminate factors causing conflict between family and work. the study also suggests examining the possibility of providing on-campus childcare. universities are capable of providing childcare facility, as this service is challenging for parents. higher education institutions in syria could also play a significant role through establishing strategic focus for building capacity and improving the performance of female researchers. syrian universities could support mechanisms for improving the reward system and compensations schemes for academic researchers, encouraging the development and production of scientific research. intrinsic and extrinsic rewards could be introduced to improve the quality and quantity of research publication. policy reform could also include introducing a carefully scrutinised academic workload, which would introduce a balance between teaching and conducting research. with an academic work overload, which is predominantly dedicated for teaching, especially for private universities, higher education institutions could take the decision to reduce the number of teaching hours in favour or dedicating time for research. combining research and teaching load is a challenging process for any academic regardless of gender. however, with household and family responsibilities creating job-family conflict, female academics face additional pressure 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(2013). busienss research methods (9th ed.). cengage learning. https://doi.org/10.1023/a:1015575616285 https://doi.org/10.1108/09649420510624738 https://doi.org/10.1108/cdi-01-2014-0009 https://doi.org/10.1111/j.1464-0597.1994.tb00807.x https://doi.org/10.1108/17537981111111265 https://doi.org/10.1108/17542411011069882 copyright © 2020 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: uliana_nikonenko@i.ua business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 2: 206–225 https://doi.org/10.3846/bme.2020.12421 analysis of institutional factors as part of the component of economic freedom as a background of improvement of structural proportions in the context of improving governance uliana nikonenko 1*, tetyana medynska 2 oleksandr bilotskyi 3, mariia baran 4, inna shevchuk 5 1faculty of media communications and entrepreneurship, ukrainian academy of printing, lviv, ukraine 2institute of economics and finance, lviv university of trade and economics, lviv, ukraine 3, 4department of public management and administration, ivano-frankivsk national technical university, ivano-frankivsk, ukraine 5departament of public administration and administration, khmelnytsky university of management and law, khmelnytskyi, ukraine received 06 april 2020; accepted 28 april 2020 abstract. purpose – the main purpose of the study is to analyze the institutional factors that are usually considered as components of economic freedom, as well as to assess the level of economic freedom as a prerequisite for improving structural proportions and stimulating the investment process in an economy with excess raw materials sector (such as ukraine). research methodology – the methodological basis is a system of complementary mathematical, general scientific and special methods, in particular system-structural comparison of retrospective, diagnostics and mathematical methods of studying possible dependence, general methods of analysis and synthesis, etc. findings – the main result of the study is that increasing the degree of economic freedom in ukraine contributes to structural shifts in favour of non-resource exports. research limitations – our assessment methodology does not take into account the specifics of most european countries and is mainly aimed at countries of eastern europe so far. practical implications – our proposed methodology for assessing the dependence of structural changes in a country’s exports on the economic freedom index ief can be used in the practice of public administration in countries of such countries as ukraine and others. originality/value – a proposed method for estimating the dependence of structural changes in ukrainian exports on the ief index of economic freedom. keywords: institutional factors, national economy, structural reforms, level of economic freedom, liberalization, exports. jel classification: f29, f43, o47, q37. mailto:uliana_nikonenko@i.ua https://doi.org/10.3846/bme.2020.12421 https://orcid.org/0000-0002-6015-6248 https://orcid.org/0000-0002-7998-4107 https://orcid.org/0000-0002-5256-5105 https://orcid.org/0000-0001-6070-9378 https://orcid.org/0000-0001-9062-8907 business, management and education, 2020, 18(2): 206–225 207 introduction the attitude to institutional factors differs in the domestic expert environment by a peculiar dualism, when the practicality of institutional changes is not disputed by almost everyone, but their interpretation and connection with the policy of financial stabilization reveal significant differences (shevchuk, 2019). since the concept of “institutional factors” is used in the academic literature in a fairly wide range – from the level of corruption to the status of a central bank, it is also often used as a synonym for structural reforms, some clarifications are needed. in a narrow sense, the institutional status of the central bank and the rules of monetary and fiscal policy are appropriate for institutional factors (other institutional factors include an authoritarian form of government (this is often one of the explanations for the successful course of economic transformation in chile since the mid-1970s), a social package (this has been used in mexico since the late 1980s), and the monetary council system as one of the options for tightly attaching a monetary unit to one of the world currencies (this was the practice of argentina in the 1990s)). it is clear that in this case, we are talking mainly about institutional factors for responsible economic policy, which should provide both financial stabilization and the necessary structural reforms (williamson, 1999). most often in this context, we are talking about a set of washington consensus events: 1) fiscal discipline, 2) government spending, 3) tax reform, 4) financial liberalization, 5) exchange rate unification, 6) foreign trade liberalization, 7) attracting foreign direct investment, 8) privatization, 9) deregulation, 10) guarantees of property rights (fiscal discipline provides for a budget deficit of not more than 2% of gdp, improvement of government spending (redistribution of expenses in favour of education, health care and infrastructure investments, tax reform (expansion of the tax base, with a reduction in marginal tax rates)). financial liberalization should ensure that the interest rate is determined on market principles, which implies its positive values (this is necessary to increase savings and prevent capital outflows). the unification of the exchange rate means the abandonment of the system of multiplied exchange rates, which in the post-war period was often used by developing countries, in particular argentina. the liberalization of foreign trade is aimed at overcoming structural deformations and creating prerequisites for increasing exports. fdi is important as a factor in increasing investment and long-term financing of the current account deficit. privatization of state-owned enterprises is important to reduce the budget deficit and increase the efficiency of the economy. deregulation aims to simplify investment and stimulate competition. protecting property rights is necessary to increase investment and increase confidence in the economy.). the economic reforms of the 1990s showed the addition of another element – balanced monetary policy (fischer, 1995). in a broader sense, institutional factors include privatization, deregulation, guarantees of property rights, the fight against corruption, the effectiveness of the judiciary, are also considered elements of structural reforms. for example, at the beginning of the last decade, it was recognized that in ukraine institutional changes are necessary for the restructuring of the sectoral structure of the economy (this was demonstrated by the experience of cee countries) (kononenko et al., 2018; liashenko, 2017). thus, the understanding of structural reforms is limited to changing the structure of the production system in several directions: 1) limiting dependence on the raw materials sector, 2) developing non-primary industries, 208 nikonenko et al. analysis of institutional factors as part of the component of economic freedom... 3) overcoming deformations in the regional context. on the other hand, a favourable institutional environment is necessary primarily to ensure constructive competition in the domestic market, which creates the prerequisites for successful competition in foreign markets. until now, the problem has not been resolved, which, together with the weakness of private property protection, limits the possibilities of diversification of ukrainian exports (shynkaruk et al., 2015). so, the study aims at analyzing institutional factors that are usually considered components of economic freedom, as well as assessing the level of economic freedom as a prerequisite for improving structural proportions (in favour of the non-primary sector) and stimulating the investment process in an economy with an excessive raw materials sector (such as ukraine), which determine directions priority liberalization of the economic environment (freedom of investment, the order of government spending, freedom of entrepreneurial activity, protection of the rights of transparency) and at the same time avoid potential risks from unnecessary liberalization measures in the financial market and in foreign trade. the current practice of developing international economic relations, developing against the backdrop of deepening global crises, more and more proves that the world is undergoing a reorientation of trade and economic policies pursued by countries towards wider use of amended protectionism. the implementation of the ideas of liberal economic patriotism, involving the active use of neo-protectionism tools, is aimed at stimulating economic activity, while the use of domestic needs instead of simply controlling foreign trade is a response to the deformation of the classic liberalism creed “laissez-faire”. given this, it should be noted that in an economy with high profitability of the commodity sector, government intervention is necessary to transfer resources to the commodity sector. one of them may be the strengthening of the monetary unit, and the other – the provision of preferences for activities in the non-primary (technological) sector. since direct financing of technological sectors contains risks of abuse and economic inefficiency, it is more about developing infrastructure and stimulating the accumulation of human capital. another opportunity is the promotion of foreign investment. when attracting foreign direct investment, incentives for the internal redistribution of resources in favour of the commodity sector are offset by the increased return on foreign investment in the commodity-exporting country compared to the host country. the appropriateness of the policy of administrative assistance to transfer production resources to the non-primary sector only increases in the event of structural shocks. empirically confirmed the importance of economic freedom as a factor in improving the quality structure of exports, implemented mainly through freedom of investment and the order of government spending, as well as freedom of business. the high correlation between the freedom of the investment process and the structure of exports can easily be interpreted in favour of attracting foreign direct investment as a factor in favourable structural transformations (in favour of non-resource exports). such results offset the numerous criticisms of russian scholars regarding the negative impact of neoliberal politics in general and the washington consensus in particular. the importance of the study is that today it is very important to establish the dependence of structural changes in ukrainian exports on institutional factors that are components of economic freedom. business, management and education, 2020, 18(2): 206–225 209 the uniqueness of the study is that it is empirically proven that increasing the degree of economic freedom contributes to structural transformations in favour of non-resource exports, that is, improves the quality structure of ukraine’s exports. 1. literature review the “washington consensus” toolkit is mainly criticized by russian scientists from the standpoint of discrepancy with the specific conditions of transformation economies (korablin, 2017), copying the “matrix” of latin american reforms (kovalchuk, 2018) or failure to implement the concept of an “autonomously operating technocrat government” (panchenko & voichak, 2016), which generally corresponds to the arguments of numerous foreign critics of neoliberal politics (holiuk & voloshchuk, 2015). in particular, the excessive speed of privatization among the cis countries, which lacked institutional and cultural freedom, was considered erroneous, which led to the “capture” of the state by monopolistic groups of newborn capital (korablin, 2017). as a result, instead of a market economy, an environment for corruption and raiding arose. at the same time, excessive openness for imports and the inability to focus on increasing technological exports in the absence of monetary resources and significant technological backwardness of capital-intensive industries led to an increase in the volume of commodity exports and the transformation into a raw materials appendage of developed countries with the largest number of votes in the imf (rudan, 2017). a. sharov (2017) categorically declares that in relations with the imf one should not adhere to the recommendations of this organization, but should propose “effective reform measures” that can solve a set of economic problems: a) financial and macroeconomic stabilization (formal goals of the imf) b) providing prospects for economic growth (program goals of the government) c) ensuring the economic security of ukraine (constitutional obligation of the president and other public authorities). however, the specialist does not specifically name any of the reform measures. an acceptable alternative is the proposal of the “post-washington consensus” from the nobel laureate j. stiglitz. in a condensed form, we are talking about maintaining the system of state regulation and restrictions on foreign trade. macroeconomic stabilization and privatization are considered insufficient for sustainable economic development if a reliable financial system is not enough (without this it is impossible to increase private savings and reallocate financial resources). the importance of the accumulation of human capital and technological development is also noted; it is impossible to solve without government intervention. other well-known critics of the washington consensus emphasize the importance of increasing investment, overcoming property stratification and strengthening state institutions, smoothing economic cycles, in particular through stabilization funds, creating a social protection system, taxing the rich, supporting small businesses, improving the land market, etc (birdsall et al., 2001). the arguments are contradictory, because in an economy with a raw materials orientation, the active development of the social protection system can interfere with the functioning of the stabilization fund (enough funds). small business support may also not have the expected incentive effect, so instead of repeating the successful german policy of supporting 210 nikonenko et al. analysis of institutional factors as part of the component of economic freedom... small and medium-sized enterprises mittelstand, which is considered the basis of the german economic miracle, you can be trapped in the abuse of public funds, as is usually the case with economies with weak institutions. the effectiveness of public investment also depends on the quality of institutions, and this significantly limits the possibilities for their use. another analytical design was the “beijing consensus” (attachment to innovation and constant experimentation with economic policy, focus on the stability of the economic system and increased exports, limited control of capital flows), supposedly working in the interests of ordinary people and ensuring the preservation of economic and political independence (maslov, 2017). subsequently, two more consensuses appeared “mumbai” and “seoul” (holiuk & voloshchuk, 2015). in the first case, it is about preserving the democratic principles of organizing political life (this contrasts with chinese experience), decentralization, increasing the well-being of the masses, the predominant orientation of the manufacturing sector on the domestic market (this denies the chinese experience), the development of private entrepreneurship and innovation, and peaceful foreign policy. but the “seoul consensus” provides for the creation of modern infrastructure, maintaining macroeconomic stability, guarantees for public and private investment, social protection, high-quality public administration, and food security. although some domestic scientists are in a hurry to join the repeated voices abroad, which, they say, is the global crisis of 2008–2009. de facto eliminated the “washington consensus” (in particular, in the spring of 2009. that was then stated by then prime minister of great britain brown), for example, this opinion is shared by yu. maslov (2017) (in some cases, conclusions about the inconsistency of the experience of countries with the logic of the “washington consensus” were drawn up based on rather dubious analogies. for example, in one study, the conclusion about the need to adopt economic reform programs to the specifics of each particular country, in this case, ukraine, was made by the example of the lack of a relationship between interest rates and the amount of savings. this supposedly proves the inefficiency of financial liberalization, but it can be evidence of the importance of such institutional factors as distrust of the banking system or the spread of corruption) do not rush. firstly, there is no convincing evidence of expansionary fiscal and monetary policies, and this is precisely what the supporters of a “sovereign” policy have in mind, which will help stimulate economic growth and do without high inflation. there is much more reason to believe that the raw material orientation of the ukrainian economy is more due to the revaluation of the hryvnia due to expansionary monetary and fiscal policies than the imf “dictate”. secondly, the order of government spending does not mean limiting public investment. it is only about the rejection of unproductive expenditures on subsidies and the functioning of inefficient state enterprises, which should free up funds for other programs. as noted by e. panchenko and m. voichak (2016), the policy of state regulation, including in the high-tech business sector, did not contradict the logic of the “washington consensus”, but there were not enough opportunities for the corresponding improvement of government spending. thirdly, it cannot be argued that the policy of the “washington consensus” was ever implemented in ukraine. maximum were fragmented attempts to implement its components. in 2000–2001 a very contrasting transition to a budget surplus took place, but gradually this element of economic policy was lost. in 2006–2008 the stability of the hryvnia exchange rate business, management and education, 2020, 18(2): 206–225 211 was maintained amid excessive growth in monetary aggregates. tax reform based on the expansion of the tax base remains on the agenda. the system of subsidies and benefits was significantly expanded back in the middle of the last decade, and after the financial crisis of 2008–2009. this element of fiscal policy has received additional impulses. in the best of times (2006–2008), attracting fdi amounted to 8% of gdp, but these revenues were directed mainly to the needs of the market. since the mid-2000s, the liberalization of capital flows has been almost complete, but it took place against the background of a growing redistribution of government expenditures for social purposes and almost “transparent” borders, leaving no options for liberalizing foreign trade (even if measures of limited trade protectionism were introduced, this should not have the expected effect). as you can see on the example of chile (shevchuk, 2019), only holistic implementation of the corresponding policy in all its aspects brings positive results, and not just individual fragments. for example, privatization will not have the expected consequences in an economy where subsidies for the industry remain and there are no guarantees of property rights. it may also be harmful to liberalize foreign trade in the absence of an effective tax system that can impose private consumption. at the same time, it should be recognized that similar results may have a stabilization policy in an economy with weak institutions. supplementing the washington consensus with an independent central bank status only partially solves this problem. success requires institutional support in a wide range, and the criterion for the success of economic policies in a commodity-oriented economy should be considered the simultaneous achievement of financial stabilization and the implementation of structural transformations in favour of the non-resource sector. assessment of the level of economic freedom is the subject of research in a large number of scientific papers. for example, ail-gasaymeh (2020) investigated economic freedom in jordan and gcc countries. czegledi (2020) investigated the coherence of market beliefs as a determinant of economic freedom. le and kim (2020) examined the effect of economic freedom on investment in a single country. teague, storr and fike (2020) conducted an empirical analysis of economic freedom and materialism. our study is different in that we empirically prove that increasing the degree of economic freedom contributes to structural transformations in favour of non-resource exports, that is, it improves the quality structure of ukraine’s exports. 2. methodology the concept of economic freedom can be considered an approximate characterization of the institutional environment in the broad sense. the most commonly used index of economic freedom is the index of economic freedom (ief), calculated by the heritage foundation, an american research centre and the wall street journal. the ief integrated index takes into account 12 sub-indices: protection of private property, the effectiveness of the judiciary, integrity of government policy, tax burden, government spending, fiscal health, freedom of business, labour market flexibility, monetary freedom, foreign trade freedom, investment climate, freedom financial activities. however, we have taken only 9 subindices of the economic 212 nikonenko et al. analysis of institutional factors as part of the component of economic freedom... freedom index. only those that have an impact on the macroeconomic policy of ukraine were considered (it is clear that in exporting countries of raw materials, such as ukraine, the proper quality of the political process, effective legal proceedings, etc. one general (integral) index of economic freedom allows you to graphically depict the dynamics of the level of economic freedom in ukraine on a 100-point scale over a fairly long period. it is easy to see a kind of “cross-section” between economic freedom and the “washington consensus” in terms of fiscal discipline, balanced monetary policy, both liberalizations – foreign trade and capital flows, and the creation of an appropriate investment climate. at the same time, the ief index takes into account institutional factors from a “wide” set: the quality of legal proceedings, protection of property rights, and freedom of business. in both cases, institutional decisions in a narrow interpretation are not considered directly, but rather indirectly  – as a means of achieving fiscal discipline and monetary freedom (in the sense of the absence of financial crises). in our opinion, this approach does not quite take into account the realities of lowand middle-income countries where there is no proper quality of the political process. accordingly, we need more reliable guarantees for economic policy, improving the quality of the institutional environment (in the broad sense), and appropriate structural reforms. institutional decisions like an independent central bank are useful from the point of view of: 1) strict observance of radical economic policy, 2) neutralization of negative socio-political factors and (preferably) 3) creation of public support for economic feasibility. guarantees of compliance with economic feasibility are achieved by setting clear rules and restrictions for economic policy and transparency of the democratic procedure for changing the status quo. for example, central bank independence means not only controlling the supply of money or inflation, but also creating pressure in the direction of fiscal discipline, liberalization of foreign trade, and the encouragement of foreign investment. providing convincing economic results and improving the living standards of the population, institutional decisions are able to generate public support in favour of economic feasibility and is not excluded (only in the longer term), which will strengthen the foundations for political stability in itself. limiting the possibilities of expansionary economic policy  – an indispensable feature of an effective institutional solution  – narrows the field for corruption and political games. this weakens the position of corporate structures and limits the possibility of exploiting populist slogans. institutional decisions shorten the time period during which society becomes convinced of the irreversibility of economic reforms. it was the uncertainty of entrepreneurs and ordinary citizens in the government’s determination to continue the reform policy that created problems in argentina (1976–1981 and 1985–1988), brazil (1985–1993), mexico (1994– 1995), chile (1980–1984) and other countries. this feature gains increased weight if it is necessary to redistribute resources from the raw materials sector to non-primary sectors. contrasting financial stabilization with institutional transformation is extremely harmful. the liberal version speaks of the inadequacy of price and monetary stability for structural transformations, and the radical structuralist keys even speak of the possible harmfulness of financial stabilization for modernization processes. the conclusions of the razumkov center are indicative: uncertainty regarding the effectiveness of structural policy is identified with business, management and education, 2020, 18(2): 206–225 213 the supposed rejection of latin american-style structuralism (sidenko & rekhta, 2017; kozyuk, 2018). it is argued that it is the state that should actively influence innovation processes, accelerating the development of the latest technologies that provide global and regional competitive advantages in the field of high technologies. since this is not enough for ukraine’s economic policy over the entire period since the beginning of the 1990s, technological lag and insufficient economic growth become clear. s. korablin (2017) calls not to exaggerate the influence of institutional features because this has no decisive influence on economic growth. this position is explained by the fact that the only sustainable economic recovery of ukraine occurred in 2000–2007. although there were no less well-known facts of corruption, shadow business and political confrontation, there were not enough high prices for raw materials. it can be concluded that in ukraine, internal factors do not influence economic growth at all. like, at the heart of economic growth 2000–2007. it was not radical structural reforms that lay, not a special business climate, not an attractive investment environment and not budgetary discipline, but a rise in world raw material prices independent of them. the opposite position is that institutional factors still affect the dynamics of economic growth and structural changes. thus, v. holyan (2016) notes that the monopolization of agricultural markets by agricultural holdings and their concentration of a significant bank of agricultural land negatively affects the investment attractiveness of the agricultural sector, which led to a reduction in foreign direct investment in agriculture, forestry and hunting. institutional problems can explain the fact that excess liquidity is regularly observed in the banking system. the problem is not created by an imaginary lack of credit resources, as the lack of investment opportunities. under such conditions, calls for institutional and structural transformations are entirely appropriate (bytsiura, 2016). moreover, any proposals on the priority areas of structural transformations will not be implemented unless appropriate institutional prerequisites are created for such changes (antoniuk, 2017). institutional obstacles to the modernization of the ukrainian economy are numerous: 1) procedural overload of doing business (the number of procedures necessary for doing business exceeds the indicators of developed countries and neighbouring countries by 2–3 times), 2) lack of certainty and protection of property rights, 3 ) a high level of corruption in government bodies and judicial proceedings; 4) an imbalance in the mechanisms for resolving corporate disputes in judicial and extra-judicial order; 5) the post-crisis disorientation of the authorities (zhalilo et al., 2018). the consequences are a low level of legitimacy of power, high individualism and a sense of isolation from social processes, lack of national identity, high social anxiety, etc., which leads to the transition of chronic institutional crisis from the economic to the social and political plane. a favourable institutional environment provides an opportunity not only to develop a business but also to respond flexibly to new needs and conditions. among practical measures, they usually emphasize the importance of the legal foundations of doing business, guaranteeing property rights, demonopolization of the economy, eradicating corruption at all levels and creating equal and transparent conditions for entrepreneurial activity in any field, stimulating competition (karasova, 2018). 214 nikonenko et al. analysis of institutional factors as part of the component of economic freedom... in the stabilization policy plane in a dollarized economy, weak institutions (not only the independent status of the central bank) are multiplying the effect of expectations of a “weak” monetary unit. this can happen both in the event of a drop in world prices for raw materials and regardless of weather, often in the context of the political cycle, which provides for a significant increase in government spending on the eve of the election campaign. as noted by v. kozyuk (2018), in addition to these two factors, “very significant mixing of signals and noise” has its own effect, which distinguishes not only biased odious experts but also individual officials who, by definition, must send completely different signals. for example, rather contradictory signals are sent by the chairman of the nbu (national bank of ukraine) council b. danylyshyn. in early february 2018, they were offered a transition to two-factor targeting  – inflation and the hryvnia exchange rate, and on occasion, it was argued that the restrictive monetary policy seriously restrains lending to the economy primarily for high rates, but not without “diverting banks’ funds to nbu certificates of deposit” (danylyshyn, 2018). the nbu discount rate hike cycle was called “untimely”, since “inflation in ukraine is not monetary, but mainly costly”. such peremptory statements are rather strange because empirical studies confirm the opposite: the proportion of money supply in inflation decomposition reaches 50%, and the budget balance is 40% (shevchuk, 2019). ukrainian inflation can be called “non-monetary” only in the sense that price dynamics no less strongly depend on fiscal policy. moreover, the monetary nature of ukrainian inflation is manifested much more clearly than is typical for latin american countries. in general, achieving a high level of economic freedom for a country involves achieving a high level of its main sub-indices (figure 1). it should be noted that ukraine was taken for the study, which is an active exporter of raw materials with a rather low level of economic development. ukraine today is one of the important participants in export-import operations in eastern europe. the european union sees in ukraine its potential participant, which can bring a lot of good for the european community. economic freedomindex sub-index1 sub-index2 sub-index3 sub-index4 sub-index5 sub-index6 sub-index7 sub-index8 sub-index9 protection of property rights freedom from corruption tax freedom government spending monetary freedom freedom of business freedom of trade financial freedom figure 1. ukraine: index of economic freedom, 1995–2018 (development by authors) business, management and education, 2020, 18(2): 206–225 215 3. results and discussions to analyse the institutional factors of the structural transformation process in ukraine, it is appropriate to use the ief index of economic freedom mentioned above (figure 2). the ief integral index reveals a gradual increase in economic freedom in ukraine on a 100-point scale from 40 points in 1995. up to 55 points in 2005 (in fact, we are talking about 2004, because ief indexes are published at the beginning of the calendar year). in the future, freedom of economic activity decreased until 2010. then, the ief index stabilized at 46–47 points (except for 2014), and since 2017, the growth of economic freedom has resumed. the situation has improved in recent years, but the level of economic freedom remains below the record levels of the middle of the last decade. the domestic indicator of 2018 at the level of 51.9 points can be compared with data from other countries. except for brazil (51.4), commodity-exporting countries from latin america predominantly have mostly better values: argentina – 52.3 points; colombia – 68.9; uruguay – 69.3 points. chile’s reformer country (75.2) can be attributed to liberal economies with high levels of entrepreneurial freedom, such as new zealand (84.2), australia (80.9) or canada (77.1). only hong kong and singapore had a higher ief index, respectively 90.2 and 88.8 points. countries with low rates include: south korea  – barely 5.8 points, venezuela  – 25.2; cuba  – 31.9; congo  – 38.9; eritrea  – 41.7; equatorial guinea  – 42; zimbabwe  – 44; bolivia  – 44.1; algeria  – 44.7; djibouti  – 45.1; mozambique  – 46.3 points. the countries of southeast asia are characterized by a high level of economic freedom: malaysia – 74.5 points; south korea – 73.8; thailand – 67.1; indonesia – 67.2 points. this figure is lower in turkey and south africa, following 65.4 and 63 points. at the same level, economic freedom in portugal is 63.4 points. it is disturbing that the level of economic freedom in ukraine is inferior to the countries of the former soviet union: georgia – 76.2 points; kazakhstan – 69.1; moldova – 58.4; russia – 58.2; belarus – 58.1; georgia – 76.2 points. below are the indicators only of uzbekistan and turkmenistan, under 51.5 and 47.1 points. but the rest of the post-soviet countries have a high level of economic freedom: armenia – 68.7 points; azerbaijan – 64.3; kyrgyzstan – 62.8; tajikistan – 58.3 points. a. lyashenko (2017) notices a peculiar “turning point” in 2004–2006 when neighbouring countries (poland, russia, even belarus) made efforts to liberalize the economic environment, and ukraine chose the opposite direction of movement in return. figure 2. ukraine: index of economic freedom, 1995–2018 (built according to the heritage foundation, n.d.) 216 nikonenko et al. analysis of institutional factors as part of the component of economic freedom... examination of sub-indexes reveals that ukraine is quite liberal in matters of taxation, monetary policy and foreign trade (figure 3). but to wish for a better fight against corruption, protection of property rights, issues of the investment climate and the functioning of financial markets. a high assessment of domestic tax legislation is somewhat unexpected because it is mainly domestic researchers who critically evaluate this particular component of economic freedom. in particular, it is argued that the problem of obstacles to business is acute in the field of tax administration because the reporting and accounting procedures directly affect the speed of operations in the economic activities of enterprises (zhalilo et al., 2018). distressed government spending policies. streamlining government spending was quite successful in 2000–2005. however, in the future, the situation rapidly deteriorated. from 2014, changes for the better resumed, but so far only the level of the second half of the 1990s has been reached. а) protection of property rights b) freedom from corruption c) tax freedom d) government spending e) freedom of business f) monetary freedom g) freedom of trade h) freedom of investment 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 figure 3. to be continue business, management and education, 2020, 18(2): 206–225 217 а) protection of property rights b) freedom from corruption c) tax freedom d) government spending e) freedom of business f) monetary freedom g) freedom of trade h) freedom of investment 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 i) financial freedom 0 10 20 30 40 50 60 70 80 90 100 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 figure 3. ukraine: components of index of economic freedom, 1995–2018 (built according to the heritage foundation, n.d.) ukraine should have had a liberal trade regime since the mid-1990s, and over time this orientation of customs legislation only intensified, without restoration of trade protectionism even in times of crisis. monetary policy became liberal in the middle of the last decade and has not changed since then, despite a certain regression in 2009–2010. and again in 2014–2016. in both cases, it was a reaction to the crisis. however, since 2017, monetary policy has again become liberal. the protection of property rights and the level of corruption have not changed much over the past two decades, despite two revolutions and the repeatedly declared course towards reform. the freedom of doing business has improved somewhat recently, after an obvious deterioration of this indicator in 2006–2010, and it remains a positive trend. however, there is not enough liberal environment for investments and activities in the financial market. it should be recognized that domestic researchers are mainly limited to stating facts and generating sentences, without relying on empirically determined dependencies. in general, it cannot be ruled out that economic freedom is superfluous for ukraine, at least in a number of institutional aspects, as s. korablin (2017), mentioned above, asserts that a rather high degree of liberalization of macroeconomic policy is quite valid. 218 nikonenko et al. analysis of institutional factors as part of the component of economic freedom... to study the possible dependence of structural changes in ukrainian exports on institutional and other factors that are usually considered components of economic freedom, we used the following statistical model: 0 1 2 1 , n t i t i t t t t i str str freedom boom crisis− = = α + α +β + γ + γ + ε∑ (1) where: freedomt  – is the ief economic freedom index (or one of the sub-indexes); boomt – is a dummy variable for accounting for the commodity boom (1 – for 2003q4: 2004q2, 2006q1: 2008q2, 0 for the remaining quarters); α0  – is a constant; αі  – is the retardation selected macroeconomic indicator with i-lag (α1, α2  – retardation with a lag of one and two quarters respectively); εt – is a stochastic factor; crisist – is a dummy variable that takes into account crisis phenomena (1 for 2000q1, 2004q3: 2004q4, 2008q3: 2009q4, 2013q1: 2015q4, 0 – for the remaining quarters). thus, it is assumed that the situation at the beginning of 2000 had its own influence, is connected with the inertia of the deep currency crisis of 2008–2009, the short-term period of financial destabilization at the end of 2004, conditioned by the “orange revolution”, the events of the global financial crisis of 2008–2009 and the last acute crisis in 2014–2015. it is assumed that the crisis appeared at the beginning of 2013 and ended by the end of 2015, although the recovery of pre-crisis economic dynamics continues to this day. the initial hypothesis is that an increase in the level of economic freedom leads to structural changes in favour of the non-resource sector ( 0β > ). for a commodity boom, it is appropriate to assume the opposite effect, as well as for crisis phenomena ( 1 2, 0γ γ < ). empirical estimates of equation (1) using the two-step least squares method (2sls) using quarterly data for the period 1995–2018. are given in table 1. the obtained results explain from 90% to 92% of changes in the dynamics of dependent variables, which is quite acceptable for a statistical model, and the stationarity of residues, according to the adf test, allows to correctly interpret the obtained functional dependencies. our results confirm the inertia of the strt indicator (with a lag of two quarters). the crisist variable was removed from the regression equations since no dependence of this indicator on crisis phenomena was found. the main result is that increasing the degree of economic freedom contributes to structural shifts in favour of non-resource exports. the corresponding influence is realized mainly through freedom of investment and the order of government spending, as well as freedom of entrepreneurial activity. the coefficient β has the largest value (and statistical significance at the level of 5%) precisely in the specification with the sub-index “freedom of investment”. the corresponding coefficient is almost three times less in the specification with the subindex “government spending” and even less in the specification with the sub-index “business freedom”. the high relationship between freedom of the investment process and strt can easily be interpreted in favour of attracting fdi as a factor in favourable structural transformations. thus, additional confirmation was found about the determining influence of fdi in the process of improving the quality structure of ukrainian exports, and not excluded – the economy as a whole. business, management and education, 2020, 18(2): 206–225 219 table 1. estimates of the dependence of structural changes in ukrainian exports on the ief economic freedom index (source: calculated according to the heritage foundation, n.d.) indicator of economic freedom (freedomt) α1 α2 β γ1 statistics integral index ief 0.626 (5.34***) 0.271 (2.39**) 0.0025 (1.72*) 0.182 (3.12***) r2 = 0.91 adf = −9.20*** sub-indexes “protection of property rights” 0.634 (5.41***) 0.281 (2.48**) 0.0029 (1.53) 0.181 (3.09***) r2 = 0.91 adf = −9.21*** “freedom from corruption” 0.541 (5.46***) 0.283 (2.49**) 0.0036 (1.32) 0.170 (2.94***) r2 = 0.91 adf= −9.09*** “tax freedom” 0.544 (5.38***) 0.282 (2.46**) 0.0009 (1.18) 0.172 (2.74***) r2 = 0.91 adf= −9.14*** “government spending” 0.610 (5.25***) 0.280 (2.52**) 0.0028 (2.18**) 0.172 (3.04***) r2 = 0.91 adf = −9.47*** “freedom of business” 0.626 (5.34***) 0.286 (2.55**) 0.0018 (1.70*) 0.193 (3.92***) r2 = 0.91 adf = −9.18*** “monetary freedom” 0.639 (5.45***) 0.276 (2.42**) 0.0013 (1.39) 0.175 (3.01***) r2 = 0.91 adf = −9.14*** “freedom of trade” 0.648 (5.51***) 0.282 (2.45**) 0.0007 (1.05) 0.174 (2.94***) r2 = 0.90 adf = −9.12*** “freedom of investment” 0.588 (5.08***) 0.250 (2.36**) 0.0071 (2.62**) 0.214 (3.63***) r2 = 0.92 adf = −8.93*** “financial freedom” 0.640 (5.45***) 0.272 (2.37**) 0.0027 (1.32) 0.145 (2.49**) r2 = 0.92 adf = −9.21*** note: ***, ** and * mean statistical significance at 1%, 5% and 10%, respectively. although the remaining components of the ief index do not affect the index of structural changes at a statistically significant level, in all cases the estimated coefficient β turned out to be positive. it is also worth noting that the value of the coefficient β is quite high in the specifications with the sub-indexes “freedom from corruption” (0.0036) and “financial freedom” (0.0027). this means that these two components of the general index of economic freedom can cause instability of the structural transformation process in favour of the nonresource sector. the liberalization of foreign trade and the corresponding changes in tax legislation does not seem to have a significant impact on structural transformations. there are no indications that the liberal trade regime has led to a deepening commodity orientation of the ukrainian economy (rudan, 2017). an important difference is that domestic investment is positively dependent on the commodity boom and negatively on crisis. this has not been identified for fdi that are resistant to both shocks. this means that attracting fdi can increase the stability of the ukrainian economy to instability in world commodity markets and contribute to structural shifts in favour of the non-resource sector of the ukrainian economy. assessing the impact of institutional factors in a wider context, it is necessary to use increased economic freedom to attract foreign direct investment (fdi), since there is no reason 220 nikonenko et al. analysis of institutional factors as part of the component of economic freedom... to fear that fdi will contribute to the deindustrialization of the economy and the strengthening of its raw material nature, as claimed for individual foreign countries. the direct relationship between an increase in the degree of economic freedom and fdi inflows has proper empirical evidence: 1 2 *** *** 2 *** 0.360 0.166 0.032 (3.31 ) (1.37) (3.31 ) 0.92 8.35 . t t t tfdi fdi fdi freedom r adf − −= + + = = − (2) a similarly favourable dependence is observed for all, without exception, ief sub-indices at the level of statistical significance of at least 5%. the corresponding regression coefficient for the sub-index “freedom of trade” has a slightly lower significance at the level of 10%, but the weakness of the corresponding effect can easily be explained by the achieved almost maximum openness of the domestic economy to foreign trade. economic freedom in a similar way must affect the rate of domestic investment: 1 2 *** * *** * *** 2 *** 0.762 0.121 0.007 (10.54 ) (1.86 ) (3.84 ) 0.032 0.067 (1.90 ) ( 4.46 ) 0.94 8.29 . t t t t t t inv inv inv freedom boom crisis r adf − −= + + + − − = = − (3) true, the regression coefficient at freedomt is much smaller, but also statistically significant at the level of 1%. all evidence indicates that the dependence of domestic investment on the achieved level of economic freedom is much weaker. an analysis of the dependence of investments on sub-indices showed that tax freedom and a liberal trade regime have a significant stimulating effect (the corresponding regression coefficients turned out to be significant at the level of 1%); less significant were monetary freedom (at 5%) and business freedom (at 10%). other factors of economic freedom turned out to be insignificant, although the corresponding regression coefficients are positive, except for the coefficient for financial freedom, which turned out to be negative. we will separately establish which sub-indices of economic freedom most affect its level and which are less (table 2). table 2. the list of sub-indices of economic freedom and their mathematical designation mathematical notation subindex group mnemonic name z1 cost sub-index group: government spending; freedom of investment; freedom from corruption csi z2 group of business sub-indices freedom of business; freedom of trade; protection of property rights gbi z3 group of sub-indices of finance: financial freedom; freedom of investment; tax freedom gfi business, management and education, 2020, 18(2): 206–225 221 matrix a of dimension 3×3 elements is added to the table by adding an information line and a column with the names of the threats to it (table 3). table 3. binary dependency matrix 1 2 3 csi gbi gfi 1 csi 0 0 0 2 gbi 1 0 1 3 gfi 1 0 0 based on the matrix a, we construct the reachability matrix. we form the binary matrix (i + a), where i is the identity matrix. as a result, the reachability matrix must satisfy the condition (4): 1 1( ) ( ) ( ) .k k ki a i a i a− ++ ≤ + = + (4) the actual construction of the binary matrix is reduced to filling in the table (table 4). table 4. the reach matrix 1 2 3 csi gbi gfi 1 csi 1 0 0 2 gbi 1 1 1 3 gfi 1 0 1 the vertex zj is reached from the vertex zi if there is a path in the graph that leads from the vertex zi to the vertex zj. such a peak is called reachable. denote the subset of similar vertices by s (zi). similarly, the vertex zi is the front of the vertex zj if it reaches its vertex. let the set of predecessor vertices form a subset of p (zi). finally, the section of the subsets of reachable and predecessor vertices, i.e., the subset (5) ( ) ( ) ( )i i ir z s z p z= ∩ . (5) the vertices that are not reached from any of the vertices of the set z1, the remaining ones determine a certain level of the hierarchy of priority of the initial groups of sub-indices of economic freedom assigned to these vertices. an additional condition for this is to ensure equality (6): ( ) ( )i ip z r z= . (6) 222 nikonenko et al. analysis of institutional factors as part of the component of economic freedom... performing the totality of the above actions gives the first level (the lowest in terms of the importance of influencing the process under study) of the hierarchy of sub-index groups. to determine it, based on the preliminary matrix, we construct a table 5. table 5. calculation table for constructing a hierarchy model of the influence of sub-index groups on the level of economic freedom і s(zi) р(zi) ( ) ( )i is z p z∩ 1 1 1, 2, 3 1 2 1, 2, 3 2 2 3 1, 3 2, 3 3 the second column of this table is the number of unit elements of the corresponding rows of the reach matrix, the third is the number of unit elements of the column columns of this matrix. without further intermediate calculations, it is possible to build a structured model (figure 4), characterizing the priority of the influence of a group of sub-indices on the level of economic freedom. z2 gbi z1 gfi level 3 level2 level 1 z3 csi figure 4. model of the hierarchy of the impact of sub-index groups on economic freedom (development by authors) in this case, it is the cost sub-index group: government spending that exercises the greatest influence on the level of economic freedom; freedom of investment; freedom from corruption. conclusions the study provides additional persuasiveness with the assertion that “catastrophic failures in the legal sphere, issues of state non-interference in business have caused inhibitions of economic development”. one mechanism has been the promotion of structural changes in favour of the commodity sector. business, management and education, 2020, 18(2): 206–225 223 the recommended palette of measures for institutional strengthening of the ukrainian economy as a means of improving the quality structure of the economy is quite transparent. it is necessary to demonstrate effectiveness in the fight against corruption and raiding (without this there are no guarantees of property rights), streamline government spending and improve freedom of business. increasing the degree of financial freedom is not so urgent, because the difficult conditions of a dollarized economy do not require haste. if we draw parallels between economic freedom and the washington consensus, then there is no reason to deny the benefits of neoliberal politics. a certain dissonance can be seen only in the fact that the quality of fiscal policy in the ief index of economic freedom usually increases with a decrease in government spending at all levels, while the above empirical estimates suggest the exact opposite – an increase in government spending. the explanation may be that we are talking about such government spending that is financed from growing budget revenues. there is an opportunity for such an increase because the tax burden for ukraine for ief developers is considered extremely insignificant. tough institutional decisions can not only neutralize various distorting signals and noises but also limit the “perimeter of competitive populism” to a minimum. otherwise, a sharp political struggle for the leverage of fiscal and monetary stimulus (under the guise of concern for economic growth) will inevitably hinder the implementation of stabilization policies and the transformation into the non-resource sector. first of all, we are talking about limiting the supply of money supply and public debt, as well as creating the prerequisites for a real “floating” of the monetary unit (with periods of significant local strengthening of the national currency). however, strengthening formal and informal institutions should not be considered a substitute for healthy macroeconomic policies using fiscal and monetary policy rules, which should provide reliable “foundations” for long-term economic growth. in addition to achieving balanced budget guidelines, it is equally important to accumulate sufficient foreign exchange reserves of the national bank of ukraine. at the same time, a significant decrease in the volatility of gdp and other macroeconomic indicators and the steady restriction of cashless payments may limit the need for foreign exchange reserves. in conditions of weak fiscal policy, signals from the national bank of ukraine indecisiveness when reaching the inflation target should be much stronger than for “normal” conditions. an increase in the discount rate should be a powerful leading indicator for market participants. if necessary, you can use administrative measures to limit consumer lending and “overheating” of individual markets, especially the real estate market. in the future, it is necessary to pay attention to the assessment and analysis of institutional factors and the level of economic freedom of countries bordering ukraine and play an important role in its economic development. disclosure statement authors declare that they have no competing financial, professional, or personal interests from other parties. 224 nikonenko et al. analysis of institutional factors as part of the component of economic freedom... reference al-gasaymeh, a. 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(2018). formation of model of economic development of ukraine in the post-crisis world. nisd, 33, 125–130. https://doi.org/10.1007/s10602-019-09296-0 https://www.heritage.org https://doi.org/10.1017/s0212610900002287 copyright © 2020 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. vocational guidance – gps for management of human resource development: does it work in lithuania daiva andriušaitienė department of economic engineering, faculty of business management, vilnius gediminas technical university, saulėtekio al. 11, vilnius, lithuania received 16 january 2020; accepted 18 march 2020 abstract. the purpose – of this article is to assess the vocational guidance situation and development opportunities in lithuania. research methodology  – systematic analysis of the peculiarities of vocational guidance; identification of the main problems and possibilities for vocational guidance through the development of a qualifications system based on the results of statistical analysis, expert assessment, data grouping and interpretation. findings – vocational guidance as an important subsystem of the educational system is being underemphasised and underfinanced, career counselling is pursued in a fragmentary manner, mainly through project-based initiatives which are not be based on systematic information. a way to improve vocational guidance is to organise it as an integrated information platform linked to the qualifications system. research limitations – the main limitation is the lack of official statistics in vocational guidance. the systematic collection and publication of statistics would make it possible to quantify and analyse the factors of the current vocational guidance situation and their impact on the development of human resources. practical implications  – the obtained results are useful for social and economic and educational policy-making. originality/value – the article contributes to the scientific literature by presenting a model of vocational guidance development related to the development of the qualifications system, which would allow providing the necessary access to information. keywords: economics, human resources, labour market, vocational guidance, qualifications system. jel classification: i25, j24, o150, p46. business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 1: 56–72 https://doi.org/10.3846/bme.2020.11937 *corresponding author. e-mail: daiva.andriusaitiene@vgtu.lt introduction global economic challenges and domestic socio-economic development problems call for a review of country’s social and economic policies and, in addition to investments in stateof-the-art technologies to ensure productivity growth and competitive production, require https://doi.org/10.3846/bme.2020.11937 mailto:daiva.andriusaitiene@vgtu.lt business, management and education, 2020, 18(1): 56–72 57 a greater focus on socio-economic issues: poverty, income inequality, quantity and quality of human resources. with the growing importance of the labour factor and the country losing the competitive battle for this factor in the global economy (emigration is increasing), lithuania appears to be at risk of falling behind the world’s most developing countries. in the search for possible solutions, the quality of human resources training and the effectiveness of labour market policies become priority tasks in the area of social and economic policy. the purpose of this article is to assess the situation of vocational guidance in lithuania and opportunities and measures for development. to this end, it is hypothesised that the guidance system is either not functioning or ineffective, leading to problems in human resource development and efficiency of the educational system, as well as to structural mismatches between qualifications and labour market needs. the possibilities to investigate this problem are limited due to the lack of official statistics allowing for quantitative research into vocational guidance problems. research model involves two stages: situation analysis of vocational guidance in lithuania and capable decisions of system development. theoretical methodological issues of vocational guidance are discussed by presenting the concept, structure, functions and aims of vocational guidance, analyzing the variety of concepts and of vocational guidance, vocational counseling and career counseling. the state of vocational guidance in lithuania is based on research information collected from various sources – statistics and results of researches, which targets indirectly related to the assessment of the status of vocational guidance. during the search for development solutions, the author presents insights on the possible development of the vocational guidance system by synchronizing it with the development of the lithuanian qualifications system – using the prepared vocational standards. this idea (presented in graphical illustration) is a practically feasible model of integration of two information systems (qualifications and vocational guidance), which would allow the vocational guidance system to function effectively, at the lowest cost, i.e. organisation of vocational guidance as a subsystem of an integrated platform linked to the qualifications system, educational system and labour market. the obtained results are useful for social and economic and educational policy-making. 1. vocational guidance as a gps on individual’s career paths vocational guidance services are recognised as an important element of a lifelong learning strategy. an effectively functioning vocational guidance system is one of the tools for human resource development, the importance and possibilities of which can be compared to the gps navigation system, a common attribute of modern life. vocational information, counselling and guidance are defined in the law on vocational education as follows: vocational information means systematic provision of information relating to the matters of vocational education, demand of qualifications in the labour market and occupational choice. 58 d. andriušaitienė. vocational guidance – gps for management of human resource development... vocational counselling means help rendered to a person to take a rational decision on occupational choice, taking into consideration his individual characteristics, demands of the labour market and opportunities for vocational education. vocational guidance means the process comprising vocational information and counselling for career development. the objectives of vocational guidance are to provide individuals with quality information on learning and employment opportunities to provide quality guidance services to all people, irrespective of their age, gender, nationality or place of residence and social status, according to individual and societal needs, improve employability of young people and adults, promote their entrepreneurship and ongoing pursuit of knowledge; to develop people’s social activity and responsibility for their occupational activities in order to prevent unemployment. this is emphasized by all the regulatory bodies and networks: european centre for development of vocational training [cedefop], european lifelong guidance policy network [elgpn] and others. (cedefop, 2008, 2013a; elgpn, 2014). vocational information, counselling and guidance services are part of the service area that assists people of all ages in getting navigated at all stages of their lives: choosing a qualification, finding a place in the labour market, and developing their professional career in a planned manner through lifelong learning and upskilling (cedefop, 2013b, 2014, 2015; deirdre & borbély-pecze, 2012). vocational guidance is a wide range of services consisting of: – information on learning opportunities; – psychological counselling to help learners know their preferences and identify career goals; – introduction to the world of work (labour market) and its needs; – assistance in developing career planning skills (including organised activities in providing advice and information by employers, alumni, students’ parents); – individual counselling to help with decisions about continued education opportunities and/or career planning; – career change counselling; – information and counselling on return to employment after a long break; – consultancy support for persons with special needs; – counselling of persons at risk of unemployment; – counselling and information for immigrants and returnees about labour market opportunities in the country; – support for persons in writing cvs, providing tips on the most appropriate ways to present themselves in the labour market. vocational guidance encompasses both vocational information and vocational counselling. the latter two functions exist as separate services, in some cases forming a complex of services and focusing on the function of vocational guidance. thus, vocational guidance of the person is the ultimate goal of all of these services, and the system of such services is commonly simply referred to in short as a vocational guidance system. the peculiarities of the structure of vocational guidance clients in methodological terms make it necessary to distinguish between vocational guidance of pupils/students and adults as two lines of services with different targeted motivational focuses (cedefop, 2014; borbélypecze & hutchinson, 2013; deirdre & borbély-pecze, 2012; elgpn, 2012, 2015a, 2015b) which are shown in figure 1. business, management and education, 2020, 18(1): 56–72 59 the educational system takes care of student vocational guidance, the particular feature of which is the choice of career oriented towards personal qualities and preferences, and the accuracy and expediency of which should not counter to realities, i.e. to the real needs of the country’s labour market (elgpn, 2014). vocational guidance for adults has much more pragmatic goals. in a sense, this is a correction of career choices made by pupils/students, where the success of a previously made decision determined by the relationship between wishes and possibilities, is verified by real life, economic needs and the labour market (european commission, 2000). there is some fundamental difference in goals and directions of adult vocational guidance by client groups. adults usually do not arrive in a facility providing vocational guidance services in a planned manner or by accident. the reason for such visits is bigger or smaller problems faced by the person in the labour market. analysis by age groups shows that the youngest clients in adult vocational guidance are young early dropouts from the sequential educational system and those who have acquired a profession/qualification in the sequential educational system but failed to find employment in the labour market immediately after graduation. client groups of adult vocational guidance include people of different ages whose professions are not demanded on the labour market and who need help deciding on upskilling or reskilling and with social psychological issues that prevent them from finding a job or integrating into the labour market. the potential clientele includes employed people who want to improve their qualifications (european commission, 2000; mcmahon, 2017; borbély-pecze & hutchinson, 2016) and need professional advice on how and where this can be done in the best way, and employers whose business development is inextricably linked to workforce development and who could expect vocational guidance institutions to provide information on job search opportunities for the qualifications in question in general, as well as on trends and measures for in-service training of their staff, and/or professional assistance in dealing with dilemmas of collective – psychological problems occurring at the micro (company) level. vocational guidance for pupils/students and adults, as two segments of vocational guidance, encompasses a whole range of milestones and factors in the provision of guidance services, but with different priority focuses. the educational system is to develop a person according to his/her natural qualities by drawing the boundaries of possibilities between figure 1. targeted motivational focuses of vocational guidance for students and adults (source: developed by author) 60 d. andriušaitienė. vocational guidance – gps for management of human resource development... fantasy, personal wishes, and qualities that are valued and developed in society, thus linking them to person’s natural capabilities. the social security system provides support for persons at later stages in life if their personal desires and prospects do not materialise for one reason or another and they have, when faced with the need to survive, to better adjust to the real needs of the labour market. for any person, whether easier or with more problems, the process of getting matched with the needs of the labour market is much longer than the period of education and training within the sequential educational system, lasting the whole working life. throughout his/her working life, a person is accompanied by the social security system which assists the person in integrating, adapting and reskilling or, if no other solution is found, helps him/her survive by providing passive forms of support, such as benefits and other similar support. all social security measures must be commensurate in terms of the reasonableness of their application to the person. arrangements for applying these measures should be sufficiently clear and flexible. and vocational guidance must play an exceptional role among all the measures. to a certain extent, these services are to serve as bridging and guiding links between different support solutions. therefore, vocational guidance for adults is in any case one of labour market policy measures and should be closely linked to all other social policies: active and passive labour market policies, vocational education and training, granting of social benefits, etc. along with the need for lifelong learning, there is a growing need for lifelong career guidance which tends to differentiate between age groups and the goals determined by the problems of target groups whether currently and in the long run (mcmahon, 2017). higher-skilled individuals are more likely to do it themselves by planning their careers independently. however, quite a large part of workforce, for one reason or another, faces a need for assistance from qualified labour market professionals and psychologists. this need will undoubtedly grow and differentiate in the future. therefore, analysis of directions for the optimisation of the provision of these services should be focused not on standardisation and levelling of service provision (by attributing it to the sphere of responsibility of one of the ministries), but should be developed by differentiating and increasing the diversity and accessibility of vocational guidance programmes which is ensured not only by the total number of service providers, but also by their diversity what, at the same time, determines priority milestones. 2. vocational guidance situation in lithuania the benefit arising from vocational guidance is determined not only by the competence and quality of work of professionals carrying out these functions. a more important factor for efficiency is the optimal level of alignment of the system. obviously, if there is any. in lithuania, functions of vocational guidance are implemented in two systems – education and work (figure 2). business, management and education, 2020, 18(1): 56–72 61 the functions and responsibilities are respectively delegated to the ministry of education, science and sports and the ministry of social security and labour. vocational information and career counselling are provided at educational institutions functioning within the educational system at all levels. to provide information on learning opportunities, there is an open information, guidance and counselling system titled aikos, the main purpose of which is to provide information on learning opportunities in lithuania; there is also the lithuanian centre of non-formal youth education with its career education information website for students mukis. information on labour market opportunities relevant for higher education students and graduates is provided at career centres of the educational institutions. vocational guidance (information and counselling) for adults who are already in the labour market is provided by the lithuanian employment service. information on labour demand provided by the lithuanian employment service and the main job supply portals serves labour market opportunities for all. career counselling services are also provided by private institutions to which everyone has access. the position of a career leader was introduced in 2017 for providing vocational information and counselling and career education services in general education schools, vocational schools and other educational institutions, higher education institutions, vocational guidance centres and other institutions. the combined efforts of educational, social security and economic systems to create a network of career leaders who liaise with employers and labour market authorities, consult learners on job opportunities according to their qualifications and monitor their careers is a welcome step towards the development of a national guidance network. however, optimism is attenuated by key indicators that illustrate the reality of vocational guidance. as a result of emigration and other reasons, we are not only facing the problem of shrinking human resources but also of potential workforce: at the beginning of academic year 2018–19, the share of pupils and students in the educational institutions of the country was by 3.7% less than in previous years  – 468 thousand pupils and students. according to data from the education management information system [emis] (2019), the number of pupils in general education schools was only slightly above 322 thousand in 2018. the number of 11–12th grade students in general education schools was by 3.4 thousand less in 2018 compared to the previous year. such trends call for even more responsible care of persistently figure 2. main vocational guidance institutions in lithuania (source: developed by author) 62 d. andriušaitienė. vocational guidance – gps for management of human resource development... shrinking human resources and future workforce, first and foremost by targeted guidance and assistance in making the best choices in line with the needs of the labour market. statistics illustrating the scope of career education work allows the assessment of the adequacy of attention being paid to these issues (mukis, 2019) (table 1). three thousand students per career leader and less than one euro for career counselling per student  – these are the statistical figures that suggest that vocational guidance can be only available in the capital (practically unavailable in the regions) and only as a relict phenomenon. the rather problematic situation of vocational guidance is formally mitigated by projectbased activities: sharing good practices in career education, publishing methodological material for teachers, tv shows (“try the profession”, etc.). one of the ongoing projects is the vocational guidance initiative launched in 2015, “jump into your parents’ clogs”. in 2019, even 230 educational institutions (21.13% of lithuanian schools, including 69 comprehensive schools and 109 gymnasiums) joined the initiative. the meaningfulness of the project is evidenced by general statistics: about 14 thousand students of the country got acquainted with real occupational activities in 722 different profit-making companies and various organisations and institutions. according to the report, as many as 830 representatives of professions were visited during the initiative and students had the opportunity to get to know about 365 different professions (mukis, 2018). although being undoubtedly very useful, such initiatives should be viewed rather as a necessary complement to basic systemic vocational guidance services. it is practical experience that cannot replace the underlying service. vocational guidance opportunities are underused and responsibility for vocational guidance is delegated to social initiatives and teachers for whom this is merely an additional function. the ineffectiveness of such a solution is illustrated by the findings of monitoring authorities and targeted studies. investments into vocational (career) guidance have an impact on choice satisfaction: according to a study carried out by the government strategic analysis centre [vyriausybės table 1. key indicators of monitoring career education for students in 2017–2018 (source: mukis, 2019) indicators schools of general education (559) vocational schools (27) full-time career leader jobs (number) 74.2 5 vocational guidance (career education) funds on average per student, (€) 1.15 0.69 share of recipients of individual vocational guidance services (in their own school), (%) 26.55 19.31 share of recipients of group vocational guidance services (in their own school), (%) 52.03 26.34 share of recipients of vocational guidance services (outside their own school), (%) 41.06 20.09 share of students who do not continue studies at vocational school, college or university after finishing 12th grade, (%) 34.90 62.50 business, management and education, 2020, 18(1): 56–72 63 strateginės analizės centras] (strata, 2019) (table  2), more than half of university and college graduates would choose to study the same speciality, but mostly those whose studies meet the qualifications in demand on the labour market (physical, biotechnological and similar areas); one fifth of them would change it; the opinion of choosing a completely different speciality was more common among graduates of humanitarian studies. these results are good enough. however, this information suggests that it is appropriate, at the stage of deciding, to provide additional information on the situation and opportunities in the labour market to those who consider humanitarian studies. early awareness of risks could reduce disappointment in the qualification gained after graduation. emis data (emis, 2019) on dropouts from vet schools or colleges/universities (figure 3) cannot directly be interpreted as a wrong decision, dissatisfaction with a chosen area of study or programme. table 2. assessment of university and college graduates of how well the studies met their expectations (source: strata, 2019) pre-enrolment expectations were met pre-enrolment expectations were met in part pre-enrolment expectations were not met 12 month after graduation (n = 1038) 51% 21% 28% 12 month after graduation (n = 807) 60% 16% 23% 12 month after graduation (n = 4166) 61% 17% 20% figure 3. share of dropouts from vet and college/university programmes of the student population in the area in 2017–2018, % (source: emis, 2019) 64 d. andriušaitienė. vocational guidance – gps for management of human resource development... yet, the information above is a signal showing that choices are not motivating to continue learning they do not match wishes or possibilities so that assistance provided by vocational guidance (information and counselling) professionals would be useful not only for those who are planning to drop out, but also for those who deliver training programmes. the fact that the system needs to be improved is illustrated by all the studies carried out (national audit office, 2014; lithuanian centre of non-formal youth education, 2017; mukis, 2018). most of the studies have been carried out within the framework of esf-funded projects. some of them involve attempts to create a single vocational guidance system: project development and implementation of vocational guidance system, implemented by the lithuanian centre of non-formal youth education (2005–2008); creating and developing career education and monitoring models in general education and vocational education and training and creating and developing career education infrastructure in general education and vocational education and training (2007–2013), euroguidance (2018–2020), aimed at developing vocational guidance in lithuania and europe. other projects with narrower goals include: guidance and orientation for adult learners (goal project), implemented by the qualifications and vocational education and training development centre (qvetdc) in 2015–2018 (under the european union erasmus + programme, key action 3 (ka3): support for policy reform); amtp 2 project of the education exchanges support foundation (2016– 2021), aimed at increasing international awareness of lithuanian higher education institutions, promoting studies in lithuania and student mobility; europass project (2018–2020), aimed at promoting the use of europass documents to facilitate employment, traineeships/ internships and continued studies of eu nationals in all eu countries. according to a report on public consultation “how to encourage lithuanian citizens to acquire and improve competences and qualifications needed in the labour market” conducted by všį investuok lietuvoje (public company invest lithuania), one of the leading proposals for strengthening the system of qualification awarding in lithuania is the targeted organisation of vocational guidance and the alignment of continuing adult education with industries where the greatest shortage of professionals has been identified. the recommendations of this consultation outline four essential steps: identification of sectors relevant to the lithuanian economy; focus on vocational guidance that responds to regional and national needs; creation and implementation of reskilling opportunities for all people seeking to change careers; creation of a pool of expertise in the lithuanian labour market. according to the poll on career guidance results, which has been carried out by the school education gateway since 2018 (a total of 289 respondents) (school education gateway, 2019), 95.5% of education professionals agree that schools do offer vocational guidance services, but even 67% of them find the process of vocational guidance to be fragmentary and non-systemic; 59% of respondents believe that vocational guidance should start at lowers secondary school grades, for pupils aged 11–16. what vocational guidance information do students lack? survey (table  3) shows that students mainly lack personal counselling to determine how well they match with a certain career and information about the labour market situation. the findings of the survey suggest that the need for personalised information on match with a certain career and likely consequences of one of another choice (labour market business, management and education, 2020, 18(1): 56–72 65 prospects) constitute the core of services of the vocational guidance system. and these are the services the need for which is critically unmet. a cedefop survey carried out in the eu in 2016 (cedefop, 2017) covered 28 countries and 35  646 respondents aged 15 and over (including 1  004 from lithuania). among those who indicated the main reasons for choosing vocational education and training (vet), the leading reason was the “likelihood of finding a job” (50% in lithuania, 46% in the eu), although lithuanians opting for vet found “career prospects” to be less important compared to interviewees from other countries (figure 4). the survey demonstrated that family’s or friends’ advice to choose vet is a stronger motivating factor (indicated as a factor influencing the decision by 29% lithuanian respondents) than advice from someone at school or someone from the world of work (chosen by 14% and 7% of respondents, respectively). respondents from other countries indicated advice from someone at school and from the world of work slightly more frequently (17% and 12%, respectively). family’s advice as a factor that influenced the decision was indicated by 31% of respondents. table 3. vocational guidance information which students are lacking (n = 242) (source: career education in schools, 2013) agree partially agree disagree career paths 20.9% 50.4% 28.6% specialities 16.3% 47.6% 36.1% match with a certain career 42.7% 46.2% 11.1% admission requirements 19.7% 33.8% 46.6% labour market situation 37.3% 46.6% 16.1% possibilities of further training and studying 21.3% 47.2% 31.5% study programmes 17.2% 42.2% 40.5% other 57.1% 21.4% 21.4% table 3. vocational guidance information which students are lacking (n = 242) (source: career education in schools, 2013) agree partially agree disagree career paths 20.9% 50.4% 28.6% specialities 16.3% 47.6% 36.1% match with a certain career 42.7% 46.2% 11.1% admission requirements 19.7% 33.8% 46.6% labour market situation 37.3% 46.6% 16.1% possibilities of further training and studying 21.3% 47.2% 31.5% study programmes 17.2% 42.2% 40.5% other 57.1% 21.4% 21.4% 66 d. andriušaitienė. vocational guidance – gps for management of human resource development... the answer to the question whether there is sufficient personal counselling which is the main requested cross-cutting vocational guidance measure for persons doubting the alternatives they have chosen is displayed by data: sharply decreasing numbers of career leaders and their posts (figure 5). in 2012–13, the number of career leaders both in general education and vet schools fell by more than half, and the number of posts decreased by 7 times. these figures clearly display the message that career counselling is treated as activity not worth investments at the national level. the apparent decline in attention suggests that the importance of vocational guidance as a system is either no longer trusted or there is simply “no money left” for vocational guidance after allocations to the hottest areas due to underfunding of the educational system in general. therefore, it is hardly possible to expect at least somewhat more significant increase in the student’s vocational guidance basket in the near future. such a decision may have been recently determined by the implementation of projects for vocational guidance activities in general education schools, vet establishments and higher education institutions. from 2010 to 2015, allocations from the european union support funds for the implementation of vocational guidance activities amounted to almost eur 20 million. this figure is supposed to mitigate the lack of attention to vocational guidance and attempts are made once again to verify the hypothesis that an effective system of vocational guidance has been developed under projects. figure 4. factors that influenced the choice of vet in lithuania and the eu, % (source: cedefop, 2017) 127 77 60 52 55 1037 852 773 760 460 0 500 1000 1500 number of career leaders in vet number of career leaders in ge 65 30 6 6 5 311 209 78 59 450 200 400 number of career leader posts in vet number of career leader posts in ge figure 5. dynamics in the number of career leaders and their posts in general education and vet schools from 2012–13 to 2016–17 (source: mukis, 2018) http://www.mukis.lt business, management and education, 2020, 18(1): 56–72 67 the question of whether it succeeded is best answered by the project “national vocational guidance system: interdepartmental service delivery model and business inclusion” initiated and implemented by invest lithuania (všį investuok lietuvoje) and the ministry of education and science in 2018 (invest lithuania, 2018). the main results of the project included a review of good foreign practices, detailed analysis of the status of the vocational guidance system (development of a map of vocational guidance services), survey of service users’ opinions, and development of a vocational guidance system model and a procedure for providing services. the greatest value of the work is the assessment of the current status of vocational guidance provided in the conclusive findings of the project. the main findings are as follows: there is no coordination; there prevails methodological and methodological fragmentation; not only there is a lack of services, but they are not accessible at all (in regions, small schools); available services are ineffective; etc. the novelty of the vocational guidance model proposed by the project developers is the creation of the coordinated national vocational guidance system linked to the qualifications generated by the qualifications system, without disrupting the existing network of vocational guidance (information and counselling) points at the micro level (in the educational system and labour market institutions). the proposal to link the model of the vocational guidance system with the qualifications formed by the qualifications system is one of the steps, the implementation of which can significantly increase efficiency. occupational standards are a significant tool for the development of vocational guidance. the national qualifications system is a system of qualification formation and management, assessment of the competences acquired by a person and awarding of qualifications. the aim of the qualifications system is to facilitate the compatibility of the needs and objectives of the world of work with those of the educational system, to organise and manage the process of harmonisation to ensure optimal results by means of improving training of a workforce and the development of qualifications structure, as well as by enhancing the effectiveness of macro-level education services in which the world of work is interested most of all. many countries of the world recognise national qualifications systems as an instrument for effective dialogue between the interests of the world of work and the educational system (cedefop, 2009, 2014a, 2014b). how can a qualifications system help balance the qualification structure of human resources? the qualifications system combines the main stages of human resources training in a cycle: methodological documents are drafted, validated and updated by qualifications management authorities for the development and updating of vocational education and training programmes that meet the needs of the economy; studies on qualifications are organised by the qualifications management authorities and carried out together with the partners of the world of work with a view to assessing and standardising the needs of the economy for qualifications and to develop occupational standards, to build and describe qualifications meeting the needs of the economy; development of modular vet and study programmes based on the studies on qualifications; teaching and learning in accordance with the programmes that meet the needs of the economy; assessment and validation of formal, non-formal and informal competences acquired. 68 d. andriušaitienė. vocational guidance – gps for management of human resource development... the qualifications system, the information of which could serve as a basis for the development of vocational guidance (borbely-pecze & hutchinson, 2016; reid, 2015; tūtlys, 2013), consists of the following subsystems: management and quality assurance of the qualification system; design of qualifications; acquisition of qualifications; recognition of qualifications. the core of the qualifications system is the development and updating of occupational standards based on studies on qualifications, which provide systematised information of the world of work about qualifications and their content. a total of 24 occupational standards have been prepared within the framework of the qualification system development projects for all sectors of country’s economic activities, providing uniformly arranged descriptions of the qualifications that actually exist and are demanded in the labour market. there are two main parties involved in the development of occupational standards, namely, the world of work and the educational system. the mission of the world of work is to participate in the identification of the existing situation by defining the currently relevant nomenclature of professional activities, the competences needed for these activities and the need for future competences, generic and specific competences in specific professional activities, performance criteria and limits of competences. simply put, the world of work has to state what it needs in terms of qualifications and competences, i.e. what qualifications and competences are expected in the labour market (figure 6). all processes in the qualifications system are managed on the basis of unified methodological principles, focusing on the changing needs of the labour market and the goals of the educational system. in this context, occupational standards (qualification profiles) are developed and updated  – information is vital for the development of modern educational content, which, when vocational guidance is actively pursued, may become an effective tool for matching the qualifications structure of human resources and the labour market needs. and this match is important at both macro and micro levels: for the national labour market, businesses and individuals. figure 6. matching the objectives and needs of the world of work and the educational system (source: developed by author) business, management and education, 2020, 18(1): 56–72 69 the fact that, according to expert analysis, only some 20% of employees’ competences acquired in formal education match the requirements of the workplace suggests that the necessary competences are to be acquired through non-formal and informal learning. on national level, this means a significant loss of return on investment in training  – unused acquired competences generate no added value. for businesses, this means additional costs related to additional training of the person employed. for individuals, this is potential costs and time that could have been spent on acquiring competences that better match their personal needs, wishes and capabilities. for these reasons, vocational guidance itself should be considered as a responsible step preceding vocational education and training in the process human resource development. effective vocational (career) guidance would ensure a better balance between individual interests and labour market needs, a more efficient use of financial resources throughout the educational system, and a more straightforward and shorter individual career path. improvement of the vocational guidance model and its linkage to information and development of the qualification system (occupational standards) may aid in achieving the objectives of ensuring effectiveness of vocational guidance and the educational system as a whole (figure 7). however, to allow effective use of occupational standards (the qualification profiles contained therein) based on the qualifications system, the system itself needs several important steps: a large-scale information campaigns and public, reliable and interactive information technologies (it) tool for developing occupational standards and using the qualification profiles contained therein and related information. creation of an integrated it tool, encompassing the main information defining the content of qualifications combined with information on educational institutions where the preferred qualification can be obtained and the conditions and process for obtaining it, labour market information on potential jobs (employers), information of the vocational guidance figure 7. qualifications system information for vocational guidance (source: developed by author) 70 d. andriušaitienė. vocational guidance – gps for management of human resource development... system on possible horizontal and vertical career schemes, would enable not only career guidance and counselling professionals, but also all and any person to model their personal career scenarios with full access to education and labour market information. the condition for implementation is also evident – education policy-makers and responsible persons from various agencies and institutions should better align and harmonise strategic objectives and, at the same time, anticipated projects aimed at ensuring efficiency and synergy effects. conclusions an effective vocational guidance system is one of the instruments of human resource development. its importance and potential for the development of the country’s human resources and for each individual can be compared to the gps navigation system, a common attribute of modern life. three thousand students per career leader and less than one euro for career counselling per student – these are the figures illustrating the use of the career guidance system. all the studies carried out show that the problem is not only the lack of funding: there is no coordination; there prevails methodological and methodological fragmentation; not only there is a lack of services, but they are not accessible at all (in regions, small schools); available services are ineffective. project-based funding and community initiatives do not fill the gaps in systematic career guidance. the opportunity to revitalise vocational guidance at the lowest cost is to organise it as an information platform linked to the qualifications system. model proposed by the author: development of an integrated it tool, encompassing the information of professionals standards (qualification profiles) combined with information on educational institutions where the preferred qualification can be obtained and the conditions and process for obtaining it, labour market information on potential jobs (employers), information of the vocational guidance system on possible horizontal and vertical career schemes, would enable not only career guidance and counselling professionals, but also all and any person to model their personal career scenarios with full access to education and labour market information. references borbely-pecze,  t.  b., & hutchinson, j. 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(2013). karjeros projektavimo ir profesinio rengimo sąveika lietuvoje: galimybių spąstų problemos sprendimas [interaction between career design and vocational training in lithuania: solving opportunity traps]. karjeros projektavimas: tyrimai ir konsultavimas, (2), 29–53. https://www.schooleducationgateway.eu/en/pub/viewpoints/surveys/poll-on-career-guidance.htm https://www.schooleducationgateway.eu/en/pub/viewpoints/surveys/poll-on-career-guidance.htm https://strata.gov.lt/images/leidiniai/absolventu_karjeros_stebesenos_tyrimo_ataskaita.pdf https://strata.gov.lt/images/leidiniai/absolventu_karjeros_stebesenos_tyrimo_ataskaita.pdf copyright © 2020 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: hrybinenko.o.m@nmu.one business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 2: 307–330 https://doi.org/10.3846/jbem.2020.12309 evaluation of demographic component of countries’ economic security olha hrybinenko 1*, olena bulatova 2, olha zakharova 2 1department of economic of enterprises, faculty of finances and economics, dnipro university of technology, dnipro, ukraine 2economics and international economic relations department, mariupol state university, mariupol, ukraine received 22 march 2020; accepted 10 august 2020 abstract. purpose – the article is aimed at evaluation of the patterns of demographic processes development in terms of their impact on shaping the level of countries’ economic security. research methodology – the study is based on a multidimensional estimation technique, which proposes the development of an integral indicator of the demographic component of countries’ economic security. stochastic research methods, in particular the t-test method, were used to identify and justify different hazard zones. findings – on the basis of the formed sample of the countries, the integral indices of the level of the demographic component of countries’ economic security for the period of 2000–2018 were calculated. the thresholds of demographic security indicators were identified and reasoned; the countries’ security risks by demographic indicators were assessed; systematisation of countries according to the level of the demographic component of security was provided. research limitations – it is proposed to include ten indicators in the structure of the index of the demographic component of economic security; these indicators characterise different aspects of the demographic processes development. however, this is not a complete list of possible valuation indicators. this determines the necessity of further studies in terms of justifying the advisability of including various parameters and assessing the degree of their importance in the structure of the demographic security index. practical implications – the practical value of the results of the comprehensive analysis of the demographic processes development in the system of ensuring countries’ economic security is the possibility of identifying real or potential threats to the sustainable social and economic development of countries and regions of the world. originality/value – the authors’ improved methodology for assessing the level of economic security based on the demographic component consideration, taking into account the system of proposed indices, allows to assess the level of security, to monitor its changes and to identify factors that pose risks not only for one country but also for groups of countries both in regional dimension and in terms of the level of their development. keywords: economic security, demographic component of security, indicator, challenge, integral criterion. jel classification: f52, j10, c10. http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 mailto:hrybinenko.o.m@nmu.one https://orcid.org/0000-0001-6320-2775 https://orcid.org/0000-0001-7938-7874 https://orcid.org/0000-0002-8718-0205 308 o. hrybinenko et al. evaluation of demographic component of countries’ economic security introduction demographic component of the security determines such state-of-art of a nation when the implementation of human potential, provision of sufficient living conditions as well as the quality of life become the basis, in terms of which birth rate and migration correspond to the available resources and compensate ageing of population and mortality being the fundamental condition of both national and international security (ptoukha institute for demography and social studies of the national academy of sciences of ukraine, 2018). the demographic component is considered as one of the determinative ones in the context of sustainable development of a nation under which adequate level of the potential human reproduction can be implemented. nature of progress of demographic processes as well as its intensity influences the formation of the total level of economic security. on the one hand, the bases for sustainable socio-economic development are provided; on the other hand, particular real or potential challenges to the sustainable progress of nations and regions of the world arise. thus, it becomes topical to study problems as for the provision of optimum level of the demographic component of economic security relying upon a complex integral analysis of both tendencies and regularities of demographic progress as well as upon evaluation of risks and challenges to the total economic security. the majority of scientific study in the field of demography connects the specificity of demographic evolution and regularities of dynamics as well as changing the structure of parameters of demographic processes with the aspects of economic and social security provision. however, identification and evaluation of the correlation are based mainly upon qualitative descriptive analysis of the certain demographic indices, conditions, and tendencies of their development in the context of the defined retrospective as well as upon evaluation of the determined demographic situation influence on the potential of socio-economic progress. fragmentary nature of the study results, insufficient completeness and consistency of consideration of multi-aspect principles of the demographic change manifestation, nonavailability of the integrated approach as for the implementation of tools to evaluate quantitatively the development level of demographic processes as well as high intensive format of their changes both at the level of one country and at the worldwide level and the global system stipulate the necessity of further studies. we believe that on the one hand, the problems of such quantitative evaluation of demographic security based upon the integrated involvement of a set of demographic indices as part of the integral index as well as the development of tools to evaluate boundary values of the parameters to be considered as the evaluation criteria for security status and inform of risks and threats become critical. purpose of the paper is to evaluate development regularities of demographic processes from the viewpoint of their effect on the formation of the global economic security level. such an evaluation will be based upon the methods of multidimensional assessment in terms of which it is proposed to develop an integral index of the demographic component of the national economic security. the represented study involves the author’s approach to the demographic component of an economic security evaluation, relying upon the following assumptions: – first, economic security is such an integral concept in which evaluation should be based upon the consideration of a set of estimation criteria (i.e., security indices). business, management and education, 2020, 18(2): 307–330 309 hence, qualitative evaluation of a security level is possible if only the methods of multidimensional evaluation are applied resulting in the formation of relevant integral security indices; – second, the developed security index should not be of the nature of a descriptive index aggregating a system of single quantitative parameters into the unified, integrated assessment. it should also be the certain criterion having under the set conditions its own variation range, which violation is a signal of changes in the security level, identifier of the intensified risks or the increased security threats; – third, taking into consideration a linkage between the demographic component of economic security and sustainable development of the national economic system following the security understanding as such a characteristic of the economic system, determining its independence, stability, and sustainability as well as it is potential to dynamic and sequential development, protectability and competitiveness, the capability to withstand various risks, it becomes expedient to form such a system of security parameters (indicators) corresponding to the un concept of sustainable development and correlating with the goals and indicators of the sustainable development achievement of which have been determined as the priority-oriented within the concept (united nations, 2020a). according to the purpose, the following tasks of the study have been determined: – systematisation of demographic security indices and determination of nature of their influence of the security level. – development of methodical tools to calculate integral index of demographic security index. – formation of a sample set of countries to analyse features of their demographic progress and to evaluate the level of demographic security within the structure of economic security. – determination of the boundary values of demographic indices as the security criteria on the basis of their statistical analysis in the context of countries and the world. – evaluation of risks and threats to the countries in terms of demographic indicators and identification of status of the countries within the areas of risk, danger, and security. – evaluation of distribution of the countries and their classification in terms of the integral level of demographic security and creation of the rating of sample countries in terms of demographic security rating. – calculation and analysis of regional indices of demographic security and group ones (according to the status of their socio-economic development). the tasks defines the paper structure making it possible to carry out integral analysis of demographic process development in the context of a system providing economic security of the world countries creating a possibility to determine both actual and potential risks to the sustainable socio-economic growth of the nations as well as to the world parts. 1. previous research the current analysis of economic security is based upon the use of various approaches making it possible to study theoretical and methodological foundations to determine economic security as a state, as a system, and as a process. research and use of empiric methods intended to study the formation of economic security, and its provision are long-term. the modern conflicts, being expanded actively worldwide, are not limited by ideological issues 310 o. hrybinenko et al. evaluation of demographic component of countries’ economic security anymore; instead, they are connected with the distribution of resources, and the use of economic power (renner, 2002). maull (1984) believes that escalations of risky tendencies of cleavage of society as well as the escalation of social conflicts and breakage of links with raw material suppliers are the threats to economic security (1984). ackroyd and marsden (2006) pay attention to the resource allocation procedure and to prioritising of national policy as for the economic security formation. it is notable that nowadays, countries apply a policy of economic nationalism actively to provide proper interests and economic security (reznikova et al., 2018). while determining a security concept, baldwin (1997) has noted truly that the category is still complicated and controversial, thus requiring adequate conceptualisation. hence, studies of economic security and its comprehensive assessment should involve the totality of evaluation criteria (i.e. indicators of security). several variants are applied to form the integral index (bulatova et al., 2018; zakharova, 2015). early studies of the authors prove that economic security is such a characteristic of the economic system determining its independence, sustainability and stability, protectability and competitiveness, its potential for dynamic and successive development, and ability to stand up to various threats. demographic safety is the weighty component of the national economic security specifying the set of preconditions to provide adequate protection level of the population against the influence of internal threats and external threats when capitalproductive progress of the nation takes place. the last message is proved by many scholars engaged in security evaluation in the context of the influence of demographic factors. hence, the demographic tendencies, connected with changes in the age structure of the population as well as with the significant regional differences, are analysed as prerequisites for the emergence and expansion of international conflicts, i.e. as a threat to military and political security and destabilisation of socio-political development (brooks et al., 2019; spear & williams, 2012). certain scholars consider demography and regularities of demographic progress as a tool of governmental influence on various aspects of socio-economic, sociocultural, and political life characterising it as demographic engineering (mcnamee & zhang, 2019). that is why the possibility of such purposeful influence on the behaviour and changes in certain parameters of demographic processes can be considered (in terms of many countries) as the instrument to provide national (governmental) interests which may favour a conflict emergence as well as destabilisation of socio-economic development as a result. from the viewpoint of socio-economic aspect, demographic determinants (i.e. specific feature of age structure, its dynamic changes, the intensity of processes of migration dynamics and processes of the natural migration of population together with other economic determinants describing a level and nature of income distribution, a level of welfare of the population) are considered as the indicators of influence on food insecurity (tarasuk et al., 2019) and the national economy on the whole (lori, 2019). social security level (i.e. regarding the formation of the efficient system of social protection of the nation) is also considered in close correlation with the nature of changes in the population size and differentiation degree of a fertility level (boldrin et al., 2015: lee, 2016). the authors propose mathematical models of quantitative evaluation of the fertility effects on the parameters of a system of social protection of the population. business, management and education, 2020, 18(2): 307–330 311 certain scientists apply such an idea as “demographic resilience” while studying the influence on demographic tendencies on the security environment of countries inclusive of those in the context of climatic changes and searching for adequate ways to overcome negative consequences (de souza, 2015). many authors believe that demographic changes are the factors providing economic welfare and activating economic growth. among other things, relations between gdp per capita growth and the working-age population and the total population growth, child and old-age dependence ratios have been analysed (choudhry & elhorst, 2010); mechanism of the effect of demographic transformations, depending upon both rates and tendencies of changes in the number of inhabitants and their age structure, on the economic dynamics rates and poverty level has been described (cruz & ahmed, 2018); the long-run and short-run impact of such demographic factors as life expectancy, fertility rate and young dependency on the economic growth of south asian countries (munir & shahid, 2020) have been defined. authors apply nonlinear mathematical models to substantiate theories of demographic transition as well as its influence on economic growth (ranganathan et al., 2015) taking into consideration cyclic nature of economic processes and dealing with processes of natural population movement and economic growth as with endogenic ones. a number of studies the regularities of demographic changes are connected with processes of human capital progress and accumulation (han & lee, 2020; fertig et al., 2009), development of educational system and standard of knowledge (kurban et al., 2015). many scholars believe that demographic transformations and demographic security level are the prerequisites of socio-political system sustainability as it has been demonstrated in terms of the middle east (hamanaka, 2017) as well as the condition to provide economic growth and the improved living standards of the population as it has been demonstrated in terms of the southeastern european countries (malnar & malnar, 2015). mainly, evaluation of demographic security is connected with the identification of risks and substantiation of nature of their manifestation and influence for the future making of effective preventive policies (maroto & pettinicchio, 2020). an increasing proportion of young adults, rapid urbanisation, a shift in the sex structure of the population, differences in the rate of growth of the population, high mortality among the adult population of working age, migration, ageing of the population and its decline (depopulation) are considered as the key demographic risks (sidorenko, 2019). increase in the risks, as well as the intensity of the influence, is indicated heavily on the security status at different levels (from personal to global) thus requiring adequate diagnostics, constant monitoring, and involvement in the process of development of both national and global security strategies. analysis of the key reports by the uno (united nations, 2019a, 2019b, 2019c, 2019d, 2020b, 2020c; international organization for migration, 2020) has made it possible to characterise the main demographic tendencies of the global economic system both creating conditions and acting as challenges and threats for a sustainable and stable progress of countries and regions. it turns the abovementioned influences the total level of international economic security. thus, they may involve: – global increase in population; growth rates; availability of regional differences in demographic dynamics (among other things, it concerns high growth rates in the 312 o. hrybinenko et al. evaluation of demographic component of countries’ economic security developing countries, mainly in africa and in the middle east on the one hand, and decrease in population or slow growth rates in the developed countries on the other hand). – changes in the age population pattern in particular regarding the increase in the share of population at the age of 65+ in the industrialised countries as a result of intensification of ageing processes and the increase in demographic burden on the employable population. – tendency for the increase of average life expectancy of population with rather high relative variation degree between the countries with different levels of socio-economic development. – keeping the global tendency as for the total reduction in fertility rate along with the expressed high level in the developing countries. – high level of natural population growth in the developing countries, which provides high estimation level of viability of residents against high mortality ratios. – decrease in the total mortality ratio of the population; among other things, it concerns the decreased level of child mortality with the held high degree of variations between the indices depending upon the level of socio-economic development of one or another nation. – maintaining the role of international migration as the essential factor of demographic changes worldwide. global population number of 7.71 billion (2019) is a billion more to compare with 2007 and 2 billion more to compare with 1994. according to the forward prognosis by the uno, population size will continue its growth up to 9.74 billion in 2050. slower population growth should be mentioned; among other things, the highest (2%) average annual increase was recorded in 1960–1970. the rates decreased down to 1.04% in 2000–2019; they will decelerate down 0.74% of annual growth in 2030–2040, and down to 0.57% in 2040–2050. 59.5% of the world population inhabits asia. however, starting in 1990, rates of population growth have their decelerating tendencies. due to the fact, the specific weight will decrease. 17.2% inhabits africa, which is by 9.2% more to compare with 1950. its increase will continue by 8.4% up to 25.6% till 2050. the world part is characterised by the highest rates of population growth which will have to increase by 1.1 billion till 2050. 9.6% of the population fall in europe, which share decreased by 12.1% to compare with 1950. the decrease will continue down to 7.3% in 2050. it is the region which will experience a decrease in the population during 2020–2050. latin america and north america are populated by 8.5 and 4.9% respectively. latin america forged ahead. during 2020–2050, both regions will experience deceleration. 0.5% inhabits oceania. in this context, the population growth rate will remain higher to compare with the worldwide rates. according to the uno evaluations, rapid population increase is the actual risk to the sustainable development provision in the longer term (united nations, 2019e). from the viewpoint of the uno, such a risk area involve 47 the least developed countries. mainly, they are states in sub-saharan africa. on the whole, up to 2050 increase in the world population will provide nine countries, namely india, nigeria, pakistan, congo, ethiopia, tanzania, indonesia, egypt, and the usa. increase in 65+ age population (the share was 9.1% in 2019) is the global tendency. it will increase up to 15.9% till 2050. the oldest population is recorded in europe (18% in business, management and education, 2020, 18(2): 307–330 313 2019) and in the developed oceania countries (16% in australia and new zealand as for 2019). moreover, the ageing tendency will continue up to 2050. according to the prediction estimate, the share of 65+ age will increase up to 28.1% in europe, up to 22.6% in north america, and up to 17.9% in oceania. from the viewpoint of the increase in demographic load, the tendencies are security risks. then, the global index is 13.58 individuals of 65+ per 100 individuals at the age of 15-64 (2018). according to the uno prognostic estimation, increase in the demographic load is expected in 48 world countries by 2050. mainly, they are european countries, countries of north america, countries of east asia, and southeast asia countries (support ratio will be less than two individuals of productive age per each retired person). the abovementioned confirms the intensified risks to security stipulated by population ageing provoking additional load on the labour market, pension system, the increased tax pressure as well as the necessity to reform the health system, pension fund scheme, and a system of social protection of senior citizens. in the context of the sustainable development provision, just a life expectancy indicator is the criterion of human progress quality; it has the pronounced tendency to its growth worldwide. according to the data of 2019, life expectancy was 72.6 years to be 54.6% more to compare with 1955, and 10.6% more to compare with 2000. following forecasts, it will increase by 5.7% up to 2050 (76.67 years). the lowest index is in african countries (62.7 years), and the highest index is in north america (79.2 years). in compliance with 2019 data by the uno, in 21 countries the life expectancy index was 60 years; it varied from 60 to 69 years in 49 countries; from 70 to 70 years in 97 countries; and exceeded 80 years in 34 countries (united nations, 2019c). decreased fertility is another global demographic tendency. in 2019, it was 2.5 to be almost twice as little to compare with 1955 and by 10.1% less than in 2000. according to forecasts, it will decrease by 11.6% more till 2050 (2.21). african countries demonstrate the highest fertility. according to 2019 estimates, it is 80% more to compare with 4.4 the average world index. europe (1.61) and north america (1.75) demonstrate the lowest fertility. according to the global estimates (exclusive of europe), the index will decrease in future. in this context, in 1990, one-third of the world population inhabited regions where fertility was more than three children per woman. in 2019, only 12% of the world population inhabited high fertility regions covering mainly sub-saharan africa (nigeria, ethiopia, sudan, congo, uganda etc.) wherein 36 countries the is more than 4 children per a woman. according to 2019 data, 40% of the population inhabits average fertility countries (2.1-4). they are india, indonesia, pakistan, mexico, philippines, egypt etc. 50% of the world population inhabit low fertility countries being less than 2.1. they are european countries, countries of north america, australia, and new zealand (united nations,2020b). birth and mortality rate is characterised by a tendency to its decrease. in 2019, the global birth rate was 18.6 individuals per 1000 to be twice as little to compare with 1950, and by 13.8% less to compare with 2000; the mortality rate was 7.6 individuals per 1000 to be by 60% less than in 1950 and by 11.8% less than in 2000. african countries demonstrate a higher birth rate, and european and african countries show a high mortality rate. as for the child mortality, which indicator is among sdg indices, it was 28.9 cases per 1000 births in 2018 to be by 45.3% less than in 2000; death rate under the age of 5 was 314 o. hrybinenko et al. evaluation of demographic component of countries’ economic security 38.4 cases. however, the level remains high in african countries (74.2); among other things, it is 20 times higher than infant mortality in the developed countries of oceania (australia and new zealand). the necessity to involve indices of demographic development in the structure of socioeconomic security is based upon the risks and threats connected with global demographic development, and its regional differences. it stipulates the objective necessity to improve methods of quantitative measurement of a level of demographic security component relying upon multidimensional (integral) evaluations. 2. research methodology the method of integral evaluation of the security level is rather popular in ukrainian practices of economic security metrics. studies by kharazishvili (2019), grishnova and kharazishvili (2019), and tsvihun (2013) are the most critical research. they represent the calculation of an integral index of demographic security tested in terms of ukraine or its regions. kharazishvili (2019) considers demographic security as a structural element of economic security in the context of social development singularising such indicators of the structure index as life expectancy, depopulation coefficient, mortality rate, morbidity level, the total birth rate, and demographic load (i.e. net reproduction rate per a woman). the similar index structure is represented in a study by grishnova and kharazishvili (2019). we believe, that disadvantage of the structure of demographic security index is as follows: it cannot involve certain important demographic tendencies, namely, nature of age structure, changes in the age structure, and development of migration processes. in the context of another research (tsvihun, 2013), the demographic security index is of more complex structure in terms of which the indicators are grouped: indicators of natural reproduction; indicators of mechanical movement and distribution of the population; health indicators; indicators of sex and age composition of population; and indicators of family values (29 indicators). the index, proposed by the author, is more inclusive involving not only demographic indicator but also other factors of social and cultural and ethical nature. the method has also been applied for the studies concerning life quality standards (kharazishvili et al., 2019) within which methodology of integral assessment of the standard of living has been developed. the methodology relies upon calculation of integral index based upon ten socio-economic indicators (i.e., labour use level, compensation of employees in output, gdp created by shadow employment and wages, shadow employment to total employment, expenditure on education to output, healthcare expenditure to output, the ratio of average wages to a living wage, wage share in the structure of income, pension expenditure to output, pension fund deficit to output). it should be noted that the methodology intended to develop the composite indicators with a thorough analysis of techniques to structure the indicators, normalise them, aggregate, measure etc., to describe pluses and minuses of each of the techniques as well as their application conditions with relevant practical examples has been published by oecd in handbook on constructing composite indicators (2008). business, management and education, 2020, 18(2): 307–330 315 while generalising the experience of early studies, we propose a proper vision of an approach to evaluate a level of demographic security component which will be based upon the abovementioned assumptions as well as upon calculation of integral indicators of the demographic component of economic security of countries with following analysis of their distribution within the world economic space and intensity of the dynamics. the following algorithm, describing the research methodology concept to calculate demographic component (i.e. subindex) of economic security, has been proposed relying upon the use of procedural tools of integral evaluation. it involves below-mentioned stages: first stage: systematisation of demographic security indicators and their classification from the viewpoint of their influence on the total level of economic security. namely, it is referred to the determination of indices of motivators, which growth creates preconditions to improve the security level, and demotivators, which increase is considered as the potential threats and risks to the security. table 1 represents the results. second stage: substantiation of a selection of a technique to valuate indicators of economic security. among other things, in the process of the research, a procedure to calculate the standardised scores (i.e. z-scores) (oecd, 2008). z-score is a measure of relative variation of the actual value of an index (i.e. observable characteristic) demonstrating the number of the involved standard deviations (σ) relative to mean level (µ). z-score is a measure less statistical indicator used to compare indices differing in their sizes and measurement units. if xj is incentive indicator, then its standardised score is calculated on the formula: . j j x z −µ = σ (1) if xj is disincentive indicator then , j j x z µ − = σ (2) where zj is the standardised value of the jth indicator; xj is the actual value of the jth indicator, µ is the mean value of jth indicator(by sample); σ is the standard deviation of the jth indicator (by sample). to reduce the standardised values to (0;1) range, their transformation to a function of standard normal integral distribution has been performed using the following formula: 2 2 2 . 1 j z n jz e − = π (3) third stage: substantiation of the form of integral evaluation of the economic security component (i.e. subindex). among other things, the study proved the expediency of geometric aggregation (calculation with the use of a mean geometric) according to the formula: 1 n nndc j j si z = = ∏ , (4) where dcsi is a subindex of the demographic component of economic security, and n jz are the normalised z-scores of security indices. 316 o. hrybinenko et al. evaluation of demographic component of countries’ economic security hence, the integral evaluation of the demographic component of economic security, in view of the proposed indicators to be included (table 1, appendix), is calculated as follows 10 dcsi pg lex ma pold dr drold dinf vr fr nmr= × × × × × × × × × , (5) where pg – population, average annual growth rates, %; lex – life expectancy at birth, years; ma – median age, years; pold – share of population aged 65 years or over,%; dr – dependency ratio; drold – old-age dependency ratio; dinf – infant mortality rate, deaths per 1000 live birth; vr – vitality rate; fr – fertility rate; nmr – net migration rate, per 1000 of population. forth stage: formation of the data sampling (i.e. identification of the amount of the sample data, and its typologisation). the sample total was formed taking into consideration two criteria: regional feature (for further possibility to involve and calculate regional security indices, and to identify certain regional features, transformations, dynamics etc.) as well as a level of socio-economic growth (to define differences in the systems of economic security provision in the context of countries varying in their development levels). as a result, the formed totality consists of fifty-three countries united in four groups depending on their regional features (i.e. america, europe, asia and oceania, africa and the middle east). each group includes both the developed countries and developing ones. retrospection period of 19 years (i.e. 2000–2018) was selected to perform dynamic comparisons and evaluate intensity and tendencies of changes. the number of observations was 10070 (inclusive of ten unit parameters added to the integral evaluation). fifth stage: substantiation of the threshold values for indicators of the demographic component of economic security and integral evaluation .since is not just an integral (multidimensional) index; it must signalise on the degree of insecurity and separate the insecure areas. thus, the necessity to identify a system of threshold values arises. the abovementioned is proposed to be implemented with the use of hemostasis mechanism as a characteristic feature of dynamic sustainability of the whole economic security system as well as its components (kachynsky, 2013; kharazishvili & dron, 2014). hence, it has been proposed to single out the following: first, threshold values of the indicators (i.e. low threshold value and high threshold value) characterising allowable interval of the values within which the most favourable functioning conditions are created. namely, values of the safety indicators, falling in the interval, are the evidence (i.e. a signal) of “relative safety area”. second, critical values of the indicators (i.e. low critical value, and high critical value) are the values which violation causes unfavourable tendencies of economic development of the nation. in other words, outstepping the limits of the critical values is a signal of violation of the security level (i.e. it is a critical condition); if the indicators are between the threshold value and critical value, then escaping from the “relative safety area” takes place as well as getting to a “security violation area” (i.e. to a risk area). to separate such values in terms of the formed sampling of indicators and units of populations (i.e. countries), stochastic research methods have been applied such as student’s t-test (paniotto et al., 2004; kharazishvili & dron, 2014). hence, in terms of each indicator, the low threshold value is determined as x −σ (i.e. the difference between a worldwide mean security indicator and a standard deviation being the absolute evaluation of safety indicator variation relative to its worldwide mean), and high business, management and education, 2020, 18(2): 307–330 317 threshold value is determined as x + σ (i.e. the total of a worldwide mean security indicator, and a standard deviation). in terms of each indicator, the low critical value is determined as x t− σ , and high critical value is determined as x t+ σ ; i.e. sampling value of the standard deviation of the value is multiplied by the t-test value (table value of student distribution depending upon probability level р and the number of degrees of freedom α). advantages of the proposed methodology are manifold analytical possibilities of the represented tools, making it possible to: – calculate safety indices which will become a basis for comparative analysis of the development of countries as for their security level and compile adequate ratings of the national economies in terms of their security; – analyse the regularities of changes in the security level dynamically, identify change tendencies, and form prognostic estimations; – determine boundary values (critical values and threshold ones) for the indicators involved in the system of security parameters which may become a basis for the development of security state monitoring, timely detection when the actual value exceeds threshold ones, and consideration of risks and threats. as a result, that may prevent potential risky situation or inhibit their negative after-effects; – classify countries as for their security level; – carry out factor analysis to identify the indicators being the most important for the total security level; and – apply the obtained integral evaluations as the variables in economic and mathematical models to evaluate the influence of the security state on the global economic development as well as situations in the certain countries, unions, and regions within the system of the world economic relations. 3. results table 2 (appendix) shows the results of calculation of boundary values of indicators of demographic security component. thus, during the analysed period, the global increase in population was characterised by a slow growth dynamics; among other things, the mid-year growth rate was 1.1% in 2018 to compare with 1.3% in 2000. the low critical boundary is evaluated by means of 0.98% decrease in the rate (the year of 2018). the high critical boundary is evaluated by means of 3.18% increase in the rate (the year of 2018). during the analysed period, the expected probability of life increased globally by 7.5% (from 67.55 years in 2000 up to 72.6 years in 2018). the low critical boundary of the value was 59.9 years in 2018 (to compare with 52.51 years in 2000), and high critical boundary of the value was 84.87 years in 2018 (to compare with 82.59 years in 2000). the global median age of the population is also characterised by its tendency to increase. in particular, the analysed period has demonstrated its 17.5 growth from 26.3 years in 2000 up to 30.9 years in 2018. the low critical boundary of the index was 15.3 years in 2018 (to compare with 11.3 years in 2000), and its high critical boundary was 46.5 years in 2018 (to compare with 41.3 years in 2000). indicator of ageing rate has its growing tendency; among other things, a share of 65+ age population increased by 2 % in the world from 6.87 years in 2000 up to 8.87% in 2018 318 o. hrybinenko et al. evaluation of demographic component of countries’ economic security (i.e. according to estimations by the uno, the demographic ageing threshold was exceeded by 7%). in 2018, the high critical boundary was 22.7% (to compare with 17.72% in 2000); according to the un ageing scale by e. rosset, it is a very high level of demographic ageing. globally, the coefficients of total demographic burden are characterised by a tendency to following decrease from 58.75 years in 2000 down to 53 years in 2018 (i.e. 9.8%) depending upon high rates of birth and fertility in certain world countries and the increased population share aged up to 15 years respectively. as a risk indicator, the high threshold value was 66.7 in 2018; and the high critical value was 80.48. alternatively, the coefficient of global retirement burden has a distinct tendency to growth being 24.4% (i.e. from 10.92 in 2000 up to 35.43 in 2018). in the capacity of a risk indicator, the high threshold was 24.47% in 2018; the high critical value was 35.43. the global child mortality rate is characterised by the most intensive dynamics towards its reduction to compare with the demographic indicators being analysed. the rate decreased by 45.7% (i.e. from 53.2 in 2000 down to 28.9 in 2018). in this context, the indicator varies significantly from one country to another one being observable at the level of boundary values; namely, in terms of the year of 2018, high critical value was 56.6 to compare with 103.2 in 2000. global survivability coefficient remains almost invariable. its rate reduced by 2.5% (i.e. from 2.53 in 2000 down to 2.47 in 2018). in a greater or lesser degree, high boundary values threaten the least developed countries thus evaluating in such a way: 4.34 (a threshold value) and 6.32 (a critical one) in the year of 2018. global fertility rate decreases further. it experienced it is 7.5% reduced from 2.7 in 2000 down to 2.5 in 2018. as with the previous indicator, high boundary values are considered as minor security threats in the least developed: 3.34 (threshold value) and 4.26 (critical one). it is expedient to evaluate migration rate as a security indicator from the viewpoint of deviation from both low and high critical values. hence, according to the data of 2018, the low critical boundary for the world countries is –9.8 (i.e. net outflow per 1000 people) which is by 53.8% less than the corresponding index in the year of 2000 which was –21.1. according to evaluations of 2018, the high critical value is 14.7 (i.e. net inflow per 1000 people) which is 51.1% less than the corresponding index in the year 2000, which was –30.2. table 3 (appendix) demonstrates the evaluation of allocation of countries within different security areas during the period of retrospective analysis (i.e. years of 2000 and 2018). thus, a small share of countries is within the critical security areas. in terms of maximum evaluation, the share is not more than 9.4% of the analysed totality. mainly, they are the least developed african countries (in terms of indicators of high rates of population growth; low expectable length of life; and high fertility rate) as well as such developed nations as italy and japan (in terms of very high ageing rate). moreover, the developed countries are involved in the area of relative insecurity due to the indicators of a decrease in population; high median age; ageing rate; retirement burden; and low vitality coefficient. following stage involved calculation of a subindex of the demographic component of economic security according to the analysed sampling of countries from 2000 to 2018. figure 1 explains the calculated indices for the years of 2000 and 2018 as well as ranges of boundary values, making it possible to use the values as security indices. business, management and education, 2020, 18(2): 307–330 319 figure 1. allocation of the world nations according to integral level of demographic component of economic security the security indices, represented in figure 1, have been derived under analytical formulas (1)–(5) making it possible to compare countries in terms of their demographic security. variation of values of demographic security indicators is limited by ranges in (1–4) graph calculated according to 2018 data relying upon values of security indices and being lc 0.055; lt 0.287; ml0.424; and ut 0.562 (upper critical value, calculated as 0.794, is not shown in the figure since no country is characterised by security level exceeding the threshold). hence, such a representation helps understand the conditions under which different countries are relative to the state of their demographic security. consequently, in terms of demographic security index, the highest integral values were obtained for such countries as kuwait, saudi arabia, peru, turkey, chile, columbia, malaysia, and algeria (all the nations belong to developing ones and represent different parts of the world). such countries as nigeria, angola, bahrain, venezuela, and japan have the lowest integral security values (except japan, the abovementioned countries are developing ones belonging mainly to the african part of the world). certain regularities of the integral index dynamics during the period under analysis should also be mentioned (the results are based upon the growth rates in % calculation for from 2000 to 2018). thus, countries may be divided into two groups: group one involves the states demonstrating a tendency to the decrease in the demographic component of economic security (i.e. the index in 2018 to compare with 2000). that concerns twenty-five countries from the sampling (47.2%). venezuela (–79.6%), nigeria (–74.8%), bahrain (–55%), japan (–46%), finland (22%), and korea (20%) demonstrated the highest rates of the decrease. group two involves 28 of the sampled countries demonstrating a tendency to the increase in the demographic component of economic security (i.e. 52.8%). uae (6.2 times), kuwait (3.2 times), yemen (2.9 times), and qatar (2.8 times) demonstrated the highest increase of the index. from the viewpoint of evaluation of the demographic component of economic security, it is possible to classify countries taking into consideration the calculated boundary values (table 4, appendix). 320 o. hrybinenko et al. evaluation of demographic component of countries’ economic security consequently, 50% of the countries, involved in the analysed sampling, are relatively safe (groups four and five) as for the demographic security; 35% of the countries (group three) have relatively risky (unsatisfactory) level, and 10% of the countries (groups one and two) are characterised by a risky (critical) level. for identification of regional distinctions and differences in the levels of socio-economic development, integral indices for the world parts and group of countries were developed according to their progress (figures 2, 3). the indices, represented in figure 2, have been calculated as a geometric mean from the security indices of the sample countries, covered by the regions, i.e., america (the usa, canada, argentina, brazil, chile, columbia, cuba, mexico, peru, venezuela), europe (germany, great britain, france, italy, spain, the netherlands, switzerland, poland, sweden, belgium, austria, norway, denmark, finland, ukraine, russia), asia and oceania (japan, australia, new zealand, china, india, korea, indonesia, thailand, malaysia, singapore, the philippines) and africa and middle east (israel, turkey, iraq, egypt, saudi arabia, yemen, qatar, bahrain, kuwait, uae, nigeria, south africa, algeria, morocco, angola). the distribution of countries was performed according to the unstat classification. as the calculations show, the highest values of the indices belong to american states and asian-pacific countries. moreover, starting in 2015, the latter demonstrates the highest security level from the viewpoint of demographic component evaluation. the lowest security level characterises african countries and middle east countries. american, european, and asian-pacific parts of the world have a tendency to the decreased security in terms of the demographic component. africa and the middle east are characterised by the increased tendency as well as growing indices of demographic security component. correspondingly, a geometric mean has been applied for aggregation. thus, group indices of demographic security have been obtained for countries with different development level (figure 3). relying upon classification methodology by the unstat such countries as the usa, canada, germany, great britain, france, italy, spain, the netherlands, switzerland, figure 2. dynamics of regional indices of the integral level of demographic component of economic security (authors’ calculations) business, management and education, 2020, 18(2): 307–330 321 poland, sweden, belgium, austria, norway, denmark, finland, japan, australia, newzealand, israel) were considered as the developed nations. other countries were considered as developing ones. to compare with the developed countries, integral values of a level of demographic security components of the developing countries are quite lower despite a tendency towards narrowing a gap between the indices (for instance, in 2000, safety index of the developed countries excessed correspondence value of the developing countries by 29.7%. in the year of 2018, the excess decreased down to 13.8%). alternatively, calculation of the values in terms of the developing countries, involving regional specifics, has demonstrated rather high differentiation, namely: on the average, higher values of security indices in african and asian countries excess values shown by the developed countries; and the lowest indices are typical for latin america. conclusions demographic security is the important component of economic security determining the environment when favourable conditions are created as for the sustainable socio-economic development of a country as well as its human potential. such basic demographic tendencies as the increase in the world population, changes in age distribution, intensification of ageing processes, increase in demographic burden for the labour force, reduction in the fertility rate in the developed countries, preservation of high level of natural population growth in the developing countries, and decrease in mortality rate determine both threats and risks to the general level of economic security. the following can be defined as the basic challenges and risks connecting with the progress of demographic processes in the context of the world economy and influencing on the figure 3. dynamics of indices of integral level of demographic component of the economic security in terms of groups of countries varying in their socio-economic development (authors’ calculations) 322 o. hrybinenko et al. evaluation of demographic component of countries’ economic security provision of sustainable development of any nation as well as on the general level of international economic security on the whole: global population growth; maintaining the tendency as for the increase in 65+ population in the developed countries; increase in the level of average life expectancy with rather high relative degree of dissimilarity among countries varying in their socio-economic development; maintaining the global tendency as for the reduction of the total fertility rate; high level of natural population increase in the developing countries; decrease in the child mortality level while maintaining a high dissimilarity degree between the indices in the context of countries varying in their socio-economic development; and intensification of international migration influence of the global demographic changes. use of the methodical tools for integral evaluation of a demographic component of economic security, proposed by the paper, has helped systemise and classify demographic security indicators from the viewpoint of influence of the general level of economic security. the threshold value of the indicators, characterising the safe range of values, has been singled out. the most favourable conditions for national security are created within the range. critical values of indicators, which violence provokes negative tendencies in the economic development of a country, have been identified. the research has helped understand that generally the least developed african countries turned out to be included in the critical risk areas (in terms of indicators of high rates of population growth; low expectancy of lifespan; high fertility rate; and high level of child death rate)as well as certain developed countries (in terms of too high ageing level). moreover, the developed nations are also involved in the areas of relative risk in terms of indicators of the decreased population; high median age; ageing level; retirement burden; and low vitality coefficient. calculation results, concerning the integral level of demographic security component, have shown that the highest values belong to such developing countries from different parts of the world as kuwait, saudi arabia, turkey, chili, columbia, malaysia, and algeria. the lowest integral security values have been obtained for such developing countries, located mainly in the african part of the world, like nigeria, angola, bahrain, and venezuela. in terms of regional index, american countries, as well as asian-pacific ones, demonstrate the highest values of the indices. moreover, since 2015 the latter illustrates the highest security level from the viewpoint of a demographic component. european demographic security nears the worldwide mean ones. african countries and middle east countries are characterised by the lowest security level. as for the prospects for future research, the following is objectively necessary: first, the analysis of country differences as for the formation of the integral level of the demographic component of economic security to identify the factors influencing the security level evaluation to the greatest extent and to evaluate the degree of the influence; 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(2015). specific features of evaluation of integral interaction between countries, and parts of the world. msu messenger. series: economy, 10, 95–103 (in ukrainian). appendix table a1. classification of demographic indicators as security indicators (compiled by the authors) indicator nature of the index as the security factor characteristic in terms of a risk level determination population, average annual growth rates, % (pg) incentive (positivevalue). disincentive (negative value; increase outside of the high critical value) indicator determining nature of demographic development of the country. negative value indicates depopulation processes while identifying value of demographic decline. positive value means the increased demographic reproduction while evaluating the intensity of population growth. life expectancy at birth, years (lex) incentive disincentive (outside of the high critical value) shows the mean expectancy interval between birth and death of the generation; acts as the generalised characteristic of a death rate. on the one hand, increase in the indicator evidences on the improved life quality as well as well-being level; on the other hand, it causes changes in the age structure of population, increase in median age while intensifying ageing processes. median age, years (ma) incentive disincentive (outside of the high critical value) age evaluation of 50% of the country population. increase in median age proves lifespan rise, and improve in well-being. on the other hand, it speaks for the nation ageing. share of population aged 65 years or over, % (pold) disincentive acts as an indicator of demographic ageing. according to the uno evaluations, ageing nation is the nation where the share excesses 7%. in terms of a scale by e. rosset (rosset, 1959), demographic ageing starts when population aged 65 years or overshare is 12%. https://www.un.org/en/development/desa/population/publications/pdf/mortality/wmr2019/worldmortality2019databooklet.pdf https://www.un.org/en/development/desa/population/publications/pdf/mortality/wmr2019/worldmortality2019databooklet.pdf https://www.un.org/en/development/desa/population/publications/pdf/ageing/worldpopulationageing2019-highlights.pdf https://www.un.org/en/development/desa/population/publications/pdf/ageing/worldpopulationageing2019-highlights.pdf https://population.un.org/wpp/publications/files/wpp2019_highlights.pdf https://population.un.org/wpp/publications/files/wpp2019_highlights.pdf https://sustainabledevelopment.un.org/sdg1 https://www.un.org/en/development/desa/population/publications/pdf/fertility/world_fertility_2019.pdf https://www.un.org/en/development/desa/population/publications/pdf/fertility/world_fertility_2019.pdf https://www.un.org/en/development/desa/population/publications/pdf/policy/world_population_policies_2019.pdf https://www.un.org/en/development/desa/population/publications/pdf/policy/world_population_policies_2019.pdf 326 o. hrybinenko et al. evaluation of demographic component of countries’ economic security indicator nature of the index as the security factor characteristic in terms of a risk level determination dependency ratio, disabled population per 100 persons of working age (dr) disincentive it is measured by the number of younger population (under the age of 15) and older population (over 65 years old) per 100 persons of working age. on the one hand, its increase depends upon the prolonged life expactancy and the decreased death rate. on the other hand, it depends upon gradual decrease in the ablebodied population increasing a level of demographic burden. old-age dependency ratio, population aged 65 and over per 100 persons of working age (15–64) (drold) disincentive shows the number of old people (65 years and over) per 100 persons of working age. this indicator approximates the implied economic dependency associated with a growing share of the population ta older ages. infant mortality rate per 1000 of the born (dinf) disincentive acts as the generally accepted indicator of the nation health; criterion of life quality of the population; wellbeing level; level of distribution of social wealth and material wealth distribution; level of education and culture; level of medical care accessibility and quality etc. vitality rate (vr) incentive/ disincentive (outside of the high critical value for the least developed countries) it is calculated with the help of birth rate-death rate ratio. acts as a value of natural migration of population. in terms of population replacement is equal to unity. in terms of depopulation, assumes a value being less than 1. fertility rate (fr) incentive/ disincentive (outside of the high critical value for the least developed countries) index characterizing average number of children born by a woman during her life. acts as indicator of the population reproduction. decrease in its level stipulates the decreased birth rate, and the decreased population rate. net migrationrateper 1000 of population (nmr) incentive/ disincentive (outside of the high and low critical values) index, calculated with the help of net migration growth-average population ratio. acts as the indicator of mechanical migration of population; influences total number of the population as well as its dynamics. to some extent, both positive value and negative value are stimulating factors (in terms of certain countries, it compensates natural population lossor, adversely, over population); its increase may threatens economic security. end of table a1 business, management and education, 2020, 18(2): 307–330 327 table a2. dynamics of boundary values of indicators of demographic component of economic security of the world countries for the period of 2000–2018 (authors’ calculations) indicator boundary values years growth rate 2018/2000, %2000 2004 2008 2012 2016 2017 2018 population, growth rate, mv 1.30 1.25 1.23 1.19 1.13 1.12 1.10 –15.4 lc –1.28 –2.67 –4.82 –1.60 –0.91 –0.96 –0.98 –23.5 lt 0.01 –0.70 –1.79 –0.20 0.11 0.08 0.06 337.2 ut 2.59 3.20 4.25 2.58 2.15 2.16 2.14 –17.4 uc 3.88 5.17 7.28 3.98 3.17 3.20 3.18 –18.1 life expectancy mv 67.55 68.65 69.90 71.17 72.18 72.38 72.60 7.5 lc 52.51 53.57 55.60 57.93 59.54 59.90 59.90 14.1 lt 60.05 61.13 62.77 64.57 65.88 66.16 66.16 10.2 ut 75.05 76.17 77.02 77.77 78.48 78.60 78.60 4.7 uc 82.59 83.74 84.20 84.41 84.83 84.87 84.87 2.8 median age mv 26.3 26.3 27.4 28.5 29.6 29.6 30.9 17.5 lc 11.3 11.3 12.1 13.1 14.1 14.1 15.3 36.1 lt 18.8 18.8 19.8 20.8 21.9 21.9 23.1 23.0 ut 33.8 33.8 35.0 36.2 37.3 37.3 38.7 14.4 uc 41.3 41.3 42.7 43.9 45.1 45.1 46.5 12.4 population aged 65 years or over mv 6.87 7.20 7.43 7.78 8.43 8.65 8.87 29.1 lc 0.00 0.00 0.00 0.00 0.00 0.00 0.00  – lt 1.47 1.56 1.55 1.51 1.68 1.82 1.98 34.9 ut 12.28 12.84 13.32 14.06 15.17 15.47 15.77 28.4 uc 17.72 18.52 19.24 20.37 21.97 22.34 22.70 28.1 dependency ratio mv 58.75 55.55 53.39 52.52 52.60 52.79 53.00 –9.8 lc 29.79 27.46 24.42 23.91 24.60 25.01 25.52 –14.3 lt 44.32 41.55 38.95 38.26 38.64 38.95 39.30 –11.3 ut 73.18 69.55 67.82 66.79 66.55 66.63 66.70 –8.9 uc 87.71 83.64 82.35 81.14 80.60 80.57 80.48 –8.2 old-age depen dency ratio mv 10.92 11.21 11.41 11.87 12.87 13.22 13.58 24.4 lc 0.00 0.00 0.00 0.00 0.00 0.00 0.00  – lt 3.02 2.93 2.67 2.34 2.31 2.49 2.69 –10.9 ut 18.81 19.49 20.15 21.41 23.42 23.95 24.47 30.1 uc 26.76 27.83 28.94 31.01 34.04 34.75 35.43 32.4 infant mortality rate mv 53.2 46.3 39.9 34.5 30.6 29.7 28.9 –45.7 lc 3.2 2.4 2.9 2.7 1.7 1.4 1.2 –62.8 lt 28.3 24.4 21.5 18.6 16.2 15.6 15.1 –46.6 ut 78.1 68.2 58.3 50.4 45.0 43.8 42.7 –45.3 uc 103.2 90.2 76.9 66.3 59.5 58.0 56.6 –45.1 328 o. hrybinenko et al. evaluation of demographic component of countries’ economic security indicator boundary values years growth rate 2018/2000, %2000 2004 2008 2012 2016 2017 2018 vitality rate mv 2.53 2.51 2.52 2.52 2.51 2.47 2.47 –2.5 lc 0.00 0.00 0.00 0.00 0.00 0.00 0.00  – lt 0.25 0.31 0.38 0.44 0.59 0.60 0.60 138.0 ut 4.81 4.71 4.65 4.61 4.43 4.34 4.34 –9.7 uc 7.10 6.92 6.80 6.72 6.37 6.23 6.23 –12.4 fertility rate mv 2.70 2.61 2.55 2.49 2.45 2.43 2.50 –7.3 lc 0.17 0.29 0.44 0.50 0.59 0.60 0.60 256.0 lt 1.44 1.45 1.50 1.50 1.52 1.52 1.52 5.8 ut 3.95 3.77 3.61 3.48 3.37 3.34 3.34 –15.5 uc 5.22 4.93 4.67 4.48 4.30 4.26 4.26 –18.4 net migration rate mv  –  –  –  –  –  –  –  – lc –21.1 –21.1 –41.5 –14.3 –9.8 –9.8 –9.8 –53.8 lt –8.2 –8.2 –16.5 –5.1 –3.6 –3.6 –3.6 –56.2 ut 17.3 17.3 33.3 13.1 8.6 8.6 8.6 –50.3 uc 30.2 30.2 58.3 22.3 14.7 14.7 14.7 –51.1 note: mv is middle value, lcis lower critical value; lt is lower threshold value; ut is upper threshold value; and uc is upper critical value. table a3. evaluation of risks and threats to security of nations in terms of the demographic indicators (authors’ calculations) indicators 2000 2018 area of relative riskslc-uc, lc-lt area of critical risks (<lc, >uc) area of relative risks ut-uc, lc-lt area of critical risks (<lc, >uc) population, growth rates (pg) 6 countries (11.3%) uc-uc: yemen, qatar, angola lc-ltv: poland, russia, ukraine 3 countries (5.7%) > uc: bahrain, kuwait,uae 9 countries (17.0%) uc-uc: nigeria, iraq lc-lt: cuba, italy, venezuela, poland, ukraine, japan, spain 2 countries (4.2%) > uc: bahrain, angola life expectancy (lex) 1 country (1.9%) lc-lt: sar 2 countries (4.2%) <lc: nigeria, angola 3 countries (5.7%) lc-lt: ras, angola, yemen 1 country (1.9%) <lc: nigeria median age, (ma) 26 countries (49.1%) lc-lt: angola, nigeria, yemen, iraq ut-uc: usa, canada, eucountries, ukraine, russia, japan, australia, new zealand – 26 countries (49.1%) lc-lt: angola, nigeria, yemen, iraq htv-hcv: canada, cuba, eucountries, ukraine, russia, korea, thailand, singapore 2 countries (4.2%) > uc: italy, japan end of table a2 business, management and education, 2020, 18(2): 307–330 329 indicators 2000 2018 area of relative riskslc-uc, lc-lt area of critical risks (<lc, >uc) area of relative risks ut-uc, lc-lt area of critical risks (<lc, >uc) share of population aged 65 years or over (pold) 21 countries (39.6%) ut-uc: eu countries, the usa, canada, ukraine, russia, japan, australia 1 country (1.9%) >hcv: italy 17 countries (32.1%) ut-uc: eu countries, canada, ukraine 2 countries (4.2%) >uc: italy, japan dependency ratio (dr) 2 countries (4.2%) ut-uc: nigeria, iraq 2 countries (4.2%) > ut: yemen, angola 2 countries (4.2%) ut-uc: yemen, iraq 2 countries (4.2%) > uc: angola, nigeria old-age dependency ratio (drold) 17 countries (32.1%) ut-uc: eu countries, japan, ukraine 2 countries (4.2%) > uc: italy, sweden 16 countries (30.2%) ut-uc: eu countries, canada 2 countries (4.2%) > uc: italy, japan infant mortality rate (dinf) – 2 countries (4.2%) > uc: angola, nigeria 2 countries (4.2%) ut-uc: yemen, angola 1 country (1.9%) > uc: nigeria vitality rate (vr) 8 countries (15.1%) ut-uc: the philippines, iraq, malaysia lc-lt, <1: italy, germany, russia, sweden, ukraine 5 countries (9.4%) > uc: saudi arabia, qatar, bahrain, kuwait, uae 14 countries (26.4%) ut-uc: angola, algeria, kuwait, bahrain, yemen, saudiarabia, egypt, iraq lc-lt, <1: italy, spain, ukraine, germany, japan, finland 2 countries (4.2%) > uc: qatar, uae fertility rate (fr) 3 countries (5.7%) ut-uc: nigeria, saudi arabia, iraq 2 countries (4.2%) > uc: angola, yemen 4 countries (7.5%) ut-uc: yemen, iraq lc-lt: korea, singapore 2 countries (4.2%) > uc: angola, nigeria net migration rate (nmr) – 3 countries (5.7%) > uc: qatar, bahrain, uae 2 countries (4.2%) ut-uc: kuwait, qatar 2 countries (4.2%) > uc: bahrain <lc: venezuela note: the number of the countries as well as their shares has been calculated relative to the amount of the analysed sampled totality (53 countries). end of table a3 330 o. hrybinenko et al. evaluation of demographic component of countries’ economic security table a4. groups of the countries in terms of their integral levels of demographic component of economic security (authors’ calculations) range of variation of security indices security level value (2018) countries <lc (less than low critical value) critical level <0.055 2 countries (3.8%) nigeria, angola 0.036 on the average lc-lt (low critical value-low threshold value range) risk level 0.055– 0.287 3 countries (5.7%) bahrain, venezuela, japan 0.130 on the average lt-mv (low threshold valuemiddle value) unsatisfactory level 0.287– 0.424 19 countries (35.8%) yemen, italy, southafrica, iraq, germany, denmark, sweden, cuba, russia, korea 0.373on the average mv-ut (middle value -upper threshold value range) satisfactory level 0.424– 0.562 21 countries (39.6%) india, belgium, greatbritain, austria, the philippines, thailand, the usa, switzerland, egypt, norway, china, canada, indonesia, newzealand, brazil, argentina,mexico, morocco, singapore, australia, israel 0.4861on the average ut-uc (upper threshold valueupper critical value range) safe level 0.562– 0.794 5 countries (9.4%) algeria, malaysia, columbia, chili, turkey, peru, saudi arabia, kuwait 0.592on the average >uc (higher than upper critical value) optimal level >0.794 – this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university using customer-based brand equity model in the higher education context: simulating the current university’s brand yulia stukalina *, dmitry pavlyuk transport and telecommunication institute, 1 lomonosova str. lv-1019 riga, latvia received 03 april 2021; accepted 05 july 2021 abstract. purpose  – the purpose of the article is to simulate the current version of a university’s brand using the customer-based brand equity (cbbe) model. research methodology – the methodology of the paper includes analysis of theoretical sources and prior research on branding in higher education. for collecting primary data, a questionnaire based on the multi-dimensional cbbe model was used; a survey was conducted in transport and telecommunication institute (latvia). structural equation modelling was then applied for confirmatory factor analysis of relationships between brand equity-related factors. findings  – statistical analysis of the conducted survey’s data disclosed the importance of different brand dimensions within the cbbe model: performance, imagery, judgments, feelings, and resonance. there is a notable difference between the perception of brand equity and associated factors by local and foreign students; it was discovered that local students have more concerns about the imagery of the university brand, while foreign students are more focused on the resonance factor. research limitations – the research was conducted within one higher education institution. further study with a broader research base that confirms the applicability of the keller’s model in different settings would be beneficial. practical implications – as brand equity affects the choice of a marketing strategy adopted by a university, the information obtained through simulation of the current version of the corresponding brand is vital for developing and updating an efficient strategy aimed at accomplishing a competitive advantage in both local and international settings. originality/value – the current brand’s version has been successfully stimulated in higher education settings, applying the cbbe model as a scalable framework – to demonstrate how different factors related to brand equity are perceived by the university’s students. keywords: university’s brand, brand equity, cbbe model. jel classification: m31. *corresponding author. e-mail: malina_st@inbox.lv business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 2: 272–288 https://doi.org/10.3846/bmee.2021.14692 https://orcid.org/0000-0002-2660-4975 https://doi.org/10.3846/bmee.2021.14692 business, management and economics engineering, 2021, 19(2): 272–288 273 introduction contemporary higher education institutions are under the impact of several forces associated with the globalization process (organisation for economic cooperation and development [oecd], 2009), as they contribute a lot to social development and economic growth through producing innovations, creating human capital, generating and sharing knowledge, ensuring social cohesion, etc. (oecd, 2008a, 2008b, 2015, 2017, 2018). due to substantial changes occurring in the modern turbulent environment, universities are more focused on the needs and anticipations of their stakeholders, and students in particular, as students are now regarded as basic consumers of educational services provided by an academia (roskosa & stukalina, 2018, 2020). it has resulted in increased marketing orientation of higher education institutions with more emphasis on building a strong institutional brand (chapleo, 2009; filip, 2012; chapleo, 2015; chapleo & clark, 2016; dean et al., 2016; hemsley-brown et al., 2016; stukalina, 2019a; clark et al., 2020). according to the results of the survey performed by maue & hayes (2015), for assessing the state of research-based brand strategies in the higher education sector, 76 percent of respondents (one hundred twenty five senior marketing managers of private and public higher education institutions) indicated they had implemented a brand strategy project; more than 50 percent of respondents said that they had spent more than $100,000 on the marketing activities; 31 percent of respondents said they had spent more than $200,000, and nearly all managers admitted that the investment was worth it. traditionally, universities rely on their academic reputation, which differentiates one institution from another; a respected identity can become the university’s competitive advantage. different activities aimed at building a unique identity should become a central part of the university’s strategy. strategic brand management is critical for assisting a higher education institution to outline its place (position) in the global market; strategic brand positioning has become a necessity for accomplishing competitive advantage of an academia, in the context of generating encouraging brand attitudes (stukalina, 2019a). so, the applicability of the research matter is determined by the fact that university managers, who make strategic decisions, have to become more market-oriented owing to strengthened competition in the international higher education market. in this context, it is vital to cultivate and enhance a university’s brand assets whose value becomes a differential impact that brand knowledge may have on consumer response to the promotion of this brand – i.e. consumer-based equity. to this extent, brand equity can be used as an essential criterion for understanding and updating marketing strategies (keller, 2013); on its basis various marketing activities can be initiated. 1. literature review. branding in higher education: current context and terminology the literature review highlights how a market-oriented approach is widespread within the higher education sector, providing information on what marketing concepts are generally accepted in the field, and what is the current state of thinking on the research issue. 274 y. stukalina, d. pavlyuk. using customer-based brand equity model in the higher education context... 1.1. higher education marketing: using a market-oriented approach as universities are becoming essential “contributors to the innovation process” and sources of human capital (league of european research universities, 2006), more attention is paid to modernization of the higher education area. in the context of modernization, the ability to apply innovation (implementing technology-supported pedagogic models and enhancing the choice of learning opportunities accessible by students) is vital for creating an improvement strategy in higher education (oecd, 2010, 2013, 2018). this brings about customer uncertainty and lead to bigger emphasis on local and international marketing, a widening scope of educational services and programmes. since marketing (external) environment is changing fast, marketing experts must consider current trends and developments for making proper modifications of their marketing strategies; a strong emphasis is put on constructing and sustaining a robust brand that “endorses” the credibility of a university in the international education marketplace (kotler & keller, 2016). most marketing concepts originated in the business environment (nicolescu, 2009). nevertheless, as a sector with increasing competitive pressure, higher education may take advantage of traditional business theories and processes in the course of making strategic and brand management decisions (williams & omar, 2014). the importance of marketing in the field is linked with its more-and-more globalized, competition-driven and “marketized” nature (elken, 2019). the massifiaction of higher education, a growing “student consumerism” in the modern revenue-generating market settings have a strong impact on all university’s activities (chapleo & o’sullivan, 2017). for accomplishing competitive advantage the possible benefits of applying traditional marketing theories are now recognized by higher education marketers (hemsley-brown & oplatka, 2006; hemsley-brown & goonawardana; 2007; hemsley-brown et al., 2016; elken, 2019; stukalina, 2019b). for example, marketing managers employ diverse marketing models and concepts (marketing mix, branding, etc.) which are also valid for higher education (kotler & fox, 1995). though, the range of marketing activities and tools in universities is different from business on account of many internal and external factors (białoń, 2015). being a service area, higher education is more concentrated on the public (williams & omar, 2014). thus, marketing methods used in education are more similar to those applied in services marketing and social marketing, which is determined by the fact that they are all affected by the development of social needs of their “customers” (filip, 2012). it should be mentioned that marketing in the higher education sector is constantly moving from “selling the institution to a more proactive role of determining future strategies” (naudé & ivy, 1999). marketing strategies of a contemporary university are developed for improving its position in the international education marketplace (białoń, 2015); promotion tools associated with the “product of universities”  – their faculties and departments are in the centre of these strategies (hall & witek, 2015). a marketing strategy is “framed by the response” to the following factors (furrer, 2006): a) meeting local demands; b) capitalizing on worldwide competitive advantage. the choice of a marketing strategy is determined by the globalization-associated challenges the agenda of customer-driven education (stukalina & zervina, 2019), circumstances in the international business, management and economics engineering, 2021, 19(2): 272–288 275 education marketp and the level of marketing knowledge obtained through the marketing environment analysis (białoń, 2015). below, branding in higher education and related issues are discussed in more detail. 1.2. some issues related to branding in the higher education sector there exists considerable research on branding in business settings. modern organizations have accepted the importance of endorsing the brand message both externally and internally (judson et  al., 2009). branding is related to differentiating the service/product from rivals (kotler & keller, 2012, 2016), brand signifying information about this service/product (keller, 2003, 2013). positive brand image and reputation directly influence consumer behaviour (kotler & keller, 2016). most of the challenges that modern universities encounter are associated with branding (woyo et al., 2014); this in turn, is directly related with changing practices, internal culture, strategies and policies (mihajlovic et al., 2016). so modern higher education institutions have “much to gain from the benefits of successful branding”; they are progressively adopting marketing and branding strategies (hemsley-brown et al., 2016). in higher education, such topics as brand identity, meaning, image, reputation, etc. are now the catchwords, because better understanding of these notions can allow brand owners communicating successfully with their numerous stakeholders (hemsley-brown et  al., 2016). the complicated nature of the brand concept determines the existence of various approaches to this notion; the choice of a particular approach is based on the context-specific and comprehensive analysis of the brand environment, including its vision and values as communicated by managers, and their meaning for main stakeholders (tarnovskaya, 2017). as stated by keller (2013), brand elements may be exposed in a different way. for example, a brand in higher education can be manifested as a tangible and intangible element (valitov, 2014). tangible brand elements may be also characterized as “functional” components, which, according to kennedy (1977), can be measured. for example, university brand value can be evaluated using the so-called “gallup-purdue index” (gallup & perdue university, 2015; gallup & university of virginia, 2016; butler university & gallup, 2018), which assesses the following aspects: purpose, financial, social, community, physical well-being. in turn, “emotional” components are associated with stakeholders’ attitudes (kennedy, 1977). now, consumers are becoming more demanding, as they are not in quest of tangible (physical) benefits only; they are also seeking for intangible benefits (attributes), for instance, status, image, etc. – this “added value” of the product (service) is referred to as “brand equity” (abd aziz & mohd yasin, 2010). brand equity includes a number of “brand assets and liabilities” connected to brand name (i.e. its symbol), which may “differ from context to context” (aaker, 1991). according to mourad et al. (2020), recently, brand equity in the higher education sector has got noteworthy attention from managers and academics. brand equity includes a number of dimensions: brand meaning, brand identity, brand responses, brand relationships; they are associated with brand salience, brand performance, brand imagery, consumer judgements, as well as brand resonance (keller, 2001, 2003, 2007, 2009). 276 y. stukalina, d. pavlyuk. using customer-based brand equity model in the higher education context... brand identity is embodied in the unique features an organization is characterized by its culture, vision, personality, positioning, relationships, etc.; later brand identity can be transformed in some components resulting in the expected brand image: its logo, messages and actions, products, emotions, etc. (mindrut et al., 2015). as stated by williams and omar (2014), brand management in an academia must ensure that the brand identity is concordant with the brand image (accepted by consumers), plus the brand “soul” accepted by staff of an organization. brand image can be considered as a more emotional phenomenon, being related to how consumers of educational services perceive university brand identity (hemsley-brown et al., 2016). a university fully depends on its image (azoury & daou, 2014); however brand image is volatile, as there are multiple contexts and multiple stakeholders in higher education who may have different expectations (tarnovskaya, 2017). forming a positive brand image (encouraging brand associations) is accompanied by building brand awareness, which is vital for creating brand equity, and would bring about the following advantages: learning, consideration, and choice advantages (keller, 2013). brand awareness is a very important aspect of brand equity (keller, 1993, 2003, 2013). brand equity possesses an “awareness dimension”, being predominantly induced by marketing activities, which have a considerable potential impact on overall brand equity (mourad et al., 2011). recently, the concept of brand equity has received much attention in many markets. growing competition and economic pressures in the higher education industry have demanded institutions respond with strong unique brands, and, as a result, intensified studies in this area. kaushal and ali (2020) established the strong positive relationship between university brand personality and students’ satisfaction and loyalty. mampaey et  al. (2020) paid a special attention to the student diversity as an important component of university brand value. their study provides evidences of the complex structure of the branding process. mourad et  al. (2020) constructed a brand equity conceptual model and empirically investigated its components in the usa and egypt. comparative analysis was conducted to discover cultural dimensions in university brands and their perception. pringle and fritz (2019) highlighted the importance of social media for university brand management and revealed that brand premises can be used against the university. pinar et  al. (2020) illustrated brand equity dimensions by a case study for a public university in turkey. summarising the recent studies of brand models in the higher education industry, we state that a university brand is a complex multidimensional entity with country-, market-, and culture-specific components and accents. thus, the emerging scientific attention to this topic has been observed. in view of the above, based on the outcomes of the marketing environment examination, different marketing strategies can be created, which are aimed at enhancing brand awareness and increasing brand value. a selected marketing strategy will then be supported by a set of marketing tactics, or concrete marketing initiatives university marketing specialists will develop for maintaining a competitive advantage in the international education sector (stukalina, 2019b). in the course of preparating and executing a marketing strategy, different approaches and models can be applied for interpreting and assessing marketing tactics integrated in the strategy, the choice of the appropriate model being dependent on various contextual factors (stukalina, 2019b). business, management and economics engineering, 2021, 19(2): 272–288 277 in order to demonstrate how a brand’s success is linked to customers’ attitudes towards the brand, a customer-based brand equity (cbee) model can be used. as stated by liu et  al. (2017), the majority of cbbe studies deal with the following theoretical frameworks: 1) aaker’s cbbe model; 2) keller’s cbbe theory. according to aaker (1991), the customerbased brand equity is a “multidimensional” notion, including an assortment of “brand assets and liabilities” connected with it, as well as the “name and symbol” adding to or subtracting from the value that is delivered by a particular product (service). in turn, keller’s definition (1993, 2003, 2013) puts more emphasis on the marketing aspect, relating brand equity to the distinguishing influence of customers’ knowledge of a specific brand on reactions to marketing activities associated with the brand. below, the customer-based brand equity (cbbe) model advocated by keller (2001) is discussed. 1.3. customer-based brand equity model consistent with the customer-based brand equity (cbbe) model, the procedure of building a robust brand includes a few successive steps towards creating strong devotion relationship between consumers and this brand (keller, 2001, 2003, 2007, 2008, 2009): generating the “right” brand identity, generating the “right” brand meaning, inspiring the “right” brand responses and finally, establishing a durable bond between the brand and its consumers. these “stages” can be also depicted as different levels of a brand pyramid. in the cbbe model, the brand identity dimension is epitomized by brand salience, i.e. how recurrently and easily the brand is induced in memory under different situations (romaniuk & sharp, 2004). the brand meaning dimension is epitomized by brand performance and imagery  – how well the brand satisfies consumers’ practical needs and how they perceive its external properties (keller, 2001). the brand responses dimension is represented by consumer judgements associated with the brand’s value, trustworthiness, superiority; the brand relationships dimension was presented by consumer brand resonance associated with devotion, community and engagement – so, brand resonance becomes the result of building a strong brand (keller, 2001). in the branding hierarchy presented by the cbbe model, every phase depends on successfully reaching the preceding stage, the final goal being attaining brand resonance as “harmonious” relationship between this brand and customers (kuhn et  al., 2008). the model was thought to include elements of different brand models used today, meeting five criteria (keller, 2001): it is supposed to be up-to-date, consistent, wide-ranging, well-grounded, and workable. besides, it reflects the twofold nature of a brand – emotional and rational constituents (keller, 2001). the cbbe model is presented below (figure 1). as seen from figure 1, the cbbe model presupposes holistic understanding of a brand, integrating various brand aspects. due to this fact, it appears to be rather flexible for using in various settings and it can become an efficient tool for addressing brand building from diverse perspectives. it may be utilized for developing more capable communication programs as part of a competitive marketing strategy (keller, 2009). the model can also be tailored for different purposes, which makes it quite helpful for marketing managers 278 y. stukalina, d. pavlyuk. using customer-based brand equity model in the higher education context... who have to develop and implement a competitive marketing strategy. it can be refined and edited to suit a variety of purposes. the research methodology and the obtained results are discussed below. 2. research method the methodology of the paper includes the analysis of 1) theoretical sources and prior research on marketing and branding in the higher education area; 2) the quantitative data obtained from a survey conducted in transport and telecommunication institute (riga, latvia)  – a university of applied sciences – in the second semester of the 2019/2020 academic year. the aim of the empirical research was to simulate the current version of a university’s brand using the customer-based brand equity (cbbe) model. brand equity being a multifaceted concept, there exist several approaches to this concept. the theoretical framework for this research is based on the brand equity model suggested and refined by keller (2001, 2003, 2007, 2009). in business, the cbbe model is usually employed to demonstrate how a brand’s achievement can be related to consumers’ attitudes to this brand (keller, 2001). in the paper, the cbbe model was applied in the higher education settings. the first step of the research involved designing a questionnaire based on the multidimensional cbbe model. the questionnaire presented an advanced version of the survey form developed by roskosa and stukalina (2020) for examining students’ perceptions of different facets of the university’s brand. the purpose of the survey was to explore students’ attitudes concerning their university’s brand equity dimensions. then the questionnaire was distributed among the 2ndand 3rd-year local and foreign (in equal proportion) students of transport and telecommunication institute (tsi), who represented the whole range of study directions offered by tsi  – business and management, information technologies, logistics and aviation engineering. the total number of figure 1. band aspects and associated brand-building blocks incorporated in the customer-based brand equity model (based on keller, 2001) business, management and economics engineering, 2021, 19(2): 272–288 279 distributed questionnaires was 304, from which 248 were returned: 126 from local students, and 122 – foreign students. the questionnaire included 22 items (statements) split into four sections, each section dealing with one of the brand aspects included in the keller’s model (represented by certain brand-building blocks); the sections are presented below. 1. brand salience (1 item): i am well-aware of the university’s brand, its personality and values. 2. brand performance (4 items) and imagery (4 items) associated with the brand meaning dimension: – the brand is exclusive compared to other universities in latvia, with which it competes. – the brand satisfies well the basic needs of the service category (educational services). – the university’s brand completely meets my requirements. – the brand is reliable in terms of quality of educational services. – the people, whom i respect and admire, like this brand. – thinking of the brand can evoke pleasant reminiscences. – the words “up-to-date” and “upper-class” can be used to describe the brand. – the design aspects of the brand are eye-catching and memorable. 3. consumer judgements (5 items) and feelings (4 items) associated with the brand responses dimension: – the providers of the brand are experienced and supportive. – the providers of this brand care about my sentiments and attitudes. – the providers of this brand understand my needs and expectations. – the providers of the brand are inventive. – the providers of the brand are fast in learning. – the brand gives me a feeling of social approval. – the brand gives me a feeling of self-respect. – the brand has a respect for keeping my personal identity. – the brand has a respect for maintaining my professional identity. 4. consumer brand resonance (4 items) associated with the brand relationships dimension: – i feel loyal to the brand. – i feel an emotional bond with others who use this brand. – i want to know more about the brand and i always follow the news about it. – i would certainly recommend the brand to others. the students’ responses were a three-point rating scale: “disagree”; “neither agree nor disagree”, “agree”. the obtained data were then processed using excel tools and mplus statistical package. structural equation modelling was applied for confirmatory factor analysis of relationships between brand equity-related factors. recently this approach has been successfully utilized for analyses of higher education institutions’ brands and their components (casanoves-boix et al., 2016). the constructed measurement model is bi-factor: each response item loads on the primary dimension of interest (brand equity) and no more than one secondary dimension (performance, imagery, judgements, feelings, and resonance). factors loadings were estimated by the weighted least squares means and variance adjusted method and analysed in the standardised 280 y. stukalina, d. pavlyuk. using customer-based brand equity model in the higher education context... form. the model’s goodness-of-fit was estimated using four popular approaches: chi-squared statistic, root mean square error of approximation (rmsea), comparative fit index (cfi), as well as tucker-lewis index (tli). the regular test and corresponding p-value were applied for testing statistical significance of the chi-squared statistic and the predefined thresholds were applied for other indices for identifying satisfactory goodness-of-fit: rmsea < 0.08, cfi > 0.9, tli > 0.9. all input variables were handled as ordinal categorical (three-point likert scale is for all survey questions), so the polychoric correlation technique was applied for estimating relationships between them. it was assumed the possibility of significant differences in the hei’s brand perception between local and foreign students. thus, the structural equation model was separately estimated for three samples: foreign students, local students and the pooled sample. the conducted analysis allows identifying similarities and differences of factors loadings between local and foreign students. 3. results and discussion 3.1. descriptive statistics radar charts were chosen as a graphical method of displaying multivariate data; five quantitative variables are represented on the five quantitative axes. the axes denote the following categories: consumer judgements (value 1) and feelings (value 2), performance (value 3), imagery (value 4), resonance (value 5), which are brand-building blocks that are incorporated in the cbbe model. using the charts it was possible to compare the respondents’ groups  – the attitudes of local and foreign students towards the university’s brand. figure 2 indicates the number of local and foreign students who agreed with the twenty-two statements formulated in the questionnaire, disagreed with the statements, or chose “neither agree nor disagree” responses. the above radar charts show the categories, which are more pronounced than others. as seen from figure 2 foreign students more often chose “neither agree nor disagree” responses; local students more frequently chose “agree” responses. in turn, for the “disagree” category, foreign students more often disagree with the statements related to their brand resonance, while local students – with the statements related to their brand imagery. figure 2. university brand-building elements as perceived by foreign and local students (source: authors’ elaboration) business, management and economics engineering, 2021, 19(2): 272–288 281 3.2. model’s summary summary of the model’s fit indices is presented in table 1. table 1. models’ fit summary (source: based on the obtained data) complete sample local students foreign students chi-square statistic (p-value) 314.01 (0.000) 229.801 (0.012) 254.566 (0.000) rmsea 0.053 0.044 0.056 cfi 0.910 0.912 0.898 tli 0.897 0.899 0.884 the chi-squared test indicates statistical validity of the factor structure (the null hypothesis about absence of factor loadings is rejected). rmsea, cli, and tli values indicate borderline performance of the structural model for all samples: rmsea values are smaller than the acceptable threshold (0.08) and close to the good threshold (0.05). cfi and tli values are close to the acceptable 0.9 threshold. summarising the model fit statistics, it can be concluded that the model satisfactorily meets the recommended fit requirements and can be used for further analysis of factor loadings. figure 3 represents the general structure of the structural equation model with standardised factor loading for the pooled sample. the structure of factors is research design-based, and performance of the model fit confirms this structure. all 5 factors of the secondary dimension significantly load to the brand equity: the smallest standardised loading (0.85) is identified for the performance factor, while loadings of other factors exceed 0.92. figure 3. diagram of the resulting structural equation model (source: authors’ elaboration based on the obtained data) 282 y. stukalina, d. pavlyuk. using customer-based brand equity model in the higher education context... first-level factors loadings are also significant for all input variables (questions) and generally uniformly distributed. the most notable deviations are: – question 5 (reliability in terms of quality of educational services) has the highest loading for the performance factor (0.70); – question 11 (care about student’s sentiments and attitudes) has the lowest loading for the judgements factor (0.42); – question 17 (keeping student’s personal identity) has the lowest loading for the feelings factor (0.47). at the next step, the differences of the structural equation model for samples of local and foreign students were analysed. firstly, it was noted that the model fit is slightly better for local students, which is probably related with a larger number of uncertain answers among foreign students (see figure 2). standardised factor loadings for local and foreign students’ samples and the pooled sample are presented in table 2. table 2. model’s factor loadings (source: based on the obtained data) standardised factor loadings (standard errors are provided in brackets) complete sample local students foreign students performance by q2. the brand is exclusive compared to other universities in latvia, with which it competes 0.591 (0.076) 0.639 (0.101) 0.538 (0.094) q3. the brand satisfies well the basic needs of the service category 0.404 (0.082) 0.357 (0.125) 0.496 (0.093) q4. the university’s brand completely meets my requirements 0.539 (0.073) 0.620 (0.103) 0.471 (0.090) q5. the brand is reliable in terms of quality of educational services 0.696 (0.068) 0.871 (0.090) 0.518 (0.093) imagery by q6. the people, whom i respect and admire, like this brand 0.645 (0.061) 0.552 (0.104) 0.699 (0.073) q7. thinking of the brand can evoke pleasant reminiscences 0.535 (0.068) 0.409 (0.109) 0.668 (0.070) q8. the words “up-to-date” and “upperclass” can be used to describe the brand 0.460 (0.079) 0.495 (0.112) 0.410 (0.115) q9. the design aspects of the brand are eyecatching and memorable 0.552 (0.067) 0.511 (0.111) 0.553 (0.086) judgements by q10. the providers of the brand are experienced and supportive 0.612 (0.059) 0.540 (0.107) 0.595 (0.072) q11. the providers of this brand care about my sentiments and attitudes 0.416 (0.076) 0.356 (0.132) 0.409 (0.090) q12. the providers of this brand understand my needs and expectations 0.732 (0.050) 0.647 (0.100) 0.704 (0.062) q13. the providers of the brand are inventive 0.602 (0.061) 0.779 (0.096) 0.415 (0.089) q14. the providers of the brand are fast in learning 0.637 (0.063) 0.783 (0.087) 0.488 (0.092) business, management and economics engineering, 2021, 19(2): 272–288 283 standardised factor loadings (standard errors are provided in brackets) complete sample local students foreign students feelings by q15. the brand gives me a feeling of social approval 0.740 (0.052) 0.873 (0.090) 0.577 (0.072) q16. the brand gives me a feeling of selfrespect 0.738 (0.055) 0.743 (0.094) 0.704 (0.068) q17. the brand has a respect for keeping my personal identity 0.468 (0.067) 0.354 (0.109) 0.468 (0.076) q18. the brand has a respect for maintaining my professional identity 0.607 (0.061) 0.685 (0.086) 0.485 (0.089) resonance by q19. i feel loyal to the brand 0.708 (0.054) 0.735 (0.084) 0.634 (0.074) q20. i feel an emotional bond with others who use this brand 0.621 (0.059) 0.698 (0.086) 0.488 (0.087) q21. i want to know more about the brand and i always follow the news about it 0.695 (0.058) 0.765 (0.085) 0.709 (0.071) q22. i would certainly recommend the brand to others 0.613 (0.061) 0.517 (0.107) 0.614 (0.074) brand equity by performance 0.853 (0.061) 0.762 (0.088) 1.076 (0.084) imagery 0.917 (0.062) 0.992 (0.142) 0.859 (0.067) judgements 0.976 (0.036) 0.829 (0.073) 1.095 (0.049) feelings 0.920 (0.041) 0.824 (0.067) 1.025 (0.064) resonance 0.972 (0.037) 0.893 (0.071) 1.038 (0.049) factor loadings for local and foreign students are generally consistent. the most notable differences are as follows: – the imagery factor has the highest loading for local students (0.992, while other factor loadings are smaller than 0.893) and the lowest loading for foreign students (0.859, while other factor loadings are higher than 1.025); – for the performance factor, question 5 (reliability in terms of quality of education services) has the highest loading for local students (0.871) and moderate loading for foreign students (0.518); oppositely, question 3 (satisfying basic needs of the educational service category) has significantly higher loading for foreign students; – for the imagery factor, question 6 (opinion of respected persons) and question 7 (pleasant reminiscences) have higher loadings for foreign students; – for the judgements factor, question 13 (inventive brand) and question 14 (feeling of social approval) have higher loadings for local students; – for the feelings factor, question 15 and question 18 have higher loadings for local students; – for the resonance factor, question 20 has higher loadings for local students. end of table 2 284 y. stukalina, d. pavlyuk. using customer-based brand equity model in the higher education context... conclusions in the paper, an attempt to simulate the current version of a university’s brand, using the customer-based brand equity (cbbe) model, was made. the customer-based brand equity model was applied as a scalable framework to demonstrate how different factors related to brand equity were perceived by university students. statistical analysis of the conducted survey’s data disclosed the importance of different brand dimensions within the cbbe model: performance, imagery, judgments, feelings, and resonance. the estimated structural equation model supports representation of the university brand equity as a combination of these factors and allows discovering factor-specific aspects. in general, the obtained results are in line with recent studies in this area: cbbe model dimensions collectively influence on university brand perception. this confirms that the analyzed brand model is applicable in different countries and socio-economic environments. the main contribution of this study is that there is a notable difference between the perception of brand equity and associated factors by local and foreign students. it was discovered that local students have more concerns about the imagery of the university brand, while foreign students are more focused on the resonance factor, which lead to significant implications for the university senior management. in addition, the survey revealed specific aspects of the brand equity factors: for example, the highest importance of quality of educational services for the performance factor and the modest importance of care about students’ sentiments for the judgements factor. so, the article provides some insights into the way local and foreign students perceive their university’s brand (that is both local and international perspectives were considered), which would be of interest for the professionals working in the higher education sector, as well as for those seeking a career in higher education administration. brand equity affects the choice of a marketing strategy adopted by a university, so the information obtained in the course of simulating the current version of the corresponding brand is vital for developing and updating an efficient strategy aimed at accomplishing a competitive advantage in both local and international settings. the research was conducted within one higher education institution, so the results may represent some specific factors, which are not illustrative of all universities. another limitation of the research is its focus on students’ perception only, while other stakeholders (secondary school graduates, their parents, alumni, etc.) are not taken into consideration. further study with a broader research base that confirms the applicability of the keller’s model in different settings would be beneficial. a sufficiently large sample size would extend the range of possible data and would form a better representation for analysis. references aaker, d. a. 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(2014). brand reputation management within the higher education sector: a review of the literature on higher education brand reputation management. international research journal of marketing, 2(1), 1–8. https://doi.org/10.12966/irjm.02.01.2014 https://doi.org/10.15405/epsbs.2019.10.02.3 https://doi.org/10.3846/cibmee.2019.062 https://doi.org/10.1007/978-3-030-12450-2_73 https://doi.org/10.1016/j.sbspro.2014.09.198 https://doi.org/10.1080/08841241.2014.920567 https://doi.org/10.12966/irjm.02.01.2014 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: pavel.pudil@vse.cz business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 1: 111–130 https://doi.org/10.3846/bmee.2021.13952 further education, its methods and selected characteristics of organisations: an empirical study of their association with organisations profitability pavel pudil 1*, petr somol2, irena mikova 3, vladimir pribyl 4, lenka komarkova 5 1, 3, 4, 5faculty of management, prague university of economics and business, jindrichuv hradec, czech republic 2institute of information theory and automation, czech academy of sciences, prague, czech republic received 23 november 2020; accepted 04 february 2021 abstract. purpose – the paper presents the results of the study based on a sample of 358 organisations that focuses on further education and training (fet) of their employees. it specifically investigates which specific educational methods and various characteristics of organisations are associated with their financial performance. research methodology  – the dependency aware feature (daf) selection method from statistical pattern recognition has been used to identify which of the 37 considered variables are most associated with the profitability indicators (roa, roce, ros). findings  – the profitability indices are significantly associated with some of the specific methods of fet. organisations should pay attention particularly to instructing, coaching and mentoring. the results also confirm the importance of talent management for organisations to be successful. research limitations – the examined sample consists solely of organisations operating in the czech republic. shortly, we plan to extend the selection by including organisations from abroad. practical implications  – the study provides recommendations for hr managers for the goals they should focus on. organisations should evaluate the impacts of fet; otherwise increasing investments in it may not have an effect. originality/value – the originality of the current study lies in using a new methodology based on machine learning and respecting complex mutual relations among variables. keywords: further education and training, lifelong education, methods of education, organisations’ profitability, human resource management. jel classification: m12, m53, l20. http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 mailto:pavel.pudil@vse.cz https://doi.org/10.3846/bmee.2021.13952 https://orcid.org/0000-0002-6474-0257 https://orcid.org/0000-0001-5649-7851 https://orcid.org/0000-0002-1940-633x https://orcid.org/0000-0003-1972-9558 112 p. pudil et al. further education, its methods and selected characteristics of organisations... introduction one way to increase an organisation’s competitiveness and profitability is to focus on improving the value of its human capital, i.e., investing in employee development through further education to increase working skills, competences and knowledge. research confirms that participation in further (lifelong) training organised by employers is beneficial not only for the staff involved but from an economic point of view, also for the organisations or companies (de grip & sauermann, 2013). however, the authors point out that the processes through which educational and development programmes in the organisation lead to higher employee productivity remain unclear. furthermore, they state that research considering both the educational and economic perspectives should focus on multidisciplinary research projects. considering both these perspectives together will help to clarify the aspects connected to the issue of transferring education into practice and enable to evaluate the benefits of educational events to organisations. as this is the focus of our research, we also used a multidisciplinary approach. in the initial research, we used the classical regression analysis to identify the relations between the financial ratio indicators and the selected characteristics of organisations (pudil et al., 2019). the study investigated six characteristics (regressors in the regression model), which had been chosen based on the literature search. there is no doubt that these six characteristics investigated in pudil et al. (2019) represent only a small subset of those that are in some way related to further or continuing education and whose relation to organisation profitability is investigated. therefore, in this follow-up research study, we explore a considerably enlarged set of variables, fully utilising the data from the questionnaire. moreover, concerning the relatively high number of variables and properties, we employ completely different methods of analysing the data in comparison to the methods used in pudil et  al. (2019). the multidisciplinarity of our approach is shown by using statistical pattern recognition methodology, which is a discipline of machine learning, thus artificial intelligence (ai). this paper aims: – to conduct an empirical investigation of a large set of characteristics of organisations and education, together with all the investigated methods of further education and training (fet); – to find their association with the profitability indicators, more specifically, to assess to what degree is each of the studied characteristics and methods associated with the profitability indicators and to rank them accordingly. to respect the mutual relations of these variables (characteristics of organisations and fet methods), feature selection (fs) and classification methods are utilised, namely the daf (dependency aware feature) selection method (somol et al., 2011). the structure of the paper is as follows. the next section contains the theoretical background, divided into three parts: – methods of further education and training and investigation; – characteristics of organisations and education; their relation to profitability; – methods of pattern classification and feature selection in the management. section 2 discusses the data and methods used in the study, particularly on the utilisation of feature selection methods, namely the daf method and pseudo-kernel regression business, management and economics engineering, 2021, 19(1): 111–130 113 model. section 3 is devoted to the results and their discussion. then the limitations of the study, together with future research directions, are briefly discussed. the paper ends with the conclusions and the list of references. 1. theoretical background since our study is essentially based on the interconnection of several seemingly unrelated areas, at this point, in the overview of the current state of knowledge, we should focus separately on all these areas, which are listed at the end of the introduction. accordingly, this section is divided into three subsections, as follows. 1.1. methods of further education and training and investigation according to armstrong (2006), bartonkova (2010), and others, fet cannot be effectively implemented without analysing and identifying educational needs, planning and selecting the appropriate training. moreover, all these authors state that the training should be accompanied with the appropriately chosen forms and methods of learning through which the desired effects can be most easily achieved. mehrdad et al. (2009) divide training techniques into behavioural, also known as on-thejob methods (i.e. orientation, training, briefing, apprenticeship, internships and assistance, work rotation and coaching) and cognitive, also known as off-the-job methods (lectures, computer training, games and simulations, etc.). alipour et  al. (2009) state that cognitive techniques can be considered to be the most suitable for the development of knowledge, while behavioural techniques effectively develop skills. further, behavioural techniques have a significant impact on employee performance and the organisation’s prosperity, while cognitive training techniques lead to optimum performance and have a substantial impact on employee creativity (falola et al., 2014). both the behavioural methods and mental training enrich employees’ potential by developing their skills and knowledge needed to optimise performance, increase efficiency, and promote the innovation and creativity that contribute to the organisation’s competitive advantage. the choice between the methods depends on the type of training planned, the selected participants, the objectives of the training programme and the nature of the training, as confirmed by alipour et al. (2009). grossman and salas (2011) addressed the success of the transfer of skills and competencies acquired by training. they found that the factors related to trainees’ characteristics, training design and the work environment are those with the closest and most consistent relationships with the transfer of training to employee activities. it is apparent from this research survey that almost all the authors share the conviction of the need to use proper methods for further education, which would ensure the desired benefits for trainees and the effectiveness of the training for organisations. therefore, our research study aims to analyse this issue and the situation in the czech republic, which is sometimes regarded as a post-transformation economy. 114 p. pudil et al. further education, its methods and selected characteristics of organisations... 1.2. characteristics of organisations and education; their relation to profitability the importance of fet as an integral part of the hrm process in any organisation as emphasised by armstrong (2006). hrm is defined as a strategic and logically thought-out approach to managing an organisation’s most valuable asset  – the people working there and contributing to its success. however, the influence of further professional education on the success of an organisation needs to be assessed. the first models for evaluating the effectiveness of fet were developed a relatively long time ago (kirkpatrick, 1959; hamblin, 1974; simmonds, 2003). kirkpatrick’s four-level model from 1994 (e.g., kirkpatrick & kirkpatrick, 2006) is considered the standard in evaluating the quality of education within hrm. this has been further enhanced by jack phillips (1996), who evaluated the financial benefits of continuing education by adding a fifth level. the resulting model is known as the kirkpatrick/phillips’s model. the fifth level of the model concerns the return on investments (roi). this indicator is even applicable to education. the area of research concerning the impact of fet on an organisation’s performance has been extensively covered by many authors, e.g. barrett and o’connell (2001), chen et  al. (2008), nikandrou et  al. (2008), van de wiele (2010), rahimić and vuk (2012), beynon et al. (2015), kaur (2016). another area that has attracted attention in recent years is talent management, as discussed, among others, by egerová et al. (2013), baartvedt (2013), dirani and nafukkho (2018). pudil et al. (2019) investigate the relationship between the selected characteristics of organisations (existence of talent management, evaluation of education, investment into education, sector of activity, size and owner of an organisation) and their financial performance using a multiple median regression model. the variables associated with the majority of the considered financial indicators were the organisation’s owner and the evaluation of the education. 1.3. methods of pattern classification and feature selection in the management and education in statistical pattern classification (e.g. devijver & kittler, 1982; jain et  al., 2000), the term “features” is used for variables or characteristics, the importance of which is investigated. the methodology of fs or more generally, dimensionality reduction in machine learning, is very extensive, and a detailed description is beyond the scope of this paper. the principal goal of fs is to select a small subset of the given problem characteristics or variables to optimise a model, typically to discriminate among classes of observations or to optimise any suitably defined criterion function (pudil et al., 2003). the main advantage of non-trivial fs methods is their ability to evaluate characteristics in context, possibly extracting more information than is customary with commonly used ranking methods. one of the more sophisticated methods is the daf procedure (somol et  al., 2011), which has a favourable mix of properties. these are the ability to reveal contextual information, reasonable speed, generalisation ability, good results for the unfavourable ratio of sample size (training set) and dimensionality (the number of features). for these reasons, business, management and economics engineering, 2021, 19(1): 111–130 115 the daf procedure was used in our study, together with a special pseudo-kernel regression model, first proposed by pudil et  al. (2013). its idea is described in more detail in subsection 2.2 “feature selection methodology – daf and pseudo-kernel regression model”. here we should state that it helps to reveal the association of the considered features with the profitability indicators. the statistical pattern recognition techniques, particularly fs methods, have been widely used in many diverse fields such as robotics, data mining, medicine, geology, banking, military applications, agriculture, information management systems, power networks, etc. the international conference on pattern recognition, which has been organised biennially since 1980, has almost 1,000 active participants split into several tracks, including applications. fs methods have also been used in research from the fields of economics and management. their perhaps first use in management can be found in pudil et  al. (2002) whose research searched for the most informative factors, differentiating the successful merger and acquisition operations from those that were unsuccessful. another paper by pudil et al. (2012) discusses the methodology and the first results of identifying the competitiveness factors of companies in the czech republic. further and more detailed results can be found in the monography by pudil et  al. (2014a). this publication addresses the issue of applying selected statistical methods to identify the competitiveness factors of companies to respect the synergistic effect of their influence. the classification-based approach that minimises the error of classifying the enterprises into two groups (“under average roa” and “above average roa”) is described in pudil et al. (2014b). the analysed dataset consisted of 260 enterprises in the czech business environment and was taken from 2011 to 2013. contemporary research on pattern recognition and feature selection is very extensive. therefore, to be in line with our study’s topic, we concentrate only on the application in management, business and education. arévalo et  al. (2019) propose a reverse engineering approach, which uses patterns to transform software projects into software business processes. bhatti et  al. (2019) used feature extraction approach and pattern recognition and implemented it in healthcare 4.0. the tool they developed is a complete package solution for the enterprise management system, which shows improvement in healthcare. cervelló-royo, guijarro, and michniuk (2015) used pattern recognition to build s stock market trading rule. another trading rule based on pattern recognition was designed and validated by arévalo et al. (2017). similarly, the k-nearest neighbour classifier was used by naranjo and santos (2019) to design a new fuzzy forecasting system for stock markets. escobar and morales-menendez (2017) present the learning process and pattern recognition strategy for a knowledge-based intelligent supervisory system; the main goal is to detect rare quality events through binary classification. paltrinieri et  al. (2019) used machine learning for risk assessment in safetycritical industries, namely oil and gas. the oil industry was also the field where the machine learning technique was applied to investigate the oil well efficiency project (bao et al., 2016). the usage of pattern recognition can be found even in the field of education. calderon, crick, and tryfona (2015) proposed that computational thinking skills can be taught to early year students and highlight a method for teaching a specific aspect, namely pattern recognition. vieira, magana, and boutin (2017) proposed using computational tools and methods 116 p. pudil et al. further education, its methods and selected characteristics of organisations... to analyse educational data. according to them, these tools can be used to visualise and characterise patterns within educational data, and validate them using statistical techniques. a very interesting paper was published by viloria et al. (2018). the authors proposed a design methodology of a student pattern recognition tool to facilitate the teaching-learning process through knowledge data discovery (big data). their research aims to answer important issues like how the teacher can identify patterns in students’ learning styles attached to their course, and in turn, to know which pedagogical techniques to use in the teaching and learning process to increase the probability of success in their classroom. in a recent paper by matusov (2020), pattern recognition is used to analyse students’ proper meaning-making patterns. according to him, students are positioned to be recipients of ready-made knowledge and skills on teachers’ demand, rather than being authors of their own education, learning, knowledge, and meaning. pattern recognition involves the emergence of active production of diverse potential patterns that may or may not approximate well the targeted pattern. this process can be guided (“supervised”) by an expert or unguided, mediated or unmediated. 2. data and methods this empirical study is based on the questionnaire data from 358 companies operating in the czech republic (cr). according to the czech statistical office (2020), 1,475,207 organisations were active in the cr to the end of 2017. the data was collected from 2017–2019 using an online questionnaire. it was inspired by the validated cranet project questionnaire (christensen et  al., 2019) and was analogously designed from the questionnaire by folwarczna (2010) for the cr environment. one respondent represented each company. the respondents were graduates of our faculty or were students in the last year of the management course in distance studies. almost all the respondents currently hold a managerial position. this study extends the preliminary results presented by pudil et al. (2019) based on the regression analysis of data from 142 companies concerning only six explanatory variables. 2.1. data – utilisation of feature selection methods before proceeding to a closer characterisation of the data and selecting research methods, we should briefly point out how our study differs from previous research, both by ourselves and other authors. to the best of our knowledge, no study has yet been conducted to analyse the association of profitability indicators with three groups of variables, namely the organisation characteristics, further education characteristics, and the fet methods group. such an analysis is further complicated by the fact that there are links between the elements (variables) of these three seemingly unrelated groups, sometimes even strong ones. our previous research demonstrates these facts (pudil et al., 2014b, 2017, 2019; mikova et al., 2019a, 2019b). considering the relatively high number of variables and their specific properties such as a mix of nominal, ordinal and dichotomic variables, together with some missing values, we decided to use fs methods as described further on. business, management and economics engineering, 2021, 19(1): 111–130 117 in particular, this study analysed the set of 37 variables (features). from these, 19 concern the specific techniques used for further education and 18 represent the various characteristics of organisations and the characteristics of education other than fet methods. the objective is to identify their association with the profitability indicators, more specifically, to what degree is each variable associated with these indicators. what should be emphasised is that we aim to assess the degree of this association for each of the 37 investigated variables not by considering them separately but considering their mutual links, which may be complex. for clarity, all the examined variables (features in terms of fs methodology), together with their description and characteristics, are listed in the following tables (table 1 and table 2). table 1. list of features representing the characteristics of an organisation and further education no. feature (abbrev.) description data type values 1 size number of employees o 1 – small (0 to 49) 2 – medium (50 to 249) 3 – large (250+) 2 investment into education o 0 – low 1 – rather low 2 – rather high 3 – high 3 owner majority owner nd 1 – foreign 0 – domestic 4 sector economic sector n 1 – primary 2 – secondary 3 – tertiary 5 eval fet evaluation nd 1 – yes 0 – no6 talent special education for talents nd 7 evalcount number of kirkpatrick model levels used o 1; 2; 3; 4 8 fieldact field of activities nd 1 – international 0 – domestic 9 strategy education in strategy nd 1 – yes 0 – no10 eduwom education for women nd 11 edu50+ education for 50+ nd 12 eduman education for managers nd 13 benefit education as part of employees’ benefits nd 14 interenv training for the international environment nd 15 adapt adaptation of new employees nd 1 – yes 0 – no16 qualif strengthening qualifications nd 17 requal requalification nd 18 personality further development of employees’ personality and career nd note: o – ordinal; n – nominal; nd – nominal dichotomous. also note that only features 1–6 were used in the initial study (pudil et  al., 2019) as regressors in the multiple median regression model. 118 p. pudil et al. further education, its methods and selected characteristics of organisations... table 2. list of features representing methods of further education no. feature (abbrev.) data type values 19 lectures o 0 – never 1 – rarely 2 – sometimes 3 – often 20 discussions o 21 demonstrations o 22 case studies o 23 workshops o 24 brainstorming o 25 simulations o 26 managerial games o 27 assessment o 28 outdoor learning o 29 e-learning o 30 instructing o 31 coaching o 32 mentoring o 33 counselling o 34 assisting o 35 task assignment o 36 job rotation o 37 working meetings o note: o – ordinal; n – nominal; nd – nominal dichotomous. three financial indicators roa (return on assets, return on total capital), roce (return on capital employed), ros (return on sales) for 2017, available in the albertina database of all the czech organisations including their financial statements, were acquired from it and used one by one as a dependent variable in separate models. all these financial indicators are described in more detail in pudil et al. (2019). note that the roce indicator is closest to roi (return on investment) considered in the kirkpatrick/phillips’s model. 2.2. feature selection methodology – daf and pseudo-kernel regression model as stated before, we should consider two aspects of our data. the first one is a high number of 37 investigated variables. the second one is a mix of nominal, ordinal and dichotomic variables, together with some missing values. therefore, fs methods from statistical pattern recognition were employed. these methods, although from a completely different field of science and research, are known to have been successfully applied across vastly different scientific areas, including management (pudil et  al., 2014a; khodaskar & ladhake, 2014; escobar & morales-menendez, 2017). business, management and economics engineering, 2021, 19(1): 111–130 119 the methodology of fs or more generally, dimensionality reduction in machine learning, is very extensive and its detailed description is beyond the scope of this paper. the principal goal of fs is to select a small subset of given problem characteristics or variables to optimise a model, typically to discriminate among the classes of observations or to optimise any suitably defined criterion function (pudil et al., 2003). in machine learning, it is well known that the two best individual features may not be the best pair. the two best individual features can very often prove to be redundant (each provides almost the same information despite their seemingly different nature). alternatively, neither of them proves sufficient to reveal the true data structure, or in our case, the ability to respect complex relationships between features (variables). for this reason, the daf procedure (somol et al., 2011) was used. to be able to understand the results, it is necessary to mention the idea briefly and explain the basic principle of daf. this is a highly robust fs procedure based on the idea that any feature importance should be investigated in the context of being or not being in the various subsets of other features. a daf coefficient then measures this importance. the higher the daf coefficient of a feature is, the more informative (thus more important) the element is in the general context. more precisely, the daf procedure ranks the features according to the average benefit of including a feature in a high number of randomly generated feature subsets. the benefit is expressed as the difference of the mean criterion values computed for subsets that do and do not contain the feature, based on a suitably chosen feature selection criterion. it should be noted that the daf coefficient can even attain negative values for some features. it means that on average, such a feature does not increase the criterion value when included in the subsets with others. contrarily, the criterion value decreases. this does not imply that the feature is useless, but rather that it may be slightly redundant in most contexts with the others. this simple idea is suitable for high dimensional fs problems where it is capable of considerably outperforming the commonly used individual feature ranking approaches due to its favourable mix of properties (somol et al., 2011) as already stated in 1.3. to reveal the association of the considered features with the profitability indicators, we used a special pseudo-kernel regression model (pudil et al., 2013). the model does not place any assumptions on the space of feature vectors except that a distance measure must exist, which is capable of evaluating the distance between any two feature vectors (organisations). the model is applied in a leave-one-out fashion on the training data, i.e., the model is used to predict its value of the profitability indicator for each organisation, and the predicted value is compared to the known value. the average difference between the predicted and known values over all the analysed organisations is then used as the feature selection criterion. those features that best predict the real profitability value (when included in various randomly generated subsets of features) can be regarded as well associated with the organisation profitability. the proposed pseudo-kernel regression model is analogous to parzen kernel models with gaussian kernels, the main difference being that we assume only one-dimensional kernels. the unknown dependent value (of the profitability indicator) is predicted as the weighted average of the known values of the dependent variables (the profitability indicators) of all other organisations. in our case, the one‐dimensional gaussian kernel serves as the weight 120 p. pudil et al. further education, its methods and selected characteristics of organisations... in the definition of distance between two organisations. the gaussian kernel thus helps to progressively reduce the influence of more distant (not similar) organisations in the considered features subspace and emphasises the importance of close (similar) organisations when predicting the dependent variable. 3. results and discussion as explained above, the daf ranking procedure using the special pseudo-kernel regression model facilitates assessing a measure of the association of features (variables) with a dependent variable, which is a profitability indicator. the principal virtue of this approach is that the assessment considers almost all possible contexts with other features in which the investigated feature may or may not occur and interact (about 40,000 subsets were randomly generated for each feature). concerning this special methodology, we repeat that the higher the daf value of a particular feature, then the higher its association with the profitability indicator (financial ratio index). three separate analyses were conducted for the three available financial ratio indices (roa, roce, ros). although a somewhat different ranking was obtained for each of these indices, the basic pattern for the individual index is not too different. therefore, we do not present the results separately for roa, roce and ros. however, as all these indices are important profitability indicators, we have introduced a “summary” measure for ranking. for each of the features, the values of the daf coefficient for roa, roce and ros, denoted dafroa, dafroce, and dafros, are calculated respectively. then their average value ( )1000 3 roa roce rosdaf daf dafadaf + + = (1) is used as a summary measure for ranking each feature. the ranking of adaf coefficients for all the analysed methods of fet (respecting their interactions with the characteristics of organisations and education) is illustrated in figure 1. we can make several observations from these results: – the three fet methods with the adaf coefficient visibly higher than the rest of the methods are instructing, coaching, and mentoring. these are the methods that the organisations should pay increased attention to, as they are most associated with organisation profitability. note that this does not mean they increase profitability, only that they are the most important for its value. – this result is in absolute accordance with the ranking of the subjectively perceived effectiveness of particular methods, assessed by all the respondents. the results presented in mikova et al. (2019b) rank instructing, coaching, and mentoring as the three most effective methods. it is of interest that as far as “the best” three methods are concerned, the subjective assessment by respondents coincides with a more objective assessment based on the calculation of adaf with pseudo-kernel regression. of course, “the best” in this context means something else for a subjective and the objective assessment. – instructing proved to be the method of fet most associated with the profitability inbusiness, management and economics engineering, 2021, 19(1): 111–130 121 dicators. its adaf coefficient is more than twice higher than that of coaching, which is ranked second. – out of the 19 fet methods, 14 have a positive value of the adaf coefficient. starting from brainstorming (ranked 4th) to assessment (ranked 13th), the adaf values are not too dissimilar. – the fet methods least associated with the profitability indicators (in the context of all the others, including the characteristics of organisation and education) are working meetings, job rotation, discussions, workshops and also lectures and managerial games. it should be noted that particularly the first four of these were found to be at least partially effective when subjectively assessed by the respondents (mikova et al., 2019b). this finding only confirms the assumption that, in general, the methods subjectively perceived as effective (at least partially) may not be well associated with the profitability indicator. most of the fet methods ranked in the top part are so-called modern methods. when adopting the division into on-the-job and off-the-job methods of fet (e.g. folwarczna, 2010), it can also be observed that on-the-job methods generally have a higher ranking. similarly, figure  2 illustrates the ranking of the adaf coefficients for all the organisations and education characteristics, while respecting their interactions with the analysed methods of fet. figure 1. ranking of the adaf coefficients for the analysed methods of further education and training 122 p. pudil et al. further education, its methods and selected characteristics of organisations... again, when interpreting these results, we have to be cautious. a lower value of adaf does not mean that the particular feature is not important, only that its association with the profitability indicators is weaker (in the context of other features, which may provide similar information). regardless, the following observations can be made from these results: – of the 18 analysed characteristics, five (size, investment, talent, eduwom, edu50+) have a positive value of the adaf coefficient. two of these (investment and talent) also proved to be significantly related to roce or roa in the initial study (pudil et al., 2019). – two characteristics with the highest value of adaf, thus the most associated with the profitability indicators, are size and investment. our previous research (2019a) also confirmed the significance of these two characteristics and their mutual relationship. moreover, the result corresponds to the findings of henderson (2003), who states that for programmes aimed at training and developing employees, the economy of scale must be taken into account. the fixed costs of starting training and education programmes are usually about the same regardless of the size of the organisation. he further argues that achieving an immediate return on investment in education is more difficult for a small organisation than for an organisation with a large number of employees. – talent is ranked relatively high (in third place) while the initial study found it had a negative relation to roa in the median multiple regression model. this negative relation demonstrates the previously mentioned fact that a relatively high daf ranking of any feature does not necessarily mean its positive relation to the corresponding profitability indicator. the daf coefficient is a measure of association of a particular figure 2. ranking of the adaf coefficients for the characteristics of organisations and education business, management and economics engineering, 2021, 19(1): 111–130 123 feature with the considered profitability indicator regardless of the direction of relation (positive or negative). therefore, a high ranking of adaf for talent does not contradict its negative relation. – eduwom  – special education for women is, perhaps surprisingly, also ranked rather high. this finding suggests the necessity to pay increased attention to this type of fet, particularly respecting the specific needs of women returning to the workplace after maternity leave or an extended stay with children at home. with the current shortage of qualified employees in the labour market, these special courses for women are gaining importance. – a joint daf analysis of all 37 investigated features (both the fet methods used and the characteristics of the organisation) show that the top places in the ranking are occupied by several fet methods (dominated by the “modern” ones), pushing characteristics such as evaluation, strategy, owner further down. on the one hand, this finding represents a possible discrepancy with previous results regarding fet evaluation and its importance, as confirmed by many studies, even in our research (mikova et al., 2019b; pudil et al., 2017). on the other hand, it also emphasises the importance of including the methods of fet used in the multivariate analysis (besides the characteristics of organisation and education used before). it is the extension of the set of variables included in the analysis that explains this apparent discrepancy with previous results. the reason is that a detailed analysis of the corresponding results shows that, for example, the evaluation of education is strongly related to using the so-called modern methods of fet. therefore, when also taking the complex mutual links with all the methods used into consideration, it appears that evaluation was pushed further down the ranking by the relatively high ranking of the modern methods of fet (due to their strong relation). a similar argument could be used for other characteristics of organisations and education (strategy and owner). it can be observed that using fs and dimensionality reduction methods may yield different results than the classical multiple median regression used in the initial study (pudil et al., 2019). the initial study found no statistically significant relationship of the size with any of the considered profitability factors. on the other hand, using the daf method, just the size was found to have the highest adaf value of all the examined variables. there can be two reasons for this different result. the first is that the initial study used smaller sized data with fewer variables (regressors) and the variable size was dichotomic compared to the three categories of size used in this study. the second reason may be that the daf method considers the complex interrelationships between all features (variables) and its algorithm analyses and compares the benefits of the individual features in a large number of different contexts. in our case, this was about 40,000 subsets randomly generated for each feature. the importance of size is confirmed by the findings of henderson (2003) and mikova et al. (2019a). the results of the current study also confirm the importance of talent management for organisations to be successful. its relatively high position in the adaf ranking follows the findings of baartvedt (2013), egerová et  al. (2013), morley et  al. (2016), and other authors. it should be noted that a negative relation between talent management and roa was found in our initial study (pudil et  al., 2019). however, considering the direction of causality, the initial study also concludes that organisations, especially those less successful, should pay increased attention to talent management. 124 p. pudil et al. further education, its methods and selected characteristics of organisations... to conclude the discussion of the results, we can state that this study complements and extends the previous one (pudil et  al., 2019), the main findings of which are described in the theoretical background section. we should emphasise that this follow-up study takes into consideration the complex relations of organisation and education characteristics with the methods of fet. as stated in the literature review, in the opinion of de grip and sauermann (2013), the processes through which educational and development programs in the organisation lead to higher employee productivity remain unclear. furthermore, they point out the need to focus on multidisciplinary research projects, especially when considering both educational and economic perspectives. the approach we chose in our study, combining the areas of hrm, corporate financial performance and the field of fs from pattern recognition, made it possible to reveal at least partially those parts of educational and development programs that lead to higher efficiency. at the same time, our findings can help clarify aspects related to transferring education into practice and enable us to evaluate the benefits of educational events for organisations. our study and its results can be placed in the context of the overall current situation, significantly affected by covid-19. the new situation has dramatically affected the labour market and transfers the labour force between economic activity sectors. although not a long time has passed since its development in terms of research, a number of papers have been published in this area. their analysis shows that virtually all of them emphasise the need to adapt the workforce to new conditions to a greater or lesser extent. some papers concern entrepreneurship education. ratten (2020) emphasises that a relative lack of practical and real-life examples in the covid-19 crisis causes difficulties for entrepreneurship education. in another paper, ratten and jones (2020) argue that besides its adverse effects, the covid-19 crisis places increased attention on the importance of entrepreneurship education for society. some authors assume that a similar global crisis may be encountered in society in the near future, and therefore changes in education need to be considered. zhu and liu (2020) suggest that the change in learning infrastructure is only the first step. it should be followed by shifting from traditional lecture-based activities towards activities more focused on students. in their opinion, it should include group activities, discussions, hands-on learning activities, and the limited use of formal lectures. this shift is precisely in line with our study’s findings, which found classical lectures as not being too effective. the importance of talent management and special education for women found in our study is also in line with newly published studies during the covid-19 crisis. haak-saheem (2020) discusses the importance of talent management in businesses in dubai. almeida and santos (2020) analyse the effects of covid-19 on job security and unemployment in portugal. in particular, they found that the most affected by unemployment are young people and women. this finding is in accordance with the uk study by mayhew and anand (2020), who advocate the necessity of a more active workforce policy to assist young people who suffer most from the job recession. of course, the need for training newly hired employees, especially young people, implies the necessity to introduce policies supporting fet at workplaces. business, management and economics engineering, 2021, 19(1): 111–130 125 we should realise that jobs are not only changing in the current covid-19 crisis, but that similar changes have a long history. whether it is the first industrial revolution, the information age or the fourth industrial revolution, each new era ushers in changes. some jobs become obsolete or disappear, and others emerge in response to the needs of the new era. hite and mcdonald (2020) explore the role of human resource development in the postcovid-19 era and talk about career sustainability. according to heslin, keating, and ashford (2020), learning will be crucial in adapting to new ways of working. moreover, being in a continuous learning mode represents for individuals a “meta-competency” for achieving career sustainability. the learning process may involve various forms like cross-training, formal and informal learning, job sharing, coaching, and consulting. a new culture that promotes lifelong learning should be fostered. davidović (2020) investigated motives for fet of adults in the current covid-19 era. specifically, he found that for almost 40% of respondents, these motives were related to professional needs, and for 27% it was a desire for learning and selfdevelopment. alternative approaches to work were explored even before the pandemic era. epstein (2019) discusses moving from job specialisation into more generalisation. recent data from the us private sector job quality index (2020) indicate that 42% of all jobs lost will not return. on the other hand, this damage can be diminished by work reallocation as the same study suggests, having found three new hires for every ten positions lost due to the coronavirus. work reallocation is also confirmed by barrero et  al. (2020), who point out that companies like amazon and walmart experienced a considerable increase while other businesses declined. of course, all these work reallocations call for the necessary training of newly hired employees, increasing the importance of the findings related to fet. 4. limitations and future research directions the limitations of our research stem mainly from the fact that the examined sample consists exclusively of organisations operating in the czech republic, and also from the associated restriction of sample size. another limitation is that we determine the financial performance of organisations for only one selected year. therefore, in the continuation of the research, we plan to increase the sample size and monitor financial performance in the longer term. in cooperation with foreign partners, we would also like to include organisations from abroad in the study. we also plan further development in the theoretical and methodological area. the daf coefficients analysis and ranking that facilitated identifying the features most associated with profitability do not answer the critical question of whether their relationship is positive or negative. therefore, one future direction of research will be to use the current results of the daf ranking to prepare an extended set of potential regressors for the multiple regression analysis that should answer the question of the direction of the relations. this extended set will not be based on the literature review but on a more exact approach as presented here. finally, we plan to use other methods from machine learning, namely pattern recognition and classification to identify the key factors that differentiate organisations with an aboveaverage financial performance from those with below-average performance. 126 p. pudil et al. further education, its methods and selected characteristics of organisations... conclusions our study investigates the association of organisational financial performance with three groups of variables, namely 1) the characteristics of the organisation, 2) the characteristics of fet, and 3) specific fet methods. with its comprehensive concept and application of fs methods, it sought to contribute to research on the financial effects of fet in organisations. the main conclusion from this study is that the methods of fet are in relation to the characteristics of organisations and education and, therefore, influence their relative importance for ranking the corresponding association with the profitability indicators. for this reason, organisations should also pay attention to the educational methods, particularly as methods such as instructing, coaching and mentoring appear to play an important role. the study provides recommendations for hr managers on which goals to focus their attention on. a major conclusion is that the relative increase in investment in fet is very important but is not enough in itself. when not accompanied simultaneously by an evaluation of fet, increasing investment in further education may not have the desired effects on the organisation and so would essentially be a loss. therefore, the evaluation of the impact of fet should be a necessary part of the measures to increase the financial performance of an organisation. finally, as discussed in more detail in the results and discussion section, we can state that the current coronavirus pandemic dramatically changes the structure of occupations, when some economic activity sectors lay off workers while others recruit them. therefore, the need for retraining such workers moving from professions affected by the unfavourable epidemiological situation is significantly increasing. even more, this fact highlights the importance of fet-related results for both the present and the near future. funding the paper was supported by the czech science foundation (gacr) under grant number 18-01159s. references alipour, m., salehi, m., & shahnavaz, a. 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(2020). education in and after covid-19: immediate responses and long-term visions. postdigital science and education, 2(3), 695–699. https://doi.org/10.1007/s42438-020-00126-3 https://doi.org/10.1016/j.ijme.2020.100432 https://doi.org/10.1109/icsmc.2011.6083733 https://www.jobqualityindex.com/#flashsection https://www.jobqualityindex.com/#flashsection https://doi.org/10.1080/09585191003612083 https://doi.org/10.1109/fie.2017.8190592 https://doi.org/10.1007/978-3-319-93803-5_63 https://doi.org/10.1007/s42438-020-00126-3 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 2: 303–336 https://doi.org/10.3846/bmee.2021.14255 *corresponding author. e-mail: lorad@bigmir.net financial security of the enterprise: an alternative approach to evaluation and management larysa dokiienko * department of finance, international university of finance, kyiv, ukraine received 19 january 2021; accepted 22 june 2021 abstract. purpose  – the main purpose of the article is to justify an alternative approach to assessing the level of financial security of the enterprises based on use the model of modified and adjusted financial statements. research methodology – the following methods of general theoretical and empirical research were used in the writing of the article: abstract-logical (when systematizing scientific publications on the problems of financial security management of enterprises), comparisons and grouping (when developing and validating a model of modified financial statements), coefficient (when considering and using models for adjusting modified financial statements), grouping (when clustering enterprises depending on the results of the analysis), formalization (when developing a matrix for diagnosing the level of financial security of enterprises), generalization (when formulating research findings). findings – based on an established sample from nine of sunflower oil production enterprises of ukraine their modified financial statements have been developed, it was adjusted to the consumer price index, key financial indicators of the model have been identified and the level of their financial security over the past 7 years have been assessed. the research identified a direct relationship between the level of financial security of enterprises and key financial indicators: financial stability, solvency and financial risk. also, the proposed methodological approach can be not only an important tool for diagnosing the level of financial security of enterprises, but also its forecasting. research limitations – the research limitation is associated with sampling size and geographical scope. also, the diagnostic results may differ depending on the chosen adjustment base, determination of adjustment method and selection of inflation measurement method for the modification financial statements. practical implications  – practical use of the proposed model proves that it is a convenient, simple, understandable and effective tool for diagnosing the financial security level of enterprises in terms of the main components: financial stability, solvency, and risk. the use of the proposed approach to the assessment of the financial security of the enterprise can serve as an indicator of the overall efficiency of its management at sunflower oil production enterprises and as an informative tool for factor analysis. http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 https://doi.org/10.3846/bmee.2021.14255 mailto:lorad@bigmir.net https://orcid.org/0000-0001-6528-6810 304 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... originality/value  – consideration of a significantly different, alternative approach that allows enterprises to quickly and easily diagnose the level of their financial security; to manage it effectively during the current period, and can also become the basis for the formation of strategic directions of financial development and forecasting of the level of financial security for prospective period. keywords: financial security, modified and adjusted financial statements model, financial stability scale, solvency scale, financial risk scale. jel classification: g32, m2, q10, q14. introduction financial security is a complex, multi-level economic category characterized by the interaction and interrelatedness of all its elements: the level of financial security of the state is one of the main general prerequisites for ensuring the financial security of its components; conversely, the effectiveness of financial security management at each level and each component affects the overall financial security of the state. in general, the financial security of an enterprise is the level of the financial security of the enterprise sufficient to meet its needs and meet its obligations which characterized of balance, resilience to internal and external negative impacts, ability to reverse external financial expansion, financial sustainability, efficient functioning and economic growth (baranovs’kyy, 2004). one of the most problematic and debatable processes for today is the process of diagnosing and assessing the financial security of an enterprise. in the various spheres of activity of enterprises, a comprehensive assessment of the level of their financial security is very complex from a methodological point of view and almost always raises controversial questions among scientists and practitioners. research on this issue suggests that the methodological approaches used as a basis for financial security analysis and management have not lost their relevance for today but need further improvement. scientific works are devoted to the justification of modern methodological approaches to the assessment of the level and position of the financial security of an enterprise are: azarenkova et al. (2018), britchenko et al. (2018), khudoliei (2018), hryhoruk et al. (2019), kosaynova et  al. (2019), drobyazko et  al. (2020), franchuk et  al. (2020), kharchuk et  al. (2020), kondratenko et al. (2020), sylkin et al. (2020). the main approaches to estimating the level of financial security of the enterprise, which are currently presented in the professional literature  – are the coefficient, which involves the calculation of a set of financial indicators (delas et  al., 2015; yeletskykh, 2017; pera, 2017; kharchuk et al., 2020); integrated, based on the definition of an integrated indicator of financial security (ganushchak, 2017; khudoliei, 2018; azarenkova et  al., 2018; kosaynova et al., 2019; kharchuk et al., 2020); based on the diagnosis of the probability of bankruptcy (valaskova et al., 2020; sylkin et al., 2018, 2019, 2020; koleda & lāce, 2008; bilomistniy et al., 2017; britchenko et al., 2018; nguyen & nguyen, 2020; franchuk et al., 2020). there are also several author’s methods for assessing financial security: hryhoruk et al. (2019) – model for assessment of the financial security level of the enterprise based on the desirability scale; zwolak (2017) – empirical model based on the cobb-douglas power function. business, management and economics engineering, 2021, 19(2): 303–336 305 in our opinion, the establishment and implementation of an effective financial security management process in enterprises require new approaches to their organization. the quality and soundness of the management decisions made at each stage of an enterprise’s financial security management depend to a large extent not only on the reliability, completeness, accessibility and timeliness of the information as well as the effectiveness of evaluation and analytical methods and methodologies used. accordingly, the improvement of methodological approaches to diagnosing the level of financial security of an enterprise is one of the key points for improving the efficiency of the whole process of its management which in turn will enable to ensure its competitiveness and investment attractiveness and raise market costs. the author’s previous research has established that the following methodological approaches are useful for diagnosing the financial security level of an enterprise at the present stage: classical financial analysis tool, financial stability assessment tool and value-based management tools (dokiienko et al., 2020). this article focuses on improving the direction “financial stability assessment tools” – justification the information and methodological support for the diagnostic and financial security management process of an enterprise through the use of a modified and adjusted financial statements model. abryutina’s work was used as a basis for structuring  the assets and capital of the enterprise and determining the overall level of financial stability of the enterprise on this basis of abryutina (2002). since financial sustainability is an essential component and a prerequisite for the financial security of an enterprise, it is proposed that this model be adapted precisely to diagnose the level of financial security of an enterprise. besides, the methodology has been brought into line with modern financial reporting standards in ukraine and has been improved through the implementation of an inflation factor adjustment, is supplemented by a scheme for assessing the level of financial security on the basis of the enterprise’s position on the scale “financial sustainability – solvency – risk”. so, the main objectives of the study are: – to establish a methodology for the development of modified financial statements of an enterprise, taking into account the peculiarities of ukrainian standards for the compilation and presentation of information in financial statements; – consideration of the methodology for adjusting the modified financial statements model required by the high inflationary impact on the performance and financial performance of ukrainian enterprises; – testing of the proposed methodology for the diagnosis of financial security level with the example of ukrainian sunflower oil production enterprises. the modified and adjusted financial statements model tested sunflower oil production enterprises as the oil-and-fat industry of ukraine is one of the leading and mobile in the agribusiness complex of the country. ukraine ranks first in the world in the production of sunflowers covering one-third of the world market. the largest share is in the production of raw sunflower oil, 95% of which is exported. 64 processing plants, 48 oil production plants, exports to more than 120 countries and $350 million in investments – all this is the oil-andfat industry today. ukraine produces an average of 6,400,000 tons of oil per year, 6 million of which are exported and this is 60% of world exports (growhow.in.ua, 2020). 306 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... according to the author, one of the most important conditions for the formation of positive results of operating activities of sunflower oil production enterprises and ensuring their sustainable growth while maintaining the desired financial condition is the existence of an effective system of financial security. the problem of ensuring the financial security of sunflower oil production enterprises has become extremely important in recent years. this is due not only to the financial crises and the unstable financial and economic situation in the country but also to the constant variation in energy prices and the high dependence on agriculture which is seasonally based, environmental, climatic and biological factors; high resource intensity of the industry; export-commodity orientation, which makes external market positions unstable, as demand for commodities is volatile and subject to high price volatility; increasing the cost of banking services, etc. therefore, the executives of sunflower oil production enterprises faced the search for the most convenient, fast and easy to use approaches to diagnose their financial security level. at the same time, out of the attention of scientists is the question of formation of appropriate methodological tools for assessing the financial security of sunflower oil production enterprises. in the previous study, the author tested the classical financial analysis tool, namely the coefficient model for assessing the financial security level of sunflower oil production enterprises (dokiienko, 2020), which is the most popular in modern financial diagnostic practice. the advantage of this model, along with simplicity and ease of calculation is that the consolidation of the results achieved has led to the development of a strategic financial position matrix for the domestic financial environment of sunflower oil production enterprises, as well as a matrix of possible strategic directions of their financial development, identifying the desired financial strategy within the framework of the desired level of financial security. but on the other hand, its use has also revealed a significant drawback – the different focus and even the contradictory results of the assessment of major groups of financial indicators make it very difficult to assess the financial security of the enterprise as a whole. accordingly, the importance of this study is that a model has been proposed for diagnosing the financial security level of an enterprise, which makes it possible to avoid this shortcoming. in addition, the uniqueness of the study is that empirically proven, that the proposed model of modified and adjusted financial statements makes it possible to assess the financial security of enterprise in a timely, convenient, accurate and as comprehensible manner as possible. 1. literature review ukrainian scientists (baranovs’kyy, 2004; blank, 2004; donets & vashchenko, 2008; yermoshenko & horyacheva, 2010; delas et  al., 2015; davydenko, 2015; vergun & topenko, 2016; bilomistniy et al., 2017; blakyta & ganushchak, 2018; ramskyi & solonko, 2018; khudoliei, 2018; kondratenko et al., 2020 and others) and authors from other countries (koleda & lāce, 2008; cernavskis, 2012; pera, 2017; zwolak, 2017; mbatha & ngibe, 2017; safargaliev, 2019; sylkin et  al., 2020; valaskova et  al., 2020; nguyen & nguyen, 2020) have devoted a business, management and economics engineering, 2021, 19(2): 303–336 307 considerable amount of their work to the issues of the substance of financial security as an economic category and the problems of its evaluation and provision. in fact, there has been increased interest in this category over the past few decades and remains relevant. the most profound and thorough works for today are baranovs’kyy (2004), who identifies several levels and dimensions of financial security: as a component of the economic security of the state; as a degree of security and security of financial interests at all levels of financial relations; as a state of financial, monetary, exchange rate, banking, budjet, fiscal, investment and other systems; the state of financial flows in the economy; the quality of financial instruments and services; blank (2004), who considered in a comprehensive manner the main range of issues, both theoretical and methodological in managing the financial safety of the enterprise in the present circumstances; and yermoshenko (2001), yermoshenko & horyacheva (2010), who have defined the methodological bases of financial security in the system of economic security at two levels of economic management of a country: states and enterprises. two key approaches to defining the nature of an enterprise economic security are highlighted in the current professional literature, which can be divided into two groups: as one of the components of an enterprise economic security (yermoshenko & horyacheva, 2010; delas et al., 2015; vergun & topenko, 2016; ganushchak, 2017; blakyta & ganushchak, 2018) and as an independent subject of financial management (baranovs’kyy, 2004; blank, 2004; donets & vashchenko, 2008; koleda & lāce, 2008; davydenko, 2015; bilomistniy et al., 2017; rushchyshyn et  al., 2017; britchenko et  al., 2018; ramskyi & solonko, 2018; sylkin et  al., 2018, 2019, 2020). for the most part, scientists define the financial security of an enterprise as: the certain financial state of the enterprise characterized by appropriate resistance to external and internal threats (blank, 2004; delas et  al., 2015; bilomistniy et  al., 2017; davydenko, 2015; rushchyshyn et  al., 2017); the state of protection of the financial interests of the enterprise against various threats (baranovs’kyy, 1999, 2004; ramskyi & solonko, 2018; khudoliei, 2018; franchuk et  al., 2020); the risk management activities, i.e., in the context of crisis management of the enterprise (sylkin et  al., 2018, 2019, 2020; nguyen & nguyen, 2020); in the context of factors determining the financial security of the enterprise (koleda & lāce, 2008; britchenko et al., 2018; mbatha & ngibe, 2017). in the author’s view, the most appropriate definition was made by blank (2004), according to which the financial security of an enterprise is the quantitatively and qualitatively determined level of its financial state, which ensures stable protection of its priority balanced financial interests from identified real and potential threats of external and internal nature, the parameters of which are determined on the basis of its financial philosophy and create the necessary prerequisites for financial support for its sustainable development in the current and prospective period. scientists concerned with the financial security of an enterprise justify different methodologies and propose different sets of partial and aggregates indicators for assessing financial security depending on the level of application of this concept. the main approaches to assessing the financial security of an enterprise which are now presented in the professional literature, can be presented as follows. 308 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... authors, which assessing the financial security of the enterprise based on the overall financial state of an enterprise, that is calculates and analyses key groups of financial indicators: profitability, business activity, solvency, financial stability, the efficiency of cash flow management (blank, 2004; delas et al., 2015; yeletskykh, 2017; pera, 2017; kharchuk et al., 2020). ganushchak (2017), khudoliei (2018), azarenkova et al. (2018), kosaynova et al. (2019), kharchuk et  al. (2020) offer to assess the financial security of the enterprise based on the definition of a generic integral measure of the financial security of an enterprise, based on the use of the different set of financial indicators and the determination of the relevant weights (limit values) for each of them. valaskova et al. (2020) and sylkin et al. (2018, 2019, 2020) use to diagnose the financial security of the enterprise classical methods of assessing the probability of bankruptcy, but modify and improve them. a significant group of authors offer to assessing the financial security of the enterprise in the context of factors (potential internal and external threats) that affect the financial security of enterprises (koleda & lāce, 2008; bilomistniy et al., 2017; mbatha & ngibe, 2017; britchenko et al., 2018; safargaliev, 2019; nguyen & nguyen, 2020; franchuk et al., 2020). other author’s approaches are usually based on one of the above or combine several of the previous ones, e.g.: empirical model based on the cobb-douglas power function used to examine the regressive dependency of profit on sales upon the eu operational fund and the eu fund for the support of the market and capital. the model has also been used to calculate the marginal and average profitability for the aforesaid funds as measures of the efficiency of their financial security with smalland medium-sized enterprises (zwolak, 2017). and assessment of the level of financial security of enterprises based on the theory of comprehensive assessment; creating a composite index of financial security and determining its level based on the dual use of the harrington desirability scale (hryhoruk et al., 2019). it should be noted that all the above methods of assessing the financial security of the enterprise are based on the use of official financial statements of the enterprise and do not provide for any adjustment. and it is this shortcoming that will be taken into account in the methodology proposed for consideration in this article. thus, in general, in order to diagnose the level of financial security of an enterprise, it is advisable to use the methodological approaches that will make it possible to identify potential threats and risks in the activity of the enterprise and to quickly find effective ways of counteracting that guarantee a stable financial state and the possibility of further development. 2. methodology given the crucial role of basic information in the process of diagnosing the financial security of an enterprise, it is useful to consider a number of policy questions concerning the methodology for modifying its financial statements. in recent years, ukraine has undergone fundamental changes in the composition of financial statements which now meet the requirements of international standards. this has significantly changed the information base for diagnosing and managing the financial security of enterprises which has had an impact on their methodology. business, management and economics engineering, 2021, 19(2): 303–336 309 thus, the first step in improving the process of diagnosing the financial security of an enterprise should be to change its information base, namely to modify the financial statements. for this purpose, the methodology of abryutina (2002) was chosen as a basis, because today it is the only one that provides for the structuring of assets and capital of the enterprise in order to assess the overall level of financial stability of the enterprise. accordingly, it is proposed to modify the standard structure of economic assets (non-current and current assets) and capital (equity and liabilities) to assess the financial condition of the enterprise as follows (figure 1). that is, in addition to the standard division of economic assets by the nature of participation in the economic process (current and non-current) it is proposed to use other classification features of enterprise assets: by the level of liquidity (liquid and non-illiquid assets), by the form of functioning (financial and non-financial assets), by the level of mobility (mobile and non-mobile assets) and their combination (non-mobile financial, liquid non-financial, non-financial illiquid, non-mobile financial and liquid non-financial assets). structuring the amount of capital of the enterprise (liabilities from the balance sheet) under the model of modified financial statements, can be represented as follows (figure 2). accordingly, for diagnostic purposes, it is envisaged to group financial capital not only on the basis of equity and liabilities, but to allocate a separate component of equity in revaluations, and to divide liabilities not into long-term and short-term liabilities, but external and internal liabilities. economic assets, еа financial assets, fa non-financial assets, nfa non-mobile assets, nma liquid assets, la nonilliquid assets, nla mobile financial assets, mfa non-mobile financial assets, nmfa liquid non-financial (current) assets, lnfa non-financial illiquid assets, nlnfa non-mobile financial and liquid non-financial assets, nmfanlnfa financial capital, fc equity, e debt or liabilities, d equity without capital in revaluations, ewcr capital in revaluations, cr external liabilities, el internal liabilities, il figure 1. scheme of economic assets modifications of the enterprise (source: compiled by the authors on the basis of abryutina, 2002) figure 2. scheme of financial capital modifications of the enterprise (source: compiled by the authors on the basis of abryutina, 2002). 310 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... however, this methodology was developed in 2002 for russian companies and for old forms of financial reporting, which is unsuitable for use in ukrainian enterprises in modern conditions. that is why it is proposed, first of all, to bring the methodology into line with modern financial reporting standards in ukraine which are close to international standards. and calculation of the above components economic assets and financial capital should be carried out according to the following formulas (table 1). table  1. algorithm for calculating the main components of modified financial statements model (source: compiled by the author) algorithm for calculating components of economic assets components of financial capital ea = fa + nfa or ea = mfa + nma or ea = la + nla fc = e + d fa = mfa + nmfa e = ewcr + cr nfa = lnfa + nlnfa d = el + il la = mfa + nmfa + lnfa el = bclt + ollt + bcst + apc + fpi +clo nmfanlnfa = nmfa + lnfa il = lts +tf + cs + sl nma = nmfanlnfa + nlnfa nla = nlnfa = nca – ltfi +ncfs mfa = c + cfi nmfa = ltfi + r + fpe + cao lnfa = in legend nса – non-current assets bclt – long-term bank credit (loan) ltfi – long-term financial investment ollt – other long-term liabilities ncfs – non-current assets for sale bcst – short-term bank credit (loan) с – cash apc – current accounts payable cfi – current financial investments fpi – future period incomes ltfi – long-term financial investments clo – other current liabilities r – receivables lts – long-term software fpe – future period expenses tf – targeted financing cao – other current assets cs – current software in – inventories sl – stable liabilities (current accounts payable for calculations with the budget, payroll, insurance) the modification of the financial statements made in this way allows to provide the enterprise with a modern tool of financial and economic analysis and to form a complete source information for a comprehensive diagnosis of financial security. accordingly, in the symbols we have adopted, the balance sheet formula of the modified financial statements model will be as follows: a af nf e el il+ = + + . (1) business, management and economics engineering, 2021, 19(2): 303–336 311 assuming, as confirmed by practice, that long-term credit and loans are directed primarily towards the capital acquisition and capital investment (nlnfa), we can convert the original balance formula as follows: ( )fa a lt a st c onln f e d nl bc ap cl   + = + − + + +   , (2) where dlt – long-term debt (borrowed capital). with the model thus transformed, the following conclusions can be drawn: if stocks are limited in size [lnfa ≤ (e+dlt) – nla] the financial soundness of the enterprise will be ensured; and the financial soundness condition will ensure the solvency of the enterprise, i.e., the financial assets will cover current liabilities [fa ≥ bcst + apc + clo]. the generalization of the financial security system of an enterprise should be considered as the assessment of its position on the scale “financial stability – solvency – risk” based on the use of the modified financial statements model, which involves the calculation of indicators of financial stability (ifs), solvency (is), and financial safety or risk (ir). accordingly, an assessment of the financial stability of an enterprise should be begun by determining the adequacy of equity to secure non-financial assets. the excess of equity over this requirement forms the capital that accumulates in financial assets and serves as a tool for managing financial stability. therefore, a financial equilibrium point can be defined for each enterprise where equity provides non-financial assets and financial assets cover the liabilities of the enterprise. in practice, there is always a deviation in one direction or another and the size of the deviation is the indicator of financial stability (ifs): – –fs a ai e nf f d= = . (3) the main indicator of an enterprise’s solvency is the indicator (іs), which shows the adequacy, excess or insufficiency of funds in relation to the enterprise’s current liabilities: – –s fa fai m d e nm= = . (4) accordingly, it is possible to distinguish the following states of solvency of an enterprise: absolute solvency where all obligations can be covered by the mobile assets of the enterprise; guaranteed solvency, if all liabilities are covered by the financial assets of the enterprise; potential solvency provided that not only the financial assets of the enterprise but also the non-financial (liquid) assets of the enterprise are covered; insolvency where the enterprise has a liquidity shortfall to meet the liability. the safety or risk scale is based on the comparison of an enterprise’s equity with nonfinancial illiquid assets. safety or risk indicator (ir) identifies reserves of its own working assets that, when available, create financial and economic security and is determined by the formula: ir = e – nlnfa. (5) in general, based on the modified financial statements model, it is proposed to diagnose the financial security of an enterprise using three scales: financial stability, solvency, risk, and their relationships (table 2). 312 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... table 2. financial security diagnosis matrix of an enterprise based on the modified financial statements model (source: compiled by the authors on the basis of abryutina, 2002) financial stability scale solvency scale financial risk scale level of financial securitygeneral differentiated financial stability perfect stability nma < e < ea nmfa < ifs < fa absolute solvency 0 < d < mfa nma < e < ea 0 < is < mfa maximum independence nma < e < ea nmfa nlnfa < ir < la absolute sufficient stability 0 < nfa < e < nma 0 < ifs < nmfa guaranteed solvency mfa < d < fa nfa < e < nma –nma < ifs < 0 optimal reliability 0 < nfa < e < nma lnfa < ir < nmfa nlnfa high financial equilibrium 0fsi = , 0si < , 0ri > normal financial instability tension 0 < nlnfa < e < nfa –lnfa < ifs < 0 potential solvency fa < d < la nlnfa < e < nfa –nmfa nlnfa < is < –nma relative security nlnfa < e < nfa 0 < ir < nlnfa acceptable risk area 0 < e < nlnfa –nfa < ifs < –lnfa insolvency la < d < ea 0 < e < nlnfa –nma < is < –nmfa nlnfa crisis risk 0 < e < nlnfa –nlnfa < ir < 0 low secondly, in contrast to the method of abryutina, which proposes to assess on the basis of three scales only the overall level of financial stability of the enterprise, author proposes depending on the location of the enterprise in one of three states: stability, equilibrium, and instability, to define the limits of its security and the risk of operating from absolute to low. that is, an enterprise that has “perfect stability  – absolute solvency  – maximum independence” will have an absolute level of financial security; the provision “sufficient stability  – guaranteed solvency – optimal reliability” will correspond to a high level of financial security; the state of financial equilibrium is the normal level of financial security; the provision “tension – potential solvency – relative security” corresponds to an acceptable level of financial security; and the position “risk area – insolvency – crisis risk” characterizes the low level of financial security. thirdly, the author proposes to improve this methodology it in order to increase accuracy, full reliability and comparability of the initial information, namely, to supplement it with a mechanism for adjusting financial statements for inflation. in our view, the proposed by abryutina methodology for modifying financial statements apart from certain advantages, has a significant drawback – it does not ensure full reliability and comparability of the initial information in the process of managing the financial security of an enterprise. after all, it is based on the use of values derived from the original valuation. the original cost of the assets is the cost of their acquisition and the amount received on credit for the liabilities. historical values are expressed in actual prices at the time of the transaction. however, the valuation of many items in the financial statements of an enterprise business, management and economics engineering, 2021, 19(2): 303–336 313 and the accounting data, which is the information base, is subject to considerable distortion over time as a result of inflationary processes of any economy and especially of ukrainian enterprises (appendix, table a.1). therefore, the next step in improving the method of diagnosing the financial security of an enterprise is to adjust the indicators of modified financial statements. it should be noted that the methodological issues involved in carrying out such adjustment in order to achieve a greater degree of reliability and objectivity have not found the necessary expression in the national scientific and economic literature. the solution to this problem, in our view, requires a more detailed examination of the following main points relating to the definition: – inflation adjustment methods for modified financial statements; – methods and indicators for measuring inflation; – adjustment factors for modified financial statements. the choice of the method of adjusting the modified financial statements is important as the choice of the adjustment method will determine to a large extent the reliability of the results and the validity of the conclusions reached. first of all, it should be noted that the choice of the adjustment base, i.e., the use of data of the reporting period (the inflation method) or past (the deflation method) as a base for comparison will influence the mechanism of calculation of the indicators. in this case, it is recommended to use the actual value of the accounting period – the inflation method. the justification for determining the adjustment method is more complex than the choice of base: according to currency fluctuations or price levels (based on a base or chained price index, valuation in monetary units of equal purchasing power, revaluation in present value and combined method). an examination of the analytical work of domestic enterprises has shown that the lack of uniform methodological approaches to adjusting financial reporting under conditions of inflation affects the soundness of the definition of their financial security and most enterprises do not make any adjustments at all. in recent years, the currency exchange rate adjustment method has become quite common. conversions to a more stable currency, such as the united states dollar or the euro, using a nominal exchange rate, are considered sufficient to ensure the reliability and comparability of financial reporting. we believe that the approach whereby previously modified financial statements can only be presented in a hard currency once they have been adjusted for inflation is more methodical to remove distortions and bring their valuation closer to fair value. this adjustment method, despite its limitations, can be considered as auxiliary and least time-consuming as it can be used in the short-term adjustment period. the constant price model is based on the use of a general price index to periodically recalculate financial statements against changes in the purchasing power of money but does not take into account price movements for individual components of assets or capital. in this method, non-monetary items are adjusted for inflation. the formula for this adjustment when recalculating modified financial statements is as follows: av iv i iii i p= × , (6) where iіav – adjusted value of a certain indicator of modified financial statements of the i-th period; 314 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... iіiv – starting value of the indicator of modified financial statements of the i-th period; pi – price index of the reporting period compared to the i-th period. this formula can be modified depending on whether the adjustment base is chosen: inflation or deflation. thus, the formula for adjusting the modified financial statements according to the method we have chosen inflation will be: r av iv i b p i b pi i i pi = × , (7) where pіr/b – price index of the reporting period compared to the base period; pіp/b – past price index versus base. in general terms for the situation inflation of the constant price approach can be presented through the following changes to the modified financial statements model: a af nf e el il+ = + + . (8) according to the constant price accounting method adjustments will not be made for items of assets and capital of modified financial statements, i.e.: ( ) ( ) ( )1 1 –a a r r a rf nf i e i el il nf e i+ × + = × + + + + × , (9) where ir – inflation rate, coefficient. by modifying formula (8), you can get the following: – –( – )a anf e f el il= − , (10) from here: ( ) ( ) ( )1 1 – – –a a r r a rf nf i e i el il f el il i+ × + = × + + + × or ( ) ( )1 – – –a r r a rea nf i e i el il f el il i+ × = × + + + × . (11) it is worth noting that the modified financial statements listed under the constant price accounting model, while reflecting changes in the value of non-financial items do not provide a differentiated assessment of their real market value over a period of time. given this, the current price accounting model is more accurate, because it involves recalculating modified financial statements items on the basis of sales prices and establishing current estimates of items on the listed assets and liabilities based on their fair market value for a given period. in this case, it is suggested to use adjustments to the modified financial statements on the basis of price indices calculated for each item of assets or liabilities but their level may differ significantly from the overall price index. the sequence of calculations is exactly the same as described above for the constant price method, i.e., recalculated according to the inflation baseline. a significant problem with this method is the determination of the present value of the assets. in this way, it is proposed that such costs be charged at the time of implementation and write-off. at the time of implementation, it is recommended that replacement value (i.e., replacement costs) be used and, at the time of write-off, the net realizable value or the net business, management and economics engineering, 2021, 19(2): 303–336 315 discounted value of the facility be used. in general, the model for adjusting modified currentprice financial statements can be presented as follows: 1 1 n n ai i ai i i i ea nf ir e el il nf ir = = + × = + + + ×∑ ∑ or 1 1 , n n ai i ai i i i ea nf ir e el il nf ir = = + × = + + + ×∑ ∑ (12) where nfai – the size of the i-th non-financial indicator of the modified financial statements; irі – rate of inflation of the i-th non-financial indicator of the modified financial statements, coefficient; n – the quantity of non-financial indicators of modified financial statements. in practice, the development of specific methodological approaches and techniques to implement the methods described above may be different depending on the purpose of the adjustment and the desired outcome, for example: a) long-term non-financial items may not be adjusted; b) only items included in the working capital of an enterprise may be adjusted; c) items that have been generated from debt capital may not be adjusted. the combined or mixed method of adjusting modified financial statements involves the use of a general price index to recalculate the sum of equity and individual price indices to recalculate the value of non-financial items of the asset. accordingly, the model for adjusting modified financial reporting in combination shall be as follows: ( ) ( ) ( ) ( ) 1 1 1 1 – n n ai i a r ai i r a r i i nf ir f e i d nf ir i f d i = =    × + + = × + + + × − − ×   ∑ ∑ . (13) in comparing the previously reviewed methods for adjusting modified financial statements, it is worth noting that: 1. the constant price method is the least labor-intensive and simpler because the adjustment assumes a single conversion index for all non-financial items. on the one hand, this would reduce the possibility of intentionally distorting the cost estimates of the indicators and would make it easier to verify the correctness of the adjustment procedures used and to ensure the comparability of modified financial statements. on the other hand, the use of one for all inflation indices is an additional distorting factor for the reliability and reliability of the data. 2. the current price method is more objective and feasible for practical application in domestic enterprises as experience has shown that the valuation of different indicators of modified financial statements under inflationary conditions changes differently. but, on the other hand, the objective difficulties in applying this method include its high labor intensity and the complexity of the adjustment verification procedure, although this can be avoided by using automated information systems for calculations. 3. the combined method is the most difficult to use in practice. another aspect of the practical implementation of methods for adjusting modified financial statements under conditions of inflation relates to the choice of the method for measuring inflation and statistical indicators reflecting the extent of inflationary processes in the 316 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... ukrainian economy. in this connection, it is worth noting that the analysis of the recommendations on the adjustment of financial statements contained in the publications of domestic and foreign authors showed that the absolute majority proposes to use the treatment model in constant prices and the consumer price index as an inflation index for adjustment. 3. results of research in recent years, ukraine ranks first in the world in sunflower production, covering a third of the world market. at the same time, the largest share is occupied by the production of unrefined sunflower oil, 95% of which is exported. according to the state statistics service of ukraine (2020), the production of sunflower oil and its fractions has been growing steadily over the past 5 years; in 2020 alone, the production of unrefined sunflower oil increased by 3.6% compared to 2019, the production of refined sunflower oil increased by 17.7%, and sunflower meal – by 6%. in 2020, according to the association “ukroliaprom” (2021a), ukraine remained the world leader in the production and export of sunflower oil and meal. during the period from september 2020 to february 2021, the structure of exports of oil and fat products was as follows: 77.7% – sunflower oil, 14.4% – sunflower meal, 2.9% – soybean meal, 2.4% – soybean oil, 1.9% – rapeseed oil, 0.7% – others. in 2020, oil-and-fat products worth $ 7.16 billion were exported (+19% by 2019). the share of exports of oil-and-fat products in total exports of goods from ukraine is 14.5%; in exports of food products and agricultural products – 32.3%. the main growth in exports of oil-and-fat products was provided by sunflower oil (+12.3% in physical terms and +24.4% in value terms), as well as sunflower meal (+11.4% in physical terms and +16.4% in value expression). however, such positive trends in the industry as a whole, unfortunately, did not always have a positive impact on the financial performance of individual enterprises, as the analysis of financial statements showed that a significant proportion of them suffered losses from operating activities and/or activities as a whole and also had an unsatisfactory financial condition. according to the author, one of the most important conditions for the formation of positive results of operating activities of sunflower oil production enterprises and ensuring their sustainable growth while maintaining the desired financial condition is the presence of an effective system of financial security. in order to validate the methodology proposed above for assessing the financial security of an enterprise on the basis of the modified and adjusted financial statements model, leading enterprises of oil-and-fat industry of ukraine were selected (appendix, table a.2), the reason for the selection of which was as follows: 1. enterprises were selected and grouped according to their specialization (oil-extraction  – production of vegetable oils and oil-and-fat  – production of animal fats and vegetable oils), size of activity (medium enterprises), organizational and legal form of operation (joint-stock companies). 2. all selected enterprises are joint-stock companies. this condition was important in view of the accessibility and openness of access to financial statements which are the basis for diagnosing the financial security level of enterprises under investigation over the last 7 years. business, management and economics engineering, 2021, 19(2): 303–336 317 3. the aim was to select enterprises that have a long-term presence in the market and meet the needs of a large number of consumers and are important in the production of products of oil-and-fat industry. according to the results of the marketing year 2019–2020 (“ukroliaprom”, 2020), 7 out of 9 selected sunflower oil production enterprises are among the top-12 largest enterprises producing the main types of edible oil. in 2020, according to the association “ukroliaprom” (2021b), the largest producers of unrefined sunflower oil included: pjsc “adm illichivsk” (6 position, share 4.2%), prjsc “vinnitsa oscf” (7 position, share 4.1%), pjsc with foreign investment “dnipropetrovsk oep” (9 position, share 3.7%), pjsc “kropyvnytskyi oep” (11 position, share 3.4%) and pjsc “pology oep” (15 position, share 2.7%). the largest producers of refined sunflower oil included: pjsc with foreign investment “dnipropetrovsk oep” (2 position, share 16.2%) and pjsc “pology oep” (12 position, share 2.2%). and the largest producers of rapeseed oil in 2020 included prjsc “vinnitsa oscf” (3 position, share 16.9%) and prjsc “chernivtsi oscf” (6 position, share 2.1%). 4. selected sunflower oil production enterprises are located in different regions of ukraine. 5. five of sunflower oil production enterprises (pjsc “adm illichivsk”, pjsc “nizhynsky zhyrcombinat” , pjsc “pology oep”, pjsc “zaporizhzhya oep”, pjsc “zaporizhzhya off”) operate as independent entities and four are affiliated to associations or large agribusiness holdings (prjsc “vinnitsa oscf” and prjsc “chernivtsi oscf” – are the part of “vioil industrial group”; pjsc with foreign investment “dnipropetrovsk oep” – is the part of “bunge limited” – bunge ukraine; pjsc “kropyvnytskyi oep” – is the part of “kernel holding s.a.”). thus, first of all, based on the methodology described above for the development of the modified financial statements model and its adjustment, each of the enterprises studied, it was developed a modified structure of economic assets and financial capital (appendix, tables а.3 – а.11). the next step is calculation the indicators of financial stability (ifs), solvency (is), and financial safety or risk (ir), which will allow to establish whether the enterprises are in a condition financial equilibrium (table 3). financial equilibrium of enterprises is secured if the following conditions are met at the same time: 0 0 0 ifs is ir  =  <  > , but in none of the periods and in any of the investigated enterprises they were performed. accordingly, the enterprises were or in a position of a financial stability (that is, they had an absolute or high level of financial security), or in a position of financial instability (that is, they had an acceptable or low level of financial security). the next step is to assess the level of financial security of the surveyed enterprises on the basis of the diagnostic matrix presented above (table 2). that is, the comparison of the relevant components of economic assets and financial capital will determine the position of each company on the scale “financial stability – solvency – financial risk” in certain periods of time, and their relationship – to establish the level of financial security. 318 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... table 3. indicators of financial stability, solvency and financial risk sunflower oil production enterprises of ukraine, thousand uah (source: authors’ calculations) evaluation periods indicator of: financial stability (ifs) solvency (is) financial risk (ir) pjsc “adm illichivsk” 31.12.2013 –9658.0 –42567.0 –3411.0 31.12.2014 –8393.0 –32496.0 2723.0 31.12.2015 –111059.0 –350628.0 –18323.0 31.12.2016 –513197.0 –585801.0 –486476.0 31.12.2017 –554368.0 –607355.0 –516220.0 31.12.2018 –516386.0 –587175.0 –470686.0 31.12.2019 –437569.0 –492267.0 –393211.0 prjsc “chernivtsi oscf” 31.12.2013 –63908.0 –95925.0 –59962.0 31.12.2014 –81333.0 –120527.0 –68447.0 31.12.2015 –66763.0 –111817.0 –52528.0 31.12.2016 –35803.0 –151025.0 –27873.0 31.12.2017 –92764.0 –150510.0 –41876.0 31.12.2018 –67951.0 –119356.0 –57140.0 31.12.2019 –113901.0 –124598.0 –90650.0 pjsc with foreign investment “dnipropetrovsk oep” 31.12.2013 175950.0 –45026.0 195519.0 31.12.2014 268506.0 –73450.0 295373.0 31.12.2015 316500.0 –80396.0 357709.0 31.12.2016 375064.0 –106494.0 429496.0 31.12.2017 452596.0 –44511.0 525422.0 31.12.2018 447195.0 –131526.0 558758.0 31.12.2019 х х х pjsc “kropyvnytskyi oep” 31.12.2013 32455.0 –26072.0 36831.0 31.12.2014 40489.0 –56344.0 47091.0 31.12.2015 119857.0 –79230.0 126236.0 31.12.2016 90123.0 –95203.0 95995.0 31.12.2017 57107.0 –102388.0 66204.0 31.12.2018 –80957.0 –183674.0 –69116.0 31.12.2019 –148300.0 –218589.0 –136241.0 pjsc “nizhynsky zhyrcombinat” 31.12.2013 –22757.0 –34775.0 –17729.0 31.12.2014 –29146.0 –46549.0 –21230.0 31.12.2015 –41659.0 –57130.0 –35516.0 business, management and economics engineering, 2021, 19(2): 303–336 319 evaluation periods indicator of: financial stability (ifs) solvency (is) financial risk (ir) 31.12.2016 –81993.0 –114314.0 –66406.0 31.12.2017 –147349.0 –226610.0 –117710.0 31.12.2018 –246872.0 –284863.0 –239909.0 31.12.2019 –318662.0 –376099.0 –270902.0 pjsc “pology oep” 31.12.2013 –346078.0 –546369.0 17270.0 31.12.2014 –378352.0 –614075.0 11425.0 31.12.2015 –413168.0 –669272.0 131889.0 31.12.2016 –831290.0 –1174928.0 102284.0 31.12.2017 –876746.0 –1358578.0 113118.0 31.12.2018 –576025.0 –965328.0 51173.0 31.12.2019 –628550.0 –994101.0 –75698.0 prjsc “vinnitsa oscf” 31.12.2013 –581842.0 –632504.0 –558035.0 31.12.2014 –753074.0 –943736.0 –708361.0 31.12.2015 –1585805.0 –1864677.0 –1015474.0 31.12.2016 –1438859.0 –2287086.0 –1121714.0 31.12.2017 –1627311.0 –2171496.0 –1108891.0 31.12.2018 –1264673.0 –1692447.0 –1105383.0 31.12.2019 –1269443.0 –1471683.0 –1071093.0 pjsc “zaporizhzhya oep” 31.12.2013 х х х 31.12.2014 х х х 31.12.2015 0.0 0.0 35418.0 31.12.2016 49335.0 –29661.0 49827.0 31.12.2017 74620.0 –2750.0 79434.0 31.12.2018 96239.0 –997.0 101332.0 31.12.2019 63130.0 –34968.0 68474.0 pjsc “zaporizhzhya off” 31.12.2013 –365605.0 –557315.0 –327730.0 31.12.2014 –532359.0 –749369.0 –415562.0 31.12.2015 –369981.0 –688161.0 –313421.0 31.12.2016 –368404.0 –687097.0 –358962.0 31.12.2017 –417976.0 –722764.0 –414389.0 31.12.2018 –423650.0 –728617.0 –395528.0 31.12.2019 –432650.5 –875161.2 –430687.3 end of table 3 320 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... thus, the results of the financial security diagnosis of sunflower oil production enterprises for the past 7 years shown in table 4. table  4. financial security diagnosis matrix of a sunflower oil production enterprises based on the modified financial statements model (source: authors’ calculations) evaluation periods indicator of: level of financial securityfinancial stability (ifs) solvency (is) financial risk (ir) pjsc “adm illichivsk” 31.12.2013 0 – – fa a fs fa e nln nf i ln < <  < < risk area – – a a s fa fa l d ea nm i nm nln < <  < < insolvency 0 – 0 fa fa r e nln nln i < <  < < crisis risk low level 31.12.2014 0 – 0 fa a fa fs nln e nf ln i < < <  < < tension – – a a fa fa s a f d l nm nln i nm < <  < < potential solvency 0 fa a r fa nln e nf i nln < <  < < relative security acceptable level 31.12.2015 0 – – fa a fs fa e nln nf i ln < <  < < risk area – – a a s fa fa l d ea nm i nm nln < <  < < insolvency 0 – 0 fa fa r e nln nln i < <  < < crisis risk low level 31.12.2016 31.12.2017 31.12.2018 31.12.2019 prjsc “chernivtsi oscf” 31.12.2013 0 – – fa a fs fa e nln nf i ln < <  < < risk area – – a a s fa fa l d ea nm i nm nln < <  < < insolvency 0 – 0 fa fa r e nln nln i < <  < < crisis risk low level 31.12.2014 31.12.2015 31.12.2016 31.12.2017 31.12.2018 31.12.2019 pjsc with foreign investment “dnipropetrovsk oep” 31.12.2013 0 0 a a fs fa nf e nm i nm < < <  < < sufficient stability – 0 fa a a s m d f nm i < <  < < guaranteed solvency 0 a a fa r fa fa nf e nm ln i nm nln  < < <  < <   optimal reliability high level 31.12.2014 31.12.2015 31.12.2016 31.12.2017 31.12.2018 31.12.2019 х х х pjsc “kropyvnytskyi oep” 31.12.2013 0 0 a a fs fa nf e nm i nm < < <  < < sufficient stability – 0 fa a a s m d f nm i < <  < < guaranteed solvency 0 a a fa r fa fa nf e nm ln i nm nln  < < <  < <   optimal reliability high level 31.12.2014 31.12.2015 31.12.2016 31.12.2017 business, management and economics engineering, 2021, 19(2): 303–336 321 evaluation periods indicator of: level of financial securityfinancial stability (ifs) solvency (is) financial risk (ir) 31.12.2018 0 – – fa a fs fa e nln nf i ln < <  < < risk area – – a a s fa fa l d ea nm i nm nln < <  < < insolvency 0 – 0 fa fa r e nln nln i < <  < < crisis risk low level 31.12.2019 pjsc “nizhynsky zhyrcombinat” 31.12.2013 0 – – fa a fs fa e nln nf i ln < <  < < risk area – – a a s fa fa l d ea nm i nm nln < <  < < insolvency 0 – 0 fa fa r e nln nln i < <  < < crisis risk low level 31.12.2014 31.12.2015 31.12.2016 31.12.2017 31.12.2018 31.12.2019 pjsc “pology oep” 31.12.2013 0 – 0 fa a fa fs nln e nf ln i < < <  < < tension – – a a fa fa s a f d l nm nln i nm < <  < < potential solvency 0 fa a r fa nln e nf i nln < <  < < relative security acceptable level 31.12.2014 31.12.2015 31.12.2016 31.12.2017 31.12.2018 31.12.2019 0 – – fa a fs fa e nln nf i ln < <  < < risk area – – a a s fa fa l d ea nm i nm nln < <  < < insolvency 0 – 0 fa fa r e nln nln i < <  < < crisis risk low level prjsc “vinnitsa oscf” 31.12.2013 0 – – fa a fs fa e nln nf i ln < <  < < risk area – – a a s fa fa l d ea nm i nm nln < <  < < insolvency 0 – 0 fa fa r e nln nln i < <  < < crisis risk low level 31.12.2014 31.12.2015 31.12.2016 31.12.2017 31.12.2018 31.12.2019 pjsc “zaporizhzhya oep” 31.12.2013 х х х х 31.12.2014 х х х х 31.12.2015 0 0 a a fs fa nf e nm i nm < < <  < < sufficient stability – 0 fa a a s m d f nm i < <  < < guaranteed solvency 0 a a fa r fa fa nf e nm ln i nm nln  < < <  < <   optimal reliability high level 31.12.2016 31.12.2017 31.12.2018 31.12.2019 continue of table 4 322 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... evaluation periods indicator of: level of financial securityfinancial stability (ifs) solvency (is) financial risk (ir) pjsc “zaporizhzhya off” 31.12.2013 0 – – fa a fs fa e nln nf i ln < <  < < risk area – – a a s fa fa l d ea nm i nm nln < <  < < insolvency 0 – 0 fa fa r e nln nln i < <  < < crisis risk low level 31.12.2014 31.12.2015 31.12.2016 31.12.2017 31.12.2018 31.12.2019 note: х – no information to calculate the data. the obtained results confirm the existence of a direct correlation between changes in the level of financial stability of a group of selected enterprises and the level of their financial security. the analysis of the situation for 2013–2019 allowed clustering of enterprises, conditionally dividing them into several groups. more than half of the surveyed sunflower oil production enterprises had low level of financial security, which characterized as risk area, insolvency and crisis risk. it was observed in pjsc “adm illichivsk” (in all years except 2014), prjsc “chernivtsi oscf”, pjsc “nizhynsky zhyrcombinat”, prjsc “vinnitsa oscf” and pjsc “zaporizhzhya off” for the whole period of the 2013–2019 study. high level of financial security, that is sufficient stability, guaranteed solvency and optimal reliability, during 2013–2019 had two of sunflower oil production enterprises: pjsc with foreign investment “dnipropetrovsk oep” and pjsc “zaporizhzhya oep”. the enterprises of this conditional group ensured the stability of financial security at a high level, which is a guarantee of further safe financing of current activities and the continuity of their production cycle. pjsc “kropyvnytskyi oep” had high level of financial security in the period of 2013– 2017, but in 2018 and 2019 has already entered a risk zone with a low level of financial security, indicating the high risk of its activities in recent years. the situation was similar at pjsc “pology oep”, because it has acceptable level of financial security, that is tension, potential solvency and relative security from 2013 to 2018, and in 2019 the enterprise found itself in the zone of risk and insolvency. in general, the results of testing the proposed model of diagnostics of financial security of the enterprise, according to the author, are a reflection of the effectiveness of management of all operating activities sunflower oil production enterprises, as well as informative tools for factor analysis in managing their financial security in terms of three key factors: financial stability, solvency and financial risk. end of table 4 business, management and economics engineering, 2021, 19(2): 303–336 323 conclusions thus, as the results of the research showed, the use of the model of modified and adjusted financial statements proposed by the author is a convenient and effective tool for diagnosing the financial security level of an enterprise in terms of the main components: financial stability, solvency and risk, ensuring the efficiency of the financial security management process of an enterprise in both the current and the prospective periods. approbation of the proposed model involved the development of modified financial statements for the studied 9 sunflower oil production enterprises, its adjustment based on the model of accounting at constant prices and using the consumer price index as a method of measuring inflation, calculation the indicators of financial stability, solvency and financial risk and diagnosis of financial security level of 9 sunflower oil production enterprises. the research identified a direct dependence of the level of financial security of enterprises on key financial indicators: financial stability, solvency and financial risk. the diagnostic results showed that 5 out of 9 surveyed enterprises prjsc “chernivtsi oscf”, pjsc “nizhynsky zhyrcombinat”, prjsc “vinnitsa oscf”, pjsc “zaporizhzhya off” and pjsc “adm illichivsk” constantly had a low level of financial security; acceptable level of financial security was at pjsc “pology oep” from 2013 to 2018, and in 2019 the enterprise found itself in the zone of risk and insolvency; and high level of financial security during 2013–2019 had two of sunflower oil production enterprises: pjsc with foreign investment “dnipropetrovsk oep” and pjsc “zaporizhzhya oep”; pjsc “kropyvnytskyi oep” had high level of financial security in the period of 2013–2017, but in 2018 and 2019 has already entered a risk zone with a low level of financial security. that is, most enterprises in the oki-and-fat industry require constant and effective management of financial security in order to improve its level, and the methodological approach proposed in the article can become not only an important tool for diagnosing the level of their financial security, but also its forecasting. in our view, the advantages of this model are: first, it enables a deeper, more comprehensive diagnosis of the financial security of an enterprise; second, it not only assesses one component of financial security but links several components  – financial stability, solvency and financial risk, thus, it is possible to predict the level of financial security of an enterprise; thirdly, there is no need to impose certain regulatory restrictions on enterprises in different sectors of the economy, specialization, forms of ownership, organizational and legal forms and the extent of their activities; fourth, as the coefficient model it allows you to develop a matrix of the strategic financial position of an enterprise’s domestic financial environment as well as a matrix of possible strategic directions for their financial development, identifying the desired financial strategy within the framework of the desired level of financial security; fifth, the method of adjustment for inflationary processes could be used as a stand-alone instrument for standard (not modified) forms of financial reporting of an enterprise used to diagnose the financial security of an enterprise through other methodological approaches. as for the shortcomings, it is worth noting that since the model is based on the use of financial statements (although modified and adjusted) it has some of the same weaknesses as an enterprise’s financial statements (and all known methodologies for evaluating the financial security today): the diagnostics is instantaneous and refers to the past period; financial 324 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... statements against which the financial security of an enterprise is assessed reflects only those events that can be presented in monetary terms and have already occurred; most indicators do not take into account certain potential liabilities because they are not reflected in the balance sheet which is the main source of information for their determination; the inability to take account of the sectoral characteristics of enterprises; some limitations in the financial security diagnostics that can be derived from this model due to the limited information available in the financial statements. thus, the alternative approach considered in the article to diagnose the level of financial security by modifying the financial statements, as well as the application of the proposed methods and coefficients of its adjustment, enables enterprises in any economic activity or branch of the economy (except companies from financial sector) to diagnose their financial security quickly and conveniently; to manage it effectively during the current period and could also become a tool for the strategic direction of financial development and forecasting the level of financial security in the future. future research is planned to focus on substantiation the methodical approaches to the multi-level assessment of the financial security sunflower oil production enterprises, development of a system for assessing the financial security of operating activities sunflower oil production enterprises; assessment of the impact of operational financing policy and financial security of operational activities on the general state of financial security sunflower oil production enterprises. funding all studies, the results of which are presented in this article, were carried out by the author on their own at their own expense. disclosure statement the author declares no conflict of interest. references abryutina, m. 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303–336 327 appendix table a.1. consumer price index, in  % to the previous year (source: compiled by the author on the basis of state statistics service of ukraine, 2020) year 2013 2014 2015 2016 2017 2018 2019 2020 cpi 0.5 24.9 43.3 12.4 13.7 9.8 4.1 5.0 table a.2. the main sunflower oil production enterprises of ukraine (source: compiled by the author) * company official website / homepage trade marks / brands pjsc “zaporizhzhya oil-extraction plant” (“zaporizhzhya oep”) https://zmez.com.ua pjsc “zaporizhzhya oil and fat factory” (zaporizhzhya off) http://zmgk.com.ua “shchedro” pjsc “nizhynsky zhyrcombinat” http:/ngk.net.ua “nizhynska oliya” pjsc “pology oil-extraction plant” (pology oep) https://mezpology.zp.ua “slaviya”, “smachna kraplya”, private label pjsc “adm illichivsk” https://adm.com private company “oliyar” https://oliyar.com.ua “majola”, “sonyashna”, “rodynna” and “oliyar”. llc “ukroliya” https://www.ukroliya.com “effo”, “garna organica”, “dikanka” llc “swativska oil”, “agrex” http://www.agrex.com.ua “swativska oliya” llc “delta wilmar ukraine” https://www.deltawilmar.com llc “js cargill” https://www.cargill.com/ worldwide/ukraine-uk group  “vioil industrial group” prjsc “vinnitsa oil seeds crushing factory” (vinnitsa oscf) http://vmzhk.vioil.com prjsc “chernivtsi oil seeds crushing factory” (oscf) chernivtsi http://chmzhk.vioil.com “bunge limited” llc “mykolaiv oil extraction plant” bunge ukraine: www.bunge.com https://oleina.ua “oleyna”, “rozumnytsya”pjsc with foreign investment “dnipropetrovsk oil extraction plant” (dnipropetrovsk oep) “kernel holding s.a.” pjsc “kropyvnytskyi oep” http://kirovogradoliya.pat.ua llc “poltava oil crushing plant” https://sdar.com.ua “shchedryi dar” llc “prydniprovsk oil crushing plant” https://www.kernel.ua “stozhar”, “chumak sunflower oil” llc “ukrainian black sea industry” llc “starokostiantyniv oil crushing plant” llc “bandurka oil crushing plant” llc “vovchansk oil crushing plant” llc “prykolotne oil crushing plant” note: * enterprises highlighted in italics are used as objects of analysis. https://tradingeconomics.com/ukraine/consumer-price-index-cpi https://zmez.com.ua http://zmgk.com.ua http://www.ngk.net.ua https://mezpology.zp.ua http://www.adm.com https://oliyar.com.ua https://www.ukroliya.com http://www.agrex.com.ua https://www.deltawilmar.com https://www.cargill.com/worldwide/ukraine-uk https://www.cargill.com/worldwide/ukraine-uk http://vmzhk.vioil.com http://chmzhk.vioil.com http://www.bunge.com https://oleina.ua http://kirovogradoliya.pat.ua https://sdar.com.ua https://www.kernel.ua 328 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... ta bl e a .3 . m od ifi ed s tr uc tu re o f e co no m ic a ss et s an d fin an ci al c ap ita l p js c “a d m i lli ch iv sk ”, th ou sa nd u a h ( so ur ce : a ut ho rs ’ c al cu la tio ns ) c om po ne nt s in fa ct o n: 31 .1 2. 20 13 31 .1 2. 20 14 31 .1 2. 20 15 31 .1 2. 20 16 31 .1 2. 20 17 31 .1 2. 20 18 31 .1 2. 20 19 m od ifi ed s tr uc tu re o f e co no m ic a ss et s 1. f in an ci al a ss et s 33 0 72 .0 24 3 46 .0 25 1 35 5. 0 75 6 05 .0 53 1 57 .0 71 3 22 .0 55 1 43 .0 1. 1. m ob ile fi na nc ia l a ss et s 16 3. 0 24 3. 0 11 7 86 .0 3 00 1. 0 17 0. 0 53 3. 0 44 5. 0 1. 2. n on -m ob ile fi na nc ia l a ss et s 32 9 09 .0 24 1 03 .0 23 9 56 9. 0 72 6 04 .0 52 9 87 .0 70 7 89 .0 54 6 98 .0 2. n on -fi na nc ia l a ss et s 11 0 48 4. 0 11 6 60 2. 0 22 7 52 4. 0 57 9 89 6. 0 61 3 10 4. 0 59 3 61 0. 0 59 0 10 3. 0 2. 1. l iq ui d no nfin an ci al a ss et s 6 24 7. 0 11 1 16 .0 92 7 36 .0 26 7 21 .0 38 1 48 .0 45 7 00 .0 44 3 58 .0 2. 2. n on -fi na nc ia l i lli qu id a ss et s 10 4 23 7. 0 10 5 48 6. 0 13 4 78 8. 0 55 3 17 5. 0 57 4 95 6. 0 54 7 91 0. 0 54 5 74 5. 0 3. n on -m ob ile fi na nc ia l a nd li qu id no nfin an ci al a ss et s 39 1 56 .0 35 2 19 .0 33 2 30 5. 0 99 3 25 .0 91 1 35 .0 11 6 48 9. 0 99 0 56 .0 4. m ob ile fi na nc ia l a ss et s 16 3. 0 24 3. 0 11 7 86 .0 3 00 1. 0 17 0. 0 53 3. 0 44 5. 0 5. n on -m ob ile a ss et s 14 3 39 3. 0 14 0 70 5. 0 46 7 09 3. 0 65 2 50 0. 0 66 6 09 1. 0 66 4 39 9. 0 64 4 80 1. 0 6. l iq ui d as se ts 39 3 19 .0 35 4 62 .0 34 4 09 1. 0 10 2 32 6. 0 91 3 05 .0 11 7 02 2. 0 99 5 01 .0 7. n on ill iq ui d as se ts 10 4 23 7. 0 10 5 48 6. 0 13 4 78 8. 0 55 3 17 5. 0 57 4 95 6. 0 54 7 91 0. 0 54 5 74 5. 0 m od ifi ed s tr uc tu re o f fi na nc ia l c ap ita l 1. e qu ity 10 0 82 6. 0 10 8 20 9. 0 11 6 46 5. 0 66 6 99 .0 58 7 36 .0 77 2 24 .0 15 2 53 4. 0 1. 1. e qu ity w ith ou t c ap ita l i n re va lu at io ns 10 0 82 6. 0 10 8 20 9. 0 11 6 46 5. 0 66 6 99 .0 58 7 36 .0 77 2 24 .0 15 2 53 4. 0 1. 2. c ap ita l i n re va lu at io ns 0. 0 0. 0 0. 0 0. 0 0. 0 0. 0 0. 0 2. d eb t 42 7 30 .0 32 7 39 .0 36 2 41 4. 0 58 8 80 2. 0 60 7 52 5. 0 58 7 70 8. 0 49 2 71 2. 0 2. 1. e xt er na l l ia bi lit ie s 39 4 64 .0 23 1 11 .0 35 6 13 6. 0 57 4 09 8. 0 60 0 13 5. 0 55 2 61 4. 0 48 4 71 7. 0 2. 2. i nt er na l l ia bi lit ie s 3 26 6. 0 9 62 8. 0 6 27 8. 0 14 7 04 .0 7 39 0. 0 35 0 94 .0 7 99 5. 0 business, management and economics engineering, 2021, 19(2): 303–336 329 ta bl e a .4 . m od ifi ed s tr uc tu re o f e co no m ic a ss et s an d fin an ci al c ap ita l p rj sc “ c he rn iv ts i o sc f” , t ho us an d u a h ( so ur ce : a ut ho rs ’ c al cu la tio ns ) c om po ne nt s in fa ct o n: 31 .1 2. 20 13 31 .1 2. 20 14 31 .1 2. 20 15 31 .1 2. 20 16 31 .1 2. 20 17 31 .1 2. 20 18 31 .1 2. 20 19 m od ifi ed s tr uc tu re o f e co no m ic a ss et s 1. f in an ci al a ss et s 32 2 36 .0 39 2 05 .0 45 2 58 .0 11 5 45 2. 0 57 8 87 .0 51 5 74 .0 11 4 44 .0 1. 1. m ob ile fi na nc ia l a ss et s 21 9. 0 11 .0 20 4. 0 23 0. 0 14 1. 0 16 9. 0 74 7. 0 1. 2. n on -m ob ile fi na nc ia l a ss et s 32 0 17 .0 39 1 94 .0 45 0 54 .0 11 5 22 2. 0 57 7 46 .0 51 4 05 .0 10 6 97 .0 2. n on -fi na nc ia l a ss et s 25 1 46 9. 0 37 7 50 0. 0 68 3 38 9. 0 75 0 66 5. 0 76 9 89 4. 0 68 6 66 5. 0 67 9 70 0. 0 2. 1. l iq ui d no nfin an ci al a ss et s 3 94 6. 0 12 8 86 .0 14 2 35 .0 7 93 0. 0 50 8 88 .0 10 8 11 .0 23 2 51 .0 2. 2. n on -fi na nc ia l i lli qu id a ss et s 24 7 52 3. 0 36 4 61 4. 0 66 9 15 4. 0 74 2 73 5. 0 71 9 00 6. 0 67 5 85 4. 0 65 6 44 9. 0 3. n on -m ob ile fi na nc ia l a nd li qu id no nfin an ci al a ss et s 35 9 63 .0 52 0 80 .0 59 2 89 .0 12 3 15 2. 0 10 8 63 4. 0 62 2 16 .0 33 9 48 .0 4. m ob ile fi na nc ia l a ss et s 21 9. 0 11 .0 20 4. 0 23 0. 0 14 1. 0 16 9. 0 74 7. 0 5. n on -m ob ile a ss et s 28 3 48 6. 0 41 6 69 4. 0 72 8 44 3. 0 86 5 88 7. 0 82 7 64 0. 0 73 8 07 0. 0 69 0 39 7. 0 6. l iq ui d as se ts 36 1 82 .0 52 0 91 .0 59 4 93 .0 12 3 38 2. 0 10 8 77 5. 0 62 3 85 .0 34 6 95 .0 7. n on ill iq ui d as se ts 24 7 52 3. 0 36 4 61 4. 0 66 9 15 4. 0 74 2 73 5. 0 71 9 00 6. 0 67 5 85 4. 0 65 6 44 9. 0 m od ifi ed s tr uc tu re o f fi na nc ia l c ap ita l 1. e qu ity 18 7 56 1. 0 29 6 16 7. 0 61 6 62 6. 0 71 4 86 2. 0 67 7 13 0. 0 61 8 71 4. 0 56 5 79 9. 0 1. 1. e qu ity w ith ou t c ap ita l i n re va lu at io ns 18 7 56 1. 0 19 1 04 5. 0 19 4 19 8. 0 19 4 82 8. 0 15 7 16 4. 0 99 7 83 .0 48 5 90 .0 1. 2. c ap ita l i n re va lu at io ns 0. 0 10 5 12 2. 0 42 2 42 8. 0 52 0 03 4. 0 51 9 96 6. 0 51 8 93 1. 0 51 7 20 9. 0 2. d eb t 96 1 44 .0 12 0 53 8. 0 11 2 02 1. 0 15 1 25 5. 0 15 0 65 1. 0 11 9 52 5. 0 12 5 34 5. 0 2. 1. e xt er na l l ia bi lit ie s 94 3 30 .0 11 8 44 8. 0 10 9 40 9. 0 14 8 18 3. 0 14 6 81 4. 0 11 5 75 0. 0 12 0 88 3. 0 2. 2. i nt er na l l ia bi lit ie s 1 81 4. 0 2 09 0. 0 2 61 2. 0 3 07 2. 0 3 83 7. 0 3 77 5. 0 4 46 2. 0 330 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... ta bl e a .5 . m od ifi ed s tr uc tu re o f e co no m ic a ss et s an d fin an ci al c ap ita l p js c w ith fo re ig n in ve st m en t “ d ni pr op et ro vs k o ep ”, th ou sa nd u a h (s ou rc e: a ut ho rs ’ c al cu la tio ns ) c om po ne nt s in fa ct o n: 31 .1 2. 20 13 31 .1 2. 20 14 31 .1 2. 20 15 31 .1 2. 20 16 31 .1 2. 20 17 31 .1 2. 20 18 31 .1 2. 20 19 m od ifi ed s tr uc tu re o f e co no m ic a ss et s 1. f in an ci al a ss et s 22 1 01 5. 0 34 2 57 6. 0 39 6 95 0. 0 48 2 81 6. 0 50 3 34 2. 0 58 0 78 1. 0 x 1. 1. m ob ile fi na nc ia l a ss et s 39 .0 62 0. 0 54 .0 1 25 8. 0 6 23 5. 0 2 06 0. 0 x 1. 2. n on -m ob ile fi na nc ia l a ss et s 22 0 97 6. 0 34 1 95 6. 0 39 6 89 6. 0 48 1 55 8. 0 49 7 10 7. 0 57 8 72 1. 0 x 2. n on -fi na nc ia l a ss et s 21 3 81 9. 0 22 5 60 8. 0 21 5 20 1. 0 20 1 59 8. 0 15 8 90 3. 0 16 1 55 7. 0 x 2. 1. l iq ui d no nfin an ci al a ss et s 19 5 69 .0 26 8 67 .0 41 2 09 .0 54 4 32 .0 72 8 26 .0 11 1 56 3. 0 x 2. 2. n on -fi na nc ia l i lli qu id a ss et s 19 4 25 0. 0 19 8 74 1. 0 17 3 99 2. 0 14 7 16 6. 0 86 0 77 .0 49 9 94 .0 x 3. n on -m ob ile fi na nc ia l a nd li qu id no nfin an ci al a ss et s 24 0 54 5. 0 36 8 82 3. 0 43 8 10 5. 0 53 5 99 0. 0 56 9 93 3. 0 69 0 28 4. 0 x 4. m ob ile fi na nc ia l a ss et s 39 .0 62 0. 0 54 .0 1 25 8. 0 6 23 5. 0 2 06 0. 0 x 5. n on -m ob ile a ss et s 43 4 79 5. 0 56 7 56 4. 0 61 2 09 7. 0 68 3 15 6. 0 65 6 01 0. 0 74 0 27 8. 0 x 6. l iq ui d as se ts 24 0 58 4. 0 36 9 44 3. 0 43 8 15 9. 0 53 7 24 8. 0 57 6 16 8. 0 69 2 34 4. 0 x 7. n on ill iq ui d as se ts 19 4 25 0. 0 19 8 74 1. 0 17 3 99 2. 0 14 7 16 6. 0 86 0 77 .0 49 9 94 .0 x m od ifi ed s tr uc tu re o f fi na nc ia l c ap ita l 1. e qu ity 38 9 76 9. 0 49 4 11 4. 0 53 1 70 1. 0 57 6 66 2. 0 61 1 49 9. 0 60 8 75 2. 0 x 1. 1. e qu ity w ith ou t c ap ita l i n re va lu at io ns 38 8 79 1. 0 49 3 13 6. 0 53 0 72 3. 0 57 5 68 4. 0 61 0 52 1. 0 60 8 75 2. 0 x 1. 2. c ap ita l i n re va lu at io ns 97 8. 0 97 8. 0 97 8. 0 97 8. 0 97 8. 0 0. 0 x 2. d eb t 45 0 65 .0 74 0 70 .0 80 4 50 .0 10 7 75 2. 0 50 7 46 .0 13 3 58 6. 0 x 2. 1. e xt er na l l ia bi lit ie s 32 5 05 .0 59 3 62 .0 33 1 05 .0 26 3 98 .0 27 9 76 .0 10 0 46 4. 0 x 2. 2. i nt er na l l ia bi lit ie s 12 5 60 .0 14 7 08 .0 47 3 45 .0 81 3 54 .0 22 7 70 .0 33 1 22 .0 x business, management and economics engineering, 2021, 19(2): 303–336 331 ta bl e a .6 . m od ifi ed s tr uc tu re o f e co no m ic a ss et s an d fin an ci al c ap ita l p js c “ k ro py vn yt sk yi o ep ”, th ou sa nd u a h ( so ur ce : a ut ho rs ’ c al cu la tio ns ) c om po ne nt s in fa ct o n: 31 .1 2. 20 13 31 .1 2. 20 14 31 .1 2. 20 15 31 .1 2. 20 16 31 .1 2. 20 17 31 .1 2. 20 18 31 .1 2. 20 19 m od ifi ed s tr uc tu re o f e co no m ic a ss et s 1. f in an ci al a ss et s 61 9 23 .0 97 0 29 .0 20 0 20 4. 0 18 6 03 6. 0 15 9 55 8. 0 10 2 77 3. 0 70 3 06 .0 1. 1. m ob ile fi na nc ia l a ss et s 3 39 6. 0 19 6. 0 1 11 7. 0 71 0. 0 63 .0 56 .0 17 .0 1. 2. n on -m ob ile fi na nc ia l a ss et s 58 5 27 .0 96 8 33 .0 19 9 08 7. 0 18 5 32 6. 0 15 9 49 5. 0 10 2 71 7. 0 70 2 89 .0 2. n on -fi na nc ia l a ss et s 24 7 00 9. 0 23 1 28 7. 0 16 6 68 5. 0 22 4 62 9. 0 28 3 96 9. 0 41 1 87 0. 0 48 7 79 5. 0 2. 1. l iq ui d no nfin an ci al a ss et s 4 37 6. 0 6 60 2. 0 6 37 9. 0 5 87 2. 0 9 09 7. 0 11 8 41 .0 12 0 59 .0 2. 2. n on -fi na nc ia l i lli qu id a ss et s 24 2 63 3. 0 22 4 68 5. 0 16 0 30 6. 0 21 8 75 7. 0 27 4 87 2. 0 40 0 02 9. 0 47 5 73 6. 0 3. n on -m ob ile fi na nc ia l a nd li qu id no nfin an ci al a ss et s 62 9 03 .0 10 3 43 5. 0 20 5 46 6. 0 19 1 19 8. 0 16 8 59 2. 0 11 4 55 8. 0 82 3 48 .0 4. m ob ile fi na nc ia l a ss et s 3 39 6. 0 19 6. 0 1 11 7. 0 71 0. 0 63 .0 56 .0 17 .0 5. n on -m ob ile a ss et s 30 5 53 6. 0 32 8 12 0. 0 36 5 77 2. 0 40 9 95 5. 0 44 3 46 4. 0 51 4 58 7. 0 55 8 08 4. 0 6. l iq ui d as se ts 66 2 99 .0 10 3 63 1. 0 20 6 58 3. 0 19 1 90 8. 0 16 8 65 5. 0 11 4 61 4. 0 82 3 65 .0 7. n on ill iq ui d as se ts 24 2 63 3. 0 22 4 68 5. 0 16 0 30 6. 0 21 8 75 7. 0 27 4 87 2. 0 40 0 02 9. 0 47 5 73 6. 0 m od ifi ed s tr uc tu re o f fi na nc ia l c ap ita l 1. e qu ity 27 9 46 4. 0 27 1 77 6. 0 28 6 54 2. 0 31 4 75 2. 0 34 1 07 6. 0 33 0 91 3. 0 33 9 49 5. 0 1. 1. e qu ity w ith ou t c ap ita l i n re va lu at io ns 11 4 51 4. 0 10 7 38 0. 0 12 2 14 6. 0 16 3 04 4. 0 18 9 36 8. 0 17 9 31 5. 0 18 8 13 1. 0 1. 2. c ap ita l i n re va lu at io ns 16 4 95 0. 0 16 4 39 6. 0 16 4 39 6. 0 15 1 70 8. 0 15 1 70 8. 0 15 1 59 8. 0 15 1 36 4. 0 2. d eb t 29 4 68 .0 56 5 40 .0 80 3 47 .0 95 9 13 .0 10 2 45 1. 0 18 3 73 0. 0 21 8 60 6. 0 2. 1. e xt er na l l ia bi lit ie s 27 8 11 .0 53 1 06 .0 77 7 01 .0 93 1 46 .0 98 8 42 .0 12 7 96 1. 0 13 9 17 7. 0 2. 2. i nt er na l l ia bi lit ie s 1 65 7. 0 3 43 4. 0 2 64 6. 0 2 76 7. 0 3 60 9. 0 55 7 69 .0 79 4 29 .0 332 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... ta bl e a .7 . m od ifi ed s tr uc tu re o f e co no m ic a ss et s an d fin an ci al c ap ita l p js c “ n iz hy ns ky z hy rc om bi na t”, th ou sa nd u a h ( so ur ce : a ut ho rs ’ c al cu la tio ns ) c om po ne nt s in fa ct o n: 31 .1 2. 20 13 31 .1 2. 20 14 31 .1 2. 20 15 31 .1 2. 20 16 31 .1 2. 20 17 31 .1 2. 20 18 31 .1 2. 20 19 m od ifi ed s tr uc tu re o f e co no m ic a ss et s 1. f in an ci al a ss et s 12 6 91 .0 17 9 74 .0 19 2 48 .0 32 3 22 .0 79 9 30 .0 39 1 02 .0 71 7 91 .0 1. 1. m ob ile fi na nc ia l a ss et s 67 3. 0 57 1. 0 3 77 7. 0 1. 0 66 9. 0 1 11 1. 0 14 3 54 .0 1. 2. n on -m ob ile fi na nc ia l a ss et s 12 0 18 .0 17 4 03 .0 15 4 71 .0 32 3 21 .0 79 2 61 .0 37 9 91 .0 57 4 37 .0 2. n on -fi na nc ia l a ss et s 36 2 67 .0 42 7 81 .0 45 1 40 .0 77 4 08 .0 14 8 25 9. 0 18 7 28 9. 0 22 2 31 4. 0 2. 1. l iq ui d no nfin an ci al a ss et s 5 02 8. 0 7 91 6. 0 6 14 3. 0 15 5 87 .0 29 6 39 .0 6 96 3. 0 47 7 60 .0 2. 2. n on -fi na nc ia l i lli qu id a ss et s 31 2 39 .0 34 8 65 .0 38 9 97 .0 61 8 21 .0 11 8 62 0. 0 18 0 32 6. 0 17 4 55 4. 0 3. n on -m ob ile fi na nc ia l a nd li qu id no nfin an ci al a ss et s 17 0 46 .0 25 3 19 .0 21 6 14 .0 47 9 08 .0 10 8 90 0. 0 44 9 54 .0 10 5 19 7. 0 4. m ob ile fi na nc ia l a ss et s 67 3. 0 57 1. 0 3 77 7. 0 1. 0 66 9. 0 1 11 1. 0 14 3 54 .0 5. n on -m ob ile a ss et s 48 2 85 .0 60 1 84 .0 60 6 11 .0 10 9 72 9. 0 22 7 52 0. 0 22 5 28 0. 0 27 9 75 1. 0 6. l iq ui d as se ts 17 7 19 .0 25 8 90 .0 25 3 91 .0 47 9 09 .0 10 9 56 9. 0 46 0 65 .0 11 9 55 1. 0 7. n on ill iq ui d as se ts 31 2 39 .0 34 8 65 .0 38 9 97 .0 61 8 21 .0 11 8 62 0. 0 18 0 32 6. 0 17 4 55 4. 0 m od ifi ed s tr uc tu re o f fi na nc ia l c ap ita l 1. e qu ity 13 5 10 .0 13 6 35 .0 3 48 1. 0 –4 5 85 .0 91 0. 0 -5 9 58 3. 0 –9 6 34 8. 0 1. 1. e qu ity w ith ou t c ap ita l i n re va lu at io ns 13 5 10 .0 13 6 35 .0 3 48 1. 0 –4 5 85 .0 91 0. 0 -5 9 58 3. 0 –9 6 34 8. 0 1. 2. c ap ita l i n re va lu at io ns 0. 0 0. 0 0. 0 0. 0 0. 0 0. 0 0. 0 2. d eb t 35 4 48 .0 47 1 20 .0 60 9 07 .0 11 4 31 5. 0 22 7 27 9. 0 28 5 97 4. 0 39 0 45 3. 0 2. 1. e xt er na l l ia bi lit ie s 34 2 49 .0 46 3 36 .0 60 1 94 .0 11 1 35 8. 0 21 4 03 1. 0 28 3 52 2. 0 35 0 88 2. 0 2. 2. i nt er na l l ia bi lit ie s 1 19 9. 0 78 4. 0 71 3. 0 2 95 7. 0 13 2 48 .0 2 45 2. 0 39 5 71 .0 business, management and economics engineering, 2021, 19(2): 303–336 333 ta bl e a .8 . m od ifi ed s tr uc tu re o f e co no m ic a ss et s an d fin an ci al c ap ita l p js c “ po lo gy o ep ”, th ou sa nd u a h ( so ur ce : a ut ho rs ’ c al cu la tio ns ) c om po ne nt s in fa ct o n: 31 .1 2. 20 13 31 .1 2. 20 14 31 .1 2. 20 15 31 .1 2. 20 16 31 .1 2. 20 17 31 .1 2. 20 18 31 .1 2. 20 19 m od ifi ed s tr uc tu re o f e co no m ic a ss et s 1. f in an ci al a ss et s 23 9 80 1. 0 27 8 51 0. 0 30 0 59 1. 0 43 6 38 6. 0 52 3 94 0. 0 42 2 57 9. 0 45 0 54 3. 0 1. 1. m ob ile fi na nc ia l a ss et s 39 5 10 .0 42 7 87 .0 44 4 87 .0 92 7 48 .0 42 1 08 .0 33 2 76 .0 84 9 92 .0 1. 2. n on -m ob ile fi na nc ia l a ss et s 20 0 29 1. 0 23 5 72 3. 0 25 6 10 4. 0 34 3 63 8. 0 48 1 83 2. 0 38 9 30 3. 0 36 5 55 1. 0 2. n on -fi na nc ia l a ss et s 63 3 77 8. 0 65 2 98 6. 0 82 0 17 0. 0 1 22 1 40 8. 0 1 28 4 01 2. 0 1 56 7 28 4. 0 1 62 6 02 9. 0 2. 1. l iq ui d no nfin an ci al a ss et s 36 3 34 8. 0 38 9 77 7. 0 54 5 05 7. 0 93 3 57 4. 0 98 9 86 4. 0 62 7 19 8. 0 55 2 85 2. 0 2. 2. n on -fi na nc ia l i lli qu id a ss et s 27 0 43 0. 0 26 3 20 9. 0 27 5 11 3. 0 28 7 83 4. 0 29 4 14 8. 0 94 0 08 6. 0 1 07 3 17 7. 0 3. n on -m ob ile fi na nc ia l a nd li qu id no nfin an ci al a ss et s 56 3 63 9. 0 62 5 50 0. 0 80 1 16 1. 0 1 27 7 21 2. 0 1 47 1 69 6. 0 1 01 6 50 1. 0 91 8 40 3. 0 4. m ob ile fi na nc ia l a ss et s 39 5 10 .0 42 7 87 .0 44 4 87 .0 92 7 48 .0 42 1 08 .0 33 2 76 .0 84 9 92 .0 5. n on -m ob ile a ss et s 83 4 06 9. 0 88 8 70 9. 0 1 07 6 27 4. 0 1 56 5 04 6. 0 1 76 5 84 4. 0 1 95 6 58 7. 0 1 99 1 58 0. 0 6. l iq ui d as se ts 60 3 14 9. 0 66 8 28 7. 0 84 5 64 8. 0 1 36 9 96 0. 0 1 51 3 80 4. 0 1 04 9 77 7. 0 1 00 3 39 5. 0 7. n on ill iq ui d as se ts 27 0 43 0. 0 26 3 20 9. 0 27 5 11 3. 0 28 7 83 4. 0 29 4 14 8. 0 94 0 08 6. 0 1 07 3 17 7. 0 m od ifi ed s tr uc tu re o f fi na nc ia l c ap ita l 1. e qu ity 28 7 70 0. 0 27 4 63 4. 0 40 7 00 2. 0 39 0 11 8. 0 40 7 26 6. 0 99 1 25 9. 0 99 7 47 9. 0 1. 1. e qu ity w ith ou t c ap ita l i n re va lu at io ns 21 1 81 9. 0 19 8 75 3. 0 33 4 84 5. 0 32 5 40 9. 0 34 6 27 9. 0 28 3 38 5. 0 32 4 17 5. 0 1. 2. c ap ita l i n re va lu at io ns 75 8 81 .0 75 8 81 .0 72 1 57 .0 64 7 09 .0 60 9 87 .0 70 7 87 4. 0 67 3 30 4. 0 2. d eb t 58 5 87 9. 0 65 6 86 2. 0 71 3 75 9. 0 1 26 7 67 6. 0 1 40 0 68 6. 0 99 8 60 4. 0 1 07 9 09 3. 0 2. 1. e xt er na l l ia bi lit ie s 55 7 01 5. 0 24 3 47 5. 0 47 7 42 1. 0 65 5 32 9. 0 68 8 34 8. 0 45 6 83 8. 0 56 8 62 3. 0 2. 2. i nt er na l l ia bi lit ie s 28 8 64 .0 41 3 38 7. 0 23 6 33 8. 0 61 2 34 7. 0 71 2 33 8. 0 54 1 76 6. 0 51 0 47 0. 0 334 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... ta bl e a .9 . m od ifi ed s tr uc tu re o f e co no m ic a ss et s an d fin an ci al c ap ita l p rj sc “ v in ni ts a o sc f” , t ho us an d u a h ( so ur ce : a ut ho rs ’ c al cu la tio ns ) c om po ne nt s in fa ct o n: 31 .1 2. 20 13 31 .1 2. 20 14 31 .1 2. 20 15 31 .1 2. 20 16 31 .1 2. 20 17 31 .1 2. 20 18 31 .1 2. 20 19 m od ifi ed s tr uc tu re o f e co no m ic a ss et s 1. f in an ci al a ss et s 50 7 64 .0 19 0 69 9. 0 28 9 91 2. 0 90 5 82 9. 0 56 7 59 9. 0 47 7 87 9. 0 24 5 63 3. 0 1. 1. m ob ile fi na nc ia l a ss et s 10 2. 0 37 .0 11 0 40 .0 57 6 02 .0 23 4 14 .0 50 1 05 .0 43 3 93 .0 1. 2. n on -m ob ile fi na nc ia l a ss et s 50 6 62 .0 19 0 66 2. 0 27 8 87 2. 0 84 8 22 7. 0 54 4 18 5. 0 42 7 77 4. 0 20 2 24 0. 0 2. n on -fi na nc ia l a ss et s 1 00 6 78 5. 0 1 76 4 30 2. 0 3 89 0 29 4. 0 4 25 1 85 4. 0 4 35 5 84 4. 0 3 89 5 24 6. 0 3 82 0 02 3. 0 2. 1. l iq ui d no nfin an ci al a ss et s 23 8 07 .0 44 7 13 .0 57 0 33 1. 0 31 7 14 5. 0 51 8 42 0. 0 15 9 29 0. 0 19 8 35 0. 0 2. 2. n on -fi na nc ia l i lli qu id a ss et s 98 2 97 8. 0 1 71 9 58 9. 0 3 31 9 96 3. 0 3 93 4 70 9. 0 3 83 7 42 4. 0 3 73 5 95 6. 0 3 62 1 67 3. 0 3. n on -m ob ile fi na nc ia l a nd li qu id no nfin an ci al a ss et s 74 4 69 .0 23 5 37 5. 0 84 9 20 3. 0 1 16 5 37 2. 0 1 06 2 60 5. 0 58 7 06 4. 0 40 0 59 0. 0 4. m ob ile fi na nc ia l a ss et s 10 2. 0 37 .0 11 0 40 .0 57 6 02 .0 23 4 14 .0 50 1 05 .0 43 3 93 .0 5. n on -m ob ile a ss et s 1 05 7 44 7. 0 1 95 4 96 4. 0 4 16 9 16 6. 0 5 10 0 08 1. 0 4 90 0 02 9. 0 4 32 3 02 0. 0 4 02 2 26 3. 0 6. l iq ui d as se ts 74 5 71 .0 23 5 41 2. 0 86 0 24 3. 0 1 22 2 97 4. 0 1 08 6 01 9. 0 63 7 16 9. 0 44 3 98 3. 0 7. n on ill iq ui d as se ts 98 2 97 8. 0 1 71 9 58 9. 0 3 31 9 96 3. 0 3 93 4 70 9. 0 3 83 7 42 4. 0 3 73 5 95 6. 0 3 62 1 67 3. 0 m od ifi ed s tr uc tu re o f fi na nc ia l c ap ita l 1. e qu ity 42 4 94 3. 0 1 01 1 22 8. 0 2 30 4 48 9. 0 2 81 2 99 5. 0 2 72 8 53 3. 0 2 63 0 57 3. 0 2 55 0 58 0. 0 1. 1. e qu ity w ith ou t c ap ita l i n re va lu at io ns 56 5 50 .0 63 8 52 .0 69 6 34 .0 71 2 01 .0 –1 2 71 8. 0 –1 00 0 56 .0 –1 79 7 12 .0 1. 2. c ap ita l i n re va lu at io ns 36 8 39 3. 0 94 7 37 6. 0 2 23 4 85 5. 0 2 74 1 79 4. 0 2 74 1 25 1. 0 2 73 0 62 9. 0 2 73 0 29 2. 0 2. d eb t 63 2 60 6. 0 94 3 77 3. 0 1 87 5 71 7. 0 2 34 4 68 8. 0 2 19 4 91 0. 0 1 74 2 55 2. 0 1 51 5 07 6. 0 2. 1. e xt er na l l ia bi lit ie s 62 9 28 2. 0 93 9 10 9. 0 1 68 2 52 8. 0 2 21 7 34 1. 0 1 64 2 94 1. 0 1 44 2 45 9. 0 1 36 5 18 7. 0 2. 2. i nt er na l l ia bi lit ie s 3 32 4. 0 4 66 4. 0 19 3 18 9. 0 12 7 34 7. 0 55 1 96 9. 0 30 0 09 3. 0 14 9 88 9. 0 business, management and economics engineering, 2021, 19(2): 303–336 335 ta bl e a .1 0. m od ifi ed s tr uc tu re o f e co no m ic a ss et s an d fin an ci al c ap ita l p js c “ z ap or iz hz hy a o ep ”, th ou sa nd u a h ( so ur ce : a ut ho rs ’ c al cu la tio ns ) c om po ne nt s in fa ct o n: 31 .1 2. 20 13 31 .1 2. 20 14 31 .1 2. 20 15 31 .1 2. 20 16 31 .1 2. 20 17 31 .1 2. 20 18 31 .1 2. 20 19 m od ifi ed s tr uc tu re o f e co no m ic a ss et s 1. f in an ci al a ss et s х х x 79 0 04 .0 77 8 08 .0 97 2 49 .0 98 2 66 .0 1. 1. m ob ile fi na nc ia l a ss et s х х x 8. 0 43 8. 0 13 .0 16 8. 0 1. 2. n on -m ob ile fi na nc ia l a ss et s х х 0. 0 78 9 96 .0 77 3 70 .0 97 2 36 .0 98 0 98 .0 2. n on -fi na nc ia l a ss et s х х 50 3 28 7. 0 45 8 74 4. 0 42 8 16 3. 0 40 3 53 2. 0 43 4 68 4. 0 2. 1. l iq ui d no nfin an ci al a ss et s х х 35 4 18 .0 49 2. 0 4 81 4. 0 5 09 3. 0 5 34 4. 0 2. 2. n on -fi na nc ia l i lli qu id a ss et s х х 46 7 86 9. 0 45 8 25 2. 0 42 3 34 9. 0 39 8 43 9. 0 42 9 34 0. 0 3. n on -m ob ile fi na nc ia l a nd li qu id no nfin an ci al a ss et s х х 35 4 18 .0 79 4 88 .0 82 1 84 .0 10 2 32 9. 0 10 3 44 2. 0 4. m ob ile fi na nc ia l a ss et s х х x 8. 0 43 8. 0 13 .0 16 8. 0 5. n on -m ob ile a ss et s х х 50 3 28 7. 0 53 7 74 0. 0 50 5 53 3. 0 50 0 76 8. 0 53 2 78 2. 0 6. l iq ui d as se ts х х 35 4 18 .0 79 4 96 .0 82 6 22 .0 10 2 34 2. 0 10 3 61 0. 0 7. n on ill iq ui d as se ts x x 46 7 86 9. 0 45 8 25 2. 0 42 3 34 9. 0 39 8 43 9. 0 42 9 34 0. 0 m od ifi ed s tr uc tu re o f fi na nc ia l c ap ita l 1. e qu ity х х 50 3 28 7. 0 50 8 07 9. 0 50 2 78 3. 0 49 9 77 1. 0 49 7 81 4. 0 1. 1. e qu ity w ith ou t c ap ita l i n re va lu at io ns х х 40 5 73 8. 0 41 5 80 7. 0 41 4 78 3. 0 41 1 78 9. 0 40 9 83 2. 0 1. 2. c ap ita l i n re va lu at io ns х х 97 5 49 .0 92 2 72 .0 88 0 00 .0 87 9 82 .0 87 9 82 .0 2. d eb t х х x 29 6 69 .0 3 18 8. 0 1 01 0. 0 35 1 36 .0 2. 1. e xt er na l l ia bi lit ie s х х x 29 6 64 .0 1 66 2. 0 1 00 4. 0 35 1 32 .0 2. 2. i nt er na l l ia bi lit ie s х х 0. 0 5. 0 1 52 6. 0 6. 0 4. 0 336 l. dokiienko. financial security of the enterprise: an alternative approach to evaluation... ta bl e a .1 1. m od ifi ed s tr uc tu re o f e co no m ic a ss et s an d fin an ci al c ap ita l p js c “ z ap or iz hz hy a o ff ”, th ou sa nd u a h ( so ur ce : a ut ho rs ’ c al cu la tio ns ) c om po ne nt s in fa ct o n: 31 .1 2. 20 13 31 .1 2. 20 14 31 .1 2. 20 15 31 .1 2. 20 16 31 .1 2. 20 17 31 .1 2. 20 18 31 .1 2. 20 19 m od ifi ed s tr uc tu re o f e co no m ic a ss et s 1. f in an ci al a ss et s 19 1 75 1. 0 22 2 52 8. 0 32 9 85 7. 0 31 8 75 5. 0 30 4 79 0. 0 30 4 99 1. 0 44 2 51 6. 6 1. 1. m ob ile fi na nc ia l a ss et s 41 .0 5 51 8. 0 11 6 77 .0 62 .0 2. 0 24 .0 5. 9 1. 2. n on -m ob ile fi na nc ia l a ss et s 19 1 71 0. 0 21 7 01 0. 0 31 8 18 0. 0 31 8 69 3. 0 30 4 78 8. 0 30 4 96 7. 0 44 2 51 0. 7 2. n on -fi na nc ia l a ss et s 61 9 08 4. 0 76 1 72 0. 0 68 7 93 6. 0 15 0 57 3. 0 13 6 85 4. 0 16 0 78 5. 0 16 6 21 0. 3 2. 1. l iq ui d no nfin an ci al a ss et s 37 8 75 .0 11 6 79 7. 0 56 5 60 .0 9 44 2. 0 3 58 7. 0 28 1 22 .0 1 96 3. 2 2. 2. n on -fi na nc ia l i lli qu id a ss et s 58 1 20 9. 0 64 4 92 3. 0 63 1 37 6. 0 14 1 13 1. 0 13 3 26 7. 0 13 2 66 3. 0 16 4 24 7. 1 3. n on -m ob ile fi na nc ia l a nd li qu id no nfin an ci al a ss et s 22 9 58 5. 0 33 3 80 7. 0 37 4 74 0. 0 32 8 13 5. 0 30 8 37 5. 0 33 3 08 9. 0 44 4 47 3. 9 4. m ob ile fi na nc ia l a ss et s 41 .0 5 51 8. 0 11 6 77 .0 62 .0 2. 0 24 .0 5. 9 5. n on -m ob ile a ss et s 81 0 79 4. 0 97 8 73 0. 0 1 00 6 11 6. 0 46 9 26 6. 0 44 1 64 2. 0 46 5 75 2. 0 60 8 72 1. 0 6. l iq ui d as se ts 22 9 62 6. 0 33 9 32 5. 0 38 6 41 7. 0 32 8 19 7. 0 30 8 37 7. 0 33 3 11 3. 0 44 4 47 9. 8 7. n on ill iq ui d as se ts 58 1 20 9. 0 64 4 92 3. 0 63 1 37 6. 0 14 1 13 1. 0 13 3 26 7. 0 13 2 66 3. 0 16 4 24 7. 1 m od ifi ed s tr uc tu re o f fi na nc ia l c ap ita l 1. e qu ity 25 3 47 9. 0 22 9 36 1. 0 31 7 95 5. 0 –2 17 8 31 .0 –2 81 1 22 .0 –2 62 8 65 .0 –2 66 4 40 .2 1. 1. e qu ity w ith ou t c ap ita l i n re va lu at io ns 1 82 4. 0 –2 1 38 1. 0 67 4 91 .0 –3 70 5 40 .0 –4 33 8 31 .0 –4 15 5 74 .0 –4 19 4 43 .4 1. 2. c ap ita l i n re va lu at io ns 25 1 65 5. 0 25 0 74 2. 0 25 0 46 4. 0 15 2 70 9. 0 15 2 70 9. 0 15 2 70 9. 0 15 3 00 3. 2 2. d eb t 55 7 35 6. 0 75 4 88 7. 0 69 9 83 8. 0 68 7 15 9. 0 72 2 76 6. 0 72 8 64 1. 0 87 5 16 7. 1 2. 1. e xt er na l l ia bi lit ie s 54 7 71 5. 0 74 0 72 1. 0 69 0 10 5. 0 68 6 40 0. 0 72 2 26 0. 0 72 8 16 9. 0 87 4 87 8. 0 2. 2. i nt er na l l ia bi lit ie s 9 64 1. 0 14 1 66 .0 9 73 3. 0 75 9. 0 50 6. 0 47 2. 0 28 9. 1 copyright © 2019 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: elias.bengtsson@hh.se motivation, learning strategies and performance among business undergraduates at university colleges in sweden elias bengtsson 1, *, britta teleman2 1school of business, engineering and science, halmstad university, kristian ivs väg 3, 30118 halmstad, sweden 2konstfack university of arts, craft and design, lm ericssons väg, 126 27 stockholm, sweden received 12 june 2019; accepted 07 september 2019 abstract. purpose – this paper brings new material to the understanding of interlinkages between motivation, learning and performance in academic contexts. by investigating these interlinkages in a new context – students of business and management at a swedish university college – it seeks to answer the following research questions: how do students’ degree and type of motivation relate to their learning strategies?; how do students’ degree and type of motivation and learning strategies relate to their academic success?; and how do student characteristics in terms of experience and gender influence the nature and strength of these relationships? research methodology – the data used in this paper is based on student surveys and a centralised system of reporting and archiving academic results. the latter contains information on the academic performance of individual students, whereas the surveys gathered information on the students’ background characteristics (experience and gender), their motivation for pursuing academic studies and their learning strategies. the difference in proportion tests and ols regressions were then applied to investigate differences between student groups and relationships between the different variables. findings – the findings reveal that business students are more extrinsically than intrinsically motivated; that deep learning approaches lead to higher grades for particular examination forms, and that female students are typically more intrinsically motivated, engage more in deep learning approaches and perform better than their male counterparts. practical implications – the findings suggest that practitioners in higher education involved with the business and/or university college students have good reasons to stimulate motivation generally, and intrinsic motivation in particular. however, this must be accompanied by examination forms that promote deep learning. originality/value – in contrast to most research, this paper focuses on the interlinkages between motivation, learning and performance among business students in a university college setting. this contrasts most research on this topic which tends to be focused on university students, particularly in the us, in other fields of study or accounting. moreover, this paper also takes student characteristics into account and uses a variety of measures to operationalise academic performance. keywords: academic performance, university college, business students, learning approaches, intrinsic motivation, extrinsic motivation. jel classification: a2, a22. business, management and education issn 2029-7491 / eissn 2029-6169 2019 volume 17 issue 2: 111–133 https://doi.org/10.3846/bme.2019.10512 http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://orcid.org/0000-0003-2173-484x https://doi.org/10.3846/bme.2019.10512 112 e. bengtsson, b. teleman. motivation, learning strategies and performance among business... introduction the relationship between motivation, learning and academic performance is a widely recognised topic which has attracted considerable empirical research. this paper investigates academic students of business and management at a swedish university college. swedish universities and university colleges offering higher studies in business education typically award two degrees; the master of science in business administration (msc business) and a more vocationally oriented degree in business called civilekonom. besides, there are several academic institutions offering supplementary specialisations or specific programs. in this paper, the sample consisted of students from both the msc business and the civilekonom degree, as well as students from a business administration program specialised on construction and real estate. this context of the paper allows it to offer new insights on the relationship between motivation, learning and academic performance. first, there is relatively little research on the link between motivation, learning strategies and academic performance among business students (vantournout et al., 2012). at the same time, it has been suggested that business students are a breed of their own in terms of motivation, which is claimed to be mainly driven by external rewards such as securing prestigious and high salary jobs (demarie & aloise-young, 2003; mcevoy, 2011). this makes motivation and its impact on education a particularly important topic for business schools (debnath et  al., 2007). indeed, the few studies that focused on business students suggest that their motivation has implications on learning approaches and academic performance (everaert, opdecam, & maussen, 2017; ariani, 2016; duff, 2004). second, the limited research on motivation, learning and performance among business students has predominantly focused on accounting students (everaert et al., 2017) and in the us (duff, 2004). understanding of the topic may, therefore, be particular and specific to those contexts. third, most academic research on student characteristics has analysed how academic performance differs between genders. the implications of experience are less researched (vantournout et al., 2012, duff, 2004), as is the link between these factors and motivation. fourth, most research on motivation, learning strategies and performance is based on university students. very few examples (e.g. yu, zhang, nunes, & levesque-bristol, 2018; vantournout et  al., 2012) tackle the topic in a university college setting, which itself may raise particular challenges relating to student motivation for academically (as opposed to more vocationally) oriented studies. fifth, most research (e.g. byrne, flood, & willis, 2002; sadler-smith, 1996; trigwell & prosser, 1991) rely on relatively narrow definitions of academic performance or single measures, which may omit meaningful relationships between performance, motivation and learning. finally, most research on motivation, learning and performance is relatively dated about the structural changes toward an increasing number and increasingly diverse body of students that has been ongoing and perhaps reinforced in recent years, both generally and in sweden (c.f. european commission, 2013; uhr, 2016). these structural developments pose challenges related to organisation and strategies in higher education (bennett, 2003; bowl & bathmaker, 2016). this paper thus brings new material to the research of interlinkages between motivation, learning and performance by taking into account gender and experience of business business, management and education, 2019, 17(2): 111–133 113 university college students. it also uses a variety of performance measures. in line with this, the paper seeks to answer the following research questions: – q1: how do students’ degree and type of motivation relate to their learning strategies? – q2: how do students’ degree, type of motivation and learning strategies relate to their academic success? – q3: how do student characteristics in terms of experience and gender influence the nature and strength of these relationships? the remainder of this paper is outlined as follows: first, we provide an overview of the current understanding of how motivation and learning strategies are related in academic settings (section 1). we focus on research from business studies contexts in particular and develop several hypotheses on the relationships between motivation, learning and academic performance. second, issues relating to data and the methodology used to test the hypotheses are outlined (section 2). in section 3, we present the results of the empirical analysis and compare them to prior research. finally, in conclusion, we discuss our findings in the light of the ongoing discussion in higher education, on what type of motivation, learning strategies and examinations one should encourage in order to promote academic performance. 1. literature review: motivation, learning and academic performance this section provides an overview of the literature on motivation (section 1.1), the link between motivation and learning (section 1.2) and the relationships between motivation, learning and academic performance (section 1.3). the section uses prior research (emphasising prior research based on business students, whenever such research is available) and deduction to develop some hypotheses that are subsequently empirically tested. a figure that summarises these hypotheses is provided at the end of the section. 1.1. motivation there are various conceptualisations on how academic students’ motivation influence their learning, performance, adjustment and well-being (vansteenkiste, zhou, lens, & soenens, 2005). one such conceptualisation is the self-determination theory (sdt) which seeks to explain people’s behaviour by their underlying motivation and the types of goals they pursue (deci & ryan, 2000). sdt distinguishes between two types of goals: intrinsic goals which are perceived as necessary in their own right, without consideration of any potential rewards linked to pursuing these goals other than self-fulfilment (i.e. self-development, health, mental fitness, community contribution, affiliation etc.). extrinsic goals are outward-oriented and relate to acquiring specific properties or characteristics that are perceived to be important in the eyes of others (i.e., wealth, fame, power, status, image, etc.) (kasser & ryan, 1996; williams et al., 2000). the terminology of extrinsic and intrinsic also provides a terminology to describe various motivation categories, where the degree of self-determination in the regulation of goals and behaviour provides a continuum of motivational categories and subcategories. intrinsic motivation is marked by pursuing goals that are valued by their significance without any other rewards. this also implies that behaviour is self-determined and regulated without external 114 e. bengtsson, b. teleman. motivation, learning strategies and performance among business... pressures (deci, 1975). extrinsic motivation includes a range of subcategories which all relate to the pursuit of extrinsic goals, but vary in the extent to which goals and behaviour are autonomous and whether it is motivated by coercion or external rewards. the least self-determined form of extrinsic motivation is external regulation, which is characterised by behaviour in pursuit of some externally defined goal, requirement or reward. introjected regulation is associated with pursuing goals to avoid feelings of guilt, self-image anxiety or to attain self-enhancements such as pride. identified regulation is the conscious pursuit of goals that the person views as characterising his or her personality or identity. finally, integrated regulation happens when external goals have been fully aligned with one’s other values and needs. actions characterised by integrated motivation share many qualities with intrinsic motivation, although they are still considered extrinsic because they are done to attain separable outcomes rather than for their inherent enjoyment or feeling of well-being itself. intrinsic and extrinsic motivations and goals are not mutually exclusive, but a particular behaviour or goal may be regulated by both (deci & ryan, 1995; ryan & deci, 2000). in research in academic contexts, differentiating between intrinsically and extrinsically motivated students is common (biggs, 2011). intrinsically motivated students to study their chosen topics primarily to gain knowledge, understanding and satisfying their natural curiosity. in contrast, extrinsically motivated students study to attain other goals than only the learning itself (vansteenkiste et al., 2006). within business and management studies, student motivation has primarily been used to understand learning approaches or to explain academic performance (see below). one exception is demarie and aloise-young (2003) who compared motivation between graduate students within the business and educational studies. business majors were significantly less likely to explain their choice of studies because of “interest in the area” or “interest in the classes” and significantly more likely to say they picked their major because it would help them “find a job easily” and lead to a “high salary.” arquero et al. (2015) demonstrate similar findings in a comparative study between nursing and accounting students. as suggested by mcevoy (2011), these results indicate that business students may generally be more extrinsically than intrinsically motivated. based on this reasoning, the following hypothesis is proposed: h1: business students are more extrinsically than intrinsically motivated 1.2. motivation and learning approaches higher education students’ approaches to learning are often conceptualised as the interaction between the characteristics of the individual student and their perceptions of courses, teaching and assessment procedures (entwistle, 1990). this paper is based on the well-established concepts of deep and surface learning approaches (biggs, kember, & leung, 2001; entwistle & tait, 1990). these are perhaps the most common way to describe and understand how different students learn and study in higher education and are the results of a long period of development and refinement in the literature. surface and deep learning approaches are mutually exclusive (biggs, 1987). adopting a surface approach means focusing on the essentials to complete a task or meet examination requirements, mostly aiming for avoiding failure at minimum effort. the learning is business, management and education, 2019, 17(2): 111–133 115 characterised by memorisation and reproduction of the material, and as a result, students focus on isolated facts and fail to understand how concepts, themes and similar are related to each other. deep learning approaches, on the other hand, are oriented towards a deeper understanding of the topic and analytical thinking. such an approach can be characterised as a personal commitment to learning and an interest in the subject (biggs, 1987). students following an in-depth learning approach develop critical thinking and seek to understand how concepts, themes etc. relate to each other. they also seek to grasp how they relate to other areas, experiences or concepts (ballantine et al., 2008; duff & mckinstry, 2007; tang, 1994). the link between motivation and learning approaches is generally conceptualized as follows: extrinsic motivation is associated with surface learning, while intrinsically motivated students tend to adopt an in-depth learning approach (lucas & meyer, 2005). the latter tend to be more dedicated and more genuinely engaged in the materials to be learned (vansteenkiste, simons, lens, sheldon, & deci, 2004). does this mean that extrinsic motivation weakens deep learning? earlier theories seem to support this notion. external rewards were understood as substitute targets that distract learners from deep learning (deci et al., 1999; luyten & lens, 1981; vansteenkiste et al., 2004; niemiec et al., 2006). extrinsic goals were seen as weakening the learning process, by undermining self-determination, interest and curiosity (vansteenkiste, lens, & deci, 2006). more recent evidence, however, suggests that extrinsic motivation, in combination with intrinsic motivation may promote deep learning (mo, 2011). also, extrinsic motivation may trigger intrinsic motivation and thereby strengthen deep learning (rassuli, 2012) and lead to better academic performance (tasgin & coskun, 2018). this is also supported by recent research in a business studies context, where accounting students with high intrinsic and extrinsic motivation tended to be more engaged in deep learning (everaert et al., 2017). in a study on first-year students in an undergraduate accounting course, intrinsically motivated students were found to have a slightly higher score for deep learning compared to surface learning (duff, 2004). taken together, this leads to the following hypotheses: h2a: intrinsic motivation among business students is positively related to deep learning approaches h2b: extrinsic motivation among business students is positively related to surface learning approaches h2c: the combination of intrinsic and extrinsic motivation among business students is positively related to deep learning approaches 1.3. motivation, learning approaches and academic performance studies on the link between learning approaches and learning outcomes are numerous (richardson, 2017; weber & patterson, 2000; watkins & hattie, 1985; trigwell & prosser, 1991; sadler-smith, 1996; duff, 2004; sun & richardson, 2016). in general, the relationship between deep learning approaches and outcomes (measured as examination scores or self -perceived learning) is positive (dong, bai, zhang, & zhang, 2019; smyth, mavor, & platow, 2017; chan, 2016; sakurai, parpala, pyhältö, & lindblom-ylänne, 2016). for students that adopt deep approaches to learning, analytical and conceptual thinking skills are more 116 e. bengtsson, b. teleman. motivation, learning strategies and performance among business... likely to develop, which in turn promote stronger academic performance (ginns, martin, & papworth, 2018; hall, & raven, 2004). in a business studies context, several studies (abhayawansa, bowden, & pillay, 2017; alanzi & alfraih, 2017; davidson, 2003) found that deep learning increases academic performance, whereas surface learning does the opposite. the latter is also confirmed by fryer and ginns (2018) and teixeira and gomes (2017). everaert et  al. (2017) report similar findings among accounting students, even when controlling for time spend and ability. however, sometimes, the relationship is perhaps less intense than expected or even negative (byrne et  al., 2002; wynn-williams et  al., 2016). this may relate to examination forms being ill-suited to assess those skills and other abilities associated with deep learning. prior research also demonstrates that the link between intrinsic motivation and academic performance in higher education is often positive (eppler & harju, 1997; turner, chandler, & heffer, 2009). taylor et  al. (2014) conduct a meta-analysis that concludes that intrinsic motivation is the only motivation type to be consistently positively associated with academic achievement, but there are also exceptions (such as herath, 2015). one reason why more intrinsically motivated student tend to perform better is that they are more likely to adopt deep learning approaches (lange & mavondo, 2004). for extrinsic motivation, the evidence is much more mixed. pintrich et  al. (1993) observed no correlation between this type of motivation and course grades. however, research on business students shows that general motivation affects performance among accounting students, both in terms of course grades (doran, bouillon, & smith, 1991) and in terms of applying knowledge on complex case material (davidson et al., 1996). for university college students (although not business students), yu et al. (2018) show that a self-determined (i.e. intrinsic) motivation to choose a major predicts positive outcomes in university college settings. taken together, the above findings point towards a positive link between learning approaches and performance on the one hand, and motivation and performance on the other. does this mean that more (intrinsically) motivated students tend to adopt more in-depth learning approaches and thereby achieve higher academic performance (c.f. biggs, 2001; everaert et al., 2017) study on accounting students found that both intrinsic motivation and extrinsic motivation have a significant positive influence on deep learning, which in turn is positively related to academic performance. conversely, surface learning was associated with lower academic performance. based on this literature, the following hypotheses are suggested: h3a: deep learning is positively related to academic performance among business students h3b: surface learning is negatively related to academic performance among business students h4a: intrinsic motivation and academic performance in higher education is positively related to business students h4b: the combination of intrinsic and extrinsic motivation is positively related to academic performance among business students business, management and education, 2019, 17(2): 111–133 117 1.4. gender the topic of differences in motivation between genders is extensively studied. severiens and ten dam’s (1994) meta-analysis of the topic suggests that males tend to report higher extrinsic motivation or similar conceptualisations than females. approaches to learning and gender differences have also received considerable attention, but findings are mixed (lange & mavondo, 2004; crawford & wang, 2015). failing to identify gender differences across learning approaches is common (richardson, 1993; wilson et al., 1996), but some studies suggest that males tend to adopt surface learning approach to higher extent than female students, whereas the latter are more likely to adopt deep learning approaches (sithole, 2018; gledhill & van der merwe, 1989; bigg, 1987). research on differences between male and female business students suggests a somewhat different pattern. while many studies also fail in establishing gender differences in learning approaches (richardson & king, 1991; byrne & flood, 2008), female students in accounting have been found to have significantly higher surface approach scores compared to male students (sadler-smith, 1996; duff, 2004). however, lange and mavondo (2004) found that male accounting students are more likely to adopt surface learning approaches. mixed results also characterise research on gender differences in terms of academic performance. some research fails to establish any cross-gender patterns (doran et  al., 1991; buckless, lipe, & ravenscroft, 1991; gist, goedde, & ward, 1996; duff, 2004). most studies seem to suggest better academic performance among female students (lipe, 1989; tyson & woodward, 1989), whereas the research that finds better performance among male students is more limited (m. y. koh & h. c. koh, 1999). research that examines gender differences across both learning approaches and academic performance is more limited. byrne et  al. (2002) is an exception and report a positive relationship between deep learning approaches and academic performance for female students. however, any similar relationship for the male student could not be established. based on these findings, the following hypotheses are developed: h5a: deep learning approaches are more common among female students. h5b: female students attain better academic results. 1.5. experience the general pattern regarding experience and learning approaches suggest that deep learning approaches increase with experience, whereas surface learning approaches diminish. this is due to cognitive sophistication or experience in handling complex situations (biggs, 1987). indeed, similar patterns are established in research focusing on learning approaches for business students. duff (1999, 2004), sadler-smith (1996) and abhayawansa, tempone, and pillay (2012) report that mature students are less likely than younger students to adopt surface learning approaches. other studies (asikainen & gijbels, 2017) also show that students tend to adopt more deep learning approaches over time. despite these findings, research suggests that younger business students tend to perform better (dockweiler & willis, 1984; m. y. koh & h.  c.  koh, 1999) or at least not worse (bartlett, peel, & pendlebury, 1993) than their 118 e. bengtsson, b. teleman. motivation, learning strategies and performance among business... fellow older students. other studies, however, report different results (postareff, mattsson, lindblom-ylänne, & hailikari, 2017; kyndt, donche, trigwell, & lindblom-ylänne, 2017). the impact of academic and work experience on motivation, learning approaches and academic performance is less studied. research on grade-school students suggests that intrinsic motivation drops as students move up the grades, whereas extrinsic motivation remains stable (lepper, corpus, & iyengar, 2005). we have not been able to identify any research on higher education business students. however, one could hypothesise that intrinsic motivation would increase with experience since experience tends to increase autonomous and self-regulatory behaviour (ryan & deci, 2000). conversely, adult life may require a focus on more external rewards, in order to sustain one’s standard of living and in some cases, support other family members. although prior findings are mixed, this paper suggests the following hypotheses: h6a: experience is positively related to deep learning approaches h6b: experience is not related to academic performance 2. data and methodology 2.1. data sample and collection the total number of students participating in the data collection amounted to 135. out of these, 56% were first-year students, whereas second-year students represented 44%. these figures represent participation rates of 52 and 53% of all business administration students enrolled. the participating students filled out a survey consisting of 56 questions relating to their background characteristics (age, experience and gender; 6 questions), their motivation for pursuing academic studies (28 questions) and their learning strategies (20 questions). also, data on academic performance was collected through the swedish centralised system of reporting and archiving academic results (“ladok”). in order to enable a cross-match between motivation, learning strategies and academic performance, the questionnaire was not anonymous. however, students were only asked to report their social security system number (and not their names) and were promised complete confidentiality. the questionnaire responses were gathered during classes on four occasions in the 2017 spring semester (25 february – 14 march). the age of the students ranged between 19–35, with 76% being 25 or younger at the time of the data gathering. in terms of experience, students had taken on average, 3.1 semesters in academic studies and had 2.8 years of work experience. 63.7% of the students were female and 36.3% male, implying that no student considered themselves outside the traditional gender classification. the distribution of the sample across the background variables is shown in table 1. 2.2.1. measuring motivation, learning strategies and academic performance 2.2.1 variables on motivation students’ motivation was measured using a swedish translation of the academic motivation scale (ams-c 28) college (cegep) version (vallerand et al., 1993). all items were rated on a seven-point likert scale, ranging from “i seldom or never do this” to “i almost always do business, management and education, 2019, 17(2): 111–133 119 this” for processing strategies and from “completely disagree” to “totally agree” for regulation strategies and motivational regulations. each question is referring to a particular type of extrinsic or intrinsic motivation, enabling a calculation of scores for all motivation types in self-determination theory (vallerand et al., 1993). annex a provides a key that shows to which motivation type the specific questions in the questionnaire are associated. based on the survey results, several motivational variables were constructed. the simplest ones included composite scores for intrinsic and extrinsic motivation by averaging the values of students’ responses on questions about particular motivational forms (c.f. vansteenkiste et al., 2004). a measure of total motivation was also included to capture students’ who may have the high or low overall motivation, which averages the scores for both motivational types. tests of internal consistencies displayed acceptable cronbach’s alpha values for the computed variables (ranging between 0.844–0.782), similar to previous studies such as vansteenkiste, zhou, lens, and soenens (2005) and kusurkar et al. (2013). 2.2.2. variables on learning approaches students’ learning strategies were measured using a swedish translation of the “revised two factor study process questionnaire” (r-spq-2f) (biggs, 1987; biggs et al., 2001). r-spq-2f provides scores relating to students’ deep and surface learning strategies. the questionnaire consists of 20 questions to which answers are provided on a five-point likert scale. students were asked to indicate how often they agree with a particular statement or perform a particular activity, with answers ranging from “i seldom or never do this” to “i almost always/ always do this”. we included both deep and surface study strategies in the analysis. omitting any of these variables would not allow for analysis of whether students who rely heavily on both approaches have different motivational drivers or obtain different academic performance. vansteenkiste et al. (2005) used a similar approach to create an optimal learning composite from the scores on the lassi (learning and study strategies inventory, vansteenkiste et al., 2005). the results from the survey showed acceptable cronbach’s alpha values for the computed variables (between 0.711–0.641) (c.f. biggs et al., 2001). 2.2.3. variables on academic performance performance measurement in prior research has often been operationalised in terms of grades, or grade point averages, final exam grades (elliot, mcgregor, & gable, 1999; diseth & kobbeltvedt, 2010; byrne et  al., 2002; sadler-smith, 1996; trigwell & prosser, 1991) or drop-out rates (bennet, 2003). in this paper, we measure ectss earned about the number of potential ectss for each student, based on the courses any particular student had registered for (p). in addition to total ectss, we also include a measure of the relative amount of high pass grades (hp), and for both these variables we distinguish between ectss relating to written exams (pw and hpw) and ectss relating to other forms of examinations (such as group assignments, essays etc.) (po and hpo). since the administrative system does not differentiate between those students passing at the first occasion for examination and those who retook an exam, this factor cannot be covered in the performance variables. 120 e. bengtsson, b. teleman. motivation, learning strategies and performance among business... 2.2.4. variables on student characteristics the survey also included questions on student characteristics: gender (male, female, other); academic experience measured as a number of semesters in higher education (acaexperience); work experience transformed into a number of full-time years, where all part-time, seasonal and temporary experiences were included (workexperience). short descriptions of all variables are provided in table 1. 2.3. data overview and empirical methods table 1 also reports sample sizes, means, and standard deviations of the significant dependent variables measured. it reveals – among other things – that the students who participated in the survey were more extrinsically than intrinsically motivated; that they were more prone table 1. descriptive statistics variables description mean median min max std. dev. skew. ex. kurt. deeplearning deep learning approach 28.72 29.00 10.00 45.00 6.52 –0.03 –0.27 surfacelearning surface learning approach 25.08 24.00 11.00 46.00 7.03 0.29 –0.40 intrinsicmotivation intrinsic motivation 4.026 4.19 1.50 6.47 1.01 –0.32 –0.40 extrinsicmotivation extrinsic motivation 5.29 5.41 3.08 7.00 0.83 –0.46 –0.03 totalmotivation (intrinsic motivation +extrinsic motivation)/2 4.66 4.76 2.37 6.44 0.80 –0.53 0.14 male gender 0.36 0.00 0.00 1.00 0.48 0.57 –1.68 acaexperience no of semesters in higher education 3.11 3.00 2.00 10.0 1.27 1.57 5.61 workexperience no of years of work experience 2.76 2.00 0.00 13.0 2.69 1.26 1.54 pass no. of ectss/ sum of ectss registered for 0.69 0.72 0.18 0.92 0.16 –0.96 0.47 highpass no. of ectss with high pass/sum of ectss registered for 0.29 0.29 0.00 0.71 0.20 0.36 –0.93 passwritten no. of ectss from written exams/sum of ectss registered for 0.55 0.55 0.08 0.86 0.16 –0.61 –0.03 highpasswritten no. of hig pass ectss from written exams/sum of ectss registered for 0.26 0.24 0.00 0.67 0.19 0.41 –0.89 passother no. of ectss excluding those from written exams/sum of ectss registered for 0.14 0.10 0.00 0.58 0.08 2.69 10.76 highpassother no. of high pass ectss excluding those from written exams/sum of ectss registered for 0.03 0.03 0.00 0.35 0.04 4.78 33.76 business, management and education, 2019, 17(2): 111–133 121 to use in-depth study strategies; that their average age was 23; that the students had around three years of work experience; and that 64% were females. the hypotheses were tested using standard statistical methods. the difference in proportion tests was used to determine whether there were any differences in motivational forms, and to see whether these differences also appeared between students based on the control variables. ols regressions were applied to investigate the relationships between independent and dependent variables. all variables were tested for multicollinearity, which led to the exclusion of the variable age due to too strong correlation with work experience. no regressions displayed heteroscedasticity. 3. results and analysis 3.1. differences in motivation beginning with within-group motivational characteristics, table  2 displays differences between intrinsic and extrinsic motivation. differences for the whole sample and subsamples based on dummy variables for gender. the results support the hypothesis that business students are more extrinsically than intrinsically motivated (h1) for both the whole sample and for the gender subsamples. external motivation exceeded intrinsic motivation at the 1% significance level. 3.2. motivation and learning several regressions were applied to test the hypotheses that link motivation with learning approaches (see table  3). regressions 1 and 4 test whether the variables relating to gender and experience in work or studies affect learning approaches. for deep study learning (deeplearning), gender was not significant. hypotheses h5a – that deep learning approaches are more common among female students is thus rejected. the other regressions (2–5) test, whether adding motivational variables enhances the explanatory power compared to the regressions based on gender and experience only. for regressions seeking to explain students’ degrees of deep learning approaches, regressions 2 and 3 led to considerable increases in explanatory power when adding the motivational variables intrinsicmotivation and totalmotivation to the model. whereas the baseline regression table 2. differences in intrinsic and extrinsic motivation variable mean ± sd δ t–value p–value n full sample intrinsic motivation 4.025 1.009 –1.268*** –11.257 0.000 135 extrinsic motivation 5.293 0.832 male intrinsic motivation 3.814 1.115 –1.250*** –6.257 0.000 49 extrinsic motivation 5.064 0.843 female intrinsic motivation 4.146 0.928 –1.277*** –9.658 0.000 86 extrinsic motivation 5.423 0.802 note: */**/*** denote significance at 10%/5%/1% levels 122 e. bengtsson, b. teleman. motivation, learning strategies and performance among business... (regression 1) had an adjusted r2 of 0.01, this figure reached 0.41 and 0.24 respectively. both these variables were found to be statistically significant at the 1%, with intrinsicmotivation displaying a much stronger impact on deeplearning. taken together, regression 2 lends considerable support to the hypothesis that intrinsic motivation among business students is positively related to deep learning approaches (h2b). similarly, regression 3 suggest that hypothesis 2c – that total motivation among business students is positively related to deep learning approaches – should be accepted. finally, experience in academic studies is negatively related to deep learning, after the effects on intrinsic motivation is considered. this lends some support for hypothesis h6a. table  3 also shows the results of the test of hypothesis h2a – that extrinsic motivation among business students is positively related to surface learning approaches. regression 4 shows that gender can explain the degree to which students engage in surface learning approaches, although the regression is insignificant at the overall level. however, this changes when adding the independent variable measuring extrinsic motivation (extrinsicmotivation). this makes the regression overall significant and increases its explanatory power. besides, it shows that extrinsic motivation is significantly positively related to surface learning approaches. table 3. motivation and learning dependent var. deeplearning deeplearning deeplearning surfacelearning surfacelearning regression # 1 2 3 4 5 n 135 135 135 135 135 intercept 29.616*** 13.858*** 10.805*** 25.765*** 17.165*** 0.000 0.000 0.001 0.000 0.000 intrinsicmotivation 4.217*** 0.000 totalmotivation 2.053*** 0.000 extrinsicmotivation 1.585** 0.033 male –1.611 –0.092 –0.204 2.716** 3.231** 0.174 0.920 0.846 0.033 0.012 workexperience 0.237 0.139 0.283 –0.195 –0.122 0.266 0.396 0.127 0.391 0.589 acaexperience –0.310 –0.793** –0.618 –0.364 –0.420 0.484 0.023 0.114 0.443 0.370 overall f–test 1.047 24.275*** 11.663*** 1.869 2.594** overall p–value 0.374 0.000 0.000 0.138 0.039 r2 0.023 0.428 0.264 0.041 0.074 adj. r2 0.001 0.410 0.241 0.019 0.045 note: */**/*** denote significance at 10%/5%/1% levels business, management and education, 2019, 17(2): 111–133 123 3.3. learning and academic performance table  4 reveals the empirical results from the regressions of motivation and learning approaches on academic performance. initially, in table  4, only gender and experience are included in the regressions (6–11) on the six different variables measuring academic performance. a few observations are noteworthy: all regressions are significant on the overall level; gender and experience have the highest explanatory power on the variables pass and passother (.14 and .37 respectively); academic experience is positively related to all measures of academic performance, whereas work experience is not; and gender matters for all academic performance variables apart from passother and highpassother. tests were also performed where dummies for academic programs were included, but not succeeding in establishing statistically significant results. taken together, this lends considerable support to hypotheses h5b and h6b – that female students attain better academic results, and that experience is not related to academic performance. in regressions 12–17 reported in table 4, deep learning was added as independent variables to investigate whether deep learning is positively related to academic performance (h3a1–2). deep learning (regressions 13 and 15) is revealed to have a significant positive impact on academic performance when measured as the percentage of high passes in general and on written exams (highpass and highpasswritten), but not for other academic performance variables. adding these variables also increases explanatory power, even after adjusting for overfitting (reflected in the adjusted r2). the variables on student characteristics remain the same, with the male still being significantly negative for pass, highpass, passwritten, highpasswritten and experience of academic studies for all performance variables. table 4 also displays the results of the relationship between surface learning and academic performance. while the signs and significances for the gender and experience variables remain unchanged, surface learning fails to achieve statistical significance for all academic performance variables (regressions 18–23). this result offers little support for the hypothesis that surface learning is negatively related to academic performance (h3b). turning to the relationship between motivation and academic performance, table 5 shows regressions of intrinsic motivation on the six academic performance variables. the results indicate that the relationship is not particularly strong, but the relationship is statistically negative for the performance variable pass. as for the regressions on learning approaches, gender and academic experience are significant. these results strongly reject the hypothesis that intrinsic motivation and academic performance in higher education is positively related (h4a1–2). similar results were found when analysing the relationship between the overall levels of motivation with academic performance. in regressions where the independent variable is intrinsic motivation, the results are more striking. in particular, regressions 30 and 32 reveal that high motivation is significantly and negatively related to both pass and passwritten. these results imply a rejection of the hypothesis that high intrinsic and extrinsic motivation is positively related to academic performance (h4b). 124 e. bengtsson, b. teleman. motivation, learning strategies and performance among business... table 4. academic performance and learning approaches dependent var. pass highpass passwritten highpasswritten passother highpassother n 135 135 135 135 135 135 regression # 6 7 8 9 10 11 intercept 0.509*** 0.222*** 0.487*** 0.223*** 0.021 –0.001 0.000 0.000 0.000 0.000 0.152 0.910 male –0.080*** –0.113*** –0.084*** –0.112*** 0.004 –0.001 0.001 0.001 0.002 0.001 0.703 0.915 workexperience –0.002 –0.001 –0.005 –0.001 0.003 0.000 0.684 0.886 0.311 0.836 0.113 0.764 acaexperience 0.070*** 0.041*** 0.034*** 0.027** 0.034*** 0.009*** 0.000 0.006 0.001 0.033 0.000 0.001 overall f–test 22.668*** 6.199*** 7.490*** 5.238*** 25.226*** 4.378** overall p–value 0.000 0.001 0.000 0.002 0.000 0.006 r2 0.342 0.124 0.146 0.107 0.366 0.091 adj. r2 0.327 0.104 0.127 0.087 0.352 0.070 regression # 12 13 14 15 16 17 intercept 0.491*** 0.066 0.508*** 0.085 –0.017 –0.0192 0.0000 0.450 0.0000 0.322 0.533 0.2765 deeplearning 0.001 0.005** –0.001 0.005* 0.001 0.0006 0.7337 0.038 0.7298 0.063 0.109 0.2283 male –0.079*** –0.104*** –0.085*** –0.105*** 0.006 0.0063 0.0015 0.0027 0.0021 0.002 0.568 0.9708 workexperience –0.002 –0.0021 –0.005 –0.002 0.003 0.0028 0.6625 0.7285 0.331 0.698 0.151 0.8556 acaexperience 0.069*** 0.038*** 0.034*** 0.029** 0.034*** 0.0345*** 0.0000 0.0034 0.0009 0.0238 0.000 0.0004 overall f–test 16.916*** 5.8579 5.6096 4.8815 19.800*** 3.6618*** overall p–value 0.0000 0.0002 0.0003 0.0011 0.0000 0.0073 r2 0.3423 0.1527 0.1472 0.1306 0.3786 0.1013 adj. r2 0.3221 0.1266 0.1210 0.1038 0.3595 0.0736 regression # 18 19 20 21 22 23 intercept 0.523*** 0.289*** 0.479*** 0.308*** 0.044* 0.007 0.000 0.000 0.000 0.000 0.072 0.647 surfacelearning –0.001 –0.003 0.000 –0.002 –0.001 0.000 0.734 0.271 0.859 0.417 0.237 0.512 male –0.078*** –0.106*** –0.085*** –0.098*** 0.007 0.007 0.002 0.003 0.002 0.005 0.552 0.987 workexperience –0.002 –0.001 –0.005 0.002 0.003 0.003 0.667 0.821 0.321 0.757 0.135 0.803 acaexperience 0.068*** 0.035*** 0.035*** 0.022* 0.034*** 0.034*** 0.000 0.007 0.001 0.086 0.000 0.001 overall f–test 16.915*** 4.962*** 5.584*** 4.458*** 19.333*** 3.378** overall p–value 0.000 0.001 0.000 0.001 0.000 0.012 r2 0.342 0.132 0.147 0.147 0.373 0.094 adj. r2 0.322 0.106 0.120 0.114 0.354 0.066 note: */**/*** denote significance at 10%/5%/1% levels business, management and education, 2019, 17(2): 111–133 125 table 5. academic performance and motivation dependent var. pass highpass passwritten highpasswritten passother highpassother regression # 24 25 26 27 28 29 n 135 135 135 135 135 135 intercept 0.584*** 0.257*** 0.566*** 0.263*** 0.018 –0.006 0.000 0.001 0.000 0.001 0.475 0.707 intrinsicmotivation –0.020 –0.009 –0.021 –0.011 0.001 0.001 0.085 0.572 0.107 0.513 0.868 0.701 male –0.087*** –0.116*** –0.092*** –0.116*** 0.004 0.004 0.000 0.001 0.001 0.001 0.687 0.969 workexperience 0.071*** 0.038*** 0.037*** 0.028** 0.034*** 0.034*** 0.000 0.005 0.000 0.028 0.000 0.001 acaexperience –0.001 –0.001 –0.004 –0.001 0.003 0.003 0.763 0.914 0.360 0.868 0.117 0.784 overall f–test 18.017*** 4.705*** 6.346*** 4.019*** 18.786*** 3.300** overall p–value 0.000 0.001 0.000 0.004 0.000 0.013 r2 0.357 0.126 0.163 0.110 0.366 0.092 adj. r2 0.337 0.100 0.138 0.083 0.347 0.064 regression # 30 31 32 33 34 35 intercept 0.659*** 0.314*** 0.652*** 0.329 0.006 –0.015 0.000 0.004 0.000 0.002 0.856 0.480 totalmotivation –0.033** –0.020 –0.036** –0.023 0.003 0.003 0.026 0.338 0.028 0.260 0.630 0.466 male –0.091*** –0.120*** –0.097*** –0.120*** 0.005*** 0.005*** 0.000 0.001 0.001 0.001 0.638 0.964 workexperience –0.002 –0.001 –0.005 –0.002 0.003 0.003 0.617 0.857 0.266 0.802 0.110 0.743 acaexperience 0.071*** 0.038*** 0.037*** 0.029** 0.034*** 0.034*** 0.000 0.004 0.000 0.024 0.000 0.001 overall f–test 18.803*** 4.878*** 7.018*** 4.257*** 18.867*** 3.406** overall p–value 0.000 0.001 0.000 0.003 0.000 0.011 r2 0.367 0.130 0.178 0.116 0.367 0.095 adj. r2 0.347 0.104 0.152 0.089 0.348 0.067 note: */**/*** denote significance at 10%/5%/1% levels 3.4. discussion in terms of the type of motivation that dominates business students, our results support the hypothesis (h1), as suggested by mcevoy (2011), that business students are more extrinsically than intrinsically motivated. the results reveal that extrinsic motivation is significantly higher at the 1%-level for the full sample and all subsamples based on the gender variable. thereby the findings are similar to those of demarie and aloise-young (2003), who discovered that business students are to a higher degree motivated by career prospects and high salaries rather than an interest in the area of studies. 126 e. bengtsson, b. teleman. motivation, learning strategies and performance among business... the results on the link between motivation and learning approach support earlier studies by lucas and meyer (2005) and vansteenkiste et al. (2004), lending considerable support to the hypothesis that intrinsic motivation among business students is positively related to deep learning approaches (h2b). similarly, extrinsic motivation yields considerable explanatory power and is significantly associated with surface learning approaches (confirming h2a). combined intrinsic and extrinsic motivation among business students was found to be positively related to deep learning approaches (suggesting acceptance of h2c), but the effect from combined intrinsic and extrinsic motivation was lower than for intrinsic motivation alone. thereby, contrary to earlier studies (mo, 2011; rassuli, 2012) including research in business studies contexts (everaert et al., 2017), no evidence is found that suggests that combinations of motivational forms support learning generally. our findings thereby support the suggestion that high extrinsic motivation does not support intrinsic motivation, but slightly distracts students from deep learning. the results show that deep learning approaches lead to better academic performance when measured as a percentage of high passes in general and on written exams, but not for other academic performance variables. a potential explanation could be that through other forms than written exams, these other performance variables are examination forms such as group assignments, and similar. this may potentially dilute the effects of in-depth learning approaches. surprisingly, no relationship between surface learning approaches and academic performance could be established. taken together, these results offer little support for the hypothesis h3b – that that surface learning is negatively related to academic performance, but at least partially supports hypothesis h3a – that deep learning is positively related to academic performance among business students, as documented by davidson (2003). turning to the direct link between motivation and academic performance, the negative albeit mainly insignificant influence on academic performance from intrinsic motivation implies a rejection of hypothesis h4a – that intrinsic motivation and academic performance in higher education are positively related. our findings thereby differ from earlier research, such turner et al. (2009). also, our results reveal that high general motivation (extrinsic and intrinsic combined) is significantly and negatively related to both pass and highpasswritten, thereby leading to a rejection of the hypothesis that a combined high intrinsic and extrinsic motivation is positively related to academic performance (h4b). something that needs to be acknowledged, however, is the sensitivity related to questions on motivation. it might be that students answer more in line with how they would like to identify themselves and their goals, rather than what motivates them. this could potentially mean that students downplay their level of extrinsic motivation. our findings on the relationship between learning approaches and academic performance paint a somewhat mixed picture, which itself is not uncommon (byrne et  al., 2002). our results thereby share characteristics of the large amount of research that fails to establish clear links between intrinsic motivation, learning approaches and academic performance (c.f. biggs et al., 2001). one explanation could be that the operationalisation of the performance variables is too crude to capture any distinct effects from different learning approaches. another potential and more dismal, the explanation could be that students are assessed and graded in ways that favour surface learning approaches. business, management and education, 2019, 17(2): 111–133 127 regarding student characteristics, several conclusions can also be drawn from the variables included in our paper. beginning with experience, the positive relation between academic experience and all measures of academic performance suggest that students become more skilled in the task of accumulating academic credits. it also suggests that there is no pattern of weak students continuing falling behind, which also could be attributable to weak students dropping out. in combination with the negative relation between academic experience and deep learning approaches, our results could suggest that students learn over time that more surface-type learning approaches are better suited to pass exams, courses or course modules. the lack of relationship between work experience and performance counters some prior research that documents that younger students are performing better than their older costudents (dockweiler & willis, 1984; m. y. koh & h. c. koh, 1999). our findings thus counter both biggs’s (1987) suggestion that work experience leads to cognitive developments and skills in handling complex tasks, as well as similar suggestions from prior research in business studies context (duff, 1999, 2004; sadler-smith, 1996). potential explanations of our findings could be that work experiences before academic studies tend to be menial jobs that add a few skills that are useful in academic studies. alternatively, students with work experience often are older and may have additional obligations outside academic studies (such as children), which may restrict time available for deep learning approaches. the variable on gender paints a coherent picture. female students are more motivated across almost all motivational variables. these results contradict those of severiens and ten dam (1994), that suggest that male students have higher extrinsic motivation than their female co-students. also, female students were found to adopt deep learning approaches to a greater extent and surface approaches to a lower extent. besides, male students performed statistically significantly worse for most academic performance variables apart from passother and highpassother. the latter could relate to courses or course modules without written exams, often including group assignments, which may dilute the gender effect. our results thus lend support to both general findings that female students tend to perform better in general (gledhill & van der merwe, 1989), and in business studies contexts (lange & mavondo, 2004). however, these results contrast findings on accounting students, where males have been found to attain better academic results (hasall & joyce, 1997; sadler-smith, 1996). conclusions the findings presented in this paper are confirming many notions found in prior research, but also offer new insights. one is formal evidence that business students are more extrinsically than intrinsically motivated. another is that deep learning approaches lead to higher grades for particular examination forms but not for others. on a meta-level, this corresponds to findings in prior research, which have yielded mixed results. a dismal explanation could be that deep learning approaches only are rewarded in particular examination forms (such as written exams but not on other examination forms). a more positive perspective would suggest that other examination forms than written exams often are group assignments, which may dilute the effects of deep learning approaches. 128 e. bengtsson, b. teleman. motivation, learning strategies and performance among business... this could also indicate that the relationships between motivation, learning and performance are influenced by other factors, implying that context, student characteristics or personality matter. in this paper, a few such factors are accounted for by including variables on student characteristics. variables relating to gender and experience provide essential information on the relationship between motivation, learning and academic performance. the findings that female students are typically more intrinsically motivated, engage more in deep learning approaches and perform better than their male counterparts are somewhat contradictory to much research in business contexts. experience is also taken into account, and the findings indicate that academic experience increases academic performance, but no effects can be related to work experience. this suggests that generic skills learnt outside academia are less useful to attain academic credits or high grades, but that students indeed learn to master those “specialised” skills of academic studying through attending higher education. another explanation could be that high age (being strongly correlated with work experience) often implies other obligations, such as having children or older parents that require support, allowing these students less time to spend but that they might still study more efficiently and/or energetically. the findings also yield a number of practical implications. one is that practitioners in higher education have good reasons to stimulate motivation generally, and intrinsic motivation in particular. however, this must be accompanied by examination forms that promote deep learning, such as choosing written exams over multiple-choice exams and consider ways to assess group assignments that do all students justice. this paper also points to fruitful areas of future research. the results indicate that the framing of academic performance, and how this is operationalised, could shed additional light. one option, albeit time-consuming and technically challenging in most administrative systems in academia, would be to operationalise performance as actual scores on exams or similar. other areas for future research include a more granular approach to the dimensions covered by this paper’s variables on student characteristics. for instance, work experience could be differentiated by types of jobs (whether these are menial or more advanced, or related to the particular topic studied) and the length of job spells (to differentiate between more permanent positions and seasonal jobs). finally, since this study only covers one cohort in one university college, there is a risk that the population might not be as representative as suggested. however, since prior research on this topic mainly focuses on university students and in the us, this setting offers a complement and might help to paint a broader picture. to include students in geographically diverse contexts and from different years would strengthen the analysis. also, conducting cross-sectional studies across topics or disciplines could reveal interesting patterns in how the link between motivation, learning and performance varies and is affected by students’ experiences, nature of academic institution (college or university) or program (more academic or more vocational). references abhayawansa, s., bowden, m., & pillay, s. 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accepted 21 april 2022 abstract. purpose – the main aim of this investigation is to introduce a framework for combining information quality concerning with contextual and representational relevance, and intrinsic accuracy in supply chain management practices to develop supply chain performance in saudi companies. research methodology – inferential technique used to examine the interplay between constructs of the study. sem was run in order to assess and estimate the causal relationship among variables. findings  – the significant effect of information quality on scp as well as the significant effect of scmps on scp. furthermore, it was found that the information quality could significantly moderate the interplay between scp and scmps. research limitations – this study conducted on 150 saudi manufacturing companies during the year 2021, in future, the findings can be adapted for other sectors of the saudi economy. practical implications – this study has implications for the industrial managers and key personnel. the study provides strong evidence revealing that higher level of integration between scmps and quality of information can lead to enhanced supply chain performance.so the proposed model can be used in the practical activities of service sectors in the future; it is possible to change and/ or add key variables and further expand the field of use of the model. originality/value – the study contributed in determining main practices of supply chan management in industrial sector of saudi arabia considering their influence on supply chain performance, as well as this study contributed in showing the engagement of information quality in supply chain management. keywords: supply chain management practices, supply chain management, information quality, supply chain performance, saudi manufacturing companies. jel classification: l15, l60, m10, m11. introduction todays, the intense competition in the business environment demands an increasing concentration on transmitting values to the clients. the main purpose in most businesses is to http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2022.16597 https://orcid.org/0000-0002-3624-4782 business, management and economics engineering, 2022, 20(1): 152–171 153 present kinds of items and services that are considered more precious than those of its competitors. besides client value, the marketplace, where businesses are running today, is widely regarded as being turbulent and complex (christopher, 2000; goldman et al., 1995). all types of organizations consider supply chain management (scm) as a critical strategy, which is mainly employed to increase the competitive position (li et  al., 2006) as scm pays more attention to the flows of information, material and cash between customers and suppliers or vice-versa (wibowo & sholeh, 2015). indeed, the firms have recently encountered various types of problems and threats in the turbulent business and unexpected requirements. further, the organizations follow an appropriate supply chain strategy (scs) to use available chances in order to resolve uncertainty. additionally, the flow of information, materials, knowledge, and cash demands an efficient information system which enables information quality sharing among supply chain partners (i.e., suppliers, distributors, manufacturers, and customers) to reduce the uncertainty and enhance supply chain performance (scp). hence, the supply chain needs to design a strategy which conform to the goods, markets, and target clients (hallavo, 2015). cigolini et al. (2004) and li et al. (2006) have noted that the practices of scm have not received enough attention from researchers in business. this lack of studies can be ascribed to scm’s interdisciplinary structure as well as its developmental features, which has led to a state of a theoretical distortion from the perspectives of its perceptions. research on scm practices that has been conducted in certain countries and industries needs to be interpreted within the particular contexts of these countries along with their distinct characteristics, which can help narrow the gap between scm application and its theory. the present study aims at empirically examining a framework in order to explore the moderating function of information quality in the interaction between the performance of supply chains and scm practices of manufacturing companies in saudi arabia. accordingly, scm practices are referred to as a range of activities that unify all different groups involved in sc including suppliers, distributors, goods producers, and clients in order to boost sc activities and achievements (barros, 2006; koh et  al., 2007). the scm practices examined in this study were designed, reviewed, and validated in the past studies done by green jr et al., (2008), cook et al. (2011), tan (2002), and li et al. (2006). these actions consist of six components: level of information sharing, strategic supplier partnership, customer, internal lean practice, relationship management, and postponement. they are defined as strategic practices, covering both past and future aspects of the sc. as the sc and its function are appealing to the scholars and researchers, this investigation seems to be contributing to the industries and literature. this will be done by examining the scm practices that result in enhancing sc performance which is related to supply chain in terms of its cost, quality, and lead time as well as the moderating information quality which itself consists of accuracy, timeliness, validity of exchanged information, and adequacy (refer to li et  al., 2006). after collecting data through the survey, the variables are operationally assessed. structural equation modelling, widely known as sem, and inferential statistics were used for assessment and validation of the hypothesized interactions. this study intends to provide scholars, more particularly, producing companies with insights that are connected with the perception of scm practices and with scope connected to their scm practices which can prominently 154 j. bani hani. the influence of supply chain management practices on supply chain performance: ... affect not only their sc but also the entire company. the present investigation therefore can effectively guide saudi manufacturing organizations in terms of scm practices. it is also a validated tool to test and conduct scm practices. the study further develops the theory in academia by extending scm knowledge among developing nations (cigolini et  al., 2004; li et al., 2006; min & mentzer, 2004). consequently, the findings of the current investigation can enable organizations to address the supply chain performance problems through several practical managerial practices. the industrial sector in the kingdom of saudi arabia has witnessed a steady development during the past years. a report issued by the “national center for industrial and mining information” indicated that the total number of existing factories in the kingdom of saudi arabia until the end of october 2021, reached about 10,216 factories, and the reason for this is to the interest and support that this sector finds from the saudi government through the establishment of industrial cities in various regions (modon has established 35 industrial cities, including five “industrial oases” suitable for women’s work, called “modon oases”). recently, the saudi government launched the national industries development and logistics services program, which is one of the most important programs of saudi vision 2030, which aims to place saudi arabia in the ranks of developed and leading countries. the saudi industrial sector has a sustainable impact, especially since there is a direct relationship between the future of industries and the rate of economic growth, which calls for the adoption of policies that support the level of productivity and competitiveness the sector in particular the manufacturing sector, which is classified as the main engine of growth. the industrial sector in the kingdom of saudi arabia seeks in all its tools to sort out an environment capable of to achieve the requirements of competitiveness in the current and future stage. accordingly, the present study was carried out to address three research questions as follows: (1) what kinds of scm practices could be used in saudi manufacturing organizations? (2) is there any relationship between the current scm practices applied by manufacturing companies in saudi arabia and their manufacturing performance? and (3) does information quality have moderating role in the interplay between scm performance and scm practices?.. 1. literature review 1.1. supply chain practices the term scm is mostly used to referred to as synchronizing a firm’s procedures with those of its clients and distributors so that the flow of information, servicing offers, and materials could be consistent with customers’ requests (krajewski et al., 2019). hence, the main purpose of scm is to handle the rate and speed of information and materials between a sequence of operations that form the “chains” or strands of a supply network (slack & brandon-jones, 2019). then, supply chain management will have an important role in the structure of supply chain in order to increase its competitive gain and benefits that are offered to the target client (lysons & farrington, 2020). academic scholars and managers of business companies have paid increasing attention to the practices of supply chain management (bani hani, 2021; tan et  al., 2009; li et  al., 2005; croom et  al., 2000). numerous manufacturing firms have found supply chain manbusiness, management and economics engineering, 2022, 20(1): 152–171 155 agement practices to play acritical role in generating and keeping a competitive profit at the market (li et  al., 2005). in the practices of scm, all levels of the sc including distributors, manufacturers, suppliers, and customers are integrated in order to enhance supply chain performance (barros, 2006; koh et  al., 2007). researchers have given attention to supply chain management performances from different aspects. for instance, alvarado and kotzab, (2001) explored core competences, inter-organizational system, and removal of excess in inventory through postponement. further, tan et al. (2009) noted that the main practices of sc include exchange of information, integration of supply chain, management of customer services, jit capabilities, and geographic proximity. using a system approach, min and mentzer (2004) and sundram et  al. (2016) classified the supply chain management practices: information sharing, agreed-upon prospects and goals, collaboration, dangers and reward sharing, long-standing association, process integration, and planned leadership in sc. lee et al. (2007) investigated five performances at supply chain level including strategic supplier partnerships, outsourcing, information sharing, customer relationship, and product modularity. zhou and benton jr (2007), in a different study, examined the integration of delivery practice, sc planning, is, just-in-time (jit) production in supply chain management. thatte et  al. (2013) defined the practices of supply chain management in the light of customer relationship, strategic supplier partnership, and information sharing. chan and lam (2011) assessed the performances of supply chain practices with respect to customer relationships, strategic supplier partnerships, information technology, information sharing, internal operations, training, innovation performance, and operational performance. sukati et  al. (2012) hold that supply chain practices are connected with customer-firm relationships, internal firm relationships, and supplier-firm relationships. in examining scp, al-shboul et al. (2017) applied seven dimensions including information sharing, strategic distributor association, client connection management, information quality, postponement, management of total quality, and internal lean performances. the present investigation employs the following parameters to examine scmp in consumer goods industry in saudi arabia: customer relationship (crm), strategic supplier partnership (ssp), information sharing (is), internal lean practices (ilp), and postponement (p). 1.2. supply chain performance in the past decade, many industries have used scp as a vital source of durable competitive leverage (wh ip et al., 2011). it is argued that companies have to improve their supply chain performance progressively in order to gain the prosperity and supremacy of the supply chain in the global business (acar & uzunlar, 2014). although some studies have brought supply chain practices and theories to the center of attention, there has not been enough attention to the supply chain performance. as, today firms face various challenges due to intense competition not only between supply chains but also between organizations themselves (abdulameer & yaacob, 2020), promoting the supply chain performance is not restricted to the organization exclusively. yet, any factor of downstream or upstream could have a prominent role in enhancing the supply chain performance (cai et al., 2009). furthermore, upgrading the supply chain performance does not make a difference for companies that provide services 156 j. bani hani. the influence of supply chain management practices on supply chain performance: ... or produce goods (basu et al., 2017). therefore, it seems necessary to draw more importance to the supply chain performance in companies. meanwhile, researchers have pointed out that no single measure has been offered to represent the supply chain performance (saleheen et  al., 2018; anand & grover, 2015). banomyong and supatn (2011) refer to supply chain performance as a system that accounts for several performance measures connected to the sc members, as well as the coordination and integration of their performances. several scholars have indicated that development and selection of the appropriate criteria to assess the supply chain performance have always been a challenging task (see anand & grover, 2015). this challenge is usually attributed to the hardship of coordinating many organizations that form the supply chain, as well as performances in the firms (subburaj et al., 2015; dweekat et al., 2017; alam et al., 2014). ahi and searcy (2015) also highlighted the difficult and challenging aspect of assessing supply chain performance. additionally, harland et  al. (1999) puts that the majority of the measurements of conventional actions are directed towards economic landscape. previous research has offered a wide range of criteria that were used to measure supply chain performance. some scholars have noted that supply chain performance could be assessed with respect to cost, service level, inventory level, throughput efficiency, and supplier performance (stevens, 1990). pittiglio, rabin, todd, & mcgrath (1994) approached the scp measurement from four different dimensions: cost, customer satisfaction/quality, assets, and time. spekman et  al. (1998) considered cost reduction and client satisfaction in order to measure the scp. beamon (1999) offered qualitative criteria to gauge scps including the integration of both information and material, flexibility, performances of suppliers, client satisfaction, and effective management of possible risks. the present study puts more emphasis on performance measures that could be used in the practical issues encountered by the manufacturing organizations, namely the issues indicated by shepherd and günter (2006) such as quality (or reliability), time, cost, innovativeness and flexibility. 1.3. information quality information quality is the main part of information management as it is processed and developed in a company. the high quality of information can help improve the making process and it brings the organization a competitive advantage (azemi et  al., 2017). information could have high quality provided that it fits the purpose, which can be evaluated by the users of the information only (bani hani et  al., 2009; embury et  al., 2009). information quality (iq) is a multidimensional notion, in which many researchers are interested in order to explore and categorize its aspects. information quality refers to what extent measurement methods employed to prepare information could reflect what a decision maker intends to find out (information relevance) and whether the given methods have been competently used and results have been truthfully depicted (information credibility or reliability) (kinney, 2000). operationally, information quality is defined as information which is useful, good, accurate, and current (rieh, 2002). li and lin (2006) argued that ensuring the information quality could play a significant role in accomplishing an effective supply chain management. the main aspects of information quality include both the subjective and objective parameters of, reliability, bias awareness, accuracy, comprehensiveness, validity, credibility, currency, trust, business, management and economics engineering, 2022, 20(1): 152–171 157 expertise, transparency, and thoroughness (laudon & laudon, 2021; bani hani & awad, 2017; diakopoulos & essa, 2008; li et al., 2006). in this study, the quality of information is measured with respect to four semantic categories as identified by lee and levy (2014) and huang et  al. (1999): (1) representational that is interpretable, understandable, consistence, and conciseness. (2) intrinsic accuracy that contain; credibility, objectivity, and reputability. (3) accessibility that related to accessing information securely and easily. (4) contextual relevance factors that include timeliness, valuableness, information richness, and completeness. 1.4. the influence of scmp on scp it has been proved that the scm is a critical factor influencing the performance of supply chain. however, empirical studies have shown mixed results. for example, some studies have reported that supply chain management performances are to gain and promote practices through supply chain, which demands integrating both internally with the organization and externally with customers and suppliers (kannan & tan, 2010; kim, 2006). kumar and kushwaha (2018) investigated the relationship between operational function of the fair price shops and various scmps (information technology or it, crm, information quality) in india. they found three aspects of practices in scm with a positive and significant connection with the practical performance. saragih et  al. (2020) demonstrated that sustainable operational performance can be gained via supply chain practices. despite the influence of scmps on sc performance, supply chain management performances could greatly impact the loyalty and satisfaction of customers, contract design in sc, and pricing rate of supply chain. for example, prathiba (2020) examined whether customer affiliation, supplier affiliation, and knowledge sharing have any effect on clients’ loyalty and satisfaction. the study found the significant influence of scmps on clients’ loyalty and satisfaction. thus, although it is agreed that supply chain management practices could influence an organization, it seems critical to precisely assess such impact on supply chain performance in an organization (green et  al., 2006). further, alahmad (2021) probed the interplay between scp and scmps in various industries in saudi arabia. accordingly, following hypothesis is presented: h1: scmps have statistically significant influences scp. 1.5. information quality as a moderating construct in modern business, in order to be successful in competitive environment, companies need to concentrate on information which strengthen supply chain performance. literature abounds with research on the effect of information quality (iq) on scp, demonstrating the significant role of iq and information sharing play in improving the scps. a study by afshan et  al. (2018) in india showed that information quality is directly related to supply chain collaboration. this, consequently, results in an improvement in supply chain performance. al-shboul et  al. (2017) also revealed a significant interaction between supply chain performances and information quality within manufacturing organizations. studying retail firms, gandhi et al. (2017) reported significant impact of information quality and sharing on supply chain performances. kim and chai (2017) conducted a study among the manufacturing companies in south korea and revealed that information quality and sharing is significantly connected to 158 j. bani hani. the influence of supply chain management practices on supply chain performance: ... scps. sahin and topal (2019) reported that businesses activities could be affected by information quality and sharing. thus, as previous studies have indicated, there is a significantly positive connection between scps and iq. the gap in the past studies proposed that the theoretical framework explaining the way information quality is integrated into supply chain management practices in order to assess their impacts on scp. it seems that the present study is pioneer in developing a research framework as illustrated in figure 1. supply chain management practices supply chain performance information quality figure 1. the theoretical framework illustrated the integrating of iq into scmps to improve scp according to what mentioned above, the following hypotheses are offered: h2: iq has a statistically significant influence on scp. h3: iq plays a significant moderating role between scmps and scp. 2. methodology 2.1. participants and collection of data all the general and functional executives in saudi arabia manufacturing companies form the population of this study. they have been listed in jeddah industrial cities becuase they are included in the saudi authority for industrial cities and technology zones (moden). as rahi et al. (2018) suggested, g-power software was used in the prior-power analysis in order to measure the sample size. rahi et al. (2018) argued that factor analysis should be used in measuring the size of the sample with prior-power analysis. according to the results of the prior-power analysis, at least 245 responses are needed in order to project the productivity of an organization. previous research demonstrated that a rise in the response rate could help decrease the magnitude of error in the sampling process (e.g., rahi et  al., 2018), and rahi et  al. (2020) suggested, according to rahi and abd. ghani (2019), a convenience sampling method is suitable when the list of the respondents is not at hand. the convenience sampling method was adequate to help in engage with actual respondents (rahi, 2021), and as the purpose of the study was to achieve high veracity from data. nearly 750 questionnaires were distributed, 150 manufacturing firms volunteered to take part in the research. each company received five questionnaires, which were filled by general manager (gm), hr manager, finance manager, operations manager, and marketing manager. 500 usable questionnaires were completed and returned with 67% response rate: hr manager (n = 66), gm (n = 113), finance manager (57), operations manager (n  = 140), and marketing manager (n  = 124). business, management and economics engineering, 2022, 20(1): 152–171 159 the responding companies were working in a wide range of areas such as cartoon and paper(18 company), beverages and food (24 company), medical and pharmaceutical products (7 companies), electronic goods (30 company), textiles (26 company), leathers (21 company), ceramic and glass (12 company), and clothing products (12 company). in total, 500 responses were inferentially analyzed. 2.2. the development of the instrument the study reported in this paper was carried out to examine the moderating role information quality (iq) plays in the interaction between scp and scmps, considering the executives’ attitudes working in saudi manufacturing companies based in jeddah industrial areas as they are listed in the saudi authority for industrial cities and technology zones (moden). to do so, we reviewed a wide range of relevant studies on the central measures of scp, scmps, and iq. a questionnaire was designed according to the key variables used in the past studies. the surveys were sent to jeddah factories with a notification that they need to be filled out by the executives at different levels. the questionnaire contains four sections. the first part pertains to the respondents’ demographic profiles; the second section was meant to examine scmps; and the third section was to measure scp. the final section included items for evaluating iq. the questionnaire was developed in such a way that the major key measures could be addressed in the light of previous literature. the main reason for choosing industrial sector is that this sector is more likely to satisfy the major constructs of this investigation. the likert scales with a range of “1” strongly disagree to “7” strongly agree conforms to rahi et al. (2018), was used in the questionnaire. 2.3. evaluating common method variance data were gathered using a single source, which is based on positivist paradigm. therefore, measurement of the bias in common method variance seems necessary. harman’s single factor analysis was employed for the sake of approving that the investigation is exempted from such variance. according to single factor analysis developed by harman, variance should go beyond 50%, which indicates that the data is bias free (podsakoff et  al., 2003). the present findings demonstrate that the variance was 19%, thus confirming that this study is exclusive of any variance bias and, therefore, known as a valid structural model. 3. analysis of data and results following the quantitative method, inferential technique was employed to examine the interplay between constructs of the study. concerning inferential technique, sem was run in order to assess and estimate the causal relationship among variables (rahi et  al., 2020; bani hani, 2021). sem involves estimating both structural model and measurement model (anderson & gerbing, 1988; rahi et  al., 2020) sem model show the causal interactions between two or more constructs, while the measurement model measures convergent and discriminant validity of the constructs. to run the models, smart-pls was employed (ringle et al., 2015; rahi, 2017). 160 j. bani hani. the influence of supply chain management practices on supply chain performance: ... 3.1. model reliability and validity the internal consistency of the constructs (test reliability) was measured using cronbach’s alpha with an acceptance level of 0.60 (sekaran, 2010). table 1 displays the “alpha” values of all constructs. the cronbach’s alpha indexes greater than 0.7 not only demonstrate the acceptable level of reliability but also indicate that instruments used in the study are of a good internal consistency (nunnally & berstein, 1994; hair et al., 2013). composite reliability (cr) was chosen to calculate the internal consistency of the model, indicating the amount of measure variance underlying the given trait in every single ordered construct of the model. all the cr values had a range between 0.944 and 0.973, exceeding the suggested minimum level of 0.7 (gefen et al., 2000; hair et al., 2013), thus demonstrating an adequate consistency (acceptable reliability) in the model. a confirmatory factor analysis (cfa) was run in order to demonstrate the validity of the model. discriminate validity is verified provided that the average variance extracted (ave) exceeds the squared correlations (fornell & larcker, 1981). as table 1 shows, the ave values ranging from 0.699 to 0.781 were all higher than the level of 0.5 recommended by bagozzi and yi (2012) and greater than the squared correlations among the variables (off-diagonal). the measures of average shared variance (ase) and maximum shared variance (msv) are found less than that of average variance extracted (ave), supporting discriminate validity (hair et  al., 2013) (see table  1). regarding all the studied constructs, the values met the recommended threshold levels, then demonstrating the satisfactory convergent validity. as table 2 reveals the outcomes of the fornell and larcker analysis, the measures of ave (diagonal) were found to be higher than the values of constructs correlation counterparts, thus confirming that the variable is discriminant enough to be used in the assessment of the specific concepts. table 1. validity and reliability indices of the proposed model variable item loading cronbach’s alpha cr ave msv asv scmps strategic supplier partnership-ssp 0.658 0.88 0.957 0.777 0.547 0.379 customer relationship-crm 0.671 internal lean practices-ilp 0.893 information sharing-is 0.950 postponement-p 0.942 iq intrinsic accuracy-ia 0.967 0.84 0.944 0.781 0.589 0.358 representation-r 0.733 contextual relevance-cr 0.837 accessibility-a 0.881 scp cost -c 0.977 0.87 0.973 0.699 0.539 0.361 time-t 0.871 quality-q 0.945 flexibility-f 0.917 innovativeness-i 0.728 business, management and economics engineering, 2022, 20(1): 152–171 161 table 2. fornell and larcker’s analysis variables ssp crm ilp is p iq scp ssp 0.871 crm 0.414 0.881 ilp 0.569 0.411 0.882 is 0.415 0.367 0.406 0.891 p 0.477 0.571 0.467 0.213 0.911 iq 0.409 0.321 0.658 0.258 0.217 0.897 scp 0.478 0.351 0.708 0.376 0.053 0.357 0.866 3.2. goodness-of-fit of the model with reference to hair et  al. (2013), the “goodness-of-fit” of the model was analyzed using different measures, namely absolute fit, incremental fit, and parsimonious fit. as shown in table  3, 12 indices, which are widely applied by researchers (hair et  al., 2013; cheung & rensvold, 2002; bentler, 1990; marsh et al., 1988), were used in the current study. table 3. goodness-of-fit indices of the structural model measures value threshold absolute fit chi-square goodness of fit 921.68 p-value 0.000 degree of freedom 499 normed chi-square 1.847 ≤3 goodness-of-fit index (gfi) 0342 ≥0.08 0r 0.09 root mean squared error of approximation (rmsea) 0.065 ≤0.08 incremental fit tucker-lewis index (tli) 0.971 0.95 and above normal fit index (nfi) 0.935 0.9 and above non-normal fit index (nnfi) 0.917 0.9 and above comparative fit index (cfi) 0.924 0.9 and above incremental fit index (ifi): 0.927 0.9 and above relative fit index (rfi) 0.938 0.9 and above parsimonious fit parsimonious normed fit index (pnfi) 0.779 0.5 and above parsimonious goodness-of-fit index (pgfi) 0.853 0.5 and above as table 2 shows, most of “goodness-of-fit” values were found satisfying and acceptable. thus, these measures illustrate that the proposed model sound well developed and acceptable. the outcomes of the fornell and larcker’s analysis revealed that the values of eva (diagonal) were found greater than those of the constructs’ correlation counterparts, hence verifying that construct measures and discriminates distinct concepts (table 2). 162 j. bani hani. the influence of supply chain management practices on supply chain performance: ... 3.3. descriptive analysis table 4 displays the detailed descriptive statistics concerning the respondents’ demographics. table 4. respondents’ demographics (n = 500) variable frequency percentage age less than 30 years 21 0.04 30–40 188 0.38 41–50 117 0.23 more than 50 174 0.35 education bachelor 348 0.70 master 121 0.24 doctorate 31 0.06 position general manager 113 0.23 hr manager 66 0.13 operations manager 140 0.28 finance manager 57 0.11 marketing manager 124 0.25 experience less than 5 years 81 0.16 5 – less than 10 318 0.64 more than 10 101 0.20 3.4. descriptive analysis of the constructs table 5 displays the standard deviation and mean in order to answer the research questions of the study. regarding scmps, the standard deviation and the mean values were 0.26 and 3.7, respectively. concerning information quality, the values of the standard deviation and the mean were 3.64 and 0.35, respectively. finally, as for scp the values of standard deviation and the mean were 0.78 and 3.83, respectively. the values of standard deviation show the level of concentration and homogeneity in the data set as the level of dispersion or variability was smaller. table 5. standard deviation and mean for items domain variables mean std rank degree scmps 3.75 0.26 2 high information quality 3.64 0.35 3 medium supply chain performance 3.83 0.78 1 high business, management and economics engineering, 2022, 20(1): 152–171 163 3.5. hypotheses testing 3.5.1. normality test prior to the linear regression analysis, the assumption of the normal distribution of data needs to be verified. as table  6 reveals through shapiro-wilk test and the level of significance, it is obvious that all the variables of the study are normally distributed. since all the significance level values are higher than 0.05 in the table, the null hypothesis, which states “there is no statistically significant difference between the normal distribution and the distribution of the variable values at the significance level (α ≤ 0.05)” is accepted. this finding confirms that the values of the variables have a normal distribution in this study. table 6. normal distribution test using shapiro-wilk test variable shapiro-wilk test sig. scmps 0.98 0.17 iq 0.95 0.20 scp 0.91 0.35 3.5.2. scnps influence on scp smart pls/ bootstrapping technique was used to assess the relevance and significance of the structural model (see table 6). supporting hypothesis 1, the results show the statistically significant effect of scnps (t  = 13.71, p < 0.001) on scp (β  = 0.256), thus indicating the acceptance of the alternative hypothesis (h1) that scmps influences scp. as correlation confident value between scp and scmps (r  = 0.53, p < 0.05) show, as long as the saudi factories pays more attention to scmps, there will be an improvement in the scp. regarding the determination coefficient of the scnps-scp construct (r2 = 28%), it seems that 28% of the total scp variance could be interpreted by scmps. the residual could be attributed to other variables. 3.5.3. the impact of iq on scp hypothesis 2 was also supported as the findings show the statistically significant influence of information quality on scp (t = 4.78, p < 0.01, β = 0.227), thus implying the acceptance of the alternative hypothesis (h2) that information quality could impact scp (table 6). according to correlation confident value between scp and iq (r = 0.55, p < 0.05), it could be said whenever the saudi companies devote more attention to the quality of information, the supply chain performance will experience an improvement. the determination coefficient of the scp-iq construct (r2 = 30%) implies 30% of the total scp variance could be explained by information quality. the residual could be interpreted in the light of other variables. 164 j. bani hani. the influence of supply chain management practices on supply chain performance: ... 3.5.4. the moderating role of information quality in the effect of scmps on acp as can been seen from table 7, the quality of information has a moderating role in the influence of scmps on scp (β = 0.514; t = 9.58; p < 0.001), thus indicating that information quality moderates the influence of scmps on scp (alternative hypothesis 3). regarding the determination coefficient of the variable (scmps-iq) on scp (r2 = 35%), it is shown that the determination coefficient has an increase compared to the first model, implying that the moderating role of information quality helps explain the scmps – scp model. table 7. pls bootstrapping results hypotheses r r2 standard bootstrap results standard error t-value p-value (1-sided) scmps – scp 0.53* 0.28** 0.017 13.71 0.00*** iq – scp 0.55* 0.30** 0.013 4.78 0.00** [scmps & iq] – scp 0.59** 0.35** 0.037 9.58 0.00*** notes: *p < 0.05; **p < 0.01; ***p < 0.001. 4. discussion the results showed that the respondents are highly interested in supply chain management practices, information quality, and supply chain performance as appeared in mean values, this is may due to recently growing saudi government interest in supply chains, in particular logistics services. this result agreed with study by alahmad (2021), that concluded that supply chain management practices has a direct in influence on supply chain performance. also, the findings of this study showed that scmps correlate with scp which implies that as long as the saudi factories pays more attention to scmps, there will be an improvement in the scp. in addition, scmps have influence on scp. the findings also showed significant positive correlation relationship between information quality and scp, which implies whenever the saudi companies devote more attention to the quality of information, the supply chain performance will experience an improvement, also the findings showed that information quality have influence on scp. study of choy et al. (2004) indicated that high cost will be considered if information cannot be reached effectively with partners in supply chain that may not help to improve supply chain performance. finally, results showed the moderating role of information quality in the effect of scmps on scp. study by marinagi et  al. (2015) reveals that information quality as an independent variable affects the supply chain performance, the study also reflects the moderating role of information sharing between information quality and supply chain performance. research work related to scmps in the manufacturing organizations find a significant correlation between scmps and scp dimensions (al-shboul et al., 2017; ibrahim & hamid, 2014; abdallah et  al., 2014; karimi & rafiee, 2014; kannan & tan, 2004). moreover, other many different previous literature agreed with the findings of this study (abdulameer & yaacob, 2020; ortiz & gomez, 2017) as they have conclude that supply chain management business, management and economics engineering, 2022, 20(1): 152–171 165 practices has a direct positive influence on different aspects of supply chain performance. the managing of supply chain practices will contribute in reduce the total cost, speed the time, improve quality, increase flexibility, and enhance innovativeness of the supply chain management, therefore the suppliers may contribute to improve performance (subburaj et al., 2015; utami et al., 2019; kumar & kushwaha, 2018; thatte, 2007). today the competition between companies has become between supply chains (li et  al., 2006). for this reason, companies should increasingly adopting scmps to achieve cost-reductions, speed the time, improving their quality, increasing flexibility, and enhance innovation that lead to enhancing their competitiveness. conclusions the three scmps, scp aspects, and iq dimensions adopted in this study were developed, examined and validated in the literature. data were collected from one hundred and fifty saudi manufacturing companies using a survey questionnaire distributed to executives and analyzing data using statistical measures developed and used to test the proposed experimental model. this study conducted in the kingdom of saudi arabia from the end of the year 2020 to the end of the year 2021. this study, thus, aims to help, manufacturing companies and researchers to better recognize the scope and activities associated with their supply chain that have a prominent role on the effective performance of the entire company. the study, therefore, provides a useful guidance for saudi manufacturing companies as well as a validated tool for them to measure and implement supply chain management. this study was an effort to show the influence of scmps on scp. it was also tried to explore whether information quality plays a moderating role between scp and scmps. the study helps grow the body of the literature by specifying the crucial role of information quality in enhancing the impact of scmps on scp on the basis of the managers’ perceptions in saudi manufacturing firms. the results of the statistical analysis highlights significant interplay between scp and scmps, that is, an increase in scmps could upgrade the level of saudi factories’ scp. moreover, scmps significantly influenced scp. such a result indicates that a change in scp could be interpreted in the light of a change in scmps. saudi manufacturing firms are recommended to implement scmps to enhance their performance. the results also suggest a significant and positive relationship between iq and scp. thus, this confirms that if more attention is drawn toward quality of information, there will be an improvement in the level of scp in saudi companies. furthermore, the significant influence of iq on scp could explain that a change in scp could be attributed to iq influence. it was also found that iq moderates the impact of scmps on scp. such a moderating role could lead to a change in scp. more specifically, the moderating role of information quality helps in the perception of the scmps – scp model. saudi manufacturing firms are recommended to increase the level of interest in information quality as an opportunity to have effective scp. the results of this study will have important implications and is believed to be very useful for the saudi industrial sector and benefited for the public sector since both will be aware of the relatively important factors that should be considered in formulating appropriate strategies. 166 j. bani hani. the influence of supply chain management practices on supply chain performance: ... current years have seen increase in the significance of integration suppliers, manufacturers, and customers. effective integration needs intensive concentration on quality of information in terms of intrinsic accuracy, representation, contextual relevance, and accessibility. effective integration of suppliers into supply chains serves as a key element to many firms to gain competitive advantage. thus, the present findings could be valuable to all saudi managers at all levels at workplace as integrating the quality of information in the practices of supply chain management will help reduce or eliminate the uncertainty and risks, as a result making an improvement in the supply chain performance. in general, it is an important for every manufacturing company to align its scmps with information quality to achieve effective scp; 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education issn 2029-7491 / eissn 2029-6169 2019 volume 17: 72–93 https://doi.org/10.3846/bme.2019.11014 introduction during the tracking of heis research and innovation activities, management issues, efficiency evaluation tools, the most important factors, which can influence the results of technology transfer (tt), the concept of efficiency evaluation can be arranged in the context of heis. successful tt is a sensitive issue in the context of heis. usually, researchers like more concentrating on their exciting topics of the research forgetting about the research priorities comparative analysis of multicriteria decision-making methods evaluating the efficiency of technology transfer  lidija kraujalienė * department of financial engineering, faculty of business management, vilnius gediminas technical university, vilnius, lithuania  received 4 june 2019; accepted 31 july 2019 abstract. purpose  – to find appropriate tools to measure the efficiency of the technology transfer process (ttp) in higher education institutions (heis). scientific problem is a lack of methods measuring the efficiency of ttp. the objective – comparative analysis of efficiency evaluation methods. research methodology – the research methodology is based on a comparative analysis of the research papers on the advantages and disadvantages of methods suitable to evaluate the efficiency of ttp. findings – among some tools, fare is highlighted for identifying the variables of ttp and assigning their weights, when topsis – to rank the variables and identify the most important. multomoora and copras methods with ranking abilities are suitable to select the number of heis. dea method is intended for the economic evaluation of ttp efficiency in heis. the social sciences are strengthened by suitable founded tools to measure the efficiency of ttp in heis. research limitations – this paper is providing all advantages and disadvantages (limitations) of decision-making multicriteria methods. practical implications  – the original structure of methods enabling stakeholders (heis, ttos and public authorities) for efficient allocation of an organisation’s financial resources, foresee the future goals for improving the efficiency of ttp. originality/value – the original framework of methods incorporated into the one model, enabling related stakeholders (heis, ttos and public authorities) allocate financial resources efficiently. keywords: efficiency, evaluation, technology transfer, methods. jel classification: c44, o32, o34. business, management and education, 2019, 17: 72–93 73 of heis, and the government. researchers searching for recognition are are interested in sharing their inventions, findings with society through research papers. hence, they have little time, which is oriented for science-business collaboration activities in a bilateral project or contract works. to overcome this gap, tt activities are coming to push research results to be search for perspective ideas, protect them (if needed), contact with industry seeking of commercialization finalisation and economic benefit for heis. university-business activities, promoted by ttos, brings economic utility, thus necessary for heis wellbeing. many countries are investing in research and development (r&d) activities, but it is challenging to evaluate ttp without appropriate tools. the information about suitable tools valuing the ttp in heis is quite limited. therefore, it is relevant to search for and analyse existing multicriteria decision-making methods appropriate for the evaluation of the efficiency of ttp. thus, the objective of the research is a comparative analysis of efficiency evaluation methods. after efficiency evaluation results and the current situation’s map, relevant changings could be implemented to improve tt performance in heis. among different hei’s performance variables, calculation methods as well as delivering the results outside to society (e.g. presenting results in the annual heis’ reports), such problems exist as converging performance results to the one platform and also finding the suitable method for facilitation and evaluation of ttp performance in heis. moreover, there is one more issue of determining the variables and improving them by raising the level of heis’ economic results of ttp. the methodology of this paper is intended to find a suitable approach to measure the efficiency of ttp performance in heis. decision-making methods serve to analyse the performance of universities. a number of research papers have been concluded that government investments are relating to the tt results implemented in heis. r&d and innovation activities in heis are significant. different countries have identified strategic priority areas and governments are investing in these areas to develop and strengthen activities in specific fields to reach economic benefit. the concept of evaluation of the tt results is formed based on the analysis of literature. taking into account the aspect of lithuanian culture, searching for performance variables to evaluate the ttp, data-gathering aspects, appropriate matchmaking methods is leading to the creation of the framework to evaluate heis’ ttp economic results. european tt models are more close to lithuanian culture than american. next, some examples are provided. the cases of germany and belgium are presented in kurgonaitė’s (2015) work on the analysis of good foreign experience in tt and commercialisation activities. the most developed countries have applied such tt model, when tto is established outside universities, including the best specialists in tt, intellectual property (ip), commercialisation activities, what have the positive effect on economic results of heis. tto serves for a few most prominent universities and hospitals in the countries. to ensure the connection with scientists, tto specialists have planned periodically meetings with the researchers, at least one or two times per month. strong tto team is required, motivated researchers, pleasant entrepreneurial atmosphere, perspective sector, high level of the market abilities and well-developed funding possibilities (kurgonaitė, 2015). in lithuania, the government allows heis to create their roles relating to tt and commercialization activities. since 2009 december, when the 74 l. kraujalienė. comparative analysis of multicriteria decision-making methods evaluating... order of the minister of education and science takes effect, heis has been promoted to implement tt and commercialization activities (order of the ministry of education and science of the republic of lithuania, 2009). a similar situation is in massachusetts institute of technology (mit) (in the boston, cambridge), working mostly in the biotechnology sector, and being successful in tt and commercialisation. mit has a high concentration of the most prominent and leading research institutions – hospitals and universities. however here tto is situated outside heis/ research organisations, and the culture developed here is positive in cooperation channel between tto specialists and researchers. around 40% of the newly started spin-off companies are formed by mit’s alumni. mit’s culture leads others to think in the way of “i can do it too”, that ensures many opportunities (e.g. competitions of a business plan) to seek strategies and get advice. dozens of mit’s students achieve venture capital funding. thus, mit tt model depends on surrounding nature and having an entrepreneurial community surrounding heis. tt is successful with a legal and relatively non-bureaucratic procedure, sufficient funds for ip protection and filing patents of heis. the formation of spin-offs (based on heis ip) and development of clusters requires talented staff: world-class scientists and researchers; tt professionals; entrepreneurial founders of start-ups or spin-offs and the work teams involving managers and scientists; knowledgeable investors not only for funding, but also for advising and guiding the company, etc. (nelsen, 2005). every process is measuring by relevant indicators. respondents could be included in the research helping to identify performance variables of the particular process, assigning the weights (if relevant). 1. comparative analysis of multicriteria decision-making methods during valuing the ttp, first of all, appropriate methods should be selected to find the framework to measure the efficiency of ttp. therefore, there is the need to value multicriteria decision-making methods with its advantages and disadvantages in applying them for evaluation of the efficiency of ttp in heis. for that purpose, the comparative analysis of the most popular decision-making methods were performed (see table 1). it is worth noting that there are some limitations in the data collecting (as the lack of data), in designing the database for implementation of research, as well as in applying certain tools due to restrictions of particular methods. a brief discussion and comparative analysis of the presented methods is provided below. every multicriteria method has its advantages and disadvantages. to avoid disadvantages, and to avail advantages of methods, the simultaneous use of several methods would deliver the benefit. to solve the issue of evaluating the ttp, the concept of the framework and involved methods able to evaluate the efficiency of ttp is presented below. there are three steps identified to start measuring the efficiency of ttp. the first step is identifying the variables suitable to measure the efficiency of ttp in heis. the factor relationship (fare) method is suitable to realize this goal and set weights for variables. it serves in the case of some various variables when the weights of their importance business, management and education, 2019, 17: 72–93 75 ta bl e  1. a dv an ta ge s an d di sa dv an ta ge s of m ul tic ri te ri a de ci si on -m ak in g m et ho ds ( co m pi le d by a ut ho r) m et ho d multicriteria evaluation used in performance-type problems concordance coef. of kendall is required maximizing / minim. criteria values compare and evaluate the criteria not requiring to minimize criteria more robust involving all stakeholders and interrelations between alternatives and objectives non-subjective subjective absolute evaluation  normalization needed does not need external normalization pair-wise comparisons a mixture of percentiles, ratios and raw data is permissible to measure weights needs initial weights minor amount of initial data is required direction and strength, asked from experts assessing the best and the worst alternatives provides the most stable results in the case of input data oscillating easy to use programmable used in case of all maximizing criteria inconsistent all the values should be positive expected utility theory huge amount of data required retrieves similar cases from existing database, proposes similar solution c o pr a s x x – x x x x x – x x – – x – – – – x x x – – – – – – – m u lt im o o r a x x – x x – x x – x x x – x – – – – x x x – – – x – – – d ea x x – x x – x x – x x – – x – – – – x x x x – – x – – – fa r e x x x – x – x x – x x – – x x – x x x x x – – – – – – – t o ps is x x – – x – x x – x x – – x – – – x x x x – – – – – – sa w x x – – x – – x – x x – – x – – – x – x x x – x – – – pr o m et h ee x x – – x x – x – x x – – x – – – – x – x x – – – – – – v ik o r x – – – x – – x – x x – – x – x – – x – – x – – – – – – m a u t x – x – x – – x x – x – – – – – – – x – – – – – – x x – a h p x x – – x – – x x x – x x – – – – x – – – – x – – – – c br x x – – x – – x x x – – – – – – – x – – – – x – – – x sm a r t x – x – x – – – x – x – – – – – – – x – – – – – – x x – 76 l. kraujalienė. comparative analysis of multicriteria decision-making methods evaluating... on the ttp are unknown. the fare method requires specialists (respondents), in this case from the sphere of tt, commercialisation and innovation management. specialists help to estimate the importance of suggested criteria to select the most important one, as well as to measure the distances of the most crucial variable following all other criteria. this framework of the research is able to identify variables by the impact influencing the ttp (ginevičius, 2006, 2007), while technique for order of preference by similarity to ideal solution (topsis) method helps to rank variables by importance of ttp for the second step, heis should be selected to include them to the research sample. some considerations exist in choosing the heis with tt and commercialisation performance results. therefore, the ranking tools serve to select the research sample. for that goal, such ranking multicriteria tools as multiobjective optimization by ratio analysis (multimoora) and complex proportional assessment (copras) are identified to rank the heis (a. hafezalkotob & a. hafezalkotob, 2015; chatterjee, mondal, boral, banerjee, & chakraborty, 2017; chatterjee, athawale, & chakraborty, 2011). when the variables and research sample are known, the final third step is intended to find the tool for the efficiency evaluation of the ttp in heis. thus, the data envelopment analysis (dea) tool is identified to calculate the economic efficiency of ttp in universities (palecková, 2016; cook, tone, & zhu, 2014). all mentioned methods were selected and involved in the framework of efficiency evaluation of ttp. next, decision-making methods in table 1 are discussed to understand their abilities and contribution to the efficiency evaluation process. selected tools for evaluation of ttp are comparing with other decision-making methods. the fare method serves to evaluate the ttp performance of heis in case of multicriteria decision-making system. ginevičius (2006) has been developed the tool of the fare to help of estimation of multicriteria weights (only one method with this possibility, see table 1). it helps to assess the importance of variables analysed. the latter tool helps to provide the consistency of formed decision matrix. the central aspect of the fare method is a superiority comparison having performed (one from all variables in the research), which is addressing for creation of decision-making system. while decision-making matrix has been already created, the most important variable has been selected among all other variables. the variable, which has the highest superiority total values are highlighted as the most critical variable since the superior level of the essential variable is equal to one or over than one in comparison with other variables (chatterjee et al., 2017; kazan, özçelik, & hobikoğlu, 2015). the fare tool is selected in the first research step based on the situation with a minor volume of initial data when the estimation of relationships is required (ginevičius, 2006, 2007). in comparison with other multicriteria decision-making tools, the simple multi-attribute rating technique (smart) method is not suitable for the reason for its ability to convert weights to real factual numbers. moreover, the overall framework of the method’s implementation is quite complicated (velasquez & hester, 2013). in turn, the analytic hierarchy process (ahp) is not suitable for the identification of variables because the principle is based on the pair-wise comparisons (velasquez & hester, 2013). the case-based reasoning (cbr) tool is not suitable for identification of the variables because for applying this method we should have an existing database of various cases when the tool is proposing the solution of similar cases (velasquez & hester, 2013). another tool of the multi-attribute utility business, management and education, 2019, 17: 72–93 77 theory (maut) is also not applicable for implementation of efficiency evaluation of ttp because this is the method of expected utility theory measuring the best possible benefit, instead of a selection of the variables by their importance level (velasquez & hester, 2013). the preference ranking organisation method for enrichment evaluation (promethee) is the method, which is not providing a definite possibility to assign weights of variables (velasquez & hester, 2013). the vlsekriterijumslca optimizacija i kompromisno resenje (vikor) method needs initial weights in advance; however, when you have only the names of variables, it is not possible to apply this method (liu & wang, 2011). in turn, the topsis method serves in determining the best and the worst alternative values for the variables of ttp. the topsis is the technique suitable to select the best alternative from a system of other alternatives in the research sample. the most important advantage of the topsis method is inability, when the best alternative, which was selected, has not only the smallest distance from the ideal solution but also the longest distance situating from the ideal worst solution. the topsis final calculation results supply interested person with information helping to make some decisions, on the one hand, close to the best possible, when from another – far from the worst. these possibilities ensuring decision-makers (e.g. the head of hei) to make decisions on the best alternative, and finally selecting one of the right decision for the organisation (ginting, fadlina, siahaan, & rahim, 2017; džunić, stanković, & janković-milić, 2018; ding & zeng, 2015). the topsis method was included in the tt efficiency evaluation model for simplicity of application framework, because it is programmable, and providing the most stable performance results in the case when input data is oscillating. the proposed efficiency evaluation model of ttp is input-oriented; therefore the topsis method is ideally appropriate for evaluating every alternative, and its deviation magnitude is able to assess alternatives from the best and the worst concerning the average attained (choudhury, 2015; ding & zeng, 2015). the multimoora is proposed as a non-subjective and more robust tool in comparison with other methods using subjective estimation framework. this method is enabling to maximize and minimize the variables’ values, similar to the copras method. the multimoora method is based on quantitative numbers; therefore, it fits for the research. besides, the latter tool has one limitation − the data incorporated to the research should be positive (altuntas, dereli, & yilmaz, 2015; karabasevic, stanujkic, urosevic, & maksimovic, 2015). the copras method allows comparing the data and ranking it. since 1994, the researchers from vilnius gediminas technical university (vgtu) as zavadskas, kaklauskas and sarka have been introduced the complex proportional multicriteria evaluation tool, named as the copras. this method is appropriate for quantitative multicriteria evaluation of maximising and minimising the number of different variables. the tool to measure efficiency is named the dea. this method is involved in the efficiency evaluation model of ttp in heis. on the other hand, efficiency could also be evaluated by applying the dea complex proportional assessment method (nazarko & šaparauskas, 2014; stefano, casarotto filho, vergara, & da rocha, 2015). the dea method is intended for the relative evaluation of individual efficiency or evaluation of the performance of a dmu (decision-making unit) within the target group of specific interest. the dea is acting in a particular field of activity like health care, banking, agricultural sphere, the sector of education (incl. 78 l. kraujalienė. comparative analysis of multicriteria decision-making methods evaluating... higher education), other. dmu means the production of heis. the dea is the tool which is applying to identify sources of inefficiency, management level (to compare manufacturing and service operations), rank universities, evaluate the efficiency of programmes/policies, quantitative evaluation of resources that help to reallocate them, evaluate the efficiency of emissions or energy efficiency, etc. (liu, l. y. lu, w. m. lu, & lin, 2013; wang, wei, & zhang, 2013; zhang & choi, 2013a; zhang, zhou, & choi, 2013b). the copras quantitative multicriteria tool is applied with maximisation and minimisation of variables’ values. it allows the user to compare and check calculated results easily. going more deep into the comparative analysis of the copras, it can be less stable in comparison with the saw or the topsis tools on the case of variation of data; thus the copras is used separately from other methods. the copras tool is suitable to compare and evaluate the variables, describing hierarchically structured complex dimensions, being on the same level of the hierarchy, and therefore, it is appropriate for efficiency evaluation of heis (a. hafezalkotob & a. hafezalkotob, 2015; chatterjee et al., 2017). the dea is suggested for the efficiency evaluation of dmus acting a convenient method, employing an input−output oriented model, which is minimising input and maximising output variables. it is available in the case of a mixture of ratios, percentiles, and raw data. the efficiency with the dea method can be easily analysed and quantified, which is essential at the end of the study. the dea method fits to evaluate the ttp in heis (cook et al., 2014; feruś, 2008). there are some other general efficiency evaluation tools of economic performance; however, the practice of their use in the case of evaluation of tto in heis have not been used before. in general, the goal of economic analyses is oriented for optimization of prevention, control, or monitoring of investments, and also to minimize the total expenditures. the choices of detection, control, and prevention are interdependent. the managers firstly should evaluate the efficiency of alternatives’ costs on each step, before developing of new strategies or policies to improve heis’ activities (epanchin-niell, 2017). there are some frameworks, which are able to evaluate the efficiency of one or another activity. for instance, the potential approaches are suitable for cost-effective management or identifying an efficient allocation of resources (shen, han, price, lu, & liu, 2017). one of the useful approaches is a cost-benefit analysis, which is appropriate to measure the efficiency of the cost of the project in order to determine the relation with investments. the model of cost-benefit analysis determines the case of whether benefits are higher than costs. another approach of return on investment analysis is prioritizing the allocation of financial resources across some independent, discrete projects (e.g. cost efficiency ranking of the projects). the methodology of the last approach is able to identify the projects in decreasing order when the formula’s sense lying on the ratio of benefits divided by costs. the third approach is named as “optimization”, which is measuring the efficiency level of investments’ (by maximising the utility of net) and creating management approaches to reach the best objective. moving forward, the methodology to implement the optimisation model is dynamic optimization and optimal control, etc. within a bioeconomic system of modelling. another efficiency evaluation framework is the optimal design of activity, which is measuring the optimal parameters to change behaviour or private decision-making to achieve management business, management and education, 2019, 17: 72–93 79 goals. some methods are proposed to apply the latter approach: dynamic optimization, or optimal control, etc., which composed for private decision-making (epanchin-niell, 2017; beikler & flemmig, 2015). there are many analytical models for evaluating the economic status of health-care interventions, for instance. the consolidated health economic evaluation reporting standards (cheers) statement means the evaluation of cost-consequence analyses and economic utility of interventions, and leaves for the user the space for interpretation of information. costminimisation analyses (cma) is suitable for the comparison of the costs of interventions with equivalent outcomes (focus on the costs and excluding outcomes). the cost-effectiveness analyses (cea) model relates the measures of outcome with costs, which advantage is in informing of the additional outcome improvement between some interventions. the cea measure is usually introduced in terms of incremental cost-effectiveness ratios icers, which are relating the difference in efficiency to the difference in the costs between various alternative interventions from 0 till 1 (beikler & flemmig, 2015). the economic evaluation methods presented in this comparative research do not solve the issue of ttp evaluation tool, but this paper has proposed the framework of suitable methods appropriate to measure the efficiency of ttp in heis by incorporating them in the one evaluation model. the model of suggested efficiency evaluation framework consists of such selected methods as the fare, topsis, multimoora/copras, and dea. the reasons for a selection of such tools are more deeply analysed in section 3, where the advantages and disadvantages of tools are provided. 2. formulas to implement the efficiency evaluation of technology transfer process in higher education institutions the formulas of applying the fare tool is presented in a number of research works (ginevičius, 2006, 2007, 2008, 2011), as well as the formulas of the topsis (zavadskas et al., 2016; choudhury, 2015; ding & zeng, 2015; song & zheng, 2015; behzadian, otaghsara, yazdani, & ignatius, 2012). the multimoora method’s formulas are described in many other research papers (a. hafezalkotob & a. hafezalkotob, 2015; a. hafezalkotob, a. hafezalkotob, & sayadi, 2016; akkaya, turanoğlu, & öztaş, 2015; altuntas et al., 2015; karabasevic et al., 2015; lazauskas, zavadskas, & saparauskas, 2015a; lazauskas, kutut, & zavadskas, 2015b; obayiuwana & falowo, 2015; brauers & zavadskas, 2010; stanujkic, 2015a; stanujkic, zavadskas, brauers, & karabasevic, 2015b; stanujkic, 2016; liu, fan, li, & chen, 2014; liu, you, lu, & chen, 2015; kildienė, zavadskas, & tamošaitienė, 2014), as the formulas of the copras (chatterjee et al., 2017, 2011; mousavi-nasab & sotoudeh-anvari, 2017; rezazadeh, sancholi, rad, feyzabadi, & kadkhodaei, 2017; rivera, fajardo, a. j. ávila, c. f. ávila, & martinez-gómez, 2017; zolfani et al. 2018; liou et al., 2016; mulliner, malys, & maliene, 2016; xue, you, zhao, & liu, 2016; bausys, zavadskas, & kaklauskas, 2015; nguyen, dawal, nukman, aoyama, & case, 2015; ghorabaee, amiri, sadaghiani, & goodarzi, 2014; hashemkhani zolfani & bahrami, 2014; pitchipoo, vincent, rajini, & rajakarunakaran, 2014; zavadskas, turskis, & kildienė, 2014; aghdaie, zolfani, & zavadskas, 2013; tavana, momeni, rezaeiniya, mirhedayatian, & rezaeiniya, 2013; ginevičius, 2008; kracka et al., 2010; 80 l. kraujalienė. comparative analysis of multicriteria decision-making methods evaluating... tupenaite et al., 2010; kaklauskas et al., 2006, 2010; turskis, zavadskas, & peldschus, 2009). the dea method’s approach and formulas are discussed in other research projects (palecková, 2016; cook et al., 2014; feruś, 2008; simar & wilson, 2007). the formulas should be analysed before their’s implementation taking into account the advantages and disadvantages of precise method. proposed methods as the fare, topsis, multimoora, copras, and dea are quite easy in use and understandable in the application. section 3 is presenting the comparative analysis on the advantages and disadvantages of efficiency evaluation methods. 3. comparative analysis of advantages and disadvantages of efficiency evaluation methods  this section is analysing the advantages and disadvantages of a number of the most popular decision-making methods in the economic arena. this research paper is intended to search for suitable tools to evaluate the efficiency of ttp in such organizations as heis. after a brief analysis of decision-making methods we see, that the most suitable tools to measure the efficiency of ttp are the fare, topsis, multimoora/copras, and dea. however, there are many other multicriteria tools discussed in this paper. the copras (complex proportional assessment) method’s advantages and disadvantages are presented in table 2. the copras tool is suitable to measure the variables of the multicriteria system while maximising and minimising the values, compare the variables, what is needed to identify the research sample of heis. also, it is convenient, that is not requiring minimisation of the table  2. advantages and disadvantages of the copras decision-making method (compiled by author, based on a. podviezko & v. podvezko, 2014; podvezko, 2011) the copras method no advantages disadvantages 1 the method is used for evaluation of the multicriteria system of variables for maximising and minimising the values copras may be less stable in comparison with saw or topsis methods in data variation case 2 the method allows to compare and also check the final results of measuring easily the results may be sensitive to a slight variation of data, and the ranks devoted may differ from ones obtained with other methods 3 the typical properties of the tool allow being used to implement the comparison and evaluation of variables describing hierarchically structured complex magnitudes, positioning on the same hierarchical level 4 this tool is not requiring such transformation as minimising the variables; therefore the transformation of the data is not distorted; this tool is appropriate to evaluate a single alternative business, management and education, 2019, 17: 72–93 81 variables, and the transformation of the data is not strained. attention should be paid to the data variation because the copras could be less stable than the saw or topsis, and the calculation results may be sensitive relating to data variation. nevertheless, based on several advantages, the copras was included in the framework of efficiency evaluation of ttp. table 3. advantages and disadvantages of the multimoora decision-making method (compiled by author, based on brauers & zavadskas, 2010) the multimoora method no advantages disadvantages 1 comparing the multimoora method with other tools, it is more robust and involving all related stakeholders (including sovereignty of the consumer), interested in a particular issue like an advantage. the multimoora has one disadvantage in the data of objectives used in the database, when the data cannot be equal to the zero or dealing with the negative numbers. 2 the multimoora method with all non-correlated goals is more robust in comparison with a limited number of goals. 3 the multimoora tool is more robust, when all objectives’ and alternatives’ interrelations are taken into account, and simultaneously in comparison with interrelations when only investigated two by two. 4 the multimoora method is non-subjective from one side, and more robust comparing with tools applying subjective estimations to implement the choice for importance and normalisation of the objectives. 5 the choice to set objectives. a system of robust objectives would be identified after the session of brainstorming technique with all the stakeholders or representative experts. normalisation. the miltimoora is the tool that does not need external normalisation and more robust in comparison with such based on the subjective external normalisation. this multiple objectives’ method is lying on dimensionless non-subjective measures without normalisation, in that way become more robust compared with methods, which are using subjective non-additive values or subjective weights. giving the importance of the objective. together with the scores and weights, the importance of some objectives is mixed with normalisation. 6 the multimoora method is based on quantitative numbers, and it is more robust than other tools based on ordinal measures. 7 the multimoora method with the available data is the base for more robust studies than based on earlier available data. 8 the application of two methods of multi-criteria objective’s optimisation is more robust in comparison with applying a single one; when the application of three tools is more robust than applying two tools, etc. 82 l. kraujalienė. comparative analysis of multicriteria decision-making methods evaluating... we see in table 3 that the multimoora method has many advantages and only one disadvantage. this method is more robust and involving all related stakeholders, interested in certain economic problem-solving. all interrelations of objectives and alternatives have been taken into account, and the multimoora does not need external normalisation. for the reason of several advantages and abilities, in case of a multicriteria system of ttp, this method is a suitable tool, involved in the efficiency evaluation framework of ttp in heis. the dea tool input-output oriented method is presented in the research papers as a convenient programmable method to evaluate the efficiency of the decision-making unit working in different spheres (see table 4). the efficiency could be easily analysed and quantified. a mixture of raw data, ratios, and percentiles is available for calculations, what has an table 4. advantages and disadvantages of the dea decision-making method (compiled by author, based on cook et al., 2014; velasquez & hester, 2013; banker, charnes, cooper, swarts, & thomas, 1989) the dea method no advantages disadvantages 1 efficiency evaluation method, input-output oriented method, which is maximising output and minimising input variables; the tool is based on proportional reduction. the number of alternatives analysed is that the sample should be at least twice lower than the number of inputs measures and outputs combined. when banker (1989) has been stated, that the number of variables should be at least three times higher than the number of outputs and inputs. 2 this method is able to handle multiple outputs and inputs. potential issues are existing during the selection of the variables for the dea tool when the raw data (e.g. revenues, the number of employees, assets, profits, etc.) and the ratios (e.g. returns on investment) would not be incorporated in the one model. 3 the tool is suitable to measure the efficiency that can be analysed and quantified. the method does not deal with an inaccurate number of data and suppose that all output and input measures are known. however, in real life, this assumption would not be true. 4 the method is able to uncover relationships, which may be in hidden under other methods. the method does not deal with an inaccurate number of data and suppose that all output and input measures are known. however, in real life, this assumption would not be valid. 5 a mixture of ratios, raw data and percentiles are permissible in one calculation of efficiency with the dea method. the measurement results could be sensitive depending on the identified outputs and inputs. 6 the dea method is widely used in economic, road safety, medical, utilities, retail, business and agriculture problemsolving. these categories have precise data using for the input, which deficiencies avoid one of the significant tool’s. 7 the tool is programmable and quite effortless in use. business, management and education, 2019, 17: 72–93 83 advantage in case of missing data from one source, or similar. this tool fits to measure the efficiency however has some disadvantages, like the number of units in the samples should be at least twice higher than the number of alternatives, and others. therefore, due to the dea advantages, this tool is selected and involved in the frameworks to measure the efficiency of ttp in heis. the topsis (technique for order preference by similarity to an ideal solution) tool (table  5) is based on that principle: the optimal dote should have the farthest point in the distance from the negative ideal solution point and the shortest line from the positive ideal solution (liu & wang, 2011). the topsis tool serves the function of ranking identifying the variables (with the fare method), which will be involved in the evaluation of the efficiency of ttp. the topsis is easy to use, not requiring minimisation of variables, and applicable in many different areas. therefore, the topsis method was selected for the framework of efficiency evaluation of ttp in heis. table  5. advantages and disadvantages of the topsis decision-making method (compiled by author, based on a. podviezko & v. podvezko, 2014; velasquez & hester, 2013) the topsis method no advantages disadvantages 1 this absolute evaluation tool, which is not requiring transformation to minimize the variables; the data transformation is not perverted. the application of euclidean distance does not look to the correlation of the attributes. 2 the topsis method is allowing to interpret the absolute evaluation of certain alternative, its deviation magnitude assessing the results starting from the best and the worst average alternatives. in this tool is quite difficult to weight and also keep the consistency of judgment, particularly with additional attributes. 3 this tool is providing the possibility of the most stable performance results in case the input data is varying. 4 the research of developing hypothetical worst and best objects is suitable for certain tasks are worth to be started in many areas, where quantitative evaluation is needed. 5 the topsis is based on the simple process; it is programmable and easy to apply. 6 the topsis method is easy in terms of maintaining the same number of steps in regard to the size of the problem. 7 the topsis tool is widely in use for areas like logistics, manufacturing systems and engineering, environmental management, marketing management, design, business, water and human resources management. 84 l. kraujalienė. comparative analysis of multicriteria decision-making methods evaluating... table 6. advantages and disadvantages of the saw decision-making method (compiled by author, based on podvezko, 2011; a. podviezko & v. podvezko, 2014) the saw method no advantages disadvantages 1 this tool is able to compensate among variables the saw method may be applied if all the variables are maximising (and transformed into maximising variables) before analysis. 2 intuitive method for decision-makers; the way of measuring is quite simple and does not require several computer programs or tools. all the values of the variables should be positive. the calculation is depending on the type of transformation converting to positive dimensions. 3 this tool integrates the values of variables and weights into a single one magnitude. the largest dimension of the variable of the saw tool maybe about unity, while the smallest dimension may reach the 0. 4 the calculation algorithm of this method is not complicated and can be implemented without the computer tools or by using a simple computer program. the saw method’s estimates yielded do not always reflect the real status. the result may not be in terms with logic, with the measures of one particular variable widely differing from once of other variables. 5 normalised values of the evaluation help visually calculate the differences between the alternatives. the saw tool is based on normalisation, with minimising the variables, converting to the maximising. 6 this tool is suitable to evaluate a singlealternative. result gathered may not be logical. the saw method (table 6) would fit to value the efficiency of ttp in heis, but we see many disadvantages of carrying out this tool: the method may be applied in case when all variables are maximising and positive, the result may not be in terms with logic. therefore, this tool, despite that fact that it also has advantages, was not selected to the framework for evaluation model of efficiency of ttp in heis. table  7. advantages and disadvantages of the promethee decision-making method (compiled by author, based on a. podviezko & v. podvezko, 2014; velasquez & hester, 2013) the promethee method no advantages disadvantages 1 this tool is not needed the transformation for minimising the variables, and the data transformation in case this method is not distorted. this tool does not provide a clear framework for assigning the weights. 2 the promethee is easy in application. this tool is requiring the assignment of measures, although it does not provide an understandable framework to assign the values. 3 it does not require the criteria to be proportionate. 4 widely used in such area as financial management, environmental, business management, management in general, water management and hydrology, chemistry, manufacturing, assembly, agriculture, transportation, logistics, energy management. 5 this tool needs normalisation. business, management and education, 2019, 17: 72–93 85 the promethee tool in table  7 does not provide a logical and accessible framework to assign values and weights. therefore this method was not involved in the framework of efficiency evaluation of ttp in heis. table 8. advantages and disadvantages of the vikor decision-making method (compiled by author, based on j. k. chen & i. chen, 2008; velasquez & hester, 2013) the vikor method no advantages disadvantages 1 the method is based on the principle of multicriteria decision making (mcdm) system’s compromise programming. the ranking needs can be performed with different values of variables’ weights. 2 this method is supporting multicriteria decisionmaker in such cases, when he is unstable, or when there is no idea to express one’s preference, e.g. at the beginning of creating the system. the analysis of the impact is applied from the side of all weights of variables on a suggested compromise solution. 3 a compromise solution is applicable based on the maximum group utility, and also on an individual regret’s minimum. this tool needs initial weights. 4 the result of ranking is the list of alternatives after special compromise ranking and the solution with an advantage rate. suitable in such cases when the information is in numerical values. 5 the vikor method is determining the stability intervals in weights. 6 the compromise solution in the vikor tool will be replaced if the measure of weight does not fit in the stability interval. 7 single variable analysis of weight’s stability intervals is used for all variables functions, with initial measures of weights. the stability of an acquired compromise solution could be analysed with the vikor electronic program. 8 this tool needs normalisation. this tool (table  8) means the optimisation and compromise solution of multi-criteria system (liu & wang, 2011). the vikor method requires initial weights because it is determining the stability intervals in weights. when we do not have weights in advance, this tool is not suitable. for that reason, this method is not involved in the suggested framework to evaluate the efficiency of ttp in heis. the maut (multi-attribute utility theory) means an expected utility theory; it can conclude on the best action for a given issue and measure the best possible benefit (velasquez & hester, 2013). the maut tool is not suitable in case of tt (table  9), because it is requiring a huge number of inputs on every step when heis do not gather vast number of information relating tt. therefore this tool is exceptionally intensive in data. usually, indicators in strategic plans value the activities of heis. there are not many indicators relating tt, so heis do not have huge information on that purpose. the maut method is not suitable for valuing the efficiency of ttp in heis. 86 l. kraujalienė. comparative analysis of multicriteria decision-making methods evaluating... table  9. advantages and disadvantages of the maut decision-making method (compiled by author, based on velasquez & hester, 2013) the maut method no advantages disadvantages 1 the maut method is taking uncertainty into account. the considerable volume of input is required at every step in order to record preferences of the decision-maker, and making this method extremely intensive in data. 2 it is comprehensive; besides, it can evaluate the preferences of every consequence in all calculation steps of the tool. the level of input measures and the massive number of data may not be available for a particular decision-making problem. 3 the maut tool is widely applicable in economic, water management, financial, actuarial, agricultural, and energy management problem-solving. all mentioned types of issues have significant amounts and uncertainty of available data, which should be enough to make the maut method a proper technique for decision-making. the precise preferences of the decisionmakers should be done. 4 this tool needs normalisation in order to eliminate the influence of various physical values on decision-making. stronger assumptions are requiring on every level. therefore, it would be relatively subjective and challenging to apply. table 10. advantages and disadvantages of the ahp decision-making method (compiled by author, based on velasquez & hester, 2013) the ahp method no advantages disadvantages 1 this tool is easy to apply. interdependence between variables and alternatives. 2 a scalable tool that easily adjusts in size to application in solving decision-making problems according to their hierarchical structure. due to the tool of pairwise comparisons, the ahp is able to be the subject to inconsistencies during ranking and judgment variables. 3 the ahp method is intensively comparing to the maut method. although, the ahp requires a quite significant amount of the data to implement pairwise comparisons suitably. the ahp method does not allow the user grading one instrument separately, however only in comparison with the all rest, without finding the strengths or weaknesses. 4 the ahp tool is widely used in performancetype problem-solving, corporate strategy and policy, public policy, resource management, political strategy and planning. resource management issues solve the limitation of rank reversal based on the limited number of alternatives. the ahp tool is appropriate to handle more significant problems making them perfect to handle issues, which are comparing the results between alternatives. the overall form of the ahp method is susceptible to reversal of the ranking function. due to the specific of comparisons, the supplement of alternatives at the end of the measurement process could lead to the reverse of the final results of rankings. 5 hierarchy structure can easily be adjusted to fit a lot of sized issues. business, management and education, 2019, 17: 72–93 87 the method of ahp (analytic hierarchy process) was analysed. the primary characteristic of this tool is pairwise comparisons, which are appropriate to compare many alternatives in the cases of different variables, serving for estimating the weights of the variables. this method is relying on the judgments of selected specialists-experts to derive the priority scales. the ahp (table  10) is the tool of pairwise comparisons, requiring the big amount of the data, therefore this tool is not suggested for the efficiency evaluation framework of ttp in heis. table 11. advantages and disadvantages of the cbr decision-making method (compiled by author, based on velasquez & hester, 2013) the cbr method no advantages disadvantages 1 this method is requiring a little effort for gaining the process of additional data the sensitivity to inconsistency in different data. 2 the cbr tool is not data intensive. it requires many cases. 3 minimum expenditure on maintenance of the data-system is needed, requiring little funding for maintenance. the cbr is implemented in such industries in a substantial number of existing previous cases (medicine, engineering designs, comparisons of businesses, vehicle insurance). 4 this tool can improve its ability over time when more and more cases are included in the maintaining data-system. 5 the cbr method can adapt to changes in the surrounding environment with its created and used database of a big number of cases. moving forward, the cbr (case-based reasoning) method is analysed in table 12. the cbr method is the tool retrieving the cases very similar to an issue from an existing datasystem of various variants. the cbr is proposing a solution for the decision-maker based on similar cases in the existing database (velasquez & hester, 2013). the cbr method (table 11) is not data-intensive, but it requires many cases and sensitive to inconsistency in different data. in the case of heis tt activities, there are different data in number, ratios, dimensions. therefore this cbr method is not suggested for an efficiency evaluation framework. the smart (simple multi-attribute rating technique) is one of the simplest forms of the maut method, conveniently converting weights to the actual numbers (velasquez & hester, 2013). the smart tool (table 12), analysed in table 12, due to it is a complicated framework, and only open, accessible data suitable for the tool, it is not suggested for the efficiency evaluation framework of ttp in heis. after analysing several presented multicriteria decision-making methods, the framework to evaluate the efficiency of ttp in heis is proposed. several methods are not suitable due to its disadvantages or application conditions, mentioned above after every method’s analysis. the framework of efficiency evaluation of ttp in heis is proposed next: fare method firstly integrated to identify the variables and their importance of ttp in 88 l. kraujalienė. comparative analysis of multicriteria decision-making methods evaluating... heis, when the topsis method is proposed to rank the variables by their importance on the process. the multimoora or the copras multicriteria decision-making methods are suggested to rank heis and to select the research sample. the dea method is selected to calculate the efficiency of decision-making units (heis). conclusions this research is suggesting the framework of evaluating the efficiency of decision-making units, in this case – heis, to value the performance of the technology transfer process. this is leading with searching for appropriate methods (tools) to measure the efficiency of technology transfer in heis. the higher education organisations are particular, and the activity of tt and commercialisation. heis in lithuania is on the way of developing the policy for initiation, protection and commercialisation of heis intellectual property in comparison with other countries abroad. after the implementation of the comparative analysis of economic decision-making tools, it is possible to propose the model to evaluate the efficiency of ttp in heis. this model is constructed from the complex of decision-making tools suitable to perform a particular function. thus, fare method is suggested to select the variables, estimate their weights and evaluate the importance on the ttp in heis. the topsis method is allowing to rank the variables and select the most critical variable for the research. the multmoora and the copras tools are suitable for ranking function in estimating the number of research sample composing from heis, which have valuable results in implementing the intellectual property management and commercialisation activities. the dea tool is entirely suitable for the table  12. advantages and disadvantages of the smart decision-making method (compiled by author, based on velasquez & hester, 2013) the smart method no advantages disadvantages 1 the maut method, all advantages is adapted. the procedure for determining work is quite difficult and not very friendly, considering the complicated framework for the user. 2 this method is allowing assignment techniques (absolute, relative, etc.) for any type of weight. 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(2018). evaluating construction projects of hotels based on environmental sustainability with mcdm framework. alexandria engineering journal, 57(1), 357-365. https://doi.org/10.1016/j.aej.2016.11.002 copyright © 2020 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. creation of a sustainable model for building and maintaining a relationship between universities and entrepreneurs santa zunda *, artūrs zeps , solvita strode faculty of engineering economics and management, riga technical university, kalnciema street 6, riga, latvia received 20 september 2019; accepted 16 january 2020 abstract. purpose – the article aims to analyse the best practices in industry-university collaboration and based on theoretical background and practical experiences of universities to provide a framework for building a sustainable industry-university collaboration model, which indicates processes and steps as well as an example of riga technical university on how to create and maintain such collaboration. research question – how to structure the activities for setting up the collaboration with industry based on the desired collaboration intensity. hypothesis – universities can effectively organise collaboration with industry if they understand what the specific achievable results they want to achieve are. research methodology – based on literature analysis, best practice and problems analysis of universities and riga technical university case analysis of university-industry collaboration, a model for improving collaboration with industry is proposed. findings – to establish an effective and productive university-industry collaboration university must apply a structured approach of communication and collaboration of all internal parties involved in the process, what can be done by using the sadi model for building a relationship between universities and entrepreneurs. for successful implementation of the university’s strategy of collaboration with industry-university must define the achievable results for such collaboration and apply the sadi model at the appropriate intensity level – basic, medium or high level. research limitations – such a model hasn’t been fully implemented, so the full spectrum of all activities and their performance hasn’t been tested yet, as the implementation of it requires the involvement of multiple university departments. as well a limited approbation of the model is done since it is tested within riga technical university. practical implications – the model can be used in different intensity levels according to the university’s strategical aims and desired achievable results from the collaboration with the industry. originality/value – the article supplements previous research done in the field of university-industry collaboration, providing an approach “sadi model for building a relationship between universities and entrepreneurs” on how to structure and organise the collaboration with industry within the university as well as provides structured approach on how to define activities to be implemented by university based on the desired outcomes form such collaboration. keywords: collaboration model, strategy, university-industry interaction. jel classification: i2, l2, m1, m3. business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 1: 33–55 https://doi.org/10.3846/bme.2020.11287 *corresponding author. e-mail: santa.zunda@rtu.lv http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://orcid.org/0000-0002-4886-3716 https://orcid.org/0000-0001-8371-7792 https://orcid.org/0000-0001-6543-3788 https://doi.org/10.3846/bme.2020.11287 34 s. zunda et al. creation of a sustainable model for building and maintaining a relationship... introduction quality and range of offers provided by university play a huge role in children and their parents’ choice for their future professional development. improved quality comes with higher financial costs which cannot always be covered by the university itself; therefore an essential step in universities’ development is to attract both financial and non-financial support from industry and to create a strong bond with industry thus improving university’s research and graduate career options. another vital aspect is the influence of higher education on national economics. contribution to national economics is made with study process when specialists are being prepared who will later become taxpayers and business owners. also, these specialists will bring their country’s name into the world with their research and valorisation activities, which will allow both public and private structures to introduce innovations and new products (zeps, 2016). universities of great britain, the united states of america and other countries calculate their influence on national economies. for example, in great britain universities in the period between 2010–2011 have contributed up to 3.3 billion pounds into national economics (northam, 2012). this contribution is made of business consultations, commercialisation of new technologies, training and consulting on various problems and other services which can be performed by the university’s teaching staff and researchers. summing up, it can be seen that relationship between universities and entrepreneurs is essential not only for universities gaining additional financial support for the development and attracting specialists to the study process, and entrepreneurs who will gain qualified workforce that helps them become not only more competitive but also to the national economics (mascarenhas et al., 2018). previous researches in spain, france and portugal show that out of 375 entrepreneurs who have made interest in cooperation with universities, only 10% ended up cooperating with them (fernández-lópez et al., 2019). looking at latvia, all possible cooperation directions are not defined together. also, one of the project’s “research of alternative models for improving study process and industry cooperation” conclusions is that there is lack of systematical approach on cooperation with entrepreneurs, and one of the possible solutions is to create unified model and methods for cooperation between universities and entrepreneurs (dubickis et al., 2017). 1. analysis of the best world practice in industry-university collaboration direct or indirect cooperation between industry and universities is implemented continuously. to create a model of collaboration, the authors have explored compiled information on the world-wide practices of university-industry collaboration and its types, as well as factors that promote and delay the development of collaboration. building a relationship between industry and universities begins with several meetings, mutual acquaintance, and mutual idea development. the more specific the meetings and negotiations are, and the less of extensive discussions, the better the results, however, the company’s interest to cooperate should be in focus (puura & varrak, 2016). it is crucial though to promote the process thoughtfully and without haste to achieve mutual trust, and not to ask for support during the first dialogue – it allows both sides to achieve better results, and if necessary to provide support based on successful collaboration to the date. business, management and education, 2020, 18(1): 33–55 35 table 1. university-industry relation types (source: perkmann & walsh, 2007) university-industry relation type description research partnerships mutual organisational arrangements for collaboration in the area of research and development research services the company orders activities, including contract research and consultations commercialisation of ownership issuing university’s intellectual property (patents) to companies scientific publications use of codified scientific knowledge in the industry academic entrepreneurship development and commercialisation of academic researchers’ developed technologies by founding companies (alone or together with partners) transfer of human resources training mechanisms of different content (for example, study options at the university for the company’s personnel, internship opportunities for last-year students and graduates in companies, permanent scientist transfer to companies informal interaction social networking and building relationship at conferences etc. perkmann and walsh (2007) in their study on university-business relations and open innovation have defined seven types (see table 1) thereof, by which the authors of the publication performed further analysis of world-wide known good examples. 1.1. collaboration in research as mentioned above, perkmann and walsh (2007) thoroughly distributed various forms of collaboration in research, and that shows its popularity and relevance. knockaert (knockaert et al., 2011, p. 783) also points out that modern entrepreneurs show an increasing interest in university open research results, which, in turn, provides universities with an opportunity to commercialise their research in the business environment. for example, according to studies on knowledge transfer in europe (arundel et al., 2013), commercial collaboration is the most popular activity in european universities and highly concentrated in biomedical research. it is only possible in cases when universities’ studies represent the area’s interests and are topical if an obstacle as determined in the research by kozlinska (2012) does not apply  – the gap between academical environment and real life. if the studies are too abstract, their implementation requires an inadequately sizeable financial contribution, and are too risky to be implemented under real-life conditions; entrepreneurs most likely will not be interested in these. in order to transfer the knowledge successfully, both sides need to consider each other as an equal partner, allowing to experiment and to unleash curiosity. rasmussen and wright (2015), nielsen and cappelen (2014) bruneel (bruneel et al., 2009, p. 860) notes the different understanding of time limitations is one of the obstacles – university’s research projects are generally long-term, while companies mostly want to see immediate results there is a contradiction here: on the one hand, the entrepreneurs want high-quality research, which will contribute to development of the company, on the other hand  – they want to perform this in the shortest terms and to get immediate results not providing with the reasonable period. 36 s. zunda et al. creation of a sustainable model for building and maintaining a relationship... from the business perspective, knowledge is considered to be a competitive advantage which may be maintained or created from scratch, so the knowledge and other intellectual property play a more significant role than physical assets (knockaert et  al., 2011, p. 783; quinn et  al., 2005, p. 82). university researchers in collaboration with companies achieve better results compared to business-unrelated studies because they forced to step out of their comfort zone and solve actual business environment challenges and problems (nielsen & cappelen, 2014). collaboration with entrepreneurs is motivating for researchers as well because it provides an excellent opportunity to add to their research programs. a similar conclusion was reached by schiller and liefner, mentioning the following as the most common motivational factors to university’s researchers: gain of additional income, and almost as much  – again of specific knowledge and experience. only 40% of the surveyed researchers pointed out additional funding for academic tasks and objectives as a motivating factor for collaboration as a result of commercialisation (schiller & liefner, 2007, p. 552). it can be concluded that a student’s involvement in studies or commercially looking for business opportunities in most cases is not the primary factor (nielsen & cappelen, 2014). the reason for this could be the students’ insufficient knowledge and not well-thought collaboration forms, the inability of researchers and university’s tutors to find the student’s place during the research, companies mistrusting the abilities of the students. direct collaboration between students and entrepreneurs is much less joint than industry-university collaboration, and to the authors’ point of view, the problem can be solved by creating awareness of each party’s role and abilities (nielsen & cappelen, 2014). lee put forward the hypothesis that taking into consideration researchers’ gained advantages and benefits from the research programs, it was likely to be a relationship between these incentives and research results (lee, 2000, p. 112). the higher the chance is for researchers to improve their qualifications and reputation, the better their work will be. rohrbeck, arnold and several other authors’ studies (american council in higher education, 2001, p. 27; rohrbeck & arnold, 2006, p. 4) show that there are other obstacles to collaboration in the field of research. in the survey of thailand’s companies and universities by shiller b.v. (mildahn & shiller, 2006, p. 36), representatives of universities referred to the reluctance of collaboration from the entrepreneurs and lack of available industry partners to the research activity. in the authors’ opinion, these claims clearly show a lack of reliability and communication, as the entrepreneurs marked the same reasons for lack of collaboration. representatives of the companies also mentioned universities’ in a comprehensive understanding of the companies’ policy as an obstacle of collaboration. in these cases, the main question is: what the company’s development objectives are and what the current situation in the industry is, as it is possible that stagnation started, and none of the parties is interested in the collaboration. many universities of the world have well-designed models for cooperation with entrepreneurs in the area of research in order to avoid the abovementioned communication problems. an excellent example of this is aarhus university in denmark, offering researchers three types of collaboration (see table 2). business, management and education, 2020, 18(1): 33–55 37 table 2. aarhus university offered collaborative research forms for companies (aarhus university, 2018) collaboration type explanation jointly funded research in this collaboration model, both parties shall make a financial contribution to the research project. it provides an opportunity for the company to invest a smaller amount of funds, but at the same time it also means that both parties shall have the right to joint project results, and the university will be able to publish the results of the research. ordered research the university offers research services under the market conditions. it means higher costs to the company, but it provides a greater impact on the results of the study, and the university may refuse/waive the right to publish it. industry phd course and industry postdoctoral programs industry phd student programs is a 3-year research project involving a phd student, the university and the company. the company employs and finances a particular student within the scope of the study for the whole period. post-doctoral program differs with time limits (depends on the project duration), and in this case, a research institution (institute, department, etc.) and the company are involved. the “adapter” platform was set up in estonia, a neighbouring country of latvia, and deals with the mentioned problems of communication between companies and universities. its primary function is to bring together entrepreneurs with the most appropriate researchers from 12 largest universities in order to carry out joint projects. moreover, in several areas students have an opportunity to apply for co-financing in the implementation of the projects (adapter, n.d.). this platform facilitates the long search process for the research project in which companies are usually spending much time and human resources. 1.2. academic entrepreneurship perkmann and walsh (2007) also distinguished academic entrepreneurship when researchers together with partners or alone found companies by commercialising technologies, and transfer intellectual property to companies by creating patents. the academic business field is very well-developed; more and more researchers’ discoveries are the basis for establishments of new companies. mascarenhas, based on the available literature on business universities (mascarenhas et  al., 2017) since 1990 to the present day, distinguished three groups: business universities that focus on changes in academic paradigms, examples; academic entrepreneurship which refers to commercialisation of knowledge, and technology-based enterprises or spin-offs. knowledge sharing and building relationships with the business community, as well as opportunities to participate in business activities in business incubators (companies’ mentors, solving of real-life situations and company problems, etc.) during the studies and free access to start-up formation etc. are the driving forces to re-profile high-shools into business universities and ensure higher education sustainability (bikse et  al., 2016; stal et  al., 2016; organisation for economic co-operation and development [oecd], 2012). today more and more universities shall endeavour to comply with these and other factors in order to ensure the development of business-driven higher education, and it is only a matter of time 38 s. zunda et al. creation of a sustainable model for building and maintaining a relationship... that this model is implemented at the majority of universities of the world, irrespectively of their primary focus. table  3 shows that there are many types of academic businesses, and entrepreneur involvement in it is inevitable. based on the hurst (1995) ideas of the organisation’s eco-cycle and entrepreneurship, brennan and mcgowan (brennan and mcgowan, 2006, p. 148) evaluated each category establishing the company’s goal through activities in each of these areas. the corporate initiative is a search for opportunities; innovation is a search for something new, while the strategic renewal is a search for advantage. table 3. academic business types (source: sharma & chrisman, 1999, p. 20) academic business category examples of academic business corporative initiatives internal: business research, spin-in companies, science parks external: joint initiatives, spin-out companies innovation e-training, patents, design rights, copyright, licensing, industry communication offices strategic renewal consulting, the teaching of corporate processes, knowledge transfer scheme, technology transfer, research groups, research student monitoring whatever the development phase the company is positioned in, in order to maintain and improve their competitiveness, the abovementioned facilities should be sought at all times. the extent to which academic business cooperation between companies and universities should be implemented is based on several factors – legislation, the motivation of both parties, access to funding, and others. university’s researchers are professionals in the field, however, faced with a great deal of bureaucracy and complex documentation may lose interest in the further development of the research. for example, in thailand, the collaboration between state universities and the industry is hampered by different bureaucratic restrictions, weak researchers’ incentive schemes, and lack of commercialisation system (mildahn & shiller, 2006, p. 32). a large number of companies do not want to be involved in joint projects because there is no certainty about intellectual property distribution (kozlinska, 2012). also, in this case, the solution could be communication between the parties and the creation of a unified system. establishment of university’s spin-off companies has become a popular way to earn with the research and to implement technology transfer. it leads to a growing interest from the scientific community and students who work in research and study academic research commercialisation (baldini, 2010, p. 864). using an idea or fragment from a current study, students, together with researchers or independently establish completely new independent companies. in italy, for example, one study concluded that university’s rational and monetary policy plays a significant role in the extent of researcher’s activity in spin-off development and that the most significant disincentive factor is university’s over-restrictive rules in respect of contracts for research and consultation activities (muscio et  al., 2016, p. 1386). similar as in other research projects, it is shown that much simpler and more easily understood administration policy reduces the administrative burden for researchers, and does not hinder business activities. business, management and education, 2020, 18(1): 33–55 39 1.3. collaboration in transfer of human resources the different forms of cooperation are referred to in transferring of human resources field; besides, they can create a benefit unilaterally, and in most cases for both sides. economic operators should be able to provide support for practical skills for both undergraduate students, as well as those who have already graduated (perkmann & walsh, 2007). tener indicated that his internship program for companies is as a significant collaboration strengthening form in which everyone wins  – students who obtain real-life experience under mentors’ competent supervision, and universities and businessmen who subsequently acquire well-prepared employees (tener, 1996, p. 159). in this cooperation, students have the opportunity not only to watch how the company operates but also to work together with the industry’s professionals and to learn from their experience. direct collaboration relationship between students and entrepreneurs is precious with spending time together so that the students may use theoretical knowledge in practice under the real working environment conditions (nielsen & cappelen, 2014). many companies worldwide have developed their internship programs. for example, accenture company at its branches throughout the world admits several hundreds of students every year for a six months long internship program, providing initial training, and later allowing them to work together with other employees in teams for different customer projects (accenture, 2018). besides, this internship practice is pre-paid, which provides the students with an excellent opportunity to obtain real knowledge and also receive financial support to cover daily costs. companies which are not so big often engage in programs offered by other companies or implemented in cooperation with other enterprises in the sector. thus, for example, a silicone valley internship program was founded, which involves information technology companies and start-up companies. this internship provides students with a 1-year internship in one of the silicone valley companies, as well as additional benefits. students are provided with a visa, covered travel expenses, as well as financial aid of 60000 $ per year ensured by the valley’s companies (silicon valley internship programme, 2016). human resources universities, in turn, can provide training on various topics for the company’s employees which would improve their qualification creating a contribution to the operation of the company. quinn states that nowadays, the value of knowledge has increased from cognitive skills to knowledge which encourages creativity (quinn et  al., 2005, p. 80). however, it shows that there is a paradox because usually, companies provide more resources for the development of employee cognitive skills than skills that would provide higher value (nielsen & cappelen, 2014). 1.4. an industry advisory committee besides the examples in table 1, unless it is not considered as a transfer of human resources, the authors have found another essential type of industry-university collaboration relationship – industry advisory committees which in the majority of cases are formed at every university. in order to achieve good results, all those involved should understand the relevance of the expected results. it is imperative to maintain mutual, accumulated for years trust and 40 s. zunda et al. creation of a sustainable model for building and maintaining a relationship... respect between the industry and the university management (tener, 1996, p. 159). tener argues that for each institution of higher education it is essential, therefore, to establish a strategy, where mission, vision and goals thereof are unanimous to all parties – the faculties, the management and representatives of the industry, and it can be achieved in the strategic management process (tener, 1996, p. 159). industry advisers participate in this process, and regular communication about the university’s strategic objectives and the status of its execution, tendencies in the industry should reduce previously defined problems, particularly, in research cooperation. for example, every department at the university of sydney has its own advisory board. such companies represent information technology faculty board as google, microsoft australia, amazon, pwc, and provides an insight to faculties and the university’s management on to the abovementioned industry development, as well as on skills that will be necessary in the future, offer internships for the students and resolution of real-life problems during a study process, help researchers to understand priorities and industry needs, etc. (the university of sydney, 2018). similarly, faculties of the university of wisconsin-madison have industry representatives at management boards, that in addition to the abovementioned assist the management not only with putting priorities in order to improve research and study quality but also with strengthening relationship with alumni and the industry (college of engineering university of wisconsin-madison, 2018). 1.5. informal interaction informal industry-university collaboration can be very different, for example, at conferences, congresses, industry fairs, etc. these interactions sometimes regarded as equally or even more important than the formal ones. (siegel et al., 2003, p. 41; d’este & patel, 2007, p. 1297) one of the most common types around the world is alumni associations. in the us, for example, graduate organisations are top-rated and it should be considered as a strategically important asset by the university management (martin et al., 2015). participants of these organisations are often middle or senior managers of large companies and can provide both financial and human recourses support to the universities. the university of bristol compiled data on their graduates, and 20% of the graduates started their own companies of which a large part supports the university (university of bristol, 2017). as it can be seen from table  4, the usa higher education institutions, where alumni organisations are particularly active, in 2017 have attracted by 14.5% greater amount of donations directly from the graduates compared to 2016, which contributed to more than onequarter of all the donations to the universities (council for aid to education, 2018). taking into consideration that these are private donations, this is a very high level. in the usa top10 universities, the most significant number of donations were from their alumni based on data of the years 2013 to 2015, on average 53% of all graduates have made donations to their universities (powell, 2016). it should be taken into consideration that donations by alumni do not include donations from the foundations to universities, and which in many cases are founded by alumni. thus, for example, the university of bristol in britain at the end of 2017 received the most significant donation so far of 10 million pounds from a graduate who established the foundation; this money will make it possible to build an entirely new student business, management and education, 2020, 18(1): 33–55 41 city (university of bristol, 2017). the following indicators show a very well-developed donation culture and a high sense of belonging to the university among the graduates. alumni networks are crucial during the studies when former students help current students with consultation, advice, exchange of experience, and also after graduation where contact networks and collaboration opportunities are formed for both business and other fields. 1.6. financial aid table  4 does not contain the widespread form of companies’ financial support to higher education institutions and their projects. matching gifts is particularly popular in the usa, which means duplicated or higher allocated funds from the companies in cases when their employees donate to a university project, grant or other purposes. the companies within the initiative have established a donation amount increasing factor or ratio, as well as maximum possible value. for example, google donation ratio is 1:1, and the amount of one donation co-payment differs from 60  $ to 6000  $. thus, in the research by karlan, dean and john about donations made in 2015 it was indicated that the possibility to increase the amount of donation increased the possibility of individual’s decision to donate by 22%, while the copayment ratio did not affect this decision significantly (karlan & list, 2007). this kind of a system among the employees increases the sense of belonging to their company, as well as promotes the development of joint donation culture. table  4 shows that, while in recent years, it has slightly decreased; however, about 16% of the usa universities receive donations from entrepreneurs. as mentioned a forehead, it is very likely that in many cases funds donated by companies are delivered to universities through various foundations, which are very common in the usa, that in many cases are established by the companies or university graduates. donations from such foundations account for a significant proportion of the total donation amount. table 4. voluntary support received by universities in the usa in 2016 and 2017, its sources and purposes (council for aid to education, 2018) 2016 2017 amount raised, mil. $ % of total amount raised, mil. $ % of total total support, $ 41.000 100 43.600 100 source alumni 9.930 24.2 11.370 26.1 other individuals 7.520 18.3 7.860 18.0 companies 6.600 16.1 6.600 15.1 funds/foundations 12.450 30.4 13.130 30.1 other organizations 4.500 11.0 4.640 10.6 purpose current projects 25.150 61.3 25.800 59.2 capital purposes 15.850 38.7 17.800 40.8 42 s. zunda et al. creation of a sustainable model for building and maintaining a relationship... 2. model of building cooperation between universities and enterprises at the end of the 20th century, etzkowitz and leydesdorff (stanford university, n.d.) formed the triple helix concept, which is the concept of relations between universities, companies and the government. it describes the role of each party, focusing on the development of innovations and economic potential in cooperation, not only on a specific activity, which is to be performed by each of the parties. the authors suggest a model called sadi (setting strategic priorities, analysis of activities and promotion of responsible persons, defining “to do” activities model, implementation and monitoring activities) that defines building relations with businesses by universities and colleges (see figure 1). the model has been made based on problems and barriers found in literature analysis of world practice in university-industry collaboration, most famous of them  – lack of communication (parties do not understand each other’s needs and goals), and no guidelines for such interaction, and riga technical university case analysis. 2.1. defining strategic priorities the first step in using this model should be choosing strategically important priorities in collaboration with entrepreneurs by the university’s highest administration. defining available resources and selecting ones suitable for promoting cooperation is of no lesser importance. the next step is defining the desired results to be achieved that the authors propose on three levels (table 5). within the basic level of relations, an enterprise concludes a general cooperation agreement with a university. referring to such an agreement can make further cooperation process more accessible and the enterprise’s highest management would not need to review figure 1. sadi model for building a relationship between universities and entrepreneurs (created by the authors) business, management and education, 2020, 18(1): 33–55 43 the performance or support of the joint projects. if necessary, the university contacts the enterprise with a request of supporting a particular project or activity whereas the enterprise contacts the university when it needs certain services  – arranging personnel training, performing contract research or contract work, etc. on the basic level, cooperation is mostly one-way and the winner is mostly one of the parties (see table 6) whereas the other party’s involvement is rather minimal. medium level relations involve more enhanced and structured cooperation on the university’s side which makes communication in addition to that more accessible for enterprises and offers broader possibilities for cooperation which is beneficial for both parties. besides the activities included in the basic cooperation level such as concluding a general cooperation agreement, providing financial support for the university and providing services to businesses, on this level of cooperation the university carries out two important activities for improving the communication process – forming a database enabling any university representative to obtain information about the current communication with the respective company and to make comments as well as creating a platform on the website for topic exchange, proposing discussions, etc. to make providing support easier and more convenient for enterprises, on this level, the university establishes a fund, granting it a social benefit status, and, if possible, affords to pay scholarships to students. already on the basic level, the universities involve students in providing services to enterprises in order to introduce students who are the most active in the respective areas and to give students a better understanding of the industry problems and updates. the higher level of building relations, besides the things mentioned above, involves only activities to be performed by both parties together from which not only the respective parties but also general social benefits. these activities are analysis of the industry needs and integration thereof into the university’s offer which would be beneficial not only for the respective enterprise but to the industry in general and also to the university’s students who would have a possibility to acquire education matching the employment market requirements; this also involves carrying out joint initiatives and projects. table  5. levels of the model for building a relationship between universities and entrepreneurs and achievable results in each of them (created by the authors) type of model achievable results basic level a comprehensive cooperation agreement, periodic, irregular receiving support for college projects and providing various services to business. medium level building enhanced structured collaboration, facilitating communication between entrepreneurs and educational institutions and offering broader cooperation possibilities and gains from them. higher-level forming enhanced, structured relations for achieving equal involvement of both sides and co-working in achieving the common goals. 44 s. zunda et al. creation of a sustainable model for building and maintaining a relationship... 2.2. analysis of activities and appointing officers in charge the next step already is within the competence of the university’s functional administrators. functional administrators should appoint the responsible officers who will carry out the activities. functional administrators should also define which of the activities specified in the model have already been carried out, how often and to what extent. it should be defined at which level the university currently is and what it lacks to achieve it to the full measure. functional administrators should also define how many resources improvement of each activity would take. 2.3. setting forth activities to be carried out the competence of the university’s functional administrators also involves defining activities that should be carried out and timing of performing these activities for the responsible employees, based on the activities defined at the previous stage already been performed and needed to be improved and the ones that should be implemented from the beginning. this timing should be set according to the rates of performance established by the highest administration. for instance, rtu highest administration can set as an achievable goal forming a reviewable database with all agreements signed with entrepreneurs, and the contents thereof within six months. the functional administrators can appoint the employees who will be responsible for processing information. 2.4. implementation and supervision of activities every university that decides to form relations with entrepreneurs according to this model, depending on the achievable level set by the highest administration, has a possibility to table  6. levels and activities of model for building a relationship between universities and entrepreneurs (created by the authors) activity type of model the winner of the relationship (u-university, e-entrepreneur, s-society) g en er al c oo pe ra tio n ag re em en t fi na nc ia l s up po rt pr ov id in g se rv ic es to bu si ne ss es r es po ns ib le p er so ns fo rm in g a da ta ba se c re at in g a pl at fo rm o n th e w eb si te in vo lv in g st ud en ts in pr ov id in g se rv ic es to en te rp ri se s es ta bl is hi ng a fu nd a na ly si s of th e in du st ry n ee ds an d in te gr at in g th em in to th e un iv er si ty ’s off er jo in t i ni tia tiv es a nd p ro je ct s basic level e→u, u→e medium level e→u, u→e, u↔e higherlevel u↔e, u+e→s business, management and education, 2020, 18(1): 33–55 45 choose to what extent each activity mentioned in table 6 can be carried out. the decision is taken based on available resources and possibilities. further, each section or activity to be implemented is described more detailed. 2.5. signing a collaboration agreement the university signs general collaboration agreements with new partners defining the rights and the duties of each party and specifying possible areas of cooperation: – regular and systematic involvement of the entrepreneur’s representatives in the university study process, which can be: guest lectures on the topics known by specialists in the course of the study process and teaching separate study courses; participation in improving study programs, proposing areas that need to be improved and solutions, including specific topics; visits to enterprises within and outside the study course; offering diploma paper themes for the last-year students; participation of the enterprise representatives in diploma papers’ evaluation boards; – the regular and systematic provision of internship to students during obligatory study internship and qualification internships, also to the interested persons who wish to take internships on their own during the time free from lectures; – granting scholarships to the best students in the area, thus motivating students to higher achievements; – granting financial and property support to university projects within the possibilities; – cooperation in research, working on solving problems typical for the area, improving the process efficiency, etc; – enterprise priority rights to the knowledge generated by the university and technologies in a specific area, etc; – rights of using the university’s infrastructure; – possibilities of using the premises of the enterprise and the university; – participation of the enterprise’s representative in the convention of counsellors, commenting about the decisions and proposals of the administration, giving advice on more efficient work of the university; – involvement of the enterprise’s employees who have graduated from the relevant university in the university alumni association, offering them respective discounts for attending the university activities, for the services provided by the university, etc. 2.6. raising funds irregular and periodic provision of financial support by enterprises to the university for carrying out various activities and projects which are usually conducted on the basis of the concluded advertisement, sponsoring and other agreements, prepared by separate structural units or student organisations. support is requested from time to time, and sometimes it is necessary within a rather short term, which does not guarantee that the enterprise will provide it promptly, even if the financing is available since preparation and negotiation of documents sometimes takes time. 46 s. zunda et al. creation of a sustainable model for building and maintaining a relationship... 2.7. providing services providing services by a university to entrepreneurs; that is not collaboration by nature, but a unilateral service for payment. universities can offer various contract researches and contract works to enterprises within the competence of the universities, arrange courses for enterprise’s employees, offer premises for rent for the enterprise needs, arrange conferences or post announcements of the enterprise. 2.8. appointing the persons (groups of persons) in charge the university’s administration appoints one full-time employee in charge of maintaining relations and cooperation with entrepreneurs. this person should possess knowledge of communication and marketing to be able to elaborate reviewable, attractive cooperation offers to businesses as well as to professionally communicate these offers to entrepreneurs. this person should be also pro-active and possess excellent communication skills, be proficient in languages in order to be able to communicate both with the domestic and international entrepreneurs and prospective partners, to participate in various technical exhibitions, conferences and seminars, to present the university’s achievements, topical projects, to share examples of good practice, etc. this person should also know the structure of the university, the competence and the possibilities of each structural unit in order to get the entrepreneur and the contact person representing the university together in case of specific questions and to continue negotiations on a more detailed level. besides the chief person in charge of cooperation with entrepreneurs, the responsible persons in charge of a particular field from each structural unit and faculty of the university should be appointed. the number of these persons depends on the size of the university and the number of its structural units that can offer cooperation possibilities to entrepreneurs. 2.9. creating a database the responsible person, together with the rest of the representatives of structural units creates a database administering all activities and communication with entrepreneurs. a similar example in the business environment is the model customer relationship management, however, in the case of the university, the direct purpose of the database is not selling but maintaining the relationship. the main sections that should be included in such a database are as follows: – information on cooperation agreements with entrepreneurs signed and valid by the moment of creating the database and information on: cooperation lines defined therein; current communication and cooperation activities (and their results) and the persons in charge of these duties – contact persons from the university; contact persons from the enterprise; enterprise budget planning schedule if available, enabling to request support at the right moment in case financial support is needed; – acquired and summarised information from each structural unit of the university on the enterprise, with which: business, management and education, 2020, 18(1): 33–55 47 any cooperation over the recent years (what type and what the results were); unsuccessful cooperation over the recent years (reasons why); – acquired and summarised information from each structural unit of the university on enterprises that are included in the list of desirable partners, but for some reason have not yet been contacted. 2.10. creating a platform the university places a separate platform or section “for entrepreneurs” in a place that is easy to see where: – information on the university is available, and its competence features – what makes it different from other schools are particularly highlighted; – descriptions of the offered study programs, including information on the schedule – information on subjects that students acquire each semester, information about internships time and length, approximate amount of lectures during each of the courses are available, enabling the entrepreneur as a prospective employer to plan and to contact particular students of particular study programs and to be informed on what they already have acquired and how much time should be devoted to work or internship; – all possibilities of cooperation with enterprises offered by the university (in research, study process, topical projects, for which support is needed, lists of accessible infrastructures, etc) are described; – contacts for each of the options mentioned in the previous clause are specified, ensuring the possibility of immediate contacting the responsible person when necessary; – for each of the possibilities above of cooperation, good examples or examples of cooperation performed with others by the present moment are mentioned; – discussion on topical themes of the industry are regularly proposed, success stories are published, entrepreneurs are informed on the newest researches, discoveries, etc. the created platform must be regularly updated, supplemented by new information, success stories, project analyses, reports, usage of finances received by the moment, etc. 2.11. creating a fund the university creates a fund with a social benefit status for promoting the university development that can administer receiving donations from entrepreneurs, making provision of financing less costly and more convenient. majority of higher education institutions in latvia are state budget institutions where the process of purchase of things necessary for carrying out projects is prolonged. in order to make the performance of different projects less time-consuming, usage of donations received by funds does not have limitations meaning that project performers – responsible representatives of the universities – can purchase services and goods easier, and thus save time which would be necessary for negotiations. the fund can also acquire rights to pay scholarships to students and academic personnel which is an attractive manner of cooperation for entrepreneurs. various motivating competitions for scholarships and awards provide an opportunity for an enterprise to direct this support as a donation as well as to make the company is known among students  – prospective employees. 48 s. zunda et al. creation of a sustainable model for building and maintaining a relationship... 2.12. analysis of industry needs and its integration into the offer taking into account rapid technology advancement, more and more companies need specialists possessing inter-disciplinary knowledge such as a business analyst with it knowledge or an entrepreneur with excellent analytic skills and high creative skills at the same time. this is an activity where both employers – entrepreneurs and higher education institutions – should get involved in, and from this, not only the involved party but society in general, including other businesses and current and prospective students would benefit. the university analyses the needs of the industry and the needed skills and qualifications of prospective employees and enhances the current study programs, creates new programs, interdisciplinary programs, etc., to ensure graduating specialists meet the market requirements. taking into account the estimated excess of specialists in humanities in the near years, it is topical to create programs with an option of re-qualification for current students as well as to ensure a possibility to replenish this knowledge for those students who have already graduated these disciplines in order to successfully work in the areas where shortage of specialists is more significant, particularly in engineering science, and to prevent the acquired knowledge from becoming unused. 2.13. joint initiatives and projects for solving problems topical for the industry, universities, together with entrepreneurs, set forth new initiatives nationwide, elaborate joint projects, programs, etc. such projects can be competitions and projects for motivating the current and prospective students and joint opinion articles in media, recommendations to management for solving industry problems, etc. in this activity, generating joint ideas and solutions is also very important. 3. riga technical university experience or steps towards implementation of the model in the case with riga technical university (hereinafter – rtu) collaboration with the industry – forms of collaboration, shape, defined priorities and goals, as well as their financial support instruments  – can be analysed from the point of valorisation. sustainable valorisation is one of the current university’s purposes under the terms of the third-generation (3g) university along with the first two goals: high-quality studies and outstanding research (under the terms of the second-generation (2g) university). the goal of the university’s sustainable valorisation is effective to transfer of technologies and innovative development environment that encourages the establishment of new technology companies and product development. rtu strategy includes the critical settings for rtu development for the period from 2014 to 2020, as well as determines performed activities and sharing responsibility for the performance of assignments. in order to achieve the objectives set, the strategy defines specific performance indicators. the leading indicators of sustainable valorisation are an annual number of patents, revenue from sold patents or licenses, the number of contracts with economic operators and other cooperation institutions, revenue from contracts with economic operators and other cooperation institutions in proportion to the rtu budget for research and established business, management and education, 2020, 18(1): 33–55 49 research-related companies. once a year the annual objectives and tasks are defined with clear performance indicators at each unit level. based on these regulations, the implementation of rtu strategy is provided and the annual report on the results is performed. 3.1. involvement of external partners under improvement of collaboration process of riga technical university during the regular exchange of opinions, the parties’ vision of university development is determined. working methods are applied under cooperation partners group – surveys, focus groups, panel discussions, seminars, forums, individual negotiations, discussions and other types of both direct and indirect cooperation is used to determine partners opinion and vision of higher education institutions cooperate with each of the groups. representatives from the industry participate in final exam committees, study programs are composed taking into consideration recommendations from the industry and social partners. representatives from the industry work at the university faculties and conventions or advisory committees. to ensure publicity and promote opportunities for collaboration, seminars, conferences, exhibitions, workshops, etc., as well as companies’ visits to the university and lecturer visits to the companies are organised. the available collaboration network is used by the university to improve and effectively apply existing knowledge, as well as to promote creativity and novelty. consequently, rtu collaborates with the industry in different ways and forms, in order to cover the broadest possible range of partners and in order to implement the rtu vision by 2020 to become the leading scientific and innovative university in the baltic states. latvian and foreign companies place orders and finance contract works for researches, expertise, consultations, development of new materials and technologies, assessment of technological solutions, product development, training of personnel, etc. collaboration projects are carried out – partnership in european union industrial research projects and participation in clusters and centres of excellence programs and research projects ordered by industry representatives, as well as in national research programs. technologies are being transferred and licensed, expertise, design development, prototyping and testing is performed. university provides support for business start-up and spin-off start-ups, product promotion to the market. there are internships provided by companies and student research work following the companies’ orders. rtu development fund together with companies performs scholarship competitions, for example, practical skills promotion grants. each year approximately 100 companies participate in the career days. the career center places job advertisements on its website. while applying regular and systematic monitoring and evaluating the execution of achieved indicators and set objectives, rtu has become a university with the most significant research contractor attraction of the industry in latvia. in 2018, 106 contracts with economic operators and other cooperation institutions were signed, 281 scholarship contests were carried out by supporting 776 scholarship holders to the total amount scholarships of 848,789 eur, which for the most part has been received from companies as funding. rtu is the first university in latvia that has managed to establish industrial doctoral program – new forms of cooperation with the industry, offering a promotion thesis studies in compliance with the company’s interests and needs which correlate to scientific research directions. 50 s. zunda et al. creation of a sustainable model for building and maintaining a relationship... 3.2. riga technical university challenges in collaboration with the industry and implementation of collaboration model despite the diversity and achievements of the collaboration as mentioned above types, rtu still faces with numerous challenges during the collaboration process with the industry, also discovered while analysing literature on the international practice – lack of capacity, a different understanding of time limitations, prioritisation challenges, costs, previous collaboration experience, stereotypes and administrative obstacles. development of collaboration with the industry is affected by fragmented research infrastructure in latvia and lack of research potential  – insufficient funding for product development, different development levels of companies, limited ability of latvian companies to finance contract work; companies do not form research and development units with highly qualified specialists, development of new products is performed in parent companies; if there are any, or are delegated to the research institutes of rtu, the infrastructure and competence is not always appropriate for prototyping companies. an equally important problem in addition to the factors mentioned above is institutional fragmentation of collaboration development and provision of services. namely, all these issues are addressed at totally independent units per their functions. within the duties of vicerector for science innovation and technology transfer center ensures intellectual property protection, promotes formation of innovation and new technologies friendly environment, cooperates with industry representatives and provides the best solutions for business development and scientific ideas commercialisation, while the design factory is a platform for innovations and business with a well-equipped prototyping workshop, highly-qualified team of experts and scientific support for entrepreneurs, managers and students in order to create innovative ideas, products with high added value and various engineering solutions. within the duties of vice-rector for development the business development department carries out promotion of lifelong education services, provision of training for corporate entities promotes cooperation with municipal institutions, while the alumni department serves as an information centre for the university graduates, attracts finances (scholarships for students, etc.) and promotes rtu. within the duties of vice-rector for studies career support and service department implements projects, supports the organization of guest lectures and seminars at the university. rtu development fund collaborates with different companies, organisations and individuals and offers scholarships for students, as well as attracts donations from companies and individuals for rtu project development. as far as possible, all structural units communicate with each other and exchange information analysing and arranging co-operation partners, prioritising areas of cooperation, allocate responsibilities within the cooperation for common goals. a perfect example is a collaboration between the design factory and rtu development fund that successfully started a student innovation grant program – a platform for cooperation between the industry and the students by promoting mutual involvement, development and innovation. the design factory implements the contents of the program, but implementation into real life is possible due to the development fund which ensures involvement and co-financing attraction from companies along with the european union funding. business, management and education, 2020, 18(1): 33–55 51 to minimise the effect of the above-mentioned factors, it is necessary to focus on cooperation, reinforcement and development of the necessary resources and expertise. rtu is currently working on the creation of a coordinated and unified communication system. in order to facilitate cooperation between departments, institutes, scientists and departments involved in the technology transfer process and to coordinate commercialisation process collaboration between the interested parties technology transfer and innovation council was established. the council will inform the parties participating in the commercialisation process of the companies’ demands and rtu’s offers, coordinates involved partners and helps rtu’s authorities to implement the commercialisation process and to develop collaboration with companies. rtu’s developed collaboration with the industry approach is shown in figure 2. a joint offer eliminates fragmentation and as a result, the scope covers the higher number of parties involved, besides, providing the targeted offer. various industry representatives communicate with multiple rtu departments and representatives about industry needs and the university’s potential for collaboration to get the services they need. the university internally accumulates, processes and coordinates industry demand to provide partners with quality services in research, commercialisation of ownership, transfer of human resource and others. it is a way of providing a frequent external service and meeting industry demand – a single point of contact as a synergy between different university departments through joint coordination, collaboration, kpi’s and tasks set to achieve this goal. ideally, it would be necessary to ensure full service and a one-stop-shop for business people and scientists in one place. experience, knowledge and information should be concentrated in one unit in order to create a new model for collaboration with the industry, not only based on the general sound practice principles but also on the current situation at the figure 2. model of rtu’s collaboration with industry (created by the authors) 52 s. zunda et al. creation of a sustainable model for building and maintaining a relationship... university, including the full range of services and involvement of all interested parties. for the identification of all the steps, it would be necessary to start with a more straightforward process – practices, career support activities, etc., which initially do not require a substantial financial and human resources from the company; however, this cooperation creates mutual trust for further implementation of financially and personally more involved projects. when there is a reasonable basic one may be developed in other directions by offering coordinated diversity. as a result, there would be new services offered with a higher added value. conclusions according to the literature analysis performed by the authors, the main problems in collaboration between entrepreneurs and universities is a) lack of structured communication with industry and internal communication between structures that implement collaboration and b) lack of a unified system for such cooperation at the same time categorising partners and activities aimed towards different partner target audiences, therefore authors have developed a model for enhancing cooperation and better relationship building. to effectively organise the collaboration with industry authors have introduced sadi model. this approach allows the university to evaluate the current situation in collaboration with the industry and define, based on intended achievable results of such collaboration, what else should be done. suggestions are provided on how university’s management should apply a model to build a structure for cooperation with industry, create an appropriate organisational and university-wide coordination structure, plan cooperation activities and monitor them, thus achieving the creation of a stronger bond with industry and promoting trust. implementation and approbation of the model in one of the leading technical universities in the baltics  – riga technical university  – proves that implementation of the model and its activities at the university can provide specific improvements, showing how to introduce the model slowly into the current complex system in order to improve communication with existing partners and develop new collaboration opportunities. further research for further research, authors suggest creating a formula for financial calculations to determine achievable sadi model level. the formula should include indicators such as available financial 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(2016). stratēģiskie risinājumi organizācijas ilgtspējīgai attīstībai un starptautiskai izcilībai: promocijas darba kopsavilkums. rtu izdevniecība. https://triplehelix.stanford.edu/3helix_concept this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: a.maciulyte-sniukiene@vilniustech.lt the eco-innovation impact on economic and environmental performance of eu member states alma mačiulytė-šniukienė 1*, dali sekhniashvili 2 1department of business technology and entrepreneurship, faculty of business management, vilnius gediminas technical university, saulėtekio al. 11a, lt-10223 vilnius, lithuania 2department of engineering economics, faculty of engineering economics, media technologies and social science, georgian technical university, kostava str. 77, ge-0160 tbilisi, georgia received 28 february 2021; accepted 18 march 2021 abstract. development of innovation is recognised as a most powerful tool for the economic growth of countries. however, their effects on the quality of the environment are still being debated. to achieve sustainable development, eco-innovation becomes significant. eu countries expand eco-innovation activities, but it is not clear whether its development achieves the goal of economic growth and improves the quality of the environment. purpose  – to present how eu member states perform in economic growth, environment and eco-innovation development and to evaluate eco-innovations impact on economic and environmental performance. research methodology – the random effect regression was used for investigation relationship between eco-innovation, economic growth and environmental performance. findings – eco-innovation development influences not only eu ms economic growth but also has a positive effect on environmental performance. research limitations – eco-innovations development and economic growth can be interdepended, but this research investigates just one-way dependence. granger causality test can be used for relationship assessment in the future. practical implications – the research results can be used for both the development of environmental policy and the policy of business support for eco-innovation implementation. originality/value  – study results confirmed previous assessment results on eco-innovation and economic growth and provided new knowledge of their effect on environmental performance. keywords: innovations, eco-innovations, economic growth, environment, eco-innovation index, environmental performance index. jel classification: o11, o31, 050, 051. business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 2: 212–228 https://doi.org/10.3846/bmee.2021.14497 https://orcid.org/0000-0001-6661-7407 https://orcid.org/0000-0001-8782-8430 https://doi.org/10.3846/bmee.2021.14497 business, management and economics engineering, 2021, 19(2): 212–228 213 introduction in recent times, politicians, the public, and, in parallel, researchers have been paying increasing attention to environmental quality analysis and initiatives to improve it. in response to environmental concerns, socially responsible businesses are developing new business and management models, new services or products, and new production processes that can protect and improve environmental quality. it means – implements eco-innovations to business activities. nevertheless, it remains unclear whether ongoing eco-innovation development activities are achieving their goal and significantly improving the environment’s quality. the development of innovations is generally considered to have a positive impact on business competitiveness, and in parallel, on the country’s economic growth, through capital accumulation and productivity growth. nevertheless, their development, especially eco-innovations, involves a significant investment, so it is unclear their return, especially in the short term. moreover, the extent of eco-innovation development varies between countries, and outcomes at the macro level may vary. analysis of previous studies revealed that most studies on eco-innovation development outcomes were conducted in developed countries (yurdakul & kazan, 2020), and the impact of eco-innovations on the economic growth and environmental performance in the eu member states (ms) is not thoroughly studied. scholars consider eco-innovations as a driving factor in eu member states. they analyse european eco-innovation performance from a global perspective, as well as key trends of the eu eco-innovation index (eco-innovation observatory, 2020), many of them assess the determinants of eco-innovation in the european union (andabaka et  al., 2019), especially in the new member countries, whose economies are characterised by low productivity and high intensity of greenhouse gas emissions (bartoszczuk, 2015; wielgórka & szczepaniak, 2019), but there is a research gap to determine whether eu ms that develop the most ecoinnovations also have the best environmental performance and whether the most developed eu ms are more eco-innovative than the less developed ones. given the fact that assessing the effectiveness of eco-innovation in a country provides important information about which countries are leaders or lagging behind, scientists emphasised the importance of measuring progress towards eco-innovation in different countries (rizos et al., 2015; loučanová & nosáľová, 2020; lesakova & laco, 2020; jang et al., 2015). although there are no studies that assess the impact of eco-innovation on environmental performance and economic growth to identify, which eu countries are lagging in developing eco-innovations, compare countries in terms of environmental performance. taking into consideration these facts and our insights, the study aims to present how eu ms performs in economic growth, environment, and eco-innovation development and evaluate the ecoinnovations impact on economic and environmental performance. to achieve this goal, we developed two random effects econometric models for panel data covering real gdp per capita and environmental performance index as dependent variables, eco-innovation index as an independent variable, and control variables. this research contributes to previous studies by providing new knowledge on the ecoinnovation effects. in parallel, it has a practical value by presenting recommendations 214 a. mačiulytė-šniukienė, d. sekhniashvili. the eco-innovation impact on economic and environmental... for environmental protection policy which is related to business support. as mentioned andriušaitienė (2020), domestic socio-economic development and global economic challenges and problems call for a review of the country’s economic and social policies. given recently identified environmental quality problems, the search for ways to address them solving by adjusting environmental policies is very timely. the rest of the paper is organised as follows: the first section is devoted to the literature review. we provided concepts of eco-innovation, systemise eco-innovation components, identified eco-innovation determinant; substantiated eco-innovations importance; discussed the relationship between eco-innovation development, economic growth and environmental performance; and impact transmission mechanism. the second section provides a research methodology, including the research model and data used. it also presents compositions of eco-innovation and environmental performance indexes that are used in research. the third section provides and discusses research results on eco-innovation, economic growth and environmental performance comparisons in eu ms, and on the relationship between them. the last section concludes the research results and provides recommendations for environmental policy. 1. literature review on the effects of eco-innovations 1.1. definitions and classification of eco-innovation the requirements for eco-friendly products and services are ever-increasing throughout the world, and consequently, eco-innovations have become a quite topical issue. at the same time, it is a challenge for the countries at both micro and macro levels, as it is necessary to produce more quality products at low costs and at the same time, it is necessary to bear certain expenses to realise environmental protection measures (fiore et al., 2018). an eco-innovation implies the reduced impact of man’s activities on the environment and maintenance of the environmental balance, better living quality, less unemployment and higher employment rates, job generation, maintenance of biodiversity, less use of natural and artificial materials and lower expenses in general (dogaru, 2017). consequently, eco-innovation can bring both economic and ecological benefits. this conclusion was made based on the studies by different scientists (king & lenox, 2001; zeng et  al., 2011; yurdakul & kazan, 2020), who analysed the ecological and financial-economic indices in their studies. it is clear that the companies will expand more investments in ecofriendly technologies and for environmental needs to as the social responsibility of the companies tends to increase customer satisfaction (díaz-garcía et al., 2015). it is clear that eco-innovation has a profound on business operations as it can improve outcomes, reduce costs and increase profits, also positively impact a company’s environmental performance (costantini et al., 2017). the term “eco-innovation” is often used in the scientific literature (schiederig et al., 2012), either in an ecological or in an economic context (díaz-garcía et al., 2015), but there is still a lack of studies considering the complex characteristics of eco-innovations as a system. business, management and economics engineering, 2021, 19(2): 212–228 215 an “eco-innovation” concept was first developed by fussler and james (1996) as the supply of new products and processes in order to reduce the negative environmental impact and yield benefit for consumers and businesses (hojnik & ruzzier, 2016). based on the determination of innovations, several studies (kemp & pearson, 2008) have defined “eco-innovation” as the development, management or use of a production or management method for products and services that is an organisational novelty and leads to a reduction in environmental pollution and other negative impacts. based on these approaches, the scientists (kemp & mainguy, 2011) draw the following conclusions: first, all resourceefficient processes are eco-innovations, since they are more environmentally friendly, and second, the term “eco-innovation” largely depends on the overall assessment of environmental impact and risks. as per another opinion, eco-innovation is new ideas, behaviour, products and processes helping reduce an environmental load. eco-innovation is any form of innovation to ensure sustainable development by reducing environmental impact and using natural resources more efficiently and responsibly. “the business case for eco-innovation” (united nations environment programme, 2014), it was proved that eco-innovative enterprises have a high potential for growth. on the other hand, the eu commission views eco-investments in view of sustainability, competitiveness and job creation. it was established that eco-innovation, which directly reduces the impact of production on the environment, also exerts an indirect positive impact in other sectors by means of various market operations. for an in-depth understanding of eco-innovations, the researchers (reid & miedzinski, 2008) consider it necessary to use a systemic approach, which means analysing the ecoinnovations at the levels of services, processes and company as well as at regional, sector, supply chain or generally, macro-economic level. as for their classification, we rely on the organisation for economic co-operation and development (2018), where two main types of innovations are considered instead of the four types described in the previous edition, in particular, product innovations and business process innovations instead of product, process, organisational and marketing. however, despite different opinions, eco-innovations are able to respond to modern environmental challenges, in particular: climate change, decreasing biodiversity, food insufficient, land degradation, lack of resources, global warming and other global and local problems (dogaru, 2020). in turn, eco-innovations depend on political decisions, effective legislative frame, resource availability, access to the sources of financing, the approach of the company management to eco-innovations and other factors (pansera & owen, 2018). the economic and social-environmental benefits of eco-innovations are extremely important both for companies and macro-economic policy, and it is not only necessary but is also an essential factor for sustainable economic development (dogaru, 2020). finally, it must be noted that the scientists’ (oltra & saint jean, 2009; hojnik & ruzzier, 2016; tamayo-orbegozo et  al., 2017) definition of eco-innovations incorporates two main factors: efficient and rational use of natural resources and reduction of negative environmental impact. consequently, we focus on these two aspects in our study – how the development of eco-innovation influences the economic growth and ecology of the countries. 216 a. mačiulytė-šniukienė, d. sekhniashvili. the eco-innovation impact on economic and environmental... 1.2. relationship between eco-innovation and economic growth and environmental performance today, many countries consider technological transformations and eco-innovations in particular as the way to solve modern economic problems and respond to environmental challenges. but everyone is well aware that eco-innovation has not only technological, institutional or economic aspects but also a cultural and political dimension. triguero et al. (2013) concluded that the consumers’ demand for ecologically pure products might force a company to develop eco-innovations. the study by kiefer et  al. (2017) results in evidence the importance of the consumers’ engagement and cooperation of other stakeholders for the introduction of eco-innovations. a number of scientific studies have highlighted the economic impact of eco-innovation from different perspectives (porter & van der linde, 1995). they outlined that the environmental response index can be seen as one of the leading indicators of competitiveness, as well-designed environmental standards can also stimulate eco-innovation. in addition to other driving factors such as regulation and tax incentives, there is additional revenue from the sale or licensing of technologies that stimulate eco-innovation. the next question to be explored is whether it is possible to obtain both environmental and economic benefits through eco-innovation. yurdakul and kazan (2020) considered this issue and concluded that eco-innovation positively affects both of them, which serves as a basis for studying the impact of eco-innovation on financial and environmental performance. studies accomplished in different countries and sectors of the economy confirm that eco-innovation has a positive impact on all areas studied in terms of economic and environmental performance (rabadán et  al., 2019; rennings et  al., 2006; nishitani et  al., 2017; vargas-vargas et  al., 2010; da silva rabêlo & de azevedo melo, 2019; cheng et  al., 2014; zhang & rong, 2019). it was found that eco-innovation not only improves the financial performance of companies (horbach et al., 2012) but also increases their competitiveness (da silva rabêlo & de azevedo melo, 2019). consumers demand, regulatory decisions and the interest of the other stakeholders strongly influences companies’ decisions to adopt eco-innovation as they play not only an important role in the implementation of eco-innovation (roscoe et  al. 2016; santos et al., 2017) to improve the financial indicators of companies (horbach et al., 2012), but it also increases their competitiveness (da silva rabêlo & de azevedo melo, 2019). as the investments in eco-innovations are stimulated by the policy instruments (law, funding, subsidies, etc.), educational policy and technological system, organisational capabilities, cost economy and etc. (kiefer et al., 2017) and given the fact that countries have different regulations, funding, subsidy, monitoring systems and law, the outcomes of eco-innovations are different too. today, the developed countries surpass the developing countries, in terms of eco-innovations, as almost all ecological and social variables of eco-innovation develop in them, while only two of six environmental and six social variables were identified in the developing countries (lopes santos et al., 2019). an eco-innovation has a positive impact on the ecological activity, which is reflected in by the prevention of environmental pollution, resource-saving, efficient use, recycling and engagement of waste in economic turnover and has an indirect positive impact on the company’s economic and financial indicators (cai & guangpei, 2018). business, management and economics engineering, 2021, 19(2): 212–228 217 the role of eco-innovations during foreign market operations is important too. in this process, eco-innovations play an intermediary role; the internationalisation leads to eco-innovations, and both (the internationalisation and the eco-innovations) have a positive impact on the company’s successful operation (hojnik et al., 2018). thus, within the context of our research, we can conclude that investing in eco-innovations leads to better environmental and economic performance, increased sales, profit and market share, as well as better competitive advantage and strength image of the company. consequently, our aim is to examine the impact of eco-innovations on the economic and environmental activities of the eu countries within the given context. 2. research methodology and data in order to evaluate and compare eco-innovation performance and development in the different eu member states, eco-innovation observatory (2016) developed the eco-innovation index (eco-ii). this index covers five sub-indexes that involves 16 various indicators (see figure 1). eco-innovation activities eco-innovation outputs resource efficiency outcomes eco-innovation inputs governments environmental and energy socio-economic outputs revenues in eco-industries and circular economy (% of total revenue across all companies) eco-innovation index r&d appropriations and outlays (% of gdp) firms having implemented ia aiming at reduction of material input per unit output (% of total) total r&d personnel and researches (% of total employment) total value of green early stage investments (usd/capita) firms having implemented ia aiming at reduction of energy input per unit output (% of total) iso 14001 registered organizations (per mln. pop.) eco-innovation related patents (per mln. pop.) eco-innovation related academic publications (per mln. pop.) eco-innovation related media coverage (per number of electronic media) material productivity (gdp/ domestic material consumption) water productivity (gdp/ water footprint) energy productivity (gdp/ gross inland energy consumption) ghg emissions intensity (co2e/ gdp) exports of products from eco-industry (% of total export) employment in eco-industries and circular economy (% of total employment across all companies) figure 1. structure of eco-innovation index (source: based on eco-innovation observatory, 2016) 218 a. mačiulytė-šniukienė, d. sekhniashvili. the eco-innovation impact on economic and environmental... environment performance index environmental health, 60% ecosystem vitality, 40% c li m a te c h a n g e s, i n -8 , 2 4 % b io d iv e rs it y & h a b it a t, i n -7 , 1 5 % e c o sy st e m s e rv ic e s, i n -3 , 6 % f is h e ri e s, i n -3 , 6 % w a te r re so u rc e s, i n -1 , 3 % p o ll u ti o n e m is si o n s, i n -2 , 3 % a g ri c u lt u re , in -1 , 3 % a ir q u a li ty , in -3 , 2 0 % s a n it a ti o n & d ri n k in g w a te r, in -2 , 1 6 % h e a v y m e ta ls , in -1 , 2 % w a st e m a n a g e m e n t, i n -1 , 2 % figure 2. structure of environment performance index (source: formed by authors based wendling et al., 2020) this index illustrates eco-innovation performance and allows for complex evaluation of eco-innovation development. the overall index score is calculated by the unweighted mean of the 16 indicators. it demonstrates how well eu ms performs in eco-innovation compared to the eu average equated with 100 (index eu = 100) (eurostat, 2020a). eurostat provided eco-innovation index data for the 2000–2019 period (eurostat, 2020a). data from 2010 will be used for the evaluation of eco-innovations development. for assessment of eu ms environmental performance, we decided to use the environmental performance index (epi). epi covers 32 indicators divided into 11 categories and provides countries ranking according to the health of environment and vitality of ecosystem (wendling et al., 2020) (see figure 2). this index is calculated every two years from 2010 onwards. therefore, for data compatibility, we used 2010, 2012, 2014, 2016, 2018 data for both indicators when we evaluated the impact of eco-innovations on environmental performance. real gdp per capita we used as an indicator reflecting countries economic performance and development. developing models for impact assessment, we included control variables in models because not only eco-innovations but also other factors can influence environment performance and economic growth. one of the critical economic development sources is a new business creation (jian et al., 2021). since businesses are related to co2 emissions and level of pollution, from our point of view, the number of businesses in the territory can influence the countries environment. to capture those effects, we included a new business density indicator (new business registrations per 1000 per working year (15–64 ages) people) as a control variable in both models. in case of evaluating eco-innovation effects on economic growth in base of previous studies results as control variable we include: i) expenditure on research and development % gdp that reflect innovation development (freimane & bāliņa, 2016); ii) trade openness expressed as the ration international trade (export + import) to gdp (fetahi-vehapi et  al., 2015); iii) business, management and economics engineering, 2021, 19(2): 212–228 219 foreign direct investment % gdp (musah et al., 2018; mačiulytė-šniukienė & davidavičienė, 2020; cicea & marinescu, 2021); iv) initial gdp per capita to control eu ms differences of the depended variable. usage data expressed as a percentage of gdp allow us to eliminate the effect of eu ms size differences on results. in the first stage of empirical research, we analyse eco-innovation and environment performance, economic growth of eu ms, and its changes over the 2010–2019 or 2010–2020 period (depending on indicator). this analysis allowed us to identify which countries are lagging in developing eco-innovations, compare countries in terms of environmental performance, and make insight into the links between these indicators and economic growth. in the next stage of the research, we have ranked eu ms according to eco-innovation and environment performance indexes, as well as according to real gdp per capita using the last available data (2019 for eco-ii and real gdp per capita, 2020 for epi). also, we have calculated the difference between ranks. it allows us to determine whether eu ms that develop the most eco-innovations also have the best environmental performance and whether the most developed eu ms are more eco-innovative than the less developed ones. the last stage of the empirical research was intended for assessing the impact of ecoinnovation on environmental performance and economic growth. we used eu ms panel data, including the united kingdom, because most of the period analysed uk was eu ms. the random effects model (re) econometric models were developed for the evaluation of the eco-innovations impact on environment performance [1] and economic growth [2]. ( )( ) ( )( ) ( )( )1 2 , ,, ,, ln _ ) ln ) ;i t i ti t i ti tln epi eco ii nbd= a +β +β + ε + ν (1) ( ) ( )( ) ( )( ) ( )( ) ( )( ) ( )( ) ( )( ) 1 1 , 2 3 4, , , 5 6 , ,, , _ ln _ ) ln _ ) ln ) ln & ) ln ) .ln ) t i t i t i t i t i t i ti t i t ln gdp pc gdp pc eco ii nbd r d to fdi −= a +β + β +β +β + β +β + ε + ν (2) where: – logarithmic dependent variables: – ln(epi)(i,t) – environment performance index in the country i in year t; – ln(gdp_pc) (i,t) – real gross domestic product per capita in the country i in year t. – logarithmic independent variable: – ln(eco_ii) (i,t) – eco-innovation index in country i in year t. – logarithmic control variables: – ln(nbd)(i,t) ( )1 ,ln i trgdpβ  – new business density in country i in year t; – ln(gdp_pct-1)(i,t) – previous years real gross domestic product per capita in country i in year t; – ln(r&d)(i,t)  – expenditure on research and development % gdp in country i in year t; – ln(to)(i,t) – trade openness ((export + import)/gdp) in country i in year t; – ln(r&d)(i,t) – foreign direct investment % gdp in country i in year t. – a – constant. – 1 2 3 4, 5 6 , , , ,β β β β β β – elasticity coefficients, reflecting the impact of independent and control variables on the dependent variable. 220 a. mačiulytė-šniukienė, d. sekhniashvili. the eco-innovation impact on economic and environmental... – εi,t – random error (heterogeneity specific to a country). – νi,t – random error (specific to a particular observation). all variables will be logarithmic to obtain the coefficients of elasticity. considering that epi index data are available for 2010, 2012, 2014, 2016, 2018, realising compiled econometric models, we used the data of all indicators of this period. 3. research results and discussion 3.1. results of the economic and environmental performance and eco-innovation development analysis to present the economic and environmental performance of eu member states and how ms performs in development eco-innovations, the analysis of real gdp per capita, epi, and eco-ii dynamics for the ten years was conducted (see table 1). the analysis reveals that in 12 countries out of 28, real gdp per capita was higher than the eu average in 2010, and in 11 countries  – in 2019. all these countries joined the eu before 1995. the highest real gdp per capita in 2010 was generated in luxembourg, denmark, and sweden. by 2019, the situation in this group of countries has changed little – the second position in terms of real gdp per capita took ireland, third position  – demark. in this group of countries, real gdp per capita rose by 6–14%, except ireland, where real gdp per capita increased by 63.64%, and italy, where real gdp per capita fell by 0.04%. more significant changes have occurred in the new eu ms that joined the eu in 2004 and later. in this group of countries, real gdp per capita increased by 16–55%, except cyprus, where real gdp per capita rose by 5%, and greece, where real gdp per capita decreased by 12%. the highest growth is recorded in lithuania (54.81%), romania (47.10%), latvia (46.83), estonia (41.35%), poland (38.30%). although eu ms’s economic situation is improving in almost all countries, the environment quality is deteriorating in some of them. the value of epi has decreased in 13 countries over the 2010–2020 period. the biggest negative change took place in latvia, sweden and slovakia, where epi’s value respectively decreased by 10.9, 7.3, and 6.2 points. the biggest positive changes have occurred in belgium (15.2 p.), luxembourg (14.5 p.), denmark (13.3). but are these changes related to the development of eco-innovation? the eco-ii value has increased in 17 eu ms, has decreased in 10 countries, and in sweden remained stable over the period analysed. although countries’ position according to the value of eco-ii has changed, in the top ten positions at both 2010 and 2019 are the same countries: luxembourg, denmark, finland, sweden, austria, germany, uk, italy, netherlands, and france. this fact allows us to suggest that countries with a better economic performance developing eco-innovation more intensively. this is also seen in table 2. table 2 provides eu ms ranking according to eco-innovation index, environment performance index and real gdp per capita results, and differences between ranks. differences between countries rank according to eco-ii and real gdp per capita reveal that most developing countries do not necessarily invest the most in eco-innovation. for example, in terms of real gdp per capita, ireland took second place between eu ms in 2019, but in terms of eco-ii took 13th place. in terms of real gdp per capita, cyprus took business, management and economics engineering, 2021, 19(2): 212–228 221 14th place, but in terms of eco-ii took 26th place. nevertheless, in many countries, the position according to economic and eco-innovation development does not differ much. this fact confirms the presumption of the existence of an interaction between indicators. however, it does not answer whether the outcome of eco-innovation ensures a positive return on economic growth. table 1. results of the real gdp per capita, epi, and eco-ii dynamic analysis in eu ms (source: authors calculations based on eurostat, 2020a, 2020b; yale center for environmental law & policy [ycelp], 2020; and socioeconomic data and applications center [sedac], 2020 data) country gdppcє, 2010 gdppcє, 2019  ∆є  ∆% epi, 2010 epi, 2020 ∆ ecoii, 2010 ecoii, 2019  ∆ belgium 33330 35940 2610 7.83 58.10 73.30 15.2 109 85 –24 bulgaria 5050 6840 1790 35.45 62.50 57.00 –5.5 31 34 3 czech r. 15020 18330 3310 22.04 71.60 71.00 –0.6 74 96 22 denmark 43840 49720 5880 13.41 69.20 82.50 13.3 149 146 –3 germany 31940 35840 3900 12.21 73.20 77.20 4.0 134 123 –11 estonia 11150 15760 4610 41.35 63.80 65.30 1.5 49 73 24 ireland 36770 60170 23400 63.64 67.10 72.80 5.7 100 97 –3 greece 20150 17740 –2410 –11.96 60.90 69.10 8.2 43 75 32 spain 23040 25200 2160 9.38 70.60 74.30 3.7 105 104 –1 france 30690 33270 2580 8.41 78.20 80.00 1.8 109 107 –2 croatia 10520 12450 1930 18.35 68.70 63.10 –5.6 91* 72 –19 italy 26930 26920 –10 –0.04 73.10 71.00 –2.1 105 112 7 cyprus 23400 24570 1170 5.00 56.30 64.80 8.5 62 56 –6 latvia 8520 12510 3990 46.83 72.50 61.60 –10.9 51 86 35 lithuania 9050 14010 4960 54.81 68.30 62.90 –5.4 47 82 35 lux. 79160 83640 4480 5.66 67.80 82.30 14.5 112 165 53 hungary 9960 13260 3300 33.13 69.10 63.70 –5.4 69 54 –15 malta 16440 21800 5360 32.60 76.30 70.70 –5.6 67 73 6 neth. 38470 41870 3400 8.84 66.40 75.30 8.9 117 110 –7 austria 35390 38170 2780 7.86 78.10 79.60 1.5 127 130 3 poland 9400 13000 3600 38.30 63.10 60.90 –2.2 40 59 19 portugal 16990 18590 1600 9.42 73.00 67.00 –6.0 71 100 29 romania 6200 9120 2920 47.10 67.00 64.70 –2.3 48 57 9 slovenia 17750 20700 2950 16.62 65.00 72.00 7.0 87 94 7 slovakia 12560 15860 3300 26.27 74.50 68.30 –6.2 43 62 19 finland 35080 37170 2090 5.96 74.70 78.90 4.2 139 145 6 sweden 39950 43900 3950 9.89 86.00 78.70 –7.3 143 143 0 uk 29830 32910 3080 10.33 74.20 81.30 7.1 116 118 2 average 24164 27831 3667 20.67 69.62 71.05 1.4 100 100 8 note: *data of 2012. 222 a. mačiulytė-šniukienė, d. sekhniashvili. the eco-innovation impact on economic and environmental... table  2. rank of eu ms according to eco-innovation index, environment performance index, and real gdp per capita (source: authors calculations based on eurostat, 2020a, 2020b; ycelp, 2020; and sedac, 2020 data) country eco-ii, 2019 rank according to eco-ii epi, 2020 rank according to epi difference on rank* real gdp per capita, 2019 rank according to gdp difference on rank** luxemb. 165 1 82.30 2 –1 83640 1 0 denmark 146 2 82.50 1 1 49720 3 –1 finland 145 3 78.90 6 –3 37170 7 –4 sweden 143 4 78.70 7 –3 43900 4 0 austria 130 5 79.60 5 0 38170 6 –1 germany 123 6 77.20 8 –2 35840 9 –3 uk 118 7 81.30 3 4 32910 11 –4 italy 112 8 71.00 15 –7 26920 12 –4 netherl. 110 9 75.30 9 0 41870 5 4 france 107 10 80.00 4 6 33270 10 0 spain 104 11 74.30 10 1 25200 13 –2 portugal 100 12 67.00 19 –7 18590 17 –5 ireland 97 13 72.80 12 1 60170 2 11 czech r. 96 14 71.00 14 0 18330 18 –4 slovenia 94 15 72.00 13 2 20700 16 –1 latvia 86 16 61.60 26 –10 12510 25 –9 belgium 85 17 73.30 11 6 35940 8 9 lithuania 82 18 62.90 25 –7 14010 22 –4 greece 75 19 69.10 17 2 17740 19 0 estonia 73 20 65.30 20 0 15760 21 –1 malta 73 21 70.70 16 5 21800 15 6 croatia 72 22 63.10 24 –2 12450 26 –4 slovakia 62 23 68.30 18 5 15860 20 3 poland 59 24 60.90 27 –3 13000 24 0 romania 57 25 64.70 22 3 9120 27 –2 cyprus 56 26 64.80 21 5 24570 14 12 hungary 54 27 63.70 23 4 13260 23 4 bulgaria 34 28 57.00 28 0 6840 28 0 differences between countries rank according to eco-ii and epi reveal that in countries with more intensive development of eco-innovation, the environment’s quality is better. a more pronounced difference between the country’s position under the eco-ii and epi is reordered only in latvia, which took 16th place in terms of eco-ii and 26th position in terms of epi. nevertheless, it can be assumed that eco-innovation development has a positive impact on the environment. this assumption is further verified by regression analysis. business, management and economics engineering, 2021, 19(2): 212–228 223 3.2. results of the economic and environmental performance and eco-innovation development analysis the random-effects model for panel data was developed for estimation eco-innovation impact on economic growth and environmental performance of eu ms (formula 1 and 2). the results obtained after the realisation of the models are presented in table 3. table 3. the results of evaluations the impact of eco-innovation on economic growth and environment performance in eu ms random-effects (gls), using 112 observations random-effects (gls), using 140 observations included 28 cross-sectional units included 28 cross-sectional units time-series length: minimum 2, maximum 4 time-series length = 5 dependent variable: l_gdp_pc dependent variable: l_epi coefficient std. error z p-value coefficient std. error z p-value const −0.0173 0.1422 −0.1216 0.9032   const 3.7443 0.1435 26.1000 3.88e150 *** l_eco_ii 0.0685 0.0261 2.6240 0.0087 *** l_eco_ii 0.1196 0.0314 3.8000 0.0001 *** l_rd 0.0046 0.0149 0.3112 0.7557   l_nbd 0.0024 0.0121 0.2006 0.8410 l_to 0.054 0.0148 3.6550 0.0003 ***   l_fdi_in −0.0022 0.0042 −0.5242 0.6001   l_gdp_ pct-1 0.9468 0.0147 64.2600 <0.0001 *** l_nbd 0.0065 0.0071 0.9144 0.3605 mean dependent var 9.894 s.d. depended var 0.62 mean dependent var 4.28 s.d. depended var 0.14 sum squared resid 0.3719 s.e. of regression 0.06 sum squared resid 2.44 s.e. of regression 0.13 log-likelihood 186.22 akaike criterion –358 log-likelihood 84.93 akaike criterion –163 schwarz criterion –338.64 hannan-quinn –350 schwarz criterion –155 hannan-quinn –160 durbin-watson 1.5802 durbin-watson 1.82 note: ***indicates significance at the 1% level. the estimations results are in line to prove our presumptions because we observed that eco-innovation development has a positive effect on both economic growth and environmental performance. inconsistent with previous studies on economic growth, we also find that a higher level of trade openness positively correlates with economic growth. it is not a surprising result, but surprising that we did not find evidence for a significant effect of r&d expenditure and inward fdi on economic growth. the relationship between new business density and economic growth, as well as environmental performance, is not significant. nevertheless, the study’s main findings made it clear that the development of eco-innovation in the eu should be encouraged and supported. european commission (2020) carries eco-innovation support initiatives via a variety of programs: eu framework programme for research and innovation (horizont 2020), eu funding instrument for the environ224 a. mačiulytė-šniukienė, d. sekhniashvili. the eco-innovation impact on economic and environmental... ment and climate action (life), programme for the competitiveness of enterprises and small and medium-sized enterprises (cosme), european structural and investment funds (esif). but these programs included support not only for eco-innovations development, and only part of the support funds is used for projects related to eco-innovation development. considering that the eu support programming period (2014–2020) ended, and ec is setting new support priorities and directions, it is important to pay attention to the need for an independent eco-innovation support program. conclusions through literary review on empirical studies we found evidence that eco-innovations help the countries to improve growth potential, create new opportunities and help the business sector to reduce expenses, strength a company image among its customers, investors and stakeholders, improve cost proficiency, increases sales and profit, expand market share and achieve sustainable competitive advantage. eco-innovation has a positive effect on environmental protection, on the efficient use of resources, waste recycling and their economic reuse, helps to save natural and artificial resources, allows companies to achieve both economic and environmental benefits through the low price, leads countries to be more competitive and achieve environmental sustainability. but there are still differences even between eu member states and sectors of the economy in promoting and introducing eco-innovations. within this context, we evaluated the eco-innovations impact on economic and environmental performance in eu member states. in all eu ms, the economic situation in terms of real gdp per capita has improved over the last ten years, except greece and italy. the economy grew faster in the new eu countries that joined the eu in 2004 and later. these results are not surprising because new eu ms have a big potential for growth, and old eu ms have already reached a high level of development and have exploited the potential for intensive growth. although economic prosperity is growing in almost all countries, the development of eco-innovations is intensifying just in part of countries. the value of the eco-innovation index has decreased in ten countries comparing 2019 with 2010. the intensity of innovation development decreased the most in belgium, croatia, hungary, and germany. judging by environmental performance index, environment quality in belgium and germany is satisfactory, but croatia and hungary, according to this index, is in the 23rd and 24th position among eu ms. these countries, including countries where the performance of the environment is particularly deteriorating (latvia, sweden, portugal, bulgaria, croatia, and malta), should develop strong policies to improve the quality of the environment and one of the ways could be the promotion of eco-innovation. although the extent of eco-innovation development varies across the eu, the overall impact of its development on economic growth and the quality of the environment is significant and positive. these results broaden the knowledge about the impact of eco-innovations not only on economic indicators but also on the state of the environment. it also complements the results of previous research carried out at the micro and industry level, and highlights the importance of eco-innovation development. business, management and economics engineering, 2021, 19(2): 212–228 225 considering those findings, including the fact that the environmental quality is not improving in all counties, the development of eco-innovation in the eu should be encouraged and supported. although the ec supports the development of eco-innovation through various funding initiatives, ec has to initiate an independent eco-innovation support program. references andabaka, a., sertić, m. b., & harc, m. 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(2014). green innovation and firm performance: evidence from listed companies in china resource. journal of cleaner production, 64(1), 81–90. https://epi.yale.edu/ https://doi.org/10.3390/su12083167 https://doi.org/10.1016/j.jclepro.2011.05.002 copyright © 2019 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: aiub_adnan@live.com business, management and education issn 2029-7491 / eissn 2029-6169 2019 volume 17 issue 2: 286–308 https://doi.org/10.3846/bme.2019.11274 does market react to tax reduction news? an empirical study on corporate tax reduction of bangladesh in 2017-18 atm adnan * department of business administration, bgmea university of fashion and technology (buft), dhaka, bangladesh received 28 september 2019; accepted 27 november 2019 abstract. purpose – this study tries to investigate the capital market reaction to the corporate tax reduction announcement (37.5% from 40%) in bangladesh for publicly listed banking, insurance and financial institutions of 2017-18. methodology  – this study applied an event study approach to identify any significant average abnormal returns as well as cumulative average abnormal returns of all the publicly listed banks, insurances and financial institutions around the announcement period. findings – insignificant average abnormal return (aar) experienced in case of banking and insurance industry on event day, except the financial institutions which have generated a statistically significant abnormal negative return on announcement day. the combined aar of all three sectors has also generated statistically insignificant return around event windows which suggest that investors did not consider tax reduction news as valuable information for investment decision nor considering it as an essential factor of share value. limitation – the study did not consider any possible extraneous variable that could result in insignificant reactions. practical implication – the findings of this research would considerably contribute to the financial and economic policy formulation while taken into consideration the possible impact of the policy over the capital market of bangladesh. originality – this study makes a considerable input to the research in the area of taxes linked to the behavioural finance applying the unique variable of investor’s reactions. keywords: tax reduction, corporate income tax, capital market, event study, abnormal return, cumulative abnormal return. jel classification: g11, g14, g18. introduction the key intention of this paper is to study the degree to which corporate tax rate deduction by 2.5 per cent for banks, insurance and fi’s in national budget of bangladesh 2018-19 https://doi.org/10.3846/bme.2019.11274 https://orcid.org/0000-0002-0340-1737 business, management and education, 2019, 17(2): 286–308 287 influence equity trading. the existing corporate tax policy applies 40% of the tax rate on publicly listed banks, insurance firms,  and financial institutions, while non-listed entities functioning in similar industries are obligated to pay 42.5% of the levy. the primary objective of initiating this reduction in corporate tax is to allow a more competitive investment environment. the tax reduction in these sectors appears to provide an incentive for investors and corporations to increase profitability and capitalisation. if investors properly admit and interpret the link between the corporate tax reduction and the potential revenue return and risk vulnerability of banking, insurance and financial institutions, it should be displayed around the announcement period in their equity earnings. proof on the instantaneous reaction of the tax rate changes on equity value will assist the researcher to comprehend how tax rates reduction affect investor’s decision in equity investment while tax rate differentiation exists among industries. adjustment or changes in the corporate tax rate may have noteworthy impact on the equity market and hence expected to be a vital aspect in the configuration of financial policy (rigobon & sack, 2003). however, small findings have come into light regarding the extent of the investor’s reaction to the tax policy change in context of the developing market (grammatikos & yourougou, 1990). this study applies an event study technique based on the immediate changes in stock market returns to measure the reaction of tax reduction. the association linking tax policy and financial securities is one of the arguable issues in the finance and capital market research ever since (modigliani & miller, 1958) prominent research paper with reservations proved that corporate taxes have an influence on firms’ value, the model have been extensively developed by integrating corporate taxation in analyzing the effect of tax rate revision on both firms and equity value. however, the findings are somehow contrasting. brennan (1970), cutler, poterba, and summers (1988), elton and gruber (1970), litzenberger and ramaswamy (1982) exhibited either hypothetical or factual confirmation that corporate tax adjustment influence equity prices. on the opposite side of the tax and equity valuation debate (black & scholes, 1974; miller & scholes, 1982) argued that taxes are insignificant to equity values. in terms of the specific industry study (grammatikos & yourougou, 1990) investigate the consequence of the 1986 tax restructuring on banks’ share and come up with the result that the tax reform did not negatively influence the banking sector. cutler (1988), downs and tehranian (1988) respectively evaluate the consequential effect of the 1986 tax alteration and the 1981 economic recovery tax revision on equity value. their findings exhibit that 1981 tax reform had no consequence on equity value whereas the outcome of the tax revision of 1986 on stock prices was indecisive (alshammari, 2012). nevertheless, the significance of the tax rate on equity prices has been positively established by number of considerable studies such as, e.g. ayers, lefanowicz, and robinson (2003), blouin, raedy, and shackelford (2002), dhaliwal, li, and trezevant (2003). additionally, contemporary research endeavours try to identify whether the changes in tax rate has an influence on equity value such as, e.g. stejskalová (2016), wagner, zeckhauser, and ziegler (2018). therefore the tax reduction effect on equity valuation and equity investment decision emerges as one of the contemporary issues to be investigated. the outcome of this study exhibits that there is no significant abnormal return experienced in case of banking and insurance industry on event day, except the financial institutions which have generated a statistically significant abnormal return on announcement day. 288 a. adnan. does market react to tax reduction news? an empirical study on corporate tax reduction... the combined abnormal return of all three sectors has also generated insignificant abnormal return. these empirical outcomes leave behind unanswered query regarding what the tax information proposed to the market, and whether the tax information was effectively adjusted in equity value. so, this can be argued with the reservation that, equity investors did not consider tax reduction news much worthy. alternatively, it can be generalised with provision that corporate tax reduction does not significantly contribute to the value of the publicly traded equity which is non-conforming to the findings of miller and scholes (1982). however, here to be taken into consideration that the announcement event also has two drawbacks; it influenced predictions about several factors apart from corporate tax revision, and the specific tax policy that would be finally passed is not certainly known (grammatikos & yourougou, 1990). this study contributes to the current tax-accounting research in several important ways. whereas maximum of the investigations has dedicated to the developed nation such as usa or eu as identified by forster (2005). this research article is one of the limited one delivering experimental proof for developing country like bangladesh. besides earlier capital market researchers have included tax application in the area of mergers and acquisition. for instance hayn (1989) investigate market feedback around the acquisition period. the paper exhibited that both target and bidder market return associated with the announcement are motivated by tax aspects of the target firms. other extensive studies explore the impact of capital gains taxes on share pricing. such as poterba and weisbenner (2001) finds increased trading number and lower equity prices for ipo winners after being eligible for capital gains tax relief consistent with the findings of p. brown, ferguson, and sherry (2010) in australian context. this research is one of the considerable attempts to carry out asset pricing associated study of the tax reduction effect to a specific industry, however, as the magnitude of the capital market in bangladesh stays lower compared to the other developed (ceic, 2019). the probable impact of equity price movements on the bangladeshi economy expected to be less influential compared to developed markets. nevertheless, considering the prominence of the capital market in the financial ecosystem of bangladesh is likely to expand notably in future, the effect of equity price movements on the economic and financial progress should also expand. the findings of this research would considerably contribute to the financial and economic policy formulation while taken into consideration the possible impact of the policy over the equity valuation, investor’s reaction and as a whole over the capital market of bangladesh. the remainder of the study is progressing as follows. in section 1, an overview of the prominent literature has been done, which has covered the findings and analysis of the tax implication on the investor’s perception and equity value of the publicly traded corporations. section 2 encompasses the development of research questions, hypothesis development. methodology of the study is discussed in section 3. the empirical result and analysis of corporate tax reduction news effect on the investor’s reaction identified on the abnormal stock returns in the banking, insurance and financial institutions are discussed in section four. finally, the conclusive remarks, limitations and opportunities for further studies are conferred in last section. business, management and education, 2019, 17(2): 286–308 289 1. literature review even though there has been a significant number of prominent studies available on the association between the dividend and investment tax policy and market value of the stock but very few empirical researches has been carried out to identify the effect of corporate tax policy changes on stock price movement. this section of the paper will review some of those prominent papers and try to draw a research question & hypothesis. traditionally two methods have been used to identify the tax reform implication on the market value. the first method is “the cash flow method” where the after-tax income is analysed to evaluate the tax reform effect while sometimes integrating the reform-driven demand swing into the analysis. the key focus is to analyse the changes in the tax liabilities/payment on variation in the profitability of the firm. although the cash flow method appropriately focuses on after-tax profits, it disregards several broad symmetrical effects. these limitations are emphasised in the “asset price model” which focuses on the variation in the value of current assets from the changes in tax rate and potential tax liabilities. the exclusive result on share price is however indefinite, based on specific modification of cost presumption. the “asset price model” actually presents cross-sectional anticipation regarding the reaction to tax policy news (cutler, 1988). tax rates are considered to be major determinants of share price movement that has been exhibited in several studies such as sialm (2009), baltagi, li, and li (2006), whitworth and rao (2010). these studies primarily tried to identify whether tax liability has any influence on the value of the share. hence it seems to be the appropriate variable to analysis. cutler (1988) in his study to identify the stock market response to the 1986 tax act (usually acknowledged as the second of two reagan  tax  cuts) proposed a diverse conclusion regarding the effect of tax modification. initially, there are very insignificant number of microeconomic determinants for the estimation of the asset price model of tax reform, although the re-estimation of the stock price due to the variable taxation on existing and new investment and the lower charge of existing depreciation allowances might proved to be practically significant. consecutively, there is little confirmation of positive reaction to variation in cash flows, or major feedback to the tax reform news more broadly. the statistical test of both variances and covariance of abnormal returns constantly decline the assumption of big, instantaneous adjustment in share prices. moreover, reasonable clarifications for the negligible changes might not be the result of the tax restructuring procedure. this finding exhibited an inefficient pricing of the market or inefficient market hypothesis. relatively contemporary study by michaely (1991) argued that alteration in macroeconomic determinants could not clarify most of the change in stock price; therefore, the small response to the tax news possibly will be the result of the general abnormality of share price resulted from economic fundamentals. several prominent studies relating to corporate tax have shown a strong association between the tax liability and share price such as hirshleifer, lim, and teoh (2004), ryan and taffler (2004) exhibited that declining of tax liability will result into a hike in share prices. another study by jolana stejskalová (2017) not only concentrated on the alteration in tax rate but also on the news about the tax liability and its effect on the capital market. 290 a. adnan. does market react to tax reduction news? an empirical study on corporate tax reduction... the degree to which taxes imposed on investment influences the market value of shares is critical to corporate appraisal and taxation strategy and is an excellent topic of research in the field of accounting, finance and economics. however, the empirical pieces of literature propose contradictory hypothesis on how adjustment in tax charges on capital gain changes share prices. the empirical findings on capitalisation of capital gains tax theory such as m. h. lang and shackelford (2000) and collins and kemsley (2000) argued that stock prices would climb when anticipated capital gain taxes are decreased. while different perspective also prevails such as klein (1999), m. h. lang and shackelford (2000) exhibited that by alleviating the lock-in consequence, tax reduction might reduce investors reservation value and decline share value. the tax-irrelevance hypothesis such as miller and scholes (1978) predicts that marginal shareholder is natural by the alteration in capital gains tax rate and therefore expect no changes in stock value. lastly, harris and kemsley (1999) in their empirical testing of “dividend tax capitalisation hypothesis” rule out the chances that capital gains taxes could influence the stock prices by presuming that firm’s profit is fully disbursed to investors as dividends and overlook the probable capital gain appraisal consequence appear in secondary market transaction. a notable number of contemporary practical researches on the consequence of capital gains taxes on share value are indecisive, for instance amoako-adu, rashid and stebbins (1992) exhibited that there is the very negligible amount of fluctuation in share price over dividend income while the canadian government introduced the $0.5 million exclusion from capital gain in early 90s. though, the study conducted by m. h. lang and shackelford (2000) discovered that corporations with superior dividend generation ratio faced a less significant price reduction than small dividend-generating corporations while the exclusion was brought down to $0.1 million afterwards in the early ’90s. there have been persisting debates amongst financial market researchers regarding the powerful effect of the tax charges on corporate payouts on universal share value. prominent studies by elton and gruber (1970) exhibited the ex-post payout day reactions of every day share prices as a fact that variable tax charges made shareholders to undervalued the taxable cash dividends compared to gains from price differences. the researchers also claimed that the general shareholder who desires to sell around the ex-post dividend date is unresponsive between offloading the shares on the ex-post and ex-ante dividend dates. in continuation to the prior study (elton, gruber, & rentzler, 1984) observed ex-post payout day returns of a considerable number of firms listed in new york stock exchange found that the parentage of changes in stock price on ex-post dividend days is less than the amount of the payout. researchers additionally discovered that the ‘payout-price change ratio’ is positively associated with the dividend yield. this is coherent with the tax clientele effect which states that shareholders in high marginal tax environment prefer to keep less dividend disbursing shares or the other way around. the researchers claimed based on their observation of yearly payout pattern that the implicit tax range descends almost steadily with increasing yield. however this research argument of elton and gruber (1970) regarding the explanation of ex-post dividend declaration day income has been challenged by several researchers, among them the prominent study of grinblatt, masulis, and titman (1984) argued that anomalous postdividend announcement day returns happen due to a number of non-tax factors, for instance business, management and education, 2019, 17(2): 286–308 291 ‘share dividends, stock splits, and tax free cash disbursement’. therefore, the study tried to impose the probability that the relative return on shares of post-dividend day do not manifest general tax charges for investors, other than it could be associated to transaction expenses or due to a bigger abnormality on ex-disbursement day. similar studies carried out by barclay (1987) investigated the ex-post dividend declaration day reaction of universal share market value before the execution of the ‘federal income tax’. the study found that share price prices decline by the whole margin of the dividend on postdividend period around the ex-ante tax phase which is constant with the tax-client theory. this outcome differs with the results of investigation applying more contemporary share price figures that undoubtedly proved that marginal shareholders are considered capital gain more valuable than dividend income. the study conducted by getry, kemsley, and mayer (2003) to observe the stock price reactions to dividend taxation in context of ‘real estate investment trusts (reits)’ found that market value of a corporation’s assets and its share price varies on firm-specific tax features. their practical work encompasses around four hundred observations from nearly ninety firms covering the time frame of seven years while restraining the nontax determinants revelled that every unit of tax basis is linked to an added nine to twenty per cent of equity value. this result serves as a yardstick for measuring the effect of dividend taxes on equity value in more broader circumstances, where business taxes are measured, payout strategy is more flexible, and corporations can employ tax-preferential stock repurchases in replace of tax payable dividends. p. r. brown, clout, and ferguson (2015) examined the market response to the preliminary declaration of the proposed resource super profit tax (rspt) and succeeding rspt policy-associated declaration. they examined the market feedback of the 612 australian large firms in material and energy sector by analyzing the daily stock prices during the time period of 2008 to 2010 and found that firms experienced negative cumulative abnormal return (caar) in response to the awaiting tax reform which might specifically aim at the profitable manufacturers in the materials and energy division. prior event studies conducted to exhibit the impact of the tax reform on share values have not been predominantly effective in authenticating a strong market reaction. such as cutler (1988) in their research of the consequence of the ‘tax reform act 1986’ on u.s. share value, discovered very negligible collective market response (correlation of 0.036 with a t-statistic value of 0.057) and established that news related to tax restructuring is undifferentiated from usual market anomaly. the researcher presented two possible clarifications regarding the minor response to tax restructuring news, firstly the probable events might have been highly expected, or secondly the tax adjustment is realised to be transitory hence not significant in a present worth perception. another important research by gadarowski, meric, welsh, and meric (2007) studied the critical incidents related to jobs and growth tax relief reconciliation act of 2003 (jagtrra), exhibited several key propositions regarding the dividend appraisal and payout strategy. analysing the abnormal yields for a significant number of sample corporations around the period between initial proposals of jagtrra to final enactment into law, they found that corporations with substantial dividend yield generate higher income around the time frame. the researchers clarified this as a verification that personal shareholders cannot freely evade dividend taxation, and they are the marginal stockholders of dividend-disbursing firms following 292 a. adnan. does market react to tax reduction news? an empirical study on corporate tax reduction... the events. these interpretations are constant with findings of elton and gruber (1970) regarding tax-clientele theory and the post marginal investor proposition studied by boyd and jagannathan (1994). this study also reveals that taxation on dividend also influences the manager’s capability to control agency costs. additionally, researchers also exhibited that dividend disbursing corporation’s experienced lower abnormal return compared to non-dividend disbursing entities. this outcome suggests that stockholders anticipate non-dividend disbursing corporations to react more strongly to a payout tax cut than dividend-disbursing entities, and this is coherent with the free cash flow proposition (jensen, 1986; l. h. lang & litzenberger, 1989), and the findings of the practical investigation of business reactions to jagtrra by j.  r.  brown, liang, and weisbenner (2004), chetty and saez (2005). a general assumption could be drawn from the findings of this study is that a significant tax reduction in dividend disbursement eventually made the dividend-paying firm’s stock more lucrative to new investors enough so that they would become the fresh marginal shareholders in dividend disbursing shares. if the dividend tax deduction is unanticipated that might result dividend-paying shares to generate real inconsistent income. the logic behind this hypothesis is that the newer marginal shareholders appraise dividend disbursing share more than that of non-dividend disbursing shares resulted in unusual surge in value dividend stocks more than the old marginal investors, resulting in an unexpected rise in the market prices of dividend disbursing shares. several other studies have applied event study methodology to assess the capital market reaction towards the tax reform acts of 1997 and 1998. such as blouin, raedy, and shackelford (2000) examined the share price response of the internal revenue service restructuring and reform act of 1998 (irsrra) proposing decrease in the longstanding capital gains holding phase by applying research pattern that measures variances in stock price reaction of investors while limiting undiversified macroeconomic variables that influence all industrial segment. the study revealed that reducing the holding time initiated a forced selling that eventually pushes down stock market value. generally, the findings in these studies are coherent with the special excise of capital gains influencing specific corporations’ value. the outcomes suggest that share value reacts to changes in capital gain although stock price capitalised predicted capital gains levies. strong empirical proofs have been exhibited by wagner et  al. (2018) that anticipation of a significant corporate tax reduction noticeably influenced the income return of the share. especially, corporations having high-level effective tax charges and excessive outstanding tax burden had benefited, whereas firms having outstanding tax resources ensuing from carrying forward net operating losses had gone down. the study also identified that the capital market’s response towards the foreign corporations was pessimistic, possibly exhibiting the anticipation of an adverse tax policy for overseas revenue. there are several important variables which might have a significant influence in the capital market and can have the predictive characteristics of price variance of shares. the primary factors such as dividend policy, taxation policy, legislative frameworks, industrial output, etc. are considered to be the vital aspects in the anticipation of capital market variability (balvers, cosimano, & mcdonald, 1990; chan, hamao, & lakonishok, 1991). as far as the methods of identification of the market reaction are concerned, some study implied questionnaires based approaches like (charoenrook, 2005), however, the predictive value seemed to be lower business, management and education, 2019, 17(2): 286–308 293 in this method due to the high subjectivity and less reliability (da, engelberg, & gao, 2014). another method has been the application of proxy variables. in this case market response has been exhibited through the significant unusual/abnormal returns of the stock to specific events news (mian & sankaraguruswamy, 2012; penman, 1987). 2. research question and hypothesis development the effective tax rate on publicly-traded and non-publicly traded banks, insurance and financial institutions has been proposed to reduce by 2.5% from the exiting tax charges on june 7th, 2018, in the budget proposal before parliament by finance minister of bangladesh which shall be taken in effect from july 1st, 2019. this particular announcement should be taken as favourable information for the banking, insurance and nbfi industry so that we could anticipate a positive reaction from this industry. the main research question is to identify whether there is any significant stock price reaction to the tax reduction proposal. in efficient markets any significant tax restructuring news declaration would be reflected through the price response of associated industries (in case banks, insurances and nbfi’s). negative market price adjustments of stocks would expose the possibility of an adverse effect of the tax reforms act on industries earning capacity and/or risk exposure. conversely a positive response would entail that banking, insurances and nbfi were anticipated to significantly capitalise the tax reduction to enhance the profitability and shareholders wealth. the most usual investigation of the feedback to tax information is the analysis of the variation in cumulative stock prices. the cash flow theory assumes that decrease in tax charges/ liabilities significantly affect/increase the firm’s profitability. thus, investors might interpret tax reduction news as a positive signal for the firm’s management and their best interest. however, several prominent studies applying event study method to analyse the market reaction of tax news found inconsistent results. such as positive association between tax news and stock prices have been exhibited by baltagi et  al. (2006), edwards, lang, maydew, and shackelford (2004), howton and howton (2006), hu (1998), lightner, morrow, ricketts, and riley (2008), umlauf (1993) whereas, amromin, harrison, and sharpe (2008), gallemore, maydew, and thornock (2014), hanlon and slemrod (2009), hill, kubick, lockhart, and wan (2013) found a negative association between tax news and the aggregate market value of the corporations. moreover, no significant market reaction to tax news has been found by amromin, harrison, liang, and sharpe (2005). these inconsistencies guide to the following hypothesis. null hypothesis: h0: no significant market reaction is associated with tax reduction announcement. alternative hypothesis: h1: significant market reaction is associated with the tax reduction announcement. note: proxy variable for the market reaction is the abnormal stock returns of banking, insurances and financial institutions associated with tax news. 294 a. adnan. does market react to tax reduction news? an empirical study on corporate tax reduction... 3. methodology 3.1. event date: as this paper intended to identify the possible market reaction from banks, insurances and financial industries towards the tax reduction announcement, 7th of june 2018, the budget presentation day in which the actual tax reduction proposal has been proposed by the finance minister was selected as an event date. 3.2. data collection: the paper has only considered the directly affected industries by the tax reform proposal. there are total 30 (thirty) publicly traded commercial banks, twenty-three financial institutions and forty-seven insurance companies were assumed to be directly influenced by the corporate tax reduction announcement. the total populations of 100 listed firms were considered for the event study. the daily stock price to calculate income return of individual firms as well as the daily returns of the market (dsex index) from april 01 2017 to may 23, 2018 were collected from the dse archive. 3.3. aar and caar measurement to calculate the effect of tax reduction on share price, this paper investigated the surplus returns triggered by tax reduction news. the market model (binder, 1998; mackinlay, 1997) (see equation (1)) has been used to calculate the expected returns (usual return exclusive of the event consequence): it i i mt itr r=α +β +ε . (1) note: rit is expected return, αi means intercept, βi is the beta coefficient (slope), and rmt is the market return. it i i mt itr r= α +β + ε . in order to calculate the individual stock return as well as the market returns logarithmic form (see equation (2)) was used: 1 ln tt t p r p −   =      . (2) note: rt is individual stock return, pt is current price, pt-1 is prior day price. two hundred and forty-five trading-day phases were considered to estimate the intercept and beta (slope) factor by applying the ordinary least squares regression of the stock return against the market index (dsex) return. the estimation phase started 245 days preceding the budget day and continues up to the tenth day before the announcement. if the declaration of tax reduction induced a strong positive response by the shareholder, the actual return will be considerably higher than the estimated return. it is a short term event study; the author thinks that in inefficient market the market reaction could be slower than expected; that is why ex-post 10 days event window has been considered. abnormal returns (arit) were calculated for t-10 ex-event and t+10 post-event days by using the following formula (see equation (3)) (watts & zimmerman, 1986). an extended event period business, management and education, 2019, 17(2): 286–308 295 has been considered due to the probabilities that market could have projected the tax reform given the status of the economy at the point of the policy reform: ( ) ( )it it i i mt it itar r r r e r= − α +β − . (3) the average abnormal return (aar) is computed by averaging the individual event day’s abnormal returns of all the listed firms by applying the subsequent formula (see equation (4)) to assess the statistical magnitude of deviation: 1 1 n t it i aar ar nt = = ∑ . (4) for a better analysis of the abnormality total event period is sregated into three different event windows such as t–10 to t–1 (prevent windows), t0 to t+1(event window) and t+2 to t+10 (post-event window) for which cumulative abnormal return has been calculated (see equation (5)): ( ) 2 1, 2 1 t tt t t car ar=∑ . (5) cumulative average abnormal return (caar) is calculated for each event windows by using the following formula (see equation (6)): ( )1 2, 1 1 n itt t i caar car n = = ∑ . (6) 3.4. hypothesis testing in this study t-test (anderson & darling, 1954; savin, 1984) has been applied to test the proposition made earlier. a statistic of this type is widely exercised in earlier event studies such as adnan, (2018), adnan, hossain, adnan, and hossain, (2016), bessembinder and zhang (2013), dissanaike (1994), giaccotto and sfiridis (1996). average abnormal returns (aar) and cumulative aar are computed and tested at 99% and 95% significance level. arr and caar value more significant or less than 0 (zero) with statistical significance (t static value at 99% and 95% significance level) signify the positive or negative investor’s reaction towards the tax reform news (see table 1). in both scenarios the alternative hypothesis will be proved. to test the hypothesis the following formula has been applied: / it car it caar t car n ∑ = σ √ , (7) where: t = t-stat, car = cumulative abnormal return, σ = standard deviation of returns, n is number of observations. table 1. decision rule of two-tailed test (lind, marchal, wathen, & waite, 2000) criteria decision -t-table <= t-stat <=t-table cannot reject null hypothesis t-stat < -t-table reject null hypothesis t-stat > t-table reject null hypothesis 296 a. adnan. does market react to tax reduction news? an empirical study on corporate tax reduction... 4. results and findings the most rational analysis of the responses to tax reform announcement is the change in cumulative share price. while the cash flow proposition expects a notable increase in share value from decline in tax rate, the assessment of asset price model is quite indecisive. the result and discussion section are segregated into four parts. in the first segment, market response from the banking sector has been analysed, followed by the investor’s reaction from the tax reduction announcement towards the insurance sector. the third part is dedicated to analyse the capital market reaction of financial institutions sector, and the last part analyses the combined market reaction of the three sectors to the tax news. 4.1. market response of banking sector to tax news industry-oriented examinations of events analysis are performed on the entire industry. this is because demand swing from the tax rate changes would probably be concerted on industry segments as well as entities within the industry might be quite analogous to assess general industry behaviour (shleifer, 2000). the analysis of the banking sector’s reaction to the tax news generally explores that the news of corporate tax reduction did not considerably influence market price of the banking stocks. table two and figure 1 exhibits the average abnormal return (aar) of the banking stocks for the ten ex-event days and post-event days of the actual event date (altogether twenty days phase). the overall pre-event abnormal stock returns of the banking companies are contrary to the tax news although most of the negative returns are statistically insignificant. out of the ten ex-event dates six dates have generated negative returns for instances day –10, – 9, –7, –6, –3 and –2 of which day –9 and day –3 have been statically significant. the actual tax announcement event day (0) has also resulted statistically insignificant positive arr. within the pre-event phase, only day –1 and –8 have generated statistically positive return. overall the pre-event returns are very inconsistent proving negative probabilities of any prior public policy information leakage about tax reduction. the post-event phase has also shown a negative response towards the tax reduction news verified by the significant negative arr on post-event dates. among the 10 post-event days the next three days have resulted positive arr but statistically insignificant. conversely day 6 and day 7 have shown statistically significant negative arr reflecting the view that shareholders are not considering the tax reduction news important. the outcomes are constant with two perspective about the market’s point of view regarding tax reform. however, none of the prospective looks very credible. initially, the events that have taken into consideration possibly have not affected the views of shareholders. such as, the continuous dialogues with the interest groups by finance minister regarding the tax reform before the budget proposal might have made market participants sure about the tax reduction, or the significance of the tax reduction has decreased to the investors due to the other direct financial benefits provided to the concerned sector (shane & stock, 2006). the cumulative average abnormal return (caar) has also been calculated for 3 separate event windows which has been presented in table  3. both the pre-event (t-1 to t-10) and the post-event window (t2 to t10) have generated a statistically insignificant negative return (caar) representing investor’s negative reaction to the event news. business, management and education, 2019, 17(2): 286–308 297 table 2. capital market response to corporate tax reform-banking sector (authors calculation) days aar t stat 5% 1% p-value decision h0/h1 status –10 –0.0103 (1.804) (+/–)1.96 (+/–)2.58 0.071 the result is not significant at p < 0.05. h0 accept –9 –0.0124 (2.103) (+/–)1.96 (+/–)2.58 0.035 the result is significant at p < 0.05 (insignificant @ 1%) h0 reject (@5%) –8 0.0099 3.462 (+/–)1.96 (+/–)2.58 0.001 the result is significant at p < 0.05 h0 reject –7 –0.0009 (0.425) (+/–)1.96 (+/–)2.58 0.672 the result is not significant at p < 0.05 h0 accept –6 –0.0041 (1.593) (+/–)1.96 (+/–)2.58 0.997 the result is not significant at p < 0.05 h0 accept –5 0.0066 1.505 (+/–)1.96 (+/–)2.58 0.132 the result is not significant at p < 0.05 h0 accept –4 0.0037 0.815 (+/–)1.96 (+/–)2.58 0.415 the result is not significant at p < 0.05 h0 accept –3 –0.0119 (4.720) (+/–)1.96 (+/–)2.58 0.000 the result is significant at p < 0.05 h0 reject –2 –0.0018 (0.678) (+/–)1.96 (+/–)2.58 0.498 the result is not significant at p < 0.05 h0 accept –1 0.0156 5.225 (+/–)1.96 (+/–)2.58 0.000 the result is significant at p < 0.05 h0 reject 0 0.0010 0.555 (+/–)1.96 (+/–)2.58 0.579 the result is not significant at p < 0.05 h0 accept 1 0.0006 0.268 (+/–)1.96 (+/–)2.58 0.789 the result is not significant at p < 0.05 h0 accept 2 0.0000 0.019 (+/–)1.96 (+/–)2.58 0.985 the result is not significant at p < 0.05 h0 accept 3 –0.0033 (1.316) (+/–)1.96 (+/–)2.58 0.189 the result is not significant at p < 0.05 h0 accept 4 –0.0035 (1.252) (+/–)1.96 (+/–)2.58 0.211 the result is not significant at p < 0.05 h0 accept 5 –0.0029 (1.219) (+/–)1.96 (+/–)2.58 0.223 the result is not significant at p < 0.05 h0 accept 6 –0.0052 (1.962) (+/–)1.96 (+/–)2.58 0.050 the result is significant at p < 0.05 h0 reject 7 –0.0056 (1.988) (+/–)1.96 (+/–)2.58 0.047 the result is significant at p < 0.05 h0 reject 8 0.0000 0.007 (+/–)1.96 (+/–)2.58 0.995 the result is not significant at p < 0.05 h0 accept 9 0.0035 1.241 (+/–)1.96 (+/–)2.58 0.215 the result is not significant at p < 0.05 h0 accept 10 0.0010 0.446 (+/–)1.96 (+/–)2.58 0.656 the result is not significant at p < 0.05 h0 accept –0.0150 –0.0100 –0.0050 0.0000 0.0050 0.0100 0.0150 0.0200 –10 –9 –8 –7 –6 –5 –4 –3 –2 –1 0 1 2 3 4 5 6 7 8 9 10 aar figure 1. average abnormal return (banks) 298 a. adnan. does market react to tax reduction news? an empirical study on corporate tax reduction... table 3. cumulative average abnormal return-bank (authors calculation) cumulative average abnormal return (bank) event window caar t stat 5% 1% p-value decision h0/h1 (–10, –1) exevent –0.00558 –0.59 (+/–)1.96 (+/–)2.58 0.555 the result is not significant at p < 0.05 h0 accept (0, +1) event 0.00166 0.501 (+/–)1.96 (+/–)2.58 0.616 the result is not significant at p < 0.05 h0 accept (+2, +10) postevent –0.01571 –1.959 (+/–)1.96 (+/–)2.58 0.988 the result is not significant at p < 0.01 h0 accept moreover, it has been exhibited from the financial disclosures made by 30 publicly traded banks to dhaka stock exchange (dse) that 18 banks among 30 have experienced negative growth in their earnings (eps) in january–september 2018 financial period compared to that of prior year that has been reported just after the tax reduction has been applied. the result is inconsistent with the cash flow assumption (lang & litzenberger, 1989; lehn & poulsen, 1989) although other 12 banks achieved a positive growth rate. additionally several negative predictions and assumptions from several capital market researchers regarding the no impact of tax reduction to investors as well as market liquidity have also influenced negative market return and response. 4.1. market response of financial institution sector to tax news the investor’s reaction from financial institutions market due to the tax reform proposal is presented in table  4 and figure 2. the empirical result shows an inconsistent investors response to the corporate tax reduction news for financial institutions. within ex-event phase day 4, 5 and 6 have generated positive arr which are statistically significant. however, day 3 generated a negative statistically significant arr. overall the pre-event phase has generated negative returns. among the ten observed dates six ex-event days have got negative arr. although the announcement day has resulted significant positive arr, it has been followed by a significant negative arr on day three in post-event period. among the observed ten post-event date, seven days have resulted negative arr. the empirical findings of the ex-event days point out that the very immediate phase of before and after the announcement (such as days +/–1 and +/–2) there has been no quick reaction from the investors but significant positive market response has been observed about five days before the budget announcement which indicates a keen market anticipation of the tax reform proposal which is found to be evident by a careful investigation of news and articles published in newspaper around the budget announcement period. however the postannouncement effect was slightly negative suggesting a quick market adjustment. in general the overall announcement period arr found to be very inconsistent and difficult to predict and explain. business, management and education, 2019, 17(2): 286–308 299 table 4. market response of financial sector to tax news source (authors calculation) day aar tstat p-value decision h0/h1 –10 –0.0040 –1.5495 0.1339 the result is not significant at p < 0.05. h0 accept –9 –0.0043 –1.1880 0.2497 the result is not significant at p < 0.05 h0 accept –8 0.0010 0.75019 0.3433 the result is not significant at p < 0.05 h0 accept –7 –0.0061 –1.7704 0.0640 the result is not significant at p < 0.05 h0 accept –6 0.0046 2.06571 0.0253 the result is significant at p < 0.05 (not significant @ 1%) h0 reject (@5%) –5 0.0092 2.90942 0.0057 the result is significant at p < 0.05 h0 reject –4 0.0037 2.16281 0.0274 the result is significant at p < 0.05 (not significant @ 1%) h0 reject (@5%) –3 –0.0065 –2.3276 0.0287 the result is significant at p < 0.05 (not significant @ 1%) h0 reject (@5%) –2 –0.0063 –1.4309 0.2539 the result is not significant at p < 0.05 h0 accept –1 –0.0043 –1.3626 0.2509 the result is not significant at p < 0.05 h0 accept 0 0.0118 2.60141 0.0101 the result is significant at p < 0.05 (not significant @ 1%) h0 reject (@5%) 1 –0.0015 –0.5560 0.6094 the result is not significant at p < 0.05 h0 accept 2 –0.0011 –0.3391 0.6936 the result is not significant at p < 0.05 h0 accept 3 –0.0052 –2.1887 0.0253 the result is significant at p < 0.05 (not significant @ 1%) h0 reject (@5%) 4 0.00146 0.53148 0.6108 the result is not significant at p < 0.05 h0 accept 5 –0.0026 –0.8202 0.7331 the result is not significant at p < 0.05 h0 accept 6 –0.0003 –0.1136 0.9689 the result is not significant at p < 0.05 h0 accept 7 –0.0014 –0.5316 0.2928 the result is not significant at p < 0.05 h0 accept 8 0.04571 7.90930 0.0000 the result is significant at p < 0.05 h0 reject 9 0.01021 1.42987 0.9923 the result is not significant at p < 0.05 h0 accept 10 –0.0057 –0.7897 0.4255 the result is not significant at p < 0.05 h0 accept figure 2. aar (financial institutions) –0.01 0 0.01 0.02 0.03 0.04 0.05 –10 –9 –8 –7 –6 –5 –4 –3 –2 –1 0 1 2 3 4 5 6 7 8 9 10 arr(nbfi) 300 a. adnan. does market react to tax reduction news? an empirical study on corporate tax reduction... table 5. caar-financial institutions (authors calculation) event window caar tstat p-value decision h0/h1 (–10, –1) ex event –0.01209 –1.75598 0.1476 the result is not significant at p < 0.05 h0 accept (0, +1) event 0.00903 2.18509 0.0286 the result is significant at p < 0.05 but not significant at p < 0.01 h0 reject (+2, +10) post-event 0.03989 3.26867 0.0029 the result is significant at p < 0.05/0.01 h0 reject the cumulative abnormal return (exhibited in table 5) indicated that the caar value of pre-event window (–1 to  –10) generated a statistically negative return. however, the event phases (0 to +1) and 9+2 to +10) generated significant positive caar indicating that investors treated tax reduction proposal as good news. therefore, null hypothesis can be rejected in case of financial institutions sector. the findings are consistent with the findings of auerbach (2018), brooks, godfrey, hillenbrand, & money (2016), wren-lewis (2016). 4.2. market response of insurance sector to tax news the average abnormal return (arr) of the insurance sector, responding to the corporate tax reduction news has been presented in table 6 and figure 3. the result exhibits that there has been a statistically insignificant response from the insurance firms towards the tax reform news. nine days out of the ten ex-event days of the announcement have generated insignificant negative returns suggesting that investors did not anticipate any tax reduction proposal for insurance sector or there was no e-event information leakage. table 6. market response of insurance sector to tax news (authors calculation) day arr tstat p-value decision h0/h1 –10 –0.00187 –0.417 0.6766 the result is not significant at p < 0.05 h0 accept –9 0.00110 0.2712 0.7862 the result is not significant at p < 0.05 h0 accept –8 –0.00025 –0.0837 0.9338 the result is not significant at p < 0.05 h0 accept –7 –0.00229 –0.8035 0.4219 the result is not significant at p < 0.05 h0 accept –6 –0.00520 –1.5635 0.1180 the result is not significant at p < 0.05 h0 accept –5 –0.00417 –1.1517 0.2497 the result is not significant at p < 0.05 h0 accept –4 –0.00551 –1.6603 0.0969 the result is not significant at p < 0.05 h0 accept –3 –0.00134 –0.4680 0.6397 the result is not significant at p < 0.05 h0 accept –2 –0.00425 –1.4103 0.1585 the result is not significant at p < 0.05 h0 accept –1 –0.00220 –0.7521 0.4520 the result is not significant at p < 0.05 h0 accept 0 –0.00057 –0.1591 0.8736 the result is not significant at p < 0.05 h0 accept 1 2.56143 0.00692 0.9944 the result is not significant at p < 0.05 h0 accept 2 0.00282 0.82041 0.4119 the result is not significant at p < 0.05 h0 accept 3 0.01010 2.74640 0.0060 the result is significant at p < 0.05/0.01 h0 reject 4 0.00288 0.89072 0.3730 the result is not significant at p < 0.05 h0 accept 5 –0.00640 –2.0719 0.0383 the result is significant at p < 0.05 but not significant @ p<0.01 h0 reject 6 –0.00198 –0.5521 0.5809 the result is not significant at p < 0.05 h0 accept 7 –0.00496 –1.3879 0.1654 the result is not significant at p < 0.05 h0 accept 8 0.002313 0.72376 0.4692 the result is not significant at p < 0.05 h0 accept 9 –0.00628 –1.7070 0.0878 the result is not significant at p < 0.05 h0 accept 10 0.001739 0.57398 0.5660 the result is not significant at p < 0.05 h0 accept business, management and education, 2019, 17(2): 286–308 301 the actual event day also generated insignificant negative return. however the day three in post-event period have generated significant positive return followed by significant negative return on day five which are random. overall the post-event reaction from insurance sector was positive, i.e. six out 10 post-event days have generated insignificant positive return. it can be generalised that is insurance firms did not consider the tax reduction proposal significantly affecting the investment returns as well as firms value. nevertheless, the full effect of the proposal was not wholly apparent until the final approval of the proposal on july 1st 2018. table 7. caar-insurance sector (authors calculation) event window caar tstat p-value decision h0/h1 (–10, –1) ex event –0.0260 –3.91397 0.000091 the result is significant at p < 0.05/0.01 h0 reject (0, +1) event –0.00055 –0.10988 0.91320 the result is not significant at p < 0.05 h0 accept (+2, +10) post-event 0.00022 0.028447 0.97734 the result is not significant at p < 0.05 h0 accept overall, the cumulative investor’s and market response to corporate tax reduction announcement for insurance sector was insignificant demonstrating that the markets did not anticipate that the tax reduction would bring any positive impact on insurance sector. the caar value of three different event windows showed (see table 7) that apart from the exevent ten days phase with significant negative return event window phase and post-event phase generate insignificant market response. 4.3. market response of all three sectors combined to tax news the combined market reaction from the three tax policy benefited sectors has been shown in table 8 and figure 4. it has been exhibited from the presentations that the combined sectoral return to tax reduction news has been very negligible. –0.008 –0.006 –0.004 –0.002 0 0.002 0.004 0.006 0.008 0.01 0.012 –10 –9 –8 –7 –6 –5 –4 –3 –2 –1 0 1 2 3 4 5 6 7 8 9 10 arr figure 3. arr (insurance sector) 302 a. adnan. does market react to tax reduction news? an empirical study on corporate tax reduction... table 8. market response of all 3 sectors to tax news (authors calculation) days arr tstat p-value decision h0/h1 –10 –0.00488 –1.74972 0.0802 the result is not significant at p < 0.05 h0 accept –9 –0.00418 –1.50146 0.1333 the result is not significant at p < 0.05 h0 accept –8 0.003151 1.787967 0.0737 the result is not significant at p < 0.05 h0 accept –7 –0.00283 –1.67845 0.0933 the result is not significant at p < 0.05 h0 accept –6 –0.00254 –1.37289 0.1700 the result is not significant at p < 0.05 h0 accept –5 0.002076 0.888337 0.3743 the result is not significant at p < 0.05 h0 accept –4 –0.00061 –0.28378 0.7771 the result is not significant at p < 0.05 h0 accept –3 –0.00561 –3.2519 0.0011 the result is significant at p < 0.05/0.01 h0 reject –2 –0.00364 –1.94209 0.0521 the result is not significant at p < 0.05 h0 accept –1 0.002805 1.426619 0.1536 the result is not significant at p < 0.05 h0 accept 0 0.002746 1.302686 0.1927 the result is not significant at p < 0.05 h0 accept 1 –0.00012 –0.05989 0.9529 the result is not significant at p < 0.05 h0 accept 2 0.001047 0.548591 0.5833 the result is not significant at p < 0.05 h0 accept 3 0.002529 1.215102 0.2243 the result is not significant at p < 0.05 h0 accept 4 0.000133 0.074469 0.9406 the result is not significant at p < 0.05 h0 accept 5 –0.00409 –2.35065 0.0187 the result is significant at p < 0.05 but not @ 1% h0 reject 6 –0.00251 –1.27151 0.2037 the result is not significant at p < 0.05 h0 accept 7 –0.00461 –2.36008 0.0182 the result is significant at p < 0.05 but not @ 1% h0 reject 8 0.011169 3.824435 0.0001 the result is significant at p < 0.05 h0 reject 9 0.000318 0.122648 0.9024 the result is not significant at p < 0.05 h0 accept 10 –0.00021 –0.09292 0.9266 the result is not significant at p < 0.05 h0 accept this result provides evidence that capital markets respond negatively in most of the event days before the tax reduction announcement (7 out of 10 ex-event days), even though only single ex-event day generate statistically significant negative return. the same situation prevailed in the post-announcement period. the only eighth day after the announcement generated statistically positive significant return, which can be considered as a random outcome. therefore, the analysis does not find any signs of a firm’s tax rate on share price reactions. the findings are very consistent with the study (cutler, 1988) on the effect of 1986 tax reform act of us on stock price, exhibited a very negligible collective quantitative reaction from market in response to tax reform and finally argued that tax reform news is hardly distinguishable from usual market fluctuations. the caar value of three different event windows has been presented in table 9 suggests that ex-event window of (–10 to –1) generates significant negative market return whereas after the announcement there has been a positive response from the market but not statistically significant. that proves that investors did not consider tax reduction news as significantly affecting stock value. business, management and education, 2019, 17(2): 286–308 303 table 9. caar-all 3 sectors (authors calculation) event window caar tstat p-value decision h0/h1 (–10, –1) ex event –0.0162 –3.58 0.00391 the result is significant at p < 0.05/0.01 h0 reject (0, +1) event 0.00262 0.9681 0.39293 the result is not significant at p < 0.05 h0 accept (+2, +10) postevent 0.00376 0.6813 0.49625 the result is not significant at p < 0.05 h0 accept conclusions this study analyses the investor’s responses towards the corporate tax reduction proposal (from 40% to 3705%) for the banking, insurance and financial institution sectors of bangladesh in financial year 2017-18.the stock return of twenty days around the event date of 100 publicly listed firms in three segments of industry namely banking, insurance and financial institution are considered for the study. event study methodology has been used to identify any statistically significant average abnormal return (aar) around the ten pre and ten postevent days as well as the cumulative average abnormal return (caar) of three different event windows. the results of the investigation exhibited no significant price movement around the event period more generally. as far as the banking industry concern, the average abnormal returns around the announcement dates are not statistically considerable. however, there was significant abnormal return incurred just the day before the announcement suggesting there could have been an information leakage or positive expectation of the investors from the budget announcement. although there have been a consistent negative returns followed by the positive return on day  –0 till day 5 including the event day. the cumulative average abnormal return (caar) of banking industry of three event windows also shows that there is no significant market response to the tax reduction news. the similar market response has also been observed by analysing the average abnormal return from stocks of insurance firms around the announcement period. there were no statistically considerable aar and caar –0.008 –0.006 –0.004 –0.002 0 0.002 0.004 0.006 0.008 0.01 0.012 0.014 –10 –9 –8 –7 –6 –5 –4 –3 –2 –1 0 1 2 3 4 5 6 7 8 9 10 arr figure 4. (aar 3 sectors) 304 a. adnan. does market react to tax reduction news? an empirical study on corporate tax reduction... values associated to the announcement windows. the market response from the financial institutions to the tax news has been different from the other two industry of observation. there has been a significant positive market response to the tax reduction news from the sector exhibited through statistically significant positive caar value in event (0 to +1) and post-event (+2 to 10) windows. however the combined market reaction of all three sectors predicted to be benefited from tax reduction shows insignificant market response. reasonable justification for this inconsequential reaction could be the inefficient valuation of the tax news by the market. additionally, market response to economic news such as tax reduction usually depends on the tax knowledge of the investors. whereas institutional shareholders are usually well up to date regarding the tax policies and updates, marginal shareholders have limited access to tax updates; therefore, tax policy enforced market response could be delayed. this research is one of the valuable efforts to take out asset pricing related analysis of the tax reduction consequence to a specific industry. however, as the enormity of the capital market in bangladesh stays lower in comparison to the other first world countries, the likely effect of share price changes on the local economy predictable to be inferior compared to established markets. nevertheless, taking into account the fact that the eminence of the capital market in the financial ecosystem of bangladesh is likely to increase remarkably in future, the consequences of equity return on the economic and financial growth should also inflate. the outcome of this study would significantly contribute to the financial and economic policy formulation while taken into consideration the possible impact of the policy over the equity valuation, investor’s reaction and as a whole over the capital market of bangladesh. reference adnan, a. 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(2016). a general theory of austerity (working paper no. 14). blavatnik school of government studies. https://doi.org/10.1111/j.0306-686x.2004.0002.x https://doi.org/10.1016/s1573-4412(84)02006-7 https://doi.org/10.2308/accr.2006.81.1.227 https://doi.org/10.1093/0198292279.001.0001 https://doi.org/10.1257/aer.99.4.1356 https://doi.org/10.11118/actaun201765062113 https://doi.org/10.1016/0304-405x(93)90005-v https://doi.org/10.1016/j.jfineco.2018.06.013 https://doi.org/10.1111/j.1755-053x.2010.01078.x https://doi.org/10.1111/j.1755-053x.2010.01078.x https://doi.org/10.1111/j.1755-053x.2010.01078.x this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: kamile.taujanskaite@vilniustech.lt business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 1: 96–118 https://doi.org/10.3846/bmee.2022.16738 development of fintech business in lithuania: driving factors and future scenarios kamilė taujanskaitė *, jurgita kuizinaitė department of financial engineering, vilnius gediminas technical university, vilnius, lithuania received 23 march 2022; accepted 04 april 2022 abstract. purpose – the research aims to find out the main factors that determine the change in the number of fintech companies in lithuania and predict the future development of this sector. research object – fintech business sector, described as the number of fintech companies. research methodology  – scientific literature analysis and generalisation, comparative analysis, statistical data collection and systematisation, correlation-regression analysis, scenario method for forecasting. findings – the main factors that may determine the growth of the number of fintech companies in lithuania were identified and several development scenarios for the segment forecasted. the first part analyses related scientific investigations and fintech’s impact on the financial system as a whole. in the empirical part, a correlation and regression analysis of the factors that may determine the change of a number of fintech companies was performed and ten main factors identified. the possible evolution of the number of fintech companies until 2024 under 5 scenarios has been predicted. research limitations – the statistical information used in this research comes from different databases and different sources and may not always be free from certain discrepancies. practical implications – the obtained results may be of interest for researchers who examine this issue and the central bank of lithuania, performing surveillance of the financial market. the forecast under various scenarios of the economic situation enables the estimation of the impact the fintech business may have and can be useful for the ministry of finance involved in strategic planning. originality/value  – an attempt was made to fill in the scientific literature gaps and find out what factors influence the most fintech sector’s development in lithuania and how this sector might grow in the future. keywords: finance, financial innovations, financial market, financial technologies (fintech), fintech development, fintech in lithuania. jel classification: f37, g17, g20. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2022.16738 https://orcid.org/0000-0003-3273-8467 https://orcid.org/0000-0002-6434-2793 business, management and economics engineering, 2022, 20(1): 96–118 97 introduction the development of information technologies and their use plays an important role in the development of the banking sector. a recent example of the impact of information technologies on finance is the emergence of financial technologies called fintech. fintech experienced the most remarkable expansion only after the global financial crisis in 2008. therefore, it is a rather new area that is growing very fast and has not been fully explored yet. globally the field of fintech has been widely analysed on the topics of interaction between fintech companies and traditional banks (blake et al., 2016; hung & luo, 2016; carney, 2017; foo et  al., 2017; gomber et  al., 2017; li et  al., 2017; omreng & gjendem, 2017; alt et al., 2018; azarenkova et al., 2018; european commission, 2018; persmoen & sandvik, 2018; de roure et al., 2018; iman, 2019; wang et al., 2021). fintech regulatory and security issues are also explored, and the impact on the shadow banking system is also analysed (financial stability board, 2017; lee & shin, 2018; salampasis & mention, 2018; laurent & sinz, 2019; nemoto et  al., 2019; svensson et  al., 2019). however, there is a lack of research examining the factors that attract fintech companies to certain countries. in recent years, lithuania has been focussing on creation favourable conditions for the fintech development and attracting the fintech start-ups. the number of fintech companies in the country started to be recorded only in 2013 with some 45 companies operating at that time. at the end of 2020, the number has reached 230 (invest lithuania, 2021) indicating a 5 times growth during the period. haddad and hornuf (2019), khatun and tamanna (2020), slazus and bick (2022), etc. have analysed factors that influence the fintech sector development globally or in specific countries. this provides information for a general understanding of the development-related issues. nevertheless, certain factors influencing the development of the fintech sector can be country-specific, e.g. related to promotion and regulation of the business within the segment, therefore analysis of their influence is important too. this research, first of all, aims to find out the main factors that determine the growth of the fintech segment specifically in lithuania and, secondly, to forecast its possible future development alternatives. research object: fintech business sector, expressed as the number of fintech companies in lithuania. research methods: scientific literature analysis and generalisation, comparative analysis, statistical data collection and systematisation, correlation-regression analysis, scenario method for forecasting. novelty and originality of this investigation: an attempt was made to fill in the scientific literature gaps related to the analysis of the most significant factors that influence the fintech sector development specifically in lithuania and the forecast of growth of this sector in the future. the obtained results could be of interest to researchers who examine these issues as well as to the central bank and the ministry of finance which are responsible for financial market surveillance. 98 k. taujanskaitė, j. kuizinaitė. development of fintech business in lithuania: driving factors... 1. review of related scientific investigations the term fintech originated only in the 21st century. although gimpel et al. (2018) state that this term was first used in the 1990s in the title of citigroup’s predecessor project to promote technological collaboration, schueffel (2016) argues that as early as 1972 the vice president of the manufacturers hanover trust bank in the united states used the term fintech in his scientific article on the day-to-day problems of banks and their solutions. this shows that neither the time nor the environment of the occurrence of the fintech term has not yet been unambiguously determined. foo et  al. (2017) described peer-to-peer (p2p) lending as a fast-growing financial technology (fintech) trend that can displace traditional retail banking. according to the international organization of securities commissions (2017), the concept of fintech is designed to describe the diversity of innovative business models and new technologies that have the potential to transform the financial services industry. kashyap et al. (2016) described fintech as a dynamic segment at the intersection of the financial services and technology sectors where technology-focused start-ups and new market entrants innovate the products and services currently provided by the traditional financial services industry. kalmykova and ryabova (2016) wrote that fintech is an economic sector where companies offer different financial services by using new technologies to make this process more efficient and convenient for customers. according to the european banking authority (2017), fintech is defined as “technologically enabled financial innovation that could result in new business models, applications, processes or products with an associated material effect on financial markets and institutions and the provision of financial services” and has the potential to transform further the provision of financial products and services. ministry of finance of the republic of lithuania (2017) highlights that the concept of fintech arose from the combination of financial services and innovative technology sectors. the central bank of lithuania (2020b) writes that fintech refers to technologically enabled financial innovation that could result in new business models, applications, processes, or products with an associated material effect on financial markets and institutions and the provision of financial services. fintech is based on innovation, ever-changing and evolving technologies. as zavolokina et  al. (2016) state “fintech is a living body with a flexible and changing nature rather than a stable notion that is transparent and clearly understood by both academia and the media”. lee and shin (2018) have investigated the fintech ecosystem and defined that it consists of 5 elements: fintech startups, government, traditional financial institutions, financial customers, and technology developers. the government regulates the activities of the financial sector and other elements are technology developers  – it specialists, who make financial technologies a reality and traditional financial institutions, such as various commercial banks, insurance companies, securities companies, etc., which can become both competitors and business partners. all these elements contribute to the emergence of innovation, the stimulation of the economy, the facilitation of cooperation, and the creation of competition in the financial system that benefits consumers of financial services (lee & shin, 2018). thus, fintech is a technology-based financial innovation that works harmoniously in a system made up of a variety of different objects. business, management and economics engineering, 2022, 20(1): 96–118 99 due to the novelty of the topic and the lack of data, it has been observed that researchers are usually conducting their research in the form of a survey, thus avoiding the problem of data shortages. in recent years, however, there has been an increase in research based on statistics. a review of investigations conducted on the fintech area shows that researchers are increasingly interested in this topic (table a1 in appendix). the other discussable issue is what factors affect fintech sector’s development. ernst & young (2019) highlighted that “fintech adoption tends to be higher in developing markets by digitally active consumers”. according to demirguc-kunt et al. (2017), fintech business sector growth has largely been driven by digital payments, government policies, and a new generation of financial services accessed through mobile phones and the internet. guild (2017) pointed out the key factors of fintech growth, such as: “digital cash transfer services, peer-to-peer lending platforms, complementary government policies, and regulatory frameworks”. haddad and hornuf (2019) have investigated related factors, but the research is based on relatively old data from 2005–2015. they found that “more fintech startups formate when the country’s economy is well-developed and venture capital is readily available. furthermore, the number of secure internet servers, mobile telephone subscriptions, and the available labor force has a positive impact on the development of fintech”. so it can be assumed that the general situation of information technology and innovation in the country should also be analysed as factors that potentially determine the development of fintech. chong et  al. (2019) has highlighted that security of technologies are very important for the fintech sector: “the security concern is significant and positively influences one’s intention to adopt fintech, as the trustworthiness of new technologies is important to ensure secured personal data”. khatun and tamanna (2020) analysed bangladesh’s financial sector and proved that “users feel convenient and wish to be connected with fintech if it is easily understandable to them”. according to zarrouk et  al. (2021), “the availability of resources through venture capital is vital to the success and survival of fintechs. however, financial barriers, the regulatory environment, and legal issues have a detrimental impact on facilitating the creation and growth of fintech ventures”. slazus and bick (2022) have made a case study of south africa and identified 6 influencing fintech development factors: four enabling and two inhibiting factors. “the enabling factors that positively influenced fintech adoption were: utility, socio-economic influencers, mobile device trust, and youth. the two inhibiting factors were: perceived risks and associated costs”. meanwhile, the number of fintech companies in lithuania has been recorded only since 2013 (invest lithuania, 2020a), there is a lack of related investigations on factors influencing finteh sector growth in lithuania. so far, they can only be speculated based on the factors that determine the development of any type of company. for example, it is known that the issue of the country’s competitiveness and, in particular, the competitive advantage of small and medium-sized businesses among the countries of the european union with the desire to improve it  – to ensure stable, rapid economic growth, living standards – has been raised in the country for some time (garuckas et  al., 2007; staskevičiūtė & tamošiūnienė, 2010; rakauskienė & tamošiūnienė, 2013). stundžienė and bliekienė (2012) have studied the impact of the economic environment on enterprises and their activities. they concluded that changes in the number of enterprises directly depend on the change of gdp in the country 100 k. taujanskaitė, j. kuizinaitė. development of fintech business in lithuania: driving factors... over the year and confirmed that the economic situation has a significant impact on enterprise performance. danilevičienė and lukšytė (2017) analysed the impact of foreign direct investment on the competitiveness of the country’s economy and identified their importance for the country’s continuous development, increasing productivity, integration into the global economy, etc. invest lithuania (2020b), the official agency for foreign direct investment and business development in the country, uses various global rankings to present lithuania and other various aspects describing the business environment  – for example, lithuania is in the top ten eu countries in terms of ease of paying taxes, online services business is also among the countries with one of the lowest corporate income tax rates in central and eastern europe, etc. besides, other aspects are also mentioned, among them extremely good personnel skills for innovation in the country, high number of educated people. this suggests that all the above mentioned and other factors can stimulate the growth of fintech segment locally and attract them to lithuania from abroad in the future. several initiatives have been launched in lithuania to attract fintech companies to the country, among them the experimental financial innovation environment (sandbox) created by the bank of lithuania in 2018. the submission of applications for those wishing to try out their innovative financial products in lithuania was started by the bank of lithuania (2020a). the bank of lithuania has also separately developed the lbchain platform based on blockchain technology, which aims to provide regulatory and technological advice to fintech companies by providing access to a test environment (invest lithuania, 2020a; bank of lithuania, 2020c). parallel to promotion, the bank of lithuania focuses on risk reduction measures related to the growth of the fintech segment and provision of digital financial services (invest lithuania, 2020a). this shows that lithuania as a country tries to be proactive in stimulating the growth of the fintech segment through creation of favourable business environment and implementation of measures, which reduce the related risks. 2. fintech in lithuania in recent years, lithuania has become increasingly noticeable among fintech start-ups. in 2019, according to the fdi intelligence, investment unit of the financial times rating, vilnius became the city that attracts the most technology start-ups (fdi markets, 2019). in the international fintech ranking prepared in the united kingdom, which evaluates various elements of the fintech ecosystem, lithuania was ranked the 4th among various 65 countries in the world in 2019 (a rise by 14 positions during the year), whereas payments, lending and banking were considered to be areas that are the most developed in lithuania (findexable, 2020). year later, lithuania maintained its leadership in fintech and was ranked the 10th among 83 countries in the world in 2020 (findexable, 2021). according to invest lithuania (2021), in 2013, when monitoring of fintech activities was started, only 45 of these companies operated in lithuania. in 2020, there were already 230 of them showing the 5 times growth (figure 1). business, management and economics engineering, 2022, 20(1): 96–118 101 according to invest lithuania (2020a), out of 170 companies that were in the fintech companies list in 2018, 20 had to be removed next year due to closure or mismatch with the fintech concept, thus in 2019, the number of new companies increased by 60. although the pandemic slowed economic growth in the country, 20 new companies were established in 2020, which increased the fintech sector up to 230 companies (after corrections to the list of companies in 2019). the core activities of these companies are: payments (30%), financial software (20%), and lending services (13%) (invest lithuania, 2021). international ranking organisations admit the presence of conducive regulatory and supervisory ecosystem as well as fostering innovation in the financial system of the country. 3. methodology of the research this section describes the methodology of the research. the study comprises 4 stages (table 1). table 1. the research framework (source: authors) steps of the research methods results 1. identification and selection of factors that may determine the emergence of fintech segment scientific and professional literature analysis 3 factor groups selected: – factors indicating country’s economic performance; – factors defining business environment (obtained by world economic forum expert evaluation); – other country-specific factors. 2. selection of the most significant factors influencing the growth of fintech segment correlation analysis is performed. pearson correlation coefficient, p-value comparison with α coefficient was used to check statistical significance the most correlated factors with the number of fintech companies were selected from each group. 45 55 64 82 117 170 210 230 2013 2014 2015 2016 2017 2018 2019 2020 n u m b er o f fi n te ch c o m p an ie s year figure 1. number of fintech companies in lithuania at the end of the year (source: created by authors, according to data based on invest lithuania, 2021) 102 k. taujanskaitė, j. kuizinaitė. development of fintech business in lithuania: driving factors... steps of the research methods results 3. simple linear regression equations compilation with selected variables from each group. formation of a multiple linear regression equation with factors selected for simple linear regression equations linear regression analysis: simple and multiple. criteria used to ensure the eligibility of the regression: – coefficient of determination; – the p-value of anova analysis of variance; – student’s criterion p-value; – durbin-watson statistic to check for autocorrelation; – vif to determine multicollinearity; – cook’s measure to detect data exceptions; – kolmogorov-smirnov and shapiro-wilk criteria for verifying the presumption of normal data distribution. – based on the assumptions of the eligible regression equation, simple linear regression equations are constructed that allow estimation the effect of variables one-by-one on the number of fintech companies. – using the selected most significant variables for simple linear regression equations, one multiple linear equations with two variables is formed. 4. using a multiple linear regression model, the change of fintech companies is predicted till 2024 forecasting is performed using 5 developed scenarios: – optimistic; – neutral; – slightly pessimistic; – strongly pessimistic; – crisis. the forecast of changes in the number of fintech companies in various situations are determined till the year 2024. 3.1. selection and grouping of factors that may influence the change in the number of fintech companies firstly, it has been established with certainty that the economic situation of a country has a significant impact on companies’ decisions to set up a fintech start-up in lithuania. also, analysing the field of fintech specifically, lithuania is characterised by certain aspects that distinguish it from other countries. a total set of 40 suitable variables were selected (table  2). according to the method of data acquisition, it was decided to distinguish data that was calculated quantitatively and that was received by the world economic forum using expert estimates. therefore, it was decided to group data into three separate groups: – the group of factors indicating the economic performance of lithuania consists of 17 variables; – the group of factors obtained during the expert assessment consists of 9 variables and they are named as describing the business environment in lithuania; – the remaining factors are included in the study as “other country-specific factors that distinguish lithuania” – these include lithuania’s ratings from general lists that compare the countries of the world in a certain aspect, factors determining internet use in the country and others, filling in this group by 14 factors. end of table 1 business, management and economics engineering, 2022, 20(1): 96–118 103 table 2. selected and grouped factors according to three separate groups (source: authors) factors indicating the economic conditions of lithuania factors defining the lithuanian business environment other factors distinguishing lithuania – central government deficit/ surplus (% of gdp) – general government deficit/ surplus (% of gdp) – local government deficit/surplus (% of gdp) – social protection funds deficit/ surplus (% of gdp) – central government debt – (end of the year, millions eur) – foreign direct investment at the end of the period (millions eur) – change in omx vilnius share prices (%) – average earnings (hourly gross) – gdp (per capita, eur) – labor force (thousands) – seasonally adjusted unemployment rate (%) – gni (eur, millions) – inflation (annual change, %) – general government revenue (annual change, %) – general government expenditure (annual change, %) – central government revenue (annual change, %) – central government expenditure (annual change, %) – the efficiency of the legal framework in settling disputes (1–7) – the efficiency of the legal framework in challenging regulations (1–7) – pay and productivity – (1–7) – hiring and firing practices (1–7) – the extent of market dominance (1–7) – venture capital availability (1–7) – the soundness of banks (1–7) – cluster development – (1–7) – the burden of government regulation (1–7) – “index of economic freedom” rating (0–100) – regular internet users (% of individuals) – households having internet access – fixed broadband internet subscription (per 100 people) – mobile broadband subscriptions (per 100 people) – cost of business start-up procedures (% of gni per capita) – “ease of doing business” rating – total tax rate (% of the profit) – “global innovation index” rating – government integrity (0–100) – business freedom (0–100) – labor freedom (0–100) – monetary freedom (0–100) – trade freedom (0–100) 3.2. data selection and limitations most of the data for the first group of factors was collected from the database of the official statistics portal of lithuania (2020). the second set of data was collected from the global competitiveness report, which presents the results of the expert assessment. according to the world economic forum (2020), the representatives of the lithuanian department of statistics were responsible for collecting the answers, which were answered by the managers of various companies. the third group of data was collected using various sources. this set of data aimed at examining other country-specific factors that distinguish lithuania, but are not directly related to country’s economic performance. this set  al.o includes data, which was obtained during the non-expert assessment. several factors are obtained from the ease of doing 104 k. taujanskaitė, j. kuizinaitė. development of fintech business in lithuania: driving factors... business (the world bank, 2020) report. lithuania’s ranking from the global innovation index (wipo, 2021) and the index of economic freedom (the heritage foundation, 2021) reports were also used. the remaining factors were obtained from the database of the official statistics portal of lithuania, the global competitiveness report, and other sources. research limitations: due to the novelty of the topic and the lack of data, the statistical information used in this research comes from different databases and different sources and may not always be free from certain discrepancies. 3.3. the setup of regression analysis the pearson correlation coefficient r was used to estimate the strength of the linear relationship, which can take values from  –1 to +1. if r  = 0, then the dependence between x and y variables does not exist, when r  = 1, the relationship between the variables is direct and completely accurate, if r  = –1, the relationship is an inverse (čekanavičius & murauskas, 2014). the p-value of the pearson correlation coefficient obtained using the spss program was compared with the selected significance level α. if p > α, correlation of variables is not confirmed and if p < α – correlation confirmed. (pukėnas, 2005). as correlation coefficient itself only assumes the existence of relationships, but does not allow to quantify it, the following linear regression models were used, which make it possible (pabedinskaitė & činčikaitė, 2016): 0 1y a a x= + + ε , (1) where: 0a – intercept (constant term); 1a – slope coefficient for explanatory variable; nx – explanatory variables ε – model residuals. the coefficient 1a expresses the effect, that the change of independent variable x by one unit has on the dependent variable y. if 1 0,a > the increase of x will cause the increase of y, and vice-versa. for multiple linear regression analysis, the following equations were used: 0 1 1 2 2 ,n ny a a x a x a x= + + +…+ + ε (2) where: 0a – intercept (constant term); 1,2 na … – slope coefficients for each explanatory variable; nx – explanatory variables; ε – model residuals. by using the spss program, non-standardised coefficients used in equations and the beta value of standardised coefficients were identified. the higher the beta, the more significant is the variable. in multiple regression analysis, anova (analysis of variance) statistic was used. multicollinearity was tested using variance inflation factor (vif), which indicates a correlation between variables when vif > 4 (čekanavičius & murauskas, 2014). according to ghinea et al. (2016), if vif < 1, the independent variables do not correlate with each other, business, management and economics engineering, 2022, 20(1): 96–118 105 if 1 < vif < 5, the independent variables correlate very insignificantly, and vif > 5 or 10 show a high correlation. the durbin-watson significance criterion was used to assess whether there is no autocorrelation between residual errors. durbin-watson statistics vary from 0 to 4. it is calculated according to the following formula (martišius & vaičiūnas, 2001): ( )22 1 2 1 , n i i i n i i ê ê d ê = − = σ − = σ (3) where ê – residual error. to elucidate the issue of autocorrelation, the critical values of the lower band (dl) and top band (du) were found in the durbin-watson significance table (figure 2), depending on the number of observations n and the number of factors k included in the model. autocorrelation inconclusive no evidence of autocorrelation inconclusive autocorrelation 0 dl du 2 4-du 4-dl 4 figure 2. interpretation of durbin-watson statistical values (created by authors according to brooks, 2019) the residues are stated to be independent when the durbin-watson criterion is obtained between the du and 4-du ranges. several assumptions were made in the analysis. first, the kolmogorov-smirnov and shapiro-wilk tests were used to verify whether the applied assumption on normal data distribution was correct. the null hypothesis that the variable is normal  – if the p-value of the test obtained is less than the significance level α = 0.05, the null hypothesis is rejected. another assumption made relates to the consistency of error variance, called homoskedasticity. it was checked graphically, deferring standardised residual errors on the y-axis. lastly, for determining the exceptions in the data, the cook measure di was used. 3.4. the setup of the forecast one of the popular ways to create a forecast is to apply the scenario method, which takes place in two stages: first, a comprehensive set of scenarios is created, and then a forecast is developed within the framework of a specific scenario (adomavičienė et al., 2012). the bank of lithuania has used the scenario method to assess the potential impact of coronavirus on the lithuanian economy. the scenarios depict a possible form v decline (3.4 percent decrease in gdp), form u decline (11.4 percent decrease in gdp), or a prolonged form u decline (20.8 percent decrease in gdp) (bank of lithuania, 2020d). by applying similar approach, it was decided to use the set of 5 scenarios in this study for the forecast of fintech companies’ number change in lithuania till 2024. the following scenarios were analysed: 1. an optimistic scenario, which would allow assessing the growth of fintech companies in a period of faster economic growth, improvement of the business environment in lithuania, and other important factors in the absence of coronavirus; 106 k. taujanskaitė, j. kuizinaitė. development of fintech business in lithuania: driving factors... 2. a neutral scenario, where the situation in the country changes insignificantly compared to the last years (the factors remain sufficiently stable); 3. a slightly pessimistic scenario, which would allow assessing the tendencies of fintech companies’ establishment in lithuania in case of economic downturn, which the bank of lithuania has identified as having a v-shape; 4. a strongly pessimistic scenario that would reflect a possible u-shaped decline; 5. a crisis scenario that would forecast the development in the event of a prolonged u-shaped decline. depending on the predictive factors identified during the study, a specific percentage change of the number of fintech companies was also modelled. 4. results of the empirical research on factors influencing the fintech sector development in lithuania paired correlation analysis allowed us to identify 19 factors that have a significant strong dependence (r > 0.7) on the number of fintech companies. from the first group of factors indicating the economic condition of lithuania, 8 out of 17 variables were significant, i. e. gni (eur, millions), gdp (per capita, eur), foreign direct investment at the end of the period (eur million), average earnings (hourly gross), general government expenditure (annual change, percentage), unemployment rate (seasonally adjusted), central government debt (end of year, eur, millions), general government revenue (annual change, percentage). from the second group of factors, describing the business environment in lithuania, 4 out of 9 variables were significant: hiring and firing practices, soundness of banks, the efficiency of the legal framework in settling disputes, availability of venture capital. of the third group of factors, indicating other country-specific factors distinguishing lithuania, 7 out of 14 variables were significant: households having internet access (percentage), regular internet users (percentage of all individuals), freedom of trade, freedom of business, freedom of work, “ease of doing business” annual rating and mobile broadband usage (per 100 inhabitants of the country). this shows that all three selected groups of factors were selected appropriately and are almost equally significant for the number of fintech companies. the performed correlation analysis allowed the selection of the most appropriate factors for regression analysis. first, they are used to develop simple linear regression equations, thus re-assessing their significance by checking various assumptions and rejecting the factors found to be insignificant at this stage. as a result, the selected factors were used to create a multiple linear regression equation, which provides an opportunity to determine the impact of several factors acting simultaneously on the number of fintech companies. firstly, equations were constructed with only one independent variable in the equation at a time. the performed simple linear regression analysis made it possible to create 10 statistically significant models (table 3). the remaining linear regression models with corresponding 9 factors were discarded due to discrepancies in the assumptions. assumptions were described in table 2. business, management and economics engineering, 2022, 20(1): 96–118 107 table 3. statistically significant equations for simple linear regression (source: authors) group of factors number of fintech companies = 1. 1. –420.874 + 0.013 × gni + ε 2. –326.869 + 0.031 × gdp per capita + ε 3. –477.189 + 0.037 × foreign direct investment + ε 4. 23.579 + 1661.924 × general government expenditure (annual change) + ε 5. –408.285 + 0.035 × central government debt + ε 2. 1. –616.205 + 154.631 × soundness of banks + ε 2. –875.899 + 265.417 × efficiency of legal framework in settling disputes + ε 3. –466.308 + 195.471 × venture capital availability + ε 3. 1. 6226.612 – 70.223 × trade freedom + ε 2. 909.490 – 10.221 × business freedom + ε then, all possible multiple linear regression models consisting of independent variables identified during the simple linear regression analysis were constructed. out of 10 independent variables, a total of 45 different models were composed of two independent variables in each. the coefficients of determination, p-values, durbin-watson statistics for autocorrelation, cook’s criteria for exclusions, vif multicollinearity analysis, kolmogorov-smirnov, and shapiro-wilk tests to confirm normality were analysed for each of them. the durbin-watson autocorrelation limits for a model with 2 independent variables are set as follows (figure 3). autocorrelation inconclusive no evidence of autocorrelation inconclusive autocorrelation 0 0.294 1.676 2 2.324 3.706 4 figure 3. interpretation of durbin-watson statistical values in a multiple linear regression analysis with two independent variables (source: authors) of all the 45 models, the p-value of only two models confirmed the significance of both independent variables in the equation, but multicollinearity was found in one of them. thus, the most accurate multiple linear regression model is in table 4. table  4. coefficient of determination of a multiple linear regression equation, anova p-value, and durbin-watson statistics (source: authors) model determination coefficient anova p-value durbin-watson statistic number of fintech companies, general government expenditure (annual change, %), efficiency of legal framework in settling disputes (1–7) 0.968 0.001 2.863 108 k. taujanskaitė, j. kuizinaitė. development of fintech business in lithuania: driving factors... the coefficient of determination shows that the annual change in government expenditure (measured as a percentage) and the effectiveness of the legal system in resolving disputes (assessed by experts from 1 to 7) allow estimating as much as 96.8 percent change in the number of fintech companies in the country. the p-value of the anova only confirms that both independent variables have a relationship to the dependent variable. however, the result of durbin-watson statistic falls within the range in which it is not possible to determine whether autocorrelation exists. on the other hand, one of the variables in the model is derived from expert assessment, the autocorrelation of which is a deliberate rejection, because it is investigated only in case of suspicion. however, it can only be stated that autocorrelation cannot be ruled out. the coefficients of the model equation and other statistics are given below in table 5. table 5. coefficients of the multiple linear regression equation, p-value, and vif factor (source: authors) model non-standardised coefficients standardised coefficients p-value vif b residual error beta intercept –443.379 129.254 0.027 general government expenditure (annual change, %) 1176.909 208.579 0.658 0.005 1.701 efficiency of legal framework in settling disputes (1–7) 132.717 36.637 0.422 0.022 1.701 based on the beta value of the standardised coefficients, the annual change in government expenditure is a slightly more significant variable than the effectiveness of the legal system in resolving disputes. the p-value confirms the significance of both variables, and the vif does not indicate a risk of multicollinearity (1.701 < 4). when checking the residual errors of this model, it is observed that their average is zero. heteroskedasticity is also not determined from the resulting residue graph. the remaining criteria are further examined (table 6). table 6. verification of the normal distribution of data resides in the multiple linear regression equation (source: authors) model cook’s measure di kolmogorovsmirnov test p-value shapiro-wilk test p-value number of fintech companies, general government expenditure (annual change, %), efficiency of legal framework in settling disputes (1–7) 0.422 0.146 0.193 no inconsistencies in the model are observed when analysing the rest of the criteria. the cook’s measure is 0.422 < 1, so there are no exceptions in the data; both criteria for normal distribution are higher than α = 0.05, so the null hypothesis of normal residue distribution is accepted. business, management and economics engineering, 2022, 20(1): 96–118 109 thus, a multiple linear regression model with the following equation is obtained: number of fintech companies in lithuania = –443.379 + 1176.909 × general government expenditure (annual change) + 132.717 × efficiency of legal framework in settling disputes + ε (4) based on the coefficient of determination, this multiple linear equation explains 96.8 percent of the change in the number of fintech companies. after checking the assumptions of the reliability of the model, it was found that there is no multicollinearity, the residues are distributed according to the normal distribution, their mean is zero, and the heteroskedasticity of the residues is not observed. however, it should be noted that the autocorrelation of the residues could not be confirmed or ruled out, so the full adequacy of the equation cannot be confirmed. the resulting equation can be interpreted in this way: when other factors remain unchanged, a 1 percent increase in government expenditure will lead to an increase of 1176 companies in the fintech sector, and a 1 point improvement in the efficiency of the legal framework in settling disputes will lead to 132 new businesses. however, it should be noted that general government expenditure varied between 0.01 and 0.10% during the study period. therefore, it would be worthwhile to provide a more detailed interpretation of this factor in the equation: without other factors, a 0.01 percent increase in general government expenditure would lead to the establishment of 11 more fintech companies in the country. it can be speculated that general government expenditure is significant for the number of fintech companies in lithuania, because the government has started to pay a lot of attention to innovation and attracting such companies – as already mentioned “sandbox”, “lbchain” were established in the country. also, the activities of invest lithuania, the official agency for foreign direct investment and business development in lithuania, which had to require certain expenses (investments), are actively carried out. the legal framework is also recognised as one of the most important factors in its effectiveness in resolving various disputes, possibly related to adaptation to various regulations which needs to be adapted for fintech companies or new ones needs to be created, as not all old ones that are suitable for various other companies are effective for fintech start-ups. in addition, the more efficient and transparent the legal system in a country, the easier it is for businesses to set up. 5. future growth forecast for fintech sector in lithuania the obtained multiple linear equation is used to forecast the number of fintech companies. the changes (compared to the previous years) of the factors used in the scenarios are shown in table 7. using the changed values of the factors and the multiple linear equation, the following changes in the number of fintech companies till year 2024 were obtained according to five scenarios (figure 4). the results of the first-optimistic-scenario reveal how the fintech sector in lithuania would expand if the country continues to foster an innovation-friendly environment, government funds would be allocated to sandbox and other initiatives of the bank of lithuania, and 110 k. taujanskaitė, j. kuizinaitė. development of fintech business in lithuania: driving factors... the legal framework, addressing various problems of fintech sector related to its regulations, would improve. with both factors of the regression model increasing by 3 percent each year, the establishment of 20 new fintech companies is forecasted annually, reaching 297 companies in the country at the end of 2024. th e second scenario predicts factors improving at a slower rate – increasing by 1 percent each year. th is can be interpreted as a gradual, steadily improving environment for the business environment in lithuania, with the government sector investing a slightly increasing amount. under such conditions, the establishment of 6–7 new companies per year is forecasted. at the end of 2024, 233 fintech companies would operate in lithuania in this case. th e third scenario, designed to mimic the v-shaped decline due to coronavirus, shows what the possible consequences of this short-term deterioration in lithuania would be for the fintech sector. initially, with a 4 percent decline in values of model factors, 35 fintech table  7. changes used in the factors for forecasting scenarios of the multiple linear regression model (source: authors) scenarios 2020 2021 2022 2023 2024 optimistic +3% +3% +3% +3% +3% neutral +1% +1% +1% +1% +1% slightly pessimistic –4% +4% +1% +1% +1% strongly pessimistic –8% –2% +2% +8% +1% crisis –18% –2% 0% +2% +4% figure 4. th e changes of fintech companies under 5 scenarios till 2024 (source: authors) business, management and economics engineering, 2022, 20(1): 96–118 111 companies are forecasted to close, and if the situation improves next year, business growth of 201 companies is projected. after that, with the slow improvement of the situation, the number of 220 fintech companies in lithuania is forecasted at the end of 2024. the fourth scenario shows a slightly longer-lasting downturn in the country. in this case, the factors of the model would reduce by 8 percent in the first year and by another 2 percent in the second, this would result in a reduction in the number of companies in the country to 149. however, with the slow start to recover in the third year, 207 companies could operate in the country by the end of 2024. thus, in 5 years almost the same result in fintech development as before the recession would be achieved. the fifth scenario is designed to assess the fate of fintech companies in lithuania in the event of a major, prolonged downturn  – a possible crisis. in this case, a sudden deterioration of the situation would lead to the closure of as many as 125 companies. slow recovery after the recession would lead to a halving of the number of fintech companies compared to 2019, with only 111 companies operating in the country by the end of 2024, according to the forecast scenario. forecasting the number of fintech companies using 5 scenarios allowed us to assess the possible future development of this sector. according to the optimistic forecast, if lithuania continues to put efforts to the improvement of the fintech ecosystem, the creation of an innovation-friendly environment, and the legal framework for resolving various disputes will continue to improve, the number of fintech companies can continue to grow rapidly. in the case of the neutral scenario forecast, a slight slowdown in the number of fintech companies can be expected. meanwhile, the remaining three forecasts, which assess the possible worstcase scenarios for lithuania after the consequences of the coronavirus, suggest that we may also have to deal with the declining fintech sector in lithuania. these projections would require significant effort and time to revive the previous upward trend in fintech development. discussion in this research, an attempt was made to identify and analyse the main factors that influence the growth of fintech companies’ segment in lithuania. the main factors identified were: gross national income gni, gdp per capita, foreign direct investment, general government expenditure, central government debt, soundness of banks, efficiency of legal framework, venture capital availability, trade freedom and business freedom. the results show that government’s role is very important. this correlates with the insights from other scientists. lee and shin (2018) claim that: “the government is important as a legislator that regulates the activities of the financial sector”. demirguc-kunt et  al. (2017) have proved that the growth of fintech business sector has been driven by digital payments, government policies, and a new generation of financial services accessed through mobile phones and the internet. among others, these researchers especially point to the government’s policy as one of the major factors. according to guild (2017), there are more important factors that influence the fintech sector’s growth. these are: “digital cash transfer services, peer-to-peer lending platforms, complementary government policies, and regulatory frameworks”. comparing the results of 112 k. taujanskaitė, j. kuizinaitė. development of fintech business in lithuania: driving factors... this research, it can be seen that the factors identified, such as central government decisions and the regulation of the legal system, coincide. zarrouk et al. (2021) have proved that “venture capital is vital to the success of fintech start-ups”. however, financial barriers, the regulatory environment, and legal issues have a detrimental impact on the creation and growth of fintech companies. these results correlate with some of the factors identified in this investigation, such as efficiency of legal framework, venture capital availability, trade freedom and business freedom. on the other hand, there are investigations that distinguish different factors that influence the growth of fintech sector in the country. for example, haddad and hornuf (2019) claim that the main factors are: the number of secure internet servers, mobile telephone subscriptions, and the available labor force. chong et. al. (2019) has highlighted that security of technologies are very important for the fintech sector: “the security concern is significant and positively influences one’s intention to adopt fintech”. slazus and bick (2022) claim that “utility, socio-economic influencers, mobile device trust, youth, perceived risks and associated costs” are the most important. it is clear that the topic is quite new and the related researches are very important, because every researcher identifies different factors that can influence the changes of numbers of fintech companies in the country. some of them rely on country-specific factors, such as gross national income, gross domestic product per capita, government decisions, and some are closely related with technological advancements, such as secure internet connections or mobile devices trust. conclusions fintech’s breakthrough became explicitly visible internationally after the 2008 global financial crisis and it was observed that the impact of this industry on the country’s economy can be quite beneficial. listing of fintech companies in lithuania started in 2013 and since then the number of the companies grew rapidly demonstrating a 5 times rise during the period 2013–2020. these companies are becoming a significant country’s economic driver, therefore both the government and the bank of lithuania are interested in the promotion of this segment through the creation of a favorable business environment, including legislation and infrastructure. efficiency of promotion is first of all subject to the identification of factors that stimulate the development of this segment, therefore this issue became the main focus in this study. these aspects so far were out of the scope of both analysts and researchers in lithuania. a special four-stage approach was applied in this study and data from several different databases selected to examine the factors that could potentially determine the change in the number of fintech companies settling in the country. a total of 40 factors, presented in three groups, were chosen to be examined as a first step. performed correlation analysis made it possible to identify19 of the factors, which had a significant relationship with the number of fintech companies. in a simple linear regression analysis by using the criteria for checking the assumptions of the regression model, 9 of the 19 factors were ruled out. the rest 10 were recognized as business, management and economics engineering, 2022, 20(1): 96–118 113 significant and were afterward used in multiple linear regression models with 2 independent variables. from 45 such models, which were composed and analysed, one was recognised as most reliable, capable of justifying 96.8 percent of the change in the number of fintech companies. it can be assumed that efforts and investment from the government side, creation of favorable legal environment and infrastructure, like specialised platforms, such as sandbox and lbchain by the bank of lithuania, also the involvement of agency invest lithuania into the activities were significant positive factors to stimulate the growth of the segment. in forecasting the number of fintech companies in lithuania, 5 possible scenarios of the country’s economic situation were used. the optimistic scenario is possible in the case if lithuania continues to allocate funds for the improvement of the fintech ecosystem, further puts efforts into the development of a favorable environment for innovation, and the country’s legal system will further improve. the neutral scenario envisages a slight slowdown of the segment’s growth. the last three represent a group of worst-case scenarios, which are mainly subject to the consequences of the coronavirus pandemic and predict a more or less declining fintech sector. in this case, the revival of a previous upward trend in fintech development would require a lot of effort and time. this study represents one of the first attempts to link the development of fintech sector in lithuania with potential factors, capable of stimulating it. the factors analysed were mainly local, therefore extension of their scope, especially through adding information from other countries could verify the results in terms of their validity and applicability on broader scale. references adomavičienė, i., kraunevičienė, r., & dirvelis, v. 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(2016). the fintech phenomenon: antecedents of financial innovation perceived by the popular press. financial innovation, 2, 16. https://doi.org/10.1186/s40854-016-0036-7 appendix table a1. research on the topic of fintech (source: authors) year author topic (research) 2016 jui-long hung, binjie luo fintech in taiwan: a case study of a bank’s strategic planning for an investment in a fintech company https://biopen.bi.no/bi-xmlui/bitstream/handle/11250/2578366/2045933.pdf?isallowed=y&sequence=1 https://biopen.bi.no/bi-xmlui/bitstream/handle/11250/2578366/2045933.pdf?isallowed=y&sequence=1 https://www.heritage.org/index/ https://www.doingbusiness.org/en/reports/global-reports https://www.globalinnovationindex.org/about-gii#reports http://reports.weforum.org/global-competitiveness-report http://reports.weforum.org/global-competitiveness-report business, management and economics engineering, 2022, 20(1): 96–118 117 year author topic (research) 2017 yingiao li, renée spigt, laurens swinkels the impact of fintech start-ups on incumbent retail banks share prices stian omreng, ida gjendem fintech in norway. the effect of fintech on the traditional norwegian banking sector diederick van thiel, fred van raaij explaining customer experience of digital financial advice 2018 ådne karlsen persmoen, eian sandvik collaboration between banks and fintech companies christian haddad, lars hornuf the emergence of the global fintech market: economic and technological determinants 2019 greta keliuotytė-staniulėnienė, gintarė smolskytė possibilities for financial technology sector development and its impact on banking sector profitability in lithuania christopher svensson, jakob udesen, jane webb alliances in financial ecosystems: a source of organisational legitimacy for fintech start-ups and incumbents david laurent, robin sinz fintech: the role of perceived cybersecurity and organisational trust xun zhang, jiajia zhang, zongyue he is fintech inclusive? evidence from china’s household survey data nofie iman traditional banks against fintech start-ups: a field investigation of a regional bank in indonesia greta navickaitė, grigorij žilinskij crowdfunding – place in fintech market and fintech research pk senyo, ellis l.c. osabutey unearthing antecedents to financial inclusion through fintech innovations 2020 moritz jünger, mark mietzner banking goes digital: the adoption of fintech services by german households micheal r. king and richard w. nesbitt the technological revolution in financial services maoyong cheng, yangqu does bank fintech reduce credit risk? evidence from china isil erel, jack liebersohn does fintech substitute for banks? evidence from the paycheck protection program shubhangi singh, marshal m. sahni, raj k. kovid what drives fintech adoption? a multi-method evaluation using an adapted technology acceptance model ayse demira, vanesa pesquécela fintech, financial inclusion and income inequality: a quantile regression approach hyun-sun ryu,kwang sun ko sustainable development of fintech: focused on uncertainty and perceived quality issues a machine learning approach to predict the success of crowdfunding fintech project jen-yin yeh, chi-hua chen a machine learning approach to predict the success of crowdfunding fintech project yadong liu, sharjeel saleem, rizwan shabbir, malik shahzad shabbir, adil irshad, shahbaz khan the relationship between corporate social responsibility and financial performance: a moderate role of fintech technology continue of table a1 118 k. taujanskaitė, j. kuizinaitė. development of fintech business in lithuania: driving factors... year author topic (research) 2021 tadiwanashe muganyiab, linnan yana hua-ping sunc green finance, fintech and environmental protection: evidence from china yang wanga, sui xiupingb, qi zhangc can fintech improve the efficiency of commercial banks? an analysis based on big data vasenska, ivanka, preslav dimitrov, blagovesta koyundzhiyska-davidkova, vladislav krastev, pavol durana, and ioulia poulaki financial transactions using fintech during the covid-19 crisis in bulgaria najib, mukhamad, wita j. ermawati, farah fahma, endri endri, and dwi suhartanto fintech in the small food business and its relation with open innovation zarrouk, hajer, teheni el ghak, and abderazak bakhouche exploring economic and technological determinants of fintech startups’ success and growth in the united arab emirates tianxiang sheng the effect of fintech on banks’ credit provision to smes: evidence from china end of table a1 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: anna.jasinska-biliczak@uni.opole.pl business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 1: 139–151 https://doi.org/10.3846/bmee.2022.16752 e-commerce from the customer panel: the phenomenon of the pandemic increase and future challenge anna jasińska-biliczak * department of economics, opole university, opole, poland received 25 march 2022; accepted 11 april 2022 abstract. purpose – the purpose of the article is to present the customers (the auction site’s users) perception of the opportunities provided by e-commerce, especially increasing its meaning during the pandemic conditions and to conclude the ways of e-commerce development in the future. research methodology  – the methodology was based at desk research and the survey conducted in april 2021 among online users of allegro on-line platform by the one of the basic quantity methods, the cawi method (by the questionnaire survey) supported by statistic method. findings – the increasing role of e-commerce in people’s lives as well as the pandemic increasing e-commerce growth effect, it can therefore be crucial for the country’s market position and its developmental perspectives. some customers habits, especially greater savings regimes, more careful approach to spending, but also on-line shopping, will stay with them even after the pandemic. research limitations – the research is limited to the leading, but one, on-line platform one of the top-10 on-line platforms however, because of the market coverage, it is representative for the examined branch. other limitation is the pandemic period which may present the data characteristic only for this time. practical implications  – nowadays, especially developed by the pandemic and lockdown all over the world, the e-trade has spread its development. the practical implication may be using the results of the research in practice by the on-line shops owners/managers. originality/value – the value of the study is the realistic approach while attempting to provide a clear view of the overarching picture of the e-trade and directions of its development, especially after pandemic experience. the originality also is that the research conducted not only it has also shown that online commerce transactions are conducted not only at young people probe, but at the probe representative for whole society, including elderly people. the study fulfils the gap at e-commerce research due to the often proclaimed lack of attitude of older people towards e-commerce or pointing them as the age group’s digital exclusion. keywords: e-commerce, customer habits, global economy, covid-19, internet usage. jel classification: d12, d81, e21. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ mailto:anna.jasinska-biliczak@uni.opole.pl https://doi.org/10.3846/bmee.2022.16752 https://orcid.org/0000-0002-1923-7345 140 a. jasińska-biliczak. e-commerce from the customer panel: the phenomenon of the pandemic... introduction commerce is one of the oldest sectors of the economy and is very important in people’s lives. thanks to the growing economy, implementation of new technologies and internet dominance, commerce is blooming again, but this time in the virtual environment. the primary reason for this are the advantages both for the seller and customer, provided by e-commerce. commerce performs various functions in the economy, such as transforming the production range into the commerce range, intermediation between production and sales, analysing the market needs, organising exchanges between the manufacturer and consumer, ensuring constant supply or striving for the high quality of the offered products. on the other hand, the internet is a network of networks, a global computer network consisting of a group of computers, their resources and peripheral devices connected with data transmission lines, thereby connecting computers around the world and enabling quick communication. it is based on a common addressing system and the tcp/ip common communications protocol. despite its deficiencies such as limited trust towards data safety, virus or hacker risks, or limited range, it is an excellent commerce (business) channel due to its many benefits and advantages such as the ability to directly acquire new customers, no territorial limitations, lower operating and transaction costs compared to stationary methods, capacity, flexibility, speed as well as high availability which is not constrained by time. it is characterised by broad research opportunities and real-time data access. in a knowledge-based economy, most challenges are derived from modern technologies and innovations. the growth of internet and mobile technologies brought about new solutions that facilitate cooperation, communication and information exchange. increasing numbers of entrepreneurs see an opportunity in gaining a competitive advantage by acting in the virtual market. electronic commerce over the internet is a way of conducting business. a combination of regulatory reform and technological innovation enabled e-commerce to evolve as it has (oecd, 1999). electronic business enabled new solutions in management as well as product and service distribution, being broadly applied, e.g. in e-banking, facilitated entering markets that were previously unavailable and enabled the expansion of e-commerce. surely, e-commerce has come to take on two important roles; first as a more effective and efficient conduit and aggregator of information, and second, as a potential mechanism for the replacement of many economic activities once performed within a business enterprise by those that can be done by outside suppliers that compete with each other to execute these activities (terzi, 2016). the purpose of the article is to present the customers (the auction site’s users) perception of the opportunities provided by e-commerce, especially increasing its meaning during the pandemic conditions and to conclude the ways of e-commerce development in the future. as the novelty the study is the realistic approach while attempting to provide a clear view of the overarching picture of the e-trade and directions of its development, especially after pandemic experience. the originality also is that the research conducted not only it has also shown that online commerce transactions are conducted not only at young people probe, but at the probe representative for whole society, including elderly people. the study fulfils the gap at e-commerce research due to the often proclaimed lack of attitude of older people towards e-commerce or pointing them as the age group’s digital exclusion. business, management and economics engineering, 2022, 20(1): 139–151 141 findings also shew increasing significance and share of e-commerce in the market. this will undoubtedly have the influence at the gdp size as well as a favorable effect on domestic economy, as it shows a huge potential for growth. 1. e-commerce as the economic phenomenon the internet market is growing in two directions. aside from the increasing number of people that actively use the network, the time spent by consumers by using the medium is also increasing. this phenomenon is affected by the growing experience of consumers, which translates into the fulfilment of more advanced and complex needs (kowal et  al., 2016) in the internet, and causes the shift of some activities previously performed using traditional methods to the internet, e.g. online shopping, telephone calls via the internet or keeping a personal calendar in the network instead of traditionally. pandemic influence the e-commerce immediately, for which it has been reported as a powerful trigger in times of crisis (eggers, 2020). prior to the pandemic, there was a strong correlation between e-commerce to gdp as measured by the wipo global innovation index (world intellectual property organization [wipo], 2020). the lower the level of e-commerce in a given country in 2019, the higher the growth rate of e-commerce during the covid-19 pandemic what implied that countries with very low e-commerce volumes have been catching up (hale et al., 2020; bloomberg, 2020). the sales organisation in e-commerce is supported by specialist computer software that ensures considerable comfort of working. however, the primary element of starting internet sales is the introduction of the previously acquired product range and all the required information about it into a database. e-commerce is a multi-dimensional phenomenon, as many research areas cover it. consider it for the economics point of view it is necessary to point such aspects as e-commerce quality measurement (sá et  al., 2016; subramanian et  al., 2014), e-commerce customer behavior (alshibly & chiong, 2015; madlberger & matook, 2017; radionova-girsa et al., 2019; bugshan & attar, 2020) or being nowadays b2b model (pabedinskaitė & davidavičius, 2012; agnihotri et al., 2016). mobile customers appreciate good communication that builds trust. it can take place via popular social networks (facebook, twitter) which are used to take care of the company’s reputation (chou et al., 2015) and communicate with potential customer (meilatinova, 2021). the most important feature of online distribution is the safety of processes, regardless whether the sales are conducted in the form of a professional online shop or an online auction. retail sales of e-commerce shows that covid-19 (oecd, 2020) has significant impact on e-commerce and its sales are expected to reach $6.5 trillion by 2023 (jones, 2020). 1.1. the allegro – characteristic of researched portal the study was led at the base of allegro  – polish e-commerce leader acting in central europe and one of the top-10 on-line worldwide platforms but steadily conducting takeovers, thereby ranking it among global e-commerce leaders with a 90% share in the polish market, becoming an indispensable sales channel in online business. 142 a. jasińska-biliczak. e-commerce from the customer panel: the phenomenon of the pandemic... arjan bakker is the mastermind of the auction site, which commenced its operation in 1999. the site, available at www.allegro.pl, allows for easy online shopping thanks to its search engine and the ability to sort goods by criteria relevant to the user. there is an infinite number of sales offer on allegro, therefore goods were classified in 10 department and those were additionally divided into categories. the website is continuously modified to follow the customer requirements and provide him or her with the most comfortable shopping conditions. due to the dynamic growth of e-commerce, especially during the pandemic, as well as the increasing popularity of the polish allegro auction site, the portal was chosen to be the subject of research. 1.2. the methodology the desk research was the first part of research. then the survey took place – it was conducted in april 2021 among online users of allegro by the cawi method (the questionnaire survey). the research was also developed by statistic method showing the correlation and partial correlations between the variables. the research was conducted on the attempt of active internet users representative on account of the sex, age and size of the region. they were respondents of full legal age. the probe size took 1000 persons out, by 89% survey return, what gave 890 respondents. the respondents were notified about the anonymity of the collected data. the purpose of the research allowed for the formulation of the following research question: to what degree is e-commerce and its opportunities used by online users? detailed questions were provided as following: – are business transactions conducted online and how often are they conducted, if so? – what is the reason for making online transactions? does the opportunity of safe online shopping affect the quantity of conducted online transactions and to what degree, if so? at the base of such a consideration the following research hypothesis was then formulated: h: e-commerce and its opportunities are used by online users to a large extent. and auxiliary hypotheses: h1. e-commerce transactions are conducted relatively often. h2. online transactions are conducted due to the convenient physical and financial conditions and the opportunities deriving from using securities in e-commerce, thereby substantially increasing the number of commerce transactions. h3. the covid-19 pandemic affected the behaviour of customers and the growth of the e-commerce sector. the verification of the formulated research hypotheses as well as online activities lead to the selection of the survey as the research technique. the survey did not feature open, semiopen or filter questions and the respondents were only asked to answer closed-ended questions. they enable quick survey completion, which can be comfortable for the respondent, therefore minimising the risk of refusal to cooperate and improving the survey return rates. http://www.allegro.pl business, management and economics engineering, 2022, 20(1): 139–151 143 the research is limited to the leading, but one, on-line platform one of the top-10 online platforms however, because of the market coverage, it is representative for the examined branch. other limitation is the pandemic period which may present the data characteristic only for this time. 2. the research results the survey featured the participation of 56% (498) males and 44% (392) females. the most numerous group among the respondents included people aged 31–35 (222 people) and the least numerous group included respondents aged 46–55 years (87 people). other respondents included people aged 26–30 years (148 people), 18–25 (178 people), 36–45 years (149 people) and aged 56 and more (106 people). the places of residence declared by the respondents include country (93 respondents: 21 men and 72 women), a town with less than 50 thousand inhabitants (178 respondents: 71 men and 107 women), town with less than 50 and more than 100 thousand inhabitants (425 respondents: 247 men and 178 women) as well as city above 100 thousand inhabitants (194 respondents: 95 men and 99 women), which is presented in the figure 1. 0 50 100 150 200 250 300 country town <50.000 town 50.000– 100.000 city >100.000 men women figure 1. the place of living declared by respondents by the place of living by number of inhabitants (source: own elaboration) 100 % respondents answered affirmatively to the question about the knowledge of the polish auction site as well as to the question of whether they were using the site. the respondents declared the time of using the site, which is presented in figure 2. 149 202 384 102 53 since the very begining more than 10 years 10–5 years 5–1 year shorter than 1 year figure 2. declared time of using the portal (source: own elaboration) the respondents were asked about the frequency of shopping via the website. half of the respondents admitted to shopping via the site once a month. 223 respondents are shopping 144 a. jasińska-biliczak. e-commerce from the customer panel: the phenomenon of the pandemic... several times a month. 178 people conduct transactions every six months and 44  – once a year. none of the respondents purchases products once a day or more and no respondent admitted to never making purchases via the analysed site. this data is presented in figure 3. 445 223 178 44 once a month few times a month once a half year once a year not at all once a day figure 3. declared frequency of using of the portal (source: own elaboration) what is important 68% of respondents have declared that pandemics had the influence at the frequency of using of the portal – they have spread it. figure 4 shows the distribution of responses. 0 50 100 150 200 250 300 country town <50.000 town 50.000– 100.000 town >100.000 men before pandemic men who spred using the portal during pandemic women before pandemic women who spred using the portal during pandemic figure 4. the influence of pandemic at the frequency of using the portal by respondents in percentage (source: own elaboration) in spite of the outbreak of covid-19 pandemic, 80% respondents did not see the reason or the need for the resignation from doing groceries in stationary shops. the situation is totally different in case of the non-food shopping: only 32% respondents were effecting this type shopping in stationary shops during the covid-19 pandemic. the straight majority of consumers who assessed the changed channels of the completion of the shopping declared that even after standing the covid-19 pandemic still they will be using new channels of sale in the internet: the 89% of them granted, that they would be making purchases via a website, but the 79% on them that they would be making the purchase with the mobile application. respondents were also asked about being hacked and frauded when using the analysed portal. a vast majority of the respondents indicated that they were not cheated when conducting transactions via the site, while 7 people were cheated. the analysis concerned a subjective evaluation of the site’s transaction security. majority of the respondents answered that the site’s security is very good. 37 indicated that the security is good, while 14 stated that the security is weak. none of the respondents stated that the site’s security is very weak or that he or she has no opinion on the topic. business, management and economics engineering, 2022, 20(1): 139–151 145 the respondents stated that the main incentives for using the site included lower prices than in regular shops (52%) and time savings (43%). the availability of rare products and products unavailable in regular shops is taken into consideration to a lesser extent. the factors that least incentivised the respondents to use the site included the comfortable product classification (13%) and product description (7%). the responses related to using the site depending on the time of day are as follows: in early morning – 8%, in the morning – 14%, in the afternoon – 28%, in the evening – 37%, late in the evening – 13%, what is presented in figure 5. 8 14 28 37 13 early morning morning a�ernoon evening late evening figure 5. the percentage of respondents using the portal in pointed time of a day in percentage (source: own elaboration) asked about the kind of goods buying by the portal respondents mainly pointed new goods (94%), rarely used once (6%). most respondents buys products for their own use (60%), while 30% buys presents on the site. the smallest group of respondents (10%) makes purchases for friends or family. none of the respondents uses the site to buy goods with the intention of re-selling them at profit. the survey also accorded subjective opinion about the change of influence and meaning of the e-commerce during a pandemic. figure 6 presents the distribution of answers according to such formulated problem. 78 47 24 9 the change observed very high high medium none figure 6. the change of influence and meaning of the e-commerce during a pandemic in percentage (source: own elaboration) the e-commerce customers pointed that they noticed that the change at its influence at their habits as the customers occurred (78%). the respondents pointed that this influence is very high (47%), high (24%), medium (9%) and none 2%. higher influence of e-commerce at consumers habits was noticed by men (81%) than the women (46%). women pointed the rise of percentage share of medicines (38%), it (27%) and electronics (12%) in their shopping. men especially pointed the rise of percentage share of food (89%), medicines (58%) 146 a. jasińska-biliczak. e-commerce from the customer panel: the phenomenon of the pandemic... and articles for children (37%) in their shopping. that allows to state that pandemic moves every day shopping to e-commerce. there was also checked the correlation and the partial correlation between the number of users, number of transactions and the period of using the portal to prove of to reject the hypothesis stated. the values of the variables taken into the statistical part of the research are presented at the table 7. table 7. the values of the variables taken into statistical examination (source: own elaboration) no. number of users number of transactions period of using the portal (in years) 1 53 952 1 2 72 795 2 3 102 2 488 3 4 169 4 210 4 5 294 7 365 5 6 312 11 214 6 7 348 19 488 7 8 273 17 831 8 9 249 15 219 9 10 202 16 164 10 11 183 18 248 12 12 149 15 870 15 the research shew the r-person correlation between two first variables at the 0.665 level, which, according to guilford classification, is defined as high (0.5 < |r| ≤ 0.7) with simultaneous significance at the 0.018 (<0.05) level, which is defined as very relevant. at the same time the partial correlation to the third variable was shew at the 0.772 level, which, according to guilford classification, is defined as very high (0.7 < |r| ≤ 0.9) with simultaneous significance at the 0.005 (<0.05) level, defined as very relevant. the value are presented at the figure 7. 20.000 15.000 10.000 5.000 0 0 200 400 number of users nu m be r of tr an sa ct io ns figure 7. the correlation between the variables (source: own elaboration) business, management and economics engineering, 2022, 20(1): 139–151 147 taking into consideration the high level of correlation between the number of users and number of transactions with its simultaneous very high significance and the very high level between them and the period of using the portal (shown in years) with its simultaneous very high significance there can be stated that the hypothesis was confirmed. 3. discussion many previous studies have found that nowadays economic growth requires a system for forecasting (arndt, 1999; davidavičienė et  al., 2016; jasińska-biliczak, 2019) and shopping is not just a matter of obtaining tangible products but also about experience (dennis et al., 2019). in the discussion, it may be observed, a harmonized transaction framework is needed for a sustainable e-commerce framework. 21st century is treated as industrial revolution transformed era. expansion of e-trade is playing a key role for the purpose of developing international trade across the world (kolbe, 2000). the literature points that despite the recent misfortunes of many dotcoms, e-commerce will have major and lasting effects on economic activity and only business models based on sound economic propositions will survive (vulkan, 2000). nowadays, especially developed by the pandemic and lockdown all over the world, the e-trade has spread its development. the lack of possibility of buying in the brick and mortar shops moves their shopping into internet, being the customers of e-commerce. there should be discussed the added value of e-commerce, which, among others, occurs in online shopping. e-business is a part of e-commerce and depends on transaction security and trustworthy transborder legal framework (weber, 2007). it is also executed by linking among different terminals through the transnational electronic transaction (alam, 2019). the research follows the thesis, that understanding consumer buying patterns emerging in crises plays an important role in the success of online grocery shop  (world health organization, 2020). there are research discussing the payment transaction system, sales, and reservations made by the business by using e-commerce technology (soegoto et al., 2018), which point the need of these areas development (lim et al., 2018; jílková & králová, 2021). analysing data collected in research it is possible to point that there is observed (bagozzi & yi, 2012) growth in on-line shopping, which has strongly developed by the covid-19 pandemic (sas institute, 2021), when the percentage of the effect of coronavirus spread varied from one company to another (abdelrhim & elsayed, 2020). there was observed important of consumers habits changes, also caused by pandemic. the research completes the research of the e-commerce development under the covid-19 conditions. as an observational research method (arndt, 1989), content analysis systematically evaluates the symbolic content of all forms of recorded communications (laros & steenkamp, 2015). the research agrees that a field of research such as e-commerce has practical implication to business and there occurs its greater importance. the results of the descriptive analysis of the returns of the e-commerce companies showed that the companies achieve positive daily returns by calculating the average daily returns (khan et al., 2020). https://www.scirp.org/journal/paperinformation.aspx?paperid=104377#ref11 https://link.springer.com/article/10.1007/s11294-021-09817-4#auth-petra-j_lkov_ https://link.springer.com/article/10.1007/s11294-021-09817-4#auth-petra-kr_lov_ 148 a. jasińska-biliczak. e-commerce from the customer panel: the phenomenon of the pandemic... the changes observed in the study are also widely discussed (niedermeier et  al., 2021) what underlines that the pandemic and changes in consumer behaviors which it brought are seen at the market and became real economic phenomenon (sheth, 2020; svajdova, 2021). present research also contributes to the literature on e-commerce the analysis of current changes in customers behavior in on-line environment. it also complements the literature with the actual trends (shin, 2021; chakraborty et  al., 2022) in developing and growth observed in e-commerce. it fulfils the gap shown in the literature, where was examined that among the business focuses on a short-term goal and needed results immediately, further empirical analysis and research-proven cases need to be accomplished (fedushko & ustyianovych, 2022). also corresponds to additional studies aiming to discover more e-commerce channels are also required as future research topics (yun et al., 2020). conclusions the data analysis confirmed the main hypothesis and the auxiliary hypotheses. it was possible to confirm the opinion that e-commerce and its opportunities are used by online users to a large extent. each of the respondents made a purchase via the analysed site at least once, thereby confirming the site’s high popularity. it also confirms the increasing popularity of e-commerce and points to its increasing role in situations such as the pandemic. the survey demonstrates an increasing use of this form of commerce by online users during the covid-19 pandemic (59% of women and 19% of men). respondents also declared that some of their habits, especially greater savings regimes, more careful approach to spending, but also on-line shopping, will stay with them even after the pandemic. the respondents also pointed the pandemic influence at their on-line habits: very high (47%), high (24%), medium (9%) and none 2%. higher influence of e-commerce at consumers habits was noticed by men (81%) than the women (46%). the survey has also shown that online commerce transactions are conducted not only by young people, but also by older people. it is an interesting phenomenon due to the often proclaimed lack of attitude of older people towards e-commerce or the age group’s digital exclusion. it has also shown the reasons for the willingness to buy products online, which mainly include product prices which are often more affordable than prices in traditional shops or willingness to save time. the research also confirmed the hypothesis concerning the transaction security. when deciding on whether to make a purchase, customers are often worried of being lied to and cheated by the sellers. the study demonstrated that the site’s security is very good. 37% of respondents indicated that the security is good, while 14% stated that the security is weak. no one stated that the site’s security is very weak or that has no opinion on the topic. however, the research has some limitations such as leading it during the pandemic, what allowed to show only the values representative for this period, but is not without the influence for the future e-commerce development directions. it is also limited to the leading, but one on-line platform, which, because of the market coverage as one of the top-10 on-line platforms, is representative for the examined branch, as the probe size took 1000 persons out, by 89% survey return, what gave 890 respondents. business, management and economics engineering, 2022, 20(1): 139–151 149 thanks to the opportunities provided by e-commerce, consumers and sellers can feel a certain level of comfort. commerce transactions conducted in the internet provide mutual benefits, however the condition for mutual satisfaction that deepens the seller-customer relations is the transactional security. based on the conducted survey, it is possible to state that the risk of online frauds is relatively low, which thereby translates into the satisfaction of internet and website users who take part in e-commerce. e-commerce is a dynamically growing branch of business, the numbers of its supporters are increasing constantly, which is affected by external factors such as the pandemic and lockdown. this situation will undoubtedly result in the establishment of new auction site and the growth of commerce platforms. the increasing significance and share e-commerce in the market was observed. this will undoubtedly have the influence at the gdp size as well as a favorable effect on domestic economy, as it shows a huge potential for growth. the increasing use of the e-commerce opportunities demonstrates the importance of the internet and the increasing number of its applications and that the national services can be competitive to international ones. taking into account the role of e-commerce in people’s lives it can therefore be crucial for the country’s market position and its developmental perspectives. references abdelrhim, m., & elsayed, a. 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https://www.who.int/news-room/questions-and-answers/item/coronavirus-disease-covid-19-food-safety-and-nutrition https://www.who.int/news-room/questions-and-answers/item/coronavirus-disease-covid-19-food-safety-and-nutrition https://doi.org/10.3390/electronics9050791 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university demographic differences matter on job outcomes: psychological contract’s mediating role ali ender altunoğlu 1*, özge kocakula 2, ayşe özer 3 1faculty of economics and administrative sciences, muğla sıtkı koçman university, muğla, turkey 2management and organization department, aydın adnan menderes university, aydın, turkey 3department of international relations and trade, muğla sıtkı koçman university, muğla, turkey received 08 may 2021; accepted 07 january 2022 abstract. purpose – drawing upon prior researches on the social exchange theory, we examine the effect of employee demographic variables on psychological contract fulfillment, which eventually influences employee’s job satisfaction, intention to leave, organizational citizenship behavior, cynicism, and task performance. research methodology – data from 274 employees of different manufacturing enterprises has been collected through the survey. description and interpretation statistics are used through spss and also amos. structural equality modeling is used to assess the psychological contract’s mediating function. findings – data analysis shows that psychological contract fulfillment mediated positive relationships between demographic variables and constructive job outcomes; in contrast, mediated negative relationships between demographic variables and destructive job outcomes. research limitations – this paper applies data from the manufacturing industry operating in turkey, which may prevent the generalizability of the paper. more study is needed to confirm these results on different samples in order to generalize findings. in addition, the data comes from a single source, raising the risk of common technique bias, and is focused solely on self-reports. practical implications – the study suggests that organizations review and revise their ideas on the exchange connection with their workforce as job outcomes of employees are connected to pc fulfillment. in practice, managers and leaders may highlight that such fulfillment constitutes an investment of resources into and a long-term commitment to the employee in addition to satisfying relational responsibilities. leaders should place a strong emphasis on increasing employee commitment levels. creating a culture of trust and loyalty fosters beneficial behavioral and attitudinal results among employees. originality/value – this study investigated psychological contract fulfilment’s mediator effect on the relationship between demographic differences and job outcomes. keywords: demographic variables, job outcomes, psychological contract fulfillment. jel classification: j21, j23, j24. business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 1: 1–22 https://doi.org/10.3846/bmee.2022.14895 *corresponding author. e-mail: aealtunoglu@mu.edu.tr http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://orcid.org/0000-0002-7610-0812 https://orcid.org/0000-0001-9710-492x https://orcid.org/0000-0002-5615-5410 https://doi.org/10.3846/bmee.2022.14895 2 a. e. altunoğlu et al. demographic differences matter on job outcomes: psychological contract’s... introduction unlike service, manufacturing companies pay more attention to issues such as production, quality, and safety. other critical success factors like employee attitudes are generally neglected (michael et al., 2005). however, enhancing workplace attitudes and behaviors are general and costly problems within their organization in the manufacturing sector (lee et al., 2006). the literature on organizational behavior covers a wide variety of attitudes and behaviors. drawing on the framework employed by robinson (1996), this research investigates five job outcomes considered as crucial for organizational success. this study intends to focus on job satisfaction, intention to leave, organizational citizenship behavior (ocb), cynicism, and task performance. while ocb, task performance, and job satisfaction are considered positive and constructive, intention to leave and cynicism are considered harmful and destructive. these outcomes are interrelated and mutually affect each other. therefore, it seems necessary to examine the association between these workplace attitudes and behaviors and their antecedents to provide an insight into the effectiveness of manufacturing companies. hence, the underlying objective of this study is to examine the strike demographic variables with organizational outcomes such as intention to leave, job satisfaction, ocb, cynicism, and task performance through psychological contract fulfillment (pcf). failure to form an employee’s psychological contract (pc) will make it difficult for the organization to reduce motivation and performance, prevent organizational engagement, job satisfaction, and ocb, which is regarded as extremely important for the organization, will not be fully formed (vos et al., 2005). in order to avoid destructive outcomes such as these, the concept of pc should be handled consciously. in this sense, pcs are regarded as one of the practice areas to examine employer and employee relations with changing management approaches. the first objective is to analyze the connection between demographic factors with pcf and workplace outcomes. demographic factors seem and affecting factors of outcomes. this study investigates any relation between job attitudes and gender, age, education level, tenure, and occupational level in light of prior research. possible results will support organizations in their efforts to enhance the level of employee job outcomes. the research’s second objective is to assess the link between pcf and workplace outcomes. rousseau (1995) argues that a pc exists when an unwritten belief between the worker and the manager about the parties’ conditions and expectations. the common point of all reviews is a trade-off between employers and employees concerning the pc. the pc involves monetary obligations and exchanging socio-emotional elements (job satisfaction, cynicism, etc.). in this sense, the pc principle is founded on the employee’s reaction in the face of the employer’s behavior (coyle-shapiro & kessler, 2002). therefore, social exchange theory may be utilized to analyze the act of pcs upon employees’ approaches and actions. given the significance of pcing, this research’s general goal is to explain the organizational consequences of strengthening workplace attitudes and behaviors within their organization. the study’s final goal is to display the mediating effect of pcf in the effect of demographic variables on destructive and constructive employee work attitudes. in addition, this research will expand the evolving empirical studies on pcf by examining pcf as a mediating variable. business, management and economics engineering, 2022, 20(1): 1–22 3 this study is designed as follows to achieve these objectives. the first part covers demographic factors and their possible associations with job attitudes and the pc. the following section examines pc and focused constructive and destructive work attitudes and highlights the advantages of higher job outcomes for organizations. these are traced by an analysis of the relationship between the pcf with those job attitudes. the discussion will be noted using the survey method to gather data and measurement details for each variable. finally, the conclusions, limitations and future directions of studies are outlined after evidence of results. 1. theory 1.1. demographic differences rousseau (1995) goes beyond looking at exchanges between workers and managers and states the necessity to consider demographic differences since employees perceive contractual psychological conditions based on their different motivations and attitudes. therefore, demographic factors are considered crucial impact factors of job attitudes. the study explores any connection between job attitudes, pcf and gender, level of education, age, tenure, and occupational level given prior studies. gender is one of the widely discussed individual differences in the literature. gender is a socially created role, attitudes, habits, and traits that a particular culture assumes are appropriate for males and females (bem, 1981). gender can affect employee expectations from work and his/her job outcomes (bal et al., 2008). prior studies indicate distinctions between the pcf and gender job attitudes (hoque, 1999; abela & debono, 2019). work-family conflict can occur, especially for women, when working in a male-dominated value system such as manufacturing. sustaining employee job outcomes, especially women, is a challenge for today’s businesses. these disputes can cause unhappiness and distress in the workplace and family, leading the female to eventually leave (netemeyer et al., 1996; callister, 2006). according to researchers, women face more disputes than men (hammer et al., 1997). therefore, the psychological agreement between males and females may vary. moreover, gender differences have been linked to job satisfaction (a. sousa-poza & a. a. sousa-poza, 2003; netemeyer et al., 1996), intent to leave (du plooy & roodt, 2013), ocb (kidder, 2002), cynicism (sak, 2018), and task performance (mackey et al., 2019). age emerges as an individual difference that impacts the perceptual differences of the employees’ motivations and attracts researchers’ attention. age differences have been associated with pcf (hess & jepsen, 2009), job satisfaction (kollmann et al., 2020), intent to leave (al zamel et al., 2020), ocb (ng et al., 2016), cynicism (chiaburu et al., 2013), task performance (gajewski et al., 2020). consistent with this study, an employee’s degree of education may influence his or her work expectations and attitudes. even though the findings are mixed, there is a need to assess the impacts of demographic variables like education level. it has been related to the pc (janssens et al., 2003). besides, education level has been linked to job satisfaction (knights & kennedy, 2005), intent to leave (lu et al., 2002), ocb (williams & shiaw, 1999), cynicism (arabacı, 2010) and task performance (anseel et al., 2009). 4 a. e. altunoğlu et al. demographic differences matter on job outcomes: psychological contract’s... this study argues that tenure can affect employee expectations from work and his/her job outcomes. in their study examining dyadic relations, ferris et al. (2009) stated that the time spent together is crucial for determining work relationships. the importance of time in relational pcs is addressed in the literature. parties’ psychological agreements include mutual respect and trust, as well as ongoing reciprocation and the sharing of intangible structures over a prolonged period (rousseau, 1995). when trying to get an idea of the relationship in its early stages, the parties may make false inferences. the parties evaluate these implications and become more precise over time (conway & coyle‐shapiro, 2012). moreover, tenure has been linked to job satisfaction (castellacci & viñas-bardolet, 2020), intent to leave (lall et al., 2020), ocb (ng & feidman, 2011), cynicism (chiaburu et al., 2013), and task performance (sturman, 2003). in this study, blue-collar and white-collar workers were considered as occupational categories in manufacturing organizations. the pc has also been associated with occupational categorization (janssens et al., 2003; wang et al., 2019), job satisfaction (hu et al., 2010), intent to leave (baruch et al., 2016), ocb (ersoy et al., 2011), cynicism (van hootegem et al., 2021), and task performance (koopmans, 2014). in the light of discussions above, the hypotheses are developed as: h1: there is an interaction between demographic variables and job attitudes. h1a: male workers are likely to act more constructive job attitudes (job satisfaction, ocb, task performance) and less destructive job attitudes (intent to leave, cynicism). h1b: while there is a positive correlation between higher age and constructive job attitudes (job satisfaction, ocb, task performance), there is a negative correlation with destructive job attitudes (intent to leave, cynicism). h1c: while there is a positive correlation between a higher level of education and constructive job attitudes (job satisfaction, ocb, task performance), there is a negative correlation with destructive job attitudes (intent to leave, cynicism). h1d: while there is a positive correlation between high tenure and constructive job attitudes (job satisfaction, ocb, task performance), there is a negative correlation with destructive job attitudes (intent to leave, cynicism). h1e: while there is a positive correlation between higher status and constructive job attitudes (job satisfaction, ocb, task performance), there is a negative correlation with destructive job attitudes (intent to leave, cynicism). 1.2. psychological contract fulfilment the pc comprises the responsibilities that an employee assumes his/her organization is in debt to him/her and the responsibilities the employee assumes he/she is in debt to his/her organization reciprocally. as a result, social exchange theory may be used to explain the idea of the pc and its sources and effects. according to social exchange theory, individuals shape exchange relationships based on their interactions with others (blau, 1986). therefore, using the theory makes it possible to have a specific framework for explaining how workers react if they feel their pcs are fulfilled. the psychological agreement offers a chance to explore the employment relationship procedures and content by focusing on specific agreements. the pc is mainly concerned with https://tureng.com/tr/ingilizce-esanlam/reciprocally business, management and economics engineering, 2022, 20(1): 1–22 5 the individual employee-employer relationship. according to rousseau (1995), individuals may have psychological agreements, but organizations may not. the mainstream pc research typically analyses from the individual worker’s perspective. looking at pc through the employer’s lens has a potential problem. the validity, feasibility and usefulness of an employer’s view on the pc have been criticized (guest, 1998). in this study, the employee perspective is used as a basis for exploring the employment relationship, incorporating both employer and employee perspectives. pc studies are generally designed to determine the consequences that employees’ sense less than they are assured. on the other hand, employee attitudes can be affected by the company’s fulfillment of commitments (turnley et al., 2003). lambert et al. (2003) argue that results are more closely linked to fulfilling pcs than to agreements in general. this study utilizes a metric of pcf that enables to cover a wide variety of potential replies for the items of the pc examined here. in the employee-organization relationship, a fulfilled pc provides a sense of control and security. the antecedents of psychological contracting are less known, particularly comparing the types of workers within the pc regarding their exchange. even though many factors that affect pc, such as trust, organizational culture and leadership style, are explored in the literature, how individual factors shape pc is not adequately discussed. as a research subject, this study evaluated demographic characteristics that shape individual behaviors -gender, age, education, duration of employment, and position level. these associations are already discussed in the previous section. h2: there is an interaction between pcf and gender (h2a), age (h2b), education level (h2c), tenure (h2d) and title (h2e). 1.3. psychological contract fulfillment and job outcomes many studies have concentrated on assessing psychological agreements and their impact on employee outcomes. according to research, employee satisfaction is influenced by the violation or fulfillment of pcs (zhao et al., 2007). looking at the current definitions of the term “job satisfaction”, it is seen that the common idea is the satisfaction of an employee with the job (mcdonald & makin, 2000). according to robinson et al. (1994), a breach of pc strongly influences relational obligations and those employees are less motivated to fulfill their work-related obligations. larwood et al. (1998) noted that increased pcf and higher work satisfaction are related. the first reason for such a statement is the gap leading to dissatisfaction between expected and received. secondly, employer promises but fails to provide can often be those dimensions of employee’ crucial job satisfaction sources (robinson & rousseau, 1994). by fulfilling the promised attempts and appeals, an individual is likely to reciprocate by fulfilling the commitments, establishing a good connection that both sides would satisfy. employee intention to leave seems to be a crucial issue for manufacturing firms since it determines hiring policies. because the left might need a long time of planning for the action (acker, 2004), intent to leave is one of the essential components in quitting the job. intent to leave is a dimension of employees’ destructive perceptions toward their work. factors related to employees’ intention to leave their employers include economic, organizational and 6 a. e. altunoğlu et al. demographic differences matter on job outcomes: psychological contract’s... personal living conditional reasons (cotton & tuttle, 1986). these reasons may trigger each other in the process, causing the intention to leave to turn into quitting behavior. chiang et al. (2012) stated a strong link between intention to leave and violation of the pc. the pc binds the parties. both parties are supposed to benefit from the relationship (robinson & rousseau, 1994). even if an employee feels his or her employer be attentive and cheerful, and even if he or she finds leaving the company to be a low cost and high profit, he or she can still respond to the organization with commitment and to accept as a caring and positive environment (chi & chen, 2007). it may be claimed that an employee’s perception of pcf demonstrates that the employer exposes reinforcement and caring. therefore, fulfillments strengthen the tie. the employee may gain trust in the advantages of remaining in the relation and, as a result, is less likely to leave. however, if one of the sides fails to meet their commitments, this leads to a reduced intention to preserve the relationship. ocb is expressed as an additional role behavior that is not clearly stated in the organization’s reward system, which increases the effectiveness of the employee’s organization (organ, 1988). moreover, organ described organizational citizenship as “a readiness to contribute beyond literal contractual obligations” (1988, p. 22). hence, the definition provides that ocb is relative to a formal employee-employer contract. besides, ocb is consistent with the employee-employer exchange relationship. as noted earlier, social exchange theory is the critical concept in the literature on employee-employer contracts. furthermore, the pc literature states that employees will adapt their actions to their views about employment contract (rousseau, 1995). consequently, it seems reasonable to expect that employees’ perceptions of how well their company has met its obligations would affect their ocb within the company (robinson & morrison, 1995). cynicism is defined as the way of thinking that individuals who believe that individuals are only observing their interests and who accept everyone as enthusiastic are called “cynical” (james, 2005). the concept of cynicism is based on dissatisfaction and anger resulting from the employee’s doubts and frustration towards the organization, resulting in the employee’s emotional leave from the organization. the violation of the pc, according to the research, is one of the significant reasons generating cynicism (johnson & o’leary-kelly, 2003; andersson, 1996). task performance can be expressed as an indicator of employee productivity level in its simplest form. task performance shows the main tasks and responsibilities related to the job, revealing the differences between the jobs (jawahar & carr, 2007). empirical results indicate that employees maintain their balance by matching the positive contributions receiving from the organization to their effectiveness (rosen et al., 2009; conway & coyle‐shapiro, 2012). as a result of this interaction, a connection can be mentioned between pcf and task performance. h3: a fulfilled pc will relate positively to job satisfaction (h3a), ocb (h3b), task performance (h3c) but negatively to cynicism (h3d) and intention to leave (h3e). 1.4. the mediating role of psychological contract fulfillment first of all, this research expects that individual differences will result in a diverse pc assessment, which will result in more favorable reactions to the constructive and destructive https://tureng.com/tr/turkce-ingilizce/strengthen business, management and economics engineering, 2022, 20(1): 1–22 7 work outcomes. pcf is anticipated to be a mediating variable that helps to clarify why demographic variables can be linked to attitudes and behaviors. some studies revealed that pcs are strongly connected to employee loyalty, job attitudes, trust and turnover intentions (robinson & morrison, 1995; robinson, 1996; johnson & o’leary-kelly, 2003; turnley et al., 2003). the perspective of pc is shaped by individual differences and significantly impacts the actions of employees. therefore, pcs can be seen as a mediating factor between individual differences and the outcomes of employees. employees will generate their perceptions based on the organization’s actions, which will determine their role in reciprocating their organizations (wayne et al., 1997). as discussed previously, individual differences are likely to affect the perceptions and expectations of employees about the organizational commitments and responsibilities underlying the employment relationships. demographic differences may generate distinct perceptions of organizations making commitments. for example, if individuals consider their organization to be considerate and support their requirements, provide opportunities for safety and development in the workplace, they may create an obligation to reciprocate the organization with enhanced emotional bonds. the relationship between demographic variables and worker role behaviors might be mediated by employees’ comprehensions of replacing the contract between themselves and their employers. for instance, it seems fair to accept that older employee possibly experiences lower pcf levels, resulting in lower job satisfaction since age is considered an effecting factor on the perceptual differences of the employees’ motivations. the negative or positive emotions are associated with pcf. demographic differences that form the social exchange expectations of employees can be attributed to higher pcf perceptions of employees, and then employees are more willing to exercise job outcomes. based on these reasons and the assumptions mentioned above, this research proposes that pcf mediate between demographic variables and work outcomes. h4a: pc fulfillment plays a mediating role in the effect of demographic variables on constructive job outcomes. h4b: pc fulfillment plays a mediating role in the effect of demographic variables on destructive job outcomes. 1.5. conceptual link undoubtedly, the importance of leadership styles and employee motivation in the emergence of pc and organizational citizenship behaviors cannot be underestimated (khan et al., 2020). they further argue that organizational culture and organizational citizenship behavior play a crucial role in mediating and moderating leadership, social interaction, and leader-member interchange theories in predicting work behavior. leadership is significantly connected to individual and group organizational citizenship behaviors (euwema et al., 2017). besides, the literature suggests that employees’ pcs can be influenced by leaders in general and leadership style in particular (oorschot et al., 2020). leaders are considered as the critical pc makers for followers from this perspective. (agarwal et al., 2021). apart from leader and leadership style, employees’ motivation towards job and organization are essential factors for pc 8 a. e. altunoğlu et al. demographic differences matter on job outcomes: psychological contract’s... and ocb. shim and faerman (2017) found that motivation positively related to employees’ engagement in ocb. vatankhah (2021) suggests that motivation would follow positive performance results and a reduced propensity to participate in negative workplace behavior. the pc is underlined as a motivation-increasing factor (vatankhah, 2021). as the literature suggests, there is an inevitable linkage between ocb, motivation, pc and leadership. 1.6. model of the study figure 1 illustrates the research model that we built based on the study’s hypotheses. h4a h4b demographic variables h h psychological contract constructive *h4a and h4b: moderating role of the psychological contract between demographic variables and job attitudes h2 h1 destructive h1a, h1b, h1c, h1d, h1e job attitudes h3 h2a, h2b, h2c, h2d h2e h3a, h3b, h3c, h3d h3e figure 1. the model of the study 2. methodology 2.1. overview and participants employees in the manufacturing sector from twelve different companies located in i̇zmir, turkey, provided the data. the study was conducted between september–november 2019. all respondents voluntarily participated in the research. the confidentiality of respondents has been stressed and ensured. four hundred (400) survey questionnaires were distributed among the companies. unfortunately, 96 responses were both incomplete and 30 excluded responses were not available to use. therefore, 274 collected questionnaire results were used in the study. 2.2. measurement of variables in the questionnaire, the data were obtained by providing employees’ beliefs regarding the factors. demographic variables: gender and the age of the employee taken into consideration. education level was divided into four categories: lower (education up to age 15), average (certification of high school), high (level of bachelor and master) and upper (level of master business, management and economics engineering, 2022, 20(1): 1–22 9 or higher). tenure is measured by time spent together in the company. blue-collar and whitecollar workers were considered occupational categories in manufacturing organizations. table 1 illustrates the details of the demographic variables. table 1. distribution by demographic variables gender education having child position parameter male female 1 2 3 4 yes no blue-collar whitecollar number 188 86 85 105 74 9 144 126 175 86 percentage 68.6% 31.4% 31.1% 38.5% 27.1% 3.3% 53.3% 46.7% 67% 33% pc fulfillment: this set of 9 items (α = .94) was adopted from robinson and rousseau (1994) and included the following promises: performance evaluation and feedback, change management, promotion, remuneration, employee qualification, job security, training and development, nature of the work, creating the opportunity for the organization to show him/herself by taking responsibility. in this study, these employer obligations are considered general promises or expectations relevant to all employees. participants reacted to these statements using a five-point likert scale (1 = “strongly disagree”; 5 = “strongly agree”). job satisfaction: the scale was developed by hackman and oldham (1975) to determine individuals’ satisfaction due to the harmony between the individual and the job. the scale consists of 14 items (α = .94). participants reacted to these statements using a five-point likert scale (1 = “strongly disagree”; 5 = “strongly agree”). intention to leave: the scale was developed by mobley et al. (1978) to measure the level of the intention of employees to leave their current jobs and consists of 3 items (α = .92). reacts to these three statements were made on a five-point scale (1 = “strongly disagree”; 5 = “strongly agree”). organizational citizenship behavior: the scale consisting of 19 items (α = .91) was developed by basım and şeşen (2006). responses to these statements were on five-point scales (1 = “strongly disagree”; 5 = “strongly agree”). cynicism: the scale developed by brandes et al. (1999) is based on three dimensions (α = .92), namely: cognitive, emotional and behavioral and consists of 13 items. participants reacted to these 13 expressions using a five-point likert scale (1 = “strongly disagree”; 5 = “strongly agree”). task performance: the scale prepared by goodman and syvantek (1999) consists of 9 items (α = .96). reacts to these statements were made on a five-point scale (1 = “strongly disagree”; 5 = “strongly agree”). in order to minimize the bias in the information-seeking process, the scales in which validity and reliability analyses were applied and used by numerous researchers in the literature were selected. moreover, the questionnaires are delivered to participants working in different companies. finally, the studies that reached contrary findings in the literature are reviewed to avoid bias in developing hypotheses. 10 a. e. altunoğlu et al. demographic differences matter on job outcomes: psychological contract’s... table 2. the alpha reliabilities among all the scales used in the study scale cronbach alpha job satisfaction 0.939 intention to leave 0.921 organizational citizenship behavior 0.911 cynicism 0.923 task performance 0.963 pc 0.940 2.3. analysis of the data to test from h1 to h4, we performed spearman’s rho correlation using spss 22.0. hypotheses 4a and 4b are the hypotheses searching for a mediating role of pcf between demographic variables and job outcomes. the sem approach was used because of its ability to deal with many endogenous, exogenous and latent variables determined as linear combinations of the observed variables throughout the covariance-based amos graphics to investigate the mediating role of pcf. the sem approach can deal with many endogenous and exogenous variables and latent variables determined as linear combinations of the detected variables (golob, 2003). the maximum likelihood approach in amos was applied to estimate the model. we examined the goodness-of–fit of the model which is proposed based on hypotheses 4a and 4b. because of its restrictive structure (bollen, 1989; njite & parsa, 2005; hooper et al., 2008) overall fit and the local fit of individual parameters were conducted using additional fit indices in this study. in regard of its tenderness to the count of estimated parameters in the model (hooper et  al., 2008), root mean square error of approximation (rmsea) regarded one of the most revealing fit indices (diamantopoulos & siguaw, 2000, p. 85; hooper et al., 2008) indicates wellness of the model, with obscure but optimally chosen parameter estimates would fit the populations covariance matrix (byrne, 1998; hooper et al., 2008). hooper et al. (2008) stated that an rmsea in the range of 0.05 to 0.10 was considered an indicant of satisfactory fit and values above 0.10 can be accepted as inadequate fit (maccallum et al., 1996); between 0.08 to 0.10 provides an average fit and below 0.08 indicates a well fit (maccallum et al., 1996). the comparative fit index (cfi) (bentler, 1990), which is one of the most popularly reported fit indices (fan et al., 1999) because of being one of the measures least affected by sample size, accepts that all latent variables are uncorrelated (null/independence model) and compares the sample covariance matrix with this null model (hooper et al., 2008). cfi scores between 0.0 and 1.0 with values closer to 1.0 were accepted indicating a good fit (bentler, 1990). tucker-lewis index (tli) was another parameter to evaluate the goodness-of-fit of the structural regression models. tli values in the area of 0.90 to 0.95 indicates a good fit (hu & bentler, 1999). incremental fit index (ifi) (bollen, 1989) was also one of the goodness-of–fit indexes to estimate the model of the study. just as tli, ifi values in the area of 0.90 to 0.95 also indicates a good fit (bentler, 1980; marsh et al., 2006). business, management and economics engineering, 2022, 20(1): 1–22 11 3. results as can be seen from table 3, there is no connection between gender and job attitudes. according to spearman’s rho correlation analysis (*p < 0.05, **p < 0.01) results; age was positively related to job satisfaction (r = 0.142; p < 0.05); ocb (r = 0.204; p < 0.01) and task performance (r = 0.0137; p < 0.05); and negatively associated with intent to leave (r = –0.238; p < 0.01) and cynicism (r = –0.232; p < 0.01). education level was positively associated with ocb (r = 0.139; p < 0.05), task performance (r = 0.240; p < 0.01) and negatively associated with intent to leave (r = –0.154; p < 0.05). tenure was positively related to job satisfaction (r = 0.159; p < 0.05), ocb (r = 0.160; p < 0.05) and negatively associated with intention to leave (r = – 0.260; p < 0.01) and cynicism (r = –0.219; p < 0.01). as status is concerned, there is positive relationship with job satisfaction (r = 0.133; p < 0.05), ocb (r = 0.187; p < 0.01), task performance (r = 0.154; p < 0.05); except that there is negative relationship with intent to leave (r = –0.238; p < 0.01) and cynicism (r = –0.142; p < 0.05). table 3 details the correlation coefficients between demographic variables and job attitudes. table 3. spearman’s rho correlations for the relationship between demographic variables and job attitudes 1 2 3 4 5 6 7 8 9 10 1. gender 2. age .108 3. education .210** .006 4. tenure .116 .731** .029 5. title .300** .138* .710** .161* 6. job satisfaction .019 .142* .131 .159* .133* 7. intent to leave .082 –.238** –.154* –.260** –.238** .372** 8. organizational citizenship –.023 .204** .139* .160* .187** .579** .224** 9. cynicism .066 –.232** –.068 –.219** –.142* .383** .620** –.173* 10. task performance –.014 .137* .240** .121 .154* .401** .174** .636** –.053 note: *p < 0.05 **p < 0.01. according to the results of spearman’s correlation analyses, pcf was positively associated with age (r = 0.124; p < 0.05) which supports h2b, education (r = 0.140; p < 0.05) which supports h2c, tenure (r = 0.148; p < 0.05) which supports h2d, title (r = 0.168; p < 0.05) which supports h2e. gender had a minor or insignificant association with the pcf (p > 0.05), not supporting h2a. table 4 shows the results of spearman’s rho correlation analysis. according to the results, as shown in table 5, the pc had strong associations with job outcomes. pcf was positively related to job satisfaction (r = 0.781; p < 0.01) which supports h3a, ocb (r = 0.565; p < 0.01) which supports h3b and task performance (r = 0.451; p < 0.01) which supports h3c; negatively related to intent to leave (r = –0.307; p < 0.01) and cynicism (r = –0.294; p < 0.01) which supports h3d and h3e. these results support h3. 12 a. e. altunoğlu et al. demographic differences matter on job outcomes: psychological contract’s... table 5. correlations between pcf and job attitudes 1 2 3 4 5 6 1. pc 1.000 .781** –.307** .565** –.294** .451** 2. job satisfaction .781** 1.000 –.372** .579** –.383** .401** 3. intent to leave –.307** –.372** 1.000 –.224** .620** –.174** 4. organizational citizenship .565** .579** –.224** 1.000 –.173* .636** 5. cynicism –.294** –.383** .620** –.173* 1.000 –.053 6. task performance .451** .401** –.174** .636** –.053 1.000 note: *p < 0.05, **p < 0.01. –.26 satisfact citizens perfor psychological_contract demograp positive_joba .96 gender age educatio tenure title .22 .65 0; .23 0; 139.91 .95 .47 1 100 1.69 33.62 2.02 1.20 2.632.63 10.50 1.32 35.13 46.90 e8 e5 e6 e7 e9 e5 e3 e2 e1 1 31.09 0; .20 0; .38 1 1 1 1 1 0; 66.80 e4 0; 65.32 0; 38.37 0; 97.81 0; –.02 1 1 1 71.67 0; 44.44 rmsea: 0.211, cmin/df: 13.248, cfi: 0.666, ifi: 0.674, tli: 0.400 figure 2. pc mediating role in the effect of demographic variables on constructive job outcomes according to the model, as shown in figure 2, demographic variables had an insignificant association with job satisfaction, ocb and task performance which were labeled as constructive job outcomes in the study (p > 0.05). while there is a significant relationship table 4. spearman’s rho correlations for the relationship between demographic variables and pcf 1 2 3 4 5 1. gender 2. age .108 3. education –.210** .006 4. tenure .116 .731** .029 5. title –.300** .138* .710** .062 6. pc –.020 .124* .140* .148* .168** note: *p < 0.05, **p < 0.01. business, management and economics engineering, 2022, 20(1): 1–22 13 between demographic variables and constructive job attitudes according to spearman’s rho correlation analysis as shown in table 3, the fact that the relationship is unrelated according to sem modeling supports the mediation effect of pcf. – .27 leave_in cynism psychological_contract demograp negative_joba – .37 gender age educatio tenure title 1.84 .65 0; .28 cc 2.02 1 1.69 33.62 2.02 1.23 2.682.68 10.51 1.32 1 1.00 0; 12.12 0; .37 1 – 1 e8 e6 e7 e8 0; 79.39 0; .68 0; 87.03 31.16 e5 e3 e2 e1 e4 0; .20 1 1 0; 66.80 1 0; 65.31 1 0; –.01 figure 3. pcf mediating role in the effect of demographic variables on destructive job outcomes similar to the constructive job outcomes, demographic variables had insignificant relationships with job satisfaction, intention to leave and organizational cynicism, which were considered as destructive job outcomes in the study (p > 0.05). while spearman’s rho correlation analysis shows a strong relationship between demographic variables and positive work attitudes (as seen in table 3), the fact that the relationship is unrelated according to sem modeling reinforces the mediation impact of pcf. 4. discussion although the importance of demographic variables in organizational psychology has long been recognized, these variables have not been systematically integrated into the pc as a mechanism for understanding exchange relationships and their impact on job attitudes. this research intends to analyze the impacts of the demographic variables on job attitudes and pcf and its possible mediating linkage between demographic variables-job attitudes are examined in the manufacturing sector. the present research leads in a way to previous knowledge of pcf. the research was one of the first studies to formulate hypotheses about the mediating role of pcf in the relationship between demographic factors and work attitudes. employees show different levels of perseverance and motivation. understanding the reasons behind such attitudes may help leaders to motivate and lead them. therefore, personnel demographic differences are taken into account to understand their impact on job attitudes in this study. the results display that there are some interactions between demographic variables and job attitudes. the very demographic variable considered in the study was gender. 14 a. e. altunoğlu et al. demographic differences matter on job outcomes: psychological contract’s... even though the literature provides many papers (a. sousa-poza & a. a. sousa-poza, 2003; bal et al., 2008; netemeyer et al., 1996; callister, 2006; du plooy & roodt, 2013), this study did not underline any interaction between gender and job attitudes. the reason behind such a finding could be the socio-economic fact of comparatively fewer job prospects for both men and women in turkey, and gender has little effect on work attitudes. as far as age is concerned, it seems to integrate job attitudes. the literature review provides that age is related to job satisfaction (kollmann et al., 2020), ocb (ng et al., 2016), intent to leave (al zamel et al., 2020), cynicism (chiaburu et al., 2013), task performance (gajewski et al., 2020). as expected, the paper displays that older employee showed stronger reactions in positive and weaker for negative job attitudes. older workers seem to respond weakly to adverse events occurring within the organization. the reason might be their more significant emphasis on constructive work interactions and comfortable relationships with their employer and their more robust control of emotions compared to the younger employees. the paper findings note that more educated workers are unwilling to leave the organization and their ocb and task performance are higher than less educated ones. the findings are consistent with the previous studies (knights & kennedy, 2005; lu et al., 2002; williams & shiaw, 1999; arabacı, 2010; anseel et al., 2009). more educated employees might significantly be more satisfied with their pay and beholding a higher position in the organization, which will eventually withdraw them from leaving the organization. besides, more educated workers seem to be respectful to colleagues and focus on collaboration instead of creating problems. more educated workers also manage the duties given by the organization and fulfill their responsibilities. the reason for such a finding might be the fact that education fosters decision-making skills and critical thinking. the more a person learns, the more he/she earns. when an individual learns, he/she begins to innovate, cooperate, and consider all the opportunities that lie before him/her. the time spent in the company also seems to be related to job attitudes apart from task performance. the findings align with previous research (castellacci & viñasbardolet, 2020; lall et al., 2020; ng & feldman, 2011; chiaburu et al., 2013, sturman, 2003). at the beginning of their career in an organization, individuals might tend to leave to find a “better” job. besides, employees who stay longer in an organization might resolve job and career issues which eventually affect their job satisfaction level. they are highly involved with the organization resulting in higher ocb. a tenured employee might be better to modify their expectations to the organizational goals. as job tenure increases, employees may gain esteem by the spent time in the job that might prevent them from behaving cynically towards the organization. the results note that being in a different hierarchical level (blue-collar and white-collar worker) might be related to job attitudes apart from job satisfaction. the results are in line with previous research (van hootegem et al., 2021; baruch et al., 2016; ersoy et al., 2011; koopmans, 2014). low pay scales and long hours at blue-collar positions may leave the company and have cynical behaviors. as responsibilities are higher at white-collar positions, they may collaborate more with co-workers and avoid conflicts. besides, promotional advances playing a crucial role in overcoming tasks and duties are higher in upper levels. because psychological breach of contract is a subjective term, the negative effects on the outcome can be intensified or absorbed by individual characteristics. for example, women’s business, management and economics engineering, 2022, 20(1): 1–22 15 career aspirations are generally much lower than men’s (blomme et al., 2010). the reason behind such a statement might be a constructive approach to align family and job obligations for women. however, our study did not notice any relationship between gender and pcf. because of the lack of career opportunities for both men and women in turkey, workers are more likely to accommodate organizational policies. the younger the respondents, the more emphasis on positive work interactions and their comfortable relationship with their employer and organization was also expected. nevertheless, the study did not show any interaction between age and pcf. as janssens et al. (2003) noted, the study results unveil that less-educated employees seem to react less emotionally to their incidences of fulfillment. higher educated workers appear to have higher perceptions of their organization’s incentives. a possible reason for this could be that even though the organization does not meet the promises, less educated employees are more likely to accommodate that since finding another job is more difficult for less-educated workers. the findings of this study, in line with the literature (rousseau, 1995; conway & coyle‐shapiro, 2012), indicate that the positive effects of pcf on the affective engagement of employees were more excellent and more pronounced for workers with longer tenure in the organization. one potential explanation for this may be that longer-tenured employees seem to be more likely to tolerate and view a violation of contract as an inevitable breach that will be remedied throughout time. the parties can be drawing false conclusions at the beginning of a relationship while trying to understand the relationship. the parties analyze those consequences and are more specific over time. according to research findings, white-collar employees might assume a certain degree of pcf relating to their employer. as the past literature (wang et al., 2019; janssens et al., 2003) argues, the research findings note that employees of various levels are likely to demand pcf based on their status as white-collar employees or more general purposes. voluntary turnover among blue-collar employees is likely to be less at the first sign of instability as the chances of low alternative job opportunities. pcf had strong associations with job outcomes as the literature suggests. pcf was positively linked to job satisfaction (larwood et al., 1998; zhao et al., 2007), ocb (robinson & morrison, 1995) and task performance (conway & coyle‐shapiro, 2012; rosen et al., 2009) negatively related to intent to leave (chiang et al., 2012) and cynicism (andersson, 1996; johnson & o’leary-kelly, 2003). keeping commitments stated by the employer during recruiting and not feeling betrayed by their organization seems to increase job security and realize prospects for the future for employees. such behaviors might eventually result in higher job satisfaction. furthermore, an organization that keeps guarantees on the level of job protection one may expect and has fewer differences between expected and actual pay and benefits is likely to face less intention to quit behavior since the employer upholds the promises. it is essential for a company when employees obey company rules and regulations and help orient new people. such behaviors display ocb attitudes. fulfillment increases trust as an employer develops a common concept in the workplace; like good faith and honesty, trust increases. by developing trust between parties, employees are more likely to obey rules and regulations even without control. cynicism is affected by policies such as organization is running improvement programs, being more concerned about its priorities and needs than in its employees’ welfare or employees are sceptical when an application was said to be 16 a. e. altunoğlu et al. demographic differences matter on job outcomes: psychological contract’s... done in the organization. these policies may have an impact on the level of cynic behavior. as far as task performance is concerned, in pcf circumstances where employees feel that an organization lives up to its promises, they are encouraged to take additional actions and undertake their tasks. pcf was anticipated to be a mediating variable that helps to clarify why demographic variables can be linked to constructive attitudes and behaviors. the research supports the hypothesis by testing the mediating effect between variables (h4a). the findings underlined that pcf fully mediated the relationship between demographic variables and constructive job attitudes. if individuals consider their organization to be considerate and support their requirements, provide opportunities for safety and development in the workplace, they will create an obligation to reciprocate the organization with enhanced emotional bonds. employees’ views of the exchange contract between themselves and their organizations seem to mediate the relationship between demographic factors and the constructive job outcomes of workers. employees might be motivated by their education level, status or tenure to exert constructive efforts because of pcf. as far as destructive job attitudes are concerned, the study findings also supported the hypothesis (h4b). the negative job outcomes are associated with pcf. individual differences that form the social exchange expectations of employees can be linked to higher pcf perceptions of employees, and then employees are likely to exercise destructive job outcomes. organizational implications this present study highlights that, leaders creating a pc in a favourable condition among employees result in positive and substantial advantages for the organization. in today’s volatile business climate, many organizations find it challenging to carry out their organizational commitments consistently and promises to their employees. as a result, organizations face a problem in effectively monitoring and managing the pc (turnley et al., 2003). the current study’s conclusions suggest that organizations review and revise their ideas on the exchange connection with their workforce as job outcomes of employees are connected to pcf. in practice, managers and leaders may highlight that such fulfillment constitutes an investment of resources into and a long-term commitment to the employee in addition to satisfying relational responsibilities. therefore, leaders should place a strong emphasis on increasing employee commitment levels. in addition, developing a culture of trust and respect fosters beneficial behavioral and attitudinal results among employees (laulie & tekleab, 2016). aside from this, leaders should encourage open communication with workers to match individual and corporate interests. limitations of the study and future research this paper applies data from the manufacturing industry operating in turkey, which may prevent the generalizability of the paper. future research is needed to replicate these findings on different samples in order to generalize findings. furthermore, the data is obtained from a single source which raises the likelihood of common method bias and is focused solely on self-reports. finally, individual perceptions may differ across countries and influence how employees approach work and their pc with their employer. for instance, because of the business, management and economics engineering, 2022, 20(1): 1–22 17 high power distance society in turkey, followers are likely to provide a biased opinion about their supervisor, contaminating the overall findings. ultimately, it can be argued that fulfillment and breach are two separate pc components (conway & briner, 2005). the paper analyzed the correlations of fulfillment to demonstrate pc. however, the consequences of breaking promises and not fulfilling obligations may be different. therefore the future studies may focus on the different consequences of fulfillment and breach of the pc. conclusions the research was one of the first studies to formulate hypotheses about the mediating role of pcf in the relationship between demographic factors and work attitudes. the results display some interactions between demographic variables and job attitudes. nevertheless, the study did not show any interaction between age and pcf. pcf had strong associations with job outcomes, as the literature suggests. pcf was anticipated to be a mediating variable that helps to clarify why demographic variables can be linked to constructive attitudes and behaviors. the current study’s conclusions suggest that organizations review and revise their ideas on the exchange connection with their workforce as job outcomes of employees are connected to pcf. in practice, managers and leaders may highlight that such fulfillment constitutes an investment of resources into and a long-term commitment to the employee in addition to satisfying relational responsibilities. therefore, leaders should place a strong emphasis on increasing employee commitment levels. disclosure statement authors declare that they do not have any competing financial, professional, or personal interests from other parties. references abela, f., & debono, m. 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accepted 08 january 2021 abstract. purpose – this study aims at investigating the effect of corporate social responsibility perceptions of local people living in diyarbakır on bank loyalty in terms of banking services and the mediator roles of trust and satisfaction in this effect. research methodology  – cronbach’s alpha coefficients, reliability, convergent and discriminant validity and multicollinearity were examined before testing the hypotheses of the research. the validity of the measurement model for the variables that are included in the model was examined by the confirmatory factor analysis. partial least squares path modelling was used to analyze the research model and hypotheses, and multiple mediation analysis was used to test the mediation effects. the collected data were analyzed by the software spss 22.0 and smartpls 3.3.0. findings  – the research results exposed that the corporate social responsibility perceptions of bank customers have significant and positive effects on bank loyalty. furthermore, satisfaction has had partial mediation effects on the relationship between csr perception and loyalty. research limitations – the population covers individuals with regular wage or salary who live in diyarbakır. the survey was conducted between october 1 and december 1, 2019, with convenience sampling technique and 400 questionnaires were collected. practical implications – when conducting csr activities, businesses should emphasize that trust and satisfaction have an essential effect as well as loyalty. originality/value – this study investigated the simultaneous multiple mediator effects of trust and satisfaction in the relationship between csr and loyalty. keywords: corporate social responsibility, customer trust, customer satisfaction, customer loyalty, multiple mediation. jel classification: m10, m14, m31. http://dx.doi.org/10.1016/s0377-2217(03)00091-2 http://dx.doi.org/10.1016/s0377-2217(03)00091-2 https://doi.org/10.3846/bmee.2021.13362 https://orcid.org/0000-0002-3660-7096 https://orcid.org/0000-0002-3933-787x 50 a. uslu, h. i̇. şengün. the multiple mediation roles of trust and satisfaction in the effect of perceived... introduction csr is an essential issue for those seeking the recipe that today’s businesses should implement and gain value in the eyes of customers. it is not easy to understand clearly whether the real intention of the companies is to take part in social projects or increase the sales volume. nevertheless, csr activities should be participated and supported by stakeholders regardless of their intentions. research on the history of csr goes back to the 1930s when berle and means defended the need for more transparency and accountability for the business’s stakeholders. it can be stated that formal research on social responsibility was handled to a great extent in the 20th century; however, research in this area has increased especially in the last 50 years (carroll, 1999). due to the information age we live in, the level of consciousness of consumers has significantly increased, which leads companies to take action as well. thus, it has come to the conclusion that companies should gain a new motivation in their marketing efforts. the understanding of social marketing emerged, and the researchers emphasized that companies should not be indifferent to their social environment. creating plans and projects prioritizing rural development, taking steps to eliminate inequalities in education, ensuring the integration of disabled citizens with society, raising awareness of the people against infectious diseases and minimizing the social impacts of this disease to the extent possible, and many other social activities can be thought as the examples (onaran et al., 2013). coronavirus (covid-19), which spread via china in 2019, affected the world in a short time. as of july 2020, more than 10 million people were infected with this disease, and approximately 500000 of them died (worldometer, 2020). the world is on alert against coronavirus, a global epidemic. the vaccine development process is progressing rapidly. on the other side of the coin, positive outcomes of this outbreak can be seen. this virus has revealed the spirit of solidarity in people from many different nationalities. businesses have not been silent despite this big event and have taken important steps for social responsibility. in this context, employers who took their employees on paid leave came to the agenda, and there were also businesses that used the factory band for equipment that should be used to fight disease free of charge. in addition, some sports clubs and businesses have taken steps to support the struggling healthcare workers. in their study, skvarciany and jurevičienė (2017, p.  636) examined the effect of trust in internet banking and emphasized that the characteristics of the bank in lithuania, risk perception of the customer in latvia and characteristics of the bank, and the experience of cooperation with a bank of the respondents in estonia are important in building trust. besides, bank information in lithuania, the website in latvia, and the bank itself and trust in estonia have been handled, and no findings have been found on the subject of satisfaction and loyalty. nejjari and aamoum (2020) presented evidence on which ethics, trust and university image have an important and positive effect on student loyalty. it also proved the impact of ethics and shared values on university image. however, satisfaction was not covered in the study. tambovceva et al. (2017), latvia business representatives primarily consider csr as a http://www.worldometers.info business, management and economics engineering, 2021, 19(1): 49–69 51 corporate image provider. in addition, they are aware of the role of csr in improving employee and customer satisfaction. uhlig et al. (2020) concluded that the philanthropy dimension, one of the dimensions of csr, has an effect on the intention to deal with socially responsible companies. iglesias et al. (2018) showed that csr affects customer loyalty both directly and indirectly through co-creation and customer trust, and concluded that co-creation has a direct effect on customer trust. in these studies, the issues of trust, satisfaction and loyalty are not sufficiently addressed. therefore, in this study, it was tried closing this gap in the literature by looking at the role of trust and satisfaction in the relationship between csr and loyalty. this study investigated the effect of csr perceptions of the people living in diyarbakır regarding the banking service they received on their loyalty was examined. in addition, the effects of trust and satisfaction on this effect on loyalty have been investigated. in this context, data from 400 people were collected from people living in diyarbakır according to the convenience sampling method. in the study, first, a wide literature review was done on the subject. in the literature review, studies examining the relationships between csr perception and customer loyalty were included. then, the literature on customer trust and satisfaction was examined, and hypotheses were created accordingly. next, the method section was started, and the model was created. following the model, statistical analysis for the research was included, and the findings were interpreted. in the conclusion part, research-specific findings and recommendations were presented. 1. literature review and research hypotheses it is stated that the sustainability issue has three dimensions in general. these are environmental sustainability, economic sustainability and social sustainability. although social sustainability is mentioned less than other dimensions, it actually has a very important place. likewise, it covers vital issues such as humanitarian standards, equality, justice, community development, humanitarian support and assistance. social sustainability overlaps with the goals of corporate social responsibility. it also addresses the welfare of humanity and society through the management of social resources (govindan et al., 2020). increased awareness of sustainability and csr has increased the interest of human resources in efforts for a cleaner business (amrutha & geetha, 2020). csr has very long and different historical backgrounds. indeed, csr history can go back to the history of concern of society from business communities. in addition, official writings on social responsibility are largely a product of the 20th century, especially the last 50 years. it is possible to see the footsteps of csr thought worldwide, mostly in developing countries. however, most of the official sources state that csr practices are evident in the usa, where the literature is accumulated (carroll, 1999). as a social structure, csr is voluntary participation to fulfil its responsibilities toward the institutions’ elements and solve some social problems (de quevedo-puente et al., 2007; brammer & pavelin, 2006; cingöz & akdoğan, 2012). all these crises motivate companies to be more social and create social value. csr activities enable many multinational companies to lead corporate strategies. for example, unilever’s paul polman claims that businesses can be a positive force for good in the world, and 52 a. uslu, h. i̇. şengün. the multiple mediation roles of trust and satisfaction in the effect of perceived... this perspective is in the interest of all company stakeholders (van doorn et al., 2017). therefore, creating something useful for humanity does not only bring material gain to businesses but is also important for motivating the shareholders. having an important place in the development of the concept of csr, carroll examined social responsibility in four dimensions and defined the social responsibility of the companies as “the sum of the economic, legal, ethical and voluntary responsibility activities that the society expects from companies at a certain time” carroll (1979). these responsibility activities are as follows: economic responsibilities: in the classical approach, economic responsibilities are accepted as the most important and fundamental responsibility of the business, both in the modern and postmodern periods. economic responsibilities can be regarded as the most important existence causes of businesses, as they act with the motive of making a profit. it is not possible for a company that does not have any financial gain to survive (torlak, 2007). legal responsibilities: the legal responsibilities of companies cover issues such as compliance with the law, compliance with central and local regulations, being a law-abiding citizen and fulfilling the legal obligations of companies (carrol, 1991). ethical responsibilities: the enterprise should take precautions to minimize the potential harm to society and environment while performing its own goals and activities. in addition, to gain the trust of its stakeholders, it should determine the ethical performance conditions in all its activities and manage the process with this reference (yakar & özhan, 2017). discretionary responsibilities: these responsibilities include acting in line with the charitable and generous expectations of society, supporting the arts, participating in volitional and charitable activities in their own regions, providing assistance to private and public educational institutions, and voluntarily supporting projects that contribute to the quality of life of the society (carroll, 1991). 1.1. the link between corporate social responsibility and customer loyalty the banking sector has a critical place in meeting the demand for funds to implement the increasing needs of individuals today. in this regard, the number of bank branches is increasing rapidly. in turkey, the banking system, as of june 19, 2020, has 48 banks in operation; the number of domestic branches of these banks is 10079, and the number of branches abroad is 71 (the banks association of turkey, 2020). when one looks at the activities of banks, it is seen that the environment they affect does not cover only bank owners, employees and customers but also they interact with many different institutions and organizations and can directly or indirectly affect the commercial activities of these institutions. furthermore, in the postmodern period, all people on a global scale need to make bank transactions. it is not possible for such a huge sector to attract customers only with its financial instruments. especially in parallel with the development of consumer awareness, the sensitivity of banks toward social responsibility has become more critical. in the research carried out by özmen (2009) on bank customers, the effect of various csr activities on the overall brand image was examined. accordingly, it was concluded that there is a relationship between the social responsibility activities related to the social environment, consumption and consumer, the environment, health, economic development, and business, management and economics engineering, 2021, 19(1): 49–69 53 sports and cultural activities and the brand image and these activities have a positive effect on the brand image. in their study, doğan and varinli (2010) examined the relationships between social responsibility understanding and corporate image of bank customers. according to the findings obtained from the study conducted with 537 participants, it was concluded that there is a relationship between the corporate image perceived by the customer, social responsibility activities and the brand image, and these activities affect the brand image positively. in the study by özgüven (2013), the impact of the concept of csr on the banking sector was examined. according to this research, it was concluded that social responsibility activities positively affect the customers’ trust in the bank and customer satisfaction. accordingly, it also positively affected customer loyalty. respect for employees, philanthropic activities and respect for consumers, which constitute the perception of csr, have had a significant impact on brand awareness, quality and brand loyalty, which are components of consumer-based brand equity (koçoğlu, 2016). chen, chang, and lin (2012) have examined whether csr impacts customer loyalty in their study on taiwan airlines. hence, it has been observed that csr has an important and positive effect on the formation of behavioural and attitudinal commitment. in a study on mobile telecommunication service, it was determined that csr has a direct relationship with satisfaction and customer loyalty and satisfaction have a mediating effect (he & li, 2011). köse (2015) concluded that the economic, ethical, legal and charitable sense of responsibility, which is one of the dimensions of csr, is effective in creating customer loyalty and customer satisfaction. in addition, chung, yu, choi, and shin (2015) concluded that csr positively influences customer loyalty. similarly, fatma and rahman (2016) concluded that csr is effective on the intention to repurchase in their study in the banking sector in india. skvarciany and jurevičienė (2017) conducted research in baltic countries to evaluate the determinants of trust in traditional banking. hence, it has been emphasized that the characteristics of the bank in lithuania, the risk perception of the customer in latvia and the characteristic of the bank, and the cooperation experience of respondents in estonia with a bank are essential in building trust. in another study, skvarciany and jurevičienė (2018) investigated the effect of trust in internet banking. based on the views of 1013 participants and 21 experts, country-based evaluations were made as factors necessary for trust-building. thus, it has been observed that bank information in lithuania, website in latvia and bank factors in estonia are effective in building trust. the study of nejjari and aamoum (2020) shows how the image of the university, ethical rules and common values of graduates positively affect trust affecting loyalty. according to the results of the research, ethics, trust and university image have an important and positive effect on student loyalty. it also proves the impact of ethics and shared values on university image. tambovceva et al. (2017) conducted a survey of latvian business representatives. latvian business representatives see csr primarily as a corporate image provider. in addition, they are aware of the role of csr in improving employee and customer satisfaction. uhlig et  al. (2020) aimed to learn the relationship intention of brazilian consumers. accordingly, it was concluded that the philanthropy dimension, one of the dimensions of csr, has an effect on 54 a. uslu, h. i̇. şengün. the multiple mediation roles of trust and satisfaction in the effect of perceived... the intention of dealing with socially responsible companies. iglesias et al. (2018) examined the impact of csr on customer loyalty, taking into account the roles of co-creation and customer trust. at the same time, the effect of co-creation on customer confidence has been explored. in this study conducted in spain, it was determined that csr affects customer loyalty both directly and indirectly through co-creation and customer trust. it was also concluded that co-creation has a direct impact on customer confidence. in line with the information obtained, as seen in figure 1, hypotheses from h1 to h3 were formed as follows: h1: corporate social responsibility positively affects customer loyalty. 1.2. the mediating roles of customer trust and satisfaction 1.2.1. the mediating role of customer trust in the corporate social responsibility-customer loyalty link in the study by özgüven (2013), the impact of the concept of csr on the banking sector was examined. according to this research, social responsibility activities positively affected the customers’ trust toward the bank and customer satisfaction. in another study, it was determined that there was a significant and positive relationship between the perceived corporate social responsibilities of the customers and the corporate image, customer loyalty and customer trust (saraçoğlu, 2013). on the other hand, kim et al. (2008) examined brand equivalence within the scope of customer relations management through an application they performed on hospitals and put forward that 5 factors affect brand equivalence through successful customer relations. thus: trust, customer satisfaction, relational loyalty, brand loyalty and brand awareness are the factors that help hospitals create brand equity and can be managed through customer relations. the findings also indicate that hospitals would be successful in obtaining an image and creating positive brand equity if they manage customer relations well (kim et  al., 2008). uslu et  al. (2020) found that the brand equity dimensions of hotel businesses have a mediator effect of trust on customer satisfaction. on the other hand, diallo and lambey-checchin (2016) and afridi et al. (2018) found the mediator effect of customer trust between csr and customer loyalty in their study. hence, we formed the following hypothesis: h2: customer trust has a positive mediate effect on the relationship between corporate social responsibility and customer loyalty. 1.2.2. the mediating role of customer satisfaction on the corporate social responsibilitycustomer loyalty link in the research conducted in the durable consumer goods sector by eren and eker (2012), they found that the corporate social responsibility activities that they have implemented in the companies significantly affect the brand image and perceived value. in addition, in this research, it was determined that the brand image has an impact on the perceived value, customer satisfaction and brand loyalty, and the perceived value has an effect on customer satisfaction. in addition, hoeffler and keller (2002) concluded that csr phenomenon creates brand awareness, brand image, trust in the brand and loyalty to the brand. business, management and economics engineering, 2021, 19(1): 49–69 55 there are studies in the literature that determine the mediating effect of customer satisfaction between csr and customer loyalty, though in a limited number (isa, 2012; rivera et al., 2019; latif et al., 2020). thus, we constructed the hypotheses: h3: customer satisfaction positively mediate the relationship between corporate social responsibility and customer loyalty 2. method 2.1. research model it has been determined that customer satisfaction has a mediating effect between csr and brand loyalty (rivera et al., 2019). afridi et al. (2018) found the mediator effect of customer trust between csr and customer loyalty in their study. are there multiple mediation effects of customer satisfaction and customer trust in the relationship between the perception of csr and customer loyalty? based on the research question, as can be seen in figure 1, the research model was created, and the analysis was carried out. in the context of the hypotheses established in line with the literature in the research, the research model was created as in figure 1 below to test the causal structures. 2.2. purpose of the study and variables the purpose of this study is to investigate the effects of corporate social responsibility (csr) perceptions of people with a certain wage or salary who are living in diyarbakır on the banks they receive service on trust, satisfaction and loyalty. furthermore, we aimed at determining the mediation role of relationship quality (trust and satisfaction) in the relationship between csr and loyalty. the fact that the mediation role of both variables was examined by multiple mediation analysis is considered as a unique approach. in this framework, the study of swaen +h1 +h3 corporate social responsibility customer loyalty customer satisfaction customer trust +h2 corporate social responsibility customer loyalty +h1 figure 1. the research model (source: authors own elaboration) 56 a. uslu, h. i̇. şengün. the multiple mediation roles of trust and satisfaction in the effect of perceived... and chumpitaz (2008), which includes 18 expressions from the scales used in previous studies, was taken as a basis to measure csr dimensions. five expressions to measure the variable of trust and 3 expressions to measure customer satisfaction, which are the sub-dimensions of relationship quality, were developed using the aydın and özer (2005) study. 2.3. population and sampling the population of this study is the people having a certain wage or salary who are living in diyarbakır. according to the 2019 census of the population by turkey statistical institute (tsi), the province of diyarbakir consists of 1,756,353 people. sample size calculated for this population calls for at least 384 individuals (cohen et al., 2017). in this respect, we assumed that the 400 questionnaires collected for our study have a sample size that can represent the population. 2.4. data collection and analysis in order to collect the research data, a questionnaire consisting of pre-prepared close-ended questions were used. the survey comprises three parts. in the first part, gender, age, marital status and monthly income questions were included in determining the demographic characteristics of the local people. in the second part, there are 3 questions asking for information about the bank from which the service is received. in the third part, there are 30 questions that measure the variables of the research (csr, trust, satisfaction and loyalty). respondents were asked to answer the questionnaire using the 7-point likert scale (1 – strongly disagree, 2 – disagree, 3 – partially disagree, 4 – neither agree nor disagree, 5 – partially agree, 6 – agree, 7 – strongly agree). during the survey application period, a total of 500 questionnaires were distributed in october–december 2019 to be made to those who live in diyarbakır and have a regular salary or wage regularly received from the bank. the surveys were applied to people visiting historical and touristic places such as ulu camii (great mosque), diyarbakır surları (city walls), on gözlü (ten eyed) bridge located in the city centre of diyarbakır. the surveys were conducted by one of the authors and 3 interviewers (students) who knew the purpose of the research in this region, which is the city centre and one of the most crowded places in the city. the survey was carried out on the basis of voluntary participation according to the convenience sampling method. as a result, 420 were returned from 500 respondents, which means 84% of the distributed questionnaires. twenty unusable questionnaires that were unusable and left blank were excluded from the study, and the remaining 400 questionnaires were evaluated. in this study, it is aimed to investigate the trust, satisfaction and loyalty relationships of corporate social responsibility (csr) perceptions of banks, where the participants receive a salary or other banking services (credit, credit card, etc.). pls-sem (partial least squares structural equation model) was used to determine the role of relationship quality (trust and satisfaction) in the relationship between csr and loyalty. validity, reliability and confirmatory factor analysis (cfa) were performed using the partial least squares measurement model. then, in the structural model, all hypotheses of the research were tested by conducting path business, management and economics engineering, 2021, 19(1): 49–69 57 analysis and mediation test. spss 22.0 and smartpls 3.3.2 statistical packages were used during the analysis of the data. 2.5. the measurement model prior to the estimation of the model, the scales’ psychometric properties were tested for reliability, discriminant and convergent validity and also multicollinearity. 2.5.1. reliability, discriminant and convergent validity before the research model was analyzed, the validity and reliability of the research variables were performed with the measurement model with the purpose of testing the validity and reliability of the measurement model. in this context, internal consistency reliability, convergent validity and discriminant validity were checked out. for internal consistency reliability, cronbach’s alpha and composite reliability values were examined. in determining the convergent validity, factor loads, and average variance extracted values were used. factor loads, cr values and cronbach’s alpha (α) coefficients are required to be over 0.70 while the average variance extracted value is expected to be over 0.50 (fornell & larcker, 1981; bagozzi & yi, 1988; hair et al., 2017). table 1 shows the results regarding internal consistency, reliability, convergent validity, and cronbach’s alpha (α) coefficients. we have stated that cronbach’s alpha (α) coefficients and cr values should be greater than 0.70 to ensure reliability and internal consistency (nunnally, 1978; gefen et al., 2000). cronbach’s alpha (α) coefficients of the variables used in the research were between 0.953 and 0.912, and cr values are between 0.962 and 0.943. it can then be stated that internal consistency reliability is provided. the rho_a coefficients that show whether the expressions in the factors are reliable were found above 0.70 for all factors. the rho_a coefficients have recently been reported in the literature to support the cronbach’s alpha coefficient and are more reliable than the cronbach’s alpha value (henseler et  al., 2016). it can be stated that due to factor loadings of all variables between 0.938 and 0.646 and ave values between 0.865 and 0.558, convergent validity is provided. fornell and larcker criteria and htmt (heterotrait-monotrait ratios) criteria were used to determine the discriminant validity (fornell & larcker, 1981; chin, 2010; hair et al., 2014; henseler et  al., 2015). according to the fornell and larcker (1981) criteria presented in table  2, the square root (bold values) of ave values should be higher than the correlation values between the other structures in the study (fornell & larcker, 1981; chin, 2010). the results presented in table 2, according to fornell and larcker criteria show that the discriminant validity is provided. another way to check discriminant validity is htmt rates. if these rates are less than 0.90, it is considered acceptable (gold et al., 2001; henseler et al., 2015). as shown in table 2, it is understood that the htmt ratios obtained are below the threshold value of 0.90 and that the model provides the discriminant validity. the goodness of fit values is not required when using pls-sem (henseler, 2018). however, henseler et  al. (2014) suggested that the value of srmr (standardized root mean square residual) can be used to determine the model-data fit in pls-sem. the fact that the srmr value is at a sufficient level such as 0.062 and that the srmr <0.08 (hu & bentler, 1999) condition is met in the research shows that the model-data fit is sufficient. as a result, 58 a. uslu, h. i̇. şengün. the multiple mediation roles of trust and satisfaction in the effect of perceived... ta bl e  1. r es ul ts o f m ea su re m en t m od el a nd r el ia bi lit y co effi ci en ts ( so ur ce : a ut ho rs o w n el ab or at io n) fa ct or s & it em s c od e fa ct or lo ad in gs t s ta tis tic s (| o / st d ev |) c ro nb ac h’s a lp ha co effi ci en ts (α ) rh o_ a c om po si te r el ia bi lit y (c r ) a ve ra ge v ar ia nc e ex tr ac te d (a v e) c or po ra te s oc ia l r es po ns ib ili ty 0. 95 3 0. 95 5 0. 95 8 0. 55 8 th e ba nk fr om w hi ch i r ec ei ve s er vi ce h el ps d ev el op in g co un tr ie s. c sr 1 0. 70 2 24 .9 98 th e ba nk w he re i r ec ei ve s er vi ce s up po rt s so ci al a nd c ul tu ra l a ct iv iti es in th e re gi on s. c sr 2 0. 78 2 37 .0 89 th e ba nk fr om w hi ch i r ec ei ve s er vi ce s de ve lo ps p ro je ct s fo r po or co un tr ie s. c sr 3 0. 76 3 32 .8 75 th e ba nk th at i r ec ei ve s er vi ce s up po rt s ph ila nt hr op y. c sr 4 0. 77 9 36 .5 11 th e ba nk fr om w hi ch i r ec ei ve s er vi ce r ed uc es th e co ns um pt io n of na tu ra l r es ou rc es . c sr 5 0. 70 2 17 .9 83 th e ba nk fr om w hi ch i r ec ei ve s er vi ce c ar ri es o ut e nv ir on m en ta lly fr ie nd ly p ro du ct io n pr ac tic es . c sr 6 0. 81 7 38 .1 11 th e ba nk fr om w hi ch i r ec ei ve s er vi ce m ai nt ai ns a n ec ol og ic al b al an ce as m uc h as p os si bl e. c sr 7 0. 80 4 37 .1 59 th e ba nk fr om w hi ch i r ec ei ve s er vi ce p ro te ct s co ns um er r ig ht s. ( po st lo an s er vi ce s et c. ). c sr 8 0. 74 7 31 .9 90 th e ba nk fr om w hi ch i r ec ei ve s er vi ce tr ea ts c on su m er s ho ne st ly . c sr 9 0. 76 4 34 .5 15 it g iv es c on su m er s ac cu ra te in fo rm at io n ab ou t t he b an k pr od uc ts th at i re ce iv e se rv ic e fr om . c sr 10 0. 77 6 36 .6 99 th e ba nk fr om w hi ch i r ec ei ve s er vi ce tr ea ts e m pl oy ee s w el l, re ga rd le ss of g en de r, et hn ic ity o r re gi on . c sr 11 0. 70 7 23 .5 63 th e ba nk fr om w hi ch i r ec ei ve s er vi ce c re at es e m pl oy m en t. c sr 12 0. 71 5 24 .4 61 th e ba nk fr om w hi ch i r ec ei ve s er vi ce a ct s in c om pl ia nc e w ith ap pl ic ab le la w s an d la w s. c sr 13 0. 70 1 23 .4 74 th e ba nk fr om w hi ch i r ec ei ve s er vi ce p ro te ct s th e ri gh ts o f e m pl oy ee s. c sr 14 0. 71 3 20 .6 11 business, management and economics engineering, 2021, 19(1): 49–69 59 fa ct or s & it em s c od e fa ct or lo ad in gs t s ta tis tic s (| o / st d ev |) c ro nb ac h’s a lp ha co effi ci en ts (α ) rh o_ a c om po si te r el ia bi lit y (c r ) a ve ra ge v ar ia nc e ex tr ac te d (a v e) th e ba nk fr om w hi ch i r ec ei ve s er vi ce h el ps a ll em pl oy ee s w ho w an t t o re ce iv e m or e tr ai ni ng . c sr 15 0. 79 2 38 .0 48 th e ba nk fr om w hi ch i r ec ei ve s er vi ce g ua ra nt ee s th e he al th a nd s af et y of th e em pl oy ee s. c sr 16 0. 74 9 31 .9 54 th e ba nk fr om w hi ch i r ec ei ve s er vi ce r es pe ct s hu m an r ig ht s in a ll co un tr ie s w he re it o pe ra te s. c sr 17 0. 76 7 32 .1 16 th e ba nk fr om w hi ch i r ec ei ve s er vi ce d oe s no t o pe ra te in c ou nt ri es w he re h um an r ig ht s ar e vi ol at ed . c sr 18 0. 64 6 15 .3 23 c us to m er t ru st 0. 92 3 0. 92 7 0. 94 3 0. 76 7 i tr us t t he b an k i re ce iv e se rv ic e fr om . t ru 1 0. 90 7 87 .8 15 i fe el th at i c an r el y on th e ba nk to s er ve w el l. t ru 2 0. 92 7 97 .5 50 i tr us t t he p ay m en t s ys te m o f t he b an k i re ce iv e se rv ic e fr om . t ru 3 0. 88 8 50 .5 94 i be lie ve th at i c an tr us t t ha t t he b an k fr om w hi ch i r ec ei ve s er vi ce d oe s no t t ry c he at in g m e. t ru 4 0. 80 4 30 .5 95 th is b an k re lia bl e be ca us e it is m ai nl y co nc er ne d w ith th e cu st om er ’s in te re st s. t ru 5 0. 84 8 50 .4 89 c us to m er l oy al ty 0. 92 0 62 .0 70 0. 94 8 0. 94 9 0. 96 2 0. 86 5 i w ill g o on u si ng th is x b an k. lo y 1 0. 93 8 10 1. 17 7 if i r ec ei ve d se rv ic e fr om n ew b an k, i w ou ld p re fe r th is b an k. lo y 2 0. 93 6 97 .3 80 i re co m m en d th is b an k to p eo pl e. lo y 3 0. 92 5 72 .6 67 i en co ur ag e fr ie nd s w ho r ec ei ve s er vi ce fr om th is b an k. lo y 4 0. 90 8 83 .0 79 c us to m er s at is fa ct io n 0. 92 8 10 5. 37 8 0. 91 2 0. 91 4 0. 94 5 0. 85 1 th is x b an k co m pl et el y m ee ts e xp ec ta tio ns fr om a ny o th er b an k. sa t 1 0. 93 0 83 .2 43 i am s at is fie d w ith th e x b an k th at i r ec ei ve s er vi ce fr om . sa t 2 0. 90 7 87 .8 15 th is x b an k m ee ts m y pr epu rc ha se e xp ec ta tio ns . sa t 3 0. 92 7 97 .5 50 n ot e: th e si gn ifi ca nc e le ve l o f a ll fa ct or lo ad s is p < 0 .0 01 a nd b oo ts tr ap pi ng w as p er fo rm ed o ve r 50 00 s am pl es . 60 a. uslu, h. i̇. şengün. the multiple mediation roles of trust and satisfaction in the effect of perceived... the validity, reliability and structural validity of the model are met. after all these values obtained for the model show that the model is well-fit, the hypotheses established based on the model can be tested. 2.5.2. multicollinearity an indicator’s information can become redundant due to high levels of multicollinearity. the variance inflation factor (vif) is identified in the literature as a good indicator to determine whether there is multicollinearity (kock, 2015). when the variance inflation factor (vif) values are less than 5, the multicollinearity problem is not expected (hair et al., 2014). the variance inflation factor (vif) values in table 2 that it is much lower than 5 points out that there is no multicollinearity problem for the research. 3. findings this part of the study includes the demographic characteristics of the local population, descriptive statistics, correlation coefficients and testing the hypotheses formed by the structural equation model. 3.1. demographic characteristics of the local population it is determined that 65.3% (261 people) of the respondents were male and 34.8% (139 people) were female; 57.5% (230 people) of the respondents married and 42.5% (170 people) single. it is seen that more than half of the respondents (51.7% = 207 people) are in the age range of 25–34, and 27.0% (108 people) in the age range of 35–44. monthly income levels range from 3501–4500 tl for 42.5% (170 people), and 4501–5500 tl for 38.5% (154 people). the local people responding to the research are mostly male, married, middle-aged young people with a monthly income between 3500 tl and 5500 tl (table 3). table 2. discriminant validity and vif values (source: authors own elaboration) variables fornell and larcker criterion htmt (heterotrait-monotrait ratios) vif csr loy sat tru csr loy sat tru corporate social responsibility 0.747 2.75 loyalty 0.664 0.930 0.693 4.35 satisfaction 0.734 0.839 0.922 0.783 0.900 3.14 trust 0.777 0.750 0.808 0.876 0.823 0.801 0.880 3.65 note: diagonal elements (bold) are the square root of variance shared between the constructs and their measures (ave). rmstheta: 0.149; srmr:0.062; nfi:0.794. business, management and economics engineering, 2021, 19(1): 49–69 61 3.2. descriptives and correlation coefficients when table  4 is examined, it is seen that the variable with the highest arithmetic average x = 4.35 according to the perceptions of local people about banking services is the variable of trust. loyalty was found to have an arithmetic mean of x = 4.28. it is seen that the lowest arithmetic average is the perceived corporate social responsibility dimension with x = 3.96. it can be stated that the respondents generally agreed with low arithmetic mean for the scale questions. the correlation coefficients were found to be between ±0.3 and ±0.9 values (raykov & marcoulides, 2006). this shows that there are significant and positive relationships between variables. table 4. means, standard deviations and correlation coefficients (source: authors own elaboration) mean standard deviation csr satisfaction loyalty trust csr 3.96 1.21 1 satisfaction 4.21 1.58 .731** 1 loyalty 4.28 1.70 .660** .840** 1 trust 4.35 1.52 .773** .808** .749** 1 note: **p < 0.01, n = 400. 3.3. testing the research model and results partial least-squares path analysis (pls-sem) was used to analyze the structural equation model. for the research model, the pls algorithm was used in calculating linearity, path coefficients and r2. in the calculation of t-values used to evaluate the significance of the pls path coefficients, 5000 subsamples (resamples) were taken from the sample and bootstrapping analysis was performed. table 3. demographic characteristics of local people (n = 400) (source: authors own elaboration) gender f % marital status f % male 261 65.3 married 230 57.5 female 139 34.8 single 170 42.5 age f % monthly income f % 18–24 27 6.8 3501–4500 tl 170 42.5 25–34 207 51.7 4501–5500 tl 154 38.5 35–44 108 27.0 5501–6500 tl 57 14.2 45–54 44 11.0 6501–7500 tl 15 3.8 55–64 14 3.5 7501–8500 tl 4 1.0 65 and older 27 6.8 total 400 100 62 a. uslu, h. i̇. şengün. the multiple mediation roles of trust and satisfaction in the effect of perceived... the results of the structural equation model formed to test the research hypotheses are shown in figure  2 and table  5. this model shows whether established relationships are supported by the model. table  5 also shows the explained variance (explained variance) (r2) values, path coefficients and t-values obtained by bootstrapping method for endogenous variables. table 5. structural model results (source: authors own elaboration) relationships model a support model b support r2 loy = 0.443 r2 loy = 0.719 r2 tru = 0.604 r2 sat = 0.539 csrloy 0.664*** (23.681) yes 0.027ns (0.560) no csrtru 0.777***(38.249) yes truloy 0.193**(2.915) yes csrsat 0.734 ***(30.517) yes satloy 0.664***(12.252) yes note: csr – corporate social responsibility; tru – customer trust; loy – customer loyalty; sat – customer satisfaction; t values in parantheses *** p < 0.001, **p < 0.01; ns – not significant. c’= 0.027ns +h6 corporate social resposibility loyalty customer satisfaction trust a1 = 0.777*** +h3 corporate social resposibility loyalty c = 0.664*** +h1 a) model of total effect a2 = 0.734*** b1 = 0.193** b2 = 0.664*** b ) model with multiple mediation h2 = csr�tru � loy (+) h3 = csr�sat� loy (+) figure 2. structural model and a multiple mediation model results (source: authors own elaboration) business, management and economics engineering, 2021, 19(1): 49–69 63 table  5 includes the direct paths for both models a and b. model a solely comprises the corporate social responsibility-customer loyalty direct link. when figure  2 and table  5 are examined, it was determined that perceived corporate social responsibility according to model a affects customer loyalty (β = 0.666; t-value = 23.681; p < 0.001). however, according to model b, it was determined that customers’ perceived corporate social responsibility of banks do not affect customer loyalty (β = 0.027; t-value = 0.560; p > 0.575) along with the mediation effects of customer trust and satisfaction. h1 hypothesis for this purpose is supported. h1 hypothesis was supported because the p-value of the standardized (β) coefficient between perceived corporate social responsibility and customer loyalty, according to model a is less than 0.05. on the other hand, considering the r2 value of model a, it was found that the perceived corporate social responsibility explained customer loyalty at a moderate level of 44% (henseler et al., 2014). when the r2 values are examined according to model b, it is determined that perceived corporate social responsibility explains customer loyalty by 72%, customer satisfaction by 54% and customer trust by 60% (henseler et al., 2014). 3.4. multiple mediation analysis in the model built with pls, besides the pls-sem method, the mediator effect between variables can also be tested. recently, the bootstrapping method has been used in pls, which suggests that it provides more reliable results than the classical mediation method of baron and kenny (1986) in mediation variable analysis (hayes, 2018). therefore, in this study, as shown in table  6, bootstrapping method (williams & mackinnon, 2008) and vaf values (nitzl et al., 2016) were used to test the mediation hypotheses (h2 and h3). chin (2010) suggests a two-step procedure for assessing indirect effects on pls. the first step deals with using the specific model in question, including both direct and indirect paths, performing n-bootstrap resampling and finally multiplying the direct paths that make up the indirect path under evaluation. the second step is the estimation of significance and the size of the indirect effects in relation to the total effect, through the assessment of the variance accounted for (vaf). in this case, it is possible to determine to what extent the variance of the dependent variable can be indirectly explained through mediator variables. as seen in figure 2, (a) is the path value between the independent variable and the mediator variable, while (b) is the path value between the mediator variable and the dependent variable. in the calculation of vaf, the formulae of vaf = a × b / (a × b + c) is used (nitzl et al., 2016). on the other hand, c value is the value of the path coefficient between perceived corporate social responsibility and customer loyalty. in single-step multiple mediator models, c value can be calculated using the formulae of c= c’ +a1b1+ a2b2 (vanderweele & vansteelandt, 2014). if vaf values are below 20%, there is a zero mediator effect (there is no mediation), whereas 20% to 80% of the vaf value means partial, and more than 80% means the full mediator effect (hair et al., 2017). when the vaf values in table 6 are examined, it is determined that the calculated vaf value is 19% and there is no mediating effect between perceived corporate social responsibility and customer loyalty to determine the mediator effect of trust. therefore, the h2 hypothesis was not supported. on the other hand, when the vaf value calculated to determine the mediating effect of customer satisfaction between perceived corporate social responsibility 64 a. uslu, h. i̇. şengün. the multiple mediation roles of trust and satisfaction in the effect of perceived... and customer loyalty was determined, it was determined that it was calculated as 42% and partial mediation effect was supported that means the h3 hypothesis was also supported. considering vaf is over 60% measuring the total effect of both customer satisfaction and trust together points out the joint indirect effect of sat and tru partial mediate the influence of csr on loy link. discussion and conclusions csr finds a significant place on the agenda of all companies that aim to prioritize community interests. the trio of price-quality-presentation that determines the customer value in the banking sector, which is mentioned more frequently with its increasing business volumes and the harsh competition conditions among themselves, is homogenized similar to other sectors. therefore, the factor that brings a bank to the forefront in the eyes of the customer is its capacity to show itself in csr activities. banks can ensure customer loyalty with csr, but if it is determined which other variables are effective in the formation of this loyalty, customer loyalty will be achieved more easily. as a matter of fact, it is assumed that the variables of customer trust and satisfaction, which are considered effective in the formation of this loyalty, will have mediating effects. thus, the purpose of this research has been to investigate the relationship between customer loyalty and customer loyalty of banks benefiting from banking services, and the mediating role of customer trust and satisfaction in this relationship. it is expected that this study makes an important contribution to the literature in terms of the city where the research was conducted and the variables it deals with. as a matter of fact, the meaningful results obtained in the study provide important clues for professionals in the banking sector. the results of this research revealed that perceived corporate social responsibility has effects on customer loyalty. studies by chen et al. (2012), özgüven (2013), köse (2015), chung et al. (2015), fatma and rahman (2016), gültekin (2018) have similar results. in addition, this research determined that customer satisfaction has mediating role between perceived csr and customer loyalty. it is seen that this result shows parallel results with the study conducted by isa (2012), rivera et al. (2019), latif et al. (2020). consequently, the better the csr perceived by customers regarding banking services, the better the satisfaction towards the bank is. perceived csr is associated with customer loyalty. table 6. results of mediating effect tests (source: authors own elaboration) total effect of csr on loyalty direct effect of csr on loyalty indirect effects of csr on loyalty coefficient t-value coefficient t-value point estimate percentile 95% ci vaf lower upper 0.664*** 23.681 h1 = c 0.027ns 0.560 total= a1b1+ a2b2 0.637 0.452 0.825 60.73% h2 = b1c1 0.150 0.048 0.250 18.42% h3 = b2c2 0.487 0.404 0.575 42.31% business, management and economics engineering, 2021, 19(1): 49–69 65 with this study, it is revealed that the bank loyalty of customers is due to perceived csr and if the customers are satisfied with banks, the loyalty of the bank increases. according to another important result obtained in the study, it was determined that customer trust does not play a mediating role between customers’ csr perceptions and customer loyalty. this result does not match the results obtained in the studies of diallo and lambey-checchin (2016) and afridi et al. (2018). it was assumed that customer trust and customer satisfaction would have a mediator effect on customer loyalty. likewise, the effect of trust and satisfaction on loyalty is known. as a matter of fact, nejjari and aamoum (2020) study show that ethics, trust and university image have a significant and positive effect on student loyalty. also, iglesias et  al. (2018) show that csr affects customer loyalty both directly and indirectly through co-creation and customer trust in a study examining the effect of csr on customer loyalty by considering the roles of co-creation and customer trust. in these studies, strong links between trust and loyalty were examined, and determinations were made based on clear findings. however, when looking at the literature, no study has been found that the relationship between csr and customer loyalty would affect customer trust and customer satisfaction together. in this respect, the study has made an important contribution to the literature. banks must provide enlightening information in determining customer-oriented policies. similarly, banks should explain themselves well to customers regarding csr. indeed, it is very well known that csr practices are essential for the client both in this research and in the literature. in this way, it is possible to establish trust and loyalty-based relationship. in order for loyalty to occur, a sense of satisfaction must develop. this will enable potential or real customers to become loyal customers. in addition, trust and satisfaction together create a mediating effect in the building of loyalty and its relationship with csr, revealing that being a reliable business and a satisfactory role is a determinant. likewise, in today’s world, where trust in csr activities has been shaken to a great extent, it will be important to build trust by focusing on policies that prioritize csr’s philanthropy dimension. nowadays, while purchasing a product of a company, consumers with a sense of responsibility make their choices by considering criteria such as the quality and price of the product, as well as how effective the company is in social issues. this is one of the most important factors that push businesses to corporate social responsibility efforts. businesses that can effectively implement corporate social responsibility practices are generally perceived more positively by their consumers. it is necessary to motivate the customers to ensure that their loyalty to the bank is based on csr practices. in fact, sharing the gains with society prevent economic crises globally. in this way, the trust of the customers toward the bank is ensured, and even conflicts between classes are prevented. customers would respect the bank, and the bank would see customers as a “value” rather than a “customer” aspect. theoretical and managerial ımplications and limitations the theoretical contribution requires specific kinds of research findings that can present novel insights into a phenomenon that is deemed important for improving csr on banking industries. our study offers an original insight based on the empirical data on the perception of csr, 66 a. uslu, h. i̇. şengün. the multiple mediation roles of trust and satisfaction in the effect of perceived... customer satisfaction, customer trust and customer loyalty, as well as various contributions to professionals and researchers. it thereby contributes by determining between the perception of csr and customer loyalty with multiple mediating roles of customer satisfaction and customer trust. hence, this study expanded research on customer relationship by examining how csr, customer satisfaction and customer trust determine the customer loyalty of the banking sector. moreover, this study identifies how large banking organizations control their perception of csr, customer satisfaction and customer trust in achieving customer loyalty. in addition to its theoretical contributions, this research has important implications for professionals. first, if professionals want to increase customer loyalty derived from their csr activities, they need to link with customers. the results of our study build on this literature by suggesting that managers should embrace csr to increase customer trust and customer satisfaction into enhanced customer loyalty. the research has some constraints. the main constraint of the research is that the data collected from the local people is of only the city of diyarbakır, and the results of the research cannot be generalized. in future studies, it is evaluated that people from different cities should also be involved so that comparisons can be made, and the research model can be enriched with variables such as perceived quality and price. on the other hand, it can be considered that this study, which is generally carried out for the banking sector, should be done separately for public, private and participation banks customers. at the same time, more holistic results can be obtained by conducting in-depth research with qualitative research methods. author contributions dr. abdullah uslu 50%: conceptualization, methodology, data analysis. dr. halil i̇brahim şengün 50%: conceptualization, data collection, literature review. references afridi, s., gül, s., haider, m., & batool, s. 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employees: mediating role of voice behaviour khadija yousaf 1, ghulam abid1 , tahira hassan butt1*, sehrish ilyas2 , saira ahmed3 1 school of business administration, national college of business administration & economics, lahore, pakistan 2 management sciences, lahore college for women university, lahore, pakistan 3 institute of business and management, university of engineering and technology, lahore, pakistan received 10 september 2019; accepted 21 november 2019 abstract. purpose  – we investigated how thriving at work and ethical leadership affects the employee psychological well-being. further, we also examined the mediating role of voice behaviour between thriving at work and employee psychological well-being as well as ethical leadership and employee psychological well-being. research methodology – a quantitative research method was utilized to collect data from employees of a telecommunication company. spss and process macro were used for data analysis. findings – results demonstrated that thriving at work and ethical leadership are positively associated with employee psychological well-being. furthermore, the employee voice behaviour acts as a mediator between thriving at work, ethical leadership and employee well-being. research limitations – all of the data in this study were collected from single source i.e., employees of information technology industry and also specific to a metropolitan city like lahore. further, study has a very limited representation of the females. practical implications – the findings suggest that organizations should create such an environment where managers are able to have positive verbal interactions with employees that may facilitate their well-being and makes them satisfied with their jobs. originality/value – this study is one of the first studies to investigate the association between voice behaviour, thriving at work, employee psychological as well as psychological well-being. keywords: thriving at work, ethical leadership, well-being, voice behaviour. jel classification: d23, o15, q56. business, management and education issn 2029-7491 / eissn 2029-6169 2019 volume 17 issue 2: 194–217 https://doi.org/10.3846/bme.2019.11176 introduction voice behavior is often considered to be significant in the organizations because nowadays organizations depend on innovative ideas and rapid response to grow in the ever-changing https://doi.org/10.3846/bme.2019.11176 business, management and education, 2019, 17(2): 194–217 195 marketplaces and excessive competition (guzman & espejo, 2019; liu, zhu, & yang, 2010; edmondson, 1999; morrison & phelps, 1999). voice behavior is defined as “proactively challenging the status quo and making constructive suggestions” (van dyne, cummings, & mclean parks, 1995, p. 266). employee voice provides a mechanism for organizational learning and to rectify the errors occur in the organizations which is critical for organizational effectiveness (morrison, 2014). employee voice behavior has been largely focused in the scholarly research from the past two decades, realizing the fact that raising voice is crucial for the efficiency of both employees and the organizations (maynes & podsakoff, 2014; weiss & morrison, 2019). even though the existing models to voice acknowledged that employees should share their ideas about the organizational errors (morrison, 2011; detert & burris, 2007), however, the recently extended work has emphasized more on the role of leaders in encouraging their employees to raise their concerns and voices (liu, zhu, & yang, 2010; edmondson, 2003). extensive research indicates several predictors of employee voice behavior, which can be categorized into three broad lines (detert & burris, 2007). a first research stream focuses on the relationship of individual characteristics to employee voice behavior (lepine & van dyne, 2001). for example, research shows that satisfaction (lepine & van dyne, 1998) and self-efficacy (morrison & phelps, 1999) have a positive association with employee voice behavior. a second stream based on exit, voice, and loyalty as the primary choices for the dissatisfied employees grounded on the work of hirschman’s (1970). a third research stream focuses the organizational factors that emphasize the employees’ willingness to raise their voice. for example, even employees who are most proactive assess that it is useful or safe to raise voice in the particular situation (edmondson, 2003; milliken, schipani, bishara, & prado, 2015). further, past researchers have showed a link between thriving at work and other organizational outcomes e.g. well-being and employee health (wallace, butts, johnson, stevens, & smith, 2016; carmeli & spreitzer, 2009), however, the underlying mechanism yet to be explored through which thriving effects those variable. similarly, leadership behavior effects employee well-being (donaldson-feilder, munir & lewis, 2013; kuoppala, lamminpaa, lira, & vainio, 2008), but the process through which ethical leadership improves employee well-being is still to be researched. specifically, in relation to this study the mechanism of how thriving at work and ethical leadership impact employee well-being, is still unexplored. in the light of above streams, we seek to further develop i) the individual stream by examining a new antecedent i.e. thriving at work which influences employee voice behavior. ii) the contextual stream by focusing that ethical leadership plays an important role to influence employees to provide their suggestions for the improvement of the organization and hence enhance employee psychological well-being. in addition, research shows that thriving has a positive association with some significant outcomes e.g. performance, well-being and employee health (cullen, gerbasi, & chrobot‐ mason, 2015), we yet have to explore how and why is this case. similarly, previous research indicates that leader’s work behavior is associated with employee well-being (donaldsonfeilder et al., 2013), but the process through which leader’s behavior effects employee well-being is unknown (tuckey, bakker, & dollard, 2012). specifically, the mechanism of how thriving at work and ethical leadership influence employee psychological well-being is 196 k. yousaf et al. impact of ethical leadership and thriving at work on psychological well-being... still unexplored. therefore, we propose that voice behavior may be a significant mediator that describes how thriving at work and ethical leadership interprets into better employee psychological well-being. overall, the main objective of this research is to empirically test the mechanism through which employee voice behavior mediates the relationship between two independent variables thriving at work, ethical leadership and a dependent variable employee psychological well-being at workplace. with regard to the literature in individual stream, many researchers have explored the positive features of individual stream as the predictors of voice behavior. for example, research shows that employee’s decision to speak up is influenced by their dispositional affectivity (george & zhou, 2002). another research established a link between voice behavior and personalities (e.g., extraversion, conscientiousness, and agreeableness) (lepine & van dyne, 2001). in this study, we are suggesting thriving as a new positive antecedent of employee voice to further advance the literature in this stream (see figure 1). in the recent literature of positive organizational scholarship, the concept of thriving has gained attention of resaerchers (abid, torres, ahmed, & qazi, 2019; abid, sajjad, elahi, farooqi & nisar, 2018; patterson, luthans, & jeung, 2014). although researchers have emphasized on thriving for organizations (spreitzer & porath, 2012), “research on thriving at work has been quite sparse” (walumbwa, muchiri, misati, wu, & meiliani, 2017; niessen, sonnentag, & sach, 2012, p. 468). moreover, with respect to the contextual stream, the importance of leaders to help employees raising their voice is more focused in the recent years (morrison, 2011; detert & burris, 2007). some examples include, mcclean, burris and detert (2013) investigated the relationship of leaders’ characteristics with employee voice. another research shows impact of psychological attachment and influence of lmx on employee voice (burris, detert, & chiaburu, 2008). detert and burris (2007) tested how leaders’ openness encourages improvement-oriented voice behavior. to extend this track, we researched the impact of ethical leadership on employee voice. the outcomes of ethical leadership behavior have been addressed in few studies (mayer, kuenzi, greenbaum, bardes, & salvador, 2009). however, the recent research supports the evidences that there is a favorable range of outcomes of ethical leadership (mayer et al., 2009; brown, treviño, & harrison, 2005). figure 1. theoretical model ethical leadership thriving at work employee voice behavior employee well-being h1 h2 h3 h4 h5 h6 h7 business, management and education, 2019, 17(2): 194–217 197 in addition, a more clear research is required to know the process by which ethical leadership affects some significant outcomes for the leadership research and practice (walumbwa & schaubroeck, 2009). previous research indicates that speaking up may influence the employees themselves. by raising voice, employees can individually demonstrate their opinions, which may lead to create a constructive work attitude (morrison & milliken, 2000). voice may help to improve the motivation and satisfaction of employees (greenberger & strasser, 1986) and their social status (weiss & morrison, 2019). morrison (2011) suggested that the outcomes of voice behavior can benefit employees in the workplace as it brings constructive ideas, recovers everyday work conditions, and improves task efficiency. we study the impact of thriving and ethical leadership on employee psychological well-being. employee wellbeing is important as the organizational commitment is associated with it (danna & griffin, 1999) and deficiency of well-being results in reduced job performance (motowidlo, packard, & manning, 1986). social exchange theory (blau, 1964) suggests that individuals build social or transactional relations at work on the basis of their personal experiences with each other. these relations may depend on monetary or social exchanges (bishop, scott, & burroughs, 2000). relationships based on monetary exchanges are short term and transactional in nature. employees feel obligated in economic exchange for the period of that particular exchange. while, social exchange relationships are long term and based on trust and emotional associations with each other. this theory particularly explains that people behavioral reactions depend on the kind and level of attachment with the other person. moreover, the theory posits that the beneficial decisions taken by the leaders help to build high quality relationships with their employees. in this way, employees feel obligated to respond back in the same constructive way at work (settoon, bennett, & liden, 1996). employee voice behavior is also a way of social exchange. leaders can build trustful relationships with their employees by treating them fairly. ethical leadership encourages employees’ positive behaviors. ethical leaders are concerned about the well-being of their employees (brown et al., 2005). leaders have authority over rewards and resources and they may use this authority to motivate employees to fulfill their obligations/contracts. when the leader takes honest and fair decisions, then employees see this relationship with their leader as a social exchange and take it as an obligation. raising constructive voice is another way to fulfill this obligation. employees give innovative ideas and suggestions or they raise voice against inappropriate actions to improve the organizational system (walumbwa & schaubroeck, 2009). the socially embedded model of thriving (spreitzer, sutcliffe, dutton, sonenshein, & grant, 2005) suggests that individual’s growth, development and well-being improves with thriving at work. spreitzer’s model explains that individuals thrive more when they work in a particular context. two characteristics of work have been taken in this study. the unit contextual features and the resources produced at work. the environment encourages honesty and respect, and then they are more likely to thrive by responding with agentic behaviors. agentic behavior means that individuals perform actively and they show more determination at work (bandura, 2001). the agentic behaviors give rise to such resources which promote back these agentic behaviors more and thus increase thriving at work. 198 k. yousaf et al. impact of ethical leadership and thriving at work on psychological well-being... 1. literature review and hypotheses development 1.1. employee voice behavior the notion of the voice was initially mentioned by hirschman (1970). he believed that voice behavior was critical because employees can identify some kind of dissatisfaction for improving their well-being (hirschman, 1970). in this way, deficiencies can be substituted by interventions and modifications in the organization. since in today’s competitive organizational life, it is required to adapt the changing environment and to intervene accordingly. thus, voice behavior is inevitable serving to the realization of this goal. employee voice behavior is conceptualized as “promotive behavior that emphasizes expression of constructive challenge intended to improve rather than merely criticize” (van dyne & lepine, 1998, p. 109). in another research, employee voice behavior is described as a deliberate exchange of concerned information and ideas to make an organizational improvement (van dyne, ang, & botero, 2003). similar dimensions of voice behavior has been defined by some other researchers (e.g., liang, c.i. c. farh, & j. farh, 2012), including the intentional behaviors at work for the organizational betterment. this conceptualization of voice as constructive has become the prominent one in the literature. it explains that voice is a constructive expression of new ideas, suggestions, or concerns (chamberlin, newton & lepine, 2017). indeed, employee voice is considered to be an extra role challenging behavior that is important for modernization, growth and avoidance of error at work (weiss & morrison, 2019; morrison, 2014). 1.2. thriving and well-being the concept of thriving at work is crucial in today’s complex organizational environment because “it helps individuals to promote their development by changing their work context and it increases their functioning and adaptability at workplace” (spreitzer et al., 2005, p. 537). thriving at work is defined as “one’s feeling of personal growth, getting better or gaining forward momentum at work” (carmeli & spreitzer, 2009, p. 173). when employees thrive, their personal abilities continuously grow at work (abid et al., 2018). spreitzer conceptualized “thriving as the combined experience of sense of learning and vitality at workplace” (spreitzer et al., 2005, p. 538; spreitzer & sutcliffe, 2007). learning is characterized by the sense of continuous improvement towards employees’ work (porath, spreitzer, gibson, & garnett, 2012). whereas vitality is the feeling of positivity and aliveness on the basis of available energy among employees (porath et al., 2012). learning and vitality are the two components of thriving and help to improve each other. if employees learn at work but they feel lethargic, they are not thriving. similarly, thriving doesn’t exist if employees feel energetic but unable to learn at work (elahi, abid, arya, & farooqi, 2019). employee well-being is the synonym for happiness (fan et al., 2014), and refers to the employees’ positive evaluation about their quality of lives. individuals make judgments about their lives after subjective analysis, summarizing and measuring their living conditions (keyes, 2014). as everyone wants happiness, so well-being is considered to be the ultimate aim of human survival and one of the most precious goals of an individual’s life (diener & business, management and education, 2019, 17(2): 194–217 199 oishi, 2000). indeed, well-being has been conceptualized by different means (van de voorde, paauwe, & van veldhoven, 2011). for example, danna and griffin (1999) conceptualized that we should consider the whole employee while explaining employee well-being. another example is of work-related well-being which takes the employee’s experience and functioning as a whole at work. (warr, 1987; grant, christianson, & price, 2007). therefore, as the previous research indicates, employee well-being is the general attitude of employees at work and towards the organization. grant et al. (2007) described that employee psychological wellbeing (i.e. happiness) emphasis on the subjective practices of employees at work. employee psychological well-being is the state in which individuals perceive their lives positively and describe that how much they are satisfied in their lives (diener, suh, lucas, & smith, 1999). it further involves that how an individual responds emotionally and how much he is satisfied from his work, health or family life etc. (spreitzer et al., 2005) which eventually brings the positivity in life. research shows that thriving is related to many organizational outcomes like innovation, improved health, better performance and self-improvement (wallace et al., 2016). thriving at work is a crucial aspect that may help to attain long term productivity through employee well-being (abid, contreras, ahmed, & qazi, 2019). further, the consequences of thriving in employees at workplace include better identification of career opportunities and fond of learning prospects (elahi et al., 2019). employees who experience thriving at work tend to be proactive, resilient and more physically and psychologically healthy (nawaz, abid, arya, bhatti, & farooqi, 2018). in today’s challenging work setting, thriving is significant for employees as they need to learn to promote their development and to maintain their physical and psychological health and well-being (spreitzer et al., 2005; pfeffer, 2010). spreitzer and porath (2014) defined, “thriving is a desirable subjective experience that helps individuals to understand what and how they are doing, and whether it is increasing their individual functioning and adaptability at work” (p. 247). an experience of vitality and aliveness in individuals helps to overcome the anxiety and depression and thus they feel healthier mentally and physically which brings positivity in life and improves their well-being (spreitzer & porath, 2012, 2014; keyes, 2002). employees get motivated by their own energy when they thrive at work (spreitzer et al., 2005), which may help to improve employee psychological well-being. thriving is a desirable psychological state that forecasts how individuals develop the skills to thrive at work (kira & balkin, 2014; spreitzer et al., 2005) and thereby enhance well-being. qaiser, abid, arya, and farooqi (2018) found a positive association between thriving and happiness at work. spreitzer et al. (2005) explained that thriving has two components, i.e. learning and vitality, and with the blended experience of both components of thriving, employees may improve their well-being. thus we hypothesize that, h1: thriving has a positive relationship with employee psychological well-being. 1.3. thriving and employee voice behavior thriving is an essential factor to promote employee voice behavior. it encompasses learning and vitality (spreitzeret al., 2005). individuals learn when they obtain new skills and knowledge according to the demand of their work (edmondson, 1999), while vitality encompasses 200 k. yousaf et al. impact of ethical leadership and thriving at work on psychological well-being... feelings of aliveness and energy as an outcome of an individual’s efforts at work (nix, ryan, manly, & deci, 1999). thriving at work enhances employee’s creativity,productivity and satisfaction at work. due to constant learning and feelings of vitality at work, employees employees show more commitment and devotion towards the organization (elahi et al., 2019). learning at work, being the first element of thriving, is an important foundation for employee voice behavior. when individuals learn at workplace, they can better predict and identify issues, and propose better solutions (carmeli & spreitzer, 2009). in today’s competitive business environment, firms need better ideas from workers, particularly where employees are often engaged directly with clients and find prospects for improvement in the system. thriving flourishes skills and abilities, which legitimizes the individuals in the eyes of others and further increases their confidence to raise voice to bring necessary changes and ‘move beyond the status quo’ (carmeli & spreitzer, 2009) and they implement whatever they learn so that they can bring constructive change at work. vitality at work, being the second element of thriving, brings energy and motivation to the workers. this energy encourages individuals to do more than the defined duties and roles. thriving is a desirable state at workplace; and when individuals thrive, they are intrinsically motivated which encourages their voice behavior. with continuous learning and energized feeling, employees experience momentum and thrust at workplace. edmondson (1999) and spreitzer et al. (2005) argued that if an atmosphere of care, respect and trust is built between employees, it also encourages raising voice because employees feel safe at workplace which enhances risk taking behavior. employees who experience thriving at work are psychologically strong which helps them to take initiatives (abid et al., 2018). the feelings of thriving at work enhances self confidence of employees so they share and implement new ideas and practices (elahi et al., 2019). hence, when employees experience thriving at work their level to raise voice at work is likely to increase. we thus hypothesize that: h2: thriving at work is positively associated with employee voice behavior. 1.4. employee voice behavior and well-being hirschman (1970) believed that voice behavior is critical; because employees can raise their voice in some kind of dissatisfaction or they may take the opportunity to improve their wellbeing. employee voice behavior is defined as “an individual’s voluntary and open communication directed towards the individuals within the organization that is focused on influencing the context of the work environment” (maynes & podsakoff, 2014, p. 88). as employees raise voice, they expect from the leaders or management to make necessary changes and resolve the organizational errors, it may help to improve employee well-being. if employees get a sense that their ideas or concerns are not valued at work, then they may feel reduced self-efficacy, self-control and well-being (morrison & milliken, 2000). on the other hand, the leaders who are concerned to improve the well-being of their employees, motivate them to speak up and listen their concerns and make rational decisions about problems at work (brown et al., 2005). if employees feel that speaking up about their problems, ideas and suggestions would be listened positively by the managers, then it can have encouraging effects on their indidividual business, management and education, 2019, 17(2): 194–217 201 behavior (milliken et al., 2015). one of the positive effects of providing voice opportunity to employees might lead to employee’s well-being. hence, we hypothesize that: h3: employee voice behavior has a positive relationship with well-being. 1.5. employee voice behavior as a mediator between thriving and employee well-being van dyne and lepine (1998) conceptualized employee voice as “primitive behavior that emphasizes expression of constructive challenge intended to improve the situation” (p. 109). employee voice behavior is based on constructive and promotive dimensions. it is defined as “the voluntary expression of ideas, information, or opinions focused on effecting organizationally functional change to the work context.” when individuals experience thriving at work, they feel healthy both psychologically and physically and less depressed which leads to the positivity in life and well-being (spreitzer & porath, 2012, 2014; keyes, 2002). according to spreitzer et al. (2005), thriving develops the innovation skills among employees hence they feel more creative. due to the feelings of learning and vitality at work, employees build strong social connections and share their knowledge at work (elahi et al., 2019). this brings out more confidence in employees and they raise their voice for construtive change at work. the socially embedded model of thriving (spreitzer et al., 2005) states that employees’ development, health foster with thriving. employees who thrive at work, raise their voice to create new and eminent ideas which helps to improve their well-being as well. moreover, in the light of blau’s social exchange theory (1964), it can be argued that employees who expeience thriving have a better constructive voice behavior because they feel positive emotions (vitality), which enhances their cognitive capacities and self-efficacy, and this will urge them to speak up easily. furthermore, in their career development process, employees would try their best in exchange for what organization has provided them. they exhibit constructive voice to bring about positive initiate the change to work in a more efficient and effective way, which helps to improve their well-being as well. on the basis of the above arguments, we postulate the following hypothesis: h4: employee voice behavior mediates the relationship between thriving and well-being. 1.6. ethical leadership and employee voice behavior ethical leadership remained a topic of interest from years for effective leadership (bass & steidlmeier, 1999). the recent research on leadership is also focused on ethical behaviors of leaders (anwar, abid & waqas, 2020) and their influence on employee’s voice (islam, ahmed, & ali, 2019). ethical leadership is defined as the “demonstration of normatively appropriate conduct through personal actions and social interactions, and the promotion of such conduct to followers through two-way communication, reinforcement, and decision-making” (brown et al., 2005, p. 120). ethical leaders built quality relationships with the employees that are not only dependent on the mutual financial benefits, but also the exchange of social norms (brown & treviño, 2006). ethical leaders construct highly truthful relations with their employees (brown et al., 2005). as a result, followers idealize their leaders who make 202 k. yousaf et al. impact of ethical leadership and thriving at work on psychological well-being... ethical decisions and they pay attention to improve the well-being of their employees and the organization (brown et al., 2005). ethical leaders have the ability to handle the external pressures and their actions show their espoused values. when leaders’ actions give impression that their decisions are according to their fundamental values, employees also get the feelings of openness (cha & edmondson, 2006) which encourage them to speak up about their concerns and share their ideas with personal consent (wood & wall, 2007). the concept of employee voice behavior revolves around whether employees raise their voice about problems at work and give recommendations for the betterment at work or decide to remain silent. employees’ choice of raising voice depends on their personal evaluation that their concerns will be valued by the management and they will not be penalized for raising voice. to speak out for the need to improve a program or policy may feel hazardous. employee voice is dependent on leader’s behavior for two major reasons (emerson, 1962; salancik & pfeffer, 1978). first, employees raise their voice to managers to get the attention of organization about the particular problem and to allocate resources to solve it. second, managers have a control over benefits or penalties; therefore, employee voice behavior depends on the behavior of their leaders (depret & fiske, 1993). ethical leaders make balanced decisions and raise their voice if any improper actions are taken in the organization. employees observe those actions taken by the leaders and they try to follow the same ethical behavior at work (bandura, 1977). managers who speak up and disagree with the erroneous organizational actions convey inspiration for employee’s behavior at work. ethical leaders may reinforce these norms by giving the rewards and punishments to the employees. employees intensely observe the consequences of speaking out as being punished or encouraged. therefore, when leaders give message through their actions that they encourage ethical and fair evaluation procedures and they listen to their employees, then employees get inspiration to raise their voice against inappropriate actions. if such ethical behavior is missing in the leaders then employees may find subordinates may find some risk (e.g., demotion or humiliation) as outweighing perceived benefits (e.g., money or promotion). thus, leaders’ actions are most important for the organization as employees follow their actions and hence considered to be the actions of the whole organization (grojean, resick, dickson, & smith, 2004). managers may influence the employee voice behavior through status or by supporting them socially. employees trust ethical leaders as they listen to employee apprehensions (brown et al., 2005) and they create environment for the employees to raise voice about their concerns. brown et al. (2005) research shows a significant association between ethical leadership and employees’ willingness to speak up. moreover, another research shows a strong cross-level relationship between ethical leadership and employee voice behavior (walumbwa & schaubroeck, 2009). ethical leaders are not only concern about the ethical matters but they also encourage their subordinates to raise voice against other work related issues in the organization. when employees feel that leaders are interested in listening their concerns at work and they encourage better communication and periodically ask questions about employees’ problems, then employees try to follow-up the same. in these ways, ethical leaders can convey that speaking up is appreciated and important for organizational improvement. therefore, our hypothesis is: h5: ethical leadership is positively related to employee voice behavior. business, management and education, 2019, 17(2): 194–217 203 1.7. employee voice behavior as a mediator between ethical leadership and employee well-being ethical leaders are altruistic and honest. employee voice behavior is encouraged when personal values and workplace values are supposed to be aligned, which also create personal congruence among employees (bono & judge, 2003). contrarily, cha and edmondson (2006) proposed that employees get disappointed and perceive negative feelings, if the leaders show the expression of incongruence at work. employees get positive emotions when speaking up and actions are in congruence with their values, which raises the sense of self-empowerment. employee empowerment is related to employee performance as it gives the feelings of power and involvement at work (avolio, zhu, koh, & bhatia, 2004) and also enhances the employee well-being (prilleltensky, 2005). social exchange theory (blau, 1964), states that individuals see relationships at work as an economic or social exchange. ethical leaders encourage their employees to speak up about their problems and take honest and sincere decisions which are important for the well-being of subordinates (brown et al., 2005) and hence voice behavior also becomes a way of social exchange to pay back the obligation. therefore, we argue that ethical leadership and employee well-being has a significant relationship that will be indirectly transmitted through employee voice behavior. thus we hypothesize that h6: employee voice behavior mediates the relationship between ethical leadership and well-being. 1.8. ethical leadership and employee well-being research shows that manager’s leadership behavior and style inspires employee behaviors and well-being (gerstner & day 1997; lowe, kroeck, & sivasubramaniam, 1996). ethical leadership is conceptualized as “the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement and decision making” (brown et al., 2005, p. 120). while, employee well-being involves employees’ general experience towards the work and the organization (danna & griffin, 1999). social exchange theory proposes that beneficial and positive actions demonstrated to the employees by their managers develop higher quality relationships that create responsibility in employees to response back in the same constructive way (blau, 1964; settoon et al., 1996). ethical leaders are reliable and concerned about the well-being of their employees and they raise voice against unfair decisions and also encourage employees to speak up to make rational judgments (chughtai, byrne, & flood, 2014; brown et al., 2005). when leaders keep a direct contact with their employees, it may help to inspire employees’ work lives. leaders may communicate with their employees by giving them feedback about work and tell them about achievements or laggings. leaders use different techniques to motivate employees, e.g. rewards, promotions, awards and coaching, etc. therefore, leaders’ actions may create a significant impact to improve employees’ well-being. leaders’ positive behavior may enhance employee’s well-being (liu, siu & shi, 2009; nielsen & munir, 2009). 204 k. yousaf et al. impact of ethical leadership and thriving at work on psychological well-being... ethical leaders are honest and perceived as ethical decision makers. they always try to improve their employee’s well-being and their actions show their ethics both at work and in their personal lives (chughtai et al., 2014). furthermore, ethical leaders follow themselves what they say (brown & mitchell, 2010). ethical leaders try to create an ethical environment at work by demonstrating ethical behavior and communicating ethical standards to employees (brown et al., 2005; brown & trevino, 2006) which may improve the employee well-being. thus we hypothesize, h7: ethical leadership has a positive relationship with employee well-being. 2. methodology in order to collect data, we employed purposive sample technique and collected data from one of the largest fiber optic telecommunication company in south asia providing telecommunication and data services. we chose telecommunication industry because it is an important fast growing sector in pakistan but yet underexplored in the domain of employee voice behavior. there are more than 150  m cellular users and the industry employed over 1.36 m people. the company selected to collet data is the first one to commercially roll out a wimax network nationwide. it has more than 250,000 wimax subscribers, provides enetrprise solutions and data sevices toover 200 leading organizations. purposive sampling technique was adopted because, to the best of our knowledge the voice behaviour of employees from telecommunication sector has not been investigated previously. among two large telecom organizations working in the region, one was selected to collect the sample as the other refused to share data. prior to the survey, the respondents were briefed verbally and also it is written on the questionnaire that their confidentiality would be secured and that the data they provide will only be used for research purposes. moreover, the employees were ensured that their managers would not see the responses they filed in and that their performance appraisals would in no way be affected by this survey. to minimize common method bias, a time lag of two weeks between data collection was used. at time 1 information regarding demographics, thriving and ethical leadership was collected, while at time 2 (two weeks after t1) information on voice behavior and well-being was taken. the interference of researcher was kept minimal during data collection so that the responses remain free from the observer effect and unbiased results could be obtained. in order to generalize our study outcomes, the sample size is selected by following kline (2015) who suggested that 10 respondents against each item in the questionnaire (i.e., no. of items in the questionnaire × 10 respondents from targeted population) from target population is an essential condition to infer best possible results about the target population. as our survey instrument consisted of 28 items, so the sample size of 280 participants would be quite sufficient to analyze our model as well as to generalize our findings. by keeping in mind the possibilities of missing data and non-respondents, we targeted 400 employees. a total of 400 questionnaires were distributed out of which 320 were returned. screening of incomplete questionnaires and those that were positive on extremity bias was carried out giving us a final usable sample of 297 employees for both times 1 and 2 collectively. this business, management and education, 2019, 17(2): 194–217 205 gave us a response rate of approximately 93%. out of 297 respondents, 254 were males while the rest were females, giving us a male-dominated sample. according to the marital status, most of the respondents were married (n = 203) followed by single (74). as per education, the majority (n = 197) respondents had 16 years of education. 2.1. measures 2.1.1. ethical leadership ethical leadership was measured by a ten item scale by brown et al. (2005). a sample item was “listens to what employees have to say”. the scale was measured on 5-point likert type scale (1 = extremely unlikely to 5 = extremely likely). the cronbach’s alpha coefficient was 0.80. 2.1.2. thriving at work thriving at work was measured by a ten item scale by porath et al. (2012). a sample item was “i find myself learning often”. the scale was measured on 5-point likert type scale (1 = strongly disagree to 5 = strongly agree). the cronbach’s alpha coefficient was 0.78. 2.1.3. voice behavior voice was measured by a three item scale by detert and burris (2007). a sample item was “i challenge manager to deal with problems around here”. the scale was measured on 5-point likert type scale (1 = never to 5 = always). the cronbach’s alpha coefficient was 0.75. 2.1.4. employee well-being well-being was measured by a five item measure through satisfaction with life scale (swls) by diener, emmons, larsen, and griffin (1985). a sample item was “in most ways my life is close to my ideal.” the scale was measured on 5-point likert type scale (1 = strongly disagree to 5 = strongly agree). the cronbach’s alpha coefficient was 0.70. 2.1.5. control variables since the data for this study was conducted in the non-contrived organizational setting there could be have been multiple factors that were affecting the well-being of employees. hence, variables like age, gender, marital status, educational level and tenure were taken as control variables, so that the effect of ethical leadership and thriving on the well-being of employees can be seen above and beyond these control variables. 3. data analysis we followed previous approaches of researchers to conduct data analysis (abid et al., 2019; butt, abid, arya, & farooqi, 2018) and tested the proposed hypotheses. specifically, the confirmatory factor analysis (cfa) was conducted using the ibm amos (maximum likelihood) software version 24 to test the factorial structure and the adequacy of our hypothesized four-factor measurement model. subsequent to the cfa, hypotheses were tested using a process macro analysis (hayes, 2012). the process macro analysis was selected because 206 k. yousaf et al. impact of ethical leadership and thriving at work on psychological well-being... based on bootstrap sampling it has been recognized as a solid and rigorous approach for detecting the significance of conditional indirect effects (abid et al., 2019; anwar et al., 2020). a total of two models were tested: a four-factor model (i.e. ethical leadership, thriving at work, voice behavior, and well-being) were compared with one-factor (all constructs combined into one factor) alternate model. the cfa results advocate that our four factor model (full measurement model) has proved better fit (χ2/df = 2.93, gfi = 0.92, ifi = 0.91, cfi = 0.91, srmr  = 0.04, rmsea  = 0.08) (hair, black, babin, & anderson, 2010; hu & bentler, 1999) as statistics are provided. furthermore, it is considered better as compared to the other one-factor alternative model (χ2/df = 7.42, gfi = 0.55, ifi = 0.28, cfi = 0.27, srmr = 0.10, rmsea = 0.15). 3.1. construct validity the discriminant validity among the study constructs was examined using fornell and larcker (1981) approach. according to this approach, the square root of ave of constructs should be greater than the correlations of other study constructs. the square root of ave for wellbeing (0.66), ethical leadership (0.68), thriving at work (0.87) and voice behavior (0.75) were found greater than the correlations of other construct and consequently, discriminant validity has been established. moreover, composite reliability values of all the study constructs range from 0.70 to 0.85, hence meeting the threshold criteria and ensuring the convergent validity (fornell & larcker, 1981). correlational analysis was carried out to initially test the hypotheses. table 1 shows that age, education and tenure, have insignificant correlations with our study variables. ethical leadership which is one of the independent variable of the study, is observed to have a significant relationship with the voice behavior (r = 0.18, p < 0.01) which is the mediator of the study. similarly, thriving (r = 0.39, p < 0.01), the other independent variable also has a significant relationship with the mediator, voice behavior. these significant behaviors between the independent variables and the mediator fulfill a necessary pre-condition for mediation analysis. moreover, voice behavior is significantly related with well-being (r = 0.39, p < 0.01). table 1. standard deviations, means, and correlation variables mean sd 1 2 3 4 5 6 1. age 32.76 4.77 1 2. education 16.23 0.94 –0.06 1 3. tenure 6.84 4.23 0.27** –0.02 1 4. ethical leadership 4.04 0.53 –0.01 0.08 0.00 1 5. thriving at work 4.14 0.42 –0.01 –0.01 –0.00 –0.02 1 6. voice behavior 3.72 0.90 –0.04 0.06 0.07 0.18** 0.39** 1 7. well-being 3.80 0.49 –0.03 –0.02 –0.05 0.12* 0.29** 0.39** note: n = 297; **. correlation is significant at the 0.01 level (2-tailed); *. correlation is significant at the 0.05 level (2-tailed). business, management and education, 2019, 17(2): 194–217 207 in order to carry our regression analysis it is necessary to test a few assumptions first. in the current study multicollinearity and autocorrelation was checked and verified prior to hypotheses testing. table 2 shows that the vif values for all study variables is less than 5 which is the cut-off acceptable value for this test. in order to check the autocorrelation (a relationship between values separated from each other by a given time lag), durbin-watson (durbin & watson, 1951) test was carried out. since the value of durbin-watson for our study is 0.274, there is a positive autocorrelation in our data. table 2. assumptions of regression multicollinearity variables vif tolerance thriving at work 1.19 0.84 voice behavior 1.23 0.81 ethical leadership 1.05 0.96 autocorrelation durbin-watson 0.27 3.2. mediation testing we analyze whether the influence of thriving at work on employee well-being could be explained through employee voice behavior. the outcomes of spss process macro (table  3) illustrated that the direct effect of thriving at work on employee well-being was positive and significant (β = 0.18, t = 2.66, p < 0.01), providing support for hypothesis 1. consistent with our expectations for hypothesis 2, thriving at work showed a positive and significant impact on voice behavior (β = 0.83, t = 7.17, p < 0.00). further, the association between employee voice behavior and well-being was positive and significant (β = 0.18, t = 5.71, p < 0.00), favoring hypothesis 3. table 3. regression results for thriving at work and well-being b se t p direct and total effects well-being regressed on thriving at work (total effect) 0.32 0.07 5.01 0.00 voice behavior regressed on thriving at work 0.83 0.12 7.17 0.00 well-being regressed on voice behavior, controlling for thriving at work 0.18 0.03 5.71 0.00 well-being regressed on thriving at work, controlling for voice behaviour 0.18 0.07 2.66 0.01 value se ll 95%ci ul 95%ci z p indirect effect and significance using the normal distribution sobel 0.15 0.03 0.10 0.21 4.44 0.00 value se ll 95%ci ul 95%ci bootstrap results for indirect effect effect 0.15 0.03 0.10 0.21 note: n = 297; β = unstandardized regression coefficient; se = standard error; bootstrap sample size = 1000; ll = lower limit; ci = confidence interval; ul = upper limit. 208 k. yousaf et al. impact of ethical leadership and thriving at work on psychological well-being... moreover, the outcomes of simple mediation model (table 3) support the indirect influence of thriving at work on employee well-being. outcomes of the mediation model were also examined using the sobel test. this test is used to authenticate whether or not a mediator explains the association between predictor and the criterion variable. the formal two-tailed significance test (assuming a normal distribution) demonstrated that the (unstandardized) indirect effect (0.15) was positive and significant as sobel z  = 4.44 and p < 0.00. the bootstrapping, without making any assumption about the shape of the sampling distribution (i.e., normality), confirmed the sobel test results with identical indirect effect value 0.15, as a 95% bootstrap confidence interval for this indirect effect did not contain zero (0.10, 0.21). this provides support for hypothesis 4. table 4 shows the relationship of ethical leadership on employee well-being through voice behavior. the direct effect of ethical leadership on voice behavior is positive and significant (β  = 0.29, t  = 2.86, p < 0.00), providing support for hypothesis 5. the association between ethical leadership and employee well-being is not significant (β = 0.06, t = 1.21, p > 0.05), so our hypothesis 7 is not supported. table 4. regression results for ethical leadership and well-being b se t p direct and total effects well-being regressed on ethical leadership (total effect) 0.12 0.05 2.22 0.03 voice behavior regressed on ethical leadership 0.29 0.10 2.86 0.00 well-being regressed on voice behaviour, controlling for ethical leadership 0.20 0.03 6.94 0.00 well-being regressed on ethical leadership, controlling for voice behaviour 0.06 0.05 1.21 0.23 value se ll 95%ci ul 95%ci z p indirect effect and significance using the normal distribution sobel 0.06 0.02 0.02 0.11 2.62 0.01 value se ll 95%ci ul 95%ci bootstrap results for indirect effect effect 0.05 0.02 0.02 0.11 note: n  = 297. β  = unstandardized regression coefficient; se  = standard error; bootstrap sample size = 1000; ll = lower limit; ci = confidence interval; ul = upper limit. however, the outcomes of simple mediation model support the indirect influence of ethical leadership on employee well-being. the two-tailed significance test demonstrated that the (unstandardized) indirect effect (0.06) was positive and significant as sobel z  = 2.62 and p < 0.01. the bootstrapping, without making any assumption about the shape of the sampling distribution (i.e., normality), confirmed the sobel test results (see table 4) with indirect effect value 0.05, as a 95% bootstrap confidence interval for this indirect effect did not contain zero (0.02, 0.11). this provides support for hypothesis 6 that employee voice behaviour mediates the relationship between ethical leadership and employee well-being. business, management and education, 2019, 17(2): 194–217 209 4. discussion this study aimed at investigating the inter-relationships between ethical leadership, thriving, voice behavior and well-being of employees. ethical leadership and thriving are the predictor variables, whereas the well-being of employees was taken as the criterion variable. in order to fully investigate the mechanism through which these variables interact with each other, voice behavior was taken as the mediator variable. our findings can be discussed with various perspectives. firstly, results of current study revealed that thriving at work has a positive relationship with the psychological well-being of employees in telecom industry. the experience of learning and vitality in the organisation gives employees a sense of personal growth which help them to feel satisfied at workplace. this brings positivity in their lives and the sense of improved psychological well-being. kern, waters, adler, and white (2014) also conducted a study on employee’s well-being and thriving but in the educational sector, yielding similar results that thriving at work was directly related to the well-being of employees. spreitzer et al. (2005) also pointed that thriving helps to improve the employee wellbeing. secondly, results of our study indicated that thriving has a positive relationship with employee voice behavior which coincides with the findings of abid (2016), which reflected that employee thriving was positively related to their constructive voice behavior. in telecom sector, employees are often engaged directly with the customers. when employees feel thrive at work, it improves their skills and abilities which further boost their confidence to identify problems and raise voice to bring constructive changes. thirdly, the results indicated that voice behavior has a positive relationship with employee’s well-being. employees respond that the environment which encourages to raise voice about the problems at workplace or giving solutions and ideas brings positivity in the their lives and hence improve their psychological well-being. wood (2008) also suggests that voice behavior does indeed have a constructive relationship with employee’s well-being. fourthly, voice behavior mediated the relationship between thriving at work and well-being of employees. results in our research shows that employees who feel sense of learning and vitality at work, raise their voices to give ideas and solutions to problems which improve their psychological well-being. literature also support that thriving at work improves skills and creativity in employees which encourages them to raise voice (spreitzer et al., 2005) and thus improves their well-being. patterson, luthans, and jeung (2014) explain that thriving at work is an essential element for the development and efficient performance of the workers in every organization. fifthly, ethical leadership had a positive significant relationship with voice behavior in this study. the results demonstrates that employees trust ethical leaders and get encouraged to speakup and maintain better communication with them. our results are thus in line with the findings of walumbwa and schaubroeck (2009) who also concluded that voice behavior of supervisors in the financial institution of usa was positively affected by their ethical leadership. this constructive voice behavior is appreciated by the organizations that focused on improving their work standards as employees who show voice behavior raise concerns regarding problems and issues that cause hindrances in work performance (brown et al., 2005; van dyne & lepine, 1998). sixthly, voice behavior mediates the relationship between ethical leadership and well-being of employees. however, hypothesis 7 that states a positive significant relationship between ethical leadership and employee psychological well-being is not supported. so our results 210 k. yousaf et al. impact of ethical leadership and thriving at work on psychological well-being... do not support the direct relationship between ethical leadership and employee well-being but supports the indirect relationship between these two through voice behavior. hence, due to the presence of ethical leadership in this organiztaion, employees are encouraged to speakup which results in improved psychological well-being. when managers take care of voice mechanism then workers perceive to work together as a partner with the management for company’s growth. avey, wernsing, and palaski (2012) also identified that when managers use ethical leadership skills with their employees, they create a safe cocoon in the organization. in such an environment, sub-ordinates and colleagues feel secure enough to interact with their superiors (prottas, 2013). this in turn creates a positive work environment in which employees flourish and their well-being escalates. 4.1. theoretical contribution drawing from the theories of social exchange (blau, 1964) and socially embedded model of thriving (sprietzer et al., 2005), this study contributes to the literature by supporting and extending the previous findings in the multiple ways. first, our main purpose was to explore how voice behavior acts as a mediator between thriving at work, ethical leadership and employee well-being. previous research is extended by arguing that employee voice behavior is a mediator (avey et al., 2012) which explains the positive impact of thriving at work and ethical leadership to improve employee psychological well-being. the empirical results suggest that thriving and ethical leadership help employees to speak up against organizational errors and eventually improves their well-being. this research not only indicates that thriving at work may help to improve employee well-being (cullen et al., 2015), but also the underlying mechanism of voice behavior is explored and empirically tested. similarly, previous research has been extended that leaders behavior and employee well-being has a positive relationship (donaldson-feilder et al., 2013). in addition, findings show that voice behavior acts as a mediator between these two variables. second, we contribute to the recent research of thriving (e.g., walumbwa et al., 2017), providing empirical evidence that it is an important individual antecedent of employee voice. our research also includes a contextual antecedent (ethical leadership). so the empirical results in this research show that employee voice behavior is encouraged by both individual (thriving) and contextual (ethical leadership) factors. employees who experience thriving at work come up with innovative ideas which help them to voice their thoughts. additionally, ethical leadership sets an example for employees to follow ethical practices and raise voice against unethical actions. third, this study adds literature on employee well-being (van de voorde et al., 2011). existing research shows that speaking up improves employee’s performance and enhance their well-being, yet this assumption had received little empirical attention. this research empirically tested that raising voice may help employees to improve their well-being. 4.2. limitations and recommendations every empirical study that is conducted in non-contrived settings has its limitations. similarly, our study also lacks in certain areas. firstly, our data is primarily comprised of males and has a very limited representation of the females. therefore the results are somewhat business, management and education, 2019, 17(2): 194–217 211 ambiguous when generalized to both genders at large. similarly, there is a bulk of the sample that belongs to married people which again makes inferences with relation to demographics skeptical. although our study takes these demographics as control variables and establishes that they have no effect on dependent variable, generally voice behavior and well-being both could be possibly affected by gender and marital status. hence, we suggest that future scholars should consider samples that equally represent both genders and different marital status so that their effect on the study variables can also be seen. secondly, our sample is limited to the information technology industry and also specific to a metropolitan city like lahore. this also makes inferences difficult when explain the voice behavior in for example, lesser industrially developed cities within pakistan or in industries that are product-oriented instead of service oriented. hence, scholars should also investigate the difference in employee behavior regarding voice and well-being between product-oriented industries and service-oriented industries. thirdly, this empirical research is a single source as the data has been collected from the employees. we primarily considered employees’ perception about their leaders and related it to other outcomes. therefore, common method biases may have occurred between the constructs. however, on the basis of recommendations positied by p. m. podsakoff, mackenzie, lee, and n. p. podsakoff (2003), a time interval of two weeks was taken for independent variables (time 1) and the criterion variables (time 2). future researchers may utilize alternative data sourcing to reduce biasness errors. for example, self-assessment of ethical leadership can be investigated by the leaders. the fourth limitation is that this research is cross sectional. thus, causality among the study variables cannot be drawn. therefore, future studies may consider the causation among the study variables by conducting a longitudinal and experimental study. 4.3. practical implications the current study aimed to analyze work behavior of employees, the results of which are beneficial to scholars and practitioners alike. today’s work environment demands more innovative ideas and creativity to grow and overcome work problems. in this research, the outcomes of hypotheses testing shows that in situations where employees feel thriving under ethical leadership, the managers create certain norms and values which their sub-ordinates follow with free-will. this creates a secure work climate where employees feel free to voice their concerns and suggestions. this environment where managers are able to have positive verbal interactions with employees facilitates their well-being and makes them satisfied with their jobs. organizations mostly offer impressive benefits to motivate creative and innovative employee behavior which can help to overcome the shortcomings in the organization. this study suggests that such goal can also be achieved by encouraging an environment where employees experience thriving and under ethical leadership they feel secure to raise their voice to overcome the flaws in the organization. in such a scenario, the organizations should hire managers who have strong leadership qualities and also possess strong ethical values so that a healthy work climate may be formed. having strong ethical managers would not only encourage their voice behaviour, but also that of the employees and would subsequently lead to well-being of employees at large. 212 k. yousaf et al. impact of ethical leadership and thriving at work on psychological well-being... moreover, managers can improve their ethical practices in the light of the ethical leadership instrument. for example, “ethical leader listens to what employees have to say” and “sets an example of how to do things the right way in terms of ethics” may help managers to improve their ethical behavior and encourage employee voice behavior. conclusions this paper aimed at shedding light on one of the critical factors in the business world: voice behavior of employees. globally, every organization requires human resource in order to carry out its functions and achieve excellence in their performances. our study has contributed theoretically and practically by explaining that in order to achieve high levels of well-being in employees it is important that managers use ethical leadership skills and focus on thriving in their work environment. this combination leads to a positive work setting where management encourages employees to raise their 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(2007). work enrichment and employee voice in human resource managementperformance studies. the international journal of human resource management, 18(7), 1335-1372. https://doi.org/10.1080/09585190701394150 https://doi.org/10.1287/orsc.1050.0153 https://doi.org/10.4135/9781446212752.n6 https://doi.org/10.1037/a0025942 https://doi.org/10.1111/j.1468-2370.2011.00322.x https://doi.org/10.2307/256902 https://doi.org/10.1111/1467-6486.00384 https://doi.org/10.1177/0149206313506462 https://doi.org/10.1037/a0015848 https://doi.org/10.1002/job.2262 https://doi.org/10.1111/j.1468-2338.2007.00482.x https://doi.org/10.1080/09585190701394150 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: laura.gudelyte-zilinskiene@vilniustech.lt business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 1: 172–188 https://doi.org/10.3846/bmee.2022.16883 investigation of the feasibility of including different cryptocurrencies in the investment portfolio for its diversification lina juškaitė, laura gudelytė-žilinskienė * department of financial engineering, faculty of business management, vilnius gediminas technical university, saulėtekio al. 11, lt-10223, vilnius, lithuania received 10 march 2022; accepted 28 april 2022 abstract. purpose – the main aim of this article is to identify cryptocurrencies suitable for investment and portfolio diversification. research methodology  – the methodology of empirical research includes methods of scientific literature analysis, statistical data analysis, multicriteria evaluation, correlation analysis. findings – bitcoin is the leading cryptocurrency, but this result could have been due to an exceptionally high market capitalization. based on the results of the analysis, the inclusion of bitcoin, etherium and dogecoin in the investment portfolio of s&p500, euro stoxx 50, dax and cac 40 indexes could be considered. terra could be an interesting investment when considering the benefits of diversification. research limitations  – based on the results of the study, the inclusion of all studied cryptocurrencies in the investment portfolio could be considered in order to diversify the portfolio, taking into account their investment attractiveness. practical implications – cryptocurrencies attract investors not only because of the returns they receive, but also because of the absence of intermediaries, which allows them to reduce transaction costs. high returns are associated with high risks, so it is necessary to conduct as much research as possible to identify the benefits of cryptocurrencies and to find risk management strategies. one such benefit of cryptocurrencies highlighted in research is diversification. originality/value – the novelty of the study lies in evaluation of 10 selected cryptocurrencies according to different criteria using a multi-criteria valuation method to identify cryptocurrencies that are non-correlated or weakly correlated with traditional assets and the most suitable for investment and for portfolio diversification. keywords: diversification, cryptocurrencies, investment, traditional assets. jel classification: g11. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2022.16883 https://orcid.org/0000-0002-5942-9608 business, management and economics engineering, 2022, 20(1): 172–188 173 introduction cryptocurrencies are one of the alternative investments that have recently attracted both experienced and inexperienced investors for their returns as well as researchers (binda, 2020; corbet et al., 2018; demiralay & bayracı, 2021; goodell & goutte, 2021), who try to understand and explain the cryptocurrency market. although there are currently many differing views on whether cryptocurrencies can be considered a separate asset class and what their similarities are to stocks, bonds, or foreign currency. demiralay and bayracı (2021) note that cryptocurrencies are considered an alternative asset class, but very little known about the results of the cryptocurrency portfolio. in recent years, the rapidly evolving cryptocurrency market has attracted an increasing investor interest, not only in terms of potential returns, but also in terms of the absence of intermediaries, which allows for low transaction costs and sometimes avoids these costs altogether. the types of cryptocurrencies are endless: some exist from the beginning of their creation until now, others are created and disappear, others result from the diverges of blockchain. many investors tend to invest in cryptocurrencies, especially for investors with high risk tolerance (andrianto, 2017), so finding the right strategy is relevant for investors. cryptocurrencies are considered a new asset class because of the additional benefits they provide. one such benefit is diversification. research studies (inci & lagasse, 2019; lee et al., 2018; liew et  al., 2019) observe that cryptocurrencies are weakly correlated with traditional assets, and the possibility of using them to diversify an investment portfolio is being explored. however, despite the strong growth of the cryptocurrency market, research on the cryptocurrency diversification portfolio is limited (w. liu, 2019). the question of whether it is possible to diversify stocks with cryptocurrencies is unsolved (goodell & goutte, 2021). investing in cryptocurrency involves high risks due to unpredictable price changes and security. the prices of cryptocurrencies are difficult to define because the literature emphasizes that cryptocurrencies have no underlying assets, so their prices depend on investors’ expectations for the future. the risks posed by cryptocurrencies call for more in-depth research to find the most appropriate cryptocurrency investment strategy. properly assessing the diversification feature of cryptocurrencies, they could become a full and useful part of the investment portfolio in the future. it is important to note that the world is currently experiencing a health crisis that is affecting the financial markets. goodell and goutte (2021) argue that the covid-19 period is expected to change the dynamics of financial markets, so that even the topics explored in detail need to be updated, so it is crucial that researchers study cryptocurrency correlations, hedging, and diversification during this crisis. problem of the research. is it suitable to use cryptocurrency to invest in portfolio diversification? research objects. investment portfolio diversification in cryptocurrencies. aim of the article. to identify cryptocurrencies suitable for investment and portfolio diversification. 174 l. juškaitė, l. gudelytė-žilinskienė. investigation of the feasibility of including different... tasks of the research: 1. to analyze the theoretical aspects of investment portfolio diversification in cryptocurrencies; 2. to make the research methodology; 3. to study the suitability of different cryptocurrencies for portfolio diversification. research methods. scientific literature analysis, statistical data analysis, multicriteria evaluation, correlation analysis. 1. theoretical analysis of investment portfolio diversification in cryptocurrencies the financial sector is undergoing fundamental changes due to globalization processes, technologies and increasing social needs, along with the growing popularity of cryptocurrencies (binda, 2020). cvetkova (2018) identifies the cryptocurrency as the new product of historical development and progress that will become an integral part of a market economy in the near future. in many parts of the world, the question remains whether cryptocurrencies are money because they exist only in cyberspace, have no physical counterpart, and are based on computer code (bondarenko et  al., 2019). encrypted data cannot be copied, so it can be said that the cryptocurrency is protected against counterfeiting (bondarenko et al., 2019). the primary reason for creating bitcoin was the motivation to create digital cash: a payment system that would be similar to cash, incorporate the useful features of cash, and allow electronic transactions (berentsen & schär, 2018). bitcoin is generally considered to be the main decentralized digital currency (maleki et  al., 2020), which has become popular due to its proposed anonymity in transactions and independence from traditional financial service providers (david et al., 2021). inci and lagasse (2019) define cryptocurrency as online cash that can be considered as valuable digital information as long as no one else has access to value-added information, and its creation is based on the need for online cash and the pursuit of anonymity. a cryptocurrency can be defined as a virtual currency created to act as an exchange medium using cryptography and is based on electronic connection (i̇çellioǧlu & öner, 2019). binda (2020) writes that cryptocurrencies are a limited-circulation digital or virtual currency that is secured by cryptographic solutions, not controlled by central authorities, and protected from government interference and manipulation. according to saksonova and kuzmina-merlin (2019), tapscott and tapscott (2017), berentsen and schär (2018), inci and lagasse (2019), the following main features of cryptocurrencies can be distinguished: – decentralized – there is no central authority with the exclusive right to manage and supervise the accounts; – transaction privacy – users can choose to remain anonymous; – no guarantees – no conditions of protection and liability, and no insurance; – blockchain technology – transaction records are linked to each previous record; – use of nicknames – nicknames allow users to remain anonymous; – unregulated – no government or organization controls any cryptocurrency; – anonymous – an anonymous system of operations without bank accounts. business, management and economics engineering, 2022, 20(1): 172–188 175 the pursuit of anonymity in financial transactions has not led to very good associations, and such transactions are often associated with fraud or crime. currently, cryptocurrencies have left their dark side and become the object of research in asset and portfolio management (trimborn et  al., 2020). cryptocurrencies differ mainly in their value, transaction speed, usage and volatility (inci & lagasse, 2019). cryptocurrencies have become the subject of discussion on the internet and in the media, attracting the attention of scientists, investors, and the government (mohammed, 2018). cryptocurrencies have become a profitable object to invest and this has led to their development (bondarenko et al., 2019). cryptocurrencies are attractive to investors because of the benefits they provide, although the primary purpose of creating them was not to invest. according to inci and lagasse (2019), trimborn et al. (2020), mohammed (2018) can be identified the main benefits of investing in cryptocurrencies: – as a hedging instrument; – the advantage of diversification; – improves risk and return ratio; – high return on investment; – there are no fees that are normally charged in the presence of financial intermediaries. alternative investments are popular and used in portfolio management, including real estate, commodities, private equity funds, hedge funds due to lower correlation with traditional asset classes: stocks, bonds and cash equivalents for good portfolio diversification (lee et al., 2018). the scientific literature discusses whether cryptocurrencies could be one of the alternatives to improve portfolio risk management. although cryptocurrencies have huge market capitalization and investors’ willingness to invest, some important strategic issues still need to be solved that cryptocurrencies would play an important role in the financial world (mohammed, 2018). cryptocurrencies are receiving a lot of attention from investors and analysts as a new form of investment offering high returns, but can also lead to high losses (kyriazis et al., 2019). cryptocurrencies, as a form of investment, are preferred for resilience control and any intervention (kyriazis et al., 2019). investors in cryptocurrencies understand that such an investment involves high risk. although academic research shows the benefits of bitcoin for portfolio efficiency, investors are still skeptical about such an investment (inci & lagasse, 2019). according to inci and lagasse (2019), trimborn et al. (2020) the main risks of investing in cryptocurrencies are: – illiquidity; – thefts; – fraud; – ransomware attacks / hacking; – strict government regulation is possible; – price volatility; – operational risk. when including cryptocurrencies in a portfolio, it is necessary to pay attention to their low liquidity compared to traditional assets; if you want to include cryptocurrencies based on market capitalization and stocks in the same portfolio, over-weighting cryptocurrencies should be avoided (trimborn et al., 2020). the cryptocurrency market is highly volatile, so it is important for investors to understand the risk structure of cryptocurrency returns before investing and that the high volatility of the cryptocurrency market is based on investors 176 l. juškaitė, l. gudelytė-žilinskienė. investigation of the feasibility of including different... sentiment rather than on the chang of fundamental factors (mohammed, 2018). it is also important need to evaluate other factors: storage security, reporting, a decentralized and autonomous cryptocurrency management structure, the complexity of managing an unregulated system (mohammed, 2018). trimborn et  al. (2020) reveal that the inclusion of cryptocurrencies in a portfolio increases returns compared to portfolios that consist only of traditional assets and can certainly improve the risk and return ratio. although there is insufficient research, these studies reveal that cryptocurrencies have the advantage of diversification in the short term because they are separated from common financial markets (inci & lagasse, 2019). corbet et al. (2018) reveal the benefits of diversification provided by cryptocurrencies in the investment portfolio as they are decoupled from underlying assets, but notes the dependence of cryptocurrency market behavior on monetary policy and regulated arbitrage. cryptocurrencies may be a good choice for diversifying portfolio risk due to the weak correlation between cryptocurrencies and traditional assets, but it should be understood that cryptocurrencies are still in an experimental stage (lee et al., 2018) and the role of cryptocurrencies in future financial markets remains unclear (huynh et al., 2020). investors in cryptocurrencies need more information to be able to make sure they are investing properly and mitigating risk (david et al., 2021). cryptocurrencies have weak correlation with each other in terms of market capitalization and are unrelated to traditional assets, making them interesting for the diversification effect (trimborn et al., 2020). research related to investing in cryptocurrencies aims to determine whether cryptocurrencies can be used for investment, assessing their benefits and risks. the ratio of returns to risk, how they correlate with traditional investment assets, the benefits of risk diversification in the investment portfolio, the probability that cryptocurrencies will remain valid in the future, and the most suitable investment horizon, are assessed. the process of evaluating highly volatile cryptocurrencies is complex and depends on many parameters (kyriazis et al., 2019). investors and financial analysts are constantly looking for a simple and informative indicator to measure asset prices. recent efforts have focused on cryptocurrencies to discover how to price cryptocurrency assets in order not only to understand prices but also to suggest practical investment strategies (y. liu & zhang, 2021) the found optimal indicator should reflect the cryptocurrency market – it is overvalued or undervalued (y. liu & zhang, 2021). lee et al. (2018) reveal a very small correlation between the cryptocurrency index crix and traditional assets, on that basis cryptocurrencies are a good diversifier of traditional assets. brauneis and mestel (2019) note the high risk mitigation potential when using more than one cryptocurrency, this approach may attract investors to cryptocurrencies who are reluctant to take on too much risk inherent in the cryptocurrency market. bondar et  al. (2020) conducted a study on the efficiency of the use of cryptocurrencies as investment resources, hypothesizing that the inclusion of crix currency index components in the investment portfolio improves its quality, which has been confirmed. given the different characteristics of cryptocurrencies, investors can take advantage of the potential benefits of diversification (demiralay & bayracı, 2021). goodell and goutte (2021) point to the covid-19 period that affects financial markets, so even well researched topics should be updated to reflect how they have changed business, management and economics engineering, 2022, 20(1): 172–188 177 during this crisis. goodell and goutte (2021) studied cryptocurrencies: bitcoin, ethereum, litecoin and tether, and stock indices: swiss index, ibex 35, dax, cac 40, ftse 100, eurostoxx and s&p 500 and observed changes in the interaction of some cryptocurrencies due to covid-19, however, a small role for bitcoin, ethereum and litecoin was found in diversifying shares during the period before covid-19 and during covid-19 period. the possibility of diversifying the investment portfolio in different cryptocurrencies should be further and more explored, as there is still no consensus. also, no single model has been found and presented on how the benefits of diversification in the investment portfolio can be properly assessed. 2. research methodology the research methodology is based on the research methods described in the scientific literature. the aim of the research is to identify cryptocurrencies suitable for investment and portfolio diversification. the scheme of this research is shown in figure 1. calculations are performed with excel and spss programs. in the first stage of the research, a matrix of 10 cryptocurrencies and 6 evaluable criteria is formed, according to which the data ranking is performed. the daily returns of the selected 10 cryptocurrencies, which make up the b10 bita crypto 10 index, are calculated in order to further evaluate the cryptocurrencies according to the selected criteria. the first criterion chosen is average market capitalization, because according to saksonova and kuzmina-merlino (2019), the main economic indicators of cryptocurrencies are exchange rate and capitalization. saksonova and kuzmina-merlino (2019) note that the cryptocurrency market is still a small part of the total financial market, so the capitalization of the cryptocurrency market is a maximizing criterion in this assessment. the second criterion reflecting market liquidity is the average daily volume of cryptocurrencies. brauneis et  al. 1 stage. selection of cryptocurrencies data daily returns on cryptocurrencies are calculated. a matrix of 10 cryptocurrencies and 6 evaluable criteria is generated and used in stage 2 of the study. 2 stage. selection of the most attractive cryptocurrencies for investment a multicriteria evaluation method is chosen. ranking cryptocurrencies according to investment attractiveness by edas method. 3 stage. selection of the most suitable cryptocurrencies for diversification weekly returns on cryptocurrencies and stock indices are calculated. correlation analysis of cryptocurrencies and stock indices. figure 1. research scheme (source: compiled by the authors) 178 l. juškaitė, l. gudelytė-žilinskienė. investigation of the feasibility of including different... (2021) argue that the volume of cryptocurrencies is one of the factors strongly affecting the liquidity of cryptocurrencies. cryptocurrencies due to high liquidity – high volume is identified as an investment opportunity (bonneau et al., 2015), so the daily volume of a cryptocurrency is a maximizing criterion in this assessment. other criteria are chosen taking into account that the goal of the investment portfolio is to achieve the optimal combination of risk and return (saksonova & kuzmina-merlino, 2019). according to inci and lagasse (2019), cryptocurrencies are valued as a separate investment opportunity based on risk and return characteristics. thus, the remaining four criteria for the cryptocurrencies under research were selected: daily average return, daily maximum return, daily minimum return  – maximizing criteria, as investors seek the highest possible return, and risk reflecting daily return standard deviation – minimizing criteria because investors typically avoid risk. the cryptocurrency evaluation criteria are distributed equally in the matrix. based on inci and lagasse (2019), the following equation is used to calculate the daily returns on cryptocurrencies: ( ) ( )1ln lnt t tr p p −= − , (1) where: rt – daily return on the cryptocurrency; pt – cryptocurrency day closing price; pt–1 – the closing price of the cryptocurrency of the previous day. based on dasman (2021), the following equation is used to calculate the standard deviation of the daily return on cryptocurrencies: ( )2 1 1 1 n i i r r n = s = − − ∑ , (2) where: s – standard deviation (risk) of the cryptocurrency daily return; ri – daily return of the cryptocurrency; r – average daily return of the cryptocurrency; n – number of observations. in the second stage of the reseach, ranking using the edas (evaluation based on distance from average solution) method is performed (ghorabaee et  al., 2015). according to ghorabaee et al. (2015), this newly proposed assessment method is useful when conflicting criteria are used in the study. the edas method is useful in this research because cryptocurrencies have quite contradictory properties. investing in cryptocurrencies involves high profits and losses. high returns are always associated with high risk, and investors are also interested in other criteria for cryptocurrencies, which makes it quite difficult to optimally select cryptocurrencies for investment. this method is also more efficient compared to alternative multicriteria evaluation methods because it is related to the distance from the average solution (av) (ghorabaee et al., 2015). the edas evaluation method, based on a matrix of cryptocurrencies selected in the first step and their criteria, consists of eight main steps and the ranking in the last 9 steps. step 1. the average solution avj is sought according to the following equation (ghorabaee et al., 2015): 1 n ij i j x av n == ∑ , (3) where: avj – the average of the criteria; xij – primary evaluation; n – the number of primary evaluations. business, management and economics engineering, 2022, 20(1): 172–188 179 step 2. if criterion j is maximizing, the positive distance from the average pdaij is calculated by the following equation (ghorabaee et al., 2015): ( )( )max 0, ij j ij j x av pda av − = , (4) where: pdaij – positive distance from the average; xij – primary evaluation; avj – the average of the criteria. if criterion j is minimizing, then the positive distance from the average pdaij is calculated according to the following equation (ghorabaee et al., 2015): ( )( )max 0, j ij ij j av x pda av − = , (5) where: pdaij – positive distance from the average; xij – primary evaluation; avj – the average of the criteria. step 3. if criterion j is maximizing, the negative distance from the average ndaij is calculated by the following equation (ghorabaee et al., 2015): ( )( )max 0, j ij ij j av x nda av − = , (6) where: ndaij – negative distance from the average; xij – primary evaluation; avj – the average of the criteria. if criterion j is minimizing, then the negative distance from the average ndaij is calculated according to the following equation (ghorabaee et al., 2015): ( )( )max 0, ij j ij j x av nda av − = , (7) where: ndaij – negative distance from the average; xij – primary evaluation; avj – the average of the criteria. step 4. calculate the weighted pdaij sum spi according to the following equation (ghorabaee et al., 2015): 1 m i j ij j sp pda = = w ⋅∑ , (8) where: spi  – the weighted sum of the positive distances from the average; pdaij  – positive distance from the average; wj – criteria weights. step 5. calculate the weighted ndaij sum sni according to the following equation (ghorabaee et al., 2015): 1 m i j ij j sn nda = = w ⋅∑ , (9) where: sni – the weighted sum of the negative distances from the average; ndaij – negative distance from the average; wj – criteria weights. 180 l. juškaitė, l. gudelytė-žilinskienė. investigation of the feasibility of including different... step 6. the normalization of spi is performed according to the following equation (ghorabaee et al., 2015): ( )max i i i i sp nsp sp = , (10) where: nspi – the normalized weighted sum of the positive distances from the average; spi – the weighted sum of the positive distances from the average. step 7. the normalization of sni is performed according to the following equation (ghorabaee et al., 2015): ( ) 1 max i i i i sn nsn sn = − , (11) where: nspi – the normalized weighted sum of the negative distances from the average; sni – the weighted sum of the negative distances from the average. step 8. the score asi is calculated according to the following equation (ghorabaee et al., 2015): ( )1 2i i i as nsp nsn= + , (12) where: asi – evaluation score; nspi – the normalized weighted sum of the positive distances from the average; nsni  – the normalized weighted sum of the negative distances from the average. step 9. ranking is performed according to the evaluation score of asi. the higher the value of asi, the higher the rank of the evaluated cryptocurrencies. in the third stage of the study, a correlation analysis is performed. the correlation coefficient shows the strength of the linear dependence of the studied variables (čekanavičius & murauskas, 2004). according to schober and schwarte (2018), the pearson correlation coefficient is commonly used for generally normally distributed data. if the assumption of normality of the variables is incorrect or the data sample is less than 20 observations, the spearman correlation coefficient is applied (čekanavičius & murauskas, 2004). based on čekanavičius and murauskas (2001), the following equation is used to calculate the pearson correlation coefficient between two investment assets: ( ) ( )( ) ( ) ( ) ( ) ( )222 2 1 1 1 i j i j p i i j j n r r r r r n r r n r r − − =   − − − −     ∑ ∑ ∑ ∑ ∑ ∑ ∑ , (13) where: rp  – pearson correlation coefficient; ri and rj return on investment assets; n is the number of observations. the correlation is considered very strong when r is from 0.90 to 1; strong  – r from 0.70 to 0.89; medium strength – r from 0.40 to 0.69; weak – r from 0.10 to 0.39; very weak (insignificant) – r from 0.00 to 0.10 (schober & schwarte, 2018). the strength of the correlation is appropriate for the same negative estimates. the negative correlation coefficient shows the inverse dependence of the variables (čekanavičius & murauskas, 2004). based on business, management and economics engineering, 2022, 20(1): 172–188 181 čekanavičius and murauskas (2004), the following equation is used to calculate the spearman correlation coefficient between two investment assets: , 1 2 2 , 1 , 1 1 1 2 2 1 1 2 2 n ri rj i j s n n ri rj i j i j n n r r r n n r r = = = + +   − −      = + +    − −        ∑ ∑ ∑ , (14) where: rs – the spearman correlation coefficient; rri and rrj – rates of return on investment assets; n is the number of observations. the spearman correlation coefficient is the same pearson correlation coefficient is only calculated not for the values of the variables, but for their ranks (čekanavičius & murauskas, 2004). the statistical significance of this correlation coefficient needs to be determined. two hypotheses are used to test significance: h0 – correlation coefficient is zero; h1 – correlation coefficient is not zero (bilevičienė & jonušauskas, 2011). if the significance level p value is lower than the selected significance level, then the hypothesis h0 is rejected and the correlation is considered significant, if the p value is higher or the same as the significance level, then the correlation is insignificant (bilevičienė & jonušauskas, 2011). to determine whether the sample has a normal distribution, “it is possible to apply the criteria of kolmogorov-smirnov and shapiro-wilk (when data are less than 50)” (bilevičienė & jonušauskas, 2011, p. 93). if the observed significance level is lower than the significance level of 0.05, it can be concluded that the distribution is not normal (bilevičienė & jonušauskas, 2011). according to ankenbrand and bieri (2018), the weak correlation between cryptocurrencies and well-established asset classes promotes the potential for portfolio diversification, resulting in a more favorable risk and return ratio for such portfolios. the correlation of the selected 10 cryptocurrencies with the traditional asset – stock indices is studied. correlation analysis is performed by spss program. 3. research results in the first stage of reseach, ten leading cryptocurrencies are selected which are traded during 2021: bitcoin (btc), ethereum (eth), cardano (ada), binance coin (bnb), dogecoin (doge), litecoin (ltc), chainlink (link), bitcoin cash (bch), terra (luna), xrp (xrp). these cryptocurrencies are included in the b10 bita crypto 10 index (bita, n.d.). criteria with equal weights are selected to evaluate cryptocurrencies as an investment vehicle: average market capitalization (max), average daily volume of cryptocurrencies (max), daily average return (max), daily maximum return (max), daily minimum return (max) and daily returns standard deviation (min). the resulting matrix of cryptocurrencies and criteria is presented in table 1. 182 l. juškaitė, l. gudelytė-žilinskienė. investigation of the feasibility of including different... table  1. cryptocurrencies and criteria matrix (source: compiled by the authors based on coinmarketcap, n.d.) 2021 average market capitalization (market cap) $ average volume (24 h) $ daily average return daily maximum return daily minimum return daily returns standard deviation max max max max max min weights 0.17 0.17 0.17 0.17 0.17 0.17 bitcoin 889783910133 47155742196 0.00125 0.17182 –0.14811 0.04210 ethereum 325038670844 27280819104 0.00444 0.23070 –0.31746 0.05623 cardano 48422576869 4216065822 0.00553 0.27944 –0.30111 0.06689 binance coin 61106456287 2851188715 0.00715 0.52924 –0.40443 0.07320 dogecoin 26745065748 4142663711 0.00934 1.51621 –0.51493 0.13251 litecoin 12499754980 4349674456 0.00041 0.24841 –0.44119 0.06275 chainlink 11589439351 2241870849 0.00138 0.27562 –0.46602 0.07426 bitcoin cash 11383281686 3727390027 0.00063 0.42082 –0.43461 0.06870 terra 9407722157 821744133 0.01341 0.64099 –0.48774 0.10125 xrp 39640149532 6086639830 0.00344 0.44461 –0.39608 0.07708 in the second stage of the study, ranking using the edas method is performed. in the first step of this method, the average solution avj according to eq. (3) is calculated. the calculated values are given in table 2. table 2. avj values (source: compiled by the authors) 2021 average market capitalization (market cap) $ average volume (24 h) $ daily average return daily maximum return daily minimum return daily returns standard deviation avj 143561702759 10287379884 0.00470 0.47579 –0.39117 0.07550 in the second step, for the maximizing criteria, the positive distance from the average pdaij is calculated according to eq. (4), for the minimizing criteria, the positive distance from the average pdaij is calculated according to eq. (5). the calculated values are given in table 3. in the third step, for the maximizing criteria, the negative distance from the average ndaij is calculated according to eq. (6), for the minimizing criteria, the negative distance from the average ndaij is calculated according to eq. (7). the calculated values are given in table 4. business, management and economics engineering, 2022, 20(1): 172–188 183 table 3. pdaij (source: compiled by the authors) 2021 average market capitalization (market cap) $ average volume (24 h) $ daily average return daily maximum return daily minimum return daily returns standard deviation max max max max max min weights 0.17 0.17 0.17 0.17 0.17 0.17 bitcoin 5.1979 3.5838 0.0000 0.0000 –0.6214 0.4424 ethereum 1.2641 1.6519 0.0000 0.0000 –0.1884 0.2552 cardano 0.0000 0.0000 0.1761 0.0000 –0.2302 0.1141 binance coin 0.0000 0.0000 0.5218 0.1124 0.0000 0.0304 dogecoin 0.0000 0.0000 0.9887 2.1867 0.0000 0.0000 litecoin 0.0000 0.0000 0.0000 0.0000 0.0000 0.1688 chainlink 0,0000 0.0000 0,0000 0.0000 0.0000 0.0163 bitcoin cash 0.0000 0.0000 0.0000 0.0000 0.0000 0.0900 terra 0.0000 0.0000 1.8535 0.3472 0.0000 0.0000 xrp 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 table 4. ndaij (source: compiled by the authors) 2021 average market capitalization (market cap) $ average volume (24 h) $ daily average return daily maximum return daily minimum return daily returns standard deviation max max max max max min weights 0.17 0.17 0.17 0.17 0.17 0.17 bitcoin 0.0000 0.0000 0.7338 0.6389 0.0000 0.0000 ethereum 0.0000 0.0000 0.0540 0.5151 0.0000 0.0000 cardano 0.6627 0.5902 0.0000 0.4127 0.0000 0.0000 binance coin 0.5744 0.7228 0.0000 0.0000 –0.0339 0.0000 dogecoin 0.8137 0.5973 0.0000 0.0000 –0.3164 0.7552 litecoin 0.9129 0.5772 0.9129 0.4779 –0.1279 0.0000 chainlink 0.9193 0.7821 0.7070 0.4207 –0.1913 0.0000 bitcoin cash 0.9207 0.6377 0.8652 0.1155 –0.1111 0.0000 terra 0.9345 0.9201 0.0000 0.0000 –0.2469 0.3411 xrp 0.7239 0.4083 0.2672 0.0655 –0.0125 0.0210 in the fourth step, the weighted sum of pdaij  – spi is calculated according to eq. (8). in the fifth step, the weighted sum of ndaij – sni is calculated according to eq. (9). in the sixth step, normalization of spi is performed according to formula 10 to obtain nspi. in the seventh step, normalization of sni is performed according to eq. (11) to obtain nsni. in the eighth step, the evaluation score asi is calculated according to eq. (12). in the ninth step, the 184 l. juškaitė, l. gudelytė-žilinskienė. investigation of the feasibility of including different... ranking according to the evaluation score of asi is performed, the higher the value of asi the higher the ranking. the results are shown in table 5. table 5. cryptocurrencies ranking (source: compiled by the authors) 2021 spi sni nspi nsni asi ranking bitcoin 1.4338 0.2288 1.0000 0.5014 0.7507 1 ethereum 0.4971 0.0948 0.3467 0.7933 0.5700 2 cardano 0.0100 0.2776 0.0070 0.3950 0.2010 7 binance coin 0.1108 0.2105 0.0773 0.5411 0.3092 4 dogecoin 0.5292 0.3083 0.3691 0.3281 0.3486 3 litecoin 0.0281 0.4588 0.0196 0.0000 0.0098 10 chainlink 0.0027 0.4396 0.0019 0.0419 0.0219 9 bitcoin cash 0.0150 0.4047 0.0105 0.1180 0.0642 8 terra 0.3668 0.3248 0.2558 0.2921 0.2740 5 xrp 0.0000 0.2456 0.0000 0.4648 0.2324 6 ranking using the edas method showed that the leading cryptocurrency according to 2021 data is bitcoin. this result only confirms that investor interest in bitcoin remains strong. this result may have led to bitcoin to have the highest average market capitalization in 2021. bitcoin accounted for 70% of the total cryptocurrency market on january 1, 2021 (coinmarketcap, n.d.). in terms of average volume, which shows cryptocurrency liquidity, bitcoin is also first, although in terms of average daily return of 0.13%, bitcoin is in eighth place, but it is important to note that the risk factor  – the daily returns standard deviation was the smallest of all 10 cryptocurrencies  – 4.21% in 2021. in second place  – ethereum. this may have led, that this cryptocurrency is second only to bitcoin in terms of market capitalization. the ranking results obtained only confirm that these cryptocurrencies can be found in the first and second place in the cryptocurrency indices. in third place – dogecoin. this result may have been due to the observed higher average return on this cryptocurrency than on the remaining cryptocurrencies, but it is important to note that this cryptocurrency had the highest risk. in the third stage of the research, a correlation analysis of the selected cryptocurrencies is performed. the correlation of 10 cryptocurrencies with traditional assets  – stock indices  – is investigated. the american stock market is represented by the s&p 500 index, the european stock market by euro stoxx 50, the german stock market by dax index, the french stock market by cac 40 index (yahoo finance, n.d.). cryptocurrencies are traded daily but stocks are traded only on work days, so it was chosen to assess the correlation between the weekly returns of cryptocurrencies and stocks. weekly returns are calculated according to formula 1: rt – weekly return; pt – weekly closing price; p(t–1) is the closing price of the previous week. the weekly closing prices of cryptocurrencies and stock indices are obtained from yahoo finance (n.d.). business, management and economics engineering, 2022, 20(1): 172–188 185 table 6. correlation (source: compiled by the authors) 2021 s&p 500 euro stoxx 50 dax cac 40 bitcoin 0.266 0.293* 0.157 0.349* ethereum 0.300* 0.156 0.088 0.252 cardano 0.021 0.093 0.024 0.132 binance coin 0.249 0.262 0.123 0.363** dogecoin 0.101 0.151 0.181 0.148 litecoin 0.183 0.214 0.091 0.294* chainlink 0.143 0.169 0.078 0.251 bitcoin cash 0.187 0.157 0,060 0.235 terra –0.039 0.074 –0.031 0.100 xrp 0.238 0.198 0.186 0.227 note: ** – the correlation is statistically significant at the 0.01 level; * – the correlation is statistically significant at the 0.05 level. the kolmogorov-smirnov test (52 observations) was performed to determine which correlation coefficient to use. the results of the normal distribution test showed that the distribution of bitcoin, cardano, litecoin, chainlink, bitcoin cash, terra, s&p 500 index and dax index was normal. based on these results, a pearson correlation coefficient can be applied between these assets. ethereum, binance coin, dogecoin, xrp, euro stoxx 50, and cac 40 index normality test results indicated that the distribution was not normal. the spearman correlation coefficient is used to assess the correlation with these assets. the correlation results are presented in table 6. correlation analysis showed that all the cryptocurrencies studied could be used to diversify the investment portfolio, as they had a very weak or weak and in most cases statistically insignificant correlation with traditional assets. terra had a very weak and statistically insignificant correlation with all stock indices under study. the inclusion of non-correlated assets in the investment portfolio leads to better diversification, a better combination of expected returns and risk, and more efficient management of the entire portfolio. the analysis showed that the returns on cryptocurrencies are not related to the stock indices under study, so it is feasibility to include all the cryptocurrencies under study in the investment portfolio for diversification. conclusions based on the literature review, it can be stated that cryptocurrencies are still controversial. although cryptocurrencies are viewed negatively because of the risks they pose, they are increasingly being considered for the benefits of diversifying their investment portfolios. when considering a cryptocurrency as an investment and portfolio diversification tool, it is important to note that investors are not insured in any way in the event of a loss, which would result in a lack of government intervention and regulation at this point. more importantly, however, government intervention should be very careful and prudent so as not 186 l. juškaitė, l. gudelytė-žilinskienė. investigation of the feasibility of including different... to cause major illiquidity problems and destroy the cryptocurrencies as a new investment vehicle, or worse, to disrupt this market. the application of the edas method in this study allows for the optimal selection of the most attractive cryptocurrencies for investment. due to the contradictory characteristics of cryptocurrencies and the goals pursued by investors, such as high return on investment, low risk and liquidity, this is usually quite difficult to do. the application of correlation analysis provides an opportunity to select cryptocurrencies suitable for portfolio diversification. cryptocurrencies valued in these two aspects could be considered for inclusion in the investment portfolio. a multicriteria assessment revealed that bitcoin is, as might be expected, the leading cryptocurrency, but this result could have been due to an exceptionally high market capitalization that would be difficult to compare with other cryptocurrencies. assessing the correlation of all studied cryptocurrencies confirms the unique feature of cryptocurrencies highlighted in studies – a weak or very weak correlation with traditional assets. all 10 cryptocurrencies had a very weak or weak correlation with all stock indices under study. based on the results of this study, the inclusion of all studied cryptocurrencies in the investment portfolio could be considered for diversification, but it is necessary to take into account the ranking results obtained and select from the most attractive for investment. based on the results of the ranking and correlation analysis, the inclusion of bitcoin, etherium and dogecoin in the investment portfolio based on s&p500, euro stoxx 50, dax and cac 40 could be considered. terra could be an interesting investment when considering the benefits of diversification, although this cryptocurrency ranks fifth, but has a very weak and insignificant relationship with all the stock indices analyzed. references andrianto, y. 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(n.d.). stock market live, quotes, business & finance news. retrieved january 16, 2022, from https://finance.yahoo.com/ https://doi.org/ 10.2139/ssrn.3657986 https://doi.org/10.24200/sci.2020.55034.4040 https://doi.org/10.2139/ssrn.3144187 https://doi.org/10.21638/spbu05.2019.205 https://doi.org/10.1213/ane.0000000000002864 https://capital.report/resources/whitepapers/40fc8a6a-cdbd-47e6-83f6-74e2a9d36ccc_finance_topic2_source2.pdf https://capital.report/resources/whitepapers/40fc8a6a-cdbd-47e6-83f6-74e2a9d36ccc_finance_topic2_source2.pdf https://doi.org/10.1093/jjfinec/nbz016 https://finance.yahoo.com/ copyright © 2020 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: za.nejjari@gmail.com the role of ethics, trust, and shared values in the creation of loyalty: empirical evidence from the moroccan university™ zakaria nejjari *, hanane aamoum national school of commerce and management, hassan 2 university, casablanca, morocco received 07 march 2020; accepted 26 march 2020 abstract. purpose  – this research discussed ethics, shared values, university image, and trust as factors of student loyalty. this investigation is performed to discover aspects that influence loyalty. student loyalty factors were previously researched, but the bulk of the research covered only major loyalty factors such as shared values, trust and university image, but overlooked university ethics as a student loyalty determinant. research methodology – this study is fundamentally a quantitative study using the methodology of survey research. the information is evaluated using amos by means of exploratory factor analysis and structural equation modelling (sem). findings – the results show how the image of the university, the ethics and the shared values of the graduates positively influence the trust, which affects loyalty. research limitations – regarding the limitations of the study which also reconfigure lines of future research, it is important to note, in the first place, the geographical restriction of the population under study to three moroccan universities. practical implications – educational providers can use the findings to know what increase the loyalty and allocate resources to improve the determinants that affect the trust of the students, thus increasing the allegiance of the learners. originality/value – this research provides innovative knowledge regarding the maintenance of the university’s relations with its graduates. keywords: student loyalty, ethics, trust, and shared values, moroccan university. jel classification: i23, i29, m10, m30. business, management and education issn 2029-7491 / eissn 2029-6169 2020 volume 18 issue 1: 106–126 https://doi.org/10.3846/bme.2020.12237 introduction higher education is vital to a country’s growth (annamdevula & bellamkonda, 2016). offering high-quality schooling to students is desirable. higher education establishments are fronting severe struggle in the present situation to fascinate and maintain fresh students. https://orcid.org/0000-0002-6075-0140 http://0000-0003-3330-0264 https://papers.ssrn.com/sol3/jeljour_results.cfm?code=m10 https://papers.ssrn.com/sol3/jeljour_results.cfm?code=m30 https://doi.org/10.3846/bme.2020.12237 business, management and education, 2020, 18(1): 106–126 107 it is crucial for policymakers to devise methods to boost loyalty to students (austin & pervaiz, 2017). loyalty is not limited to students staying at university but remains after graduation (ribes-giner & rillo, 2016). education is based on individuals. students are clients of educational organizations (t. finney & z. finney, 2010). in order to improve loyalty, it is essential to build relationships with students. the employment of marketing ideas in an educational environment is relatively small, and there is a minimal study in an educational framework from the relationship view (henning-thurau et al., 2001). consequently, there is a necessity for studies in the context of education from the view of relationships. this research aims at filling gaps in understanding and suggest a detailed model that depicts significant loyalty factors and their elaborate attachments. the purpose of this research is to propose university leadership measures to improve student loyalty. also, the study tries to assess the applicability within the education sector of marketing concepts. researchers have offered relatively limited formal investigation on the operators of loyalty in universities and higher education institutions (brown & mazzarol, 2009). the study conducted by yavas and shemwell (1996), henning-thurau et  al. (2001), rojas-méndez, vásquez, and kara (2009) used trust as a loyalty antecedent. s. wong and k. wong (2011) and martensen et  al. (1999) adopted shared value and trust as loyalty antecedents. the research performed by haynes (1998); coplan (2001) showed variable ethics as a loyalty antecedent. our design seeks to clarify the essential antecedents of loyalty that capture a set of variables that have never been combined in the preceding analysis. these variables are ethics, shared values, university image and trust. our specific research objectives are as follows: first, this research looks at the direct impact on student loyalty of ethics, shared values, image and trust. second, the elements that affect loyalty in the context of education are examined. knowing what variables lead to student loyalty is essential to university leadership. the loyalty backgrounds will lead university management to develop strategies aimed at student holding trust (douglas et  al., 2006), institution image (nguyen & leblanc, 2001), shared values and ethics are the primary determinants of student loyalty. this empirical research is carried out in morocco within the framework of height education. in this context, a model of ethics-image-trust-loyalty is analyzed, which includes key variables such as antecedents: ethics, image, shared values and trust . the proposed model provides variables little studied in the education field and aims to examine the role of ethics, shared values, university image, trust and loyalty in the graduate-university relationship, its possible antecedents, and its consequences. we consider it essential for the management of universities to answer the following questions: does loyalty in the institution continue to exist once the students graduate from it? would it be important and beneficial for the university to maintain it? what variables affect it and what consequences can it bring? besides the explanation presented above for this study, a few peculiarities of moroccan education have been established. the headship of moroccan universities barely maintains a formal connection with their students, unlike western countries. in distinction, students in the u.s. automatically become members of the university (hoffmann & müller, 2008), whereas graduate students are given membership in germany and russia (iskhakova et al., 2016). given the minimal tendency of moroccan universities to retain a long-lasting connection with their students, it is necessary to figure out the amount of loyalty that the graduate 108 z. nejjari, h. aamoum. the role of ethics, trust, and shared values in the creation of loyalty... feels for their universities so that university leadership can review the orthodox form of terminating their connection with students as quickly as they graduate. subsequently, the research methodology and the hypothesis test based on an empirical study of a quantitative nature are presented, with a random sample of 383 graduates from 3 moroccan public universities, using the structural equations modelling as a method of analysis. finally, results, conclusions and future lines of research are presented. 1. conceptual framework and hypothesis formulation the main benefits of building strong relationships and collaboration between organizations and their stakeholders are the basis of relationship marketing. the commitment theory of the relational marketing approach (morgan & hunt, 1994) propose trust as an essential element in the context of services, given the characteristics of their intangibility and heterogeneity (philbin, 2008). it also raises the fact that through trust, lasting relationships are achieved, which results in long-term commitment and loyalty. this theory states that, when both parties have confidence and are engaged in a relationship, it is worthwhile to make the necessary efforts so that it lasts over time, obtaining more excellent value for all parties. 1.1. the role of trust in the context of higher education trust is an issue that has been arousing great interest in the academic community in different fields such as psychology, sociology, economics, administration and marketing (delgado & munuera, 2005) also in traditional banking (skvarciany & jurevičienė, 2017), trust in humanai interactions (ferrario et al., 2019) as well as risk-taking in the banking industry (kanagaretnam et  al., 2019). falahat et  al. (2019) confirmed that one of the major concerns for the successful proliferation of e-commerce is the issue of consumers’ trust in internet vendors. trust is considered a strategic action in the field of marketing and an essential ingredient in the success of relationships. in this sense, trust is recognized as a determining factor in the success of long-term relationships and is considered as a key mediator of exchanges (morgan & hunt, 1994; delgado & munuera, 2005). the study of trust in the field of services has had a long history. there is a considerable number of research around this concept that proposes this variable as a key element for maintaining relationships over time (parasuraman et al.1985; morgan & hunt, 1994; sheth & parvatiyar, 1995). the majority of the studies have focused on lucrative contexts, especially in specific areas such as financial (flavian et  al. 2005; pizzutti & von der heyde, 2008; aminet  al., 2013); online environments (mukherjee & nath, 2007; aldás-manzano et al., 2009); agrifood sector (delgado & munuera, 2005; espejel et  al., 2011) and tourism (suárez et  al., 2007; lin & lu, 2010). there are few investigations that have approached the study of trust in the nonprofit field (warkentin et  al., 2002). specifically, in higher education (dalati & alchach, 2018), the studies by ghosh, whipple, and bryan (2001), henning-thurau et al. (2001), adidam, bingi and sindhav (2004), carvalho and mota (2010), s. wong and k. wong (2011), frasquet et al. (2012) and hoffmann, gattermann, simões and kleinowski (2012), who have https://www.cambridge.org/core/search?filters%5bauthorterms%5d=kiridaran%20kanagaretnam&eventcode=se-au https://www.cambridge.org/core/search?filters%5bauthorterms%5d=kiridaran%20kanagaretnam&eventcode=se-au business, management and education, 2020, 18(1): 106–126 109 adapted morgan-hunt’s trust-commitment latency (1994) to the educational context to analyze student-university and university-business interaction. despite its importance, and graduates being a key stakeholder for educational institutions, no studies have been found that support the role of trust in the relationship between the employees and their institution (t. finney & z. finney, 2010; chen et al. 2016). in the educational context, and following the definition of morgan and hunt (1994), students can rely on the honesty and benevolence of institutions of higher education. this trust will be based on their personal experiences (service meeting) with the members of the university community (henning-thurau et  al., 2001; s.  wong & k.  wong, 2011; hartono et al., 2019) and with their perception of it. ghosh et al. (2001) define trust as the degree in which students feel safe and have faith that the educational institution seeks their benefit and will help them achieve their learning and career goals. justified the relevance of the confidence in this scene-river, in order to generate a first conceptual framework, a model of relations between some of the most significant variables that influence as antecedents or consequences of the graduate’s confidence towards its institution is proposed (figure 1). 1.2. the role of ethics policy and shared values in the perceived image of the university ethics has become a notably argued subject. therefore, ethics in university constitutes a crucial feature of education nowadays during which students should be acquainted. this should even be reconciled with the growing attention on business social responsibility equally within the personal and public sector. ethics may be outlined as “inquiry into the character and grounds of ethicality wherever the term morality is taken to mean moral judgments, standards and rules of conduct” (hunt & vitell, 1986). a university is one organization among many that impact students’ lives. it offers expertise late in youth once thoughts, morals and values area unit a lot of advanced and students less receptive adult instruction and approval than in earlier years. it competes with television, motion pictures, and the tumult of the external world replete with disgraces and lurid disclosures. with its commitment to intellectual freedom and selection, a university even lacks the management to bring a reliable, synchronized influence up-to-date on those that live and work at intervals its walls. for varied students, its toil to speak on ethical interrogations lost amid the interruptions of the supplementary activities that seal the everyday field. universities play a significant role in figure 1. proposed cenceptual model 110 z. nejjari, h. aamoum. the role of ethics, trust, and shared values in the creation of loyalty... effecting amendment in civilization. ethical, ethical and skilled values of honesty and social responsibility can’t be separated from the context during which they’re exercised. consequently, students, as forthcoming professionals, will afford to neglect their civic, moral and social responsibilities that area unit basic to their roles as representatives of the social amendment. this can’t be all over-stressed within the context of minor developing nations wherever resources area unit rare relative to more prominent industrialized countries. students’ data at this era of their lives ought to impact on their actual manner within the world of labour. as student’s pursuit to specific their moral responsibilities, the university will play a vital role. its helpfulness comes partially from the capability to impart superior respect for facts and more substantial capacity to reason with wisdom regarding difficult issues. similarly, valuable is its diverse community occupied by students and school with several modified backgrounds and opinions. such clarifies tolerance, respect for different values, an acknowledgement of the social difficulties. in so doing, it makes students well for the physical world. it aids a perceptive individual to get an ethical understanding way comfy and a lot of decisively fastened within the intricacies of up to date life than humbler dogmas cultivated in additional substantial, a lot of judiciously controlled environments. universities should be the last establishments to discourage a belief within the price of rational argument. values are crucial to establishing organizational culture (enz, 1988; weiner, 1988). several authors have indicated the influence of shared values on some elements of user brand perception (eisingerich & rubera, 2010; sichtmann & diamantopoulos, 2013; brecic et  al., 2013). frankel, schechtman, and koenigs (2006) operated a regulated set of values to compare images of optimal leadership between two divisions of the education industry: independent elementary schools and colleges/research universities in the usa and canada. they discovered that the ideal higher education institution higher education ideal contained more influential aspects of collaborative work and shared decision-making by faculty. diverse investigators have noticed that students who shared objectives, models, codes of conduct, learning approaches, and assessments with their educational institution were more expected to engage to a relationship with this institution (holdford & white, 1997; adidam et al., 2004). however, the university aims to supply the utmost quality study. at the guts of this can be the most principle that rules all analysis involving human members, personal knowledge and personal matter: respect for the contributors’ welfare and rights. naturally, students do research or courses with ethics element, ought to act ethically. however, analysis of the impact of educational majors on students’ moral intentions has been indecisive. giving to beltramini et al. (1984), the tutorial majors of scholars meaningfully affected on their moral conclusions and indirectly impact their deciding. just as each person has values, organizations meet criteria with which they will project how to work and identify with their environment. it also makes them universal for being transmitted to all who integrate and relate to it. the importance of the values is that they become a motivating element, define the fundamental and definitive nature of the organization and create a sense of identity of the staff with the organization (blanchard & o’connor, 1997). business, management and education, 2020, 18(1): 106–126 111 several authors have pointed out the importance of the shared values of employees in aspects of consumer behaviour (maxham & netemeyer, 2003) and, in particular, that of shared values of the consumer and various elements of brand perception (eisingerich & rubera, 2010; sichtmann & diamantopoulos, 2013; brecic et al., 2013). in this sense, and given the emptiness of studies in the field of higher education and explicitly concerning graduates with the university, the following hypothesis is proposed: h1. the shared values of graduates with the university positively influence the perceived image. h2. ethics of the university positively influence the perceived image. 1.3. the image of the university, ethics, and shared values as a background of trust the image of an organization plays a vital role in contexts in which it is difficult to differentiate products or services based on tangible quality characteristics (mudambi et al., 1997). an image is a set of adjectives notes spontaneously associated with a given stimulus, which has previously triggered in individuals a series of associations that form a set of knowledge called beliefs or stereotypes. it is the sum of beliefs, ideas and impressions that a person has about an object (kotler & fox, 1995). the perceived image of higher education institutions has a critical role in the attitudes of the public of that institution towards it (landrum et  al., 1998) as well as in the consequences that derive from this perception (cervera et al., 2012). institutions need to maintain or develop a distinctive image in order to create a competitive advantage in an increasingly globalized market (paramewaran & glowacka, 1995). the different publics of the universities draw conclusions about the overall image of an institution from the impressions they have of their strengths and weaknesses, derived from their experiences (ivy, 2001). the image, therefore, is an idea, concept or attitude that is formed because of the interpretation of all the information that comes to the individual about something or someone. although at first it was believed that the image was a “product” of the organization, which had to be transmitted to the public, research in the field of perception and communication led to the modification of this conception. audiences are not passive subjects, but “creative subjects”; the image of the institution is generated in public, it is the result of the interpretation that they make of the information or disinformation about the organization (kazoleas et al., 2001). smeltzer (1997) states that trust in a relationship could be influenced by the perceived image of the organization among its stakeholders. singh and sirdeshmukh (2000) consider that trust is generated after the interactions that interest groups have with the organization. according to identity theory, an image can translate into trust through the self-checking mechanism (burke & stets, 1999). trust is formed based on the judgment of what the organization communicates and does. selnes (1998) points out that trust is strengthened when a buyer perceives the positive qualities of the organization. in fact, the notoriety of the name of the organization can positively influence trust, since it contributes to strengthening its image and creating security in the mind of the consumer (sánchez et al., 1999). authors in the context of service companies have confirmed looking the image as one of the variables that most influences trust (ball et  al., 2004; flavian et  al., 2006; mukherjee & nath, 2007; lin & lu, 2010; amin et al., 2013; upamannyu et al., 2015). 112 z. nejjari, h. aamoum. the role of ethics, trust, and shared values in the creation of loyalty... from these findings, and given the little empirical evidence that exists between image and trust in the field of graduate-university relationship, the first hypothesis is formulated: h3. the image of the university perceived by the graduates positively influences their trust towards the institution. if we chief in ways that trust and ethics are dependable, we satisfy a significant part of our obligation as ethical managers and leaders. when it derives to leading ethically, trust is not a nice-to-have; it is a “must-have”.  if we lead ethically, that lets individuals recognize they can count on us, and being able to count on us builds trust with entities and within the group (fisher thornton, 2014). ethics and trust act in a cycle. like the respiratory system and the heart of the institution. if one bomb, the other follows. keeping them in decent form  needs continuous care and regular exercise. shared values, on the other hand, is another variable that is also proposed as a background of trust and is defined by morgan and hunt (1994) as the degree in which two parts of a relationship have common beliefs about what behaviours, goals and policies are necessary, appropriate and correct, and which are not. kashyap and sivadas (2012) and s. wong and k. wong (2011) confirm the internal nature of this variable, which is part of the behaviour of individuals. applied to the university context, graduates share values with the educational institution when they perceive that the university where they studied has values similar to theirs. holdford and white (1997) and adidam et al. (2004) found that students who shared goals, ideals and codes of ethics with their institution were more likely to have a more intense relationship with it. due to the lack of previous research in this regard in the university context, it is considered of great interest to deepen this line. several studies have allowed us to affirm that the way in which one’s own organizational identity is perceived (the evaluation made of it, its image and, more transparently, the values, beliefs and character of an organization) will influence the levels of trust towards the organization (morgan & hunt, 1994; holdford & white, 1997; adidam et al., 2004; s. wong & k. wong, 2011; hartono et al., 2019). sharing values facilitates the achievement of common objectives, reduces interpersonal barriers and, consequently, generates greater confidence (doney & cannon, 1997; k. s. coulter & r. a. coulter, 2002; alosaimi, 2016). this leads to the third hypothesis: h4. the shared values of graduates with the university positively influence the levels of trust towards the institution. h5. the ethics of the university positively influence the levels of trust towards the institution. 1.4. loyalty as consequences of trust, ethics, and shared value in the graduateuniversity relationship over the past few decades, a reasonable number of companies have realized that profits were based on something that went far beyond selling products or services; it was necessary to invest in building brands and, consequently, in a deeper relationship with their audience, based on solid values such as ethics. business, management and education, 2020, 18(1): 106–126 113 for strieder (2000), ethics contemplate social responsibility; therefore, it is essential for organizations to reflect on how their actions can positively or negatively influence society and the environment, especially as consumers today seek to buy from companies that are socially engaged. ethics arise when a man begins to live in society. thus, it is essential in ethical reflection that companies think about how their actions can contribute to the wellbeing of society. according to tonti-filippini (2012), ethics refers to man’s way of being or his character. ethics is directly linked to philosophy, as it aims to reflect on human existence and defines a parameter of man’s ideal behaviour in society. the author also states that reflecting on ethics leads the individual to want to do good and respect others, exercising patience and tolerance in the face of others’ weaknesses. unlike morals, ethics is unchanging and is the determination of what is good, right and just. morality, on the other hand, changes over time and adapts to the culture of a particular group, which may be a religious, political, tribe and other. the moral customs established by one of these groups are not universal, as only their members follow them. according to pinheiro de lima, gouvea da costa, and faria (2010), we deal daily with values that money cannot buy: ethical and moral values. thus, ethics is present at all times in our lives, and living in society is a challenge. the author states that ethics can be transmitted, influenced and constructed through family teachings, at school or with friends. the ethical formation can also come through time, experience, living with different people and other knowledge, and it is possible to look at the world with other eyes. we investigate another antecedent of loyalty: shared values. this variable has long been viewed as a vital component in strengthening buyer-seller relationships (wilson, 1995; macmillan et al., 2005; heffernan et al., 2008). the shared values concept can be described as “the extent to which partners have beliefs in common to what behaviours, goals, and policies are important or unimportant, appropriate or inappropriate, and right or wrong” (morgan & hunt 1994, p. 25). taleghani, gilaninia, and mousavian (2011) proved that shared values could be considered an antecedent of loyalty. in short, we consider it of interest to determine the explanatory power of the ethics and the shared value of university in the context of higher education through the following hypothesis: h6. the shared value of graduates with the university positively influences loyalty towards it. h7. the ethics of the university positively influences loyalty towards it. the different conceptualizations about consumer loyalty have something in common: they refer to the consumer’s relationship with a specific object over time, be it the seller, brand, retailer or service provider (söderlund, 2006). in this sense, loyalty implies a certain level of continuity in the consumer’s relationship with that object and in the way that relationship occurs. the most widespread extension of this concept  – beyond the mere repetition of purchase  – is that which defends the intentional and deterministic nature of loyalty and conceives it as a psychological or emotional link of the consumer towards a product, service, brand or organization, therefore representing the explicit or implicit promise to continue with the choice of said object (delgado, 2004). 114 z. nejjari, h. aamoum. the role of ethics, trust, and shared values in the creation of loyalty... the current characteristics of universities, the increasing competition, their internationalization, the increase in the drop-out rate of the studies and the bologna declaration (1999) among other factors, justify the importance of analyzing loyalty in this context (henning-thurau et al., 2001; alves & raposo, 2007; helgesen & nesset, 2007), necessary for the survival of university teaching institutions. after graduating, a student loyal to the institution can attract new students through a word-of-mouth communication (helgesen & nesset, 2007), improve the image and reputation of the university in its environment (martensen et al., 1999; nguyen & leblanc, 2001) or attract entities or organizations that make donations or finance research projects (mael & ashforth, 1992). in this way, you can see how the consequences of this loyalty are not limited to the time the student remains in the institution but continues throughout his life. the high levels of trust towards the organization translate into behaviours of loyalty towards it in the field of services, as confirmed by various studies (zeithaml et  al., 1996; pizzutti & von derheyde, 2008; nguyen et al., 2013; amin et al., 2013). on the other hand, ball et al. (2004) and nguyen, leclerc and leblanc (2013) reveal that the image has an indirect impact on loyalty through trust. the relationship between these two variables has been confirmed in lucrative and service fields, however, in the educational context, few findings deepen and confirm this relationship (gattermann et al. 2012; carvalho & mota, 2010; henning-thurau et al., 2001). also, studies such as geyskens, steenkamp and kumar (1999) and rojas-méndez et  al. (2009) raise the importance of how the inclusion of variables such as satisfaction and trust help explain and develop loyalty, which leads to the following hypothesis: h8. the trust of graduates in the university positively influences loyalty towards it. 2. methodology and data analysis this investigation is fundamentally a quantitative investigation using the methodology of survey research. this study includes five variables, three independent variables (ethics, shared values and university image), one dependent variable (loyalty) and a mediator variable (trust). the questionnaire has been used to gather information. ethics, shared values, university image, trust and loyalty items have been assessed on a 5-point scale from “very satisfied” to “very dissatisfied” choices. to carry out the hypothesis contrast and meet the objectives of this study, the target population was formed by individuals graduated from the first and second cycle degrees, from 3 moroccan public universities (the university of ibn zohr, the university of hassan 2 and the university of cadi ayyad) that had finished their university studies 3 and 2 years before the completion of the fieldwork. 323 questionnaires analyzed (graduate students (bachelors and a master’s degree)), 168 of them have followed their training at the regional centre of teaching professions). there were 383 students in the complete sample size. the questionnaire was distributed on behalf of these three universities. of the 383 questionnaires distributed, 323 were completed, representing a rate of 84.33%. there were very few instances with missing values. if such instances are shallow to have any significant effect on the outcome, they could be removed, giving to hair et al. (2010). thus, the questionnaires filled with any missing values have been business, management and education, 2020, 18(1): 106–126 115 removed. meanwhile, some items were contextualized and a few new items designed, it was necessary to perform exploratory factor analysis. convergent and discriminating validity guaranteed the validity of the instrument. all constructs were based on existing approved scales. to measure the construct trust, the same type of  scales and attributes applied in the investigation conducted by morgan and hunt (1994). to measure the effects of shared value, the items adopted by morgan and hunt (1994) were followed. in the measurement of the  ethics construct scales previously investigated by several scientists were utilized (haynes, 1998; coplan, 2001). besides, to measure university image, nguyen and leblanc (2001) work is used. finally, we adopted henning-thurau, langer, and hansen (2001) research that used 4 items to measure loyalty. as hausknecht (1990) show, investigators have little demand to produce newer scales given those existing have already confirmed their benefit. 3. analysis, results and discussion efa’s primary aim is to define the magnitude of connection of observed variables with their highlighted determinants (bryman & cramer, 2009). kaiser-meyer-olken (kmo) was run to verify the tolerability of the sample size to run efa. kmo value is regarded as necessary to exceed 0.6 (pallant, 2010). cronbach’s alpha of the variables, calculated based on the statements, is very acceptable according to the criteria of nunnally and brenstien (1994) and evrard et  al. (2003). the msa test and the bartlett sphericity test were applied, with a kmo index greater than 0.5. bartlett’s significance test equals 0.000 for all variables, meaning the factor solution is fully possible. a one-dimensional structure appears in which all the items of all the variables are appropriately positioned to account for at least 79.941% of the total variance (see table 1). all the other indices (by explained variance and commonalities) are higher than the thresholds fixed within the framework of this analysis, which leads to validate the factorial structure. table 1. a synthetic vision of the exploratory phase variables number of items before kmo bartlett % of the variance cronbach alpha number of items after loyalty 4 .847 .000 90.362 .926 4 trust 3 .907 .000 82.727 . 986 3 university image 3 .807 .000 93.146 .956 3 shared values 3 .717 .000 79.941 .906 3 ethics 3 .883 .000 89.986 .946 3 3.1. confirmatory analysis and hypothesis testing overall, the model was a good fit. the value of gfi is 0.921 (>0.90) and agfi = 0.823 (>0.80) and rmsea = 0.039 (<0.05). other incremental fit and parsimony fit measures are also more than or close to standards set by hair, black, babin, anderson (2010). 116 z. nejjari, h. aamoum. the role of ethics, trust, and shared values in the creation of loyalty... table 2. convergent validity of latent variables shared _values ethics university_image trust loyalty ave > .5 0.771 0.908 0.855 0.770 0.714 cr > .7 0.909 0.952 0.922 0.910 0.832 convergent validity established established established established established the above table  2 and the calculation 〖ave〗 (average variance extracted) and 〖cr〗 (composite reliability) show that convergent validity is maintained for all variables (hair et al. 1998, p. 612). table 3. discriminant validity of constructed variables correlation factor correlation squares ave ave1 (ave >r²) discriminant validity ethics <--> university_image .239 0.057 0.908 0.855 validate shared _values <--> university_image .524 0.275 0.771 0.855 validate university_image <--> trust .197 0.039 0.855 0.770 validate shared _values <--> trust .437 0.191 0.771 0.770 validate ethics <--> trust .416 0.173 0.908 0.770 validate shared _values <--> loyalty .276 0.076 0.771 0.714 validate trust <--> loyalty .246 0.061 0.770 0.714 validate ethics <--> loyalty .734 0.539 0.908 0.714 validate the two-test setup, convergent validity test and discriminant validity (table  3)ensure that the instrument measures the constructs it was designed to measure, and it provides an adequate measure of the conceptual model on which it is based. indeed, our model aims to measure the students’ loyalty based on four factors. as a result, the definition of the measured constructs and the items of which they will be composed will differ, and yet it turns out that the loyalty has a good construct validity, since they adequately measure the conceptual model of the students’ loyalty and the associated constructs. business, management and education, 2020, 18(1): 106–126 117 the hypothesis h2, h3 and h4 are accepted (table 4), the statistical results indicate a positive (estimate values .772 and .668) mediation of the image of the university in the relations shared _values -> trust and ethics -> trust (p-values .000). this proves us that the ethics of the speakers and staff of universities, having a better perception on the image of the university later on the students’ trust, which influences the loyalty towards their universities of origin. hypothesis h7 and h8 are accepted, p-values (.000) and (.000) illustrate that the ethics impact positively (.668) the trust who influence the loyalty significantly. the values do not show a direct effect, which was not expected. hypothesis h1 and h6 are rejected (table  4), p-values (.634) and (.087) show that the relations between shared values and university image of one side and shared values and loyalty of another side are not significant. the values do not show a direct effect, which was not expected. 3.2. discussion the results obtained provide evidence that confirms previous studies in contexts other than that of higher education and highlights the role that variables of relational character play in the perceptions and behaviours of the graduate towards the university. the 8 hypotheses contrasted in the proposed model prove the relevance and significance of these relationships in the non-profit field of higher education so that the contributions of this study allow to deepen the knowledge about the perceptions of a stakeholder as important as graduates. the literature review has shown that the adequate provision of services in institutions of higher education stands as a key instrument, both for the institutional strengthening of universities and their consequent improvement in the quality of education, as well as for the internationalization of its activities. it is also a key element for cultural and social development. through the approach of a model of relationships in the educational context, some key variables have been analyzed (image of the perceived university, ethics and shared values) that influence trust generators between the graduate and his university, as well as possible consequences of it: loyalty. trust in an institution such as the university allows approaching stakeholders and favour exchanges for mutual benefit. the results have confirmed the influence of the perceived image on the trust and loyalty of the graduate, acting the image as a table 4. result of the analysis using the method of the structural equation estimate s.e. c.r. p shared _values <--university_image –.308 .180 –1.710 .087 ethics <--university_image .772 .143 1.902 *** shared _values <--trust .604 .129 3.144 *** university_image <--trust .971 .142 6.859 *** ethics <--trust .917 .154 5.940 *** shared _values <--loyalty .068 .143 .476 .634 trust <--loyalty . 668 .201 1.834 *** ethics <--trust .917 .154 5.940 *** 118 z. nejjari, h. aamoum. the role of ethics, trust, and shared values in the creation of loyalty... filter of trust, results that come to support other findings (folkes, 1988; bloemer & de ruyter, 1998) and that contribute to the study of the behaviour of these variables. on the other hand, the data obtained also demonstrate that the graduate’s trust towards the university institution can contribute to the formation of their loyalty, an aspect that had been demonstrated in other study contexts (sirdeshmukh et al., 2002; nijssen et al., 2003; lentz et al., 2004). the positive contribution of the ethics perceived by the graduate to the formation of his loyalty towards the university institution is also derived from the analysis of the results obtained. this result comes to subtract controversy from the triangle of relationships ethics, shared value and loyalty (andreassen & lindestad, 1998; petrick et  al., 2001; martín et  al., 2004), and to confirm this approach in the university environment. the first and sixth hypothesis is about the effect of shared values on student university image and loyalty. shared value (p > .05) has no significant impact on student image of university and loyalty. since these factors as antecedents of student loyalty have been ignored, there are hardly any studies to compare it with. the effect of university image on student loyalty was observed by helgesen and nesset (2007), brown and mazzarol (2009) and alves and raposo (2007) same finding confirmed by the study showing that university image impact positively the student loyalty. these results contradict the findings of nguyen & leblanc (2001) and tan et al. (2013). relationship trust and university image are found to be positively associated with loyalty in the business environment in previous studies, such as cáceres and paparoidamis (2007), amine (1999), and morgan and hunt (1994). in the limited previous research in an education environment, relationship trust and university image are found to be a key factor affecting students’ cooperation and propensity to leave (adidam et al., 2004; holdford & white, 1997). the results show the low intensity of the relationship between shared value-university image and loyalty. despite the fact that several studies carried out in other contexts have supported this relationship (for example, yang & peterson, 2004; karwowska, 2019), the results obtained at the university level indicate that the highest or worst the shared value it is not one of the elements that most condition students loyalty to a certain university and it’s not a viral factor that can create a good image for university, unlike what happens, for example, with ethics or, to a lesser extent, with trust (sánchez et al., 1999). the first and sixth hypothesis rightly questions the argument that what is right for university is necessarily suitable for students and what is useful for students can also be good for the university and their image after. in this context, the results show that it is not necessarily true. given the disparity of results obtained in the different studies (such as karwowska, 2019), the work has sought to clarify these relationships as much as possible, considering this context. before this study, education scholars had studied the concept of shared values because of its influence on relationship commitment (s. wong & k. wong, 2011). however, shared values had never been tested as a direct antecedent of graduate loyalty. our results show that having shared values promoted by a university does not enhance student loyalty toward the university. this can be explained by the fact that the students don’t know the social purpose of university because what is suitable for the university is not necessarily useful for students. the results show that there is no effect of shared values on the university. seemingly, the graduates do not share values and ideals with their universities. openness and transparency business, management and education, 2020, 18(1): 106–126 119 can be critical elements in stakeholder communication policies regarding common values that can contribute to enhancing university image and that it is not the case in the moroccan universities context (basfao, 2005; chiheb, 2014). also, this result can be related to the lower integration of students in their universities (chiheb, 2014). conclusions the proposed relationship model and the measuring instruments associated with it can be applied reliably and validly to the context of higher education institutions, providing useful information for decision-making in university management. the communication policy of the institution is vital in the formation of the perceived image, trust and loyalty considering that these institutions play a crucial role that entails the identification of their students, their orientation, the coordination of educational activities and the achievement of organizational excellence objectives. this research showed the significance of student trust in enhancing the university’s image that affects their loyalty. besides acting on increasing teaching quality, growing administrative assistance and enhancing the standard of physical equipment, there is a severe need to set up a subdivision of public relations to spread positive and minimize negatives in order to handle the university’s government image. the institution may hold meetings and sessions, hold intra-university contests, conference, and send students to abroad exchange programs to boost the picture of the university. to make them feel devoted to the institution, the university may issue loyalty cards to students. discounts for decision-making training and skill development plans may be available to students. it is suggested that, with these proposals, scholars be involved in the procedure of admission and program creation. the real challenge of the university with its graduates to generate sufficient spaces in which joint actions are developed that allow it to know the real impact of its actions in society, as well as the adjustments that must be made to adapt its actions to the social needs that are they observe today. in this sense, social networks can act as vehicles for continuous communication and dialogue with graduates and strengthen the link. the results of this study add valuable organizational insights into the educational sector. this research demonstrates that ethics, trust and university image have a significant and positive impact on student loyalty. this research proved the impact of ethics and shared values on the university image. the officials involved should invest in enhancing the university’s image by growing the role of morals and common integrities in the educational process that will leave an effect on the perception of the student. university administration is often considered less significance. this research reflected the students amazingly elevated implication. it demonstrates that in resolving their queries in time, students are very vulnerable. they want to care and respect to be handled. implications for high education institutions to boost student loyalty, educational providers must concentrate on improving those variables. educational providers can use the findings to know what increase the loyalty and allocate resources to improve the determinants that affect the trust of the students, thus https://www.powerthesaurus.org/considered https://www.powerthesaurus.org/considered 120 z. nejjari, h. aamoum. the role of ethics, trust, and shared values in the creation of loyalty... increasing the allegiance of the learners. this will also guarantee the implication of former students on their universities and expand the educational organizations. this investigation suggested that office employees be qualified to act correctly and fix their issues with scholars. in this logic, the understanding and evaluation of the variables that create loyalty and trust in the students and graduates, as well as the aspects that contribute to their perceived image, ethics and shared values, are highly relevant elements that must be reflected in the strategic plans and designs. curricular programs, providing quality services that enable the student to graduate with the vital skills to practice professional gentleness effectively and to continue to learn unceasingly during his lifetime. finally, educational providers can achieve a better knowledge of loyalty-influencing factors and can, therefore, plan to cultivate them accordingly. limitations and future of the research with regard to the limitations of the study which also reconfigure lines of future research, it is important to note, in the first place, the geographical restriction of the population under study to 3 moroccan universities, which must be overcome in future research, to grant greater validity to the conclusions obtained through relationship analysis in a higher number of universities. in line with the above, it would also be convenient, for the sake of greater validity, to develop a study with different samples and educational levels, it would even be interesting to be able to compare this model in private universities, to know if the fact that it is a public educational institution or private generates differences in the levels of trust, image or loyalty. given the dynamic nature of trust and loyalty, a lengthy study would carry new data, which would allow the comparison of trust, loyalty or image that changes over time for the citizens, despite not being in contact with the institution. also, future research can consider conducting a longitudinal 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engineering 2023 volume 21 issue 1 pages 48–62 https://doi.org/10.3846/bmee.2023.17607 the evolution of digital transformation in smes in the manufacturing industry in the different blocks of the bm canvas since the beginning of the pandemic markéta bednářová , mariana tesařová , iveta šimberová institute of management, faculty of business and management, brno university of technology, kolejní 2906/4, 612 00 brno, czech republic article history: abstract. purpose – the following article focuses on assessment of the evolution of digital transformation in smes in the manufacturing industry since the beginning of the pandemic. the digital transformation is assessed in the different blocks of the bm canvas. the main objective of the paper is to evaluate the impact of the pandemic on the development of digital transformation, and to assess whether it is still influencing it now, or vice versa, or no longer has such an impact. research methodology – the digital transformation is examined in each block of the business model canvas (bm canvas) from the beginning of the pandemic to the current state. the individual data is obtained from a survey conducted among 18 smes. small and medium-sized enterprises in the manufacturing industry are examined. the survey is based on semi-structured interviews with sme´s management representatives. the collected data is then processed by examining the average rate of digital transformation in each block, the modus, and the median. the focus was again on developments and changes in the digital transformation of enterprises. the data was collected for three periods – before the pandemic (2019), during the pandemic (2021) and now (july 2022). findings – the paper shows the evolution of digital transformation in the different building blocks of the bm canvas for smes in the manufacturing industry since the beginning of the pandemic. the evolution of digital transformation varies across the bm canvas blocks. for the channels block, as of july 2022, there has been a decrease in the average digital transformation rate. the other blocks have seen an increase and continue to develop. however, the increases are no longer as high as in 2021. whether digital transformation will continue to develop for individual blocks in future periods is a suitable research question for further research. the findings show that the changes and developments vary from building block to building block. it was found that the importance of each building block changed during the pandemic for each firm representative. the results provide the basis for the analysis of the development and change of bm canvas for individual companies. research limitations – at the moment, the current situation in ukraine, in addition to the covid-19 pandemic, is playing a major role in smes activities as it affects companies. this conflict was not considered in the research, and the development since the beginning of the pandemic was followed. practical implications – this research highlights how the digital transformation of individual smes in the manufacturing industry is evolving. it highlights the impact of the pandemic, which has undoubtedly increased the growth of digital transformation rates. for future research, these results can be very useful, as other influences on the rates of digital transformation can be investigated. originality/value – the research was carried out on the basis of primary data collected by the authors themselves. the data were processed and evaluated. the results of the research show how the level of digital transformation in different blocks of the bm canvas has evolved from the beginning for each sme in the manufacturing industry. ■ received 15 september 2022 ■ accepted 18 april 2023 keywords: digitalization, covid-19, digital transformation, business model canvas, smes. jel classification: l1, l21, m1.      corresponding author. e-mail: marketa.bednarova@vut.cz http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2023.17607 https://orcid.org/0000-0003-2779-3883 mailto:marketa.bednarova@vut.cz https://orcid.org/0000-0002-1515-0357 https://orcid.org/0000-0002-9236-4439 business, management and economics engineering, 2023, 21(1): 48–62 49 introduction the covid pandemic has affected not only physical and mental health of people but also the financial health of companies around the world. pandemic caused increased digital transformation, changes in customer behavior, and a gap in managerial and technological knowledge to address those (klein & todesco, 2021). smes are adapting their business models to adapt to this changing environment (gregurec et al., 2021). currently, digital transformation in smes is an increasingly discussed and hot topic for scholars and practitioners (cha et al., 2015; li et al., 2018). the use of state-of-the-art technology to manage business activities during community closure to spread the covid-19 pandemic, albeit involuntarily, is evidence that technology offers not only competitive advantages but also the means to survive by improvising on existing business models (akpan et al., 2021). the aim of this paper is to analyze the evolution of digital transformation since the beginning of the pandemic in the different building blocks of the bm canvas in smes in the manufacturing industry. furthermore, the variation in the different building blocks within the digital transformation will also be assessed. the conceptual framework used for this research is the business model canvas according to osterwalder and pigneuer (2010). this research will contribute to gaining new insights and understanding in the development of the digital transformation rate for each building block of the bm canvas. 1. key literature reviews digital transformation is an increasingly important topic for companies. smes in particular are looking to engage in a comprehensive global digital strategy process (dethine et al., 2020). the world of digital technology brings opportunities to optimize various challenges, such as just the operation of smes in times of pandemic (viswanathan & telukdarie, 2021). by adopting digital technology platforms, sme entrepreneurs can establish direct connections between suppliers and customers, and furtherly, they can work closely with other stakeholders (chatterjee et al., 2022). the very concept of business model (bm) was first discovered in a research paper by bellmann et al. in 1957. the topic of business model has subsequently been the subject of many studies and academic papers conducted by various authors (osterwalder et al., 2005; teece, 2010). some of the influential publications include the works of linder and cantrell (2000), osterwalder (2004), chesbrough (2006) and many others. business model research according to foss and saebi (2017) has grown significantly, reaching 7391 publications in the scopus database over the period 1980–2015. the very idea of a business model deals with general, fundamental and familiar problems of a strategic nature (sandberg, 2002; verstraete & jouison-lafitte, 2011), yet there is still debate about what business models are and their usefulness. the concept of business model was first important for understanding e-business and the commercialization of technology and innovation (amit & zott, 2001; chesbrough & rosenbloom, 2002; johnson, 2010; zott et al., 2011). however, porter (2001) described the ambiguous nature of business model as “inviting faulty thinking and deception” after analyzing unhealthy business practices on the internet. according to osterwalder and 50 m. bednářová et al. the evolution of digital transformation in smes in the manufacturing industry in the different... pignerur (2010), a bm can be defined as an abstract illustration of how an organization works to achieve its strategic goals, while defining 9 main components, called building blocks, for designing a business model. business models that operate in the digital age are transforming existing industries at a rapid pace (yrjölä et al., 2020). digital transformation requires companies to rethink and innovate their business models. however, the problem is that smes have little time to experiment with their bms and implement new strategies (parida et al., 2019; bouwman et al., 2019). the pace of change in digital transformation accelerated significantly during the covid-19 pandemic (mostaghel et al., 2022). businesses are trying to cope with the impact of the pandemic by continuing to transform their business models with the support of digital technologies (priyono et al., 2020). digital transformation is described as a comprehensive approach that involves enterprise-wide changes that require the development of new business models (verhoef et al., 2021). due to the pandemic, the digital transformation of organizations is progressing at a very fast pace. while some companies have gained pioneering roles in digital transformation, other companies are lagging behind because they find the transition very difficult (abbu et al., 2022). digital transformation itself is more about people than digital technologies. organizational changes are required, supported by leadership and driven by radical challenges to corporate culture. for digital transformation, business leaders are required to build trust (gudergan et al., 2019; abbu et al., 2020; mugge et al., 2020). 2. methodology and research design the aim of this paper is to explore the evolution of the digital transformation of smes in the manufacturing industry in the different building blocks of bm canvas. the status before the start of the pandemic (2019), during the pandemic (2021) and now (july 2022) is monitored. this research builds on research conducted in 2021, which examined the effect of digital transformation on the bm canvas of smes in the manufacturing industry. results show that the evolution of digital transformation varies from block to block but has an increasing trend. therefore, the authors investigate whether the upward trend continues. the analysis is based on research conducted on eighteen selected smes in the manufacturing industry. this research is followed by semi-structured interviews with management representatives of each firm. semi-structured interviews were conducted with management representatives of eighteen smes in the manufacturing industry. first, they were asked for a percentage assessment of the degree of digital transformation of the entire company, then they evaluated individual blocks. afterwards, a discussion was held in which areas digital transformation had shown the most impact. the focus is on the analysis of developments and changes of digital transformation in the pandemic era, more specifically on how the different building blocks respond to digital transformation and whether they respond proportionally across building blocks or whether the level of digital transformation is rather different. the average level of digital transformation in each building block, the modus and median, and increase since the start of the pandemic is tracked. the survey itself involved management representatives from eighteen selected business, management and economics engineering, 2023, 21(1): 48–62 51 smes in the manufacturing industry. the level of digital transformation was assessed by the management representatives of the selected companies themselves. each representative determined the percentage of digital transformation of his company and then determined the percentage of digital transformation in each block of the bm canvas. the authors then aggregated the data, averaged it, and determined the modus and median. they also calculated the differences between periods. the results of the survey provide a baseline that analyses the evolution and changes of the bm canvas for these enterprises in the area of digital transformation. the authors examine the evolution of digital transformation in each building block since the beginning of the pandemic. 3. research findings/results this chapter presents the results of the research, which focuses on the evolution of digital transformation since the beginning of the covid-19 pandemic in the different blocks of the bm canvas in smes from the manufacturing industry. each bm canvas building block is examined separately with respect to digital transformation. the individual level of digital transformation is assessed in three periods – the period before the pandemic (2019), the period during the pandemic (2021) and the current state (july 2022). the mean, modus and median are used as comparative variables. the results show an overview of the changes in the different building blocks of the bm canvas for smes. 3.1. customer segment the customer segment has continued to see growth in the rate of digital transformation since the pandemic began. this was reported by 61.1% of smes. 38.9% of smes say that they are no longer digitizing this area, or that digital transformation is stagnating. prior to the 2019 pandemic, the average digital transformation rate was 31.7%. during the 2021 pandemic, this rate was 56.61%, while at the same time companies report an average digital transformation rate of 67.56%. this is therefore an increase over the pandemic period of 35.86% overall. the modus currently has a value of 90%; before the pandemic it had values of 30%, 50% and 60%; in 2021 it was at 60% and 80%. the median is now 71%, an increase of 41% since the start of the pandemic. table 1 below provides a summary of selected indicators within the digital customer segment. table 1. summarizes the mode, median and average digital transformation rates in the customer segment block (source: created by authors, 2022) 2019 (before pandemic) 2021 (during pandemic) the increase (2021-2019) now (2022) the increase (2022-2021) total increase (2019-2022) mode 30%, 50%, 60% 60%, 80% x 90% x x median 30% 60% 30% 71% 11% 41% the average rate of digital transformation 31.7% 56.61% 24.91% 67.56% 10.95% 35.86% 52 m. bednářová et al. the evolution of digital transformation in smes in the manufacturing industry in the different... the development and completion of an online customer database was noted as the most frequent impact of digital transformation within this block. during the pandemic, these databases were emerging; now companies have established them. these systems help manufacturing companies keep track of their customers and also help them communicate better with them. companies also report that they have linked these systems to their online communications and their e-stores. 3.2. value proposition the value proposition block also showed an increase in the level of digital transformation. here, 61.1% of companies said that the rate of digital transformation has changed. 38.9% of companies said that there has been no or minimal change in the rate of digital transformation. the average digital transformation rate is now 63.28%, an increase of 15.89% since the beginning of the pandemic (2019). in 2021, the average digital transformation rate was at 53.89%, an increase of 9.39%. the modus is now at 80%, and in 2021 there were two values – 50% and 60%; before the 2019 pandemic, the modus was at 40%. the median has also seen an increase, up 20% overall since the start of the pandemic. before the pandemic, the value was 44%, in 2021 it was 55% and now it is at 64%. table 2 provides a summary of selected indicators within the digital value proposition. table 2. summarizes the mode, median and average digital transformation rates in the value proposition block (source: created by authors, 2022) 2019 (before pandemic) 2021 (during pandemic) the increase (2021-2019) now (2022) the increase (2022-2021) total increase (2019-2022) mode 40% 50%, 60% x 80% x x median 44% 55% 11% 64% 9% 20% the average rate of digital transformation 47.39% 53.89% 6.5% 63.28% 9.39% 15.89% the value proposition has adapted to today’s times. companies cite a change in pricing and tailoring of products to customers as a major change. online product catalogues have also been created for customers to browse. some companies claim that digital transformation in this block is not yet at the level they would like to see. further developments in the level of digital transformation of the value proposition can therefore be expected. 3.3. channels the channels have recorded very interesting numbers. this block has been changed for 72.2% of msps in the last year, with 27.8% of msps saying they have not been digitally changed. the digital transformation rate for the channels block has risen to 66.61% since 2019, the start of the pandemic. this is a total increase of 29.78%. what is interesting, however, is that if we look at the period 2021–2022, the digital transformation rate here has seen a decline, by 5.11%. in 2021, the digital transformation rate was at 71.72%, which was an increase of 34.89% from 2019 business, management and economics engineering, 2023, 21(1): 48–62 53 (before the pandemic started). companies explain the current decline in the digital transformation rate by saying that they have returned to in-person sales after loosening restrictions. the median also saw a decline, dropping 7% from 2021, to 68%. before the pandemic it was 40%, yet since the pandemic began the overall figure is positive at 28%. the modus is now at 65%, which also points to declining ratio values. table 3 provides a summary of selected indicators. table 3. summarizes the mode, median and average digital transformation rates in the channels block (source: created by authors, 2022) 2019 (before pandemic) 2021 (during pandemic) the increase (2021-2019) now (2022) the increase (2022-2021) total increase (20192022) mode 15% 75%, 80%, 90% x 65% x x median 40% 75% 35% 68% –7% 28% the average rate of digital transformation 36.83% 71.72% 34.89% 66.61% –5.11% 29.78% it is easy to explain why channels’ digital adoption rate has declined over the past year. the main reason is that, thanks to the loosening of measures concerning pandemic, they are returning to face-to-face contact. this applies to personal contacts with both suppliers and customers. within the ordering systems that have been set up, customers have a choice of distribution channels and many of them are using face-to-face purchasing. thus, companies have responded to the limitations of some distribution channels because they were unused. 3.4. customer relationships 77.8% of companies say they have been affected by digital transformation in the last year, while 22.2% say they have not. the customer relationships block now has a digital transformation rate for smes of 79.44%, an increase of 37.5% since the start of the pandemic. since 2021, this has increased by 15.2%. the modus is now at the same level it was in 2021 – 90%. before the pandemic, the modus was at 60%. the median has increased by 35% since the start of the pandemic to 80%. before the pandemic, it was at 45%. table 4 presents an overview of selected summary indicators. table 4. summarizes the mode, median and average digital transformation rates in the customer relationships block (source: created by authors, 2022) 2019 (before pandemic) 2021 (during pandemic) the increase (2021-2019) now (2022) the increase (2022-2021) total increase (2019-2022) mode 60% 90% x 90% x x median 45% 70% 25% 80% 10% 35% the average rate of digital transformation 41.94% 64.24% 22.3% 79.44% 15.2% 37.5% 54 m. bednářová et al. the evolution of digital transformation in smes in the manufacturing industry in the different... manufacturing smes say that over the past year, their customer relationships have developed very rapidly in the online environment. companies are using more online communication tools – social networks, websites, e-shops, etc. while face-to-face customer relationships are still very important, the online environment is becoming increasingly important in communicating and maintaining customer relationships. moreover, thanks to well-targeted social media posts, they can also attract new customers. 3.5. revenue streams according to 61.1% of smes, revenue streams have not been affected or have been affected minimally by digital transformation. revenue streams now have an average digital transformation rate for smes of 66.78%. this block has therefore seen an increase of 21.67% since the beginning of the pandemic. in 2021, the digital transformation rate was 61.17%, and for 2022 it has only increased by 5.61%. the modus is identical for 2021 and 2022 – 75%. in 2019 (before the pandemic) it was at 50%. the median has seen a 26.5% increase since the start of the pandemic. before the pandemic, the median was 48.5%, in 2021 it was 60% and now it is 75%. table 5 below provides a summary of selected indicators within the revenue streams block. table 5. summarizes the mode, median and average digital transformation rates in the revenue streams block (source: created by authors, 2022) 2019 (before pandemic) 2021 (during pandemic) the increase (2021-2019) now (2022) the increase (2022-2021) total increase (2019-2022) mode 50% 75% x 75% x x median 48.5% 60% 11.5% 75% 15% 26.5% the average rate of digital transformation 45.11% 61.17% 16.06% 66.78% 5.61% 21.67% the main change over the last year has been the establishment of online payment platforms. newly created e-shops have also started to become one of the main sources of revenue for companies. the original pilot e-shop schemes have evolved into fully functioning e-shops. here, companies report that they continue to want to expand their online platforms to make this area as digital as possible. 3.6. key resources key resources have not been much affected by digital transformation in the last year, as confirmed by 77.8% of companies. only 22.2% say that digital transformation has made progress here. even so, the average level of digital transformation has increased. it now stands at 62.11%, an overall increase of 18.61%. however, over the last year, the digital transformation rate has only seen an increase of 4.33%. the modus currently stands at 60%. before the pandemic, it was at 30%. during the pandemic (2021), the modus had two values of 60% and 80%. the median value is interesting. before the pandemic it was 40%. during the 2021 pandemic it was at 60%. this is the median value now. table 6 shows a summary of the selected indicators for the digital transformation area in this block. business, management and economics engineering, 2023, 21(1): 48–62 55 table 6. summarizes the mode, median and average digital transformation rates in the key resources block (source: created by authors, 2022) 2019 (before pandemic) 2021 (during pandemic) the increase (2021-2019) now (2022) the increase (2022-2021) total increase (2019-2022) mode 30% 60%, 80% x 60% x x median 40% 60% 20% 60% 0% 20% the average rate of digital transformation 43.5% 57.78% 14.28% 62.11% 4.33% 18.61% the companies do not report significant impacts. most often they mention that they imagine e-commerce as a key source in the future. they also say that they are also creating online systems for employees to better plan shifts to production. however, even so, this area is rather stagnant in terms of digital transformation. 3.7. key activities according to 66.7% of smes, the level of digital transformation has been affected in the last year, while 33.3% of businesses have not been affected. key sme activities now have an average digital transformation rate of 79.61%. prior to the pandemic (2019), this was at 43.78%. in 2021, this rate has risen to 75.39%, up 31.61%. so, between 2021 and 2022, this rate increased by 4.22%. the modus is now at 90%. before the pandemic it was 40%, in 2021 during the pandemic it was 80%. the median then increased by 45% overall since the start of the pandemic. it is now at 85%, was at 40% before the pandemic, and was at 80% in 2021. thus, between the period 2021–2022, it has seen a 5% increase. selected ratios for the selected period are shown in table 7 below. table 7. summarizes the mode, median and average digital transformation rates in the key activities block (source: created by authors, 2022) 2019 (before pandemic) 2021 (during pandemic) the increase (2021-2019) now (2022) the increase (2022-2021) total increase (2019-2022) mode 40% 80% x 90% x x median 40% 80% 40% 85% 5% 45% the average rate of digital transformation 43.78% 75.39% 31.61% 79.61% 4.22% 35.83% the level of digital transformation in this block was also influenced by the creation of new e-shops. e-shops are becoming the main key activities that bring companies more and more profit. as a result, some companies have been able to transfer their activities from the pure b2b market to b2c markets. some companies have also developed production automation as part of their core activities. companies have invested in new production machinery and it technologies. this change has resulted in more efficient employees who can process more products thanks to better production processes. 56 m. bednářová et al. the evolution of digital transformation in smes in the manufacturing industry in the different... 3.8. key partnerships 50% of companies were affected by this block. key partnerships have seen a 22.05% increase in the average digital transformation rate since the pandemic began. it now stands at 60.44%. before the pandemic, this value was at 38.39%. in 2021, it has increased by 15.11%, to a level of 53.5%. the modus currently has two values – 50% and 75%. in 2019, the modus had three values 20%, 50% and 60%. in 2021, the modus had only one value – 50%. the median within this block increased by 28.5% to a level of 62%. before the pandemic, it had a value of 33.5%, and by 2021 it had seen a 19% increase to a value of 52.5%. summary selected ratios are shown in table 8 below. table 8. summarizes the mode, median and average digital transformation rates in the key partnerships block (source: created by authors, 2022) 2019 (before pandemic) 2021 (during pandemic) the increase (2021-2019) now (2022) the increase (2022-2021) total increase (2019-2022) mode 20%, 50%, 60% 50% x 50%, 75% x x median 33.5% 52.5% 19% 62% 9.5% 28.5% the average rate of digital transformation 38.39% 53.5% 15.11% 60.44% 6.94% 22.05% the main change in business partnerships is the cooperation with pr agencies, which take care of the company’s online communication. some companies have also created inventory delivery systems to make material purchases as efficient as possible. this is what the external it companies that have created these systems help them with. 3.9. cost structure the cost structure of digital transformation has been on a slight upward trend over the last period. according to 77.8% of smes, this block continues to be digitally transformed. 22.2% of smes say that it is not. since the beginning of the pandemic, the average digital transformation rate has seen an increase of 8.33% to 68.5%. at the beginning of the pandemic, the digital transformation level of this block was at 40.56%, and by 2021 it has increased by 19.61% to a value of 60.17%. thus, the overall increase since the beginning of the pandemic is 27.94%. the modus before the pandemic was 40%, by 2021 it was at 80%, and currently it has two values – 75% and 85%. the median has then increased 31% overall since the start of the pandemic. before the pandemic it was at 42.5%, in 2021 it had a value of 60% and now it has a value of 73.5%. table 9 shows a summary of selected ratios. companies report that the introduction of new machines and systems has resulted in significantly lower product costs. costs have been passed on to the external companies that manage the systems for them. however, even so, digital transformation has reduced costs for most companies. their investment in production automation is paying off and most expect a very quick return. business, management and economics engineering, 2023, 21(1): 48–62 57 table 9. summarizes the mode, median and average digital transformation rates in the cost structure block (source: created by authors, 2022) 2019 (before pandemic) 2021 (during pandemic) the increase (2021-2019) now (2022) the increase (2022-2021) total increase (2019-2022) mode 40% 80% x 75%, 85% x x median 42.5% 60% 17.5% 73.5% 13.5% 31% the average rate of digital transformation 40.56% 60.17% 19.61% 68.5% 8.33% 27.94% 3.10. importance of individual building blocks for manufacturing smes at the end of the research, we asked businesses if they could now rate each building block according to its importance to their company. the ratings were made on a scale of 1–5, with the number 1 indicating the least significance and the number 5 representing the greatest significance. these values were compared to the previous values that were obtained in 2021. it is very interesting to see how some of the blocks are now more significant to companies than before. table 10 below shows the average significance values for each building block. table 10. average significance values of individual building blocks (source: created by authors, 2022) the average significance (2021) the average significance (2022) the difference customer segments 4.30 4.72 +0.42 value propositions 3.00 3.05 +0.05 channels 2.78 2.33 –0.45 customer relationships 4.06 4.44 +0.38 revenue streams 3.33 3.67 +0.34 key resources 3.06 3.22 +0.16 key activities 3.28 3.67 +0.39 key partnerships 3.28 3.67 +0.39 cost structure 3.44 3.83 +0.39 the total average 3.39 3.62 0.23 table 10 shows that the significance for each building block has changed over the last year. the customer segment continues to be the most significant for companies, with a significance level of 4.72, an increase of 0.42. this explains that customers are very important to a business in generating profits and without segmentation they would not be able to function properly. on the other hand, the channels block continues to have the lowest significance. it even recorded a decrease of 0.45. during the pandemic distribution channels were very important due to the constraints due to the pandemic. now, as the measures have eased, companies are returning to face-to-face contacts, negotiations, and hence channels have lost 58 m. bednářová et al. the evolution of digital transformation in smes in the manufacturing industry in the different... some of their relevance to businesses. but apart from channels, all building blocks have seen an increase. what is interesting is the prominence for key activities and key partnerships. in 2021 they had the same values of 3.28. even now they have the same values of 3.67, an increase of 0.39. 3.11. summary of results smes have an average digital transformation rate of 68.3%. this is an overall increase of 27.3% since the beginning of the pandemic (2019). in 2021, the average digital transformation rate was 61.6%, an increase of 6.7% over the last year. even though businesses are going digital, the upward trend has already dropped significantly. figure 1 below shows the average digital transformation rate of smes in the manufacturing industry. figure 1. the average digital transformation rate of smes in the manufacturing industry (source: created by authors, 2022) in the following figure 2, we can see the average digital transformation rate of each building block of bm canvas for 2019, 2021 and 2022. now, the key activities block is the most digitized at 79.61%. customer relations also has a high digital transformation rate of 79.44%. the least digitized block is then key business partners, which is at 60.44%. figure 2. the average digital transformation rate of each building block of bm canvas for 2019, 2021 and 2022 (source: created by authors, 2022) business, management and economics engineering, 2023, 21(1): 48–62 59 3. discussion the authors christofi et al. (2023) looked at new digital technologies in smes in combination with the challenges faced by the pandemic. the authors argue that the pandemic has forced enterprises to innovate their business models. this can be confirmed by our research, where we have shown a significant change in digital transformation in smes for the canvas business model since the beginning of the pandemic. the authors of christofi et al. (2023) also argue that these changes have a positive effect on the persistence of enterprises to innovate business models. malodia et al. (2023) also find a significant association between digital transformation and firm performance. according to rupeika-apoga et al. (2022), digital transformation has a positive mediating effect due to digital orientation on revenue and business model as well as a digital capability on revenue. based on our research and that of other authors, it can be concluded that digital transformation has been accelerated by the pandemic. digital transformation also has a positive effect on the better performance of smes. these findings can be useful for sme managers and practitioners. if smes stay with digital technology, they can benefit from it. our research has also focused on the evolution of digital transformation rates at bm canvas since the beginning of the pandemic. a surprising finding is that some blocks have digitally transformed very quickly due to the pandemic. for example, the “channels” block. however, in 2022, when the pandemic measures were not so strict, this block saw a decrease in the digital transformation rate. this is because companies were returning to face-to-face communication. even so, most of the blocks continue to digital transformation and it will be interesting to see the evolution in future research. conclusions the authors observed the evolution of digital transformation changes in small and medium-sized manufacturing companies since the beginning of the pandemic. based on a survey and semi-structured interviews with sme’s management representatives, significant changes in several aspects of bm models were highlighted. prior to the pandemic, the average digital transformation rate for each bm canvas building block at companies was around 41%. the highest rate was for value proposition at 47.39%. conversely, the lowest was at 31.7% for the customer segment. after the pandemic outbreak, all the building blocks saw an increase in the average digital transformation rate. however, the increase was not high everywhere. some building blocks were less impacted by the covid-19 pandemic because companies did not feel the need to apply digital tools. in 2021, the overall average digital transformation rate rose to 61.6%. channels saw the highest increase in average digital transformation rate at 34.89%. however, in 2022, the rate of average digital transformation rate slowed down, it had a value of 68.3%. even though most building blocks saw an increase, it was not as significant as in 2021. the channels block even saw a 5.11% decrease in the average digital transformation rate, to a value of 66.61%. the companies explained this by saying that there was no longer a need to use some channels once some measures were relaxed. companies also saw a change in the importance of individual building blocks during the pandemic. on a scale of 1–5, where number 1 indicated the least significant and conversely number 5 the 60 m. bednářová et al. the evolution of digital transformation in smes in the manufacturing industry in the different... most significant, companies began to place more importance on the customer segment, which has now risen to a value of 4.72. an equally important block for companies is the customer relationships block with a value of 4.44. this indicates that companies have begun to recognize the value of the customer even more as shopping has been curtailed by measures through the pandemic. in terms of significance, channels has now decreased in value and is therefore the least significant block according to companies. in conclusion, the evolution of digital transformation varies across building blocks of the bm canvas. for the channels block, as of july 2022, there has been a decrease in the average digital transformation rate. the other blocks have seen an increase and continue to develop. however, the increases are no longer as high as in 2021. whether digital transformation will continue to develop for individual blocks in future periods is a suitable research question for further research. funding this paper was supported by the brno university of technology, faculty of business and management. grant title "economic-managerial impacts of development strategies in the conditions of small and medium-sized enterprises", grant number [fp-j-23-8255]. disclosure statement authors declare that they do not have any competing financial, professional, or personal interests from other parties. references abbu, h., mugge, p., gudergan, g., & kwiatkowski, a. 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seymayilmaz@karatekin.edu.tr determinants of non-performing consumer loans for turkey: ardl bounds testing approach şeyma yilmaz küçük* çankırı karatekin university, çankırı, turkey received 07 may 2022; accepted 31 october 2022 abstract. purpose  – the aim of this study is to specify the factors affecting the non-performing consumer loans in deposit banks operating in turkey. besides the internal factors specific to banks, the effect of macroeconomic factors is also investigated. research methodology – monthly data of deposit banks operating in turkey and data on macroeconomic indicators for the period 2005:1–2021:12 is used is the study. with these data, ardl bound testing approach is applied. if there is cointegration relation between variables, the long and short run coefficients are estimated. findings – with the two different models created in the study, it has been specified that macroeconomic variables and internal variables have a cointegration relationship with non-performing loans. the rise in loan interest rates and unemployment rate increase the rate of non-performing consumer loans. conversely, the increase in deposit interest rates and the dollar exchange rate decreases the rate of non-performing consumer loans. for internal factors, it is determined that the increase in the capital adequacy standard ratio and the return on assets decreases the ratio of non-performing consumer loans. research limitations – the major limitation of this study is to research only the factors affecting the non-performing consumer loans ratio for turkey. practical implications – the results obtained in the study are valuable for bank managers and investors. administrative decisions and investment decisions by considering the factors affecting the non-performing consumer loans ratio will increase the performance of both groups. originality/value – studies in the literature generally consider non-performing loans for banks as a whole. however, determining the factors affecting the non-performing loans ratio on the basis of loan types will make a significant contribution to the literature. for this reason, the factors affecting the non-performing consumer loans for the turkish market is investigated, thus contributing to the literature. keywords: non-performing loans, consumer loans, turkish banking sector. jel classification: g10, g21, g50. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2022.16936 mailto:seymayilmaz@karatekin.edu.tr https://orcid.org/0000-0002-1547-7122 business, management and economics engineering, 2022, 20(2): 312–328 313 introduction banks are the most important actors that transfer funds with their shares in the financial system. banks have important mission in the expansion of the real economy by offering the funds they collect as loans to the real economy. private sector loans have positive effects on economic growth (fufa & kim, 2018). in addition to economic growth, financial inclusion also has recuperative effects on poverty and income distribution (omar & inaba, 2020), intrinsically the importance of banks for financial base expansion is undeniable. in addition to the contributions of banks to the economy and individuals, it is known that the problems in the banking sector put a crimp in the real economy (reinhart & rogoff, 2011; brůha & kočenda, 2018; huber, 2018; iacovone et al., 2019; zubair et al., 2020). banks should have a healthy financial structure in order to contribute to the economic system and, moreover, not to harm the economic activities in an economy. among the factors affecting the sustainability of the banking sector, asset quality and profitability come to the fore (tejo & hanggraeni, 2020). banks take the risk of non-repayment while using the funds they collect and own as loans. although the loans are expected to be collected in maturity, this is not always possible. the inability to collect the loans in maturity decreases the asset quality of the banks and negatively affects the banks profitability due to the provisions (panta, 2018). in the banking sector, loans that cannot be collected in a certain payment period are defined as non-performing loans. although many factors cause the non-performing loans, the main reason is an unpredictable reduce of the borrower’s income due to internal or external reasons arising from the general economy (yücememiş & sözer, 2011). in addition, banks’ management skills and risk preferences also have an impact on non-performing loans (anastasiou et al., 2016). although the methodologies used to measure the collection ability of loans are developed and used day by day, non-performing loans still remain as an important problem in the banking sector. non-performing loans, which arise for different reasons, deteriorate the quality of assets in the banking sector, reduce profitability and cause liquidity risk for banks. therefore, it is important to determine the factors that cause non-performing loans to be reduced, and this issue is frequently emphasized both in the literature and in practice. when the legal legislation for the turkish banking sector is examined, it is seen that it is regulated by the banking regulation and supervision agency with the regulation on the procedures and principles regarding the classification of loans and provisions to be set aside for these (official gazette: 29750). according to article 5 of the regulation, loans categorized in the third, fourth and fifth groups, in other words, non-performing loans are defined as collection of principals and/or interest are delayed more than ninety days from the due date. non-performing loans differ between periods depending on the causative factors and this indicates the necessity of determining the causative factors. the efforts to minimize the effects of non-performing loans on the banking system and thus on the real economy increase. of course, in order to reduce non-performing loans, it is essential to determine the causative factors. in the literature, bank-specific factors and macroeconomic factors affecting the non-performing loans ratio have been frequently investigated both for the turkish market and for different markets. however, it is seen that studies 314 ş. yilmaz küçük. determinants of non-performing consumer loans for turkey: ardl bounds... generally focus on the total non-performing loans of banks. however, determining the factors affecting non-performing loans according to loan types will be a guide for economy management as well as for banking sector managers and investors. the aim of this study is to determine the factors affecting the non-performing consumer loans in deposit banks operating in turkey. thus, this study differs significantly from the previous studies which review the non-performing loans as a whole and reveals valuable findings for practitioners. in the study, macroeconomic factors and banking sector-specific internal factors affecting non-performing consumer loans are examined separately. thus, hypotheses expressing that macroeconomic factors and bank-specific endogenous factors affect non-performing consumer loans are tested in the study. in the study, the current situation is presented to the users by using the monthly data for the period 2005:1–2021:12. the results obtained in the study are valuable for bank managers and investors. administrative decisions and investment decisions to be taken according to the factors affecting the non-performing consumer loans ratio will increase the performance of both groups. in the following parts of the study, studies examining the factors affecting non-performing loans will be introduced, the data set and methodology of the study will be explained, then the findings will be interpreted. 1. related literature about non-performing loans non-performing loans are closely monitored by the banking sector, because they affect the asset quality and profitability of banks directly. in addition, non-performing loans, especially the factors affecting non-performing loans have been frequently inquired for different markets in literature. studies in the literature, some of which are summarized in table 1, consider non-performing loans for banks as a whole. however, determining the factors affecting the non-performing loans ratio on the basis of loan types will make a remarkable contribution to the literature. for this reason, the factors affecting the non-performing consumer loans for the turkish market is investigated, thus contributing to the literature. table 1. the related studies in the literature (source: compiled by the author) author(s) data set methodology results messai and jouini (2013) data of 85 banks operating in italy, greece and spain for 2004–2008 panel regression analysis it was determined that the increase in gdp and return on assets decreased the npls ratio, while the rise in unemployment rate, loan loss provision and interest rate increased the npls ratio. makri, tsagkanos and bellas (2014) 14 countries’ data in euro region for 2000–2008 gmm it has been determined that the ratio of bank capital and reserves to total assets in the previous period, roe, growth rate of gdp affect npls ratio negatively, while the lagged value of nonperforming loans, the lagged value of public debt ratio to gdp, the unemployment rate and the lagged value of the unemployment rate affect npls ratio positively. business, management and economics engineering, 2022, 20(2): 312–328 315 author(s) data set methodology results yağcılar and demir (2015) 26 commercial banks’ data in turkey for the period 2002:q4– 2013:q1 panel regression analysis the increase in roa, total assets, loan/deposit ratio and liquidity ratio decreased the npls ratio. in addition, trading in the stock market reduces npls ratio for banks. the increase in the economic growth, interest from loans/total loans and capital adequacy ratio increases npls ratio, while being a foreign bank affects npls ratio negatively. abdioğlu and aytekin (2016) data of 22 deposit banks operating in turkey for 2002– 2014 difference gmm and system gmm increases in net interest margin, capital adequacy ratio and equity/total assets decreases npls ratio, while the increases in interest applied to loans, loan/deposit, other operating expenses/total operating income and non-interest income/total assets increase npls ratio. genç and şaşmaz (2016) data of turkey for the period 2005q4–2015q2 hatemi-j cointegration test, dynamic least squares method the rise of real exchange rate increases npls, while the increase of the bist-100 index and the commercial loan interest rate decreases npls. yüksel (2016) annual data of the turkish banking sector for 1988–2014 multivariate adaptive regression splines the rise of usd exchange rate increases npls ratio, while the increase in the interest income of banks and the growth rate of the country decreases npls ratio. kumar et al. (2018) data of five commercial banks and two nonbank financial institutions in fiji from 2000–2013 panel regression analysis the results show that roe, capital adequacy requirement, market share based on assets, unemployment and time have negative effect on npls, while the net interest margin affects npls positively. tekşen and çelik (2018) data of 10 turkish deposit banks between 2006 and 2016 panel regression analysis the increase in housing loans/consumer loans and commercial vehicle loans/commercial loans decreases npls ratio. the increase in vehicle loans/consumer loans, inflation, lagged value of npls and asset size increases npls ratio. umar and son (2018) data from 197 banks of china for the period 2005–2014 system gmm estimation the increase in gdp, effective interest rate and loan loss reserves/impaired loans decreases npls, while the increase in consumer price and renminbi exchange rate increases npls. bayar (2019) 23 emerging market economies data for 2000–2013 system gmm dynamic panel data estimator economic growth, inflation, institutional development, roa, roe, regulatory capital to risk-weighted assets and noninterest income to total income have a negative effect on nonperforming loans. conversely, unemployment, public debt, credit growth, lagged values of nonperforming loans, cost to income ratio and financial crises have a positive effect on nonperforming loans. kara and baş (2019) quarterly data of turkish banking sector for 2005:q4–2017:q4 ardl model the increases in the banking sector loan volume increase npls in the long run. continue of table 1 316 ş. yilmaz küçük. determinants of non-performing consumer loans for turkey: ardl bounds... author(s) data set methodology results kjosevski, petkovski, and naumovska (2019) data of the republic of macedonia banking sector for the period 2003q4–2014q4 ardl model the profitability of banks, the growth of loans, gdp growth affect npls negatively. banks’ solvency and unemployment affect npls positively. in addition, for enterprises, the exchange rate affects npls positively, while inflation affects npls negatively for households. kuzucu and kuzucu (2019) data of 53 emerging and 30 advanced countries for the period 2001–2015 dynamic panel regression the increase in gdp decreases npls for both economies in the whole term. in the post-crisis period (2008–2015), current account balance affects npls negatively, foreign direct investment and exchange rate affect npls positively. poyraz and arlı (2019) turkish banking sector’ monthly data for january 2008–august 2018 johansen cointegration test and granger causality test there is a cointegration relationship between usd/tl rate and npls. in addition, there is a causal relationship from usd/tl rate and gbp/ tl rate to npls. ciukaj and kil (2020) data of 629 banks operating in 7 euro countries for 2011–2017 panel regression analysis for commercial banks, gdp growth and total assets of banks have a negative effect on npls, on the other hand unemployment rate, herfindahl-hirschman index, house price indices and value of the loan portfolio affects non-performing loans positively. kozarić and dželihodžić (2020) banking sector data of bosnia and herzegovina for period 2006–2017 regression analysis gdp growth affects npls negatively, though inflation and unemployment affect npls positively. zheng, bhowmik, and sarker (2020) data of 59 bangladesh commercial banks for the period 1979–2018 ardl and vec models bank loan growth, net operating profit, deposit rates, gdp growth and unemployment affect npls negatively. bank liquidity, lending rates, domestic credit and exchange rates affect npls positively. ayaydın, pilatin, and barut (2021) 21 turkish banks’ data for 2004– 2017 static and dynamic panel regression analysis the increase in equity/total assets, provisions/ total loans, interest rate and unemployment rate increase npls ratio, while the increase in total loans/total assets decreases npls ratio. erdas and ezanoglu (2022) data of g20 countries between 1998 and 2017 two-step gmm regression the increase in operating expenses of a bank as a share of sum of net-interest revenue and other operating income, ratio of bank credit to bank deposits and lagged values of npls result to increase in npls. while increase in gdp growth, non-interest related activities as a percentage of total income, return on equity and ratio of bank capital and reserves to total assets results to decrease in npls. when the studies in the literature are examined, it is seen that the increase in gdp, roa and roe reduces non-performing loans. on the other hand, unemployment and increases in exchange rates negatively affects non-performing loans. the ratio of non-performing loans in the previous period, loan growth and interest rates are also generally the factors that increase end of table 1 business, management and economics engineering, 2022, 20(2): 312–328 317 non-performing loans. the growth of banks’ assets decreases non-performing loans. the effect of capital adequacy ratio, loan/deposit ratio, non-interest income, economic growth rate factors on non-performing loans has differences for different economies and periods. therefore, it is still important to determine the factors affecting non-performing loans. in addition, as in this study, determining the factors affecting different loan types will provide important contributions for practitioners. 2. data and methodology in this study, banks specific factors and macroeconomic factors that affect the npls ratio are investigated. for this purpose, monthly data of deposit banks in turkey and data on macroeconomic indicators for 2005:1–2021:12 are used. factors which have effects on the npls ratio are frequently investigated in the literature are included in the data set1. the variables used in the study are explained in table 2. table 2. variables used in the study (source: compiled by the author) symbol definition data source dependent variable npcl non-performing consumer loans and personal credit cards/total consumer loans and personal credit cards (%) brsa independent variables (internal factors) loans logarithm of total loans in deposit banks brsa car capital adequacy standard ratio (%) brsa roa return of assets (%) brsa nii/nie non-interest income/non-interest expense (%) brsa homeloan home loans / total consumer loans and personal credit cards (%) brsa ta logarithm of total assets brsa independent variables (macroeconomic factors) usd logarithm of usd/tl cbrt lir weighted average interest rates applied by banks for tl consumer loans (%) cbrt dir weighted average interest rates applied by banks for tl deposits with a term of up to 3 months cbrt unemp unemployment rate (%) tsi cpi logarithm of the consumer price index tsi ipi industrial production index (2015 = 100) tsi note: brsa: banking regulation and supervison of agency, cbrt: the central bank of the republic of türkiye, tsi: turkish statistical institute. 1 although gdp growth is a factor that is frequently examined in the literature and its negative effect is determined, it is not included in the data set because the data is used on a monthly basis in this study, since gdp is not calculated monthly. instead, the industrial production index is included in dataset to express economic activity. 318 ş. yilmaz küçük. determinants of non-performing consumer loans for turkey: ardl bounds... in this study, which investigated the effects of bank-specific internal factors and macroeconomic factors on the ratio of non-performing consumer loans, ardl limit test is used. the ardl bounds test can be applied with series that are i(0) and i(1), except for the constraint that the series is i(2) (pesaran et  al., 2001). for this reason, the stationarity of the series used is investigated with augmented dickey fuller (adf) unit root test and the results are summarized in table 3. it was determined that the dependent variable of the study, the npcl variable, is not i(0) according to the constant and trend model, but is i(1) according to both models. as seen in the table, the independent variables are found to be i(0) or i(1). the fact that all series were stationary at the level or at the first difference demonstrated the compatibility with the ardl bounds test. there are two stages in the ardl bounds testing approach. firstly, the cointegration relationship between the variables is examined with the unlimited error correction model (uecm). table 3. adf unit root test results (source: own calculation of author) variables i(0) i(1) constant, no trend constant, trend constant, no trend constant, trend npcl –2.9608 (0.0404)b –2.9937 (0.1366) –3.9569a (0.0020) –3.8924b (0.0141) loans –2.0723 (0.2562) –3.8315b (0.0168) –10.9239a (0.0000) –11.1006a (0.0000) car –5.2205a (0.0000) –4.6843a (0.0010) –11.0935a (0.0000) –11.3993a (0.0000) roa –1.5670 (0.4975) –3.6161b (0.0310) –3.8723a (0.0027) –3.8750b (0.0149) nii/nie –10.2188a (0.0000) –10.2113a (0.0000) –10.0684a (0.0000) –10.0424a (0.0000) homeloan –6.2431a (0.0000) –5.6593a (0.0000) –4.5302a (0.0002) –5.1825a (0.0001) ta 0.5869 (0.9891) –2.2572 (0.4549) –13.6074a (0.0000) –13.6099a (0.0000) usd 2.6294 (1.0000) –0.1366 (0.9940) –8.8289a (0.0000) –9.3910a (0.0000) lir –2.9955b (0.0370) –2.9433 (0.1512) –8.6246a (0.0000) –8.6496a (0.0000) dir –2.6059c (0.0934) –2.5597 (0.2994) –7.8413a (0.0000) –7.8658a (0.0000) unemp –1.5818 (0.4900) –1.7725 (0.7146) –13.1656a (0.0000) –13.1364a (0.0000) cpi 2.9897 (1.0000) 2.9933 (1.0000) –5.7653a (0.0000) –6.3234a (0.0000) ipi 0.9557 (0.9961) –1.5632 (0.8039) –5.2757a (0.0000) –5.4421a (0.0000) note: a, b ve c denote 1%, 5% and 10% statistical significance levels, respectively. the values in parentheses are the t statistic probabilities. business, management and economics engineering, 2022, 20(2): 312–328 319 if there is a cointegration relationship between the variables, the long and short run coefficients of the model are estimated in the second stage (akalin et al., 2018). in this study, eq. (1) will be used for unlimited ecm that tests cointegration with ardl bounds test for macroeconomic factors. if the null hypothesis (h0) for eq.  (1) is rejected, in other words, if cointegration is detected, eq. (2) and eq. (3) will be used to determine the effect of macroeconomic factors on the npcl ratio. eq.  (4) will be used to test the cointegration for the rate of non-performing consumer loans with the internal factors, and eq. (5) and eq. (6) will be used to determine the effect of the internal factors on the rate of non-performing consumer loans. 0 1 2 3 4 1 0 0 0 5 6 7 1 1 2 1 3 1 0 0 0 4 1 5 1 6 1 7 1 a b c d t i t i i t i i t i i t i i i i i f ge i t i i t i i t i t t t i i i t t t t npcl y y npcl y usd y lir y dir y unemp y cpi y ipi npcl usd lir dir unemp cpi ipi − − − − = = = = − − − − − − = = = − − − − ∆ = + ∆ + ∆ + ∆ + ∆ + ∆ + ∆ + ∆ +α + α + α + α +α +α +α + ∑ ∑ ∑ ∑ ∑ ∑ ∑ ;t (1) 0 1 2 3 4 1 0 0 0 5 6 7 0 0 0 ; a b c d t i t i i t i i t i i t i i i i i f ge i t i i t i i t i t i i i xnpcl y y npcl y usd y lir y dir y unemp y cpi y ipi − − − − = = = = − − − = = = = + + + + + + + + ∑ ∑ ∑ ∑ ∑ ∑ ∑  (2) 0 1 2 3 4 1 0 0 0 5 6 7 1 0 0 0 ; a b c d t i t i i t i i t i i t i i i i i f ge i t i i t i i t i t t i i i npcl y y npcl y usd y lir y dir y unemp y cpi y ipi ect − − − − = = = = − − − − = = = ∆ = + ∆ + ∆ + ∆ + ∆ + ∆ + ∆ + ∆ + ψ + ∑ ∑ ∑ ∑ ∑ ∑ ∑  (3) 0 1 2 3 1 0 0 4 5 6 7 0 0 0 0 1 1 2 1 3 1 4 1 5 1 6 / / a b c t i t i i t i i t i i i i f gd e i t i i t i i t i i t i i i i i t t t t t npcl y y npcl y loans y car y roa y nii nie y homeloan y ta npcl loans car roa nii nie homelo − − − = = = − − − − = = = = − − − − − ∆ = + ∆ + ∆ + ∆ + ∆ + ∆ + ∆ + ∆ + α + α + α + α +α + α ∑ ∑ ∑ ∑ ∑ ∑ ∑ 1 7 1 ; t t tan ta− −+α +  (4) 0 1 2 3 4 1 0 0 0 5 6 7 0 0 0 / ; a b c d t i t i i t i i t i i t i i i i i f ge i t i i t i i t i t i i i xnpcl y y npcl y loans y car y roa y nii nie y homeloan y ta − − − − = = = = − − − = = = = + + + + + + + + ∑ ∑ ∑ ∑ ∑ ∑ ∑  (5) 0 1 2 3 4 1 0 0 0 5 6 7 1 0 0 0 . / a b c d t i t i i t i i t i i t i i i i i f ge i t i i t i i t i t t i i i npcl y y npcl y loans y car y roa y nii nie y homeloan y ta ect − − − − = = = = − − − − = = = ∆ = + ∆ + ∆ + ∆ + ∆ + ∆ + ∆ + ∆ + ψ + ∑ ∑ ∑ ∑ ∑ ∑ ∑  (6) 320 ş. yilmaz küçük. determinants of non-performing consumer loans for turkey: ardl bounds... 3. effects of macroeconomic factors on non-performing consumer loans for the ardl bounds test, firstly the appropriate lag length will be determined. in order to select the appropriate model, the variables are tested with different combinations of lags and the model that gives the lowest value according to the information criteria is determined (akel & gazel, 2014). in this study, ardl (7,2,1,2,0,3,4) model was chosen as the appropriate model by akaike information criteria (aic) (figure 1). –2.043 –2.042 –2.041 –2.040 –2.039 –2.038 –2.037 –2.036 –2.035 –2.034 a r d l( 7, 2 , 1 , 2 , 0 , 3 , 4 ) a r d l( 7, 6 , 1 , 2 , 0 , 3 , 4 ) a r d l( 4, 2 , 1 , 2 , 0 , 3 , 4 ) a r d l( 5, 2 , 1 , 2 , 0 , 3 , 4 ) a r d l( 7, 6 , 1 , 2 , 1 , 3 , 4 ) a r d l( 7, 2 , 1 , 5 , 0 , 3 , 2 ) a r d l( 7, 2 , 1 , 5 , 0 , 3 , 4 ) a r d l( 7, 2 , 2 , 2 , 0 , 3 , 4 ) a r d l( 7, 2 , 1 , 6 , 0 , 3 , 4 ) a r d l( 7, 2 , 2 , 6 , 0 , 3 , 2 ) a r d l( 7, 2 , 1 , 6 , 0 , 3 , 2 ) a r d l( 7, 2 , 1 , 2 , 1 , 3 , 4 ) a r d l( 7, 2 , 2 , 5 , 0 , 3 , 2 ) a r d l( 4, 2 , 1 , 3 , 0 , 3 , 4 ) a r d l( 7, 2 , 1 , 3 , 0 , 3 , 4 ) a r d l( 6, 2 , 1 , 2 , 0 , 3 , 4 ) a r d l( 7, 3 , 1 , 2 , 0 , 3 , 4 ) a r d l( 7, 2 , 2 , 6 , 0 , 3 , 4 ) a r d l( 7, 6 , 1 , 6 , 0 , 5 , 2 ) a r d l( 7, 5 , 1 , 6 , 0 , 3 , 2 ) akaike information criteria (top 20 models) figure 1. selection of appropriate lag length for ardl bounds test (source: own calculation of author) ardl bounds test results for the determined (7,2,1,2,0,3,4) model are given in table  4. f-statistic is greater than the upper limit critical value at the 1% significance level. therefore, the null hypothesis (h0) is rejected and the alternative hypothesis (h1), which states cointegration between the variables at the 1% significance level, is accepted. also, there is cointegration at the 5% significance level for the critical values suggested by narayan (2005). table 4. ardl bounds test results (source: own calculation of author) model f-statistics critical values for the f-statistica critical values for the f-statisticb probability i(0) i(1) i(0) i(1) (7, 2, 1, 2, 0, 3, 4) 4.1666 10% 1.99 2.94 2.088 3.103 5% 2.27 3.28 2.431 3.518 1% 2.88 3.99 3.173 4.485 note: athe critical values determined by pesaran, shin and smith (2001) for t = 1000 and k = 6. bthe critical values suggested by narayan (2005) for case iii: t = 80 and k = 6 for the constant, no trend model. business, management and economics engineering, 2022, 20(2): 312–328 321 after determining the cointegration between the variables, long-term coefficients are estimated for the variables and the results are shown in table 5. the results obtained reveals that the increase in the lir and unemp variables causes an increase in the npcl variable at the 1% statistical significance level. while, the increase in the usd and dir variables causes a decrease in the npcl variable at the 5% and 1% significance level, respectively. diagnostic tests also show that there is not heteroscedasticity (breusch pagan godfrey test) and autocorrelation (breusch-godfrey serial correlation lm test) and the model is well defined (ramsey reset test). in addition, parameter stability for the predicted model is examined by cusum and cusumsq tests. the test results are shown in figure 2. when figure 2 is examined, the fact that the plots showing cusum and cusumsq are within the limits (95% confidence interval), confirms the stability of the estimations. table 5. long-run coefficients estimation results (source: own calculation of author) dependent variable: npcl independent variables coefficient t-statistics probability usd –3.3654 –2.2359 0.0266 lir 0.3114 3.0150 0.0030 dir –0.2633 –2.7715 0.0062 unemp 0.4950 2.9763 0.0033 cpi 0.9665 0.3915 0.6958 ipi 0.0419 1.4268 0.1554 c –9.4560 –0.8406 0.4017 diagnostic tests statistics probability breusch-godfrey serial correlation lm test 0.0528 0.9485 breusch pagan godfrey test 0.9920 0.4804 ramsey reset test 0.0653 0.9479 –40 –30 –20 –10 0 10 20 30 40 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 cusum 5% significance –0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 cusum of squares 5% significance figure 2. cusum and cusumsq test results (source: own calculation of author) 322 ş. yilmaz küçük. determinants of non-performing consumer loans for turkey: ardl bounds... the short-term coefficient estimates of the variables based on the error correction model are presented in table 6. the one period lagged value of the error term (ecm(–1)) has a value between –1 and 0 and is statistically significant. this indicates that the effects of a shock that will occur in the short term will disappear and the long-term equilibrium will be approached. the fact that the ecm(–1) coefficient is 0.04 indicates that after a shock, approximately 4% of the deviation in the long-term balance will improve within a month and approach the long-term balance, and the long-term balance will be achieved in approximately 25 months. table 6. error correction model results (source: own calculation of author) dependent variable: npcl variables coefficient t-statistics probability d(npcl(–1)) 0.2767 4.4008 0.0000 d(npcl(–2)) 0.0962 1.3794 0.1695 d(npcl (–3)) 0.2034 2.9318 0.0038 d(npcl (–4)) 0.0501 0.7915 0.4297 d(npcl (–5)) 0.0468 0.8632 0.3892 d(npcl (–6)) 0.0951 1.7806 0.0767 d(usd) 0.1208 0.6561 0.5126 d(usd(–1)) 0.5954 2.8262 0.0053 d(lir) 0.0332 4.3407 0.0000 d(dir) –0.0663 –5.8869 0.0000 d(dir(–1)) 0.0342 3.8380 0.0002 d(cpi) –0.1788 –0.2872 0.7743 d(cpi(–1)) –1.5413 –1.8647 0.0639 d(cpi(–2)) –1.8799 –2.6881 0.0079 d(ipi) –0.0016 –2.2372 0.0266 d(ipi(–1)) –0.0030 –3.7538 0.0002 d(ipi(–2)) –0.0008 –0.9625 0.3371 d(ipi(–3)) –0.0017 –2.3752 0.0186 ecm(–1) –0.0438 –5.8904 0.0000 when the findings related to macroeconomic factors are evaluated, it is revealed that there is a cointegration relationship with non-performing loans. increases in loan interest rates and unemployment rates in the long run increase the rate of non-performing loans in consumer loans. on the other hand, it is concluded that the increase in deposit interest rates and the usd exchange rate decreased the rate of non-performing loans. 4. effects of internal factors on non-performing consumer loans the ardl model to be established to analyze the cointegration relationship between the internal factors and non-performing consumer loans ratio is determined by akaike information criterion and the ardl (4,4,1,6,0,4,0) model is chosen as the appropriate model (figure 3). business, management and economics engineering, 2022, 20(2): 312–328 323 –2.014 –2.013 –2.012 –2.011 –2.010 –2.009 –2.008 –2.007 a r d l( 4, 4 , 1 , 6 , 0 , 4 , 0 ) a r d l( 7, 3 , 1 , 0 , 1 , 2 , 5 ) a r d l( 7, 3 , 1 , 0 , 0 , 2 , 5 ) a r d l( 7, 3 , 1 , 0 , 0 , 2 , 0 ) a r d l( 7, 3 , 1 , 0 , 1 , 2 , 1 ) a r d l( 7, 3 , 1 , 0 , 0 , 2 , 1 ) a r d l( 5, 4 , 1 , 6 , 0 , 4 , 0 ) a r d l( 4, 4 , 0 , 6 , 0 , 4 , 0 ) a r d l( 7, 3 , 0 , 0 , 0 , 2 , 0 ) a r d l( 4, 4 , 2 , 6 , 0 , 4 , 0 ) a r d l( 7, 3 , 1 , 0 , 1 , 2 , 0 ) a r d l( 4, 4 , 1 , 6 , 0 , 5 , 0 ) a r d l( 4, 4 , 1 , 6 , 0 , 4 , 1 ) a r d l( 4, 4 , 1 , 6 , 1 , 4 , 0 ) a r d l( 7, 4 , 1 , 6 , 0 , 4 , 0 ) a r d l( 7, 3 , 1 , 0 , 1 , 3 , 5 ) a r d l( 7, 4 , 0 , 6 , 0 , 4 , 0 ) a r d l( 7, 3 , 0 , 0 , 0 , 2 , 1 ) a r d l( 7, 3 , 1 , 0 , 1 , 3 , 1 ) a r d l( 4, 3 , 1 , 6 , 0 , 2 , 0 ) akaike information criteria (top 20 models) figure 3. selection of appropriate lag length for ardl bounds test (source: own calculation of author) ardl bounds test results for the determined (4,4,1,6,0,4,0) model are given in table  7. f-statistic is greater than the upper limit critical value at the 1% significance level, and the alternative hypothesis (h1) is accepted. table 7. ardl bounds test results (source: own calculation of author) model f-statistics critical values for the f-statistica critical values for the f-statisticb probability i(0) i(1) i(0) i(1) (4, 4, 1, 6, 0, 4, 0) 7.9044 10% 1.99 2.94 2.088 3.103 5% 2.27 3.28 2.431 3.518 1% 2.88 3.99 3.173 4.485 note: a the critical values determined by pesaran, shin and smith (2001) for t = 1000 and k = 6. b the critical values suggested by narayan (2005) for case iii: t = 80 and k = 6 for the constant, no trend model. after determining that there is cointegration between the variables, long-term coefficients are estimated for the variables and the results are shown in table 8. the results reveals that the increase in car and roa variables results a decrease in npcl variable at 10% and 5% significance levels, respectively. the effect of other variables on npcl could not be explained statistically. diagnostic tests also show that there is not heteroscedasticity (breusch pagan godfrey test) and autocorrelation (breusch-godfrey serial correlation lm test) and the model is well defined (ramsey reset test). the plots showing cusum and cusumsq in figure 4 are within the limits (95% confidence interval), confirming the stability of the estimations. 324 ş. yilmaz küçük. determinants of non-performing consumer loans for turkey: ardl bounds... table 8. long-run coefficients estimation results (source: own calculation of author) dependent variable: npcl independent variables coefficient t-statistics probability loans –11.8324 –1.4489 0.1492 car –0.8392 –1.8734 0.0627 roa –5.8131 2.3069 0.0127 nii/nie 0.0080 0.3764 0.7070 homeloan 0.0981 0.7328 0.4647 ta 8.4428 0.9886 0.3242 c 62.6026 2.3101 0.0221 diagnostic tests statistics probability breusch–godfrey serial correlation lm test 0.0964 0.9081 breusch pagan godfrey test 1.4196 0.1004 ramsey reset test 1.1101 0.2685 –40 –30 –20 –10 0 10 20 30 40 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 cusum 5% significance –0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 cusum of squares 5% significance figure 4. cusum and cusumsq test results (source: own calculation of author) the short-term coefficient estimates of the variables based on the error correction model are presented in table 9. the fact that the ecm(–1) coefficient is 0.02 indicates that a deviation in the long-term balance after a shock will improve by approximately 2% within a month and approach the long-term balance. a cointegration relationship is determined between the bank-specific factors and the npl ratio for consumer loans. in the long run, it is determined that the increase in the capital adequacy standard ratio and return on assets decreases the non-performing loans ratio. again, it is concluded that the resulting shocks approached the equilibrium in the long run. business, management and economics engineering, 2022, 20(2): 312–328 325 table 9. error correction model results (source: own calculation of author) dependent variable: npcl variables coefficient t-statistics probability d(npcl(–1)) 0.1042 1.5384 0.1258 d(npcl(–2)) 0.0502 0.7646 0.4455 d(npcl(–3)) 0.1966 3.3014 0.0012 d(ta) 3.0056 5.0185 0.0000 d(ta (–1)) 2.4295 3.7663 0.0002 d(ta(–2)) 1.8141 2.6527 0.0087 d(ta(–3)) 1.7024 2.4706 0.0145 d(car) 0.0025 0.1808 0.8567 d(roa) –0.0747 –5.6515 0.0000 d(roa(–1)) 0.0701 3.9623 0.0001 d(roa(–2)) 0.0785 4.7062 0.0000 d(roa(–3)) 0.0587 3.9739 0.0001 d(roa(–4)) 0.0494 3.5185 0.0006 d(roa(–5)) 0.0424 3.1826 0.0017 d(loans) –3.8135 –4.6807 0.0000 d(loans(–1)) –3.1460 –3.6296 0.0004 d(loans(–2)) –1.5670 –1.7525 0.0815 d(loans(–3)) –2.0619 –2.3359 0.0206 ecm(–1) –0.0245 –8.1122 0.0000 conclusions in addition to the benefits, they provide for the economies, banks can also cause significant damage to the economies with their failures. consequently, it is appropriate to ensure financial success of banks. high asset quality and profitability of banks are essential for their financial success. it is important for banks to be able to collect their loans in due time, in order to ensure asset quality and profitability. it is necessary to determine the factors affecting this situation in order to ensure that the loans are collected at maturity and therefore there are no non-performing loans. although the factors affecting non-performing loans are frequently investigated in the literature, studies investigating this effect according to loan types are limited. the aim of this study is to determine the bank-specific internal factors and macroeconomic factors that affect non-performing consumer loans for deposit banks operating in turkey. for this purpose, ardl bounds testing approach is used by using monthly data of the turkish deposit banking sector for 2005–2021. in the study, the effects of 6 bank-specific internal factors and 6 macroeconomic factors are investigated. the findings obtained in the research reveal the cointegration between macroeconomic factors and non-performing consumer loans. long-term relationships are investigated for the factors with cointegration relationship. the increase in loan interest rates and unemployment rate increase the rate of non-performing consumer loans. the results obtained are consistent. 326 ş. yilmaz küçük. determinants of non-performing consumer loans for turkey: ardl bounds... the increase in unemployment rate and the deprivation of income of more individuals will negatively affect their ability to pay loans. it is also determined that when loan interest rates increase, the rate of non-performing consumer loans increases. the increase in loan interest rates will cause more risky individuals to use loans. the increase in those with high risk among individuals using loans will cause non-repayment of consumer loans, which will increase the rate of non-performing loans. conversely, the increase in deposit interest rates and the dollar exchange rate decreases the rate of non-performing consumer loans. when deposit interests increase, the increase in interest income and the positive effect on the income level as a result of its distribution among individuals in the society may facilitate the payment of consumer loans. again, due to the high foreign currency and gold savings of individuals in turkey, the increase in the dollar exchange rate is likely to reduce the ratio of non-performing consumer loans. in the study, a cointegration relationship is determined between the internal factors specific to banks and the ratio of non-performing consumer loans. the effect of only 2 of the 6 internal factors on the ratio of non-performing consumer loans in the long term is found to be statistically significant. it is determined that the increase in the capital adequacy standard ratio and the return on assets decreases the ratio of non-performing consumer loans. this result shows that the decrease in risk and increase in profitability in banks decrease the ratio of non-performing consumer loans. the fact that banks with lower risk and increased profitability will turn to customers with lower risk in consumer loans, and will avoid too much risk due to sufficient profitability, may reveal this result. in the study, the effect of the increase in the return on assets decreasing the npl ratio is determined and the results are consistent with the results obtained by messai and jouini (2013), yağcılar and demir (2015), bayar (2019) and kjosevski et  al. (2019). the negative effect of the capital adequacy ratio on non-performing loans is similar to the results obtained by kumar et  al. (2018) for the fiji market. however, yağcılar and demir (2015) obtained a different result in their study, in which they examined the 2002–2013 period for the turkish market. this indicates that the effect of capital adequacy ratio on non-performing loans may vary periodically. the effect of unemployment rate on non-performing loans has also been determined for different markets and periods by messai and jouini (2013), makri et al. (2014), kumar et al. (2018), bayar (2019), kjosevski et al. (2019), ciukaj and kil (2020), kozarić and dželihodžić (2020) and ayaydın et al. (2021). findings regarding the decrease in non-performing loans due to the increase in the exchange rate differ with the findings obtained by yüksel (2016). the results obtained in the study are valuable for bank managers and investors. administrative decisions and investment decisions to be taken according to the factors affecting the non-performing consumer loans ratio will increase the performance of both groups. bank managers can maximize the profits of banks by re-evaluating the risks of consumer loans in periods when unemployment rate and loan interest rates are expected to increase. investors can prevent portfolio values from decreasing by avoiding investments in banks with high consumer credit in their portfolio in periods when an increase in unemployment rate and loan interest rates is expected. it is also determined that the decrease in the capital adequacy standard ratio and the return on assets will cause the ratio of non-performing consumer loans to increase. despite falling profitability, bank managers can maintain their asset quality by not turning to risky consumer loans, thus enabling profitability to rise again. business, management and economics engineering, 2022, 20(2): 312–328 327 the main limitation of this study is to investigate only the factors affecting the non-performing consumer loans ratio. in future studies, determining the factors affecting non-performing for other loan types, even for loan types included in consumer loans, will make a significant contribution to the literature and will help managers and investors in developing strategies. references abdioğlu, n., & aytekin, s. 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(2020). does the financial crisis change the effect of financing on investment? evidence from private smes. journal of business research, 110, 456–463. https://doi.org/10.1016/j.jbusres.2020.01.063 https://doi.org/10.2478/jcbtp-2020-0011 https://doi.org/10.1108/arj-06-2015-0077 https://doi.org/10.1080/1540496x.2018.1547877 https://doi.org/10.2298/pan1402193m https://doi.org/10.1080/00036840500278103 https://doi.org/10.1186/s40008-020-00214-4 https://doi.org/10.1002/jae.616 https://doi.org/10.25095/mufad.625767 https://doi.org/10.1257/aer.101.5.1676 https://doi.org/10.2991/aebmr.k.201222.022 https://doi.org/10.25095/mufad.438778 https://doi.org/10.1108/jabs-01-2016-0005 https://doi.org/10.3390/su12010325 https://doi.org/10.1016/j.jbusres.2020.01.063 _goback baut0010 baut0015 bme_16(1)_2018_maketas.indd copyright © 2018 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. business, management and education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 1: 81–93 https://doi.org/10.3846/bme.2018.2142 *corresponding author. e-mail: barta.gergo@phd.uni-szie.hu introduction financial auditors want to make sure that relevant it systems in the scope containing sensitive financial information support their work, however, the increasing number of cybercrime activities and it systems with lack of appropriate controls makes the audit process more difficult, emerging the question how much they can rely on the system. if the answer is no, then financial auditors must perform substantive testing and examine much more documents what results in ineffective audit work, and chief level executives are initiating awkward discussions why the audit took more time and why it costs more. as defined by ifac (international federation of accountants “the purpose of an audit (financial audit) is to enhance the degree of confidence of intended users in the financial statements.” (ifac, 2009). the role of financial auditors is, therefore, to perform procedures in alignment with predefined criteria to provide an opinion whether the financial statement of the audited organization is presented fairly. these predefined criteria are based on international accounting standards such as the ifrs (international financial reporting standards), the increasing role of it auditors in financial audit: risks and intelligent answers gergő barta* szent istván university, doctoral school of management and business administration, páter károly str. 1., 2100 gödöllő, hungary received 29 may 2018; accepted 09 june 2018 abstract. financial auditing cannot be imagined without the involvement of it specialists since business processes are designed to be served by it components such as erp systems, online customer-facing applications, databases etc. financial auditors therefore exposed to it system and control reliance want to gain reasonable assurance that data and transactions stored in it systems cannot be modified, access is controlled, and there is no suspicion of any fraud at business organizations. the paper tries to understand the current situation of it audit involvement in financial auditing, interpret risks that parties face and provide some solutions by use of intelligent applications. keywords: financial audit, it audit, it controls, it threats, risk management, machine learning. jel classification: m42. 82 g. barta. the increasing role of it auditors in financial audit: risks and intelligent answers us gaap (the united states generally accepted accounting principles), has (hungarian accounting standards) etc. financial auditors, as a basis, express the audit opinion to obtain reasonable assurance, not an absolute assurance, which indicates that the goal is not to achieve total certainty, but a high-level confidence that financial statements are not materially misstated (isaca, 2004). there are many reasons why absolute assurance cannot be provided. one of them is that it is impossible to detect each and every human error as it would require the financial auditors to inspect every transaction, invoice, bank statement, etc. that demands a huge amount of time and resources, thus raises the question of efficiency. financial auditors use sampling techniques to select and observe audit evidence based on statistical and other criteria, hence there is a chance that there might be some errors that can go undetected. that is the reason why “materiality” is introduced into the world of financial auditing. materiality is a concept indicating the significance of a transaction. misstatements can be material if they could influence the economic decisions of users, taken on the basis of the financial statements (ifac, 2009). the audit report issued by the audit firm expressing the opinion on financial statement has a high impact on the operation of an organization. the audit report can be used for the purpose of attracting external investors, obtaining credit, or it can affect the whole public appearance of the organization. as a consequence, auditors have a high responsibility to appropriately assess controls, procedures and perform testing to detect anomalies in business operation, therefore, detect the existence of material misstatements. to highlight the importance of the mentioned point, it is worth noting the most known case in history, the famous enron scandal which eventually bankrupted and because of independence issues and the destruction of audit evidences, its audit firm, arthur andersen was found guilty and the audit license had been revoked making around 85.000 people unemployed (li, 2010). in 2015, tesco’s profit had been overstated by £250 million leading to a loss of £2 billion in value for the company, which resulted in the change of tesco’s audit firm (the guardian, 2014). as the examples show, financial auditors have an immense obligation to express a fair opinion on organizations’ financial statements, however, with the increased digitalization techniques and complex information systems, other approaches should have been introduced in the process of financial auditing, as the spread of it solutions not only caused convenience and automation of business processes but brought in many new risks into the life of organizations. to appropriately address these risks affecting the books and accounting, other experts are required to be involved in financial audits. 1. digitalization and new threats the automation of business processes is inevitable in order to stay in the competition. digitalization can enhance productivity, reduce human error, and make the accounting process totally paperless. based on a research work, performed in 2017 by one of the biggest audit firm, kpmg, about the digitalisation in accounting (kpmg, 2017), besides among others, data quality and data consistency have improved, and reporting speed and focus on processes has increased the most in recent years among the 146 companies the research has been conducted in germany as shown in figure 1. business, management and education, 2018, 16(1): 81–93 83 figure 1. the influence of digitalization on accounting – status quo in germany (source: kpmg, 2017) the identifiers on the y-axis relate to the following items: 1. data quality and data consistency have improved. 2. reporting speed has increased. 3. the focus on processes has been increased. 4. the range of services has been expanded. 5. employee qualifications have expanded in the direction of it. 6. more tasks have been bundled internally. 7. costs have been reduced. 8. there has been an overall reduction in accounting staff as a result of digitalisation. 9. more tasks have been outsourced to external service providers. important to notice that digitalisation also have an impact on the whole accounting profession, a great number of respondents agree that employees’ qualification has moved towards the direction of it which raises many questions beyond the subject of this article. how long will this profession be alive and how will it change the roles of financial auditors entirely? if the accounting process becomes totally automated, then it professional involvement will be maximized, as the most of the focus will be on the reliability of it services and it controls. financial auditors, then, should only understand the support business processes, but testing will maybe only required for the it environment to obtain assurance that controls are designed, implemented and operating effectively to protect financial information. this reasoning serves as an evidence that it experts’ roles is a must, increased and expected to continuously increase in the years to come. one of the biggest negative consequence of high-level automation is the extended exposure to cyber threats as systems are connected to large networks opening several doors to business-critical information in case appropriate controls are not implemented to protect business information assets. as new technologies are introduced by companies for development purposes every now and then, new threats and a new type of cyber attacks are appearing parallel to take advantage of not yet discovered vulnerabilities. figure 2. shows the emerging trend of new malware specimen (in millions, where 2017 q2-q3-q4 are forecasted) in the past few years where we can observe that the forecasted result for 2017 is almost 60 times 84 g. barta. the increasing role of it auditors in financial audit: risks and intelligent answers more new malware than in 2007 (statista, 2017a). these malicious software programs can encrypt stored data and give the encryption key for a significant amount, steal business information committing data leakage selling the data and benefiting in the black market or totally stop the business causing reputation risk and induce disasters. cybercriminals are threatening companies, individuals, other organizations by stealing data or making them unavailable causing business disruption that can have a high impact on the accuracy of source data feeding financial statements. if business services are not available e.g. as a result of a ddos attack, background processes being responsible for automated accounting might not work in alignment with management intention and several items might go unbooked. of course, this is just examined from the perspective of data integrity relevant to the financial statement, in worst case scenario, business organizations are not able to continue business for a longer period which can result in bad public appearance increasing reputational risk, finally resulting in bankruptcy. one of the biggest recent ransomware is petya which demanded $300 for decrypting computers infected 2.000 devices causing disruption in the uk, us, france, germany, and mostly in ukraine where the list of victims included the ukrainian government, interior ministry and ukrainian national bank (the telegraph, 2017). external threats, therefore, should be taken care of by implementing logical and physical measurements, for both preventing and monitoring its existence, and action must be taken when its presence is detected. however, threats not only can come from externally, but internal fraud is also present and based on the research of kroll (2015), internally committed frauds also show an emerging trend. in the study 768 senior executives were interviewed from worldwide, and 75% of companies were reporting internal fraud, which has increased 14% compared to the results obtained in 2012. figure 3 illustrates the trend of types of fraud and declared vulnerabilities. the identifiers on the y-axis relate to the following items: 1. theft of physical assets 2. vendor, supplier or procurement fraud 3. information theft 4. management conflict of interest 5. regulatory or compliance breach figure 2. viruses, worms and trojan horses. number of new malware specimen (in millions) (source: statista, 2017a) business, management and education, 2018, 16(1): 81–93 85 6. corruption and bribery 7. internal financial fraud 8. misappropriation of company funds 9. money laundering 10. ip theft 11. market collusion number 1 internal fraud is the theft of physical assets that beyond decreasing the property of organizations, highly contributes to data leakage as employees or external parties stealing the device as well as the information stored on them. fraud can be due to human error, careless, and also on purpose in order to benefit in some way from the lack of internal controls by the perpetrator. internally committed fraud can be as well as dangerous as external attacks since employees have already access to highly restricted and business-critical information. altering business information in order to show better business performance may seem attractive for management or other employees hoping for better year-end bonuses. internal financial fraud was named in the referenced research as the 7th type of fraud that caused the biggest headache for companies which definitely have a great impact on the reliability of the financial statement. thus, business data might be manipulated and the financial statement may present distorted data as a result. this type of fraud can be easily committed if controls are not in place. access rights should be appropriately granted, continuously monitored and reviewed in order to prevent and detect unauthorized access (such as to modify financial data), adequate logging should be established so that organization could continuously monitor transactions and detect anomalies, and definitely the internal roles and responsibilities should be segregated so that one employee cannot be involved in one whole process (such as booking an invoice and then approving it). as we can see here, financial auditors have to face many new challenges with the emerging trend of digitalization, however, financial auditors by themselves cannot cope with the mentioned problems, therefore, it expert involvement is needed to give an opinion about the control environment of it systems to adequately address the risk arising from the use and operation of technological solutions having an expanded impact on the completeness and accuracy of financial data. figure 3. companies affected by fraud and vulnerable to it (source: kroll, 2015) 86 g. barta. the increasing role of it auditors in financial audit: risks and intelligent answers 2. relying on information systems since paper-based accounting is not anymore taking place in the life of organizations, financial auditors have to make sure that financial data stored in different information systems are complete and accurate. this requires to perform an investigation on the it infrastructure and related applications, databased etc., therefore on selected it elements affecting financial reporting. as we could see from the previous section, this has to be done, so far, because of the existence of external and internal threats. the audit of information systems can be divided into two major fields as explained by palmas, e. (2011): it application controls and it general controls. application controls are specific controls related to specific information systems. they can be e.g. input controls that regulate the format and range of data for a transaction needing input data, or an appropriate authorization in a system. for example, in the sap erp application, authorizations can be granted via profiles, roles, which can contain transaction codes, table authorization, or regulating which company code an employee can access (manara & cavalleri, 2011). the it auditor should have specific knowledge on the system, the auditor should know which controls are relevant and have to test whether it is in alignment with industry standards and good practices as well as established internal policies and applicable regulations. it general controls are non-specific processes, procedures and policies which apply to the whole it environment ensuring that it operation (including access management and development) is adequately functioning enforcing an error-free operation. for example, it auditors have to address the risk arising from poor access management processes. if access rights are not controlled, there is no management approval, no user access review taking place etc. then there is no assurance that business users are not modifying data being beyond their daily responsibilities. it is not only a threat to confidentiality being compromised but that due to the lack of knowledge or purposely, an employee can modify financial data. definitely, the arising risk from general it controls are wide, and appropriate risk identification and management processes shall be conducted by the auditors to understand the nature and extent of organizations to determine the risk level necessary for obtaining assurance that financial auditors can rely on the audited information systems. not only can the human error be imagined, but information systems can go wrong in case of failure in the supporting hardware and infrastructure. if a storage stops functioning, then data is no longer available, and the accounting process must stop if there is no backup plan, such as providing business continuity by utilizing a secondary redundant site reserved for such disaster situations. if accounting stops then a control should be established requiring that every automatic job retrospectively performs accounting, and accountants also manage to book everything after the disaster situation is over. as we can observe, this area is quite complex, and one of the conclusion to note here is that more automation and use of it infrastructure are leading to more and more risks, therefore, the role of it auditors is increasing. the international standard on auditing published by ifac (2009) details the following control areas which have to be carefully investigated: – data center and network operation – system software acquisition, change and maintenance – program change – access security business, management and education, 2018, 16(1): 81–93 87 – application system acquisition, development, and maintenance the following section explains more details about the topic of program change, as it directly relates to the innovation of organizations that drives businesses into the direction of more intelligent solutions introducing several new risks that can have an impact on financial data, therefore the reliability of financial statements. 3. it development to stay in competition research and development is one of the key attributes that can contribute to surpass competitors, or at least to stay in competition for business organizations. in the perspective of the scope, it means that systems have to be developed, new features have to be introduced, legacy systems have to be changed to approach the current level of innovation that helps the whole company develop making the communication easier between information systems, better attempting customers or exchanging information with administration on a faster way. at the same time, development of information systems can negatively affect financial data integrity. new feature development should be controlled via an effective change management process. this means that application development should be appropriately documented in order to address how the change in the system would affect financial data e.g. with data transformation, developments must be appropriately tested in order to detect any anomaly, human error and malicious code, roles of development and implementation into the production environment has to be segregated in order to prevent a developer implement malicious or not tested code into production, and new developments have to be monitored whether they operate as intended. the problem here is that not always possible to take care of the mentioned points because of the lack of human resource or sometimes a change is needed as quick as possible to solve an urgent business problem, therefore, controls are bypassed e.g. in case a transaction is stuck in the system, or quick resolution is needed at monthend closing. untested programme code, therefore, means a significant risk to financial data. sap has introduced a so-called debug function in the netweaver 7 in 2005, which can be used to find mistakes directly in the programme code even in the production environment (mohapatra, 2015). the biggest problem with that is that it allows to bypass application level controls by changing source code which is responsible for the protection of business data. one not appropriately considered access right and the system can become easily vulnerable. definitely, there is a solution to overcome this problem by only granting this access to users when it is really needed by continuously monitoring its use, and once the job is done, the access shall be revoked. as we can see here, to adequately protect the information stored in information systems a great number of staff is required, but where is the balance between the cost and security? new developments also contain new vulnerabilities. if a new platform is introduced, then appropriately tested and protected applications can become vulnerable by the threats not yet discovered for operating platforms. in the case an application contains its security setting in the operating system level, then no matter how secured the application is, it can be bypassed. figure 4 shows the new vulnerabilities for microsoft products in the last few years until the end of february, 2018, as microsoft windows is one of the most popular operating platform. 88 g. barta. the increasing role of it auditors in financial audit: risks and intelligent answers figure 4. microsoft vulnerability statistics (source: cve details, 2018) the general trend is increasing that can be favourable for cybercriminals as well internal fraud commenters, since they can take the advantage of vulnerabilities if they are not addressed in time, or the patch management process (responsible business procedure for hardening servers and installing corrective program code) is not operating effectively. as a summary, automated processes create many new risks. beside preventive controls, detective controls can help detect any anomaly if log files of information systems are appropriately monitored and secured from modifications e.g. by employees. 4. monitoring transactions log monitoring cannot be effective if performed totally manually as because of human errors. several mistakes, failures and behaviour being different from the standard operation can go undetected. what can be then the solution? how to answer for more and more business process automation? is it even possible to detect each and every fraud and potential risks at all? information systems can produce a tremendous amount of log files. each user log-in, each data modification, each application process, each background job running, each automated process activity at several layers of information technology elements. on this increased number of files sometimes are impossible to go through manually, it would require many new employees endangering efficiency and creating more cost. so why not respond to the enhanced level of automated operations with the automated investigation? what do we need to prepare and have in order to apply automated analysis? in case of external threats, the network traffic can be monitored so as to detect anomalies in daily operation. this can be done by looking up for unusual behaviours. first, the normal operation should be analysed creating patterns what employees are using for the network, and then the task is to determine data flow which differs from these patterns. the same can be performed for internal transactions, just in this case not only the network and electronic channels to the it infrastructure shall be monitored, but each and every access, data change and flow. a test period should be developed when data for the normal business operation is collected, appropriately analysed, and then patterns are created. definitely, there are many things to be considered. first is, that it has to work on a time series basis i.e. an internal fraud may take for several months when the committee tries to build up the perfect crime in silence. second, action business, management and education, 2018, 16(1): 81–93 89 plans have to be in place once an anomaly is detected to answer for possible fraud or attack. the biggest question, is definitely, how is it even possible to carry out, and that is when the challenge starts from. 5. artificial intelligence as a possible solution with the increased technology development, artificial intelligence has arisen. based on recent researches, artificial intelligence seems to have tools to solve the above-mentioned problems. artificial intelligence is a scientific area which aims to empower computers with human thinking and problem-solving. haugeland (1985) defined artificial intelligence as a new experiment to make computers to think, and used the expression as “conscious machine”. nillson (1998) defined artificial intelligence as the scientific area of intelligent behaviours of objects. the very first idea and the basics of artificial intelligence was detailed by mcculloch and pitts (1943), in their publication they investigated the human nervous system and concluded that machines could also work on the principles of the human brain, opening the door for recent machine learning systems with their publications, which is a subfield of artificial intelligence. machine learning can be applied to teach algorithms based on historical data to recognize patterns, therefore, may appear to be useful to detect and prevent fraud. machine learning has three major fields of research (raschka, 2015): 1. supervised learning 2. unsupervised learning 3. reinforcement learning supervised learning is used to teach algorithms with historical data to predict an outcome for unseen data. (norvig & russell, 2005) this outcome can be a category whether a transaction appears to be fraud or not. in addition, with supervised learning, the probability of a transaction being fraud can also be estimated. unsupervised learning is used for recognizing pattern in existing data, however, no previous training is needed. it can group transactions which behaves similarly, thus, it can be used to initially determine what kind of business behaviours an organization can divide its transactions. clustering algorithms belong to unsupervised learning. reinforcement learning attempts to maximize a reward for a software agent in an environment. for the problems in scope, supervised learning can give promising results. one of the greatest machine learning algorithm which is widely used and most of the research focuses on is deep learning (gartner, 2017a). deep learning serves as a state of the art technology for autonomous vehicle driving, natural language processing, image and speech recognition etc. deep learning is an extended version of neural networks, such as the principles were introduced by previously referenced mcculloch and pitts (1943). neural networks aim to copy the process of human decision making (szatmári et al., 2013) the neurons collect data from the input, transport them to other layers of neurons, activating the data via an activation function, and finally providing data for the output neurons. with the application of neural networks, both regression and classification problems can be solved. investigating transactions whether they are fraudulent or not is a binary classification problem and by feeding a neural network with historical data, it can predict the existence of fraud. the conclusion, and recommendation here is that adequate preventive controls should 90 g. barta. the increasing role of it auditors in financial audit: risks and intelligent answers be in place first to prevent any fraud either its coming from external or internal sources. however, preventive controls are not always enough as they can be bypassed because of not appropriate implementation or because of the problems of operating effectiveness. therefore, detective measures should also be implemented, and the one which should be considered is to monitor the log files and each and every user activity. as information systems produces a large amount of log files, it cannot always be done manually because of the limit of human resource, but automated solutions should be developed such as with the help of machine learning which, with a great care and attention, can help organizations to detect in time any anomaly observed. 6. auditing with artificial intelligence big four public accounting firms have also recognized that artificial intelligence can be a useful supporting tool in financial audit and started adapting their solutions and made agreements with tech giants purchasing their intelligence products. big four companies are deloitte, pwc, kpmg and ey, the four largest auditors in the world (statista, 2017b). as summarized by issa, ting, and vasarhelyi (2017) deloitte are introducing a contract analysis system which aims to help auditors analyse complex and long documentation provided by the audited company as audit evidence. it can be performed by text mining and natural language processing saving precious time since auditors don’t necessarily have to go through each and every contract, statement and policy, the system is capable to extract the necessary information which can then be used for further investigation. ey uses a software which can model human behaviour (ey, 2016), pwc applies artificial intelligence to optimize its internal processes (mit, 2016), kpmg works with ibm’s wattson to detect audit exceptions based on loan grading (kpmg, 2016). 7. challenges of artificial intelligence artificial intelligence can provide a wide variety of solutions which can help protect the integrity and confidentiality of financial data. if so, how is it possible that not each and every organization using it already? gartner (2017b) has performed a research on the challenges of artificial intelligence where 83 companies were asked for an interview. the results of current artificial intelligence challenges shown on figure 5. figure 5. biggest challenges of artificial intelligence (source: gartner, 2017b) business, management and education, 2018, 16(1): 81–93 91 the identifiers on the y-axis relate to the following items: 1. lack of necessary staff skills 2. defining our ai strategy 3. identifying use cases for ai 4. funding for ai initiatives 5. security or privacy concerns 6. the complexity of integrating ai with our existing infrastructure 7. determining how to measure value from using ai number 1, responded by more than half of the organizations is that they lack of appropriate experts who could be capable of building up the artificial intelligence infrastructure meaning that relevant business needs exist, but the education does not follow the technology trend that is an obstacle for further development. number 2 challenge is that defining artificial intelligence strategy is problematic. business strategy is the main source, each and every policy, procedure and strategy should be derived from ensuring that different functional areas also understand the business needs and other development initiatives in alignment with the business goals of organizations. if business strategy and it strategy are not harmonized, then business and it might follow their self-interest causing harm to achieve business objectives. artificial intelligence strategy, therefore, should also follow business strategy, but if business strategy is not well defined, or does not even exist, then the strategy of artificial intelligence will not be a success story, more like unnecessary waste of money and resources. number 3 challenges are identifying use cases for artificial intelligence and the funding problem of it. finding appropriate business case can be hard due to a lack of knowledge or organization culture. funding the initiatives is always a problem, as the quantitative value of artificial intelligence cannot always be measured, therefore, chief executives cannot be convinced the necessity of artificial intelligence. it can be seen as a plus cost, not the added value to the business operation. number 4 challenge is the security and privacy concerns for applying artificial intelligence. as information systems are vulnerable against internal and external threats, artificial intelligence applications are not exceptions either. in addition, artificial intelligence can introduce new threats. not properly trained intelligent applications can have serious consequences endangering not only financial data, but the whole operation of a company. intelligent solutions can be used for automated decisions, chief level executes might rely on the outcome of such systems, therefore, if they are not appropriately tested or fine-tuned for current business needs, it may lead to false conclusions resulting in incorrect decisions. also important to mention, since intelligent solutions can automate whole business processes, the production of malware is also possible meaning that machines by themselves empowered by artificial intelligent can be capable of producing more and more malware software flooding the internet with no human intervention meaning that with the trend of automation cybercriminals also have the tools build up intelligent blackmailing or malicious robots that cause significant harm for organizations and for the whole society. number 6 challenge is the problem of integrating artificial intelligence with the current it infrastructure. still many organizations use legacy applications that operates well for long years, but these systems do not have the capability for further intelligent development because of the limits of obsolete 92 g. barta. the increasing role of it auditors in financial audit: risks and intelligent answers technology or programming standards. number 7 challenge is the problem of measuring the real value from artificial intelligence monetarizing the added value, quantify and estimate exactly the reduction in costs, or benefits. this may be hard as for determining the value, key performance and financial indicators shall be measured historically, evaluated and then compared. but the lack of appropriate measurements might result in the fact, that certain solutions may not be comparable, therefore, the value cannot be estimated. conclusion based on the analysis of relevant literature and statistics presented in this article, the conclusion can be drawn that with the increased use of automated solutions to reduce human error and optimize business processes, a couple of new risks are introduced into the life of business organizations that have to be taken care of. to protect information relevant to financial reporting, effective controls must be implemented that cannot be bypassed, but the lack of human resource and not appropriate design can leave information systems vulnerable. financial auditors, in the era of digitalization, cannot perform an effective audit without the involvement of it auditors. as the trend is increasing, it experts are more needed to test it environments in order to obtain assurance that financial data is appropriately protected, and there is no suspicion of internal fraud via the exploitation of vulnerabilities. artificial intelligence can provide solutions as an answer to the risks introduced by digitalization, however, many challenges exist as of now that can pull back its high-level spread. references cve details. 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(2017). petya cyber attack: everything to know about the global ransomware outbreak. retrieved from https://www.telegraph.co.uk/technology/2017/06/27/petya-cyber-attack-everythingknow-global-ransomware-outbreak/ this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 2: 207–223 https://doi.org/10.3846/bmee.2022.17101 *corresponding author. e-mail: mangirdas.morkunas@evaf.vu.lt can climate-smart agriculture help to assure food security through short supply chains? a systematic bibliometric and bibliographic literature review mangirdas morkūnas 1*, elzė rudienė 2, aleksander ostenda3 1faculty of economics and business administration, vilnius university, lithuania 2business school, vilnius university, lithuania 3university of technology, katowice, poland received 06 june 2022; accepted 04 july 2022 abstract. purpose – this paper aims to reveal potential research possibilities for enhancing climatesmart agriculture through short supply chains. research question – how can short supply chains assure food security and the promotion of climatesmart agriculture? research methodology – bibliographic and bibliometric coupling techniques were employed using data from 1990–2022. the raw data was processed using the vosviewer 1.6.18 software version. findings – the results confirm the positive effect of the systemically important relationship between the short supply chain and food security. research limitations – climate-smart agriculture is a complex and multifaceted phenomenon. additional variables may have moderating and mediating effects on the impact of short supply chains on food security. practical implications – the results establish the importance of having a short supply chain for food security in different aspects of the process from the harvest to the table. originality and value – this study confirms the rationale for developing shorter food supply chains to assure food security and climate-smart agriculture when possible. keywords: climate-smart agriculture, food security, short supply chain, bibliographic analysis, vosviewer. jel classification: q18, q19. introduction the coronavirus pandemic, which began in 2019, and the 2022 war in ukraine are the main causes of disruption to the food distribution network (benedek et  al., 2021; barrett, 2020). http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://orcid.org/0000-0002-5575-2213 https://orcid.org/0000-0002-9326-5379 https://orcid.org/0000-0002-9326-5379%202 208 m. morkūnas et al. can climate-smart agriculture help to assure food security through short supply... sustainability and the food supply chain (from production to consumption) are the key challenges in terms of food loss and waste (fao et al., 2021; stanciu et al., 2022). one option for solving this problem is reflected in a growing trend towards a diet based on local products (constantin et al., 2021). the traditional structure of the supply chain has several limitations within the process (mirabelli & solina, 2019). the number of actors in a long supply chain depends on the complexity of the product’s production and the ability of one manufacturer to carry out all possible work to enable the product to be used by the end customer (molnár et  al., 2010). short food supply chains (sfscs) are recognised as innovative options with the potential to control prices and be independent of other parties (ilbery & maye, 2005; aleksiev & petrova, 2021). having a short food supply chain also benefits the producer, who can create a larger one for added value, and the consumer, who receives healthier food from a shorter distance. supply chain risk can lead to internal and external disturbances (li et al., 2018; rauschmayer et al., 2015) regarding sustainability, food security and food waste. sustainable supply chain management (sscm) is important not only for the optimisation of the process but also for food security (tuomala & grant, 2021). supply chains can be categorised by different characteristics (e.g., type of product, market demand), which are usually related to food security (castro & jaimes, 2017). 1. a brief literature review on the nexus between food security and the short supply chain problems concerning food waste were identified in the 1980s by the food and agriculture organization [fao] and centred on food security and the fight against hunger. as tuomala and grant (2021) have identified, security and access to food are dimensions directly related to sustainable development and, thus, to the topics of food security and food waste. the inefficiency of the food supply chain is characterised by two aspects: first, it is a disruption (e.g., pandemic, war) and a dynamic environment, and second, it is the length of the supply chain and the need to compromise between sustainability and economic functioning (vojtovic et al., 2016; torero, 2020). because the full cycle (from the farm to the table) is compressed to meet deadlines and maintain production efficiency, supply chain design must rely on logistics and warehousing functions (gružauskas et al., 2018; xue et al., 2017; diaz-ruiz et al., 2018; krishna bahadur et al., 2016) as the main aspects for preventing food loss. magalhães et al. (2019) have identified 15 main causes of food loss, including lack of infrastructure and technical management, inefficient storage management, lack of coordination and exchange of information, lack of pricing strategies and advertising management, overproduction and inadequate demand forecasting (magalhães et al., 2019). disruptions of transport traffic can also play an important role in reducing the supply chain system efficiency (castro & jaimes, 2017). diaz-ruiz et al. (2018) categorise the reasons that lead to food security, loss and waste at three different levels: (a) micro-level causes (e.g., packaging); (b) meso-level causes (e.g., infrastructure); and (c) macro-level causes (e.g., purchasing options). inefficiencies in the food supply chain, leading to food security problems, loss and the generation of waste take place across all of these stages (hartikainen et al., 2018; raak et al., 2017). the covid-19 pandemic has had a significant impact on the food security and food supply chain, adding to the rapid increase of food insecurity compared to the pre-covid-19 business, management and economics engineering, 2022, 20(2): 207–223 209 period. pandemics impact food security and cause disruption to the gfsc (global food security supply chain) as well (alabi & ngwenyama, 2022). the food supply chain is influenced by multiple different parties, such as politicians, retailers, society and manufacturers, and farmers/growers (mithun ali et al., 2019). the fao et al. (2013) has identified the need to focus on food loss and waste generation in the initial stages of the food supply chain from the farm/growing area to the distribution stage. in the european context, there are two types of food supply chains: local food systems (lfs) and short supply chains (sfsc) (floris & schwarcz, 2018). from a global perspective, the food supply chain usually includes the stages of farm, processing, wholesale, retail and consumer. many different elements comprise these stages, and each element can influence food loss and waste (chauhan et  al., 2021). a short supply chain has fewer negative impacts (aleksiev & petrova, 2021) on food security because of the distance between production and consumption. the quality of the food is mainly reflected in the losses, as it is important to measure food security. it is affected by several feedback loops: two cycles of positive feedback cycles or reinforcement. one of the aspects of the short supply chain is the “local food system”, in which the production, processing, marketing and consumption of food takes place in a limited geographic area (todorova, 2020). the main positive aspect of food supply chains is the number of intermediaries (in principle, using the minimum number is preferable). the ideal is to have direct contact between the producer and the consumer. there are different groups of possible systems, including “community-supported agriculture” and “member states” (todorova, 2020), and the main issues include direct communication (consumer–producer) and transportation (e.g., farm shops, pick-your-own). jarzebowski et  al. (2020) classify factors into three groups: (1) creation of short food supply chains (product know-how, innovations, regulatory frameworks and government policies); (2) product development in the short food supply chain (efficient application of technology, investment of time and money, collective branding); and (3) access to market (online sales, sales to local communities) (hoang, 2021). sellitto et  al. (2018) have identified nine factors present in the short food supply chain: environmental friendliness of operations; specificity of territorial brands; direct and ethical relationships between producers and consumers; organic production; food safety and traceability; cultural heritage; consumers’ health; origin identification of products; and local work and cooperation. researchers have found that the supply chain evaluated by the structure has different problems with food security (castro & jaimes, 2017). the lack of investment in the agriculture sector is identified as a major barrier to ensuring food security (kaur, 2021). this finding stresses the importance of the first – economic dimension of climate-smart agriculture. the main factors influencing food security, loss and waste in the food supply chain in the context of climate-smart agriculture beausang et  al. (2017) identify pre-harvest conditions and actions in the field that can lead to subsequent losses in the food supply chain due to differences in the quality at harvest; specifically, contracts may undersupply quantities more than necessary, and promotions by retailers can manage waste. janousek et  al. (2018) indicate that food producers, retailers and consumers experience financial losses associated with food waste stemming from direct about:blank 210 m. morkūnas et al. can climate-smart agriculture help to assure food security through short supply... losses, sales losses and the cost of waste management (buzby & hyman, 2012; gunders, 2012; hickey & ozbay, 2014). peira et al. (2018) analyse the management of unsold products and how operators act in such situations. all of these aspects could be identified as stakeholders’ attitudes and their importance for food loss and waste, as well as food security in the food supply process. the second important factor is poor management of spoilable foods. zhu (2017) states that a dynamic pricing policy supported by a traceability system could significantly reduce food waste and improve retailers’ performance. rijpkema et  al. (2014) confirmed that the management of the retailer can effectively supply products of appropriate quality with acceptable levels of product waste and security. product specifications are an important tool in supply chains for managing the quality levels of products offered to (end) customers (de hooge et al., 2018). this fact confirms and adds additional aspects according to devin and richards (2018), who emphasise strict privacy standards as a key to food waste issues in the fresh food supply chains of industrialised countries. buyer–supplier contracts and agreements that enforce strong conditions for deliveries and unsold products are considered to potentially lead to waste, as food chain operators with greater bargaining power have a “tendency” to shift the risk and costs of unsold products to weaker operators through free returns of last-minute cancellations (mena et al., 2011; devin & richards, 2018). supply chain interruptions could be identified as several different elements, but teller et al. (2018) related them to retail operations such as in-store logistics, out-of-stock prevention and the occurrence of waste in the store. in general, teller et al. (2018) opine that logistics and marketing aspects with not such big idea for food loss and waste prevention. shelf space in the store is very important when considering food loss and waste (yang et al., 2017; grzybowska et al., 2014). research by goossens et al. (2019) has proved that secondary packaging in food loss, waste and food security aspects are very important and in some cases can create losses in the distribution stage, although customers can waste food as well. from another point of view, wohner et al. (2020) note that packaging itself is a problem due to shape, composition, and other factors. the problem regarding quality standards may be invisible because significant amounts of goods are left in the field and will never be transported to the consumer (gillman et al., 2019). even food products that do reach retailers can be stopped because of quality and cannot be redistributed (hermsdorf et al., 2017). edible products can be removed from the commercial food supply chain, being rejected as outtrades deemed cosmetically defective due to market-based decisions (mckenzie et al., 2017). in general, a short food supply chain is more environmentally friendly and results in less loss and waste, but it is not always a feasible alternative. 2. methodology various bibliographic coupling techniques are proposed as a research tool to achieve a systematic review of the literature (habib & afzal, 2019; morkunas & balezentis, 2021; maseda et  al., 2022). bibliographic coupling is a particularly useful research technique when investigating interdisciplinary (thurner et  al., 2020) or newly derived concepts (shah et  al., 2019). our research satisfies both of these criteria, as food security is being researched in a variety of disciplines, including economics (tweeten, 1999; de haen & hemrich, 2007; stevano et al., business, management and economics engineering, 2022, 20(2): 207–223 211 2020), environmental science (workie et al., 2020), agricultural and plant science (reddy, 2015; opitz et al., 2016; ulian et al., 2020), sociology (carolan, 2016; bhandari, 2017) and management (mclaughlin & kinzelbach, 2015; abdelkader & elshorbagy, 2021). short supply chains appear in fields such as logistics-related research (paciarotti & torregiani, 2021), agricultural research (de fazio, 2016), economics (kiss et  al., 2019) and sustainability science (kamble et al., 2020). thus, our research concepts are of a truly interdisciplinary nature. the novelty of our research is confirmed by the information provided in figure 1, which shows that research on short supply chains under the food security concept has gained momentum only after 2018. numerous studies aimed at systematic literature reviews employing various bibliographic coupling procedures (yu et al., 2020; abdullah & naved khan, 2021; morkunas et al., 2022) suggest a procedure that determines explicit inclusion and exclusion criteria. these criteria are illustrated in table 1. table 1. inclusion and exclusion criteria for research inclusion criteria exclusion criteria paper included short supply chain and food security subjects among its keywords paper focused on other research domains paper is in english paper is in other than english language paper is longer than 6,800 characters paper is shorter than 6,800 characters paper has been peer reviewed paper has not undergone a peer review procedure multiple rationales motivated the selection of the inclusion criteria noted in table 1. for one, we are investigating the development of science in short supply chains under the food security domain. we are not fluent in any other scientific language except english. in addition, english is the primary scientific language in the world (ferguson et al., 2011). moreover, typical scientific papers are at least four pages long (morkunas & balezentis, 2021), which typically equates to more than 6,800 characters (excluding spaces). lastly, although we do not question the scientific integrity of the clarivate db, which we used as a source for our research, and its rigorous peer review procedures, some of the papers in clarivate db are not peer reviewed. for example, some editorial addresses or letters are not appropriate subjects for a peer review procedure. thus, we excluded such documents from our research. our research was carried out on 5 may 2022. the keywords used were “food security and short supply chain”. the research sources were articles published in outlets included in the clarivate analytics master journal list. the time span was 1990–2022. the raw data was processed using vosviewer 1.6.18 software version. 3. results 3.1. bibliometric analysis our research produced 134 publications that satisfied the predetermined inclusion criteria. the first publication appeared in 1999, indicating that research on short supply chains in the context of assuring food security represents quite a recent topic. however, as figure 1 212 m. morkūnas et al. can climate-smart agriculture help to assure food security through short supply... shows, specific research in the area of food security and short supply chains only gained momentum in 2018, confirming the relevance of the current study in analysing trends in a recently emerging research area. –5 0 5 10 15 20 25 30 35 40 figure 1. number of publications in food security and short supply chain area, 1990–2022 when analysing the specific journals that have been most engaged in the area of short supply chains and food security, we identified one polarising centre for the dissemination of scientific knowledge in the area: sustainability (issn 2071-1050), which has published more than 10% of all scientific papers in the field. the remaining scientific outlets have not produced more than 2–3% of all published materials and do not appear to exercise a significant influence on the development of knowledge in the food security and short supply chain area (see table 2). table 2. scientific outlets most engaged in the dissemination of knowledge in the food security and short supply chain area, 1990–2022 journal number of publications related to food security and short supply chains sustainability 14 global food security –agriculture policy economics and environment 4 acta horticulturae 3 agricultural systems 3 business, management and economics engineering, 2022, 20(2): 207–223 213 journal number of publications related to food security and short supply chains agronomy (basel) 3 food and energy security 3 science of the total environment 3 british food journal 2 china agricultural economic review 2 frontiers in sustainable food systems 2 iop conference series: earth and environmental science 2 journal of agribusiness in developing and emerging economies 2 land 2 nato science for peace and security series c: environmental security 2 a comparative analysis of countries and geographic entities which are the most involved in research on short supply chains in the context of food security was not as easily ascertained as the analysis of scientific publications (table 2). the leading country is the united states, closely followed by the united kingdom. other countries heavily involved in this area of research include italy, australia and india. notably, the 13 countries listed in table 3 account for 100% of the research in the area (134 out of 134). table 3. countries and geographic entities most engaged in the dissemination of knowledge regarding food security and short supply chains, 1990–2022 country number of publications usa 31 uk 21 italy 13 australia 10 india 9 prc 8 spain 8 canada 7 kenya 6 netherlands 6 brazil 5 france 5 romania 5 end of table 2 214 m. morkūnas et al. can climate-smart agriculture help to assure food security through short supply... 3.2. bibliographic coupling analysis in total, five clusters with 130 links and a total link strength of 216 were identified during the bibliographic coupling procedure. figure 2. bibliographic coupling of research in the food security and short supply chain area, 1990–2022 we start our analysis with a violet cluster (please see figure 2) which has 15 links and a total link strength of 34. although some may find the study by gregory et  al. (2005) to be the polarising element within the network, the largest number of links (thus, the strongest networking influence) is displayed by the rivera-ferre et al. (2021) study on the effects of the covid-19 pandemic on food security. similar tendencies are being displayed by the blue cluster, where the network polarising study is considered to be garnett’s study on food sustainability (2013), although the nchanji and lutomia (2021) research covers the broadest scope in the science, with nine links and total link strength of 11. once again, the study about the effects of the covid-19 pandemic on the resilience of food systems appears to be the most influential. the green cluster seems more balanced than the previous ones. it has two focal items authored by smith et al. (2016) and borsellino et al. (2020), the latter being the most influential with 17 links and a total link strength of 37. the red cluster also displays a balanced character with quite equal weights of network items and dense links within the network. the leading, although not dominating, item is xu’s et al. (2021) research about the compound effects of the covid-19 pandemic on food security and food supply chains. the smallest cluster (here, the yellow one) displays not only the lowest number of items within the network but also the least density and importance to the development of the science. the loose bounds and small weight of the network items indicate that they are only loosely connected. the most important item within the network is barbosa’s (2021) bibliometric study about the management of the agri-food supply chain. it displays a total link strength of 11, achieved by 11 links. this correspondence between total link strength and number of links indicates that this study does not have explicitly expressed relationships with any of the other scientific publications. the density map (figure 3) illustrates that there are no overlying heat areas, so the research in this area is quite fragmented, not allowing identification of the main research streams. two studies, namely gregory et al. (2005) and garnett (2013), dominate the scientific landscape in the area. business, management and economics engineering, 2022, 20(2): 207–223 215 figure 3. density map of bibliographic coupling of research in the food security and short supply chain area, 1990–2022 generalising this part of the research, it appears that from a scientific perspective, food security and short supply chains started being more intensively researched together only after the covid-19 pandemic outbreak. it may be a shortcoming, as ilbery and maye (2005) have previously demonstrated, that short supply chains were not identified earlier as a solution to food security problems. and if researched earlier, they may have helped to feed a substantial portion of the world population much earlier. 3.3. citation analysis the citation analysis (figure 4) also revealed five main clusters in the area. the corresponding number of clusters obtained during bibliographic coupling and co-citation analysis confirms the robustness of the research results. all five clusters contain 120 items with 1,393 links and a total link strength of 1,594. figure 4. citation analysis of research in the food security and short supply chain area, 1990–2022 the dense red cluster is centred around hobbs’ (2020) research, with 38 links and a total link strength of 53. analysing network-to-network dependency, we found moderate relationships with blue and green clusters and only weak interdependences with violet and yellow clusters, indicating the distinctiveness of the red cluster research, which is generally based on the covid-19 effects on food supply chains and networks. the green cluster is based on 216 m. morkūnas et al. can climate-smart agriculture help to assure food security through short supply... more conceptual research focusing on the food supply industry in general and its influence on the various forms of rural development. the leading article is the marsden et al. (2020) study on the impact of various forms of food supply chains on the development of rural regions. this study has 39 links and a total link strength of 43. the most influential is renting’s et al. (2003) research aimed at disclosing the positive effects short food supply chains have on rural development. the blue cluster is focused on various issues related to food security and the possible role of short supply chains in it. it is being dominated by the godfray et al. (2010) conceptual study aimed at raising discussion about the drawbacks that the world must accept in a quest to feed a population that is approaching 9 billion people. its total link strength is 41, achieved by 36 links. the yellow cluster can be viewed as a methodological one. this cluster is dominated by research investigating various new approaches for supply selection in food supply chains, risk measurement methods and similar topics. the leading study is forman and penivati (1998), which examined adjustments to the analytical hierarchy process (ahp) individual judgement scales. the least important is the violet cluster, which has the fewest number of items, and the relationship between network participants is the weakest. the most important study is lioutas and charatsari’s (2020) investigation of the possibility of integrating short supply chains into the smart farming concept. its total link strength is 20, with 20 links. this research is also related to three of the four remaining clusters (blue, red and green). figure 5. density map of citation analysis of research in the food security and short supply chain area, 1990–2022 the density analysis (figure 5) clearly indicates the extreme proximity of the red cluster research – the studies aimed at investigating possible solutions to food security problems that are offered by short supply chains in the wake of the covid-19 pandemic. the distinctiveness of the research comprising the role of the short supply chain in the evolution of rural areas can also be observed. in view of these findings, we can conclude that based on co-citation analysis, we revealed the following scientific trends: short supply chains are seen as one of the factors for rural development, and another emerging research direction is to consider a short supply chain as a possible response to food shortages that have been intensified by the covid-19 pandemic. business, management and economics engineering, 2022, 20(2): 207–223 217 3.4. keywords analysis the keywords analysis (figure 6) provided 21 clusters with 290 items, which are bonded by 2,059 links, with a total link strength of 2,125. figure 6. keywords analysis of research in the food security and short supply chain area, 1990–2022 the overwhelming majority of network influence is executed by the food security concept, displaying a total link strength of 243, with 204 and 28 occurrences which (together with concepts of food supply chains and delivery technologies) comprise the violet cluster. the brown cluster is focused on the covid-19 pandemic and its influence on malnutrition, food supply and agri-food supply chains (particularly in africa). it has 69 links, with a total link strength of 78 and 10 occurrences. three different clusters (blue, light blue and purple) are focused on various aspects of climate change. in all of this research, short supply chains are considered one of the focal actors in mitigating climate change. the blue cluster is more oriented toward micro-level agricultural interventions helping to facilitate local food production and short supply chains. the focal keyword is “greenhouse gas emissions”, with 21 links and a total link strength of 21 in three occurrences. light blue is more oriented towards macro-level actions and policy measures in supporting short supply chains as an approach to lowering the carbon footprint. the main keyword in this cluster is “climate change”, with 30 links, a total link strength of 34, and four occurrences. the purple cluster focuses on the resilience and vulnerability of food systems in light of climate change. the most frequent keyword here is “climate change”, with 39 links, a total link strength of 43, and four occurrences. the light green cluster evaluates food security through the lens of alternative agrifood networks. the most influential keyword in this network is “security”, with a total link strength of 72 in 64 links and six occurrences. in sum, we can state that a significant part of the research on food security and short supply chains falls under a broader climate-change-mitigation umbrella. another significant research direction is a response to the covid-19 pandemic and resulting food security issues. a smaller yet significant research direction is aimed at solving food security challenges with the help of short supply chains in the least developed countries, in particular sub-saharan africa. 218 m. morkūnas et al. can climate-smart agriculture help to assure food security through short supply... conclusions the short supply chain management in the context of climate-smart agriculture covers several unique aspects of sustainability, including food loss and food waste, but food security is the most important. all aspects are even more important because of unusual situations such as the pandemic (covid) or war (in ukraine). accordingly, producers and farmers are taking increasing care regarding food security in supply chain management. the wider implementation of short supply chains provides more leverage and bargaining power for farmers, thus improving their economic position. this action strengthens not only the economic but also the social dimension of climate-smart agriculture. analysis of short supply chain management shows a clear solution for the food security (and food waste) issue in the context of climate-smart agriculture: its short supply chain management and local food system (where possible). both solutions are related to having as short of a supply chain as possible between the producer/farmer and the consumer. the bibliometric analysis proves that the investigation of short supply chains in the context of food security is a new and promising research avenue. current research is focused on a few directions, namely covid-19-induced challenges to food security, environmental concerns and climate change mitigation policies, which represent the adaptation facet of the climate-smart agriculture concept. due to the novelty of the idea, the research on short supply chains in the context of food security is highly polarised. all 100% of the publications were produced by 13 leading countries in this particular research area. this situation requires urgent attention, as climate-smart agriculture initiatives as well as food shortage supply chains are context-sensitive; thus, the solutions offered must be tailored to local needs. the expansion of the research geography would allow solving food security problems in a greater number of struggling countries, especially in africa and southeast asia, where food security remains a major issue (chan et al., 2019). acknowledgements this research has received funding from european social fund (project no 09.3.3-lmtk-712-19-0086) under grant agreement with the research council of lithuania (lmt lt). references abdelkader, a., & elshorbagy, a. 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the original author and source are credited. *corresponding author. e-mail: kvilerts@gmail.com business, management and education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 1: 160–173 https://doi.org/10.3846/bme.2018.2145 introduction in most advanced economies public sector makes up for a notable fraction of the total employment. the sheer size of it and the fact that public sector employers compete with their private sector counterparts for workers suggest that public sector employment policies may alter private sector employment and compensation decisions and consequently affect the economic stability. previous studies have shown that public sector wage premium (average compensation in the public sector relative to the average compensation in the private sector) tends to be positive in many developed countries (kollintzas, papageorgiou, & vassilatos, 2015) which may carry implications for the labour market. in fact, it has been shown that private sector wages and employment are very responsive to changes in public sector wages (european commission, 2014) and that an increase in public sector wages may have negative side-effects e.g. loss of international competitiveness (lane & perotti, 2003), reduced private sector profitability (alesina, ardagna, perotti, & schiantarelli, 2002) and lower productivity (kollintzas et al., 2015). public sector wage premium and output volatility in the european union karlis vilerts1* 1 faculty of business, management and economics, university of latvia, aspazijas blvd. 5, riga lv-1050, latvia received 30 may 2018; accepted 09 june 2018 abstract. this study seeks to uncover the role played by the public sector wage premium in explaining the output volatility. furthermore, the study also explores the factors that might substantiate the cross-country differences in the volatility of the public sector wage premium. using cross-sectional regression analysis for the european union countries, the findings indicate that more volatile public sector wage premium is associated with higher fluctuations in the private sector employment and less stable growth. findings also suggest that volatility of the public sector wage premium tends to be larger in countries with smaller governments and in countries where collective bargaining is the predominant regime for public sector wage setting. keywords: macroeconomic stability, output volatility, public sector wages, public sector wage premium, public sector wage setting. https://doi.org/10.3846/bme.2018.2145 business, management and education, 2018, 16(1): 160–173 161 despite the consequences that mere existence of the public sector wage premium can cause, the dynamics of the public sector wage premium (and its economic effect) have often been neglected in the literature. therefore, the main objective of this study is to investigate the macroeconomic effects of the public sector wage premium volatility, in particular how it affects the economic stability. using cross-sectional regression analysis for eu countries over the period 1995–2016 the study investigates whether higher fluctuations in the public sector wage premium add to the volatility of the private sector employment and therefore amplify the output volatility. the second part of empirical analysis explores the determinants of the cross-country variation in volatility of the public sector wage premium. main findings of the study reveal that countries with more volatile public sector wage premium tend to have higher output volatility. this effect, however, is of indirect nature. fluctuations in the public sector wage premium add to the volatility of private sector employment which in turn has an adverse effect on the economic stability. the findings are robust if the total employment is used instead of the private sector employment, which rules out the possibility that private sector jobs are perfectly “crowded out” by public sector jobs. considering these adverse effects, the study investigates factors that might contribute to the volatility of the public sector wage premium. results suggest that the volatility the public sector wage premium tends to be larger in countries with smaller governments, providing support to the hypothesis that smaller governments apply more monopolistic wage setting. findings also reveal the importance of wage setting practices and institutions. the fluctuations of the public sector wage premium are approximately 50% lower in those countries where the predominant regime of wage setting in the public sector is collective bargaining (instead of the unilateral decision). there is little evidence that differences in other wage setting institutions or fiscal consolidation efforts contribute in explaining the cross-country variation in the public sector wage premium volatility. a small number of observations could, however, be a reason for the lack of significance. the study is ordered as follows. section 1 reviews previous literature, focusing on the strands related to the public sector wage premium and output volatility. section 2 describes the data used in the study. section 3 presents the main findings. finally, the last section concludes. 1. literature review this study is related to two strands of literature. first investigates the channels through which fluctuations in the public sector wage premium might affect the output volatility. second explores the factors that might substantiate the existence and variation of the public sector wage premium. the negative consequences of high output volatility have been well established in the previous literature. in a seminal paper g. ramey and v. a. ramey (1995) show that countries with higher output volatility also tend to have lower growth. they argue that the negative costs of higher volatility come from the uncertainty-induced planning errors by firms (as suggested in g. ramey & v.  a.  ramey (1991)). this has led to growing number of studies investigating the drivers of output volatility. acemoglu and zilibotti (1997) show that richer 162 k. vilerts. public sector wage premium and output volatility in the european union countries tend to have a more diversified economic structure in terms of sectoral composition which therefore reduces the exposure to asymmetric shocks and adds to macroeconomic stability. easterly, islam, and stiglitz (2001) argue that countries that are more open to international trade and hence are more exposed to the external shocks also have more volatile output. it has also been shown that economic fluctuations tend to be lower in countries that have larger governments with more room for automatic stabilizers (debrun, pisani-ferry, & sapir, 2008; gali, 1994). another set of studies suggest that active use of discretionary fiscal policy increases macroeconomic instability (badinger, 2009; badinger & reuter, 2017; fatas & mihov, 2003). the labour market drivers of output volatility and particularly the role played by the public sector wage premium, however, is relatively less explored. boeing-reicher and caponi (2016) goes in that direction by showing that for a sample of u.s. metro areas higher public sector wages are associated with increased business cycle volatility. the adverse side-effects of changes in public sector wages are mostly related to the linkages between public and private sector wages i.e. changes in public sector wages create labour movement between the sectors and affects the labour supply that is available to the private sector. this as a consequence changes the price of the labour (equilibrium wage) in the private sector (afonso & gomes, 2008; european commission, 2014; holm-hadulla, kamath, lamo, perez, & schuknecht, 2010). in fact, the resulting increase in private sector wages has been associated with a loss of international competitiveness (lane & perotti, 2003), lower private sector profitability (alesina et al., 2002) and lower productivity (kollintzas et al., 2015). previous studies that have explored the potential implications of the public sector wage premium have mostly focused on the average size of the premium. although averages are certainly informative, they might not reveal the whole story, particularly when investigating how public sector wage premium affects the private sector employment. previous evidence on the cyclical response of wages suggests that relatively rigid public sector jobs become more attractive during the economic downturn when the public sector wage premium is higher whereas the opposite is true in an upswing (caponi, 2017a; gomes, 2015; lane, 2003; quadrini & trigari, 2007).1 in the light of the above, the average public sector wage premium (which over the cycle would be closed to long-term mean) might not fully reflect the effect which the public sector wage premium exert on the private sector employment. in order to capture this interaction, we explore the volatility of the public sector wage premium as a potential determinant of the fluctuations in private sector employment. another strand of literature investigates the factors which substantiate the existence of the public sector wage premium. using a broad sample of oecd countries campos, depalo, papapetrou, perez, and ramos (2017) show that size and composition of the public sector contribute in explaining the cross-country variation in the public sector wage premium. they argue that countries with lower shares of government employees should also have higher public sector wage premium. this is due to higher specialization in the provision of public sector goods and services which 1 however, the extent and in some cases also the direction of cyclical response of public sector wages varies notably (see hallerberg & strauch, 2002; lane, 2003; lamo, pérez, & schuknecht, 2013). business, management and education, 2018, 16(1): 160–173 163 could result in a more monopolistic wage setting. a similar hypothesis is also developed in more theoretical models (see kollintzas et al., 2015). other factors that might explain the amplitude and the volatility of the public sector wage premium are related to wage setting practices and institutions which often differ between public and private sectors. the evidence from the previous studies highlights several factors, in particular, responsiveness of public sector wages to changes in productivity, degree of centralization in public sector wage setting, and labour market protection. for example, gomes (2015) show that procyclicality in the public sector wage setting can reduce the part of the public sector wage premium that is brought about by different reaction of public and private sector wages to changes in productivity. caponi (2017b) develops a regional model of segmented labour markets and shows that degree of public sector wage setting centralization matters. he argues that since homogenous public sector wages need to be attractive in the highly productive regions, the same wage results in a high public sector wage premium in less productive regions. campos et  al. (2017) show that countries with more stringent employment protection tend to have higher public sector wage premiums. they argue that higher public sector wages are needed to offset better (safer) conditions in the private sector. overall, previous literature on factors which substantiate the existence of the public sector wage premium, provide a valuable insight into the potential determinants of its volatility. 2. data the sample covers 27 european union countries over the period 1995–2016.2 the primary source of data used throughout the study is eurostat, however, some additional variables are taken from other data sources (see appendix a1 for a list of all variables used in the study and the respective sources). in the baseline specification compensation per employee is used as a measure of wages in both sectors. compensation per hour worked as well as wages and salaries per employee (and per hour worked) are also used to test the robustness of findings. compensation per employee in each sector is computed by dividing compensation of employees over a number of employees in the respective sector. compensation of employees (as well as the number of employees) in the private sector is obtained by deducting compensation of employees (number of employees) in the public sector from the compensation of employees (number of employees) in the total economy. the public sector is defined by the national accounts (nace sectors o, p and q public services, healthcare and education). public sector wage premium is obtained by dividing the public sector wage measure over the respective measure for the private sector. table 1 reports summary statistics for the sample used in the study. on average, the compensation per employee in the public sector has been 1.05 times higher than in the private sector. nevertheless, notable heterogeneity exists between the countries. in cyprus and portugal compensation per employee in the public sector is approximately 60% higher than in private sector. the ratio is the lowest in sweden where public sector employees earn on average 20% less than their private-sector counterparts. overall, 2 united kingdom is excluded from the sample due to missing data. 164 k. vilerts. public sector wage premium and output volatility in the european union public sector employees earn more in most of the countries with exception of sweden, slovakia, the netherlands, belgium, latvia, lithuania, estonia france, finland and germany. the average volatility of the public sector wage premium is 0.09, however, it varies from country to country. with some exceptions, volatility of the public sector premium seems to be higher in central and eastern european countries, in particular, romania and latvia. in contrary, fluctuations are the lowest in western european countries, especially in germany, sweden, the netherlands and belgium. table 1. summary statistics of the public sector wage premium in the 27 eu countries country mean st. dev. obs. austria 1.05 0.03 22 belgium 0.97 0.02 22 bulgaria 1.18 0.11 17 croatia 1.09 0.09 8 cyprus 1.63 0.08 22 czech republic 1.10 0.05 22 denmark 1.01 0.09 42 estonia 0.98 0.08 22 finland 0.96 0.03 37 france 0.87 0.04 42 germany 0.99 0.01 22 greece 1.27 0.07 22 hungary 1.08 0.10 22 ireland 1.24 0.07 22 italy 1.25 0.07 22 latvia 0.98 0.14 22 lithuania 0.97 0.07 22 luxembourg 1.23 0.04 22 malta 1.14 0.03 22 netherlands 0.99 0.02 22 poland 1.15 0.05 14 portugal 1.57 0.11 22 romania 1.43 0.22 21 slovakia 0.97 0.06 22 slovenia 1.20 0.09 22 spain 1.21 0.05 22 sweden 0.80 0.02 23 total 1.05 0.09 42 notes: public sector wage premium is a ratio of compensation per employee in public and private sectors. business, management and education, 2018, 16(1): 160–173 165 3. main findings 3.1. public sector wage premium and the output volatility in this section, we explore the relationship between the public sector wage premium and the output volatility. figure 1 shows a dot plot of both variables in the 27 eu countries. figure 1 provides stylized evidence of a positive relationship between both variables i.e. countries with higher fluctuations in the public sector wage premium also tend to have less stable growth. next, the relationship is explored econometrically. 1 , pub pri w wout c c j j c cx        σ =α σ + α +∈ , (1) where out cσ is the log standard deviation of growth in real gdp per capita in a country c, pub pri w w c        σ is the log standard deviation of the public sector wage premium, xj,c is a vector of j covariates which could affect the output volatility, and αj are the respective regression coefficients. these include government size defined as government expenditure over gdp, openness to international trade which is measured as a sum of imports and exports over gdp, and log of real gdp per capita. c∈ is the error term. table 2 reports the main findings. column (1) of the table 2 shows that higher volatility of the public sector wage premium is also associated with higher output volatility. the coefficient does not change significantly if other control variables are added to the equation (column 2). regarding the control variables, coefficients for government size and trade openness turn out to be vaguely significant. figure 1. volatility of the public sector wage premium and the output volatility (source: author’s calculations using eurostat data) notes: volatility of the public sector wage premium is calculated as a standard deviation of a ratio of compensation per employee in public and private sectors. 166 k. vilerts. public sector wage premium and output volatility in the european union the signs of coefficients provide some support for previous studies which have argued that variability of the output is lower in countries with larger governments those that are less exposed to external shocks.3 the volatility of the public sector wage premium is likely to affect the economic stability indirectly by inducing fluctuations in private employment. in times when relative wages in public sector significantly exceed wages in the private sector, employees from the latter could seek the employment in the former. the opposite would be true in times when private sector wages exceed wages in the public sector. the results in column (3) reveal that the coefficient for the volatility of the public sector wage premium turns insignificant when the volatility of the private sector employment is added to the regression, thus supporting the indirect effect hypothesis. the indirect effect of fluctuations in the public sector wage premium on the output volatility is further explored in table 3 which reports the two-stage least squares (2sls) estimates. 2sls approach can be split into two parts: (a) the first stage uses the volatility of public sector wage premium along urbanization rate to instrument the volatility of the private sector employment; and (b) the second stage which employs the obtained private sector employment volatility to explain the output volatility. another benefit of using the 2sls approach is that it considers the potential endogeneity of private sector employment. indeed, fluctuations in private sector employment might not be completely exogenous to output volatility. for example, shocks that impact the demand for domestically produced goods could also affect the private sector employment. the upper panel of table 3 (column 1) confirms the indirect relationship. coefficient estimates indicate that 1% increase in the volatility of the public sector wage premium translates 3 insignificance of other control variables might partially be due to relatively homogenous sample of 27 eu countries. table  2. estimated relationship between volatility of the public sector wage premium and the output volatility (1) (2) (3) volatility of the wage premium 0.358*** (0.08) 0.290** (0.10) 0.145 (0.12) gdp per capita 0.061 (0.11) 0.071 (0.10) trade openness 0.140 (0.11) 0.220* (0.11) government size –1.554** (0.61) –0.294 (0.63) private employment 0.587*** (0.15) n r2 27 0.330 27 0.557 27 0.728 notes: * p < 0.1, ** p < 0.05, *** p < 0.01 standard deviation in the parentheses. volatility of the public sector wage premium is defined as a standard deviation of a ratio of compensation per employee in public and private sectors. constant included, but not reported. business, management and education, 2018, 16(1): 160–173 167 into a 0.3% increase in the volatility of private sector employment. in turn, the lower panel of table 3 indicates that the respective increase of the private sector employment volatility is nearly perfectly (0.985) reflected in increased output volatility. a valid argument could be raised that fluctuations of the private sector employment are perfectly offset by changes in the public sector employment (crowding out effect) leaving the volatility of the total employment unaffected by changes in the public sector wage premium. estimates in column (2), however, reveal that the relationship holds even when the private sector employment volatility is replaced by the volatility of the total employment. the estimates of both first stage and second stage regressions are nearly identical. these findings provide support for caponi (2017a) who suggests that in a presence public sector wage premium (penalty) individuals might accept a temporary unemployment in order to obtain a public (private) sector job. similar conclusions are reached by algan, cahuc, table 3. volatility of the public sector wage premium and the output volatility (2sls estimates) (1) (2) first stage regression (dependent variable: volatility of the private sector employment or total employment) volatility of the wage premium 0.294** (0.14) 0.320** (0.14) urbanization rate 0.006 (0.01) 0.006 (0.01) gdp per capita –0.035 (0.13) –0.074 (0.14) trade openness –0.166 (0.16) –0.164 (0.17) government size –2.226*** (0.71) –2.469*** (0.75) sargan overidentification test p value 0.174 0.197 second stage regression (dependent variable: output volatility) gdp per capita 0.054 (0.10) 0.092 (0.11) trade openness 0.266** (0.13) 0.255** (0.13) government size 0.503 (1.00) 0.581 (1.00) private employment 0.985*** (0.35) total employment 0.914*** (0.32) n r2 27 0.647 27 0.655 notes: * p < 0.1, ** p < 0.05, *** p < 0.01 standard deviation in the parentheses. volatility of the public sector wage premium is defined as a standard deviation of a ratio of compensation per employee in public and private sectors. constant included, but not reported. 168 k. vilerts. public sector wage premium and output volatility in the european union and zylberberg (2002) who look at a panel of oecd countries and find that each additional public sector job is offset by one and a half jobs lost in the private sector. 3.2. robustness checks to test the sensitivity of the findings, alternative definitions of the public sector wage premium are used as a dependent variable. the 2sls estimates are summarized in table 4.4 table 4. estimated relationship between volatility of the public sector wage premium and output volatility (2sls) alternative definitions of the public sector wage premium (1) (2) (3) first stage regression (dependent variable: volatility of the private sector employment) volatility of the wage premium 0.331*** (0.11) 0.364** (0.13) 0.414*** (0.10) urbanization rate 0.006 (0.01) 0.008 (0.01) 0.009 (0.01) gdp per capita –0.096 (0.11) –0.002 (0.13) –0.064 (0.10) trade openness –0.101 (0.15) –0.143 (0.15) –0.045 (0.14) government size –1.507* (0.73) –1.968*** (0.69) –1.134 (0.67) sargan overidentification test p value 0.123 0.133 0.126 second stage regression (dependent variable: output volatility) gdp per capita 0.0003 (0.09) 0.025 (0.09) 0.013 (0.08) trade openness 0.196* (0.12) 0.227* (0.12) 0.212* (0.11) government size –0.404 (0.79) 0.002 (0.81) –0.198 (0.70) private employment 0.611** (0.26) 0.788*** (0.27) 0.696*** (0.21) n r2 27 0.699 27 0.696 27 0.702 notes: * p < 0.1, ** p < 0.05, *** p < 0.01 standard deviations in the parentheses. volatility of the public sector wage premium is defined as a standard deviation of a ratio of (1) compensation per hour; (2) wages and salaries per employee; (3) wages and salaries per hour in both sectors. constant included, but not reported. since the interaction between public and private sector wages could also be affected by changes in hours worked, a ratio of compensation per hour in public and private sectors is used as an alternative definition of the public sector wage premium. the estimates (column 1) confirm the robustness of the main findings. in fact, fluctuations in hourly wage premium 4 estimates of robustness check for ols regressions as well as alternative 2sls specifications are available upon a request. business, management and education, 2018, 16(1): 160–173 169 seem to have even more pronounced effect on the volatility of the private sector employment. in columns (2) and (3) wages and salaries are used instead of compensation measures. overall, the estimates reconfirm the robustness of the relationship between the public sector wage premium, the private sector employment and the output volatility. 3.3. determinants of the public sector wage premium volatility considering the economic importance discussed in previous sections, this section uses crosscountry variation in the volatility of the public sector wage premium to explore the factors that might explain it. when choosing the set of covariates which might determine the volatility of the public sector wage premium we follow campos et al. (2017) who highlight main arguments on why public sector wage premium might differ from country-to-country: (a) differences in the size of the public sector; (b) differences in wage setting institutions and practices; and (c) fiscal consolidation efforts. previous literature has shown that smaller governments with a higher degree of monopolistic power in the provision of certain goods and services tend to have higher public sector wage premiums (kollintzas et  al., 2015). the size of governments might also play a role in explaining the volatility of the public sector wage premium. wages in the smaller governments with uncompetitive wage settings could be less responsive to the changes in productivity and hence add to the fluctuations of the public sector wage premium. figure 2 provides some stylized evidence that larger governments (defined as public sector employment share in total employment) tend to have the lower volatility of the public sector wage premium in the sample of 27 eu countries. figure 2. government size and the volatility of the public sector wage premium (source: author’s calculations using eurostat data) notes: volatility of the public sector wage premium is calculated as a standard deviation of a ratio of compensation per employee in public and private sectors. government size is defined as public sector employment share in total employment. 170 k. vilerts. public sector wage premium and output volatility in the european union based on previous findings on the determinants of the public sector wage premium several variables reflecting wage setting practices and institutions were also added to the regressions. these include prevalence of the collective bargaining in the public sector; centralization in public sector wage setting; and stringency of employment protection. finally, consolidation efforts which governments of various eu countries took as a response to the recent economic crisis is another potential determinant of fluctuations in the public sector wage premium. to take this into account we follow campos et  al. (2017) and define fiscal consolidation efforts as a difference of cyclically adjusted primary balance (capb) between 2012 and the minimum from the period 2007–2012.5 due to a limited number of observations, we test each set of variables separately. findings are summarized in table 5. first, in column (1), the negative relationship between the government size and the volatility of the public sector wage premium is confirmed i.e. countries with larger governments have lower fluctuations in the public sector wage premium. a 1 percentage point increase in public sector employment share is translated into 0.077% decrease in the public sector wage premium volatility. columns (2) and (3) present the coefficient estimates for variables related to the wage setting practices and institutions. 6 similar to the findings in campos et al. (2017) there is little evidence on the role played by the wage-setting institutions in explaining the public sector wage premium. one exception is the variable that reflects whether the predominant regime of wage setting in the public sector is 5 countries undertook the consolidation efforts at different periods in time, therefore the flexibility in the definition of fiscal effort. 6 we test epl separately because inclusion of it significantly reduces the number of observations. table 5. estimated relationship between volatility of the public sector wage premium and output volatility (1) (2) (3) (4) government size –0.077*** (0.03) collective bargaining –0.473* (0.25) –0.489* (0.27) centralization 0.348 (0.25) 0.391 (0.25) epl –0.036 (0.28) consolidation effort 0.047 (0.03) n r2 27 0.244 26 0.212 27 0.557 27 0.130 notes: * p < 0.1, ** p < 0.05, *** p < 0.01 standard deviation in the parentheses. volatility of the public sector wage premium is defined as a standard deviation of a ratio of compensation per employee in public and private sectors. government size is defined as public sector employment share in total employment. constant included, but not reported. definitions and sources of other variables available in the table 1a. business, management and education, 2018, 16(1): 160–173 171 collective bargaining as opposed to a unilateral decision which enters the regression significantly. the estimates suggest that collective bargaining in the public sector reduces the fluctuations by approximately 50%. this finding reinforces gomes (2015) argument that more procyclical public sector wage setting scales down the differences in how public and private sector wages react to productivity shocks which in turn reduce the public sector wage premium (and its volatility). although the coefficient for centralization bears the expected sign, it is insignificant. finally, the estimates in column (4) show that fiscal consolidation does not significantly affect the volatility of the public sector wage premium. the findings are robust with respect to other definitions of the public sector wage premium (not reported, but available upon a request). conclusions using the data for eu member states over the period 1995–2016 this study investigates whether fluctuations in the public sector wage premium increase the volatility of the private sector employment and therefore amplify the output volatility. this study adds to existing literature by focusing on the volatility instead of the magnitude of the public sector wage premium. the findings suggest that countries with more volatile public sector wage premium tend to have higher fluctuations in the private sector employment which in turn amplifies the business cycle volatility. in addition to providing support for previous evidence on the adverse effects of public sector wage premium, these findings highlight the necessity to consider not only the size but also the volatility of the public sector wage premium. given these economic implications, this study also explores the factors that contribute in explaining the cross-country variation in the volatility of the public sector wage premium. overall, findings suggest that the volatility of the public sector wage premium tends to be larger in countries with smaller governments (which might apply more monopolistic wage setting). wage setting practices and institutions do not appear to be significant factors in explaining the public sector wage premium. the only exception is the prevalence of collective bargaining in the public sector. the volatility of the public sector wage premium is approximately 50% lower in those countries where collective bargaining is the predominant regime for public sector wage setting as opposed to the unilateral decision. this finding supports the notion that more procyclical public sector wage setting may be beneficial in terms of economic stability. there are various limitations to the study, therefore the findings should be treated as indicative evidence instead of unequivocal truth. first of all, as a consequence of choosing a rather homogenous sample, the number of observation used in the empirical analysis is rather small. furthermore, the definition of the public sector wage premium does not take into the consideration that characteristics of the employees in each sector could differ. in the light of the above, further studies could look into the explore the problem by employing the conditional public sector wage premium. disclosure statement the author declares that he does not have any competing financial, professional, or personal interests from other parties. 172 k. vilerts. public sector wage premium and output volatility in the european union references acemoglu, d., & zilibotti, f. 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(n.d.). retrieved from https://data.worldbank.org/indicator appendix 1 table a1. sources and definitions of the variables variable source gdp per capita: gdp chain linked volumes (2010), euro per capita eurostat public sector wage premium: compensation of employees total; compensation of employees public (nace sectors o, p and q public services, healthcare and education); number of employees total; number of employees in public sector; hour worked total; hour worked total in the public sector; compensation of employees in the private sector calculated as a difference between the total compensation of employees and that of public sector; compensation per employee computed by dividing compensation of employees with the number of employees; compensation per hour computed by dividing compensation of employees with the number of hours worked; all of the computations mentioned above were also performed for wages and salaries; eurostat trade openness: imports and exports as a % of gdp eurostat government size: total government expenditure or public sector employment share in total employment eurostat urbanization rate: urban population as % of total population world bank collective bargaining: predominant regime of wage setting in the government sector is collective bargaining as opposed to unilateral decision ec (2014) centralization: there is de jure centralization of wage updates across the government sector as opposed to decentralization. ec (2014) epl: employment protection legislation index. version 2 of this indicator is the weighted sum of sub-indicators concerning the regulations for individual dismissals (weight of 5/7) and additional provisions for collective dismissals (2/7). it incorporates 12 detailed data items. oecd consolidation efforts: consolidation effort is differences in capb between 2012 and the minimum from the period 2007–2012. ameco https://doi.org/10.1016/s0047-2727(02)00075-0 https://doi.org/10.1016/s0047-2727(01)00194-3 https://doi.org/10.1111/j.1467-9442.2007.00517.x https://doi.org/10.3386/w3755 bme_16(1)_2018_maketas.indd copyright © 2018 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: szaruckm@uek.krakow.pl business, management and education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 1: 94–107 https://doi.org/10.3846/bme.2018.2138 introduction involvement of customers in the process of value creation of products and services has been one of the fundamental research areas in service marketing and management for several past decades (lovelock & young, 1979; kelley, donnelly, & skinner, 1990; grönroos, 2011; grönroos & voima, 2013; mustak, jaakkola, & halinen, 2013; yang, chen, & chien, 2014; hollebeek, srivastava, & chen, 2016). changes observable in both marketing and marketplace over the last years tend to reveal the importance of the increasing role of customers’ involvement in value co-creation leading to the achievement of better results. it might have service marketing, value co-creation and customer satisfaction in the airsoft industry: case of a technology-based firm marek szarucki1, *, gabriela menet2 1, 2department of strategic analysis, cracow university of economics, rakowicka 27, krakow, poland received 29 may 2018; accepted 07 june 2018 abstract. the main objective of the paper is to examine whether offering a co-creation opportunity as a part of service marketing strategy influences customer value creation and satisfaction in the airsoft industry. our study uses a case study of a technology-based firm from the airsoft industry which operates internationally. the methods employed included statistical analyses based on the data collected through a survey of the technology-based company customers (n=178). coefficients of spearman and kendall were used to examine the correlations between respondents’ particulars and elements influencing customer satisfaction. the study results reveal that there are different drivers involved in the marketing strategy of value co-creation and customer satisfaction, and some of them have a stronger impact on target customers. the research contributes to the present scientific publications by adding a comprehensive analysis of users’ value co-production as part of a successful marketing strategy implementation by a technology-based firm. the study emphasizes the need for more empirically grounded support for the management of value co-creation processes incorporated in firm’s marketing strategy. keywords: service marketing, value co-creation, customer satisfaction, airsoft industry, case study. jel classification: m1, m3, m31, l8, l83. business, management and education, 2018, 16(1): 94–107 95 intense consequences for different marketing phenomena (prahalad & ramaswamy, 2004; grönroos, 2008; heinonen et al., 2010; zhang, lu, torres, & chen, 2018). various services have become progressively significant for production firms. despite the fact that these companies mostly concentrate on products, executives and researchers still need a complete framework to comprehend when they generate substantial investments in specific types of services (cusumano, kahl, & suarez, 2015). due to the growing importance of services in the modern world, over these past decades marketing philosophy has progressed from approaches concentrating on goods to those taking into account the service and interaction approaches of service-dominant logic (lusch, vargo, & o’brien, 2007; vargo & lusch, 2008; skålén, gummerus, von koskull, & magnusson, 2015). the mentioned logic has expanded the range of perception of the function of marketing. nevertheless, the look on service-dominant logic is even now exceedingly production and interaction-concentrated. research in this area related to firms manufacturing high-tech products is scarce, especially in the airsoft industry. the main objective of the paper is to examine whether offering a co-creation opportunity as a part of service marketing strategy influences customer value creation and satisfaction in the airsoft industry. the research employs a case study of a technology-based firm which operates internationally in the airsoft industry. the paper is organised as follows: firstly, theoretical background related to service marketing and customer-dominant logic is presented. secondly, the notion of value co-creation and the relationship of service marketing and customer satisfaction are described. thirdly, the research methodology is presented. next, the results are exemplified and discussed. finally, the conclusions are formulated and future research opportunities are proposed. 1. theoretical background 1.1. service marketing and customer-dominant logic there are differences between the roles that marketing plays in the space of physical goods and non-physical ones – services. in the traditional sense, a physical product is an outcome of how numerous resources, such as individuals, technologies, raw materials, know-how and information, have been managed in a manufacturing unit to integrate some features that customers in specific markets are searching for. since the manufacturing process may be described as a closed, internal process, the customer may not directly participate in it. as a result, a product is created as a premanufactured bundle of resources and features, complete to be exchanged. in such situation, the main duty of marketing is to figure out what product properties the customers are looking for and to provide promises about those properties via external marketing actions. according to the product marketing triangle (grönroos, 1996, p. 9), where three main functions of marketing concentrate on making promises, fulfilling promises and enabling promises, if the product owns qualities that customers need, it will accomplish the promises passed to the customers. this approach considers customers “in terms of markets of relatively anonymous individuals” (grönroos, 2007, p. 61). 96 m. szarucki, g. menet. service marketing, value co-creation and customer satisfaction ... in case of service companies, the range and substance of marketing are getting more complex, since the idea of a premanufactured product with properties that customers are searching for is too restricted to be helpful here. a similar situation is observed under conditions of business-to-business marketing where the traditional product construct is very restrictive due to the fact that customer relationships frequently cover not only physical goods but also different categories of service processes as well as hidden services. very often it is not known in detail what are the customer’s wants and expectations at the beginning of the service process. similarly, the company must decide itself what resources are required, as well as to what degree and in what composition they should be utilised. for instance, the service prerequisites of an electronic device that has been distributed to a customer may differ (training or financial issues). this leads to adjusting the firm’s resources and methods of their use accordingly. therefore, the service marketing triangle (grönroos 1996, p. 10), contrary to the product marketing triangle, does not possess the preproduced product. according to grönroos (2007, p. 62) “in process consumption, no preproduced bundle of features that constitutes a product can be present”. merely service perceptions and arrangements for a service process can be finished earlier and partially ready services can be existent. thus, service marketing triangle encompasses three interwoven groups (customer, provider and the firm) that work together to create, promote and deliver service to the satisfaction of the customer. analysing the above, it is worth noticing the existence of two types of logic: one related to good and another related to services. comparing two different logics of services and goods it has been argued that the earlier mentioned one fits well the settings of utmost goods manufacturing companies nowadays (vargo & lusch, 2004; grönroos, 2006). in this paper, we tend to apply a consumer dominant marketing logic, which according to heinonen et  al. (2010, p. 534) means “a view that positions the customer in the centre, rather than the service, the service provider/producer or the interaction or the system”. this perception is unlike conventional concepts of customer orientation mainly because of changing the perspective. it concentrates on services utilisation by customers and service to complete their personal aims, instead of looking at what companies do to generate services that customers will favour. this logic allows firms to develop a business on an exhaustive understanding of customers’ activities, experiences, practices, as well as context. the major matter is the life of a customer and functions that the offering is connected to (heinonen et  al., 2010 ) rather than perceiving the offering as traditionally as a result (material good, service, answer) or a process (service interrelation). this is especially important in industries where customer involvement in products and services creation is of importance, e.g. hightech industry (bosch‐sijtsema & bosch, 2015). marketing activities, in this case, concentrate on activities taking into account the customer’s life in a broader perspective (e.g. involving customers hobbies and products related to those hobbies). therefore, the customer’s logic must be the basis of a customer marketing logic especially taking into account value cocreation from a customer perspective. 1.2. value co-creation usually, the term “co-creation” is used by authors without clarifying whether they speak of customer involvement in the offering formation process, or his or her involvement in the business, management and education, 2018, 16(1): 94–107 97 value formation process (mustak et al., 2013). it is important to separate customer involvement in the formation of primary offerings from the development of value despite interrelatedness of these diverse concepts (grönroos & voima, 2013). different studies have concentrated on the relations between customer involvement in developing offerings and, nevertheless research thoroughly analysing these relations is a limited value (lusch et al., 2007; grönroos, 2008; aarikka-stenroos & jaakkola, 2012; kowalkowski, ridell, röndell, & sörhammar, 2012; zhang et al., 2018). similarly, researchers have studied different individual outcomes of customer involvement, such as customer satisfaction (vegavazquez, revilla-camacho, & cossío-silva, 2013) or customer loyalty (yang et  al., 2014). despite that, these results are fragmented and disclose little on the connection between the offerings formation and the value creation (mustak et al., 2013). thus, more studies on this phenomenon are needed. in this study, co-creation is perceived according to prahalad and ramaswamy (2004) as the mutual value creation between the customer and the supplier and involves a joint effort of the parts making up commercial relationships in order to build experiences and to resolve problems. contemporary studies in the service literature put the accent on dynamic customers that co-create value. many researchers argue that customers seem to be the value or experience co-creators via the service distribution process (grönroos, 2011; mustak et al., 2013). according to grönroos and voima (2013), the value in service-dominant logic is created by the combined activities of co-creation between customers and firms. based on this, it could be argued about the customers and firms value co-creation via relations and diverse contextual experiences (zhang et al., 2018). even though numerous approaches have shaped the conceptualisation of value co-creation in very distinctive expressions, this idea is built principally on service-dominant logic (vargo & lusch, 2008; skålén et al., 2015). giving this logic, the firm can only declare value propositions but cannot provide value since customers are the co-creators of value (vargo & lusch, 2008). according to hollebeek et al. (2016) value co-creation is recognised as one of important customer involvement profits (resource development, customer individual/interpersonal operant, and co-creation) to be useful within managing customer relationships. together with the evolving dominance of services, there is a growing stress on generating meaningful and impressive customer experiences (homburg, jozic, & kuehnl, 2017). the essential premise is that firms cannot act alone in assuring services of high-quality but need to embrace customer-oriented approaches by sustaining longstanding and emotive ties with customers via co-creating of remarkable experiences (vargo & lusch, 2008; troye & supphellen, 2012). it is also important to mention value for customers of participating in value co-creation (mustak et al., 2013). participation is related with enhanced observed quality and larger observed value by customers and gives customers an opportunity of having an influence and control over the process of product co-creation (kelley et al., 1990; prahalad & ramaswamy, 2004; vega-vazquez et al., 2013). moreover, customers’ involvement in the offering creation process leads to customer engagement perceived as “the mechanics of a customer’s value added to the firm, either through direct or/and indirect contribution” (pansari & kumar, 2017, p. 295). the level of customer commitment increases during their involvement in a 98 m. szarucki, g. menet. service marketing, value co-creation and customer satisfaction ... firm’s innovation process and co-producing value with the company (zhang, lu, & kizildag, 2017) by giving feedback and commentaries on products or services (i.e. suggesting improvements or “liking” innovative firm promotions). some studies have proved that customers having more control collect information on different features of an offering, make crucial decisions consequently to a substantial level, and build societies of like mind customers, what aid them to generate higher value (bagozzi & dholakia, 2006). other scholars indicate that customers may also accumulate economic value via involvement since they profit from discounts and cost reductions when taking part in the formation of offerings (prahalad & ramaswamy, 2004; pansari & kumar, 2017). moreover, customer participation supports vendors in reducing worker expenditures, a portion of which can be transferred to customers. furthermore, some vendors offer discounts responding to customer involvement, additionally increasing customers’ profits. 1.3. service marketing and customer satisfaction another important issue that service marketing attempts to achieve in order to build profitable relationships with customers is ensuring customer satisfaction. the idea of placing customers at the centre is not novel as such. levitt (1960), in his landmark paper, claimed that firms are excessively concentrated on their own manufacturing processes and not satisfactorily concerned with customer satisfaction. customer satisfaction is perceived to be one of the most significant ideas of the marketing literature, since it permits to connect purchasing and consumption practices with after-purchase trends, such as repeated buying, a variation of attitude or brand loyalty (vega-vazquez et al., 2013). from the theoretical perspective, the curiosity rests in the facts that satisfaction guides to increase in loyalty and economic outcomes. customer satisfaction is a multifaceted concept that has been broadly discussed in the literature. plentiful descriptions have been offered that sometimes are contradictive and vague. satisfaction can be principally recognised as an individual appraisal of accomplishment contrasted with the expectation (hunt, geiger-oneto, & varca, 2012). nevertheless, an increasing number of publications suggests that satisfaction appraisals are of social nature (fournier & mick, 1999). this point of view denotes a transformation from the tangible resources approach to intangible one (vargo & lusch, 2004). among those immaterial resources are valued co-creation and relationships. service marketing activities may positively influence customer satisfaction. the empirical study of 924 customers of bloemer and ruyter (1999) exhibits that particularly in the high-involvement service settings where customers spend substantial time and meet sensual encounters (e.g. in eating places or vacation camps), partaking directs to greater customer satisfaction. involvement has also been linked with greater customer loyalty, trust, and progressively positive appraisals of both the offering and its value results, all of which ultimately improve the seller-customer link (rosenbaum, ostrom, & kuntze, 2005; dabholkar & sheng, 2012, troye & supphellen, 2012). other results have proved that growth in customer satisfaction originating from participation in new service development directs customers to communicate their reactions via optimistic online evaluations or offline contact with personnel (melián-gonzález, bulchand-gidumal, & gonzález lópez-valcárcel, 2013). business, management and education, 2018, 16(1): 94–107 99 service marketing via its actions related to the marketing-mix tends to improve customer satisfaction and relationships. there are studies which prove a negative correlation between the degree of customer satisfaction and his or her price acceptance (anderson, 1996). furthermore, the existence of the strong and positive impact of customer satisfaction on a willingness to pay was discovered in other research (homburg, koschate, & hoyer, 2005). apart from the price, another marketing-mix element is placed, which is strictly connected with the spot where customers actually make a purchase. nowadays, more and more customers decide for online shopping using vendor’s websites, which quality has an immediate and positive impact on customer satisfaction (bai, law, & wen, 2008). furthermore, some elements of online store impact more on customer satisfaction than others (kim & stoel, 2004). attitudes of the target customers toward promotion (e.g. product packaging and advertising campaigns) are also of importance. testing those assumptions may be a basis for developing a future marketing strategy, which can take two directions: defensive marketing (e.g. complaint management) or offensive marketing (e.g. advertising). some researchers have already proved that the defensive marketing activities can considerably reduce costs of offensive marketing (fornell & wernerfelt, 1987). moreover, academics highlight that it is worth to verify in research the importance of socially sensitive factors such a salary (srinivasan & park, 1997). based on the theoretical foundations provided above, we propose the following hypotheses: h1. the marketing mix of a technology-based firm has impact on customer satisfaction in the airsoft industry; h1a. the product, in the marketing mix context, positively influences the customers with lower salary; h1b.the price level is important for the customers with lower salary; h1c. the customers with lower salary pay more attention to the product purchase place; h1d. the promotion positively influences the customers with lower salary. 2. data and methodology 2.1. case background this research follows “revelatory” case study approach (yin, 2009). the applied case considers a fast-growing technology-based gate company founded in poland in 2008. the case matches the research objective as gate engages its customers in value co-creation in order to learn if the company marketing strategy performs well and gain some hints for its future marketing actions. the gate company was chosen as it has an interesting business model generating almost all of its inflows from the clients abroad. the unusual phenomena is that gate’s sales in 2017 increased by more than 180% comparing to 2016. the value co-creation was the main reason for the company’s success during recent years. also, the gate company can definitely be categorized as a technology-based firm (groen, cook, & van der sijde, 2015). technology is embedded in the enterprise’s culture and philosophy. several experts manage the company and being completely independent of other already established firms, gate exploits technologically innovative concepts. gate bets on 100 m. szarucki, g. menet. service marketing, value co-creation and customer satisfaction ... an interactive collaboration with target customers and strive to co-produce value with airsoft players. furthermore, no studies concerning the connection between marketing strategy, value co-creation and customer satisfaction in airsoft industry were found. we carried out the research on airsoft players: the target customers of gate company. the airsoft market can be characterized as a niche market of hobby goods. nevertheless, taking into consideration the specific products delivered by gate (electronics for airsoft guns and android app), the part of the market in which gate operates can be categorized as a high-tech industry. the company designs and manufactures electronic systems, which are then installed in airsoft replicas in order to upgrade them. even though the company was focusing on involving customers in the development of ideas for new functions and innovatory products, there was a need to engage the airsoft players in co-production in the field of marketing activity. gate put into practice the concept of value proposition co-creation several years ago. the firm’s strategy of value creation is consistent with the model of the cocreative practice of forming a value proposition developed by kowalkowski et al. (2012). for instance, the gate’s customers were involved in value co-production in 2017 through participation in survey containing questions crucial for value formation in the future. moreover, before a product launch, almost 50 beta-testers from around the world verified the product prototype, gave priceless feedback and hints with ideas for improvement of the ultimate version of the device. with their help, new and innovative functions can be introduced and product adjustments implemented, what makes the final product almost ideal. the research perspective is consistent with studies conducted by many prominent academics as to mention: prahalad and ramaswamy (2000, 2004), yang et al. (2014), j. k. hsieh and y. c. hsieh (2015). our research assumes that offering a co-production opportunity as a part of marketing strategy impacts on customer value creation and satisfaction in the airsoft industry. 2.2. method the analysis is based on data from the internet survey. the link to the google docs questionnaire was sent on the 12th of april 2017 via newsletter to 1033 clients from the company’s newsletter database. according to the statistics from freshmail (website through which the newsletter was sent), 479 recipients opened the email. moreover, on the 12th of april 2017, the gate published the survey on its facebook fan page reaching 5717 facebook users. the campaign lasted for the 12 days and gathered answers and valid data from 178 respondents from more than 30 countries in four continents (including europe: 69.1%, north america: 21.3%, asia: 8.4% and south america: 1.2%). the multitude of participants derived from the fact that for those who fulfilled the questionnaire, gate offered a coupon code with 20% discount for shopping at gate’s online store. due to its limited sample size, the research is a demonstrative, a pilot study. the applied methods were thoroughly selected for this particular kind of study. the statistical application pqstat (version 1.6.4.122) was used in order to perform the statistical analyses. the inferential analyses of relations between the level of “salary” and scales from the question “rate each of the elements according to the importance” were analyzed by estimating the monotonic correlation coefficients of spearman and kendall. it allowed measuring the monotonic business, management and education, 2018, 16(1): 94–107 101 dependence of those random variables. thus, the correlation between two separate variables proved to be high when observations were of similar rank. the correlation was significant at p<0.05 and highly significant at p<0.01. the survey was prepared based on the literature review on the value proposition, customer satisfaction and marketing. the questions also derived from some strategic plans of gate company. the initial version of this questionnaire contained around 100 questions (including open answer and multiple choice questions). after delving deeper into the research and company needs, we limited and modified the questions, finally reaching 27 in total. there are seven categories of the survey questions: introduce yourself; products and functions; manuals; price; gate; airsoft; satisfaction. there was also need to answer questions about respondent’s particulars, sharing such information as a country, age, education, salary, the amount spent on airsoft and frequency of attendance in airsoft games. for the purpose of this research, the marketing-oriented questions were correlated with the levels of respondents’ salary. the marketing-oriented questions included likert-scales (1-5), where respondents rated the answers. 2.3. findings and discussion the survey questions analysed below concerned the marketing-mix (table 1). the questions considering “product” included such areas as product design, ease of installation, instructions, product functionality, quality, tutorial videos and warranty conditions. then, the survey checked how important is a level of “price” for the respondents. as gate sales to ultimate customers through its online store, one of the questions considered the company website and with reference to four marketing p’s, this question was categorized as “place” meaning distribution channel. the last p: “promotion” included questions about the aftersales service, the company brand name, packaging as well as sales promotion and advertising. generally, the most important for customer satisfaction (median 5) turned out to be: quality level, product functionality and tutorial videos. the least important (median 3) were: packaging and brand name. at this stage, considering the marketing mix, it looks like “product” is most important for customer satisfaction in the airsoft industry. comparably, a similar research was carried out in the insurance industry (agarwal & kapoor, 2014). one of their hypotheses was “there is a significant impact of marketing strategies on the customer satisfaction to win the competitive advantage”. the researchers gathered data from a well-structured questionnaire on 300 customers and analysed, inter alia, correlations between different factors. they found out that 5 out of 13 elements of customer satisfaction play important role in this particular industry: brand popularity, innovation in policy, quick response to customers, building relationship network, and financial security. their study also proved that those are the innovation and creativity which play important role in developing 4 p’s of marketing. on the other hand, there was a research conducted in the market of mobile instant messages in china, which found out that trust, perceived service quality, customer value (including functional value and emotional value) are most important factors of customer satisfaction in this industry (deng, lu, wei, & zhanga, 2010). the survey questions contained some demographics such as country, age, gender, education, salary, money spent on airsoft hobby and frequency of playing airsoft. during analysis, 102 m. szarucki, g. menet. service marketing, value co-creation and customer satisfaction ... the evaluation of statements for the question “rate each of elements [of customer satisfaction] according to the importance” was correlated with the scales from respondent’s particulars which considered „salary (monthly in usd)”. the 15.2% of respondents earned less than $500, whereas 12.9% of them had a salary between $501 and $1000. the group of 35.4% of respondents declared that they earned $1001–$2500. the 22.5% of airsofters indicated the range $2501–$3999. the 7.9% of respondents stated that they earn between $4000–$5999, whereas only the group of 6.2% could have admitted that their salary exceeds $6000. most of the respondents indicated the salary lower or equal to $2500. this means that, surprisingly, most of gate customers do not earn very much taking into consideration scales. before the survey was carried out, gate believed that its target customers are those who earn more, because gate products are rather expensive comparing to competition. however, the results have shown that gate should target in its marketing activities not specifically those who earn most, but particularly those who earn less. as the survey results are the basis for marketing strategy formulation, the strategy should be designed putting emphasis on those factors which are negatively correlated with a salary increase. as shown in table 1, there is no significant correlation between statements from “product” category (design, ease of installation, manuals, product functionality, quality level, tutorial videos, warranty period) and the level of salary. this rejects the hypothesis (h1a) “the product, in the marketing mix context, positively influences the customers with lower salary”. table 1. correlations between the scales of “rate each of the elements [of customer satisfaction] according to the importance” and “salary (monthly in usd)” (source: own study based on the questionnaire) spearman kendall r p tau p product design (how the product looks like) –0.0617 0.4134 –0.0523 0.3002 ease of installation –0.0735 0.3294 –0.0620 0.2192 manuals (user-friendly and multilingual) –0.0834 0.2685 –0.0735 0.1453 product functionality 0.0527 0.4851 0.0471 0.3505 quality level –0.0442 0.5580 –0.0399 0.4294 tutorial videos –0.1284 0.0877 –0.1074 0.0333 warranty period –0.0612 0.4173 –0.0512 0.3098 price price level –0.2139 0.0041 –0.1782 0.0004 place company website (online store) –0.1850 0.0134 –0.1566 0.0019 promotion after-sales service –0.0512 0.4970 –0.0446 0.3773 brand name –0.0376 0.6184 –0.0305 0.5459 packaging –0.1822 0.0149 –0.1450 0.0040 sales promotion and advertising –0.1773 0.0179 –0.1450 0.0040 business, management and education, 2018, 16(1): 94–107 103 the strongest relation that was found in the correlation between the scale “salary (monthly in usd)” and “price”. these scales are negatively correlated on a low level. both in case of spearman’s and kendall’s correlation it is highly significant (p < 0.01). thus, the lower rate for the “salary (monthly in usd)”, the higher rate for the “price”. it proves that the higher the salary of respondents, the less important for them is the price. this confirms the hypothesis (h1b) “the price level is important for the customers with lower salary”. however, similar studies have proved that there is a negative correlation between the degree of customer satisfaction and the level of customer price tolerance (anderson, 1996). moreover, other researchers found out that there exist strong and positive influence of customer satisfaction on a willingness to pay (homburg et al., 2005). therefore, gate should pay particular attention to keep the price at adequate level taking into consideration its target customers (those, who earn less according to this study). the scale “salary (monthly in usd)” is negatively correlated on a low level with evaluation of the statement “company website (online store)” (see table 1). considering the spearman’s correlation, it is significant (p < 0.05). however, in case of kendall’s correlation, it is highly significant (p < 0.01). consequently, the lower salaries of airsoft players, the more they pay attention to the online store at company’s website where they can purchase gate products. this confirms the hypothesis (h1c): “the customers with lower salary pay more attention to the product purchase place”. to get the broader view on the topic, it is worth to mention that according to the study carried out on chinese online visitors, the website quality has a direct and positive impact on customer satisfaction (bai et  al., 2008). moreover, there was even a study showing which particular dimensions of the website have a direct influence on customer satisfaction in case of online shoppers (kim & stoel, 2004). nevertheless, as gate is going to target those who earn less (the majority of its clients), it should follow a totally different approach toward fields of marketing investments than actually is suggested in the other studies. with reference to the “promotion” category of the marketing mix, the “after-sales service” and “brand name” are not significantly correlated with the customers’ salary. however, we found out a significant correlation between the scale “salary (monthly in usd)” and “packaging”. the rate for „packaging” is negatively correlated on a low level with the level of „salary (monthly in usd)”. in case of spearman’s correlation it is significant (p < 0.05) whereas in case of kendall’s correlation it is highly significant (p < 0.01). therefore, the lower rate for the „salary (monthly in usd)”, the higher rate for the „packaging”. this means that those who earn less, care more for the “packaging”. moreover, as shown in table 1, the evaluation of the statement “sales promotion and advertising” is negatively correlated on a low level with the scale “salary (monthly in usd)”. taking into consideration the spearman’s correlation, it is significant (p < 0.05), but looking into kendall’s correlation, it is highly significant (p < 0.01). thus, the lower the respondent’s salaries, the more attention they pay to the sales promotion and advertising. taking into consideration the findings, the hypothesis (h1d) “the promotion positively influences the customers with lower salary” turned out to be true only partly. the above results have rejected one hypothesis: (h1a), partly confirmed one hypothesis (h1d), as well as confirmed two: (h1b) and (h1c). nevertheless, they proved that the main hypothesis (h1) “the marketing mix has an impact on customer satisfaction in the airsoft industry” is partly true. to fully understand the study findings, it is important to highlight 104 m. szarucki, g. menet. service marketing, value co-creation and customer satisfaction ... that similar studies have been already performed in other industries. those were: analyses of the impact of co-brand marketing mix strategies on customer satisfaction, brand and loyalty for korean traders and manufacturers (k. kim, y. kim, lee, & youn, 2014); research of user’s satisfaction with e-payment system (adeyinka & isah, 2015); identification of factors affecting customer satisfaction in case of online travel agencies from india (sabyasachi, chauhan, & chauhan, 2017) as well as analyses of relations between sacrifices, quality, value, satisfaction and loyalty in tourism (gallarza, gil-saura, & arteaga-moreno, 2017). moreover, the relation between expectations, quality, price and customer satisfaction was examined in swedish market (anderson, fornell, & lehmann, 1994). these studies proved that it is possible to identify customer satisfaction elements in different industries, to rate them and correlate with other factors in order to validate different hypotheses connected with the relationship between customer satisfaction, marketing-mix, and value. conclusions the study results have revealed that there are different drivers involved in the service marketing strategy related to value co-creation and customer satisfaction, and some of them have a stronger impact on target customers. the research contributes to theory development by providing a comprehensive analysis of users’ value co-production as part of a successful marketing strategy implementation by a technology-based firm. the study emphasis supports the need for more empirically based guidance for the management of value co-creation processes incorporated in firm’s marketing strategy. moreover, the practical contribution of our findings is related to the direct impact of the value co-creation of gate company and its customers. the research has shown how gate is performing in the field of marketing activity and has highlighted the areas on which the company should focus on future marketing undertakings. therefore, the implications for marketing strategy creation are as follow: firstly, focus on targeting those airsoft players who earn $2500 or less. then, pay attention to the elements of marketing strategy which are crucial to their satisfaction: low price, well designed and user-friendly online store, refined packaging and frequent promotions. apart from those presented in the paper, the company shall consider also other kinds of co-producing value. for example, the managers could invite airsoft players to the headquarters in order to test prototypes. moreover, gate could engage its employees from r&d department in taking part in airsoft meetings (where they could play airsoft, get to know the customers and use in the games the products they designed). this would accelerate the new product development process (time-to-market launch), and make the new products address the customer needs adequately. in case of the gate company, those are the most proper ways to co-create value. the obtained results should be treated carefully due to some limitations of the study concentrating on the technology-based firm operating in the airsoft industry. it shall be highlighted that characteristics of the technology-based firm in this niche industry of hobby items might be totally different than in case of technology-based firms operating in other industries. moreover, in case of a non-technology-based company targeting airsoft players, the findings may not apbusiness, management and education, 2018, 16(1): 94–107 105 ply. future research should broaden its scope to other companies from the airsoft industry or other technology-based firms in different industries. furthermore, it would include not only respondents who are familiar with the brand name of a particular company, but also individuals who do not know the brand but 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(2018). engaging customers in value co-creation or co-destruction online. journal of services marketing, 32(1). https://doi.org/10.1108/jsm-01-2017-0027 copyright © 2016 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics ligita gasparėnienė1, rita remeikienė2 department of banking and investment, faculty of economics and finance, mykolas romeris university, ateities g. 20, lt-08303 vilnius, lithuania e-mails: 1ligitagaspareniene@mruni.eu; 2rita.remeikiene@mruni.eu (corresponding author) received 16 october 2015; accepted 18 february 2016 abstract. increasing amounts of the eu structural support in lithuania require theoretical and practical research to disclose the determinants that have a significant impact on the competitiveness of lithuanian economics. the purpose of this article is to evaluate the impact of the eu structural support on the competitiveness of lithuanian economics. the methods of the research include systematic and comparative analysis of the scientific literature, expert evaluation and linear regression. the research disclosed the main determinants of country’s competitiveness. the results have revealed that eu structural support has the most significant impact on lithuanian engineering and technological infrastructure. the impact of the support on country’s macroeconomic, scientific and social environment can also be considered as significant. the eu structural support has medium strong impact on education and business environment conditions in lithuania. it has been established that, in the field of business advancement, lithuanian should be rated as medium competitive. hence, the increase in country’s competitiveness by employing eu structural funds should be treated as one of priority aims. in addition, responsible authorities should perform with higher efficiency seeking for higher competitiveness of the country. keywords: competitiveness, the determinants of competitiveness, eu structural support, the impact of the eu structural support, lithuania, lithuanian economics. jel classification: f21, f43. 1. introduction competitiveness is a complex concept which is interpreted in many different ways without existence of an accurate and universal definition. according to navickas (2010: 99), “country’s competitiveness is the ability of the country to improve its position and maintain advantage in respect of other countries”. a competitive country is able to provide favourable conditions for business; locally made products and services are successfully traded in both domestic and foreign markets; high employment rates and life standards are ensured. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(1): 74–88 doi:10.3846/bme.2016.291 mailto:1ligitagaspareniene@mruni.eu mailto:2rita.remeikiene@mruni.eu http://dx.doi.org/10.3846/bme.2016.291 75 business, management and education, 2016, 14(1): 74–88 traditionally, country’s competitiveness is described by its economic indicators. however, considering the complexity of global conditions, the analysis of purely quantitative economic indicators is insufficient. hence, this research is aimed at qualitative and quantitative evaluation of country’s competitiveness. it should be noted that the results of previous studies on the impact of the eu structural support on competitiveness are rather contradictory. some studies (puigcerverpeñalver 2004; cardenete, delgado 2013 and others) reveal and empirically substantiate a positive impact of eu structural funds on economics, while the others prove that this impact is weak (dall’erba et al. 2009; aiello, pupo 2012; zaleviciene 2012), statistically insignificant (aiello, pupo 2012) or even negative (dall’erba et al. 2009; fiaschi et al. 2011). in addition, some authors (paun 2013; mohl, hagen 2010) note that the impact of the eu structural support can be bidirectional. this raises the scientific problem: what is the impact on the eu structural support on the competitiveness of lithuanian economics? this article is aimed at evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics. for fulfilment of the defined aim, the following objectives have been raised: 1) to analyse the theoretical determinants of country’s competitiveness; 2) to present the methodology of the research; 3) to introduce the results of the empirical research on the impact of the eu structural support of the competitiveness of lithuanian economics. the methods of the research include systematic and comparative analysis of the scientific literature, expert evaluation and linear regression. 2. the determinants of country’s competitiveness: theoretical background scientific literature covers the variety of the determinants of competitiveness with a recent focus on non-economic ones. rakauskiene and tamosiuniene (2013) divided the determinants of country’s competitiveness into 11 following groups: institutional, macroeconomic, engineering, technological, scientific, educational, social, product market, labour market, finance market and business progress. this classification can be considered as comprehensive since it covers a variety of the aspects of country’s competitiveness. improvement of institutional environment influences the development of such determinants as innovation, services, science, education, business, etc. (radovic et al. 2012). on the other hand, valodkiene and snieska (2012) note that governmental interference should remain comparatively moderate. stable macroeconomic policy contributes to rapid and continual economic growth, which, in turn, facilitates making investment and business decisions. macroeconomic indicators commonly employed for the assessment of country’s competitive advantage 76 l. gasparėnienė, r. remeikienė. evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics include gdp, inflation rate, fdi, international trade balance (seputiene, brazauskiene 2013), long-term interest rate, monetary stability, public debt and budget deficit (rakauskiene, tamosiuniene 2013). continual innovations contribute to knowledge improvement as well as creation of new products and technologies. what is more, they ensure proper functioning of a funding system (schwab 2014). competitiveness of advanced economies is based on high value which is generated by skilled staff as well as by assurance of flexible life-long learning opportunities. high quality education contributes to an increase in average income and efficiency; it also enables to reduce probability of social problems (sahlberg 2006). social environment, which is described by such factors as healthy labour force, health care quality, social welfare, ecological situation and exploitation of renewable energy, is also attributed to the determinants of country’s competitiveness (rakauskiene, tamosiuniene 2013). healthy labour force is vital for country’s competitiveness since sick labour force is less productive (schwab 2014). favourable business conditions, assessed by investment climate and economic freedom, have a significant impact on an increase in the standard of living as well as on country’s ability to ensure business competitiveness (titarenko et al. 2007; kharlamova, vertelieva 2013). the impact of fdi on competitiveness emerges as adoption of new technologies and innovations, spread of managerial knowledge and skills, creation of new workplaces, and direct increase of capital in international markets (plchova, gajduskova 2013). systematised determinants of country’s competitiveness have been presented in table 1. summarising, country’s competitiveness is described by a variety of determinants which can be classified into micro and macro, economic and non-economic, internal and external, etc. although the analysis of competitiveness is traditionally based on macroeconomic determinants, under the conditions of modern competition, such assessment often appears insufficient. on the contrary, an adequate assessment of country’s competitiveness requires a complex attitude, i.e. consideration of all determinant groups. for implementation of the eu cohesion policy aims over the period of 2014–2020, in the last few years lithuania absorbed nearly 23.56 billion litas from the eu structural funds, including 392.67 million litas for european territorial co-operation. over this period, the biggest share of the contributions were directed towards assurance of territorial cohesion, implementation of macroregional strategies and creation of work places. 77 business, management and education, 2016, 14(1): 74–88 table 1. the basic determinants of country’s competitiveness (source: compiled by the authors) determinant author(s), year currency exchange rate herrero et al. (2014) labour productivity herrero et al. (2014), maciulyte-sniukiene, paliulis (2011) employment meiliene, snieska (2010) labour market efficiency yao, cui (2010), meiliene, snieska (2010) institutional system schwab (2014), radovic et al. (2012), stevans et al. (2012) monetary and fiscal policy seputiene, brazauskiene (2013), rakauskiene, tamosiuniene (2013) fdi clipa (2011), plchova, gajduskova (2013) transport infrastructure valodkiene, snieska (2012), rakauskiene, tamosiuniene (2013) educational system lane, johnstone (2012), sahlberg (2006), stevans et al. (2012) social environment rakauskiene, tamosiuniene (2013), stevans et al. (2012) efficient finance system schwab (2014), monnin, jokipii (2010) innovation vaicekauskaite (2011), valodkiene, snieska (2012) technological advancement balkyte, tvaronaviciene (2010) quality of goods and services latruffe (2010) intellectual factors balkyte, tvaronaviciene (2010) knowledge infrastructure balkyte, tvaronaviciene (2010), valodkiene, snieska (2012) business environment seputiene, brazauskiene (2013), titarenko et al. (2007) clusters jurgutis, jucevicius (2009), parausic et al. (2014) 3. the methodology of the research in order to ensure reliability of the research results, both qualitative (expert evaluation) and quantitative (linear regression) analysis was employed. the questionnaire for expert evaluation was composed of 8 questions that were developed to acquire general information about the experts and obtain expert evaluation on the researched problem. while forming the group of the experts, the basic requirements raised for them included competence and experience in the research field. representatives of the eu structural support interim and implementation institutions (ministries, support agencies) directly dealing with the issues of the eu support administration and assessment, i.e. heads of departments, project managers and chief specialists, were selected as experts. for the assurance of high competence, the specialists with work experience not shorter than 3 years were involved. for higher accuracy of the results, the experts representing 78 l. gasparėnienė, r. remeikienė. evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics different industries – business (22 percent of the experts), finance (11 percent of the experts), education (11 percent of the experts), transport infrastructure (22 percent of the experts), environmental protection (11 percent of the experts), information technologies (11 percent of the experts) and business education (12 percent of the experts) were involved. according to burinskiene and rudzikiene (2009), the optimal size of the expert group makes 8–10 experts. following the above-mentioned theoretical recommendation, the expert group for this research was composed of 10 people. kendall’s coefficient of concordance was employed to verify compatibility of the experts’ opinions. for verification of internal consistency of the expert evaluation, cronbach alpha coefficient was calculated. the impact of the eu structural support on macroeconomic, business and labour market determinants was additionally verified by applying simple linear regression analysis. this technique was employed to establish the links between the eu structural support (independent variable) and the determinants of lithuanian competitiveness (dependent variables) such as gdp, r&d expenditure rate, fdi, the number of operating entities, budget balance, annual inflation, employment rate, cpi and foreign trade balance. the data was processed with spss and ms excel software. 4. the results of the empirical research on the impact of the eu structural support on the competitiveness of lithuanian economics the value of cronbach alpha coefficient equal to 0.855 reveals the acceptable internal homogeneity of the expert evaluation. the value of kendall’s coefficient of concordance w = 0.505 reflects compatibility of the experts’ opinions. concordance can be considered statistically significant since p = 0 < 0.05. nevertheless, for confirmation of the evaluation compatibility, it is recommended that the value of kendall’s coefficient should reach 0.6. thus, the coefficient of concordance was additionally calculated for each of the questions in order to identify the ones with higher or lower degree of expert evaluation compatibility (see table 2). table 2. the results of kendall’s test for survey questions (source: compiled by the authors) question kendall’s coefficient p-value annotation significance of the determinants of country’s competitiveness 0.334 0.000 (<0.05) rather compatible lithuanian competitiveness in respect of competitiveness of the eu member states 0.237 0.000 (<0.05) hardly compatible the impact of the eu structural support on the competitiveness of lithuanian economics 0.611 0.000 (<0.05) reliably compatible 79 business, management and education, 2016, 14(1): 74–88 the results of kendall’s test show that experts’ opinions split while evaluating the significance of various determinants on country’s competitiveness (w = 0.334, p = 0.000 < 0.05), and were hardly compatible while evaluating lithuanian competitiveness in respect of the competitiveness of the eu member states (w = 0.237, p = 0.000 < 0.05). nevertheless, the evaluations appeared reliably compatible on the basic issue of the research – the impact of the eu structural support on the competitiveness of lithuanian economics (w = 0.611, p = 0.000 < 0.05), which proposes that the results of the research are statistically significant. in order to identify the main determinants of the country’s competitiveness, the experts were asked to evaluate the significance of the determinants in the five-point likert scale. interpreting the results, the determinants with the average lower than 2.5 were considered insignificant, with the average from 2.5 to 3.5 – medium significant, with the average from 3.5 to 4.5 – significant, and with the average higher than 4.5 – extremely significant. the determinants of country’s competitiveness, ranked by their significance, have been presented in table 3. table 3. ranks of the determinants of country’s competitiveness by their significance (source: compiled by the authors) rank determinant average (m) standard deviation (s) mode (mo) significance 1. scientific infrastructure 4.78 0.67 5.00 extremely significant 2. technological infrastructure 4.56 0.73 5.00 extremely significant 3. business environment 4.56 0.53 4.00 extremely significant 4. institutional environment 4.22 0.44 4.00 significant 5. engineering infrastructure 4.22 0.67 4.00 significant 6. labour market 4.11 0.78 4.00 significant 7. business progress 4.00 0.00 4.00 significant 8. macroeconomic situation 4.00 0.50 4.00 significant 9. finance market 3.89 0.33 4.00 significant 10. education 3.67 0.73 3.00 significant 11. social environment 3.44 0.72 3.00 medium significant table 3 reveals that the experts consider all the determinants of country’s competitiveness more or less significant – neither of the introduced determinants was evaluated as insignificant. scientific infrastructure was acknowledged as the most significant determinant, while social environment – as the least significant one. considering a 80 l. gasparėnienė, r. remeikienė. evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics small sample of the research, it should be noted that extremely high or low values may distort the overall results. thus, for more accurate results of the research, mode, which reveals the most recurrent value in the data set, was calculated. by this characteristic, the least significant determinants of country’s competitiveness are social environment and education, recurrently given the evaluation of 3 points. the most significant determinants in this respect include scientific and technological infrastructure with the recurrent evaluation of 5 points. institutional environment, macroeconomic situation, engineering infrastructure, business environment, labour and finance markets as well as business progress were recurrently given the evaluation of 4 points, which allows to consider them as significant for lithuanian competitiveness. the research also included evaluation of lithuanian competitiveness in comparison to other eu member states. the results of the research on lithuanian competitiveness by particular determinants have been presented in table 4. table 4. evaluation of the competitiveness of lithuania in comparison to other eu member states (source: compiled by the authors) determinant average (m) standard deviation (s) mode (mo) result scientific infrastructure 3.56 0.73 3.00 competitive technological infrastructure 4.56 0.53 5.00 extremely competitive business environment 3.22 0.83 3.00 medium competitive institutional environment 3.33 0.87 3.00 medium competitive engineering infrastructure 3.78 0.83 4.00 competitive labour market 2.89 1.05 3.00 medium competitive business progress 3.22 0.83 3.00 medium competitive macroeconomic situation 3.11 0.78 3.00 medium competitive finance market 3.33 1.22 4.00 medium competitive education 3.56 0.73 3.00 competitive social environment 3.00 0.87 3.00 medium competitive the data presented in table 4 reveals that technological infrastructure is the main determinant of the competitiveness of lithuanian economics (in the field of technological infrastructure, the country was evaluated as extremely competitive). the other significant determinants (by which the country is considered to be competitive) with high average evaluations include engineering infrastructure, scientific infrastructure and education. by the rest of the determinants, lithuania is considered to be medium competitive with the average evaluations of 2.89–3.33 points and recurrently given evaluation of 3 points. lithuanian labour market and its social environment with the lowest 81 business, management and education, 2016, 14(1): 74–88 expert evaluations are considered to be the determinants the least contributing to the competitiveness of the country. the experts also provided their evaluations on the impact of the eu structural support on particular determinants of the competitiveness of lithuanian economics. interpreting the results of the research, the impact of the eu structural support with the average lower than 2.5 points was considered insignificant, the impact with the average from 2.5 to 3.5 points – medium significant, the impact with the average from 3.5 to 4.5 points – significant, and the impact with the average higher than 4.5 points – extremely significant (see table 5). table 5. the impact of the eu structural support on the determinants of the competitiveness of lithuanian economics (source: compiled by the authors) determinant average (m) standard deviation (s) mode (mo) impact scientific infrastructure 4.33 0.71 4.00 significant technological infrastructure 4.67 0.71 5.00 extremely significant business environment 3.22 0.97 2.00 medium significant institutional environment 2.44 0.73 3.00 insignificant engineering infrastructure 4.78 0.44 5.00 extremely significant labour market 2.44 0.73 2.00 insignificant business progress 3.89 0.33 4.00 significant macroeconomic situation 3.67 0.87 4.00 significant finance market 2.22 0.97 2.00 insignificant education 3.44 0.73 3.00 medium significant social environment 3.67 0.71 3.00 significant the results of the research have revealed that the eu structural support has the most significant impact on engineering and technological infrastructure of the country. what is more, its significant impact on country’s macroeconomic situation, scientific infrastructure, social environment and business progress has been revealed. the experts noted that the eu structural support has medium significant impact on lithuanian education and business environment. however, its impact on institutional environment, labour market and finance market is treated as insufficiently significant. the experts were also asked to point out the determinants of the competitiveness of the country that, in the experts’ opinion, are significantly influenced by the eu structural support, although these determinants were not included in the questionnaire. additional determinants were pointed out by the only expert who acknowledged significance of 82 l. gasparėnienė, r. remeikienė. evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics lithuanian business, directly and indirectly related to the impact of the eu structural support, and indicated participation in joint projects as one the determinants of the competitiveness of lithuanian economics. the experts were also asked to generalise their evaluations concerning the impact of the eu structural support on the competitiveness of lithuanian economics (positive impact, more positive than negative impact, more negative than positive impact, negative impact or there is no impact). on this issue, unanimous expert evaluations have been obtained – 100 percent of the experts evaluated the impact of the eu structural support as positive (systematised results of the expert evaluation have been presented in table 6). summarising the results of the research on the impact of the eu structural support on the competitiveness of lithuanian economics, it can be stated that the main determinants of the competitiveness of lithuanian economics are scientific and technologitable 6. significance of particular determinants on the competitiveness of lithuanian economics and the impact of the eu structural support on the identified determinants (source: compiled by the authors) rank determinant significance competitiveness of lithuanian economics by the determinant the impact of the eu structural support 1. scientific infrastructure extremely significant competitive (3.56) significant 2. technological infrastructure extremely significant extremely competitive (4.56) extremely significant 3. business environment extremely significant medium competitive (3.22) medium significant 4. institutional environment significant medium competitive (3.33) insignificant 5. engineering infrastructure significant competitive (3.78) extremely significant 6. labour market significant medium competitive (2.89) insignificant 7. business progress significant medium competitive (3.22) significant 8. macroeconomic situation significant medium competitive (3.11) significant 9. finance market significant medium competitive (3.33) insignificant 10. education significant competitive (3.56) medium significant 11. social environment medium significant medium competitive (3.00) significant 83 business, management and education, 2016, 14(1): 74–88 cal infrastructure. following the expert evaluations, lithuania is considered to be an extremely competitive country by its technological infrastructure (access to and usage of it, telecommunications and other newest technologies). the research has also revealed that the eu structural support has an extremely significant impact on lithuanian technological infrastructure, which proposes that namely eu funding has determined high level of the competitiveness of lithuanian technological infrastructure. although slightly less competitive in comparison to the technological infrastructure, lithuanian scientific infrastructure (creation of innovations, quality of scientific institutions, cooperation between science and business, human scientific resources) can be considered to have achieved a rather high level of competitiveness; the eu structural support has also had a significant impact on its development, which has been confirmed by the statistical data analysis that reveals the positive causality between r&d expenditure rate and the volumes of the eu structural support distributed for project funding. efficient absorption of r&d expenditure is a vital condition for maintenance and increase of the competitiveness in the scientific infrastructure of the country. an extremely significant impact of the eu structural support on lithuanian engineering infrastructure (effectiveness and quality of transport and energetics infrastructure) could have also determined high level of the competitiveness of lithuanian economics in this area. in the field of education (primary, higher, staff training), lithuania is considered to be competitive. however, the impact of the eu structural support on education is only medium significant, which proposes the following conclusions: first, competitiveness of lithuanian education is influenced by other determinants rather than by the structural support; second, medium significant impact may have been determined by inefficient absorption of the support, especially considering the fact that a large share of the eu structural funds (over 3 billion litas) were distributed for funding of lithuanian educational and scientific projects during the period of 2007–2013. since education is acknowledged as a significant determinant of country’s competitiveness, the opportunities to increase the efficiency of lithuanian educational projects should be reviewed. the expert evaluation has confirmed that the impact of the eu structural support is significant in the field of business progress (business culture, cluster development, foreign investment). this result could have also been determined by the positive interrelation between the structural support and fdi as well as by the links between the structural support and the number of operating entities. in the field of business progress, lithuania is evaluated as medium competitive. hence, an increase in country’s competitiveness achieved by employing the eu structural support can be referred to as one of the priority directions. the research has revealed a significant impact of the eu structural support on country’s macroeconomic situation, which was also confirmed by the positive links between gdp and the structural support. lithuanian macroeconomic situation is considered to be medium competitive, which requires a careful review of the opportunities to increase 84 l. gasparėnienė, r. remeikienė. evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics the level of competitiveness by employing the eu structural support. country’s macroeconomic situation reflects the overall state of its economics. for this reason, it is rather difficult to specify the fields where the support could improve country’s competitiveness in respect of its macroeconomic situation. what is more, country’s macroeconomic situation can be treated not only as the determinant of competitiveness, but also as its result. hence, an increase in country’s competitiveness requires the efficient and smooth operation of all the processes engaged, which means that the projects based on the structural funding, especially the ones designed for economic growth, must be implemented with the highest possible efficiency. the research has also disclosed that not all the determinants of competitiveness are influenced by the eu structural support. it has been established that the impact of the eu structural support is insignificant in institutional environment (efficiency of legal system, transparency and efficiency of governmental activities), labour (flexibility of the labour market, labour force quality and quantity, regulatory framework) and finance markets (efficiency of banks and stock exchange). the eu structural support may influence not all aspects of institutional environment. however, the results of the research allow to envisage the opportunities of the competitiveness increase in this field by promotion of administrative abilities, public administration and technical support efficiency. insignificant impact of the eu structural support on lithuanian labour market contradicts to the majority of previously conducted studies and evaluations. this contradiction can be explained by a wider attitude towards the labour market, which in this research is described not only by employment rate, but also by labour force quality and regulatory framework. nevertheless, for more accurate establishment of the opportunities to increase the impact of the eu structural support on lithuanian labour market, further research including all the aspects of labour market competitiveness is required. it is important to note that finance markets are not directly provided with the eu structural support. hence, the analysis of the impact of the structural support on the increase of the competitiveness of this determinant is inexpedient. as well as finance markets, business environment conditions (in this research treated as competitive conditions in the market including procedures, tax and legal base) are not attributed to the field of the direct impact of the eu structural support. hence, improvement of business environment by employing the structural support will not be further discussed. social environment (health care system, social welfare, ecologic situation) is the only determinant evaluated as insignificant to country’s competitiveness. lithuanian social environment is considered to be medium competitive, although it is significantly influenced by the eu structural support. considering the comparatively low significance of this determinant to country’s competitiveness, it can be concluded that the impact of the eu structural support on lithuanian social environment is sufficient. calculations of pearson correlation coefficient, estimated to determine the strength of the links between gdp and the eu structural support, revealed value r equal to 0.703, 85 business, management and education, 2016, 14(1): 74–88 and value p = 0.016, which proposes that the links between gdp and the eu structural support are medium strong positive. the coefficient estimated to determine the strength of the links between r&d expenditure and the eu structural support revealed value r equal to 0.798, and value p = 0.003, which proposes that the links between r&d expenditure and the eu structural support are strong positive. the coefficient estimated to determine the strength of the links between the number of operating entities and the eu structural support revealed value r equal to 0.861, and value p = 0.001, which proposes that the links between the number of operating entities and the eu structural support are extremely strong and positive. finally, the coefficient estimated to determine the strength of the links between fdi and the eu structural support revealed value r equal to 0.844, and value p = 0.001, which proposes that the links between fdi and the eu structural support are strong positive, i.e. increasing inflows of the eu structural support in lithuania contribute to the growth of fdi. the impact of the structural support on budget balance, annual inflation, employment rate, cpi and foreign trade balance has not been confirmed due to insufficiently strong correlation between the researched variables, so the detailed analysis has not been conducted. summarizing the results of the empirical research, it can be stated that, in general sense, the eu structural support promotes the competitiveness of lithuanian economics. 5. conclusions the analysis of the scientific literature has revealed that although the studies on country’s competitiveness are traditionally based on the research of macroeconomic determinants, under the conditions of modern competition such evaluation often appears insufficient. an adequate evaluation requires a complex attitude, i.e. consideration of all the groups of determinants without giving any priorities to one or another group. the results of the empirical research propose that the impact of the eu structural support on different determinants of country’s competitiveness is comparatively variant. nevertheless, the overall impact should be treated as positive. the research has disclosed an extremely significant impact of the eu structural support on lithuanian technological infrastructure (which alongside with scientific infrastructure can be treated as the main determinant of the competitiveness of lithuanian economics) and engineering infrastructure; the eu structural support has a significant impact on lithuanian scientific infrastructure, business progress, macroeconomic situation and social environment, and medium significant impact on country’s business environment conditions and education. the impact of the eu structural support on lithuanian institutional environment, labour market and finance market is insignificant. the links between gdp and the eu structural support are medium strong positive, between r&d expenditure and the eu structural support – strong positive, between the 86 l. gasparėnienė, r. remeikienė. evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics number of operating entities and the eu structural support – extremely strong positive, and between fdi and 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zaleviciene, a. 2012. regionine politika ir europos sajungos strukturinė parama: patirties ivertinimas, ekonomika ir vadyba: aktualijos ir perspektyvos 2(26): 44–53. ligita gasparėnienė. prof. dr links her research fields to the analysis of macroeconomic phenomenons, practical decisions of outsourcing and estimation of shadow economy. during the period of 2005-2015, the researcher has published over 40 scientific articles and issued two monographs titled “the methodology of the estimation of external service transaction costs” and “evaluation of financial investment and investment projects”. at present, ligita gasparėnienė works as a professor with mykolas romeris university, the department of banking and investment. rita remeikienė. assoc. prof. dr has accumulated much scientific experience in the research of self-employment and business environment conditions in transition economies. during her scientific career, rita remeikienė has prepared and published over 40 scientific articles. the main topics of her research are linked to the issues of expansion of opportunities in the labour market, shadow economy, outsourcing, gender gaps and entrepreneurship. currently, rita remeikienė works as an associate professor with mykolas romeris university, the department of banking and investment. http://dx.doi.org/10.5755/j01.em.17.2.2188 significance of demographic variables for targeting of internet advertisements václav stříteský1, marek stříteský2, martin john david quigley3, david říha4 the demand for professional knowledge as a key factor of the development of outsourcing of financial and accounting services in poland anna bagieńska the concept of a smart city in urban management sławomira hajduk the concept of basic income: global experience and implementation possibilities in lithuania algimantas laurinavičius1, antanas laurinavičius2 julia siderska evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics ligita gasparėnienė1, rita remeikienė2 the concept of products and services integration – analysis of scientific publications justyna kozłowska categories of supply chain performance indicators: an overview of approaches dorota leończuk multivariate analysis of short and long-impact indicators for corporate bond market development ieva astrauskaitė the research on interface between lithuanian direct investment abroad and foreign trade flows anžela kozlova1, algita miečinskienė2 this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons.org/ licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2023 the author(s). published by vilnius gediminas technical university issn 2669-2481 / eissn 2669-249x business, management and economics engineering 2023 volume 21 issue 1 pages 124–139 https://doi.org/10.3846/bmee.2023.18958 macro-economic development of the eu countries in the context of performance and competitiveness of smes katarina valaskova , marek nagy department of economics, faculty of operation and economics of transport and communications, university of zilina, univerzitna 1, 01026 zilina, slovakia article history: abstract. purpose – the paper focuses on the identification of disparities in the development of the macroeconomic environment across the member states of the european union and problematic factors impacting the business environment’s level. research methodology – to find the disparities in the development of the eu countries, the topsis method was used. based on this analysis, the crucial factors influencing the development of the macroeconomic environment were determined. the discriminant analysis was then used to form a model, which could help assess and examine the relationship between the business environment and significant determinants of development. findings – based on the methods applied, the determinants influencing the development of the macroeconomic environment and key factors and aspects affecting the rate of development of the economic and business environment were identified and the analysis of the economic and business environment was performed through selected statistical techniques. practical implications – the analysis confirmed that some countries have certain gaps in its assessment of the dynamics of economic development in eu countries in terms of the sustainability and competitiveness of small and medium-sized businesses, and that the business climate is not entirely conducive to these businesses. originality/value – the additional value of the paper is the formation of the model, which helps identify the countries with appropriate business environment and those where the economic development is not sufficiently developed which may be useful for enterprises, investors, and creditors. ■ received 12 april 2023 ■ accepted 09 may 2023 keywords: competitiveness, small and medium-sized enterprises, topsis analysis, discriminant analysis, business environment. jel classification: l25, f63, o11.      corresponding author. e-mail: katarina.valaskova@fpedas.uniza.sk introduction competitiveness has become a much-discussed term in the past period. this term is often found in government program statements and other important documents. however, this concept is often understood differently and occurs in different dimensions (valaskova et al., 2021a). the absence of a uniform definition of the term makes it impossible to understand the term well. the historical context of the concept of competitiveness differs considerably from period to period (rajnoha & lesnikova, 2022). in the past, this term was associated with an active balance of payments, productivity growth, or the use of basic production factors (labor, capital, and land). currently, there are already several ways to evaluate the competitiveness of a country by different indicators – some measure competitiveness, some innovations, http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2023.18958 https://orcid.org/0000-0003-4223-7519 mailto:karahan.kara@artvin.edu.tr mailto:katarina.valaskova@fpedas.uniza.sk https://orcid.org/0000-0003-0740-6268 business, management and economics engineering, 2023, 21(1): 124–139 125 others map the state of the business environment, and some contain entire complex factors that provide a comprehensive view on the country’s competitiveness (kiselakova et al., 2018). according to safar et al. (2018), small and medium-sized businesses have a significant global and regional economic influence, not only in central europe. these are the main pillars of a successful labor policy. the european union offers a number of initiatives that might benefit businesses and works to make the environment in which they operate as favorable as possible. one of the key benefits of the european union is the openness of its borders, which allows for the potential of expanding into new markets and the harmonization of the economic, social, and legal frameworks for businesses. consequently, it may be claimed that this combination of social, economic, cultural, and political components produces an ecosystem that either supports or impedes entrance into undertaking commercial operations following first company failure (guerrero & espinoza-benavides, 2021. stam and van de ven (2021) discovered a considerable correlation between the incidence of high-growth businesses and the strength of the entrepreneurial environment. business units have the chance to expand and thrive in new areas and find their essential success elements thanks to the open community (moktadir et al., 2020). the nations of central europe take advantage of this chance and set up shop wherever it is practical and profitable. it should be stressed, nonetheless, that the macroeconomic climate and business-friendly conditions do have an impact and must be accurately analyzed and assessed (roszko-wójtowicz & grzelak, 2020). thus, the article focuses on identifying differences in the macroeconomic environment among european union member states as well as problematic elements that have an influence on the level of the business environment. based on the calculations it would be possible to identify the most significant factors affecting the quality of the business climate and overall competitiveness of the countries. the paper focuses on the identification of disparities in the development of the macroeconomic environment across the member states of the european union and problematic factors impacting the level of the business environment. the paper is divided into the literature review which summarizes the most important and up-to-date references to show the importance of the issue in the international context. the research methodology describes the database od inputs used in the research as well as the methodological steps which were followed. the section focused of the research results highlight the outputs of the calculations which are then discussed in the context of other relevant studies. 1. literature review the notion of competitiveness has moved from the business level to the international level because of globalisation. however, many scholars see the idea of competition differently. yumei et al. (2021) and abdul-rashid et al. (2017), for example, argue that competitiveness is a multifaceted term that allows for several interpretations. in the same breath, they say that technical competitiveness is the most important part of firm competitiveness. belas et al. (2021) acknowledge that competitiveness is a complex concept and add that it must be viewed holistically; therefore, its evaluation should reflect the extent to which the country fosters a business environment in which businesses can grow at a sustainable rate, thereby 126 k. valaskova, m. nagy. macro-economic development of the eu countries in the context of performance... creating jobs and enhancing the well-being of its citizens. it follows from the preceding that company competitiveness is crucial. since wealth is produced at the micro level, brieger et al. (2020) and buyukozkan et al. (2018) explore the idea of competition at this level. based on the social and behavioural sciences, teece (2007) and zhang and browne (2012) specify in greater detail the nature and particularly the micro foundations of capabilities that are required to maintain excellent business performance in an open economy, primarily through rapid innovation, globally dispersed sources of invention, and production capabilities. thus, those are the dynamic skills that enable firms to generate, deploy, and safeguard intangible assets, hence supporting long-term business performance excellence. evangelista et al. (2014) and valaskova et al. (2021b) assert that the degree of profit achieved has a significant impact on the financial health and competitiveness of businesses. according to the research findings by kiselakova et al. (2019), in the countries of the european union, the micro level (business sector) is dominated by small and medium-sized enterprises (smes), which play a crucial role in the process of sustainable, competitive economic development. furthermore, human resources are a significant factor in the internationalisation of european smes. du et al. (2017) and gajanova et al. (2020) claim, that small and medium-sized enterprises are the actual lifeblood of economies throughout the world, since they contribute to the creation of employment and the competitiveness of economies, particularly during times of economic crisis. a portion of the scientific-research basis supports the study of the notion of innovation-based competitiveness. in terms of elkington (1994) and grewal et al. (2021), the primary objective of creative acts by businesses is to increase their assortment, quality, and market share or competitiveness. cheng et al. (2022) stated that there is a substantial correlation between a state’s degree of competitiveness and its investment in research and development, human capital development, innovation potential, and scientific research base strengthening. jayarathna et al. (2022) and kliestik et al. (2020) conducted research on the competitiveness of regions and reached the conclusion that uneven development of natural, human, financial, infrastructural, and security aspects can lead to regional differences in the country, resulting in uneven development of regions and a decrease in competitiveness regions, which can result in a lower standard of living for residents in less developed regions. several authors have studied the interrelationships and interdependencies between competitiveness and quality of life. valaskova et al. (2021b), who examined the multidimensional evaluation of competitiveness, well-being, and innovation, determined that there is a significant and direct relationship between competitiveness, innovation, and well-being. governments and corporations that engage more in innovation-focused research to boost the competitiveness of their goods and services have a higher gdp and a more prosperous populace. cieslik and michalek (2018) identified the following as factors that increase well-being, prosperity, and economic growth: population growth, working time, technology, specialisation, capital, labour, and productivity, in addition to numerous institutional factors, such as political system, economic freedom, and development (cantele & cassia, 2020). climate change and global warming have compelled economists and scientists to incorporate an environmental dimension into the idea of competitiveness. porter (1998) presented the research in which he determined that environmental regulations raise expenses needlessly, hence retarding environmental progress. the industry’s business, management and economics engineering, 2023, 21(1): 124–139 127 competitiveness has suffered because of the disregard of innovation’s advantages, which has led to a rise in compliance-related expenses and a decline in innovation’s benefits. in the past, the term “eco-innovation” was also used. this phrase is associated with organisational innovations, creative goods or processes designed to decrease environmental costs, boost societal acceptability, and eventually achieve sustainable development (isensee et al., 2020; vatamanescu et al., 2021). the rise of the global economy, however, sparked a desire for indices that give a generally recognised assessment of competitiveness and construct a worldwide comparison of the competitiveness of national economies. the global competitiveness index and the world competitiveness index are two indices that society considers to be the most significant and most acceptable. several authors have done research on these indices, which may be interpreted separately or in line with other factors to produce a multidimensional model that can better characterise the business environments of nations (see nogueira & madaleno, 2021; olczyk et al., 2022; benítez-márquez et al., 2022; khazei et al., 2021; etc.). lu et al. (2022) conducted a one-dimensional comparison of indices and mapping of the business environment, in which they identified the primary obstacles that prevent slovak entrepreneurs from conducting business. kiselakova et al. (2019) and nagypal (2014) attempted to identify important interrelationships between the evaluation of global competitiveness, the business environment, and the human development index in eu nations by conducting a panel analysis and non-linear regression analyses with the anova test. their conclusion was that there is a correlation between the business environment and the calibre of human resources, which are regarded as a worldwide competitive advantage. hajduova et al. (2021) and virglerova et al. (2017) conducted a similar multivariate analysis using the topsis method, which allowed them to categorise individual countries of the european union and thus reveal individual disparities between eu countries, concluding that the least effective business environment is in cyprus, the czech republic, estonia, hungary, poland, latvia, lithuania, slovakia, and slovenia because they ranked below the eu average. estonia, malta, and slovenia had the most improvement in their business climates among eu nations. this awareness of the reordering of indicators is also supported by the world economic forum, which in 2018 introduced a revised world competitiveness index that began to account for industry 4.0. as a result of this small adjustment, slovakia improved by up to 18 positions compared to the previous year. despite these arguments and facts, there is a scientific basis for competitiveness indexes. 2. research methodology the study analyses the business climate of eu nations using appropriate mathematical and statistical techniques. in the context of global competition, the building of a foundation for successful appraisal of the economic environment becomes essential. to compare the business environment in the eu countries, the topsis methods was used. several important macroeconomic factors were considered, which adequately represent the business and macroeconomic climate of eu member states. these factors were determined as input factors of the topsis method: f1 – gross domestic product (in billions of u.s. dollars), f2 – average annual unemployment rate (in percent), f3 – average annual inflation rate (in percent), f4 – 128 k. valaskova, m. nagy. macro-economic development of the eu countries in the context of performance... foreign direct investment (in billions of u.s. dollars), f5 – tax rate (in percent), f6 – openness of the economy (in percent), f7 – freedom of business (score), f8 – infrastructure (score), f9 – innovation level (score) and f10 – corruption rate (score). after establishing the criteria, it was required to locate information for each european country (however, one country, malta, was omitted from the analysis, as appropriate data were not available for the selected period). after collecting data for all 26 european countries for the period 2017–2021 and dividing it into two sections, the time before the covid-19 pandemic till 2019 and the period after the pandemic, the average values were determined. due to turbulent changes on the national markets and distorted development of all macroeconomic indicators caused by the covid-19 pandemic, it was necessary to consider two periods when assessing the performance and competitiveness of enterprises. after gathering the data, the computations begin; initially, the preferences between the criteria are determined. the quantitative comparison was conducted using the saaty’s matrix, in which a pair of criteria is always compared, followed by the determination of the preference’s magnitude. this matrix arranges the elements into a hierarchy using subjective judgments in order to assign numerical values based on the relative importance of these elements to the overall goals (saaty, 1987). to eliminate the subjectivism in the calculation, the consistency ratio should be calculated, which is the ratio of a consistency index to the mean consistency index from a large sample of randomly generated matrices. if the consistency ratio is above 0.1, it is needed to reconsider the decision matrix for any inconsistent rating of factors (pourghasemi et al., 2012). the recommended point scale for this method is as follows: 1 – the criteria are of equal importance, 3 – the criterion in the row is less significant than the criterion in the column, 5 – the criterion in the row is more significant than the criterion in the column, 7 – the criterion in the row is extremely more significant than the criterion in the column, 9 – the criterion in the row is absolutely more significant than the criterion in the column (table 1). the calculated value of the consistency ratio was below the limit value of 0 indicating a reasonable level of consistency. table 1. saaty matrix (source: authors’ compilation) f1 f2 f3 f4 f5 f6 f7 f8 f9 f10 f1 1 1/3 1/4 5 1/4 5 2 1/5 1/5 1/5 f2 3 1 1/5 5 1/4 4 2 1/5 1/5 1/5 f3 4 5 1 5 1 4 3 1/5 1/5 1/5 f4 1/5 1/5 1/5 1 1/5 1/3 1/2 1/5 1/5 1/5 f5 4 4 1 5 1 5 5 1/4 1/4 1/4 f6 1/5 1/4 1/4 3 1/5 1 1 1/5 1/5 1/5 f7 1/2 1/2 1/3 2 1/5 1 1 1/5 1/5 1/5 f8 5 5 5 5 4 5 5 1 1 1 f9 5 5 5 5 4 5 5 1 1 1 f10 5 5 5 5 4 5 5 1 1 1 business, management and economics engineering, 2023, 21(1): 124–139 129 subsequently, the criteria were arranged into saaty’s matrix, to which the following applies: ≈ = …,  , 1, 2, 3iij j v s i j n v . (1) to calculate the weights, saaty created an eigenvector corresponding to the largest eigenvalue of the matrix a, the solution is then the normalized geometric mean of the matrix s, where vi is the weight of the i-th criterion (wong et al., 2021). = = =  π =  π  ∑ 1 1 1 11 k k i i k k k j iji j v s . (2) using a scale ranging from one to nine, the relationships between the chosen criteria were identified. the subjective evaluation of the significance of specific criteria is, of course, one of the downsides of this technique (which was eliminated calculating the consistency index). as the comparison of the criteria with itself equals to one, this matrix is consequently reciprocal; there are always units on the major diagonal. above this diagonal, the sorted values are ranked according to the subjective opinion of their relevance. underneath this diagonal are their inverse values. the selected unput criteria domestic product, foreign direct investment, freedom of entrepreneurship, openness of the economy, infrastructure, innovation level, and degree of corruption were set as the maximising criteria for the application of the topsis technique and unemployment, inflation, and taxation as minimising criteria. maximization criteria are required for the topsis analysis, thus, in the following stage, the minimization criteria must be replaced by maximisation criteria. in the subsequent phase, a weighted criteria matrix was created by multiplying each j-th column of the normalised criterion matrix by its respective weight vi . following this, the ideal and baseline variants for each criterion can be calculated. the authors established the upper limit as the column’s maximum and the lower limit as its minimum. in the last phase, the euclidean distance between the ideal +id variation and the base −id variant was calculated. using the following formulas, the ideal and baseline variations were determined: ( )+ =    = − = …     ∑ 1 22 1 1, 2, 3 k i ij j i d w h i n ; (3) ( )− =    = − = …     ∑ 1 22 1 1, 2, 3 k i ij j i d w d i n . (4) after calculating the ideal and base variants, the relative indicators of the distance of variations from the base variant ic (0;1) were measured. − − + = + i i i i d c d d . (5) 130 k. valaskova, m. nagy. macro-economic development of the eu countries in the context of performance... after calculating the relative indicators, variations were obtained and sorted in descending order based on the decreasing values of the ci indicator, resulting in a comprehensive arrangement of all variants. the identification of these criteria and ordering the countries according to the level of the national competitiveness and development of the macroeconomic environment, the discriminant analysis was used, using the same input variables, to find a linear combination of features that characterizes or separates two groups of countries – with developed and competitive business environment and those with the deficient one. this method comprises a discriminant function that is premised on linear combinations of the predictor variables that offer the best discrimination between the groups of european countries. to use the discriminant analysis, the basic assumptions of the input data must be met in our study: i) samples should be independent and unconnected to one another; ii) the variance-covariance matrices for each group should be the same, and the predictor variables should have a multivariate normal distribution; iii) as a group membership is assumed to be mutually exclusive (no case belongs to more than one group), it is presumed that cases cannot correspond to more than one group. 3. research results and discussion to reach the main aim of the paper and following the methodological steps, the ci indicator was calculated for both periods (pre-pandemic and pandemic) using the selected macro-economic indicators which appropriately assess the quality and attractiveness of the business environment. as indicated in the methodology section of the paper, the analytical calculus is focused on ten important indicators which allow determining the development of the macroeconomic environment across the member states. table 2 summarizes the results, based on the calculated ci indicator in the first analysed period. table 2. ranking of the eu countries in the period 2017–2019 (source: authors’ compilation) ranking country ci indicator ranking country ci indicator 1. ireland 0.61724 14. slovenia 0.42455 2. denmark 0.61133 15. spain 0.41637 3. finland 0.60264 16. poland 0.41341 4. germany 0.58997 17. hungary 0.41209 5. sweden 0.58442 18. czech republic 0.41184 6. netherlands 0.57102 19. bulgaria 0.39413 7. france 0.52004 20. latvia 0.39178 8. austria 0.48961 21. estonia 0.38611 9. luxembourg 0.48335 22. croatia 0.36243 10. cyprus 0.48294 23. greece 0.35218 11. italy 0.45153 24. lithuania 0.34163 12. portugal 0.45028 25. romania 0.30783 13. belgium 0.42984 26. slovak republic 0.30055 business, management and economics engineering, 2023, 21(1): 124–139 131 the study indicates that ireland is the country with the most appropriate business environment. consequently, denmark, finland, germany and sweden outperform in terms of competitiveness, economic freedom, innovation, corruption, and environmental performance. comparing the top countries with those at the end of the ranking, the problematic characteristics of the slovak republic include economic growth, employment, inflation, tax policy, inadequate infrastructure, a low degree of innovation, and relatively high levels of corruption. comparing ireland and the slovak republic across the competitiveness pillars (international institute for management development [imd], 2022) reveals that company efficiency is the most problematic aspect (figure 1). 0 20 40 60 80 100 government efficiency business efficiency infrastructure economic performance ireland slovakia figure 1. radar diagram for ireland and slovakia (source: authors’ compilation) the same procedure was followed for the calculation in the years 2020 and 2021. by calculating the relative indicators, the variants were obtained, which were arranged in descending order according to the decreasing values of the ci indicator, thereby achieving a complete arrangement of all variants (table 3). table 3. ranking of the eu countries in the period 2020–2021 (source: authors’ compilation) ranking country ci indicator ranking country ci indicator 1. sweden 0.60850 14. slovenia 0.43584 2. denmark 0.60266 15. portugal 0.42301 3. finland 0.59755 16. hungary 0.41219 4. ireland 0.58733 17. spain 0.41161 5. netherlands 0.56231 18. lithuania 0.40713 6. germany 0.56158 19. bulgaria 0.39388 7. france 0.54987 20. czech republic 0.39119 8. austria 0.49602 21. latvia 0.36868 9. luxemburg 0.48031 22. greece 0.36485 10. cyprus 0.46389 23. croatia 0.32744 11. belgium 0.46119 24. poland 0.32275 12. italy 0.44027 25. romania 0.30812 13. estonia 0.43758 26. slovak republic 0.28781 132 k. valaskova, m. nagy. macro-economic development of the eu countries in the context of performance... table 3 presents similar results compared to the outputs in the pre-pandemic period, but there were some shifts, sweden took the first place. germany dropped out of the top five and was replaced by the netherlands. if the country with the most and least appropriate business environments, sweden and slovakia, are compared, the areas of improvement can be determined (economic growth, employment, inflation, tax policy, insufficient infrastructure, problems with innovation potential, and high corruption). even in this analysis, it is appropriate to create a radar diagram (figure 2) to reveal the weak points of slovak business environment (imd, 2022). 0 20 40 60 80 100 government efficiencyinfrastructure business efficiency economic performance sweden slovakia figure 2. radar diagram for sweden and slovakia (source: authors’ compilation) after a better analysis of business-related indicators, slovakia should increase overall labour productivity in all areas, increase the efficiency of small and medium-sized businesses, make greater use of digital tools and technologies, increase financial skills, attract, and retain talent, prevent brain drain (which hinders economic growth), attract talents from abroad, or open the national culture to new ideas. the analysis realized in the pandemic period shows, that slovakia should primarily improve three of the four evaluated areas of government effectiveness, such as the level of debt, increasing transparency, reducing bureaucracy, addressing corruption, strengthening the rule of law, mitigating protectionist measures, implementing solutions in the parallel economy, and streamlining the operation of businesses. regarding infrastructure: completion of road infrastructure, energy infrastructure, increasing digital and technological skills, increasing expenditures on research and development, increasing the transfer of knowledge, reducing the ecological footprint, utilising renewable resources, increasing expenditures on education, increasing the quality of higher education, and increasing literacy and language skills knowledge. however, these are the areas to be improved not only in slovakia, but also other countries with deficiencies in the development and competitiveness of their business environment. moreover, the economic impacts of the pandemic also had an effect on global competition as the overall calculated values of the ci indicator are lower (reflecting the overall macroeconomic development of the national business environment) in the second analyzed period. nonetheless, raising long-term economic growth rates and rising living standards require improving national competitiveness. together with macroeconomic variables, the business environment, and customer demand, competitiveness business, management and economics engineering, 2023, 21(1): 124–139 133 factors alter (boikova et al., 2021). the rising significance of digitization for businesses across all industries is indicative of these shifts (gavurova & megyesiova, 2022; markova et al., 2022). the results achieved may be also confirmed by different world competitiveness rankings that measure the competitiveness performance (zahorskyi et al., 2020) on a basis of various pillars (e.g. global competitiveness index, doing business index, world competitiveness ranking, environmental performance index, etc.). contrary to the critique that has frequently been made in the academic literature, competitiveness rankings are quite popular. rankings presuppose that there are no regional variations in the factors that affect competitiveness. the list of determinants is supplied, and although each determinant’s weight is given, it is assumed that all nations would perform similarly despite the fact that a country’s real performance may differ for each factor. thus, the use of macro-economic indicators to assess the national business environment seems to be a relevant measure. the study of simionescu et al. (2021) on the eu countries in the period 2004–2018 indicated that the level of research and development expenditure, gross domestic product (gdp), foreign direct investments (fdi) and the innovation processes are the most significant drivers of the competitiveness which is in line with the indicators used in this study. roszko-wójtowicz and grzelak (2020) in their study focused on the macro-economic stability and competitiveness of eu member states confirmed the importance of the dgp, fdi, registered unemployment rate and inflation rate in the assessment of the economic situation of eu countries. dima et al. (2018) compared the global competitiveness index with selected macro-economic indicators and highlighted the role of innovation and research and development activities which significantly develop the competitiveness of eu countries. moreover, the empirical analyses by simionescu et al. (2017) proved that fdi promoted economic growth in all central european countries as well as the expenditures on research and development. the amount of foreign direct investment (fdi) demonstrates the attractiveness of particular nations to foreign direct investors. foreign direct investment is regarded as advantageous for host nations because it fills up the capital gap left by insufficient national savings. it introduces or spreads contemporary management systems and impacts an economy’s technological modernization. foreign direct investment (fdi) is also seen to be a means of promoting economic development in impoverished areas, such as through the creation of new employment by foreign investors (petricevic & teece, 2019; su et al., 2018; altomonte & ottaviano, 2011). based on the analysis, the crucial factors (same input variables as in the topsis method) influencing the development of the macroeconomic environment were set and determined. the discriminant analysis was then used to form a model, which could help assess and examine the relationship between the business environment and significant determinants of development and, thus, determine the countries with developed and competitive business environment and those with the deficient one. after gathering all the data, a model was developed using the spss statistics. as indicated in the methodology section, the basic assumptions should be considered. tests of equality of group means revealed, that out of all ten input variables only one of them is an appropriate discriminant – the volume of foreign direct investments (p-value 0.038). the results of the box’s m test verify that the variance-covariance matrices for each group of countries is the same (p-value 0.073). the overall quality of the discriminant model was verified by the canonical correlation (0.873) and its test of the 134 k. valaskova, m. nagy. macro-economic development of the eu countries in the context of performance... statistical significance (p-value 0.007). using the unstandardized coefficients of the canonical discriminant function, it is possible to set the resulting discriminant function of the prediction model for eu countries, which has the form: = − + ⋅30.4 0.035 .z fdi (5) the spss program uses the model constant to calculate the centroids, thereby making a targeted correction so that the weighted average of the centroids (weighted by the number of countries in each group) is equal to zero. the result is then determined by comparing the z-score values with zero, a positive value represents a developed business environment, and a negative value is for the business environment with some deficiencies. the results of the discriminant analysis proved the importance of the foreign direct investments in the development of the competitive business environment within the eu countries. horobet et al. (2021) identified fdi as the most important predictor form a set of 15 macro indicator in the central european countries which shapes the competitiveness in this environment. the same result was achieved in the study by majeed et al. (2021) who claimed that fdi influence financial development and has significant implications on the competitiveness of an economy which was proved on a data from 1990 to 201 using the method of panel cointegration and causality analysis. hakhverdyan and shahinyan (2022) affirmed that fdi and import trade are major aspects of the technological diffusion. based on the observations of macroeconomic variables in more than 50 countries in the 20-year period they confirmed the influence of fdi on country competitiveness. nonetheless, fdi seem to be a source of national competitiveness (gugler & brunner, 2007). the topsis investigation determined that ireland and sweden offer the most suited business environments, compared to the business environment in slovakia, which should be significantly improved in specific aspects. based on the selected data, discriminant analysis revealed that the level of the foreign direct investments is the most appropriate macro-economic parameter to determine the performance and competitiveness of the business environment. conclusions as part of the assessment of the dynamics of economic development in the countries of the european union in the context of the sustainability and competitiveness of small and medium-sized enterprises, the analysis of the business environment led to the conclusion that slovakia has certain competitiveness gaps and that the business environment is not wholly favourable for small and medium-sized enterprises. the competitiveness of the economy, economic freedom, innovation, corruption, environmental performance, and population contentment are the primary determinants of the growth of the economic and commercial environment. a lot of elements determine the business environment; on the one hand, there are individual characteristics that disclose the company’s competitive edge. in addition to external variables affecting the business, the government primarily impacts the business through the enactment of pro-business laws. regarding global issues, it is the capacity of businesses to adapt to foreign situations. foreign direct investments are a crucial factor in influencing the quality of the business climate. via business, management and economics engineering, 2023, 21(1): 124–139 135 direct foreign investments, the standard of life of the populace rises; through the expansion of employment, there is an infusion of new technology; and so forth. the contribution of corporate income taxes to the state budget is an indirect advantage of direct foreign investments. foreign direct investments have a significant impact on the macroeconomic environment, as well as on the business environment of european countries, which should not be omitted. if states want to improve their performance and competitiveness in the global market, it is necessary to increase the level of foreign direct investment, which is a challenge for the policy maker within the country’s economic policy, while their management requires a long-term plan. the availability of an educated, qualified, productive and flexible domestic workforce has a significant impact on attracting foreign direct investment with a positive impact on the development of the economy. the increase and maintenance of foreign direct investments depends mainly on the improvement of the business environment, its immutability and transparency. the unavailability of newer and more thorough sources that may improve and deepen the analysis is one of the limits of this study. there is also potential for a broader comparison of nations, even though the comparison of the entire european union can be considered a representative sample. therefore, the future of this research may include non-eu countries as well as other indicators, also under the influence of the evolution of the world’s most recent technological achievements – industry 4.0 and its transition to phase 5.0, the comprehension and application of which would be extremely beneficial for the countries with some deficiencies in the competitive business environment. acknowledgements this research was financially supported by the slovak research and development agency – grant vega 1/0121/20: research of transfer pricing system as a tool to measure the performance of national and multinational companies in the context of earnings management in conditions of the slovak republic and v4 countries and faculty institutional research 1/ke/2022: analysis of the determinants of indebtedness and profitability of business entities in the european area. funding this research received no external funding. conflicts of interest the authors declare no conflict of interest. author contributions all authors listed have made a substantial, direct and intellectual contribution to the work, and approved it for publication. 136 k. valaskova, m. nagy. macro-economic development of the eu countries in the context of performance... data availability statement the data presented in this study are available on request from the corresponding author. references altomonte, c., & ottaviano, g. i. p. 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(2012). dynamic factor analysis with ordinal manifest variables. in statistical methods for modelling human dynamics: an interdisciplinary dialogue (pp. 241–264). routledge. https://doi.org/10.4324/9780203864746 https://doi.org/10.1007/s11356-020-10415-w https://doi.org/10.18371/fcaptp.v2i33.207230 https://doi.org/10.4324/9780203864746 bookmark 2 copyright © 2016 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. the concept of products and services integration – analysis of scientific publications justyna kozłowska faculty of management, bialystok university of technology, wiejska 45a, 15-351 bialystok, poland e-mail: j.kozlowska@pb.edu.pl received 1 february 2016; accepted 16 march 2016 abstract. currently, global economy tends to turn into functional economy what triggered the birth of new terms and research fields such as integration of products and services (in literature termed: product-service systems). though the subject is often discussed in scientific and academic publications, there are still many aspects of developing and delivering integrated solutions to customers insufficiently explored or even neglected. the paper presents the concept of an integrated product-service solution. the analysis of publications in terms of research topics connected with product-service systems was carried out and the achieved results were discussed. keywords: product-service systems, integrated product-service offerings, literature review, term co-occurrence/bibliometric analysis. jel classification: l10, l21, l80, o14. 1. introduction the current global economy tends to turn into functional economy or service-based economy and the process of the industry sector servicization can be observed as well. the development of a service-based economy triggered the birth of new terms and research fields. one of them is a product-service system as a solution of selling products and services as integrated offerings. the term joins three notions: “product”, “service” and a “system”, thus, first and foremost, it is crucial to define them, to fully understand the idea of its integration into one solution. goedkoop et al. (1999) proposes the following approach: if a product is a tangible good which is manufactured to be sold; a service means an activity which is done (by a human or automated system) to gain an economic profit, and a system is a collection of elements including relations between them, the integrated solution, i.e. “product-service system (pss)” can be define as a set of products and services that are sold on the market and can jointly fulfil customer needs. this definition was the first one that appeared in the literature, although the idea of mix offerings had existed on the market place already for some time. the subject b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(1): 89–102 doi:10.3846/bme.2016.311 http://dx.doi.org/10.3846/bme.2016.311 90 j. kozłowska. the concept of products and services integration – analysis of scientific publications is relatively novel and still widely discussed in academic publications. the analysis of scientific literature published in recent years has been carried out in terms of problems discussed and research fields connected with service-oriented solutions as well as the identification of top ten cited papers and authors that specialized in this field. the results of such analysis may be helpful to identify needs for future research or gaps to be filled in this area. the study was based on the collections of following databases: web of science (wos), scopus, emerald insight and springer. this choice was determined by the databases accessibility for the author. 2. the concept of product and service integration the idea of combining a product and service in one offering is not new (car rental or apartment hiring), but they were usually separately planned, designed and developed. an integrated approach to this kind of offerings emerged when the concept of perceiving it as a system solution first was introduced in the literature. the easiest and most common way to deliver a mix of products and services is to offer product-oriented (e.g. after-sales) services. the product-service system approach, however, goes further and combines a product with services, which create significant added value for the customer, are sold inseparably with the product, and are basically a main source of manufacturer’s profit. services and products become joined in packages with various shares, which depends on the needs of an industry or sector. at the same time it is essential that the outcomes or benefits of a pss are manifold (e.g. cost effectiveness, sustainable use of resources or less environmental burden) and not less important than the key benefit of pss – which is the creation of value for the customer (durugbo et al. 2010). the pss concept concurs with the idea of sustainable economic growth due to its capability to more effective use of resources, and its potential to decrease the consumption of material goods (goedkoop et al. 1999). in the literature many definitions of integrated solution of products and services were proposed. table 1 contains few definitions of pss proposed both in scientific publication and doctoral theses, as a result of a comprehensive analysis of the new research field. not only is there a lack of one valid definition of this kind of solution but also there is a lot of different points of view on naming it in the literature (product/service systems, product service-system, product-service system, product-service offering or simply integrated offerings). the basis of product-service offering may be a service (e.g. the health care or restaurant service) and a product sale (e.g. electric cables) or manufacturing (aerospace spares and engines), which are then transformed into offering that integrates both – a product and a service – into a system solution. the examples of such solutions are presented in the table 2. 91 business, management and education, 2016, 14(1): 89–102 table 1. definitions of a product-service system (source: own elaboration) author definition goedkoop et al. (1999) “a marketable set of products and services capable of jointly fulfilling a user’s need.” mont (2002) “a system of products, services, supporting networks and infrastructure that is designed to be: competitive, satisfy customer needs and have a lower environmental impact than traditional business models.” manzini, vezzoli (2003) “an innovation strategy, shifting the business focus from designing (and selling) physical products only, to designing (and selling) a system of products and services which are jointly capable of fulfilling specific client demands.” baines et al. (2007) “an integrated product and service offering that delivers value in use.” tan (2010) “a system of integrated products and services that companies develop and deliver in order to fulfil a need with their customer.” ostaeyen (2014) “an integrated offering of products and services with a revenue mechanism that is based on selling availability, usage or performance.” table 2. product-service system solutions across industry sectors (source: based on durugbo et al. 2010) industry product-service system solution reference basic materials improved processes in acquiring value from the use of chemicals which derives from cost savings (tukker, tischner 2006) consumer goods convenient transportation organic vegetables subscription system educational items and toys library (rexfelt, ornas 2009) (manzini et al. 2002) (ibid.) consumer services improved feeding and health (evans et al. 2007) health care improved health care (ajai et al. 2009) industrials availability of equipment remote monitoring and control management of equipment better work experience by i.e. workspace planning, leasing, ergonomic trainings, reparations, refurbishment extended range of services along the value chain from milk production to filling the final product (erkoyuncu et al. 2009) (after thurston 2013 in: kozlowska 2015) (tan et al. 2007) (meier et al. 2010) oil and gas convenient oil and gas availability and delivery (neely 2009) telecommunication/ technology new business configuration to meet customer needs (wirtz 2001) utilities reduction in material use and waste generation (tasaki et al. 2006) 92 j. kozłowska. the concept of products and services integration – analysis of scientific publications it is noteworthy that in the literature the application of the integration of services into company’s offer is most common the industry of machinery and equipment (in other words the investment goods sector). undoubtedly, in this sector, where companies were focused on the product and experienced in its design, development and sale, it is very challenging to include services into company strategy. such change impacts organization at many levels – from operational, through technical or technological, to even human level. table 3 summarizes the differences between selling products and selling performance (which in fact the service provision becomes) and this way the fundamental shifts for the manufacturer to become a service provider are defined (tan 2010). table 3. the differences between selling a product and selling a performance (source: tan 2010) sale of a product (industrial economy) sale of a performance/result (service economy) the object of the sale is a product. the object of the sale is a performance/customer satisfaction/result. the seller is liable for the manufacturing quality (defects). the seller is liable for the quality of the performance (usefulness). payment is due for and at the transfer of the property rights (an “as-is, where-is” principle). payment is due pro rata if and when the performance is delivered (a “no fun, no money” principle). the work can be produced centrally or globally (production); product can be stored, re-sold, exchanged. the work has to be product in situ (service), around a clock, no storage or exchange is possible. property rights and liability are transferred to the buyer. property rights and liability remain with the fleet manager. advantages for the buyer: – right to a possible increase in value; – status value as when buying performance. advantages for the user: – high flexibility in utilisation; – little knowledge necessary; – cost guarantee per unit of performance; – zero risk; – status symbol as when buying product. disadvantages for the buyer: – zero flexibility in utilization; – own knowledge necessary (e.g. driver’s license); – no cost guarantee; – full risk for operation and disposal. disadvantages for the user: – no right to a possible increase in value. marketing strategy = publicity, sponsoring marketing strategy = customer service 93 business, management and education, 2016, 14(1): 89–102 3. the analysis of publications related to pss 3.1. methodology of the study for the purposes of this analysis, following steps were undertaken. as a first step, search for publications on products and services integration were conducted in four scientific databases: web of science (2015), scopus (2015), emerald insight (2015) and springer (2015). this choice was determined by the databases accessibility for the author. as the product-service system notion is considered as a basic idea in this research field (durugbo 2013), therefore this term was used to investigate into publications on the subject matter. next, a literature review was carried out based on papers found in the mentioned above databases. the scopus and web of science searching results were, subsequently, analysed with the usage of vosviewer application to examine the co-occurrence of terms in articles that were found in the searching process, and maps of co-occurrence has been created. finally, a bibliometric analysis (number of publications per year, top ten authors in terms of the articles number, top ten articles in terms of citation) was carried out and its findings has been discussed at the end of this article. 3.2. the research topics analysis in the literature many aspects of the integrated product-services solution has been proposed or researched. as a result of the search in the scopus database, using the pss term as a searching phrase and with the limitation of a publish date between 2001 and 2015, 1984 matches has been found. within the results, the pss shortcut was applied to refine the searching outcomes and 593 articles were selected this way. then, the text file, collecting the summary of the searching results – articles titles, abstracts and source information – has been exported, and a term co-occurrence map based on a text corpus has been created with the usage of vosviewer software (fig. 1). terms (words) have been extracted from the field: title and abstract, and the minimum number of occurrence of a term was set to 3. with this settings 40 terms met threshold. the circle on the map represent the item (the term that was found more than 3 times in the analysed file). the bigger the circle, the higher the term occurrence score. the items are clustered in groups of one colour on the basis of an occurrence score, where colours range from blue (low score), through green (average score), to red (high score). furthermore, the closer the circles are, the more often terms co-occurrence, and the thicker the line connecting them – the more significant the weight of co-occurrence. hence, it can be noticed that items like: product, service, system, study, approach, result, method, industry, development or research occurred most frequently in analysed papers. on the other hand, words: value, model, use, customer and stakeholder or demand belong to one cluster (green colour) – what means they appeared in close neighbourhood (one paper) more often than with other terms, and have an average occurrence score. 94 j. kozłowska. the concept of products and services integration – analysis of scientific publications fig. 1. the network visualisation for the search results of the scopus database (source: own elaboration with the usage of vosviewer software 2015) searching the web of science database, using the “product service system” term as a searching phrase within the title or topic of the publication and with the limitation of a publish date between 2001 and 2015, resulted in finding of 2698 matches. then, within results, pss shortcut was used to refine outcomes and 1309 articles was selected this way. figure 2 presents a term co-occurrence network based on a text corpus of a file created on the basis of the search. terms have been extracted from the field: title and abstract, and the minimum number of occurrence of a term was set to 5. with this settings 395 terms met threshold. fig. 2. the network visualisation for the search results of the web of science database (source: own elaboration with the usage of vosviewer software 2015) 95 business, management and education, 2016, 14(1): 89–102 what is noticeable that the web of science database collection appears to be more coherent and precise – there is much more publication on pss in general, and also the red cluster, which present the highest score of terms occurrence, is more directly related to the pss notion. the number of papers found is much higher than in scopus, thus it means that the wos collection is more comprehensive in terms of researched topics. the words that appeared most frequently in a close neighbourhood with pss are: provider, offering, prototype, effectiveness, design process, maintenance, customer requirement, conceptual design, service element, new concept, delivery, ips2 – so the papers in wos seem to be more specific and precisely connected with studied topic. in the next step of this study, the search of publications was conducted in following databases: web of science, scopus, elsevier, springer and wiley, using the terms: “product-service system”, “servicization” and “product service integration” as a searching phrase. in this way the main study topics connected with pss were identify manually. to each topic only few exemplary references are given in the table 4, however, the number of references informs likewise about the overall number of publication that was found on each topic. table 4. different aspects of pss discussed in scientific publications (source: own elaboration) classification (tukker 2004; gaiardelli et al. 2014) cost estimation (roy, erkoyuncu 2011) delivery (morlock et al. 2014) designing (aurich et al. 2008; geum, park 2011; maussang et al. 2007) evaluation method for designing (yoon et al. 2012) development (tan et al. 2007; tan 2010; boughnim, yannou 2005; morelli 2006) engineering (pezzotta et al. 2012; cavalieri, pezzotta 2012) integrated knowledge management (dongmin et al. 2012) planning (steven, richter 2010) quality assessment (waltemode et al. 2012) requirement analysis (durugbo 2013) review papers (mont, tukker 2006; reim et al. 2015; oliveira et al. 2015; baines et al. 2007; beuren et al. 2013) sustainability (maxwell et al. 2006; vezzolli et al. 2014) validation (exner et al. 2014) classification (tukker 2004; gaiardelli et al. 2014) cost estimation (roy, erkoyuncu 2011) 96 j. kozłowska. the concept of products and services integration – analysis of scientific publications on the basis of these findings the yet unexplored topics can be determined as well as future challenges and, most of all, needs. but also, the authors experienced in specific area of research may be identified. in the matter of gaps that emerge from the conducted study, one can conclude that there are numerous fields that are still neglected and insufficiently explored e.g. planning and designing of product-service system solution in respect to different types of pss, strategic analysis at the earliest stages of integration services into company’s strategy, tools and methods for testing and validation of developed pss solutions or, likewise, a practical aspects of realization and developing of such solutions, and customer behavior and experiences with pss. 3.3. bibliometric analysis of the publications on product-service system four databases were searched for publications on pss to assess the popularity of the research field. the choice of database was determined by the accessibility to the author. figure 3 presents the publications number between 2001 and 2015. the augmented number of papers published in last five years can be noticed, therefore this topic is somewhat relevant and up-to-date. the springer database collects the highest number of papers about pss, it should be noticed however that although some authors suggest that it is enough to analyse the scopus database (reim et al. 2015) or web of science database (oliveira et al. 2015) there is a significant difference between the results of the search in each databases. as the same phrases were used during the search, one can conclude that the collection gathered in each databases rather complement than duplicate each other. in the next step, the author’s goal was to identify the researchers with a significant contribution into pss research fields, therefore the top ten authors were identify in the scopus database (the only one that enable to filter the search result in terms of the papers authorship), and they are as follows: shimomura (29 papers), meier (16 papers), sakao (16 papers), chu (15), jiang (15), kimita (15), roy (15), durugbo (14), krcmar (13) and akasaka (12). lastly, the list of top ten articles published between 2001 and 2015 with the highest citation number were generated on the basis of the web of science and scopus searching results and are gathered in the table 5 and table 6. fig. 3. number of publications in different databases per year (source: own elaboration) 97 business, management and education, 2016, 14(1): 89–102 table 5. top ten cited articles at the scopus database (source: own elaboration) article times cited “state-of-the-art in product-service systems” (baines et al. 2007) 268 “industrial product-service systems – ips2” (meier et al. 2010) 182 “life cycle oriented design of technical product-service systems” (aurich et al. 2008) 142 “review of sustainability terms and their definitions” (glavic, lukman 2007) 103 “service, services and products: rethinking operations strategy” (spring, araujo 2009) 73 “services, products, and the institutional structure of production” (araujo, spring 2006) 68 “the transfer and application of product service systems: from academia to uk manufacturing firms” (cook et al. 2006) 67 “towards an operations strategy for product-centric servitization” (baines et al. 2009) 66 “does the potential of the use of lca match the design team needs?” (millet et al. 2007) 62 “mindful consumption: a customer-centric approach to sustainability” (sheth et al. 2011) 61 table 6. top ten cited articles at the web of science database (source: own elaboration) article times cited “clarifying the concept of product-service system” (mont 2002) 473 “state-of-the-art in product-service systems” (baines et al. 2007) 469 “industrial product-service systems – ips2” (meier et al. 2010) 239 “product-services as a research field: past, present and future. reflections from a decade of research” (tukker, tischner 2006) 176 “a strategic design approach to develop sustainable product service systems: examples taken from the ‘environmentally friendly innovation’ italian prize” (manzini, vezzoli 2003) 168 “developing new product service systems (pss): methodologies and operational tools” (morelli 2006) 128 “the transfer and application of product service systems: from academia to uk manufacturing firms” (cook et al. 2006) 87 “functional and systems aspects of the sustainable product and service development approach for industry” (maxwell et al. 2006) 78 “product service systems in the automobile industry: contribution to system innovation?” (williams 2007) 75 “institutionalisation of sustainable consumption patterns based on shared use” (mont 2004) 73 98 j. kozłowska. the concept of products and services integration – analysis of scientific publications 4. discussion and limitation the results of the above presented analysis provide basics in the subject of products and services integration. it is also a source of knowledge of different aspects of this solution that has been already investigated into by different researchers. the study reveals that the issues like: designing, planning, delivery or engineering of pss has been quite often raised in scientific publications. the industrial application of integrated offerings is also one of the most commonly presented in the literature. however, there are issues that has not been studied yet, e.g. assessment tools for pss, the study of customer behavior and experiences with pss, and also the strategic analysis issues at the earliest stages of integration services into manufacturing company’s strategy. the obvious limitation of the study is the capability of the software used to examine the occurrence and relations of the terms connected with the product-service system concept. vosviewer enables to develop the co-occurrence map on the basis of files exported from two academic databases only: the scopus and the web of science. though these are one of the largest and most popular repositories of scientific papers published worldwide, they definitely collect only part of all of the publications. furthermore, they must be analysed separately (to aggregate data from different databases previously data processing is needed, with the use of another software e.g. pajek). however, it can be noticed that the map created on the basis of scopus resources differs from the web of science map, thus analyses conducted on both may be considered as complementary to each other. the other constraint is the database choice, which was determined by the accessibility of the scientific databases for the author, and the range of databases tools for bibliometric study (only the wos and scopus enable to gain the information about citation number). the detailed analysis of publications was done by author itself therefore it may be influenced by the personal judgment on the importance or adequacy of a particular publication to the studied topic. however, the author believes that the outcomes of the analysis can be a valuable source of knowledge for assessing the potential of pss as a research area and may also be useful for those who are looking for basic information on the integrated products and services solution. 5. conclusions the changes in global economy establish new challenges to all market players and researchers and create business and scientific opportunities as well. the idea of integration products and services into one offering, which applies a system approach as a key feature, is one of them. the result of analysis presented in the paper reveals that despite of many topic raised in scientific literature and high popularity of the topic in last decades, there are still many unanswered question and insufficiently explored fields, both in theory and in practice, in this area e.g. the lack of coherent tools for planning and designing of product-service system solution in respect to different types of pss, 99 business, management and education, 2016, 14(1): 89–102 the lack of strategic analysis methodology at the earliest stages of integration services into manufacturing company’s strategy or the lack of studies on customer behaviour and experiences with pss. it turned out that the industrial application of pss is most frequently discussed in scientific papers. the results of above presented analysis allowed to identify the top 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vosviewer [online]. 2015. website, a free software for vizualizing scientific landscapes [cited 1 november 2015]. available from internet: http://www.vosviewer.com/ yoon, b.; kim, s.; rhee, j. 2012. an evaluation method for designing a new product-service system, expert systems with applications 39(3): 3100–3108. http://dx.doi.org/10.1016/j.eswa.2011.08.173 justyna kozłowska. phd student, researcher and academic teacher at the chair of business informatics and logistics, faculty of management, bialystok university of technology, poland. scientific research interest: service science, service management and engineering, products and service integration in particular. teacher of: mathematics, operational research, service engineering and forecasting in economy. member of: international society for manufacturing, service and management engineering (ismsme), polish society of production management, scientific society of organization and managing. 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of lithuanian economics ligita gasparėnienė1, rita remeikienė2 the concept of products and services integration – analysis of scientific publications justyna kozłowska categories of supply chain performance indicators: an overview of approaches dorota leończuk multivariate analysis of short and long-impact indicators for corporate bond market development ieva astrauskaitė the research on interface between lithuanian direct investment abroad and foreign trade flows anžela kozlova1, algita miečinskienė2 copyright © 2016 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. exploring employee motivation in polish family firms. case of retail sector iwona kubica1, marek szarucki2 cracow university of economics, rakowicka str. 27, 31–510 krakow, poland e-mails: 1kubicai@uek.krakow.pl; 2saruckim@uek.krakow.pl (corresponding author) received 11 november 2016; accepted 06 december 2016 abstract. this article focuses on the construct employee motivation in family businesses. its main aim is to examine employee motivation in family firms on the example of selected companies from the retail sector in poland. first, selected theoretical aspects of family business functioning have been discussed. second, the special character of employee motivation in family firms has been presented, in the light of literature. as methods of research literature review and a semistructured questionnaire were applied. the empirical part presents the results of the analysis of the employee motivation in the selected firms. finally, some insights and recommendations for future research were proposed. keywords: employee motivation, family firms, retail sector, poland. jel classification: m10, m12, m19, m52. 1. introduction the phenomenon of family in business is a topic undertaken for a relatively short time. as a matter of fact, research on family firms began in the second half of the 1970s, and as a new subdiscipline – family firm science – it was separated at the end of the 20th century. depending on the adopted definition, it is estimated that family firms constitute from one third to more than 70 per cent of all entities operating on the market, generating between 20 and 70 per cent of the gdp and employing from 27 to 70 per cent of all employees (kowalewska 2009). running a family business has its pros and cons affecting durability and development of a family firm. family and limited size of the entity and its resources are the most characteristic traits of family firms in the world and they substantially affect the way they are managed. research on employee motivation in family firms is scarce. therefore, the aim of this article is to examine employee motivation in a family firm using the example of selected companies from the retail sector in poland. at the beginning, selected theoretical aspects of family firm functioning have been discussed. then, the special character of employee motivation in family firms has been presented in the light of literature. the empirical part consists of the analysis of the examined issues in the selected firms. finaly, conclusions and future research objectives have been formulated. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(2): 194–209 doi:10.3846/bme.2016.333 doi:10.3846/bme.2016.333 195 business, management and education, 2016, 14(2): 194–209 2. theoretical foundations of family firms nearly one century ago, “business” stood for “family business”, and as a result the adjective “family” was unnecessary. currently, scholars exploring “family businesses” feel obliged adding the adjective “family”, even though they observe that more of 90 per cent of all businesses possessed by households are family firms (heck, trent 1999). thus, there is still no agreement as to what defines a family firm (neubauer, lank 1998; chua et al. 1999; miller et al. 2007; harms 2014; dieguez-soto et al. 2015). family business as a specific domain of research is relatively young – present for about two decades in europe and 40 years in the united states. moreover, this ambiguity is a matter of existence of different approaches to define family firms (litz 1995; chrisman et al. 2005) as well as different research sources (neubauer, lank 1998). looking into the past and taking into account approaches first mentioned by litz (1995), two of them could be distinguished: a structure-based and an intention-based. the first one characterizes the family firm by their ownership and management, while the second one is based on the values and preferences of the family firm’s members towards family-based relatedness. nowadays researchers refer to them accordingly as componentsof-involvement and an essence approach to define family business. the components-of-involvement approach describes family firms operationally by the components of a family’s engagement in the business: management, ownership, supervision, and succession within the family (chrisman et al. 2005). consequently, the criteria used to define family firms contain, for instance, the percentage of ownership, involvement of multiple generations or active management by family members (for more criteria see table 1). basically, the components of involvement approach admit that the family’s participation in the business is an ample condition for regarding a business to be a family firm. on the other hand, according to chrisman et al. (2005) essence approach is based on the conviction that “family involvement is only a necessary condition; family involvement must be directed toward behaviours that produce certain distinctiveness before it can be considered a family firm”. therefore, two firms with the same level of family involvement may not both be family businesses when either misses the intention, vision, familiness, or behaviour that comprise the essence of a family business. moreover, lindow et al. (2010) as the sufficient condition, mention ownership of one or several crucial features, such as: family influence over the strategic direction of a firm, intention of the family to keep control, family firm behaviour, or unique, inseparable, synergistic resources and capabilities arising from family involvement and interactions. contrary to the two mentioned above approaches, which appear to be converging, neubauer and lank (1998) list four research sources while investigating the theory related to family firms, namely: entrepreneurship, small and medium-sized enterprises, owner-managed business and family business. similarly, it could be observed that the family firm owner perceives the business and what happens within it from three overlapping perspectives (ward, antonoff 1993): 1) family, 2) ownership and 3) management (fig. 1). 196 i. kubica, m. szarucki. exploring employee motivation in polish family firms. case of retail sector family management ownership fig. 1. three overlapping perspectives on family business (source: hatten 2003: 189) table 1. criteria for family business definition (source: own elaboration based on drucker 1995: 45; gersick et al. 1997: 27; westhead, storey 1997: 197; fletcher 2000: 156–157; chrisman et al. 2003: 467; arosa et al. 2010: 88) author year criteria ward (1987) passing on the firm for the family’s next generation; family control; family management. litz (1995) involving family members in ownership and management of the company; non-family ownership with family managers involved in management; family business that has gone public but family members are still in senior management positions. shanker and astrachan (1996) percentage of ownership; voting control; power over strategic decisions; involvement of multiple generations; and active management of family members. gersick et al. (1997) position of the company in terms of family; position of the company in terms of ownership; position of the company in terms of business life-cycles. westhead and storey (1997) undergoing inter-generation transition; having more than 50% of shareholding owned by family group; more than 50% of family members are involved in management. chrisman et al. (2003) intention to maintain family control; unique, inseparable, and synergistic resources and capabilities arising from family involvement and interactions; a vision for trans generational value creation; pursuance of such a vision. arosa et al. (2010) large body of common stock is held by the founder or family members; participation of family members in monitoring the firm. 197 business, management and education, 2016, 14(2): 194–209 from the first perspective, a family member needs a job and it would be an opportunity to help one of the relatives from the family perspective. second, the effect of a new hire on profits would be taken into account. third, from a management perspective, the concern would be about how this situation will affect non-family employees (hatten 2003). on one hand, the overlapping perspectives are useful organizational behaviour models for unfolding the multifaceted individual and organizational phenomena, connected with the overlapping subsystems and for identifying the stakeholder perspectives, roles, and responsibilities. on the other hand, the overlapping circles model has limitations for identifying performance outcomes and explaining how these interactions materially influence firm level outcomes (chua et al. 1999). nevertheless, due to the purposes of our study we use this model to access functioning of family firms from the management perspective, namely issues related to employee motivations within this type of business. the common perception of family-owned businesses is that they are subject to stagnation, exclusiveness, discrimination and rash leadership (miller, le breton-miller 2005). in spite of the fact that family firms have both advantages and disadvantages related to their founding and managing (szarucki, brzozowski 2010), many family based companies are big and very often successful ones. according to cromie and o’donoghue (1992) family business is common within the hospitality industry (e.g. hotels, restaurants and public houses). however, among the top ten biggest family companies in the world, there are companies active in the automotive industry, banking sector, energy and telecommunications, retail and steel industry. the leader is in retail industry, which is a discount retail chain wal-mart stores inc. established in the usa in 1962. thus business activity of family firms is not limited to specific cluster, but rather they are present in almost all sectors of the economy. 3. employee motivation in family firms the ability to motivate group members is one of the most important factors determining efficiency of a manager’s work, and the use of the integrated model of motivation to work supports decision-making, planning and control processes (staehle 1991: 117). in family firms, where we are dealing with two groups of employees – family members and “outsiders”, understanding the mechanisms of exerting impact on people seems to be even more significant. the notion of motivation is understood as a process of deliberate and intentional impact on behaviour of people in the work process by creating conditions allowing them to satisfy the needs as an effect of their contribution to implementation of specified organizational goals. all elements – conditions and motivational factors are interrelated and affect motivation of people to work in a certain way. motivation covers such elements of working environment as: firm location, economic situation, image of the firm on the market, organizational structure, content and conditions of work and work organization, technical level, social relations, compulsion measures 198 i. kubica, m. szarucki. exploring employee motivation in polish family firms. case of retail sector (commands, bans etc.), measures of persuasion (informing, consulting or criticism), as well as incentives – financial and non-financial incentives (pocztowski 2008; azourya et al. 2013). the latter are very often considered to be one of the most important motivators, encouraging employees to work more effectively, as they have the greatest effect on human behaviour due to a measurable sense of effectiveness and one’s effort. financial incentives provide an employee with economic benefits as well as the possibility of pursuing his or her goals and needs, and therefore improve material conditions of his or her life. on the other hand, non-financial incentives give the employee the possibility to feel respect, dignity, appreciation, and also satisfy the social and self-fulfilment needs. as it has been already mentioned, motivation in a family firm applies to two groups of internal employees: family members and employees from outside the family. use of certain organizational practices may have a motivating impact only on one group, and, at the same time, a demotivating impact on the another (sułkowski 2006). usually, family members are more motivated to work, more loyal and committed. however, preferential treatment (more favourable treatment of some people, on better terms than those offered to others) of family members, frequent in family firms, has a demotivating effect on the employees from outside the family. fair treatment of employees is always motivating (sułkowski 2006), and the detailed specification of factors motivating all employees of family firms has been presented in the table below (table 2). as we can see, the main factor motivating to work in a typical family firm is, apart from the obvious needs for “working”, a sense of responsibility for family assets invested in the company. in all firms, an unquestionable value is also right to property, acquired as early as at the time of birth and the need for maintaining this property in the hands of the family at any cost. it involves the “implicit” right of employment in the company that is granted to every family member, and resulting only from the fact of birth and affiliation to a given family (winnicka-popczyk, popczyk 2004). table 2. motivational factors in family firms (source: own elaboration based on sułkowski 2006: 73–74) family member employee from outside the family motivational factors responsibility for family assets right to property need for working need for preserving the good reputation high and certain remuneration training courses fixed remuneration education possibility closer contact with the superiors a particularly interesting aspect with regard to motivating employees of family firms is the issue of remuneration. in the literature, we can encounter information that most managers in family firms strive to use uniform principles of remuneration for employees both from the family and from the outside. the research conducted by lansberg (1983) shows that the remuneration of family members working in a firm is often lower than 199 business, management and education, 2016, 14(2): 194–209 the remuneration of outsiders who have similar experience and competences. however, according to sułkowski (2006) this thesis is not confirmed in polish family firms, what was proved by interviews conducted with entrepreneurs running family firms. at a deeper analysis it turns out that employees from the family are, however, better remunerated, though this phenomenon often assumes rather concealed forms, e.g. additional contracts of mandate or commissioning contracts for performance of “alleged” projects (sułkowski 2006). such preferential treatment of “their people” has an undoubtedly negative impact on other employees, therefore the safest way is fair treatment and pursuit of uniform principles of remuneration for all employees. an important factor motivating family members working in a firm is also the need for preserving the good reputation of the family and often even raising its significance. it explains an almost “obsessive” pursuit of quality and care towards the employees. it can be seen in joint work on the assigned activities with employees not belonging to the family, as well as possession of extensive knowledge about families of these employees. the majority of family firms pay also great attention to their reputation among customers and suppliers (e.g. personally dealing with key customers and suppliers in order to initiate close cooperation) or the local community (among others, by means of sponsoring local events or participation in charity campaigns). good opinion about family members who jointly run business, provides family firms advantage over competitors with regard to promotion of the quality of their products or provided services. this contributes to better quotations of a family firm on the stock exchange, beyond the reach of non-family firms (winnicka-popczyk, popczyk 2004). education, training and career development are, for the employees, a form of improvement and enrichment of the content of work, which leads to entrusting them with more and more serious obligations, and thereby – affects the level of their motivation and satisfaction with work. like in the case of remuneration, also in the aspect of development, an important factor is development of similar conditions for employees both from the family and from the outside. preferential treatment of family members does not create conditions and opportunities for development for other employees, just like investment in development of employees from immediate family that brings no benefits to the firm itself (sułkowski 2006). as it has been already mentioned, the issue of family firms in poland is not yet sufficiently examined, and in the available literature there are not many studies in this field. what is interesting, the subject matter of succession was intentionally ignored for many years in scientific analyses, which was caused by the fact that in polish reality, a vast majority of family firms are relatively “young” firms, the so-called first generation firms, established as the result of system transformations in the 1990s (surdej, wach 2010). succession is a long and multi-stage process and only now it starts to gain importance, since many companies have faced or will face in the near future the problem of passing the power and property on to another generation. a very interesting thing are thus observations concerning the person of a potential successor of the manager, 200 i. kubica, m. szarucki. exploring employee motivation in polish family firms. case of retail sector being most often a family member. if such a person works with commitment and has no power exceeding his or her competences, such a situation is usually assessed positively by most employees. however, there are always some employees who will be less happy and will perceive themselves as potential candidates to firm management, which they will never achieve in a family company. nonetheless, the majority of employees usually acknowledge that preparation of a successor as a good promise when it comes to firm development (sułkowski 2006). it is also worth mentioning that due to different reasons succession planning in family businesses is perceived as a wicked problem that must be solved (eddleston et al. 2013; devins, jones 2016). in addition, research on motivation in family firms (mcconaughy 2000) shows that the chief executive officers (being members of the founder’s/founders’ family) have different motivation than executives from outside the family (e.g. contractual manager), i.e. they feel less urge to receive additional incentives for increased effort for the firm’s performance. furthermore – families that control their management by means of the so-called “normative control” (raz 2002), that is thanks to common values, usually bear lower costs than the owners who must apply increased financial motivation. as we can see, the specific character of family firms requires people managing them not only to have knowledge in the scope of running business but, above all, to understand mechanisms of impact on people by a system of incentives (rewards) and to structuralize the conditions on which employees may gain both external and internal rewards. managers of family firms, in order to effectively shape behaviour of their employees – being both members of their own family and unrelated people, must know even better the effects of their behaviour being a rewarding value for employees and have an authority to use these effects (mączyński 1994). some authors provide valuable insights on building an efficient motivation system for small and medium-sized enterprises that could be utilised within family businesses belonging to this category of enterprises (dzieńdziora et al. 2014: 100). practical implications of the discussed issues will be covered further below based on business practice of the selected polish family firms from the retail sector. 4. analysis and evaluation of employee motivation in the selected family firms 4.1. research methodology invitation to participate in the research was addressed to 3 family firms, running their business on the territory of poland (one from the silesian region and two from małopolska) since approx. 25 years and employing from 6 to 50 employees. all of the surveyed organizations wanted to remain anonymous, and consequently, for the purpose of the paper, they have been called firm a, firm b and firm c. all of them are retail firms, specializing in sales of non-alcoholic beverages, garden machines, as well as production and sale of kitchen furniture. 201 business, management and education, 2016, 14(2): 194–209 the main research technique applied when analysing the level of motivation at work and factors motivating employees in the examined family firms was a survey. it contained 21 cafeteria questions concerning financial and non-financial motivation tools, the degree of satisfaction with the aforementioned tools and professional development opportunities in the examined organizations. the survey was supplemented by interviews with the owners of examined organisations, which enabled better understanding of functioning of the aforementioned organisations. based on the literature review, we formulated a hypothesis h1: personal features influence the opinions of the respondents on factors motivating to work at family firms. moreover, we assume that these opinions will differ among the analysed firms. in total, the study involved 70 people (including 12 women) – 6 from firm a (100 per cent of employees), 25 people from firm b (70 per cent of employees) and 39 from firm c (90 per cent of employees). in the surveyed companies employees aged below 24 were 14 per cent of the surveyed, 1/5 are employees aged 25–29, nearly half (49 per cent) are people aged 30–44, and the remaining 9 per cent are people aged 45–65. the level of education of the surveyed was included in the table (table 3). due to the pilot study the research sample is small and the results cannot be generalised on the whole population. nevertheless they show some interdependencies in the analysed sample and can be used as good ground for further research. from among the examined firms, employees with the highest formal qualifications are present in firm b where 33 per cent of the respondents have at least incomplete higher education, and a half has secondary education. other employees have vocational or incomplete secondary education. a similar situation takes place in firm c where nearly half (47 per cent) of the respondents has secondary education, and 23 per cent at least have incomplete higher education. the remaining 1/3 of employees has incomplete secondary education. on the other hand, in firm a only one person has incomplete higher education, while others – vocational education. such structure of the employment explicitly indicates the special character of established job positions – in most cases these are operational jobs (e.g. driver, salesperson or mechanic) that do not require special qualifications. other positions are, above all, commercial ones – shop assistants and sales representatives with at least secondary education. the persons with the highest qualifications occupy strategic positions (president, director, regional manager or chief accountant) and usually are members of a family to which the firm belongs. the examined firms have been active on the polish market for nearly 25 years, and the dynamics of development is strongly related to the economic situation on the market and is reflected in the work experience of the employees (table 4). the most dynamic growth in the last 4 years was recorded in firm c, which – due to territorial expansion, opened new branches and was forced to hire new employees (64 per cent of the surveyed have been working for less than 2 years). an opposite situation 202 i. kubica, m. szarucki. exploring employee motivation in polish family firms. case of retail sector takes place in firm a where 2/3 of employees have been working for above 6 years. the length of employment in firm b also refers to changes in business strategy – almost 1/3 of employees has been related to it from the very beginning, 38 per cent for the period from 3 to 5 years (market stabilization period), and 29 per cent joined the company over the past 2 years, when the firm increased its turnover by almost 40 per cent as compared to the first decade of the 21st century. as we can see – a feature common for family firms is stability and length of employment, which will be also mentioned further in the article. this is typical for companies characterized by the dominance of clan culture over other types of organizational cultures. it has its implications in perception of satisfaction from work performed1. thus, in firm a and b all respondents declared that they were satisfied with work performed by them. on the other hand, in firm c such a declaration was expressed by 72 per cent of the respondents. atmosphere at work, the feeling of influence or responsibility for the work performed (as well as durability and success of the firm in the case of family firms), are also reflected in the level of motivation of their employees. in the case of firms a and b, all employees feel motivated, in firm c, on 1 according to the concept of organizational cultures by cameron and quinn, an organization with a clan culture, is a friendly workplace. people interact perfectly, and the firm resembles a big family. consistency of organization is provided by loyalty and attachment to tradition. much emphasis is put on long-term benefit, good atmosphere within organization and care for people. organization rewards teamwork, participation and consensus (cameron, quinn 2003). table 3. education structure (source: own study) education firm a (n = 6) firm b (n = 25) firm c (n = 39) total % total % total % higher 0 0 6 25 6 17 incomplete higher 1 17 2 8 2 6 secondary 0 0 12 50 17 47 incomplete secondary 0 0 1 4 3 8 vocational 5 83 3 13 7 19 primary 0 0 0 0 1 3 table 4. job seniority (source: own study) work experience firm a (n = 6) firm b (n = 25) firm c (n = 39) total % total % total % less than one year 0 0 2 8 10 40 1–2 years 1 17 5 21 6 24 3–5 years 1 17 9 38 2 8 6–7 years 2 33 1 4 3 12 above 8 years 2 33 7 29 4 16 203 business, management and education, 2016, 14(2): 194–209 the other hand, 35 per cent are not ready to call themselves motivated – most likely these are the same people that are not satisfied with the work performed by them. analysis of answers to questions concerning financial and non-financial motivation as well as personal feelings concerning their impact on motivation to work will make it possible to identify the aforementioned phenomenon in the examined family firms. the results of the analysis will be discussed in the section below. 4.2. results and discussion the respondents, when asked about factors which have the greatest effect on growth in their motivation, almost unanimously pointed out remuneration (firm a – 100 per cent, firm b – 80 per cent, firm c – 67 per cent), atmosphere at work (firm a – 83 per cent, firm b – 52 per cent, firm c – 44 per cent), as well as the sense of self-fulfilment and development (respectively 33, 28 and 26 per cent). other determinants differed depending on the firm. fear of losing job was a factor motivating 67 per cent of employees (firm a). in none of other companies was this fear such an important determinant (firm b – 8 per cent, firm c – 23 per cent). it is surprising, because family firms are often perceived as firms where stable and long-term employment is one of the assumptions of the organizational culture. in firm b, of most importance are mainly elements related to the possibility of using one’s own skills (44 per cent), achieving a bonus (40 per cent), as well as independence and sense of accomplishments (20 per cent). in the last of the examined firms, a factor important from the point of view of motivation was bonus (59 per cent) and independence (44 per cent). other factors were definitely less important. what is interesting, promotion prospects did not gain, in any of the examined firms, more than 16 per cent of answers2, which may indicate a flat organizational structure and/or – due to the profile of a family firm, taking up posts by owners-family members (“natural” succession of generations and subsequent descendants of owners/founders of family organizations joining the firm, which has been mentioned in the first part of this article). in the first two examined firms, an important issue was also the opinion of the superior about the work performed (respectively 33 per cent and 28 per cent, while in firm c – only 13 per cent). what may be puzzling – in firms a (67 per cent), as well as c (36 per cent) also fair treatment of all employees was reported as a motivating factor. this can indicate that – due to family ties, “outsiders” can feel that they are treated worse/differently and might feel more motivated, if these differences were not so visible. it can be seen also in perception by employees of the efforts of their superiors in motivating to work, e.g. by pep talks. and so, in firm a all employees stated that the superior tried to increase their 2 a confirmation of this thesis can be found in the question concerning the demotivating factors, where lack of remuneration increase, development and promotion demotivates in firm a and c, nearly half of employees (50 per cent and 44 per cent of the respondents). in firm b this phenomenon applies to 1/5 of the respondents. 204 i. kubica, m. szarucki. exploring employee motivation in polish family firms. case of retail sector motivation to work, while in firms b and c nearly 1/3 of the respondents (respectively 28 and 30 per cent) did not notice signs of such efforts from their superiors. interesting conclusions about functioning of the examined organisations can also be drawn when analysing the factors demotivating the respondents. in firm a bad atmosphere (100 per cent of the selected answers), lack of organization (only 1 person did not indicate this answer) and bad communication (67 per cent) are indicated as factors mostly demotivating for employees. other answers, such as lack of interest of superiors or penalties for failure to achieve goals, do not occur at all. such a distribution of answers indicates organizational difficulties regarding work organization and internal communication, which is reflected in deterioration of relations at work and decrease in employee commitment. in turn, in firm b bad communication as a demotivating factor was indicated by 44 per cent of respondents, and lack of organization and bad atmosphere – by 32 per cent. these were the highest indications from all the possible answers. therefore, it can be assumed that employees in this company do not feel dissatisfaction with work and it is difficult for them to identify elements that would cause their demotivation in this particular firm. lack of organization is also one of the snags in firm c (51 per cent of the selected answers). it is also the only company, in which the level of remuneration causes demotivation of its employees (41 per cent)3. the respondents also drew attention to the lack of promotion prospects (44 per cent), bad atmosphere (28 per cent), as well as penalties for failure to achieve goals (26 per cent) as factors demotivating them. furthermore, 21 per cent of the surveyed employees complain about lack of interest from superiors and – what is interesting, this is the same organization, in which only 13 per cent of the respondents believe that management opinion about their work is motivating. when juxtaposing motivational factors and demotivators of the aforementioned organizations, it is possible to notice difficulties in the personnel management process caused by significant chaos in work organization, lack of clear legal procedures (among others, information flow, principles of granting penalties and rewards/bonuses for accomplishment of objectives) and unsatisfactory level of remuneration. according to the owners of the analysed firms, they were surprised by the dynamics of the firm development and – since they were not prepared for it, they had to learn how to manage a firm “in a real time mode”. they are also aware of competence shortages in human resource management and the need to prepare procedures stabilizing the firm’s activity. from the point of view of motivation systems, it is not sufficient to identify only motivational and demotivational factors, it is also necessary to discover the degree of their importance for employees to respond to their needs and adequately construct the system of payment and non-payment motivation. a specification of such factors and the degree of their importance for the respondents is presented in the table below (table 5). 3 for comparison, in firm a nobody indicated remuneration as a demotivating factor, and in firm b – it was indicated by only 12 per cent. 205 business, management and education, 2016, 14(2): 194–209 table 5. significance of financial and non-financial motivation factors (source: own study) to what extent do the following factors motivate you to work? firm a (n = 6) firm b (n = 25) firm c (n = 17) median (1 – the lowest; 5 – the highest) good relationship with the superior 5 4 5 possibility to use trainings 1.5 4 2 good reputation of the firm 4 5 4.5 attractive compensation package 3 4 3 pay 5 5 4.5 possibility of independent decision-making 5 4 3 good atmosphere at work 5 5 5 interesting work 5 4.5 4 professional development prospects 4 4 4 employment stability 5 5 5 promotion prospects 2 3 1.5 wage raise 5 5 4.5 bearing in mind that in firm c as much as 35 per cent of employees do not feel motivated to work, it should not be surprising that in this organization majority of the listed factors have average significance for the motivation process4. in firm a, as the most important motivation factor, the respondents indicated employment stability. it is associated with the fact that almost all employees are related to the firm owner and any economic difficulties of the firm threaten the financial security of the whole family. the willingness to survive and provide support for family seemed to be a “sufficient” source of motivation and commitment to work. nevertheless, in two other companies where the share of the family members in the structure of employment is lower, stability of employment also plays an important role. taking into account the role of financial and non-financial factors shaping the motivation of employees there are some interesting observations (table 5). looking at non-financial motivators, it is observed that in all three examined firms issues related to participation in training or promotion prospects play the least important role. on the other hand good atmosphere at work and employment stability turned to be the most valued factors in the analysed firms. a slightly different picture arises when taking 4 a puzzling fact is also that only 17 from among 39 respondents evaluated particular motivational factors. others made no efforts to assess the importance of the aforementioned factors to them. this situation alone may tell a lot about the level of employee motivation/commitment in an examined organization. 206 i. kubica, m. szarucki. exploring employee motivation in polish family firms. case of retail sector into account financial factors of employees’ motivation. factors related to employees’ remuneration were regarded of higher importance (e.g. pay, wage raise) than other (e.g. compensation package). considering the results of the analysed firms separately, the respondents’ opinions slightly differed from each other. the opinions in the analysed firms do vary from each other what was confirmed by the kruskal-wallis (possibility to use trainings: h (2, 69) = 6.83, p = 0.033; promotion prospects: h (2, 64) = 11.64, p = 0.003). opinions on the motivational system within the studied family firms depend on the individual features of the respondents. this dependence has been confirmed in case of age (chi square = 35.55; p = 0.017; v-cramer = 0.49) and gender (chi square = 9.72; p = 0.045; v-cramer = 0.46). these results partly confirm the hypothesis h1. in other cases the dependence was not confirmed statistically. moreover, such dependence was confirmed in case of age and possibility of development and promotion (chi square = 36.64; p = 0.002; v-cramer = 0.38), level of education and perception of the remuneration level (chi square = 35.44; p = 0.017; v-cramer = 0.37). 5. conclusions the conducted research on employee motivation in the selected family firms indicates a number of interesting observations. firstly, the very of owners of the examined firms see that the success achieved by the firm was the reason for the greatest difficulties with regard to human resources management – in particular with regard to employee motivation and rewards of the hired employees, for which (as management) they were not prepared properly. secondly, a person becomes an employee of a family company most often not due to the education level or competences, but the mere fact of being born in a given family. this often results in division into “their people” vs. “outsiders” and affects the level of motivation: commitment, loyalty, sense of responsibility and influence, as well as financial expectations of both of these groups. thirdly, in a family company friendly atmosphere, partner relations between co-workers and significant care for the reputation outside the company are expected. a consequence of the aforementioned regularities is job seniority longer than in non-family firms. to conclude, it is worth mentioning the most frequently observed errors in the motivation process, which undoubtedly include: making popular decisions, preferential treatment of selected people (in this case, family members), closeness to some quite, disloyalty or unjust exercise of discipline (pocztowski 2008). all these dysfunctions or pathologies are particularly visible in practices of family firms, which was also reflected in the results of the conducted research such as e.g. signalling unequal treatment of employees within the structures of a given firm. summing up, the obtained research results should not be treated uncritically, due to the small research sample from the retail trade sector. nevertheless, they may encourage further research in this field based on a greater research sample – both in poland and abroad. in addition, an interesting thing seems to be finding the answer to the ques207 business, management and education, 2016, 14(2): 194–209 tion of whether the sector of operation of family firms affects the employee motivation system, the level and structure of employee remuneration, as well as the differences in perception between family and non-family employees. acknowledgements this research was inspired by intergenerational succession in smes’ transition – insist project no. 2014–1-hu01-ka200–002307. this study was financed from the grant for young researchers titled “human capital management in family-owned firms” no. 101/we-kzkl/02/2014/m/4297. references arosa, b.; iturralde, t., maseda, 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antonoff, c. 1993. two “laws” for family businesses, nation’s business (february): 52–53. westhead, p.; storey, d. j. 1997. financial constraints on the growth of high technology small firms in the united kingdom, applied financial economics 7(2): 197–201. https://doi.org/10.1080/096031097333763 winnicka-popczyk, a.; popczyk, w. 2004. firma rodzinna w gospodarce rynkowej, in j. jeżak, w. popczyk, a. winnicka-popczyk (eds). przedsiębiorstwo rodzinne. funkcjonowanie i rozwój. warszawa: difin, 31–32. iwona kubica. ma, teaching assistant in the department of human capital management at the cracow university of economics. she gained her professional experience in hr department and subsequently in training and consulting companies working as a co-trainer and consultant. her research interests concentrate on diversity and adaptation processes in multicultural organizations. she is an author and co-author of several scientific papers and book chapters as well as a participant of international research projects. marek szarucki. phd, assistant professor in the department of strategic analysis at the cracow university of economics (cue). his scientific interests concentrate on the methodology of management science, strategic management, innovation management and entrepreneurship. he is the author and co-author of numerous scientific papers and book chapters that have been published in refereed journals and books. he holds a phd in economics with major in management sciences from the cue. https://doi.org/10.1080/096031097333763 copyright © 2016 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. the concept of a smart city in urban management sławomira hajduk faculty of management, bialystok university of technology, bialystok, poland e-mail: s.hajduk@pb.edu.pl received 10 october 2015; accepted 18 may 2016 abstract. analyzing the literature covering public management, the author noticed that the urban planning is a crucial fac-tor in urban development. cities which have an adequate intellectual resources and proper institutions as well as developed infrastructure are called smart cities. according to the author, proper local spatial development plans should be applied in those cities. crucial parts of the city, places of the highest investors interest such as technology parks, r&d companies, business incubators, technology transfer centers and industrial complexes should definitely be incorporated in these plans. the iso 37120 standard is the most practical method to measure a city’s perfor-mance. the factor which decides about special management is the level of investment pressure. if this indicator is decreasing then the area does not have to be covered by local spatial development plans. this elaboration aims to examine the role of the smart city in urban management. the research shows the relationships between coverage planning, investment pressure and green areas. the main result is the author’s classification of selected 34 medium-size cities in poland. the test procedure exploited taxonomic methods as ward’s hierarchical analysis. keywords: smart cities, iso 37120, urban development, spatial management, urban sprawl, taxonomic methods, classification. jel classification: r10, o18. 1. introduction the number of people inhabiting urban areas is constantly increasing. it is predicted that until 2050 the proportion of people living in cities will change from 53% to 70% (lierow 2014; un 2015). 70% of the global gross domestic product is obtain by cities which are social and economic centers. many governments may find investing in those areas profitable, however it should be done in an effective and balanced way. in addition cities have to face major changes and challenges resulting from global environmental shifts, abrupt urbanization as well as older and older infrastructure. thus an appropriate and coherent methodology must be taken. the iso 37120:2014 standard: sustainable development of communities – indicators for city services and quality of life is the first standard of the international organization for standardization concerned with city metrics and can be helpful. city services and quality of life are crucial indicators which b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(1): 34–49 doi:10.3846/bme.2016.319 mailto:s.hajduk@pb.edu.pl http://dx.doi.org/10.3846/bme.2016.319 35 business, management and education, 2016, 14(1): 34–49 give information about cities efficiency. all necessary factors are determined and found thanks to special methodology. neither location nor position and size matter in applying iso 37120:2014 standard. unequivocal and transparent urban planning should be the foundation of smart cities functioning in poland. while initiating this work the author placed some research questions, for which response have been searched in the elaboration: how important is urban planning in the concept of smart cities? what factors influence urban planning? in the context of spatial management what are the differences between cities of poland? how can local governments reduce urban sprawl? this collection of doubts was exploited to establish the aims of the elaboration. the significant purpose of the elaboration is to examine the connection between coverage planning, investment pressure and green areas in term of urban management. the research included 34 medium-sized cities of poland. the author exploited statistical data from the local data bank of the central statistical office and reports prepared by the institute of geography and spatial organization of the polish academy of sciences, the international organization for standardization and the european union. the test procedure covered the following methods such as: pearson’s linear correlation, ward’s analysis and k-means analysis. 2. background literature according to territorial management, smart cities is presently one of the most common and popular ideas. miscellaneous efforts have been made to academically identify and conceptually delineate a smart city. this also has been showed in emerging modern theories of development management, especially within the concepts of the industrial district, the network model, knowledge organization, intellectual capital, e-governance, new public management, intelligent specialization, regional foresight, the cluster, learning region and city, value-based management, reengineering, innovative organization, lean management (allwinkle, cruickshank 2011; arribas-bel et al. 2013; deakin, waer 2011; eleander 2002; flynn 2012; mateson 2008; wiatrak 2011; roberge 2013; pors, johannsen 2003; foray et al. 2009; andrews, van de walle 2013; dias et al. 2014; dunleavy, hood 1994; paskaleva 2009; schiuma, lerro 2008; ricciardi, za 2014). the smart city is a global trend of urban strategies aimed at recovering the quality of inhabitants living in urban areas and at leveraging innovation and high technologies to solve the difficult problems generated by high-population density (marinova, philimore 2003; dameri 2013; hancke, silva 2013). it helps to solve issues of urbanization, especially pollution of environmental, land consumption, urban sprawl, transport congestion, energy needs, difficulties in accessing public services and contains a diversified set of public initiatives: form building better transportation systems to endorsements creative innovation, knowledge for designing energy-saving policies (florida 2008; eger 2009; hollands 2008; o’grady, o’hare 2012). 36 s. hajduk. the concept of a smart city in urban management the concept of smart city was first used in 1994 (porter 2003; lombardi et al. 2012; dameri, cocchia 2013). since 2011 the amont of publications referring to this subject has distinctly grew. this is associated with the emergence of smart city projects and endorsement by the european union. the concept of smart city is most frequently mentioned in literature. nam and pardo presented a smart city model having three dimensions: technology, people and institutions. in all analyzed smart city models the authors stated repeating social elements related with technologies aimed at transforming the economy, the environment and the community (nam, pardo 2011). caragliu and nijkamp determined a city to be smart when investments in human and social asset as well as traditional and modern communication infrastructure fueled balanced economic development and a high quality of life, coupled with reasonable management of natural resource, through taking part operation and commitment (caragliu et al. 2011). giffinger constructed a smart city ranking list based on some urban characteristics (giffinger et al. 2007). they identified 6 categories: governance, economy, mobility, people, environment and living. the authors ranked 70 cities within the european union based on a amount of ratios and indicators. leydesdorff and deakin considered a triple-helix model of smart cites underpinned by local government, academic leadership and industry wealth (leydesdorff, deakin 2011). lombardi also describes smart cities using the triple-helix model and the role of universities and research centers in generating innovation and patents (lombardi et al. 2012). whereas sainz pena defined a smart city as something that exploits information and communication technologies to make its critical infrastructure, its elements and public services more interactive, efficient and noticeable to inhabitants (sainz pena 2011). mandelson and bradshaw, in turn, identify ten main areas possessed by a smart city: health, effective use of resources, ict literacy, public administration, regional economics, education, innovative services, culture and recreation, public safety (mandelson, bradshaw 2009). several authors determine a smart city as a inteligance transport, comprehensive urban strategy based on some important components such as technology, sustainable economy and environment, digitalization of daily life, a good style of governance and ict (simmie, strambach 2006; briggs 2009; lazaroiu, roscia 2012; tachizawa et al. 2015). the smart city phenomenon developed due to some important challenges such as technological progress, innovative devices, knowledge economy, environmental pressures and the political support of global institutions, including the united nations, the european union and the oecd (eu 2011, 2014; thite 2011; winters 2011; zygiaris 2013; cocchia 2014). analysis of international literature concerned with the smart city suggests that the present concept is the result of three trends of urban research, that of the digital city, the green city and the knowledge city (chourabi et al. 2012; vanolo 2014; neirott et al. 2014). ict, knowledge and the environment are seen as inextricably linked with the implementation of more innovative cities (table 1). the smart city is an integrated and comprehensive vision of all aspects of urban life including: the economy, government, transport, green areas, health care and culture. 37 business, management and education, 2016, 14(1): 34–49 the specific character of a smart city consists of creating and consolidating knowledge and innovation (rogerson 1999; baqir, kathawala 2004; edvinsson 2006; yigicanlar et al. 2008; navarro et al. 2012; kourtit, nijkamp 2012; labra, sanchez 2013). this is the reason implementation of smart initiatives increases social and economic attractiveness and competitiveness a city supported by its technological infrastructure (qi, shaofu 2001; rosvall et al. 2005; dameri, cocchia 2013; kitchin 2014). in particular a smart city exploits ict to optimize the performance and effectiveness of serviceable and needful city processes, activities and services typically by joining up diverse components and actors into a more or less seamlessly interactive intelligent system (yovanof, hazapis 2009; woods 2013; townsend 2013; manville et al. 2014). all these aspects are combined with wider concepts including environmental protection and energy production (cozens 2008; brondizio et al. 2009; fiksel 2006; levin et al. 1998; oliver 1997; roseland 1997; albino, dangelico 2012; mori, christodoulou 2012). nowadays every city needs indices to measure its performance. current indices are generally not standardized, compatible or comparable over time. the smart city table 1. trend of smart cities and definitions (source: own elaboration on the based ishida 2002; schuler 2002; giffinger et al. 2007; batagan 2011; gartner 2011; ergazakis et al. 2004; komninos 2006) trends authors definitions digital city ishida 2002 an arena where people can interact and share knowledge and information in a digital format schuler 2002 as a result of a physical or virtual ict infrastructure giffinger et al. 2007 a digital platform on which a complex ecosystem of multiple agents (includuding administration, companies and citizens) is developmened, equipped with sensors and capable of offering, through the processing of all the information acquired by the sensor network, the best services possible at every moment green city batagan 2011 a city pursuing economic development while reducing greenhouse gas emissions and polution gartner 2011 the city will act on this information flow to make its wider ecosystem more resource efficient and sustainable. the information exchange is based on a smart governance operating framework designed to make cities sustainable knowledge city ergazakis et al. 2004 a city that aims at a knowledge-based development, by encouraging the continuous creation, sharing, evaluation, renewal and update of knowledge komninos 2006 a cities are territories with high capacity for learning and innovation, which is built in the creativity of thei population, their institutions of knowledge creation 38 s. hajduk. the concept of a smart city in urban management iso 37120 standard is a collection of standardized indices which ensure a uniform approach to what is measured and how that measurement is made (steele 2014). on the whole, iso 37120 determines 100 city performance indices that are required or recommended (tillie 2014; lynch 2015) as well as includes 46 core and 54 supporting report indices (fig. 1). these indicators can be used to track and monitor progress of a city’s sustainable development. planning for future needs must take into consideration current effectiveness of resource use. according to iso 37120 cities can receive various levels of certification based on the number of reported and verified indicators (table 2). the indicators have been developed in order to help cities learn from one another by allowing comparisons across a wide range of performance measures and sharing best practices. this standard can be exploited in combination with the iso 37101 sustainable development in communities: management systems – general principles and requirements. fig. 1. themes and the number of indicators in iso 37120 (source: own elaboration on the based standard iso 37120:2014 sustainable development of communities: indicators for city services and quality of live) table 2. levels of certification cities and the number of indicators (source: own elaboration on the based wccd 2014) levels of certification cities the number of indicators aspirational 30–45 core indicators bronze 46 core + 0–13 supporting silver 46 core + 14–29 supporting gold 46 core + 30–44 supporting platinum 46 core + 45–54 supporting 39 business, management and education, 2016, 14(1): 34–49 fig. 2. green space in cities [hectars/100000 person] (source: own elaboration on the based wccd 2014) one of the 17 themes defined by the iso 37120 standard is urban planning. urban planning indicator’s role is to report about green area and trees planted per person, the areal size of informal settlements as well as the jobs/housing ratio (mccarney 2014). a green area is broader than a recreational space and it is publicly accessible. according to world health organization it is advised to all cities to have at least 9 m2 of green area per person. it is suggested that 10 and 15 m2 per inhabitant is the most reasonable number. the cities with the highest number of green areas worldwide is guadalajara in mexico having 446 m2 per capita. on the following positions dubai and helsinki can be mentioned. an extremely difficult task, succeeded by rotterdam and shanghai, is the ability of incorporating large green areas in populations with high density. the least green cities are haiphong with 2 m2 and makati – 0.6 m2 of green space per person (fig. 2). the indicator of trees planted ensures a helpful measure of the city’s involvement to urban and environmental sustainability, and municipal adornment. informal settlements contribute to urban sprawl and as plenty of people displaced into cities attracting new businesses will help ensure greater jobs and economic growth. in 2003 the american planning association released a planning instrument for local governments that overrun that problem. the often cited jobs-housing balance report suggests permissible compartments of jobs-to-housing indicators should fall between 1.3:1 and 1.7:1. 3. research methodology this research involves 34 facilities with populations between 100 thousand and 500 which were chosen from 305 polish cities. eleven of these cities are situated in the silesia province (table 3). indices for the study have been computed on the basic of statistical data from the local data bank of the central statistical office from 2014 40 s. hajduk. the concept of a smart city in urban management and are linked to three dimensions: coverage planning, investment pressure and green space. the first determines the surface area covered by local spatial development plans. it consists of following indicators: x1, x2, x3, x4. the second results from decisions on building conditions and land development. it obtains following indicators: x5, x6, x7, x8. and the last considers the size of green area. it consists of following indicators: x9, x10, x11. according to the assessment of literature above-mentioned, the author assumed the following indices as eleven diagnostic variables: x1 – the share of the area covered by local plans in the total city area [%]; x2 – the share of the area covered by proposed local plans within the total city area [%]; x3 – the average area covered by the local plan [hectares]; x4 – the share of the number of developing local plans whose preparation has taken longer than 3 years in the total number of developed local plans [%]; x5 – the share of the area covered by local plans which will use agricultural lands and forests for non-agricultural and non-forest purposes [%]; x6 – the number of decisions issued on building conditions and land development per 1,000 hectares of area not covered by the local plan; x7 – the area of land excluded from agricultural and forestry production per 1000 population; x8 – the number of decisions for building conditions issued per 1,000 population; x9 – the share of the green area in the total city area [%]; x10 – green area per 100000 population in hectares; x11 – the yearly number of trees planted per 100,000 inhabitants. table 3. medium-size cities of poland vs. nomenclature of territorial units (source: own elaboration) nuts 1 nuts 2 medium-size cities of poland central region lodz province mazovia province – płock, radom south region lesser poland province silesia province tarnów bielsko-biała, bytom, częstochowa, gliwice, zabrze, chorzów, tychy, katowice, ruda śląska, rybnik, dąbrowa górnicza, sosnowiec earth region lublin province subcarpathia province swietokrzyskie province podlasie province lublin rzeszów kielce białystok north-west region greater poland province west pomerania province lubusz province kalisz szczecin, koszalin gorzów wielkopolski, zielona góra south-west region lower silesia province opole province legnica, wałbrzych opole north region kuyavia-pomerania province warmia-masuria province pomerania province bydgoszcz, toruń, włocławek olsztyn, elbląg gdańsk, gdynia 41 business, management and education, 2016, 14(1): 34–49 polish municipalities are characterized by low planning coverage averaging 29.2% (śleszyński et al. 2015). there are provinces with above-average coverage of local plans and these, include the following: silesia, lower silesia, lublin and lesser poland. low planning coverage applies in particular to urban agglomerations and transport corridors. polish cities are covered in 49.6% by local plans. analyzed cities are characterized by 42.1% coverage planning which is higher than the national average, but lower than coverage in all cities (table 4). three cities have full coverage planning as: chorzów, ruda śląska, rybnik. table 4. profil of the medium-size cities (source: own elaboration) characteristic of cities frequency percentage area covered by local plans [%] under 20 7 20.6 20–40 13 38.2 40–60 9 26.5 greater than 60 5 14.7 land excluded from agricultural and forestry production [hectar/1000population] under 2 25 47.1 2–4 4 11.8 greater than 6 5 13.6 green area [%] under 5 29 85.3 5–10 4 11.8 greater than 10 1 2.9 the scope of my research included three stages of the test procedure (carrillo 2004): – reducing of the variables set by means of the hellwig parametric method with pearson’s correlation coefficient matrix (appendix 1); – classification of cities using ward’s hierarchical analysis (figs 3, 4); – determining the characteristics of individual clusters through the use of a deglomerating k-means analysis (fig. 5). the author computed indicators by applying statistica12.0 computer package and a microsoft office excel 2010 spreadsheet. variables x7, x8 and x10 were not taken into consideration in further analysis as a result of author’s assumptions using the hellwig parametric method with pearson’s correlation coefficient matrix. other eight variables (x1, x2, x3, x4, x5, x6, x9 and x11) were included in the further part of the study. ward’s hierarchical analysis encompassed euklidean distance (panek 2009; olszewska 2014). 42 s. hajduk. the concept of a smart city in urban management 4. results and discussion the author presented the connections between coverage planning, investment pressure and green space by analysing the outcomes of the taxonomic analysis. it was prepared within the urban management in chosen 34 polish cities. the researched entities had the same characteristics which enabled the division of medium-sized cities into three individual groups (fig. 3). applying comparing binding distance chart to binding levels facilitated to establish the limiting distance at the level of 10.0 (fig. 4). fig. 3. the dendrogram grouping polish medium-sized cities by ward’s analysis (source: own calculation using statistica12.0) fig. 4. the chart comparing distance to binding levels (source: own calculation using statistica12.0) 43 business, management and education, 2016, 14(1): 34–49 the first class includes eight elements such as: kalisz, płock, sosonowiec, bydgoszcz, radom, tychy, rzeszów and katowice. these cities are showing the lowest levels of coverage planning. moreover, the second class consists of twenty two cities such as: tarnów, częstochowa, bielsko-biała, gdynia, koszalin, wałbrzych, dąbrowa górnicza, lublin, białystok, bytom, zielona góra, gorzów wielkopolski, szczecin, legnica, włocławek, opole, zabrze, olsztyn, kielce, toruń, gdańsk and elbląg. these objects are characterized by an medium level of coverage planning. therefore, the third class consisted of four-elements such as: gliwice, rybnik, chorzów and ruda śląska. these cities are characterized by very high levels of coverage planning adapted to investment pressures (local plans cover areas which are the most attractive to investors). fig. 5. the characteristics of classes by a deglomerating k-means analysis (source: own calculation using statistica12.0) figure 5 presents the characteristics each classes of cities. first class stands out the lowest share of green areas. objects of second group are distinguished by having the highest investment pressure and the lowest values of coverage planning. elements of third class can boast of having the highest share of green areas and coverage planning but the lowest investment pressure. 44 s. hajduk. the concept of a smart city in urban management 5. conclusions analyzing the literature covering public management, the author noticed that the urban planning is a crucial factor in urban development. cities which have an adequate intellectual resources and proper institutions as well as developed infrastructure are called smart cities. according to the author, proper local spatial development plans should be applied in those cities. crucial parts of the city, places of the highest investors interest such as technology parks, r&d companies, business incubators, technology transfer centers and industrial complexes should definitely be incorporated in these plans. the iso 37120 standard is the most practical method to measure a city’s performance. the factor which decides about special management is the level of investment pressure. if this indicator is decreasing then the area does not have to be covered by local spatial development plans. a close connection of coverage planning, investment pressure and green space was observed thanks to applying taxonomic methods on 34 medium-sized urban centers in poland. analysed cities have been included into three individual classes. the first class of urban centers contained cities which need an improvement in coverage planning. it will certainly positively affect the innovation levels of these cities. the methods suggested and recommended by the author might serve an important role in supervising planning coverage in different territorial units. this kind of monitoring can have a beneficial effects for local governments, public institutions and organizations connected with those entities. references albino, v.; 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7.14 0.0 0.00 0.0 0.00 223.20 4.0 700 rybnik 99.8 31.71 548.1 11.11 0.0 0.00 0.0 0.00 226.19 2.1 326 dąbrowa górnicza 40.4 8.67 131.6 0.00 11.6 10.77 7.2 0.98 366.03 2.4 658 sosnowiec 32.7 16.34 124.2 40.00 2.5 67.76 0.4 1.98 224.65 5.2 1811 tychy 16.9 24.58 20.3 70.97 17.4 50.01 1.9 2.64 301.22 4.7 658 lublin 47.0 16.25 256.9 16.13 8.8 84.74 1.8 1.94 244.83 5.7 114 rzeszów 15.5 38.17 9.2 73.63 0.0 65.36 0.0 3.47 168.40 2.7 567 białystok 45.0 20.34 43.8 39.29 13.5 87.22 2.1 1.66 171.14 5.0 285 kielce 17.3 7.20 34.5 68.75 1.4 42.79 0.1 1.95 165.58 3.0 124 gorzów wielkopolski 44.6 17.46 57.9 25.00 7.8 39.80 2.4 1.52 284.29 4.1 35 zielona góra 59.0 24.77 47.8 30.00 4.3 21.31 1.3 0.43 144.46 2.9 122 kalisz 17.1 9.15 41.0 72.73 51.1 51.63 5.9 2.87 165.76 2.5 236 koszalin 35.7 3.52 79.9 0.00 3.6 19.78 1.2 1.15 170.93 1.9 152 szczecin 46.6 35.73 66.4 61.67 2.4 22.50 0.8 0.89 108.14 1.5 130 legnica 39.0 21.37 18.8 41.67 5.8 18.93 1.3 0.64 195.36 3.5 134 wałbrzych 17.5 4.03 29.6 22.22 12.6 19.74 1.6 1.18 144.35 2.0 59 opole 38.3 15.35 67.2 54.55 0.0 23.16 0.0 1.15 253.17 3.1 249 bydgoszcz 33.5 9.66 46.1 33.33 20.1 28.04 3.3 0.92 415.66 8.4 1816 toruń 44.9 8.53 29.7 33.33 0.0 30.88 0.0 0.97 170.63 3.0 382 włocławek 30.1 24.58 47.9 56.25 3.9 22.05 0.9 1.14 132.97 1.8 174 gdańsk 64.8 4.81 29.6 20.27 0.0 33.76 0.0 0.67 167.99 3.0 650 gdynia 27.4 11.38 39.0 3.85 28.7 34.26 4.3 1.36 99.27 1.8 48 elbląg 45.5 10.77 46.0 30.77 8.0 13.33 2.4 0.47 125.27 1.9 748 olsztyn 55.8 16.25 75.8 41.67 0.1 66.34 0.0 1.49 182.50 3.6 562 grey color in the table means the highest value of variable. source: own calculation using microsoft office excel 2010. sławomira hajduk received the msc eng. degree in environmental protection from bialystok university of technology, poland, in 1995, the m.s. degree in math from university of bialystok, poland, in 2001 and the phd degree in economy from wroclaw university of economy, poland, in 2002. she is currently working in the faculty of management, bialystok university of technology, poland. her long-established research activities are in the fields of the territorial management, in particular urban and regional development. significance of demographic variables for targeting of internet advertisements václav stříteský1, marek stříteský2, martin john david quigley3, david říha4 the demand for professional knowledge as a key factor of the development of outsourcing of financial and accounting services in poland anna bagieńska the concept of a smart city in urban management sławomira hajduk the concept of basic income: global experience and implementation possibilities in lithuania algimantas laurinavičius1, antanas laurinavičius2 julia siderska evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics ligita gasparėnienė1, rita remeikienė2 the concept of products and services integration – analysis of scientific publications justyna kozłowska categories of supply chain performance indicators: an overview of approaches dorota leończuk multivariate analysis of short and long-impact indicators for corporate bond market development ieva astrauskaitė the research on interface between lithuanian direct investment abroad and foreign trade flows anžela kozlova1, algita miečinskienė2 this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons.org/ licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2023 the author(s). published by vilnius gediminas technical university issn 2669-2481 / eissn 2669-249x business, management and economics engineering 2023 volume 21 issue 1 pages 84–105 https://doi.org/10.3846/bmee.2023.18360 the potential of macroeconomic factors in shaping the landscape of technological development: a testimonial from upper-middle-income countries sadik aden dirir faculty of law, economics, and management, university of djibouti, djibouti article history: abstract. purpose – the main goal of the paper is to examine the role of macroeconomic factors in promoting the technological development of upper-middle-income countries. research methodology – to carry on with the investigation the paper selected the expenditure in research and development as a proxy for technological advancement while gdp per capita, final consumption expenditure, domestic credit to the private sector, national income, and government transparency are selected as proxies for the macroeconomic indicators. moreover, a vecm approach is performed in order to capture the long-run and short-run relationship among the variables. additionally, a granger causality test was used to observe the causality direction among the variables. findings – the obtained results revealed that in the short run, all the selected variables have no prominent impact on r&d expenditure. however, the long run result, presented that the transparency situation of upper-middle-income countries, simultaneously the governments’ final consumption, the amount of credit provided to the private sector, and national income are unfavorably affecting technological development while the gdp is positively affecting the expenditure in r&d. research limitations – the exclusive focus on macroeconomic factors and upper-middle-income countries as well as the fact of excluding the role of micro factors and low-income countries are the major limitation of the study. practical implications – policymakers and nations looking to accomplish technological transformation in the age of digitization can benefit from the study’s findings. originality/value – since prior studies highlighted the link of macroeconomic factors with specific sectors such as healthcare, education, and agriculture. thus, giving little attention to or neglecting the information technology sector that compromises a more specific branch such as research and development. for that reason, this paper will bring light to this phenomenon. ■ received 23 december 2022 ■ accepted 09 may 2023 keywords: macroeconomic factors, r&d, technological development, upper-middle-income countries. jel classification: o11, o32, o38.      corresponding author. e-mail: sadikaden1999@gmail.com introduction technology is derived from the word technique, which denotes information, experience, tools, and instrument. previous decades have seen the generation of knowledge and expertise across many facets of society (bismala et al., 2020). the total amount of information on the methods and strategies employed in the creation of materials is known as science. the word “technology” has now been expanded to include both the methods and processes themselves as well as the body of information about them. this knowledge today encompasses not just manufacturing but also other facets of social life (lee, 2018). http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2023.18360 https://orcid.org/0000-0002-8159-5442 mailto:karahan.kara@artvin.edu.tr mailto:sadikaden1999@gmail.com business, management and economics engineering, 2023, 21(1): 84–105 85 cui (2016) in one of his studies states that as nations transition from agrarian to industrialized societies, and then to post-industrial digital civilizations, many aspects of their features change, notably the importance placed on training and the work opportunities of labor. contrasting the traits of modern society with the characteristics of manufacturing and agrarian civilizations has allowed everyone to track this progression. although on a personal point, there may be prolonged life expectancies, extra leisure time, and a decline in hours spent on transportation, demographic change, and an increase in urbanization, the advancement of emerging technologies and scientific research has led to the higher significance of investigation and training, the complexity of institutions, bigger value of communication, higher levels of the employees in information, major roles for the mass communication, and a broader range of interdependence (alam et al., 2019a). research and development are the standard strategies for fostering technological advancement, therefore appeals for additional r&d expenditure have become commonplace in both the governmental and general public spheres (bengoa et al., 2017). it is easy to identify several breakthroughs as the main cause of the rise in living standards during the previous two centuries. greater r&d, according to supporters, will provide new technical innovations that will promote wealth and economic development (i.e., an expansion in production per person) (barkhordari et al., 2019). some supporters even go to the extent of claiming that nations compete with one another for technical supremacy (muscio & ciffolilli, 2018). the nations who triumph in this competition produce the most advanced technical goods, reaping the benefits of their achievement. these nations are thought to have better production and efficiency levels. it is anticipated that their employees would earn the greatest real earnings and thus have the best quality of life. the nations that succeed in achieving technological advancement could even be in a position to outperform others who are unable to reach the technological horizon (chen et al., 2021). however, a significant portion of people who do not have such a pessimistic viewpoint nonetheless agrees that higher investment in r&d will boost future salaries and performance (godil et al., 2021). in light of this, governments shouldn’t be reluctant to proactively promote and finance r&d efforts, particularly if private industry r&d is insufficient. one of the key factors in boosting a nation’s prosperity and competitiveness is its expenditure on research and development (bor et al., 2010). generally speaking, economic expansion is a long-term result of technical progress. therefore, innovation increases overall factor productivity, which indicates an increase in overall output (surani et al., 2017). since schumpeter, the importance of economic innovation practices in development has been extensively examined. schumpeter is considered one of the pioneering economists who studied the macroeconomic link between technological innovation and economic development in this setting (hasan & tucci, 2010). through the beginning of the twentieth century, the neoclassical growth paradigm had narrowed its attention to the contributions that capital formation, technical advancement, population expansion, and output made to long-term economic development. although the concept stresses how technology fosters progress, it has been acknowledged that technological advancements are an exogenous component. r&d was regarded as an endogenous element in economic development frameworks in the late 1980s because of the groundbreaking work of peng (2010). 86 s. aden dirir. the potential of macroeconomic factors in shaping the landscape of technological development: ... the major factor underlying technical advancements is r&d activity. r&d efforts yield ideas that are projected into products, which are then released onto the market through marketing. nations can achieve greater technological levels and create new goods in this way to outperform others in terms of growth potential (adomako et al., 2021). therefore, governments should broaden the scope of r&d operations and devote additional gdp to r&d. economic expansion concepts frequently challenge the idea that r&d expenditures are crucial to the cycle of economic growth (beladi et al., 2021). typically, the following issues occupy a central place in the discussion of innovation strategy: first, the use of the finest methods in public policy to encourage private-sector innovation with the broadest potential societal consequences. second, the spread of technology (across nations and businesses). third, the recognition of revolutionary breakthroughs and strategies for promoting them. four, the significance of non-r&d innovation. lastly, the relative contributions of public and private r&d (prokop et al., 2021). the most urgent technology obstacles for upper-middle-income countries have been recognized, and they include expanding experience and understanding industrial activities, enhancing the availability of capital for high-growth, new sophisticated activities, enhancing the contribution of universities of higher learning to community business incubators, and enhancing the democratic institutions of innovations and research systems (vrontis & christofi, 2021). as matter of fact, prior studies highlighted the link of macroeconomic factors with specific sectors such as healthcare (darvas, 2018), education (olilingo & putra, 2020), and agriculture (czyżewski & majchrzak, 2018). thus, giving little attention to or neglecting the information technology sector that compromises a more specific branch such as research and development. as a consequence, this research aims to better investigate how macroeconomic factors, including a transparent government, contribute to technological development while taking into account the practical and dramatic elements of filling in the gaps of earlier literature. based on this the paper answer question such as; do macroeconomic factors contribute to the process of technological development in upper-middle-income countries? and how do these influences differ through the long-run and short-run aspects? to address these research questions, this study proposes a vecm model to assess the cointegration among the variables in both the long-run and short-run periods. additionally, the study employs a granger causality test to examine the causality direction among the variables. the theoretical foundations of earlier studies reviews are explained in the upcoming section. the methodology section will include details on the data source, such as measurement details for each variable, and the research process adopted moreover, the econometric model will be highlighted. continuously, the discussion of empirical findings, data suitability, and results comes next. after validation of the findings, the implications, restrictions, and recommendations for further research are discussed. 1. survey of the literature expenditure in research and development (r&d) is regarded as one of the most crucial factors in fostering economic progress. coccia (2018) noted that by enhancing efficiency and expanding their base of knowledge, nations with adequate r&d expenditure may accomplish business, management and economics engineering, 2023, 21(1): 84–105 87 their desired economic development. the goals for sustainable development (sdg9) now include creativity as one of its goals, and nations are urged to create a sustainable building, support an accessible and stable economy, and support innovation. based on this r&d is the fuel to promote innovation. for instance, sdg9.5 urges nations to significantly expand public and corporate r&d expenditure. in different regions, east asia and the oecd have the maximum r&d concentration; nationally, china and india have been the world’s largest innovation hubs for the past 10 years (knoll et al., 2021). this approach had a substantial influence on r&d efforts in russia, which changed to a market economy in 1991 after the soviet union fell apart. industry groups, businesses, and local authorities have more influence now that state-owned firms are less dominant (gokhberg, 1999). nevertheless, russia’s r&d operations were adversely impacted by the country’s shift to a market economy. because the public’s straightforward contribution to r&d spending as a share of gdp has declined by around 75%. due to this, the employment of half the researchers and scientists was endangered (schweiger et al., 2022). china’s technology infrastructure was not as strong in comparison to that of developed nations during the beginning of the 1980s. after the chinese economy underwent structural reform in 1978, the fields of technology and science grew quickly (chen et al., 2015). in this regard, the administration’s adoption of science and technology legislation in 1985 had a favorable impact on china’s advancement of its technical infrastructure. furthermore, in 1996, the act encouraging corporatization of scientific and technical research and inventions was adopted. these strategies have placed a strong emphasis on commercializing academic results and building industry sectors’ capability for r&d and innovation (yao et al., 2021). wang and wu (2015) examined the impact of firm and government r&d spending on china’s economic development in different research. based on the report, all r&d investments have a favorable impact on economic development, however, although there is a substantial association between enterprise r&d investments and growth, there is less link between government r&d investments and growth. institutional variables may also contribute to the explanation of r&d expenditure (wu et al., 2016). by enhancing the businesses’ potential for collaboration, a better institutional framework may encourage r&d activities. simultaneously, audretsch and belitski (2020) claimed that the administrative contexts in which enterprises function in addition to the characteristics of the company do matter for innovation. this idea was reinforced by (wang et al., 2015), who also noted that the r&d expenditures approach, framework, and process needed to be in line with institutional requirements. institutional contexts are regarded as the most significant stimuli for a creative activity for a number of reasons. first, organizational issues have an impact on r&d investments since they are hazardous and long-term investments. nevertheless, better institutions aid in reducing the organization issue among decision-makers thus assisting in boosting r&d spending. second, the effectiveness of institutions spurs r&d spending by giving businesses exposure to a range of resources and innovations. third, strong institutional qualities may draw international investments, enabling businesses to obtain external financing, reducing the amount of murky information, and offering incentives to businesses, which in turn encourages internal r&d investment. last but not least, sound governance, such as robust intellectual property rights, offers investors safeguards and encourages investment in r&d. 88 s. aden dirir. the potential of macroeconomic factors in shaping the landscape of technological development: ... fiscal policy is one of the macroeconomic elements that influence research and development. this shows that increasing the quality and efficiency of public expenditure is a key strategy for preserving financial restraint (muscio & ciffolilli, 2020). the development of the required monitoring systems applied to specific expenditure areas, such as public actions in r&d, public schooling, health care, and infrastructure on a global scale, has advanced despite the systematic challenges raised by measuring the quality of public spending on r&d (castellani et al., 2019). in a prior study, cincera et al. (2008) used both techniques to estimate an average performance of the link between inputs and outputs (such as governmental r&d incentives to the business sector, r&d expenditures by educational institutions, and r&d carried out in public research organizations). macroeconomic statistics from a panel of oecd nations provide the foundation of the experimental study. the study’s key findings may be summed up as follows. an indicator of the effectiveness of government expenditure on r&d is the link between inputs and outputs. contrarily, stability-focused economic regulations, a legal framework that protects rights (such as patents), an industrial framework focused towards high-tech industrial sectors, a more beneficial taxation system for global trade, and increased liberalization in the workforce and commodity marketplaces are discovered to favorably influence technological development. additionally, high inflation rates and the proportion of government spending to overall consumption have a detrimental impact on technological development. as per guceri and liu (2019), a nation like the united kingdom launched its first r&d tax motivational program in 2000 in an attempt to resolve its “economic output dilemma”, which refers to the uk private sector’s subpar overall factor productivity achievement in contrast to certain other advanced nations like the united states (us), france, and germany. firms find it simpler to adopt volume-based plans over cumulative plans, which concentrate benefits on the growth in r&d expenditure from a previous time span. volume-based plans focus benefits on the total quantity of acceptable r&d completed in the time frame. companies have been shown to employ stop-and-go tactics in evolutionary plans, potentially leading to inefficiencies (ientile & mairesse, 2009). the research by guellec and van pottelsberghe (2004) examined a group of 16 oecd nations and used, among other tools, an error-correction model (ecm) to calculate the effect of both government and private r&d on total factor productivity (tfp). the model they used presupposed similar coefficients for each of the 16 nations in the investigation. guellec and van pottelsberghe determined that the production elasticity of company (private) r&d in oecd nations from 1980 to 1998 was equal to 13% and grew with time. they discovered that the long-term elasticity of research conducted by governments and universities was significantly higher for public research: roughly 17%. additionally, their analysis emphasized the significance of “foreign” r&d operations for many nations, especially the smaller oecd nations included in their group. countries with smaller populations seemed to be significantly more affected by “cross-border” ripples than bigger ones, which is in line with their greater proportions of global co-publication and co-patenting. but in order to reap such advantages, a lesser nation would eventually need to grow more r&d-intensive and specialized. bottazzi and peri (2007) similarly employed a vecm strategy, their attention was largely directed at how r&d may describe the dynamics of patents as a sign of innovative thinking business, management and economics engineering, 2023, 21(1): 84–105 89 as opposed to productivity (tfp). additionally, they avoided directly addressing how governmental r&d spending affects the economy. instead of r&d spending data, they used r&d employment data. no error-correction strategy was used in khan and luintel’s (2006) article. they elected to use a general output function approach instead, where country-specific intercepts and curves are permitted. they created association terms between a variety of factors, such as foreign direct investment and the percentage of high-tech businesses in trade, and the nation-specific norms of the expertise stock indicators to account for variance in the slopes of the r&d variables per nation. the diversity of associated factors was then linked to the heterogeneity of the country-specific regression coefficients that were the outcome of this experiment. however, using such a strategy makes it impossible to examine prospective responses from production on the left side of the equation regarding information stocks and the many dynamic relationships between output, productivity, and knowledge stocks on the right side. public and private research investment complement one another in that it attracts globally mobile r&d, or what can be considered a domestic r&d “crowding-in” impact. such studies include a variety of factors, including the possibility of excellent collaborators, employment prospects, and the existence of a regional expertise cluster, frequently supported by an infrastructure for knowledge and technology transfer (cassiman & veugelers, 2002). panel data for 15 oecd nations are used by bassanini et al. (2001), who additionally contain independent variables for the intensity of public and private r&d. they discover that private r&d has an advantageous projected effect (0.26) while public r&d has an adverse estimated effect (–0.37). the authors suggest that one explanation for the detrimental consequences of governmental r&d is the crowding out of private r&d activities. additionally, they point out that publicly funded research may be more focused on developing fundamental information than on immediately enhancing productivity. 2. methodology 2.1. data the study investigates the role of macroeconomic forces in shaping the landscape of technological development in upper middle-income countries. the selected countries are well known for their great social diversity, significant degrees of education, advanced national insurance, free healthcare systems, accessibility to technology, and advanced legal frameworks. these mentioned characteristics reflect the transparency and partial administration of these countries. the technological development in upper-middle-income countries would likely depend on several factors, including the nature and scope of technological innovation, the level of investment in research and development, the extent of technology diffusion and adoption, and the impact of technological progress on economic growth and development. additionally, technological development in upper-middle-income countries can be a sign of progress and advancement, as it can lead to increased productivity, improved competitiveness, and enhanced economic growth. it can also contribute to social and environmental development by improving living standards, promoting sustainable development, and addressing societal challenges such as poverty and inequality. 90 s. aden dirir. the potential of macroeconomic factors in shaping the landscape of technological development: ... consequently, macroeconomic policies and conditions can have a significant impact on the level of investment in research and development, the availability of funding for innovation, the extent of technology diffusion and adoption, and the overall environment for technological development in a country. for example, macroeconomic policies such as fiscal and monetary policies can impact the availability of funding for research and development (tang et al., 2022). inflation and interest rates can affect the cost of borrowing and the willingness of businesses to invest in new technologies (chu et al., 2015). government policies such as tax incentives, subsidies, and intellectual property protections can also influence the development and adoption of new technologies (rao, 2016). additionally, macroeconomic conditions such as economic growth, income levels, and the structure of the economy can affect the demand for technology and the ability of firms to innovate and compete (das & mukherjee, 2020). for instance, a growing middle class may create a larger market for new technologies, while a shifting economic structure may present new opportunities for innovation in specific sectors. with that in mind, the percentage of gdp spent on research and development is considered a proxy for technological development. by investing in r&d, firms and governments can generate new knowledge and technologies that can drive innovation and economic growth. r&d activities can lead to the creation of new products and services, improved production processes, and the development of new materials, technologies, and systems that can be used across a range of industries. because r&d is such a critical component of technological development, it is often used as a proxy for measuring the level of technological progress in a country or industry. metrics such as r&d expenditure, patents granted, and scientific publications are commonly used to track changes in the level of technological development over time. what is more, indicators such as gdp per capita, final consumption expenditure, domestic credit to the private sector, national income, and the cpia transparency, accountability, and corruption in the public sector rating are selected as proxies for the macroeconomic indicators. finally, to carry on with the study a vector error correction model is used to assess the cointegration between the variables. the model is used to analyze the long-run dynamics between two or more time series variables it is also important because it allows researchers and analysts to analyze the long-run relationships between multiple variables, while also accounting for the potential presence of short-term deviations from equilibrium. similarly, the granger causality test was applied to determine the nature of causality (unidirectional or bidirectional). the data are extracted from the world bank database, from the period 2000 to 2021. table 1 presents the overall variables used in the study. table 1. summary of the variables (source: author’s computation) notation description source years 20 years from 2000 until 2020countries upper middle income rd research and development expenditure (% of gdp) world bank database especially from world governance indicators and development indicators. tc cpia transparency, accountability, and corruption in the public sector rating (1 = low to 6 = high) gdp the logarithm of the gdp per capita (current us$) fc the logarithm of the final consumption expenditure (current us$) dc domestic credit to the private sector (% of gdp) ic the logarithm of the adjusted net national income (current us$) business, management and economics engineering, 2023, 21(1): 84–105 91 2.2. research process figure 1 gives a general overview of the study’s structure. the flowchart thoroughly looks into the analytic methodologies employed for the study. additionally, it provides a comprehensive breakdown of the methodology utilized to draw logical conclusions throughout the study’s results phase. figure 1. the analytical chart of the study 2.3. model presentation to ascertain the interaction between the variables, the current study utilized the following economic functions: ( )= ∫ , , , ,t t t t t trd tc gdp fc dc ic . (1) 2.4. error correction term in order to evaluate the cointegration between the chosen variables, the research utilizes a vector error correction model. additionally, we will conduct a granger causality test to establish the relationship and direction between the variables. the vecm model may be referred to as a constrained var because cointegration is present in the model. the fundamental presumption is that all indicators should be static within the appropriate direction or scale relative to the hypothesis that has to be met, notably in the first difference (gujarati & porter, 2010). it is possible to segregate the long-run and short-run elements of the data construction process using the vecm approach. because it uses a var (vector autoregressive) method version. consequently, the vecm model may be written as the following equation: 92 s. aden dirir. the potential of macroeconomic factors in shaping the landscape of technological development: ... − − − − = = − − − = ∆ = σ + γ ∆ + η ∆ + ξ ∆ + λ +…+ ∑ ∑ ∑ 1 1 11 1 1 11 ; k k t i t j t ji j k m t m t tm y y x r ect u (2) − − − − = = − − − − − − = = = − − − = ∆ = σ + β ∆ + φ ∆ + η ∆ + ξ ∆ + ϑ ∆ + σ ∆ + +λ + ∑ ∑ ∑ ∑ ∑ ∑ 1 1 11 1 1 1 1 1 1 1 1 11 . k k t i t i j ti j k k k l t l m t m n t nl m n k l t l t to rd rd tc gdp fc dc ic ect u (3) all of the variables that were utilized in the study are listed in the equation above. first, we examine the main variable, which consist of the research and development expenditure (rd), as well as the exogenous variables, which are the following: tc, gdp, fc, dc, and ic. the vecm equation has k–1 which suggest that the lag length is reduced by 1. then we perceive β φ η ξ ϑ ω, , , , ,i j l m n p that denotes for the short-run dynamic coefficients of the model’s adjustment long-run equilibrium. next, there is the −1tect that signifies the error correction term. and finally, ut which is the residuals (impulses). 2.5. granger causality test additionally, it was intended to record how the different variables related to one another causally. the granger causality test, recommended by (granger, 1969), was performed to ascertain whether there is a causal link between the variables. below a more comprehensive explanation of the model is provided: ( )− − = = + + m∑ 11,1 1 12,1 11 ; p t t t tl x a x a y (4) ( )− − = = + +∑ 21,1 1 22,1 11 . p t t t tl y a x a y  (5) as illustrated in equations (4) and (5) is the model order, ( )=,1 , 1, 2ija i j are the coefficients of the model, and mt and ϵt denotes the residuals. ordinary least squares can be used to estimate the coefficients, and f tests can identify the causality relationship between x and y. 2.6. unit root test to ensure the stability and reliability of the data the study performed stationarity tests that consist of the augmented dickey-fuller test (adf) and the phillips-perron test (pp). starting with the augmented dickey-fuller test, it assumes that u is a white noise error term. however, if u is autocorrelated we would need a drift version of the test which allows for higher-order lags. accordingly, the test is augmented using p lags of the original series (dickey & fuller, 1979). furthermore, the phillips-perron test corrects for any serial correlation and heteroskedasticity in the errors by some direct modification to the test statistics (phillips & perron, 1988). below the equations for both tests are presented. business, management and economics engineering, 2023, 21(1): 84–105 93 − − = ∆ = y + m + α + β∆ +∑1 1 1 p t t t t i y y t y u ; (6) ( ) ( )−∆ = y + m + d +*1 ,   0 ,  ,t t t ty y t u u i arma p q∽ . (7) as per equation (6) p is used to augment the past autoregressive lags of the difference term. while m and at denotes the time trend parameter and also the intercept. in equation (7) yy consist of the initial term of the data while the term ut implies the stationarity at level i(0). additionally, m* expresses the intercept while dt denotes the time trend. 3. findings table 2 provides a summary of the descriptive statistics, including the data used in this study and the statistical results of several parametric tests (jarque-bera, skewness, probability, and kurtosis). each variable includes 21 samples of time series data for upper middle-income countries between 2000 and 2021. according to real observations, the distribution is favorably skewed and the percentage of rd spans from 0.68 to 1.99 with a median of 1.22 and kurtosis of 2.05, and a standard deviation of 0.398%. gdp in upper-middle-income nations ranges from an average of 3.72% to a maximum of 4.03%. the maximum rate of economic growth cannot rise by more than 0.261% throughout the years since the standard deviation is less than 1. the results show that most of the variables, with the exception of transparency and domestic credit given to the private sector, have negatively skewed distributions. additionally, the higher standard deviation value in dc illustrates the broad variation of domestic credit provided to the private sector and suggests that in nations with upper-middle incomes, the private sector needs more credit. table 2. descriptive statistics (source: author’s computation) rd tc gdp fc dc ic mean 1.247327 3.376902 3.725607 12.91027 90.14900 12.98800 median 1.223243 3.400350 3.838833 13.01254 82.21595 13.10075 maximum 1.996084 3.681818 4.034850 13.18178 143.9245 13.25876 minimum 0.684406 3.178571 3.292912 12.48955 58.64133 12.54162 std. dev. 0.398344 0.156642 0.261679 0.258046 27.50871 0.267380 skewness 0.309693 0.053814 –0.601716 –0.565526 0.624437 –0.623666 kurtosis 2.058733 1.809916 1.815042 1.744797 2.111440 1.812449 jarque-bera 1.163820 1.308894 2.614674 2.616912 2.153458 2.718938 observations 22 22 22 22 22 22 a correlation matrix is a vital tool for establishing assumptions between variables before they are addressed. as a result, we can notice in table 3 that every variable is closely related to the amount spent on research and development. this shows that rd tends to grow in value together with gdp, national income, final consumption of the government, transparency, and domestic lending to the private sector and vice versa. 94 s. aden dirir. the potential of macroeconomic factors in shaping the landscape of technological development: ... table 3. matrix of correlation (source: author’s computation) variables rd tc gdp fc dc ic rd 1.000 tc 0.949 1.000 gdp 0.911 0.937 1.000 fc 0.911 0.932 0.998 1.000 dc 0.979 0.900 0.825 0.830 1.000 ic 0.902 0.925 0.998 0.999 0.817 1.000 in table 4 stationarity test is performed by using the augmented dickey-fuller test and phillips–perron test. the statistical results are contrasted with the mackinnon critical values. hence, the data is deemed to be non-stationary if the results show that the t statistic count is more than the mackinnon critical value. on the other hand, it is said to be stationary if the value is less than the estimated mackinnon critical value. both tests revealed that all the variables are only stationary at first difference. consequently, we will proceed with the model estimation since the variables displayed the absence of unit roots. table 4. unit root test (source: author’s computation) variables panel a: augmented dickey-fuller test (adf) test at level note at first difference note decision rd 0.946 not stationary –0.010** stationary i (1) tc –0.039 not stationary –2.836* stationary i (1) gdp –1.681 not stationary –2.714* stationary i (1) fc –2.093 not stationary –3.486** stationary i (1) dc 1.388 not stationary –3.031** stationary i (1) ic –2.315 stationary –2.523* stationary i (1) variables panel b: phillips–perron test at level note at first difference note decision rd 3.225 not stationary 0.010*** stationary i (1) tc 0.185 not stationary –2.836** stationary i (1) gdp –1.397 not stationary –2.714* stationary i (1) fc –1.628 not stationary –3.486* stationary i (1) dc 2.658 not stationary –3.031*** stationary i (1) ic –1.825 not stationary –2.523** stationary i (1) note: ***, **, and * denote significance at the 1%, 5%, and 10% levels, respectively. one of the metrics used to assess the var model is the optimal lag to impose. a var system’s autocorrelation issues may be rectified by figuring out the ideal lag, which is helpful for demonstrating how long a variable takes to react to other variables. this test also verifies the accuracy of the information generated by the estimate of the vector error correcting model. the metrics (lr), (aic), (fpe), (sc), and (hq) are evaluated to estimate lag candidates. table 5’s findings show that lag 1 is the ideal latency for the paper. business, management and economics engineering, 2023, 21(1): 84–105 95 table 5. optimal lag selection (source: author’s computation) lag logl lr df p fpe aic hqic sbic 0 126.832 – – – 6.0e-14 –13.4258 –13.384 –13.129 1 239.797 225.93 36 0.000 1.5e-17* –21.9775* –21.691 –19.899* 2 630.604 781.61* 36 0.000 8.5e-34 –61.4005 –60.868* –57.542 3 2987.24 4713.3 36 0.000 – –319.916 –319.179 –314.573 note: * indicates the lag order selected by the criterion. lr: sequential modified lr test statistic (each test at 5% level). fpe: final prediction error. aic: akaike information criterion. sc: schwarz information criterion. hq: hannan–quinn information criterion. the cointegration test aims to determine the cointegration of the non-stationary variables. if there is cointegration, the investigation of the vecm model can be continued. table 6 demonstrates a cointegration with statistical values above the threshold value for the trace statistic test. as a result, we establish the existence of a long-term link between the variables. hereby, we will continue with the error correction model. table 6. cointegration test (source: author’s computation) hypothesized no. of ce(s) eigenvalue trace statistic 0.05 critical value prob.** none * 0.991415 240.1102 95.75366 0.0000 at most 1 * 0.980917 144.9549 69.81889 0.0000 at most 2 * 0.851999 65.77519 47.85613 0.0005 at most 3 0.595735 27.56450 29.79707 0.0886 at most 4 0.305444 9.450798 15.49471 0.3253 at most 5 0.102425 2.161162 3.841465 0.1415 note: * denotes rejection of the hypothesis at the 0.05 level and trace test indicates 2 cointegrating eqn(s) at the 0.05 level. table 7 presents the short-run results among the variables in proportion to the expenditure on r&d. the findings reveal no evidence of cointegration among the variables with r&d. this suggests during the short-run framework economic growth, government final consumption, domestic credit provided to the private sector, national income, and the government transparency do not contribute in the technological development of upper-middle-income countries. nevertheless, we observe a negative cointegration between r&d with gdp, fc, and ic. for instance, a 1% increase in expenditure on research and development decrease the gdp, government final consumption, and national income by 0.51%, 0.56%, and 0.64% respectively. contrary to the short-run outcome which demonstrated no evidence of relationships among the variables. the long-run outcome displays the presence of cointegration among the variables. within this scope, we observe that tc, fc, dc, and ic are negatively affecting the expenditure in r&d. this implies that the transparency situation of upper-middle-income countries, simultaneously the governments’ final consumption, the amount of credit provided to the private sector, and national income are unfavorably affecting the technological development. nevertheless, the economic growth of upper-middle-income countries is revealed to support technological development. this is supported by the 1% increase in gdp which results in a 7.3% increase in expenditure on research and development. the results are displayed in table 8. 96 s. aden dirir. the potential of macroeconomic factors in shaping the landscape of technological development: ... table 7. short-run estimates (source: author’s computation) variables d_rd d_tc d_gdp d_fc d_dc d_ic ect (–1) –0.354 (0.542) 0.315 (0.334) 0.698*** (0.146) 0.548*** (0.146) –64.99 (40.86) 0.638*** (0.136) ∆rd (–1) 0.248 (0.768) –0.169 (0.474) –0.512** (0.206) –0.564*** (0.207) 67.26 (57.94) –0.647*** (0.193) ∆tc (–1) 0.334 (0.520) –0.127 (0.321) 0.107 (0.140) –0.0217 (0.140) –15.41 (39.19) 0.0225 (0.131) ∆gdp (–1) 2.004 (5.945) 1.245 (3.670) –5.765*** (1.596) –5.828*** (1.602) 371.6 (448.2) –6.712*** (1.496) ∆fc (–1) 2.232 (5.839) 0.603 (3.605) 1.807 (1.568) 2.036 (1.574) 88.85 (440.3) 2.477* (1.470) ∆dc (–1) –0.00435 (0.00652) 0.00555 (0.00403) 0.005*** (0.001) 0.00514*** (0.00176) –0.578 (0.492) 0.00506*** (0.00164) ∆ic (–1) –4.488 (4.841) –1.198 (2.988) 4.636*** (1.300) 4.609*** (1.305) –482.1 (365.0) 5.010*** (1.219) constant 0.0518 (0.0759) 0.0152 (0.0468) 0.06*** (0.0204) 0.049** (0.0205) 0.0014 (5.723) 0.061*** (0.0191) observations 20 20 20 20 20 20 r-squared 0.6043 0.5329 0.9137 0.8957 0.5991 0.9155 chi2 18.32339 13.6926 127.0069 103.0298 17.92952 129.9526 p > chi2 0.0189** 0.0901* 0.0000*** 0.0000*** 0.0218** 0.0000*** note: standard errors in parentheses, *** p < 0.01, ** p < 0.05, * p < 0.1. table 8. long-run estimates (source: author’s computation) variables coefficient std.dev t–statistics p–value tc –0.7061*** 0.03826 –18.45 0.000 gdp 7.346*** 0.67695 10.85 0.000 fc –3.2439*** 0.43344 –7.48 0.000 dc –0.0037*** 0.00036 –10.25 0.000 ic –4.6522*** 0.43611 –10.67 0.000 constant 76.378 note: ***, **, and * denote significance at the 1%, 5%, and 10% levels, respectively. the impulse response function (irf) displays how a variable responds to a shock (such as a stress of one standard deviation, a stimulus of one unit, etc.) over a specific period of time. a variable’s impact on another factor cannot be determined using the granger causality or the vd. to ascertain an impact’s route, the irf evaluation is crucial. the horizontal axis depicts time, while the vertical axis indicates the size of a variable’s responses to a shock. the red dotted line substitutes for the confidence bands at 5% significance while the blue line represents the irf. table 9 shows the responses of rd, tc, gdp, fc, dc, and ic to one standard deviation shock of rd. within this scope, we witness that the impulse responses estimate in table 9 shows that the amount of expenditure in research and development in upper middle-income countries would probably decrease as a result of gdp and government business, management and economics engineering, 2023, 21(1): 84–105 97 consumption, domestic credit to the private sector, and national income. on the other hand, it would seem that the transparency and corruption regulations would expand overall technological development. therefore, these areas require additional focus and funding to help boost technological progress during the coming ten years. table 9. impulse response’s function (source: author’s computation) periods rd tc gdp fc dc ic 1 0.068002 0.000000 0.000000 0.000000 0.000000 0.000000 2 0.114941 0.027005 –0.017025 –0.017004 –0.014690 –0.032655 3 0.223534 0.073350 –0.045293 –0.075262 –0.029346 –0.065743 4 0.515151 0.176368 –0.096951 –0.204501 –0.090158 –0.135450 5 1.284428 0.452286 –0.248377 –0.550764 –0.258181 –0.334988 6 3.335901 1.194493 –0.664293 –1.483842 –0.703091 –0.872437 7 8.825649 3.179417 –1.778213 –3.982346 –1.892621 –2.309054 8 23.52164 8.491946 –4.759761 –10.66969 –5.078169 –6.154294 9 62.86333 22.71404 –12.74278 –28.57249 –13.60642 –16.44923 10 168.1844 60.78820 –34.11490 –76.50046 –36.43713 –44.01006 table 10 depicts the variance and the decomposition outcome of all the explanatory variables of the model in combination with the research and development variable for the entire time frame. it can be noticed from the table that the time period selected was fixed to 10 years and divided to 5 years in order to evaluate the shock of each of factors on r&d. the results imply that the government final consumption, which is anticipated to increase from 1.415% in 2022 to 13.844% in 2031, would have a greater variance shock of 13.844% on the technological development. additionally, transparency is expected to impose a greater variance shock of 8.74% on the technological progress of upper middle-income countries in 2031. the remaining factors gdp, domestic credit to the private sector, and national income will only cause a moderate shock on the technological development with variances of 2.75%, 3.14%, and 4.58% respectively. table 10. variance decomposition (source: author’s computation) periods. rd tc gdp fc dc ic 1 100.0000 0.000000 0.000000 0.000000 0.000000 0.000000 2 87.31835 3.570180 1.418962 1.415562 1.056435 5.220512 3 76.46423 6.889924 2.640411 6.714036 1.214542 6.076858 4 71.98452 8.040337 2.536630 10.32167 1.988853 5.127994 5 69.30740 8.450564 2.566586 12.27213 2.651552 4.751768 6 67.88190 8.638975 2.664905 13.21743 2.952155 4.644643 7 67.28506 8.707765 2.718486 13.61327 3.070020 4.605407 8 67.05624 8.731383 2.740665 13.76513 3.116181 4.590397 9 66.96885 8.739889 2.749682 13.82256 3.133831 4.585192 10 66.93566 8.743067 2.753261 13.84422 3.140441 4.583350 98 s. aden dirir. the potential of macroeconomic factors in shaping the landscape of technological development: ... following an examination of the cointegration between the predictor variables (rd) and the regressors (tc, gdp, fc, dc, and ic), the granger causality test will be performed to ascertain the relationship between the variables (granger, 1969). according to the estimation results, we perceive a unidirectional relationship between all the variables with the research and development at 1% and 10% significance levels except for transparency which revealed no prominent causality. for instance, gdp is the driving force behind the level of rd investment, rather than rd investment being the driving force behind gdp growth. this result may be due to a number of factors. for example, it could be that countries with higher gdp have more resources available to invest in research and development, and therefore see greater levels of rd investment. alternatively, it could be that companies are more likely to invest in rd when they expect that economic conditions will be favorable for their products and services, which could lead to higher gdp growth. next, as fiscal expenditure is one of the main ways that governments can support r&d investment in their countries. by providing funding, tax incentives, and other forms of support for r&d, governments can encourage businesses and other organizations to invest in research and development. in turn, this can lead to new technological innovations and improvements in productivity, which can contribute to economic growth. third, the result behind unidirectional causation running from r&d to domestic credit provided to private sector may be due to the fact that r&d investment can lead to the development of new technologies and products, which can create new markets and opportunities for businesses. this can in turn lead to increased demand for credit to finance expansion and investment in these new markets. additionally, r&d investment can lead to improvements in productivity and competitiveness, which can make businesses more creditworthy and therefore more likely to qualify for loans. further, the outcome between national income and r&d is consistent with the idea that r&d investment is a luxury good, meaning that as incomes rise, individuals and businesses are more likely to allocate resources towards r&d investment. additionally, higher national income may provide more resources for governments to invest in r&d through public funding, tax incentives, or other policy measures. hence, we conclude that technological development has a long-run relationship with the gdp, government final consumption, domestic credit provided to the private sector, and national income. see table 11. table 11. granger causality test (source: author’s computation) hypothesis f-statistic prob. decision direction rd granger cause tc 4.472 0.107 dismiss no causality tc granger cause rd 1.350 0.509 dismiss rd granger cause gdp 0.237 0.888 dismiss unidirectional gdp granger cause rd 21.49 0.000*** maintain rd granger cause fc 0.521 0.770 dismiss unidirectional fc granger cause rd 13.292 0.000*** maintain rd granger cause dc 5.683 0.058* maintain unidirectional dc granger cause rd 3.135 0.205 dismiss rd granger cause ic 1.814 0.404 dismiss unidirectional ic granger cause rd 19.85 0.000*** maintain note: ***, **, and * denote significance at the 1%, 5%, and 10% levels, respectively. business, management and economics engineering, 2023, 21(1): 84–105 99 in accordance with table 12, the various diagnostic tests that consist of jarque-berra for normality, and stability conditions are performed. based on the findings we perceive that all the variables are normally distributed across the model. what is more the eigenvalue for stability condition indicates that the vecm imposes 5-unit moduli. table 12. the diagnostic test (source: author’s computation) tests prob verdict residual normality joint test (jarque-berra) 0.311 all the variables are normally distributed. eigenvalue stability condition the vecm specification imposes 5-unit moduli discussion many emerging economies are currently on the forefront of development thanks to technological advancements and transmission that have benefited and still benefit sizable portions of their populations. a number of nations, including china, india, korea, taiwan, singapore, and, to some extent, brazil, have followed their own technological trajectories. even so, given the potential that modern inventions like solar technology, mobile phones, and even the internet could help them revitalize their transition to the 21st century’s technological advancement, the applications of technology continue to stay a utopian fantasy for significant portions of africa, asia, as well as latin america. since ancient times, technology has always remained at the center of progress, moving from one stage to another, from the industrial to the contemporary technological eras. the introduction of new goods, procedures, and services that improve the quality of lifestyle for both wealthy and less wealthy persons is the result of technology’s ongoing innovation. research, innovation, and technology are crucial components of progress since the majority of items utilized in contemporary life are the result of technology, and engineering, which are derived through the resources that are extracted and analyzed in industries. it is necessary to examine the individuals and organizations that innovative culture in a certain field of technology, industry, or research level in order to comprehend how supporting the technology works. actors often comprise people and groups functioning at various sizes, such as national and regional governments, city councils, colleges, for-profit and nonprofit businesses, startups, and technology users. the relationships and conduct of participants in an innovation system are governed by institutions, which are a collection of official and unofficial rules, conventions, decision-making processes, convictions, incentives, and expectations. innovation frameworks are complex and adaptable because of the relationships between individuals and organizations throughout the numerous steps of the development process, which take place in various industries and at various scales. achieving a technology shift can be significantly impacted by institutional policies and macroeconomic conditions. to guarantee that technology contributes as much as possible to sustainable growth, there are four important domains where authorities need to set up legislative, administrative, financial, and policy frameworks. also, adequate regulation of macroeconomics such the national income, wealth generation, adequate fiscal policies, 100 s. aden dirir. the potential of macroeconomic factors in shaping the landscape of technological development: ... economic growth, trade, and financial tools assist in promoting innovation and r&d. accordingly, the goal of this paper was to examine how macroeconomic factors affect the process of technological development, particularly in upper-middle-income countries. within this framework, a vecm approach and granger causality test are performed by using yearly data of economic indicators concerning the upper-middle-income countries for the period 2000 to 2021. within the paper, the expenditure in research and development is considered as a proxy for technological development and five macroeconomic factors are selected as explanatory variables. the findings demonstrated that in the short run there is no notable cointegration among the variables with r&d expenditure. in other words, during the short-run framework economic growth, government final consumption, domestic credit provided to the private sector, national income, and government transparency do not contribute to the technological development of upper-middle-income countries. nevertheless, the study detected that r&d expenditure has negative cointegration with the gdp, government final consumption, and national income. this may be explained by the fact that r&d expenditure is a relatively fixed cost for firms, meaning that they are less likely to increase spending on r&d when the economy is experiencing a downturn. another possibility is that during periods of economic growth, firms may be more likely to invest in physical capital (such as machinery and equipment) than in r&d. next, the negative relationship between r&d expenditure and government final consumption may be explained by the fact that governments often allocate resources towards social programs and infrastructure during periods of economic growth, rather than towards r&d. additionally, during periods of economic contraction, governments may reduce spending on r&d in an effort to cut costs. third, the negative relationship between r&d expenditure and national income may be due to the fact that as national income rises, firms may shift their focus towards other types of investment, such as physical capital, rather than r&d. additionally, higher national income may lead to greater competition for resources, which may make it more difficult for firms to allocate resources towards r&d. further, the long-term result displayed the presence of cointegration between the variables. according to the long-run outcome, we observed that the transparency situation of upper-middle-income countries, simultaneously the governments’ final consumption, the amount of credit provided to the private sector, and national income are unfavorably affecting the technological development. however, it turns out that the development of technology is supported by the economic growth of upper-middle-income nations in the long run. furthermore, the causality test among the variables presented a unidirectional association between all of the variables, with research and development at 1% and 10% significant levels, with the exception of transparency, which showed no clear causation. therefore, we draw the conclusion that the gdp, government final consumption, domestic credit given to the private sector, and national income are all positively correlated with technological development over the long term. the result obtained in the framework of economic growth and r&d is consistent with the study conducted by (bozkurt, 2015). in his study, the author investigated the longrun and short-run relationship between r&d and economic growth in turkey. the study uncovered that a 1% increase in gdp rises 1.6425% the fund allocated to r&d. next, the business, management and economics engineering, 2023, 21(1): 84–105 101 negative result discovered in terms of government transparency and corruption agrees with the result obtained by (alam et al., 2019b). in his research, the author used a gmm model on the institutional environment that influences r&d in emerging markets. he unveiled that the transparency and corruption levels of these countries decreased by 0.0021% the r&d. however, the present paper contradicts the findings obtained by (rehman et al., 2020) in the scope of private credit provided to the domestic sector in proportion to r&d. the author examined the role of the public entities in supporting the r&d. the study showed that in oecd countries the public sector contributes by 0.3% increase in r&d. finally, kirca et al. (2021) examined the causality relationship between the national income per capita and r&d. according to the results of his bootstrap panel causality test, there is a unidirectional causal link between r&d spending and per capita income in hong kong and korea. in contrast, in china and turkey, there is a single direction of causation connecting per capita income to r&d spending. important policy implications that could be extracted from the study are that first, fiscal policy can play an important role in supporting r&d investment. governments can use public funding, tax incentives, and other forms of support to encourage businesses and other organizations to invest in research and development. by doing so, they can help to create a more favorable environment for technological development, which can contribute to economic growth. next, policymakers should focus on increasing investment in r&d, as this can have a significant impact on technological development. this can be achieved through a range of measures, such as tax incentives, grants, and loans. third, policymakers should also focus on promoting innovation, as this can drive technological development. this can be achieved through measures such as patent protection, technology transfer agreements, and research partnerships. fourth, the presence of strong and accountable institutions can facilitate technological development. policymakers should focus on strengthening institutions such as regulatory bodies, intellectual property offices, and science and technology ministries. fifth, access to credit can be a crucial factor in enabling businesses to invest in r&d and develop new technologies. policymakers should focus on enhancing access to credit, especially for small and medium-sized enterprises (smes), as these businesses can play a critical role in driving technological development. lastly, a skilled workforce is critical to technological development. policymakers should focus on promoting education and skills development, especially in science, technology, engineering, and mathematics (stem) fields. overall, policymakers and nations looking to accomplish technological transformation in the age of digitization can benefit from the study’s findings. the research also provides a systematic approach to the macroeconomic aspects that should be used to create an environment that is conducive to and supportive of technological growth. as a limitation of the study, the exclusive focus on only macroeconomic factors excluded the possibility of investigating the role of micro factors that may have an influence on technological development. therefore, it is recommended that enlarging the scope of new research that involves microeconomic factors and governance indicators that affect technological development as well as a particular focus on the r&d of low-income countries needs to be addressed since the current paper only considers upper-middle-income countries. 102 s. aden dirir. the potential of macroeconomic factors in shaping the landscape of technological development: ... conclusions technological development in upper middle-income countries varies widely depending on the specific country and sector in question. generally speaking, upper middle-income countries tend to have more advanced technology and infrastructure than lower-income countries, but may not be as advanced as high-income countries. many upper middleincome countries have made significant progress in developing their technology sectors, particularly in areas such as information technology, biotechnology, and renewable energy. these countries often have well-educated and skilled workforces, strong institutions, and policies that promote innovation and entrepreneurship. however, there are also challenges associated with technological development in upper middle-income countries. these may include issues such as limited access to financing for r&d, weak intellectual property protections, and inadequate infrastructure. in addition, upper middle-income countries may face increasing competition from other countries, particularly emerging economies that are rapidly developing their own technology sectors. within this framework, the current study investigated the potential of macroeconomic factors in shaping the landscape of technological development by mainly focusing on upper-middle-income countries. accordingly, the results uncovered that the transparency situation of upper-middle-income countries, simultaneously the governments’ final consumption, the amount of credit provided to the private sector, and national income are unfavourably affecting the technological development. whereas, the economic growth of these countries is favourably supporting the research and development. overall, while there is significant variation in the state of technological development across upper middle-income countries, many of these countries have made progress in developing their technology sectors and 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(2021). characteristics and evolution of china’s industry–university–research collaboration to promote the sustainable development: based on policy text analysis. sustainability, 13(23), 13105. https://doi.org/10.3390/su132313105 https://doi.org/10.1016/j.cjar.2022.100250 https://doi.org/10.1016/j.jbusres.2019.03.031 https://doi.org/10.1016/j.jbusres.2014.08.002 https://doi.org/10.4236/jssm.2015.86082 https://doi.org/10.1016/j.jwb.2015.09.002 https://doi.org/10.3390/su132313105 bookmark 2 copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. the future of evaluation of lower secondary schools’ management ewa chodakowska faculty of management, bialystok university of technology, ul. wiejska 45a, 15-351 białystok, poland e-mail: e.chodakowska@pb.edu.pl received 09 december 2014; accepted 17 january 2015 abstract. efficiency of educational institutions is a significant issue worldwide. however, there is no commonly accepted way to measure the quality of management of education services. mainly because it too much depends on the national factors: political, economic or legal. moreover, it has been proved that the efficiency of the school’s teaching is affected directly by the environmental factor represented by selected characteristics of students. therefore, taking into account value-added students’ knowledge rather than absolute exam results changes evaluation of the schools’ efficiency. the article contribute in international discussions about future of evaluation the quality of management in educational sector. in the article the model of evaluation polish lower secondary schools’ management taking into account local and environmental context is proposed. on the basis of bialystok’s schools, author shows that the implementation of dea could be useful and provides additional knowledge about the efficiency of management in educational institutions. keywords: evaluation, education institutions, data envelopment analysis (dea), schools, efficiency. jel classification: c44, i21. 1. introduction education is the foundation of civil society and a key condition for economic development. on the other hand, limited financial resources make the appropriate funding allocation extremely crucial. efficiency evaluation of education institutions management is important at all levels: from nursery to university. however, there is no commonly accepted way to measure the quality of management of education services. mainly because it too much depends on the national factors: political, economic or legal. in poland, there are no strong stimulators promoting high quality educational services. the basic education sector in majority belongs to the public finance sector. the competition on the market of educational services is only emerging. rankings of schools b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(1): 112–125 doi:10.3846/bme.2015.256 113 business, management and education, 2015, 13(1): 112–125 of different levels are the evidence of that process. however, ranking of educational institutions in poland are usually constructed on the basis of arbitrarily selected indicators and their weights. the most common measure of the school performance is its students’ test results. in 2005 a group of experts started developing a methodological and statistical background for the polish version of educational value added (eva). evd, while assessing the school on the basis of students’ exam results, take into account the school’s students prior scores on compulsory exam (dolata et al. 2013). however, full assessment should, analyze all the activities of the school and consider other aspects (chodakowska 2014). the article presents the use of data envelopment analysis (dea) in the process of assessing the lower secondary schools’ efficiency in poland. the model of evaluation the polish lower secondary schools’ management taking into account local and environmental context is proposed. an example of evaluation of schools management using dea is done on the basis of schools in bialystok. the article consists of seven parts. after introduction, the concept of dea methodology and mathematical formulations of dea models are presented in brief. the dea applications in the area of education that were carried out in the world are reviewed in the third part. the next part focuses on education system in poland which introduction is necessary to understand the selection of assessment criteria. the proposed methodology and the process of efficiency evaluation of lower secondary schools in bialystok are presented in the fifth part. then the results of efficiency evaluation of bialystok’s using dea method are presented. the article ends with conclusions that contain recommendation for application the dea methodology to evaluate the performance of schools in poland. 2. data envelopment data envelopment analysis data envelopment analysis (dea), developed by (charnes et al. 1978), is a well-established method for evaluating the relative efficiency of a set of comparable entities – decision making units (dmus). dea method is derived from the farrell’s concept of efficiency, who proposed the relative efficiency measurement, indicating the ratio of inputs to outputs in relation to the maximum value achieved in the technological conditions (farrell 1957). fully efficient units create an efficiency frontier. the possibility of improving the efficiency of inefficient units is determined by reference their results to the efficient frontier (fig. 1). determining the efficieny using dea method is to find the optimal technology by solving the adequate linear programming task (cooper et al. 2007). the efficiency ratio is obtained by comparing the optimal, virtual and empirical technology. 114 e. chodakowska. the future of evaluation of lower secondary schools’ management the basic input-oriented radial dea model for measuring performance of (dmuj0) can be written as (cooper et al. 2007): 0 min jθ ; 0 1 n ij j ij j x x = θ ≥ λ∑ , i = 1, 2, …, m; 0 1 n rj j rj j y y = ≤ λ∑ , r = 1, 2, …, s; 0jλ ≥ , j = 1, 2, …, n, where: ( )1 2 3 , , , , ,j j j j mjx x x x x= … − input vector; ( )1 2 3 , , , , ,j j j j sjy y y y y= … − output vector; λj − intensity levels at which the production activities are conducted by the j-th dmus; r = 1, 2, …, s – number of outputs; i = 1, 2, …, m – number of inputs; j = 1, 2, …, n – number of dmus; 0j θ – efficiency ratio taking values in the range <0.1>; 1 for fully effective entities. the larger 0j θ is, the better efficiency dmuj0 has. since dea allows multi input and output variables, it can take into account many different areas of the school performance. in addition, output and input variables can be stated in different units of measurement. because dea is a non-parametric method it places no restriction on functional form of the production relationships between the outputs and inputs. methodological extensions can adjust the dea measure for exogenous environmental variables. fig. 1. production frontier – a case of single output and single input (source: coelli et al. 2002; cooper et al. 2007) 115 business, management and education, 2015, 13(1): 112–125 3. previous research data envelopment analysis (dea) is more and more popular and widely used method for determining the effectiveness of both commercial and non-profit organizations. vast and constantly growing number of publications on the subject is a proof. education is one of the top five areas of application of dea – over five percent of application embedded papers addresses education sector. efficiency study in education focus mainly on higher education sector (liu et al. 2013). the most recent work concerning universities are for example: duh et al. (2012), bayraktar et al. (2013), de witte et al. (2013), nazarko, šaparauskas (2014). however, dea method can be successfully used also to construct a synthetic indicator to measure primry and lower secondary school performance. one of the first studies in this sector was done by (bessent et al. 1982). this analysis was applied to 167 elementary schools in the houston independent school district. due to this work dea provides the management information. in developing an operating plan for the each school, the managers of a school can increase output goals if achievement is below the norm and will be able to request additional input resources. since then, dea and related non-parametric methods continue to be used to derive measures of efficiency (ray 1991; ray et al. 1998; kirjavainen, loikkanen 1998; noulas et al. 1998; ruggiero, vitaliano 1999; bradley et al. 2001; chakraborty et al. 2001; mizala et al. 2002; waldo 2002, 2006; stupnytskyy 2004; portela, camanho 2010; korhonen et al. 2011; haelermans et al. 2012; portela et al. 2012; haelermans, ruggiero 2013; podinovski et al. 2014; essid et al. 2014). the data envelopment analysis proved to be an appropriate method to analyse efficiency of educational institutions. the results of the analysis show that some of the school and teacher characteristics significantly affect school productivity. the schools with similar characteristics and inputs display quite different results, so studying the reasons for these differences will help to design more effective educational policies. the researches indicate that the choice of inputs and outputs plays a key role in assessing the effectiveness of the education units by the dea. furthermore, the results highlight the importance of including environmental variables in both technical and allocative efficiency. 4. education system in poland compulsory education in poland starts at the age of five or six, from the one-year preschool preparation, then from six or seven years of age, from the 1st grade of primary school. after 6 years of primary education, students take an external compulsory competence test and join the general lower secondary school for 3 years and at the end, take another compulsory exam. to ensure that every graduate of primary school finds a places in lower secondary schools, public lower secondary school must first take all the children from its catchment area, regardless of the student’s competence test results. 116 e. chodakowska. the future of evaluation of lower secondary schools’ management primary and lower secondary schools students graduate regardless of the score. graduates from lower secondary school can continue their education in the different types of schools. depending on scores on the exam they can choose: 3-year general upper secondary school, 3-year specialised upper secondary school, 4-year technical upper secondary school or 3-year basic vocational school. in addition to the compulsory education until the age of 18 and the lack of possibilities for the public primary and lower secondary schools to choose students, what determines and limits the performance of schools the most are the responsibilities distributions and funding. the responsibility for the administration of public primary schools as well as lower secondary schools has been delegated to local governments. the school education part of the general subvention from the state budget is the main source of funding for the school education sector in poland. however, subvention transferred from the state budget is insufficient to cover all the needs of schools and local governments have to finance education with additional sources. the largest part in the total expenditure on education are teachers’ salaries with its derivatives. salary standards in public schools is closely linked only to promotion system. current government financing policy does not include the estimation of relative effectiveness of school performance and do not affect the selection of teaching staff in schools. at the same time local governments responsible for the maintenance and financial management in primary and lower secondary schools are not responsible for quality management and pedagogical supervision over schools. it is the responsibility of regional superintendent authorities under the ministry of national education. according to the author, the existing legal solutions and restrictions in no way should be a premise to abandon the comprehensive analysis and evaluation of the effectiveness of individual schools. 5. methods 5.1. the proposed methodology of evaluation of lower secondary schools’ management the depth study of the literature on efficiency and dea method and critical analysis of its applications allows to determine the stages of work necessary to assessment of the effectiveness of lower secondary schools. these included: analysis of the environmental context of secondary schools, the choice of variables, the estimation of efficiency and additional analysis based on selected models of dea (fig. 2). the environmental context in which a lower secondary school operates has a significant impact on the evaluation of the efficiency of its performance. knowledge about identical for all lower secondary schools operating conditions needs to be expanded with a detailed diagnosis of situation of the analysed units. then variables to estimate efficiency can be select. it is worth to check the database which are keept by local govern117 business, management and education, 2015, 13(1): 112–125 ments for the purpose of education management and may be useful for the evaluation of efficiencys of lowers secondary schools. cooperation with departments of education in local governments, regional examination boards and regional superintendent authorities is necessary to properly define the results (outputs) and expenditures (inputs), as well as obtaining quantitative data. the selection of variables to dea model is the most important stage because it determines significantly performance indicators (chodakowska, komuda 2010; cook et al. 2014). author advises to identify the main factors differentiating schools to use a questionnaire survey, correlation matrix and factor analysis. then dea can be implemented to evaluate the lower secondary schools’ management. dea scores should be corrected by regression analysis to take into account environmental context. at the end the additional analysis basis on the dea method can be carried out: sensitivity of the model to data errors or changing with the efficiency during the time. this stage is particularry important because the occrrence of data interference, may distort the classification of the units and may cause misjudgement of their effectiveness (nazarko, urban 2007). it must be emphasized that the implementation of a system to assess the effectiveness by dea would raison d’être only if there is feedback. drawing conclusions from the results obtained is a fundamental issue to implement each system of effectiveness measurement. 5.2. efficiency evaluation of bialystok’s lower secondary schools efficiency evaluation of the polish lower secondary schools’ management was done on the basic of municipal district bialystok. firstly based on the literature review and with cooperation with educators, managers, superintendents from regional educational board in lomza and regional superintendent authority in bialystok was prepared a list of over 100 potential variables describing the schools, their work and the effects they achieve. then questionnaire study was carried out. the questionnaire study was rather an in-depth experts’ interview. a questionnaire was a scenario conversation, the impulse to free discussion with experts – school directors and inspectors, superintendents. however experts do not significantly reduce the number of variables and therefore statistical analysis was implemented. preliminary statistical analysis were subjected to a set of 47 variables. this was a result of the exclusion of insignificant variables according to the respondents, and the fig. 2. scheme of the research process (source: author) 118 e. chodakowska. the future of evaluation of lower secondary schools’ management variables without reliable quantitative data in education databases. correlation matrix, as well as on conclusions derived from questionnaire survey and literature review allow to include in further analysis set of 20 variables. then factor analysis was performed. the 6 factors explain a total of more than 84% of the variance. the first factor had high values of factor loadings for variables that can be classified as “value-add of knowledge”. the second factor represented the type of school: public/non-public. the third factor was strongly correlated with variables that indicate the implementation of inclusive education in school. the fourth factor is the absolute exam results. the fifth factor captures sport performance. the sixth factor can be considered as an “environmental” factor, talking about the economic situation of the families of students and parents’ educational ambitions. two variables were not included in any factor. the percentage of students participating additional classes and the unexcused absence of more then 30% of classes. six dimensions that were obtained following the procedure of factor analysis indicates a high complexity of the problem of description lower secondary schools. confirmed that the practice of creating rankings of schools solely on the basis of exam results does not take into account other relevant aspects of lower secondary schools.to build the dea model author decided to use the value of each factor, and compare the results obtained taking into account the representatives, that is, the variables most strongly correlated with the factors. by testing the six different models (table 1) with different combinations of inputs, outputs and environmental variables and making multiple rankings of bialystok lower secondary schools author attempted to define the relevant criteria of evaluation. comparative analysis of the results led the author to focus on two models: m1 and m2. these models differ in the way of inclusion one variable: a percentage of students with no unexcused absences of more than 30% of classes. the results of evaluation studies can be presented in the various charts and classification (e.g. fig. 3). author in the research used rare in the literature super efficiency dea model (andersen, petersen 1993; guzik 2009). to evaluate the efficiency and take into account the exogenous environmental factors in which the school operates, author used a combination of dea and regression method (cooper et al. 2004). additional analysis based on dea models were done to authenticate the results of research through testing the stability and sensitivity of selected models. among other things, resistance of classification to data errors was checked. it was be done by making efficiency calculations after random distorting the value of inputs by a noise (nazarko, urban 2007). the procedure was repeated several times with different levels of coefficient of variation and different number of inputs modified to determine the acceptable level of errors that does not undermine the stability of the models. author also conducted analysis of efficiency changes over time using malmiquist index. consecutive, annual analysis of graduates is more objective because eliminates the risk of incidental 119 business, management and education, 2015, 13(1): 112–125 table 1. models and variables used in the study (source: created by the author) m1 m2 m3 m4 m5 m6 inputs variable – a percentage of students with special education needs x x x variable – a percentage of students with no unexcused absences of more than 30% of classes x x variable – a percentage of students participating additional classes x x x x factor – an implementation of inclusive education in school x x x outputs variable – an average score obtained from the humanistic part of the exam relative to the average score predicted by eva x x x variable – a number of points obtained in the sport competitions to a number of students x x x factor – a relative change in the exam results x x x factor – a sport performance x x x environmental variable – a number of rooms in a school to a number of students x x x variable – a lower secondary school students average score on the compulsory test at the end of primary school x x x variable – a percentage of students not repeated a year x x x variable – a percentage of students with no unexcused absences of more than 30% of classes x x factor – type of a school: public/non-public x x x factor – absolute exam results x x x factor – “environmental” x x x circumstances that may have caused for not appropriate evaluation of the schools’ efficiency. at the end of the analyses, author proposed using results of the dea method in benchmarking, understood as comparing in order to identify best practices, establish criteria to improve the performance and measure progress. using the features of a dea linear programming problem can be determined the excess in inputs and/or deficiency in outputs. author proposed a concept of implementing analytical dea tools inside information system gathering, processing and reporting data on expenditures and achievement of schools (fig. 4). 120 e. chodakowska. the future of evaluation of lower secondary schools’ management 0% 50% 100% 150% 200% 250% 300% 350% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 e ffi c ie n c y [ % ] schools m1 m2 fig. 4. the concept of the system of continuous evaluation of the efficiency of lower secondary schools in the district of bialystok (source: author) fig. 3. the effectiency of bialystok lower secondary schools by models m1 and m2 (source: author) 121 business, management and education, 2015, 13(1): 112–125 6. results, discussion and limitations considerations carried out on the basis of expert opinions, and above all quantitative research, narrowed the set of varaibles to several indicators with significant measurable impact on school achievement. absolute school exam results are determined mostly by the results achieved on previous stage of learning. thus, it can be say that the social and family factors and individual characteristics of the student, included implicitly in its achievements in primary school, have a considerable impact on the assessment of the efficiency of lower secondary school (fig. 5). most non-public schools select the candidates for students and enroll those with the results above average. public schools have no such opportunity. definitely, assessment of the value-added is a better alternative to the schools performance evaluation then absolute exam scores. assessment of the efficiency changes also, but to a lesser extent, an explicit inclusion of environmental variable: the percentage of students repeating a class. law in poland that result specific financial implications, but also the observed practice of financing education sector clearly show the lack of relationship between expenditure on education and the efficiency of the school. particularly unacceptable is the lack of effect of teacher work in their incentive benefits. it should be noted, that even the current legal regulations do not prohibit local governments to take into account the evaluation of the efficiency of lower secondary schools in the rules for the financing of these schools. one reason for this state of affairs might be just the lack of appropriate tools for assessing performance. according to the author, the future of evaluation schools’ management is to taking into account many different areas of the school performance, incorporate into assessment local and environmental context. application of data envelopment analysis is 50% 60% 70% 80% 90% 100% 60% 70% 80% 90% 100% a v e ra g e e x a m s c o re s in th e l o w e r s e c o n d a ry s c h o o ls [ % ] average test scores in the primary schools [%] public school non-public school fig. 5. average test and exam scores in primary and lower secondary schools [%] (source: author) 122 e. chodakowska. the future of evaluation of lower secondary schools’ management a useful tool to measure school performance. dea uses mathematical programming techniques to evaluate the performance of a given unit. since dea allows multi input and output variables, it can take into account many different areas of the school performance. in addition, output and input variables can be stated in different units of measurement. because dea is a non-parametric method it places no restriction on functional form of the production relationships between the outputs and inputs. dea does not require also specification or knowledge of a priori weights or prices for the outputs and inputs. the concept of evaluation of efficiency by data envelopment analysis is showed in figure 6. 7. conclusions in the article on the basis of bialystok lower secondary schools, the author shows that the implementation of dea could be useful and provides additional knowledge about the effectiveness of educational institutions. through its versatility and flexibility dea method is a useful tool for a multicriteria measuring and benchmarking analysis of lower secondary schools. dea efficiency evaluation can be an imitation of competitiveness that could stimulate the enhancement of education quality. the author is aware that the dea is not universal remedy for the problem of performance evaluation of lower secondary schools. as a deterministic non-parametric method dea has the drawback that there are no conventional tests of significance or methods for drawing inference. moreover efficiency estimates can be affected by sample size (johnes 2014). particular care should be taken in choosing the inputs and outputs of any dea model which should consistent with the production process being evaluated (cook et al. 2014). dea should be considered as an alternative better way – which does not mean with no flaws – of using of exams and other results and allows to assess the contribution of the school to obtain them. the main objection in presented example of using dea is that only quantitative data was used. while, from the point of view of learning outcomes, are also very important subjective information such as the atmosphere in the school, relationships between students and the teacher, etc. fig 6. the concept of evaluation the efficiency in data envelopment analysis (source: author on the basis of kosieradzka, lis 1998) processes environment dea efficiency inputs xi i = 1, 2,..., m outputs yr r = 1, 2,..., s 123 business, management and education, 2015, 13(1): 112–125 dea, allowing to compare the unit’s results with the results of competitors, is a very commonly used method to evaluate the efficiency of educational institutions around the world. in the article a possibility of implementing dea in the process of evaluating the schools in poland was presented. on the basis of bialystok lower secondary schools it was demonstrated that it is worth extending the currently used methods of evaluation of schools of the implementation of the dea method and obtain additional knowledge about the efficiency of each school. reliable assessment of the education operations could help to optimize the economic activities of local governments, taking into account the human and social factor. the information obtained may help to promote the school and identify the most effective ways of development of weaker schools. this knowledge would help making strategic decisions in the sector, aimed at improving the efficiency of schools in terms of the expenditures and the results achieved. according to the author, dea is an interesting and valuable methodological proposal in the comparative evaluation of efficiency of schools. the analysis results can be complementary to the activities of local governments and regional superintendent 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vitaliano, d. f. 1999. assessing the efficiency of public schools using data envelopment analysis and frontier regression, contemporary economic policy 17(3): 321–331. http://dx.doi.org/10.1111/j.1465-7287.1999.tb00685.x stupnytskyy, o. 2004. secondary schools efficiency in the czech republic. prague: center for economic research and graduate education and the economics institute (cerge-ei). waldo, s. 2006. competition and public school efficiency in sweden, working papers 7. lund university, department of economics. waldo, s. 2002. efficiency in public education, working paper 10. lund university, department of economics. ewa chodakowska. phd, graduated from the faculty of computer science and the faculty of management bialystok university of technology. receive her phd degree in management science from the faculty of management at warsaw university. member of the ieee systems, man, and cybernetics society, section of classification and data analysis of polish statistical association and the polish society of podlasie production management. area of research interests: productivity, data analysis, forecasting and data science. this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2021 the author(s). published by vilnius gediminas technical university macroeconomic sensitivity and firm level volatility: the case of new york stock exchange muhammad saqib bashir butt 1*, hasniza mohd. taib2 1school of economic, finance and banking, universiti utara malaysia, 06010, kedah state, malaysia 2department of finance, school of economics, finance and banking, universiti utara malaysia, 06010 uum sintok, kedah, malaysia received 28 january 2021; accepted 04 may 2021 abstract. purpose  – this paper investigates whether the macroeconomic factors affect the firm stock returns volatility differently depending on their location in different sectors. for this purpose, daily financial time-series data for 683 firms located in nine us sectors for the period of 2000 to 2017 are employed. research methodology  – the garch (1,1) model was applied to each firm located in nine us sectors. the four macroeconomic factors, namely, exchange rate, treasury yield spread, oil prices, and market return, are included in both mean and variance equations of garch (1,1) model to estimate the effect. research limitations – this research study is limited to the new york stock exchange; therefore, it can be extended to the other economies as well. further, this study uses one firm feature that is the sectoral location of the firm; it is recommended that some other firm features should be studied to explore the volatility behaviour of firms. in the methodological part, this study does not include the lag effect, since it is recognised in the literature that the investors underreact to public information, so future research can be extended to test the underreaction hypothesis. practical implications – this study has implications for the investors and policymakers. since it has emerged from the findings that some sectors are more sensitive than others to macroeconomic changes, so this knowledge will help the investors to diversify their portfolio and policymakers to maintain macroeconomic discipline. originality/value  – the main contribution of this study is that it undertakes the assumption of heterogeneous nature of firms and conducts a detailed firm level analysis by sector covering a more extended period of time to investigate the impact of four macroeconomic factors, namely, exchange rate, treasury yield spread, oil prices, and market return on firm stock returns, volatility using daily data. further, this study contributes by including all the macroeconomic factors together as an exogenous variable in mean and conditional variance equations of the garch (1,1) model to investigate the effect simultaneously. keywords: macroeconomic sensitivity, firm volatility, heterogeneous nature of firms. jel classification: e44, g10, g11, g15. business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2021 volume 19 issue 2: 198–211 https://doi.org/10.3846/bmee.2021.14310 *corresponding author. e-mail: saqibbasheerbut2020@gmail.com https://orcid.org/0000-0001-7936-3485 https://doi.org/10.3846/bmee.2021.14310 business, management and economics engineering, 2021, 19(2): 198–211 199 introduction this study is motivated by the literature that has recognized the heterogeneous nature of firms, and more precisely, in the case of the us stock market, it is empirically recognized that the firms and the sectors are heterogeneous (sharma & narayan, 2014). since firms belong to different sectors and each sector has its own dynamics and market structure, then it is expected that the changes in the macroeconomic factors will affect the firm stock returns volatility differently depending on their sectoral location. however, the literature on the effect of macroeconomic factors on stock returns volatility is limited to the aggregate market analysis (beltratti & morana, 2006; choudhry et  al., 2016; corradi et  al., 2013) or sectoral level analysis (cai et  al., 2015; chinzara, 2011; nathan & panayiotis, 2006). these two branches of studies considered the macro approach to analyse the significance of macroeconomic factors in determining the stock volatility. this paper is focusing on the micro perspective. further, it has been recognised that the firms are heterogeneous even in a narrowly defined sector (see, ewing et al., 2005; sharma et al., 2014). however, the limitation of previous studies is the assumption of perceiving firms and sectors as homogeneous; whereas a large portion of scientific literature challenges this assumption and asserted that the results are spurious in the presence of heterogenous firms (khan et al., 2016; narayan & sharma, 2011). to avoid spurious outcomes, this study considers the heterogeneous nature of firms located in different sectors and contributes to the existing scientific literature on finance. further, the literature analysis revealed that if the macroeconomic factors affect the first moment (stock returns) it will also affect the second moment (stock volatility) (narayan & sharma, 2014), hence macroeconomic factors can be placed in both the mean and variance equation of garch (1,1) model to simultaneously investigate the effect of macroeconomic factors on stock returns volatility. this approach was first used by davis and kutan (2003) to investigate the impact of inflation and real output on the stock market volatility of 13 industrial and developing countries. as the literature review for this paper showed, no other study has used this approach at the firm level. so, this study follows the same approach and includes the macroeconomic factors, namely, exchange rate, treasury yield spread, oil prices, and market return, in both the mean and variance equations of the garch (1,1) model to simultaneously investigate the effect on stock returns volatility at the firm level. in the context of the new york stock exchange, this study aims at the firm level analysis to investigate the impact of macroeconomic changes on firm stock returns volatility considering the sectorial location of a firm. the arbitrage pricing theory (apt) and the dividend discount model lays the theoretical foundation that provides a channel through which the macroeconomic factors can affect the stock prices (chen et al., 1986; chinzara, 2011). considering this approach, the macroeconomic factors that are included in this study are exchange rate (trade weighted us dollar index), treasury yield spread (10 year treasury bill yield minus 3-month treasury bill yield), oil prices (west texas intermediate) and market return (s&p-500 index). 200 m. s. bashir butt, h. mohd. taib. macroeconomic sensitivity and firm level volatility: the case... 1. literature review the stock market volatility has been given considerable attention in the academic literature as well as in the financial press. several studies established linkages between macroeconomic factors and aggregate stock market volatility (beltratti & morana, 2006; choudhry et  al., 2016; engle et al., 2013). however, firm level volatility in this regard has not been given the due attention since it has been recognized that the firm level volatility and aggregate market volatility exhibit a diverging trend at the same time period (campbell et  al., 2001; sharma et al., 2014; xu & malkiel, 2003). in this regard, most of the studies pointed out the heterogeneous behaviour of firms due to their unique characteristics (chun et al., 2009; comin & mulani, 2006; davis & kahn, 2008), thus the firms may exhibit different volatility behaviour depending on their unique characteristics. in addition, chun, kim, morck, and yeung (2008) pointed out that the firm level volatility will be cancelled out in the aggregate analysis. chou, ho, and ko (2012), pointed out that the firms may have different sensitivities to the macroeconomic changes depending on the firms operations in different sectors. a few studies documented the heterogeneous nature of firms even in a narrowly defined sector (bernard et al., 1995; melitz & redding, 2012; yeaple, 2005) and more precisely in the case of the us stock market (sharma & narayan, 2014). moreover, several studies suggested that the hypotheses testing in the presence of heterogeneous firms may lead to spurious outcomes (khan et  al., 2016; narayan & sharma, 2011; sharma & narayan, 2014; sharma et al., 2014). some other prominent studies raised the question of generalizability of results provided by the aggregate analysis in the presence of heterogeneous firms (chun et al., 2008; ewing et al., 2005). the remaining paper is organized as follows. in section 2, sampling and procedure are explained. section 3 discusses research methodology. in section 4, results are reported and discussed, and in last section conclusions are presented. 2. sample and procedure the data on daily closing stock prices for 683 firms listed on new york stock exchange (nyse) are obtained from thomson one banker for the period 3rd jan 2000 to 30th june 2017. since a large number of firms are listed on nyse, a common filtering approach is used to select the firms. in this regard, this study follows the sharma and narayan (2014) approach for the selection of firms. this is as follows: (1) stock prices must not be less than $5 or more than $500. this ensures avoiding the undue influence of lowand high-priced stocks on the results. (2) listed stock must be traded actively for the entire period. the firms are then categorized into nine us sectors, namely, industrials (ind), consumer discretionary (cd), financials (fin), energy (en), materials (mat), utilities (ut), health care (hc), consumer staples (cs), and information technology (it) based on global industry classification system (gics). the daily data on the macroeconomic factors, namely, exchange rate, oil prices, and treasury yield spread, are obtained from the federal reserve economic data. the daily closing data on s&p-500 index (market return) is collected from yahoo finance. all the times series data are expressed in terms of logarithmic differences (i.e; ln pt  – ln pt-1). table  1 shows the number of firms categorised by sector based on gics classification. business, management and economics engineering, 2021, 19(2): 198–211 201 table 1. firms categorized by sectors firms ind cd fin en mat ut hc cs it total firms number of firms 141 112 101 75 65 55 46 45 43 683 3. research methodology it is widely recognized that the financial time series data exhibit some stylized facts such as volatility clustering, heteroscedasticity or non-normal distribution of returns known as leptokurtosis (brooks, 2002). in the presence of stylized facts in financial time series data, the traditional linear models may lead to spurious results. the garch-model is preferred because it incorporates heteroscedasticity and leptokurtosis (elyasiani & mansur, 2003; mandimika & chinzara, 2012; zakoian, 1994). to investigate the volatility dynamics in the time series data various studies used the garch (1,1) model (cai et  al., 2015; chinzara, 2011; elyasiani et  al., 2011). further, the garch (1,1) model is considered to be sufficient to capture the volatility dynamics in the financial time series data and overruled the use of high order garch models in the academic literature (chinzara, 2011). most specifically in the case of daily data, the standard garch (1,1) model is preferred because it outperforms the other advanced garch models in capturing the volatility dynamics (sharma & vipul, 2015). considering this study, garch (1,1) model is the most appropriate to investigate the impact of macroeconomic factors on firm stock returns volatility with respect to the sectoral location of firm using daily data. this study applied the garch (1,1) model (bollerslev, 1986; engle, 1982) to investigate the impact of macroeconomic factors on firm stock returns volatility located in nine us sectors. the macroeconomic factors, namely, exchange rate, treasury yield spread, oil prices, and market return, together are included in the mean and variance equation of the garch (1,1) model as exogenous variables to estimate simultaneously the effect of these variables on the firm volatility following the davis and kutan (2003) approach. the garch (1,1) model will take the following form. 0 1 2 3 4 , t t t t m t tr ex tys op r=α + α ∆ + α ∆ + α ∆ + α + ε ; (1) 2 0 1 1 2 1 3 4 5 6 , t t t t t t m th h er tys op r− −=l + l ε + l + l ∆ + l ∆ + l ∆ + l (2) 0 1 2 0, 1l > l + l < , ( ) ~ 0,t tn hµ . eq. (1) is the mean equation, and eq. (2) is the variance equation. where as: rt is the return on firm stock on time t; tex∆ is the change in the exchange rate from the previous day; top∆ is the change in oil prices from the previous day; ttys∆ is change in treasury yield spread from the previous day; ,m tr is a market return at time t; l0 is a constant; variance term lt denotes the conditional stock returns volatility. l1 coefficient is the arch term and l2 coefficient is the garch term. to meet stationary conditions in the 202 m. s. bashir butt, h. mohd. taib. macroeconomic sensitivity and firm level volatility: the case... garch (1,1) model it is necessary for l1 + l2 to be less than 1. otherwise, violation of this assumption leads to highly undesirable properties, such as the convergence of the conditional variance not occurring (brooks, 2002). to justify the need for garch (1,1) model, it is important to check the time series assumptions. the investigation process takes the following steps. first, descriptive statistics including jarque-bera statistics, skewness and kurtosis were used to check the normality of each financial time series data. second, the augmented dicky fuller (adf) test and the philip parron (pp) test were used to check the stationarity of the time series data. after satisfying the stationarity conditions, the third step is to test the appropriate mean equation. in the fourth step, the ljung and box (1978) statistics for both residuals lb(12) and for squared residuals lb2(12) are used to determine the autocorrelation, and, volatility clustering and heteroscedasticity, respectively. this justifies the need to use the garch (1,1) model (mandimika & chinzara, 2012). moreover, arch-lm test was also used to check the heteroscedasticity in the residuals. after satisfying the conditions in the fifth step, the garch (1,1) model was tested for all individual firms. in the garch (1,1) estimation the equation (1) represents the mean equation and equation (2) represents the variance equation with estimations for 683 firms. since the focus of the study is the firm stock returns volatility, the results obtained from the variance equation (eq. (2)) for all individual firms were then aggregated in their respective sectors. these results are reported and discussed by sector in the following section. 4. results in this section, the results obtained from eq. (2) for each of 683 firms are aggregated in their respective sectors. the effect of each macroeconomic factor (exchange rate, treasury yield spread, oil prices and market return) on firm stock returns volatility by sector are reported and discussed separately. 4.1. exchange rate and firm volatility the results reported in table  2 are related to the impact of exchange rate on firm stock returns volatility with respect to the sectorial location of the firm are reported. the results are summarized as follows. first, in general, the results indicated that the largest percentage of firms located in nine sectors, exchange rate changes have a significant positive effect on firm stock returns volatility , compared to the corresponding negative significant effect on firm stock returns volatility. since this study uses a trade-weighted index as a proxy to measure the value of the us currency, hence an increase in the index means the appreciation of the us dollar. thus, it implies that the appreciation in the us dollar is affecting firm stock returns volatility across nine us sectors more than the depreciation in the us dollar. this might be due to two reasons. first, the majority of firms in the us are exporting firms. an increase in the exchange rate may adversely affect the cost and profitability of exporting firms. consequently, this may lead to a decrease in the competitiveness of these firms in the international trade. second, cheaper imports may also affect the local industry. business, management and economics engineering, 2021, 19(2): 198–211 203 in this scenario, it is difficult for the local industry to compete with cheap foreign goods (aggarwal, 1981; agrawal, 2010). moreover, “organization for economic cooperation and development economic surveys: united states” (organization for economic cooperation and development, 2016) indicated that the weakening global demand and sharp exchange rate appreciation since 2014 are creating a greater risk for the us firms and most particularly for the firms involved in the international trade. theoretically, the results are in line with the flow-oriented approach (dornbusch & fischer, 1980). according to this approach, the exchange rate appreciation increases the cost of export and affects the competitiveness of firms internationally. this may decline the profits and have an adverse effect on the stock prices. second, the results indicated that the largest positive and statistically significant effect of exchange rate on firm stock returns volatility is observed in the firms belonging to the utilities sector, and the lowest percentage is observed in consumer discretionary sector firms. in the utilities sector it is around 72.73 per cent, and in the consumer discretionary sector it is around 35.71 per cent of firms experiencing an increase in firm volatility due to a significant positive change in the exchange rate. the percentage of firms in other sectors that experienced a significant positive effect of exchange rate on firm stock returns volatility is around 68 per cent of firms in the energy sector, 64.44 per cent of firms in the consumer staples, 57.44 per cent in the industrial sector, 55.38 per cent of firms in the materials, 44.55 per cent in the financial sector, 43.48 per cent of firms in health care, and 39.53 per cent of firms in the information technology sector. in summary, the results unfold three new findings. first, it is found that the largest percentage of firms across all sector experienced a significant positive effect of exchange rate on firm stock returns volatility. second, the significant positive effect of exchange rate on firm table 2. garch (1,1) model results – exchange rate and firm stock returns volatility (sectoral location of the firm) sectors sig. (+) sig. (–) insig. (+) insig. (–) en 51(68%) 5(6.67%) 11(14.67%) 8(10.67%) mat 36(55.38%) 7(10.77%) 14(21.54%) 8(12.31%) ind 81(57.44%) 26(18.44%) 22(15.60%) 12(8.51%) fin 45(44.55%) 17(16.83%) 28(27.72%) 11(10.89%) cd 40(35.71%) 30(26.79%) 23(20.54%) 19(16.96%) cs 29(64.44%) 6(13.33%) 6(13.33%) 4(8.89%) hc 20(43.48%) 14(30.43%) 6(13.04%) 6(13.04%) it 17(39.53%) 13(30.24%) 4(9.30%) 9(20.93%) ut 40(72.73%) 1(1.82%) 12(21.82%) 2(3.64%) note: sig. (+) represents the positive and statistically significant coefficient for the number of firms and percentage of firms in their respective sector. sig. (–) represents the negative and statistically significant coefficient for the number of firms and percentage of firms in their respective sector. insig. (+) and insig. (–) represents the number and percentage of statistically insignificant firms in their respective sectors. the number of firms is divided by the total number of firms in each sector to convert into percentages and is reported in parenthesis. all results are reported at 5 per cent significance level. 204 m. s. bashir butt, h. mohd. taib. macroeconomic sensitivity and firm level volatility: the case... stock returns volatility varies with respect to the sectorial location of firms. third, the utilities sector appeared to be highly sensitive against the exchange rate appreciation, while the consumer discretionary sector emerged as the least sensitive to the exchange rate appreciation. these findings are helpful for the policymakers to devise effective fiscal and monetary policy considering the varying impact of exchange rate changes on firm stock returns volatility with respect to the sectors. further, it is also important for the regulators to understand the relationship between exchange rate changes and firm stock returns volatility at the sectorial level to foresee future crisis (kumar, 2013). it is also useful for the portfolio managers to improve their risk management strategies. these findings also carry significance for the multinational companies and exporters because these companies are involved in foreign sales and international trade, respectively. 4.2. treasury yield spread and firm volatility the results related to the impact of changes in treasury yield spread on firm stock return volatility belonging to nine us sectors are reported in table 3. the overall results indicated that the treasury yield spread is affecting firms stock returns volatility differently depending on the sectoral location of the firm, both in terms of magnitude and sign. results are summarized as follows. first, it is identified for the largest percentage of firms in three sectors: financial, consumer discretionary, and energy sectors; the effect of treasury yield spread on firm stock return volatility is significant negative, which is more than the significant positive effect. the percentage of firms belonging to the financials, the consumer discretionary, and the energy sectors that experienced a negative and statistically significant relationship are around 39.60 per cent, 32.14 per cent and 30.67 per cent, table 3. garch (1,1) model results – treasury yield spread and firm stock returns volatility (sectoral location of the firm) sectors sig. (+) sig. (–) insig. .(+) insig. (–) en 15(20%) 23(30.67%) 15(20%) 22(29.33%) mat 21(32.31%%) 8(12.31%) 24(36.92%) 12(18.46%) ind 46(32.62%) 33(23.4%) 23(16.31%) 39(27.66%) fin 22(21.78%) 40(39.6%) 17(16.83%) 22(21.78%) cd 26(23.21%) 36(32.14%) 29(25.89%) 21(18.75%) cs 21 (46.67%) 12(26.67%) 4 (8.89%) 8(17.78%) hc 22(47.83%) 6(13.04%) 10(21.74%) 8(17.39%) it 16(37.21%) 12(27.91%) 6(13.95%) 9(20.93%) ut 23(41.82%) 3(5.45%) 21(38.18%) 8(14.55%) note: sig. (+) represents the positive and statistically significant coefficient for the number of firms and percentage of firms in their respective sector. sig. (–) represents the negative and statistically significant coefficient for the number of firms and percentage of firms in their respective sector. insig. (+) and insig. (–) represents the number and percentage of statistically insignificant firms in their respective sectors. the number of firms is divided by the total number of firms in each sector to convert into percentages and is reported in parenthesis. all results are reported at 5 per cent significance level. business, management and economics engineering, 2021, 19(2): 198–211 205 respectively. the negative relationship described by chen et al. (1986) asserts that when the long-term interest rates decline, the return on any form of capital declines as well. thus, such stocks contain negative risk premier. moreover, the term structure is also considered as a good predictor of an economy and more specifically, in the us economy (li, 2014). these results can also be explained in the light of expectation theory of interest rate that postulates the term structure contains information about the future interest rates and inflation which in turn explains the expectation about the future economic condition (li, 2014). when the long-term interest rates are declining or lower than the short-term interest rate the investors are expecting a recession in the economy and are more uncertain about the future of the economy. this uncertainty is reflected in the cash flows of the firms as well as in the stocks (chen et al., 2013). further, schwert (1989) concludes that stock volatility rises during a recession. thus, the firms located in these three sectors are more sensitive to the expectations about the recession in the economy. second, the largest percentage of firms belonging to health care, consumer staples, utilities and information technology sectors experienced a significant positive effect of treasury yield spread on firm stock returns volatility more than the corresponding significant negative effect. the percentage of firms that experienced a positive and statistically significant effect in health care sector is around 47.83 per cent, in consumer staples 46.67 per cent, in the utilities sector 41.82 per cent, in information technology 37.21 per cent, in materials 32.31 per cent, and in industrials sector 32.62 per cent. the positive relationship between treasury yield spread and stock returns volatility implies that the investors are expecting interest rates and inflation to increase in the economy that, in turn, increases the expectations on the yield of the stock. the additional compensation required by the investors will increase the discount rate and ultimately the stock prices go down. this fact is supported by many researchers such as shiller (1980 , 1981); christie (1982); mankiw et al. (1985), and li (2014). third, it is noted that the largest percentage of firms belonging to the materials sector and utility sector experienced an insignificant relationship between the treasury yield spread and firm stock return volatility. in summary, there is an ample evidence that the effect of treasury yield spread on firm volatility varies both in terms of magnitude and sign depending on the sectoral location of firm. 4.3. oil prices and firm volatility the results related to the impact of changes in oil prices on firm stock return volatility located in nine us sectors are reported in table 4. the main finding supports the expected connotation that the impact of oil prices on firm volatility varies with respect to the sectoral location. the summary of the results is as follows. first, it is noted that for most firms across all sectors, the oil prices have a negative significant effect on firm stock returns volatility more than the positive significant effect. further, the negative significant effect differs in terms of magnitude across all sectors. the significant negative effect of oil prices ranges from 49.09 per cent of firms in the utilities sector to 86.67 per cent of firms in the energy sector. the utilities sector appeared to be the most sensitive and the utilities sector appeared to be the least sensitive against the negative oil price changes. 206 m. s. bashir butt, h. mohd. taib. macroeconomic sensitivity and firm level volatility: the case... second, the largest percentage of firms in other sectors that experienced a negative significant relationship are information technology (74 per cent), consumer staples (71 per cent), materials (68 per cent), industrials (66 per cent), financials (66 per cent), consumer discretionary (64 per cent) firms, health care (54 per cent) firms, and utilities (49 per cent). these results confirmed the variation in terms of magnitude. the overall results indicated that the oil prices are affecting stock returns volatility of firms belonging to different sectors differently in terms of magnitude. this heterogeneous response of firms across different sectors is supported by many researchers; though, their focus was on discovering the relationship between oil prices and stock returns. some valuable researches in this regard are narayan and sharma (2011) and (tsai, 2015). 4.4. market return and stock return volatility table 5 reported the results regarding the effect of market return on firm stock returns volatility belonging to nine sectors. the results indicated that market return has a significant negative effect on firm volatility for the largest percentage of firms in all sectors. further, there is ample evidence that the effect of market returns on firm volatility varies in terms of magnitude with respect to the sectoral location of the firm. so, all sectors are not equally sensitive to the shock in market returns. the summary of the specific results is as follows. first, the significant negative effect of market return on firm stock returns volatility is the largest for the information technology sector firms (58.14 per cent) and the lowest for the utilities sector firms (34.55 per cent). in that case information technology sector is the most sensitive and the utilities sector is the least sensitive among all other sectors. second, the firms in the other sectors that experienced table 4. garch (1,1) model results – oil prices and firm stock returns volatility (sectoral location of the firm) sectors sig. (+) sig. (–) insig. (+) insig. (–) en 1 (1.33%) 65(86.67%) 2(2.67%) 7(9.33%) mat 6(9.23%) 44(67.69%) 9(13.85%) 6(9.23%) ind 21(14.89%) 93(65.96%) 9(6.38%) 18(12.77%) fin 12(11.88%) 67(66.34%) 07(6.93%) 15(14.85%) cd 17(15.18%) 72(64.29%) 9(8.04%) 14(12.5%) cs 05(11.11%) 32(71.11%) 05(11.11%) 03(6.67%) hc 12(26.09%) 25(54.35%) 02(4.35%) 07(15.22%) it 03(6.98%) 32(74.42%) 03(6.98%) 05(11.63%) ut 05(9.09%) 27 (49.09%) 05(9.09%) 18(32.73%) note: sig. (+) represents the positive and statistically significant coefficient for the number of firms and percentage of firms in their respective sector. sig. (–) represents the negative and statistically significant coefficient for the number of firms and percentage of firms in their respective sector. insig. (+) and insig. (–) represents the number and percentage of statistically insignificant firms in their respective sectors. the number of firms is divided by the total number of firms in each sector to convert into percentages and is reported in parenthesis. all results are reported at 5 per cent significance level. business, management and economics engineering, 2021, 19(2): 198–211 207 a largest negative significant effect of market return on firm stock returns volatility are energy sector (56 per cent), consumer staples (56 per cent) and industrials (52 per cent). third, the other sectors that are less affected by the negative and statistically significant effect of market return are materials (48 per cent), consumer discretionary (45 per cent), and financials (41 per cent). the overall results indicated that the largest percentage of firms belonging to nine us sectors are more sensitive to the negative shock in the market return than to the positive shock. the stock market provides information about the economy and is reflected in the stock prices (mwang & mwit, 2015). the negative return in the stock market is reflecting the bad news about the economy that may affect the firm’s future cash flows or the discount rate because of the increased risk premium. moreover, the stock market and the firms share economic ties because the stock market return is a function of aggregate firm returns (sharma et al., 2014). this might be a fair reason for most of the firms to follow the market and the firm stock prices fall. this fall in stock prices increases the firm stock returns volatility (black, 1976; cheung & ng, 1992; christie, 1982). however, the response of firms is different in terms of magnitude because of their location in different sectors. so, the results provided sufficient support that the market return has a heterogeneous effect on firm stock returns volatility with respect to the sectoral location of the firm. conclusions the main contribution of this study is that it undertakes a detailed firm level analysis by sector for a longer period of time to investigate the impact of four macroeconomic factors, namely, exchange rate, treasury yield spread, oil prices, and market return on stock returns table  5. garch (1,1) model results  – market return and firm stock returns volatility (sectoral location of the firm) sectors sig. (+) sig. (–) insig. (+) insig. (–) en 08(10.67%) 42(56%) 09(12%) 16(21.33%) mat 13(20 %) 31(47.69%) 05(7.70%) 16(24.62%) ind 22(15.60%) 73(51.77%) 23(16.31%) 23(16.31%) fin 19(18.81%) 41(40.59%) 21(20.79%) 20(19.80%) cd 24(21.43%) 50(44.64%) 19(16.96%) 19(16.96%) cs 09(20%) 25(55.56%) 03(6.67%) 08(17.78%) hc 10(21.74%) 23(50%) 3(6.52%) 10(21.74%) it 09(20.93%) 25(58.14%) 03(6.98%) 06(13.95%) ut 06(10.91%) 19(34.55%) 10(18.18%) 20(36.36%) note: sig. (+) represents the positive and statistically significant coefficient for the number of firms and percentage of firms in their respective sector. sig. (–) represents the negative and statistically significant coefficient for the number of firms and percentage of firms in their respective sector. insig. (+) and insig. (–) represents the number and percentage of statistically insignificant firms in their respective sectors. the number of firms is divided by the total number of firms in each sector to convert into percentages and is reported in parenthesis. all results are reported at 5 per cent significance level. 208 m. s. bashir butt, h. mohd. taib. macroeconomic sensitivity and firm level volatility: the case... volatility. further, this study contributes by including all the macroeconomic factors together as an exogenous variable in mean and conditional variance equations of the garch (1,1) model. the empirical analysis is based on 683 firms listed on nyse and located in nine us sectors. the overall results indicated that the given macroeconomic factors affect firm stock returns volatility differently depending on the sectoral location of a firm, confirming the expectation of this study. in summary, the main contributing findings of this study are as follows. first, for the majority of firms belonging to nine sectors, a change in the exchange rate has a significant positive effect on the firm stock returns volatility but differs in terms of magnitude. further, the utilities sector firms appear to be the most sensitive and the consumer discretionary sector firms are the least sensitive to the exchange rate appreciation. second, for the largest percentage of firms located in three sectors  – financial, consumer discretionary and energy  – the effect of treasury yield spread on firm stock return volatility is significant negative. on the contrary, a large percentage of firms belonging to health care, consumer staples, utilities and information technology sectors experienced a significant positive effect of treasury yield spread on firm stock returns volatility. third, for all sectors, the oil prices have a significant negative effect on firm volatility. further, firms in the energy sector are highly sensitive and firms in the utilities sector are the least sensitive to the negative oil price changes. fourth, market return has a significant negative effect on firm stock returns volatility for the largest percentage of firms in all sectors. in this case, the negative significant effect of market return on firm stock returns volatility is the largest for information technology sector firms and the lowest for utilities sector firms. thus, the findings of this study revealed that the macroeconomic factors have a significant heterogenous effect on firm stock returns volatility located in nine us sectors. the outcomes of this study have implications for the policymakers and investors. it has emerged from the findings that exchange rate, oil prices, treasury yield spread, and market return significantly affect the firm stock returns volatility, so it is important for the policy makers to closely monitor these macroeconomic factors. since the world financial markets are well integrated due to globalisation and technological advancement, an increase in volatility may spill over form one sector to the other sectors and from one financial market to the other financial markets in the world, as was witnessed in the us financial crisis of 2007-08. further, an increase in volatility after a certain limit may disrupt the smooth functioning of the financial market and may result in capital flight. so, to maintain a macroeconomic discipline in the country and to avoid the financial crisis, the policymakers must have a clear understanding of the factors that can increase the volatility in the sectors that may lead to increase the volatility in the aggregate market. boni and womack (2006) pointed out that the analysts in the us stock market evaluate the stocks by taking industry perspective and making recommendations to the investors based on their location in different industries. since the findings of this study indicated that the firms located in different sectors exhibit a different level of sensitivity against the macroeconomic changes, such a knowledge will be beneficial for the investors to diversify their investment considering the volatility behaviour of firms against the macroeconomic changes located in different sectors. further, for the researchers it is important to consider the heterogenous nature of firms while studying the financial markets to avoid spurious results. business, management and economics engineering, 2021, 19(2): 198–211 209 this research study is limited to the new york stock exchange, so it can be extended to the other economies as well. further, this study uses one firm feature that is sectoral location of the firm, it is recommended that some other firm features is studied to explore the volatility behaviour of firms. in the methodological part this study does not include the lag effect, since it is recognized in the literature that the investors underreact to public information, so future research can be extended to test the underreaction hypothesis. references aggarwal, r. 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(1994). threshold heteroskedastic models. journal of economic dynamics and control, 18(5), 931–955. https://doi.org/10.1016/0165-1889(94)90039-6 copyright © 2016 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. uncertainty in the sphere of the industry 4.0 – potential areas to research andrzej magruk management faculty, bialystok university of technology, ul. wiejska 45 a, 15–351 bialystok, poland e-mail: a.magruk@pb.edu.pl received 01 february 2016; accepted 07 november 2016 abstract. the world stands on the threshold of a new age of technology, which will launch a fourth industrial revolution (industry 4.0). according to this idea, web-based network will support smart factories at every stage of the work on the product, from design through to servicing and recycling. it is a vision of a world in which the real environment connects to the digital one using follows driving forces: internet of things, cloud computing, big data, cyber-physical systems, and others. the industry 4.0 concept is based on developing smart chains preparation based on communicating with each other means of production, products, components, plants, humans. established in germany, the concept of industry 4.0, is the brainchild – its beginning reaches 2011. it is therefore fraught with high level of uncertainty in many aspects (economic, social, technological, legal, etc.). the main aim of this article is to analyze different dimensions of uncertainty regarding the industry 4.0, both in terms of opportunities and threats. due to the freshness of the topic and the great complexity of the industry 4.0 phenomenon, the main aim of the article is to identify potential areas requiring the necessary research in order minimizing negative – today uncertain – effects occurring in both the design concept industry 4.0 as well as during its functioning. keywords: industry 4.0, uncertainty, intenet of things, cyber-physical systems. jel classification: d24, d81, l85, o14. 1. introduction the industry 4.0 concept (founded in germany) is based on developing smart chains built on communicating with each other means of production, products, components, plants, humans. according to this idea, web-based network will support smart factories at every stage of the work on the product, from design through to servicing and recycling (maślanek 2014). the industry 4.0 is one of the effects of transformation of era of mathematization to the era of informatization of all sciences – medical, energy, media, legal, automotive, b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(2): 275–291 doi:10.3846/bme.2016.332 mailto:a.magruk@pb.edu.pl doi:10.3846/bme.2016.332 276 a. magruk. uncertainty in the sphere of the industry 4.0 – potential areas to research biotechnology, computational linguistics, neuroinformatics and finally manufacturing (wahlster 2014). according to a fraunhofer institute study on the basis of the analysis of german companies in the following industries: engineering and producing electrical components and automation, in the period of 2014–2025 should expect an increase in gross profits by approx. 30% (szulewski 2016). the beginning of all industrial revolutions took place in the industry. it caused a huge change in society. in the current industrial revolution is the opposite. the beginning of the transformation process is not driven directly by the industry itself. as the main driving force should be considered the invention of social networks and intelligent devices used by workers of manufacturing companies. the development of this interconnections drives today development of production sector (schuh et al. 2014). many of germany’s competitors have recognized the trend for using the internet of things in the manufacturing environment and are promoting it through a range of institutional and financial measures. germany is not the only country that identified the potential use of the internet of things in the production and its impact on industrial processes as strategic challenges. the terms “smart production”, “smart manufacturing” or “smart factory” are used in europe, china and the usa to refer specifically to digital networking of production to create smart manufacturing systems (kagermann et al. 2013). chinese version of “industry 4.0” is known as “made in china 2025” plan (zhang et al. 2014). universality in industrial applications: internet of things, internet of services, internet of media, big data, communications inter-machines and cyber-physical systems using interoperability, decentralization and full virtualization certainly will affect different course of many phenomena than is apparent from past experience. the direction, the strength and intensity of these changes are increasingly becoming unpredictable. in addition, the present pace of economic, political, social, environmental and technical changes faced by almost every organization in the world is unprecedented. this makes economic space is becoming more and more undetermined. this vague situation determines the appearance of uncertainty (wawiernia 2013). uncertainty is a condition in which the observer of any phenomena in a given place and time, is not being able, with complete certainty, to define the further course of this phenomenon (zawiła-niedzwiecki 2007). the main aim of this article is to analyze the various elements that affect the uncertainty of industry 4.0, both in terms of opportunities and threats. due to the freshness of the topic and the great complexity of the phenomenon of industry 4.0, the main effect of the article is to identify potential areas requiring the necessary research to minimize the negative effects occurring in the industry 4.0 concept. 277 business, management and education, 2016, 14(2): 275–291 2. industry 4.0 – analysis of the phenomenon revolution 4.0 is the transformation of industry based on centralized production to decentralized production based on cyber-physical systems (maślanek 2014). it also products transform from uniform to customization and users transform from partially to fully participating in production (zhang et al. 2014). industry 4.0 can also be described as the digitization of material production, driven by cyber-physical systems in the internet of things (iot) environment, which consists of two main components in the form of internet of services (ios) and internet of media (iom). the implementation of this concept requires proper cooperation between the parties of tools, connecting and merging of previously separated systems, the identification of new targets and management of new functions (see fig. 1). the heart of the industry 4.0 will become the factory 4.0, which will be characterized by supply products even in individual pieces, not accompanied by increasing costs. in this way, mass production will be combined with personalization at the level of the production line. it has been impossible so far to implement (kagermann et al. 2013). in addition, smart factory should be characterized by (ślązak 2015; stein 2016): – use available on the market innovative solutions, eg. in order to identify in realtime people, equipment, works and goods; – efficient communication engineer-machine, engineer-m2m, – the ability to adapt to changing conditions, fig. 1. the main subsystems of industry 4.0 based on the architecture of the internet of things (personal design on the basis of schoenthaler 2015; lg snc 2015) 278 a. magruk. uncertainty in the sphere of the industry 4.0 – potential areas to research – resource efficiency and ergonomics, – the possibility of integration of customers and business partners at various levels, – link the extended supply chain and distribution to create dynamic workflows, – high level of security against cyber sabotage. the development of industry 4.0 affects the development of countries in specific areas of its economic activity (see table 1), cyclicality of economic development and emergence periods of crises in which there is an increased need to take risks and seek new technological solutions to ensure growth of enterprises productivity (badurek 2014). table 1. industry 4.0 data spotlights, top and bottom positions of the 15 eu countries with highest gdp in 2012 (dujin et al. 2014) key determinants of new industrial landscape (see fig. 2) (dujin et al. 2014) are the following: 1. cyber-physical systems and marketplace in industry 4.0 – todays it systems will be far more connected to all sub-systems, processes, internal and external objects, the supplier and customer networks; 2. smart robots and machines in industry 4.0 – robots and humans will work hand in hand, so to speak, on interlinking tasks and using smart sensored human-machine interfaces; 3. big data – innovative methods to handle big data and to tap the potential of cloud computing will create new ways to leverage information; 4. new quality of connectivity – machines, workpieces, systems and human beings will constantly exchange digital information via internet protocol; 5. energy efficiency and decentralization – climate change and scarcity of resources are megatrends that will affect all industry 4.0 players. these megatrends leverage energy decentralization for plants, triggering the need for the use of carbon-neutral technologies in manufacturing; 6. virtual industrialization – industry 4.0 will use virtual plants and products to prepare the physical production. every proces is first simulated and verified virtually the main changes for companies connected to industry 4.0 (dujin et al. 2014) refer to: 1. final results – mass customization based on local production. industry 4.0 will be characterized by greater flexibility in the production process. it will be possible to create products for-fitted to the needs of a single client at a relatively low marginal cost. physical production will be able to be done locally, without having to use the services of subcontractors, for example through the use of 3d printers. 279 business, management and education, 2016, 14(2): 275–291 2. process – production based on the web and dynamic clusters. the companies will operate in scattered locations, confessing the idea of “industrial democracy”, lowering the barriers to entry for smaller or more specialized companies. 3. business models – based on distributed value chains. its importance will gain skills such as design, service processes, customer data management. in such models philosophy of “long tail” should be explored with the traditional internet to the internet of things. referring to the views of ch. anderson can say that the market for niche poducts (created for individual customers) will be more powerful than the market based on very popular mass products. 4. competition – based on the convergence of the borders. traditional industry boundaries between the industrial and nonindustrial actions sighting loose the focus. strong emphasis will be placed on industrial methods of work. 5. skills – strong emphasis will be placed on interdisciplinary thinking. companies in the industry 4.0 will need to have excellent skills in both the social and technical spheres. there will be a shift toward a design thinking instead of production thinking. new job titles will emerge such as data scientist and cyber safety guards. new jobs will be for smart employees who can administrate the smart system and connect it to the produc-tion network, instead of workers for simple factory work (lg snc 2015). 6. globalisation – the organization of the future will concentrate on selected hotspots, not the overall global presence. often it will be cheaper to transfer data and product locally on a small-sized scale. enterprises 4.0 will be created in a more decentralized and flexible way. fig. 2. the main components of industry 4.0. (personal design on the basis of kopp 2014; dujin et al. 2014; lg snc 2015; qin 2016) 280 a. magruk. uncertainty in the sphere of the industry 4.0 – potential areas to research according to j. lee, e. lapira, b. bagheri, h. kao the basic definition of a manufacturing is described as a 5m system which consists of (lee et al. 2013): – materials (properties and functions), – machines (precision and capabilities), – methods (efficiency and productivity), – measurements (sensing and improvement) – modeling (prediction, optimization, and prevention). information system can be further enhanced with a 5c functions, which consist of (lee et al. 2013): – connection (sensor and networks), – cloud (data on demand and anytime), – content (correlation and meaning), – community (sharing and social), and – customization (personalization and value). according to s. weyer, m. schmitt, m. ohmer, d. gorecky (2015), central aspects of the industry 4.0 can be specified through three paradigms: 1. the smart product. 2. the smart machine. 3. the augmented operator. the smart product will receive a memory on which operational data and requirements are stored directly as an individual building plan. the paradigm of the smart machine describes the process of machines becoming cyber-physical production systems. the augmented operator, targets at the technological support of the worker in the challenging environment of highly modular production systems (weyer et al. 2015). 3. the uncertainty and its dimensions uncertainty as a cognitive category manifests itself in a lack of information necessary to make decisions, inability to predict the effects of decisions and the inability to assess the impact of events occurring in the environment (jędralska, czech 2011). the multidimensional nature of the uncertainty and the determination of its complexity and dynamic changes, make should be viewed from different perspectives. depending on the examined contexts the phenomenon of uncertainty focuses on different aspects (table 2). primary trend in research of uncertainty is represented by a. h. willett and f. knight. according to the first author. uncertainty is a subjective measure which is correlated with the objective risks and concerns changes that are difficult or impossible to estimate (janasz 2009). according to f. knight when the probability of certain events is measurable then it should talk about the risks. otherwise, there is uncertainty in the strict sense (wawiernia 2013). 281 business, management and education, 2016, 14(2): 275–291 according to the second approach, the human mind is seen as a filter for environmental information. the filtration process may be considered in terms of temporal and causal (dynamic). temporal uncertainty is a future category. knowledge gap concerning incomplete recognize the reality in the present tense is treated as indeterminacy. causative type of uncertainty is dynamic and is manifested by the fact that the gap of knowledge stimulates the exploration activity which is active in finding new information (bojarski 1984). in terms of behavioral internal uncertainty stems from the awareness of subjective cognitive limitations and takes the form of deduced/analytical uncertainty (impeding selection of specific behaviors) or experienced uncertainty (based on intuition and table 2. dimensions of uncertainty (personal design on the basis of bombola 2014; jędralska, czech 2011; wawiernia 2013) 282 a. magruk. uncertainty in the sphere of the industry 4.0 – potential areas to research associated with a deficit of information). external uncertainty resulting from gaps of knowledge can have singular character, in the case of unique or unusual events or distributive character – by analyzing one of the components of the distribution, it can be applied to other similar to it. mutual assembling uncertainty of external and internal uncertainties may be described as complex or generalized uncertainty (jędralska, czech 2011). in structural term subjective uncertainty due to the cognitive limitations of decisionmaker. they are the result of the following three sources (jędralska, czech 2011): 1) obtaining information – conditioned by fragmentary sense of observation and the emerging difficulties while understanding the structural properties of the system and its dynamics; 2) information processing – relating to the fact that the human mind can process a finite amount of information per unit of time; 3) storing information – indicating that remembering all the events and circumstances is beyond the reach of the human brain. the objective uncertainty is associated with the dynamics, finite, excess and loss of controlled resources, skills and competencies. relational uncertainty arises at the interface between the organization and dynamics of an environment. it is shaped by the hampered predictability of behavior of different groups of elements that are interdependent with it. in processual term uncertainty can take four forms (jędralska, czech 2011): 1) uncertainty at zero or full confidence; 2) uncertainty as one of alternative scenarios – the range of available information does not allow to make conclusion which of these scenarios will be realized; 3) the type of knight uncertainty when you understand the possible states of the environment, but it is unknown probability distribution of their occurrence; 4) uncertainty as ambiguity when it is impossible to determine the range of potential outcomes (jędralska, czech 2011). in the case of decision-making theory we are dealing with two groups of binary way of describing uncertainty: 1) the type of knight’s uncertainty otherwise known as structural uncertainty (analogously to processual uncertainty); b) ignorance (total/deep uncertainty) occurs when there is no possibility to build a proper chain of cause-and-effect relationships (mesjasz 2008); 2) volatility – is created by the dynamic and unpredictable changes in the environment; b) indeterminacy – applies to the present – refers to the absence of full knowledge of the cause and effect relations occurring between variables (jędralska, czech 2011). evaluative dimension is associated with the ability to quantify uncertainty. in this perspective a. wawiernia by j. teczke distinguishes between 3 types of uncertainty (wawiernia 2013): 283 business, management and education, 2016, 14(2): 275–291 1) probabilistic whose value can be determined based on a known probability distribution; 2) stochastic, for which it is known function probability distribution, but this can be inferred from the distribution of the sample; 3) strategic, for which is known only set of limit values. quoting w.g. schoroeck a. wawiernia proposes to turn a distinction in the evaluative dimension of general and specific uncertainty. the first is analogous to the theory of ignorance in the case of decision-making processes. while specific uncertainty allows to make objective or at least subjective the possibility of appointing a probability of potential outcomes, and thus allows their quantification (wawiernia 2013). in the information dimension in static term uncertainty can take three forms (wawiernia 2013): 1) total certainty, 2) certainty at zero – that is ignorance, 3) indirect certain or unawareness to the possible changes in states and directions of reality development. in a dynamic term uncertainty is a decision-making situation in which the decision maker does not know all the paramaters its making. in the case of uncertainty as determinant of cognition process we can distinguish uncertainties: passive/objective one, which exists independently of its knowledge, as well as active one, which arises only at the time of initiating the process of cognition. completion of the cognition process causes subsequent conversion of active in the passive uncertainy (zawiła-niedzwiecki 2007). referring to the sources of uncertainty it can be distinguished subjective uncertainty as derivative competencies of individual entities theoretical and methodological knowledge of the subject and the objective uncertainty associated with the object of cognition (wawiernia 2013). other possible types of uncertainty, for example, the random uncertainty as a result of the random events, undergone operation of the law of large numbers and quantifiable using probability theory. in turn, the natural uncertainty is associated with the change of management in natural conditions including changes in climate and atmospheric conditions (wawiernia 2013). 4. characteristics of selected potential elements of uncertainty in relation to the industry 4.0 development of fourth industrial revolution, involves three, not fully defined, phenomena which from today’s point of view, are associated with large areas of ignorance (paprocki 2016): 1. universal digitization (as one of the megatrends) and ensuring constant communication between the people themselves, people with devices and machines to each other. 284 a. magruk. uncertainty in the sphere of the industry 4.0 – potential areas to research 2. increasingly implemented disruptive technological innovations (fig. 3), which affect the abrupt increase the efficiency and effectiveness of the socio-economic system. 3. the achievement of such a development machine that gain the ability to autonomous behavior through the use of in the process of controlling artificial intelligence. such complex phenomena prevent create simple deterministic models that would simulate a future development of the industry 4.0. in this case, must be use other approaches that use expert, intuitive and probabilistic approach. a description of such methods is the summary of this article. the concept of disruptive innovations introduced in 1997 c. christensen. this term refers to the effectiveness of market take-up of breakthrough technologies by enterprises. figure 3 presents the scheme so-called “valley of death” by f. diana. image shows a skeleton to build relationships between the introduction of breakthrough technologies and megatrends (disruptive scenarios) for the creation of a new potential paradigm in economics. the shape of the curve in the form of the letter “u”, symbolizes that the breakthrough technologies, in the absence of their adaptation, can lead to the collapse of existing economic models. valley of death may be able to understanding of opportunities, uncertainties, and potential responses (zaręba 2016). due to the complexity of the components of industry 4.0 all the processes undergoing in it will become very complex and therefore will be subject to a high degree of uncertainty. fig. 3. “valley of death” of innovative disruptive technologies (diana 2015) 285 business, management and education, 2016, 14(2): 275–291 the list below presents selected determinants generating the phenomenon of uncertainty in the area of industry 4.0 (maślanek 2014; albert 2015; dujin et al. 2014; lee et al. 2014; dmowski et al. 2016; ślązak 2015): – communication between the main network components of industry 4.0 based on massive amounts of data based on self-control, beyond a secure internal network; – creation of new, not previously known business models of cooperation and new values chains, based on a very extensive scale relationships between all parties setting up the ecosystem of industry 4.0; – change the basic conditions for doing business; – the need to analyze structured and unstructured data; – excessive attention paid to the traditional ways of production; – integration of new it systems with the old system not designed for the internet of things; – level of progress of actual production and material technology; – the current lack of resolution of the following issues: 1) what data to collect? 2) who will get the in-formation derived from the data? 3) how will this information be used? that the right decisions were made? – determination of industry 4.0 as a revolution – at the initial stage – burdened with many unknowns; – very high complexity and dynamism of industry 4.0 environment’s; – the lack of smart analytic tools in many manufacturing systems to manage big data; – replacement workers by new solutions such robots; – creation by industry 4.0 jobs with other qualifications than those which replaces; – implementation in other countries more favorable solutions, which will result in the transfer of production right there, and do not develop it on the spot; – loss strong position in the export markets of countries that are characterized by a current cost advantages; – significant delay in the economic development of some countries can cause a big advantage of foreign suppliers at the start; – increase the complexity of the manufactured parts; – uncertain fate of leaders in the mobile technology market – such as failure of yahoo and drop list of twitter – digitization of business processes goes beyond the boundaries of the closed facilities (factories), in the form of eg. virtual fleets and covers the activities of “anywhere, anytime”; – equipment must meet much higher demands on the reliability of their actions in the context of changing weather conditions. other potential areas of uncertainty referring to the technological (communication) aspects (control engineering magazine 2015): – decentralized intelligence – is where intelligent drive and control technologies network with other devices with decentralized autonomy; 286 a. magruk. uncertainty in the sphere of the industry 4.0 – potential areas to research – rapid connectivity – immediate vertical and horizontal connectivity, enabling the free flow of data across the corporate structure; – open standards and systems – how “open” systems could be in terms of support for emerging communications and software standards and in how open individual components are to make industry 4.0 a reality; – context of real-time integration – this will equip manufacturers and machines with details to execute the rapid process and production changes to fulfill the vision of profitably making products for specific customer needs; – autonomous behavior – technology helps the production line to become autonomous. these mentioned above areas for their correct understanding, can be associated with the following dimensions of the theory of uncertainty (jędralska, czech 2011; wawiernia 2013): 1. uncertainties in behavioral terms – as a composite, which is the result of internal factors (relating to the industry 4.0) and external (situational), induced by the complexity and dynamics of the environment (suppliers, customers, network security, etc.). 2. subjective uncertainty (in structural terms) results from cognitive limitations of policymaker refering to information management generated in the system and subsystems of industry 4.0, in particular, in terms of its acquisition, processing and storage. 3. relational uncertainty (in structural terms), formed at the interface between the organization and environment through a complex web of interaction between companies 4.0 and their stakeholders. this uncertainty will shaped by dynamics of business environment and difficult predictability of behavior of different groups of stakeholders. 4. structural uncertainty (in terms of a binary way of describing uncertainty) will occur when there will be the opportunity to identify the chain of cause-and-effect relationships regarding the analyzed events (in contexts: economic, technological, social, legal, etc.), but, due to the a huge dynamic development of the industry 4.0 will not be possible to determine probable future events based on conditions of present. 5. indeterminacy (in terms of a binary way of describing uncertainty) concerns the present and includes mainly countries such as poland where there is a lack of clear information about the validity of changing ambient-tion, lack of full knowledge of the cause and effect relations occurring between the variables and uncertainty, the available courses of action and their consequences. building a new generation enterprises based on modern machine production is impossible without integration of these machines in the internet of things. in addition, it is necessary to education policies. repatriation of manufacturing from developing countries to europe may require investment programs or incentives (dujin et al. 2014). 5. conclusions the notion of industry 4.0 is not yet precisely defined. uncertainty thus relates to a technological boundary of the concept that is the scale and complexity of future systems 287 business, management and education, 2016, 14(2): 275–291 and to determine which technologies are within the internet of things range, and which are excluded from it. mastering the technology (for example, by its estimate) from the industry 4.0 will give a chance to occupy the appropriate position in the market, both in the enterprise, research unit, region and country (gudanowska 2014). examples of ways to overcome the uncertainty in industry 4.0 (kopp 2014; albert 2015, dujin et al. 2014; ślązak 2015; stein 2016; paprocki 2016; zaręba 2016; szulewski 2016; lee et al. 2014): – the adoption of common standards for the different devices and applications; – mastering of complex systems for suitable simulation and optimization models and software; – guaranteed data security – development of new systems that are safe from attacks; – explicit acknowledgment that the individual human being will continue to play an active, engaging role in manufacturing; – distinguish between what can be considered as known and what is essentially uncertain; – distinction systems possible related to industry 4.0 and its surroundings due to their importance and probability of occurrence; – adaptation of regulation and legislation to the new reality before industry 4.0 will become commonplace; – set the conditions for the ecosystem of industry 4.0; – a shared vision for policy makers and governments is needed; – industry 4.0 must be understood by governments and policy makers, and promoted as a priority for europe; – in industry 4.0 we should try to think more systemic; – legislation should create an “infrastructure” for promoting entrepreneurship; – the new competency fields required by industry 4.0 need to be embedded in education. this includes fields such as software programming, data analysis or scientific computing; – the full integration of machinery and equipment with production management systems; – the creation of organizations, clusters that deal with the development of standards, eg. communication, used in a-production systems. the composition of these clusters should include the following: projecting and producing control systems, robots, machines and machine tools and software to support them; – design ruggedized industrial networking infrastructure that will endure in harsh environment; – other than the current, meet the challenges of the earth inhabitants for the reduction in energy consuming to quasi-zero level through the commercialization of two technologies: 1) electricity production in the “in-finite number” based on renewable energy sources; 2) control over the process of hydrogen storing; 288 a. magruk. uncertainty in the sphere of the industry 4.0 – potential areas to research – use more elaborate equipment containing component with higher quality, durability and reliability; – division of the construction costs for infrastructure among many suppliers of services. an example would be the advanced telematics of cars. the terminal, equipped with multiple sensors can be used simultaneously by the vehicle manufacturer, the insurer, providers of multimedia content; – ensuring the free flow of data in both vertical and horizontal hierarchical it structure of the smart factory; – the individual steps of the manufacturing process should be viewed in holistic and systemic way (in a ful-ly integrated manner) instead of the chain of following processes in chronological order; – utilization of advance prediction tools. helpful in the process of leveling the uncertainty phenomenon in the system of industry 4.0 may be an attempt to answer the following questions (lempert, zmud 2012): 1. to which extent will the system work properly? 2. to which extent will the system be accepted by the government, society, science and other organizations of public life? 3. to which extent to creation of the universal cyberspace will influence policy in the social, legal, economic and technological? 4. what threats will have grappled cybernetic systems? 5. what type of security is necessary to ensure the reliability and safety of industry 4.0 systems. designed by i. asimov in 1942 three laws of robotics become real meaning and their fulfillment is necessary to minimize possible risks and uncertainty in the industry 4.0 (wortal robotyka.com 2015): 1. a robot may not injure a human being or, through inaction, allow a human being to come to harm. 2. a robot must obey the orders given it by human beings except where such orders would conflict with the first law. 3. a robot must protect its own existence as long as such protection does not conflict with the first or second laws. modern inventions, which are attributes of industry 4.0, provide not longer extension of human muscles and senses, as was the case with previous industrial revolutions, but some of the functions of the brain are responsible for conscious perception and intelligence. you could say that every sufficiently complex system (which is undoubtedly industry 4.0), whose elements exchanged between each other information, energy or matter has a chance of being promoted to the rank of the conscious. it is worth at this point realize that the dialogue between man and machine in industry 4.0 may take place only in a common language. if, therefore, do not we force machines to accept human qualities, we will be forced to take over their modus operandi (magruk 2004). 289 business, management and education, 2016, 14(2): 275–291 industry 4.0 should be considered in the category of complex systems, and like any complex system, according to the principle of indeterminacy, it can not be ever fully understood (cempel 2002). according to p. schwartz uncertainty is the “new normal” in today’s fast-changing times. one of proven approach to navigating through this uncertainty is scenario planning (schwartz 2012), a well-developed tool in future studies (kononiuk, nazarko 2014; halicka 2016). keep in mind that the degree of uncertainty existence of a particular scenario to a large extent on the degree of uncertainty of development of individual factors which are components of a given scenario. for example, demographic trends are characterized by relatively low uncertainty of forecasts results. but economic factors such as consumer preferences are characterized by a high degree of uncertainty. one solution is to divide into two groups of factors: 1) consisting of one parameter – a 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of management of the bialystok university of technology. research interests relate to: theory of uncertainty, foresight methodology, e-economy, technology management. member of the ieee engineering management society, the international society for manufacturing, service and management engineering, ieee poland section technology and engineering management society chapter, polish society for production management. involved in many projects concerning the management of future technologies. https://doi.org/10.17814/mechanik.2016.7.221 https://doi.org/10.1016/j.ifacol.2015.06.143 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: enkeleda.lulaj@unhz.eu business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 2: 329–357 https://doi.org/10.3846/bmee.2022.17389 an unstoppable and navigating journey towards development reform in complex financial-economic systems: an interval analysis of government expenses (past, present, future) enkeleda lulaj * faculty of management in tourism, hospitality and environment, university haxhi zeka, peja, kosovo received 04 august 2022; accepted 11 november 2022 abstract. purpose – the world is facing unprecedented opportunities to improve welfare and reduce poverty, so every day more and more public spending is becoming important in every country. the purpose of the research was prompted by the questions of whether there were development reforms and what is the complexity that has evolved in each variable (ws, gs, eu, st, ce, and te) for the time interval 2007–2020. how and are governing bodies able to continuously drive growth for decades by being more efficient users of government spending planning in complex financial and economic systems? therefore, this paper aims to understand and advance by bringing a new approach to unstoppable and navigating reforms to government spending in complex financial and economic systems. research methodology – the research was conducted through secondary data from annual financial reports and statements for both central and local levels. the time interval for 14 years was analyzed through two analyses and one matrix such as descriptive analysis (9 tests), correlation analysis (3 tests), and proximity matrix (euclidean distance between years and variables, z stress test) as in the tables (1–12), in the figures (1–11) using spss version 23.0 for windows. findings – the findings showed that: a) the data had a normal distribution, b) there was an increase in expenditures for each year, especially in times of pandemic covid-19, c) the data were obtained from financial reports and statements as well as different institutions over different years, d) there is a strong and positive relationship between the variables for government spending in complex systems, e) public expenses have increased due to covid-19 and the damage caused is continuing, affecting the decline in the well-being of the residents. research limitations – the limitations of this paper are that only a considerable number of variables are studied and only in the state of kosovo for 14 years (2007–2020). in this case, for other analyses by other researchers’ other variables can be analyzed, more extended periods or comparability with other states. practical implications – based on the above questions, it was confirmed that there were reforms in the complex financial and economic systems for government expenditures each year. originality/value – such research has not been analyzed before and the findings of this research can help budget experts to accurately plan expenses based on the three periods studied (past, present http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2022.17389 https://orcid.org/0000-0002-5325-3015 330 e. lulaj. an unstoppable and navigating journey towards development reform in complex... or the period of the covid-19 pandemic and the future or the post-covid-19 pandemic period). it is strongly recommended that governing bodies develop and improve the category of public investment expenditures. keywords: complex systems, interval analysis, public spending, financial reports and statements, financial and economic reform, past-present-future ppf. jel classification: m48, b41, c01, h50, h61, h76, g00. introduction every day, the world is increasingly faced with unprecedented opportunities to improve human well-being and reduce poverty (lópez et al., 2008). many studies emphasize that public spending is important and necessary for economic growth, but empirical results are still mixed. in this case, some empirical analyzes emphasize that macroeconomic stability, openness, investment in the private sector, and use of funds for productive purposes are quite important (bayraktar & moreno-dodson, 2010). many previous studies of public spending in complex financial and economic systems have helped policymakers and other researchers draw interesting lessons, but at the same time open up new avenues for further research on methodological improvements that support in-depth analysis, especially in complex systems for developing countries (moreno-dodson, 2009). in terms of complex financial and economic systems, they have contributed (lulaj et  al., 2022), it is emphasized that the risk management of budgetary challenges is greater than ever influenced by new technologies in e-government according to research findings such as lack of cooperation, lack of information, lack of budget experts, lack of resources and reduced focus, lack of resources (staff, funds, infrastructure, tools, etc.), selection of programs based on priorities and not based on wishes and policies, etc. regarding the unstoppable journey of development in complex financial-economic systems (dai, 2021) it is emphasized that the rapid development of the market economy is increasingly in demand for projects in industry and financial complexity through the development of computer technology and the promotion of robotic consultants to manage and supervise financial industry projects. according to tang (2022), the main purpose of current policy in complex systems is a financial constraint and not financial constraint by recommending that the evaluation of the effectiveness of financial policies for the financial structure and scale to support quality investments be achieved through economic transformation and improvement as well as a sustainable and healthy development. to have performance in government spending on complex financial systems according to zheng and du (2015), it is recommended to use the laws of design synchronization control of hyperchaotic financial systems. complex systems based on economics and finance according to tabak et  al. (2020) are showing interest in the micro-level analysis, but empirical methodologies are limited to mainly linear methods brought by traditional econometric methods. according to huang et  al. (2014), although much research has been done, there are still challenging open-ended questions about complex financial and economic systems where it is recommended to develop new theories and methods as well as to refine techniques known for analyzing financial problem classes and public spending time intervals. to look at the journey and navigating complex financial systems (ding & xu, 2016), it is emphasized that business, management and economics engineering, 2022, 20(2): 329–357 331 the control method and synchronization criteria are applied to study the mixed synchronization of a chaotic class of modified financial systems. according to squartini et al. (2018), the question arises when a financial system is considered complex. this question still does not have a definite answer for complex financial and economic systems. regarding the capital expenditure variable (ahuja & pandit, 2020), it is emphasized that population growth and unemployment affect the increase of public expenditures, so the investments have a great impact on complex financial and economic systems. according to ampah and kotosz (2016), using wagner’s hypothesis for bukrina faso data between 1960–2015, it is emphasized that currencies have an impact on complex financial and economic systems. relating to the transparency of the budget in expenditures in complex financial systems, it is emphasized that the state should provide citizens with access to financial statements and reports, fair distribution of resources, and efficient management at both levels of government and all institutions in complex economic and financial systems (lulaj, 2019). to analyze the relationship between complex economic and financial systems through expenditures (al-faris, 2002) he used the data of the gulf cooperation council (gcc) countries in his research, which states that the hypothesis of public spending that causes national income is not supported. based on the variables of services and goods (gs) and transfers and subsidies (st) according to li and li (2018), it is emphasized that the main obstacle to the economic advancement of the country is the low quality of service in the service sector (electricity, water, natural gas, etc.), so the main findings of this research are: government transfers fail to cover this deficit, institutions of reducing the quality of services and goods for subsidized consumers by suggesting future research to see the impact of cross-subsidies on the well-being of citizens and better design of subsidy financing in complex financial and economic systems. based on the variables of utility expenses (eu) and total expenses (te) (marica & piras, 2018) it is emphasized that the relationship between governments and economic growth has the opposite direction to theory and practice, so it is suggested to improve public spending on economic growth through the provision of municipal services for all citizens at both levels of government, also according to kutasi and marton (2020), regarding the variables of this research as ws (wages and salaries), gs (goods and services), ue (utility expenses), st (subsidies and transfers), ce (capital expenses ), te (total expenses) have a significant and strong coefficient for public order expenditure in complex systems. based on the analysis of the expenditure interval towards economic and financial development reforms and the variables taken in this study (ws, gs, ue, st, ce, te) (schick, 2007) it is emphasized that extra-budgetary spending weakens government financial control in many aspects of budgeting that are still relevant today: public sector transformation, private sector interconnection, government scope and size, regulatory role, the emergence of new organizational forms and use of performance objectives and long-term planning. for all variables of this study, according to kay and llewellyn smith (1985), there should be allocation criteria and incentives for sectors and countries that are most in need of public spending’s such as subsidies and transfers, capital investments, goods and services, salaries and wages, and utilities. regarding navigating and unstoppable expenses, it was emphasized that the latest global trends prove the great impact of public finances on the economies of world countries based on the fiscal management environment, which is unstoppable and moving fast. therefore, the economic and social structures that 332 e. lulaj. an unstoppable and navigating journey towards development reform in complex... are floating and changing due to the demands of the citizens, which are becoming more and more diverse, must be encouraged (world bank and korea development institute, 2004). research of this format on the unstoppable journey and navigation towards the development reform in complex financial-economic systems through the analysis of the government expenditure interval has not been conducted before, therefore the main purpose of this scientific research is whether there have been development reforms in complex systems financial-economic for the period 2007–2020 (14 years) based on the variables raised for government expenditures: ws (wages and salaries), gs (goods and services), eu (utility expenses), st (subsidies and transfers), ce (capital expenditures), te (total expenses), as well as what is the complexity that has evolved in each variable and has development reform been achieved in complex financial-economic systems? regarding the problems caused by public government expenditures for all expenditure variables (ws, gs, eu, st, ce, te) many other researchers, have also contributed (staats, 1950; hulse, 1950; harrell, 1950; briggs, 1950). therefore, based on the purpose of the research, his problem to look at the unstoppable and floating journey towards the reform of development in complex financial and economic systems for the interval of government expenditures for the period 2007–2020 in the state of kosovo starts from questions such as: are governments able to sustain economic growth for decades? how can the state (government) be a more efficient use of public expenditure planning to improve its structure in complex financial and economic systems for certain time intervals? therefore, this research (a) will bring a new approach to governance for the public spending interval for 14 years (2007–2020) on how governments can be more efficient, (b) will analyze which variables are needed to pay more attention to government public spending on economic growth, and (c) learn something special about unstoppable navigation to bring about reforms to complex financial and economic systems by increasing the well-being of its inhabitants through continuous encouragement. 1. literature review seeing the great importance every day of an unstoppable and floating journey of reforms in complex financial and economic systems through the analysis of government spending from the past, present, and future, the measurements of each variable were explored individually. so, based on the variables taken for study in this research we emphasize the contribution of other researchers related to each variable: wages and salaries (ws), goods and services (gs), utility expenses (eu), subsidies and transfers (st), capital expenditures (ce) and total expenses (te). regarding the variable of general government expenditures, he has contributed (gómez, 2010), which emphasizes that the well-being and long-term growth of economic and financial development in the complex systems of the country are done in the case of imposing income tax to equalize the elasticity of public services. regarding the capital expenditure variable (ce), according to eicher and turnovsky (1999), based on recent empirical research, it is emphasized that technology and capital are very important inputs for complex financial and economic systems but it is suggested that there be further improvements and that countries know how to plan for capital expenditures. general expenditures that are realized without proper planning can increase the state debt, therefore according marle (2020), it is embusiness, management and economics engineering, 2022, 20(2): 329–357 333 phasized to forecast fiscal revenues, calculate the probability of non-payment of expenditures, increase the degree of security in complex financial systems through signaling guidelines to cope with the risks of general government expenditures during the unstoppable and floating development journey. reforms in complex financial-economic systems. in terms of the complexity of government spending (bruce, 1995), it is emphasized that complex financial and economic systems are constructively used to achieve certain spending languages within the complex systems of the country. to elaborate reforms towards economic development in complex financial systems have contributed ouyang and lu (2021) which emphasizes that egovernment of complex financial and economic systems has become one of the key points of the government building, but that the degree of success of e-government projects in variables (ws, gs, eu, st, ce, and te) both in developed countries and in developing countries it is not high. to look at general government spending on variables (ws, gs, eu, st, ce, and te) contributed sun (2021), where it is emphasized that the gaussian probability-based semantic analysis model can provide robust, extraordinary detection of anomalies in a fully automated data-driven solution in complex financial systems for government spending. to see the role of signaling systems in complex financial and economic systems for all variables taken in the study for the government expenditure interval (2007–2020) has contributed chen (2021), which states that governments should use signaling systems to optimize the structure of the country’s fiscal revenues and expenditures. regarding the variable of capital expenditures and the variable of subsidies and transfers (park, 2012), it is noted that the choice of government projects varies according to the methods of government intervention and according to the subsidy rate. while roy (2012) states that government investment diverts private investment, therefore the overall effect of total government spending on economic growth is unclear. regarding the subsidy and transfers (st) variable, another contribution was given by schaffitzel et al. (2020), who emphasized that the governments of the countries should attach great importance to projects for the allocation of government expenditures on subsidies and transfers were some unnecessary subsidies should be removed and replaced with subsidies that are useful and necessary for the country. regarding the variable of goods and services in the category of municipal government expenditures for subsidies and transfers, according to li et al. (2018), it is noted that governments when faced with financial deficits provide low-quality services to subsidized residents compared to those who pay additional tariffs. therefore, the difference in the quality of services between groups of residents is reduced by an increase in the number of external transfers of governments in this case to boost electricity consumption by the poor, the colombian government should finance subsidies, strengthen quality regulation and increase the transparency and reliability of government transfers. again, they contributed regarding the utility variable (clarke & wallsten, 2002) who point out that until recently utility services (telecommunications, energy, water, and gas) around the world were provided by large monopolies usually state-owned but encouraged by technological change and innovation in complex financial systems as well as pressure from international organizations many developing countries are privatizing state-owned companies to increase competition in providing the highest quality services. but at the interval of government spending on the unstoppable journey of reforming the development of these complex systems, some governments worry that even if reforms improve the efficiency of goods and utilities, they may 334 e. lulaj. an unstoppable and navigating journey towards development reform in complex... undermine an important public policy goal of securing “access” universal for low-income and rural households, but the results have suggested that these reforms of complex financial and economic systems have not harmed the poor and rural residents but in most cases have improved their utility in the communal services (clarke & wallsten, 2002). regarding the variable of wages and salaries (ws), according to dabre (2014), the administration deals with the creation and implementation of sound employee compensation policies and practices through employee performance appraisal, payroll and payroll surveys, institutional problem analysis, the development and maintenance of the payroll structure, and the establishment of rules for the administration of salaries and wages, profit sharing, changes and adjustments of wages and salaries, additional wages, the cost of compensation, etc. regarding the investment variable of government expenditures, similar analyzes were also emphasized for the unstoppable and floating travel, emphasizing that investment financing in any sector is vital and profitable towards the progress of the well-being of the country’s population, also evaluating the future scenarios of government spending until 2040 (global burden of disease health financing collaborator network, 2018). 2. methodology 2.1. methods for this study, data were collected from institutions in the state of kosovo, specifically at the central level (ministry of finance) and the local level (38 kosovo municipalities). therefore, the research was conducted through secondary data for the variables studied (ws, gs, eu, st, ce, te) from reports published on the website of the ministry of finance after their audit by internal and external auditors and signature by the minister of finance and analyzing in detail the reports and financial statements of all municipalities for the variables also mentioned after the audit by the auditor and the signature by the director of the finance department (reports and financial statements for the period 2007–2020) by looking at the unstoppable and floating journey towards development reforms in complex financial and economic systems (ministry of finance, 2007–2020). all variables were analyzed through descriptive analysis and correlation analysis as well as tests that fit these two analyzes using spss version 23.0 for windows. the analysis involved several processes where some of the factors were deleted to make the model acceptable, in which case, as stated in the conceptual model, the purpose of these analyzes and models is to obtain reliable data (r above value 0.50). in this case, 6 factors were analyzed as stated above with their sub-variables. 2.2. instruments and research methodology as stated in the introduction, the main purpose and objective of this research are to see if there have been development reforms in complex financial and economic systems during the time interval 2007–2020 and what the complexity of evolution is in the variables studied. based on these issues, the findings from econometric models will provide recommendations for kosovo institutions and beyond complex financial and economic systems. business, management and economics engineering, 2022, 20(2): 329–357 335 figure 1. instruments and research methodology figure 1 shows: the research methodology for each phase for all variables taken into the study through the analysis of annual fi nancial reports for the period of 14 years. 2.3. data collection process data collection was performed by the results of descriptive analysis, correlation analysis, tests of normality (tn), data patterns (all cases) (dp), summary of estimated means (sem), wald-wolfowitz test (wwt), mann-whitney test (mwt), friedman test (ft), run test (rt), kruskal-wallis test (kwt), pearson (p), kendall’s tau_b (kt), spearman’s rho (sr), proximity matrix (euclidean distance between years 2007–2020 and variables: ws, gs, ue, st, ce, te), z statistics (stress test). data screening descriptive analysis tn dp sem wwt mwt ft rt kwt correlation analysis p kt sr spss 23.0 proxi mity matrix figure 2. data collection process figure 2 shows the process of data analysis through descriptive analysis using tests (nt, dp, sem, wwt, mwt, ft, rt, and kwt) and correlation analysis using tests (p, kt, sr). descriptive statistics have been used to elaborate the time interval of expenditures in complex fi nancial and economic systems, whereas according to mc cue (2007), descriptive analysis is the process of categorizing and describing information by analyzing sample data for all variables. to look at the distribution of data in complex fi nancial systems, the normality test was analyzed where according to shaik and gulhane (2021), the application of normality tests in diff erent periods to the indian stock exchange is abnormal. regarding data patterns (all cases) he contributed (clain & leppel, 2018) where the characteristics related to the variables were analyzed, which variable has had changes at diff erent time intervals. to see where the fi nancial reports are obtained and whether the navigation and development are the same in 336 e. lulaj. an unstoppable and navigating journey towards development reform in complex... complex financial systems, the wald-wolfowitz test was used, therefore about this test they contributed (khan et al., 2006) from their analysis emphasized that the results provided by variables re-emphasize the close connection between statistical decision theory and variables. to analyze if there is a difference between the time interval (2007–2020) the mann-whitney test was used in all variables, therefore concerning this test in their research they contributed (ayadi & ghorbel, 2018) analyzed the characteristics for each variable studied. to see the differences between the variables and if they are random, friedman and runs tests were used, which he contributed to this research his research (melitz, 1965), while in terms of the run test he contributed (watts, 2020). to see the differences between the variables and their navigation over the years, kruskal-wallis’s test was used, and he contributed to this test in his research (salkind, 2010). regarding the importance of the correlation of variables, pearson, kendall’s tau_b, and spearman’s rho tests were used, where (shekhovtsov, 2021; de winter et al., 2016; kirch, 2008). 2.4. data analysis process the research data related to the unstoppable journey and navigation towards the development reform in complex financial-economic systems through the analysis of the government expenditure interval have been analyzed through the previously mentioned analyzes for the testing of hypotheses through spss 23.0 software. 2.5. the conceptual framework for government spending in complex financial and economic systems figure 3 shows: the conceptual framework for government spending in complex financial and economic systems by analyzing each variable (ws, gs, eu, st, ce, and te) through the quality of arguments and useful information from the annual financial reports for unstoppable navigation 14-year period in complex financial and economic systems. wages and salaries goods and services utility expenses capital expenses total expenses argument quality paper usefulness of information interval analysis unstoppable and navigating journey subsidies and transfers complex financial and economic figure 3. conceptual framework (source by the author) 2.6. research hypotheses regarding the raised hypothesis, many opinions were given by different researchers, where according to cordes et  al. (2015), it is emphasized that to have a normal distribution of business, management and economics engineering, 2022, 20(2): 329–357 337 expenses in complex financial systems (h1), there must be effectiveness of the rules of expenses. regarding the importance of reforms for public spending in the economic development of complex financial systems (h2, h3), (constantine, 2017), it is emphasized that economic structures are the fundamental cause of economic performance based on a case study in the usa where the structural origin of the financial crisis was exposed. developing countries are hit hard by financial crises, including the crisis caused by covid-19, and the recovery in each variable of government spending may be limited due to the lack of resources to stimulate the economy (gurtner, 2010; ocampo et al., 2000; roaf et al., 2014; peng et al., 2014; hawtrey, 1996). the hypotheses of this research are presented below: h1: distribution of data on public expenditures in financial reports to complex financialeconomic systems follows the normal distribution. h2: economic development reforms are significant in complex financial-economic systems for public spending. h3: data is not obtained from the same year in the reports of complex financial-economic systems. h4: is there a difference between the years of transition for financial reforms in complex financial-economic systems. h5: there is a link between the variables in the three tests for public spending towards the development of reforms in complex financial-economic systems. 2.7. materials kolmogorov and smirnov proposed the ks test in 1993 (kolmogorov, 1933) as: 2 1 ,1 ix d z i nn +   = = − ≤ ≤      1 ,1 i i d z i n n − − = − ≤ ≤    max( , )d d d + −= , (1) where iz where black is the cumulative probability of the normal distribution for the expenditure interval (2007–2020) and d is the difference between the observed and expected values for complex financial and economic systems. shapiro and wilk formed the original test in 1965 (shapiro & wilk, 1965). test statistics for complex financial and economic systems at the cost interval are defined as: ( ) 2 1 2 1 ) ) n i ii n ii a x w x x = = = − ∑ ∑ , (2) where, ( )ix is the government expenditure interval ith statistics, i th, x is the sample mean for complex financial and economic system it is the constant obtained: ( ) 1 1 1 1 1/2( ) t i n t m v a a a m v v m − − − = … = , 338 e. lulaj. an unstoppable and navigating journey towards development reform in complex... where 1( ) t nm m m= … are the expected values of the ranking statistics of the independent variables expected for complex financial and economic systems and v is the covariance matrix of these statistics for government spending. according to fraser (1956), wald and wolfowitz have a general theorem of specifics for complex financial and economic systems as follows (amstatnews, 2010): ( ) 2 21 1 2 2 1 1 exp[ ] exp[ ] 2 2 2 2 x µ x µ −  − + − − σσ π σ π  . (3) regarding the mann-whitney test, he has contributed (mann & whitney, 1947) so the equation in complex financial-economic systems is as follows: ( ) 1 1 , n m i j i j u x y = = = ∅∑∑ , (4) where, yj per j = 1, n in the sample size sample for government expenditure n = m + n, and, ( ) 1, , 0, i j i j i j if x y x y if x y >   φ =  ≤   . regarding complex financial and economic systems, friedman mitigated normative conflicts by defining issues related to government spending to achieve a common goal, he said, making a major contribution to the “positive economy methodology” (hetzel, 2007). the friedman test determines whether the ranking totals for each condition/treatment differ significantly from the values that would be randomly expected for government spending. the test statistics suggested by friedman (siegel & castellan, 1988) are as follows: ( ) ( )21 1 12 3 1 1 k k k t r n k mk k = = − + + ∑ , (5) where, n k ik i r r= ∑ , is the sum of degrees for handling k over n blocks for government spending on complex systems. the kruskal-wallis test statistic measures the extent to which the ratings of the current ir observed averages differ from their expected value (n  +  1)/2 (ostertagová et al., 2014). the calculation for government expenditures is as follows: ( ) ( ) ( ) 2 2 1 1 12 12 1 21 1 k k i i i i ii i r n h n r r n nn n n n= =  + = − = −  + +   ∑ ∑ . (6) the coefficient 12/n (n + 1) is a normalization factor suitable for complex economic financial systems in the time interval of government expenditures, then the statistic can be rewritten in another equivalent form as: ( ) ( )2 1 12 3 1 1 k i i h r n n n = = − + + ∑ . (7) pearson’s test for complex systems is a proper statistic (obilor & amadi, 2018) to measure the correlation between variables (ws, gs, eu, st, ce, and te). bivariate union (x1, y1), (x2, y2), . . . , (xn, yn), then the correlation of the pearson coefficient (r) for government expenditure variables in complex systems are defined as: xy x y s r s s = . (8) business, management and economics engineering, 2022, 20(2): 329–357 339 given the above relationship, the pearson (r) correlation coefficient in complex financial systems for the cost interval can be written as: 2 2 2 2 1 1 1 xy x y nr x x y y n n ∑ − =     σ − − σ −        , (9) when r  – pearson correlation coefficient in complex systems, n  – number of values in variables, xyς – the sum of government expenditure variables x and y, x – mean of values, y – mean of values y, –x y calculation of average values of the expenditure interval, 2xς − the sum of squares of values x, 2yς − the sum of squares of values y. kendall test (kendall, 1955), is a measure of consistency between the two variables observed for government spending during the time interval 2007–2020. the statistic τ is defined as the difference between the probabilities of matching and the mismatch between the two variables (kendall & george, 1948). the equation for calculating the government expenditure interval in complex systems according to kendall tau_b is as follows: ( ) ( ) ( ) 1 | 2 | 1 2 1 i j i j i j i j i j i jp y y x x p y y x x p y y x xτ = < − > < = > < − = π − , (10) according to the definition in equation (10), τ is a population property for complex financial and economic systems. when x and y are double normal with correlation coefficient ρ, it is straight forward to government spending: 12 sin p−τ = π . (11) the formula for the spearman correlation coefficient rho to the time interval of government spending on complex financial and economic systems is as follows (clef, 2013): ( ) 2 2 6 d 1 1 i n n σ ρ = − − ; (12) ( ) ( ) ( ) ( )( ) ( ) ( ) ( ) ( ) 1 11 2 2 1 11 1 1 ) * 1 1 ) * ) n i n nx y i i r x r x r y r ysxy n s s r x r x r y r y n n = = = − − ρ = = − − ∑ ∑ ∑ , (13) when r (x) and r (y) are the ranks for financial complex systems, r (x) bar and r (y) bar are the mean ranks for public spending. 3. results and discussion of results obtained this research, as discussed in the methodology are included two analyzes and one matrix: descriptive analysis, correlation analysis, tests of normality, data patterns (all cases), summary of estimated means, wald-wolfowitz test, mann-whitney test, friedman test, run test, kruskal-wallis test, pearson, kendall’s tau_b, spearman’s rho, proximity matrix (euclidean 340 e. lulaj. an unstoppable and navigating journey towards development reform in complex... distance between years 2007–2020 and variables: ws, gs, ue, st, ce, and te), z statistics (stress test). factors analyzed for all variables ws, gs, eu, st, ce, te: i. presentation of data on the time interval of public expenditures in complex financialeconomic systems to their distribution in public institutions at both levels (local and central). ii. analysis of data related to the interval of public expenditures in complex financialeconomic systems at both levels in all institutions. iii. analysis of data on unstoppable and floating travel towards development reform in complex financial and economic systems of government spending through wald-wolfowitz, mann-whitney, friedman, run, kruskal wallis tests. iv. analysis of data through correlation according to tests pearson, kendall tau, and spearman related to public spending in complex financial-economic systems at both levels in all institutions. 3.1. results from the presentation of data on the time interval of public expenditures in complex financial-economic systems to their distribution in public institutions at both levels (local and central) regarding the presentation of time interval data on public spending (goemans, 2022), the multipliers of government spending in america were analyzed to why they are high during periods of uncertainty and whether the distribution is normal compared to safe periods through the use of data from 1990 onwards in local governments, where it was pointed out that unemployment is rising in uncertain times compared to normal times. regarding the shocks to the distribution of government expenditures, according to ricco et al. (2016), it is emphasized that when there are low disputes, the production response to innovation in fiscal expenditures is large and positive due to the reaction to private investment and vice versa. table 1 shows: the data during the unstoppable and floating journey towards the development reform in the complex financial-economic systems for public expenditures are fully used, which means that there is no lack of data in the reports and financial statements on the financial items for public expenditures for period 2007–2020 at both central and local levels in all institutions of the state of kosovo. table 1. case processing summary case processing summary cases valid missing total n percent n percent n percent years 14 100.0% 0 0.0% 14 100.0% table  2 shows: the arithmetic mean for 14 years is (2013.5) and the standard deviation for 4.1830, while 95% reliability values are given at the lowest and highest limits (2011.09 and 2015.91). the maximum number of years calculated for public spending is 2007 while the maximum is 2020. according to skewness, the distribution is normal, while according to the kurtosis test (–1.200) the distribution is not fair. business, management and economics engineering, 2022, 20(2): 329–357 341 table 2. descriptive statistics descriptive statistics statistic wages and salaries years mean 2013.5000 95% confidence interval for mean lower bound 2011.0846 upper bound 2015.9154 5% trimmed mean 2013.5000 median 2013.5000 variance 17.500 std. deviation 4.18330 minimum 2007.00 maximum 2020.00 range 13.00 interquartile range 7.50 skewness .000 kurtosis –1.200 table  3 shows: according to the level of importance 5% in the variables (wages and salaries, goods and services, utility expenses, subsidies and transfers, capital expenses, and total expenses) the value of both tests kolmogrov-smimov and shapiro-wilk (0.200 & 0.196) values are greater than 5% in this case the h1 hypothesis is accepted because the data are distributed normally. table 3. tests of normality tests of normality years/variables independent kolmogorov-smirnova shapiro-wilk statistic df sig. statistic df sig. years/ ind. var. .084 14 .200* .965 14 .196 3.2. results for the analysis of data related to the interval of public expenditures in complex financial-economic systems at both levels in all institutions regarding complex financial and economic systems have contributed (tsviliuka et al., 2010), it is emphasized that complex systems are provided by applications in the fields of finance and economics. regarding capital investments made by the government, according to titman et  al. (2004), the institutions that increase capital investments tend to have higher returns. regarding the variable of goods and services, they contributed (isaac et  al., 1985) analyzed that the problem of providing public services has been major in many areas of the economy. according to traditional economic models which are based on the assumption that behavior 342 e. lulaj. an unstoppable and navigating journey towards development reform in complex... and non-compliance during a period of public good sent governments into decision-making processes relying on voluntary individual payments to provide public services and goods (... see feldman’s example 1980), the results, therefore, stressed that governments need to solve problems of public services and goods. table 4. data patterns (all cases) data patterns (all cases) case # m % m missing and extreme value patterns variable values w s g s u e st c e t e years ws gs ue st ce te 1 0 .0 2007 208923.00 132877.00 17903.00 154552.00 159208.00 673463.00 2 0 .0 2008 228059.00 144583.00 18489.00 210006.00 351651.00 952788.00 3 0 .0 2009 268925.00 154739.00 19234.00 257767.00 406382,.00 1107047.00 4 0 .0 2010 316200.00 167156.00 19527.00 253484.00 459272.00 1215639.00 5 0 .0 2011 388303.00 161591.00 20388.00 256476.00 531290.00 1358048.00 6 0 .0 2012 409245.00 172482.00 21560.00 280317.00 554813.00 1438417.00 7 0 .0 2013 418546.00 195365.00 21664.00 315619.00 534690.00 1485884.00 8 0 .0 2014 486691.00 188033.00 22100.00 364526.00 412920.00 1474270.00 9 0 .0 2015 526311.00 184828.00 24166.00 422099.00 407926.00 1565330.00 10 0 .0 2016 544831.00 183050.00 23362.00 475103.00 449147.00 1675493.00 11 0 .0 2017 550749.00 204151.00 24158.00 508316.00 471098.00 1758472.00 12 0 .0 2018 592588.00 229057.00 23440.00 558778.00 533064.00 1936927.00 13 0 .0 + 2019 616921.00 273312.00 24866.00 627959.00 533773.00 2076831.00 14 0 .0 + 2020 661343.00 280007.00 22168.00 868480.00 384471.00 2216469.00 note: – indicates an extremely low value, while + indicates an extremely high value. the range used is (q1 – 1.5*iqr, q3 + 1.5*iqr). table  4 shows: based on the table it is noted that in 2007 (case 1  = 159208.00) in the capital investment variable (q6) unlike other years there is a small number of investments in complex financial and economic systems while in 2019–2020 (cases 13 & 14) in the variable of goods and services there is an increase in expenditures for this category due to the management of the covid-19 pandemic in 2020 (280007.00). table 5. summary of estimated means summary of estimated means ws gs ue st ce te listwise 2013.5000 444116.7857 190802.2143 21644.6429 396677.2857 442121.7857 all values 2013.5000 444116.7857 190802.2143 21644.6429 396677.2857 442121.7857 table 5 shows: in listwise the arithmetic averages are calculated only for complete observations in complex financial systems on public expenditures, while in (all values) the averages are calculated taking all the values of public expenditures for all years. in all variables the averages are the same in both tests with crust it is emphasized that the distribution is business, management and economics engineering, 2022, 20(2): 329–357 343 normal there is no coincidence in the unstoppable and floating journey towards the reform of development in complex financial-economic systems for the interval of public expenditures during 2007–2020, therefore hypothesis 2 (h2) is accepted. figures 4–9: public expenditures in complex financial-economic systems (2007–2020). figure 4. goods and services figure 5. capital expenditures figure 6. utility expenses figure 7. subsidies and transfers figure 8. wages and salaries figure 9. total of public expenditures 344 e. lulaj. an unstoppable and navigating journey towards development reform in complex... based on the figures 4–9 for public expenditures in complex systems, it is emphasized that in the variable ws (wages and salaries) in the years 2007–2009 the expenditures were small, while during the unstoppable and navigable journey towards the development reform there is an increase of expenditures in each year and in particular there is an increase in expenditures in the years (2019–2020) as noted in the results in table 5 due to the covid-19 and other expenditures allocated by the state for both levels for salaries and wages of employees and other categories according to the financial statements. the variable gs (goods and services) states that in the years (2007–2008) there was a smaller number of goods and services category, then over the years’ financial reforms in complex systems for this category went on increasing and in particular, there was an increase in 2020 due to covid-19. the eu variable (utility expenses) states that in each year (2007–2020) there are reforms in complex systems in this category, in this case, 2007 had lower municipal expenditures and there was a reduction of these expenditures in 2020 due to the pandemic which had blocked everything at both levels and that the demand for municipal expenditures was quite small on the part of citizens and other actors. the variable st (subsidies and transfers) states that in 2007 had very small expenditures, while in 2020 there were quite large expenditures due to covid-19, the state had allocated subsidies and transfers for the recovery of the country’s economy. in the category ce (capital expenditures) it is stated that the year with the lowest capital expenditures was 2007 as was pointed out in table 5, where there were small expenditures in 2020 due to covid-19. the te variable (total expenditures) states that 2007 had small expenditures, while large expenditures were created during the years 2019–2020 as elaborated in each category. therefore, the state had an unstoppable and floating journey towards development reform in complex financial-economic systems for the interval of government expenditures during the years 2007–2020. 3.3. results for the unstoppable and navigating journey towards development reform in the complex financial and economic systems of government spending through the wald-wolfowitz, mann-whitney, friedman, run, and kruskal-wallis tests to see if the financial data are taken from the same ratio and year in complex economicfinancial systems are analyzed the results of tests wald-wolfowitz, mann-whitney, friedman, run, kruskal-wallis, in all variables for expenditures public navigation and development towards complex reforms. regarding the impact of reports and financial reporting on whether data is taken for time intervals from one report, or several reports have contributed (power, 2021) where it is emphasized that each model of financial reporting system should be as simple and dynamic as possible focused on relationships between financial items and not in static entities. table  6 shows: the data obtained from the wald-wolfowitz test indicate that the value of p (sig.  = 1.000) at the significance level 0.05 hypothesis 3 (h3) is accepted. the data for (ws, gs, eu, st, and ce) were received from different institutions at both levels for the categories of public expenditures in the complex financial and economic systems for the period 2007–2020. navigation and development in financial-economic reforms in complex systems are not the same. business, management and economics engineering, 2022, 20(2): 329–357 345 table 6. wald-wolfowitz test wald-wolfowitz test test statistics a,b frequencies number of runs z exact sig. (1-tailed) years n wages and salaries (ws) exact number of runs 2c .000 1.000 2007.00 1 2020.00 1 total 2 goods and services (gs) exact number of runs 2c .000 1.000 2007.00 1 2020.00 1 total 2 utility expenses (ue) exact number of runs 2c .000 1.000 2007.00 1 2020.00 1 total 2 subsidies and transfers (st) exact number of runs 2c .000 1.000 2007.00 1 2020.00 1 total 2 capital expenditures (ce) exact number of runs 2c .000 1.000 2007.00 1 2020.00 1 total 2 note: a. wald-wolfowitz test; b. grouping variable: years; c. no inter-group was encountered. table 7. mann-whitney test mann-whitney test test statisticsa ranks ws gs ue st ce var years n mean rank mann-whitney u 21.000 21.000 21.000 21.000 21.000 ws 2007.00 1 1.00 2020.00 1 2.00 total 2 wilcoxon w 1.000 1.000 1.000 1.000 1.000 gs 2007.00 1 1.00 2020.00 1 2.00 total 2 z –1.000 –1.000 –1.000 –1.000 –1.000 ue 2007.00 1 1.00 2020.00 1 2.00 total 2 asymp. sig. (2-tailed) .009 .009 .009 .009 .009 st 2007.00 1 1.00 2020.00 1 2.00 total 2 exact sig. [2*(1-tailed sig.)] .005b .005b .005b .005b .005b ce 2007.00 1 1.00 2020.00 1 2.00 total 2 note: a. grouping variable: years; b. not corrected for ties. 346 e. lulaj. an unstoppable and navigating journey towards development reform in complex... table 7 shows the value of z -1000 for all variables and the value of the significance level p = 0.009, in this case, the results are statistically significant there is a difference between the interval of 2007 and 2020 for all variables which means that the state has developed complex financial and economic systems, hypothesis 3 (h3) is accepted. table 8. runs and friedman tests runs test friedman test test statisticsa ws gs ue st ce ranks meanrank n 14 test valuea 452618.50 183939.00 21882.00 340072.50 454209.50 years 1.00 chisquare 79.102 cases < test value 7 7 7 7 7 ws 5.43 df 6 cases >= test value 7 7 7 7 7 gs 3.00 asymp. sig. 0.000 total cases 14 14 14 14 14 ue 2.00 n 14 number of runs 2 4 2 2 5 st 4.57 a. friedman test z –3.060 –1.947 –3.060 –3.060 –1.391 ce 5.00 asymp. sig. (2-tailed) .002 .022 .002 .002 .004 total 7.00 note: a. median table 8 shows: according to the runs test the data are not random, because the values of z are (ws = –3.060; gs = –1.947; eu = –3.060; st = –3.060; ce = –1.391) and sig is (ws = 0.002; gs  = 0.022; ue  = 0.002; st  = 0.002, ce  = 0.004), hypothesis 4 (h4) is accepted. according to the friedman test, there is a difference (asympt. sig.0.000 <0.005) between categories (y  = 1.00; ws  = 5.43; gs  = 3.00; ue  = 2.00; st  = 4.57; ce  = 5.00; te  = 7.00). according to the variables, it is emphasized that there is an unstoppable journey and navigation towards the development reform in the complex financial-economic systems through the analysis of the government expenditure interval, especially in capital investments and salaries and wages, again hypothesis 4 (h4) is accepted. table 9 shows: there is a difference between the years in all variables. in the first variable (ws) in 2020  = 14, there was an increase in expenditures for salaries and meditation due to the pandemic, while lower expenditures were in 2007  = 1. in the second variable (gs) also in 2020 = 14, there was an increase in expenditures for goods and services, while lower expenditures were in 2007 = 1. in the third variable (eu) there was an increase in expenditures for municipal expenditures in 2019  = 14, while lower expenditures were in 2007  = 1. in the fourth variable (st) there was an increase in expenditures for transfers and subsidies in 2019  = 14, while lower expenditures in 2007  = 1. in the fifth variable (ce) there was an increase in capital investments in 2012  = 14, while lower expenditures were in 2020  = 3 in 2007  = 1. in total, the increase in expenditures was in 2022  = 14 due to covid-19, while the decrease in expenditures was in 2007, which means that there were not many reforms in the complex financial-economic systems. hypothesis 4 (h4) is accepted. business, management and economics engineering, 2022, 20(2): 329–357 347 table 9. kruskal-wallis test kruskal-wallis test ws gs ue st ce total 2007.00 1.00 2007.00 1.00 2007.00 1.00 2007.00 1.00 2007.00 1.00 2007.00 1.00 2008.00 2.00 2008.00 2.00 2008.00 2.00 2008.00 2.00 2008.00 2.00 2008.00 2.00 2009.00 3.00 2009.00 3.00 2009.00 3.00 2009.00 3.00 2009.00 4.00 2009.00 3.00 2010.00 4.00 2010.00 5.00 2010.00 4.00 2010.00 4.00 2010.00 8.00 2010.00 4.00 2011.00 5.00 2011.00 4.00 2011.00 5.00 2011.00 5.00 2011.00 10.00 2011.00 5.00 2012.00 6.00 2012.00 6.00 2012.00 6.00 2012.00 6.00 2012.00 14.00 2012.00 6.00 2013.00 7.00 2013.00 10.00 2013.00 7.00 2013.00 7.00 2013.00 13.00 2013.00 8.00 2014.00 8.00 2014.00 9.00 2014.00 8.00 2014.00 8.00 2014.00 6.00 2014.00 7.00 2015.00 9.00 2015.00 8.00 2015.00 13.00 2015.00 13.00 2015.00 5.00 2015.00 9.00 2016.00 10.00 2016.00 7.00 2016.00 10.00 2016.00 10.00 2016.00 7.00 2016.00 10.00 2017.00 11.00 2017.00 11.00 2017.00 12.00 2017.00 12.00 2017.00 9.00 2017.00 11.00 2018.00 12.00 2018.00 12.00 2018.00 11.00 2018.00 11.00 2018.00 11.00 2018.00 12.00 2019.00 13.00 2019.00 13.00 2019.00 14.00 2019.00 14.00 2019.00 12.00 2019.00 13.00 2020.00 14.00 2020.00 14.00 2020.00 9.00 2020.00 9.00 2020.00 3.00 2020.00 14.00 3.4. correlation results according to tests pearson, kendall_tau, spearman’s rho for the analysis of data related to public spending in complex financial-economic systems at both levels in all institutions to see the impact of the pearson, kendall_tau, and spearman’s rho tests on data and all variables on public spending during the unstoppable and floating journey towards reforms in complex financial and economic systems, the following results are presented based on the hypotheses raised. ( ) ( ) ( ) ( ) ( ) 0 : µ , , , , , µ _ , , , , , µ , , , , , µ , , , , , µ _ , , , , µ h pearson ws gs ue st ce te kendall tau ws gs ue st ce te spearman s rho ws gs ue st ce te or pearson ws gs ue st ce te kendall tau ws gs ue st ce te spearm = = − − ′ ( ) , , , , , 0an srho ws gs ue st ce te =′ or h0: there is no link between the variables in the three tests for public spending toward the development of reforms in complex financial-economic systems ( ) ( ) ( ) ( ) ( ) 5 : µ , , , , , µ _ , , , , , µ , , , , , µ , , , , , µ , , , , , µ tau h pearson ws gs ue st ce te kendall tau ws gs ue st ce te spearman s rho ws gs ue st ce te or pearson ws gs ue st ce te kendall ws gs ue st ce te spearman s ≠ − ′ ′ ≠ − ( ) , , , , , 0rho ws gs ue st ce te ≠ h5: there is a link between the variables in the three tests for public spending toward the development of reforms in complex financial-economic systems 348 e. lulaj. an unstoppable and navigating journey towards development reform in complex... 3.4.1. pearson correlation (2-tailed) test results table 10. pearson correlation (ws, gs, ue, st, ce, te) pearson correlations ws gs ue st ce te wages and salaries pearson correlation 1 .866** .852** .905** .298** .968** sig. (2-tailed) .000 .000 .000 .000 .000 n 6217635 6217635 6217635 6217635 6217635 6217635 goods and services pearson correlation .866** 1 .618** .935** .241** .939** sig. (2-tailed) .000 .000 .000 .000 .000 n 6217635 6217635 6217635 6217635 6217635 6217635 utility expenses pearson correlation .852** .618** 1 .603** .443** .768** sig. (2-tailed) .000 .000 .000 .000 .000 n 6217635 6217635 6217635 6217635 6217635 6217635 subsidies and transfers pearson correlation .905** .935** .603** 1 .060** .939** sig. (2-tailed) .000 .000 .000 .000 .000 n 6217635 6217635 6217635 6217635 6217635 6217635 capital expenditures pearson correlation .298** .241** .443** .060** 1 .379** sig. (2-tailed) .000 .000 .000 .000 .000 n 6217635 6217635 6217635 6217635 6217635 6217635 total expenses pearson correlation .968** .939** .768** .939** .379** 1 sig. (2-tailed) .000 .000 .000 .000 .000 n 6217635 6217635 6217635 6217635 6217635 6217635 table  10 shows: according to the pearson test (2-tailed) there is a strong, positive significant relationship between ws and (gs = 86%, eu = 85%, st = 91%, te= 97%), while a link is positive but small with ce  = 30%, which means that wages and salaries on the part of capital investments are small because there was not a large number of capital investments as noted in the above tables and graphs of especially in 2020 the damage caused by the covid-19. the gs variable has a strong and important position correlation with (ws  = 87%, eu  = 62%, st  = 94%, te  = 94%), while a positive but small correlation with ce  = 24% due to covid-19. the eu variable has a strong and important positive relationship with (ws = 86%, gs = 62%, st = 60%, and te = 77%), while there is a positive but smaller relationship with ce  = 44%, which will mean that municipal expenditures were for goods and services, transfers and subsidies, while lower municipal expenditures were on the part of capital investments due to covid-19. the st variable has a strong and significant positive correlation with (ws = 91%, gs = 94%, eu = 60%, and te = 94%), while a positive but small correlation with ce = 6%. the ce variable has positive and significant correlations but not business, management and economics engineering, 2022, 20(2): 329–357 349 in high values (ws = 30%, gs = 24%, eu = 44%, st = 6%, te = 38%). the te variable has a positive and important relationship with (ws = 97%, gs = 94%, eu = 7%, st = 94%, and ce = 38%). based on this table, it is strongly recommended to develop reforms in complex financial-economic systems in the category of capital investments, because for 14 years there is no unstoppable journey and navigation towards the reform of the development of complex systems, but that this category has been quite affected by the covid-19 pandemic. hypothesis 5 (h5) is accepted. 3.4.2. kendall’s tau_b & spearman’s rho test results table 11. kendall_tau b & spearman’s rho correlation (ws, gs, ue, st, ce, and te) correlations kendall tau_b & spearman’s rho ws gs ue st ce te kendall’s tau_b ws correlation coefficient 1.000 .846** .802** .956** .297 .978** sig. (2-tailed) . .000 .000 .000 .139 .000 n 14 14 14 14 14 14 gs correlation coefficient .846** 1.000 .692** .802** .319 .868** sig. (2-tailed) .000 . .001 .000 .112 .000 n 14 14 14 14 14 14 ue correlation coefficient .802** .692** 1.000 .758** .319 .780** sig. (2-tailed) .000 .001 . .000 .112 .000 n 14 14 14 14 14 14 st correlation coefficient .956** .802** .758** 1.000 .253 .934** sig. (2-tailed) .000 .000 .000 . .208 .000 n 14 14 14 14 14 14 ce correlation coefficient .297 .319 .319 .253 1.000 .319 sig. (2-tailed) .139 .112 .112 .208 . .112 n 14 14 14 14 14 14 te correlation coefficient .978** .868** .780** .934** .319 1.000 sig. (2-tailed) .000 .000 .000 .000 .112 . n 14 14 14 14 14 14 spearman’s rho ws correlation coefficient 1.000 .952** .903** .987** .345 .996** sig. (2-tailed) . .000 .000 .000 .227 .000 n 14 14 14 14 14 14 gs correlation coefficient .952** 1.000 .837** .938** .420 .956** sig. (2-tailed) .000 . .000 .000 .135 .000 n 14 14 14 14 14 14 ue correlation coefficient .903** .837** 1.000 .890** .411 .899** sig. (2-tailed) .000 .000 . .000 .144 .000 n 14 14 14 14 14 14 st correlation coefficient .987** .938** .890** 1.000 .301 .982** sig. (2-tailed) .000 .000 .000 . .296 .000 n 14 14 14 14 14 14 ce correlation coefficient .345 .420 .411 .301 1.000 .376 sig. (2-tailed) .227 .135 .144 .296 . .185 n 14 14 14 14 14 14 te correlation coefficient .996** .956** .899** .982** .376 1.000 sig. (2-tailed) .000 .000 .000 .000 .185 . n 14 14 14 14 14 14 350 e. lulaj. an unstoppable and navigating journey towards development reform in complex... table  11 shows: according to the correlation coefficients (rho and tau_b, 2-tailed) the values are very important and positive between the variables in all categories for the period 2007-2020. in the variable ws, there is a strong and important positional relationship in both tau_b tests (gs  = 85%, ue  = 80%, st  = 96%, te  = 98%) and rho (gs  = 95%, ue  = 90%, st = 99%, te = 100%) while a positive but small correlation with (tau_b: ce = 30%, rho: ce = 35%). in the variable gs there is a strong and important positional relationship in both tau_b tests (ws = 85%, ue = 69%, st = 80%, te = 87%) and rho (ws = 95%, ue = 84%, st  = 94%, te  = 96%), while a positive but small correlation with (tau_b: ce  = 32%, rho: ce = 42%). in the eu variable there is a strong and important positional relationship in both tau_b tests (ws = 80%, gs = 69% st = 76%, te = 78%) and rho (ws = 90%, gs = 84% st  = 89%, te  = 90%), while a positive but small correlation with (tau_b: ce  = 32%, rho: ce = 41%). the ce variable in both tau_b and rho tests for all categories and variables for the period 2007-2020 has a positive relationship but with small values and in particular, the impact of the pandemic during 2020 is emphasized as a blow to capital investment by not functioning properly. in the te variable there is a strong and important positional relationship in both tau_b tests (ws = 98%, gs = 87%, eu = 78%, st = 93%) and rho (ws = 100%, gs = 96%, eu = 90%, st = 98%), while a positive but small correlation with (tau_b: ce = 31%, rho: ce = 38%). according to both the taub_b and rho tests, it is emphasized that there is a strong and positive relationship between the variables, but it is strongly recommended to develop and improve the category of public investment expenditures to have reforms in complex financial and economic systems as stressed and to the pearson test. figure 10 shows: the distance between years with the years goes by increasing, in this case, 2007 compared to other years has this distance as ten distances between two years with the figure 10. proximity matrix (euclidean distance between years) business, management and economics engineering, 2022, 20(2): 329–357 351 value of 2007 (2007 = 2008 =, 458; 2008 = 2009 =, 459; 2009 = 2010 =, 471; 2010 = 2011 =, 516; 2011 = 2012 =, 499; 2012 = 2013 =, 417; 2013 = 2014 =, 252; 2014 = 2015 =, 277; 2015 = 2016  =, 316; 2016  = 2017  =, 307; 2017  = 2018  =, 309; 2018  = 2019  =, 296; 2019  = 2020  =, 540), which means that the closer the years to each other the distance is small in complex financial and economic systems and conversely the existence of long distances of dependent variables reduces the levels of explanation of the dependent variable. matrix (stress test  =, 03359 & rsq =, 99613) àthe value of stress according to kruskals is 100% emphasizes the suitability of the data for the years 2007–2020 in complex financial and economic systems. figure 11. proximity matrix (euclidean distance between variables) figure 11 shows: variable wages and salaries has the closest distance to utility expenses (ws = ue = 1.507). the variable gods and services have the closest distance to subsidies and transfers (gs = st = 1.220). the utility expenses variable has the closest distance to wages and salaries (ue = ws = 1.507). the subsidies and transfers variable has the closest distance to goods and services (st = gs = 1.220). the capital expenditures variable has the closest distance to utility expenses (ce = eu = 3.408). all the farthest distance variables have the variable of capital investments, again the development of complex financial and economic systems to the variable of capital investments is strongly recommended. matrix (stress test =, 04053 & rsq  =, 99462) à the stress value according to kruskal’s is 100% emphasizes the suitability of the data for all variables in complex financial and economic systems. 3.5. elaboration validation of the hypotheses table 12 shows: the validation of the hypotheses (h1, h2, h3, h4, and h5) for all variables (ws, gs, eu, st, ce, and te) through 7 tests on the 5 hypotheses raised, with their most extensive verification and elaboration is done in the above tables. 352 e. lulaj. an unstoppable and navigating journey towards development reform in complex... table 12. elaboration validation of the hypotheses (h1, h2, h3, h4, h5) no. tests hypotheses (h1, h2, h3, h4, h5) approved/ rejected 1 tests of normality kolmogorovsmirnova shapiro-wilk h1: distribution of data on public expenditures in financial reports to complex financial-economic systems follows the normal distribution approved h1 2 data patterns (all cases) listwise h2: economic development reforms are significant in complex financial-economic systems for public spending approved h2 3 wald-wolfowitz test h3: data is not obtained from the same year in the reports of complex financial-economic systems approved h3 4 mann-whitney test h3: data is not obtained from the same year in the reports of complex financial-economic systems approved h3 5 runs test friedman test h4: is there a difference between the years of transition for financial reforms in complex financial-economic systems approved h4 6 kruskal-wallis test h4: is there a difference between the years of transition for financial reforms in complex financial-economic systems approved h4 7 pearson h0: m pearson (ws, gs, ue, st, ce, te) = m kendall_tau (ws, gs, ue, st, ce, te) m spearman’s rho (ws, gs, ue, st, ce, te) or m pearson (ws, gs, ue, st, ce, te) – m kendall_tau (ws, gs, ue, st, ce, te) – m spearman’srho (ws, gs, ue, st, ce, te) = 0 or h0: there is no link between the variables in the three tests for public spending towards the development of reforms in complex financialeconomic systems h5: m pearson (ws, gs, ue, st, ce, te) ≠ m kendall_tau (ws, gs, ue, st, ce, te) ≠ m spearman’s rho (ws, gs, ue, st, ce, te) or m pearson (ws, gs, ue, st, ce, te) – m kendalltau (ws, gs, ue, st, ce, te) – m spearman’srho (ws, gs, ue, st, ce, te) ≠ 0 h5: there is a link between the variables in the three tests for public spending towards the development of reforms in complex financialeconomic systems approved h5 rejected h0 kendall tau_b approved h5 rejected h0 spearman rho approved h5 rejected h0 conclusions public spending is becoming more and more important in every country. in modern times there has been a tremendous increase in government spending in all countries of the world, especially in times of the covid-19 pandemic. modern states are social states which are aiming to prove the well-being of their citizens by taking many functions upon themselves, so to complete these activities there is more and more public spending. therefore, the purpose of public spending is to meet common needs that people in their capacity are not able to meet effectively. expenditures should be planned, analyzed, and controlled using the rules of coordination and focusing on their time interval in complex financial systems, in such a way that the governing bodies do not endanger the well-being of a municipality or a ministry. so, the results of this research were easy to understand and apply, as well as the originality of business, management and economics engineering, 2022, 20(2): 329–357 353 this research was the combination of conceptual and managerial methodology for the years 2007–2020 for future years to benefit governing institutions at both levels from the advantages and recommendations of this research. more specifically, an unstoppable and navigating journey towards the reform of development in complex financial-economic systems through the time interval of public expenditures for the period 2007-2020 analyzed through: descriptive analysis, correlation analysis, tests of normality, data patterns (all cases), summary of estimated means, wald-wolfowitz, mann-whitney, friedman, run, kruskal-wallis, pearson, kendall’s tau_b, spearman’s rho, proximity matrix as in tables (1–12), in figures (1–11). therefore, 6 variables were analyzed (ws, gs, eu, st, ce, and te) where it is stated that the data had normal distribution, there was an increase in expenditures for each year, and especially during the covid-19, the data were taken from reports and different institutions for different years, as well as there is a strong and positive correlation between all variables, but a positive but lower correlation was with capital investment expenditures in 2007 and 2020. ws = tau_b (gs = 85%, ue = 80%, st = 96%, te = 98%) and rho (gs = 95%, ue = 90%, st = 99%, te =1 00%), gs = tau_b (ws = 85%, ue = 69%, st = 80%, te = 87%) and rho (ws = 95%, ue = 84%, st = 94%, te = 96%), ue = tau_b (ws = 80%, gs = 69% st = 76%, te = 78%) and rho (ws = 90%, gs = 84% st = 89%, te = 90%), ce in both tau_b and rho tests for all categories and variables for the period 2007–2020 there are positive correlations, but with small values and in particular, the impact of the pandemic during 2020 is emphasized as a blow to capital investments by not functioning properly. the variable te = tau_b (ws = 98%, gs = 87%, ue = 78%, st = 93%) and rho (ws = 100%, gs = 96%, ue = 90%, st = 98%). pearson(r): gs (ws = 87%, ue = 62%, st = 94%, te = 94%), ue = (ws = 86%, gs = 62%, st = 60%, te = 77%), st = (ws = 91%, gs = 94%, ue = 60%, te = 94%), ce = (ws = 30%, gs = 24%, ue = 44%, st = 6%, te = 38%), te = (ws = 97%, gs = 94%, ue  = 77%, st  = 94%, ce  = 38%). but other techniques, methodologies, and philosophies exist from other research to implement reforms in complex financial and economic systems for government spending. given the main goals mentioned in the methodology, whether there have been development reforms in complex financial-economic systems for the period 2007–2020 (14 years), what is the complexity that has evolved in each variable, and whether development reforms have been achieved in the complex financial-economic systems? it was confirmed that there were reforms in the complex financial and economic systems for government spending each year, but it is strongly recommended that the category of public investment spending be developed and improved. the limitations of this paper are that only a considerable number of variables are taken into the study and only in the state of kosovo for a period of 14 years (2007–2020). in this case, for other analyzes by other researchers’ other variables can be analyzed, longer periods or comparability with other countries. because there are still challenging questions for complex financial and economic systems by studying financial items at the micro level. data availability the data used to support and prove the findings of this study are available from the corresponding author upon request. 354 e. lulaj. an unstoppable and navigating journey towards development 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(2015). projective synchronization of hyperchaotic financial systems. discrete dynamics in nature and society, 2015, 782630. https://doi.org/10.1155/2015/782630 https://doi.org/10.1155/2012/383812 https://doi.org/10.4135/9781412961288.n207 https://doi.org/10.1016/j.enpol.2019.111120 https://doi.org/10.1787/budget-v7-art13-en https://doi.org/10.1002/ijfe.2579 https://doi.org/10.2307/2333709 https://doi.org/10.1016/j.procs.2021.09.235 https://doi.org/10.1155/2018/3132940 http://www.jstor.org/stable/23405176 https://doi.org/10.1155/2021/1614055 https://doi.org/10.1155/2020/4247587 https://doi.org/10.1155/2022/2834009 https://doi.org/10.1017/s0022109000003173 https://doi.org/10.1016/j.procs.2010.04.268 https://doi.org/10.1177/2332858420928985 https://doi.org/10.1155/2015/782630 _goback baut0010 baut0015 copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. complex analysis of financial state and performance of construction enterprises algirdas krivka1, eglė stonkutė2 1faculty of business management, vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania 2faculty of economics, vilnius university, saulėtekio al. 9, lt-10222 vilnius, lithuania e-mails: 1algirdas.krivka@vgtu.lt (corresponding author); 2egles.stonkutes@gmail.com received 18 october 2015; accepted 21 november 2015 abstract. the paper analyses the financial state and performance of large constructions enterprises by applying financial indicators. as there is no one single decisive financial indicator enabling to objectively assess enterprise performance, the multi-criteria decision making (mcdm) methods are applied with four groups of financial ratios (profitability, liquidity, solvency and asset turnover) acting as evaluation criteria, while the alternatives assessed are two enterprises compared throughout the reference period of three years, also with the average indicator values of the whole construction sector. the weights of the criteria have been estimated by involving competent experts with chi-square test employed to check the degree of agreement of expert estimates. the research methodology contributes to the issue of complex evaluation of enterprise financial state and performance, while the result of the multi-criteria assessment – the ranking of enterprises and sector average with respect to financial state and performance – could be considered worth attention from business owners, potential investors, customers or other possible stakeholders. keywords: enterprise performance, financial analysis, financial ratios, profitability, liquidity, solvency, mcdm, saw, complex analysis. jel classification: c44, c61, d24, g11, g30, g33, m41. 1. introduction in the light of complicated highly competitive modern business environment, disposing comprehensive information on enterprise financial state and performance, enabling to objectively assess the position of an enterprise in the market and its competitive capabilities, becomes the question of vital importance. although modern scientific research on the issue of enterprise performance evaluation propose a variety of methods based on financial and non-financial, both quantitative and qualitative criteria, it is still the pure financial approach (with the values of quantitative indicators, or financial ratios, calculated) being applied most commonly. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(2): 220–233 doi:10.3846/bme.2015.300 http://dx.doi.org/ 10.3846/bme.2015.300 221 business, management and education, 2015, 13(2): 220–233 however, a significant drawback concerning financial ratios application has to be recognized – a comprehensive and sustainable study on enterprise financial state and performance should involve a balanced set of financial ratios, which could seem to be equally important, but very different in their nature, while there is no single financial indicator reflecting the ultimate result. moreover, this problem becomes even more important in case of comparative analysis of financial performance in a reference period or among the group of enterprises. suppose, a part of indicators (e.g. profitability and turnover) reflect improved enterprise performance comparing to the previous year, while the others (e.g. liquidity and solvency) take a turn for the worse, thus making the results of such research quite controversial and tricky to interpret. the problem of this paper is complex quantitative evaluation of financial state and performance of construction enterprises. the aim of the research is to complexly assess the financial state and performance of construction enterprises on the basis of quantitative financial criteria. facing the issue of multiple financial ratios reflecting enterprise performance, multi-criteria decision making (mcdm) methods are applied in order to calculate the value of the integrated criterion for each alternative, i.e. financial state and performance of a particular construction enterprise in a particular year. the assessment criteria are composed of the balanced set of financial ratios, with their weights being estimated by the competent experts. the structure of the paper is as follows: we start with an overview of previous research on enterprise performance analysis concentrating on the role of financial indicators and mcdm; then the methodology of the research is presented including criteria selection and their weight estimation, normalization of criteria values, and mcdm methods application; the paper is finished with the discussion of the results and conclusions. 2. previous research traditional, and probably, most popular approach to enterprise performance analysis, is based on financial results, usually being expressed with the values of financial ratios which are commonly classified into the following groups: profitability, liquidity, solvency, activity (turnover), and market value (bansal 2011; erdogan 2013; hofmann, lampe 2012; kotane, kuzmina-merlino 2012; mackevičius, valkauskas 2010; seay 2014; zelgalve, zaharcenko 2012). the certain advantages of the following approach include the quantitative analysis, possibility to compare performance in a number of periods, between different enterprises without limitations to company size (as the calculated indicators are ratios with no dimension); besides, it is always profit and market value being the ultimate results the business owners are interested in. however, there is no one single decisive indicator enabling to objectively assess the enterprise financial state and performance. rather, enterprise financial analysis could provide quite controversial results if a part of indicators is showing good results, while this is not the case for the others; especially, taking into account possible reverse dependence between some ratios. 222 a. krivka, e. stonkutė. complex analysis of financial state and performance of construction enterprises financial indicators could also be assessed on economic sector or industry level in the empiric research based on the structure-conduct-performance (see bain 1959), i.e. the scp paradigm (e.g. bhardwaj et al. 2013; garza-garcia 2012); moreover, the financial analysis approach in industry research (i.e. investigating industry-average values of common financial ratios) gained additional importance under the conditions of the recent economic crisis: e.g. furniture industry (li et al. 2011), logistics (hofmann, lampe 2012), textile (abbas et al. 2012), agriculture (li et al. 2011), inter-industry complex analysis (krivka 2014). other common approaches to enterprise performance analysis integrate financial indicators with other non-financial criteria. the combination of thereof is commonly supported by managerial needs, as, in deed, financial criteria are considered to be lagging, clearly reflecting the past, but not saying much about the future. the balanced scorecard, or the bsc (see kaplan, norton 1992), offers the assessment of performance from four interrelated perspectives (financial, customer, internal business processes, learning and growth), in empiric research each represented by a set of performance evaluation criteria (ardekani et al. 2013; lee 2014; panicker, seshadri 2014; tavana et al. 2015). key performance indicators (kpi) also integrate financial and non-financial dimensions providing feedback from enterprise strategy implementation, as they usually represent the detail quantitative criteria enabling to assess the achievement of the objectives, laid down in company’s strategy as the desired values of the indicators, or to compare enterprise performance with industry best or best practices using benchmarking technique (milichovsky, hornungová 2013; pavláková dočekalová et al. 2015). as it was mentioned earlier, there is no one single indicator, enabling to make the ultimate conclusion on enterprise financial state and performance, therefore modern empiric research address this problem in at least two different ways: determining the indicators having the most significant influence on enterprise financial state and performance (bhunia, sarkar 2011; erdogan 2013; hsu 2013; pavláková dočekalová et al. 2015) or calculating the integrated criterion characterizing enterprise performance by applying mcdm methods. the latter methods are applied involving financial indicators only (e.g. ginevičius, podviezko 2013; hosseini et al. 2013; krivka 2014; liao, ni 2014) or combining both financial and non-financial indicators in the context of the bsc (e.g. ardekani et al. 2013; tavana et al. 2015) or other approach, e.g. financial performance and risk analysis (hsu 2014). although some researchers as one of the main features, distinguishing construction industry from other kinds of economic activity, indicate large scale projects with high risk of delay, growing costs and the subsequent need to manage the associated risks (gonzález et al. 2014; gündüz et al. 2013; rosenfeld 2014; zhao et al. 2013), a considerable part of construction sector studies is devoted to enterprise performance assessment, while the analysis methodology is common with those applied to other industries. the paragraph below presents a brief overview of a number of recent empiric studies devoted to enterprise financial state and performance analysis in construction. 223 business, management and education, 2015, 13(2): 220–233 h. al-malkawi and r. pillai (2013) investigate the impact of the financial crisis on uae real estate and construction sectors by applying liquidity, profitability, financial leverage, and turnover ratios. m. hegazy and s. hegazy (2012) develop a benchmarking model to evaluate uk construction companies’ performance by outlining the set of financial kpi (including the indicators representing liquidity, leverage, activity management, profitability, and shareholder value), together with the minimum standard values of the mentioned indicators (benchmarking technique). t. adeleye et al. (2013) apply binary logistic regression, with financial ratios (e.g. operating expense divided by sales, cost of revenue divided by sales, long-term debt divided by total assets) coupled by non-financial indicators (e.g. age of a company, type of trade) acting as parameters, to distinguish the factors having the strongest influence on probable loss of large construction companies. i. e. tsolas (2013) in the first step of his research employs data envelopment analysis (dea) to model the performance of listed construction enterprises in two dimensions: profitability efficiency and efficiency in the market value-generating process; the second step is devoted to identifying the drivers of performance with the help of the regression model. f. deng and h. smyth (2013) present a comprehensive overview of studies by other researches on the topic of measuring performance of constructions companies and distinguish 36 financial and non-financial indicators, reflecting enterprise performance, whereas the profitability indicators are considered to be used most often. in other empiric research, headed by f. deng, factor analysis is applied in order to find out the indicators having the strongest influence on construction companies’ competitiveness in china (deng et al. 2013), and the main performance drivers for construction enterprises in the uk focusing on three groups of indicators: profitability measures, employee measures, and growth measures (deng, smyth 2014). jin et al. (2013) apply the bsc approach for evaluating international construction companies’ performance within six dimensions of indicators: financial performance, market performance, customer perspective, stakeholders, internal business processes, learning and growth. y. s. liu et al. (2013) investigate the relationship between market structure, ownership structure and performance in chinese construction industry under the scp approach based on multiple regression analysis. h.-j. kim and k. f. reinschmidt (2012) present a study investigating market structure of us construction industry and the organizational performance of large contractors and design firms, focusing on size, growth rate, business stability, and market diversification. y. tan et al. (2012) analyse the impact of competition environment on performance, examining the relationship between competitive strategy and performance, and indicating four main generic strategies applied by contractors classified into four groups according to their different strategic orientations: prospectors, analysers, defenders, and reactors. tamošaitienė et al. (2011) offer a du point pyramid-based methodology for profitability analysis of construction projects with mcdm methods applied for estimating the best contractor. with regards to the accomplished literature review, it has to be emphasized that both financial and non-financial indicators could be applied for enterprise performance 224 a. krivka, e. stonkutė. complex analysis of financial state and performance of construction enterprises analysis in the scope of different approaches; however, the decision upon relying on financial indicators only or combining them with non-financial criteria, and the choice of particular indicators depend on the aim of the research. the research presented in this paper employs financial indicators only, while such approach is based on the following arguments: – the aim of the research considers the assessment of enterprise financial state and performance in the past reference period, with no managerial implications to ongoing performance monitoring; – financial indicators are quantitative criteria, which is usually more reliable than qualitative; – mcdm methods are to be employed for evaluation, thus avoiding the problem of no single ultimate indicator to reflect enterprise performance. the following section of the paper explains the methodology of the research, including the alternatives to be assessed, the choice of financial indicators (evaluation criteria), weight estimation and an overview of mcdm methods to be applied. 3. methods and theoretical framework the financial data of the constructions enterprises analysed in this paper is obtained from financial reports of companies listed in nasdaq baltic; moreover, the analysis is supplemented by the average construction industry data obtained from statistics lithuania (official national authority in the sphere of statistics). with regards to experience of other authors (bansal 2011; erdogan 2013; kotane, kuzmina-merlino 2012; mackevičius, valkauskas 2010; seay 2014; zelgalve, zaharcenko 2012) the system of financial state and performance indicators is composed of four main groups of enterprise financial ratios: profitability, liquidity, solvency and asset turnover. on the authors’ opinion, financial ratios are the most convenient way to compare financial state and performance of a specific company to its competitors and average industry data. the indicators selected for the research and their formulas are presented in table 1. financial state and performance of an enterprise cannot be evaluated on one financial ratio (or even group of ratios); rather, it has to be assessed from various perspectives (different ratios and their groups). all these indicators might be contrary to each other, maximizing or minimizing, so it is necessary to find the single integrated criterion enabling to judge upon enterprise financial state and performance. in such a case mcdm methods, currently widely applied in construction (e.g. kalibatas et al. 2012; šaparauskas et al. 2011; zavadskas et al. 2008), economics and management (e.g. ginevičius et al. 2012, 2013; ginevičius, podviezko 2011, 2013; hsu 2013), seem to be an appropriate tool. the research, presented in this paper, is based on financial data of calendar years 2011–2013 (since the research was conducted in 2014, the data for 2014 had not been published yet). the alternatives under evaluation are two large construction companies 225 business, management and education, 2015, 13(2): 220–233 and construction industry average (see table 2) – each of them is assessed with regards to 10 financial state and performance indicators (the scheme of evaluation is presented in table 3). the evaluation is performed on yearly basis, so the calculations are repeated for every year from 2011 to 2013. the value ijr of the particular evaluation criterion (financial indicator) i ( 1 10= ,...,i ) for the assessed alternative (construction enterprise / industry average) j ( 1 3= ,...,j ) is calculated on the basis of officially published companies’ financial statements, while the industry average values of financial ratios are obtained from statistics lithuania. to estimate weights ωi of the financial indicators, the method of expert evaluation is applied with respect to condition 10 1 1 = ω =∑ i i . table 2. the assessed alternatives (source: authors) no description 1 as “merko ehitus” 2 as “nordekon” 3 construction industry average table 1. enterprise financial state and performance indicators, applied in the research (source: erdogan 2013; mackevičius, valkauskas 2010; zelgalve, zaharcenko 2012) no indicator formula profitability ratios 1 gross margin ratio gross profit / sales revenues 2 return on sales (ros) net profit / sales revenues 3 return on assets (roa) net profit / total assets 4 return on equity (roe) net profit / equity liquidity ratios 5 current ratio current assets / current liabilities 6 quick ratio (current assets – inventory) / current liabilities solvency ratios 7 equity-to-debt ratio equity / total liabilities 8 debt ratio total liabilities / total assets asset turnover ratios 9 total asset turnover sales revenues / average total assets 10 accounts receivable turnover sales revenues / average accounts receivable 226 a. krivka, e. stonkutė. complex analysis of financial state and performance of construction enterprises table 3. the scheme of multi-criteria assessment of construction enterprises with regards to financial state and performance indicators (source: authors) criteria criteria values for assessed alternatives no description max (+) / min (–) weight 1 2 3 1 gross margin ratio + w1 r1,1 r1,2 r1,3 2 return on sales (ros) + … … … … 3 return on assets (roa) + … … … … 4 return on equity (roe) + … … … … 5 current ratio + w1 ri,1 ri,2 ri,3 6 quick ratio + … … … … 7 equity-to-debt ratio + … … … … 8 debt ratio – … … … … 9 total asset turnover + … … … … 10 accounts receivable turnover + w10 r10,1 r10,2 r10,3 the result of multi-criteria evaluation is the ranking of enterprises for every year of the period from 2011 to 2013. three mcdm methods, i.e. sum of ranks, geometric mean and saw (simple additive weighting), have been applied in the research. these methods have been chosen for several reasons: because of their popularity, simple calculation algorithm, which can be easily performed without a help of special software, and clear interpretation of the results obtained. sum of ranks calculates the sum of criteria value ranks ijr of all criteria for each j-th alternative (ginevičius 2007): 1= = ∑ m j ij i v r , (1) where the best alternative has the lowest sum of ranks jv . geometric mean calculates the geometric mean of normalized criteria values ijr , and the best alternative is indicated by the highest value of the integrated criterion π j . initial criteria values ijr are normalized using the formula (ginevičius et al. 2008a, 2008b, 2012; podvezko 2011): 1 = ∑ = rij rij n rij j  , (2) and the integrated criterion values are calculated as follows: 1 = ∏π = m m rj iji  . (3) 227 business, management and education, 2015, 13(2): 220–233 saw method calculates the sum of normalized (see formula 2) weighted values ijr of all criteria ( 1= ,...,i m ) for each j-th alternative (ginevičius et al. 2008a, 2008b, 2012, 2013; podvezko 2011): 1= = ω∑ m j i ij i s r , (4) while the best alternative gains the highest value of the integrated criterion js . 4. research procedure and results the questionnaires for estimating the weights of the selected financial state and performance indicators were submitted to a number of construction enterprises, and 7 fully filled-in forms have been received. the experts (construction enterprises’ finance department managers) were asked to evaluate the weights of the financial indicators in two steps: first to estimate the weights of the indicators inside every particular group (profitability, liquidity, solvency and asset turnover – see table 1) and then the weights of four groups: the ultimate weight ωi of the i-th indicator was calculated by multiplying its weight ω gi inside the group by the weight ω g of the group in the integrated criterion: ω = ω ⋅ ωgi i g , (5) with respect to conditions: 1ω =∑ gi (for every group of indicators) and 1ω =∑ g (for the integrated criterion). table 4 displays the ultimate weights of the evaluation criteria. table 4. evaluation criteria weights based on expert estimates (source: authors) evaluation criteria experts and criteria weights no description 1 2 3 4 5 6 7 average 1 gross margin ratio 0.09 0.09 0.06 0.09 0.06 0.09 0.09 0.081 2 return on sales (ros) 0.09 0.15 0.15 0.09 0.12 0.06 0.15 0.116 3 return on assets (roa) 0.06 0.03 0.03 0.06 0.09 0.06 0.03 0.051 4 return on equity (roe) 0.06 0.03 0.06 0.06 0.03 0.09 0.03 0.051 5 current ratio 0.15 0.09 0.12 0.15 0.12 0.15 0.15 0.133 6 quick ratio 0.15 0.21 0.18 0.15 0.18 0.15 0.15 0.167 7 equity-to-debt ratio 0.21 0.18 0.18 0.18 0.21 0.18 0.18 0.189 8 debt ratio 0.09 0.12 0.12 0.12 0.09 0.12 0.12 0.111 9 total asset turnover 0.06 0.06 0.04 0.06 0.06 0.06 0.04 0.054 10 accounts receivable turnover 0.04 0.04 0.06 0.04 0.04 0.04 0.06 0.046 totals 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 228 a. krivka, e. stonkutė. complex analysis of financial state and performance of construction enterprises the agreement of experts’ responses has been tested by applying 2χ criterion with 1= −v m degrees of freedom (ginevičius et al. 2008a, 2008b): ( ) 122 1 χ = + s rm m , (6) where m is the number of evaluation criteria, r is the number of experts, and s is the dispersion calculated by the formula: ( )2 1= = −∑ m i i s c c , (7) with ic being the sum of ranks of all r experts’ criterion i estimates, and c is the mean value of sums of all criteria ranks. seeing that the calculated value of 2 49 53χ = . is larger than the critical value of 2 16 92χ = .cr (with the significance level of 0 05α = . and 9 degrees of freedom), the experts’ responses are considered to be in agreement. this allows us to use the average weights of the indicators in our calculations. first, the alternatives have been evaluated for every year of the reference period of 2011–2013 (table 5). table 5. the results of multi-criteria assessment on yearly basis (source: authors) alternative sum of ranks geometric mean saw ultimate results value rank value rank value rank sum of ranks ultimate rank 2011 as “merko ehitus” 19 2 0.22 3 0.33 2 7 2 as “nordecon” 23 3 0.23 2 0.27 3 8 3 construction industry average 18 1 0.4 1 0.4 1 3 1 2012 as “merko ehitus” 13 1 0.42 1 0.44 1 3 1 as “nordecon” 23 2 0.27 2 0.26 3 7 2 construction industry average 24 3 0.26 3 0.3 2 8 3 2013 as “merko ehitus” 16 1 0.37 1 0.4 1 3 1 as “nordecon” 21 2 0.31 2 0.28 3 7 2 construction industry average 23 3 0.28 3 0.32 2 8 3 229 business, management and education, 2015, 13(2): 220–233 the yearly results indicate that as “merko ehitus” was the best alternative in 2012 and 2013, while in 2011 both enterprises performed worse than construction sector average. though all the chosen mcdm methods have provided the same result concerning the best alternative (ranked 1st), for the 2nd and 3rd ranks the results have deviated. this supports the approach of applying several mcdm methods with the ultimate ranking coming from the average results. then the whole period of 2011–2013 was taken into account – the ultimate results of assessment of financial state and performance during the entire reference period, based on the sum of the ultimate yearly ranks, are presented in table 6. table 6. the final ranking of the alternatives throughout the research period of 2011–2013 (source: authors) alternative sum of the ultimate yearly ranks final rank as “merko ehitus” 4 1 as “nordekon” 7 2–3 construction industry average 7 2–3 it has been determined that for the whole reference period the best alternative is as “merko ehitus”, which means that this enterprise can be characterized by the strongest financial state and performance in 2011–2013, compared to other alternatives, whereas as “nordecon” performed similar to the construction sector average. 5. conclusions the research on complex evaluation of construction enterprises’ financial state and performance presented in this paper is summarized by the conclusions and a glance at possible further research. having accomplished the comprehensive literature study, it can be presumed that although modern scientific research propose a wide range of methodology for enterprise financial state and performance analysis, most of the recent studies on the topic rely on financial indicators completely or at least partially (combining them with non-financial criteria). this fact, coupled by extra arguments related to the aim of this research and reasonable preferences towards the purely quantitative approach, encouraged the authors of this paper to assess enterprise financial state and performance on the basis of financial indicators. since it has been presumed in the paper that there is no single financial indicator enabling to reflect the ultimate result of enterprise financial state and performance, the balanced set of financial indicators (including profitability, liquidity, solvency and asset turnover ratios) has been applied for assessment, with the integrated criterion values being estimated with the help of mcdm methods. in the scheme of multi-criteria evalu230 a. krivka, e. stonkutė. complex analysis of financial state and performance of construction enterprises ation financial state and performance of two enterprises along with the average construction industry results in a three-year reference period are considered to be the alternatives assessed, while the criteria for evaluation are represented by the set of financial ratios with their weights being estimated by the competent experts. the results of multi-criteria assessment enable to rank the alternatives, i.e. it has been determined that taking into account the whole reference period of 2011–2013, as “merko ehitus” had supreme financial state and performance results compared to their rival as “nordekon” and to industry average. it has to be stated though that on the basis of multi-criteria assessment it cannot be determined to what extent as “merko ehitus” has outperformed the other alternatives, because mcdm methods are limited to providing rankings only. however, the results of the assessment can be considered worth attention from business owners, potential investors, customers or other possible stakeholders, as they have clearly shown that 1) as “merko ehitus” is performing better than the construction industry in general; 2) as “merko ehitus” is performing better than its main competitor as “nordekon”. the further research could be related to wider application of mcdm for enterprise financial state and performance analysis in the context of choosing the best alternative for investment from publicly listed enterprises. disclosure statement authors do not have any competing financial, professional, or 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lithuania. in 2015 she received a bachelor of economics in vilnius gediminas technical university. currently studying at vilnius university, a master of accounting (accounting and auditing specialization). http://dx.doi.org/10.3846/1648715x.2011.586532 http://dx.doi.org/10.1061/(asce)co.1943-7862.0000407 http://dx.doi.org/10.1007/s10479-014-1738-8 http://dx.doi.org/10.1061/(asce)co.1943-7862.0000559 http://dx.doi.org/10.3846/1392-3730.2008.14.3 http://dx.doi.org/10.1061/(asce)co.1943-7862.0000712 copyright © 2016 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. acession to the european union: advantage or disadvantage for czech companies? dušan litva department of microeconomics, faculty of business and administration, university of economics in prague, nam. w. churchilla 1938/, 130 67, prague 3, czech republic e-mail: xlitd00@vsel.cz received 4 october 2016; accepted 21 november 2016 abstract. in this paper has been studied effects of accession to the eu on czech companies which were selected and grouped according to 5 parameters: region, legal form, operation area, business sector and size of the company defined by number of employees. questionnaire containing 14 questions have replied in total 146 respondents. it is possible to conclude that accession to the eu brought more advantages to big global jointstock companies than to small regional companies which were mostly negative and claimed worsening of business results due to european integration. most of the 146 respondents asked via questionnaire containing 14 questions did not agree with acceptance of euro, while those who agreed had been estimated 2020 as ideal year to access eurozone. companies in quaternary sector were mostly positive on the opposite to the companies in tertiary sector which were negative. companies in prague and central bohemia were much more positive towards eu benefits than in rest of the czech republic regions. keywords: eu, czech, entrepreneurship, parameters, euro. jel classification: p16, f55. 1. introduction on 1st may 2004 became czech republic (cr) valid member of the european union (eu). expectation before access has been different. it was expected that due to institutional and legislation changes which czech government committed to keep, economy will change significantly which will influence entrepreneurs in czech republic and their behaviour. in the first years after the eu accession, the czech economy experienced an unprecedented growth since the beginning of the economic transformation at the beginning of the 90s (jonas, bulir 1995). the growth was accompanied by an increase in labour costs and by the strengthening of the czech crown. the impact of the crisis of 2008–2011 has been relatively limited. the major reason is the conservative approach of czech banks in the pre-crisis period. as an export-oriented economy, however, the czech republic has been very sensitive to the consumption trends of its eu neighbours, particularly in germany (jacobsen 2002). the export to germany dropped almost by b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(2): 226–248 doi:10.3846/bme.2016.331 mailto:xlitd00@vsel.cz doi:10.3846/bme.2016.331 227 business, management and education, 2016, 14(2): 226–248 10% in 2009 in comparison with previous years and the economic recovery in germany in 2010 was reflected in the growth of czech exports. as an eu member, the czech republic has gained a potential to influence the regulatory framework of the internal market as an active player, in contrast to the position of a passive recipient of acquis in the pre-accession period. the experience of the first post-accession years has demonstrated with great clarity the importance of defining and pursuing national interests within the eu structures. it is obvious, that not all changes related to access of czech republic to the european union has occurred only in 2004 which is year of access to eu. it can be said that some changes had been happening already since establishment of czech republic or even further since transformation of czech economy to market economy (cecchini et al. 1998). however, there are existing changes and their consequences which were caused by borders opening and accessing one market of european union. first negotiations about access of czech republic to eu has started in 1990 and hence this year can be considered as beginning of all changes related to access of czech republic to eu (holub 2003). application of access to eu has been submitted by czech government on 17th jan 1996 (world bank 1999). since this year has been existing requirements on harmonisation of law, account and tax system, duties, protection of consumer etc. adaptation to czech law to european union law has touched czech entrepreneurs in several ways. preparation for access has helped to improve economic environment (ministerstvo pro místní rozvoj české republiky 2014). on the other side, it has forced companies to major investment to reach unification with new law and regulations. also, increase of indirect taxes influenced in some areas demand. main goal of this paper has been described and analyse perception of czech entrepreneurs, executives and managers of companies from different regions, legal forms, economical classification of business area or number of employees, regarding accession of czech republic to the european union and its consequences on entrepreneurship area. 2. scientific literature review while eu integration was much desired and greatly anticipated goal for most of the czechs, it also called for many fears and concerns. among them was fear that eu membership could harm competitive position of czech republic in global economy, it would lead to higher unemployment and influx of foreign workers, higher prices and inflation, undermine social cohesion. there was also fear it will be costly and net drain on czech budget. however, after 12 years it has shown up that this fear was unfounded. economic growth. accession has had positive impact on the performance of czech economy, as it continued to grow and slowly catch up with eu 15 in terms of per capita income, standard of living, and changes in the structure of consumption. supported by increase of export and fdi, since 2000 gdp of czech republic has consistently growth at higher rate than eu 15. czech gdp reached 4.5% in 2004 and czech economy grew 228 d. litva. acession to the european union: advantage or disadvantage for czech companies? by more than 6% for next 3 years, which was much above eu average growth. however, after the global crisis growth have been slow down. unemployment. despite predictions of huge unemployment rate increase, it did not change dramatically, in fact it declined. before accession unemployment was reaching level 7–8%, in 2004 it reached 8.3% (compare to eu average 8.5%) and it was gradually decreasing in following years. in 2008 unemployment fell to historically lowest value of 4.4%. employment rate reached in 2008 66.6% exceeding eu average of 66.3%. unemployment increased in 2009 to the level of 6.7%. by december 2008 nearly 285 000 foreign workers employed legally in czech republic which is more than 250% increase from the 108 000 foreign workers in 2004. the biggest amount of workers were coming from slovakia (39%), ukraine (29%) and poland (8%). however, in spite of this increase, immigration was not perceived as a problem by czech society. prices and inflation. a major concern in 2004 was that domestic prices for goods and services would rise sharply after accession. because of the gap between price levels in the czech republic and the eu 15 (average price level of cr has been 52% of the average price level of eu 15), there was a pressure for nominal convergence. it was even more so because of geographical proximity of the czech republic to more economically developed countries of germany and austria. gradual increase of prices with convergence to global prices started already in 1990. relatively high prices could be found in equipment for investment, passenger vehicles, communications and clothing. on the other hand, services such as housing, education or health care have been remained at generally low levels. despite expectations prices did not increase significantly after accession. prices were growing gradually and in 2008 were in average 40% higher than in 2005. however, this trend was consequence of higher global energy and food prices the eu integration. increase related to the eu accession can be linked with tax harmonization as strategical goal of eu has been indirect tax harmonization (vat and consumption tax). vat tax has been fixed to 15% as a minimum. direct tax such as income tax have not been harmonized. tax legislation have been received in 2004 and touched were also alcohol, cigarettes and petroleum gas products. total estimated impact of tax harmonization has been one third lower than estimated by czech national bank. there was not significant impact on growth of inflation. czech republic and eu budget. eu budget increase several times in subsequent years. in period of 2007–2013 it was allocated for czech republic nearly 27 bil. euro in cohesion policy funds which was 3rd highest among all memberstates and highest in per capita terms. as a results position of net recipient has improved. cumulative positive balance has reached 3.1 bil. euro mostly from structural and cohesive funds. economic convergence. eu membership entails the obligation of adopting euro and joining euro area. in the accession treaty which cr and other states were required to accept goal of emu but they were not obliged to meet the criteria for entering eurozone during accession. it was expected that memberstates could enter eurozone only after 229 business, management and education, 2016, 14(2): 226–248 meeting necessary convergence criteria. while czech republic did not enter eurozone it is required to implement steps that will help it to become prepared for joining eurozone. czech republic is in longterm preparation phase and it needs to meet following 5 criteria during this phase: 1. exchange rate stability defined in erm ii without devaluation and severe tensions and volatility; 2. a balance budget over business cycle, defined a a budget deficit not higher than 3% of gdp; 3. manageable public debt defined as less than 60% of gdp; 4. long term price stability define as inflation no more than 1.5% higher than average of 3 lowest eu memberstates for last 12 months; 5. stable long term interest rate defined as 10 years bond rates no more than 2% higher than 3 eu memberstates with lowest inflation. the most challenging criteria to meet for czech republic is sustainability of fiscal stence and structural deficit which was increasing relatively fast due to strong economic growth period. current literature and studies. there are existing many publications and studies regarding eu integration analysing economic impact and macroeconomy parameters, mostly published in 2014, 10 years after czech republic accessed to the european union. however, these studies are focused on whole czech republic and not specifically on enterpreneuership area. czech ministry of industry and trade is publishing annual reports of actual status of sme (small and medium businesses) based on collected analytical and statistical information. these studies are based on easily quantify economic parameters like gdp contribution, exports, employment in sme etc. however, study focused on subjective perception of parameters which are difficult to quantify like company culture, profit, availability of labour resources, administration and legislation improvements is in available literature missing. companies studied in this paper were selected randomly but with condition of minimal existence since 2000 in order to be able to answer questions related eu integration with high relevance. 3. methodology questionnaire based on likert scale has been used as a key investigative qualitative technique to evaluate subjective perception of the respondents. all the answers from 146 respondents with response rate 2% have been summarized and given to tables. most significant results based on relations of the answers and 5 chosen parameters have been captured into table for each question as well. statistical evaluation. dependence and independence of 2 observed parameters is typically evaluated by pearson chiquadrat test and fischer exact test. however, outcome of these 2 tests is the only decision about presence or unpresence statistically significantly relation. nor one of them is able to quantify proven relation. key parameters which help to quantify tightness of these relations are relative risk (rr) and odds ration (or). by using these 2 parameters can be compared probabilities of occurrence for observed phenomenon in 2 different groups which are called experimental and controlled (pagano, halvorsen 1981). 230 d. litva. acession to the european union: advantage or disadvantage for czech companies? relative risk and odds ratio. calculation of relative risk (rr) is comparison of probabilities of occurrence of observed phenomenon in 2 different groups experimental experimental (p1) and controlled (p0). final result is number which express how many times is probability of occurrence in experimental group higher than in controlled group. binomial testing. except continual there are existing also discontinued categorical data where are the simplest example binary data. binary data are described by binomial distribution as a base for statistics of binary data, confidentiality intervals and binomial testing. from table 1 is obvious that evaluation of binomial variable lead to testing of null hypothesis of shares, where main target is evaluation of statements about parameter π binomial distribution which is reflecting probability of occurrence of considered feature in observed population (zar 2010). except point parameter π are important also: – confidentiality interval for parameter π. – test for parameter π against constant π0. – test about parameter π in 2 different groups. table 1. rules for rejection of h0 for test for ratio of one selection according to chosen alternative alternative 1 0h π ≠ π: 0jecth if→ re 1 2>z z −α/ alternative ( ) ( )( ) ( )( ) ( )( )1 1 1 1us us us usloans d depth d index d internet− − − −+ + + + 0jecth if→ re 1z>z −α alternative 1 0 < h π π: 0jecth if→ re <zz α 4. experimental part experimental part of the research is focused mostly on description and structure of the experiment, process of obtaining and analysing data, selection of key parameters of answers selection. due to huge amount of questions and parameters are presented only most important results and findings, which resulted from questionnaire. main goal of practical part has been sharing info and results which are valuable inputs for interpretation, analysis and formulation of final recommendations. description of the experiment. in order to evaluate subjective perception of respondents regarding accession of czech republic to the eu for areas and questions which are not easily quantified i decided to use qualitative research and hence form of questionnaire. main goal of questionnaire investigation was to define perception of accession to the eu by different companies within different categories and sectors in czech republic. questionnaire has been created out of 14 questions while 11 have been closed with opportunity to choose one of 5 choices of scale of agreement. two questions have been opened and one has been halfopened. one of the questionnaire main targets have been to find out subjective opinion of entrepreneurs in areas which are very difficult to measure and quantify like company culture, perception of competition and competitive231 business, management and education, 2016, 14(2): 226–248 ness, possibilities to raise outside capital, perception of corruption or ideal year for euro acceptance. hence quantification of subjective measures evaluated by questionnaire would be ideal fulfilment of easily measured and quantified data like macroeconomic analysis. questionnaire has been answered by 146 respondents. questionnaire evaluation is including percentage expression of the answers to all closed questions and the most frequent answers for open questions grouped to several representative statements. in each question is explored relation between answer and size of the company, geographical region, legal form, size of the company and sector of entrepreneurship. in questionnaire are not included physical objects or companies which were established after 2004 as i believe they would not be able to asses with relevance impact of accession to the eu. i emphasize that questionnaire was not addressed to ordinary people but to different business representatives and hence questions are always referring to impact of accession to the eu on entrepreneurship area and not to the common economic welfare or perception of quality of life by ordinary citizens. distinguishing parameters of questioned companies. respondents has been classified according to location of company headquarter into 8 regions according to nuts2 prague, central bohemia, southwest, northwest, northeast, southeast, central moravia, moravskoslezsko. answers of the respondents are sorted according to size of the company as well. companies has been sorted according to number of employees into following 3 groups: small (0–99 employees); medium (100–499 employees); big (500 and more employees). assumed was also certain level of polarity of the answers for companies operating at regional and global scale. companies were hence classified into 3 following groups: regional, national, global. business sector or economic activity can play significant role for perception of advantages and disadvantages of accession to the eu on entrepreneurship area. companies were sorted according to business sector into 4 sectors: raw materials (primary sector), manufacturing and industry (secondary sector), sector of services (tertiary sector), knowledge sector (quarterly sector). the last fifth parameter of classification of the companies was legal form. classification of the companies according to legal has divided answers into 2 groupsltd and jointstock companies while those 2 legal forms are prevailing in czech republic. answers evaluation. question 1: accession of czech republic to the european union has overall positive impact on entrepreneurship area. table 2. overall percentual evaluation of question 1 strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) 32.1% 34.3% 16.8% 10.9% 5.8% https://cs.wikipedia.org/wiki/nuts_st%c5%99edn%c3%ad_%c4%8cechy https://cs.wikipedia.org/wiki/nuts_jihoz%c3%a1pad https://cs.wikipedia.org/wiki/nuts_severoz%c3%a1pad https://cs.wikipedia.org/wiki/nuts_severov%c3%bdchod https://cs.wikipedia.org/wiki/nuts_jihov%c3%bdchod https://cs.wikipedia.org/wiki/nuts_st%c5%99edn%c3%ad_morava https://cs.wikipedia.org/wiki/nuts_st%c5%99edn%c3%ad_morava 232 d. litva. acession to the european union: advantage or disadvantage for czech companies? from percentage proportion in table 2 is obvious, that most of the respondents agree with statement, that access to the eu has overall positive impact and hence positive effects were stronger than negative. this quasi aggregate question in which each respondent is expressing its overall attitude is a key question of full study. from binomial test and z statistic shown in table in appendix is obvious that null hypothesis h0 with 50% probability of agreement has been rejected (|z| = 6.369 > 1.96), while with 95% confidence will be probability of agreement with question 1 in confidence interval from 0.725 to 0.872. binomial distribution could be approximated by normal distribution due to compliance with condition np(1 – p) = 18.360 > 10. from table 3 is obvious that global companies observed the most advantages from accession to the eu and regional companies the least. chance that global companies will agree with statement in question 1 is 6.24 times higher than for the rest of the companies. it seems like open european market has helped big companies to expand and utilize returns from scale. on the opposite, smaller regional companies were in more difficult situation to compete on the highly competitive market. table 3. classification of the answers for question 1 per operation area and its association in four field table operation area strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly agree (%) or cior rr cirr regional 19.4 25.8 22.6 22.6 9.7 0.24 (0.09;0.64) 0.68 (0.48;0.97) national 25.9 35.2 20.4 11.1 7.4 0.74 (0.29;1.87) 0.94 (0.77;1.15) global 46.2 38.5 9.6 3.8 1.9 6.24 (1.73;22.48) 1.33 (1.12;1.59) question 2: due to accession of czech republic to the european union has been competition on czech market increase. table 4. overall percentual evaluation of question 2 strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) 29.9% 45.3% 10.9% 9.5% 4.4% in total 75% of respondents agree with statement that accession to the eu has increased competition at home market (table 4). it is hence in agreement with expectations during accession period when open market, schengen creation or uniform legislation enabled accession of foreign companies to czech market which lead to increase of competition. it is also obvious that accession and enlargement of european market has contributed even more to globalization tendencies and greater role of international companies and corporations which started to utilize even more profits from scale for new markets. removal of barriers in the markets has supported even more export policy 233 business, management and education, 2016, 14(2): 226–248 (marek, baun 2002). pressure for efficiency has been hence since accession to the eu enormous which has showed up in close out of many small and middle size companies, which were not able to leverage advantage of profits from scale or increase efficiency sufficiently. several traditional industrial sectors which were not efficient has been hence devastated. attractiveness for foreign invetors has been given by macroeconomic stability with relatively low and stable inflation (vasicek 2011). from binomial test and z statistic shown in table 27 (see appendix) is obvious that null hypothesis h0 with 50% probability of agreement has been rejected (|z| = 6.369 > 1.96), while with 95% confidence will be probability of agreement with question 2 in confidence interval from 0.725 to 0.872. binomial distribution could be approximated by normal distribution due to compliance with condition np(1 – p)=18.360 > 10. from table 5 is obvious that without more significant difference in companies according to sectors or regions all the companies have felt increase of competitiveness at local market since accession to the eu. in fact, there was no parameter which could explain significantly answers for this question. table 5. classification of the answers for question 2 according to business sector and its association in four field table business sector strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) or cior rr cirr primary 39.7 44.4 6.6 3.4 5.9 1.60 (0.83;1.36) 1.06 (0.19;13.55) secondary 36.7 44.9 6.1 10.2 2.0 1.38 (0.48;3.91) 1.05 (0.90;1.22) tertiary 25.0 46.9 10.9 9.4 7.8 0.59 (0.22;1.58) 0.92 (0.79;1.08) quaternary 18.8 37.5 31.3 12.5 0.0 0.81 (0.16;4.10) 0.97 (0.72;1.29) question 3: accession to the european union has contributed positively to increase probability to succeed in foreign markets. table 6. overall percentual evaluation of question 3 strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) 24.8% 34.3% 27.0% 8.8% 5.1% from table 6 is obvious that 59% of respondents agreed with statement that accession to the eu had overall positive impact on possibilities to succeed at foreign markets. however, it is important to notice that this was an advantage mostly for big 234 d. litva. acession to the european union: advantage or disadvantage for czech companies? international companies and export companies. for local companies, it has not been any advantage and just opposite they had to face increased competition of foreign companies in czech republic which is one of the main reason of euronegative attitude of smaller companies (toth 2014). from table 7 is visible that advantage to compete on foreign markets has been taken more by companies from quaternary and secondary sectors and with opposite situation in tertiary sector (0r 0.36). this result can be explained by the fact that after unification of legal norms and terms was trade in knowledge sector the easiest with no barriers for penetration on foreign markets. just opposite for business of service it was the most difficult to compete at foreign markets (komarkova, komarek 2007). local language or habits could play important role (bakosova 2004). table 7. classification of the answers for question 3 according to business sector and its association in four field table business sector strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) or cior rr cirr primary 12.5 34.5 44.3 2.9 5.8 0.99 (0.10;9.35) 0.99 (0.64;1.56) secondary 28.6 36.7 24.5 10.2 0.0 1.83 (0.60;5.57) 1.11 (0.93;1.34) tertiary 20.3 28.1 32.8 9.4 9.4 0.36 (0.13;1.02) 0.82 (0.67;1.01) quaternary 37.5 46.2 3.7 6.3 6.3 1.78 (0.37;8.57) 1.10 (0.89;1.36) question 4: accession to the european union has negative impact on administration, legislation and bureaucracy in entrepreneurship area. table 8. overall percentual evaluation of question 4 strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) 47.4% 26.3% 13.9% 8.0% 4.4% table 8 is showing that accession to the eu has in total negative impact on increase of legislation and administration. at one side is obvious harmonization of the norms which become unified (hajek 2008). on the other side has many of the companies obvious constrains related to the application of european norms to czech local conditions while for most of the respondents these norms are not many times applicable or they are not adding value, regulation is inappropriate and work with officers very frustrating. 235 business, management and education, 2016, 14(2): 226–248 from binomial test and z statistic shown in table 27 is obvious that null hypothesis h0 with 50% probability of agreement has been rejected (|z| = 7.773 > 1.96), while with 95% confidence will be probability of agreement with question 4 in confidence interval from 0.793 to 0.919. binomial distribution could be approximated by normal distribution due to compliance with condition np(1 – p) = 14.551 > 10. from table 9 is obvious that perception of legislation and administration has been more negative for companies with limited liability. jointstock companies have disponed most probably with much better human capital or they had established specialized departments or processes and hence could cope with legislation requirements better. table 9. classification of the answers for question 4 according to legal form and its association in four field table company legal form strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) or cior rr cirr ltd. 41.5 25.3 11.1 17.1 5.1 1.27 (0.40;3.95) 1.04 (0.87;1.24) jointstock company 45.5 29.0 30.8 11.5 3.2 1.15 (0.30;4.40) 1.02 (0.85;1.22) question 5: opportunities to raise outside capital for financing has been improved due to accession to the european union. table 10. overall percentual evaluation of question 5 strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) 8.8% 32.1% 38.0% 15.3% 5.8% main target of this question was find out and assess impact of accession to the eu on possibilities to gain outside capital. it was assumed that raise capital will be much easier with more opportunities for financing (jurajda, stancik 2012). this assumption has been confirmed in this question as it is obvious from table 10. most of the respondents agreed with statements that accession to the eu made process of accessing outside capital easier with increase amount of opportunities to obtain capital (roman, sargu 2013). european capital seems to be much easier to access for many of big international companies (moore, wang 2007). data in table 11 are showing that small companies had with financing more issues than big companies (or 0.70). it could be seen as a paradox as one of the key goals of the eu had been support and subsidies of small and medium companies (eu information centre 2001). 236 d. litva. acession to the european union: advantage or disadvantage for czech companies? table 11. classification of the answers for question 5 according to company size and its association in four field table company size according to number of employees strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) or cior rr cirr small (0–99) 10.0 27.8 40.0 17.8 4.4 0.70 (0.27;1.80) 0.89 (0.65;1.20) middle (100–499) 2.9 34.4 42.1 7.8 12.8 1.03 (0.18;6.04) 1.01 (0.56;1.82) big (500 and more) 8.1 40.5 32.4 10.8 8.1 1.49 (0.54;4.12) 1.14 (0.83;1.55) question 6: obtaining of euro funds and subsidies was easy and transparent. table 12. overall percentual evaluation of question 6 strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) 2.2% 7.3% 22.6% 44.5% 23.4% from table 12 is visible that raising euro funds is obviously problematic and not sufficiently transparent process which seems to be for most of the entrepreneurs as complex and unfortunately also corrupted process (moussis 2008). based on statement of many respondents, it provides competitive advantage to those who reach euro funds and disadvantage to those who did not access them from different reasons. this makes market disturbances and misbalances even deeper. overall seems to be this area in unhealthy shape which is also indicated by amount of not used funds in recent period. governments’ subsidies are considered to be a disaster and misbalance mechanism at the market for many respondents. in general, has been euro funds capital funding very long and complex process which was highlighted by many respondents as well. full process is accompanied by huge and inappropriate legislation and administration which is pushing deadline terms and drop off dedicated financials. from table 13 can be seen that euro funds have been reached easier by companies from quaternary sector as probability that companies from quaternary sector will agree with this statement is 2.15 times higher than in other sectors. in this question is hence again reflected strategical direction of the eu with focus on research and development. euro funds requirements and approval process favoured strongly quaternary sector against services. others companies did not exceed agreement rate by 10%. 237 business, management and education, 2016, 14(2): 226–248 table 13. classification of the answers for question 6 per business sector and its association in four field table business sector strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) or cior rr cirr primary 3.2 7.1 33.5 46.9 9.3 1.35 (0.15;12.52) 1.29 (0.20;8.32) secondary 4.6 6.1 24.5 44.9 19.9 0.52 (0.13;2.02) 0.56 (0.16;1.91) tertiary 3.1 7.8 20.3 45.3 23.4 1.30 (0.41;4.16) 1.26 (0.45;3.50) quaternary 6.3 12.5 18.8 37.5 25.0 2.49 (0.59;10.59) 2.15 (0.68;6.79) question 7: qualification and availability of labour resources has been improved after accession of czech republic to the european union. table 14. overall percentual evaluation of question 7 strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) 3.6% 17.5% 24.1% 35.0% 19.7% from table 14 is obvious that accession to the eu did not bring positives in area of accessibility of qualified labour forces. opening the market contributed to the leave of qualified and capable workers for higher salaries, wages and benefits abroad. these workers might have been replaced by not so qualified or cheaper workers from eastern europe or poor countries (strielkowski et al. 2013). this can have negative impact on future competitiveness or inflow of direct external investments as without sufficient number of qualified workers it will be not feasible to cover sufficiently the need of labour market. answer at this question is clearly showing importance of quality educational system. based on data in table 15 is possible to say that global companies had with accessibility of qualified labour less issues. qualified workers have been more likely reachable outside of czech republic and hence agreed with positive statement of this question. chances to agree with this statement have been 1.25 higher for global companies. 238 d. litva. acession to the european union: advantage or disadvantage for czech companies? table 15. classification of the answers for question 7 according to operation area and its association in four field table operation area strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) or cior rr cirr regional 3.2 16.1 25.8 32.3 22.6 0.89 (0.31;2.54) 0.92 (043;1.98) national 1.9 16.7 25.9 33.3 22.2 0.79 (0.32;193) 0.84 (0.44;1.62) global 5.8 19.2 21.2 38.5 15.4 1.36 (0.57;3.25) 1.25 (0.67;2.31) question 8: accession to the eu has contributed positively on your company culture. table 16. overall percentual evaluation of question 8 strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) 5.8% 26.3% 35.0% 16.1% 16.8% from the table 16 is obvious that most of the respondents disagree with statement that accession to the eu had positive impact on company culture despite free movements of people, labour, goods or capital. significant part of respondents means under european culture brussels legislation and bureaucracy, respectively leave of qualified and talented workers. most probably european methods and ways of management has not been sufficiently penetrated and shared to the czech entrepreneurship area or they were not perceived as a positive. when looking at company culture and results of the answers in table 17 it can be noticed that more advantages have been taken by joint-stock companies. they were likely able to employ more foreign employees and hence gain more from diversity of company culture. relative risk is 0.84 for limited liabilities companies vs. 1.29 for joint stock companies. table 17. classification of the answers for question 8 according to legal form and its association in four field table company legal form strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) or cior rr cirr ltd. 3.0 27.3 35.4 18.2 16.2 0.69 (0.27;1.76) 0.84 (054;1.29) jointstock company 12.9 25.8 35.5 9.7 16.1 1.73 (0.63;4.77) 1.29 (0.83;2.00) 239 business, management and education, 2016, 14(2): 226–248 question 9: transparency of government contracts has been improved and corruption decreased after accession to the eu. table 18. overall percentual evaluation of question 9 strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) 1.5% 15.3% 22.6% 29.2% 31.4% from table 18 is obvious that most of the respondents do not think that accession to the eu had positive impact on transparency of government contracts or corruption. one of the most criticises area by european commission is corruption. hence is it said to say that not even european institutions, accession interviews or change in legal forms did not improve this area. it looks like european norms and legislation are deeply required in entrepreneurship area however they are not successfully implemented in upper government spheres. according to size of the company (table 19) is obvious that big companies had with corruption much less problems than small companies. explanation would be similar as for legal form parameter. it is possible that big companies have been competing in average for much bigger businesses and hence were supervised much more carefully. table 19. classification of the answers for question 9 according to company size and its association in four field table company size according to number of employees strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) or cior rr cirr small (0–99) 4.2 13.3 18.6 27.2 36.7 0.42 (0.16;1.08) 051 (0.25;1.05) middle (100–499) 2.2 27.6 12.1 29.0 29.1 1.93 (0.44;8.38) 1.62 (0.59;4.41) big (500 and more) 5.4 16.2 32.4 27.0 18.9 2.07 (0.75;5.69) 1.73 (0.83;3.59) question 10: accession to the eu has been contributed positively on company profits. table 20. overall percentual evaluation of question 10 strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) 10.9% 37.2% 22.6% 18.2% 10.9% 240 d. litva. acession to the european union: advantage or disadvantage for czech companies? the main target of this question has been identification if impact of accession of czech republic to the eu on profits while there are existing many factors which could influence this parameter. most of the respondents reply that accession to the eu has positive impact on profit which is obvious from table 20. open european market, zero trade barriers, increase of competition and pressure for effectivity increase brought more positives than negatives. on the other hand, there is still existing almost 1/3 group of respondents, which expressed in a negative way. from regions point of view and impact of accession to the eu on business result it is possible to see in table 21 equal expression of respondents across regions. many of the parameters could be aggregated and hence final result can strongly depend on prevailing business sector or structure of the region (heimpold 2008). or and rr are very similar. table 21. classification of the answers for question 10 according to region and its association in four field table region of headquarters nuts2 strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) or cior rr cirr prague 14.3 38.8 22.4 18.4 6.1 1.50 (0.65;3.48) 1.16 (0.86;1.55) central bohemia 8.1 44.4 12.1 16.1 19.2 1.01 (0.23;4.48) 1.00 (0.57;1.76) southwest 7.1 44.0 22.6 15.1 11.1 1.56 (0.29;8.43) 1.16 (0.71; 1.90) northwest 7.4 32.6 15.6 22.2 22.2 0.58 (0.14;2.46) 0.79 (0.39;1.61) northeast 2.8 17.9 31.7 8.4 39.2 0.22 (0.04;1.19) 0.44 (0.14;1.44) southeast 8.3 30.3 30.9 25.0 5.6 0.71 (0.29;1.77) 0.87 (0.59;1.28) central moravia 22.1 44.5 16.0 6.3 11.1 1.90 (0.36;9.90) 1.23 (0.80;1.88) moravskosliezsko 2.4 68.2 16.4 8.1 4.9 1.89 (0.19;18.79) 1.22 (0.70;2.20) question 11: accession to the eu has been contributed positively to decrease indebtedness of your company. table 22. overall percentual evaluation of question 11 strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) 2.9% 7.3% 43.1% 22.6% 24.1% from table 22 is obvious that most of the respondents has relatively neutral attitude and hence is can be justified that accession to the eu did not have direct impact in in241 business, management and education, 2016, 14(2): 226–248 debtedness which could be linked with european integration or impact would be more negative than positive. it can be assumed that euro funds and government subsidies has substituted partially financing of projects via loans which does not increase indebtedness as an impact of accession to the eu (machova 2011). there is clearly negative attitude of bothregional and global companies for indebtedness with minimum differences between them (table 23) as or is between 0.46 and 1.54. this question can be linked with question of availability of foreign capital as improvements of availability of foreign capital can have overall negative impact on indebtedness. table 23. classification of the answers for question 11 according to operation area and its association in four field table operation area strongly agree (%) agree (%) nor agree, nor disagree (%) disagree (%) strongly disagree (%) or cior rr cirr regional 0.0 6.5 38.7 29.0 25.8 0.46 (0.09;2.27) 0.52 (0.13;2.11) national 1.9 9.3 40.7 22.2 25.9 1.10 (0.34;3.52) 1.08 (0.41;2.81) global 5.8 5.8 48.1 19.2 21.2 1.54 (0.47;5.00) 1.42 (0.55;3.66) question 12: what do you consider as biggest advantage of accession to the eu on entrepreneurship area? this question was an open question to avoid limitation of respondents by forced selection. replies are grouped to the statements shown below: key advantages of accession to the eu: schengen, opening of the boarders, cancellation of duty union, faster transfers and logistics; easier access to the european market, access to the new segments of the market, new market opportunities for export; removal of trade barriers and barriers for accession to the market; bigger customer portfolio; overall cultivation of entrepreneurship area and political environment; wider portfolio of suppliers; eu trademark as competitive advantage; free movements of people, goods, services and capital; better opportunity to cooperate geographically, financially and in a human way; positive impact on diversity and company culture; unified norms and certifications, harmonization of legislation; easier to look for and hire labour force; easier development of qualifications of employeeschange of roles, internships, external workers; positives in banking area, decreasing of currency risk; opportunities to obtain european subsidies, accessibility of european capital, inflow of investments; penetration of new technology to czech market. question 13: what do you consider as a biggest disadvantage of accession to the eu on entrepreneurship area? 242 d. litva. acession to the european union: advantage or disadvantage for czech companies? same as previous, also this question is formulated as an open while grouping the most frequent answers. key disadvantages of accession to the eu are: exaggerated bureaucracy, administration, legislation, many times higher requirements than before; work culture of officers “monitor and control”; regulation from eu which are not accommodated to czech market and hence many times inappropriate and not applicable; not relevant environmental requirements for manufacturing which do not have practical impact on health or environment; negative impact on wage increase of labour; leave of qualified labour outside of czech republic; hidden protection of several countries and markets (in a way of forms and prescription); increase of competition at czech market due to impact of foreign competitors; creation of better conditions for global player, loss of national sovereignty, devastation of czech industry; advantage only for big companies, small and medium size company only minimum, liquidation of small and middle size companies; unfair handling during allocation of subsidies, positive discrimination, quotes, corruption; subsidies from eu which are providing competitive advantage to the companies which gained them and disadvantages to the company which were not successful; incorrect prioritization and selection of the projects, sources used unequally and unclearly; commands from brussels, loss of possibility to decide about future, loss of identity, permanent controlling of activities; not existing average real wages, fictive propaganda, figure out numbers; not legal environments, not clear vision of future direction, disunited europe; production based on need of eu; language barriers mainly for older entrepreneurs. it is possible to conclude that accession to the eu has been for most of the entrepreneurs of small and medium size companies perceived negatively. current migration crisis, greece debts and unified contribution of all member states to euro val, corruption of governments and also european structures, nontransparent funds raising and government subsidies obtaining, opening of the market and related increase of competition, liquidation of part of czech traditional industry, leave of qualified labour, inappropriate regulations, exaggerated bureaucracy, fear from loss of national identity and possibilities to decide about future, commands from brussels, inferior german politics, unclear vision and directions, nonactionable european politics, hidden protectionism in forms of local norms and restrictions, nonflexible european structure this all contribute to obvious dissatisfaction. question 14: do you agree with euro acceptance? what do you think would be appropriate period? table 24. overall percentual evaluation of euro acceptance yes (%) no (%) 43.5% 56.5% 243 business, management and education, 2016, 14(2): 226–248 table 25. overall percentual evaluation of ideal year for euro acceptance 2016 and earlier (%) 2017 (%) 2018 (%) 2019 (%) 2020 (%) 2021 and later (%) 14.8% 11.1% 18.5% 5.6% 40.7% 9.3% from table 24 is obvious that slightly more respondents disagree with euro acceptance than agree. reasons are fear from loss of national identity, worries from negative influence on quality of life as a citizen, loss of control for exchange rate or interest rate as a tool of monetary policy, full control of financial and bank sectors by european institutions (zdarek 2011). on the other side, obvious positives are decrease risk of exchange rate fluctuation as it is not needed to fix it against eurozone, lower transaction costs, simplification of trade (rodriguez et al. 2007). from table 25 can be seen that ideal year for euro acceptance according to respondents is 2020. table 26 can be interpreted in the way that joint stock companies would accession of the euro welcome and opposite, companies with limited liability have overall negative attitude towards euro with or 0.60. it has been reflected also in an ideal year of euro acceptance which has been for shared companies much earlier. acceptance of the euro would mean decrease of exchange rate risk or decrease of transaction costs and hence would be beneficial mostly for international companies (fidrmuc, horvath 2008). table 26. classification of the answers for question 14 according to legal form and its association in four field table company legal form yes (%) no (%) or cior rr cirr ideal year for euro acceptance ltd. 40.2 59.8 0.60 (0.27;1.31)) 0.76 (0.51;1.13) 2019.8 joint-stock company 55.2 44.8 1.83 (0.80;4.20) 1.37 (0.92;2.06) 2019.2 when looking at operating area and euro acceptance results confirmed expected trend with positive statement of big global companies and oppositeclear disagreement of regional companies. it can be summarized that regional companies see euro acceptance mostly like a big threat than advantage (rr is only 0.40). euro acceptance could enable for big companies even bigger competitive advantage which could have devastating impact on results of many of czech regional companies. analogic have been also results for comparison of the companies according to their size. from region point of view results for this question were not surprising as companies from prague and central bohemia would welcome acceptance of the euro and on the other hand rest of czech republic which stands mostly against euro acceptance. 244 d. litva. acession to the european union: advantage or disadvantage for czech companies? 5. conclusions finding: most of the small and medium size regional companies did evaluate accession to the eu negatively. big global companies on the opposite did evaluate accession positively. natural consequences of open market with no barriers of trade. playground for big players has become even bigger and hence they could utilise advantages from their size (hvozdenska 2014). strong are becoming even stronger. recommendation: strategical focus of the eu on support of small and medium size companies. establishment of detailed eu study for purpose of quantification of benefits which have been gained by big companies (in monetary parameters) and counting of the losses of small and medium size companies as a consequence of accession to the eu. proposal of compensating mechanism for small and middle size companies. finding: tertiary sector of the companies did evaluate accession to the eu the most negatively. quaternary sector did evaluate accession to the eu the most positively. reason: strategical goals of eu regarding support of research and development favoured in subsidy programs mostly quaternary sector. tertiary sector and services received the least of investment. recommendation: creation of specific programs and grants for tertiary sector, better balancing of grant programs. finding: companies from prague and central bohemia did evaluate impact of accession to the eu most positively. rest of czech republic more negatively. reason – in the cities are concentrated mostly bigger companies with global impact and operating area. education level is higher. recommendation: equal allocation to the regional budgets for all the regions. finding: most of the respondents has expressed negative attitude to euro accession, mostly small regional companies. supportive have been only big companies mostly from prague and central bohemia. strongly against euro have been companies from tertiary sector. reason: accession of the euro would mean zero transaction costs and zero exchange rate risk which would be advantage again for bigger international companies. this would mean significant competitive advantage for bigger companies and threat for small regional companies. tertiary sector has been in general not supported and it was in general heavily competitive. euro would offer advantage to external competitors as well. companies outside prague has overall much more problems with brussels bureaucracy and legislation, euro refuse by principle. recommendation: later euro accepting, careful evaluation of euro acceptance taking into consideration all the potential consequences. in case of euro acceptance all the next steps should lead to support of development, trade and expansion of small and medium size companies. finding: average proposed year of euro acceptance has been 2020. reason: companies’ processes are not sufficiently optimised and in compliance with eu requirements, czech companies still did not implement sufficiently eu norms and legislation. complicated transition to euro could make situation even worse in spite of clear economic advantages. recommendation: do not accept euro before 2020 as companies and their processes are not ready for its acceptance, most of the companies still refuse euro acceptance. 245 business, management and education, 2016, 14(2): 226–248 finding: raising euro funds is considered by most of the companies as a complicated process. reason: too high complexity of the process for raising euro funds and subsidies, release of money only retrospectively after spending real costs (cabelkova et al. 2015). recommendation: adjustment of the system in order to finance projects at least partially before realization. finding: availability of qualified labour has been worsening after accession to the eu. it has been perceived in a worst way by small regional companies. reason: qualified and well educated employees have been leaving czech republic after accession to the eu as free movements of people has contributes significantly to this phenomenon. big companies were able to hire employees abroad. recommendation – support of education and increase of wages mostly in technical job positions. finding: impact of accession to the eu is in average not significant. however big companies expressed in average more positively, small companies more negatively. reason – bigger companies were able to leverage advantage from free movements of the people much better and employ wider range of employees from different countries which contributed positively to increase of diversity and company culture (fojtikova 2014). recommendation: motivational incentives from state for multicultural company structure. subsidized exchanges of employees with western europe countries and employers. finding: there is existing relation between size of the company and impact of accession to the eu on business resultsthe bigger is the company the more positive attitude. small companies just opposite on business results negatively. reason – big companies were able to leverage advantages which has naturally occurred with accession to the eu much more and hence were becoming more competitive (fojtikova 2015). recommendation: start-up supports, creation of seed capital funds, opening of centres of development and supports of small and medium size companies. possibly tax discounts of another forms of supports for small companies up to the level of estimated benefits which were gained by big companies. next steps of the research could be more detailed investigation in areas where results were surprising against expectations like eu influence on company culture or euro acceptance. benefits from more detailed study of euro acceptance could be seen in detailed understanding of negative attitudes and fear to accept euro followed by list of recommendations or time scale when program for preparation to accept euro should be put in place in cr. limitations of the study is mainly willingness of respondents to join the survey and defining list of companies with longterm existence at least since 2004 which has shown to be strong limitations mainly for sufficient amount of big companies. relatively low response rate is indicating negative general attitude to eu and related survey. it is important to consider also fact that survey may have joined with high probability mostly respondents with positive attitude to eu and those with negative were not even willing to fill the questionnaire which could have impact on total results. total results could be in reality in relation to eu impact on entrepreneurship area worse as euro sceptics might refuse to join the survey. 246 d. litva. acession to the european union: advantage or disadvantage for czech companies? references bakosova, z. 2004. czech republic 2003/2004: entering the eu 2004, prague: cerge-ei 1(2): 89–101. cabelkova, i.; mitsche, n; strielkowski, w. 2015. attitudes towards eu integration and euro adoption in the czech republic, 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analysis of the process of price convergence of the czech republic and new eu member states towards the euro area, politicka ekonomie 59(4): 454–474. appendix table 27. binomial testing statistics overview question p (h0 = 0.5) np (1 – p) > 10 z statistic (approximation without correction) z1 – a/2 = z0.975 confidence interval 1 0.798 18.360 6.369 1.96 (0.725; 0.872) 2 0.844 16.041 7.605 1.96 (0.779; 0.908) 3 0.0810 15.390 6.200 1.96 (0.733; 0.887) 4 0.856 14.551 7.773 1.96 (0.793; 0.919) 5 0.659 19.106 2.929 1.96 (0.558; 0.760) 6 0.123 11.407 –7.770 1.96 (0.060; 0.185) 7 0.279 20.913 –4.511 1.96 (0.193; 0.365) https://doi.org/10.1016/j.irfa.2007.03.006 https://doi.org/10.2307/2287590 https://doi.org/10.2753/eee0012-8775450603 https://doi.org/10.2753/ree1540-496x470504 248 d. litva. acession to the european union: advantage or disadvantage for czech companies? question p (h0 = 0.5) np(1 – p) > 10 z statistic (approximation without correction) z1 – a/2 = z0.975 confidence interval 8 0.494 31.198 –0.106 1.96 (0.390; 0.598) 9 0.217 18.009 –5.828 1.96 (0.139; 0.295) 10 0.622 24.907 2.525 1.96 (0.530; 0.715) 11 0.179 31.198 11.487 1.96 (0.094; 0.265) 14 0.435 31.198 –1.500 1.96 0.350; 0.520 dušan litva received his masters’ degree in business and economics from university of economics in prague where he is currently finishing his phd and mba studies. he has a number of peer reviewed publications and conference presentations in various countries in such fields as economy, political economy and business and management. end of table 1 copyright © 2016 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. multivariate analysis of short and long-impact indicators for corporate bond market development ieva astrauskaitė finance department, faculty of economics, vilnius university, saulėtekio av. 9, vilnius, lithuania e-mail: ieva.astrauskaite@ef.vu.lt received 2 may 2016; accepted 24 may 2016 abstract: an additional instrument or established access to the capital market funding would increase business opportunities for performance, development, growth, channeling financing for sustainable and long-term economic growth and job creation. capital market and its level of development or further development opportunities are exposed to different factors. clear identification of them mobilizes the attention of accurate and useful decisions or actions influencing the expected results, their adoption and implementation, monitoring. with the purpose to identify a set of factors influencing the capital market development as well as to introduce a model of their short term and long term impact projections, the ardl model for the us and lithuanian cases is introduced. the concluding remarks state on different legal and regulatory framework, banking sector and ict measures exposures to the different stages of the corporate bond market development. keywords: corporate bond, ardl, long term impact, dynamic models. jel classification: g14, g31. 1. introduction by cooperating in funds allocation process, financial and credit markets share the nature of the measures and sets of concurrent players, while the general economic cycle features highlight the differences of these markets. starting 2007 in united states and in 2008 in europe, the financial crisis led to a review of the balance sheets of the credit institutions and further restrictions. tighter standards for business loans force to look for alternatives (to the knowledge of european commission in 2013 (european commission 2015), there were rejected around 35 percent of sme credit applications in the euro area). one of them is corporate bonds or debentures. the favor of this instrument in the market has grown after the financial market crisis in 2008 and moratoria of its players (such as lehman brothers, inc.). since 2009, corporate bond market faces its every year growth by almost 2 per cent in europe, extends the gdp of us. however, lithuanian corporate bond market has been still underdeveloped. its role in financing b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(1): 116–135 doi:10.3846/bme.2016.318 mailto:1ieva.astrauskaite@ef.vu.lt http://dx.doi.org/10.3846/bme.2016.318 117 business, management and education, 2016, 14(1): 116–135 growth is miserable and businesses remain heavily reliant on banks, making the economy vulnerable to a tightening of bank lending. some of sme’s are even looking for financing in the neighboring capital markets (e.g. warsaw stock exchange). this reduces the concentration of financial markets competition-driven advantages – the reduction of the cost of raising the capital, favorable debt conditions (terms, collaterals needed, etc.), greater diversification and allocation of risk, shock-absorption capacity, allows for more investment without increasing levels of indebtedness. the domination of one source of borrowing creates some restrictions for market participants, in association with restricted access to funding for development or financing of investment projects and other business needs, increasing dependence on the economic cycle mediated segment reactions and changes. therefore, an additional instrument or established access to the capital market funding would increase business opportunities for performance, development, growth, channeling financing for sustainable and long-term economic growth and job creation. on the other hand, the declining interest on deposits, diminishing yields of government securities lead to more profitable investment with minimal risk tolerance amplitude as the corporate bond demand activation. investors who opt for investment direction or specific instruments in assessment of the minimum risk are of conservative financial behavior, but relatively high profitability expectations. declining real return on the instruments held by the portfolio or the interest of the deposit, the scope of a conservative investment strategy sought for alternatives. such expectations of market participants and market conditions for the period 2009–2013 increase the attractiveness of corporate bond instrument in europe and the united states. the development of corporate bond market is characterized by higher emission volumes or a measure of market depth. in addition to more effectively implemented business or investor needs, capital market development promotes further economic growth, creating conditions for the improvement of the other components – labor productivity, investment, etc. the more rapid development of the capital market is characterized by term of “financialization” which describes a systematic and sustainable process in transcendent with economic growth. such aspirations and market integration led the european commission to launch a single capital market and capital market union (cmu) development process1 by issuing a green paper, indicating potential courses of actions and measures, in consultation with member states. cmu creation process is expected to end by 2019. capital market and its level of development or further development opportunities are exposed to different factors: the intervention or market created innate qualities, 1 building a true single market for capital and creating a capital markets union (cmu) for all 28 member states aim to increase the efficiency of the eu investment chain, finding the ways of linking investors and savers with growth. ec key actions are oriented to identify and remove the barriers which stand between investors’ money and investment opportunities, and overcome the obstacles which prevent businesses from reaching the investors. ec performance measures: legislation and its improvement (the prospectus and other directives), specific recommendations to member states, promotion of market forces (european commission 2015). 118 i. astrauskaitė. multivariate analysis of short and long-impact indicators for corporate bond market development which in turn result in market liquidity, and further impact on the entire country or region’s economy. in differential impact, probability of occurrence, the nature or source of market factors determine the scope or depth of its development (growing, stagnating or moderating). clear identification of market development factors mobilizes the attention of accurate and useful decisions or actions influencing the expected results, their adoption and implementation, monitoring. well known (projected) market development opportunities and trends ensure timely and appropriate measures of performance targets. in the case of corporate bond market, identification of market development factors conditions more effective capital market supervision and efficient market participants’ activity, resulting in wider funding opportunities. a possibility to predict the development of the corporate bond market, identified the drivers of change will create conditions for sustainable and systematic development of the market to the benefit of both businesses and investors, and the whole country or region’s economy. the purpose of this paper is to identify a set of factors influencing the capital market development as well as to introduce a model of their short term and long term impact projections. although corporate bond market is less dynamic than stock, similar techniques are used for its analysis. therefore a multivariate factor analysis was conducted in accordance with autoregressive distributed lag model (ardl). the motivation of the choice is explained in detail in the third section of the paper. the paper contains of five sections. first section briefly introduces the relevance of the topic. the literature review on different factors and their impact to capital market development is summarized in section two. the third section contributes to the motivation, the methodology and the main steps of ardl technique. its implementation and empirical results are introduced in the fourth section. finally, the conclusions and insights are made. 1. literature review in the scientific literature, the corporate bond market and its impact factors are examined in several dimensions: – in the contain of the capital market (see klimašauskienė, moščinskienė 1998; leipus, norvaiša 2003; brzozowska 2008; raddatz, schmukler 2008; chami et al. 2009; peiris 2010; stankevičienė, gembickaja 2012; bianchi et al. 2012; sienaert 2012; laeven 2014); – in the scope of credit instruments (see hubbard 1998; greenwood, hanson 2013); – in developing (see srinivas et al. 2000; eichengreen, luengnaruemitchai 2006; international 2011; sui 2011; jaramillo, weber, 2012; gozzi et al. 2012; felman et al. 2014; levinger, li 2014 ) or developed (see bayoumi, bui 2012; australian... 2014) samples of countries. 119 business, management and education, 2016, 14(1): 116–135 in the contain of capital market, the corporate bond market and its market performance are analyzed in the context of information efficiency (klimašauskienė, moščinskienė 1998; bianchi et al. 2012), the efficient market hypothesis (leipus, norvaiša 2003; stankevičienė, gembickaja 2012), institutional investors (raddatz, schmukler 2008), government regulation (chami et al. 2009), internationalization (peiris 2010; sienaert 2012) by identifying the mandatory prerequisites for the effective functioning of the market (laeven 2014). separate analysis of the macro-environment for corporate bond market has not been conducted. in the scope of credit instruments, corporate bond analysis covered credit ratings (greenwood, hanson 2013), state grants and equivalent market information (hubbard 1998) as well as their impact on the profitability of the instrument and its price. greenwood and hanson (2013) demonstrated that a significant reduction in the company’s credit rating leads more to credit market “overheating” than the sudden increase in the debt capital gains. the authors agreed on the less meaningful market information that credit rating for corporate bond did provide. so far other authors provided the measures favoring the corporate bond instrument. he saw the strengths and weaknesses of granted corporate bonds, in order to encourage the activity in the sector, renew funding, protect against further financial crises and reduce the price of the loan. on the other hand, the state guarantees are regarded as an instrument of competitive distortions in the market, giving more favorable conditions for some market participants over others. other market distortions are examined by hubbard (1998). when assessing the information asymmetry in the credit market, hubbard (1998) named it of little concern for the minor consequences it causes. asymmetric information that is possessed by borrowers and lenders causes internal and external financing cost differences, which are represented in prices and yields of debt instruments. however, the strongest motivation in the development of the market analysis of multiple factors influencing the capital market is a cross country competition and comparison. srinivas et al. (2000) compared the taxation of capital in latin america and eastern europe, indicating the favorable circumstances for further development. moreover, eichengreen and luengnaruemitchai (2006) proved the relationships of asian, european and latin american capital markets, in the meaning of systemic risk and vulnerability to the effects of economic shocks. other findings were more concrete on the reasons or consequences of underdeveloped capital markets, identifying the solutions to further improvements. for example, sui (2011) examining the evolving chinese corporate bond market, identified lack of innovation (most tools are of limited duration, low yield, tight range of risk management and the relationship with the profitability measures), excessive administrative control of state level projects for corporate bond issues (which must be inspected and approved by several institutions), the lack of trusted credit rating agencies (in china), undeveloped secondary market (deficiency of specialized institutional investors, dealers), poor disclosure and publicity as the interference of capital market 120 i. astrauskaitė. multivariate analysis of short and long-impact indicators for corporate bond market development development. meanwhile, levinger and li (2014) complemented with the factors that encouraged the asian corporate bond market development, which could be distributed to internal and international ones. these are lower interest rates in the developed countries, which encouraged investors to seek higher-yielding in asia market. on the supply side, the development of the market was driven by regulatory and policy initiatives in developing the market infrastructure (levinger, li 2014). on the contrary, felman et al. (2014) catalyst factors of the development of corporate bonds in asia attributed to foreign investment. however, in unison levinger and li (2014) and felman et al. (2014) for efficient corporate bond market development identified the development of investor base or the critical mass and the importance of investments to the market infrastructure. generally without the specific country or region classification, the corporate bond market in developing countries was examined by international organization of securities commissions in collaboration with the world bank group (2011), jaramillo and weber (2012), gozzi et al. (2012). the interferences of emerging capital markets to develop could be summarized like (international 2011): – limited variety and quality of corporate bonds; – low liquidity of the secondary market; – relatively underdeveloped market regulatory framework; – inefficient market infrastructure; – the lack of diversity of instruments and a narrow investor base. followed by the insignificance of fiscal factors for bond yields in developing economies, but being valued by market participants, when investing in different countries (see jaramillo, weber 2012) and uncompetitive internationalization when local and international corporate bond markets are complementary, not competing for different duration and nature of the instruments (gozzi et al. 2012). on the other hand, the comparative analysis of developed capital markets reveals a bandwidth of the markets to economic shocks and a dispersion of these effects. bayoumi and bui (2012) identified that the us impact on other markets (eu, japan) is a much more significant than other markets impacts to the united states in terms of financial crises or economic shocks dissemination. also they found a correlation between the uk and the euro area member states. meanwhile, the australian corporate bond market development factors are defined as the exception of short term “vanilla” corporate bonds prospectus publicity, attraction of retail investors to the market, emission of covered bonds by authorized banks – these are the changes of regulatory and legal framework. the importance of the developed market is based on the diversification of investment opportunities for local investors as well as for issuers of debt (borrowing or investing into a market not only a bank instrument) and the arguments of systemic risk mitigation. the latter can be subject to market interference: from the issuer side – an unfavorable tax base, the investor – low liquidity (australian... 2014). 121 business, management and education, 2016, 14(1): 116–135 the corporate bond market development is identified as a challenge to all states and there is no rapid deployment of this task, the need of which is justified by arguments (international... 2011): – a developed corporate bond market can act as a source of stability, especially during periods of financial crisis, when credit markets are often stagnating; – liquid corporate bond market will reduce the country’s reliance on the banking sector and increase funding for a variety of asset classes for diversification; – the corporate bond market also helps to reduce the risk of currency mismatches and funding periods, especially in long-term projects. laeven (2014) sums up all the factors in the appropriate fields and lists mandatory conditions for local capital markets to operate which divides into three groups (see laeven 2014): – sound macroeconomic policies (for market openness and integration into international markets); – a strong institutional and legal framework (legislation, investor protection has a positive correlation with the corporate bond market development, less severe than the macro-economic factors); – and a well-functioning financial infrastructure (contract terms, credit ratings, investors’ rights). nevertheless, the effective functioning of the market is defined by the requirements of minimum size (often there is not sufficient of existing infrastructure, legislation or policy, encouraged demand for investors, intensified private pension funds and other institutional investors are needed) (laeven 2014). this was supported by chami et al. (2009) indicating the development of the market requiring the borrower’s and the lender’s willingness to enter into transactions, favorable liquidity sources and means of conditions that can be supported, developed or removing obstacles that prevent them by different regulatory structures. of more specific measures and recommendations to develop the corporate bond market are (international... 2011): – market efficiency: the development of methods for the initial distribution of securities, reducing the corporate bond issue registration or registration confirmation periods standardizing bond offering documents, creating a benchmark of government bond yield and the pre-publication of the auction calendar. – market infrastructure and development of investor base: increasing the efficiency of trade, the development of the market system, creating a corporate bond index and the establishment of a specific guarantee institution; cancelling market entry barriers as well as opening up the market to investors in particular to boost the retail ones. – enhancing investor protection: promoting price and trade transparency, enhancing the quality and timeliness of information made public, strengthening the supervision 122 i. astrauskaitė. multivariate analysis of short and long-impact indicators for corporate bond market development and control of the market mechanisms, defining the use of the credit ratings and tightening the rules on bankruptcy (insolvency laws) and restructuring. – favorable tax system: reviewing the tax system and the creation of the corporate bond market competition conditions for adequate ones to government bonds or bank lending markets. other authors extend the proposals to capital and bond market development by democratization (shiller 2012) and standardization (novick et al. 2014). democratization is described as the opening of financial market to the public. it’s a target to create the legal and infrastructural capabilities for retail investors in transactions (not through intermediaries), thereby increasing the activity of the market, liquidity, transparency and confidence (shiller 2012). meanwhile, standardization is understood as uniformity of the duration or extent of the instrument (in this case, the corporate bond), which would also increase market liquidity, reduce emissions and transaction costs, increase transparency of the price and etc. (novick et al. 2014). to the view of the author of this paper this reform is disadvantaged as well: in particular, by the standardization of the instruments in the capital market there would be reduced access to credit for small businesses (proposals for minimum emissions starts from 750 million usd). on the other hand, standardization creates favorable conditions for the transfer of statistical data collection, enabling bigger data sets for the analysis of scale and research. a variety of influencing capital and corporate bond market factors were identified (in the sense of development or interference). for a comprehensive complex analysis according to the data access and unexplored areas the following corporate bond market factors influencing the development are chosen: – legal framework, state regulation and taxes. factor argumentation for the choice consists of the theoretical base, highlighting the efficient functioning of the corporate bond market assumptions within the existing infrastructure, the legal basis (the protection of investors, tax laws) which are under the maintenance, development and direct responsibility of the governments. – information and communication technologies (ict). factor is considered and selected as a counterweight to the information asymmetry; new technological infrastructures are leading to the development of the market (faster transactions taking place and those served by ict) and transparency (widely available set of information). – competition with bank loans. while arguments of the need of the capital market development stand for the alternative to bank loans, the author of this paper has decided on the inclusion of this factor into the analysis to be investigated on further and the relevant market dependence, mutually owned or designated development. international integration component in this paper will continue to develop a comparative analysis: comparing the corporate bond market development in the us and lithuania. these cases were chosen for the different level of the market development as well: us standing for the developed, while lithuania – underdeveloped market category. 123 business, management and education, 2016, 14(1): 116–135 besides the geographic factor, with accordance of dynamic nature of the research object (corporate bond market and its development), time series approach is introduced with an exposure of long-term or short-term impact of the dependents. simplifying the analysis of factors with the assumptions of previous works of the author (astrauskaitė, paškevičius 2014; astrauskaitė 2014), the proxy measures of the listed groups, underlying the strongest relationship with the corporate market development were chosen. each variable set is represented within the empirical results of the cases studies. 3. the methodology the corporate bond market, as each economic phenomenon, is of complex composition (instruments, participants, organization of activities). therefore it is appropriate a systematic analysis of the overall impact of market influence factors. since no one single indicator does not have such a feature collection, which integrates the essential aspects of the whole market, a complex analysis is used (see podvezko 2008), which reveals the integrity of the impact of the factors and the market reaction to it. under this argumentation all variables are combined into one multivariate equation. for the investigation of the long-term factors effects on corporate bond market development, an autoregressive distributed lag (ardl) model methodology was adapted. the motivation of the selection of the model contains: – relatively short set of observations that limited the application of the multiple regression model; – good practices of the application of the model to investigation of long-term economic relations (atkins, coe 2002; fedderke, liu 2002; ioannides et al. 2005; byrne, davis 2005; dritsakis 2011); – the model encompasses not only the static but also the dynamic characteristics of the factors (the difference in the amount of delay); – assessing both short-term and long-term effects of the factors (the integrated data i (0) and i (1)); – there is unnecessary to set a level of factor integration. in the ardl model, the coefficients are calculated by the least squares technique, integrating and differentiating the different sets of primary data (i(1) and i(0)) by deriving and later on combining several var equations (1) (pesaran et al. 2001): 0 1 1 2 1 1 0 m n i t i i t i t t t i i y y x y x− − − − = = ∆ = α + β ∆ + ϕ ∆ + δ + δ + ε∑ ∑  , (1) where y – the dependent variable, x – the independent variable, t – the number of periods, i – series of delays, δ denotes the first order of the integral i (1), εt – standard error (“white noise”), α0 – intercept, βi, φi , δ1, δ2 – coefficients of the independent variables. this is a generalized the first delay ardl (1) equation. for the optimal 124 i. astrauskaitė. multivariate analysis of short and long-impact indicators for corporate bond market development amount of delays for each variable the aic criteria was used (minimum value of the criterion marks the optimal delay). correlograms and adf (augmented dickey fuller) tests are used to the data stationarity (the mandatory condition of autoregressive data models) check. ardl model evaluates only co-integrated long-term and short-term factors. cointegration between the factors is understood as long-term relationship or a presence of long-term dynamics or interfaces. the co-integration between the model variables is tested by the f statistics and wald test, approving or rejecting the hypothesis h0: = δ1, δ2 = 0 defining the absence of coefficients of independent variables. alternatively, a hypothesis h1: δ1 ≠ δ2 ≠ 0, meaning the co-integration between the factors, is approved (pesaran et al. 2001). notably pesaran et al. (2001) use non-standard distribution of two-valued f, where a higher limit of the range shows the integration between the variables when one can reject the hypothesis h0. calculated coefficients of independent variables in integrated ardl factor model were assessed by their statistical significance to the dependent factor. the significance level (p-value) procedure with the chosen level of 0.05 was used for estimating. insignificant factors were removed from the equation. the adequacy of the whole model (based on normal distribution for distributed, uncorrelated, homoscedasticity of errors) in the manner of p-value and f statistics was inspected by lm (lagrange multiplier), white and jarque-bera tests. statistically significant variables of adequate ardl model equation were interpreted in the calculation of elasticity (2): 2 1 xye δ = − δ   , (2) where e – elasticity, δ2 – coefficient of independent variable, δ1 – coefficient of dependent variable. calculated values of the elasticity factor represent the percentage of independent variable’s impact on the dependent variable. integrated i(1) data elasticity shows short-term effects while non-integrated i(0) – the long-term ones. with the purpose of the systemic exposure of corporate bond market development factors and time as well as different regions or level of development valuation targets, adrl model was adapted to the cases of lithuania and the united states.2 the input data and the results and the main insights of their description are provided in accordance with each case study. the calculation of ardl models was proceeded with statistical package of eviews. 2 note: the different cases were chosen according to country market level of devepment in order to adopt the research results to different kind of markets. 125 business, management and education, 2016, 14(1): 116–135 4. empirical results 4.1. case study of usa according to the factor groups which were identified as the influencing to the corporate bond market development, the us ardl model input data contains of the following independent variables3: – an index on regulatory burden of corporate bond market (rbi) (indexus), representing the corporate bond market regulations, regulatory and fiscal environment and the influence of these components to the development of the market (this index was constructed by the author of the paper, including qualitative assessment of the legal and regulatory framework of the corporate bonds in the country, tax system as well as administrative burden (cots of issuing and meeting other legal requirements); all these categories were evaluated in the range of 1 to 10 and weighted equally); – internet dissemination (% of population with access to the internet) (internetus) – a factor that describes the impact of ict on the development of corporate bond market (astrauskaitė 2014); – local banks’ loans to the private sector in billions of usd (loansus) – a factor that characterizes the influence of the banking sector to the corporate bond market development (astrauskaitė, paškevičius 2014). as a dependent variable of the model two corporate bond market development characteristics were chosen: volume, which is measured in nominal value of corporate bonds issues (issueus), and market depth indicator (in percentage of gdp) (depthus), measuring the coverage of the demands of corporate bond market participants. analysis was performed using time series of 2002s1-2013s2. frequency was selected according to the data available. before concluding ardl model, the optimal number of delays for each independent variable identified by aic criteria is given in table 1. table 1. an optimal number of delays of independent variables in us ardl model (aic criteria) (source: compiled by the author) dependent variables independent variables indexus internetus loansus issueus 1 (10.19) 1 (14.71) 2 (23.87) depthus 1 (–7.89) 2 (–3.77) 1 (4.65) note: the lowest value of the aic criterion is shown in brackets. 3 note: the independent variables differ across country samples, because their influence to local corporate bond market was found to be of different significance (see astrauskaitė 2014; astrauskaitė, paškevičius 2014). 126 i. astrauskaitė. multivariate analysis of short and long-impact indicators for corporate bond market development as can be seen from table 1, the most common delay among independent variables is one semester, distinguishing the internet dissemination (internetus) on the corporate bond market depth (depthus) and private sector loans (loansus) on corporate bonds in the nominal value (issueus) equations, which were delayed by a year (2 semesters of delay). such delays mean that the corporate bond market depth of the us can be projected of the latter half of the legal and regulatory framework and banking sector data and ict development in recent time, or such period is necessary for the reflection of the above-mentioned sector changes in the corporate bond market depth metric. meanwhile, the us corporate bond issuance can be projected of the latter half of the legal and regulatory framework data and ict development in recent time and the last year data of the banking sector. these periods show when and for a while components affect the corporate bond market by volume or in depth. however, the estimates of least squares referred to optimal number of delays because of perfect correlation of regressors were not found. therefore, the following analysis of all variables was conducted with assessment of minimum period of one delay, shown in ardl(1) equations (3) and (4): ( ) ( ) ( ) ( )1 1 1us us us usd issue c issue index internet− − −= + + + +            . ( ) ( )( ) ( )( ) ( )( )1 1 1 1us us us usloans d issue d index d internet− − − −+ + + +            ( )( )1usd loans − ; (3) ( ) ( ) ( ) ( )1 1 1us us us usd depth c depth index internet− − −= + + + +            ( ) ( )( ) ( )( ) ( )( )1 1 1 1us us us usloans d depth d index d internet− − − −+ + + +            ( )( )1usd loans − , (4) where d represents disaggregated data, (–1) – the first delay, c – intercept, indexus – an index on regulatory burden of corporate bond market, internetus – internet dissemination (% of population with access to the internet), loansus – local banks’ loans to the private sector in billions of usd, issueus – nominal value of corporate bonds issues, depthus – mark depth indicator (in percentage of gdp). for the evaluation of co-integration of the indicators of the estimated equations (3) and (4), the conducted wald test results led to the following conclusions: – the calculated level of significance of the equation (3) parameters in wald test was lower than the selected (0.01 < 0.05); moreover the statistics fk is higher than the upper mean of f critical value interval to a value f3 (5.16 > 2.79 4), so the hypothesis h0: “there is no integration between the factors” was rejected and the 4 pesaran et al. 2001. 127 business, management and education, 2016, 14(1): 116–135 alternative hypothesis h1 accepted that these factors are co-integrated (their coefficients are not equal to zero). – the calculated level of significance of the equation (4) parameters in wald test was lower than the selected (0.02 < 0.05); moreover the statistics fk is higher than the upper mean of f critical value interval to a value f3 (4.23 > 2.79 5), so the hypothesis h0: “there is no integration between the factors” was rejected and the alternative hypothesis h1 accepted that these factors are co-integrated (their coefficients are not equal to zero). as it was confirmed, that the factors were characterized by long-term dynamics, the analysis was continued by the evaluation of their statistical significance using a measure of t statistics. removing statistically insignificant variables previous equations were transformed into (5) and (6) models: ( ) ( ) ( )1 1495 65 0 11 0 03 0 44us us usd issue issue loans− −= − + + −  .     . *   . *   . * ( )( ) ( )( )1 10 08us usd issue d loans− −+   . * ; (5) ( ) ( )10 03 0 001 0 11us usd depth internet −= − + −  .     . *   . * ( )( )1usd internet −     , (6) where d represents disaggregated data, (–1) – the first delay, c – intercept, internetus – internet dissemination (% of population with access to the internet), loansus – local banks’ loans to the private sector in billions of usd, issueus – nominal value of corporate bonds issues, depthus – market depth indicator (in percentage of gdp). us ardl(1) models indicate that the corporate bond market development in the country is due to bank loans to the private sector and ict development. impacts differentiate in size, direction, and the market component which is affected. to ensure the correct interpretation of the coefficients, the evaluation of both equations error autocorrelation, heteroscedasticity and distribution according to the normal distribution phenomena is introduced. summarized lm (lagrange multiplier), white and jarque-bera test results are as follows: – the model of us corporate bond issues and the factors that determine it (5) satisfied the assumption of homoscedasticity (the calculated significance level of white test was above the selected (0.85 > 0.05), so the hypothesis h0: “the model error distribution is of constant homoscedasticity” was adopted); there were no autocorrelated errors (for number of 2 delays the calculated values of significance level were higher than at the level of 0.05, so the hypothesis h0: “errors of delays do not correlate” was adopted); and the distribution was normal (the significance level of 5 pesaran et al. 2001. 128 i. astrauskaitė. multivariate analysis of short and long-impact indicators for corporate bond market development an overall estimate of jarque-bera test was greater than the chosen (0.76 > 0.05), so the hypothesis h0: “the model errors are distributed under the normal distribution” was adopted). – the model of us corporate bond market depth and the factors that determine it (6) also satisfied the assumption of homoscedasticity (the calculated significance level of white test was above the selected (0.96 > 0.05), so the hypothesis h0: “the model error distribution is of constant homoscedasticity” was adopted); there were no auto-correlated errors (for number of 2 delays the calculated values of significance level were higher than at the level of 0.05, so the hypothesis h0: “errors of delays do not correlate” was adopted); and the distribution was normal (the significance level of an overall estimate of jarque-bera test was greater than the chosen (0.13 > 0.05), so the hypothesis h0: “the model errors are distributed under the normal distribution” was adopted). as calculated estimates of equations models are concerted, efficient and unbiased, they are used for the further estimation of the impact (in the sense of its direction and size) to corporate bond market development by the evaluation of the elasticity (see table 2). table 2. elasticity measures of us ardl model coefficients (source: compiled by the author) dependent variables independent variables internetus d(internetus) loanus d(loanus) issueus – – –0.27 –0.75 dephus 0.08 –0.01 – – one percentage point increase in internet dissemination in us conditions a shortterm decrease of 0.01 percent in corporate bonds market depth. however, in the longterm the same factor increases market depth of 0.08 percent. significant differences by the period of the impact of ict development are explained by the psychosomatic preferences of the users of technological diffusion, admissibility of learning and adaptation features: when skills are get and experienced, the advantages of them are conditioned by the long term. notably there is a bigger long than short-term impact of ict on the corporate bond market depth. in contrast, one percent increase in us bank loans to the private sector in terms causes 0.75 percent short-term and 0.27 percent long-term losses of corporate bonds issues in the nominal value. although changes are negative, there are no significant arguments of these markets substitution effect. it should be noted that short-term corporate bond market shrinkage effect is amortized in the long run. statistically insignificant and eliminated from the equation factor of the legal and regulatory framework has no significant short-term or long-term impact on the us corporate bond market development. 129 business, management and education, 2016, 14(1): 116–135 in summary, it must be concluded that the most prominent factor considering the us corporate bond market development is ict development in the long term, as well as both the short and long term declining in business loan portfolios by local banks. 4.2. case study of lithuania by adapting ardl model to the case of lithuania, the corporate bond market development factors are chosen by analogy with the united states. therefore, the model independent variables contain: – an index on regulatory burden of corporate bond market (rbi) (indexlt), representing the corporate bond market regulations, regulatory and fiscal environment and the influence of these components to the development of the market; – number of mobile telephone subscribers per 100 inhabitants (mobilelt) – a factor that describes the impact of ict on the development of corporate bond market (astrauskaitė 2014); – bank loans for the private companies in billions eur (loanlt) – a factor that characterizes the influence of the banking sector to the corporate bond market development (astrauskaitė, paškevičius 2014). likewise the case of the us, as a dependent variable of the model two corporate bond market development characteristics were chosen: volume, which is measured in nominal value of corporate bonds issues (issuelt), and market depth indicator (in percentage of gdp) (depthlt), measuring the coverage of the demands of corporate bond market participants. analysis was performed using time series of 2003s1-2013s2. frequency was selected according to the data available. before concluding ardl model, the optimal number of delays for each independent variable identified by aic criteria is given in table 3. table 3. an optimal number of delays of independent variables in lithuanian ardl model (aic criteria) (source: compiled by the author) dependent variables independent variables indexlt mobilelt loanlt issuelt 1 (3.07) 4 (9.84) 4 (8.79) depthlt 1 (–5.75) 4 (0.97) 4 (–0.02) note: the lowest value of the aic criterion is shown in brackets 130 i. astrauskaitė. multivariate analysis of short and long-impact indicators for corporate bond market development comparing the optimal number of variable delay in united states and lithuania ardl models, lithuania indicators distinguished permanently. as can be seen from table 3, the biggest delay is characterized by loans granted to private companies (loanlt) and mobile penetration (mobilelt) using 2 years old the historical data (delay of 4 semesters) for making corporate bond nominal value (issuelt) and or market depth (depthlt) predictions. on the other hand, the two-year period change in the market, i.e. the diffusion of mobile or increasing portfolio of bank loans to private companies, the changes of these factors will be reflected in the corporate bond market only after 2 years. meanwhile, the measures of the index (indexlt) prove the country’s corporate bond market sensitivity to changes in the legal and regulatory framework. the last half of the year (1 semester delay) rbi index value is used for making forecast of corporate bond market development or rbi and the corporate bond market and the characteristics of these components changes and synergies are appointed by a half of the period. however, the estimates of least squares referred to optimal number of delays because of perfect correlation of regressors were not found. therefore, the following analysis of all variables was conducted with assessment of minimum period of one delay, shown in ardl(1) equations (7) and (8): ( ) ( ) ( ) ( )1 1 1lt lt lt ltd issue c issue index mobile− − −= + + + +            ( ) ( )( ) ( )( ) ( )( )1 1 1 1lt lt lt ltloans d issue d index d mobile− − − −+ + + +          ( )( )1ltd loans −  ; (7) ( ) ( ) ( ) ( )1 1 1lt lt lt ltd depth c depth index mobile− − −= + + + +            ( ) ( )( ) ( )( ) ( )( )1 1 1 1lt lt lt ltloans d depth d index d mobile− − − −+ + + +            ( )( )1ltd loans − , (8) where d represents disaggregated data, (–1) – the first delay, c – intercept, indexlt – an index on regulatory burden of corporate bond market, mobilelt – number of mobile telephone subscribers per 100 inhabitants, loanlt – bank loans for the private companies in billions eur, issuelt – nominal value of corporate bonds issues, depthlt – market depth indicator (in percentage of gdp). for the evaluation of co-integration of the indicators of the estimated equations (7) and (8), the conducted wald test results led to the following conclusions: – the calculated level of significance of the equation (7) parameters in wald test was lower than the selected (0.0007 < 0.05); moreover the statistics fk is higher than the upper mean of f critical value interval to a value f3 (9.71 > 2.79 6), so the 6 see pesaran et al. 2001. 131 business, management and education, 2016, 14(1): 116–135 hypothesis h0: “there is no integration between the factors” was rejected and the alternative hypothesis h1 accepted that these factors are co-integrated (their coefficients are not equal to zero). – the calculated level of significance of the equation (8) parameters in wald test was lower than the selected (0.0003 < 0.05); moreover the statistics fk is higher than the upper mean of f critical value interval to a value f3 (11.52 > 2.79 7), so the hypothesis h0: “there is no integration between the factors” was rejected and the alternative hypothesis h1 accepted that these factors are co-integrated (their coefficients are not equal to zero). as it was confirmed, that the factors were characterized by long-term dynamics, the analysis was continued by the evaluation of their statistical significance using a measure of t statistics. removing statistically insignificant variables previous equations were transformed into (9) and (10) models: ( ) ( ) ( ) ( ) ( ) ( )( ) ( )( ) 1 1 1 1 1 1 43 27 0 86 0 27 0 03 10 97 0 33 7 66 lt lt lt lt lt lt lt d issue issue loans mobile index d loans d index − − − − − − = − − + × − + +   .   . *   . * . . * . * . * ; (9) ( ) ( ) ( ) ( ) ( ) ( )( ) 1 1 1 1 1 0 55 0 91 0 003 0 0003 0 14 0 004 lt lt lt lt lt lt d depth depth loans mobile index d loans − − − − − = − − + − + +   .   . *   . * . * . * . * ( ) ( )10 1 ltd index −. * , (10) where d represents disaggregated data, (–1) – the first delay, c – intercept, indexlt – an index on regulatory burden of corporate bond market, mobilelt – number of mobile telephone subscribers per 100 inhabitants, loanlt – bank loans for the private companies in billions eur, issuelt – nominal value of corporate bonds issues, depthlt – market depth indicator (in percentage of gdp). unlike the case of the usa, lithuania corporate bond market development is determined by the majority of indicators examined, which are evenly spread across the prediction of different corporate bond market characteristics (e.g. volume and depth). to ensure the correct interpretation of the coefficients, the evaluation of both equations error autocorrelation, heteroscedasticity and distribution according to the normal distribution phenomena is introduced. summarized lm (lagrange multiplier), white and jarque-bera test results are as follows: – the model of lithuanian corporate bond issues and the factors that determine it (9) satisfied the assumption of homoscedasticity (the calculated significance level of white test was above the selected (0.26 > 0.05), so the hypothesis h0: “the model 7 see pesaran et al. 2001. 132 i. astrauskaitė. multivariate analysis of short and long-impact indicators for corporate bond market development error distribution is of constant homoscedasticity” was adopted); there were no auto-correlated errors (for number of 2 delays the calculated values of significance level were higher than at the level of 0.05, so the hypothesis h0: “errors of delays do not correlate” was adopted); and the distribution was normal (the significance level of an overall estimate of jarque-bera test was greater than the chosen (0.58 > 0.05), so the hypothesis h0: “the model errors are distributed under the normal distribution” was adopted). – the model of lithuanian corporate bond market depth and the factors that determine it (10) also satisfied the assumption of homoscedasticity (the calculated significance level of white test was above the selected (0.27 > 0.05), so the hypothesis h0: “the model error distribution is of constant homoscedasticity” was adopted); there were no auto-correlated errors (for number of 2 delays the calculated values of significance level were higher than at the level of 0.05, so the hypothesis h0: “errors of delays do not correlate” was adopted); and the distribution was normal (the significance level of an overall estimate of jarque-bera test was greater than the chosen (0.72 > 0.05), so the hypothesis h0: “the model errors are distributed under the normal distribution” was adopted). as calculated estimates of equations models are concerted, efficient and unbiased, they are used for the further estimation of the impact (in the sense of its direction and size) to corporate bond market development by the evaluation of the elasticity (see table 4). table 4. elasticity measures of lithuanian ardl model coefficients (source: compiled by the author) independent variables dependent variables issuelt depthlt loanlt –0.31 –0.004 mobilelt 0.03 0.0003 indexlt –12.79 –0.15 d(loanlt) 0.39 0.004 d(indexlt) 8.94 0.11 as can be seen from table 4, from all market development indicators analyzed, lithuanian corporate bond market is mostly sensitive to changes in the index (rbi), the direction of the reaction depending on the period. one percent increase in rbi evaluation leads to almost 9 percent development of the market in the short term, while adequate change of the index in the long run reduces the corporate bond nominal value by almost 13 percent. rbi impact on the corporate bond market depth has identical mark and period, but stands out with significantly smaller size of the effect: only 0.15 per cent corporate bond market contraction in the long term and 0.11 percent development in the short term are accompanied by 1 percent rbi changes. 133 business, management and education, 2016, 14(1): 116–135 another factor that affects the market value of corporate bonds in long and short term is bank loans for the private companies. one percent increase in private bank loans to business increases the corporate bond issues by 0.39 percent in the short term. however, the same scope of change in bank loans reduces the corporate bond issues by 0.31 percent in the long term. this effect must be regarded as an amortization of business loans effect on corporate bond market when the positive and negative change in value is approximately the same size. this is supported by market depth and elasticity analysis of corporate loans in the long and short terms at the opposite effect and the identical size: one percent increase in business loan portfolio increases the corporate bond market depth by 0.004 percent in the short term, but equally decreases (–0.004 per cent) in the long term. compared with other factors of influence, mobile penetration effects considered to be of the lowest impact to lithuanian corporate bond market: one percent increase in the number of subscribers, causes 0.03 percent increase in the corporate bond issuance and 0.0003 percent increase in market depth indicator. it should be noted that the dissemination of mobile stands in a long-term impact on the corporate bond market. to conclude, in the short term lithuanian corporate bond market development is ensured by the legal and regulatory framework and bank loans to private entrepreneurs. the complementarity of the banking sector and the corporate bond markets is approved and the importance of legal framework and regulatory infrastructure possibly is linked to the emerging market phase. meanwhile, the long-term negative impact of legal and regulatory framework and bank loans to the corporate bonds market could be diminished by a wider development of ict. conclusions factors influencing the development of corporate bond market could be summarized as legal framework, state regulation and taxes, information and communication technologies (ict), competition with bank loans. general conclusion of the multivariate complex analysis is formulated on us and lithuanian models. it should be noted that the ict factor displayed a stronger long-term impact on the developed corporate bond market, than in developing one. on the contrary, the legal and regulatory framework and mechanism and tax environment is more robust to the developing markets, regardless the period, which determines the direction of the impact being often conditioned by market participants’ expectations, preferences or other psychosomatic effects. the short-term positive market reaction to changes in the legal framework can be changed in long-term negative ones because of tightened regulatory system or increase in the tax burden on the market participants’ mood. differential effects of the impact of the banking sector to the corporate bond market in emerging markets are influenced by the importance of greater market 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policy research working paper 6284, 1–15. srinivas, p. s.; whitehouse, e.; yermo, j. 2000. regulating private pension funds’ structure, performance and investments: cross-country evidence, mpra paper no 14753, 1–52. stankevičienė, j.; gembickaja, n. 2012. market behavior: case studies of nasdaq omx baltic, business, management and education 10(1): 110–127. sui, h. 2011. factors influencing the development of china’s corporate bond market and relevant suggestions, international journal of business and management 6(9): 258–260. http://dx.doi.org/10.5539/ ijbm.v6n9p258 ieva astrauskaitė, phd is a lecturer at vilnius university, faculty of economics, department of finance. over the last five years she has published over 5 publications and has participated more than in 5 international conferecences. research interests are capital and financial markets, market development issues, corporate finance. http://conferences.telecom-bretagne.eu/asmda2005/img/pdf/proceedings/910.pdf http://ilcampodelleidee.dol.it/allegati/wp14234.pdf http://ilcampodelleidee.dol.it/allegati/wp14234.pdf https://www.dbresearch.com/prod/dbr_internet_en-prod/prod0000000000328056/what%e2%80%99s+behind+recent+trends+in+asian+corporate+bond+markets%3f.pdf https://www.dbresearch.com/prod/dbr_internet_en-prod/prod0000000000328056/what%e2%80%99s+behind+recent+trends+in+asian+corporate+bond+markets%3f.pdf https://www.dbresearch.com/prod/dbr_internet_en-prod/prod0000000000328056/what%e2%80%99s+behind+recent+trends+in+asian+corporate+bond+markets%3f.pdf http://www2.blackrock.com/global/home/publicpolicy/publicpolicyhome/index.htm http://dx.doi.org/10.1002/jae.616 http://dx.doi.org/10.5539/ijbm.v6n9p258 http://dx.doi.org/10.5539/ijbm.v6n9p258 significance of demographic variables for targeting of internet advertisements václav stříteský1, marek stříteský2, martin john david quigley3, david říha4 the demand for professional knowledge as a key factor of the development of outsourcing of financial and accounting services in poland anna bagieńska the concept of a smart city in urban management sławomira hajduk the concept of basic income: global experience and implementation possibilities in lithuania algimantas laurinavičius1, antanas laurinavičius2 julia siderska evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics ligita gasparėnienė1, rita remeikienė2 the concept of products and services integration – analysis of scientific publications justyna kozłowska categories of supply chain performance indicators: an overview of approaches dorota leończuk multivariate analysis of short and long-impact indicators for corporate bond market development ieva astrauskaitė the research on interface between lithuanian direct investment abroad and foreign trade flows anžela kozlova1, algita miečinskienė2 this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons.org/ licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2023 the author(s). published by vilnius gediminas technical university issn 2669-2481 / eissn 2669-249x business, management and economics engineering 2023 volume 21 issue 1 pages 63–83 https://doi.org/10.3846/bmee.2023.18676 identifying the effects of corruption perception on the relationship between international trade and logistics performance in developing countries avni zafer acar 1, karahan kara 2 1faculty of applied sciences, istanbul bilgi university, istanbul, türkiye 2logistics program, artvin çoruh university, artvin, türkiye article history: abstract. purpose – logistics creates a strategic effect by playing a facilitating role in international trade, which has a significant impact on the economic performance of countries. logistics performance and corruption play an influential role  in determining the trade efficiency  levels of developing countries. there are two purposes in this research. first purpose is to determine the international trade efficiency level of developing countries based on logistics  performance. the second purpose is to determine the efficiency level of trade based on both  logistics performance and corruption levels. research methodology – output-oriented data envelopment analysis (dea) has been applied in the research. the research covers the years 2012–2020. the sample area is developing countries. findings – countries with full efficiency levels in 2012–2020 have been determined according  to both logistics performance and corruption scores. research limitations – the research covers the years 2012–2020. the sample area is developing countries. practical implications – the reduction of corruption levels in some developing countries is an important factor in increasing the level of international trade efficiency.  originality/value – this research highlights the role of corruption in the relationship between trade and logistics performance. ■ received 21 february 2023 ■ accepted 22 april 2023 keywords: logistics performance, corruption, international trade, developing countries, data envelopment analysis. jel classification: d73, o11, c30.       corresponding author. e-mail: karahan.kara@artvin.edu.tr introduction the literature agues that international trade has significant effects on the growth and competitiveness of national economies (acar & yurdakul, 2015), and these relationships have been supported by the studies performed in different economies (e.g. elbeydi et al., 2010; akhter  et al., 2022; dragusha et al., 2023). thus, most of the developing countries aim to increase  their national income by pursuing outward-oriented development policies. in this context countries undersigned many bilateral and multilateral trade agreements and participating global and/or regional trade unions. this highlights the importance of promoting foreign trade, particularly exporting, to economic prosperity. along with this widely supported concept regarding globalization and increasing competition, research studies show that improvements in logistics performance facilitate international http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2023.18676 https://orcid.org/0000-0003-4538-4944 https://orcid.org/0000-0002-1359-0244 mailto:karahan.kara@artvin.edu.tr mailto:karahan.kara@artvin.edu.tr 64 a. z. acar, k. kara. identifying the effects of corruption perception on the relationship between international trade and... trade in different ways (gani, 2017), such as reducing the impact of distance and transport  costs, providing better infrastructure and so on (çelebi, 2019). this will result in reducing the overall international trade costs, while increasing the level of competition and economic growth. in this respect, logistics has been considered as one of the main determinants of the international trade performance of countries. basically, it is easy to say improvements in logistics have reduced transportation costs. however, the development of logistics activities not only reduces transportation costs, but also it has a positive effect in reducing the production costs via supporting the supply chains  (lapinskaitė & kuckailytė, 2014). moreover, logistics services ensure the mobility of products  in a safe, reliable, quick, and efficient manner which means reducing costs in international  trade. thus, it is considered that logistics is one of the key elements in international trade together with globalization and increasing competitiveness (martí et al., 2014). in this framework literature is full of conceptual and empiric studies articulating the mutual relationship between foreign trade and international logistic performance of the countries. especially the logistics performance of developing countries has been considered as vital for them to increase their share in global trade and to benefit from the revenues of globalization  (ofluoğlu et al., 2018). logistics industry, particularly transportation, as a facilitator in international trade grew significantly while logistics became a significant part of the business economic system and  major global economic activity in recent years (yurdakul & acar, 2015). moreover, a recent  study shows that countries with greater capability in logistics are taking the lead over their competitors regarding the world economic forum’s global competitiveness index (gci). this  and other related studies indicate that there is a strong relationship between logistics performance and the general competitiveness of a country (erkan, 2014; kabak et al., 2020). however, global logistics business is full of challenges. thus, logistics managers must deal with many non-tariff barriers as well as problems such as costs, exchange rate differences,  and different customs regimes to ensure the effective and efficient flow of goods. one of  the important problems which can be considered a non-tariff barrier in developing countries  is corruption. since this problem negatively affects international logistics networks, there is  a vast literature about the negative effects of corruption on economic development, foreign  direct investment, international trade, and international logistics performance. the fact that corruption trends are higher in developing countries causes these countries to be more affected by the negative effects of corruption in their international trade  activities and performances. in addition, considering the close relationship between logistics performance and international trade, it is expected that corruption will weaken the effect of  both logistics performance and logistics performance on trade. at this point, there are two main motivations for this research. these motivations also address research questions. the research questions are as follows: ■ research question 1: can trade efficiency levels be determined according to the logistics  performance of developing countries? ■ research question 2: can trade efficiency levels be determined according to both logistics performance and corruption of developing countries? what are the differences  according to the first research question? business, management and economics engineering, 2023, 21(1): 63–83 65 in accordance with these two research questions, this empirical study has two aims. one of the two aims is to determine the international trade efficiency level of developing countries  based on logistics performance. the other aim is to determine the efficiency level of trade  based on both logistics performance and corruption levels. in the literature, it is seen that data envelopment analysis is commonly preferred to determine the efficiency levels (rashidi & cullinane, 2019; polat et al., 2022; kara, 2022; kara  & çetinkaya, 2022). thus, dea analysis was preferred to achieve the research objectives. with this analysis, efficiency levels based on input and output variables can be determined.  in addition, it is aimed to provide suggestions to countries by detecting changes in activity levels by considering corruption based on the comparison of these two results. in this context, data envelopment analysis has been applied to determine the international trade (% of gdp)  efficiency levels of developing countries. the fact that trade efficiency has been determined  by considering the effect of corruption on trade as well as logistics performance with this  empirical research makes the study different from the other research. however, the limitations  of the current research can be considered as the fact that a model was created in which only logistics performance and corruption variables were used to determine the international trade efficiency levels of countries, the research period was limited to the 2012–2020 period, and  the data set was obtained from secondary reports. the second part of the article is dedicated to establishing a conceptual framework based on a literature review. in the third part, the methodology of the research is explained. in the fourth part, the findings of the empirical research are given. in the last part, conclusions  based on the findings and implications and suggestions for countries have been developed. 1. conceptual framework and literature review the interrelationships between international trade and international logistics regarding the effect of corruption will be conceptually examined in the following sub-sections. this review  provides a framework based on the building blocks of the main concepts of the research and examining their relationships. 1.1. importance of foreign trade in economic prosperity it can be considered that adam smith was the first to highlight the positive effect of international trade on economic growth (smith, 2010). the thesis that foreign trade is the engine  of growth was discussed in the context of adam smith’s theory of specialization. according to adam smith’s theory, a country should produce and specialize in whatever goods it can produce more cheaply than others, and so which provide an “absolute advantage”. therefore, it should export these goods that it can produce at low cost and import the goods that it can produce at a high cost from foreign countries. ricardo expanded the theory within the framework of the theory of comparative advantage and carried it to new horizons. later, the relationship between foreign trade and economic growth has been confirmed by michaely (1977) and feder (1983). since then, the  relationship between import, export and economic growth has been one of the important 66 a. z. acar, k. kara. identifying the effects of corruption perception on the relationship between international trade and... issues discussed in the economics literature. the increase in the number of imports and exports, that is, in the volume of foreign trade, can increase economic growth by increasing employment and labor productivity by creating technological innovations and the transition to economies of scale. in foreign trade, on the one hand, economic growth is achieved due to economies of scale and increased productivity by selling products to wider markets, on the other hand, imports of intermediate and capital goods and basic raw materials from abroad help countries to easily access the inputs they need and thus increase their economic growth. in studies on the relationship between foreign trade and growth, most of the researchers on economics argue that exports affect growth more, particularly in developing or less-developed countries (vohra, 2001) such as libya (elbeydi et al., 2010), jordan (shihab et al., 2014), pakistan (saleem & sial, 2015), india (mishra, 2011; kumari & malhotra, 2014), turkey  (bahramian & saliminezhad, 2020) and china (mah, 2005; kumari & malhotra, 2014). on the  other hand, those who argue that imports are also effective on economic growth are not  to be underestimated. according to this approach, imports provide the intermediate goods and capital goods needed by the country in production in the most appropriate variety and positively affect the country’s economy with the effect of the decreasing cost of capital (şahin  & durmuş, 2018). however, the increase in international trade numbers also contains many question marks. that is, the ratio of imports to exports or the added value created by the exported goods are the data that should always be questioned. in this context, in general, the necessity of evaluating the international trade of a country emerges not only in terms of numbers but also in terms of efficiency. 1.2. relationship between international trade and international logistics the demand of the manufacturers to transport their products to the consumers with minimum time loss and low cost but reliably creates the necessity of working in connection with various industries in domestic economies. these links have been strengthened through effective transport and logistics systems. in this context, logistics services not only provide  industrial connections within the domestic economy, but also connect the domestic economy to the international economy (gani, 2017). moreover, logistics, particularly transportation-related activities, determines the amount of trade and goods exchange (hesse & rodrigue, 2004) by facilitating international trade as it enables companies to effectively complete the  import, export and related transactions of goods and services. therefore, logistics services, which ensure the mobility of the products in a safe, reliable, quick, and efficient manner while  reducing costs, have become one of the key elements in international trade during globalization and increasing competitiveness (martí et al., 2014). international trade broadly refers to transferring the finished goods of a company to the  other company in the importing country by exporting it with the aim of making a profit. international trade increases national income and reduces poverty under favorable conditions. thus, as it is argued in one of the oecd/wto reports that international trade contributes to both economic and social development (oecd/wto, 2013). therefore, factors which disturb the smooth and cost-effective flow of trading commodities such as bureaucratic procedures  to be done in the process of exchanging produced goods between countries, documents business, management and economics engineering, 2023, 21(1): 63–83 67 to be arranged, legal regulations to be complied with, transportation and insurance costs incurred, and expenses arising from delays cause significant trade costs. for this reason,  simplifying the procedures to be followed in international trade, reducing the number of documents, using common documents and legislation, establishing an effective  logistics  system, and increasing the quality of logistics services have become the priority objectives for increasing the world trade volume. in this context, especially high logistics costs and inadequacy of logistics services are considered as barriers to international trade. therefore, countries are expected to increase their logistics performance to minimize these obstacles (ofluoğlu et al., 2018). there are many studies in literature that evaluate the relationship between international trade and logistics, both conceptually and empirically. puertas et al. (2014) argued that an  efficient supply chain system in international trade requires logistics as the enabler of organization and synchronization of trade flows. meanwhile, based on their findings in developing  countries, the same authors claimed that the underdevelopment of logistics can cause an increase in trade costs and impede the efficient movement of goods (martí et al., 2014). shepherd (2016) pointed out that improved logistics performance can positively affect export and  facilitate trade by increasing the efficiency of trade in goods, reducing the cost, providing the  simplicity of the procedures, and more efficiently processing the necessary documentation  accompanying trade. bensassi and colleagues examined the bilateral exports from 19 spanish regions to 64 destinations by using an augmented gravity model of trade. their findings proved the  positive correlation between logistics performance based on the number, size and quality of logistics facilities and the trade (export) flows in goods (bensassi et al., 2015). a more recent  study conveys the findings of bensassi and colleagues’ study to new frontiers and proved  that logistics performance is more critical for exporting countries than for importers (host et al., 2019). as a global study, the world bank’s lpi report findings showed that among  countries with similar income levels, those with better logistics performance stood out with an additional 1% gdp growth and 2% trade growth (arvis et al., 2016). more recently, bugarčić et al. performed an empirical study considering the logistics performance and the trade volume of the central and eastern european (ceecs) and western balkans countries. their analysis based on the gravity model statistically proved the common assumption about the improved logistics performance and logistics services lead to a positive impact on the international trade volume. thus, they claimed that better logistics performance of the countries will lead to increased bilateral trade while reducing trade costs (bugarčić et al., 2020). korkut et al. (2021) have used it to analyze the relationship between international trade and logistics by considering different modes of transport function of logistics and related  infrastructural investments. they used panel co-integration and panel causality analyzes to compare the current account balance data of the g20 countries in international trade with the  infrastructure expenditures of the countries on the highways, railways, airlines, and seaways. as they expected, data analyses revealed that there is a co-integration between international trade and logistics infrastructure investments. 68 a. z. acar, k. kara. identifying the effects of corruption perception on the relationship between international trade and... as can be clearly seen from these studies in the literature, there is a strong relationship between logistics and trade. so, as is repeatedly argued in the literature, researchers of the current study assumed that logistics is one of the determinants of the efficiency of trade, and  it is a cost item for the companies as well as the value it creates. 1.3. logistics performance of the countries logistics should not be considered as a mere transportation activity. logistics, which is one of the basic elements of international trade and international supply chains, covers a set of core activities associated with various public and private sector institutions ranging from transportation, warehousing, cargo consolidation, customs clearances to domestic distribution and payment systems to the transformation and circulation of goods (arvis et al., 2012;  hesse & rodrigue, 2004). thus, to improve the effectiveness and the efficiency of a logistics  system all these basic activities should be considered and evaluated in a competitive manner. in a competitive business environment, logistics performance has a significant impact on  many strategic decisions such as which countries the companies will be in, which suppliers they will buy from, and which markets they will enter. high logistics costs and low level of logistics service constitute an obstacle to trade, foreign direct investments, and thus economic growth. for these reasons, improving a country’s logistics performance has become an important development policy goal. to improve a system or a process, first, it should be measured by a valid criterion. however, there is not any logistics performance criteria list which has been agreed upon. however, studies dealing with the relationship between international trade and international logistics performance empirically took into account the lpi values developed by the world bank in  order to measure the logistics performances of countries (e.g. nguyen & tongzon, 2010;  martí et al., 2014; puertas et al., 2014; bensassi et al., 2015; gani, 2017; jiang & wu, 2017;  wang et al., 2018; ofluoğlu et al., 2018; bugarčić et al., 2020). at the macro level, logistics performance is among the main indicators pointing to the logistics competencies of countries (international transportation, customs services, international transportation legislation, import and export transactions, etc.) (halaszovich & kinra, 2020). logistics performance index (lpi) was developed by the world bank (wb). it provides  feedback, based on a global survey, to help countries develop logistics reform programs to increase their trade capability and competitiveness. with this index study, the wb aims to create a competitive environment between countries and tries to determine the situation for countries to improve their logistics performance. the lpi provides detailed information about  the logistics environments of countries, their basic logistics processes and organizations, and their time and cost performances. so, countries can find the opportunity to compare themselves with other countries in terms of international logistics activities, and they can see the opportunities and obstacles in front of them. the wb’s lpi has been calculated every two years since 2007 and measures the international logistics performance of approximately 160 countries. however, there are also many criticisms about the research methodology and calculation algorithm of this index. despite all the criticisms written about its subjective aspects, it is possible to say that lpi is an appropriate  business, management and economics engineering, 2023, 21(1): 63–83 69 measurement to compare countries regarding logistics performance (acar et al., 2015; polat  et al., 2022). besides the wb, also a worldwide logistics company (agility) has measured the international logistics performance of the emerging economies and release the annual aemli  (agility emerging markets logistics index) report since 2011. aemli reports in 2011–2018 are based on three key components. these components are  market size and attractiveness (50%), market compatibility (25%), and connectedness (25%).  in determining the market size and attractiveness score, the economic outputs, growth rates, financial stability and population sizes of the countries are considered. market compatibility  score determines the market accessibility of countries, the size of foreign investments and the level of economic development based on logistics services. connectedness, on the other hand, is determined based on the national and international transport connections of the countries. as of 2019, aemli reports are calculated based on domestic opportunities (33%),  international opportunities (33%) and business fundamentals (33%). the domestic opportunities score is determined according to the economic and population sizes of the countries, income equality, urbanization levels and the development status of business clusters. international opportunities are determined based on countries’ international logistics market sizes, logistics-based trade sizes, infrastructure, and success in customs processes. business fundamentals, on the other hand, are calculated depending on the legal regulations in the countries, the amount of credit and debt, the success of the fight against corruption, inflation,  financial expenditures caused by crime and violence, and local stability. the impact of the logistics performances of developing countries on the commercial activities of the countries is inevitable. as stated in aemli reports, logistics activities directly  affect market efficiency. as a result, international trade efficiency is directly affected. at this  point, the first hypothesis of testing international trade efficiency based on the logistics performance of developing countries is as follows: h1: international trade efficiency of developing countries based on logistics performance can be ascertained, and the efficiency levels of countries can be determined. 1.4. effects of corruption corruption is a concept that has existed since ancient times and was defined by kaufmann  (1997) as the misuse of public goods by public servants for their own benefit. meanwhile,  tanzi (1998), referring to the fact that it is not that easy to define corruption, supported a  definition as the malicious use of public power for personal gain. when current studies are  examined, it is understood that the view of “abuse of public power for personal benefit” is  generally accepted (e.g. dong, 2011; larson, 2020). in addition, bahoo et al. (2020) drew  attention to seven main streams in their research to determine the corruption agenda in the concept of international business. among them, the fight against corruption, the determinants of corruption, the effect of corruption on companies, the relationship between the political environment and corruption, the anti-corruption management, the effect of corruption  on foreign investors and trade. thus, it is clearly understood that the relationship between corruption and trade is on the agenda of international literature. 70 a. z. acar, k. kara. identifying the effects of corruption perception on the relationship between international trade and... according to the existing literature, studies examined the effects and the relationship of  the corruption regarding different aspects and the factors such as trade, economic growth,  foreign direct investment, political regime, co2 emissions and so on. although there are few studies claiming to the contrary (e.g. egger & winner, 2005; méndez & sepúlveda, 2006; aidt  et al., 2008; dong, 2011) it is stated that there is no evidence that corruption has positive  effects in the majority of the studies in the literature. also, corruption researchers paid too  much attention to less developed and developing countries. there is extensive literature on the relationship between corruption and international trade (e.g. trefler, 1995; eaton & kortum, 2002; de jong & bogmans, 2011; leitão, 2021). one  of the most outstanding works, among others, is the work of trefler (1995), who calls corruption the “mystery of missing trade”. de jong and bogmans (2011) claimed that corruption would reduce the volume of international trade. accordingly, eaton and kortum (2002) gave a ratio, assertively argued that international trade would be five times larger than its current  state if there were no frictions such as corruption. however, de jong and borgmans (2011) have argued that corruption can facilitate international trade if the related systems and/or institutions are not well developed or of low quality. meanwhile, the literature regarding the relationship between corruption and logistics is  relatively smaller than the corruption and international trade relationship. although it has not been proven statistically, it is an expected finding that most of the related publications  originate from developing countries (e.g. stefanovskiy et al., 2012; omran, 2012; seabra et al.,  2016; uca et al., 2016). also, some researchers have used panel data of the countries (world,  eu28 etc.) to examine econometric models (e.g. larson, 2020; goel et al. 2021). following  these opposing views,  identifying the effects of corruption on trade efficiency based on  logistics performance is one of the main objectives of this research. there are also studies on research aimed at reducing corruption in international transportation activities (sarker et al., 2021). considering the level of corruption, which plays an important role in the impact of logistics performance on international trade, the second hypothesis for determining the level of international trade efficiency is as follows. h2: based on both logistics performance and corruption, the international trade efficiency of developing countries can be ascertained, and the efficiency levels of the countries can be determined. 2. methodology there are many studies in the literature dealing with the relationships between the logistics performance levels of countries and their trade-based economic indicators (martí et al., 2014;  faria et al., 2015; danaci & nacar, 2017; gani, 2017; çelebi, 2019; bugarčić et al., 2020; song  & lee, 2022). however, there are a limited number of studies dealing with the relationship between logistics performance and corruption (seabra et al., 2016; larson 2020). in addition,  there are rare articles dealing with the relationship between logistics performance, corruption, and trade-based economic indicators (uca et al., 2016). there are regression models (larson,  2020; shikur, 2022), panel data models (tang & abosedra, 2019), structural equation models  (sénquiz-díaz, 2021) that try to explain the relationship between logistics performance, trade,  business, management and economics engineering, 2023, 21(1): 63–83 71 and corruption variables. in this research, the relationships between logistics performance, corruption, and international trade are examined by data envelopment analysis considering the developing countries, and the trade efficiency levels of the countries based on both  logistics performance and corruption scores have been revealed. in this context, the research was carried out in three stages. in the first stage, trade (%  of gdp) efficiency levels were determined based on the logistics performance of developing  countries by dea. in the second stage, the efficiency levels of trade (% of gdp) based on  logistics performance were determined by considering the effect of corruption by dea. in the  third stage, the efficiency level findings obtained in model 1 and the efficiency level findings  obtained in model 2 were compared. the empirical analysis flowchart is shown in figure 1. 2.1. variables and sampling the role of corruption is examined in this empirical research, which is expected to affect the  relationship between the logistics performance of developing countries and the share of trade in gross domestic product (trade (% of gdp)). data envelopment analysis has been applied in  the research. at this point, two data envelopment models were created. in the first data envelopment model (model 1), “sub-dimensions of logistics performance” of developing countries  were determined as input variables, and “share of trade in gross domestic product” as output variables. in the second data envelopment model (model 2), “sub-dimensions of logistics performances” and “corruption perceptions” of developing countries were determined as input variables, and “the share of trade in gross domestic product” as output variables. the purpose of model 1 is to determine the efficiency level of the share of trade in gross domestic product  of developing countries based solely on logistics performance. the purpose of model 2 is to  determine the efficiency level of the share of trade in gross domestic product of developing  countries based on both logistics performance and corruption. determining the “trade (% of gdp)” efficiency levels based on the “logistics performance indicators” of the developing countries by data envelopment analysis (model 1) determining the “trade (% of gdp)” efficiency levels based on the “logistics performance indicators” and “corruption perceptions” of the developing countries by data envelopment analysis (model 2) comparison of “trade (% of gdp)” efficiency levels obtained in model 1 and model 2 determining the sampling and variables figure 1. empirical analysis flow chart 72 a. z. acar, k. kara. identifying the effects of corruption perception on the relationship between international trade and... the current empirical research considers developing countries as sampling which takes place in the “agility emerging markets logistics index (aemli)” report. it should be noted that  this report has been chosen because it is appropriate to the main assumption of this study and considers emergent economies which have the potential to suffer from corruption. in this  context, it is aimed to determine the efficiency values of the developing countries in each year  between the years 2012–2018. the logistics performance scores of developing countries were  obtained from the aemli reports. corruption perceptions scores were obtained from reports  published by the “transparency international” organization (corruption scores have been taken as “1/corruption” score in the analyses, since the negative impact of corruption scores was considered). the share of trade in gross domestic product is obtained from the “world bank” reports. when the reports are examined, it has been determined that there are deficiencies  in the data announced by the countries. for this reason, countries were determined for each year. the variables, periods and number of countries used in this study are shown in table 1. table 1. variables and sampling models period input variable output variable sampling model 1 2012 market size & attractiveness,  market compatibility,  connectedness trade (% of gdp) 41 countries 2013, 2014, 2015, 2016 45 countries 2017, 2018 49 countries 2019 domestic opportunities, international opportunities, business fundamentals trade (% of gdp) 48 countries 2020 49 countries model 2 2012 market size & attractiveness,  market compatibility,  connectedness, corruption trade (% of gdp) 41 countries 2013, 2014, 2015, 2016 45 countries 2017, 2018 49 countries 2019 domestic opportunities, international opportunities, business fundamentals, corruption trade (% of gdp) 48 countries 2020 49 countries 2.2. data envelopment analysis charnes et al. (1978) introduced the data envelopment analysis method, which enables the  determination of efficiency levels based on inputs and outputs, to the literature. dea is useful  in determining the efficiency levels of the variables, considering the relationships between the  data in different measurement units. it is also a commonly used non-parametric mathematical  modeling method in operation research and economics. dea makes measurements based on total factor productivity. it’s also useful for benchmarking. mathematical expression of total  factor load is seen in eq. (1) (zionts, 1968): = = = ∑ ∑ 1 1       s rk rkr m rk rkr u y total factor efficiency v x . (1) business, management and economics engineering, 2023, 21(1): 63–83 73 ( )=  1,...,rky r s it is the amount of output produced by the decision unit. ( )=  1,...,ikx i m it is the amount of input used by the decision unit. ( )=  1,...,rku r s  it is the weight coefficient that the decision unit gives to the outputs. ( )=  1,...,ikv i m  it is the weight coefficient that the decision unit gives to the inputs. in this study, the output-oriented ccr-o (charnes et al., 1978) model, one of the dea  methods, was applied. the reason for choosing this model is to achieve the maximum output level. charnes et al. (1989) points out that the main goal of the ccr model is to bring the  sum of the weighted inputs to the minimum level while maximizing the output level. in this study, two ccr models were developed and applied to all years. therefore, the ccr model constructs are common. however, there are differences in the indices and parameters used in  the models. the objective function (eq. (2)) of the ccr model, constraints (eq. (3)) objective function (eq. (4)) of the dual model, constraints (eq. (5)) are as follows: objective function: = =∑ 1 min   m k i ik i e v x . (2) constraints: = = − ≥ = …∑ ∑ 1 1     0      1, ,  m s i ij r rj i r v x u y j n ; = =∑ 1 0 s r rk r u y ; ≥ = … = …,  0;   1,   ,  ;   1,   , r iu v r s i m . (3) objective function (dual model):   kmax z . (4) constraints (dual model): = ϕ − ≤∑ 1     0 n jk ij ik j x x ; = − ϕ − ≤∑ 1     0 s k rk jk rj ik r z y y x ; ϕ ≥ = … = … = …0;   1,  ,  ;   1,  ,  ; 1,  , jk r s i m j n . (5) the indices of model 1 are as follows: indices (for model 1): i aemli indicators  i = 1,2…, m (m = 3) r trade (% of gdp) r = 1,2…, s (s = 1) j countries j = 1,2…, n (n = 41 for 2012; n = 45 for 2013, 2014, 2015 ,2016; n = 49 for 2017, 2018, 2020; n = 48 for 2019). 74 a. z. acar, k. kara. identifying the effects of corruption perception on the relationship between international trade and... the indices of model 2 are as follows: indices (for model 2): i aelpi indicators and cpi i = 1,2…, m (m = 4) r trade (% of gdp) r = 1,2…, s (s = 1) j countries j = 1,2…, n (n = 41 for 2012; n = 45 for 2013, 2014, 2015, 2016; n = 49 for 2017, 2018, 2020; n = 48 for 2019). the parameters of model 1 and model 2 are as follows: parameters:  :iv  “i” weight given to logistic performance input (with cpi for model 2).  ru  : “r” weight given to trade (% of gdp) output.  :ikx  “k” score of the “i” logistics performance input (with cpi for model 2) of the decision  unit.  :rky  “k” score of the “r” trade (% of gdp) output of the decision unit.   :i ijv x “j” country’s weighted input score. r rju y : “j” country’s weighted output score. 2.3. findings in this empirical research, first of all, the trade (% of gdp) efficiency levels of developing  countries between 2012 and 2020 were determined by dea analysis. at this stage, the findings of the trade (% of gdp) efficiency levels based on the logistics performances of the  countries have been obtained. as seen in the table 2, two countries (bahrain, vietnam) for 2012, three countries (bahrain, cambodia, vietnam) for 2013 and 2014, three countries (libya, cambodia, venezuela) for 2015, two countries (vietnam, cambodia) for 2016, three countries table 2. countries with 100% trade (% of gdp) efficiency with and without corruption 2012 2013 2014 country (without cpi) (with cpi) country (without cpi) (with cpi) country (without cpi) (with cpi) bahrain 1 1 bahrain 1 1 bahrain 1 1 vietnam 1 1 cambodia 1 1 cambodia 1 1 vietnam 1 1 vietnam 1 1 2015 2016 2017 libya 1 1 vietnam 1 1 libya 1 1 cambodia 1 1 cambodia 1 1 vietnam 1 1 venezuela 1 1 bahrain 0.85 1 cambodia 1 1 ukraine 0.79 1 bahrain 0.93 1 ukraine 0.75 1 2018 2019 2020 vietnam 1 1 angola 1 1 libya 1 1 libya 1 1 vietnam 1 1 vietnam 1 1 mozambique 1 1 mozambique 1 1 bahrain 0.96 1 ukraine 0.63 1 business, management and economics engineering, 2023, 21(1): 63–83 75 (libya, vietnam, cambodia) for 2017, three countries (libya, vietnam, mozambique) for 2018,  three countries (angola, vietnam, mozambique) for 2019, and two countries (libya, vietnam)  for 2020 stand out as countries with full efficiency level. this finding supported the assumption of hypothesis1 in the context of the countries mentioned above. according to the trade (% of gdp) activities of countries based on both logistics performance and corruption levels (table 2), it is seen that bahrain and ukraine have been  added among the countries with full efficiency levels for 2016, 2017 and 2018 regarding  the logistics performance. this finding indicates that bahrain and ukraine are the countries  which increase their trade (% of gdp) activities to full efficiency level because of their successful implementation of anti-corruption policies. this finding supported the assumption  of hypothesis 2. the other main finding of the empirical research is that when the corruption levels of the  countries are considered, the trade (% of gdp) efficiency levels of some countries increase.  countries with increased efficiency levels are presented in the appendix. these countries with  the highest increase in efficiency levels over the years are: ■ qatar (22%), malaysia (9%) and ukraine (8%) in 2012, ■ qatar (23%), ukraine (14%) and uruguay (11%) in 2013, ■ qatar (28%), chile (24%) and ukraine (17%) in 2014, ■ qatar (38%), malaysia (25%) and chile (24%) in 2015, ■ qatar (35%), malaysia (33%) and chile (27%) in 2016, ■ qatar (31%), malaysia (28%) and chile (27%) in 2017, ■ qatar (38%), ukraine (37%) and malaysia (35%) in 2018, ■ ukraine (29%), malaysia (20%) and chile (17%) in 2019, ■ ukraine (26%), qatar (21%) and malaysia (20%) in 2020. this finding reveals that qatar, ukraine, malaysia, and chile are the top countries which  increase the efficiency in trade within time frame of the current research. thus, both of our  hypotheses were accepted. figure 2 shows the efficiency levels. however, the supplementary aim of this study is to provide suggestions to countries by detecting changes in activity levels by considering corruption based on the comparison of the findings of hypothesis 1 and 2. in this sense, considering the corruption perception  index data between 2012 and 2020, it is seen that the countries that have reached the level of full efficiency in international trade are bahrain (2017, 2018) and ukraine (2016, 2017,  2018). besides, it has been observed that there are countries whose efficiency levels have  increased even though they have not reached the full efficiency level in international trade  between 2012 and 2020 such as qatar, malaysia, and chile (see appendix). in addition to  the years of full efficiency, ukraine has increased its efficiency level in 2012, 2013, 2014,  2019 and 2020. 3. results and discussion the mutual relationship between international trade and logistics, and the effects of the corruption -mostly negativeon these concepts are generally known and accepted by experts and practitioners. also, in literature, there are a vast number of scientific studies exposing the  relationships between and among these concepts mentioned above. even though different  76 a. z. acar, k. kara. identifying the effects of corruption perception on the relationship between international trade and... figure 2. trade efficiency levels of developing countries business, management and economics engineering, 2023, 21(1): 63–83 77 methodologies are used, many scientific studies have verified the mutual relationship between logistics and international trade (e.g. nguyen & tongzon, 2010; bensassi et al., 2015;  gani, 2017; wang et al., 2018; korkut et al., 2021). besides, because both international trade and logistics activities need coordination and collaboration of many shareholders, there is always a probability of encountering a weak point along the supply chain that is corrupt. however, the studies considering the variables of international trade, logistics performance and corruption together are very rare particularly with a macro approach (e.g. uca et al., 2016). gani (2017) claimed that complex business  administrative procedures can create more inefficiency as well as create an environment for  corruption to emerge, but he has not proven this empirically. thus, the current study examines the interrelationships between the international trade and international logistics performance of the emerging economies under the consideration of the effect of corruption. an econometric model has been established to reveal the relationships by considering the international trade efficiency, international logistics performance,  and the corruption assumption of sampling countries. based on the findings, it has been determined that corruption level plays an active role  in international trade efficiency based on logistics performance. with the findings of this  research, it has been revealed that international trade efficiency and the international trade  efficiency based on logistics performance can be ascertained in developing countries by dea.  according to the findings of the related hypothesis 1, between the years 2012–2020 which are  the time limits of our research, bahrain (2012, 2013, 2014), vietnam (all years except 2015), cambodia (2013, 2014, 2015, 2016, 2017), libya (2015, 2017, 2018, 2020), venezuela (2015),  mozambique (2018, 2019) and angola (2019) were identified as countries with full efficiency.  these findings carry the retrospective perspective, which compares the obtained logistics  performance level as a result of investments in developed countries with the international trade data, to different horizons in respect of emergent economies. it can be interpreted that  logistics is not the sole factor determining international trade efficiency. the fact that this  relationship has been verified only in some of the developing countries can be interpreted  as logistics is not the only factor that determines the efficiency of international trade. this  inference, of course, reveals the question of what could be the missing point. to find an answer to this question, the corruption factor was added to the analysis in the  continuation of the study. according to the hypothesis 2 test finding obtained by considering  the years 2012–2020, bahrain (2012, 2013, 2014, 2017, 2018), vietnam (all years except 2015),  cambodia (2013, 2014, 2015, 2016, 2017), libya (2015, 2017, 2018, 2020), venezuela (2015),  mozambique (2018, 2019), angola (2019) and ukraine (2016, 2017, 2018) are countries with  full activity. as can be seen from the findings, the analysis revealed the fact that the relations  that are predicted to be carried forward in this way will be proven to be valid in more countries and for more years. thus, it has been concluded that international trade efficiency levels  can be determined based on the logistics performance of countries, together with corruption, which is among the main problems of developing countries. also, these findings represent  the novelty and the contribution of our study to literature. 78 a. z. acar, k. kara. identifying the effects of corruption perception on the relationship between international trade and... conclusions, implications, and limitations the findings of this study can be interpreted into two results in general. first, in line with the  general opinion, the results of this empirical research also revealed that corruption affects  the efficiency of international trade in most of the developing countries. in determining the  international trade efficiency of countries in the context of logistics performance, only looking at the lpi data may be biased as it does not reveal the individual or holistic behavior  models of people, which are the basic building blocks of the business philosophy. therefore, current research findings show that considering logistics performance under the influence of  corruption perception in determining international trade efficiency provides more significant  results. in this context, it may even be considered to update the lpi calculation by incorporating corruption perception data as a sub-dimension. this study also has a practical implication. the results of this research can be used to inform policymakers and supply chain managers to be aware of the effects of corruption on  international logistics performance at the country level. in addition, it is seen and recommended as remarkable studies in examining the relations between other macroeconomic indicators (such as income level, political stability, and institutional quality), logistics performance and corruption. it should be considered by researchers as the limitations of the current research that models were established using only logistics performance and corruption variables in determining the international efficiency levels of countries, the research period was 2012–2020, the data  set was obtained from secondary reports, the dea analysis was determined as output-oriented, and the sample area was only the developing countries. at this point, it is recommended that researchers examine logistics performance and trade efficiency levels based on corruption with various dea models. in addition, it is believed that 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2deniss.sceulovs@rtu.lv; 3elina.gaile-sarkane@rtu.lv received 27 january 2015; accepted 27 february 2015 abstract. the aim of this paper is to indicate the relations between company’s value added (va) and intangible assets. authors declare that intellectual capital (ic) is one of the most relevant intangibles for a company, and the concept with measurement, and the relation with value creation is necessary for modern markets. since relationship between ic elements and va are complicated, this paper is aimed to create a usable dynamic model for building company’s value added through intellectual capital. the model is incorporating that outputs from ic elements are not homogeneously received and made some contributions to dynamic nature of ic relation and va. variables that will help companies to evaluate contribution of each element of ic are added to the model. this paper emphasizes the importance of a company’s ic and the positive interaction between them in generating profits for company. keywords: intellectual capital, information communication technologies, value creation, organizational structure, performance. jel classification: g14, l21, m1, m10, m21. 1. introduction this study was conducted within the scope of the ekosoc-lv state research “the development of innovation and entrepreneurship in latvia in compliance with the smart specialization strategy” no. 5.2.2. there is one important question, which has been dominating through history of management, and it is “how do we create value added of company”, and thus, enhances shareholder value. many scientists emphasize the importance of company’s value added as the main factor for creating shareholder value (kay 1995; mclean 2006; pitelis 2009; bowman, ambrosini 2010; bang et al. 2010). nowadays, the efficiency of value chain as one of the key inputs to added is well understood (porter 1979). today’s knowledge intensive companies have more advanhttp://dx.doi.org/10.3846/bme.2015.265 mailto:vladimirs.satrevics@rtu.lv mailto:deniss.sceulovs@rtu.lv mailto:elina.gaile-sarkane@rtu.lv 77 business, management and education, 2015, 13(1): 76–94 tages in more complex environment. the changing environment replaced the perception of company’s value added (va) sources. reliance on productive tangible assets such as “raw materials, fixed capital, and even managerial knowledge” no longer account for investments made and wealth created by new and prospering companies (oecd 1996). as the primary inputs to organizations’ value creation processes are internal resources, but classic economic laws are hardly applicable for knowledge and other intangible resources. these resources traditionally seen as external could make an important contribution to the value creation process of the company. based on the intellectual capital (ic) approach, the paper begins the research that explores the effect of intangible resource in creation of added value. many scientists were analysing the influence of intangible assets on company’s value added (zeghal, maaloul 2010; bontis 1999; edvinsson, malone 1997; o’regan et al. 2000). sveiby and o’regan are assuming that intellectual capital is composed of the following three main parts: external structure, internal structure, and human capital (sveiby 1997; drucker 1993). the ic literature draws on aspects of the practical applications, providing a framework for explaining the value creation process as the link, between resources and shareholder value. value creation is not only difference between incomes and expenditures. p. f. drucker accentuates this and emphasizes that “main producers of wealth have become information and knowledge” and also the knowledge productivity (brooking 1996). the aim of this paper is dedicated to evaluate the relationship between company’s value added (va) and intangible assets. paper’s subject is intellectual capital (ic) and information and communications technologies (ict). authors see e-environment as a modern and powerful tool in creation of ic that helps to transfer company knowledge to customers and build product/service value. the ic literature draws on aspects of the practical applications, providing a framework for explaining the value creation process as the link, between resources and shareholder value. the theoretical and methodological ground-work of the study is formed of scientific articles, monographs, regulatory enactments and researches, conference materials, internet resources, expert opinions published in latvia and abroad. the theoretical and methodological ground-work of the study using literature exploratory approach, in the research generally accepted qualitative and quantitative data analysis methods of the economic science were employed, among them, statistical data processing, data grouping, and inductive-deductive data analysis methods. the scientific study employs surveying, observation study method, as well as comparative, and analytical methods, which are used by the authors to compare and analyse facts and assess solutions to specific issues. authors of the article use tables and figures created with microsoft office to ensure visual clarity of the study. 78 v. shatrevich et al. dynamic intellectual capital model in a company the e-environment dominance in the market increases, as well as interaction of both fields. the paper question is “how to evaluate sme ic using ict”? paper deals with the sector of information and communications technologies (ict) as a result of e-environment development. this paper analyses and describes the role of the ict sector in modern entrepreneurship and e-environment processes as a part of knowledge management and ic processes. the e-environment is analysed in this context as a factor affecting entrepreneurship development and competitiveness. the problem, despite the fact that e-environment developed dramatically and companies can benefits by using e-tools, is that many companies are still resistant to e-tools. the authors of the paper make contribution to practical aspects of adaptation of ict in companies. the e-environment is analysed in this context as a factor affecting entrepreneurship development and competitiveness. 2. intellectual capital approach the concept of ic started to formalize in the early 1990s by leif edvinsson (edvinsson, malone 1997). the work of skandia (fig. 1) was presented as a supplement to the annual shareholders report to describe the “true” value of the company’s. this new model was created to identify the roots of a company’s value by measuring hidden dynamic factors that underlie “the visible company of buildings and products”. market value financial capital intellectual capital human capital customer capital structural capital organizational capital innovation capital process capital fig. 1. skandia’s value scheme (source: edvinsson, malone 1997) 79 business, management and education, 2015, 13(1): 76–94 by the end of the 1990s, references to intellectual capital in contemporary business publications were commonplace (stewart 1991). many scientists started to define ic, having a similar opinion about intellectual capital and its definition (stewart 1991; edvinsson, malone 1997; standfield 1999; pike et al. 2000; roos et al. 1997). bontis considers that intellectual capital is everything that is in a company: all intangible resources and processes that belong to the company, patents, innovations, and customers, tacit and explicit knowledge (bontis 1999). what resources actually make up these generic capital forms is unique to each and every organization, as only those resources that are important for creating value should be included in constructing the distinction tree for an organization (bontis 1999). the work of skandia advised to measure the ic through indexes (fig. 2), recommended 112 metrics. later ic-index practice was created by roos, dragonetti and edvinsson (roos et al. 1997). sample of skandia ic measures financial focus – revenues / employee ($) – revenues from new customers / total revenue ($) – profits resulting from new business operations ($) customer focus – days spent visiting customers (#) – ratio of sales contacts to sales closed (%) – number of customers gained versus lost (%) process focus – pcs / employee (#) – it capacity cpu (#) – processing time (#) renewal and – satisfied employee index (#) development focus – training expense / administrative expense (%) – average age of patents (#) human focus – managers with advanced degrees (%) – annual turnover of staff (%) fig. 2. scandia ic measures (source: roos et al. 1997) roos et al. propose that the specific measurement of company ic by weightings and indicators can be decided by knowing the company’s strategy. also roos et al. suggests that the main consideration for assigning the weights to indexes should be the relative importance how they help the company achieve its strategic goals (roos et al. 1997). karl-erik sveiby gives his own conceptual framework (fig. 3) of measuring ic assets based on three families of intangible assets: external structure (brands, customer and supplier relations); internal structure (the organization: management, legal structure, manual systems, attitudes, r&d, software); and individual competence (education, experience (sveiby 1997)). 80 v. shatrevich et al. dynamic intellectual capital model in a company visible equity (book value) tangible assets minus visible debt. intangible assets (stock price premium external structure (brands, customer and supplier relations) internal structure (management, legal structure, manual systems, r&d, software) individual competence (education, experience) fig. 3. measuring model of intangible assets (source: sveiby 1997) ic approach helps us to develop strategy that focused on intangible resources, allowing them to manage more effective in process increasing in shareholder value. to conclude, different scientists intellectual capital is understood as the sum of all knowledge in the company that is able to generate company’s value added and it is affected by knowledge quality and knowledge productivity. 3. the concept of e-environment the rapid electronic environment development over the last decade has fostered the emarket growth and has provided companies with opportunities that they previously did not have. by employing advantages offered by the e-environment, entrepreneurs can ensure expedient and effective communication with the target audience, by promoting products on the global market. the performed scientific studies show that proper and skilful use of modern technologies can contribute to significant development of companies. up to now, no unequivocal studies have been performed about the use of the electronic environment in ensuring development of micro, small, and medium enterprises. the electronic environment is used for various needs – for trade, marketing, advertisement, studies, communication, training, etc. simultaneously, there is an opinion claiming that in future, the majority of transactions will be performed on the electronic market, hence advancing the dominant position of the e-environment in achieving entrepreneurship competitiveness. the electronic environment already now offers companies practically all the necessary marketing and communication tools for ensuring company development by creating competitive advantages, nevertheless, not all companies can employ the opportunities rendered by the e-environment, in order to increase company competitiveness and productivity. there are several well-known and popular value theories, such as, the five forces model (porter 2008), shareholder value model (fruhan 1979), as well as the “value map” theory, intended for analysing the economic gain for consumers (kambil et al. 1997). various theories were developed many years ago, when the electronic market was not yet developed, and hence are suitable for the conventional market. due to this rea81 business, management and education, 2015, 13(1): 76–94 son, the authors of the article suggest that companies use the alexander osterwalder’s value proposition concept or the approach that is a constituent element of the author’s developed business model canvas. (osterwalder, pigneur 2009). the osterwalder’s business model was formed based on freeman’s stakeholder theory (freeman 1984). the model is adapted to today’s market needs and conditions, and the importance of the electronic environment, i.e. of the electronic market, in entrepreneurship is taken into account. osterwalder distinguishes between “value proposition” and “elementary value proposition”, which is an element of value proposition. the authors wish to draw attention to osterwalder’s “value life cycle” consisting of five stages: value creation, appropriation, consumption, renewal, and transfer (osterwalder 2004). all life cycle stages are linked to value consumption, using the electronic environment: value creation process (based on information and communication technologies (ict) – adaptation of various products for the needs of an individual consumer, e.g., personal computers, footwear, etc. value appropriation – “a one click purchase” at an internet shop. value consumption – listening to music, watching a movie, etc. value renewal – various software updates, value transfer – disposal of old computers and other machinery, giving away unnecessary books and equipment for further use, etc. upon combining analysed models, it can be seen that the information and communication technologies (in the osterwalder’s model) or the information communication technology bear great importance in creating value for consumers and that they undoubtedly affect the company’s image. nevertheless, several empirical studies made by authors in latvia, show that many latvian smes do not employ ict and therefore the most suitable way should be sought for how to involve ict in elaborating business development models. the value concept is broadly used in various business models, including e-business models. the value forms the basis of several business models. the e-business model is based on mutual integration of key flows and values and implementation thereof between e-market participants, through the use of the e-environment. three main e-business model elements can be distinguished: flows, participants, value. the term e-business model describes a broad spectrum of informal and formal models, which may be used in companies to depict various business aspects, such as operational processes, organisational structures, and financial forecasts (laudon, traver 2010). in studying various business model concepts, the authors have come to a conclusion that both business model types (taxonomic and conceptual) can be applied to the latvian smes; however the conceptual business models would still be primary. it is related to the fact that there are many niche and narrow profile companies in latvia. moreover, the majorities of companies are operating only on the local market and depend on domestic demand fluctuations. 82 v. shatrevich et al. dynamic intellectual capital model in a company the conceptual business models enable companies to analyse the current condition more broadly and to evaluate the already existing business. by employing this analysis, companies can develop new business development directions or improve the existing ones, because a modern market demands that companies change and are aware of their global condition. entering the global market allows companies to reduce their dependency on local market fluctuations. taxonomic models, for their part, can serve as a specific type of entrepreneurship. for instance, when developing the conceptual business model, companies will answer the question “how to develop further on?”, but the taxonomic model will allow answering the question “what to do in order to develop?” the use of ict promotes communication (fig. 4); moreover, ict is at the basis of the first stage “value creation” of the value life cycle. competitive advantage depends on effective communication with stakeholders ict is the base of “value creation” in the value’s life-cycle the value is the key element of different corporate-level management strategies and business models v alue is an integral part of the competitive advantage commumcation of stakeholders promotes by ict (information communication technologies) fig. 4. competitive advantage, ict and value intermediation (source: ščeulovs 2013) based on the authors’ performed study about the use of e-environment in latvian companies (ščeulovs, gaile-sarkane 2010), having studied value formation theories, having analysed the types and theories of business models, the authors have drawn a conclusion that the most suitable course of action would be to base further development on the osterwalder’s business model canvas (business model foundry 2014). forbes has referred to this business model canvas as a simple instrument for creating innovative business models (ščeulovs 2013). the model is based on active use of the e-environment in entrepreneurship. there are nine stakeholder groups at the basis of the model. meanwhile, reciprocal and effective interaction and communication between the stakeholders promotes a company’s competitiveness (osterwalder, pigneur 2009). at the same time, value is an intrinsic part of a competitive advantage. it can be concluded that a competitive advantage depends on effective communication with stakehold83 business, management and education, 2015, 13(1): 76–94 ers and customers. the previous study done by the authors about competitiveness of latvian companies’ shows that it is the use of communications networks, being a constituent element of competitiveness of latvian companies, that the companies are using the least (ščeulovs 2013). thus, the authors of the paper assume that by increasing e-environment element as part of ic system, the competitiveness companies will also increase. 4. ict, e-environment and value creation intermediation the identification of value-drivers elements in ic system and their subsequent management is seen as the key to value added authors present the model of ic describing the system how ic resources are used to increase value added. author’s model of ic composed of mainly three components: human capital, structural capital (organisational capital) and relational capital (social capital). information communication technologies e-environment structural capital human capital relational capital so ci al c ap ita l internal structure e xte rna l str uct ure information communication technologies value fig. 5. ict, e-environment and value creation intermediation (source: hermans, kauranen 2005) this model presented three main elements of va creation – human capital is defined as the combined knowledge, skill, innovativeness, and ability of the company’s individual employees to meet the task at hand. it also includes the company’s values, culture, and philosophy. structural capital is the hardware, software, databases, organizational structure, patents, trademarks, and everything else of organizational capability that supports those employees’ productivity – in other words, everything that gets left behind at the office when employees go home. customer capital (relational capital) – provided by structural capital, the relationships developed with key customers. 5. measuring of intellectual capital and information communication technologies in the context of knowledge, because knowledge itself is invisible, its creation and use are hardly measureable. nonetheless investing in ict many valuable outputs are generated (brand, know-how, patents etc.). value generated by knowledge will probably have 84 v. shatrevich et al. dynamic intellectual capital model in a company time lag (long-term) and not always have instant impact on profit (short-term). using this model can describe the methodology of our evaluation model. promoting investments to ict and specifically to e-environment, it is possible to evaluate company value. as for beginning should calculate the investment made by company to ict, comparing to abnormal revenue flow generated by ict and intangible value created. investments in ict (inputs) abnormal profit impact on company profit competitive advantages created internal efficiency and external financial value of intangibles (outputs) created ic value customer performance customization “getting the job done”, design brand/status cost reduction risk reduction accessibility fig. 6. ict, e-environment and value creation mediation (source: pulic 2000) this model helps to describe the methodology of authors of the paper quantitative evaluation model. based on the model (fig. 5) puts an emphasis on external efficiency. current quantitative model concentrates on external reporting, including internet statistics, investment analysis and methods for reporting the nonfinancial value of intangibles. so quantitative model is based mostly on vaic (value-added intellectual coefficient) approach. iict hr sc rct t t t= + + , (1) where: hrt – human resources dedicated to specific ict project (according to pulic’s concept mainly labour costs) at time t. sct – investments made to structural capital (maintenance, equipment, r&d costs) at time t. rct is the relational capital expenses (advertising costs – e.g. such systems as google index etc.) at time t. so we present formulae based on sveiby (sveiby 1997). va creation model and author`s model based on pulic (pulic 2000) (figs 3 and 6): ( ) ( )va iict ap iv= −α + β × δ( )t t t tt t t , (2) where t – value added created at time; at – is correlation coefficient (function of timeseries properties); iictt – capital (physical and financial) invested by company to specific ict project at time t; bt – is correlation coefficient (function of time-series properties); apt – abnormal profit generated by company through ict project per t period; δt– is correlation coefficient; ivt – intangible value generated by ict at time t. 85 business, management and education, 2015, 13(1): 76–94 or it could be seen as: ( ) ( ) 1 va hr sc rc ap iv − = −α + + + β × δ∑( ( ) ) n t t t t t t t t t i , (3) where apt – reported abnormal profit are based on a traditional accountant system; ivt – intangible value generated by ict could be calculated using specific parameters: ( )1 2 17iv .t f indx indx indx etc= + … + , (4) authors recommend developing indexes researched in their previous work (see short description on table 1). table 1. iv indexes in value creation based on conducted research (source: ščeulovs 2013) indx1 market share based on unit sold through ict indx2 relative market share indx3 penetration indx4 gross active customer volume indx5 information diffusion rate indx6 satisfaction indx7 “willing for searching” indx8 “try & buy” indx9 penetration(t) indx10 ict sales forecast indx11 repeated sales indx12 trial volume indx13 opportunities-to-see indx14 clickthrough rate indx15 session index indx16 client behaviour dynamics indx17 client time-spent dynamics authors agree with bontis et al. (1999) conclusion and emphasise that every company could include or exclude their own indexes based on specific market condition and working profile, that is why formulae could be modified (bontis 1999). based on previously conducted research (bontis 1999), authors of the article made description to the va creation model. va creation model regarding financial part (formula 1) – α, β coefficients. authors also conclude that these values are very sensitive to company strategy. after analysing financial figures (expenses and profits) coming from ict, authors of the article suggests (for more information see also roos et al. (1997) presented conclusions), that α, β coefficients should be based on company strategy. it means that, if company’s strategy is sustainable development, these coefficients should 86 v. shatrevich et al. dynamic intellectual capital model in a company be less sensitive, and, in case, company’s shareholder support speculative strategies – more sensitive. it could be easily understood as soon as one of ic capital fundamentals is long-term value creation. as for nonfinancial part of our model, using previously conducted research (result are provided by spss), authors of the paper found that δ coefficient is more complicated and should be expressed as sum of correlations coefficients (table 2, ščeulovs 2013). δ = ∑ n j i i f , (5) where δ – is sum of correlation coefficients (table 2); i = 1 – corresponding ic factor; j = 1 – corresponding ic correlation coefficient. table 2. ic factor’s correlation coefficients based on conducted research (source: ščeulovs 2013: 177–178) nr factor description factors variables correlation coefficient (average) 1 knowledge about use of e-environment tools 7 0.917 2 knowledge about ict tools and its usage 3 0.725 3 knowledge about e-environment models 1 –0.869 4 communication with interested party online 4 0.795 5 ict unit as sale and marketing instrument 1 0.701 6 usage of e-environment tool for customer and marketing research 3 0.770 7 knowledge about institutional services 5 0.852 8 e-environment tool acceptation in hr 2 0.825 9 e-environment tool diversity 2 0.811 10 use of institutional services for business goals 2 0.736 6. dynamic intellectual capital business model for the practical use of the formulae on e-business authors uses the business model ontology (bmo) (osterwalder 2004). the bmo’s roots are found in management science and information systems research. its four basic areas of preoccupation of a business model, the value proposition, the customer interface, the infrastructure management and the financial aspects stem from management literature (kaplan, norton 1992; markides 1999; hagel iii, singer 2000). the proposed dynamic business model elements are a synthesis of the authors formulae (3), providing practical contribution for business users. it’s scientific roots originate in so-called design science (owen 1997) and its recent upsurge in information systems research (march, smith 1995; au 2001; ball 2001; hevner et al. 2004). 87 business, management and education, 2015, 13(1): 76–94 fig. 7. sena business model’ bmo ontology based on osterwalder (2004) for authors a business model is understood as a conceptual tool that contains a set of elements and their relationships and allows expressing the business logic of a company. it is a description of the what, the who, the how and the how much in a company (kaplan, norton 1992; markides 1999; hagel iii, singer 2000). in other words it describes the value a company offers (what?) to one or several segments of customers (who?) and the architecture of the firm and its network of partners for creating, marketing and delivering this value and relationship capital (how?), in order to generate profitable and sustainable revenue streams (how much?). this business model has a good visualization, allowing understanding value creation logic (fig. 7). 88 v. shatrevich et al. dynamic intellectual capital model in a company cost account hr+sc+rc profit/loss ap revenue stream iv capital necessary investment capital in human resources structural capital relational capital value proposition va offer relationship mechanism indicators (table 3) awarness desire to search repeated purchases etc. resource and capability δ – ability table 2 value configuration meeting owners rights and customers customer relations indicators (table 3) brand development penetration sales forecast market concetration etc. distirbution channel indicators (table 3) market share relative market share numerical distribution clickthrough rate etc. fig. 8. dynamic intellectual capital business model (source: authors created model based on bmo ontology by osterwalder (2004)) the author focus is to integrate ic into the value creation intermediation of the company, as it aims at conceptually representing the way a specific company does business and its logic as to earning revenues (see fig. 8). in this approach authors integrates a set of indicators to evaluate relationship mechanism (table 3). indicators used by authors in revenue stream could be found on table 1. table 3. non-financial indicators for company’s development determination (source: ščeulovs 2013) # indicator name formula* *signage: $ – currency unit, % – percentage, # – numerically, r – rating, i – index aim (task) / description 1. market share by purchased units ( ) ( ) ( ) % purchased units in the market % % purchased units total market purchased units = key indicator of market competitiveness ( ) ( ) ( ) # purchased units in the market # # purchased units total market purchased units = 89 business, management and education, 2015, 13(1): 76–94 # indicator name formula* *signage: $ – currency unit, % – percentage, # – numerically, r – rating, i – index aim (task) / description 1.1. market share by revenue ( ) ( ) ( ) $ market share by revenue % 100% $ revenue from sales total revenue from market sales = × 2. relative market share ( ) ( ) ( ) $, # relative market share i, # $, # brand market share biggest competitors market share = to measure performance of the company or brand and market position 2.1. market concentration (related metrics) shows which a relatively small number of companies account for a large market share. it is also known as the concentration ratio. is usually calculated in relation to the three or four biggest companies on the market. 3. three (four) companies concentration ratio total (sum) market share, which mainly consist of 3–4 leading competitors in the market. 4. brand development index brand development index brand sales for a group household in a group total brand sales total household = to understand the relative brand performance for certain customer groups 5. penetration ( ) ( )( ) # market penetration % 100% # customers who bought product total population = × to measure popularity of brand ( ) brand penetration % 100% customers who bought brand total population = × ( ) penetration share % 100% brand penetration market penetration = × ( ) ( )( ) , # penetration share % 100% , # customers who bought brand customers who bought brand = × 5.1. the total number of active consumers (related metrics) percentage of consumers who at least once certain periods of time have bought a brand or product. when it refers to a specific brand, it is equivalent to the brand permeability acceptors: consumers who accept a given product and its benefits. those who reject: contrary acceptors. “ever-try-customers” – the part of consumers who have ever tried a particular brand. 6. awareness awareness scale (r) with point grading system, for example: from very dissatisfied to very satisfied to measure consumers’ awareness of the product / brand continued table 3 90 v. shatrevich et al. dynamic intellectual capital model in a company # indicator name formula* *signage: $ – currency unit, % – percentage, # – numerically, r – rating, i – index aim (task) / description 8. desire to search desire to search (%) = percentage of the number of consumers who want to postpone purchase, changes stores or reduce purchases volume, focuses on other brands to measure the trust to the brand/product 9. trial rate ( ) ( )( )( ) trial rate % 100= × purchased first time in period t total population number of customers             #   %         # to predict the volume of sales volume, as well as to measure changes in the volume of sales 10. penetration t ( ) ( ) ( ) ( ) penetration t penetration t1 replicates rate % first purchased in period t # # #  = × ×  11. sales forecast ( ) ( ) ( ) ( ) sales forecast t penetration t the average purchase frequency average number of sold units # # # # = × × 12. repeated purchases ( ) ( ) ( ) number of repeated number of buyers trial number repetitions rate % # # = × 13. trial volume ( ) ( ) ( )trial volume trial number number of sold units = ×# # # 14. repeated purchases volume ( ) ( ) ( ) repeated appliences volume repeated buyers number number of appliences made by one customer repeat times = × × # # # 15. numerical distribution ( )numerical distribution % 100= × number of brand banners total number of banners         %       to measure a company’s distribution (delivery) ability to customers 16. all products distribution ( ) ( ) all products distribution % 100= × total sales volume of all brand s sales places total sales volume of sales places banners           `         %             17. distribution of particular type of product (ptp) ( ) ( )( )( ) distribution of ptp % 100= × total ptp brand s sales places sales volume total sales volume of sales places banners     `           $     %             $ 18. premium price ( ) ( ) ( )( ) premium price % 100 − = × ′brand s a price etalon price etalon price       $       $     %     $ to develop product pricing in competition conditions 18. premium price ( )premium price % 100= ×revenue market share product market share         %     19. impressions, opportunities-tosee exposures impressions (#) = network reach (#) × frequency (#) impressions, opportunities-to-see, exposures – internet users, who individually reacted on concrete ad or other marketing activity in internet. net reach, rating point) – percentage of reach of the certain audience through the media. frequency – certain ad or others activity views number, which done by one user. modify the overall effect on the number of people and the average frequency, with which they are exposed to advertising continued table 3 91 business, management and education, 2015, 13(1): 76–94 # indicator name formula* *signage: $ – currency unit, % – percentage, # – numerically, r – rating, i – index aim (task) / description 20. clickthrough rate clickthrough rate = clicks effect     initial consumer reaction on conquering web pages. 21. the industry growth rate tu (the company’s commercial sales growth rate) > tn (industry growth rate) 22. visits indicators visits, sessions – a particular company’s website firsttime attendance of users. visitors, unique visitors – the number of users who visit a particular website of the company for a given period. clickstream – way, how user find website abandonment rate – the percentage of abandoned number of websites. cookie – small visitor’s file, which recorded by website and helps identify user next on visiting time. to analyse the behaviour of internet users 23. website traffic statistics dynamics website traffic statistics dynamics, # shows how many internet users visited a given site during a given period. 24. web site visit duration web site visit duration, # shows average time which users spent on the site. it is important to remember that attendance and viewing sites are different; not always visiting the site matches and the site’s viewing are equal. 25. site visitors characterization site visitors characterization, # behaviour: new and repeated visitors, frequency etc. demographic data: language, location, gender, etc. etc. 26. technologies technologies used in site attendance: – device, from which the attendance made; – browser and operating system, with which help made attendance; – provider used for site visiting; – visitors flow (what content were visited on the site); – in what way was visited site – directly or via link and/or divert from other sites; – others. business model focuses on the design of a company’s value creation model, visualization of value creation in bmo is highly relevant, and such visualisations are used to explain a model to stakeholders. the bmo approach builds on the use of entityrelationship-type models (see fig. 8). additionally, it proposes specific diagrams, for instance for distribution channel strategies or activity configurations. the authors’ formulae allow to automatically calculating the profitability of the business model of a ic value given. end of table 3 92 v. shatrevich et al. dynamic intellectual capital model in a company 7. conclusions the main aim was to reveal the main theoretical and practical aspects of the relations between company’s value added (va) and intangible assets. firstly, we created the concept model of ict, e-environment and value creation intermediation to discover the relation between company’s value added and intellectual capital. secondly, in order to evaluate the relation between company’s value added and intellectual capital, our mathematical model is created to explain the causal relation among these three types of capital in ic model and value added. authors added the variables that will help companies to evaluate contribution of each element of ic. authors declare that intellectual capital is one of the most relevant intangibles for a company, and the practical concept with measurement, and the relation with value creation is necessary for modern markets. as a second phase of our research, there is not yet fully approved direct correlation between model factors, and therefore authors are forced to use in future researches more information analysis presented by companies. more empirical researches are needed to investigate the relation effect of intellectual capital on value creation. this paper emphasizes the importance of a company’s ic and the positive interaction between them in generating profits for company. our findings indicated that the relations between ic elements and va are complicated; outputs from ic elements are not homogeneously received. this relationship has different inputs with different evaluating methods and specific impact on va. therefore, this paper was aimed to create a usable dynamic model for building company’s value added through intellectual capital. finally, authors presented a dynamic intellectual capital business model. our practical model is making contribution, both from financial perspective and easy business logic conceptualization, to the research of ic dynamic nature and its relation to va. the proposed dynamic business model was created to provide practical framework for business users, the authors were focused to represent intermediation of ic and value creation of the company, in order to conceptually visualize the way a specific company does business and its logic in earning revenues. the main contribution of this paper is that previous bmo models do not allowed such calculations earlier. visualization is also crucial to observe a complex relationship between ic elements and va from different business perspectives (e.g. customer perspective, structural capital perspective etc.). references au, y. a. 2001. design science i: the role of design science in electronic commerce research, communications 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attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(1): 46–63 doi:10.3846/bme.2015.269 a model for assessing the gender aspect in economic policy ona gražina rakauskienė1, eglė krinickienė2 1department of international economics and business management, faculty of business management, vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania 2institute of economics and business, faculty of economics and business management, mykolas romeris university, ateities g. 20, lt-08303 vilnius, lithuania e-mails: 1ona.rakaus@gmail.com; 2egle.krinickiene@gmail.com (corresponding author) received 19 march 2015; accepted 11 april 2015 abstract. the purpose of research is to develop a conceptual model for assessing the impact of the gender aspect on economic policy at macro– and microeconomic levels. the research methodology is based on analysing scientific approaches to the gender aspect in economics and gender–responsive budgeting as well as determining the impact of the gender aspect on gdp, foreign trade, the state budget and the labour market. first, the major findings encompass the main idea of a conceptual model proposing that a socio–economic picture of society can be accepted as completed only when, alongside public and private sectors, includes the care/reproductive sector that is dominated by women and creating added value in the form of educated human resources; second, macroeconomics is not neutral in terms of gender equality. gender asymmetry is manifested not only at the level of microeconomics (labour market and business) but also at the level of macroeconomics (gdp, the state budget and foreign trade), which has a negative impact on economic growth and state budget revenues. in this regard, economic decisions, according to the principles of gender equality and in order to achieve gender equality in economics, must be made, as the gender aspect has to be also implemented at the macroeconomic level. keywords: gender, gender equality, gender awareness, macroeconomic policy, care/reproductive economy, gender responsive budget, foreign trade and gender. jel classification: a130, d630, e6, j160. 1. introduction gender equality is recognized as one of the fundamental values in the european union and other developed countries worldwide. the practical implementation of the principles of gender equality and the awareness of such principles in society allow determining the progress of a country and the level of civilization. it is of utmost importance that gender equality is considered as the key to eliminating the effects of the recent global http://dx.doi.org/10.3846/bme.2015.269 mailto:ona.rakaus@gmail.com mailto:2egle.krinickiene@gmail.com (corresponding author) 47 business, management and education, 2015, 13(1): 46–63 economic and financial crisis. the provision of conditions for an increased number of women fully engaged in the labour market creates a real opportunity for increasing the overall employment rate and making use of the intellectual potential of women for the benefit of economic development. therefore, the examination of trends in economic policy–making needs to take into account gender relations and transformations of their role that have taken place in recent decades, because it has an essential impact on economic development and the prospects of such growth at both the national and international level. the issue of gender inequality rooted in society and its consequences are most frequently studied from the perspective of sociology, education science, philosophy and health care. recently, the eu and lithuania have devoted attention to studies on gender equality in the economic field, though this time, the focus has been on microeconomic policy, the most important objects of which are the labour market and business. however, the impact of the gender aspect on the formation of macroeconomic policy has been analyzed to a much lesser and insufficient extent. as for lithuania, a formal and declarative approach to gender equality prevails. despite a strong focus on the legal regulation of gender equality, putting provisions on equal opportunities of women and men into practice faces major challenges. in formal terms, the law on equal opportunities of women and men is in force (passed in 1998), and the fourth national programme on equal opportunities for women and men (2015–2021) is in the process of implementation; however, putting declared ideas and legal commitments into practice falls short of the desired level, and lithuania is actually facing problems in the field of gender equality. this is manifested by a number of labour market indicators (employment and economic activity level, poverty level, the vertical and horizontal segregation of the labour market, gender pay gap) demonstrating that the situation of women and that of men, in fact, are characterized by significant differences. they are becoming increasingly sharp along with deepening economic integration worldwide, which, as a rule, is more favourable for more flexible and mobile workforce. this causes considerable difficulties for women who are often forced to choose between family and career. the complicated situation of our country in the area of gender equality is reflected by the gender equality index published by the european institute for gender equality, according to which lithuania ranks as low as 18 of 27 eu member states. 2. overview of research into the scientific issue gender equality issues, necessity to introduce the gender aspect into the public and socio–economic governance of a country, a negative impact of gender stereotypes on women and their position in the labour market, the stability of family institution, mental and physical health, the transfer of the negative phenomena of poverty, social exclusion and economic passivity to the growing generation have been studied by l. beneria and savitri (1999), m. daly (2000), c. moser (2002), m. kimmel (2004), j. reingardienė 48 o. g. rakauskienė, e. krinickienė a model for assessing the gender aspect in economic policy (2004), m. jankauskaitė, i. mackevičiūtė (2005), d. leinartė (2006, 2008), a. bagdonas et al. (2007), o. g. rakauskienė et al. (2014). the inseparable link between the gender aspect and the effectiveness of economic governance is analyzed by the foreign classics of gender economics and has been developed, in recent years, by the researchers who note that the provision, on a national scale, of equal conditions to the social group of women for the realization of their human and professional potential would benefit economy thus promoting its growth (bakker 1994; elson 2001; budlender, hewitt 2002; balmori 2003; rakauskienė, krinickienė 2009, 2012). it is pointed out that gender economics is a relatively new area of economic research that is still taking a shape and attracting attention worldwide. all researchers come to the unanimous conclusion that the effect of the global financial system for both men and women cannot be viewed as absolutely positive, as women are a group of society that has suffered economically and is socially discriminated. gender equality challenges in the macro–economic governance of a state, namely, in the areas of economic growth, gender–sensitive budget formation and foreign trade policy have been analyzed by d. dollar and r. gatti (1999), n. cagatay et al. (2000), s. baden (2002), d. budlender (2001), d. elson (2001), z. randriamaro (2006), i. van staveren et al. (2007), o. g. rakauskienė and e. krinickienė (2012), etc. lithuanian and foreign researchers give a prominent position in their works to women’s participation in the labour market and the promotion of related socio–economic processes. the position of both sexes in the labour market, links with housework, the forms and levels of the discrimination of women in the labour market have been studied by the researchers from various areas, including economists, sociologists, psychologists and healthcare professionals. women’s employment, its structure and determining factors, the economic activity of genders, roles in the areas of employment and family life have been analyzed by v. kanopienė (2005), v. stankūnienė et al. (2005), i. mackevičiūtė and vengalė (2007), a. dromantaitė-stancikienė (2011), o. g. rakauskienė (2014). studies conducted by foreign and lithuanian researchers (i. bakker, d. elson, d. budlender, g. hewitt, t. mukhopadhyay, n. cagatay, h. h. balmori, n. kabeer, o. g. rakauskienė, etc.) confirm the existence of a direct link between the gender aspect and the effectiveness of economic governance. the introduction of gender mainstreaming into economic policies at all levels and stages, taking into account the socio– economic needs of women and men, allows increasing the effectiveness of economic governance at the macro– and micro–levels. 3. theoretical framework and research methods the gender equality research conducted by foreign researchers at the macroeconomic level suggests that the problem lies in the prevailing economic model itself. the main objects of macroeconomic research determining national socio–economic well-being 49 business, management and education, 2015, 13(1): 46–63 such as gdp, the state budget and foreign trade are characterized by being gender–neutral (budlender et al. 2001). the classical economic theory views them as being separate from the human factor and, even more, from the gender. meanwhile, the researchers of gender economics state it is human identity, i.e. sex, race, culture or an ethnic group that determines his/her socio–economic behaviour. the gender occupies one of the most important positions on this scale, because belonging to the social group of women or men essentially determines individual needs, interests and consumer motivation. on this basis, it is claimed that macroeconomic policy, which fails to take into account specific needs of women and men, becomes gender–blind (balmori 2003). with reference to the fact that the prevailing model for macroeconomics ignores the gender aspect: first, economy loses significant impetus for growth. the social group of women consists of over a half of humanity, and the stereotypical roles of the gender shaped by historical and cultural conditions create artificial barriers that do not allow fully exploiting the potential of women to promote economic growth. in the context of the global financial and economic crisis of 2008, it has been publicly acknowledged that one of the ways to overcome the consequences of the recession is to create conditions for as many women as possible to enter the labour market or to start their own business. due to the principles of gender inequality deeply rooted and prevailing in the society of each country, women make up an unjustly undervalued and underused reserve of human resources in the global economic system (european parliament 2011; european commission 2013, 2014). the classical macroeconomic theory, while ignoring the impact of the gender aspect on economic development, does not recognize a significant and equivalent element of the economic system, namely, the sector of the care economy. it is also referred to as the “women’s”, “family’s” or “reproductive” sector and is specific due to the fact that most women carry out all activities, including child raising and parenting, housework, tending to the elderly and disabled family members, the organization of family leisure and recreation, etc. taking into account the fact that the work performed by women is not attributed to the category of an economic transaction in the care economy, it is not visible, not assessed, not measured and not subject to remuneration (women’s unpaid work). in gender economics, the reproductive sector, just as the productive (production or market) one, occupies an important place. moreover, it is stated that the care economy is the foundation of the entire economic system of the state on which formal, informal and household economy are built. considering the fact that woman activities include the education of human resources in the care economy, at the same time, acting as the workforce of the formal economy taking care of the disabled and elderly and providing the non–formal education and health care of family members indicates that added value created by them constitutes a significant share of national assets. the inclusion of the added value created in the care economy into gdp would lead to an increase in 50 o. g. rakauskienė, e. krinickienė a model for assessing the gender aspect in economic policy this indicator, according to various estimates, from 6 to 8 per cent. currently, women’s unpaid work is not reflected in any way in the national accounting system, does not occupy a deserved place in the economic system of the country, exacerbates the problem of gender inequality even further and has a negative impact on the overall macroeconomic growth. although women’s unpaid work is not included in gdp, hence, this significant indicator reflects the macroeconomic situation in the country and is lower than it could be. it is due to the fact that women’s work is not included in economic analysis that the national economy takes the form of an underwater iceberg. the formal (production, market) economy, in which market transactions are made and the added value of which (according to official statistics) forms a country’s gdp, is merely the tip of the iceberg. the informal economy lies beneath it where market transactions also take place, though they are not recorded in official statistics; below the introduced economy, the household (socalled “subsistence”) economy, in which goods and services are produced by households for individual consumption can be observed, whereas at the bottom of the iceberg – the unpaid care/reproductive economy described as a foundation for all types of the economy listed above is placed (fig. 1). it is the care economy that ensures workforce productivity maintaining the viability of the entire economic system (kabeer 2003). fig. 1. the “iceberg” view of a country’s economy (kabeer 2003) second, women have unequal and much poorer, as compared to men, access to financial and economic resources. the state budget is a declaration of the socio–economic priorities of the government. in recent decade, the gender equality policy promoted by the eu has placed national governments under the obligation not only to publicly declare the incorporation of gender mainstreaming in all policies at all levels and stages 51 business, management and education, 2015, 13(1): 46–63 (based on the official definition of gender mainstreaming as approved by the council of europe in 1998) but also to take real steps towards implementation. however, most national budgets are actually formed ignoring provisions for gender equality – “gender–blind” models also characterize them. budget revenue is formed and expenditure is allocated without regard to the specific needs of both genders. as a rule, the social group of women experiences the greatest social injustice – its interests, first and foremost related to family care functions, are addressed inadequately, which has a negative impact on the quality of life, the stability of women themselves and family institution. this becomes a sign when a state is undergoing economic transition or the post–crisis period when the government undertakes macroeconomic stabilization and austerity measures. during this difficult period, the social group of women is assigned a “buffer” function, that is, not only to engage in productive economic activities but also to increase the care burden in the reproductive economy. this process is inevitable, because the government usually saves budget funds by reducing social spending and increasing taxes (including taxes on utilities). in order to maintain the normal functioning of the household, women are forced, at the expense of their health and leisure time, to intensify the provision of care by tending to family members in need of care and to ensure proper living conditions for the growing generation. in such a manner, the state seems to delegate to women the functions it must ensure itself. women become over–exploited human resources, their possibilities of utilizing professional skills in the labour market become limited and their right to rest, leisure and healthy lifestyle is ignored. by disregarding the importance of the gender aspect in economic policy, the government not only fails to propose solutions year after year, but on the contrary, reproduces/deepens the socio–economic inequality of genders in society. third, foreign trade, as one of the strategic elements of macroeconomic development, particularly strongly influences the social groups of women and men, and therefore cannot be considered as a gender–neutral field. the women who make up over a half of humanity and unjustly hold lower socio–economic positions compared to men while acting as full–fledged participants in the foreign trade system in the capacity of employees, consumers and human resource educators, are excluded from the decision– making process at the level of the wto and have unequal opportunities to enjoy the benefits provided by foreign trade (randriamaro 2006). the unequal women’s position based on stereotypes does not allow fully realizing their professional and intellectual potential. hence, gender inequality, in its own turn, negatively affects the efficiency of foreign trade. fourth, at the micro–level, that is, in the labour market and business, the prevailing vertical and horizontal segregation shapes “feminine” and “masculine” areas of employment, which in turn, promote and develop gender asymmetry and determine the lower income of women compared with that of men. the vertical segregation of the labour market is described by the metaphor of “glass ceiling”, which stands for the 52 o. g. rakauskienė, e. krinickienė a model for assessing the gender aspect in economic policy obstacles limiting women’s rise in professional career. this includes the preconceived opinions of employers and colleagues, organizational barriers and informal constraints. the horizontal segregation of the labour market is illustrated by the image of “glass walls”, which means that women hold less important, low–prestige positions and often work in flexible secondary labour markets. being particularly closely associated with the activities of family care and guardianship and thus experiencing double burden at work and in the household, women have less opportunities for self–realization in the labour market, business and decision–making process than men. in order to reconcile career and family responsibilities, women often face stereotypical evaluations essentially restricting their aspiration for self–realization. employers often treat women as less valuable employees who may go on maternity leave, have limited possibilities of going on work trips or working overtime and are unable to fully devote themselves to improvement in qualifications. in light of such undervaluation, women face the effects of this stereotypical attitude both currently and in the long run: – the gender pay gap acts to the detriment of women and determines a smaller old–age pension in the future (women are paid on average 20 per cent less than men for equal work and that of equal value); – uneven time use for housework and care activities within family significantly limits women’s rest and leisure: women spend 80 per cent of family time on caring about children, the elderly and disabled, whereas men make as little as 20 per cent. moreover, working women spend, on average, 39 hours a week on housework while men – as few as 26 hours (european institute for gender equality 2014); – the insufficient representation of women at top decision–making levels (both in enterprises and political institutions) limits their possibilities of ensuring the interests of the social group of women and equal access to socio–economic benefits provided by business and political bodies. ignoring the gender aspect in economic policy is caused by deeply–rooted stereotypes attributing the respective roles to femininity and masculinity and leads to gender asymmetry in the life of society. this, first of all, has an adverse impact on the economic development of the country and, second, on the quality of life of both social groups – women and men. macroeconomics and macroeconomic policy are not neutral in terms of gender equality. gender asymmetry is manifested not only at the level of microeconomic policy, but also at the macroeconomic policy level, which has a negative impact on economic growth and state budget revenues. in this regard, decision–making in the area of economic governance must be adequate and accomplished in compliance with the principles of gender equality and, in its own turn – in order to achieve gender equality in the area of economic governance, the gender aspect must be also implemented at the macroeconomic level. 53 business, management and education, 2015, 13(1): 46–63 the authors present a conceptual model for assessing the impact of the gender aspect on economic policy (fig. 2). the main idea raised in the model is that, regarding the economy, there is a third actor functioning on an equal basis with public and private sectors, namely, the care (or reproductive) sector that is dominated by women and creates added value in the form of educated human resources that make up workforce active in the public and private sectors of the economy and creating added value in the care economy. fig. 2. conceptual model for assessing the impact of the gender aspect on economic policy a research methodology of gender equality presents two main levels of economic governance: – macroeconomic (assessment of the impact of gender equality on the economic growth of the country, gender–responsive budgeting and the impact of gender inequality on foreign trade); – microeconomic (the 3r method as developed in sweden and the analysis of statistical data). 54 o. g. rakauskienė, e. krinickienė a model for assessing the gender aspect in economic policy 4. interpretation of the obtained results the care economy constitutes an important part of national wealth in the country, but is not reflected in the structure of lithuanian gdp. the care economy is responsible for the reproduction of the human potential where women perform the main functions, including housework, child–raising, care for the elderly and disabled family members, planning family leisure and recreation, etc. this work seems to be invisible in the economy, is not assigned to the category of an economic transaction, and hence is unpaid (women’s unpaid work) and not assessed in any way. however, the care economy is an important branch of economic activity equivalent to any other economic activity that functions in the interaction with other key economic sectors – public and private sectors, creates added value in the form of educated human resources and makes a significant contribution to the country’s gdp. if the care economy is assessed according to the methodology developed by the authors, lithuanian gdp will increase by 7.87 per cent (according to data of 2011). in view of the fact that the care economy is a full–fledged economic sector responsible for the development of human resources and the formation of workforce for public and private sectors, the country’s economy and society face the result of the undervaluation of the care economy, that is, gender asymmetry, which leads to the following negative consequences: first, women, as a rule, work in less productive and less profitable branches of the economy, earn less and have less equity and real estate, and for such reasons, their contribution to gdp and the national budget is lower than it could be; second, taking into consideration women’s professional discrimination and segregation in terms of the gender, the country’s budget fails to collect, according to different estimates, from 15 to 26 per cent of total tax revenue; third, according to the share of state budget expenditure, it is estimated that women and children, which make up about the two–thirds of the total population, receive from the state as little as approximately the one–third of the total expenditure, including public sector wages, pensions and other social benefits; fourth, when the care economy is not given a significant place in the country’s economic system which it deserves and women’s aspiration of reconciling family and work commitments is not supported, damage is done to the quality of educated human resources, which in a long term, may lead to a decrease in the country’s effectiveness of economic governance and competitiveness. lithuanian state budget is funded according to the principle of gender discrimination: expenditure for male–dominated sectors (e.g. general public services, public order and security) is funded from the state budget on a priority basis, whereas expenditure for female–dominated sectors (e.g. education, social security, culture) – on a residual basis from municipal budgets (table 1). such a practice of budget funding promotes 55 business, management and education, 2015, 13(1): 46–63 gender inequality. gender–asymmetrical distribution of public expenditure negatively affects the economy, public revenues in particular. there is a ground to believe that one of the causes of a decrease in state revenue in lithuania is gender equality distortion in forming the country’s budget. table 1. lithuanian state budget and the expenditure of municipal budgets by function in 2010–1013, per cent from total expenditure (sources: statistics lithuania 2013a, 2013b; ministry of finance of the republic of lithuania 2014) function 2010 2011 2012 2013 state budget municipal budget state budget municipal budget state budget municipal budget state budget municipal budget general public services 28.0 12.2 30.0 11.2 18.2 11.2 19.0 7.0 defence 4.0 0.1 4.2 0.1 4.4 0.1 4.2 0.1 public order and safety 7.4 0.8 8.0 0.8 8.4 0.9 8.3 1.0 economics 25.2 3.7 24.5 4.3 24.6 5.5 27.7 4.1 environmental protection 4.3 3.3 3.0 3.3 3.2 3.5 2.8 1.8 housing and public utilities 0.1 3.6 0.1 3.8 0.1 3.6 0.1 2.8 health care 9.3 0.5 8.8 0.7 7.7 0.8 7.0 2.6 recreation, culture and religion 2.1 4.8 2.3 5.9 2.3 5.5 2.2 6.6 education 9.3 53.6 10.1 50.8 17.9 48.9 16.6 55.0 social security 10.2 17.4 9.2 19.0 13.3 20.0 12.1 19.0 total 100 100 100 100 100 100 100 100 based on the best practices of foreign countries, it is appropriate to introduce gender–responsive budgeting in lithuania. to this end, the authors offer the following recommendations: – for implementing the europe 2020 strategy for the socio–economic development of the eu and gender mainstreaming, it would be appropriate to analyse lithuanian budget from a gender perspective and to designate the ministry of finance of the republic of lithuania to act as the competent authority to ensure the conduction of gender analysis on a regular basis at public institutions related to the allocation of economic resources and within the framework of the lithuanian national budget. based on the experience of foreign countries, 56 o. g. rakauskienė, e. krinickienė a model for assessing the gender aspect in economic policy gender analysis helps with determining whether relevant financial allocations meet the specific needs of women and men. if opposite trends emerge, budget funds should be reallocated in such a way that the social groups of men and women could have equal access to benefits provided by the financial system of the state without discriminating any of the sexes. in this way, targeted steps would be taken towards social justice and bridging the gender gap, and in the long run, this would help with achieving stable and sustainable economic growth and would positively affect the collection of public revenues; – it would be appropriate to designate the ministry of finance of the republic of lithuania and the association of local authorities in lithuania to act as competent authorities which, assisted by experts in gender equality and the representatives of women’s ngos, could carry out the gender analysis of municipal budgets, submit recommendations to municipal councils concerning the restructuration of municipal budget expenditure based on the principles of gender equality and initiate gender–responsive budgeting in municipalities; – in order to support gender–responsive budgeting, it is expedient to organise trainings and consultations for representatives and experts of the ministry of finance of the republic of lithuania to hold conferences. the general analysis of the national budget in lithuania has been carried out by the authors and allowed identifying three stages of budget development: – the first stage of eu pre–integration (1999–2003) is characterised by a sharp division of budget expenditure into “male” and “female” sectors. appropriations for male–dominated areas were provided on a priority basis from the state budget, whereas appropriations for female–dominated areas were decreasing and mostly allocated from municipal budgets, that is, on a residual basis. such budget funding practices in lithuania seem to have legalised and promoted gender inequality. the gender–asymmetrical allocation of public expenditure has a negative impact on the economy, public revenues in particular. – the second stage of the lithuanian economic boom (2004–2008) is characterised by changes in former trends: upon lithuania’s accession to the eu in 2004 and with a view to implementing international commitments, greater attention is devoted to social policy and gender equality. as a result, state budget funding for female–dominated sectors began to grow while budget expenditure for male–dominated sectors decreased or changed only slightly. – the third stage of the global economic and financial crisis aftermath (2009– 2012) is characterised by a large–scale national economic decline that enabled the government to introduce economic stabilisation policy involving a reduction in social costs. the policy hit particularly hard the most vulnerable layers of society – women, children and old–age population. this stage is also characterised by a significant increase in spending on goods and services of first necessity (food, health care, transport) and utilities. according to the data 57 business, management and education, 2015, 13(1): 46–63 provided by statistics lithuania in 2012, expenditure on utilities made up to 18 per cent of all the household consumption expenditure (table 2). as for household economics, women are responsible for maintaining the usual standard of family well-being. solving this problem becomes problematic when the prices of utilities, medical services and education are increasing while social support of the state is decreasing. this leads to deterioration in the quality of life of lithuanian population and increases the care burden for women in households. table 2. the structure of lithuanian household consumption expenditure for the period 2000– 2012, in per cent (source: statistics lithuania 2013a, 2013b) 2000 2004 2007 2008 2012 food and non-alcoholic beverages 37.7 38.0 33.1 32.5 33.7 alcoholic beverages 2.6 3.9 2.5 2.5 2.4 tobacco 1.9 1.5 1.2 1.2 1.0 clothing and footwear 7.5 8.1 9.2 8.3 6.6 utilities 15.6 12.2 12.0 11.9 18.0 household equipment 4.5 4.8 5.8 6.6 4.4 health care 4.8 4.5 4.8 4.9 5.9 transport 8.7 10.0 10.4 11.3 10.3 communication 4.2 5.6 4.9 4.4 3.7 recreation and culture 4.1 5.1 5.5 5.5 4.9 education 0.7 1.0 0.8 0.8 1.0 hotels, restaurants, cafes 4.5 4.3 5.2 5.1 3.1 other goods and services 3.2 5.1 4.7 4.9 5.0 total 100 100 100 100 100 based on foreign scientific research, two important conclusions can be drawn: first, the liberalization of foreign trade increases gender inequality and, second, gender inequality in its own turn has a negative impact on foreign trade efficiency. the gender aspect is a particularly important factor determining foreign trade efficiency. foreign trade covers the strategic areas of economic development (agriculture, services, intellectual property, investment, etc.), and therefore cannot be regarded as a neutral object of macroeconomics. on the contrary, it must be treated as systemic activity having a significant impact on individual social groups. due to gender role, stereotypes are still running rampant in society, men and women occupy different socio–economic positions and their possibilities of participating in foreign trade are not equal, just as the benefits (or losses) they receive from the multilateral trading system. the examination of the impact of trade liberalization on women and the gender balance reveals that trade liberalization promotes gender inequality and impairs the socio–economic situation of 58 o. g. rakauskienė, e. krinickienė a model for assessing the gender aspect in economic policy women. for this reason, changing foreign trade policy from a gender perspective opens up opportunities for sustainable economic growth and mitigates the effects of globalization. taking into consideration the interaction between foreign trade liberalization, economic development and gender equality, the authors propose making use of the following recommendations: – to initiate, at the government level, the gender analysis of foreign trade authorising the ministry of economy and the ministry of finance of the republic of lithuania to perform this task. this analysis would allow assessing the impact of foreign trade efficiency on economic growth and would help in seeking the achievement of gender equality goals so that the social groups of women and men could enjoy equal access to the benefits of foreign trade; – foreign trade efficiency and equal benefits for women and men would increase upon the introduction of a quota system thus increasing the representation of women in key organisational structures of the global trading system, and international trade agreements could be concluded incorporating the gender aspect at all levels and stages; – the policy based on the principles of gender equality can help with preventing from discriminating women in the field of foreign trade, facilitating the use of women’s stifled potential for contributing to the development of foreign trade and, at the same time, increasing women’s contribution to the global economy. the gender analysis of the labour market carried out in the context of microeconomic governance has allowed identifying that women and men have unequal (to the detriment of women) employment opportunities in seeking career and promotion. discrimination against women existing in the labour market leads to lower income among women, exacerbates the problems of gender inequality and negatively affects the effective governance and development of a number of areas of the economy: – despite a relatively high female employment rate in lithuania (in 2012 – 61.8 per cent), which exceeds the average of eu-27 by 3.2 per cent (eu–27 – 58.6 per cent), the social group of women often faces difficulties and discrimination in the labour market. as for lithuania, the indicators of employment and economic activity of women are lower than those of men; women, far more than men (11.3 per cent and 7.5 per cent in 2012 respectively), work part–time (statistics lithuania 2013a, 2013b). despite the fact that the unemployment rate for women is lower than that for men, long–term unemployment among women is growing, and the number of the unemployed educated women is steadily increasing. this leads to extremely dangerous social phenomena, such as an increase in poverty, social exclusion and emigration. the latter phenomenon, namely, emigration, and its rapid growth show that, on the one hand, women are unable to fully realise their potential in lithuania and, on the other hand, the state fails to make the rational use of human resources; 59 business, management and education, 2015, 13(1): 46–63 – vertical segregation prevailing in the lithuanian labour market (described by means of the “glass ceiling” metaphor) indicates there are structural and institutional barriers to the development of women’s career and undertaking own business. despite the existence of the laws securing gender equality, due to prevailing stereotypes among employers and in society, women are less frequently offered top management positions. even in strongly feminised areas, women make up the minority in executive ranks: first, although the overall education level of women is higher, they are under–represented in leadership and decision–making positions. according to data provided by statistics lithuania, in 2011, the number of women who completed all levels of university education significantly exceeded that of men: women accounted for 63.5 per cent of graduates with a bachelor’s degree (men – 36.5 per cent), 67.1 per cent of graduates with a master’s degree (men – 32.9 per cent) and 57.2 per cent of graduates with a doctor’s degree (men – 42.8 per cent). nevertheless, in the same year, women accounted for merely 39 per cent of all top executives (legislators, senior officials, heads of enterprises, institutions, organizations and other managers) (statistics lithuania 2012); second, the higher is the scientific degree (doctor, doctor habilitatus) and pedagogical title (assistant, lecturer, associate professor, professor), the lower is the number of women holding such a degree or title. in 2010, the majority of researchers were women making 54.2 per cent; meanwhile, as little as 19.7 per cent among them, were habilitated doctors, and the women holding the title of professor accounted for 18.7 per cent (statistics lithuania 2011). – in lithuania, the pronounced horizontal segregation of the labour market (described by means of the metaphor of the “glass walls”) – a marked division into “male” and “female” professions is observed. men dominate the areas of construction, transport and agriculture, while women occupy those of health care, education, accommodation and catering, social services. this has a negative impact on the development of these spheres, reduces their innovative potential, determines relatively lower wage levels among women and further reinforces the stereotypes of “male” and “female” roles in society; – in lithuania, the gender pay gap is still prevailing. despite the principle of equal pay for equal work or that of equal value as established in the eu and lithuanian legislation, women earn 15–20 per cent less than men. these differences are determined by both the vertical and horizontal segregation of the labour market. in addition, women earn less than men in almost all sectors of the economy. the largest pay gap in 2012 was observed in the financial intermediation market and accounted for as much as 40 per cent (statistics lithuania 2013a, 2013b). relatively lower wages lead to the phenomenon of the feminisation of poverty and social exclusion. 60 o. g. rakauskienė, e. krinickienė a model for assessing the gender aspect in economic policy 5. conclusions 1. gender bias is deeply rooted at global, international, national and local (municipal) levels leading to gender asymmetry in economic policy. 2. macroeconomic policy is not neutral in terms of gender equality. gender asymmetry is manifested not only at the micro–, but also at the macroeconomic policy level, which adversely affects economic growth and state budget revenues. in this regard, decisions on the economic policy of the state must be adequate and adopted in compliance with the criteria for gender equality. 3. women’s care (or reproductive, family) economy is an important branch of economic activity equivalent to any other economic activity that also creates added value in the form of educated human resources and contributes to gdp. the care economy is not reflected in the structure of gdp, its contribution is not measured in any way, not evaluated and not calculated. 4. the national budget in lithuania is formed by ignoring the principle of gender equality: expenditure is allocated to male–dominated sectors from the state budget on a priority basis, while to female–dominated sectors – on a residual basis. the gender–asymmetrical allocation of public expenditure promotes gender inequality and negatively affects the economy, particularly public revenues. this is one of the causes of a decrease in public revenues in lithuania. 5. foreign trade policy is not gender–neutral, as gender equality is an important factor in the policy. gender inequality adversely affects the efficiency of foreign trade. 6. women and men have different access to economic resources, employment, career and promotion. for these reasons, women’s contribution to gdp and the national budget is lower than it could be. 7. women’s creativity and business potential are a hidden source of economic growth and job creation. references baden, s. 2002. trade policy, retail markets and value chain restructuring in the eu clothing sector [online]. 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statistics lithuania. http://osp.stat.gov.lt/ http://www.finmin.lt http://books.google.ca/books?id=wgcp4a4l5psc&pg=pa174 http://en.wikipedia.org/wiki/international_standard_book_number http://en.wikipedia.org/wiki/special:booksources/0-203-41194-3 http://dx.doi.org/10.9770/jssi.2014.4.1(4) 63 business, management and education, 2015, 13(1): 46–63 van staveren, i.; elson, d.; grown, c.; catagay, n. 2007. the feminist economics of trade [online], [cited 17 march 2014]. london: london routledge. available from internet: http://books. google.lt/books?hl=en&lr=&id=sytrpk3sxk0c&oi=fnd&pg=pp2&ots=5duuu-du6b&sig=lshgxy_5x29thuxkhschznl238&redir_esc=y#v=onepage&q&f=false ona gražina rakauskienė is economist, prof. dr habil. at mykolas romeris university and vilnius gediminas technical university, lithuania. o. g. rakauskienė is a representative of the holistic paradigm of economics. she focuses on scientific research on social components and the importance of human resources in economics. scientific research areas include the welfare and quality of life of population as an indicator for the effectiveness of economic policy, gender economics, social and economic cohesion of the eu, the european welfare model and state role in the market economy. o. g. rakauskiene has published more than 200 scientific works, 10 monographs and 1 international study. she is a member of four boards of editors of the periodic journals of scientific research. eglė krinickienė lecturer, dr at mykolas romeris university, vilnius, lithuania. an author (together with co–authors) of 5 scientific articles and 1 monograph. scientific research areas include gender economics (micro– and macroeconomics), foreign trade by the gender aspect, the quality of life by the gender, the reconciliation of work and family. http://books.google.lt/books?hl=en&lr=&id=sytrpk3sxk0c&oi=fnd&pg=pp2&ots=5duuu-du6b&sig=l-shgxy_5x29thuxkhschznl238&redir_esc=y#v=onepage&q&f=false http://books.google.lt/books?hl=en&lr=&id=sytrpk3sxk0c&oi=fnd&pg=pp2&ots=5duuu-du6b&sig=l-shgxy_5x29thuxkhschznl238&redir_esc=y#v=onepage&q&f=false http://books.google.lt/books?hl=en&lr=&id=sytrpk3sxk0c&oi=fnd&pg=pp2&ots=5duuu-du6b&sig=l-shgxy_5x29thuxkhschznl238&redir_esc=y#v=onepage&q&f=false copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(1): 140–157 doi:10.3846/bme.2015.220 benchmarking as an instrument for improvement of quality management in higher education narimantas kazimieras paliulis1, rimvydas labanauskis2 vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania e-mails: 1narimantas.paliulis@vgtu.lt; 2rimvydas.labanauskis@vgtu.lt (corresponding author) received 09 june 2014; accepted 26 march 2015 abstract. conditioned by globalisation and constant change, higher education institutions (heis) are forced to pursue new instruments for quality assurance in higher education. states seem to pursue this aim by attempting to create an efficiently operating system of higher education that satisfies needs of diverse societal groups. quality dimension is the most important element of efficient and effective higher education. from the perspective of a state, assessment and monitoring of quality are instruments for the management of processes of higher education. the article substantiates these statements using the evolution of the dimension of quality in the european and lithuanian higher education in the course of the bologna process. the article also presents a benchmarking method and discusses its development and application tendencies in business organisations. also, it looks at possibilities to apply this method in higher education. the main aim of this article is to explore benchmarking as an effective instrument for the improvement of performance quality in heis and complement the already implemented quality management systems. another aim is to suggest this method to national agencies for quality assurance in higher education for monitoring and analysis of qualitative changes on the systematic level. the object of the article is the improvement of performance quality in heis. benchmarking is proposed for the use in higher education on the institutional level as an instrument that complements presently introduced quality management systems in lithuanian heis. this way, it will contribute to the formation of the culture of quality in higher education. keywords: higher education, bologna process, quality assurance, benchmarking, performance quality, studies. jel classification: i21, i23. 1. introduction universities are reasonably considered among the oldest acting types of an organisation. in the middle-ages, european universities developed from monastic schools, were acknowledged by secular authorities and were granted rights of self-governance. from the middle-ages to the beginning of the 19th century, european universities were http://dx.doi.org/10.3846/bme.2015.220 mailto:2rimvydas.labanauskis@vgtu.lt 141 business, management and education, 2015, 13(1): 140–157 “ivory towers”, where intellectuals created and disseminated science that usually had nothing to do with practical routine demands (garcı´a-aracil, davinia 2010). for entire centuries, science remained a privilege of a small part of society. only in the 20th century, urbanisation and industrialisation made higher education accessible to wider society. as higher education was exceptional and intended for the elite, there was no objective demand to monitor, measure, and assess its quality. in other words, there was no education higher than higher education, which subsequently determined its best or highest quality. from the mid-20th century, differences between education systems of european countries started to diminish. this transformation can be explained by pervasion of democratic education and business influence on societies, which challenged important changes in the whole higher education (academic) system (garcı´a-aracil, davinia 2010). the dimension of quality in higher education gradually developed in the second half of the 20th century. it was related to the number of factors but among the most important were the increase in the extent of higher education, i.e., the increase in numbers of institutions and students. the phenomenon of the extent of higher education depends on two essential elements: rapid growth of global economy and rapid development of technologies. the latter was significant as knowledge, which was previously the sole important element of higher education and required most of the time and efforts, became quickly and inexpensively accessible to the larger part of society. mass, internationalisation and market impact were the strongest factors influencing changes within the sector of higher education (harvey, williams 2010). in the second half of the 20th century, rapid societal changes were conditioned by globalisation processes, economic-social and demographic factors particular to regions and separate states. soon, the so-called “quality movement” started in the united states of america, australia, and later in europe. it embedded instruments for the improvement and development of the quality of performance in companies and the public sector institutions. among the instruments were total quality management, international quality standards, re-engineering of business processes and benchmarking (alstete 1995). although heis are not usually considered flexible and dynamic institutions, the discussed societal changes accelerated changes in the higher education and demanded more change management efforts from states. heis are under constant change as organisations and performers of their most important education and science activities. study processes in higher education undergo substantial changes: studies are becoming more accessible, conditions are changing (e.g., the factor of internationalisation) and the duration is getting shorter. however, expectations and requirements for higher education formulated by states and society have remained almost the same as during the time when it was intended for the elite. to be precise, once entrance conditions significantly changed, the result remained essentially unchanged. due to the increased number of 142 n. k. paliulis, r. labanauskis. benchmarking as an instrument for improvement... students, it became more difficult to ensure high-quality management of study and science processes. without proper reaction to conditions of the dynamic environment, devaluation of mass higher education may spark social conflicts. states struggle with the challenging question whether a mass product (or a potentially mass product) can be of required quality? another question to ask is what instruments could adequately ensure the quality of such a product as higher education studies? in contemporary socioeconomic context and knowledge-based society, heis perform three inter-related missions: (1) education (dissemination of knowledge), (2) research and (3) the new so-called third mission that connects university’s scientific activities with the external economic and social worlds. the ambition to discover the best balance between these roles and responsibilities is among the key challenges of universities. stakeholders monitor universities from the economic perspective (employers, business groups), social perspective (families of potential students, community organisations), and educational perspective (providers of education). some external stakeholders monitor universities in a local context, and others – in the international context (houston 2008). despite all changes, expectations of society toward universities remain very high: universities are anticipated to perform successfully under “market conditions” and be innovative. the development of the quality dimension in higher education is analysed in the context of these changes and transformations. thus, the object of the article is the improvement of the quality of performance in heis. the research aim is to explore benchmarking as an effective instrument for the improvement of the quality of performance in heis and complement the already introduced quality management systems. the research has two tasks. firstly, it seeks to compare and analyse the development of the quality dimension in higher education (he) in lithuania and europe. secondly, it explores assumptions and opportunities for application of benchmarking as a method in heis to develop their quality of performance. the article uses such research methods as the comparison and analysis of the development of the quality assurance dimension in higher education of lithuania and the bologna process. based on literature review, an additional analysis focused on possible opportunities for application of benchmarking in heis. 2. development of the quality assurance dimension in higher education of lithuania and the bologna process the development of the higher education dimension in lithuania is represented by legal acts regulating higher education and studies and the establishment of institutions for assessment and monitoring of the quality of higher education. a decade earlier than the bologna process, lithuania began the introduction of separate elements of the system for organisation of studies, e.g. the implementation of three cycles of studies 143 business, management and education, 2015, 13(1): 140–157 and the calculation of the scope of studies in credits (fig. 1). after the restoration of lithuania’s independence in 1991, the first iteration of the law on science and studies was adopted. however, the law did not regulate the quality of the performance of heis (pūraitė 2011). as the state aimed to ensure the quality of the education system, it established two institutions: the centre for quality assessment in higher education (skvc) in 1995 and the national examination centre (nec) in 1996. skvc was assigned periodic assessments of the quality of higher education study programmes and an assessment of the performance of newly established schools of higher education. nec organised the implementation of the system for national maturity examinations. following the establishment of the uniform system of national maturity examinations in 1998, two lithuanian universities started the common admission of students. in 2001, this initiative evolved into the association of lithuanian universities for joint admission (lama bpo). eventually, almost all state heis joined the association, despite their type (colleges and universities) or the type of their founders (state or private). once the admission processes were transferred to the virtual space, the quality of services and transparency improved. in 1999, the establishment of private capital heis commenced in lithuania. they enlarged the accessibility to higher education and provided entrants with more options. lithuania was among 29 european countries that adopted the bologna declaration (1999) and inspired changes in higher education. the document established the shift to two (and later to three) cycles of studies, comparative credit systems, the development of the quality assurance dimension and guidelines for promotion of the mobility of students and lecturers (reinalda 2008). the declaration launched the bologna process. in the last decade of the 20th century, it had become one of the best examples of networking in the area of higher education in europe. even in 2001, westerheijden stated that the goal of the bologna process was to improve the transparency of higher education in europe and encourage the development of a clearer process for quality assurance (westerheijden 2001). from the very beginning of the bologna process, the quality of studies was stressed as the essential priority for the development of europe’s higher education. this message was also asserted by all adopted bologna process declarations (fig. 1). multidimensional missions of heis were stressed to secure the diversity of european education systems. they comprised education, research and services for society, increase of social cohesion and cultural expansion. quality assurance of studies was considered an important part of academic professionalism and the essential element of institution’s reputation or idiosyncrasy on the competitive local as well as international market. the quality of studies cannot be analysed separately without the context of higher education studies. all spheres of activity of the bologna process – internationalisation of studies, social dimension, student-centred learning model and others – have a direct connection to the quality of studies. 144 n. k. paliulis, r. labanauskis. benchmarking as an instrument for improvement... f ig . 1 . d ev el op m en t o f q ua lit y as su ra nc e in h ig he r e du ca tio n in l ith ua ni a an d th e b ol og na p ro ce ss in 1 99 1– 20 15 (s ou rc e: c re at ed b y au th or s ba se d on in fo rm at io n pr ov id ed b y e h e a 2 01 4) 145 business, management and education, 2015, 13(1): 140–157 the law on higher education of the republic of lithuania was adopted in 2000. it established the binary system of higher education and colleges as the new type of nonuniversity heis. they were granted the right to organise the first cycle studies, honour professional qualifications and perform applied science centred on practical activities. this system of higher education allowed better satisfaction of market needs through the training of specialists of different levels. these provisions corresponded to european trends of the time. e.g., the united kingdom was implementing the higher education reform and incorporated colleges and polytechnic schools into the system of higher education in 1998 (green 1994). the lithuanian law set forth certain obligations for state heis, such as to inform its founders and society about undertaken activities, instruments used for the quality assurance of studies and the use of funds. the law also touched upon the quality of studies, indicated functions of self-governance bodies and top executives. apparently, the law already included principles for assurance of quality in the system of higher education and certain particular requirements for quality of studies, e.g., general requirements for study programmes. during 2000–2008, higher education in lithuania experienced the period of rise and growth to masses. during that time, some heis gradually grew as well as numbers of students. although lithuania had the possibility to participate actively in the activities of the bologna process, the elaboration on the quality of higher education did not receive proper attention. no institutional quality assessment of heis was undertaken. in 2007, the centre for monitoring and analysis of science and studies was established. it started a systemic analysis of processes of science and studies and their results on the national level. in general, the development of the higher education system was extensive during this period. simultaneously, the dimension of quality in the bologna process was coherently elaborated as reflected in documents approved during 2001–2009. the european standards and guidelines for quality assurance in higher education (esg) were adopted in 2005. the document stressed the internal quality of study in 7 areas and was considered one of the most significant events of the bologna process in terms of the development of quality assurance of higher education (standards and guidelines… 2009). it is important to note that standards and guidelines on quality assurance of european higher education correspond to international guidelines for quality assurance in higher education of unesco and oecd. the guidelines emphasise that the development of internationalisation of higher education demands quality assurance of studies. however, esg did not establish standards for quality, i.e., they did not indicate what is considered the best quality hei. despite this, esg referred to the following clearly formulated principles: 1. the responsibility for provided services and the assurance of their quality belongs to heis in the first place; 2. quality assurance processes are adapted to the diversity of higher education systems, institutions and programmes; 146 n. k. paliulis, r. labanauskis. benchmarking as an instrument for improvement... 3. the quality assurance process includes and refers to the expectations of stakeholders and society; 4. the quality assurance contributes to the development of quality culture. in general, it can be stated that esg consolidated provisions for heis creating the internal system for quality assurance of studies. also, the document defined guidelines for institutions assessing the quality of studies in heis. in 2005, 2007, 2009 and 2012, stocktaking reports on the progress of the bologna process were issued. the documents analysed ways states took to reach their national goals. realisation of quality assurance instruments was measured by the following parameters (reinalda 2008): 1. stage of the development of the quality assurance system; 2. key elements of the evaluation systems; 3. level of participation among students; 4. level of international participation, co-operation and networking. achievements of the states in the implementation of provisions of the bologna process in certain areas were evaluated using a five-point system. it should be said that the constantly corrected methodology led to incomparability of all four stocktaking reports. however, the assessment of the progress in states formed assumptions for the comparison of the progress achieved by states. although this method was informal and took place in the network of heis of a certain state, stocktaking reports on achievements are considered a useful material for comparison. in 2009, the new law on higher education and research of the republic of lithuania came into force. also, subsequent legal acts were adopted and altogether formed the background for the systemic reform of higher education. the adopted law elaborated on the provisions for quality assurance of studies: – the statute of a hei has to specify the procedure for quality assurance of research and studies (article 28); – one of the functions of the senate of a hei (academic council) is the approval of internal system for quality assurance of studies and the control over its implementation (article 21); – heis are responsible for the quality of research (art) activities, studies and other activities (article 40); – every higher education institution must have an internal system of quality assurance in studies based on the provisions of quality assurance in studies of the european higher education area and on the strategy of improvement of activity quality approved by the higher education institution itself; must provide for action methods and measures which help to ensure the quality of higher education provided by the institution (article 41). several essential elements of the reform in lithuanian higher education can be distinguished. first, heis were obligated to implement internal systems for quality assurance 147 business, management and education, 2015, 13(1): 140–157 of studies. the law also established that external assessment of study programmes can be performed by the national agency for quality assessment in higher education (skvc) as well as other agencies for quality assessment in higher education that are on the european quality assurance register for higher education (putkiranta 2012). in 2010, the reform necessitated the adoption of the new procedure for the assessment and accreditation of heis. the newly introduced procedure was complex. the institutional assessment of heis comprised two parts: assessment of material resources and assessment of compliance. assessment of material resources focuses on facilities and learning resources, investments, composition and qualification of staff engaged in pedagogy and administration, scientific and applied research activities, academic training of students and number of drop-outs, and the effectiveness of state budgetary funds. also, the state started to monitor the level of readiness among applicants to study at heis. this monitoring only covers entrants to study places financed by the state in the heis. however, several state and private heis have already introduced the use of minimal requirements (admission score) for entrants under their initiative before 2015. admission score is considered a strong qualitative indicator irrespective of the party that makes the estimation, i.e., the state or a hei. the state has challenged the initiation of regulation for the level of all entrants to heis on the national level. compliance assessment of heis focuses on the performance in following areas described in a self-analysis report prepared by the hei under assessment: strategic management, studies and life-long learning, research, innovations and contribution to the development of the state. the analysis considers the collaboration with local and foreign academic and social partners, the demand for trained specialists on the scale of the state, efficiency of the internal system for quality assurance, the level of academic ethics, and dissemination of exact and objective information on the performance. based on the assessment results, recommendations for the improvement of performance of the hei is provided, and the decision on accreditation of the hei is made. positive assessment results in accreditation for the period of six years. negative assessment results in accreditation for three years, during which the accreditation procedure is repeated. second negative assessment means no accreditation and suspension of the license to organise higher education studies. in conclusion, lithuania uses external quality assurance as an instrument for regulation of for the control of higher education. the assessment exercise focuses on the external assessment of study programmes and institutions to make decisions regarding accreditation. therefore, it aims to achieve minimal standards and ensure responsibility (pivoras, skaburskienė 2012). as the observed quality assurance mechanisms in higher education are directed to the satisfaction of minimal requirements and assurance of responsibility, they are only imposed procedures for heis that need to learn to perform “correctly”. it should be mentioned that assessment of study programmes and institutional assessment of heis are executed on the basis of self-analysis reports prepared by heis. self-analysis is an attribute of mature perspective on quality. however, 148 n. k. paliulis, r. labanauskis. benchmarking as an instrument for improvement... heis understand the difficulty of being self-critical, especially in a competitive environment (newton 2006). another important element that contributed to the development of quality was projects implemented by lithuanian heis. they were committed to the creation and elaboration of heis’ internal systems for quality assurance of studies. during 2008–2014, thirty-six state and non-state heis, despite their type, used the support of the european union to implement such projects (skaburskienė 2014). the absolute majority of heis that implemented the projects, created quality management systems based on quality management systems such as iso, efqm or iso + efqm. since continuous improvement is the central principle of quality management, international quality standards such as iso, establish only the minimal limit for performance of a quality system. their attention to improvement techniques is conditionally limited, an attribute of the use of these standards is the process of audit (houston 2008). a deeper perception of quality in higher education has two dimensions at least: structural (guidelines for quality management, definition of processes, instruments) and organisational value dimension (related to values skills and attitudes of members of the organisation). the described period of project implementation and creation of quality management systems had to contribute to the perception and development of esg provisions in lithuanian heis and establishment of a quality culture. however, reality demonstrates that the quality in lithuanian heis was perceived only as the establishment of structural units for quality management and acquisition of certifications, e.g., iso. to paraphrase harvey, an internal studies quality assurance system “cannot be simply equated to institutional quality assurance system, even though this system is its important part” (harvey, williams 2010). in summary, the ultimate goal to ensure internal and external quality in heis. the european association for quality assurance in higher education (enqa) disseminates the best practice in the area of quality assurance in higher education (hämäläinen 2002). the association indicates that internal quality is based on basic institutional operations and is essentially assessed locally (in the institution). its main aim is to warrant the quality, student assessment processes and academic resources. external quality is an added value, which is composed of the best practices of institutions. frequently external quality assessment refers to the procedures used in institutions to self-evaluate the internal quality (garcı´a-aracil, davinia 2010). the new esg edition emphasises that quality assurance has two basic goals: quality improvement and accountability. the selected conception for quality assurance presents quality as an instrument to “fit for purpose”. this means that quality assurance has to guarantee a study environment where content of study programmes, conditions to study and infrastructure fit the intended purposes (draft esg, https://revisionesg.wordpress. com/ (official website of the esg revision 2014)). the new esg edition should be adopted at the bologna ministerial meeting in 2015. https://revisionesg.wordpress.com/ https://revisionesg.wordpress.com/ 149 business, management and education, 2015, 13(1): 140–157 differences between presently valid esg provisions and the new draft are presented in table 1. table 1. esg provisions of 2005 and the new draft of 2015 (source: composed by authors) esg 2005 esg 2015 (draft) 1. policy and procedures for quality assurance 1. policy and process for quality assurance 2. approval, monitoring and periodic review of programmes and awards 2. design and approval of programmes 3. assessment of students 3. student-centred learning, teaching and assessment 4. student admission, progression, recognition and certification 4. quality assurance of teaching staff 5. teaching staff 5. learning resources and student support 6. learning resources and student support 6. information systems 7. information management 7. public information 8. public information 9. on-going monitoring and periodic review of programmes 10. cyclical external quality assurance the presented table indicates that the new draft of esg guidelines revisits certain definitions on the basis of principles of the total quality management: “procedures” are replaced by “processes” and “information systems” by “information management”. cyclical external quality assurance is introduced. the bologna principles, the social dimension and student-centred learning change and at the same time extend the previous “assessment of students”. it is important to note that the aspects influencing the quality of higher education as a system of several cycles or external assessment of study programmes were perceived and launched in lithuania before the beginning of the bologna process. however, the bologna process suggested the concept of the internal system of quality assurance of studies based on the esg principles. neither lithuanian national nor institutional levels managed to perceive and properly assess this aspect. this statement could also be substantiated by the fact that lithuanian higher education institutions rarely considered esg provisions during the implementation of the projects aimed at the creation of internal systems for quality of studies systems. it is rational to analyse assumptions and possible application of the benchmarking method for the search of mechanisms that help to develop quality assurance and change management in higher education and pursue a quality culture. 150 n. k. paliulis, r. labanauskis. benchmarking as an instrument for improvement... 3. benchmarking method and its application in businesses in the second half of the 20th century, the benchmarking method was widely applied in businesses as an easily understandable and effective instrument for strengthening the competitive ability of companies. at the time, the method gained recognition and was positioned among such instruments for improvement of organisational performance as total quality management, continuous quality improvement, and business process reengineering (alstete 1995). scientific literature defines this method differently (camp 1989; epper 1999; fernandez et al. 2001; kumar et al. 2006; wong, w., wong, k. 2008; anand, rambabu 2008; huggins 2010; rigby et al. 2014; talebi et al. 2014; kuhlmann 2010). despite this diversity, all definitions include three main elements of benchmarking that are performed in the following order: 1. search and identification of exceptional best practice; 2. systematic learning from others; 3. change in the activity. organisational products, services, processes and activities can be benchmarked. it is important for the activity to be continuous. benchmarking involves the strongest competitors or companies that are considered to be the leaders in a certain field. the purpose of benchmarking is to provide owners (managers) of a process with information on its quality and measurement costs. a specific external standard is used for the measurement, which also helps to determine ways to improve the activity. in other words, benchmarking is a structured method used for the implementation of changes within an organisation. also, benchmarking is the search for a practice that suggest the best way to implement activities or processes. xerox case is a classical example of benchmarking used in a business. in the 1980s, this international documentation management corporation pursued a competitive edge and retrieval of the lost market share. benchmarking helped the corporation to understand reasons behind the lost market share and the absence of competitive ability. another example comes from the same decade. ford – one of the largest world automobile manufacturers – hired about 500 accounting employees in north america. the company aimed to optimise its costs by improving performance and processes. this measure had to lead to redundancies amounting to 20 per cent. the team of researchers made an analysis and chose benchmarking for this activity the same process implemented by mazda, which was a counterpart for the exercise. researchers found that mazda used a group of 5 employees to conduct the function (however, the scope of activities were not benchmarked in this case). based on the results, ford began to essentially reform the function. in the end, a significantly fewer employees were conducting the mentioned function instead of several hundred (keegan, o’kelly 2004). 151 business, management and education, 2015, 13(1): 140–157 consequently, the dissemination of benchmarking among businesses was conditioned by the circumstances presently relevant to higher education institutions, namely: 1. growing international competition; 2. increasing interest in the techniques of quality improvement or the so-called quality movement; 3. the rapid advancement of information technologies that facilitated the collection and management of statistical data. benchmarking requires a careful selection of suitable counterparts. the following “pyramid” may be helpful for the rational and consistent selection of partners: 1. world class. 2. the best-in-class. 3. a best practice. 4. an improvement of current practices. 5. a practice similar to the current practices (qiping, guiwen 2007). one of the aims of benchmarking is to stimulate activity and creativity in an organisation (slack et al. 1998). benchmarking is appropriate means for separating facts from visions and opinions. a discovered better way necessitates the implementation of change (innovation) and saves the organisation from “reinventing the wheel”. however, certain researches indicate that the dissemination of this method in business companies changed during the last 15 years. it became popular at the end of the 1990s, but later the expansion went downwards. the research suggests one of the reasons for this tendency: there is no clear link between benchmarking and changes in results of a company’s performance (putkiranta 2012). 4. studies on application of benchmarking in heis review of scientific literature on the subject involved analysis of some articles issued in lithuania and worldwide. in the articles, comparative analysis is used for one or another aspect of higher education. it should be stressed that no articles examine the use of benchmarking in lithuanian heis. the following part of this article presents the most significant articles and publications on the applicability of benchmarking in heis. one of the most cited sources on the topic is alstete’s work published in 1995, entitled “benchmarking in higher education. application of best practices for quality improvement”. the text provides a detailed description of benchmarking types and possibilities of application in higher education. the author claims that benchmarking helps to overcome the resistance of heis to changes. also, it gives a form (structure) for external evaluation and creates new communication networks between heis, enabling them to share valuable information and practices (alstete 1995). in 1998, unesco prepared and released a study “benchmarking in higher education”. the study includes different conceptions of the method and its application examples in the united kingdom, europe, north america and australia. the publication “benchmarking. a guide for australian universities” was released in 2000. it analyses 152 n. k. paliulis, r. labanauskis. benchmarking as an instrument for improvement... australian universities and suggests as many as 25 possible areas of activity for benchmarking (mckinnon et al. 2000). the european commission initiated several studies on this subject as well. in 2008, “benchmarking in european higher education. a practical guide” was prepared and released by the european centre for strategic management of universities and its partners. in 2010, the centre prepared “benchmarking in european higher education. a university benchmarking handbook”. this publication had an extensive theoretical part and examples of benchmarking of some areas of activity of universities. the analysis involved issues related to management, life-long learning, cooperation between universities and companies, and curriculum. the first benchmarking project “european benchmarking initiative in higher education” was financed by the eu and implemented in 2006–2010. this project was aimed at modernisation of management in higher education and improvement of the attractiveness of the european higher education. according to the european commission, benchmarking could be a modern management instrument for progress and institutional reforms to increase performance efficiency and capability while adapting to new challenges in the environment (woźnicki et al. 2013). 5. assumptions and opportunities for application of benchmarking in heis most heis have the ambition to learn from each other and share best practices. however, typical problems experienced by heis can range across a wide variety of issues. they include scarce market knowledge and customer-centred approach, slow and bureaucratic preparation of new study programmes, high costs of performance, the average quality of studies (or organisation) or even uncompetitive prices. heis are among especially conservative organisations that have implemented very few changes during a long period. benchmarking could be a suitable method for solving these problems. benchmarking can help universities to indicate areas of successful performance and compare them with universities of the same profile (group). also, the instrument helps to acknowledge areas of improvement and prepare targeted strategies for enhancement of performance in these areas. benchmarking is a modern management instrument with a great added value. it can be helpful to executives of heis making strategic decisions for the development of their organisation. the decisions are based on a systematic collection of data and identified objectives for higher performance results. benchmarking is described as one “of the most effective antidotes to the complacency that is treated as a stigma of higher education” (sorensen et al. 2005). benchmarking is spreading between universities that recognise the need to compare their performance with that of other universities. this comparison helps heis to analyse their strong and weak sides and introduces processes for the improvement 153 business, management and education, 2015, 13(1): 140–157 of performance results. therefore, the usefulness of this exercise strongly depends on groups used for comparison, which should be as indiscrete as possible. discreteness could significantly influence the results (agasisti, bonomi 2014). universities should participate in benchmarking on a voluntary basis and free of charge. benchmarking can be: 1. internal (inside the institution) and external (between several institutions); 2. intended for comparison of results; 3. intended for comparison of processes (comparing procedures and processes of institutions); 4. strategic (comparing operations and decisions on the strategic level). possible ways of benchmarking in heis: 1. the institution compares procedures and results with those of other institutions (comparative assessment) to comprehensively strengthen and improve its performance. 2. the institution has procedures for generalisation of results on indicators measuring satisfaction of students and researchers and compares the results to those of other similar institutions. 3. the institution compares student performance data with relative student performance data of other institutions (agasisti, bonomi 2014). the evaluation of benchmarking types and methods (woźnicki et al. 2013; garcı´aaracil, davinia 2010; anand, rambabu 2008; vught 2008, 2010; dotun et al. 2010) reveal a number of essential issues. the following issues could be viewed as opportunities for heis to participate in the benchmarking exercise and reach clearer insights for performance improvement: 1. analysis of documents providing information on operation of strategic planning and quality management systems: 1.1. governance and leadership (clarification of objectives and consistency on various levels); 1.2. administrative capacities of the institution (clearly defined lines of responsibility); 1.3. economic (material) and human resources (employees, academicians); 1.4. changes in financial structure (finance diversification); 1.5. quality management system (level of organisational culture); 1.6. ability to correspond to changes. 2. analysis of the meanings of key performance indicators (kpi). processes of the main activity, generating value for stakeholders (clients): 2.1. flexibility of the study process; 2.2. reaction to demand changes (establishment of new specialities); 2.3. sufficiency and accessibility of material resources for studies; 2.4. administrative services for students; 2.5. scope of applied research (scientific activity), impact of art (artistic activity); 154 n. k. paliulis, r. labanauskis. benchmarking as an instrument for improvement... 2.6. fitness of study programmes and qualification courses; 2.7. career development and monitoring; 2.8. composition, structure and qualification of pedagogical and administrative personnel. 3. the influence of the institution on the external world (society and region): 3.1. competitiveness; 3.2. reputation (attractiveness); 3.3. student satisfaction; 3.4. employability of graduates (locally, internationally); 3.5. development of private sector initiatives; 3.6. commercialisation: net return on equity. benchmarking should not be confused with presently popular rankings. these systems are usually composed of certain defined criteria and sums of their scores. it is true that the criteria used to compose certain rankings can be included while benchmarking results. however, rankings are usually characterised by compiled order of the rated. therefore, although benchmarking and ranking systems have certain similarities, they are essentially different in their purpose and have different objectives. despite many recommendations and numbers of successful cases, benchmarking receives criticism regarding the application in heis (putkiranta 2012). some authors believe that benchmarking is a simple means to implement minor changes in an organisation and is usually used for improvement of the administrative process. but it is considered a euphemism and can also reveal shortcomings of an institution to the public. the essential principle of benchmarking is voluntary participation in a research effort based on partnership. currently, various national institutional initiatives are discussed to exercise this method externally. possibly, results of a certain heis will be compared or a “top-down” benchmarking approach will be applied. however, it will not be the benchmarking exercise, which answers the question in what way and for what reasons certain results were received. 6. conclusions under the influence of globalisation, higher education is turning into the mass phenomenon that changed the very concept of quality. the problem of quality has become essential to lithuania and in the entire european higher education area. in the context of european states, the development of quality dimension in the lithuanian higher education was gradual. there was a timely understanding of the importance of quality. the required legal regulation followed soon after. with time, attention to quality grew. still, demographic and economic circumstances of 2000–2008 decelerated the development of this dimension in lithuania. it should be noted that the instruments chosen for the elaboration of quality management systems in heis did not produce the expected result. the state chose the model, according to which the supervision and 155 business, management and education, 2015, 13(1): 140–157 control of quality in higher education was entrusted to the institution subordinated to the ministry. however, heis attempt to satisfy the requirements rather than identify their place in the country and the region. similarly, universities aiming to improve management should focus on strategic directions, such as simplification of internal structure and subordination, and attribution of clear responsibility for the results to either academic or administrative units. however this effort requires new priorities in strategic development, focused on the efficiency of university management and strengthening of accountability to society. 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national and multiple accreditation in europe after the fall of the wall and after bologna, quality in higher education 7(1): 65–75. http://dx.doi.org/10.1080/13538320120045094 wong, w.; wong, k. 2008. a review on benchmarking of supply chain performance measures, benchmarking: an international journal 15(1): 25–51. woźnicki, j.; luterek, m.; degtyarova, i. 2013. benchmarking in higher education, proceedings of 2013 international conference on technology innovation and industrial management, 29–31 may 2013, phuket, thailand. narimantas kazimieras paliulis is a professor at the department of business technologies, the faculty of business management, vilnius gediminas technical university. his research interests are: information technologies and telecommunications in business and transport, e-business, e-government, knowledge management, enterprise management and economics. rimvydas labanauskis is a phd student at the department of business technologies, the faculty of business management, vilnius gediminas technical university. his research is focused on quality management, benchmarking and networking, as well as strategic management and value-added tools (value creation) of higher education. http://dx.doi.org/10.1080/08982112.2013.803121 http://dx.doi.org/10.1080/13538320120045094 copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. forward-looking planning of technology development katarzyna halicka bialystok university of technology, wiejska 45a str., 15-351 bialystok, poland e-mail: k.halicka@pb.edu.pl received 30 june 2015; accepted 4 november 2015 abstract. the main aim of this article is to adapt the future-oriented technology analysis (fta) to prospective planning of technology development. firstly, the article presents the assumptions, methods and idea, as well as the concept of the fta method. moreover, selected publications on the use of this method were analysed. then, an original, base model of forward-looking planning of technology development was constructed and presented. the end result of this process will be the development of the localized in time, presented in graphic form, action plan referred to as the route of technology development. basing on the literature review and the research projects a preliminary route of development of arbitrarily chosen technology was also built and presented. keywords: foresight, future-oriented technology analysis (fta), roadmapping, forward-looking planning. jel classification: o32, q42. 1. introduction with increasing demand for innovative technologies and broad trading market for technologies the issue of prospective planning of technology development is gaining importance. when reviewing literature it can be seen that the management of technology should be aimed at the identification and exploitation, but also the selection, acquisition, protection and acquiring of knowledge, undertaken in order to achieve and maintain a high market position of the organization (cetindamar et al. 2009; gregory 1995; rush et al. 2007). the identification process involves taking actions to acquire new technologies that would improve the competitiveness of the organization or to prevent its deterioration. due to the importance of technology to the organization, the processes of obtaining it should be implemented in a planned and systematic manner. the selection is based on identifying the technologies with the greatest potential for development with respect to future economic, technological, environmental, social trends. on the basis of the selected technologies research and development priorities can be generated and applied in the form of research and development efforts, the results of which, when put into b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(2): 308–320 doi:10.3846/bme.2015.294 http://dx.doi.org/ 10.3846/bme.2015.294 309 business, management and education, 2015, 13(2): 308–320 practice will allow in the future to achieve the target level of technological development and the provision of e.g. a development and competitive technological portfolio to a company (nazarko 2013). the acquisition of pre-selected technologies involves making a decision on the purchase or implementation of technology (nazarko et al. 2011). in contrast, exploitation of technology involves the use of technology in order to provide financial or non-financial benefits for the company. in turn the process of technology protection is associated with the protection of unique of industrial and intellectual property of a company. in turn knowledge acquisition is conditional upon, inter alia, the development and exploitation of technology. the acquisition of a given technology involves most frequently incurring high costs and the use of significant resources of the organization. therefore, it seems reasonable to examine how the selected technology will evolve over time. therefore, according to the author, in the structure of technology management another important process involved in the planning of the development of technologies needs to be extracted (halicka 2014b). the process should include both the current development trends enabling extrapolation for the immediate future and long-time horizons. effective planning of technology development is difficult due to the cost, complexity, and pace of technological change on the global market. prospective planning of the technology development for the benefit of the national economy and its individual entities requires the use of specific systems and processes, which make the investment in research and development, facilities and qualifications of the staff to be tailored to the needs of the market and industry, both now and in the long-term perspective. those conditions justify the use of future-oriented technology analysis tools (future-oriented technology analysis). fta is a systematic process of technology characterization and the identification of their development paths and potential impacts, especially in the future. this approach combines technology assessment and foresight activities with foresight and technology intelligence (gudanowska 2014). the purpose of this article is to present the future-oriented technology analysis (fta) methodology as a method applicable in technology/technologies management, and in particular in the planning of the technology development. the authorial, base model of technology development planning was also presented in the article. the end result of this process will be the development of the localized in different time horizons, presented in a graphic form, action plan. basing on the literature review and the research projects a preliminary route of development of arbitrarily chosen technology was also built and presented in further research. 2. idea of fta the term fta was first used in 2004 in the seminar on new horizons and challenges for future-oriented technology analysis: new technology foresight, forecasting and assessment organised by the institute for prospective technological studies (ipts). 310 k. halicka. forward-looking planning of technology development the main objective of the seminar was to analyse possible overlapping fields of practice among technology foresight, forecasting, intelligence, roadmapping, and assessment. over time the term was used to describe a set of disciplines and methods, which try to better understand and shape the future from different methodological perspectives” (haegeman et al. 2013). according to cagnin and keenan (cagnin et al. 2008) fta is: a common umbrella term for technology fore-sight, technology forecasting and technology assessment. future-oriented technology analysis includes 50 methods making up 13 “methods families” (table 1). table 1. future-oriented technology analysis methods (source: cagnin et al. 2008) no methods families sample methods 1 creativity approaches triz, future workshops, visioning 2 monitoring and intelligence technology watch, tech mining 3 descriptive bibliometrics, impact checklists, state of the future index, multiple perspectives assessment, literature review 4 matrices analogies, morphological analysis, crossimpact analyses 5 statistical analyses risk analysis, correlations 6 trend analyses growth curve modelling, leading indicators, envelope curves, long wave models 7 expert opinion survey, delphi, focus groups, participatory approaches 8 modelling and simulation innovation systems descriptions, complex adaptive systems modelling, chaotic regimes modelling, technology diffusion or substitution analyses, inputoutput modelling, agent-based modelling 9 logical/causal analyses requirements analysis, institutional analyses, stakeholder analyses, social impact assessment, mitigation strategizing, sustainability analyses, action analyses, relevance trees, futures wheel 10 roadmapping backcasting, technology/product roadmapping, science mapping, multi-path mapping 11 scenarios scenario management, quantitatively based scenarios, different emphases, science theatres, video 12 valuing/decisionaiding/economic analyses cost-benefit analysis (cba), swot, analytical hierarchy process (ahp), data envelopment analysis (dea), multicriteria decision analyses 13 combinations scenario-simulation (gaming), trend impact analysis according to the author fta is to collect a set of useful tools which can be used successfully in perspective predicting of technology development. not all methods listed in table 1 are suitable for management, planning technology development. it is difficult, however, to choose among the dozens of methods used in the fta – especially by 311 business, management and education, 2015, 13(2): 308–320 inexperienced researchers – those that will be useful for predicting technology development. it is therefore appropriate to prepare a prospective model of technology development planning. this model should contain the stages of research proceedings seeking the future-oriented technology development planning. this model should also include methods useful for the implementation of each step. in order to develop such a model, the author analysed the database of scientific ieee and web of science publications, in terms of procedure, scope and frequency of the use of future-oriented technology analysis. the choice of databases was dictated by their availability. based on a search of databases using keywords such as future-oriented technology analysis, in the last ten years, 45 articles were identified (fig. 1). fig. 1. number of publications in the database ieee and web of science on fta (source: own study based on the review of literature) analysing figure 1, it can be concluded that the interest in the subject is steadily increasing, and since 2012, there have been over 10 newly created publications in this field every year. then, the citation index in the web of science database (fig. 2) was checked, and a systematic increase in citations of publications associated with the fta was observed. the most cited publications were analysed, and it can stated that they are of application nature, the usage of the fta method is presented there. the most cited article is the publication from 2008 (robinson, propp 2008) associated with the use of the fta for the construction of the emerging technologies’ development strategy. fig. 2. citations in each year (source: own study based on the review of literature) 312 k. halicka. forward-looking planning of technology development all the collected publications were analysed in detail and a classification by the nature of the article was performed: (1) methodological – where the fta methods or their modifications were presented; (2) review – a review of methods, classification, description, etc., were performed; (3) application – where the application of the fta method was presented (guo et al. 2011; huang et al. 2011; marinho, cagnin 2014; markus, mentzer 2014). definitely, most of the articles are reviews (25 articles); methods were reviewed, classified, and the possibility of their use was also presented (amanatidou et al. 2012; boden et al. 2012; cagnin et al. 2013; eerola, miles 2011; georghiou, harper 2013). on the other hand, the least articles are applications – only 8 articles. most commonly, this method is used in the field of nanotechnology to predict the development of new and emerging science and technologies (alencar et al. 2007; damrongchai et al. 2010; huang et al. 2012; koivisto et al. 2008; robinson et al. 2013; schaper-rinkel 2013). by analysing publications in detail, comparing them with table 1, the author noticed the most commonly used methods belonging to groups: descriptive, monitoring and intelligence, expert opinion, scenarios, roadmapping. the methods from other groups (creativity approaches, matrices, statistical analyses, trend analyses, logical/causal analyses, valuing/decision-aiding/economic analyses) are used sporadically (gesche et al. 2012; magruk 2011; weber et al. 2012). according to the author, in technology development planning, the tools for accurately describing, understanding the technology are of great importance (gudanowska 2013). however, taking into account table 1, it can be seen that these tools have been treated rather marginally. the model of prospective technology management, proposed by the author, includes these methods. 3. the characteristics of the prospective technology development planning process based on a detailed analysis of publications, a base model of prospective technology development planning was established. figure 3 shows the process enabling foresight to anticipate the development of technology. the model of prospective planning of technology development consists of three consecutive stages. the first stage consists primarily of analysing and understanding the collected technologies. at this stage, the current state and the current possibilities of application of technology will be examined. an analysis of the life cycle of technology will be conducted and technological the technology readiness level will be determined. the lca method allows the diagnosis of the market age of technologies. within lca analysis the following elements can be distinguished: (1) core technologies – widely used in the sector, available with light and weakening competitive value; (2) key technologies – underlying competitiveness, strongly protected; (3) experimental 313 business, management and education, 2015, 13(2): 308–320 technologies with little application, which may in the future become key technologies. in turn, by using the method of trl, the categorization of the level of technology development will be possible, so that you can determine its current state and prospects of development according to the accepted scale uniform for all the analysed technologies. the end result of this step will be the development of a directory of key technologies. in the next stage, only the key technologies selected in the first stage will be analysed in detail based on bibliometrics analysis, source data analysis, patent analysis, literature review. bibliometrics analysis allows to determine the state of technology through research using quantitative (statistical) methods – on the basis of descriptions and bibliographies, research of the content of full-text literature databases, scientific citation indexes and statistics on publications – scientific and technical literature in the field of the ongoing research. in turn, source data analysis involves the analysis of statistical data and analysis of the literature. the result of this method may be a project including the diagnosis of the current state of technology development. in contrast, patent analysis focuses primarily on finding, analysing technical information, and enables the identification of gaps in the area of intellectual property, identification of key authors, inventors and owners of the rights to innovation in a particular area. honest review of the literature is an introduction to the current state of knowledge on the topic. it is based on a logical, reflective approach, based on an analysis of prior knowledge regarding the study area, and contained in scientific publications, books, reports, articles. in stage 2, using the abovementioned methods, areas/spheres/layers will be proposed, that influence the development of technology, such as resources. in the model, this step is conventionally called the designation of areas/spheres/layers. this step will also identify the potential application of key technologies. at this stage, the final result will be to establish the initial route of technology development. it is important for this route to present the current, objective and fair view of the technology. therefore, it should be developed by an independent and impartial team. during the creation of the initial route, the opinions of the environment related to technological development should not be included. the effect of this stage is the result of a review of literature, patent databases and research reports. the last stage (iii) will involve, inter alia, verification of the base route developed in the previous stage. this time, the representatives of science (experts of the technologies) as well as decision-makers or entrepreneurs using technology will be invited to the research. the opinions of experts will be collected using the delphi method. it is a tool enabling an effective communication in the group of experts, who remain anonymous to each other, in order to solve a complex problem. the persons whose competence in a particular area inspires confidence will be invited to the group of experts. it is expected that experts have knowledge of future trends in the development of the studied area and represent a broad perspective of thinking. initially, delphi questionnaire will be developed. then the developed delphi questionnaire will be sent to a wider group of experts. the task of the group of experts will involve filling in the questionnaire and making 314 k. halicka. forward-looking planning of technology development judgments about the development of selected technologies in a determined term. the filled in questionnaires will be collected, compared, summarized, and sent to the experts again. in the next round of the research the respondents will fill in the same questionnaire, whereas they have the opportunity to get acquainted with the collective results of the first round of research. thus the experts have the opportunity to become acquainted with the opinions of other experts (but without the ability of contacting each other and establishing their personal details), they may modify, maintain and revise their previous opinions etc. the opinions of experts will help to complete the route, or to change the layers or the information provided in the individual layers (nazarko et al. 2011). the end result of the whole process will be the technology development route, which locates the development of technology in the time dimension, and allows for reflection of relationships that exist between the development of technology and progress in other areas. the route of technology development can present visions of development of selected technologies in terms of market, technological or human potential (kim et al. 2010). the literature review indicates that the created development routes can also assume a different graphic form. they are presented in the form of histograms, fig. 3. the base model of the prospective planning of technology development (source: halicka et al. 2015) 315 business, management and education, 2015, 13(2): 308–320 tables, graphs, flow diagrams or text. according to the author, presentation of the maps of technology development in the form of area charts is clear, easy to read and understand. the author also proposes to include the concept of r. phaala in the design of routes of technology development, inter alia consisting in identification of: (1) the needs of industrial and scientific and research sector, the country of the organization; (2) products, services and projects that meet identified needs; (3) the directions of research allowing for development or production of new products and services; (4) the potential and resources that will allow for the implementation of the desired vision of development. thus, the route of technology development – according to the author – should be presented in an area chart containing such layers as the market, products, technologies, research directions and resources. using the model shown in the picture later in the article, a preliminary development route of the arbitrarily chosen technology was developed – the result of phase ii of the base model of prospective planning of technology development. 4. an example of the use of the base model of prospective technology planning in this chapter to present the development of technologies the methodology proposed in the previous chapter was used. due to the author’s experience and knowledge in the area of the energy market, and in particular the renewable-energy sources, an initial technology development route for energy storage technologies – lithium-ion (li-ion) battery type was built (halicka 2014a, 2014b, 2014c). these batteries have a very wide application. they can be used, inter alia, in electrical vehicles and for storing the energy from renewable energy sources (electric power research institute 2010; international electrotechnical commission 2011). the initial route was designed for the time horizon until the year 2030. according to the model of a prospective technology management phase ii is primarily based on a review of the literature, patent databases and reports of research on the chosen technology – in this case the battery li-ion. as a result of a thorough analysis of the literature and research in the field the author proposed the route of development of the li-ion battery was composed of four layers: technology resources, product, application, market drivers. the layer of market drivers should include social, political, legal or environmental (trends) conditions that influence the development of li-ion batteries. in turn, the layer of technology resources will take into account technical and economic conditions that determine the development of the product layer, and this in turn will contribute to the development of the layer of application. figure 4 shows the initial route of development of the li-ion battery. the initial route is the primary source of knowledge about the technology, it is a kind of knowledge base on technology, presented in a manner which is synthetic and easy 316 k. halicka. forward-looking planning of technology development to read. the reliably designed initial route will contribute to the improvement of the delphi survey, and thus to preparation of the complete, final version of the development route of the selected technology. the route of development of the li-ion technology will be useful to producers of renewable energy who will use or intend to use batteries for energy storage. it will also be useful to battery manufacturers and researchers. the route also allows for summarizing, illustrating the barriers to the use of the technology, and this in turn may encourage researchers to conduct further studies allowing for the reduction of these restrictions. fig. 4. the initial route of development of the li-ion battery (source: halicka et al. 2015) 317 business, management and education, 2015, 13(2): 308–320 it is also important to develop routes of similar technologies having similar properties, applications. then it will be possible to compare these technologies. therefore, the author recommends performing technology development routes of all the available energy storage technologies. 5. conclusions according to the model of a prospective technology management phase ii is primarily based on a review of the literature, patent databases and reports of research on the chosen technology – in this case the battery li-ion. as a result of a thorough analysis of the literature and research in the field the author proposed the route of development of the li-ion battery was composed of four layers: technology resources, product, application, market drivers. the layer of market drivers should include social, political, legal or environmental (trends) conditions that influence the development of li-ion batteries. in turn, the layer of technology resources will take into account technical and economic conditions that determine the development of the product layer, and this in turn will contribute to the development of the layer of application. figure 4 shows the initial route of development of the li-ion battery. the initial route is the primary source of knowledge about the technology, it is a kind of knowledge base on technology, presented in a manner which is synthetic and easy to read. the reliably designed initial route will contribute to the improvement of the delphi survey, and thus to preparation of the complete, final version of the development route of the selected technology. the route of development of the li-ion technology will be useful to producers of renewable energy who will use or intend to use batteries for energy storage. it will also be useful to battery manufacturers and researchers. the route also allows for summarizing, illustrating the barriers to the use of the technology, and this in turn may encourage researchers to conduct further studies allowing for the reduction of 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harper, j. c.; koennoelae, t.; barcelo, v. c. 2012. coping with a fast-changing world: towards new systems of future-oriented technology analysis, science and public policy 39(2): 153– 165. http://dx.doi.org/10.1093/scipol/scs012 katarzyna halicka. phd, since 2008 is an assistant professor at the faculty of management and finance at the bialystok university of technology. deputy head of the department of business informatics and logistics and an editor of the logistics management section of the economics and management journal. author of about 60 scientific articles. research interests: forecasting, foresight studies, technology management, methods of artificial intelligence. http://dx.doi.org/10.1016/j.techfore.2012.10.007 http://dx.doi.org/10.1093/scipol/scs012 copyright © 2016 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(2): 153–178 doi:10.3846/bme.2016.329 why do i study? the mediating effect of motivation and self-regulation on student performance dorothea wahyu ariani department of management, economics faculty, maranatha christian university jl. prof. drg. suria sumantri no. 65, 40164 bandung, indonesia e-mail: ariani1338@gmail.com received 26 september 2016; accepted 16 november 2016 abstract. the present study is designed to improve understanding of personal and situational effects on academic performance. this study examines relationship between flexible assessment system and academic performance mediated by self-regulation and academic motivation. this study also investigates moderated gender as a variable on the relationship models. a sample of 326 students of economics and business program were participated in the current study. the results indicate that academic motivational construct is a strong predictor of students’ self-regulation in learning and academic performance. self-regulation mediates relationship between students’ academic motivation and students’ academic performance. academic motivation and self-regulation also mediate the relationship between flexible assessment system and self regulation. the results also indicate that flexible assessment system does not have a direct relation with performance. these results are discussed with regard to the relevance of flexible assessment system, academic motivation, and self-regulation in increasing academic performance. keywords: flexible assessment system, academic motivation, self-regulation, student performance, self-efficacy, cognitive motivation theories. jel classification: m12, i23, m14, m53. 1. introduction motivation is seen as a key factor affecting learning outcomes. high learning achievement is often associated with high motivation and learning environment and affects high motivation (chen 2001). recently, research on students’ academic motivation seems to be the core of research in the context of learning. noe (1986) stated that students’ academic motivation indicates the need for students to study the substance of learning programs. academic motivation is indicators of cognitive, emotional, and behavior of students, as well as a devotion of education (tucker et al. 2002). however, it is actually hard to understand what motivates the students to learn. doi:10.3846/bme.2016.329 mailto:ariani1338@gmail.com 154 d. w. ariani. why do i study? the mediating effect of motivation and self-regulation on student performance academic motivation is a key determinant of selection of students to be bound in the learning process. academic motivation is presented in the learning process, and bonded actively in learning activities. previous researchers suggest that academic motivation is a robust predictor of learning outcomes such as academic performance and is affected by individual and situational characteristics (noe 1986; tannenbaum, yukl 1992). previous study also indicates that there is strong positive correlation between academic motivation and academic performance or learning outcomes (noe, schmitt 1986; colquitt et al. 2000). the research results of klein et al. (2006) stated that academic motivation is also associated with satisfaction in the learning and assessment methods used. previous research conducted in the context of learning stated that motivation plays an important role in learning (shiu, lin 2012). according to tucker et al. (2002), some researchers claim that only motivation that directly affects academic performance, meanwhile, other factors will affect the academic performance only through its influence on motivation. in other words, academic motivation is an important factor for student achievement and become mediating of various independent variables that affect academic performance. students with a positive attitude and have high academic motivation will demonstrate learning independent, will have high achievement, and they will have high academic performance (green et al. 2006). academic motivation and self-regulation are interconnected and can predict whether students will perform well (paulsen, gentry 1995; zimmerman 2002). academic motivation is an important factor in self-regulation (hong, o’neil 2001). therefore, academic motivation and self-regulated learning as two interrelated constructs and affects academic performance. besides academic motivation, self-regulation or self-regulated learning can indeed direct the academic learning process (zimmerman 1986, 1990). self-regulation is a condition in which individuals can use social processes to regulate their behavior and ability to form a learning environment through feedback (hong, o’neil 2001). a strong relationship between academic motivation and self-regulation have been investigated in various studies (bandura 1993; zimmerman 1990; zimmerman et al. 1992; pintrich, de groot 1990; fadlelmula et al. 2015; lichtinger, kaplan 2015). students with high self-regulation are also likely to use his skills and become self-efficacious, and be able to increase their effort in a learning situation and be better than individuals with low self-regulation (hong, o’neil 2001). in this study, the self-regulation construct is a compounding of self-efficacy and effort. in addition, self-regulation is affected by the assessment system and may mediate the relationship between academic motivation and academic performance. self-efficacy can affect an individual’s belief in the ability that is shown in his academic performance (bandura 1993; mulkey, o’neil 1999). a previous study presents a significant correlation between self-efficacy and students’ academic performance (barrows et al. 2013). individuals who do not perceive that he is competent will lose motivation to complete their tasks that are heavy and just focus on the negative results 155 business, management and education, 2016, 14(2): 153–178 (barrows et al. 2013). previous research suggests a strong correlation between academic motivation, self-efficacy, and self-regulation (hong, o’neil 2001). both self-efficacy and academic motivation are important factors for self-regulated learning and have an influence on self-regulated learning. according to pacharn et al. (2013), flexible assessment system allows students to learn self-regulated learning skills so that students can choose the tasks and participate in it. as well as curricula and teaching methods, assessment system is a part of the learning context. assessment system is more affecting student learning than learning styles (gibbs, simpson 2004). assessment system can increase students’ learning motivation (pacharn et al. 2013). cook (2001) states that the flexible assessment system could relieve stress of students in the examination. this study is built to find a relationship model between flexible assessment system, self-regulation, academic motivation and student performance. in general, this study also examines the influence of personal factors and situational or environmental toward academic motivation that energizes and directs students’ behavior or to achieve better performance. this study tests academic motivation and self-regulation as mediating variables on positive relationship between flexible assessment system and academic performance. this is due to two things are interrelated and equally affect student performance. this study uses a self-report questionnaire to assess students’ academic motivation, flexible assessment system, self-regulation, and academic performance. 2. literature review and hypothesis development 2.1. academic motivation and academic performance in higher education, research on the learning process, student achievement, and students’ academic motivation play important role in learning and academic performance. motivation is a popular issue for researchers and academicians. motivation indicates the conditions in which individuals intensified informal, direct, and sustain behavior (green et al. 2006). in the context of student learning, academic motivation is used to increase the effort and enthusiasm in the attachment, performance, and persistence in learning. motivation is the desire and control to achieve a particular action or behavior (cortright et al. 2013). motivation is a psychological process resulting from the interaction between individual factors and environmental factors. academic motivation is also an important and significant factor for academic learning. academic motivation regarding doing tasks, effort and persistence in academic tasks and understanding all subjects that is elected. motivation has positive impact on learning by supporting, encouraging, and providing direction on learning activities (mubeen et al. 2013). although motivation is a confusing topic in organizational science, but organizational researchers present motivation as a basis for the development of effective theory (steers et al. 2004). the social cognitive models stated that students 156 d. w. ariani. why do i study? the mediating effect of motivation and self-regulation on student performance are motivated in different ways, either by intrinsic factors (cognitive) and extrinsic factors (social and cultural) (dweck, leggett 1988). failure in academic performance is considered as a result of low academic motivation. academic motivation can be understood by using motivational theories such as selfdetermination theory, attribution theory, academic self-concept, need for achievement, expectancy theory, and self-efficacy theory. self-determination theory emphasizes the electoral behavior intentionally, while the attribution theory emphasizes the explanation of the causes of individual behavior internally and externally (hartman et al. 2013). meanwhile, academic self-concept is a general view of individuals’ academic competence that can drive the success academically (bong, clark 1999). mcclelland states that need for achievement is a desire for achievement that emphasize on what directs the hope of success and fear of failure (robbins, judge 2011). expectancy theory and self-efficacy theory are motivation theories that are most often used which emphasizes individual expectations for the competence or confidence in the ability to perform their duties and bound to certain desires, especially in learning activities. furthermore, selfconcordance theory identifies two reasons for achieving their goals, which is the reason that expressed a desire long-term (sheldon, elliot 1999) and the grounds were prompted by circumstances or by others (gore, rogers 2010). motivation is referred to as the cognitive processes that occur in the personality then motivation is expressed into the social environment. motivation can be characterized as a model of thought that drive the behavior of individuals (achakul, yolles 2013). the internal process can be influenced by personal and environmental factors associated with attachment to the activity and administration of reward and punishment on the student attachment. in general, the goal of motivational research was to examine the influence of personal and environmental factors to the internal processes as to provide energy and can drive behavior (chen 2001). in the field of education, academic motivation research is tied to how personal and environmental factors in the learning process can affect student learning. academic motivation is an important element in the learning process, although at the same time that element is not enough for students to achieve performance or better performance (barrows et al. 2013). 2.2. self-regulation and academic performance self-regulation is important because educational objectives are to achieve expertise in lifelong learning. self-regulated learning is an inherent aspect of cognitive learning, which includes knowledge, belief, and the skills learned (kadhiravan 2012). social cognitive theory provides a theoretical basis for the development of independent learning model within the individual, where contextual and behavioral factors interact to give the learners an opportunity to control the learning outcome. in this study, contextual factor is flexible assessment system, whereas behavioral factor is academic motivation. 157 business, management and education, 2016, 14(2): 153–178 self-regulatory trait is one of the personality characteristics that influence motivation. however, self-regulation also presents the personal beliefs or individual’s confidence of his ability in a particular task (yusuf 2011). zimmerman and martinez-pons (1986) proved the closeness of the relationship between nature and perception of students’ independence on their academic self-efficacy. in other words, self-regulation is positively related to students’ academic self-efficacy and students’ performance. students with high self-efficacy are motivated to achieve high academic performance. according to pintrich and de groot (1990), students with high self-regulation are more motivated to use strategies such as planning, organizing, and self-monitoring strategies than students with low self-regulation. pintrich and de groot (1990) also suggests that there is a correlation between academic motivation and self-regulation in learning, as well as positive influence of academic motivation and self-regulation to students’ academic performance. students who have high self-regulation will have great ideas about how and why certain learning strategies used. self-regulation combines motivational process such as self set goals and performance, maintain a positive belief about the ability of individuals, assessing learning and know the results, as well as experiencing a positive feeling as proud or satisfied with the efforts that have been made (schunk 2005). hong and o’neils’ (2001) research results showed that one-dimensional self-regulation is the motivation. the dimensions of motivation in this study include self-efficacy and effort. positive relationship between self-efficacy and self-regulation in the academic field has been extensively tested in the previous study (zimmerman et al. 1992; malpass et al. 1999). self-regulation is seen as a condition or trait (hong, o’neil 2001). conditions show a relatively volatile individual who showed variability in individuals who are subject to change. meanwhile, the nature of the individual condition showed stable or fixed from time to time. according to zimmerman (1990), self-regulated learners presented a high sense of efficacy in their ability for influencing knowledge and expertise in goals setting and its commitment to meet the challenges. non self-regulated student was not involved in learning (yusuf 2011). individuals who do not have self-regulation will have low academic performance (zimmerman 1986). the impact of students’ perceived self-efficacy on self-regulation has not been tested directly (zimmerman et al. 1992). research results of zimmerman et al. (1992) suggested that students’ self-belief of efficacy against the strategically regulate learning is an important factor in academic motivation. individuals with low self-efficacy will have a negative mindset towards task demands and that task is seen as a threat and not as a challenge (yusuf 2011). they will also set goals lower. in addition, students who perceive themselves were able to organize its activities in the long term is students who believe on their ability to understand the lessons and were able to achieve better performance (zimmerman et al. 1992). 158 d. w. ariani. why do i study? the mediating effect of motivation and self-regulation on student performance without academic motivation, self-regulation is difficult to achieve (zumbrunn et al. 2011). individuals with high self-regulation will be able to achieve high academic performance (zimmerman 2008; schunk, zimmerman 2007; wolters, hussain 2015). students that are motivated to learn will use their time and energy to learn and implement self-regulation. when students successfully apply self-regulation, they will be motivated to accomplish the learning tasks (zimmerman 2000). in general, self-regulation and academic motivation supports each other in explaining student learning and student performance in the classroom. self-regulation can encourage students’ intrinsic motivation for enhancing student learning (cheng 2011). zimmerman and martinez-pons (1986) also believe that the self-regulated ability was the best predictor of student learning performance. boekaerts (1995), corno (1986), as well as pintrich and de groot (1990) state that students’ academic motivation is an important component of self-regulation. in other words, academic motivation affects students’ self-regulation. however, self-regulation can improve or enhance the learning motivation. chengs’ research results (2011) showed that self-regulation can enhance student learning. his research results showed that learning performance related to academic motivation and self-regulation. 2.3. flexible assessment system and academic performance flexible assessment system allows students to learn independently and indicates their involvement (pacharn et al. 2013). the assessment can affect the motivation through its influence on the orientation of students to learn. the assessment system is an attempt to get information about the performance of the students and become the primary teachers’ responsibility. several previous studies have shown their strength of assessment system that can support or encourage learning and student motivation (harlen, crick 2003; natriello 1987). flexible assessment system can increase students’ involvement in the learning activities and improve the students’ independence in learning. involvement in learning will encourage individuals to participate actively so that it can drive motivation and learning behavior (zimmerman, martinez-pons 1986). flexible assessment system will encourage students to assess their strengths and weaknesses, designing studies that can increase motivation, and evaluate learning approaches in the past to choose a more appropriate learning strategy. ames (1992) states that academicians can use a mastery goal orientation approach for their students, including the engagement in learning and feel the establishment that may affect the achievement or academic performance. pacharn et al. (2013) stated that the flexible assessment system can be more effective in increasing student motivation and affect academic performance. self-determination theory stated that students need a sense of competence, have autonomy or independence, and can communicate with others (singh, p., singh, n. 2013). according to alkharusi 159 business, management and education, 2016, 14(2): 153–178 et al. (2014), there is relationship between motivation and students’ perceptions of assessment. this is because the perception of the assessment system is likely to affect students’ perception of his ability to complete a task. 2.4. relationship between flexible assessment system, academic motivation, self-regulation, and academic performance although a lot of research on education is effective teaching methods, but research on the relationship of assessment methods, academic motivation, self-regulated learning, and academic performance or student achievement remains to be examined carefully. assessment methods is a method of teaching practice that is used to assess students in the classroom based on variety of matters specified as the basis for the assessment by teachers, students, friends, and so on (smimou, dahl 2011). the assessment method determines how students perform in the classroom based on multiple measurements as a determinant of educational system. flexible assessment system will encourage student achievement through learning motivation and setting learning strategy. the assessment system will encourage the students put learning objectives, moving the students reach the learning objectives, and encourage students to choose the best strategy to achieve these objectives. research regarding self-regulation and learning motivation indicates relationship between these two constructs (schunk 2005). students who have high self-regulation tend to have higher academic motivation compared to other students who do not have self-regulation (pintrich 2003). academic motivation shows students’ interest and effort achieve their goals and contribute to the academic success (dweck, leggett 1988). academic motivation is an important factor in student learning. self-regulation is the process whereby individuals set goals, monitor, manage, and control motivation, cognition, and behavior (rakes, dunn 2010). associated with motivation, self-regulated learners have orientation on purpose and have high self-efficacy in learning. students’ competence and expertise did not explain fully the students’ academic achievement (schunk, zimmerman 2007). there are several other factors that play an important role in students’ academic performance, namely academic motivation (areepattamannil et al. 2011). academic motivation was positively related to learning strategies and academic performance (rakes, dunn 2010). this presents that academic motivation affects academic performance through self-regulation. in other words, selfregulation mediates the effect of academic motivation on academic performance. results of previous studies state that academic motivation and self-regulation are directly related to academic performance (pintrich, de groot 1990; zimmerman, martinez-pons 1990; van den hurk 2006; fadlelmula et al. 2015). based on social learning theory, there is significant relationship between academic motivation, self-regulation, and academic performance. 160 d. w. ariani. why do i study? the mediating effect of motivation and self-regulation on student performance previous research also states that self-regulation is an important predictor for students’ academic motivation and students’ academic performance (pothukochi et al. 2014). self-regulation usually mediates the relationship between learner and environment and affects the students’ performance or students’ academic achievement (schunk 2005). according to schunk (2005), academic motivation is actually followed selfregulatory learning but academic motivation is a construct that is separated from the self-regulatory learning. this study aims to examine the relationship models between flexible assessment system, academic motivation, self-regulation and academic performance. this study also examined the models using self-regulation and motivation as mediating variable. this study did not examine the effect of flexible assessment system directly to the academic performance. this study examined the effect of flexible assessment system in the academic performance mediated by academic motivation and self-regulation. it is based on research results pacharn et al. (2013) which states that flexible assessment system did not directly affect the academic performance, but effect of flexible assessment system on academic performance ss mediated by academic motivation and selfregulation. furthermore, previous studies claims that there are differences between men and women motivation (vansteenkiste et al. 2005; kusurkar et al. 2013). the gender differences issue in education in fact has been well documented in recent years and is still doing research to date (baker 2002; britner 2008; meece et al. 2006). velayutham, aldrige, and fraser (2012) suggest that there is gender influence in student’s academic motivation and self-regulation. according to meece and eccles (1993), compared to men, women have lower self-perceptions of their academic ability, but they perform better than men. pajares and viliante (2001) also proved in his research on the gender differences in academic motivation and self-regulated learning. based on a variety of such explanation, the hypotheses that can be arranged are: h1: flexible assessment system affects academic motivation. h2: flexible assessment system affects self-regulation. h3: academic motivation affects self-regulation. h4: academic motivation affects academic performance. h5: self-regulation affects academic performance. h6: academic motivation mediates the effect of flexible assessment system on selfregulation and academic performance. h7: self-regulation mediates the effects of flexible assessment system and academic motivation in academic performance. h8: gender moderates the relationship model of flexible assessment system, academic motivation, self-regulation, and academic performance. 161 business, management and education, 2016, 14(2): 153–178 3. research methods 3.1. samples and procedures research research was conducted on students’ undergraduate program on economics and businesses who were studying in yogyakarta. yogyakarta city was chosen because yogyakarta is known as the first student city in indonesia. students from all over indonesia went to yogyakarta as their learning goals. yogyakarta is a city of learning destination of indonesian people; especially those living on the java island are occupied by half the population of indonesia. in addition, the academic climate is still felt in yogyakarta. the selection of the research setting was based on previous research. the previous research stated that students will perform well if there is a challenge, curious, and want to do the work independently. this study also examined the relationship model between flexible assessment system, academic motivation, self-regulation, and academic performance. this study used a survey method using questionnaires carried out its own distribution. the questionnaires were distributed to students as respondents of this study. respondents were students of undergraduate program on economics and business that is still as active students in yogyakarta. the survey was conducted about three months (september – november 2015). there are four types of primary data collection methods, especially that using questionnaires. several methods that can be used in the survey are interviews with direct face to face, a questionnaire was sent or by correspondence, questionnaires were read over the telephone, questionnaires via electronic media, or combination of survey methods (cooper, schindler 2008; neuman 2006; sekaran, bougie 2010). primary data collection method using questionnaires survey conducted by researcher is the best method (cooper, schindler 2008; neuman 2006; sekaran, bougie 2010). research on students’ academic motivation is important because academic motivation significantly affect learning in school. in addition, academic motivation has been identified as one of the important and consistent predictors of learning outcomes such as academic performance. research used the individual as the unit of analysis requires samples with specific criteria or characteristics. undergraduate students of economic and business program were selected as respondents because self-regulation is one of the hidden curriculum to prepare students to become independent entrepreneur. characteristics of the sample were used to convey the characteristics of the sample relative to the population. research with individuals as the unit of analysis used the sample selection criteria. sample selection method used in this study was non probability sampling, particularly purposive sampling. requirement for selected sample was students who were active of undergraduate program on economic and business for four semesters. students who have been through college for two years and declared free drop out selected as respondents. in addition, this study used self-assessment methods with anonymity. it is intended that students are willing to fill in the questionnaire honestly. the sample consisted of 326 students (with a response rate of 93.14%) of the 350 students. respondents who were 162 d. w. ariani. why do i study? the mediating effect of motivation and self-regulation on student performance students of undergraduate program on economics and business who were studying in yogyakarta received a survey using a pen and paper questionnaires. respondents were assured anonymity and guaranteed confidentially their answers by researcher completed the survey during study hours in campus. 3.2. measurement the instruments were designed for the individuals as unit of analysis. each of the respondents in this study was asked to complete four measurements, namely flexible assessment system, academic motivation, self-regulation, and academic performance. questionnaires regarding flexible assessment system was taken and developed by previous researchers, namely pacharn et al. (2013). academic motivation construct was measured using questionnaires from nichols and ultesch (1998). self-regulation questionnaires were taken from the study hong and o’neil (2001), while the academic performance questionnaires were taken from the research of dyne et al. (1994) which had been adapted for educational setting in indonesia. the questionnaires were adopted with little modification to fit local needs and research setting in indonesia in the field of academic research. modifications were made in the questionnaires translated from english into bahasa indonesia. furthermore, the questionnaire was translated back into english (back translation) and adjusted to the learning system in indonesia. all item questionnaires measured using likert scale with 5-point starting from the number 1. this study used factor analysis as a way to examine the construct validity. the testing reliability of the research instrument with internal consistency test was used cronbach’s alpha. validity test used the varimax rotation with loading factor of at least 0.4 as suggested by hair et al. (2006). reliability test used cronbach’s alpha with the alpha value at least 0.7 as suggested by hair et al. (2006). furthermore, before testing the model by using structural equation modelling, researcher used correlation to examine the relationship among all constructs. next, to examine the relationship model of flexible assessment system, academic motivation, self-regulation, and academic performance was used structural equation modelling (sem) using amos program. meanwhile, to examine gender as moderating variable was used multigroup sem. in addition, this study also using independent sample t test to complete the testing of gender differences. 4. results 4.1. analysis of validity and reliability collecting data in this study used questionnaires that have been developed by some previous researchers. questionnaires were then translated into bahasa indonesia. testing validity used in this study was content validity and construct validity. content validity was done by discussing with experts. in accordance with the opinion of sekaran and bougie (2010), the questionnaires were also tested to students who have the same characteristics as respondents for improving the questionnaires. 163 business, management and education, 2016, 14(2): 153–178 construct validity testing was done by using the factor analysis technique with orthogonal and varimax rotation. extraction factor was determined by taking eigenvalue more than one. this study used a loading factor above 0.4 as suggested by hair et al. (2006) indicated that results of testing the construct validity is practically significant. factor loading recorded value between 0.420 and 0.774. given all the items noted above extracted 0.4, there were some items that turned out to be removed because these items did not valid. items that had construct validity based on the results of the factor analysis were then tested for reliability. items of questionnaires that have been qualified by construct validity were tested reliability. reliability testing in this study used internal consistency with cronbach’s alpha values more than 0.7. based on the results of testing the reliability, instruments that were valid and reliable used in subsequent testing in descriptive statistics. cronbach’s alpha values as the reliability tests measuring instrument in this study resulted in a score of 0.803 for flexible system assessment construct, 0.828 for academic motivation construct, 0.886 for self-regulation construct, and 0.808 for academic performance construct. cronbach’s alpha values of all variables used in this study were above 0.7. table 1. valid and reliable questionnaires, loading factor, and cronbach alpha questionnaires flexible assessment system academic motivation self regulation performance flexible assessment system3 .574 flexible assessment system4 .503 flexible assessment system7 .500 flexible assessment system9 .420 flexible assessment system10 .566 flexible assessment system11 .666 flexible assessment system12 .612 flexible assessment system13 .507 flexible assessment system14 .595 flexible assessment system15 .672 flexible assessment system16 .637 flexible assessment system19 .527 academic motivation1 .548 academic motivation2 .622 academic motivation3 .532 academic motivation6 .545 academic motivation7 .645 academic motivation8 .662 academic motivation9 .570 164 d. w. ariani. why do i study? the mediating effect of motivation and self-regulation on student performance questionnaires flexible assessment system academic motivation self regulation performance academic motivation11 .712 academic motivation12 .686 academic motivation13 .572 academic motivation14 .576 academic motivation18 .437 self-regulation1 .642 self-regulation2 .669 self-regulation3 .736 self-regulation4 .743 self-regulation5 .767 self-regulation6 .708 self-regulation7 .497 self-regulation8 .555 self-regulation9 .696 self-regulation10 .774 self-regulation11 .692 self-regulation14 .462 self-regulation16 .475 self-regulation17 .450 performance1 .531 performance2 .480 performance3 .497 performance4 .513 performance5 .450 performance8 .519 performance9 .584 performance10 .588 performance11 .547 performance12 .636 performance13 .617 performance14 .589 performance16 .457 performance20 .483 cronbach alpha (α) .803 .828 .886 .808 n of items 12 12 14 14 end of table 1. 165 business, management and education, 2016, 14(2): 153–178 based on the results of the reliability testing, researcher stated that the reliability of the measuring instrument of this study was far above the cut-off line reliability as recommended by hair et al. (2006). results of testing the validity and reliability with many items that valid and reliable questionnaire presented in the table 1. 4.2. descriptive statistics for performing statistical analysis, the researcher used a series of analysis the relationship among all constructs or research variables using bivariate correlation analysis. correlation between two constructs or variables used in this study was significantly positive. standard deviation, reliability scale, and correlations among all study variables are presented in table 2. table 2. mean, standard deviation, dan correlations between research variables mean sd α 1 2 3 4 flexible assessment system (1) 3.913 0.2024 0.803 1.000 academic motivation (2) 3.787 0.3286 0.828 0.533** 1.000 self-regulation (3) 3.846 0.1673 0.886 0.508** 0.597** 1.000 performance (4) 3.704 0.2665 0.808 0.367** 0.387** 0.559** 1,000 notes: correlation is significant at the 0.01 level (2-tailed). based on table 2, the mean of three variables was moderate (mean values between 3.704 and 3.913) and the standard deviation was relatively small (standard deviation values between 0.1673 and 0.3286). in addition, all correlations were obtained quite strong. correlation between flexible assessment system and academic motivation was positive significantly (r = 0.533, p < 0.01). correlation between flexible assessment system and self-regulation was positive significantly (r = 0.508, p < 0.01). correlation between flexible assessment system and academic performance was positive significantly (r = 0.367, p < 0.01). correlation between academic motivation and self-regulation was positive significantly (r = 0.597, p < 0.01). correlation between academic motivation and academic performance was also positive significantly (r = 0.387, p < 0.01). meanwhile, the correlation between self-regulation and the performance was also positive significantly (r = 0.559, p < 0.01). that is not too strong correlation between these variables is likely due to the characteristics of the variables in this study. 4.3. hypothesis testing results application of exploratory and confirmatory factor analysis of the data collected was used to test the validity and reliability of measuring instruments. this was due to exploratory factor analysis developed theories about the constructs that make up the measuring instrument that was understood by the respondents as samples. exploratory factor analysis is a statistical method used to found the underlying structure of construct. 166 d. w. ariani. why do i study? the mediating effect of motivation and self-regulation on student performance exploratory factor analysis is a technique within factor analysis for identifying the relationships between measured constructs. meanwhile, confirmatory factor analysis confirmed the theory is built. exploratory factor analysis is also used to extract a set of relevant factors, whereas confirmatory factor analysis is used to test the model. confirmatory factor analysis is also used to examine the discriminant validity of the constructs. specifically, researcher tested four constructs in the relationship model of flexible assessment system, academic motivation, self-regulation, and academic performance as different latent factors. the strength of the relationship between flexible assessment system, academic motivation, self-regulation, and academic performance were examined through structural equation modelling (sem). one of the major advantages of sem is that this model relationships at the item level and explicitly accounting for measurement error (byrne 2001). anderson and gerbing (1988) recommended for analyzing separately the measurement models and structural models. the measurement model was used to confirmatory factor analysis for determining the items used in the study load on constructs. the structural model was used to examine relationships among constructs. this study used previously published scales to collect data that were relevant for this study. results of the testing model suggested that there was significant effect of academic motivation and self-regulation as independent variable on the academic performance as dependent variable. meanwhile, flexible assessment system was not examined directly effect on academic performance, but was mediated by academic motivation and self-regulation. furthermore, in addition academic motivation also affected selfregulation and both affected academic performance. one of the objectives of this study was examination the influence of academic motivation and self-regulation as mediating variables in the relationship model between flexible assessment system and academic performance. table 3 describes the results of the mediating test of the model using structural equation models with two-stage approach. structural equation model in this study was designed and tested using amos 4.0 software program (byrne 2001). the structural model determined by allowing each item of every measurement fit on the latent factors. at first, the researcher conducted dimensional analysis using confirmatory factor analysis, which covers all measures to examine the relationship between the unobserved variables and observed variables that serve as indicators of them. furthermore, the test results of mediation model of academic motivation and self-regulation on the relationship between flexible assessment system and academic performance presented in table 2. the results showed that the hypothesized model fit to the data (χ2 = 6.052; df = 1, p = 0.014; gfi = 0.991, agfi = 0.909, cfi = 0.946). based on the results of the model testing, flexible assessment system influenced academic motivation and self-regulation positively and significantly (hypothesis 1 and hypothesis 2 were supported). impact academic motivation on self-regulation and academic performance was also positive significantly (hypothesis 3 and hypothesis 4 were 167 business, management and education, 2016, 14(2): 153–178 supported). meanwhile, self-regulation had positive effect on academic performance (hypothesis 5 was supported). based on table 3, it can be stated that academic motivation mediated the effect of flexible assessment system on academic performance and self-regulation (hypothesis 6 was supported). while self-regulation also mediated the influence of flexible assessment system and academic motivation on performance (hypothesis 7 was supported). this study used a 0.9 for goodness of fit index (gfi), adjusted goodness of fit index (agfi) and comparative fit index (cfi) as recommended by byrne (2001). testing hypotheses 1 through 7 were supported by the goodness of fit index or gfi that is above 0.90. changes in chi-square test were used to evaluate the best model fit to the data (byrne 2001). meanwhile, to test the hypothesis 8 that evaluated the effects of gender differences in this research model used multigroup structural equation modelling (multigroup sem). the test results of gender as a moderating flexible relationship model assessment system, academic motivation, self-regulation, and performance presented in table 4. based on the results of multigroup sem in table 4, chi square (χ2) for unconstrained models was 4.481 with a degree of freedom 2, while constrained models were 11.130 with a degree of freedom 7. the gender moderating generated chi square value 6.289 and the degree of freedom is 5. the results then compared with the χ2 table with a significance level of 5%. based on χ2 table, chi square value with the degree of freedom 5 was 11.0705. because the χ2 value was less than the χ2 table, the difference was not significant. in other words, gender did not moderate the relationship model flexible assessment system, academic motivation, self-regulation and performance (hypothesis 8 was not supported). structural model in figure 1 shows that academic motivation and self-regulation mediates the effect of flexible assessment system on academic performance. meanwhile, gender does not moderate the relationship models. this means there is no difference between male and female students in the model of the relationship. table 3. analysis of mediating model beta (β) critical ratio flexible assessment system à academic motivation 0.220 3.602 flexible assessment system à self-regulation 0.127 2.164 academic motivation à self-regulation 0.371 6.354 academic motivation à performance 0.150 2.258 self-regulation à performance 0.243 3.668 gfi = 0.991 agfi = 0.909 cfi = 0.946 p = 0.014 chi square = 6.052 df = 1 168 d. w. ariani. why do i study? the mediating effect of motivation and self-regulation on student performance table 4. results of testing gender as moderating variable using multigroup sem multigroup sem unconstrained model pria wanita β cr β cr flexible assessment system à academic motivation 0.235 2.692 0.222 2.591 academic motivation à self-regulation 0.369 4.342 –0.352 4.317 flexible assessment system à self-regulation 0.102 1.206 0.165 1.999 academic motivation à performance 0.280 2.953 0.051 0.569 self-regulation à performance 0.104 1.113 0.422 4.689 gfi = 0.993 chi-square = 4.841 df = 2 multigroup sem constrained model pria wanita β cr β cr flexible assessment system à academic motivation 0.240 3.714 0.213 3.714 academic motivation à self-regulation 0.351 6.119 0.368 6.119 flexible assessment system à self-regulation 0.140 2.274 0.130 2.274 academic motivation à performance 0.131 2.249 0.163 2.249 self-regulation à performance 0.257 4.316 0.305 4.316 gfi = 0.983 chi-square = 11.130 df = 7 flexible assessment system gender selfregulation academic performance academic motivation s s s s s ns fig. 1. relationship model among research variables 169 business, management and education, 2016, 14(2): 153–178 furthermore, the researchers conducted further analysis of gender differences in academic motivation, self-regulation, flexible assessment system, and academic performance. the respondents of this study consisted of 161 males and 165 females. tests carried out using independent sample t test. the results are presented table 5. table 5. test results gender differences independent samples test levene’s test for equality of variances t-test for equality of means f sig. t df sig. (2-tail ed) mean diff. std. error diff. 95% confidence interval of the difference lower upper acad. motv. equal variances assumed .036 .851 –.876 324 .382 –.04257 .04858 –.13813 .05300 equal variances not assumed –.877 323.902 .381 –.04257 .04855 –.13808 .05295 flex. ass. equal variances assumed .464 .496 –1.867 324 .063 –.08906 .04771 –.18291 .00479 equal variances not assumed –1.865 320.826 .063 –.08906 .04775 –.18300 .00488 self– reg. equal variances assumed .348 .555 –2.362 324 .019 –.11380 .04818 –.20858 –.01902 equal variances not assumed –2.360 322.072 .019 –.11380 .04821 –.20864 –.01895 perfm. equal variances assumed .412 .522 –.017 324 .987 –.00070 .04242 –.08416 .08276 equal variances not assumed –.017 321.966 .987 –.00070 .04245 –.08422 .08282 170 d. w. ariani. why do i study? the mediating effect of motivation and self-regulation on student performance based on test results using independent sample t test it appears that there was no difference between males and females in academic motivation and self-regulation in learning (hypothesis 8 was not supported). in addition, perception of males and females in flexible assessment system was no different. academic performance between males and females was also no difference. in other words, there was no gender difference among students in yogyakarta as student city in indonesia on academic motivation, self-regulation in learning, academic performance, and their perceptions of flexible assessment system. 5. discussion previous research has shown that motivated students were the key to success in the classroom (pajares 2001; velayutham, aldrige 2013). with these motivations, the students’ academic achievement will be increased through the increasing students’ attendance in the classroom, participation actively in class, ask and explain his opinion, doing the task of individuals or groups, and add time to study. the results of this study present that both academic motivation and self-regulation affect performance. this is consistent with previous studies (hong, o’neil 2001; nonis, hudson 2006; kanfer et al. 2010; barrows et al. 2013; pintrich, de groot 1990). according to pintrich (2000), many previous studies have examined the relationship between self-regulation, motivation, and performance and the results also showed the same thing. the results of this study indicated those students’ academic motivation influence positively learning strategies and academic performance. this is consistent with the research result of vansteenkiste et al. (2005) and the research results of sobral (2004). this study also presented that the motivation encourage students doing for self-regulation in accordance with the results of pintrichs’ research (2004). from the review of the research results conducted by pintrich (2003) concluded that students are more motivated academically will show higher self-regulation in learning. in general, students who have self-regulation were likely to have a high academic performance (pintrich 2003). academic motivation is seen as an important factor that encouraged individuals to be bound in self-regulation (wolters, hussain 2015). the relationship between students’ academic motivation and students’ academic performance have been studied regularly in the literature (ames 1992; green et al. 2006; peklaj et al. 2006; colquitt et al. 2000). motivation indeed been recorded in education as the variables that affect academic performance through the study effort as a mediator (vansteenkiste et al. 2005). research results of kusurkar et al. (2010) showed that motivation correlates significantly with good learning strategies and good learning effort. meanwhile, flexible assessment system did not have direct effect on academic performance. flexible assessment system was a system or method of assessment. according smimou and dahl (2011), assessment methods determine how well students have performed in class based on various measures as determined by the teacher on the education system. in this study, flexible assessment system affected academic perfor171 business, management and education, 2016, 14(2): 153–178 mance through academic motivation and self-regulation. this was consistent with the research results of pintrich (2000) and the research results of boekaerts and corno (2005) which stated that self-regulation may mediate the relationship between individual and contextual factors influencing the student achievement or academic performance. flexible assessment system did not directly affect the students’ academic performance. this system actually affected the students’ motivation and students’ learning strategies. this means that flexible assessment system affected academic performance through academic motivation and self-regulation. self-regulation is the ability of individuals to control their behavior to achieve the goal. the results of this study indicated that self-regulation affects performance. the results of this study were consistent with the research results of velayutham et al. (2012) which stated that self-regulation in learning are important factors that affect the results of the learning process and determinant of students’ academic success. the researchers acknowledged that learning in school involves the cognitive processes or simple information exchange (pintrich et al. 1993). the variables which are affect learning for example personal choice, individual needs, and motivational beliefs (pintrich, de groot 1990). researchers generally make the motivation as core of learning research. motivation will encourage the students to be active, to control, to set goals, and doing self-regulation (pintrich 2004). students must actively do the learning activities in order to achieve better academic performance. motivation also encourages self-regulation to control, monitor, and regulate various aspects. self-regulation is done by determining the objectives, criteria, and standard assumptions. this is what will encourage individuals achieve goals. the results of this study are consistent with the research results of zimmerman (2002). zimmerman’s (2002) self-regulated learning theory emphasizes the role of motivation in achieving and maintaining students’ selfregulation in learning. this result was consistent with the results research of pintrich (2004) which states that self-regulation is a mediator between the personal characteristics which in this case is the academic motivation and contextual which in this case is the flexible assessment system. students who have self-regulation will have higher academic achievement (velayutham et al. 2012; dunn et al. 2012; cleary, zimmerman 2004). furthermore, the linkage of students in the learning process depends on students’ self-efficacy beliefs, the perception of the ability to do the work and the results obtained. other variable in the self-regulation is the effort. students can arrange their effort will be able to learn better than students who are not able to regulate their effort (pintrich 2003). self-regulation is an effortful process that can encourage student achievement. the results of this study indicated that self-regulation is influenced by academic motivation. this was consistent with the research results of wolters and hussain (2015) which stated that academic motivation is a factor that encourages individuals to be bound in self-regulation. the results of this study are also in line with the research results of pintrich and de groot (1990), which showed a strong relationship between motivation and self-regulation. 172 d. w. ariani. why do i study? the mediating effect of motivation and self-regulation on student performance the results of this study indicated that there is no difference between men and women in the relationship model proposed in this study. this means that students’ academic motivation, self-regulation, academic performance, and perception of flexible assessment system between male and female are not different. the results of this study also indicated that there was no statistically significant mean difference among academic motivation, self-regulated learning, academic performance, and perception of flexible assessment system with respect to gender. the results of this study provide empirical support for the theoretical relationship between cognitive evaluation theories and selfregulated learning strategies in the context of the classroom. 6. conclusions psychologists claim that when people experience a sense of fit between the various important aspects of themselves and environmental aspects, the results or positive and adaptive responses will occur (rodriguez et al. 2013). in the academic achievement domain, fit between students’ academic motivation, self-regulation, and the learning environment associated with students’ academic performance. the results of this study indicate that academic motivation and self-regulation are powerful influence on academic performance. learning environment which is in this study shown as a flexible assessment system affects academic performance through academic motivation and selfregulation. the findings of this study highlighted the importance of self-regulation and academic motivation in improving academic performance. this study found that gender had not an impact on the motivation and learning strategies used by undergraduate program on students of economics at private university in yogyakarta. based on the results of this study, it can not be recommended that females should be treated differently in courses in comparison to males and vice versa. although this article provides empirical support for the proposed model trough seven hypotheses were supported, overcoming the potential limitation of this study provides guidance for further research. one limitation to the present study is the self-report nature of all variables. the use of self-report to assess academic motivation and selfregulation may limit to students’ subjective perception. the shared variance inherent in this method suggests that the relations found here may be overstated and bounced beta. another limitation is the difficulty in making a causal statement or conclusion without longitudinal analysis. this study used cross sectional data that can not be used for examining mediating model. future research that assessed the flexible system, academic motivation, self-regulation, and academic performance using other valid method should provide useful insights. the third limitation is the use small amounts of data led to this study can not be generalized even for the same research setting. further research should be able to use the data in larger quantities. one of the strengths of my study is that we used structural equation modelling approach and have found a well-fitting model for the relationship between flexible assess173 business, management and education, 2016, 14(2): 153–178 ment system, academic motivation, self-regulation, and academic performance. despite these limitations, the 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https://doi.org/10.1207/s15430421tip4102_2 https://doi.org/10.3102/0002831207312909 https://doi.org/10.3102/00028312029003663 https://doi.org/10.3102/00028312023004614 https://doi.org/10.1037/0022-0663.82.1.51 copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(1): 1–24 doi:10.3846/bme.2015.266 the influence of technology transfers on the development of innovations in the process industry of croatia (istrian county case) marinko škare1, sanja biberić2 faculty of economics and tourism, “dr. mijo mirkovic”, juraj dobrila university of pula, p. preradovica 1/1, 52 100 pula, croatia e-mail: 1mskare@unipu.hr (corresponding author); 2sanja.biberic@unipu.hr received 05 february 2015; accepted 20 may 2015 abstract. this paper studies the influence of technology transfers on the development of innovations in the process industry in croatia (istrian county case). the technological regime identifies characteristics of the learning processes, sources of knowledge and the nature of knowledge bases linked to the innovative process in the company happening as part of production activities. the research supports schumpeter’s standpoint in his theory of creative destruction. when a new and more efficient design for the production of a commodity is created, the enterprise that first starts using the new design conquer a part of its competitors’ market. the competition reacts either by introducing the same design or one even newer or completely loses the market, as this is the case in the process industry in croatia. keywords: technology transfer, innovations, intellectual property, technological regimes, schumpeter’s theory of creative destruction, processing industry. jel classification: l24, o14, l60, o00. 1. introduction the notion of “creative destruction” linked to schumpeter describes the paradoxical situation where the pacing of innovations in an economy is proportional to the pacing by which economic subjects of the same economy decline. schumpeter differentiates innovations in the general sense from entrepreneurial innovations. the entrepreneur gives contributions to innovations not only by using other’s innovations, but also by introducing new ways of production, new products and new forms of organisation. these innovations demand the same level of knowledge and courage as the sole innovation process in general. what makes schumpeter’s theory different from “standard” theories on enterprises’ behaviour is that he recognises heterogeneity between producers (rahim 2009). he considers the continuing moves in the composition of an enterprise’s population through entrances, exits, expansion and contraction essential in the development and http://dx.doi.org/10.3846/bme.2015.266 mailto:mskare@unipu.hr mailto:sanja.biberic@unipu.hr 2 m. škare, s. biberić. the influence of technology transfers on the development of innovations in... creation of new processes, products and markets. thus, the relocation of resources from less productive process units to more productive production units is made easier (schumpeter 1951). the concept of technological regimes describes the technological environment in which the enterprise functions. nelson and winter (1982) give a model of endogenous technological changes as the key source of productivity growth. the technological regime identifies characteristics of the learning process, sources of knowledge and the nature of knowledge bases linked to the innovative process of the enterprise happening in the group of production activities. two technological regimes are described in the literature (carreira, teixeira 2003). the “entrepreneurial” one makes the innovative entrance easier while the “routine” one facilitates innovations of those indigenous to industry (winter 1984). a low and high level of technological possibility can be distinctive to both regimes (breschi et al. 2000). the process industry has, along with the sector of financial mediation, real estate business, rentals and business services, the largest share in the structure of the gross domestic product (gdp). that also holds for the total employment and total export with process industry as strategic growth determinant. the purpose of this paper is to research and understand the significance of technology transfers in the process industry and how to stimulate innovations within it. particularly, this paper identifies major factors of innovation in the process industry and explains how technology transfers limitations affects innovation. authors rationalize the interdependence of technology transfer and development of innovations in the process industry starting from schumpeter’s theory of “creative destruction”. companies and capitalism are evolution systems and process growing and developing or declining – if not creatively destructive – by the logic of evolution and natural selection (nicholas 2003; diamond 2004, 2006). key factor in growth and development is the institutionalization and technological advance. through constant destruction of the old (organization, production process, product) and an innovative creation of a new and better in terms of competition (aghion 2002). the research of the technology transfer influence on the development of innovations is based on the data obtained from the croatian chamber of economy and the financial agency. a questionnaire surveying business subjects in the process industry of the istrian county is also used. paper results show technology transfer is important in the formation of the industrial competition model in croatia. the paper is structured as follows: introduction offers a view on the importance of the technology transfers and innovations for growth theories. in the section two an overview of the growth models is presented and in section three technological regimes, innovation and the transfer of technology dynamics explained. section four offers an insight into the developmental characteristics of the croatian processing industry. data and methodology of the paper is presented in section five. paper empirical analysis and results are summarized in section six and conclusion in section seven. 3 business, management and education, 2015, 13(1): 1–24 2. growth models based on research and development endogenous growth models follow the former finding that growth mainly depends on technological changes. from the literature review, a number of basic models of endogenous growth can be abstracted. these are models based on externalia, models based on research and development and ak models (grossman 1996). this chapter offers a short outline of models based on research and development, which is closely linked to the underlying purpose of the conducted research, namely the influence of technology transfers on the development of innovations. building upon some schumpeter’s ideas (1942), the first model of sustainable development was developed by romer (1990), followed by grossman and helpman (1990, 1991) and aghion and howitt (1992). schumpeter (1942) thinks that research and development bring economic growth, and what stimulates them is the conviction that extra profit will be secured. while in perfect competition conditions enterprises may freely use innovations, and there is no stimulus for research and development, this stimulus is ensured on monopolistic markets. these models are often called neo-schumpeter because of the origin of the main ideas at the base of this group of models. table 1 represents their systematic overview. table 1. overview of the fundamental groups of growth models based on research and development (source: authors according to grossman 1996) neo-schumpeterian growth models schumpeter (1942) uzawa (1965) judd (1985) 1990 romer (1990); grossman and helpman (1990) 1991 grossman and helpman (1991) 1993 aghion and howitt (1992) judd developed the first dynamic model of general balance that explicitly involves the activities of research and development, as well as the monopolistic profits justifying former investments, in 1985. however, in this model innovations show a decreasing contribution and the economy shown by judd cannot effectuate a sustainable growth. firms can create new products by investing a fixed quantity of resources into innovations, and each company can protect its innovation by a patent that offers the exclusive right of sale for a particular limited period. the problem of this model comes out of the fact that innovators appear after that period had lower profits because faced with the competition in the search for work. in the end, their profit is insufficient to cover the expenses invested in the research and development of the patent. romer (1990) thinks that judd missed understanding that technology is a non-competitive and partly exclusive good. a detailed overview of growth models can be found in helpman (1992) and grossman and helpman (1994) where monopolistic profits motivate innovations and growth 4 m. škare, s. biberić. the influence of technology transfers on the development of innovations in... is based on the innovative activity. investments into innovation projects do not have the characteristics of gradually declining incomes. thus, the productivity of new investments within innovative activity does not decrease, enabling a constant sustainable growth. the growth rate depends on the quantity of funds intended for the innovation activity, i.e. research and development. it also depends on new technologies share in the private sector (i.e. the level of monopolistic power) and on the time horizon of the investor. grossman and helpman (1990, 1991) discuss the implication of the international market, in general while rivera-batiz and romer (1991) give a warning that global integrations can offer additional stimulus to the industry. romer builds his 1990 model on three fundamental assumptions: – technological changes are at the core of economic growth, – technological changes are mostly caused by purposeful actions undertaken by individuals reacting to market stimuli and finally, – technology differs from other economic goods according to its characteristics. this assumption is directly followed by the conclusion that equilibrium is not possible in conditions of perfect competition, but a monopolistic competition has to exist. namely, if all inputs would be paid as the border product, the enterprise would encounter losses coming out of the additional expenses linked to former investments in research and development of a new product. fig. 1. the structure of romer’s model (1990) based on research and development (source: valdés 1999) 5 business, management and education, 2015, 13(1): 1–24 in the completely simplified romer’s model (1990) there are four basic factors (fig. 1): physical capital, labour, human capital and technology. economy, then, has three sectors: a research sector using human capital and the existing level of accumulated knowledge (technology) to produce new knowledge. more precisely, this sector produces “new designs” for the production of intermediary capital goods. the second, sector for the production of intermediary capital goods, uses new designs coming from the research sector along with the earlier created products from the final sector (which has not been spent, but saved) with the aim of producing different new intermediary capital goods. the sector of final goods uses labour, human capital and intermediary capital goods to produce end consumer goods. the product may be produced for consumption or cutting down expenses (see reinhart, rogoff 2009). however, some authors (valdés 1999) have noticed the defectiveness of romer’s model. the research sector uses not only knowledge and human capital, but also labour, and that the sector of intermediary goods uses human capital and labour as consumptions, which has been left out in this model. the analysis of individual activity departments’ characteristics inside the process industry, the twenty-four of them (data from the financial agency for 2012) shows a significant dispersion of production to a relatively large number of activity departments in the process industry. the dispersion is understandable since many final products, very different in their purpose, are produced in the process industry. regarding the number of entrepreneurs (a total of 10,830 entrepreneurs), the largest part of them (16.2 percent or 1,750) produces finished metal products, except machines and equipment, followed by the production of food stuff (11.8 percent or 1,278). regarding the achieved total income, the production of food stuff has the largest share (17.7 percent or 30.8 billion hrk) followed by the production of coke and refined petroleum products (16.0 percent or 27.9 billion hrk). other departments, the 22 of them, have a share in the total income lower than 10 percent (from 0.5 percent in the other process industry to 7.3 percent in the production of finished metal products, except machines and equipment). with the difference of this model, in which the number of new designs is constantly increasing as the result of new research, new products can also replace the old ones. this characteristic of technological advancement was especially studied by grossman and helpman (1991) and aghion and howitt (1992). schumpeter’s idea of “creative destruction” is at the base of these models. when a new and more efficient design for the production of a good is created, the enterprise which first starts using this design will conquer a part of its competition market because it can offer a better good for the same price or the same good for a lower price. the competition reacts either by introducing the same design, or an even newer one, or they completely lose the market (gordon 2000; foster, kaplan 2001). according to these models, it is possible to improve a product for an endless number of times, while the new generation of goods always ensures more services per 6 m. škare, s. biberić. the influence of technology transfers on the development of innovations in... expenditure unit than the former generation. the race for the production of a product’s new generation includes expenditures for research and development while the winner keeps the monopolistic profit until a new innovation appears. models based on research and development has often been used to study the role of an economy’s openness. rivera-batiz and romer (1991) show that a balanced growth is faster in an integrated world than in the world of isolated countries, even in the case when there is no exchange of goods between the countries. in the world of relatively cheap communications, the general knowledge existing in one country is readily available by researchers in other countries (romer 2001), but there are also other ways in which openness encourages technological advancement. enterprises in open economies have thus the chance to sell their innovations on the world’s market and, anticipating a larger profit, invest in research and development more than enterprises selling only on the home market. besides, a part of the models based on research and development is directed toward the analysis of processes in which technologically less advanced countries imitate technological advancements in countries leading the technological advancement (grossman, helpman 1991; rosenberg 2000). 3. technological regimes, innovation and the transfer of technology the notion of technological regimes is linked to the technology that enterprises lean on when solving problems, thus giving the widely defined “way of doing things”. nelson and winter (1982) emphasize the concept of the cognitive nature regarding the conviction that something is achievable, or at least worth succeeding. the technological regime sets the boundaries of what can be achieved in activities of problem solving. this regime is linked to production activities and instructions (natural orbits – trajectories) that will possibly offer the solution. dosi (1982) develops the definition of the technological regime and the technological (or “natural”) trajectories. the technological regime can be determined taking into consideration some fundamental dimensions: 1. characteristics of the learning process are linked to problem solving activities in an enterprise; 2. the system of sources of knowledge, internal and external, relevant for solving problems; 3. the nature of the scientific and technological knowledge basis from which enterprises take solutions to a problem. according to carreira and teixeira (2003) there are two forms of technological regimes (entrepreneurial and routine). in the entrepreneurial regime a direct competition between innovative enterers and existing enterprises can be found and the industrial productivity growth is higher. a lower level of competition in the routine regime leads to a lower level of exploitation of the dominant technology potentials, thus leading to a lower industrial productivity growth. regimes are defined by the combination of certain factors like the level of technological opportunity for existing enterprises, the easiness of an enterprise’s approach to new technological regimes and the cumulativeness of learning. 7 business, management and education, 2015, 13(1): 1–24 the technological environment that facilitates the innovative activity of new (mostly small) enterprises improves the entrance of new companies in the industry. at the same time, technological conditions that facilitate the innovative activity of the existing (large enterprises) ones represent an obstacle to the entrance of new enterprises (audretsch, acs 1994). when the entry technological barriers are low, as in the case of the entrepreneurial regime, innovative entrepreneurs encourage less efficient enterprises to exit (acs, audretsch 1987, 1989). studies including indicators of the entrepreneurial regime presence in industry, with difference to the routine regime (determined by the innovative rate of small enterprises) have shown that technological regimes are important in understanding the relationship between innovation and entry (caves 1998; bartelsman et al. 2003). when the entry barriers are high, usual for the routine regime, the reallocation of the market share between existing enterprises is the largest source of productivity growth, despite irregularities in elements of an enterprise entry dynamics. moreover, other studies have applied more direct measures of technological possibilities than the innovative rate have shown a systematic connection between the regime and entry (bain 1956; orr 1974; van dijk 2000). utterback and suarez (1993) say that the entry of new enterprises is helped by a relatively huge role of academic researchers in industrial innovations, and hampered by the powerful scientific basis of knowledge in the process of innovation in the enterprise because this demands innovative activities to be performed in large r&d laboratories. the entry is also hampered by a high level of uncertainty caused by fast changes in the product specification. some researchers (cohen, levin 1989; kamien, schwartz 1982) deal with the analysis of the market structure with the aim of reaching an answer to the question: what are the conditions in which a new technology is being exploited through the foundation of new enterprises? for instance, scientists have studied the influence of the average enterprise size, disposability of capital, intensity of investment in research and development and the industrial concentration on the foundation of new enterprises (cohen, levin 1989; baldwin 1995; marsili 2000). however, it is stated that the lack of success in explaining variations among industries occurred because little attention was paid to technological regimes or systems of knowledge where the innovation happened (malerba, orsenigo 1997). the notion of “creative destruction” linked to schumpeter describes the paradoxical situation where the pacing of innovations in an economy is proportional to the pacing to which business subjects belonging to the same economy decline (mayhew 1980). schumpeter differentiates innovation in a general sense and an entrepreneurial innovation. according to schumpeter, an entrepreneur gives contribution to an innovation not only by using other’s innovations, but introducing new ways of production, new products and new forms of organisation. these innovations require the same level of knowledge and courage as the process of innovation, in general (schumpeter 1950). 8 m. škare, s. biberić. the influence of technology transfers on the development of innovations in... following schumpeter’s contribution, some authors emphasize that innovations could be a way for new enterprises to enter the market successfully. the innovative entry is treated as the main power carrying competition among enterprises (dosi et al. 1997). smaller enterprises have a higher rate of innovations per employee than bigger enterprises. innovation rates are lower, compared to larger competitors, in industries that are less innovative or have “substantial industrial” characteristics like high concentration, intensity of capital (christensen et al. 2004). when innovation rates are analysed, it is noticed that smaller enterprises’ innovation rates are not less dependent on the level of expenditures for research and innovation in the industry in question. small businesses entry rates are lowered by entry expenditures, but increased by human capital or working force which is consistent with the high entry rate in the innovation’s early phase of life and the declining rate with the detachment of the process. the role of innovation is especially important to entrepreneurs, and it implies the application of improved or new procedures, products, business services, and they can move from the application of less useful ideas to the complete change of business politics in the enterprise development (scherer 1965). innovations are given special attention in developed economies, while inventiveness of a company and its intellectual property are considered its most valuable resources or non-material property for which there are various methods of evaluation (cost, market, profit method, etc.), (christensen 2000). elaborating on the commercialisation and applicability of innovations, the transfer of technology is the key activity of a company founded on knowledge and innovations (baldwin 1995). the transfer of knowledge and technology is a process running among scientific institutions and economies, as well as among economic subjects on the home or foreign market. technology implies a product, process or service protected as intellectual property and has the potential of commercialisation. the transfer of technology is a dynamic, multi-phase, interdependent and complex process. figure 2 shows a diagram of the course of technology transfer. it displays a transfer of economically applicable technological solutions, knowledge and experiences from one economic subject (distributor of technology) to another (recipient of technology). as can be noticed in figure 2, the process of technology transfer from its beginning to the final point is an extremely complex and multi-phase process. innovative solutions can appear as a result of individual business subjects’ research and development or as a result of the scientific and innovative community’s work. companies not having own research and development departments can secure innovative solutions and technologies, and in the end products and services, only through the transfer of technology from the scientific and innovative community. significant contribution to the advancement of existing products and their characteristics can be also brought by the cooperation between the innovative community and economy. in the process of technology transfer, particular attention should be paid to the decision whether to protect intellectual property or not. the protection of intellectual 9 business, management and education, 2015, 13(1): 1–24 property is useful on the competition market, for the development of relationships with employees, consultants, customers and business partners and the acquisition of capital. in the creation of the company’s business plan, by which resources for reaching business goals and business politics are defined, it is necessary to define the commercial value of the intellectual property and its managing logistics, because intellectual property rights increase the company’s negotiating power. its efficient use creates the business image and along with other marketing tools (for example, advertising and other promotion activities) it represents the structure to recognize and promote its products and services. the process industry is a very complicated area of defining the way in which technology is transferred and innovations developed because of the dispersion of sub-activities enclosed in it, as well as because of the fact that it includes the production of final, but also intermediary products. there is a perfect competition in the sector of final products. however, this is not possible in the sector of intermediary products, because every producer in this area has a patent on the production of the intermediary capital product, either by investing into research and development and thus coming to the new design to be protected by patent or by buying the patent. regardless of the way the patent has been secured, the individual producer is the only one with the legal right to use the patent for the production of a relevant capital good, and is thus a monopolist in its production. in the research and development sector, where human capital and the existing level of knowledge are used, there is a perfect competition because of the following reason: every single enterprise uses the two mentioned factors to produce new designs. on the market there are individuals owning human capital and enterprises, which are in its demand. that is why the human capital market is characterized by fig. 2. diagram of the course of technology transfer (source: made by the author) 10 m. škare, s. biberić. the influence of technology transfers on the development of innovations in... a perfect competition. when an enterprise produces a new design, a large number of potential customers of the patent belonging to the sector of intermediary capital goods appear. this is the reason why the price of this sector’s product, i.e. the new design and human capital price, is determined by the actions of the perfect competition. 4. developmental characteristics of the croatian processing industry the croatian processing industry has lately been characterized by changes manifested in the increase of significance and volume of production in technologically intensive activities (i.e. in industries of a low or lower technological level). such changes express the need of undertaking activities to change the structure of the process industry of the republic of croatia in the direction of raising the competition and the ability to produce export products with a higher added value, having in mind that croatia is a small and open developing economy which has to export goods if it wants to achieve economic growth and prosperity. according to the data of the analysis of the processing industry made by the financial agency in 2008, running a business in the process industry in 2008 was happening in the complex and challenging business conditions. all economic trends in the republic of croatia, as well as certain segments of earning, are strongly influenced by activities in the process industry because many products from many other areas of activity are linked to them. on one hand, these products represent the entry raw materials in finalizing the process industry products while on the other; this activity final product is used in almost all earning areas, and even wider. according to its potential and reached financial results, the process industry is a very important activity in the croatian economy, and its 2008 shares are as follows: 12.1 per cent in the total number of entrepreneurs, 27.9 per cent in the number of employees, 24.6 per cent in the total income, 25.0 per cent in the total expenditures, 20.3 per cent in the periodical profit, 31.5 per cent in the periodical loss and 8.8 per cent in the consolidated financial result – net profit. the processing industry achieved financial results in 2008 were positive in its entirety because a positive consolidated financial result was achieved (periodical profit reduced by the periodical loss), but significantly lower than the previous year. in 2008 the processing industry recorded a 1.2 per cent increase in employment, an 8.5 per cent increase of total incomes, a 11.6 per cent increase of total expenditures, a 17.7 per cent loss in periodical profit, a 72.3 per cent increase in periodical losses and a 71.6 per cent loss in the final consolidated financial result. in 10,830 companies, in 2008 the processing industry entrepreneurs had 260,392 employees who reached a total income of 174.4 billion kunas, a total expenditure of 171.7 billion kunas, a periodical profit of 7.0 billion kunas, a periodical loss of 5.5 billion kunas and a consolidated financial result – net profit of 1.5 billion kunas. the net profit was significantly lower, even 71.6 per cent lower, than the achieved net profit in 2007. 11 business, management and education, 2015, 13(1): 1–24 table 2. basic financial results of the processing industry in 2008 (amounts in million kunas, shares in percentages, index 2007 = 100) (source: fina, analysis of the processing industry in 2008) description 2008 index of the processing industry index croatia shares in croatia number of entrepreneurs 10,830 98.0 107.3 12.1 number of employees 260,392 101.2 105.1 27.9 total income 174,398 108.5 110.6 24.6 total expenditure 171,710 111.6 112.4 25.0 profit before taxation 8,447 83.0 97.6 20.1 loss before taxation 5,759 176.7 160.00 32.4 value added tax 1,168 74.4 96.7 16.8 periodical profit (after taxation) 7,041 82.3 97.2 20.3 periodical loss (after taxation) 5,521 172.3 158.4 31.5 consolidated financial results – net profit 1,519 28.4 69.8 8.8 investments in new long-term property 12,136 116.7 105.7 19.0 average monthly net salary in hrk 4,409 106.9 106.3 -2.9 entrepreneurs and activities in the processing industry achieved 1.5 billion kunas of net profit in 2008, followed by 642 billion kunas of net loss in 2009, which in 2010 increased up to 1.9 billion kunas. in 2010, 234,356 employees in 11,686 entrepreneurs of the process industry achieved 152.9 billion kunas of total profit, 153.1 billion of total expenditures, 7.7 billion kunas of periodical profit, 9.6 billion kunas of periodical loss and 1.9 billion kunas of net loss. exporting brought 53.6 billion kunas profit, 31.6 billion kunas were paid for imported goods and the commercial surplus of 22.0 billion kunas was reached. compared to 2009, in 2010 the number of employees in the process industry dropped by 3.9 per cent, total incomes raised by 1.9 per cent, total expenditures raised by 2.1 per cent, periodical profit raised by 25.9 per cent, periodical losses raised by 41.7 per cent and net losses raised by 193.1 per cent. the raise of the commercial surplus of 30.5 per cent, as the result of an increase in export by 14.3 per cent and in import by 5.1 per cent, is a positive fact. a total of 11,133 entrepreneurs of the croatian process industry managed their business relatively successfully in the first nine months of 2012 and made a gross profit of 12.7 billion kunas. entrepreneurs of the processing industry in the structure of the croatian economy participate in the total business results of the entrepreneurs paying the value added tax with 12.0 per cent in the total number of entrepreneurs, 26.6 per cent 12 m. škare, s. biberić. the influence of technology transfers on the development of innovations in... in the total number of employees, 26.8 per cent in total incomes, 25.4 per cent in total expenditures and 50.6 per cent in the gross profit of the first nine months in 2012. entrepreneurs of this activity had 224,752 employees who made a total profit of 123 billion kunas, total expenditure of 110.3 billion kunas, 12.7 billion kunas of gross profit and set aside investment funds of 4.7 billion kunas. not all entrepreneurs in the process industry ran their business positively. of them all, 6,694 or 60.1 per cent from a total of 11,133 made a gross profit in the first nine months of 2012, while the rest, namely 4,439 or 39.9 per cent made gross losses. in the nine months of 2012, compared to the same period of 2011, entrepreneurs belonging to the croatian process industry increased the number of employees by 1.0 per cent, total incomes by 0.9 per cent, total expenditures by 0.8 per cent and decreased investments in long-term property by 2.2 per cent. because they had a bigger increase in incomes than in expenditures, their business efficiency, or economy, increased. on every hundred invested kunas they made an income of 111.5 kunas compared to the 111.39 kunas of the nine months in 2011. the reason of the 1.9 per cent increase in the gross profit is the increased business efficiency, i.e. economic quality. regarding the istrian county, in 2012 the croatian chamber of economy recorded 757 trading companies belonging to the process industry. the number of employees has been pretty stable in the last five years and it stands at about 10,000 employees. according to this index, industry employs about 31 per cent of all employees in the economy of the istrian county. the total income of the process industry of the istrian county achieved a growth of 9.3 per cent in 2008, then a loss of 5.8 per cent in 2009, then again a growth of 17.3 per cent in 2010, followed by a foundering of 16.5 per cent in 2011, and of 6.4 per cent (or 7.5 billion kunas) in 2012. in the period from 2008 to 2012 the industry registered a constant decrease in profit, and the fact that a loss in companies from the process industry is constantly growing in the mentioned period and doubled in relation to 2008 is also disturbing. based on the expressed financial results for 2012, the process industry participated by 35.6 per cent in the total profit and by 19.5 per cent in the total losses of the istrian economy. industrial investments, which were considerably falling up to 2010, have registered a light growth of 1 per cent in the last two years and in 2012 it amounted to 300 billion kunas. as regards the current solvency and indebtedness, the process industry has been on the average in the istrian county in the last five years. the current solvency coefficient ranges from 0.94 to 1.07, while the indebtedness ranges at about 0.60. in activities of the istrian process industry, the strongest is the markedly exportoriented shipbuilding industry that has successfully built technologically most sophisticated ships on its slipways in the last 150 years. it is followed by the production of other external clothes, other parts and requisites for motor vehicles, production of cement, other non-metal mineral products, other plastic products, cutting, shaping and dressing 13 business, management and education, 2015, 13(1): 1–24 stone, production and processing glass, production of paints and varnishes and other activities the export value of which was under 10 million usd in 2012. the process industry activities which participate in import with more than 10 million usd are the production of electrical power, other parts and requisites for motor vehicles, production of other external clothes and other non-metal mineral products, production of other plastic products, wavy paper and cardboard as well as packages made of paper and cardboard, steel pipes and requisites. 5. data and methodology the starting point for the empirical part of this paper are the data about business subjects of the industry sector of the croatian chamber of economy following its members’ state and needs, and in line with the national classification of activities. the 2007 classification is as follows: production of tobacco products (c12), production of textile fabrics (c13), production of clothes (c14), production of leather and similar products (c15), production of paper and paper products (c17), printing and multiplying recordings (c18), production of coke and refined petroleum products (c19), production of chemical substances and chemical products (c20), production of basic pharmaceutical products and pharmaceutical preparations (c21), production of rubber and plastic products (c22), production of other non-metal products (c23), production of metal (c24), production of finished metal products, except machines and equipment (c25), production of computers and electronic and optical products (c26), production of electric motors, generators, power transformers and appliances for the distribution and monitoring of electrical power (c27), production of machines and devices (c28), production of motor vehicles, trailers and semitrailers (c29), production of other means of transport (c30), other process industry (c32), repair and installation of machines and equipment (c33). the data obtained from the croatian chamber of economy consisted of the following: name of the company, headquarters, contact data (telephone, fax, e-mail address and web page), representative person, type of activity, size of the company and number of employees. according to the analysis of these data, out of the 350 business subjects belonging to the istrian county process industry, 322 of them are small enterprises, 21 of them are medium enterprises and seven of them are large enterprises (considering the total number of employees criterion). the research was conducted through an anonymous questionnaire created by google docs and sent by e-mail to 350 business subjects to be filled out. the multiple filling out of the questionnaire by the same business subject was disabled by a software restriction. the questionnaire consisted of 12 questions, 10 closed ended and two open ended questions. 14 m. škare, s. biberić. the influence of technology transfers on the development of innovations in... the open-ended questions regarded the development direction and the area of innovation coverage inside the process industry sector, the thematic areas of research and development inside a company, as well as the development of certain sector niches. the latter were used to obtain (detailed) individual information. closed ended questions were used for the needs of ranging and presence of certain elements. the research was conducted in july and august 2014 and the questionnaire was accessible only in that period. out of the 350 business subjects covered by the study, 117 of them answered the survey, which is a return of 33.43 per cent. 6. empirical results and analysis in the context of the research on the influence technology transfers have on the development of innovation in the istrian county process industry the first question regarded the definition of developmental needs among the questioned business subjects, and it can be read in the answers (fig. 3) that the largest number of them, namely 72 of them, defined needs for investments as the most important developmental need, while technology was considered the most important developmental need by only 22 of them. human resources were the most relevant to 12, and needs for access to the market to 11 business subjects. fig. 3. developmental needs of the questioned business subjects (source: authors’ calculation) figure 4 shows developmental components that business subjects mostly have at their disposal. it can be seen that out of the 117 business subjects who answered the questionnaire, 72 of them possess adequate technology. the idea that technology is important in the formation of the industrial competition model is at the core of sutton’s “bounds” approach. this approach states that technologies differing in productivity in research and development activities and in the volume of different technological trajectories studied by companies can implicate different profit possibilities for the “potential” enterer who innovates and thus forms different market configurations in industries (sutton 1998). 15 business, management and education, 2015, 13(1): 1–24 fig. 4. developmental components of the questioned business subjects (source: authors’ calculation) further on, figure 4 shows that after technology, for 20 business subjects capital is the second developmental component at their disposal, eight of them have managerial components, seven of them have the organisational know-how, six of them have marketing components and four of them have the approach to international markets. the last is in favour of the fact that the istrian process industry products are insufficiently placed on international markets. the task of business subjects linked to the third question was to evaluate on a 1–5 scale (likert’s scale) how much the untimely implementation of innovations influenced the “withdrawal” or decline in sales of their product on the market. figure 5 shows that most of the questioned subjects think that the untimely implementation of innovations partly influenced or either influenced or not the “withdrawal” or decline in sales of their products on the market. fig. 5. the influence of untimely implementation of innovations on the placement of products on the international market (source: authors’ calculation) 16 m. škare, s. biberić. the influence of technology transfers on the development of innovations in... in favour of what has been said are the relationships between the industrial competition and technology illustrated through different approaches. gort and klepper (1982) state that an enterprise’s demography, including entries and exits, is formed by the nature of technologies linked to the various phases of a new product’s life cycle. according to this interpretation, innovation is what brings the current of new enterprises’ entry in the early phases of a new product development, as long as a dominant design is founded (utterback, suarez 1993). a competitive and efficient industrial sector depends primarily on the ability of the industry to adapt continually and react to environment changes, directing its activities to structural reforms and adaptations to the demands of the market. after that (fig. 6) information was gathered about the cooperation between questioned business subjects from the process industry and the scientific-research institutions and about the plans for future cooperation. the first question regarded the establishment of a certain cooperation model with the scientific-research institutions (common research, transfer of technology and similar). of all the questioned subjects, 76.07 percent answered that they did not establish any cooperation with the scientific-research sector, while 23.93 percent of them established cooperation in the form of conducting common researches, technical support, etc. the second closely linked question regarded a future intention to conduct common researches with the scientific-research sector, where 63.25 percent of the business subjects expressed an intention of cooperation with the scientific community, while 36.75 percent of them said they did not have plans for cooperation. fig. 6. the cooperation of questioned business subjects with the scientific-research sector (source: authors’ calculation) results from figure 6 about the cooperation with the scientific-research institutions, or the 76.07% of questioned subjects not cooperating with the scientific-research institutions are not positive at all. cooperating with the scientific community companies could ensure a quality and cheap development and research, the application of new 17 business, management and education, 2015, 13(1): 1–24 technologies and innovations, the estimation and procedure for the protection of intellectual property, and finally the creation of a comparative precedence on the market. on the other hand, 63.25% of the questioned subjects who intend to cooperate with the scientific community in the future lead us to the possible existence of the problem of a subjects’ insufficient level of information about a potential cooperation. the next, sixth question in the questionnaire (fig. 7) was about the forms of technology transfers used by questioned business subjects and it showed that 45.30% of them used technical help and technical cooperation, followed by licenses (19.66%), and consultancy on the third place (11.97%). other ways of technology transfers (leasing, franchising, know-how, joint investments) were used by a considerably smaller number of questioned subjects. fig. 7. forms of technology transfers used by questioned business subjects (source: authors’ calculation) the research next shows (fig. 8) factors considered by the questioned business subjects as most important in the influence on technology transfers. the offered answers were subjects and distributors of technology, the technology market, contract, training, rules and culture. distributors and recipients of technology were considered as the most important in the process of technology transfer by 52.99% of the subjects, while 14.53% of them found the technology market as the most important in the transfer of technology. fig. 8. factors of influence on technology transfer expressed by the questioned subjects (source: authors’ calculation) 18 m. škare, s. biberić. the influence of technology transfers on the development of innovations in... regarding subjects – distributors and recipients of technology – the advantage of the former is that they exploit their own research results through third persons thus achieving significant financial effects, while the benefit of the latter is manifested in the fact that without engaging their own financial means they gain already finished technological solutions and by their acquisition they develop their own product line thus increasing their business success and competitiveness on the market. the eighth question of the questionnaire (fig. 9) regarded the evaluation of the transfer of technology success. the possible answers were: by profitability of the project/product, by the correct conduction of the project/placement of the project, by the correct use of technology, by safety in running business and by the constant accessibility of information. to 51 of the questioned business subjects the most important thing contributing to the transfer of technology was the profitability of the project/product, followed by the correct conduction of the project/placement of the project, considered most important by 27 subjects. the correct use of technology was the most important to 19 subjects, safety in running business to 16 questioned subjects while the constant accessibility of information was on the first place for only four subjects. fig. 9. evaluating the success of technology transfer (source: authors’ calculation) linked to the profitability of the project/product considered as key to the success of the technology transfer process by the largest number of business subjects, during studying romer’s model (1990) shown earlier, valdes (1999) says that each research laboratory tries to produce a new product which can be patented and which will ensure incomes in the form of monopolist profit, at the same time contributing to the level of general knowledge. information, which cannot be patented or kept secret, is in question. that is why general knowledge is a common good serving as the cost amount for further innovation. in line with that, valdes thinks that the cost of innovations has to fall quickly 19 business, management and education, 2015, 13(1): 1–24 to keep pace with the decline of monopolistic profits gained by the new product. thus, a linear connection between the productivity of the research and development sector and the cumulative number of new patents is necessary. the solution to this model, among others, drives to the conclusion that the incomes of the enterprise involved in the production of the new design have to be higher of the border expenditure in order for the expenses of interests on the starting investment of the new product to be covered. in the following question (fig. 10) the business subjects were asked to define the most serious obstacles to the transfer of technologies. the following answers were offered: not knowing the economic resources, lack of information about the contributions of science to the economy, lack of transparency of the knowledge market and lack of financial funds. out of the 117 questioned business subjects, 77 of them recognized the lack of financial funds as the most serious obstacle to the development of technology transfers. lack of transparency was seen as the most serious problem by 23 of them, not knowing economic resources by 11, and lack of information was considered as the most serious obstacle to the process of technology transfer by six business subjects. fig. 10. obstacles to the development of technology transfers (source: authors’ calculation) concerning the lack of transparency of the knowledge market it is possible to trace the problem in high transactional expenses occurring during purchase, for example, the import of finished solutions (license agreement) instead of turning to home scientific institutions already having developed solutions of a possible technological use or a patent registered at the state intellectual property office. the last closed-ended question (fig. 11) of the questionnaire regarded the familiarity with the work of technological centers. the obtained result was beating, because even 75 business subjects were not familiar with the work of technological centers, while 42 of them answered the question affirmatively. the result is beating because the aims of technological centers are more successful transfers of technological processes and the 20 m. škare, s. biberić. the influence of technology transfers on the development of innovations in... increase of competitive efficiency of the home industry, as well as the technological development as the lever and precondition for raising the level of competitiveness and life standard. fig. 11. the business subjects’ familiarity with the work of business centres (source: authors’ calculation) some researchers (christensen, raynor 2003) have shown that the best success can be achieved by the cooperation of enterprises (innovators) and networks specialised for technology transfers. the combination of knowledge about the technology owned by the distributor and knowledge about the international market mechanisms and the network of contacts owned by the supporting institutions form an optimal cooperation that, along with the effort made, brings results. the internal channels of technology supply and demand and the organisation of business meetings can serve as main tools for the purpose. 7. conclusions the croatian process industry is in need of a technological restoration to diminish the gap between the demand and supply of products of a higher level of technological complexity. because of the negative effects which could emerge from limiting the import of goods, the industrial policy measures should be directed toward the increase of competitiveness on the international market through the improvement of the home entrepreneurs’ technological basis, encouraging research and development, educating employees and attracting direct foreign investments directed toward sectors of a higher level of technological complexity. in the upcoming period it is necessary to define new measures which will initiate a new industrial impetus, while the most important trends in the following medium-term period should be the continuation of the process of structural adaptations and reforms in the economy system, repositioning traditional industries and activities with a move toward products of a higher added value, increasing the competitiveness of the process 21 business, management and education, 2015, 13(1): 1–24 industry, an increased care about the protection of the environment and sustainable development by the implementation of acquired directives, investment in technology and innovations, making faster adaptations to the market needs, flexibility on the working force market. the economic restructuring should be in the spotlight of the croatian industrial policy with the aim of making economic activities more dynamic and increasing productivity in all economic sectors, from the process industry to agriculture and tourism. according to schumpeter’s theory of “creative destruction”, new, entrepreneur innovations push out the old ones provoking waves of “creative destruction”. the mere process of creative destruction that includes the destruction of both old technologies and enterprises is the cause of progress and increase in competitiveness, as well as standard of life. the cooperation with the scientific community realises a comparative precedence by a quality, faster and cheaper research and development while the use of new technologies and innovations solves the existing technological problems. such cooperation could lead to a “win-win” combination. the benefit for the scientific community is 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287–320. http://dx.doi.org/10.1016/0167-2681(84)90004-0 valdés, b. 1999. economic growth: theory, empirics and policy. cheltenham, united kingdom: edward elgar. marinko škare. professor of economics, economic research journal editor in chief, member of editorial board of several international journals, department economics and tourism “dr. mijo mirković” in pula, juraj dobrila university of pula. he served as assistant dean for education, faculty of economics &tourism, pula, assistant dean for international cooperation, faculty of economics & tourism, pula, main and team researcher on several scientific projects, former dean of the faculty of economics & tourism, pula and former vice president for international cooperation, juraj dobrila university of pula. he has published several books and a large number of scientific papers on the subject of economic growth, welfare economics and poverty, human capital, economics in transition, economic philosophy and monetary economics. he is a member of the american economic association, royal economic society, economic history association, economic history society, and association for comparative economic studies. research interests: macroeconometric modeling, poverty, welfare, inequality, growth models, economic philosophy, history of economics, technology and innovation, economic development. biberić sanja, the faculty of economics and tourism “dr. mijo mirković”, juraj dobrila university of pula. ph. student, postgraduate doctoral study of “new economy” (theme: establishing a model of economic diplomacy to increase the competitiveness of the croatian economy). project assistant at international cooperation office on juraj dobrila university, tasked for international projects financed from eu funds. joined the university team after working for the local governance – city of pula, department of finance and general administration. bachelor degree in economics, field of tourism, the faculty of economics and tourism “dr. mijo mirković” (2010). master of economics, field of tourism and development (2012). phd student (2013). research visits to vilnius mykolas romeris university (2013) – capacity building and transmission of best practice in the field of project management, planning, preparing, realization and procedures, university of the basque country (2014) – focusing on gaining and improving skills, and knowledge necessary to deal with international eu projects for further development of the resources and internal services. research interests: technology and innovation, economic development and public policies, eu funds in financing regional and local development, governance models, economic diplomacy. http://dx.doi.org/10.1016/0167-2681(84)90004-0 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: kristina.astike@vilniustech.lt business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 2: 224–236 https://doi.org/10.3846/bmee.2022.17308 does cultural economics affect country’s competitiveness? kristina astikė vilnius gediminas technical university, vilnius, lithuania received 04 april 2022; accepted 17 july 2022 abstract. purpose  – the purpose of the article is to identify factors of cultural economics and examine their impact on countries’ competitiveness. research methodology – in this study, the following factors have been determined to affect the competitiveness of the european union countries: cultural employment by age (18–65), general government expenditure on cultural services, households expenditure on cultural goods, persons working as creative and performing artists, authors, journalists and linguists engaged in individual activity and employment. panel data, which are processed with the gretl software, are used for the study. findings  – the results revealed that all the distinguished factors affect the competitiveness of the european union countries; however, general government expenditure by function has the most significant effect. research limitations  – the article analyses all countries of the european union except romania because there is a lack of statistical data on this country, which interferes with the research. practical implications  – as cultural economics is linked to both the public and private sectors, the revenue and the products it generates undoubtedly contribute to the country’s economic development and, hence, competitiveness. originality/value  – cultural economics is an interdisciplinary field of scientific research described and analysed by various authors as the interaction of human-made activities with new technologies, various artistic forms, knowledge, and creativity. consequently, cultural economics has received more and more attention. however, the factors of cultural economics and their impact on a country’s competitiveness level is a fragmentarily examined topic which shows its originality. keywords: cultural economics, competitiveness, global competitiveness index (gci) european union countries, panel regression. jel classification: b41, c22, e00, q01. introduction there is no general concept of cultural economics, and this is due to several reasons. first of all, the fact that cultural economics is one of the newest branches of economics, another reason is that cultural economics is often confused with a term close to it – creative economics; http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2022.17308 business, management and economics engineering, 2022, 20(2): 224–236 225 however, this branch of economics covers an even wider field of research, which also includes the cultural economics itself (ljunggren, 2016). the links between competitiveness and cultural economics have not been studied much, which is the novelty of this study. therefore, the article examines the influence of cultural economics’ factors on the competitiveness of countries. often, culture in economics is assessed and studied through copyrights, various patents, licenses, trademarks, etc., as a factor promoting their development (karimzadi, 2019). this is because many authors in their studies identify cultural economics as a field of scientific research that combines new technologies and knowledge with creativity, from which various new products and services are born that need to be patented (barrado-timón et al., 2020). however, it is suggested to look at cultural economics even more broadly, including such factors as employees of the cultural sector, income spent by households on the consumption of cultural products, public sector spending on culture, etc. the statistical data of these cultural economics’ factors are more challenging to access. however, they are relevant and show a wider field of cultural economics research, which allows us to speak more broadly about the influence of culture on the competitiveness of countries. since cultural economics is related to both the public and private sectors, the income it generates and the products it creates undoubtedly contribute to the country’s economic development and competitiveness. competitiveness is the ability of a country to achieve and maintain a competitive advantage and achieve economic and social development. in the global market, competitiveness is related to a country’s ability to respond to urgent changes in the market and maintain its position in it (reese et al., 2022). various authors often emphasise that the most typical sources of competitive advantage are innovation, technology, quality and price (universit & bontempo, 2022; knapčíková, 2021). since competitiveness is a complex phenomenon showing the country’s economic and social well-being and prestige, its increase must be in the country’s national interest. increasing competitiveness directly through different factors such as free legally-regulated market, developed infrastructure, increased level of education and others, attracts investments to the country, promotes tourism and increases the country’s attractiveness (aiginger, 2021). the aforementioned advantages of competitiveness are closely related to understanding cultural economics. therefore, according to the scientists šandrk nukić and načinović braje (2022), it can be assumed that the factors of cultural economics affect the competitiveness of countries. thus, this study aims at determining whether selected cultural economics’ factors influence the competitiveness of european union (eu) countries. although cultural economics is a new branch of the economics, a number of studies have already been devoted to it in the scientific literature (wiśniewska et al., 2020; houkamau & sibley, 2019), but little attention is paid to the influence of the factors of cultural economics on the competitiveness of countries. the article analyses all the eu countries except for romania because too little statistical data is provided about this country, which does not allow the research to be carried out, which is also the limitation of this article. the statistical data of the countries used in the study are taken from the eurostat database and the global competitiveness report from 2011–2020. the theoretical part of the article presents the links between culture and competitiveness. factors of cultural economics are also presented, the impact of which will be studied on the competitiveness of the eu countries. the research part of the article describes the research method used and the calculations based on it. the article ends with conclusions and suggestions. 226 k. astikė. does cultural economics affect country’s competitiveness? 1. theoretical background before naming cultural economics’ factors that can influence the competitiveness of the eu countries, it is essential to discuss how competitiveness is measured. since competitiveness is a complex phenomenon that cannot be measured by several parameters, the scientific community does not have a common approach to it among authors. for this reason, this study uses a specific global competitiveness index (gci) and analyses how it is influenced by selected factors of cultural economics. factors of cultural economics that are not included in the gci are selected. this index is prepared annually by the world economic forum and published in the global competitiveness report (gcr). the purpose of the index is to provide a comprehensive picture of a country’s national competitiveness. it is important to mention that the gci calculation methodology has changed since 2018 (dudáš & cibuľa, 2018). since the data used in this study are from 2011 to 2020, two data matrices were compiled for 2011–2017 and 2018–2020. culture is often the main factor explaining the development of countries. each country has its own expressed culture and factors of cultural economics that emphasise the country’s individuality. it is the individuality of the country that is associated with competitiveness and its development in the country (daubaraite-radikiene & startiene, 2022). mihaela et al. (2011) and koltsova et al. (2020) show in their research that the links between culture and competitiveness lead to good economic results. because these links create a favourable business environment that encourages innovation and investment, through which labour productivity, employment growth and the income of the population are increased. table 1 shows the connections of cultural economics to the country’s competitiveness presented by researchers in the latest academic literature. as can be seen from table  1, the links between culture and competitiveness in the research are examined from various aspects. the importance of cultural products in terms of their development for different consumer markets is examined (koltsova et al., 2020). table 1. theoretical interfaces between cultural economics and the country’s competitiveness (source: compiled by the author) authors and year theoretical interfaces between cultural economics and the country’s competitiveness koltsova et al. (2020) examines the links between culture as an economic branch and the country’s competitiveness, through the distribution and consumption of cultural products. x. li (2020) the link between the cultural and tourism infrastructure of a specific city (shanghai) and competitiveness is analysed. ali (2021) the links between competitiveness and organisational culture of lecturers and researchers working in universities and higher education institutions are investigated. šandrk nukić and načinović braje (2022) the links between cultural institutions and competitiveness are investigated. kowal and paliwoda-pękosz (2017), song et al. (2019) the links between competitiveness and culture through the development of employees’ knowledge are examined. x. li (2020) the links between cultural sector employees and competitiveness are analysed. business, management and economics engineering, 2022, 20(2): 224–236 227 it analyses the functions of cultural institutions as institutions performing the formation of public consciousness, helping the state solve problems related to improving the country’s image (šandrk nukić & načinović braje, 2022; song et al., 2019). culture is considered a driving force of urban economic growth, and the development of its infrastructure strengthens the competitive position of cities (j. li, 2020). great attention is also paid to the issues of organisational culture in companies and the importance of the qualification of cultural workers. because the development of skills and knowledge is critical to remaining competitive in the labour market. for this reason, those organisations and companies that consider upgrading the qualifications of their employees are more attractive among the employees. šandrk nukić and načinović braje (2022) analyses the support of cultural institutions and how competitive they are compared to other sectors. such a wide field of cultural research is due to the breadth of the concept of culture itself, which allows the analysis of culture from various aspects. it can be seen from the presented connections that culture is closely related to competitiveness, which means that it is also closely related to cultural economics. therefore, analysing these connections in more detail is relevant, as such studies are lacking. despite the abundance of connections presented in table  1, little attention is paid to the influence of cultural factors on the competitiveness of countries in research. these links between culture and competitiveness highlighted in table 1 are closely related to the economics, so it is possible to form cultural economics’ factors from the links highlighted and examine the influence of these factors on countries’ competitiveness. upon the summary of the links between culture and competitiveness, it can be assumed that the field of culture is an integral part of the country’s economics, the importance of which is constantly increasing in current conditions and influences the competitiveness of countries. examples of economic history show that cultural diversity is one of the main elements influencing the successful development of countries. cultural diversity in the country brings together many different skills, talents and experiences, creating a favourable environment for developing new ideas. customs and ethical values shape society’s openness to innovation – one of the main factors influencing competitiveness (bacsci, 2018). each country has a different level of development depending on the country’s history, legal system, geographical features, natural conditions and cultural characteristics. the cultural characteristics form the factors of the cultural economics, the analysis of which allows to study the influence of the factors of cultural economics on the competitiveness of countries. below the article presents the factors of cultural economics that are singled out in the scientific literature as having the most significant influence on the competitiveness of countries. cultural employment by age (18–65) cultural industries have grown faster than traditional industries over the past few decades. they create jobs and positively affect employment rates (de santana ribeiro et al., 2020). since the employment problem is one of the most critical social problems for the countries’ economies, increasing employment allows us to assume that economic growth will also accelerate, as people’s incomes will increase, while decreasing employment will cause the opposite reaction – a slowdown in economic growth. therefore, employment research is given 228 k. astikė. does cultural economics affect country’s competitiveness? significant attention, and cultural sector workers are a part of it. arseneault and roulin (2021) analyse statistical data that reflect what percentage of the total workforce comprises workers in the cultural sector. in both the old and the new gci calculation methodology, the labour market is included in the calculation of gci as one of the 12 areas. however, if one looks at the gcr methodology of who enters the labour market, there are no cultural workers in it. according to verhun et al. (2020), this is because cultural workers are too small a part of the labour market, and for this reason, they are not included separately. this further substantiates why it is relevant to analyse the statistical data on cultural workers and see if they influence gci, especially since (grillitsch & tavassoli, 2018; sanchez salgado, 2018) consider cultural workers as an important part of the labour market. valverde-moreno et al. (2021) claim that the cultural sector significantly contributes to increasing the employment of disabled people and women, which increases the cultural level of the country’s labour market and makes the country socially responsible. bilan et al. (2019) claim that one of the main areas of work of cultural workers is the creation of innovations and their implementation, which also attracts new investments. thus, from the statements made, it can be seen that cultural workers contribute to the formation of work culture, increasing social employment and creating innovations, all of which make the country more attractive and competitive in the global labour market. persons working as creative and performing artists, authors, journalists and linguists engaged in individual activity and employment continuing with the employment issue, another essential aspect is employees working under individual activity contracts. the statistical data on the number of such employees per thousand inhabitants are analysed. the more modern, open to innovation and freer the society, the more attractive it is to workers working under individual activity agreements. often, such workers are various creators, artists, performers, and journalists belonging to the sector of cultural workers. this indicator is also not analysed in the gci methodology, although it is an important factor in increasing the country’s attractiveness. baluku et al. (2019) show in their study that individual activity contracts are an important factor in reducing unemployment, especially among young people. this is because this type of employment contract allows the employee to regulate the scope of their work, work from anywhere in the world and easily combine work with studies (minola et al., 2016). individual activity contracts also contribute to promoting an entrepreneurial culture in the country, as new businesses often start their operations based on individual activity contracts (autio et al., 2013). therefore, the issue of promoting entrepreneurship should be a priority of national policy, as it directly affects the country’s attractiveness for investment and job creation in the country. therefore, it is relevant to examine the statistical data of cultural workers working under individual activity contracts because after assessing whether this factor affects the country’s competitiveness, it is possible to find solutions that would contribute to the development of competitiveness in the country. business, management and economics engineering, 2022, 20(2): 224–236 229 general government expenditure on cultural services another factor of the cultural economics analysed in the article is government spending on the cultural sector. statistical data on how many euros are spent on the cultural sector per year are analysed. fiscal and budget policy is a frequent object of study by researchers. it is common to analyse what factors determine government spending on one or the other sectors. however, a less analysed question is whether government spending dedicated to the cultural sector affects the country’s competitiveness (ercolano & romano, 2018). getzner (2015) emphasises that spending on culture helps preserve and restore heritage and develop the city’s cultural infrastructure. public expenditure allocated to the development of theatres, museums or exhibition halls contributes to the education of the population and the development of tourism (werck et al., 2008). all these aspects imply that spending on the cultural sector should influence the country’s competitiveness. however, this factor is not analysed in any gci methodology, so it is included in this study. households expenditure on cultural goods consumption of cultural products is an important component of household consumption. consumer preferences are often unpredictable in the markets for cultural goods and services. in most cases, such consumption decisions are determined by the buyer’s personality, education, interests and, of course, income (kaimann & cox, 2021). the statistical data of this factor analysed are what part of the annual consumer index comprises household expenditures on cultural products. this factor is also not analysed in any gci methodology, so it is essential to include it. household spending on entertainment, including cultural services, is often estimated by authors to be 15–20 per cent of consumer income (hamlin, 2019). these are high costs, and it is relevant to analyse how they influence gci. thus, it can be seen from the cultural economics’ factors discussed that the selected factors are not included in either the old or the new gci calculation methodology. however, according to various authors mentioned in the study, the factors chosen are significant, contributing to the creation of innovations and the development of the country’s attractiveness, so it is relevant to study their influence on the eu gci. 2. methodology data this study uses data reflecting cultural factors that can influence the competitiveness of countries, such as cultural employment by age (18–65), persons working as creative and performing artists, authors, journalists and linguists engaged in an individual activity and employment, general government expenditure on cultural services, households expenditure on cultural goods. abbreviated names of all variables that are used in the analysis are presented in table 2. 230 k. astikė. does cultural economics affect country’s competitiveness? table 2. variables of the research (source: compiled by the author) full variable name short variable name measurement unit independent variables cultural employment by age (16–65) cultempt thousand persons persons working as creative and performing artists, authors, journalists and linguists engaged in individual activity and employment arts thousand persons general government expenditure on cultural services genexp million euro households expenditure on cultural goods houcult annual average index as can be seen from table 2, not only the abbreviation, which is used in the analysis but also the information about the units of measurement is indicated next to each independent variable. model development the main goal of this study is to identify the factors of cultural economics and to investigate whether the selected factors influence the competitiveness of eu countries. in order to clarify this, a panel regression was performed. since gci was chosen as the dependent variable in the study, and its calculation methodology from 2018 has changed, and this may influence the results of the study, two data matrices were compiled and used in the study. one for 2011–2017, the other for 2018–2020. for this reason, the study presents a panel regression for two different periods. this allows not only to see whether the selected factors of cultural economics influence the competitiveness of the eu countries but also to compare whether the gci of the eu countries is affected by the changes in the calculation of the gci. thus, our proposed model allows calculating the influence of selected cultural economics factors on gci of eu countries. the model is represented in eq. (1): 1 2 3 4cultemp arts genexp houcultit it it it it itgci u= α +β +β +β +β + , (1) where: gci – dependent variable; t – time; β1…. β4 – coefficients; uit – is the error term. cointegration test in order to find out if there is a long-run relationship between the series, two series are cointegrated when they have common trends, i.e. they are in some sense similar. in order to test this, the pedroni cointegration test is employed. actually, the pedroni test is one of the most popular while working with panel data. the null hypothesis states that there is no cointegration; the alternative – “all panels are cointegrated”. the results of the cointegration test are provided in table 3. table 3. pedroni cointegration test for 2011–2017 model (source: compiled by the author) statistic p-value modified phillips-perron test 8.447 0.000 phillips-perron test –25.498 0.000 augmented dickey-fuller test –49.209 0.000 business, management and economics engineering, 2022, 20(2): 224–236 231 according to the results presented in table 3, it could be concluded that there is an existence of a robust long-run relationship between gci and explanatory variables. table 4. pedroni cointegration test for 2018–2020 model (source: compiled by the author) statistic p-value modified phillips-perron test 9.257 0.000 phillips-perron test 7.486 0.000 augmented dickey-fuller test –11.153 0.000 the same results, that all three variables have a strong relationship with gci, were also obtained in the other analysed period. the results are shown in table 4. panel unit root test in order to check the stationarity of the panels, the unit root test is employed. the current study employs levin-lin-chu unit-root tests. the null hypothesis of the unit root test is “panels contain unit roots”; the alternative is “panels are stationary”. the results of the test are provided in table 5. table 5. levin-lin-chu panel unit root test for model 2011–2017 (source: compiled by the author) variable adjusted t without time trend p-value gci –2.225 0.013 cultemp –8.673 0.000 arts –69.117 0.000 genexp –1.742 0.041 houcult –3.272 0.000 based on the results provided in table 5, panels are stationary. table 6. levin-lin-chu panel unit root test for model 2018–2020 (source: compiled by the author) variable adjusted t without time trend p-value gci –3.259 0.000 cultemp –7.259 0.005 arts –55.249 0.000 genexp –1.987 0.020 houcult –3.490 0.000 based on the results in table 6, it can also be seen that all the data are stationary. 232 k. astikė. does cultural economics affect country’s competitiveness? 3. results and discussion after performing the panel regression, it can be seen that the coefficient of the houcult factor is negative, as the p value is more than 0.05, which means that this factor is statistically insignificant, so it will be removed from further analysis. the results of the panel regression analysis are shown in table 7. table 7. 2011–2017 panel regression analysis (source: compiled by the author) coefficient std. error t-ratio p-value const 4.047 1.719 2.354 0.020 cultemp 0.319 0.030 10.56 3.64e-020 arts 0.001 0.000 2.203 0.029 genexp 4.28706e-05 1.30909e-05 3.275 0.001 houcult –0.007 0.171 –0.404 0.687 due to the negative coefficient, after removing the houclt cultural economics’ factor from the calculations, the panel regression was repeated with the remaining three variables: cultemp, arts, genexp. the results of the panel regression analysis are shown in table 8. table 8. 2011–2017 panel regression analysis (source: compiled by the author) coefficient std. error t-ratio p-value const 3.325 0.108 30.91 2.96e-076 cultemp 0.326 0.027 11.88 9.93e-025 arts 0.001 0.000 2.342 0.020 genexp 4.38358e-05 1.20111e-05 3.650 0.000 as can be seen from table  8, the factor of genexp of cultural economics has the most significant influence on gci. the coefficient of this factor is the highest compared to the other two factors. such a result is likely because general government expenditure on cultural services is an essential factor in the development of culture. authors studying fiscal and budget policy agree with this. rius-ulldemolins et al. (2019), who study cultural policy, claim that state government expenditure on cultural services is important for the preservation of cultural heritage, the cultivation of the country’s traditions and history, and all of this contributes to the attractiveness of the country. getzner (2015) emphasises that spending on culture helps preserve and restore heritage and develop the city’s cultural infrastructure. werck et al. (2008) argue that the state expenditures allocated to the development of theatres, museums, and exhibition halls contribute to the education of the population and the development of tourism; such investments make the country more attractive and competitive compared to other countries. next, a panel regression was performed for the 2018–2020 data, the results of which are shown in table 9. business, management and economics engineering, 2022, 20(2): 224–236 233 table 9. 2018–2020 panel regression analysis (source: compiled by the author) coefficient std. error t-ratio p-value const 82.058 27.087 3.029 0.004 cultemp 4.233 0.719 5.891 3.04e-07 arts 0.017 0.010 1.677 0.099 genexp 0.000 0.000 1.851 0.070 houcult –0.275 0.261 –1.054 0.297 as can be seen from table  9, the cultural economics’ factor with a negative coefficient value has not changed; it is houcult, which further shows that this factor does not affect the gci of eu countries. after removing this houcult factor of cultural economics that does not influence the gci of the eu countries, a repeated panel regression was performed, the results of which are shown in table 10. table 10. 2018–2020 panel regression analysis (source: compiled by the author) coefficient std. error t-ratio p-value const 53.678 2.844 18.87 6.41e-025 cultemp 4.124 0.711 5.793 4.08e-07 arts 0.016 0.009 1.608 0.114 genexp 0.000 0.000 1.885 0.065 from the results indicated in table  10, it can be seen that compared to the results of 2011–2017, the factor with the highest coefficient has changed  – cultemp. the change in the most influential cultural economics’ factor in the gci of the eu countries could also be determined by the too-small sample of years. however, this is not an unexpected result because compared to the results of 2011–2017, this cultural economics’ factor of cultemp was the second most influencing gci of the eu countries. this is supported by other studies, which state that the cultural sector has grown faster than other sectors in europe over the past few decades, which contributes to the creation of new jobs and improves employment indicators (de santana ribeiro et al., 2020). it has also been noticed that the cultural sector employs employees with higher education, so the higher the percentage of people working in this sector, the more attractive the country is compared to other countries (arseneault & roulin, 2021). thus, it is evident that the mentioned aspects contribute to increasing the country’s competitiveness and justify the obtained results. conclusions although cultural economics is a new branch of economics, culture is often the main factor explaining the development of countries. each country has its own expressed culture and factors of cultural economics that show the country’s individuality. research by different authors shows that it is the individuality of the country that is connected to its competitiveness and 234 k. astikė. does cultural economics affect country’s competitiveness? its development in the country. therefore, in this study, the following cultural economics’ factors were singled out and analysed: cultural employment by age (18–65), general government expenditure on cultural services, households expenditure on cultural goods, and persons working as creative and performing artists, authors. in order to investigate whether selected factors of cultural economics influence the competitiveness of the eu countries, a model of factors of cultural economics was created. gci was chosen as the dependent variable in the study. its calculation methodology from 2018 changed, so two data matrices were constructed and used in the study. one for the 2011–2017 period, the other for 2018–2020. the results of the different tests performed showed a solid long-term relationship between the gci and selected factors of cultural economics in both periods. the obtained test results showed that all the data are stationary. the results of the panel regression analysis showed that households expenditure on cultural goods is statistically insignificant, so it was excluded from further research. the obtained results showed that the mentioned cultural economics’ factors contribute to increasing the competitiveness of the eu countries. thus, it is crucial to invest in the cultural sector and develop it because it contributes to increasing competitiveness, which affects the attractiveness of countries in global markets and new investments in countries. as a limitation of the study, the too-small number of cultural economics’ factors can be singled out. therefore, it is recommended for further research to expand the number of factors of cultural economics, which would even more accurately reflect the entire cultural sector and substantiate its importance for the competitiveness of eu countries. references aiginger, k. 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accepted 09 june 2018 abstract. cultural management as a complex process is constantly facing social/cultural challenges (policy shifts, creativity, interest coherence, the rise of technological capital, cultural emigration, etc.) that affect the growing need and importance for smartness in management. there is a lack of interdisciplinary research on smartness in the context of cultural management. the goal of this article is to ground smartness dimensions in cultural management in the context of changing the social/ cultural environment. strategy,  creative development,  harmonization of interests in the cultural sector,  empowered cultural sector parties, harmony of intellectual and technological capital as well as the culture of shared value creation are presented in this article as six smartness dimensions in cultural management (the management of cultural sector and the cultural policy implementation at the state level). the object of the work – smartness dimensions in cultural management. principal objectives: critically analyse a variety of concepts of cultural management; reveal the importance of smartness in cultural management in the context of changing social/cultural environment; explore the characteristics of smartness dimensions in cultural management. methods employed: critical literature analysis and meta-analysis. research conducted by authors of this article allowed to ground smartness dimensions as factors, possibly determining a more successful cultural management. keywords: smartness dimensions, cultural management, cultural sector. jel classification: z1, z18, d78, d73, h11, o3, o35, o38. introduction it would be difficult to start the analysis of cultural management (sometimes in english scientific literature expressed as culture management) without typically starting with an at least brief epistemological analysis of the term culture (jucevičius & pauliukevičiūtė, 2017; štreimikienė, 2016) (from the latin colere, to till). culture as “cultivation of the soul” (according to the classical roman  politician and philosopher marcus tullius cicero) now is business, management and education, 2018, 16(1): 108–120 109 understood differently. founder’s of cultural anthropology edward tylor’s 1871 work, “primitive culture”, provides the first formal definition of culture: “complex whole, which includes knowledge, beliefs, arts, morals, law, customs, and any other capabilities and habits acquired by a human as a member of society” (street, encyclopaedia britannica). raymond williams (whose work laid the foundations for the field of cultural studies) in his famous “keywords: a vocabulary of culture and society” has expressed that culture is one of two or three most complicated words in the english language (williams, 1977; mulcahy, 2006). culture can be seen as a process (pauliukevičiūtė, 2011; pauliukevičiūtė & raipa, 2014) of becoming educated/cultured, it can also be seen as the cultivation of intellectual and aesthetic sensibilities (williams, 1977; mulcahy, 2006). variety of concept culture meanings, links to other terms and interpretations of creativity, arts, beliefs, institutional climate, behaviour patterns and many more strengthens the general complexity of the definition (pauliukevičiūtė & raipa, 2011; pruskus, 2013). to sum up, three common directions of understanding culture can be seen from the scientific literature: predominant attitudes and behavior that characterize the functioning of a group or organization; intellectual and artistic activity and the works produced by it; a high degree of taste and refinement formed by aesthetic and intellectual training (donskis, 2009). in both political and managerial discourse, culture is commonly used and identified as the arts (kangas, 2008; mulcahy, 2006). authors of this article identify culture as a specific sector (domain/field) of arts, which is influenced by both: policy and management at the state level and require modern smart managerial decisions (pauliukevičiūtė & jucevičius, 2016). the scientific problem in this article is addressed with three fundamental questions and arguments. first, by trying to understand how smartness can be useful in the cultural sector management in general, the rhetoric question is asked: is cultural management changing according to changes in social/cultural environment and how can it be conceptualised from the state policy implementation level; second, is it possible to define challenges in cultural management context regarding the changing social/cultural environment and third, do changing cultural and social conditions (including the rise of creative economy, modernization of cultural management and other) require smartness competences in cultural sector system (can it be seen through six smartness dimensions). the new creative (still rational) type of management, smart management, in the cultural sector, could possibly be based on expression of smartness dimensions in cultural sector (pauliukevičiūtė & jucevičius,  2016; jucevičius & pauliukevičiūtė,  2017). the object of the research  – smartness dimensions in cultural management. the goal of this article is to ground smartness dimensions (strategics, creative development, harmonization of interests in the cultural sector, empowered cultural sector parties, harmony of intellectual and technological capital as well as the culture of shared value creation) in cultural management also considering the context of ever-changing social/cultural environment. objectives: critically analyse a variety of concepts of cultural management; reveal the importance of smartness in cultural management in the context of changing social/cultural environment; explore the characteristics of smartness dimensions in cultural management. methods of the research are critical literature analysis and meta-analysis. 110 a. pauliukevičiūtė, r. jucevičius. six smartness dimensions in cultural management ... 1. the spectrum of cultural management concepts there are plenty of cultural management concepts (jucevičius & pauliukevičiūtė, 2017) like there are different concepts of management and a numerous number of term culture explanations and interpretations. cultural management concept is often linked to the general management in the culture sector (pauliukevičiūtė & raipa, 2012), or arts management (basically understood as management of cultural institutions and/or organizations, practically using all management functions: planning, organising, implementing, monitoring). still, it is important to state, that cultural management is a broader term, it gives the ability to look at the cultural sector not from the narrow cultural organization’s internal environment perspective, but by using a more contextual view, paying a proper attention to the external environment of the field. cultural management in the culture sector (particularly identified as arts sector management at state, regional or city level) functions in the complex social system (johnson, 2009) and is a unique process, which can determine different ways of development according to national or international policy goals (regarding managing cultural differences (alperytė, 2010), debureaucratization of decisions (bučinskas, raipa, & pauliukevičiūtė, 2010), strategic decision making (cray & inglis, 2011), transnational cultural policymaking (dewey, 2008), cultural industries (hesmondhalgh & pratt, 2005), etc. the system of managerial decisions in cultural policy formation and implementation at the state level, cultural management, in the context of globalization and continues technologization (internet opportunities and threats, new technologies in cultural life and art forms, virtual realities, social networking, etc.), is changing continuously: shifting mostly from management based on long-term perspective planning and organizing to the seeking for faster and more rational results. this is effected by social behavioural changes in all lifestyles, ways of implementing policies (bučinskas et al., 2010), language importance in culture development (kairaitis, 2013), environment of creativity (baltrėnas, baltrėnaitė, & kačerauskas, 2015) industry concentrations (grodach, 2016), cultural emigration and etc. policy shifts (changes at national economic/social policy level), interest coherence, the rise of technological capital in general and knowledge economy (hay & kapitzke, 2009), multiculturalism and growing diversity of cultures, global environment – all of these circumstances provide new social/cultural challenges for cultural management worldwide. some theoreticians state that cultural citizenship should be seen as a particular way of improving cultural management (mercer, 2005; martin, 2009; pauliukevičiūtė & raipa, 2012). we could also predict that cultural citizenship, or the involvement of stakeholders in cultural management becomes crucial for the cultural system development. numerous authors agree that cultural management success in ever-changing environment at the state level depends on timeless managerial competencies, like: good knowledge about european (or international) and national cultural policies, knowledge in cultural history and/or arts, planning, organizing knowledge and skills, implementation tactics, decision monitoring, understanding of cultural sector technological, creative, social development aspects (for example, in the field of stakeholder interests analysis and shared value creation), strategic as such and etc. still, modern management competencies are also becoming more and more important. to sum up – there can be a lot off cultural managebusiness, management and education, 2018, 16(1): 108–120 111 ment concepts, the spectrum of its understanding variations differs according to the understanding of culture, but either the concept explains culture as a system, or a process, the cultural management can be seen from the state level perspective broader point of view as state management of the arts sector. 2. smartness in cultural management: meaning and importance in the context of changing social/cultural environment smartness (as a human intelligence quality and a human being characteristic) in management is seen in these contexts as a new concept (jucevičius & pauliukevičiūtė,  2017). as the xxi century is often named (in social sciences literature) as the new economy era (technological and innovation-driven), smartness is, firstly, basically understood from the technological perspective (jucevičienė & jucevičius, 2014; jucevičius, 2014). on the other hand, the smart way of behavior in management or the smartness as the specific quality of decision making and implementation by actively reacting to the ever-changing external and internal environmental by formulating and implementing right and most rational decisions faster and in time – is more often seen and understood as a very important social system quality, which can be identified only in specific situations according to the concrete environment (jucevičius & jucevičienė, 2017). it must be stated here, that, unfortunately, not so many scientific studies have pointed out the link between smartness as quality and the cultural sector management improvement, or the sector development progress (for better results, productivity of decision making, ethical vs. efficient decisions, etc.). smartness is not that type of quality which can be expressed and noticed all the time everywhere, still, it can add additional value to all functions of general management in any cultural context. due to the small number of smartness studies in management (albert & fetzer, 2005; jucevičius & jucevičienė, 2017), (this object of the research is still new in cultural management and lacks both: qualitative and quantitative research) (pauliukevičiūtė & jucevičius,  2016), there is still the need of a better conceptualization of smartness as a managerial competence. some rhetoric questions can be provided: how smartness can be identified in cultural management as a complex system (cilliers, 1998) and what smartness dimensions could be possibly expressed in cultural management? what would conceptual/ theoretical basis of smartness in cultural management allow providing a better ground for the quality and efficiency of management in this domain? smart development (jucevičius & jucevičienė, 2017), the smart social system (jucevičienė & jucevičius, 2014), smart city (albert & fetzer, 2005; jucevičius, 2014) and smart governance concepts are all related to each other and to smartness as the main quality, which unites unique managerial practices in all processes or systems. smart social system (qualities: networked, learning, collaborative, digital, innovative, intelligent, dynamic, sustainable, agile) is like a sort of idealistic type of a social system (identified concerning the positivistic perspective), and can include qualities like: being intelligent, knowledge-driven, digital, willing to learn, networked, innovative, agile, sustainable and socially responsible (jucevičienė & jucevičius, 2014; jucevičius, 2014) in the context of social systems (jucevičius & jucevičienė, 2017). smartness is defined as the ability to envisage the 112 a. pauliukevičiūtė, r. jucevičius. six smartness dimensions in cultural management ... critical indicators or their system, quickly and creatively react to their crucial factors (challenges, opportunities, trends or symptoms) in adjusting to this environment by taking adequate decisions as well as using it to pursue the goals. cultural systems (as social systems) may be considered as products of action, and as conditioning elements of further action (šlapkauskas, 2010). complex social systems (cultural systems) may be understood as self-regulating ones, or the ones which are regulated, in both cases, intelligent and knowledge-driven decisions become more important as the world continues to deal with the globalisation processes. a smart manager has to be very intelligent to know how to solve problems in a specific (including both policy and politics) cultural arena, marked by a diversity of cultures, influenced by social interactions/networks/ actions/changes and many more. a smart human being is not the absolute given, smartness becomes evident in the relationship of a human being with the physical and socio-cultural environment, action (barab & plucker, 2002 cited by jucevičienė & jucevičius, 2014). cultural and social changes, technological progress (defined as a system of very complicated processes covering all spheres of societal life and all possible directions of social, economic and technological development in the contemporary society in general (melnikas, 2014) is influencing management styles, tactics, goals, opens up new modern platform for the management action in physical and socio-cultural environment. every manager must understand the need of increasing knowledge in facing new socialcultural challenges by making most rational, suitable and right decisions faster. time management becomes more important. the speed of information sharing and decision making in a virtual environment has increased in every cultural social sphere of life (this is not only a factor, possibly helping organizations or states to increase productivity and efficiency). “managing fast” (especially in cultural sector) sometimes doesn’t help those, who seek to collect more data before choosing the right action, cultivate long discussions, instead of quick brainstorming, analyse different approaches, monitor context instead of acting quickly. both ways of behaviour in cultural management (fast or standard) are needed (it is still better do not hurry up, if priorities of acting are not clear, but always make the decision faster if the direction is understood. then it would be possible to name this type of action as a positive example of smartness in management. 3. characteristics of six smartness dimensions in cultural management smartness dimensions in cultural management (strategy, creative development, intelligent harmonization of interests in the cultural sector, empowered cultural sector parties, harmony of intellectual and technological capital, culture of shared value creation) (jucevičius & pauliukevičiūtė, 2017), their criteria/characteristics and elements (from social/cultural environment perspective are presented in table 1). all dimensions must be understood as equally important for the explaining of smartness in cultural management (pauliukevičiūtė & jucevičius, 2016), they were identified in the context of cultural sector social/cultural system (as smart social system), all together dimensions provide a broader view to the field and understanding of its challenges (elements from social/cultural environment perspective (see table  1) express areas of possible cultural sector challenges. criteria of strategics (first business, management and education, 2018, 16(1): 108–120 113 smartness dimension in cultural management, grounded by social system qualities: being intelligent, knowledge-driven, willing to learn, agile) include: understanding the subject of cultural policy that is being formed and implemented at the state level; strategic decision makers and implementation understanding about factors possibly determining cultural management; clear cultural policy orientation in cultural sector development strategic documents (štreimikienė, 2016); professional governance of cultural policy implementation (kangas, 2008; liutkus, 2010; mercer, 2005; mulcahy, 2006). a core quality of strategics is intelligence and agility. the strategy was always important in cultural management: by formulating and implementing decisions, identifying priorities, etc. a smart way of planning is linked to strategics as a modern competence needed not only in a narrow specific sphere but used more widely as a tool and good practice based on deep knowledge in the field, etc. (pauliukevičiūtė & jucevičius, 2016). creative development (grounded by social system qualities: innovative, dynamic, knowledge-driven) also is identified through four characteristics: cultural policy which is programming creativity (florida, 2002; grodach, 2016); distinctive (original) attitude in cultural policy at the state level; an entrepreneurial attitude in the development of the cultural sector; creative decisions in policy implementation jucevičius and pauliukevičiūtė (2017). sustainable, agile and networked qualities of smart social system are seen in dimension intelligent harmonization of interests in the cultural sector, criteria are: understanding stakeholder needs and interests; understanding the influence of interests groups on the cultural sector development; ability to involve different stakeholders in decision making; ability to harmonize stakeholder groups positions and interests (see table 1). empowered cultural sector parties dimension most important aspects include such smart social system qualities, like networked, learning, digital. four criteria of this dimension are: functional framework (system) of cultural sector development instrumentality; cultural sector development is managed competently; conditions are created for cultural sector specialists for their continuous study and improvement; the rational autonomy of cultural entities is ensured jucevičius and pauliukevičiūtė (2017). harmony of intellectual and technological capital as the smartness dimension in cultural management, grounded by digital, knowledge-driven and sustainable (smart social system qualities), can be expressed with these criteria: understanding about cultural sector intellectual resources (hay & kapitzke, 2009; manzaneque, ramírez, & diéguez-soto, 2017); understanding about cultural sector technological instrumentality (melnikas, 2014); the ability to digitalize intellectual and technological capital in cultural management; the ability to harmonize intellectual and technological capital according to knowledge, structural and technical potential aspects. last but not least, the sixth dimension culture of shared value creation must be grounded. four of its criteria: understanding the logic and importance of shared value creation (porter & kramer, 2011); decision-making is grounded by the development of a shared value; democratic cooperation culture is dominating; fast response to the change in internal and external circumstances which are important for shared value creation to be assured. the culture of shared value creation is based on smart social system qualities: dynamic, sustainable, innovative. 114 a. pauliukevičiūtė, r. jucevičius. six smartness dimensions in cultural management ... all six smartness dimensions in cultural management need a more deep analysis from the theoretical point of view (this can be an important direction for future studies and research in this field), every dimension has four criteria and every criterion (in another broader research of the authors of this article) is grounded by different indicators. by not trying to ground every characteristic with a specific argument (what would be needed for a further research in this field), we try to focus in this article more on general aspects of all dimensions and their characteristics. discussing the criteria of strategics, it is important to state, that those characteristics rely on the importance of understanding the field (from the subject level to the policy orientation). we see creative development as a way of innovatively, dynamically strengthen the cultural sector. in this case, the original new attitude or approach is needed. the cultural sector is rich with its sector parties, there are many different stakeholders, interested in results and perspectives of the cultural sector development at the state level. the criteria which underline the importance of stakeholders interests analysis are important for a today’s cultural manager, who at the state level is dealing with different political parties and there interest groups in every day manage. cultural or social emigration, traditions versus novelty, long-term policy versus short-term decisions, a proper regulation of cultural goods, cultural programmes and projects implementation strategics (pauliukevičiūtė & jucevičius, 2016) – these all spheres could be seen as difficult ones for a manager acting in a traditional sometimes more bureaucratic way. cultural and social changes and challenges are generally changing traditions in social-cultural life. managers are influenced by those changes. every new experience or knowledge from a philosophical point of view in a long perspective changes the way a manager is understanding the cultural life. to develop a conceptual model of how management works and/or could work in cultural sector according to changing social and cultural environment, what functions it includes, what problems it can solve, regarding to which cultural sector understanding it can link  – this is still a rhetoric question, important future goal for theoreticians and management practitioners. by adding the concept smartness (in cultural management) instead of sustainable, creative or any other term, in a specific way conceptualising the unique type of management in cultural sector, we believe that only with the meaning and value smartness concept and smartness dimensions (with all criteria) can provide and using smartness in practice, challenges in cultural management could be possibly solved out in a more efficient way, because the smart way of thinking and acting includes all already above mentioned smart social system qualities (jucevičius & pauliukevičiūtė, 2017). the need for a new, dynamic evolutionary model of cultural management is rising (this is especially seen in eastern european countries, lithuania is no exception) (bučinskas et al., 2010; dewey, 2008; jucevičius & pauliukevičiūtė, 2017). the dependency of decisions made in cultural sector management is linked to the timely knowledge and modern education in both: culture (behavioural studies, arts, subcultures, creative industries and the new economy spheres) and management history, theory and practice (management discourse, functions, strategies, tools, decisions, etc.). new ways of management are important not only in the arts sector organizations internal environment but at the state cultural sector level (external/ business, management and education, 2018, 16(1): 108–120 115 internal environment from the state demographic perspective). external environment as the environment of social/cultural changes must also be well identified. in this article, we do not analyse (due to the publication extend limits) the regional, international or global context of cultural management (but this doesn’t mean it is not understood by us as equally important). we argue, that the external social/cultural environment of the state as its main cultural conditions, cultural policy factors, relate not only to the economy of the state but also to its cultural traditions and core national strategies. table  1. smartness dimensions in cultural management: their criteria/characteristics and elements (from social/cultural environment perspective) (source: compiled by the authors) smartness dimension criteria/characteristics (through which dimensions are expressed) elements (from social/cultural environment perspective) strategics understanding the subject of cultural policy that is being formed and implemented at the state level subject of cultural policy (bučinskas et al., 2010; cilliers, 1998; hesmondhalgh & pratt, 2005; kangas, 2008; pruskus, 2013) strategic decision makers and implementors understanding about factors possibly determining cultural management knowledge of decision makers and implementers in strategics (doz & kosonen, 2014; melnikas, 2015) clear cultural policy orientation in cultural sector development strategic documents cultural policy orientation, priorities (liutkus, 2010; mulcahy, 2006) professional governance of cultural policy implementation professional governance (bovaird & loffler, 2003; mcnabb, 2009) creative development cultural policy which is programming creativity creativity in policy conceptualization and visions (florida, 2002; grodach, 2016; hesmondhalgh & pratt, 2005) distinctive (original) attitude in cultural policy at the state level attitude originality (albert & fetzer, 2005; baltrėnas et al., 2015; jucevičius & pauliukevičiūtė, 2017; lee, 2016; mcnabb, 2009; osborne, 2006) an entrepreneurial attitude in the development of the cultural sector entrepreneurial way of thinking and acting (pauliukevičiūtė & jucevičius, 2016) creative decisions in policy implementation creative decisions (martin, 2009; reimeris, 2016; staniulytė, 2017) intelligent harmonization of interests in the cultural sector understanding stakeholder needs and interests stakeholder needs and interests (martin, 2009; mercer, 2005) understanding the influence of interests groups on the cultural sector development type of interests groups influence (pauliukevičiūtė & raipa, 2011; pollitt & bouckaert, 2011) ability to involve different stakeholders in decision making stakeholders involvement (thibodeau & rüling, 2015; woronkowicz, 2018) ability to harmonize stakeholder groups positions and interests harmonization of interests (martin, 2009; mercer, 2005) 116 a. pauliukevičiūtė, r. jucevičius. six smartness dimensions in cultural management ... smartness dimension criteria/characteristics (through which dimensions are expressed) elements (from social/cultural environment perspective) empowered cultural sector parties functional framework (system) of cultural sector development instrumentality instrumentality in cultural sector development (grodach, 2016; lee, 2016; pauliukevičiūtė, 2011) cultural sector development is managed competently competencies in managing the development (albert & fetzer, 2005; alperytė, 2010; bovaird & loffler, 2003) conditions are created for cultural sector specialists for their continuous study and improvement cultural sector specialists improvement system (liutkus, 2010; pauliukevičiūtė & raipa, 2011) the rational autonomy of cultural entities is ensured autonomy of sector parties (jucevičius & pauliukevičiūtė, 2017) harmony of intellectual and technological capital understanding about cultural sector intellectual resources intellectual resources (florida, 2002; hay & kapitzke, 2009; manzaneque et al., 2017) understanding about cultural sector technological instrumentality technological resources (melnikas, 2014) the ability to digitalize intellectual and technological capital in cultural management digitalization (osborne, 2006; pauliukevičiūtė & jucevičius, 2016; pollitt & bouckaert, 2011) the ability to harmonize intellectual and technological capital according to knowledge, structural and technical potential aspects harmonization of resources (manzaneque et al., 2017) culture of shared value creation understanding the logic and importance of shared value creation core idea of shared value creation (porter & kramer, 2011) decision-making is grounded by the development of a shared value decision-making for a better-shared value (jucevičius, 2014; jucevičius & pauliukevičiūtė, 2017) democratic cooperation culture is dominating democratic cooperation (albert & fetzer, 2005; bovaird & loffler, 2003; cray & inglis, 2011) fast response to the change in internal and external circumstances which are important for shared value creation to be assured ability to respond quickly and make decisions fast (jucevičius & jucevičienė, 2017; jucevičius & pauliukevičiūtė, 2017) the development of high technology sectors, increase in efficiency of national/regional economic systems could be defined as a critical precondition for successful cultural development (melnikas, 2014). cultural management is in the need of smartness and smart decisions because the development of the cultural sector is like the ever-changing process in which new challenges arise regarding changes in policies and civil society, also the global and national economy. six smartness dimensions (see table  1) (24 criteria) fully show the need and importance of smartness in cultural management. end of table 1 business, management and education, 2018, 16(1): 108–120 117 conclusions cultural management in the culture sector (particularly identified as arts sector management at state, regional or city level) functions in the complex social system. cultural sector or cultural environment could also be seen and interpreted as the sphere of the cultural system, in which a variety of concept culture meanings influence the cultural management understanding. in both, political and managerial discourse, culture is commonly used and identified as the arts. analysing the cultural management from the state level perspective it is important to clarify the cultural management concept, know its history, understand and agree on its main field of action (in other words directions of management). smartness in cultural management is important and significant in the context of changing the social/cultural environment. every manager must understand the need for increasing knowledge in facing new social-cultural challenges. cultural systems may be understood as self-regulating ones, or the ones which are regulated, in both cases, intelligent and knowledge-driven decisions become more important as the world continues to deal with the globalisation processes. a smart manager has to be intelligent, have the ability to envisage the critical indicators or their system, quickly and creatively react to their crucial factors (challenges, opportunities, trends or symptoms) in adjusting to this environment by taking adequate decisions as well as using it to pursue the goals. smartness in cultural management is still new and modern theoretical framework with the potential in many future directions for further research. all smartness dimensions in cultural management must be understood as equally important for the explaining of smartness in cultural management (strategy, creative development, intelligent harmonization of interests in the cultural sector, empowered cultural sector parties, harmony of intellectual and technological capital, culture of shared value creation). cultural and social changes and challenges are generally changing traditions in social-cultural life. managers are influenced by those changes. cultural management is in the need of smartness and smart decisions because the development of the cultural sector is like the ever-changing process in which new challenges arise regarding changes in policies and civil society, etc. such elements (possible cultural social environment challenges) from social/cultural environment perspective can be identified: subject of cultural policy; knowledge of decision makers and implementers in strategy; cultural policy orientation, priorities; professional governance; creativity in policy conceptualization and visions; attitude originality; entrepreneurial way of thinking and acting; creative decisions; stakeholder needs and interests; type of interests groups influence; stakeholders involvement; harmonization of interests; instrumentality in cultural sector development; competencies in managing development; cultural sector specialists improvement system; the autonomy of sector parties; intellectual and technological resources; digitalization and harmonization of resources; core idea of shared value creation; decision-making for a better shared value; democratic cooperation and the ability to respond quickly and make decisions fast. all of them contribute to a better understanding of the need of smartness in cultural management. 118 a. pauliukevičiūtė, r. jucevičius. six smartness dimensions in cultural management ... references albert, s. r., & fetzer, r. c. 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(2018). community engagement and cultural building projects. the journal of arts management, law, and society, 48(1), 32-43. https://doi.org/10.1080/10632921.2017.1366962 copyright © 2016 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. application of tecnomatix plant simulation for modeling production and logistics processes julia siderska department of business informatics and logistics, faculty of management, bialystok university of technology, tarasiuka 2, 16-001 bialystok, poland e-mail: j.siderska@pb.edu.pl received 03 october 2015; accepted 05 may 2016 abstract. the main objective of the article was to present the possibilities and examples of using tecnomatix plant simulation (by siemens) to simulate the production and logistics processes. this tool allows to simulate discrete events and create digital models of logistic systems (e.g. production), optimize the operation of production plants, production lines, as well as individual logistics processes. the review of implementations of tecnomatix plant simulation for modeling processes in production engineering and logistics was conducted and a few selected examples of simulations were presented. the author’s future studies are going to focus on simulation of production and logistic processes and their optimization with the use of genetic algorithms and artificial neural networks. keywords: computer simulation, tecnomatix plant simulation, modeling, digital model. jel classification: c61, l23. 1. introduction in the contemporary, dynamic changing world, access to production data in real life is necessary to properly plan, simulate and supervise production. companies operating in different sectors of the economy are more and more commonly using it solutions to optimize logistic systems by improving the handling of materials and performance parameters. computer simulations are the techniques and tools most frequently used in broadly understood production engineering, logistics or industrial engineering. along with the technological progress in the field of information technology and very rapid enhancing computing power, increases also the popularity of methods based on computer simulation (see smith 2003). moreover, to follow the technological and economic changes and dynamic developing global trends, the companies must react in a cost-effective, efficient and fast way (see gola, konczal 2013). to remain competitive, companies must design manufacturing systems that not only produce high-quality b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(1): 64–73 doi:10.3846/bme.2016.316 mailto:j.siderska@pb.edu.pl http://dx.doi.org/10.3846/bme.2016.316 65 business, management and education, 2016, 14(1): 64–73 products at low costs, but also allow for rapid response to market changes and consumer needs (see gola, świc 2012). identifying errors in the planning phase is much cheaper for a company than doing that after the start-up of a project or its full implementation. performing a computer simulation makes it possible to assess whether the project was designed properly and is being carried out as it should. simulation provides a comprehensive perception of the studied process or product, allows to conduct multi-criteria analysis, and to test many scenarios. that is why computer systems are becoming necessary tools which support the design and improvement of business processes. the terms “simulation” and “model” are often used in the work, hence it is necessary to provide their definitions. quoting bangsow (see bangsow 2010) simulation is a representation of a real system including its dynamic processes in a digital model, allowing the transfer of conclusions to the reality. in a broader meaning, simulation means the preparation, implementation and evaluation of specific experiments with the use of a simulation model. model is a simplified copy of a planned or real system, including its processes, in another system (see bangsow 2010). regarding simulation, it is recommended to apply the following methodology presented at the figure 1 (see bangsow 2010): 11 2 3 4 5 6 7 • to formulate the problem • to test the possibilities of performing a simulation • to formulate the objectives • to gather and analyze data • to perform the simulation • to analyze and interpret the results • to draw up documentation fig. 1. the methodology of conducting simulation (source: own study on the basis of bangsow 2010) thus, computer simulations should be understood as methods which allow to test the planned solutions in a digital, virtual model before they are implemented in the real world. the article discusses the possible applications of tecnomatix plant simulation software to simulate production processes and emphasizes the advantages of applying such simulations. it also introduces some integrated optimization tools and advanced analytic tools to optimize the throughput and operation of production plants and individual logistics processes and minimize work-in-process. 66 j. siderska. application of tecnomatix plant simulation for modeling production and logistics processes tecnomatix plant simulation is an object-oriented 3d program used to simulate discrete events, which allows to quickly and intuitively create realistic, digital logistic systems (e.g. production) and thus test the properties of the systems and optimize their performance. the application is manufactured by the german company siemens plm software, which is the leading global supplier of software for plm (product lifecycle management) and mom (manufacturing operations management). the solutions provided by siemens as part of smart innovation portfolio help production companies optimize digital enterprises and implement innovations. digital models make it possible to perform experiments and test “what if” scenarios without disturbing the work of production systems or, in the case of the planning process, long before their assembly. preliminary definition of the libraries of factory and logistic facilities makes it possible to create simulation models in an interactive way (see siemens 2016). advanced analytic tools, such as bottleneck analysis, statistics and charts, can be used to evaluate different production scenarios. the results ensure information necessary for quickly making good decisions at early stages of production planning. in addition, this way it is possible to optimize material flow, the use of resources and logistics at each level of planning – beginning with global production facilities, through local enterprises, up to individual lines. tecnomatix plant simulation application is available in: english, german, japanese, hungarian, russian and chinese. it is also possible to efficiently switch from one language to another. a very important feature of the program is the possibility to model and simulate processes following the paradigms of object-oriented programming. the following features of such programming need to be mentioned (see bangsow 2010): – inheritance – it is possible to create new classes on the basis of existing ones. the original class is called the base class, and the derivative one is the subclass. this property is important e.g. when designing a production hall. if several machines (workstations) are of the same type and have the same properties, then instead of defining each of them individually, we can only define the base machine (base class), and define the settings of the other machines (subclasses) by inheriting the properties from the base class; – polymorphism – classes and methods may be redefined, which allows to build complex models with a very transparent structure in a quick and simple way; – hierarchy – complex models can be designed on several logically connected levels (working windows). this property enables to implement two most popular strategies used in information processing and design: “top-down” and “bottom-up”. tecnomatix plant simulation provides effective and simple analytic tools which allow the detection of bottlenecks (bottleneck analyzer), tracking material flow (sankey diagrams) and identification of resource excess (chart wizard). a very important advantage of this program from the point of view of the author’s scientific interest is that it provides integrated optimization tools. these include mainly: http://www.plm.automation.siemens.com/pl_pl/about_us/index.shtml http://www.plm.automation.siemens.com/pl_pl/about_us/index.shtml http://www.plm.automation.siemens.com/pl_pl/about_us/facts_philosophy/smart-innovation-portfolio/index.shtml 67 business, management and education, 2016, 14(1): 64–73 – ga wizard – an optimizing simulation model using genetic algorithms; – layout optimizer – which enables minimizing transportation costs using genetic algorithms; – neural network – which makes it possible to identify connections between input and output parameters and which provides projections with the use of artificial neural networks; – experiment manager – used to create scenarios or evaluate relations between two input parameters. tecnomatix plant simulation allows also to perform statistical data analyses (e.g. studying dependence and independence, regression, data fitting, anova etc.). furthermore, it is possible to import data from other systems, programs or databases, e.g. access, oracle, excel, sap, autocad. a very important advantage of the program is also the tool used for original algorithms and scripts programming (method). the built-in language simtalk, with the syntax based on basic, is used for this purpose. 2. literature analysis the analysis of the literature of the subject gives us relatively few publications which discuss the application of tecnomatix plant simulation in production engineering and logistics. what is more, most of them are absent from the web of science database. still, they refer to interesting solutions and lead to interesting conclusions. most articles are by european researchers from: slovakia (see filo et al. 2013; kliment, trebuna 2014; kliment et al. 2014), poland (see danilczuk et al. 2014; gola, świc 2012; gola, konczal 2013; kłosowski 2011; kostrzewski 2013), bosnia and herzegovina (see jovisevic et al. 2014; borojevic et al. 2009), the czech republic (see boruvka et al. 2011) or germany (see gutenschwager et al. 2012; kuehn 2006). simulation modeling is commonly used in manufacturing and it enables solving various problems. the simulation can be applied when a new facility is planned or the existing one should be optimized. in those cases the simulation helps to optimize the times (processing time, failure time, set-up time, recovery time, etc.), the throughput of the plant, determine the size of buffers and the number of machines. the research conducted by danilczuk, cechowicz and gola (see danilczuk et al. 2014) from lublin university of technology focuses on the application of tecnomatix plant simulation in the analysis of efficiency of a production line machining a specific kind of parts as part of a technological process which involves two operations and five technological procedures. the system was simulated and analyzed in a production process involving two, three, or four stages. the influence of failure-related machine stoppage on the efficiency of the whole production line was shown. such a workstation blocks the next machines, so it is a bottleneck of the process. an experiment like this is a signal for the company that certain actions should be taken to eliminate the effects of temporary unavailability of the workstation. the machine can be modernized 68 j. siderska. application of tecnomatix plant simulation for modeling production and logistics processes (or replaced by a new one), or so-called buffers can be used to temporarily exclude it from the process. computer simulation made it possible to determine the size of the buffer and properly plan its location, which was essential from the point of view of the best use of space in the production hall (see danilczuk et al. 2014). boruvka, manlig and kloud (see boruvka et al. 2011) discussed an example of computer simulation performed so as to analyze the capacity of production lines, and verifies how failures of individual workstations affect the whole production and efficiency of the production line. besides, an experiment was carried out to determine the minimum number of pallets necessary to ensure the maximum use of production lines. using specific examples, it was shown that the elimination of 5% of bottlenecks leads to approx. 5% increase of production (see boruvka et al. 2011). an interesting application of tecnomatix plant simulation software was introduced by borojevic, jovisevic and jokanovic (see borojevic et al. 2009). the work presents the outcome of simulation of production and assembly of crankshafts for saw engines. computer simulations allowed to identify production process bottlenecks, to show the lack of efficiency of certain workstations, and to minimize the duration of the whole process. on the basis of the conducted analyses it was possible to introduce buffers storing the manufactured elements, to eliminate inefficient workstations, to reduce the time of transporting elements between the workstations, and to introduce extra machines. these actions considerably reduced the time of processing elements at each workstation and led to optimizing the duration of the whole production process (see borojevic et al. 2009). tecnomatix plant simulation was used by moscow domodedovo airport for modeling air cargo handling, passenger flows in the international terminal as well as various terminal performance scenarios. the main objective was to model the handling of incoming air cargo in order to identify bottlenecks and to improve overall efficiency. tecnomatix plant simulation enabled to conduct essential improvements to airport workflows, including check-in planning, equipment for check-in, luggage claim areas, the locations of stores, buses, gates, passenger routes across the terminal and boarding management etc. 3. the example of tecnomatix plant simulation application let’s consider the example of production line shown in figure 2. it is a simple digital model representing the process of nails production, designed by the author with the use of the tecnomatix plant simulation program. in the developed model, steel wire is collected from the stock, then at the first workstation it is cut (the disassembly process) into 100 elements (“wire cutting” machine). the duration of wire cutting is 10 seconds (100 elements, 0.1 second per nail). the unused parts of steel wire are removed from the process as a separate out69 business, management and education, 2016, 14(1): 64–73 put (“cuttings” workstation). after the cutting, these elements go to the station called “tip” in the model, where the nail tips are sharpened and the heads are formed. the time of sharpening each nail tip and of forming each nail head is 10 seconds. the set-up time after the first action is 20 seconds. further, half of the nails are copper plated (“copper plating” machine), and the other half are zinc plated (“zinc plating” machine). the working times of these machines are 2 seconds per nail. the movement of the elements along appropriate paths is defined using a flowcontrol object. after copper or zinc plating, a nail is stored in a buffer with the capacity of 4,000 pieces (“buffer1” and “buffer2” stations, respectively). from the buffers, the nails go to the assembly workstation, where they are packaged in boxes containing 50 copper plated nails and 50 zinc plated nails each. the machine used to package the nails (“assembly_packaging” workstation) is fed with boxes from an extra source, i.e. the “box” workstation. the assembly time is 1 minute. a ready packet containing a total of 100 nails in a box is then directed to the process output. in addition, the appropriate statistic was defined at the model output, which summarizes the manufactured and assembled elements. within 24 hours of technological process, the production capacity for machine and workstation settings defined this way is 862 boxes of nails. figure 3 presents the performance charts of individual workstations in the analyzed production process. statistical analyses of work at each workstation performed after the whole production process showed that only 10% of the wire cutting machine capacity was actually used. this station is blocked by the “tip” machine, which is the bottleneck in this process. fig. 2. example of production process designed using tecnomatix plant simulation 70 j. siderska. application of tecnomatix plant simulation for modeling production and logistics processes fig. 3. statistics concerning the work of machines in the discussed production process the research question was formulated as follows: what are the bottlenecks of the production process and how to increase the throughput of the plant? the results of author’s experiments showed that increasing the process flow capacity is possible e.g. by adding another, parallel workstation for sharpening the cut nails. settings of the extra machine are the same as of the main one: the process duration is 10 seconds, and the set-up time lasts 20 seconds. the result of the simulation of introducing an extra nail sharpening workstation into the discussed production process is shown in figure 4. this solution produced very satisfying effects, as it allowed the increase of production up to 1,438 boxes of nails within 24 hours. processing times and setup times of individual workstations after introducing an extra sharpening machine into the discussed production process are shown in table 1. fig. 4. change of production volume after adding the “tip” workstation 71 business, management and education, 2016, 14(1): 64–73 table 1. processing times and setup times of machines operation machine setup time [sec] processing time [sec] cutting wire cutting 0 10 tipping tip_1 20 10 tipping tip_2 20 10 plating copper plating 2 0 plating zinc plating 2 0 assembly assembly_packaging 0 60 figure 5 presents the statistics concerning the work of machines after adding an extra sharpening workstation. the wire cutting machine is working all the time now and 100% of its’ capacity was actually used. this machine is not blocked by the “tip” workstation any more. fig. 5. statistics after adding “tip” workstation the effect of shortening the time of assembly of one box from 60 to 30 seconds was also analyzed. this would make it possible to increase the production capacity even up to 1,726 pieces within 24 hours. thus, in the analyzed process it would be worthwhile to modernize the existing workstation at which the final product is assembled. 4. conclusions computer simulations using it tools have recently become necessary activities supporting the design of new production and logistic systems or streamlining the existing ones. simulation methods are also used to evaluate different aspects of production systems. repeatability is a significant feature of computer simulation. thanks to determining a certain number of parameters and assigning them specific numerical values, the same 72 j. siderska. application of tecnomatix plant simulation for modeling production and logistics processes process can be repeated many times. in real life conditions, such procedures could not be performed (kłosowski 2011). computer simulations performed with the use of it tools ensure the optimization of work and performance of whole production plants, production lines, as well as individual logistics processes. digital models of logistic systems enable enterprises to carry out simulations without interrupting the work of real systems. furthermore, thanks to testing different scenarios, it is possible to choose the best strategy ensuring the increase of efficiency and quality and lowering production costs (borojevic et al. 2009). different types of simulation, for example discrete events, can be applied in digital models to various planning tasks and stages to improve the product and process planning at all levels of the whole production process. the combination of simulation and optimisation techniques allows for advanced approaches for planning and improving the product development and production planning processes (see kuehn 2006). this paper introduced the implementations of tecnomatix plant simulation for modeling the process of nails production. the conducted simulations pointed the bottlenecks of the whole production process and allowed for experimenting some optimizations and introduced the possibilities of increasing throughput of the plant. by adding an extra nail sharpening workstation into the discussed production process it would be possible to increase the whole process flow capacity. this solution produced very satisfying effects, as it allowed the increase the production up to nearly 70% within 24 hours. the analysis of the previous applications of tecnomatix plant simulation to model and simulate production processes allows to regard it as an effective it tool, used e.g. for increasing the efficiency of the existing system, optimizing resource consumption, limiting stocks and shortening the production time. the author’s recent research interests include implementation of simulations and digital models for assessing the condition of manufacturing companies. the author’s future studies are going to focus on simulation of production and logistic processes and their optimization with the use of genetic algorithms and artificial neural networks. those implementations with artificial intelligence tools will be the fundamental basis for the author’s further commitments. funding the research were conducted within mb/wz/1/2014 project and were financed from ministry of science and higher education funds. references bangsow, s. 2010. manufacturing simulation with plant simulation and simtalk. usage and programming with examples and solutions. berlin heidelberg: springer-verlag. http://dx.doi.org/10.1007/978-3-642-05074-9 http://dx.doi.org/10.1007/978-3-642-05074-9 73 business, management and education, 2016, 14(1): 64–73 borojevic, s.; jovisevic, v.; jokanovic, s. 2009. modeling, simulation and optimization of process planning, journal of production engineering 12(1): 87–90. university of novi sad, serbia. boruvka, j.; manlig, f.; kloud, t. 2011. computer simulation of the assembly line – case study, in carpathian logistics congress clc 2011, 27–30 september 2011, podbanské, slovakia, 24–28. danilczuk, w.; cechowicz, r.; 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costing of manufacturing systems, production economics 58(3): 289–301. http://dx.doi.org/10.1016/s0925-5273(98)00204-7 julia siderska, msc, academic teacher and researcher of technical university of bialystok (poland); board member of international society for manufacturing, service and management engineering; member of ieee technology management council; member of polish association of production management. research interest: artificial intelligence methods, neural networks, soft computing, management information systems, computer simulations in logistics and production engineering. http://pub.pollub.pl/zrodla/114258/ http://dx.doi.org/10.5604/20804075.1073052 http://dx.doi.org/10.1109/wsc.2012.6465023 http://dx.doi.org/10.12691/ajme-2-7-24 http://yadda.icm.edu.pl/yadda/element/bwmeta1.element.baztech-da5bf295-346c-40f3-b418-370aa1d8e39d http://dx.doi.org/10.1109/wsc.2006.322972 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the concept of products and services integration – analysis of scientific publications justyna kozłowska categories of supply chain performance indicators: an overview of approaches dorota leończuk multivariate analysis of short and long-impact indicators for corporate bond market development ieva astrauskaitė the research on interface between lithuanian direct investment abroad and foreign trade flows anžela kozlova1, algita miečinskienė2 copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. an empirical study on the relationship between logistics performance and education turkay yildiz izmir institute of technology, b.i.d.b., 35430, gulbahce kampusu, izmir, turkey e-mail: turkayyildiz@iyte.edu.tr received 16 october 2015; accepted 16 november 2015 abstract. logistics occupations require skills that involve blueand white-collar activities and different levels of educational skills. with the increase in global trade and competition, the varying skills necessary for different parts of the logistics sector have attracted attention. in this regard, this empirical study examines the relationship between logistics performance indicators and education assessment scores and identifies associations. the presented results, by using canonical correlation analysis, indicate that certain education assessment scores contribute more to improving logistics performance than do other variables. the variables that influence logistics performance are also highlighted. keywords: logistics performance, transportation, education assessment, pisa, global competitiveness, canonical correlation. jel classification: a20, i25, l25, m20. 1. introduction logistics professions cover a wide range of skill levels and specialties including equipment operators and mechanics, inventory managers, supply chain managers, business information systems, and distribution frames (sheffi 2012). to recruit labor and carry out on-the-job training, many logistics groups attract and develop workers in partnership with educational institutions that supply vocational, undergraduate, postgraduate, and professional training (sheffi 2012). indeed, technological, economic, and political trends have increased demand for higher skills and reduced demand for low skills while increasing competition for quality jobs (stewart 2012). this is one reason for paying attention to the international core skills assessments that have recently been implemented. these core skills evaluations and their results have led to a growing body of research, observation, and discussion that goes beyond the numbers and rankings to help us understand why some systems are moving forward quickly and producing more equitable performance, while others remain static and uneven. in this regard, the current research was undertaken to address b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(2): 249–275 doi:10.3846/bme.2015.292 http://dx.doi.org/ 10.3846/bme.2015.292 250 t. yildiz. an empirical study on the relationship between logistics performance and education the issue of developing human capital in the field of logistics, specifically for achieving higher logistics performance. in which areas, do logistics firms need help building competencies in order to improve performance? what skills should these firms be looking for in the first place? more specifically, how do education and skills influence logistics performance? the remainder of this paper is organized as follows. section 2 reviews the literature on logistics in general and education-related issues in particular. section 3 introduces the data and methods used for the canonical correlation analyses of the perceptions of countries’ logistics efficiencies and educational scores by using various measures drawn from the world bank, the global competitiveness index (gci) of the world economic forum (wef), and the international institute for management development (imd) database. specifically, this section investigates the associations between logistics performance indicators and education-related scores derived from the programme for international student assessment (pisa) of the oecd, the wef, and the imd. in addition, ridge regression analysis is performed on the logistics performance indicators and pisa education variables to find those variables that contribute most to influencing overall logistics performance. section 4 presents and discusses the empirical findings. the study is concluded in section 5. 2. literature koenig (2011) stated that there is a growing recognition that individuals need a broad range of skills to meet the demands of the modern workplace. gone are the days where multitudes of jobs were available that required workers to perform simple manual tasks (koenig 2011). in this vein, goldsby and martichenko (2005) indicated that all forms of education continue to offer the fastest return on the investment made and that all knowledge acquired through training exercises improves firm performance. svensson (2007) stated that logistics educators in general have received their training in marketing, operations, and quantitative methods, but that skills in organizational behavior and psychology are also required. these skill sets suggest that current teachers are ill equipped to deal with the new managerial dimensions required for modern scm (svensson 2007). however, these additional dimensions must be incorporated into logistics education if the promises of scm are to be met (svensson 2007). managers should also search out such educational opportunities. the rapid expansion of national participation in studies of international achievement has been a feature of education planning over the past 25 years (wiseman 2010). largescale international comparative educational assessments began more than 50 years ago with the formation of the international association for the evaluation of educational achievement (iea) and they have since developed and diversified (wiseman 2010). however, particularly over the past decade, renewed interest in these studies has swept 251 business, management and education, 2015, 13(2): 249–275 public discourse. national rankings of test results are now part of common educational jargon and the number, severity, scope, complexity, and connectivity of these assessments are at a historically high level (wiseman 2010). researchers have examined the connection between industry performance and education on scm. for example, authors have explored the challenges of scm module boards (bak, boulocher-passet 2013), the development of scm training (bernon, mena 2013), using scm software in education (campbell et al. 2000), the integration of production and logistics in principle, in practice, and in education (chikan 2001), and education and training needs in logistics (felea et al. 2010). furthermore, scholars have investigated logistics and scm doctoral training (grant, bourlakis 2010), scm simulation as a tool for education (holweg, bicheno 2002), and scm for education engineering students and employees (ilie-zudor et al. 2011). research on logistics education has also examined the current state of the art (lutz, birou 2013), using scm to improve collaboration between universities (om et al. 2007), and the future of logistics education (ozment, keller 2011). similarly, previous studies have explored activities and education in logistics (skrinjar et al. 2008), competitiveness, manufacturing, and the role of education in scm in the forest industry (smith 2005), the provision of education and current practitioner future needs (van hoek, wagner 2013), and competitiveness, manufacturing, and the role of education (winistorfer 2005). moreover, zinn and goldsby (2014) presented a study about logistics professional identity for strengthening the discipline. wu and huang (2013) performed a study about making on-line logistics training sustainable through e-learning. in the same vein, sweeney et al. (2010) performed a study on teaching supply chain and logistics management through commercial software. bian et al. (2014) performed an empirical research on the effect of workplace learning on logistics management and decision implications. cvetic and vasiljevic (2012) explored game-based enhancement for teaching logistics and supply chain management. in addition, fawcett and rutner (2014) assessed the supply chain education and explored the challenge of retaining relevance in today’s marketplace. kovacs et al. (2012) explored the skills needed to be a humanitarian logistician. thai and yeo (2015) studied perceived competencies required for container shipping logisticians in singapore and south korea. shi and handfield (2012) explored talent management issues for multinational logistics companies in china. wong et al. (2014) studied uk markets on logistics and supply chain education and jobs. wu et al. (2013) provided perspectives from practitioners in taiwan about global logistics management curriculum. the modern workplace requires workers to have broad cognitive and affective skills (koenig 2011), often referred to as “21st century skills.” these skills include being able to solve complex problems, think critically about tasks, communicate effectively with people of different cultures, use a variety of techniques, work with others, adapt to changing environments and conditions to carry out tasks, effectively manage workload, 252 t. yildiz. an empirical study on the relationship between logistics performance and education and acquire new skills and information proactively (koenig 2011). skills, which relate to experience and are knowledge context-dependent, are taught in most logistics classes, which are vital for practitioners (gammelgaard, larson 2001). however, to achieve a level of competence in the discipline of logistics, practitioners gain knowledge depending on their degrees of organizational experience (gammelgaard, larson 2001). the present study adds another dimension to the existing literature. in this regard, by using statistical methods, it provides a better understanding for policymakers. specifically, it differs from previous works in that it investigates statistically significant relationships between logistics performance and education assessment scores. 3. data and methods in this study, four main types of data sources are used, all of which are drawn from the world bank, the gci database, and the imd’s world competitiveness database. the first data source is on the perceptions of countries’ logistics efficiencies. the second data source is the pisa survey assessment indicators. the third data source is the fifth pillar from the gci (gci5 hereafter), which measures higher education and training. the fourth data source is the imd’s various education scores (see tables a17 and a18). the logistics performance index (lpi) is the first international benchmarking tool that measures the ease of trade and transport logistics by country (mclinden et al. 2010). the lpi is based on a global survey that the world bank conducts every two years, covering 155 countries and completed by nearly 1,000 logistics professionals in international freight forwarders and express carriers (arvis et al. 2010). each lpi report contains a comprehensive cross-country assessment to help countries identify their challenges and opportunities in trade and transport logistics performance and disaggregates data into six categories to highlight problem areas (mclinden et al. 2010). the composite lpi summarizes all areas of performance. in brief, these variables are as follows: cust stands for the customs clearance process, infr is the quality of trade and transport-related infrastructure, itrn is the ease of arranging competitively priced shipments, logs is the quality of logistics services, trac is the ability to track and trace consignments, time is the frequency with which shipments reach the consignee within the scheduled time, and ovrl is overall logistics performance. pisa is a triennial international survey that aims to evaluate education systems worldwide by testing the skills and knowledge of 15-year-olds. to date, students representing over 70 countries have participated in the evaluation. pisa 2012, the fifth survey program, assessed the skills of 15-year-olds in reading (read), mathematics (math), and science (sci) in 65 countries and economies. approximately 510,000 students aged 15 years and 3 months and 16 years and 2 months participated in the evaluation, which represents about 28 million children worldwide, thereby providing evidence of the ef253 business, management and education, 2015, 13(2): 249–275 fect of the development of younger children on later school success (wu et al. 2012). pisa is unique because it develops tests that are not directly related to the curriculum. these tests are designed to assess how well students at the end of compulsory education can apply their knowledge to real-life situations and be equipped to participate fully in society. the information gathered through questionnaires also provides a context that can help analysts interpret the results. the gci (2013–2014) measured national competitiveness by using a complex methodology involving raw data and executive opinions. the index rests on 12 pillars categorized into three groups, namely basic requirements (four pillars), efficiency enhancers (six pillars), and innovation and sophistication factors (two pillars). countries are rated on a seven-point scale, with a higher score indicating more competitiveness. in this research, the fifth pillar, which concerns higher education and training, is taken into consideration. this pillar has three sub indicators: quantity of education, quality of education, and on-the-job training. the gci is a comprehensive database of the competitiveness of nations. global competitiveness is an area of economic theory that analyzes the facts and policies that shape the ability of a nation to create and maintain an environment that sustains more value creation for its enterprises and more prosperity for its people. the approach of the imd’s world competitiveness center for global competitiveness is to analyze how nations and businesses manage all their skills to achieve greater prosperity. from this database, only education-related variables are used in this study. it should be noted that the lpi variables (cust, infr, itrn, logs, trac, time) introduce severe multicollinearity. multicollinearity, which occurs when the predictors included in the linear model are highly correlated (yan 2009), poses statistical inference problems. therefore, to overcome this problem, by applying the factor analysis technique, six lpi variables were factor analyzed and six components extracted, each representing their respective variables, although factor analysis mainly aims to obtain a smaller number of factors that account for most of the variability. in this special case, six factors were extracted from the six variables. together, they accounted for 100% of the variability in the original lpi data. finally, these extracted factors were stored as anderson–rubin factor scores, which are uncorrelated scores with other factors. the same multicollinearity issue for the three pisa variables (math, read, sci) was also overcome by using the same technique. the factor loadings of the equamax rotation are presented in tables a1 through a6. multicollinearity does not pose a problem for the gci5 variables. the preliminary tests of these variables indicated that the variance inflation factors (vifs) were below 5. vif is an indicator of how the other explanatory variables affect the variance of a regression coefficient of a particular variable, given by the inverse of the square of the multiple correlation coefficient of the variable with the remaining variables (everitt 2002). ideally, researchers are looking for vifs < 10 (see table a7). the multicollinearity 254 t. yildiz. an empirical study on the relationship between logistics performance and education issue was overcome for the imd variables by extracting factor scores and storing the extracted factors as anderson–rubin factor scores (see tables a11 through a16). 3.1. canonical correlation analysis of logistics performance indicators and pisa scores nearly 80 years ago, harold hotelling (1936) introduced canonical correlation analysis (see also brown et al. 2011). essentially, this method identifies the holistic relationship between two multivariate sets of variables, an obvious next step after factor analysis and principal component analysis made their appearance in the first decades of the twentieth century (brown et al. 2011). this procedure finds the linear combinations of two sets of variables that have the highest correlation between them (see table a8 for the linear relationship between the lpi and pisa scores). table 1. chi-square tests with successive roots removed. rows having p < 0.05 are highlighted canonical r canonical r-sqr. chi-sqr. df p lambda – prime 0 0.72 0.52 56.62 18 0.00 0.33 1 0.51 0.26 18.66 10 0.04 0.69 2 0.24 0.06 2.97 4 0.56 0.94 the canonical analysis summary is that the canonical r equals 0.72, chi²(57) equals 56.61, and p equals 0.00. in this case, three sets of linear combinations have been formed. however, only two sets are statistically significant (p < 0.05; table 1 and fig. 1). the first set, which forms the strongest correlations, has the following highly contributing variables: u1 = –0.68×math – 0.55×read – 0.46×sci and l1 = –0.61×cust – 0.36×infr – 0.39×itrn – 0.47×logs – 0.09×time – 0.16×trac. in addition, the second set of linear combinations, the next strongest correlation among all combinations that are uncorrelated with the first set, has the following highlighted highly contributing variables: u2 = –0.43×math + 0.83×read – 0.38×sci and l2 = –0.07×cust + 0.45×infr – 0.25×itrn – 0.30×logs + 0.95×time + 0.67×trac, where the variables have first been standardized by subtracting their means and dividing by their standard deviations. table 1 and figure 1 show the estimated correlations between each set of canonical variables. since two of the p values are less than 0.05, those sets have statistically significant correlations at the 95% confidence level. 255 business, management and education, 2015, 13(2): 249–275 (a) (b) fig. 1. (a) pisa (right set root 1) versus lpi (left set root 1) and (b) pisa (right set root 2) versus lpi (left set root 2) other ways of dealing with complex sets of multivariate data are structural equation modeling and confirmatory factor analysis (brown et al. 2011). these powerful developments in the factor analytic tradition, which have arrived over the past three decades or so, constitute a computational general case of which factor analysis and canonical correlation analysis are special cases (brown et al. 2011). whereas principal component analysis, canonical correlation analysis, and some factor analyses can improve the holistic understanding of complex data and provide a better visible apprehension of one’s data, structural equation models allow researchers to test specific scientific models against complex empirical data (brown et al. 2011). 256 t. yildiz. an empirical study on the relationship between logistics performance and education 3.2. ridge regression for logistics performance indicators versus raw pisa scores ridge regression is one of the remedies to treat severe multicollinearity in least squares estimations (yan 2009). one approach to dealing with multicollinearity is thus to apply the ridge regression (lesaffre, lawson 2012). the method of ridge regression suggested by hoerl in 1962 and systematically developed by hoerl and kennard (1970a, 1970b) can significantly improve the mean squared error of the least squares estimator when the columns of the matrix vector design are multicollinear (tong et al. 2011). the r-squared statistic indicates that the model as fitted explains 46.32% of the variability in ovrl. the adjusted r-squared statistic, which is more suitable for comparing models with different numbers of independent variables, is 43.28%. the standard error of the estimate shows the standard deviation of the residuals to be 0.35. the mean absolute error of 0.28 is the average value of the residuals. the durbin–watson statistic tests the residuals to determine if there is any significant correlation based on the order in which they occur in the data. (a) (b) fig. 2. (a) ridge trace for ovrl and (b) vifs for ovrl 257 business, management and education, 2015, 13(2): 249–275 figure 2a shows the standardized regression coefficients for the values of the ridge parameter between 0.0 and 0.1. these are the coefficients of the regression model when the variables are expressed in standardized form. as the ridge parameter increases from 0, the coefficients often change dramatically at first and then become relatively stable. a good value for the ridge parameter is the smallest value after which the estimates change slowly. this is admittedly subjective, but the ridge trace helps researchers make a good choice. figure 2b shows the vifs for each of the coefficients in the regression model. vifs measure the degree to which the variance of the estimated coefficients is inflated relative to the case when all the independent variables are uncorrelated. as before, as the ridge parameter increases from 0, the vifs often decrease dramatically at first and then become relatively stable. a good value for the ridge parameter is also the smallest value after which the vifs change slowly. this is admittedly subjective, but the plot of the vifs again helps us make a good choice. this procedure aims to estimate the regression coefficients when the independent variables are strongly correlated. by allowing for a small amount of bias, the precision of these estimates can often be greatly increased. in this case, the fitted regression model is: ovrl = 0.3593 + 0.0025×math + 0.0032×read + 0.0008×sci. table 2. model results when the ridge parameter is 0.1 parameter estimate vifs constant 0.3593 math 0.0025 1.32968 read 0.0032 1.30215 sci 0.0008 0.911942 3.3. canonical correlation analysis of logistics performance indicators and gci5 scores as noted earlier, this procedure finds the linear combinations of two sets of variables that have the highest correlation between them (see table a9 for the linear relationship between the lpi and gci5). the canonical analysis summary is that the canonical r equals 0.87, chi²(18) equals 189.45, and p equals 0.00. table 3. chi-square tests with successive roots removed. rows having p < 0.05 are highlighted canonical r canonical r-sqr. chi-sqr. df p lambda – prime 0 0.87 0.75 189.45 18 0.00 0.21 1 0.30 0.09 19.61 10 0.03 0.85 2 0.25 0.06 7.71 4 0.10 0.94 258 t. yildiz. an empirical study on the relationship between logistics performance and education in this case, three sets of linear combinations have been formed. however, only two sets are statistically significant (p < 0.05; table 3 and fig. 3). the first set forms the strongest correlations (r2 equals 0.75). in detail, the first set of linear combinations with the highlighted highly contributing variables is: u3 = +0.43×f_time + 0.31×f_itrn + 0.42×f_cust + 0.35×f_infr + 0.50×f_ trac + 0.37×f_logs and l3 = +0.37×[quantity of education] – 0.01×[quality of education] + 0.76×[on-thejob training]. the second set of linear combinations, which has the next strongest correlation (r2 equals 0.09) among all combinations that are uncorrelated with the first set, has the following contributing variables: u4 = –0.25×f_time + 0.17×f_itrn – 0.76×f_cust + 0.51×f_infr + 0.20×f_ trac + 0.27×f_logs and l4 = +0.72×[quantity of education] – 2.01×[quality of education] + 1.23×[onthe-job training], where the variables have first been standardized by subtracting their means and dividing by their standard deviations. table 3 and figure 3 show the estimated correlations between each set of canonical variables. since two of the p values are less than 0.05, those sets have statistically significant correlations at the 95% confidence level. (a) 259 business, management and education, 2015, 13(2): 249–275 (b) fig. 3. (a) gci5 (right set root 1) versus lpi (left set root 1) and (b) gci5 (right set root 2) versus lpi (left set root 2) 3.4. canonical correlation analysis of logistics performance indicators and imd scores again, this procedure finds the linear combinations of two sets of variables that have the highest correlations between them (see table 4 for the linear relationship between the lpi and the imd’s education assessment pillar). the canonical analysis summary is that the canonical r equals 0.98, chi²(96) equals 135.18, and p equals 0.00. table 4. chi-square tests with successive roots removed. rows having p < 0.05 are highlighted canonical r canonical r-sqr. chi-sqr. df p lambda – prime 0 0.98 0.97 135.18 96 0.01 0.00 1 0.95 0.90 82.76 75 0.25 0.00 2 0.87 0.75 46.64 56 0.81 0.05 in this case, some sets of linear combinations have been formed. however, only one set of linear combinations is statistically significant (p < 0.05; table 4 and fig. 4). the first set forms the strongest correlations (r2 equals 0.97) and this has the following highly contributing variables: u5 = –0.45×[student mobility outbound] – 0.13×[educational assessment, science] –0.11×[language skills] – 0.10×[pupil-teacher ratio (primary education)] –0.03×[secondary school enrollment (%)] – 0.02×[total public expenditure on education] 260 t. yildiz. an empirical study on the relationship between logistics performance and education +0.02×[management education] + 0.03×[educational assessment, mathematics] +0.17×[english proficiency toefl] + 0.19×[student mobility inbound] +0.22×[higher education achievement (%)] + 0.24×[pupil-teacher ratio (secondary education)] +0.31×[educational system] + 0.33×[illiteracy (%)] +0.41×[university education] + 0.55×[science in schools] and l5 = –0.22×f_infr–0.12×f_time + 0.17×f_logs + 0.18×f_itrn + 0.46×f_ cust + 0.82×f_trac, where the variables have first been standardized by subtracting their means and dividing by their standard deviations. table 4 and figure 4 show the estimated correlations between each set of canonical variables. since two of the p values are less than 0.05, those sets have statistically significant correlations at the 95% confidence level. fig. 4. imd scores (left set root 1) versus lpi (right set root 1) 4. research findings and highlighted discussions the first canonical correlation, u1 and l1, is moderately strong with a magnitude of 0.72 and statistically significant at p < 0.05 (see table 1 and fig. 1a). there are primarily relationships between the logistics performance variables of logs and cust, on the one hand, and the education assessment variable of math with some contribution from read and sci, on the other. this finding implies that the quality of logistics services and customs clearance process are related to the education assessment variables of the mathematics skill, with some contribution from the reading and science skills. 261 business, management and education, 2015, 13(2): 249–275 the second canonical correlation, u2 and l2, is less strong with a magnitude of 0.51 and statistically significant at p < 0.05 (table 1 and fig. 1b). we see relationships between the logistics performance variables of time and trac and the education assessment variable of read with some contribution from math and sci. the implication here is that the frequency with which shipments reach the consignee within the scheduled time and the ability to track and trace consignments are related to the education assessment variable of the reading skill with some contribution from the mathematics and science skills. the ridge regression model for the dependent variable of ovrl versus the pisa variables shows the contributions of the independent variables. the r-squared statistic indicates that the model as fitted explains 46.32% of the variability in ovrl. the adjusted r-squared statistic, which is more suitable for comparing models with different numbers of independent variables, is 43.28% and is moderately strong (table 2). as the fitted ridge regression model explains, the math and read variables highly contribute to overall logistics performance with a smaller coefficient of sci. for gci5 versus the lpi variables, the first canonical correlation, u3 and l3, is moderately strong with a magnitude of 0.87 and statistically significant at p < 0.05 (table 3 and fig. 3a). there seems to be a relationship between all logistics performance variables (as their coefficients are close to each other) and the education assessment variable of on-the-job training with some contribution from quantity of education. primarily, trac and the variable on-the-job training are canonically correlated with the highest coefficient. this finding implies that the ability to track and trace consignments is primarily related to the education assessment variable of the on-the-job training with some contribution from quantity of education. quality of education has almost no effect in this first canonical correlation. the second canonical correlation of gci5 versus the lpi variables, u4 and l4, is less strong with a magnitude of 0.51 and statistically significant at p < 0.05 (table 3 and fig. 3b). there is a relationship between cust and infr and the education assessment variable of quality of education with some contribution from on-the-job training and quantity of education. the primary implication here is that the customs clearance process and quality of trade and transport-related infrastructure are related to the quality of education with some contribution from on-the-job training and quantity of education. for the imd versus the lpi variables, the canonical correlation, u5 and l5, is strong with a magnitude of 0.98 and statistically significant at p < 0.05 (table 4 and fig. 4). cust and trac are related to science education in schools and university education with some contribution from illiteracy (percentage) and the educational system. this finding implies that the ability to track and trace consignments and customs clearance process are related to the education assessment variables of science education in schools and university education with some contribution from illiteracy (percentage) and the educational system. 262 t. yildiz. an empirical study on the relationship between logistics performance and education (a) (b) (c) 263 business, management and education, 2015, 13(2): 249–275 (d) fig. 4. in each figure, the countries with darker (lighter) grays indicate good (poor) performance. white regions/countries: unavailable data. (a) math scores, (b) read scores, (c) sci scores, and (d) overall logistics performance (ovrl) all countries are trying to get people out of poverty and respond to increasing public pressure to provide more economic opportunities for the next generation through the expansion of education (stewart 2012). countries with high performance and rapid improvement are also carefully designed as learning systems, constantly checking and updating in order to determine if the education system is preparing their students for the knowledge economy in this rapidly changing world (stewart 2012). however, during the past two decades, countries have focused on the expansion of education as the key driver to maximizing individual well-being, reducing poverty, and stimulating economic growth (stewart 2012) (see figs 4, 5, and 6). the design, management, and constant renewal of logistics systems and the supply chain demand considerable sophistication and analytical knowledge (sheffi 2012). the analysis of logistics systems makes extensive use of mathematics, particularly operations research methods that aim to optimize the flow of goods, people, and goods subject to the constraints of cost, time, capacity, and uncertainty (sheffi 2012). even though a worker can physically move a box, intellectual muscle remains necessary in order to determine which of the thousands of boxes to put in which truck to transport each item (sheffi 2012). because tasks such as designing a network of distribution centers, planning travel modes, and optimizing inventory in the face of an uncertain future need technical sophistication, companies require logistics managers and engineers with university and postgraduate training (sheffi 2012). 264 t. yildiz. an empirical study on the relationship between logistics performance and education (a) (b) (c) fig. 5. (a) quantity of education scores, (b) quality of education scores, and (c) on-the-job training scores 265 business, management and education, 2015, 13(2): 249–275 (a) (b) fig. 6. (a) science in schools and (b) university education (source: the imd world competitiveness database (60 countries)) globalization poses challenges for everyone. every education system in the world is struggling to some extent to deal with the rapid pace of change (stewart 2012). in addition, countries are facing similar challenges. for example, internal and international migration have created more widespread heterogeneous societies everywhere, imposing new demands on teachers as they respond to students and families from diverse cultural and linguistic backgrounds (stewart 2012). 5. conclusions in this empirical study, the relationship between logistics performance indicators and educational assessment scores are examined and their associations are identified. the presented results indicated that certain educational assessment indicators, as evidenced 266 t. yildiz. an empirical study on the relationship between logistics performance and education by the canonical correlation analyses, contribute much more to improving logistics performance than do other variables. logistics performance depends on many factors, as supply chains are complex systems with complex processes. supply chain organizations are challenged to improve efficiency in the face of increasing complexity and global competition. therefore, it became necessary to determine the relationship and recognize the relevant indicators that contribute to high logistics performance. it is evidenced by the analysis that certain variables in indicators contribute much more to logistics performance than other variables. in this regard, it is essential for policymakers in the logistics field to take account of those variables that have higher contributions in canonical correlations. by taking into consideration the education assessment indicators, the main areas for improvement of the logistics performance include focusing more on the highlighted indicators to have an opportunity to significantly improve outcomes. indeed, this research has one main limitation, as it does not directly assess the group of skills required to improve logistics performance. it rather investigated the canonical correlations between logistics performance and selected educational assessment scores, which is an indirect measurement of contribution. however, as the assessment scores suggest, countries that provide better education opportunities are also those that improve logistics performance. further research should nevertheless aim to investigate those skills directly related to the logistics industry that can improve logistics performance. such research would shed light on the primary skills needed in the logistics sector. references arvis, j. f.; 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galaxies collide, journal of business logistics 35(1): 23–28. http://dx.doi.org/10.1111/jbl.12038 appendix factor analysis of lpi and pisa scores retrieval of lpi factors: the kaiser–meyer–olkin measure indicates sampling adequacy, which is 0.938. since this value is above 0.6, it indicates that sampling is adequate. bartlett’s test of sphericity is a test of the null hypothesis of whether the correlation matrix is an identity matrix, which would indicate that the factor model is inappropriate. since its p-value is 0.00, which is below the 0.05 threshold, the null hypothesis is rejected. this implies that the model is appropriate for factor analysis. table a1. kmo and bartlett’s test kaiser-meyer-olkin measure of sampling adequacy 0.938 bartlett’s test of sphericity approx. chi-square 1625.877 df 15 sig. 0.000 table a2. total variance explained. extraction method: principal component analysis component rotation sums of squared loadings total % of variance cumulative % 1 1.035 17.250 17.250 2 1.024 17.072 34.322 3 1.007 16.790 51.112 4 0.985 16.417 67.529 5 0.984 16.401 83.930 6 0.964 16.070 100.000 http://dx.doi.org/10.1108/scm-04-2012-0145 http://dx.doi.org/10.1596/978-0-8213-9564-6 http://dx.doi.org/10.1142/6986 http://dx.doi.org/10.1111/jbl.12038 270 t. yildiz. an empirical study on the relationship between logistics performance and education table a3. rotated component matrixa 1 2 3 4 5 6 time 0.692 itrn 0.677 cust 0.642 infr 0.614 trac 0.616 logs 0.575 extraction method: principal component analysis. rotation method: equamax with kaiser normalization. a. rotation converged in 59 iterations. retrieval of pisa factors: the kaiser–meyer–olkin measure indicates sampling adequacy, which is 0.761. since this value is above 0.6, it indicates that sampling is adequate. bartlett’s test of sphericity is a test of the null hypothesis of whether the correlation matrix is an identity matrix, which would indicate that the factor model is inappropriate. since its p-value is 0.00, which is below the 0.05 threshold, the null hypothesis is rejected. this implies that the model is appropriate for factor analysis. table a4. kmo and bartlett’s test kaiser-meyer-olkin measure of sampling adequacy 0.761 bartlett’s test of sphericity approx. chi-square 353.298 df 3 sig. 0.000 table a5. total variance explained. extraction method: principal component analysis component rotation sums of squared loadings total % of variance cumulative % 1 1.016 33.857 33.857 2 1.008 33.592 67.449 3 0.977 32.551 100.000 table a6. rotated component matrixa component 1 2 3 math 0.699 read 0.691 sci 0.656 extraction method: principal component analysis. rotation method: equamax with kaiser normalization. a. rotation converged in 36 iterations. 271 business, management and education, 2015, 13(2): 249–275 table a7. vifs and coefficientsa of fifth pillar of gci variables model standardized coefficients t collinearity statistics beta tolerance vif (constant) 2.662 5.a. quantity of education 0.298 4.997 0.595 1.681 5.b. quality of education –0.033 –0.349 0.236 4.231 5.c. on-the-job training 0.686 7.821 0.274 3.646 a. dependent variable: ovrl. the test of the existence of linear relationships for lpi and pisa, lpi and gci’s 5th pillar, lpi and imd’s pillar: four multivariate statistics calculated to test the null hypothesis that the canonical correlations are zero that there are no linear relationships between lpi and pisa, and lpi and gci’s fifth pillar variables. since p values are less than 0.05 in the pillais (the pillai’s trace), hotellings (the hotelling-lawley trace) and wilks (the wilks’ lambda) tests, the null hypothesis is rejected. therefore, the alternative hypothesis that there are linear relationships between lpi and pisa, and lpi and gci’s fifth pillar variables is accepted. the roys (the roy’s greatest root) test behaves differently from the other three tests. in cases where the remaining three are not statistically significant and roy’s is statistically significant, the effect considered not to be statistically significant (see table a8 and a9). for lpi and imd’s variables, hotellings’ p is below the 0.05 threshold, thus there is an existence of linear relationships (see table a10). table a8. between lpi and pisa. “effect ... within cells” regression. multivariate tests of significance (s = 3, m = 1, n = 23) test name value approx. f hypoth. df error df sig. of f pillais 0.85 3.27 18 150.00 0.00 hotellings 1.53 3.95 18 140.00 0.00 wilks 0.33 3.64 18 136.25 0.00 roys 0.52 – – – – table a9. between lpi and gci’s fifth pillar. “effect ... within cells” regression. multivariate tests of significance (s = 3, m = 1, n = 59) test name value approx. f hypoth. df error df sig. of f pillais 0.90 8.74 18 366.00 0.00 hotellings 3.14 20.73 18 356.00 0.00 wilks 0.21 13.67 18 339.90 0.00 roys 0.75 – – – – 272 t. yildiz. an empirical study on the relationship between logistics performance and education table a10. between lpi and imd’s pillar. “effect ... within cells” regression. multivariate tests of significance (s = 6, m = 4 1/2, n = 2) test name value approx. f hypoth. df error df sig. of f pillais 3.75 1.14 96 66.00 0.29 hotellings 43.32 1.96 96 26.00 0.03 wilks 0.00 1.56 96 40.81 0.06 roys 0.97 – – – – factor analysis of lpi and imd’s scores retrieval of imd factors: table a11. kmo and bartlett’s test kaiser-meyer-olkin measure of sampling adequacy 0.6 bartlett’s test of sphericity approx. chi-square 426.165 df 120 sig. 0.000 table a12. total variance explained. extraction method: principal component analysis component rotation sums of squared loadings total % of variance cumulative % 1 1.151 7.194 7.194 2 1.129 7.058 14.252 3 1.102 6.890 21.142 4 1.084 6.778 27.920 5 1.082 6.764 34.684 6 1.059 6.620 41.304 7 1.022 6.389 47.693 8 1.019 6.371 54.064 9 0.981 6.129 60.194 10 0.975 6.093 66.286 11 0.950 5.937 72.223 12 0.933 5.828 78.052 13 0.899 5.616 83.668 14 0.878 5.487 89.155 15 0.870 5.437 94.592 16 0.865 5.408 100 extraction method: principal component analysis. 273 business, management and education, 2015, 13(2): 249–275 table a13. rotated component matrixa components: 1 2 3 4 5 6 7 8 84. science in schools 0.885 78. student mobility inbound 0.93 79. student mobility outbound 0.972 74. pupil-teacher ratio (primary education) 0.916 77. higher education achievement (% 0.884 75. pupil-teacher ratio (secondary 0.874 76. secondary school enrollment (%) 0.793 82. english proficiency – toefl 0.808 components: 9 10 11 12 13 14 15 16 72. total public expenditure on education 0.777 88. language skills 0.74 81. educational assessment science 0.674 80. educational assessment mathematics 0.662 87. illiteracy (%) –0.73 86. management education 0.589 83. educational system 0.584 85. university education 0.566 extraction method: principal component analysis. rotation method: equamax with kaiser normalization. a. rotation converged in 61 iterations. retrieval of lpi factors: table a14. kmo and bartlett’s test kaiser-meyer-olkin measure of sampling adequacy 0.934 bartlett’s test of sphericity approx. chi-square 600.078 df 15 sig. 0.000 table a15. total variance explained. extraction method: principal component analysis component rotation sums of squared loadings total % of variance cumulative % 1 1.050 17.492 17.492 2 1.028 17.129 34.621 3 0.997 16.622 51.243 4 0.988 16.473 67.716 5 0.973 16.208 83.924 6 0.965 16.076 100 extraction method: principal component analysis. 274 t. yildiz. an empirical study on the relationship between logistics performance and education table a16. rotated component matrixa 1 2 3 4 5 6 time 0.715 itrn 0.683 cust 0.630 trac 0.616 infr 0.587 logs 0.576 extraction method: principal component analysis. rotation method: equamax with kaiser normalization. a. rotation converged in 71 iterations. table a17. wef: “twelve pillars of economic competitiveness”. highlighted row variable is used. 1 – “basic requirements” institutions 2 – infrastructure 3 – macroeconomic stability 4 – health and primary education 5 – “efficiency enhancers” higher education and training 6 – goods market efficiency 7 – labour market efficiency 8 – financial market sophistication 9 – technological readiness 10 – market size “innovation and sophistication factors” 11 – business sophistication 12 – innovation table a18. imd: four categories with several sub-categories. highlighted row variable is used economic performance: domestic economy international trade international investment employment prices government efficiency: public finance fiscal policy institutional framework business legislation societal framework 275 business, management and education, 2015, 13(2): 249–275 business efficiency: productivity and efficiency labour market finance management practices attitudes and values infrastructure: basic infrastructure technological infrastructure scientific infrastructure health and environment education turkay yildiz is a researcher at izmir institute of technology. he received his phd from the institute of marine sciences and technology, dokuz eylul university, izmir, turkey. he received his master’s degree in logistics management from izmir university of economics. he has a number of peer reviewed publications and conference presentations at various countries in such fields as transportation, logistics and supply chains. he also has various levels of expertise in the applications of information technology. end of table a18. this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: annie.le@nccu.edu.tw business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 2: 237–257 https://doi.org/10.3846/bmee.2022.17055 performance evaluation of bilateral economic cooperation between taiwan and partner countries under new southbound policy: past, present, and future thi-nham le * ba program in southeast asian languages and cultures, national chengchi university, taipei city, taiwan (r.o.c) received 29 may 2022; accepted 18 october 2022 abstract. purpose – in light of the taiwan new southbound policy (nsp), this paper aims to evaluate the performance of bilateral cooperation between taiwan and its economic partner countries in order to have a better understanding of the coherence of reciprocal relations in the past, present and future. research methodology  – firstly, both individual forecasting models and combining forecasts were employed to predict the future values based on a period of thirty years (1990–2019). secondly, the paper proposes non-convex dea to detect non-convex characteristics of datasets where the volume of inputs and outputs were unevenly allocated in past years. finally, a dea window was applied to provide efficiency scores for decision-making units (dmus) across a period of twelve years (2014–2025). findings  – the results found that the efficiency of seven out of eight dmus will improve in the coming years. with a stable performance in both scale and efficiency, singapore is taiwan’s most successful economic partner, followed by malaysia. the nsp remained as a vital foreign policy in supporting taiwan’s bilateral trade and outward foreign direct investment (ofdi). research limitations  – more inputs and outputs are required in order to reflect the overall performance of the bilateral cooperation between two economies. furthermore, more extended models are worth further investigation. practical implications – the forecasting values of exports and imports can be used in analysing taiwan economy’s trade deficits. this study provides useful inputs for managers in allocating resources of inbound and outbound values, and reacting rightfully to the uncertain future. originality/value – the paper not only contribute much more than previous ones by evaluating into the relationship between size of scale and efficiency of bilateral economies but also provide advices for policymakers in creating mechanisms that can facilitate the nsp’s sustainable development. keywords: taiwan new southbound policy, data enveloping analysis (dea), non-convex dea, window dea, forecasting models. jel classification: f17, f21. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2022.17055 https://orcid.org/0000-0002-7319-8447 238 t.-n. le. performance evaluation of bilateral economic cooperation between taiwan and partner... introduction the rapid economic growth and geopolitical importance have made southeast asia (sea) and india of the significant region to the global economy. taiwan new southbound policy (nsp) promulgated in 2016 towards 18 countries in the indo-pacific region considered as the foreign policy with attempts to enhance the regional economic connectivity (chang et al., 2017; hsu, 2017; huang, 2018; lee & sun, 2019; yang & chiang, 2019). many researchers have studied on the core goals and implementation of the nsp, an interpretation emphasized on people-centered orientation. hsu (2017) reviewed the differences between the new version and the previous “go south” policy proposed under the lee and chen administration, the new core elements are added in attempting to reflect a cornerstone of the regional cooperation and integration, and to build the bilateral economies between taiwan and its partnership. chen (2020) argued that the nsp is an ambitious initiative that objectives are vague with lack of metrics to be evaluated. in the study of lee and sun (2019), economic roles of the five nsp “flagship” agenda in endeavoring to promote the “soft power” for taiwan and manufacturing capacity, and the ultimate objective is to gradually build up the win-win collaboration and a sense of regional community rather than the focus of economic-only policy. chang et al. (2017) provided a comprehensive the review of short-and medium-term roadmap in order to potentially enhance values of cooperation targeting on six larger scale production countries (india, indonesia, thailand, vietnam, philippines and malaysia), the paper suggests four major aspects of nsp should be focused on the collaboration of industry, market, capacity building and system. the aforementioned literatures analyzed on socio-cultural and political aspects of the nsp phenomena, of which, few studies that focus on addressing the economic issues; thus far, none of prior researches provides empirical outcomes relative to the bilateral economic cooperation based on quantitative approaches. the wave of investment from taiwan to the asean have been increased gradually over the years; however, the uncertain suspicions and obstacles are remained, and needed to be further investigated (chen, 2020). therefore, this paper aims at evaluating the performance of bilateral cooperation between taiwan and its partner countries based on the perspectives of the reciprocal relations. many studies found effects of fdi of a country is correlated with its stage of economic development, and the relations between fdi and trade flows are substitution or complementary to each other (lin et  al., 2015; kozlova & miečinskienė, 2016; ahmad et  al., 2016; bhasin & baul, 2016; camarero et al., 2018). therefore, decision-making units (dmus) are assumed as bilateral fdi and trade flows between taiwan and its economic counterparts. in this paper, two inputs, taiwan outward fdi (ofdi) and net import are capital outflow out of taiwan considering as input cost; whereas, two outputs, taiwan inward fdi (ifdi) and net export are output profit where taiwan receives capital from its counterparts. the methodological approach is summarized in three main stages. firstly, instead of using one single approach where it only deals with data trend under static condition, both individual and combining forecasts are utilized to produce accurate results. five simple models are the mean method, moving average, exponential smoothing, theta and autoregressive integrated moving average (arima) considered as the most fitted models by generating smallest errors within this study. each dataset was business, management and economics engineering, 2022, 20(2): 237–257 239 performed in an out of sample forecast with a 6-step-ahead forecast. secondly, a non-convex dea was employed to provide scale-and cluster-adjusted scores (sas) and scale efficiencies in the past period. thirdly, the dea window was applied to analysis inter-temporal empirical data and provide clear efficiency scores for 12 years (2014–2025). therefore, this study contributes much more than previous ones by evaluating into the relationship between size of scale and efficiency of bilateral economies. to our best knowledge, no prior study has employed an integrated approach of forecasting techniques, dea non-convex and window analysis to evaluate the performance of dmus. there are some limitations, which lead to the future research. in the light of taiwan’s nsp, there are 18 partner countries under its scope; however, due to the inadequate datasets, this article only examines the bilateral cooperation between taiwan and the eight major targeting economies. hence, it suggest that more economic indicators and powerful models are required in order to generate better fruitful results, and that provides a more comprehensive perspectives and advices for policymakers. 1. literatures 1.1. the selection of forecasting models together with the rapid development of forecasting techniques, more innovative models can be used for increased forecasting accuracy of fdi, exports and imports. since the approach of forecasts combination was firstly introduced by bates and granger (1969), an amount of papers have aimed at comparing the forecasting accuracy between individual and combining forecasts; however, no consensus in the conclusions (ajayi, 2019; thomson et al., 2019). a large number of literatures demonstrate that the accuracy of combining forecasts are not guaranteed to outperform the individual ones, but it is resulted in lower risk in practical prediction (kourentzes et al., 2019; alaminos et al., 2022). the accuracy of different techniques varies widely based on characteristics of datasets and the lengths of historical time series data (çatık & karaçuka, 2012; petropoulos et al., 2018). between two individual economies, the trend of trade and investment are fluctuated largely on yearly basis and affected by many external factors. hence, it is very difficult to predict the future data based on one single forecasting approach for 32 datasets with different characteristics and uncertain conditions. fildes and petropoulos (2015) proposed simple and accurate forecasting models that needs to be firstly considered, rather than using complex models, which are required to develop the formulation in computational challenges. within a vast amount of models, it is important to select a feasible methodology that can be easily interpreted and consequently utilized to provide advices for policymakers. therefore, both individual and combining forecasts are carried out carefully. the selection of models were decided which based on each dataset condition and the forecasting accuracy drawn from empirical results. to the best of the author’s knowledge, none of the existing studies relative to the forecasts in bilateral foreign direct investment between two individual economies have been employed the proposed models as it used within this research. therefore, this study aims at filling the gap in the forecast literature. 240 t.-n. le. performance evaluation of bilateral economic cooperation between taiwan and partner... 1.2. data envelopment analysis and the selection of dea models data envelopment analysis (dea) was originally developed by charnes et al. (1978), a nonparametric approach used in empirical studies for quantifying the efficiency level of dmus. recent years, a numerous amount of dea models are available to evaluate the efficiency of dmus in analyzing efficient scores of fdi and its impact on the economic growth for the host countries. most of dea models assume the efficient frontier is convex for the purpose on measuring efficiencies. however, non-convex frontiers are existed in the context of reality, and it cannot be solved by traditional methods (bayaraa et  al., 2019). tone and tsutsui (2015) introduced the non-convex dea that regarded as the best model to deal with nonconvex datasets; it is helpful in addressing the problem of imbalances between outbound and inbound investments. in dea approach, four available models aim at evaluating the performance of dmus changes over time, including malmquist productivity index by caves et al. (1982), dynamic dea (tone, 2010), resampling supper-sbm (ouenniche & tone, 2017); however, only dea window analysis can provide the efficiency scores of single terms under the consideration of carry-over activities between multiple consecutive windows. the dea window considers the problem of small amount of dmus where only eight dmus are analyzed under 12 adjacent years. hence, both dea non-convex and window model fit the aim of this study well. as far as the author’s knowledge, there is non-existing literatures relatives to performance evaluation of bilateral economic cooperation based on using either non-convex dea or window analysis. 2. methodology 2.1. forecasting techniques this paper employs five simple forecasts are mean method, simple moving average, exponential smoothing, theta and arima. naïve model is known as naïve nf1, together with auto arima model, both are employed as forecasting benchmark. in naïve nf1 model, all forecasts performed by the value of the last observation (athanasopolous et al., 2010). the equation is written as tt h ty yˆ ˆ+ = , where ŷ is the predicted value, t is the time and h is the horizon. mean method is one of simple forecasting models, with the predictive values being equal to the average of historical data. the equation can be written as: ( )t h|t 1 t tŷ y y y /+ = = + …+ , (1) simple moving average (sma) is considered as the simplest forecasting model (svetunkov & petropoulos, 2018). the sma() function of the package “smooth” constructs an autoregressive (ar) model in the single source of error state space form. the mathematical formulation is presented by: k t t i i 1 ˆ 1y y k −= = ∑ , (2) business, management and economics engineering, 2022, 20(2): 237–257 241 where: ty – actual value, t and k – length of the sma. the ar(n) process is rewritten as: t t 1 ty w v −′= + ∈ , t t 1 tv fv g−= + ∈ , where n 1 11 1 i 0k k f , g , w , 1 1 0 0 k k −                 = = =                        tv is the state vector. (3) assimakopolous and nikolopoulos (2000) developed theta model. the local curvature of time series through a coefficient theta ( r)θ ∈ is relevant to the second difference of data with formula as follow: ( )2 2t tz y , t 3, , n,∇ θ = θ∇ = … (4) where: 1 ny , ,y… is the original time series and ∇ is the difference operator, as t t t 1 x x x −∇ = − . svetakov and kourentzes (2018) developed the exponential smoothing, which employs the notion of potential information as an unobserved time series element. the model can deal with stationary and non-stationary in forecasting processes. the mathematical expression is as follow: ( )( ) ( )( )t 1 t 1 0 1 t t 0 1 t ty ip i y iˆ p 1 i i p̂ˆ iˆ y+ ++ = α + α + + − α + + α + , (5) where tŷ being the estimated value of time series, tp̂ is estimated values of the information potential and 0 1iα + α as complex smoothing parameters. arima is one of the most widely used forecasting methods, developed by box and jenkins (1976). it assumes a linear correlation of the time-series data in utilizing the observed linear dependencies, together with the aim to capture local patterns and extricate noise out of parameters. the non-seasonal arima model is formula as: ' ' 't 1 t 1 p t p 1 t 1 q t q ty c y y− − − −= + φ + …+ φ + θ ε + …+ θ ε + ε , (6) where 'ty is the differenced series, p – order of autoregressive part, d – degree of differencing, and q – order of the moving average part. the combination of individual forecasting methods employed to improve the forecast accuracy by hedging against forecast errors. the combined forecast is then obtained by: ( )t tŷ f 'w= , (7) where: ty is the variable of interest, ( ) ' t 1t ntf f , , f , = … the simple average gives equal weights to all predictors w 1 / n= , n is not perfectly collinear predictors. 2.2. forecast evaluation thomakos and guerard (2004) proposed the standard procedure of forecasts that it splits the time series into the training set and the test set. the test set should contain at least 242 t.-n. le. performance evaluation of bilateral economic cooperation between taiwan and partner... the same amount of data samples as the projected forecasting horizon h. in this study, the 80-20 split ratio is chosen; whereas, the 80 percent of initial 30 data points are applied to train the model, while the remaining 20 percent are used to compare actual values against forecasted ones. evaluation metrics are used to compare the forecast accuracy of each proposed model against benchmark models obtained from the rwf() function (naïve nf1) and auto.arima() function (arima). forecast errors are the difference between an observed value and its forecasts, which computed by: t h t h t h|te y ŷ+ + += − , (8) where the training data are given by { }1, ty y… and the test data as by { }1 2, ,t ty y+ + … . in this study, the mean absolute percentage error (mape) is used; this is one of the most popular error metrics in measuring forecast accuracy. the equation is written as follow: tt t 100e p y = . (9) if 0ty = , errors will be infinite or undefined; if ty is close to zero, errors are tended towards extreme values. the values of mape can be interpreted as follow: less than 10 percent considered as highly accurate forecasts; from 10 to 20 percent regarded as good forecasts; from 20 to 50 percent examined as reasonable forecast; and more than 50 percent denoted as inaccurate forecasts (thomakos & guerard, 2004). 2.3. non-convex dea in order to determine s-shaped frontiers precisely, tone and tsutsui (2015) developed the non-convex dea model aimed at identifying the influence of scale efficiency and clusters. with varying degrees of inputs or outputs, dmus are divided into several clusters; hence, efficiency scores are localized rather than general scores attained from the entire group. the model proposes a scale-and cluster adjusted score (sas) used to observe carefully dmus which are not efficient. if the input-oriented are considered, the model can be described as follow: the inputs and outputs data are formulated as: ( ) ( )m×n s×nx ir and y irij rjx y= ∈ = ∈ . (10) with m, s, and n are numbers of inputs, outputs and dmus. it assumes that x and y are positive values. the input-oriented estimates the effective performance of each dmus in the constant returns to scale (crs) and variable returns to scale (vrs) models are written as follow: ( ){ }crs : x, y | x x , y y , 0p = ≥ λ ≤ λ λ ≥ ; ( ){ }vrs : x, y | x x , y y , e 1 , 0p = ≥ λ ≤ λ λ = λ ≥ ; (11) vrs ,s ,s 1 1 : min (1 ) m i k iki s m x− + − λ = θ = − ∑ ; s.t. x s x , s y , e 1, 0, s 0, s 0k k − + − +λ + = λ − = λ = λ ≥ ≥ ≥y . (12) business, management and economics engineering, 2022, 20(2): 237–257 243 the scale efficiency (σk) of dmu are computed with the values from zero and one, a larger value that interprets the better efficient score. the projection dmus attained efficiency scores under the assumption that all sas, crs and vrs are efficient within its cluster. the sas scores are formulated as: ( ) cl * cl *k ksas 1 1 1 s1 1 : 1 1 m m kik k ik iki i ss m x m x − −− = = − σ + θ = − = −∑ ∑ . (13) where the sas is not less than the vrs score: ( )sas vrs k k kθ ≥ θ ∀ . (14) if all dmus are positioned in the same cluster, then ( )sas vrsk k kθ = θ ∀ indicating that there is no s-shaped frontiers with all dmus located to the same cluster. 2.4. window dea banker et al. (1984) developed the window dea that enables to provide the efficiency level of dmus over the years under the consideration of carry-over activities between multiple windows. it increases the opportunities to realize on how efficiency level develops through sequences of overlapping window. this model estimates the efficiency change over time by using a moving average analogue that covers observations from whole study period; therefore, efficiency scores are more reliable. this model can be explained briefly as follow: it assumes that n decision-making units (n  = 1… n) are observed in t periods (t  = 1… t), where r inputs used to generate s outputs. therefore, the sample has n x t observations, and an observation n in period t, ntdmu has an r-dimensional input vector ( )'n n n nt 1t 2t rtx ,x , ,x= …x and one s-dimensional output vector. ( )'n n n nt 1t 2t sty y ,y , ,y= … . (15) the window starting at the time k, 1 k t≤ ≤ and with the width w, 1 w t k,≤ ≤ − is denoted by kw . the matrix of inputs for this window analysis is written as: ( )w 1 2 n 1 2 n 1 2 nk k k k k 1 k 1 k 1 k w k w k wx x ,x , ,x ,x ,x , ,x , ,x ,x , ,x+ + + + + += … … … … ; (16) ( )w 1 2 n 1 2 n 1 2 nk k k k k 1 k 1 k 1 k w k w k wy y ,y , ,y ,y ,y , ,y , ,y ,y , ,y+ + + + + += … … … … . (17) the matrix of outputs is as follow: lin et  al. (2015) proposed that all dmus in each window are compared and contrasted against from each other; hence, a narrow window width should be considered in order to provide more accurate outcomes that are efficient across the specific period. 3. results and discussion 3.1. data source given by aforementioned literatures, this paper defines the dmus as bilateral trade and investment between taiwan and its major economic counterparts. since there are large 244 t.-n. le. performance evaluation of bilateral economic cooperation between taiwan and partner... differences among the amount values of ofdi between dmus, eight dmus classified into three clusters, are a, b and c which are considered carefully according to the scale of ofdi. cluster a considers as two-way trade and investment between taiwan and its partners, singapore and vietnam. cluster b, which defines as dmus between taiwan and three partners are australia, thailand and malaysia economies, respectively. dmus in cluster c are between taiwan and three member countries, are the philippines, indonesia and india, respectively. table 1 shows the eight dmus. table 1. list of eight bilateral economies (source: compiled by the author) dmus bilateral economic relation clusters dmus bilateral economic relation clusters a1 taiwan – singapore a b3 taiwan – malaysia b a2 taiwan – vietnam a c1 taiwan – philippines c b1 taiwan – australia b c2 taiwan – indonesia c b2 taiwan – thailand b c3 taiwan – india c the selection of target partner countries and the aggregate data are chosen which based on the consistent availability of taiwan ofdi and ifdi data under the nsp. the minimum number of dmus is at least twice of the total number of inputs and outputs which required by the dea application. the raw data of taiwan bilateral ofdi and ifdi are retrieved from the monthly report of taiwan ministry of economic affairs, whereas, the actual values of bilateral exports and imports are taken from the statistics database and taiwan department of custom. 3.2. data forecasting this section aims to forecast the most accurate future values of 32 datasets for six years from 2020 to 2025. statistical software “r” version 4.0.2, together with the additional packages of “forecast”, “robets” and “smooth” are utilized to generate the forecasting results. both individual and combining forecasts are examined carefully in order to select the best-fit models. in this study, an out of sample forecast is fundamental approach in the modelling process. each sample set comprises of a period of 30 historical points are divided into a training set of the first 24 points and a validation set of remaining 6 points. as an initial step, the candidate forecasting models are selected for the training set. consequently, a 6-step-ahead forecast used to predict future values and then compared them with the mean of the obtained ones against the previously generated validation set. mape is selected as a measure in evaluating which models are the best ones. it defines that the values of applied models are smaller than benchmark models, which are the random walk model (naïve nf1) and auto arima. finally, the proposed methods found as the best-fitted models by providing the smallest errors occurred during the forecasting steps. the empirical results found that 14 out of 32 datasets using the forecast combinations are proved superior in comparison to the individual ones. the flowchart shown in figure 1, which describes the forecasting procedures used in this research. business, management and economics engineering, 2022, 20(2): 237–257 245 figure 1. forecasting fl owchart table  2 shows the forecast accuracy of 32 datasets and comparisons between proposed models against benchmark models. th e specifi c forecasting models and its predictive values of 32 datasets are also illustrated in appendix. it found that this paper’s applied models, which are used to predict the future values of imports, and exports regarded as the best-fi tted models by providing the small errors ranged from 2.29 percent to 14.1 percent, representing the good to an excellent level of forecast accuracy. th e empirical results found that six out of eight economic counterparts observe the uptrend tendency in exports and imports with taiwan, only two-way trade with indonesia and india experience the slight decrease in the coming years. table 2. th e accuracy comparisons of forecasting models (source: compiled by the author) mape/ export a1 a2 b1 b2 b3 c1 c2 c3 naïve nf1 11.61 11.9 17.85 12.75 31.53 19.44 36.88 9.34 auto arima 25.4 3.47 13.25 20.8 13.54 36.79 23.16 9.34 th is paper’s applied models 9.11 2.29 4.3 7.98 12.14 14.1 9.59 8.03 mape/ import a1 a2 b1 b2 b3 c1 c2 c3 naïve nf1 7.81 17.77 19.69 17.5 18.16 8.27 16.51 19.66 auto arima 7.39 16.47 40.18 13.25 14.3 13.01 24.71 19.66 th is paper’s applied models 7.25 9.86 6.67 8.23 8.06 8.2 8.6 8.75 mape/ ofdi a1 a2 b1 b2 b3 c1 c2 c3 naïve nf1 29.86 38.49 68.17 57.84 69.1 33.12 34.77 46.9 auto arima 35.73 34.79 49.53 35.93 69.2 46.03 34.29 57.1 th is paper’s applied models 24.3 28.03 24.31 28.81 23.9 25.2 22.29 24.7 mape/ ifdi a1 a2 b1 b2 b3 c1 c2 c3 naïve nf1 47.17 60.35 31.67 40.23 33.56 30.53 26.73 66.59 auto arima 37.53 48.00 26.95 37.63 29.93 36.53 35.79 23.34 th is paper’s applied models 27.59 22.3 26.47 25.88 21.68 24.83 16.2 19.78 246 t.-n. le. performance evaluation of bilateral economic cooperation between taiwan and partner... due to the large fluctuation of both inbound and outbound investment between two individual economies over a historical period, the mape values of ofdi and ifdi are ranged from the good to the reasonable level of forecast accuracy. based on the indices of mape, it indicates the proposed models used in this study outperformed better than benchmark models, are naïve nf1 and auto arima. taiwan’s outward fdi to vietnam, thailand, india and singapore will be remained as the constant uptrend for the forecasted period; it shows the sideways movement of investment from taiwan to australia, indonesia and malaysia, whereas, only taiwan’s ofdi to the philippines will experience the fluctuation over the predicted period. the moving sideways forecasts of taiwan’s ifdi from india, indonesia, the philippines and vietnam are found; whereas, it depicts a slight decrease trend in ifdi from singapore and malaysia; it foresees that taiwan will receive more fdi from australia, thailand in the coming years. the findings indicates the vital roles of the nsp in support of the increases in bilateral economic cooperation between economies. this is supported by the study of kalirajan (2007) which found the significant role of regional foreign policy in attempts to facilitate australia’s bilateral trade volume with 17 member countries in the indian ocean rim, association for regional cooperation, increased by 15 percent in the period of 1999 to 2002. 3.3. non-convex frontiers in this research, the non-convex frontier model is used to detect the non-convex structure of datasets where an amount of inputs (ofdi and import) and outputs (ifdi and export) are unevenly allocated within a historical period. this study also makes comparisons across years to understand situation of each dmu compared to others. if sass have larger values than scores given by vrs model, indicating non-convex characteristics of a dataset. table 3 provides the average scores of all scale-and cluster-adjusted score (sass), constant returns to scale (crss), variable returns to scale (vrss) and scale efficiencyies change over the past six years (2014–2019). in cluster a, discrepancies between all scores are small, depicting the highest scores for each model, regarded as the most efficient when considering the adjusted score. the results show that large variations exist within cluster b, demonstrating the nonconvex structure of economies. for cluster c, an average of sass is centered equally between crss and vrss, implying the existence of non-convex structure within the sample. among three subgroups, an average score of scale efficiency in cluster a obtained at highest score of 0.9377, cluster b came in second with score of 0.8797, and the final ranking was dmus in cluster c with much smaller score of 0.7565. table 3. cross-period comparison between clusters (source: compiled by the author) cluster sas crs vrs scale eff. a 0.9713529 0.9167085 0.9760838 0.9376754 b 0.8823381 0.7812942 0.8499074 0.8796777 c 0.7395895 0.6573728 0.8276483 0.7564878 business, management and economics engineering, 2022, 20(2): 237–257 247 table  4 and figure 2 present the average scores of all sass, crss, vrss and scale efficiencies in the historical period. among eight dmus, singapore had the most substantial relationship with taiwan in both values of trade and investment. therefore, a1 achieved the best performance with all indicators of 1.00, interpreting an equality of two-way partnership. like dmu1, c1 also ranked at the first place with a maximized efficiency of 1.00, explaining the reciprocal values of each other. table 4. cross-period comparisons between dmus (source: compiled by the author) dmus a1 a2 b1 b2 b3 c1 c2 c3 sas 1 0.94260 0.761217 0.89175 0.9940 1 0.3976 0.82613 crs 1 0.83342 0.74170 0.62038 0.9817 1 0.2898 0.68991 vrs 1 0.95217 0.824533 0.72518 1 1 0.5369 0.96085 scale eff. 1 0.87535 0.8401 0.81715 0.9817 1 0.5568 0.70773 0 0.5 1 1.5 taiwan– singapore taiwan– vietnam taiwan– australia taiwan– thailand taiwan– malaysia taiwan– phillippines taiwan– indonesia taiwan– india sas crs vrs scaleeff. figure 2. cross-period comparisons between bilateral economies (source: compiled by the author) b1 followed in fourth by obtaining an average index of 0.84 in scale efficiency, with the sas is placed between the crs and vrs scores. the dmu outperformed in the years of 2015, 2016 and 2019 with all indices are scored at 1. however, b1 revealed to the non-convex structure in 2017 due to the smaller amount of an inward fdi. the average score in scale efficiency of b2 ranked fifth, c3 followed in sixth, and c2 came in last. b2 was worsen, with four non-convex frontiers in historical years. c2 experienced three out of six observations are non-convex structures, with all indices are much smaller than other dmus, from 30 to 50 percent. notwithstanding the fact that two-way economic cooperation of c3 is much smaller than dmus; however, it experienced one non-convex structure only. simultaneously with the remarkable score of 0.96 in vrs, indicating that india is regarded as the significant partner for taiwan where the degree openness of the economic integration is proved in this study. 248 t.-n. le. performance evaluation of bilateral economic cooperation between taiwan and partner... 3.4. window analysis in the real context, the long-term strategy of trade and investment are a matter of great concern, macroeconomic issues at national level may take more than several years to adjust input factors given to the outputs level; hence, the chosen window length is five years. the results of 12 terms in inter-temporal analysis are conducted in table  5 and table  6, which show the efficiency trends of dmus. it exhibits an average efficiency of 81.6 percent in a 12-year period (2014–2025) within the sample, 22 out of 92 observations are fully efficient. the forecasting years are projected to obtain an average score of 88.5 percent, increased by 13.9 percent compared to the historical term. table 5. variation on performance across a period of 12 terms (source: compiled by the author) year dmus 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 a1 1 0.957 0.813 0.804 0.955 1 1 1 1 1 1 1 a2 0.910 0.878 0.824 0.896 0.824 0.600 0.682 0.677 0.681 0.668 0.661 0.654 b1 0.358 1 0.769 0.306 0.379 1 0.792 0.887 0.910 0.952 0.996 1 b2 0.480 0.521 0.771 0.476 0.673 0.665 0.999 0.999 0.999 1 1 1 b3 1 0.683 0.615 0.508 0.982 0.649 0.779 0.884 0.922 0.995 0.997 1 c1 1 1 0.975 0.972 0.936 0.998 1 1 0.987 0.988 1 1 c2 0.283 0.319 0.500 0.448 0.420 0.486 0.512 0.605 0.594 0.605 0.625 0.634 c3 0.851 1 1 0.785 0.623 0.930 0.924 0.946 0.966 0.970 1 0.997 average 0.735 0.795 0.783 0.649 0.724 0.791 0.836 0.875 0.883 0.897 0.910 0.911 table 6. comparisons between the past and future period (source: compiled by the author) dmus the past period the forecasted period discrepancy average a1 0.922 1 0.078 0.961 a2 0.822 0.671 –0.151 0.746 b1 0.635 0.923 0.288 0.779 b2 0.598 1 0.402 0.799 b3 0.74 0.929 0.189 0.835 c1 0.98 0.996 0.016 0.988 c2 0.409 0.596 0.187 0.503 c3 0.865 0.967 0.102 0.916 av. 0.746 0.885 0.139 0.816 c1 obtained the most efficient observations over a time-span of 12 years with an average index of 98.8 percent, where the dmu found to have the lowest slacks between input and output variables. the two-way investment was ranked at fifth out of 8 dmus, taiwan export and import from its counterpart was at fourth and eighth, respectively. it is the small size in both inputs and outputs, but reflect the proportionality collaboration between taiwan and the philippines. business, management and economics engineering, 2022, 20(2): 237–257 249 singapore is taiwan’s largest trading partner. recently, singapore is the second destination of taiwan ofdi, after vietnam; taiwan received the largest amount of investment from singapore, with 40 percent out of the eight dmus. a1 is the only counterpart attained fully efficient scores over seven consecutive years 2019–2025. therefore, singapore regarded as the most successful economic partner in the regional bloc in both size and efficiency. c3 came in third with an average score of 91.6 percent; it predicts that it will be increased by 10.2 percent in the forecasted period. india is taiwan’s smallest fdi recipient compared to other nsp partner countries, with only 4 percent. however, as analyzed in the non-convex dea assessment, this dmu obtained an impressive score of vrs in the historical years, exhibiting an acceleration of economic exchanges and stronger ties between two countries in efficiency. taiwan-malaysian relation estimates to be risen by 18.9 percent in efficiency. malaysia is taiwan’s second largest trading partner, after singapore and the third largest investor in taiwan market, after singapore and australia. it made an estimate of fully efficient in 2025 after a fluctuation in efficiency during a period 2014–2018. the result indicates the intensifying economic ties between two economies. b2 ranked at fifth in efficiency. it exhibits the most improvement in efficiency by comparing the average score of forecasting and historical years, it expects to be risen sharply with 40.2 percent. thailand is taiwan’s third largest fdi recipient in the regional bloc. overall, the forecasting years are predicted to obtain the stable efficiency performance, with fluctuation around 77.9 to 100 percent. australia is the only country that taiwan imports a greater value than it exports, with major merchandises are coal, iron ore, natural gas, copper and agricultural products. b1 ranked at six in efficiency. it revealed variations in efficiency in the past period, with fluctuation between 35.8 and 100 percent; however, it gradually increases in the forecasting period. vietnam has huge development opportunities to ride fdi waves from taiwan. the finding shows that efficient scores experience the decrease almost 15.1 percent in the coming years after reaching the peak of 91 percent in the year of 2014, interpreting uneven utilizations between inputs and outputs, where values of ofdi are much greater than ifdi. taiwan continues to increase the large amount of investment into vietnam, not only light industries but also high tech factories. c2 observed the lowest ranking, with an efficiency score at 50.3 percent, the fluctuation between 28.3 and 63.4 percent. taiwan-indonesia bilateral economy experienced the smallest scores in all indicators of sas, crs, vrs and scale efficiency. the empirical results interpret that indonesia regarded as the smallest economic counterpart out of eight dmus in both size and efficiency. 4. discussion the above empirical results depict that seven out of eight dmus characterized by upward trends of efficiencies in the forecasted period (2020–2025), indicating the significant role of the nsp in support of taiwan’s exports, imports and outward fdi. some previous 250 t.-n. le. performance evaluation of bilateral economic cooperation between taiwan and partner... studies had examined the regional economic cooperation between countries by measuring the impact of fdi and trade values on bilateral economies. goh et  al. (2013) found the correlation of two-way collaboration between malaysia and 59 countries over the period from 1991 to 2009. the findings indicate the positive coefficients of ifdi for the bilateral imports and exports, whereas, the ofdi is negligible impact on the linkages for malaysian’s bilateral trade values. in the literature of li et al. (2019), the authors investigates the performance evaluation of bilateral economic cooperation between china and 64 countries under the international trade of the belt and road initiatives (bri) over the period 2010–2017. the empirical results exhibited that 46 (72 percent) countries increased the trade volume with china in 2010–2017 period. this study is considered as novelty contribution to the bri foreign policy for chinese policymakers using the quantitative approach. in this paper, it aims to fill the gap by focusing more closely on performance evaluation of two-way (inbound and outbound) cooperation in order to identify the coherence of bilaterally reciprocal relations based on the past, present and the future data of bilateral fdi and trade in the light of taiwan’s nsp. conclusions based on the findings of an integrated approach, it considers in classifying dmus into four groups. group i, a1 and b3 shows a stable efficiency performance in terms of both scale and efficiency, characterized by increasing returns to scale (irs), indicating singapore is the most successful economic partner, followed by malaysia. the result underpins the complementary nature of partnership between two economic alliances. group ii includes counterparts like thailand, india and the philippine, considered as taiwan’s small and medium-sized collaborations; however, the efficiency scores are found that relatively high, it suggests that taiwan nsp policy makers should promote further agendas in order to attain the win-win cooperation for both sides. group iii, two-way economic cooperation between taiwan and its partnership, australia and vietnam, viewing as large scale of input values but resulting in lower efficiency scores, indicating the decreasing returns to scale. the findings emphasize on the alleviation between capital outflows and inflows. taiwan has slide towards increased merchandise trade deficit with australia where imports are greater value than exports. whereas, taiwan ofdi to vietnam has increased sharply but ifdi from vietnam to taiwan are stagnated, it caused to the low scores in performance. group iv, the large uneven allocations of inputs and outputs are major causes of poor performance, bilateral economy between taiwan and indonesia regarded as small value in both size and efficiency. this research differs from the existing literatures in three novel aspects. firstly, the methodological contribution aims towards a framework in three major stages, which includes data forecasting, non-convex frontiers and window analysis in both dynamic and volatile macroenvironment. secondly, the predictive values of exports and imports can be used in analyzing taiwan economy’s trade deficits. it also solves the deficiency of forecasting literatures relating to investment flows, exports and imports between taiwan and its economic counterparts. business, management and economics engineering, 2022, 20(2): 237–257 251 thirdly, this study provides useful inputs for policy makers in allocating resources of inbound and outbound values, and reacting rightfully to the uncertain future. the paper not only add to the literature by evaluating the performance of two-way economic cooperation, but also provide advices to policy makers in creating a mechanism design to pursuit the sustainable development and promoting the nsp agenda for its regional policy. it is worth noting that the nsp considered as vital foreign policy where taiwan inbound investment and export will be increased in the forecasted period. taiwan government has pursued an active policy aimed at enhancing the nsp. many factors may contribute to the level of scale inefficiencies such as outward sources are greater values than inwards, and the political environment change. nevertheless, the outcomes may be due to the effects of longterm sustainable investments. it suggests that the policy makers should focus on persistent efficiency enhancement in the long-term. the promotion of scale efficiency change is a main key to increase the fdi attractiveness from its economic partnership. the nsp’s member countries should focus on industrial restructuring, regional economic circle development and digital development in order to gain more investment from each other. as the limitation of this study, it suggests more national economic indicators and efficient models, and its theoretical extensions are worthy of further examination in order to reflect the perspective of coherence of reciprocal relations between taiwan and the 18 member countries in the light of the taiwan’s nsp. data availability statement the data that support the findings of this study are available in taiwan ministry of economic affairs and taiwan customs administration. acknowledgements it is an honour to express my gratitude for great the comments and feedbacks received from anonymous referees and editors. funding no funding was received for conducting this study. disclosure statement the author has no conflicts of interest to declare that are relevant to the content of this article. references alaminos, d., salas, m. b., & fernández-gámez, m. a. 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accepted 16 may 2016 abstract. the increasing complexity of supply chains, whose structure is changing from a linear to network form creates the need to track a growing amount of information allowing the evaluation of the functioning of the entire supply chain. developing a system for measuring the performance of the supply chain requires the proper selection of indicators. performance measurement should be done in a particular context, the analysed dimensions of indicators resulting from the purpose and focus of the survey should be determined. the article reviews polish and foreign literature in terms of the proposed framework and methods for measuring the performance of the supply chain and the indicated categories (dimensions) of indicators. the authors approach the subject of evaluation of the performance of the supply chain in very different ways. indicators are divided according to the level of the decisionmaking process: strategic, tactical, and operational. they are also divided into cost and non-cost or financial and non-financial ones. there are also approaches using the already well established methods and models. an example of this is the selection of perspectives according to the balanced scorecard (bsc) and the scor model. keywords: supply chain, performance measurement, indicators, categories, dimensions. jel classification: l20. 1. introduction the increasing complexity of supply chains, whose structure is changing from a linear to a network form, creates the need to track a growing amount of information allowing the evaluation of the functioning of the entire supply chain. achievement and maintenance of an adequate level of supply chain performance is becoming a major source of sustainable advantage in many industries, due to the increasing competition between supply chains. supply chain performance is the ability of the supply chain to (whitten et al. 2012): – provide products and services of appropriate quality in specific quantities and at the appointed time, and; – minimize the total cost of products and services to the final customer in the supply chain. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(1): 103–115 doi:10.3846/bme.2016.317 http://dx.doi.org/10.3846/bme.2016.317 104 d. leończuk. categories of supply chain performance indicators: an overview of approaches creating and developing a system for measuring the performance of the supply chain requires the proper selection of indicators. performance measurement should be done in a particular context, the analysed dimensions of indicators resulting from the purpose and focus of the survey should be determined. the article presents: (i) the concept of supply chain performance, (ii) a framework for measuring the performance of the supply chain and its role in supply chain management, (iii) review of the polish and foreign literature in terms of the proposed framework and methods for measuring the performance of the supply chain and the indicated categories (dimensions) of indicators. 2. the concept of supply chain performance supply chain performance is defined as the ability of the supply chain to deliver the right product to the correct location at the appropriate time at the lowest cost of logistics (zhang, okoroafo 2015). this definition takes into account the time of delivery, cost, and value for the end consumer. the authors believe that this definition includes the most important aspects of the supply chain (zhang, okoroafo 2015). there are three basic criteria of performance evaluation (estampe 2014): – efficacy – the relationship between the achieved results and the pursued objectives; it is related to the level of customer satisfaction with respect to the resources committed for this purpose; – efficiency – the relationship between efforts and resources involved in the operation and the actual utility value as a result of the action; it is linked to the achievement of objectives at a lower cost; – effectiveness – is related to the satisfaction with the results. supply chain performance is the ability (of the entire supply chain) to meet end-customer needs, associated with ensuring the availability of product, deliver it on time in the right way and ensure appropriate inventory levels. it also exceeds the functional boundaries of organizations, i.e. production, distribution, marketing and sales, research and development. the functioning of the supply chains should be constantly improved. therefore, measures to support the improvement of the performance of the global supply chain should be used, not only those that relate to the individual companies and their functions (hausman 2004). performance measurement is defined as the process of quantifying the efficiency and effectiveness of the undertaken actions. effectiveness is understood as the degree of fulfilment of customer expectations, while efficiency is a measure of the extent to which business assets are used to provide a given level of customer satisfaction (neely et al. 1995). in turn, the performance measuring system should be understood as a set of indicators used to quantify the efficiency and effectiveness of operations (shepherd, günter 2012). performance measurement system may be analysed on three different levels: – individual performance indicators; – a set of performance indicators (as a whole); – the relationship between the performance measurement system and the environment in which it operates. 105 business, management and education, 2016, 14(1): 103–115 the relationships between them are shown in figure 1. environment individual indicators performance measurement system individual indicators individual indicators individual indicators fig. 1. a framework for performance measurement system design (source: neely et al. 1995) the fundamental objectives of performance measurement systems include (akyuz, erkan 2010; parker 2000): – identification of success; – monitoring of the degree of meeting customer expectations; – better understanding of the processes taking place in the company and its environment; – identification of bottlenecks, wastage, problems and opportunities for development; – making decisions based on facts, not on assumptions or emotions; – creating conditions for development; – tracking the progress of the introduction of improvements; – facilitation of open communication and cooperation. the development of a performance measurement system of the supply chain requires the proper selection of indicators. an important practical problem is the analysis of too many indicators (sometimes hundreds), which greatly hinders their interpretation. furthermore, it stresses the lack of their relationship with the organization’s and the supply chain’s strategies (shaw, grant 2010). supply chain performance management (scpm) has become one of the key ways of achieving perfection. scpm aims to provide information and insight into the functioning of the supply chain by tracking key indicators, for example product quality, inventory levels etc. (louw, goedhals-gerber 2014). a well-organized system for measuring the performance of the supply chain is crucial for better supply chain management. it is necessary to identify problems, areas of measurement, and relationships between economic operators. in addition, the right tools and measurement methods should be chosen (dobroszek 2012). performance measurement as part of supply chain management (fig. 2) has an impact on the effective planning, controlling, monitoring and conducting analyses of logistics processes. it provides relevant information on costs, profits and results presented in the form of appropriate reports useful in decision-making. 106 d. leończuk. categories of supply chain performance indicators: an overview of approaches supply chain as logistic network supply chain management including logistics management (strategy, objectives) supply chain performance measurement for: • strategic dimension • tactical dimension • operational dimension information tools and methods (from financial accounting, controlling/logistics controlling, logistics) levels of supply chain: objects (e.g. resources, business entities), processes (logistics and other processes in the supply chain), tasks, partnership, the whole supply chain areas of performance measurement: time, quality, productivity, flexibility, reliability, capacity, cost, results, customer satisfaction fig. 2. performance measurement as a part of management in supply chain (source: dobroszek 2012) an adequate performance measurement system helps to identify problem areas. performance measurement is crucial in managing the organization in a turbulent environment and competitive global markets. an appropriate set of metrics enable companies to observe the progress in implementing the strategy, identify areas that need improvement, as well as compare themselves with competitors and leaders. they provide the necessary information for managers so they can take the right decisions at the right time. one of the most important problems associated with performance measuring is attempt to analyse too many indicators, hundreds of them which, however, are not related to the company’s strategy (shaw, grant 2010). performance measurement should be performed in a particular context, the analysed dimensions of indicators resulting from the purpose and focus of the measurement should be determined. 3. categories of supply chain performance indicators developing a framework for assessing the performance of the supply chain requires certain assumptions, including the ones related the areas of its measurement. the catalogue 107 business, management and education, 2016, 14(1): 103–115 of selected categories of indicators proposed in literature, which can be used to assess the performance of the supply chain is shown in table 1. table 1. the categories/dimensions of the supply chain performance indicators (source: own) source categories/dimensions framework shepherd, günter 2012; chan et al. 2003 qualitative, quantitative – gunasekaran et al. 2004 strategic, tactical, operational decision level de toni, tonchia 2001 cost and non-cost: time, quality, flexibility – neely et al. 1995; elrod et al. 2013; arif-uzzaman, ahsan 2014; bozarth, handfield 2007 time, cost, flexibility, quality – shepherd, günter 2012 time, cost, flexibility, quality, innovativeness – chimhamhiwa et al. 2009 cost, time, quality, technological innovation, society, customer satisfaction – angerhofer, angelides 2006; beamon 1999 resources, output, flexibility – cai et al. 2009 resource, output, flexibility, innovativeness, information – cho et al. 2012 financial, competitiveness, quality of service, flexibility, resource utilization, innovation service supply chain ganga, carpinetti 2011 reliability, flexibility, responsiveness, cost, assets scor metrics focus on five performance attributes golrizgashti 2014; rodriguez-rodriguez et al. 2010 financial, internal processes, innovation and improvement, customers balanced scorecard perspectives bullinger et al. 2002 financial, customer, organisational, innovation (for each supply chain perspective, customer perspective, function perspective) balanced scorecard perspectives gunasekaran et al. 2004; chae 2009 plan, source, make, deliver scor model shepherd, günter 2012; arif-uz-zaman, ahsan 2014 planning and product design (plan), supplier (source), production (make), delivery (deliver), customer (return) scor model 108 d. leończuk. categories of supply chain performance indicators: an overview of approaches source categories/dimensions framework zailani et al. 2012 operations, economic, social, environment the extent of implementation of sustainable supply chain rajagopal 2009 customer orientation, distribution, internal operations, supply – kowalska 2011 quality, delivery, total cycle time, loss – witkowski 2010 added value and customer satisfaction, cost of operations, financial results, added value of the chain – kisperska-moroń 2006 logistics, production, purchasing, new product development, customer order management, supply chain diagnostics used in ibm van hoek 1998 cost effectiveness, integration, customer service – otto, kotzab 2003 system dynamics, operational research, logistics, marketing, organization, strategy – carvalho, azevedo 2012 operational performance, economic performance – anand, grover 2015 transport optimization, inventory optimization, information technology optimization, resource optimization retail supply chain based on review of literature it may be noted that the authors look at the problem of assessing the performance of the supply chain from different angles. they distinguish indicators according to the level of the decision-making process: strategic, tactical, and operational (gunasekaran et al. 2004). they are also divided into cost and the non-cost ones (de toni, tonchia 2001) or qualitative and quantitative (shepherd, günter 2012; chan et al. 2003). examples of qualitative measures can be customer satisfaction, flexibility, information and material flow integration, effective risk management, supplier performance. among the quantitative measures authors indicate (chan et al. 2003): 1. associated with the cost: cost, sales, profit, inventory investments maximisation; 2. associated with the customer: product lateness, fill rate, customer response time, lead time; 3. related to productivity: capacity utilisation, resources utilisation. end of table 1. 109 business, management and education, 2016, 14(1): 103–115 in literature there are also approaches using the already well known methods and models. an example of this is the selection of perspectives according to the balanced scorecard (bsc) proposed by kaplan and norton (fig. 3): financial, internal processes, innovation, improvement, and customers (bullinger et al. 2002; golrizgashti 2014; rodriguezrodriguez et al. 2010). this method is used frequently to assess the company’s activities on the strategic level, but it can also be used in supply chain management. financial perspective (shareholders’ view) mission: to succeed �nancially, by delivering value to our shareholders customer perspective (value adding view) mission: to achieve our vision by delivering value to our customer internal perspective (process based view) mission: to promote e�ciency and e�ectiveness in our business processes learning and growth perspective (future view) mission: to achieve our vision, by sustaining innovation and change capabilities, through continuous improvement and preparation for future challenges fig. 3. the four perspectives in a balanced scorecard (based on golrizgashti 2014) the measurement concept in the form of the scor model (supply chain operations reference model), proposed by the american supply chain council association is also often used (shepherd, günter 2012; arif-uz-zaman, ahsan 2014; gunasekaran et al. 2004; chae 2009). this model is designed for the management of business processes extending beyond the limits of one a single company. in this model indicators relate to the following aspects: planning, sourcing, manufacturing, delivery and returns. it also takes into account five performance attributes: reliability, responsiveness flexibility, cost and asset management efficiency, which are described in figure 4 (ganga, carpinetti 2011). 110 d. leończuk. categories of supply chain performance indicators: an overview of approaches in the article (de toni, tonchia 2001) authors identified two types of performance measurement systems: traditional cost performances (the production costs and the productivity) and more innovative non-cost measures (quality, time, and flexibility). traditional performances are related to the results of the company, for example profitability or net income. the second group are measured by non-monetary units of measure. in addition to these four categories of performance (cost, time, flexibility and quality), authors also propose innovativeness (shepherd, günter 2012). moreover, many authors agree that a measurement system should use three types of measures: flexibility, resource, and output. resource measures, can help to minimize costs, and maximize resource utilisation. the goal of them is to ensure a high level of cost efficiency. the next category, which measure the outputs of a supply chain, attempt to provide means to optimise performance. flexibility measures are used to measure the supply chain’s ability to cope with volume and schedule variations from customers and suppliers (angerhofer, angelides 2006; beamon 1999). these measures have different objectives and purpose which is shown in table 2. reliability • whether the correct product is delivered to the correct place, in the correct quantity, at the correct time, with the correct documentation and to the right customer responsiveness • the speed at which a supply chain provides the products to customers flexibility • the agility of a supply chain to respond to market changes in demand in order to gain or maintain its competitive advantage cost • involves all the costs related to the operation of a supply chain asset management e�ciency • the e�ciency of an organization in managing its resources to meet demand fig. 4. the five performance attributes used in a scor model (based on ganga, carpinetti 2011) 111 business, management and education, 2016, 14(1): 103–115 table 2. goals and purpose of performance measure categories (source: beamon 1999) performance measure type goal purpose resources high level of efficiency impact on profitability output high level of customer service avoiding the transition of customers to other supply chains flexibility ability to respond to a changing environment quick response to changes the study described in the article (zailani et al. 2012) investigates the extent of implementation of sustainable supply chain management practices (environmental purchasing and sustainable packaging), and also the outcomes of these practices on sustainable supply chain performance. factor analysis of the survey data (survey was carried out among 400 manufacturing firms in malaysia) resulted in four categories of outcomes: 1. economic, covering the following items: – sales and market share; – waste and its disposal costs; – resources management efficiency. 2. environmental, covering the following items: – compliance to environmental standards; – consumption for hazardous/harmful/toxic materials; – energy consumption. 3. social, covering the following items: – image in the eyes of its customers; – relations with community stakeholders, e.g. community activists, and non-governmental organizations (ngo); – product image. 4. operational, covering the following items: – manufacturing operating cost; – response time to unexpected fluctuations in demand; – reaction to changes to the competitors’ product offerings; – inventory turnover rate; – perfect order fulfilment. in the article (rajagopal 2009) author analyses the issue of supply chain performance measurement, based on research conducted in the indian market. the supply chain performance has been measured by identified variables in four major elements of supply chain: supply, internal operations, distribution, and customer service. kisperska-moroń cites a number of approaches to the performance measurement systems. one of them is a set of indicators used in ibm, recommended by apqc and council of supply chain management professional, collected in the following areas 112 d. leończuk. categories of supply chain performance indicators: an overview of approaches of activity: logistics, production, purchasing, new product development, customer order management, and supply chain diagnostics (kisperska-moroń 2006). (carvalho, azevedo 2012) describe agile and resilient approaches to supply chain management. they differentiate two dimensions of supply chain performance: economic and operational. figure 5 provides an overview of operational and economic measures that can be used to evaluate the influence of the agile and resilient approaches on supply chain performance. operational performance quality delivery time flexibility cycle efficiency inventory levels economic performance cash-to-cash cycle economic value added cost return on assets efficiency fig. 5. measures to evaluate the influence of agile and resilient approaches on supply chain performance (source: based on carvalho, azevedo 2012) 4. conclusions the performance measurement system should be adapted to the specific needs of each supply chain. proper selection of a set of indicators, and their dimensions helps to identify problem areas, and is crucial in managing the organizations and whole supply chains in a turbulent environment and competitive global markets. an adequate system of performance measurement, taking into account the strategies of the company and the supply chain, provides the necessary information for decision-makers. the multitude of indicators mentioned in literature (there are as many a few hundred) makes it necessary to introduce certain measurement assumptions. therefore, this may be the cause of the diverse approach to this issue in the literature. the developed catalogue of the categories of indicators can help the process of selecting the dimensions of performance measurement, both for individual companies, and entire supply chains. only taking into account a sufficient number of dimensions allows to obtain a comprehensive picture of performance. the developed in the article catalogue of categories of indicators that can be used to assess the performance of a supply chain is not exhaustive, but may be a prelude to further research. it is necessary to carry out a more extensive analysis of the proposed 113 business, management and education, 2016, 14(1): 103–115 indicators and their categories, as well as expand it with information concerning the fact whether the dimensions of performance specified in the work have been verified using statistical methods and expert knowledge. funding the research were conducted within s/wz/1/2014 project and were financed from ministry of science and higher education funds. references akyuz, g. a.; 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financial and accounting services in poland anna bagieńska the concept of a smart city in urban management sławomira hajduk the concept of basic income: global experience and implementation possibilities in lithuania algimantas laurinavičius1, antanas laurinavičius2 julia siderska evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics ligita gasparėnienė1, rita remeikienė2 the concept of products and services integration – analysis of scientific publications justyna kozłowska categories of supply chain performance indicators: an overview of approaches dorota leończuk multivariate analysis of short and long-impact indicators for corporate bond market development ieva astrauskaitė the research on interface between lithuanian direct investment abroad and foreign trade flows anžela kozlova1, algita miečinskienė2 copyright © 2016 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. the demand for professional knowledge as a key factor of the development of outsourcing of financial and accounting services in poland anna bagieńska department of finance and accounting, faculty of management, bialystok university of technology, tarasiuka 2, 16-001 kleosin, poland e-mail: a.bagienska@pb.edu.pl received 01 february 2016; accepted 03 march 2016 abstract. the access to professional knowledge and specialists’ skills is possible for small enterprises thanks to the outsourcing of services. purpose – the aim is to analyse the reasons for the outsourcing of accounting services and the factors influencing the choice of the accounting office. the specific aim is to evaluate the entrepreneur’s benefits resulting from using the knowledge of the specialists providing outsourcing services. design/metodology/approach – a questionnaire survey was conducted among 120 entrepreneurs who outsource accounting services in the podlaskie region in poland. findings – the most important factors influencing the entrepreneur’s cooperation with the accounting office are: high quality of services resulting from the competence of the employees of the office, the range of services offered by the company, advising on finance management, correctness of tax accounting, the possibility of using additional services. due to high competitiveness, the demand for professional knowledge influences the development of the outsourcing of financial and accounting services to a greater degree than the price of the services offered by the accounting offices keywords: outsourcing of financial and accounting services, human capital, demand for professional knowledge, entrepreneur. jel classification: l21, m21, m12. 1. introduction in the modern economy, knowledge and human capital constitute a very important factor of development of each enterprise. a. pocztowski defines it as a whole of specific characteristics and properties embodied in employees, which have a definite value and which constitute a source of future income both for the employee and the organization using this capital on given conditions (pocztowski 2003). in the development of financial and accounting services provided by accounting offices, the role of human capital is related, on one hand, to the accounting office owner’s perception of knowledge and skills as a b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(1): 19–33 doi:10.3846/bme.2016.313 http://dx.doi.org/10.3846/bme.2016.313 20 a. bagieńska. the demand for professional knowledge as a key factor of the development of outsourcing of financial and accounting services in poland factor of development, on the other hand, to the demand for high-quality services, both basic ones, concerning accounts and tax clearances, and additional services. a specialized branch of finance and accountancy is necessary for conducting any activity, also the one done by individual entrepreneurs and small and middle-sized enterprises. however, not all entrepreneurs are able to employ workers with necessary knowledge and skills due to financial and organizational factors. one of the reasons is economic inefficiency of creating one’s own financial-accounting department in the case of small size of enterprises. another reason is the lack of a person who has proper knowledge, competences and qualifications. the entrepreneurs who do not employ their own workers of the financial-accounting department can use the specialists’ knowledge by outsourcing. outsourcing consists in distinguishing from the organizational structure of a mother enterprise the functions it realizes and ordering other external entities to do them (trocki 2001). the external entities providing financial-accounting services are both services centers, for instance, business process outsourcing centres, shared service centres, and accounting offices providing services individually. the services offered by the centers are used most frequently by big and middle-sized domestic companies as well as by the foreign ones (świetla 2009). the research studies conducted by the starter foundation show that approximately 63% entrepreneurs use the services of accounting offices, 9% employ an accountant, and about 28% do the accounting on their own by means of a program or on-line (business development foundation “starter” – accounting services in poland 2013 (starter 2013)). accounting offices constitute the most common form of outsourcing of financial-accounting services on the polish market. the aim is to analyze the reasons for the outsourcing of accounting services and the factors influencing the choice of the accounting office. the specific aim is to evaluate the entrepreneur’s benefits resulting from using the knowledge of the specialists providing outsourcing services. in the paper, one will discuss the results of survey research done in a group of polish entrepreneurs using external accounting services. while conducting the present research study, it will be attempted to verify the thesis that the demand for specialized knowledge, which the accounting workers have, determines the development of the outsourcing of financial-accounting services in poland. 2. financial-accounting services as the object of outsourcing de vita and wang (2006) distinguish three generations of the outsourcing of various service processes. the first one concerns the fragmentation of processes unrelated to the key competences of the organization, the cause of which is the attempt to reduce the employment costs. the second generation is the exclusion from the companies other, not only ancillary, processes, which are not classified as the key competences of enter21 business, management and education, 2016, 14(1): 19–33 prises. the last generation of production fragmentation is the processes defined as key competences of the companies. the reason for such fragmentation is the improvement of efficiency and flexibility as well as innovation increase, often forced by growing competition. the factors influencing the enterprises’ decisions regarding the fragmentation of both production and other functions realized by the company as well as the profitability of outsourcing have evolved with the outsourcing development. the first causes of fragmentation are the following: competition pressure, concentration on costs, and additional benefits from the outsourcing agreements (tate et al. 2009). the financial-accouting services are classified as so-called business services (cyrek 2012), which are the services requiring professional knowledge, necessary for proper reporting, accounting and other services based on legal solutions. the collected financial data constitutes a source of information for entrepreneurs, which influences their managerial decisions. professional business services, except the high-tech industries, science and b+r activity, education and information society services, are classified as carriers of knowledge based economy, because their base is the improvement of given processes in a company thanks to the transfer of specialists’ knowledge to business (kuczewska 2009). the financial-accounting services, similarly to other functions and processes, can be ordered outside of a company in the form of outsourcing. according to the polish law (the act on accountancy) book keeping can be outsourced to the entities which provide book keeping services. as emphasized by matejun, outsourcing consists in “using the competences and skills of external, specialized entities, so that they would deal with the tasks (processes or functions), which tend to be unrelated to the main area of the mother company activity (distinguishing the activity from its structure)” [own translation] (matejun 2011). thus, it is a conception of extending the access of physical, informational and other intangible, including human, resources without increasing the size of mother organization. small enterprises have special predispositions for outsourcing their book keeping, especially in terms of the functions, which require specialized knowledge and particular skills. accounting research conducted on small and middle-sized enterprises (sme) has suggested that many companies lack qualified internal accounting capabilities (mitchell, reid 2000: 368). the lack of accounting knowledge, shortage in financing and human resources in smes pushes them to outsource in order to improve their organization. the smes use the external accountants as a source of professional advisory services to do the book keeping and prepare the financial reporting (husin, ibrahim 2014). however, very often smes do not make an optimal use of accounting information because they do not possess the skills to understand or apply the information (marriot, n., marriot, p. 2000; reddaway et al. 2011). 22 a. bagieńska. the demand for professional knowledge as a key factor of the development of outsourcing of financial and accounting services in poland employees create value for the accounting office by using their own intellectual capital and effort at the work place. the human capital resources are heterogeneous, so the results of using them become less predictable in comparison with the material assets. however, expenditure on human capital gives higher profits in a long period under given circumstances. the studies show that the set of information used by investors to evaluate the capital of an enterprise is related to the information on human capital (wyatt, frick 2010). moreover, researchers draw attention to the fact that using technology also depends on qualifications of human resources, especially in certain sectors (gomez, vargas 2012). it is not possible for companies to use only material assets (bagieńska 2015). outsourcing of accounting in smes supports two major transaction cost economics predictions, i.e. for frequency and asset specificity. eweraert, sarens and rommel present that frequency turns out to be significantly associated with the outsourcing intensity of both routine (entry of invoices, interim reporting) and non-routine (period-end accounting, preparation on financial statements) accounting tasks. they found evidence for the important role of asset specificity, in particular for the non-routine tasks. non-routine accounting tasks require more expertise and evaluation from the accountant (eweraert et al. 2010). the research conducted by jarka indicate that 22% small and middle-sized companies in poland outsource book keeping (jarka 2011). one of the causes is controlling activity of the revenue organs, which draws managers’ and enterprise owners’ attention to the need of keeping high-level tax and accounting documentation prepared by properly qualified economic entities (zieliński 2008). the analysis slovenian small and micro firms that outsource accounting presents that professional qualifications are positively associated with only one of the perceived service quality dimensions – accounting competences (groff et al. 2015). the basic task of accounting as an informational-controlling system and an economic measurement system is to create a true picture of the potential and achievements of an economic unit in the financial report. an efficient realization of this aim requires the accountant not only to scrupulously keep the accounting books and to properly present the financial report, but also to control, analyze and interpret this report (micherda, świetla 2013). it is vital that this person should have professional knowledge and skills, so that it could be possible to realize the financial-accounting tasks and to conduct the process of preparing the documentation and tax clearances properly. among the advantages of the outsourcing of financial-accounting services, it is possible to mention the reduction of the operational costs resulting from the specialization and outer provider’s scale benefit, saving time and resources, and the access to specialized technologies. the enterprises which decide to outsource the financial-accounting processes can also realize other objectives, such as gaining a competent partner representing the company in contacts with the public-legal organs, transferring part of responsibility for wrong calculating tax dues to the provider of outsourcing services as well as no need http://www.tandfonline.com/author/zaman+groff%2c+m 23 business, management and education, 2016, 14(1): 19–33 of employment and training of qualified staff in the field of finance and accounting (zieliński 2008; bagieńska 2012). the regulatory framework for accounting in poland is based on the act of 29 september 1994 on accounting. the accounting act allows selecting a variety of accounting solutions that can be individually adjusted to the specifics of the entity’s activities. an entity obliged to keep the books may do that on its own or use the services of external providers (dyhdalewicz, bagieńska 2015). the accounting services used by polish entrepreneurs in the framework of accounting outsourcing (rok po deregulacji… 2015): – revenue office settlements service (89%), – polish social security institution settlements (88%), – formal and accounting control of documents (85%), – book keeping for the settlements of tax on goods and services (88%), – book keeping (76%), – representing the enterprise in polish social security institution (78%), – preparing the payroll and staff files (78%), – representing the company in the revenue office (78%), – keeping the tax revenue and expense ledger (58%). the above presentation shows that the services tend to belong to basic activities related to proper account and tax settlements. therefore, a question arises whether the entrepreneurs do not use other services, for example, advisory, analytical, the analysis of financial results of the company, or the accounting offices do not offer such services. 3. methodology in the pilot studies preceding the research, one obtained the preliminary information on the factors determining the decision about the outsourcing of accountancy. the questionnaire was designed on the basis of this information. the research was done in 2015, in poland, in a group of 120 polish entrepreneurs, using the services of accounting offices. the respondents are the clients of randomly selected accounting offices, located in various places in the podlasie voivodship. on the owner’s approval, the clients were given 200 questionnaires. the return rate was 60%. the questionnaire consists of 30 closed questions divided into four groups: – identification of the factors which determined the decision that accounting will be done by an external company; – determinants of starting the cooperation with the present accounting office; – the factors deciding about the prolongation of the cooperation for another year; – the evaluation of the cooperation of the accounting office. the answers were presented as a set of affirmative sentences with likert’s numerical answer scale, on which intensity is marked as follows: 1 – definitely not, 2 – rather not, 3 – rather yes, 4 – definitely yes. the answer “i have no opinion” was excluded in 24 a. bagieńska. the demand for professional knowledge as a key factor of the development of outsourcing of financial and accounting services in poland order to motivate the respondent to give his or her own answer. each set of questions was followed by an open question, the function of which was to determine other factors. however, such factors have been indicated only in the case of 15% questionnaires, which may mean that the entrepreneur identifies similar determinants to those included in the sets of sentences. five responses, indicating the entrepreneurs’ demand for specialized knowledge, were selected from the survey. the following answers were chosen for evaluation: – the lack of an employee with appropriate qualifications, – the belief that external specialists will do the accounting in a more professional way, – possibility of receiving the information on current financial affairs, – help offered to choose the best form of taxation of conducted economic activity, – competent staff offering help in choosing the optimal solutions. then, it was attempted to determine the relation of this responses to the respondents’ education, the form of the conducted economic activity, the form of book keeping records, the number of years of conducting the activity. the chi-square (x2) test was applied in order to determine on the basis of grouping the answers in the contingency table whether there is a significant relation between the responses given to the two questions. in the test, the following hypotheses were verified (micherda, świetla 2014): h0 – the characteristics x and y are independent (p value < α) and h1 – the characteristics x and y are dependent (p value > α). in the calculations, one adopted the significance level of α = 0.05. in order to determine the strength of the relation between the responses to every two questions on the basis of grouping the answers in the table, the yule’s coefficient of colligation f, which is defined in the following way (micherda, świetla 2014): φ = 2x n , (1) where: x2 – the chi-square statistic value, n – the number of observations. the coefficient value is within the range [0; 1]. the higher its value is, the greater strength of the of the relation between the responses to the questions is: – the relation between the characteristics is strong if the variability of yule’s coefficient is in the range [0.65; 1], – the relation between the characteristics is moderate if the variability range of yule’s coefficient is in the range [0.35; 0.65], – the relation between the characteristics is weak if the variability range of yule’s coefficient is in the range [0; 0.35]. 25 business, management and education, 2016, 14(1): 19–33 4. research results in the research study, there were 79 male and 41 female participants, among whom 66.7% are graduates with an m.a. degree and 18.3% – graduates with a bachelor degree. almost half of them, 48%, have been running a company for 4–5 years, and 22.5% – for 2–3. new companies which have operated up to one year constitute 6%, while 16% of the respondents have operated more than 5 years. in the research group, the following subgroups dominate: entrepreneurs conducting the activity as a one-person company (33%), micro – employing up to 9 workers (31.%), as well as small ones – from 10 to 49 (30.8%). 4.2% respondents using services of the analyzed accounting offices belong to the group of middle-sized enterprises (50–250 employees). the biggest ratio of entrepreneurs have revenue and expense ledger (77.5%), while 12.5% – accounting ledgers, and 10% pays taxes in the form of tax and recorded revenue without deductible costs. the first part of the research concerns the identification of the factors, which decided about taking the decision that accounting should be done by an external company. among the most significant statements, which explain why the company decided to outsource accounting services are the following ones (fig. 1): – a sense of security and trust in knowledge and competence of the accounting office staff expressed in the statement that the cooperation with the office guarantees proper settlements with the revenue office (71% – definitely yes, 25.8% – rather yes); – the lack of the employee who has proper qualifications (67.5% – definitely yes, 20% – rather yes); – fear that if accountancy will be done internally, there will be mistakes (42.5% – definitely yes, 38.3% – rather yes; the statement also indicates that the owner does not have adequate knowledge to do, for instance, the book keeping. although the vast majority of respondents are graduates, they are afraid to do the accounting on their own. they prefer to have an external company to do it. 67.5 62.5 37.5 42.5 55.8 20.0 28.3 18.3 38.3 16.7 7.5 9.2 25.0 19.2 17.5 5.0 0.0 19.2 0.0 10.0 0% 20% 40% 60% 80% 100% the lack of an employee with appropriate qualifications the lack of time for doing the accounting the fear that doing the accounting on one’s own will result in mistakes the size of the company is too small to employ an accountant the cooperation with an accounting office will guarantee proper settlements with the revenue office definitely yes rather yes definitely not rather not fig. 1. the factors deciding about the outsourcing of accountancy (source: survey research results) 26 a. bagieńska. the demand for professional knowledge as a key factor of the development of outsourcing of financial and accounting services in poland in the second part, the respondents were asked which factors decided about the choice of the office, which currently provides accounting services. the most important factors are the following: – the range of offered services (68.3% – definitely yes, 31.7% – rather yes); – the opinions and recommendations of other companies (60.8% – definitely yes, 25% – rather yes); – offering advice on the choice of the best form of conducted economic activity taxation (45% – definitely yes, 44.2% – rather yes); – location of the office (30% – definitely yes, 25.8% – rather yes). the above listed determinants confirm that the range of services, their quality, help and advice on taking decisions attested by other clients’ opinions have more influence than other factors. the price of services, which in the research study rok po deregulacji, accountants placed on the first positions is very important for only 20% respondents, for 19% – rather yes. a many as approximately 25% respondents claim that the price, the size of the office and the certificates do not determine the choice of a service provider in a significant way. 30% respondents exclude them as factors deciding about the choice of the present office. moreover, it is interesting that 74% research participants do not find the accounting office insurance important. the trust in knowledge and competence of office staff is the reason for taking the decision to cooperate with a given office (fig. 2). possessed certificates necessary for the office operation service price opinions and recommendations of other companies range of services offered size of the accounting office location of the office possessed insurance help offered to choose the best form of taxation of conducted economic activity methods of promotion used by the office 28.3 20.0 60.8 68.3 21.7 30.0 15.0 45.0 10.8 17.5 19.2 25.0 31.7 23.3 25.8 10.0 44.2 25.0 23.3 30.0 11.7 0.0 27.5 20.8 23.3 4.2 15.8 30.8 30.8 2.5 27.5 23.3 51.7 6.7 48.3 fig. 2. determinants of the choice of the accounting office conducting the book keeping of the company (source: survey research results) in the next part of the research, one collected the information on the factors deciding about the prolongation of the cooperation for the next year. most respondents emphasized proper conducting the accounting, the possibility of receiving the information on current financial affairs, proper cooperation, help in applying for credit and the eu funds, doing the services according to the deadlines. (fig. 3). 27 business, management and education, 2016, 14(1): 19–33 fig. 3. the factors determining the prolongation of the cooperation for the next year (source: survey research results) the last area of the analysis was the evaluation of the cooperation of an accounting office. slightly more than half of the respondents, i.e. 52%, express a definitely positive evaluation. the services provided by the company meet the needs of a company (48% – definitely yes, 49% – rather yes). the entrepreneurs trust the office staff and the cooperation gives them a sense of security (57% – definitely yes). however, a certain percentage of the respondents agree with the statement that the accounting conducted by an external office makes the current evaluation of the company more difficult and they consider employing their own accountant (21% – definitely yes, 22% – rather yes) (fig. 4). fig. 4. the evaluation of the cooperation with the accounting office so far (source: survey research results) 28 a. bagieńska. the demand for professional knowledge as a key factor of the development of outsourcing of financial and accounting services in poland from the questionnaire questions one chosen those which indicate that the entrepreneurs deciding to outsource accountancy are driven by the need to acquire external specialists’ knowledge. figure 5 shows the respondents’ answers to these questions. among the factors which decided about taking the decision that accounting should be done by an external company most respondents emphasized the lack of an employee with appropriate qualifications (117 respondents gave a positive answer) and the belief that external specialists will do the accounting in a more professional way (109 respondents). the most important factor which decided about the choice of the office, which currently provides accounting services is help offered to choose the best form of taxation of conducted economic activity (108 respondents gave a positive answer). among the factors deciding about the prolongation of the cooperation for the next year most respondents emphasized competent staff offering help in choosing the optimal solutions (98 respondents gave a positive answer) and possibility of receiving the information on current financial affairs (107). 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 definitely yes rather yes definitely not rather not the belief that external specialists will do the accounting in a more professional way possibility of receiving the information on current financial affairs the lack of an employee with appropriate qualifications help offered to choose the best form of taxation of conducted economic activity competent staff offering help in choosing the optimal solutions fig. 5. the responses indicating the need to acquire external specialists’ knowledge (% all respondents) (source: survey research results) the biggest number of respondents (70% participants) chose the statement – definitely yes – in the item on the possibility of receiving the information on current financial affairs. only an educated specialist in finance and accountancy can provide such information on the basis of the accounting records. the lack of sufficient knowledge of entrepreneurs in this area results in their searching for external specialists. in order to determine whether there is a significant correlation between responses to the above mentioned questions and the period (the number of years) of conducting the economic activity, the kind of the company (one-person economic activity, micro, small, middle-sized), the form of book keeping (revenue and expense ledger) and the education of the respondents, the results of the chi-square test and yule’s coefficients 29 business, management and education, 2016, 14(1): 19–33 of colligation are presented in the table. on the basis of the chi-square test for the adopted trust level α = 0.05, it was determined when it is not justified to reject the zero hypothesis on lack of relation between the analyzed characteristics. for the first statement “the belief that external specialists will do the accounting in a more professional way”, one observed correspondence of the responses with the period of conducting the company, the kind of the company and the respondents’ education. 80 respondents (giving a positive answer) have companies operating shorter than 5 years: 29 – one-person economic activity, 38 – micro, 37 – small. 99 respondents are graduates, with either bachelor’s degree or mba. yule’s coefficient indicated that the relation is moderate. a group of 105 respondents agreed with the statement that accountancy was outsourced because of the lack of an employee with appropriate qualifications. on the basis of the chi-square test, it can be concluded that the answers are not related to the analyzed respondents’ characteristics. yule’s coefficient confirmed that the correlation is weak (table 1). table 1. the relation of questionnaire statement to the respondents’ education, the form of the conducted economic activity, the form of book keeping records, the number of years of conducting the activity (source: survey research results and own calculation) questionnaire statement characteristics of the company chi-square yule’s coefficient correlation the belief that external specialists will do the accounting in a more professional way operation period 16.14 + 0.36 moderate kind of company 22.5 + 0.43 moderate education 45.06 + 0.61 moderate form of accounting records 3.51 – 0.17 weak the lack of an employee with appropriate qualifications operation period 6.3 – 0.22 weak kind of company 2.14 – 0.13 weak education 5.67 – 0.21 weak form of accounting records 4.97 – 0.20 weak competent staff offering help in choosing the optimal solutions operation period 21.8 + 0.42 moderate kind of company 7.3 – 0.24 weak education 24.7 + 0.45 moderate form of accounting records 2.13 – 0.13 weak possibility of receiving the information on current financial affairs operation period 14.2 + 0.34 weak kind of company 8.7 + 0.27 weak education 57.4 + 0.69 strong form of accounting records 14.1 + 0.34 weak help offered to choose the best form of taxation of conducted economic activity operation period 3.12 + 0.54 moderate kind of company 15.7 + 0.36 moderate education 7.28 – 0.24 weak form of accounting records 14.1 + 0.34 weak note: (+) the characteristics x and y are dependent (p value > α); (–) the characteristics x and y are independent (p value < α). 30 a. bagieńska. the demand for professional knowledge as a key factor of the development of outsourcing of financial and accounting services in poland moreover 98 respondents think that competent staff offering help in choosing the optimal solutions is the factor which decides whether the cooperation will be prolonged, while 22 do not agree with it. the chi-square test results show that there is a significance of the responses from the period of conducting the company and the respondents’ education. the companies of under-five-year activity agree that the decisions which they take require the use of the knowledge of the staff of an accounting company. the entrepreneur’s degree does not guarantee taking optimal decisions. many entrepreneurs are not graduates of economic studies, which is necessary for understanding financialaccounting data. the greatest significance of correlation of the responses to the questions with the respondents’ education level was observed for the statement “possibility of receiving the information on current financial affairs”. the chi-square test and yule’s coefficient show that the relation is strong. all respondents with mba agreed that this factor decided on the prolongation of the agreement with the accountancy office. they trust in office staff’s knowledge. the information they obtain on the financial situation of the company are correctly and reliably prepared. the way of presentation of the information is clear to the entrepreneur. the values of the yule’s coefficient of colligation show weak correlations between the responses and the period of conducting activity or the kind of the company. help offered to choose the best form of taxation of conducted economic activity is very important for small companies with a short period of operation. in such cases, it is possible to choose the form of taxation. the period of activity operation and the kind of the company influence significantly the choice of answers: 107 respondents agree that this factor decided about the present accounting office. it is the knowledge and experience of the office staff that they are able to give advice and offer help in choosing the optimal taxation of economic activity. the chi-square test and yule’s coefficient show that the correlation is moderate. the analysis of the selected statements confirmed that the specialized knowledge of the accounting office staff is a factor enhancing the development of the outsourcing of accountancy. a big share of the respondents (fig. 5) strongly agree that that external specialists, possessing adequate knowledge and competences are better than them at book keeping, providing financial information and offering help in taking financial decisions. moreover, the results of questionnaire survey enabled evaluating the advantages of using specialists’ knowledge in the area of financial-accounting settlements and managerial decisions, such as: – the choice of the optimal taxation of economic activity for a given entrepreneur, – correct and on-time settlements of income tax and polish social security institution, – the possibility of consultation regarding the financial results of investment decisions which are planned (e.g. credit or leasing for financing the purchase of fixed assets), 31 business, management and education, 2016, 14(1): 19–33 – help in obtaining credit, the eu funds, – the choice of optimal amortization of fixed assets, – advice on managing the company on the results of the financial analysis, – providing the entrepreneur with explanations and help during the tax audit. more than 45% respondents claimed that conducting accountancy by an external company makes the current evaluation of the company more difficult. therefore, they consider employing an accountant. the group is composed of entrepreneurs conducting economic activity of greater dimensions, with records based on books of account. they have a university degree. the difficulties in the current control of the condition of the firm may result from: – the lack of current access to books of account, – the lack of information on the financial situation of the company from the accounting office, – the lack of financial analyses of liquidity, profitability and indebtedness measurement among the services which are offered. 5. conclusions the outsourcing of financial-accounting services is more and more frequently treated as a complex process aiming to increase the dynamics and effectiveness of the company activity. the access to knowledge and tools offered by the service provider enables obtaining various information, thanks to which it is possible to take adequate decisions, which results in achieving better results of activity. the fragmentation, whose result is accountancy outsourcing, occurred due to cost-oriented decisions. in the present phase, it is evolving towards searching for additional benefits from the outsourcing agreements. such advantages comprise using the specialists’ knowledge and skills not only for basic financial-accounting services, but also for additional analyses, the evaluation of the financial situation, help in obtaining the financial means from external sources etc. accountants’ fear regarding the perception of price as the main determinant of the service provider choice was not grounded. the price is important, but it is not the main factor determining the choice. the research studies present a slightly different perception of the price and service range as factors deciding about the choice of the office providing the service. the results of the questionnaire also showed that the factor is less significant. the research conducted by the author favors the adoption of the thesis that the demand for specialized knowledge is a very important factor of the development of services outsourcing realized by accounting offices. the research shows that entrepreneurs emphasize the significance of employees with proper qualifications, trust in the office staff’s knowledge and competences, and begin to cooperate with an accounting office, because it guarantees correct settlements with the revenue office. the entrepreneurs are convinced that the employees of the accounting office will deal with accounting 32 a. bagieńska. the demand for professional knowledge as a key factor of the development of outsourcing of financial and accounting services in poland issues better that they do themselves. approximately 77% respondents 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http://centrumprasowe.pap.pl/cp/en/news/info/31956,,efekty-deregulacji-zawodu-ksiegowego-beda-widoczne-za-kilka-lat;jsessionid=6tb5q4o5eaistkaqeqxoxkaq.undefined http://www.fundacjastarter.org.pl/tl_files/informatory/raport-uslugi-ksiegowe-2013.pdf http://dx.doi.org/10.1016/j.ijpe.2009.04.005 http://dx.doi.org/10.1111/j.1835-2561.2010.00104.x significance of demographic variables for targeting of internet advertisements václav stříteský1, marek stříteský2, martin john david quigley3, david říha4 the demand for professional knowledge as a key factor of the development of outsourcing of financial and accounting services in poland anna bagieńska the concept of a smart city in urban management sławomira hajduk the concept of basic income: global experience and implementation possibilities in lithuania algimantas laurinavičius1, antanas laurinavičius2 julia siderska evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics ligita gasparėnienė1, rita remeikienė2 the concept of products and services integration – analysis of scientific publications justyna kozłowska categories of supply chain performance indicators: an overview of approaches dorota leończuk multivariate analysis of short and long-impact indicators for corporate bond market development ieva astrauskaitė the research on interface between lithuanian direct investment abroad and foreign trade flows anžela kozlova1, algita miečinskienė2 this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons.org/ licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2023 the author(s). published by vilnius gediminas technical university issn 2669-2481 / eissn 2669-249x business, management and economics engineering 2023 volume 21 issue 1 pages 140–168 https://doi.org/10.3846/bmee.2023.18828 explanatory factors of local waste management in morocco: a territorial and organizational approach mohammed sadik , yousra chnigri , hamid slimani department of management, faculty of economics and management sciences, sidi mohamed ben abdellah university (usmba), fez, morocco article history: abstract. purpose – the aim of this article is to specify the determining factors behind the decision to adopt either an internal or external means of the household waste management service in moroccan local authorities (las), particularly in the “communes”. research methodology – the methodology applied is quantitative, based on a questionnaire addressed by e-mail to 115 “communes”. the spss 25 software was used to analyze the result of the logistic regression. results – our findings show that socio-territorial factors do not have a significant influence  upon the choice of a local waste management service delivery mode, while organizational and institutional factors, particularly financial resources, do influence this choice. local authorities  with better financial resources tend to rely less on in-house solid waste management services. research limitations – methodological limitations such as sample size and a lack of reliable data on public service delivery, may be overcome in an exploratory study by using a qualitative method (interviews, case studies). practical implications – our study sheds light on the factors explaining the development of public service management methods as well as testing proposals favoring the effective use of  management techniques in the local context. originality/value – the originality of our study lies in its quantitative investigation of waste management service delivery mode in moroccan local authorities emphasizing the role of financial resources and distinguishing itself from previous research by finding that socio-territorial factors do not significantly affect this choice. ■ received 25 march 2023 ■ accepted 09 may 2023 keywords: waste management, public services, determinants, local authorities. jel classification: d73, h72, h83.       corresponding author. e-mail: yousra.chnigri@usmba.ac.ma introduction the question as to the factors which influence the choice of the way public services are  provided is increasingly more important to address within territorial public services whose specificities are confined to the contexts in which these organizations operate (guenoun &  turc, 2009). this imposes choices which respond not only to demands made over the continuity of the services but also to the need to obtain an optimal use of available financial and  budgetary resources. morocco is a country where public services, especially at the local level, are subject to ever-increasing demographic, socio-economic and urbanistic pressures which places these local services in a crossfire between these deep changes and incessantly higher demands.  http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2023.18828 https://orcid.org/0000-0003-1400-4443 https://orcid.org/0000-0001-5121-6600 mailto:karahan.kara@artvin.edu.tr mailto:yousra.chnigri@usmba.ac.ma https://orcid.org/0000-0002-8238-8648 mailto:yousra.chnigri@usmba.ac.ma business, management and economics engineering, 2023, 21(1): 140–168 141 in morocco, the juridical responsibility for the production and organization of municipal public services (potable water, electricity, sewer systems, lighting, transportation, household waste collection) and public infrastructures (wholesale markets, fish markets, bus stations...)  falls upon the local authorities. this article will focus on the household waste collection services provided by the “communes”, municipal governments. here, the central question will be presented both as a conceptual and as an empirical analysis: which are the main determining factors in the arbitrage between internal and external management in waste removal services in the context of moroccan local authorities? in this sense, we will reflect in general on the  elements which influence the decisions these territorial entities make as to how local services  are to be provided. the aim of this study is therefore to formulate and test a certain number of hypotheses and proposals over contextual and environmental factors, whether they be endogenous and/ or exogenous, which have a bearing over the way waste collection is carried out in such authorities. in the first part, we introduce the literature which allows us to draw a distinction between  three categories of factors which may potentially lead to a decision as to the management of local services either internally or through outsourcing. in the second part, the proposals related to the respective influence of these factors are  tested and then discussed. there are two orders of expected implications in this work. first, our research takes on a theoretical interest by clarifying the explanatory factors behind the development of modes of public service administration at a local level. secondly, this work is also of practical and administrative interest by testing the proposals over the factors which favor a more effective  use of managerial techniques by local authorities. 1. literature review and situational statement over the course of the last two decades, the public sector has become more and more interested in the quality of the services provided to users. the aim to provide a service of higher quality forces numerous countries to undertake administrative reforms inspired by new public management (npm). these reforms have extended the tools and principles of private sector management to central and local administrations. nowadays, concepts such as effectiveness,  efficiency and economy are no longer a monopoly of the private sector since the public  sector is also increasingly interested in them (andrews & van de walle, 2013; dunleavy &  hood, 1994; hood, 2011).  the managerial reforms set forth in the npm approach have been accompanied by institutional reforms in an effort to reduce the role of central governments in order to share  powers and responsibilities with decentralized governmental bodies as well as through diverse means of privatization (verdier et al., 2004; torres & pina, 2002). consequently, these  restructuring processes have brought about changes in the procedures through which local public entities provide services (argento et al., 2010). these changes have adopted distinct forms according to the historical, institutional, political and cultural context of each individual country (wollmann, 2004; pollitt & bouckaert, 2004; lüder, 2002).  142 m. sadik et al. explanatory factors of local waste management in morocco: a territorial and organizational approach a literature review shows that the delivery of local public services is an object of research which has made considerable amounts of ink flow in various contexts. argento et al. (2010)  addressed institutional changes in the providing of local public services by drawing comparisons between two european countries – italy and sweden – through an empirical study based on secondary data. the authors sought to describe and explain the evolution in the delivery of local public services, particularly stressing the tendency towards corporization and its impact on local governance. in the spanish context, upon observing the increase in the amount of public services offered at the local level and the growing financial and budget constraints weighing on local  authorities thereby further complicating the allocation of resources, pérez-lópez et al. (2015) carried out a study whose main objective was to determine whether npm, namely in the creation of agencies, outsourcing and inter-municipal cooperation effectively improve the  efficiency of spanish local authorities, especially in times of economic crisis.  in the netherlands, elrabaya and marchenko (2022) carried out a study in which the most usual organizational methods of domestic solid waste disposal were examined along with the establishing of tariffs for the service. their aim was to enable local entities to choose either  one or a combination of methods to simultaneously manage the volume, the fees and the structure of the production and treatment of solid home waste. the results of the study led researchers to conclude that any further tariff reduction would depend on user involvement  and consciousness-raising. such user involvement remits us to the important article by osborne and strokosch (2013), entitled “it takes two to tango”, an interesting contribution to the development of a theoretical evaluation of the co-production of public services which is becoming an ever more important part of the current agenda of reform of public services worldwide. a study done in the uk examined how elements of the administration of services stemming from the general management theory and market-based thought could be incorporated into perspectives of public administration of the co-production of central or local services. based on this same article, sønderskov and rønning (2021) tried to combine the  theory of general administration with the theory of public administration in order to come up with an improved model for the logic of public service administration and to aid the sector in the development of services through user co-creation. this study deals with the pertinence of public service logic to improve the quality of services provided in the sector by examining the question through a review of the literature pertaining to the main elements of service management on which public service logic is based. the authors point out the importance of considering users as citizens’ collectives instead of as individuals. following up on the idea of the collective co-production of public services as a topic of investigation, bovaird et al. (2016)  did a study over the local authorities of england and wales backed up by the results of previous studies which suggested that citizen participation in the production of public services is more likely to be produced when the actions involved are simple and can be carried out either individually or in groups. their idea consisted of determining which people are more likely to take part in individual or collective co-production and how to influence people, reinforce their efforts of production and encourage further participation in collective activities. the choice of means for managing local public services is a topic of that has also interested investigators in other contexts. local governments have been progressively leaving behind business, management and economics engineering, 2023, 21(1): 140–168 143 forms of direct management in favor of more indirect ones which imply diverse modalities such as outsourcing, namely corporization, public-public collaboration and public-private partnerships, etc. (reichard, 2006; walsh, 1995; wettenhall, 2001; hefetz & warner, 2004;  rodrigues et al., 2012; warner & hefetz, 2003). according to divay and charbonneau (2019a),  this choice follows the research logic of the strategic combination of internal and external resources to produce desired outcomes. the work by guirou (2016) for instance, addresses  the most ideal means of administration for the management of public services, particularly in the case of municipal nursery schools. in his exploratory work, the author examined two opposing cases of municipalities, one of which delegated the child care service while the other municipalized it. the study focused on the motives and the beliefs of the respective decision-makers in order to better understand what determined their choice between either internal or external means of management. still within the french context, bouba-olga et al.  (2008), in their work entitled cognitive constraints, essential determinants in the choice of ways of water management examined the economic factors which moved a local entity to decide upon one means of administration over another for its water service. the results of this study show that the administration of responsibilities remains well at the heart of the choice of ways of determining the way the water supply is managed in local authorities in france. in the above section, we try to present the research topics in a set of studies where the question of the administration of local public services is addresse. for higher visuality, we include a table that provides a summary of relevant studies related to our topic of interest in the appendix. we can thereby observe that despite the growing interest in the subject, quantitative  empirical investigative works over the factors that determine how the means of management of public services are chosen remain uncommon and insufficient, even more so in the case  of morocco. 2. the explanatory factors behind the choice of means of management of local services the examination of the question related to the motivations which explain the decisions taken by local authorities (las) as to their choice of the means of providing local public services, namely the service of waste collection, is based on various theories. several theoretical and empirical approaches can be mobilized to study the determining factors behind the decision to provide public services either internally by the la themselves or by resorting to new means. the literature reveals that previous works dealing with the choice as to how local public services are to be provided often appeal to the npm paradigm which recommends governmental decentralization (hood, 1991, 2014; osborne et al., 2016) and the promotion of private  sector participation in the delivery of public services through public-private agreements or through cooperation with local authorities (currie et al., 2011) and/or via outsourcing of these services (bel et al., 2010; bel & gradus, 2018; niskanen, 1979). however, in recent years, other studies have sought to expand the theoretical framework by adopting approaches such as neo-institutional theories (dimaggio & powell, 1983;  weitz & shenhaav, 2000), resource dependence (pfeffer & salancik, 2003), transactional costs  144 m. sadik et al. explanatory factors of local waste management in morocco: a territorial and organizational approach (williamson, 1985) and more generally, the contingency theory (burns & stalker, 1961) to point  out the factors which could influence the decisions enacted by local public organizations. in this work, we will follow the “multi-theoretical” approach (johansson & siverbo, 2009)  in order to reduce the risk associated with the lack of important aspects in the organizational reality (malmi, 1997). we wish to complete the literature pertaining to local public services,  namely in relation to waste collection (dreyfus et al., 2010; mceldowney, 2016) and for this, we  deal with the factors which condition the decisions adopted by territorial public organizations in morocco as to whether the management of waste disposal is to be handled internally or through alternative modern means such as outsourcing. in our theoretical framework, we distinguish between two types of factors. on one hand, we stress the role that exogenous factors of a territorial, demographic or socio-political nature may play (favoreu et al., 2019). we then focus on endogenous and organizational  determinants which more often than not, deal with a lack of resources or the search for higher performance (damanpour & schneider, 2009). we thus agree with other authors who  have found that the decisions made by organizations pertaining to the means of providing public services to users can more likely be attributed to external, environmental and institutional pressures rather than to an internal desire for a more efficient use of resources within  the logic of a search for an enhanced performance (bel et al., 2010; hefetz & warner, 2004;  warner & hefetz, 2003). 2.1. social-territorial determinants exogenous determinants are founded on a range of theories such as those that reveal institutional approaches (dimaggio & powell, 1983) and of contingency theory. damanpour  and schneider (2006, 2009) for example, found that environmental factors such as economic  expansion, population growth and territorial size have a positive influence over the decisions  taken by public organizations by incentivizing them to undertake organizational changes. according to these studies, resorting to alternative means of providing services may be qualified  as organizational innovation which shows the will to react and adapt structurally to changes imposed by circumstances. under an organizational plan, the adoption of outsourcing or inter-municipal cooperation often involves structural changes within the la and can also be considered a managerial innovation which translates into a response to a change insofar as opportunities or as constraints to development (andrews et al., 2006). bel and warner (2016) maintain  that point of view and state that highly-fragmented local government systems face the challenge of efficiently providing services of proximity as well as overcoming the problem  of overextended services. for other authors, environmental constraints such as urbanization  (boyne & walker,  2005), the economic situation of the territory (kearney et al., 2000; moon & deleon, 2001)  and population growth (rivera et al., 2000) are also decisive factors. bel and warner (2016)  demonstrated that high-income american suburban territories in relation to rural areas more often tend towards the use of new means of management such as mixed administration than rural areas (warner & hefetz, 2003). for certain authors, population growth provides  local governments a growing tax base which helps attract further investment (damanpour &  business, management and economics engineering, 2023, 21(1): 140–168 145 schneider, 2009) while a greater size gives higher-scale economies for organizations to work with (hitt et al., 1990; nord & tucker, 1987).  through the same logic, bel and warner (2016) confirmed that a larger population size is  one of the main determining factors behind the choice of alternative means of management such as outsourcing and mixed administration among american local administrations. according to these two authors, the larger and more sophisticated an entity is, the more likely it is to adopt new ways of providing public services to its population. in smaller territories, social and institutional constraints are less pressing and so, la in this category are therefore less likely to resort to outsourcing and more reticent to the adoption of other newer administrative practices (choudhury, 2007). on the other hand, certain authors point out the influence of the heterogeneity of users in  terms of age, employment, ethnicity and social class. various studies state that these factors  impose different demands on public organizations and may therefore lead to different ways  to provide public services (bel et al., 2010; bel & warner, 2016; hefetz & warner, 2004; warner  & hefetz, 2003). indeed, as a population becomes more heterogeneous, the environment  also becomes more complex and authorities are faced with multiple needs which makes the delivery of a standard basket of services more difficult and so, la may have to diversify their  means of production of these services. in our study, we suppose that the heterogeneity of the population is influenced by the  degree of dispersion of users. this factor is likely to have an influence over the decisions  enacted by local governments in the providing of public services (warner & hefetz, 2003).  the notion of dispersion refers to the geographic distribution of users who need services. local authorities whose population is widely spread out over vast geographical areas often face restrictions due to the high costs related to the delivery of new services whenever new installations have to be built. therefore, a high degree of heterogeneity calls for more specific  investments and increases internal uncertainty, thus forcing la to resort to subcontracting or outsourcing of services (ghertman, 2003). in this perspective, we formulate our first hypothesis as follows: h1 – the management processes associated with waste collection are influenced by the  characteristics of the territory. however, warner and hefetz (2008) emphasized the rôle of socio-political factors in the  adoption of mixed administration in an american context. this author found that citizen satisfaction also affected the level of acceptance of alternative mixed means of providing services. numerous authors point out that citizen involvement and participation lie at the heart of the delivery of public services (deleon & denhardt, 2000; denhardt & denhardt, 2003;  mintrom, 2003). at a local level, citizen proximity is one of the specificities in the territorial  public sphere in comparison to central governmental entities (divay, 2019a, 2019b; divay  & caron, 2019; divay & charbonneau, 2019a, 2019b). as a consequence, local government  accountability is higher because citizens can actually sense the impact of externalization over the quality of a public service and thus demand a more pragmatic behavior by municipal authorities (warner & hefetz, 2003). we consider that the level of citizen involvement in the management of local affairs tends  to influence how public services are administered by territorial entities. our second hypothesis is formulated as follows: 146 m. sadik et al. explanatory factors of local waste management in morocco: a territorial and organizational approach h2 – the level of citizen involvement in a local community influences the waste collection  management process. 2.2. organizational and institutional factors besides the contingency theory, the resource dependence theory (pfeffer & salancik, 2003;  wernerfelt, 1984) also constitutes an appropriate theoretical framework to explain the motivations local authorities have in relation to the means of providing local services. this approach suggests that organizations depend on resources from their surroundings in order to meet their objectives (pfeffer & salancik, 2003). in the sector of la for example, resorting to partnerships with the private sector could be explained by budgetary restraints. indeed, poor state financing and the weight of local public  debt, the availability and the adequacy of human, financial or technical resources may obligate  la to seek out contractual arrangements with the private sector in order to come up with additional funds in order to finance necessary investments to provide public services (campagnac,  2009; campagnac & deffontaines, 2012; el kouhen & benchekara, 2021; saussier & tirole, 2015). bel and warner (2016) consider that fiscal factors represent one of the main motors behind the reform of local authorities over the last few decades. for the authors, la have had to externalize their service due to ever-increasing fiscal restrictions since the decade of the  2000s. warner and clifton (2014) point out that budgetary cutbacks brought about by debt,  reduction of expenses or a drop in local tax income could be offset by the fiscal capacity  related to the wealth of the community. over the last few years, local authorities have been faced by growing constraints due to austerity policies, the effects of the covid-19 health crisis  along with taxation and spending ceilings adopted by upper levels of government. our third hypotheses therefore is the following: h3 – the level of available resources influences the management processes of a la regarding waste collection. the literature over local authorities is interested in the most appropriate size for the services provided (mirrlees, 1972; oates, 1972; olson, 1969). earlier works over the externalization of  services provided by local administrations is focused mainly on the characteristics of the services in relation to economies and to transactional costs (bel & fageda, 2008; brown & potoski,  2003; gradus et al., 2014; hefetz & warner, 2004; levin & tadelis, 2010; wassenaar et al., 2013). along this line, bel and warner (2015) affirms that one of the challenges local governments face is that size and fragmentation make obtaining profit difficult in economies of  scale. the means of providing local services could thereby be affected by cost-based concerns  which are presented as an essential component in the efficiency dimension of organizational  performance (fliegel & kivlin, 1966; lorino, 1999; tornatzky & klein, 1982; wolfe, 1994). from this perspective, the transactional cost theory suggests that arbitrage between an internal mode of governance and resorting to market mechanisms is influenced by factors  such as the specificity of assets, the degree of uncertainty and complexity in the execution  of contracts (coase, 1995; williamson, 1989). in the local public sector, transactional costs are highly important when choosing an arrangement for the delivery of services and could be applied to decisions adopted by local business, management and economics engineering, 2023, 21(1): 140–168 147 authorities. some authors affirm that before signing and enforcing contracts, institutional  arrangements tend to become increasingly complex due to the costs arising from follow-up and control (bel et al., 2014). divay and charbonneau (2019a) state that the decisions whether  to make or to have something made should end up in arbitrage, not only in terms of the cost of the service, but also to transactional costs (bel et al., 2014) related to the degree of  uncertainty brought about by the information, negotiation and surveillance of the volume and quality of the public service. for example, the choice to provide a service through publicpublic or even private-public partnerships remains preferable to lucrative contracts when these services generate high transactional costs due to concurrence (hefetz & warner, 2004;  levin & tadelis, 2010). for some authors, the specificity of assets is decisive in an arbitrage  between internal or externalized management. stein (1990) states that the least specific services and those that are easier to measure are the most likely to be outsourced. along that same line, brown and potoski (2003) observe that follow-up is common when the specificity  of assets is higher. for these authors, an on-the-spot follow-up of the services would be less frequent as these become more difficult to measure. on the other hand, a loose follow-up in  difficult conditions for measurement is a recipe for failure (poister & streib, 1999), and therefore, local governments resort to internal management instead of to an adequate follow-up system via external contracts. our fourth hypotheses is as follows: h4 – the level of uncertainty associated with the monitoring of the public waste collection service influences the la’s waste collection decision and management process. based on the underlying hypothesis, the conceptual model is presented in (figure 1),  offering a visual representation that illustrates the relationships and key elements involved  in the context under study. territorial o rganizational specificities of the territory � population size � average household size � urbanization rate citizen involvement � unemployment rate � citizen involvement resources � financial � technical � human uncertainty � follow-up index management method of local public service h1 h2 h3 h4 d eterm inants dependent variable independent variables figure 1. conceptual model (source: author conception) 148 m. sadik et al. explanatory factors of local waste management in morocco: a territorial and organizational approach 3. data and methods in this section, we will present the scope of our research along with the design of the method employed to measure and analyze dependent and independent variables that arise in our conceptual model. 3.1. field of research and the process of collection and treatment of data in morocco, there is no text defining what a local authority is since constitutional or regulatory provisions have merely set the bases of the legal regime that is common to it and make it a legal category distinct from other sub-national state organizations. generally speaking, a territorial authority is “an administrative district with a legal personality that constitutes part of the territory of a state and has a certain legal and patrimonial autonomy” (azon, 2012;  zahed, 2017). the notion of territorial authority was first used by the moroccan constitution of 29 july  2011, which since then, is being increasingly replaced by that of the local authority in various legal texts. in morocco, territorial authorities are decentralized legal entities under public law that manage their affairs democratically and enjoy the right to local autonomy as well as a  relatively strong constitutional position thanks to the decentralization process that led to the constitutional reform of march 2011. in this sense, article 135 of the moroccan constitution recognizes the existence of three categories of territorial authorities: regions, prefectures and provinces, and communes, which makes the moroccan territorial organization a relatively fragmented system. according to the constitutional text, power-sharing among these three levels of la in morocco is based on the principle of subsidiarity where each level carries out their responsibilities within specific domains (amrani et al., 2021, 2022; sadik et al., 2021). in this cadre,  the lowest level of la is made up of “communes”, that is, municipalities, which are in charge of providing services of proximity such as public lighting, garbage treatment, street maintenance, etc. at the second level, there are the provincial counsels and prefectures whose role is social development, the reinforcement of efficiency and cooperation in rural areas. the largest  level of la are the regions which are in charge of promotion of integrated development, namely in the enhancement of the attractiveness of the territory of the region as well as its economic competitiveness and the preservation of its natural resources. in morocco, the absence of a viable system able to give out exhaustive data is one of the major difficulties we face in our research into how public services are provided at the local  level. this complicates the follow-up and investigation of explanatory models which could give a greater insight into these processes and their evolution over time. this lack of information is especially important in the case of more than 1500 territories. in morocco, various differing management models are used for a wide range of services  such as garbage collection, potable water, electricity, sewerage and public illumination. these categories of services are those which have the greatest impact over the general population (see table 1). business, management and economics engineering, 2023, 21(1): 140–168 149 table 1. state of means of providing local public services with greater impact on the moroccan population in 2022 (source: general directorate of local authorities in morocco, 2022) public service delegated management national office  water and electricity1 internal management commissioning society for local development2 number of communes (n) % (n) % (n) % (n) % (n) solid waste 204 14 – – 1299 86 – – – electricity 41 2.3 1684 95.7 34 2 – water 52 2.95 731 41.49 876 49.71 103 5.84 – sewerage 51 2.89 144 8.17 1509 85.64 58 3.29 – lighting 03 0.19 – – 1498 99.68 – – 02 in the case of morocco, the data given by the dgcl in 2022 as to the means of providing local public services reveals that internal management is the most common way to manage most services, namely in public illumination (99%), solid waste collection (86 %), sewerage  (85%) followed by the potable water supply (49%). among other alternative ways to provide public services, we find the onee, in the case of electricity (95%) and potable water production (41%). delegated management remains limited except in the case of solid waste (14%). upon reading these figures, we can conclude that in the case of morocco, the emergence  of npm principles still remains scarce while in other neighboring countries such as spain (ferran & puey, 2016), the general adoption of npm doctrines has been followed by an increase  in the use of npm tools without that necessarily leading to changes in the underlying logic of how such services are actually provided, as supposed by the npm narrative. as mentioned above, we delve into the explanatory factors behind the adoption of alternative means of providing local services. as to the data shown in the above table, we focus on mainly on garbage management, a choice justified for various reasons. first, la in morocco  use two ways for the administration of solid waste disposal: delegated management and a classic or internal mode of administration which goes along with our research question of understanding the explanatory factors behind the choice of either a modern or a classical means of management. secondly, the existence of two modes facilitates the setting up of the binary logistic regression method we seek to pursue in our study. to look into the use of these explanatory factors, we turned to two sources of data. first, it was necessary to collect responses as to several of our latent variables by sending a questionnaire by e-mail to the moroccan association of general directors of lc during the second semester of the year 2022. before proceeding definitively and in order to guarantee  the success of our questionnaire by correspondence, however, we carried out a prior test to verify the reliability of our tool and to see if the protocol of the study was realistic, especially as to the pertinence of the measuring scales and their comprehensibility by the respondents 1 office national d’eau et d’electricité (onee) is a public organism in charge of infrastructures of production, transportation and distribution of electricity and water as well as sewerage treatment. 2 local development societies are companies (sa or sarl) created at the initiative of local authorities to undertake economic activities within municipal field of competence. 150 m. sadik et al. explanatory factors of local waste management in morocco: a territorial and organizational approach (baumard et al., 2014). the pre-test period was undertaken in two stages: first, face-to-face  with a group of territorial functionaries and later via e-mail with the heads of four relevant territorial administrations through our personal networks. in total, we received 115 responses, a reply rate of 8%, out of all the la, 48% of these used externalized means for the management of solid waste collection. all responses were confidential and anonymous. secondly, we employed data furnished by open-source data bases of the high-commissariat of the plan in order to obtain additional information such as indexes of urbanization, mean household size and unemployment rates. it’s worth pointing out that this information is generally gathered by surveys carried out by that governmental agency. within the framework of this research, our sample includes 115 local authorities, i.e. a  response rate of 8% of all moroccan local authorities. although this rate seems low, our sample represents 57% of the local authorities that use external management as a mode of solid waste management, which represents an acceptable rate for the purposes of our research. all responses were anonymous and confidential. the data was treated with the aide of the  spss 25 © program. 3.2. measure of variables 3.2.1. dependent variables within the framework of our study, our dependent variable is the means of management of  garbage collection adopted by moroccan municipalities. respondents are asked to address the question with a (1) in case the municipality uses an internal means of administration or with a (0) if an externalized means of administration is used. as to the dichotomous character of our dependent variable, we resort to the binary logistic regression method in order to evaluate what distinct explanatory variables bring to the probability of the appearance of a random event: the mode of management of local waste collection service. the model of this relation takes the following form: ( ) 0 1 1 1 1 n i ii c c x p y e =   − +    = = + ∑ . in this equation, y represents the endogenous variable (mode of management), c0, a constant, ci, the estimators and xi the variables exogenous to the model. 3.2.2. independent variables the literature review we carried out allow us to classify the explanatory factors behind the means of administration for garbage collection into two categories: the social and territorial factors on one side and organizational and institutional factors on the other. the first category are operationalized through five sub-variables while second is made up of four. 3.2.3. socio-territorial variables ■ rate of urbanization the index of urbanization represents the proportion of population living in urban areas over the total population of a la. we expected to find that high urbanization would have a  business, management and economics engineering, 2023, 21(1): 140–168 151 certain influence over the choice of an externalized management given the constraints these  municipalities face. ■ population size we expected to find that the effective legal population of a la plays a determinant role  in the choice of a means of handling the solid waste disposal service. indeed, population size could have a double effect since la in a overpopulated area are confronted with greater  needs as to the amount of waste to be treated. on the other hand, a more sizable population may enable a la to benefit from greater fiscal resources which could also influence the mode  of administration enacted. we would like to point out that for this variable we have taken  into consideration the decimal logarithm of the population, in order to reduce the strong dispersion between the values in large and small la, and to make the values more readable, relevant and easier to interpret. ■ average household size this is the average number of people residing in a single dwelling, whether they are related or not. a household, for example, could be made up of only one person. the data pertaining to these first three variables come from the open-source data base  of the high-commissariat of the plan (haut commissariat aux plans, 2022). ■ unemployment rate generally, the literature does not provide enough information as to the link which could exist between the economic situation of a territory and how local public services are administered (kearney et al., 2000; moon & deleon, 2001). in our study, the state of economic health  of a territory is measured by the unemployment rate. we anticipated the existence of a link  between this variable and the way municipalities handle garbage collection, supposing that low unemployment would translate into a higher standard of living which would thereby have a positive influence over household income and consumption levels. ■ citizen satisfaction index according to various authors, the choice of means of providing basic local services could be considered as a response to external concerns of the citizens as to their participation in the process of how these services are managed. at a local level, some authors state the hypotheses that it is highly convenient to not only take citizen concerns over technical efficiency  into account but their level of political involvement in the process as well (box et al., 2001;  feldman & khademian, 2001). to measure the degree of citizen involvement, we used the index developed by warner  and hefetz (2008) which poses the following questions: (1) an evaluation of citizen satisfaction with the management of the garbage collection service; (2) conducting surveys among  the citizens; (3) the degree of the presence of mechanisms to handle user complaints and  suggestions related to the service and (4) the regular treatment of user input. our respondents were asked to answer according to the five-point likert scale, from “totally disagree” (1) to “totally agree” (5) and from there, calculate the replies on an index that ranged from 4 to 20. a cronbach alpha of 0.837 indicates a high reliability. 3.2.4. organizational variables ■ resources earlier works show how the state of health of an organization’s resources is reflected in  its financial, human and technical plans (damanpour & schneider, 2009). since the literature  152 m. sadik et al. explanatory factors of local waste management in morocco: a territorial and organizational approach does not talk about this variable on a measurable scale, we asked our respondents to answer eight questions using the five-point likert scale: 1) the quantitative availability of equipment: trucks, processing equipment, etc., for waste collection;  2) the qualitative adequacy and pertinence of this equipment to the furnishing of the service (capacity for specific treatment, recycling and recovery, respect for the environment, etc.);  3)  the level of the capacity of the municipal landfill to handle the collected waste; 4) the adequacy of the landfill: distance, ease of use...; 5) the availability and adequacy of the collection personnel; 6) the level of skill and qualification of human resources; 7) the capacity of the municipality to mobilize the financial resources for the service; 8) the adequacy of budgetary resources of the municipality. we then proceeded to verify the usefulness of this scale in two times. first, we examined  the reliability of the scale of measurement by calculating the crobach index (α = 0.873) which  shows a high reliability. we then performed a “principal component analysis” of the scale in  order to verify the structure and quality of the information. the results show the existence of three components which is in agreement with the literature. the first of these is called  “technical resources”, the second is “human resources” while the third is “financial resources” (see table 2). table 2. results of the principal component analysis (source: author’s conception) components technical resources human resources financial resources quantitative availability of equipment .846 qualitative adequacy and pertinence of equipment .839 adequacy of the landfill .938 capacity of the landfill .837 sufficient hr .913 adequate hr .811 availability of financial resources  .840 sufficient fiscal resources .802 kmo = 0.791 bartlett test 0.000 ■ follow-up index of the service according to poister and streib (1999), a reliable follow-up of the conditions of measuring how a service is provided may be a decisive factor in the increase of certain means of providing local public services such as mixed management, for example. likewise, warner  and hefetz (2008) proceeded to the construction of a follow-up index for municipal services which we adapted and contextualized. we asked our respondents to indicate on the likert  business, management and economics engineering, 2023, 21(1): 140–168 153 scale from 1 to 5, the degree to which the management of the service of waste collection is followed-up and evaluated according to these four items: ■ a regular evaluation of the administrative costs of the service. ■ a regular examination of the reglementary clauses and dispositions relative to the administration of the service. ■ an on-the-spot follow-up of the performance of the management of the garbage collection service. ■ an examination and analysis of all relevant data pertaining to the management of the service. we proceeded to gather and count up the responses through the “follow-up index of  services” on a score from 4 to 20. the cronbach reliability for this index is 0.919. 4. results in our study, we carried out an analysis by using two complementary approaches: the first of these was a descriptive approach in order to test the relationship among explanatory variables and the variables to be explained by the model by using the chi-squared test, a method which is likely to point out the sense of such a relationship. the second, within the explanatory approach, was an analysis of the importance of the relations based on the study of regression coefficients. the binary logistic regression method  allows for the odds ratio to be estimated and thus easily interpreted. also, the coefficient  pointed out by the model translates the random relationship between the individuals presenting the characteristic which links it with the other individuals in the sample. the interpretation of the regression models was done by using pseudo-r2 and the capacity of the logistic regression model which takes reality into account (the % of classification accuracy is  shown). for our study, we relied on the hierarchical logistic regression method upon entering first the socio-territorial variables (model 1) then the organizational variables (model 2) and  finally, both categories of variables (model 3). the descriptive statistics and correlation coefficients for all the variables are presented in  the appendix. an examination of the effects of multicollinearity aided by variance inflation  factors (vif), enabled us to reach the conclusion that the factors of all the variables are situated between 1.117 and 2.971, that is, below the floor value of 10 (see appendix), thereby  indicating that multicollinearity is negligible (neter et al., 1985). correlation tests in our starting conceptual model, we drew a distinction among four hypotheses related to variables exogenous to the choice of the means of management of local garbage collection service made by moroccan municipalities. based on our sample, only the size of the la,  measured by its effective population, is positively associated to the adoption of a municipal  management of performance (see appendix).  based on our sample, the variables relative to territorial factors: the size of the population of the territory, the average household size and the index of urbanization, are positively associated to the adoption of an internal type of management of local garbage collection. however, as to social factors, only the index of citizen involvement seems to be associated 154 m. sadik et al. explanatory factors of local waste management in morocco: a territorial and organizational approach with a dependent variable whereas the level of dependence between unemployment and the endogenous variable of the model is insignificant (p, .0369). as for organizational factors, all  the variables in the model seem to bear a correlation with the dependent variable. results of the regression model 1 (table 3), which is only made up of socio-territorial variables, indicates that only population size (p, .000) and household size (p, .085) are statistically significant. according to  the signs of the regression coefficients, population size negatively influences the choice of an  internal management of garbage collection by moroccan municipalities. however, the results of the regression indicate that average household size has a positive influence over the decision taken by la to internalize the service. overall, the model of socio-territorial factors indicates a high prediction accuracy rate (77.6%) and an acceptable explanatory capacity (44.6%). these results imply that overpopulated municipalities do not resort to internal administration to handle the demographic pressure over the capacity to deal with a greater volume of waste. therefore, we can state that there exists a positive relation between population size and the volume of waste to be treated. table 3. logistic regression result (source: author’s conception) independent variables model 1 model 2 model 3 population size – .952*** – .905*** average household size 1.0165* 1.345 (ns) urbanization rate – .017 (ns) – .007 (ns) unemployment rate – .006 (ns) 0.009 (ns) citizen satisfaction index – .0050 (ns) – .026 (ns) financial resources –2.404*** – 2.387*** technical resources –.368 (ns) 0.641 (ns) human resources .177 (ns) –.224 (ns) follow-up index .013 (ns) –.068 (ns) classification accuracy rate % 77.6 83.6 89.6 r2 nagelkerke 0.468 0.581 0.726 significance level : ***1% *10% the model of organizational factors shows that only the variable relative to financial  resources seems to have a significant and negative effect over the adoption of a mode of  internal management of solid waste disposal in moroccan la (p, .000). nonetheless, the logistic regression results do not allow us to prove the existence of a significant influence  over other explanatory variables. in model 3, we introduced all the explanatory variables. overall, this model enables us to accurately predict  (89.6%) the results with a relatively high total explanatory capacity  of variance (72.6%). as in the case of the previous two models, only two variables have a  significant and negative effect over the installment of an internal management of garbage  disposal by la in the sample under study, namely, population size (p, .000) and financial  resources (p, .000). the table 4 summarizes the synthesis of the results of the hypotheses. business, management and economics engineering, 2023, 21(1): 140–168 155 table 4. synthesis of hypotheses results (source: author’s conception) hypotheses results socio-territorial factors territorial factors population size confirmed average household size discarded* urbanization rate discarded social factors unemployment rate discarded citizen involvement discarded organizational factors resources financial confirmed technical discarded human discarded uncertainty level follow-up index discarded note: *confirmed by model 1. discussion and conclusions the aim of our study consists of testing hypotheses over the determining socio-territorial and organizational factors, whether they be endogenous or exogenous, which may influence the  way garbage collection services are managed by local authorities in morocco. the literature suggests that the decision to adopt either an internal or an external means of administering local public services by municipalities can be the result of a complex process which must take into account numerous factors such as legislation and regulations, available financial  resources, technical capacities, citizen involvement, environmental considerations as well as the availability of infrastructure and equipment. however, in the moroccan context, it appears that the choice of a means of local waste disposal often falls under the influence of territorial factors. indeed, from our results and from  the literature examined in the first part, two of our hypotheses (h1 and h3) were confirmed  and the existence of a significant influence of several different variables over the choice of  how this service of proximity was to be provided was established whereas, two other hypotheses (h2 and h4) where specific aspects which went against the theories set forth were discarded.  the significant role of size and influence mitigated by other socio-territorial factors.  aside from the factor of the size of the territory, our results were unable to show a significant influence of other variables such as urbanization, mean household size, unemployment  or levels of citizen involvement over the choice of how local garbage collection services are to be managed. as was to be expected, the element of size seemed to have a significant  and negative effect over any decision to adopt an internal waste-management system. the  larger and more disperse a territory is has an influence over numerous other factors such as  population density, infrastructures, available resources and environmental constraints. densely populated urban areas generally have a greater need for waste management systems different from those of more sparsely populated rural areas. for example, urban zones may  require more frequent collection infrastructure and more intensive waste treatment due to 156 m. sadik et al. explanatory factors of local waste management in morocco: a territorial and organizational approach the higher number of households and businesses while on the hand, rural zones may have higher collection costs due to the greater dispersion of dwellings. nonetheless, our results run counter to those neo-institutional theories which suggest that organizational decisions are often a reaction to pressure from contextual factors (carassus et al., 2014; powell & dimaggio, 2012; walker et al., 2011). variables linked to specificities  of the population should be expected to have a negative effect over the adoption of an internal administration of waste disposal yet, with the exception of population size, results point to a negligible impact of other factor like household size, urbanization and unemployment. theoretically, the geographical characteristics of the municipalities, such as their population density, localization or surface area, may influence their choice of a particular means of waste  disposal. for example, a densely urbanized municipality situated in a geographically complex territory could opt for innovative solutions, a more frequent and specialized system of waste collection and treatment. likewise, since a greater population would also have the positive effect of a more robust tax base, local governments would also be motivated to adopter  novel approaches in order to extend and improve the quality of their services (damanpour & schneider, 2009). a weak fiscal balance along with high unemployment, on the other hand,  could lead local administrations to adopt innovative systems to bring about a greater internal efficiency in their way of providing services (damanpour & schneider, 2006). municipalities  could therefore be moved to set up more or less costly waste management policies according to their budgetary capacity. faced by high unemployment, they may be compelled to cut expenses and to adopt a cheaper way to manage waste disposal. unemployment could also influence the demand for certain waste disposal services since households would resort to  economical solutions like composting of garbage and reusing objects. if a municipality seeks to create local jobs, it might put in place policies which would favor local recycling enterprises and cooperatives. at this level, we can state that in the moroccan context, the lack of a significant influence of the unemployment rate over the way waste disposal services are  managed shows to what extent these links are complex, thus making it difficult to generalize  and pointing to other local and contextual factors. still in the area of socio-territorial factors, contrary to the american context where citizen involvement is central to the choice of means of administration of public services, in morocco, our results do not enable us to confirm the  existence of any such influence, a circumstance which could be attributed to cultural reasons.  in other words, even if a commune were to implement solutions and set up platforms to facilitate user participation in the administration of local public services (amrani et al., 2022), such measures would fall far short of bringing about any meaningful results, due to illiteracy (32%) and a lack of knowledge about new participative approaches in municipal management. organizational factors, the preponderant influence of financial resources. as to organizational and institutional factors, our results indicate that only the availability of financial resources has a significant and negative effect over the adoption of internal  means of solid waste management by local administrations while neither human and technical resources nor the level of certainty in the follow-up of how the service is carried out has no real effect, a surprising result in light of earlier works. normally, the decision to provide an internal management or to outsource it could be influenced by a lack of qualified human resources or by the unavailability or inadequacy of  business, management and economics engineering, 2023, 21(1): 140–168 157 technical means such as controlled landfill sites, treatment stations, separation and composting installations, garbage removal vehicles, etc. municipalities which have a limited technical capacity will naturally turn to outsourcing waste disposal to specialized service providers. nevertheless, the results of our study point out the fact that the most financially favored communes resort increasingly less to internal garbage collection systems. this may be attributed to a greater administrative efficiency and a higher quality of services provided  by outsourced enterprises which tend to be better equipped, more experienced and better informed. this result coincides with the reality on the terrain where several actors expressed their desire to outsource their waste-management services which, according to them, would allow them to guarantee a better quality of service and consequently, a higher level of user satisfaction as well as reducing the stress linked to the internal management of such a vital service. as in any investigation work, our study has not been spared certain limits and so, the results obtained should be taken prudently due to its methodological limitations, especially as to sample size with a rate of response of only 8% of the total number of las, a limitation which hampers all quantitative studies based on questionnaires. our study is also focused on two categories of factors: socio-territorial and organizational. it would be recommendable for further studies to explore the influence of environmental, institutional or regulational  factors as well. besides the quantitative methodology used in our study, other types of research could be  employed to give a deeper insight into the factors behind the choice of ways to administer waste-management services. for example, a qualitative case study could provide a more detailed examination of the experience and opinion of local authorities and residents over different ways of handling waste disposal. it would be interesting to include other services  such as water and electricity in future studies since these are also influenced by the same  organizational and institutional factors. it would also be beneficial to study the capacity a  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(2010) “the ‘externalisation’ of local public service delivery: experience in italy and sweden” qualitative comparative case study between italy and sweden italy and sweden have implemented policies to outsource the delivery of local public services, although they have done so to varying degrees and in different  areas of public services. pérezlópez et al. (2015) “rethinking new public management delivery forms and efficiency:  long-term effects in  spanish local government” qualitative case study in spanish local government the adoption of (npm) delivery forms in spanish local governments has not led to sustained improvements in efficiency and  service quality, contrary to their intended goals. elrabaya and marchenko (2022) “the influence of organizational and economic methods of household waste management on the volumes and structure of its formation: the experience of the netherlands” quantitative 384 municipalities in the netherlands the netherlands' successful waste management approach involves a mix of economic and organizational factors. incentives help, but infrastructure, communication, and policy are also important. osborne and strokosch (2013) “it takes two to tango? understanding the coproduction of public services by integrating the services” management and public administration perspectives” qualitative literature review successful co-production of public services requires collaboration and communication between service providers and citizens, and that a holistic approach integrating both service management and public administration perspectives is necessary for effective co-production. sønderskov and rønning  (2021) “public service logic: an appropriate recipe for improving serviceness in the public sector?” qualitative literature review psl can improve "serviceness" in the public sector by prioritizing citizens' needs over efficiency or  political goals, but its success depends on contextual factors like regulatory frameworks and the adaptability of public organizations to new approaches. bovaird  et al. (2016) “promoting the collective co-production of public services: encouraging citizens to participate in complex governance mechanisms in the united kingdom” qualitative case studies in england and wales promoting the collective co-production of public services requires the creation of appropriate conditions and mechanisms for citizen engagement, the building of trust and collaboration between citizens and service providers, and the recognition and valuing of citizens' contributions to the co-production process. 164 m. sadik et al. explanatory factors of local waste management in morocco: a territorial and organizational approach author title type of study sample and method key findings guirou (2016) “choosing a management mode: the importance of beliefs” qualitative case study two municipalities in france the beliefs of public managers about management effectiveness  impact their choices of management mode. these beliefs are influenced by experiences, context,  and social networks. managers should challenge their beliefs and be open to innovation for better results. boubaolga et al. (2008) “cognitive constraints as a key determinant of the choice of water management mode” quantitative 25 909 -communesin france cognitive constraints, such as cognitive load, mental habits, and perception of risk, are important determinants of the choice of water management mode. these constraints can limit the range of options considered by decisionmakers and should be considered when designing policies and decision-making processes for water management. nemec and soukopová  (2016) “mixed system: transformation and current trends in the provision of local public services in the czech and slovak republics” quantitative and qualitative comparative analysis between the czech republic and slovakia the local public services system in the czech republic and slovakia has shifted towards a mixed system of service provision, which involves partial asset privatization and outsourcing in some areas. however, there are ongoing debates and challenges around the effectiveness of this system in  meeting the needs of the population. mikuła  and walaszek  (2016) “the evolution of local public service provision in poland” qualitative case study in poland the evolution of local public service in poland has been influenced  by political and economic factors, leading to a shift towards privatization and outsourcing in some areas. survey extract i. management method adopted ◆ in your commune, what is the form chosen for the management of the household waste management service ■ internal management ■ external management ii. determinants for all the statements below, please indicate your level of agreement (1 – not at all in agreement; 2 – no agreement; 3 – neither agree nor disagree; 4 – i agree; 5 – totally agree) business, management and economics engineering, 2023, 21(1): 140–168 165 item level of agreement 1. the commune evaluates citizens’ satisfaction with the household waste management service 1 2 3 4 5 2. the commune conducts regular surveys of its citizens 1 2 3 4 5 3. the commune conducts regular surveys of its citizens 1 2 3 4 5 4. the commune has mechanisms to receive complaints and claims from users regarding the household waste management service 1 2 3 4 5 5. the commune proceeds to the treatment of the complaints of the users relating to the service management of the household waste 1 2 3 4 5 6. the commune regularly evaluates the costs of the household  waste management service 1 2 3 4 5 7. the commune regularly reviews compliance with the regulatory clauses and provisions relating to the management of the household waste management service 1 2 3 4 5 8. the commune regularly monitors the performance of the household waste management service in the field 1 2 3 4 5 9. the commune regularly reviews and analyzes data related to the household waste management service 1 2 3 4 5 10. the commune has the necessary and sufficient equipment  (trucks, bins, compactors, skips...) to manage the household waste management service 1 2 3 4 5 11. the commune has the relevant equipment to ensure an efficient and permanent management of the household waste  management service 1 2 3 4 5 12. the commune has a household waste landfill with sufficient  capacity 1 2 3 4 5 13. the landfill available to the commune is relevant (distance,  ease of operation) 1 2 3 4 5 14. the commune has sufficient staff to manage the household  waste management service 1 2 3 4 5 15. the commune has sufficient expertise to ensure the  management of the household waste management service 1 2 3 4 5 16. the commune is able to mobilize financial resources to  manage the household waste service 1 2 3 4 5 17. overall, the commune’s fiscal resources are sufficient 1 2 3 4 5 operationalization and descriptive statistics label measurement source min max mean sd management method 1 = the commune adopts an internal  waste management system; 0 = the municipality adopts an  outsourced waste management system; survey 0 1 .50 .502 citizen satisfaction index aggregate index of four questions below to measure the degree of user satisfaction by the commune (α = 0.837 ) satisfaction_ measure likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 2.62 1.357 166 m. sadik et al. explanatory factors of local waste management in morocco: a territorial and organizational approach label measurement source min max mean sd surveys likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 2.17 1.288 complaints likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 2.85 1.561 resolution_ claims likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 2.97 1.589 service tracking index aggregate index of four questions to measure the degree of tracking of waste management service (α = 0.919) cost measurement likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 2.58 1.493 respect of the engagements likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 2.70 1.410 field monitoring likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 3.26 1.499 data analysis likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 2.72 1.467 resources degree of availability and adequacy of resources (technical, human and financial) to ensure waste management by the commune (α = 0.873) resource availability likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 2.61 1.326 adequacy of resources likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 2.46 1.149 sufficient hr likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 2.65 1.348 adequate hr likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 2.69 1.323 adequacy of the landfill likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 2.41 1.427 capacity of the discharge likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 2.28 1.357 availability of financial  resources likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 3.16 1.371 sufficient fiscal  resources likert scale (1 – totally disagree;  5 – totally agree) survey 1 5 2.78 1.183 urban rate percentage of the population living in urban areas in relation to the total population of the local authority haut commissariat aux plans (2022) 1.1 100.0 79.587 29.5239 average household size the average number of occupants per principal residence haut commissariat aux plans (2022) 3.5 6.6 4.578 .5980 business, management and economics engineering, 2023, 21(1): 140–168 167 label measurement source min max mean sd unemployment rate the unemployment rate in the labor force aged 15 and over. obtained by dividing the number of unemployed persons by the number of working people aged 15 and over haut commissariat aux plans (2022) 4.40 37.80 17.6991 7.14823 size of the legal population the logarithm of the legal population of the commune haut commissariat aux plans (2022) 7.99 15.03 10.3205 1.45176 results of the correlation tests assumptions meaning of the test value-added level p so ci ote rr ito ria l f ac to rs territorial factors size of the population very significant (p, .000) average household size (p, .000) urbanization rate (p, .000) social factors unemployment rate not significant (p, .369) citizen satisfaction index very significant (p, .025) o rg an iz at io na l f ac to rs resources financial very significant (p, .000) techniques (p, .000) human significant (p, .010) level of uncertainty tracking index very significant (p, .002) results of the multicoliniarity test coefficients model non-standardized coefficients standardized coefficients t sig. co-linearity statistics a standard error beta tolerance vif (constant) 1.936 .521 3.720 .000 urban rate –.002 .001 –.105 –1.192 .236 .542 1.846 average household size .066 .072 .079 .916 .362 .570 1.756 index_satisfaction –.010 .046 –.025 –.227 .821 .360 2.778 tracking_index –.006 .044 –.016 –.143 .886 .336 2.972 hum_resources .024 .037 .059 .632 .529 .476 2.102 tech_resources .043 .048 .091 .901 .370 .418 2.393 fin_ resources –.258 .037 –.564 –6.894 .000 .630 1.587 unemployment rate .001 .005 .008 .122 .903 .895 1.117 population size –.094 .026 –.270 –3.564 .001 .733 1.364 168 m. sadik et al. explanatory factors of local waste management in morocco: a territorial and organizational approach summary of regression results for the three models a e.s. wald ddl sig. exp(b) model 1 urban rate –.017 .012 1.950 1 .163 .983 household size 1.065 .619 2.961 1 .085 2.900 index_satisfaction .050 .203 .062 1 .803 1.052 unemployment –.006 .033 .037 1 .848 .994 population size –.952 .253 14.132 1 .000 .386 constant 6.283 4.128 2.317 1 .128 535.467 model 2 tracking_index .013 .268 .002 1 .961 1.013 hum_resources .177 .351 .253 1 .615 1.193 tech_resources .368 .388 .902 1 .342 1.445 fin_resources –2.404 .464 26.794 1 .000 .090 constant 5.742 1.336 18.484 1 .000 311.800 model 3 tracking_index –.068 .466 .021 1 .884 .934 hum_resources –.224 .427 .276 1 .599 .799 tech_resources .641 .523 1.502 1 .220 1.898 fin_resources –2.387 .563 17.950 1 .000 .092 urban rate –.007 .014 .259 1 .611 .993 household size 1.345 .871 2.382 1 .123 3.838 index_satisfaction –.026 .455 .003 1 .955 .975 unemployment .009 .042 .050 1 .823 1.009 population size –.905 .313 8.375 1 .004 .404 constant 10.143 5.611 3.268 1 .071 25425.080 bookmark 2 this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons.org/ licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2023 the author(s). published by vilnius gediminas technical university issn 2669-2481 / eissn 2669-249x business, management and economics engineering invigorating supply chain performance in small medium enterprises: exploring knowledge sharing as moderator wayan edi arsawan 1, viktor koval 2 , dwi suhartanto 3, larysa babachenko 4, larysa kapranova 5, ni putu santi suryantini 6 1politeknik negeri bali, indonesia 2izmail state university of humanities, izmail, ukraine 3politeknik negeri bandung, indonesia 4chernihiv polytechnic national university, chernihiv, ukraine 5pryazovskyi state technical university, mariupol, ukraine 6universitas udayana, badung, indonesia article history: abstract. purpose – this research aimed to evaluate information sharing as a moderating component and examine supply chain performance, including collaboration, capabilities, and innovation. particularly in the sme sector, since the significance of collaboration and opportunity in supply chains as an scm trigger is still underdeveloped. research methodology – to test the hypotheses, data were collected from 179 smes in indonesia, involving 537 managers and assistant managers, and analyzed using partial least square modeling. findings – the result of cooperation with supply chain partners has led to the gradual improvement of capabilities and innovations, such as improved processes, more efficient operations, better quality, and lower costs. it has also resulted in radical innovation, including introducing new technologies and a change in strategy; thus, it could develop and improve the ability to innovate. finally, the results helped managers with strategic planning and prioritizing supply chain collaboration to improve capabilities, innovation, and performance. research limitations – generalizability is limited because of sampling constraints. practical implications – the results helped managers design strategic planning and prioritize supply chain collaboration to improve capabilities, innovation, and performance. originality/value – to the extent of our knowledge, this study is the pioneer investigation into the supply chain in smes value-chains in an emerging country from a holistic perspective. ■ received 05 october 2022 ■ accepted 02 january 2023 keywords: supply chain performance, innovation performance, knowledge sharing, smes. jel classification: 03, 031, p17.      corresponding author. e-mail: victor-koval@ukr.net introduction the current economic climate shows that competition is now between supply chains rather than between enterprises to eliminate various interruptions (kazmi & ahmed, 2021) and cost-effectiveness (hu et al., 2020; jafari et al., 2021). in order to enhance operational performance, this serves as the foundation for strategic adjustments and an evaluation of the supply chain’s collaborative structure (baah et al., 2021b). despite substantial research on supply chain management (asamoah et al., 2020), more insight is required to identify the significance of supply chain capabilities as a trigger for scm (kazmi & ahmed, 2021). organizations must maximize their available resources to improve supply chain capabilities and 2023 volume 21 issue 1 pages 1–18 https://doi.org/10.3846/bmee.2023.17740 http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://orcid.org/0000-0001-8493-5249 https://orcid.org/0000-0003-2562-4373 mailto:victor-koval@ukr.net https://orcid.org/0000-0001-5612-9610 https://orcid.org/0000-0002-6312-4700 https://orcid.org/0000-0003-2562-4373)4 https://orcid.org/0000-0001-6014-9999 https://orcid.org/0000-0002-4759-7671 mailto:victor-koval@ukr.net https://doi.org/10.3846/bmee.2023.17740 2 w. e. arsawan et al. invigorating supply chain performance in small medium enterprises: exploring... gain competitive advantages (s.-h. liao et al., 2022). building collaboration with suppliers, customers, and competitors can enhance this capability (arsawan et al., 2022a). in order to increase supply chain performance and sustainability (nandi et al., 2020), collaboration must be strengthened (aslam et al., 2020). despite the benefits, collaboration results in expensive transaction costs (schmidt & wagner, 2019). therefore, building an ecosystem that supports the quality of the relationships between members is required. the literature on supply networks emphasizes the importance of innovation performance, but it needs to get more attention (ferraris et al., 2021). in order to comprehend innovation in the context of supply chains, further research is required (gupta et al., 2020). apart from various studies on supply chain capabilities that promote innovation performance, there has yet to be any empirical research linking cooperation and capabilities to boost innovation performance (y. liao & li, 2019). due to the requirement for empirical supply chain research, it is necessary to study how both are factors of innovation performance from an integrated perspective (asree et al., 2018). according to the literature, supply chain performance is complicated and affected by a variety of variables, including collaboration (liu et al., 2020b), capabilities (asamoah et al., 2020), and innovation performance, which is the scp’s foundation (kähkönen et al., 2017). in addition, the requirement for moderation must be considered because there is still a lack of understanding of the mechanisms underpinning the quality of interactions that influence innovation success (rungsithong & meyer, 2020). further, in this study, we use knowledge sharing as a moderator for three main reasons. first, sharing knowledge among supply chain members can generate ideas that will strengthen innovation (fosso wamba et al., 2020). in the supply chain context, knowledge is a crucial trigger that must be maintained and protected (li, 2020). second, knowledge sharing can increase the capacity of organizations to learn from one another to strengthen innovation (arsawan et al., 2022b) because it involves social interaction, exchange of knowledge, experience, and research and development skills (wang & hu, 2020). third, knowledge sharing is an intangible asset to achieve competitive advantage through collective knowledge management (tukamuhabwa et al., 2021). ultimately, interaction with knowledge sources, whether from suppliers, buyers, or other partners, is a way to acquire new knowledge, which will be strengthened by knowledge sharing to build supply chain performance (h. f. lin, 2017). it will deepen the understanding of how to build sustainability through supply chain collaboration. this study intends to investigate the key characteristics, such as information sharing, which has yet to be previously evaluated, as supply chain performance predictors. collaboration between firms relies heavily on knowledge exchange; therefore, innovation and supply chain performance will be more strongly affected in the future. for the purpose of filling the gap, this study assessed drivers of supply chain performance in the sme context of indonesia with several considerations. first, indonesia is an archipelagic country consisting of 17,000 islands that require an integrated supply chain, especially involving 64.2 million msmes with a contribution to the gross domestic product of 61.07 percent or idr 8,573.89 trillion. accordingly, comprising solid supply chain management will improve the performance of smes. second, enhancing collaboration and supply chain capabilities is indispensable with the enormous potential of an archipelagic country that requires resources in an integrated manner. it can bridge sme operations across islands to reach the business, management and economics engineering, 2023, 21(1): 1–18 3 right consumers. as a result, the inter-island economy will increase, the flow of goods will function adequately, and the needs of the people will be fulfilled. third, smes need to build collaboration to improve capability and supply chain performance to build performance and competitive advantage. despite limited resources and relatively low financial capabilities, the ability to build a convenient collaboration will improve operational performance capabilities and increase agility (arsawan et al., 2022b). lastly, citing the data from schwab (2019) indonesia has a low supply chain and innovation capabilities ranking. it is also shown to be ranked 74th; hence, collaboration with similar companies, suppliers, and competitors is crucial. based on these concerns, it is reasonable to examine collaboration in enhancing innovation capabilities and performance on supply chain performance in the sme context. this research aims to evaluate information sharing as a moderating component and examine supply chain performance, including collaboration, capabilities, and innovation. particularly in the sme sector, the importance of collaboration and opportunity in supply chains as an scm trigger is still underdeveloped. 1. literature review and hypotheses formulation 1.1. stakeholder theory the stakeholder idea is (freeman, 1984) assertion that corporate organizations should consider all pertinent stakeholders’ interests when making strategic decisions (freeman et al., 2018). according to the thesis, there is a connection between business and communities, groups, and people who work for a similar objective and affect one another (baah et al., 2021a). in order to produce value, innovate, and address inclusivity, as well as the interaction of pertinent groups and individuals, these interactions entail contacts, exchanges, and collaborations (huge-brodin et al., 2020). because it necessitates interactions between businesses and various stakeholders, the supply chain is crucial to the idea. although the idea served as a theoretical foundation for several scm investigations, its advancement within scm is still constrained (y. c. huang et al., 2021). various industries worldwide, including the textile industry, hospitals, logistics companies, and industrial groups, have also studied and applied supply chain management (liu et al., 2020a). however, companies are seen as organizations that need to define or comprehend their competitive strategy. thus, they require constant improvement (dey et al., 2021), about product development (y. s. lin & chen, 2021), collaboration with supply chain members (zaridis et al., 2021), and distribution capabilities for a competitive benefit (tukamuhabwa et al., 2021). 1.2. hypotheses development supply chain collaboration and capabilities broad supply chain cooperation, according to s.-h. liao et al. (2022) influence an organization’s capacity to recognize, use, and incorporate internal or external resources and information to support overall activities. collaboration is a technique to combine and test capabilities that affect organizational operations (kleine jäger & piscicelli, 2021). partners in the supply chain interact and work together to create a network that enhances the chain’s capabilities, 4 w. e. arsawan et al. invigorating supply chain performance in small medium enterprises: exploring... effectiveness, and efficiency (rajaguru & matanda, 2019). inter-organizational and inter-functional collaboration using coordinated and collaborative efforts enable superior performance through resource optimization to improve organizational capabilities, processes, and routines (anser et al., 2020). based on this description, the following hypothesis was formulated: h1: supply chain collaboration has a positive effect on capabilities supply chain collaboration and performance organizational collaboration with suppliers helps to achieve the needed coordination in the supply chain by involving other organizations (mandal & saravanan, 2019). the motivation for collaboration is to improve overall performance (liu et al., 2020a), which leads to an increase in resource efficiency (tsimoshynska et al., 2021). y. huang et al. (2020) confirmed the critical role of collaboration in determining supply chain performance (cui et al., 2020; yuan et al., 2019). based on this description, the following hypothesis was formulated: h2: supply chain collaboration has a positive effect on performance supply chain collaboration and innovation performance maintaining sustainable innovation skills is crucial for creating a competitive edge for all supply chain participants (hong et al., 2019b). numerous empirical studies have demonstrated that working with sc partners can help businesses increase their performance in terms of innovation (yuan et al., 2019). specifically, corporations interact with other supply chain partners during the collaborative innovation process, which encourages the dispersion and transfer of information and knowledge to boost the performance of the company’s invention (shin et al., 2019). collaboration quality is a predictor of innovation performance because it involves cooperation and increases commitment through effective communication to reduce uncertainty (li, 2020). this performance can be realized by having and maintaining longterm collaborative relationships with key partners upstream and downstream (arsawan et al., 2021; asree et al., 2018). furthermore, the collaboration between suppliers is a strategic step in improving innovation performance (kähkönen et al., 2017). based on this description, the following hypothesis was formulated: h3: supply chain collaboration has a positive effect on innovation performance supply chain capabilities and innovation performance innovation strategies assist organizations in addressing sustainability issues in manufacturing processes and supply chains (gupta et al., 2020). innovation capability also helps organizations to enhance their performance (parwita et al., 2021) and build agility (arsawan et al., 2022a). the supply chain capabilities improve operations, allow organizations to coordinate overall resources, and increase innovation (y. liao & li, 2019). based on this description, the following hypothesis was formulated: h4: supply chain capabilities have a positive effect on innovation performance supply chain capability and performance companies must acquire capabilities that allow for the efficient configuration of resources if they want to adapt to changing market conditions and gain a lasting competitive edge (kilubi & rogers, 2018; yi et al., 2021). the ability of a business to locate, use, or incorporate business, management and economics engineering, 2023, 21(1): 1–18 5 internal and external resources and information to enable all activities is referred to as the supply chain capability (aboelmaged, 2018). additionally, empirical data favors the idea that scm capabilities lead to higher performance. for instance, w. yu et al. (2018a) found a substantial correlation between supply chain competencies and business performance. businesses with more robust scm capabilities in integration, reactivity, and flexibility perform better (flöthmann et al., 2018). as a result, it helps businesses increase product availability, deliver goods on time, and minimize inventory levels necessary to guarantee and enhance operational performance (asamoah et al., 2020). this description led to the formulation of the following theory: h5: supply chain capabilities have a positive effect on performance innovation and supply chain performance in the long-term measure, innovation performance is the company’s ability to increase the significance, usability, and performance of its products and services (hong et al., 2019b). competitors may find it difficult to imitate when innovations that generate uniqueness and value contribute vitally to improving supply chain performance. this improved supply chain performance can be obtained by encouraging relational exchange and innovation and working with partners to detect areas needed for improvement (maldonado-guzmán et al., 2020). furthermore, innovation, including changes in products, services, processes, and management, affects the interactions between producers and suppliers or producers and customers (parwita et al., 2021). even though the relationship between innovation and supply chain performance has not been investigated in any of the leading scm literature, innovation performance will positively affect performance, particularly in the logistic environment. this description led to the formulation of the following theory: h6: innovation performance has a positive effect on supply chain performance the moderating role of knowledge sharing in the context of innovation performance, knowledge sharing refers to exchanging knowledge between companies through their supply chain members (fosso wamba et al., 2020). the success of this collaboration is determined by communication and information sharing, although it is difficult for most companies (baah et al., 2021b). in the supply chain context, knowledge is a source of power; therefore, it is often guarded and protected (li, 2020). nonetheless, knowledge and information sharing build innovation capabilities by increasing organizations’ capacity to learn from one another. it can also strengthen innovation performance because it involves social interaction, the exchange of knowledge, experience, and skills in research and development (wang & hu, 2020). for organizations, knowledge capital is a very strategic resource, and sharing in the supply chain is an effort to develop and manage knowledge to achieve a competitive advantage (dung et al., 2020; flöthmann et al., 2018). furthermore, in supply chain collaboration, direct and indirect interaction with knowledge sources such as suppliers, buyers, or other partners is a strategy for acquiring new knowledge (do canto et al., 2020). therefore, the collaboration between supply chains can be strengthened by knowledge sharing to build performance in the future. based on this description, the following hypothesis was formulated: 6 w. e. arsawan et al. invigorating supply chain performance in small medium enterprises: exploring... h7: knowledge sharing moderates the supply chain collaboration and innovation performance. h8: knowledge sharing moderates the relationship between supply chain collaboration and supply chain performance. this study examines the determinants of supply chain performance, namely supply chain collaboration, capabilities, and innovation performance. moreover, the study also explores the role of knowledge sharing in moderating the relationship between supply chain collaboration and innovation performance and supply chain collaboration and supply chain performance. the research framework is shown in figure 1. h1 h2 h3 h4 h5 h6 h7 h8 supply chain capabilities supply chain performance supply chain collaboration innovation performance knowledge sharing figure 1. research framework 2. research methods 2.1. sampling procedure the population of this study was 179 smes spread across nine districts in bali, indonesia. in this study, we used a saturated sample to obtain optimal data by involving 537 respondents, including assistants and operational managers, who are assumed to be the corporate executives who make strategic decisions on supply chains. in order to improve the survey’s performance and substance, a pre-test employing a questionnaire with 69 instrument questions was conducted by three expert academics. in addition, each participating company’s production manager was given a survey package with a cover letter detailing the study’s goals, a questionnaire, and pre-stamped envelopes with return addresses. the respondents completed the questionnaire and were asked to comment on the items’ clarity, wording, and comprehension. in the trial, the overall instrument design and content were also considered. consequently, no statement was eliminated, and only minor adjustments were suggested from the first test or trial replies. business, management and economics engineering, 2023, 21(1): 1–18 7 2.2. measurement the variable was evaluated by adopting previous works that collected data using a likert scale from 1 to 7 (“1-strongly disagreed” to “7-strongly agreed”). sixteen indicators from chen et al. (2017) were used to measure four aspects of supply chain collaboration. next, the capability was adopted from asamoah et al. (2020) with 17 indicators. we also used nine indicators adopted from hong et al. (2019a) to evaluate the innovation performance. supply chain performance was examined across three dimensions using a total of 14 indicators that were taken from asamoah et al. (2020); lee et al. (2007), and knowledge sharing across two dimensions using a total of 13 indicators were taken from lei et al. (2020). further, pls-sem is a helpful technique for validating theories by testing research models (hair jr et al., 2017). as a result, the supply chain management model’s postulated relationships were tested in this study using smartpls 3.2.7 software. furthermore, by analyzing the measurement model, the method was also utilized to assess the construct validity and reliability. lastly, it was applied to test multi-group analysis to evaluate the moderating influence of knowledge sharing (hair et al., 2016). 3. result 3.1. respondent profiles one hundred seventy-nine smes in bali, indonesia, contributed 537 respondents to this study. operational, assistant, and primary directors all received questionnaires requesting information on strategic policies relating to supply chain management to meet the study’s objectives. judging from experience, respondents with a range of 6–10 years and 16–20 years have the highest experience with 33.7% and 30.4%, respectively, indicating that it was crucial to building collaboration between stakeholders to achieve supply chain performance (damert et al., 2020; dey et al., 2021). in terms of age, respondents with an age range of 25–30. 31–35 had the highest percentage, namely 30.2% with a bachelor’s level of education, as the main potential for building knowledge sharing practices that produce knowledge quality (arsawan et al., 2022b). further, respondents were dominated by male respondents (76.7%). they were in the position of operational managers at 40.06%, indicating that decision-making regarding the supply chain is linked to responsibilities at the managerial level. table 1 shows the demographic information from the respondents. table 1. demographic facts characteristics frequency percentage experiences <5 2 4.00 6–10 181 33.7 11–15 82 15.3 16–20 163 30.4 >20 109 20.3 8 w. e. arsawan et al. invigorating supply chain performance in small medium enterprises: exploring... characteristics frequency percentage age <25 25 4.70 25–30 162 30.20 31–35 162 30.20 36–40 141 26.30 41–45 47 8.80 educational level bachelor 492 91.60 master 41 7.70 doctor 4 0.70 gender male 125 23.30 female 412 76.70 level of positions manager 121 22.54 assistant managers 201 37.40 operational managers 215 40.06 3.2. outer model measurement table 2 shows that the current model was built using 69 indicators from 5 variables. a measure of model dependability, cronbach’s alpha, gave a value of 0.7, deemed a suitable measurement (hair et al., 2016). the convergent validity of this model was assessed using the composite reliability (cr), average variance extract (ave), and item reliability generated from each variable. according to table 2 all values satisfied these requirements. additionally, each item’s loading factors at the individual level were higher than 0.7 (hair jr et al., 2017). the discriminant validity of this study was confirmed using the htmt criteria, and the htmt ratio value should be 0.85, while values up to 0.90 are acceptable (hair jr et al., 2017). as shown in table 3 all the htmt ratios fell below 0.85, demonstrating that the study model’s discriminant validity complied with the standards. table 2. instrument reliability test variables items* cronbach’s alpha rho_a composite reliability average variance extracted (ave) supply chain collaboration 1.000 internal collaboration 0.786 0.837 0.874 0.700 collaboration with supplier 0.899 0.911 0.924 0.671 collaboration with customer 0.847 0.858 0.898 0.688 collaboration with competitors and others 0.837 0.841 0.902 0.755 end of table 1 business, management and economics engineering, 2023, 21(1): 1–18 9 variables items* cronbach’s alpha rho_a composite reliability average variance extracted (ave) supply chain capabilities 1.000 information exchange 0.832 0.956 0.893 0.704 integration 0.833 0,887 0.893 0.683 coordination 0.846 0,869 0.887 0.612 responsiveness 0.860 0.897 0.911 0.725 innovation performance 1.000 product innovation 0.856 0.864 0.912 0.776 process innovation 0.885 0.890 0.929 0.813 management innovation 0.888 0.889 0.930 0.816 supply chain performance 1.000 reliability 0.801 0.815 0.868 0.623 efficiency 0.870 0.897 0.914 0.731 flexibility 0.864 0.870 0.901 0.647 knowledge sharing 1.000 explicit 0.854 0.857 0.892 0.579 tacit 0.828 0.841 0.872 0.599 table 3. htmt heterotrait-monotrait ratio (htmt) constructs sccol sccap ip supply chain capabilities 0.534 innovation performance 0.485 0.354 supply chain performance 0.394 0.475 0.317 note: *scco – supply chain collaboration, sccs – supply chain capabilities, ip – innovation performance, scp – supply chain performance. 3.3. inner model measurement tenenhaus’ structural model check goodness of fit index score of 0.482 suggested that the model’s fitness was high (tenenhaus et al., 2005). the examination of the normal fit index value (0.684) and the standardized root mean square residual value showed that the model was fit (0.113). the r2 test revealed that supply chain innovation and performance accounted for 0.311 (31.1%) of the variation in performance. last but not least, all q2 scores were positive, demonstrating that all components had excellent predictive power (chin et al., 2020). five of the six direct relationship hypotheses were supported, according to the data analysis findings (table 4). the path coefficient of 0.462 and a t-statistic of 11,363 greater than 1.96 demonstrated a strong positive relationship between supply chain collaboration and capabilities, and hypothesis 1 was accepted. since there was a significant positive correlation between supply chain collaboration and performance (β = 0.239, stdev 0.041, t statistics 4.429 > 1.96), h2 was acceptable. a significant positive link between supply chain end of table 2 10 w. e. arsawan et al. invigorating supply chain performance in small medium enterprises: exploring... table 4. collaboration within the supply chain’s impact on capacities, innovation, and supply chain effectiveness constructs direct indirect total β t-value β t-value β t-value supply chain collaboration -> supply chain capabilities 0.462 11.363 – – – – supply chain collaboration -> supply chain performance 0.239 4.429 0.106 4.250 0.345 5.882 supply chain collaboration -> innovation performance 0.187 4.875 0.139 5.140 0.326 5.806 supply chain capabilities-> innovation performance 0.300 6.098 – – – – supply chain capabilities -> supply chain performance 0.230 4.858 0.021 1.363 0.013 1.375 innovation performance -> supply chain performance 0.071 1.433 – – – – table 5. testing of moderation effects constructs original sample (o) sample mean (m) standard deviation (stdev) t statistics (|o/stdev|) p values decisions supply chain collaboration -> knowledge sharing -> innovation performance 0.189 0.199 0.033 5.806 0.000 h10 = supported supply chain collaboration -> knowledge sharing -> supply chain performance 0.040 0.043 0.040 0.987 0.324 h11 = not supported collaboration and innovation performance (β = 0.187, stdev 0.038, t statistic 4.875 > 1.96) further supports h3. h4 was acceptable since there was a significant positive association between supply chain capabilities and innovation performance (β = 0.300, stdev 0.049, t statistics 6.098 > 1.96). since supply chain performance and capacities have a significant positive relationship (β = 0.230, stdev 0.047, t statistics 4.858 > 1.96), h5 was acceptable. because innovation and supply chain performance were insignificant (β = 0.071, stdev 0.050, t statistics 1.4331.96), hypothesis 6 was not accepted. this study also examined the moderating variable (table 5) multigroup-analysis utilizing pls was used to explore the moderating role of knowledge sharing (henseler & fassott, 2010). in addition, the relationship between supply chain collaboration and innovation performance was also evaluated. besides, knowledge sharing was found to be a moderator (β = 0.189, stdev 0.033, t statistics 5.806 > 1.96, pv 0.000). as a result, hypothesis 7 is confirmed. however, it did not attenuate the relationship between supply chain collaboration and performance (β = 0.040, stdev 0.040, t statistics 0.9871.96, pv 0.324); hence, hypothesis 8 was rejected. business, management and economics engineering, 2023, 21(1): 1–18 11 4. discussion and theoretical implications according to the analysis’s findings, supply chain collaboration considerably improved capabilities. it was consistent with previous studies that collaboration enhanced capabilities through the integration of resources among supply chain partners (s. h. liao & kuo, 2014; rajaguru & matanda, 2019), and improved efficiency in the areas of planning, purchasing, and achieving sales goals (chand et al., 2020). in addition, collaboration increases productivity, lowers transaction costs and increases resource availability (chen et al., 2017; um & kim, 2019). the relationship between collaboration and innovation performance was significantly positive and reinforced previous results (nguyen et al., 2019) that collaboration was an essential trigger for innovation, especially with key partners upstream and downstream (asree et al., 2018). in addition, the relationship between supply chain capabilities and innovation performance was significantly positive and supported (hong et al., 2019a) that capability increased the acceleration of value creation and innovation (kumar et al., 2020). likewise, the relationship between supply chain capabilities and performance was significantly positive. it was in line with asamoah et al. (2020) that capabilities assisted organizations in identifying and assimilating internal or external resources to achieve sustainable performance (mandal, 2017; z. yu et al., 2018b). knowledge sharing moderated the relationship between supply chain collaboration and innovation performance in the moderation test. it suggested that the relationship between collaboration and innovation was strengthened by knowledge sharing, which can be obtained from internal sources of the organization, i.e., employees, or external sources, i.e., government agencies, consultants, universities, and research institutions (jimenez-jimenez et al., 2019). organizational supply chain partners were essential for creating new knowledge and learning. they also have an important role in the innovation realization of organizations (kumar et al., 2020). meanwhile, knowledge sharing was not a moderating variable in the relationship between supply chain collaboration and performance. it indicated that the relationship could not be strengthened by sharing knowledge. this study contradicted attia and essam eldin (2018) finding that denoted sharing between supply chain members can accelerate the knowledge flow, increase supply chain efficiency and effectiveness, or enable organizations to respond quickly to changing customer needs. this study enhanced the literature on supply chain management which can be explained as follows. first, the scp was assessed by integrating innovation performance into the performance model. according to the data analysis, the collaboration integration model for scp was appropriate. the insertion of a capability in the innovation performance model increased the explanatory power of the scp model. conceptually, these results strengthened the collaboration-capabilities-performance model in the sme sector (dey et al., 2021; singhry, 2015; zaridis et al., 2021). it showed that within scp, collaboration could simultaneously strengthen the influence of capabilities and innovation on the model. therefore, in the smes context, the scp model conceptually expanded to become sc collaboration-sc capabilities and filled gaps in the literature (bravo et al., 2017; y. liao & li, 2019; zimmermann et al., 2016) that there was no previous study had integrated these three models. furthermore, this study proved 12 w. e. arsawan et al. invigorating supply chain performance in small medium enterprises: exploring... that supply chain capabilities built with effective and efficient collaboration were essential strengths as a predictor of scm (hong et al., 2019b) in obtaining resources and developing organizational capabilities to create competitive advantage. second, this study unexpectedly discovered a non-significant impact of innovation performance as a predictor of scp. therefore, the analysis offered a new result: innovation performance could not improve supply chain performance. it contradicted seo et al. (2014), singhry (2015) finding, which stated the role of innovation as a significant predictor in building supply chain performance. a possible explanation was that sme supply chain performance involved more collaboration since smes needed to define or understand their competitive strategy (dey et al., 2021; zaridis et al., 2021). consequently, companies were required to make continuous improvements through knowledge sharing to gain external knowledge, technology, and management idea (arsawan et al., 2022b). third, this study showed how knowledge sharing moderated supply chain collaboration and innovation performance. an essential role of knowledge sharing in the supply chain is social interaction, exchange of knowledge, experience, and skills in research and development (wang & hu, 2020). therefore, it needed to be maintained and protected to increase capacity and strengthen innovation performance. in the context of theory, this study contributed to enriching stakeholder theory (e. r. freeman, 1984) that organizations were responsible for all activities between supply chains (y. c. huang et al., 2021). strong collaboration between organizations has increased capabilities and performance in building competitive advantage. moreover, collaboration was the most critical determinant, enabling value creation for capabilities (tsimoshynska et al., 2021), and innovation (damert et al., 2020). this result was consistent with trachenko et al. (2021), which stated that the supply chain was relevant from the stakeholder theory perspective because it required companies to interact with various stakeholders in a business approach. 5. managerial implications this study provided managerial insight as follows. firstly, the collaboration result with supply chain partners had incremental improvements in capabilities and innovations, such as process improvements, more efficient operations, better quality, and lower costs, as well as radical innovations, including the implementation of new technologies and changes in strategy. therefore, it can develop and improve their capacity for innovation. hence, internal and external collaboration has implications for customer engagement: strengthening the market structure. second, this study contributed to evaluating and improving collaborative practices in supply chains to increase efficiency. consequently, making a formal agreement in a business context was necessary to keep all parties safe in the cooperation process. third, collaboration among supply chain members can be an opportunity to practice knowledge sharing. consequently, it can increase the transfer of knowledge, experience, and skills in research and development to make strategic decisions that improve performance. the expected consequence is that smes become more resilient and have several options and strategic flexibility that can be used as guidance when encountering various risks. fourth, sme managers need to re-examine the business-to-business relationships between supply business, management and economics engineering, 2023, 21(1): 1–18 13 chain partners to ensure the compatibility and conformity of values, goals, and attitudes, which maximizes benefits for all the supply chain members. these results offer insight to sme managers on managing collaboration structures and improving inter-organizational capabilities to maximize the benefits derived from innovation and supply chain performance. eventually, in an archipelagic country like indonesia, our research results offer the best practice that solid supply chain collaboration provides a new perspective on how to structure collaborative structures that are mutually reinforcing, beneficial, and provide added value. a strong collaboration structure will reduce costs incurred, thereby increasing operational performance to build a resilient supply chain. in addition, collaboration is the foundation for enhancing capabilities and knowledge sharing efforts. as a result, accumulating collaborative knowledge will become a new force in dealing with environmental dynamics, uncertainty, and even crises. 6. limitations and further research although this study contributed to theory and practice, it has some limitations that should be explored further. first, the operating strategy was closely related to the competitive environment, and the combination of various operating strategies can assist the company in surviving such a situation. moreover, this study single-handedly investigated the effect of supply chain collaboration and capabilities on innovation and supply chain performance. thus, future studies can consider the combination of operating strategy dimensions (cost, quality, flexibility, and delivery) as important variables determining supply chain performance and the role of leadership in coordinating or implementing strategies to improve operational quality. second, supply chain collaboration has several dimensions, such as supplier, customer, and internal integrations, which were not separately examined in this study. hence, it is highly recommended to re-examine the above model by separating these dimensions into essential variables. third, the hypotheses were tested based on 537 responses from 179 smes in indonesia. subsequently, future studies should focus on obtaining data from different countries, allowing improvisation of the generalizability and comparability of the results and interesting findings. conclusions this study aimed to examine the supply chain performance drivers, namely collaboration, capabilities, and innovation, both direct and indirect. then, it examined the role of knowledge sharing as a moderator variable. four important conclusions were obtained from this study. firstly, supply chain performance is a complex construct that consists not only of supply chain collaboration but also of supply chain capabilities and knowledge sharing. second, the determining factor that has the most influence on supply chain performance is supply chain collaboration because it has the most significant total effect compared to other determinants. these findings underlined the critical role of collaboration in determining supply chain performance. third, this study unexpectedly discovered a non-significant impact of innovation performance as a predictor of supply chain performance. these results proved that smes are still focused on building collaboration and capabilities. although not directly 14 w. e. arsawan et al. invigorating supply chain performance in small medium enterprises: exploring... significant, strengthening knowledge sharing practices were expected to improve supply chain performance in the future. fourth, knowledge sharing played a role in strengthening the relationship between collaboration and innovation performance. with these results, smes are expected to build collaboration gradually to improve their innovation capabilities and performance. on the other hand, by sharing knowledge between supply chain collaborations, innovation performance will increase. disclosure statement authors declare that they do not have any competing financial, professional, or personal interests from other parties. references aboelmaged, m. 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(2016). the influence of supply chain on the innovation process: a systematic literature review. supply chain management: an international journal, 21(3), 289–304. https://doi.org/10.1108/scm-07-2015-0266 https://doi.org/10.3390/su11020449 https://doi.org/10.1016/j.csda.2004.03.005 https://doi.org/10.33271/nvngu/2021-4/165 https://doi.org/10.33271/nvngu/2021-2/184 https://doi.org/10.1108/jbsed-04-2021-0051 https://doi.org/10.1016/j.ijpe.2018.03.025 https://doi.org/10.1016/j.technovation.2017.12.002 https://doi.org/10.1016/j.jbusres.2021.03.024 https://doi.org/10.1016/j.tre.2017.04.002 https://doi.org/10.17270/j.log.2018.304 https://doi.org/10.1080/09537287.2020.1796136 https://doi.org/10.1108/scm-07-2015-0266 bookmark 2 copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(2): 175–202 doi:10.3846/bme.2015.297 relationship model of personality, communication, student engagement, and learning satisfaction dorothea wahyu ariani department of management, economics faculty, maranatha christian university, jl. prof. drg. suria sumantri no. 65, bandung, indonesia e-mail: ariani1338@gmail.com received 10 november 2015; accepted 24 november 2015 abstract. this study aims to examine the engagement as a mediating variable of the relationship between personality and communication with satisfaction. this study was conducted at business school in indonesia with 307 students who are still active as a respondent. survey research was conducted over four months by questionnaire that has been well-established that was taken and modified from previous studies. the results of this study indicate that student engagement mediates the relationship between personality and communication as independent variables and satisfaction as the dependent variable. extroversion personality and communication significantly positive effect on student engagement in all three dimensions (vigor, dedication, and absorption). in addition, this study also showed that engagement and satisfaction are two different variables, but correlated, and there was no difference in terms of gender differences involvement. keywords: big five personality, internal communication, student engagement, learning satisfaction. jel classification: i23, m12, o15. 1. introduction engagement is a relatively new concept, it is important, and much in demand by researchers and practitioners (macey, schneider 2008; rothman, s., rothman, s. (jr.) 2010; harter et al. 2002; bakker et al. 2008). according to saks (2006), it appears the concept of engagement of practitioners, instead of academics, so that only a few researchers who conduct research on engagement. however, an engagement gets a great attention both from the company as well as in the academic literature (saks, gruman 2011; rich et al. 2010; saks 2006). this is because engagement has been described as a key control in attitudes, behavior, and performance of individuals in order to improve performance, productivity, ownership, financial, and income of the shareholders of the company (harter et al. 2002; bates 2004; richman 2006). in other words, engagement is a key of the organization’s success in winning the competition. http://dx.doi.org/ 10.3846/bme.2015.297 mailto:ariani1338@gmail.com 176 d. w. ariani. relationship model of personality, communication, student engagement, and learning satisfaction research of engagement has been done in the company, but a little research has been conducted on the engagement of an educational institution. comprehension of engagement has been escalated not only on company, but also on student engagement in school and engagement in learning. the engagement associated with achievement in school and a favorable outcome such as social welfare and psychological well-being (crick, goldspink 2014). students that are involved will be motivated and will increase the complexity of a college. these complexities include of education funding, accountability, and oversight of education to improve the quality education received by students (devlin et al. 2009). definition and understanding of engagement is overlap with other constructs such as organizational commitment and organizational citizenship behavior (saks 2006). however, in the academic literature, engagement is defined as construct different and unique. engagement includes components of cognitive, emotional, and behavioral related to performance in accordance with the role of the individual. engagement is related with a variety of results that can be enjoyed by the organization, such as loyalty, increased productivity and profitability, as well as labor turnover, absenteeism, and desire out of the organization declined (harter et al. 2002). in addition, the engagement also has positive impact on psychological well-being (may et al. 2004; rothman, s., rothman, s. (jr.) 2010). schaufeli et al. (2002a) and bakker et al. (2008) said that engagement is a state of positive thinking and excited associated with a task or job and is characterized by vigor, dedication, and absorption. vigor is strength or energy or power, excitement, desire to invest his efforts on the job. dedication is an ability not to get tired easily, and persevering in the face of difficulty, devotion, or sacrifice which is a strong engagement in the work, enthusiasm, and a sense of pride, inspired, and challenged. absorption is pleasant conditions in the job or task, felt the time passed so quickly, and was not able to shed jobs or duties. macey and schneider (2008) stated that the engagement is a job satisfaction and also a few studies have attempted to distinguish between engagement and job satisfaction. however engagement can also increase job satisfaction and organizational commitment, as well as decrease the desire to leave the organization (saks 2006). based on the results of previous studies, engagement associated with work such as job satisfaction (yakin, erdil 2012). according to luthans and peterson (2002), engagement is a significant predictor for the desired organizational outcomes such as job satisfaction, productivity, profitability, and the desire to remain in the organization. in educational institutions, job satisfaction can be referred to as the satisfaction of learning or learning satisfaction. furthermore, the engagement is the attitudes and behavior (little, b., little, p. 2006). the behavior of individuals is determined by situational or environmental factors or work and personal factors (rothman, welsh 2013). in theory of organizational behavior, both situational factors and personal factors or dispositional is an antecedent in 177 business, management and education, 2015, 13(2): 175–202 explaining behavior in the workplace such as engagement. previous research states that the interaction between situational factors and personal factors such as personality will influence the attitudes and behaviors (ilies et al. 2006; bono, judge 2003; judge et al. 2005). some previous research has examined the relationship between engagement and personality. langelaan et al. (2006) examined the relationship between engagement and burnout with dimensions of emotional instability personality (neuroticism) and openness personality dimensions (extraversion). kim et al. (2009) suggested a negative relationship between engagement and emotional instability and a positive correlation between the personality dimensions of conscientiousness and engagement. bakker et al. (2012) showed that conscientiousness positively related to engagement. some researchers claim that the concept of engagement is an individual’s emotional commitment to the organization to engage psychologically, have the desire and ability to achieve the goals and objectives of the organization (iyer, israel 2012). this is what requires all members of the organization to develop internal communication. clear communication and information within the organization will allow individuals to work and achieve its objectives are aligned with organizational goals. communication within the organization is also associated with engagement. employees will see their leaders can be trusted if they can communicate intensively and can provide accurate information. sufficient explanation accompanied by appropriate feedback and quickly will increase confidence (folger, konovsky 1989). leader who is able to explain the decision will increase the confidence of her followers (konovsky, cropanzano 1991; sapienza, korsgaard 1996). open communication will encourage leaders convey ideas and thoughts so as to increase the trust. lack of communication and information will lead to distrust, dissatisfaction, indifference, and the desire to leave the organization (turnover intention) and cause personal crisis. therefore, to build engagement, internal communications required a clear, honest, concise, and timely. social exchange theory is a prominent theoretical paradigm in understanding the relationships in the workplace and employee attitudes (cropanzano, mitchell 2005). meanwhile, the relationship between personality variables and the behavior of individuals in the workplace is based on the self-identity theory (karanges et al. 2014). the purpose of this study was to examine the relationship between constructs based on the principles of social exchange and identity. this study has built a model of relations, where the three-dimensional of engagement would mediate the relationship between conscientiousness personality and extraversion personality as well as the communication as the independent variables and satisfaction as the dependent variable. furthermore, this study also tested whether the engagement and satisfaction are two different constructs given previous research suggest that both constructs are overlapping each other. engagement research was important, because the engagement will create prosperity, productivity, and improved performance and organization (harter et al. 2002; schaufeli et al. 2002a). attention of researchers on engagement escalated of recent times both in 178 d. w. ariani. relationship model of personality, communication, student engagement, and learning satisfaction academics and practitioners. definition of engagement also varies among practitioners and academics. the researchers describe the engagement as individuals scientifically motivated (steele, fullagar 2009). individuals engaged in the activity for its own sake, not as a consequence of extrinsic (schaufeli et al. 2002b). research on engagement in academic field is very limited. nevertheless, research findings indicate that students can also experience engagement in academic activities. this research was conducted at business school in indonesia with undergraduate students who are still active as respondents. 2. theoretical review and hypothesis testing 2.1. engagement the term engagement in the work was first presented by kahn (1990) describes a new approach to motivating employees using the view that behavior is based on three dimensions: the physical engagement, emotional engagement, and cognitive engagement. according to kahn (1990), engagement is a multidimensional construct. individuals may be engaged in emotional, cognitive, and physical. psychological engagement and organizational behavior require emotional and cognitive engagement. to be emotionally engaged, individuals will establish meaningful relationships with others, such as with colleagues and leaders, as well as the experience of empathy and concern for the feelings of others. according to kahn (1990), individuals may be engaged only in one dimension, and not in another dimension. however, the more individuals engaged in each dimension, then the stronger engagement. in all personal engagement, then the individuals will feel engaged when aware cognitively their meaningfulness (e.g., understand what is expected of their organization, how to form strong relationships with co-workers and leaders, or feel a sense in the workplace, and connect emotionally with other people). engagement is a positive relationship between individual and task or job that is characterized by feelings of meaning, competence, and has influence (macey, schneider 2008). work engagement is positive emotions that can lead to the spirit or energy that will be used individually to devote himself to his work. individuals who are passionate and dedicated to spend time and energy to carry out his duties because they are too busy doing the job. the concept of engagement in the work has been conceived as a variable that fluctuates from day to day (xanthopoulou et al. 2009). however, engagement in work showed a relatively stable phenomenon associated with the presence of specific job and continuous organizational characteristics (macey, schneider 2008). individuals who do not feel engaged in the work will disengage and withdraw cognitively and emotionally. according to hochschild, employee disengagement showed low performance, unwillingness to try or effortless, and stiffness (may et al. 2004). employee disengagement could be due to a lack of social interaction in the workplace, just get a little autonomy in the workplace, and feel that the work is not important 179 business, management and education, 2015, 13(2): 175–202 (luthans, peterson 2002). individuals who are not engaged personally would always avoided or defensive and tend to avoid its role in the workplace, and do not want to deal with co-workers (handa, gulati 2014). individuals will show its performance when they find that their role means, secure environment, and the availability of resources to carry out its work. furthermore, other researchers looked at from a different perspective states that stress and burnout is the opposite of engagement and being on the same continuum with engagement (maslach et al. 2001). maslach et al. (2001) describes the engagement of the three dimensions of attitudes, namely the spirit or energy, devotion or sacrifice or dedication, and fun. these three dimensions are based on three-dimensional kahn (1990) which was also presented by schaufeli et al. (2002a) and bakker and demerouti (2007). the concept of measurement and their engagement is then developed and perceived as an important concept that is necessary to test the validity and reliability of the measuring instrument. some researchers then developed a measurement tool based on the concept of job engagement (see e.g., may et al. 2004; saks 2006). rich et al. (2010) adopted a conceptual framework kahn (1990) and then develop and test the validity of measurement scale while maintaining the dimensions of physical engagement, emotional engagement, and cognitive engagement. the subsequent researchers then evaluated the concept of work engagement and prepare a meta-analysis to examine the antecedents and consequent of work engagement (see e.g., christian et al. 2011; crawford et al. 2010). work engagement is a relatively new concept and is often debated. engagement show workmanship and simultaneous expression of individuals in that task behavior indicates to do with work, others, personal condition (physical, cognitive, and emotional), active, and performance (kahn 1990). individuals engaged will use her full and formal performance with the power flowing into the physical, cognitive, and emotional of that individual (kahn 1990; rich et al. 2010). individuals engaged not only physically be at work, but more important is the individual psychologically more give attention, integrated, and focused on the work and performance. individuals that are engaged will be able to finish the job. individuals with high engagement will experience psychological condition and physical condition of healthy, creative in the workplace, and using all his personal resources, experiencing positive emotions in the workplace, to transfer positive engagement conditions on others, and receive high performance assessment (bakker 2009; bakker, demerouti 2008; bakker et al. 2004; strausser et al. 2011). engagement is also a motivation that involves the allocation of its resources to achieve its performance. several studies have shown inconsistency theoretically and empirically, especially in the three-factor structure of engagement and relationship with other concepts (vecina et al. 2012). some researchers suggest that engagement includes three dimensions (schaufeli et al. 2002b, 2002a). several other researchers stated that the engagement of only one dimension (hallberg, schaufeli 2006). wefald and downey (2009) who 180 d. w. ariani. relationship model of personality, communication, student engagement, and learning satisfaction conducted research using students as respondents did not support the engagement of the third dimension. meanwhile, hallberg and schaufeli (2006) stated in his research that the engagement could include a one-dimensional or three-dimensional. this study uses three-dimensional engagement developed by schaufeli et al. (2002a, 2006), bakker et al. (2008) which included the spirit or energy (vigor), dedication, and absorption. macey and schneider (2008) stated that the engagement mediates the relationship between antecedents (such as job characteristics, leadership, and personality) and outcomes (such as task performance and contextual performance). engagement is better known by practitioners rather than in theory and empirical research. defining the concept of engagement is also similar to other first known, such as organizational commitment and organizational citizenship behavior, or is defined as the emotional and intellectual commitment to the organization, or the number of businesses who “deviant” individual shown in the workplace. macey and schneider (2008) states that the engagement is a concept that overlaps with satisfaction, organizational commitment, and empowerment, even the engagement of a merger of these constructs. based on this, the research questions that can be asked is whether the three dimensions of engagement mediates the relationship between personality and communication as antecedents to job satisfaction as a consequence of this research? based on the above discussion, hypothesis of this study is offered, that is: h1: there is a difference between engagement and learning satisfaction. 2.2. engagement and personality lately, personal factors also included as antecedent construct of engagement (xanthopoulou et al. 2009). engagement is a construct that gets attention because it is associated with positive psychological conditions to examine how non-cognitive factors affecting results are positive (bakker et al. 2008). judge et al. (1997) emphasize the personal aspect as an antecedent of individual behavior in the workplace. one of the personal factors that influence individual behavior is personality. personality is a set of personal characteristics that determine an individual’s perception and reaction to the situation. personality is also an individual choice or individual ways of behaving, thinking, and feeling. personality enable to measuring actual behavior. the importance of understanding personality is personality can affect performance (tett, burnett 2003; barrick et al. 2002) and satisfaction (arvey et al. 1989). research on the big five personality is developed by costa and mccrae. five personality dimensions include emotional instability or neuroticism, extraversion, openness to experience, agreeableness, and conscientiousness. neuroticism is an individual’s inability to emotionally adjust to its environment. neurotic individuals are individuals who experience negative feelings such as fear, sadness, anger, shame, and guilt, has no rational idea, not able to control the conscience, and depressed by the negative emotions that deviate from the environment. extraversion dimension is excited, optimistic, and 181 business, management and education, 2015, 13(2): 175–202 happy. individuals who are extroverts have high social life, active, talkative, and assertive. openness to experience is characterized by imaginative, sensitive, listen to your heart, intelligent, curious, and independent. individuals are usually open to new and different things, and emotionally upbeat. agreeableness is the tendency of individuals to become donors or love of neighbor. such individuals usually feel sorry and want to help others. while of conscientiousness is characterized by being able to control themselves, focus, able to plan and organize well, and be able to work or completing a task or job. according to barrick and mount (1991), conscientiousness, neuroticism, and openness to experience are associated with the performance. according to macey and schneider (2008), engagement is associated with personality, especially conscientiousness. meanwhile, langelaan et al. (2006) stated that engagement is negatively related to neuroticism and positively related to extraversion. kim et al. (2009) stated that of the five dimensions of personality called the big five personality, only conscientiousness dimension effects on engagement, while neuroticism dimensions and extraversion does not effect engagement. ongore (2014) stated that his research result showed the all of dimensions in the big five personality affect engagement. personality is considered as an important variable to influence the individual’s engagement in the work. for example, two people working in the same environment can have different levels of engagement for different personality traits. schaufeli and salanova stated that only emotional instability and openness are associated with engagement, while openness to new experiences even unrelated (ongore 2014). conscientiousness dimension is characterized by responsible, dependable, have a plan, manage, persistent, using deep consideration, and achievement-oriented (barrick et al. 1993). these characteristics indicate that individual with high conscientiousness is an individual who has a positive attitude and motivated in their work. in general, they also have a way to support the achievement of goals and have the ability to hold social interaction. although individual uses task-based achievement, but the individual who has the dimension of conscientiousness also emphasizes the goal-achievement. individuals with a high degree of conscientiousness will have a high citizenship behavior and they are able to perform their role in the workplace. conscientiousness dimension is positively associated with success or achievement. individual who have high caution is likely to work to achieve the goal (smithikrai 2007). in addition, individuals with high conscientiousness convinced that the work has a special meaning for him and experiencing higher psychological fulfillment of the job compared to individuals with low levels of conscientiousness (li et al. 2007), and they are able to regulate behavior in more effective (wallace, chen 2006). conscientiousness personality is a tool to achieve employment success as motivation and a desire to be more productive (judge, ilies 2002). in other words, individuals with high conscientiousness demonstrated its capacity to function and develop in a way that is productive and can get things done faster. furthermore, individuals who have the personality dimension of extraversion tend to be friendly, assertive, talkative, ambitious, and gregarious, so that the person using 182 d. w. ariani. relationship model of personality, communication, student engagement, and learning satisfaction the work environment to show life that enable them to fulfill their aspirations and to show his talents (hurley 1998). individuals who have an extraversion personality are usually more stable, calm, optimistic, aggressive action indicated by the results of the work is complete and satisfactory. they generally feel comfortable working with other people and have a positive emotional reaction, as well as more comfortable expressing themselves. smithikrai (2007) suggested a positive correlation between the extraversion personality dimension and success in work, especially in jobs that require personal contact. previous research supported the relationship between extraversion, neuroticism, and conscientiousness with job engagement (kim et al. 2009; langelaan et al. 2006; liao et al. 2013). based on a wide range of exposure on the relationship engagement and personality, then the hypothesis of this study is offered. h2: conscientiousness personality has positive effect on engagement. h3: extraversion personality has positive effect on engagement. 2.3. engagement and internal communication ilies et al. (2006) showed that the interaction between personality and situational factors in the workplace affect work outcomes or individual performance. the resources in the workplace such as social support from coworkers and supervisors, performance feedback, the variation of expertise, autonomy, and learning opportunities within the organization positively related to engagement (bakker, demerouti 2007). the resources in the workplace or place of learning is situational factors that can play a role both as an intrinsic motivator for helping growth, learning, and development of an individual and as an extrinsic motivator because it is a way or means to achieve goals. several previous studies have shown a positive correlation between the resources that exist in the workplace and engagement (schaufeli, bakker 2004). research results of hakanen et al. (2006) showed that information, job control, supervisor support, innovative climate, and social climate were positively related to engagement. some studies also emphasize and underline the importance of communication for organizational success and showed that the quality of communication in organizations dealing with employees, satisfaction, and motivation (orpen 1997). communication and organizational climate will improve productivity. there is a relationship between the amount of time spent on communication and job satisfaction. organizational communication includes techniques for transferring information, ideas, and assessment from one individual to another. organizational communication is a communication and interaction among members of the organization. organizational communication is a dynamic process and involves techniques, networking, and complex. organizational communication is important for organizational members to be able to better engage in the organization, convey information, build trust and cooperation with each other, understand and coordinate the work, improve communication and learning climate, and to achieve individual satisfaction and all members of the organization (ali, haider 2012). this study uses 183 business, management and education, 2015, 13(2): 175–202 organizational communication as one of the independent variables. this organizational communication hereinafter referred to as internal communication. internal communication can serve to motivate all organizational members. good internal communication will be able to improve the morale of individuals, making people feel a part of the organization’s members and will encourage motivation from within the individual (intrinsic motivation), which in turn will improve the satisfaction of the individual. mccleod and klarke underlined that communication is an important factor that can improve individual performance through engagement (dromey 2014). good internal communication will encourage engagement. individuals also require clarity of communication and information from the head to determine whether it plays a role in accordance with the vision of the organization and its leaders. good internal communication will improve intellectual ability and creativity of employees to produce benefits for the organization (mishra et al. 2014). transparent organization will provide information widely. openness in communication and providing information indicate a strong relationship between members of the organization and shows the trust between members of society together and leaders. internal communications provide positive benefits to the organization, such as an enhancement in commitment and confidence, which in turn will have a positive impact on relationships with all stakeholders in the organization, including customers. according to saks (2006), clear and intensive communication will increase engagement. individuals within the organization will also be engaged when there is a positive relationship with the organization. welch and jackson (2007) also stated that internal communication is important in achieving the individuals engagement in the task or job. leader need to communicate openly and consistently with all his subordinate. internal communication is part of the organizational context in which that engagement will occur (bakker et al. 2011). engagement is influenced by internal communication even well designed internal personal communication will improve engagement (papalexandris, galanaki 2009). communication is the psychological needs of employees in which the organization will be able to maintain and increase engagement (welch 2011). based on an examination of the relationship between the various internal communication and engagement, hypothesis of this study is offered. that is: h4: internal communications positive effect on engagement. 2.4. engagement and learning satisfaction job satisfaction is an individual assessment of the work or cognitive variables, an affective reaction to the work, or an individual’s attitude toward work (weiss 2002). weiss (2002) argued that job satisfaction is an attitude, i.e. positive or negative evaluation of individuals to work or work situation. according to alarcon and lyons (2011), job satisfaction is different from engagement in two respects. first, job satisfaction can 184 d. w. ariani. relationship model of personality, communication, student engagement, and learning satisfaction be experienced at different levels and is a function of perception and affect employment (organ, near 1985), while the engagement is the core or the content of such work (maslach, goldberg 1998). second, research shows that engagement is positively related to requests or demands in the workplace, not like that job satisfaction is negatively related to requests or demands in the workplace (saks 2006). learning satisfaction is also a construct that is conceptually similar to job satisfaction. learning satisfaction is an assessment of the students’ academic and social processes are done for college. learning satisfaction is an evaluative description of the task or job and task or job characteristics that are characteristic of the attitude of learning, while the engagement is a description of the individual experiences resulting from work (christian et al. 2011). moreover, although there are similarities with other concepts theoretically, but difference between engagement and organizational commitment is not easily extinguished in the workplace (vecina et al. 2012). empirical research on the engagement reported that high engagement can increase satisfaction and organizational commitment, lower absenteeism and a desire to get out of the organization, improve well-being and behavior, improve behavior beyond a role played, improve performance or achievement, increase personal initiative, behavior proactive, and motivation to learn. satisfaction is an attitude that shows the inner feelings or pride in doing a particular task or job. satisfaction is how much people loved the task or job. macey and schneider (2008) stated that the concept of engagement is overlapping with satisfaction, organizational commitment, and empowerment, as well as the incorporation of these constructs. some researchers also stated that although there are similarities between these constructs, but the research and theory suggests that the engagement is a different conceptually and empirically with these constructs (hallberg, schaufeli 2006; schaufeli, bakker 2004). according viljevac et al. (2012), the limitation of engagement is unclear. some researchers suggest that engagement also includes other constructs such as satisfaction, organizational commitment, a desire to remain in the organization, and proactive behavior, and citizenship behavior (frank et al. 2004; macey, schneider 2008; bhatnagar 2007; heger 2007). some researchers suggest that engagement is similar to other constructs such as satisfaction, positive influence, and organizational commitment (newman, harrison 2008). according to rich et al. (2010), the engagement is an individual who is a holistic concept of the role, while other concepts are similar to the narrower concept of the individual. hallberg and schaufeli (2006) also prove that engagement and organizational commitment are different constructs. wefald and downey (2009) and alarcon and lyons (2011) in his research also supports the idea that engagement and satisfaction are two different constructs. according to rich et al. (2010) and hallberg and schaufeli (2006), correlations between the constructs that are similar to the various variables that are antecedent variables may indicate that engagement, satisfaction, organizational commitment, intrinsic motivation, and positive influence is constructs that are different from each other. indi185 business, management and education, 2015, 13(2): 175–202 viduals who are engaged will have pleasant emotional state in the workplace or learning places that show a high level of satisfaction (biswas, bhatnagar 2013). they will generally do a good job and is able to achieve the target. previous research stated that there is a positive relationship between engagement, psychological conditions, satisfaction, and a desire to remain in the organization (handa, gulati 2014). saks (2006) also stated that such engagement is positively associated with satisfaction, organizational commitment, and organizational citizenship behavior, and negatively related to the desire out of the organization. however, the relationship between these concepts is still a debate among researchers, and the results showed no empirical research (little, b., little, p. 2006). meanwhile, several studies have shown a correlation between these concepts. based on an examination of the various attachment relationship work and job satisfaction, the hypothesis of this study is offered, that is: h5: engagement has positive effect on satisfaction. 2.5. student engagement the researchers discussed the engagement as a psychological construct in the work setting. therefore, the researchers were also able to use the engagement in research on college students. in the academic sector, engagement shows the active engagement of students in learning activities which also includes the engagement of the habits and behavior skills (concentration, attention, effort), emotional engagement which includes motivations and feelings (interest and excitement in learning), and cognitive engagement that includes beliefs and values (the use of cutting-edge instructional strategies) (reeve 2012). underlying psychological constructs employees and students are the same. the difference is only the setting in which the work was done. the researchers did some research on engagement as much research on the attitudes of employees. this study uses students as a source of data to support the research hypothesis regarding the students’ engagement. students demonstrate the level of engagement through a wide range of academic behavior. according to skinner and belmont (1993), students who have a high engagement showed behavioral engagement in learning activities associated with positive emotional states. they chose the tasks according to the competence or ability, conducting when you get a chance, struggle and concentrate fully in the learning task. in addition, students who have engagement will show positive emotions during the conduct of activities, including enthusiastic, optimistic, curious, and show concern or interest in learning. there are two reasons why students are not engaged, that is because there is no chance or because students are not aware of the availability of facilities in organization for them (bisson 2007). engagement can encourage various activities such as exercises, present in cultural events, and more participate in community service or community activities. they are also generally more satisfied with their experiences on campus and looked at the campus is a positive organization. research results of wefald and 186 d. w. ariani. relationship model of personality, communication, student engagement, and learning satisfaction downey (2009) showed overlap between student engagement and academic satisfaction. student engagement is also associated with time and physical energy used by students to undertake activities in the academic experience. in addition, engagement is related with students desire to learn or attempt to subjects, practice, achieve or obtain feedback, analyze, and solve problems (kuh 2003; robinson, hullinger 2008). student engagement is a topic that attracted the attention of researchers, because based on previous research, student engagement was negatively related to dropping out of school (alexander et al. 1993) and positively associated with the development and student achievement (devlin et al. 2009; marks 2000). this is due to the engagement of more effective in mobilizing interest, energy, excitement, and curiosity of students (bakker 2005; patrick et al. 2000). engaged students will experience positive emotions which includes happiness, interest, joy, enthusiasm, better health, creating jobs and personal resources, and transferring engagement in others (bakker, demerouti 2007, 2008). bakker and schaufeli (2008) argues that there are still required a lot of research on the antecedents of student engagement in the education sector that is relatively limited. harris (2011) stated that the dimension of student engagement may include cognitive, psychological or emotional, behavioral, and academic dimensions. behavioral engagement is important activities that are measured by attendance, adherence to rules, and participation in activities (appleton et al. 2008). cognitive engagement is associated with a personal investment in the task, which includes the development of skills, setting goals, self-regulation, and commitment to the mastery of an activity (lee, anderson 1993). meanwhile, emotional engagement shows affective and psychological ties to the institutional activities. emotional engagement shows enthusiasm, interest, excitement, pleasure, and sense of belonging (marks 2000). students engagement in academic activities include academic engagement is directly related to the behavior of the learning process and social engagement is the interaction with the teachers (finn et al. 2003). student engagement is also influenced by personality characteristics. based on previous research, the four factors of the five factor model of personality associated with academic performance. the fourth factor is conscientiousness, openness to experience, emotional instability or neuroticism, and extraversion, while agreeableness personality is not associated with engagement (caspi et al. 2006). based on study conducted caspi et al. (2006), conscientiousness personality has the strongest relationships with academic performance and is the most stable personality, while extraversion personality still has controversial relationship with engagement. saks (2006) found that student engagement is essentially the same as the engagement of employees and expected to mediate the relationship between situational and personal factors as antecedents and attitudes which in this case is satisfaction. based on the above discussion, the hypothesis of this study is offered. that is: h6: student engagement mediates the relationship between personality and communication as independent variables and satisfaction as the dependent variable. 187 business, management and education, 2015, 13(2): 175–202 3. research methods 3.1. samples and research procedures this research was carried out on students who are studying at the business school in yogyakarta, indonesia. student engagement in campus demonstrated by their engagement in the activities of groups, organizations, and other activities aimed at improving skills in leadership, organization and development of various other personal aspects (mccannon, bennett 1996). student engagement is critical to its success both on-campus and off-campus because of engagement or participation can help the development of leadership and expertise in the organization. the researchers discuss engagement in the work as a psychological construct in the work settings. therefore, the researchers were also able to use them in researching student engagement in a university (wefald, downey 20009). underlying psychological constructs, employees and students are the same. they differ only in the setting in which the work or activities performed. researchers had previously done some research on engagement as research on work attitudes and employees. this study uses students as a source of data to support the hypothesis of the student engagement. wefald and downey (2009) showed overlap between student engagement and academic satisfaction or learning satisfaction. this study aims to examine the effect of the five dimensions of personality variables in particular conscientiousness dimensions and extraversion as personal or dispositional factors and internal communications as situational factors on the three-dimensional student engagement. this study also aims to examine the influence of these three dimensions of student engagement on learning satisfaction or academic satisfaction, as well as to test the three dimensions of engagement as mediator of relationship between personality variables (particularly on conscientiousness and extraversion personality) and communication as antecedent variables with the satisfaction of learning as a consequence variable. this study is a survey research using a questionnaire that spread is conducted by researcher. the questionnaire was distributed to individual data collection on respondents. samples were undergraduate students who are active at business school located in yogyakarta, indonesia were collected by using convenience sampling method. students of business school were chosen as the respondents of this study because in general the students understand how to do business. they also have experience in business entrepreneurship courses. the survey was conducted about four months that is in august to december 2014. compared with four other methods (e.g., survey interviews with direct face to face, a questionnaire was sent or by correspondence, the questionnaire was read by telephone, questionnaires via electronic media, or a combination of survey methods), method of questionnaire survey conducted itself is the best method (cooper, schindler 2008; 188 d. w. ariani. relationship model of personality, communication, student engagement, and learning satisfaction neuman 2006; sekaran, bougie 2010). research on personality, internal communication, and student engagement is important to improve and provide suggestion on how to improve learning satisfaction that is not because of the award. research by the individual as the unit of analysis requires samples with specific criteria or characteristics. characteristics of the sample are used to convey the characteristics of the sample relative to the population. samples intended to be representative of the population. the sample size also affects the accuracy or representation of the population, despite the large sample would indicate a high level of confidence or the greatest confidence in the study. the sampling method used in this study is a non-probability sampling. in this method, the elements in the population do not have the same probability to be selected as a sample in the study (sekaran, bougie 2010; cooper, schindler 2008). non-probabilistic sampling technique chosen is convenience sampling. the criteria that is used to select the sample is undergraduate students that was still active at private universities in yogyakarta, indonesia who met for four months. in addition, this study uses self-assessment. the sample consisted of 307 people (with a response rate of 95.9%) of 320 persons. the amount is based on multivariate criteria, i.e., at least five times the number of items in the questionnaire questions this research (hair et al. 2006). this study uses a 31 item questionnaire, so it must collect a minimum of 155 respondents. in addition, because this study used factor analysis to test the validity of the questionnaire, minimum number of respondents is 300 people (hair et al. 2006). one of the characteristics of the studied demographic profile is gender. the respondents received a survey using a pen and paper. respondents were assured anonymity and complete the survey during study hours. 3.2. measurement instruments designed for the unit of analysis at the individual level. each of the respondents in this study were asked to complete four types of questionnaires, the personality (especially conscientiousness and extraversion dimensions), internal communication, students engagement (passion, dedication, and absorption), and learning satisfaction. questionnaire about personality and student engagement was taken and developed by previous researchers, namely handa and gulati (2014). questionnaire on internal communication was taken from harris (2006), while learning satisfaction questionnaire is taken from pieterse (2012). research questionnaires were then modified or adapted to research settings. this modification was associated with changes in the questionnaire by using indonesian. all scale measured with likert scale with 5-point ranging from number 1. this study uses content validity to ensure that the sentences on each question can be understood by respondents. in addition, this study also uses the factor analysis as a way to test the construct validity and internal consistency with cronbach’s alpha to indicate the reliability of the measuring instrument. with varimax rotation and loading factor of at least 189 business, management and education, 2015, 13(2): 175–202 0.4 as suggested by hair et al. (2006). furthermore, to examine the relationship between independent variable and dependent variable, researcher used correlation. furthermore, to examine the engagement of a third dimension as mediating variable model of the relationship between antecedents and consequences used structural equation modeling (sem) using amos. 4. results and discussion 4.1. analysis of validity and reliability this study used a questionnaire developed by previous researchers to translate from the original language into bahasa indonesia. to assess the validity of the measurement items all the variables, researcher tested content validity and construct validity. content validity was used to assess the instrument measurements performed on the pre-analysis by asking the opinion of experts in the field of organizational behavior and qualitative and quantitative research methods. measuring instrument or questionnaire was tested on 30 respondents who are students who have similar characteristics to the target population of the study as suggested by sekaran and bougie (2010). researcher used factor analysis to examine the construct validity. to further simplify the interpretation and the search for a simpler structure, the researchers used a technique and orthogonal varimax rotation. factor analysis (fa) was also performed on the constructs under study. extraction executed factor and every eigenvalue greater than one (1) will be adopted. varimax rotation performed to reveal each variable. recorded using a loading factor loading above 0.50 as suggested by hair et al. (2006) called as a result of testing construct validity practically significant. factor analysis was conducted to test the construct validity. by using varimax rotation and loading factor of at least 0.4 as suggested by hair et al. (2006) can be achieved construct validity of test results that can be said to be significant. factor loading values recorded between 0527 and 0.803. given all the items noted above extracted 0.4, there are three items that turned out to be deleted because it is declared invalid. items that have construct validity based on the results of the factor analysis were then tested for reliability. furthermore, to assess the reliability of the measurement items all the variables tested the internal consistency with cronbach alpha values. cronbach alpha values of reliability tests measuring instrument in this study resulted in a score of 0.7210 for conscientiousness dimensions of personality, personality dimensions 0.5554 for extraversion, and 0.7743 to construct an internal communication. meanwhile, the reliability of 0.8490 for the vigor dimensions of engagement, 0.7202 for the dedication dimensions of engagement, 0.7616 for absorption dimension of engagement, and 0.7854 to construct learning satisfaction. based on the results of testing the reliability of the authors stated that the reliability of measuring instruments of this research is far above the cut-off line in particular internal consistency reliability as recommended by hair et al. (2006). 190 d. w. ariani. relationship model of personality, communication, student engagement, and learning satisfaction 4.2. descriptive statistics for statistical analysis, the researchers used a series of analysis of the relationship between all constructs or research variables using correlation analysis. correlations between all constructs or variables used in this study are significantly positive. the relationship between each dimension of engagement is positive significantly, though weak. correlation between personality dimensions of conscientiousness and extraversion as well as internal communication is positive significantly related, but weak. meanwhile, the relationship between learning satisfaction and all variables used in this study is positive significantly, except for the relationship between learning satisfaction and extraversion dimensions. standard deviation, reliability scale, and the correlation between all study variables are presented in table 1. table 1. mean, standard deviation, dan correlation among research variables mean sd α 1 2 3 4 5 6 7 conscientiousness 3.7549 0.5239 0.7210 1.000 extraversion 3.1661 0.6206 0.5554 0.274** 1.000 int. communication 3.5562 0.6687 0.7743 0.031 0.004 1.000 vigor 3.2494 0.5161 0.8490 0.564** 0.384** 0.187** 1.000 dedication 3.6840 0.5812 0.7202 0.341** 0.114** 0.345** 0.527** 1.000 absorption 3.2937 0.5634 0.7616 0.227** 0.245** 0.267** 0.535** 0.459** 1.000 learning satisfaction 3.7883 0.6335 0.7854 0.282** 0.063 –0.088 0.438** 0.504** 0.401** 1.000 notes: correlation is significant at the 0.01 level (2-tailed). based on table 1, the mean of seven variables is between moderate and high (mean of 3.1661 to 3.75498) and the deviation is relatively moderate (between 0.5161 and 0.8490). in addition, all the correlations obtained are not too strong. correlation between conscientiousness personality and extraversion personality are significantly positive (r = 0.274, p < 0.01). correlation between conscientiousness personality and internal communication is not significant. correlation between conscientiousness personality and vigor is significantly positive (r = 0.564, p < 0.01), correlation between conscientiousness personality and dedication is significantly positive (r = 0.341, p < 0.01), correlation between conscientiousness personality and absorption is significantly positive (r = 0.227, p < 0.01), and correlation between conscientiousness personality and learning satisfaction is also significantly positive (r = 0.282, p < 0.01). furthermore, correlation between extraversion personality and vigor is significantly positive (r = 0.384, p < 0.01), correlation between extraversion personality and dedication is significantly positive (r =0.114, p < 0.01), and correlation between extraversion personality and absorption 191 business, management and education, 2015, 13(2): 175–202 is significantly positive (r = 0.245, p < 0.01). however, correlation between conscientiousness personality and internal communication, between extraversion personality and internal communication and between extraversion personality and learning satisfaction are not significant. furthermore, the correlation between each dimension of the positive engagement significantly, respectively r = 0.527, p < 0.01 between vigor and dedication, r = 0.535, p < 0.01 between vigor and absorption, and r = 0.459, p < 0.01 between dedication and absorption. the relationship between internal communication and learning satisfaction is not significant, but the relationship between internal communication and each dimension of positive engagement significantly i.e., r = 0.187, p < 0.01 between internal communication and vigor, r = 0.345, p < 0.01 between internal communication and dedication, and r = 0.267, p < 0.01 between internal communication and absorption. the relationship between learning satisfaction and each dimension of engagement is positive significantly, i.e., r = 0.438, p < 0.01 between learning satisfaction and vigor, r = 0.54, p < 0.01 between learning satisfaction and dedication, and r = 0.401, p < 0.01 between the learning satisfaction and absorption. low correlation between these variables is likely due to the characteristics of the study variables. 4.3. hypothesis testing results confirmatory factor analysis (cfa) is used to test the discriminant validity of the study variables. specifically, researcher tested the model of seven variables in which conscientiousness personality, extraversion personality, internal communication, vigor of engagement, dedication of engagement, absorption of engagement, and learning satisfaction is the different latent factors. the strength of the relationship between conscientiousness personality, extraversion personality, internal communication, vigor of engagement, dedication of engagement, absorption of engagement, and learning satisfaction was examined through structural equation modeling (sem). the results of relationship model test show that no significant direct effect of all independent variables (conscientiousness personality, extraversion personality, internal communication, vigor of engagement, dedication of engagement and absorption of engagement) on the dependent variable (learning satisfaction). furthermore, one of the goals of this study was to examine the influence of the vigor of engagement, dedication of engagement, and absorption of as mediating variables in the model of the relationship between conscientiousness personality, extraversion personality, and internal communications as an independent variable and learning satisfaction as the dependent variable. therefore, table 2 presents the results of testing the mediation models using structural equation model with two-stage approach. structural equation model in this study was designed and tested using amos 4.0 software program (byrne 2001). the structural model is determined by allowing each item of any size to fit on the latent factors. at first, researchers dimensional analysis using confirmatory factor analysis or cfa which covers all measures to assess the relationship between latent variables and real products that serve as indicators of them. 192 d. w. ariani. relationship model of personality, communication, student engagement, and learning satisfaction furthermore, the results of testing mediation models vigor of engagement, dedication of engagement, and absorption of engagement on the relationship between conscientiousness personality, extraversion personality, and internal communication as independent variables and job satisfaction as dependent variables presented in table 2. the results showed that the hypothesized model fit with the data (χ2 = 24.288; df = 0, p = 0.000; gfi = 0.977; cfi = 0.966). based on the results of examination model, the influence of conscientiousness personality on each dimension of engagement is not significant (hypothesis 2 is not supported). the influence of conscientiousness personality on engagement is only on absorption of engagement. the influence of conscientiousness personality on absorption of engagement is negative. this indicates that individual that is responsible for learning, have a plan to quickly complete his studies, and they more have a plan, the stronger desire to perform, the absorption of individual engagement is lower. meanwhile, the effect of extraversion personality on engagement is significantly positive for the three dimensions (hypothesis 3 is supported). the stronger extraversion personality, then the individual will increasingly have a high engagement on vigor dimension, dedication, and absorption of engagement. furthermore, the influence of internal communication on engagement is also significantly positive for all three dimensions of engagement table 2. analisis model mediasi keterangan beta (β) critical ratio conscientiousness à vigor of engagement –0.102 –0.400 conscientiousness à dedication of engagement –0.115 –0.537 conscientiousness à absorption of engagement –2.053 –0.707 extraversion à vigor of engagement 0.980 4.021 extraversion à dedication of engagement 0.725 3.508 extraversion à absorption of engagement 0.990 3.739 int. communication à vigor of engagement 0.238 2.045 int. communication à dedication of engagement 0.533 5.384 int. communication à absorption of engagement 0.402 2.701 vigor of engagement à learning satisfaction –0.524 –3.676 dedication of engagement à learning satisfaction 0.978 6.800 absorption of engagement à learning satisfaction 0.147 1.116 gfi = 0.977 cfi = 0.966 p = 0.000 chi square = 24,288 df = 1 193 business, management and education, 2015, 13(2): 175–202 (hypothesis 4 supported). this suggests that the better internal communication and the more information a student, the student’s engagement will be higher. the influence of vigor and dedication of engagement in learning satisfaction is also significantly positive, but the influence of absorption of engagement in learning satisfaction was not significant (hypothesis 5 was partially supported). this shows that the stronger dedication of engagement, student will be more satisfied. based on table 2 can also be stated that the three dimensions of engagement mediates the relationship between conscientiousness personality, extraversion personality, and internal communication as independent variables and learning satisfaction as dependent variable. this is evident in goodness of fit index or gfi is above 0.90 (hypothesis 6 is supported). furthermore, this study also tested there is a difference between student engagement and learning satisfaction or academic satisfaction. test results using a paired sample t-test result that there is a difference between learning satisfaction and engagement of the third dimension. value t between learning satisfaction and vigor of engagement is 12.563, 0.000 significance, between learning satisfaction and dedication of engagement is 2.787, 0.000 significance, and between learning satisfaction and absorption of engagement is 19.966, 0.000 significance. these results indicate a difference between learning satisfaction and student engagement (hypothesis 1 is supported). 4.4. discussion the behavior of individuals is determined by factors extrinsic and intrinsic factors. this study focuses on academic behavior, especially in the lecture process with two types of antecedents, namely internal communication (extrinsic factor) and personality, especially conscientiousness personality and extraversion personality (intrinsic factor). engagement is characterized by vigor, dedication, and absorption. student engagement involves individuals who are controlled by the power of the personal (physical, cognitive, emotional, and mental) into its role in the workplace or the right to learn. the results of this study showed a relationship between the three dimensions of engagement, although the relationship is not very strong. the results showed a moderate correlation between the dimensions of engagement. this shows that the three dimensions can indeed stand alone. britt, deckinson, greene, and mckibben states that a strong correlation between the three dimensions of the show that actually could work engagement is a single dimension (wefald, downey 2009). in addition, a moderate correlation between these three dimensions shows that the engagement variables, particularly the student engagement is reflective. to previous research showed that variables such as personality can predict engagement, but research on the student engagement is still very little (alarcon et al. 2011). the results of this study support the hypothesis proposed in part. the results of this study indicate that the extraversion personality is an antecedent to the third dimension of engagement (vigor, dedication, and absorption). extraversion personality effect positively and significantly on all three dimensions of engagement. extraversion 194 d. w. ariani. relationship model of personality, communication, student engagement, and learning satisfaction personality characteristics shown with a friendly attitude, talkative, dynamic, intimate, and be happy. individuals are generally enthusiastic, optimistic, talkative, assertive, outgoing, happy, passionate, and active in various activities. this individual can easily communicate with co-workers and supervisors. individuals who have an extraversion personality have positive feelings and emotional experience. the influence of personality characteristics on this engagement in accordance with research result of macey and schneider (2008) which states that the engagement is influenced by personality. meanwhile, hakanen et al. (2006) stated that the engagement is influenced by the environment such as communication and information. the influence of extraversion personality on the third dimension of student engagement is very significant. extraversion is going to make students better able to interact with their friends, the teachers, staffs, laboratory assistants, and all other academic community on campus. this is what can lead to greater student engagement on campus, both on passion, dedication or sacrifice or struggle, and the fun or pleasure or absorption to follow the academic process or learning process and social processes on campus. based on the research results of furnham and medhurst (1995) shows that extraversion is positively related to engagement or participation in class. in addition, caspi et al. (2006) study explained that students who are engaged or participate in campus is characterized as extrovert and unengaged students characterized as difficult to control emotional (neurotics). individuals who open or have extraversion personality tend for looking and enjoy relationships with organized social exchange and feel comfortable in social situations. such individuals tend to be proactive and always seek social support face various problems. in general, extrovert individuals are the talkative, active, friendly, outgoing, and enjoy the social environment, or often called person-oriented (dougherty et al. 2008). meanwhile, the conscientiousness personality dimension only affects the absorption dimensions of student engagement. it was a negative influence. conscientiousness personality has no effect on vigor and dedication to engage or individual sacrifice in academic activities on campus. however, the relationship between conscientiousness personality and third dimensions of student engagement is significant, though weak. caution or awareness of students did not make too eager students in the academic process and less able to push the struggle or the sacrifices made by the students. furnham and medhurst (1995) which states that an extraversion personality influence the level of engagement or participation, and does not support the furnham et al. (2002) research which states that conscientiousness personality effects on engagement. in addition, the results of this study showed a negative influence conscientiousness personality in the absorption of student engagement in participating in academic process and social processes. this is due to the students just thought to follow the lectures and exams, while the social process that followed is a social process that makes the students get an assessment of non-academic activities on campus as graduation requirements. 195 business, management and education, 2015, 13(2): 175–202 the students generally do not want to get too preoccupied or enjoy the academic process. this condition is different from the engagement of employees in the workplace. in general, employees are engaged with a vigor, dedicated, and absorption to do the job because its where they work or do not want to leave the organization (saks 2006; macey, schneider 2008; robertson et al. 2012; vecina et al. 2012; hallberg, schaufeli 2006). the results of this study also showed a significant correlation between the three dimensions of engagement and learning satisfaction, although the correlation is weak. this is consistent with the results harter et al. (2002) which states that the engagement is positively related to business outcomes and organizations such as job satisfaction, productivity, profits, and income, and negatively related to the desire to get out of the organization. the results of this study also indicate that the engagement of particular dimension of vigor and dedication effect on learning satisfaction. employees engaged will experience unpleasant emotional condition at work that shows a high level of satisfaction. this is consistent with research of biswas and bhatnagar (2013) who confirmed it. however, the influence of vigor to engagement on learning satisfaction is significantly negative, while the influence of dedication or struggle to engagement on learning satisfaction is significantly positive. this is consistent with the results research of saks (2006). furthermore, the results of this study also indicate that engagement mediates the relationship between personality and internal communication as independent variables and learning satisfaction as dependent variable. this is consistent with the results research of macey and schneider (2008) which states that the engagement mediated the relationship between antecedents (job characteristics, leadership, and personality) and the results of the work (task performance and contextual performance). therefore, bakker and leiter claimed that engagement is actually a psychological condition that mediates the antecedents and outcomes of such engagement (bakker 2011). engagement is expected to mediate the relationship between antecedents and consequences. strong and rational theory in explaining involvement is social exchange theory which states that the relationship between individuals based on reciprocal independence in the presence of trust, loyalty, and mutual commitment (cropanzano, mitchell 2005). when individuals receive economic resources and socioemotional of the organization, they will feel a responsibility to respond and pay back to the organization through his engagement in the organization. this condition does not fully exist in student engagement on campus. in general, students are engaged because there are clear information and communication and they do have an extraversion personality and was always active in the social environment. therefore, in line with the opinion of kahn (1990) which stated that engagement is generally based on economic and social considerations. therefore, because both of these considerations are not on the students, conscientious personality has no significant effect on engagement in the academic process. the students felt he had to pay school fees, then you have in plan formulation goal is to enable students are able to complete their studies on time. 196 d. w. ariani. relationship model of personality, communication, student engagement, and learning satisfaction 5. conclusions human capital is an important asset in the effort and performance that can determine the success of an organization. therefore, it is important to understand the factors that influence the behavior of the individual. in theory of organizational behavior, both situational and personal factors are antecedents that can explain the behavior of individuals in the workplace. engagement showed positive psychological condition of the individual, so that the individuals involved have the spirit, enjoy the work or task, and have an effective relationship with the work or duties (kahn 1990; macey, schneider 2008). although contextual employee engagement is the same thing with the engagement of students, but in fact setting the job or task, the objectives to be achieved, and the values that affect organizational would make relations with the antecedents and consequences are different. the weakness of this study is the use of cross-sectional data for testing the influence of the independent variables and the dependent variable along with mediator variable not very precise. mediation model is a longitudinal model (mackinnon et al. 2012). however, in practice, mediation tests can be done by using cross-sectional data. in practice, testing mediation models often use the preferred method for the evaluation of the mediation process, which uses cross-sectional data are available. this study also used a sample in small quantities and carried in undergraduate students in yogyakarta, indonesia, so it can not be generalized. generalizing the results of this research will be done when many researchers to test models of the same relationship in various universities. the results found in this study should be regarded as tentative and require further testing before generalizations can be made. more empirical research is needed to validate the results and conclusions of this study. a larger sample size would make a better result. longitudinal research design that will measure personality, internal communication, student engagement and learning satisfaction more than one point in time is also important to clarify their relationship. references alarcon, g. m.; 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jackson, p. r. 2007. rethinking internal communication: a stakeholder approach, corporate communication: an international journal 12(2): 177–198. xanthopoulou, d.; bakker, a. b.; demerouti, e.; schaufeli, w. b. 2009. reciprocal relationships between job resources, personal resources, and work engagement, journal of vocational behavior 74(3): 235–244. http://dx.doi.org/10.1016/j.jvb.2008.11.003 yakin, m.; erdil, o. 2012. relationship between self-efficacy and work engagement and the effects on job satisfaction: a survey on certified public, procedia – social and behavioral science 58 (october): 370–378. http://dx.doi.org/10.1016/j.sbspro.2012.09.1013 dorothea wahyu ariani. dr s.e., m.t., senior lecturer and researcher of maranatha christian university, indonesia; board member of indonesian economics graduate – branch yogyakarta; board member of inspect researchers yogyakarta. research interest: human resource management, organizational behavior, management of education, operations management, organizational development. http://dx.doi.org/10.1037/0022-0663.85.4.571 http://dx.doi.org/10.1111/j.1468-2389.2007.00372.x http://dx.doi.org/10.3200/jrlp.143.1.5-27 http://dx.doi.org/10.1002/j.2161-1920.2012.00006.x http://dx.doi.org/10.1037/0021-9010.88.3.500 http://dx.doi.org/10.1111/j.1464-0597.2011.00460.x http://dx.doi.org/10.1080/09585192.2011.639542 http://dx.doi.org/10.1111/j.1744-6570.2006.00046.x http://dx.doi.org/10.3200/jrlp.143.1.91-112 http://dx.doi.org/10.1016/s1053-4822(02)00045-1 http://dx.doi.org/10.1016/j.jvb.2008.11.003 http://dx.doi.org/10.1016/j.sbspro.2012.09.1013 this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: shamimru@gmail.com business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 2: 286–311 https://doi.org/10.3846/bmee.2022.16754 an integrated model of destination advocacy and its direct and mediating effects on destination revisit intention md. alamgir hossain 1*, abul kalam 2, md. shakhawat hossain 3, mst nilima sarmin 4, md. nuruzzaman 5 1department of management, hajee mohammad danesh science and technology university, dinajpur, bangladesh 2department of marketing, hajee mohammad danesh science and technology university, dinajpur, bangladesh 3department of management studies, barishal university, bangladesh 4department of the wang yanan institute for studies in economics, school of economics, xiamen university, fujian, china 5department of marketing, rajshahi university, bangladesh received 25 march 2022; accepted 25 october 2022 abstract. purpose  – purpose of the study is to build an integrated model of tourist destination advocacy explaining how tourists’ revisit intention is affected by its direct and mediating effects, integrated with destination experience, tourist satisfaction, and destination image. design/methodology/approach – data is collected online using a self-administered structured questionnaire tool, and the survey is hosted in a google doc. spss and sem-amos are used to analyze the data (443 samples) after successful data cleaning and outlier elimination. findings – all of the hypotheses were shown to be true in this investigation, with the exception of two. the findings confirmed that tourists’ destination experiences improve tourists’ satisfaction, destination advocacy and destination image but not destination revisit intention. the likelihood of revisit intention is significantly influenced by destination satisfaction and image. furthermore, destination satisfaction, destination advocacy and destination image significantly mediate the link between destination experience and revisit intention. originality/value – this study contributes to the existing literature on consumer behavior in tourist destinations, and would guide practitioners towards effective destination management. research limitations  – due to the lack of control factors on the relationship between all predecessors, destination revisit intentions, and all of the data gathered from domestic visitors, the current study may have limited the applicability of its findings. therefore, additional research is necessary to validate these results across a variety of samples in order to draw generalizations. keywords: destination experience, destination satisfaction, destination advocacy, destination image and destination revisit intention. jel classification: m370, m10, m3. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2022.16754 https://orcid.org/0000-0002-8217-6610 https://orcid.org/0000-0002-6045-6734 https://orcid.org/0000-0001-6627-4635 https://orcid.org/0000-0002-4996-8077 https://orcid.org/0000-0001-9666-3391 business, management and economics engineering, 2022, 20(2): 286–311 287 introduction tourism is one of the significant contributors and foremost cornerstones in the formation of wealth, livelihoods, and income of the country (abbasi et al., 2021). despite the foundation of the country’s economy, the tourism industry fears competition to attract global tourists and retain domestic visitors (afshardoost & eshaghi, 2020). to cope with those fears of competition, the creation of tourist revisit intention through satisfaction of tourist, destination image, and tourist destination advocacy is the immense dominating strategy (afshardoost & eshaghi, 2020; chen et  al., 2020; elahi et  al., 2020). because tourist satisfaction can be worked as a destination’s success indicator and is measured by comparing expected performance to perceived performance which has the motivating power to make a tourist’s revisit decision (jumanazarov et  al., 2020); the sum of a person’s ideas, thoughts, and perceptions of a location is referred to as the destination image. destination image (lee & xue, 2020) is seen to be an efficient way to increase visitor loyalty, which also influences the likelihood of a revisit intention (lv & mccabe, 2020). tourist destination advocacy is the positive tongue of tourists about their experience destinations visited (nomm et al., 2020) and would recommend the goal to others, as like a ambassador of brand, and usually these are repeat visitors for high engagement with the destination (kumar & kaushik, 2020). fostering the tourist revisit intention through the ways mentioned above is currently the pathway to profitability of tourist destinations in bangladesh; hence it can reduce marketing and promotion costs (abbasi et al., 2021). even though bangladesh is a queen of beauty with full of sea beaches and river coasts, religious places, archaeological sites, waterfalls,hills, forests, tea gardens, etc. still failed to gain familiarity as a tourist destination, lower number of foreign tourists visited the country compares to neighboring countries, and has unexplored destinations due to negligent government and private initiatives (kumar, 2020; hasan, 2014). furthermore, due to the issues of security, infrastructure, cuisine, natural calamities, and culture, foreign visitors are likely to ignore visiting bangladesh (karim et al., 2018). moreover, because of the affordability, only a particular group of people are expected to do the tour for recreational purposes, the lower-income group is struggling only to meet their basic needs, which they could not think of traveling for pleasure. as a result, creating repeat or revisiting the intentions of experienced tourists should be one of the prime strategies for the growth of tourism in bangladesh. therefore, research on approaching the tourists’ revisit intention is a timely issue for academics. on the other hand, in the heart of researches, the psychological factors (chen et al., 2020), destination image (elahi et  al., 2020), a desire for variety, the environment, infrastructure, recreation and entertainment, local food, mobility, and price value, and atmosphere (giao et al., 2020), destination attributes including cognitive and affective evaluation (jumanazarov et al., 2020), destination brand engagement factors (kumar & kaushik, 2020), sustainability and environmental awareness (kusumawati et al., 2020), quality of service, corporate image, and customer satisfaction (khoo, 2022), etc. have explored to create the revisit intention in the different destinations rather than bangladesh. the above-mentioned studies have discovered that destination image, customer satisfaction, tourist’s recommendation regarding the revised benefits in the same destination can influence the revisit intention. 288 m. a. hossain et al. an integrated model of destination advocacy and its direct and mediating. in addition, in light of study in the context of bangladesh, polas et  al. (2020) established a favorable and substantial association between quality of service, environment, and pricing and intention to revisit, as well as customer satisfaction’s mediating effects between the environment and price insight and customer return intention. additionally, hasan et al. (2020) based on the theory of planned behavior, conducted a study to investigate tourists’ revisit intentions to seaside tourism destinations in bangladesh and discovered that perceived value significantly affects both tourists’ attitudes and intention to revisit, however service quality only affects tourists’ attitudes. moreover, karim et  al. (2018) investigated six push elements (escape, self-respect, relaxation, relationship, knowledge, and novelty) as well as six pull factors (culture and history, safety, sightseeing, service quality, lodging, and natural attractions). they demonstrated that travel behavior, including internal reasons (push factors) and external motives of destination qualities (pull factors), influenced their future return to that location. furthermore, haider et  al. (2018) attempted to assess the recreational services of four tourist spots: mozaffar garden, shat gombuj mosque, chandramahal eco-park and niribili tourist point in the southwest part of bangladesh, using the travel cost method (tcm) to estimate recreational values and then the contingent valuation method (cvm) to value willingness to pay (wtp) for the development these sites. their results revealed that these place make a consumer surplus worth 1.24–3.64 usd per tourist in a year and, thus yield a gross recreational value 0.06–0.84 million usd per year in this region. the scholars, rahman et al. (2021), examined the destination’s brand equity and tourists’ revisit intention toward health tourism. their analysis indicated that destination brand equity affects a traveler’s revisit intention for medical tourists through destination brand association, and that a traveler’s perceived trust, reliability, and soft concerns moderate the link between destination brand equity and destination brand association, as well as a significant moderation impact on the link between destination brand association and intention to revisitof a traveler to a health tourism destination. therefore, even though some studies in the context of bangladesh have been conducted ondivergent issues, there is a shortage of studies on the strategy of revisiting intention through the destination image, tourist satisfaction, and tourist destination advocacy. thus, research on the comprehensive model consisted of destination experience, destination image, tourist satisfaction, tourist destination advocacy, and tourist revisit intention is very crucial, which was not examined yet (hasan et al., 2020). as a result, considering the practical and theatrical aspects ofmaking the bridge in the gaps of prior literatures, this study attempts to develop an integrated model using the constructs of destination experience, destination image, tourist satisfaction, tourist destination advocacy, and tourist revisit intention for further study purposes. doing those, this research searches the answer of the questions;  rq1:  does tourist destination experience improve tourist satisfaction, tourist destination advocacy, destination image, and tourist revisit intention?  and  rq2:  how does tourist destination advocacy, satisfaction and destination image endorse direct and mediating effects on the tourist revisit? to address these research questions, this study proposes a comprehensive model of tourist destination advocacy and its direct and serial mediating effects on tourist revisit intention, integrated with destination experience, tourist satisfaction, and destination image. to establish and test the model for creating tourist revisit intentions, 395 respondents were interviewed through the business, management and economics engineering, 2022, 20(2): 286–311 289 self-administered questionnaire, who had visited the sea beaches of cox’s bazar and saint martin at least twice each. cox’s bazar sea beach is the world’s extended beach, located in the south portion of bangladesh, also known as the tourism hub of bangladesh, with 125 kilometers of longstraight, uninterrupted beach of white sand, where around 5 million tourists  – local and foreign  – visit each year (hasan et  al., 2020). another one is saint martin, also known as “narikel jinjira” bengali, which means “coconut island”, the only coral reef island in bangladesh. a convenience sampling technique has been used to collect the data; as it has a scarcity of lists of tourists (population) for this study. the structural equation modeling (sem) approach is used in the analysis. this study, therefore, subsidizes in two ways: theoretically to the existing literature on tourism management and practices for managing tourist destinations. additionally, the established and tested comprehensive model would guide scholars to fill the research gaps in tourist destination management (tdm). eventually, this study will be a cornerstone in bridging the research gap in the context of tdm in bangladesh. in practice, evaluating a complete model as a maiden study will help tdm managers and decision-makers to have clear understandings into creating tourist revisit intention effectively through tourist satisfaction, destination image, and tourist destination advocacy. moreover, by assessing the mediating properties in the model, it will be evidenced that only confirming the desired services as enjoyable experiences in the tourist destination solely is challenging to fostering tourist revisit intention. finally, this study can be substantial to other similar tourist destinations, suggesting the managers create revisit intentions for their tourists. the next section provides an explanation of the theoretical underpinnings of previous research reviews, conceptualizes hypothesized directions, and creates the research model. the data collection method, measurement information for each variable, and data analysis process will all be noted as part of the methodology. following that, empirical findings are discussed together with data appropriateness and hypothesis outcomes. after evidence of results, the conclusions, limits, and future directions of studies are described. 1. literature review 1.1. destination experience the sector “tourism” acts as a commendable instance of sagacity in the economy (dann, 1977) and experience is real feelings or behavior that comes from actual activities. according to addis and holbrook (2001), a company’s service offerings and the user’s encounters with them create the customer’s experience. tourists travel to a location to satisfy their need for new experiences (prebensen et al., 2013). in tourism, tourists go to a favorable destination for time passing, relaxation, enjoyment, refreshment, etc., and they get emotions, perceptions, and ideas that constitute destination experiences that are distinctive, emotionally resonant, and have a high  level of self-value (ekinci et  al., 2013; mcintosh & siggs, 2005). recently, consumer experience has been characterized as a multifaceted assessment, according to a consensus (hsu et  al., 2009). so, much research has been done regarding tourist 290 m. a. hossain et al. an integrated model of destination advocacy and its direct and mediating. experiences at various destinations from various perspectives (li, 2000), namely experiences in nature, heritage (schänzel & mclntosh, 2000), risky adventures, and leisure (hsu et  al., 2009). tourists’ first experiences lead them to further activities such as referring the destination to others, returning intentions, loyalty, etc. so, tourist experiences are becoming a basic concern for marketers who need to understand what makes them unique globally, and they try to provide customer services with unique, satisfying, even remarkable experiences (nikolova & hassan, 2013; perdue, 2002). therefore, researchers find experience influences ability on various post-travel performance, particularly satisfaction, image, advocacy, and return intention (rosid et al., 2020; mittal et al., 1999; chi & qu, 2008; severt et al., 2007). 1.2. destination advocacy one of the most efficient as well as reliable promotion method is word of mouth (wom) that automatically comes from consumer satisfaction or dissatisfaction. the research of word-ofmouth pre destination commenced in the early 1960s. while arndt (1967) defines wom as a non commercial oral conversation between people, the other side (receiver) believesthe giver about that specific product or service. george silverman was the leader of wom marketing in the pre-1970s. when people promote a brand, goods, services, or event without earning a profit, it is called “wom”. since it is personal compared to other promotions, there is no profit, so people think it is more trustworthy (brysha, 2013). simpson and siguaw (2008) also define wom as a highly powerful means of communication that has a great effect on the brands of tourist destinations, where it urges people to describe them positively. besides, akhtar et al. (2019) segment wom into two groups: positive and negative. when a tourist has a positive or negative experience with a destination, he or she will share and recommend it to others. however, liu and lee (2016) delve into their study and find wom works as a medial variable that affects revisit intention. but, before it works as intervening, it is influenced by other variables to illustrate the quality of the service, monetary cost, and behavioral cost. according to rosid et  al. (2020), visitors’ perceived value is influenced by wom, and perceived value has a big impact on tourists’ desire to return. hence, wom influences tourist revisit intention significantly. generally, the wom tool for any tourist destination may be considered as destination advocacy because when someone advocates or supports others on behalf of a destination that he/she has experienced, which is congruent with wom. destination advocacy has an important impact on tourist behavior, because it sways consumer or tourist attitude also revisit intention. tanford and jung (2017) describe revisit intention as a result of promotion, whereas, brodie et al. (2013) discover a positive influence of destination brand engagement on destination brand advocacy and revisit intention. in this case, frequent tourists positively advocate more than others about a destination (bilro et  al., 2019). relatively, kumar and kaushik (2020) uncover from their empirical investigation that destination brand engagement is affected by sensory, affective, intellectual, as well as behavioral dimensions of brand experience, and it plays aquite important role in increasing tourist brand advocacy and inclination to return. it is quite important. business, management and economics engineering, 2022, 20(2): 286–311 291 1.3. destination satisfaction as a consequence of cognitive reactions to an event, satisfaction results in an emotional reaction (smith, 2020). oliver (1980) states the topicality of satisfaction through the confirmation and disconfirmation examples, where satisfaction levels are measured by comparing the real experience with past and expected experience. in the tourism sector, destination satisfaction plays a crucial role in exploring widely about destination information, and jarvis et  al., (2016) say customer satisfaction affects customer loyalty. over the past few decades, though satisfaction has been more significant in the tourism and hospitality industry since peak tiers  of satisfaction may steer  to a variety of good behaviors, which in turn can affect the profits of a destination (shavanddasht & schänzel, 2019). wom is influenced by destination satisfaction; however, chen et al. (2014) show indirect impacts of satisfaction on wom rather than direct effects. moreover, effective destination branding relies heavily on customer satisfaction since it impacts the choice of location as well as the desire to come back (yoon & uysal, 2005; aliman et al., 2016). demonstrate from tourism-related study where satisfaction has a major impact on tourists’ favorable return intentions (hasan et al., 2019; breiby & slåtten, 2018). therefore, an et al. (2019) explore the positive stimulation of tourist satisfaction on revisit intention. 1.4. destination image image comprises aggregate cognition in some impulsive situations (oxenfeldt, 1974). from the conclusion (dobni & zinkhan, 1990), image is a perceptible thing which is shaped by the consumer’s emotional explanation with cognitive as well as affective elements. in 1970s, researcher hunt raises that perceived image from tourist aspects (hunt, 1975). then, crompton (1979) defines perceived image as tourist’s thoughts, feelings, attitudes, and affections (lai & li, 2016; marine-roig, 2015). other researchers (jenkins, 1999; min et  al., 2013; zeugnerroth & žabkar, 2015) state that a destination image anticipates a person’s or group’s impression of a specific place or destination, and it is considered as an interactive way of thinking, views, ideas, visions, impressions as well as intentions toward a certain destination or place (költringer & dickinger, 2015; tasci & gartner, 2007). scholars further mention the multidimensional subsection for deep research (marine-roig & ferrer-rosell, 2018; martín-santana et  al., 2017; michaelidou et  al., 2013), those dimensions are considered asa cognitive and emotional image (baloglu & mccleary, 1999). multifaceted (zeugner-roth & žabkar, 2015) and intangible (fakeye & crompton, 1991) features of tourism product or service, make the measurement complicated to construct destination image. however, the perceived image or destination image mitigates the perceived risk and it tries to keep the trust of tourists, which stimulates tourist intention, behavior as well. if a customer gains a better image, they easily recommend it to others (shankar et  al., 2003), which is similar to the research of abbas et  al. (2018), that suggests a perceived image is effective for wom (ifie et  al., 2018). hosany and prayag (2013) delve into how the tourist place selection process and revisit intention affect by destination image in the near future. correspondingly, from the findings (wu, 2016) image of a destination influences destination loyalty positively and consumer satisfaction, which insists tourists return. 292 m. a. hossain et al. an integrated model of destination advocacy and its direct and mediating. 1.5. destination revisit intention in general, revisit intention comes from satisfaction. um et al. (2006) consider revisit intention as an expansion of satisfaction rather than the pioneering of the revisit idea generation process. tourists assess various risk factors before making decisions owing to the distinction of geographic, demographic, cultural, psychological, and travel experiences (aqueveque, 2006; reisinger & mayondo, 2005; kozak et al., 2007) that may stimulate tourist behavioral tendencies in different ways (quintal & polczynski, 2010). in fact, sustainable tourism industries depend on the repetition of tourist that past literature establishes (kozak, 2001; hung et al., 2016; quintal & polczynski, 2010; stylos et al., 2017) which demonstrates that repeat tourism is less expensive than the first time visiting, so the enhancement of the tourism sector highly depends on tourist (um et al., 2006). there are some factors that greatly influence destination revisit intention for instance destination experience (zhang et al., 2018) satisfaction (nguyen viet et al., 2020) image (abbasi et al., 2021; baloglu & mccleary, 1999; hussein, 2016) perceived risk (hasan et  al., 2017) and wom (kusumawati et  al., 2020) respectively. that’s why, tourist behavioral intention or revisit intention negatively influenced by perceived risk, in contrast, positively influenced by destination image (nazir et al., 2021). additionally, revisit intention is significantly affected by destination image and satisfaction (abbasi et al., 2021) and extremely satisfied tourists have more eagerness to come back (seetanah et  al., 2020). through structural equation modeling song et  al. (2021) unearth the effectiveness of destination attractiveness, which may enrich the identity of the place and increase travel revisit intention as well as wom recommendation. even, increasing wom may improve revisiting (liu & lee, 2016). 1.6. destination experience, satisfaction, advocacy, revisit intention, and image in case of relationship between destination experience and satisfaction, satisfaction is used to assess previous customer experiences, goods and service quality, the impressions of the physical surroundings, including community or tourist attraction (ekinci et al., 2013). mittal et al. (1999) they get past experience of a destination influence tourist satisfaction also loyalty. wu (2016) also finds the same as mittal et  al. (1999) that previous experience of tourists has a positive sway on satisfaction. on the other hand, better experience has high advocacy tendencies, hudson and ritchie (2008), say tourist’s branding that is kind of wom of destination come from experience; destination brand engagement is affected by some factors of brand experience which in turn increases destination brand advocacy (kumar & kaushik, 2020). besides, revisit intention is the tourist behavioral action when the gain positive experience. sirakaya-turk et al. (2015) and kim et al. (2012a) reveal the relationship of travel experience with future visitation. thus, tourist’s experience amplifies of tourist intention for revisiting the location. lastly, zeugner-roth and žabkar (2015) state that a destination image anticipates a person’s or group’s perception of a particular destination, that means tourist thinking, views, intentions etc. are created after getting experience. studies illustrate that satisfied tourists who get charming experience are interested to come more often with the intention of referring the destination to other people since they have a positive image of that business, management and economics engineering, 2022, 20(2): 286–311 293 (chi & qu, 2008). according to della corte et  al. (2015), tourist experiences may produce return intention, advocacy, and satisfaction that take part in loyalty of a products or services. after summarizing past literature, this study gets to know that (rosid et  al., 2020) destination experience directly affects revisit intention, satisfaction (mittal et  al., 1999), advocacy and image (chi & qu, 2008; severt et al., 2007). the following are the offered hypotheses: hypothesis 1: destination experience has a significant positive influence on destination satisfaction (h1a), destination advocacy (h1b), destination revisit intention (h1c) and destination image (h1d). 1.7. destination advocacy, satisfaction, and image tourist destination advocacy is the positive voice about the location tourist visited (nomm et al., 2020), and they would recommend to others like a brand ambassador, and they consider frequent visitors for brand engagement (kumar & kaushik, 2020). mujihestia (2018) investigate how city branding influence visitors and they find the positive influence which this study consider advocacy. in addition, playing two roles, a promotion mechanism and a repression mechanism, destination branding differentiates the location from any other that attract the people who have intention to visit and it influence the satisfaction also destination image. the tourism industry is highly related to tourist or consumer attitude toward their intention, for example, consumer eagerness to recommend other visitors (chen et al., 2019) where behavioral tongue, or wom, or destination advocacy influences destination satisfaction and image positively as well (siang et al., 2020; prayogo et al., 2017). jalilvand et al. (2012) find the positive influence of wom on destination image in teheran, whereas the effect of destination advocacy toward destination satisfaction, yoo et  al. (2015) find positive influence and it’s because of positive advocacy disclose the facilities, beauty, nature etc. to others that make strong their thinking of tourist and also their satisfaction. therefore, the proposed hypotheses are: hypothesis 2: destination advocacy has a significant positive influence on destination satisfaction (h2a) and destination image (h2b). 1.8. destination satisfaction, advocacy, image, and revisit intention satisfaction refers a feeling that arise from happiness or joy of someone coming from comparing the estimated worth of a service or product against the expectations (kotler & keller, 2009), and then when tourist’s expectation meets their expectation is destination satisfaction, it can measure the destination’s success and it has the power to motivate tourist’s return decision (jumanazarov et al., 2020); destination advocacy is positive tongue about the destination tourist has experienced (nomm et  al., 2020) which has the ability to transfer information to the actual person; destination image is the views, ideas, visions, impressions, and desire to a certain place or destination (költringer & dickinger, 2015); revisit intention is tourist’s judgment of likeness and eagerness referring the place to others (khasawneh & alfandi, 2019). normally, satisfied tourist who has good image regarding destination then they try 294 m. a. hossain et al. an integrated model of destination advocacy and its direct and mediating. to recommend it to others, because they have positive views, they may return the same destination. several researchers find the effect of some variables like satisfaction, advocacy, image on tourist revisit intention (an et al., 2019; song et al., 2021; elahi et al., 2020; abbasi et  al., 2021; nguyen viet, 2020; prayogo et  al., 2016; atmari & putri, 2021). the following are the offered hypotheses: hypothesis 3: destination satisfaction (h3a), destination advocacy (h3b) and destination image (h3c) have a significant positive influence on destination revisit intention. 1.9. mediating effects of destination satisfaction, destination advocacy and destination image tourist decision-making is significantly influenced by destination experience. kim et  al. (2012b) say experience is a main and valuable thing for the tourism industry. some scholars study the relationship between destination experience and revisit intention via the role of many mediating variables. experience is usually accompanied by satisfaction, so tourists will be more likely to revisit a location after having a positive experience, due to a greater degree of satisfaction (kim, 2018). studies unveil that tourism or destination experience influences revisit behavior through the mediation of destination satisfaction (sharma & nayak, 2019) in which revisit or return intention affect by perceived value through destination satisfaction (khuong & duyen, 2017). along with, battour et al. (2012) explore in their empirical study about the satisfaction’s mediating role and atmari and putri (2021) say there is an impact of experience on destination revisit intention through satisfaction. so that, destination satisfaction works as a mediating variable between destination experience and the tourist’s revisit intention. wom plays an important mediating role between travel experience or perceived value or information on tourist revisit behavior (xu et al., 2020; trung & khalifa, 2019). in accordance, some researchers demonstrate the significant mediating role of wom between quality of service and revisit behavior (gholipour soleimani & einolahzadeh, 2018; laksana & ekawati, 2020) and they suggest enlarging service quality for magnify the positive influence of wom on tourists return intention. however, this study considers wom as destination advocacy. so that, wom works as a mediator then destination advocacy also could mediate the relationship between experience and revisit of tourist. furthermore, experiences are the memories of the person’s subjective judgment of the entire events that construct the destination vision that are stored when they have pleasant impressions (dagustani et  al., 2018) which indicate that image has a connection with experiences. destination image is another mediating variable (loi et  al., 2017; nazir et  al., 2021) that mediates revisit intention. according to kim (2018) experience affect revisit intention via the mediator destination image. atmari and putri (2021) also show mediating effect of destination image between experience and return intention. the following are the offered hypotheses: hypothesis (h4a): destination satisfaction (h4a), destination advocacy (h4b) and destination image (h4c) significantly mediate the relationship between destination experience and revisit intention. business, management and economics engineering, 2022, 20(2): 286–311 295 figure 1. authors conceptual research model 2. research methodology 2.1. sample and data basically, this study emerges on conclusive research where we show the relationship between variables using various hypotheses. we gathered information from saint martin, the sole island in this nation, and cox’s bazar, one of the world’s largest sea beaches. every year in november to february many tourists from inside or outside come to visit those places. in this study, using structured questionnaire, we collect data via online survey within two weeks in the month of april, 2021. here 25 respondents take part for pilot study due to ensure the relevancy, consistency as well as order of the designed questionnaire and 25 measurements are items finally placed after modification and changes. a seven-point likert scale which started from strongly disagree (1) to strongly agree (7) are used in this research, and there two parts in the questionnaire one is respondent demographic history and other one is their opinion. initial sample size was 462, where 19 is incomplete. so, the utmost sample size was 443 for analysis. questionnaire link with detail instructions randomly send to the respondents through online, and there is attached acknowledgement that respondents provided information would be kept secret. according to the demographic characteristics, male respondents are 62.3% and female respondents are 37.6% approximately. more than 69% respondents are between 18–28 years old. the respondents of bachelor degree are higher 53% where the lower degree is below ssc 2%. for occupation, 58.8% respondents are students, private employees, govt. employees are 9.3%, 8.6% respectively. most of the respondents nearly 62% stay 3 nights or less than 3 nights. 296 m. a. hossain et al. an integrated model of destination advocacy and its direct and mediating. table 1. demographic characteristics (n = 443) (source: survey data) variable items percentage variable items percentage gender male 62.3% occupation govt. employed 8.6% female 37.6% private employed 9.3% age range 18–28 years 69.3% self-employed 5.8% 29–39 years 11.7% student 58.8% 40–50 years 5.3% others 5.9% 51–60 years 5.5% length of stay 3 nights or less 62.1% more 8.2% 4–6 nights 22.6% educational qualification below ssc 2% 7–10 nights 8.4% ssc or equivalent 4.5% more 6.1% hsc or equivalent 10.8% bachelor 53.3% more 29.3% 2.2. measures a quantitative survey is completed among tourists who have visited cox’s bazar sea beach and saint martin in bangladesh. the uses of all the measurement instruments are adopted from previous literatures. destination experience with five items is adapted from the research of meng and cui (2020), kumar and kaushik (2020), kusumawati et  al. (2020). similarly, destination image with six items is based on the research of abbasi et  al. (2021). items for destination advocacy are taken from the study of kusumawati et  al. (2020), kumar and kaushik (2020). destination satisfaction with four items are taken from abbasi et al. (2021) research. in addition, measures of tourists’ destination revisit intention are adopted from the research of abbasi et  al. (2021), meng and cui (2020), song et  al. (2020). we show all the variables with respective items in the appendix. 2.3. common method bias or variance we applied procedural approaches and statistical techniques to remedy common method bias (cmb). as procedural approaches, (1) we used set questions from authentic sources, (2) pre-test and pilot-test were applied using directed samples, (3) to encourage objective reflection of the respondents before responding, thereby generating a psychological separation in response, we randomized the questionnaire and used two types of scales. as a statistical measures, we used (1) harman’s single-factor test, (2) common latent factor test and (3) correlation method. the results of the harman’s single-factor test shows that first factor explained 37.14% of the variance, which is below of its critical value of 50% (podsakoff et al., 2012; hair et al., 1998). common latent factor test results shows that there is no path difference >0.20 between the standardized factor loads with latent factor and without latent factor (archimi et al., 2018). furthermore, the highest correlation value is 0.75, which is less than 0.90. overall, our perceived statistical measures support procedural approaches to establish that cmb is not a serious issue in this study. business, management and economics engineering, 2022, 20(2): 286–311 297 3. empirical results 3.1. reliability and validity analysis for testing convergent validity, it requires to measure composite reliability (cr) and the average variance extracted (ave) (hair et  al., 1998). so, this study test convergent validity by investigating cr and ave. in accordance to fornell and larcker (1981), acceptable cr is 0.7 or above and ave is about 0.5. from the table 2, cr ranges from 0.836 to 0.929 and ave ranges from 0.564 to 0.699 which meet the standard value refer by fornell and larcker (1981). in case of reliability analysis, this study selects cronbach’s (lee et al., 2017). results revel that cronbach’s values range from 0.843 to 0.928 that means all the values are greater than 0.7 (table  2). fornell and larcker (1981) also state that square root of the ave value of each variable need to be greater than the correlation between those variables and all the other variables then it would be considered good discriminant validity. from the table 3, the discriminant validity meets the criterion of the dimension. table 2. reliability and validity statistics variables estimate s.e. t-value c.r ave cronbach’s destination experience 0.855 0.929 0.629 0.928 0.856 .040 23.445 0.840 .041 22.684 0.839 .040 22.645 0.860 .039 23.682 destination image 0.796 0.920 0.659 0.923 0.756 .054 17.469 0.795 .053 18.683 0.878 .050 21.424 0.829 .051 19.753 0.811 .050 19.160 destination advocacy 0.870 0.921 0.699 0.920 0.853 .041 23.883 0.831 .041 22.774 0.803 .047 21.428 0.823 .042 22.372 destination satisfaction 0.857 0.871 0.629 0.871 0.756 .047 18.621 0.757 .050 18.660 0.799 .044 20.259 destination revisit 0.782 0.836 0.564 0.843 0.806 .060 18.269 0.786 .062 17.860 0.613 .064 13.194 298 m. a. hossain et al. an integrated model of destination advocacy and its direct and mediating. table 3. discriminant validity variables mean std. deviation 1 2 3 4 5 vif 1. destination experience 5.52 1.34 0.79 3.11 2. destination image 5.30 1.31 0.74 0.81 3.65 3. destination advocacy 5.22 1.32 0.77 0.74 0.83 2.84 4. destination satisfaction 5.46 1.34 0.77 0.77 0.67 0.79 2.25 5. destination revisit intention 5.49 1.28 0.63 0.63 0.73 n/a 0.75 x2/df. = 2.643, agfi = 0.87, cfi = 0.96, tli = 0.95, rmsea = 0.061. 3.2. hypothesis testing table 4 shows the essence findings of hypotheses testing. here seven hypotheses are accepted (p < 0.001) among nine hypotheses. destination experience highly influence destination satisfaction (β = 0.678, p < 0.001), destination advocacy (β = 0.788, p < 0.001) and destination image (β  = 0.474, p < 0.001). similarly, tourist satisfaction (β  = 0.147, p < 0.05) and image (β = 0.476, p < 0.001) regarding destination are positively influence by destination advocacy, therefore hypotheses h1a, h1b, h1d, h2a, h2b are accepted. moreover, destination revisit intention is significantly predicted by destination satisfaction and destination image. thus, hypotheses h3a (β = 0.655, p < 0.001) and h3c (β = 0.282, p < 0.001) are accepted. on the other hand, there is no significant impact in this study of destination experience and advocacy on destination revisit intention. consequently, hypotheses h1c and h3b are rejected. table 4. hypothesis results hypothetical paths estimate s.e. t-value p-value decision destination experience ---> destination satisfaction 0.678 .069 9.665 *** accept destination experience ---> destination advocacy 0.788 .043 17.232 *** accept destination experience ---> destination revisit intention 0.110 .066 1.380 .168 reject destination experience ---> destination image 0.474 .050 8.645 *** accept destination advocacy ---> destination satisfaction 0.147 .069 2.231 ** accept destination advocacy ---> destination image 0.476 .053 8.678 *** accept destination satisfaction ---> destination revisit intention 0.655 .054 10.102 *** accept destination advocacy ---> destination revisit intention –0.029 .058 –.429 .668 reject destination image ---> destination revisit intention 0.282 .074 3.454 *** accept business, management and economics engineering, 2022, 20(2): 286–311 299 hypothetical paths estimate s.e. t-value p-value decision variance explained: destination advocacy: 61% destination satisfaction: 63% destination image: 70% destination revisit intention: 60% x2/df. = 2.701, agfi = 0.86, cfi = 0.95, tli = 0.94, rmsea = 0.062 note: *** p < 0.001, ** p < 0.05. 3.3. mediation testing for testing mediation effect of destination satisfaction, destination advocacy and destination image, the method of the product of coefficient and bootstrapping use in this study (hayes, 2009). the absolute value of z needs to compare with value of 1.96 for measuring significant effect of mediating variables by product coefficients. to ascertain the mediating significant effect, it requires determining if the confidence interval for the mediating impact contains zero using bootstrapping method. according to table 5, the absolute value of destination satisfaction of mediating effect is higher than the value of 1.96 and the confidence interval of destination satisfaction also does not contain zero. it means that tourist’s destination satisfaction (from cox’s bazar and saint martin) mediate the relationship between the destination experience and revisit intention significantly. thus, the result exists hypothesis h4a. additionally, the absolute value for destination advocacy of mediating effect is higher than value of 1.96 and the confidence interval of destination advocacy also does not contain zero. it illustrates that tourist’s destination advocacy of cox’s bazar and saint martin mediate the relationship between the destination experience and destination revisit intention significantly. thus, the result accepts h4b. furthermore, the absolute value for destination image of mediating effect is higher than 1.96 and the confidence interval of destination image also does not contain zero. this indicate that tourist’s destination image of cox’s bazar and saint martin mediate the relationship between the destination experience and destination revisit intention significantly. thus, the result accepts h4c. table 5. mediation results variables estimate se z bootstrapping bias-corrected percentile 95% ci 95% ci indirect effect lower upper lower upper destination satisfaction 0.560*** 0.058 9.65 0.452 0.681 0.451 0.678 destination advocacy 0.138** 0.059 2.33 0.029 0.262 0.027 0.260 destination image 0.405*** 0.103 3.93 0.220 0.626 0.224 0.629 note: *** p < 0.001, ** p < 0.05, process is repeated at 5000 times. end of table 4 300 m. a. hossain et al. an integrated model of destination advocacy and its direct and mediating. 5. discussion despite the fact that tourism research recognizes the importance of researching destination experience (kim, 2018; prentice et  al., 2021; yang et  al., 2021; li et  al., 2021; zhang et  al., 2019), previous research does not adequately illuminate the direct effects of destination experience on tourists’ revisit intention. as a result, the present study is driven by a need for research to create an integrated destination experience model that connects destination experience, destination satisfaction, destination advocacy, destination image, and tourist intents to return to a destination as well as the mediating roles of destination satisfaction, destination advocacy, and destination image in the proposed model. figure 2. structural model the empirical results suggest that destination experience has a substantial impact on destination satisfaction (h1a), destination advocacy (h1b), and destination image (h1d), with the exception of destination revisit intention (h1c). it is most likely to be found that those tourism destinations which are given good experiences by tourists enhance their destination satisfaction and create a good image of the destination in the tourism world. this boosts the destination’s advocacy, but experience may not directly augment the return intention of tourists. this is in tune with earlier research on the beneficial impact of tourists’ destination experiences on satisfaction (sangpikul, 2018; stavrianea & kamenidou, 2021), on destination advocacy (hossain et  al., 2021), on destination image (kim, 2018). on the other hand, the findings of (h1c) contradict the findings of kim (2018), who found that a memorable travel experience in the destination directly influences the revisit intentions of the tourist. in accordance with prior findings (baloglu & mccleary, 1999; prayogo et al., 2017), the findings of the current study revealed that destination advocacy has a vital role in enhancing tourists’  destination satisfaction (h2a) as well as the image of the destination (h2b). the connection between destination advocacy and destination image, as well as destination advocacy and destination pleasure, may, however, be generalized across a variety of sectors. destination satisfaction is derived from the destination’s advocacy, and tourists are satisfied because they have more information about the destination from diverse sources. this is explained by destination advocacy in the tourism industry, which has a direct impact on destination satisfaction and image. business, management and economics engineering, 2022, 20(2): 286–311 301 furthermore, the outcome demonstrate that destination satisfaction considerably increased the formation of tourists’ destination revisit intentions (h3a), and destination image enhanced tourists’ destination revisit intentions (h3c), supporting the current conceptual framework and earlier research findings (e.g., hossain et al., 2021; kim, 2018; nguyen viet et al., 2020). for example, hossain et al. (2021) revealed that in the nature-based destination of bangladesh, tourists’ satisfaction positively affects tourists’ destination revisit intentions. remarkably, table 5 shows that destination satisfaction, advocacy and image have noteworthy mediation effects on the link between destination experience and destination revisit intentions (h4a-c). previous study has shown that destination satisfaction, advocacy, and image all play important mediating roles in the connection between experience and behavioral intentions such as revisiting (moon et al., 2013; kim, 2018; kanwel et al., 2019). for example, sangpikul (2018) discovered that in the perspective of island sites, tourist satisfaction appears to be an imperative variable mediating the effects of site seeing experiences on site loyalty, inferring that the relationship between tourism experiences and tourism site loyalty is mediated by tourist satisfaction. as a consequence of these findings, it is likely to identify the indirect impacts of destination experience on destination revisit intentions via the mediating effects of satisfaction with the destination, destination advocacy, and destination image. to summarize, it is possible to construct the following relationships: destination experience → destination satisfaction → destination revisit intentions; destination experience → destination advocacy → destination revisit intentions; and destination experience → destination image → destination revisit intentions. as a result, the present research offers a complete perspective on the connections between destination experience, destination image, destination advocacy, and destination satisfaction, as well as their relative impacts on visitors’ inclinations to return and find multiple mediating roles in the proposed model. conclusions, implication, limitations and future research scope the current study was one of the first to conceptualize a comprehensive model that combined tourist satisfaction, advocacy, and image with destination experience, advocacy, and image in a single model. it also developed hypotheses about the mediating roles of tourist satisfaction, advocacy, and image in the relationship between destination experiences and intentions to revisit. this study might add to the current body of literature in tourism in two ways: theoretical implications and practical consequences. the findings confirmed that tourists’ destination experiences improve tourists’ satisfaction, destination advocacy, destination image and there is an exception in the link between destination experience and intention to return. tourists’ satisfaction, advocacy and image are compatible factors that play a key mediating role on links between destination experience and destination revisit intentions. implications of the study the theoretical, methodological, and empirical contributions of research in an area can be used to assess its relevance (summers, 2001). this study’s theoretical contribution is that it presents empirical evidence about the relationship between destination experience, 302 m. a. hossain et al. an integrated model of destination advocacy and its direct and mediating. destination advocacy, destination satisfaction, and destination image on a visitor’s intention to return to a tourist site in the setting of emerging economies. destination satisfaction and image have a direct and mediating effect on the rapport between destination experience and destination revisit intentions, and destination advocacy has a mediating effect on the aforementioned link but no direct effect was found, refereeing to the fact that destination satisfaction and image are inevitable concerns for enhancing revisit intentions in today’s tourism destinations. on the other hand, destination advocacy is not a precursor of revisiting intention but plays a mediating role. the research as well extends the body of knowledge on the mediation of destination satisfaction, advocacy, and image on the connection between destination experience and intentions to return to the tourism site. ultimately, in the tourism sector, the interaction between destination experience and destination revisit intentions is neither simple nor linear, although destination satisfaction, advocacy, and image have a significant impact on this relationship. in addition, this study provides service providers, destination marketing organizations, and practicing destination managers with useful practical insights into managing tourists’ experiences, destination image, satisfaction, and advocacy in tourist destinations in order to increase revisiting intentions. for example, managers may utilize the information gained from this study to gain competitive advantages over competitors in strategy formulation for destination management. as previously said, one of the major competitive advantages of a destination is its travel experience, and the quality of a tourist’s travel experience is an essential element in attracting visitors to that location (sangpikul, 2018). managers should focus on the advancement of the location attributes in order to increase visitor satisfaction, advocacy, and improve the destination’s image, all of which contribute to repeat visits. limitations and future research despite the fact that this research bestow on the tourism field, it has certain shortcomings that need to be addressed for succeeding research possibilities. first, the research did not look at the moderating effects of gender, age, visit purpose, visit time and season on the link between all the predecessors and destination revisit intentions. second, the cross-sectional method used in this research, as well as all of the data collected from domestic visitors, restrict knowledge and limit the universalizability of the findings. to address the study’s flaws, future research should incorporate longitudinal studies of domestic and international visitors. additionally, further research is needed to identify and evaluate the moderating factors that may affect the connection between the constructs studied in order to get useful insights. references abbas, m., gao, y., & shah, s. s. h. 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(2019). exploring the roles of technology, people, and organization in building a tourism destination experience: insights from the 2nd usa-china tourism research summit and industry dialogue. journal of destination marketing & management, 12, 130–135. https://doi.org/10.1016/j.jdmm.2019.03.001 appendix constructs and items destination experience (meng & cui, 2020; kumar & kaushik, 2020; kusumawati et al., 2021). the basic amenities provided by cox’s bazar and saint martin were sufficient. availability of food and accommodation facilities provided as promised. i found these destination interesting in a sensory way. these destination makes a strong impression on my senses, visually and in other ways. the tourist services at the destination provide good value for money. destination image (abbasi et al., 2021). cox’s bazar and saint martin are safe and secure. cox’s bazar and saint martin offers exciting and interesting places to visit. cox’s bazar and saint martin have beautiful scenery and natural attractions. cox’s bazar and saint martin have a pleasant climate. the city has appropriate facilities. the behavior of the people of the host city is appropriate and friendly. destination advocacy (kusumawati et al., 2021; kumar & kaushik, 2020). i intent to talk the positive aspects on my visit and recommend to others. these destinations are likely to be my next traveling destination. i would share my experiences of this trip on social media. i often consult other tourists’ online travel reviews to help choose an attractive destination. i would tell my relatives, friends, and colleagues about the advantages of these places. https://doi.org/10.1177/2158244020919491 https://doi.org/10.1016/j.jhtm.2021.07.014 https://doi.org/10.1016/j.im.2015.03.001 https://doi.org/10.1016/j.tourman.2003.08.016 https://doi.org/10.1016/j.jbusres.2015.01.012 https://doi.org/10.1016/j.jdmm.2017.06.004 https://doi.org/10.1016/j.jdmm.2019.03.001 business, management and economics engineering, 2022, 20(2): 286–311 311 destination satisfaction (abbasi et al., 2021). i am fully satisfied with the trip to cox’s bazar and saint martin. i am satisfied with my decision to visit cox’s bazar and saint martin. i was excited about having a new experience. compared to other things i could have done, the time spent traveling was enjoyable. destination revisit intention (abbasi et al., 2021; meng & cui, 2020; song et al., 2021). i predict i will visit cox’s bazar and saint martin in the future. if everything goes as i think, i will plan to visit cox’s bazar and saint martin in the future. i have the knowledge and the ability to look for interesting destination to visit. taking my past experience with a good quality of service into account affects my willingness to travel again. i would more frequently visit cox’s bazar and saint martin. _goback baut0010 baut0015 copyright © 2016 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. the concept of basic income: global experience and implementation possibilities in lithuania algimantas laurinavičius1, antanas laurinavičius2 faculty of economics, vilnius university, saulėtekio al. 9, lt-10222 vilnius, lithuania e-mails: 1algislaur@gmail.com (corresponding author); 2antanaslaur@gmail.com received 14 january 2016; accepted 18 april 2016 abstract. the article gives an overview of universal basic income as one of the instruments of the asset-based policy, analyses its theoretical concept and practical examples. latest trends in europe, especially in finland and switzerland, are overviewed and possibilities to implement such an instrument in lithuania are evaluated. research methods of scientific literature analysis, comparative and logical analysis of statistical data, data grouping and presentation were used. article finds out that the concept of basic income is being implemented on a small scale in the us state of alaska and in a small autonomous territory of china – macao. finland and switzerland are determined to fully implement the concept of basic income by providing monthly benefits to all their citizens. although lithuania is categorized as a country with high income inequality and high level of poverty risk, currently it is not possible to implement the concept of basic income in lithuania: the state social insurance fund budget would not be able to fund sufficient benefits, and the benefits that could be provided by the budget would not comply with the objectives of the concept of basic income. keywords: basic income, income inequality, poverty rate, asset-based policy, poverty reduction. jel classification: d63, i38. 1. introduction high income inequality and high level of poverty impede the development of the society and the state, and have a significant impact on the level of population health, education possibilities, housing conditions and crime. income inequality and wealth disparity cause political discontent that may lead to serious social upheaval. lithuania is categorized as a country with high income inequality: using the gini coefficient1 as a measure of income inequality, lithuania takes only the 26th place among the eu countries, leaving behind only latvia and bulgaria. in addition, indicators that measure income inequality and poverty level did not show any progress in lithuania 1 the gini coefficient is a measure of statistical dispersion intended to represent the income distribution of a nation’s residents. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(1): 50–63 doi:10.3846/bme.2016.306 mailto:algislaur@gmail.com mailto:2antanaslaur@gmail.com http://dx.doi.org/10.3846/bme.2016.306 51 business, management and education, 2016, 14(1): 50–63 over the last eight years. the gini coefficient remained at the same level (see fig. 1), while the level of poverty risk decreased by only 0.9 p.p (from 20.0% in 2006 to 19.1% in 2014) (statistics lithuania 2015). thus, the gap between the rich and the poor has not decreased. traditionally, measures for combating poverty and social inequality are focused on the issues of income and consumption, with particular emphasis on the idea of progressive personal income tax and the increase of various benefits for the poor. such measures – also known as the income support or security policy – are used in order to support persons during times when they do not have sufficient income and are faced with temporary or permanent difficulties such as unemployment, health problems, accidents or old age. the income security policy is passive: it supports persons who are faced with difficulties, but it is not designed to develop their possibilities (sherraden 2002, 2003). scientific studies have shown that benefit transfers to the poor do not decrease the poverty level which occurred before the benefits (danziger, plotnick 1986). today’s post-industrial economy requires an active social policy, based on saving, investments and asset accumulation, encouraging personal development and motivating people to improve their knowledge, skills and possibilities. such an innovative social policy, which emphasizes long-term opportunities for individuals provided by a certain amount of accumulated assets, is called an asset-based policy (sherraden 1991). various foreign authors have proposed different ways of implementing the assetbased policy practically. even though there are quite a few proposals which often have some similarities and differences between them, all the proposed methods for implementing the asset-based policy practically can be categorized into four main groups: 1) one-time grant to all individuals reaching majority (nissan, le grand 2000; ackerman, alstott 1998). b. ackerman and a. alstott named this benefit the stakeholder grant; 0.37 0.35 0.33 0.31 0.29 0.27 0.25 eu average lithuania 2006 2007 2008 2009 2010 2011 2012 2013 2014 fig. 1. gini coefficient in lithuania, and eu average (source: concluded by the authors, based on the data of eurostat 2015) 52 a. laurinavičius, a. laurinavičius. the concept of basic income: global experience and implementation possibilities in lithuania 2) permanent unconditional monthly benefits for all adult citizens (van parijs 2005). p. van parijs named these benefits the basic income; 3) children’s savings accounts. this proposal suggests to provide governmental benefits for all new-borns of the country by transferring the funds to their long-term savings accounts (sherraden 1991; kelly, lissauer 2000); 4) matched savings accounts. this proposal suggests to provide governmental benefits to people living in poverty by transferring governmental benefits to their special savings accounts. such transfers would, to a certain ratio and to a certain extent, supplement their personal savings that are deposited in these accounts (sherraden 1991). it should be noted that even though these proposals provide different ways of implementing asset-based welfare, they all focus on the same goal – to help accumulate a certain amount of assets, escape from regular cycle of benefits, consumption and poverty, encourage development of personal capabilities and as a result, a better development of entire society and national economy. children’s savings accounts as a method of the asset-based policy implementation has been discussed, analysed and applied to lithuania on a theoretical level by laurinavičius and galinienė (laurinavičius 2013; laurinavičius, galinienė 2013, 2014). however, the relevance of another asset-based instrument – basic income and possibilities of its practical implementation in lithuania is not yet analyzed, and therefore it makes a research problem and a ground for this paper. the aim of this article is to review the theoretical concept of basic income, as well as evaluate the prevalence of its practical application in the world, overview the latest trends in europe, and calculate the implementation costs of such an instrument in lithuania. research object: basic income as a practical instrument for the asset-based policy implementation. research methods: scientific literature analysis, comparative and logical analysis of statistical data, data grouping and presentation. 2. theoretical aspects of the basic income concept the proposal of basic income was formulated as early as the end of the 18th century in the work of t. paine “agrarian justice”, and at the end of the 20th century this idea was developed further by economist p. van parijs (van parijs 2005). this idea is based on the assumption that all citizens of the country receive an unconditional monthly benefit, referred to as the “citizen salary”, which ensures that the standard of living of citizens is above the poverty line. these benefits are universal and not selective – this means that all citizens can receive them, regardless of their financial situation or economic activity. and they are unconditional – i.e., the receipt of such benefits does not 53 business, management and education, 2016, 14(1): 50–63 depend on whether a citizen is employed or not. in this respect, basic income is the same as other universal unconditional social services, such as free healthcare, maintaining of order or national defence. in terms of the idea of unconditional universal basic income, no citizen of a prosperous society should live below the poverty line. thus, the idea of basic income proposes redistribution that guarantees the opportunity for all individuals to live above the poverty line, even when being unemployed or engaging in unremunerated activities. supporters of the idea of basic income name various advantages of such a method of implementing asset-based welfare, such as an increase in personal freedom, increased economic efficiency and reduction of the level of poverty. e.g., k. widerquist and m. lewis claim that the main objective of social policy is to reduce poverty and that basic income is the most obvious and most effective way to achieve this (widerquist, lewis 1997). various income and benefit programmes, which are intended only for the poor, have done little to reduce poverty. such programmes significantly decrease incentives to work in the formal labour market, they are stigmatizing and further deepen social exclusion among various groups of society instead of encouraging solidarity. whereas universal programmes intended for all individuals should be much more effective in reducing poverty. in the sixties of the 20th century a group of economists proposed various basic income options which were know at the time as negative income tax. m. friedman proposed very low negative income taxes – the return of unused income tax deductions – as a replacement for existing welfare programmes. j. tobin supported much higher negative income taxes – universal tax credit – as a replacement for several welfare programmes (laurinavičius 2013). the size of benefits in today’s basic income proposals is also very varied, however, there are not enough empirical studies on how different benefit sizes affect the poverty level. one of these studies is carried out by i. garfinkel, c.-c. huang and w. naidich in 2005 who modelled changes in the poverty level when applying various basic income programmes (garfinkel et al. 2005). their research revealed that all hypothetical basic income programmes reduced the level of poverty – the more generous was the programme, the stronger its effect was. therefore this naturally raises a question: why not increase the benefits to the extent that would completely eliminate poverty? according to the aforesaid authors, there are several counterarguments for this: – first of all, basic income is not the only preferred social welfare programme (general education and healthcare are other not less important programmes distinguished by them); – in addition to the social welfare programmes, the state also ensures law and order, defence, transport and communication infrastructure, etc. these public goods must also be financed from taxes. and if the total tax rate becomes too high, this reduces initiative, productivity and growth; 54 a. laurinavičius, a. laurinavičius. the concept of basic income: global experience and implementation possibilities in lithuania – in addition, it would be wrong to rely on only a single instrument in public finances, no matter how good it is. when summarizing their research, the aforesaid authors acknowledge that a smallscale basic income programme would be very welcome, while universal unconditional benefits of significant size would not be acceptable. there were various proposals on how to finance basic income: varying from land or natural resources taxes, to vat, inheritance taxes, and even tobin tax for speculative capital transfers. supporters of this idea also discuss whether basic income should be ensured for only the citizens of the country or for all people residing in it; should individuals receive such income from birth or after they reach adulthood; should retired individuals receive such income or not (laurinavičius 2013). a question arises whether the concept of basic income even complies with the principles of asset-based welfare, i.e., whether it is the instrument of asset-based policy, or ordinary social policy (as it is based on small periodic unconditional benefits instead of capital accumulation or large one-time capital grants). one can agree that the form of this method of asset-based welfare implementation looks like the instrument of redistributive income support (security) policy. however, they also have significant differences (laurinavičius 2013): – first of all, the aims of ordinary redistributive social policy and the concept of basic income are different. instead of focusing on short-term poverty reduction and possibility to live “from benefit to benefit”, the latter emphasizes the aim to create and implement asset-based welfare, to increase economic efficiency, ensure personal freedom and independence from the labour market and reach long-term reduction of the level of poverty; – selective poverty reduction programmes intended specifically for the poor significantly decrease incentives to work in the formal labour market, they are stigmatizing and further deepen social exclusion among various groups of society instead of encouraging solidarity. whereas the concept of basic income is a universal programme intended for all the citizens of the country regardless of their financial situation or economic activities; – the concept of basic income proposes permanent unconditional benefits, and it is known that residents spend permanent income more carefully and more responsibly than randomly received one-time benefits (baena et al. 2012). the development of financial responsibility and planning is one of the objectives of the asset-based policy. summarizing the concept of basic income, it can be stated that it proposes monthly benefits as a mean for redistribution which guarantees the opportunity for all individuals to live above the poverty line, even when being unemployed or engaging in unremunerated activities. however, the size of benefits in different proposals is very varied depending on different tasks that are assigned to this social instrument. 55 business, management and education, 2016, 14(1): 50–63 3. basic income – the decline of the incentives to work and the collapse of the economy? the concept of basic income has received a lot of criticism: 1. the idea of basic income is criticized due to the fact that its full implementation would be too expensive (which is particularly unacceptable at a time when the public debts of developed countries reach a record high). and if such a programme is implemented with acceptable costs, the basic income per capita would be so small that this programme would lose its sense. according to b. bergmann (bergmann 2005), the current level of income in countries that implement the social welfare state is insufficient for the services and benefits provided by the social welfare state and the asset-based welfare implementation policy to function at the same time. problems would arise from excessive taxation, as there is always a certain limit of gdp redistribution. additionally, incentives not to work arising from the implementation of asset-based welfare would further increase the problem of tax deficiency, and, as a result, this would start the spiral of increase in tax rates and decrease in tax income; 2. such policy would encourage illegal immigration from poorer countries in order to earn a better life for the children; 3. such policy is unfair, because additional resources are given to all people, including the wealthy; 4. such policy is also unfair due to the fact that additional resources are given to people who are unemployed and live “at the expense of others”, and redistribution unjustifiably takes away part of the assets from those who worked hard to accumulate them; 5. it is likely that a large part of individuals would withdraw from the labour market if basic income would be large enough to enable them to live above the poverty line even when being unemployed (the so-called free-rider problem), then the whole national economy would collapse and cease to function, and, in order to ensure the proper implementation of asset-based welfare, the tax rate would be so high that it would decrease incentives to save and accumulate assets. some authors counter this aspect of criticism and propose providing benefits that would barely cover the basic needs. others state that people work not only to survive, therefore, even if there would be a possibility to receive income without working, this would not encourage them to do so (standing 2005); 6. healthy, employable people who would make a decision to use their basic income without working would soon lose the respect of society (bergmann 2005); 7. an issue of decreasing parental influence on children would arise. knowing that they will receive basic income on a monthly basis, children would have no incentives to study as well as no willingness to obey their parents (bergmann 2005). to sum up, it should be noted that various criticism is expressed towards the concept of basic income. however, most criticism can be met with strong counterarguments. 56 a. laurinavičius, a. laurinavičius. the concept of basic income: global experience and implementation possibilities in lithuania criticism that such policy is unfair because additional resources are given to all individuals, including the wealthy and those who are unemployed, can be met with a strong counterargument that universality is the fundamental feature of the asset-based policy, which essentially separates it from the selective social policy. in addition, some of the currently existing social policy benefits are also universal (e.g., one-time payment for a new-born or funeral benefit in lithuania). finally, the argument that such policy would encourage illegal immigration from poorer countries in order to earn a better life for the children may not be called criticism in lithuania, but estimated as one of the possible solutions to the country’s demographic problems, especially if such policy would not only encourage immigration, but also the re-emigration of the country’s population (laurinavičius 2013). 4. practical examples of the implementation of basic income in the us state of alaska, there is a single existing asset-based policy model that at least partially complies with the concept of basic income. it is known as the alaska permanent fund which pays annual dividends to the residents of the state of alaska. this fund is established in the state’s constitution (article no. 9.15) and is financed with part (25%) of the income received from the oil trade, and the dividends are paid from the fund’s investment gains (hsieh 2003). it should be noted that even though that the implementation form of this policy complies with the concept of basic income, however, no conventional asset-based policy implementation objectives (e.g., formation of saving skills, capital accumulation, improvement of access to higher education, decrease of poverty or inequality, etc.) are stated in the funds mission, nor in the constitution of the state of alaska. the constitution indicates that part of the income from oil trade must be deposited into the fund, and the fund’s mission indicates that it “aims to properly administer the dividend programme in order to ensure that all the residents of alaska receive their share of dividends” (laurinavičius 2013). the alaska permanent fund was established in 1976 and since then its amount increased from 0.7 million us dollars to 52 billion us dollars (according to the data of november 2015), and this amounts to over 80 000 us dollars per each resident of the state. the fund’s assets are invested into securities (60%), real estate (13%) and other assets (27%) (alaska permanent fund 2015). each year since 1982, the fund pays dividends to all residents of alaska (dividends were paid to 644 thousand residents of alaska in 2015), regardless of their financial position or age. these dividends are calculated as 10.5% from the average investment gains over the past 5 years (this amounts to about half of the investment gains of the current year). on average, dividends that are paid to residents amount to 1300 us dollars per year, and historically ranged from 331 us dollars in 1984 to 3269 us dollars in 2008. within the period of three decades, the fund paid over 20 billion us dollars to the residents of alaska. 57 business, management and education, 2016, 14(1): 50–63 even though dividends received by the state’s residents do not compare to the benefits provided by the concept of basic income (“benefit that ensures the standard of living above the poverty line”), however, calculations show that properly invested benefits would enable the residents of alaska to accumulate a substantial capital. from 1982 to 2015, each resident of the state received 40 thousand us dollars (or 30 thousand us dollars during the period of 1995–2015) (see table 1). by reinvesting the dividends received from the fund with a 5% annual rate of return, in 2015, residents of the state of alaska who turned twenty years old could have accumulated 51 thousand us dollars in their investment accounts (for comparison, table 2 shows the amount of capital that could have been accumulated if the received dividends have been reinvested with a 3%, 5%, 7% return or annually reinvested into the us stock market). table 1. dividends paid by the alaska permanent fund, us dollars/per resident (source: concluded by the authors, based on the data of the alaska permanent fund corporation (alaska permanent fund 2015))2 1982–2015 1995–2015 annual average 1.300 1.451 total (without reinvesting) 40.299 30.480 when reinvesting with a 3% 62.778 41.327 when reinvesting with a 5% 87.133 51.222 when reinvesting with a s&p500 return2 227.432 69.198 it should be noted that even though residents are generally satisfied with the amount of the received pay-outs, however, some authors think that paying out “undeserved” benefits to residents may cause confusion due to the fact that residents themselves may not know which policy is being implemented through these benefits. nevertheless, even though the alaska permanent fund does not communicate the objectives of an asset-based policy, however, it continually pays stable dividends, and it is known that residents spend their permanent income more carefully and more responsibly than randomly received one-time benefits (baena et al. 2012). the concept of basic income is also being implemented on a small scale in a small autonomous territory of china – macao. in 2015, the government of macao announced that it would pay 9.000 patacas (around 1.127 us dollars) to each individual who is a permanent resident of this territory, and 5.400 patacas (around 676 us dollars) to each non-permanent resident. the only condition is to have a valid macao resident identification card. 2 10.2% – 1982–2014; 7.7% – 1995–2014. 58 a. laurinavičius, a. laurinavičius. the concept of basic income: global experience and implementation possibilities in lithuania this programme is implemented since 2008. in 2015, 675.696 people received benefits (of which 90% received the full amount of the benefit). in 2014, benefit size was the same, however, that year these benefits were given to 635 thousand people. benefits applied in macao are a small scale basic income programme, similar to the dividends paid in the state of alaska. it is aimed to ensure that all the residents of the area would receive at least a small gain from the economic development of this area (widerquist 2015). there are currently only two practically implemented examples of the universal basic income in the world: in alaska and in macao. however, there is not enough surveys to see if they have any impact on social inequality, or they just perform “undeserved” pay-outs to the residents of these territories. 5. basic income experiments in europe even though there are only two practical examples of the concept of basic income in the world, europe has recently also become a more active supporter of this idea with two new implementation models proposed in finland and switzerland. the finnish social insurance board (kela) has recently announced its revolutionary plans to change the country’s social welfare model – the state would pay monthly benefits of 800 eur to each citizen of finland, however, the country would deny all social and other concessions. such basic income would not be taxed and it would be given to each citizen of finland, regardless of whether the citizen receives any kind of salary or is unemployed. it is planned that the reform will be implemented in two stages. first, the benefit would be 550 eur and some currently applied social concessions would still remain. later, basic income would be increased to 800 eur (yle 2015). the implementation of basic income should fundamentally change the entire social welfare and financial system in finland. according to kela analysts, such measure would encourage economic growth, and each citizen, who would no longer have to worry about income to satisfy his basic needs, would be able to choose a work regime that is acceptable to him. it should be noted that the model that is proposed in finland complies with the benefit size defined in the concept of basic income (“benefit that ensures the standard of living above the poverty line”), therefore there is a big chance that part of the individuals would simply withdraw from the labour market. on the other hand, average income in finland is around 2.300 eur/month (after taxes), and this is almost 3 times more than the benefit proposed by kela. kela plans to present a specific proposal regarding the implementation of basic income in november of 2016. there are currently around 5.4 million people living in finland, thus the country would have to pay around 52.2 billion eur per year to its people, if each of them would 59 business, management and education, 2016, 14(1): 50–63 receive a monthly benefit of 800 eur (this would consume 21% of the country’s gdp, or 36% of the state’s budget). there are reasonable doubts as to whether the country would be capable to pay such amounts. since the middle of 2012, finland’s economy experienced recession and has modest growth potential. the traditionally strong paper and wood industry retreated, and the technology sector also experienced a decline when “nokia” lost its leading position in the global mobile device market. nevertheless, the proposed basic income model can be implemented, as it is currently supported by all the governing parties and the idea is approved by the society. latest surveys show that 69% of finns support the basic income programme and believe that the benefit should be increased to 1.000 eur per month. juha sipila, the prime minister of finland, estimates that such a model would enable to simplify the country’s social benefit system. an even more generous basic income model is proposed in switzerland, according to which each citizen of switzerland would receive monthly basic income of 2.500 francs (around 2.300 euros). a referendum is planned in the country in 2016. however, the implementation of such a programme would require around 223 billion eur each year (this makes 35% of the country’s gdp, or over 100% of the state’s budget). therefore, the government of switzerland recommended its citizens not to support the basic income model in the referendum. the same recommendation was also declared by the swiss parliament in september of 2015. it did not support this civil initiative by a majority of votes, however, according to the laws of switzerland, the civil initiative that received more than 100.000 citizen signatures must be submitted for general voting through a referendum. the main criticism expressed in the parliament included aspects such as the threat of immigration, the loss of motivation to work and unreasonably high benefits that cannot be funded even by prosperous switzerland. a survey of the population of switzerland shows that 49% of respondents would agree to the basic income idea, 43% of citizens would not agree to it, and the answer of the remaining 8% would depend on the size of the intended benefits (tages anzeiger 2015). two new implementation models of the universal basic income, proposed in finland and switzerland, both are very generous and very expensive even for these rich countries: if implemented this policy would consume 21% of the finland’s gdp, or 36% of its budget, and 35% of swiss gdp, or over 100% of the state’s budget. 6. the implementation of the concept of basic income in lithuania as already mentioned, lithuania is categorized as a country with high income inequality and high level of poverty risk. it is also obvious that the traditional social policy, which is based on income security, did not reach any significant achievements over the last years. today’s post-industrial economy requires an innovative and active 60 a. laurinavičius, a. laurinavičius. the concept of basic income: global experience and implementation possibilities in lithuania social policy, based on saving, investments and asset accumulation, encouraging personal development and motivating people to improve their knowledge, skills and possibilities. the need for new instruments in the social policy field could be interpreted in all developed countries with rapidly rising discontent regarding achievements of the traditional welfare state in the field of poverty reduction. it is generally accepted that conventional welfare security measures create a “trap” for poverty and unemployment – i.e., the poor remain in poverty and dependence which the welfare state should have eliminated. in addition, it is generally accepted that traditional welfare security measures are too strongly connected to the archaic definition of labour and household, and this leaves large groups of people without the security of incomes and welfare. these traditional welfare state failures are the basis for the need of a reform (skidelsky 2001). whether such a reform would follow the road of the asset-based policy, or more precisely the concept of basic income, is left for discussion. if such a road was selected, the next step would be to decide on monthly benefits size. if the finish model was selected, the size of monthly benefits in lithuania should be adapted according to the differences in set of indicators, such as standard of living, average or minimum salaries, in lithuania and finland (the standard of living measuring ability to pay such benefits, and the size of salaries using as a measure of decent living). however, the size of the minimum salary is not fixed in finland, so the standard of living, measured by gdp per capita, and the average salary were selected for further analysis. table 2 shows that the average salary is 4.2 times bigger in finland that in lithuania, and the gdp per capita is 1.5 times bigger in finland that in lithuania. then, the size of the lithuanian basic income should be 1.5–4.2 times lower than in finland and could reach from 193 to 538 eur per month per resident (see table 2). table 2. the possible size of basic income in lithuania, eur / per month / per resident (source: concluded by the authors, based on the data of eurostat (2015) and statistics lithuania (2015)) average monthly salary, eur (after taxes) gdp per capita according to the purchasing power parity, eu = 100 possible basic income, eur per month finland 2.300 110 800 800 lithuania 554 74 193 538 difference (in times) 4.2 1.5 4.2 1.5 even when selecting the cheaper 193 eur / per month / per resident scenario, such a programme would cost to our state budget 6.7 billion eur a year (see table 3). it would become a heavy burden, as it would comprise around 80% of the state budget, or would exceed the entire social insurance fund budget by two times. 61 business, management and education, 2016, 14(1): 50–63 table 3. costs of the implementation of the concept of basic income (source: concluded by the authors, based on the data of statistics lithuania (2015)) number of residents in 01.11.2015 2.893.336 basic income, eur per month per resident 193 basic income, eur per month total 557.533.267 basic income, eur per year total 6.690.399.210 even if the entire budget of the social insurance fund would be used for paying out basic income benefits, they would reach only 98 eur / per month / per resident. thus, those who are retired would receive benefits that are two and a half times smaller than the pensions that they receive under the current social security system (in october of 2015 the average retirement pension in lithuania was 247 eur); (ministry of social security and labour of the republic of lithuania 2015). and generally the benefits would be so small that the basic income programme would lose its sense as it would no longer comply with the objectives of this concept (e.g., “benefit that ensures the standard of living above the poverty line”). thus, at the current redistribution level, the state budget of lithuania or the budget of the social insurance fund are not big enough to support universal basic income. 7. conclusions 1. at the end of the 20th century, a new social policy based on saving, investments and asset accumulation in order to reduce poverty and social inequality was initiated. one of the implementation instruments of this policy is universal basic income. universal basic income is unconditional benefits which are paid out to all citizens of a country on a monthly basis. however, the size of benefits in different academic papers vary depending on different tasks that are assigned to this social instrument. 2. supporters of the universal basic income name various possible advantages of the implementation of this concept, such as an increase in personal freedom, increased economic efficiency and reduction of the level of poverty. empirical research has proved that all the experimental basic income programmes decreased the level of poverty – the more generous the programme was, the stronger its effect was on the reduction of poverty. 3. the concept of basic income is being implemented on a small scale in the us state of alaska and in a small autonomous territory of china – macao. the general objectives of the asset-based policy (such as the formation of saving skills, capital accumulation, improvement of access to higher education, reduction of poverty or inequality, etc.) are not communicated in both programmes and there is not enough surveys to see if they have any impact on social inequality, or they just perform “undeserved” pay-outs to the residents of these territories. 62 a. laurinavičius, a. laurinavičius. the concept of basic income: global experience and implementation possibilities in lithuania 4. two new implementation models of the universal basic income are proposed in europe: finland and switzerland are determined to fully implement the concept of basic income by providing monthly benefits to citizens, reaching 800 eur in finland, and 2500 francs in switzerland. however, the proposed models are very expensive and if implemented they would consume a substantial part of states’ budget. 5. lithuania is categorized as a country with high income inequality and high level of poverty risk. thus, the traditional social policy, which is based on selective programmes and income 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management. http://dx.doi.org/10.1111/1468-2397.00248 http://www.skidelskyr.com http://www.stat.gov.lt/ http://www.stat.gov.lt/ http://www.tagesanzeiger.ch/schweiz/standard/eine-freiere-gesellschaft-oder-der-ruin-der-schweiz/story/24386980 http://www.tagesanzeiger.ch/schweiz/standard/eine-freiere-gesellschaft-oder-der-ruin-der-schweiz/story/24386980 http://www.basicincome.org/news/2015/06/china-macau-residents-to-receive-annual-basic-income/ http://www.basicincome.org/news/2015/06/china-macau-residents-to-receive-annual-basic-income/ significance of demographic variables for targeting of internet advertisements václav stříteský1, marek stříteský2, martin john david quigley3, david říha4 the demand for professional knowledge as a key factor of the development of outsourcing of financial and accounting services in poland anna bagieńska the concept of a smart city in urban management sławomira hajduk the concept of basic income: global experience and implementation possibilities in lithuania algimantas laurinavičius1, antanas laurinavičius2 julia siderska evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics ligita gasparėnienė1, rita remeikienė2 the concept of products and services integration – analysis of scientific publications justyna kozłowska categories of supply chain performance indicators: an overview of approaches dorota leończuk multivariate analysis of short and long-impact indicators for corporate bond market development ieva astrauskaitė the research on interface between lithuanian direct investment abroad and foreign trade flows anžela kozlova1, algita miečinskienė2 copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. ethics management: how to achieve ethical organizations and management? carita lilian snellman metropolia univerity of applied sciences, leiritie 1, 00160 vantaa, finland e-mail: lilian.snellman@metropolia.fi received 10 november 2014; accepted 31 august 2015 abstract. the last decades’ serious organizational scandals that mainly stem from corruption and conflicting interests but also from bribery, favoritism and other wrongdoings have accentuated the need for finding instruments for achieving more ethical organizations and management. ethics management is particularly important in the public sector because public employees and holders of public office are responsible for increasing wellbeing and providing common good for all citizens. only accountable management striving for integrity through ethical practices and decision making will guarantee ethical organizational behavior. in spite of increasing research on ethics in general and ethics management in particular, increase in organizational scandals indicates that there is knowledge gap concerning ethical instruments that help to solve ethical problems. the aim of this paper is to shed light on ethical theories and instruments, and wrongdoings in public sector organizations. the main questions are; why is there so much wrongdoing; how can it be reduced; and how can more ethical organization and management be achieved. this is a review paper aiming to provide a review of ethical theories and instruments and discuss serious wrongdoings and the role of ethics in the public sector. the paper contributes to the fields of management and organization, ethics, and public management. keywords: ethics, ethics management, corruption, conflict of interests, ethical theories, code of conduct, code of ethics. jel classification: m140. 1. introduction in the recent decades the public sector has been facing challenges of ethics management due to big reforms intended to transform the traditional hierarchical and bureaucratic public institutions into more flexible ones. these reforms imply cooperation between public, private and third sector partners. such cooperation typically requires adaptation from all the participants. accordingly, the recent reforms towards post-bureaucratic structure (whitton 2001) imply changes in moral thinking and ethics management in the public sector. due to the reforms public values are changing, accountability getting b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(2): 336–357 doi:10.3846/bme.2015.244 mailto:lilian.snellman@metropolia.fi http://dx.doi.org/ 10.3846/bme.2015.244 337 business, management and education, 2015, 13(2): 336–357 fragmented, and ethical requirements imposed onto governments, administrations and public officials are continuously increasing (whitton 2001). consequently, public management is becoming more complex (demmke, moilanen 2011) which seems to give rise to new kinds of unethical patterns of behavior and, above all, increase in the number and scope of wrongdoings such as corruption, conflicts of interest, fraud, and bribery, to name a few. there are also indications that misuse of public power and public resources for personal purposes is increasing. in addition, it seems that trust in governments, public authorities, employees and in politicians is reducing (salminen, ikola-norbacka 2009). similarly, lack of accountability and transparency is noted (demmke, moilanen 2011). for these reasons, new effective instruments are needed to curb wrongdoings and to improve ethical behavior of civil servants and holders of public office. it is claimed that public administrators should seek a broad and solid understanding of ethical approaches and traditions (amundsen, pinto 2009), and look for methods for thinking about the ethical dimensions of their decision-making (whitton 2001) because ethical requirements imposed onto governments, public administrations and public officials have become more demanding and diversified. such ethical approaches or theories stem originally form different philosophical tradition (donahue 2003). there are three major ethical theories (vance, trani 2008) virtue theory, consequential theory and deontological theory (e.g., amundsen, pinto 2009). ethical theories can be applied while researching organizations and trying to enhance ethical behavior and while addressing ethical concerns in general. more practical instruments such as laws, codes of conduct, and codes of ethics may also be applied for improving ethical behavior of public servants and holders of public office and for combating wrongdoings (e.g., gilman 2005; amundsen, pinto 2009). motivated by the ethical problems that challenge organizations in the current rapidly changing environment, this paper will discuss wrongdoings, and review ethical theories and instruments applied when fighting against unethical behavior in organizations. the focus lies on the three main ethical theories and ethical instruments applied in the public sector in order to making it function more ethically. ehtics management is crucial in the public sector because public sector employees and holders of public office play an important role in public decision-making affecting thereby the life of all citizens (amundsen, pinto 2009). the underlying assumption in this paper is that ethics management based on ethical theories and effective instrument is crucial in the public sector because the public sector is accountable for decisions that concern all citizens and should be just when it is delegating and exercising public power and allocating public resources and when it is providing public good and promoting wellbeing of the citizens. another assumption is this paper that ethical management is only possible for such public employees who are virtuous, behave ethically and complete their duties in accordance with common moral standards and values inherent to the public sector. a third assumption is that only by the help of effective ethical instruments that stem form the ethical theories can wrongdoings be combated and ethical behavior enhanced. in 338 c. l. snellman. ethics management: how to achieve ethical organizations and management? order to address the above assumptions, a literature review on ethical theories, ethical instruments and most serious wrongdoings is conducted, and ethical concerns of the public sector are addressed. this paper is structured as follows. first, the last decades’ development trends and the role of ethics in the public sector are addressed. second, the main ethical theories and instruments are presented. third, most challenging wrongdoings are accounted for. the fifth section presents findigs. finally, conclusions are drawn, and a suggestion for future research is made. 2. recent trends and the role of ethics in the public sector over the past decades, the public sector in many countries has been going through several reforms with sift from traditional bureaucratic, rules-oriented approaches to a resultcentred model (gregory 1999). such public sector reforms are known to affect the work, behavior and actions of public employees (demmke, moilanen 2011), and imply increasing interaction with private as well as third sector organizations. 2.1. recent trends the recent decades’ rapid changes in the organizational environmnent have triggered new working methods and practices such as alliances, partnerships, and outsourcing. cooperation-based ways of providing public service imply that ethical cultures and values of the cooperating parties meet which, in turn, may lead to ethical problems or wrongdoings such as violations of integrity, ethical failures, conflicts of interest, corruption (demmke, moilanen 2011) and increased and more complex ethical dilemmas (ehrich et al. 2004). this kind of ethical challenges are reflected in an increasing media coverage (donahue 2003), better focused public scrutiny (whitton 2001), increase in public reporting on ethical scandals (demmke, moilanen 2011) and above all more salience concerning corruption scandals. consequently, it seems that due to the great number of corrupt incidences, discussions about new values, value conflicts, and value management is becoming more intense (whitton 2001). importantly, it is alleged that ethics management can be seen as an appropriate reaction to complement these reforms and compensate for their possible negative impact on the ethics of public servants (oecd 1996, 2000a in maesschalck 2004). the increasing number and diversity of ethical issues to be dealt with has implied a change in the definition of unethical behavior. similarly, the notion of ethical administration has changed being currently broader, more complex and more complicated (demmke, moilanen 2011). ethical administration is based on trust and on model examples given by public authorities and politicians (salminen, ikola-norrbacka 2009). unfortunately, if the public authorities do not show ethical example, and do not behave in ethical way, public trust may decrease. public employees and holders of public office have moral obligations, in other words, a series of duties, both legal and moral, that are circumscribed in their professional 339 business, management and education, 2015, 13(2): 336–357 ethics (constantin 2014). wrongdoings take place if such duties are ignored. corruption is considered as the most common type of wrongdoings (transparency international 2015), but also conflict of interests, fraud as well as lack of accountability and transparency seem to be in increase (demmke, moilanen 2011). literature in the field of public administration indicates that to be able to address ethical challenges in the public sector, diversified instruments based on ethical theories are to be introduced to guide the behavior of civil servants and holders of public office. it is alleged that ethics management with effective ethical instruments can help people make better decisions, and evaluate the decisions of others (amundsen, pinto 2009), prevent illegal behaviour, and foster genuinely ethical behaviour (maesschalck 2004). there are concrete examples on how the recent social, political and economic changes bring along ethical challenges in the public sector (demmke, moilanen 2011), as well as strong indications that public trust is in decrease (salminen, ikola-norrbacka 2009). recent research shows that most member states in the eu are of the opinion that trust levels concerning the public sector are in decrease (demmke, moilanen 2011). trust is understood as general confidence in public authorities and politicians (salminen, ikola-norrbacka 2009) or as a positive expectation that the other party does not act opportunistically through words, actions, or decisions. factors that have an impact on the level of public trust include performance of the public sector, general perceptions of the government, economic situation, scandals and dramas, media reporting, change of political culture, and changing expectations (demmke, moilanen 2011). consequently, in order to prevent wrongdoings and illegal behaviour of civil servants and holders of public office as well as to foster ethical behaviour and restore public trust, there is an urgent need to turn to ethical theories and apply diversified ethical instruments in the public sector. the continuous and many times complex changes in the public sector that are known to have a notable impact on the ethical behavior of public employees (demmke, moilanen 2011), any discussion of public service ethics needs to be located within the wider context of public services management and public policy (whitton 2001). accodingly, the interest in ethics management has been linked to broader changes in society (maesschalck 2004) that seem to have changed in perception of values and interpretation of duties. previously tolerated conduct is now deemed unethical and previously unethical conduct is now deemed criminal (demmke, moilanen 2011). it is also noted that while in the past, only a restrict ed number of issues were seen as unethical, today the definition of unethical behavior concerns an ever growing number of issues (demmke, moilanen 2011). such new perceptions stem partly form the changed behaviour of citizens who have become more assertive and demanding toward governments demanding increased and more direct accountability of the public administrators (maesschalck 2004). as ethic issues and efforts to deal with them seem to be ubiquitous (whitton 2001) governments worldwide have become more aware of the need of adopting new accountability mechanisms such as ethical standards and antidiscrimination and the 340 c. l. snellman. ethics management: how to achieve ethical organizations and management? like (demmke, moilanen 2011) and have stated to demand creative solutions that allow more ethical conduct in the public sector (whitton 2001). consequently, not in vain considerable scientific debate on how to make the public sector function in the best way is taking place (amundsen, pinto 2009). such debate has been fuelled in most countries by a clear rise of expectations from business leaders, civil society ordinary and ordinary citizens that government should establish and deliver higher standards of ethicality and integrity in the civil service, agencies of government, and government itself (whitton 2001). fortunately, improvements have been achieved. there are indications that never before have governments and public authorities been so interested in finding instruments to fight against corruption, to establish ethics management, to train employees in ethic conduct, and to adopt of new rules in order to curb corruption levels, fight against discrimination (demmke, moilanen 2011). creating a strong ethical climate based on ethical culture (menzel 2006), improving ethical behavior, and curbing corruption and other wrongdoings (e.g., amundsen, pinto 2009; demmke, moilanen 2011) are seen as paramount aims of the public sector in the current situation with increased cooperation with new partners and changing working methods implying complex ethical challenges. taken together, because ethics management has been linked to broader changes in society in general and in public sector reforms in particular (maesschalck 2004), public sector ethics has received more attention than ever before (peters, pierre 2012; demmke, moilanen 2011). the increasing attention to ethical behavior of public sector stems also from the fact that instead of safeguarding well-being and security of citizens, providing common good, allocating public resources in just and equal manner, using public power for the benefit of all, and making ethical decisions on behalf of the citizens, public employees and holders of public office seem increasingly to use public power and resources unethically for private objectives. in addition, ethical problems in the public sector seem to result from changed, more complex tasks and responsibilities of public employees that are known to lead to wrongdoings and illegal behaviour of public employees (demmke, moilanen 2011). due to such development in the public sector, there is an accentuated need for increased implementation of ethical theories with the subsequent generation and introduction of new more diversified ethical instruments for addressing wrongdoings and fostering ethical conduct among public sector employees. to sum up, it is seen as highly important to apply ethical theories in order to help public employees to face new ethical challenges in the changing environment in general, and to behave ethically and to combat wrongdoings in particular. 2.2. role of ethics one of the main characteristics of the public sector is its complexity. the complexity results from the public sector entities that operate within a specific legislative framework and from the fact that such entities typically lak standard organizational shape or size (ifac 2001). generally, the public sector organizations differ from the private sector ones in many respects although there have been serious efforts to adopt 341 business, management and education, 2015, 13(2): 336–357 practices, managerial styles and organizational structures from the private sector (demmke, moilanen 2011). in spite of such efforts, there are notable differences. while the aim of private corporations is to generate profit, the public sector strives for performing functions for the society as a whole in accordance with political priorities. in addition, both the context and the principles of operation differ from those of the private sector (sullivan, segers 2007) because the public sector organizations are regulated by stricter rules and specific laws (demmke, moilanen 2011). in the public sector ethics and moral thinking has traditionally guided decision making, behaviour and actions of civil servants and the holders of public office. the actions have typically have been based on basic virtues such as fairness, transparency, responsibility, efficiency and no conflict of interest (kinchin 2007). the difference is also seen in that whereas it is perfectly legitimate in the private sector to develop close relations with customers and offer gifts, in the public sector neutrality and objectivity establish the norm (demmke, moilanen 2011). accordingly, behavior acceptable or expected, in the private sector, may seem as unethical or even corrupt because it may provoke ethical dilemmas and problems that require specific ethics policies. there are also differences concerning the obligations. whereas the most important obligations of civil servants and holders of public office consist of exercising their functions impartially and rationally (weber 1947) while providing public goods and services such as justice, transportation, air and water quality, consumer and occupational safety, national security, and while protecting citizens form the misfortunes of age, poverty, or race (menzel 2006), providing means and exercising control over public resources (amundsen, pinto 2009), the main obligations of the private sector companies are profit generation, company growth and success. because of their special function as elected, appointed, and career officials in public positions, the public sector employees are constrained by laws and regulations which secure that the public interest is not sacrificed by self-interest oriented pursuits (moilanen, demmeke 2011). typically public officials face a moral conflict between their personal beliefs and the beliefs of the citizens because they administer resources of the citizens they represent, make crucial decisions that affect all and delegate public power while fulfilling their duty and official obligations. for these reasons, it is an imperative concern in the public sector to ensure responsible administration based on ethics and moral concerns (moilanen, demmeke 2011). this kind of thinking was advanced already by max weber when he introduced the ideal bureaucratic organization structure for government administration. weber argued that the genuine officials should engage in impartial administration which would be his only dedication (weber 1947; henderson, parsons 1012) hindering the public officials form misuse of public resources and conflicting interests. based on weber’s ideal organization it was possible to create an ideal government based on impartial ethical administration. much has changed since weber’s creation of the ideal organization. however, a rational well organized and ethical public administration continues to be essential because governments employ public means, make decisions that affect the fate of all citizens, and because many public authorities interfere with personal rights (amundsen, pinto 2009). in addition, public 342 c. l. snellman. ethics management: how to achieve ethical organizations and management? officials provide services such as healthcare, social service, education, and public goods which are crucial for all (moilanen, demmeke 2011). importantly, governments also allocate and control over public money (frederickson 1999) delegate and exercise power. for all these reasons, the actions of public employees and holders of public office are to be guided by rules and policies that prevent them from abusing public resources or from using public power or authority unethically for own objectives. civil servants bear important moral and ethical obligations because they are responsible for public programs and issue directives and regulations (moilanenen, demmeke 2011). it is also to be noted that the public sector employees have discretionary powers that go beyond the manuals, orders, job descriptions and legal framework of their position and duties (amundsen, pinto 2009). as a consequence, public employees must be accountable, pursue the public interest, exercise administrative discretion ethically when performing their duties. overall, public trust on the government depends on the manner these duties are carried out. subsequently, it is of great importance that public employees follow ethical standards, rules and regulations while implementing their public functions (amundsen, pinto 2009). the traditional characteristic of the public sector has been the hierarchical and formalized organizational structure and the fact that the public career is characterized by full-time employment and lifetime tenure with clear and rigid career paths, seniority, advantageous pension systems and rigid remuneration systems (weber 1947). these specific principles of the public sector were introduced with the aim of reducing risks of political influence, corruption, misconduct interests and instability of government (demmke, moilanen 2011). since the public officials act on behalf of others and because their acts have consequences for others (sullivan, segers 2007), financial and political neutrality is essential. it is such financial and political neutrality of the public officials that safeguards stability of the administration (demmke, moilanen 2011), ethical allocation of resources, and elimination of political influences. because of the specific nature and characteristics of the public sector there are ethics laws establishing a minimum set of principles, and ethics-based codes to guide civil servants and public officials to serve the public interest, and to strive for transparency, integrity, legitimacy, fairness, responsiveness, efficiency and effectiveness (richter, burke 2007). due to these concerns, public authorities should apply ethical theories for creating ethical instruments that enhance ethical behaviour, help to reduce conflicts of interest, fraud, bribery, violations of integrity, maladministration, ethics failures and above all help to fight against corruption. the ethical theories may be applied while researching and resolving ethical problems inherent to the public sector. there are also more practical ethical instruments arising from the ethical theories such as codes of rules and regulations, codes of conduct and codes or ethics. in general terms, the ethical theories serve as tools when trying to achieve ethical administration in general and improve ethical behavior of civil servants and holders of public office in particular. the ethical theories inform public employees of the cardinal virtues honesty, responsibility, temperance and courage (menzel 2005) and of public sector virtues such as benevolence, patience, trustworthiness and loyalty 343 business, management and education, 2015, 13(2): 336–357 (menzel 2006), fairness, transparency, responsibility, efficiency, and no conflict of interest (kinchin 2007). in addition, the ethical theories help the public employees to evaluate the consequences of their actions, to understand the importance of rules, regulations and values, and a specific public service ethos which presupposes that administrators promote the public interest over their own interest and the interest their employers or elected foremen (menzel 2006). taken together, the duties and obligations of public sector employees are based on specific laws which are stricter than those enacted for private sector employees. in addition, public employees are required to develop specific ethics-based competencies because their duties differ from those of the private sector employees. the primary task of the public employees and holders of public office is to serve the public interest, respect the law and work for common good. this implies respect for public values, concern for public virtue and, above all, ethical management and ethical behaviour of public employees. in consequence, ethics management and ethical behavior of public employees are of paramount importance in contemporary societies where public trust is in decrease due to continuously increasing ethical wrongdoings. 3. therethical framework: ethical theories and instruments the recent decades’ debates concerning the responsibilities of the public sector as well as its interaction with civil society, individual citizens, governments, foreign and domestic corporations, and private business institutions (amundsen, pinto 2009), coupled with the expectations that the public sector should deliver higher standards of ethicality (whitton 2001), have risen interest in and given more salience to ethics and particularly accentuated the need for ethics management in public administration (maesschalck 2004). similarly, ethics is recently given more and more importance within diversified realms of scholarship (donahue 2003) and has become an important research object in the field of public administration (menzel 2006). nevertheless, it is to be noted that ethics is not a new topic. one could rather talk about the re-entering of ethics as an interesting research object in in several fields (amundsen, pinto 2009). the recent interest in and the subsequent increasing amount of research on ethics is a clear indication of the relevance of ethics both in business and public management (vance, trani 2008). it is considered as highly essential that administrators seek a broad and solid understanding of ethical theories and traditions (amundsen, pinto 2009) in order to inform employees on more ethical behaviour and decision making, and discourage wrongdoings. in broad terms, ethics refers to principles by which to evaluate behavior as good or bad. ethics is concerned with standards of right and wrong, and prescribes peoples´ choices as for what they ought to do and ought not to do. such choices are ethical and informed by values (amundsen, pinto 2009) showing that there is an interdependent relationship between values and ethics (demmke, moilanen 2011). ethics can also be understood as continuous efforts of to ensure that people live up to the standards that 344 c. l. snellman. ethics management: how to achieve ethical organizations and management? are reasonable and solidly based (amundsen, pinto 2009). in the public sector, ethics is understood in terms of virtuous, value-based behaviour because public administration is a moral activity grounded in obligations, duties, and moral principles (lawton 2005) aimed to strengthen public trust and enhance ethical conduct. it is known that values change with changing contextual factors (demmke, moilanen 2011). such development is clearly seen in the public sector as a result of the recent increase in partnerships between public, private and voluntary sectors which imply integration into different performance regimes, value systems and moral thinking (lawton 2005). as the public administration and public institutions have changed so have the public values. public employees have had to adapt to new values which, in turn, affect their ethical behavior. there is empirical evidence that public servants’ ethics are currently influenced by a great number of conflicting values (demmke, moilanen 2011), which has given rise to ethical dilemmas (bromell 2012; donahue 2003). in addition to values, obligations and duties, laws guide the actions and behaviour of public employees. laws account for the basic official promoters of ethical behavior (amundsen, pinto 2009). laws, nevertheless, only impose a minimum standard for ethical conduct (demmke, moilanen 2011) defining only actions that are strictly prohibited and penal permitting all other actions that are not punitive but may be highly unethical. as a consequence, obeying the law does not guarantee ethical behaviour which highlights the importance of applying noncoercive positive ethical frameworks and instruments for guiding ethical conduct and decreasing wrongdoings. 3.1. ethical theories ethics can be interpreted in terms of normative and descriptive approaches (amundsen, pinto 2009). while the descriptive approach focuses on people’s moral beliefs, normative ethics refers to ethical theories that prescribe how people ought to act in order to be ethical and virtuous, achieve ethical outcomes or fulfill one’s duty by obeying common ethical rules and regulations. consequently, normative ethics focuses on standards of the rightness and wrongness of behavior (amundsen, pinto 2009) and is based in laws, regulations, and principles. normative ethics is seen to accounts for three main ethical theories (e.g., vance, trani 2008): virtue ethics, consequentialism, and deontological ethics or character-based ethics, rule-based ethics, and result-based ethics successively (vance, trani 2008). virtue is a behavior showing a high moral standard and focuses on people´s character (amundsen, pinto 2009). virtue ethics is based on the ethical thinking of the ancient periods when defining what makes a good person was essential for the wellbeing of the whole community. plato and aristotle related ethics to the objective of living in harmony with others which would be facilitated by virtuous people possessing the four cardinal virtues; prudence, justice, fortitude and temperance (amundsen, pinto 2009). such virtues would be commonly valued and practiced by each member of the community. hence, virtue ethics focuses on the goodness of individual persons and their being virtuous in handling with others (sullivan, segers 2007). taken together, virtue 345 business, management and education, 2015, 13(2): 336–357 ethics postulates that if virtues are universal and all the people are virtuous, there is neither unethical behavior nor wrongdoings. consequentialism, also called teleology, focuses on the results of an action. from the consequentialist perspective a morally right action is one that produces a good outcome (amundsen, pinto 2009) meaning that the ethical merit of an act should be judged by its consequences rather than by the virtues of people (sullivan, segers 2007). the early representatives of consequentialism stuart mill and jeremy bentham contended that only the consequences of an act count, not the actors with certain virtues (ahmed, machold 2004). consequentialism is seen to represent two dominant lines of thinking, namely “ends justify the means” and “utilitarianism” (vance, trani 2008). in accordance with utilitarianism thinking acts should be judged in terms of the amount of happiness or unhappiness that they bring and it is accentuated that no one’s happiness is counted as more important than anyone else’s (vance, trani 2008). the basic idea of utilitarianism is to provide greatest good to the greatest number (sullivan, segers 2007). hence, the moral worth of an action is solely determined by its contribution to overall utility. simply put, the more happiness or pleasure for the more people, the better (sullivan, segers 2007). according to the “ends justify the means” approach a noble end can be used to justify even unethical means (vance, trani 2008) meaning that unethical behaviour is to be accepted if the final end is important and contributes to general good. deontology, the third ethical theory, is also called duty or obligation-based theory (amundsen, pinto 2009) because it postulates that being ethical means fulfilling duties, moral obligations and principles. thus, deontology accentuates that the right or duty takes priority over the good (virtue ethics), or the consequence of an action (consequentialism) (sullivan, segers 2007). deontological ethics is rooted in the moral philosophy of immanuel kant who stressed the importance of rules, and is later informed by john rawls who focused on justice and accentuated the duty to treat people as ends, not as means to the ends (ahmed, machold 2004). according to rawls people are treated as ends when they are able to consent to the actions that affect them and that rights ought to be distributed as equally as possible, but in case of inequalities, they ought to be arranged for the benefit of the least advantaged (richer, burke 2007). although different and approaching ethics from their own specific perspectives, all these theories can be applied the objective of solving ethical problems and making the world more ethical. there is an increasing interest to apply ethical theories for improving ethics management. it is noted that the three main ethical theories described above – virtue, deontological, and consequential theories – may appear incompatible, but more detailed analyses gives indications that they all can be useful when aiming at more ethical behaviour and decision-making (sullivan, segers 2007) because the theories may complement each other when applied for solving ethical problems. there are strong claims that consequentialism is the ethical approach applied by most public officials (sullivan, segers 2007) because their actions have consequences for all the citizens. nevertheless, research indicates also that elements of deontological and virtue ethics often become an 346 c. l. snellman. ethics management: how to achieve ethical organizations and management? essential part of the public officials’ consequentialist reasoning (amundsen, pinto 2009). there is also evidence that the utilitarian approach is the option preferred by politicians and public managers when applying their ethical strategy of defending and serving the interests of the majority (sullivan, segers 2007). more of the than not, public administrators are seen to prioritize decisions that allocate public resources to projects that benefit the majority of citizens while minorities may see their services reduced, and politicians are known to make decisions and give promises that are supposed to benefit or please the greatest number of voters. while doing so, the public employees are applying the utilitarian approach. unfortunately, it is also well known that public employees may in certain circumstances apply bad means to achieve good ends. this indicates that public employees apply the consequential theory focusing on the consequences of a certain decision while at the same time disregarding virtue theory because they do not follow the virtues and respect values inherent to the public sector. in other occasions, though, public employees when making official decisions may persistently do their duty, are virtuous, promote common good and wellbeing of the citizens and consciously fight against wrongdoings. consequently, when analyzing the behavior of the public sector employees in terms of the ethical theories, it appears that all three approaches are applied. it seems that there is no one best approach but context and a specific issue plays an important role. while in some cases the consequences guide the decision, in other cases the public employees base their decisions on principles or their proper moral thinking and personal virtues (sullivan, segers 2007). especially today when the public sector is going through big reforms giving rise to profound changes, it is to be supposed that one approach will not guarantee the most ethical decision-making and behavior. because the public sector is continuously becoming more flexible, boundary less and complex, virtue and deontological approaches may make up for some of the deficiencies of the sole application of consequentialism (amundsen, pinto 2009). it is logical that due to the complexity with increasing partnerships, wider networks and more intense cooperation with stakeholders from different sectors, it is extremely important to predict the consequences of certain actions and decisions. hence, it seems plausible that civil servants and holders of public office will more frequently apply the deontological theory. such development is seen today concerning corruption. with more and more serious incidences of corruption more laws and regulations are created meaning increased application of deontological approach. it seems that when deciding on action in specific situations, public officials may make use of all the three approaches even if they do not usually articulate their thinking in precisely these terms (sullivan, segers 2007). the application of ethics approaches is apparent in the eu. deontological approach is applied by all member states since they agree in that the traditional principles of impartiality, principle of legality, and specific ethics standards are necessary for civil servants, and since they also agree in that there is need for common duties and rules to be followed by all the member states (demmke, moilanen 2011). it is also evident 347 business, management and education, 2015, 13(2): 336–357 that virtue is guiding the behavior of the public officials in the eu because all member states argue that it is essential to serve the common good, fulfill their community-based tasks in an impartial and fair manner, and take into consideration the common interest. utilitarian approach is applied regularly because decisions are made with the aim of fulfilling the needs of the most member states. taken together, currently public sector officials tend to apply the utilitarian perspective trying to make such decisions that guarantee greatest benefit for the greatest number of citizens. however, virtues are also essential for public sector employees because working in the public administration is a moral activity requiring highly ethical behaviour. increasingly, citizens expect ethical behaviour based on obligations and duties because public employees and holders of public office are expected to exhibit the highest moral qualities including optimism, courage, fairness, civility, courtesy, respect, tolerance, and justice (demmke, moilanen 2011). interestingly, in the contemporary situation characterized by great changes in the public sector, it seems evident the virtue ethics, duty based ethics, or consequentialism seldom are applied independently, but rather complete each other. it is noted that it would be very challenging to act purely on the basis of duty to principle, or focus on pure calculation of consequences (demmke, moilanen 2011) while striving for best decisions that yield common good and increase well-being of the citizens. all the above mentioned ethical theories form the basis, and give rise to practical ethical instruments that are seen to help in solving ethical problems both in private and in public organizations. especially different kinds of codes are being introduced for enhancing ethical behaviour and for combating wrongdoings. 3.2. ethical instruments as noted above, ethical instruments derived from the ethical theories are crucial in faingting against wrongdoings and for enhancing ethical behavior in the public sector. previously, the public sector faced fewer ethical problems and the only instruments for fighting against unethical behavior were the legal sanctions i.e. binding laws, the public service ethos, and oaths (menzel 2006; demmke, moilanen 2011). importantly, due to the technological development and the continuous public sector reforms, the character of the public sector has changed significantly triggering new ethical challenges. to face such situation new theoretical approaches, laws, and diversified ethical instruments are being been introduced and increasingly applied. new ethical instruments include for example rules for the declaration of costs, rules for the acceptance of gifts, rules on whistle blowing, reports in the field of integrity, integrity officers, management plans, and central registers for integrity violations (demmke, moilanen 2011). ethics instruments contribute to the creation of a more ethical, in other words, more transparent, accountable and effective public administration and more ethical public sector as a whole. recently, new strategies have been suggested and adopted to enhance ethics management. such strategies include laws to protect appropriate public interest and to facilitate disclosures of wrongdoing by officials; ethics audits to identify risks to the integrity; 348 c. l. snellman. ethics management: how to achieve ethical organizations and management? human resource management strategies with merit based promotion and recruitment, antidiscrimination protections; training and development in ethics; application of ethical management principles, the proper use of official power, and the requirements of professional responsibility and effective external and internal complaint and redress procedures (whitton 2001). the importance of creating and applying new ethical instruments is also manifested by the european union. the eu has introduced a variety of ethics instruments for curbing political and administrative corruption. new suggested instruments include diversified rules, standards and codes; value managements; ethical leadership; whistleblowing; disciplinary rules; job rotation; risk analysis of vulnerable positions; training and dilemma training; integrity plans; scandal management; audits; integrity officers; registers of interest; transparency requirements; internet based selfassessments; and ethics climate surveys (demmke, moilanen 2011). it is evident that traditional disciplinary framework with effective legal instruments is necessary for combating wrongdoings because it establish clear procedures and sanctions for combating wrongdoings. penal law-based instruments are, however, only the minimum criteria for an effective ethically functioning public sector (amundsen, pinto 2009). for this reason, there is important discussion going on concerning more positive instruments for fighting against wrongdoings and promoting ethical behavior. overall, there is no doubt that in order to improve ethics management, create ethical culture and achieve more ethical organizations in the public sector, introduction of diversified positive instruments is crucial. in recent decades special attention has been dedicated to different codes. codes of conduct and codes of ethics are seen as positive ethics instruments, because they, in contrast to laws and strict regulations, function non-coercively, and as such, are binding ethical instruments. codes, established to improve ethics management, include a wide range of ethical guidelines for making organizational behavior more ethical. specifically in the public sector, codes as positive ethics instruments are gaining importance and becoming more frequent. codes are seen as basic documents with rules that are written in easily understandable language setting forth board goals for public sector employees to conduct themselves in manner that corresponds to their office (whaley 1999). as codes are based on rules that prescribe proper behavior of decision makers, and are meant to be universally applied they stem form the deontological theory (menzel 2005) that advocates adherence to rules because the right action is that allowed by the rules and the wrong is that forbidden by the rules (vance, trani 2008). in the public sector codes guide public employees in their strive to behave in accordance with public values and ethical principles and direct them to actions that result in doing the right things for the right reasons (demmke, moilanen 2011). codes can be seen as the ultimate terms of reference, the framework upon which professions are built and civil servants work (gilman 2005). for example civil service code of the uk government reflects the values and standards of behaviour forming part of the employment terms and conditions (gov. uk 2013). 349 business, management and education, 2015, 13(2): 336–357 there are several kinds of codes to guide and regulate the actions of the public sector employees. codes of rules and regulations i.e. laws refer to a legislative act and official regulations. laws are a series of detailed prescriptions dealing with the crime, offence and punishment (gilman 2005) setting clear behavioral expectations and defining disciplinary consequences (demmke, moilanen 2011). hence, laws account for the legal requirements for public administrators to carry out their office with political impartiality and professionalism (vogelsang-coombs, bakken 2003). codes of conduct, in turn, account for a set of non-binding rules outlining the responsibilities or practices for an individual or an organization. codes of conduct refer to principles, values or behavioral standards that guide the decisions, procedures and systems of an organization in a way that the welfare of the key stakeholders is improved (amundsen, pinto 2009). one of the most central codes is the so called codes of conduct for public officials, a set of codes recommended for the member states of the eu and adopted by them in 2000 (council of europe 2000). its aim was to provide a reference point and an ideal for state administrations, and it was basically intended to set a precedent for countries when drafting their own mandatory codes of (amundsen, pinto 2009). in general, a code of conduct is a milder instrument than a code of rules and regulations because it does not have an imperative character and it is not binding. a code of ethics refers to the ethical principles of official behavior. as a framework for ethical behaviour, a code of ethics is more abstract and shorter than a code of conduct because it does not provide detailed rules, and unlike a code of rules and regulations, a code of ethics cannot be enforced (demmke, moilanen 2011). today, a well-written and well implemented code of ethics is seen as a useful ethical instrument because it clarifies the public values, provides an important guide for making decisions on complicated ethical issues, and indicates the basic standards of behavior to be expected from public sector employees (amundsen, pinto 2009). codes of ethics as well as codes of ethics are based on the deontological theory because they establish rules that refer to obligations and duties of persons that practice a certain profession (constantin 2014). as for civil servants and holders of public office, a code of ethics establishes the obligations and duties inherent to their office as the public sector employees. the eu has also created a specific statutory instrument for ethics in public office (hr.per.gov.ie/files/2011) a voluntary code of reference for public-service reflecting the basic common values and standards for the eu member states. similarly, the oecd has adopted a recommendation to improve ethical conduct in the public service. the oecd principles for managing ethics in the public service includes recommendations for regulating against unethical behavior and provides incentives to good conduct (oecd 2000b). in summary, codes stem for the ethical theories and are generated for guiding ethical behavior. they define boundaries of behavior providing clear markers as to what kind of behaviour is prohibited vs. expected (gilman 2005). concerning the public sector, codes facilitate ethical actions and decision making provide an ethical framework for civil servants and holders of public office when striving to complete their duties ethically 350 c. l. snellman. ethics management: how to achieve ethical organizations and management? in a responsible way (demmke, moilanen 2011). codes are increasingly introduced by public as well as private organizations in order to enhance ethical behvior and, even more importantly, to combat wrongdoings. 4. wrongdoings wrongdoings and ethics failures are noted worldwide. the prominence of corruption and ethics as topics of public discourse is reflected in news media which recently appears to be filled with stories of unethical behavior and ethical issues in virtually every aspect of public life: in government and politics, sports, business, religion, education, and other arenas (richter, burke 2007). by now, it is general knowledge that wrongdoings, the source of increasing ethical scandals, account for the most serious problems of the public sector (demmke, moilanen 2011) affecting societal well-being worldwide. there are several reasons for wrongdoings and ethics failures. probably the main reason stems from the public sector reforms that have been taking place in most societies during the last decades. such reforms bring along different tasks, new responsibilities and managerial techniques and practices making the public sector more like the private sector (maesschalck 2004) and hence more complex (demmke, moilanen 2011) and more difficult to manage ethically. the reforms are known to imply clash of value systems that may raise new ethical dilemmas and problems. it is noted that while it is perfectly legitimate in the private sector to develop close relations with customers by offering gifts such practice is seen unethical or even corrupt in the public sector (maesschalck 2004). due to the changed role of public mangers resembling more and more that of the private sector, the public sector managers find themselves facing broader and more diffuse responsibilities, greater accountability and fewer human as well as less financial resources than in the past (richter, burke 2007). the reforms have triggered new collaborative ways of working such as outsourcing, contracting, privatization, and the commercialization of public-private partnerships blurring public-private-non-governmental boundaries and contributing to the new shape of government which, in turn, calls for the development of creative ethics management (demmke, moilanen 2011). the blurring of boundaries seem to have led to increasing challenges concerning accountability, transparency, use power, allocation of public resources, and conflicts of interest because there are partners form several different organizational cultures and working environments providing public services in collaboration. it is also to be noted that during the last decades, in addition to the traditional wrongdoings such as corruption and fraud, several new kinds of wrongdoings have gained prominence (demmke, moilanen 2011). maladministration is one of them. it refers to making of official decisions in a manner which is contrary to law, arbitrary, unreasonable, without proper justification, lacking in procedural fairness, or made without due consideration of the merits of the matter, or made corruptly (frederickson 1999). maladministration may be no more than simple incompetence but may equally refer to abuse of office. in either case, though, maladministration by a public official is inherently unethical. other recent wrongdoings are 351 business, management and education, 2015, 13(2): 336–357 patronage to fraud and novel ways to misuse and manipulate information. this indicates that the public sector is currently experiencing a greater number and more diversified ethics failures and wrongdoings than before which, in turn, has led to continuous revelations of public sector scandals increasing critique towards public administration, politicians and public sector employees because citizens’ attitudes towards authorities have become more and more critical and mature (demmke, moilanen 2011). as a result, ethics is increasingly gaining prominence in the discourse about governance (united nations 2000). for these reasons, it is more important than ever before, that new effective ethical instruments are introduced and ethical approaches applied for fighting against wrongdoings of which corruption is the number one being a global problem (transparency international 2015). 4.1. corruption corruption is a problem for all countries and a poor score in corruption perception index signals widespread bribery, lack of punishment for corruption and public institutions that do not respond to citizens’ needs (transparency international 2014). corruption, broadly defined as “abuse of entrusted power for private gain” (transparency international 2015), is becoming more frequent and is considered to be one of the greatest ethical challenges of the contemporary world (demmke, moilanen 2011). it is internationally recognized that corruption impedes economic development, undermines stability and erodes trust in public institutions (amundsen, pinto 2009) and undermines good government, fundamentally distorts public policy, leads to the misallocation of resources, harms the private sector and private sector development and particularly hurts the poor (transparency international 1998 in demmke, moilanen (2011)). concerning public administration, corruption can be defined as the private wealth-seeking behavior of people who represent the state and the public authority or as the misuse of public goods by public officials for private benefit (amundsen, pinto 2009), or simply put, the illegal use of public office for private gain (national democratic institute for international affairs 1999). accordingly, corruption takes place when civil servants, functionaries, bureaucrats and politicians, or anyone who holds a position of authority to allocate rights over public resources in the name of the state or the government, misuses the public authority and power for private benefit (demmke, moilanen 2011). corruption can take two forms. on the one hand there is the so called grand corruption (practiced by elites), and on the other, the so called petty corruption (practiced by bureaucrats) (national democratic institute for international affairs 1999). there is evidence that grand corruption invites petty corruption (whaley 1999) and it is also known that the long term combination of grand and petty corruption can lead to economic, social and political paralysis (national democratic institute for international affairs 1999). where grand corruption is rampant, there is no hope of controlling petty corruption which means that combating widespread corruption must focus on unethical behavior at the grand level. for this reason the fight against corruption should start form the top layers 352 c. l. snellman. ethics management: how to achieve ethical organizations and management? of administration. as a whole, due to the severe consequences, increasing number and seriousness, and the global impacts of corruption, there is urgent need for finding effective methods and instruments for fighting against corruption. 4.2. conflict of interests together with corruption, conflict of interests has become one of the most prominent serious wrongdoings today, mainly due to the last decades´ changing context requiring collaboration between numerous partners and stakeholders from different sectors (demmke, moilanen 2011). in such context the boundaries between different organizations and sectors get blurred so do the lines of authority and responsibility which makes ethics management a great challenge. in such boundary-less working environment public employees with side-line activities such as secondary jobs or other financial interests face situations where their private interests are conflicted with their official duties. in other words, a conflict of interests occurs when people in a position of trust and responsibility, have competing professional and personal interests (amundsen, pinto 2009). hence, a conflict of interest takes place always when the official job of a public employee is influenced by or contradicts with his or her private job. this kind of wrongdoing may have wide impacts if it is linked to family interests. a family-related conflict of interests takes place for example when a family member is employed by a holder of public office (amundsen, pinto 2009). conflict of interests may be difficult to perceive if the public sector lacks transparency. a recent oecd study shows that the main sources of conflicts of interest in the oecd countries are secondary employment in the private sector; private-public partnerships, and shareholdings in an entity with a contractual or regulatory relationship with the government (demmke, moilanen 2011). because of the severe ethical as well as economic consequences the increasing number of conflicts of interest is having in the public sector causing, it should be taken seriously and combated with the most effective instruments. here the ethical theories could inform the public employees helping to create more ethical environment where the employees would respect the public sector virtues (virtue ethics), follow the ethical rules inherent to the sector (deontological theory) and think about the consequences of their actions (consequentialism). without application of relevant instruments ethical improvements are less plausible. 5. findings and discussion the assumption of this paper was that ethics management based on ethical theories and effective ethical instrument is crucial in the public sector because public employees and holders of public office provide public goods that all citizens depend on, delegate and exercise public power, allocate public resources, and make decisions that affect all citizens. it was also assumed that ethical management is only possible by public employees who are virtuous and complete their duties in accordance with 353 business, management and education, 2015, 13(2): 336–357 common moral standards and values inherent to the public sector. the paper also proposed that the public sector ethics can be improved and wrongdoings combated by applying ethics theories that give rise to ethical instruments which can be applied for enhancing ethical behaviour, fighting against wrongdoings and, in particular, for eliminating corruption and conflicts of interest. to address these assumptions, a literature reviews was conducted. the literature review shed light on ethics, research on ethics specifically in in the field of public administration, and on theories that have given rise to ethical instruments applied for enhancing ethical behaviour and for combating wrongdoings. the aim of the review was to increase knowledge about ethics in organizational setting by enlightening the most serious wrongdoings, ethical theories, and ethical instruments. the focus was on the ethics management in the public sector because the decisions and actions of public employees and holders of public office have impact on all citizens instead of just affecting one organization and its stakeholders as is the case concerning private sector companies. the literature review shows that last decades’ increasing revelations of ethics scandals worldwide have incited growing interest in ethics in general and encouraged research on ethics management in particular. there seems to be continuous search for instruments that can be applied for enhancing ethical behaviour as well as for fighting against wrongdoings, the catalysts of ethical scandals. the review also indicates that the public sector and public administration is facing big challenges as the number and scope as well as diversity of wrongdoings is growing. several studies show that due to the last decades’ reforms great changes have taken place in working environment and practices in the public sector. in consequence, the public sector has had to adapt to new working methods such as public-private-partnerships, contracting, outsourcing, downsizing, and alliances that imply increased collaboration with different partners and stakeholders from different sectors and entities. typically, borders between the different sectors and entities are blurring leading to fragmented accountability, conflicting interests and uncertainties concerning responsibilities, and delegation of power. also the roles, tasks and management practices in the public sector are changing and getting more complex. studies indicates that particularly the co-production of public services seems to have risen complex ethical dilemmas because the values and cultures of different sectors and entities conflict. it is noted in the literature that the changed situation with new ethical challenges requires specific instruments to increase understanding of ethical problems and to facilitate adaptation in order to be able to act ethically. the literature review finds that corruption is the most serious wrongdoing affecting all nations. corruption is noted especially in the high levels of administration and research indicates that if such elite-based corruption is not combated first it is impossible to reduce lower level corruption. empirical studies show that public employees and holders of public office increasingly use their public position and authority for personal purposes. this indicates that unethical behaviour in terms of misuse of public power and resources has become more common in the public sector. 354 c. l. snellman. ethics management: how to achieve ethical organizations and management? the literature in the field suggests that effective ethical methods or instruments have to be applied in order to be able to combat wrongdoings and enhance more ethical conduct in the public sector. the review found that there are theoretical instruments, ethical theories, and more practical instruments such as codes that can be implemented in accordance with the character and severity of the wrongdoings. in more detail, the review shows that penal enforceable codes, laws, can be used to enforce obligations or to punish certain behaviors, while codes of conduct and codes of ethics are positive instruments used for guiding public employees in their conduct, decision-making, and daily work. as for the ethics theories, there is evidence that all the three main theories – virtue, consequential and deontological theories – are applied by civil servants and holders of public office. the theories stem from different philosophical traditions highlighting differenet perspectives on ethics, and have different objectives. for this reason they are oftentimes seen as incompatible and difficult to combine while trying to address ethical issues. nevertheless, studies indicate that the theories are oftentimes applied simultaneously because they may complete each other when trying to solve ethically problems. the most negative finding is that in spite of a general awareness of the importance of ethics theories and instruments and the increasing research on ethics management, unethical behavior is in increase. a general indication of this is the increasing media attention on ethics scandals with particular stress on corruption. this review shows, however, that corruption is on the agenda of several international organizations. similarly, it indicates that most nations, institutions and organizations, both private and public, are applying own specific ethical instruments. importantly, though, it is stressed that if the increase in wrongdoings and unethical behaviour is not taken seriously at all administrative levels and, in particular, at the top level which is the most prone to corruption there will be serious economic and social consequences. drawn together, the main finding seems to be that there is accentuated need for finding new effective ethics instruments and for applying all the three ethical approaches while creating more ethical organizations and management. 6. conclusions and suggestion for future research the main questions of this paper were; why is there so much wrongdoing; how can it be reduced; and how can more ethical organization and management be achieved. concluding from the findings wrongdoings stem mainly form the recent decades’ great changes in the organizational environment have implied new working methods and practices that have led to conflicting values and cultures triggering several kinds of wrongdoings. the findings suggest that ethical theories and effective ethical instruments can be applied with the purpose of reducing and even eliminating wrongdoings. similarly, ethical theories and instruments informs public employees and holders of public office helping them to act ethically and make ethical decisions. media coverage on increased ethical 355 business, management and education, 2015, 13(2): 336–357 scandals, literature in the field and recent empirical studies on ethics management in the public sector indicate, however, that further research is needed in order to make the public sector function in a more ethical way and to eliminating wrongdoings. research in the field of ethics is typically normative and descriptive due to the abstract nature of ethics. empirical research would inform the field in essential way as it would reveal real life phenomena reflecting the concrete everyday behavior of civil servants and holders of public office. both quantitative and qualitative empirical studies will undoubtedly add knowledge to the field. especially qualitative research should be encouraged because ethics is an abstract research object which makes it very challenging to measure and evaluate ethical behaviour and actions. nevertheless, there is no doubt that statistical data contribute to research on ethics. this is demonstrated by international organizations such as the oecd, the eu and the ti that are continuously conducting quantitative research on ethics management and wrongdoings. drawn together, the most relevant conclusion of this paper is that more should be done in the field of ethics management. there seem to be lack of effective instruments for solving ethical problems and addressing ethical dilemmas as the number and scope of wrongdoings is in increase. neither is there general ethical theory that would help to eliminate wrongdoings. these concerns justify more research on ethics in general and specifically research on ethics management. there are several research gaps to be filled in the field of ethics management. one research object could be the entire process related to codes: planning, writing down, implementation, control, evaluation, feedback, improvement, institutionalization and continuous improvement of codes. in other words, the whole life-cycle of a code from the beginning to the final institutionalization could be researched and a 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bakken, l. 2003. civic duty, in j. rabin (ed.). encyclopedia of public administration and public policy. new york: crc press. carita lilian snellman is a senior lecturer at helsinki metropolia university of applied sciences (finland). she has received her master of science in arts, humanities and social sciences at the university of helsinki, and her master of science in economics and business administration at hanken school of economics. her areas of research focus on management and organization, entrepreneurship, family business, and ethics. http://www.uk.sagepub.com/books/book236069 http://www.transparency.org/whatwedo copyright © 2016 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(1): 1–18 doi:10.3846/bme.2016.277 significance of demographic variables for targeting of internet advertisements václav stříteský1, marek stříteský2, martin john david quigley3, david říha4 1,4department of marketing, faculty of business administration, university of economics, prague, w. churchill sq. 4, 130 67, prague, czech republic 2,3department of human resource management, faculty of business administration, university of economics, prague, w. churchill sq. 4, 130 67, prague, czech republic e-mails: 1vaclav.stritesky@vse.cz (corresponding author); 2marek.stritesky@vse.cz; 3martin.quigley@vse.cz; 4david.riha@vse.cz received 7 may 2015; accepted 18 february 2016 abstract. broad ad targeting options belong among the major advantages of internet advertising. demographic targeting has become a standard option in most of on-line advertising systems. there are more ways how to target on-line advertisements by using demographic variables. in some cases, e.g., social media, we can use data from user registrations. modern technologies enable to estimate the demographic profile of internet users using on behavioural data. the traditional approach to the demographic targeting of advertisements based on affinity targeting assumes the existence of internet servers with sufficient homogeneity of visits. the aim of this article is to identify the differences in the internet content consumption habits of czech internet users based on gender and age. the analysis is based on the data from the extensive research which was carried out by the netmonitor project, and which was provided for the purposes of this study by the association for internet development (spir). the research results show that the traditional affinity-based method of targeting according to gender and age is still suitable on the czech internet. on the other hand, in some cases, the traditional approach of ad targeting based on affinity leads to wasted ad impressions that miss defined target group. keywords: internet users, internet advertising, demographic targeting, affinitybased targeting, internet advertising, gender and age. jel classification: m31, m37. 1. introduction the internet is one of the kinds of media which is becoming increasingly popular among advertisers (chitu 2009). in the long term, expenditure on internet advertising will increase. this holds true for the internet in the czech republic, as well. in 2014, 20% of advertising expenditure went on internet advertising. http://dx.doi.org/10.3846/bme.2016.277 2 v. stříteský et al. significance of demographic variables for targeting of internet advertisements besides the traditional advantages of the internet (see jemmeson 1997; sedláček 2006; javalgi et al. 2005); the most important one from the point of view of the internet advertising, is the very precise targeting of advertisement campaigns and good interaction with consumers. a very important point is that it is relatively easy to measure the results and to precisely evaluate the effectiveness of the advertising campaign. bok (2014), however, recommends measuring also less visible indicators of the effectiveness, such as awareness and brand recognition, intention to purchase, and other communication effects. boudreau and watson (2006), emphasise the global reach as the crucial difference between the internet and other types of media. for this reason they also attach the strategic significance of internet advertisement links with companies’ entire strategies in the case of international firms. because the internet allows to effectively reach more potential customers at a lower cost, it also opens up new possibilities for advertisers from other countries, such as india (khare 2009), where the online advertising market is growing dynamically (ziaul 2014). the effectiveness of internet advertising, as well as advertising in the traditional media, is largely determined by proper targeting. on the one hand, the internet offers a lot of innovative advertisement targeting options. on the other hand, it is important for many advertisers to target on traditionally defined groups of customers. although the internet provides a lot of advanced methods for targeting advertisements, it begs the question: can we target internet users on the biggest servers; according to their basic demographic characteristics; effectively? potential problem could be low internet penetration within some demographic groups. for instance, 96.5% of individuals aged 16 to 24 years old are connected to the internet, while only 18.9% of people aged 65 and over, are online (czech statistical office 2014b). it can be seen from the data of the czech statistics office that the number inhabitants in the czech republic, who are online, contains a very high proportion of young people with higher education; mostly men; as well as students aged 16 and over. finding suitable sites for the effective placement of advertisements presupposes differences in the preferences of users when they consume internet content. according to recent research, differences in user behaviour are changing. however, the differences between men’s and women’s behaviour on the internet still persist. (ono, zavodny 2003; hu et al. 2012; tsai, lin 2004). this article should answer the question of whether on the czech internet it is possible to find thematic categories of servers with an above-average interest of internet users within the different demographic groups defined by gender and age. the aim of this article is to identify the differences in the internet content consumption habits of czech internet users; based on gender and age; in order to determine differences in preferences in the type of internet sites visited. from these results, it should be possible to assess the possibilities for the demographic targeting of internet advertising by gender and age in the czech republic. attention is paid to the traditional way of targeting 3 business, management and education, 2016, 14(1): 1–18 by affinity. for this purpose the data from the netmonitor is analysed. netmonitor is an extensive research project aimed to gather information on internet audience in the czech republic as well as socio-demographic profile of czech internet visitors. sociodemographic research of visitors is realized on a panel (sample of visitors) of czech internet users. the panel consists of 2 parts: pop-up panel which collects information by showing pop-up questionnaires on participating websites and netmonitor panel which uses a local application, netsoftware, installed on individual netmonitorpanel members’ computers. the resulting joint panel comprises ca. 30.000 people and reports unified data. the system processing eliminates inaccuracies arising from deleting cookies and delivers the actual number of visitors (real users). research infrastructure is used now for overlying research, such as post-buy analyses, ad-hoc research, and campaign pre-tests and post-tests. mutual comparability (and possible interconnection) of results enables standardized monitoring of the czech internet in this area (netmonitor 2012). 2. internet advertising targeting options the appropriate targeting of advertising is one of the basic requirements for its effectiveness. some of the methods used to address internet users are very inexpensive. this may discourage advertisers from expending any great effort on advertising activity on the internet in order to get a better target. advertisers, however, in this case, should also consider the issue of ethical behaviour (cheyne, ritter 2001). traditionally, the purpose of targeting advertisements is to reduce the costs of unnecessary advertising, by minimizing its distribution to groups of “targets” who do not belong in the category of active users (iyer et al. 2005). at present, advertisement targeting options, however, allow for much more than just not displaying advertising to non-users. it can really target the advertisement based on well defined market segments respecting, among other things, the target group’s preferences, purchasing habits and media. current changes in the direction taken by the fragmentation of the media have also contributed to the more precise targeting of advertisements (nelson-field, riebe 2011). bergemann and bonatti (2011) have demonstrated that the development of targeted advertising has the effect of lower costs for advertisers. at its simplest level, the basic characteristics of the target group are divided into geographic, demographic and psychographic aspects (lin 2002; vysekalová, mikeš 2007). behavioural characteristics are also vital for market segmentation. the popularity of the use of demographic criteria in the definition of target groups, for the purposes of marketing communication, is based on several factors (koudelka 2005). traditional segmentation criteria are often logically associated with the different behaviour of consumers. the advantage is also their easy measurability. the essential argument is the availability of information from secondary data sources, because traditional demographic characteristics are the data which is routinely monitored in most consumer surveys. 4 v. stříteský et al. significance of demographic variables for targeting of internet advertisements geographical criteria, along with the user’s language, belong among the default methods of targeting advertisements with international reach. traditional methods can certainly include placement targeting, according to the thematic focus of the server. the internet offers the advertising industry a rich selection of specialized servers on which to place their advertisement. on the czech market, 21 specialised categories of servers were defined by netmonitor, the official internet monitoring project (netmonitor 2012). from the content focus of servers, the interests and demographic characteristics of visitors can be indirectly inferred, but technically the server type is being targeted, not the type of user. also contextual advertising works by targeting a server according to its content. in a broader sense, as a contextual advertisement can be also understood search advertisements which appear in the context of the user’s query. indubitably, this targeting has the advantages that it: responds to active user’s demands and that it reaches potential customers in the advanced stages of the buying cycle. nowadays, the targeting of advertisements is slowly moving from the traditional method of targeting according to the server, to targeting according to the user. this includes targeting the interests of users. in the past this option existed only on those platforms where the user declared his/her interests upon registration. the new development is called: behavioural targeting. in general it means targeting according to the past behaviour of users. the collection of data about user behaviour on the internet causes people to feel alarmed, which results in efforts to pass laws which more strictly regulate this activity (goldfarb, tucker 2011; berger 2011). it is certainly an unpleasant fact for marketers, because according to studies carried out in the field, it is a very effective way of targeting advertisements. goldfarb and tucker (2011) found that in cases where regulation has limited behavioural advertising, the impact of advertising on users’ intention to purchase the advertised product was reduced by about 65%. behavioural targeting can also bring higher profits, even for the content providers (advertising servers) themselves; up to double amounts (jianqing, stallaert 2014). under the heading “behavioural targeting”, we can also put the specific form called “retargeting”. this consists of reaching users based on their previous interactions with the advertiser’s website. today’s technology basically enables the advertiser to target differentially, according to the customer’s values. however, account should not be taken only of users’ current values, but also their future values (tahal 2014). this is a current challenge for further development in the area of internet advertising. although it is argued that targeting users’ interest reduces the importance of traditional demographic targeting (bailey et al. 2012), there are obvious attempts to offer the possibility of demographic targeting even in advanced advertising systems, which had, first of all, to discover the technological ability to identify the demographic characteristics of visitors. a number of studies have confirmed the importance of demographic 5 business, management and education, 2016, 14(1): 1–18 targeting and its positive influence on the effectiveness of internet advertisements (banerjee, dholakia 2012; jansen, solomon 2010). demographic targeting on the internet uses three basic approaches. advanced technologies make it possible to identify the demographic profile of the user by his/her behaviour. that means that the profile is built up according to the servers he/she visits, or the specific topics which he/she searches for on the net. a much more reliable method is targeting by demographics on those platforms where users register and declare their demographic characteristics. this is typical for advertising on social networks. the third approach is to estimate the demographics according to the type of server. advertisers have at their disposal internet data from an official source of measurement of the medium. in the czech republic there is an extensive research project called netmonitor. on the basis of data purchased from this project, advertisers can get very precise information about the traffic and profile of visitors to the advertising servers involved. they can then target servers with above-average number of visits by the target group (by affinity).this traditional way of demographic targeting is a compromise because it does not enable a clean hit on a specific target group. the following analysis can help to answer the question, to what extent can this traditional method help make a hit, of sufficient quality, on demographic groups which are defined according to sex and age, on the czech internet. 3. methods the research for this article is based on the analysis (data minig) of database carried out by the project netmonitor. this is an extensive research project, which is the official source of data on the size and socio-demographic profile of the czech internet population. the project was commissioned by the association for internet development (spir 2014), and implemented by the company gemius, s.a. in cooperation with mediaresearch, a.s. the research on the profiles of the internet population is carried out on the so-called joint panel of approximately 30,000 respondents. data for measuring server traffic are collected via the javascript code. the data for june 2014 was made available for the purposes of this research (full database is not publicly available). software gemisu explorer was used for data minig. during the research period, the project covered 457 major internet sites. the reach of the project netmonitor, in june 2014, amounted to 97.7% of the czech internet population. the total size of the czech internet population was 6,500,147. in the analysis, attention was focused on the key demographic criteria – age and gender. netmonitor measures the online population aged 10 and over. the age intervals for analysis were set as follows: – juniors – 10 to 29; – middle age – 30 to 49; – seniors – 50+. 6 v. stříteský et al. significance of demographic variables for targeting of internet advertisements the analysis is being worked with thematic categories of servers; 21 were defined by netmonitor. the results of the analysis show differences in the behaviour of users, according to gender and age. for this purpose, the following indicators were used: – the number of real users (ru) – the number of internet users in the relevant target group who have generated at least one page view on the selected web server during the given month (week, day); – the average time spent per visitor (ats) – the total time spent by the average visitor (real user) from the target group, on the selected web server during the given month; – reach profile – the ratio of the number of visitors (real users) from the particular target group who visited the selected web site, to the total number of visitors who have visited the selected web site during the given month (week, day). – affinity index – the ratio of the composition of visitors of the particular target group for the selected web site, to the composition of the target groups for the group of all the servers which were measured. (coefficient expressing the relationship between the audience of a chosen medium and the audience of all measured media). an affinity higher than 100 indicates the suitability of a server or category of servers to address defined target groups (it means above average representation of the target group on this server or category of servers). the analytical software gemius explorer version 5.6.40.0., was used for analysis of the data. 4. results and findings based on the analysis of the data of the research project netmonitor, it is possible to evaluate differences in the behaviour of internet users, and thus to assess the suitability of the traditional method of demographic targeting in internet advertising. it is implemented based on the placement of the advertising format on the internet servers with the highest affinity, and at the same time, reach to the defined target groups. table 1. top 5 categories according to the number of visitors (ru) (source: authors, data mined from netmonitor database 2014) category no.of ru top server no. of ru hp of portals 5 728 186 seznam.cz – homepage 5 317 113 databases, catalogs 4 700 222 mapy.cz 2 808 534 news 4 470 459 novinky.cz – zpravodajství 3 517 353 communication services 4 351 230 seznam.cz – email 3 881 881 e-commerce 4 038 878 heureka.cz 2 235 915 7 business, management and education, 2016, 14(1): 1–18 for the following analysis it is useful to get an idea about the traffic on web sites categories for the entire internet population. this allows an easier evaluation of the specifics of the behaviour of individual demographic groups. the most popular categories of servers which were measured are shown on table 1. 4.1. gender differences in internet use the composition of internet users in the czech republic is relatively gender balanced, with slightly more men. this is one of the differences between the profiles of the general population and the internet population in the czech republic. the analysis shows that in june 2014, 3,239,000 men, aged 10 and over, visited the czech internet. in the same year it was 3,094,000 women. as stated above, most internet users visit, most frequently, the fairly traditional categories of web servers such as, for instance, news or communication services (e-mails). as regards the reach of the target groups by gender; we can expect a similar composition of the categories of servers as in the general population. however, if an advertiser were to target advertisements only according to the reach of an internet server, then, in many cases, a significant proportion of paid advertisements would by-pass the intended target group. from the analysis of the data, it is clear that men visit most often the category sites, in a similar order to the rest of the internet population. compared to the visiting order for the rest of the online population (see table 2), men give preference to the tv and radio categories (2,022,000 ru) over the e-commerce category. this latter is the sixth most visited category for men on the internet (2,020,000 ru). men are also interested in tabloid magazines (1,945 thousand. ru), and servers focused on it and mobile and digital technology (1,701,000 ru). women give preference to the internet communication services more than to the news servers (2206 thousand. ru compared to 2,122 thousand. ru). the results show that there are no great differences between men’s and women’s visits to the most important categories of web sites. when comparing the actual value of the traffic (indicator: ru), and reach, it can be seen that relatively more men prefer news servers (70.5% men, as opposed to 67.0% women), and watching, or listening to, internet radio and television stations (61% men, as opposed to 58% women). on the other hand, relatively more women visit communications sites (70.0% women, as opposed to 64.4% men). the remaining most popular categories for women and men are not very different – as for their reach. differences in the preferences of men and women are captured best by the calculated affinity index and reach profile (composition of visitors), which indicate the suitability of a given category of servers for reaching the defined target groups. this analysis answers the question of whether there can be found, on the czech internet, servers which have homogeneous traffic from a gender perspective. 8 v. stříteský et al. significance of demographic variables for targeting of internet advertisements table 2 shows the categories of servers which are most popular among men, and which are least popular among women. the results of the analysis show how web sites are of above interest for male users. server categories are not too homogeneous from the gender point of view. men can, relatively effectively hit on content servers which are directly aimed at this target group, such as lifestyle magazines for men (for the resulting statistics: see table 3). however, the indicator reach profile is here, too, surprisingly less than 64%. this means that advertisements targeted on the whole category will hit almost 36% of women users. similar results for the affinity index and reach profile is the predictable auto-moto category, which is also one of the “usual” male categories. although on the five most popular categories of servers we find a considerable traffic of women visitors, it can be seen what the main items of interest for men exist on the czech internet, and which topics are interesting for this target group. apart from the aforementioned male lifestyle magazines, and auto-moto, we see that sports and it servers are also well represented. table 2. men’s internet preferences (source: authors, data mined from netmonitor database 2014) ranking category of server affinity index reach profile 1. men’s lifestyle magazines 123.99 63.57% 2. automoto 123.57 63.36% 3. sport 116.45 59.71% 4. it servers, mobile phones, digital technologies 110.85 56.84% 5. economy, finance, law 104.35 53.50% more precise targeting of male internet users demands a more careful selection of specific sites which have a higher affinity index, or, profile reach. however, it is necessary to take into account a much lower reach of users. the analysis which was carried out confirms that it is possible to find such servers with a relatively high homogeneity of visitors. these servers show visitor traffic in the tens of thousands of ru. some examples are: eurogamer.cz (affinity index 171.09, reach profile 87.72%); tryhard.cz (affinity index 168.15, reach profile 86.22%); jiskreni.cz (affinity index 166.05, reach profile 85.14%); sportrevue.cz (affinity index 161.28, reach profile 82.69%). there are, however, also servers with hundreds of thousands of visitors ru, such as autorevue.cz with interesting affinity index values, as well as compositions of visitors (152.59, 78.24%). as for women, the analysis shows a relatively lower number of opportunities for the effective deployment of advertising campaigns which target the thematic category. women’s preferences on the czech internet are shown in table 3. 9 business, management and education, 2016, 14(1): 1–18 table 3. women’s internet preferences (source: authors, data mined from netmonitor database 2014) ranking category of server affinity index reach profile 1. pregnancy and parenthood 132.35 64.49% 2. health 121.99 59.44% 3. hobby 112.21 54.68% 4. social networks, teens servers, photogalleries 108.51 52.87% 5. entertainment and games 107.16 52.22% in comparison with the male categories, typical women‘s categories achieved lower values on the affinity index, so they are less homogeneous in terms of gender. the only exception is the group of servers focused on pregnancy and parenthood with affinity index of 132.35. women accounted for 64.5% of visitor traffic to these sites. the first two categories with the highest reach profile, however, have a relatively lower reach, each less than 600,000 ru. compared with male server categories, targeting women is more demanding in this respect. for men, the second best category (auto-moto), at the same time, offers a very interesting reach for this target group, with 1,126,000 ru. the other three categories of female servers, on the contrary, already show a relatively low level of homogeneity. these groups have a significant number of male visitors. the analysis has yielded the surprising result that those categories which are aimed at women and fashion are, while in terms of affinity index more attractive for women (affinity index 106.4), their internet visitor traffic is in absolute terms, essentially identical to that of the male internet population, thanks to the lower representation of women in the czech internet population (women within this category make up only 51.82% of visitor traffic). just as in the case of men, targeting of women can also be done more effectively by the careful selection of high affinity individual servers. the highest values of the index affinity are achieved by those servers which have the number of their visitors in the lower tens of thousands. examples are: stastnezeny.cz (affinity index 173.87, reach profile 84.72%); porodnice.cz (affinity index 173.39, reach profile 84.49%); elle.cz (affinity index 167.71, reach profile 81.72%). servers with significantly higher visitor traffic (in the hundreds of thousands of ru) can also be found. these are, for instance, the server votocvohoz.cz (affinity index 157.19, reach profile 76.59%); or modrykonik.cz (affinity index of 154.7, reach profile 75.38%). differences in behaviour between men and women can be observed based on the average time spent online per visitor per month. this indicator thus expresses, on which internet themes men and women spend the most time. the first two categories of servers are identical for both men and women and are the following: 1. hp of portals (8 hours 16 minutes for men, and 7 hours 39 minutes for women). 2. communication services (4 hours 47 minutes for men, and 6 hours 7 minutes for women). 10 v. stříteský et al. significance of demographic variables for targeting of internet advertisements the third category with the most time spent per visitor is for men, with news servers (2 hours 11 minutes). news servers are in tenth place among women (only 1 hour 9 minutes). men continue to spend most of their time on sites which focus on e-commerce (2 hours 08 minutes) and sport (2 hours 3 minutes). women spend a similar amount of time on e-commerce, but here, it is now the category with the third highest amount of time spent spent on it (2 hours 2 minutes). next come the categories entertainment & games (1 hour 37 minutes), and tabloid magazines (1 hour 31 minutes). men spend less time on these categories (56 min), putting them in twelfth position according to the amount of time spent on them. 4.2. age differences in internet use explored age categories have different incidence of representation on the internet. the youngest users account for 30.72% of the internet population, while the middle age and oldest users make up 41.65% and 27.63%, respectively. the age structure is one of the main differences between the internet population and the general population, in which the representation of the senior population plays a role. from the results of the analysis, we can see certain specific features in the behaviour of the defined age groups of internet users. it is no surprise that the most popular category of servers is common across all age groups. these are the home pages of major portals, such as seznam.cz or centrum.cz. in the case of the youngest and middle age groups, the second most popular categories – databases and catalogs – have traffic equal to that of the entire internet population. their reach is very similar (the population reach in this category is 72.31%. the youngest generation has a reach of 72.46%). the youngest user age group has a similar composition to the top five categories as the entire internet population, but the difference is now on the third position of the “most visited site” category. the internet population likes news servers, which, however, do not address the younger generation so much. in terms of visitor traffic, the news category approaches 6th position, with a reach of 60.71% (compared to 68.77% of the wider internet population). young people prefer more categories of communication services, as well as e-commerce and tv and radio. the middle age group, which is the largest group on the internet, is an exact copy of the order of the most popular categories of the entire population. certain differences can be found only in the reach where, for example, the middle age group is relatively more attracted to news servers and communication services. in the oldest age group we can identify different rankings in the most popular categories. in the first five rankings, we find that e-commerce servers are absent, but tabloids are present. tabloids, among the oldest age group, have above average visitor traffic (64.03%, as opposed to 59.56% of the total population). news servers are very popular among the oldest internet users. they now occupy second position in visitor traffic, with a reach of 77.94% (compared to 68.77% of the population). next come the categories database and catalogs and communication services. 11 business, management and education, 2016, 14(1): 1–18 in the next part of the analysis we have evaluated the differences in the behaviour of the different age groups, according to affinity index and composition of visitors (reach profile). the results show the thematic categories of web sites with the greatest homogeneity of visitor traffic by age. table 4. preferences of the 10–29 age group of users (source: authors, data mined from netmonitor database 2014) ranking category of server affinity index reach profile 1. men’s lifestyle magazines 144.74 45.60% 2. entertainment and games 132.15 41.63% 3. social networks, teens servers, photogalleries 117.50 37.02% 4. pregnancy and parenthood 116.57 36.72% 5. health 115.14 36.27% table 4 shows the category of servers which are exceptionally interesting for the 10 to 29 age group. the youngest age group is characterized by the highest values of the affinity index for the preferred categories of servers. the first category – lifestyle magazines for men – is in fact purely a junior category. almost half of the traffic belongs exactly in the 10–29 age group. other topics are not really surprising. the category entertainment & games is also characterized by a significant dominance of young visitors in the 10 to 29 age group. it is also a category with a significant reach (49.94%). compared with the homogeneous category of male lifestyle magazines there is a marked difference; in that this age group’s reach is only 14.77%. among the other categories which are exceptionally interesting for the young internet population are the community and teens servers and photo galleries. these, along with the health category, are still on servers where only those users in the 10–29 age group have a value of affinity index greater than 100. web sites from pregnancy and parenthood category have above average visitor traffic among the middle age group (see below), while they appear not to hold any interest for the oldest age group. the analysis of the age criteria also examined the differences in behavior by gender for each age group (according to above-average visitor traffic to the respective categories of servers). for men in the youngest age group, the following categories of servers are most popular: 1. lifestyle magazines for men (index affinity 201.26). 2. entertainment and games (index affinity 138.12). 3. it servers, mobile and digital technology (index affinity 125.08). 4. auto-moto (index affinity 118.19). 5. community and teens servers, photo galleries (index affinity 107.43). 12 v. stříteský et al. significance of demographic variables for targeting of internet advertisements for women in the youngest age group, the homogeneity of visitor traffic with a significant share of this target group, can be found in the following categories of servers: 1. pregnancy and parenthood (index affinity 140.09). 2. health (index affinity 136.24). 3. entertainment & games (index affinity 127.61). 4. social networks, teens servers, photogalleries (index affinity 125.18). 5. hobby (index affinity 117.94). the analysis shows that the thematic categories of servers, in the youngest age group, with a relatively homogenous load of visitor traffic, are those for men, rather than for women. with careful selection, it is possible to find a number of sites; for the youngest age group; with interesting values of affinity index and reach profile. servers with a monthly visitor traffic of tens of thousands ru, even, hundreds of thousands of ru were identified. examples include the servers: tryhard.cz (affinity index 293.55, reach profile 92.48%); eurogamer.cz (affinity index 278.31, reach profile 87.68%); lamer.cz (affinity index 269.30, reach profile 84.84 %). the following servers have visitor traffic in the lower hundreds of thousands: titulky.com (affinity index 261.41, reach profile 82.35%); or, loupak.cz (affinity index 252.91, reach profile 79.68%). the 30 to 49 age group is the dominant one in the czech internet population. this fact is reflected in the relatively high values of the reach profile on servers in the categories of topics which are typical for internet users in the middle age group. on the other hand, it is logical that the affinity indices for the thematic categories are likely to be lower. table 5 shows the results of the analysis. table 5. preferences of the 30–49 age group of users (authors, data mined from netmonitor database 2014) ranking category of server affinity index reach profile 1. automoto 111.73 46.95% 2. pregnancy and parenthood 108.24 45.49% 3. real estate, housing 104.17 43.78% 4. sport 101.40 42.61% 5. communication services 101.31 42.57% above average interest in the server categories of auto-moto and pregnancy and parenthood can be seen in the middle age group of internet users. this is the category with the highest index of affinity, and representation of the target group, in their visitor traffic. the auto-moto category still has an interesting reach, as it receives hits from about a third of this age group (30.64%). in contrast, the pregnancy & parenthood category receives hits from only 14.72% of these users. the housing and real estate category looks fairly interesting, with a lower affinity index, but a reach of 32.84%. categories with a higher reach already suffer from a low homogeneity of visitors in terms of age. 13 business, management and education, 2016, 14(1): 1–18 taking account of gender in this age group, different preferences for thematic categories with a higher affinity index were identified. men in the 30–49 age group are above average visitors to these server categories: 1. auto-moto (affinity index 137.62). 2. lifestyle magazines for men (affinity index 116.28). 3. sport (affinity index 115.64). 4. it servers, mobile phones, digital technologies (affinity index 106.28). 5. economy, finance, law (affinity index 100.47). women in this age group have a higher than average interest in following category servers: 1. pregnancy and parenthood (affinity index 139.55). 2. health (affinity index 115.46). 3. hobby (affinity index 110.39). 4. communication services (affinity index 108.50). 5. real estates, servers about housing (affinity index 108.23). the middle age group has rather less homogeneous categories for both men and women. there are more typically female categories here, unlike the situation with the youngest age group. for the middle age group, there are also internet sites with relatively high values of affinity index and reach profile, but with a rather lower reach. given the large representation of this age group among the czech internet population, there are no servers with an index of affinity greater than 200, as there was with the youngest user age group. examples include the servers: powerplaymanager.com (affinity index 163.11, reach profile 68.55%); i-creative.cz (affinity index 146.42, reach profile 61.53%); mtbs.cz (affinity index 146.36, reach profile 61.51%). greater visitor traffic was achieved by, for instance: the server tipcars.com (affinity index 128.93, reach profile 54.18%). larger servers with homogeneous visitor traffic completely in the 30–49 age group are, in principle, unavailable. targeting by affinity in this case appears to be fairly difficult. users from the oldest age group form a smaller part of the internet population. this is reflected in the relatively lower values reach profile. when targeting the older internet population by means of affinity to the categories of servers, the effectiveness of an advertisement will be lower, since the greater part of the advertisements on these servers will hit a younger age group. in terms of index values of affinity, sport, economics and law belong among the exceptionally popular categories of servers. rather more educated people, in line with the general assumption, than the general population move with the internet, primarily with the information servers. table 6 shows the results of the analysis carried out on the 50+ age group. naturally, individual categories also differ in terms of their reach. while the reach profile for the oldest age group in the top five categories is very similar, the best reach offers the category of news servers (77.94%). conversely, servers focused on housing and real estate show a reach of only 35.81%. 14 v. stříteský et al. significance of demographic variables for targeting of internet advertisements table 6. preferences of the 50+ age group of users (source: authors, data mined from netmonitor database 2014) ranking category of server affinity index reach profile 1. sport 119.10 31.53% 2. economy, finance, law 118.04 31.25% 3. real estate, housing 113.62 30.08% 4. news 113.32 30.00% 5. women‘s and fashion magazines 112.01 29.65% as for the differences between the preferences of men and women in the 50+ age group, the results of the analysis show quite different preferences. men in the 50+ age group show an above average interest in the following categories: 1. sport (affinity index 132.53). 2. economics, finance, law (affinity index 122.63). 3. news (affinity index 115.82). 4. society magazines (affinity index 110.94). 5. auto-moto (affinity index 110.36). what is even more significant is the level of interest shown in the information content of news sites, including that of sports, economics, finance and law. women in the 50+ age group show an above-average interest in the following categories: 1. real estates, servers about housing (affinity index 124.82). 2. women and fashion magazines (affinity index 118.39). 3. society magazines (affinity index 112.83). 4. economy, finance, law (affinity index 110.19). 5. health (affinity index 109.99). women in the 50+ age group give the greatest preference to the hobby and socially oriented servers. with the 50+ age group, just as with the youngest age group of internet users, the homogeneity of site visitors can be found more among men than among women. as far as specific servers are concerned, where it is possible to much more effectively target the oldest age group; there is, in terms of the affinity index, a fairly interesting selection. the reach profile values are, however, weaker, caused by, as mentioned above, lower representation of this age group in the internet population. some examples of suitable sites are: moneymag.cz (affinity index 283.78, reach profile 75.12%); spa.cz (affinity index 232.34, reach profile 61.50%); prazskypatriot.cz (affinity index 219.75, reach profile 58.17%); ecards.cz (affinity index 214.01, reach profile 56.65%). these servers get tens of thousands of visitors each month. the server eurozpravy.cz, with an interesting affinity of 211.51 (reach profile 55.99%), receives a much higher number of visitors per month. 15 business, management and education, 2016, 14(1): 1–18 also the analysis of age groups has taken into account the average amount of time spent online, per month. this indicator complements the view of the attractiveness of the individual thematic categories of the servers, as well as the intensity of consumption of their content. the first two categories of servers do not vary across the different age groups, because a longer time spent surfing the net is a typical feature of the entire internet population. they are hp of portals: 7 hours 20 minutes for the 10–29 age group; 8 hours 44 minutes for the 30–49 age group, and 7 hours 27 minutes for the 50+ age group and communication services: 3 hours 35 minutes for the 10–29 age group; 6 hours for the 30–49 age group, and 6 hours 40 minutes for the 50+ age group. furthermore, users in the 10–29 age group spend the most time on the social networks, teens servers and photogalleries (2 hours 9 minutes); e-commerce (2 hours 6 minutes) and sport (1 hour 58 minutes). users in the middle age group (30–49) spend the most time visiting the following categories: e-commerce (2 hours 8 minutes); social networks, teens servers and photogalleries (1 hour 38 minutes), and pregnancy and parenthood (1 hour 32 minutes). users in the 50+ age group, in addition to the aforementioned two categories, most often visit the following categories: news (2 hours 47 minutes); e-commerce (1 hour 59 minutes), as well as spending quite a lot of time playing games (1 hour 57 minutes). the entertainment & games category is typical in that the average time spent here increases with age. young people spend, on average, only 1 hour 19 minutes, while the middle age group spends 1 hour 25 minutes in this category. 5. discussion from the results of the analysis we can see that the preferences of users, by gender and age, on the czech internet still differ, but also that the homogeneity of preferences is not always clear. the traditional method of demographic targeting in such an environment as the internet; with its wide variety of themed servers; places quite high demands on the planning of advertising campaigns. for target groups, which are broadly defined by sex and age, we can, in some cases, find thematic categories with high value of affinity indices. more satisfactory results are only guaranteed by careful selection of the specific internet sites. the homogeneity of the traffic across thematically defined categories of web sites tend to be lower. the analysis of the targeting strategies, which were aimed at men, have yielded satisfactory results, when two broad categories of male servers have a greater than 60% share. such is the case with the men’s lifestyle magazines and auto-moto servers. this applies to the case of women only in one server category; that is: pregnancy and parenthood. one very surprising thing is that almost half of the hits on sites devoted to women and fashion, were from men. generally, the analysis shows the greater demands placed on the planning of advertising campaigns which are aimed at women’s web sites. by careful selection of the specific servers, however, both sexes can be successfully targeted; when addressing the groups concerned; with a rate of accuracy of between 80 and 90%. however, the lower values of the reach of the advertising campaigns must be taken into account. 16 v. stříteský et al. significance of demographic variables for targeting of internet advertisements in the case of the age groups, the results of the analysis show the homogeneity of visitor traffic consisting of the youngest internet users. here, a wide category of internet servers were identified which had a relatively high number of young visitors (between 40 and 50%). sites that are of interest to young men (men’s lifestyle magazines), and which have high affinity index values, can be successfully targeted by advertisers. choosing specific web servers can achieve a share of young visitors with a value of more than 90%. as for the median age category; which forms the majority of internet visitors in the czech republic; it is difficult to find themes with higher values of affinity index. the auto-moto category has the greatest share of visitor traffic (which attracts mainly middle-aged men), and pregnancy and parenthood (which attracts primarily middle-aged women). in this age group, more women’s than men’s category internet servers were identified. targeting can be more accurate with the choice of specific internet servers. in this case, the reach profile is still relatively lower; between 60 and 70%. we can say that it is still difficult to target the 50+ age group effectively. some categories are characteristic for the older age group, in particular the information servers. homogeneous preferences in this age group can be seen more with the men than the women, when several broad categories of web sites with relatively high affinity index values were identified. however, indicators showing the composition of the internet visitors were problematic, when the older age group makes up a maximum of onethird of the visitor traffic; and advertisements largely miss the intended target group. the placement of advertisements on carefully chosen internet servers solves this problem only partially. we have identified servers with high values of affinity index but with a rather low value of reach profile (50–60%). with the increasing penetration of the internet within this age group, a gradual increase in the efficiency of such targeted advertising can be expected. 6. conclusions the internet is one of the types of marketing media which is, for many reasons, very attractive to advertisers. this is because it enables, among other things, the accurate targeting of advertisements. one way of reaching the desired audience, for advertisers, is to target the demographic characteristics of internet users. for many advertising systems, the method of demographic targeting presents great challenges. for instance, collecting data about internet visitors and estimating their profile is difficult and encounters many obstacles. demographic targeting via those platforms where data can be obtained from the registration of users brings a distinct competitive advantage. social networks such as facebook, can serve as an example. the disadvantage of this method, however, is the relatively limited reach of these systems, especially for the selected target groups, which is determined by the number and profile of the registered users of the service. the opportunity for reaching users is also limited by the fact that the advertisement can only reach those internet users who visit the social network; and their readiness to buy is very limited. the alternative to this is the traditional method of targeting, whereby advertisements are placed on those content sites where the demographic profile of their visitors is known. the placement of advertisements on those internet sites with a high volume of traffic, and which also have an affinity for the given target group, can be a very effective way of targeting, too. 17 business, management and education, 2016, 14(1): 1–18 the results of this analysis have thus shown us that, especially when targeting by gender (particularly for men); and for targeting the younger age groups; quite effective use can be made of affinity in the traditional methods of advertising campaigns. based on the results presented above we can see that on the czech internet it is possible to find thematic categories of servers with an above-average interest of internet users within the different demographic groups defined by gender and age. on the other hand, we cannot ignore the current internet boom in targeting advertisements based on user data. this solves the problem of wasted 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kolkata, advances in management 7(9): 27–32. václav stříteský is an assistant professor at the department of marketing of university of economics, prague. his research focuses on internet marketing a consumer behaviour. marek stříteský is an assistant professor at the department of human resource management of university of economics, prague. his research focuses on hr marketing and hr audit. martin john david quigley is an assistant professor at the department of human resource management of university of economics, prague. his research focuses on hr marketing and recruitment. david říha is an assistant professor at the department of marketing of university of economics, prague. his research focuses on sales management and advertising. http://dx.doi.org/10.1287/mksc.1050.0117 http://dx.doi.org/10.1145/1753326.1753448 http://dx.doi.org/10.1108/02651330510630276 http://dx.doi.org/10.1080/13527266.2010.484573 http://www.netmonitor.cz/netmonitor-ma-nove-obsahove-kategorie http://dx.doi.org/10.1111/1540-6237.t01-1-8401007 http://www.spir.cz/tz-internetova-inzerce-loni-presahla-13-miliard-za-poslednich-pet-let-vzrostla-dvojnasobne http://www.spir.cz/tz-internetova-inzerce-loni-presahla-13-miliard-za-poslednich-pet-let-vzrostla-dvojnasobne http://dx.doi.org/10.18267/j.cebr.79 significance of demographic variables for targeting of internet advertisements václav stříteský1, marek stříteský2, martin john david quigley3, david říha4 the demand for professional knowledge as a key factor of the development of outsourcing of financial and accounting services in poland anna bagieńska the concept of a smart city in urban management sławomira hajduk the concept of basic income: global experience and implementation possibilities in lithuania algimantas laurinavičius1, antanas laurinavičius2 julia siderska evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics ligita gasparėnienė1, rita remeikienė2 the concept of products and services integration – analysis of scientific publications justyna kozłowska categories of supply chain performance indicators: an overview of approaches dorota leończuk multivariate analysis of short and long-impact indicators for corporate bond market development ieva astrauskaitė the research on interface between lithuanian direct investment abroad and foreign trade flows anžela kozlova1, algita miečinskienė2 bme_16(1)_2018_maketas.indd copyright © 2018 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. business, management and education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 1: 174–189 https://doi.org/10.3846/bme.2018.2000 *corresponding author. e-mail: sigitas.mitkus@vgtu.lt introduction this paper looks at construction defects from the standpoint of the entity which is capable of detecting the defect: contractor, nonprofessional owner, professional owner, technical supervisor, designer and building inspector. in this study, the responsibility of each entity for construction defects is discussed and the corresponding documentation and statutory and case law are analyzed for the u.s., lithuania, and to a lesser extent germany and russia for comparative purposes. understanding which entity has liability and the extent of the liability can aid in settling a dispute. this paper also gives an overview of the united states’ legal system and the lithuanian legal system. legal evaluation of the quality of construction works and the issues of liability for possible defects continue to be topical problems both from a practical and scientific perspective (trinkūnienė et  al., 2017). in the literature, construction defects are usually looked at from the technical cause of the defect. the aim of the kraus, vondráčková, and nývlt (2016) liability of the entity capable of detecting a defect of construction works: a comparative study of the u.s. and the republic of lithuania sigitas mitkus1,* , nancy j. white2 1 department of law, business management faculty, vilnius gediminas technical univercity, vilnius, lithuania 2departmant of finance and law, central michigan university, mount pleasant, michigan, usa received 23 may 2018; accepted 02 june 2018 abstract. the his research looks specifically into the potential legal liability of the entity capable of detecting construction defects: contractor, nonprofessional owner, professional owner, technical supervisor, designer and building inspector. in this study, the responsibility of each entity for construction defects is discussed and the corresponding documentation and statutory and case law are analyzed for the u.s., lithuania, and some other countries for comparative purposes. keywords: quality management, construction law, defects of construction works, construction mamagement, conflict management. jel classification: m11, k12, l15, l74. business, management and education, 2018, 16(1): 174–189 175 paper was to evaluate serious incidents related to construction in the czech republic. the conclusion was fire was a major cause. sedeka and serwab (2016) looked at a new system for detecting defects in bridges. forcada, macarulla, gangolells, and casals (2014) assessed construction defects in residential buildings in spain. boboc et  al. (2017) looked at human intervention as a cause of defects in road design, construction and maintenance. schenck and goss (2016) did look at the potential joint legal liability of the various entities involved in a construction defect case. cho, cha, kim, hwang, and shin (2014) looked at countermeasures to prevent lawsuits related to apartment building construction defects in korea. 1. comparison of legal systems in order to understand some of the comparative legal aspects presented in this paper, it is necessary to have a basic understanding of the legal systems under discussion. the primary legal systems considered here are lithuania, the united states, and to a lesser extent russia and germany. the european union has its own law and legal order. european law has a direct or indirect effect on the laws of its 28 member states: once in force, its laws become part of the legal system of each member state. the main legal foundations of the eu are the treaty on european union, other treaties and international agreements, general principles of union law, and secondary legislation (regulations, directives, decisions, recommendations and opinions). directly or indirectly, the construction industry is regulated by six secondary regulations (regulation (ec) no 765/2008, directive 2010/31/eu, regulation (eu) no 305/2011, directive 2011/92/eu, directive 2014/24/eu). most eu countries utilize a civil law legal system based on a comprehensive compendium of statutes. the alternative to a civil law system is a common law system, which may contain a comprehensive statutory framework but also includes the decisions of judges on the interpretation of law as binding precedent. civil law systems do not, as a rule, recognize the decisions of judges as binding on later cases. before march 11, 1990, lithuania was a part of the ussr. after that date, it became an independent nation and began the creation of its own legal system. the foundation of this legal system is the constitution of the republic of lithuania, adopted in 1992 by referendum. the main source of the country’s private law is the civil code of the republic of lithuania, which went into effect on may 1, 2004. the code is the main source for private construction law in that it regulates the legal relationship relations between the parties involved in construction contracts. the main sources of public construction law are the law on construction and the law on state supervision of territory planning and construction. public construction law is subject to numerous regulations. even though construction law, along with the entire legal system of the lithuanian republic, is quite young, it was created with reference to the legal systems of developed european civil law countries (mostly germany, the netherlands, and france). it therefore primarily reflects the main legal traditions of european civil law countries, despite the presence of some remnants of soviet law (bakšiene, 2016). the highest legal source in the federal republic of germany is the 1949 basic law for the federal republic of germany, which serves as the nation’s constitution and operates in 176 s. mitkus, n. j. white. liability of the entity capable of detecting a defect of construction works... accordance with codified and systematically developed statutory laws. german construction law consists of two basic fields: private construction law and public construction law. the main source of private construction law is the german civil code bgb. public construction law concerns all public regulations on construction and is divided into two fields – zoning law and building regulations. the main source of public construction law is the federally legislated german federal building code and public procurement of construction works is regulated under the contracting rules for the procurement of public works (brakalova, 2016). the foundations of russia’s legal system are laid down in the constitution of the russian federation, which went into effect on december 25, 1993. statutes are the predominant legal source and the russian federation. codes are the primary source for law relating to the construction process. the civil code of the russian federation is the main source of private law, which is also strongly influenced by presidential decrees and directives as well as agency regulations. most scholars have classified the russian legal system as a civil law system. besides the civil code, the other main sources of construction law in russia are the town planning code of the russian federation, the land code of the russian federation, and regulations based on the provisions of the codes, which establish more detailed regulations for specific areas of construction. the united states consists of over 300 entities united in a federation. a federation is a societal entity formed by uniting smaller or more localized entities (merriam-webster dictionary, 2017). each entity in the federation is referred to as a jurisdiction (merriam-webster dictionary, 2017). in u.s. law and has its own laws for that jurisdiction. although the federal government of the u.s. does have laws applicable to all its member jurisdictions, the law discussed in this paper is not one of those laws. the laws discussed in this paper are controlled in the united states by individual states such as california or new york, not by the federal government headquartered in washington d.c. this means that variations from what is discussed here may exist, depending on which state’s laws are applicable. however, the law of each member state of the federation known as the united states, is similar enough to allow for the concepts presented in this paper to be generally applicable. the law concerning federal contracts – that is, contracts between the united states government and a given contractor, is highly regulated by the federal government and not covered here (federal acquisition regulation (far), 2018) and not covered in this paper. all of the states in the u.s. federation except for louisiana are common law jurisdictions. a common law jurisdiction is characterized by the existence of case law. a decision made by a court in the same jurisdiction may act as precedent (i.e., must be followed) for a later case in the same jurisdiction (common law and civil law traditions, 2017). the authors have not researched each of the governments in the federation; some tribal and/or territorial governments may be civil law jurisdictions but in general, member states of the u.s. federation are common law jurisdictions. 2. the concept of a “defect” merriam-webster defines defect as “an imperfection that impairs worth or utility” from the latin defectus: “a lack of something necessary for completeness, adequacy, or perfection.” business, management and education, 2018, 16(1): 174–189 177 (merriam-webster dictionary, 2017). other definitions worth bearing in mind are that of the oxford learner’s dictionary (“a fault in something or in the way it has been made which means that it is not perfect”) (oxford advanced learner’s dictionary, defect, 2017) and the cambridge dictionary (“something that is lacking or that is not exactly right in someone or something”) (cambridge english dictionary, defect, 2017). van den brink and han (2015), citing mills, love, and williams (2009), define a defect as the physical manifestation of an error or omission. despite the variations among these dictionary definitions, there is general agreement that the word denotes something that is not as good as it should be, or is of a quality that is not what it should be. the problem in the construction industry is that this general definition is insufficient. in fact, the word “defect” has received a great deal of legal attention because the variety of defects that can arise on a construction project is enormous, and it is unlikely that any construction project can ever be entirely free of defects. aljassmi and han (2014) have defined a defect as “a failing or shortcoming in the function, performance, statutory or user requirements of a building [that] might manifest itself within the structure, fabric, services or other facilities of the affected building”. aljassmi and han (2014) have also noted that the term defect not only refers to shortcomings (e.g., cracks) that give rise to catastrophic failure but also includes undesired nonconformance with principles or requirements that may not necessitate rework. for our purposes, unfinished work belongs in a category separate from defective work. unfinished work is partially completed. it requires new, additional work to complete the project. defective work, on the other hand, requires rework of a completed project. repairing defects often costs much more than repairing unfinished work. repairs to unfinished projects usually do not require additional resources beyond those normally needed to finish the project as planned. however, this is not always true: unfinished projects may need to be redone, depending on the type of unfinished work. for example, a given design project may specify the use of suspended concrete for load-bearing structures in specific places only, but if suspended concrete has been used elsewhere, the entire structure may need to be demolished before resuming work on the project. although rare, defects of this nature can require repair costs that exceed the cost of the initial project (mitkus, 2017). another concept that needs to be distinguished from defects and unfinished work is that of “failure” or “failed” works (the free dictionary, failure, 2017). “failure” can be defined as the condition or fact of not achieving the desired end or ends, or “an unacceptable difference between expected and observed performance; also the termination of the ability of an item or system to perform an intended or required function” (poles, 2008). a “failure mechanism” is “an identifiable phenomenon that describes the process or defects by which an item or system suffers a particular type of failure” (poles, 2008) “failure mode” refers to “a description of the general type of failure experienced by a system” (poles, 2008). collapse is the ultimate and most serious result of structural failures, but overstressing, which can lead to collapse, is normally evident at earlier stages of structural failure, when deformation and fractures develop. this paper focuses on defects in completed projects only. it does not consider defects in unfinished or failed works, which do not fall within the scope of this paper. 178 s. mitkus, n. j. white. liability of the entity capable of detecting a defect of construction works... neither the law on construction of the republic of lithuania (law on construction of republic of lithuania, 1996 nor the code of the republic of lithuania (civil code of the republic of lithuania, 2000) defines the term “defect.” instead, the statutes present “quality” requirements for construction works. construction work that fails to comply with the quality requirements should be considered defective (law on construction of republic of lithuania, 1996, article 2(40)). “quality” is a not an uncommon word to use in the evaluation of construction projects. low and wee (2001), quoting chung (1999), defined quality in construction as a standard that meets the requirements of the parties involved (i.e., it “[meets the] contractual requirements of the client, legislative and regulatory requirements of the authorities, social requirements of the public and even cost requirements of the contractor”). molenaar, songer, and barash (1999), stressed that there are three criteria for measuring quality in construction: conformity with expectations, conformity with administrative (legal) restrictions and client’s/customers’ satisfaction. these definitions provide a measurable definition of “quality” that is useful for evaluating construction projects. quality is one of critical success factors in construction projects. in order to predict quality of a particular construction work, trinkūnienė et  al., 2017, developed a multi-attribute decision-making (madm) set of attribues. these attributes were chosen based on their review of disputes related to quality of construction works.this process was used to predict which contracts were more likely to lead to quality construction works. see also mardani, jusoh, and  zavadskas, 2015a, 2015b for a discussion of quality. various issues construction quality also are analized by aïssani, chateauneuf, fontaine, and audebert (2016), mitkus (2016), mitkus and cibulskienė (2016), lin, chang, and su (2016). lithuanian law defines standard construction quality as work that complies with construction norms. note, however, that the law on construction of republic of lithuania, article 2(40) does not even suggest that the quality of a construction project might be dependent on the standards set forth in the construction contract. the reason for this omission is that provisions for compliance with construction contracts are already included in the civil code of the republic of lithuania. article 6.663 of the code stipulates that the quality of a contractor’s work must conform to the conditions of the construction contract. article 6.684(1) reads that the contractor shall be obliged to perform all construction work in accordance with the requirements established in the technical construction regulations and the contract (contractual documentation). article 6.684(1) further states that quality requirements must be stipulated in the contract. the design of any construction project is a part of the construction contract; therefore, it follows that quality requirements in the contract conform to the quality requirements set in the design of the construction works. frequently, neither the contract nor the normative documents contain quality requirements for construction operations and processes. in such cases, the provision in article 6.663(1) of the civil code should apply; that is the absence of any specific method for determining quality stated in the contract, the quality of the work must conform to the requirements ordinarily presented for work of the nature of the given project. the quality of the work should also render the project fit for use within a reasonable period of time. business, management and education, 2018, 16(1): 174–189 179 in summary, according lithuanian statutory law, the following quality requirements for construction works apply: – construction works must conform to the requirements laid down in the contract; – construction works must conform to the requirements ordinarily presented for work of the respective nature of the given project; and – the project must be fit for the designed use within the limits of a reasonable period of time. construction projects that match these requirements should be treated as quality projects, and those not meeting these requirements should be treated as examples of defective construction. lithuanian case law consistently adheres to these provisions. under the german civil code bgb, defects are divided into “material defects” and “legal defects” (section 633(3)). construction work is free of material defects when it complies with agreed-upon standards of quality. in the event that “quality” has not been defined in the contract, then the work is free of defects if the project conforms to the use envisaged in the contract or is suitable for the customary use of work of that type. construction must comply with this section as well as with the requirements of mandatory regulations. the civil code of the russian federation does not define the term “defect” in relation to construction work but does provide remedies for “improper quality of work” (the civil code of the russian federation, 2011).1 the code stipulates quality requirements for different kinds of works (the civil code of the russian federation, article 721, 2011) and the main criterion for construction works is compliance with requirements of the contract. in the absence of terms and conditions for construction works that outline quality, or in the event that these terms and conditions are incomplete, the work must conform to the usual requirements for work of that kind. other mandatory regulations also apply to specific types of projects work. each jurisdiction in the united states has its own statutory law, which can provide its own definition of a defect. in the case of one such jurisdiction, nevada (davis, 2015), a construction defect is defined as “a defect in design, construction, manufacture, repair or landscaping” that occurs when building a new residence or renovating an existing residence. further, in nevada, a defect is defined as that: 1. which is done in violation of law, including, without limitation, in violation of local codes or ordinances; 2. which proximately causes physical damage to the residence; 3. which is not completed in a good and workmanlike manner in accordance with the generally accepted standard of care in the industry; or 4. which presents an unreasonable risk of injury to a person or property (nevada revised statute 40.61, 2016). 1 in cases where the work has been performed by the contractor with departures from the work and labour contract which have worsened the result of the work or with other defects which make it unsuitable for the use, envisaged by the contract, or in the absence of the relevant condition of unfitness for the usual use in the contract, the customer shall have the right, unless otherwise stipulated by the law or the contract, to demand from the contractor the following actions at his option: gratuitous removal of defects within the reasonable period; an adequate reduction of the price fixed for the work; reimbursement of his expenses incurred in the elimination of defects, when the customer’s right to remove them is provided for by the work and labour contract (article 397, the civil code of the russian federation) 180 s. mitkus, n. j. white. liability of the entity capable of detecting a defect of construction works... 3. liability for defects by the entity capable of detecting the defect the ability to detect defects depends upon: – the qualifications or characteristics of the inspector. an architect has a higher qualification than a consumer. – the scope of the inspection. a construction supervisor usually inspects on a daily basis while government building authorities inspect on occasion or only at certain points in the work. construction supervisors and designers are trained in construction techniques and have a greater ability to detect defects than the typical owner. figure 1 gives an illustration of the comparable level of ability to notice defects depending on the types of subjects. this figure is an illustration only and is not based on any data. 3.1. contractors’ liability for detecting defects under both u.s. and lithuanian law, the contractor is liable for any defects caused by the work of the contractor or its subcontractors, suppliers, agents, or employees. this is true whether or not the contractor was able to detect the defect. failure to comply with a contract is a breach, irrespective of ability to perform required tasks or detect defects. the contractor’s subcontractors, suppliers, agents, and employees may also be liable to the contractor for their actions or inactions that result in defects. notice that these parties are not liable to the owner of the project because there is no contractual relationship between these parties and the owner. however, a contractor sued by an owner for defects may be able to reduce its share of the liability if it can prove that the owner, designer, or technical supervisor (cm) had the ability to detect the defective work but did not. 3.2. nonprofessional owners’ liability for detecting defects the owner is usually a nonprofessional with no specific knowledge of the field of construction. however, even a nonprofessional owner has some familiarity with buildings and what they are designed to do. 0 20 40 60 80 100 120 consumer level of ability to notice defects non professional owner professional owner architect technical supervisor ownergovernment building authority figure 1. ability of subjects to notice defective construction works business, management and education, 2018, 16(1): 174–189 181 the civil code of the republic of lithuania and other legal acts do not directly address what kinds of defects should be recognizable to nonprofessional owners. the owner has no obligation to conduct any special measurements, tests, etc. the owner should, however, ensure that control measurements and tests have been carried out if they are required by law (article 6.694 [5] of the civil code of the republic of lithuania). what kinds of defects in construction works should be treated as latent for nonprofessional owners? here case law is instructive. in the case uab jaukuriai v. buab forsitia, 2010, the supreme court of lithuania held: the law provides for the owner’s obligation to pay for construction works performed and the right to express a claim to the contractor for shortcomings of the construction works associated with signing the act of handover. according to the stipulations presented in articles 6.662 and 6.694 of cckr, it is the owner’s duty to inspect and accept the construction works as carried out. acceptance of the construction works that have been carried out is formalized by the act of handover. upon signing the act of handover, the owner confirms that the construction works have been carried out (with or without reservations) and that the contractor confirms the transfer of the works. the owner must act carefully during handover – he must visually inspect the result of the construction works in order to ensure that the result has no obvious shortcomings. the law does not require anything beyond normal inspection of the completed construction works for obvious shortcomings. the owner is under no obligation to apply any special means or techniques. – as this quote makes clear, the supreme court of lithuania has ruled that the owner is not obligated to apply any special means or techniques during the acceptance and handover of construction works: simple visual inspection is all that is required. the supreme court of lithuania has held this position consistently  – as in the case of uab laugina v. uab agaras, 2008, where it held: – the appellant cites as obvious defects wet walls in the shower stalls, improper floor drainage in the shower room, improper construction of road and parking surfaces, and improper installation of manhole covers. according to the case file, the courts found that the following defects, in accordance with a bonus-pater-familias standard, could not have been detected during handover because the owner could not foresee that the walls would become moist after their intended use as shower facilities and that not all of the water would drain from the shower floor because of improper sloping, that the surface of the road and parking area would crumble, and so on. – some of the above-mentioned defects can be discovered only by using laboratory tests. a case in point is the quality of concrete. some defects can be determined with simple tests. for example, simply pouring water onto a floor can suffice to determine whether the floor drains properly. we can conclude that according lithuanian case law, the owner has no duty to perform even the simplest tests during the acceptance of construction works (e.g., turning on and off water and electrical appliances; trying out engineering systems through practical use; checking parts of buildings, such as windows, skylights, etc.). under u.s. law the nonprofessional owner is not required to detect defects caused by the contractor. however, the nonprofessional owner is liable to users of the construction works for defects caused by its agents and employees, including the contractor and the designer. for example, if the contractor builds in a defective manner and that defect causes injury to a user of the project, the owner is liable. if the designs are defective and that defect later causes injury to a user of the project, the owner is liable. 182 s. mitkus, n. j. white. liability of the entity capable of detecting a defect of construction works... 3.3. professional owners’ liability for detecting defects as stated above, both statutory and case law apply very low standards of carefulness for owners at the time of handover of construction works. the reason for this is that the owner is a nonprofessional subject. but this is not always the case. for example, many construction projects are carried out by subcontractors. in such cases, the customer (i.e., the one accepting the construction works) is a professional entity – the general contractor responsible for the quality of the project as a whole. the question then is: should the same low standards of carefulness at handover that are applied to nonprofessional owners also be applied to general contractors? no u.s. case was found that addressed any difference in liability between professional and nonprofessional owners. since liability to users of a project is usually dependent on a negligence standard of “what a reasonable owner would do” and not upon the specific status or knowledge of the owner, it is unlikely that u.s. law would hold professional owners to a higher standard than nonprofessional owners. the professional owner’s liability to the contractor or designer would be based on the contract. 3.4. technical supervisors’ liability for detecting defects in the case of most construction contracts, the owner is a nonprofessional participant with little or no understanding of the construction process. this professional can be referred to as the “technical supervisor” of the project and may be the engineer, the architect, or a consultant of some sort. in the united states this person often has the title of “cm,” which stands for “construction manager who is employed by the owner to oversee the construction of the project.” as an example of a contract requiring a technical supervisor, the ejcdc standard form of agreement between owner and engineer for professional services, 2008, is a u.s. contract for owners who want to hire an engineer to oversee and inspect quality during the construction phase of a project. according to this contract, the engineer visits the site at appropriate intervals to review the work. article a 1.05 (7a) of exhibit a of the above contract reads: such visits and observations by engineer, and the resident project representative, if any, are not intended to be exhaustive or to extend to every aspect of contractor’s work in progress or to involve detailed inspections of contractor’s work in progress beyond the responsibilities specifically assigned to engineer in this agreement and the contract documents, but rather are to be limited to spot checking, selective sampling, and similar methods of general observation of the work based on engineer’s exercise of professional judgment, as assisted by the resident project representative, if any. based on information obtained during such visits and observations, engineer will determine in general if the work is proceeding in accordance with the contract documents, and engineer shall keep owner informed of the progress of the work. paragraph 8 of the article stipulates the right of the engineer to reject defective works. the american institute of architects aia-201, contract for construction, 2007, article 4, states that the owner shall retain an architect in the jurisdiction where the project is located. the architect provides administration of the contract and is the owner’s representative durbusiness, management and education, 2018, 16(1): 174–189 183 ing construction. the architect is obliged to visit the site at intervals appropriate to the stage of construction, or as otherwise agreed upon with the owner, to become generally familiar with the progress and quality of the portion of the work completed, and to determine if the work observed is being performed in a manner indicating that, when fully completed, it will be in accordance with the contract documents. the standard form of the contract also states that the architect will not have control over, charge of, or responsibility for the construction means, methods, techniques, sequences or procedures in connection with the construction works. the architect as administrator and/or supervisor of construction works is foreseen in the law of most european countries (chao-duivis et al., 2015, p. 766). the scope of duties of an architect is highly dependent on the state. in european countries the most popular standard form of the construction contract is that of the fidic2. according to provisions of the standard fidic contracts, the engineer, working alone or with staff, is obliged to carry out an inspection of the construction works for which the engineer is responsible. according to the law on construction of the lithuanian republic, technical supervising of construction is mandatory, with the exception of simple construction projects and repairs. otherwise, the owner must appoint a technical supervisor of the construction works as an employee or agent. the rights and duties of a technical supervisor of construction are laid down in detail in the law on construction and technical regulation of construction str 1.06.01:2016. among their others duties, technical supervisors of construction are obliged to carry out the following functions: – check that construction is being carried out according to the design; – check quality of building materials and facilities and prevent their use if they do not meet requirements; – check the quality of construction works; – check and accept covered construction works and structures; – participate in the testing of engineering systems, facilities, structures; and – the technical supervisor must sign the construction book every day. lithuania’s civil code makes a distinction between four entities: contractor, designer, technical supervisor of the construction, and contractor of expertise of design. these entities are liable for: – the collapse of a structure and the resultant damage (article 6.696[1]); – the defects discovered within the guarantee period (article 6.697[3]). the civil code of the republic of lithuania does not distinguish what part of the liability lies with each of these entities. that distinction is made in case law. the liability of technical supervisors of construction works has been examined by the supreme court of lithuania in several cases. see tūb vikensta v. uab skala, 2006; uab valviktė v. uab laugina, 2008; uab agaras v. uab laugina, 2008; uab angel stone v. uab ulgis, 2009; uab v. klaipėdos hidrotechnika v. state enterprise klaipeda state seaport authority, 2014; uab seno dvaro sodyba v. uab rustonas, 2015. 2 fidic: the international federation of consulting engineers. fidic acronym for its french name fédération internationale des ingénieurs-conseils. 184 s. mitkus, n. j. white. liability of the entity capable of detecting a defect of construction works... in lithuanian case law the technical supervisor has been found liable for nonperformance or improper performance of a construction project in about 10 to 15% of the cases. the supreme court of lithuania has noted that if defects are found in a construction project, it is important, in the context of liability of the contractor, designer or technical supervisor of construction, to identify the cause(s) of the defects in each particular case and to link the cause(s) to shortcomings or improper performance by persons liable for the defects. see tūb vikensta v. uab, 2006. if the technical supervisor is to be held liable, then it is essential to determine what kinds of defects are noticeable to the technical supervisor. the technical supervisor is not liable for all defects even if the technical supervisor has performed daily inspections. liability will depend on the circumstances. for example, in the civil case uab “laugina” v. uab “agaras” (2008), the courts found that the plaintiff performed the installation of concrete floors in the building in question, but the plaintiff did not sign the statement of acceptance of the works and filed a claim regarding the quality of the work. although the construction contract provided for the plaintiff ’s duty to perform technical supervision, the courts failed to establish that the plaintiff ’s acts could have had any influence on the quality of construction. in u.s. law, the cm’s liability for defects is not contingent upon whether the defect is patent vs. latent. the cm’s liability is based on any specific guarantees or warranties in the contract (which are seldom made) or upon a negligence standard if no specific contract terms apply. in other words, the question is, has the cm operated below the level of other similar professionals in the field? for example, an insurer alleged that the cause of flooding in a certain instance was the failure to install a roll-down security gate properly. this improper installation allowed cold air to travel through the space, which in turn caused a pipe to freeze and then burst. the insurer asserted claims against the construction manager for breaching its duties under its management contract and for negligence in its supervision of the construction. the construction manager claimed it had no such duty, but the court found that substantial issues of fact remained as to its role in the project. the court noted that the negligence claim was not for vicarious liability, but for failure to perform its duty to supervise the subcontractors. summary judgment was denied because of the need to determine whether the construction manager had been negligent in its duties (travelers indem. co. v. 28 e. 70th st. constr. co., 2003). in summary, under both lithuanian and u.s. law before liability can be placed on the technical supervisor (architect, engineer, cm, or other consultant) a determination of the scope of the duties of the technical supervisor must be made. the scope of the technical supervisor’s duties is defined by examination of the contracts as well as the law. 3.5. designers’ liability for detecting defects this section outlines the designer’s liability for defects apart from any duties the designer has as technical supervisor. if a designer has merely designed a given project, but has no supervisory role in the construction, the designer can only be liable for defects in the plans business, management and education, 2018, 16(1): 174–189 185 and specifications. defects of this nature are called “design defects,” as distinct from defects caused by faulty construction. lithuanian statutory law does not stipulate the liability of construction project designers and no case law exists on the issue. since design (an activity carried out by the architect or engineer) is a paid activity, a design that is defective and causes injury should lead to liability on the part of the designer. under lithuanian law it might be essential to define which defects are noticeable to the design supervisor (the architect or engineer). responsibility for assessment as to whether the defect is noticeable by the design supervisor (the architect) should be defined within the scope of duties of the subject. the scope of duties can be defined by examining the contractual documentation as well as statutory and case law. in the united states case law does exist to clarify this issue. the designer can be liable to the owner or ultimate users of a given project. this liability to the owner and ultimate users is based on a negligence standard. the designer could warrant the plans and specifications, but this seldom happens, and the designer is not liable to the owner for defects in the plans and specifications unless they rise to the level of professional negligence. the designer cannot be liable to the contractor as there is no contract between them. if a design contains a design defect and must be redone to fix it, the owner is liable, not the designer. in other words, as between the contractor, the designer, and the owner, the owner is liable for design defects, not the designer. this fundamental principle is called the “spearin doctrine,” from a u.s. supreme court federal construction law case of that name. united states v. spearin, 248 u.s. 132 (1918). 3.6. liability of building or inspection authority for detecting defects in lithuania, the state construction agency plays the main role in government supervision of construction. but approximately 50 other institutions carry out various kinds of inspections involving fire and other safety, hygiene, and environmental protection. these institutions perform random inspections and also inspect the completed construction works. the main aim of inspections by government institutions is to check whether the quality of the construction works is sufficient to protect a particular public interest, such as fire prevention, environmental quality or safety. if a state institution performs an inspection improperly and fails to detect a construction defect, the question of liability can arise if the defect resulted in harm to the owner or user of the construction project. the law on construction of the lithuanian republic (article 28) stipulates that upon completion of all but simple construction projects, the act of completion of construction shall be drawn up. this procedure upon completion of construction is organized by the inspection of territory planning and construction. the agency appoints commissions for the inspection of completed construction works. members of the commission, according to their competence, must visually check whether completed projects comply with the design of the construction. this means that both the scope of the inspection and the inspection techniques are rather limited. in 2008, a man (whom we will refer to as a.k.) fell from a stair and was fatally injured. among the defendants in a criminal proceeding related to the death was the commission 186 s. mitkus, n. j. white. liability of the entity capable of detecting a defect of construction works... of the completion of the construction works. the court’s expert witness determined that the stairs were improperly built and did not comply with the building codes and standard construction practice. the court expert witness also concluded that the commission should have noticed the noncompliance. this testimony could have supported a finding of criminal liability on the part of the members of the commission. however, the case was settled before an actual finding of criminal liability could be made (see american law reports 5th, 2017). in the united states, a government building code inspector might be liable for failure to detect patent defects under a negligence standard. however, governments are protected from lawsuits under the doctrine of sovereign immunity, and regulations may restrict the types of damages that can be recovered or require that claims be filed within a limited time period. see new jersey stat. § 59:9-2, 2017 and 1-6 insurance risk management § 6.06, 2016. conclusions in order to successfully file a claim as well as defend a claim in the case of defects, it is important to identify important characteristics of the defect in the construction works. this paper has looked specifically at one characteristic: the entity entity capable of detecting the defect and its liability. comparisons were made between united states, a common law jurisdiction, and lithuania law, a civil law jurisdiction. the ability to detect defects depends upon the qualification or characteristics of the person involved in conducting the inspection. an contractgor has a greater responsibility for detecting defects which occur during construction than the architect. the architect has a greater responsibility for detecting defects related specifically to the plans and specifications. in addition to the qualification or characteristic of the person involved in the inspection, the required scope of the inspection is relevant. a construction supervisor usually inspects on a daily basis while government building authorities inspect on occasion or only at certain points in the work. in both legal systems contractors and technical supervisors are most capable of detecting the defect and therefore liability will usually rest there although designers maintain liability for defects caused by their designs. lituanian law places some responsibility upon nonprofessional owners for detecting defects while u.s. law does not. under u.s. law however, it is clear that owners, bot professional and nonprofessional, are liable to users of the construction works for 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(2015). application of social network analysis for analyzing the relationships between root and direct causes of defects. modern applied science, 9(12), 12. https://doi.org/10.5539/mas.v9n12p12 copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. identification of preferred sources of information for undertaking studies in the faculty of engineering management at poznan university of technology magdalena k. wyrwicka1, beata mrugalska2 1, 2faculty of engineering management, poznan university of technology, ul. strzelecka 11, 60-965 poznan, poland e-mails: 1magdalena.wyrwicka@put.poznan.pl; 2beata.mrugalska@put.poznan.pl (corresponding author) received 09 december 2014; accepted 19 january 2015 abstract. since 2010 a survey has been conducted among first-year students about sources of information which influence the decision of undertaking field studies in safety engineering, management engineering and logistics in the faculty of engineering management at poznan university of technology. the goal of these analyses is both to assess the effectiveness of promotion and also show trends in the use of diverse channels of information transfer of studies. the results of the investigation show that internet promotion via university and faculty website plays the dominant role but also direct promotion, such as opinion of older friends, is crucial. furthermore, from year to year the analyses indicate the significant increase of official media and reveal that the prospective students rely on a few sources of information simultaneously. keywords: communication channel, higher education, high school graduate, information, information-seeking behaviour, promotion, source of information, university choice. jel classification: i21. 1. introduction in the recent two decades university education has expanded to a remarkable extent in poland. it results from the fact that before 1990 the higher education system in poland comprised only state institutions, and the exception was the non-state catholic university in lublin. in 1990, the new act on schools of higher education established rules for nonstate institutions of higher education. in the consequence, in the academic year 2013/2014 we had 467 higher education institutions whereas in 2000/2001 there were only 310. these institutions are facing now increasingly complex challenges as the size of higher education age groups is decreasing. in 2000, 1 584 804 students were enrolled in all types of higher education institutions, whereas in 2005 this number increased to 1 953 832. since then it has been dropping and it amounted 1 676 927 students in 2012 (cso 2013). b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(1): 126–139 doi:10.3846/bme.2015.257 http://dx.doi.org/10.3846/bme.2015.257 127 business, management and education, 2015, 13(1): 126–139 on the other hand, modern technology provides a variety of new information delivery systems, sources and channels, which are accessible at anytime from anywhere. however, it is important to emphasise that the easy access to them does not have to mean that all retrieved information is relevant, reliable, valid and of sufficient quality. therefore, the range of information resources contributes to the need to identify and select the most appropriate one. therefore, there is a demand in a deeper understanding of the sources of information prospective students’ use when enrolling to college or university. in the paper the problems of higher education institutions in poland are highlighted. the analysis of the existing theoretical and methodological potential about information seeking behaviour and sources of information is also presented. it provides a background to the investigation part where the results of the questionnaire survey conducted among students in the faculty of engineering management at poznan university of technology are shown and widely discussed. the final part of the paper summarizes the following discussion and provides some suggestions for future research. 2. previous research in recent decades science and technology have developed rapidly and brought major changes in the ways in which information is being sought and used. information seeking behaviour involves activities that are undertaken to identify information needs, search for information, evaluate and select it, and finally use to satisfy its needs (wilson 1999). various factors can be differentiated that determine the information seeking behaviour based on an individual or a group of individuals. thus, it is vital to recognize the purpose for which information is needed, its environment, operator’s skills, its channels and sources, including both active and passive seeking, and limitations (robson, robinson 2013; timmers, glas 2010). information-seeking behaviour of children, young people, students, researchers, and professionals has been the interest of the research for decades (ansari, zuberi 2010; brussert 2011; cluver 2013; khosrowjerdi, iranshahi 2011; oláh et. al 2014; sokkary 2013). however, initially, most of the studies were primarily focused on evaluation of library collections and lead to the design of appropriate information systems and services (halder et al. 2010; nesset 2014). for the aim of this paper in further analysis of the existing theoretical and methodological potential only high school graduates were taken into account. selecting university is a decision-making process, which relies on an individual choice (gati, asher 2001). it is connected with the topic of career and it creates a “mini-cycle”, which constitutes a part of the whole career development cycle (germeijs et al. 2012). the choice process of educational institution encompasses the following five steps: 128 m. k. wyrwicka, b. mrugalska. identification of preferred sources of information for undertaking studies... − needs and motives, − information gathering, − evaluating alternatives, − decision and post-choice evaluation. a need or motive is usually a result of a perceived lack and when the student realizes it he starts to pursue higher education and searches for information about its possible providers. on the basis of the possessed experience and knowledge an evaluation between alternatives is established and choice is done. each choice is evaluated in time (al-fattal 2010). numerous factors influence information gathering process as applicants have different expectations and perceptions of the university degree benefits. they are depicted in 11 groups in figure 1. for example, prospective students are affected by different opinions of various reference groups such as parents, siblings, friends, teachers, high school and college counsellors, who have smaller or bigger impact on the individual (navrátilová 2013; kim, gasman 2011). the background also seems to determine the decisions of the students as it is proved that parents who went to college themselves, support much more their children in education process than those who did not attend it (dumas, lambert 2011; kim, gasman 2011). moreover, other studies showed that children from a lower socioeconomic background have even a smaller chance to get the qualification for university entrance (solga, dombrowski 2009). in many cases it may result from the high school context and location (bell et al. 2009; mangan et al. 2010; rowan-kenyon et al. 2008). other critical factors in the students’ decision of a place to further studies are career prospects (kinsler, pavan 2011; beffy et al. 2009) and reputation of the university, its programmes and rankings (brown et al. 2009; munisamy et al. 2014; ciriaci, muscio 2014). fig. 1. factors affecting students’ university choice (source: created by the authors) university choice individual (collegues) society (family) educational background carrier advisors mass media university facilities carrier prospects promotional materials university staff reputation rankings 129 business, management and education, 2015, 13(1): 126–139 it is also revealed that financial aspects (e.g. tuition, scholarships, loans, grants, cost of living and the ability to work) are also of high importance for students (cross, goldenberg 2009; dunnett et al. 2012; pampaloni 2010; rodic et al. 2012). sometimes they are even a key factor as on the basis of them the decision is undertaken to not study at all (heine et al. 2010). following the study conducted by the association of higher education facilities officers (june 2006) it is revealed that students indicate the following university facilities as a key factors to consider when choosing higher school: library (73.6%), technology (53.6%), classrooms (50.9%), residence halls (42.2%) and exercise facilities (35.5%). although the factors mentioned above have been identified as influential in the university choice process, there might be still discrepancies due to nation, gender and religion (kim, gasman 2011; ivy 2010; obermeit 2012; taulke-johnson 2010; sojkin et al. 2012). for educational institutions it is very important to possess knowledge of information, which was taken into account during such decision, as it allows them to prepare the right promotional strategy which is target at the defined audience (blackwell et al. 2001; navrátilová 2013). therefore, it is vital to discover what kind of information is supposed to be get, and from what sources it will be collected. studies have shown that it is possible to differentiate several sources that are the most influential for students to collect information. according to evans (1995), the major source of information is an institution’s staff and their direct or phone enquiries, whereas taylor (1992) suggested friends’ advice and pimpa (2005) underlined the role of family. in particularly, alonderiene and klimavičiene (2013) emphasized the role of parents and wiese et al. (2010) mentioned siblings. furthermore, other studies revealed the importance of the role of career advisers in information provision (james et al. 1999; foskett 2009), current and prospecting students and employers (mupemhi 2013). however, kotler and armstrong (2008) emphasized the need of division of information sources into the following four groups: − personal non-marketer controlled (e.g. family, friends, acquaintances), − personal marketer controlled (e.g. sales representatives), − non-personal non-marketer controlled (e.g. mass media), − non-personal marketer controlled (e.g. advertisements, prospectuses). he indicated the significance of the personal sources as they are a starting point for a student’s information gathering and in the further steps they supplement non-personal sources. in other studies it is shown that a highly influential role has an institution’s promotional materials such as guides, leaflets and prospects (pasternak 2005). but on the other hand, eckel (2007) noticed that information materials are generally poorly designed (not detailed enough or difficult to understand) and do not contain sufficient information for students and their parents for making comparisons between universities. rankings 130 m. k. wyrwicka, b. mrugalska. identification of preferred sources of information for undertaking studies... seem to be also helpful in undertaking decision which university to choose to study but nowadays they become to have a de-contextualised symbolic value which is no longer related to its original (kehm 2014). according to kim and gasman (2011) and pampaloni (2010) students willingly visit campuses to get direct information. on the other hand, it happens that young people, when they have a direct contact with educational institution, get overloaded with data which makes them more difficult to make decisions (drummond 2004). however, in the last decade it is noticed that more and more attention is paid to social media. the data presented in the 2014 social admissions report (pratt et al. 2014) reveal that 68% of secondary students use social media to find colleges and on the other hand 73% of universities interact with the prospective students using it. social media provide the information not only via university web pages and blogs but through such informal media such as facebook, google+, instagram, linkedin, myspace, pinterest, twitter and tumblr (reddy 2014; pratt et al. 2014). as far as university websites are concerned, 84% of prospective students indicate it as the most important source which supports their decision-making process concerning university choice (ashburn 2007). traditionally, the university website provides general information about school, its campus, academic programmes and news. in the past it used to be updated rarely, only some small parts of it were changed a few times per a month. however, this situation has changed completely in recent years. they have started to be dynamic sources of information which resemble storytelling, include videos and live updating events calendars. they allow to interact with a university community, current students, alumni, faculty, and staff. what is more, such websites include interactive virtual tours of the campus (hussey 2011). moreover, rss (really simple syndication) feeds users can subscribe to it. such a tool allows to get the latest news without having to search the web in the user’s reader. it collects the news on the basis of the reader’s set up. the examples of such readers are bloglines and my yahoo (web-based readers) or pressfeed reader or newsgator (downloadable newsreaders) (pressfeed 2010). on the other hand, many higher education professionals have already recognized the opportunities which informal media provide. following the 2010 pew internet project survey it can be noticed that 73% of online recent school leavers, who are potential prospective students, use social networks. the similar amount of young adults (72%) admits to communicate about their life also on networking sites (lenhart et al. 2010). moreover, the other research studies show that twitter is recognized better (30.7%) than other internet user (10.7%). its recognition seems to increase as 71.8% of faculty declares to use twitter more often (magna 2009). it results from the fact that it is a platform which enables to engage, participate and collaborate the prospective students in real time. it is based on a content strategy: act and interact. acting means providing news of interest, events, photos or statistics whereas interacting is observing what is 131 business, management and education, 2015, 13(1): 126–139 said, answering questions, updating, or congratulating on accomplishments (hussey 2011). the greatest advantage of this new media is that it allows “the democratization of the creation, publishing, distribution and consumption of media context, and the real-time generation of new, unregulated content” (reddy 2014). however, 53% of 243 schools admit that they monitor what is written about their institutions (barnes 2009). in social media the most important roles as sources of information pay admissions counsellors (36%), currently enrolled students (32%), other admitted students (29%), guidance counsellors (28%), administrators (23%), faculty (20%) and alumni (13%) (pratt et al. 2014). furthermore, the prospective students precisely indicate that are interested in receiving instant messaging with the admissions counsellors (72%), reading blogs written by faculty members (64%) and profiles or blogs by current students (junco, cole-avent 2008). some other social networks as ratemyprofessors.com and stumbleupon also offer possibility of sharing, rating and recommending data on educational context. these are the places where people exchange information about the university staff, their skills and competences (reddy 2014). when the sources of information are identified, a promotional effort to build communication channels, which will provide this information, should be done (navrátilová 2013). for this aim education institutions can create two types of communication channels (koekemoer 2010): − pull, − push. pull channels involve the user in whereas push channels are responsible for delivering information to its users so they engage the educational consumers only in the process of receiving it. communication channels can be also diversified into: − personal, − non-personal. personal channels comprise two or more people communicating directly with each other. for instance, it can be communication face to face, through personalized mails, over the telephone or public speaking (clemente 2002; sandhusen 2008). in the last years more and more important instant messages and independent sites, that allow to contact with its clients, have become. in the future it is supposed that this distinction will be made into three types of communication channels: − advocate, − expert, − social. advocate channels involve organization people who contact the prospective student in the target market. expert channels are those where independent experts make statements to the audience whereas social channels encompass neighbours, friends, family members and associates who influence target person (kotler et al. 2009). 132 m. k. wyrwicka, b. mrugalska. identification of preferred sources of information for undertaking studies... the advantage of personal communication channels is the possibility of personalizing the message and receiving feedback. non-personal communication channels involve message transmittance without personal contact or interaction. the examples of them are: print (newspapers, magazines, leaflets, guides and direct mailing), broadcast (radio, television), electronic (audiotape, videotape), display (billboards, signs, posters), publicity, special events and atmospheres, or so called “packaged environments” which are responsible for creating or reinforcing a client to purchase a product which is an education (such as viewing rooms) (sandhusen 2008). they can be also used to encourage personal communication via stimulating opinion leaders who later influence prospective educational consumers (clemente 2002). 3. materials and methods the purpose of this study was to determine sources of information which have an impact on undertaking studies. for this aim a theoretical review of previous researches in this area was done and then practical investigation was carried out among students of the first year of bachelor and master science programme. the respondents studied such fields as logistics, management engineering and safety engineering in the faculty of engineering management at poznan university of technology. the modes of their studies were both daily and extramural. the study was based on a questionnaire that was distributed to the students before and after lectures in the first semesters in the years 2010–2013. all the questionnaires were valid what allow us to gather 1650 samples (481 in 2010, 456 in 2011, 350 in 2012 and 363 in 2013). the questionnaire consisted of eight questions from which seven were multiple choice questions with at least two answers. in some of them it was also possible to add more detailed information. the last question was open-ended so the students could add any sources of information not mentioned in the questionnaire. it allowed to collect a wider range of opinions. 4. results, discussion and limitations in order to indicate the most important sources of information for enrolling studies in the faculty of engineering management at poznan university of technology the investigation was conducted in the four following years and its results are presented in figure 2. the studies have shown that in additional to formal information sources, high school graduates also relied heavily on informal communication channels to seek for information about studies. however, internet was chosen as the most often consulted source. analysing this information in details (table 1) it can be noticed that the respondents mainly used university and faculty website (48.76% and 38.84%, respectively). in most cases they did it directly which means that they had already known university and faculty website. it rarely happened that some browsers were used for this aim. 133 business, management and education, 2015, 13(1): 126–139 fig. 2. sources of information for undertaking studies in the faculty of engineering management at poznan university of technology (source: created by the authors) the research participants indicated people as the second most suitable source of information. they mainly relied on the opinions of their friends (41.32%) and family (21.21), and only sometimes on employers and other (ca. 1%). according to the study more than one-third of responses concerned the guides to higher education as a source of information for enrolling studies. the resources published by the university were the highest assessed. when traditional news media are taken into account it appeared that television was indicated 56 times (overall ca. 15%) and radio was only chosen 20 times (ca. 6%). the newspapers, in particular, local ones, are a source of information in only 7%. on the basis of the results of the study it can be said that modern news media such as internet is the most often perceived as the preferred source of information in contrast to traditional ones among young people. however, verbal communication still leads to an efficient flow of information. seeking for knowledge about studies the attention is also paid to materials especially devoted to this issue such as guides and leaflets rather than advertisements in newspapers. during educational fairs the graduates compile a wide range of competitive information on education and its suppliers – educational institutions. these results of the study are comparable with the investigations presented in chapter 2 of this paper where an enviable role of institution and family is emphasised in the choice of higher schools. so, it can be noticed that directly involved factors have much more significant influence than indirect ones such as media. the limitation of the study is not a possibility of finding a correlation between variables what could help to better understand the choice of communication channels. 0 20 40 60 80 100 120 140 160 internet people guide to higher education educational fairs newspapers television radio other 134 m. k. wyrwicka, b. mrugalska. identification of preferred sources of information for undertaking studies... over the years the questionnaires were not kept and only data were collected in files. moreover, this study was conducted in only one faculty so the respondents might have an impact on the final results. it is also not possible to define any trend for the whole university. furthermore, it could be interesting to compare these data with other higher schools. 5. conclusions contemporarily, young people have an opportunity to use many communication channels for data gathering. however, in the educational point of view, it is crucial and vital to identify the preferred ones to be able to provide appropriate promotion as the table 1. detailed sources of information for undertaking studies in the faculty of engineering management at poznan university of technology (source: created by the authors) source of information number of answers(n = 363) % internet university website faculty website directly browser 177 141 105 43 48.76 38.84 28.93 11.85 people colleagues family employer other 150 77 6 4 41.32 21.21 1.65 1.10 guide to higher education published by poznan university of technology national regional 104 18 7 28.65 4.96 1.93 educational fairs organized by poznan university of technology regional organized by other higher school 78 19 5 21.49 5.23 1.38 television local national 51 5 14.05 1.38 newspapers local national 29 23 7.99 6.34 radio regional national afera 13 4 3 3.58 1.10 0.83 other 1 0.28 135 business, management and education, 2015, 13(1): 126–139 number of high school graduates is decreasing in contrast to the number of educational institutions. therefore, the study was carried out among the students of the first year of bachelor and master science programme in the faculty of engineering management at poznan university of technology. on the basis of the obtained data it can be concluded that the internet was identified as the most suitable source of information. almost 50% of the students indicated the university website as the basic knowledge provider about the studies. the faculty website was directly searched by 39% of the prospective students whereas 29% of them used a browser to find it. majority of the respondents indicated also the significant role of friends and family in the process of enrolling studies. however, it must be emphasized that colleagues (41%) and family (21%) were indicated as the most 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students’ university choices, studies in higher education 35(3): 247–261. http://dx.doi.org/10.1080/03075070903015755 139 business, management and education, 2015, 13(1): 126–139 taylor, m. 1992. post-16 options: young people’s awareness, attitudes, intentions and influences on their choice, research papers in education 7(3): 301–335. http://dx.doi.org/10.1080/0267152920070305 timmers, c. f.; glas, c. a. w. 2010. developing scales for information-seeking behaviour, journal of documentation 66(1): 46–69. http://dx.doi.org/10.1108/00220411011016362 wiese, m.; van heerden, c. h.; jordaan, y. 2010. the role of demographics in students’ selection of higher education institutions, acta commercii 10(1): 150–163. wilson, t. d. 1999. models in information behavior research, journal of documentation 55(3): 249– 270. http://dx.doi.org/10.1108/eum000000000714 magdalena k. wyrwicka. phd, dsc is a professor and a dean in the faculty of engineering management at poznan university of technology in poland. as a phd in technical sciences (her work applied to implementation of automation), she studied the issues of human resource management and small and medium size enterprises’ management at witschaftsuniversität in vienna which constituted the basis for her postdoctoral degree in the scope of management science and it centred on a range of problems connected with organizing an enterprise’s development. she is a licensed teacher of german refa (verband fϋr arbeitsgestaltung, betriebsorganisation und unternehmensentwicklung) in the elementary scope and production planning and control. magdalena k. wyrwicka is an author and a co-author of more than 170 publications. her scientific research concentrates on endogenous organization premises concerning the enterprise development and companies’ networks. since october 2009 to december 2011 she has been managing a project called “foresight ‘wielkopolska’s economic networks’ – scenarios of knowledge transformations supporting an innovative economy” in the scope of an operational programme of an innovative economy. beata mrugalska. phd, eng. is a researcher and lecturer at the chair of ergonomics and engineering quality in the faculty management engineering in poznan university of technology. she received the msc degree in enterprise management and the phd degree in machinery construction and operations from poznan university of technology (poland) in 2001 and 2008, respectively. her current research interests include robust quality control, robust product design and human factors. beata mrugalska has published more than 20 papers in journals and conference proceedings. she is an author and co-author of 5 monographs and 26 book chapters. copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. transparency of university rankings in the effective management of university marta jarocka faculty of management, bialystok university of technology, ul. wiejska 45a, 15-351 białystok, poland e-mail: m.jarocka@pb.edu.pl received 09 december 2014; accepted 10 february 2015 abstract. university rankings are extremely important not only for future student, but also for universities themselves. they have a large impact on the institutions of higher education. a lot of universities believe, that rankings help them to maintain and create a reputation. ranking systems function as some kind of fashion arena, where universities make comparisons between themselves. universities want to improve their position in published classifications, so very often they try to change their policy and strategy. they also try to influence the ranking indicators, for example by hiring nobel prize winners. therefore, there is an increasing need for reliable and transparent information about schools. however universities need not only statistical data, but also the tools, which will be useful in their comparisons and evaluations. the article presents the possibility of using one of the methods of graphic presentation of multidimensional empirical data structure, so called rgm, proposed by m. rybaczuk. thanks to this method universities could easily compare one another. they also could identify the fields of their activities, in which they are able to be better. the proposed way of graphical presentation of the universities could be a useful addition to traditional rankings, which just show us a lists of schools from the best to the worst. keywords: university, ranking, higher education, strategy, management, classification. jel classification: i23. 1. introduction according to van vught and westerheijden (vught, westerheijden 2010), international discussions on higher education have given rise to a new concept called “transparency”, which relates to the need to provide information about universities’ activities. it is “perceived as a set activities intended to provide proof of quality to higher education institutions’ external stakeholders, then creating transparent entails providing the information which these stakeholders need in order to form judgments and make decisions.” b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(1): 64–75 doi:10.3846/bme.2015.260 http://dx.doi.org/10.3846/bme.2015.260 65 business, management and education, 2015, 13(1): 64–75 (vught, westerheijden 2010). it is not easy to obtain reliable and transparent information about universities, mainly due to the complexity of the systems of higher education. it requires so-called transparency tools (ziegele 2013). nowadays there are many forms of evaluations and comparisons of higher education institutions such as ranking, classification, college guide, accreditation, typology, ratinig and benchmarking (vught et al. 2005, 2008; nazarko et al. 2009; hazelkorn 2012; nazarko, kuźmicz 2013). in author’s opinion the most popular are university rankings. rankings list, as defined european commission, “items in a hierarchical order according to identified criteria. rankings compare universities sing weighted indicators which are aggregated, and then hierarchically ordered.” (european commission 2010). the main aim of university rankings is to present the relevant comparative information about the position of particular school. according to j. sadlak, director of unesco-european centre for higher education (unesco-cepes), rankings inform various social groups about the condition of the universities, but also stimulate competition in higher education sector (sadlak 2007). in bibliography there has been a few authors who said that rankings have considerable influence of the sector of higher education (liu, cheng 2005; thakur 2007; clarke 2007; kehm, stensaker 2009; marginson, van der wende 2009). the outcomes of university rankings are often used in the management of universities. this was confirmed by international researches, which were carried out under the auspices of the institute for higher education policy (ihep), the institutional management in higher education (imhe) and the international association of universities (iau). the impact of university rankings on the decision of their stakeholders was analysed (hazelkorn 2007, 2008). it turned out that the behaviour of higher education institutions is determined by ranking systems. the top universities believe that rankings can help them to maintain and create their reputation. almost half of the respondents used their position for advertising in various publications, press releases, presentations and university’s website. it is also worth drawing attention to the fact that the majority of respondents admitted to taking strategic actions after publishing rankings’ results. they tried to identify and eliminate the weaknesses of their institutions and even reorganize them. they also tried to influence the criteria of rankings, for example, by hiring nobel prize winners. in a few cases, respondents appointed the team to supervise changes, which had led to improving their position in the rankings. moreover, over 76% of respondents admitted to monitor the activities of other universities in the country and 50% of them observed the universities around the world. therefore, there is an increasing need for reliable and transparent information about universities. current university rankings are usually presented in the form of ranking list, so-called league table. the league tables, as presented by a. usher and j. medow, are “ranking systems that provide a single integrated score that allows an ordinal ranking of entire institutions” (usher, medow 2009). the main idea of the majority of university ranking systems is the creation of the aggregated indicator, also called synthetic 66 m. jarocka. transparency of university rankings in the effective management of university variable, which is the basis of hierarchical ordering of analyzed universities. but universities need not only linearly ordered data, which are included in most of published rankings, but also the tools, which will be useful in their comparisons and evaluations. in author’s opinion, university rankings, which only show lists of schools from the best to the worst, should also present the results of their comparison in graphical form. for this purpose one of the methods of graphic presentation of multidimensional empirical data structure, so called rgm (rybaczuk 2002), could be used. thanks to this method universities could identify the fields of their activities, in which they are able to be better. then, more efficient management of those institutions would be possible. 2. the rmg method / theoretical framework the set of n universities ω = {o1, o2, …, on}, characterized by l features x = {x1, x2, …, xl}, is the point of the method of graphic presentation of multidimensional data. it can be presented in the matrix x, where xij is the value of j-th feature for i-th object. x = 11 12 1 21 22 2 1 2 ... ... ... ... ... ... ... l l ij n n nl x x x x x x x x x x        = =         x , (1) where: n – number of universities, i = 1, 2, …, n, l – number of features, j = 1, 2, …, l. let s is a structure of data in the l-dimensional space of features defined as the relationship: – university – university, that is, the similarity of objects is described by one of the measures of distance, – feature – feature, characterized by a measure of interdependence of indicators, – university – features, expressing the normalized values of j-th indicator for i-th university. the aim of this method is to obtain a picture of s* of the structure s in the area of a circle in such way that the images of features and objects are presented as points on the plane. the features are placed on a circle with a radius of value 1, and objects inside it, on the surface delimited by the circle. to such assumption concerning the distribution of images of objects and features, data from matrix x must be normalized. the values of each xij should be included within the interval [0,2]. an example of the procedure of normalization is: 1, max − = + − ij j ij ij j i x x z x x (2) where: i = 1, 2, …, n; j = 1, 2, …, l. 67 business, management and education, 2015, 13(1): 64–75 the matrix of data after normalization takes the following form: 11 12 1 21 22 2 1 2 ... ... . ... ... ... ... ...        = =        k k ij n n nk z z z z z z z z z z z (3) in such case, the problem of mapping of multidimensional data in a circle on the plane comes down to finding the set of points ( , )i ix y , i = 1, 2, ..., n, which are the coordinates of images of the i-th objects and )ˆ,ˆ( jj yx , j = 1, 2, ..., l, which represents the coordinates of the images of the j-th features. it can be solved by finding the minimum of the following function: 2 1 1 ( ) ( ) min, = = = − →∑ ∑ n k ij ij i j f d z d (4) where: dij – distance between the image of the j-th feature and the i-th object, expressed by the formula: 2 2ˆ ˆ( ) ( )ij j i j id x x y y= − + − (5) with following limitations: 2 2 1,+ ≤i ix y (6) where: i = 1, 2, …, n, 2 2ˆ ˆ 1,+ =j jx y (7) where: j = 1, 2, …, l. figure 1 shows the essence of graphic presentation of four objects: u1, u2, u3 and u4 characterized by two features: x1 and x2 in the area of a circle on a plane. the rmg method allows mapping points of placing features and universities in such way that minimize the divergence between the values of features describing universities and object-feature distances on the plane. as a result, the observation of the full data structure (university-feature, university-university and feature-feature relations) is possible. thanks to this the comparative analysis of universities can be carried out, however: – the closer the points representing images of universities are located, the more similar universities are; – the closer the points representing images of features are located, the stronger positive correlation between them is; – the more clearly images of features are located on the opposite side in relation to the centre of the circle, the stronger the negative correlation between them is; – the larger distance of the point representing the image of the object from the image’s features, the higher level of features for a given object is, and vice versa. 68 m. jarocka. transparency of university rankings in the effective management of university 3. example comparison of three top polish universities in the research study, the data from perspektywy university ranking 2012 (perspektywy webside) was used. this ranking presented the list of 88 polish universities. academic higher education institutions (academic heis) were characterised by 33 indicators, which were divided into 6 dimensions, such as prestige, academic potential, academic effectiveness, innovation, learning environment and internationalization. table 1 shows the list of indicators, which were used to prepare perspektywy university ranking. in order to avoid writing full name of particular criteria the abbreviations were introduced. due to the large number of criteria, the set of data was verified. to eliminate the indicators, which are strongly correlated, parametric hellwig method (hellwig 1981) was used. implementation of this task will contribute to better transparency of the results of the comparative analysis. the final set of data includes 21 indicators. it is shown in the table 1 (the indicators are in bold). firstly, the classic form of ranking, which presents a hierarchical ordering of universities from “the best” to “the worse”, was analysed. such example list of universities is shown in table 2. the author doesn’t present the whole list of schools, because it is available on the perspektywy’ website. in table 2, there are only those, which opened perspektywy’ classification in 2012. the selected criteria and their values of ten top universities are also presented. fig. 1. graphical presentation of the data structure using the rmg method (source: own study based on rybaczuk 2002; rybaczuk, nazarko 2007) 69 business, management and education, 2015, 13(1): 64–75 table 1. the criteria of perspektywy university ranking 2012 (source: perspektywy’ webside 2012) group of criteria sign criteria prestige p1 employer reputation p2 academic reputation (teaching) p3 international recognition p4 talented students application innovation i1 patents and licenses i2 eu funding i3 infrastructure for innovation academic potential pn1 parametric evaluation pn2 right to confer phd with habilitacja degree pn3 rights to award phd degrees pn4 staff with highest qualifications pn5 accreditations academic effectiveness en1 faculty development en2 academic titles awarded en3 external funding for research en4 publications en5 citations en6 h-index en7 eu programmes en8 phd students learning environment ws1 students – teaching staff ws2 e-holdings ws3 printed library holdings ws4 library facilities ws5 support for students’ scientific interests ws6 sports achievements internationalization um1 programs in foreign languages um2 students studying in foreign language um3 student exchange (outbound) um4 student exchange (inbound) um5 international students um6 foreign teaching staff um7 multicultural composition of student body note: the final set of data, which were used in the research, are in bold. 70 m. jarocka. transparency of university rankings in the effective management of university table 2. ten top polish universities from perspektywy university ranking 2012 (source: perspektywy’ webside 2012) ranking university selected criteria p1 p2 p3 p4 i1 i2 1 jagiellonian university 90.53 100 96.89 47.82 8.35 71.94 2 university of warsaw 98.88 92.5 100 87.64 3.02 100 3 adam mickiewicz university 77.17 58.3 15.74 19.61 11.8 71.29 4 warsaw university of technology 100 42.05 32.15 34.85 43.45 76.41 5 wrocław university of technology 97.7 33.15 8.64 24.1 100 49.23 6 agh university of science and technology 98.49 31.33 11.28 63.22 73.81 59.23 7 university of wrocław 69.28 36.32 8.46 16.22 2.3 21.44 8 lodz university of technology 74.87 14.43 0.87 5.75 53.38 79.92 9 nicolaus copernicus university 64.28 21.01 4.97 13.76 10.79 45.94 10 poznan university of medical sciences 39.61 17.72 2.15 53.37 2.01 14.52 the data about polish universities presented in table 2 were normalized according to following normalization formula: / max{ },=ij ij ij i z x x (8) where: xij – the value of the j-th features for i-th university. according to the author, basing only on information from table 2, it is not easy to compare selected universities. it is very difficult to identify our university’s weaknesses, mainly due to the size of matrix of data (in such case: 88 universities x 33 indicators). but it would be possible to do thanks to graphical comparison on the plane. in order to present the results of the rmg method, three top polish universities – jagiellonian university (u1), university of warsaw (u2) and adam mickiewicz university (u3) – were compared. figure 2 shows the result of graphical presentation of the multidimensional data related to the selected higher education institutions. the positions of points in the circle, that illustrate universities, depend on the levels of criteria. basing on the graphical presentation of the universities structure (fig. 2), universities can easily compare the levels of their indicators. they can indicate their strengths as well as weaknesses. when we try to interpret the distance university-feature, we should remember, that the bigger it is, the higher level of realization of the feature assigned to this unit becomes. 71 business, management and education, 2015, 13(1): 64–75 the position of the point u1 mostly shows, that jagiellonian university is characterized by a high level of academic effectiveness, which is determined by such indicators as: faculty development (en1), academic titles awarded (en2), publications (en4) and phd students (en8). but from the external funding for research (en3) point of view, this institution, in comparison to others (u2 and u3), occupies the last place in this classification. furthermore, both jagiellonian and adam mickiewicz universities, as opposed to university of warsaw, are characterized by a high level of innovation. the level of innovation is expressed as a number of patents and licenses (i1) and outstanding innovative facilities (i3). moreover, university of warsaw is the best in such fields as: external funding for research (en3), staff with highest qualifications (pn4), sports achievements (ws6) and talented students application (p4). another example presents graphical presentation of the multidimensional data related to three top polish technical universities. warsaw university of technology (u4), wrocław university of technology (u5) and lodz university of technology (u8) – were compared (fig. 3). moreover, in order to personalize the comparison, the indicators were selected by one of the student. the student showed interest in the indicators, which belong mostly to two groups of criteria: within learning environment and internationalization. the following criteria are: e-holdings (ws2), support for students’ scientific interests (ws5), sports achievements (ws6), programs in foreign languages (um1), student exchange (outbound) (um3), eu funding (i2) and infrastructure for innovation (p3). basing on graphical presentation presented on figure 3, identification of diffrences between the universities is relatively easy. warsaw university of technology, as opposed to others, distinguishes itself by high level of such indicators as: sports achievements fig. 2. graphical presentation of the multidimensional data related to the selected heis (source: own study using the visualization program) – indicators within prestige – indicators within innovation – indicators within academic potential – indicators within academic effectiveness – indicators within learning environment – indicators within internationalization – universities 72 m. jarocka. transparency of university rankings in the effective management of university (ws6), international recognition (p3) and e-holdings (ws2). a huge number of programs in foreign languages (um1) is a strength of wrocław university of technology. therefore, lodz university of technology is the best in student exchange (outbound) (um3). basing on presented comparisions, universities would be able to identify their strengths and weaknesses and then they could take action to improve their position in the ranking. the results of such evaaluations could also be useful in the management of universities. this way of evaluation of schools could be very useful not only for institutions of higher educations, but also for young people and their families. they could compare selected universities. furthermore they could choose indicators which they are the most interested in. 4. conclusions university rankings became a subject of many scientific discussions connected mainly with methods of selection of data and weights, the presentation of classification’s results, as well as the reliability of data (proulx 2007; raan 2007; tofallis 2012; dill, soo 2005; rocki 2005; saisana, d’hombres 2008; wende 2008; harwey 2008). the results of this article may be a significant voice in the ongoing debate. university rankings are an important source of comparative information for various stakeholders. year by year, they have an increasing impact on the higher education institutions and their environment, influencing, for example, the decisions of the future students in their choice of schools, the government policy of financing higher education institutions as well as the way of managing the universities. therefore, it is critical for the ranking organizations to provide the public with the possibly most objective picture of the position of particular universities in relation to one another (jarocka 2012). fig. 3. graphical presentation of the multidimensional data related to three selected technical univesities (source: own study using the visualization program) – indicators within prestige – indicators within innovation – indicators within learning environment – indicators within internationalization – universities 73 business, management and education, 2015, 13(1): 64–75 the quality of evaluation of institutions of higher education depends on the reliability of information, but also on way of their processing and presentation. the large number of details criteria, which can be use in university rankings, does not necessarily contribute to greater transparency of the higher education system. therefore, the selection and aggregation of the data and presentation of the results of comparative analysis are very important problems in every ranking’s methodology. moreover, according to the author, the tool for comparative analysis should be able to generate information, which is relevant from the point of view of different users. the final set of criteria should depend on their individual priorities and preferences. in author’s opinion, the ranking organizations should supplement the classic form of ranking, namely a hierarchical ordering of universities from “the best” to “the worse” by such tools, via which their stakeholders could make their own, individual comparisons. the proposed procedure of the graphical presentation of the multidimensional data allows to compare selected universities. it also makes it possible to decide which criteria of evaluation are the most important and interesting as well as which universities will be compared. it gives them possibility to find and compare similar schools in terms of specific purposes. 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approach to university rankings, higher education 63(1): 1–18. http://dx.doi.org/10.1007/s10734-011-9417-z usher, a.; medow, j. 2009. a global survey of university rankings and league tables, in b. m. kehm, b. stensaker (eds.). university rankings, diversity, and the new landscape of higher education. global perspectives on higher education, vol. 18. sense publishers, 3–18. wende, m. van. 2008. rankings and classifications in higher education: a european perspective, higher education: handbook of theory and research 23: 49–71. vught, f. van; bartelse, j.; bohmert, d.; burquel, n.; divis, j.; huisman, j.; van der wende, m. c. 2005. institutional profiles: towards a typology of higher education institutions in europe [online]. report to the european commission [cited 10 november 2014]. available from internet: http://doc. utwente.nl/53776/1/engreport05institutionalprofiles.pdf vught, f. van; brandenburg, u.; burquel, n.; carr, d.; federkeil, g.; kuźmicz, k.; nazarko, j.; rafael, j.; sadlak, j.; urban, j.; wells, p.; westerheijden, d. 2008. a practical guide: benchmarking in european higher education. european centre for strategic management of universities. vught, f. van; westerheijden, d. f. 2010. multidimensional ranking: a new transparency tool for higher education and research, higher education management and policy 22(3). ziegele, f. 2013. classification of higher education institution: the european case, pensamiento educativo. revista de investigación educacional latinoamericana 50(1): 76–95. http://dx.doi.org/10.7764/pel.50.1.2013.7 marta jarocka. phd student, researcher at the bialystok university of technology, poland. she does research on multidimensional comparative analysis in creating the university rankings. she has published over 30 publication related to classification and data analysis. she teaches mathematics, statistics and operational research to polish students. copyright © 2018 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. business, management and education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 1: 147–159 https://doi.org/10.3846/bme.2018.2198 *corresponding author. e-mail: aija.sannikova@inbox.lv introduction social enterprises belong to the social economy sector. their purpose is rooted in the targets of the european commission’s strategy europe 2020 (european commission, 2016): to promote a sustainable and competitive economy, social and territorial cohesion and employment in europe. unlike other agents of this sector, the framework of social entrepreneurship encompasses a specific target – social effect, which enterprises have to make through producing goods or services for the market in an innovative way (european commission, 2013). the role of social entrepreneurship in europe increases (lukjanska & cīrule, 2014). however, social entrepreneurship is a new phenomenon; therefore, it has to be researched in order to build up information and shape discussions on its expansion, taking into account economic, social and other preconditions in a particular region. development of social entrepreneurship in latvia aija sannikova1,*, inara brante2 1, 2university of ekonomics and culture, lomonosova 1/5, riga, latvia received 31 may 2018; accepted 05 june 2018 abstract. the development of social entrepreneurship as a special business type is in its beginning in latvia, therefore its development conditions have been researched very little. the legislation regulating this type of business activity commences on the 1st april 2018. in order to promote the development of social entrepreneurship and at the same time promote employment opportunities for unemployed persons who are less favoured, persons with disabilities and other socially vulnerable persons, the eu structural funds support for the realization of these strategic goals is available for social businesses. the research carried out a comparative analysis of the legal framework regulating social entrepreneurship in the baltic states and an analysis of economic preconditions and the support system for social entrepreneurship. the present research contributes to research on social entrepreneurship in two aspects: 1) the legal framework distinguishing this business form from others is analysed; 2) economic preconditions for social entrepreneurship as well as its socioeconomic goals and the relevant institutional framework in latvia are analysed. the subject of the research: preconditions and prerequisites for social entrepreneurship. methods of the research: the monographic method, statistical analysis and comparative analysis. keywords: social business, social entrepreneurship, legislation, employment, region. jel classification: k22, d02, j11, h74, r11. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bme.2018.2198 mailto:aija.sannikova@inbox.lv file:///d:/rasa_stankevi%c4%8diut%c4%97_2017-11-11/darbai/d%20a%20r%20b%20a%20i/z%20u%20r%20n%20a%20l%20a%20i/bme/bme_2018_16_1/txt/../../../appdata/local/microsoft/downloads/european commission file:///d:/rasa_stankevi%c4%8diut%c4%97_2017-11-11/darbai/d%20a%20r%20b%20a%20i/z%20u%20r%20n%20a%20l%20a%20i/bme/bme_2018_16_1/txt/../../../appdata/local/microsoft/downloads/european commission 148 a. sannikova, i. brante. development of social entrepreneurship in latvia the formation of an excellent environment for entrepreneurship in the eu member states and experience transfer to social enterprises promote the development pace of social entrepreneurship. however, a number of problems could be identified in the environment for entrepreneurship in latvia that can affect business development in the social economy sector. according to the world economic forum report (world economic forum, 2017), latvia ranked not high in business innovation and excellence (innovation and sophistication factors) (rank 58, score 3.7 out of 7) and the efficacy of corporate boards (rank 55, score 5.0 out of 7), while public trust in politicians (rank 95, score 2.5 out of 7) and market size (rank 96, score 3.2 out of 7) were ranked as low. as stressed by the national development plan of latvia (lr saeima, 2012), the drivers of an effective environment for entrepreneurship, including those of social entrepreneurship, are as follows: clear and competitive preconditions for business start-up, a complete legal framework for social entrepreneurship, a predictable tax policy, support for the development of social entrepreneurship and a high match between demand and supply in the labour market. since social entrepreneurship in latvia is at the initial stage of development, the preconditions for it has been little researched. the research aim is to perform an analysis of the legal prerequisites and economic preconditions for social entrepreneurship. 1. methods of the research and research limitations methods of the research: the monographic method, statistical analysis and comparative analysis. data on support measure participants were acquired in direct interviews and at meetings of the teams working on the legal framework for social entrepreneurship at the ministry of welfare of the republic of latvia. the subject of the research is preconditions and prerequisites for social entrepreneurship. research limitations. the research is based on an analysis of legal prerequisites and economic preconditions for the start-up of social entrepreneurship, including 1) an analysis of the latest available statistical data on unemployment in the regions of latvia (2017) and data on unemployment among age groups in latvia, which were compared with the data for 2013 when, in the authors’ opinion, a period of active preparation for social entrepreneurship began in latvia (within the meaning of the legal framework); 2) an analysis of support (financial, legal) for social entrepreneurship includes an analysis of funding available from the eu structural funds, an analysis of the application of the social enterprise law in relation to specific provisions and the commercial law in relation to general provisions as well as a comparative analysis of the legal frameworks for social entrepreneurship in the baltic states. abbreviations used in the research: social enterprise – se; limited liability company – ltd; social enterprise law in latvia – sell. 2. social enterprise as an actor of the social economy sector the concept of social enterprise is new. it is believed that social enterprises emerged in italy in the late 1980s and later in the other european countries (vukmirović, 2014). at present in europe, social enterprises as a specific form of business, just like cooperatives (housing cooperatives, agricultural cooperatives, worker cooperatives, consumer cooperatives) mutual business, management and education, 2018, 16(1): 147–159 149 societies, non-profit associations, foundations, are considered to be social economy sector agents (european commission, 2018). even though all agents of this sector are united by a number of common goals – social, ecological, cultural etc. –, which often lead to an understanding that this is a non-governmental sector or a non-profit sector, there are differences among the agents. the problem is larger due to the fact that the term social enterprise is explained in different ways and is often unclear (thomas, 2004). a social enterprise has some specific indications, the most important ones are as follows: 1) it operates in favour of society, fully or partly; 2) economic risks; 3) paid employees; 4) enterprise management autonomy; 5) limited profit distribution. for these reasons, an se is an intermediate link between a commercial enterprise and a non-profit one. entrepreneurship within social goals is specific to social enterprises; consequently, they more contribute to social solidarity within society. they create an opportunity for their actors to make economic and social gains without becoming investors or owners. a common feature of social economy enterprises is the fact that they, unlike conventional companies, serve their shareholders or the target group (european commission, 2018). the european commission believes that social enterprises are the driver of social innovation, as the services or products produced by them have to be competitive. the effect of social enterprises, as well as the social economy sector as a whole, is significant particularly in the field of employment  – 4.5 million working-age individuals were employed in this sector in the eu-27 in 2009–2010 (monzón & chaves, 2012). one can conclude that the role of the social economy sector increased  – 2.8 million individuals were employed in the social economy in 2002–2003, and most of them (92%) were employed by associations, foundations and other similar accepted forms of enterprises (european commission, 2013). in 2002–2003 the baltic states belonged to those european countries where the social economy sector was poorly developed; compared with sweden, where 11% of the population were engaged in the social economy, in the baltic states this sector comprised only 2% of the population. social enterprises in europe have no single legal form (european commission, 2013; monzón & chaves, 2012; lešinska, litvins, & pīpiķe, 2012), yet the following three forms are the most common: – cooperatives. for example, social cooperatives operate in poland, hungary, italy and greece, while in the united kingdom there are enterprises that work only in favour of society  – community interest companies. the main activity fields of cooperatives pertain to the social integration of target groups and employment integration. however, the distribution of revenue of cooperatives differs across the countries; – companies. social enterprises in finland and community interest companies (enterprises regulated by companies) in the united kingdom are those working only in favour of society, whereas in italy they represent for-profit enterprises; – free legal form. in this case, the status of a social enterprise is granted to an organisation regardless of the legal form and, actually, it is a brand. for example, such a legal form exists in finland. file:///d:/rasa_stankevi%c4%8diut%c4%97_2017-11-11/darbai/d%20a%20r%20b%20a%20i/z%20u%20r%20n%20a%20l%20a%20i/bme/bme_2018_16_1/txt/../../../appdata/local/microsoft/downloads/european commission file:///d:/rasa_stankevi%c4%8diut%c4%97_2017-11-11/darbai/d%20a%20r%20b%20a%20i/z%20u%20r%20n%20a%20l%20a%20i/bme/bme_2018_16_1/txt/../../../appdata/local/microsoft/downloads/european commission file:///d:/rasa_stankevi%c4%8diut%c4%97_2017-11-11/darbai/d%20a%20r%20b%20a%20i/z%20u%20r%20n%20a%20l%20a%20i/bme/bme_2018_16_1/txt/../../../appdata/local/microsoft/downloads/european commission file:///d:/rasa_stankevi%c4%8diut%c4%97_2017-11-11/darbai/d%20a%20r%20b%20a%20i/z%20u%20r%20n%20a%20l%20a%20i/bme/bme_2018_16_1/txt/../../../appdata/local/microsoft/downloads/european commission file:///d:/rasa_stankevi%c4%8diut%c4%97_2017-11-11/darbai/d%20a%20r%20b%20a%20i/z%20u%20r%20n%20a%20l%20a%20i/bme/bme_2018_16_1/txt/../../../appdata/local/microsoft/downloads/european commission file:///d:/rasa_stankevi%c4%8diut%c4%97_2017-11-11/darbai/d%20a%20r%20b%20a%20i/z%20u%20r%20n%20a%20l%20a%20i/bme/bme_2018_16_1/txt/../../../appdata/local/microsoft/downloads/european commission 150 a. sannikova, i. brante. development of social entrepreneurship in latvia the european commission (2013) gives the following definition of social enterprise: “a social enterprise is an operator in the social economy whose main objective is to have a social impact rather than make a profit for their owners or shareholders. it operates by providing goods and services for the market in an entrepreneurial and innovative fashion and uses its profits primarily to achieve social objectives. it is managed in an open and responsible manner and, in particular, involves employees, consumers and stakeholders affected by its commercial activities”. the definition indicates that particularly the social economy is a good example at the micro-level and how market economy principles dominate, while also making social impacts instead of profits (european commission, 2013). 3. development of social entrepreneurship in latvia and its role in the economy the authors who analysed the development of social entrepreneurship in latvia and in the eu (lešinska et al., 2012; l. dobele, a. dobele, & sannikova, 2010; dobele, 2013; lešinska, 2014; lukjanska & cirule, 2014; lr labklājības ministrija, 2018; european commission, 2013; european commission, 2016; european commission, 2011) find as well as the latest data on the establishment of social enterprises in 2017–2018 in latvia reveal that several periods could be distinguished in the development of social entrepreneurship in latvia: 1) the 1990s–2013; 2) 2013–2017; 3) from 2018 onwards. in the first period, the concepts of social economy, social entrepreneurship and social enterprise began to be understood not only in latvia but also in europe (dobele, 2013). nevertheless, the nature of social enterprises was still unclear in latvia in 2012–2013 (ltrk, 2013). the most important event and stimulus for social entrepreneurship was the 2009 report of the european parliament (2009), in which the european commission and the member states were called for recognising the social economy in legal acts and political priorities, contributing to its development and enshrining it in the legal acts. since 2011, the concepts of social responsibility and social enterprises have entered the political arena in latvia, and a response to it is the situation where a number of nongovernmental organisations and even enterprises, based on the concept of corporative ethics, call themselves social enterprises (lešinska et al., 2012). until 2018 in latvia, mostly non-governmental organisations were involved in the social field, and their legal form was usually an association, which means that it united particular individuals for the purpose of achieving a common goal (lešinska, 2014). many nongovernmental organisations acquired the status of public benefit organisation, which gave them an opportunity to receive higher aid intensity in regional project proposal competitions or to get tax relief. in the period 2013–2017 in latvia, a new legal framework for social entrepreneurship was gradually designed: 1) the cabinet of ministers of the republic of latvia adopted the conception “on opportunities to introduce social entrepreneurship in latvia” (30 october 2014); the cabinet of ministers adopted the “inclusive employment guidelines for 2015–2020” (12 may 2015); 3) since 2015, a team of the saeima has worked on a draft law on social entrepreneurship; 4) in 2016, ministry of welfare esf project no. 9.1.1.3/15/i/001 support for social entrepreneurship was started; in the result, the social enterprise law was passed on 12 october 2017 (lr saeima, 2017) and the development of binding legal acts was started. e:\downloads\european commission e:\downloads\european commission business, management and education, 2018, 16(1): 147–159 151 table  1. change in the economically active and economically inactive population aged 15–74 in latvia (source: authors’ calculations based on csp 2018) residents aged 15–74 2013 2017 change, 2017/2013 number number % employed 893.9 894.8 0.1 unemployed 120.4 85.4 –29.1 economically inactive 521.8 443.1 –15.1 problems with socially vulnerable groups, e.g. the disabled, pre-pension age people and other groups determined the economic need to improve the legal framework for social enterprises in latvia. even though the number of the unemployed among the population aged 15–74 decreased in latvia in 2017 compared with 2013 (–29.1%) and the number of the employed slightly increased (+0.1%), the absolute number of the unemployed indicated that the number of economically inactive residents was large in latvia (table 1). in 2017 in latvia, according to the statistical data, the total number of economically active residents aged 15–74 was equal to 980.3 thousand (69.0% of the total age group), of which 8.7% were the unemployed, while economically inactive residents represented 31.1% of the total age group. among the regions of latvia in 2017, the highest unemployment rate was in latgale region – 10.6%, in zemgale region it was 10.1% and in vidzeme region 8.0%, while the lowest unemployment rates were reported in pieriga region – 5.7%, riga region – 7.4% and kurzeme region – 6.5%. one of the target groups for social entrepreneurship in latvia is the population aged over 54. according to the authors’ calculations, the unemployed aged 55–74 totalled 16.0 thousand in latvia in 2017. one can conclude that unemployment problems in latvia in the period 2013–2017 were urgent in the country as a whole, in the regions and among certain age groups. among the economically inactive population, there were individuals who could not find a job for a long period and, consequently, lost or did not wish to acquire unemployed status. according to a public report by the state commission of physicians for health and work capacity examination (vdek 2017), there were 182.0 thousand disabled individuals in latvia in 2017, including those aged 18 and over – 173.8 thousand. many of them, particularly group i (14%) and group ii (48%) disabled individuals as well as those with functional impairment and mental diseases were not employed, as entrepreneurs incur additional costs to employ them, e.g. workplaces have to be equipped for this purpose or communication has to be adapted. a draft regulation “procedure for granting business support for social enterprises” (lr ministru kabinets, 2018) was made publicly available at a meeting of state secretaries held on 21 january 2018. applying for the status of social enterprise and, later, financial support from the eu structural funds (lr ministru kabinets, 2015, 2017) has been possible since the autumn of 2017. the data acquired by the research show that social entrepreneurship draws quite a lot of attention, and 45 ltd (48%) and 49 associations and foundations (52%), of which 58 (59%) had a positive decision, while 11% applications were not processed, applied for the status of 152 a. sannikova, i. brante. development of social entrepreneurship in latvia social enterprises in january 2018. as regards the regional aspect, enterprises, associations and foundations from riga region accounted for the highest proportion in the total applications (36%). the authors explain it by the region’s large contribution to gdp – according to the central statistical bureau, the gdp of riga region in real prices in 2016 made up 54.0% of the national gdp (csp, 2018). the first data for 2018 give insight into the fields of economic activity in which the enterprises (58) that acquired the status want to implement social entrepreneurship in latvia: employment integration (25%), health promotion, sports, cultural diversity and the environment (18%), promotion of an inclusive civic society (16%), social services (13%), enhancement of the life quality of target groups (13%), education (8%) and medical services (75). based on the experience of the applicants in social entrepreneurship, one can find that 25 (43%) were newly registered enterprises. in 2018, before the sell comes into force, the target groups for social entrepreneurship are determined by the cabinet of ministers based on the socio-economic situation in the country and the effects of it on individual target groups. even though the relevant regulations have not been adopted as of the time of working on the present research, one can conclude, based on the information acquired from the teams working on the legal framework for social entrepreneurship and their meetings where one of the authors participated, that the following socially vulnerable groups are going to be involved: 1) the disabled and persons with mental impairment; 2) persons fitting the status of poor family (person); 3) the unemployed having dependents, the unemployed aged over 54 and the long-term unemployed; 4) an ethnic minority  – the roma; 5) prison inmates or those released from imprisonment; 6) persons addicted to alcohol, drugs, psychotropic and toxic substances, gambling or computer games as well as those whose place of residence is a night shelter; 7) victims of human slavery and persons with refugee status granted in the republic of latvia, with alternative status or stateless persons; 8) orphans and children aged under 15 who have lost their parents as well as adults aged under 24 belonging to this group. the flow of the working-age population occurs in the economy (figure 2), as some individuals move from one economic sector to another or from the sector of economically 36% 23% 5% 10% 10% 16% riga region pieriga region zemgale region latgale region vidzeme region kurzeme region figure 1. percentage breakdown of qualification applications for the status of social enterprise by region of registration of economic activity of the applicants in latvia as of january 2018 (source: authors’ calculations) business, management and education, 2018, 16(1): 147–159 153 active residents (consisting of the employed (a) and the unemployed (b)) to the sector of economically inactive residents (c). in the context of social entrepreneurship, one can conclude that the identified target groups are also represented by individuals with poor (or even non-existent) professional experience and skills. this indicates that human resources, in particular, could become a factor decreasing the competitiveness of social enterprises if, at the same time, no other factors make their effects (melihovs & dāvidsons, 2006). besides, the location of a social enterprise in a particular region being at a different stage of development (world economic forum, 2013), in interaction with a potentially low level of knowledge of labour resources makes a different impact on regional development (sannikova, 2014; sannikova, a. dobele, & m. dobele, 2015). the adaptation of enterprises to the specifics of social entrepreneurship does not occur fast. quite often, significant support is needed for the start-up of entrepreneurship – funding or even ideas. insufficient financing, in particular, is one of the key problems in latvia, which limits the development of social enterprises (dobele, 2013). for this reason, eu structural funding available in the programming period 2014–2020 could be used to contribute to the development and initiatives of social entrepreneurship (lr ministru kabinets, 2015). eu structural funding and other kinds of public funding change the market balance and make a positive effect on labour market demand. the direct effects of eu structural funding (lr finanšu ministrija, 2007, 2011) might be viewed from four economic perspectives: 1) investment in equity capital (k); investment in human capital (h); 3) investment in the productivity of the factors of production (a); 4) investment in technological change (f). even though it is difficult to estimate an increase in human capital because the national account system does not provide an opportunity to acquire and accumulate the data, a change in it could be attributed to a change in labour endowment (l) that is exploited by entrepreneurs or to a change in labour productivity. the authors agree that an increase in human capital makes a positive effect on output (melihovs & dāvidsons, 2006). in the case of social enterprises, an increase in human capital, in particular, could affect the competitiveness and sustainability of natural resources and enterprise owners. figure 2. flow of the working-age population in the economy (source: authors’ construction) 154 a. sannikova, i. brante. development of social entrepreneurship in latvia 4. legal framework for social enterprises in latvia an analysis of legal provisions for social entrepreneurship in latvia done by the authors reveals that the social enterprise law (sell), (lr saeima, 2017) becomes effective in latvia on 1 april 2018. the sell defines for the first time the concept of social enterprise – it is a limited liability company (ltd) that is granted the status of social enterprise in accordance with the procedure prescribed by the law and that performs economic activity making a favourable social impact (e.g. provision of social services, formation of an inclusive civic society, promotion of education, support for science, environmental protection and preservation, animal protection or a contribution to cultural diversity (section 1, social enterprise law (lr saeima, 2017)) – and prescribes the goals of social enterprises as well as criteria and procedure for acquiring the status of social enterprise. if the goal of an enterprise is the employment of a target group, it could acquire the status of social enterprise only as an ltd, in which one or several public persons have no majority of votes (sociālo un darba lietu komisija, 2016; lr ministru kabinets, 2018). the provisions of the sell complement the legal framework by matters not dealt with in other national laws – the commercial law, the voluntary work law, the law on the prevention of squandering of the financial resources and property of a public person and other relevant laws. upon identifying an inconsistency between legal provisions of the same legal force, a general provision (in this case the commercial law) is applicable to the extent it does not limit a specific provision (in this case the sell), (tiesu namu aģentūra, 2013). however, it has to be concluded that no case law exists in latvia in relation to the application of the sell and there is no single international case law in the field of social entrepreneurship, and the applicability of these provisions has not been researched yet. for this reason, the further research focuses on an examination of the inconsistency of the sell with other laws. the sell stipulates that a social enterprise in latvia may be only an ltd. the authors conclude that in order for an enterprise to become a social enterprise, first of all, an ltd has to be founded and registered in accordance with the commercial law (figure 3). decision on founding an ltd lv register of enterprises lv ministry of welfare decision on registering the ltd in the register decision on granting the status of se decision on granting support support institutions ltd decision on acquiring the status of se ltd decision on applying for support measures figure 3. acquisition of the status of social enterprise and of support in latvia by newly established enterprises (source: authors’ construction) business, management and education, 2018, 16(1): 147–159 155 in latvia, in accordance with the commercial law (section 135), (lr saeima, 2000) an ltd is a legal entity, and it is considered to be founded and acquires the status of a legal person on the day when it is registered in the commercial register. the legal address of an ltd is the address where the management of the company is located (headquarters of the company). the commercial law prescribes also the establishment of the executive board of an ltd, the responsibility of executive board members, the size of equity capital and the procedure for the payment of equity capital as well as regulates mutual relationships among the shareholders of the company. in latvia, the commercial law prescribes that an ltd is a closed company, the shares of which are not publicly traded and the founder of it is a natural or legal person or a partnership that has established the company or on behalf of which it has been established (section 140, commercial law). an ltd may be founded by one or several founders (section 135, commercial law) in 2014, a list of risk addresses and a list of persons of risk were created in latvia, which raised the responsibility of any member of the executive board. the law on taxes and duties (paragraph 31, section 1) stipulates that an ltd can become a person of risk because of tax debts and this status is in force for three years (section 34.3, law on taxes and duties (lr saeima, 1995). the prohibition of holding positions in an ltd is stipulated in the law on the enterprise register of the republic of latvia (section 4.12). neither the sell and the commercial law nor other national legal acts define the number of limited liability companies in which the same legal or natural person may be a shareholder. from 2018 onwards, the register of enterprises of the republic of latvia takes control measures during the registration of an ltd to reduce the risk of tax evasion. the checks are carried out based on a decision by the state revenue service of the republic of latvia (uzņēmumu reģistrs, 2017). in accordance with the sell, in order for an ltd to acquire the status of social enterprise, the ltd has to meet  al. the criteria set in the law and the goal set in the statute of the enterprise has to be consistent with that set in the law (sections 1, 2, social enterprise law). a decision on granting the status of social enterprise (figure 1), refusing the status or cancelling the status is made by the ministry of welfare. upon losing the status, in accordance with the commercial law, the legal form of ltd is retained. the ministry of welfare creates and maintains the register of social enterprises (ulande, 2017). the sell prescribes that a social enterprise may receive support for social entrepreneurship (figure 3) (section 8, social enterprise law). however, the commercial law stipulates the responsibility of the executive board of an ltd. one has to conclude that in view of the provisions of the commercial law (section 137), an ltd is not responsible for its shareholder’s liabilities and its shareholder is not responsible for the company’s liabilities. it follows that the responsibility of legal persons for the attraction and use of funds for support activities of social enterprises lies upon only the executive board members of the ltd, while the shareholders of the company do not bear any responsibility. before establishing a social enterprise, the provisions of both the commercial law and the sell have to be examined very carefully. in latvia, the commercial law does not set any restrictions on what kind of economic activity a limited liability company may perform, while the sell sets some restrictions. the sell prohibits businesspersons engaged in social 156 a. sannikova, i. brante. development of social entrepreneurship in latvia entrepreneurship from 1) doing systematic transactions with securities or real property, except for renting out premises; 2) doing business in such areas as the production and sale of explosives, weapons and ammunition, the production of alcoholic beverages (except for small alcoholic beverage facilities), the production and sale of tobacco products, gambling and betting, financial and insurance services or in areas that endanger the security and health of society; 3) making loans, except for loans for the target group if prescribed in the statute of the social enterprise (section 9, social enterprise law). however, the primary criterion to be assessed in relation to the relevant legal framework is the goal of establishment and operation of the social enterprise set in its statute, as the goal has to be oriented towards benefiting the society or tackling problems being important for the society by means of business methods, as contrasted with the goal of doing business and making profits for the owners (frīdenberga, 2016). the research found that the rules in relation to the distribution of profits in social enterprises are different across european countries – there are various terms and conditions: 1) profits may not be distributed among the owners; 2) no restrictions in relation to the distribution of profits; 3) profits may be distributed to the extent set by the law. in latvia, the commercial law provides that ltd shareholders have the right to receive dividends. however, the social enterprise has to purposefully allocate all its funds (including profits) for achieving the goals set in the statute  – benefiting the society. this indicates that the specific provisions of the sell regarding profit distribution contradict the general provisions set by the commercial law. after analysing the legal frameworks for social enterprises in estonia and lithuania, the authors conclude that: – estonia has no specific law defining a se and regulating its operation. the estonian association of social entrepreneurs, which was established in 2012, represents se interests and provides a platform for discussions on social enterprises as well as represents social entrepreneur interests at the level of policy-making (lešinska, 2014); – in lithuania, the law on social enterprises is in force. the law was adopted on 1 june 2004. an amendment made on 1 november 2006 cancelled a provision stating that a social enterprise has to meet the criterion of a small or medium enterprise. at present, lithuanian legislators intensively work on a new law that is scheduled to be adopted in 2018 (kneyzevichiene, 2017; nikolaychik, 2017). a special register for social entrepreneurs, which is maintained by a national institution, was created in lithuania (lešinska et al., 2012). – no particular legal form for social enterprises has been set in lithuania and estonia. in lithuania, the status of social enterprise could be acquired in accordance with the legislation, and the legal acts define the characteristics to be met by social enterprises (lešinska et al., 2012; teder, 2011). conclusions development of social entrepreneurship as a special business type is in its beginning in latvia, therefore its development conditions have been researched very little. the present research contributes to the research of social entrepreneurship theme in two aspects: 1) economic conbusiness, management and education, 2018, 16(1): 147–159 157 ditions of social entrepreneurship are analysed as well as socially economical goals and institutional basis in latvia; 2) legal conditions separating this business form from others are analysed. – the authors of the research concluded that: – social enterprises are important agents of the social economy sector in the european union (eu). their economic impacts take the form of promoting employment and tackling social, economic, cultural and other problems for socially vulnerable target groups in society; – general trends in eu policies and the wish of latvia to foster entrepreneurship and contribute to employment determined the creation of a specific framework for social enterprises in latvia, particularly for certain target groups; – in latvia, fast expansion of social entrepreneurship was observed in the period 2013– 2017 when the concept of social enterprise was defined and the social enterprise law, which comes into force on 1 april 2018, was adopted. the law defines the concept of social enterprise and the goals of a social enterprise, the procedure of acquiring the status of social enterprise as well as other matters; – in view of the fact that the social enterprise law is a specific law in latvia, and there are other laws applicable to social entrepreneurship, e.g. the commercial law, it is not difficult to introduce a single approach to the application of legal provisions to social entrepreneurship; – to promote the sustainable 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2svetlana.saranda@gmail.com received 16 november 2016; accepted 22 december 2016 abstract. technical and fundamental analyses are widely used to forecast stock prices due to lack of knowledge of other modern models and methods such as residual income model, ann-apgarch, support vector machine, probabilistic neural network and genetic fuzzy systems. although stock price forecast models integrating both technical and fundamental analyses are currently used widely, their integration is not justified comprehensively enough. this paper discusses theoretical one-factor and multi-factor stock price forecast models already applied by investors at a global level and determines possibility to create and apply practically a stock price forecast model which integrates fundamental and technical analysis with the reference to the lithuanian stock market. the research is aimed to determine the relationship between stock prices of the 14 lithuanian companies listed in the main list by the nasdaq omx baltic and various fundamental variables. based on correlation and regression analysis results and application of c-squared test, anova method, a general stock price forecast model is generated. this paper discusses practical implications how the developed model can be used to forecast stock prices by individual investors and suggests additional check measures. keywords: stock price, forecast, correlation analysis, regression analysis, fundamental analysis, technical analysis, model, investment. jel classification: g1, g12, g2, g30. 1. introduction nowadays individual and institutional investors are surrounded by a rapidly changing external environment (political, social, economic and technological) which results in volatility in the financial markets. inability to manage investments properly is considered to be one of the causes of the global 2008–2009 financial crisis. investments in securities, especially to companies’ stocks, are the most common type of investments. however, investors, especially if they are individual persons, often lack b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(2): 292–307 doi:10.3846/bme.2016.337 mailto:1audrius.dzikevicius@vgtu.lt doi:10.3846/bme.2016.337 293 business, management and education, 2016, 14(2): 292–307 knowledge needed to make investment decisions, which can lead to financial losses. if these investors could make more accurate stock price forecasts, financial resources could be allocated more effectively. if this were the case, the development of stock markets could result in increasing confidence among individual investors. in order to forecast stock prices investors usually use either fundamental or technical analysis. some investors may try to apply models which include both fundamental and technical analysis with a basis on neural networks. however, this requires a sophisticated understanding of neural networking. the problem is that since global financial markets and economic have recovered after the financial crisis of 2008–2009, the academia started to pay less attention to research that focuses on stock markets and their forecasts. several studies of high quality have been done to forecast stock prices, probably since it seemed attractive due to high benefits (zavadskas, turskis 2011; li et al. 2014). research aimed to help investors in the application of both fundamental and technical analysis without using neural networks is at early development phase. due to this reason a stock price forecast model which integrates both analyses is being developed and tested in the lithuanian stock market with a possibility to apply it at global level further. it is assumed that stock prices in various foreign markets can be also predicted using the same stock price forecast model. the purpose of this paper is to clarify if it is possible to form and practically apply a stock price forecast model with reference to previously conducted research based on technical analysis and possibilities to apply financial ratio analysis when forecasting stock prices. moving average (ma), one of the widely used technical analysis tools, is not useful when forecasting stock price movement trends. for specific time series its lengths differ by forecast accuracy level. thus this method can generate significant forecast value errors and deviations from real stock prices. meanwhile, exponential moving average (ema) with an appropriate α constanta level is more relevant to forecast stock prices. the highest α level decreases the probability of a higher bias level for investors. however, longer period of the ema means higher bias level and less accurate forecast of stock prices but it does not mean that this method is unsuitable to predict stock markets fluctuations. previous research proves that a company analysis should be conducted, after that a sector analysis and then an economic analysis should be conducted. by so doing the links between the company and the external factors can be identified and used to evaluate their impact on the financial company’s performance and its stock prices. that’s why it is necessary to obtain various variables (macroeconomic factors, financial ratios, sector indexes etc.) which potentially have an influence on companies’ stock prices. this can help in the investment decisions making. 294 a. dzikevičius, s. šaranda. formation of an integrated stock price forecast model in lithuania 2. review of theoretical stock price forecast methods and models while most investors believe that markets in general, and stock markets in particular, will deliver increased value in the future, during times of economic and financial instability they face significant losses. most investors relate their expectations to increasing asset value, supported by future profit, productivity, population growth and similar factors. the global financial and economic crisis of 2008–2009 demonstrated that investors’ false belief in unstoppable asset value growth is the main reason for the financial market downturn. today econometric and economic science make possible the application of various methods and models aimed at predicting stock market processes but not all of already available theoretical forecast methods and models can be applied effectively. for instances, in lithuania, the most common methods used are quite simple, namely, fundamental and technical analysis. fundamental analysis is based on the in-depth analysis of companies’ financial performance, surrounding industrial environment, macroeconomic factors, as well as industrial news. all this supports decision making when forecasting stock prices (chen 2013). its application also requires the assessment of companies’ future growth prospects and competitive landscape (bonga 2015) as well as potential changes in gdp, sales strategies and other different indicators relevant not only for individual businesses but for the industries as a whole in which they operate (kartašova, venclauskienė 2014). in order to forecast stock prices the residual income model (rim) with its strong theoretical background can be applied with reference to the financial data sourced from accounting (sarikhani, ebrahimi 2012; tareq 2012; kariuki, oyugi 2013). as higgins (2011) states, its successful application contributes to a fundamental perspective when making decisions regarding forecast of stock prices. proponents of technical analysis criticize the application of fundamental analysis by claiming that the stock market historical data creates problematic assumptions for the development of rules used to predict future changes in stock prices (kimoto et al. 1990; olson, mossman 2003). indeed, investors sometimes ignore fundamental analysis and rely solely on technical analysis results. in their opinion, application of fundamental analysis is useful for a long-term investment while in the short-term it may generate losses. for instance, autoregressive and moving average (arma) model is widely used by the proponents of technical analysis. autoregressive integrated moving average (arima) as an improved arma model can be also used effectively when forecasting stock prices. the main difference between the models is that arima model converts a non-stationary data to a stationary data before its application. arima model is widely used to make linear data series forecasts (box, tiao 1975). mondal et al. (2014) claim that the accuracy of stock price forecasts achieved with arima model is quite high i.e. above 85%, making the model suitable for practical use with a relatively small bias. in addition to these methods and models aimed to support companies’ stock price forecasts, other various methods and models exist. for instances, artificial neural networks 295 business, management and education, 2016, 14(2): 292–307 (ann) method is widely applied (öğüt et al. 2009; tseng et al. 2012; guersen et al. 2011; mostafa 2010; cheng et al. 2012; cimpoeru 2011). bildirici and ersin (2009) also suggest to use an ann-apgarch model as an improved apgarch model to make stock prices forecasts more accurate by reflecting the real situation in the market. data mining and neuro fuzzy system methods are based on a possibility of extracting useful information from various data sets and play an important part when forecasting stock markets and making investment decisions. these approaches are applied in order to monitor the entire the stock market price behavior and market fluctuations. meanwhile, markov model is developed exclusively for financial markets and stock price forecasting (preethi, santhi 2012). sometimes integrated or hybrid models such as the hybrid model of artificial intelligent methods proposed by wu et al. (2015) can be also be applied. it is a combination of arma, the support vector machine method (svm) and a probabilistic neural network (pnn). another offered model includes application of genetic fuzzy systems (gfs) and ann (hadavandi 2010). despite the fact that a lot of theoretical and practically tested stock price forecast methods and models exist, the majority of lithuanian investors believe that stock prices can be described by one factor. for example, it is assumed that yields depend on the gdp and its dynamics (duca 2007). in 2011, hsing proposed a stock price forecast model suitable for a global and most developed stock markets as well as less developed markets such as lithuanian one. the model is based on an expansion of the previously proposed models (bulmash, trivoli 1991; abdullah, hayworth 1993; kim 2003; ratanapakorn, sharma 2007; humpe, macmillan 2009; pilinkus 2009, 2010). unfortunately, only few studies suggest a stock price forecast model that includes not only the fundamental factors but also the technical elements of the analysis. one such model has been proposed by bettman et al. (2009). ferreira and santa-clara (2008) reviewed the relevant academic literature and concluded that price multiples, macroeconomic factors, financial ratios and different measures of risk are the most common variables taken into account when forecasting stock returns. for example, campbell and shiller (1988), lamont (1998) used the p/e ratio to forecast stock returns. this ratio enables an analysis of investors’ willingness to pay for the company’s earnings. it makes sense to purchase stocks with low p/e ratio value only in case if the earnings are real (kartašova, venclauskienė 2014). meanwhile kothari and shanken (1997), pontiff and schall (1998) use the p/bv ratio. another financial ratio to forecast companies’ stock prices suggested by the academia is return on equity (roe) (petcharabul, romprasert 2014). it measures company’s performance efficiency (higgins 2009). elleuch (2009) also noticed that the ratio is a predictive measure to forecast future stock prices. omran and ragab (2004) discovered that roe plays a significant role in investment decision making. 296 a. dzikevičius, s. šaranda. formation of an integrated stock price forecast model in lithuania return on assets (roa) ratio also indicates the level of company’s performance (purnamasari 2015). ball and brown (1968), hou et al. (2014) indicate that in addition to the mentioned financial ratios, earning per share ratio (eps) may serve as a variable when forecasting stock prices. analysts estimate that the stock price increases when reported ratio is higher than expected and vice versa – if it is lower, then the stock price decreases (renfro 2015). a company’s net profit margin (npm) is also an important driver of stock performance and price trends. financial analysts and investors refer to earnings, as well as npm, as stock price is often related to a company’s expected future earnings (amir et al. 2012). due to this reason the ratio may serve as a useful variable when forecasting stock prices, for example in the lithuanian market. with the reference to previously conducted research, dutta et al. (2012) concluded that financial ratios can used by investors to assess future performance of companies’ stock prices and their trends. therefore, financial ratios can be also used by to classify the performance of different companies and forecast their stock prices in the market. both linear and non-linear types of relationship between financial ratios and stock prices can be used as a background. this finding is also supported by jabbari and fathi (2014). 3. research methodology for the research purposes the annual data of 14 lithuanian companies in accordance to the baltic main list of stocks for the period of 2010–2014 was used (table 1). table 1. list of researched companies and the industries they operate in symbol company’s name industry apg1l apranga 5000 consumer services cts1l city service 2000 industrials grg1l grigiškės 1000 basic materials ivl1l invalda invl 8000 financials ldj1l lietuvos dujos 7000 utilities lna1l linas agro group 3000 consumer goods ptr1l panevėžio statybos trestas 2000 industrials pzv1l pieno žvaigždės 3000 consumer goods rsu1l rokiškio sūris 3000 consumer goods sab1l šiaulių bankas 8000 financials teo1l teo lt 6000 telecommunications utr1l utenos trikotažas 3000 consumer goods vlp1l vilkyškių pieninė 3000 consumer goods vbl1l vilniaus baldai 3000 consumer goods 297 business, management and education, 2016, 14(2): 292–307 only last (close) annual stock prices of the listed companies were analysed. statistical data reflecting indexes provided in the table 1 were also used. in order to reflect the real stock market performance dividends are reinvested in the gross index. the relevant financial data for these companies is sourced from the officially published financial statements. based on the in-depth literature analysis, seven financial ratios were selected for the further analysis (table 2). table 2. calculation methodology and description of the financial ratios used financial ratio calculation methodology description eps (earnings per share) net profit – preference share dividend weighted average number of ordinary outstanding eps ratio shows how much of the company’s earned net profit is attributed to an ordinary share. p/e (price / earnings ratio) current share price earnings per share p/e ratio reflects how much an investor pays for 1 euro of the company’s 1 net profit euro. it also relates the stock’s market value to the profit reflected in financial statements. p/s (price to sales ratio) current share price sales per share p/s ratio shows how much an investor pays for 1 euro of sales revenue generated by one share. p/bv (price to book value ratio) current share price book value per share p/bv reflects how much an investor pays for 1 euro of equity. roe (return on equity) net profit margin x total assets total assets turnover x equity roe shows how much net profit is generated by 1 euro of equity. roa (return on assets) net profit margin x total assets turnover roa shows how much net profit is generated by 1 euro of assets. npm (net profit margin) net profit sales npm indicates the percentage of net profit with 1 euro of sales revenue i.e. it shows the company’s operating efficiency. 298 a. dzikevičius, s. šaranda. formation of an integrated stock price forecast model in lithuania the financial ratios are calculated in accordance with the methodology accepted by nasdaq omx. data indicating annual time series of macroeconomic factors is also used in this research. based on the analysis of the scientific literature it was concluded that for this research purpose only the most important macroeconomic factors are analyzed. they are outlined as follows: gross domestic product (gdp), value in eur; foreign direct investments (fdi), value in eur; consumer price indexes (cpi); unemployment rate (ur), %; interest rate of loans issued to households and non-financial institutions (ir), %; import (i), value in eur; export (e), value in eur. relevant data was sourced from the official statistics portal and the bank of lithuania. during the first phase of the research a data set combining companies’ stock prices, financial ratios, macroeconomic variables, and sector indexes is built. the set is used to perform correlation analysis. only variables which correlation with companies’ stock prices r ≥ |0.95| are selected. further a regression analysis is conducted to equate a linear relationship between companies’ stock prices and selected variables as well as analysis of variance (anova). for decision making purposes, additional measure of forecast accuracy evaluation is introduced. c-squared test is applied to check whether forecasted stock prices reflect real market prices. to check whether forecasted companies’ stock prices differ from the real ones, the analysis of the distribution of index returns using c-squared test method is used (1): ( )22 1 k i i ii o e e= − χ = ∑ , (1) where: oi – historical companies’ stock prices; ei – forecasted companies’ stock prices; k – range of variables; companies’ stock price forecast model is acceptable when csquared test p value >0.05. if this condition is satisfied than a created model based on linear regression maybe used practically. 4. discussion of the research results during the first stage of the research variables (i.e. stock prices of other companies, financial ratios, macroeconomic factors, sector indexes) which correlate with companies’ stock prices r ≥ |0.95| are selected (table 3). during the research it was established that most of the companies’ stock prices correlate with one or several variables: one variable (pzv1l, rsu1l, utr1l, vlb1l); three variables (apg1l, lna1l, teo1l, ldj1l); four variables (inv1l, sab1l); five and more variables (ptr1l, cts1l). 299 business, management and education, 2016, 14(2): 292–307 table 3. correlation analysis results company variable r ≥ |0.95| company variable r ≥ |0.95| pzv1l sab1l p/e 0.9833 teo1l lna1l roa lna1l roe teo1l p/bv –0.9583 –0.9531 0.9940 rsu1l inv1l p/bv 0.9843 ldj1l sab1l utr1l p/e vlp1l p/bv 0.9753 0.9985 0.9576 utr1l rsu1l eps –0.9515 inv1l utr1l p/e vbl1l eps vbl1l p/e vbl1l roa –0.9977 –0.9949 0.9662 –0.9664 vbl1l apg1l eps 0.9531 sab1l apg1l p/e rsu1l p/e utr1l p/e vlp1l p/bv 0.9661 0.9573 0.9555 0.9700 apg1l lna1l pzv1l p/e pzv1l p/bv 0.9801 –0.9936 –0.9826 ptr1l apg1l p/e ldj1l roa ldj1l roe ptr1l p/bv rsu1l p/e rsu1l p/bv vlp1l gp b2000gi b8000gi 0.9592 0.9865 0.9925 0.9978 0.9811 0.9842 0.9521 0.9869 0.9680 lna1l lna1l gp pzv1l p/e pzv1l p/bv –0.9528 –0.9579 –0.9658 cts1l ptr1l ldj1l roa ldj1l roe ptr1l p/bv ptr1l gp rsu1l p/e rsu1l p/bv sab1l p/e b2000gi b8000gi e i 0.9758 0.9782 0.9604 0.9839 0.9641 0.9817 0.9863 –0.9893 0.9718 0.9682 –0.9538 –0.9764 vlp1l is the only company stock prices of which do not correlate with any variables. due to this reason it is singled out for further analysis. ptr1l and cts1l are the companies’ stock prices of which correlate with sector indexes, namely b2000gi industrials and b8000gi financials. moreover, in the case of company cts1l the stock prices correlate with macroeconomic variables such as import and export. the research reveals that in the lithuanian market environment the companies’ stock prices correlate with their own financial ratio very rarely. it is more likely that they correlate with the financial ratios of other companies (fig. 1). 300 a. dzikevičius, s. šaranda. formation of an integrated stock price forecast model in lithuania fig. 1. share (%) of the analysed variables correlating with companies’ stock prices p/e, p/bv, roa and roe are the most important financial ratios of the companies other than analyzed. the results exhibit both negative and positive correlations. therefore, further research is necessary to clarify why these correlations exist. this will enable a deeper understanding of investment logics, and help in the developing of an improved stock price forecast model, which is detailed later on in this paper. with reference to the findings presented in the figure 1 regression analysis and anova method are applied to equate the relationship between companies’ stock prices and selected variables mentioned in the table 1. essentially, companies’ stock price forecast models for pzv1l, rsu1l, utr1l, vlb1l can be supported by a linear regression when one variable is applied (2): 1 1tp x= α + β + ε, (2) where: α and β1 – linear regression coefficients; ε – bias for the forecast value; t – time period; stock price forecast models for these companies are presented in the table 4. table 4. stock price forecast models with one variable company stock price forecast model for the period 2010–2014 general stock price forecast model ptr1l ( )1 2261 0 0398 1 sab l p e+ + ε. . / ( )1 sab l p eα + β + ε/ rsu1l 0 9673 0 4660 1 ivl l p bv+ + ε. . ( / ) 1 ivl l p bvα + β + ε( / ) utr1l 0 5939 1 4455 1 rsu l eps− + ε. . ( ) 1 rsu l epsα + β + ε( ) vbl1l 5 9058 42 5329 1 apg l eps+ + ε. . ( ) 1 apg l epsα + β + ε( ) 301 business, management and education, 2016, 14(2): 292–307 stock price forecast model supported by a linear regression with three variables is applied using equation (3): 1 1 2 2 3 3tp x x x= α + β + β + β + ε, (3) where: α and b1, b2, b3 – linear regression coefficients; ε – bias for the forecast value; t – time period. however, stock price forecast models only for three companies i.e. apg1l, lna1l, teo1l are presented in table 5. table 5. stock price forecast models with three variables company stock price forecast model for the period 2010–2014 apg1l 2 0574 2 2581 1 0 0247 1 1 8083 1 lna l pzv l p e pzv l p bv− + − + + ε. . ( ) . ( / ) . ( / ) lna1l 1 2770 0 0884 1 0 0002 1 0 1807 1 lna l gp pzv l p e pzv l p bv− − − + ε. . ( ) . ( / ) . ( / ) teo1l 0 4882 0 4924 1 0 2076 1 0 2269 1 lna l roa lna l roe teo l p bv− + + + ε. . ( ) . ( ) . ( / ) company general stock price forecast model apg1l 1 2 31 1 1 lna l pzv l p e pzv l p bvα + β − β + β + ε( ) ( / ) ( / ) lna1l 1 2 31 1 1 lna l gp pzv l p e pzv l p bvα + β + β + β + ε( ) ( / ) ( / ) teo1l 1 2 31 1 1 lna l roa lna l roe teo l p bvα + β + β + β + ε( ) ( ) ( / ) during correlation analysis stage it appeared that stock prices of the ldj1l company correlate with three variables. however, after regression analysis and application of the anova method it was concluded that only one variable is significant i.e. utr1l p/e (table 6). table 6. stock price forecast model for ldj1l company stock price forecast model for the period 2010–2014 ldj1l 0 5832 0 0029 1 utr l p e+ + ε. . ( / ) company general stock price forecast model ldj1l 2 1 utr l p eα + β + ε( / ) meanwhile variables sab1l and vlp1l p/bv are excluded. although stock prices of inv1l and sab1l correlate with them, they should be excluded when equating the relationship between stock prices and variables for these companies. the results are presented in table 7. 302 a. dzikevičius, s. šaranda. formation of an integrated stock price forecast model in lithuania table 7. stock price forecast model for inv1l and sab1l company stock price forecast model for the period 2010–2014 inv1l 3 2887 0 0338 1 0 0480 1 utr l p e vbl l p e− + + ε. . ( / ) . ( / ) sab1l 0 2344 0 023 1 utr l p e+ + ε. . ( / ) company general stock price forecast model inv1l 1 31 1 utr l p e vbl l p eα + β + β + ε( / ) ( / ) sab1l 3 1 vbl l p eα + β + ε( / ) similar to the ldj1l case, unnecessary β coefficient values are eliminated together with the relevant variables. for the stock price forecast model linear regression with five and more variables is applied as follows: 1 1 2 2t i ip x x x= α + β + β + + β + ε... , (4) where: α and b1, b2, ..., bi – linear regression coefficients; ε – bias for the forecast value; t – time period. although during correlation analysis phase it was concluded that stock prices of the companies ptr1l and cts1l correlate with more than five variables, the application of the regression analysis and anova method provides slightly different results as presented in the table 8. table 8. correlation and regression analysis results for the stock price forecast model when correlation analysis is misleading company stock price forecast model for the period 2010–2014 ptr1l 0 3154 0 1560 1 0 0009 2000 0 0004 8000vlp l gp b gi b gi− + + + + ε. . ( ) . ( ) . ( ) cts1l 3 45025 0 0005528 1 0 0000001 2000 0 0000001 8000 sab l p e b gi b gi + + − + ε . . ( / ) . ( ) . ( ) company general stock price forecast model ptr1l 7 8 91 2000 8000vlp l gp b gi b giα + β + β + β + ε( ) ( ) ( ) cts1l 10 11 121 2000 8000sab l p e b gi b giα + β + β − β + ε( / ) ( ) ( ) it was established that stock prices of some companies, namely ptr1l and cts11l, depend on sector indexes i.e. b2000gi (industrials) and b8000gi (financials). due to this reason it is recommended to integrate additional variables i.e. ema of different 303 business, management and education, 2016, 14(2): 292–307 length (n days) into the stock price forecast model as presented in table 9 to make more accurate stock price forecasts as it was determined during previous research (table 9). table 9. multiple emas to be used as additional variables to forecast stock prices of ptr1l and cts1l b2000gi (industrials) length (days) length (days) length (days) length (days) δ n-1 48 72 92 54 n 49 73 93 55 δ n+1 50 74 94 56 b8000gi (financials) length (days) length (days) length (days) δ n-1 48 72 92 n 49 73 93 δ n+1 50 74 94 when adding the variables into the stock price forecast model, three ema lengths (for example, of 48, 49 and 50 days) should be used. after the research in reference to historical data covering period 2010–2014 was conducted, it was concluded that a theoretical stock price forecast model for companies listed by nasdaq omx can be generated. furthermore, such model can be improved in accordance with its practical application possibilities at the global level with reference to already developed international stock markets. based on the research results a general stock price forecast model is created (5): 1t i i k k m m n np p fr mf ema si+ = α + β + β + β + β + ε( ) , (5) where: α and bi, bk, bm, bn – linear regression coefficients; pi – i – company’s stock price; frk – k – financial ratios of the company under analysis or another company performing in the stock market; mfm – m – macroeconomic factor; ema – ema of n days for the selected sector index; sin – n – sector index; ε – bias for the forecast value. to support the created stock price forecast model it is also useful to understand why the relationship between stock prices of particular companies and sector indexes exists. in light of findings outlined above, there are all assumptions to carry out further research aimed at developing the created stock price forecast model at the global level, which will also enhance its practical application various stock markets. 5. conclusions this paper examined whether it is possible to create a stock price forecast model which integrates already known methods and models, namely fundamental and technical 304 a. dzikevičius, s. šaranda. formation of an integrated stock price forecast model in lithuania analyses, can be used practically by investors. with the reference to the companies listed by nasdaq omx baltic, stock prices of 14 selected lithuanian companies where analyzed, covering the period of 2010–2014 omx. the researched discovered a strong correlation (r ≥ |0.95|) between stock prices and several variables, such as: stock prices of other companies than these under analysis; financial ratios (in most cases financial ratios of companies other than under review but also listed by nasdaq omx); macroeconomic factors; sector indexes. it was established that stock prices of the majority of the companies examined correlate with one or several variables, among which p/e, p/bv, roa and roe are the generally held to be the most important financial ratios. in some cases the correlation between stock prices and the ratios is positive, while in other cases a negative correlation was found. other important variables include the stock price of companies other than analyzed, eps and npm ratios, country’s import and export values as well as b2000gi (industrials) and b8000gi (financials) indexes. for companies stock prices forecast models of which include sector indexes it is recommended to integrate an additional variables ema of specific length (n days) selected particularly for these sectors. when adding the ema, at least three different length (ndays) should be used to make stock forecasts more accurate. however, application of the correlation analysis only is not reliable when creating a stock price forecast model because the selected variables may not be significant statistically and should be not integrated into the model. for these purposes the regression analysis and anova method coupled with c-squared test results is recommended. potentially, the general stock price forecast model described in this paper can be applied practically to forecast stock prices in various. however, further research is needed in order to understand the drivers behind the relationship between stock prices of particular companies and sector indexes, financial ratios etc. in light of findings outlined above, there are grounds for conducting further research towards developing stock price forecast model. all this will allow to drive and support growth of the economic and strengthen companies’ growth perspectives. in this case, for different stock markets the use of additional check measures is recommended. they include: goodness of fit test (gfi); 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2algita.miecinskiene@vgtu.lt (corresponding author) received 4 april 2016; accepted 31 may 2016 abstract. the scientific research results related to foreign trade and direct investment abroad (dia) are discussed in the article. the relation of the direct investment abroad and foreign trade is still under the discussion as there is no clear answer whether foreign trade is supplemented or replaced by the direct investment abroad. since 1997 the flows of the direct investment abroad increased greately in lithuania. consequently, it is important to define the link between the dia and foreign trade considering each country separately. direct investment abroad and trade links in lithuania in 1997–2014 are analyzed in the article. the research analysis involves lithuanian direct investments in the developed countries except some countries, such as belorus, russia and ukraine. it is defined that there is a positive bilateral link between lithuanian direct investment abroad and foreign trade. it is also observed the impact of general development of lithuanian direct investment abroad (considering certain countries) on the countries economy itself – imports can exceed exports. engle-granger causality test is applied in the research paper for the purpose of defining the impact of the dia on the import and export range. keywords: direct investment abroad, export, import, engle-granger causality test, foreign trade. jel classification: f14, f21. 1. introduction scientists are greately interested in the impact of the direct investment abroad (dia) on the trade. however, both scientific analysis models and empirical evidence obtained concerning the direct investment abroad impact on foreign trade are not the same. two attitudes considering direct investment abroad and foreign trade are formed in the scien tific literature: some authors (mundell 1957; fonseca et al. 2010) claim that direct investment abroad and foreign trade substitutes each other, while others (schmitz, helmberger 1970; pfaffermayr 1996) argue that direct investment abroad has not only positive links with foreign trade but can also supplement it. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(1): 136–151 doi:10.3846/bme.2016.321 mailto:2algita.miecinskiene@vgtu.lt http://dx.doi.org/doi:10.3846/bme.2016.321 137 business, management and education, 2016, 14(1): 136–151 lithuania (the same as other countries) takes active part both, in global trade and stock movement, though recently enough. following the data of the statistics lithuania in 1997 lithuanian direct investment abroad was 30.08 eur mill. where 5.88 eur mill. to eu countries and 23.42 eur mill. to commonwealth of independent states (cis) countries. in 2015 the flow of lithuanian direct investment abroad increased by 2052.60 eur mill. where 1860.68 to eu countries and 170.01 eur mill. to cis countries. so, the questions arise: does lithuanian direct investment abroad act as a foreign trade supplement or replacement? what is the economical impact on the country? the aim of the article is to estimate the impact of lithuanian direct investment abroad on foreign trade from 1997 to 2014, while analysing the impact of direct investment abroad on foreign trade considering each country separately. engle-granger causality test is applied in the research work for the purpose of defining the impact of the direct investment abroad on the import and export range. 2. the analysis of preceding empirical investigations of direct investment abroad and foreign trade relation two attitudes are formed in scientific literature: one – direct investment abroad and foreign trade substitutes each other, and the other – direct investment abroad and foreign trade act as a supplement to the trade. while estimating scientific literature it is noticed chronologically by previous research that capital export and foreign trade substitutes each other, however, it is defined by later research that direct investment abroad might supplement foreign trade. mundell (1957) was one the first to analyse the link between trade and movement of production factors (two countries, two goods, two production factors) referring heckscher-ohlino model. however, while entering international mobility of production factors between the countries, it was defined that international capital export and foreign trade act as substitutes. it is assumed in schmitz and helmberger (1970) model, that production factors are mobile as well as international production functions are not identical. mundell (1957) model claims production functions to be homogenous and identical in both of the countries. schmitz, helmberger (1970) concludes that direct investment abroad is a supplement to foreign trade. with the aim to estimate the relation of direct investment abroad with export “vertical” (helpman 1984) and “horizontal” (markusen 1984) models of integration analysis appeared. the case of “vertical” integration involves the intermediate product sale between subsidiaries in rich with stock countries to rich with work places countries, that‘s why foreign trade might be supplemented. “vertical” integration is considered to be the case when different segments of production process are set out in different countries. “vertical” model of direct investment seems to be more linked to the investments 138 a. kozlova, a. miečinskienė. the research on interface between lithuanian direct investment abroad... of developing economies (markusen et al. 1996). “horizontal” integration is the case when a subsidiary is formed in the country where the same or similar production to the market of the host country is manufactured (markusen 1984), thus the export to the country might be changed by the investment. such a conclusion is made by ekholm et al. (2003). they claim that “horizontal” integration acts as a substitute and “vertical” – as a supplement. one more conclusion is made by markusen et al. (1996) that „horizontal“ model dominates in the countries of the same size and have average or big marketing costs. empirical research work is made and both, model of gravity and econometric were applied. however, there is no one opinion considering the question, so as it is confirmed by the empirical research that direct investment abroad acts as foreign trade substitutes or might act as a supplement. austrian direct investment abroad was analysed by pfaffermayr (1996) and positive bilateral relation between direct investment abroad and export was defined. bajo-rubio, montero-muñoz (1999) made analysis of relation between spanish direct investment abroad and export, so the conclusion was made that direct investment abroad has a positive impact on the growth of export. the authors claim, that direct investment abroad is very important as the way to promote export. also, links of direct investment abroad and export was analysed by fontagné (1999) and the conclusion was that direct investment abroad promotes the growth of export as well as supplement foreign trade. analysis showed that each dollar invested directly abroad leads to 2 additional export dollars, “one direct investment abroad dollar is related to 2.3 additional export dollars and 1.9 dollars of additional import”. portugese direct investment abroad and foreign trade was analysed by fonseca et al. (2010) and it was noticed that investment had a negative impact on the balance of trade with the exception trends in angola and spain. gross domestic product (gdp) per capita, the distance from lisbon to other countries, portugese direct investment to 15 eu countries, usa, brazil, angola, japanese and china was analysed by the study and the conclusion was made, that portugese direct investment abroad is negatively related to export, the substitution effect was noticed. falk and hake (2008) analysed the links of export and direct investment abroad and claimed that direct investment abroad might be promoted by export but not vice versa. it was written by the authors that export is supplemented but not substituted by direct investment abroad. seo and suh (2006) estimated korean direct investment to asian countries, that is indonesia, malaysia, philippines, thailand applying econometric model. it was noticed that direct investment abroad doesn‘t have the impact of substitute neither on export nor on import, though it was clear that by that time the flows of direct investment abroad could give slight contributions to korean reagional export. kang (2012) made analysis on the impact of korean direct investment abroad and export to the developed as well as developing countries. the conclusion made was, that korean export to the developing 139 business, management and education, 2016, 14(1): 136–151 countries might be enhanced by direct investment to those countries. foreign trade with developing countries is supplemented by the flows of direct investment abroad, though it has no impact on the trade with develped countries. the analysis of the impact made on direct investment abroad in asian countries was made by ahmad et al. (2015) and the conclusion was, that direct investment abroad is a supplement to foreign trade. significant positive factors of four asian countries (malaysia, philippines, singapore and thailand) were obtained. chow (2012) analyzed the effect of outward fdi, both country by country and host groups as a whole, on taiwan’s exports. it is concluded that outward fdi has a complementary effect on home country’s export in taiwan. the scientific literature gives no unambiguous answer to the question: what the impact is of direct investment abroad on foreign trade. the final conclusion can’t be made following the research performed to find out whether the flows of direct investment abroad in a small developed country give some contribution to the growth of foreign trade and what the impact on trade balance is as the obtained results differ. 3. the research methoodology lithuania is involved in the movement of international stock just most recently in comparison to other countries, where they have long experience, though today the country involved in the process handles both, import and export. nevertheless, lithuania is rather small country but it is classified as developed country used by unctad. the data range from 1997 till 2014 was used for the research work. there was analysed direct investment abroad and foreign trade with such countries as belorus (by), estonia (ee), united kingdom (uk), cyprus (cyp), latvia (lv), poland (pl), russia (ru), germany (de), the netherlands (nl), sweeden (se), ukraine (ua), italy (it). one region of the country e.g. kaliningrad region of rusian federation (kal) was separated for analysis, because direct investment to this region is very important and consist a big part of all investment abroad. matching the data presented by the department of statistics in 1997–2014 these countries are considered to be the most important partners of export and import. the statistic information of data basis owned by lithuanian republic department of statistics (official… 2016b) as well as the information presented on the website (official… 2016a) was used. furthermore, the research had the use of annual data of direct investment abroad flows in lithuania as well as the extent of annual export and import in each country separately (official… 2016c; unctad 2014; eurostat 2016). to identify, whether direct investment abroad changes do have the impact on import and export range, engle-granger causality test was applied. engle-granger causality test because of its versatility is applied in most of the spheres. in this case it was used to check whether a pair of indictors are cointegrated and if long-term relation exists among the indicators. 140 a. kozlova, a. miečinskienė. the research on interface between lithuanian direct investment abroad... engle-granger causality test is performed in several stages (kvedaras 2005; sas/ ets®9.2 2010): – checking the stacionarity of indicators aplying expanded dickey-fuller test (adf); – regression is defined by the least squares method, x and y; – dickey-fuller test is used to determine the margin of error of regression model having the aim to check the margin of error of stationarity; – in case the margin of error is stationary error correction model (ecm) is worked out. otherwise it might be claimed the indicators are not cointegrated. the first stage is to check analyzed indicators (a pair of indicators) whether they meet assumption of stationarity. this study involves checking the time lines stationarity in the broadest sense. the process cosidered to be stationary in the broadest sense if: 1. 2 tey <∞ , for any t t∈ ; 2. 2t 0ey =ey , for any t t∈ ; (1) 3. ( )cov t,s =cov(t+h,s+h) for any t,s,h t∈ . to check the stationarity extended dickey-fuller test is used. in case analyzed nominal indicators don‘t meet the assumption of stationarity, the indicators are integrated by the first line (i(1)), that is, indicator changes to previous period are calculated. if the data doesn’t meet stationarity definition the indicators are integrated by the second line (i(2)). usually indicators integrated by the first line are used for econometric research because of the interpretation simplicity. by using adf it is defined whether the time line is matched to the integrated process in the first line involving stochastic trend component, also, if the time line is matched to the stationarity process involving determed trend component. model (2) is used to perform dickey-fuller test: 1 1 1 ∆ = + β ⋅ + γ ⋅ + δ ⋅ ∆ + … + δ ⋅ ∆ + νt t t t p ty c t y y yp  , (2) where: c and β – constants , and p – delay line. hypothesis tested: ( ) ( ) ( ) ( ) 0 0 0 0 0 β γ = β γ ≠a h c c h c c , , , , ; , , ,: , : . (3) having performed the stationarity test, it is moved to the next stage where regression model is worked out. the regression equation is calculated by using the method of the least squares: t t ty c x e= + β ⋅ + , (4) next, the square sums of both equation remains are compared: t 2 1 t 1 rss = = ∑ tû , t 2 0 t t=1 rss =∑ê . (5) 141 business, management and education, 2016, 14(1): 136–151 the test statistics (s1) is calculated by formula 6. ( )0 1 21 1 t(rss -rss ) s = ~ p rss χ , (6) if the test statistics exceeds critical value of theoretical statistics, then hypothesis h0 (claiming x is no y granger cause) is rejected. models of panel data. there are formed 2 types of panel data regression models in order to define the impact of direct investmant abroad on import and export. indicator changes (i(1)) and fixed effect regression is used in the study. dia impact on import and export indicator factors are defined by these 2 models. i(1) mathematical presentation of regression model: ∆ = β ⋅ ∆ + ∆εit it ity tui , (7) where: ∆ ity – import/export annual changes in the i country; ∆ ittui – dia annual changes in the i country; β – dia impact on import/export; εit – casual margin of error; t – time period; i – the country. mathematical presentation of fixed effect model: -( ) ( )iit i it ity y tui tui= β × + ε , (8) where: yit – import/export indicator in the i country; tuiit – dia indicator in the i country; β – dia impact on import/export; iy – dia average in the i country; itui – import/export average in the i country; εit – casual margin of error; t – time period; i – the country. rating of model parametres and testing of statistic significance. for regression of changes in indicator i(1) rating as well as rating of fixed effects and model parametres the least squares model (formula 4) is used. the main goal of this stage is to obtain ratings of matched parametres. it is also of great importance to have ratings of worked out model parametres being statistically significant. statistically significance of model parametres rating is defined having tested hypothesis: 0 0 a 0 h : =0; h : 0. β β ≠ (9) for h0 hypothesis testing f-statistics is used. in case hypothesis h0 is rejected, the conclusion arises that the model is statistically significant so, dia variation is justified by export (import) variation. 142 a. kozlova, a. miečinskienė. the research on interface between lithuanian direct investment abroad... 4. empirical test results 4.1. import, export and direct investment trends in investigated countries in order to perform analysis of indicator relation, the survey of import, export and dia variation in different countries during a certain time period is made. as it is shown in the figure 1 (in horizontal axix years is represented and ranges from 1997 to 2014), the import of poland is much bigger having compared with the other countries during the testing time period. russia and latvia are the leading countries considering the import extent. the import extent of the other countries are similar. 1 = ‘by’; 2 = ‘ee’; 3 = ‘uk’; 4 = ‘cyp’; 5 = ‘lv’; 6 = ‘pl’; 7 = ‘ru’; 8 = ‘kal’; 9 = ‘de’; 10 = ‘nl’; 11 = ‘se’ fig. 1. the import index variation in different countries (eur mill.) (source: created by authors) while analysing export standard variation it‘s clearly seen that in 1999 russian export was greately enlarged in comparison with the export extent in other countries. though, the other years data shows that poland was the leading country considering the export extent. while analysing the crisis impact on the export extent it‘s clear, that in 2009 the export extent was decreasing in all the countries (fig. 2) (in horizontal axix years is represented and ranges from 1997 to 2014). monitoring the rate variation of different dia indicators it‘s clear, that significant growth of investment is fixed in lithuania from 2003 (fig. 3) (in horizontal axix years is represented and ranges from 1997 to 2014). 143 business, management and education, 2016, 14(1): 136–151 1 = ‘by’; 2 = ‘ee’; 3 = ‘uk’; 4 = ‘cyp’; 5 = ‘lv’; 6 = ‘pl’; 7 = ‘ru’; 8 = ‘kal’; 9 = ‘de’; 10 = ‘nl’; 11 = ‘se’ fig. 2. the export index variation in different countries (eur mill.) (source: created by authors) 1 = ‘by’; 2 = ‘ee’; 3 = ‘uk’; 4 = ‘cyp’; 5 = ‘lv’; 6 = ‘pl’; 7 = ‘ru’; 8 = ‘kal’; 9 = ‘de’; 10 = ‘nl’; 11 = ‘se’; 12 = ‘it’; 13 = ‘ua’ fig. 3. dia index variation in different countries (eur mill.) (source: created by authors) 144 a. kozlova, a. miečinskienė. the research on interface between lithuanian direct investment abroad... in latvia dia rates were steady during the testing time period. the biggest dia rates were in the netherlands starting from 2009 and it remains at the same position till 2014. 4.2. granger causality analysis before analysis started, stationarity assumption of analysed indicators was tested, so as the assumption of indicator cointegration is such that indicator data must be stationary. dickey-fuller expanded criteria was applied to test stationarity data. the results obtained showed, that all the indicators (dia, export and import) meet the stationarity assumption because p < 0.05 (see table 1). table 1. static results (dickey-fuller test) of export and import index and dia (source: created by authors) dia exp imp test statistic: tau_c(1) –4.13658 –5.19251 –3.50822 asymptotic p-value 0.0008412 8.107e-006 0.007806 in the other stage of study granger causality test was applied. the goal of using this test is to define whether the dia indicator is the cause of granger import/export, that is if dia extent variation impacts the changes of import/export. during the analysis both, the test statistics and error assumption is calculated. the obtained results showed, that dia is the cause of export granger indicator, as tau_c(1) = –4.159 (p = 0.004 < 0.05). and besides dia is the cause of import granger indicator, as tau_c(1) = 4.387 (p = 0.0018 < 0.05). it means, that the margin of error of both worked out regression models (having not depending variable export/import extent) meet the stationarity assumption and it indicates accordingly the rate of cointegration. while analysing relation of export/import indicator variation it was defined that, these indicators have specific bilateral links as granger causality criterion results are statistically significant, when not depending regression variable standard is both, for export and import (respectively, p < 0.05) (table 2). table 2. granger causality test results (source: created by authors) test statistic: tau_c(1) asymptotic p-value dia – exp –4.15916 0.004155 exp – dia –1.00775 0.9002 dia – imp 4.38715 0.001817 imp – dia –0.8893 0.9198 eksp – imp –6.47986 7.614e-008 imp – exp –4.54145 0.001002 145 business, management and education, 2016, 14(1): 136–151 summing up granger casualty results, it must be said, that dia variation is related to export/import extent variation. this study deals with analysis of indicator relation in the sense of cointegration, so the discussed relations occur during the long time period. 4.3. dia impact on import and export in further stage of study using granger causality test defined relation trends were analysed, so as it is important to know not only if there are links related to the indicators, but also tendency of dia impact on export/import ratings. cosequently, there was worked out two types of models having one regression factor: (a) i(1) regression and (b) fixed effect models. the first model is specific as there rating variation considering the previous time period were analysed but not the nominal value of index. the obtained results shows, that having integrated the indexes in the first line the dia impact on import extent is not important statisticly, because d_dia = 0.266 (p value = 0.742 > 0.05) (table 3). besides, determination coefficient of the worked out model is rather low (r2 < 0.1), that’s why the model results are not acceptable and it‘s necessary to modify the model of regression. table 3. i(1) regression imp-dia results (source: created by authors) coefficient std. error t-ratio p-value const 81.3813 34.6743 2.3470 0.0201 ** d_dia 0.266265 0.80745 0.3298 0.7420 r-squared: 0.000636. ** the value of parameter is statistically significant when statistical significance level is 0.05. analogous situation is monitored and the impact of dia integrated index on export extent is analysed in the first line. the impact of investment is not significant statistically, so as d_dia = 0.709, p value = 0.1089 > 0.05 (table 4). it shows, that dia annual growth in the countries doesn‘t have statistically significant impact on the growth of export. the determination coefficient of the worked out model is also low enough (r2 < 0.1), so the results obtained by the model are not acceptable and it is necessary to modify the model of regression. table 4. i(1) regression eksp-dia results (source: created by authors) coefficient std. error t-ratio p-value const 77.7222 18.8999 4.1123 <0.0001 *** d_dia 0.709218 0.440115 1.6114 0.1089 r-squared: 0.01. ***the value of parameter is statistically significant when statistical significance level is 0.01. 146 a. kozlova, a. miečinskienė. the research on interface between lithuanian direct investment abroad... summing up i(1) the results of regression models it can be said, that using the general sample data (pooled ols), modelling dia impact on import and export is not acceptable in different countries, as it‘s not taken in consideration the range of indicators of each country separately what causes error while calculating the parametre estimations. in the other stage of study the alternative strategy of modelling is used, applying the panel model of fixed effects which enables to estimate rating changes in each country separartely. while working out the model, the average of dia and import/export ratings are calculated in each country and making further calculations using regression equation, differentiated values matching the general rating of each country are applied but not nominal dia and import/export rating values. the modelling process mentioned above gives us the possibility to eliminate wrong relation between analysed ratings in different countries. the results of fixed effect model show that dia impact on import extent is significant statistically, because dia = 4.26 (p value = 0.0001 < 0.05) (table 5). general determination coefficient of created model is 0.699 (least-squares dummy variables (lsdv)) and it means that average data of created model is appropriate. more important is within determination coefficient which equals 0.2496. it shows that created panel regression justifies 25% on average the dissemination of import index in each country, according to dia changes. table 5. fixed effects regression impdia results (source: created by authors) coefficient std. error t-ratio p-value const 669.743 66.5765 10.0597 <0.0001 *** dia 4.26214 0.561813 7.5864 <0.0001 *** lsdv r-squared: 0.699311. within r-squared: 0.249632. *** the value of parameter is statistically significant when statistical significance level is 0.05. in case of estimated regression in export range it was defined that dia impact on export standard is significant statistically, because dia = 3.53 (p value = 0.0001 < 0.05) (table 6). lsdv determination coefficient of created model equals 0.52, it shows the model average data is appropriate. within determination coefficient equals 0.28, so the panel regression justifies 28% on average the dissemination of export index in each country, according to dia changes. table 6. fixed effects regression ekspdia results (source: created by authors) coefficient std. error t-ratio p-value const 522.154 50.8122 10.2762 <0.0001 *** dia 3.53282 0.428784 8.2392 <0.0001 *** lsdv r-squared: 0.516438. within r-squared: 0.28181. *** the value of parameter is statistically significant when statistical significance level is 0.01. 147 business, management and education, 2016, 14(1): 136–151 summing up the panel regression models it might be said that better explanation of import and export indicators range in different countries according to dia range is given by the panel fixed effect model than by i(1) regression models. it says, it’s very important to estimate the economical impact of individual country applying fixed effect regression. nevertheless, it‘s possible to develop worked out fixed effect models, eliminating monitoring which gives rather big divergency from the dominant tendency. thus, the import and export extent of poland is much more bigger comparing to other countries during the test period, so, when the polish data is removed, developed fixed effect models are worked out and the estimation of dia impact on import and export might be given (not including polish data). the obtained results show, that dia impact on import extent remains positive and statistically significant, because dia = 2.62 (p value = 0.0001 < 0.05) (table 7). lsdv determination coefficient of the worked out model equals 0.77, what is the evidence of high coherence of data. within determination coefficient equals 0.39. in comparison to previous worked out models, the new model describes by 15% more data dissemination, so the removing the polish data had the positive impact on general coordination of the model. table 7. fixed effects regression impdia results (having polish indicators removed) (source: created by authors) coefficient std. error t-ratio p-value const 494.05 30.7291 16.0776 <0.0001 *** dia 2.623 0.261405 10.0342 <0.0001 *** lsdv r-squared: 0.770154. within r-squared: 0.392253. *** -the value of parameter is statistically significant when statistical significance level is 0.01. figure 4 shows (in horizontal axix years is represented and ranges from 1997 to 2014), the model gives rather exact range description of import index in different countries. the biggest variations of import index from modelled values are monitored in latvia, russia and germany, that is the countries where import and dia extent had the biggest range. the obtained results show, that dia impact on export extent is also positive and statistically significant, because dia = 2.26 (p value = 0.0001 < 0.05) (table 8). lsdv determination coefficient of the worked out model equals 0.50, it shows medium coherence of data. within determination coefficient equals 0.25. in comparison to initial panel model (full taken), the quality of this model became slightly worse, so, removal of polish data didn‘t have the positive impact on general coordination of the model. however, initial and new export regression models are equivalents considering predicted accuracy. 148 a. kozlova, a. miečinskienė. the research on interface between lithuanian direct investment abroad... 1 = ‘by’; 2 = ‘ee’; 3 = ‘uk’; 4 = ‘kip’; 5 = ‘lv’; 6 = ‘ru’; 7 = ‘kal’; 8 = ‘de’; 9 = ‘nl’; 10 = ‘se’; 11 = ‘it’; 12 = ‘ua’ fig. 4. fitted and actual values of the import regression model (source: created by authors) table 8. fixed effects regression ekspdia results (having polish indicators removed) (source: created by authors) coefficient std. error t-ratio p-value const 500.499 36.7683 13.6123 <0.0001 *** dia 2.26132 0.312778 7.2298 <0.0001 *** lsdv r-squared: 0.503417. within r-squared: 0.250971. *** the value of parameter is statistically significant when statistical significance level is 0.01. figure 5 shows (in horizontal axix year is represented an range are from 1997 to 2014) that export index range in different countries is described with high precision by the model. the data of latvian export extent is described poorly so, as in latvian sample of data outliers is observed (export extent > 4000). summing up fixed effects of import and export regression models results it might be said, these are the best alternatives for panel data modelling in comparison with the regression models of general sample. fixed effect regression results show, that having dia increase of 1 eur mill. the import extent of the country has an average increase 149 business, management and education, 2016, 14(1): 136–151 of 2.62 eur mill. while analysing dia impact on the export extent, it might be said, that having dia increase of 1 eur mill., export extent in the countries has an average increase of 2.26 eur mill. so it is seen from the research data that foreign trade and lithuanian direct investment are supplements. 5. conclusions the question of relation between the direct investment abroad and trade is under the discussion in the scientific literature, so as there is no unambiguous answer whether the direct investment abroad is a supplement or substitution of the trade. obtained conclusions of empirical studies are quite different: there is a positive bilateral link between direct investment abroad and foreign trade, direct investment abroad supplements trade (motivates foreign trade) or may add its slight contribution to the export growth, direct investment abroad substitutes the trade. just recently lithuania takes part in the international stock movement. since 1997 the flows of the direct investment abroad increased greately in lithuania, today its bigger part has eu countries. the research analysis involves lithuanian direct investments in the developed countries except some countries having economy in transition, such as belorus, russia and ukraine. it is determined by 1 = ‘by’; 2 = ‘ee’; 3 = ‘uk’; 4 = ‘kip’; 5 = ‘lv’; 6 = ‘ru’; 7 = ‘kal’; 8 = ‘de’; 9 = ‘nl’; 10 = ‘se’; 11 = ‘it’; 12 = ‘ua’ fig. 5. fitted and actual values of the export regression model (source: created by authors) 150 a. kozlova, a. miečinskienė. the research on interface between lithuanian direct investment abroad... the study, that the range of lithuanian direct investment abroad is related to the range of export and import extent and also there is a positive bilateral link. it is also observed the impact of general development of lithuanian direct investment abroad (considering certain countries) on foreign trade and dia supplement foreign trade. references ahmad, f.; draz, m. u.; yang, s.-c. 2015. outward fdi and home country exports: empirical evidence from asean region. social science electronic publishing, 1–16. http://dx.doi.org/10.2139/ssrn.2649493 bajo-rubio, o.; montero-muñoz, m. 1999. foreign direct investment and trade: a causality analysis, open economies review 12(3): 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laurinavičius1, antanas laurinavičius2 julia siderska evaluation of the impact of the eu structural support on the competitiveness of lithuanian economics ligita gasparėnienė1, rita remeikienė2 the concept of products and services integration – analysis of scientific publications justyna kozłowska categories of supply chain performance indicators: an overview of approaches dorota leończuk multivariate analysis of short and long-impact indicators for corporate bond market development ieva astrauskaitė the research on interface between lithuanian direct investment abroad and foreign trade flows anžela kozlova1, algita miečinskienė2 copyright © 2016 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. factors affecting research environment at syrian business faculties: a student-perceived model bayan khalifa1, riad abdulraouf2, sulaiman mouselli3 1department of management, faculty of business administration, arab international university, mazzeh-high way, damascus, syria 2, 3department of accounting and finance, faculty of business administration, arab international university, mazzeh-high way, damascus, syria e-mails: 1bayan.khalifa@outlook.com; 2riadraouf@hotmail.com; 3s-mousele@aiu.edu.sy (corresponding author) received 2 june 2016; accepted 22 september 2016 abstract. this study aims at investigating the factors that affect the research environment of business postgraduate students, particularly master students, from the perspective of these students. from the same perspective, it also aims at assessing these factors together with the quality of research environment. a questionnaire survey method was employed. the questionnaire was developed by academics from five business faculties based on relevant studies and was distributed to graduate students enrolled in all of the research business programs at the faculty of economics, damascus university, ending up with 88 valid responses. to explore the factors that may affect research environment, exploratory factor analysis was employed. in addition, multiple regression analysis and t-test were applied to respond to the study purposes. facilities and industry linkage come to be significant factors in the research environment. however, the results show insignificant impact for each of the research courses, networking, and research skills in the overall research environment. variations in regard to the availability of these factors were identified with low level of availability for the facilities and industry linkage. the study is one of a kind that investigates factors affecting research environment of postgraduate students and particularly master students. further and to the best of our knowledge, it is the first study that examines such factors in war conditions, which enables us to understand what students perceive as critical factors influencing their research performance in these conditions. recommendations to policy makers are presented to develop strategies that respond to students’ concerns for a better research environment. keywords: business research, facilities, industry linkage, research courses, networking, research skills, syria. jel classification: i20, i23, i29. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(2): 210–225 doi:10.3846/bme.2016.322 mailto:bayan.khalifa@outlook.com mailto:riadraouf@hotmail.com doi:10.3846/bme.2016.322 211 business, management and education, 2016, 14(2): 210–225 1. introduction the syrian higher education system on the postgraduate level has its unique characteristics. it treats master level as research degree that requires submitting a thesis of at least one year of research as a requirement for awarding the degree (the ministry of higher education in syria website: http://www.mohe.gov.sy/mohe/). moreover, master students are expected to deliver high quality research and to publish articles during their master study in order to continue their doctoral studies. extra points are assigned to students who have international publications, which count for in the selection process for admission to doctoral program (damascus university website: http://www. damascusuniversity.edu.sy/ce/srd/2011–04–05–10–34–02/2010–10–27–13–20–19/787– 2013–04–24–10–02–01). this policy encourages master students to publish both locally and internationally in order to have a better chance of admitting to doctoral programs. master students at faculties of business and economics are in the core of this policy. despite research students’ recognition of the importance of having quality international publications, many factors are expected to hinder business master students from conducting research. factors affecting the performance of master students are quite similar to those affecting academic staff. however, certain specialties exist to accommodate the student case such as the quality of research method modules and the quality of supervision (matre 2014). the majority of prior literature focuses on the factors that affect research performance and environment of academics (macgregor et al. 2006; sabzwari et al. 2009; billot 2010; sulo et al. 2012; orlando, gard 2014), and to a lower extent doctoral students (walsh et al. 2010; golovushkina 2012; ismail et al. 2013), as the premium source of research, including the research at business schools. however, master students were not foreseen as researchers. accordingly, factors affecting the research performance of master students were not adequately investigated. this could be attributed to the taught nature of the master programs at the business schools of many western universities. the objective of this paper is twofold. first, it tries to fill the observed gap in the literature that investigates the factors which affect research performance of postgraduate students and particularly master students, which are rather neglected in the previous literature. second, given the war conditions in syria, examining such relevant factors for postgraduate students enables us to understand what students perceive as critical factors influencing their research performance in these conditions. the literature lacks such studies which can give additional novelty to this study. this could help policy makers to develop strategies that respond to students’ concerns which could result in a better research environment. 2. the syrian situation – a struggle for boosting research the syrian higher education authorities consider enhancing research quality in all fields, and particularly in business studies, as a national priority (the ministry of higher 212 b. khalifa et al. factors affecting research environment at syrian business faculties: a student-perceived model education in syria website: http://www.mohe.gov.sy/mohe/). however, syria is witnessing a period of political, economic, and social challenges resulted from the current more than five years crisis. hence, this research becomes a vital issue for the reconstruction process at both the economic and social levels. in syria, scientific research in business is strongly linked to the public higher education system. for many years, higher education had been solely provided by the government for very limited student fees. this is due to political reasons that considered education as a right guaranteed by the government for every person. however, the increasing demand and the arising cost of higher education posed a substantial challenge for the government to fulfill higher education needs, either at the quantitative or at the qualitative level. as a result, the government was encouraged to allow opening private fee-paying universities, which took place in 2001. by the end of 2014, six public universities, seventeen private universities, four public higher institutes, and one private higher institute were operating in the system of higher education in syria. in spite of the current government trends towards allowing the private higher education, research programs in syria are still exclusive for public higher education. private universities are not yet allowed to open research post-graduate programs. the government claims that the quality of research can only be guaranteed through its public higher education institutions. in 2014, there were 837 and 187 business research students at master and phd levels respectively, enrolling at public universities and high institutes (the ministry of higher education in syria website: http://www.mohe.gov.sy/mohe/). hence, the majority of business research activities are funded by the government with non-government sources remain very light. despite the relatively-large number of business research students in syria, international business research production that is published in referred international academic journals, and indexed in international research databases is considered poor compared to most countries in the middle east (khalifa et al. 2015). according to the report produced by khalifa et al. in 2015, only 17 syrian-affiliated researchers in the fields of social sciences and humanities have published their research in journals that are indexed by scopus database1, including only seven researchers in the field of business. the productivity of research students is even far worse. the recent awareness of the higher education authorities of the poor production of business research, and its importance led the higher education authorities to apply certain reforms to encourage both research students and academic staff to conduct high quality research, with higher focus on research students as the promising promoters of research (the ministry of higher education in syria website: http://www.mohe.gov.sy/mohe/). for example, master students are encouraged through awards and extra marks for publishing in 1 scopus is the largest bibliographic database containing abstracts and citations for academic journal articles. it is owned by elsevier and is available online. 213 business, management and education, 2016, 14(2): 210–225 national and international journals. these students are supposed to pass eight modules in the first year of their master followed by a thesis. the ministry of higher education, thus, started to encourage master students to publish their research in academic-refereed journals. further, publishing a minimum of one article has become mandatory to apply for a doctoral program in syria. moreover, master graduates with exceptional international publication skills were treated preferably when applying for doctoral programs (damascus university website: http://www.damascusuniversity.edu.sy). the current reforms to encourage high quality international research by master students have some positive outcomes but fail to achieve the intended impact. obviously, it increases the awareness among research students of the importance of conducting high quality research. however, this awareness and the introduced incentives have not been translated into the expected research performance by master students. one of the possible reasons is that research environment does not go along with the higher education authorities’ policies and ambitions and there could be many factors that hinder research in business studies. 3. literature review the literature on the factors that affect research performance of research students is very narrow (dogan, bikmaz 2015) and reflects the specific nature of each educational system. however, the factors that affect the research performance of academic staff are well-researched. those factors can be split into three main categories according to the concerned level; individual level, institutional level and country level. on the individual level, personal characteristics of faculty members such as age, gender, civil status, educational attainment, academic rank, and teaching load among other factors were investigated. for example, conklin and desselle (2006) found that 35% of the variance in staff research productivity of pharmacy academics is explained by a number of personal factors such as gender, academic rank, the number of hours spent on research activities every week, teaching self-efficacy, research self-efficacy, graduate programming interdisciplinary consensus, stress related to fulfilling academic roles and field of specialization. quimbo and sulabo (2014), in a study on the productivity of research staff in five state universities in philippines, found that educational attainment and teaching load significantly affect research self-efficacy which in turns affects research productivity. moreover, they found that research experience is a significant determinant of research productivity. on the source of educational attainment, sahoo et al. (2016) found that indian business faculty members who attain their doctoral degrees from outside india and/or had worked abroad for a few years are more research productive than their counterparts who had such degrees or experience solely from india. on the institutional level, a mixture of factors that impact research performance of academic staff at faculties and other professional researchers were suggested. quimbo and sulabo (2014), for example, investigated the impact of research policy, research 214 b. khalifa et al. factors affecting research environment at syrian business faculties: a student-perceived model funding, research benefits and incentives on research productivity and found that only research benefits and incentives load significantly on research productivity. sahoo et al. (2016) asserted the institutional importance documenting that business faculty staff at the indian institutes of technology are more research productive than those at indian institutes of management. other factors suggested by (bland, ruffin 1992; pratt et al. 1999; rix et al. 2004; macgregor et al. 2006; dhillon et al. 2015; lamm 2015; gregory et al. 2016), are: (1) research management structure transparency and effectiveness, (2) the linkage between research and workloads, (3) new researchers’ nutrition, (4) facilities provided by faculty research management, (5) effectiveness of research communication mechanisms, (6) interdisciplinary research collaboration encouragement, (7) external research collaboration encouragement, (8) relevance of research indicators to individual’s own research, (9) impact of research indicators on individual’s own research, (10) fostering of research mentoring system, (11) engagement of research students in research activities, (12) effectiveness of quality assurance mechanisms, (13) clarity of research priority areas, (14) natural research concentrations emergence, (15) general opinion on research environment. on the country level, other factors emerge. the accessibility to research funds is seen as important determinant of research performance especially when government resources are allocated to universities on the basis of research performance (macgregor et al. 2006; sulo et al. 2012; muscio et al. 2013; gonzalez-brambila et al. 2016). gonzalez-brambila et al. (2016), for example, revealed that in the latin america region, investment in r&d is comparatively low, largely depends on public funds, and is highly concentrated in academic research with limited business applications. they also unveiled a lack of connection in the region between those who produce knowledge (academia) and those who use that knowledge (business practitioners). they argued that business schools in the region have a role to play filling this gap by conducting more research with real-world business applications and by fostering innovative entrepreneurship among business school students. careful comparison of previous factors indicates that the majority of these factors are only applicable to academic staff and other professional researchers with some relevant to research students and too much emphasis on doctoral students. most of the doctoral students’ studies were focused on supervision issues, the skills and competencies of phd candidates, communication and networking, and courses (kim et al. 2010; sachdev 2011; mohamed et al. 2012; baptista 2014; philippi 2014; strandler et al. 2014; olehnovica et al. 2015; baruffaldi et al. 2016; nehls et al. 2016). baptista (2014) addressed the role of emotions in the supervisory and research processes of phd students. he argued that this experience has been considered, for many phd students, an intense and demanding “roller coaster”. furthermore, mohamed et al. (2012) suggested that soft skills and thinking out-of-the box skills are the main skills identified by the respondents as determinants of doctoral research students. moreover, sachdev (2011) identified the main problem that face research students as isolation and small 215 business, management and education, 2016, 14(2): 210–225 research communities. moreover, kim et al. (2010) identified the main weaknesses in the curriculum. these weaknesses are lack of courses which focus on developing core research competencies, lack of intraand external funding for dissertation research, and limited access to facilities. on the basis of the above review of literature on factors affecting performance of research students, and on the exploratory factor analysis conducted in this study, this article investigates the impact of five extracted factors on research environment. in other words, the literature yielded several items that are expected to affect research environment. thereafter, the analysis came to aggregate five factors based on these items. the factors are research-related courses provided to research students, facilities available to them to conduct research, cooperation between industry and students conducting research, networking, and research skills (table 1). table 1. factors affecting research environment of research students factor reference research courses kim et al. 2010 facilities kim et al. 2010 industry linkage kahn et al. 2012; mello et al. 2015 networking sachdev 2011 skills mohamed et al. 2012 4. methodology this study aims at determining the factors that affect the research environment at damascus university in syria, from the perspective of business research students. it also aims at assessing these factors together with the quality of research environment from the perspective of these students. in order to achieve this purpose, a questionnaire survey method was employed. the questionnaire consists of an introductory section for students’ profiles (i.e. gender, age, nationality, department, and education level) and two more sections aiming at achieving the study purposes. the first section consists of ten items targeting the research environment. the second section consists of 54 items that are expected to contribute to enhancing the research environment. keeping in mind the international nature of the research environment, the questionnaire was developed by academics at universities in three countries: damascus university (du), arab international university (aiu), and international university for science & technology (iust), syria; vilnius gediminas technical university (vgtu), lithuania; and modern university of business and science (mubs), lebanon. subsequently, to embrace the perceptions of the private business sector, the questionnaire was revised and benefited from the comments provided by the syrian consulting bureau for development & investment, a private company specialized in conducting macro216 b. khalifa et al. factors affecting research environment at syrian business faculties: a student-perceived model economic and sector studies, especially in the area related to the linkage between industry and university. the stated process yielded a questionnaire in english language. to guarantee students’ accurate understanding, the questionnaire items were translated to arabic by academics in syria. items were close ended, and were assessed on a 5-point likert scale. based on the final version of the questionnaire, data collection took place in the period between 7th to 30th july 2014. questionnaires were distributed to graduate students enrolled in all of the research business programs at the faculty of economics, damascus university. in order to distribute the questionnaire, two means were employed. first, lecturers manually delivered 70 copies of the questionnaire to their students, which resulted in a 100% response rate. second, due to the current war conditions and in order to reach students at remote locations, the questionnaire was distributed online through the university website, students’ facebook groups, and students’ email lists. the number of students that reached the questionnaire through the online channels was estimated by 500. these channels yielded other 18 valid responses with a response rate of 3.6 percent, a usual rate compared to the average of 2 percent reported by petchenik and watermolen (2011) for online surveys. accordingly, the overall valid responses were 88. respondents’ profiles are presented in table 2. the data was treated through spss version 20. table 2. students’ profile variable frequency % gender female 40 45.5 male 48 54.5 age 20–25 40 45.5 26–30 41 46.6 31–35 5 5.7 36–40 2 2.3 nationality syrian 83 94.3 palestinian 4 4.5 jordanian 1 1.1 department business administration 12 13.6 economics 24 27.3 banking and insurance 38 43.2 applied statistics 5 5.7 accounting 9 10.2 education level master (courses) 57 64.8 mphil 27 30.7 phd 4 4.5 217 business, management and education, 2016, 14(2): 210–225 5. results to explore the dimensionality of the questionnaire items, an exploratory factor analysis was applied using varimax rotated principal axis factoring as shown in table 3. the analysis resulted into six factors with eigenvalues and factor loadings that, respectively, exceeded the minimums of 1 and 0.3 suggested by creswell (2012). the factors also fulfilled the minimum criteria (at least three items per factor) of defining a factor (brown 2015). accordingly, the authors named the generated factors through driving the concept behind the meaning of the constructed items. cronbach’s alpha, a measure of internal consistency, was found to exceed the minimum of 0.6 suggested by devellis (2012) for all of the factors. to investigate the significant contributions of these factors to the research environment, a multiple regression analysis was conducted. in order to investigate the impact of the five extracted factors: research courses, facilities, industry linkage, networking, and skills on research environment, a multiple regression analysis was run using the following equation, research environment = β0 + β1 research courses + β2 facilities + β3 industry linkage + β4 networking + β5 skills + ε where: b0 is the constant; β1, β2, β3, β4, and β5; are the sensitivity of research environment to changes in research courses, facilities, industry linkage, networking, and skills respectively; ε is the error term. the results revealed a significant impact for each of the facilities offered by the university and its linkage with the industry on research environment. the most important factor is industry linkage with a coefficient of 0.379. it indicates that one percentage improvement in industry linkage would enhance research environment by 0.379%. moreover, the coefficient of 0.285 indicates that one percentage increase in facilities offered by universities, improves research environment, by 0.285% (fig. 1). research courses facilities skills networking industry linkage research environment 0.285* 0.379* note: dashed lines indicate non-significant paths at 0.05. fig. 1. path model 218 b. khalifa et al. factors affecting research environment at syrian business faculties: a student-perceived model ta bl e 3. e xp lo ra to ry fa ct or a na ly si s an d re lia bi lit y te st c on st ru ct it em fa ct or lo ad in g e ig en va lu e c ro nb ac h’ s al ph a f1 f2 f3 f4 f5 f6 r es ea rc h en vi ro nm en t 4. 62 0 0. 72 3 sc ie nt ifi c re se ar ch a ct iv ity is v er y pr ev al en t 0. 34 6 q ua lit y of r es ea rc h ac tiv ity is v er y go od 0. 37 3 r es ea rc he rs a re fi na nc ia lly s up po rt ed a nd e nc ou ra ge d 0. 50 5 r es ea rc h co nf er en ce s an d w or ks ho ps a re h el d re gu la rl y 0. 49 7 sc ie nt ifi c re se ar ch is c on du ct ed a cc or di ng to th e ne ed s of b us in es s an d in du st ry 0. 64 3 a f ai r ev al ua tio n of th e qu al ity o f re se ar ch a ct iv iti es is co nd uc te d re gu la rl y 0. 52 2 r es ea rc h co ur se s 3. 35 7 0. 71 7 t he re is a de qu at e gu id an ce o f le ct ur er s in b us in es s re se ar ch c ou rs es 0. 61 4 l ec tu re rs ’ s uf fic ie nt k no w le dg e of s ta tis tic s ha s a m aj or in flu en ce o n th e qu al ity o f bu si ne ss r es ea rc h co ur se s 0. 54 3 r es ea rc h co ur se s ar e eq ui pp ed w ith r ec en t m et ho ds o f re se ar ch 0. 70 1 q ua lit at iv e an d q ua nt ita tiv e re se ar ch m et ho do lo gi es ar e fu lly c ov er ed in th e co ur se s 0. 68 0 fa ci lit ie s 4. 31 8 0. 74 9 in te rn et la bs a re a va ila bl e an d w el l e qu ip pe d fo r re se ar ch 0. 48 0 e le ct ro ni c re so ur ce s an d da ta b as es a re a va ila bl e in th e l ib ra ry 0. 72 7 d if fe re nt r es ea rc h jo ur na ls a re a va ila bl e in th e lib ra ry 0. 69 4 l ib ra ri es h av e ad eq ua te n um be r of r ec en t b us in es sre la te d te xt bo ok s an d re so ur ce s 0. 51 5 l ib ra ri an s pr ov id e he lp fu l a ss is ta nc e 0. 42 4 t he re a re e no ug h us ef ul te xt bo ok s av ai la bl e in th e lib ra ry o n ne w r es ea rc h m et ho do lo gy 0. 66 1 in du st ry li nk ag e 4. 62 0 0. 68 4 219 business, management and education, 2016, 14(2): 210–225 r es ea rc h is li nk ed to p ra ct ic al n ee ds o f bu si ne ss a nd in du st ry 0. 60 7 r eg ul ar m ee tin gs a re h el d w ith b us in es se s to d is cu ss th ei r ne ed s 0. 50 8 b us in es s pr ov id e ad eq ua te f un d an d su pp or t f or re se ar ch 0. 55 8 t he r es ea rc h’ s in te gr at io n w ith b us in es s is s at is fa ct or y 0. 42 1 r es ea rc h m et ho ds c ou rs es e m ph as iz e lin ki ng a ca de m ia to b us in es s 0. 64 9 n et w or ki ng 4. 25 0 0. 69 8 in te rn at io na liz at io n of r es ea rc h en vi ro nm en t a t u ni ve rs ity is im po rta nt to r un s ci en tifi c re se ar ch 0. 43 8 o rg an iz ed in te rn at io na l c on fe re nc e at u ni ve rs ity /f ac ul ty fo r sh ar in g sc ie nt ifi c re su lts is r el ev an t t o ru n sc ie nt ifi c re se ar ch 0. 70 9 o rg an iz ed s pe ci al s ci en tifi c w or ks ho ps a t u ni ve rs ity / fa cu lty a re r eq ui re d 0. 70 7 st ro ng li nk ag es w ith in du st ry a nd u ni ve rs ity /f ac ul ty a re re qu ir ed 0. 71 0 e ng lis h la ng ua ge s ki lls a re n ee de d 0. 56 4 sk ill s 7. 31 6 0. 74 8 r es ea rc h m et ho ds a nd to ol s’ s ki lls a re n ee de d to b e ab le to c on du ct b et te r re se ar ch 0. 44 8 a ca de m ic w ri tin g sk ill s ar e ne ed ed to b e ab le to co nd uc t b et te r re se ar ch 0. 57 6 d ec is io nm ak in g sk ill s (t he s ki lls to m ak e tim el y de ci si on s, to ta ke r es po ns ib ili ty f or d ec is io ns , e va lu at e th e ri sk s an d co ns eq ue nc es o f de ci si on s) a re r eq ui re d 0. 45 2 c re at iv ity , c re at iv e th in ki ng s ki lls ( sk ill s to p re se nt or ig in al id ea s, o ff er in no va tiv e an d un co nv en tio na l so lu tio ns ) ar e ne ce ss ar y to b e ab le to c on du ct b et te r re se ar ch 0. 55 7 pr es en ta tio n sk ill s (s ki lls to c om m un ic at e cl ea rl y an d pr ec is el y ar tic ul at e th ou gh ts a nd id ea s cl ea rl y ex pl ai ne d) a re n ee de d 0. 58 0 se lf -d ev el op m en t a nd s el fle ar ni ng s ki lls a re w an te d 0. 67 3 220 b. khalifa et al. factors affecting research environment at syrian business faculties: a student-perceived model however, the other three factors, research courses, networking, and skills did not show significant impacts on research environment, with p-values that are above 0.05 (table 4). table 4. direct effects’ coefficients the relationship estimate p-value research environment <--research courses –0.021 0.746 research environment <--facilities 0.285* 0.000 research environment <--industry linkage 0.379* 0.000 research environment <--networking –0.080 0.558 research environment <--skills 0.024 0.859 *significant at 0.05 to assess the extent to which these factors are available to the business research students at damascus university, means and one-sample t-test was conducted. cooper and schindler (2011) suggested that one-sample t-tests are used when we have a single sample and wish to encounter the difference between observed and expected values. in this study, t-test was employed to investigate the differences between the observed mean values and the neutral values of the study factors, where the neutral value is the middle of the scale used, three. exhibited in the second-left column in table 5, the results showed that business research students have negative perceptions towards the quality of the research environment, with the mean of 2.127, that detracted the neutral value of three. they also undervalue each of the research courses, facilities, and industry linkage that are offered by their university, with the means of 2.285, 2.144, and 1.873, respectively. in addition, business research students expressed high scores for each of the constructs of networking and skills, with the means of 4.065 and 4.218, respectively, which exceeded the neutral values of three. table 5. t-test for assessing the quality of the research environment and the expected contributors construct test value = 3 mean t df sig. research environment 2.127 –13.493– 87 0.000 research courses 2.285 –7.859– 87 0.000 facilities 2.144 –11.023– 87 0.000 industry linkage 1.873 –15.485– 87 0.000 networking 4.065 9.656 87 0.000 skills 4.218 11.196 87 0.000 6. discussion of results this study aims at investigating the factors that affect the research environment of postgraduate students, particularly master students, from the perspective of business research students. it also aims at assessing these factors together with the quality of research environment from the same perspective. 221 business, management and education, 2016, 14(2): 210–225 the results of this article indicate that research students perceive facilities as the dominant factor that affects their research performance. these facilities include, but are not limited to, internet labs, electronic resources and databases, journals and software packages. it is highly expected that this factor will come first in research student perception because in the absence of such facilities, conducting a proper research is unimaginable. the result, however, comes to confirm previous research (e.g., kim et al. 2010). hence, the main emphasis of higher education authorities should be directed towards making these facilities available to research students. among all the facilities, electronic resources and databases perceived as the most important elements. accordingly, the authors invited the ministry of higher education in syria and the universities to offer their research students subscriptions to high-quality scientific databases. these subscriptions may include access to latest journal articles and research methodology books to support students in their research. in the current situation of public funds shortage, and in line with previous research (kahn et al. 2012; mello et al. 2015), research students recognize cooperation with industry in both funding and needs’ awareness as the second priority. the overwhelming dependence on public funds of public universities and the current war situation of the country impose great constraints on the funds available to research students with almost no funds made available to research in these universities since the beginning of the war in syria. more cooperation in the form of regular meetings and partnerships between industry and universities especially in funding new projects will significantly enhance the research performance of research students. however, our results contradict previous research in regard to the three remaining factors, research courses, networking, and skills (aguilar et al. 2013; chase et al. 2013; mello et al. 2015).the insignificant impact of these factors should not be taken as an indicator of their irrelevance for research nor should be considered as if they are already on place. one reason of research students not considering research courses as essential for their research performance could be that students find alternatives to university research courses in online courses and social media. the results, thus, intensifies the need to develop self-learning skills in order to help students get the most possible benefits from these alternatives. universities are invited to run workshops and training courses to develop their students as self-learners. further, they are invited to enhance teaching and assessing methods in a way that avoids rote learning and encourages independence of students. the lack of awareness on the benefits and rewards of networking and research skills could be the reason of students undervaluing these factors. accordingly, holding conferences, workshops, and seminars to raise awareness of students on these factors could be a plausible solution for the fact. responding to the second purpose of the study, which is to assess the extent to which these factors together with an appropriate research environment are available to the business research students at damascus university, our results show variabilities. 222 b. khalifa et al. factors affecting research environment at syrian business faculties: a student-perceived model the worth noting result is that students hold negative assessment towards the research environment in their university. further, they also perceive low availability of each of the facilities and industry linkage, which are identified by these students as significant factors in the research environment. 7. conclusions and recommendations this article investigates the perceived impact of five factors on research environment from the point of view of research students at a syrian business faculty. we find that research students perceive facilities as the dominant factor that affects their research performance. moreover, research students recognize cooperation with industry in both funding and needs’ awareness as the second priority. however, the results show insignificant impact for each of the research courses, networking, and research skills in the overall research environment. clearly, those results hold for other public universities offering post-graduate research programs. the results, accordingly, call for the higher education authorities to reform the research environment for a more friendly linkage between industry and universities in a win-win situation. moreover, minimum, at least, research facilities should be regulated and guaranteed by higher education authorities to ensure the availability of all necessary facilities. furthermore, allowing private universities to open post-graduate research programs jointly with public universities may overcome the lack of facilities from which public universities suffer while assuring the quality of teaching. this study is limited to master students in the business field. therefore, future studies may investigate the factors affecting research environment in other fields which may have different dominated factors. in addition, this study is based on a questionnaire that contains a number of factors predetermined by academics and expected to affect research environment. thus, future research may conduct interviews or focus groups with students to explore other factors that may affect research environment including personal attitudes and motives. such attitudes and motives may overweigh a number of the examined factors and could explain the excellent research performance of some students and constitute a venue for future research. acknowledgements this research has benefited in questionnaire development from the feedback of jurgita raudeliūnienė, vida davidavičienė, serene dalati, mohamad alkhedr, m. sadiq alnosairat, and bassem kaisse. funding this work was financially supported by tempus project no. 544001-tempus-1-detempus-jphes. 223 business, management and education, 2016, 14(2): 210–225 disclosure statement the authors declare that they do not have any competing financial, professional, or personal interests from other parties. references aguilar, s. m.; ynalvez, m. a.; kilburn, j. c.; hara, n.; ynalvez, r. a.; chen, k. h.; kamo, y. 2013. research productivity of east asian scientists: does cosmopolitanism in professional 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research interest: audit risk, corporate governance, and audit quality. sulaiman mouselli. senior lecturer in finance and dean of the faculty of business administration, arab international university. damascus, syria. research interest: stock market anomalies, asset pricing models, corporate governance, and macroeconomic risk. https://doi.org/10.1080/1360080990210104 https://doi.org/10.1080/03075079.2013.818639 https://doi.org/10.1186/1472-6920-9-68 https://doi.org/10.1016/j.omega.2016.02.004 https://doi.org/10.1108/ijrd-03-2014-0002 https://doi.org/10.1108/1759751x201100015 copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. the process of selection of the main research methods in foresight from different perspectives andrzej magruk management faculty, bialystok university of technology, ul. wiejska 45 a, 15-351 bialystok, poland e-mail: a.magruk@pb.edu.pl received 30 june 2015; accepted 31 august 2015 abstract. when making research tasks in every field of science is essential to have the conviction that the selected research methods and procedures are reasonable applied, that is, one that effectively lead to the realization of the defined tasks. the set of methods that can be used in foresight projects (future studies) is very rich and, due to the dynamics of foresight, is still open. this article presents a synthetic set of guidelines for the choice of methods for exploring the future, paying attention to the very important fact that the rules of effective methodical conduction, due to its complexity, are often not clearly defined. depending on the context, functions, stages, types, classes of foresight methods can be used in different ways, which also complicates the creation of optimum model. the article shows that this problem – under certain conditions – can be effectively minimized. the article analyzes the current (shown in the future science literature) approaches, principles, assumptions associated with the selection of foresight research methods. keywords: research method, context of foresight, future studies, stages of research. jel classification: o20, o21, o32, o33. 1. introduction nowadays, one of the most popular tools for planning, creation a vision, and management of strategic changes in both the global as well as local level, is foresight (jemala 2010). its idea is based on a systematic multi-dimensional creations long-term future (gudanowska 2011). foresight is relatively difficult to clearly definable. in contrast to traditional forecasting, which often do fail to predict the future in turbulent times (nazarko, kononiuk 2013), it creates a platform for developing the science of the future. r. slaughter defines foresight as a universal human ability that allows to think ahead, to model, create and respond to eventualities in the future. it is based on a extensive, integrated and complex system of thought, supporting human perception (hideg 2007). this is all the b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(2): 234–248 doi:10.3846/bme.2015.281 http://dx.doi.org/ 10.3846/bme.2015.281 235 business, management and education, 2015, 13(2): 234–248 more valuable that as noted by zavadskas and turskis (zavadskas, turskis 2010), “in many real-world decisionproblems a decision-maker has a set of multiple conflicting objectives”. “futures research aims at systematically exploring, predicting and/or explaining future developments with the means of different methods and techniques. thus, it supports organizations (i.e. companies’, regions, etc.) efforts to sense change and adapt or renew accordingly. in this context, the application of futures research methods can serve various goals such as testing strategies, or identifying new fields (i.e. business) or new policy issues“ (duin et al. 2014). in the context of the article is subject, we can say that foresight using research methods (participative, transparent, forwardlooking) (havas et al. 2010) derived from different fields of science, creates a platform for developing the science of the future. due to the high complexity of foresight the process of selection of “appropriate methods” has many gaps, which according to the author can effectively supplement, which is proved in this article. 2. assumptions concerning foresight research process a set of methods that can be used in these programs is very extensive and because of the dynamics of foresight it is still open. the author has identified a rich list of 116 methods that can be used in foresigh programs (magruk 2011). literature does not present simple rules concerning the choice of suitable methods for research. depending on the function and context of foresight, methods can be used in different ways (nazarko, ejdys 2011) which complicates creation of an optimal workflow (unido 2008). several years of direct observation and literature analysis helped the author of this article to identify several important conclusions and assumptions concerning foresight research process: – the selection of foresight methods is a complex, multifactorial process, but often unsystematic and incoherent process based solely on intuition (markley 1988), and sometimes also on inexperience and irresponsibility of practitioners and promoters (popper 2008b); – in foresight studies there is no single best method by which we can resolve the research problem (slaughter 2004); – foresight research methods are selected mainly on the basis of their internal attributes (eg. quantitative-qualitative) (elena et al. 2008); – there are many sources of literature on the use of various research methods, but relatively little has been written about their efficient selection (elena et al. 2008); – appearing in the literature analysis and typological classification is often not taken into account a wide range of foresight research methods. only a few authors of 236 a. magruk. the process of selection of the main research methods in foresight from different perspectives the study involved more than four classes/types. additionally, in some cases, definition of typology is confused or equated with the definition of the classification. it is important, therefore, to find ways to facilitate the selection of research methods foresight. 3. aspects influencing the selection of the main foresight research methods – gneral view in most cases (including foresight) some disciplines adopt common methodological assumptions, exploit of research results from related disciplines, and only in appropriate cases, develop a separate method only for the specific discipline (chrisidu-budnik et al. 2005). the main purpose of foresight, which can be expressed as exploring the future through its targeted building, is carried out by using a variety of tools and research methods. t. kotarbiński pays particular attention to the systematic nature of the method and the need for its modification and adaptation to a situation or problem that is under consideration. according to the author of this article, in the case of foresight methods such features as repetition, regularity and adaptation to a given problem are of a special nature. other important features of the research methods are: intelligibility, clarity, advisability, efficiency and reliability (apanowicz 2003). in the case of foresight methods only clarity rule – that excludes the flexibility to use different ways and procedures – it is not always maintained. some methods (for example, a scenario method, delphi, wild card, etc.), despite the well-established principles of application, allow for flexibility and modifications. very important feature of the foresight research method is the possibility of resorting to practical knowledge – based on experience and intuition of experts involved in the study. m. alexandrova, d. marinova, d. tchonkova, m. keenan, r. popper and a. havas emphasized that the method of foresight (as in other research (apanowicz 2000)) should always be selected after determining the aim of research, but never vice versa (alexandrova et al. 2007; popper 2008a, 2008b). only after the identification of phenomena, questions and hypotheses, the relationship between them can proceed to the selection of methods, research tools, indicators (nowak 2006). for example, method-oriented communication and use informal sources of information are relevant when we examine the dynamic and rapidly changing areas. in addition, motivational and coordination function of these methods allow to overcome organizational barriers and personal (reger 2001). 237 business, management and education, 2015, 13(2): 234–248 linear presentation of the future, for instance, by extrapolating trends may be useful, only on restricted and solid conditions or in combination with a more dynamic methods. in foresight, there are methods that allow for ambiguity, and those that are sensitive to the initial or new conditions. the foresight nonlinear systems thinking is critical, because even a small event in one place can cause problems in another, because of the sensitivity of the system to new initial conditions. it is important to note that the use of models, research methods in new, unconventional way can become a source of innovation. according to m. aaltonen and t. i. sanders for the effective application of foresight research methods it is necessary to understand several guidelines (aaltonen, sanders 2006): – in-depth understanding of research methods, which is the starting point for a successful foresight process; – the use of a single method is the wrong approach; just thought a combination of different, even contradictory techniques can give proper results; – mathematical and system engineering methods should be applied in the initial phases of research foresight. in fact, every foresight should be based on knowledge of the largest possible number of sources of information. foresight projects should end by methods emphasizing the social context; – major in research foresight is to treat the future as a factor having an impact on what is new, and not as a factor which is a continuation of the past. referring to the t. j. gordon and j. c. glenn (gordon, glenn 2004) research, below are presented some important rules that must be taken into account in studies of foresight: – accuracy and precision are two distinct concepts. quantitative forecasts can be very precise, but quite inaccurate. on the other hand, the forecast may be accurate, but imprecise; – future relied only on research extrapolation will certainly be flawed; – each typical forecasting is incomplete, because there will never be a complete understanding of all phenomena in the world. many undiscovered phenomena is not based on precedents; – due to the inaccuracy and incompleteness, the planning must be a dynamic process, based on ongoing scanning of new ideas, the development of new trends and opportunities for the future; – the future depends on the opportunity; changes often irrelevant in the initial phase can turn into phenomena that dominate the tested field; – many methods should be assisted by determination of the likelihood of future events; – accurate forecasts of some complex and non-linear systems can be impossible. m. alexandrova, d. marinova, d tchonkova, m. keenan, r. popper and a. havas formulated three important assumptions for to the selection of appropriate methods (alexandrova et al. 2007): − a list of methods that can be used in foresight research should be the fullest; − have knowledge about the characteristics of each method, it is crucial to understand the features of each of them; 238 a. magruk. the process of selection of the main research methods in foresight from different perspectives − one should set criteria that will allow the selection of appropriate methods and rejection of other techniques. in general meaning, the choice of methods should be subordinated primarily to issues of the study. it is harmful phenomena when methods dominate over the research issue (nowak 2006). according to j. apanowicz, research methods should be properly “tailored” to the specific nature of the object of study, the characteristics and complexity of the phenomenon and its diagnostic features (apanowicz 2000). 4. typology and classification of research foresight methods this section has been made to systematize the typology and classification of research foresight methods. according to the author this brief characteristics, on the one hand complements descriptions in the previous section, as well as synthesizes guidelines for building effective research foresight methodologies. table 1 shows a summary list of the existing typologies and classifications of method used in future studies. j. c. glenn, t. j. gordon are one of the first authors who have made a thorough analysis of methods used in the future studies (gordon, glenn 2004). the unido handbook characterizes two classifications. first, by i. miles and m. keenan, includes 13 methods and 4 classes (cariola 2007; unido 2008). the second classification of g. may includes 40 methods and is divided into 3 classes: i. foreseeing: ii. managing and iii. creating. the starting point in the foreseeing is the present (or past), which takes anticipation of a possible or probable future (unido 2008). the methods of management group are focused on management of changes and strategic crisis. these methods are often based on the identification of new peripheral trends, weak signals or tsunami of change (may 2009). creating is based on the normative methods and assumes that the future does not exist, but can be invented and developed (unido 2008). in addition, in the unido handbook we can find two types of methods focusing on the product and focus on the process. the first group of methods allows generate of formal results as e.g. scenarios, key technologies, etc. methods focused on the process allows to look at the foresight problem in several stages, facilitating the continuation of the program after its finish and creation of sustainable networks between participants of foresight studies (unido 2008). m. aaltonen, t. i. sanders, referring to the research of j. c. glenn and t. j. gordon created a typology consisting of 29 methods in four areas as combination of four dimensions called perspectives: mathematical, social, engineering and system. methods of engineering and system groups are used for a long time, with a strong grounding for example in strategic management. mathematical methods based on complex adaptive systems are still not very common in future studies. together with the methods 239 business, management and education, 2015, 13(2): 234–248 table 1. typologies and classifications of research foresight methods in foresight literature (source: created by the author) authors [t]-typology [c]-classification: names of types/classes (references) t. j. gordon, j. c. glenn [t]: 1) collect judgments genius, 2) forecast time series, and other quantitative measures, 3) understand the linkages between events, trends, and actions, 4) determine a course of action in the presence of uncertainty, 5) portray alternate plausible futures, 6) reach an understanding if the future is improving 7) track changes and assumptions, 8) determine system stability, 9) quantitative, 10) qualitative, 11) normative, 12) exploratory (gordon, glenn 2004) i. miles, m. keenan [c]: 1) identifying issues, 2) extrapolative approaches, 3) creative approaches, 4) prioritization (unido 2008) g. may [c]: i. foreseeing: 1) prediction; 2) extrapolation; 3) analytical forecasting; ii. managing: 1) judgemental; 2) forecasting; 3) management), iii. creating: 1) policy-making; 2) speculation; 3) imaging (unido 2008) unido [t]: 1) concentration on product, 2) concentration on process (unido 2008) m. aaltonen, t. i.sanders [t]: 1) mathematical, 2) social, 3) engineering, 4) system (aaltonen, sanders 2006) o. saritas [t]: 1) understanding, 2) synthesis&model, 3) analysis&selection, 4) transformation, 5) action (elena et. al. 2008) i. miles, r. popper [t]: 1) pre-foresight, 2) recruitment, 3) generation, 4) action, 5) reneewal (popper 2008b) r. popper [c]: 1) quantitative, 2) semiquantitative, 3) qualitative (popper 2008b) r. popper, d. loveridge [t]: 1) creativity, 2) interaction, 3) evidence, 4) expertise (popper 2008b) r. popper [c]: 1) bottom-up, 2) top-down (popper 2008b) euforia project [t]: 1) based on virtual environment, 2) based on real environment, 3) soft (qualitative), 4) hard (quantitative), 5) based on expert judgements, 6) analytical, 7) bottom-up, 8) top-down (popper, korte 2004) r. slaughter [c]: 1) input methods, 2) analytic methods, 3) paradigmatic methods, 4) iterative and exploratory methods (slaughter 1997) k. borodako [c]: 1) strategic, 2) forecasting, 3) futuristic (borodako 2009) foren [c]: 1) methods that are based on eliciting expert knowledge to develop long-term strategies, 2) quantitative methods that make use of statistics and other data, 3) methods to identify key points of action todetermine planning strategies (miles, keenan 2001) f.tilley i t. fuller, s. inayatullah [c]: 1) predictive, 2) cultural, 3) critical (tilley, fuller 2000) k. cuhls, k. blind, h. grupp [c]: 1) cognitive, 2) statistical and econometric, 3) structural and causal (cuhls et al. 2002) a. l. porter [t]: 1) creativity, 2) descriptive and matrices, 3) statistical, 4) expert opinion, 5) monitoring and intelligence, 6) modeling and simulation, 7) scenarios, 8) trend analyses, 9) valuing/decision/economic, 10) hard (quantitative), 11) soft (qualitative), 12) exploratory, 13) normative, 14)roadmapping, 15) combinations (porter 2010) j. voros [c]: 1) evolutionary, 2) revolutionary (voros 2006) a. magruk (magruk 2011) [c]: 1) consultative, 2) creative, 3) prescriptive, 4) multicriterial, 5) radar, 6) simulation, 7) diagnostic, 8) analytical, 9) survey, 10) strategic 240 a. magruk. the process of selection of the main research methods in foresight from different perspectives emphasizing the social aspect create a complementary picture of the emerging future (aaltonen, sanders 2006). o. saritas divided 32 foresight research methods into five types according to key stages of systemic foresight: understanding, synthesis and model, analysis and selection, transformation, actions (elena et al. 2008). r. popper and i. miles made the typological distribution foresight research methods in-debt criterion, which are the stages of foresight: pre-foresight, recruitment, generation, action, reneewal. another, well known among practitioners of foresight, the r. popper’s typological distribution of methods (relating to the classification of quantitative, indirect and qualitative methods) is foresight diamond, comprising four dimensions: creativity, interaction, evidence, expertise (popper 2008b). according to r. popper, proper design of foresight research methodology should include the use of at least one method of each dimension of diamond (popper 2008a). according to the author of this article, r. popper’s approach is correct, but incomplete. many methods are not clearly assigned to specific poles of the diamond. this fact can create big problems – especially for new practitioners of foresight – in the process of construction of research methodology. another classification is composed of two groups: bottom-up and top-down. practitioners emphasize the importance of foresight methods from the bottom-up group, based on the participation of a wide range of stakeholders (not only expert) with different backgrounds. in this approach, the prevailing view that more important than the final results are research process, social participation and debate. in a study of top-down central role is played by the experts. most results (both fragmentary as well as the final) are based on their opinions (popper 2008b). international project euforia let distinguish 4 original types of methods. methods based on the virtual environment used digital tools (eg. internet network) are recommended in case of complicated calculations and the need for systemic look at the issue. methods based on the work in a real environment, force personal contact of foresight stakeholders, which affects the speed-up the final results. methods based on the intuition of experts (heuristic) generate original ideas and solutions. analytical methods use of readily available knowledge as evidence, statistics, analysis, allowing appoint vision and development priorities (popper, korte 2004). r. slaughter made a classification of twelve methods due to the 4 functions. input methods accumulate the knowledge needed in the organization of the entire research process. analytical methods are the main in the research process and are often used in combination with other methods. paradigmatic methods are those that treat studied objects in a systemic way using a holistic vision of the world. iterative methods allow for substantive determining the future and development of strategies (slaughter 1997) k. borodako (using research of f. tilley and t. fuller) distinguishes three groups: strategic methods (which create scenarios), forecasting methods (extrapolating future) and a futuristic methods (based on the narrative of alternative futures) (borodako 2009). 241 business, management and education, 2015, 13(2): 234–248 f. tilley and t. fuller identify three classes of foresight methods: predictive, cultural, critical. the first group is identical to the explorative methods. the aim of cultural method is understanding (insight) of research problem and the treatment of language and cultural aspects as important in the process of creation of reality. the aim of the critical methods is to find ways of uniting sophisticated analyses (tilley, fuller 2000). k. cuhls, k. blind, h. grupp distinguished 3 classes of foresight 30 research methods: cognitive (large and small scale), statistical and econometric (extrapolative, econometric, facilitating decision making), structural and causal (scenario, simulation, evaluation) (cuhls et al. 2002). according to a. l. porter creative methods allow to generate of novel approaches. the descriptive and matrix approach facilitates the interpretation of the examined information. monitoring and intelligence methods outline and profiles the available information. scenario methods combine multi-shots in order to build alternative futures. methods of time trends analysis are used to projection into the future. valuing/decision/economic methods support estimation of certain activities (for example political). roadmapping methods inform and assist the planning of development of science and technology. combined methods integrate various research tools in order to develop the perspective of a better future (porter 2010). among the prospective methods, j. voros distinguishes two classes of methods. in the evolutionary methods starting point is the present time, which occurs relatively stable, predictable and reliable development. revolutionary methods focus on a distant, hard predictable future, based on emergency events, not necessarily connected with the present. these methods are often characterized by sudden, a different point of view (voros 2006). despite the fact that some typological and classification approaches are very popular in literature, in the opinion of the author of this article, they have many limitations. the new classification (table 2) of a. magruk (magruk 2011) takes into account all the characteristics of existing typologies and classifications enriching them many other features. the homogeneous distribution to 10 separate classes appears to be more complete, so that the selection of methods seems to be easier. 5. selection of foresight research methods according to the context of research, stages and the author’s classification in present chapter author of the article referred to a study jw creswell (for f. boardman), the investigator combining quantitative and qualitative methods, which states that in the process of combination of research methods answer the following key questions (boardman 2012): – in what order the collected qualitative and quantitative data will be implemented to research? 242 a. magruk. the process of selection of the main research methods in foresight from different perspectives – what relative priority will be given to the collection and analysis of qualitative and quantitative data? – at what stage of the project qualitative and quantitative data will be integrated? the first question can strictly refer to the stages of the foresight process. the author has analyzed the potential application of the methods of the class (table 2) of selected research phase of foresight. the second question is related to the selected contexts foresight studies. in this case, these are the contexts of technological, social, and cognitive (nazarko 2013). priorities are reflected by the strength of ties methods with particular contexts (table 3). the third question corresponds directly with the stages of research foresight and indirectly from the author’s classes. determined research context of and the selection of appropriate methods are highly interdependent of each other. they also have a direct relationship with the stages of foresight process. table 2. classification of technology foresight research methods (source: created by the author) innovative classes methods belonging to each class consultative voting, polling, survey, interviews, expert panels, essays, conferences, workshops, citizen panels, brainstorming creative wild cards, weak signals, mindmap., lateral thinking, futures wheel, role play, business wargaming, synectics, speculative writing, visualization, metaphors, assumption reversal prescriptive relevance trees, morphological analysis, rich pictures, divergence mapping, coates and jarratt, future mapping, backcasting, sri matrix, science fiction analysis, incasting, genius forecasting, futures biographies, triz, future history, alternative history multicriterial key technologies, source data analysis, migration anal., shift-share anal., dea, factor anal., correspondence anal., cluster anal., sensitivity anal., ahp, input-output anal., priorization, smart, prime, mcdm radar scientometrics, webometrics, patent analysis, bibliometrics, technological substitution, s-curve anal technology mapping, analogies simulation probability trees, trend extrapolation, long wave anal., indicators, stochastic forecast, classification trees, modeling and simulation, system dynamics, agent modeling diagnostic object simulation, force field anal., word diamond, swot, steepvl, institutional anal., degest, trial&error, requirement anal., theory of constraint, issue management, ankot analytical sofi, stakeholder anal., cross-impact anal., trend impact anal., structural anal., megatrend anal., critical influence anal., tech. barometer, cost-benefit anal., technology scouting, technology watch, sustainability anal., environmental scanning, content analysis, fmea, risk anal., benchmarking survey web research, desk research, tech. assessment, social network anal., literature review, retrospective anal., macrohistory, back-view mirror anal strategic technology roadmapping, tech. positioning, delphi, scenarios, social impact assessment, rpm, technological scanning, multiple perspectives assessment, causal layered analysis, manoa, action learning 243 business, management and education, 2015, 13(2): 234–248 table 3. the strength of relationship of classes with 3 contexts (source: created by the author) methods relating to the technological sphere analyze in a strong degree of technological aspect. using them can be implemented the following functions (phaal et al. 2004): identification of key technologies, assessment of risks and opportunities of technology, analysis of technology in relation to the competition; vision for future, technology trends, identification, observation and analysis of new technologies, monitoring technology and the results of previous studies, identification of actions to be taken in order to develop the technology. methods referring to the social context are methods: testing (monitoring) social needs, analyzing expectations (and their dynamics) of different groups of potential customers, examining the structure of social change to enable active participation in creating a vision for the development of wide or narrow groups, examining the factors affecting social development, affecting the social networking (borup et al. 2006; martin 2010). cognitive aspect, referring both to the restorative and creative process. especially in the context of technological development can be effectively implemented through the answers to the most important questions related to the management of technology: for what? what? how to? when? who? what is the base/base? how to choose a course of action? how to do it? (phaal et al. 2004). the main criterion for determining the strength of the links of the method of the specific context of a set of individual characteristics associated with each method (magruk 2011). foresight methods can be used in different phases of the research process. referring to research r. popper (popper 2008a) (which presented an analysis of the usefulness of selected methods in different stages of foresight), author calculated the potential use of 116 methods in each of, identified by author, eight stages of foresight in the relation to the author’s classification (table 4). on the basis of this analysis has been made of the 244 a. magruk. the process of selection of the main research methods in foresight from different perspectives synthetic measurement (using a weighted average) potential for the application of each class in each stage of the foresight research. author’s study allowed to synthetic location of each class on specific thematic map that refers to the stages of foresight studies as well as three contexts: technological, social and cognitive (fig. 1). this schematic approach, although simplistic, provides good basis for the implementation of the main goal of article, namely the development of methodology of designing hybrid systems integrating synergistic research methods, and thus to improve the methodological aspects of foresight. based on author’s analysis we can draw general conclusion that each class creates a group of substitute methods to each other and complementary to the methods of other classes. using the methods only form one class can lead to a situation in which the method will share related information resources, as well as to generate results in a similar way, without thereby affecting the desired synergy effect. the most favorable situation for foresight research methodology is selection of methods in each stage from the various classes with high-potential applications, with balanced reference to three contexts. in the opposite situation may occur the situation that each context will be stressed too weak. or one context will be exposed too much in relation to the other, which involves a risk of domination by any discipline. table 4. the strength of relationship of classes with steges of foresight process (source: created by the author) 245 business, management and education, 2015, 13(2): 234–248 fig. 1. the strength of relationship of classes with stages of the foresight process in 3 contexts (source: created by the author) referring to figure 1, it can be concluded that it is particularly inappropriate to use methods only from consultative class due to very strong connection in social and cognitive contexts, through which there is a risk of insufficient emphasis technological sphere. a similar situation, with the possibility of dominance of subject in the cognitive context, can occur when we use in the main stage, most methods only from one class: creative, normative, multicriterial or simulation. 6. theoretical effective selection of foresight methods in order to verify the process of selection of appropriate foresight methods below is shown an example of obtaining a synergistic effect. for this purpose, was used as one hypothetical example (fig. 2) illustrates the effective selection method that is based on strong appeal to the stages and the three main contexts of foresight. model preserves the balance between contexts: technological, social and cognitive. methods belong to different classes, so that they remain complementary character. synergistic effect may manifest itself as follows: 1) the relation among the first three methods is the subject of exchanging opinions (based on literature and patent review) by vide range of stakeholders at conferences/workshops; 2) using next three methods we can create visionary image of the future, which is divided into fragments, which are more specific and easier to interpret. evaluative i resuming stages it is difficult to analyze in the context of synergism due to their several years distance from fundamental research. during designing the research methodology of foresight, it is important to remember that there are many ways of combining of research methods. for example, all possible combinations of six methods (it is the average number of methods used in global foresight projects) from the set of 33 methods is 1,107,568, the number of permutations in the 246 a. magruk. the process of selection of the main research methods in foresight from different perspectives six methods is 720, so that all possible connections is about 800 million. combining six methods (out of 116 methods identified by the author of this article) it will be received over 3 billion calls, which makes it impossible to determine one of the best combinations. 7. conclusions in author’ opinion selection of adequate objective foresight research methods, eg. on the basis of the appropriate classification may affect, among other things, the following aspects identified by m. m. aaltonen and t. i. sanders (unido 2008): – make the foresight process more systematic; 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http://dx.doi.org/10.1108/14636680810918586 http://dx.doi.org/10.1080/09537320127286 http://dx.doi.org/10.4324/9780203465158 http://dx.doi.org/10.1016/s0016-3287(99)00073-7 http://dx.doi.org/10.1108/14636680610656174 http://dx.doi.org/10.3846/tede.2010.10 copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. ground handling business at non – european biggest world airports as a problem of market structures anna tomová1, lukáš trgiňa2, alena novák sedláčková3 faculty of operation and economics of transport and communications, university of žilina, univerzitná 1, 010 26 žilina, the slovak republic e-mails: 1anna.tomova@fpedas.uniza.sk (corresponding author); 2lukas.trgina@gmail.com; 3alena.sedlackova@fpedas.uniza.sk received 08 october 2015; accepted 24 november 2015 abstract. in the paper we analyse the market structures of ground handling at the biggest non-european passenger and cargo airports in accordance with the aci list of the most important world airports in 2014. using the iata ighc database as of spring 2015, our analysis revealed that out of europe double digit numbers of providers are rare what contrasts with situation in europe where ground handling markets were deregulated by the council directive 96/67/ec. the analysis also brought that the monopolistic structures of ground handling markets were more specific for the regions of asia and the middle east. airports as ground handling providers were not found within the analysed sample in north america, latin america, africa and australia and oceania, while this arrangement was to a larger extent present at the analysed asian airports. asia and the middle east biggest airports are identified by us as candidates for further deregulation of ground handling arguing by forecasted demand for air services in the regions, although expected deregulation may be curbed by national regulators. keywords: airports, ground handling, deregulation, market structure, monopoly, duopoly, product portfolio, global expansion. jel classification: l1, r40. 1. introduction to provide air traffic services air carriers have to handle passengers, baggage, cargo and aircraft on ground. according to the european commission (2011) ground handling services as services which cover all ground-based aviation related activities carried for airlines at airport are a key function in the aviation value chain.1 icao (2010) in its official definition contained in the annex 6 to the convention on international civil 1 proposal for a regulation com (european commission 2011) 824 estimated costs for ground handling services represent about 5 to 12% of airlines operating costs. ground handling services also impact on flight delays as expressed by sita (2010): “one of the greatest opportunities for airlines and other airport-based companies is to improve the efficiency and flexibility of ground handling to lower operting costs and reduce flight schedule delays”. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(2): 321–335 doi:10.3846/bme.2015.301 mailto:anna.tomova@fpedas.uniza.sk mailto:lukas.trgina@gmail.com mailto:3alena.sedlackova@fpedas.uniza.sk http://dx.doi.org/ 10.3846/bme.2015.301 322 a. tomová et. al. ground handling business at non – european biggest world airports as a problem of market structures aviation operation of aircraft part i defines ground handling as “services necessary for an aircraft’s arrival at, and departure from, an airport other than air traffic services”. in the definitions, operational approach to ground handling is emphasized although ground handling is also an interesting economic issue market structures of ground handling services including. ground handling services may be delivered to airlines under different market structures depending on subjects participating in the delivery of ground handling services. in principle, airports, airlines and independent ground handling companies are involved in ground handling business as suppliers. while airports and independent ground handling companies are so called third parties in the delivery of ground handling services for airlines, airlines may deliver the services for themselves or provide services for other airlines. when airlines deliver ground services to other airlines this is considered as the delivery by third parties. when airlines selfhandle themselves on the ground this is so called self-handling. thus, third party vs self-handling are two options for airlines. airlines ground handling strategies depends on many factors, mainly on business model applied. following low cost (cost cutting) strategy airlines may prefer the outsourced delivery of ground handling services while full service network airlines typically rely more on the inhouse delivery of ground handling services keeping in this way ground operation under their control. however, strategies of airlines towards ground handling are in a state of flux. some full service network airlines have converted their ground handling strategy from in-house concept to complete outsourcing. further full service network airlines have taken over ground operation from airports. some airlines have expressed their interest to be more active in the delivery of ground handling services as a third party provider. at local, i.e. one airport level, there are different market structures for different categories of ground handling services. it gives the enormous complexity to this issue as every category of ground handling services represents a specific market with a specific market structure (tomová, kirschnerová 2015). moreover, there can be a different access (i.e. regulatory) regime for domestic and foreign airlines operation what add further complexity to the issue. thus, the structure of ground handling markets depends on regulatory measures which open the market more or less for self-handling providers and/or third party providers of ground handling. within third party portion of the market (i.e. not considering self-handling) we can theoretically distinguish the market structures according to numbers and types of ground handling suppliers. an airport may be the only third party provider of ground handling services at the airport, or airlines as third party providers compete with the airport at the airport for ground handling services, or third party handling is accessible only for independent ground handling companies at the airport or there may be a duopoly of the respective airport and an airline, etc. 323 business, management and education, 2015, 13(2): 321–335 in this paper we investigate market structures of ground handling focusing on the most important (i.e. the biggest world airports out of europe). in general, ground handling economic problems are not sufficiently covered by the aviation economic literature and non-european coverage of the topic is still very poor. 2. previous research economic research of ground handling business has been mostly aimed at europe reflecting in this way deregulation of ground handling markets as initiated by the council directive 96/67/ec of 15 october 1996 on access to the ground handling market at community airports. the directive have been introducing two freedoms – freedom of self-handling and freedom of third party handling into the system, although for some airports limited access with regard to the market access freedoms still exist at some airports in some countries. in generally, application of the directive have brought more competition among the providers of ground handling and more options for airlines to choose among competing third party handlers or to be self-handled. impact of the directive were investigated in study of the impact of directive 96/67/ec on ground handling services (acr 2009), also in study on the quality and efficiency of ground handling services at eu airports as a result of the implementation of council directive 96/67/ec (sh&e 2002). both studies have found the number of ground handling providers airports increased due to deregulation. ahsbash (2008) reviewed fundamental changes of ground handling markets at european airports as a consequence of deregulation, and similarly, müller et al. (2008) investigated deregulated ground handling markets at german airports. ground handling markets at brussels airport were analysed by meersman et al. (2011), burghouwt et al. (2014) examined the situation at amsterdam schiphol airport. global expansion of several independent ground handling companies was documented by wto (2007) study as a consequence of deregulation of ground handling markets in the world. according to the state of our current knowledge, only barbott (2012) tried to cover the issue theoretically. she examined effects of different market structure s in ground handling on consumer surplus using cournot’s theory and considering ground handling as complementary goods.2 her findings revealed impacts of market structure on consumer surplus. ground handling markets at airports out of europe have been only slightly touched by the work of tan (2010) letting thus a space for further investigations. 2 several practitioners and theoretists as well consider ground handling production as a joint production with the production of air traffic services and reject to analyze ground handling services as complementary goods. 324 a. tomová et. al. ground handling business at non – european biggest world airports as a problem of market structures 3. methodology and data in our research we worked with the iata ighc database (as of spring 2015) which contains the data about ground handling providers – members of the iata ighc covering airports worldwide. however, we had to extract and consequently process the data what was exhausting and time consuming process as the database does not provide the data in this format. then, we reviewed the market structures ground handling markets at 74 non-european airports. the choice of airports came of the top 100 lists of the biggest airports in the world, both in passenger and cargo segment. we gathered the data for 27 airports in asia, 8 airports in the middle east, 26 airports in the north america, 7 airports in latin america, 3 airports in australia and oceania, 3 airports in africa. we were led by the following research questions: are market structures of ground handling at the most important airports in noneuropean regions similar to situation in europe? (in europe, at the most important airports, ground handling markets are neither monopolistic nor duopolistic nowadays. as a result of deregulation of ground handling markets relatively high numbers of third party providers compete there (tomová 2013) although historically – before liberalisation of air transport market in the european union – just monopolies or duopolies prevailed in the european union ground handling markets). are there typical market structures at the world regions differing one region against the other one? or are there mainly country versus country differences? (ground handling markets are primarily driven by national regulatory measures therefore country versus country differences can be expected in the issue more). what is a share of airports in the position of a third party provider at the airports we analysed? (when an airport delivers ground handling services as one of the third party providers it may abuse its position (barbott 2012) and distort competition). how many independent providers has full portfolio of services in its supply at the airport? (this is important when considering global expansion of ground handling companies (tomová, kirschnerová 2015). due to the fact a shift to multiproduct companies operating ground handling globally can be assumed). in our analyses we split the market structures of ground handling distinguishing the following market structures: – monopoly of an airport (so called centralized model); denoted in the following tables as m/airp, – monopoly of an independent ground handling company; denoted in the following tables as m/ighc, – monopoly of an airline; denoted in the following tables as m/airl, – duopoly of an airport and an independent ground handling company; denoted in the following tables as d/airp-airl, – duopoly of an airline and an independent ground handling company; denoted in the following tables as d/airl-ighc, 325 business, management and education, 2015, 13(2): 321–335 – duopoly of an airport and an airline; denoted in the following tables as d/airp –airl, – duopoly of two airlines; denoted in the following tables as d/airl-airl, – duopoly of two ighc; denoted in the following tables as d/ighc-ighc – diversified market structures with more than two providers; denoted in the following tables as divs. our approach to the topic is similar with the methodology of (acr 2009) and (sh&e 2002) studies covering the european union ground handling markets after deregulation. the studies revealed the numbers of ground handling suppliers and types of ground handling suppliers. 4. results and findings in the following tables the results of the processed ighc iata data are contained informing about the market structure at the biggest world non-european airports. as contained in table 1, in asia, ground handling markets at the analysed airports differ. about 48% airports in the sample had diversified structures of ground handling markets with more than two providers, however, hong kong international airport was the only asian airport in the sample which achieved double digit number of ground handling providers. duopolistic markets were observed at 22% airport and monopolistic markets at about 30% airports. monopolistic market structures were represented by monopoly of an independent ground handling provider, monopoly of an airline and monopoly of an airport as well. mainly in the analysed chinese airports we revealed monopoly as prevailing form of market structure in the delivery of ground handling services. in hong kong, taiwan and turkey a more diversified structures dominated. in japan we observed diversified structures and duopoly as well. airports as providers of ground handling services were observed at about 30% airports. using the information in table 2, airports in the middle east did not achieve double digit number of ground handling providers. half of the analysed airports experienced diversified market structures of ground handling. the rest was represented by monopoly of independent ground handling providers. diversified market structures were typical for the analysed airports in israel and the united arab emirates, while qatar and saudi arabia kept monopolistic structures of the markets. only one airport in the sample exploited monopoly power as a ground handling supplier. as contained in the table 3 on the following page, at the analysed airports in latin america all three market structures (diversified market structures, duopolistic markets and monopolistic markets) were observed. none of the airport achieved double digit number of ground handling providers and airports in the analysed sample were not involved in the delivery of ground handling services. in the case of diversified market structures, none of the airports achieved double-digit number of ground handling suppliers indicating a different situation in comparison with the european union biggest world airports. 326 a. tomová et. al. ground handling business at non – european biggest world airports as a problem of market structures table 1. ground handling providers (iata ighc members) at the biggest world passenger and cargo airports in asia (source: processed and compiled by the authors from the iata ighc database) airport country total number of providers number of airlines – providers number of indep. providers airport as a provider market structure taiwan taoyuan international taiwan 6 5 0 + divs sindira gandhi international india 4 1 3 – divs chennai international 3 2 1 – divs chhatrapati shivaji international 2 1 1 – d/airlighc bengaluru international 2 1 1 – d/airlighc soekarno-hatta international indonesia 1 0 1 – m/ighc narita international japan 5 2 2 + divs kansai international 3 2 1 – divs fukuoka 3 2 1 – divs tokyo (haneda) international 2 2 0 – d/airl-airl naha international 2 2 0 – d/airl-airl new chitose 2 1 1 – d/airlighc incheon international korea 3 1 1 + divs jinnnah international pakistan 4 0 4 – divs ninoy aquino international phiilippines 4 1 2 + divs singapore changi singapore 1 1 0 – m/airl subarnabhumi international thailand 4 2 2 – divs tan son nhat international vietnam 4 2 1 + divs hong kong international hong kong 10 3 6 + divs chengdu shuangliu international china 2 1 1 – d/airlighc pudong international 1 0 0 + m/airp beijing capital international 1 1 0 – m/airl guangzhou bai yun international 1 1 0 – m/airl shenzen international 1 0 1 – m/ighc tianjin binhai international 1 1 0 – m/airl hongqiao international 1 0 1 – m/ighc ataturk international turkey 6 2 4 – divs 327 business, management and education, 2015, 13(2): 321–335 table 3. ground handling providers (iata ighc members) at the biggest world passenger and cargo airports in latin america (source: processed and compiled by the authors from the iata ighc database) airport country total number of providers number of airlines – providers number of indep. providers airport as a provider market structure aeor.int. de la cuidad de méxico mexico 5 1 4 – divs aer. int. de azeiza argentina 3 1 2 – divs guarulhos int. brasil 3 2 1 – divs viracopos intern. ao 1 0 1 – m/ighc aeropuerto int. el dorado columbia 2 2 0 – d/airlairl aeropuerto internacional arturo merino benitez chile 1 1 0 – m/airl aer.int. jorge chávez peru 3 1 2 – divs as contained in table 4, in africa at three of the analysed airports a diversified market structure was revealed, and cairo international airport achieved a double digit number of ground handling providers represented mainly by independent ground handling suppliers. none of the analysed airports in the sample was involved in the provision of ground handling services. table 2. ground handling providers (iata ighc members) at the biggest world passenger and cargo airports in the middle east (source: processed and compiled by the authors from the iata ighc database) airport country total number of providers number of airlines – providers number of independent providers airport as a provider market structure ben gurion intern. israel 5 2 3 – divs doha intern. qatar 1 0 1 – m/ighc king khaled intern. saudi arabia 1 0 1 – m/ighc king abulaziz intern. 1 0 1 – m/ighc dubai intern. the united arab emirates 5 0 5 – div/s abu dabi international 4 1 3 – div/s sharjah international 5 0 4 + divs dubai world central al maktoum international 1 0 1 – m/ighc 328 a. tomová et. al. ground handling business at non – european biggest world airports as a problem of market structures table 4. ground handling providers (iata ighc members) at the most important passenger and cargo airports in africa (source: processed by the authors from the iata ighc database) airport country total number of providers number of airlines – providers number of indep. providers airport as a provider market structure cairo int. egypt 10 1 9 – divs jomo kenyatta int. kenya 4 0 4 – divs or tambo int. the republic of south africa 4 0 4 – divs similarly as in the case of latin america and africa, none of the analysed airports in australia and oceania was involved in the provision of ground handling services as well as none of the airports achieved double digit number of ground handling providers (table 5). slightly diversified structure of ground handling markets was observed at the analysed australian airports while aucklad international airport in new zealand had a duopolistic market structure of its ground handling. table 5. ground handling providers (iata ighc members) at the most important passenger and cargo airports in australia and oceania (source: processed and compiled by the authors from the iata ighc database) airport country total number of providers number of airlines – providers number of indep. providers airport as a provider market structure sydney international australia 3 1 2 – divs melbourne 3 1 2 – divs auckland international new zealand 2 1 1 – d/airlighc in the analysed airports in the north america, the airports were not involved in the provision of ground handling services and none of the analysed airports achieved a double digit numbers of ground handing providers. at the only airport in the sample ground handling market was monopolistic, duopoly was recorded for three airports. at about 85% analysed airports diversified market structures were observed with los angeles international ao at the head in this respect counting eight providers. based on the findings in table 6 we can summarize the analysed biggest world airports in north america, australia and oceania, africa and latin america were not involved in the provision of ground handling services. it implies that due to this arrangement airports cannot abuse their power to distort the competition being one among competing providers. monopolistic provision of ground handling services was found in a larger extent at the analysed asian biggest airports and the analysed airports in the middle east’s. in the list of analysed north american airports the only case of monopolistic 329 business, management and education, 2015, 13(2): 321–335 table 6. ground handling providers (iata ighc members) at the most important passenger and cargo airport in the north america (source: processed and compiled by the authors from the iata ighc database) airport country total number of providers number of airlines – providers number of indep. providers airport as a provider market structure memphis int. airport us 4 1 3 – divs ted stevens anchorage int. airport 2 0 2 – d/ighcighc louisville international airport 1 1 0 – m/airl miami international airport 4 1 3 – divs los angeles international ao 8 1 7 – divs john f. kennedy int. airport 6 3 3 – divs o´hare international airport 5 1 4 – divs indianapolis int. airport 2 1 1 – newark liberty int. airport 3 1 2 – divs hartsfield-jackson atlanta int. airp. 5 1 4 – divs dallas/ft worth int. airport 3 1 2 – divs cincinnati/northern kentucky int. airport 2 1 1 – d/airlighc oakland int. airport 4 1 3 – divs george bush intercontinental airport 3 1 2 – divs la/ontario int. airport 4 1 3 – divs honolulu int. airport 3 1 2 – divs philadelphia int. airport 4 1 3 – divs san francisco int. airport 8 2 6 – divs seattletacoma int. airport 5 2 3 – divs sky harbor int. airport 3 1 2 – divs logan int. airport 3 2 1 – divs washington dulles int. airport 3 1 2 – divs denver international airport 3 1 2 – divs detroit metropolitan wayne county airport 3 1 2 – divs toronto pearson int. airport canada 4 2 2 – divs vancouver int. airport 4 2 2 – divs 330 a. tomová et. al. ground handling business at non – european biggest world airports as a problem of market structures provision was found. at the analysed latin american airports as well as african and australian oceanian airports duopoly or a more diversified market structures were typical. as a whole, working with 74 analysed cases monopoly was found at 20% airports, duopoly at 15% airports and more diversified market structures was revealed at 65% airports. however, the only three of non-european analysed biggest world airports in passenger and cargo airports, i.e. 4% of the sample investigated recorded double digit numbers of ground handling providers. this is a different in comparison with europe where deregulation of ground handling markets made the markets more accessible and the numbers of providers increased importantly mainly in the biggest airports. as our investigation included also services portfolio we were aimed to find how many of the providers at the analysed airports supply markets with the full range of ground handling services according to the categories of iata ighc (eight categories), such approach is reasoned by the fact that evolution of the industry is expected to shift to multiproduct ground handling companies competing globally. further argument is in the status of competition among ground handling providers which may be different among providers with complete and uncomplete portfolio of services. table 7. number of the providers at the biggest world airports out of europe with full portfolio of services (source: processed by the authors from the iata ighc database) world region asia middle east latin america africa australia and oceania north america total number of providers with full portfolio of services 10 5 1 2 2 0 20 of which independent providers 1 4 1 2 0 0 8 as contained in table 7, from the handlers which operated ground handling services at the analysed airports in asia only 12.5% provided full portfolio of services. in the middle east almost 22% of the providers provided full portfolio of services, in latin america only one provider had such attribute, in australia and oceania two providers, in africa two providers and no such provider of this type was found in the north america. it means that multi-service providers with full portfolio of ground handling services represent only small portion of the providers operating ground handling at the analysed airports (8.2%). the respective share of independent ground handling providers with full portfolio of ground handling services compared to all providers at the analysed airports is even minor counting only 3.3%. with regard to the presence of so called global ground handling companies, we were focused on the presence of two ground handling giants at the analysed airports swissport and menzies. 331 business, management and education, 2015, 13(2): 321–335 table 8. presence of two global giants on ground handling markets at the analysed airports in world regions out of europe (source: processed by the authors from the iata ighc database) world region swissport menzies number of airports with swissport presence share of the analysed airports in the region number of airports with menzies presence share in % of the analysed airports in the region asia 4 14 % 3 11% middle east 1 13% 0 0% latin america 5 71% 2 29% africa 2 67% 1 33% australia and oceania 0 0% 3 100% north america 22 85% 9 total 34 45% 18 24% as it can be seen in table 8, swissport had established ground handling operation at 34 airports within the analysed group what represents 45%. menzies had established ground handling operation at 18 airports within the analysed group what represents 24 %. from this finding results that global giants in ground handling business which expand internationally are important players at the biggest airports out of europe and full geographical coverage and extension of their geographical network may be expected in future. 6. conclusions in this paper we investigated the market structures of ground handling markets at the biggest world passenger and cargo airports out of europe covering the regions of asia, the middle east, latin america, africa, australia and oceania and north america. our analysis revealed that out of europe double digit numbers of providers are rare what contrasts with situation in europe where ground handling markets were deregulated. only three of the analysed airports recorded such double digit numbers of ground handling providers. our analysis also brought that monopolistic structure of ground handling markets was more specific for the analysed airports in asia and the middle east, while at the analysed airports in africa, australia and oceania and latin america this market arrangement was not found. airports as ground handling providers were not revealed within the analysed sample in north america, latin america, africa and australia and oceania, while this arrangement was to a larger extent present at the analysed asian airports. although in the cases when an airport is not an operator of ground handling services and market structure is not monopolistic it may prefer one of the providers present at the airport from several reasons, for instance if such provider is a national flag carrier. airport portion in the ownership of ground handling providers (joint stock companies) is a further problem connected with market power abuse. 332 a. tomová et. al. ground handling business at non – european biggest world airports as a problem of market structures at the analysed airports ground handlers with full portfolio of services represented only marginal share in the total number of providers at the airports what makes the problem of market structures attributable to specific ground handling services even a more complex issue. of this number, independent ground handling companies with full range of supplied services counted even less. on the other hand, our analysis confirmed international expansion of key global handlers swissport and menzies at the biggest world passenger airports out of europe. our analysis showed there can be expected further deregulation of ground handling markets at the biggest world airports – mainly in asia and the middle east as they were identified by us as the regions in which monopolistic or duopolistic structures still exist in a larger scale. on the other hand, just these two regions are so called high growth aviation regions and increased demand for passenger and cargo air services is predicted in these regions in future (boeing 2015; airbus 2015). in a situation of monopoly and duopoly, the supply of ground handling services may be limited not meeting increasing demand what will generate pressure on deregulation of ground handling markets in the regions. higher competition due to deregulated markets with higher numbers of competing ground handling providers can impact prices and quality of ground handling services delivering in this way competitive benefits for the analysed airports and consumer surplus to customers (barbott 2012). this aspect is extremely important for those of the analysed airports which compete each other as international hubs. further deregulation of ground handling markets will boost global ground handling players like swissport and menzies to expand more at the biggest airports and exploit in this way network economies typical for global business (tomová 2011a, 2011b). in our paper we worked with the data of iata ighc what can be objected as selfhandling part of the markets is not clearly discoverable and only the iata ighc members were covered, however according to our current and best knowledge such analysis focused on noneuropean world regions has not been realized so far. in general, contemporary economic aviation research should concentrate more on the topic of market structures in world ground handling by theoretical and empirical studies. in theory, contemporary economic research have not answer yet whether the provision of ground handling services is joint production or production of complementary goods what is essential to recommend an optimal market structure for ground handling markets at airports in different contexts. taking into account barbott (2012) approach to this issue, we are not aware of any more theoretical considerations of the problem. empirical investigations realized so far were concentrated to view the issue at local, i.e. one airport level and network nature of ground handling business which is typical for expanding global ground handling giants is not sufficiently covered nor by theory neither by empirical research. competition of handlers running their business on network of airports each other as well as their competition with local players at local level is a further rail for contemporary economic research. such research could help in answering 333 business, management and education, 2015, 13(2): 321–335 the question about potentially global nature of ground handling business and its impact on aviation in future. as deregulation of ground handling is being prepared in some countries (capa 2014) regulators of ground handling markets in these countries with monopolies or duopolies of handlers at their airports can demand this research output to open ground handling markets effectively, i.e. for the benefits of final consumers of air services. on the other hand, insufficiency of the big global data will be certainly a limiting factor in such effort and creating such big global ground handling databases will probably accompany 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https://www.appearnetworks.com/wp-content/uploads/2013/01/transforming_airline_operations_at_airports_with_handheld_devices_0.pdf https://www.wto.org/english/res_e/booksp_e/airtransport_2005_e.pdf 335 business, management and education, 2015, 13(2): 321–335 anna tomová, csc. doc. ing. – an associated professor at the department of air transport, faculty of operation and economics of transport and communications, university of žilina. she published several papers devoted to railways and air transport economics using long-term experience in teaching and scientific projects. she is responsible for the development of new courses of air transport economics at the department to meet new requirements of labour markets in industry. lukáš trgiňa, ing. – a graduate from the department of air transport, faculty of operation and economics of transport and communications, university of žilina, he participated in the research of airports economics within the department of air transport and contributed to the research by his thesis. alena novák sedláčková, doc. judr. ing., phd – an associated professor at the department of air transport, faculty of operation and economics of transport and communications, university of žilina. she researches legal and economic problems in the development of airports. this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university *corresponding author. e-mail: rajput.naveen07@gmail.com business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 2: 258–285 https://doi.org/10.3846/bmee.2022.16905 identifying consumer resistance of mobile payment during covid-19: an interpretive structural modeling (ism) approach naveen kumar singh 1*, pragati singh 2 1school of forensics, risk management and national security, rashtriya raksha university, gandhinagar, india 2independent researcher, india received 30 april 2022; accepted 18 october 2022 abstract. purpose  – due to country-wise lockdown and state-wise curfews in covid-19, people were not able to make offline payments (i.e. cash payments) during purchases in india. so, people are switching their payment behavior from offline to online mode. but, as per the central bank report, the rate of adoption through mobile payments is still slow. the paper focuses on identifying critical barriers to mobile payment systems (mpss) adoption in india. innovation resistance theory (irt) has been used as a base model for barriers, despite the wide range of choices of barriers available in the mpss context. additionally, three external variables which are out of the wider coverage of irt constructs were incorporated in this paper. the study, on the other hand, adds to innovation resistance theory in the frame of reference of mpss from a theoretical perspective. interpretive structural modeling (ism), together with micmac analysis is brought into play to analyse the direct and indirect relationship amongst the barriers. research methodology – ism approach has been used to establish the relationship among the eight (08) identified barriers, through literature and expert opinions. the key barriers to high driving power are then identified with the help of micmac analysis. findings – the results reveal that value barrier (b2), image barrier (b5) and visibility barrier (b7) are the most significant variables. interestingly, irts’ risk barrier (b3) and privacy barrier (b6) from the literature fall in the lowest level of the ism model. the majority of the barriers fall under quadrant iii of micmac analysis, indicating the high driving and dependence power. research limitations  – the developed ism model is based on the sentiments of five (05) experts, which could be biased and influence the structural model’s final output. due to covid-19, data has been collected through online video conferencing mode, this may vary if data will be collected through an offline or face-to-face interview. the proposed model’s key findings aim to assist in explaining the barriers that exist during mps adoption. originality/value – this study is the first attempt to use the ism approach in conjunction with irt to detect barriers within mpss. the result of this paper will guide and motivate the researcher to analyse more critical barriers with irt to contribute to the theoretical development. keywords: innovation resistance theory (irt), interpretive structural modelling (ism), mobile payment systems (mpss), micmac analysis, transitivity analysis, adoption, barriers, leapfrog. jel classification: e42, m15, o14, o33. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2022.16905 https://orcid.org/0000-0001-7133-900x https://orcid.org/0000-0003-1527-4293 business, management and economics engineering, 2022, 20(2): 258–285 259 introduction covid-19 is triggered off by the virus sars-cov-2 (severe acute respiratory syndrome coronavirus 2) (world health organization [who], 2020). this isn’t the first time a coronavirus outbreak has reached crisis point. it is, however, the first time that a pandemic has had such a widespread impact. there were about 177 million active cases worldwide until june 23, 2021, with over 29 million instances in india (who, 2021). in many ways, covid-19 coronavirus has had an impact on not only people’s respective lives, but also absolute economies, industries, and countries around the globe (united nations industrial development organization [unido], 2020). the who provide various guideline to break the chain of deadly virus, like, maintaining social distancing, covering mouth and nose, frequent hand washing, self-quarantine (if diagnosed) at least for 14 days etc. many countries, including india, have taken precautionary actions to reduce extend and impact of the covid-19 pandemic. as a result, the government of india (goi) professed national lockdown on march 24, 2020. as a result of the global spread of the coronavirus pandemic, some industries have converted to remote working to reduce infectious disease transmission (covid-19). businesses, for example, have established cloud-based it infrastructures in order to explore the possibility of providing contactless or contact-free services via mobile apps, video conferencing, enhanced telemedicine, e-learning, telecommuting, and mobile transactions (pop et  al., 2022; xiao & fan, 2020). consumers’ purchasing patterns have changed to online media as direct person-to-person contact has become less frequent. as a result, the pandemic has assisted the development of digital infrastructure across a wide range of industries (kim, 2020). since social distance has been recommended or even mandated as a means of reducing covid-19 dissemination (guan et al., 2020; lee & lee, 2020), shifting the payment channel from traditional (i.e. cash-based) to online is a better alternative. this process would eventually deliver new wealth for the citizens of the country. in recent years, however, an alternative theory of “leapfrog” development has been growing in popularity as the development community has searched for new ways to leverage technological progress to drive growth and help emerging economies. leapfrogging occurs when a nation bypasses traditional stages of development to either jump directly to the latest technologies (stage-skipping) or explore an alternative path of technological development involving emerging technologies with new benefits and new opportunities (path-creating) (yayboke et al., 2020). people were forced to use digital payment apps due to social isolation and lockdown. but, during the initial period of the lockdown and curfew, there was a drop in mpss; however, after a few months, the payments picked up with the progressive relaxations (reserve bank of india [rbi], 2021). over the last decade, india has gradually transitioned away from traditional payment methods towards online transactions through mobile phone (sun et al., 2020; fabris, 2019). mobile payments refer to financial transactions that customers make in the absence of real cash primarily using their smartphones. as a result, mobile payment systems (mpss) are becoming increasingly popular in a variety of industries, including hospitality, healthcare, retail, and tourism. adopting cashless payments has numerous advantages for consumers. mpss provide both convenience and speed (teo et al., 2015). unlike typical cash transactions, mpss reduce theft and other money-related offense (armey et  al., 2014), because 260 n. k. singh, p. singh. identifying consumer resistance of mobile payment during covid-19:... users carry less physical currency while shopping. the covid-19 pandemic is likely to have long-term consequences for standard payment methods in the post-pandemic era (lee & lee, 2021). according to a survey released on january 14, 2021 by people research on india’s consumer economy (price), a statutory body working under the canopy body of retail and digital payments national payment corporation of india [npci], one-third of the country’s population uses digital payments, but more awareness and training is needed to increase adoption rates (npci, 2021a). following that, on april 8, 2021, india’s leading financier bank, state bank of india (sbi), and the national payments corporation of india (npci) collaborated to unveiling a upi awareness campaign to expand the reachability of mobile payments throughout the country (npci, 2021b). consumer adoption of technical advancements such as mobile payments frequently necessitates effort and a learning process (eriksson et al., 2021). innovations are always met with resistance at first, although resistance and adoption can accompany amidst the innovation’s life cycle. as a result, it’s essential to better comprehend resistance (ram, 1987), particularly with respect to digital financial services (laukkanen & kiviniemi, 2010; ram & seth, 1989). in addition, according to theories of diffusion of innovations, the identified adopter categories (innovators, early adopters, early majority, late majority, and laggards) indicate varied degrees of innovation resistance in a population (rogers, 2003). resistance to advances such as mobile payment systems should not be considered as adverse; instead, it should be observed as consumers making plausible decisions (szmigin & foxall, 1998). earlier studies have acknowledged a number of validated barriers to the adoption and usage of mpss, including payment complexity (mallat, 2007), a lack of extended merchant acceptance (deloitte, 2019; mallat, 2007), perceived risks such as security and privacy issues (ramos de luna et  al., 2019; kerviler et  al., 2016; oliveira et  al., 2016; yang et al., 2015; mallat, 2007), lack of perceived usefulness (deloitte, 2019; oliveira et al., 2016) and lack of consumer knowledge (deloitte, 2019). more exploration is necessitated, however, to better comprehend the causes for resistance and, as a result, what may be preventing mpss from becoming more extensively take on board. multiple researches related to mobile payment adoption have been carried out in the past. factors such as perceived risk (yang et  al., 2012), perceived security (oliveira et  al., 2016), perceived cost (de sena abrahão et  al., 2016), anxiety (bailey et  al., 2017), switching cost (zhou, 2015), habit (keramati et al., 2012), technology competency (changchit et al., 2017) etc. influence the user interface to adopt mps as per the studies. however, when numerous factors having interactions among themselves influence the user adoption of mps, a proper approach for adoption process is not found in any earlier study. for this reason, identification of relationships between factors that affect the user adoption is required. interpretive structural modeling (ism) is preferred in order to develop a relationship with rationale between the influencing factors. in order to develop the user adoption framework utilizing interpretive structural modeling, a variety of factors influencing user adoption are taken into consideration. the purpose of this paper is to acquire an extensive level of detail into the causes of non-adoption of mobile payments utilising an ism methodology, particularly in relation business, management and economics engineering, 2022, 20(2): 258–285 261 to consumers who have not yet accepted mobile payments. at the same time, the study furthers the concept of technological innovation resistance in the context of mps adoption. it is possible that this study will aid merchants, mobile service providers and government by enabling them to better understand the challenges to mps adoption. the following is the outline of the article. to begin, the background of innovation resistance theory (irt) theory has been discussed using the model barrier (i.e. functional and psychological), as well as three other forms of barrier constraints (i.e. privacy barrier, visibility barrier, and design constraint barrier), trailed by a description of the ism methodology using transitivity and micmac analysis. the findings are then provided, followed by conclusions, as well as some recommendations for future study and managerial implications. 1. literature review 1.1. innovation resistance theory ram (1987) proposed the innovation resistance theory (irt), which was later enhanced by ram and sheth (1989). this theory delivers an explanation of why consumers are hesitant to adopt new technology. as customers seek out new solutions that disrupt their present way of doing things, they exhibit resistance to change, according to hew et al. (2019). consumer resistance is a major factor in determining whether or not an innovation is embraced (ram & sheth, 1989). if a new innovation changes a customer’s lifestyle or position, they may be reluctant to accept it (ram & sheth, 1989). barriers are alienated into dual categories by the irt: functional and psychological (ram & sheth, 1989). the psychological barrier is subdivided into image and tradition, whereas the functional barrier is segregated into value, risk, and usage. consumer resistance is classified as either active or passive according to heidenreich and handrich (2015). active resistance has been labelled as a form of irt functional barrier that arises from the characteristics of innovation (kaur et al., 2020; sivathanu, 2018; yu & chantatub, 2016; tansuhaj et  al., 1991). passive resistance, on the contrary, is a psychological barrier that emerges from a contradiction in the consumer’s existing belief system (kaur et al., 2020; sivathanu, 2018; yu & chantatub, 2016). the whys and wherefores of irt being appropriate for present study are, first, prior authors have used irt to investigate innovation resistance in a variety of online domains, including virtual shopping (gupta & arora, 2017; lian & yen, 2013, 2014), mobile social tourism (hew et  al., 2017), online travel agency (talwar et  al., 2020; jansukpum & kettem, 2015), organic food industry (kushwah et al., 2019), mobile services (joachim et al., 2018), mobile banking (laukkanen, 2015, 2016; yu & chantatub, 2016; yu et  al., 2015), mobile commerce (moorthy et al., 2017), mobile gaming (oktavianus et al., 2017), eco-friendly cosmetics (sadiq et  al., 2021) and similarly in context with mpss (sivathanu, 2018). second, irt barriers provide a useful framework for studying users’ aversion to change. finally, latest readings have highlighted the significance of the irt framework in the milieu of mpss, arguing that mps adoption in india is hampered by innovation resistance (kaur et al., 2020; sivathanu, 2018). 262 n. k. singh, p. singh. identifying consumer resistance of mobile payment during covid-19:... 1.1.1. functional barriers 1.1.1.1. usage barriers usage barriers manage the impediment imposed due to potential changes, particularly within the framework of implementing new innovation in contrast to existing systems (ram & sheth, 1989). the work necessary to learn and practise the novel system, along with the adjustments to old routines and habits, is an example of a usage barrier. usability, ease-of-use, and product or service compatibility are all related to usage (laukkanen et al., 2007). when present habits, practises, and norms clash with innovation, it manifests (laukkanen, 2016). consumers’ current habits, routines, or lifestyles may be incompatible with a new product, necessitating frequent changes; this disparity and incompatibility may raise the need for adjustment, leading to increased resistance. this factor is also linked to “complexity”, which means consumer’s perceived difficulty in comprehending and implementing the innovation (rogers, 1962). users with limited technical abilities or expertise with mpss may find the intricacy of mpss to be a problem. according to oktavianus et al. (2017), usage barriers cause digital inventions to be abandoned. on the other hand, according to laukkanen and cruz (2010), the usage barrier is most substantial to mobile payment among the five listed in the irt framework. because the intricacy of newer digital technologies’ utilisation can damage their prospects of becoming mainstream innovations, usage barriers are an essential variable. users’ inefficiency due to knowledge levels (rahman, 2013) and irregularity in mobile payment behaviour (mahatanankoon & vila-ruiz, 2007) can be considered as usage barriers, and previous research has bolstered our argument. innovations that require customers to adjust their habits or practices over a longer period of time also require more time for acceptance (chen & kuo, 2017; lian & yen, 2013). we propose that comparable difficulties could bolster the argument that usage constraints are undermining young adults’ desire to use and recommend mpss in india. 1.1.1.2. value barriers the value barrier arises when an innovative product’s monetary worth and performance are equal to that of its substitutes (ram & sheth, 1989). in other words, value barriers relate to opposition that arises from incompatibility within the established value system, particularly with respect to equating the cost of adopting and understanding the innovation against the given benefits (morar, 2013). in the meantime, a value barrier arises once customers view innovation to be incapable of providing superior functionality to alternatives utilising the similar economic resources (kaur et al., 2020). laukkanen et al. (2008) and heidenreich and spieth (2013) highlighted that when an innovation is unable to give a suitable performanceto-cost ratio in comparison to its substitutes, consumers will believe that changing the technology is unjustifiable. there is no need to change if the innovation is less than or equal to the cost of change (chaouali & souiden, 2019; kim & seo, 2017). users will continue to use the current product because the disadvantages of departing from the established norm appear to outweigh the benefits (kahneman et al., 2012). 1.1.1.3. risk barriers when consumers perceive that innovation is fraught with dangers, a risk barrier arises (kaur et al., 2020; ram & sheth, 1989). it addresses the resistance that arises as a result of the level business, management and economics engineering, 2022, 20(2): 258–285 263 of uncertainty, danger, and threat that is a normal element of any innovation adoption process (laukkanen, 2016; dunphy & herbig, 1995; ram & sheth, 1989). consequently, it may be stated that the larger the risk perception, the larger the resistance to change (ram, 1987). concerns about losing status, not being able to master new abilities, or getting estranged from friends may arise as a result of the uncertainty (hirschheim & newman, 1988). physical, economic, functional, and social risks are among the four types of risks identified by ram and sheth (1989). physical risk ascends when an innovation causes harm to an individual’s life or assets; economic risk arises when an investment in an innovation proves to be unworthy or a lower priced product enters the market (kim & seo, 2017); and social risk arises from consumers’ anxieties around the product’s social views. finally, there is the functional risk, which is concerned with whether the innovative product will function reliably (heidenreich & spieth, 2013). to put it another way, greater risk barriers lead to an adverse user behaviours like resistance. users of mpss may be exposed to the risk of fraud, money loss, inadequate internet access, or poor functionality. mpss are fraught with security and trust concerns (vinerean et al., 2022; marett et al., 2015). losing money and causing security issues are two examples of probable risks. the lack of information regarding the security and trust aspects of digitalized services among potential and existing consumers may lead to the presence of risk barriers (luo et al., 2010). 1.1.2. psychological barriers 1.1.2.1. tradition barriers a tradition barrier refers to a consumer’s aversion to any changes in their daily routines, values, norms, culture, behaviour, or habit that the innovation may bring about (lian & yen, 2013; laukkanen et  al., 2008; ram & sheth, 1989). scholars have previously claimed that traditions are deeply ingrained in society and people’s lives, and that any future disagreement with them results in considerable consumer reaction, such as negative word-of-mouth, unpleasant advertising, and boycott (andrew & klein, 2003). consumers will develop habits and procedures that are very significant to them as a result of long-term use of a product or service (laukkanen, 2016). similarly, when innovation compels customers to break with tradition or diverge from social norms, they will become resistant to it (ma & lee, 2019). a tradition barrier may arise in the case of mpss if a customer chooses to engage with banks in person to conduct financial transactions rather than adopting new technology (kaur et al., 2020). traditionally, payments were made with cash, but mpss now use mobile devices to make payments that are cashless. mpss, for example, demand users to make digital payments, which is in contrast to traditional cash-based payment systems. in india, the use of mpss has resulted in a substantial shift in the way people make payments. 1.1.2.2. image barriers generalizations about an innovation, which might associate to its country of foundation or a brand associated with it, create an image barrier (kim & seo, 2017; laukkanen et al., 2007; ram & sheth, 1989). it is a crucial indicator for consumers when evaluating a product or service (ma & lee, 2019). image barriers, according to laukkanen (2016) and lian and yen (2013), relate with an unfavourable perception of an innovation resulting from a perceived 264 n. k. singh, p. singh. identifying consumer resistance of mobile payment during covid-19:... amount of complexity connected with its use or origin. meanwhile, based on the product quality supplied by the point of origin, the style chosen for a specific group of customers, and the values presented by various brands, consumers could have a certain image perception of innovation (ram & sheth, 1989). consumers, for example, do not typically regard mpss to be secure, which contributes to a negative image (hayashi, 2012). 1.2. other constraint-based on barrier of adoption 1.2.1. privacy barrier “do individuals care about their privacy while adopting technology?” is one of the most frequently asked question about privacy (vimalkumar et  al., 2021; kokolakis, 2017). in the field of technology adoption, privacy is one of the oldest, most difficult, and contentious issue (merhi et  al., 2019; herrero et  al., 2017; chen, 2013). the issue began with an article by warren and brandeis (1890) in the harvard law review, in which the author defines privacy barrier as “the right to be left alone.” the anxiety of providing sensitive information via the internet is linked to the privacy barrier (khanra et  al., 2020). people are concerned about their privacy when doing online transactions, making the new technology unfavourable initially. when using the mpss, a consumer might be anxious with peculiar information, such as the consumer’s identification being shared amid financial transactions (chang et al., 2018). in addition, consumers may be concerned that during online purchases, too much personal information is accessed (ozturk et al., 2017). the privacy barrier has been explored from a variety of viewpoints, including law, economics, psychology, management, marketing, and information systems. self-privacy, attitudinal privacy, peer-group privacy, and data/ information privacy are the four categories of privacy identified by clarke (1999). according to studies, citizens of the digital era are anxious about the confidentiality of their personal information (vimalkumar et al., 2021). 1.2.2. visibility barrier the degree to which an individual witness’s others adopting the new innovation is referred to as visibility (johnson et al., 2018; moore & benbasat, 1991). visibility, according to cruz et  al. (2010), refers to how evident an innovation’s usage is to potential users. many earlier studies in technology innovation have explored visibility (hsu et  al., 2007; van slyke et  al., 2007; agarwal & prasad, 1997). rogers (1995), in the theory of diffusion of innovation shows that the more evident the benefits of employing a new innovation are to an individual, the more likely they are to adopt it. as a result, high exposure means that people in society can easily and regularly notice an innovation (talwar et al., 2020). it is realistic to anticipate that as the infrastructure supporting the service develops and expands, mpss will become more apparent to the consumer. in the absence of visibility, potential consumers may be hesitant to adopt the technology (kuo, 2020; zhou, 2013). 1.2.3. design constraints barrier the term “design” refers to the new innovation’s system quality (pal et al., 2021). system quality with design features, according to zhou (2013), comprises “ease of use, and navigation.” it comprises device compatibility, system complexity, and comfortability in the context of business, management and economics engineering, 2022, 20(2): 258–285 265 mpss (cruz et al., 2010; mallat & tuunainen, 2008). system complexity imposes a “cognitive burden” on task performance, is linked to design restrictions, and has been highlighted as a barrier to technological innovation (ghasemaghaei, 2018). as far as barrier is concern, lack of ease of use, and low navigation make the technology less or unadaptable. therefore, easy and compatible design constraints accelerate the user to use the technology, which further enhances the adoption rate of technology. these constraints are not created by the designer on purpose; nevertheless, they are a result of the technology used throughout the design process (norman, 1988). norman (one of the pioneers of affordance theories) is particularly interested in how humans alter their affordances in response to new technological design, particularly with respect to human-computer interfaces (fayard & weeks, 2014). numerous types of users are likely to face different kind of design constraints, on the basis of their learning ability, frequency of usage, and peer group support (song, 2011). as a result, we put forward design constraints as a barrier for mpss as well, because complex app or device design is often seen as a negative aspect of technology adoption. 1.3. introduction to ism methodology warfield (1974) introduced the ism approach, which is regarded as a complex mathematical system of calculations that produces relationships in binary form (ie. 0 & 1) to communicate interconnectedness. by bringing structure and direction to the complex links, it transforms ambiguous, inadequately structured interpretive models into clear, aptly described models suitable for a range of applications (rana et al., 2019; singh et al., 2018; sahu & singh, 2018; hughes et al., 2016; diabat et al., 2013; mandal & deshmukh, 1994; sage, 1977). because of its specialty in exposing interrelationships between antecedents of similar kind and revealing reasons of influence between them, ism has become a well-established and widely utilised technique in academic studies. it’s a system in which elements are connected in a number of ways, either directly or indirectly. it interprets the fixed element and simplifies the identification of system structure (singh et al., 2018; sahu & singh, 2018; kannan & haq, 2007; hawthorne & sage, 1975). the variables in a problem are first recognised, and then the association between them is formed founded on the context. a structural self-interaction matrix (ssim) will be created from the element set grounded on a pair-wise comparison of variables. the transitivity is verified, and a matrix model is created. ism is descended from the element partition and the structural model extraction (sage, 1977). theoretical and computational powers are used in this technique to describe the contextual relationship between the variables. as a result, ism is one of the most suitable method for gaining a deep understanding of the underlying factors that prevent mps adoption (singh et al., 2018; sahu & singh, 2018; jharkharia & shankar, 2005; sage, 1977; warfield, 1974). ism uses an interpretive technique (based on expert verdict) to determine the contextual relationship between various directly relevant variables of a particular issue, (singh et al., 2018; sahu & singh, 2018; mudgal et al., 2009; sage, 1977; warfield, 1974). it is the use of simple graph theory notations to define a composite network of relationships (singh et al., 2018; sahu & singh, 2018; ravi et al., 2005; singh et al., 2003; malone, 1975). this study employs the ism methodology with the objective of identifying interdependencies among the barriers. an expert participant group was used to identify the relationship 266 n. k. singh, p. singh. identifying consumer resistance of mobile payment during covid-19:... among the barrier. five of the eight barriers stated in the previous section are part of the irt model and are used as required factors for the ism method’s implementation. ism has the potential to bring a group of people together to gain a common thought over a critical problem (jharkharia & shankar, 2005). due to the covid-19 pandemic and its constraints, the ism-based questionnaire tool (annexure 1) was being sent to experts on their email addresses. the experts were then briefed of the process to fill in the ssim matrix through video conferencing which took place on microsoft teams software. determining direct and indirect links between the variables leads to a consensus of the components based on previous research. 2. method the study begins by obtaining, evaluating, and analysing the key antecedents that limit mps adoption intentions in india in covid-19 crisis. the main barriers to adoption are then based on this information. this research makes use of ism, a mathematically created technique that enables the organized representation of a problem or a collection of varied beliefs (warfield, 1974). the goal of the whole procedure is to identify the most significant barrier of mpss adoption and represent in a hierarchical structure on the basis of expert opinions. five experts from academia (i.e. higher education) were chosen, each with more than ten years of teaching proficiency in the arena of technology adoption but no experience with mobile payment systems. online survey has been conducted with the help of google form sent over the expert’s official email id. the gender ratio among the experts are 3:2 (m/f) and the age of all the experts lies above 50 years. the ism process the ism technique is a distinguished method for detecting associations amid discrete individual elements that are of minimal significance until they are brought together to constitute a complicated problem. there could be several components that are assumed to be the reason of a particular issue, but examining them independently will result in a much less accurate representation of the situation than examining the aspects in direct and indirect interactions. this justifies the usage of ism since it encourages experts to reconsider their pre-conceived notions and base their conclusions on the relationships between important barriers. due to the study gap, it is unclear what connects these barriers or if they have any relationships. ism model will provide an insight about the direct and indirect relationship among the barriers through empirical analysis of expert opinions. the following are the steps involved in ism technique: step 1: this step entails identifying various antecedents to be investigated for the problem. various barriers to mpss have been distinguished from the literature review in this paper. step 2: once the barriers have been identified, expert opinions on the contextual relationships among the identified barriers have been acquired. step 3: using the symbols a, b, c and d, construct an ssim showing pair-wise relationships between different identified barriers. step 4: this step develops the preparatory reachability matrix (prm) from ssim by business, management and economics engineering, 2022, 20(2): 258–285 267 converting symbols into binary matrix after placing 0 and 1 accordingly, and checking of transitivity. in ism, as per transitivity rule, if barrier x is related to barrier y and y is related to barrier z, then x will essentially relate to z. step 5: using the rule of transitivity, a conclusive reachability matrix (crm) has been structured in this step. step 6: the crm level partitioning were completed in this step. step 7: this step entails the creation of an ism model. figure 1. flow chart for preparing the ism model of barriers to mpss adoption for micmac (matriced’ impacts croise’s multiplication applique’e an classement) analysis, crm is exercised for plotting the graph between dependence power and driving power and it is elucidated in further sections. all steps of ism model are exhibited in a flow diagram in figure 1 and deliberated in the following sections. 268 n. k. singh, p. singh. identifying consumer resistance of mobile payment during covid-19:... 3. data analysis and results 3.1. structural self-interaction matrix (ssim) it demonstrates a step-by-step process that begins with the establishment of the irt model and other barriers. ssim has been created in accordance with this contextual relationship. the researcher assessed the matrix’s variables and attempted to establish any interdependencies amongst them based according to their own perspective and the ism ruling’s boundaries. the linkages in this matrix are the result of one variable influencing another or vice versa, while some elements may have equal impact and others may have none (gupta & dhingra, 2022; rana et  al., 2019, 2022; rafiq et  al., 2021; tamtam & tourabi, 2021; singh et al., 2018; sahu & singh, 2018; maheshwari et al., 2018). the interactions between the variables are represented by the symbols ‘i’ & ‘j’ in the rows and columns, respectively. table 1 shows the ssim, with the symbols “a,” “b,” “c,” and “d” denoting the relationship among each barrier (al-muftah et al., 2018; janssen et al., 2018; mangla et al., 2018; singh et  al., 2018; sahu & singh, 2018; mishra et  al., 2017; dwivedi et  al., 2017; hughes et  al., 2016). the four symbols below designate the existence of an affiliation amid the two variables (i and j) and the consistent direction of the relationship. – “a”, refers to ‘i’ is a predictor of ‘j’; – “b”, refers to ‘j’ is a predictor of ‘i’; – “c”, refers to ‘i’ and ‘j’ are predictor of each other; – “d”, refers to ‘i’ and ‘j’ are no relation between them. the development of ssim can be easily understood by looking at the intersection point of ‘i’ and ‘j’ at usage barrier (b1) and tradition barrier (b4) in table  1, where the experts have suggested an “a”. here, it can be interpreted as that b1 is a predictor of b4 or b1 directly influences b4. likewise, the intersection of usage barrier (b1) and design constraint barrier (b8) has a “b”, representing b8 is a predictor of b1. the method is continued until all cells are completed diagonally. common intersecting cells i.e, b1:b1; b2:b2 are suggested to left alone because the multiplication of these cells is always equal to 1. the blank cells in the matrix denoting the replicating cells, which will be covered by the researcher on the basis of expert opinion. table 1. structural self-interaction matrix (ssim) i/j b8 b7 b6 b5 b4 b3 b2 b1 b1 b c b c a b a – b2 d c b c b b – – b3 c d c d d – – – b4 d d d d – – – – b5 c a b – – – – – b6 c d – – – – – – b7 d – – – – – – – b8 – – – – – – – – business, management and economics engineering, 2022, 20(2): 258–285 269 3.2. preparatory reachability matrix (prm) the development of prm is the next process in the ism methodology. the data of the ssim is replaced by the binary numbers according to the following criteria: rule 1: if the (i, j) in the ssim is a, then the entry in (i, j) becomes 1 and the (j, i) turn out to be: 0; rule 2: if the (i, j) in the ssim is b, then the entry in (i, j) turn into 0 and the (j, i) turn out to be: 1; rule 3: if the (i, j) in the ssim is c, then the entry in both (i, j) and (j, i) turn into 1; rule 4: if the (i, j) in the ssim is d, then the entry in both (i, j) and (j, i) becomes 0. based on the above rules prm is then prepared and showed in table 2 below. table 2. preparatory reachability matrix (prm) i/j b1 b2 b3 b4 b5 b6 b7 b8 b1 1 1 0 1 1 0 1 0 b2 0 1 0 0 1 0 1 0 b3 1 1 1 0 0 1 0 1 b4 0 1 0 1 0 0 0 0 b5 1 1 0 0 1 0 1 1 b6 1 1 1 0 1 1 0 1 b7 1 1 0 0 0 0 1 0 b8 1 0 1 0 1 1 0 1 3.3. conclusive reachability matrix (crm) after the ssim is converted into prm, crm is now prepared by applying transitivity rule. the transitivity rule has already been discussed in previous sections and shown as in table 3 within the crm, transitivity is denoted by 1t. the steps to convert prm into crm are, step 1: start looking at prm (row-wise) for ‘0’ and stop when you find it. for instance, ‘0’ at the intersection cell b1:b8 in row b1 (first row) in table 2. step 2: now, keeping in mind the transitivity rule, look for ‘1’ in the same row (ignoring common intersecting cells) and again stop once you find it. like, ‘1’ at intersection point b1:b2 in the same table. here, the first part of transitivity rule comes in. step 3: next step is to look for second part of transitivity, which stated that if b1 is related to b2, then is there a possibility that b2 might relate to b8 to apply the transitive rule between b1 and b8. this can be analysed by looking for ‘1’ at intersection point of row b2 and column b8 in the same table. if the intersection has ‘1’ in it then the transitivity exists and ‘0’ means no transitivity. here, no transitivity exists in between b1 and b8, since ‘0’ is put at b2:b8. step 4: if no transitivity is found at first instance, step 2 is to be repeated again ignoring previously analysed ‘1’ until any transitive link is found in the same row. for example, b1:b5 has ‘1’ in row b1. step 5: step 3 is again taken into consideration in this step and it is to be repeated unless any transitive links are found. here, since b5:b8 has ‘1’ it means the transitivity exists between b1 and b8 (b1→b5→b8, thus b1 is in turn related to b8) as shown in table 3 by putting 1t. 270 n. k. singh, p. singh. identifying consumer resistance of mobile payment during covid-19:... table 3. conclusive reachability matrix (crm) i/j b1 b2 b3 b4 b5 b6 b7 b8 driving power b1 1 1 0 1 1 0 1 1t 6 b2 1t 1 0 0 1 0 1 1t 5 b3 1 1 1 1t 1t 1 1t 1 8 b4 0 1 0 1 1t 0 1t 0 4 b5 1 1 1t 1t 1 1t 1 1 8 b6 1 1 1 1t 1 1 1t 1 8 b7 1 1 0 1t 1t 0 1 0 5 b8 1 1t 1 1t 1 1 1t 1 8 dependence power 7 8 4 7 8 4 8 6 3.4. level partitioning by evaluating the reachability and antecedent sets for each barrier, the crm matrix has now been partitioned. the next stage is to create the reachability set (rs) and antecedent set (as). the rs is comprised of the particular variable as well as the other variables that it is predictor of. table 3 distinguishes these by using 1 and 1t for each variable (i) across all rows (j). as is comprised of the individual variable as well as any other variables that may contribute in its achievement. table  3 demonstrates this by highlighting the occurrences of 1 and 1t across all the columns (ie. ‘j’) that corresponds to each barrier (ie. ‘i’). intersection set (is) of these rs and as set are the final top-level variables in the matrix. table 4. level partition – i i rs as is level b1 1,2,4,5,7,8 1,2,3,5,6,7,8 1,2,5,7,8 b2 1,2,5,7,8 1,2,3,4,5,6,7,8 1,2,5,7,8 i b3 1,2,3,4,5,6,7,8 3,5,6,8 3,5,6,8 b4 2,4,5,7 1,3,4,5,6,7,8 4,5,7 b5 1,2,3,4,5,6,7,8 1,2,3,4,5,6,7,8 1,2,3,4,5,6,7,8 i b6 1,2,3,4,5,6,7,8 3,5,6,8 3,5,6,8 b7 1,2,4,5,7 1,2,3,4,5,6,7,8 1,2,4,5,7 i b8 1,2,3,4,5,6,7,8 1,2,3,5,6,8 1,2,3,5,6,8 the levels have been defined in the ism hierarchy, where there is an exact match between rs and is. ‘i’ (i.e. level 1) will be placed in front of the relevant barrier where there is a match found. hence, the value barrier (b2), image barrier (b5) and visibility barrier (b7) are the matching barriers and are labelled as ‘i’ in table  4. the level ‘i’ barriers are those barriers which will not allow other barriers beyond their individual level in the hierarchy (singh et al., 2018, 2020; sahu & singh, 2018). business, management and economics engineering, 2022, 20(2): 258–285 271 the same procedure is continued in level partition ‘ii’ (table 5) here, in this step the barriers delineated in level ‘i’ are eliminated from rs and is. tradition barrier (b4) is the only barrier which is labelled as ‘ii’. in the next table (table 6), b1 (usage barrier) and b8 (design constraint barrier) are labelled as iii. remaining barriers, b3 (risk barrier) and b6 (privacy barrier) were outlined in level iv respectively (table 7). table 5. level partition – ii i rs as is level b1 1,4,8 1,3,6,8 1,8 b3 1,3,4,6,8 3,6,8 3,6,8 b4 4 1,3,4,6,8 4 ii b6 1,3,4,6,8 3,6,8 3,6,8 b8 1,3,4,6,8 1,3,6,8 1,3,6,8 table 6. level partition – iii i rs as is level b1 1,8 1,3,6,8 1,8 iii b3 1,3,6,8 3,6,8 3,6,8 b6 1,3,6,8 3,6,8 3,6,8 b8 1,3,6,8 1,3,6,8 1,3,6,8 iii table 7. level partition – iv i rs as is level b3 3,6 3,6 3,6 iv b6 3,6 3,6 3,6 iv 3.5. ism modeling ism based model was developed with the help of crm, as depicted in figure 2. the arrow shows the relationship among the barrier between them. as identified in table  4, top level consists of value barrier (b2), image barrier (b5) and visibility barrier (b7). the reason being the fact, that they have high driving and dependence power (figure 3). resulting, the barrier high dependency on the lower-level barriers to attain the results pertaining to mpss adoption. the lower-level barriers b3 (risk barrier) and b6 (privacy barrier) have maximum driving power and minimal dependence power. interestingly, risk barrier being one of the important constructs in irt model, is placed at lower level in this study stating less dependence on other barriers and need to be driven. 272 n. k. singh, p. singh. identifying consumer resistance of mobile payment during covid-19:... figure 2. ism model 3.6. micmac analysis th e objective of the micmac analysis is to classify variables on the basis of their drive power and dependence power. all pre-identifi ed variables are plotted on a graph with the x-axis and y-axis refl ecting the degree of dependence and degree of driving power respectively (chander et al., 2013). in this research, establishment of dependence and driving powers that contribute to mps adoption barriers were identifi ed. driving and dependence power were identifi ed by the totaling of value ‘1’ and ‘1t’ across each row (ie. ‘i’) and column (ie. ‘j’) of every barrier in the crm table (table 3). th e sum of each row and column for each variable is used to establish the appropriate position for the variable’s plot (figure 3). th ere are four quadrants in the micmac plot diagram, which denote the power of driving and dependence in various relationships among the variables. for instance, each quadrant indicates the power and dependence of the variable into it, over other variables, as well as how it fi ts into the ism model. autonomous quadrant (i): the variables of this quadrant have weak driving power along with weak dependence power. th is means, the variables have a negligible infl uence over other variables, and they have very less linkages with them. dependent quadrant (ii): the variables in this quadrant have high dependency power but the driving power is low. th ese variables are generally infl uenced by others. linkage quadrant (iii): the variable of this quadrant have both high driving power and high dependence power. as a result, the variable is considered unbalanced, in which they provide a certain constant result. independent quadrant (iv): this quadrant provides a strong driving power but a low dependence power, hence this quadrant is oft en more important. consistent with the outcomes of the micmac analysis, there are no barriers in quadrant i. th e absenteeism of such barriers in the study demonstrates that all barriers have a substantial eff ect. as a result, the presence of any of the barriers highlighted in this study could be a crucial facilitator in understanding mps adoption. quadrant ii contains a “tradition barrier”, which has low driving power but high dependency power. image barrier, design barrier, value barrier, visibility barrier, and usage barrier are all included in quadrant iii. with “privacy barrier” and “risk barrier”, quadrant iv has by far the most driving power. business, management and economics engineering, 2022, 20(2): 258–285 273 figure 3. driving and dependence power plot 4. discussion the drive of this study was to gain insights on the reason(s) as to why some consumers are reluctant to mpss adoption, even during in this covid-19 pandemic times. this qualitative study identified eight critical barriers including the five barriers of irt (usage barrier, value barrier, risk barrier, tradition barrier and image barrier). the three-privacy barrier, visibility barrier and design constraint barrier emerged with irt, and did not fall in the above categories of barriers. see annexure 1 for the related questionnaire prepared for the response from the experts. the questionnaire consists of demographic items in section i followed by barrier related items in section ii. we have mentioned the sub-factor under each category of barrier, to brief and make the expert familiar about the concerned barrier. the findings suggest that usage barriers are in level iii and have high driving and high dependence power, which indicate that there are multiple mpss options are available in indian market but there is still lack of proper awareness, and training. the result is similar with the finding mentioned by rbi in the annual report 2021. in the indian market, banks are partnering with global mpss such as google pay, amazon pay, paytm, phonepe, and others, rather than providing exclusively their own banking options such as online and mobile banking. although the above-mentioned contactless payment solutions do not demand any further investments from users, they do necessitate some training in areas such as qr codes, rewards, and mpin (mobile banking personal identification number) generation/change, which is a concern for users (tiwari & singh, 2019; bryman, 2012). not unexpectedly, respondents mentioned the importance of having a backup payment method (i.e. cash) and having numerous applications for different buying scenarios. some of them also stated that they lacked knowledge of mobile payment options. furthermore, in terms of value barriers, it has a high driving and reliance power and belongs to the ism model’s level i. the findings, like those of other studies (deloitte, 2019; oliveira et  al., 2016), show that people are not adopting mpss due to a lack of utility and switching benefits. cashbacks and other incentives were identified as possible value drivers for beginners to mobile payments. on the word of arvidsson (2014), users feel that mpss 274 n. k. singh, p. singh. identifying consumer resistance of mobile payment during covid-19:... should be fast, easy, and economical as card payment. the findings display that the value barrier is still a major barrier to mobile payment adoption. in the cash dominating country like india, where the debit and credit card are highly accepted there may be low benefits for mpss. mpss may provide more benefit to the users in exchange for their work in learning and becoming familiar to utilising this technology since they have low value barriers. additionally, users may also avail the technological benefits of mpss which further spur in the technological advancement of the country. risk barrier is one of the major concerns among the respondents. it is one of the key barriers which has high driving and low dependency power. in this study, the concern was lack of trust on the device, app, and/or payment technology. in previous studies also, trust has always been one of the major concerns in the technology adoption (vinerean et  al., 2022; ramos de luna et  al., 2019; singh et  al., 2018; sahu & singh, 2018; kerviler et  al., 2016; oliveira et  al., 2016; yang et  al., 2015; arvidsson, 2014; mallat, 2007). according to the report of opensignal (2021), the average internet connection speed in india is 8.1 mb/s which is 85th rank worldwide. “internet connection lost” is one of the major risks during mobile payment, especially in large value payment, due to which people are concerned about monetary loss, pending payment, dual payment etc. with this people feel tradition method of payment is more secure. tradition barrier is related to the old habits of a person. this is the only barrier which is on level ii of ism model and dependent quadrant, which means tradition barrier is very important barrier and it is highly influence by other users. people may use or not to use mpss according to the spending habits and influencers around. during this study a common question was always raised by the respondents that, “why would i need to change, if i am comfortable with the tradition method?” it is in their habit to use cash first in place of thinking about any alternatives. very few senior citizens, those are not using mpss try to learn new technology, else are happy with their traditional mode of payment. being comfortable in no-change obstruct the technology adoption of mpss, similar with prior studies (singh et al., 2018; sahu & singh, 2018; chemingui & ben lallouna, 2013). image barrier also matters, it has the equal and highest ratio of driving and dependence power in the micmac analysis. the findings support those of arvidsson (2014), who emphasised the importance of the relationship between business to consumer (b2c) in the adoption of mpss. the image of company and the country image is the representative of the new technology adoption behaviour. privacy barrier is also an important barrier of technology adoption, which has high driving power. people are concerned about what global it corporations may do with their personal data, and the management of personal information by third-party suppliers (other than one’s own bank) are important problems to consider. security concern has always been a major concern on technology adoption (sahu & singh, 2018). visibility barrier arises when the payment methods are not available to use. it is due to the merchants of that locality not using it. results shows that it is quadrant iii in micmac plot and level i in the model, which represents the importance of this barrier in mpss context. mallat (2007) has written extensively about the less merchant acceptance of mpss. this fear is likely to fade, with the mass adoption of mobile payments. the current study also revealed business, management and economics engineering, 2022, 20(2): 258–285 275 that other people’s acceptance is crucial for adoption. new users always take suggestion about the technology from their family, friend and peer group. therefore, mpss platform providers may be more attentive to the improvement of visibility, so as to facilitate the willingness of the potential users to adopt the mpss platform. the government may also offer resources and regulations to make adoption simpler and clearer. this is due to the fact that an individual’s attitude, moral obligations to his or her country and society, and support from various mobile payment service providers and vendors would have a high impact on their intention to continue using mobile payment services when they are strongly motivated by mandatory government regulation (eg. the demonetisation regulation) (verma et al., 2019). likewise, other barriers, design constraints of the device are also one of the main concern for people. the result is concurring with the previous study (sahu & singh, 2018). it is in quadrant iii, which means this barrier has high impact with other barriers of the study. design constrains are involved when the mobile is not compatible with the systems, along with fear of low battery life, possibility of theft etc. conclusions, limitations and future research direction the mpss is one of the most cost-effective, convenient, and digitally enabled technology in the digital world. it acts as an enabler to achieve the objective of zero physical cash transactions. traditional payment services should be replaced by mpss, as adoption of this technology is likely to increase in most countries, with some emerging economies potentially showing a leapfrog development from cash to mobile pay (boden et al., 2020). during covid-19, government suggested to adopt mpss in routine transactions to avoid the transmit of virus as well as to maintain the transparency during the transaction. therefore, marketers look for a positive growth in the area of mpss. however, as per the central government report, the adoption rate is very low which is not expected by the government. hence, a study was required to identify the reason behind the slow adoption rate of mpss. with the help of review of literature, and interviews of experts, this study identified a set of total 8 barriers of adoption of mpss in which 5 barriers were commonly used barriers of well-known irt model, that could prohibit india from adopting mpss technology. this research applied ism and micmac methods to derive interplay among the factors and present a structured model. subsequently, identification of the pairs of barriers (i, j) was made possible through the development of a contextual relationship among these 8 barriers. the application of ism resulted in a final hierarchal model which divided all the barriers into four different levels and developed an interconnection among them, allowing users, researchers, and policymakers to better grasp the notion and become acquainted with the interactions that can lead to adoption failure. with the help of ism this research is able to provide both direct and indirect links between the barriers in context with mpss. the findings emphasise the unpredictability of variables in terms of their influence on one another, their interactions, and themselves. it demonstrates the necessity of looking at data as a whole afore at individual barriers. on the micmac plot diagram in figure 3, each variable’s driving power and dependent power has been identified and assigned to a separate quadrant. as a result of the variables’ location, the majority of them have a high driving and 276 n. k. singh, p. singh. identifying consumer resistance of mobile payment during covid-19:... dependency power. high driving power means, high amount of influence over key factors. the barriers with the high driving and dependent power are found at the top (level i) of the ism model (figure 2), implying that they will be impacted and influenced if any of the related elements in the lower levels are impeding adoption. therefore, level i barriers essentially be properly addressed if both the driving and dependant powers are high. in conclusion, the novelty of this research work is threefold. first, it surfaces three new factors  – privacy barrier, visibility barrier and design constraints barrier into the extant of irt. second, it brings a new conceptual model towards the barrier of technology adoption. finally, few strategies are recommended for the barriers of adoption of mpss with ism methodology. there are few flaws in this study as well. first, this study is concentrated on mpss barriers which are obtained from the irt model. researcher can identify more barrier through extensive literature review in the area of technology adoption. the ism technique could be used to develop a framework for mpss adoption in the future. second, only indian academics working in higher education were selected as expert and were requested to complete the survey, therefore, there could be a possibility of bias and may have narrowed the scope of the findings to a single industry. in future, additional comparisons might be done and the results could be more thorough if the study was conducted in other locations or sectors. furthermore, since the ism methodology was used in this study, the result is not statistically validated. hence, the scholars may explore empirical methods such as sem to test the model to reduce bias (chowdhury et al., 2019). third, the strength of the links between the factors is not clear, and a fuzzy micmac analysis could have been employed to find out the strength of such inter-relationship (venkatesh et  al., 2015). fourth, mpss user behaviors could also vary across countries; therefore, it is worth testing this model across geography. this may provide different 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(a) postgraduate (b) doctorate (c) any other 2. what is your total teaching experience? (a) 10–15yrs (b) 11–0 yrs (c) >20 yrs 3. how many employees working in your organization? (a) <50 employees (b) 51–250 employees (c) >250 employees section ii 4. relationships between the barriers of mpss adoption. i j b8 b7 b6 b5 b4 b3 b2 b1 b1 b2 b3 b4 b5 b6 b7 b8 sub-factors of the barriers usage barriers – lack of knowledge of the technology – alternate payment options are easier than payment through mobile phone – multiple apps required for different merchants value barriers – lack of benefits over other options available in the market – no switching benefits – i am looking for a big offer/incentive/reward to start using risk barriers – mobile payment is not function proper at all the time – lack of trust on the device/app/payment technology – fear of monetary loss during the transaction – alternate payment options available in the market are more secure – poor connectivity of the internet tradition barriers – why would i need to change, if i am comfortable with the tradition method? – i don’t want to learn/effort for new technology image barriers – the company/country of technology providing is not good – third party, except banks are not trustworthy – others are not happy or getting threat by the use of technology privacy concern barrier – risk of unauthorized access of my personal information – fear of leakage of information i am putting on third party app visibility barrier – i can’t see anyone using the technology in my locality – nobody is taking initiatives to start using the new technology – merchants are not accepting the new technology of payment design constraints barrier – my phone is not compatible to use any mobile payment app – the mobile payment app isn’t easy to learn _goback baut0010 baut0015 copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. role of smart specialisation in financing the development of regions in perspective 2020 aleksandra gulc department of economic information and logistics, faculty of management, bialystok university of technology, ojca tarasiuka 2, 16-001 kleosin, poland e-mail: a.gulc@pb.edu.pl received 11 november 2014; accepted 10 february 2015 abstract. the aim of this article is to present the role of smart specialization concept in the process of providing funds for regional development. the systematic literature review was conducted in order to identify the role of smart specialisation concept in the process of providing funds for regional development. the methodology followed for the literature review included two main phases: selection and analysis. the article presents: (i) the idea of smart specialisation, (ii) characteristics of the areas of specialisation in the european union, (iii) the creation of smart specialization strategies in the regions, (iv) the role of smart specialization in financing the development of regions, (v) examples of methodological approaches to identify smart specialisation at the regional level. the research examines the relationship between smart specialisation and process of providing funds for regional development. keywords: smart specialisation, regional development. jel classification: o23, o31. 1. introduction although europe seems to overcome the last economic crisis, it has to face many long-term challenges like globalization, pressure on resources, and ageing populations. but probably the most important problem is still slower growth of europe’s economy than its main competitors caused by among others lower level of innovativeness and r+d expenditure. innovation is considered as one of the key growth drivers as geoffrey nicholson1 said “research is the transformation of money into knowledge. innovation is the transformation of knowledge into money”. therefore, the european union emphasis the significant role of smart specialisation as a new innovation policy concept designed to promote the efficient and effective use of public 1 geoffrey nicholson – 3m (3m ranks 3rd on the booz & company “the global innovation 1000” study 2012, whereas it ranks only 86th in terms of r&d spending). b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(1): 95–111 doi:10.3846/bme.2015.249 mailto:a.gulc@pb.edu.pl http://dx.doi.org/10.3846/bme.2015.249 96 a. gulc. role of smart specialisation in financing the development of regions in perspective 2020 investment in research and technology. it is a key solution for avoiding dissipation of the eu research funds and for focusing the research, innovation, human and financial resources on those innovative sectors which can be competitive on the global scale. moreover, smart specialisation is a new generation of research and innovation policy that is not just for the “best” regions and technology leaders. on the contrary, this concept provides strategies and roles for any region. its goal is to boost regional innovation in order to achieve economic growth and prosperity, by enabling regions to focus on their real strengths (european commission 2012c). the aim of this article is to present the role of smart specialization concept in the process of providing funds for regional development. the article presents: (i) the idea of smart specialization, (ii) characteristics of the areas of specialization in the european union, (iii) the creation of smart specialization strategies in the regions, (iv) the role of smart specialization in financing the development of regions, (v) examples of methodological approaches to identify smart specialization at the regional level. 2. concept of smart specialisation smart specialisation is a relatively new concept both at academic and political level. current references are limited to the authors that actually advise the commission called as “knowledge for growth” (foray, van ark 2007; foray et al. 2009; mccann, ortegaargilés, 2011). according to them, smart specialisation could be defined as the identification of a small group of sectors/technologies at regional/national level, which can be potentially competitive in international markets and generate new activities with comparative advantage over other locations. the conceptual approach above considers the following features when defining smart specialization (del castillo et al. 2011; foray, van ark 2007; foray 2009): – global perspective – the aim for intelligent specialization is to create a large area of research and innovation in order to compete on a global market beyond geographic boundaries; – specialisation in technological domains in order to achieve competitive advantage over the other locations, specialisation in connected with general purpose technologies, which means technologies, which caused a breakthrough in the global economy; – regional diversity – identification and exploitation of the regional related diversity in order to develop new technology domains and sectors; – government role – a huge role in shaping smart specialisation plays government policy which tasks are as follows: giving incentives for entities involved in the process of specialisation identification, assessing the value of chosen specialisation, selecting and promoting innovation which is complementary to specialisation, reducing investments, which were supported in the ex-ante framework of seeking appropriate expertise, and which turn out to be inadequate ex post. 97 business, management and education, 2015, 13(1): 95–111 smart specialisation is different from the average innovation strategy in the following aspects: – it sets priorities taking into account prudent spending and focusing investments on those sectors or technology which allow regions to be competitive comparing to other countries or regions; – it is based on facts considering not only typical research and skills issues in regions, but all assets like geographic location, population structure, climate and natural resources, but also societal needs, potential customers, public sector innovation. in this way, smart specialisation can encourage a country or region to merge its unique local know-how and productive capacity into new combinations and innovations; – it is a bottom-up decision created and implemented in a dynamic entrepreneurial discovery process involving key stakeholders; – it is not focused on the implementing new knowledge everywhere, but it uses existing knowledge and technologies to innovate in many different forms, including organisational, marketing, user-driven, and social innovation; – smart specialisation is not only for the leaders in particular sector or technology, but it rather supports the cooperation between regions in a form of clusters, sectoral and cross-sectoral activities, eco-innovation, knowledge spill-overs, both within the region and externally with other regions (campagni 2013; european commission 2012b). the concept of smart specialisation is not only dedicated to european union but it is widely known on the world-wide scale. oecd emphasizes that smart specialisation can be one of the key divers for growth but it requires effective and active coordination of policy interventions and longer term visions of policy makers but also various stakeholders, including business (oecd 2013). from a scientific point of view, the most substantial are methods and means used to designate the smart specialization and later verification of their contribution to development of the region, country or europe. in this article, the main point of interest is smart specialisation at the regional level, however, is conditioned by factors at national and european level. 3. smart specialisations in european union 3.1. europe 2020 strategy in response to the last financial crisis and global challenges, the main goal of european union is to boost the prosperity and create conditions required for a more competitive economy. to achieve this aim the european commission has elaborated europe 2020 strategy with key following priorities (european commission 2010a): – smart growth – through more effective investments in education, research and innovation; – sustainable growth – thanks to eco-friendly economy; – inclusive growth with a strong emphasis on job creation and poverty reduction. 98 a. gulc. role of smart specialisation in financing the development of regions in perspective 2020 based on these three mutually reinforcing priorities, european member states and regions are encouraged to find their own assets and r&i strengths and finally identify limited number of priorities. this approach called as smart specialisation is dedicated not only for leading regions but also for the underdeveloped ones. it aims to help countries and their regions to increase the level of employment, productivity and social cohesion in a manner that would be not only globally competitive but also environmentally, financially and socially sustainable. looking at three priorities elaborated by the european commission, the first place is dedicated to smart growth, which means the development of economy based on knowledge and innovation. it was stated that in order to reach this goal, it is necessary to increase education level, improve research activity results, reinforce innovation and knowledge transfer in european union, develop information and communication technologies, but also support the process of transformation of new idea into products and services. that is why europe has to make investments into innovation, education, trainings, lifelong learning and digital society (european commission 2010a). in order to face these challenges the european commission divided three priorities into seven flagship initiatives presented on figure 1. the concept of smart specialisation is connected with one of them – the innovation union. smart growth sustainable growth inclusive growth – digital agenda for europe – innovation union – youth on the move – an industrial policy for the globalisation era – resource-efficient europe – agenda for new skills and jobs – european platform against poverty fig. 1. priorities and initiatives in strategy europe 2020 (source: author’s own study on the basis of european commission 2010a) the innovation union is strategic and integrated approach, which aims to improve framework conditions and make better access to finance research and innovation projects. in this way, novel idea will have chance to transform into products and services and create new workplaces (european commission 2010b). the main principles of innovation union are as follows: – making investments in r&d and innovation in the field of climate change, energy and resource efficiency, health and demographic change; – supporting those technologies which can be competitive on a global scale; – avoiding the practice of excessive duplication, inefficient resource allocation; – improvement and coordination of national/regional research and innovation systems; – supporting every link in the innovation chain, from “blue sky” research to commercialization; 99 business, management and education, 2015, 13(1): 95–111 – involvement of all actors in the innovation process – the authorities, leaders of innovation, as well as universities and non-governmental sector, private enterprises including small and medium ones, and finally citizens (“social innovation”). as far as smart specialisation concept is concerned, the european commission outlines that it is a key solution not only for leading regions but also for the underdeveloped ones. the regions should develop on the basis of their strengths, however in cooperation with the rest of member countries and regions. in addition, the innovation union clearly outlines that smart specialisation concept should be included among the objectives of the structural funds programs, the cohesion policy and rural development policy in the financial perspective 2014–2020. moreover, the implementation of smart specialisation model can be supported by two other initiatives: the youth on the move, which aim is to improve education results and increase of competitiveness of higher education on the international scale; the digital agenda for europe which offers wide-spreading fast internet and the opportunity of taking benefits from single digital market (european commission 2010c). 3.2. regional innovation strategies for smart specialisation the concept of smart specialization on the regional level is related with the implementation of the cohesion policy for the period of 2014–2020. smart specialisation identification is ex ante condition for funding actions by the eu funds in the following fields (european parliament and the council 2013): – research, innovation and technological development, information and communication technologies – financed by european regional development fund (european commission 2012a); – knowledge and innovation transfer in the agriculture, forestry and rural areas financed by the european agricultural fund for rural development. the european commission in the special communication pointed out the positive influence of regional politics on the implementation of smart growth concept (european commission 2010c). according to this communication, regional politics can unblock the potential of european union by promotion of innovation in all regions, complementarity of innovation systems at eu, national and regional level but also by making investments in r+d and ict technologies. despite the differences between the development of european regions, the regional politics has to support smart growth in each region so that all of them will be able to absorb innovation and implement new projects effectively. in order to benefit from eu funds in the financial perspective 2014–2020, each member country is obliged to prepare regional and national strategy of research and innovation based on the concept of smart specialisation. however, the national strategy is not prior to the regional one. these strategies should guarantee more effective public spending and stimulate investments in private sector. regional innovation strategy for smart specialisation (ris3) aims to face social and economic challenges in order to support transformation of the region’s economy based on new technologies, gain the position of 100 a. gulc. role of smart specialisation in financing the development of regions in perspective 2020 region on the global scale but also reinforce the internal and external connection with other regions. the concept recommends that each region should focus its efforts and resources on a limited number of realistic niches which allow to develop and compete in the global economy following the smart, sustainable and inclusive growth priority (european commission 2014). while elaborating the smart specialisation strategy, the regional authorities should take into account the following aspects: innovative clusters, innovation-friendly business of small and medium enterprises, long-life education in the field of research and innovation, attractive regional research infrastructure, competitive centres and european partnership for innovation. regional research and innovation strategies for smart specialisation (ris3 strategies) as integrated and economic transformation agendas have five important characteristics: – support key regional challenges and needs through policies and investments; – are based on strengths, competitive advantage and potential excellence of each region; – support technological and practical innovation and stimulate investment in the private sector; – commit different stakeholders and resources in order to create shared vision of future; – are based on facts, and include the appropriate monitoring and evaluation systems. regional research and innovation strategies for smart specialisation of the eu’s regions should be based on the analysis of a region potential for innovation and relevant innovation actors, but also identification of limited priorities and targets. the ris3 strategy should be elaborated in 6 steps shown on figure 2. regional context and potential for innovation inclusive govermance structure shared vision about the future of the region prioriteis for regional development policy mixes monitoring and evaluation fig. 2. steps of elaboration of regional research and innovation strategies for smart specialisation (source: author’s own study on the basis of european commission 2014) first step of the analysis should be based on the one of the most important element of smart specialisation concept, which means regional diversity. each region must find its own potential so it is necessary not only to describe specific regional context, but also determine key economic and social challenges, existing assets and major strengths and 101 business, management and education, 2015, 13(1): 95–111 weaknesses. moreover, regions should take into account their relations with other regions and the position within the eu. secondly, the process of setting main goals of the strategy should involve stakeholders from different sectors like companies, research centres and universities, but also business environment institutions and non-governmental organizations. in result, all stakeholders committed in the process should elaborate shared vision of region’s future with clear directions of regional development. this step is an important political process, which decides if the strategy is going to be successful. later, the priorities should be chosen with accordance between top-down objectives of eu policies and a bottom-up identification of niches through entrepreneurial process. while setting priorities, regions should take into account existing assets and their possibilities, potential diversity of analysed sectors, critical mass and potential among each sector, international position on global value chain. afterwards, the strategy should be implemented by a means of a clear action plan allowing for a degree of experimentation through diverse pilot projects. finally, from the very beginning the strategy should include the mechanisms for monitoring and evaluation. the european commission recommends the implementation of these six steps in sequence shown on the figure 2. however, it is important to point out that they can sometimes overlap in case of many unexpected situations coming up in the process like entering of new actors or discovering unrealised potential. therefore, they should be thought as interacting elements of a comprehensive design scheme, which implementation order depends on the specificity of regional context (european commission 2014). the preparation of ris3 is a major challenge for member states, especially for those with little experience in the creation, implementation, and evaluation of innovation policy. that is why, the european commission released two useful tools – guide to research and innovation strategies for smart specialisation and the smart specialisation platform (platform s3). both the guide ris3 and the platform aim to support regions of the member states in better defining their research and innovation strategies, specific strengths and weaknesses and to develop their competitive advantage. the platform supported by the institute for prospective technological studies (institute for prospective technological studies ipts) gives idea and guidance, provides case studies and methodology as well as serves the exchange of contacts, opinions and experiences. moreover, on the platform many workshops, trainings, and annual meetings concerning smart specialisation are organised. the commission noticed many problems while setting r&i priorities in europe: sometimes either the priorities are not clearly defined, or they are simply copied from one region to another. it is worth outlining that to develop excellence and compete in the global economy, each region should identify its own best assets, r&d potential and choose a limited number of priorities (european commission (2012a), smart specialization platform). although the european commission prepared special helpful guide and platform for regions and countries but it did not point what methods would be best to identify their smart specialisation. therefore, the methods used to identify smart specialisation are very differentiated in european regions – the overview of different research methods are shown on figure 3. the world bank recommends a mixture of different approach in order to obtain 102 a. gulc. role of smart specialisation in financing the development of regions in perspective 2020 as soon as possible a comprehensive understanding of region potential. however, it is not precise in what order these methods should be applied, although it seems reasonable to start with the two first methods (analyses of s&t and economic specializations) since they are relatively easy to conduct and provide decision-makers with basic information about the region’s innovation system. the latter methods are more complex, but could be more accurate as quantitative analysis is complemented by a qualitative layer (piatkowski et al. 2014). among the approaches used in order to identify smart specialisation, regions usually choose the following research techniques (dziemianowicz et al. 2014): desk research, statistic methods, swot analysis, individual in-depth interviews, focus group interview, experts panel, scenario analysis, five porter’s forces analysis, technological foresight. analysis of science and technology – quantitative anaysis of different indicators like patents, research, employment in research, r&d investment (private and public), etc. foresight – participant process of designing strategic vision of future (the time-span of 5–20 years) and priorities through identification of region's strength and sectors with high development potential looking for “clusters” – quantitative identification of a region’s clusters which are outstanding in comparison with different regions. the analysis take into account such indicatirs like employment, added value, export contribution, gdp contribution market selection – in order to find comparative advantage, actors make experiment (market entry-exit) and try to discover a region’s strengths – government should create a friendly environment for such experimentation as well as introduce monitoring and evaluation tools into the system case-studies – deep case-studies of existing groups of companies or economic specialisations. – the analysis aims to reveal the connectivity between entities in order to choose sectors of the highest potential. the analysed indicators are: added value, gdp contribution, vast presence of skills and human capital required by given specialization competitive selection – smart specialisation are selected in a bottom-up manner of competing between clusters in order to gain financing – the approach can beused in well-developed regions with strong relationships between companies from different sectors of economy gravity model – qualitative and quantitative analysis aims is to reveal strong centres and develpmnet potential on the subregional level municipality or district. – it is rather expert analysis but the selction of analysed are can be done in boootm-up manner. fig. 3. potential research methods of selecting smart specializations (source: author’s own studies on the basis of piatkowski et al. 2014) 103 business, management and education, 2015, 13(1): 95–111 4. level of specialisation and innovativeness in european union a region/country’s level of specialisation in a field of science or technology is measured by comparing the world share of the region/country in the particular field to the world share of the region/country for all fields combined. the eu’s scientific and technological output appears to be more diversified than that of the usa. specialisation in research and technology (s&t) in selected countries of the european union is shown in table 1. table 1. specialisation of s&t in ue member states (source: cooke 2009) s&t be cz dk de ee el es fr ie it cy lv lt lu hu mt nl at pl pt si sk fi se uk agriculture and food basic life sciences biological sciences biomedical science and pharmacology clinical medicine and health sciences earth and environmental sciences chemistry engineering mathematics and statistics physics and astronomy computer sciences specialization before specialization without specilization regarded scientific and technological specialisation in the european union, member countries are very diversified. as the table 1 shows, poland specializes in chemical sciences, mathematics, physics, and astronomy. in the field of innovations, the diversity among countries of the european union can be also noted. based on the average innovation performance measured by summary innovation index (sii)2, the member states fall into four different performance groups which are demonstarted on the figure 4. 2 sii is based on 25 different indicators divided into 8 following dimensions: human resources, research systems, finance and support, firm investments, linkages & entrepreneurship, intellectual assets innovators, innovation of the country. 104 a. gulc. role of smart specialisation in financing the development of regions in perspective 2020 – denmark – finland – germany – sweden – bulgaria – latvia – romania in no va tio n l ea de rs in no va tio n fo ol lo w er s m od er at e in no va to rs m od es t i nn ov at or s – austria – belgium – cyprus – estonia – france – ireland – luxembourg – netherlands – slovenia – the united kingdom – croatia – czech republic – greece – hungary – italy – lithuania – malta – portugal – slovakia – spain – poland fig. 4. eu member states’ innovation performance (source: author’s own study on the basis of innovation union scoreboard 2014) as shown above, poland takes the last place within the group of moderate innovators as the sii value reached 0.279 and is much lower than the average one in ue – 0.554. the lowest place has only bulgaria, latvia and romania. in 2013, the most innovative countries among eu were: sweden with the highest index of innovation at the level of 0.750, next germany (0.728), denmark (0.709) and finland (0.684). similarly to the innovation union scoreboard, european regions, according to regional innovation scoreboard3, have also been classified into four groups (shown on fig. 5): – regional innovation leaders (34 regions), – regional innovation followers (57 regions), – regional moderate innovators (68 regions), – regional modest innovators (31 regions). as we analyse the figure 5, the most innovative regions are located in countries which are innovative leaders. unfortunately, most regions are either innovation followers or moderate innovators. these regions are situated developing countries of eastern and southern europe (e.g. poland, czech republic, slovakia) or in countries which were marked the most by the financial and economic crisis (e.g. portugal, spain greece, italy). as far as polish regions are concerned, five of them are classified as moderate followers – the developed regions of central and south part of poland. however, eleven of them are modest followers – on the one hand, the poorest ones situated on the east part of poland but on the other, surprisingly also the richer ones located on the west side of country. 3 comparing to iis, ris is based only on 11 indictors from 25 used in iss, because some regional data was not available. 105 business, management and education, 2015, 13(1): 95–111 fig. 5. regions’ innovation performance (source: regional innovation scoreboard 2014) 5. smart specialisation in polish regions taking into account the european commission recommendations mentioned in chapter 1, polish regions have chosen their smart specialisations. the data presented in table 2 were gathered on the basis of information presents on s3 platform, regional innovation or development strategies and the report made for the ministry of regional development. the results in table 2 show that regions defined very differentiated smart specialisation. the most popular are quite new and modern sectors like it/multimedia, bioeconomy, healthy food and medicine especially medicine tourism. on the contrary, there are also regions, in which traditional sectors like gun & metal industry or power engineering will play the dominant role of regional development – adequately 7 and 6 voivodeships. on the one hand, some regions identified very rare specialisation like mining, manufacture of plastic products, textile industry/design aviation and aerospace, gate to east, offshore technologies and water economy. on the other hand, a part of specialisations, which are seen as universal ones, is chosen by a few regions for example 106 a. gulc. role of smart specialisation in financing the development of regions in perspective 2020 table 2. smart specialisation in polish regions (source: author’s own research on the basis on regional innovation strategies and regional development strategies: inteligentna specjalizacja (is)… 2012; program rozwoju inteligentnych… 2015; program strategiczny regionalna… 2014; regionalna strategia innowacji… 2011, 2012, 2013, 2014; strategia rozwoju województwa… 2013a, 2013b; zaktualizowana strategia rozwoju 2013; założenia aktualizacji regionalnej… 2012, and the reports: potencjały i specjalizacje… 2013; obszary inteligentnych specjalizacji… 2014; ramy strategiczne 2014) specialisation voivodeship (region) do ln oś lą sk ie ku ja w sk opo m or sk ie lu be ls ki e lu bu sk ie łó dz ki e m ał op ol sk ie m az ow ie ck ie op ol sk ie po dk ar pa ck ie po dl as ki e po m or sk ie śl ąs ki e św ię to kr zy sk ie w ar m iń sk om az ur sk ie w ie lk op ol sk ie za ch od ni op om or sk ie su m ict/multimedia 10 bio-economy 9 healthy food 9 medicine/m.tourism 9 gun and metal industry 7 power engineering (including oze) 6 chemistry 4 creative industry 3 services for business 3 construction 3 logistics, water and land engineering 3 high life quality 2 woodworking &furniture 2 mining 1 manufacture of plastic products 1 textile industry/ design 1 aviation and aerospace 1 gate to east 1 offshore technologies 1 water economy 1 sum 7 8 5 4 5 5 4 5 3 2 8 3 5 2 6 5 107 business, management and education, 2015, 13(1): 95–111 creative industry, services for business, high quality of life. it can be the result of mature approach of regions to the assessment of own potential or the necessity of limiting the number of priorities. however, the list of smart specialisation is not closed because the process of their selecting is still ongoing (for example in dolnośląskie and podlaskie voivodeship). moreover, the process of smart specialisation identification was different in each regions – more often integrated with the updating of regional innovative strategies or regional development strategies. only a few regions prepared specially dedicated strategies towards smart specialisation. in addition, as table 3 shows, the most popular method of smart specialisation design was the analysis of scientific and technological potential with the use of desk research as the basis for later research. the results of these analysis were deepen by expert panels and individual interviews. some regions have done comprehensive procedure of specialisations selecting, but unfortunately with little participation of foresight methodologies and benchmarking. however, many authors emphasise that foresight method is an efficient, but unappreciated instrument of regional strategic management, supporting the development of regional policies, development scenarios and decisions. it could be also used as the tool in smart specialisation identification thanks to its long time-span, flexibility and ability to adapt to changing conditions but also participation of all stakeholders in the process (ejdys, lulewicz-sas 2013; kononiuk, nazarko 2011). table 3. research techniques of smart specialisation identification in polish regions (source: author’s own research on the basis on sources mentioned in table 2) specialisation voivodeship (region) do ln oś lą sk ie ku ja w sk opo m or sk ie lu be ls ki e lu bu sk ie * łó dz ki e m ał op ol sk ie m az ow ie ck ie op ol sk ie po dk ar pa ck ie po dl as ki e po m or sk ie śl ąs ki e św ię to kr zy sk ie w ar m iń sk om az ur sk ie w ie lk op ol sk ie za ch od ni op om or sk ie desk research statistic methods swot analysis scenario analysis individual in-depth interviews focus group interview experts panel five porter’s forces analysis technological foresight 108 a. gulc. role of smart specialisation in financing the development of regions in perspective 2020 the good example of research project aiming to select technological specialisations on regional level is foresight technologiczny «nt for podlaskie 2020»: regionalna strategia rozwoju nanotechnologii (nazarko 2011; nazarko et al. 2013). the project involved many experts from numerous national and international research centres and numerous stakeholder groups representing entrepreneurs, local authorities, non-governmental organisations, media and students. an important novelty, in comparison with the previous regional strategic documents, is the approach based on foresight, which aims to develop a vision of desirable future. the authors express their hope that the strategy will contribute to the development of the knowledge-based economy in the region, including the intensive exploration of the possibilities afforded by nanotechnologies. policy-makers and other stakeholders can use this kind of projects based on foresight method as a helpful tool for creating regional innovation policy. to sum up, the analysis of polish smart specialisation strategies conducted recently, have shown many problems identified within the current system of innovation support, including the ris3 frameworks both at the national and regional levels. they are concentrated in four following aspects (piatkowski et al. 2014): – coherence – limited cohesion not only between but also within the various governance levels, which results in chaotic actions and a high degree of uncertainty in the system; – quality – the low quality of strategic documents, including ris3, as well as failure in fulfilling ex ante conditionality, resulting in “business-as-usual” rather than supporting a fundamental socio-economic change; – smart specializations – selection of smart specializations is not treated as a key tool in socio-economic transformation; – implementation – an implementation system is still a weak element in the ris3 framework, which lowers the realism of the presented ideas and weakens the impact of the strategy. 6. conclusions the article presented the concept of smart specialisation, its relevance with regional development, characteristics of specialisation areas in the european union, methodological approaches to identify smart specialisation at the regional level on the example of polish regions. although each polish region selected smart specialisation, the experts have recently identified many problems within the current system of innovation support, including the innovation strategy frameworks both at the national and regional levels. in addition, the final shape of the criteria according to which ris will be assessed, is still during negotiations. therefore, regions are still uncertain how their strategies will be assessed. in result, the author of this article states that further researches on the issue of smart specialisation should be conducted in order to help regions in case of failure. from a scientific point of view, the most substantial in not only the evaluation of methods and means used to designate the 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[online]. 2012. lublin [cited 09 november 2014]. available from internet: http://www.rsi.lubelskie.pl/index. php/regionalna-strategia-innowacji aleksandra gulc. ma, lecturer on the faculty of management at bialystok university of technology. main research interests: regional and structural policy of european union, smart specialisation, project management and corporate social responsibility. http://www.lodzkie.pl/files/biznes/rsi_-_publikacja.pdf http://ris.slaskie.pl/files/zalaczniki/2014/03/14/1356089359/1394800415.pdf http://www.ocrg.opolskie.pl/download.php?id=5597&x=3144783 http://www.ocrg.opolskie.pl/download.php?id=5597&x=3144783 http://www.strategia.wrotapodlasia.pl/pl/ps2/var/resources/154/248/4/srwp_2020_1.pdf http://www.wrpo.wielkopolskie.pl/zalaczniki1/2013/zaktualizowana_strategia_rww_do_2020.pdf http://www.rsi.lubelskie.pl/index.php/regionalna-strategia-innowacji http://www.rsi.lubelskie.pl/index.php/regionalna-strategia-innowacji copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(1): 158–174 doi:10.3846/bme.2015.259 benchmarking in university toolbox katarzyna anna kuźmicz bialystok university of technology, ul. wiejska 45a, 15-351 bialystok, poland e-mail: k.kuzmicz@pb.edu.pl received 09 december 2014; accepted 17 january 2015 abstract. in the face of global competition and rising challenges that higher education institutions (heis) meet, it is imperative to increase innovativeness and efficiency of their management. benchmarking can be the appropriate tool to search for a point of reference necessary to assess institution’s competitive position and learn from the best in order to improve. the primary purpose of the paper is to present in-depth analysis of benchmarking application in heis worldwide. the study involves indicating premises of using benchmarking in heis. it also contains detailed examination of types, approaches and scope of benchmarking initiatives. the thorough insight of benchmarking applications enabled developing classification of benchmarking undertakings in heis. the paper includes review of the most recent benchmarking projects and relating them to the classification according to the elaborated criteria (geographical range, scope, type of data, subject, support and continuity). the presented examples were chosen in order to exemplify different approaches to benchmarking in higher education setting. the study was performed on the basis of the published reports from benchmarking projects, scientific literature and the experience of the author from the active participation in benchmarking projects. the paper concludes with recommendations for university managers undertaking benchmarking, derived on the basis of the conducted analysis. keywords: benchmarking, higher education institution (hei), university management, benchmarking initiatives, benchmarking classification. jel classification: i200. 1. introduction competition on educational market triggers actions oriented on improvement and increase of higher education services quality. dynamic technological, economic and social changes foster advanced research. modern higher education institutions (heis) need to meet expectations of students and their future employers, transfer knowledge into economy, answer the needs of the region and from the other hand function in a way that will satisfy its employees. in order to meet these challenges heis undergo an intensive process of modernisation. http://dx.doi.org/doi:10.3846/bme.2015.259 159 business, management and education, 2015, 13(1): 158–174 there is an urgent necessity to increase innovativeness and efficiency of management. the proper action is to systematically search for a point of reference necessary to assess institution’s competitive position and learn from the best in order to improve. just as other public institutions heis improve their management through adaptation of methods, techniques and tools used in enterprises. one of such tools is benchmarking. there are numerous definitions of benchmarking in the literature. according to b. karlöf and s. östblom (karlöf, östblom 1993), benchmarking is a continuing and systematic process which involves confronting effectiveness measured by productivity, quality and experience with the results of the companies and organisations which can be seen as models of perfection. benchmarking as a process of evaluation and best practice application is described by j. kulmala (kulmala 1999), and r. pieske (pieske 1994) claims that benchmarking is a method of comparing with the best and learning from them in a systematic, detailed and branch independent way. in european benchmarking initiative (ebi) benchmarking was meant as an internal organisational activity which aims to improve the organisation’s performance by learning about possible improvements of its primary or support processes by looking at these processes in other, better-performing organisations (van vught et al. 2008). most of the definitions accentuate that benchmarking should be used systematically, it should be continual and improvement oriented. its essence is learning form the best and creative adaptation of the best practice identified. the author perceives benchmarking as a tool useful in the improvement of organisational units functioning and flexible – adapting easily in higher education setting. numerous examples support this thesis, especially benchmarking applications in great britain, germany, usa and australia, the countries which can be seen as leaders in this field. benchmarking, just as other management tools, requires financial input. in the face of recession or economic crisis many heis can be reluctant to spend money on quality enhancement tools. however it should be noticed that benchmarking is relatively inexpensive and it relies on the natural human ability to observe others and adopt these practices to the ones needs. finding solutions to overcome difficulties thanks to rational benchmarking can be an attractive option. 2. premises of benchmarking application in higher education institutions benchmarking in such institutions as universities seems natural as it is the inherent feature of the university to practice and propagate learning. therefore heis should exercise and improve ability to learn from the best. it is the way to improve the whole institution itself. benchmarking in higher education is conducted in order to improve quality of teaching and research, support rational allocation of financial funds from public sources and trigger competition among heis, make them more open to the market and, more 160 k. a. kuźmicz. benchmarking in university toolbox flexible in cooperation with other entities (nazarko et al. 2009b). the primary purpose of benchmarking in higher education is to improve national or international competitive position of the hei. the practical effect of which is to identify best practices of leaders and especially reasons of their advantage over others. benchmarking enables heis to use these practices in order to limit the distance from the leaders (nazarko et al. 2009a). especially process benchmarking increases transparency of functioning through careful observation of the processes taking place at a hei. it requires a detailed description of the processes enabling possibility to share this description it with partners and make mutual learning possible. benchmarking in higher education can be perceived as a tool for self-assessment and self-evaluation. the primary aims of self-evaluation in higher education were pointed out by n. jackson. they embrace facilitating improvement, making changes and meeting expectations and requirements connected with accountability (jackson 2001). the author presented the definition of benchmarking in british heis describing benchmarking as a process facilitating systematic comparisons and evaluation of practices, processes and outcomes conducted in order to support improvement and self-regulation (jackson 2001). on the basis of this definition two dimensions of benchmarking can be indicated: focus on accountability and self-evaluation against the standards and focus on development and gaining competitive advantage (fig. 1). accountability, standards development and competitive advantage benchmarking benchmarking is a process facilitating systematic comparison and evaluation of practices, processes and results in order to support improvement and self-regulation jackson (1998) benchmarking is an open based on cooperation form of evaluation of services and processes made in order to imitate or improve the best available practices price (1994) fig. 1. benchmarking dimensions (source: created by the author on the basis of jackson 2001) benchmarking in higher education should be perceived as a tool enhancing competitiveness and self-evaluation. through systematic comparisons hei reviews knowledge about itself and increases transparency of its activity. realising the idea of benchmarking which is constant improvement through learning, university increases quality and improves its competitive position. benchmarking based on cooperation with partners enables making relations with other institutions which can be realised on different levels and different areas of activity of the university. benchmarking may be perceived as a form of self-evaluation and as a part of quality assurance system. 161 business, management and education, 2015, 13(1): 158–174 3. types of benchmarking applied in heis the outstanding researcher of benchmarking in higher education n. jackson (jackson 2001) notes, that first benchmarking initiatives were conducted in the early 90s in usa (alstete 1995; farquhar 1998). they were followed in australia (massaro 1998), and since the half of the 90s in great britain (jackson, lund 2000) and in continental europe (schreiterer 1998). at the beginning benchmarking in higher education was applied in the field of management of libraries, fixed assets, campus, energy and finance (jackson, lund 2000). the most recent practical benchmarking initiatives embrace all aspects of university functioning: research (tijssen et al. 2009; acu 2014), teaching (cswe 2012), administrative activity (manzini, lazzarotti 2006) and managerial processes (freeman 2010). the definite majority of the benchmarking initiatives concerns processes connected with teaching students. most of them concentrate on priorities indicated by the european union such as teaching with the usage of computer networks and internet (e-learning) (council resolution… 2001) and lifelong learning (bolonia declaration 1999; decision no. 1720/2006/ec). initiatives in this field also tackle the issues of study programmes. many of benchmarking projects concern students affairs, internationalisation of studies and matters concerning employability of graduates. the scope of the recent benchmarking initiatives in the field of research focuses on cooperation between universities and enterprises, transfer of research into industry and common publications. it should be noted it is the area where benchmarking is rarely employed although the results of such initiatives would be highly useful and interesting to the stakeholders of heis (kuźmicz 2015). more and more often the subject of benchmarking become practices that support the core mission of the university (research and teaching). these practices involve administration and management of the university for instance risk management, sustainable development, resources and supply. the examples of benchmarking initiatives quoted in this paper embrace initiatives based on cooperation of universities. higher education institutions create a benchmarking group in the framework of which they learn through making comparisons. sometimes they engage specialists in benchmarking universities such as his – hochschulentwicklung im deutschen zentrum für hochschulund wissenschaftsforschung (his-he im dzhw) or centrum für hochschulentwicklung (centre for higher education development – che) in germany, association for commonwealth universities (acu), higher education academy (hea) in uk. often universities decide on oneto-one benchmarking, which means that they make use of the services of companies specialised in benchmarking which offer a possibility to compare with other heis with the usage of a database. 162 k. a. kuźmicz. benchmarking in university toolbox universities that systematically and periodically practice benchmarking (for instance university of adelaide (university of adelaide 2011) or university of sydney (university of sydney 2014) in australia), publish on their websites guidelines concerning benchmarking directed to their internal units. they include the adopted definition of benchmarking, procedure of managing benchmarking projects, procedures concerning undertaking new benchmarking projects, list of strategic documents that benchmarking initiatives should be compliant with, list of potential benchmarking partners, information concerning former benchmarking undertakings, repository of the conducted projects, proposals of the potential sources of data, indicators and literature. analysing international experience it can be stated that benchmarking is a systematically used managerial practice in higher education. carried out on a university level, national, international and transcontinental level benchmarking embraces new areas of university activity. a. kelly (kelly 2005) propagates comparative benchmarking as an opposite to statistical benchmarking. it involves comparing processes not only their outcomes. different units also from the outside of higher education sector can become benchmarking partners. partnership is promoted, often mentor relation is needed. a better partner helps the weaker and does not perceive sharing knowledge as a threat to its competition position. statistical benchmarking is associated with individuality. it assumes that university is an organic entity which is difficult to accept by many stakeholders of heis. in comparative benchmarking universities are perceived as a complex of collaborating or conflicted sides which much better reflects reality. contrary to statistical benchmarking which may be not sufficiently efficient and may persist inertia, comparative benchmarking encourages changes and looking for new ways to success. in other words comparative benchmarking offers quality assurance while statistical kind only quality control. lack of systematised knowledge about benchmarking in higher education environment often causes misinterpretation of this term with the polarisation towards the field of study the persons involved in benchmarking are specialised in (nazarko et al. 2009b). limiting benchmarking only to comparisons of effects or indicators concerning hei’s activity regardless of the analysis of the ways these results had been gained, contributed to the domination of statistical benchmarking. positioning of universities means ranking and it should not be aliased with benchmarking. according to the terminology of european network for quality assurance in higher education (enqa) (hämäläinen et al. 2002), the real benchmarking is always improvement oriented. from this point of view ranking of universities can be treated as an initial step in benchmarking. rankings point out benchmarks and benchmarking gap but they do not reveal ways of improvement (nazarko et al. 2009b). therefore university rankings can be called false benchmarking. in the figure 2 classification of benchmarking initiatives in which universities cooperate in a benchmarking group is presented. the opposite of cooperative benchmarking 163 business, management and education, 2015, 13(1): 158–174 is individual or one-to-one benchmarking embracing comparisons with the data made available by institutions specialised in benchmarking. this type of benchmarking can be classed to statistical benchmarking. cooperative benchmarking initiatives are differentiated according to the criteria: geographical range, scope, type of data, subject, support and continuity. geographical criterion divides initiatives according to the participation of the partners from different continents, from one region of the world (europe, baltic sea region) or from just one country. the criterion of scope includes division into the core areas of university activity that can be benchmarked: research, teaching, administrative processes and management processes. according to the type of data involved in comparison there can be distinguished statistical benchmarking – using quantitative data (indicators) and comparative benchmarking – using mostly qualitative data. criteria of scope and type of data are closely related with the criterion of subject. the scope of the project determines whether the subject of comparison will be outcomes or processes (the author narrowed the typology in this area, because these are the types used in higher education). the type of the data used is dependent on the subject of benchmarking. according to the criterion of support initiatives are divided into those with the participation of external moderator (specialised in benchmarking) ensuring professional organisation of the undertaking and those in which universities make a benchmarking club alone. according to the criterion of continuity the initiatives can be divided into those incidental and continued, that is those in which it was decided to broaden the scope of benchmarking or in case of which it was decided to deepen the analysis of the outcomes. classification of collaborative benchmarking initiatives carried out by heis criterion: geographical range benchmarking: • transcontinental • regional • national criterion: scope benchmarking: • research • teaching • administrative processes • management processes benchmarking: • comparative • statistical criterion: support benchmarking: • with external moderator • without external moderator criterion: subject benchmarking: • processes • results criterion: continuity benchmarking: • incidental • continued • cyclic criterion: type of data fig. 2. classification of benchmarking initiatives in heis (source: on the basis of kuźmicz 2015) 164 k. a. kuźmicz. benchmarking in university toolbox within benchmarking with the participation of external moderator, association sponsored benchmarking can be classified. the term has been coined by j.w. alstete, who gave this name to benchmarking initiatives organised and conducted by professional associations for the sake of its members (for example in usa national association of college and university business officers (ncubo), association of continuing higher education (ache), international association for management education (aacsb) and american accounting association (aaa)) (alstete 2000). 4. benchmarking in heis of the world in-depth analysis of benchmarking projects in universities is a troublesome task because of difficulties in access to information about benchmarking undertakings. the published results of benchmarking projects include information agreed by the parties participating in the project. therefore comparison of the projects is difficult. the presented projects illustrate different approaches to benchmarking in higher education. the examples are referred to the classification of collaborative benchmarking initiatives presented above (table 1). table 1. classification of the reviewed benchmarking initiatives in heis (source: created by the author) name of the project (coordinator) criteria geographical range scope type of data support subject continuity benchmarking programme (association of commonwealth universities) regional (commonwealth) teaching, management processes comparative with the participation of external moderator processes cyclical development research uptake in sub saharan africa (drussa) (association of commonwealth universities) regional (east, southern and west africa) research comparative with the participation of external moderator processes and results cyclical global research benchmarking system (grbs) (global alliance for measuring university performance) regional (usa, canada, asia and pacific region, ultimately transcontinental) research statistical with the participation of external moderator (internet tool) results cyclical 165 business, management and education, 2015, 13(1): 158–174 name of the project (coordinator) criteria geographical range scope type of data support subject continuity benchmarking and pathfinder programme (higher education academy & joint information systems committee) regional (england, wales, scotland) teaching comparative with the participation of external moderator processes incidental the university policy benchmarking project (benchmarking club of universities from australia and new zealand) regional (australia, new zealand) management processes, administrative processes comparative without the participation of external moderator results, processes incidental benchmarking university –industry research cooperation worldwide (leiden university) national (holland) research statistical without the participation of external moderator results incidental australian national higher education procurement benchmarking programme (anhepbp) (university of new castle) national (australia) administrative processes statistical with the participation of external moderator processes incidental since 1996 association of commonwealth universities (acu) has systematically run benchmarking programme (acu 2013). the participants of the programme included universities from the commonwealth. each year acu defined fields of benchmarking. the scope of acu benchmarking programme in the years 2010–2012 is presented in table 2. according to the acu methodology a questionnaire with open questions grouped in five sub subjects in each field was used. they concerned policy, strategy, implementation, monitoring and communication. the universities were instructed to answer the questions according to the documentation and the solutions that were functioning in the university at the moment and not according to the plans made for the future. after gathering and verifying the complementary data the practices were assessed in the end of table 1 166 k. a. kuźmicz. benchmarking in university toolbox framework of three pillars approach – applied policy or technique, application – to what extend policy or technique is applied at the university and outcome with regard to the extend the aims had been achieved and the needs to modify and adjust to the changing environment. the conclusions were presented in a final report. each participant was encouraged to evaluate in 5-point scale with respect to each good practice, which is later used by the universities to find partners for cooperation. in the course of the programme there were workshops organised during which participants received a report with good practices analysis. table 2. scope of acu benchmarking (source: created by the author on the basis of the association of commonwealth universities website) year scope of benchmarking 2010 strategic alliances student experience managing it 2011 management the university of the future branding and marketing hr management – new forms of hr service delivery 2012 financial management managing league tables managing graduate outcomes since october 2014 the acu has launched a new online tool acu measures. it is going to enable its members to benchmark their performance in a range of non-academic areas (acu 2014). initially three focus areas were chosen for benchmarking: academic salaries, research management, and gender mainstreaming. in the course of this programme participants responded to a survey encompassing the following aspects: institutional priorities, policies for research, staffing for research management and uptake, and current research and research uptake activities. the benefits of the tool indicated by acu include among others: opportunity to benchmark performance over time and demonstrate the impact of managerial changes; individualised reports, possibility to use it as a case for reallocation of resources. an interesting new initiative by acu is development research uptake in sub saharan africa (drussa). conducted initially in 2012 it was followed in 2014 to check the degree of change brought by the previous benchmarking. it is planned as a fiveyear programme and engages 24 african universities. it focuses on how research and research uptake are approached at the institutional level and what are the constraints in bringing research finding to end users (falk et al. 2014). research uptake is defined by acu as an emerging field in university management which focuses on practical, 167 business, management and education, 2015, 13(1): 158–174 cost-effective and sustainable approach to getting research into use (acu 2014). the project includes three major phases (falk et al. 2014): – the survey based on quantitative data concerning institutional priorities, policies of research, staffing for research management and uptake, and current research and research uptake activities; – the 2014 leadership and benchmarking conference, as an occasion to discuss in greater detail ways in which institutional change has been achieved and is being developed; – the final benchmarking report. on the basis of the review of available publications about benchmarking initiatives in heis it can be observed that universities participating in acu projects also take part in other benchmarking initiatives, for instance in european benchmarking initiative (ebi). it means that they are satisfied from benchmarking and their appreciate the benefits they receive from such activity. global research benchmarking system (grbs) undertaken by the partnership global alliance for measuring university performance was started in october 2010. the members of the partnership are universities from the whole world, center for measuring university performance, the united nations university’s international institute for software technology (unu-iist) and elsevier publishing. the published materials should serve university managers to increase management efficiency. according to the project’s coordinators reliable data can contribute to the improvement of many areas of university activity, such as: teaching, research, local environment engagement and social dimension of university functioning. the idea of the project was to create an alternative to university rankings, because according to the authors of the project, the diversity and richness of university functions cannot be reflected by only one number in the ranking table. the aim of the project is to develop a new system measuring effects and evaluating university functioning and at the same time reflecting university complexity. the first undertaking in this project was benchmarking research activity with division into scientific domains and disciplines. benchmarking is supported by the internet tool, which enables to compare according to different criteria (indicators) among the registered universities. in 2011 there were 729 heis registers from asia and pacific region, usa and canada. the first step was to create benchmarking group. this choice was valid for the next edition. the user chose category and subcategory (in 2011 23 disciplines and 251 sub disciplines according to all science journal classification (asjc) were considered, including interdisciplinary publications). the next step was the choice of indicators. the system includes two types of indicators: primary and normalized by affiliated authors. as a result of benchmarking the user obtains graphs reflecting data concerning publications, citations, among others: 4-year hirsch index, number of publications in journals in 10% and 25 of the most 168 k. a. kuźmicz. benchmarking in university toolbox valued journals in the certain discipline on the basis of source-normalized impact per paper (snip) from 2010; number of citations in journals that are in top 10% and 25% of the highest snip value; number of publications written in cooperation with at least one researcher from abroad etc. the following undertakings in the framework of grbs were planned to include: finance, commercialisation and social impact of research. it was also planned to broaden the scope of the project to european countries. unfortunately to date no information has been published about the outcomes of this actions. it should be noted that this project is based on statistical benchmarking, and does not allow universities to learn from each other through gaining knowledge about best practices. it would be highly beneficial if this project would be continued in a way fulfilling the premises of real benchmarking. another example of an interesting benchmarking project is the initiative benchmarking and pathfinder programme conducted by the higher education academy and joint information systems committee (hea & jisc 2008). it was initiated in 2005 and till july 2008 77 universities from england, wales and scotland took part in it. the defined purpose of the project embraced enhancing e-learning capability and introducing it into practice. because of the luck of the defined methodology of benchmarking e-learning and the complexity of higher education sector higher education academy decided to use five methodologies: elti (embedding learning technologies institutionally), mit90s (designed by massachusetts institute of technology in the 90s), obhe/acu (observatory for borderless higher education/association of commonwealth universities), pic&mix (designed by p. bacsich, consultant of the project) and emm (e-learning maturity model). the project was divided into phases and the participants could decide which methodology was the most appropriate for them (table 3). table 3. the methodologies applied in benchmarking and pathfinder programme (source: hea & jisc 2008) methodology pilot phase phase i phase ii the number of universities applying the methodology elti 3 6 0 9 emm 1 0 7 8 pick&mix 3 7 10 20 mit90s 1 4 0 5 obhe/acu 4 21 10 35 number of heis taking part in the phase 12 38 27 77 169 business, management and education, 2015, 13(1): 158–174 the descriptions of the methodologies in the available sources are very laconic. in the report of the project only a few-sentence descriptions were included. the methodology elti was described in the course of the project jisc ended in 2003. it covers three research fields: culture, infrastructure and expertise. it includes 12 indicators, 4 for each field. in the methodology participants agree on up to 10 indicators described in a form of indicative sentences, which are evaluated in a 1–5 scale. they include also qualitative sentences. the indicators were adjusted to the specificity of the participants activity (researching… 2012). the methodology emm was developed by s. marshall for heis in new zealand. it is based on a university model which processes in the area of e-learning mature from ad hoc processes to revised processes reflecting the culture of constant development (hea & jisc 2008). the mit90 concept is based on an assumption about evolutionary and revolutionary change, which source is applying the technology in education. the methodology was developed by the massachusetts institute of technology (mit) in the 90s to plan and monitor strategic change in e-learning. it is assumed that the university consists of five elements interacting with each other: strategy in the area of technology, organisational structure, units that serve special roles, management processes and technology. the methodology obhe/acu is based on collaboration. the universities taking part in the project filled in institutional review document consisting of eight part, embracing: strategy development, e-learning management, e-learning resources, issues connected with the relation of the quality to the input spent, issues connected with students using e-learning, staff, cooperation and communication of the outcomes of the evaluation. the methodology pick&mix designed by p. bacsich includes systematic monitoring of other approaches to benchmarking e-learning, looking for common parts and also new solutions. it includes a set of obligatory and additional criteria enabling adding criteria that reflect specificity of a certain hei. the author of the methodology makes the benchmarking questionnaire available on its website. according to the participants the added value of the undertaking was most of all making relations among institutions, progress in e-learning process understanding, increase of managers awareness, focusing attention on constantly changing teaching and learning process and facilitating communication inside the university thanks to building relations among staff members who did not cooperate with each other in the past. benchmarking enabled management and staff to understand how important is constant improvement and confronting own activity with others and making an institutional practice out of it. the barriers in realisation of the programme appeared to be the following: time, human resources, logistics and culture. the coordinators underlined difficulties with overcoming the false belief that benchmarking should lead to university ranking. 170 k. a. kuźmicz. benchmarking in university toolbox this proves that it is highly needed to explain the idea of benchmarking in higher education and propagate its proper definition in the academic environment. the next example of a benchmarking project realised in higher education sector is the initiative the university policy benchmarking project (report on the university… 2010; kuźmicz 2012). the purpose was to examine the extent to which university policy is reflected in its website, identification of good practices, quality resources supporting the cycle of university policy development and creating models of university policy management. in the project since february till april 2010 16 systems of conducting university policy was examined. the participants were universities from australia and new zealand. the sample included 132 heis from usa and australia dependent territories (excluding tasmania), 33 heis from new zealand (north and south islands), institutions of higher education sector and of vocational sector, metropolitan universities and regional universities and one private university (bond university). on the basis of the available information on the websites of the heis taking part in the project the exercise embraced (freeman 2010): – university policy frameworks and policy on policy statements comparative analysis; – comparative analysis of the methods of presentation of the repository of university policy and websites presenting university policy; – study of the available resources supporting the cycle of university policy development; – the complex benchmarking carried out on a sample of four areas of university policy (plagiarism policy, environmental sustainability policy, leave without pay and credit policy); – dissemination of undertakings with the participation of enterprises and traditional vs. new areas of activity or interests of the university; – development of the models university policy frameworks and policy on policy statements; – development of the concept of the website presenting university policy; – identification of good practices. according to the participants of the project the gathered data enabled to identify good practices and reliable analysis of university policy matter. benchmarking substantially helped the universities to improve conducting and presenting university policy. the added value of the project comprised creating of the cooperation network and enabling evaluation of the advancement of the university in certain areas of university activity being benchmarked. the purpose of the benchmarking project carried out by universiteit leiden was to indicate leading universities with respect to supply enterprises with knowledge and services based on research (tijssen et al. 2012). the study embraced 350 biggest research oriented universities. it was based on statistical data concerning common publications 171 business, management and education, 2015, 13(1): 158–174 of researchers and enterprises workers. data was extracted from the web of science (wos), international, multidisciplinary bibliographical database including international technical reviewed journals. the authors of the study recommend using the data to multidimensional benchmarking comparisons. however at the same time they highlight that they allow only approximate indicating of the best universities in the studied field. they do not consider mechanisms concerning cooperation of the university with entrepreneurs, factors connected with management, organisation and financial aspects. the authors of the study contest reliability of the data. they stress that the universities should be grouped in such a way that similar institutions would be compared with each other. it should be noted that the study was more ranking oriented then involving real benchmarking. the proposed benchmarking has a statistical character, not comparative, which means that it narrowed only to comparison of indicators and it does not answer the question how are results being achieved and what practices lead to the success. conducting comparative benchmarking with taking into consideration the way the university realises cooperation with enterprises and not only effects in a form of numbers of common publications of both environments what be surely purposeful and beneficial. the example of applying benchmarking in university administration is the project australian national higher education procurement benchmarking programme (anhepbp), financed by the australian government of education, employment and workplace relations (hes 2011; kuźmicz 2012). it was initiated by the higher education services (hes) and australian universities procurement network initiative (aupn), which with the support of a private company purchasing index pty ltd. conducted pilot benchmarking project with the participation of five universities. the subject of the undertaking was benchmarking of university spending on stationery. later university of newcastle on behalf of hes and aupn obtained research grant on continuing the project with more participants. the project was realised in the years 2007–2009. the participants were 29 australian universities. the subject of benchmarking was procurement. 12 categories of goods and services that universities buy were identified: office procurement, laboratory procurement, partial time works, business trips, multifunctional equipment, transactional banking, telecommunication, computers, professional services, advertising and it leasing. the participants were obliged to take part in at least three benchmarking tasks. the purpose of the project was benchmarking procurement and the anticipated outcome was the improvement of the analysed processes and indicating possibilities of savings. the second part of the project covered benchmarking of the procurement process. the data was gathered through interviews with managerial workers and questionnaires. each of the participating hei received individual report and the aggregated final report. each benchmarking task were finished with workshop which was supposed to help to start cooperation and encourage knowledge sharing. unfortunately no detail information has been published about the project. similarly like in other benchmarking projects it is the result of the benchmarking confidentiality rule. 172 k. a. kuźmicz. benchmarking in university toolbox 5. conclusions in-depth and detailed analysis and evaluation of benchmarking initiatives is troublesome because of incomparability and incompleteness of the published information. only direct participation in benchmarking projects or gaining permission from the project coordinators for a case study enables insightful investigation of the methodologies applied. numerous examples of successful benchmarking initiatives around the world substantiate introduction of this tool into management toolbox of the hei. systematic use of benchmarking by many universities means that they appreciate the benefits benchmarking offers. university managers should decide on comparative benchmarking focusing on the good practices that contribute to the successful outcomes. 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van leeuwen, t. n.; van wijk, e. 2009. benchmarking university–industry research cooperation worldwide: performance measurements and indicators based on co-authorship data for the world’s largest universities, research evaluation 18(1): 13–24. http://dx.doi.org/10.3152/095820209x393145 van vught, f.; brandenburg, u.; burquel, n.; carr, d.; federkeil, g.; kuźmicz, k.; nazarko, j.; rafael, j.; sadlak, j.; urban, j.; wells, p.; westerheijden, d. 2008. a practical guide: benchmarking in european higher education. european centre for strategic management of universities, brussels. katarzyna anna kuźmicz. phd, is employed in the department of business informatics and logistics at the faculty of management of the bialystok university of technology. she is also dean’s plenipotentiary for studies in foreign languages. her research interests embrace benchmarking, university management, project management and productivity analysis. http://dx.doi.org/10.1080/03797720903356677 http://dx.doi.org/10.1080/03797720903356677 http://dx.doi.org/10.3152/095820209x393145 bme_16(1)_2018_maketas.indd copyright © 2018 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: jana.kostalova@upce.cz business, management and education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 1: 54–64 https://doi.org/10.3846/bme.2018.2223 introduction ensuring the successful existence of a business, regardless of the scope of activity in the changing environment, is conditioned by the ability to make changes. changes at the enterprise level are usually implemented in the form of projects. project management is a tool for successful change management. many studies have confirmed the benefits of using project management, e.g. de carvalho, patah, and bido (2015), joslin and müller (2015), lappe and spang (2014), spalek (2014) and patanakul, iewwongcharoen, and milosevic (2010). in business practice, a number of projects are implemented in all areas of corporate activities with different impact across the enterprise, and it is possible to record the implementation of different types of projects (archibald, 2004; turner & ledwith, 2009; pitas et al., 2012; skalicky, 2010). regardless of the size or type of the project, it can be stated that the rate of utilization of project management in the different phases of the project life cycle is influenced by the extent of the participants’ knowledge of the project management theory and the extent of their experience with projects from previous practice. therefore, to successfully implement project management education in metallurgical companies in the czech republic jana kostalova *, marie bednarikova , michal patak department of economy and management of chemical and food industries, faculty of chemical technology, university of pardubice, studentska 95, 532 01 pardubice, czech republic received 04 june 2018; accepted 08 june 2018 abstract. the paper focuses on the issue of project management education as the tool of positive influence on the success of project implementation in corporate practice. the aim of the authors is to identify the ways of training project managers, project team members and top management members in project management on the basis of interviews with human resources managers of metallurgical companies in the czech republic. based on the findings, recommendations of appropriate measures are formulated at the end of the paper to improve the situation in the area of project management education in metallurgical companies. keywords: project management, project management education, project management information system, hard project management skills, soft project management skills, metallurgical industry. jel classification: i25, l61, o15. business, management and education, 2018, 16(1): 54–64 55 project management, it is important in assigning staff to project management and project team to assess their project management competencies (more information in kostalova, bednarikova, & patak, 2018). it is then important to support improving project managers’ and project team members’ competencies by training in project management and related areas. not only project managers and project team members, but also top managers and stakeholders responsible for implementing the effective strategy of the company, among other things through projects grouped in a number of cases into project programmes or portfolios to set the conditions for using project management methods and tools, should be aware of project management issues (hyväri, 2016; hermano & martín-cruz, 2016). a high level of use of project management can be expected in fields such as information and communication technologies, construction, and lines of business supplying on the basis of customer requirements in the form of projects. however, the changing environment has an impact on all lines of business and it is, therefore, desirable to focus also on the areas where process management procedures are mainly expected to be used, such as the chemical, food and metallurgical industries, in which project management procedures are increasingly used. the aim of the research is to assess the approach of metallurgical companies to the education of project managers, project team members and stakeholders or top managers in the area of project management. 1. literature review 1.1. usage of project management generally recognized and used project management practices can be traced in particular within the international project management standards. standard project management institute (pmi), standard projects in controlled environments 2 (prince2) and an international standard of international project management association (ipma), these the international project management standards. standards of the three largest industry associations with a global presence in the field of project management are among the most widespread. standard pmi, is specified in a guide to the project management body of knowledge (pmbok) (pmi, 2004). association for project management group (apm) presents standard prince2 in the apm body of knowledge (apm, 2012) and ipma creates an international standard ipma competence baseline (ipma, 2015b). with the increasing scope of use of project management, international project management standards also address issues of management and coordination not only of projects but also of project programmes and portfolios and eventual use of project management office (pmo). as part of the organizational structure of the investigator of projects, programmes and project portfolios, pmo provides methodological support and ongoing monitoring of implemented projects or is responsible for planning and managing projects, programmes and portfolios (hofman, 2014; unger, gemünden, & aubry, 2012; müller, glückler, & aubry, 2013). the use of project management in practice is also significantly influenced by the use of support in the form of project management information system, the use of software support allows simplification of procedures in project planning, implementation and evaluation, allows data sharing across the project team and the project environment and allows the use of available documentation when planning additional projects (kostalova, tetrevova, & svedik, 2015). 56 j. kostalova et al. project management education in metallurgical companies in the czech republic 1.2. project manager competencies the appropriate range of knowledge of project managers, project team members and top managers responsible for implementing projects, programmes and project portfolios can be found, in particular, in the ipma standard, which specified the technical, behavioural and contextual competencies of project managers (ipma, 2015b). but also in pmi, besides defining procedures, they define appropriate project manager competencies (pmi, 2007). it is also possible to use t0he holistic model of competence, which is built on three pillars: the general knowledge pillar, the necessary practical skills and the necessary social (human) competence (taraba, kavkova, & trojan, 2017). crawford (2005), shi and chen (2006), clarke (2010) or fisher (2010) further focuses on the issue of defining project managers’ competencies. on the national level in the czech republic, we can use the database of the national system of occupations (národní soustava povolání), defining the scope of the project manager’s work activities and recommended qualification requirements in the field of professional skills, general skills and soft skills (ministry of social labor affairs cz, 2016). 1.3. project management education company education appears as a very significant factor of the success rate and as the necessity for maintaining of required competencies of the employees (botek, 2016). project management education is routinely included in study plans at both economic and technical faculties of universities. the lessons are usually designed in accordance with one of the international project management standards and focus on both technical skills and soft skills (pant & baroudi, 2008). professional international associations also offer the opportunity to learn about project management in the form of lifelong learning within a range of courses that can complete with the certification of project managers. project manager certifications within international project management standards are provided at various levels, both within prince 2 (levels foundation, practitioner and agile), within the standards of the pmi associations (levels certified associate in project management and project management professional and other certification in area of programme management, project portfolio management, risk management and in project scheduling, business analysis and agile project management) and ipma (levels d – certified project management associate, c – certified project manager, b – certified senior project manager, a – certified project director) (axelos, 2017; svirakova, 2014; pmi, 2018; ipma, 2015a). the varying scope and focus of the training courses, as well as the different levels of certification, means that the different scope and focus of education in the area of project management is required for different project positions and for project managers dealing with different projects. the requirements for the education of project team members and project managers will be different, taking into account the complexity of the projects and the field of application (cicmil & gaggiotti, 2018; müller & turner, 2010). expanding knowledge in project management is also desirable towards top management and stakeholders who are responsible for the planning and implementation of projects. ewin, luck, chugh, and jarvis (2017) and hansen (2004) emphasize the importance of improving mainly soft skills that can make a significant contribution to reducing project business, management and education, 2018, 16(1): 54–64 57 failures. authors of professional literature criticize a trend still often used in project management education focused on the highly techno-scientific basis of project management knowledge, which is being replaced by an approach base on responsible project management education (cicmil & gaggiotti, 2018). in the area of alternative approach to the general practice of project management, it is possible to mention agile management (beck et al., 2001) and design thinking (ewin et al., 2017). however, it is important to note that the usage assessment of alternative project management methods is possible based on advanced knowledge of project management and evaluation of the type of project, i.e. the agile management is beneficial just for special types of projects. 1.4. conceptual development of project management competencies in the field of project management education, it is also necessary to mention the fact that in order to achieve maximum efficiency in the training of project team members, project managers as well as representatives of top management and stakeholders, it is not possible to see this area in the short term. in the field of project management education, it is a long-term conceptual staffing work in which we plan to gradually expand the knowledge of the project staff, familiarize them with the latest trends and tools that can be used for project management. from the point of view of effective use of knowledge and experience, it is necessary to plan the use of project managers, which is more demanding in terms of the temporary nature of the work on projects than in the case of functional managers (turner, huemann & keegan, 2008). it is a dynamic work environment in which it is necessary to offer project workers support in their career development (el-sabaa, 2001; turner et al., 2008). the importance of project management education is growing steadily (kostalova & bednarikova, 2017). ramazani and jergeas (2015) recommend viewing project management education as a multidimensional and complex process. as a key role, they developing of critical thinking for dealing with complexity, developing softer parameters of managing projects, especially interpersonal skills as opposed to just technical skills, and preparing project managers to be engaged within the context of real-life projects (ramazani & jergeas, 2015). pant and baroudi (2008) also recommend that project management education is approached from a holistic point of view with respect to ethics, logical integrity and emotional acceptance with increasing the human skills emphasis. according to el-saba (2001), it is beneficial for career development in project management to develop versatile knowledge and skills, accept change and be active in building a career. 2. methodology of research primary research was based on a literature review of expert contributions on personnel management and education of project managers, project team members, and project management training. the literature review was followed by qualitative research in selected metallurgical companies in the czech republic. for this research, metallurgical companies 58 j. kostalova et al. project management education in metallurgical companies in the czech republic in sectoral associations (association of foundries of the czech republic (2017) and steel federation, inc. (2017)) were selected. of the 23 representatives of metallurgical companies approached, members of these associations, responses were received from 11 respondents in a structured questionnaire through in-depth interviews. the sample of respondents was represented by large consortium enterprises (5 respondents), medium (4 respondents) and small (2 respondents) enterprises operating in the metallurgical industry. in each company human resources department staff was interviewed, whose competencies include training in project management. metallurgical industry in the czech republic is an important position, the production is determined for the national market, mainly for such types of industry as automotive, engineering etc., but important part of the production is exported. all-important metallurgical areas are presented in the czech republic. it is possible to find iron, steel, non-ferrous metallurgy, including aluminium, tin, lead, nickel or mercury here, but there are presented also other metals processing areas – gold, silver and platinum processing. among the top 100 companies in the czech republic are 10 metallurgical companies (5 of which were represented in the framework of selection as representatives of large companies). 3. results and discussion – project management in metallurgical companies respondents from metallurgical companies in the czech republic expressed their views on two main areas – what is the nature of the organization and what project activities are being implemented in the company and how, and to what extent training in project management and other personnel work with project staff is taking place. 3.1. conceptual development of project management competencies metallurgical companies implement various types of projects. in 6 metallurgical companies, medium-sized projects are implemented, which can be characterized as projects with a larger budget, more time-consuming, providing a more robust project output with more complex planning. however, in 4 enterprises smaller projects are implemented more often, which can be characterized as projects with a smaller budget, less time-consuming, with a low level of complexity in the planning and implementation of project outputs. in terms of project focus, investment projects (9 respondents), customer projects (8 respondents), r&d projects (3 respondents) and projects focused on organizational change and restructuring (2 respondents) are implemented. the projects are solved both in a matrix across the organization and within individual organizational units. only two companies use the pmo support. the support in the form of a project management information system is not very widespread either, only 4 respondents declared to use it. the scope of project management application in the practice of respondents was assessed on the basis of selected activities based on international project management standards. table 1 shows the extent to which individual activities are used by the respondents. business, management and education, 2018, 16(1): 54–64 59 table 1. activities carried out as part of project management in the metallurgical companies surveyed (source: authors) project activities number of cases project management at all stages – initialization, planning, implementation, monitoring and reporting, handover, evaluation and closure 8 coordination and cooperation in the creation of input analyses of the subject matter and objectives of the project 7 collaboration in the tendering and contracting of the project 7 determining the schedule and financial plan of the project implementation 7 assembling, leading and managing the project team 7 managing communication in the project, supporting and stimulating project members for effective performance 6 coordination of work processes and continuity of activities in individual tasks 6 managing all available resources in the project 5 reporting the state of implementation of the project to the project team and towards the project owner and management of the companies concerned 5 project change management 5 ensuring the transfer of project outputs and their acceptance by stakeholders 4 managing and checking complete project documentation 4 project financial resources, costs, revenues and cash-flow management 4 project risk and opportunities analysis and management 3 project quality management, including hygiene and work safety inspections 3 collection of project ideas across the organization 1 programme management, project portfolio management 1 from the above data, it can be stated that the metallurgical companies surveyed use project management in the basic scope (time management, finance management, output range management, including continuous monitoring throughout the life cycle of the project). there is less use of activities related to the management and coordination of multiple projects, programmes or project portfolios, which corresponds to the predominant type of implemented projects and their integration into the organizational structure. 60 j. kostalova et al. project management education in metallurgical companies in the czech republic 3.2. project management education in companies surveyed in the field of higher education, respondents most often as project managers require a bachelor or higher education (7 respondents). respondents also prefer technical or combined (engineering, economics, management) studies, which is closely related to the companies’ business in metallurgy. as far as project management education is concerned, half of the respondents confirmed they were providing training to its staff in project management. preferred forms of training are lecturing training (in 4 cases). the other forms mentioned include participation in conferences (3 cases), coaching (2 cases), cooperation with an external project manager (2 cases) and training related to the subsequent certification in project management (2 cases). this is related to very low familiarity with the certification system within international project management standards. research has actually shown that the majority of respondents (8 cases) have not yet come across this type of certification. in two cases, the knowledge of prince2 and/or pmi was ascertained. none of the respondents knew the ipma certification. in addition to the international project management standards, one of the respondents also mentioned the international standard iso 10006 quality management – guidelines to quality in project management and 21500 guide on project management. this is related to the fact that the iso international standards are commonly used especially in technical fields such as metallurgy. as regards the training of project managers, soft skills and training of project management information system usage are preferred. the training of project team members is focused on the basics of project management, the development of soft skills and the training of project management information system usage. in the training of top managers, the training of project management information system usage and development of soft skills are preferred. as preferable soft skills, for which is required the development via project management education are: self-reliance, cooperation and collaboration, active approach, workload management, resistance, effective communication, problem-solving, flexibility, information management, leadership, creativity, self-education, relationship-building. the respondents were also asked about conceptual work with workers in project management. only 3 respondents prepare a career plan for these workers. the other respondents do not address this issue. this is probably due to the fact that a large number of the project managers manage small and medium-sized projects as part of their functional position in a permanent organizational structure and therefore they are not under such a strong pressure in terms of temporary involvement in the implemented projects. 4. recommendations based on the facts found in the companies of metallurgical industry surveyed, it can be stated that project management education is at a relatively low level. therefore, recommendations can be formulated to improve the status of these companies and to increase the knowledge of project staff. these recommendations can also be used in general terms in business practice, especially of those industries that have similar features to the metallurgical industry. business, management and education, 2018, 16(1): 54–64 61 in the area of project management education, it is, therefore, possible to recommend the companies to: – consider the possibility of comprehensive training, in particular, of project managers with the use of back-testing in the form of certification under one of the international project management standards; – use different forms of training and dissemination of knowledge and experience in project management and related areas (such as e-learning, access to professional education servers, collaboration with external consultants, project managers, membership of project management associations etc.); – familiarize project managers with new trends in project management (agile management, design thinking, responsible project management education etc.); – elaborate methodical procedures for the conceptual work of the career development of the personnel involved in project implementation; – together with project managers on a personal level, in accordance with methodological procedures, plan and continuously consult individual career development. generally, in the field of project management, it is desirable to make more use of the theoretical know-how that can be drawn from international project management standards. due to the lower expansion of project change management and quality management activities, it would be advisable to focus on expanding the knowledge, especially in these areas. similarly, there was also a lack of use of communication-based activities in projects, stimulating project staff for effective performance, collecting project incentives, analyzing and preparing project planning documents. here too, it is desirable to expand existing knowledge and put these techniques into practice. prospectively, in the event of a growing number of projects and with a higher need for coordination of more implemented projects, it is desirable to start to be interested in the management of programmes and portfolios of projects or to consider the concentration of methodical support into an organizational unit in the form of pmo. consideration should also be given to an increased use of project management information systems, both in the form of stand-alone project management support applications (such as microsoft project) and in the form of integrated modules to support planning, project management and project documentation management within complex enterprise resource planning systems. conclusions project management education can make a significant contribution to increasing the project implementation success rate and reducing project failures. it is therefore important to compare the extent to which project management education is realized in the practice of project implementers. the results of the research present the situation of metallurgical companies in the czech republic in the area of project management education. based on the findings, it is possible to assess the situation in the companies and the trends in the field of project management education. in practice, the companies under consideration implement small and medium-sized projects; in order to increase their success rate, it would be desirable to extend the conceptual 62 j. kostalova et al. project management education in metallurgical companies in the czech republic work to the development of the career managers of project managers, to make more use of different forms of training in project management and the related areas. one of the possible forms of comprehensive training in project management is the preparation and certification of staff within international project management standards. it is important to allow especially project managers to keep up to date with new trends in project management. due to the nature of the involvement of project managers, not temporarily but usually in addition to being included in the functional organizational structure, career planning is not a necessity in terms of the temporality of involvement in projects, but it is important for the improvement of workers in the scope of their knowledge and experience. training support should be aimed not only at project managers but also at project team members, with regard to the form of their involvement in the project, and at stakeholders and top management members responsible for project supervision. for this group of workers, it is particularly beneficial to provide training in the combination of project management with strategic management of businesses. applying these changes will also affect staff in human resources management. the limiting factor of the article is the limited number of companies surveyed. the authors of the article conducted a similar pilot research among chemical companies in the czech republic, too (kostalova & bednarikova, 2017). for further research, it would be desirable to focus on other related industrial areas and to compare the situation in the field of project management education as well as in other areas using a larger sample of respondents. nevertheless, despite the above limitations, it is possible to deduce tendencies and trends in the companies’ project management education practice from respondents’ answers and, on this basis, to get an overview of the issues in the metallurgical industry. the contribution of the article is an overview of the state and tendencies in the area of project management education in one of the industrial sectors where, unlike in 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(2012). the three roles of a project portfolio management office: their impact on portfolio management execution and success. international journal of project management, 30(5), 608-620. https://doi.org/10.1016/j.ijproman.2012.01.015 copyright © 2016 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. utilization of facebook by school children in the apprenticeship seeking process tom sander1, phoey lee teh2, biruta sloka3 1university of ludwigshafen am rhein, ernst boehe str. 4, 67059 ludwigshafen, germany 2faculty of science and technology, sunway university, no. 5 jalan university, bandar sunway, 46150 petaling jaya, selangor darul ehsan, malaysia 3faculty of economics and management, university of latvia, aspazijas bulv. 5, riga, lv-1050, latvia e-mails: 1tomsander@hotmail.de (corresponding author); 2phoeyleet@sunway.edu.my; 3biruta.sloka@lu.lv received 17 august 2016; accepted 25 october 2016 abstract. the search for a practical apprenticeship place can be the first step in the business world for german students. the students have to apply for this placement, as companies require applicants. facebook is one of the most often used social networks among the younger generation in germany, which can provide a direct communication channel between businesses and candidates. the research evaluates the reasons to use facebook to identify a solid apprenticeship training platform for german students. research methods applied: scientific publication analysis, survey (by paper-based questionnaire) of german students of the ninth and tenth grade. analysis of survey data by main indicators of descriptive statistics: arithmetic mean, mode, median, and standard deviations to get an impression of evaluations on analysed aspects by survey respondents. analysis of variance – anova – is applied to study the difference of the assessments between female and male school children and the differences between the ninth and tenth classes. the existence of correlations between the intensity of use of social network sites (sns) and the apprenticeship seeking process have been investigated. the results of the research have shown that there are differences in evaluations, on analysed aspects, between female and male school children in the analysed classes on the occasion career entry by the apprenticeship. keywords: apprenticeship seeking process, facebook, social network sites, human resources management. jel classification: m51, d85, e24. 1. introduction the paper investigates the interest of school children seeking apprenticeship training placement through the facebook channel. the objects of study concentrate on students from the ninth and tenth class of german schools. they have the opportunity to get a degree after the tenth class and to start an apprenticeship in cooperation with a company. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(2): 179–193 doi:10.3846/bme.2016.328 mailto:tomsander@hotmail.de mailto:phoeyleet@sunway.edu.my mailto:3biruta.sloka@lu.lv doi:10.3846/bme.2016.328 180 t. sander et al. utilization of facebook by school children in the apprenticeship seeking process this apprenticeship guides the students to their profession of choice. the students have to apply to a company to get an apprenticeship training place. the search of the apprenticeship place has a high relevance for a successful professional future for them. a good apprenticeship practical training position is a door opener for interesting employment opportunities. it is a similar situation as adults apply for a job opportunity. the company selects the school children and provides offers for the educational program in close relation to praxis. students in the ninth and tenth classes have technical experience, and all members of the sample have access to the internet; they are currently searching for an apprenticeship or for further educational programs to get a higher degree. this paper concentrates on the search after an apprenticeship and the influence of facebook. facebook is a common sns which is used by school children to exchange and collect information. it is very popular to share information with friends and to use facebook to collect interesting information (cheung et al. 2011; lee et al. 2015; mayer et al. 2016; lee cheng, teh 2016). the current research concentrates on the use of facebook by school children to identify trainee opportunities. the research question is “how school children use facebook to investigate companies as an apprenticeship provider?”. business snss are concentrating on business related issues. research has evaluated that business snss are more commonly used for the employment-seeking process. the membership of business snss are mainly for adults, but not for school children (caers, castelyns 2010). that triggers the need to investigate if the popular social media platform, e.g. facebook could be the tool used for the similar purpose. organisations need young individuals and well-educated employees. they are offering their apprenticeship places on different channels to the school children. these companies use facebook to get in touch with potential candidates. the use of facebook by the target group for the apprenticeship seeking process needs to be investigated. this information is useful for companies to decide to use facebook as an effective and efficient tool for the human resources management, to communicate about apprenticeship information with school children. facebook offers the opportunity to contact their target group and to directly communicate with a specific group (rimkuniene, zinkeviciute 2014). it also provides opportunities to present videos, posts or other information to the potential apprentice. the company can submit their benefits and advantages to motivate school children to apply for an apprenticeship training position. facebook is assisting in branding and exposing their news to a broad audience (li, bernoff 2011; soares, pinho 2014); as well as disseminating companies, blogs, or field reports from current apprentices to transfer information to potential candidates. the apprentice has a similar language to the prospective candidates. it promotes quicker and easier information dissemination among them. theoretically, facebook is a good place to forward information to a broader audience, but the effectiveness and efficiency of the data transfer depends on the quality of the content (ang 2011; levickaite 2010; filip et al. 2015). the first key issue to discuss in this study is the value of content shared among the apprenticeships. 181 business, management and education, 2016, 14(2): 179–193 additionally, the influencing factors of the period of start and end date of participants are also discussed. the ninth and tenth class have a different scheduled time to leave school. the idea is to investigate the existence of influence on the timeline. the assumption is the actuality of a topic and priority of the situation change the behaviour of the school children. the priority of the event changes the use of facebook. school children will change their behaviour if the distance to their degree is decreasing. the assumption is that the prospective use of sns is directly proportionate to the distance to a life event, such as examinations. research has investigated that there is a difference between men and women in using snss (sander et al. 2016; mcdonald et al. 2009)but few have examined whether access to information about job opportunities varies by race and gender. findings from nationally representative survey data reveal significant white male advantage in the number of job leads received through routine conversations when compared to white women and hispanics. differences in social network resources (social capital. this research expands the investigation from men and women to boys and girls among school children. some organisations are more interested in reaching female or male candidates for different reasons. gender targeting provides a suitable, tailor-made solution to establish contact with the specific target group, which supports the success of the organisations to reach successfully potential applicants with few costs. the intensity of use of snss influences the behaviour of sns members. the assumption is that the use of snss correlates with the needs and interest of sns members (cheung et al. 2011; ellison et al. 2007). the benefit of school children is considered different to adults. the factor to use snss can be influenced by the duration of membership, number of contacts and utilisation in minutes per day. a regular user is more experienced and deeper involved in the network. that leads to the general assumption that the intensity use of snss influences the research for information. the specific assumption for this article is that the intensity of use of sns influences school children with their investigation for information about possible apprenticeship places. social media is a broad field with many different tools. it is impossible to describe the entirety of social media in one paper, and the differences between the social media tools make it necessary to concentrate on one kind of social media like facebook (sander 2013). that is a limitation of the paper, but the differences between private and business snss exist, and the behaviour of individuals on these two different snss is not comparable (sander et al. 2015). the scientific pragmatism leads to the concentration on one social media tool because it is not possible to research all social media tools with their differences. facebook was selected, as it is the most popular among the schoolchildren in grades nine and ten, which was the research target audience for the current research. the used methods for the research are the literature review to provide a theoretical basis, there is applied quantitative investigation with a survey to test the theory and as182 t. sander et al. utilization of facebook by school children in the apprenticeship seeking process sumptions for the investigated issues. for survey data processing and data analysis use the paper the main indicators of central tendency or location (arithmetic mean, mode and median) as well as the most often used indicator of variability – standard deviation to investigate the distributions of responses to the survey. spearman correlation and anova were applied to test significant differences of evaluations in a study of analysed aspects by respondents and to describe the use of facebook as a tool for the apprenticeship seeking process. the novelty of this study has the focus to the perspective of research in studying school children with their apprenticeship opportunities on facebook in promoting apprenticeship seeking processes through social media. 2. theoretical discussion snss are platforms on the internet to share and exchange information between individuals. this paper investigates facebook as a private sns which is mainly used to create ties to friends and to exchange private issues (levickaite 2010; boyd, ellison 2007). individuals use private snss to present themselves with a profile to an audience and companies can use sns profiles to present their business to a broader audience. the businesses can use the snss presence as a communication channel for their new products, company culture or employer branding relevant content to interested individuals who have a tie with the enterprise for example (ang 2011; bellou et al. 2015; filip et al. 2015). this member is denoted “follower” because they are following an organisation, and use the tie to the company via facebook to be up to date and to collect additional information. the member can discuss with the group the new products or apprenticeship opportunities. they can collect exclusive information, and some companies offer the chance to get in touch with their employees (bernoff, schadler 2010; teh et al. 2014). the data represents the reality and is more authentic because the information is from people who are involved. they present their daily business in their language. marketing departments do not primp the information for example. the companies expect that some of the followers forward the content of their profile to their contacts, that the members improve the innovations of the organisation or collect information which supports the decision to apply for an apprenticeship with the business for example (moolenaar, sleegers 2010). the follower is expecting additional information and having an advantage with their tie to the company e.g. exclusive updates for a product, to get the opportunity to test innovations or to collect additional information about a product. the exchange of information and expert knowledge, expertise of individuals to another person is a resource. the exchange of information and resources creates obligations (lin 2001; rimkuniene, zinkeviciute 2014). the period of the relationship and actual behaviour creates trust and increases the value of the information. these network effects are explained with the social capital theory. the members can penalise the misuse of the snss and reduce the benefit for the individual. 183 business, management and education, 2016, 14(2): 179–193 the use of social networks for the employment-seeking process is well researched (granovetter 1995; sander 2013). the use of snss for the employment-seeking process for adults is under observation of some authors at the moment (ollington 2013), but the situation of school children who seek an apprenticeship is not under investigation. the gender differences to use snss for the employment-seeking process has been done for adults, and there are differences between female and male adults (sander et al. 2016). that leads to the assumption that girls and boys are differently using facebook for the investigation of information about apprenticeship training places. the measurable investment in snss is time and creation of contacts. the individuals invest their leisure time in private snss to organise their private life. that leads to the hypothesis: if school children invest more time in snss then they are using more intensive snss to identify information about possible apprenticeship training places. the time to create a contact and the number of contacts is an indication for the use of snss and the involvement in snss. the new perspective for the use of facebook for the apprenticeship practical training places is the urgency. the individuals need a practical apprenticeship place or other solution for their next level of education. that means the 10th grade has a higher pressure to identify suitable places than the 9th grade, which is the assumption. this assumption leads to the hypothesis: if the time to an event is closer then school children are more intensive using facebook to collect information about this event. social capital theory is the theoretical background for this research. the social capital theory explains the mechanism of networks. particularly for the exchange of resources and information. the reason to be a member of a social network is for the benefit of the individual (obukhova, lan 2012; mcdonald 2011). the social capital provides additional information and more valuable information to social network members because the information is exclusive. the sharing and exchanging of information is an investment in the relationship, to maintain the relationship and the individual who provides the information expects obligations or has a benefit with providing the information (wasko 2005). for this research provides the social capital theory with the reason to share information in the network facebook and explain the mechanism of snss theoretically (valenzuela et al. 2009). the companies provide the information to school children about their apprenticeship places and expect the students to apply. the school children get more and deeper information as they increase their knowledge about the apprenticeship requirements. they can investigate if the apprenticeship place is of interest for them. that means both groups have an advantage and gain a benefit with their membership in a network. companies get interesting, well-informed applicants and school children have the opportunity to find the best suitable apprenticeship training place for them. the information supports their decision for or against a company or possible apprenticeship training area. 184 t. sander et al. utilization of facebook by school children in the apprenticeship seeking process 3. dataset description and methodological issues the research is based on a project at the university of ludwigshafen. the survey was organised by the paper-based questionnaire which had questions about the needs and use of school children regarding the transfer of information about apprenticeship opportunities via facebook. the questionnaire is asking for the opinion and approach of the school children. the population are students in the ninth and tenth classes at a secondary modern school, who are finishing their school career soon. the sample had 143 participants. the distribution of gender is 55.3% male, and 44.7% female. the participants were asked for their grade, and 47.6% were in class ten, and 52.4% in class nine. the age range for those classes was between 14 and 16 years. all participants were living in germany and spoke german. they were visiting the same kind of school and had similar requirements. the surprising information is that the use of facebook is not as popular as expected. 65% (92 of the 143 participants) of the respondents reported that they were a member of facebook but all participants knew facebook. the results regarding the intensity to use facebook are presented in table 1. for most of the respondents duration of membership of facebook is four years (characterised by mean, median and mode) as indicated in table 1. that means that the majority of the facebook participants have in average four years of facebook user experience, 300 contacts and use 35 minutes per day. the standard deviation for time to use facebook per day in minutes and number of contacts at facebook indicate that the variability of responses is rather high. table 1. key indicators of descriptive statistics on evaluations regarding the intensity to use facebook by the participants, authors’ elaboration indicators duration of membership of facebook in years time to use facebook per day in minutes number of contacts of facebook n 92 81 83 mean 3.59 35.60 356.18 median 4 20 300 mode 4 10, 20, 30, 60 300 standard deviation 1.57 43.27 246.01 the cronbach’s alpha for the questionnaire is 0.787 which is excellent and confirms the reliability of the survey. the analysis of variance (anova) has been applied to identify differences in response on evaluations of analysed aspects in the survey between gender and between school classes. the spearman correlation compares the relationship between the use of snss and the statements of the participants. the use of snss is defined as “use in minutes per day”, “duration of membership” and “number of contacts”. the time to use 185 business, management and education, 2016, 14(2): 179–193 snss and efforts to create and maintain relationships can be specified as an investment. the knowledge about the influence of the use of snss on the apprenticeship seeking process supports the understanding of the mechanism and use of snss. 4. overview of the statistical results the statistical results provide fascinating insights into the use of facebook. the first statement is about the usefulness of facebook to investigate information about apprenticeship training positions or to follow companies on facebook to get access to apprenticeship training position relevant information. both results have the mode four. that means the majority of the respondents selected the fourth stage on a scale from one for a full agreement to six for total disagreement. the indicators of location are presented in table 2. the participants disagree with 72% to follow companies on facebook and with 52% to investigate their information of facebook about apprenticeship places. they have mainly selected response options of four, five or full disagreement on a scale from one for a full agreement to six total disagreements. young people avoid the opportunity to use facebook to identify apprenticeship or company relevant information. none of the respondents selected the possible evaluation level indicated by 1 for “full agreement” for both analysed statements. that is a clear result that facebook is not the source for seeking and sharing the information about apprenticeship training positions and companies for practical placements. table 2. indicators of central tendency or location of respondent’s opinion regarding the usefulness of facebook to investigate apprenticeships or company relevant information, scale from 1 for full agreement to 4 for full disagreement, source authors elaboration, n = 143 statistic indicators facebook is a useful place to investigate information about apprenticeship training positions are you a follower of companies at facebook? mean 3.27 3.52 median 3 4 mode 4 4 the questionnaire has two questions with statements. the statements are regarding how to use facebook for the apprenticeship seeking process. the questions explain the reason for young individuals to use or not to use facebook for the apprenticeship seeking process. the first statement is “the following information should be presented by companies on facebook for apprenticeship training positions”. the explanations for the questions describe the opportunities which can be provided by organisations via facebook to potential candidates. the statements have the ability to be an advantage for individuals. the results provide the answer on the needed content of companies facebook presence to be more attractive to potential candidates and to fulfil the expectations of school children to be beneficial to identify apprenticeship opportunities. 186 t. sander et al. utilization of facebook by school children in the apprenticeship seeking process the median and mode are on level one, and two and arithmetic means are around 2 (on 1–4 evaluation scale, where 1 – full agreement with the statement and 4 – full disagreement with the respective declaration). that means the participants agree that additional information on facebook about practical apprenticeship places is an advantage in their opinion. they are expecting advertisements and the opportunity to ask questions and this aspect is the highest rated compared with the ratings of other statements. the application format facebook and the chance to apply via facebook is not as well accepted as the other statements. the median three and mode four is a clear tendency to full disagreement. the other three statements are mainly accepted; all three statements have the mode 1 and median 2. the results of the median and mode are supported by the results for the mean. the results give a clear picture that school children know what kind of content can be exchanged and be beneficial for them. they have collected this experience from other situations e.g. innovations of products. the results of the survey are presented in detail for the statements in table 3. however, they are not using facebook advantages for the apprenticeship seeking process as seen in table 2. their reasons not to use facebook are presented in table 4. the next statement that has to be evaluated by the participants is “reasons not to use facebook to find information about companies which offers apprenticeship training positions”. the answer opportunities provide possible reasons not to use private snss for the apprenticeship seeking process. there are three answers with mode and median 1. that means only a few participants agree completely. the participants anticipate facebook as a tool for their leisure activities, and they are not aware that they can use this tool to identify information about apprenticeship opportunities, that it is a reservoir for private issues. table 3. indicators of descriptive statistics for the statement “following information should be presented by companies on facebook for apprenticeship training positions”, evaluation scale from 1 to 4, 1 for full agreement and 4 for full disagreement, n = 143, authors’ own elaboration statistic indicators apprenticeship training position advertisements current information about apprenticeship training positions and vocational education information about recognised occupations requiring formula training field reports from trainees opportunity to ask questions application form on facebook mean 1.80 1.81 1.92 2.10 1.71 2.46 median 1 2 2 2 1 3 mode 1 1 1 1: 2 1 4 standard deviation 1.19 1.11 1.15 1.18 1.16 1.34 the school pupils are not interested in searching on private snss for these issues because they conduct facebook in their leisure time. another surprising result is that school children report not finding information about apprenticeship training positions on facebook. 187 business, management and education, 2016, 14(2): 179–193 table 4. main indicators of descriptive statistics for the statement “following information should be presented by companies on facebook for apprenticeship training positions”, scale from one to four, one for full agreement and four for full disagreement, n = 143, authors’ own elaboration statistic indicators i use facebook only for my leisure activity i am not aware that facebook is a place to research information about apprenticeship training positions i do not trust facebook i could not find information about apprenticeship training positions mean 2.03 1.75 2.01 1.81 median 1 1 2 1 mode 1 1 1 1 standard deviation 1.42 1.25 1.14 1.48 that means companies have to improve their private sns presence so that individuals can find the required information quickly and easily. the only statement with median two and mode one is “i do not trust facebook” in this context. the median two compared with the other results is the weakest result. that means the influence of trust is not as large as expected before. the social capital theory explains the exchange of resources with trust. trust is important so that snss operate well (valenzuela et al. 2009; sabatini, sarracino 2014). this has to take into consideration the explanation of the theory. the details of the survey data analysis is presented in table 4. the next results are the significant correlation coefficients between the intensity of the use of snss which is explained as an investment in snss. the surprising result is that the duration of membership in years does not have any significant correlation. that means the history and experience with facebook does not affect the use of facebook for the apprenticeship seeking process. the number of contacts has one significant negative correlation coefficient with –0.3. this result is a tendency that the number of contacts influences negatively the exchange of information on facebook for the apprenticeship seeking process. that means individuals with more contacts are less interested in being a follower of companies on facebook. the use of facebook many times per day has three significant results. the individuals who use facebook several times per day for their leisure time have a correlation coefficient of –0.249. in general, the statistically significant correlation coefficients are on a low level, but there are tendencies which support findings to explain reasons to use or not to use facebook for the apprenticeship seeking process. the daily time on the use of private snss is not compatible with the use of facebook for the apprenticeship place seeking process. the school children who invest time in facebook avoid this kind of sns to investigate apprenticeship availability. 188 t. sander et al. utilization of facebook by school children in the apprenticeship seeking process table 5. spearman correlation coefficient between the use of facebook for the apprenticeship seeking process and intensity of use of facebook, n between 81 and 83, authors’ elaboration time to use facebook per day in minutes number of contacts at facebook are you a follower of companies on facebook? correlation coefficient –0.13 –0.30** sig. (2-tailed) 0.22 0.006 i use facebook only for my leisure activity correlation coefficient –0.24* –0.05 sig. (2-tailed) 0.02 0.61 i am not aware that facebook is a place to research information about apprenticeship training positions correlation coefficient 0.30** 0.04 sig. (2-tailed) 0.005 0.66 i do not trust facebook correlation coefficient 0.23* 0.03 sig. (2-tailed) 0.03 0.76 note: * correlation is significant at the 0.05 level (2-tailed); ** correlation is significant at the 0.01 level. trust influences the use of snss and the evaluation of the statement of the school children regarding trust is unexpected. school children who use more time in minutes per day on facebook have less trust for the employment-seeking process. that is surprising and can be a reason not to use private sns for the apprenticeship seeking process. the number of contacts has a negative impact, and the assumption that private sns members with many friends use facebook for the apprenticeship seeking process is not confirmed. that means the intensity of the use of facebook has a negative influence on the apprenticeship practical training places search process. table 6. anova to compare the 9th and 10th class, relevant significant results are presented, authors’ evaluation sum of squares df mean square f sig. facebook is a useful place to investigate information about apprenticeship training positions between 9th and 10th class 5.076 1 5.076 5.536 0.02 the analysis with an anova about differences on analysed aspects between the genders provides more significant results compared with the school grade nine or ten. that means the interest to collect information is statistically significantly different with 189 business, management and education, 2016, 14(2): 179–193 high probability. the interesting point is that only the statements for the topic “the following information should be presented by companies on facebook for apprenticeship training positions” differ statistically significantly with high probability. this is an indication that school boys and school girls have different interests in the kind of information at the facebook. table 7. anova to compare school girls and schoolboys, relevant significant results are presented, authors’ evaluation sum of squares df mean square f sig. apprenticeship training positions advertisements between male and female school children 15.578 1 15.578 11.749 0.001 current information about apprenticeship training positions and vocational education between male and female school children 14.853 1 14.853 13.004 0.000 information about recognised occupation requiring formula training between male and female school children 12.564 1 12.564 10.089 0.002 field reports from trainees between male and female school children 11.616 1 11.616 8.758 0.004 application form at facebook between male and female school children 7.736 1 7.736 4.367 0.038 the other topic “reasons not to use facebook to find information about companies which offer apprenticeship training positions” does not have significant differences. that result indicates that the motivation to use or not to use facebook does not depend on the gender in this age group. 5. conclusions the results explore the use of facebook for the apprenticeship seeking process. the use of facebook for this situation is different between male and female school children under consideration of the kind of information. the anova could not find a significant difference between female and male students for the reasons not to use facebook. that means to avoid facebook as a tool for the apprenticeship seeking process, is not different between female and male school children. that means the statement about the differences between a female and male user on facebook is partly confirmed, but the evaluation presents similarities. the assumption that the timely distance to an occasion influences the behaviour of individuals is mainly rejected. only the statement “facebook is a useful place to 190 t. sander et al. utilization of facebook by school children in the apprenticeship seeking process investigate information about apprenticeship training positions” provides a significant difference. that displays that the difference between tenth and ninth, class to anticipate facebook as a useful place for the apprenticeship seeking process is not confirmed with the statements “reasons not to use facebook to find information about companies which offers apprenticeship training positions” and “following information should be presented by companies on facebook for apprenticeship training positions”. the expectation that the distance to the occasion increases the interest for information about relevant apprenticeship topics or that the tenth class is more aware of the opportunity to collect information about apprenticeships providing organisations is not confirmed. that means this statement can be mainly rejected for the apprenticeship seeking process. the intensity of use of facebook and the behaviour to use facebook for the apprenticeship seeking process has various results. the first interesting point is that there does not exist any significant result or applicable correlation coefficient for the duration of membership on facebook. that means the history and experience do not influence the use of facebook for the apprenticeship seeking process. the number of contacts has a significant correlation coefficient of –0.3 for the statement “are you a follower of a company on facebook”. that means that individuals with many contacts do not follow companies on facebook. that is contrary to the hypothesis that the intensity to use facebook influences the use of facebook for the apprenticeship seeking process positively. the number of contacts has a negative influence. an explanation can be that many friends on facebook are single friends and that the participants are not willing to use facebook to follow companies. they are using facebook only for personal reasons to gain the largest benefit from facebook and to fulfil the purpose of facebook. the second indicator to explain the influence of intensity to use facebook on the behaviour is the time which is invested daily in the use of facebook, time to use facebook per day in minutes. there the result is if people use facebook only a few then are using facebook for their leisure time and not so much for apprenticeship seeking reasons. the correlation coefficient is –0.249 between “time to use facebook per day in minutes” and “i use facebook only for my leisure activity”. members of facebook who employ a high intensive facebook usage, have a lower level of trust on facebook, and they are less aware that facebook is a place to research information about apprenticeship training positions. the assumption for this result is that experience and history with facebook can reduce trust. an explanation could be that school children who use facebook more often are more aware of risks and disadvantages. the results lead to the recommendation that companies need a strategy to be more present and visible for the school children in facebook regarding information about apprenticeship. the companies have to lead to employment relevant content more accurate that the students can find the information quickly and easily. there needs tailor made a strategy for schoolgirls and schoolboys because they have different interests, and are not reachable with the same kind of information. the distance to the occasion 191 business, management and education, 2016, 14(2): 179–193 does not influence the use of facebook with the sample. the companies have to change their communication that facebook can be used for the apprenticeship seeking process. at the moment school children do not use facebook to search information about companies or practical apprenticeship places. they are not following corporations, and for them, facebook is a private place for their leisure time. they are not willing and prepared to use facebook for public reasons. under consideration of potential apprenticeship relevant information, the school children provide the feedback that they do not trust facebook. that is valuable information for human resources management because the use of facebook for apprenticeship relevant issues is not useful. the use of facebook is ineffective and can lead to a negative promotion. the results of the study recommend not to use facebook for apprenticeship practical training places or relevant topics. there is a need for further research with a larger respondent age distance between the groups e.g. eighth and tenth class students, but there may be a reduction in relevance to investigate, as apprenticeship related topics are not given to students in the eighth class because they are too young. companies have to be aware that school children do not trust them on facebook. it has the appearance that facebook is not an appropriate place for apprenticeship related issues. it can be that organisations destroy their reputation. they could be victims of the adverse reactions e.g. transgressing the notion of a public vs. private persona if they use facebook in an inappropriate way. further factors which influence the use of snss and another live setting of individuals have to be researched more deeply to provide a clear answer. the 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145–153. https://doi.org/10.15181/rfds.v16i3.1128 sander, t.; sloka, b.; teh, p. l. 2016. gender difference in the use of social network sites, in project management development – practice and perspectives. 14–15 april 2016, riga, latvia, 324–332. soares, m.; pinho, c. 2014. advertising in online social networks: the role of perceived enjoyment and social influence, journal of research in interactive marketing 8(3): 245–263. https://doi.org/10.1108/jrim-08–2014–001 teh, p. l.; huah, l. p.; si, y.-w. 2014. the intention to share and re-shared among the young adults towards a posting at social networkin sites, in a. rocha, et al. (eds.). new perspectives in information systems and technologies. heidelberg: springer berlin heidelberg, 13–21. https://doi.org/10.1007/978–3-319–05951–8_2 valenzuela, s.; park, n.; kee, k. f. 2009. is there social capital in a social network site?: facebook use and college students’ life satisfaction, trust, and participation, journal of computer-mediated communication 14(4): 875–901. https://doi.org/10.1111/j.1083–6101.2009.01474.x wasko, m. 2005. why should i share? examining social capital and knowledge contribution in electronic networks of practice, mis quarterly 29(1): 35–57. tom sander is giving lectures at university of ludwigshafen for master and bachelor students. he is doing social network sites related projects there and he is supervisor for bachelor thesis. tom sander hold mba degree and diploma in business administration. currently he is doing his phd at university of latvia. he has visited conference in australia, asia and europe. phoey lee teh is an associate professor in department of computing and information systems. she obtained her phd in management of information systems from university putra malaysia (upm) in 2011. she obtained a master in information technology from university of science, malaysia (usm) in 2003 and a bsc.(hons) remote sensing from university of technology, malaysia (utm) in 2002. she has published over thirty-five papers journals, book chapters, conferences, and workshops. her researches focus mainly on social computing, social network analysis, data analytics and sentiment analysis. she is a member of ieee and the association of information systems. biruta sloka is a professor in university of latvia, faculty of economics and management, has been involved in several research projects, has significant amount of scientific publications, was supervisor of doctoral students who have defended dissertations, was leading eurofaculty riga centre, is member of several professional associations and is a president of association of statisticians of latvia. https://doi.org/10.15181/rfds.v16i3.1128 https://doi.org/10.1108/jrim-08-2014-001 https://doi.org/10.1007/978-3-319-05951-8_2 https://doi.org/10.1111/j.1083-6101.2009.01474.x bme_16(1)_2018_maketas.indd copyright © 2018 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. introduction in small open eu economies like latvia, export is an important determinant of economic growth. moreover, if a larger share of the population in regions is involved in export-oriented activities, also gdp increases faster (gonzález-pernía & peña-legazkue, 2015) and regions develop more coherently. strong export growth cannot be achieved, if export competitiveness is weak (vukšić, 2015). therefore export development has to be analyzed together with the competitiveness. moreover, for the sustainable export development, it is important to ensure that high value-added products gradually become more competitive and replace others (saboniene, 2009), even, if the current competitive positions of the traditional lower value-added products are strong and stable. export performance and competitiveness depends on many factors, beginning with those, which are related to the enterprises like the performance of particular enterprises (navarro-garcía, arenas-gaitán, javier rondán-cataluña, & rey-moreno, 2016), competitiveness and economic development scenarios of latvia astra auzina-emsina, velga ozolina*, remigijs pocs riga technical university, riga, latvia received 07 june 2018; accepted 09 june 2018 abstract. the paper deals with the analysis of exports and competitiveness in latvia in comparison with estonia and lithuania. the objective of the study is to elaborate the possible sectoral development scenarios based on the competitiveness analysis results. the main focus is on exports of goods and revealed comparative advantage (rca) of exported products as compared to the eu exports. scenarios are elaborated to model economic development by industries using latvian model of development (lmd), which is a macro-econometric model. results argue that the economic development is higher if the competitiveness ensures both higher export growth and import substitution. rca is an appropriate method to apply in competitiveness studies and the research findings can be used in economic policy and analysis. keywords: competitiveness, revealed competitive advantage, economic development, industries, scenario analysis, scenarios of latvia. jel classification: f10, f14, f47. business, management and education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 1: 40–53 https://doi.org/10.3846/bme.2018.2399 *corresponding author. e-mail: velga.ozolina@rtu.lv business, management and education, 2018, 16(1): 40–53 41 internationalization processes in enterprises (papadopoulos & martín martín, 2010), internet marketing activities (bianchi & mathews, 2016), even personal skills of employees (solovjovs, kotlars, skribans, & liptak, 2017) and ending with such macro level factors as the eu membership (buturac, lovrinčević, & mikulić, 2017), foreign direct investment (nidhiprabha, 2017), labour productivity and innovations (olczyk & kordalska, 2017), which ensure better trade conditions, increased quality of goods, lower prices and other aspects. in the context of the eu, researchers argue that globalization processes, trade liberalization and eu integration (fojtíková & staníčková, 2017) are important factors. other authors argue that non-price competitiveness has to be enhanced to ensure the ability to compete in the foreign markets in the long run (bierut & kuziemska-pawlak, 2017). in order to understand, how exports and competitiveness can facilitate economic growth of the country, different macroeconomic models can be applied. in case of sectoral analysis, models, which incorporate input-output relationships, are useful. such models can be extended, for example, to incorporate developments of demography and labour market (batey, 2018), also other important economic variables can be included in such models. but up-to-date input-output data are not always available. for example, the latest official input-output table for latvia is available for 2010. also, other model types have their strengths and weaknesses (blanchard, 2018), therefore it is up to researchers to decide, which is more appropriate in a particular case and which theories should be used (hendry, 2018). moreover, the use of more complex models does not always give the expected results and their development is very time consuming (skribans & balodis, 2016). therefore it is necessary to build such a model that is not too complicated but allows understanding the main issues and developments related to the particular research. the objective of the study is to determine the possible economic development scenarios based on competitiveness analysis results. the research includes a description of the data and methodology, competitiveness analysis of latvia as compared to estonia and lithuania, also the definition of scenarios as well as the results and conclusions. 1. data and methodology the main data sources of this research are eurostat (eurostat, 2018b) and central statistical bureau of latvia (csb) database (csb, 2018), which form the basis of the modelling database. eurostat comext (eurostat, 2018a) data of exports of goods by cpa categories in 2010–2017 for the baltic states (estonia, latvia and lithuania) and the eu (28 countries) are used for revealed comparative advantage (rca) index analysis. cpa classification is chosen because its products are grouped similarly as activities in nace classification, but data on exports are not available in nace classification for all the eu countries. for classification of goods in high-, medium-high-, medium-lowand low-technology goods eurostat methodology for aggregations of manufacturing industries based on nace rev. 2 (eurostat, 2015) is used. equation (1) is used to compute the rca index. rca index is widely used in the export analysis (brakman & van marrewijk, 2017; french, 2017), but it mainly compares export performance of products of a particular country to the global exports of particular products. in 42 a. auzina-emsina et al. competitiveness and economic development scenarios of latvia this research export structure of estonia, latvia and lithuania are compared with that of the eu. this choice is determined by the fact that the baltic states are a part of the eu and can use the benefits of this economic union also in exports. on the other hand, the eu member states compete with each other as in most cases they have similar conditions of trade: ,i j i j x x rca x x      =       , (1) where: xi,j – exports of the product group i in the country j; xj – total exports in the country j; xi – eu exports of the product group i; x – total eu exports. rca values are only positive. if the rca value is larger than 1, the product group has a revealed comparative advantage. for scenario analysis, a macro-econometric latvian model of development (lmd) is adjusted and applied. the main structure of the model is similar as in (ozolina & pocs, 2013). the model includes the main macroeconomic variables and covers the whole economy that is subdivided into 10 industries: agriculture, industry, manufacture, construction, trade and hospitality, transport, public administration, education, healthcare and other services. it is estimated using data on economic indicators in euros for 1995–2016. scenario analysis is performed for 2017–2021. 2. competitiveness analysis in the research, rca indexes are first analysed by groups of products, which correspond to the industries included in the model. further analysis is made in more detail in order to make assumptions about competitiveness developments and their influence on the future sectoral development. as data on exports of goods are used in the research, the analysis includes the major three groups of products. figure 1 shows that latvia has revealed comparative advantages in products of agriculture, forestry and fishery, as well as in other industrial products (rca>1). figure 1. rca index of selected product groups in latvia (source: calculated by the authors, using data from eurostat, 2018a) business, management and education, 2018, 16(1): 40–53 43 the computed value of rca for manufacturing products is slightly less than 1, which means that, if some of the products become more competitive, also the whole manufacturing industry will have revealed comparative advantages. if compared to the data of the other baltic states, results indicate that estonia has revealed comparative advantages in all three product groups despite the fact that the data on several products are not available and zero exports assumption is used for these products. in case of lithuania, only products of agriculture, forestry and fishery have revealed comparative advantage. it is interesting to note that when analysing extraand intra-eu trade, estonia has revealed comparative advantages only in other industrial products in intra-eu trade, which means that it is more oriented on the extra-eu trade, while in latvia and lithuania the results are alike both in intra-eu, extra-eu and in total exports. the three baltic states have close economic relations and their exports include a considerable part of the produced value added of other two countries as well (ozoliņa, 2016). therefore revealed comparative advantages in one country partly show the potential to improve the export competitiveness also for the other countries of the baltic states. to determine which products have a potential to be more competitive, it is necessary to analyse the data in more detail. in the group of products of agriculture, forestry and fishery latvia in general has the same position as lithuania and estonia is somewhat lagging behind (see table 1). latvia is the only country in the baltic states, which has revealed comparative advantages in exporting fish and related products. if compared with lithuania, latvia in 2016 and most of the previous years did not have these advantages only for perennial crops (a sub-category in products of agriculture, hunting and related services). in this group of products, latvia has a potential to increase the export competitiveness of products of agriculture, hunting and related services, namely the perennial crops. however, as it is more important to facilitate higher value-added exports rather than the exports of primary products, this potential is not considered in scenario analysis. results presented in table 2 clearly show that it is necessary to analyse revealed comparative advantage in greater disaggregation, as it is possible to be more competitive with partable 1. revealed comparative advantage of products of agriculture, forestry and fishery in the baltic states according to the cpa classification in 2016 (source: calculated by the authors, using data from eurostat, 2018a) cpa code product (number of sub-categories) country code rca value number of subcategories with rca>1 01 products of agriculture, hunting and related services (4) ee lv lt 1.4 3.0 2.7 2 3 4 02 products of forestry, logging and related services (1) ee lv lt 12.3 19.2 6.4 1 1 1 03 fish and other fishing products; aquaculture products; support services to fishing (1) ee lv lt 0.3 1.3 0.3 0 1 0 44 a. auzina-emsina et al. competitiveness and economic development scenarios of latvia ticular products and not the whole product group (motor vehicles, trailers and semi-trailers are some of the examples here). regarding high-technology products (cpa product groups 21 and 26), latvia is the only country, which had revealed comparative advantage in 2000 in pharmaceutical preparations, afterwards, none on the baltic states has these advantages in major sub-groups of basic pharmaceutical products and pharmaceutical preparations. the situation is more appealing in computer, electronic and optical products, where estonia and latvia have stronger positions as the value of rca is larger than 1, however, lithuania has the same number of competitive product sub-categories as latvia. in this product group latvia has a potential to increase exports of optical instruments and photographic equipment (latvia had revealed comparative advantages for these products in 2015 and lithuania has these advantages also in 2016) and in measuring, testing and navigating equipment; watches and clocks (estonia has revealed a comparative advantage for these products). in the group of medium-high-technology products (cpa product groups 20, 27–30) estonia has more revealed comparative advantages. it is especially evident for electrical equipment and machinery and equipment n.e.c., where latvia does not have any products with revealed comparative advantages and lithuania has one. moreover, overall rca value of estonia in these two product groups is larger than 1. table 2. revealed comparative advantage of highand medium-high-technology manufacturing products in the baltic states according to the cpa classification in 2016 (source: calculated by the authors, using data from eurostat, 2018a) cpa code product (number of sub-categories) country code rca value number of subcategories with rca>1 20 chemicals and chemical products (5) ee lv lt 0.9 0.5 1.2 1 1 1 21 basic pharmaceutical products and pharmaceutical preparations (2) ee lv lt 0.0 0.6 0.5 0 0 0 26 computer, electronic and optical products (7) ee lv lt 1.7 1.3 0.6 2 3 3 27 electrical equipment (6) ee lv lt 1.6 0.6 0.7 3 0 1 28 machinery and equipment n.e.c. ee lv lt 1.0 0.5 0.6 3 0 0 29 motor vehicles, trailers and semi-trailers (3) ee lv lt 0.2 0.4 0.3 1 1 1 30 other transport equipment (4) ee lv lt 0.3 0.2 0.1 1 1 0 business, management and education, 2018, 16(1): 40–53 45 taking into consideration export trends and revealed comparative advantages in estonia and lithuania, latvia could increase the competitiveness of basic chemicals, fertilisers and nitrogen compounds, plastics and synthetic rubber in primary forms and domestic appliances, possibly also of wiring and wiring devices, electric lighting equipment and other general-purpose machinery. results presented in table 3 show that regarding agricultural products (both unprocessed and processed) competitiveness trends go in line with the (bojnec & fertő, 2014) conclusion that export competitiveness of the higher processed food increases the export competitiveness of the whole chain of particular products. for example, in latvia, the products related to crops have revealed comparative advantages, while in lithuania both products of agriculture and food products are most competitive. all the baltic states are highly competitive in wood and products of wood and cork, which can be explained by the relatively high share of woods in these countries thus ensuring the availability of the necessary resources. latvia and lithuania hold comparatively good positions in other non-metallic mineral products, where more than a half of sub-categories of products have revealed comparative advantages. latvia and lithuania have better positions in exporting textiles, while estonia has a better position in exporting paper and paper products, where all the baltic states have one sub-group of products with revealed comparative advantage, but only in case of estonia, the value of the rca is larger than 1. analysis of the calculated rca indexes and export trends shows that it might be possible to increase the competitiveness of textile yarn and thread and pulp, paper and paperboard during the next five years. table  3. revealed comparative advantage of selected medium-low and low-technology manufacturing products in the baltic states according to the cpa classification in 2016 (source: calculated by the authors, using data from eurostat, 2018a) cpa code product (number of sub-categories) country code rca value number of subcategories with rca>1 10 food products (9) ee lv lt 0.6 1.3 1.7 1 5 7 11 beverages (1) ee lv lt 1.7 3.8 1.1 1 1 1 12 tobacco products (1) ee lv lt 0.0 1.2 6.0 0 1 1 13 textiles (3) ee lv lt 1.5 1.4 2.0 1 2 3 14 wearing apparel (3) ee lv lt 0.9 0.9 1.4 1 0 2 46 a. auzina-emsina et al. competitiveness and economic development scenarios of latvia cpa code product (number of sub-categories) country code rca value number of subcategories with rca>1 16 wood and of products of wood and cork, except furniture; articles of straw and plaiting materials (2) ee lv lt 14.0 15.6 4.5 2 2 2 17 paper and paper products (2) ee lv lt 1.1 0.7 0.8 1 1 1 23 other non-metallic mineral products (7) ee lv lt 0.6 1.9 1.0 1 4 4 25 fabricated metal products, except machinery and equipment (6) ee lv lt 0.9 1.2 1.0 3 3 2 32 other manufactured goods (5) ee lv lt 0.9 0.7 0.7 1 2 1 in the group of other industrial products, the positions of all the baltic states are similar (see table  4). estonia and latvia have a better position in other mining and quarrying products, lithuania – in electricity, gas, steam and air conditioning (data of estonia are not available for this category). table 4. revealed comparative advantage of selected other industrial products in the baltic states according to the cpa classification in 2016 (source: calculated by the authors, using data from eurostat, 2018a) cpa code product (number of sub-categories) country code rca value number of subcategories with rca>1 08 other mining and quarrying products (1) ee lv lt 1.8 3.7 0.8 1 1 0 35 electricity, gas, steam and air conditioning (1) ee lv lt … 0.1 1.1 … 0 1 38 waste collection, treatment and disposal services; materials recovery services (1) ee lv lt 4.6 4.4 2.0 1 1 1 notes: … – no data available. in this group of products latvia has a potential to increase competitiveness only of electricity, gas, steam and air conditioning products, however, it cannot be achieved in the next five years, therefore, higher export potential is not considered for the industry in scenario analysis. it can be concluded that in the case of exports of goods, possibilities to increase competitiveness in a comparatively short time period are limited and mostly related to the highand medium-high-technology products. end of table 3 business, management and education, 2018, 16(1): 40–53 47 3. model overview and scenarios the core of the latvian model of development (lmd) forms the final demand elements, which determine the values of output and imports with the assumed import and output ratios for each industry. productivity assumptions and output determine the number of employees by industries and unemployment is calculated taking into consideration the demographic aspects. then the ratios of the value added to output are used to calculate the value added by industries. all the previous elements determine the revenues and expenditures of government, which afterwards influence disposable income and final demand components. the main assumptions in the model are related to the real exports by industries, import shares or ratios of real imports to output by industries, productivity by industries (real output per employee) and the ratio of the value added to output by industries. as revealed comparative advantage analysis showed that there is more potential to increase the competitiveness and thus exports of manufacturing goods, further analysis mainly focuses on manufacturing. in order to examine if the main assumptions are related to each other, correlation analysis was carried out for indicators of manufacturing. it showed that there is a weak correlation between the productivity and other exogenous variables. a strong correlation was found between the real exports and import share (see figure 2). this relationship was affected by the global economic crisis of 2008–2009 when the slope of it changed to a more horizontal one. thus if the real exports increase, import share should be constant or increase as well, according to the previous trends. the decrease in import share is also possible, but not likely unless some major activities towards the import substitution are implemented. import share can be constant in case of moderate export growth, which is achieved due to the productivity changes. in case of higher export growth in a comparatively short time (e.g., five years) import share should grow as well. this is due to the fact that it usually takes some time to attract investment and to use increased production capacity needed for that extra exports (alamá-sabater, heid, jiménez-fernández, & márquez-ramos, 2017) thus the higher export demand is satisfied partly with the help of imports. moreover, if the export increase is achieved by the higher productivity, the export increase should not influence figure 2. the relationship between real exports and import share in manufacturing in latvia in 1995–2016 (source: calculated by the authors, using data from eurostat (2018a) and csb (2018)) 48 a. auzina-emsina et al. competitiveness and economic development scenarios of latvia output negatively. that is, more imports are used to deal with additional exports and not to substitute domestic output. also, the relationship between the real exports and the ratio of value added to output is strong (see figure 3) and is affected by the crisis. also here, if real exports increase, the values of the ratio of the value added to output should be constant or slightly increase. in this case increase in the ratio of value added to output can be associated with the export structure  – if the structure changes towards the higher value-added goods, the value of this ratio should increase. and the faster the process, the higher the increase in the ratio of the value added to the output. the base scenario assumes that the real exports by industries are developing further according to the trends in 2014–2016. import shares are assumed to be the same as in 2016, implying that productivity changes can ensure the increased exports according to the current ratio of imports to output. assumptions regarding productivity differ taking into consideration the previous trends – for agriculture the average growth rate of 2014–2016 is used, for manufacturing, trade and hospitality and education the average growth rate of 2011–2016 is used, for industry and construction zero productivity growth is assumed and for other industries the average growth rate of 2015–2016 is used for assumptions. for the ratio of the value added to the output, the values of 2016 are used as the export structure is not assumed to change significantly. table 5 summarizes the main assumptions related to the manufacturing. the second scenario is higher exports scenario due to the increase in competitiveness. as productivity is an important aspect of the competitiveness increase, its values are assumed to be higher as compared to the base scenario, ensuring higher export growth with less need for additional employees (see table 6). the import share is assumed to be slightly larger than in case of the base scenario to ensure the necessary amount of goods for export and at the same time ensuring that the influence on output is not negative. higher values of the ratio of value added to output are achieved due to increased exports of highand medium-high-technology products, which can be considered as higher value-added products. exports of manufacturing are assumed to grow by 5% annually. 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0 5000 10000 ra �o o f v al ue a dd ed to o ut pu t real exports of manufacturing, m eur figure 3. relationship between real exports and import share in manufacturing in latvia in 1995–2016 (source: calculated by the authors, using data from eurostat (2018a) and csb (2018)) business, management and education, 2018, 16(1): 40–53 49 the third analysed scenario is the import substitution scenario. as import substitution demands even higher competitiveness, which can be achieved only with additional investment, it is assumed that such investment can be implemented only in 2019–2021. this implies that in 2019–2021 both the values of exports, the ratio of the value added to output and productivity will be higher in this period, but import share will slightly decrease. the assumptions of this scenario are summarized in table 7. table  5. base scenario assumptions of the main exogenous variables for manufacturing in latvia for 2017–2021 (source: calculated by the authors, using data from eurostat (2018a) and csb (2018), authors’ assumptions) year real exports, m eur import share ratio of value added to output productivity, thsd eur 2016* 7923 1.30 0.34 65.7 2017 8167 1.30 0.34 66.8 2018 8419 1.30 0.34 67.8 2019 8679 1.30 0.34 68.9 2020 8947 1.30 0.34 70.0 2021 9223 1.30 0.34 71.1 notes: * – actual data. table  6. higher exports scenario assumptions of the main exogenous variables for manufacturing in latvia for 2017–2021 (source: calculated by the authors, using data of eurostat (2018a) and csb (2018), in 2017–2021 authors’ assumptions) year real exports, m eur import share ratio of value added to output productivity, thsd eur 2016* 7923 1.30 0.34 65.7 2017 8319 1.31 0.35 67.4 2018 8735 1.32 0.35 69.2 2019 9171 1.33 0.35 71.0 2020 9630 1.34 0.36 72.8 2021 10112 1.35 0.36 74.7 notes: * – actual data. table 7. import substitution scenario assumptions of the main exogenous variables for manufacturing in latvia for 2017–2021 (source: calculated by the authors, using data of eurostat (2018a) and csb (2018), authors’ assumptions) year real exports, m eur import share ratio of value added to output productivity, thsd eur 2016* 7923 1.30 0.34 65.7 2017 8319 1.31 0.35 67.4 2018 8735 1.32 0.35 69.2 2019 9346 1.31 0.36 71.2 2020 10000 1.30 0.36 73.4 2021 10700 1.29 0.37 75.6 notes: * – actual data. further, the model is solved for alternative scenarios and the main results are analysed. 50 a. auzina-emsina et al. competitiveness and economic development scenarios of latvia 4. modelling results according to the modelling results, higher increase in manufacturing exports determine higher output values both in manufacturing and in related industries as well, which afterwards through employment indicators and personal disposable income influence domestic demand and output. results on modelled gdp growth rates are summarized in table 8. table 8. real gdp growth rate forecasts in latvia for 2017–2021 (source: calculated by the authors; in 2016 data of csb, 2018) year base scenario higher exports scenario import substitution scenario 2016* 2.0 2.0 2.0 2017 4.5 4.9 4.9 2018 3.0 3.3 3.3 2019 2.7 3.1 4.1 2020 3.0 3.3 4.4 2021 3.0 3.4 4.4 notes: * – actual data. results of the base scenario show that the real gdp will grow on average by 3% annually if current trends continue. however, export growth ensures even higher gdp growth, especially in case of import substitution, because of not only foreign demand increases but a domestic one as well (that is, it shifts from imported to locally produced goods). according to the productivity assumptions, in case of the base scenario, the number of employees is forecasted to grow approximately to 960 thousand in 2021, in case of higher exports – to 970 thousand and in case of import substitution – to 990 thousand in 2021 (see figure 4). it should be noted that the highest number of employees in latvia was in 2007 and it was almost 1.06 million, however, the number of the population has decreased by about 240 thousand in 2007–2016, therefore the possibility to reach the same number of employees without dramatic changes in demographic trends is quite small. figure 4. forecasts of the number of employees in latvia in 2017–2021 and actual data in 2010–2016 (source: calculated by the authors, in 2010–2016 data of csb, 2018) business, management and education, 2018, 16(1): 40–53 51 also, the modelled values of the unemployment rate show that the results of the import substitution scenario cannot be implemented without re-emigration or the use of foreign labour. the unemployment rate in 2021 is low also in case of the base scenario and the higher exports scenario (see table 9). 4–5% unemployment rate can be considered as natural only in case the labour force has the necessary skills, which is not always the case in latvia. also, social problems often hinder unemployed persons from education and re-entering the workforce (stalidzane & dislere, 2012). other researchers stress that it is necessary to work on a policy of workforce attraction from abroad (freidenfelde, 2011) to attract those with higher qualification. table  9. unemployment rate forecasts in latvia for 2017–2021 (source: calculated by the authors; in 2016 data of csb, 2018) year base scenario higher exports scenario import substitution scenario 2016* 9.6 9.6 9.6 2017 7.4 7.2 7.2 2018 6.7 6.3 6.3 2019 6.0 5.4 4.8 2020 5.0 4.2 2.8 2021 5.4 4.5 2.4 notes: * – actual data. positive developments towards the export increase and import substitution already have taken place in latvia in 2011–2015 (see figure 5). figure 5. forecasts of real export-import balance in latvia in 2017–2021 and actual data in 2010–2016 (source: calculated by the authors, in 2010–2016 data of csb, 2018) 52 a. auzina-emsina et al. competitiveness and economic development scenarios of latvia also in the next five years, the negative external trade balance maintains and gradually changes, the deficit is becoming smaller comparatively faster in case of import substitution. the more latvian producers will be able to invest in increased competitiveness, the more chances they will have to increase exports and to strengthen their positions also in the domestic market thus ensuring faster economic growth. conclusions rca is an appropriate method to apply in competitiveness studies as it shows, which products are exported with more success. as the baltic states have strong economic relations, including participation in common value chains, it is advisable to analyse rca indicators in all three baltic states together. results of rca analysis show that, in case of goods, latvia has a potential to increase exports of manufacturing products, mainly highand medium-high-technology products. facilitation of such exports is promoted also by latvian government institutions. results argue that economic development is higher if increased competitiveness ensures both higher export growth and import substitution. however, the insufficient number of the qualified workforce can serve as a hindering factor unless heavy investment in productivity increase is made or labour is imported from abroad. the research findings can be 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(2015). effects of private ownership, trade, and foreign direct investment on labor productivity growth in transition economies: evidence from the croatian manufacturing industry. emerging markets finance and trade, 52(2), 322-335. https://doi.org/10.1080/1540496x.2015.1011540 bme_16(1)_2018_maketas.indd copyright © 2018 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: irina.voronova@rtu.lv business, management and education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 1: 13–26 https://doi.org/10.3846/bme.2018.2482 evaluation of enterprise survival: case of latvian enterprises natalia scacun1, irina voronova2, * 1, 2department of innovation and business management, riga technical university, kalnciema street 6, riga, latvia received 10 june 2018; accepted 11 june 2018 abstract. authors study the nature of insolvency both from the legal point of view and scientist position as well as updating tendencies of an insolvency of enterprises in recent years. the subject of the study has been selected company’s survival potential that is analyzed with financial ratio analysis using bankruptcy prediction models. considering research results, authors identify models that are applicable to a particular industry. authors put primary metal industry (nace 24) for the study. the aim of the paper is to investigate the survival potential of enterprises by testing existing parametric models of insolvency forecasting and assessing their potential for use in the economic conditions of latvia. during the investigation has been reviewed the concept of the financially healthy company and its relation with the main success development factors. keywords: non-financial company distress, solvency forecasting models, parametric models, latvian enterprises, metal industry, model validation. jel classification: c5, c520. introduction the value of knowledge is the ability to apply it practically by predicting the situation and determining preventive actions. this paper is concentrated on scientist corporate bankruptcy prediction models to determine non-financial organization probability of bankruptcy. company’s financial stability prediction has always been a popular topic among scientists and researchers. subject matter investigation became especially trendy when facing 2007–2009 financial crisis (amini, cont, & minca, 2016). authors believe that in the conditions of economic instability caused by political and crisis processes, each entity must evaluate its own risks. the inability of companies to conduct qualitative financial risk assessment meeting timely requirements and developing strategic goals could lead a company from insolvency process till legally recognized bankruptcy. moreover, corporate financial distress could lead to domino effect affecting both stake–/ shareholders. the timely management of symptoms 14 n. scacun, i. voronova. evaluation of enterprise survival: case of latvian enterprises can help to avoid high costs (keasey, pindado, & rodrigues, 2015). to prevent unfavourable internal and external costs, there is a necessity of implementing tools that could provide an accurate and timely manner reliable answers. the principle “the survival of the fittest” finds then its reflection in practice (boratynska, 2016). therefore, forceful financial failure prediction is crucial for entities to make the relevant decision. input variables, for instance, financial ratios and prediction techniques such as statistical and machine learning techniques affect the prediction performance. financial ratios are identified as one of the most important factors that affect accuracy when developing bankruptcy prediction model (liang, lu, tsai, & shih, 2016). in this paper, authors want to focus on insolvency forecasting models from different authors based on financial ratios. this could be an effective tool for predicting organization insolvency because many researchers have tried to find out combinations of financial indicators that could be useful for predicting insolvency risk. insolvency risk accurate assessment is prerequisite of future gain to an entity, therefore active risk management should be implemented (buston, 2016). the rest of this paper is organized as follows. section 1 gives an overview of scientists and researchers definitions, shows dynamics tendencies using statistical data. section 2 and 3 present research methodology and empirical results accordingly. finally, the last section gives a summary of the research and propose the implementation of models as well as gives recommendations how to improve research accuracy for the further researches. 1. enterprise survival essence 1.1. definition of enterprise solvency the concept of solvency issues in latvia appeared relatively recently, while the foreign practice has a long history. bankruptcy concern has been studied by researchers from america, for example, a.  e.  altman, l.  a.  bernstein, j.  j.  wild; from great britain  – r. taffler, h. tisshaw; from canada – d. a. botheraas, j. g. fulmer, g. l. v. springate, from france – m. golder, j. konan; from lithuania – j. mackevichius and many others (shneidere, 2009). various definitions of “insolvency” and “bankruptcy” are proposed by authors. a. e. altman (1993) describes that “bankruptcy” may reflect a situation when company’s net worth is negative or when a company has officially declared insolvency proceeding (altman & hotchkiss, 2006). r. shneidere (2009) has defined that solvency refers to when a company is able to provide sufficient financial performance in order to cover all liabilities. the concept of insolvency is used to describe the counterpart of company’s solvency (shneidere, 2009). g. savickaya defines that financially stable company is an entity that is able to face debt obligations and finance company’s operations from operating funds and avoid financial crises (savickaya, 2006). from the legal point of view, relying on latvia insolvency law “the legal person’s insolvency process is a set of legal measures, in which the claims of creditors are paid from debtor’s property in order to facilitate the fulfilment of the debtor’s obligations (1). the legal person’s insolvency proceeding is commenced from the day when declared the insolvency proceeding and takes place until the day when the court takes a decision on the termination of insolvency proceeding (2)” (maksātnespējas likums, n.d.). authors could business, management and education, 2018, 16(1): 13–26 15 conclude that scientist’s definitions give priority to inability to cover their obligations while law emphasizes the legal subject of the entity. 1.2. insolvency signs detection in today’s economic environment company faces severe market competition. as a result, many companies are becoming more sensitive to environmental changes. to remain competitiveness, organizations need to increase the efficiency of their business, therefore financial resources needed to maintain competitiveness and retain solvency. american energy enterprise enron that six consecutive years were acknowledged as an american most innovative company by fortune opinion became bankrupt on december 21st, 2001 has confirmed the fact that even multinational companies must keep track of their financial situation and analyze financial stability (ventura, 2008). understanding economic conditions, identifying insolvency factors could be an effective analytical tool that will help to manage company’s crisis when generating forecasts and decision making. there is need to evaluate organization stability considering quantitative models that refer on financial data and includes a variation of coefficients as well as qualitative models, for instance, delphi method, brainstorm, swot matrix, mckinsey and other (baykina, 2010). in this work, authors will review quantitative models as they are based on publicly available information, namely, annual reports that could be used to calculate financial indicators. even though today’s accounting system is governed by generally accepted international norms and rules developed based on accounting theory and practice, the financial quality of the reports is questionable (januška, 2004). economical and scientific researches suggest that using financial ratios in different combinations can predict the company’s insolvency. currently, there are many insolvency forecasting models that are already in use, but some are still in the development phase. the diversity of models could be explained by the fact that the specifics of the industry and the economic environment in which the company operates is unstable, therefore, it is necessary to seek out the most precise models and to study their application (nelson, 1981). currently, the insolvency models of e. altman and v. beaver are widely used by foreign companies, who have proved themselves in practice (tereshchenko, 2000). however, authors want to study and pilot 20 insolvency models that could be useful in latvian economic conditions. laakso (2010) has created “healthy firm triangle” including three factors that are generally defined as insolvency factors: profitability, solvency and liquidity. laakso believes that profitability is a precondition for all successful companies continuing with the fact that profitability has a positive effect on liquidity because it is wise to show sufficient cash flow to reduce the need for short-term liabilities thereby reducing insolvency risk (laakso, laitinen, & vento, 2010). petersen and plenborg (2012) point out that without liquidity, the entity cannot meet short – term liabilities because liquidity risk affects the company’s ability to generate positive net cash in short– /long–term. the risk of insolvency relates to the company’s ability to fulfil its financial obligations (petersen & plenborg, 2012). 16 n. scacun, i. voronova. evaluation of enterprise survival: case of latvian enterprises 1.3. business demography character the environmental characteristics are essential in order to carry out a qualitative analysis of the company’s insolvency, therefore necessary to understand what external factors affect the company’s operations and how their changes can affect the company’s economic activity. the country is interested in positive business climate as the number of registered companies will increase, tax payments will be higher in the state budget as well as increase market motivation mechanism – a competition that will contribute to economic growth rates. figure 1 shows that there is a decline in the dynamics of registered companies. moreover, in mid – 2017 number of dead companies exceeded active that indicates unfavourable business demography conditions. one of the most important indicators that characterize the country’s economic development and economic growth rates is a gross domestic product (gdp). one component of gdp is exports that increase the competitiveness of the country. figure 2 shows metal industry (nace 24) export and import dynamics. figure 1. dynamics of latvian registered bankrupt companies in 1992–2018 years 0 100000 200000 300000 400000 500000 600000 20 09 20 10 20 11 20 12 20 13 20 14 20 15 � ou sa nd s of e ur o time period, years export import figure 2. metal export and import dynamics (nace 24) business, management and education, 2018, 16(1): 13–26 17 currently could be seen metal market stagnation. this could be explained due to the fact that liepaja’s metalurgs – one of the largest metal producers in latvia, encountered financial problems and metal production has been interrupted that affected export and import by a sharp decrease. authors could also assume that export and import slowdown relates to world metallurgical crisis. many researchers attribute the crisis to the fact that the metal is no longer needed in its pure form, as new alloys appear which are in high demand on the market. according to world steel association (wsa) statistical data, in 2015 there has been a sharp decline in metal production since 2009. the main factors mentioned by wsa is metal overproduction and protectionist policy (world steel association, 2015). from figure 3 could be seen that most rapid collapse of production was in ukraine, usa, turkey, japan, china, the european union and russia by 15.60%; 10.50%; 7.40%; 5%; 2.30%, 1.80% and 0.50% reduction of metal production volume respectively. 2. evaluation of enterprise survival 2.1. insolvency forecasting approach there is a huge amount of bankruptcy prediction methods. the subject of the study has been selected company’s insolvency forecasting models. plenty of models have been created, however, relatively small number of existing models suits market and economic conditions of the latvia republic. according to the figure 1, the number of death companies has increased dramatically. authors could mention several reasons for such situation. firstly, current market conditions significantly differ from preceding, secondly, the business environment is highly turbulent, thirdly, small and medium enterprise (sme) quantitative domination and inappropriate insolvency law in latvia to prevent insolvency proceedings for sme, consequently, insolvency detection on the 1st organization symptoms. bankruptcy models could be generally categorized as 2 major groups: parametric and non  –parametric. parametric models depend on rational criteria, consequently, known parameters to make decisions, whereas non – parametric techniques assume a model with figure 3. metal production decline in 2015 15,60% 10,50% 7,40% 5% 2,30% 1,80% 0,50% u k r a in e u s a t u r k e y ja p a n c h in a e s r u s s ia m e ta l p ro d u c ti o n d e c re a se countries 18 n. scacun, i. voronova. evaluation of enterprise survival: case of latvian enterprises unknown parameters  – distribution free (gepp, kumar, & bhattacharya, 2010). non  – parametric techniques have been favourably applied in recent studies, therefore authors assume, that models have a potential for development. as per all analyzed insolvency forecasting models, they are parametric and could be classified four groups: multiplicative discriminant analysis (mda); logarithmic regression; valuation approach, rating (i. mavlutova, zalitis, a. mavlutova, b. mavlutov, & 2014). authors suggest for research models compiled in table  1 that were obtained using author’s original papers as well as taken from researchers practical assessment of theoretical and empirical studies of insolvency forecasting models. table 1. insolvency forecasting models taken for analysis (altman and hotchkiss (2006); arasu, balaji, kumar, and thamizhselvi (2014); shneidere (2009); kanapickiene & marcinkevicius (2014); berzkalne & zelgalve (2013); ginoglou, agorastos, & hatzigagios (2002); singh & mishra (2016); pitrova (2001); gruszczynski (2015); joo-ha & taehong (2000); shneidere (2009); singh & mishra (2016); savickaya (2006), теreshchenko (2000); alferov & khudyakova (2017)) model group model mda e. altman z’’ (1993); e. altman z (1968); e. altman’s z’ (1983); g. springeits (1978); r. shorin, i. voronova (1998); r. taffler, h. tisshaw (1977); lis (1972); e. altman (1968); fulmer (1984); konan, golder (1979). logarithmic regression ginoglou, agorastos (2002); lin, piesse (2004); altman, sabato (2007); chesser (1974); gruszczynski (2003); joo-ha, taehong (2000); voronova, genriha (2009); begley, ming, watts (1996); d. ohlson (1980). valuation approach m. zmijewski (1984); g. savickaya (2007); irkutsk scientists (1998); durand (1941). rating saifulin, kadikova (1996) 2.2. methodology of the research financial data is input information; therefore, it should be reliable. for this purpose, authors have used lursoft database, research was held by authors in may 2016. 21 companies were selected for primary research: 12 companies are active (solvent) and 9 companies have been liquidated (bankrupt). all companies were selected from one industry – manifesting of business, management and education, 2018, 16(1): 13–26 19 metals and metal products  – nace 24 classification. when extracting input date for 5 last years, 4 companies annual reports were considered as invaluable for research because many accounting items lines were absent that could cause errors approbating models. consequently, the research calculation part is based on the financial statements of 17 companies over a period of last 5 years, of which 7 companies are bankrupt, and 10 are solvent. the approbation of the model includes the principle of recognition of bankrupt/ solvent organization. authors have analyzed models from the aspect  – which model could faster alert the company, namely, 5; 4; 3; 2 and 1 years before bankruptcy. the methodology for determining the accuracy of models is as follows: firstly, it is necessary to select the correct sum of the estimates, that is, how much they recognize or do not recognize bankrupt or solvent. bankrupt and solvent number of companies will be in the column total forecasts. secondly, the precision of models is determined by dividing the amount of the assessment with the number of existing bankrupt/ solvent companies (total forecasts). thirdly, the number of unrecognized companies is entered in the column with the wrong sum of classification, and its value is divided by the number of existing bankrupt/ solvent companies when mathematical calculating an error. based on the accuracy and error values, the top 3 models for multiplicative discriminant analysis, logarithmic regression, valuation approach and rating models selected 5; 4; 3; 2 and 1 year before bankruptcy. when forecasting probabilities were calculated, authors have done a comparative analysis of models to detect 3 models for determining the company’s bankruptcy. consequently, active enterprises could in a timely manner make prudent decisions to maintain the company’s solvency. continuously changing environment is precondition of necessity to determine valuable insolvency prediction model to protect and support business decision making. therefore, authors put forward hypothesis  – it is useful to use at least three insolvency models from different classes, predicting the company’s potential bankruptcy in the economic environment of latvia. 3. results 3.1. financial ratio correlation in analyzed insolvency forecasting models the most frequent ratio used is liquidity ratio working capital / total assets. this ratio shows whether an organization has enough active value to finance its liabilities (swedbank, 2016). the 2nd most repeated ratio is efficiency ratio asset turnover ratio (atr) – net turnover/ total assets. the analysis of net turnover dynamics is important for the organization as its reduction may indicate a decrease in demand that could be caused by inadequate business processes that should be improved. atr measures revenues generated to the value of assets (saksonova, 2006). according to table  2 authors could conclude that financial coefficient correlation corresponds to the laakso “healthy firm triangle” (laakso et  al., 2010) as insolvency models mostly include profitability, liquidity and solvency ratios. 20 n. scacun, i. voronova. evaluation of enterprise survival: case of latvian enterprises table 2. correlation of financial ratios in insolvency forecasting models (source: own research) financial ratio count working capital / total assets 11 net turnover / total assets 10 gross profit or loss / total assets 7 retained earnings / total assets 6 net profit or loss / total assets 6 account payable / total assets 6 own capital / account payable 5 profit or loss before tax and interest payments / total assets 3 current assets / current liabilities 3 3.2. test of insolvency forecasting models relying on the table 3 results, the author could conclude that model of e. altman z’’ (1993) better forecasts insolvency 1, 2, 3 years before bankruptcy, the accuracy is 77.78%, 64.71% and 70.59% respectively. 4 years before bankruptcy with accuracy 70.59  % is generated by two models g. springate (1978), r. taffler, h. tisshaw (1977). 5 years before bankruptcy, r. taffler, h. tisshaw (1977) creates the same precision, namely, predicting bankruptcy 4 years before with accuracy of 70.59%. the worst prediction dynamics of 1, 2, 3 and 4 years before the bankruptcy is generated by konan, golder (1979) model with an accuracy of 22.22%, 47.06%, 29.41% and 41.18% respectively. 5 years before bankruptcy has changed the trend, and this model is 5th out of 10 mda models. the worst forecast 5 years before the bankruptcy is lis (1972). even though the model among the british is considered to be precise and practical, this is not applicable in predicting the probability of insolvency for metal producing companies. table 3. percentage accuracy of bankruptcy based on mda models (source: own research) model years before bankruptcy 1 2 3 4 5 e. altman (1968) 56 59 59 59 59 e. altman z (1968) 72 59 71 47 41 e. altman z’ (1983) 72 59 71 47 47 e. altman z’’ (1993) 78 65 71 59 35 fulmer (1984) 56 59 53 47 41 g. springate (1978) 72 65 71 71 65 konan, golder (1979) 22 47 29 41 53 lis (1972) 61 53 65 47 29 r. shorin, i. voronova (1998) 67 65 71 59 41 r. taffler, h. tisshaw (1977) 63 63 69 71 71 business, management and education, 2018, 16(1): 13–26 21 analyzing results of logarithmic regression models (see table 4), could be concluded that ginglou, agorastos (2002) model is applicable in determining probability 1, 3 years before bankruptcy, their accuracy is 88.89% and 88.24% respectively. lin, piesse (2004) model is effective in predicting the unfavourable financial situation 2 years before bankruptcy, its accuracy is 76.47%, 4 and 5 years before bankruptcy – altman, sabato (2007), the accuracy is 70.59% and 64.71% respectively. table 4. percentage accuracy of bankruptcy based on logarithmic regression models (source: own research) model years before bankruptcy 1 2 3 4 5 altman, sabato (2007) 72 53 65 71 65 begley, ming, watts (1996) 33 41 41 35 41 chesser (1974) 67 53 59 47 47 d. ohlson (1980) 17 29 35 41 41 ginoglou, agorastos (2002) 89 71 88 65 53 gruszczynski (2003) 61 53 59 47 41 joo-ha, taehong (2000) 50 47 35 35 24 lin, piesse (2004) 83 76 71 47 47 genriha et al. (2009) 44 47 41 47 47 the worst results for 1, 2, 3 years before bankruptcy are due to the d. ohlson (1980) model, their error is 83.33%, 70.59% and 64.71% respectively; 4, 5 years before bankruptcy best result generate joo–ha, taehong (2000) model. from the table  5, the author noticed that 1, 2 and 3 years before the bankruptcy assessment approach and rating models did not show an error higher than 50%. this may be caused due to the fact that existing models are quite precise. predicting the situation 1, 2 and 3 years before bankruptcy, the highest accuracy of 83.33%, 70.59% and 76.47% respectively show the model of m. zmijewski (1984). the model of g. savickaya (2007) gives the highest accuracy 4 and 5 years before bankruptcy – 64,71%, 70.59% respectively. durand model has worst result 1, 2, 3, 4 and 5 years before bankruptcy. table 5. percentage accuracy of bankruptcy based on assessment approach and rating models (source: own research) model years before bankruptcy 1 2 3 4 5 g. savickaya (2007) 72 71 65 65 71 irkutsk scientists (1998) 67 59 71 59 59 m. zmijewski (1984) 83 71 76 59 53 saifulin, kadikova (1996) 72 71 71 53 53 durand (1941) 67 53 59 41 35 22 n. scacun, i. voronova. evaluation of enterprise survival: case of latvian enterprises analyzing forecasting models results, they provide different accuracy level, therefore, authors conclude that any company evaluating its financial situation, should take at least 3 models from different model classes. table 6. highest percentage accuracy of bankruptcy prediction models (source: own research) model years before bankruptcy 1 2 3 4 5 e. altman z (1968) 70,59 e. altman z’ (1983) 70,59 e. altman z’’ (1993) 77,78 64,71 70,59 g. springate (1978) 70,59 70,59 r. shorin, i. voronova (1998) 70,59 r. taffler, h. tisshaw (1977) 70,59 70,59 ginoglou, agorastos (2002) 88,89 88,24 lin, piesse (2004) 76,47 altman, sabato (2007) 70,59 64,71 m. zmijewski (1984) 83,33 70,59 76,47 g. savickaya (2007) 70,59 64,71 70,59 from table 6 could be seen that for analysis of 1 year before bankruptcy is useful to use e. altman z’’ (1993), ginoglou, agorastos (2002) and m. zmijewski (1984). 2 years before bankruptcy is worth using e. altman z’’ (1993), lin, piesse (2004) and m. zmievskis (1984) or g. savickaya (2007) models. when calculating the result 3 years before bankruptcy, it is worthwhile to use the following mda models: e. altman z’’ (1993), e. altman z (1968), e. altmans z’ (1983), g. springate (1978), r. shorin, i. voronova (1998), since these 5 models show the same precision 70.59%. from logarithmic regression models – ginoglou, agorastos (2002), from valuation approach, rating models – m. zmijewski (1984). it is important to note that logarithmic regression and valuation approach, rating models 1, 2 and 3 years before bankruptcy enters higher accuracy than mda models. the best results 4 years before bankruptcy are presented by g. springate (1978); r. taffler, h. tisshaw (1977) mda models with the same accuracy of 70.59%. with the same precision, it is worth using a logarithmic regression model altman, sabato (2007), in turn from the valuation approach, rating models g. savickaya (2007). calculating probability 5 years before bankruptcy, the models do not differ 4 years before bankruptcy. the difference is that g. springate (1978) get lower by 5.88%, altman, sabato (2007), and g. savickaya (2007) increased by 5.88 %. when evaluating all three groups, the author can conclude that logarithmic regression models are the most accurate, followed by valuation approach, rating models and mda. such situation authors could explain by the mathematical differences between models. mda models in construction of a linear function, logarithmic regression functions have a small bend also called “tails”. valuation approach, rating models are mda and logarithmic regression combinations. business, management and education, 2018, 16(1): 13–26 23 3.3. results application despite the results obtained, authors also wanted to test the accuracy based on real company. primary company was selected – liepājas metalurgs as that entercounted financial difficulties and in 2013 started insolvency process. as shown in table 7, not all models with a high degree of precision prove themselves to be in practice. models e. altman z (1968), e. altman z’ (1983), e. altmann z’’ (1993), g. springate (1978), r. shorin, i. voronova (1998), ginoglou, agorastos ( 2002) lin, piesse (2004) confirms the results obtained, that is, identifies the bankrupt business. m. zmijewski (1984) model showed bankruptcy only when the company started insolvency proceedings. r. taffler, h. tisshaw (1977), altman, sabato (2007), g. savicka (2007) did not reflect the empirical data. this situation allows us to conclude and prove hypothesis that the company must use at least 3 models from each group to verify the quality of the data obtained. table 7. models with highest percentage accuracy based on liepājas metalurgs as data (source: own reserch) model 2014 2013 2012 2011 2010 e. altman z (1968) 1 1 1 1 1 e. altman z’ (1983) 1 1 1 1 1 e. altman z’’ (1993) 1 1 1 1 1 g. springate (1978) 1 1 1 1 1 r. shorin, i. voronova (1998) 1 1 1 1 1 r. taffler, h. tisshaw (1977) 0 0 0 0 0 ginoglou, agorastos (2002) 1 1 1 0 1 lin, piesse (2004) 1 1 1 0 0 altman, sabato (2007) 1 1 0 0 0 m. zmijewski (1984) 1 1 0 0 0 g. savickaya (2007) 1 0 0 0 0 * 1 – bankrupt; 0 – solvent models e. altman z (1968), e. altman z’ (1983), e. altmann z’’ (1993), g. springate (1978), r. shorin, i. voronova (1998), ginoglou, agorastos ( 2002) lin, piesse (2004) confirms the results obtained, that is, identifies the bankrupt business. m. zmijewski (1984) model showed bankruptcy only when the company started insolvency proceedings. r. taffler, h. tisshaw (1977), altman, sabato (2007), g. savicka (2007) did not reflect the empirical data. this situation allows us to conclude and prove hypothesis that the company must use at least 3 models from each group to verify the quality of the data obtained. looking at table  7, authors have noticed that mda models more accurately describe the current situation than the other models, which in this case indicates that they are most applicable in the economic conditions of latvia, despite the conclusion made by the authors regarding the accuracy of the group, based on the data, in order to facilitate more accurate results should be used larger number of companies. moreover, viewed models do not include external environmental factors, therefore influence results. 24 n. scacun, i. voronova. evaluation of enterprise survival: case of latvian enterprises conclusions research was mainly based on the metal products industry. analyzing the tendencies of the steel market, since 2013 in latvia has been a sharp decrease in export and import volumes. the main reason mentioned by wsa is metal market stagnation that caused sharp decrease in export and import volumes. correlation analysis of used forecasting model financial ratio correspond to laakso healthy firm triangle as mostly models include profitability, liquidity and solvency ratios that overall contribute to the financial stability of the company. authors explored and piloted 20 insolvency forecasting models and their potential as a predictor 1, 2, 3, 4, 5 years before of bankruptcy. according to the authors empirical results, 1 year before the bankruptcy, it is useful to use models of e. altman z”, ginoglou, agorastos and m. zmijewski; 2 years before bankruptcy it is worth using e. altman z”; lin, piesse and m. zmijewski or g. savickaya models; 3 before bankruptcy – e. altman z; e. altman z’; e. altmana z’’; g. springate; r. shorina, i. voronova; 4 years before bankruptcy g. springate or r.taffler and h. tisshaw; altman, sabato; g. savickaya; 5 years before bankruptcy r. taffler, h. tisshaw; altman, sabato; g. savickaya. some of mentioned models show the same percentage accuracy and error, so person who will use these models can choose the appropriate one based the author’s research results. relying on the empirical data, authors conclude that logarithmic regression models are the most accurate, followed by valuation approach, rating models and multiplicative discriminant analysis models respectively. the result may be explained by model’s mathematical differences. authors suggest that for several models, prediction error could arise due to the fact that active companies were facing financial difficulties due to metal market stagnation. in order to verify the reliability of the models, the company liepājas metalurgs as was taken as the base for approbation. most of the models were able to determine if company entercounted finansial difficulties, however, m. zmijewski (1984), r. taffler, h. tisshaw, altman, sabato, g. savickaya did not reflect the empirical data. additionaly, mda models were more precise in determining bankruptcy of the company despite the fact that empirical research showed logarithmic regression higher agree of accuracy. this allow authors to prove hypothesis that company should use at least three models, predicting bankruptcy from different model classes. considering the abovementioned factors, authors believe that approbation of models in the economic conditions of latvia should be continued increasing the reliability of the models by analyzing larger number of enterprises that will allow to make qualitative conclusions about an organization future development scenario. authors believe that implementation of solvency forecasting models in organization require financial specialists continuously follow models as changes in external environment can reduce the reliability of the models that can lead to incorrect interpretation of company’s financial position. author’s research is in demand because liquidated enterprises rapidly increased in recent years as well as have reduced the number of registred companies. due to this situation, smaller amounts of taxes are transferred to the state budget, consequently, development of the latvian economy diminishing. business, management and education, 2018, 16(1): 13–26 25 in order to ensure a viable business environment, predictive models could be an effective financial risk tool that would be useful both for company’s management by taking preventive actions to improve existing financial position and the state in order to improve monitor function of bankrupt firms that could cause global problems to the country. financial crisis causes could be classified as external and internal that depend on problem context (ventura, 2008). taking into account empirical evidence, insolvency forecasting models could be an effective predictors of business failure. references altman,  e.  i., & hotchkiss, e. 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(2015). retrieved from https://goo.gl/ytkg4h bme_2014_12_1 maketas.indd copyright © 2014 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2014, 12(1): 127–137 doi:10.3846/bme.2014.09 identifying predictors of student satisfaction and student motivation in the framework of assuring quality in the delivery of higher education services yulia stukalina transport and telecommunication institute, 1 lomonosova street, lv-1019, riga, latvia e-mail: stukalina.j@tsi.lv received 7 april 2014; accepted 1 may 2014 abstract. nowadays, the quality of educational services provided by a university is a crucial aspect of the education managers’ strategy in the customer-driven education context, quality assurance in education being an essential issue to be promoted in european higher education institutions. students’ evaluation of the educational services (that is consumer-oriented assessment) can be regarded as one of the most significant educational management tools used for stimulating quality enhancement in a university. it is vital for supporting decision-making process. a special emphasis may be put on monitoring student satisfaction with the educational services and student motivation toward studies. understanding the central factors that are supposed to influence and predict student satisfaction and student motivation may provide education managers with best possible solutions to improve quality of the educational services in a higher education institution. this paper presents the results of an empirical study performed in riga technical university. the study was aimed at identifying the basic determinants (predictors) of student satisfaction and motivation in the framework of the esp (english for specific purposes) course. keywords: educational management, higher education services, quality assurance, student satisfaction, student motivation. reference to this paper should be made as follows: stukalina, y. 201x. identifying predictors of student satisfaction and student motivation in the framework of assuring quality in the delivery of higher education services, business, management and education 12(1): 127–137. http://dx.doi.org/10.3846/bme.2014.09 jel classification: m19. 1. introduction modern higher education has to deal with many challenges owing to fundamental challenges in the global environment (bernhard 2012). today, the pressures for modernizing higher education can be traced everywhere (mcroy, gibbs 2009). according to kazeroony (2012), there are many factors that have given rise to the 128 y. stukalina. identifying predictors of student satisfaction and student motivation in the framework... need for re-considering strategies employed in higher education: the new generations of learners, technological innovations, economic factors, etc. the central businesses of modern universities remain teaching and research; however, their role has broadened in the context of social inclusion and knowledge economy (shattock 2003). as stated by wissema (2009), contemporary higher education institutions are changing fundamentally, since they have to compete for the best students in the international environment. promoting learning is still considered to be the primary purpose of educational organizations, but other management and leadership responsibilities should also contribute to this predominant objective (bush et al. 2010). faced by unprecedented accountability pressures managers working in the area of education have to deliver advanced educational standards; they also require better skills and flexibility to sustain their institutions (bush 2011). thus, educational management, being mainly concerned with the purpose of education (bush 2011), embraces the activities aimed at achieving academic excellence and competitive advantage. identifying the mechanisms of competitive advantage is directly attributable to the increased competition between higher education institutions. according to bernhard (2012), all changes and transformation processes in higher education are closely related to an increasing interest in quality. as stated by moldovan (2012), competitive strategies in the area of higher education can be developed through quality. by means of integration of quality assurance and strategic management procedures the university’s strategy is implemented, and organizational objectives are achieved (kettunen 2011). it is obvious that the quality of educational services provided by a university has become a crucial aspect of the education managers’ strategy in the customer-driven education context. the students, their parents and the society are key customers of education, and the entire process of managing for quality in a higher education institution focuses on the needs of its customers – both internal and external (sharma, kamath 2006). according to kettunen (2008), management for quality in education is related to stakeholder accountability, customer satisfaction and issues of assessment, the focus being put on understanding the customers’ needs. since the adoption of the bologna declaration (1999), improving quality of higher education and developing quality assurance (qa) systems related to establishing stakeholder confidence has been a high priority for the european union member countries (standards… 2005; bergen communiqué 2005; london communiqué 2007; the european… 2012). as said by diamantis and benos (2007), the necessity to guarantee quality enhancement in education has stimulated the development of various methods of assessment of the promised quality. planned collection and analysis of data aimed at receiving constructive feedback from students in relation to various aspects of the educational environment is vital for supporting decision-making process in the context of a higher school improvement (stukalina 2012). it is vital to take into account the 129 business, management and education, 2014, 12(1): 127–137 expectations of students, which are changing now: modern students expect to choose “what they learn, how they learn and when they learn, according to their individual needs and interests” (com (2013) 499 final). it should be noted that, in higher education, “students have always been expected to play an active role in the educational process” (little, williams 2010). a university is a social place that contributes to the socialization of young people, as well as to the development of their personalities (daxner 2010), so students must be to be regarded as active members of the academic community. participation of students helps en sure the legitimacy of the qa system itself and its results (stråhlman 2012). today, european higher education institutions have to create such learning environments and such feedback systems that will “allow their students’ views, learning experience, and their performance to be taken into account” (report… 2013). students’ evaluation of the educational services (that is consumer-oriented assessment) can be regarded as one of the most significant education management tools used for stimulating quality enhancement of the educational environment of a university. according to kara and deshields (2004), educational institutions that recognize the importance of consumer-oriented principles would have a better chance of satisfying the needs of their students more effectively. in this case, emphasis may be put on student satisfaction with the educational services (in a broader sense, with the educational environment) and their motivation for further studies. student satisfaction is considered to be an important quality factor in education (postema, markham 2001). the practice of monitoring satisfaction levels of consumers of higher education services is widely used in modern universities (chenicheri et al. 2010); it is implemented through information feedback, which “shows deviations from standards and initiates changes” (koontz, weihrich 2010). student satisfaction – “the result of student interactions with the educational environment as an outcome of the expectations and experiences of the subject, study course, or study programme” – can be viewed as a precursor of student motivation – “students’ positive emotional experience in education as the result of students’ interactions with the educational environment” (stukalina 2012). thus, being responsive to students’ needs and expectations, educators are supposed to increase their motivation for further studies. education managers may successfully employ student evaluations in different contexts including monitoring service quality in higher education institutions. understanding the main factors that are supposed to have impact on student satisfaction with the educational services and student enthusiasm toward studies may provide education managers with best possible solutions for supporting constant quality improvement of the educational environment of a university. this paper discusses the results of an empirical study performed in the form of the integrated educational environment evaluation in riga technical university. the study was aimed at identifying the basic predictors of student satisfaction and student motivation in the frame of the esp (english for specific purposes) course. 130 y. stukalina. identifying predictors of student satisfaction and student motivation in the framework... 2. empirical study 2.1. materials and methods the holistic approach to management of the educational environment of a university presupposes that all aspects of the environment should be considered and analyzed (stukalina 2011). students’ evaluation of the educational environment should be performed in the framework of all-embracing model of managing the educational environment resources, which is associated with managing the educational environment as an integrated multi-level supersystem that embraces various interrelated subsystems. this model is based on the typology of management and leadership models adapted by bush from bush and glover (bush 2003). it assumes that education managers coordinate and redistribute the integrated educational environment resources: (a) material, (b) human and (c) informational; these resources are related to the four central educational environment aspects (stukalina 2010): − physical and technological environment including university facilities (buildings, lecture rooms and lecture halls, laboratories, libraries, etc.). − instructional environment including regulative documents, teaching materials, online instructional materials, etc. − executive environment that is related to conducting lessons and delivering lectures. − psychological environment that is related to the psychological atmosphere created in the study process. there was developed an original wide-ranging evaluation questionnaire containing ten evaluation indicators associated with the four above aspects. two hundred fourteen students from riga technical university (faculty of architecture and urban planning, faculty of civil engineering, faculty of computer science and information technology, faculty of electronics and telecommunications) were surveyed after completing their esp course. the rationale for engaging respondents from different faculties was to obtain a constituent and comprehensive perspective from within the rtu. the questionnaire contains 73 items (evaluation statements) grouped into ten qualitative evaluation indicators representing four higher order dimensions: the executive environment, physical and technological environment, instructional environment, psychological environment (fig. 1). satisfaction and motivation associated with every indicator are presented by separate items. students were asked to rate the items on a five-point likert scale, as follows: 1 = strongly disagree, 2 = disagree, 3 = partly agree or disagree, 4 = agree, 5 = strongly agree. 131 business, management and education, 2014, 12(1): 127–137 fig. 1. the proposed indicators for evaluating the integrated educational environment from the students’ perspective (source: stukalina 2011) wide-ranging educa�onal environment evalua�on evalua�on of the execu�ve environment evalua�on of the physical and technological environment evalua�on of the instruc�onal environment evalua�on of the psychological environment evalua�on indicator i4: the computer laboratory facili�es i5: the library services evalua�on indicator i6: the study course content i7: teaching materials quality and availability evalua�on indicator i1: the informa�on quality and availability i2: the quality of acquired skills i3: the quality of conducted lessons evalua�on indicator i8: the environment safety and comfort i9: collabora�ve learning i10: support from the teaching staff, a�ending staff and educa�on managers 2.2. analysis and results the standard tools and procedures of spss 17 software package were utilised. measurement scale reliability was evaluated by means of cronbach alpha. cronbach’s alpha was used to assess the internal consistency reliability of a multiple item instrument. the coefficient alpha values were calculated for all ten indicators. the reliability check indicates that all measures satisfied the requirement for cronbach’s alpha relia bility. the coefficient alpha ranged from 0.804 to 0.871 indicating that the scale was internally consistent. the regression analysis was then used to measure the degree of influence of the independent variables (indicators) on a dependent variable (student satisfaction or student motivation). the impact of the various indicators associated with the four basic aspects of the educational environment was investigated using a regression on the students’ level of satisfaction with the variables, which had significant correlation coefficients. the stepwise regression model definition procedure was applied as a model-building method. the forward stepwise selection began with independent variables being entered into the regression equation one at a time, provided predictors meet the statistical significance criteria with the dependent variable. selection of independent variable entry was based on the descending order of the largest significant correlation coefficient. the 132 y. stukalina. identifying predictors of student satisfaction and student motivation in the framework... forward stepwise regression was conducted for the ten evaluation indicators to limit the number of input variables. in the end, there were obtained two models with high adjusted r square (coefficients of determination): 0.829 for student satisfaction (see table 1) and 0.679 for student motivation (see table 2). table 1. the forward stepwise regression procedure: satisfaction (source: created by the author) model summary model r r square adjusted r square std. error of the estimate 1 .790a .625 .623 .31453 2 .857b .735 .733 .26488 3 .883c .780 .777 .24183 4 .896d .802 .798 .23004 5 .904e .818 .814 .22122 6 .910f .827 .822 .21600 7 .914g .835 .829 .21165 table 2. the forward stepwise regression procedure: motivation (source: created by the author) model summary model r r square adjusted r square std. error of the estimate 1 .720a .519 .516 .42167 2 .787b .619 .615 .37614 3 .809c .655 .650 .35884 4 .822d .676 .670 .34846 5 .828e .686 .679 .34363 the most significant predictors of student satisfaction include seven causal factors (see table 3): ind6: “study course content”; ind3: “quality of conducted lessons”; ind8: “environment safety and comfort”; ind10: “support from teaching and attending staff, managers”: ind5: “library services”; ind9: “collaborative learning”; ind4: “computer laboratory facilities”. table 3. regression coefficients: satisfaction (source: created by the author) independent variable unstandardized coefficients standardized coefficients b std. error beta t sig. (constant) –.003 .119 –.029 .977 ind6 .238 .041 .289 5.862 .000 ind8 .166 .031 .194 5.280 .000 ind3 .197 .038 .242 5.162 .000 ind10 .124 .032 .152 3.882 .000 ind5 .106 .025 .141 4.226 .000 ind9 .101 .031 .133 3.300 .001 ind4 .061 .020 .096 3.097 .002 133 business, management and education, 2014, 12(1): 127–137 the most significant predictors of student motivation include five causal factors (see table 4): ind6: “study course content”; ind10: “support from teaching and attending staff, managers”; ind9: “collaborative learning”; ind7: “teaching materials quality and availability”; ind5: “library services”. table 4. regression coefficients: motivation (source: created by the author) independent variable unstandardized coefficients standardized coefficients b std. error beta t sig. (constant) –.261 .188 –1.390 .166 ind6 .274 .058 .282 4.723 .000 ind10 .269 .049 .277 5.511 .000 ind9 .183 .047 .202 3.927 .000 ind5 .143 .039 .160 3.707 .000 ind7 .156 .059 .143 2.630 .009 the summary of the most significant predictors of student satisfaction and student motivation in the integrated educational environment is presented in the diagram below (fig. 2). integrated educational environment library services instruc�onal environment execu�ve environment study course content quality of conducted lessons physical and technological environment psychological environment collabora�ve learning support from teaching/a�ending staff, managers environment safety and comfort computer laboratory facili�es student sa�sfac�on student mo�va�on teaching materials quality and availability fig. 2. predictors of student satisfaction and student motivation in the integrated educational environment (sourse: created by the author) 134 y. stukalina. identifying predictors of student satisfaction and student motivation in the framework... the results indicate that a number of predictors contribute to student satisfaction and student motivation, the main predictors of student satisfaction and student motivation being associated with all four aspects of the educational environment: 1) the instructional environment (“study course content”, “teaching materials quality and availability”); 2) the psychological environment (“collaborative learning”, “support from teaching and attending staff, education managers”); 3) the physical and technological environment (“library services”, “computer laboratory facilities”); 4) the executive environment (“quality of conducted lessons”). this goes to prove that both student satisfaction and student motivation can be stimulated by different aspects of the integrated educational environment, which are related to various organisational processes and activities (teaching and learning activities, managerial activities, economic activities); the activities directly linked to the study process are supposed to play a key role in determining student satisfaction and student motivation (“study course content”). this also means that the above determinants do a good job of enhancing student satisfaction and student motivation in higher education. all of the aforesaid substantiates our earlier assumptions that the above factors may serve as evaluation indicators used for assessing the quality of the educational environment of a university, provided that the environment is assessed as an integrated whole in the form of student evaluations of a study course, study programme, faculty, etc. (stukalina 2012). this would allow education managers to get the big picture of the educational services offered to students, at the same time paying attention to the details based on information gained from internal customers of the university. so, students are expected to indirectly participate in the process of decision-making in the context of providing quality assurance in higher education. 3. conclusions the research has provided empirical findings to understand, which factors may determine and predict both student satisfaction with educational services and student motivation toward studies. the findings of this research indicate that student satisfaction and motivation can be modelled on a number of predictors (determinants) represented by a set of indicators associated with different aspects of the integrated educational environment. the results of the study may be employed by university managers for creating their own wide-ranging scheme for assessment of the educational environment in the context of assuring service quality in higher education, the emphasis being put on student satisfaction and student motivation. however, they should take into consideration the specific nature of a higher education institution. the author hopes that these insights will help universities to better focus their activities and the available resources in the framework of implementing a set of strategies aimed at achieving competitive advantage and academic excellence. 135 business, management and education, 2014, 12(1): 127–137 there are also some limitations that need mentioning. this study is an effort to model student satisfaction and student motivation on the basis of a particular study course. therefore, several factors may have been not considered. the sample in this study included one university, so caution must be exercised in generalizing the results beyond this higher education institution. future research with a more diverse student population is recommended to verify and generalize the findings. besides, the scale items could be further refined to better define and evaluate the factors that are supposed to influence student satisfaction with educational services and their motivation toward studies. references bergen communiqué. 2005. the european higher education area – achieving the goals, in communiqué of the conference of european ministers responsible for higher education, 19–20 may, 2005, bergen norway [online], [cited 15 february 2014]. available from internet: http://ec.europa.eu/education/policies/educ/bologna/bergen.pdf bernhard, a. 2012. quality assurance in an international higher education area: a case study approach and comparative analysis. germany: springer fachmedien. bologna declaration. 1999. 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[online], [cited 10 february 2014]. available from internet: http://www.ehea.info/uploads/(1)/bologna%20 process%20implementation%20report.pdf wissema, j. g. 2009. towards the third-generation university: managing the university in transition. uk: mgp books ltd. http://dx.doi.org/10.4337/9781848446182 yulia stukalina (dr sc. admin., associate professor) teaches esp and management science (in english) in transport and telecommunication institute, riga, latvia. she received her doctor’s degree in educational management at the university of latvia. her research areas include educational management, quality management and strategic management. yulia stukalina is the author and co-author of twenty scientific publications including conference papers, peer-reviewed journal articles and book chapters. she is also the author and co-author of six study aids for students of transport and telecommunication institute. copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(2): 276–291 doi:10.3846/bme.2015.302 socio-cultural factors and international competitiveness madara apsalone1, ērika šumilo2 faculty of economics and management, university of latvia, riga, latvia e-mails: 1madara.apsalone@gmail.com (corresponding author); 2erika.sumilo@lu.lv received 02 november 2015; accepted 02 december 2015 abstract. socio-cultural factors – shared values, norms and attitudes are significant, but less acknowledged sources of international competitiveness. previous studies have found socio-cultural factors positively affecting various aspects of international competitiveness – entrepreneurship, innovation, productivity and international cooperation. these factors are more sustainable and less affected by external environment changes in comparison with the traditional factors. sociocultural factors provide an opportunity to develop competitiveness strategies based on unique advantages. this research aims to explore the impact of socio-cultural factors on international competiveness in small, open economies. analysing relationship between 400 socio-cultural indicators and competitiveness indicators such as productivity, economic development, business and government efficiency, innovation capacity and infrastructure in 37 countries, six socio-cultural factors have emerged: collectivism and hierarchy; future, cooperation and performance orientation, self-expression, monochronism and rationality, economic orientation and social structure. the first factor – collectivism and hierarchy – tends to reduce the international competitiveness; the other five affect it positively. keywords: cross-cultural studies, international competitiveness, socio-cultural factors. jel classification: m16, f00. 1. introduction in times of globalization, international competitiveness is an important aspect of prosperity and development potential of countries and organizations. international competitiveness has several determinants – export capability (ezeala-harrison 1999), resource productivity (porter 1990), as well as infrastructure, institutions and macroeconomic environment (world economic forum 2014). traditionally international competitiveness depends on the available economic capital, human capital, technologies, knowledge and natural resources. competitiveness is also affected by a group of factors that could be referred to as socio-cultural factors – http://dx.doi.org/ 10.3846/bme.2015.302 mailto:1madara.apsalone@gmail.com mailto:2name.surname@dbsa.edu 277 business, management and education, 2015, 13(2): 276–291 values, norms and attitudes. classical factors do not provide a complete under-standing of competitiveness in a long-term. a country can, for example, disproportionately consume its natural re-sources, manipulate exchange rates, or protect certain sectors and enterprises to create a competitive advantage in the short-term. similarly an organization can overuse its human and capital resources in the short-term. traditional factors are affected by economic cycles. short-term changes in economic indicators are quickly reflected in competitiveness indicators, but do not necessarily imply long-term structural improvements. socio-cultural factors based on social priorities are more permanent and less affected by external environment changes. they provide an opportunity to develop competitiveness strategies based on unique advantages. the impact of socio-cultural factors on various aspects of international competitiveness – external trade, entrepreneurship, innovations and knowledge transfer, productivity and international cooperation – has been observed in the previous research, as explained in the model illustrated in the figure 1. the purpose of this research is to define socio-cultural factors and explore their impact on international competiveness. 2. socio-cultural factors – the existing frameworks many definitions of culture exist. culture can be seen a broader sense as a civilization, or as certain values, beliefs and attitudes characterizing a certain group or community. in this study we have approached culture using the definition of geert hofstede seeing culture as “the collective programming of the mind distinguishing the members of one group or category of people from others”. each individual belongs to several groups socio-cultural factors environment: economics legislation social infrastructure institutional infrastructure factors of international competitiveness: international trade entrepreneurship innovation productivity international cooperation international competitiveness fig. 1. relationship model of socio-cultural factors and international competitiveness (source: authors’ model) 278 m. apsalone, ē. šumilo socio-cultural factors and international competitiveness and thus this collective programming can take place at different contexts and levels – such as at national, organizational, occupational and gender levels (hofstede, g. h., hofstede, g. j. 2005). in this study we focus on the national level – the impact that socio-cultural factors of a certain nation has on the country’s international competiveness. at the same time this study recognizes that organizational culture could have significant effects on international competitiveness of this organization. socio-cultural factors provide dimensions for measuring and comparing cultures, and they were principally defined by talcott parsons, edward t. hall and geert hofstede. american sociologist talcott parsons developed five relational orientations (parsons 1951): – universalism versus particularism – universalism seeks a general and consistent application, while in particularism a situation specific context matters the most; – individualism versus collectivism determines self-orientation versus collective orientation; – neutrality versus affectivity describes the level of expressing emotions; – specificity versus diffuseness measures the degree to which members of a certain culture separate their personal and public lives; – achievement versus ascription refers to status (based on achievement or attribution). american anthropologist edward t. hall defined three cultural dimensions (hall 1976): – context – high-context cultures have many contextual elements, meaning is embedded in the information and the listener is expected to understand the unsaid. in low context meanings are explicitly expressed; – time – monochronic time assumes planning and sequencing, polychronic time assumes parallel actions; – space – high territoriality concerns ownership, lower territoriality implies less ownership of space and less importance of boundaries. dutch social psychologist geert hofstede conducted one of the most comprehensive studies of how values in the workplace are influenced by culture. he used the dimension of individualism versus collectivism exploring the degree to which people in a society are integrated into groups, and defined four additional dimensions of culture (hofstede, g. h., hofstede, g. j. 2005): – power distance describes the extent to which less powerful members of organizations and institutions accept and expect unequal power distribution. – uncertainty avoidance describes a society’s tolerance for ambiguity. – masculinity values achievement, heroism, assertiveness and material rewards for success, while femininity – cooperation, modesty and quality of life. – long-term orientation versus short-term orientation associates the connection of the past with the current and future actions and challenges. 279 business, management and education, 2015, 13(2): 276–291 hofstede later introduced one more dimension – indulgence versus restraint – which measures happiness. these socio-cultural factors have been modified and used in further studies – for instance, alfons trompenaars conducted a comprehensive study, using the five factors developed by parsons, adding time and environment as additional cultural dimensions (trompenaars, hampden-turner 2005), while globe project measured nine dimensions, using power distance and uncertainty avoidance, and further developing the dimension of collectivism into societal collectivism and in-group collectivism. a different perspective has been provided by the world values survey. analysis of world values survey data made by political scientists ronald inglehart and christian welzel asserts that there are two major dimensions of cross cultural variation in the world – traditional values versus secular-rational values and survival values versus self-expression values. traditional values emphasize the importance of religion, parentchild ties, deference to authority and traditional family values. survival values place emphasis on economic and physical security. self-expression values give high priority to environmental protection, growing tolerance of foreigners and minorities, gender equality, and rising demands for participation in decision-making in economic and political life (world values survey 2015). the dimension of survival values versus selfexpression values is conceptually related to the dimension of individualism and collectivism. two more indexes are calculated – post-materialist index and autonomy index. 3. defining international competitiveness international competitiveness can be defined in many different ways. in this study we’re interested in national level competitiveness. initially international trade provided basis for such competitiveness – export exceeded import in a country with a competitive economy, and if import exceeded export, it was considered as not competitive (ezealaharrison 1999). this approach formed mercantilist policies. porter’s fundamental work “competitive advantage of nations” argued that the only meaningful concept of competitiveness at the national level is productivity. porter defined that “the principal goal of a nation is to produce a high and rising standard of living for its citizens. the ability to do so depends on the productivity with which a nation’s labour and capital are employed. productivity is the value of the output produced by a unit of labour or capital.” (porter 1990). in this research we have chosen two comprehensive frameworks assessing economic competitiveness landscapes. first, the world economic forum defines competitiveness as “the set of institutions, policies and factors that determine the level of productivity of a country” (world economic forum 2014) and calculates the global competitiveness index in 144 economies. gci is calculated using 12 pillars of competitiveness, grouped into 3 sub-indexes. gci assumes that, in the first stage, the economy is factor280 m. apsalone, ē. šumilo socio-cultural factors and international competitiveness driven and countries compete based on their factor endowments – primarily unskilled labour and natural resources. as a country becomes more competitive, move into the efficiency-driven stage of development. finally, as countries move into the innovationdriven stage, wages will have risen by so much that they are able to sustain those higher wages and the associated standard of living only if their businesses are able to compete with new and unique products (world economic forum 2014). so, when calculating the index, factors are weighted depending on the development level of the economy. second, swiss international management development institute’s (imd 2011) world competitiveness center calculates the world competitiveness index based on economic performance, government efficiency, government efficiency and infrastructure (imd). in comparison to the gci, the weight of wci indicators remains constant and is not adjusted for the development of an economy. 4. previous research on the impact of socio-cultural factors on international competitiveness several studies have confirmed the impact of socio-cultural factors on international trade (dwyer et al. 2005; hewitt et al. 2006; iwasaki, suganuma 2013) and export capacity (gonzález 2006). it has also been observed that economic development affects culture in different ways – increasing or lowering the impact of the socio-cultural factors (gannon 2008). analyzing the impact of socio-cultural factors on entrepreneurship, studies revealed that culture can be a source of entrepreneurial attitudes towards independence, risk and the distribution of power (shane 1994; tan 2002; alvarez, urbano 2012; noguera et al. 2013). evidence was found that national ethics affects business ethics (stajkovic, luthans 1997). it was also confirmed that the role of culture is crucial for the development of innovation – long-term aims, risk-taking ability and individual responsibility increases innovation capacity (king 2007; turró et al. 2014). culture affects productivity through shaping social decision-making process, forming an attitude towards innovation, affecting the ability to adjust to economic changes and through attitudes towards social equality (throsby 2001). certain cultural values also affect effectiveness, productivity and welfare (house, javidan 2002). cultural values will determine tightness and effectiveness of leadership (aktas et al. 2015). and it has also been observed that home country’s’ culture affect performance of multinational corporations abroad (schein 2001; halkos, tzeremes 2008). previous research has also confirmed the impact of socio-cultural factors on international cooperation. for in-stance, evidence has been found that culture determines how much the society is ready to invest in economic and social development and how open it is to international cooperation in general (hofstede, g. h., hofstede, g. j. 2005; gannon 2008). depending on the culture, international cooperation can become a source of mutual trust, or a source of conflicts. 281 business, management and education, 2015, 13(2): 276–291 5. data and methodology for this research, we examined 400 socio-cultural indicators assessed in 37 countries. firstly, we assessed five cultural dimensions developed and studied by geert hofstede in 64 countries. those include the power distance, individualism versus collectivism, uncertainty avoidance, masculinity versus femininity and long-term orientation versus short-term orientation. lately introduced dimension – indulgence versus restraint was not used in this research due to data availability. secondly, seven dimensions of culture measured in a cross-cultural study by alfons trompenaars, exploring cultural diversity in business, impact on the organization of the systems and management models in 51 countries. five of these dimensions were based on relational orientations defined by talcott parsons. trompenaars also studied sequential versus synchronic attitude towards time and internal versus external control towards environment, which refers to controlling environment or being rather controlled by it. thirdly, nine cultural dimensions were included in the globe cross-cultural leadership study conducted in 62 countries and especially focusing on leadership, management style and productivity. power distance and uncertainty avoidance were defined similarly to the respective hofstede’s dimensions. humane orientation was defined similarly to femininity – as a degree to which a group encourages and rewards individuals for being fair, altruistic, generous, caring and kind to others. this study distinguished two aspects of collectivism – societal collectivism – the degree to which individuals are integrated into groups within the society, and in-group collectivism – the degree to which individuals have strong ties to their small immediate groups. gender egalitarianism measures the degree to which a collective minimizes gender inequality. assertiveness – the degree to which individuals are assertive, dominant and demanding in their relationships with others. future orientation measures the extent to which a collective encourages and rewards future-oriented behaviours such as delaying gratification, planning and investing in the future. performance orientation measures the tendency towards performance improvement and excellence (house, javidan 2002). fourthly, we used the cultural orientations indicator (coi) developed by tmcorp, which analyses 22 socio-cultural aspects organized into 10 groups in 55 countries, mainly emphasizing the intercultural aspects of cooperation. the coi includes 10 groups. environment includes control, harmony and constraint and it refers to how individuals view and relate to the people, objects and issues in their sphere of influence. time includes 3 continuums – single-focus or multi-focus, fixed or fluid and past, present or future oriented, and it explains how individuals perceive the nature of time and its use. action is defined as either being or doing, and it explains how individuals conceptualize actions and interactions with people and objects in their environment. communication includes 4 continuums – high context or low context, direct or indirect, expressive or instrumental and formal or informal. space can be either private or public, and it refers to how individuals demarcate their physical and psychological space. power – hierarchy 282 m. apsalone, ē. šumilo socio-cultural factors and international competitiveness or equality – defines how individuals view differential power relationships. individualism determines how individuals define their identity – individualistic or collectivistic and universalistic or particularistic. societies and individuals are either competitive or more cooperative. order or flexibility in structure determines how individuals approach change, risk, ambiguity and uncertainty. and thinking explains how individuals conceptualize – it can be either deductive or inductive and either linear or systemic (coi 2011). finally, the world values survey covers people’s values, beliefs and attitudes towards family, work, environment and society, in total 350 indicators in 87 countries. world values survey wave 3 (1995–1999) was chosen based on the countries included in this period. indicators were chosen taking into account thematic relevance to the study, sample adequacy (available results for at least 30% of the 222,732 respondents), sample adequacy for each country as well as correlation with the competitiveness indicators. in addition the four world values survey indexes (post-materialist index, autonomy index, traditional values versus secular-rational values and survival values versus self-expression values) were included in the further calculation. while recognizing that each culture has its unique set of values and heritage, only those values and norms that can be quantified and thus internationally compared and relevant to the field of economics and business were included in this study. furthermore, the study assumes that these values and norms are broadly shared by the whole society independency of ethnical differences – we base this assumption on previous research that common social systems, such as education and economy affect the values of individuals more than ethnicity (parboteeah, cullen 2003). all cultural indicators were tested for correlation with international competitiveness indicators. as international competitiveness indicators we used the world economic forum’s global competitiveness index and its sub-indexes, imd world competitiveness index and its subindexes. we also looked at labour productivity as an internationally accessible and comparable productivity indicator, the world bank’s doing business index, transparency international’s corruption perceptions index and political risk services indicators. given the possible correlation between various cultural indicators, socio-cultural factors were determined using the principal component analysis (pca). this analysis was chosen as it does not require making assumptions about the data structure. such assumptions would be difficult to make, given the very diverse definitions, nature and scales of socio-cultural factors. in order to perform the pca, we made assumptions of linearity and statistical significance of the mean and of the covariance. the number of respondents and countries allow making an assumption about sampling adequacy, and as national averages are used, we can assume the significance of deviation. the socio-cultural factors have been rotated using direct oblimin method, allowing further usage of factors in a regression analysis. the number of basic factors was determined using the kaiser criterion (dropping all components with eigenvalues under 1.0), the scree test, the total percent variance explained and the interpretation criteria. 283 business, management and education, 2015, 13(2): 276–291 6. determining socio-cultural factors following the methodology explained in the previous section, 6 independent sociocultural factors emerged – collectivism and hierarchy; future, cooperation and performance orientation, self-expression, monochronism and rationality, economic orientation and social structure. the pca is statistically significant (table 1): table 1. kmo and barlett’s tests (source: authors’ scf calculations) kaiser-meyer-olkin measure of sampling adequacy 0.765 bartlett’s test of sphericity approx. chi-square 828.890 df 300 sig. 0.000 and the calculated components explain 81% of the total cultural variance (table 2). table 2. socio-cultural factors and international competitiveness (source: world economic forum 2011; imd 2011; euromonitor international 2011; transparency international 2011; world bank group 2011; prs group 2011; authors’ scf calculations) world economic forum imd l ab ou r pr od uc tiv ity c or ru pt io n pe rc ep tio ns in de x e as e of d oi ng b us in es s r an ki ng pr s c om po si te r is k r at in g g c i b as ic re qu ir em en ts e ffi ci en cy en ha nc er s in no va tio n an d so ph is tic at io n o ve ra ll c om pe tit iv en es s e co no m ic pe rf or m an ce g ov er nm en t e ffi ci en cy b us in es s e ffi ci en cy in fr as tr uc tu re collectivism and hierarchy –0.62 ** –0.61 ** –0.63 ** –0.62 ** –0.46 ** –0.15 –0.32 –0.38 * –0.62 ** –0.77 ** –0.77 ** 0.59 ** –0.59 ** future, cooperation and performance orientation 0.57 ** 0.38 * 0.57 ** 0.58 ** 0.70 ** 0.45 ** 0.75 ** 0.78 ** 0.49 ** 0.47 ** 0.52 ** –0.44 ** 0.49 ** self-expression 0.52 ** 0.53 ** 0.46 ** 0.51 ** 0.32 0.12 0.18 0.17 0.52 ** 0.28 0.34 * –0.41 * 0.54 ** monochronism and rationality 0.54 ** 0.60 ** 0.57 ** 0.41 * 0.56 ** 0.45 ** 0.51 ** 0.40 * 0.55 ** 0.48 ** 0.51 ** –0.40 * 0.48 ** economic orientation 0.42 * 0.38 * 0.43 ** 0.49 ** 0.54 ** 0.33 0.38 * 0.46 ** 0.61 ** 0.49 ** 0.48 ** –0.21 0.30 social structure 0.60 ** 0.58 ** 0.60 ** 0.56 ** 0.57 ** 0.34 0.66 ** 0.59 ** 0.41 * 0.38 * 0.56 ** –0.41 * 0.53 ** notes: * correlation is significant at the p = 0.05 (asymptotic). ** correlation is significant at the p = 0.01 (asymptotic – 2-tailed). 284 m. apsalone, ē. šumilo socio-cultural factors and international competitiveness collectivism and hierarchy describes the degree of integration and power distance in the society. high values for this factor indicate the importance of hierarchy and relationships. low values indicate equality, direct communication and precise approach to time. figure 2 illustrates collectivism and hierarchy in regional division. fig. 2. collectivism and hierarchy in regional division (source: authors’ calculations) we found high values for africa and the middle east, asia and the central eastern europe (the highest results in morocco, china, taiwan and bangladesh). most of the western cultures – anglo-saxon, germanic and scandinavian countries – have low tendency towards collectivism and hierarchy (the lowest values in denmark, finland, norway, sweden and the netherlands). future, cooperation and performance orientation describes the preference of future aims, tendency to reduce uncertainty, trust in social institutions and importance of teamwork. low values in this factor indicate priority of daily issues over future objectives and planning, as well as a low cooperation level in the society. scandinavian countries and the confucian asia demonstrate high values for this factor (the highest values in singapore, switzerland, japan and china). we found low future, cooperation and performance orientation in the central eastern europe, latin europe and latin america (fig. 3). fig. 3. future, cooperation and performance orientation in regional division (source: authors’ calculations) 285 business, management and education, 2015, 13(2): 276–291 self-expression explains the tendency of individuals to be independent and the mutual trust between the members of society. low values of this factor indicate low autonomy and dominance of religious and traditional values, as well as a lack of trust between people. we found high values of this factor in the nordic countries, the central eastern europe and in the confucian asia, while low values in africa, the middle east and latin america (fig. 4). fig. 4. self-expression in regional division (source: authors’ calculations) monochronism and rationality refers to linear attitudes towards time. individuals in monochronic societies tend to prioritize tasks and favour a rational assessment. individuals in polychronic societies tend to multitask. in addition, they are more expressive. anglo-saxon countries, the central eastern europe and scandinavia display high values for this factor (the highest results observed in the united states, australia, the russian federation and new zealand), while south asia and latin countries have low values (the lowest values in south korea, spain, india and italy. figure 5. illustrates monochronism and rationality in regional division. fig. 5. monochronism and rationality in regional division (source: authors’ calculations) economic orientation describes strong economic focus and achievement orientation. lack of economic orientation indicates the importance of relationships over results. germanic countries and sweden score high for this factor, while we found low values for latin america, confucian asia and central eastern europe (fig. 6). 286 m. apsalone, ē. šumilo socio-cultural factors and international competitiveness fig. 6. economic orientation in regional division (source: authors’ calculations) social structure refers to universal or particular attitudes. germanic, anglo-saxon and confucian asia have highly developed society structure (the highest values for germany, chile, india, taiwan and switzerland). social structure has lower values in africa, the middle east and latin cultures, especially turkey, vietnam, bangladesh, mexico and italy (fig. 7). fig. 7. social structure in regional division (source: authors’ calculations) 7. impact on international competitiveness we used multiple regression analysis to determine the impact of socio-cultural factors on international competitiveness. we found that the global competitiveness index is the best explained using a fivefactor regression model (it has the highest adjusted determination coefficient). collectivism and hierarchy, future, cooperation and performance orientation, self-expression, monochronism and rationality and social structure explain 83% of the global competitiveness index change (table 3). 287 business, management and education, 2015, 13(2): 276–291 table 3. global competitiveness index regression – model summary (source: world economic forum 2011, authors’ scf calculations) m od el r r-square adjusted r-square std. error of the estimate r square change change statistics durbin watsonf change df1 df2 sig. f change 5 0.913e 0.834 0.807 0.2726479 0.045 8.497 1 31 0.007 2.225 notes: predictors: (constant); collectivism and hierarchy; social structure; future, cooperation and performance orientation; self-expression; monochronism and rationality. economic orientation was not included in the model, as it was not statistically significant. the autocorrelation amongst the factors is not significant (durbin-watson test { }0 4 2 2; .∈ = and the regression analysis is statistically significant. all the factors included in the model have a positive effect on competitiveness, except collectivism and hierarchy that affects it negatively (table 4). table 4. global competitiveness index regression – regression coefficients (source: world economic forum 2011, authors’ scf calculations) m od el unstandardized coefficients standardized coefficients 95,0% confidence interval for b b std. error beta t sigma lower bound upper bound 5 constant 4.654 0.045 103.820 0.000 4.562 4.745 collectivism and hierarchy –0.208 0.051 –0.334 –4.087 0.000 –0.311 –0.104 social structure 0.180 0.050 0.291 3.577 0.001 0.078 0.283 future, cooperation and performance orientation 0.197 0.049 0.317 4.004 0.000 0.097 0.297 self-expression 0.170 0.048 0.274 3.550 0.001 0.073 0.268 monochronism and rationality 0.147 0.051 0.237 2.915 0.007 0.044 0.250 imd world competitiveness index is the best explained by a three-factor regression model. future, cooperation and performance orientation, monochronism and rationality and economic orientation explain 77% of the world competitiveness index changes (table 5). table 5. imd world competitiveness index – model summary (source: imd 2011, authors’ scf calculations) m od el r r-square adjusted r-square std. error of the estimate r square change change statistics durbin – watsonf change df1 df2 sig. f change 3 0.879c 0.773 0.749 9.1039788 0.049 6.244 1 29 0.018 1.821 notes: predictors: (constant); future, cooperation and performance orientation; monochronism and rationality, economic orientation. 288 m. apsalone, ē. šumilo socio-cultural factors and international competitiveness the other three socio-cultural factors (collectivism and hierarchy, self-expression and social structure) do not have a significant effect. the autocorrelation amongst the factors is not significant (durbin-watson test { }0 4 1 8; .∈ = and the regression analysis is statistically significant. all the factors included in the model have a positive effect on competitiveness (table 6). table 6. imd world competitiveness index – regression coefficients (source: imd 2011, authors’ scf calculations) m od el unstandardized coefficients standardized coefficients 95,0% confidence interval for b b std. error beta b std. error beta b 3 constant 70.051 1.598 43.830 0.000 66.782 73.319 future, cooperation and performance orientation 10.271 1.602 0.588 6.411 0.000 6.994 13.547 monochronism and rationality 7.471 1.693 0.415 4.414 0.000 4.009 10.933 economic orientation 4.226 1.691 0.242 2.499 0.018 0.767 7.684 to illustrate the impact of socio-cultural factors, we provide an example of three small, open economies – denmark, chile and singapore – for which international competiveness is particularly important, given the limited size of their domestic market. denmark ranks as the 8th most competitive economy globally in the imd world competitiveness scoreboard and the 13th most competitive economy globally in 2014– 2015 after the global competitiveness index. similarly to other scandinavian nations, danes demonstrate a strong equality orientation (low collectivism and hierarchy). high scores in future, cooperation and performance orientation impact the long-term approach towards strategy. high orientation towards self-expression is the third cornerstone of denmark’s international competiveness (it has the 5th highest score amongst the countries included in this research). this factor drives openness towards new ideas, creativity, innovation and international cooperation. ranking 33rd by the global competitiveness index and 35th in the imd world competitiveness scoreboard, chile has the most competitive economy in the latin america. chile stands out with a very high orientation towards social structure (the 3rd highest score amongst the countries included in this research). chile has lower corruption and more transparent business environment (transparency international 2015). it is complemented by high economic orientation and monochronism and rationality. singapore ranks 2nd by the global competitiveness index and 3rd in the imd world competitiveness scoreboard. singapore has a very interesting culture, shaped by both – the confucian asia and the west values. singapore is particularly characterized by a sin289 business, management and education, 2015, 13(2): 276–291 gle socio-cultural factor – future, cooperation and performance orientation (singapore scores the highest amongst all the countries included in this research, and the second score is twice lower). singapore’s international competitiveness is also positively affected by more direct business communication and more precise approach towards time. 8. conclusions based on several global frameworks, in this study we determined and calculated 6 socio-cultural factors – collectivism and hierarchy; future, cooperation and performance orientation, self-expression, monochronism and rationality, economic orientation and social structure explaining 81% of the total cultural variance. this study confirms the impact of socio-cultural factors on international competitiveness. collectivism and hierarchy, future, cooperation and performance orientation, self-expression, monochronism and rationality and social structure explain 83% of the global competitiveness index change. and future, cooperation and performance orientation, monochronism and rationality and economic orientation explain 77% of the world competitiveness index change. all of the defined socio-cultural factors except collectivism and hierarchy affect international competitiveness positively. the unique competitive advantage of certain socio-cultural factors has been illustrated by equality in denmark, strong tendency towards social structure in chile and future, cooperation and performance orientation in singapore. however some limitations in our study must be emphasized. the data used to calculate the socio-cultural factors have been collected by several studies having diverse aims, diverse geographic coverage and diverse measurement scales. the data has been collected in different times. we would argue, however, that socio-cultural factors are long-term indicators and thus do not change rapidly in a relatively short time. yet it could be further explored, how changes in socio-cultural factors result in changes of long-term competitiveness indicators. another aspect is that not only socio-cultural factors affect international competitiveness, but country’s economic development could over time change its socio-cultural factors. future research could be directed towards an investigation of this aspect. nevertheless this study provides solid empirical evidence for policy implications on the fact that socio-cultural factors are important and along with so-called traditional factors have a direct effect on international competitiveness. disclosure statement we declare that we do have any competing financial, professional, or personal interests from other parties. 290 m. apsalone, ē. šumilo socio-cultural factors and international competitiveness references alvarez, c.; urbano, d. 2012. cultural-cognitive dimension and entrepreneurial activity: a crosscountry study, revista de estudios sociales 44: 146–157. http://dx.doi.org/10.7440/res44.2012.14 aktas, m.; gelfand, m.; hanges, p. 2015. cultural tightness–looseness and perceptions of effective leadership, journal of 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five universities and four countries: latvia, denmark, france and the usa. madara apsalone started to work with latvian enterprises willing to globalize their businesses and foreign investors expanding to latvia just after the first year of her bachelor studies, and has an extensive experience working with international affairs and european union policy for the latvian government. ērika šumilo, phd, professor, is the head of department of international economics and business at the faculty of economics and management, university of latvia. she is also the director of international economics and commercial diplomacy and international economic relations programmes at the faculty of economics and management, university of latvia. research interests: competitiveness, human and social capital, innovation, organizational culture, cross-cultural studies. http://epub.prsgroup.com/products/international-country-risk-guide-icrg http://dx.doi.org/10.1162/152417301750406112 http://dx.doi.org/10.1016/s1090-9516(97)90023-7 http://dx.doi.org/10.2139/ssrn.1552182 http://www.transparency.org/cpi2011/results http://www.transparency.org/country/#chl http://dx.doi.org/10.1016/j.techfore.2013.10.004 http://www.doingbusiness.org/ http://www3.weforum.org/docs/wef_gcr_report_2011-12.pdf http://www3.weforum.org/docs/wef_globalcompetitivenessreport_2014-15.pdf http://www.worldvaluessurvey.org/wvs.jsp http://www.worldvaluessurvey.org/wvscontents.jsp this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons.org/ licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2023 the author(s). published by vilnius gediminas technical university issn 2669-2481 / eissn 2669-249x business, management and economics engineering 2023 volume 21 issue 1 pages 169–189 https://doi.org/10.3846/bmee.2023.18822 towards poverty alleviation for the base of pyramid: social business model in urban low-cost housings mohammed ali berawi 1, perdana miraj2 1department of civil engineering, universitas indonesia, depok 16424, indonesia 2department of civil engineering, pancasila university, srengseng sawah, jakarta 12640, indonesia article history: abstract. purpose – this study investigates alternative a small-scale social business model that potentially generate sustainable income for households at the base of the pyramid. a comparison of two low-cost housings that have a different geographical condition and local characteristics is examined. research methodology – this research adopted two-stage approach to address the research objective. a pairwise comparison was employed to evaluate alternatives based on selected criteria for decision-making. in the second stage, the proposed business model was assessed by taking into account investment, processing cost, and revenue. findings – the findings of this research suggest suitable business model that combine profit orientation and facilitates social mission in urban settings. the business model offers attractive financial feasibility from the investor viewpoint and simultaneously engages low-income households to improve their prosperity level leaving the base of the pyramid (bop) status. research limitations – this paper is not involving division of responsibility between stakeholders in low-cost housing and bop sector. this study also not discussed how social entrepreneurs play a role in the social business model. there is a need to further investigate how the impact of social entrepreneurs on this model and engage collaboration with interest parties to engage community development. practical implications – the findings recommend strategies that can be used by policy-makers and other related stakeholders to scale-up the business model, empower more low-income households, and create new job opportunities for urban poor. the findings of this research also indicate social business model that enables households at the bop to earn sustainable income and release their current poverty status. originality/value – the research is one of the few studies that explored alternatives to social business models available for urban poor by taking into account project feasibility. no previous research has been attempted to consider both pairwise comparison and life cycle cost approach in the development of social business models. this research can be found useful for those with similar issues not only in emerging economies but also in developed countries. ■ received 23 march 2023 ■ accepted 20 june 2023 keywords: developing countries, feasibility, housing, poverty, social business model, sustainability. jel classification: o18, o35, o53.      corresponding author. e-mail: perdanamiraj@yahoo.com introduction currently, more than half of the world population is living in cities (thakur et al., 2022). in most urban areas, limited land supply along with a growing population causes an increased price of housing. those who have low and unstable income – often called the base of the pyramid (bop) cannot purchase proper settlement; therefore, the slum area is the only option they have for a living (ouma et al., 2022). as mega-cities continuously emerged particularly http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2023.18822 https://orcid.org/0000-0002-4781-7494 https://orcid.org/0000-0003-2197-1378 mailto:karahan.kara@artvin.edu.tr mailto:perdanamiraj@yahoo.com mailto:perdanamiraj@yahoo.com 170 m. a. berawi, p. miraj. towards poverty alleviation for the base of pyramid: social business model in urban low-cost... in asia that estimated to occupy more than 90% of urban development in the near future (un-habitat, 2016), there is a growing concern to fulfill adequate urban settlement for every citizen. in 2030, it is estimated that one-seventh of the people will be living in informal settlements or slum areas worldwide (corburn & sverdlik, 2017). indonesia as one of the developing countries in south east asia experiences a growing slum area as housing for the poor. in 2014, there is approximately 38,431 ha of slum areas in 4,108 sites across the nation. the indonesian government targeted to minimize the number of slum areas into less than one hundred sites in 2019 by introducing affordable housing nationwide (ministry of public works and housing, 2016). although some of the housing allocated for regular occupants, most of the housing targeted low-income households as primary target. the government considers number of units and locations to evaluate the stages in national housing program. major cities such as jakarta and surabaya are two targeted cities in the first stage of development due to their growing number of slums area and low-income households. jakarta as the capital city of indonesia have acute poverty issue where the population live in slum areas almost reach 50% (jakarta central bureau of statistics, 2022). as vacant land in the city continues to be limited, the provincial government of jakarta started to relocate low-income households from slums to an affordable house for a better living environment in the past few years. in the long term, this strategy expected to increase the ability of low-income households to find jobs, improve competitiveness, and earn a better quality of life (majid, 2022). the local government charges a monthly fee for affordable housing that ranges between us$ 53.50 and us$ 100.33 depending on the size and location of the room. in some cases, low-income households may be required to pay less than us$ 8 per month for an 18-square-meter unit on the fifth level of the building in outer part of the city (jakarta provincial government, 2018). this fees relatively cheaper than typical vertical houses across the city due to government support through a subsidy. in reality, there is a huge challenge regarding the sustainability of monthly charge. in the last five years, the local government experience a deficit of us$ 2,013,888.89 from the low compliance of occupants. the fact that most occupants had unstable earnings mostly below us$ 100/month and their expenditures include transport and/or daily expense almost occupy the overall income, thus it is not a surprise they cannot accommodate housing charges every month. in the past decade, academics have been discussed social business as one of the solutions to cope with social problems and environmental issues, particularly in developing economies. some studies discussed a combination of social businesses with local contexts such as tourism to alleviate poverty of local people (dahles et al., 2020). while others evaluate the impact of technology adoption to provide the basic needs of the people in terms of safe drinking water to the urban poor (sarkar, 2019). some studies attempt to scale up current business process to engage more community into the project, in an attempt to boost economic activities and release low-income households from the current poverty level (bocken et al., 2016; palomares-aguirre et al., 2018). in general, every social business model pursues sustainability and empowerment of community as the core functions to tackle poverty and other related social problems worldwide (akter et al., 2020; kuckertz et al., 2023). in indonesia, there are more than 340,000 social businesses in partnership with 2,000 both profit-based and non-profit organizations and targeting women, local people, and disability business, management and economics engineering, 2023, 21(1): 169–189 171 (cnn, 2020). however, despite the increasing deployment and adoption across sectors and backgrounds, some business models struggle to reach financial break-even point while some others are not suitable for a certain type of household (cheah et al., 2019). it is common that individuals from bop background in developing countries such as indonesia only knows the job they currently enrolled and little to pursue the path of entrepreneurship (srimulyani & hermanto, 2022). thus, instead of finding new ways of opportunity in business, they often stay to their current activities although it might heavily cost them for transport or other daily expenditure when their settlements are relocated to other places far from the previous job location. existing research has examined the role and impact of social enterprises in addressing social problems and environmental issues, particularly in developing economies. however, there is a dearth of research on their application and viability in urban poor communities. particularly unexplored is the potential of social business models in the context of urban housing affordability and sustainability for low-income households in expanding urban areas, such as jakarta, indonesia. it is necessary to conduct further studies in order to comprehend how social business models can be designed and implemented to effectively mitigate the housing affordability issues confronted by the urban poor. this includes evaluating the financial viability of such models, determining how they can be adapted to the unique socioeconomic dynamics of urban impoverished settlements, and determining how they might contribute to enhancing the residents’ quality of life and financial stability. in addition, there are no studies that examine how social business models can encourage and empower individuals at the base of the pyramid (bop) in developing nations to engage in entrepreneurial activities. given the prevalent challenges associated with relocation, such as limited employment opportunities and high transportation costs, studies that investigate innovative solutions in this direction could make a significant contribution to the literature and policymaking in this area. based on the problems, and opportunity that has been discussed, this research formulate research question as follows. “how can social business models be effectively designed and implemented to address the housing affordability challenges faced by the urban poor in rapidly growing urban areas?” the research output expected to mitigate increasing debt from individuals in the base of the pyramid, to attract investment for business sustainability, and to provide input for government in developing policies and regulations related to housing, urban poor and community engagement. 1. literature studies in an attempt to fully understand how to develop social business for low-income households, this research firstly discussed literature of low-income households and the key concept of social business as follows. 1.1. low-income households and poverty low-income households define as someone who unable to fulfill their basic needs as the result of limited assets, low access to public services, and a low level of exchange entitlement. 172 m. a. berawi, p. miraj. towards poverty alleviation for the base of pyramid: social business model in urban low-cost... they often associated with the definition of the base of the pyramid (bop) due to their similarity in purchasing power and income generation. nowadays, it is estimated that over four billion people are living in this economic level worldwide. the people in this category have annual income per capita by 1,500–2,000 usd (visser & prahalad, 2013) or employ a threshold of 1 or 2 usd/day (kolk et al., 2014). world bank (2022) further emphasizes those living on less than $2.12 a day categorized as extremely poor. despite income measurement, individuals categorized as low-income households also considered being a group of people who use all their activities and time to fulfill basic needs such as food, shelter, and clothing. according to united nations development programme (2018) report, several factors outside personal earnings leading someone to instate in the base of the pyramid such as health (child mortality, nutrition), education (years of schooling, enrollment), and living standards (water, sanitation, electricity, cooking fuel, floor, assets). unlike those living in developed economies, people in developing countries particularly in africa and parts of asia such as south asia and south east asia countries unable to access primary education, making it difficult to find a proper job and earn income as an adult. this situation resulting these people mostly into two options, begging for aid or borrowing to – in some cases loan shark for food (jaiyebo, 2003). although some studies argued that most bop living in rural areas due to their dependency on to agriculture sector rather than service or manufacturing (ma et al., 2022), but those living in cities also vulnerable to poverty when they failed to seek opportunity in generating income for the family (headey et al., 2022). many stakeholders have put their interest in alleviating low-income households for a better life by taking into account various strategies such as loans or other aid-based programs to empower the local community (biglaiser & mcgauvran, 2022). however, it is believed that large firm involvement plays pivotal points in solving problematic issue of poverty alleviation. initially, they need to take responsibility in terms of social and environmental issues for running a business and later on evolved to become the featured program of the company in dealing with the poverty issue. therefore social mission in emerging markets dominated by bop consumers argued as an inspiration for expanding companies’ existence while at the same time contribute to one of the world’s acute problems (seelos & mair, 2005). various stakeholders such as government agencies, international donors and non-governmental organizations (ngos) need to switch their traditional approach in helping low-income households from aid-based programs to participatory-based approach by considering bop as the agent of change in combating poverty (visser & prahalad, 2013). since then, the discussion of poverty alleviation has been evolved from bop as consumers and recipients of the existing product (geradts et al., 2022) to the engagement of bop not only as a business partner but deepen to product invention, management, and delivery process (dembek et al., 2020). many initiatives that focus on different sectors emerged in various countries to utilize resources from low-income households and release them from the poverty trap (seelos & mair, 2005). despite various attempts to engage social and environmental purposes into a profitable business, there is little evidence that this type of hybrid organization delivers its original promise in alleviating poverty. one business model from a particular country may not suitable for adoption and requires some adjustment or a different approach that has to established to reach successful social business initiatives. therefore, both organizations business, management and economics engineering, 2023, 21(1): 169–189 173 and participants must understand the context of living conditions, cultural habits, economic variations, product needs, and market orientation, in order to increase bop participation and create a sustainable business model (semprebon et al., 2020; yunus et al., 2010). 1.2. social business for bop the interest to develop business model has emerged since the 1990s and to date have been evolved into multiple concepts and adopted in economic, manufacturing, social, cultural, or other contexts. a business model denotes the rationale on how an organization creates optimum strategies to deliver products that meeting customers’ requirements (palomares-aguirre et al., 2018). a business model often involves customer value, profitable activities and efficient resources to capture values for the targeted market (zott et al., 2011). initially, most firms tend to conceal their business model to prevent competition and maintain their supreme existence in the longer-term (teece, 2010). nowadays, many businesses have been collaborated with other organizations to pursue similar objectives (foss & saebi, 2017; sabatier et al., 2017). unlike traditional business model that pursue three predominant elements (value proposition, value constellation, positive profit equation) as the core function of the organization, social business models induced social profit as an additional component to capture both economic and social value (spieth et al., 2019; yunus et al., 2010). yunus et al. (2010) argued that the social business model aims both profit and non-profit objectives simultaneously by involving all related stakeholders in the business process. it is argued that business has to earn adequate revenues to cover its operation costs, but profits generated from running the organization are reinvested to the business instead of to the investor. however, this concept may not apply in practice in different settings, thus several adjustments are required when considering this type of social business model in other case studies (madanaguli et al., 2023). seelos and mair (2007) emphasize that investment from the business should be justified from sufficient financial returns and social implications. in the past years, literature has been discussed components that should be included for creating a social business model. some of these components are mainly adopted from traditional business aims to capture customer value proposition. for instance, hedman and kalling (2003) argued that the business model should involve customers, competitors, the offering, activities and organization, resources, and factor market interactions. rasmussen (2007) emphasizes six components to deliver business model including (1) value proposition, (2) market segment and revenue model, (3) value chain, (4) cost structure and profit potential, (5) value network, and (6) competitive strategy. on the other hand, osterwalder and pigneur (2010) proposes several components such as customer segments, value propositions, channels, customer relations, revenue streams, key resources, key activities, key partnerships, cost structure. while, michelini and fiorentino (2012) suggests five building blocks for social business including value proposition, governance model, partner network, market segment, and revenue management. furthermore, there are four macro-level conditions, consist of governance, socially inclusive economic approach, financial services, and entrepreneurial culture that should be considered when dealing with business and social issues (laylo, 2018). 174 m. a. berawi, p. miraj. towards poverty alleviation for the base of pyramid: social business model in urban low-cost... table 1. research variables for the case study research variables description market growth projected industry growth in the future human resources number of low-income households involved based on their level of productivity revenue nett income gained by the low-income households participant market entry level of penetration for new business by taking into account porter five forces indicator this research takes into account the theoretical framework suggested by yunus et al. (2010) and michelini and fiorentino (2012) to achieve the research objective and recommends a suitable business model for the case study. this research assessed potential industry in terms of business sustainability, therefore the prospect of the business should carefully addressed by taking into account historical data, future projection, or other related considerations. on the other hand, human resources related to the number of low-income households in performing industrial activities to generate revenue. if the industry attracts a high number of participants from low-income households, this social business model potentially expanded to contribute to alleviating poverty at the national level. moreover, a business model cannot be separate from revenue that enables organization to operate business in the longer term. therefore, it is crucial to select the type of social business model that offers optimum revenue for business sustainability. last, market-entry relates to the chance of a product successfully penetrate the market and generate income for the organization and the low-income households as the participants. the summary of research variables shown in table 1. 2. research methodology this research employs two stages to achieve research objectives. firstly, this study adopts pairwise comparison to evaluate alternatives for decision-making. in this second stage, the proposed business model evaluated by taking into account project life cycle (lcc) including initial cost, operation and maintenance cost, and revenue (miraj et al., 2021). 2.1. pairwise comparison the method of pairwise comparison has been extensively developed as a means of prioritizing criteria. this approach involves requesting stakeholders to compare two criteria at a time, thereby promoting a comprehensive evaluation of all elements within the criteria set (pinzon amorocho & hartmann, 2022). this study incorporated the expert panels committed to affordable housing, including those from the ministry of cooperatives and smes, private, ministry of public works, and jakarta provincial agency (see table 2 for the background of experts). the research was primarily focused on indonesian participants. this selective approach assured a level of consistency in the collected data by avoiding cultural differences between international and local participants that could have led to discrepancies. by concentrating solely on indonesian respondents, the research could provide a more homogeneous and culturally specific understanding of the issues at hand in relation to affordable housing in jakarta. business, management and economics engineering, 2023, 21(1): 169–189 175 table 2. background of experts identifier current role institution experiences area of expertise expert panel dates exp 1 head of general affairs ministry of cooperatives and smes 24 years planning and policy development in sme 11/05/2022 exp 2 comissioner private company 10 years industry expertise exp 3 head of settlement section jakarta provincial agency 15 years policy expertise exp 4 head of housing management system and strategy ministry of public works 18 years planning and policy in financing lowcost housing initially, a matrix comprising all relevant factors was constructed. following the instructions provided in table 3, the experts determined the relative significance of each of the pairings. table 3. guidelines for scoring score guiding criteria 0 when the factor in the left-sided column produce equal benefit than the right one. 1 when the factor in the left-sided column produce slight benefit than the right one. 2 when the factor in the left-sided column produce more benefit than the right one. 3 when the factor in the left-sided column produce significant benefit than the right one. a decision matrix is a table to determine the best alternative among others based on the weighted score. after finishing the matrix, the geometric mean of each criterion’s scores was computed (by locating the nth root of the product of all scores, where n is the total number of criteria within the matrix). the cumulative sum of all these geometric means was then calculated. each criterion’s weight was determined by dividing its geometric mean by the total sum of all geometric means (li et al., 2020; zardari et al., 2015). the calculation of variables in decision matrix can be seen in table 4. table 4. pairwise comparison matrix of research variables variable a b c d product product ^0.5 sum of (product ^0.5) weighting a – 3 1/3 ½ 3.833 1.958 7.464 26.23% b 1/3 – 2 2 4.333 2.081 7.464 27.88% c 1/3 1/2 – 1/3 1.167 1.080 7.464 14.47% d 2 1/2 3 – 5.500 2.345 7.464 31.42% notes: a – market growth; b – revenue; c – human resources; d – market entry. each housing has three alternatives of potential social business model that will be treated as similar calculation above. shrimp industry, catfish fillet processing, and knitting are three social business model for marunda housing. while brown rice processing, educational toys, 176 m. a. berawi, p. miraj. towards poverty alleviation for the base of pyramid: social business model in urban low-cost... and handicraft are three social business model for cbs housing. in order to determine the best alternatives, following formula was used. total weight of each alternative = (w1 * p1) + (w2 * p2) + (w3 * p3) + (w4 * p4). weights: w1 – global weight of market growth; w2 – global weight of revenue; w3 – global weight of human resources; w4 – global weight of market entry. weight of alternative: p1 – local weight of market growth; p2 – local weight of revenue; p3 – local weight of human resources; p4 – local weight of market entry. the highest score selected as the best alternative and further analyzed using life-cycle cost analysis to determine its feasibility and its impact on low-income households. 2.2. life cycle cost while there are numerous resources available lcc, there is no definitive conclusion regarding the most appropriate lcc model to adopt, as it is primarily dependent on the specific objectives, sectors, and scope that researchers and practitioners wish to achieve (durairaj et al., 2002). the relevant categories of costs for this study are detailed in table 5. the following sections will provide in-depth discussions of all lcc components and other crucial factors, such as inflation rate, that contribute to determining the total lcc. table 5. cost categories of life cycle cost initial cost operation and maintenance costs renewal costs ic 1 land acquisition oc1 electricity, water, advertisement r1 equipment replacement ic 2 production building oc2 building maintenance ic3 warehouse oc3 low-income housing fees ic4 car oc4 management ic5 production materials oc5 materials and others the rate of return generated from the business model needs to meet the weighted average cost of capital (wacc) from companies that interested to participate in funding the project. wacc is an indispensable tool for evaluating the performance of investments, performing both direct and indirect roles. in essence, it affects the required rate of return on capital over a specific period of time for stakeholders and lenders (koziol, 2014; mian & vélez-pareja, 2008). from the perspective of the company, wacc is a valuable component of valuation, as it indicates the rate of return for evaluating prospective business projects. consequently, the wacc plays a significant role in the discount rate utilised by the discounted cash flow (dcf) method and other valuation models (franc-dabrowska et al., 2021). literature showed that wacc from multiple companies in indonesia are about 13% (finbox.com, 2023). business, management and economics engineering, 2023, 21(1): 169–189 177 2.2.1. initial cost the initial costs consist of five components, which have been determined based on inputs from similar studies conducted frequently in indonesia and in-depth interviews with relevant stakeholders. these components include land acquisition, the construction of a production facility, a warehouse, a vehicle, and the acquisition of production equipment. the following formula is used to calculate the total investment cost for the completion year(s): 5 1 v k k ic ic = = ∑ , (1) where kic represents investment cost (us$) of components k that follows categorization in table 5. 2.2.2. operation and maintenance cost this study examines five components of operation and maintenance, including electricity and water, building maintenance, fees for low-income housing, and management, among others. this business model takes into consideration the rent paid by tenants who are also employees. the purpose of this arrangement is to ensure that the profits generated by the business model result in affordable housing and the occupants’ ability to pay. the total cost of operation and maintenance is the sum of these component costs, as detailed in table 5. 5 1 t y y om om = = ∑ , (2) where omt is the total operation and maintenance cost, while omy is the maintenance cost. both are incurred every year during the particular life span that considers the inflation rate of and computed as follows: ( ) ( ) 1 1 1 n y z n s om om s s + − = + , (3) where: omz – the fixed cost of specific components z in the operation or maintenance (us$); s – sectoral inflation rate (%); n – project life span (years). 2.2.3. renewal cost renewal (r) costs consist of different materials and components that need to be replaced during their service life. each component for renewals shall be evaluated, taking into account the essential cost, number of occurrences, life expectancy, and adjusted using present-value to display its present cost. this calculation expressed by the following formula: ( ) 1 1 1 t x i fi rc rc s= = + ∑ , (4) where: rci – each component requiring replacement; t – number of occurrences; s – general inflation rate (%); f – the event of renewals (years). 2.2.4. inflation rate inflation is a fluctuating process (either an increase or decrease) of prices linked to a market system. consumption levels, market liquidity, or even the logistics distribution system can 178 m. a. berawi, p. miraj. towards poverty alleviation for the base of pyramid: social business model in urban low-cost... have an impact on this variation (barro, 2013; guinée et al., 2011). annual reports released by reputable international organisations or national statistics bodies often contain inflation figures. the indonesian statistics agency is in charge of disseminating this information in indonesia, and their online database makes it simple to do so. the consumer price index (cpi), which reflects the fluctuating costs of goods and services, is used to measure inflation. the average inflation rate for indonesia is 5.53% (miraj et al., 2021). 2.3. the case studies in this study, two examples of low-cost housing in jakarta, indonesia’s capital city, were chosen as case studies to investigate suitable social business models. despite its role as one of southeast asia’s fastest growing urban centers and its important contribution to the nation’s economic activity, jakarta has severe social equity discrepancies, particularly in terms of population welfare. according to data from the jakarta bureau statistics agency (2022) as shown in figure 1, the number of low-income households in the city has increased during the last decade. from 2012 to 2019, the number of low-income households stayed largely below 400,000, with a record high of 412,790 households in 2014. however, in the previous three years, this figure has skyrocketed, reaching 502,040 families. while this figure looks to be small (4%) in comparison to jakarta’s total population of 9.6 million, it is critical to realize that these marginalized citizens have an intrinsic right to appropriate urban living. as a result, the case studies chosen in jakarta provide a suitable foundation for providing a benchmark model that might potentially be used in comparable urban environments. the provincial government of jakarta attempt to accommodate housing for low-income households by launched low-cost housing in 13 locations. however, the primary survey shows that the ability to pay from these low-income households is us$ 16.41 which far below from monthly rental fees charged by the government. in order to better understand the impact of 100 000 200 000 300 000 400 000 500 000 600 000 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 h ou se ho ld s year figure 1. number of low income households in jakarta business, management and economics engineering, 2023, 21(1): 169–189 179 the proposed social business on low-income households earnings and poverty reduction, this research considers two low-cost housing based on geographical condition and local characteristics namely marunda housing and cipinang besar selatan (cbs) housing. the earlier located in the coastal area with the fishery sector as a primary job. while the latter located in suburban areas with trading as a primary job. 2.3.1. marunda housing marunda housing located in cilincing, north jakarta has nine blocks and each block has six stories. the type of unit is similar for every block but the number of units varied due to the different gross floor area. the units are consist of two bedrooms, a bathroom, a living room with a kitchen, and a sunroom. the local government also provide clinics, early childhood institution, green space, and transportation network around the housing complex. in total, this housing has 2,580 units and inhabited by approximately 8,700 persons. the housing which firstly operated in 2009 is owned and managed by the housing department of jakarta province to accommodate low-income households to have proper residential for the living. based on the governor regulation no. 55 in 2018 concerning the housing service levy rates, the user will be charged us$ 13.36 to us$ 15.56 per month for selected occupants (those who relocated from slum area) and us$ 27.70 to us$ 32.23 for regular occupants. although rental charges for the housing kept minimum, the jakarta provincial government experience debts for us$ 705,000 from 560 units. most of the residents of the marunda housing are refugees from the penjaringan sub-district – an area in the northern part of jakarta most frequently affected by flooding. in addition, the kalijodo region (area of illegal prostitution activities) refugees also relocated to the housing. based on the primary survey to the site, most of them unable to pay monthly rent due to limited earnings or if they were able to, unwillingly to pay because the management missed to charge them. this housing is located near the coastal area and potentially generate revenue related to salt-water resources. the location also included in national spatial planning as a special economic zone, which targeted to contributes to local economic roughly 7% annually from tourism, trade, creative industries, services, and finance as well as high technology and non-pollutant industries. near the location, there are two logistic centers namely marunda center and marunda terminal. both expected to be an international-scale industrial and warehousing area that serves maritime, cargo, mining, and vehicle crossing activities. 2.3.2. cipinang besar selatan (cbs) housing cbs housing located in cipinang, east jakarta area, and has two blocks, and each block has six stories, similar to the previous housing in marunda. in 2008, this housing had 200 units, but the number grows into 300 units in 2017 due to expansion from the provincial government, the housing currently inhabited by approximately 1,500 persons. public facilities provided by the provincial government exist in this housing consist of a playground, soccer field, wifi area, and transportation network. similar to marunda housing, the provincial government experience outstanding payment for us$ 59,343.76 from 163 units. in contrast with occupants located in marunda housing which more diverse in terms of background and job occupation, this housing mostly occupied by those from the slums area in 180 m. a. berawi, p. miraj. towards poverty alleviation for the base of pyramid: social business model in urban low-cost... ciliwung river, pluit reservoir, and east canal of jakarta. they are also incapable to accommodate monthly rental fees mainly because of high transportation costs from their residence to the workplace. east jakarta as the area of this housing has potential economic generation such as the central rice market located fifteen kilometers from the site, tourism area such as taman mini indonesia indah, cipinang river, as well as gombrong central toys market. the site of both housings can be seen in figure 2. 3. results and analysis 3.1. potential business in the case studies marunda housing has huge potential in fishery business due to its premium to the coastal area. this is supported by a report from the indonesian government that fishery production plays a significant role in people’s daily consumption accounted for more than 20 million tons (indonesian ministry of marine affairs and fisheries, 2018) the report also shows that other industries related to the fishery sector experiencing an exponential increase such as the processing industry and tourism since 2014. however, there is a limited option to use the fishery sector as a social business model for urban poor in low-cost housing. the production should consider a small and medium scale of business to maintain a simple structure of the organization and limit the investment as low as possible. two potential industries in the fishery sector can be adopted due to its flexibility in terms of the scale of production and the increasing demand in the last ten years namely shrimp and fish processing. on the other hand, this research considers the crafting industry as potential commodities that can be used for low-income households’ main jobs. this creative industry contributes more than us$ 50 million per month across indonesia. the demand particularly crafts knitting from indonesia also increases in the us and europe which therefore shows great prospects to generate revenue and to increase economic activities. figure 2. location of marunda housing and cbs housing (source: wikimedia commons, 2007 with author adjustment) business, management and economics engineering, 2023, 21(1): 169–189 181 in contrast with marunda housing located in the northern part of the cities, cbs housing located in the suburban area has potential in manufacturing and toy processing. there is two trading market that can be used the main source to generate revenue near the location namely gombrong toys market. furthermore, low-income households will be trained to decorate and to form the craft for selling purpose, and earnings in return from their result. the local government and related ministries such as indonesia creativity board and ministry of small and micro enterprise invited to conduct workshops or entrepreneur training to the participants of the industry. this research also proposed the brown rice processing industry as an alternative industry for the cbs housing. there is cipinang rice market nearby the housing which potential for collaboration and trading activities. besides, people living in cities started to consider their intake to gain a healthy life. brown rice is one of the option to provide healthy food while at the same time, gain fiber, vitamins, and minerals. the content of fiber in brown rice will help in reducing cholesterol levels and make someone full longer rather than regular rice. cbs housing also needs to capture the opportunity of this industry due to its close distance to the rice market. 3.2. pairwise comparison analysis there are four indicators in the table: market growth, revenue, human resources, and market entry. the weight assigned to each indicator reflects its significance or contribution to the overall evaluation. the table displays the percentages of market growth, revenue, human resources, and market entry for each housing alternative option which is based on pairwise comparison matrix of research variables (see table 4). to determine the total weight of an option, multiply the percentage of each indicator by its assigned weight and add the resulting values. for instance, the market growth of shrimp industry in marunda housing was calculated by multiply 34.51% with the global weight of market growth of 26.33%. after performing the calculations for each indicator, ones obtain a weighted score for each option. these scores are represented in the table’s total weight column, which indicates the aggregate performance of each alternative across all indicators. the alternative with the highest total weight is deemed the most desirable option, whereas a smaller total weight indicates a less desirable option. among the three alternatives, the processing of catfish fillets is the most profitable business model for marunda housing. this is due to its ability to effectively employ a large number of urban impoverished individuals, its market growth potential, its ability to generate stable revenue, and its relatively low to moderate market entry barriers. on the other hand, the decision matrix analysis indicates that two alternatives are appropriate for cbs housing business models: the processing of brown rice and the production of educational toys. however, educational toys are the preferred business model for cbs housing due to their market growth potential, reasonable revenue, and involvement of low-income households’ human capital. the detail of the decision matrix score for both case studies is shown in table 6. 182 m. a. berawi, p. miraj. towards poverty alleviation for the base of pyramid: social business model in urban low-cost... table 6. the result from decision matrix on both case studies market growth revenue human resources market entry total weight rank global weight 26.23% 27.88% 14.47% 31.42% alternative recommendation for marunda housing shrimp industry 34.51% 19.30% 19.30% 19.30% 23.29% 3 catfish fillet processing 43.66% 47.28% 47.28% 33.42% 41.98% 1 knitting industry 21.83% 33.42% 33.42% 47.28% 34.73% 2 alternative recommendation for cipinang besar selatan housing brown rice processing 16.58% 36.87% 33.42% 47.28% 34.32% 2 educational toys 45.42% 46.64% 47.28% 19.30% 37.82% 1 handicraft 38.00% 16.49% 19.30% 33.43% 27.86% 3 3.3. life cycle cost analysis the topmost social business model from table 6 was utilized to conduct further feasibility calculations. both housing projects were evaluated by a life cycle cost analysis that considered four primary factors: initial cost, operation and maintenance cost, renewals, and revenue. each aspect is composed of multiple sub-aspects. for instance, the initial cost includes the production building, the warehouse, the production materials, and the value-added tax, whereas operation and maintenance costs include electricity, water, and advertising, building maintenance, low-income housing fees, and management, among other components. the study implies that all tools and equipment have no residual value, meaning they are not sold at the end of their five-year lifespan and are replaced with new equipment in the sixth year. in addition, a bank of indonesia annual interest rate of 6.5% is considered throughout the life cycle cost analysis. the comparison of lcc between marunda and cbs housings can be seen in table 7. table 7. comparison of lcc between each housing components marunda housing cbs housing initial production building 724,137.93 241,379.31 warehouse 482,758.62 24,137.93 production materials 86,944.14 8,105.34 value added tax 129,384.07 27,362.26 sub total 1,423,224.76 300,984.84 operation and maintenance/month electricity, water, advertisement 334.48 275.86 building maintenance 1,126.79 448.28 low-income housing fees 11,586.21 3,372.41 management 115,862.07 10,344.83 materials and others 263,540.69 23,165.28 sub total 265,001.97 23,889.42 renewals/6 years 86,909.66 8,105.34 revenue 286,896.55 27,793.10 business, management and economics engineering, 2023, 21(1): 169–189 183 the number of households unable to pay their monthly rent differs between the two housing sites, with 560 households in marunda and 162 households in cbs. initially, it was anticipated that these households would join a social business model as employees. in the future, however, revisions may be made to better suit their purposes or satisfy technical requirements. in contrast to the small-scale business model of cbs housing, marunda’s business model is characterized as large-scale due to the large number of employees, necessitating a complex organizational structure. distribution, administration, fish-cutting, fish-cleaning, and fish-packaging are responsibilities within the supply chain of the industry that can be considered to develop the business further. table 8. financial analysis between both housings housing irr npv payback period wacc marunda housing 16.82% positive 6 years 13% cbs housing 16.78% positive 6 years irr can be used to gauge the profitability of prospective investments. typically, an investment is deemed profitable if its irr exceeds the required return. both marunda housing and cbs housing have comparable irrs of 16.82% and 16.78%, respectively. the results indicate a return rate of at least 15%, which is higher than the average wacc (weighted average cost of capital) in indonesia (finbox.com, 2023). this indicates that their expected rates of return are comparable. npv is utilized in capital budgeting to evaluate the profitability of an investment or endeavor. a positive npv indicates that projected earnings (in present currency) are anticipated to exceed projected expenses. both marunda housing and cbs housing possess a positive npv, indicating that they are profitable businesses. in addition, the payback period is the time required for an investment to generate an amount of income or currency equal to its cost. it is a straightforward method for assessing the risk associated with an investment. the shorter the payback period, the less risky the investment is considered. both marunda housing and cbs housing have a return period of 6 years, indicating that the initial investment is expected to be recovered quickly. table 8 depicts the expected financial analysis of both housings. 3.4. discussions this research uses a framework from yunus et al. (2010) to discuss the social business model in both case studies and identifies lessons learned for other research development. in term of value proposition, the traditional business model put customers as the center of attention, and firms will take any effort to win customers interest over their competitors. in contrast, the social business model valued not only products but also the stakeholders’ involvement. in the case studies, the value proposition is low-income households have sustainable income to cover their daily expense, and in the longer-term may lift their poverty level. this business model also benefitting other stakeholders such as local government, raw materials suppliers, and resellers. the local government can no longer concerned regarding outstanding fees or allocate financing schemes through the aid-based program, grants, and public-private 184 m. a. berawi, p. miraj. towards poverty alleviation for the base of pyramid: social business model in urban low-cost... partnerships for low-income households. instead, they can put their effort into other aspects regarding housing and the quality of life of the citizen. in terms of value constellation, internal and external stakeholders involved in the business value chain should be identified. in this study, there are several stakeholders in value constellation. the fishermen are the origin of raw material sources of the catfish processing industry. in the case of the toy-processing industry, there are various sources of raw materials depends on the type of toys. the raw materials then processed by the social business organization before distributed to resellers, street vendors, or other types of customers/owners. investors may support this social business model to the social business organization either from private, or government. international donors or ngos may be involved in this model as part of the aid-based program to alleviate the poverty of low-income households. the coordination of this business value chain can be understood in two ways. the organization can be made in a simple way when the government, international donors, and ngos were not involved and dealing only with a social entrepreneur or other small-medium scale individuals as an investor. as a result, the business may not experience a progressive development but offers easier coordination and power-sharing among actors in internal organization. on the contrary, an organization requires more complex coordination when previously excluded parties are involved. it because each of them have their interest and agenda which may affect the main goals of the organization. however, this coordination and collaboration offer a higher chance for business expansion and progressive development in terms of leadership, commercialization, and management competencies. this research suggested the engagement of low-income households to participate in the social business model as part of social profit equation. in marunda housing, a large business model offers an opportunity for 560 low-income households to increase their income level and leaving extreme poverty behind. on the other hand, small-medium business in cbs housing offers low-income households to have sustainable income to cover their daily expenses. there are other low-cost housings where the people unable to have adequate earnings not only in the capital city but throughout indonesia. there is a bigger chance to reduce the number of poverty by engaging more low-income households and encourage them to improve their quality of life from the slums environment when suitable social business models for each low-cost housing can be identified. yunus et al. (2010) denotes an economic profit equation related to sales revenue, cost structure, and capital recovery. this research suggests an expected level of financial feasibility from a business perspective where both of the proposed industries provide a significant rate of return larger than 15%. however, some main challenges should be taken into account when a business model attempt to take the transitional stage for scaled-up business namely the right business partner and share value capture among stakeholders (sabatier et al., 2017). from methodological point of view, pairwise comparison and life cycle cost analysis (lcca) are two different methods used for decision-making and evaluating the economic performance of options. combining these two techniques can offer a more comprehensive evaluation both qualitatively and quantitatively where pairwise comparison allows for a simplified, systematic comparison of multiple alternatives based on specific criteria. on the other hand, lcca provides a detailed cost analysis over the entire lifespan of a project. on business, management and economics engineering, 2023, 21(1): 169–189 185 the other hand, there are some drawback in using these approach. pairwise comparison is largely subjective and can be influenced by the biases of those making the comparisons. when combined with lcca, there is a risk of these biases affecting the overall outcome of the decision-making process. furthermore, lcca requires detailed cost data over the entire life of a project, which can be difficult to accurately estimate or may not even be available for all alternatives. this could limit the effectiveness of combining these methods. conclusions the paper presents findings from potential social business models in two case studies in jakarta to deal with the sustainability income of low-income households. the result showed that combining pairwise comparison and life cycle cost enable related stakeholders to understanding potential social business model that offers sustainable income for the base of the pyramid. the financial analysis from both housing showed high irr, positive npv, and short payback period. the findings also suggest some indicators that should be taken into account when initiating the social business model on a certain location. these indicators play a significant role in determining which alternative business model that is suitable for the targeted population. the failure to unfold these indicators may be resulting in ineffective program development and missed the opportunity to engage low-income households from the poverty trap. subsequently, it is also crucial to understand the market, typical low-income households, and market barriers to deliver a successful social business model particularly in developing economies. this research provided a conceptual framework that may enable a balanced from economic profit and social equations. this equilibrium can be achieved by proposing an optimum revenue from a traditional business perspective but involving a high number of low-income households. by this social business model, those who failed to accommodate daily expenditure may have sustainable income leading to a better chance of living in the city. these strategies may also be adopted in other low-cost housings across countries and contribute to alleviating poverty levels of those in the base of the pyramid on a larger scale. subsequently, this conceptual model requires support not only by the government but also by various parties in the social business value chain to reduce poverty across the country and to generate a regular payment from those living in low-cost housing. for instance, in the context of indonesia, some industries still dominated by small-scale companies and yet to reach a larger scale due to various reasons. in this situation, the government may have a partnership with the local government to assist small-scale companies to scale up their business through training, monitoring, and funding. the government may also be involved regarding the suitability of the social business model based on cash flow and other quantitative or qualitative indicators. the management who runs this business model may use the aid-based program to collaborate or involved investors for operation or management. this strategy aims to make sure the business handled in professional ways and the low-income households gained benefits to improve their welfare and quality of life. this research can contribute to the development of efficient, scalable, and replicable social business models for enhancing the well-being of low-income households in a variety of 186 m. a. berawi, p. miraj. towards poverty alleviation for the base of pyramid: social business model in urban low-cost... contexts. replication and expansion of the findings are possible when the context, indicators, and research framework are considered. various socioeconomic and cultural contexts can facilitate the generalizability of results. while unique characteristics, market conditions, and potential barriers encountered by low-income households in the target locations can provide additional insight into this topic. this paper has some limitations that should be addressed in future research development. for instance, this paper only focussed on social business feasibility through life cycle cost analysis. further research suggested involving division of responsibility among parties including the government, international donors, and the private sector for market penetration and access to financing. tax exemption and subsidy also can be adapted to increase the economic viability of social business models. furthermore, this study also not discussed how social entrepreneurs play a role in the social business model. social entrepreneur is one of key success factor to delivering the project successfully as they have a good sense in scouting and recruiting employees and have leadership in 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(2011). the business model: recent developments and future research. journal of management, 37(4), 1019–1042. https://doi.org/10.1177/0149206311406265 https://doi.org/10.1016/j.lrp.2009.12.005 https://doi.org/10.1007/978-3-319-12586-2 https://doi.org/10.1177/0149206311406265 bookmark 2 bme_2014_12_1 maketas.indd copyright © 2014 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2014, 12(1): 47–59 doi:10.3846/bme.2014.04 econometric methodology of monopolization process evaluation dmitrijs skoruks1, maija šenfelde2 faculty of engineering economics and management, riga technical university, kalku 1, lv-1658 riga, latvia e-mails: 1dmitry.skoruks@gmail.com; 2maija.senfelde@rtu.lv (corresponding author) received 14 february 2014; accepted 09 may 2014 abstract. the research “econometric methodology of monopolization process evaluation” gives a perspective description of monopolization process’ nature, occurrence source, development procedure and internal conjuncture specifics, as well as providing an example of modern econometrical method application within a unified framework of market competition analysis for the purpose of conducting a quantitative competition evaluation on an industry level for practical use in both private and public sectors. the main question of the aforementioned research is the definition and quantitative analysis of monopolization effects in modern day globalized markets, while constructing an empirical model of the econometric analysis, based on the use of international historical experience of monopoly formations standings, with the goal of introducing a further development scheme for the use of both econometrical and statistical instruments in line with the forecasting and business research need of enterprises and regulatory functions of the public sector. the current research uses a vast variety of monopolization evaluation ratios and their econometrical updates on companies that are involved in the study procedure in order to detect and scallar measure their market monopolizing potential, based on the implemented acquired market positions, turnover shares and competition policies. keywords: monopolization process, applicable econometrical modeling, competition level analysis, market conjuncture, industry development trends. reference to this paper should be made as follows: skoruks, d.; šenfelde, m. 2014. econometric methodology of monopolization process evaluation, business, management and education 12(1): 47–59. http://dx.doi.org/10.3846/bme.2014.04 jel classification: d42, d43, d52. 1. introduction with the vast development of the modern business and trade, numerous former unquestioned and unchallenged visions of the market functioning paradigms, mechanisms and conformity of natural laws are being transformed, reevaluated and analyzed from different economic perspective. 48 d. skoruks, m. šenfelde. econometric methodology of monopolization process evaluation based on the classic a. smith’s theory, j. m. keynes alternative approach and works of p. samuelson, economic research is developing further among with the entire society, causally following and quickly reacting to newly emerging social trends. it states in “an inquiry into the nature and causes of the wealth of nations” book iv, chapter viii: “consumption is the sole end and purpose of all production and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer”. thus, the inventor of “invisible hand” concept underlines that no form of competition, regardless of its specifics and market conjuncture composition, is free from or can neglect the maximum level of consumption capacity, made available by the current demand (chamberlin 2010; chemberlin 2011). it is argued in “foundations of economic analysis”: “every good cause is worth some inefficiency”. thus, it may be argued that for the sake of economic stability maintenance and social utility maximization, a shift from perfect or near – perfect competition can and to some extent, should be made (samuelson, nordhaus 2012). it is explained in “the general theory of employment, interest, and money”: “the difficulty lies not so much in developing new ideas as in escaping from old ones”. consequentially, this undoubtedly widely respected author suggest the non – conventional approach to implementing new elements into the modern day economic theory while being able to take a fresh, innovative look those seemingly common aspects of market interactions (keynes 2011). nevertheless, there is one particular existing field of economic evaluation that hadn’t seen any changes in the public opinion since the mid xix century. it is still, as well as more than a hundred years before, being seen as concentration of “capitalism evil” that bring only losses and price increasing to all members of the society. it is a legal equity, profiting from the position of absolute monopoly, so attractive and wanted by any actively functioning company, influencing all aspect of modern day economic processes, significantly changing the composition of any given market conjecture and reshaping all forms of business conduction possibilities. the above mentioned position is being obtained in the process of monopolization – one of the most topical phenomena of both developed and developing economies of the current century, significantly rising in importance of full understanding within the context of the world financial crisis aftermath. the composing element of any national economy, namely, markedly involved companies are forced to adapt to the process of globalization through finding new, sometimes quite unorthodox ways of securing the conducted business profitableness and liquidity, thus, consequentially increasing competition within any given market that frequently leads to market consolidation tendency increase, while excluding a large portion of inefficient companies from the market, leading to natural increasing of the industry monopolization level (šenfelde 2009). 49 business, management and education, 2014, 12(1): 47–59 the goal of the current research, taking into consideration modern day economic challenges and above described tendencies, is to, with the use of analytical, comparatively – economical, coherently – logical and economic index analysis methodologies, conduct a full – scale study on the nature of monopolization process, detect its appearance sources, define the caused effect in modern economic systems, as well as analyze and evaluate the main monopolization influence factors that shape conduction of the process according to various industries market conjecture specifics. the hypothesis of the current research is as follows: modern day small open economies undergo a natural, consequentially – economic based and supported by internal competition, process of market consolidation, which leads to the acceleration of individual monopoly power concentration in specified niches, especially seen in industries that are restricted from the effects of import due to their functioning specifics. the current researches scientific study is defined as five structural industries of latvian national economy, their market conjectures and specifics of competition conduction, as well as revealed monopolization trends and its development algorithm. an additional focus of attention will be given to the mobile communication market as a system, naturally secured from macro – external competition such as import and international equity infiltration due to the regional specifics of providing telecommunication services. the object of the current research is the latvian republic mobile communication market along with involved companies (bite 2012; tele2 2012; lmt 2012), their supplied services, pricing systems, management strategies, related additional products, empirical demand, supply and client loyalty in the specified market and the above given factor cluster influence on the process of monopolization within the framework of the evaluated industry. the main goals of the current research are: − defining the existence substantiations, causes and consequences of monopolization process; − defining the positive and negative consequences on monopolization process conduction in the modern day economic systems; − construct an empirical quantitative model that would allow to evaluate and conduct scientific study of monopolization process combining the main existing methodologies with innovative causally – coherent approach; − conduct a study of the process of monopolization, its structured development and composition algorithm with the use of the developed model; − conduct a complex quantitatively – qualitative analysis of latvian national economy’s industries with the use of the developed model; − conduct a verification test of the current research hypothesis with the use of the developed model, consequentially confirming of neglecting its rationality and applicability. 50 d. skoruks, m. šenfelde. econometric methodology of monopolization process evaluation the following assessment methods shall be use in order to conduct the current study: monographic analysis, secondary statistical data analysis, graphic analysis, econometrical modeling, mathematical criteria analysis, quantitative regression analysis, qualitative resulting interval range analysis and data grouping method. the following sources were used in order to conduct the current research: printed scientific literature and fundamental researches (lībermanis 2011; nešpors 2012; tarbell 2012; bartneev 2008; liwschitz 2011; soloc 2007; khayeck 2012), internet portals, electronically accessible market and enterprise data (bite 2012; lmt 2012; tele2 2012) data, electronic university databases, officially published statistical data (csp 2012), published legislative literature (judit 2011). in order to establish a scientifically clarified field of analysis, the following assumptions are being taken into account: − all industry supply participants, who ate initialed to an individual market share under five percent of the gross market capacity shall be merged into one cluster of statistical data until its market share value reaches a minimum of the aforementioned five percent; − merged data cluster, regardless of the number of included participants are being seen as one unified member of the market with the respected individualized monopolization possibilities. additional complementary services that are not primal to the dual core product benefits are being seen as minor influence factors that have a semi-significant effect on the market share fluctuation between competing parties. 2. monopoly essence summary monopoly (from greek μονο (mono) – one and πωλέω (poleo) – to sell) is a unique advantage situation in any state, industry, organization or branch that allows to acquire benefits from such position. in terms of economic evaluation, a monopoly is defined as a special market situation, ensuring a higher level of profitability on the behalf of price growth and production cost cutting with the use of the so-called monopoly position advantages. such position is wanted by any entrepreneur due to, on one hand, neglecting of competition risks, growing marginal costs, sale amount fluctuations and, on the other hand, the ability to influence both pricing and social preferences through the supply amount changes (tarbell 2012). the above given characteristic of the absolute monopoly market type from the perspective of modern economic reality is to a certain extent, outdated, not reflecting the true nature of “money–product–money” link internal casual relations, for the monopolist is dependant on a voracity of influence factors, regarding price rising, such as, consumption rates, consumer disposable income, demand flexibility, but mostly – the common economic scene that dictates the rationalization of prices in order to maximize the 51 business, management and education, 2014, 12(1): 47–59 actual profit. nevertheless, the public opinion is still largely depended on stereotypes, the most powerful and persistent of which is the assumption of “monopolies dictating the prices” (fisher 2012). the main reason for emerging, adaptation and successful functioning of an absolute monopoly are several strictly economic reasons that are listed below: − there is only one supplier in the market; − there are now replacement products (goods or services) available; − existence significant, almost unconquerable barriers for new suppliers to enter the monopolizes market; − monopoly’s supply amounts are equal to entire industries supplier demand, which can be interpreted as a down-lined linear chart (robinson 2012). it would be worthwhile to describe the main barriers, implemented by the modern monopolies in order to better understanding of monopoly advantages: − legal – laws and governmental decision; − economic – lack of capital, resources, cost cutting abilities, information or any other market influence tool due to their concentration in the hands of the monopoly; − technology – experience, specifics efficient methods of business conduction or manufacturing protected as the commercial secret or individualized know – how (coase 2011). the above given information allows to asses the phenomena of absolute monopoly with an understanding of such market positions advantages for the benefit – holding legal equity and, as the flip side, the shortcoming from the society’s point of view in terms of competition and trade liberalization, thus, insuring the necessary strictly scientific basis for the further conduction of the current research. 3. concept of econometric methodology of monopolization process evaluation in the previous sections of the current study, various classic theoretical monopolization methodologies were analytically described, evaluated and implemented in order to conduct a scientifically – acknowledgeable basis for further development of conceptually new econometrical tool of monopolization process multi-perspective analysis. the developed model will combine existing methods of both specialized monopoly and empirically – econometrical data assessment with author proposed innovation, consequentially designing a combined quantitatively – qualitative tool with cheap installation, easy implementation and demonstrative result outputs, suitable for use in both state sector for regulatory reasons and private equities with the goal of business planning or managerial tasks performance improvement. 52 d. skoruks, m. šenfelde. econometric methodology of monopolization process evaluation the use of already existing methods will allow to prosper from previously gained international experience, while implementation of newly developed correlations and additional influence factors shall provide a topical transformation of the necessary nature, inflicted by globalized merging market clustered composition units, thus, creating a synergetic effect, consequentially improving the existing approaches while preventing innovative tool of assessment from untested and questionable fluctuation, reasoning scientific heritage with rational updates on a scalar scale, reaching far more flexible, fundamental and coherent model composition. the main foundation of the developed complex model of monopolization process evaluation is the step-by-step assessment of available data prom econometrical perspective with the perspective acquired scalar result qualitative evaluation, allowing the conduction of a complex, multi-scale analysis, suitable for all economic field of activity, meaning that the current model shall be suitable for evaluations of any national economy industry. the developed model composition will be further described in the following chapters of the current section to give a complete and sufficient understanding of the internal quantitative correlations between model’s structural elements, as well as working out a steady implementation algorithm, while creating a qualitative interpretation methodology for assessing the quantitative scalar outputs of the conducted multi-factor analysis. in order to testify the hypothesis of the current research, consequentially approve or decline its conceptual formulation, the developed model shall be implemented, tested and statistically leveraged in order to prevent any minor calculation imprecision on the five following industries on the latvian national economy: − industries, unaffected by import flows: mobile communication market; banking sector; multi-purpose retail trade market; − industries, affected by import flows: brewing industry; pharmacy market. the reason for selecting the above mentioned industries is the need for various situation testing of the developed model, which can be reached only by implementation testing within the framework of different and partially unrelated sectors of the economy, while defining the effect of import on market consolidation processes and, consequentially, more rapid monopolization trend strengthening. 4. econometric methodology’s of monopolization process evaluation quantitative functioning principles using the information, described in the above given section of the current research, it can be stated that the modern econometrical data assessment methods and the existing monopolization evaluation approaches share the following basic quantitative market data clusters: individual market share dynamics, demand flexibility – price fluctuation correlations, number of competing suppliers in the entire industry. these elements 53 business, management and education, 2014, 12(1): 47–59 undergo an individualized evaluation, according to the chosen methodologies and the results of the conducted analysis are re-interpreted separately, forming unrelated scales of decision making. taking into account the multi-scale evaluation, conducted within the framework analytical methodology assessment section of the current research, in is necessary to update each studied methodology by creating a more transparent quantitative basis for respectful influence factor group and integrating them into a single confound of a complex econometric multi-function analytical model. the most relevant case of natural monopolization process conduction can be seen in a situation that uncovers a. smith’s “invisible hand of the market” concept’s hidden essence, serving at the same time as the source of critics against both neoliberalism tendencies and orthodox free competition schools. the above mentioned phenomenon can be defined as follows – regressive competition. regressive competition is a market situation, achieved by strong internal competition pushing suppliers out from the market, while new competitors are unable to infiltrate the current market due to the lack of resources and high industry, based on constant fluctuation of the market conjuncture, exclaimed by the level of internal competition. consequentially, the market becomes a closed system with no entrance possibilities, but the existing suppliers are continued to be pushed out by their more efficient rivals, thus, leading to natural market consolidation until the state of oligopoly and enabling the process of monopolization to begin its conduction and development along with the evolution of the market. another way of regressive competition to come into place is a wide-scale economic crisis that in a natural way forces part of the suppliers to leave the market, while the remaining competitors engage each other in drastic measures of market share redistribution. due to the crisis, there is no rational reason for a new player to infiltrate the industry, suffering from a full-time recession, again leading to market consolidation and boosting the monopolization trend to strengthen and evolve. therefore, the complex model of monopolization process evaluation must include all factors that influence market share dynamics, individual company monopoly power fluctuation evaluation, competition and it’s effects analysis, current gross position of all suppliers of the industry in terms of sale amounts, internal and external possibilities for market conjuncture changes and last but by no means least, the attractiveness of the specified market for external infiltration, while assessing the rationale want and practical possibility of new supplier involvement into the market in terms of monopolization process future diagnosis. the indexes are additionally integrated into the structure of the current model with the use of statistical weights system, allowing the synergetic effect of mass coherence to take place. the conceptual structure of the current model can be seen in the table 1. 54 d. skoruks, m. šenfelde. econometric methodology of monopolization process evaluation table 1. summary of the developed methodologies integrated quantitative index system (source: compiled by authors) title of the model – used index index use substantiation weight of index in acquired result evaluation net industry monopolization level index define the current level of monopolization process development 20% relative monopolization growth index 20% monopoly power stratification index 15% monopolization effect index 10% market natural monopolization potential index evaluate monopolization potential and future possibilities 15% industry competition capacity index 10% competition potential index 10% from the information, given in table 1, it can be seen that the currently developed model inflicts a dually – complex method of data analysis, quantitatively assessing both current monopolization status and future monopolization process development potential in an econometrical, coherent way within the framework of integrated index system. it would be rational to define and analytically describe the calculation and quantitative casual links between the indexes that form the composition of the current model, while giving an overview of qualitative assessment methodology, used for interpretation of the gained quantitative analysis result evaluation. 5. quantitative structure of developed methodology the main modern paradigm of assessing monopolization process in all aspects of the analysis is to create one-dimensional perspective with a number of related simplifications and evaluate this economic phenomenon in the framework of developed assumptions. it would be, however, most beneficial to use a multi-dimensional perspective in order to analyze the process of monopolization, while creating an econometrical balances system of integrated and quantitatively measurable influence factors. the complex model of monopolization process evaluation consists of seven indexes, conceptually and analytically described in the current researches 4. section that are built in a unified econometrical system of multifunction evaluation. the quantified system itself is based on correlative dynamic equation modeling approach, creating a combined system of mathematical calculation. 55 business, management and education, 2014, 12(1): 47–59 naturally, it would be absolute and inefficient to construct a manual calculation system in the age of advanced technological preferences. therefore, the need for an electronic instrument, easy to apply, cheap to implement and convenient to use emerged. on the base of microsoft excel program, an electronic template, consisting of primary and secondary data inserting area, analytical input and output field, as well as total summarized result quantification cells. the developed econometric methodology model of monopolization process evaluation is a fully modern tool of econometrical market evaluation, fit for easy and efficient use to evaluate any market or industry by any competent physical person, legal equity or official institutions. while the current model provides economically accurate and methodologically verified data analysis on up-to-date, fully digital basis, qualitative interpretation of the acquired scalar results is crucial for making correct decision. due to the recognition of the need for quantitative result qualitative interpretation, the current model has an additional explanatory feature, allowing the conduction of a fully transparent scientific market analysis. an illustration of the newly and innovatively developed electronic template can be seen in the form of table 2. table 2. summary of the developed methodologies integrated quantitative index system (source: compiled by authors) ∑ eur ∑% nr market suppliers absolute net competition effect sum(e;y) 100% 1 a k1 ∑ eur/n ∑%/n 2 b k2 average(e;y) k% 3 c k3 4 d k4 5 e k5 ... ... ... x z k% 6. implementation of econometric methodology of monopolization process evaluation within the context of research hypothesis verification in would be most rational to create a single framework of the conducted model implementation result evaluation illustration in order to compare both quantitative and qualitative aspect of the completed research. the unified complex model of monopolization process analysis can be seen in table 3. 56 d. skoruks, m. šenfelde. econometric methodology of monopolization process evaluation table 3. evaluation of the econometric methodology of monopolization process implementation quantitative results system (source: compiled by authors) title of the model – used index industry, used in model implementation net industry monopolization level index mobile communication market banking sector multi-purpose retail trade market brewing industry pharmacy market relative monopolization growth index 6678.09 6802.16 7383.85 1253.82 1448.99 monopoly power stratification index 3005.14 489755.6 170883.38 125382.5 92735.1 monopolization effect index 36.67% 12.67% 32.21% 22.54% 26.99% market natural monopolization potential index 70.28 8003.67 3726.08 474.77 126.19 industry competition capacity index 16970.23 65441.64 267237.82 4779.84 586.8 competition potential index 14.62% 24.01% 12.86% 23.57% 41.68% combined summary evaluation 33.33% 16.67% 25.00% 20.00% 16.67% it can be stated, acknowledging the information, given in table 3 that the developed complex model of monopolization process evaluation is a precise, econometrical tool of market research conduction, able to leverage any statistical out scale data burst with the carefully selected weight system, leading to a multi-functional, economically sustainable and scientifically correct model of market data analysis. to create a comparison between the quantitative experiment result qualitative evaluation of different industries in order to define the current level of monopolization in the five markets, undergone the analysis with the use of the developed model. qualitative result interpretation can be seen in table 4. table 4. evaluation of the complex monopolization process model implementation qualitative results system (source: compiled by authors) industry, used in model implementation established monopolization level current monopolization level monopolization process future development perspective combined total monopolization level mobile communication market medium–high high relatively–high banking sector medium high medium–high multi-purpose retail trade market medium–high high relatively–high brewing industry medium–low medium medium–low pharmacy market medium–low low relative–low 57 business, management and education, 2014, 12(1): 47–59 the information, given in table 4 testifies that the level of monopolization in the mobile communication, multi-purpose retail trade markets and banking sector are medium–high and relatively–high, while the brewing industry and pharmacy market are, respectfully, medium–low and relative–low, indicating that the industries, open to import infiltration, have two times lower combined monopolization evaluative coefficient then those markets that are localized and enclosed from influence of external competition. 7. conclusions summarizing the conducted research layout, acquired quantitative analysis result and their profound qualitative evaluation, the following conclusions can be made: − the conducted research proves the economic nature of monopolization process origins and sources; − analysis of the research object had verified that monopolization is a reaction to consequences of fierce competition; − the model, developed by the conduction of the current research, had described and confirmed the duality of monopolization process conduction due to the nature of its boosting economic influence factors; − the developed model had proven that irreparable resources, technologies and know-how can and. mostly, does stimulate conduction of monopolization process; − the conducted research testifies and confirms the thesis on national economy structural crisis stimulation of monopolization process within those industries that are undergoing a recession; − the conducted research had proven the much higher level of analytical precision of methods that operate with market share data, rather the just the number of supplier, functioning in the defined market, evaluating industry monopolization process development; − positive consequences of monopolization can be seen in the forms of technological innovation, completely new goods, introduced to the market or low cost producing organisation as the so called “mass production effect”; − the hypothesis of the current research has been fully confirmed: indeed, modern day small open economies undergo a natural, consequentially – economic based and supported by internal competition, process of market consolidation, which leads to the acceleration of individual monopoly power concentration in specified niches, especially seen in industries that are restricted from the effects of import due to their functioning specifics. − the conducted research has proven the industries with low demand flexibility are more tended to be monopolized due to non-elastic total natural market capacity and inability of the demand amount to operatively relocate; − the conducted research had proven that monopolization can and must be assessed by coherently-integrated econometrical modelling, which would lead to a much 58 d. skoruks, m. šenfelde. econometric methodology of monopolization process evaluation higher level of scientific and applied analytical precision that can be achieved by individual case – study evaluation. summarizing the conducted research, developed complex model of monopolization process evaluation and its implementation results, the proposals can be made: − conduction of the analysis of monopolization process as an economical and rational casual relation system; − implementation of quantitatively – econometrical instruments for national economy sector analysis in terms of monopolization with the goal to uncover transparent paradigm that can be used in further studies on various industry functioning; − usage of combined quantitatively – qualitative assessments methods in order to conduct market research of any nature; − assessment of market monopolization stage development, based not only on the typology of the current industry, but, rather, with the use of individual company monopoly power concentration analysis; − define monopolization process within the context of natural market consolidation tendencies and total demand amount fluctuation trends; − acknowledge the monopolization tendencies, existing in small open economies, as markedly justified and economically rational; − define a certain market as monopolized only with the use of scientifically tested and experimentally verified methods of assessment, wit the use of “natural monopolization process dual perspective” presumption; − continue to adjust and develop antitrust regulations in order to, on one hand, neglect the negative side effect, caused by monopolies, and, on the other hand, to abstain from regulatory interference in situation when monopolization process has not yet reached the negation stage in order to give the market a chance to leverage its internal functioning; − use the author’s developed complex model of monopolization process evaluation in order to asess the current phenomena in both qualitative and quantitative ways for regulatory, scientific and business reasons; − create a paradigm of using complex econometrical methods of assessment for monopolization studies, thus, replacing the current trend of case – study approach prevailing. references bartneev, s. 2008, istorija ekonomicheskikh 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[online], [cited 29 march 2012]. avialable from internet: http://www.tele2.lv/privatpersonam/pakalpojumi/ dmitrijs skoruks is a phd student and a lecturer at riga technical university’s faculty of engineering economics, where he had previously (2011–2013) successfully completed a master program in economics, and after the defense of his thesis was awarded a masters’ degree (mg. oec.) with excellence. he had also studied and successfully fulfilled a course (2012–2013) at the vrije universiteit brussel in brussels, belgium. he had previously been employed at the rsa insurance group’s balta branch company as an insurance marketing consultant and is currently working at the latvian central finance and contracting agency as an senior rapporteur of the program management and supervision department, responsible for methodological development of the empirical state aid compatibility and proportionality monitoring system in economic activities, co-financed by the european structure funds and cohesion fund. he is the author of various published scientific articles and research papers. maija šenfelde holds a doctor degree in economics (1993) from scientific council of latvian university. she has been working for riga technical university in different positions. since 2003 maija šenfelde is profesor of faculty of engineering economics and management, from 1997 to 2007 she was a deputy dean for studies, since 2009 she is director of institute of national and regional economy. main fields for research are macroeconomics, international and regional economics. she has published scientific papers in peer-reviewed journals and articles and is the author of study books as well. maija šenfelde is an expert of the latvian science council, a member of the promotion council, member of professors councils of rtu and lu. copyright © 2016 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. the exploration of the relationships between the global competitiveness, the ict and education turkay yildiz izmir institute of technology, b.i.d.b., 35430, gulbahce kampusu, izmir, turkey e-mail: turkayyildiz@iyte.edu.tr received 27 may 2016; accepted 14 november 2016 abstract. information and communication technology (ict) is a key element for development and economic expansion. however, many of the developing countries appear to gain only small fraction of the advantages from the ict sectors. indeed, developed countries are taking the most of the advantages and opportunities brought by the use of ict. therefore, it is necessary to highlight the essential role and the significant relationship of ict and education for gaining the competitive advantage. in this regard, this study investigates the complex relationships of some of the global competitiveness indicators of the ict, education and the business sophistication and innovation factors. in this study, several statistically significant relationships are explored by applying canonical correlation analysis. these findings and significant statistical results are highlighted. keywords: ict, education, competitiveness, technological readiness, business sophistication, innovation, canonical correlation. jel classification: i25, i21, l2, n70. 1. introduction knowledge and learning are widely regarded as the key not only to sustained development and growth of economies but also societies (baskaran, muchie 2007). as information and communication technologies (ict) has become one of the main driving forces of globalization, it has been increasingly perceived as a major factor determining the comparative advantage of nations and the competitiveness of their economies because of its potential to bring about socio-economic transformation (baskaran, muchie 2007). ict is believed to be an essential driver for development and it can expand economic opportunities. indeed, developed countries tend to gain more advantages from ict sectors than developing countries (pham 2014). some newly industrialized countries back in 1980s became more developed because of ict development (pham 2014). policy makers at national and international levels believe that ict provide a key opportunity for particularly developing countries to address problems in the field of education, health, rural development, poverty alleviation and employment (baskaran, muchie 2007). b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2016, 14(2): 249–274 doi:10.3846/bme.2016.320 mailto:turkayyildiz@iyte.edu.tr doi:10.3846/bme.2016.320 250 t. yildiz. the exploration of the relationships between the global competitiveness, the ict and education in this regard, the current research was undertaken to highlight the key points of the relationships between the global competitiveness, the ict and education. more specifically, the association between the ict and education, in terms of technological readiness, quantity and quality of educational indicators are investigated by applying statistical methods. additionally, the relationships between education-related indicators and business sophistication and innovation factors are investigated. statistically significant associations are highlighted. the remainder of this paper is organized as follows. section 2 reviews the literature on ict in general and education-related issues in particular. section 3 introduces the data and methods used for the canonical correlation analyses of the perceptions of countries’ ict and educational scores by using various measures drawn from the global competitiveness index (gci) of the world economic forum (wef) database. specifically, this section investigates the associations among technological readiness, business sophistication, innovation indicators and education-related scores derived from the wef. section 4 presents the empirical findings. the study is briefly concluded in section 5. 2. literature review the ict is unique mainly in two aspects. firstly, it affects almost every developed and developing countries and almost every aspect of life – economic, social, and cultural, as stated by baskaran and muchie (2007). therefore the dynamics of technological change in ict is a global issue rather than being national or regional issue. secondly, unlike other technologies, ict has significant potential to build both social and technological capabilities in developing countries (baskaran, muchie 2007). ict is perceived to be an essential facilitator for information transparency, good governance, empowerment, participatory management and grass-root democracy (baskaran, muchie 2007). as empowerment requires complete transparency in functioning of government as well as corporations, ict has an essential role to make it possible through extensive use of electronic governance (baskaran, muchie 2007). researchers have examined the connections among ict, education and competitiveness. for instance, ozmen (2013) performed a study on the virtual communities of practices for ensuring innovation at universities. the findings revealed that virtual communities of practices were thought to be important for ensuring improvement and innovation by the majority of the administrators; however, some barriers, such as distrust and insecurity, lack of leadership, and lack of knowledge and skills existed. selwyn (2008) examined the realization of the potential of new technology by assessing the legacy of ict agenda. the study stated that the ict agenda may well have had the short term impact of increasing the physical presence of ict resources in all education institutions, its longer-term educational legacy was compromised by the wider macrolevel issues it purported to address. 251 business, management and education, 2016, 14(2): 249–274 studies of ict in relation to the education have been made by numerous researchers. the most recent research reflects the significant amount of international literature in the area based on many different viewpoints. for example, bankole et al. (2015) explored the impact of ict infrastructure and complementary factors on intra-african trade. their research used structural equation modeling to analyze data. the analysis showed that the telecommunications infrastructure has a major impact on intra-african trade and taking into account other relevant factors that also influence trade such as institutional quality and educational attainment. interacting factors such as institutional quality and educational attainment also play a role in influencing intra-african trade. anyanwu (2013) performed a study on the characteristics and macroeconomic determinants of youth employment in africa with a view to proffering some solutions. the author’s estimates show that a nation’s domestic investment rate is found to be positively and significantly associated with youth employment in the overall africa and sub-saharan estimations. the study also included variables as such ict infrastructure, education others into their study. the author stated key policy implications. antlova et al. (2011) studied the long term growth of small and medium enterprises (sme) from the view of ict competencies and web presentations. they explored the correspondence between ict competencies of sme by using employed decision tree classifiers and association rules as well as class outlier detection methods and hierarchical cluster analysis. they found that some companies had developed significantly more ict competencies than the others and these competencies help them to be more successful and competitive. taylor et al. (2008) outlined an initiative to support and encourage capacity building in remote desert centers and to create networks to overcome the isolation experienced by desert-based small and medium-sized enterprises. building on existing local initiatives and seizing the opportunities offered by a range of new information and communication technologies (ict), businesses are linked together to explore the benefits of networking, to identify possible synergies and opportunities for collaboration, to gain practical ict and networking skills and confidence in the processes, and create real outcomes for their business. torrent-sellens and ficapal-cusi (2010) investigated new co-innovating sources of business productivity. their results for catalan companies indicate that evidence has not been found for the great majority to corroborate the existence of new sources of productivity and thus the results also show the adaptation to enable them to compete in global knowledge markets. rodriguez et al. (2012b) developed a conceptual framework for the sustainable adoption of technology-enhanced learning environments. rogosic (2015) focused on the construct validity of the questionnaire measuring technical and socio-psychological factors which affect successful integration of ict into education. rodriguez et al. (2010) developed a monitoring and evaluation scheme for an ict-supported education program in schools. chen (2011) examined the fostering taiwanese efl teachers’ constructivist instructional beliefs through teaching goals and ict use. the results show that higher education efl teachers, who are constructivist-oriented, tend to use ict more. chikasa 252 t. yildiz. the exploration of the relationships between the global competitiveness, the ict and education et al. (2014) studied ict integration in teaching as an uncomfortable zone for teachers with a case of schools in johannesburg, south africa. they found that teachers who are more likely to integrate ict into their teaching if they believe it have potential to enhance teaching and learning. berrio-zapata and rojas (2014) explored the digital divide in university in bogota, colombia. their results show that the variables of the model link causally, with the strongest relations between education, attitude towards icts and ict application. hadfield and jopling (2014) discussed the development of an implementation model for ict in education as an example of the interaction of affordances and multimodality. the study argues that the perceived status of technologies is a key factor in the success of an innovation. song et al. (2013) performed the development and pilot test of ict in education readiness indicators in the global context. rezaei et al. (2011) investigated challenges of ict in education. gewerc and montero (2013) explored cultures, training and career development and the integration issues of ict in educational institutions. their results showed abundant evidence of teachers’ career development and changes in professional and institutional culture through the collaborative action research process. hashim et al. (2010) assessed antecedents of ict attitudes of distance education students. melero et al. (2012) reviewed the constructivist learning methods with supporting tooling in ict higher education. devolder et al. (2010) explored identifying multiple roles of ict coordinators. this study reports on the development and validation of measurement scales to study the different roles fulfilled by ict coordinators. kolodziejczyk (2015) performed mixed methods for study of gender issues in access, application, and attitudes toward ict in higher education institutions in papua new guinea. aesaert and van braak (2015) investigated the gender and socioeconomic related differences in performance based ict competences. their results show that girls have better technical ict skills and higher-order ict competences than boys. additionally, the results reveal that the educational level of the mother is positively related to both students’ technical ict skills and higher-order ict competences. lau and yuen (2015) studied factorial invariance across gender of a perceived ict literacy scale. sang et al. (2010) explored student teachers’ thinking processes and ict integration as the predictors of prospective teaching behaviors with educational technology. their results show that prospective ict integration significantly correlates with all teacher related variables, excluding gender. kerckaert et al. (2015) explored the role of ict in early childhood education as a scale development and research on ict use and influencing factors. aftab and ismail (2015) researched the defeating poverty through education by exploring the role of ict. the authors of the paper focus on issues in forming ict based educational and socio development initiatives. kokkalia and drigas (2015) investigated the working memory and attention deficit hyperactivity disorder in preschool education. they investigated the role of ict’s as a diagnostic and intervention tool. ott and pozzi (2011) performed a research on the new era for cultural heritage education by discussing the role of ict. 253 business, management and education, 2016, 14(2): 249–274 parvin et al. (2011) investigated the role of ict in business ethics courses by exploring the evidences from bangladesh. kim et al. (2014) studied ict ethics of college students in korea. the study investigates factors affecting ict ethics (ie) behavior intent and presents their implications for ie education. hoque et al. (2012) explored the role of ict in school management of maldives. lu et al. (2015) explored the role of ict infrastructure in its application to classrooms for middle and primary schools in china. doucek et al. (2014) examined the requirements of the competence of ict managers and their coverage by the educational system in the czech republic. the presented results indicate the requirements on knowledge and skills for the role of ict manager in the czech education market. palmero and rodriguez (2012) explored advantages and drawbacks of the impact of education policies to incorporate ict as innovative agents in the classroom. vanderlinde et al. (2012b) studied ict policy planning in a context of curriculum reform. their results indicate that ict policy planning in schools should be considered as a multifaceted phenomenon grounded in school culture. austin and hunter (2013) examined ict policy and implementation in education with some cases in canada, northern ireland and ireland. shaikh and khoja (2011) examined the role of ict in shaping the future of pakistani higher education system. their findings suggest that an effective and robust ict policy could greatly improve the status of the pakistani knowledge-based economy, therefore helping establish ict policy and planning, administration, and integration at the higher education level. savage (2010) performed a survey of ict usage across english secondary schools. the findings show that music education is dominated by conservative uses of ict that reinforce traditional subject content. quintana et al. (2012) investigated the internet navigation and information search strategies about children who are influenced by their participation in an intensive ict project. their results reveal that students of elementary and secondary education, who have an interaction with ict, but not specifically introduced to searching for information on the internet, know how to benefit from the technology. tondeur et al. (2010) studied teacher and school characteristics that are associated with the use of ict in primary education. aesaert et al. (2014) investigated the direct measures of digital information processing and communication skills in primary education. vanderlinde et al. (2014) investigated the institutionalized ict use in primary education as a multilevel analysis. vanderlinde et al. (2012a) explored school-based ict policy plans in primary education. vanderlinde and van braak (2011) explored a new ict curriculum for primary education in flanders. vanderlinde et al. (2010) examined the use of an online tool to support school-based ict policy planning in primary education. baytak et al. (2012) examined parents’ perception over use of ict in education. their results showed that parents had neutral attitudes towards use of ict in education 254 t. yildiz. the exploration of the relationships between the global competitiveness, the ict and education but they were against to unrestricted use of ict by their children. belando-montoro and bedmar (2015) analyzed ict and education in studies on frailty in elderly. their conclusions are focused on two proposals; one is related to the necessity for specific trainers for the use of ict by the elderly, and the other one about the solidarity and intergenerational learning. dukic et al. (2012) analyzed students’ ict usage in croatian higher education development management. isiyaku et al. (2015) developed an empirical modeling of ict usage behavior among business education teachers in tertiary colleges of a developing country. ottestad (2010) explored the innovative pedagogical practice with ict in three nordic countries. the findings imply that finnish teachers are either not differing or they are scoring significantly lower on the two indicators than teachers from denmark or norway. sang et al. (2011) studied the prediction of ict integration into classroom teaching in chinese primary schools. their results reveal that classroom use of ict directly depends on teachers’ computer motivation and the supportive use of ict. akbiyik (2010) researched the affective computing, which lead to more effective use of ict in education. the main purpose of the study was to make an inquiry on affective computing with an educational viewpoint. hu and mcgrath (2011) examined the innovation in higher education in china by exploring the readiness of teachers to integrate ict in english language teaching. the findings indicate that limited ict skills and pedagogic expertise are obstacles to the use of ict in english language teaching. player-koro (2013) studied hype, hope and ict in teacher education. the main finding is that, contrary to the intentions to renew and revitalize education, ict in use operate as a relay in the reproduction of traditional ways of teaching and learning. solar et al. (2013) examined a maturity model for assessing the use of ict in school education. rogers and twidle (2013) explored a pedagogical framework for developing innovative science teachers with ict. ricoy and rodriguez (2013) researched contributions and controversies generated by the use of ict in higher education. wastiau et al. (2013) explored the use of ict in education with a survey of schools in europe. baelo and canton (2010) examined the use of information and communication technologies in castilla leon universities. peric (2011) investigated the ict and the new generations of professionals. the research performed to determine the students’ use of ict in the learning process, their primary requirements and the level of satisfaction with the existing faculty website. khodamoradi et al. (2011) performed a research on the utilization of ict in education. aoki et al. (2013) examined the factors influencing in the ict composite index at the school level. their findings provide suggestions to other nations that are endeavoring to enhance the ict levels of schools. alexandru et al. (2013) analysed ict challenges and issues in climate change education. fauville et al. (2014) examined ict tools in environmental education by reviewing two newcomers to schools. a key finding is that there is far less research on the fit with and implications for student learning, though the existence of a rich variety of tools and applications. 255 business, management and education, 2016, 14(2): 249–274 bostan and akman (2015) explored the impact of education on security practices in ict. results indicate that education level has significant impact on all security issues included in the analysis regarding computer usage, web usage and e-mail usage. de witte and rogge (2014) investigated the ict matter for effectiveness and efficiency in mathematics education. viseu and da ponte (2012) explored mathematics teacher education, supported by ict in the teaching internship. peltenburg et al. (2010) researched ict-based dynamic assessment to reveal special education students’ potential in mathematics. bocconi et al. (2013) discussed framing ict-enabled innovation for learning with the case of one-to-one learning initiatives in europe. cifuentes and vanderlinde (2015) analyzed the ict leadership in higher education with a multiple case study in colombia. their findings are of particular relevance for the work of policy makers, ict coordinators and leaders in higher education around the world. tondeur et al. (2015) focused on integrating ict in kenyan secondary schools with an exploratory case study of a professional development programme. rodriguez et al. (2012a) investigated evolutionary development with a model for the design, implementation, and evaluation of ict for education programmes. egea (2014) explored neoliberalism, education and the integration of ict in schools. oshima and muramatsu (2015) investigated current situation and issues related to ict utilization in primary and secondary education. their research describes the government’s policy for the introduction of ict in education and the efforts that fujitsu is making in this regard. garcia-valcarcel et al. (2014) researched ict in collaborative learning in the classrooms of primary and secondary education. the results indicate that teachers think that ict have great potential for enhancing collaborative activities among students and for developing highly relevant generic skills. heemskerk et al. (2012) investigated the inclusiveness of ict in secondary education by taking into account of students’ appreciation of ict tools. demirli (2013) examined the ict usage of pre-service teachers as part of a cultural comparison for turkey and bosnia and herzegovina. the results reveal the need to take into account the cultural differences in ensuring the integration of icts. xiong and lim (2015) researched curriculum leadership and the development of ict in education competencies of pre-service teachers in south china. tezci (2011) studied factors that influence pre-service teachers’ ict usage in education. the results reveal that turkey is in the early phase of ict integration in education. szeto and cheng (2014) studied exploring the usage of ict and youtube for teaching as a case of pre-service teachers in hong kong. martin et al. (2010) studied school teacher training and ict integration in education. yurdakul (2011) examined techno-pedagogical knowledge competencies of pre-service teachers based on ict usage. koh et al. (2013) examined the understanding of the relationship between singapore pre-service teachers’ ict course experiences and technological pedagogical content knowledge through ict course evaluation. 256 t. yildiz. the exploration of the relationships between the global competitiveness, the ict and education kuskaya mumcu and kocak usluel (2010) investigated ict in vocational and technical schools by taking into consideration of teachers’ instructional, managerial and personal use matters. moreno et al. (2013) studied engineering education for sustainability with a multi-stakeholder case study on ict and transportation. munoz-repiso and tejedor (2012) researched the incorporation of ict in higher education. munoz-repiso and tejedor (2011) explored ict variables related to the generation of new scenarios of learning in higher education. rosman and burita (2014) focused on the concept of the computer science course and some aspects of ict integration into education. the analysis of the research results makes possible to suggest options for further development of the course. blignaut et al. (2010) analyzed ict in education policy and practice in developing countries. nachmias et al. (2010) studied ict use in education with different uptake and practice in hebrew-speaking and arabic-speaking schools in israel. the conclusions imply that further effort is needed to close the gaps between hebrew and arabic-speaking schools as well as collaboration and exchange of ideas, information and educational experience between staff members from sectors. uslu and bumen (2012) investigated the effects of the professional development program on turkish teachers. zhang et al. (2010) researched the latest progress report on ict application in chinese basic education. zlamanski and ciccarelli (2012) explored the teachers’ belief about their competency to promote healthy ict use among their students. wiseman and anderson (2012) studied ict-integrated education and national innovation systems in the gulf cooperation council countries. sanchez et al. (2011) studied education with ict in south korea and chile. rubagiza et al. (2011) studied introducing ict into schools in rwanda by considering educational challenges and opportunities. peeraer and van petegem (2011) explored ict in teacher education in an emerging developing country with vietnam’s baseline situation at the start of “the year of ict”. their analysis reveals the teacher educators’ access to ict, their intensity of use, their related skills, and their confidence in using ict, as well as their conceptions of learning. jun et al. (2014) assessed the computational literacy of elementary students on a national level in korea. hismanoglu (2012) investigated prospective efl teachers’ perceptions of ict integration with a study of distance higher education in turkey. the results imply that training that will enable teachers to become competent in and receptive to ict is quite critical in distance education realms. hammond et al. (2011) examined how and why do student teachers use ict. jordan (2011) studied framing ict, teachers and learners in australian school education ict policy. kreijns et al. (2013) studied adopting the integrative model of behavior prediction to explain teachers’ willingness to use ict as a perspective for research on teachers’ ict usage in pedagogical practices. brun and hinostroza (2014) present a study about learning to become a teacher in the 21st century by considering the ict integration in initial teacher education in chile. espinosa et al. (2010) studied ict competences of future teachers. martinovic and zhang (2012) examined situating ict in the teacher education program. voogt et al. (2013) investigated 257 business, management and education, 2016, 14(2): 249–274 conditions of ict which have a positive effect on teaching and learning. khan (2015) investigated the emerging conceptions of ict-enhanced teaching within the australian tafe context. hinostroza et al. (2011) analyzed teaching and learning activities in chilean classrooms by exploring the ict-made differences. their results contribute to the discussion regarding the specific role of ict in teaching and learning activities. based on the foregoing, the present study adds another dimension to the existing literature. in this regard, by using statistical methods, this paper provides an additional viewpoint for policymakers in the field. specifically, it differs from previous works in that it investigates significant relationships and connections between competitiveness, ict and education and competitiveness. 3. data and method description the gci (2014–2015) measured national competitiveness by using a complex methodology involving raw data and executive opinions. the index rests on 12 pillars categorized into three groups, namely basic requirements (four pillars), efficiency enhancers (six pillars), and innovation and sophistication factors (two pillars). countries are rated on a seven-point scale, with a higher score indicating more competitiveness. in this research, the fifth pillar, which concerns higher education and training, is taken into consideration. this pillar has three sub indicators: quantity of education, quality of education, and on-the-job training. the ninth pillar, which concerns technological readiness, is also taken into the analysis. this pillar has two sub indicators: technological adoption and ict use. finally the eleventh and twelfth pillars, which measure business sophistication and innovation factors, are taken into consideration. in this study, one main type of data source is used, which is drawn from the global competitiveness index (gci) of the world economic forum (wef) database. the data source is the fifth pillar from the gci (gci–5) the ninth pillar from the gci (gci–9), the eleventh and twelfth pillars of the gci (gci–11 and gci–12), which measures higher education and training, technological readiness, business sophistication, innovation indicators (see appendix tables a1 through a4). the gci is a comprehensive database of the competitiveness of nations. global competitiveness is an area of economic theory that analyzes the facts and policies that shape the ability of a nation to create and maintain an environment that sustains more value creation for its enterprises and more prosperity for its people. firstly, for data investigation and depiction purposes, response surface method (rsm) is applied to visualize the data in three dimensions. then, self-organizing maps (som) are generated on the clustered data for detecting cluster structures. finally, canonical correlation procedures are applied. this procedure finds the linear combinations of two sets of variables which have the highest correlation between them. before beginning the analysis, all the variables have first been standardized by 258 t. yildiz. the exploration of the relationships between the global competitiveness, the ict and education subtracting their means and dividing by their standard deviations. technically, the canonical correlation is a generalization of principal component analysis, which is developed by hotelling back in the year 1936. the canonical correlation analysis is concerned with the amount of linear relationship between two sets of variables. the method was developed for studying the relationship between two sets of variables with one or more sets of variables. indeed, the canonical correlation analysis is a complicated method of analysis based on the largest number of matrix algebra tools, which include elements such as the cholesky decomposition, matrix inversion, eigenvalues and eigenvectors and decomposition singular values. response surface method (rsm) and self-organizing maps (som). the rsm figures depict the relationships among the competitiveness variables (fig. 1). quantity of education (b.05.01), quality of education (b.05.02) and global competitiveness (gci) on-the-job training (b.05.03), quantity of education (b.05.01) and global competitiveness (gci) technology adoption (b.09.01), ict use (b.09.02) and global competitiveness (gci) business sophistication (c.11), innovation (c.12) and global competitiveness (gci) fig. 1. 3d visualization of the data (response surface – algorithm: neural networks) 259 business, management and education, 2016, 14(2): 249–274 figure 2 shows the davies-bouldin (db) index, which is useful for determining the appropriate number of clusters to be applied to the source dataset (sum ratio of internal variance for each cluster, with inter-cluster distance) for the partitive clustering. fig. 2. davies-bouldin (db) index of clustering in this case, three clusters are generated as the db index suggested. see figure 2. based on the clustered data, som analyses are performed. fig. 3. som components the figure 3 shows how different components are distributed on the som hexagonal grid. similar component maps are placed in adjacent positions in order to spot correlations. in this case, quality of education (b.05.02) and innovation (c.12) components are placed on down right corner. quantity of education (b.05.01) and ict use (b.09.02) components are placed upper left and upper right corners, whereas all together business sophistication (c.11), on-the-job training (b.05.03), technology adoption (b.09.01) and global competitiveness index (gci) components are placed down left corner. see figure 3. 260 t. yildiz. the exploration of the relationships between the global competitiveness, the ict and education fig. 4. som d-matrix figure 4 puts on the top of each unit the mean value of the distances from its six nearest neighbors. peaks of far of units separate valleys of nearest ones. this chart shows the detected cluster structure in input data. fig. 5. som p-matrix figure 5 displays the probability density of input data. each unit displays the relative number of input data for which it and its six nearest neighbors is the best matching unit (bmu). the peaks of dense zones of the input space separate valleys of sparse ones. it is useful for detecting density-based cluster structures. see also d-matrix of figure 4. canonical correlations – education and technological readiness. this procedure finds the linear combinations of two sets of variables, which have the highest correlation between them. the numbers of complete cases are 156. in this case, 4 significant sets of linear combinations have been formed (table 1). the table 1 shows the estimated correlation between each set of canonical variables. since 4 of the p-values are less than 0.05, those sets have statistically significant correlations at the 95.0% confidence level. 261 business, management and education, 2016, 14(2): 249–274 table 1. canonical correlations – education, and technological readiness number eigenvalue canonical correlation wilks lambda chi-square d.f. p-value 1 0.919 0.959 0.0245 545.0 56 0.0000 2 0.489 0.699 0.303 175.0 42 0.0000 3 0.218 0.467 0.594 76.7 30 0.0000 4 0.155 0.393 0.759 40.5 20 0.0043 5 0.0627 0.25 0.898 15.8 12 0.2029 6 0.0298 0.172 0.959 6.23 6 0.3984 7 0.0121 0.11 0.988 1.79 2 0.4095 since p values are less than 0.05 in the wilks (the wilks’ lambda) tests, the null hypothesis is rejected. therefore, the alternative hypothesis that there is a linear relationship between the “education and technological readiness” variables is accepted. the variables have first been standardized by subtracting their means and dividing by their standard deviations. tables 2 and 3 show the estimated correlation between each set of canonical variables. table 2. coefficients for canonical variables of the first set (higher education and training – 5th pillar) set: 1 2 3 4 secondary education enrollment (5.01) 0.164 0.291 –0.795 0.909 tertiary education enrollment (5.02) 0.112 0.706 0.289 –1.31 quality of the education system (5.03) –0.0888 0.276 0.296 –0.611 quality of math and science education (5.04) 0.00308 0.0986 –0.215 –0.431 quality of management schools (5.05) 0.0311 –0.394 1.47 0.873 internet access in schools (5.06) 0.39 –0.0106 0.0291 1.19 avail. of research and training services (5.07) 0.376 0.0715 0.0162 –0.193 extent of staff training (5.08) 0.125 –0.99 –1.08 –0.739 table 3. coefficients for canonical variables of the second set (technological readiness: technological adoption and ict use – 9th pillar) set: 1 2 3 4 availability of latest technologies (9.01) –0.131 –0.198 2.95 2.39 firm-level technology absorption (9.02) 0.479 –1.24 –1.61 –2.66 fdi and technology transfer (9.03) 0.112 –0.00371 –0.657 0.519 individuals using internet (9.04) 0.383 0.593 –0.98 1.18 fixed broadband internet subscriptions (9.05) 0.27 0.733 0.783 –1.03 int’l internet bandwidth (9.06) –0.0557 –0.315 –0.236 0.305 mobile broadband subscriptions (9.07) 0.0225 0.244 –0.706 –0.476 262 t. yildiz. the exploration of the relationships between the global competitiveness, the ict and education in this case, seven sets of linear combinations have been formed. however, only four sets of linear combinations are statistically significant p < 0.05 (see table 1 and see table 2, 3 and fig. 6a). the first set forms the strongest correlations and r equals to 0.96. the first set of linear combinations with the highlighted highly contributing variables is u1 = 0.164 × [secondary education enrollment (5.01)] + 0.112 × [tertiary education enrollment (5.02)] – 0.0888 × [quality of the education system (5.03)] + 0.00308 × [quality of math and science education (5.04)] + 0.0311 × [quality of management schools (5.05)] + 0.39 × [internet access in schools (5.06)] + 0.376 × [avail. of research and training services (5.07)] + 0.125 × [extent of staff training (5.08)] and l1 = – 0.131 × [availability of latest technologies (9.01)] + 0.479 × [firm-level technology absorption (9.02)] + 0.112 × [fdi and technology transfer (9.03)] + 0.383 × [individuals using internet (9.04)] + 0.27 × [fixed broadband internet subscriptions (9.05)] – 0.0557 × [int’l internet bandwidth (9.06)] + 0.0225 × [mobile broadband subscriptions (9.07)]. in addition, the second set of linear combinations, which is the next correlation and is less strong (r equals to 0.7) amongst all combinations that are uncorrelated with the first set (see table 1 and see table 2, 3 and figure 6b), with the highlighted highly contributing variables is, u2 = 0.291 × [secondary education enrollment (5.01)] + 0.706 × [tertiary education enrollment (5.02)] + 0.276 × [quality of the education system (5.03)] + 0.0986 × [quality of math and science education (5.04)] – 0.394 × [quality of management schools (5.05)] – 0.0106 × [internet access in schools (5.06)] + 0.0715 × [avail. of research and training services (5.07)] – 0.99 × [extent of staff training (5.08)] and l2 = – 0.198 × [availability of latest technologies (9.01)] – 1.24 × [firm-level technology absorption (9.02)] – 0.00371 × [fdi and technology transfer (9.03)] + 0.593 × [individuals using internet (9.04)] + 0.733 × [fixed broadband internet subscriptions (9.05)] – 0.315 × [int’l internet bandwidth (9.06)] + 0.244 × [mobile broadband subscriptions (9.07)], where the variables have first been standardized by subtracting their means and dividing by their standard deviations. table 1 shows the estimated correlation between each set of canonical variables. for the other sets, third set (r equals to 0.47) and fourth set (r equals to 0.39), of linear combinations, please refer to tables 2, 3 and figure 6c, 6d. 263 business, management and education, 2016, 14(2): 249–274 (a) linear combination 1 (r = 0.96) (b) linear combination 2 (r = 0.70) (c) linear combination 3 (r = 0.47) (d) linear combination 4 (r = 0.39) fig. 6. canonical correlations – education and technological readiness canonical correlations – education, business sophistication and innovation. again, this procedure finds the linear combinations of two sets of variables, which have the highest correlation between them. the numbers of complete cases are 163. in this case, 2 significant sets of linear combinations have been formed (table 4). the table 4 shows the estimated correlation between each set of canonical variables. since two of the p-values are less than 0.05, those sets have statistically significant correlations at the 95% confidence level. 264 t. yildiz. the exploration of the relationships between the global competitiveness, the ict and education table 4. canonical correlations – education, and business sophistication and innovation number eigenvalue canonical correlation wilks lambda chi-square d.f. p-value 1 0.922 0.96 0.0704 422.0 6 0.0000 2 0.0931 0.305 0.907 15.5 2 0.0004 since p values are less than 0.05 in the wilks (the wilks’ lambda) tests, the null hypothesis is rejected. therefore, the alternative hypothesis that there is a linear relationship between the “education, and business sophistication and innovation” variables is accepted. the variables have first been standardized by subtracting their means and dividing by their standard deviations. table 5 and 6 show the estimated correlation between each set of canonical variables. table 5. coefficients for canonical variables of the first set (higher education and training – 5th pillar) set: 1 2 a. quantity of education (b.05.01) 0.104 0.732 b. quality of education (b.05.02) 0.00712 –2.15 c. on-the-job training (b.05.03) 0.931 1.45 table 6. coefficients for canonical variables of the second set (business sophistication and innovation) set: 1 2 11th pillar: business sophistication (c.11) 0.9 2.8 12th pillar: innovation (c.12) 0.106 –2.94 in this case, two sets of linear combinations have been formed and the two sets of linear combinations are statistically significant p < 0.05 (see table 4 and see table 5, 6 and fig. 7a). the first set forms the strongest correlations and r equals to 0.96. the first set of linear combinations with the highlighted highly contributing variables is k1 = 0.104 × [a. quantity of education (b.05.01)] + 0.00712 × [b. quality of education (b.05.02)] + 0.931 × [c. on-the-job training (b.05.03)] and m1 = 0.9 × [11th pillar: business sophistication (c.11)] + 0.106 × [12th pillar: innovation (c.12)] in addition, the second set of linear combinations, which is the next correlation and is substantially less strong (r equals to 0.30) amongst all combinations that are uncor265 business, management and education, 2016, 14(2): 249–274 related with the first set (see tables 4, 5, 6 and fig. 7b), with the highlighted highly contributing variables is, k2 = 0.732 × [a. quantity of education (b.05.01)] – 2.15 × [b. quality of education (b.05.02)] + 1.45 × [c. on-the-job training (b.05.03)] and m2 = 2.8 × [11th pillar: business sophistication (c.11)] – 2.94 × [12th pillar: innovation (c.12)] where the variables have first been standardized by subtracting their means and dividing by their standard deviations. table 4 shows the estimated correlation between each set of canonical variables. since two of the p values are less than 0.05, those sets have statistically significant correlations at the 95% confidence level. (a) linear combination 1 (r = 0.96) (b) linear combination 2 (r = 0.30) fig. 7. canonical correlations – education and business sophistication and innovation 4. the empirical findings the results of the first sets (tables 3 and 4, set columns 1), the canonical correlation is strong with a magnitude of 0.96 and statistically significant at p < 0.05 (table 1, fig. 6a). there are primarily relationships between the higher education and training variables of internet access in schools and availability of research and training services, on the one hand, and the technological readiness variable of firm-level technology absorption with some contribution from individuals using internet and fixed broadband internet subscriptions, on the other. in addition, all other findings that are highlighted on table 3 and table 4 indicate the significant importance of variables in each respective set (fig. 6). 266 t. yildiz. the exploration of the relationships between the global competitiveness, the ict and education by looking at the results of the first sets (tables 5 and 6, set columns 1), the canonical correlation is strong with a magnitude of 0.96 and statistically significant at p < 0.05 (table 4, fig. 7a). there are primarily relationships between the higher education and training variables of on-the-job training, on the one hand, and the business sophistication and innovation variable of business sophistication, on the other. in addition, all other findings that are highlighted on table 5 and table 6 show the significant importance of variables in each respective set (fig. 7). 5. conclusions in this study, the relationship between ict indicators and education-related indicators are examined and their associations are identified. the presented results indicate that certain indicators, as evidenced by the canonical correlation analyses, contribute much more to improving competitiveness than do other variables. additionally, there is an apparent link between economic development, competitiveness and education related variables. thus, it is essential for policymakers in the field, especially those in developing countries, to take account of specific decisions based on the highlighted significant indicators in this study. the broad areas for improvement include increasing the quality of ict services, developing and improving ict infrastructure, promoting cooperation and coordination among service providers, investing into ict, reducing costs and increasing training on all aspects of ict and education. ict is a key element for development and economic expansion. however, many of the developing countries appear to gain only small fraction of the advantages from the ict sectors. indeed, developed countries are taking the most of the advantages and opportunities brought by the use of ict. because, these countries have well-developed ict infrastructure, expertise, and enough capital to finance and thereby provide the best education opportunities, whereas developing 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technopedagogical knowledge competencies of preservice teachers based on ict usage, hacettepe universitesi egitim fakultesi dergisi-hacettepe university journal of education 40: 397–408. zhang, j. t.; fang, y. y.; ma, x. l. 2010. the latest progress report on ict application in chinese basic education, british journal of educational technology 41(4): 567–573. https://doi.org/10.1111/j.1467–8535.2010.01083.x zlamanski, r.; ciccarelli, m. 2012. do teachers believe they are competent to promote healthy ict use among their students?, work – a journal of prevention assessment rehabilitation 41: 869–875. appendix table a1. higher education and training (5th pillar) b.05.01 a. quantity of education 5.01 secondary education enrollment, gross % 5.02 tertiary education enrollment, gross % b.05.02 b. quality of education 5.03 quality of the education system, 1–7 (best) 5.04 quality of math and science education, 1–7 (best) 5.05 quality of management schools, 1–7 (best) 5.06 internet access in schools, 1–7 (best) b.05.03 c. on-the-job training 5.07 availability of research and training services, 1–7 (best) 5.08 extent of staff training, 1–7 (best) table a2. technological readiness (9th pillar) b.09.01 a. technological adoption 9.01 availability of latest technologies, 1–7 (best) 9.02 firm-level technology absorption, 1–7 (best) 9.03 fdi and technology transfer, 1–7 (best) b.09.02 b. ict use 9.04 individuals using internet, % 9.05 fixed broadband internet subscriptions/100 pop. 9.06 int’l internet bandwidth, kb/s per user 9.07 mobile broadband subscriptions/100 pop. table a3. business sophistication factors (11th pillar) c.11 11th pillar: business sophistication 11.01 local supplier quantity, 1–7 (best) 11.02 local supplier quality, 1–7 (best) https://doi.org/10.1111/j.1467-8535.2010.01083.x 274 t. yildiz. the exploration of the relationships between the global competitiveness, the ict and education 11.03 state of cluster development, 1–7 (best) 11.04 nature of competitive advantage, 1–7 (best) 11.05 value chain breadth, 1–7 (best) 11.06 control of international distribution, 1–7 (best) 11.07 production process sophistication, 1–7 (best) 11.08 extent of marketing, 1–7 (best) 11.09 willingness to delegate authority, 1–7 (best) table a4. innovation factors (12th pillar) c.12 12th pillar: innovation 12.01 capacity for innovation, 1–7 (best) 12.02 quality of scientific research institutions, 1–7 (best) 12.03 company spending on rd, 1–7 (best) 12.04 university-industry collaboration in rd, 1–7 (best) 12.05 gov’t procurement of advanced tech products, 1–7 (best) 12.06 availability of scientists and engineers, 1–7 (best) 12.07 pct patents, applications/million pop. turkay yildiz received his phd from the institute of marine sciences and technology, dokuz eylul university, izmir, turkey. he has degrees in electronics, management, and he received his master’s degree in logistics management from izmir university of economics. he has a number of peer reviewed publications and conference presentations at various countries in such fields as transportation, logistics and supply chains. he also has various levels of expertise in the applications of it. copyright © 2014 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2014, 12(2): 181–193 doi:10.3846/bme.2014.245 regional differentiation of revenues collected by local governments of lithuania romualdas ginevičius1, neringa slavinskaitė2, dainora gedvilaitė3 vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania e-mails: 1romualdas.ginevicius@vgtu.lt; 2neringa.slavinskaite@vgtu.lt (corresponding author); 3dainora.gedvilaite@vgtu.lt received 02 november 2014; accepted 10 november 2014 abstract. the article focuses on the issue of municipal funding from revenues collected by local governments and the state budget of lithuania. in addition, it offers an evaluation of the lithuanian practice in this field, discusses used methodological approaches and overviews practical experience of other countries as well as the relevant theory. furthermore, it considers theoretical issues of local tax and tax distribution between levels of local government. finally, it gives general principles of tax distribution and administration. the results of this investigation point to fundamental problems, relating the misbalance in funding of local governments with regional differentiation. the growth in disparities of municipal revenues demands a better redistribution of income, which includes an increasing amount of grants. however, the current system used for funding of local governments limits possible solutions that could address these problems. it should be considered that in 2009–2013, the lowest amount of municipal income per resident was identified in vilnius county; whereas the highest amount was found in utena (2009), alytus (2010–2012) and šiauliai (2013) counties. keywords: local government revenue, general grant, regional differentiation. jel classification: h2, h6, h7. 1. introduction one clear trend in the development of the state government is to develop the independency of municipalities and expand their functions. this gives rise to additional difficulties in the field of funding. the problem is particularly complicated, because the economic potential of municipalities is highly different, which determines unequal opportunities to receive income and provide services to the public. these relevant problems can be addressed with the help of a universal method called the interbudgetary redistribution of funds which is known and, probably, broadly applied in many countries. this function of the method is also discussed in the european charter of local mailto:2neringa.slavinskaite@vgtu.lt 182 r. ginevičius et al. regional differentiation of revenues collected by local governments of lithuania self-government. it aims to allocate additional revenues required by municipalities to implement the assigned functions (conferred obligations). scientific studies show that issues of local budget formation are becoming an important financial and economic research object, which is reflected in papers of the following authors: wenli (2011), shoup (2004), alm, buschman, sjoquist (2014), cal, garrey, renner, clyde (1987), whitney (2013), bartle, kriz, morozov (2011), zhang (2013), haug, nerre (2005). lithuanian scientists also deal with matters of local self-government, among whom are davulis, peleckis, slavinskaitė (2013), astrauskas, striškaitė (2003), baltuškienė (2004), astrauskas (2011), bivainis (2005), naraškevičiūtė (2008) and others. this research aims to reveal theoretical and practical aspects pertaining to revenue formation in lithuanian municipalities considering regional differentiation. the following objectives were formulated for the research: 1. to overview literature of lithuanian and foreign authors on revenue formation in lithuanian municipalities. 2. to investigate the change in revenues collected by local governments by regions in the period 2009–2013. 3. to analyse the amount of the state budget allocated to municipalities. the following methods were used to conduct the research: the analysis of legislation and documents, comparative and logical analysis, calculation of arithmetic mean, induction, generalisation, analysis of statistical data, applying the calculations of variation width (r), variation coefficient (vk) and variation mean (v). 2. survey on theoretical sources of revenue collection by local governments the law on the methodology of determination of municipal budgetary revenues establishes the municipal budget as well as determines three local revenue sources: tax revenue, non-tax revenue, and grants from the state budget (fig. 1). revenues are allocated to municipalities in accordance with the law on the budget structure. the first two kinds of income may be called as own income, while the last one – grants – are state designated funds for municipalities to deliver their functions. the unutilised balance of the latter is to be returned to the state budget at the end of a year (davulis 2009). 183 business, management and education, 2014, 12(2): 181–193 m u n ic ip a l b u d g e t r e v e n u e income from taxes paid to the local budget under laws and other regulations. tax revenue income from municipal property municipal revenues from budgetary institutions. fees under the charges law of the republic of lithuania other non-tax revenues non-tax revenue general grants compensation of general grants special grants grants fig. 1. sources of municipal budget revenues of the republic of lithuania (source: prepared by the authors, on the basis of lietuvos respublikos savivaldybių… 2013). the basics of interbudgetary relationships are discussed in publications by tiebout (1956), musgrave (1959) and oates (1972). investigation of theoretical and applied work and practices has lead oates (1999) to three most important objectives associated with reallocation of funds: 1. to compensate for external effects arising from the fact, that a part of administrative territorial units receive some benefits from the activity of other administrative territorial units; 2. to equalise budget revenues of the lower tier; 3. to eliminate difficulties caused by disadvantages of the tax system to sustain a harmonious development of administrative territorial units. according to their nature, reasons behind the first and second objective are impartial, while the third objective is based on partial reasons. the budget system of lithuania has two tiers, namely, the state budget and municipal budget. the law on the budget structure of the republic of lithuania (lietuvos respublikos biudžeto… 2004) describes state and municipal budgets in the following manner: − state budget – the plan of state budget revenue and assignations, approved for the budget year by the seimas of the republic of lithuania. − municipal budget – the plan of municipal budget revenue and assignations, approved for the budget year by the municipal council. 184 r. ginevičius et al. regional differentiation of revenues collected by local governments of lithuania compared to three-tier budget systems that are particular to large countries (e.g. australia, usa, canada, russia, germany, etc.), the he two-tier budget system leads to a relatively simpler reallocation of revenues between budgets (butkevičius, bivainis 2009). in lithuania, the state budget revenue is allocated to municipal budgets for the following purposes: 1. to equalize disparities between the actual and planned tax revenue; 2. to reduce disparities in expenditure structure; 3. to carry out functions designated by the state to municipalities; 4. to organise education of children, youth and adults; 5. to implement programmes approved by the seimas and government; and 6. to compensate the changes in municipal budget revenue and expenditure, which arise because of decisions taken by the seimas and the government. currently, the main legislation, governing the redistribution of revenues between budgets are the law on the budget structure of the republic of lithuania and the law on the methodology of determination of municipal budgetary revenues. according to the law on the methodology of determination of municipal budgetary revenues, general grants from the state budget are allocated for the following purposes (table 1): − to equalise disparities between actual and planned revenues from personal income tax paid by municipal residents, provided the prognosis shows the lack of funds into the state budget; − to equalise the disparities in municipal expenditure structures, resulting from objective factors which are independent of municipal activity, provided the prognosis shows the lack of funds into the state budget. the special purpose grants for municipal budgets are allocated: − according to the established method for calculation of funds required for the implementation of functions assigned by the state to municipalities; − according to the established method for calculation of funds required for the implementation of the independent municipal function, i.e. to organise general education for children, youth and adults; − to carry out the programmes approved by the seimas and the government. general grant compensations (ggc) are allocated to municipal budgets for compensation of changes in revenue and expenditure in relation to decisions, made by the seimas or the government. the amount of grant for a municipality is approved by the law of the republic of lithuania on the approval of financial indicators of the state budget and municipal budgets. 185 business, management and education, 2014, 12(2): 181–193 table 1. the aim and criteria of state budget appropriations allocated to municipalities (source: prepared by the authors with reference to law on the methodology of determination of municipal budgetary revenues) aim of the grant criteria for supporting the municipalities formula to equalise disparities between the actual and planned revenues from personal income tax paid by municipal residents supporting municipalities with a lower actual tax revenue per capita for the last month compared to the actual average tax revenue of all municipalities. l1i = gi · h · (xf – xif ) – (bd1i /12), 1) a part of funds allocated to the municipality l1i in order to equalise disparities between the actual and planned tax income; 2) population of the municipality gi; 3) xf – actual average revenue per capita collected from tax in all municipalities for the last month; 4) actual revenue per capita collected from tax in the municipality xif; 5) a part of general grant, allocated from the state budget to the municipality bd1i, in order to equalise disparities between the actual and planned tax income; 6) h – 0.9 – equalisation coefficient, which determines the amount of funds allocated for each municipality in order to equalise disparities between the actual and planned tax income. to equalise the disparities in municipal expenditure structures allocated to a municipality considering the weight of certain demographic, social and other indicators that impact on objective changes in the revenue structure of the municipal budget. 2 2i n ni n l l k e= ⋅ ⋅∑ 1) a part of funds, allocated to the municipality l2i, in order to equalise disparities in expenditure structure; 2) kn – coefficient, denoting the influence of demographic, social or other `n` indicator on the structure of expenditures of all municipalities ( 1)n n k =∑ ; 3) a part of demographic, social or other `n` indicator, belonging to municipality eni, calculated in accordance with the formula ni ni ni i re r = ∑ , here is the meaning of `n` indicator of municipality rni. when counting eni, rni is taken only of those municipalities, of which a part of tax income, which is approved in the appendix of this law is of 100 percent. 3. analysis of lithuanian local government revenues by regions in 2009–2013 this chapter is devoted to the analysis of local government revenues by regions in the period 2009–2013. the income is going to be calculated per capita in order to see differences in allocation of grants and collection of taxes by region. 186 r. ginevičius et al. regional differentiation of revenues collected by local governments of lithuania in the period 2009–2012, the average income per capita increased in all municipalities except for vilnius city municipality (here, the income fluctuated by rising and declining each year); however, the year 2012 marked the start of declining income in most municipalities (except for šiauliai and vilnius city municipalities). the financial crisis and economic slowdown of 2009 resulted in the lowest income per one resident of all ten municipalities (table 2). table 2. income per capita in counties in 2009–2012 (ltl thousand) (source: prepared by the authors with reference to calculations and data from statistics lithuania) year county 2009 2010 2011 2012 2013 alytus 2.158 2.283 2.482 2.585 2.528 kaunas 1.918 2.114 2.221 2.328 2.259 klaipėda 2.085 2.142 2.384 2.448 2.470 marijampolė 2.048 2.081 2.328 2.351 2.302 panevežys 1.975 2.113 2.297 2.334 2.330 šiauliai 2.125 2.245 2.429 2.549 2.546 tauragė 2.172 2.230 2.391 2.488 2.479 telšiai 2.111 2.261 2.406 2.468 2.380 utena 2.235 2.265 2.397 2.500 2.445 vilnius 1.856 1.851 2.018 1.969 2.004 average (v) 2.068 2.159 2.335 2.402 2.374 variation width (r) 0.379 0.432 0.464 0.616 0.542 variation coefficient (vc) 5.78 6.08 5.71 7.33 6.82 during the analysed period (2009–2013), the income of vilnius city municipality per capita was the lowest and barely reached ltl 2000 (this amount was reached in 2011 and 2013), while alytus county had one of the highest incomes and has already exceeded ltl 2500 in 2012. this could have happened because compared with other municipalities, the part of personal income tax (pit) transferred to the budget of vilnius city municipality was significantly lower and amounted to 42% until 2014 and 48% since 2014, while the majority of municipalities received 100% (table 3). in addition, some impact could be explained by regional differences in involvement of residents in the labour market. table 3. allocation of income tax by municipalities in 2014 (ltl thousand) (source: prepared by the authors with reference to lietuvos respublikos 2014 metų… 2013) name of municipality the amount of personal income tax in municipality the part of personal income tax allocation of income tax to the state budget to the municipal budget vilnius 1 074 184 48 558 576 515 608 kaunas 409 560 94 24 574 384 986 klaipėda 202 744 86 28 384 174 360 all 1 686 488 611 534 1 074 954 187 business, management and education, 2014, 12(2): 181–193 in the period 2009–2013, the highest income increase per capita was noted in 2011 (the average of 8%). it was observed in the counties of marijampolė (10.87%) and klaipėda (11.30%). during the analysed period, the calculated coefficient varied from 5.71 to 7.33%; however, it did not exceed 10%. therefore, it can be stated that statistically, there is little variation. a similar situation may be observed when analysing the distribution of income tax per capita according to regions. according to table 4, the lowest amount of income tax is allocated to panevėžys and šiauliai counties (respectively, ltl 869 and ltl 793 per capita). however, after increasing the part of collected income tax in šiauliai and panevėžys municipalities up to 100 per cent, the worst place, since 2011, goes to vilnius. according to table 3, vilnius county receives the lowest part of income tax amounting to as little as 48 per cent, whereas the majority of municipalities get 100 per cent (except for kaunas with 94 per cent and klaipėda with 86 per cent). however, from 2015, the methodology for allocation of income tax to municipalities will be amended. according to the new methodology, municipalities will no longer receive a particular share of income tax, but a percentage corresponding to this tax. according to calculations of the minister of finance, the new methodology should provide municipalities with approx. ltl 150–170 million of additional revenue next year. this method remained in effect until 2011 (for 10 years) and later was adjusted because of the crisis. table 4. income tax per capita by county in 2009–1013 (ltl thousand) (source: prepared by the authors with reference to calculations and data from statistics lithuania) years county 2009 2010 2011 2012 2013 alytus 0.997 0.927 0.776 0.833 0.847 kaunas 0.943 1.002 0.850 0.920 0.912 klaipėda 1.068 1.072 0.830 0.896 0.914 marijampolė 0.916 0.818 0.743 0.796 0.806 panevėžys 0.869 0.853 0.792 0.853 0.847 šiauliai 0.992 0.943 0.802 0.863 0.866 tauragė 0.907 0.793 0.791 0.834 0.825 telšiai 0.931 0.869 0.711 0.785 0.780 utena 1.051 0.899 0.839 0.882 0.894 vilnius 0.930 0.865 0.666 0.700 0.730 average (v) 0.960 0.904 0.780 0.836 0.842 variation width (r) 0.199 0.279 0.184 0.220 0.184 variation coefficient (vc) 6.711 9.397 7.509 7.630 7.018 the amount of collected income tax depends on the tendency of tax income to change. in terms of the total revenue, this tax amounts to more than 30% of revenue in a region; consequently, it has a significant role in the formation of municipal budgets. 188 r. ginevičius et al. regional differentiation of revenues collected by local governments of lithuania according to figure 2, lithuanian municipal revenue mainly consists of tax income and grants from the state budget. fig. 2. dynamics of lithuanian municipal revenue in 2009–2013 (source: prepared by the authors, with reference to calculations and data from statistics lithuania) during the analysed period, grants amounted to more than 50% of the total revenue and in 2009, they reached nearly 60%; whereas tax and non-tax revenues did not reach 40% of the total revenue. in 2013, the largest share of grants in municipal budgets were observed in counties of tauragė and alytus (approx. 58%); while the smallest share belonged to klaipėda, vilnius and kaunas counties (40–45%). according to figure 3, the portion of grants in municipal revenues was at a slight decline since 2010; correspondingly, tax and non-tax revenues increased. this demonstrates that economic growth results in greater revenues from taxes; consequently, less grants are required from the state. fig. 3. revenue structure of lithuanian municipalities by county in 2013 (source: prepared by the authors, with reference to calculations and data from statistics lithuania) 189 business, management and education, 2014, 12(2): 181–193 however, there continues a tendency that almost a half of the revenue is received on the grant basis. according to davulis (2009), civinskas and tolvaišis (2006), the higher is the level of state grants in the revenue structure, the less independent is a municipality. during 2009–2013, vilnius county received the lowest amount of grants per capita from ltl 819 to ltl 1029. the highest amount was in alytus and tauragė counties and varied from ltl 1164 to ltl 1487 per capita (table 5). according to the calculated variation width, the biggest difference between received grants per capita was in 2012 and reached ltl 511. in addition, the variation coefficient amounts to more than 10%, which shows disparities in the allocation of grants for regions. in 2009, regional disparities of allocated grants per capita were the lowest (approx. 11.33%) and in 2010 – the highest (14.60%). table 5. grants per capita by county in 2009–2013 (ltl thousand) (source: prepared by the authors, with reference to calculations and data from statistics lithuania) years county 2009 2010 2011 2012 2013 alytus 1.044 1.272 1.450 1.487 1.421 kaunas 0.872 0.998 1.090 1.100 1.058 klaipėda 0.856 0.904 1.104 1.097 1.083 marijampolė 1.036 1.172 1.335 1.299 1.252 panevežys 1.007 1.162 1.317 1.291 1.254 šiauliai 1.020 1.187 1.338 1.352 1.335 tauragė 1.164 1.329 1.449 1.470 1.446 telšiai 1.102 1.295 1.420 1.417 1.325 utena 1.066 1.249 1.379 1.421 1.363 vilnius 0.819 0.862 1.028 0.976 0.948 average (v) 0.999 1.143 1.291 1.291 1.248 variation width (r) 0.345 0.467 0.422 0.511 0.498 variation coefficient (vc) 11.329 14.459 12.214 13.654 13.330 the highest tax income per capita in 2009–2013 was observed in klaipėda county. it varied from ltl 1068 to ltl 1199 per capita (table 6). estimation of tax income per capita according to the calculated variation width (from ltl 199 to ltl 299) and variation coefficient (from 6.7 to 9.4%) demonstrates that statistically, regional differentiation is lower than according to the grants allocated per capita. consequently, the variation width did not exceed ltl 290 and the variation coefficient did not exceed 9%; whereas the allocation of grants for regions according to the number of residents exceeded ltl 500 and the variation coefficient was more than 10%. this could have been influenced by a different number of residents and companies in counties, size of municipalities in the territory, amount of wages and other factors that have a direct or indirect impact on tax income. the smallest regional differentiation was in 2009, when the variation width reached only ltl 199 per capita (vc – 6.7%). the biggest differentiation was in 2012, when the variation width reached nearly ltl 300 per capita (vc – 8.9%). 190 r. ginevičius et al. regional differentiation of revenues collected by local governments of lithuania the part of non-tax income is quite minor in the total revenue: during the years 2009–2013, it did not reach 10% of the total revenue. according to figure 3, the major part of non-tax revenue was observed in klaipėda county in 2013, which may be due to fees paid by the state enterprise klaipeda state seaport authority. table 6. tax income per capita by county in 2009–2013 (ltl thousand) (source: prepared by the authors, with reference to calculations and data from statistics lithuania) years county 2009 2010 2011 2012 2013 alytus 0.997 0.927 0.934 1.007 1.025 kaunas 0.943 1.002 1.011 1.084 1.076 klaipėda 1.068 1.072 1.083 1.167 1.199 marijampolė 0.916 0.818 0.878 0.944 0.955 panevežys 0.869 0.853 0.871 0.938 0.936 šiauliai 0.992 0.943 0.952 1.055 1.060 tauragė 0.907 0.793 0.842 0.934 0.950 telšiai 0.931 0.869 0.889 0.949 0.965 utena 1.051 0.899 0.895 0.965 0.966 vilnius 0.930 0.865 0.851 0.868 0.918 average (v) 0.960 0.904 0.921 0.991 1.005 variation width (r) 0.199 0.279 0.241 0.299 0.281 variation coefficient (vc) 6.711 9.397 8.308 8.877 8.602 table 7. non-tax income per capita by county in 2009–2013 ltl thousand) (source: prepared by the authors, with reference to calculations and data from statistics lithuania) years county 2009 2010 2011 2012 2013 alytus 0.123 0.089 0.096 0.091 0.082 kaunas 0.109 0.121 0.120 0.144 0.125 klaipėda 0.173 0.179 0.197 0.184 0.187 marijampolė 0.102 0.099 0.116 0.108 0.095 panevežys 0.105 0.105 0.109 0.104 0.139 šiauliai 0.121 0.124 0.140 0.141 0.150 tauragė 0.109 0.117 0.100 0.084 0.083 telšiai 0.085 0.106 0.097 0.102 0.090 utena 0.126 0.124 0.123 0.114 0.116 vilnius 0.110 0.129 0.139 0.125 0.138 average (v) 0.116 0.119 0.124 0.120 0.121 variation width (r) 0.088 0.090 0.101 0.100 0.104 variation coefficient (vk) 19.861 20.518 24.265 24.915 28.271 191 business, management and education, 2014, 12(2): 181–193 statistically, the variation of non-tax revenue per capita in 2009–2013 is large enough (20–30 proc.). from the point of view of statistics, non-tax revenue per capita is not homogeneous and a differentiation between counties exists, which may be the result of different payment amounts determined by separate municipalities, or the rates applicable to this type of income. in 2009–2013, the highest non-tax income per capita belonged to klaipėda county and ranged from ltl 173 to ltl 197, whereas the lowest non-tax income belonged to telšiai (2009), alytus (2010–2011) and tauragė (2012–2013) counties. klaipėda and vilnius counties collect higher non-tax revenues as they are centres of attraction for tourists: resort towns of klaipėda, palanga and neringa, the port and the capital city of vilnius. 4. conclusions lithuanian budget has two tiers. it enables municipalities to dispose of their budget: they can independently use revenues allocated by the state and acquire some financial resources to ensure the fulfilment of assigned tasks. however, it should be noted that the municipal financial management is very complicated and governed by various laws that restrict the autonomy of local governments. it was found that the growth of municipal revenue disparities demands a better redistribution of income, which includes an increasing amount of grants. however, the current funding system applicable to local government does not promote the search for a solution to these problems. the analysis demonstrated that in 2009–2013, the lowest amount of municipal income belonged to a resident of vilnius county, whereas the highest amount belong to a resident of utena (2009), alytus (2010–2012) and šiauliai (2013) counties. the research revealed that the collection of income tax depends on trends of personal income tax changes. according to the percentage of personal income tax in the total income, this tax is responsible for more than 30 per cent of the total income, which shows its significance in the formation of local government budgets. references alm, j.; buschman, r. d.; sjoquist, d. l. 2014. foreclosures and local government revenues from the property tax: the case 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public budgeting, accounting & financial management 25(4): 649–675. zhang, g. 2013. the impacts of intergovernmental transfers on local governments’ fiscal behavior in china: a cross-county analysis, australian journal of public administration 72(3): 264–278. romualdas ginevičius. prof., dr habil., head of the department of enterprise economics and management, construction engineer and economist. the author of more than 350 research papers and over 20 scientific books; editor-in-chief of the “journal of business economics and management” (located on the isi database “web on science”) and the journal “business: theory and practice”. research interests: organisational theory, complex and quantitative evaluation of social processes and phenomena. neringa slavinskaitė. doctoral (ph) student of social sciences (economics) at vilnius gediminas technical university from 2013. lecturer of the department of enterprise economics and management from 2009. she has published about 10 articles on economics, especially in the area of fiscal decentralisation. research interests: fiscal decentralisation, local government. dainora gedvilaitė. lecturer at the department of enterprise economics and management, vilnius gediminas technical university (vgtu). master of business, specialisation – investment management, vgtu (2013). research interests: sustainable development, sustainability of regional development. copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(1): 25–45 doi:10.3846/bme.2015.254 a framework for the corporate governance of data – theoretical background and empirical evidence tomi dahlberg1, tiina nokkala2 turku business school at university of turku, rehtorinpellonkatu 3, fi-20014 university of turku, finland e-mails: 1tomi.dahlberg@utu.fi (corresponding author); 2tiina.nokkala@utu.fi received 03 december 2014; accepted 17 january 2015 abstract. in a modern organization, it and digital data have transformed from being functional resources to integral elements of business strategy. against this background, our article addresses corporate governance of digital data in general and that of aging societies in particular. to describe the role of executives and managers in data governance, we first review the corporate and it governance literature. we then propose a theoretical framework for the governance of data: a novel construct. we apply the framework to the governance of aging societies related data, that is, to answer the question of how best to manage the provision of services to citizens with digital data enablement and support. we also disclose the results from two recent surveys, with 212 and 68 respondents respectively, on the business significance of data governance. the survey results reveal that good governance of data is considered critical to organizations. as concluding remarks, we discuss the significance of our results, our contributions to research, the limitations of our study and its managerial implications. keywords: governance of data, governance of it, corporate governance, data management, aging, aging societies, managers and data, data assets. jel classification: m15, g34, h51, h53, j14, l86. 1. introduction the motivation for this article comes from early-phase research on how to govern aging societies with the help of information technology (it) and digital data. these are considered some of the key means of providing solutions to the global problems of population aging (obi et al. 2013) – a promise yet to be fulfilled. our article focuses on the use and especially the governance of digital data, rather than the full range of it-enabled services. although our interest lies in the governance of data in a specific context, we believe that the governance of data for aging societies is fundamentally similar to the governance of data in any other context. consequently, we propose a generic framework for the governance of data. we approach our topic from a corporate http://dx.doi.org/10.3846/bme.2015.254 26 t. dahlberg, t. nokkala. a framework for the corporate governance of data... governance (managerial) perspective as we consider the governance of data a business managerial issue as opposed to an it or data modelling issue, technology, it and data modelling centric approaches use the data governance construct, which actually often describes data management. therefore, we pay special attention to the role of business management in the governance of data. the aging of populations affects both developed and developing economies. a recent united nations study disclosed that the proportion of persons older than 60 years was 11% of the world’s population in 2012 (united nations 2014). the same report estimates that this proportion will double to 22% by the year 2050. according to the oecd, japan had the highest proportion of citizens older than 65 years at 24.2% in 2012, followed by italy and germany with 20.6% (oecd 2014a). the country of the authors, finland, had the seventh highest proportion of citizens over 65 years among the oecd countries at 18.1%, whilst the average for oecd countries was 15.1% and for the eu28 17.8%. the oecd estimates that by 2050 the proportion of elderly citizens will grow to 35.6% in japan, 35.3% in italy and 29.5% in germany (oecd 2014b). the estimate for finland is 27.1%, for oecd countries 25.2% and for the eu25 29.5%. the aging of populations is also strong in developing economies. for example, in china it is estimated that the number of citizens over 65 years will have grown from 25 million in 1953 to 349 million in 2050 (caiwei 2013). demographic changes, such as longer life expectancies and lower birth rates, are creating serious economic and social challenges for economies. peter wintley-jensen, the head of the dg-information society within the european commission, has listed critical challenges for the eu by 2025: the dependency ratio (proportion of citizens not in the labour force) will drop from 1:4 to 1:2; the proportion of health and social care to gdp will increase by 4–8%; the headcount of the work force will shrink by 20 million (wintley-jensen 2013). the concept of the super-aged society has been introduced to describe aging in japan (obi et al. 2013). this also describes an approach that aims to turn challenges into opportunities for economic growth. for example, responding to the increasing demand for healthcare and social welfare services requires the promotion of healthier lifestyles, encouraging greater activity in the monitoring of wellbeing, increasing pre-emptive care and self-services, and developing services so that citizens can stay at home; also, among the solutions proposed are empowerment through active aging, new working arrangements and longer inclusion and participation in society. digital data are viewed as being able to support service development, innovations and reforms in three ways. at national, regional and local levels, data compiled and analysed concerning citizens and their service needs can be used to design and operate national, regional and local healthcare, social welfare and other service systems and policies. aged care services are only one element in such systems and policies. digital data can also be used to develop national, regional and local services by automating data routines, integrating data storages and transferring data electronically. this requires 27 business, management and education, 2015, 13(1): 25–45 data interoperability, inter-organizational coordination hubs (markus, quang 2012) and standards. cooperation between organizations and stakeholders is also needed. the governance of data and the daily management of data are fundamental to the coordination of national, regional and local data, as well as data-driven services. second, healthcare, social welfare, finance and other professions providing services to (elderly) citizens need good quality data in their work. the requirements for data are similar to those outlined above. data interoperability and transferability within and between tasks and organizations are required to ensure that professionals have useful information. there is also a need for better coordinated service activities with improved data sharing between professionals (hovenga 2013; obi et al. 2013). for example, an elderly citizen may need home care (e.g. food delivery), social welfare (e.g. financial support to pay a part of expenses), basic healthcare (e.g. control in the timeliness of drug delivery) and specialized medical care (e.g. periods of care at a hospital); these are services which need to be provided as a coordinated whole. citizen-authorized access to data on the socio-medical-economic status of the citizen is expected to improve the efficiency and the impact of services. finally, (elderly) citizens use data-enabled services and are – or still too often should be – the owners of the data concerning them. data need to be made available to facilitate its use. as parts of these data are sensitive, such as health, financial and social status data, adequate privacy and authorization mechanisms are needed. on the other hand, mobile technologies, cloud services, games and gamification, social media, robotics, etc., have already produced many services that help in the daily lives of (elderly) citizens. these include services that promote healthier living and self-diagnosis. an (elderly) citizen could even store data using cloud services, for example data series on blood pressure, nutrition, exercise, diabetes and heartbeat. cooperation between healthcare, service providers and citizes and mechanisms to ensure the (medically required) reliability of this data are needed to achieve data interoperability and integration to the medical and social welfare databases created by professionals. currently, data interoperability and transferability are far from reality. several reasons prevent the electronic transfer and consolidation of data: data creation and handling processes vary, leading to dissimilarities in data coding and content; data concepts, formats and structures differ; data are fragmented and duplicated. there is also a lack of any accepted and widely used international, national and/or local data model or data message standards. health and medical data are one of the most standardized areas. nonetheless, out of the 194 member states of the world health organization (who), only 34 members were able to provide reliable health data in 2012 (hovenga 2013). a major reason for the current situation is the fact that each organization typically develops/purchases and runs its own databases and information systems (iss) without considering data interoperability, transferability and usability (dahlberg 2010; dahlberg et al. 2011; hovenga 2013). as the number of iss and data storage systems continues 28 t. dahlberg, t. nokkala. a framework for the corporate governance of data... to increase, there are data held on the same citizens, services, professionals, etc., in an ever-increasing number of data storages and information systems. we claim that this is a managerial issue. why? because only business professionals know what the content of data should be and what data are needed to perform specific tasks. if the governance of data is unclear, no one in an organization is responsible for the content quality or the availability of data in specific tasks. currently, even within a single organization, business executives may allow or even demand the purchase/ development of iss and data storage systems that do not share or transfer data. the situation is similar in general. for example, most large companies have limited visibility for their customers, products, vendors, etc. data are fragmented into hundreds of incompatible iss and dozens of data storages. sales, procurement and manufacturing professionals, as well as customers, vendors, partners, etc., face similar data challenges to those confronting healthcare and social welfare service professionals and citizens. we conclude that the governance of data framework should be generic and have a corporate governance (managerial) focus. at the same time, the governance of data on elderly citizens is ideal for the testing and validation of the proposed framework. elderly citizens have lived long and thus data concerning them are stored in multiple storages, may cover several decades and include rich sets of events and changes. second, when an elderly citizen retires, the collection of occupational healthcare, hr and other work-related data discontinues and salary payments are transformed into pension payments – at least partially. there are also changes in taxation, benefits, social status, etc. third, many elderly citizens make a gradual transformation from active, “young” elderly citizens to “old” elderly citizens. the young elderly travel and consume cultural services and they may continue to work in some way, participate in societal activities and spend time with their grandchildren, friends, etc. as they age, they start to need more support and care service provision. to summarize, this article proposes a generic governance of data framework from a corporate governance perspective. our intention is later to test the framework in an on-going research project entitled “governance of aging societies”. we aim to evaluate the ability of the framework to solve data interoperability and transferability problems in the context of data-driven services offered to elderly citizens. our article addresses two issues (research questions): first, we discuss the proposed framework and its theoretical basis; second, we answer the question of how important the governance of data is using the evaluations of the respondents gathered from two surveys. section 2 addresses the theoretical aspects of the study. section 3 covers the methodological facets of the surveys and section 4 presents the results. finally, a conclusion and discussion section ends the article. 29 business, management and education, 2015, 13(1): 25–45 2. governance of data framework and its theoretical basis the work of data management association (dama) international to establish data management concepts is probably the most acknowledged cumulative endeavour in data management (dama 2009). dama’s dmbok (data management book of knowledge) distinguishes between data, information and knowledge. data are defined as the representation of facts, such as text, numbers, graphics, images, sound and video (dama 2009: 2). data transforms into information when definition, format, timeframe and relevance are added to the data. information transforms into knowledge when patterns, trends, relationships and assumptions are added to information. data have seven phases during their lifecycle. the planning, specification and enabling phases predate the existence of data. data are processed during the creating and acquiring, maintaining and using, archiving and retrieval, and purging phases (dama 2009: 4). the dmbok framework identifies ten data management functions (dama 2009: 7) and seven environmental elements (dama 2009: 13). the data governance function is used to steer the other nine functions. due to nature of the dmbok data governance tasks and the lack of a governance body (iso/iec 2008) this is not governance of data. the mapping of data management functions and environmental elements results in the dama-dmbok functional framework (dama 2009: 15). a “context diagram” is also crafted (dama 2009: 18). the dmbok manual then devotes one chapter to each data management function and its context diagram (dama 2009: 37–334). we attempted to apply the dmbok framework and later the method for an integrated knowledge environment (mike 2014). we chose these frameworks because they are – as far as we know – globally used holistic data management frameworks. we found both frameworks insufficient for three reasons. first, both the dmbok and the mike frameworks use the word “governance”. yet, governance here primarily describes daily management and the use of data, rather than the governance of data management and especially corporate governance of data. second, governance of data is looked at from the inside, i.e. from an it perspective. in contrast, corporate governance of data looks at data from the outside, namely how investments in data help to achieve the business objectives of the “corporate” and ensure a financial return on investments. finally, the dmbok framework assumes that the meaning of data can be defined universally. based on the assumption of universality, the meaning of patient, citizen and service event concepts, inter alia, and related data attributes could be defined so that there is a single version of “the truth” applicable to all situations and contexts. we do not share this assumption. instead, we propose that the meaning of data is defined in its creation and/or use context. for example, the meaning of the patient concept and patient concept-related data attributes differs for authorities, doctors, nurses, relatives of the patient and the patients themselves, depending on what each of them does with the data in a particular situation, or context. due to these limitations, we decided to propose a new framework by using three building blocks. 30 t. dahlberg, t. nokkala. a framework for the corporate governance of data... 2.1. corporate governance and the governance of it according to the classic, widely used definition of shleifer and vishny (1997), corporate governance refers to the ways in which suppliers of finance assure returns on their investments. they approach the issue from an agency perspective, by separating ownership and control. shleifer and vishny (1997) state that: “in most general terms, the financiers and the manager sign a contract that specifies what the manager does with the funds, and how the returns are divided between him and the financiers. ideally, they would sign a complete contract, that specifies exactly what the manager does in all states of the world, and how the profits are allocated” (p. 741). however, this is impossible in practice due to various uncertainties. therefore, investors and the manager agree on control rights, which are used to respond to uncertainties as they occur. the activities of setting objectives, agreeing accountability and putting controls in place to secure the achievement of objectives have become descriptive characteristics of corporate governance. bebchuk and weisbach (2010: 940) note that “[b]ecause returns to suppliers of finance depend on myriad legal and contractual arrangements, the operation of various markets, and the behavior of different types of players, corporate governance has evolved into various subliteratures”. corporate governance of it (e.g. iso/iec 2008), or simply governance of it, is one such subliterature, although corporate governance research may not acknowledge governance of it in this role. governance of it applies corporate governance concepts and principles for it and digital data. for example, the family of international iso/iec 38500 standards states that the governance body of an organization (corporate) should evaluate it, i.e. it should set objectives for the use of it and digital data in line with corporate objectives. the governance body should also direct it, agreeing areas of accountability in activities for the use of it and digital data to achieve the objectives. finally, the governance body should monitor it, ensuring through the use of control mechanisms that the objectives established for the use of it and digital data are really achieved. in the governance of it literature, this is called the evaluate–direct–monitor (edm) cycle. the edm cycle governs and interacts with the daily management of it and digital data, both in business projects with it investments and business operations with it dependencies. the governance of it emphasizes the role of business executives and managers (“investors”) in two ways: i) the governance body of the organization, typically the board, ceo, executive committee, etc., is responsible for implementing it governance; ii) the evaluation of it builds on the principle that business-driven objectives are established for the governance of it and data – and their management. we apply the edm model of the iso/iec 38500 standard to the governance of data, as this is the model that is widely employed, as well as the established international standard for the governance of it. the results are shown in table 1. 31 business, management and education, 2015, 13(1): 25–45 table 1. evaluate-direct-monitor (edm) model applied to governance of data (source: compiled by the authors, applying the format of iso/iec 2008) governance body task description of governance body tasks evaluate determine for what current and future purposes data are used in an enterprise to execute business strategy and to achieve business objectives and thus to set business objectives for data usage. consider how changes in business needs and the environment impact the use of data. set in place a management system with objectives, areas of accountability, controls and behaviours which ensure efficient and effective use of data. direct implement the management system to govern data creation, maintenance and usage by assigning responsibilities and by directing the preparation and implementation of policies and plans. ensure that the implementation of projects and other data quality improvement activities, as well as the translation of results into operational practice, are properly planned and managed, including stakeholder involvement and consideration of related business and it systems. encourage a sound data and information management culture. monitor monitor through appropriate measurement systems the performance of data processes, data quality and data usage, including the relation of data to the achievement of business objectives. ensure that external obligations in data management (e.g., laws and regulations on privacy, continuity, etc.) are met. previous research has proposed that structures, processes and cooperation mechanisms be used to design it governance arrangements (van grembergen et al. 2004; van grembergen, de haes 2008). data-related decision right matrices and organizational and control structures for the creation and use of data are examples of data governance structures. the edm cycle and control processes used to ensure the quality of data are examples of processes. contracts, discussions and interactions between owners/ investors and data managers/experts are examples of cooperation mechanisms. corporate governance encourages governance bodies to prepare against uncertainties. within the context of data management, a typical means of doing so is through enterprise architecture, especially information architecture and data/information risk management. enterprise/information architecture is used to manage and reduce the complexity of data and thus reduce the possible negative consequences of uncertainties. architecture also relates data to the business, iss and infrastructure. furthermore, information architecture promotes learning and understanding by defining data-related concepts, models, etc., which are then used to promote a common language and learning within an organization. the purpose of data/information risk management is to secure the continuity of the organization’s business activities by mitigating data/informationrelated risks. in addition to continuity management, means of doing so include data 32 t. dahlberg, t. nokkala. a framework for the corporate governance of data... security and data quality management. the purpose of data security – including cyber security – and data quality management is to ensure secure access to data and also the availability, integrity, timeliness, etc., of the data. 2.2. digitalization of data and digital strategy the digitalization of data started when computers were first put into use some 60 years ago. in organizations, business data started to accumulate to their iss and databases and have done so at an increasing pace over the years (davenport 2007). for a long time, the majority of data were non-digital. according to hilbert and lopez (2011), a major transformation started around the year 2000, when audio and video data increasingly became digital, fuelled by innovations in data storage, data transformation, data compression and other technological advances. the cost of processing and storage per unit of data is now negligible. as a consequence, mankind had generated 276 exabytes (billions of gigabytes or 260) of data by 2007 according to hilbert and lopez (2011) and the international data corporation (idc 2011): of this, approximately 95% was digital. in four years the amount of data created grew to 1.8 zettabytes (or 1800 exabytes, zettabyte = 270) and the proportion of digital data increased to over 99%. for this year (2014), the estimate is 7.5–9.0 zettabytes. if these estimates are even roughly accurate, they mean that over the last two year mankind has created more data than during its cumulative history prior to that time. according to the internet systems consortium (isc) there were over 900 million server computers – excluding pcs, tablets, smart phones, etc. – used to process data in mid-2012 (isc 2012). despite this huge computing capacity and the low cost of data storage, it was no longer possible to store all data by 2006–2007 according to the idc (2011). the idc estimates that we are currently able to store less than half the amount of newly created data. the emergence of new data concepts is one aspect in the digitalization of data. in addition to transactional business, data organizations use various types of sensor data, including data created by robots. organizations also use message, audio and video data and spatio-temporal data, i.e. location/space and/or time-stamped data. organizations may also use open data, which are typically data made available by public sector organizations free of charge. figure 1 lists the aforementioned types of data sources. in addition to structured data, organizations have an interest in using unstructured data. furthermore, data may be internal or external to an organization. figure 2 shows the combinations of structured vs. unstructured and internal vs. external data. watts et al. (2009) have pointed out that the complexity of data management grows with the increase in data volumes. currently, as the result of this data spread to an increasing number of iss and data storages, each holding more or less overlapping data. data digitalization, data explosion and their consequences emphasize the need for governance of data and the role of business management in this area. the digitalization of data means that it has become business-critical for an organization to understand what data it creates and processes in its various activities. decisions on what data/informa33 business, management and education, 2015, 13(1): 25–45 tion to store and what not should be based on a sound business rationale as opposed to technical considerations. the principle of corporate governance, according to which the financiers of investments in digital data need to assure themselves of returns on their investments, is a sound basis for this. the digitalization of data has also exerted an impact on strategy work. bharadwaj et al. (2013) claim that due to business infrastructure digitalization, it strategy has become an integral part of business strategy to the extent that the two can no longer be separated (bharadwaj et al. 2013). they use the concept of digital strategy, which is important not only to single organizations, but also business networks (pagani 2013). digital strategy represents a fundamental change in business strategy thinking – although exactly what this constitutes is still open for discussion. looking at the last 30 years, we have first defined business strategy and then considered how it and digital data should be used to implement business strategy as one of the functional resource strategies. this perspective to business strategy can be found even within the business – it alignment approach (henderson, venkatraman 1993), that is, business strategy is seen to direct it strategy. the digital strategy approach appears to change the actual business strategy process only slightly. the proposition is that the business significance and the deployment of digital data and it should to be considered an element of business strategy, rather than a functional strategy following on from business strategy. the digital strategy approach emphasizes the central role/involvement of business executives and managers in the governance of it and data. 2.3. data and information assets of organizations and their ontological nature we found dmbok to be useful in the classification of the data and information assets that organizations use. business transactions, documents, content and reports are intuitively evident to most people as data, whereas master data, reference data and metadata fig. 1. types of data sources (source: compiled by the authors) fig. 2. structure and internality of data (source: compiled by the authors) transactional business data sensor data audio and video stream data spatial and spatio-temporal data messages and other www-data open data (not covered above) unstructured internal data unstructured external data structured internal data structured external data internal and external data internal external s tr u c tu re d u n st ru c tu re d s tr u c tu re d a n d u n st ru c tu re d d a ta 34 t. dahlberg, t. nokkala. a framework for the corporate governance of data... are not. master data, reference data and metadata are building blocks for the other asset types of data shown in figure 3. the definitions in figure 3 are based on dmbok (dama 2009), cleven and wortman (2010) and dahlberg et al. (2011). as discussed in the introduction, our opinion is that one of the key issues in the governance of data is the ontological nature of data. we build on the work of iivari et al. (1998) and wand and weber (1993, 2002). iivari et al. (1998) consider an is – and thus digital data within the is – to represent real-world, especially human, activities. at the ex tremes, there are two approaches to interpret what representations mean, universal and contextual. according to the universal approach, an is and its data describe facts which remain stationary and stable as long as the data exist. hence, the real world, seen through the lenses of data modelling, is also considered stationary and stable. the contextual approach, on the other hand, proposes that data represent vested interests and dynamic interplay between socially-constructed concepts, especially the representations of human behaviour in the context that the is serves. as we share this view, we consider that the current challenges in the governance of data, in data mana gement and in the quality of data arise largely from assumptions about the stability, predictability, uniformity and causality of the real world (dahlberg et al. 2011). the propositions of wand and weber (1993, 2002) explain why the increase in digital data has spread into an increasing number of iss and data storages. according to these authors, any is represents the ontology of the real world (context) with a minimum set of constructs. any is should also map and track the state changes of the real world, such as the diverse data needs of various stakeholders in their anticipated and ad-hoc use/behaviour purposes. wand and weber’s propositions explain both the existence of multiple iss with more or less similar data and the means to govern them. governance of data builds on understanding the meaning of the various representations, i.e. the contextually defined semantic/descriptive metadata of those representations. fig. 3. data and information assets used in organizations transactions operational business data: business transactions within operational applications and data storage systems reporting reporting data: original and processed data within reporting data storage systems used for reporting, analyses and business intelligence content content data: messages, e-mails, images, wwwdata, audio and video streams; can be combined with other information assets documents documents: structured and unstructured drawings, memos, presentations, spreadsheets and other documents master and reference data: shared non-transactional data used in several applications, e.g. product/item, customer, loc ation, chart of accounts, country metadata – data on data: (1) what data means in a business context, e.g. how users understand item data and how they use them in a specific context (informational); (2) the structure, format and coding of data, how it flows and where it is stored (operational/administrative) 35 business, management and education, 2015, 13(1): 25–45 although this discussion appears highly theoretical, it has significant practical consequences as the following example demonstrates. assume a situation in which we want to compile data from multiple data storages, e.g. data on an elderly citizen. the formats and structure of the data as well as the number and the hierarchy of data attributes (data fields) differ in these data storages. what do we do? the universal approach assumes that they all represent a single truth. this leads to the listing of all data attributes with the objective of finding the universal – also called global – data attributes of the data storage systems. data vocabulary and synonym tables are then created, as well as transformation tables, to capture the differences in the formats and length of data. challenges created by situations in which two or more data values have the same meaning, or where one data attribute can have two or more meanings, are solved in the same way. as the last step, the data are harmonized and standardized and duplicates are removed. although this approach appears logical, it works only for sets of closely related iss and data storages, i.e. for those, which are contextually close. it does not provide a generic solution because of the increasing complexity of data and the inability of humans to agree on the meaning of the data due to their different needs and interpretations. the first reason is practical and the second is ontological. according to the universal approach, it professionals are the key persons involved as their expertise is needed to model the data. the contextual approach acknowledges that the universal approach suits situations in which real-world representations are closely related, such as similar tasks or chains of tasks. for example, applications used in procurement could be related in this way. the contextual approach emphasizes the role of metadata and the use of agreed messages in sharing data between data storages. with metadata repositories and agreed messages, it is possible to create links between data storages so that data may remain in respective storages, including the memory of a computer. also data ontologies, such as address lists (of elderly citizens) or medical device classifications, offer possibilities to support interoperability and data transfer. they contain descriptions about the meaning of data, which can be used in data queries and analyses. thus, by knowing the metadata, it is possible to compile data from multiple sources. when data are compiled, the original data (e.g. video and audio clips, or documents) can be attached to the transferred data or the links can be used to provide trusted access to data. this could significantly reduce the need for data transfers as the data can remain in their original destination and still be recognized. another important difference from the universal approach is the emphasis on business professionals, who know the meaning of data. 2.4. synopsis – corporate governance of data framework the proposed governance of data framework is compiled from the theoretical building blocks described above. the full framework is shown in figure 4. for example, the governance element of the framework includes the edm cycle as well as structures, processes and cooperation mechanisms. this and all the other elements of the framework have been discussed in detail in the three subsections above. 36 t. dahlberg, t. nokkala. a framework for the corporate governance of data... we intend to evaluate the framework as follows. the use of robotics to support elderly citizens living at home could be the first empirical contexts for the evaluation of the framework. robots have sensors, which collect data about the environment, the citizen served, the use of the functionalities in the robots, etc. we evaluate the framework by analysing whether or not it helps to provide better identification of data useful to home care, other social security providers, basic medical care, special medical care and other professionals serving the citizen, as well as the relatives of the citizen and the citizen himself or herself. the framework should help to determine what aspects of the data collected should be made interoperable and transferable with data, is and data storages used by the aforementioned stakeholders and how. finally, the framework should make it easier to define areas of accountability for the governance of data as a whole. it is noteworthy that data interoperability and transferability are bi-directional: i) from data compiled by robots to data used by professionals; ii) from data used by fig. 4. corporate governance of data framework (source: compiled by the authors) transactional business data sensor data audio and video stream data spatial and spatio-temporal data messages and other www-data open data (not covered above) 37 business, management and education, 2015, 13(1): 25–45 professionals to data used to guide robots. for example, if a citizen has been operated on and is released to go home, the framework is valuable if it helps to determine what kind of data are transferred to the robots to support rehabilitation at home. our intention is to evaluate the framework also in other contexts, such as electronic commerce. 3. survey methodology as we have not yet validated the proposed framework empirically, we investigated the perceived significance of data governance through two survey studies. in the first study, we used a relatively large, existing dataset called it barometer 2013, which includes data collected by a national data processing asso ciation in mid-2013. one of the authors collected the survey data from cios and business executives, mainly from organizations with over 500 employees. we used only the part of the available data that concentrated on the perceived significance in the governance of data. the survey included the following governance of data questions expressed as statements: (1) in my organization, we have agreed clearly the ownership and the decision rights for data; (2) in my organization, we govern data comprehensively by developing the governance of data on the basis of a holistic roadmap. invitations to participate in the survey and one reminder were sent to 2,128 people. the response rate was 10%, which we regard as slightly higher than normal for it management surveys sent to executives and managers. of the respondents, 53% (n = 115) were cios and other it managers, 19% were business executives and 28% were senior business experts. of the participants, 27% worked in industry, 12% in commerce, 46% in services and 14% in public sector organizations. in terms of reporting to superiors, 49% of the survey respondents indicated that the cio in their organization reported to ceo, 26% to cfo and 25% to other cxo. the second survey was addressed to well-recognized healthcare and social welfare experts selected by the association of finnish local and regional authorities. respondents were asked to evaluate the governance principles and the benefits of an interorganizational it governance arrangement established between over 100 organizations in finland. the it governance arrangement is related to the reform of social welfare and healthcare services with related laws and decrees in the country. also, in this case, one of the authors collected the survey data, of which we used the part that dealt with aspects of perceived significance for the governance of data. dahlberg (2014) has described the case in detail. the survey included the following questions on the benefits of it governance expressed as statements: (1) increase the interoperability of patient/ customer information systems and data storages; (2) create jointly agreed data models and stick to them. invitations to participate in the survey were emailed to 260 persons. the association mentioned above sent invitations to experts who were deemed to influence decisions concerning the establishment of it governance arrangements within their regional areas 38 t. dahlberg, t. nokkala. a framework for the corporate governance of data... in the country. after one reminder, 68 responses were received. we regard the 26% response rate to be high for this type of study. of the respondents, slightly over half (53%) worked in healthcare districts, 37% in cities, towns or municipalities and 10% in other organizations. executives and managers accounted for 66% and experts the remaining 34%; 55% worked in social welfare or healthcare professions and 45% in social welfare or healthcare it professions. healthcare and social welfare executives or managers had worked in those positions on average for 15.9 years and experts for 12.7 years. healthcare and social welfare cios and it managers had worked in those positions on average for 7.2 years and it experts for 8.8 years. in both surveys, respondents were asked to evaluate survey items on a seven-point likert scale from totally disagree (=1) to totally agree (=7). both surveys also included demographic, situational and behavioural control variables. the first survey included eight behavioural control variables and the second survey seven behavioural control variables presented as statements on a seven-point likert scale, similar to the other survey items. the demographic, situational and behavioural control variables in the first survey are shown in table 2. similarly, the demographic, situational and behavioural control variables in the second survey are shown in table 3. the statistical relationships between the dependent variables – that is, the two statements from the first survey and the two statements from the second survey – and the demographic, situational and behavioural control variables were analysed using pearson’s correlation coefficient. for statistical analyses, behavioural control variable responses were also classified into two classes: “agree” (likert scale values 5–7) and “disagree” (likert scale values 1–3). differences in the distributions of the dependent variables were analysed using fischer’s f-test and differences in the means using the two-tailed student’s t-test. these analyses were done separately for each demographic, situational and behavioural control variable classified into the “agree” and “disagree” classes. the distributions of the dependent variables were skewed. as the results, we therefore report only the statistically significant differences with confidence levels above 95% for the “agree” and “disagree” groups. we also limit the reporting of statistical analysis to the results of the t-test for the same reason. however, it is worth mentioning that correlations between the two variables were statistically significant if there were statistically significant differences in the t-test. in summary, we used guidance provided by sireci (1998) and yin (2009) to design both surveys and also the scales of the survey statements in both surveys. 39 business, management and education, 2015, 13(1): 25–45 table 2. demographic, situational and behavioural control variables in first survey construct survey item demographic and situational control variables professional status (business manager, it manager, expert) size of the organization (<100, 101–500, 500 + employees) industry (industrial, commerce, service, public sector) the composition of it costs (it function, it function + business it) the superior of the cio (ceo, cfo, other cxo) the organizational status of the cio (executive committee member, non member) behavioral control variables my organization manages it and develops it management as its strategic capability my organizations develops systematically it competencies needed in the execution of our business including it management competencies senior, business unit and it executives share the accountabilities of it management on the basis of a clearly defined governance arrangement in my organization business strategy, business models, operative model and it constitute a well-integrated whole in my organization the selection of it solutions is based on the alignment of business and it needs my organization defines measurable objectives for it purchases so that business needs are well taken care of my organization knows well how it impacts our business as evaluated with reliable metrics after it purchases we monitor the achievement of the measurable objectives defined for the purchases table 3. demographic, situational and behavioural control variables in second survey construct survey item demographic and situational control variables type of organization (municipal healthcare district) geographic area (the area for which governance of it was established, other parts of the country) organizational status (h/s manager, h/s expert, it manager, it expert), where h/s = healthcare/social welfare experience in years in h/s managerial positions experience in years in h/s expert positions experience in years in it managerial positions experience in years in it expert positions involvement in the establishment of the inter-organizational it governance arrangement 40 t. dahlberg, t. nokkala. a framework for the corporate governance of data... construct survey item behavioral control variables as a whole the role of it is generally regarded as much too important for healthcare and social welfare services as few as possible funds should be used for healthcare and social welfare it services in future it will be much more important to the development and operation of healthcare and social welfare services my organization is a highly competent deployer of it for healthcare and social welfare services in my organization it governance accountabilities are allocated clearly between healthcare/social welfare and it professionals we have clear measurable objectives for healhcare social welfare it services as a whole my organization applies it so well to healthcare and social welfare services that it would be graded as a or a+ were it considered in terms of educational grading 4. survey results the mean and median values and the proportions of high evaluations among the responses to the questions for both surveys are shown in table 4. the first survey measured the status in the governance of data and the second survey the significance for the governance of data. the respondents in the first survey evaluated the status in the governance of data low on the likert scale from 1 to 7. the results of the second survey indicate that the respondents consider the governance of data highly significant. great caution is necessary in comparing the results of the surveys. respondents were selected on the basis of different sampling frames, the contexts of the surveys were different and also the formulations of survey items were dissimilar. it is perhaps safe to conclude tentatively that the governance of data is perceived to be more important than its current status suggests. no other empirical data were collected in the first survey. the other survey, however, comprises one set of data among other sets of empirical evidence (dahlberg 2014). when the governance of it principles and the benefits of it governance were presented to the executives, managers and experts within the area of established inter-organizational it governance, the lack of social and medical data interoperability and transferability was mentioned as the most burning challenge related to it governance (dahlberg 2014). in the first survey, only the position of the cio (the cio is or is not a member of the organization’s executive committee) produced statistically significant differences in the means of one dependent variable. the average of responses was 4.45 for respondents who indicated that the cio was a member of their organization’s executive committee. end of table 3 41 business, management and education, 2015, 13(1): 25–45 the corresponding average was 3.50 for respondents who indicated that the cio was not a member of the executive committee. the statistical reliability of this result was greater than 99.999%. all the eight behavioural control variables produced statistically significant differences in the means of both dependent variables. furthermore, the statistical reliability of all results except one was greater than 99.999%; the statistical reliability of the exception was 99.992%. figure 5 illustrates the comparison of responses between the groups created on the basis of behavioural control variables. in our opinion, the results of the two surveys provide clear support for the development of governance of data in general and also for proposing a governance of data framework such as the one provided in this paper. the results shown in the upper part of table 4 provide an indication that the status of the governance of data is not satisfactory. furthermore, the results shown in the lower part of table 4 suggest that data interoperability and the governance of data were considered highly necessary by the respondents in the second survey. the results visualized in figure 5 support the use of the building process selected in section 2 for the design of the corporate governance of data framework. good governance of it practices includes systematic development of it competencies, clear accountability, business–it alignment, the setting of clear objectives for it purchases and the monitoring of it usage and purchases using reliable metrics. these are not only in line with the governance of it principles (e.g. iso/iec 2008), but also with corporate governance. furthermore, the results shown in figure 5 also demonstrate that the deployment of good it governance practices is positively related to good corporate governance of data. table 4. results of the two surveys survey item mean median proportion of strongly agree survey 1: (it baromter data): business and it executive evaluations about the it and its role. (n = 207 for the first item and n = 206 for the second survey item. strongly agree is composed of values 6 and 7 on the likert scale) in my organization, we have agreed clearly the ownership and the decision rights for data 3.9 4.0 16.4% in my organization, we govern data comprehensively by developing the governance of data on the basis of a holistic road-map 4.0 4.0 14.1% survey 2: social welfare and healthcare professionals’ evaluations about the significance of it governance principles and it governance benefits (n = 68) increase the interoperability of patient/customer information systems and data storages 6.3 6.5 86.8% create jointly agreed data models and stick to them 6.3 7.0 85.3% 42 t. dahlberg, t. nokkala. a framework for the corporate governance of data... 5. discussion and conclusions this paper has proposed a framework for the corporate governance of digital data. we have not been able to identify data governance frameworks within prior research, addressing the issue from the perspective of corporate governance and the related governance of it. corporate governance and the governance of it consider investments in it/data from the outside. the key question is how investors, as the providers of funds, are able to secure a return on their investments. the existing dbbok and mike frameworks approach the issue from technical and data management perspectives, i.e. from the inside. thus, they are unable to answer the key concern of the “investors”, how to assure returns. the proposed framework emphasizes the central role of business executives in the governance of data. second, our framework considers data to be defined contextually as opposed to universally. this underlines the role of business executives, managers and professionals even further, as they know for what purposes the data are used and what they mean in specific contexts. for these reasons, the proposed framework was built on the idea that the governance of data is a managerial issue, not a technical or a modelling issue. the framework was designed by combining three theoretical building blocks. these were corporate governance and governance of it, the digitalization of data and digital strategy, and data and information assets used by organizations, taking into consideration the ontological nature of these assets. we used established definitions for corporate governance (shleifer, vishny 1997) and for the governance of it (iso/iec 2008) in the design of the framework. the framework contributes to knowledge concerning both corfig. 5. differences in the means of response classes formed on the basis of responses for behavioural control variables (“no” values 1–3, “yes” values 5–7, n = 207) ownership and the decision rights for data are agreed clearly 4.21 3.37 4.33 3.11 4.42 4.35 2.96 4.48 3.31 4.21 3.16 4.36 3.29 4.28 3.39 3.23 1.00 2.00 3.00 4.00 5.00 6.00 7.00 yes no it is managed as a strategic means it competencies are developed systematically governance of it accountabilities are clearly defined enterprise architecture is well managed business and it needs are alignned in it purchases it purchases have measurable objectives business impact of it are known based on reliable metrics the achievement of it purchase objectives are monitored 43 business, management and education, 2015, 13(1): 25–45 porate governance and the governance of it in addition to establishing a new knowledge construct – governance of data. as it and digital data have become elements of most investments, the question of how investors are able to secure returns from such investments is increasingly important. within the it governance research, the governance of data is a new topic. for example, within the iso/iec standardization, it is likely to emerge formally as a new work item in 2015. the results of the two surveys reported in this paper suggest that there is a clear need for the corporate governance of data. the two surveys indicate that the current status in the governance of data is unsatisfactory and that there is a strong need to improve data interoperability. the surveys also provide empirical evidence supporting the use of the corporate governance approach. our article also has some limitations. we once again point out that the proposed framework has not been tested or verified empirically. this may mean that the building blocks of the framework do not fit together and require modifications. second, the empirical evidence provided concerning the status in the governance of data and its significance was collected only in one country. multivariate statistical testing could shed more light on the empirical results. despite these limitations, our paper offers several scientific contributions. the most significant contribution is the proposed framework. the framework builds on the idea that digital data are contextually defined and central to business management. thus, the proposed framework fills a research gap and offers an alternative to the dmbok and other it and data modelling based frameworks, which assume the universality of data and which address data management rather than the governance of data. parts of our proposed framework, namely the typification of data sources and the matrix combining the structure and the internality of data shown in figures 2 and 3, could even be used to extend the dmbok framework – to better govern and manage data. the proposed framework opens up several meaningful venues for future research. we have already mentioned the verification of the framework. alternatively, it would be possible to compare alternative data management frameworks, their ontologies and theoretical bases from a governance perspective. such research appears to be sorely needed as the volume and complexity of digital data continue to grow at a fast rate. our motive for proposing the framework is to facilitate better management of the complexity of data and to involve business executives, managers and experts in the governance and management of data with a clear mandate. the proposed framework may, for example, also help to cope with and provide direction in the data management challenges raised under the “big data” concept. the concept of “big data” appears to be far from fulfilling its promise. finally, our advice to practitioners is to ensure that business executives and managers are genuinely and actively involved in the governance and management of data. without their involvement, advances in the governance of digital data, its management and deployment are likely to be slow. 44 t. dahlberg, t. nokkala. a framework for the corporate governance of data... references bharadwaj, a.; el sawy, o. a.; pavlou, p. a.; venkatraman, n. 2013. digital business strategy: toward a next generation of insights, mis quarterly 37(2): 471–482. bebchuk, l. a.; weisbach, m. a. 2010. the state of corporate governance research, the review of financial studies 23(3): 939–961. http://dx.doi.org/10.1093/rfs/hhp121 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thousand oaks, ca: sage publications. tomi dahlberg. phd, professor, research director, senior researcher fellow, executive in residence since 2000 at aalto university business school, university of jyväskylä, turku school of economics at the university of turku, åbo akademi university. director, senior vice president, executive vice president, cio, cto, ceo, board member in software industry, finance and banking, telecoms, nanotechnology and management consulting since 1984. member of the iso/iec jtc1 sc40 and its wg1 (governance of it) and wg2 (it service management) and the chair of the finnish sfs shadow group sr-08. research interests: governance of information, governance of data, inter-organizational governance of it, business models, master and metadata management, governance of aging societies, cio profession, payment instruments, innovation management processes. tiina nokkala. msc (econ.), phd student and researcher, phd research is supervised by tomi dahlberg. previously worked in the finance and insurance industry. research interests: governance of data, master data governance, governance of aging societies. this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons.org/ licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2023 the author(s). published by vilnius gediminas technical university issn 2669-2481 / eissn 2669-249x business, management and economics engineering 2023 volume 21 issue 1 pages 19–47 https://doi.org/10.3846/bmee.2023.18618 a sustainable business profit through customers and its impacts on three key business domains: technology, innovation, and service (tis) enkeleda lulaj faculty of management in tourism, hospitality and environment, university haxhi zeka, eliot engel, 30000 peja, kosovo article history: abstract. purpose – this research examines and investigates the importance of sustainable business profit through customers and its impacts on three key business domains: technology-innovation-service (tis). the main goal was to see what were the interrelationships of business-consumers and consumers-business analysis to have a sustainable profit based on the models: innovation and growth teams (igt), innovative customer relationship management (icrm), business-to-consumer (b2c), customer service and support (css), customer service technology (cst), and multidimensional scaling model (mds) or the factors (f1–f14). were these factors important to businesses and which variables had the greatest impact on sustainable profit through consumer evaluation during purchase? research methodology – this research was carried out on manufacturing, service, and distribution businesses (consumer-business analysis) and consumers (business-consumer analysis) in 200 businesses and consumers, through the completion of the online questionnaire and the meeting with the business managers, considering the same variables during the period (2019–2022). the data processing was done through (spss statistics 23) using tests and econometric analysis (descriptive, factorial, reliability, multiple regression, and multidimensional scaling analysis) the model shows that all factors have great effects on sustainable business profit through consumers. findings – however, it is suggested that of great importance for a sustainable business profit through customers are: the behavior of workers and staff, handling requests faster, business support before and after purchase, providing information applications (discount, usage, term of the expiration date, product content, payment methods as well as the provision of transport by the business for consumers. research limitations – the limitations of this research are only a certain number of variables, years, and the number of businesses, but for other analyses and research, researchers can take a larger number of variables, businesses, and/or countries using the same models. practical implications – based on the above questions, it was confirmed that a (tis) through models will make the profit even more stable by strengthening the position of businesses in the market against their competitors. so, in this case there are still practical implications in three key business domains (tis) technology, innovation, and services. therefore, businesses should pay attention to these findings to have a sustainable business profit. originality/value – research related to sustainable profit through consumers considering three key business domains technology, innovations, and services (tis) has not been analyzed earlier in terms of consumers as buyers and businesses as providers of products and services. ■ received 11 february 2023 ■ accepted 31 march 2023 keywords: sustainable profit, customers, profit matrix, econometric analysis, profit models, corporate finance, managerial accounting, businesses. jel classification: m41, m42, c5, e2, g3, g4, l2, o3.      corresponding author. e-mails: enkeleda.lulaj@unhz.eu, enkeleda_lulaj@hotmail.com introduction to have a sustainable profit, recent research and practices have shown the great importance of customers, innovations, services, and technology in businesses. therefore, to include http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bmee.2023.18618 https://orcid.org/0000-0002-5325-3015 mailto:enkeleda.lulaj@unhz.eu mailto:enkeleda.lulaj@unhz.eu mailto:enkeleda_lulaj@hotmail.com 20 e. lulaj. a sustainable business profit through customers and its impacts on three key business domains: technology... sustainability in business, companies must consider the social and environmental aspects of consumers (morioka et al., 2015), balancing the social, economic, and environmental values of consumers (bocken et al., 2013) consider the basic models included in this research (tis or technology innovation and service, innovation and growth teams (igt), innovative customer relationship management (icrm), business-to-consumer (b2c), customer service and support (css), customer service technology (cst), and multidimensional scaling model (mds)) and the impact of each factor of these models on sustainable business profit. the three key business domains (technology-innovation-service) have an increase in business practice nowadays, yet little is known about the successful adoption of sustainable business models by consumers (evans et al., 2017). such gaps were also highlighted (yang et al., 2017) where it is emphasized that businesses to have a sustainable profit must identify new opportunities to create the model (tis) and capture the value of business profit sustainability by having the customer at the center of attention. according to snihura and bocken (2022), it is emphasized that the strategic business management model (tis) is not showing any significant impact on corporate sustainability through customers or financial performance, but according to yang and jang (2020), it is emphasized that in smes (small and medium-sized enterprises) this model has a positive impact by pushing businesses towards continuous innovation and change to satisfy customers and have a sustainably profitable business. according to vidmar et al. (2021), it is emphasized that businesses must combine sustainable financial management objectives with the three main indicators (innovation, technology, and service) to offer a wide range of opportunities for consumers when purchasing products/services. still, further research is suggested for a sustainable business profit integrating strategies and models that contribute to a world in which businesses and consumers succeed in buying and selling products/services (bansal & des jardine, 2014). therefore, the main goal is to analyze the businessconsumer and consumer-business relationship to have a sustainable profit, analyzing what was the impact of the three key business domains (tis) on businesses through consumers in the models of each session (igt, icrm, b2c, css, cst, and mds) for factors (f1–f14). so, based on the findings from the econometric analysis and the validity of the hypotheses in each model, recommendations will be given to businesses regarding the sustainable profit of the business through consumers, bearing in mind that this research will bring: a) a new approach for a sustainable business profit, b) analysis of business through consumers, c) analysis of consumers through business. 1. literature review as it was pointed out in the introduction in general there is still a continuous transition for the sustainability of profit through customers considering the three main indicators of tis (technology-innovation-services) in each model in different departments and businesses. therefore, the creation and delivery of sustainability of economic-financial value are still unexplored (agwu & bessant, 2021). some businesses can create a sustainable profit through the model (tis) if they offer green or bio products to consumers because according to larson et al. (2000), it is emphasized that customers who request these products are willing to pay a premium price to buy. businesses must have developed sustainable supply chain management business, management and economics engineering, 2023, 21(1): 19–47 21 for consumers when purchasing products/services according to the four sessions of this research for all models: innovation and growth teams (igt), innovative customer relationship management (icrm), business-to-consumer (b2c), customer service and support (css), customer service technology (cst), and multidimensional scaling model (mds) and all factors involved (f1-f14) to have a steady profit. therefore, the authors’ analysis (gong et al., 2019) suggests the great impact of technology, innovations, and services on the performance and sustainable profit of the business as well as this continuous improvement in the supply chain of businesses considering that we are in an era when the natural environment, social responsibility, and consumer demands have increased. but are there economic improvements and sustainability of profit from improving customer satisfaction according to the models of this research? according to anderson et al. (1994), it is emphasized that the expectations, quality, and prices offered by the business affect the satisfaction of consumers on the one hand, and on the other hand, there is also an increase in the economic improvement and sustainable profit of the business. the authors further elaborate that (it) has increased productivity and created significant value for consumers, but there is no evidence that this economic benefit has resulted in more than normal business profit, this was analyzed by hitt and brynjolfsson (1996). regarding the non-sustainability of profit through (tis) through customers according to zeithaml (2000), six categories of the (tis) model that affect the non-sustainability of profit are highlighted as (the direct effect of non-quality through poor service, offensive effects through workers, non-defensive effects, weak link between service and sales intentions, lack of customer benefits, key drivers of customer non-retention). but according to bolton (1998), the effects of business profit losses are related to business failures to provide quality products/services to consumers. to help businesses in the effective decision-making process and to have stability of the financial position, according to lulaj (2021), lulaj and iseni (1018), it is emphasized that cost-volume-profit analysis has a significant impact on the sustainability business profit and its relationship with consumers during the purchase of products/ services, as well as the fair evaluation of financial items in the financial statements that affect the sustainable profit and financial stability of the business. according to bolton and drew (1991), it is recommended that customers who have experience in the businesses in which they purchase products/services more accurately evaluate the service levels from the workers and staff of the business, therefore there are discrepancies between the levels of performance predicted by that perceived. despite the experiences of consumers in evaluating the product/ service offered by businesses, according to snyder et al. (2016), it is emphasized that there are still uncertainties and weak definitions of the sustainability of profit and the importance of the three key business domains (tis). the increase in the sustainability of the profit is achieved through the relationship between the service and the stable price as well as the cost supported by the company in generating this profit as emphasized by carù and cugini (1999). according to jiang et al. (2022), it is emphasized that businesses should focus on the impact of service-oriented production starting from (production, design to final disposal) to have product sustainability. there is still little evidence on customer satisfaction and its impact on measures of business financial performance and sustainable profit as highlighted by yeung and ennew (2001). regarding this, the authors also agreed (hogreve et al., 2021) but added the importance of digital changes according to the model (css & cst) for providing 22 e. lulaj. a sustainable business profit through customers and its impacts on three key business domains: technology... products/services to consumers. it is further argued by ahearne et al. (2004) that the models (tis & igt), (css & cst), and (b2c & icrm) enable sales performance and sustainability of business profit. according to sharma (2008), consumer confidence in the products/services offered by the business is of great importance in the sustainability of profit not only in the short term but also in the long term (through high productivity, better customer satisfaction on the online pages of businesses, innovations for payment methods, support during and after purchases of products/services, etc.) were elaborated and analyzed by mai et al. (2019). a similar opinion is emphasized by mulhern (1999) adding the importance of the degree of concentration of profits among consumers. by holma and ax (2020) it is emphasized that the competition between businesses to provide a quality service to consumers during the purchase has a positive relationship with the sustainable profit of the business or the opposite. but according to korsakiene (2009), it is emphasized that the relationship between business (consumer-business and business-consumer analysis) and consumers is a relatively new discipline that recommends that the correct management of these relationships increases the trust of old consumers and affects attracting new customers. this relationship is failing and there is an urgent need for some practices to address these issues was argued by ryals (2005). new issues of improving the relationship (business-consumers and consumers-business) to increase the sustainability of the profit were analyzed by coltman et al. (2010) where it is emphasized that businesses must maintain the privacy of consumers and the reduction of cost caused by the products /services. as for the model (tis & igt) in which the factors (f1, f2, f3, f4, and f5) were included, contributions were made by various researchers regarding the sustainability of business profits through consumers. according to (f1) or workers and staff are polite according to zhang et al. (2021) is emphasized that consumers prefer positive strategies of politeness of workers and business staff during the purchase of the product/service, while according to bahadur et al. (2018), pointed out that a sustainable business profit is closely related to positive consumer intentions by spreading word-of-mouth information about business hospitality for consumers. according to pugh (2001), it is emphasized that workers should contain their emotional state in front of customers by showing positive emotions for them. according to (f2) or handling requests quickly by workers and staff for customers during the buying, according to verhoef et al. (2009), it is emphasized that the business to have a sustainable profit must deal more quickly with the demands of consumers since the previous experiences of consumers influence their future experiences. according to (f3) or the provision of advice during the purchase to consumers by workers and staff, according to inderst (2011), and inderst and ottaviani (2010), it is emphasized that financial advice for the purchase of products/services for consumers from business plays an important role in consumer decision-making to buy products/services indirectly influencing the sustainability of business profits. according to (f4) or the support for consumers during the purchase by workers or staff, according to balderjahn et al. (2020), is emphasized that the support from the business increases satisfaction for the purchase on the one hand, but on the other hand, the social well-being of consumers affects the sustainability of business profit. according to (f5) or staff and workers are efficient/transparent to customers when purchasing products/services, according to lemon and business, management and economics engineering, 2023, 21(1): 19–47 23 verhoef (2016), it is emphasized that during the integration of multiple business functions, workers and staff must be transparent/efficient with customers so that the business can make a sustainable profit because customer journeys in this era are becoming more and more complex. but to see if the state (country) offers the opportunity to support the sustainability of business profits through public expenditures (public budget) in the division for businesses, according to lulaj (2022) it is emphasized that public expenditures are increased due to covid-19 and that their gaps still continue, in this case, the possibility of support is not high, and the country must have political stability to support businesses based on priorities, not on the basis of political desires or interests it was said by the authors lulaj et al. (2022), but despite this, taxes on the income of corporations (businesses) are collected mostly in the country, affecting the well-being of the population was emphasized in the research of lulaj and dragusha (2022), therefore businesses have a stability of profit due to (tis). as for the model (icrm & b2c) where the factors (f1, f2, f3, and f4) were included, contributions were made by different authors related to each factor of this model to analyze the sustainable business profit. according to factors (f1 and f2) or the provision of business support before the purchase and after the purchase (instructions, advertisements, clarifications, transport, packaging, etc.). following cravo and piza (2019), it is emphasized that any kind of business support for consumers during the purchase of products/services improves business performance, creates new jobs, and increases profit sustainability. according to (f3) or the provision of business support for consumers regarding the provision of different payment methods during the purchase of products/services (carlson & paul, 2022), it is emphasized that the gift cards (discount, convenience, the free gift of any product/service, etc.) for customers offered by the business increase customer satisfaction by attracting new customers and increasing the sustainability of profit. while, according to świecka et al. (2021), it is emphasized offering different methods from the business to make payments to consumers facilitates decision-making for purchases, but despite the innovative forms of payment methods, some consumers still prefer the traditional form of payment with cash for products/services. regarding (f4) or the provision of business support for consumers related to online orders and purchases of products/services according to bauman and bachmann (2017), based on 138 scientific kinds of research, it is emphasized that businesses to have a sustainable profit must consider: (1) consumer-business and business-consumer trust patterns, (2) technology, and (3) social factors that influence trust in online shopping and ordering. regarding the model (css & cst) in which the factors (f1, f2, f3, f4, and f5) were included, contributions were made by different authors for each factor of this model to have a sustainable business profit. according to (f1) or ease of customer access to products/services through online business websites, according to rust and lemon (2001), it is emphasized that many businesses do not fully utilize the unique nature of the website, becoming critical in effective interaction with customers in interactive information environments. therefore, it is recommended to create e-services strategies to have a sustainable business profit. according to (f2, f3, and f4) or applications to offer advice and recent discounts according to wohllebe et al. (2020), it is emphasized that applications are becoming more and more important for businesses to have a sustainable profit. but one of their challenges is the use by consumers which is still without any great positive effect. regarding the factor (f5) or the applications 24 e. lulaj. a sustainable business profit through customers and its impacts on three key business domains: technology... offered by the business to make payments during the purchase of the product/service according to martinez and mc andrews (2022), it is emphasized that there is still reluctance on the part of consumers to make payments via the internet related to products/services. according to lulaj et al. (2023), it was emphasized that to have a sustainable profit, businesses must be careful in total liabilities, increase the performance of total assets, increase the performance of net income and total business income, as well as provide training for increasing the skills of workers and improving technology (equipment, machinery, etc.). it is therefore recommended that businesses bring something else through (tis) to have sustainability of profit. while according to pal et al. (2021), it is emphasized that payment applications are not uniform. therefore, this affects the sustainable profit of businesses through online consumer payments for products/services. 2. methodology 2.1. the purpose of the paper research related to sustainable profit through consumers considering three main business indicators technology, innovations, and services (tis) has not been analyzed earlier in terms of consumers as buyers and businesses as providers of products and services, therefore the aim is to analyze what is the impact of the three indicators (tis) for a sustainable business profit through customers based on the models (igt, icrm, b2c, css, cst, and mds) for the factors (f1–f14). are these factors important to businesses and which variables have the greatest impact on sustainable profit through evaluation by consumers during purchases? so, the main goal is to analyze the relationship between business-consumer and consumer-business to have a sustainable business profit. therefore, based on the findings from the econometric analysis and validation of the hypotheses in each model, recommendations will be given to businesses related to sustainable business profit through consumers. this research will bring: a) a new approach for sustainable profit, b) an analysis of business through consumers, and c) an analysis of consumers through business. 2.2. methods and data collection this research was carried out on manufacturing, service, and distribution businesses (consumer-business analysis) and consumers (business-consumer analysis) in 200 businesses and consumers, through the completion of the online questionnaire and the meeting with the business managers, considering the same variables during the period (2019–2022) as well as using the econometric models that were suitable for this research as elaborated in the figure 1. figure 1 shows the conceptual framework for a sustainable business profit through customers and its impacts on three key business domains: technology, innovation, and service (tis). this model includes four econometric analyses, such as factorial analysis, reliability analysis, multiple regression analysis, and multidimensional scaling analysis. as it was emphasized in the methods, to see the importance of factors in sustainable profit through consumers, factor analysis was used, where according to shrestha (2021), it is emphasized that this analysis helps to extract some useful factors as well as remove useless ones from business, management and economics engineering, 2023, 21(1): 19–47 25 a large number of variables (kaiser-meyer-olkin, bartlett’s test of sphericity, determinant score, kaiser’s criterion, varimax, pca, matrix, etc.). a similar contribution was made to the authors’ research hayashi and arav (2006). according to the results, three factors were created through the models: innovation and growth teams (igt), innovative customer relationship management (icrm), business-to-consumer (b2c), customer service and support (css), customer service technology (cst), and multidimensional scaling model (mds) as well as 14 sub-factors. ≠ ≠ ≠ = + ∑ ∑ ∑ 2 2 2 iji j j ij iji j i j r kmo r u , (1) where rij is the correlation matrix for sustainable profit in businesses through consumers and uij is the partial covariance matrix for relationships (consumers-business and business-consumers). while to see the effect and importance of the independent variables on the dependent variable and its impact on three key business domains (technology-innovation-service) for sustainable business profit, this research was based on the above questions of whether the independent variables had a significant impact and what the relationship was between the consumer and the business as well as between the business and the consumer when purchasing products and services. therefore, the data were analyzed through multiple regression analysis for all models and sections of this research. according to takemura (2021), and uyanık and güler (2013) it is emphasized that regression analysis helps to determine the importance and effects of each independent variable on the dependent variables as well as the importance of the model as a whole through anova. = β + β + β +…+ β + ε0 1 1 2 2 n ny x x x , (2) where y – the dependent variable for each section of sustainable business profit through consumers and its impact on the three main domains ((model: tis (technology-innovation-service & igt (innovation and growth teams), model: icrm (innovative customer relationship elaboration of the econometric model of tis factor analysis (kmo & bt, com, rcm, ie, essl) reliability analysis (cronbach’s alpha, hotelling’s tst) multiple regression analysis (r, r2, adjusted r square, f, df1-2, sig, d-w, anova, coefficients) multidimensional scaling analysis (z, matrix, stress) figure 1. the processing of econometric analyzes related to the sustainable profit of businesses through consumers and its impact on technology, innovation, and service (tis) (source: author) 26 e. lulaj. a sustainable business profit through customers and its impacts on three key business domains: technology... management) & b2c (business-to-consumer), and model css (customer service and support) & cst (customer service technology)); x1 – independent variables (f1–f14); β1 – parameters; ε – error. 2.3. instruments and research methodology as stated in the methods, the main goal was to analyze the relationship between business-consumer and consumer-business to have a sustainable business profit, analyzing what was the effects on three key business domains (technology-innovation-service-tis) through consumers in the models of each section (igt, icrm, b2c, css, cst, and mds) for factors (f1–f14). it is emphasized that for each variable and factor there is a difference in their importance and effects in the sustainable business profit through consumers based on the relationship (consumer-business and business-consumer). therefore, businesses must take into account the three key business domains (tis) at every stage of the business to have a sustainable business profit: for the tis (technology-innovation-service) and igt (innovation and growth teams) model (f1 and f2), for the icrm (innovative customer relationship management) and b2c (business-to-consumer) model (f1 and f2), for the css (customer service and support) and cst (customer service technology) model (f2 and f3), for the mds (multidimensional scaling) model (s1f1, s1f2, s1f3, s1f4, s1f5, s2f3, s2f2, and s2f3). 2.4. research hypotheses the research data related to the sustainable business profit through consumers and its impacts on three key business domains: technology, innovation, and service (tis) were analyzed through the econometric analyzes mentioned above. figure 2 presents the elaboration of the hypotheses for all sections based on the models: innovation and growth teams (igt), innovative customer relationship management (icrm), business-to-consumer (b2c), customer service and support (css), customer service technology (cst), and multidimensional scaling model (mds) for a sustainable business profit through customers and its impacts on three key business domains (tis). in this figure, 4 hypotheses are raised for each section: h1 = 5 factors, h2 = 4 factors, h3 = 5 factors, h4 = 14 factors. • h3 • 5 factors • h4 • 14 factors • h2 • 4 factors • h1 • 5 factors tis & igt model icrm & b2c model css & cst model mds model figure 2. elaboration of hypotheses for the sustainable business profit through consumers and its impacts on three key business domains (tis) (source: author) business, management and economics engineering, 2023, 21(1): 19–47 27 table 1. descriptive analysis descriptive analysis age frequency incomes frequency gender frecuency businesses frequency va lid 15–25 years old 22.0 100–300 euro 7.5 m 56.5 small 17.5 26–35 years old 28.5 301–500 euro 19.5 f 42.0 medium 47.5 36–45 years old 18.0 501–1000 euro 42.0 no answer 1.5 big 35.5 46–55 years old 24.0 over 1000 euro 31.0 total 100.0 total 100.0 56–65 years old 5.5 total 100.0 over 65 years old 2.0 total 100.0 table 1 presents the descriptive analysis of the data of respondents and businesses related to the variables (age, income, gender, businesses). according to the age variable, respondents aged 26–35 gave the greatest answer (28.5%). according to the income variable, it is emphasized that respondents with an average income are (500–1000 euros) or 42.0%. according to the gender variable, male respondents (56.2%) gave the biggest answers. the businesses that were awarded the most are medium enterprises (47.5%). hypotheses: h1: the factors of the model (tis & igt) have a significant impact on a sustainable business profit through customers ( ) ( ) ( ) ( ) ( )= α + β + β +β + β + β + ε0 1 2 3 4 51 2  ˆ 3 4 5y f f f f f . (3) with changes in model variables (tis & igt) to what extent should businesses be careful to have a sustainable business profit through consumers? h2: the factors of the model (icrm & b2c) have a significant impact on a sustainable business profit through customers. ( ) ( ) ( ) ( )= α + β + β +β + β +ε0 1 2 3 41 2  ˆ   3 4y f f f f . (4) with changes in model variables (icrm & b2c) to what extent should businesses be careful to have a sustainable profit through consumers? h3: the factors of the model (css & cst) have a significant impact on a sustainable business profit through customers ( ) ( ) ( ) ( ) ( )= α + β + β +β + β + β + ε0 1 2 3 4 51 2  ˆ 3 4 5y f f f f f . (5) with changes in model variables (css & cst) to what extent should businesses be careful to have a sustainable business profit through consumers? h4: business-consumers and consumers-business relationships have a significant impact on a sustainable business profit. 28 e. lulaj. a sustainable business profit through customers and its impacts on three key business domains: technology... the multidimensional measurement of interrelationship (consumers-business and business-consumers) in which dimensions emphasize the importance of factors in sustainable business profit? 3. results and discussion of results obtained in this section, three key business domains of tis (technology, innovation, and service) will be analyzed for a sustainable business profit through customers using the models: innovation and growth teams (igt), innovative customer relationship management (icrm), business-to-consumer (b2c), customer service and support (css), customer service technology (cst), and multidimensional scaling model (mds) as follows: 3.1. tis and igt model for a sustainable business profit through customers. 3.2. icrm and b2c model for a sustainable business profit through customers. 3.3. css and cst model for a sustainable business profit through customers. 3.4. mds model for a sustainable business profit through customers. 3.1. tis and igt model for a sustainable business profit through customers in this section, the data of the (tis & igt) model for a sustainable profit business through consumers will be analyzed using econometric analysis such as: 3.1.1. elaboration of the tis and igt model through factorial and reliability analysis for a sustainable business profit. 3.1.2. elaboration of the tis and igt model through multiple regression analysis for a sustainable business profit. regarding the tis (technology-innovation-service) model, according to bocken and konietzko (2022), it is emphasized that to have a sustainable profit, businesses have started to set ambitious circular economy objectives. regarding the igt model (innovation and growth teams) to have a sustainable profit through customers, according to achtenhagen et al. (2013), and antikainen and valkokari (2016), it is emphasized that new growth opportunities should be used, oriented toward innovative experiments, balanced use of resources to achieve coherence between leadership, culture and employee engagement by jointly shaping key strategic actions for profit sustainability. according to baden-fuller and haefliger (2013), it is emphasized that business models are closely related to innovation and technology to provide quality services to consumers during their purchases. 3.1.1. elaboration of the tis and igt model through factorial and reliability analysis for a sustainable business profit the factors of the model (tis & igt) for a sustainable business profit that provide services to customers during product purchase and service are analyzed through factor and reliability analyses. therefore, to analyze the impact of each variable on a sustainable business profit, the following factors were elaborated on: f1. the employees and staff are very kind. f2. the employees and staff are quick to handle my purchase/service request. business, management and economics engineering, 2023, 21(1): 19–47 29 f3. the employees and staff are very knowledgeable and provide me with relevant advice during purchase/service. f4. the employees and staff are willing to assist me during purchase/service. f5. the employees and staff are efficient/transparent during purchase/service. regarding the variable (f1) of workers and staff are very kind to customers during the purchase of the product/service according to west and dawson (2012), and crant (2000), it is emphasized that one of the main factors in the performance and sustainability of the profit in the business is the engagement of workers at work and in organizing the performance of tasks. but according to freeman (1973), ashford and cummings (1983), and lutz (2011) it is emphasized that workers who had good behavior with customers during their purchase influenced the sustainability of business profit in contrast to workers and staff who had other properties. regarding the variable (f2) or whether workers and staff deal more quickly with customer requests during the purchase of the product/service according to hartline and ferrell (1996), it is emphasized that workers and staff who are responsible and dedicated to the completion of their work handle customer requests more quickly, while to receive a positive evaluation from customers, workers and staff must increase their efficiency and job satisfaction, reduce conflicts and role ambiguity. important impact on faster handling of customer demands for a sustainable profit and business performance according to deery and nath (2015), it is emphasized that the relationship between the well-being and the work of employees should be taken into account from the business side. regarding the variable (f3) if the workers and staff have the knowledge and offer advice to consumers during the purchase of the product/service according to sánchez et al. (2003), it is emphasized that to increase the skills of the employees for their work as well as for providing more advice to consumers during their purchases, businesses should invest in training activities for workers, but that this type of investment is still very low on the part of businesses was emphasized by huselid (1995), in this case, the lack of investment in training affects the sustainability of business profit. regarding (f4) if workers and staff are willing to help customers during the purchase according to harris (2007), it is emphasized that the help from the workers affects the process of building the customer experience by increasing satisfaction and trust during the purchase, therefore the investment from the business in training workers to be more helpful to customers during their purchases pays off with more consistent and quality customer exchanges. and according to vance (2006), employees who are engaged in their work by assisting customers give their companies decisive competitive advantages, including sustainability of profits and high productivity in contrast to businesses that do not provide such conditions for consumers. regarding the variable (f5) if workers and staff are efficient and transparent with consumers in the cases of their requests during the purchase according to buell and kalkanci (2019), it is emphasized that the transparency and internal responsibilities of businesses can be very motivating for consumers, this increases the probability to continue their purchase in transparent businesses. therefore, loyal customers increase the stability of profit and business performance. 30 e. lulaj. a sustainable business profit through customers and its impacts on three key business domains: technology... table 2. factor analysis and reliability analysis for sustainable profit in businesses through consumers (tis & igt model) (source: author) kmo and bartlett’s test reliability statistics kaiser-meyer-olkin measure of sampling adequacy. .853 cronbach’s alpha cronbach’s alpha based on standardized items n of items bartlett’s test of sphericity approx. chi-square 472.783 df 10 .872 .873 5 sig. .000 communalities-pca component matrixpca total variance explained anova with tukey’s test for nonadditivity no. initial extraction no. tis igt extraction sums of squared loadings f sig. 1 no. cum. % between items 16.667 .000 f1 1.000 .587 f2 .864 f1 66.436 residual 2.320 .012 f2 1.000 .747 f5 .841 f2 77.899 hotelling’s t-squared test f3 1.000 .651 f3 .807 f3 86.760 ht f df1 df2 sig f4 1.000 .629 f4 .793 f4 94.411 f5 1.000 .708 f1 .766 f5 100.000 60.336 14.857 4 196 .000 table 2 presents the results for sustainable business profit through consumer purchases using the model (tis & igt) for factors (f1, f2, f3, f4, and f5). according to the kmo test (.853 > 0.50, sig .000) it is emphasized that the data are suitable and very important for the factorial analysis. according to communalities-pca, it is emphasized that all factors have a significant impact on the model (p > 0.05) for (f1: 0.587 > 0.05, f2: 0.747 > 0.05, f3: 0.651 > 0.05, f4: 0.629 > 0.05, f5: 0.708 > 0.05) while the factor with the highest variance is (f2 = 0.747) or workers and staff handle customer requests faster when purchasing or performing services. according to the rotated component matrix, it is emphasized that one factor (tis & igt) and five sub-factors (f1.1, f1.2, f1.3, f1.4, and f1.5) were created, in this case, the variables that have greater weight in a sustainable business profit are (f1.2 and f1.5) or the workers and staff handle customer requests more quickly and are efficient/transparent during customer purchases. according to initial eigenvalues, it is noted that the variance for the model (tis & igt) is 66.436 ≈ 66%. according to the reliability analysis (α = 0.873 ≈ 87%), it is emphasized that the data are quite important and reliable for the model. according to hotelling’s t-squared test (p = 0.000), it is emphasized that there is a significant difference between the sub-factors related to the sustainable profit in businesses through customers, and in particular through services and the increase of workers’ assistance to customers during the purchase. 3.1.2. elaboration of the tis and igt model through multiple regression analysis for a sustainable business profit through multiple regression analysis, the factors of the model (tis & igt) were analyzed for a sustainable business profit by providing services to customers during the purchase of the product and performing the services for the factors (f1, f2, f3, f4, and f5) through tests such as r, r2, adjusted r square, change statistics, durbin-watson, anova, coefficients to prove the raised hypothesis. business, management and economics engineering, 2023, 21(1): 19–47 31 table 3. regression multiple analysis for sustainable business profit through consumers (tis & igt model) (source: author) model summary (tis & igt) model r r square adjusted r square std. error of the estimate change statistics-anova durbinwatsonr square change f change df1 df2 sig. f change 1 .966 .924 .907 .18321 .924 121.871 2 36 .000 2.110 a. predictors: (constant): (f1, f2, f3, f4, f5) b. dependent variable: tis & igt coefficients model unstandardized coefficients standardized coefficients t sig. 1 b std. error beta (constant) 0.199 .288 3.161 .000 f1 .569 .089 .665 .861 .003 f2 .515 .109 .595 .769 .002 f3 .369 .082 .383 2.182 .001 f4 .249 .085 .259 .671 .005 f5 .218 .097 .215 1.001 .005 table 3 explains 92% (r2 = 0.924, sig. = 0.000, f = 121,871) for the model (tis & igt) for a sustainable business profit through consumers during the purchase of the product/service depends on the independent variables (f1, f2, f3, f4, and f5), while 8% depends on other variables outside this model through random error. adjusted r square at the value of 0.907 indicates that 91% of the variables are related to the model, while according to the d-w test (2.110) the model is significant and the autocorrelation is negative, which means that the standard error of the coefficient b or the model (tis & igt) is very small. while, according to anova, it is emphasized that the model is significant at every level of significance (sig. = 0.000). according to the table of coefficients, it is emphasized that the constant value of 0.199 indicates that if businesses do not take into account the factors (f1, f2, f3, f4, and f5) then the sustainable business profit through consumers will be 19% correct. according to (f1) it is emphasized that if the workers and staff are polite during the purchase of customers, then the profit will increase and will be stable by 57%. according to (f2) it is emphasized that if the workers and staff deal more quickly with the customer’s requests during the purchase or performance of services, then the profit will increase and will be stable by 52%. according to (f3) it is emphasized that if the workers and staff have the knowledge and offer advice during the purchase of consumers, then the profit will increase and will be stable by 37%. according to (f4) it is emphasized that if the workers and staff are willing to help customers during the purchase, then the profit will increase and be stable by 25%. according to (f5) it is emphasized that if workers and staff are efficient and transparent with customers, then the profit will increase and be stable by 22%. the beta coefficient shows that all the independent variables are significant in the model, but the two factors that have great significance for the 32 e. lulaj. a sustainable business profit through customers and its impacts on three key business domains: technology... sustainability of the business profit are (f1 = 67% and f2 = 60%) or workers and staff are polite and quickly handle customer requests during their purchase. ( ) ( ) ( ) ( ) ( )= α + β + β +β + β + β = + + + + + + 0 1 2 3 4 5 1 2 3  4 5 1 2   3 4 5 0.1999 0.569  0.515  0.369 0.249  0.218  0.08 . ŷ f f f f f x x x x x µ according to the 95% confidence interval (sig.2-tailed), it is noted that the p-value is smaller (p = 0.000 < 0.05) than the 5% significance level, then h0 is rejected and accepted ( β β β β β1 2 3 4 5, , ,   ). 3.2. icrm and b2c model for a sustainable business profit through customers in this section, the data of the (icrm & b2c) model for a sustainable business profit through consumers will be analyzed using econometric analysis such as: 3.2.1. elaboration of the icrm and b2c model through factorial and reliability analysis for a sustainable business profit. 3.2.2. elaboration of the icrm and b2c model through multiple regression analysis for a sustainable business profit. regarding the icrm model (innovative customer relationship management) according to the authors (valmohammadi, 2017; guerola-navarro et al., 2021; wahlberg et al., 2009) it is proven that the practice of this model (icrm) results in performance better organizational and affects sustainable profit growth, while businesses are stronger and more sustainable when they use strategies to provide services to customers this was proven by saura et al., 2020). another contribution related to (icrm) was made by paesbrugghe et al. (2022), where it was pointed out that consumers when they perceive the sales offer from businesses as risky prefer a different approach to purchasing the product/service businesses. according to reinartz et al. (2004), it was emphasized that the implementation of crm has a moderately positive relationship with the perceptive and objective performance of the company. regarding the b2c model (business to consumer) according to sorce and edwards (2004), it is emphasized that the business-consumer analysis is suitable for understanding the nature of business-consumer and consumer-business relationships as well as for the elaboration and definition of these relationships, the dimensions of service quality for consumers during the purchase are important to have a sustainable profit. while according to drigas and leliopoulos (2013), it is emphasized that observations of the growth of behavior (b2c) in businesses increase customer satisfaction during the purchase. 3.2.1. elaboration of the icrm and b2c model through factorial and reliability analysis for a sustainable business profit the factors of the model (icrm & b2c) for a sustainable business profit that provide services to customers during product purchase and service are analyzed through factor and reliability analyses. therefore, to analyze the impact of each variable on a sustainable business profit, the following factors were elaborated on: f1: the business provides pre-purchase support (instructions, advertisements, clarifications, etc.). business, management and economics engineering, 2023, 21(1): 19–47 33 f2: the business provides post-purchase support (shipping, packaging, instructions for use, etc.). f3: the business provides support for payment methods (through cash, debit-credit cards, loans, etc.). f4: the business provides support for purchasing and ordering the online product/service. regarding the variable (f1) if the business offers support to consumers before purchasing the product/service (instructions, advertisements, other clarifications, etc.), according to küster et al. (2016), it is emphasized that transactions related to services from the business to pre-purchase consumers that they are determinants of sustainable profit. according to the variable (f2) or the business provides support to customers after the purchase (transportation, packaging, instructions for the use of the product, etc.) according to chang et al. (2010), it is emphasized that customer satisfaction is positively related to the convenience of the service or support after purchase for consumers, as well as trust in the product/service offered by the business. regarding the variable (f3) or the business offers support to consumers regarding the method of payment during purchase (through cash, debit-credit cards, loans, etc.) according to stavins (2017), gaps have been identified regarding payment methods and that still research is needed to understand consumer payment choices during product/service purchase. regarding the variable (f4) or the business provides support to customers in case of online orders and purchases of the product/service, according to rose et al. (2011), four important contributions are highlighted for both academics and businesses as (the content of purchase, specifics of the purchase, possible consequences, managerial implications). while according to izogo and jayawardhena (2018), it is emphasized that for businesses to have a sustainable profit through online ordering and purchasing customers must support and focus on customer experiences to improve their shortcomings. table 4. factor analysis and reliability analysis for sustainable business profit through consumers (icrm & b2c model) (source: author) kmo and bartlett’s test reliability statistics kaiser-meyer-olkin measure of sampling adequacy. .743 cronbach’s alpha cronbach’s alpha based on standardized items n of items bartlett’s test of sphericity approx. chi-square 181.636 df 6 .747 .744 4 sig. .000 communalities-pca component matrixpca total variance explained anova with tukey’s test for nonadditivity no. initial extraction no. icrm b2c extraction sums of squared loadings f sig. 1 no. cum. % between items 54.272 .000 f1 1.000 .649 f2 .824 f1 56.928 residual 12.410 .000 f2 1.000 .679 f1 .806 f2 74.898 hotelling’s t-squared test f3 1.000 .517 f4 .729 f3 89.853 ht f df1 df2 sig f4 1.000 .532 f3 .646 f4 100.00 139.413 46.004 3 197 .000 34 e. lulaj. a sustainable business profit through customers and its impacts on three key business domains: technology... table 4 presents the results for sustainable business profit through consumer purchases using the model (icrm & b2c) for factors (f1, f2, f3, and f4). according to the kmo test (0.743 > 0.50, sig 0.000) it is emphasized that the data are suitable and very important for the factorial analysis. according to communalities-pca, it is emphasized that all factors have a significant impact on the model (p > 0.05) for (f1: 0.649 > 0.05, f2: 0.679 > 0.05, f3: 0.517 > 0.05, f4: 0.532 > 0.05) while the factor with the highest variance is (f2 = 0.679) or the business provides post-purchase support (shipping, packaging, instructions for use, etc.). according to the rotated component matrix, it is emphasized that one factor (icrm & b2c) and four sub-factors (f1.1, f1.2, f1.3, and f1.4) were created, in this case, the variables which have the greatest weight in a sustainable business profit are (f1.2 and f1.1) or the business provides post-purchase support (shipping, packaging, instructions for use, etc.), as well as the business, provides pre-purchase support (instructions, advertisements, clarifications, etc.). according to initial eigenvalues, it is noted that the variance for the model (icrm & b2c) is 56.928 ≈ 57%. according to the reliability analysis (α = 0.747 ≈ 75%), it is emphasized that the data are quite important and reliable for the model. according to hotelling’s t-squared test (p = 0.000), it is emphasized that there is a significant difference between the sub-factors related to sustainable profit in businesses through consumers and in particular the innovations that businesses bring to consumers. 3.2.2. elaboration of the icrm and b2c model through multiple regression analysis for a sustainable business profit through multiple regression analysis, the factors of the model (icrm & b2c) were analyzed for a sustainable profit in businesses by providing services to customers during the purchase of the product and performing the services for the factors (f1, f2, f3, and f4) through tests such as r, r2, adjusted r square, change statistics, durbin-watson, anova, coefficients to prove the raised hypothesis. table 5. regression multiple analysis for sustainable profit in businesses through consumers (icrm & b2c model) (source: author) model summary (icrm & b2c) model r r square adjusted r square std. error of the estimate change statistics-anova durbinwatsonr square change f change df1 df2 sig. f change 1 .898a .858 .841 .81668 .858 9.1555 4 195 .000 2.152 a. predictors: (constant): (f1, f2, f3, f4) b. dependent variable: icrm & b2c coefficients model unstandardized coefficients standardized coefficients t sig. 1 b std. error beta (constant) 0.173 .293 5.870 .000 f1 .552 .477 .697 1.984 .004 f2 .345 .175 .567 1.932 .000 f3 .291 .174 .389 2.592 .005 f4 .229 .072 .131 .407 .003 business, management and economics engineering, 2023, 21(1): 19–47 35 table 5 explains 86% (r2 = 0.858, sig. = 0.000, f = 9.1555) for the model (icrm & b2c) for a sustainable profit through customer during the purchase of the product/service depends on the independent variables (f1, f2, f3, and f4), while 14% depends on other variables outside this model by random error. adjusted r sq. at the value of 0.841 shows that 84% of the variables are related to the model, while according to the d-w test (2.152) the model is significant and the autocorrelation is negative, which means that the standard error of the coefficient b or the model (icrm & b2c) is very small. whereas, according to anova, it is emphasized that the model is significant at every significance level (sig. = 0.000). according to the table of coefficients, it is emphasized that the constant value of 0.173 shows that if businesses do not take into account the factors (f1, f2, f3, and f4) then the sustainable profit through consumers will be 17% correct. according to (f1) it is emphasized that if the business provides pre-purchase support (instructions, advertisements, clarifications, etc.) to consumers, then the profit will increase and be stable by 55%. according to (f2) it is emphasized that if the business provides post-purchase support (shipping, packaging, instructions for use, etc.) for consumers, then the profit will increase and be stable by 35%. according to (f3) it is emphasized that if the business provides support for payment methods (through cash, debit-credit cards, loans, etc.), then the profit will increase and be stable by 29%. according to (f4) it is emphasized that if the business provides support for purchasing and ordering the online product/service for consumers, then the profit will increase and be stable by 23%. the beta coefficient shows that all the independent variables are significant in the model, but the two factors that have great significance for the sustainability of the business profit are (f1 = 70% and f2 = 57%) or the provision of business support to customers during and after the purchase of products or services. such an innovation through two models will make a profit even more stable by strengthening the position of businesses in the market against competitors. ( ) ( ) ( ) ( )= α + β + β +β + β = + + + + + 0 1 2 3 4 1 2 3  4 1 2   3 4 0.173 0.552  0.345  0.291 0.229  0.14 . ŷ f f f f x x x x µ according to the 95% confidence interval (sig.2-tailed), it is noted that the p-value is smaller (p = 0.000 < 0.05) than the 5% significance level, then h0 is rejected and accepted ( β β β β1 2 3 4, , , ). 3.3. css and cst model for a sustainable business profit through customers in this session, the data of the (css & cst) model for a sustainable profit business through consumers will be analyzed using econometric analysis such as: 3.3.1. elaboration of the css and cst model through factorial and reliability analysis for a sustainable business profit. 3.3.2. elaboration of the css and cst model through multiple regression analysis for a sustainable business profit. regarding (css & cst) model according to sergeant and frenkel (2000), it is emphasized that several variables such as the support of departments to each other, innovative technology, and the capacity of employees to satisfy the needs of customers during the purchase were very important in a sustainable profit. regarding the css model (customer service and support) according to chopra (2014), it is emphasized that businesses that provide support 36 e. lulaj. a sustainable business profit through customers and its impacts on three key business domains: technology... and services during the purchase of consumers such as care, problem-solving, dedicated and helpful workers and staff play an important role in customer satisfaction and sustainable profit growth. regarding the cst model (customer service technology) according to considine and cormican (2016), it is emphasized that the discussion about the adoption of self-service technology offered by businesses to customers should be expanded, the gap between theories and practices should be overcome, as well as this model helps decision makers determine how they should invest in cst to have a sustainable profit through consumers. regarding the variable (f1) or ease of access for consumers to products/services through online pages according to ritaa et al. (2019), it is emphasized that businesses must take into account three dimensions of the quality of the electronic service (design of the website, security/privacy, as well as the fulfillment of customer requirements) influence the growth of profit stability and customer satisfaction. figure 3 elaborates on the relationships between customer satisfaction, customer trust, and purchase intention. regarding the factor (f2) or applications to address consumer issues according to heinonen (2011), it is emphasized that businesses should discover their management challenges for online sites and plan the adjustment of applications to respond to the issues addressed by consumers. regarding the factor (f3) or applications of businesses to provide advice to consumers about their products/services according to molinillo et al. (2022), it is emphasized that businesses should emphasize the importance of their online site to provide the necessary advice for consumers during their purchase. regarding the factor (f4) or applications to inform consumers about the latest discounts for their products/ services according to gao and chen (2015), it is emphasized that consumers faced two types of uncertainty regarding online sites where product discounts/services such as product/service evaluation uncertainty as well as consumption state uncertainty. regarding factor (f5) or applications for payment methods for consumers according to chakraborty et al. (2022), consumption by consumers positively affects the adoption of payment applications through mobile phones. with the rapid development of electronic payments for products/services by consumers according to li et al. (2022), this new form of payment is a new perspective for businesses that affects the increase in the sustainability of profit through consumers and the importance of three main indicators tis (technology-innovation-service). figure 3. overall e-service quality (source: ritaa et al., 2019) business, management and economics engineering, 2023, 21(1): 19–47 37 3.3.1. elaboration of the css and cst model through factorial and reliability analysis for a sustainable business profit the factors of the model (css & cst) for a sustainable business profit that provides services to customers during product purchase and service are analyzed through factor and reliability analyses. therefore, to analyze the impact of each variable on a sustainable business profit, the following factors were elaborated on: f1: ease of access to the product/service through online sites for consumers. f2: apps to address customer concerns about the product/service. f3: apps to provide product/service advice to consumers. f4: apps to inform about the latest discounts for consumers. f5: apps for consumer payment methods. table 6 presents the results for sustainable business profit through consumer purchases using the model (css & cst) for factors (f1, f2, f3, f4, and f5). according to the kmo test (0.815 > 0.50, sig 0.000) it is emphasized that the data are suitable and very important for the factorial analysis. according to communalities-pca, it is emphasized that all factors have an impact on the model (p > 0.05) for (f1: 0.562 > .0.05, f2: 0.770 > 0.05, f3: 0.769 > 0.05, f4: 0.726 > 0.05, f5: 0.666 > 0.05) while the factor with the highest variance is (f2 = 0.770) or apps to address customer concerns about the product/service. according to the rotated components matrix, it is noted that in this case one factor (css & cst) and five sub-factors (f1.1, f1.2, f1.3, f1.4, and f1.5) were created. the variables that have the greatest weight in a sustainable business profit are (f1.2 and f1.5), or businesses offer the product/service through online sites table 6. factor analysis and reliability analysis for sustainable business profit through consumers (css & cst model) (source: author) kmo and bartlett’s test reliability statistics kaiser-meyer-olkin measure of sampling adequacy. .815 cronbach’s alpha cronbach’s alpha based on standardized items n of items bartlett’s test of sphericity approx. chi-square 593.238 df 10 .891 .891 5 sig. .000 communalities-pca component matrixpca total variance explained anova with tukey’s test for nonadditivity no. initial extraction no. css cst extraction sums of squared loadings f sig. 1 no. cum. % between items 17.173 .000 f1 1.000 .562 f2 .878 f1 69.872 residual 1.323 .250 f2 1.000 .770 f3 .877 f2 81.144 hotelling’s t-squared test f3 1.000 .769 f4 .852 f3 90.120 ht f df1 df2 sig f4 1.000 .726 f5 .816 f4 96.574 f5 1.000 .666 f1 .750 f5 100.000 65.047 16.017 4 196 .000 38 e. lulaj. a sustainable business profit through customers and its impacts on three key business domains: technology... to consumers and have applications to address customer concerns about the product/service. according to initial eigenvalues, it is noted that the variance for the model (css & cst) is 69.872 ≈ 70%. according to the reliability analysis (α = 0.891 ≈ 89%), it is emphasized that the data are quite important and reliable for the model. according to hotelling’s t-squared test (p = 0.000), it is emphasized that there is a significant difference between the sub-factors related to sustainable profit in businesses through consumers, and in particular for providing different applications for purchasing and performing services for consumers. 3.3.2. elaboration of the css and cst model through multiple regression analysis for a sustainable business profit through multiple regression analysis, the factors of the model (css & cst) were analyzed for a sustainable profit in businesses by providing services to customers during the purchase of the product and performing the services for the factors (f1, f2, f3, and f4) through tests such as r, r2, adjusted r square, change statistics, durbin-watson, anova, coefficients to prove the raised hypothesis. table 7 explains 99% (r2 = 0.986, sig. = 0.000, f = 121,871) for the model (css & cst) for a sustainable profit through customers during the purchase of the product/service depends on the independent variables (f1, f2, f3, f4, and f5), while 1% depends on other variables outside this model by random error. adjusted r square. at the value of 0.863 shows that 86% of the variables are related to the model, while according to the d-w test (2.076) the model is significant and the autocorrelation is negative, which means that the standard error table 7. regression multiple analysis for sustainable business profit through consumers (css & cst model) (source: author) model summary css & cst model model r r square adjusted r square std. error of the estimate change statistics-anova durbinwatsonr square change f change df1 df2 sig. f change 1 .994a .986 .863 .85299 .986 3.663 5 194 .003 2.076 a. predictors: (constant): (f1, f2, f3, f4, f5) b. dependent variable: css & cst model coefficients model unstandardized coefficients standardized coefficients t sig. 1 b std. error beta (constant) 0.355 .260 9.058 .000 f1 .381 .081 .410 1.097 .000 f2 .624 .114 .712 .914 .002 f3 .584 .118 .699 –1.568 .005 f4 .444 .102 .449 .430 .004 f5 .314 .096 .323 2.234 .002 business, management and economics engineering, 2023, 21(1): 19–47 39 of the coefficient b or the model (css & cst) is very small. while, according to anova, it is emphasized that the model is significant at every significance level (sig. = 0.000). according to the table of coefficients, it is emphasized that the constant value of 0.355 indicates that if businesses do not take into account the factors (f1, f2, f3, f4, and f5) then the sustainable profit through consumers will be 36% correct. according to (f1) it is emphasized that if the business offers easy access to products and services through their online pages, then the profit will increase and be stable by 38%. according to (f2) it is emphasized that if the business offers apps to address customer concerns about the product/service, then the profit will increase and be stable by 62%. according to (f3) it is emphasized that if the business offers apps to provide product/service advice to consumers, then the profit will increase and be stable by 58%. according to (f4) it is emphasized that if the business offers apps to inform about the latest discounts for consumers, then the profit will increase and be stable by 44%. according to (f5) it is emphasized that if the business offers applications for different ways of making payments when buying products or performing services, then the profit will increase and be stable by 31%. the beta coefficient shows that all independent variables are significant in the model, but the two factors that have great significance for the sustainability of the business profit are (f2 = 71% and f3 = 70%), or apps to address customer concerns about the product/service as well as apps to provide product/service advice to consumers ( ) ( ) ( ) ( ) ( )= α + β + β +β + β + β = + + + + + + 0 1 2 3 4 5 1 2 3  4 5 1 2   3 4 5 0.355 0.381  0.624  0.584 0.444  0.314  0.01 . ŷ f f f f f x x x x x µ according to the 95% confidence interval (sig.2-tailed), it is noted that the p-value is smaller (p = 0.000 < 0.05) than the 5% significance level, then h0 is rejected and accepted ( β β β β β1 2 3 4 5, , , ,  ). 3.4. mds model for a sustainable business profit through customers through the analysis of multidimensional measurement, the relationship between business and consumer (consumer-business and business-consumer) was investigated by analyzing the three indicators tis (technology-innovation-service) included in all models within each indicator igt (innovation and growth team), icrm (innovative customer relationship management), b2c (business to consumer), css (customer service and support), cst (customer service technology), mds (multidimensional scaling) for a sustainable profit through customers through the hypothesis of raised. table 8 presents the multidimensional measurements for the three main indicators (tis) related to sustainable profit through customers to see the differences or similarities of customers related to the variables of the models (tis, igt, icrm, b2c, css, cst, and mds). in the 4th iteration, the result (stress values = 00026) was achieved, where it is emphasized that the values are desired and qualified as a suitable choice for the sustainable profit of businesses through consumers. according to the stress matrix (rsq = 83158), it is emphasized that the data is significant at the value of 83%. the multidimensional measurement analysis is analyzed through two dimensions, where according to the first dimension (consumers with the code: s1f1 = 1.5551, s1f2 = 1.1192, s1f3 = 1.3500, s1f4 = 1.2779, s1f5 = 1.1831) about 40 e. lulaj. a sustainable business profit through customers and its impacts on three key business domains: technology... their evaluations of products/services of businesses in (6 factors) it is emphasized that providing applications to see information about products/services related to prices, quality, use, expiry date, their content, then support during the purchase and after purchase (packaging, instructions), hospitality and a suitable environment for purchasing and performing services are important to have a sustainable profit through customers. according to the second dimension (customers with code: s2f2 = 1.0691, s2f3 = 1.4438), it is emphasized that offering different ways to make payments when purchasing or performing services as well as transporting products has great importance for sustainable business profit. therefore, the hypothesis (h4) is confirmed, where it is emphasized that business-consumer and consumer-business relationships have a significant impact on the sustainable profit of businesses through consumers. the most important dimensions (offering different methods for making payments to consumers from the business, and providing information on prices, quality, discounts, and product transportation). table 9 shows four models (tis and igt; icrm and b2c; css and cst; mds model), as well as factors (f1–14) and sub-factors (f1.1–f1.14), emphasize the identification of alternative hypotheses for each of the models of this research to have a sustainable profit through consumers. therefore, there is a significant difference between the variables according to the indicators (tis) for a sustainable business profit. table 8. multidimensional for sustainable profit in businesses through consumers (source: author) iteration history for the 2-dimensional solution (in squared distances) stimulus coordinates young’s s-stress formula 1 is used. elaboration dimension iteration s-stress improvement stimulus number stimulus name 1 2 1 .28541 1 s1f1 1.5551 –.7359 2 .24652 .03889 2 s1f2 1.1192 –.4817 3 .24394 .00259 3 s1f3 1.3500 –.3767 4 .24368 .00026 4 s1f4 1.2779 –1.1503 iterations stopped because s-stress improvement is less than .001000 for matrix stress = .21893 rsq = .83158 5 s1f5 1.1141 –.9206 6 s2f1 .2749 .9954 7 s2f2 –.1562 1.0691 8 s2f3 1.0186 1.4438 9 s2f4 –1.1767 .8186 10 s3f1 –.9552 .5517 11 s3f2 –1.2596 –.3305 12 s3f3 –1.4763 –.4131 13 s3f4 –1.4468 –.4943 14 s3f5 –1.2390 .0246 business, management and economics engineering, 2023, 21(1): 19–47 41 table 9. verification of hypotheses (source: author) models factors subfactors multiple regression mathematical equation clarification of hypotheses tis and igt model for a sustainable business profit through customers f1 f2 f3 f4 f5 h1: the factors of the model (tis & igt) have a significant impact on a sustainable business profit through customers ( ) ( ) ( ) ( ) ( )= α + β + β +β + β + β = + + + + + + 0 1 2 3 4 5 1 2 3  4 5 1 2   3 4 5 0.1999 0.569  0.515  0.369 0.249  0.218   ˆ 0.08 y f f f f f x x x x x µ according to the 95% confidence interval (sig.2-tailed), it is noted that the p-value is smaller (p = 0.000 < 0.05) than the 5% significance level, then h0 is rejected and accepted ( β β β β β1 2 3 4 5, , , ,  ) icrm and b2c model for a sustainable business profit through customers f1 f2 f3 f4 h2: the factors of the model (icrm & b2c) have a significant impact on a sustainable business profit through customers ( ) ( ) ( ) ( )= α + β + β +β + β = + + + + + 0 1 2 3 4 1 2 3  4 ˆ 2 1 2   3 4 0.173 0.55  0.345  0.291 0.229  0.14 y f f f f x x x x µ according to the 95% confidence interval (sig.2-tailed), it is noted that the p-value is smaller (p = 0.000 < 0.05) than the 5% significance level, then h0 is rejected and accepted ( β β β β1 2 3 4, , , ) css and cst model for a sustainable business profit through customers f1 f2 f3 f4 f5 h3: the factors of the model (css & cst) have a significant impact on a sustainable business profit through customers ( ) ( ) ( ) ( ) ( )= α + β + β +β + β + β = + + + + + + 0 1 2 3 4 5 1 2 3  4 5 ˆ 1 2   3 4 5 0.355 0.381  0.624  0.584 0.444  0.314  0.01 y f f f f f x x x x x µ according to the 95% confidence interval (sig.2-tailed), it is noted that the p-value is smaller (p = 0.000 < 0.05) than the 5% significance level, then h0 is rejected and accepted ( β β β β β1 2 3 4 5, , , ,  ) mds model for a sustainable business profit through customers f1 f2 f3 f4 h4: business-consumers and consumers-business relationships have a significant impact on a sustainable business profit (rsq = 83158) therefore, the hypothesis (h4) is confirmed, where it is emphasized that business-consumer and consumer-business relationships have a significant impact on the sustainable profit of businesses through consumers. the most important dimensions (offering different methods for making payments to consumers from the business, and providing information on prices, quality, discounts, and product transportation). conclusions and practical implications sustainable business profit through consumers and the impact of the three indicators tis (technology-innovation-service) is very important for businesses to ensure consumer satisfaction when purchasing products/services and increase the sustainability of business profit. since customers are important in business, it is quite essential to assume how a sustainable profit depends on the main indicators (tis). therefore, in this research, sustainable profit through customers was analyzed through models (igt, icrm, b2c, css, cst, and mds). a sample of 200 businesses and consumers was created by interviewing and completing the online questionnaire for the four sessions included in this research during the period (2019–2022). according to the findings of econometric analyzes and tests (factorial, reliability, multiple regression, and multidimensional scaling analysis), the great importance of each 42 e. lulaj. a sustainable business profit through customers and its impacts on three key business domains: technology... factor in the sustainability of business profit through consumers was emphasized. but it is strongly recommended that businesses should take into account the three indicators (tis) in each stage of the business to have a stable profit: for the tis and igt model (f1 and f2), for the icrm and b2c model (f1 and f2), for the css model and cst (f2 and f3), for the mds model (s1f1, s1f2, s1f3, s1f4, s1f5, s2f3, s2f2, s2f3). research brought: a) a new approach for a sustainable profit (css & cst: f2 = 71%, f3 = 70%, icrm & b2c: f1 = 70%, f2 = 57%, tis & igt: f1 = 67%, f2 = 60%), b) an analysis of business through consumers (d1: s1f1 = 1.5551, s1f2 = 1.1192, s1f3 = 1.3500, s1f4 = 1.2779, s1f5 = 1.1141, s2f3 = 1.0186), c) an analysis of consumers through business (d2: s2f2 = 1.0691, s2f3 = 1.4438). the limitations and implications of this research are only a certain number of variables, years, and the number of businesses, but for other analyses and research, researchers can take a larger number of variables, businesses, and/or countries using the same models. there are still practical implications in three key business domains (tis) technology, innovation, and services. therefore, businesses should pay attention to these findings to have a sustainable business profit. data availability the data used to support and prove the findings of this study are available from the corresponding author upon request. conflict of interest the author declares that there are no conflicts of interest regarding the publication of this paper. references achtenhagen, l., melin, l., & naldi, l. 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education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 1: 121–132 https://doi.org/10.3846/bme.2018.2190 *corresponding author. e-mail: agnieszka.bitkowska@pw.edu.pl introduction today’s enterprises are striving to improve their competitiveness by changing the orientation from functional to process. this leads to the conception of business process management (bpm) with a concentration of the company on the systematic identification, modeling and improvement of processes. planning and implementing improvements should be done using knowledge about the company’s strengths and weaknesses, its resources (nadarajah, latifah, & kadir, 2016, pp. 1069-1078; trkman, 2010; jeston & nelis, 2011; antonucci & goeke, 2011; balzarowa, bamber, & mccambridge, 2004; bolisani & handzic, 2015, hammer, 2015). the scope and purpose related to process improvement should result from the effects of diagnosis of emerging problems that occur in the enterprise and have a negative impact on the efficiency and course of processes (niehaves, poeppelbuss, plattfaut, & becker, 2014, pp. 90-106, chong, 2007, cooper, & kleinschmidt, 2007). some process-oriented enterprises create specialized units, business process management centre of excellence (bpm coe), which support the implementation of process solutions. their main message is to support the development of the company by improving the organization processes, building a knowledge business process management centre of excellence as a source of knowledge agnieszka bitkowska* faculty of management, warsaw university of technology, warsaw, poland received 30 may 2018; accepted 06 june 2018 abstract. the aim of this article is to present the functioning of the business process management centre of excellence (bpm coe) from a knowledge perspective. empirical research has been carried out in an enterprise operating on the territory of poland in 2017. the results revealed that enterprises with the implementation of process approach tend to maximize knowledge diffusion and develop organizational competencies via organizing business process management centre of excellence in the world and in poland. an increasing number of companies adopting a business process management centre of excellence, which is a centre for process improvement and provides many good practical solutions. keywords: business process management (bpm), business process management centre of excellence, knowledge. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ mailto:bitkowska@pw.edu.pl 122 a. bitkowska. business process management centre of excellence as a source of knowledge base on all aspects of the implementation of business process management. the aim of the article is to present the operation of the business process management centre of excellence from a knowledge perspective. 1. literature review 1.1. business process management centre of excellence a business process management centre of excellence (bpm coe) refers to a formal group within an organization that, serves to provide support for others doing process work. it may coordinate all process work within the organization, monitor process performance, or undertake projects, it provides support for process change efforts (harmon & wolf, 2012). it can use any of several methodologies, such as bpm, lean, bpms or six sigma, or a combination of approaches. a business process management centre of excellence is an organizational unit is established to coordinate and manage process undertakings from the point of view of the whole enterprise, which is a platform for collecting and transferring process knowledge (bitkowska, 2018). it is a centralized and separated organizational unit created to perform many tasks related to process management. its aim is to raise the level of efficiency and effectiveness of the implemented process initiatives; to offer specialized services and support in the field of process management. its tasks include providing recommendations and guidelines for the operation of processes as well as managing change projects in the company. the unit is also a center of process knowledge, because it creates specialized intranet sites, internal portals dedicated to the issues of process management and introduced changes, implements good practices throughout the enterprise. its main task is to provide support for process management through, among others, coordination of process projects, ensuring an efficient information flow, improvement and development of managers and employees (table  1). m. rosemann (2008) classifies a set of services that can be implemented by the business process management centre of excellence: 1. bpm maturity assessment 2. strategic alignment 3. process modeling 4. library management 5. process improvement. 6. designing process-aware information systems 7. process automation 8. process change management 9. management of bpm projects 10. process governance 11. process compliance 12. process performance measurement 13. process forensics 14. process education/training 15. process portfolio management business, management and education, 2018, 16(1): 121–132 123 managers have the opportunity to choose potential services offered by a centralized process management office. however, many basic and additional services should be provided by specific departments (e.g. it department, supervision department, development department). the list of services offered by the process management office will vary depending on the type and size of the company and the territorial distribution. along with the functioning of this unit, one can observe the levels of its development, which include: dissemination of benefits from the management of processes, creation of convergence between process initiatives, strategic management and creation of process culture. the implementation of various process management initiatives throughout the organization is a difficult operation that usually requires the implementation of many complex stages. to meet this challenge, many enterprises decide to separate in their structures the business process management centre of excellence, which is responsible for various aspects of the implementation of processes. the business process management centre of excellence can be organized in various ways such as: – a centralized unit most often is created in enterprises in which the decision-making functions are located in the head office. – decentralized units are established in individual enterprises within a capital group, operating on a global scale, in which the decision-making functions are dispersed. – a temporary unit primarily serving process and project activities. – virtual existing units. the business process management centre of excellence, established in the organizational structure provides a significant support for the use of the methodology of process management and ongoing projects (richardson, 2006; von looy, de backer, & poels, 2011). in many cases, failure to implement process initiatives resulted, among other things, because of the lack of a deeper understanding of its essence; lack of involvement of top management or dislike resulting from the changes. in addition, one of the reasons for unsuccessful implementations of this concept is the lack of required and comprehensive knowledge of the methodology of process management. in some companies, it managers take process initiatives or they are initiated by the process improvement teams. therefore, in the case of innovative solutions or comprehensive changes implemented in the enterprise, it is necessary to take actions aimed at proper management of knowledge and experience through the creation of a dedicated unit. table 1. main capabilities of bpm coe by jesus, macieira, karrer, and rosemann (2015) competence groups characteristic diffusion of bpm concepts & benefits ability the provision of bpm methodologies, techniques and tools. creation of convergence among bpm initiatives creating alignment, governance and convergence of all bpm-related activities within the organization in order to create synergy and consistency. strategic alignment and bpm culture linking bpm services with corporate strategy and establishing a culture that is materialized in thinking about business processes as essential corporate assets. 124 a. bitkowska. business process management centre of excellence as a source of knowledge 1.2. business process management centre of excellence versus knowledge perspective when deciding to implement a business process management centre of excellence in an enterprise, it should be emphasized that it is a complex and long-term undertaking. it is necessary to support the board properly and to ensure the optimal amount of resources to achieve the set goals. the tasks and responsibilities of the individual should be related to the company’s strategy and objectives. professional approach to the implementation of the unit will enable the company to better, faster and more effectively implement processes while maintaining the required quality, and as a consequence, gain a competitive advantage on the market. business process management centre of excellence creates a perspective of knowledge. this perspective is very important and that both individuals, as well as organizations, need to continually learn to improve their knowledge base to remain relevant (sisson & ryan, 2017). it is crucial to point out organizational culture which regulates two important areas from the perspective of knowledge management: readiness to collaborate and trust between employees (girard & ribiere, 2016; paliszkiewicz & koohang, 2013, cervone, 2016; garlatti, & massaro, 2015, liebowitz, 2012, liebowitz, 2016, paliszkiewicz, gołuchowski, & koohang, 2015). knowledge sharing requires human interaction, an exchange of ideas and openness (alavi, kayworth, & leidner, 2005; de long & fahey, 2000; wong, 2005, heisig, 2015, de long, & fahey, 2000). moreover, management staff (process managers, project managers) should promote the establishment of collaborative goals and open communication or trust between employers (steers & shim, 2013; e. f. cabrera & a. cabrera, 2005; warrick, 2017). it requires the redefinition of employer-employee relations and the development of values such as dialogue, partnership and cooperation and trust. from the point of view of transferring knowledge in a process organization, there may be three solutions in which: 1) knowledge exchange between process teams does not occur. 2) knowledge exchange is informal. 3) exchange of knowledge between projects is organized and carried out in cooperation with the management office processes. business process management centre of excellence plays an important role from the perspective of the knowledge management system, as a permanent organizational unit providing support for processes and temporary, time-limited projects. it enables continuity and durability of process and project know-how. the unit also stores the knowledge and project experience of individuals and teams that, after being completed, is collected and transferred to the knowledge base and can be used for subsequent projects (yeong & lim, 2010). this enables continuous learning of the company, shortening the time of access to design knowledge, which in turn allows for more efficiency. the business process management centre of excellence should support the development of process managers, improve their competence, train process teams, develop a common methodology and standard documentation in the implementation of processes. business process management centre of excellence acquires and collects process knowledge, organizes trainings and workshops on the process approach or the use of it tools (table 2). business, management and education, 2018, 16(1): 121–132 125 other initiatives concern preparation and implementation of thematic training in the field of soft aspects of process management, individual methods and tools used in improving process solutions. the exchange of knowledge between processes is a more advanced and organized form of cooperation through the organization of individual units and teams. such a solution may be necessary due to the weaknesses of communities of practitioners and informal networks in solving complex problems, as well as due to the difficulty in maintaining the knowledge possessed by the network due to the loose nature of these structures and the importance of the context of this knowledge. one of the arguments for introducing the business process management centre of excellence is also to relieve project teams from tasks related to the exchange of knowledge, in particular in the area of investing significant resources in the exchange and transfer of knowledge methods. many process initiatives in enterprises were conducted in an inappropriate manner, which resulted in limited benefits and reduced effects of implementing projects. one of the important challenges associated with the implementation of business process management is to provide uniform solutions, guidelines and principles that can be implemented with the support of a specialized unit – business process management centre of excellence this requires, above all, the establishment of a basic set of services and appropriate methodologies, tools and techniques that are key in process management. in this situation, the business process management centre of excellence becomes not only a provider of infrastructure for knowledge exchange but also a cell that maintains the continuity of project knowledge in the organization; owns and coordinates the process of preserving and distributing knowledge in projects, maintaining archives and project repositories, table 2. business process management centre of excellence from the perspective of knowledge (created by the author) level of bpm characteristics the perspective of process and project knowledge strategic support the implementation of projects; project management methodology; initiation of process projects; coordination of the portfolio of process projects; associating strategies with process architectures knowledge acquisition; knowledge application; knowledge storage operational coordination of occurring processes; monitoring process performance indicators; providing support for the implementation of changes in individual processes; monitoring and control of processes; modelling and optimization of processes using it tools; support in the use of various concepts and management methods, eg lean, six sigma; consulting and training for process managers and process teams; improving process competence; knowledge acquisition; knowledge diffusion; knowledge application; knowledge storage 126 a. bitkowska. business process management centre of excellence as a source of knowledge organizing meetings summarizing the project, recipient of logs and registers of design experiences from many projects; a cell responsible for the assessment of project experience and implementation of best practices; a coordinator and the creator of internal management trainings projects and many more. the introduction of the business process management centre of excellence allows the efforts to improve project management to make a lasting organizational formula and to indicate the specific activities of the office together with those responsible for them. an important advantage is its role as a centre for communication and project coordination; access to tools and technologies that support people in sharing knowledge and information, as well as engaging them in problem-solving and environmental improvement processes project (rosemann & von brocke, 2015). it is responsible for building up and maintaining business process models, process management consultancy, integrating the main processes into the business strategy, the definition of process goals in accordance with the process owner and process control. the business process management centre of excellence becomes a platform of infrastructure for knowledge exchange and knowledge sharing, which is one of the key elements of the whole process of knowledge management. it is defined as a process of disseminating knowledge within a specific group of employees in the organisation (van den hooff & de ridder, 2004), focused on exploiting the existing knowledge and identifying the accessible knowledge. it is important to achieve a better, faster, or cheaper execution of a given task than would happen without sharing knowledge (paliszkiewicz & koohang, 2013). it is based on exchange relations, which contain expectations for obtaining financial and non-financial benefits in the future for people participating in this process (reychav & weisberg, 2009). it mainly consists of providing information connected with a task or know-how (wang & noe, 2010). knowledge sharing includes the process of communication, in which two or more parties take part in providing and acquiring knowledge (usoro, sharratt, tsui & shekhara, 2007). it occurs when people mutually share overt or hidden knowledge in order to create new knowledge (van den hooff & de leeuw van weenen, 2004). knowledge sharing is considered a critical condition for every organization (majchrzak & malhotra, 2013), a factor of creating new knowledge, creating innovation (liao, 2006), improving individual and organizational efficiency (verburg & andriessen, 2011), making changes and adapting to the requirements of the surroundings (sharratt & usoro, 2003) and obtaining a durable competitive advantage (van den hooff & de ridder, 2004). in order to reach for these possibilities it is required that the members of a project team or process team share their knowledge in trust perspective (paliszkiewicz & koohang, 2013; nissen, 2007). at the basis of knowledge sharing is a process, which preceded the creation of organizational knowledge, an assumption that the necessary condition is the diversity of the participants of this exchange process (nonaka & takeuchi, 1995). 2. results and findings the functioning of the business process management centre of excellence is aimed at supporting process initiatives and consolidating the benefits resulting from the implementation of business process management. the gradually growing interest of managers in the creation business, management and education, 2018, 16(1): 121–132 127 of such an entity indicates the need for further work in this area. research carried out in 2005–2017 in the world indicates the need to intensify initiatives for process management (table  3). enterprises recognize the need to improve managers as well as take appropriate initiatives. the functioning of the business process management centre of excellence is aimed at supporting process initiatives and consolidating the benefits resulting from the implementation of process management. the gradually growing interest of managers in the creation of such an entity indicates the need for further work in this area. research conducted in the world in 2005–2011 indicates that among process oriented enterprises, on average around 65% create the business process management centre of excellence (harmon & wolf, 2012). analysis of global research on services provided by process management offices indicates mainly: 69% process modelling, 66% process architecture design and management, 63% process repository management, and process optimization and redesigning (51%) (harmon & wolf, 2012). the most important reasons for the establishment of a bpm coe according to respondents concerned primarily the need to increase operational organizational efficiency (64%), the need for standardization and control (64%), better coordination of process initiatives (56%) and the need for process visualization (56%) (harmon & wolf, 2012). the research carried out by the author in 2017 concerned the analysis of the functioning of the business process management center of excellence.the study included 144 enterprises operating in poland (table  4). the selection of the research sample was carried out using the targeted method and included only those enterprises that implemented process management. the following research methods and techniques were used in the research: the cawi survey questionnaire and interviews conducted with process specialists, process owners, and process experts. an important criterion for the division of the surveyed organizations was the number of employees employed. the analyzed organizations were classified into the following groups: small enterprises – 10–49 people, medium-sized organizations – 50–249 people. table 3. undertaking process initiatives in enterprises by harmon (2018) characteristics 2005 2007 2009 2011 2013 2015 2017 enterprise process management efforts 25% 29% 28% 26% 22% 23% 29% process manager training 19% 22% 24% 24% 20% 19% 20% table  4. business process management center of excellence e has been implemented including the number employed in the surveyed enterprises in poland (created by the author) specification quantity of employed people 10–49 50–249 above 249 there is an business process management center of excellence 10,20% 43,60% 56,20% no business process management center of excellence 58,00% 31,90% 20,10% 128 a. bitkowska. business process management centre of excellence as a source of knowledge among the respondents, the largest share had organizations employing more than 249 people (60.50%) and 50–249 people (25.50%), 10–49 employees (14.00%). services provided by process management offices, first of all, process modelling to create their descriptions, and then make them available to employees in the form of procedures. other services were related to measuring and monitoring processes, providing methods of process improvement or participation in improvement projects. essential services also include creating requirements and specifications before implementing it systems (table 5). table 5. services provided by business process management center of excellence including the number of employees employed at the enterprises in poland (created by the author) specification the quantity of employed people 10–49 50–249 above 249 process modelling, preparation of procedures 20,40% 32,20% 47,20% optimization / implementation of changes in process models 20,10% 34,90% 45,00% process monitoring and measuring 18,50% 24,30% 59,20% cooperation with consulting companies 16,10% 26,10% 58,80% conducting trainings for process managers/employees 14,20% 18,90% 64,90% support for process owners 10,20% 33,60% 56,20% participation in process improvement projects 19,10% 31,90% 49,00% defining requirements before implementing it solutions 16,50% 24,30% 59,20% management support in implementing the organization’s process initiatives 12,10% 32,10% 56,80% the surveyed enterprises recognize the benefits of the business process management center of excellence and the use of knowledge management. the knowledge collected, better opportunities for process optimization, sharing employees’ knowledge and strengthening employee competencies (table 6). table  6. business process management center of excellence of knowledge about the number of employees in the surveyed enterprises in poland (created by the author) specification quantity of employed people 10–49 50–249 above 249 knowledge use 20,20% 32,60% 47,20% process optimization 24,10% 30,90% 45,00% sharing employee knowledge 18,50% 23,30% 58,20% learning and strengthening the skills of employee 16,10% 26,10% 58,80% documentation and knowledge of process knowledge 18,20% 18,90% 62,90% process selection of appropriate methods and tools for processing and preserving process knowledge 12,20% 31,60% 56,20% identification of sources of knowledge needed to implement other processes 20,10% 30,90% 49,00% business, management and education, 2018, 16(1): 121–132 129 conclusions many contemporary enterprises are aware that the process approach to management increases the efficiency and effectiveness of operations and delivery of high-quality products and services (van looy, de backer, & poels, 2011). however, implementation of process management in contemporary organizations remains a major challenge (niehaves, poeppelbuss, plattfaut, & becker, 2014). the creation of specialized units, bpm coe, can be an important solution in the effective and efficient implementation of this concept. the unit is the centre of process knowledge (paliszkiewicz, svanadze, & jikia, 2017) and provides appropriate competencies for employees and the entire organization. its goal is to support employee initiatives and consolidate the benefits of implementing process management. this allows you to take action to improve processes and implement legitimate process initiatives. this unit enables the implementation of projects; implementation and use of process maturity models in order to achieve the planned strategic assumptions from the point of view of ensuring the competitiveness on the market. it should be emphasized that the process management office is established rather in medium-sized and large enterprises with a higher degree of development of process maturity. the research approach bridges the gap of literature in creating a business process management center of excellence and knowledge management. the research shows the integration of business process management and project management in knowledge perspective. creating a business process management center of excellence in an enterprise requires significant involvement of the top level staff as well as adequate human and financial resources. it is, therefore, a complex and long-lasting activity. the appropriate approach to creating a process management office will allow you more effectively to implement the entire process management process while maintaining the required quality 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(2010). integrating knowledge management with project management for project success. journal of project, program & portfolio management, 1(2), 8-19. https://doi.org/10.1002/kpm.368 https://doi.org/10.1016/j.hrmr.2009.10.001 https://doi.org/10.1108/02635570510590101 https://doi.org/10.1016/j.bushor.2017.01.011 copyright © 2015 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2015, 13(2): 203–219 doi:10.3846/bme.2015.299 impact assessment of public innovation support in european economic area mantas vilys1, artūras jakubavičius2, eigirdas žemaitis3 vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania e-mails: 1mantas.vilys@vgtu.lt (corresponding author); 2arturas.jakubavicius@vgtu.lt; 3eigirdas.zemaitis@vgtu.lt received 19 october 2015; accepted 24 november 2015 abstract. the object of this paper is related to the public innovation support in european economic area and its effectiveness assessment. main aim of the research presented in this paper is to propose new model for public innovation support effectiveness assessment, which could be relevant to the contemporary needs and would be based on new explored practice of public innovation support developments. the methods of comparative, regression, modelling analysis, multicriteria evaluation, analogy search, logical abstraction and impact evaluation have been applied for the research presented in this paper. proposed original system of quantitative and qualitative indicators that characterize any public innovation support system (public innovation support index) enables creation and implementation of measures devoted to the public innovation support impact improvement at eu and national level. keywords: innovation, public innovation support, impact assessment, index. jel classification: o31, o32. 1. introduction context. the current global economic crisis emphasizes the need for efficient and effective use of public funding for the benefit of public interest. under such circumstances increased pressure is forwarded to the public budgets. according to the eu wide studies the impact of the crisis on innovation expenditures seems to be the greatest in low tech manufacturing sectors and in countries classified as “catching up” by the european innovation scoreboard. it could be stated that as a direct impact of the economic crisis, the innovation gap in the eu risks to be widened again. the need of new approaches for the assessment of public innovation support is caused by: – limited understanding how to assess the relevance of public innovation support schemes to the needs of businesses and public interest; – limited effectiveness of public innovation support; http://dx.doi.org/ 10.3846/bme.2015.299 204 m. vilys et al. impact assessment of public innovation support in european economic area – lack of indicator systems suitable for the comparative analysis of complex public innovation support systems at national and at eu level; – absence of theoretical background which could justify the creation and development of complex public innovation support systems relevant to the national socioeconomic challenges. by reacting to the all above stated challenges the issues of public innovation support assessment has recently received an increasing attention among scholars and practitioners. however, only with few exceptions, scientific studies has been based on the analysis of particular innovation policies or instruments in limited manner neglecting almost completely the specific policy dilemmas arising from weak and fragmented understanding of support impact. topicality. in developed countries innovation has been the key engine for economic development enabling to reach international competitiveness and relevant quality of people’s life. in view of the complex and strategic character of innovation processes and their significance for the country, the intervention of the public sector in the innovation development and promotion process is not only possible, but necessary. in order to ensure qualitative development of public innovation support systems which are relevant to the needs of business but also matches the public interest it is very important to understand the synergies of multiple public support actions under holistic innovation paradigm and to suggest novel and comprehensive approach for national innovation support system assessment. it also should be stated that such assessment of public innovation support is important and topical action for the science of management at the national as well as at supranational level. this paper discusses conceptual frameworks for assessment of the impact of public innovation support while applying conventional descriptive methods to explore the changes in innovation in european economic area. the assessment of public innovation support effectiveness is important field for the scientific research due to the following reasons: – creates a ground for rationalization of public innovation support policies; – justifies appropriateness of public funds allocated for this support; – encourage improvement of public support, its effectiveness, thus reforming current and introducing new support programs and measures. therefore, it is very important to explore and suggest new approaches, methods and instruments for the modern public innovation support assessment. object of the research presented in this paper. the research object is public innovation support in european economic area and its effectiveness assessment. aim of research presented in this paper – to propose new model for public innovation support effectiveness assessment, which is relevant to the contemporary needs and is based on explored practice of public innovation support development. 205 business, management and education, 2015, 13(2): 203–219 methodology of research. the methods of comparative, cluster, regression, modelling analysis, multi-criteria evaluation, analogy search, logical abstraction and impact evaluation have been applied for the research presented in this paper. scientific novelty. scientific novelty is observed by main results: – with the definition of a new research field in the area of public innovation support effectiveness assessment a strong ground for the better perception of public support impact was created. – common for eu and specific to lithuania patterns of public innovation support development practice were identified which creates new opportunities for the improvement of public support effectiveness. – original system of quantitative indicators enables creation and implementation of measures devoted to the public innovation support effectiveness improvement at eu and national level. – suggested model for the assessment of public innovation support is based on theoretical argumentation and practical verification. its structure is based on new solutions and quantitative assessment methods. practical value. the presented research results can be used in creation and development of particular public innovation support measures or their systems which will be relevant to the economic development priorities and needs of businesses. the practical application of the suggested model is significant for the effectiveness improvement of public innovation support at eu as well as at lithuanian institutions. 2. previous research of public innovation support impact assessment it could be stated that the emphasis on public innovation support is caused by widespread of innovation phenomena that contribute significantly to gdp and contribute to the important socioeconomic challenges. by understanding the importance of public innovation support to the development of innovation it should be clearly stated that this field is not scientifically and practically explored. some scientific research has been made to identify the effects of public innovation support measures nevertheless this research could be considered as fragmented and scattered. by referring to the current state of the art in supporting innovation by different public actions main research areas are as follows: – organization and institutional forms for public innovation support (ertmer, ottenbreit-leftwich 2010; eufp 2013; goel et al. 2012; luke et al. 2010; minogue 2005; fung, wright 2001; gavin, muers 2002; macpherson 2001; straits 2002; sherwood 2002); – the role and models of public innovation support in fostering innovation in business (naštase 2013; noor al-jedaiah 2010; barrett, hill 1984; braczyk et al. 1998; miles 2004; earl 2004; tan 2004; melnikas 2005); 206 m. vilys et al. impact assessment of public innovation support in european economic area – public sector as a main developer of innovations. the paradigm of full governmental involvement for the generation and dissemination of innovation (pacharapha, ractham 2012; rutkauskas, račinskaja 2013; bhatta 2003; cainelli et al. 2004); – provision of innovation support services in line with other public measures. in this case the main scope of the research was to explore key elements for the efficient delivery of public support (santos silva 2013; sullivan, marvel 2011; gallouj, savona 2010; insight 2007). by summarizing different scientific suggestions (antonelli 2009; cassiman, veugelers 2002; miravete, pern 2000; beerepoot 2007; blake, hanson 2005; blindenbach 2006) public innovation support can be defined as an activity which is planned, organized, implemented and controlled by public or private institution under the public interest with the aim to foster innovation in all possible areas. it could be suggested that government, industry and universities should work in partnership in order to take all benefits of public support measures during the current global economic crisis. therefore the assessment of public innovation support is important action which could guarantee further development of the economy in a manner that is relevant to the needs of business but also matches the public interest. in recent years, a substantial shift in the way the impact of public innovation support is assessed could be revealed. according to the neoclassical tradition, the discussion on rationales for public intervention is robustly linked to the notion of optimality. according to the neoclassical theory classics (vargas-hernandez 2011; varghese 2013; bator 1958; medema 2004; mankiw et al. 2002; mohnen et al. 2004) public sector should intervene to solve the market failures that prevent achieving the optimal development of innovation. as opposed to the neoclassical theories, the notion of optimality is considered to be irrelevant by the systems of innovation approach. it focuses on the evolutionary nature of innovation processes that are path dependent over time and it is not clear which path will be taken (edquist 2001). therefore in systems that never achieve equilibrium the notion of optimality is irrelevant. under this paradigm the rationale for public innovation support is based on identification, analysis and elimination of systemic problems (bastalich 2010; boehm, fredericks 2010; camic et al. 2012; chaminade, edquist 2006; hassink, dong-ho 2005; lundvall 2007; edquist 2001; heidenreich 2004; juma, yee-cheong 2005; nelson 2002). after the in-depth analysis of different theoretical approaches the concept of holistic innovation system was selected as the background to design the model for assessment of the public innovation support. table 1 depicts the main methods used for the assessment of public innovation support and the main results from selected recent related studies. 207 business, management and education, 2015, 13(2): 203–219 table 1. recent studies for the assessment of the public innovation support impact (compilation based on almus, czarnitzki 2011; duguet 2013; wong 2013; schibany et al. 2014) year authors results 2012 almus companies that participated in public r&d schemes increased r&d-investments with an amount corresponding to 4% of their turnover. 2013 duguet r&d subsidies add to the private r&d. 2013 wong public subsidies add to private funding of r&d. regression methods suggest that one additional dollar in r&d subsidy would increase private r&d by 41 cents. 2014 schibany et al. firms with fewer than 10 employees and firms with more than 250 employees exhibit the highest leverage from public innovation support. taking into account the holistic innovation system approach and the scientific studies which were made to explore the impact of public innovation support further analysis was concentrated on identification and classification of various public support additionality concepts and their sub-dimensions. additionally quantitative parameters as well as descriptive methods are used to explore how companies rate and rank the merits of public innovation support. in the last years, a growing number of countries have adopted the system of innovation approach officially to create and disseminate public innovation support systems. nevertheless this process requires the extensive analysis that could be supported by new models for the assessment of such systems. for this purpose further research priorities were identified: – a research in which the possibility to apply neoclassical and systems of innovation theoretical approach to the assessment of public innovation support are evaluated. – a research in which classification of various public support impact additionality concepts and their sub-dimensions are explored. – a research during which the models for creation, dissemination and evaluation of public innovation support are elaborated. 3. suggested model for effectiveness assessment of public innovation support by following the proposed assessment principles new public innovation support effects could be identified and explained. suggested model for the assessment of public innovation support in european economic area is depicted below (fig. 1). 208 m. vilys et al. impact assessment of public innovation support in european economic area fig. 1. the model for the assessment of public innovation support the assessment of public innovation support impact in european economic area is based on public innovation support index and chronological assessment of correlations between public innovation support index and growth rate of gdp in particular country. public innovation support index calculation. by summarising analysed scientific literature, it can be stated that proper assessment is necessary for the better design and development of public innovation support systems. by applying common principles for assessment of existing national support schemes we will be able to compare characteristics of available international experience in designing and development of public innovation support systems. in this context, it is important to propose a new index that could help to characterize every public innovation support system in every country. in the context of social sciences index is the relative indicator of the phenomenon in question that characterizes it according to the selected reference system (diewert 2009). for example – consumer price index is a set of prices (with a particular weigh) that is expressed in a relative, synthetic and numeric form. in the figure 2 the summary of different indexes that could be used for public innovation support systems analysis is presented. in this case, the innovation index – the synthetic indicator that not only reflects innovation activities and related public support but also ranks countries/economies in terms of their environment to innovation and their innovation outputs. with the in-depth comparative analysis of all suggested indexes that could be used to characterize the public innovation support system it was possible to identify global innovation index eu innovation scoreboard global competitiveness index innovation capacity index unido competitive industrial performance index knowledge economy index public innovation support system fig. 2. indexes applicable for the comparative analysis of public innovation support systems 209 business, management and education, 2015, 13(2): 203–219 the limitations that are vitally important for the further development of public innovation support systems. the results of above mentioned analysis are presented in the table 2. table 2. indexes that could be used for characterization of public innovation support system (world bank 2011; desai 2002; unido 2011; porter, stern 2001; unctad 2011; pro inno europe 2012; claros, yasmina 2009) dimension of the innovation system cipi gii is gci kei ici investment in innovation activities x x x x x x output of innovation activities x x x x impact of innovation activities x x x x scale of public innovation support x x x x x quality of public innovation support x impact of public innovation support x number of indicators in the index 8 81 24 11 12 61 acronyms: cipi– competitive industrial performance index; gii – global innovation index; is – eu innovation scoreboard; gci – global competitiveness index; kei – knowledge economy index; ici – innovation capacity index. with respects to the conclusions of the comparative index analysis it is necessary to create a new, cumulative index that could reflect all important characteristics of existing public innovation support system. the proposed public innovation support index should have a composite structure of qualitative and quantitative indicators that reflect three most important dimensions of public innovation support – scale, quality and impact. the proposed set of indicators is reflected in the table 3. table 3. proposed structure of the public innovation support index component of the index indicator source scale of public innovation support government expenditure on education (% of gdp) unesco institute for statistics, uis online database r&d expenditure in the public sector (% of gdp) eurostat state aid for r&d (% of gdp) dg competition, eurostat researchers in r&d (per million people) world development indicators, world bank new doctorate graduates (isced 6) per 1000 population aged 25–34 eurostat 210 m. vilys et al. impact assessment of public innovation support in european economic area component of the index indicator source quality of public innovation support quality of scientific research institutions world economic forum quality of scientific research institutions world economic forum availability of scientists and engineers world economic forum extent of staff training world economic forum quality of the educational system world economic forum impact of public innovation support public policy stability world bank, governance indicators government effectiveness index world bank, governance indicators effectiveness of legal system world economic forum regulatory quality index world bank, governance indicators rule of law index world economic forum regulatory quality world bank, world governance indicators ease of starting a business world bank, ease of doing business index 2014 press freedom index reporters without borders, press freedom index 2013 quality of ipr system world economic forum since the data used for calculation of proposed innovation support index is non-homogenous it should be normalized by applying the formula below. min max min i n r r r r r − = − , where: rn – normalized value of particular indicator; ri – analysed value of particular indicator in the i country; rmin – lowest value of particular indicator; rmax – highest value of particular indicator. data normalization method for public innovation support index values is based on the scientific suggestions (smith, glass 1987; stake 1995; thomas nelson 1996) and takes into account the following characteristics of data to be used: the maximum value, minimum value, variance, standard deviation. it is possible to attribute a specific significance for every component of the proposed public innovation support index by applying the formula below. 1 2 3 1 2 3   mi ki vi i i i i i ω + ω + ω = ω + ω + ω , where: imi – indicator for the scale component of public innovation support index in the country reffered as i, iki – indicator for the quality component of public innovation end of table 3. 211 business, management and education, 2015, 13(2): 203–219 support index in the country referred as i, ivi – indicator for the impact component of public innovation support index in the country reffered as i, ω – significance of the particular component in question. it is also should be considered that all public innovation support system components may be equally important for countries in the european economic area especially when taking into account different social, economic, and cultural context therefore it is suggested that for the sake of comparability to consider all components of the index as equally important (for example as it is a case in calculation of global entrepreneurship and development index). if calculated according to the methodological suggestions the public innovation support index not only makes it possible to measure public support for innovation in the european countries by uniform principles, but also to assess the changes over time. in this respect it is also possible to assess the effectiveness of public innovation support for the country’s economic development. it could be achieved by examining the relationships between the changes of public innovation support index and the gdp growth rates. such assessment could be accomplished by applying regression analysis, where frequency tables of positive and negative “events” are generated. the “event” in this context is understood as a year to year increase of country’s gdp growth rate in the relation to the increased public innovation support index. it is also important to consider the fact that the impact of public innovation support that results in increase of gdp growth rate could happen with some delay. such phenomena is presented in recent scientific research (drennan, mcconnell 2007; hood, miller 2009; brown 2010). nevertheless the precise quantitative expression of the delay in question still remains unsolved. the approach suggested for solving this challenge is based on application of proposed public innovation index in regression analysis with the gdp growth rate. it is possible to calculate the delay of public innovation support by performing a series of regression analysis with variable time shift (expressed in years) values. the chronological assessment of interrelations between public innovation support index and the gdp growth rate for the particular country should be performed by following main methodological steps as described below. at first, the sequence of yearly innovation support index values is created for as long period as possible. in order to achieve statistical significance of the analysis this period should be at least 10 years. the sequence of innovation support indexes is expressed in the following way: { }1; ; ;  ,k k k ni i i i+ += … where: ik – public innovation support index of the country in the year k; n – the number of years used in the analysis. 212 m. vilys et al. impact assessment of public innovation support in european economic area based on the sequence that is expressed by function no.3 the sequence of yearly ∆ is calculated: { }1 2; ; ; ,k k k ni i i i+ + +∆ = ∆ ∆ … ∆ 1 1   k k ki i i+ +∆ = − , where: ∆ik – the change of public innovation support index of the country in the year k; by following the same principles it is important to compose the sequences of changes in gdp growth rates in the following manner: ( ) ( ) ( ) { }1 2 gdp; ; ;g g k g k g k ngdp gdp gdp+ + +∆ = ∆ ∆ … ∆ , where: gdp∆ gk – the change of gdp growth rate of the country in the year k. by linking up the sequences expressed in the function 4, 6 it is possible to compose the frequency table for the regression analysis as it is presented in the table 4. table 4. frequency table for the expression of dependence of public innovation support index, gdp growth rate ∆bvpg ∆i ∆bvpg > 0 ∆bvpg = 0 ∆bvpg > 0 ∆i > 0 n11 n12 n13 ∆i = 0 n21 n22 n23 ∆i < 0 n31 n32 n33 in this case, the frequency expressed as n11 shows the number of cases of positive change in value of public innovation support index that resulted in positive gdp growth rate in the same k year. further on the regression analysis is performed and particular factors of regression equations are calculated. in the same manner it is possible to compose the frequency tables where the change of gdp growth rate of the country in the year k is compared not to the same year value change of public innovation support index but to the value change that happened earlier (for instance in the year k-1, k-2, k-3…). by doing so we are able to express and calculate the precise delay of public innovation support impact to the gdp growth rate in particular country. 4. results of the chronological assessment of interrelations between public innovation support index and the gdp growth rate in european economic area in this section the results of verification of the proposed model for the public innovation support characterization as well as for impact assessment is presented (table 5). the following study was performed with data that covers the last 15 years of public innovation support efforts by all countries in european economic area in the period 1997–2012 213 business, management and education, 2015, 13(2): 203–219 and that was linked to the gdp growth rate accordingly following the methodological suggestions that were presented in the paragraph above. that table below presents the results of calculation of public innovation support index in the european economic area with the data for 2012. table 5. public innovation support index in european economic area in 2012 no. country impact of public innovation support scale of public innovation support quality of public innovation support public innovation support index 1 finland 6.23 6.07 6.37 6.22 2 sweden 6.26 5.59 6.17 6.01 3 denmark 6.25 5.41 6.18 5.95 4 iceland 5.60 5.51 5.72 5.61 5 norway 5.93 4.75 5.31 5.33 6 netherlands 5.68 4.46 5.67 5.27 7 ireland 5.45 4.37 5.48 5.10 8 belgium 4.74 4.38 5.92 5.01 9 austria 5.59 4.26 4.72 4.86 10 germany 5.22 4.21 5.00 4.81 11 france 4.41 4.57 5.46 4.81 12 great britain 5.16 4.11 5.07 4.78 13 luxembourg 5.91 3.19 3.40 4.17 14 cyprus 4.89 3.04 4.25 4.06 15 czech republic 3.71 3.93 4.49 4.04 16 estonia 5.11 3.16 3.69 3.99 17 liechtenstein 5.73 2.84 3.22 3.93 18 slovenia 4.06 3.98 3.73 3.92 19 malta 4.93 2.48 3.07 3.50 20 portugal 3.87 2.84 3.11 3.28 21 spain 2.86 3.40 3.50 3.25 22 hungary 3.57 2.99 2.86 3.14 23 lithuania 3.62 2.63 2.52 2.92 24 poland 2.75 2.73 2.99 2.82 25 latvia 3.40 2.35 2.16 2.64 26 greece 2.91 2.75 2.18 2.61 27 slovakia 3.34 2.41 1.97 2.57 28 romania 2.48 2.41 2.11 2.33 29 italy 2.41 2.41 2.08 2.30 30 bulgaria 1.69 2.12 1.35 1.72 214 m. vilys et al. impact assessment of public innovation support in european economic area summarizing the data that is depicted in the table 4 all the countries in the european economic area can by grouped according to the development level of public innovation support system that in this case is expressed by the value of the proposed public innovation support index: – leaders in public innovation support. in this list – first ten countries with the most developed system of public innovation support: finland, sweden, denmark, iceland, norway, netherlands, ireland, belgium, austria and germany. this group includes counties in which the public innovation support is developed in average more than 20% above the eu average. – the second group of public innovation support followers includes countries with a performance close to that of the eu average i.e. less than 20% above, or more than 80% of the eu average (great britain, czech republic, estonia, slovenia etc.) – the last catching-up group includes countries that show public innovation support performance level well below that of the eu average, i.e. less than 60% of the eu average. this group includes bulgaria, latvia, and romania. by following same manner the public innovation support index values were calculated for the period 1997–2012 for all countries in european economic area and then linked to the gdp growth rate accordingly. in conclusion the results of the regression analysis shows that there is no statistically significant links between the changes in public innovation support (expressed by proposed index) and country’s gdp growth rate. in order to confirm the hypothesis that impact of public innovation support occurs with some delay the logit regression was performed repeatedly by shifting the data by one, two, three or more years. the hypothesis was confirmed when some statistically significant links between the public innovation support index values and gdp growth after 2 or more years. the findings of the research shows that the following delay could be expected to the gdp growth while improving the countries public innovation support system: – expected public innovation support impact delay in the case of ireland, lithuania, cyprus, greece –3 years; – expected public innovation support impact delay in the case of germany, the netherlands – 4 years; – expected public innovation support impact delay in the case of hungary, romania – 2 years. the empirical research confirmed appropriateness of the model for the characterization of public innovation support systems in european economic area and its applicability for impact assessment. proposed methodology for the impact assessment can be applied for the further development of public innovation support systems – e.g. if the index of public innovation support i < 3 then the scale component of public innovation support should be developed and if the index of public innovation support i >3 then the quality component of public innovation support should be developed. 215 business, management and education, 2015, 13(2): 203–219 5. conclusions 1. generation and development of innovations are extremely important for modern society beyond social and economic challenges. innovations ensure international competitiveness and effect on sustainable technological, political, economic and social growth of each country. the following patterns for the justification of public innovation support effectiveness assessment could be identified: – innovation is related to risk and changes which result in high technical, technological, process and market uncertainty; – effective public innovation support is able to reduce the risk of innovation and enhances the scale and performance of innovation in business; – the diversity of support measures is caused by high investment to the development of public innovation support systems, therefore the assessment of interdependent impacts is very complicated. despite of the fact that a wide range of research and theoretical studies has been made on the subject of innovation, further exploration of public innovation support is needed due to a lack of its efficiency and limited opportunities to assess its progress. 2. the comparative analysis of innovation and public innovation support theoretical frameworks and models revealed that in majority cases the challenges of support effectiveness are solved according to the neoclassical and evolutional approaches. this limits understanding of how different public innovation support measures interact and how the support effects innovation in business. therefore in order to increase the effectiveness of public support it is very important to follow these directions for scientific research: perform complex analysis of public innovation support systems; create and apply in practice methods for assessment and interpretation of the support impact. 3. taking into considerations the diversity of public innovation support measures the effectiveness assessment should be based on holistic innovation paradigm. by following it, public innovation support effectiveness assessment could be performed with the help of newly proposed public innovation support index. 4. the empiric study where application of proposed model was performed revealed the important patterns for the public innovation support impact assessment: 4.1. the increase of public innovation support index is a necessary but insufficient condition for the growth of the countries innovation index. in order to successfully develop public innovation support it is important to focus on effectiveness and quality parameters but not on the scale. 4.2. the impact of public innovation support occurs only in the long run, the delay of the effect exists. the study revealed that the public innovation support impact to the countries innovativeness will occur with 3 years delay (a case of lithuania and some other eu countries). 216 m. vilys et al. impact assessment of public innovation support in european economic area 5. the proposed index and approach for the impact assessment could be used in the development and implementation of innovation policies in order to assess the impact of public innovation support at both national and eu level. the application of the model is beneficial for: increase of efficiency of innovation support; increase of long term countries competitiveness; exploration of direct and indirect effects of public innovation support; international comparisons of public support systems according to its effectiveness. references almus, m.; czarnitzki, d. 2011. 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associate professor at vilnius gediminas technical university. in 2004 he graduated from vilnius university (vu), the faculty of physics, acquired bachelor’s degree in physics. in 2006 he graduated from vilnius gediminas technical university (vgtu), the faculty of business management, acquired master’s degree in business management. in 2007–2011 he is phd student of vilnius gediminas technical university and since 2006 he has been a delivering lectures at the same university. research interests: innovation, public innovation support, management. artūras jakubavičius. phd, professor at department of international economics and management, vilnius gediminas technical university. innovation management expert – consultant at lithuanian innovation centre. more than 20 years he is focusing on innovation management, innovation support systems, innovation financing, innovation networking issues. since 1994 he has been a delivering lectures for students in universities. research interests: innovation management, innovation support systems, innovation clusters. eigirdas žemaitis. phd student, lecturer at department of international economics and management, creative industry faculty at vilnius gediminas technical university. innovation and creativity consultant . 13 years of consultancy and training on innovation management, creativity, marketing. since 2004 he is delivering lectures at various universities in lithuania. verslas_2013_11_1_r.indd models as tools of analysis of a network organisation wojciech pająk cracow university of economics, ul. rakowicka 27, 31-510 kraków, poland e-mails: pajakw@uek.krakow.pl received 12 may 2013; accepted 7 june 2013 abstract. the paper presents models which may be applied as tools of analysis of a network organisation. the starting point of the discussion is defining the following terms: supply chain and network organisation. further parts of the paper present basic assumptions analysis of a network organisation. then the study characterises the best known models utilised in analysis of a network organisation. the purpose of the article is to define the notion and the essence of network organizations and to present the models used for their analysis. keywords: management, network organisation, analysis. reference to this paper should be made as follows: pająk, w. 2013. models as tools of analysis of a network organisation, business, management and education 11(1): 96–108. http://dx.doi.org/10.3846/bme.2013.06 jel classification: m10. 1. introduction the evolution of management follows along with the changes in the conditions of competition resulting from globalisation processes and the growing it introduction to business operations. shaping the flows of products and the accompanying information using the principles, the methods and the techniques of logistic management has become a key problem of management in a contemporary enterprise. the pursuit of the full use of the potential of an enterprise requires the extension of the cooperation with the issues of improvement of financial flows and other areas of functioning of an enterprise (witkowski 2003). such possibilities are provided by the concept of a network organisation. effective functioning of such an organisation is a result of integration and coordination of various areas of functioning of a network organisation, such as: research-development works, logistics, marketing, production management or finance management. hence, network organisations set new requirements concerning the strategy and the method of its formulation. in order to meet these requirements, changes are necessary in the traditional understanding of the strategic management process. in this case strategic management does not apply to solely to particular enterprises but their entire network. this means that to ensure proper operation of such an organisation it is necessary to look at the essence and the role of the strategic management process in a new way. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2013, 11(1): 96–108 doi:10.3846/bme.2013.06 copyright © 2013 vilnius gediminas technical university (vgtu) press technika www.bme.vgtu.lt 97 business, management and education, 2013, 11(1): 96–108 management of a network organisation is not simple. mere observation of the flows within such a network and adoption of a thesis claiming it is necessary to cooperate do not result in integrity or high effectiveness. such results can be achieved no sooner than as a result of a prepared management strategy implemented in a network organisation (ciesielski, długosz 2010; ciesielski 2007). 2. supply chain and network organisation a supply chain means a sequence of activities performed subsequently by different organizations from the beginning of the process of creation of value for the final user (ciesielski 2005). the supply chain can be defined by identifying the product, the customer and/or distribution channels as well as markets in the geographic meaning (bolsdorf, rosenbaum 2003; łobesko 2010). cooperation regarding various operating functions of the enterprises forming the supply chains may ensue in them. this cooperation inherently includes supply and distribution, but also may apply to marketing, research and development or production. if partners manage real and information flows (logistics) together we are dealing with a supply network (ciesielski 2005; bowersox, closs, cooper 2010; harrisom, van holk 2010). as a result of changes in the conditions of competition resulting from globalisation processes the term supply chain has evolved. as a result of this evolution the term supply chain has become very ambiguous and imprecise (witkowski 2003). most often the supply chain is described based on the following criteria (witkowski 2003): 1) entitative structure, 2) object of the flow, 3) objectives, functional scope and area of cooperation of participating entities. taking into account the objective, the subjective and the functional scope of cooperation between the members of a supply chain, it can be defined as enterprises collaborating in various functional fields: mining, production, trade, service-oriented enterprises and their customers between which flow streams of products, information and funds (witkowski 2003). the conditions for construction of a supply chain have been created primarily as a result of changes in the approach to the manner of implementation of tasks of logistic enterprises. as a result of globalisation of manufacturing processes strategic importance of logistics which resulted in integration of logistic systems of enterprises has increased. two basic stages of this integration may be identified (blaik 2010; blaik, matwiejczuk 2009): 1) integration within an enterprise providing the basis for creation of an integrated logistic system of the enterprise; 2) external integration encompassing the entire logistic chain from the source of supply to the final recipient. 98 w. pająk. models as tools of analysis of a network organisation the literature on the subject does not agree on specific procedures used to achieve higher levels of cooperation (poirier 1999; simchi-levi, kamiński, simchi-levi 2000; blaik, matwiejczuk 2005; rutkowski 1999). however, there is a fundamental conformity of views claiming that this process begins with introduction of logistic improvements in partners’ enterprises, then a programme of development of the chain of suppliers is developed to achieve the highest level of collaboration in the form of a network organisation in the end (witkowski 2003). it should be assumed that a network organisation consists of entities implementing the processes of temporal-spatial transformation of material goods, harmonised by the management subsystem. these activities may be harmonised in time and space by provision of integration and coordination (fey 1989). being an anticipative form of harmonisation of activities, integration means consolidation of cooperating elements into one whole in order to achieve synergy. in the supply network established as a result of the process of integration, functional and hierarchical relations occur (stabryła 1984). integration by means of functional relations is related to the division of labour and applies to material flows. hierarchical integration is concerned with information streams being part of the management process. functional integration runs in two directions: horizontal (economic) and vertical (technical) (fey 1989). the impulse causing horizontal integration processes are orders received from customers. the essence of this integration is agreeing all activities necessary to complete a given order as part of the supply chain. vertical integration processes are related to the product creation process. to make a network organisation more flexible it is often necessary to integrate the horizontal and the vertical flows (lateral integration). this applies primarily to planning, regulating and control tasks implemented within the management system. continuous or replicable agreement of processes is implemented by coordination. in contrast to integration, coordination is an ex-post type of harmonisation (hubner 1984). coordination under a network organisation consists in orientation of its particular elements and the relations between them in accordance with its imperative goals. the demand for coordination actions increases along with the growth in degree of the specialisation of its particular components. the level of this demand depends on the type of interdependencies between particular elements of such a system. three types of interdependencies may be identified at this moment (stoner, freeman, gilbert 2011): 1) summing – the chain links perform their tasks independently, the success of the whole depends on the effects of the actions made by each of them, 2) sequential – one link of the chain must take an action before another link can begin its, 3) mutual – cooperation of links. 99 business, management and education, 2013, 11(1): 96–108 in the case of a network organisation the present interdependencies are mutual interdependencies within the management system as well as sequential interdependencies in the case of operating systems. coordination is implemented as part of the execution of the function of the management system. efficient and economically effective flow of raw materials, materials for production, finished products aimed at achievement of customer satisfaction (supplier, intermediary, final customer) and profits of particular enterprises (maximisation of longterm profits), should result from correct functioning of such a system. establishment of a network organisation is also the effect of implementation of the strategy of internationalisation of activities in enterprises. during this process the enterprise may pursue one of the following strategies (ciesielski 2005): 1) ethnocentric consisting in export of the product to markets with similar requirements as the native market of the enterprise, 2) polycentric characterises by adaptation of the products to the requirements of particular local markets, 3) global assuming a broad homogenisation of the world market, 4) dual, consisting in determining the scope of homogenisation of the world market while taking account of diverse requirements of the local markets. each of these strategies determines the quantity, the structure and the configurations of a network organisation affecting the strategic planning process. this process includes two basic phases: strategic analysis and designing strategies. strategies of particular partners of the network organization in the supplier-recipient relations can be brought down to the ccc paradigm (ciesielski 2005). this paradigm assumes that such strategy can be described using three parameters: 1) cooperation, 2) competition, 3) control understood as the desire to gain control over the partner. strategies between the supplier and the recipient are defined using strategic alliances. the essence of such strategic alliance can be identified as a long-term cooperation contract concluded between two or more enterprises in order to connect, exchange and/or integrate specific resources for partners to achieve the assumed objective (hung 1992). strategic alliances between partners in a network organisation can be perceived as a coalition of two organisations established to achieve the strategic objective favourable for both partners (murray, mahon 1993). the essence of such strategic alliance consists in joining partners with complementary resources with each other (romanowska 1997). it can be assumed that in relations between the supplier and the recipient we are dealing both with partnership and dominance (ciesielski 2005). the dualist nature of these relationships results from the pressure exerted by stronger partners on weaker partners resulting from their bargaining power. in extreme cases it may lead to desintegration of a network organisation in accordance with the previously accepted paradigm of a 100 w. pająk. models as tools of analysis of a network organisation partner strategy. according to the already stated paradigm, strategic alliances in relations between the supplier and the recipient, although classified into non-competitive alliances (garrette, dussauge 1996), involve the risk of occurrence of a conflict. non-competitive alliances include: vertical partnership, international joint venture enterprises as well as intersectoral agreements. vertical partnership concerns enterprises from neighbouring sectors within the value chain (supplier-recipient relation). international joint venture enterprises are agreements between partners, one of which has a product and the other access to a given market. the rarest form of alliances found in a network organisation are intersectoral agreements. they join partners operating in different sectors. the purpose of these alliances is to diversify the operations of a enterprise participating in a given network organization. 3. analysis of network organisations the starting point for conducting a strategic analysis of a network organisation will consist of a scheme of assessment of functioning of the supply chain (fig. 1) (ciesielski, długosz 2010; ciesielski 2009). the diagram of assessment of functioning of the supply chain indicates the need for the entities forming the network organization to carry out a analysis. this should provide the basis for development of common strategic objectives taking account of both the interests of its particular participants as well as the interests of the whole network organisation. when pursuing the objectives defined this way the entities should be construct functional strategies as well as formulate detailed programmes. an ideal network organisation should make it possible to postpone decisions on production and deliveries made on the basis of the information on the demand, allow them to offer their customers a diverse product offer as well as minimise the duration of deliveries, inventory and costs (ciesielski 2007; fuks, łupicka 2009). the analysis of the strategic potential of a supply chain compared to the analysis of the strategic potential of an enterprise is much more complex (schilke, goerzen 2010). it should be assumed that this analysis does not apply solely to the assessment of the competitive position of the examined supply chain as compared to other competitive chains, but should also include internal relationships between the partners in three reference structures: 1) horizontal – separation of systems outside an integrated supply chain from among the partners’ functional systems, 2) vertical – separation of systems preceding and following links of the supply chain as part of vertical integration of the partners’ activities, 3) lateral – separation of systems of links of supply chains penetrating the partners’ systems functional. 101 business, management and education, 2013, 11(1): 96–108 mutual importance for risk reduction mutual identification mutual estimation mutual implementation monitoring (control) network identification estimation importance for risk reduction implementation partner identification estimation meaning for risk reduction implementation partner fig. 1. diagram of assessment of functioning of the supply chain (source: ciesielski, długosz 2010) in the case of a supply chain strategic analyses can be based on commonly known methods. these methods are used to collect and analyse information about the factors determining its strategic situation (krubski 2003; lisiński 2004; obłój 1998). a analysis conducted while using the proposed methods is supposed to make it possible to design a strategy adequate to the internal and external situation of a supply chain properly (sroka 2012). designing strategies consisting in forming a vision, the mission and strategic objectives of an organisation, identifying significant strategic options as well as devising a strategic plan by confronting the objectives of the organisation with the possibilities of their achievement is supposed to lead to formulation of a supply chain strategy. also in this case we are dealing with complex relations. the process of formulation of an integrated supply chain strategy consists of two stages. the first stage is formulation of the strategies of particular partners within the supply chain. the second stage is concerned with formulation of a supply network strategy being the “result” strategy of particular partners. 102 w. pająk. models as tools of analysis of a network organisation 4. models used in analysis of a network organisation usually a model is defined as some projection or some pattern. sometimes a model is identified with some very broadly understood methods of actions (findeisen 1985). as a result, models are presentations of states, objects or events. their simplicity compared to reality results from the fact that they take account of the properties of reality important in a given case (ackoff 1969). this means that the model is something which describes the nature or the behaviour of a certain original entity. this description is made using words, numbers, symbols, diagrams, charts or objects looking or behaving like the original. the basic relation occurring between the original and the model is the relation of similarity. this relation may take a form of isomorphism or homomorphism. isomorphy means that any part and each relation between these parts of the original entity corresponds to one and only part as well as one and only relation in the model. on the other hand, when the model does not include all the features of the original entity, we may say that it has a homomorphic nature. this means that the relevance of the original entity and the model is irreversible. in this context, the model is only an approximation, simplification of the original entity. the image most often used in scientific research is a homomorphic image of the entire object, but an isomorphic image of the examined characteristics of the entire object. the basic cognitive functions of models include (koźmiński 1976): 1) the descriptive function, 2) the function of explanation of reality, 3) the function of prediction of future occurrences, 4) the heuristic function, 5) the designing function. in scientific research models serve as cognitive operators. on the one hand, they provide images of reality, on the other hand, they allow scientists to conduct experiments. the models most often used in management are functional, prognostic, selective and strategic models (czermiński 1982). the functional model explains the occurrence of characteristics of some element, indicating, at the same time, which role it plays in sustaining or changing the condition or the structure of an object it is an integral part of. prognostic models are used to predict the future conditions of an object based on known interactions and dependencies. selective models are a tool used to choose possible decision-making options. 103 business, management and education, 2013, 11(1): 96–108 strategic models are used to predict the behaviour of the objects and assess the future effects of made decisions. this type of models are utilised in the strategic analysis of a network organisation. the most well-known models of strategic analysis, network organisations include the following models (ciesielski, długosz 2010): 1) cox, 2) saunders, 3) kraljic, 4) olsen and ellram models. the cox model is used to examine the correctness of relations between the manufacturer and the suppliers in a supply chain. this model assumes that products offered by suppliers may contribute to the establishment of the manufacturer’s core competences. the cox model includes five possible relations between the supplier and the manufacturer (ciesielski, długosz 2010; hines 2004): 1) the supplier is merely the manufacturer’s subcontractor; 2) the manufacturer chooses the suppliers and maintains contact with a privileged group of suppliers; 3) the manufacturer uses a single supplier to reduce transaction costs; 4) the suppliers maintain partner-like relations with each other; 5) the supplier enters into a strategic alliance with the manufacturer. in the case of routine competences the manufacturer is able to ensure themselves a strong advantage in their relations with the supplier by subcontracting or giving the supplier privileges. on the other hand, in the case of partnership as well as a strategic alliance we are dealing with the supplier’s competences the recipient does not have at their disposal. this entails the phenomenon of supplementation of competences, thanks to which both the supplier and the manufacturer gain benefits. this cooperation may result in deepening the mutual dependences by establishing a merger between the partners. this process applies to the core competences (hines 2004). contrary to m. e. porter’s value chain model the saunders model describes a supply chain while taking account of the factors of the macroenvironment and the competitive environment (fig. 2). this model provides the possibility to apply other aforementioned methods of analysis of the macroenvironment and the competitive environment as tools in this method. due to the fact that in this model we are dealing with a system of external and internal factors, we can also apply the swot analysis as an auxiliary measure. due to its clarity and synthetic nature, this model may provide a basis for the methodology of strategic analysis of network organisation. 104 w. pająk. models as tools of analysis of a network organisation political and economical factors competition supply chain competition t echnological factors cultural factors supp ly demand global factors fig. 2. saunders model (source: hines 2004) the kraljic model is used to examine the relations that should connect the manufacturer and the supplier. in this model the type of relations depends on the type of the product manufactured by the supplier. the basis for identifying the type of the product consists of two criteria: the risk associated with the supplier and the impact of the supplied product on the manufacturer’s financial result. the level of risks connected with the supplier is defined with regard to the level of their concentration and the consequences resulting from resignation from cooperation. the impact of the product on the financial result is assessed based on the analysis of the scale of turnover, the level of reduction in costs as well as the share of this product the impact of the product on in generation of value added of an enterprise (fig. 3) (ciesielski, długosz 2010; hines 2004). impact of a product on the manufacturer’s financial result risk associated with suppliers “levers” low high big small standard products “bottlenecks” strategic products fig. 3. kraljic model (source: ciesielski, długosz 2010; hines 2004) four groups of products have been defined based on those criteria: standard products, bottlenecks, lever product and strategic products. each of those products requires a different strategy of dealing with the supplier (table 1). 105 business, management and education, 2013, 11(1): 96–108 table 1. strategies for various purchasing groups (source: bendkowski, radziejowska 2005; ciesielski, długosz 2010) groups of products manufacturer‘s strategy instruments of implementation of the strategy standard dual, single sourcing outsourcing/integrated supplier joint purchases/cooperation simplification of execution of the order limitation in the number of suppliers pursuit of standardisation “bottlenecks” multiple sourcing checking the suppliers formation of security stocks monitoring the market search for substitutes “levers” global sourcing multiple sourcing joint purchases/cooperation just-in-time sourcing using bargaining power reduction in the number of suppliers continuous assessment of suppliers logistic cooperation with the suppliers strategic partnership single sourcing modular sourcing precise forecasts of the demand market research long-term contracts with suppliers risk analysis standard products must be standardised and their suppliers consolidated, which may significantly increase the manufacturer’s bargaining power. in the case of “bottlenecks” the manufacturer’s bargaining position compared to the supplier is very weak. this allows the supplier to impose the manufacturer a high margin and dictate the terms of the deliveries. to reduce the level of risk associated with the delivery of those products, the manufacturer should possess adequately large stocks and have prepared plans of action in the event of emergencies. “levers” include raw materials and low processed products offered by a large number of suppliers. this means that the manufacturer’s bargaining position compared to the supplier is very strong. due to the competition between the suppliers, it is possible to get low prices for the offered products. the tools the manufacturer should use include: tenders and auctions as well as constant monitoring of the situation on the supply market. on the other hand, strategic products are supplied in large quantities and their parameters are special and adapted to the needs of a given manufacturer. any disturbance in the deliveries of those products may cause very high losses. in the case of strategic products we are dealing with a very strong bargaining position of the supplier. to reduce the risk associated with these products it is recommended that the manufacturer should start closely cooperate with the supplier. this includes the supplier’s involvement in the process of designing and development of the product as well as the technology used to manufacture it. such type of cooperation may become a source of competitive advantage, both to the manufacturer and the supplier. 106 w. pająk. models as tools of analysis of a network organisation the olsen and ellram model is a modification of the karlic’s concept. in this model purchases of products have been specified using the criterion of their strategic importance and the degree of complexity of the purchase management process (olsen, ellram 1997). the strategic importance of a product is assessed based on the following factors: 1) the manufacturer’s product and technological competencies; 2) economic factors (volume, value of purchases and their contribution into the profit brought by finished goods); 3) the supplier’s image in the eyes of the customers. the assessment of the degree of complexity of the process of purchase management is influenced by the following (ciesielski, długosz 2010; olsen, ellram 1997): 1) product characteristics (exceptionality, complexity); 2) situation on the supplier market (number of suppliers, their relative market share, their share in the manufacturer’s purchases); 3) uncertainty and risk related to purchase transactions (technological risk, supplier’s behaviour) (fig. 4). degree of complexity of purchase process strategic importance of a product “levers” low high big small standard products “bottlenecks” strategic products fig. 4. olsen and ellram portfolio purchase model (source: olsen, ellram 1997; ciesielski, długosz 2010) the authors of the abovementioned concept suggest similar actions as in the kraljic model with regard to particular product groups. 5. conclusions based on the abovementioned deliberations we can ascertain that it is possible to conduct a analysis of network organisations using the presented models. this analysis should be referred to the participating strategies of particular partners participating in the network. the latter reference also applies to the analysis of relationships between those partners in a network organisation. these relationships are a combination of competition, cooperation and control in the relations with partners and must take account of the distribution of tender forces within those relations. 107 business, management and education, 2013, 11(1): 96–108 preparation of a consistent concept of strategic planning in a network organisation will allow the researchers to penetrate the essence of those extremely complicated dependencies. it will also make it possible to draw up a consistent system of strategies of a network organisation. an important issue, as complex as planning strategies, is its implementation and execution both in the entire supply network and its particular participants. references ackoff, r. l.1969. decyzje optymalne w badaniach stosowanych [optimal decisions in applied research]. pwn, warsaw. baik, p. 2010. logistyka [logistics]. pwe, warsaw. bendkowski, j.; radziejowska, g. 2005. logistyka zaopatrzenia w przedsiębiorstwie [supply logistics in an enterprise]. wydawnictwo politechniki śląskiej, gliwice. blaik, p.; matwiejczuk, r. 2009. logistic 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(popesko 2009a; bogdanoiu, mirea 2013). abc is a system conferring concise information about the costs of individual products, services, customers, regions, distribution channels, and so on. it is a tool for abm. abc is not a modification or improvement of the traditional model of labor overhead costs. it’s a fundamentally different view on the manner of costs. abc is a methodology mailto:1radoslav.bajus@tuke.sk mailto:2lenka.stasova@tuke.sk 229 business, management and education, 2014, 12(2): 228–244 that measures the costs and efficiency of cost objects, activities and resources. it uses causal relationships among cost objects and activities and among activities and resources (staněk 2003; bogdanoiu 2011a). abc method can be characterized by three innovations: the first innovation: assigning the costs to activities. assignment is based on the measurement of resource consumption. knowledge about the costs of activities are an important source for identifying assets with a high potential for cost reduction activities. the second innovation: assigning the costs to cost objects. this method assigns activity costs to cost objects based on media activities that accurately measure the consumption of these activities. medium refers to the measurement of consumption activities to cost objects. the third innovation: improving information quality regarding the activities of non-expanding information about how activities are carried out. factors that determine how much power range is required to carry out the activities are called carrier costs. indicators of achievements are called performance indicators. in this way, abc method combines non-financial and cost information for the benefit of the company management to improve business performance. (bogdanoiu 2011b; popesko, tučková 2012). these issues are also involved in these authors antlová (2009); castellacci et al. (2005); kádárová et al. (2013); popesko (2008, 2009b); siničáková (2013); spišáková (2010). the basic structural elements of abc method in terms of cost allocation are: − sources, − activities, − activity centers, − media sources, − cost funds activities − cost elements, − cost objects (foltínová 2007; popesko 2010; závadská et al. 2013). abc method focuses on indirect costs – overheads, and turns them into direct costs. the bottom line is that in the first step, direct costs are assigned to outputs and indirect costs are assigned to activities. in the second step, the activities assign to individual cost items according to the degree of difficulty for consumption activities necessary for their provision. the objective of the implementation of abc method is to create a flexible business model of company operations. this model must be capable of using data from the accounts given accurate information about the need of business sources and their assignment to the right product. when implementing the method into a chosen company we follow generally defined steps of the implementation of this method: − preparatory phase, − specification of activities, − aggregation activity to activities, 230 r. bajus, l. hudáková stašová. implementation of the abc model in a company dealing with extraction… − identification of sources, − first stage of allocation – costing of activities, − production of cost flow structure, − activity centres identification, − specification of the products, − second stage of allocation – costing of products, − evaluation of the results (pataky, stašová 2005; mihaila 2011; dejnega 2011). 2. methods of research the use of the abc method in business practice exists in two forms, either as a single model – e.g. the strategic abc model or as an operating model for regular monthly or quarterly assessments, which are usually part of controlling. the single model is used to analyze a selected period, eventually a part of the company (processes, products, customers) to verify the necessary contextual relationships. a typical example is obtaining the final product calculations for the selected period. in case of a single model, it is not necessary to solve the abc data links with the other data sources and a special purpose simplification is used that has no significant impact on the result. single models are mainly used in the final calculations, what-if analyses, occasional optimization of processes and in strategic abc models and strategic planning (hunka 2013; ivan et al. 2013; zhou, fan 2007; vollmuth 2009; anton, constantin 2013). operational models for the monthly or quarterly assessment are suitable for companies with dynamically changing conditions (prices, discounts, quantity produced, costs of inputs). there, monthly calculations are usually required, therefore it is essential to systemically solve the abc links with the primary registry in the is modules. the created model must be detailed to take into account the specifics of cost occurence and their causes. monthly calculations take place via specialized software (e.g. monetabc), which represents an extension of a transaction system, and is generally connected with the former by data export and import. the implementation of the operational model takes longer, because of the usual effort to automatize the monthly calculations as much as it is possible. these issues are also involved in these authors janíková (2011), krištofík, kanderová (2009), šoltés (2010), szabo et al. (2013), gavurová et al. (2014), georgescu (2012), popesko, novak (2008). the abc operational models are used primarily in the monthly calculations, as a support of staff motivation in relation to the guarding of processual costs, as the permanent process optimization, of the product and customer portfolio as an aid to business negotiations. 231 business, management and education, 2014, 12(2): 228–244 the implementation of the abc/m is divided into three stages. stage 1 (one month): the analysis and establishment of a basic dynamic model connected to the accountants to the business processes and activities, products, orders and customers. refilling the model with numerical values for the selected period and comparison with existing information. draft proposal of new registers for the needs of calculations and controlling. presentation of the company management solutions. approval of the parameters of the target solution and further progress with the senior management. stage 2 (one to four months): incorporation of the comments into the system proposal. detailed solution of the codebooks and registers. methodology for systematic collection and asessment of data. user training into the operation of the system. the created model is ready for regular monthly calculation of the processes, products and customers. draft of the reports for management and decision-making. stage 3 (one to two months/continuously): automation of periodic reports. cooperation in monthly asessment, adjustment, respectively, update of the system. maintenance of the system in case it is necessary. integrating the created controlling system into management – optimization, motivation, economization of the management. 3. the introduction of abc method into the company silo enterprise is an enterprise engaged in the extraction of raw materials. we decided to introduce this abc method into its action. we will make ourselves clear how the current situation seems. we will select major accounting costs (see table 1). table 1. the main accounting costs of silo company in € (source: own processing) cost type total material 509 500 energy 45 750 repair 34 000 services 175 000 personal expenses 537 465 amortisation 90 000 total 1 391 715 for the analysis of the composition of the cost and understanding of the current costing model and to verify the calculation of overhead rate, we divide the costs of this table 1 into two groups. 232 r. bajus, l. hudáková stašová. implementation of the abc model in a company dealing with extraction… table 2. the first group of costs-direct costs for material and services of silo company in € (source: own processing) type of costs total direct costs 450 000 direct services 125 000 total direct costs 575 000 the first group consists of costs of direct materials and services (see table 2) and the second group comprises other costs divided into production overheads and salaries and non-production costs (see table. 3). table 3. the second group of costs-other costs of silo company in € (source: own processing) cost type production overheads material 52 500 energy 45 750 repair 34 000 services 26 250 personal expenses 408 021.75 amortisation 90 000 total 656 521.75 we can see that the total costs can be divided into direct costs of materials and services and other costs (personnel costs and overheads). other costs are important for overhead rate. therefore, we will verify the calculation of two overhead surcharges. one surcharge is a manufacturing overhead rate which covers direct wages together with manufacturing overhead. this surcharge is calculated as the sum of direct wages and production overheads per worker’s hour labor. thus, classical overhead rate assuming the cause of creation and size of production overheads is direct labor. calculation of overhead rate is shown in table 4. 233 business, management and education, 2014, 12(2): 228–244 table 4. calculation of the traditional overhead rate – production (source: own processing) direct wages and manufacturing overhead 656 521.75 € number of direct labor hours 31 000 overhead rate in € / hour. 21.178 € the second surcharge is non-productive overhead rate covering all other non-production overheads. this is calculated as a sum of the other non-manufacturing costs to € of total production costs. total production costs are all costs of production without non-production costs (ie excluding the cost of direct materials, services, direct labor and manufacturing overhead). the calculation of this overcharge is shown in table 5. table 5. calculation of the traditional overhead rate-non-productive (source: own processing) non-production costs 160 193.25 € total production costs 1 231 521.75 € overhead rate % to production costs 13% now we look at the order of the silo company, comparing the results of traditional procedures with the result of introducing abc method. profitability is under traditional model as follows (see table 6). table 6. profitability of the order by the traditional method in the silo company (source: own processing) revenues 60 625.65 € direct material and cooperation 39 805.10 € number of direct labor hours 580 direct wages with production overheads 12 283.25 € total production costs 52 088.35 € non-production overheads as % of manufacturing n 6 771.50 € the total costs of the order 58 859.85 € profit of the order in € (3%) 1 765.80 € in developing the model, sources, activities, cost objects and cost flow causes of consumption we will follow five stages. 1st stageupdate of accounting data the analyzed company is divided into 8 centers: purchasing, production, extraction, expedition, production planning, human resources management, facilities management, marketing and resort management company. the total costs, of course, 234 r. bajus, l. hudáková stašová. implementation of the abc model in a company dealing with extraction… except of the costs of direct material, direct services and co-operation are listed in the following table 7. table 7. cost centers of silo company according to accounting and kind in € (source: own processing) center material energy repairs services personal n amortization total purchase 1 500 5 000 27 500 34 000 production 10 750 45 750 34 000 78 950 50 000 219 450 extraction 25 000 2 500 110 800 5 500 143 800 expedition 10 000 20 000 21 400 3 750 55 150 production planning 2 500 5 000 96 400 103 900 human resources management 1 000 3 750 48 750 53 500 facilities management 1 000 8 750 21 750 30 750 62 250 sales and management 7 750 5 000 131 915 144 690 total 59 500 45 750 34 000 50 000 537 465 90 000 816 715 2nd stage-design of activities and 3rd stage-valuation of activities the next step is to analyze the work, to define the activities which individual employees do. it turns out that the distribution of the main activities corresponds to about distribution centers. the theory is clear that some activities have a direct causal relationship to the cost items and some not. due to the decision to introduce abc method into silo company means that while the definition of business activities will be measured and then according to the results of their analyzes will be corrected. the steps will be done separately so that the whole process is simple and then understandable. as supporting activities, we can define facilities management and human resource management center. facilities management is related to amortization and maintenance of corporate buildings, stores. human resources management include s the costs for personnel management of subordinates in production and administration. we assume that the organizational division of the company is responsible for the center’s main business activities. because some activities take place at centers or more centers are involved in certain activities, we can abandon this assumption and can specify individual costs. but now, we divide costs of the two support centers (activities) to other centers (activities). the result of redistribution of costs outreach appears as follows: (see table 8). 235 business, management and education, 2014, 12(2): 228–244 table 8. cost operations after cost division supporting business activities in silo company in € (source: own processing) center expenses before correction division of center buildings costs after corrections division of center human resources management costs after corrections purchase 34 000 11 300 45 300 2 550 47 850 production 219 450 18 250 237 700 13 375 251 075 extraction 143 800 12 400 156 200 24 950 181 150 expedition 55 150 9 550 64 700 4 750 69 450 pre-production 103 900 6 250 110 150 2 500 112 650 human resource management 53 500 1 475 54 975 –54 975 0 building management 62 250 –62 250 0 0 sales and management 144 665 3 025 147 690 6 850 154 540 total center 816 715 0 816 715 0 816 715 we can see that the total costs remain unchanged. the only thing that changes is a way of the flow of costs from resources to activities. thereby, we will change the perspective from the particular cost types to abc method. we will move from the perspective of the material, services, wages as a cost to activities. costs of the supporting activities of the human resources management center and buildings management center are all assigned to activities that are supported. there left no costs in these centers (activities). it may happen in some cases that one activity supports another one, or the activity supports each other altogether. now we divide supporting activities of the buildings management center. then we divide human resource management center so that buildings management center in terms of this support is omitted. support of human resource management center activities, which are provided by facilities management activities, is relatively insignificant. we determine shopping center activities as the other supporting activities. from discussions with the staff of silo company, we learned that other effort requires the purchase of equipment, purchase of other components, purchase of external services and cooperation and administrative facilities and purchase of equipment. thus, we divided the costs of the center according to the effort that was spent on each activity. therefore, we defined new activities such as buying new material, components and services. by the analysis of these activities, we found out that about 40% of the effort is spent on buying activity components. the reason is repeated searching of suppliers, negotiating with suppliers and resulting administration, own transport and access control. only 236 r. bajus, l. hudáková stašová. implementation of the abc model in a company dealing with extraction… an absolute majority is needed for buying material such as buying components because assortment plays a major role, and the range is not as wide as relationships among suppliers that have already been run. in conclusion, we can say that there occur two distinct activities. thus, we divided this center into two parts-the operation of machine setup and operation of own production. the centre preparation of production also supports other main activities. what is carried out, we can mention mainly maintenance, production planning, material transfers, components, products. by analysis of resource consumption to supporting activities, wedisjoin all the costs of the operation to supporting activities. of course, also a part of the hidden activities in other modes in center sales and other management belongs to the supporting activities. we will keep the other costs in this activity and convert them into sales and administration. let us now look at the newly created and renamed activities and disjoined cost supporting activities (centers) to the activities supported (see table 9). table 9. costs for new and renamed activities in silo company in € (source: own processing) activity / center pu rc ha se pr od uc tio n in st al la tio n e xp ed iti on pr epr od uc tio n m an ag em en t to ta l material buying 10 000 8 200 15 450 33 650 components buying 17 250 9 000 15 450 41 700 services buying 13 000 9 750 15 450 38 200 machine setup 64 125 9 250 7 500 80 875 own production 2 250 186 950 44 800 7 500 241 500 extraction 181 150 13 725 7 500 202 375 inspection, packing and shipping 69 450 1 450 1 125 72 025 sales and administration 5 350 16 475 84 565 106 390 total in activities 47 850 251 075 181 150 69 450 112 650 154 540 86 715 originally in centers 47 850 251 075 181 150 69 450 112 650 154 540 86 715 237 business, management and education, 2014, 12(2): 228–244 4th stage-definition of cost objects at this stage, we choose the cost objects. we use purchase as cost objects. we described these cost objects at the beginning. then, we select business clients for cost objects. 5th stage-valuation of cost objects valuation of defined cost objects is last and difficult step. for valuation, we need to find the causes that provoke consumption of activities to specific cost objects. we need to determine why the consumption of activities changes by cost objects. for the first three activities, buying material, components and services, we decide for the cause-purchase price. chosen cause for each purchase is known and it means we do not have to find any new information. for machine setup activity, we choose number of settings as the main cause. we assume that each setting takes and costs approximately equally. then, we consider the reasons (eg, short and long setting). in this case, we obtain much more concise cost as far as all the costs of adjustment are included in manufacturing overhead and relate just to the cause of direct labor hours. we get to know how much the overhead cost for each purchase separately is. for own production activities, we can not say that every purchase lasts equally. therefore, we must consider the cause related to time. because of the machines operating with periodically unattended and staff serve a different number of machines, we will decide for the cause the time handling machine. in contrast, extraction is mostly craftwork. used tools are only a part of similar costs of production and therefore we keep direct labor hours as a cause of consumption. for activities inspection, packing and shipping, we came to analogous conclusion to that of activity setting. the differences in the time required for final inspection, packing and shipping for each order are not significant. thus, we decide to establish activity the number of expeditions as the cause of the consumption. arguments why the obtained information is more concise than overhead rate is described in activities settings. the biggest problem occurred in the last activity sales and administration. we were able to reduce costs of the original center sales and management but this activity continued to include many diverse activities. after consideration, we came to the conclusion that all the activities related to the amount of purchase in terms of internal costs for the construction purchase. they are related to all internal functions involved in purchase work. thus, compared with the current method for allocating non-production overheads, our cause is created by total internal costs without external direct costs of material, services and cooperation. let us now summarize valued activities and causes of these activities in table 10. 238 r. bajus, l. hudáková stašová. implementation of the abc model in a company dealing with extraction… table 10. valuation of activities and calculation of costs to the causes of silo company in € (source: own processing) activities of companies costs € consumption cause number od causes price to one cause € 1 material buying 33 650 the purchase price of the material 10 mil. 0.003365 2 components buying 41 700 the purchase price components 6 mil. 0.00695 3 services buying 38 200 the purchase price of services 4 mil. 0.00955 4 machine setup 80 875 number of settings 400 202.1875 5 own production 241 500 number of machine hours 8 000 30.1875 6 extraction 202 375 number of direct labor hours 15 000 13.49 7 inspection, packing and shipping 72 025 number of expeditions 1 200 60.02 8 sales and management 106 390 total internal n 26 659 071 0.00399 total 816 715 instead of two original price overhead surcharges we will use the activity element and concise reasons for their consumption. instead of surcharge which covers all manufacturing overheads according to the number of paid hours of direct labor and surcharges according to the total production costs, we will use the the causes of these production and non-production overheads. 6 causes of consumption activities were chosen: purchase price, number of machine sets, number of machine hours, direct labor hours, the total the number of expeditions and total internal costs. now consider the purchase of an analyzed company (see table 11). table 11. total costs of a company on order by abc model in € (source: own processing) activity of a company number of causes price to one cause € abc costs € 1 material buying 50 000 0.003365 168.25 2 components buying 10 000 0.00695 69.50 3 services buying 0 0.00955 0 4 machine setup 4 202.1875 808.75 5 own production 80 30.1875 2415 6 extraction 50 13.49 674.50 7 inspection, packing and shipping 20 60.02 1 200.40 8 sales and management 299 700 0.00399 1 195.80 total 6 532.20 direct material and services 39 805.10 total costs 46 337.30 239 business, management and education, 2014, 12(2): 228–244 from the table above, we can see that abc costs are lower than in the traditional method. results comparing the total costs are summarized in the following table 12. table 12. comparison of order differences in both traditional and abc model (source: own processing) purchace of the company traditional model abc model revenues € 60 625.65 60 625.65 the total costs € 58 859.85 46 337.30 order’s profit in € 1 765.80 14 288.35 order’s profit in% of revenues 3% 23.75% it follows that the silo company has greater profitability calculated by abc model. this means that abc model is to define the costs and causes of activities accurately. 4. results and discussion summarizing the theoretical knowledge of research problems, based on expert consultations and knowledge and skills gained studying the available literature in this area, drawing on practical applications, we can put a proposal methodological procedure: 1. analysis of financial data according to centers – analysis of a book account, analysis of the resulting cost accounts, 2. analysis of activities, their definition, processing expense by groups – naming and description of the main activities and processes of the organization which actually our company makes, who performs that activities, which major and key processes are, which ancillary processes are, what activities these processes consist of, 3. valuation of assets – how much our company spends for each of the defined activities, how much of our resources all activities include – the result is how much each activity costs, 4. definition of cost objects – why our company performs these activities as defined, 5. valuation of cost objects – how much our company spends on each customer, product or other cost object, how many activities are consumed just by the customer, for this product, at this vendor, etc.., 6. realization of the process, 7. monitoring, evaluation and improvement of the proces (antošová et al. 2014; dolejšová 2008). we can also conclude that the use of abc method with so-called pareto analysis is relatively simple, but very effective method for use in management practice. abc analysis is historically based on the conclusions of a political scientist vilfredo pareto that could be defined as follows: − 20% of the population consumes 80% of national income, − 20% of workers makes 80% of the work, 240 r. bajus, l. hudáková stašová. implementation of the abc model in a company dealing with extraction… − 20% of newspaper contains 80% of information, − 20% of the effort produces 80% effect, − 20% of the time taken enables to reach 80% of the results. for practical use of pareto analysis, elements of the research object may be divided into two groups (a, b), in three groups (a, b, c) or into four groups (a, b, c, d). distribution of frequency and significance when divided into two groups is obviously not accurate 20:80, as mentioned above, but there was a clear tendency towards the achievement of that relationship. the breakdown of the population into three groups may occur for example ratios of 15:65, 20:20 and 65:15. analysis and cost control belong to important tasks of management. correctly performed analysis allows to determine the current level of costs by cost types and according to other aspects, to compare benchmarking to competing products and then apply eg. value analysis to reduce costs in the key items. using the pareto principle allows to determine critical items at cost analysis that have the greatest impact on the total amount of costs. result of this principle is to identify elements that are in a given system or process critical. by concentrating the efforts on the elements or processes better system functionality, improving performance, cost reduction can be achieved. these issues are also involved in these authors jurásková, macurová (2013), michalik et al. (2013), nedomová et al. (2014), tuček et al. (2013), rajnoha, dobrovič (2011), gál, kresta (2014), gavurová (2012), popesko (2011). the abc system can be beneficial for all sizes of companies and sectors of their business. in the following, we present the most common reasons for introducing the abc method: − companies from rapidly changing industrial branches such as food processing, applied household chemistry, etc – they need operative final calculations, price modeling in relation to the quantities being taken and to the delivery terms and conditions, monthly profitability asessment of the customers and networks, motivating the salesmen not baccording to sales, but according to the profit they bring, − big successful companies with a broad portfolio of products, respectively customers, which are capable of dynamic development – optimizing the range of the product and customer portfolio, as a too broad portfolio can reduce economic efficiency and it is not always true that large volumes bring big profits, − companies that reduce costs and overheads – they want to clarify the eligibility of costs in the processes, reveal inefficient and unprofitable activities, to achieve changes in the business and properly motivate the employees, − branches of foreign companies in slovakia – need controlling not only to report to the parent company, but especially managerial process controlling for their home management, so that the slovak branch would be managed demonstrably effectively and thus would have its long-term future guaranteed, 241 business, management and education, 2014, 12(2): 228–244 − holding structures – the owners want to have a unified methodology of monitoring the economic efficiency of the owned firms, they want to have access to the analysis of corporate activities, products and customers and have a tool for modeling the contribution of currencies, activelly, and thus have a guaranteed long-term future, − companies with powerful information systems – they need a flexible and affordable tool for modeling and rapid surveys for managers, but with more comfort within the routine processing, as provided by ms excel. 5. conclusions abc method is a partial controlling instrument. in literature, it sometimes refers to a method of controlling overhead costs. an effective system of cost management is an inevitable condition for ensuring effective corporate governance. the system of cost management is an integral part of the controlling hand in all three areas of its activities (planning, accounting, computer science). abc system is becoming the basis for reassessment products and business activities. based on the analysis conducted and the definition of the kind of problems we concluded that the proportion of overhead costs to total costs is an important factor that should be considered when undertaking any use of scheduling techniques in building costing activity-based (abc). the higher the proportion of overhead costs to total costs in a company is, the greater uncertainty of allocating costs with the help of allocation base in the enterprise is. companies can determine the cost of products more accurately than with conventional methods by implementation of the proposed abc model. abc method can be considered as a very important tool for cost management. it allows to allocate costs to activities and thereby based on the following inspection to assess the validity of a causal relationship to costs during the manufacturing process. the aim of introducing abc method is to increase profit, reduce costs, outsourcing, motivation, improving the market position of the company and ultimately improve prices. direct allocation of the cost of products or services does not reflect the true cost of business flow. most of the costs are to be assigned to products based on the allocation base which do not reflect the real causes of cost. the results are distorted, which adversely affect the decisions of directors. from practical experience, just activity based costing 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managerial accounting, financial control. research interests: managerial accounting, financial accounting, costing, financial control, controlling. this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2022 the author(s). published by vilnius gediminas technical university toward value creation in local authorities: the role of information and communication technologies nouha amrani 1*, mohammed sadik2, yousra chnigri3, mohamed hemmi, hamid slimani 5, ilona skačkauskienė 6 1,2,3,4,5department of management, faculty of economics and management sciences, sidi mohamed ben abdellah university (usmba), fez, morocco 6department of management, faculty of business management, vilnius gediminas technical university, vilnius, lithuania received 02 september 2022; accepted 27 november 2022 abstract. purpose – the aim of this paper is to focus on the use of information and communication technologies (ict) by local authorities (las) in order to understand to which extent, they impact the value chain of local public services. the value creation in this article concerns not only economic effectiveness and efficiency but also the articulation and development of icts in the strategy of the la, as well as the impact on citizen satisfaction. research methodology – the methodology applied is quantitative, based on a questionnaire addressed to managers and officials in different moroccan las (regions, provinces and prefectures, municipalities). spss 25 was used as a materiel to analyze the result of the linear regression. findings  – the results obtained confirm the importance of ict in terms of optimization of expenses, the improvement of the quality of work by facilitating communications between services. in addition, the ict are no longer centered on the managerial side, but contribute to the consecration of good governance principles, namely transparency and citizen participation. research limitations – the present research excludes political leaders throughout data collection. methodologically speaking, this means that the study can also take on the meaning of an exploratory study with qualitative method (interviews, case studies) in order to understand how these ict, contribute to local public value creation. practical implications – the research provides clues to la managers about the importance of ict and their contribution to value creation. the results obtained encourage decision makers to accept this change and to adopt the ict approach in order to provide a higher quality of services. originality/value  – the originality of this paper lies in the variables and the context in which they are studied. the existing literature interested in introducing icts in the public sector focus on the use of these tools to achieve economic performance. furthermore, only a few research papers have been conducted on value creation in la including the impact of ict which justifies the originality and novelty of this paper. keywords: value creation, information and communication technologies, local authorities, new public management. jel classification: d73, o32, h83. *corresponding author. e-mail: nouha.amrani@usmba.ac.ma business, management and economics engineering issn: 2669-2481 / eissn: 2669-249x 2022 volume 20 issue 2: 358–388 https://doi.org/10.3846/bmee.2022.17526 http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://orcid.org/0000-0001-6256-5224 https://orcid.org/0000-0002-8238-8648 https://orcid.org/0000-0002-5078-3678 https://doi.org/10.3846/bmee.2022.17526 business, management and economics engineering, 2022, 20(2): 358–388 359 introduction over the last few decades, works on public management have seen unprecedented changes in order to propose management models that are more suitable for a specific context. the logic of means has been replaced by a logic of performance and a few years later, there was a rise in power and the use of the concept of “value” in the management of public organizations. this observation is justified by a paradigm change that is manifested by the shift from new public management (npm) to public value. this change is materialized by the adoption of new management tools that are open to innovative and agile techniques such as information and communication technologies (ict). these are tools for rethinking local public management and a means of guiding decision-makers in their reflection on the creation of value for a given service. the questioning of the potential contributions that icts could offer to the las is still an important and topical issue. the introduction of icts in the public sector has been known to have benefits in terms of improving the efficiency of public services, increasing efficiency and transparency, and improving the coordination of procedures and management of public administration. ict are seen as a potentially more effective and efficient delivery of value along the value chain of public service provision (porter, 1985). as a result, digital leverage is not only a powerful driver in the improvement of services to users but also a very effective means of fighting against illicit practices of corruption and other abuses of power and is likely to change the relationship with all stakeholders and accelerate the process of decentralization and deconcentrating. a review of the existing literature and writings interested in the issue of introducing icts in the public sector shows a tendency to examine these tools from an instrumental point of view while focusing on variables of effectiveness and efficiency and consequently, the performance of public action in its economic dimension. nevertheless, a marginalization of the expected effects and impacts of icts on public sector organizations and the services they provide has been observed. it is on the basis of this theoretical gap that we wish to engage in research that aims to find elements of answers to the following question: to what extent can ict contribute to the creation of value for local public services? the objective of this paper is to go beyond the reductive idea that tends to consider ict as a means to accelerate npm reforms and to obtain better financial results, focusing instead on their role as a source of value production for public services. in addition, we also want to focus on the use of icts by local governments and the expected and perceived contributions of these tools in terms of optimizing the value chain of local public services. to address the question posed, we considered it appropriate from a theoretical point of view to first touch on the driving variables of this investigation, namely the creation of value and ict in the public context, and to present their position with respect to the modernization of public management. from an empirical point of view, a questionnaire was designed for territorial executives and service managers in the different moroccan las (regions, provinces and prefectures, municipalities). the questions asked were generally aimed at showing the level of articulation and development of icts in the strategy of the la, as well as emphasizing the degree of involvement of the las studied in the implementation of icts and 360 n. amrani et al. toward value creation in local authorities: the role of information and... their capacity to keep up with the pace of reforms related to digitalization. finally, all these questions are intended to answer our initial question and to show the role that icts play in the redesign of public services and in the creation of value in the las. 1. ict and public value creation: literature review 1.1. public value: a renewal of public management since the 1990s, public value research represents a new “post-competitive” way of thinking that signals a shift away from the logic of results and efficiency to the broader governmental goal of creating public value (hughes, 2006; carmeli & kemmet, 2006). this approach now pervades many works and inspires a vigorous stream of research and theorizing. drawing on the work of moore and braga (2004) and moore (1995), stoker (2006) sought to articulate a model of public value management, an “alternative paradigm” or “holistic framework” for post-competitive and collaborative networked forms of governance. he argues that this represents in part a response to the weaknesses of the npm approach but also recognizes that new neoclassical institutional and economic understandings of human behaviour conflict with the central goals of more collaborative forms of organization and operation. while the debate about public value has become increasingly commonplace, a universal or absolute definition still remains elusive (alford & hughes, 2008). some authors even point to the still ambiguous nature of the notion of public value (rutgers, 2015; cordella & bonina, 2012). for these authors, this is because the notion of public value incorporates ambiguous and open-ended concepts that are both policy and context dependent. in the uk, for example, benington (2007) points out that the concept of public value has been used loosely as a broad term expressing ideals and aspirations for public service which are capable of meaning many different things to different stakeholders. the literature review reveals that the shift from the npm paradigm to that of public value has three implications. first, it broadens the notion of public performance to include new dimensions of measurement in terms of trust, equity and legitimacy (1). second, the idea of individual preferences is being challenged and the collective preferences of the community are gaining ground (2). and finally, the need to redefine new ways of steering public action that are likely to create public value is stated (3). 1.1.1. public value, expanding the boundaries of public performance for benington (2007), the theoretical underpinnings and underlying assumptions of the notion of public value have been less rigorously developed and the concept has been less tested through the prism of different disciplines and cultures. public value concept is a part of a logic that incorporates broader notions of legitimacy, trust, and utility of public action. from this perspective, bracci et  al. (2014) identify three spheres to analyse public value. first, the sphere of its creation which informs how value is produced by the public organization. second, the sphere of its measurement, which refers to the way users evaluate and assess the usefulness of public services. and, third, the sphere of its authorization, which refers to the way in which the community legitimizes the effects of public action (figure 1). business, management and economics engineering, 2022, 20(2): 358–388 361 figure 1. the triptych dimension of public value (source: authors’ conception based on the work of horner & hutton, 2010) kelly et al. (2002) identify three key components of public value. the first component, they argue, provides the means by which public value is delivered through actual services to users or customers. the second component encompasses much broader aspirations and refers to the outcomes or effects of public policy. the third component concerns legitimacy and trust in government which the authors argue are essential to the creation of public value (kelly et al., 2002). for these authors, these three “building blocks” of public value creation form the basis of a new way of thinking about government activity and a means of guiding decision-makers in their thinking about the value they create. stoker (2006) highlights the fundamental differences between public and private sectors, by stating that the public sector governs differently from the private sector. he identifies four key propositions within the public value paradigm. (1) the first asserts that public policy is defined by the pursuit of public value which breaks with the justifications for market failure typically advanced by economists. (2) the second, that a wide range of stakeholders have legitimacy and should be included and involved in government activity, contrasts sharply with the traditional model and converges on a more collaborative and consultative approach. (3) the third, the adoption of an open relational approach to procurement, fits well with hughes’ (2006) call for a new pragmatism in public sector management, rejecting a one-size-fits-all approach to contracting and procurement. (4) the fourth proposition is that an adaptive, learning-based approach is needed in public service delivery, which fits well with stoker’s, (2006) emphasis on networked models but would surely conflict with more market-based approaches that may be appropriate in some circumstances. in the same logic, bouckaert (2005) considers that results and outcomes are not objectives in themselves in the public sector since the ultimate ambition is to ensure a functional level of trust and legitimacy of public action. benington (2007) and spano (2014) support this idea and argue that the notion of public value is expressed at the level of the interaction of two aspects that can often assume a relationship of tension and sometimes conflict: first, what the community appreciates or values (external evaluation by citizens/users), and then what adds value to the public sphere (the utility of the public service). the articulation of these two dimensions allows for a shift from a procedural approach to a more consumer-oriented mode of government. alford and hughes (2008) argue that public value is not necessarily defined by those who produce it but rather by the citizens who collectively consume it. for hefetz and warner (2004) while in transactions with suppliers, private sector firms focus on efficiency, quality, safety, and reliability; in the public sector, managers combine these concerns with public accountability and preferences which are collective in nature. these distinctions make politics central to the public value paradigm, often overlooked by the npm paradigm (dereli, 362 n. amrani et al. toward value creation in local authorities: the role of information and... 2007). indeed, government is more than just business and must incorporate the expectations of citizens and should not simply drive a market process (denhardt & denhardt, 2003). this theoretical debate about the limits of viewing citizens as customers has highlighted the need for managers to consider both technical efficiency concerns and the process of political engagement (box et  al., 2001; feldman & khademian, 2001; nalbandian, 2005). this is a significant difference from the “input” status of policy in traditional administration and npm (stoker, 2006). for moore (1995), public value creation results from an alignment of the enabling environment, operational and administrative capabilities as well as and values, goals, and mission of public organizations. from this perspective, policy and management strategies must be of substantial value to society, politically legitimate, feasible and supportable, operationally possible and practical. 1.1.2. towards a collective rather than individual dimension of preferences an important element of the public value paradigm is the concept of collective preferences that distinguishes it from the individualistic approach of the npm. for stoker (2006) public value is not only defined as the aggregation of individual preferences of users or producers of public services but is collectively constructed through deliberations involving elected and appointed government officials and key stakeholders. in this sense, cordella and bonina (2012) argue that public value creation is related to the sustainability of public policies that aim to pursue the political mandate that citizens give to government through the democratic process of elections. as such, it is based on the politically mediated expression of collectively determined preferences, i.e., what citizens consider valuable or useful (alford, 2002; kelly et  al., 2002). this calls into question the idea that individual preferences can be aggregated to reflect what the “public” expects from government, such as is the tendency in the npm paradigm. this is very different from the direct economic exchange relationships that take place in the private sector, so it is possible to argue that public value is something provided by government organizations to its citizens rather than to individuals (alford, 2002). including these points into a new way of thinking forms the basis for a major shift, and for stoker (2006), the adoption of the public value management model would represent a paradigm shift in the way public services are managed. 1.1.3. public value: towards a new management mode for public organizations the integration of the notion of value creation implies that traditional performance management models, often based on assumptions of standardization and stability of social needs, are being questioned (lorino, 1999). public organizations must limit their approach to offering public services in a logic of openness to personalization, and therefore to listening to the user who is now positioned as a customer (millard, 2008). the development of the notion of “public value management” implies the redefinition of the ways in which public organizations produce public services in a value-creating logic. from this perspective, the question of “what the public values” can be seen as a counterweight to earlier traditions of public administration in which “producers” defined and determined the value of public services (benington, 2007). this dimension of public value focuses not only on the individual interests of current users, but also on the longer-term public interest, including the needs of future generations. business, management and economics engineering, 2022, 20(2): 358–388 363 the complex nature of the public value concept underscores the importance of focusing on the outcomes and processes that add value to the public sphere, not just on inputs and outputs or input/output ratios and economic performance. in this sense, moore suggests that public value can be measured in relation to the different stages of the value chain, i.e. inputs, procedures, activities, outputs and outcomes. this mode of management puts value creation at the heart of the concerns of public organizations and requires modelling of the organization by showing transversal processes that create value for the different stakeholders, both internal and external, through activities and processes, outputs and outcomes, with the active help of co-producers and partner organizations (figure 2). figure 2. the public value chain as a mode of management and value creation for public organizations (source: authors’ conception) according to the literature review, this general and ambiguous nature of the notion of public value raises questions about the role that information and communication technologies (icts) could play in the production of public value, not only as a means of optimizing performance measured in terms of effectiveness and efficiency, as in the case of the reforms that fall under the npm. the dominant approaches to estimating the impact of public sector ict policies focus only on efficiency-oriented performance measures, such as cost reduction and return on investment, as well as on the achievement of management objectives, transparency and accountability which are closely related to private sector economic standards (moore, 1995). ict-based reforms integrated into the npm domain still remain focused on managerial values (efficiency-oriented performance measures) while neglecting the broader political and social implications (bonina & cordella, 2009). however, the effects of ict on other aspects of the public value paradigm, such as justice, equity, democracy and equality, are still neglected. 2. ict, questioning of public value creation since the 70s and 80s, in developed countries, icts have gradually grown to be ubiquitous in the functioning of companies and organizations, both public and private (benabderrahmanebouriche, 2012). environmental changes, globalization and the technological revolution are the main factors that have made their introduction a major objective for organizations in order to achieve greater efficiency and responsiveness in the performance of tasks. the emergence of ict is the result of the development and strong intertwining of three technical fields: telecommunications, audio-visual and computer science (nwamen, 2006). however, 364 n. amrani et al. toward value creation in local authorities: the role of information and... the literature review does not reveal a consensus about the definition of ict, but it is possible to distinguish between classifications according to two aspects. the first one focuses on technical dimension (tlich, 2013) and the second one focuses on managerial and organizational dimension. taking into consideration the research question and the objective of the current investigation, we will give more attention to the last aspect (managerial and organisational dimension). 2.1. ict in the organization according to a managerial approach, icts are considered to be a set of innovative and informative tools (favoreu et al., 2019; damanpour & aravind, 2012; walker et al., 2011) that allow to improve the management system of an organization and to enhance the efficiency mechanisms (golubeva et  al., 2019). although they perform almost the same functions, icts do not have the same characteristics with regard to organizational determinants and their impact on coordination mechanisms. on the other hand, like any strategic choice, the integration of ict requires organizational change as confirmed by several authors (benabderrahmane-bouriche, 2012; deffayet, 2002; tlich, 2013). such a change affects both strategy, structure and human resources. more generally, the integration of ict into organizations is illustrated through their information systems (is) and the use of technological tools (algan et al., 2016). certainly, in the public sector, the use of icts can support the effective and efficient redeployment of resources and capacities, making public organizations more dynamic and much more resilient (bekkers & homburg, 2007; gupta et al., 2008). however, the changes that icts bring about affect the nature or the means by which services are provided and therefore have significant political and administrative consequences (cordella & iannacci, 2010). indeed, for several authors (barca & cordella, 2006; cordella, 2007; currie & guah, 2007; homburg, 2004), icts have often been seen as tools for deploying the public administration reforms envisaged by the npm trends, with a view to rationalizing information and optimizing performance. according to cordella and bonina, 2012), previous works on the most frequently identified impacts of icts in the public sector have been limited to examining their capacity to improve the efficiency and productivity of government performance which means that their use is mainly considered instrumental as stated by aberbach and christensen (2005), cordella, (2007) and orlikowski and iacono (2001). indeed, the literature on the introduction of icts in the public sector has largely been limited to examining the expected effects of these tools in terms of efficiency, effectiveness, and economy of public action. this approach has focused primarily on the search for best practices and universal strategies for successfully implementing these programs, and marginalizes the broader impacts of these reforms (bannister, 2007). however, several authors lament that this research has often neglected to discuss the effects and impacts that icts can have on public sector organizations and the services they provide (danziger & andersen, 2002; andersen et  al., 2010; cordella, 2007; dawes, 2009). the icts have profoundly changed the nature of the service rendered to citizens as well as the means used to deliver public services. consequently, the public value created by ict could not be understood only in terms of the effectiveness business, management and economics engineering, 2022, 20(2): 358–388 365 of government actions but must also incorporate broader dimensions related to the effectiveness of government program achievements in relation to certain democratic outcomes. for o’flynn (2007), the introduction of icts in the public sector should take into account the particularity and complexity that are associated with their implementation and do a better job of addressing the social and political outcomes of their adoption. in the same sense, authors such as cordella and iannacci (2010), and cordella and willcocks (2010), emphasize the importance of the mediating role of icts in public administration with regard to their ability to change the way public administrations organize and deliver their services. in this context, o’flynn (2007) suggests that the analysis of the effects of ict-related public sector reforms, whether positive or negative, should not be limited to the analysis of their impact in a logic of effectiveness and efficiency of public management. for him, it is necessary to go beyond individual preferences and to focus on the collective dimension of citizens’ needs as indicated by the public value paradigm. in the same perspective, mergel (2020) concludes in his work that the introduction of ict in the public sector highlights four dimensions of public value: economic, administrative, democratic and citizen. from this perspective, the focus should be on how ict can be a source of public value production of public services and not only as a means to achieve better financial results, as in the case where ict is adopted to facilitate npm reforms. 2.2. conceptual model in this paper, we will refer to the work of bonina and cordella (2009) in order to propose a holistic framework to study the value creation associated with the use of ict in the public sector. based on this intersection our conceptual model can provides a framework of public value that is relevant to measure the effects of these tools on public sector performance (figure 3). therefore, in public management, resources are not ends but rather a means to create public value, which is the natural purpose of the organization. the purpose of designing this public sector scorecard is to produce a performance measurement system for public sector managers who need a non-financial measure to indicate whether they are effectively investing financial resources to create public value (moore, 1995). figure 3. a new framework for assessing the effects of ict on public value creation (source: authors’ conception adapted from mergel, 2020; bonina & cordella, 2009) 366 n. amrani et al. toward value creation in local authorities: the role of information and... 2.2.1. the managerial model this value domain is part of the performance logic prescribed by the npm (jørgensen & bozeman, 2007), which is assessed in terms of effectiveness and efficiency in public service delivery. for mergel (2020), icts are characterized by their ability to simplify and automate tasks. they are likely to reduce the number of interactions between the various stakeholders and the administration due to the reduction in the number of agents needed to perform basic tasks. indeed, the use of ict and its impact on efficiency is mainly related to the improvement of internal operating systems. these include the use of management tools such as financial and budgetary management systems, data collection and transmission, payment processes, internal communications and human resource management to generate savings, and atms (bonina & cordella, 2009). in addition, the availability of information and the provision of online services are the most emphasized elements in the promotion of e-government policies aimed at streamlining the dissemination of information and the interactions between citizens and the administration. for mergel (2020), value creation results from the ability of ict to enhance responsiveness, responsibility and accountability in the delivery of public services by decreasing the volume of data corrections transmitted by users, decreasing the number of missing data and interaction with other public organizations due to the heterogeneity of information systems. from this point of view, public value reflects the renovation of internal administrative processes that are directly linked to external services. 2.2.2. the democratic and citizen model the public values that fall into the banner of this group refer to values related to the prevention of distortions, the search for “correctness”, legitimacy and political rights (hood, 1991). the use of icts in this logic should make information a means to improve governance and strengthen democratic and ethical values (brewer et al., 2006; kernaghan, 2006). in addition to the professional values, kernaghan (2006), distinguishes two other categories of public values. those of ethics, which are assessed in terms of integrity, fairness, disinterestedness, and a sense of justice, and those that refer to democratic values, namely impartiality, respect for the law, neutrality, etc. these values are complex, intangible and difficult to assess (bonina & cordella, 2009). in other words, the implementation of ict in the public sector must be conceived as a tool to improve trust and promote a more participatory relationship between the citizen and the government. this area captures the ability of ict to simplify and facilitate access to public services, especially for those who are excluded. from this perspective, public value aims at generalizing access to remote services for all citizens regardless of their knowledge, skills, and specific needs (mergel, 2020). the citizen dimension focuses on how the latter benefits from digital transformation, i.e., how icts should guarantee transparency, privacy, protection of civil rights, community participation in public policy design, deliberation and dialogue, and the provision of key, relevant and reliable information to citizens (eppler, 2007). similarly, icts have been used to strengthen participation and democracy by opening up new and innovative channels of participation (jaeger, 2007), such as e-mailing, internet-based public deliberation and electronic voting systems. the literature review on the introduction of icts in public administrations calls for reflection on the existence of a holistic representation of their contributions to value creation. business, management and economics engineering, 2022, 20(2): 358–388 367 previous works highlight two models that reflect the concern for improving performance but also the consideration of the democratic and citizen dimension. however, the managerial and democratic models of public value were conceived from different logics. from this, the conceptual model is presented as follows (figure 4). figure 4. conceptual model (source: author conception) the first model places the optimization of performance and the improvement of the responsiveness of internal processes at the centre of the organization’s concerns through the use of ict. at this stage, our first two hypotheses are as follows: h1: the use of ict is likely to improve the performance of the local authority. h2: the integration of ict in the strategy of the local authority is likely to improve its performance. on the contrary, the second hypothesis makes information and communication technologies tools whose use is likely to improve governance and strengthen democratic and ethical values (bonina & cordilla, 2009; brewer et  al., 2006; kernaghan, 2006; gilman & lewis, 1996). at this point our second hypothesis is as follows: h3: the use of ict improves democratic value creation in the local government. h4: the integration of ict in the strategy of the la improves the creation of democratic and citizen value. 3. methodology 3.1. operationalization of variables each of the variables in our study were measured by using indicators made up of various items in the survey. since the literature does not give information over the consensual existence of a scale of measurement, notably for both independent variables, we had to develop those items and send them out to experts in ict in order for them to be revised. likewise, the experts also received the objectives of the study as well as a detailed description pointing out the constructions of interest in specific items. the definitive survey was formalized in respect to the steps proposed by dillman (2000). 368 n. amrani et al. toward value creation in local authorities: the role of information and... 3.1.1. independent variables in the conceptual model, we have defined two independent variables. the first one is “technological infrastructure”, measured the level of access to technological infrastructure within la. due to the lack of a measurement scale in the literature, we had to construct an index based on the aggregation of four sub-variables which determined the degree of use of ict in la (table 1). the items relating to the first sub-variable “electronic platforms”  looked into the level of availability to electronic platforms set up by the central state in the framework of the project of electronic administration at the level of the la. to operationalize this variable, the respondents were asked to indicate the existence or none of these platforms at the level of their la. as for the second sub-variable “official gateway”, this was represented as a dichotomous variable in which the respondents were asked about the existence or none of an table 1. operationalization of independent variables (source: author’s conception) independent variables items measuring scale electronic infrastructure availability of electronic platforms dichotomous variable: 1: existence of regular use of platforms set up by the la; 0: non-use use of intranet dichotomous variable: 1: regular use of intranet for la services; 0: non-use use of administrative computer programs dichotomous variable: 1: regular use of computerized administrative programs and tools; 0: non-use existence of operational electronic official gateway dichotomous variable: 1: access to an operational official gateway regularly updated by the la; 0: non-use ict strategy modernization of the la dichotomous variable: 1: consideration of the integration of ict within the strategy of development of the la; 0: none normalization of information dichotomous variable: 1: existence of a normalized information strategy in the la; 0: none evaluation of it risks dichotomous variable: 1: consideration of the assessment of computerized risks in la; 0: none itaudit dichotomous variable: 1: regularly practiced computer-based audits; 0: none business, management and economics engineering, 2022, 20(2): 358–388 369 operational electronic gateway – a facebook page, online website or others – at their la. the third sub-variable asked about the use of internal communication tools or electronic messaging services by the la while the fourth sub-variable dealt with the regular use of computer programs and tools of bureaucratic administration, applications and other such platforms, geographic information systems and the like. the table gives a summary of the different subvariables and the measuring scales used. the second independent variable referred to the strategic dimension of ict, which called “strategic ict”. this variable assessed the level of articulation of the ict within the overall strategy of the la. in order operationalize this variable, we had to resort to an exploratory study according to experts in ict as well as we referred to the works of beynon-davies and williams (2003). for these authors, the strategic dimension of ict refers to the activities essential activities of it planning and includes the auditing and the normalizing of information, the setting up of a cartography and the conception of the process for the treatment of information, the strategy and the modernization of the territorial public administration, it strategy, risk assessment and cost-benefit analysis. in the framework of our study, we operationalized these variables by defining the items that dealt with the level of articulation of the ict into the strategic orientations of the la. four sub-variables were defined to determine the presence of the axes dedicated to the integration of the dimension ict within the orientations of the strategic programs of the la, the regular practice of computerized control and risk assessment. in general, the existence of a policy of the normalization of information at the level of the territorial administration (table 1). 3.1.2. dependent variables the current research looks forward finding the link between the introduction of ict and the creation of value by the la. from the literature review, we draw a distinction between the two models, the first dealing with the improvement of economic or administrative performance (bonina & cordella, 2009), while the second falls within the democratic and citizens logic (bonina & cordella, 2009; cordella & bonina, 2012; kernaghan, 2006). according to gerbing and anderson (1988), the setting up of all conceptual frameworks should operate in two steps, first of all, exposing the results of the development phase and then evaluating the measurement scales followed by the presentation of the results relative to test the hypothesis. however, in the framework of our research, the operationalization of our dependent variables was based on an analysis of the existing literature given the abundance of texts over the measurement of the notions of performance, particularly of public value in general. after having determined the measurement scales in the literature, it was necessary to carry out a contextualization and depuration. we had to go into an analysis of the main components in order to reduce and summarize the volume of information captured by the measurements (donada & mbengue, 2014). likewise, two criteria for internal reliability and consistence of the measurement scales employed had to be taken into account, namely that of kaiser (the values associated with factors greater than 1) and that of the internal coherence of factors determined through cronbach’s indicator. for managerial model, to operationalize the variables in this model, we started from 22 items found in the literature which were presented to respondents (carassus, 2007; carassus et al., 2012, 2017) who were asked to indicate on the likert scale from 1 to 5, the potential 370 n. amrani et al. toward value creation in local authorities: the role of information and... gains perceived from the use of ict in their administration. to test the validity in the measurement of the variables in this model, we analyzed the main components through the varimax rotation. the results led us to discard three items due to their low percentage of representation. finally, the principal component analysis (pca), as predicted, pointed out the appearance of three factors which accounted for 67% of the variance, a high index of internal reliability (α = 0.929) and a kmo index of 0.732, significantly above the threshold of 5% (see appendix). the first factor was called “organizational resources” and dealt mainly with the reduction of the delays in users’ waiting times. the third category, “expenses”, deals with the time required to select suppliers and issue tenders, as well as with the general expenses of the la. for the democratic model, to construct the measurement scales, we used the works of grimmelikhuijsen and knies (2017) and sabadie (2003). similarly, to the previous model, we carried out an pca analysis with a varimax rotation. the results of the factorial analysis brought out a structure made up of 5 factors which accounted for 77% of variance, an important index of internal reliability (α  = 0.941) and a kmo index of 0.745, significantly above threshold of 5% (see appendix). the first factor is called “equality” and concerns the equal treatment of all users, the protection of their personal information and remote access to public services for people with specific needs. the second factor, “participation” refers to the possibilities offered to the citizens to be able to participate in the elaboration of public services and policies. the third “reactivity” deals with information as to the treatment of the users’ records as well as to receiving their inquiries. the fourth factor, “transparency” refers to the public diffusion of information about works carried out by the local authorities while the fifth factor, “assurance” deals with the possibility of users to follow up on and act upon their records (see appendix). 3.2. data collection the scope of our study is la in morocco which are considered democratically-elected organs of government by the population with a bicephalous system of political-administrative management. the moroccan constitution recognizes three levels of la: (1) the municipality, (2) the provinces and the prefectures and (3) the regions, (figure 5). these organizations the regions (12) regional development and territorial planning the provinces and prefectures (75) social development, strengthening efficiency, cooperation and mutualization municipalities (1503) provision of local services to citizens figure 5. levels of la in morocco (source: author’s conception) business, management and economics engineering, 2022, 20(2): 358–388 371 have at their disposal a wide range of maneuver in their management of local affairs thanks to the principle of free administration and financial and moral autonomy. through the general policies of the state, moroccan la are invested with a large management power to work with. power-sharing among the three levels of la obeys the constitutional principle of subsidiarity which recognizes each level of jurisdiction in their specific domains. in this sense, the lowest level of la, made up of the municipalities which are considered to be polyvalent ss of proximity which provide the widest range of services such as public illumination, garbage collection and disposal, street maintenance etc while the second level, the provincial councils and prefectural provide social service actions, rural development, major infrastructures and highways. the regions make up the largest level of these la and are in charge of missions of sustainable development for the improvement the territory attractiveness and enhance the economic competitiveness in the region. the data used in this research was collected through a questionnaire administered via the internet to the moroccan association of directors and managers of la during the first six months of the year 2021. as a sample target of our study, we chose only 103 la that involved in the programme of performance improvement in moroccan la. we opted for a precise sampling method according to royer and zarlowski (2014), approach whose choice was based on several reasons. first, it enabled to access to a broad sample of la from different regions and with various sizes, representing around 55% of the total population. then, this approach allowed us to avoid the risk of being denied response due to the delicate and still unfamiliar character of the notion of performance in the public sector in morocco. therefore, was more likely to generate results which could be analytically generalized and from there, further our aim to explore the potential link existing between the use of ict and the creation of value within the la. the questionnaire is structured in two parts. the first part aims at revealing the statement of ict use in the las. the items were generated on the basis of different sources: the literature review and an exploratory qualitative study conducted with managers and officials in la. the items ask about the degree of integration of electronic platforms set up by the central government as part of the e-government project at the level of the las, as well as the availability of other tools voluntarily adopted by these organizations (internal communication and electronic messaging tools, software, office management tools, intranet, applications and platforms, geographic information system, etc.). other questions focused on the level of articulation and development of icts in the la strategy. then, other questions focused on the services/department that use ict. 3.3. data processing the quantitative data collected were analyzed using spss 25 software. in total, 100 usable replies were received (figure 6), a very high index of response of 97%. nonetheless, one of the most notable limits to our research was the inherent difficulty to be able to give an external generalization due to the fact that our sample only represented 7% of the total of 1503 moroccan la. further studies over a broader sample base would be pertinent. in order to guarantee the success of our remote questionnaire, it was necessary to conduct a pre-test to find out whether the protocol of the study was realistic or the measurement scales were valid 372 n. amrani et al. toward value creation in local authorities: the role of information and... or understandable for the respondents (baumard et al., 2014). this preliminary test was carried out in two steps: first, in face-to-face interviews with five territorial mangers after which surveys were emailed to four other managers among our personal network of relationships. 4. results the results obtained will be presented according to the variables making up the conceptual model. we will therefore start with the managerial model component and then the democratic model while doing a cross reading of the independent’s variables. 4.1. managerial model overall, the model of the dependent variable «expenses» is very significant at the 1% which confirms the existence of a high correlation among the explicative variables introduced into the model. concerning the variables relative to the strategic dimension of ict, their explanatory capacity, measured by the determination coefficient, is acceptable (r2  = 0.235). this model of regression shows, however, that only one variable seems to have a statistically significant influence over this occurrence: the normalization of information while other explanatory variables are insignificant. it’s interesting to point out that the regression equation shows the negative influence of this variable through regression coefficients (β = –0.485). in other words, setting up procedures of normalization in the diffusion and sharing of information at the level of a territorial administration has an indirect effect over its expenses. besides, the regression results confirm the existence of significant effects of two explanatory variables in relation to the technological infrastructure dimension (platforms, intranet). for these two independent variables, the regression model presents an acceptable explanatory capacity and adjustment to the data (r2 = 0.135). our results show that the use of intranet acts indirectly over the expenses of the la (β = –0.280) while on the other hand, these evolve in the same degree as the use of electronic platforms (β = 0.294). in the case of the second dependent variable of the managerial model “actions and activities”, the linear regression results reveal that only the variable “modernization strategy” has a significant influence (p < 0.001) according to the regression model obtained with a positive effect (β = 0.493). for this model, the capacity rises to 21.2% which is significant (f = 19.862; r2  = 0.212). at the level of the use of technological infrastructure, our results reveal that our model is significant at the 1% with an explanatory capacity of 24.3%. at this level, two variables seem to significantly affect the follow-up of actions and activities of the la. first, figure 6. statistics of variables (source: authors’ conception) business, management and economics engineering, 2022, 20(2): 358–388 373 the existence of an operational official gateway allows for optimization of internal processes by offering a range of on-line services which lightens the workload of the administration and reduces waiting times and delays in the handling of user records (β = 0.385). however, the use of intranet does not seem to have a positive effect over internal processes which can be seen in the surprisingly unexpected result from our research (β  = –0.238). at this level we can put forth the hypothesis according to which the use of intranet still remains weak due to the bureaucratic and often routine character of the moroccan public administration. the “organizational resources” variable in the model is overall significant which points out the connection between the variables introduced into the model and the dependent variable (correlation coefficient r = 0.461; f = 16.708; p < 0.001). the determination coefficient which measures the explanatory capacity of the model remains acceptable (r2  = 0.212). in the case of the variables having a significant effect, the model demonstrates that the effect is indeed significant but negative as far as the normalization of information as well as the optimization of the use of organizational resources is concerned (β  = –0.461; p < 0.001). additionally, at the level of components of technological infrastructure such as platforms and the intranet, these seem to be the only variables having a significant effect, with β  = 0.502 and β= –0.219, respectively. as far as the connection between explicative variables in the model and the dependent variable is concerned, the fisher test indicates an important correlation (f  = 6.457; p < 0.01). the explanatory capacity of the variables introduced into the organizational resources model is relatively high at 5% (r2 = 0.284). 4.2. democratic model the results of the linear regression related to the equality model shows an explanatory capacity of the introduced variables relatively lower but still overall acceptable and very significant at the 1% (correlation coefficient r = 0.380; r2 = 0.415). in this model, only the variable that measures the setting up of a process of it auditing seems to have a significant positive effect over equal treatment of users of territorial public services (β = 0.380; p < 0.001). in the case of the operational dimension of ict, only the use of electronic platforms and the existence of an official gateway seem to have significant effects (p < 0.005) over the dependent variable (equality). these results allow us to deduce the legitimacy of the causality among the explicative variables introduced into the model whose explanatory capacity remains acceptable as a sign of the value for r2 (0.196). insofar as the sense of this relation, the beta coefficient allows us to understand that for the two variables introduced, there exists a significant positive effect (β = 0.367 for the platforms and β = 0.223). in other words, our results confirm the existence of a significant positive influence due to the use of electronic on-line platforms and the setting up of an official electronic gateway over the strengthening of equal treatment of users of local public services among the study sample. the digitization of the bidding process, for example, tends to ensure equal treatment among those who submit bids for public services. in the case of the reactivity model, the regression results bring up the fact that three are connected with reactivity in local public services: modernization strategies of the la through the use of ict (positive effect; β = 0.219; p < 0.1), the normalization of information (negative effect ; β  = –0.316; p < 0.05), and the evaluation of computerized risks (positive 374 n. amrani et al. toward value creation in local authorities: the role of information and... effect; β  = 0.275; p < 0.05) whereas other explanatory variables have no effect. overall, the reactivity model is significant at the 5% with an explanatory capacity of 0.258 and a relatively weak fisher test (f  = 5.427). the reading of these results enables us to conclude that the setting up of normalized processes for the handling of information calls into question the traditional way of functioning of the internal services of the collectives which accounts for the negative relation between the two variables. as for the variables relative to technological infrastructure, once again the use of an official gateway (β = 0.303) and intranet (β = – 0.227) seems to have a significant effect at the 1% over the level of reactivity of the services of the la. a reading to these results, we can set forth the hypothesis according to which the use of an official gateway reinforces the reactivity of services by offering citizens the possibility of access to on-line services. the use of intranet, on the other hand, is still bogged down due to heavy administrative procedures and the continued manual handling of certain tasks by internal services. the results of the linear regression of the transparency model demonstrates the significant positive effects of two variables: the integration of ict into the modernization strategy (β  = 0.309; p < 0.05) and the existence of a formalized procedure of a computerized audit (β = 0.267; p < 0.05). the explanatory capacity of this model is in general moderate (r2  = 0.145 and significant at the 5%). likewise, the sign of the fisher test indicates the existence of a connection between the variables introduced into the model and the dependent variable. besides, under a more operational logic, as expected, only the use electronic on-line platforms seems to have a significant positive effect over “transparency” (β = 0.274; p < 0.05). as pointed out above, these platforms reduce human intervention in the handling of paperwork, for example, in the bidding process and the granting of authorizations by following a totally digital on-line procedure which greatly accounts for the influence these electronic solutions have over the reinforcement of transparency in management in territorial administrations. the insurance model is significant at the 5% as indicated with the fischer test (f = 4.844). in greater to lesser intensity, the significant effects demonstrated by this model are first of all, the computerized audit, (β = 0.276; p < 0.05) followed by computerized risk assessment (β = 0.327; p < 0.05). these results were expected given the role played by audits and the it assessment in reducing the risks associated with the misuse of users’ personal data which is likely to increase users’ confidence in the online services provided by las. in case of the technological infrastructure variables, the linear regression points to the existence of a connection between the explanatory variables in the model and the dependent variable (r2 = 0.222 and a signification of p < 0.05); the explanatory capacity, however, is lower (r2 = 0.223). the results of the linear regression show two variables having significant effects: platforms and official gateway with beta coefficients of 0.372 for the former and 0.265 for the latter. the participation model is overall significant with an explanatory capacity of 0.193. the results of the liner regression point out two variables which have significant but opposite effects over citizen participation in the production of territorial public services. the normalization of information seems to have a significant negative effect at the 5% (β = –0.381) while setting up an assessment of computerized risks has a likewise significant yet positive effect (β = 0.286). business, management and economics engineering, 2022, 20(2): 358–388 375 reading the results of beta coefficients and significance levels (table 2) allows us to draw the following conclusions: first, only the “software” variable seems to have no significant effect on the dependent variables of both models. as far as the democratic dimension is concerned, software remains much more oriented towards internal use and has no direct effect on citizens and users. second, the variables of the “technological infrastructure” dimension seem to be much more related to the managerial dimension because of their internal use, with the exception of the electronic platforms and the official portal whose use is rather external (zone 1). third, the variables of the strategic dimension of ict seem to have stronger effects on the variables of the democratic model. third, the variables of the strategic dimension of ict seem to have more important effects on the variables of the democratic model. therefore, variables such as computer auditing and standardization of information aim at reducing the risks linked to the computerized exchange of information, ensuring equality and transparency in the management of the la (zone 2). zone 1 zone 2 table 2. summary of beta coefficients and thresholds of significance (source: author’s conception) managerial model democratic model ex pe ns es a ct io ns a nd ac tiv iti es o rg an iz at io na l re so ur ce s eq ua lit y r ea ct iv ity tr an sp ar en cy pa rt ic ip at io n in su ra nc e platforms –.294*** ns .502*** .367*** ns .274*** ns .372*** intranet .280*** –.238** –.219** ns –.227** ns ns ns official gateway ns .385*** ns .223** .303*** ns ns .265** software ns ns ns ns ns ns ns ns modernization strategy of la ns .493*** ns ns .219* .309** ns ns normalization of information –.485*** ns –.461*** ns –.316*** ns –.381*** ns it audit ns ns ns .380*** ns .267** ns .276*** it risk assessment ns ns ns ns .275** ns .287** .287*** note: *** significant at 1%; ** significant at 5% 376 n. amrani et al. toward value creation in local authorities: the role of information and... discussion this analysis focuses on the interpretation of the results obtained on the influence of ict on value creation for moroccan las based on two dimensions: managerial and democratic/ citizen. we named as explanatory variables the technological infrastructure and the ict strategy adopted by the la studied. through this, we seek to compare our results with the existing literature and to see what implications they may generate. the existing literature shows that in decentralized organizations such as las, icts can be instruments that can strengthen the cooperative links between actors and promote, through the sharing of knowledge and information, the creation of synergies with a view to improving the internal processes of services (grosjean & bonneville, 2007) for several authors (greenan, 2003; lacoste & grosjean, 1999), the use of icts facilitates the sharing of information by actors, thus enabling organizations to become more responsive and autonomous. numerous empirical studies have emphasized the link between the introduction of icts within organizations and the decentralization (bouamama, 2015; čudanov et  al., 2009; dadashpoor & yousefi, 2018; marsal, 2006) that is gradually taking place thus promoting the development of non-hierarchical communication networks and the emergence of management autonomy for the actors. by analysing the link that can exist between ict and the creation of value within la, we have considered the use of ict not only in terms of the technical-operational dimension, assessed in terms of technological infrastructure, but also in terms of the strategic dimension, which refers to the introduction of ict in the development of the organization. the objective was to analyse the impact of these two variables on the creation of public value in its dual dimension, managerial and democratic (alford & hughes, 2008; benington, 2011; cordella & bonina, 2012; cordella & iannacci, 2010; cordella & willcocks, 2010; meynhardt, 2009; o’flynn, 2007). from a managerial logic, the results of our study corroborate the positive link between the adoption of a modernization strategy via ict and the improvement of the internal management of las. indeed, the results of our study confirm the statement of graziani (2014), who mentioned the positive effects of standardization on the administrative function. for this author, standardization applies to all components and levels of the organization which helps to improve the efficiency of each of them in terms of reducing costs and delays. our study did not deviate from these statements because it confirms the existence of a positive link between the adoption of an information standardization strategy by the la and the reduction of expenditure. however, our results could not confirm the existence of a positive relationship between information standardization and the efficiency of organizational resources at las studied. indeed, a paradox was raised because organizational resources have an inverse relationship with information standardization. this observation can sometimes be accounted for by the rigidity of the procedures that arise when new standards are adopted or by their complexity (lambert & ouédraogo, 2010). given the specificity of their hybrid or dual political-administrative system, local governments are among the complex organizations whose operations are governed by well-defined laws and procedures. the organizational system of the business, management and economics engineering, 2022, 20(2): 358–388 377 las reveals actors with sometimes divergent rationalities. the standardization of processes may be jeopardized by the reluctance of actors to change or by a lack of training of human resources. in the same vein, the results obtained prove that a modernization strategy seems to have had a contribution to the improvement of the social climate, as well as of the quality and the management process which we have reduced to “activities and actions”. this result corresponds to what trosa (2010) has concluded in his work. the implementation of an ict strategy was also evaluated from a citizen democracy point of view. indeed, our results show that the existence of an it audit process in a la favors the principles of good governance, notably equality, transparency and assurance. indeed, we believe that the implementation of an it audit approach is likely to strengthen the confidence of citizens/users with regard to the use of icts and remote access to services provided by the local authority. given the importance of responsiveness, las are directing their ict strategies toward improving responsiveness through information standardization and it risk assessment. in addition to it auditing, transparency is enhanced by integrating ict into the la’s modernization strategy. another determinant that should not be neglected to guarantee the assurance and participation of the citizen in the administration of la, is the evaluation of it risks. indeed, a control of the risk creates a kind of motivation in the citizen and encourages him to participate in the production of public services and in the formulation of public policies. however, an exaggerated standardization of information can be a constraint that will hinder citizen participation. we can say that our results are in accordance with guidelines of the organic laws related to the la and the strategies of digitalization adopted by the moroccan government, which show to what extent these practices will contribute to the creation of value in the public sector. following the example of several previous studies (bonneville, 2005a, 2005b), our results show that the technical-economic logic (grosjean & bonneville, 2007) guides the technological choices made by public organizations. indeed, according to this logic, the implementation of ict is justified by the need to control the cost of services. in the context of our study, the use of electronic platforms put in place by the supervisory authority (interior ministry) in morocco seems to have contributed significantly to the reduction of expenditures at the level of the las. indeed, the ministry of the interior has made available to moroccan las the “gid” platform (integrated expenditure management) for effective and efficient management of their expenditures. in the same vein, the implementation of these platforms has made it possible to reduce the delays relating to the procurement process, placing of orders and tenders by las. the same is true for the monitoring of actions and activities, which are done through the use of official gateway. there is an inverse relationship between the gateway and the intranet, even though the latter is intended for information exchange, coordination between services and facilitation of teamwork. the las rely on gateway to improve internal working conditions whereas this tool is only effective externally, i.e. in terms of posting information and contact with the citizen. the absence of a generalized use of the intranet in the las studied can be explained by the absence of a culture of change or by the problem of mastery among the administrators. this relationship is very logical as far 378 n. amrani et al. toward value creation in local authorities: the role of information and... as organizational resources are concerned, where platforms are the most sought after by the las at the expense of intranets. moreover, moroccan las have recently integrated platforms such as “watika” and others in order to dematerialize tasks and to to reduce delays as well as waiting in lines. these results perfectly validate the basic postulates of the resource theory which stipulates that organizations must be well equipped with specific resources in terms of knowledge and expertise, which allow them to be more efficient. conclusions the literature review shows that in the public sector, management is no longer centered on the classical model that implies a standardization of needs but rather on a logic of specialization and personalization in the framework of the new paradigm of value creation as some have preferred to call (alford et  al., 2017; benington, 2007; moore, 2000). the measurement and evaluation of public value is a highly since the introduction of ict into the management of public organizations in recent years under the aegis of the npm to solve problems. the objective of the empirical study was to deepen the understanding of the use of ict in moroccan las and to show how these tools can contribute to value creation in this specific context. our analysis was based on two logics: managerial and democratic/citizen, while focusing on strategic and technological infrastructure variables. our results underline the determining role of these technological tools at the level of internal management, notably in terms of optimization of expenses, the improvement of the quality of work and of the actions carried out in the las studied thanks to communications and coordination between the services. and finally, the evaluation of organizational resources implies a rationalization of document processing times (reducing delays) and of the number of people assigned to the services (only those with added value are maintained). in addition, the results confirm that icts are real tools that contribute to the consecration of the principles of good governance, namely transparency and citizen participation. however, our research has a number of limitations, which could be explored in future research. first, the data were collected from administrators (managers, directors and officials) which excludes in the study another rationality of political leaders as long as las, as public organizations, are specified by the existence of these two actors. it would be interesting to understand in further detail, how ict influences the decisions of presidents and the degree to which they adapt to such tools. besides, from a methodological point of view, the study can also take on the meaning of an exploratory study with qualitative method (interviews, case studies) in order to understand how these ict contribute to local public value creation. references aberbach, j. d., & christensen, t. 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(2011). management innovation and organizational performance: the mediating effect of performance management. journal of public administration research and theory, 21(2), 367–386. https://doi.org/10.1093/jopart/muq043 appendix descriptive statistics of independent variables table a1. technology infrastructure items average standard deviation intranet .47 .502 official gateway .56 .499 platforms .5819 .22637 software .3867 .39910 n valid (listwise) 72 table a2. ict strategy items average standard deviation modernization of the la .67 .473 normalization of information .78 .417 assessment of it risk .50 .504 it-audit .19 .393 n valid (listwise) 64 https://doi.org/10.1108/eb039075 https://doi.org/10.1177/0275074014525833 https://doi.org/10.1177/076737010301800101 https://doi.org/10.1108/s2051-663020140000003015 https://doi.org/10.1177/0275074005282583 https://doi.org/10.3917/rsg.259.0163 https://doi.org/10.3917/rfap.136.0895 https://doi.org/10.1093/jopart/muq043 384 n. amrani et al. toward value creation in local authorities: the role of information and... descriptive statistics of dependent variables items average standard deviation expenses reduction of la expenditures 3.38 1.159 selection of la suppliers 2.60 1.497 order lead times frs 2.99 1.227 processing time for tenders 3.43 1.364 organizational resources efficiency in the use of la services by users 3.01 1.345 time allocated to service delivery 3.22 1.390 reduction of waiting lines in the la 3.33 1.341 reduction of errors in data processing 3.35 1.438 reinforcement of the coordination between the information system of the ct and those of other partner public administrations (dgcl, tgr, igat...) 3.45 1.266 reduction in staffing levels for services 3.11 1.270 reduces the processing time of paraphrases 2.92 1.169 reduction of the hourly workload in the la 2.99 1.259 activities and actions improvement of the quality of internal work 3.14 1.326 improved process for developing the la action plan 2.95 1.334 improved monitoring of projects and actions carried out by the la 3.02 1.303 strengthening communication and coordination between internal ct services 3.07 1.183 improved teleworking in your la 3.28 1.223 facilitation of teamwork 2.90 1.193 reactivity to listen to the expectations of the users 2.84 1.376 to provide citizens with relevant and reliable information 2.70 1.403 provide clear and accurate information on the benefits provided by the la 2.71 1.250 provide users with answers to any problems or changes in their situation 2.70 1.330 transparency take into account the opinion of the users to establish its service offer 2.60 1.287 promote media coverage of the work of the council (online dissemination of the work of the session, dissemination of the agenda.... ) 2.76 1.199 promote claims 3.02 1.326 business, management and economics engineering, 2022, 20(2): 358–388 385 items average standard deviation insurance explain to users their nature and consequences 2.51 1.202 inform users of the possibilities of recourse available to them 2.40 1.263 provide the information necessary for them to evaluate the quality of the service provided 2.80 1.181 participation co-production of services delivered by the la 2.28 1.111 take into account users’ suggestions to improve its services 3.00 1.428 promoted citizen participation in the design of la policies (goal setting, planning and decision making) 2.56 1.131 promote deliberation and dialogue with citizens 2.69 1.412 equality promote access to information by citizens 2.76 1.240 inform users of the follow-up of their files 2.62 1.170 promote remote access to la services for people with special needs 2.80 1.363 ensure equal treatment of users 2.80 1.385 equal treatment of candidates’ files during recruitment procedures organized by the la 3.03 1.439 data protection and privacy of users/citizens 2.84 1.354 n valid (listwise) 88 results of the principal component analysis of the dependent variables rotation of the component matrix of the managerial model items components 1 2 3 reduction of waiting lines in the la 0.879 reduction of the hourly workload in the la 0.694 reduction of errors in data processing 0.676 time allocated to service delivery 0.665 efficiency in the use of la services by users 0.663 reduction in staffing levels for services 0.645 strengthening coordination between the la information system and those of other partner public administrations (dgcl, tgr, igat, etc.) 0.616 reduces the processing time of paraphrases 0.527 improved process for developing the tk action plan 0.830 improved monitoring of projects and actions carried out by the la 0.804 strengthening communication and coordination between internal ct services 0.782 facilitation of team work 0.779 improved teleworking in your la 0.764 improvement of the quality of internal work 0.520 selection of la suppliers 0.855 386 n. amrani et al. toward value creation in local authorities: the role of information and... rotation of the component matrix of the managerial model items components 1 2 3 order lead times frs 0.837 processing time for tenders 0.582 reduction of la expenditures 0.487 extraction method: principal component analysis. rotation method: varimax with kaiser normalization. convergence of the rotation in 6 iterations. α: 0.930 kmo: 0.732 total variance explained: 67%. rotation of the matrix of the components of the democratic and citizen model items component 1 2 3 4 5 data protection and privacy of users/citizens 0.770 ensure equal treatment of users 0.769 equal treatment of candidates’ files during recruitment procedures organized by the la 0.755 inform users of the follow-up of their files 0.745 promote remote access to la services for people with special needs 0.588 promote access to information for all citizens 0.570 co-production of services delivered by the la 0.806 promoted citizen participation in the design of la policies (goal setting, planning and decision making) 0.801 take into account users’ suggestions to improve its services 0.727 promote deliberation and dialogue with citizens 0.654 listening to users’ expectations 0.887 provide clear and accurate information on the benefits provided by the la 0.623 provide users with answers to any problems or changes in their situation 0.606 to provide citizens with relevant and reliable information 0.486 promote the media coverage of the council’s work (online distribution of the session’s work, distribution of the agenda.... ) 0.807 take into account the opinion of the users to establish its service offer 0.741 promote claims 0.545 provide the information necessary for them to evaluate the quality of the service provided 0.802 explain to users their nature and consequences 0.710 inform users of the possibilities of recourse available to them 0.610 convergence of the rotation in 7 iterations α: 0.941 kmo: 0.745 total variance explained: 77.14 business, management and economics engineering, 2022, 20(2): 358–388 387 summary of linear regression models model r r-2 r-2 adjusted margin of error change in statistics variation r-2 variation f ddl1 ddl2 sig. variation of f m an ag er ia l o r ec on om ic v al ue s explained variable: expenses of the la 1 .273a .075 .065 .98631 .075 7.921 1 98 .006 2 .391b .153 .136 .94854 .078 8.961 1 97 .003 a. predicted values: (constant), platforms b. predicted values: (constant), platforms, intranet explained variable: organizational resources 1 .486a .237 .229 .88619 .237 30.360 1 98 .000 2 .533b .284 .269 .86250 .048 6.457 1 97 .013 a. predicted values: (constant), platforms b. predicted values: (constant), platforms, intranet explained variable: actions and activities 1 .365a .133 .124 .96225 .133 15.039 1 98 .000 2 .435b .189 .173 .93527 .056 6.736 1 97 .011 a. predicted values: (constant), official gateway b. predicted values: (constant), official gateway, intranet d em oc ra tic a nd c iti ze n va lu es explained variable: equality 1 .383a .147 .138 .99134 .147 16.834 1 98 .000 2 .443b .196 .180 .96700 .050 5.996 1 97 .016 a. predicted values: (constant), platforms b. predicted values: (constant), platforms, official gateway explained variable: reactivity 1 .285a .081 .072 1.05105 .081 8.632 1 98 .004 2 .364b .132 .114 1.02661 .051 5.722 1 97 .019 a. predicted values: (constant), official gateway b. predicted values: (constant), official gateway, intranet explained variable: transparency 1 .274a .075 .065 1.01056 .075 7.924 1 98 .006 a. predicted values: (constant), platforms explained variable: insurance 1 .391a .153 .145 .95130 .153 17.730 1 98 .000 2 .472b .223 .207 .91601 .070 8.696 1 97 .004 a. predicted values: (constant), platforms b. predicted values: (constant), platforms, official gateway 388 n. amrani et al. toward value creation in local authorities: the role of information and... summary of linear regression models (continued) model r r-2 r-2 adjusted margin of error change in statistics variation r-2 variation f ddl1 ddl2 sig. variation of f m an ag er ia l o r ec on om ic v al ue s dependent variable: expenses 1 .485a .235 .223 .89945 .235 19.052 1 62 .000 a. predicted values: (constant), normalization of information b. dependent variable: expenses dependent variable: organizational resources 1 .461a .212 .200 .90279 .212 16.708 1 62 .000 a. predicted values: (constant), normalization of information explained variable: actions and activities 1 .493a .243 .230 .90201 .243 19.862 1 62 .000 a. predicted values: (constant), modernization strategy d em oc ra tic a nd c iti ze n va lu es dependent variable: equality 1 .380a .145 .131 .99539 .145 10.483 1 62 .002 a. predicted values: (constant), it-audit b. predicted values: (constant), equality dependent variable: participation 1 .335a .112 .098 1.06799 .112 7.841 1 62 .007 2 .439b .193 .166 1.02685 .080 6.067 1 61 .017 a. predicted values: (constant), normalization of information b. predicted values: normalization of information, assessment of it risk explained variable: reactivity 1 .361a .130 .116 1.02561 .130 9.264 1 62 .003 2 .437b .191 .164 .99733 .061 4.567 1 61 .037 3 .508c .258 .221 .96299 .067 5.427 1 60 .023 a. predicted values: (constant), modernization strategy b. predicted values: (constant), modernization strategy, normalization of information c. predicted values: (constant), modernization strategy normalization of information, assessment of it risk explained variable: transparency 1 .274a .075 .060 1.01346 .075 5.022 1 62 .029 2 .381b .145 .117 .98230 .070 4.996 1 61 .029 a. predicted values: (constant), modernization strategy b. predicted values: (constant), modernization strategy, itaudit dependent variable: assurance 1 .461a .212 .200 .92015 .212 16.717 1 62 .000 2 .520b .270 .246 .89289 .058 4.844 1 61 .032 a. predicted values: (constant), assessment of it risk b. predicted values: (constant), assessment of it risk, it-audit _goback baut0010 baut0015 verslas_2013_11_1_kitam pusmeciui.indd determinants of foreign direct investments outflow from a developing country: the case of turkey gokhan onder1, zeynep karal2 faculty of business, anadolu university, yunus emre campus, 26470 eskişehir, turkey e-mails: 1gokhanonder@anadolu.edu.tr (corresponding author); 2zkaral@anadolu.edu.tr received 5 february 2013; accepted 15 may 2013 we thank to assoc. prof. dr. yılmaz kilicaslan for all contributions abstract. foreign direct investments (fdi) outflows of turkey have remarkably been raising over the last decade. this rapid increase brings about the need for questioning the determinants of fdi outflows. the aim of this paper is to estimate the factors affecting outflow fdi from turkey from 2002 to 2011 by using prais-winsten regression analysis. according to estimation results, population, infrastructure, percapita gross domestic product of the host country, and home country exports to the host country are the factors having positive effects on outflow fdi. we found, on the other hand, that the annual inflation rate of the host country, its tax rate collected from commercial profit, and its distance from turkey have a negative relation with investment outflows. moreover our results show that while investment outflows to developed countries are in the form of horizontal investments, investment outflows to developing countries are in the form of vertical investments. keywords: foreign direct investments outflow, turkey, panel data analysis, developing countries, prais-winsten regression, investment decision. reference to this paper should be made as follows: onder, g.; karal, z. 2013. determinants of foreign direct investments outflow from a developing country: the case of turkey, business, management and education 11(2): 241–255. http://dx.doi.org/10.3846/bme.2013.14 jel classification: f21 1. introduction foreign direct investment (fdi) is an important instrument in realizing the economic growth objectives of countries. this instrument is particularly important for developing countries with limited capital and technical capacity. developing countries’ transnational companies (tnc) contribute to the economic growth of home country by transferring the knowledge gained by operating abroad. this internationalization process may also give developing countries tnc’s an opportunity to enhance competitive advantages. the last decade has shown a significant rise in developing countries’ outflows of foreign direct investment (ofdi). while 11% of global foreign direct investments were made by developing countries in 2001, this rate increased to 32% in 2010 and realized as 27% b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2013, 11(2): 241–255 doi:10.3846/bme.2013.14 copyright © 2012 vilnius gediminas technical university (vgtu) press technika www.bme.vgtu.lt 242 g. onder, z. karal. determinants of foreign direct investments outflow from a developing country: the case of turkey in 2011. a three-fold increase in fdi from developing countries over the past ten years would lead one to consider the reasons lying behind those investments. the questions that should be answered: which factors specific to home and host countries are at play? what are economic, bureaucratic, and cultural factors effecting country choice? similar to the trends in developing countries, a large increase in turkey’s ofdi was observed in the last ten years. while ofdi from turkey was about 250 million usd in 2002, this figure increased to 2.6 billion usd in 2011. the aim of this article is to estimate the factors affecting the ofdi from turkey by using panel data analysis. the rest of the paper is organized as follows: the next section introduces descriptive statistics of fdi to show the economic magnitude of the subject matter, such as global foreign direct investment (fdi) trends, the shares of developing and developed countries in these investments and the position of turkey in this picture. the third section covers the theoretical bases of foreign direct investment and discusses empirical studies analyzing the factors affecting the ofdi from turkey. the model, data and econometric method used in this study are presented in the fourth section. section five discusses the estimation results. finally, section six concludes. 2. foreign direct investment overview global foreign direct investment inflows have increased by 17% to 1.5 trillion usd in 2011 (see figure 1). 51% of these investments went to developing countries (see figure 2). these investments, which significantly decreased due to the global financial crisis, have been steadily increasing since 2009. fig. 1. world direct investment inflow (trillion $) (source: unctad (2012), world investment report 2012) 243 business, management and education, 2013, 11(2): 241–255 fig. 2. the distribution of fdi among developed and developing countries, %, 2000–2011 (source: unctad (2012), world investment report 2012) it is observed that fdi inflows to turkey over the past ten years have increased significantly (see figure 3). turkey, which received approximately 1 billion usd foreign direct investment in 2000, has received 22 billion usd in 2007. although incoming investments have declined from this date onward due to the global financial crisis, turkey attracted 15 billion usd in 2011. fig. 3. fdi inflows to turkey, 2002–2011(billion $) (source: unctad (2012), world investment report 2012) 244 g. onder, z. karal. determinants of foreign direct investments outflow from a developing country: the case of turkey an analysis of the fdi outflows from turkey over the past ten years shows that these investments have also increased significantly. turkish tnc’s fdi was about 250 million usd in 2002, and then increased to 2.6 billion usd in 2011(see figure 4). fig. 4. fdi outflows from turkey, 2002–2011(million $) (source: central bank of republic of turkey. www.tcmb.gov.tr (accessed: 27.04.2013)) continental distribution of fdi outflows from turkey shows that more than half of investment went to europe in the last decade. europe was followed by asia, america and africa. the reason of this is the fact that europe and middle asia are the major trade partners of turkey. fig. 5. continental distribution of fdi outflows from turkey (2002–2011) (source: general directorate of statistics of central bank of turkish republic www.tcmb.gov.tr (accessed: 27.04.2013)) 245 business, management and education, 2013, 11(2): 241–255 in 2000, the developing countries got 20% of global inward fdi. this figure increased to 51% in about ten years. 10% of global outward fdi was made by the developing countries in 2000. similarly, this figure also reached to 27% within ten years. the implication of this picture is that the developing countries became not only fdi destinations but also fdi source countries in the last decade. 3. literature framework since 1960’s researchers have tried to answer the question that why a business goes abroad. the answers are considered as the cornerstone of fdi literature. cornerstones are important for our research paradigm. this section includes theoretical framework of determinants of fdi and literature which analyzing these determinants empirically within the context of turkey. vernon (1966) claims that as the newly developed product become a standard product in time, the production facilities will be moved from developed countries where the product was first introduced to the market to less developed countries where production costs are lower. knickerbocker (1973) mentions that foreign direct investment decisions of businesses operating in oligopoly market are affected by competitors fdi decisions. according to knickerbocker, those businesses that do not want to lose market share as a result of investments their competitors made are inclined to make counter investments. when explaining foreign direct investments hymer (1976) assumes that businesses that establish production facilities abroad should have some advantages compared to local businesses in the production of a product. he mentions that in imperfect market conditions, such as monopoly or oligopoly, this advantage will be profitable only through the investments that are under the ownership and control of the enterprise. buckley and casson (2009) claim that due to imperfections in the market and transaction costs, some activities can be performed more effectively under control of businesses rather than in the market. for example, if the businesses don’t timely procure the raw materials and intermediate goods, they may prefer to produce these materials their selves. hence an intermediate market becomes internalized. in the oli paradigm, dunning (1994, 1998, 2006) states that production in a foreign country serves to benefit long-term business objectives only when three factors are satisfied simultaneously. the first of these factors is ‘ownership specific advantages,’ which are the tangible and intangible asset-based advantages of business. the second is the location specific factors, which are those specific to host or home country. the third is internalization advantages which are benefits that come from market imperfections (dunning & lundan 2008). researches on the determinants of foreign direct investment outflows from turkey have been sparse and concentrated mostly on host country determinants of fdi. majority 246 g. onder, z. karal. determinants of foreign direct investments outflow from a developing country: the case of turkey of these researches used firm-level data, while minority of them used macro data as the unit of analyses. these researches commonly try to answer two questions: what turkish businesses focus on in choosing a host country? whether or not there is a difference in fdi outflows with respect to development levels of countries? in addition to this, based on dunning’s studies in this area, investments have been attempted to be classified according to market, source, efficiency, and strategic assets purposes. anıl’s (anil et al. 2011) analyzed 107 turkish tnc’s that have investments in central asia, the balkan countries, and russia in order to explore which factors are important in choosing the investment location. the factors were turned out to be the benefit of being the first business operating in the market, the purchasing power of customers, the level of competition in the sector, the growth rate of the country, the market size, the probability of having access to low-cost inputs, and the easy access to neighboring-country markets respectively. demirbağ’s (demirbağ et al. 2010), which examined investment destination choices of 522 turkish tnc’s, concluded that turkish tnc’s have been making investments in developed countries to reach strategic assets and developing countries in order to benefit from firm-specific advantages. in addition, the results of this research indicates that as the amount of capital required for investment increases, businesses prefer developed countries as the destination of investment. the fact that economic and political risks in developed countries are less than in developing countries has been put forward as the reason for this situation. the research has evaluated that the concentration of investments from the same home country in a host country is a factor that affects the investment destination. when the investment concentration is in question, turkish businesses prefer developing countries to ease the information exchange in markets where uncertainty is high. kayam and hisarciklilar (2009) in their study examining the factors determining fdi outflows from turkey from 1992 to 2005 by using the gravity model determined that investments were in the form of horizontal investments for the purpose of reaching out to faraway markets, and as the distance between turkey and the host country increased, investments also increased. according to their findings, as the exports from turkey to the host country increases, investment to the host country also increases and an increase in per-capita income both in turkey and in the host country negatively affect the investments. according to akçaoğlu (2005), depending on the characteristics of firm size and the sector of operation, turkish tnc’s have been making investments for different purposes in different countries. the developed countries have been attracting largescale businesses’ strategic-asset-seeking investments. turkish businesses, however, have been making investments in developing countries because of markets, effectiveness, and natural resources. according to research of 109 businesses with investments abroad, protecting the export markets, gaining new markets, and increasing the efficiency of export activities play an important role in turkish foreign direct investment outflows. 247 business, management and education, 2013, 11(2): 241–255 akis’s (1999) which analyzed the reasons why turkish businesses are successful in the former soviet union, determined that turkish businesses started their operations in the markets in question before the businesses of other countries provided them a significant advantage. additionally, turkish investors’ skills in managing uncertainties, turkey’s physical proximity to these countries, the possibility of having communication in turkish in these countries, and support that the turkish government provided to investors have been demonstrated as the reasons that make turkish businesses successful in these countries. in sum, empirical studies about turkey’s ofdi have some common points. while to be the first business operating in the market and easy access to low cost inputs are said to be the major ofdi determinants for developing countries, reaching strategic assets and protecting export markets are the main motives of developed country ofdi. market size is a common factor for both country groups. in this study we aim to explore the factors affecting ofdi from turkey, using some host countries institutional and economic fdi determinants, in addition to factors that used in previous empirical studies. 4. model, data and econometric method we, in this study, are attempting to bring forward the factors determining outflow fdi from turkey. the choice of explanatory variables which affect outflow fdi from turkey is predicated on certain literature determinations and theories. the empirical foundations of outflow fdi from turkey are based upon newton’s “general law of gravity”. the law of gravity states that the force between two objects is directly proportional to their masses and inversely proportional to the square of the distance between them. the use of the general law of gravity in economics literature has first been made by tinbergen (1962) and pöyhönen (1963). with linnemann’s (1966) addition of other explanatory variables and the development of many other economic studies, the model is presently being used in economic literature in many fields, such as commerce, investment, tourism, etc.1 in this study, we analyze outflow fdi from turkey by using the adapted version of the gravity model that trade between countries is directly proportional to gdp and inversely proportional to the distance between the two countries. the estimated model in this study has given in equation 1 (table 1): lnofdiit = α + lnexpit +lngdpit +lndstit+ lnpopit +lninfit+ lntaxit +lntelit . (1) 1 some empirical and direct investment related articles involving gravity model: anderson, j. e. (1979); bergstrand, j. h. (1985); mauro, f. (2000); kleinert, j., toubal, f. (2010). 248 g. onder, z. karal. determinants of foreign direct investments outflow from a developing country: the case of turkey table 1. definitions of variables variables definition ofdi outflow fdi flows (million $) exp export to host country( million$) gdp host countries’ gdp per capita (million$) dst distance between capital cities (kilometers) pop host countries’ population inf host countries’ gdp deflator (% annual) tax host countries’ total tax rate (% commercial profit) tel telephone line per 100 people in host countries while we are attempting to bring forward the reasons of outflow fdi from turkey, the per-capita income (gdp) of the country to which investments are made and distance (dst) are included in the model. the distance is measured as the distance between the capital cities in kilometers. the estimation results that we attempt to reach should be consistent with the gravity model. turkish businesses have engaged fdi activities in recent years. it is assumed that they intent to invest in export markets that they were previously active in. so the export (exp) variable measured as export to the host country from turkey has been added to the model. within this framework the expected result is that the export and investment variables move in the same direction. in addition to these three explanatory variables, in order to proxy the market size the population (pop) variable is used in the model. economic stability in the host country is reflected by using the inflation (inf)2 variable. the tax rate (tax) collected from commercial profit as one of the important determinant investments is included in the model. a telephone line per 100 people (tel) is used to proxy the infrastructure level in host country. we expect positive association between outflow fdi from turkey and population and infrastructure level in the host country, while expecting negative impact of inflation and taxes. all of the variables in the model are log-transformed. in order to strengthen the explanatory power of the model, we have employed other explanatory variables such as per-capita electricity consumption, inter-country real wage indexes, technological level of countries etc. the unbalanced country-based data of outflow fdi from turkey was obtained from the central bank of the turkish republic in the model. the data for exports from turkey have been retrieved from the t.r. ministry of economy’s data base. the distance variables have been retrieved from the “how far is it?” website3, inflation, tax, 2 inflation, gdp deflator (% annual) 3 http://www.indo.com/cgi-bin/dist. 249 business, management and education, 2013, 11(2): 241–255 telephone line and per-capita gdp data were taken from world bank databases. the total tax rate variable is missing for 2002-2004. however export, per-capita income, and inflation data have caused imbalances. the descriptive statistics for the data used is given in table 2. table 2. descriptive statistics variable obs. mean std. dev min max lnofdi 310 12,278 7,344658 0 20,36516 lnexp 309 20,2609 1,842113 7,507141 23,3588 lngdp 306 9,001615 1,401078 6,173786 11,29466 lndst 310 7,596229 0,559144 6,60123 9,075551 lnpop 310 16,97845 1,713783 13,37245 21,01901 lninf 297 1,468333 1,125689 -2,95756 4,066761 lntel 309 3,219035 0,794501 0,888049 4,307577 lntax 215 3,718767 0,468274 2,272126 4,923624 as it is seen in the equation i, the empirical analysis is being carried out by using a panel data set. this data set covers a 10-year period from 2002 and 2011 and 31 of 33 countries to which more than 50 million usd or over outflow fdi from turkey recorded. luxembourg and malta, to which more than 50 million usd of direct investment has gone, were excluded from the study. luxembourg is a country where tax advantages are utilized rather than direct investments. in malta, however, during this 10-year period, there has been 1 billion usd outflow in a single year. we argue in this study that factors affecting foreign investment decisions may vary with respect to development level of countries. in order to test if the development level of countries is important for the outflow fdi of turkey, we classified 31 countries in our database into two as developed and developing and estimated the relations for these two groups separately. it turned out to be that while 10 countries in our data set were classified as developed countries, the other 21 countries were classified as developing countries with respect to imf criteria. export, distance, and population variables were used in the estimates conducted with respect to development level. these variables are independent from development level of countries. the exp and dist variables are turkey specific factors (turkey’s export to host country, turkey’s distance the host country). however the pop variable, also independent from development level of countries, was included to answer that how the market size affect ofdi from turkey respect to development level of countries. 250 g. onder, z. karal. determinants of foreign direct investments outflow from a developing country: the case of turkey for the investment outflows to developed countries (ofdidedc) and investment outflows to developing countries (ofdidingc), the models were configured equations 2 and 3: lnofdidedcit = α + lnexpit+lndstit+ lnpopit; (2) lnofdidingcit = α + lnexpit+lndstit+ lnpopit . (3) in analyzing outflow fdi from turkey, the model was estimated by using the praiswinsten regression method. because it has turned out to be that there is heteroscedasticity, correlation between units, and special ar (1) correlation between units in the model. we used the prais-winsten estimator because of the fact that panel corrected standard errors (pcse) is an effective estimator for these types of models. another reason for choosing this method is that in situations where time dimension is more limited than cross-section dimension, this methodology produces more effective estimator than “feasible generalized least squares” (fgls), which have been adopted within the framework of this study4. 5. findings the summary of estimate results performed by the stata 11 package program is presented in the table 3. because both heteroscedasticity and unit correlation were allowed in the results, 496 covariance are observed, and because countries were allowed special ar (1) correlation, it is observed that autocorrelation coefficients equal to the unit number of 31 were calculated. wald chi2 test shows that the total of the model gives significant results. within the framework of these calculations z statistics show that coefficients are significant. as a result variables have turned out to be both in accordance with the gravity model and in the expected direction. when we analyzed the results of model 1, it was revealed that there is a positive relationship between outflow fdi from turkey and host countries’ population (market size), infrastructure facilities, per-capita gross domestic product (meaning the purchasing power of the market), and the exports that turkey makes to host countries. it was also revealed that there is a negative relationship between the inflation rate (economic stability) of host countries, the tax rates that host countries collect from commercial profit, the physical distance between turkey and these countries, and foreign direct investment outflows from turkey. the positive relationship between the variables of population, per-capita gdp and outflow fdi point to the market-oriented direction of the investments. it was shown that market size and purchasing power play important roles in the investment decisions of businesses. on the analysis of the export variable, when the fact that foreign direct 4 beck, n., katz, j. n. (1995); podesta, f. (2002); tatoğlu, f. y. (2012) and opposite thought is, reed, w., webb, r. (2010). 251 business, management and education, 2013, 11(2): 241–255 investment outflows from turkey have reached significant size in recent years is taken into account, it can be taken in stride that first investment experiences are concentrated in the export markets where there exist previous market experiences. in addition to this, it can be said that in directing the investments into export countries, as akçaoğlu (2005) indicates, protecting and enlarging the export markets and increasing the efficiency of export activities have an effect. the tel variable that we believe to some degree represents infrastructure facilities of the countries shows that host country infrastructure systems have an effect on outflow fdi from turkey. table 3. estimate results variables model 1 model 2 developed countries model 3 developing countries lnexp 0,4635777* 0,6683486* 1,784487* [0.929464] [0.1240083] [0.0874076] lndst –2,817362* 2,075411* –1,132966* [0.4235122] [0.3534391] [0.2336103] lnpop 2,031658* 0,3544824* 0,2516426* [0.1250922] [0.1422319] [0.0952131] lngdp 0,8777977* [0.189958] lninf –0,5090912* [0.0997254] lntax –3,934211* [0.264389] lntel 1,289574* [0.4257372] estimated covariance 496 55 231 estimated autocorrelations 31 10 21 estimated coefficients 8 4 4 r-squared 0,6208 0,6657 0,255 wald chi2 (7) 320815,67 592,28 580,99 *5% significance level standart erros in parenthesis 252 g. onder, z. karal. determinants of foreign direct investments outflow from a developing country: the case of turkey it was shown that as expected there is a negative relationship between inflation, tax variables and ofdi from turkey. this reveals that while choosing host countries, turkish tnc’s prefer countries with economic stability and low tax costs. when we analyzed the distance variable, however, we found a negative relationship between distance and outflow fdi from turkey. the negative relationship between outflow fdi and distance can be seen as natural due to the fact that trade activities tend to decrease as the distance between two countries increases. however, in model 2 and 3, where we separated the countries with respect to their development level, we found that the relationship between the distance variable and outflow fdi is positive for developed countries and negative for developing countries. (the fact that in model 1 the majority of our sample was constituted by developing countries is supportive of this outcome). this difference stems from the characteristics of investments. while the basic purpose of horizontal investments is to reach host country markets and better serve them, these investments have been increasing as the distance between the two countries increases while vertical investments’, whose basic purpose is to fragment the production process in order to benefit from different factor endowments, have been decreasing as the distance between the two countries increases (egger 2008). the reason for this is the effect of the distance between the two countries on trade costs. in vertical investments, trade relations between home country and host country are intense (transportation of inputs from the home country to the host country and the processing of inputs in the host country or production in the host country and sending the products to the home country can be given as examples of the trade relations in question). because an increase in the distance between the two countries will make trade relations more costly as the distance increases, investments in the character of vertical tend to decrease. like distance, labor is also an important determinant for vertical fdi5. when average minimum wages (amw) were compared for countries in our data sample, developed countries’ amw were about 1762 usd, this figure were 256 usd for developing countries in 2011. when we evaluated the relations between ofdi, labor and distance, we can say that outflow fdi from turkey to developing countries is in the character of vertical investments to benefit from different factor endowments. the fact that the export variable within the two country groups has a higher coefficient for the developing countries group is in keeping with this idea. it can be said that outflow fdi from turkey to developing countries is complementary to exports going to these countries from turkey. we can also say that outflow fdi from turkey to developed countries is in the character of horizontal investments toward the markets to which previous exports were made. in model 2 and 3, where we separated the countries with respect to their development levels, it is seen that for both groups there is a positive relationship between the 5 labor cost statistics of developing countries in our sample aren’t systematically available for research’s time period (2002–2011). therefore, we couldn’t estimate the labor cost effect on ofdi. we calculated minimum wage statistics, for giving an opinion about labor cost. minimum wage statistics are collected from eurostat and u.s. department of state’s country reports on human rights practices for 2011. 253 business, management and education, 2013, 11(2): 241–255 population of the home country as well as exports made from turkey to the host country and outflow fdi from turkey. in this case we can say that, irrespective of development levels of countries, outflow fdi from turkey is affected by the market size of the host countries and that they prefer the markets to which previous exports were made. 6. conclusions this study explores the factors affecting outflow fdi from turkey from 2002 and 2011 by prais-winsten regression analysis. according to estimation results, populations of host countries, their infrastructure facilities, their per-capita gross domestic product, and turkey’s exports to the host country have positive effects on outflow fdi from turkey. the annual inflation rate of the host country, its tax rate collected from commercial profit, and its distance from turkey are, on the other hand, the factors having negative effects on investments. we found that populations of host countries and exports made from turkey to the host country affect the investments positively for both developed and developing countries. the only variable that has different impact in different countries with respect to the development 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webb, r. 2010. the pcse estimator is good, just not as good as you think. working paper. available from internet: http://www.econ.canterbury.ac.nz/repec/cbt/econwp/1053.pdf 255 business, management and education, 2013, 11(2): 241–255 tatoğlu, f.y. 2012. i̇leri panel veri analizi. beta yayınevi. i̇stanbul. tinbergen, j. 1962. shaping the world economy: suggestions for an international economic policy. new york: twentieth century fund. unctad. 2012. world investment reports 2012. united nations publications. switzerland. united states department of state. 2011. country reports on human rights practices for 2011 [online], [accessed 20 march 2013]. available from internet: http://www.state.gov/j/drl/rls/hrrpt/ humanrightsreport/#wrapper vernon, r. 1966. international investment and international trade in the product cycle, quarterly journal of economics 80: 190–207. http://dx.doi.org/10.2307/1880689 gökhan önder. i was born in samsun in 1987 and graduated from business administration department of anadolu university, in 2009. i have graduated master degree in international business administration at anadolu university. i am a ph.d. candidate in management &organization at anadolu university and also i have been working as an assistant to the faculty of business administration in anadolu university since 2011. i work in the areas of foreign direct investments, competition, clusters and business history. zeynep karal. i was born in ankara in 1986 and graduated from public finance department of ankara university, in 2009. i am a ph.d. student in public finance at anadolu university. there i have been working as an assistant to the faculty of economics in anadolu university since 2011. i work in the areas of investment policy, labor policy and public choice. copyright © 2017 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2017, 15(1): 1–13 doi:10.3846/bme.2017.355 using risk simulation to reduce the capital cost requirement for a programme of capital projects francois joubert1, leon pretorius2 department of engineering and technology management, faculty of engineering, built environment and information technology, university of pretoria, lynnwood road, 0002 pretoria, south africa e-mails: 1francois.joubert@kwanto.co.za (corresponding author); 2leon.pretorius@up.ac.za received 14 february 2017; accepted 24 april 2017 abstract. this paper combines various concepts related to (i) project risk management, (ii) monte carlo simulation, (iii) project contingency cost estimation, and (iv) the relationship between project and programme risks, to illustrate that the contingency requirements are lower when simulating all the risks in the programme when comparing it with the individual project contingency requirement. a case study organisation provided 86 quantified risk registers related to port and rail capital projects. for each of these risk registers, the project contingency was estimated using a prescribed risk register template and monte carlo simulation software. the same 86 quantified risk registers were then used to simulate the programme contingency. the simulation results indicated that the programme contingency requirement was approximately 8% points lower than that of the sum of the individual projects. the first implication of this research result is that, should borrowed capital be used to fund the projects, the interest bill would be higher when calculating project contingency on a project-by-project basis. the second is that regularly appearing low probability, high impact risks, should be identified and these risks should be quantified not in the projects themselves, but in a centrally managed, programme cost contingency fund. keywords: monte carlo, risk simulation, port and rail projects, project management, risk management. jel classification: c15. 1. introduction there are various terms which are used to describe funds which finance realised project risks. iso31000:2009 states that risk financing is as form of risk treatment, and it involves “contingent arrangements for the provision of funds to meet or modify the financial consequences” of realised risks (american society of safety engineers 2011a). pmbok™ uses the term reserve and defines it as a provision made in the project management plan to mitigate cost and/or schedule risk (project management institute https://doi.org/10.3846/bme.2017.355 mailto:1francois.joubert@kwanto.co.za mailto:2email2@email.com 2 f. joubert, l. pretorius. using risk simulation to reduce the capital cost requirement for a programme of capital projects 2013). chapman & ward (2011) uses a different definition by stating that contingency is the difference between an acceptable commitment level and the expected value of future performance. contingency is generally included in most cost estimates, and it is expected to be expended (association for the advancement… 2013). further to this, godfrey (1996) stated that there are three basic types of project contingencies: (i) tolerance in the specification, (ii) float in the programme and (iii) money in the budget. for this paper, the term contingency refers to “money in the budget”. the importance and accuracy of contingency is covered by oberlender & trost (2011), baccarini (2004), mak et al. (1998) and loizou & french (2012). papers by baccarini (2006) and bakhshi & touran (2014), hamad et al. (2016), hollmann (2008) and lam & siwingw (2016) listed various methods (and methodology categories) for estimating project budget contingency. these estimating techniques include methods such as (i) traditional percentage, where contingency is calculated using an overall percentage which is added to the base estimate and (ii) monte carlo simulation. monte carlo simulation is a computerized mathematical technique that allows for the calculation of risk in quantitative analysis and decision making (hillson 2009). it is used to aggregate variation in a system resulting from variations in the system, for several inputs, where each input has a defined distribution and the inputs are related to the output via defined relationships (american society of safety engineers 2011b). it is popular because it uses basic statistics, can used with existing project data as baseline and there are many good software tools available (hillson 2009). 2. research context and motivation up to 2010, the case study organisation (cso) in this research used a joint venture, as an engineering, procurement, construction management consultant. this consultant’s employees conducted quantitative risk analysis on a small number of large projects since there were no similar internal resources at the cso. the quantitative risk analysis was used to (i) estimate project contingency and to (ii) evaluate the level of risk for each project. when the relationship with consultant ended, internal project risk management capacity was created at the cso. it was the first time in south africa’s history that a quantitative risk management approach was rolled out on part of a port and rail capital investment programme, and not only on individual, unrelated projects. this also means that the amount, quality and extent of data which was collected during this process is unique in a south african context. there were two primary reasons for the roll-out of quantitative risk analysis at the cso as part of this research. the first was that (i) the implemented project contingency guidelines were inaccurate and that the (ii) enterprise risk management (erm) approach could not handle the complex projects which were being executed by the cso. 3 business, management and education, 2017, 15(1): 1–13 the contingency guidelines provided by the cso project lifecycle process (plp), used traditional percentage values to calculate project contingency. this meant that for a project in execution phase, a standard 10% was applied. the problems associated with this approach have been widely described by baccarini (2005) and bakhshi & touran (2014) and criticism uses terms such as “un-scientific”, “not project context specific” and “arbitrary”. in addition to this, cso erm methodology followed a risk qualification approach. this process ranked risks for further analysis or action by assessing and combining their probability of occurrence and consequence but did not provide for quantitative analysis of the effect of identified risks on overall project objectives. a quantitative approach fulfils this requirement and had to be able to model risks of the following complexity: “risk xyz is a multiple occurrence risk, which can happen 4 times over the duration of the project, has a time delay of up to 4 weeks, with a weekly cost of r250 000 and additional capital cost of between r3 and r6 million”. a more accurate approach was required at the new risk register (document used to identify, analyse and evaluate risks (international organization for standardization 2009)) template and had to provide for the following: – the calculation, testing and tracking of project contingency/reserves. these provisions in the project estimate to be used in the mitigation of cost and/or schedule risk (project management institute 2013) estimate project management plan. – the integration of a risk register with the project estimate and project schedule, to provide a risk loaded final project cost and completion date. a risk quantification methodology using a ms excel based risk register template and simulation software (@risk) was rolled out on 106 projects as part of this research. of these 106, 86 were quantified. the first phase of the research in this case study was to simulate the contingency requirements for each of the projects. do to this, @risk was used to generate an output distribution for each of the project risk registers. the 80th percentile (p80 value) of these output distributions was then added to the project base costs as cost contingency. the next phase was the introduction of cost uncertainty into the estimate itself and the integration of the risk register into the estimate. this allowed the concurrent simulation of the estimate and the risk register to produce a “risk loaded estimate”. the final step in the roll-out was the integration of the risk register into the project schedule to produce a “risk loaded schedule”. the last two steps were not rolled out to all projects due to a lack of appropriate skills, the complexity of integrated risk register / cost estimate / project schedule simulation models and inappropriate resource and task allocation. it is assumed that this had no effect on the results presented in this paper. the latter refers to the risk managers doing work on risk identification and quantification, but not on assisting the project manager in decision making, managing the risks and their treatment plans. 4 f. joubert, l. pretorius. using risk simulation to reduce the capital cost requirement for a programme of capital projects 3. research objective after the implementation of this quantitative approach at the cso, the following research question was therefore asked as manifestation of the research objective: “how does the sum of the p80 values from a risk register for each of the 86 project compare to the p80 value of the entire programme of projects?” this question needed to be answered in terms of two types of projects – large and small. the large projects were identified, by using criteria such as (i) being complex, high capital cost, multi-disciplinary engineering projects, having (ii) complex hydrogeological conditions (for example lots of water and rock) and (iii) projects with unfamiliar scope which are only executed once every 20 years etc. a total of eight projects like this were identified. tasks: the following tasks as part of the research process were followed to address the research objective and answer the question: – verifying the validity of simulation as research methodology, – using monte carlo simulation to model likelihood (chance of occurring) for both once-off and multiple occurrence risks as well as various types of consequence. – giving a high-level overview of the simulation process. 4. methodology 4.1. simulation as research methodology several sources indicate the validity of simulation in management studies and research. harrison et al. (2007) stated that although some simulation studies were published in major management journals in the 1980s, simulation-based work did not begin to appear in management and social science journals with any regularity until the 1990s. it was particularly found in disciplines related to management, sociology, psychology, economics and political science. this view was confirmed by berends & romme (1999). harrison et al.’s (2007) conclusion started with “computer simulation can be a powerful way to do science” and concluded with “…computer simulation promises to play a major role in the future…”. they also stated that, together with theoretical analysis (deduction) and empirical analysis (induction), computer simulation is now a recognised technique in scientific research. additionally, jahangirian et al. (2010) stated that a wide scope of simulation techniques were being used and that the employed techniques focussed on real-world applications. 4.2. monte carlo simulation and the modelling of single and multiple occurrence risks and consequence monte carlo simulation can be used to perform risk analysis by developing models of possible results by substituting a range of values, in the form of a probability distribution, for any factor in a project that has inherent uncertainty (palisade corporation 2014; cooper et al. 2005). in the context of project management, these factors include variables such as project 5 business, management and education, 2017, 15(1): 1–13 delays, time variable cost and additional capital requirements. the simulation then calculates results repeatedly, each time using a different set of random values produced by probability distribution functions. after executing up to tens of thousands of iterations, a monte carlo simulation produces distributions of possible outcome values (palisade corporation 2014; american society of safety engineers 2011b). in practical terms, it produces a number in conjunction with a likelihood, for example: “there is an 80% likelihood that the project will be completed on 4 april 2019” instead of “on 4 april 2019”. the 80% likelihood may also be presented in terms of a p-value, i.e. p80. a ms excel risk register was used, which made provision for the modelling of both single and multiple occurrence risks. for single occurrence risks, table 1 below was used as probability values. these values were selected from the likelihood ranges prescribed by cso’s erm policy since @risk requires a discrete value to simulate likelihood. these use of likelihood ratings like this forms the probability part of probability-impact grids (pig) as described by cooper et al. (2005) and hillson (2009). cox (2008), hillson (2009), with chapman and ward (2011) present some criticism on the use of such matrices, mainly related to their simplicity (not being able to support complex decision making), as well as their focus on risk and the exclusion of opportunities. another shortcoming is that they generally do not assess risk urgency, and do not make provision for multiple occurrence risks. it was however, the approach used in the cso’s risk register template (rrt). a binomial distribution was used to model single occurrence risks. the binomial distribution is a discrete distribution returning only integer values greater than or equal to zero (palisade corporation 2014). in the context of a construction project, risk such as safety incidents, procurement delays; and material deliveries can realise multiple times and were modelled as such. a poisson distribution was used to model the frequency of these type of risks. the poisson distribution is a discrete distribution returning only integer values greater than or equal to zero (palisade corporation 2014). the rtt made provision for the modelling of various types and combinations of consequence (outcomes of the risk event). these include time variable cost as well as direct capital cost. risk consequence was modelled in terms of the monetary impact on the project, using the following method (1) and (2): 3 3 e = × +point estimate point estimates total cost time delay weekly weighted averag cost additional capital cost (1) where: w =eekly weighted average cost ( ) 5 1 % = ×∑ k k k supplier weekly rate consequence (2) 6 f. joubert, l. pretorius. using risk simulation to reduce the capital cost requirement for a programme of capital projects the latter is best described here by using the following example: a project has two contractors: contractor a with a weekly average rate of r150 000, and contractor b with a weekly average rate of r10 000. during the risk workshop conducted as part of the case study research, it was established that should a specific risk realise, contractor a will have a 10% loss and contractor b a 25% loss. the weekly weighted average cost would therefore be as follows (3): weekly weighted average cost = r150 000*10% r10 000*25%+ = r17 500 (3) to ensure that sampling took place at the tail end of more uncertain risks, two different distributions from @risk were used to estimate time delay and direct capital cost (4), (5) and (6): time delay3 point estimate = peralt (0.05, min, 0.5, most likely, 0.95, max) or (4) ( )3 0 05 0 5 0 95=point estimatetime delay lognormalt min most likely max     . , , . ,   , . , when (5) ( ) ( ) 2 − ≥ × −max most likely most likely min (6) taking the above, the overall logic used in creating simulation results, appears in figure 1. table 1. likelihood categories (joubert 2016) category qualitative description criteria probability interval a rare occurrence requires exceptional circumstances, exceptionally unlikely; even in the long-term future; only occur as a “100-year event”. 1.0% b unlikely may occur but not anticipated, or could occur in “years to decades”. 20.0% c moderate may occur shortly but a distinct probability it won’t, or could occur within “months to years”. 45.0% d likely balance of probability will occur, or could occur within “weeks to months”. 80.0% e almost certain consequence is occurring now, or could occur within “days to weeks”. 95.0% 7 business, management and education, 2017, 15(1): 1–13 fig. 1. modelling of likelihood and consequence (joubert & pretorius 2015) 5. high level overview of simulation process the first step in the simulation process was to combine the existing risk registers into one ms excel workbook, on a single sheet, using the logic displayed in figure 1. this process is displayed in figure 2. the cleaned-up complete risk register (crr) contained 1063 different risks, with a total of 165 individual risk names. fig. 2. steps in simulating p80 values for each risk register as well as programme of projects (source: prepared by the authors) 8 f. joubert, l. pretorius. using risk simulation to reduce the capital cost requirement for a programme of capital projects steps 2 and 3 of the simulation process is best described in terms of ms excel and @risk, as in figure 3. in cell e4, the simulation results for the project “export trippers, port of richards bay” was collected, using a riskmakeinput() statement. cell d4 displays the p80 value from the risk register after the simulation was run. cell c4 displays this p80 value as a % of the project estimate. to ensure that the simulation results were reliable, simulation was executed and error checking took place. during the developing of the simulation model, two types of errors related to the following occurred: – the cells (or some cells) returned no results due to data description or data type mismatches. this was corrected by simply removing these errors and re-running the simulation. – if #value errors occured, it meant that there are problems in the crr_simulation_result named range, where certain of the line items in the data range returned errors. filters were used to sort and correct these types of error. 6. findings after error checking was completed, 5 000 iterations were execution for each of the three project groups considered in the cso. the first included all 86 projects, the second the 78 smaller projects and the last, the eight large projects. the results for the three groups of projects appear in the next table (table 2): fig. 3. calculating project and programme contingency (source: prepared by the authors) 9 business, management and education, 2017, 15(1): 1–13 table 2. comparing individual p80 values with p80 value of entire simulation category 86 projects (r million) 78 other projects (r million) 8 large projects (r million) simulated p80 of projects in group r 5 255.23 r 785.91 r 4 519.06 sum of individual project p80 values total r 5 703.73 r 939.12 r 4 764.61 –7.9% –16.3% –5.2% when studying at the result for the 86 projects, 7.9% reflects a substantial difference of approximately r445.5 million. should the cso have elected to use the p90 value, the “over requirement” would have been 25.1%, which in turn reflects a difference of just more than r1 920 million. the disparity between the p80 values of the two project groups indicates that the eight large projects primarily influence the risk profile of the programme. 7. discussion the discussion covers (i) the financial impact of the contingency calculation methodology as well as (ii) recommendations related to the estimation of risks on a programme basis. financial impact of applied contingency calculation methodology the implication of this simulation result is that when a company uses the p80 values from a risk register and simply adds them to the project estimate, the contingency requirements are overstated. this also has an impact related to the interest bill on the lent capital, as in the following example: taking a programme of r100 billion, which contains a contingency of r15 billion, the contingency would be over-estimated by r1.2 billion. the annual interest bill on r1.2 billion, using a interest rate of 8%, would be r96 million. should the cso have selected to use the p90 value, the contingency requirements could have been over-stated by approximately r3.75 billion, leading to an annual interest bill of nearly r300 million. some recommendations the impact of the current methodology to estimate contingency as the p80 value of the output from a risk register, on a project by project basis, is leading to higher capital requirements and the accompanying finance charges. in an environment where skills are in short supply, a possible way to reduce the contingency requirement in the absence 10 f. joubert, l. pretorius. using risk simulation to reduce the capital cost requirement for a programme of capital projects of a concurrently run monte carlo simulation on the entire programme of projects, is to review the risk registers, and to classify the risk and the related treatment plans in terms of what aritua et al. proposed (2011). their recommendation is to distinguish between three types of risks: (i) programme, (ii) amplified and (iii) generic project risks, as described in table 3. table 3. common to programme, amplified and generic project risks (aritua et al. 2011) category qualitative description typical risks common to programme risks these risks related to the function of managing multiple projects and aligning them to the organisation’s strategy and policies. it included the following risks linking strategy and projects. challenges in procurement. competition for contractors. stakeholder expectation management. amplified risks these risks are simple to deal with but exacerbated because of the multi-project environment. reputational risk. fraud. cash flow and funding problems. changes in government policy. generic project risks the next step would be to decide which of the various programme and amplified risks should be quantified in the projects themselves, or be removed from the projects, and quantified and managed on a programme basis. an added advantage of having treatment plans and owners, on a programme basis, would be that the effect of successful treatment plans would affect the entire programme. another recommendation would be to implement a policy regarding which type of risk identification and contingency estimating process would be applied on which type of projects. a decision regarding this might be that the current p80 rule is applied to the smaller projects and that the large projects undergo the risk loaded estimate and schedule route. the last recommendation relates to low probability / high consequence risks which appear on many or all the project risk registers. although the cso has a deeply embedded safety culture and accompanying safety statistics, the risk and consequences of having an on-site fatality is reflected in nearly all the risk registers. it is suggested that the data which was collected during this research be used to identify these risks and to include, but not quantify these risks, on a projectby-project basis. as described in previous paragraph, contingency provision for these risks should be made on a programme level. 11 business, management and education, 2017, 15(1): 1–13 8. conclusions this paper combined various concepts related to (i) project risk management, (ii) monte carlo simulation, (iii) project contingency cost estimation, and (iv) the relationship between project, and programme risks to illustrate that the contingency requirements are lower when simulating all the risks in the programme, when comparing it with the individual project contingency requirement. there are various implications and recommendations. the first is that, should borrowed capital be used to fund the projects, the interest bill would be higher when calculating project contingency on a project-by-project basis. the second is that the cso needs to identify low probability, high impact risks which regularly appear in the risk registers and to make provision for them not in the projects themselves, but in a central contingency fund. this should reduce some of the duplication in the project programme. in cases of resource constraints, organisations could introduce policies regarding which types of project would undergo which type of contingency estimation methodology. the simulation results also showed that a small set of projects caused the most uncertainty in the programme. this is significant for project and risk managers since it brings the question “which projects cause the most risk?” to mind, which in turn, should assist in ensuring that project management resources are proportionally assigned. disclosure statement the authors hereby declare that there were no competing financial, professional, or personal interests from other parties during the 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https://doi.org/10.1016/j.ejor.2009.06.004 https://doi.org/10.1108/14635781211206922 https://doi.org/10.1080/014461998371917 https://doi.org/10.1061/(asce)0733-9364(2001)127:3(173) 13 business, management and education, 2017, 15(1): 1–13 francois joubert. phd, part time extraordinary senior lecturer at the department of engineering and technology management, university of pretoria. his research focusses on project risk management related topics such as risk identification, risk simulation and project cost contingency estimation. his non-academic work includes risk work on various large construction projects, both in south arica and ghana. his academic qualifications include phd (engineering management), mphil (ethics), mba, meng (technology management), beng hons and beng (mech). leon pretorius. phd, professor in the graduate school of technology management at university of pretoria. professor pretorius is active as a specialist consultant and researcher in the engineering industry and has supervised 230 master and phd students in engineering as well as engineering and technology management on their master research projects, master dissertations and doctoral theses. more than 240 technical conference papers and peer reviewed journal articles as author and co-author in his fields of expertise has been published. he holds the degrees d eng, msc eng, msc math, bsc eng hons, bsc hons math from the university of pretoria. bme_2013_11_2 maketas.indd the development of an attitude towards risk management in the context of country competitiveness viktorija stasytytė vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania e-mail: viktorija.stasytyte@vgtu.lt received 26 august 2013; accepted 23 september 2013 abstract. the paper analyses the prevailing definitions of risk, uncertainty and risk management as well as attitudes towards risk identification, analysis and response in the context of the enterprise and country as a whole. the article presents a scheme of attainment of risk-intelligent enterprise management and discloses its application possibilities to country risk management. the paper also shows the schematic views of particular techniques applied in each step of the risk management process. after analysing a report on global country risks, a generalized risk map of global risks is formed and detailed further trends of research are determined in order to develop a thorough picture of country risks in lithuania. keywords: risk, risk management, uncertainty, country risk, risk map, expert valuation. reference to this paper should be made as follows: stasytytė, v. 2013. the development of an attitude towards risk management in the context of country competitiveness, business, management and education 11(2): 281–293. http://dx.doi.org/bme.2013.16 jel classification: d81, g32, r10. 1. introduction there is no agreed definition of the concept of risk. literature points to a number of different ways of understanding this concept. some definitions are based on probability, chance or expected values, some of those on undesirable events or danger, whereas others emphasise uncertainties (aven 2012). naturally, risk means different things to different people, and they perceive risk in different ways depending on what area they are working within (riabacke 2006). many studies have attempted to deal with this problem and studied the role of risk in their respective fields (sweeney et al. 1999; sadka 2006; tohidi 2011). according to french and liang (1993), “risk is a much overused word; indeed, it has been used in so many senses as to become virtually meaningless”. risk management in a company is often limited to financial risk management: market risk, credit risk, exchange rates risk, etc. however, the management of enterprise activity risk is as much important as financial risk management, and therefore should be treated with no smaller effort and resources in order to achieve the efficiency of the company’s activity (stasytytė 2012a). b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2013, 11(2): 281–293 doi:10.3846/bme.2013.16 copyright © 2013 vilnius gediminas technical university (vgtu) press technika www.bme.vgtu.lt 282 v. stasytytė. the development of an attitude towards risk management in the context of country competitiveness considering research on country risk, a trend towards the analysis of financial aspects is obvious in scientific publications (di gregorio 2005; mcaleer et al. 2011; baglioni, cherubini 2013), though there are some broader investigations (herrero et al. 2011; sanjo 2012). the analysis of country risk can be also performed using similar methods as those applied for enterprise risk analysis. thus, this paper puts forward research on risk identification and analysis techniques pursuing intelligent risk management. taking into account the variety of issues related to risk management and a rising need to apply adequate methods to solve these questions, a scientific problem of the paper can be defined as a growing need to successfully manage arising risks and insufficient knowledge about various aspects, methods and ways of implementing enterprise and country risk management. the objective of research is to analyse methods and techniques for risk identification and further analysis proposing the ways and combinations of their application in order to increase the efficiency of risk management that could be applied to a company or country as a whole. in order to attain the above stated objective, the following tasks have been distinguished: − to analyse risk and uncertainty definitions provided in scientific literature and practical user guides to risk management; − to discuss the main aspects of risk identification and analysis accompanied with the presentation of respective techniques; − to investigate how country risks can be analysed with the help of the proposed methods and techniques. the applied research methods are scientific literature analysis, comparative analysis, synthesis and generalization, graphical visualization. 2. the evolution of the concepts of risk and risk management 2.1. does risk have a close or distinct meaning to uncertainty? due to a great amount of research on risk management, many different definitions of risk appeared. according to oxford english dictionary (thompson 1996), a definition of risk it provides is ‘a chance or possibility of danger, loss, injury or other adverse consequences’, and a definition of at risk is ‘exposed to danger’. in this context, risk is used for signifying negative consequences. however, taking risk can also result in a positive outcome. a third possibility is that risk is related to the uncertainty of the outcome. definitions of risk can be found from many sources. sometimes literature can display two parallel definitions of risk: 1. risk is an uncertain situation with possible negative outcomes. 2. risk is a potential variation in outcomes. the variation can be either positive (upside risk) or negative (downside risk). 283 business, management and education, 2013, 11(2): 281–293 definition 2 is mainly used in finance where both positive and negative positions in securities are possible. in other fields, definition 1 is more common. based on the findings of knight (1921), luce and raiffa (1957) provide us with a useful definition of risk in the field of decision-making. the definition distinguishes three types of decision-making situations. we can state that most decision-makers are in the realms of decision-making under either: − certainty where each action is known to lead invariably to a specific outcome; − risk where each action leads to one of a set of possible specific outcomes, each outcome occurring with a known probability; − uncertainty where actions may lead to a set of consequences, but where the probabilities of these outcomes are completely unknown (luce, raiffa 1957). thus, a risky situation is the situation where the outcome is unknown to the decisionmaker, i.e. he/she is not sure which outcome will occur and uncertainty may lead to erroneous choices. the analysis of the concepts of risk and uncertainty can be perfectly accomplished by the findings of aven (2012) who developed a thorough classification system for risk definitions. such definitions involving uncertainty are provided in table 1. table 1. classified definitions of risk (source: created by the author based on aven (2012)) the group of risk definitions risk definition risk = objective uncertainty a) risk is objective correlative of subjective uncertainty; uncertainty considered as embodied in the course of events in the external world. b) risk is measurable uncertainty, i.e. uncertainty where the distribution of the outcome in a group of instances is known (either through calculation a priori or from the statistics of past experience). risk = uncertainty a) risk is uncertainty in regard to cost, loss or damage. b) risk is uncertainty about a loss. c) risk is the uncertainty of the happening of unfavourable contingencies. d) risk is the uncertainty of the outcome, actions and events. risk = consequences/damage/ severity + uncertainty a) risk = uncertainty + damage. b) risk is equal to a two-dimensional combination of events/ consequences (of an activity) and associated uncertainties. c) risk is uncertainty about and the severity of the consequences (or outcomes) of activity with respect to something that humans value. d) risk is deviations from a reference level (ideal states, planned values, expected values, objectives) and associated uncertainties. 284 v. stasytytė. the development of an attitude towards risk management in the context of country competitiveness each of the definitions belonging to every of the three groups related to uncertainty has been proposed by a particular researcher. as the objective of the current paper is not to engage in a deep historical analysis of the evolution of risk definitions, but rather to concentrate on tools for risk identification and analysis, which, by the way, could partly depend on how one perceives risk, the original sources of literature have not been presented but can be easily found in aven (2012). 2.2. contemporary trends towards enterprise risk management a corporation can manage risks in one of two fundamentally different ways: (1) one risk at a time, on a largely compartmentalized and decentralized basis; or (2) all risks viewed together within a coordinated and strategic framework. the latter approach is often called “enterprise risk management” or “erm” (nocco, stulz 2006). other definitions of this approach embrace integrated risk management, corporate risk management, holistic risk management or enterprise-wide risk management. thus, risk management is now moving away from a silos perspective of risk towards a holistic way of looking at risk, in which all risks are managed jointly and analyzed across the entire enterprise (korombel 2012). enterprise risk management, according to the committee of sponsoring organizations of the treadway commission (coso), is “a process effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise and designed to identify potential events that may affect the entity and manage risk to be within its risk appetite so that to provide reasonable assurance regarding the achievement of entity objectives” (coso 2004). according to hopkin (2010), however, the erm approach means that an organization looks at all risks that it faces across all operations it undertakes. erm is concerned with the management of risks that can impact the objectives, key dependencies or core processes of the organization. currently, many organizations and institutions all over the world deal with the development of integrated risk management standards (knight 2002; raz, hillson 2005; aven 2011). the most popular ones include irm 2002 (the institute of risk management), coso ii – enterprise risk management – integrated framework developed by the committee of sponsoring organizations of the treadway commission in usa (coso 2004) and iso 31000:2009 risk management – principles and guidelines (iso 2009) that replaced the australian – new zealand standard as/nzs 4360:2004 risk management (australian … 2004). the aim of the risk management process is to identify potential events which, if occurred, could have a negative impact on the achievement of the objectives set by an enterprise, to assess their effects and probability of occurrence as well as to indicate the ways of limiting them. naturally, the occurrence of an event may also have a positive impact on the company’s objectives, though in practice, the events that cause negative deviations from the set objectives are mainly considered (korombel 2012). the process 285 business, management and education, 2013, 11(2): 281–293 of risk management in companies usually consists of such steps as risk identification, risk assessment, risk response (treatment), communication and monitoring. sometimes additional steps at the beginning of the process such as the analysis of an internal company’s environment or objective setting are added (coso 2004). also, risk analysis, as well as risk identification, can be seen as a “substep” of the major risk assessment step (irm 2002). thus, it often happens that the companies that succeed in creating effective erm have a long-run competitive advantage over those that manage and monitor risks individually. by measuring and managing its risks consistently and systematically, and by giving its business managers information and incentives to optimize tradeoff between risk and return, a company strengthens its ability to carry out its strategic plan. also, erm can add some value for company shareholders. 3. methodology for particular situations 3.1. risk intelligence as a proposed attitude towards risk besides recent improvements in the risk management process and development of enterprise risk management and risk management standards, one more innovative trend – the so-called risk intelligent enterprise management – has been noticed (risk intelligent ...2010). this approach considers risk as a key input into leadership decisions versus as an outcome to be managed after the fact. it is worth making contrast between risk intelligent enterprise management and the way many companies are approaching erm today. a number of companies have implemented erm programs in response to investor and regulator demands for more effective risk management. these erm programs are intended to evaluate, monitor and document an organization’s risks bringing some degree of structure to what might formerly have been a disparate set of information-gathering and risk mitigation processes. but while an erm program can help an enterprise in better organizing its risk-related activities, it is not, in itself, enough to embed a thoughtful, sustainable consideration of risk into the organization’s key decision-making processes. risk intelligent enterprise management, unlike many companies’ approach to erm, treats risk management as an integral part of managing the enterprise strategy and operations, not as a separate, siloed process. in risk intelligent enterprise management, executives understand that every action that could create value also carries the potential for risk. they recognize that the discussion about risk and value cannot be separated, and therefore view risk as a decision driver rather than as a consequence of decisions that have already been made. knowing this, they endeavour to make risk-intelligent choices that expose the enterprise to just the “right” amount of risk needed to pursue value creation. they consider risk on the front end of every decision they make both to identify potential threats and to strategically select risks they choose to take in order to pursue value. 286 v. stasytytė. the development of an attitude towards risk management in the context of country competitiveness st ak eh ol de r va lu e stages of risk management maturity ini�al fragmented integrated top -down risk intelligent fig. 1. risk intelligence maturity model (risk intelligent ... 2010) in order to start implementing, or at least moving towards risk management intelligence, a risk manager in a company should understand in what place exactly the company or organization is on the way to intelligent risk management. this can be done with the help of a risk intelligence maturity model (fig. 1). thus, depending on how risk management is performed in the company, it can find its place on the axis showing a direction towards intelligent risk management. at companies that only start managing risk and lack appropriate knowledge and experience, or may be have not faced such a necessity yet, risk management is implemented chaotically, differently at various parts of organizations and has little in common with the corporate strategy. the more we move towards the maturity of risk management, the more integrated, reasonable and quantitatively-based it becomes (stasytytė 2012b). the risk-intelligent approach to risk management requires the four main factors to be taken into account: 1) risk discussion included in the strategic fields of the company’s activity; 2) early warning system about high risks; 3) linkage to performance measures and incentives; 4) risk modelling. in this case, a problem of optimal resource allocation between the above mentioned factors appears. thus, an assumption that a company assigns a certain amount of resources to manage risks can be made. however, if the company identified itself being at the initial or fragmented stage of risk management (fig. 1), then, it should gradually pass all further stages, and first of all, assign resources to the activities of every subsequent stage. after the greatest possible effect of the current stage is achieved, the company moves to the next stage etc. until reaches risk management intelligence. the risk management activities attained at every stage are broadly described in the earlier publication of the author (stasytytė 2012b). for the optimal allocation of resources and formation of risk management activity portfolio, the method of an adequate portfolio should be applied, as described in the publications by rutkauskas (2006), rutkauskas and stasytytė (2011a, 2011b). 287 business, management and education, 2013, 11(2): 281–293 3.2. qualitative and quantitative tools for risk identification, analysis and response according to various methodologies and standards, risk identification is one of the most important steps of the risk management process. risk identification is sometimes named as event identification; for example, in coso risk management cube (coso 2004). the events can be both positive and negative (fig. 2). events risks (nega�ve impact) opportuni�es (posi�ve impact) strategy implementa�on and achievement of objec�ves fig. 2. event identification (source: stasytytė 2012a) an event is an incident or occurrence emanating from internal or external sources that affects the implementation of a strategy for achieving the set objectives. the events may have a positive or negative impact, or both. also, event identification can be made according to the predetermined categories defined in pestel, internal-external factor analysis or internal context (fig. 3). pestel analysis internal-external factor analysis economic technological environmental legal socio-cultural legal external factors economic natural environment poli�cal social technological internal factors infrastructure personnel processes technology internal context governance policies resources rela�onships organiza�on‘s culture informa�on systems standards and models fig. 3. groups of internal and external factors in risk identification (source: created by the author) 288 v. stasytytė. the development of an attitude towards risk management in the context of country competitiveness in event identification, management recognizes that uncertainties exist but does not know whether and when an event will occur or its precise impact in case it occurs. management initially considers a range of potential events − stemming from both internal and external sources − without necessarily focusing on whether the impact is positive or negative. in this way, management identifies not only potential events with a negative impact but also those representing opportunities to be pursued. to avoid overlooking relevant events, identification is best made apart from the assessment of the likelihood of the event occurring and its impact. however, practical limitations exist, and it is often difficult to know where to draw the line. however, even the events with a relatively low possibility of occurrence should not be ignored if the impact on achieving an important objective is great. plenty of external and internal factors drive events that affect strategy implementation and achievement of the established objectives. as a part of enterprise risk management, the executives recognize the importance of understanding these external and internal factors and the type of the events that can emanate therefrom. the proposed scheme for determining categories of the events in the risk identification process can help companies with developing event categories based on the categorization of their objectives thus using a hierarchy that begins with high-level objectives and then cascades down to the objectives relevant to organizational units, functions, or business processes. each company, depending on its size and field of activity, can have slightly different event categories. 3.3. particular techniques for identifying events a methodology for identifying an entity event may comprise a combination of techniques together with supporting tools. for instance, management may use interactive group workshops as a part of the methodology for its event identification with a facilitator employing any of a variety of technology-based tools for assisting participants. event identification techniques look to both the past and the future. the techniques also may vary depending on how they are applied within an entity – in a top-down or bottom-up direction. the most widely used and proposed in literature event identification techniques (coso erm integrated framework 2004; iso 31000:2009) are event inventories, internal analysis, facilitated workshop, process flow analysis, leading event indicators, loss event data, brainstorming, delphi technique, cause and effect diagrams along with the techniques and methods mentioned above, some traditional techniques such as swot, pest, pestle or more sophisticated like system analysis, scenario analysis and system engineering can be used for risk identification. besides, an entity may choose a combination of techniques or methods for more successful risk identification. 289 business, management and education, 2013, 11(2): 281–293 3.4. visualization techniques for adequate risk analysis and response the way of how the gathered information about risks pertaining to an entity is presented impacts the efficiency of the future treatment and management of identified risks. thus, one needs to present the results of risk assessment in the most user-friendly way. for this reason, a number of means and tools can be used. the author distinguishes a risk map and risk register as the most suitable and informative means. risk 2 risk 3 risk 1 1 2 3 4 5 5 4 3 2 1 likelihood impact a) risk map no. risk description current level of risk response likelihood impact overall rating b) risk register fig. 4. schematic forms of the risk map and risk register (source: created by the author) the axes of the risk map can be quantitative (impact expressed in monetary terms, likelihood – in percentage or both in conditional units if, for their determination, expert valuations have been used) and qualitative (impact ranging from insignificant to catastrophic; likelihood ranging from negligible to probable). the form of the risk register also can vary depending on the industry, size and other specifications of the company under analysis. fig. 4 presents the most common view of the above mentioned tools, which is effective for the initial analysis of risks within the entity. for a more comprehensive analysis of risk such indicators as possible loss, detailed response (treatment) actions, cost, human resources and time needed to implement the selected response can be also included into the risk register. the above-described means can be successfully applied to country risk analysis, and therefore some insights of such investigation will be presented in the next chapter. 290 v. stasytytė. the development of an attitude towards risk management in the context of country competitiveness 4. the possibility of assessing and managing country risk pursuing competitiveness a comprehensive analysis of country risk is a complicated enough task requiring adequate decision methods. some of those applied to enterprise risk analysis and management can be also considered in the analysis of risks pertaining to the country. however, researchers often narrow their investigations to merely financial risks that country is exposed to. timurlenk and kaptan (2012) distinguish the four main groups of methods for financial country risk analysis: 1) fully qualitative method, 2) structured qualitative method, 3) checklist method and 4) other quantitative methods (ex. discriminant analysis, principal component analysis, logit analysis and classification, regression tree method). yim and mitchell (2005) analyse country risk models based on hybrid neural networks, kohonen networks, discriminant analysis, logit and probit models, artificial neural networks and cluster techniques, and made a conclusion that hybrid artificial neural networks is the best method for predicting country risk. however, the authors of the report “global risks 2012” performed a questionnaire and interviewed 469 respondents working in various types of organizations, living in different countries of the world and having their own area of expertise. according to the report, the following five global risk categories were distinguished: 1) economic risks; 2) environmental risks; 3) geopolitical risks; 4) societal risks; 5) technological risks. each category included particular risks that were placed on the two-dimensional risk map according to their likelihood and impact (fig. 5). moreover, the centre of gravity 1 2 4 3 5 likelihood impact 3 3.5 4 4.5 4.5 4 3.5 3 fig. 5. the most significant risks (centres of gravity) according to the “global risks 2012” report (source: created by the author using global risks report (2012)) 291 business, management and education, 2013, 11(2): 281–293 (highest risk according to both impact and likelihood as respondents provided) in each category of risk was established. the centres of gravity are as follows: 1) economic – chronic fiscal imbalances; 2) environmental – rising greenhouse gas emissions; 3) geopolitical risks – global governance failure; 4) societal risks – water supply crises; 5) technological risks – cyber attacks. each centre of gravity with a respective number has been placed on the generalized risk map. the numeration of axes is in conditional points starting from 3.0 and finishing 4.5 for convenience. however, each country may have its own risk map and its own centres of gravity in each risk category. analysing the situation in lithuania, an assumption that, regarding the category of environmental risks, the risk of mismanaged urbanization or land and waterway use mismanagement would achieve greater scores than rising greenhouse gas emissions could be made. also, unmanaged migration, the mismanagement of the aging population or unsustainable population growth could possibly surpass water supply crises, which is critical in the global environment in the category of societal risk. 5. conclusions scientists still have not agreed on a unique definition of risk. some definitions are based on probability, chance or expected values, some – on undesirable events or danger, whereas others on – uncertainties. people perceive risk in different ways depending on what area they are working within. however, despite the variety of definitions of risk, such elements as loss, danger and uncertainty are clearly embedded in the perception of risk. the main difference between risk and uncertainty appears to be that risk is measurable while uncertainty is not. a great number of risk identification and analysis methods for an enterprise have been already developed. however, the suitability of their application in particular situation depends on many factors pertaining to an entity. moreover, not all of those are adequate to country risk analysis. still, the risk map and risk register are the most universal tools for risk analysis in every perspective. for identifying country risk, the method of questioning, or appealing to a smaller number of more professional respondents, an expert valuation is suitable. hence, thorough expert investigation should be made in order to determine a clear picture of country risks in lithuania. however, for a further analysis of identified risks, especially if they are not limited to the financial ones, the scheme similar to enterprise risk analysis could be used. the management of country risk could also seek the highest level of intelligence where the competitiveness of the country is pursued. in such a case, the initiator of risk management activities should be a defined public or governmental organization. the question of resource allocation for such public management of country risk, as well as 292 v. stasytytė. the development of an attitude towards risk management in the context of 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2dahlish@ummgl.ac.id; 3mujimranani@ummgl.ac.id received 13 april 2017; accepted 19 may 2017 abstract. this research examines the existing of investor overconfidence in the capital market and the phenomena of stock prices reversal in the future due to the existing of this behavior. it has a different approach to test the existing of investor overconfidence by introducing firm’s growth as the information which has triggered many investors to behave overconfidently. by using multiple regression analysis, the results of this research confirmed our conducted hypothesis, investor tends to behave overconfident to firms which have higher growth. it proofed by the positive relation between firms’ growth and trading volume. afterward, this research also found that higher growth firms tend to have declining on its performance in the future. the negative relation between firms’ growth and longterm performance means that the stock’s price reversal caused by the existing of investor overconfidence. keywords: investment, firms’ growth, investor behavior, stock behavior, price reversal. jel classification: g11, g12, g14. 1. introduction the capital market in indonesia has been growth rapidly. the average of the increasing trading volume was 267% during 2011–2016. even in 2016 the trading frequency of indonesian stocks were 23,83 million times, it means that the average turnover of buying and selling was 8 days. in other said, people who buy shares today will sell it back 8 days later. it evidence showed great development of capital market in indonesia but in other side it inflicted many worries about speculative trading behavior. the speculative trading is one of many factors which pushed many investors to trade irrationality, the overconfident and overreaction behavior are the example in which has attracted many scholars. de bondt and thaler (1987) was the pioneer of research on overreaction hypothesis in capital market, especially on many financial events. in their research, they said that b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2017, 15(1): 127–139 doi:10.3846/bme.2017.358 mailto:2dahlish@ummgl.ac.id https://doi.org/10.3846/bme.2017.358 128 b. s. raharja et al. research of the stock price overreaction and investor overconfidence issues investor tend to overreact to unexpected events rather than the whole of the base-data of the firms. the overreaction behavior would make the stock prices departed away from its fundamental values (de bondt, thaler 1987). therefore, the stock prices were rising at the short-time whereas in the long-time due to an adjustment of the availability information it would be declined, it was called stock prices reversal. previous research found the phenomena of stock price reversal in many financial events such as ipos (ritter 1991; agarwal et al. 2008; cai et al. 2008; thomadakis et al. 2012) and seos (wadhwa et al. 2016). many scholars argued that the stock price reversal at financial events due to the existing of investor overreaction in capital market (ritter 2003; agarwal et al. 2008; cai et al. 2008; vakrman, kristoufek 2015). this research also examine the overreaction hypothesis in capital market, but not only restricted on financial events like ipos and seos. daniel et al. (1998) said that overreaction behavior occurred due to investor overvalued on recent information in capital market. thus, there is not only restricted on financial events, but rather the investment activity in the capital market. many previous research also found the investor overconfidence and stocks’ price overreaction on investment activity in capital market (daniel et al. 1998; ma et al. 2005; boussaidi 2013; ni et al. 2015). but the existing research not fully explained what and how the private information signals affected on the overconfidence behavior. for example agarwal et al. (2008) and boussaidi (2013), they used trading volume, price reversal, and trading volatility to capture the investor overconfidence and stocks’ price overreaction. higher trading volume of stocks has a mean of higher demand from investor to buy the stocks due to overconfidence of their private information. it implied that trading volume could be a proxy of investor overconfidence. the higher trading volume would make stocks’ price overreacted and keep away from its fundamental values. and in the future, due to the correction of availability information in capital market, stocks’ price will decline closed to its intrinsic values. therefore, the issues in this area remain unresolved, need more explanation about the information which have triggered many investor to behave overconfident. this research introduces firms’ sales growth as an information which have caused investor overconfidence, it implied that investor overweight to firms’ which have higher sales growth. in other that, this research also examines the long-term performance of firms’ which have higher sales growth and identify what factors affected on its long-term performance. we begin by analyzing how investor reacted to the firms which experienced higher sales growth. secondly, we analyze how the stocks’ performance of higher growth firms in the future. thirdly, we identify what factors affected on the stocks’ long-term performance. our empirical results show that investor is overconfidence to higher growth firms, it showed by higher trading volume of higher growth firms, and we also found the declining of its performance in the future. the empirical results of this research give knowledge to investor on how to invest wisely in capital market, minimizing self-attribution bias by looking and understanding the details of firms’ information. 129 business, management and education, 2017, 15(1): 127–139 2. literature review and hypothesis 2.1. investor overconfidence and past information many evidences challenge the existing of efficient market hypothesis (emh) on explaining many phenomena in the capital market. for example, figure 1 shows the data of trading frequency in indonesian stock exchange (idx) during 2011–2016. as mentioned previously that trading volume and trading frequency of indonesian stocks in idx increase during 2011–2016. the increasing trading volume activity, in the other side, will effect on higher trading volatility and push capital market to have higher uncertainty due to the information could not distribute perfectly. therefore, investor tend to have irrational on making decisions. efficient market hypothesis (emh) is a classical theory in investment which explained that the price of stocks reflected to the all of existing information. the theory required at least two conditions, firstly, the all of information distributed smoothly. secondly, investor have ability to interpret information precisely and taking decisions rationally. therefore, in the context of emh, stocks’ return determined by risk bearing. but, many previous research gave evidences that have challenged to the existing of emh. many scholars who have concerned on the phenomenon of stock prices reaction to many events such as stocks split (lamoureux, poon 1987), dividend announcement (bessler, nohel 1996), stock repurchase (isa, lee 2014), political events (raharja 2015) found the abnormal return during announcements. raharja (2015) found that abnormal returns occurred during 40 days after announcement indonesian reshuffle ministry. it researchers also found the anomaly of the excess return of risk free asset over market performance. the other phenomena also challenged to emh such as positive short-term autocorrelation of stock returns (rouwenhorst 1998), long-term reversal (raharja et al. 2017). therefore, those empirical results pushed many scholars to rethinking alternative approach in elaborating capital market phenomena. the behavioral approach is the alternative approach that can be used to get more detail explanations about it. fig. 1. trading volume and trading frequency (source: financial services authority (ojk)) 0 20 40 60 80 100 2011 2012 2013 2014 2015 2016 trading volume (in millions) trading frequency (in thousands) 130 b. s. raharja et al. research of the stock price overreaction and investor overconfidence issues de bondt, thaler (1985) argued based on the basic of psychological theory, in violation of bayes’ rule most people tend to overreact to dramatic news events. by using this concept he explained the increasing of stock prices over its intrinsic values at many news events, it empirical results called “stock market overreaction”. daniel et al. (1998) argued that stock market overreaction occurred due to investor overconfidence behavior. the investor overconfidence pushed the increasing demand of stocks, consequently the price of stocks will increase keep away from its intrinsic values. previous researches proof this evidence, their research found that higher trading volume as a proxy of higher demand of stocks, has been the antecedents variable of stock market overreaction (hirshleifer 2001; agarwal et al. 2008; hsu, shiu 2010; boussaidi 2013; raharja et al. 2017). but as mentioned previously that its previous research did not consider many information which have triggered many investor to overconfident. weinstein (1980) explained the overconfidence behavior occurred due to most people tend to have self-attribution bias, it means people tend to overweight their ability in interpreting information. if the object have good or successfully past experience, the self-attribution bias as well as the overconfidence behavior get worse (steen 2004). for example, gilovich (1985) found that people tend to overweight past winning teams in betting basketball game. but when the game is running and past losing teams leading over pas winning teams most people tend to change their betting which overweight to past losing teams, and so on, always changed depending on which team was superior. this empirical result give insight to understand the information which have triggered many investor became overconfident. in this research we use firms’ growth, measured by firms’ sales growth, as information which has triggered many investor. therefore, investor become overconfidence in investing their funds on higher growth firms, it showed by higher trading volume of higher growth firms. h1: sales growth positively related to trading volume 2.2. stock’s prices reversal if investor become overconfidence, stock’s prices tend to overreact and increase keep away from its intrinsic values. but after that as daniel et al. (1998) explained, that the stock’s price would be corrected, the confident level of many investor decline, therefore in the future stock’s prices back to its intrinsic values. in other said, stocks which have overreacted in the past will have declining long-term performance in the future, it called stock’s prices reversal. stocks’ price reversal occurred due to the overconfident behavior of investor which pushed stocks’ price overreact. many previous research also found the phenomena of stock’s prices reversal of winning stocks (ritter 1991; daniel et al. 1998; cai et al. 2008; li, yeh 2011; hribar, mcinnis 2012; raharja et al. 2017). in this research, we have different approach to proof the existing of investor overconfidence. we use firms’ growth as the information which have triggered many investor to become overconfident, therefore it would caused on the declining of long-term 131 business, management and education, 2017, 15(1): 127–139 performance. in other said, higher growth, winning stocks, tend to have declining on long-term performance in the future. ramezani et al. (2002) and gombola, marciukaityte (2007) in their research also found that higher growth firms tend to have declining on its long-term performance. therefore, the second hypothesis is: h2: firms growth negatively related to long-term performance. 2.3. theoretical framework the theoretical framework of this research show in fig. 2. h1 h2 firms’ growth long-term performance trading volume fig. 2. theoretical framework of this research 3. research method 3.1. data this research uses the data of 1.993 manufactural firms in indonesia. measuring firms’ growth are began from 2000 to 2013, whereas long-term performance measured by 3 years’ stocks performance after experienced higher growth. totally, the range of the research’s sample are range from 2000 to 2016. the design of this research breakdown into 3rd steps. firstly, it firms classified into 4 (four) quartile based on its firm’s growth from 2000 to 2012. q1 is firm with highest sales growth, q2 whose sales growth less than q1, and so on. secondly, to examine the effect of higher firms ‘growth as a factor which have triggered many investor to behave overconfident, this research eliminates firms which classified in q2, q3, and q4. table 1 show the distribution of research’s sample in this research. as mentioned above, this research test whether firm’s growth is the one of many information have triggered the sentiment of many investor to buy more shares in capital market. this research also examines whether firm’s growth is the main factor which caused the declining performance in the future. furthermore, we measure the monthly stock returns of 224 firms and market performance during three years after experienced highest sales growth. the purpose of this analysis is to examine the declining of firm’s performance in the future. therefore, to take the whole sample, this research use the secondary data of the firms from 2000 to 2015. 132 b. s. raharja et al. research of the stock price overreaction and investor overconfidence issues table 1 shows that the sum of firms which classified into q1 from 2000 to 2012 are 485 firms. furthermore, it firms eliminate into 224 firms due to delisting from indonesian capital market in the middle of research period. this research omitted delisting firms due to the availability of the data. thirdly, as mentioned above, this research measure stocks’ long-term performance of sample’ firms, as proxied by three years’ stock performance after experienced higher growth, then its performance compare to market performance (jkse) from 2000 to 2015 as a benchmarking. the sources of the secondary data in this research are from indonesian capital market corner (pojok bei) and center of economics and financial development universitas muhammadiyah magelang. 3.2. data analysis the data analysis of this research divided into three steps. step 1, this research analyze the relation between firms’ growth and stocks’ trading volume to examine which information have triggered many investor to became overconfident. to deal with it, we use simple regression analysis. table 1. distribution of firm’s growth (source: indonesian capital market directory) year the sum of q1’s firms quartile firms’ growth q1 q2 q3 q4 2000 35 1.96 0.27 0.02 –0.26 2001 35 1.56 0.34 0.19 –0.07 2002 40 18.13 1.62 –0.37 –0.89 2003 37 0.27 0.07 –0.04 –0.18 2004 38 20.18 1.62 –0.43 –0.88 2005 39 0.78 0.27 0.13 –0.12 2006 37 0.90 0.20 0.09 –0.14 2007 38 0.42 0.11 0.01 –0.26 2008 37 0.57 0.22 0.12 –0.10 2009 38 2.78 0.28 0.18 –0.10 2010 37 17.70 0.04 –0.12 –0.40 2011 38 0.70 0.14 0.04 –0.24 2012 36 2.34 0.21 0.10 –0.09 2013 24 0.44 0.23 0.16 0.01 σ 485 68.72 5.63 –0.07 –3.73 π 37 4.91 0.40 –0.00 –0.27 σ 1.44 7.70 0.54 0.20 0.28 133 business, management and education, 2017, 15(1): 127–139 trading volumei = ∝0 + β1. firms growthi + β2. eati = εi (1) trading volume is the amount of stocks that was traded at a day after firms experienced highest firms’ growth. in this research sales growth use as a proxy of firms growth. earning after tax (eat) in model 1 as a control variable of the relation between firms ‘growth and trading volume. sales growthi = 1 1 − − −i t i t i t sales sales sales , , , ( ) step 2, we analyze the relation between growth of the firms and its long-term performance. the aim of this analysis is to proof that the overconfident behavior caused the declining performance in the future. equation 2 illustrate the model of simple regression which used on dealing in step 2. long – term performancei = µ1 + β2. firms growthi + β3. eat i +εi long-term performance is three-year performance of highest growth firms. in model 2, this research also use eat as a control variable. to measure long-term performance, we use monthly stock return during three years after experienced highest sales growth. therefore, the monthly stocks performance of highest growth firms benchmarked by monthly market performance to obtain abnormal return. we introduce market adjusted model for gaining abnormal return (ar). abnormal returni = returni – market returnt cumulative abnormal return (car)i = 36=∏ n t abnormal return (aar) step 3, we use descriptive analysis and theoretical concept to describe how the highest growth firms tend to have declining performance in the future. in this step, we identify the variable which caused the declining of highest growth firms’ performance in the future and describe theoretically. 4. result and discussion research results show the aspects of the analysis of step 1 and step 2. the results of equation (1) show that firms growth positively and significant related to trading volume, whereas in equation (2) show that firms growth negatively and significant related to long-term performance. it proofs our both hypothesis that investor tend to have overconfident behavior to highest growth firms, it caused stock market overreact keeping away from its intrinsic values and outperform over market performance in the future. as mentioned above that table 2 show the statistical test of our hypothesis, in equation (1), t-statistic value of the relation between firm’s growth and trading volume is 2.01 (> 1.96), it means that the higher the sales growth, the higher the trading volume of its stocks. whereas in equation (2), the t-statistic value of firm’s growth to longterm performance is –3.14 (<–1.96), it means that the higher the firms’ growth, the 134 b. s. raharja et al. research of the stock price overreaction and investor overconfidence issues lower its long-term performance in the future. the important findings of this analysis showed that firms growth is one of many pieces information which has triggered many investors become overconfident. the existing of investor overconfidence proofed by high trading volume and declining performance in the future. consider to daniel et al. (1998) that explained the price of overreacted stock would be corrected in the future due to spreading information availability in the market, therefore, its price would be back into its intrinsic values. in other said, the price of overreacted stocks would decline in the future, in which usually called stock prices reversal. the empirical results of this research confirm the hypothesis (h1, and h2) of this research and much earlier research (ritter 1991; daniel et al. 1998; cai et al. 2008; li & yeh 2011; hribar & mcinnis 2012; raharja et al. 2017). in step 3 this research analyze descriptively about the factor of which identified caused the performance of highest growth firms declined in the future. this research argues that investor who has overconfident behavior did not consider many fundamental pieces of information of the firms. they tend to overweight firms which have good and successful past performance. ramezani et al. (2002) found empirical results that firms which have the highest growth tend to have higher debt on its financing decisions. this research also found that firms which have higher growth tend to have to decline on longterm performance, or in other said, the stock prices of its firms reverse in the future. by table 2. the results of regression analysis (source: worked by eviews 6) model (1) model (2) trading volume long-term performance constanta 14.23 (6,90)*** firms growth 0.30 (2.01)*** eat 0.02 (1.10) constanta 0.01 (5.20)*** firms growth –0.005 (–3.14)*** eat –0.0002 (–0.62) **significant at 10% level ***significant at 5% level 135 business, management and education, 2017, 15(1): 127–139 using it empirical results we describe and analyze debt to equity ratio of highest growth firms. higher debt to equity ratio has meant higher on debt using in financing decisions. table 3 describes the quartile of firm’s growth and its debt to equity ratio. research results show the evidence that firms which have higher growth, tend to have higher in debt to equity ratio. it means that firms which have higher growth tend to use more debt in its financing decisions. the sum and the average of debt to equity ratio of highest growth firms in 2000 to 2012 are higher than the other categorized firms in q2, q3, and q4. even in every year, the debt to equity ratio of highest growth firms is higher than the others. it evidences implicitly make sense due to higher growth firms need more funds to run its business as a consequence of increasing on its sales growth. for example, firms need more resources to handle the higher production, need more employee to handle business operation, more funds on marketing activity to expand its existing market and meet economic of scale, etc. but, the literature on capital structure, table 3. firm’s growth and debt to equity ratio (source: indonesian capital market directory) year quartile firm’s growth debt to equity ratio q1 q2 q3 q4 q1 q2 q3 q4 2000 1.96 0.27 0.02 –0.26 2.30 2.89 3.43 3.40 2001 1.56 0.34 0.19 –0.07 2.72 2.88 1.51 2.77 2002 18.13 1.62 –0.37 –0.89 1.26 2.04 3.12 0.94 2003 0.27 0.07 –0.04 –0.18 2.81 2.83 2.00 1.85 2004 20.18 1.62 –0.43 –0.88 9.85 2.16 2.10 2.01 2005 0.78 0.27 0.13 –0.12 1.90 1.11 2.40 2.08 2006 0.90 0.20 0.09 –0.14 1.96 0.94 0.51 1.51 2007 0.42 0.11 0.01 –0.26 2.41 1.06 0.44 2.49 2008 0.57 0.22 0.12 –0.10 2.53 2.66 2.44 1.56 2009 2.78 0.28 0.18 –0.10 2.29 2.12 1.79 1.69 2010 17.70 0.04 –0.12 –0.40 1.54 0.18 0.97 3.39 2011 0.70 0.14 0.04 –0.24 1.48 1.07 1.65 1.81 2012 2.34 0.21 0.10 –0.09 0.97 0.47 1.22 0.57 2013 0.44 0.23 0.16 0.01 2.76 1.95 0.98 0.29 σ 68.72 5.63 –0.09 –3.73 37 24.35 24.58 26.36 ∏ 4.91 0.40 –0.01 –0.27 2.63 1.74 1.76 1.88 σ 7.51 0.52 0.20 0.28 2.16 0.92 0.90 0.93 136 b. s. raharja et al. research of the stock price overreaction and investor overconfidence issues trade-off theory, said that higher debt to equity ratio would increase the firms’ risk, ultimately the risk of bankruptcy (scott 1977). many previous research also found that higher debt to equity ratio tend to have negatively related to its stocks return (ramezani et al. 2002; gombola, marciukaityte 2007; d’mello, gruskin 2014; davydov et al. 2014). research results show that rational investor tends to give negative sentiment on firms which have higher debt to equity ratio. by the finding of it empirical results, we can understand why higher growth firms tend to have to decline on its performance in the future. instead of fully controlling and taking advantage of its growth, higher growth firms trapped on the risk of higher debt in financing decisions. consider to classical theory in corporate finance that cost of debt is categorized on fixed charges of the firms. the higher fixed charges mean the longer firms to meet its break-even point. the longer firms achieving its break-even point, the higher firms’ bankruptcy risk. many investors who suspected overconfident behavior did not consider it evidences. they, due to their self-attribution bias, only trust on good and successfully experience of firm’s performance on gaining higher sales growth. 5. conclusions this research conducted to examine the existing of overconfident behavior in capital market and stock prices reversal in the future. we hypothesize that investor overconfidence makes stock market overreact and keep away from its intrinsic values, it proxied by higher trading volume of stocks. higher trading volume tends to make stock prices increasing, furthermore, its prices reverse to its intrinsic values in the future. in another word, there are stock prices declining in the future. this research also analyzes the factor which has triggered many investors to behave overconfidently. furthermore, analyze whether it cause on the declining stock prices performance in the future. afterward, we identify the fundamental factor of the firms which can push to the declining performance in the future. the empirical results of this research showed that many investors in capital market behave overconfidently. it showed by the empirical result in the first hypothesize, which said firm’s growth has a significant positive relation on higher trading volume of stocks. it means that higher firm’s growth, higher in trading volume of stocks. investor tends to behave overconfident on higher growth firms, as a result investor ask more on its stocks then the stock prices increase reactively and keep away from intrinsic values. afterward, in the future, due to spreading of the availability information, stock prices will be corrected and it back to its intrinsic values. in other word, stocks prices decline in the future and outperform over market performance, or usually called stock prices reversal. it empirical results proofed by hypothesis 2, firm’s growth negatively related to its longterm performance. the analysis of why stock prices of firm’s growth underperform over market performance and investor overconfidence to choose it stocks proofed by step. 3 analysis in this research. it descriptively explains that firms which have higher growth 137 business, management and education, 2017, 15(1): 127–139 also have higher debt to equity ratio. in another word, it used more debt on financing decisions to run and operate its business activity. from the classic literature of capital structure, that said firms which have too much debt means have higher business and financial risk. instead of taking advantage of its sales growth, higher growth firms could not control its growth and trapped in the situation of higher debt financing, too much cost of debt and too slow to meet break-even point. due to regardless of this evidence and overconfident on good and successfully past performance, higher firms’ growth, in the future investor will suffer the loss on their investment in capital market. although in this research limited on firms’ growth as the only one information which have affected on the overconfident behavior. the empirical results of this research give knowledge to many investors. investment decisions are not only short-term planning but also long-term planning. they ought to consider and analyze much complete fundamental information of the firms carefully. for example, look at how the firms financing its business and then measuring its business risk. do not overconfident on the only good and success of past performance, such as higher firm’s growth, and etc. understanding and analyzing carefully on the whole of fundamental pieces’ information of the firm, investor freed on self-attribution bias on decision making. for future research, many scholars can introduce other information which have indicated on the overconfident behavior. references agarwal, s.; liu, c.; rhee, s. g. 2008. investor demand for ipos and aftermarket performance: evidence from the hong kong stock market, journal of international financial markets, institutions & money 18: 176–190. 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psychology 39(5): 806–820. https://doi.org/10.1037/0022–3514.39.5.806 bayu sindhu raharja. lecturer and researcher in the department of management, the faculty of economics and business, universitas muhammadiyah magelang. he has concerned his research on the topics of behavioral finance, behavioral economics in decision making, personal finance, and banking. dahli suhaeli. lecturer and researcher in department of management, the faculty of economics and business, universitas muhammadiyah magelang. he has concerned his research on strategic financial institution, monetary economics, and strategic human development in enterprises. muji mranani. lecturer and researcher in department of accounting, the faculty of economics and business, universitas muhammadiyah magelang. she has concerned his research on accounting behavior, and sector public accounting. copyright © 2017 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. smart specialization strategy and its operationalization in the regional policy: case finland jari kaivo-oja1, saku vähäsantanen2, ari karppinen3, teemu haukioja4 1finland futures research centre, turku school of economics, university of turku 2regional council of satakunta, pori, finland 3school of management, university of tampere, fi-33014 tampereen yliopisto, tampere, finland 4pori unit, turku school of economics, university of turku, p.o. box 170 (pohjoisranta 11a), fi-28101 pori, finland e-mails: 1jari.kaivo-oja@utu.fi (corresponding author); 2saku.vahasantanen@satakunta.fi; 3ari.karppinen@uta.fi; 4teemu.haukioja@utu.fi received 6 february 2017; accepted 7 may 2017 abstract. in the european union, smart specialization is an important concept in regional policy. its primary aim is to achieve inclusive and sustainable economic growth. there is a lack of convenient region specific measures to operationalize smart specialization startegies (s3). the purpose of the paper is to find “indices of smart specialization” on a regional level. we propose indices that are based on (1) the rate of industrial diversification, (2) revealed comparative advantage and (3) regions’ overall relative specialization. in the empirical part, we analyze smart specialization in finland using structural data provided by statistics finland for seventy sub-regions (lau1) and 24 sub-industries in manufacturing. these industries are the most important for exports, productivity, and regional economic performance for a small country. the following indices are used in empirical evaluations: herfindahl-hirschman index (hhi) for regional diversity, balassahoover index (bhi) for revealed comparative advantage, and region’s relative specialization index (rrsi) for aggregate regional specialization differences. the concept of smart specialization is related to these measures. index analyses reveal that many growing sub-regions have similar comparative advantages. this means inter-regional synergy, and it enables opportunities for strategic cooperation between regions. to develop smart specialization strategies for europe’s regions, we need these kinds of empirical knowledge-based management tools and planning approaches. keywords: smart specialization, finland, manufacturing, sub-industry, lau1, herfindahl-hirschman index (hhi), balassa-hoover index (bhi), revealed comparative advantage, region’s relative specialization index (rrsi). jel classification: b41, c18, c43, d20, d78, f14, f43, f63, h70, i23, i25, i52, l60, l78, n80, o12, o32, o33, r10, r11, r12, r58, z18. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2017, 15(1): 28–41 doi:10.3846/bme.2017.362 mailto:jari.kaivo-oja@utu.fi mailto:saku.vahasantanen@satakunta.fi mailto:ari.karppinen@uta.fi mailto:teemu.haukioja@utu.fi https://doi.org/10.3846/bme.2017.362 29 business, management and education, 2017, 15(1): 28–41 1. introduction the european union has a cohesion policy which underlines integrated and placebased economic convergence. the general dimensions of national/regional research and innovation strategies for smart specialisation (s3 strategies) are policy support and investments, spatial strengths, competitive advantage and excellence, innovation activities, stakeholders’ participation, and experiments and evidence-based policy (european commission 2014: 1). we focus here on the evidence-based strategy tools for ris3. we shall demonstrate the use of some regional planning and management tools, which are suitable for smart specialization (s3) analysis and management. we expect these methods are useful in the regional policy processes of the european union. the eu regions are facing many challenges of the global economy and global political landscape. the spatial context of our analysis is finland and its sub-regions (lau1). earlier, karppinen and vähäsantanen (2015) have studied the resilience of finnish sub-regions by focusing on manufacturing industries. this means that our analysis can be applied in all the lau1-level sub-regions in the european union. there is large and growing literature on the issue of smart specialization (capello 2014; mccann, ortega-argilés 2015; foray 2015; gianelle et al. 2016). in addition to the eu, also the oecd has paid attention to this issue in its report (oecd 2013). in broader international perspective, smart specialization has been seen a policy relevant topic. our framework is closely linked to the mainstream thinking of economics. we emphasize the identification of potential domains of specialization that might be beneficial for the country given its productive assets (foray 2011). we focus on the industries, the most important element of quartet helix, when analysing smart specialization strategy in the regional context. other key elements of the helix are the academia, the government, and civil society with citizens (see e.g. foray et al. 2009; foray 2011, 2012, 2014, 2015; santonen et al. 2014; virkkala et al. 2014; s3 platform 2015; johnson 2015; mccann, ortega-argilés 2015). the principle of comparative advantage1 and the structure of spatial economic activity have been key topics in the field of regional economics. our aim is to link these two important approaches to the discussion on smart specialization strategy. this critical aspect of smart specialization has been lacking in many scientific articles, which have analysed and elaborated smart specialization strategy in the european union (see e.g. jucevicius, galbuogiene 2014; sipilova 2015; gule 2015; paliokaite et al. 2015; paliokaite et al. 2016; gheorghiu et al. 2016). we shall provide a new empirical tool package for the analysis of smart specialization strategy in the european union. measurement of these economic issues is important for the smart specialization strategy in eu-countries and eu-regions (gianelle et al. 2016). 1 comparative advantage is a traditional concept in the field of international trade. we apply the hypothesis of revealed comparative advantage, which is parallel to competitive advantage in a regional context (see e.g. thissen et al. 2013: 34–35). 30 j. kaivo-oja et al. smart specialization strategy and its operationalization in the regional policy: case finland political decision-makers in european union are today very interested in key success factors like economic growth, jobs, and investments (see european commission 2017). these economic success factors are always linked to regional economies in the european union. the idea of smart specialization can be considered a strategic planning policy instrument. our motivation is to show how regions in the european union can analyse the actual contents of smart specialization policy in their local activities. in the practice of regional economic policy, we can improve economic productivity and export success through smart specialization. we argue that smart specialization strategy must be based on the knowledge of basic realities of regional economy and place-based industrial activity/structure. 2. theoretical framework in scientific literature, the concepts of innovation, competitive advantage, and spatial development are closely interconnected (borsekova et al. 2016). these concepts have various common features and are the subject of many debates among practioners and academics. this article focuses on competitive advantage and spatial development, but we understand that all kinds of innovation activities are shaping local economies and industries. current industrial structures and regional competitive advantages are outputs of innovation activities (fig. 1). the smart specialization strategy depends on the three key elements described below. if (1) there is not much innovation and r&d activity, if (2) there are not much competitive advantages in local economies, and if (3) spatial development is not effective and economy is not delivering economic growth, welfare, and happiness, the development process is not fully based on smart specialization strategy. our empirical analysis is focused directly on the measurement of competitive advantage and spatial development. innovation activities are driving forces for spatial economic growth, but in this article we are focusing on realized competitiveness. the elements of (1) creative destruction and entrepreneurial discovery (see e.g. maliranta 2005) and (2) flexible serendipity management can play regenerative roles in spatial development (see e.g. kakko et al. 2016; roth et al. 2017; gheorghiu et al. 2016). these aspects do not eliminate the role of strategic planning in the context of spatial development. fig. 1. interconnections among innovation, competitive advantage, and spatial development (borsekova et al. 2016). 31 business, management and education, 2017, 15(1): 28–41 in next sections, we define our empirical analysis tools for the smart specialization strategy. smart specialization of the eu regions does not happen in a vacuum. globalization, hypercompetition, and rapid technological changes reshape the conditions of regions and local economies continuously (see fig. 2 above). mindsets of local stakeholders play an important role in the formulation of smart specialization strategies (see lahari, perez-nordtvedt 2008; virkkala et al. 2014). based on fig. 2 we can understand that it is important that the mindsets of stakeholders (global mindset, virtual mindset, innovation mindset, and collaboration mindset) correlate with the realities of globalization, hypercompetition, and rapid technological change. our empirical approach directly supports regional and local reality checks in this respect. 3. index framework of the study all the following indices are based on karppinen and vähäsantanen (2015). herfindahl-hirschman index (hhi) we apply the herfindahl-hirchman index (hhi) to the finnish sub-region data. our data includes 71 sub-regions and 24 industrial sectors. the herfindahl-hirschman index (hhi) is a commonly accepted measure of market concentration. we are not analyzing market shares but the industry shares of sub-regions. the hhi formula is the following: 2 1=   =   ∑ n i s si x hhi x      (1) where xi is the number of employed people in industrial sector (i) and x is total number of people employed in all industrial sectors in region (s) and n is number of industrial sectors (n). hhi-index is calculated as the sum of squared industry shares for each sub-region. in other words, it measures the diversification of industry structure of a fig. 2. framework showing relationships between competitive challenges, mindsets, and smart specialization challenges (modified, see lahari, perez-nordtvedt 2008: 313). 32 j. kaivo-oja et al. smart specialization strategy and its operationalization in the regional policy: case finland sub-region. hhi takes values between [0,1]. the smaller the value, the more diversified region, and vice versa. balassa-hoover index (bhi) the key index in this study is the balassa-hoover index (bhi). the formula of bhi is the following: bhisi = si i s x x x x (2) where xsi is the number of employed people in region s and in industry i, (xsi/xi) is corresponding share for all sub-regions. if bhisi ≥ 1, there is revealed comparative advantage in relation to all regions. we use bhi with industrial labor data of statistics finland (2017). region’s relative specialization index (rrsi) we use rrsi as a measure of comparative specialization of sub-regions. rrsi can be calculated in the following way: ( ) ( ) ( ) ( )2 2 21 21 1 1= − + − + … + −i i insrrsi bhi bhi bhi                    (3) the higher the rrs index is the more specialized the structure of manufacturing industry is in the region. if the structure of a region is homogenous, the rrsi obtains value zero. if the rrsi ≠ 0, the industrial structure of a region differs from the country’s average. the higher the rrsi value, the more a region is different from the whole country. 4. empirical demonstrations: case finland in this section, we present some empirical results based on smart specialization tools presented above. we focus on key results in the case of finland. first, we figure out the hhi index for sub-regions in finland (fig. 3). this indicator is important for resilience analysis. small hhi value means stronger resilience potential and higher index numbers mean weaker resilience. the hhi is an indicator of industrial diversity. from the figure 3, we can observe that in 2014 the seven most diversified subregions in finland were kuopio, turku, lahti, helsinki, tampere, hämeenlinna and pori. except in helsinki and tampere, they all have been growth-led sub-regions in the recent recession. the gdp rate of growth in finland was 2.07% in 2011–2014. corresponding figures for the sub-regions are: 4.94% in turku, 4.19% in hämeenlinna, 3.81% in jyväskylä, 3.80% in kuopio, 3.63% in pori, and 2.27% in lahti. the rates of gdp growth in helsinki (1.97%) and in tampere (1.86%) were slightly less than the average (statistics finland 2017). since the late 2000s oulu region has been one of the growth centers in finland due to nokia and the rapid growth of the ict-sector. during 2011–2014, its rate of growth (0.53%) deviated 70% from the country average. 33 business, management and education, 2017, 15(1): 28–41 the hhi-index tells that the region is the least diversified among the group of large sub-regions. on the the hand, salo sub-region was hit by the worst negative rate of growth, –9.04% in 2011–2014. other sub-regions with negative rates of growth were porvoo (–7.05%), loviisa (–5.46%), ålands skärgård (–5.25%), etelä-pirkanmaa (–4.64%), sydösterbotten (–0.86%), raahe (–0.68%), kouvola (–0.66%), and äänekoski (–0.26%). from the figure 3 we can observe that except in kouvola and salo, these sub-regions have relatively large values for the hhi, i.e. their industrial structures are less diversified than in average. 0,867 0.000 0.050 0.100 0.150 0.200 0.250 0.300 0.350 0.400 0.450 0.500 kuopio turku lah� helsinki tampere hämeelinna pori jakobstad joensuu lounais-pirkanmaa kotka-hamina keski-karjala mikkeli kokkola suupohja lappeenranta ylä-savo mariehamns stad luoteis-pirkanmaa riihimäki jyväskylä pohjois-satakunta raasepori ylivieska kajaani kouvola pielisen karjala joutsa rauma rovaniemi pohjois-lappi kyrönmaa pieksämäki salo vakka-suomi savonlinna itä-lappi seinäjoki etelä-pirkanmaa ylä-pirkanmaa porvoo forssa saarijärvi-viitasaari torniojokilaakso oulu äänekoski kehys-kainuu sisä-savo haapavesi-siikalatva varkaus järviseutu kaus�nen kuusiokunnat vaasa tunturi-lappi loviisa nivala-haapajärvi sydösterbo�en keuruu jämsä koillis-savo kemi-tornio loimaa oulunkaari ålands landsbygd imatra koillismaa åboland-turunmaa raahe ålands skärgård fig. 3. herfindahl-hirschman index of sub-regions (lau1) based on the analysis of 24 industrial sectors in finland, 2014. 34 j. kaivo-oja et al. smart specialization strategy and its operationalization in the regional policy: case finland next, we present balassa-hoover index for industrial production (24 manufacturing sectors) in eight urban regions (fig. 4). with the exception of oulu, these regions have more diversified industrial structure than in average (see fig. 3). in figure 4, if the bhi values for industries exceed eight then comparative advantage is revealed. 13 such manufacturing industries can be found. as we can see, the bhi values are not evenly distributed among the regions. we can interpret to mean that when the value of bhi > 8, the industries as aggregate reveal comparative advantage, but not necessarily in a specific region. to get this information, we need to inspect figure 5, where cases for bhi > 1 are exposed. few observations can be made. first, no industry exsits as a source of revealed comparative advantage in all eight regions. second, three industrial sectors (“machinery and equipment repair, maintenance and installation”, “manufacturing of furniture”, and “manufacturing of chemicals and chemical products”) give impetus to revealed comparative advantage in five regions. this result can be interpreted in terms of smart specialization. one one hand, these five fig. 4. balassa-hoover index (bhi) of industrial production (24 manufacturing sectors) in some urban sub-regions in finland, 2014. 0 2 4 6 8 10 12 14 16 18 20 10 manufacturing of food products 11 manufac ring of beverages 12 manufactoring of of tobacco products 13 manufacturing of tex les 14 manufactoring of clothes 15 leather and leather products manufacturing 16 manufacturing of wood and cork products (except… 17 manufacturing of paper and paper products 18 prin ng and reproduc on of recorded media 19 manufacturing of coke and refined petroleum… 20 manufacturing of chemicals and chemical products 21 manufacturing of basic pharmaceu cal products and… 22 rubber and plas c products 23 manufacturing of other non-metallic mineral products 24 metal processing 25 fabricated metal products (excl. machinery and… 26 computer, electronic and op cal products 27 manufacturing of electrical equipment 28 manufacturing of other machinery and equipment 29 manufacturing of motor vehicles, trailers and semi-… 30 manufacturing of other transport equipment 31 manufacturing of furniture 32 other produc on 33 machinery and equipment repair, maintenance and… helsinki tampere turku oulu jyväskylä kuopio pori rovaniemi 35 business, management and education, 2017, 15(1): 28–41 regions have been successful in competition as compared to the whole country. on the other hand, these five regions have an opportunity to exploit inter-regional synergies. that is, helsinki, turku, oulu, kuopio and pori could try to seek strategic alliances to cooperate in activities where synergies can be found; in manufacturing of chemicals and chemical products, for example. figures 7–9 describe corresponding interregional synergy potentials for all 70 lau1 regions, and some manufacturing industries. third, as we combine the results of figure 3 and 5, it can be found that less diversified sub-regions oulu and rovaniemi (relatively high hhi values) have less revealed comparative advantage in industries. further, there are some dominating industries in their regional economy: “computer, electronic and optical products” in oulu (bhi = 5.2), “manufacturing of motor vehicles, trailers and semi-trailers” (bhi = 13.7), and unspecified “other production” in rovaniemi (bhi = 10.5). correspondingly, in helsinki sub-region there are nine manufacturing industries, which belong to revealed comparative advantage sectors, and the range of the bhi value is from 1.1 to 2.5. this kind of information is highly valuable for smart specialization discussions in finland. similar smart specialization analysis can be applied to all european subregions and urban centres. fig. 5. revealed comparative advantage (bhi > 1) in industrial sectors for some key finnish urban sub-regions 2014 (bhi values inside columns) 1.1 2.5 1.1 1.7 1.6 1.9 2.4 1.7 1.3 3.4 2.2 1.2 1.3 1.2 1.7 1.4 1.5 1.2 1.5 1.7 2.9 1.6 6.1 1.2 1.5 3.9 1.2 1.3 1.9 1.1 2.1 1.1 1.3 1.6 1.1 1.1 1.4 5.2 1.3 1.1 3,7 1.8 2.9 1.8 2.0 1.2 1.1 1.5 2.0 1.4 1.2 1.2 2.0 1.0 4.5 1.2 2.4 1.7 1.1 1,1 13.7 1.2 10.5 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 10 manufacturing of food products 11 manufac�ring of beverages 13 manufacturing of tex�les 14 manufacturing of clothes 15 leather and leather products manufacturing 16 manufacturing of wood and cork products (except… 17 manufacturing of paper and paper products 18 prin�ng and reproduc�on of recorded media 19 manufacturing of coke and refined petroleum… 20 manufacturing of chemicals and chemical products 21 manufacturing of basic pharmaceu�cal products and… 22 rubber and plas�c products 23 manufacturing of other non-metallic mineral products 24 metal processing 25 fabricated metal products (excl. machinery and… 26 computer, electronic and op�cal products 27 manufacturing of electrical equipment 28 manufacturing of other machinery and equipment 29 manufacturing of motor vehicles, trailers and semi-… 30 manufacturing of other transport equipment 31 manufacturing of furniture 32 other produc�on 33 machinery and equipment repair, maintenance and… helsinki tampere turku jyväskylä oulu kuopio pori rovaniemi 36 j. kaivo-oja et al. smart specialization strategy and its operationalization in the regional policy: case finland in figures 6a and 6b, we figure out the key findings of the region’s relative specilization index (rrsi) for finnish sub-regions. the higher the rrs index the more specialized the structure of manufacturing industry is in a region as compared to the whole country (see equation 3). the bhi index can be used to industry specific analyses. instead, the rrs index can be used to measure the specialization intensity of the whole regional economy. the rss index can also be used to measure the aggregate deviation of specialization from country’s avarerage. rss index analyses can reveal useful information for regional smart specialization strategies. the hhi analysis reflects the risk potential that is embedded in region’s economic structure, if it confronts the exogenous economic shocks. instead, the rrsi analysis reflects regions’ risk for exogenous (national or supranational) industrial or regional policy. therefore, smart specialization policy should be region specific. all finnish regions are covered in the rrsi analysis in figures 6a and 6b. fig. 6a. rrs index, 35 sub-regions in finland, the index number refers to the most specialized sub-region, rankings 1–35, 2014. 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0 45,0 50,0 åboland-turunmaa koillis-savon porvoo ylivieska kaus�nen sydösterbo�en rovaniemi raahe jämsä vakka-suomi kyrönmaa kajaani kemi-tornio lounais-pirkanmaa mikkeli tunturi-lappi imatra ålands landsbygd ålands skärgård koillismaa torniolaakso oulunkaari ylä-savo itä-lappi loviisa pohjois-lappi suupohja pohjois-satakunta mariehamn luoteis-pirkanmaa kehys-kainuu kuusiokunnat kokkola turku ylä-pirkanmaa 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 ...225,7 37 business, management and education, 2017, 15(1): 28–41 the top 10 sub-regions – jyväskylä, helsinki. riihimäki, tampere, rauma, joensuu, varkaus, salo, kuopio and loimaa – are similar with the whole country’s industrial structure. turku region is the second in diversification as measured by the hhi, but its rrs index is 34th in the ranking reflecting that its deviation from country’s average is notable. this can be explained by relatively large manufacturing of basic pharmaceutical products and pharmaceutical items in turku region. figures 7, 8, and 9 demonstrate the power of our tool package in the context of smart specialization potential. smart specialization potential is calculated for all 24 industrial sectors. top 10 subregions are reported in three industries as an example: (1) manufacturing of food products, (2) manufacturing of paper and paper products, and (3) metal processing. 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 keuruu haapavesi-siikalatva järviseutu pielisen karjala seinäjoki nivala-haapajärvi vaasa savonlinna lah� jakobstads keski-karjala raasepori sisä-savo joutsa saarijärvi-viitasaari äänekoski kotka-hamina kouvola oulu etelä-pirkanmaa pieksämäki forssa hämeenlinna pori lappeenranta loimaa kuopio salo varkaus joensuu rauman tampere riihimäki helsinki jyväskylä 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 fig. 6b. rrs index, 35 sub-regions in finland, the index number refers to the most specialized sub-region, rankings 36–70, 2014. 38 j. kaivo-oja et al. smart specialization strategy and its operationalization in the regional policy: case finland figure 7 reports the smart specialization potential (measured by balassa-hoover index; revealed comparative advantage) of top 10 sub-regions in the sector “manufacturing of food products”. these sub-regions may have potential opportunities to exploit horizontal inter-region synergies. fig. 7. manufacturing of food products, smart specialization potential (measured by balassa-hoover index) of top 10 subregions in finland, 2014. fig. 8. manufacturing of paper and paper products, smart specialization potential (measured by balassa-hoover index) of top 10 sub-regions in finland, 2014 fig. 9. metal processing, smart specialization potential (measured by balassa-hoover index) of top 10 sub-regions in finland, 2014 to sum up, for ålands skärgård, ålands landsbygd and sisä-savo it might be worthwhile to seek possible strategic alliances to exploit the probable benefits of inter-regional horizontal co-operation in food production industry (fig. 7). for imatra, jämsä and kouvola the same holds in manufacturing of paper and paper products, and for raahe, kemi and tunturi-lappi in metal processing. 39 business, management and education, 2017, 15(1): 28–41 5. conclusions in this study we have discussed the smart specialization strategy and its numerical assistance. empirical analyses are focused on 70 lau1 regions and 24 manufacturing sector industries (2-digit level) in finland. our aim is to demonstrate the power of well-known economic analysis tools in the context of smart specialization strategy (s3). smart specialization strategy is a regional policy agenda aimed at increasing a country’s competitiveness via exploiting intra-region efficiencies and inter-regional synergies. many of these concepts are well-known for regional practioners, but numerical evaluations of smart specialization are almost absent. we suggest that in the eu it is beneficial to analyze comparative advantages of regions and sub-regions in the context and formulation of smart specialization strategies. further, empirical index based analyses could help regional and national decision-makers to identify key economic structures and potentials of smart specialization by multifaceted indicator analyses. we illustrated the power of three key indicators, hhi, bhi, and rrs indices. already these demonstrations show us that they provide useful information for strategic analyses of smart specialization. revealed comparative advantage index is a useful tool. attention needs to be paid also to resilience and diversification of industrial activity in the eu regions and sub-regions. our analyses reveal the potential benefits of these economic index analyses. there is need to integrate science, technology, and innovation (sti) indicators to regional competitiveness and other economic analyses. revealed comparative advantages of sub-regions can be interpreted as outcomes of long-run innovation activities. in future research, this critical link between sti activities with comparative advantages and resilience levels requires further scientific analyses. acknowledgements we want to thank the ministry of economic affairs and employment (finland) for financial support of previous project “the competitiveness and resilience of regions”. we are responsible for all the opinions and all the analyses. references borsekova, k.; vanova, a.; vitalisova, k. 2016. smart specialization for smart spatial development: innovative strategies for building comparative advantages in tourism in slovakia. socio-economic planning sciences (in press), 1–12. capello, r. 2014. smart specialisation strategy and the new eu cohesion policy reform: introductory remarks, scienze regionali 13(1): 5–14. https://doi.org/10.3280/scre2014–001001 european commission. 2014. national/regional innovation strategies for smart specialisation (ris3). cohesion policy 2014–2020 [online], [cited 07 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[online], [cited 07 june 2017]. available from internet: http://s3platform.jrc.ec.europa.eu/home sipilova, v. 2015. when regional growth does not benefit from high-tech specialization? explaining the experience of latvian regions?, procedia economics and finance 30: 863–875. https://doi.org/10.1016/s2212–5671(15)01336–2 statistics finland. 2017. regional account statistics 2000–2015 [online], [cited 21 march 2017]. available from internet: http://pxnet2.stat.fi/pxweb/pxweb/en/statfin/statfin__kan__altp/?tablelist=true#_ ga=1.169395877.502038858.1487697945 thissen, m.; van oort, f.; diodata, d.; ruijs, a. 2013. regional competitiveness and specialization in europe: place-based development in international networks (new horizons in regional science). cheltenham, uk: edward elgar. https://doi.org/10.4337/9781782545163 virkkala, s.; mäenpää, a.; mariussen, å. (eds.). 2014. the ostrobothnian model of smart specialisation [online], [cited 07 june 2017]. proceedings of the university of vaasa, reports 196. available from internet: http://www.uva.fi/materiaali/pdf/isbn_978–952–476–577–0.pdf jari kaivo-oja, phd, research director, adjunct professor, finland futures research centre, turku school of economics, university of turku. his scientific interests are regional and national foresight systems, corporate and technology foresight, futures studies, innovation management, global foresight and international futures research. he has worked for the european commission in the fp6, in the fp7 and in the horizon 2020. he has worked in projects with the european foundation, the eurostat, the nordic innovation centre and the european parliament. research director jari kaivo-oja has published more than 150 articles in academic journals and books. teemu haukioja, phd, assistant professor in university of turku, turku school of economics, pori unit. his scientific interests are economic growth, and sustainable development. he is the author and co-author of several scientific papers and book chapters that have been published in refereed journals and books. he holds a phd in economics from turku school of economics. ari karppinen, m.sc. econ., university instructor, university of tampere, faculty of management. his scientific interests are in the fields of regional economics and development and multinational enterprises. he is the author and co-author of several scientific papers. saku vähäsantanen, m. sc. econ., regional advisor at regional council of satakunta. his scientific interests are focused on regional economy, regional competitiveness and resilience. he is the author and co-author in numerous studies about regional economy and business cycles. he has been a project researcher at the university of turku, pori unit, but his current work at regional council concentrates on regional development and studies. https://doi.org/10.1016/j.techfore.2016.01.005 http://s3platform.jrc.ec.europa.eu/home https://doi.org/10.1016/s2212-5671(15)01336-2 https://doi.org/10.4337/9781782545163 http://www.uva.fi/materiaali/pdf/isbn_978-952-476-577-0.pdf copyright © 2018 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: libena.tetrevova@upce.cz business, management and education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 1: 133–146 https://doi.org/10.3846/bme.2018.2205 introduction in the today’s demanding economic world conditions, where businesses are threatened by strengthening competitors, especially from asian countries, where the growing public budget deficits result in the growing tax burden of all economic entities, utilization of unconventional economic tools, procedures and practices is a prerequisite for the prosperity and future existence of businesses. we can meet them in all areas of corporate activities, where they represent, on the one hand, an opportunity for businesses and, on the other hand, they might also become a significant threat. from the point of view of corporate financing, the innovated tools include mezzanine financing instruments (sources). mezzanine financing instruments represent a hybrid form of financing, interconnecting the features of classic long-term financing sources in the forms of equity and debt. although some mezzanine financing sources were first used in the usa as early as in the 80’s of the 20th century and then in europe in the 90’s, they still have not seen broad utilization in a number of countries, see more e.g. in (amon & dorfleitner, 2013; dec & masiukiewicz, 2017; knežević, ljumović, & pavlović, 2015; sazanov et al., 2016; svedik & tetrevova, 2014b). mezzanine financing instruments in comparison to the classic financing sources libena tetrevova*, jan svedik department of economy and management of chemical and food industries, faculty of chemical technology, university of pardubice, studentska 95, 532 10 pardubice, czech republic received 02 june 2018; accepted 05 june 2018 abstract. the paper deals with innovated financing in the form of mezzanine financing instruments (sources). the authors aimed to identify, characterize, and assess mezzanine financing instruments in comparison to the classic corporate financing sources. mezzanine financing represents an innovated form of financing interconnecting the features of equity and debt. the paper specifies the sources and characterizes and assesses pros and cons of each of them. subsequently, it presents an overall evaluation of mezzanine financing instruments in comparison to the selected equity and debt financing sources. this evaluation was performed on the basis of 14 set criteria using a binary scale. keywords: corporate financing sources, mezzanine, equity, debt, czech republic. jel classification: g10, g32, m21. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ 134 l. tetrevova, j. svedik. mezzanine financing instruments in comparison to the classic financing sources the question is what mezzanine financing instruments are offered by the financial market, or what specific features, advantages and disadvantages these instruments have. the authors of this paper aimed to identify, characterize, and assess mezzanine financing instruments in comparison to the classic corporate financing sources. the fact is that the economic situation and competitiveness of economic entities is strongly affected by their financial structure. the structure of financial sources, particularly the capital structure, i.e. the structure of financing sources intended to cover long-term investment activities, determines the ability to respond quickly and accurately to the permanently changing market conditions, which subsequently leads to the extended creation of financial sources. it is also necessary to assess whether mezzanine financing sources represent a feasible opportunity for businesses and offer them something extra compared to classic financial sources. 1. literature review and hypotheses mezzanine financing (or mezzanine capital or just mezzanine) represents an omnibus term for hybrid forms of financing that have both the features of equity and the features of debts (amon & dorfleitner, 2013; bondarenko, maksimova, & zhdanova, 2016; shen, xu, & yang, 2016; svedik & tetrevova, 2012). these sources are inserted into the company’s capital structure between the “floor” of equity and the “ceiling” of senior debt (anson, fabozzi, & jones, 2010). they can be of various forms. according to silbernagel and vaitkunas (2008), mezzanine capital includes senior subordinated debt, convertible subordinated debt and redeemable preferred stocks. according to the european commission (ec, 2007), vasilescu (2007, 2009, 2010), or tetrevova (2009) they are subordinated loans, participating loans, silent participation, profit participation rights, convertible bonds and bonds with warrants. on the basis of the above, we can state that mezzanine financing instruments include silent participations, preferred stocks, participating loans, participating bonds, subordinated loans, subordinated bonds, convertible bonds and bonds with warrants. the above mezzanine financing instruments can be classified from the point of view of the corporate balance or from the point of view of public tradability. from the point of view of the corporate balance, we can differentiate equity mezzanine, including mezzanine financing instruments with a higher rate of equity, and debt mezzanine, including mezzanine financing instruments with a higher debt tendency (dec & masiukiewicz, 2017; golej, 2016; meluzin & zinecker, 2009). from the point of view of public tradability, it is possible to distinguish private mezzanine, including mezzanine financing instruments that do not enter the open capital market, i.e. which are not publicly tradable, and public mezzanine, including mezzanine financing instruments that are publicly tradable on the capital market (haldia & mittal, 2015; oncioiu, 2012; tetrevova, 2009; vasilescu, 2010). equity mezzanine includes silent participations and preferred stocks. the reason why they have been included in this mezzanine category is the fact that these instruments are, in the corporate financial structure, a part of the equity capital, but they do not fulfil one or more basic characteristics of equity, e.g. the right to take part in the management of the company or nonpayability of the given source (meluzin & zinecker, 2009; svedik & tetrevova, 2014b). silent participation represents capital investment in the company, where the silent partner shares profits or losses, but not the company management itself (comino, nicolò, & tedeschi, business, management and education, 2018, 16(1): 133–146 135 2010; ernst & häcker, 2012). this partnership is conditional on a special type of agreement on the basis of which the company is obliged, within a specified period, to return the investment to the silent partner (svedik & tetrevova, 2014a). therefore, it is a property contribution (a feature of equity), but it is necessary to redeem this contribution within a certain period and it does not include any voting rights (typical features of debt) (svedik & tetrevova, 2012). preferred stocks represent securities confirming the investors share in the corporate assets. they are connected with the priority right to a share in profits in the form of dividends, which are usually fixed, and also with the priority right to a share in the liquidation balance; however, the holder of this security has no right to take part in the company management (kallberg, liu, & villupuram, 2013; ravid et al., 2007). by issuing preferred stocks, businesses increase their equity capital, but the existing proportions of the company owners’ voting rights do not change (rejnus, 2011). therefore, this is also a case of a property contribution (a feature of equity). however, preferred stocks are not connected with any voting rights, their yields are fixed in advance, and they often become mature as at a certain date (typical features of debt). debt mezzanine includes participating loans, participating bonds, subordinated loans, subordinated bonds, convertible bonds, and bonds with warrants. the reason why they have been included in this mezzanine category is the fact that these instruments are, in the corporate financial structure, a part of the debt, but they also have some features that are typical for equity (svedik & tetrevova, 2014b). participating loan represents an analogue of a classic bank loan, but in this case, the loan provider’s yield depends on the economic result of the company (van gelder & niels, 2013; mütze, senff, & möller, 2012). this instrument is thus connected with the feature typical for equity in the form of investment of an owner that is connected with yields depending on the company’s economic results (franke & hein, 2008). however, participating loan comes into existence on the basis of a loan agreement that does not establish any ownership rights relating to the company, and so its provider is in the position of a creditor. another difference compared to equity is that the amount of payment for the loan is defined in the loan agreement, while the amount of the dividend is determined on the basis of a decision made by the general meeting (sanders, 2013). another difference is in the way of sharing the liquidation balance of the company, where the providers of participating loans share the liquidation balance in the same manner as the other creditors, and so they have priority, in this respect, over the company owners (helminen, 2010). participating bond is an analogue of participating loan and represents corporate bond whose yield depends on the economic result of the issuer and is determined as a share in profits specified in advance (johnson, 2010). this debt financing source has, in this respect, features that are similar to those of the equity financing sources (hutchison et  al., 2016; svedik & tetrevova, 2015). unlike the stockholders, the holders of these securities are in the position of a creditor. moreover, the coupon payments from participating bonds are not determined on the basis of a decision made by the general meeting, but on the basis of predefined rules specified in the issue conditions. in the case of winding-up, the holders of participating bonds share the liquidation balance in the same manner as the other providers of debt capital, i.e. they are satisfied prior to the company owners (svedik & tetrevova, 2014a). 136 l. tetrevova, j. svedik. mezzanine financing instruments in comparison to the classic financing sources subordinated loans represent loans whose providers are entitled, in the case of bankruptcy of the company, to settlements only after settlement of any liabilities towards the providers of senior debts and other creditors (conlon & cotter, 2014; mäntysaari, 2010). the providers of the equity capital are then paid off after the creditors providing subordinated debt (lasher, 2011). at the same time, subordination is a reason for classification of these loans among mezzanine financing instruments; the thing is that it is a feature typical for the equity capital (ernst & häcker, 2012). subordinated bonds represent corporate bonds connected with the right to settlement of liabilities (redemption of the nominal value and disbursement of the adequate yield) in the case of winding-up only after settlement of liabilities towards any other creditors, except liabilities with the same condition of subordination (conlon & cotter, 2014; svedik & tetrevova, 2015). at the same time, the holders of subordinated bonds are satisfied before the providers of the equity capital (iannotta, 2010). also, in this case, the subordination, which is typical for the equity capital, is a reason for classification of subordinated bonds among mezzanine financing instruments (svedik & tetrevova, 2014b). convertible bond combines both the rights connected with holding of a classic bond and the rights to exchange this bond for another security of the given issuer (batten, khaw, & young, 2013; zhang, 2016). in view of the characteristics of mezzanine financial sources, convertible bonds are understood as bonds exchangeable for certain property securities, i.e. for common or preferred stocks. such convertible bonds combine the features of equity and debt financing sources. an exchange of convertible bonds for stocks is made possible for the investor through purchase option, attached to the bond (koller, goedhard, & wessels, 2010; madura, 2011; strobel, 2012). this option entitles the holder of the convertible bond to make a decision to exercise the conversion right as at the specified date and thus get stocks of the given company, or not to exercise the conversion right and receive the nominal value of the bond (stickney et al., 2010). bonds with warrants represent bonds connected with the possibility of buying newly issued stocks of the given issuer (rahim, goodacre, & veld, 2012). so, they combine both the features of debt financing sources representing the rights connected with holding of a classic bond and the features of the equity financing sources in the form of stocks. the bondholder is provided with the purchase option through the warrant, which can be traded as an integral part of the bond with warrants, or it can be separated from the bond with warrants and traded separately (choudhry, 2010). unlike convertible bonds, in the case of application of the warrant the company’s debt does not cease to exist. the company is obliged to continue to pay out the bond yields, and as at the maturity also redeem their nominal value. nevertheless, the company obtains additional financial sources from the sale of stocks (svedik & tetrevova, 2012). as for the classification from the point of view of public tradability, private mezzanine instruments include silent participations, participating loans, and subordinated loans. on the other hand, public mezzanine instruments include preferred stocks, participating bonds, subordinated bonds, convertible bonds, and bonds with warrants. as stated above, mezzanine financing instruments represent a hybrid form of financing, which interconnects the features of equity and debt financing sources. therefore, it is possible to presume that they are instruments combining the positive features, i.e. advantages, of the business, management and education, 2018, 16(1): 133–146 137 classic financing instruments in the forms of equity and debt capital, and so mezzanine sources should be, in comparison to the classic financial sources, more advantageous. thus the first survey question was whether mezzanine financing instruments interconnect, from the qualitative point of view, the advantages of equity and debt financing sources, and within complex assessment, they are advantageous compared to the classic financial sources. therefore, it is necessary to verify hypothesis h1: mezzanine financing sources represent, from the qualitative point of view, more advantageous sources compared to equity and debt financing sources. professional discussions are still being conducted over the problems of choosing the optimal capital structure, where one of the significant questions is whether to give preference to private or public financial sources. corporate managers consider, when choosing the capital structure, a number of aspects (elsas, flannery, & garfinkel, 2013; öztekin, 2015; robb & robinson, 2012), and an important criterion in the present knowledge economy is represented by information, to be more specific the scope of information, which has to be published by the company in relation to the acceptance of a certain financial source. the key role in this respect is played mainly by the protection of the corporate know-how and the related still low level of sharing information (vlckova, 2011), but it is also the cost of provision of such information what plays another important role. the second significant question is whether finance managers consider, within individual groups of mezzanine instruments, private mezzanine or public mezzanine instruments as more advantageous. the fact is that a larger scope of information has to be provided in relation to the public sources, unlike the private sources (tetrevova, 2006). it is possible to define hypothesis h2: private mezzanine instruments appear, within alternative instruments, more advantageous compared to public mezzanine instruments. 2. data and methodology the presented study develops results of the research realized in 2013, which only briefly dealt with mezzanine instruments from the perspective of industrial, especially metallurgical, firms (see svedik & tetrevova, 2014a) and adds new aspects  – deep analysis of advantages and disadvantages of mezzanine instruments and their comparison with classic financial sources. the study draws on the integration of two key knowledge areas, the theory and practice of corporate financial management. it is based on a secondary analysis focussed on the processing of the current status of knowledge of the solved problems. its essence was research into scientific literature, both books and papers, and conference contributions. the research team took a multidisciplinary approach, where the analyzed secondary sources included sources from the areas of the financial theory, banking, corporate finance, or business economy. the secondary analysis was followed by a qualitative survey focussed on assessment of individual mezzanine financing instruments in comparison to selected classic corporate financial sources, namely bank loans, corporate bonds, and common stocks. the research team identified the pros and cons of individual mezzanine financing instruments and also conducted an overall assessment of mezzanine and classic financial sources through 14 identified criteria using the binary scale of numbers, which has two digits 0 and 1 (amos, 2013; ramaswamy, 2016). for the purpose of application of assessment using the binary scale, the assessed criteria, i.e. advantages and disadvantages of the assessed financial sources, were 138 l. tetrevova, j. svedik. mezzanine financing instruments in comparison to the classic financing sources expressed as positive (desirable) features. in this respect, it is necessary to point out that when this method is used all the assessed criteria are of the same weight. in practice, however, corporate managers may attach different weights to the specified criteria with respect to the current situation. to determine the advantages and disadvantages of individual mezzanine financing instruments, to identify the 14 criteria that were applied within the overall assessment and their evaluation, the research team used, on the one hand, the outcomes of the scientific literature research and, on the other hand, directed interviews with representatives of the selected commercial banks as bank loan providers and security issuance intermediaries and with managers of the selected companies as persons making decisions about utilization of these financial sources, but also discussions with experts from the academic environment. the survey among banking subjects involved representatives of the banks that rank among big banks according to the methodology of the czech national bank, i.e. banks with the balance sheet sum exceeding czk250bn, i.e. ceskoslovenska obchodni banka, a.s., ceska sporitelna, a.s., komercni banka, a.s., and unicredit bank, a.s. the survey among entrepreneurial subjects involved top managers (in the positions of a director or a finance director) of the selected industrial companies operating in the czech republic from the engineering (3), food (5), chemical (5), metallurgical (3), and electro-technical (2) industries. the above-directed interviews were conducted in two periods – from june to december 2013 (the first study) and from september to december 2016 (the second study) and lasted for 60 minutes on average. 3. results 3.1. advantages and disadvantages of mezzanine financing instruments when deciding about the inclusion of individual mezzanine financing instruments in the capital structure of the company, the finance managers have to take account of all of their pros and cons. as for silent participation, it is a source suitable for financing businesses of all sizes, and so they can also be used by smaller entrepreneurial entities for which it is not very convenient to issue securities. silent participation makes it possible to achieve increased flexibility in financing their business intents; the number of silent partners is not limited, and so the company can get a larger volume of financial sources on the basis of entering into more silent partnership agreements. this financial source is mainly suitable for businesses having a higher ratio of debts in the capital structure, which can optimize their capital structure through silent participation, and decrease thus the average cost of capital. moreover, the terms and conditions of the provision and repayment are stipulated on an individual basis. this financial source is not connected with any initial costs (as e.g. issuance costs in securities, or bank fees in loans), or with the obligation to provide the silent partner with regular payments. also, the silent partner has no right to take part in the company management but shares, in the case of a loss, its settlement. on the other hand, what is a disadvantage from the point of view of the company is the fact that in silent participation the silent partner usually requires a higher yield on the provided capital compared to bank loans, corporate bonds, or stocks. moreover, the share in profits is not a tax-deductible cost, and the company business, management and education, 2018, 16(1): 133–146 139 thus cannot, in the case of profitability, use the tax shield. it is also necessary to mention another disadvantage in the form of terminability of the silent partnership agreement by the silent partner. through issues of preferred stocks, the company can obtain a big volume of financial sources, which makes it possible for the issuer to be more flexible in financing their entrepreneurial intents. businesses having a higher ratio of debts in their capital structure can, through the issuance of preferred stocks, optimize their capital structure and thus decrease the average cost of capital. another advantage is that the amount of dividends on preferred stocks does not grow together with growing profits of the company. moreover, non-payment of dividends on preferred stocks is connected with relatively less significant consequences compared to non-payment of interests on loans. preferred stocks are thus usually not connected with voting rights, i.e. with participation in the company management. another advantage that cannot be omitted is the fact that acquisition of financial sources in the form of an issue of stocks increases the creditors’ confidence in the given company and its creditworthiness. on the other hand, an issue of preferred stocks is connected with certain disadvantages for the company as the issuer. it is mainly the fact that the volume of issued preferred stocks is usually legislatively limited in relation to the total volume of the company’s equity capital. an issue of these securities also involves high issuance costs. another disadvantage is the fact that in preferred stocks the investors require higher profitability compared e.g. to bonds; the amount of the paid dividends then, in the case the profits made are going down, do not decrease, and the paid dividends do not represent a tax-deductible cost, and so it is not possible to use, in the case of profitability, the tax shield. an advantage of a participating loan is that it can also be obtained by businesses that cannot acquire finance through an issue of securities (i.e. stocks or bonds), and the terms and conditions of provision and repayment are stipulated on an individual basis. another advantage is that when this source is obtained, the control over the company activities is not extended. moreover, in the period when the company’s profits are going down, the payments for the provision of this financing source are decreasing, too. on the other hand, a disadvantage of a participating loan from the point of view of the company is the fact that it is a limited source of capital compared to an issue of corporate bonds or stocks. to obtain it, the company has to have a certain share of its own financial sources at its disposal. it is also required to secure loans with collaterals. the creditors may also place certain limiting conditions on the company. moreover, the payments for provision of the loan and repayments of the nominal value have to be performed in time and properly, and in the case the company achieves high profits, its cost of holding the given source is also rising, and the payments for provision of the loan do not represent a tax-deductible cost, and so the company cannot use the tax shield. and although in this case there are no issuance costs as it is in the case of securities, it is not possible to omit the costs in the form of bank fees connected with this financing source. as for participating bonds, their issue makes it possible to obtain a big volume of financial sources from a large number of creditors, which brings company managers increased flexibility in the creation of the capital structure. moreover, the interest on these bonds usually represent lower amounts than dividends on the common or preferred stocks, and in the period when the issuing company shows a lower economic result, the payments for this 140 l. tetrevova, j. svedik. mezzanine financing instruments in comparison to the classic financing sources financing source are decreasing. another advantage can be seen in the fact that in relation to this financing source the control over the company’s activity is not extended and that securing in the form of property collaterals is not required. successful placement of these bonds on the capital market then increases the soundness of the issuer. on the other hand, an issue of participating bonds places significant demands on the company’s creditworthiness, where the financial risk rises due to an increase in the ratio of debt to the total capital. another disadvantage is that the interest and the principal value have to be settled in time and properly. in the case the company’s profitability is growing, the interest payments are growing and increasing the cost of holding this financial source. moreover, the paid interest is not a tax-deductible cost and the company thus cannot use the tax shield. this source is also connected with high issuance costs and it might also be connected with certain limiting conditions for the owners and the company management. as for the subordinated loan, it can also be obtained by companies that cannot obtain finances through an issue of securities, and the terms and conditions of provision and repayment are stipulated on an individual basis. in this case, the company is not burdened with high issuance costs and the control over the company’s activity is not extended, either. an advantage is that the paid interest represents a tax-deductible cost, and the company can thus use the tax interest shield. moreover, the inclusion of subordinated loan in the company’s capital structure makes it possible to obtain the classic loan under better conditions. however, a disadvantage is that it is a limited source of capital compared to an issue of corporate bonds or stocks. also, the company has to have a certain share of its own financial sources at its disposal to be able to get this loan. moreover, securing in the form of collaterals is required, and the creditors may also place certain limiting conditions on the company. another disadvantage can be seen in the fact that the payments of the interest and of the nominal value have to be performed in time and properly, and subordinated loans are connected with a higher interest rate, i.e. with a higher cost of capital, compared to the classic loans. they are also connected with certain bank fees. an issue of subordinated bonds gives the company the chance to obtain a big volume of financial sources from a large number of creditors and thus achieve an increased flexibility in the creation of the corporate capital structure, but it also makes it possible to obtain another debt capital under better conditions. another advantage is in the fact that the interest on subordinated bonds represent, in most cases, lower amounts compared to dividends on common or preferred stocks. moreover, it is a tax-deductible cost, and the company can thus use the interest tax shield. subordinated bonds are not connected with the extension of the control over the company’s activity, and their issue does not require any securing in the form of property collaterals. another advantage that must not be omitted is the fact that successful placement of subordinated bonds on the capital market increases the company’s soundness. on the other hand, their issue results in an increase in the financial risk due to an increased ratio of debt to the total capital. it is also connected with high issuance costs and the obligation to pay the interest and the principal value in time and properly, where the interest rates are higher compared to the classic bonds. moreover, these bonds may also be connected with certain limiting conditions for the company owners and management. business, management and education, 2018, 16(1): 133–146 141 convertible bonds, as well as the other types of bonds, make it possible to obtain a big volume of financial sources from a large number of creditors and lead to an increased flexibility in the creation of the corporate capital structure, and their issue does not require any securing in the form of property collaterals. another advantage is that the interest on convertible bonds represents, in most cases, lower amounts compared to the interest on the classic corporate bonds or dividends on the common and preferred stocks. moreover, it is tax deductible and the company can thus use the interest tax shield. in the case of an exchange of convertible bonds for stocks, the company obtains a non-payable financial source, where the right to an exchange can be the reason for an increased interest of investors in these securities. successful placement of these bonds on the capital market increases the soundness of the issuer and, moreover, the issuer can implement, through convertible bonds, a new issue of stocks even in the period when there are limited conditions for their placement. on the other hand, an issue of convertible bonds places significant demands on the creditworthiness of the issuer and leads to an increased financial risk due to an increased ratio of debt to the total capital. the interest (and in the case, there is no conversion, also the principal value) has to be settled in time and properly and, at the same time, it is also necessary to pay high issuance costs. in the case of implementation of an exchange of the bonds for stocks, the control over the company’s activity is extended, and after such an exchange the increase in the number of stocks also results in a decrease in earnings per stock. also, an issue of bonds with warrants makes it possible to obtain a big volume of financial sources from a large number of creditors and to ensure increased flexibility in the creation of the company’s capital structure, and it is not necessary to secure them with property collaterals. moreover, in the case of exercise of the warrants, the company acquires additional financial sources from the sale of stocks. another advantage is that the interest on bonds with warrants usually represents lower amounts than dividends on preferred or common stocks and, at the same time, it is a tax-deductible cost and so it is possible to use the interest tax shield. another fact that must not be omitted is that the option right might be a reason for an increased interest of investors in these securities and that successful placement of these bonds on the capital market increases the soundness of the issuer. on the other hand, an issue of bonds with warrants places significant demands on the issuer’s creditworthiness and increases the financial risk due to an increase in the ratio of debt to the total capital. an issue of these securities is then connected with high issuance costs and the obligation to pay the interest and the principal value in time and properly as the company’s debt relating to the bond does not cease to exist if the warrants are exercised. another disadvantage is that if the warrants are exercised, the control over the company management is extended and the earnings per stock are decreased due to an increased number of stocks. moreover, warrants usually have a long-term to maturity and so the investor is entitled to purchase the company’s stocks for a longer time period. 3.2. assessment of mezzanine financing instruments in comparison to equity and debt financial sources the outcomes of the overall evaluation of pros and cons of mezzanine financing instruments in the forms of silent participations, preferred stocks, participating loans, participating bonds, 142 l. tetrevova, j. svedik. mezzanine financing instruments in comparison to the classic financing sources subordinated loans, subordinated bonds, convertible bonds, and bonds with warrants and their comparison to the pros and cons of the classic financing sources in the forms of common stocks as equity financing sources and the classic bank loans and corporate bonds as debt financing sources are shown in table 1. table 1 implies that the first place in the assessment was taken by silent participations, the second by preferred stocks and common stocks, i.e. from the point of view of the corporate balance equity capital, and from the financial point of view equity capital and equity mezzanine. the third place was taken by subordinated loans, the fourth by subordinated bonds table 1. evaluation of mezzanine, equity and debt financial sources (source: authors) evaluated criterion mezzanine equity debt sp ps pl pb sl sb cb bw common stocks bank loans corporate bonds 1. big volume of the capital 0 1 0 1 0 1 1 1 1 0 1 2. availability for businesses of all sizes 1 0 1 0 1 0 0 0 0 1 0 3. special conditions 1 0 1 0 1 0 0 0 0 1 0 4. creditors set no limitations 1 1 0 0 0 0 0 0 1 0 0 5. no possibilities of extended control over the corporate activities arise 1 0 1 1 1 1 0 0 0 1 1 6. demands on the corporate credit capacity do not increase 1 1 0 0 0 0 0 0 1 0 0 7. improvement of corporate creditworthiness 1 1 0 0 1 1 0 0 1 0 0 8. financial risk does not increase 1 1 0 0 0 0 0 0 1 0 0 9. no threat of sanctions if a payment is not performed in time and at proper amount 1 1 0 0 0 0 0 0 1 0 0 10. financial source provider does not share growing profits 0 1 0 0 1 1 1 1 0 1 1 11. financial source provider bears consequences of decreased profitability 1 0 1 1 0 0 0 0 1 0 0 12. tax deductibility of payments 0 0 0 0 1 1 1 1 0 1 1 13. absence of security in the form of a pledge 1 1 0 1 0 1 1 1 1 0 1 14. absence of issue costs 1 0 1 0 1 0 0 0 0 1 0 ∑ 11 8 5 4 7 6 4 4 8 6 5 order 1 2 5 6 3 4 6 6 2 4 5 legend: sp  – silent participations, ps  – preferred stocks, pl  – participating loans, pb  – participating bonds, sl – subordinated loans, sb – subordinated bonds, cb – convertible bonds, bw – bonds with warrants. business, management and education, 2018, 16(1): 133–146 143 and classic bank loans. the fifth place was taken by participating loans and classic corporate bonds. the last, sixth place was taken by participating bonds, convertible bonds and bonds with warrants. it is, from the point of view of the corporate balance, debt capital, and from the financial point of view debt capital and debt mezzanine. 4. discussion the study shows that equity capital together with  equity mezzanine is connected with a larger number of advantages compared to debt capital and debt mezzanine. however, there is no substantial difference between the advantages of mezzanine and classic equity or debt financing sources. as for the comparison between private and public mezzanine, there are no evident fundamental differences between the mentioned groups. however, within individual instrument categories (loans versus bonds, silent participations versus preferred stocks), private mezzanine instruments appear, compared to public mezzanine instruments (i.e. securities), more advantageous. as the paper implies, there is no significant difference between the advantages of mezzanine and classic equity or debt financing sources. therefore, hypothesis h1: “mezzanine financing sources represent, from the qualitative point of view, more advantageous sources compared to equity and debt financing sources.” has been disproved. as for the conducted comparison between private and public mezzanine instruments, there are no significant differences between the mentioned groups, but within individual instrument categories, private mezzanine instruments appear more advantageous than public mezzanine instruments. this confirms hypothesis h2: “private mezzanine instruments appear, within alternative instruments, more advantageous compared to public mezzanine instruments.”. conclusions mezzanine financing represents a hybrid form of financing interconnecting the features of equity and debt. mezzanine financing instruments came into existence on the basis of the classic financial sources in the forms of bank loans, corporate bonds, and common stocks. they include silent participations, preferred stocks, participating loans, participating bonds, subordinated loans, subordinated bonds, convertible bonds, and bonds with warrants. each of these instruments is distinguished by specific features and is connected with certain advantages and disadvantages. as the study implies, there is no substantial difference between the advantages of mezzanine and equity or debt; however, equity together with equity mezzanine is connected with a larger number of advantages compared to debt and debt mezzanine. the study also shows that there are no significant differences between private and public mezzanine, but within individual instrument categories, private mezzanine instruments appear more advantageous than public mezzanine instruments. in conclusion, we can state that the innovated method of financing in the form of mezzanine financing instrument does not bring, from the qualitative point of view, significant 144 l. tetrevova, j. svedik. mezzanine financing instruments in comparison to the classic financing sources advantages compared to the classic financial sources. their inclusion in the corporate capital structure will be considered by the corporate finance managers in specific situations in view of individual characteristics of these instruments. at the same time, they will also have to take account of the quantitative point of view, i.e. the costs of the above forms of capital with respect to the current conditions on the financial market. this paper was compiled on the basis of a survey performed in the conditions of the czech republic. therefore, its limiting factor can be seen in the projection of certain specifics of the given financial market. however, with respect to harmonization of the rules, procedures 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s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2014, 12(2): 303–317 doi:10.3846/bme.2014.238 ethical-economic dilemmas in business education anna remišová1, anna lašáková2, zuzana búciová3 comenius university in bratislava, odbojárov 10, 820 05 bratislava 25, slovakia e-mails: 1anna.remisova@fm.uniba.sk; 2anna.lasakova@fm.uniba.sk; 3zuzana.buciova@fm.uniba.sk (corresponding author) received 20 october 2014; accepted 6 november 2014 abstract. the main purpose of the article is to support the idea of institutionalizing business ethics education at all business schools. further, the article stresses the importance of using ethical-economic dilemmas in business ethics education. it argues that business students should learn that managerial work is too complex to make do with expertise and experience and help them to acquire the skill of ethical reflection of economic activity. solving ethical-economic dilemmas in business ethics courses helps to develop cognitive skills in considering economic or managerial problems on the basis of ethical and economic interaction. in order to support the main purpose stated above, we aimed at getting a picture of how respondents assess and solve an ethical-economic dilemma. hence, this article presents results of an empirical investigation of the ethical decision-making (edm) process on a sample of slovak students of management. keywords: business ethics, ethical-economic dilemma, ethical decision-making (edm), ethical rationality, economic rationality, business education. jel classification: a13, a22, a23. 1. introduction people have been constantly confronted with consequences of unethical business practises. it is not unusual to witness how ethical misconduct in business gives rise to negative outcomes of enormous proportions. as unethical decisions of business leaders was identified as one of the key factors leading to many disasters (donaldson 2012; friedman, h., friedman, l. 2010), with increasing number of such cases urgency arises to pay more attention to ethical education of future managers. in recent years, world leading business schools have been aiming attention at integrating business ethics in their curriculum, as some of them became embarrassed by the role played by their alumni in corporate scandals. according to ghoshal (2003), business school teachers have been careless in their responsibilities, ill preparing students for the reality of corporate life by treating business disciplines “as if it were a kind of physics, in which individual intentions and choices either do not play a role or, if they do, can safely be taken as being determined 304 a. remišová et al. ethical-economic dilemmas in business education by economic, social and psychological laws” (ghoshal 2003). he is just one of those calling for change in business education, suggesting that “coursework-as-usual is insufficient, or at least irresponsible, because they cover material independent of ethics” (cant, kulik 2009). though some argue that ethics cannot be taught (e.g. cragg 1997) and that it is difficult to change personal values and principles in business ethics courses (mccabe et al. 1991), the association to advance collegiate schools of business (aacsb) obviously assuming that ethical decision-making (edm) strategies and ethical values can be trained (sims, felton 2006) has included ethics instruction as an accreditation requirement and recommended it to be high priority in the curriculum (falkenberg, woiceshyn 2007). 2. the role of ethics in business education business is “a social activity with moral prerequisites” (de george 1989) and with “the potential for a myriad of moral dilemmas” (falkenberg, woiceshyn 2007). business students should realize that ethics is an integral part of business and is present in every decision-making. “a business decision may be labelled or categorized as a financial, manufacturing or marketing decision, but ethical dimensions are intertwined in the decision, regardless of its description” (sims, felton 2006). students should learn that in the course of professional activity, the manager commonly gets into situations when his moral beliefs conflict with his economic intent; when there is a conflict between the desire to succeed and the desire to act honestly; a conflict between career and conscience, or moral values of his associates and his/her values. the purpose of teaching business ethics is to achieve students’ realization that ethics is not a luxury or additional cost in the manager’s work, but an integral part of his everyday work (remišová 2004). as “all management decisions have possible second and third generation consequences of an ethical nature” (sims, felton 2006), students should be aware that “what may appear to be an ethically responsible decision when viewed from a short-term perspective often has long-term negative and unintended consequences that are ethically irresponsible” (sims, felton 2006). previous research showed that perceived importance of an ethical issue is a predictor of moral intent (haines et al. 2008), which supports the significance of discussing ethical issues regarding all business activities to better understand their impact. students should understand that every decision has an ethical dimension, be able to find and assess it, as well as, reason ethical primacy in their decisions. however intense the debate might be on integrating ethics into business education, it should primarily focus not on whether ethics can be taught, but on how to teach ethics more effectively. what can educators do to achieve the best possible education results? many authors agree that apart from familiarizing students with business ethics as a subject matter, a good business ethics course should (1) raise awareness of ethical issues, (2) help students to identify and understand their core values and give them the 305 business, management and education, 2014, 12(2): 303–317 possibility to question and challenge them, (3) broaden students’ understanding of ethics and its complexities, and (4) strengthen their analytical skills, moral reasoning and judging abilities (see e.g. sims 2002; lowry 2003; sims, felton 2006; cant, kulik 2009; kolb, a. y., kolb, d. a. 2005). moreover, business ethics course should be intended to “strengthen students’ adaptation” to meet their future managerial social obligations (sims 2002), increase capacity “to critically respond to changing environments that contain competing interests and complex obligations to numerous stakeholders” (cant, kulik 2009), and get them into the “habit” of applying edm strategies in a school setting (oddo 1997). there are also suggestions that developing certain competencies may help individuals to effectively include ethics in decision-making process (moralessánchez, cabello-medina 2013). last not least, it is important to help students understand that “being an ethical manager is a process – a process that needs to be nurtured throughout one’s management career” (sims, felton 2006). 3. ethical-economic dilemmas to accomplish the exacting objectives, a wide range of pedagogical approaches to teaching business ethics has been discussed over the literature, ranging from structured lectures, discussions, role-plays, case-studies, presenting ethical issues within the context of films and novels to “interaction with convicted white-collar criminals to learn from their mistakes” (sims, felton 2006). we agree that in order to make business ethics courses effective, the learning must be experience based and emphasize personal experience application (sims, felton 2006) as more experienced students appear to be more ethically oriented (eweje, brunton 2010). in accordance with the finding that studying ethics scandals positively impacted student perceptions of the ethics of business people (cagle, baucus 2006), we believe students should be given an opportunity to see business situation from someone else’s point of view in simulations, role plays, ethical-economic dilemmas, or by sharing their own experience. by engaging in such activities, they experience how it feels to be “on the other side” of their decision, and/ or experience consequences of their decisions in model situation. at faculty of management, comenius university in bratislava, where all authors of this article teach courses in business and managerial ethics, the instruction is based on three main pillars: 1. primacy of ethical rationality over economic one. based on ulrich’s (1997, 2010) integrative approach to business ethics, emphasized in all remišová’s works on business ethics (e.g. remišová 1997, 2004, 2011, 2012; remišová, búciová 2012), students are taught to understand the difference in ethical and economic rationality in everyday business situations and learn to integrate them. moreover, they are taught to understand, that in case those rationalities are in conflict, the ethical one should be given priority (i.e. the universal interests should be preferred over individual ones). the main goal of the courses is to teach students distinguish 306 a. remišová et al. ethical-economic dilemmas in business education between ethical and economic aspects of everyday business situations, and to help them acquire skills to solve them in favour of ethics. 2. managerial ethics is a professional ethics, and therefore cannot be withdrawn from business education. just as medical or law students cannot graduate without encountering ethics instruction during their studies, all business students should complete courses in business or/and managerial ethics to have the opportunity to encounter and discuss ethical issues of their future profession, improve their moral sensitivity, thinking, reasoning, etc. 3. solving ethical-economic dilemmas helps developing students’ thinking and moral judgment. this idea derives from kohlberg’s model of moral development, which was analyzed by remišová (1996). according to kohlberg’s theory of moral development (1981), moral judgment develops over time together with the development of one’s thinking. in teaching ethics, it is more important that students have to engage in the process of solving ethical dilemmas, than the actual solutions they are able to come up with. by facing ethical dilemmas in school environment, students are forced to think about how to solve such situations, and thus they create mental schemes for solving such problems. this is one of the most important outcomes business ethics courses can provide. ethical-economic dilemmas present everyday business situations in which economic dimensions of a managerial problem are confronted with ethical ones. solving such situations becomes not merely a matter of business knowledge, economic parameters and legislation, but is strongly influenced by ethical moments. individual action is influenced by one’s moral principles, values, character qualities, moral development, ability to respect human rights of other people, and ability to consider concerns of all the individuals and groups involved (remišová 2004). ethical-economic dilemmas are not simply about choosing between “the right” and “the wrong”. according to brady (1990) such dichotomy is misleading and may cause frustration. they present a complex decision-making process, in which decisions between profit and social harm take place, complicated multilateral alternatives are assessed, and expected consequences, uncertain possibilities and career implications are taken into consideration (remišová 2004). according to remišová (2004) in order to find a solution of an ethical-economic dilemma, three types of analysis may help: economic (considering impersonal market principles), legislative (considering impersonal social rules) and ethical one (trusting individual moral values). students are taught to analyze various situations from ethical viewpoint (as it is assumed that they have already been taught to analyze problems from economic viewpoint on many other subjects in the curriculum). discussing such dilemmas enhances their moral awareness, ethical thinking and improves moral reasoning (remišová et al. 2014). as already mentioned, the most significant outcome of solving ethical-economic dilemmas is in the process itself. no matter what the decision made is, by facing and solving the dilemmas and weighing possible solutions students are creating an important habit for their future profession. 307 business, management and education, 2014, 12(2): 303–317 4. research methodology the main purpose of our research was to gain a clearer picture of how respondents assess and solve an ethical-economic dilemma, this being measured in regard to certain elements of edm. in order to gain valid and reliable data we decided to first perform a pilot study, in which the designed research methodology (e.g. content of the given ethical-economic dilemma, the way the variables were coded, etc.) would be investigated. after evaluation of the pilot study results, the coding scheme for variables included in the research had to be précised and refined. the partial results of our pilot study were published in our previous article (remišová et al. 2014). after integrating minor changes to the questionnaire body, we proceeded with the research. in order to achieve the research purpose stated above, we had to follow these consecutive methodological steps: 1. respondents were given an ethical-economic dilemma by anna remišová (2011) in a written form. it was presented to respondents as a short case study that introduced a situation, in which respondents represented owners of a company dealing with waste disposal. the company cared about its environmental reputation, and therefore, it invested in a device for intercepting emissions from burning waste. the company was in the stage of growth but big investments had exhausted it, and so it was essentially looking for lucrative orders. one of the managers came with a proposal he had received from an unknown foreign food company to dispose spoiled goods. burning such goods produced emissions and the foreign company would have to pay a high fine for disposing such waste in its home country. the cost for disposing the goods in the food company’s home country was stated to be 20-times higher than in country, in which our company operated, as the environmental legislation in our country was more benevolent. as owners of the waste disposing company the participants were informed their newly bought device could not intercept those emissions. they also knew there was no monitoring device for emissions in the region where their company operated. the company was to receive 600.000 € for the waste disposal, which would solve its current economic problems as well as strengthen its market position. the manager, who received this offer, was asking what to say to the food company. 2. after reading the dilemma the participants were asked to think about it and then fill in a questionnaire that was at the end of the dilemma. it consisted of six openended questions tied to the wording of the dilemma. questions comprised issues of how would respondents decide in such a situation, what would be the economic point of view, what would be the ethical dimension of this dilemma, what would be the consequences of the selected solution, whether respondents would be willing to bear responsibility for their decision, and finally, whether they thought it was ethically correct that economically more developed countries disposed waste in the weaker ones. the closing demographic question page asked about respondents’ gender, age, work experience and whether they had taken any courses in ethics prior to the testing. 308 a. remišová et al. ethical-economic dilemmas in business education 3. after receiving the filled in questionnaires, all responses were transcribed into one document ordering them according to the six consecutive open-ended questions. next a pre-developed coding scheme, that was refined after the pilot study, was applied in order to catch the most important elements of each answer. hence, answers on six open-ended questions were differentiated into 17 quantitatively coded variables. moreover, 16 demographic variables were involved in the analysis, too. the data had been transcribed into an excel file, which was subsequently scored in the version 21 of spss program. for the sake of the research goals we assessed the data by the means of various methods of descriptive statistics, like frequencies and cross-tabulations. further we used the chi-square test for independence, calculated cramer’s v, and contingency coefficient for calculating the strength of the association between measured variables. our two main research questions were: i. how did our respondents solve the respective ethical-economic dilemma? because the issue of edm is multifaceted, we had to fine down this complex question into the particular processes of edm. more specifically, we investigated here three processes of edm (rest et al. 1986): − what was respondent’s dominant decision (intended action)? − what was the nature of moral awareness of respondents? − what was the nature of respondent’s moral judgment? where they able to determine, which course of action is morally correct? ii. is there any statistically significant relationship between previous education in ethics and the way respondents solved the moral dilemma? more specifically, is there any relationship between education in ethics and: − decision, in the sense of giving priority to ethically right decision over ethically incorrect decision; − moral awareness, which was inspected on the basis of: a) the awareness of ethical stakes inherent in the given moral dilemma, b) sensitivity to various stakeholders, to which the dilemma was supposed to relate, c) consequences of intended action awareness, and d) long-term/short-term consequences of intended action awareness; − moral judgment that was in our research represented by the attitude of respondents toward whether to exploit (economically) weaker countries is ethically correct or incorrect; − respondent’s willingness to bear responsibility for their intended action; and − the scope of economic rationality that was perceived by respondents in relation to the selected solution of the dilemma. the next section of this paper will refer to the above stated research questions. 309 business, management and education, 2014, 12(2): 303–317 5. results sample. our sample consisted of both undergraduate and graduate students studying at the faculty of management, comenius university in bratislava, slovakia. no grade was assigned for the task of filling in the questionnaire and students were told to express their opinion freely and anonymously. after assembling the data, questionnaires filled in incompletely were excluded from the assessment, leaving 189 respondents in the final sample. as for the character of our sample, 67% of the sample consisted of women, 93% was populated by people being up to 26 years old, while 74% of them didn’t have a full-time work experience, however up to 67% of the sample did have work-related experiences on a managerial position. the majority of the sample population worked on a part-time platform: hrm positions (48%), admin-related positions (30%), finance/accounting positions (23%), followed by sales (20%), marketing (19%), and production (5%) positions. as for having education in ethics, 45% reported having attended a course related to ethics. as for the overall sample, 23% of them took a course in business ethics, 10% in ethics, 7% in managerial ethics, 3% in csr, and approximately 2% of them took differently specialized courses in ethics. on the solution of ethical-economic dilemma. table 1 illustrates the overall research outcomes regarding the basic variables measured within the edm process. we assessed 17 sub-elements of edm. as for the intended action to take, according to the results majority of our respondents (64%) would accept the offer to burn the toxic waste in order to solve current economic problems of their company. moral awareness was differentiated according to various stakeholders and other aspects that respondents would take into account, according to being able to identify that the respective dilemma includes the contrast between ethical and economic rationality, further according to being able to specify ethical stakes, and awareness of consequences of intended actions together with recognizing their long-term and short-term dimension. results show that more than 87% of respondents were aware of ethical stakes that were inherent in the dilemma. this means that respondents were able to identify ethical side of chosen solution (the course of action) they wanted to undertake. further results show that 58% of respondents took stakeholder “environment” into account, 25% considered region/people, 7% of respondents indicated economic weaker countries as important, only 4% considered future generations, and only 5% of the sample took into consideration employees of the company. almost 43% of respondents considered the aspect of company image as being important to think about, 19% recognized owner and his conscience, and 7% of respondents indicated violation of laws as being important to take into the decision-making. moreover, 25% of the sample was able to identify that there might be contrast between ethical and economic rationality in the respective dilemma. 310 a. remišová et al. ethical-economic dilemmas in business education table 1. edm related process research outcomes (source: created by the authors) edm-related processes edm elements variables n education in ethics yes/no intended action decision accepted unethical offer 121 49.6% 50.4% not accepted unethical offer 46 37.0% 63.0% moral awareness stakeholder environment not involved in reasoning 80 42.5% 57.5% involved in reasoning 109 46.8% 53.2% stakeholder region/people not involved in reasoning 141 39.0% 61.0% involved in reasoning 48 62.5% 37.5% stakeholder future generations not involved in reasoning 181 43.6% 56.4% involved in reasoning 8 75.0% 25.0% stakeholder economic weaker countries not involved in reasoning 176 44.3% 55.7% involved in reasoning 13 53.8% 46.2% stakeholder employees of the company not involved in reasoning 178 44.4% 55.6% involved in reasoning 10 50.0% 50.0% aspect of company image not involved in reasoning 107 43.0% 57.0% involved in reasoning 82 47.6% 52.4% aspect of owner/conscience not involved in reasoning 154 41.6% 58.4% involved in reasoning 35 60.0% 40.0% aspect of violation of laws not involved in reasoning 175 45.7% 54.3% involved in reasoning 14 35.7% 64.3% ethical rationality in contrast with economic rationality not involved in reasoning 142 41.5% 58.5% involved in reasoning 47 55.3% 44.7% awareness of ethical stakes ethical stakes specified 165 47.3% 52.7% ethical stakes not specified 24 29.2% 70.8% awareness of ethical stakes specified various stakeholders are at stake 78 48.7% 51.3% personal values/conscience are at stake 87 46.0% 54.0% law violation is at stake 12 33.3% 66.7% awareness of consequences aware 100 40.0% 60.0% not aware 89 50.6% 49.4% awareness of long/short term consequences long-term 33 51.5% 48.5% short-term 67 34.3% 65.7% moral judgment moral judgment on acceptance of exploitation of the weaker countries it is correct 19 42.1% 57.9% it is incorrect 170 45.3% 54.7% responsibility to bear responsibility for intended action is willing 160 43.8% 56.3% is not willing 29 51.7% 48.3% economic rationality scope of economic rationality pure economic calculus 141 45.4% 54.6% involving stakeholders into account 48 43.8% 56.3% 311 business, management and education, 2014, 12(2): 303–317 ethical stakes that were identified by respondents were mostly tied to the values and conscience of the owner of the waste disposing company (46%), to the various stakeholders (41%), and to possible violation of laws (6%). up to 6% of the sample was not able to recognize neither any ethical stakes nor any stakeholders. only 18% were aware of long-term consequences of their action, and 47% of the sample population was not at all aware of any consequences of their intended action. up to 35% were aware only of short-term consequences tied to their course of action in solution of the dilemma. moral judgment proved to be the easiest to recognize by our respondents. more than 89% of the sample population was able to determine, which course of moral action would be ethically correct. up to 85% of respondents would be willing to bear responsibility for their action. further, when asked, what is the economic viewpoint of the problem depicted in the dilemma, circa 75% of respondents relied solely on economic calculations of income and expenses, which means that only 25% of the sample was able to involve also some stakeholders and their stakes into the economic perspective. on the relationship between education in ethics and the way respondents assess the moral dilemma. the 17 elements of edm were tested also from the perspective of their relation to ethical education of respondents. when testing the relations between those who had and didn’t have ethical education, no significant relations were proved but two. these two statistically significant relations were confirmed (see table 2 and table 3). table 2. relation between previous ethical education and involvement of stakeholder region/ people into consideration when solving the dilemma (source: created by the authors) stakeholder region/people education in ethics yes no not involved in reasoning 55 86 involved in reasoning 30 18 pearson chi-square .005* contingency coefficient .201** *asymp. sig. (2-sided). ** approx. sig. table 3. relation between previous ethical education and involvement of owner/his conscience into consideration when solving the dilemma (source: created by the authors) aspect of owner/conscience education in ethics yes no not involved in reasoning 64 90 involved in reasoning 21 14 pearson chi-square .048* contingency coefficient .143** *asymp. sig. (2-sided). ** approx. sig. 312 a. remišová et al. ethical-economic dilemmas in business education our results as depicted in table 2 and 3 indicate that in our sample of slovak managerial students the strongest, although still rather moderate to weak relationship between ethical educational background and various parts of edm lie in involvement of the stakeholder region/people and the aspect of the owner´s conscience into account in the process of dilemma solution. no other statistically significant relations between measured variables of edm and ethical educational background were identified. in order to gain a clearer picture of the relevance and implications of research results, the discussion part of this paper will interpret our results in a broader context of business and business ethics education realities. 6. discussion the results of our survey indicate that having education in ethics did not have any significant relation to respondents’ intended course of action, moral awareness, or moral judgment. however, a relationship was proved between ethical educational background and involvement of the stakeholder region/people and owner’s conscience into account in the process of dilemma solution. students with education in ethics were more likely to consider negative impact of waste disposal on people living in the close area – ranging from long-term and short-terms health risks, to decrease in living comfort and drop in real-estate value due to pollution. they also more often reasoned that accepting the unethical offer might be in conflict with the owner’s conscience, or might be in utter contradiction with the core values and beliefs upon which the company was built (i.e. they referred to company’s conscience). interesting results occur when comparing willingness to bear responsibility for a chosen solution and the awareness of consequences. up to 85% of respondents would be willing to bear responsibility for their action, but only 18% were aware of long-term consequences, 35% were aware only of short-term consequences and 47% were not at all aware of any consequences of their intended action. these results may indicate either that a shallow or no knowledge of consequences and their complexity might lead to greater willingness to accept responsibility for a decision, or that respondents do not fully understand what “accepting responsibility” means. respondents might think they would be willing to accept responsibility for their decision (even if it means accepting the unethical offer), because they are not able to portray the consequences adequately, or they cannot portray responsibility for such a decision in terms of triple relationship of responsibility, i.e. who is responsible for what towards whom (remišová 2004). in both cases, what teachers can do is to emphasise ethics of responsibility as one of the basic frameworks for edm, discuss the complexity of every-day business decisions with accent on their consequences towards different stakeholders, and by using experiential learning methods to help students find the answers themselves. another interpretation of the results may be that respondents deliberately picked the risk of accepting the unethical offer as they believed the economical rationality had 313 business, management and education, 2014, 12(2): 303–317 to go first (i.e. to maximize profit, support the company financially in order to sustain or stay competitive, etc.). when asked, what the economic viewpoint of the problem depicted in the dilemma is, 75% of respondents relied solely on economic calculations of income and expenses, which means that only 25% of the sample was able to involve also some stakeholders and their stakes into the economic perspective. we suggest that students either did not see the different impact of consequences for different stakeholders or did frame the dilemma as a managerial problem without any ethical component and thus solved it based on the economic rationality only. if we work on the assumption that respondents believed economic rationality should have preference in the dilemma, than an important shift should be made in their entire business education – to let them understand that doing business cannot be limited to economic rationality only. we strongly agree with sims that in order to be successful, implementation of business ethics in the curriculum requires involvement and commitment of the entire business faculty to an overall set of ethical principles to be expressed to students (sims 2002), otherwise ethical values and principles trained in business ethics courses may collide with economic principles favoured in other business subjects. our results to certain extend correspond with marnburg’s (2003) suggestion that business ethics course might increase awareness of moral issues. we neither prove nor disapprove ritter’s assumption, that “while efforts to integrate ethics into curriculum may increase the possibility that individuals with a prior ethical schema will activate it in business situations, there may be little or no effect on individuals who have not yet created an ethical schema” (ritter 2006). we are of the opinion that business ethics should be mandatory part of business and economic education, regardless of what the students’ level of individual ethical thinking is, prior to the university studies (remišová et al. 2014). in accordance with oddo, we believe that “if students get into the “habit” of applying edm strategies in a school setting, they will be more likely to use them in business situations” (oddo 1997). it is important to note that in the educational process, ethical-economic dilemmas are usually used to provoke and stimulate discussion. each student is asked to participate in the discussion, give reasons for his solution and confront it with the solutions of others. this way, students learn to identify ethical aspects of economic problems, and to reflect their own decisions. self-reflexion and self-evaluation are essential in the process of becoming responsible managers. 7. conclusions one of the things students are familiarized with in business ethics courses, are tools for institutionalizing business ethics in organizational environment. unfortunately, teachers usually do not have such tools to institutionalize ethics in business education. thus, they can only influence a limited number of students, who have decided to enroll in business ethics course, which is often elective only. this article should serve as one of 314 a. remišová et al. ethical-economic dilemmas in business education the impulses for starting a discussion about integrating business ethics instruction into curriculum in all european business schools. we believe that business ethics should be treated at least as other business disciplines to prepare all students for the complex reality they will face in their future careers. courses in business and managerial ethics should not be withdrawn from business education. moreover, it is not enough to integrate them into business curriculum as elective courses only. as managerial ethics is a professional ethics, all managers should be prepared to handle business situations in favor of ethical rationality. these premises were reflected also in our research approach and design. we are aware of certain limitations of our approach to the research methodology, this influencing the character of research results. first, the variables included in our research might not wholly cover the entire edm process. although the literature dealing with the edm process and edm models is of a quite large scope, further theoretical clarification of particular elements of edm has to proceed in order to overcome certain vagueness and inconsistencies in the current theory. cross-field cooperation between managerial decision-making and various applied ethical disciplines, especially business ethics and managerial ethics should be supported in order to build models easily utilizable in managerial decision-making. hence managerial-oriented empirical studies with leadership decision-making studies as the key element of the former should be carried on to have enough comparable sets of data for meta-analyses. moreover, because of the qualitative nature of our approach and consequent quantification of the qualitative data in the process of respondents answer coding, there is, despite of previous pilot study, still a risk of incorrect coding. the content of our research instrument is rather single-sided, offering us to gain at first hand only qualitative data. therefore we are aware of the need to widen the scope of respondents, especially from managerial praxis, in order to confirm or reject some of our results in a larger managerial personnel-oriented study. another limitation of our study lies in certain negligence of situational variables and their impact on the edm, this being a result of focusing solely on the ethical educational background and its effect on the edm of the student population. this issue might be also one of the further challenges in the edm studies; to investigate the interconnections and correlations between leadership and culture contingencies and the edm process. further, for the utilization of theoretical models of edm into managerial praxis, it would be helpful to investigate the impact of moral intention, awareness, and judgment on the actual behaviour in longitudinal studies. we are aware that these challenges were not met in our article, but despite this fact we still believe that our study delivered new insights into the complex realm of edm and might be useful for practitioners in ethical education. 315 business, management and education, 2014, 12(2): 303–317 funding this article is part of a research project vega 1/0333/13 – critical analysis of the impact of cultural and ethical factors on leadership in current slovak business environment and was supported by scientific 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(ethics and morale, 2012), etika a ekonomika (ethics and economics, 2011), etika v médiách (ethics in media, 2011), manažérska etika (managerial ethics, 1999), and dejiny etického myslenia v európe a usa (the history of ethical thinking in europe and the usa, 2008). she is a member of ethics council of mol group in hungary and she leads the first ethical consultancy in slovakia. she was teaching at the technische universität in chemnitz, germany, and at the university fribourg in switzerland. since 1997 she has been a member of eben (european business ethics network). http://dx.doi.org/10.1007/bf00383799 http://dx.doi.org/10.1007/s10551-013-1817-9 http://dx.doi.org/10.1023/a:1017951729585 http://dx.doi.org/10.1007/s10551-006-9062-0 http://dx.doi.org/10.1007/s10551-005-3562-1 317 business, management and education, 2014, 12(2): 303–317 anna lašáková. phd, is associate professor at the faculty of management at comenius university in bratislava, slovakia. she gives lectures on organizational behavior, leadership, expatriate management, and business ethics. her research background lies in cross-cultural management, ethical leadership, and hr in relation to business ethics. a special field of her research interests regards the intercultural differences in ethical leadership, and in csr-related managerial decision-making. anna lašáková is author and co-author of more than forty scientific papers published in slovak as well as in foreign scientific research journals and anthologies. she has worked in several research projects, including the international globe student (global leadership and organizational behaviour effectiveness) research. zuzana búciová. phd, is lecturer at the faculty of management, comenius university in bratislava. she teaches human resource management, compensation systems, conflict resolution, and business ethics. in her dissertation (2010), she dealt with measuring corporate social responsibility. she researches at the theoretical as well as at empirical basis issues regarding corporate social responsibility, business ethics, ethical decision-making, and human resource management. she is the author of several professional articles in slovakia as well as abroad. this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons.org/ licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. copyright © 2023 the author(s). published by vilnius gediminas technical university issn 2669-2481 / eissn 2669-249x business, management and economics engineering corporate social responsibility in business practices of multinational companies: study of differences between czech and slovak renata skýpalová 1 , jana kozáková 2, mária urbánová 3, vito di sabato 4 1ambis college, prague, czech republic 2,3,4slovak university of agriculture in nitra, nitra, slovakia article history: abstract. purpose – find differences  in the core principles of  implementation of csr (cor‐ porate social responsibility) practices in subsidiaries of foreign multinationals in slovak and czech republic, two similar yet different countries.  research methodology – the questionnaire was distributed to local daughter companies of foreign multinational enterprises selected on the basis of stratified randomization. the sam‐ ple: 360 enterprises (180 from each country). mann‐whitney u test was used for the analysis (non-normally distributed data) of the differences between slovak and czech companies in  their csr implementation. findings – differences among the two countries  in the  implementation of csr exist  in  few  factors due to their joint history. research limitations – the representativeness of companies connected with foreign mother companies in the two countries cannot be computed: no data are available. to overcome this issue, the same number of monitored entities was analysed to so as to make further statistical analysis possible. practical implications – the results can be used by business entities, which may benefit from  comparing themselves against other players on the market or against the average situation on the monitored markets. moreover, teaching future managers and promoters csr is of significant importance. originality/value – the work sheds lights on csr practices in czechia and slovakia, two coun‐ tries in which there is a lack of studies on the topic of csr. ■ received 17 april 2023 ■ accepted 18 may 2023 keywords: multinational corporations, slovakia, czech republic, corporate social responsibility, difference. jel classification: m14, a13, h59.       corresponding author. e‐mail: renata.skypalova@ambis.cz introduction corporate social responsibility (csr) is becoming increasingly important for businesses around the world, especially multinational corporations that operate in different countries all over the  world. many organizations have begun implementing csr policies as part of their business strategies to demonstrate their ethical practices and improve their image in the eyes of the public. the czech republic and the slovak republic share a common historical and cultural or‐ igin within the former czechoslovakia, which was established after the world war i and existed  until its dissolution in 1993. since then, the two countries have been developing separately, but there still are a number of ties and common elements. after the break‐up of czechoslovakia, both countries went through a complicated process of transforming their economies from a 2023 volume 21 issue 1 pages 106–123 https://doi.org/10.3846/bmee.2023.18942 http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://orcid.org/0000-0002-7161-7038 mailto:renata.skypalova@ambis.cz https://orcid.org/0000-0001-7913-9053 https://orcid.org/0000-0003-4281-7329 https://orcid.org/0000-0001-8072-0136 https://doi.org/10.3846/bmee.2023.18942 business, management and economics engineering, 2023, 21(1): 106–123 107 planned economy to a market economy. in this area, the two countries have moved forward significantly, albeit at different rates. the czech republic has integrated faster into european  and world markets, which has enabled it to attract more foreign investment and increase its economic growth. slovakia had less industrial potential and poorer infrastructure in the early 1990s, but since then it has also improved considerably and is catching up with the czech republic. in recent years, both countries have faced challenges in terms of demography and population ageing, which affect productivity growth and competitiveness.  after the break‐up of czechoslovakia, the czech and slovak republics found themselves in a new geopolitical situation. the czech republic quickly integrated into european and world structures and became a member of the eu and nato, while slovakia joined these organizations only later. both countries are also making an effort to develop their relations  with the neighbouring countries, and with multinational companies coming to both countries and introducing management innovations that were not previously commonplace in the given countries. these are mainly innovations in the field of human management, resource  management, business ethics, and corporate social responsibility. the current study complements the literature by offering insight into the interconnection  of csr characteristics. by studying the factors influencing csr, the paper offers the opportu‐ nity to better understand entrepreneurial thinking in the context of central europe.  formally, the study aims at investigating the topic of corporate social responsibility in the specific conditions the of two transition economies of czech republic and slovak republic  (bryson, 2008). the goal is to find differences in core principles of csr implementation in  subsidiaries of foreign multinationals in these two similar different for countries and their  business environments (pawliczek, 2015). connection to foreign multinational companies was the precondition in regard to a specific situation in czechia and slovakia after 1989 when  specific managerial tools such as csr were introduced by mncs (kozáková et al., 2021).  in view of the above, it is interesting from a research point of view to look at one of the new aspects brought about by the operation of multinational companies in both countries that shared a common historical and geopolitical development. this aspect is corporate social responsibility. we assume that no significant difference can be found in the area of corporate  social responsibility: ■ h0: there is no statistically significant difference between czech and slovak companies  in the implementation of corporate social responsibility. ■ h1: there is a statistically significant difference between czech and slovak companies  in the implementation of corporate social responsibility. the study emphasizes the significance of implementing csr according to the size of a  company, since companies of different sizes deal with various issues in social csr operations  (waluyo, 2017; zbuchea, 2017). it also highlights the greater pressure placed on larger corpo‐ rations to publish their csr activities and the general presumption that these companies have a larger budget for such endeavors. our findings suggest that it is crucial for businesses to  reevaluate the reasons behind their decision to conduct csr initiatives and to be transparent when disclosing the costs associated with them. correspondingly, companies should change the way they see the primary goal and openness of csr initiatives since this obligatory csr reporting will shed light and stimulate interest of various stakeholders regarding responsible activities of businesses. 108 r. skýpalová et al. corporate social responsibility in business practices of multinational companies: study... 1. literature review the importance of corporate sustainability addressed in academia (gray, 2007; lee et al., 2012) and in business practice (roca & searcy, 2012; searcy & buslovich, 2014) is on the rise. in literature, the concept of corporate social responsibility is also linked to the term of “environmental sustainability” (aguinis & glavas, 2012; hahn et al., 2015; williams et al., 2017), however, the opinion on the compatibility of this unified use is different with respect  to the historical differences in the development of the two concepts (bansal & song, 2017).  the triple bottom line concept (elkington, 1997) will be used in this paper, which includes all three important groups of socially responsible activities, including linking the importance of stakeholder engagement (ahi & searcy, 2013; maj, 2018; ashby et al., 2012; hohnen & potts, 2007; hahn & kuhnen, 2013). the implementation of corporate social responsibility activities and their reporting still differ, the greatest convergence can be observed between eastern  europe and western europe (petera et al., 2019). czech republic and the slovak republic, according to a survey conducted by kpmg (2017), ranks below the global average in the area of reporting csr activities, and the overall culture of sustainable behaviour has not yet fully developed in the eastern european region. overall, the importance of corporate reporting of csr activities continues to grow, and although sustainability reporting and sustainability management are not the same activities, they are strongly interconnected and communica‐ tion as such is of great importance for the sustainability of companies (petera et al., 2019). the overall role of corporations in business practice is rising sharply, as is people’s inter‐ est in socially responsible behaviour on the part of companies (krajnakova et al., 2018). the most advanced forms of sustainable behaviour, such as social enterprises (krajňáková et al.,  2018) and inter-institutional cooperation (raišienė et al., 2019), are also experiencing great  development. crane et al. (2014) follow the mainstream in their theoretical reflections and  interpret csr as a disclosure that should be accompanied by various reports from corpora‐ tions, governments, public sector organizations, ngos, and even international organizations. the direct impact of size on csr implementation in business is positive. thus, the larger a company grows, the higher the impact on csr (brammer & millington, 2006). the level of socially responsible communication of multinational companies is adapt‐ ed to the level of communication in the country of operation (tetrevova et al., 2019). the conclusions of the study (tetrevova et al., 2019) show that the intensity of communication and the structure of socially responsible activities is influenced by the country in which the  multinational company operates. significantly higher communication intensity is achieved by  companies operating in western europe (germany) compared to manufacturers operating in eastern european countries – the czech and slovak republics. foreign‐owned companies demonstrate a greater commitment to social responsibility (hinčica et al., 2021). the growing demands on performance, reporting, and communication of socially respon‐ sible corporate activities are based primarily on the demand of end and corporate customers and employees. according to a 2018 ipsos (2019) study conducted in the czech republic, 53% of customers consider the social responsibility of the companies they buy from when making purchasing decisions, 58% of customers are willing to pay more for environmentally friendly products, and 78% of employees consider it important that their employer is socially business, management and economics engineering, 2023, 21(1): 106–123 109 responsible. these requirements also stem from eu legal acts such as the european union directive 2014/95/eu of the european parliament (euriopean union [eu], 2014) and of the council of 22 amending directive 2013/34/eu (eu, 2013) regarding disclosure of non-financial  and diversity information by certain large undertakings and groups. a key role in the application of the concept of corporate social responsibility (csr) is played by the communication phase, the prerequisite of which is the performance and report‐ ing of socially responsible activities. nowadays, communication through corporate websites and social networks is becoming increasingly important. the fact is that the level of com‐ munication in the field of csr varies over time and varies between regions and countries or  sectors. the kpmg study, conducted in 48 countries on a sample of the country’s 100 largest companies, shows a growing trend in the level of csr reporting and communication, which increased by 3% to 77% in europe between 2015 and 2017. at the same time, there is a noticeable difference between the level of csr reporting and communication in western  (82%) and eastern (65%) european countries. there is also a noticeable difference between  individual sectors, where higher levels of csr reporting and communication are achieved by companies from the so‐called reporting and communication socially sensitive csr sectors (kpmg, 2017). research conducted on 454 companies from the czech republic and 368 companies from slovakia showed that csr is not perceived similarly in both countries, leading to dif‐ ferences between countries. no correlation was found between csr and company size, but the decisive factor is the length of time it operates on a given market, especially for a slovak company. in addition, there is evidence that older slovak companies are less open to carrying out csr activities (çera et al., 2020). the bibliographic analysis (see table 1) shows that in the period 1993–2023 (i.e. since the establishment of the independent republics: the czech republic and the slovak republic), a total of 40,128 articles on “corporate social responsibility” or “csr” were published in the web of science database, of which more than half come from the five past years. however,  if we are looking for articles that are devoted to a joint focus on the czech republic and the slovak republic, we find 99 articles in the monitored period, of which only 28 articles in the  last five years. in this area, we see a gap in research that our article is intended to fill. table 1. bibliographic records on a query in the web of science (wos) 1990–2022 (source: calculated by authors, access 2023/02/21) query wos 1993–2023 wos 2018–2023 “corporate social responsibility” or “csr” 40,128 24,363 “corporate social responsibility” or “csr” and “czech” or “czech republic” 681 327 “corporate social responsibility” or “csr” and and “czech” or “czech republic” “slovak” or “slovak republic” 281 119 “corporate social responsibility” or “csr” and and “czech” or “czech republic” “slovak” or “slovak republic” 99 28 total 41,189 24,837 110 r. skýpalová et al. corporate social responsibility in business practices of multinational companies: study... 2. research methodology in this section we present the methodology used for the analysis. first, the material of the study is described, followed by the research design. afterwards, the used methods and pro‐ cedure are explained. eventually, the sample and its characteristics are described.  2.1. material the study was conducted in the form of questionnaire survey (roopa & rani, 2012) realized by the team of trained interviewers (mclafferty, 2003) in slovakia and in the czech republic.  survey was aimed at the various aspects of corporate social responsibility and this paper presents just the part of obtained data. the precondition for selecting the monitored entities was the registration in the commercial register in monitored countries and connection to foreign multinational companies. in fact, a monitored entity had to be resident in the czech republic or slovak republic and considered as daughter company of a foreign multinational company. the type of this connection and form of entry host country market was not taken into account since these conditions were considered variables. for the purposes of the study, companies of various sizes,  legal form, and other specifics were selected on the basis of  stratified randomization (kim & shin, 2014). for the purpose of statistical analysis, the sample  was narrowed down to an equal number of monitored entities from each country. after data adjustment and corrections (munk, 2011) there were 360 monitored entities (180 from each country based on the smaller sample of obtained data from one country). 2.2. research design based on the specifics of the implementation of csr in multinational companies (lind et al.,  2022) the questionnaire was divided into several parts out of which the parts of questions regarding the mother company, daughter company, and csr basic implementation were included. the majority of questions were closed questions with multiple‐choice answers for respondents (reja et al., 2003). questions regarding the year of establishment and ownership structure were open and transferred into types of answer in the data adjustment phase. final version of questions and their answers were later transformed into three groups of factors: fm – factors of mother company: fm1 establishment, fm2 legal form, fm3 registered office of the parent company – region, fm4 total number of countries in which a company  operates. fd – factors of daughter company: fd1 legal form, fd2 year of establishment, fd3 members of statutory body, fd4 establishment as ewfep, fd5 primary area of operations, fd6 size of the company, fd7 ownership structure. csr – factors: csr1 csr in organizational structure, csr2 main motivation for csr, csr3 csr connection with the core of business, csr4 csr reporting, csr5 csr competition, csr6 csr certification, csr7 csr expenses data availability.  2.3. scientific hypothesis based on the character of this study, the main purpose was to find statistically significant  differences in csr implementation between monitored companies from the czech republic  business, management and economics engineering, 2023, 21(1): 106–123 111 and slovak republic. implementation of csr was described through three groups of factors fm – factors of mother company (fm1–fm4) which describe specific features of foreign  mother companies of monitored entities, fd – factors of daughter company (fd1–fd7) which describe specific situation of monitoring daughter company located in czech or slovakia,  and sr – factors (csr1–csr7) which describe specific features of csr implementation in the  monitored companies. with regards to the fact that we have three groups of factors, the general hypothesis above was extended to a set of derived hypotheses that  includes selected factors fm –  factors of mother company (fm1–fm4), fd – factors of daughter company (fd1–fd7), and csr – csr factors (csr1–csr7). 2.4. methods initially, the data was adjusted and coded into a form suitable for further statistical analysis by the software ibm spss statistics subscription 1.0.0.1447. as the first step the shapiro-wilk  test of normality (shapiro & wilk, 1972) confirmed non-normal data distribution which de‐ termined selection of further methods used. after, the durbin‐watson test of autocorrelation (watson & durbin, 1951) excluded the autocorrelation between the selected variables, which  made it possible to continue with the statistical investigation. as per non‐normal data dis‐ tribution, the mann-whitney u test (mcknight & najab, 2010) was used for identification of  statistically significant differences between slovak and czech companies in their csr imple‐ mentation. the size of effect was then calculated by dividing standardised z test statistic by  the square root of the number of cases. according to cohen’s classification (1988) of effect  sizes, 0.1 is small effect, 0.3 moderate effect, and 0.5 and above a large effect.  2.5. sample characterization the sample consists of 360 monitored companies (180 from each country). these companies were chosen based on stratified randomization with two main prerequisites for inclusion in  the study. the residency in monitored economies (czech republic and slovakia) and the aggregation in the multinational enterprise through the foreign mother company. the na‐ ture of the relationship with the parent company (degree of centralization) or the form of entering the host market (franchise, acquisition, the establishment of a subsidiary with capital participation of a foreign company, etc.) was not decisive. the result was that the monitored companies have various characteristics. monitored entities (daughter companies of foreign mother companies) had various legal forms in the czech and slovak republics. there were 255 limited liability companies (124 sk, 131 cz), 91 joint stock companies (45 sk, 47 cz), 3 limited partnerships (1 sk, 2 cz), and 10 public companies (all from sk). monitored companies were established mostly between 1990 and 1995 (58 sk, 79 cz) and between 2001 and 2020 (61 sk, 56 cz), 65 were estab‐ lished between 1996 and 2000 (44 sk, 21 cz), and 41 in 2011 or later (17 sk, 24 cz). of the 360 monitored entities, 213 were established as enterprises with foreign capital participation (106 sk, 107 cz) and 147 as enterprises without foreign capital (74 sk, 73 cz). based on these characteristics, we can assume that the used sample is balanced in terms of the key characteristics. 112 r. skýpalová et al. corporate social responsibility in business practices of multinational companies: study... 3. results and discussion to evaluate the differences between czech and slovak companies in their implementation  of csr, mann-whitney u test was utilized. the key values for concluding the differences  among examined factors were mann-whitney u, z and the 2-tailed significance score in table  2. the performed statistical test discovered significant differences for four out of 19 factors  related to the implementation of csr between czech and slovak companies namely in fm1 establishment, fd6 size of the company, csr2 main motive for csr and csr7 csr expenses  availability. the test revealed significant differences in the establishment from the perception of czech  republic (median = 2, n = 180) and slovak republic (median = 2, n = 180), u = 12690, z = –4.128, p = 0.000, r = 0.22. hence, hypothesis 1 was supported and the differences are  small according to calculated r. as per the size of the company, the test revealed significant differences from the percep‐ tion of czech republic (median = 2, n = 180) and slovak republic (median = 2, n = 180), u = 13720, z = ‐3.044, p = 0.002, r = 0.16. therefore, hypothesis 1 was supported with the small effects size according to the calculated r.  table 2. statistical analysis (source: own elaboration based on own data) mann‐whitney u wilcoxon  w z asymp. sig. (2‐tailed) fm1 establishment 12690.000 28980.000 –4.128 0.000 fm2 legal form 15317.000 31607.000 –0.985 0.325 fm3 registered office of the parent  company – region 15660.000 31950.000 –0.682 0.495 fm4 total number of countries in which the company operates 14836.500 31126.500 –1.486 0.137 fd1 legal form 15296.500 31586.500 –1.155 0.248 fd2 year of establishment 15507.000 31797.000 –0.739 0.460 fd3 members of statutory body 14645.000 30935.000 –1.637 0.102 fd4 establishment as ewfep? 16110.000 32400.000 –0.107 0.915 fd5 primary area of operations 15032.500 31322.500 –1.260 0.208 fd6 size of the company 13720.000 30010.000 –3.044 0.002 fd7 ownership structure 15343.000 31633.000 –0.911 0.362 csr1 csr in organizational structure 16103.500 32393.500 –0.102 0.919 csr2 main motive for csr 13350.000 29640.000 –3.137 0.002 csr3 csr connection with the core of business 14308.500 30598.500 –2.163 0.031 csr4 csr reporting 13658.000 29948.000 –2.758 0.006 csr5 csr competition 13901.000 30191.000 –2.444 0.015 csr6 csr certification 16200.000 32490.000 0.000 1.000 csr7 csr expenses availability  14130.000 30420.000 –2.874 0.004 business, management and economics engineering, 2023, 21(1): 106–123 113 for the main motive for csr, the test revealed significant differences from the perception  of czech republic (median = 2, n = 180) and slovak republic (median = 2, n = 180), u = 13350, z = –3.137, p = 0.002, r = 0.165. hence, hypothesis 1 was supported and the differ‐ ences are small according to the calculated r. the test revealed also significant differences in csr expenses availability from the per‐ ception of czech republic (median = 2, n = 180) and slovak republic (median = 2, n = 180), u = 14130, z = –2.874, p = 0.004, r = 0.15. hence, hypothesis 1 was supported and the differences are small according to the calculated r. for the remaining factors there was  no significant differences found between the examined countries in the implementation of  corporate social responsibility. taking into account the results of the statistical tests, we analysed and described the ones that are statistically significant according to mann whitney u test.  the bar chart (figure 1) illustrates how companies in the two countries were established, considering two periods, respectively: before and after ww2. as it is possible to see, in slovakia, more companies were established before ww2 (100 and 61 after), whereas in the czech republic, more companies were established after ww2 (119 compared to 61 in the post ww2 period). out of 7 factors of a daughter company, the factor fd6 size of the company resulted as the only significant between the examined countries (figure 2). while microenterprises (5 in  slovakia and 6 in czech republic) and medium size enterprises (29 in slovakia and 38 in czech republic) were in about the same number for both countries, the main difference in  the sample was represented by small (11 in slovakia and 27 in czech republic) and large enterprises (135 in slovakia and 109 in czech republic). slovakia differs with higher number  of large companies and lower number of small companies. as per  the main motive  for csr  (csr2), we see  the biggest difference  in  the effort  to strengthen marketing activities. in slovakia indeed 18 out of 180 companies selected this answer, while in czech republic none of them chose it (figure 3). regarding 1, both countries consider the need to contribute to the “public good” as the main reason to have figure 1. country according to fm1 establishment (source: own processing) 114 r. skýpalová et al. corporate social responsibility in business practices of multinational companies: study... csr (108 from slovakia and 75 from czechia). this means that half of the companies in the sample are driven by this motive. the remaining motives 2. the need to copy current trends and moves of competitors and 4. pressure from the parent company are somewhat equally spread in the sample, 80 and 79 respectively. analysing these two motives at country level, it appears that more companies based in czech republic select them (54 and 51, respectively). csr7 is about the disclosure of csr related expenses. from figure 4 we can observe that  the analysed companies do not make available csr expenses to the employees and to the  public (277 out of 360). this information is available only to managers responsible for the implementation of the given activity and top management with 150 of slovak and 127 for czech companies. csr expenses available to all employees and public are divided as follows:  30 companies from slovakia and 53 from czechia. figure 2. country according to fd6 size of the company (source: own processing) figure 3. country according to csr2 main motive for csr (source: own processing) business, management and economics engineering, 2023, 21(1): 106–123 115 considering the above, we can say that there are some statistical differences between the  czech and slovak republics regarding the implementation of corporate social responsibility between czech and slovak companies. batten et al. (1999) concluded that ethical manage‐ ment practices are likely to vary between countries due to differences in socio-economic and  cultural factors. therefore, it is normal to find differences. still, due to their joint history, czech  and slovak individuals would not have so many cultural and socio‐economic dissimilarities, which may explain the insignificant differences in the other factors. for the mother and daughter factors, it was discovered that the establishment of a mother company and the size of a daughter company differed among the examined countries. there  were more mother companies in slovakia established before ww2 and at the same time more daughter companies were large in size in slovakia, whereas the czech republic has higher number of small size enterprises. from the csr factors, two resulted as significantly  different between czech and slovakia. csr2 main motive for csr and csr7 csr expenses  availability. all these factors have only small effects size according to the calculated r.  implications and proposals for practice the study considered factors related to both the mother company and the daughter compa‐ ny, as well as factors generally related to corporate social responsibility (csr). realized anal‐ ysis identified, that only four factors are significant in determining differences between czech  and slovak daughter companies (fm1 establishment; fd6 size of the company; csr2 main motive for csr; csr7 csr expenses availability).  there is empirical evidence that business commitment to corporate social responsibility (csr) has a direct positive impact on customer loyalty, employee performance and, as a result, company value (titko et al., 2021). corporate social responsibility (csr) is increasingly recog‐ nized not only as a key to mitigating risks, but also as a key element for building corporate value and strengthening business activities (du et al., 2010; mercadé‐melé et al., 2018). in the czech republic, in recent years we can observe a “stage of awakening”, as the topic of figure 4. country according to crs7 csr expenses  (source: own processing) 116 r. skýpalová et al. corporate social responsibility in business practices of multinational companies: study... csr begins to penetrate more and more into public awareness and into corporate actions (skácelík, 2010), companies perceive csr activity as useful and also as a necessary part for future successful action on market. 75% of czechs are willing to pay extra for products that  were produced in accordance with csr principles (formánková & mikusová, 2014). within the slovak republic, more than 50% of companies report to the implementation of csr activities and to the transmission of information about these activities to their stakeholders (nadanyiova et al., 2021). nevertheless, within the framework of reporting csr activities in the v4 countries, hungary achieved the highest indicator, slovakia the lowest, the czech republic ranked second, and poland third (przytuła et al., 2019). a study (çera et al., 2020)  on a sample of 822 small and medium‐sized enterprises (454 companies from the czech republic and 368 companies from slovakia) showed that csr is not perceived similarly in both countries. no connection was found between csr and company size, on the contrary, a dependence was found between the length of time on the market and csr, especially for slovak companies, older slovak companies make less use of csr activities. we agree with the statement (çera et al., 2020) that by studying the factors that influence csr, it offers the  possibility to better understand entrepreneurial thinking in the context of central europe.  gavurova et al. (2022) states, based on the results of a study conducted between czech and slovak companies, that the size of the company affects whether the company can be classified  as csr‐oriented. compared to medium‐sized enterprises, micro‐enterprises are 45% less like‐ ly and small enterprises are 33.5% less likely to be perceived as csr‐oriented. compared to companies from slovakia, companies in the czech republic are 41% less likely to be perceived as csr‐oriented. hungarian companies are 70% more likely to be perceived as csr‐oriented compared to companies from slovakia. our study also proved the size of the company as one of the important factories that influence the use of csr. the rest of the examined factors were  identified as not significant since the analysis  confirmed no statistically significant differences between the czech and slovak daughter  companies of multinationals in terms of these factors. it is difficult to explain these outcomes.  however, here are some possible explanations as why these factors may not have been sig‐ nificant. the legal form of the companies is similar in both the examined countries, which did  affect the outcomes for the daughter companies. likewise, legal forms worldwide are regulat‐ ed using similar principles so we assumed that they were similar enough to not significantly  impact the situation in the mother companies. based on that, the legal form factors (fm2 and fd1) were identified as not significant. similarly, the region in which a mother company is  registered (fm3) may not have been significant because the location of the parent company’s  registered office does not necessarily have a direct impact on the operations of the daughter  companies in each country. however, it must be highlighted, that other factors, such as local laws and regulations (which were not examined), may have a greater influence on the oper‐ ations of the daughter companies. the same can be concluded as per the total number of countries in which a company operates (fm4); this might not have been significant because  it does not necessarily impact the operations of the daughter companies in each country. instead, the specific markets in which the daughter companies operate and the strategies  they employ may be more important factors. business, management and economics engineering, 2023, 21(1): 106–123 117 the year of establishment (fd2) might not have been significant because the age of a  company does not necessarily impact its operations or performance, mainly in case of csr activities, which can be gradually changed according to the current market trends, however there is no connection between the age of a company and its csr strategy. also the factor considering members of statutory body (fd3) and establishment as ewfep (fd4), which are associated with the company’s managerial structure, do not necessarily influence the csr strat‐ egy and activities realized. therefore, differences between the two monitored countries were  not found since we assume that in both these countries the mentioned factors are insignificant.  on the other hand, the factor of primary area of operations (fd5) can be significant for csr  implementation, but with no difference between czechia and slovakia. this factor might not  have been significant because both czech and slovak daughter companies may operate in  similar industries or markets, making their primary areas of operations similar enough. the same reason can be applied to factor ownership structure (fd7), since the ownership structure of companies in both countries may be similar enough that no differences were found.  the third group of examined factors include five factors, among which no significant  differences were found between czech and slovak daughter companies of multinationals:  csr1 – csr in organizational structure, csr3 – csr connection with the core of business, csr4 – csr reporting, csr5 – csr competition, and csr6 – csr certification. in general  terms, it is unclear why these factors were not significant without deeper analysis of impact  of these factors on csr strategy or selected activities in monitored countries separately. however, it is possible that csr practices and approaches are similar enough between the czech and slovak daughter companies that there again are no significant differences across  these factors. used factors are graphically displayed at figure 5. sk / cz fm factors of mother company fm1 establishment fm2 legal form fm3 registered office of the parent company fm4 total no. of contries in which company operates fd factors of daughter company fd1 legal form fd2 year of establishment fd3 members of statutory body fd4 establishment as ewfep fd5 primary area of opera�onsfd6 size of the company fd7 ownership structure csr factors csr1 csr in organiza�onal structure csr2 main mo�ve for csr csr3 csr connec�on with the core of business csr4 csr repor�ng csr5 csr compe��on csr6 csr cer�fica�on csr7 csr expences figure 5. graphic result (source: own elaboration) 118 r. skýpalová et al. corporate social responsibility in business practices of multinational companies: study... recommendations for further research: based on these outcomes, we can conclude that providing deeper analysis of the used factors and their impact on csr situation in czech republic and slovakia separately would be of essence. consequently, a comparison of the outcomes perthese two countries would be also interesting. likewise, the need for further examination of the local legislation and regulations, the specific markets in which the daughter  companies operate, and the strategies they employ should be targeted in a future analysis too. in respect of the identified significant differences we would like to point out the impor‐ tance of csr implementation based on the size of a company (dias et al., 2018). companies of distinct sizes generally deal with different problems pertaining mainly to social csr activ‐ ities since they have diverse numbers of employees for whom they must create activities. as per the company size, there tends to be a general assumption that the larger the company, the larger the budget for csr activities should be available (zbuchea, 2017). similarly, based on the company size, ec introduced an obligation to report csr activities and therefore for companies of various sizes there are also varying degrees of pressure on implementing ac‐ tivities and reporting them (european commission, 2023). in this regard, we recommend that smaller companies not yet bound by this obligation should start implementing and reporting their activities gradually. in this context we would like to draw attention to the need for re‐ considering the motives for the implementation of csr activities (grimstad et al., 2020) by individual companies and the availability of information regarding the cost spent on these ac‐ tivities. both factors are particularly important in shaping the opinion of different stakeholder  groups about business entities since it may change a firm’s behaviour and generate positive  externalities at the expense of the stakeholders (chen et al., 2018). at a time of increased  pressure to report csr activities, we therefore recommend that companies adjust their at‐ titudes to the main motive and transparency of csr activities (kim & lee, 2018), which are expected to have a major impact on the content of upcoming csr reports (rim et al., 2019).  contribution: the study contributes to the literature on emerging economies (fogel, 2019) and business practices of daughter companies of foreign multinationals operating in them (khan et al., 2022; zhao et al., 2022). since the monitored countries are at the same time a part of the visegrad region, the study contributes to v4 literature connected to csr topics too (hąbek, 2017; przytuła et al., 2019; lentner & nagy, 2020). generally, there is a lack of  such topics in the respective geographic area. therefore, the study lays down a methodolog‐ ical basis for further research of differences between business entities in poland and hungary  and other post-communist countries respectively (redžić & everett, 2020). limitations: the study was conducted on a sample of 360 monitored companies, 180 from each country. it is basically impossible to calculate the representativeness of this sample since there is no data available regarding the total number of companies that relate to the foreign mother company in the czech republic, or in slovakia. likewise, the czech republic and slo‐ vakia are compared very often in various ways (e.g.: teplická et al., 2019; belas et al., 2020), but as economies they are not similar in their size, number of business entities and business culture either (kolman et al., 2003; belas et al., 2020; janas & jánošková, 2022). despite that, the same number of monitored entities was chosen to create suitable conditions for further statistical analysis. business, management and economics engineering, 2023, 21(1): 106–123 119 bias of the study: there could have been some biases in this research. initially, the research assumes that larger organizations have larger budgets for csr initiatives, which may not be the case for all businesses. secondly, the research does not take into account the unique con‐ ditions of each organization, assuming that smaller businesses should progressively execute  and report on their activities. thirdly, not all businesses in the visegrad region or emerging economies may be represented by the research, which could generate a bias in favour of firms with overseas multinationals as their mother company. additionally, the sample size of  360 businesses might not be typical of all businesses in slovakia and the czech republic or of all businesses affiliated with overseas mother corporations in these countries.  generalizability of the research: the generalizability of the research findings to other busi‐ nesses or environments may be constrained as a result. furthermore, because the same number of monitored organizations was picked for this purpose without taking into account the representativeness of the sample or the unique qualities of each company, the research may be skewed. towards statistical analysis. conclusions the study addresses the issue of corporate social responsibility in the specific context of the  czech and slovak republics. the aim is to find out the differences in the basic principles of  his csr implementation in subsidiaries of foreign multinational companies. a prerequisite for selecting a monitored company was a registration in the commercial register of the moni‐ tored country and links with foreign multinationals. a sample of 360 monitoring units was used for data analysis. questionnaire survey was divided into three parts, which were later converted into groups of factors. fm – parent company factors (fm1–fm4), fd – subsidiary factors (fd1–fd7), csr – csr factors (csr1–csr7). the main problem of this study was to identify if there exists a difference in implementation of corporate social responsibility be‐ tween czech and slovak companies. for the mother and daughter factors it was discovered that the establishment of a mother company and a size of a daughter company differs among  examined countries. there were more mother companies in slovakia established before ww2  and at the same time more daughter companies were large in size in slovakia, and the czech republic has a higher number of small‐size enterprises. from the csr – factors, two results as significantly different between czech and slovakia: csr2 main motive for csr and csr7 csr  expenses availability. all these factors have only small effects size according to calculated r. in  conclusion we can say that there are still some differences among these two very comparable  countries in the implementation of csr. the research highlights the importance of csr implementation based on the size of a company, as different-sized companies deal with different problems in social csr activities.  larger companies are assumed to have a larger budget for csr activities and face more pressure to report their activities. smaller companies should implement and report on their activities gradually. it’s important for companies to reconsider their motives for implement‐ ing csr activities and to ensure transparency in reporting the expenses for these activities.  companies should adjust their attitudes towards the main motive and transparency of csr activities, which will have a major impact on upcoming csr reports. 120 r. skýpalová et al. corporate social responsibility in business practices of multinational companies: study... the study contributes to the literature on emerging economies and business practices of daughter companies of foreign multinationals in the visegrad region, particularly in czechia and slovakia. the research lays down a methodological basis for future research on differ‐ ences between businesses in these two countries. however, the sample size of 360 monitored companies (180 in each country) may not be representative, as there is no data on the total number of companies connected with the foreign mother company in monitored countries. nonetheless, the same number of monitored entities was chosen for statistical analysis pur‐ poses. the research might be biased in some ways, such as favouring certain company sizes or a small sample size. the generalizability and dependability of the research findings may  be constrained by these biases. acknowledgements the paper was prepared as part of the project “etika v podnikaní na slovensku” no. 01/2022/ ga fem spu supported by grant agency – faculty of economics and management – slovak university of agriculture in nitra. funding this work was supported by the the internal grant agency of ambis college. author contributions authors contributed to the development of this article as following: jk conceived the study and was responsible for the design and development of the data analysis. rs, jk and mu were responsible for data collection and analysis. rs and vds are responsible for literature review. mu and vds were responsible for data interpretation. vds is responsible for conclusion. disclosure statement we declare that we have no competing financial, professional or personal interests from  other parties. references aguinis, h., & glavas, a. 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(2022). knowledge management of emerging economy multinationals. journal of world business, 57(1), 101255. https://doi.org/10.1016/j.jwb.2021.101255 https://doi.org/10.1051/shsconf/20219101024 https://doi.org/10.1016/j.sbspro.2015.04.895 https://doi.org/10.5755/j01.ee.30.4.22481 https://doi.org/10.1007/978-3-030-00440-8_20 https://doi.org/10.24818/amp/2019.33-03. https://doi.org/10.1002/csr.1766 https://doi.org/10.1016/j.jclepro.2011.08.002 https://doi.org/10.1177/0974909820120509s https://doi.org/10.1007/s10551-013-1701-7 https://doi.org/10.1080/00401706.1972.10488921 https://doi.org/10.1080/13504851.2018.1508866 https://doi.org/10.18267/j.cebr.258 https://doi.org/10.35808/ersj/840 https://doi.org/10.1214/aoms/1177729592 https://doi.org/10.1016/j.jclepro.2017.02.002 https://doi.org/10.25019/mdke/5.3.06 https://doi.org/10.1016/j.jwb.2021.101255 bookmark 2 bme_16(1)_2018_maketas.indd copyright © 2018 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. introduction the balanced development of regions significantly influences the sustainable development of a country. inequality and disparity of economic and social condition in regions affect businesses and people. some of the results of increasing differences between regions are depopulation in ‘unattractive’ regions; aggravation of age, education, qualification and etc. structures of population and labour force, overstrain of transport and social infrastructure in ‘attractive’ region; problems with the housing; ineffective use of resources and etc. although some of the processes may be assessed as positive (for example market expansion, much more opportunities for well-paid jobs, better education and healthcare in ‘attractive’ regions and less environmental pollutions and stress in ‘unattractive’ regions), the final result for a society is negative. the aim of this research is to study the inequalities between regions (nuts 3 level) in bulgaria by calculation of the regional competitiveness index (rci) based on the latest available data and to compare it with previously published data for it. the rci is a tool which is based on 10 important for regional development indicators. study of regional inequalities: case of bulgaria ivaylo ivanov* department of economics, faculty of business management, university of forestry, sofia, bulgaria received 06 june 2018; accepted 07 june 2018 abstract. the sustainable development of a country depends on many factors. one of them is the balanced development of regions. the aim of this research is to study the inequalities between regions (nuts 3 level) in bulgaria by application of the regional competitiveness index (rci), a tool, which is based on 10 important for regional development indicators. the paper presents the last rci ranking list (for the 2016 year) and analyses and compares it with the ranking lists for previous years. the results show significant inequalities between the capital region and other regions for the whole period and relative small imbalances between other regions. the rci ascertained relatively stable groups of most competitive and most non-competitive regions. keywords: regional competitiveness index (rci), regional development, regional analysis, regional compares, regional inequality, regional imbalances. jel classification: o18, p25, r12, r58. business, management and education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 1: 27–39 https://doi.org/10.3846/bme.2018.2275 *corresponding author. e-mail: ihivanov@hotmail.com 28 i. ivanov. study of regional inequalities: case of bulgaria the main tasks of the research are: – to calculate the rci for the last year 2016 by regions of bulgaria and to create a ranking list; – to cluster regions into groups by the new rci scores; – to compare the new rci ranking list for the 2016 year with the ranking list for the previous years; – to analyse the rci in dynamics, from the viewpoint of the regions’ variation in the ranking lists and the difference between the most competitive region and the least competitive region. the objects of research are regions of bulgaria which, according to the nuts classification of the european union, which corresponds to nuts 3 level. the map of the regions in bulgaria is presented in figure 1. figure 1. nuts 2 and nuts 3 levels regions in bulgaria the period of research is the year 2016 but the changes in a region’s previous years’ ranking have also been analysed. the data was obtained from the national statistical institute of bulgaria (nsi, 2018). 1. literature overview many researchers working in the field of inequalities and disparities at the regional level have linked them with regional competitiveness, regional development, sustainable development and etc. huggins et al. have studied both theoretically and empirically the underlying tenets of regional competitiveness (huggins, izushi, & thompson, 2013). turok reviews some of the main ideas of competitiveness, particularly as they apply to cities and regions (turok, 2004). christopherson, michie, and tyler (2010) generalize studies about regional resilience and assess its underlying theoretical foundations, the empirical evidence that may lie behind it and more importantly what it may have to offer to the formulation of policy (christopherson et al., 2010). rucinska and rucinsky describe that the “competitiveness is governable variable consisting of many elements, and each of them can be used for the benefit of competitiveness growth” and “the rate of the influence of a factor depends on the fact whether there is a static business, management and education, 2018, 16(1): 27–39 29 or dynamic regional factor” (rucinska & rucinsky, 2007). lengyel et al. make a redefinition of the pyramidal model for interpretation, measuring regional competitiveness and demonstrating its influencing factors (lengyel & rechnitzer, 2013). there are a lot of approaches and tools for assessment of the competitiveness of regions. annoni and kozovska have developed the regional competitiveness index (rci) which focuses on the nut 2 level regions of the eu and shows the strengths and weaknesses of each of them (dijkstra, annoni, & kozovska, 2011; annoni & kozovska, 2013). ginevicius et al. propose 45 indicators for evaluation of regional development in three directions: economic, social and ecological (ginevicius, hogeforster, & gedvilaite, 2014; ginevicius, stasiukynas, & gedvilaite, 2016). a similar approach is used by benzaquen et al., where the competitiveness of regions was identified by 5 pillars: government and institutions; economic development; productive infrastructure; human capital and business efficiency and a set of factors and their variables (benzaquen, carpio, zegarra, & valdivia, 2010). the regional competitiveness index, used by muntean et al., includes 5 economic, 4 social and 3 technological indicators with different weights (muntean, r. niistor, & c. nistor, 2010). judrupa and senfelde study the problems of evaluation of the competitiveness of latvian regions (judrupa & senfelde, 2008). enyedi explores the regional competitiveness in hungary by simple methodology using three interrelated economic parameters: gdp per capita; labour productivity and employment rate (enyedi, 2009). mereuta et  al. assess the regional competitiveness using a model that evaluates national competitiveness on the basis of five integrating criteria: overall operational economic performance, energy use, information and communication technology, gross value added structure, participation in the international markets (mereuta, albu, iordan, & chilian, 2007). snieska et  al. have established a new regional competitiveness index and have tested it empirically on the basis of data of 10 lithuanian districts for a period of six years (snieska & bruneckiene, 2009). gavurova et al. study structural aspects of competitiveness at the level of self-governing regions of the slovak republic and develop a regression model of gdp based on eleven variables (gavurova, vagasova, & kovac, 2016). bronisz et al. examine “a competitiveness from a regional perspective and has attempted to conceptualize regional competitiveness by combining some data, namely inputs, outputs and outcomes in one global index” (bronisz, heijman, & miszczuk, 2008). nevima et  al. propose a modification of a traditional approach to regional competitiveness by using of 7 indicators: gross domestic product, gross fixed capital formation, gross domestic expenditures on research and development, net disposable income, the rate of employment, knowledge-intensive services and patents (nevima & kiszova, 2012). huovari et al. have constructed an index which assesses human capital, innovativeness, agglomeration and accessibility at the regional level and has determined “highly correlated with traditional long-term indicators of economic well-being, such as per capita gdp and personal income” (huovari, kangasharju, & alanen, 2001). some of the studies focus on exploration and analysis of the key factors for regional competitiveness. komarova et al. note that the infrastructure has an important role for regional competitiveness but it must not be overestimated (komarova, zjablova, & denmukhametov, 2014). caruso and miro have studied one aspect of sustainable regional development by analysing ‘the relationship between the successful positive influences for farms and the diversifying its activities with respect to the tourism’ (caruso & miro, 2016). ivanova, kamola 30 i. ivanov. study of regional inequalities: case of bulgaria and kamols have researched income inequality and human capital as factors for the economic development of the regions in latvia (ivanova, kamola, & kamols, 2016). foders demonstrates how the economic theory and regional experience in germany have proved the general importance of training for economic development and regional policy (foders, 1997). judrupa and senfelde explore smart work as a factor for increasing regional competitiveness and improving regional development (judrupa & senfelde, 2016). studies of bojkov et al., ganchev, ivanova et al., pashev have described imbalances in the development of bulgarian regions (regions and municipalities) from different points of view and the influence of industries for regional competitiveness (bojkov, ivanovski, & damyanova, 2002; ganchev, 1999; ivanova, stoenchev, kovacheva, ivanov, & kostadinov, 2008; ivanova, stoenchev, kovacheva, & ivanov, 2009; ivanova et al., 2010; pashev, 2003). 2. methods competitiveness of the regions in bulgaria was estimated using the regional competitiveness index (rci) which was designed on the basis of 10 indicators. the indicators assess four key spheres of regional development. these are market size, quantity and quality of labour resources, region attractiveness and competitiveness of local businesses (table 1). the indicators were selected by the author from a data set of 42 indicators, annually publishes by the national statistical institute of bulgaria, on the basis of their representativeness and reliability. some of them were obtained by additional calculations using the official statistical data. although the method was described in previous publications (ivanov 2008, 2010, 2016, 2017), it is presented again in this publication for better understanding and clarity of analyses and results. estimating the rci was made by using a known mathematical-statistical methodology, which eliminated the difficulties and inconveniences of different indicator measurements. all indicators have the same relative weight in the rci and the maximum indicator value means the best value. the methodology used examines each region as a vector whose coordinates are numerical characteristics of selected indicators. the algorithm allows including an unlimited number table 1. the key spheres and indicators of the regional competitiveness index market size quantity and quality of labour resources population density per sq. km natural growth, ‰ turnover per capita, bgn rate of employed persons, % the relative share of the population aged between 25–64 with a higher education degree, % the relative share of people aged between 16–74 years who have used the internet in the last 12 months, % region attractiveness competitiveness of local businesses foreign direct investment per capita in non-financial enterprises on a cumulative basis, bgn expenditure on acquisition of tangible fixed assets, thousand bgn productivity, bgn per employed person gross domestic expenditure on research and development per person engaged in research and development, bgn business, management and education, 2018, 16(1): 27–39 31 of indicators regardless of the unit in which they are represented. the dependency n indicators and  m regions can be represented by n*m measurement matrix which is presented by formula (1). 11 12 1 21 22 2 1 2 ... ... ... ... ... ... ... m m n n nm x x x x x x x x x x      =        . (1) a hypothetical region called standard region or the best region is defined as a vector by the best values for each indicator of the compared regions. each region is compared with the standard region. the final assessment/score is derived from the aggregation of the distance of each region from the standard region for each indicator. the steps of the methodology are (gatev, 1995; stoenchev, 2010; stoenchev & ivanov, 2015, stoenchev, 2016): 1. calculating the standardised deviation of indicators (i) for different regions (j) of the arithmetical average of each indicator in order to avoid differences in their scale. , ij i ij i x x z − = σ 1,2,...,i n= , 1,2,...,j m= , (2) where zij is the standardised deviation of ith indicator of jth region; xij – the value of ith indicator of jth region; ix – the arithmetic average of ith indicator calculated by the formula (3) 1 m ij j i x x m = = ∑ , 1,2,...,i n= ; (3) σi – the standard deviation of ith indicator calculated by the formula (4). 2 1 ( ) , m ij i j i x x m = − σ = ∑ 1,2,...,i n= . (4) 2. establishing a z-matrix by standardized indicators zij that determines the standard region. the obtained standardised indicator zij in every line is a vector whose total sum of coordinates equals to zero, but the length of the vector equals to 1. this matrix is meant to calculate final assessment and it is similar to the distance method. the standard region, in this case, is determined by z-matrix values. this is the vector with the best values zij for each indicator i. when the indicator should have a maximum value, the maximum value of zij is chosen, and when the indicator should have a minimum value, the minimum value of zij is chosen. 3. calculating the final assessment/score. the final assessment is the total distance of each region from the standard region and it is calculated by the formula (5). 2 1 ( ) , n j ij im i rci z z = = −∑ 1,2,...,j m= , (5) 32 i. ivanov. study of regional inequalities: case of bulgaria where rcij is the final assessment/score for jth region; zij – the standardised deviation of ith indicator of jth region; zim – the standardised deviations of ith indicator of the standard region. 4. calculating the interval gap into groups. the interval gap into groups helps to cluster the regions in groups with the equal difference between the bottom level of the interval and the upper level of the interval, and it is calculated by the formula (6). max min , rci rci r k − = (6) where r is the interval gap between groups; rcimax –the maximum value of the final assessment of regions; rcimin  – the minimum value of the final assessment of regions; k  – the number of the groups. the rcij represents the distance between a given region (j) and the standard region. the most competitive regions have the lowest rci score, which means they are the closest to the standard regions. the less competitive regions have higher rci scores, which means they are farther from the standard region. 3. results and discussions the calculation of the rci for the year 2016 showed that the capital region is the most competitive region in bulgaria. the rci score for sofia (capital) is 5.076 (table 2). table 2. the regional competitiveness index score for the year 2016 by nuts 3 level regions in bulgaria rank regions score name code 1 sofia (capital) sof 5.076 2 varna var 10.602 3 plovdiv pvd 10.767 4 burgas bgs 10.774 5 ruse rse 11.492 6 sofia sfo 11.605 7 stara zagora szr 11.783 8 gabrovo gab 12.204 9 veliko turnovo vtr 12.426 10 blagoevgrad blg 12.431 11 shumen shu 12.565 12 yambol jam 12.586 13 dobrich dob 12.685 14 smolyan sml 12.768 rank regions score name code 15 haskovo hkv 12.997 16 kardzhali krz 12.999 17 pleven pvn 13.079 18 razgrad raz 13.080 19 pernik per 13.175 20 lovech lov 13.378 21 sliven slv 13.426 22 targovishte tgv 13.512 23 vratsa vrc 13.547 24 kyustendil knl 13.665 25 montana mon 13.765 26 silistra sls 13.943 27 vidin vid 14.130 28 pazardzhik paz n/a business, management and education, 2018, 16(1): 27–39 33 the next region in the ranking list is varna with the significant twofold difference in the rci score. the rci score for varna is 10.602. the next regions in the ranking list are plovdiv (10.767), burgas (10.774), ruse (11.492), sofia (11.605), stara zagora (11.783) and etc. one region (pazardzhik) is not included in the rci ranking list for 2016 because of the lack of data at the moment of research (february 2018). the following regions have an insignificant difference of the rci score in comparison with the previous region and the next region in the ranking list. this difference is less than a unit, in some cases – a few thousand parts of a unit. the top five less competitive regions in 2016 are vidin (14.130), silistra (13.943), montana (13.765), kyustendil (13.665) and vratsa (13.547). three of them (vidin, montana and vratsa) are in the same nut2 level region (the north-west region). for the more understandable presentation of the results, a grouping of regions was made using formula (6). all regions except sofia (capital) fall into three groups by the rci score. the groups are competitive regions, moderately competitive regions and less competitive regions (figure 2). figure 2. the regional competitiveness index for the 2016 year by nuts 3 level regions in bulgaria the first group of competitive regions for 2016 includes 6 regions (varna, plovdiv, burgas, ruse, sofia and stara zagora). these regions are with administrative centres in the major cities of bulgaria and they can be described as an ‘engine’ for the economic development of the country. the regions are attractive for foreign direct investment (fdi). the business regularly, every year and not just sometimes, invests in the economy, which is based on research and development (r&d). in these regions, the population in the active age uses the internet relatively more frequently and has relatively better education and qualification measured by the relative share of the population aged between 25–64 with a higher education degree. the administrative centres of the regions in this group can hardly become leaders in the rci ranking list because of the huge differences between them and the capital city. sofia as a capital city concentrates the fdi, the administration and the r&d potential of the country. the size of sofia’s market is significant and the labour force has relatively more options for employment and jobs. 34 i. ivanov. study of regional inequalities: case of bulgaria geographically, the competitive regions are mainly located in south bulgaria and through their territory pass the fully completed highway road named ‘trakia’. the results confirm the conclusions in the study of the institute for market economics about the economic centres in bulgaria (nikolova, tsvetkov, ganev, aleksiev, & slavova, 2015; nikolova, tsvetkov, ganev, aleksiev, & slavova, 2016). the group with moderately competitive regions in 2016 includes nine regions. they are gabrovo, veliko turnovo, blagoevgrad, shumen, yambol, dobrich, smolyan, haskovo and kardzhali. the gap in the rci score is less than a unit, more precisely – 0.795. the administrative centres of these regions are middle range cities by population, not big cities. these regions are relatively successful to develop a ‘smart’ and innovative economy, an economy based on r&d, to be attractive for fdi and etc. usually, this occurs only sometimes (not every year) or only in a few businesses/companies. the less competitive regions in 2016 are eleven (pleven, razgrad, pernik, lovech, sliven, targovishte, vratsa, kyustendil, montana, silistra and vidin). this is the biggest group in a number of regions if the ranges of groups by the rci scores are equal. the regions in this group hardly cope with the challenges of the open market and free movement of people, capitals, goods and services. the market size of them is small which affects the fdi and the expenditures for r&d and they are mostly rare occasions, and not permanent. the labour force does not have qualifications in line with the needs and expectations of the ‘modern’ businesses. from the viewpoint of ranking dynamics, the results show that the most competitive region for the last two years (2015 and 2016) is sofia (capital) because its rci rank has not changed. the other regions that have not changed their positions in the rci ranking list are varna and kustendil. one of them (varna) is a competitive region, the other (kyustendil) is in the group of less competitive regions (figure 3). figure 3. changes of region’s rank during 2016 year in compare of 2015 year the group of the regions which have improved their positions in the 2016 rci ranking list in comparison with the 2015 rci ranking list, and the group of the regions which have worsened their positions are equal in number: eleven regions in each group. the analysis by group shows: business, management and education, 2018, 16(1): 27–39 35 – for the group of competitive regions  – two regions are with better ranking (plovdiv and ruse) and three are with worse ranking (burgas, sofia and stara zagora); – for the group of moderately competitive regions – seven of the nine regions are with better ranking (gabrovo, veliko turnovo, shumen, yambol, dobrich, haskovo and kardzhali) and only two of the nine regions are with worse ranking (blagoevgrad and smolyan); – for the group of less competitive regions – seven of the eleven regions are with worse ranking (pleven, pernik, lovech, sliven, vratsa, silistra and vidin) and only three of the eleven regions are with better ranking (razgrad, targovishte and montana). the results of the rci ranking dynamics are particularly worrying for the group of less competitive regions because razardzhik is not included in this analysis. in the 2015 rci ranking list, pazardzhik occupied 15th place, which means that we may assume that the results for the group of less competitive regions are likely to be even worse. the regions’ ranking variation for the period 2004–2016 was analysed by standard deviation, presenting the regions which relatively more frequently change their places in the ranking list. the regions were divided into four groups by the standard deviation value (figure 4). figure 4. the standard deviation of regions’ rank, 2004–2016 the regions, which changed their places in the ranking list in wide limits, are smolyan, lovech, gabrovo, pazardzhik and shumen and they are listed from the one with the highest value of standard deviation to the one with the lowest value. the ratio of less competitive regions to regions with moderate competitiveness according to the 2016 rci ranking is 2:3. the group of regions with moderate values of standard deviation includes eleven regions, seven of them are less competitive in the 2016 rci ranking list, the others are with moderate competitiveness. the third group of regions, which have not changed their places in the ranking list in wide limits, also includes eleven regions. the main share is that of the competitive regions, with all of them under the 2016 rci ranking belonging to this group. also here are three less competitive regions – kyustendil, montana and vidin. the results for this group are relatively stable. the competitive regions can hardly be replaced from their top positions in the rci ranking list. the less competitive region can hardly be pushed up from the bottom without support and change of the regional policy. 36 i. ivanov. study of regional inequalities: case of bulgaria there is one region, which has never changed its position in the rci ranking lists. this is sofia (capital). the conclusions about the leading role of sofia (capital) and the long-term disparities between the capital region and the others regions are again confirmed by the analysis of the dynamics of the gap between the most competitive region and the least competitive region. the rci scores for the period 2004–2016 show that the smallest deference between the most competitive region and the least competitive region was in the year 2004 (7.1 points), the highest – in the year 2009 (13.1 points or close to twofold difference); the average value of the gap for the whole period is 9.9 points (figure 5). figure 5. the gap between the most competitive region and the least competitive region by the regional competitiveness index, 2004–2016 the results present a negative tendency of increasing inequalities and disparities in the regional development. the changes of the rci score for the least competitive region are insignificant, around 14 points – from 13.4 in 2006 to 14.9 in 2011. in comparison, the most competitive region has an rci score with more sizable variation from 1.5 in 2009 to 6.8 in 2004. conclusions and recommendations the study of regional inequalities in bulgaria using the rci shows significant disparities between the capital region and all other regions, and insignificant differences between all regions excluding sofia (capital). this observation is valid not only for the last year of 2016 but also for the previously researched period 2004–2015. the group of less competitive regions is greater in number than the group of competitive regions. the regions in these two groups have relatively rarely changed their places in the rci ranking lists, which shows again that inequalities and disparities between regions in bulgaria have had a relatively stable character over the years. one possible solution for reversing this negative tendency is regional policies focused on investment and development of ‘modern’ economy, an economy based on r&d, smart work, activities with high added value and etc. the biggest question is ‘how to achieve this?’. the role of authorities – state, regional and local – is very important in this process. business, management and education, 2018, 16(1): 27–39 37 the most significant factor for regional development is the government, which is confirmed by the rci. the result of the regional policy for the last twelve years in bulgaria is an increase of inequalities between regions. the government should change the policy of regions’ support and try to create in all regions relatively the same conditions for the development of business and for a living. at the moment in bulgaria, there is no difference in the share of project self-financing between the ‘rich’ and ‘poor’, the big and small, the financially stable and financially unstable regions. there are local administrative units (municipalities) in bulgaria that have huge financial problems because of bad project management, high current expenditures for unnecessary infrastructure (mainly big stadiums and sports halls in small towns and villages) and etc. using tools, such as the rci, can give the government objective criteria for better diversification of regional policy and abandonment of the unified treatment of regions. the role of government should be: – building/maintaining the infrastructure (transport, electricity, water, gas and etc. supply systems) so that its quality and capacity allow for the development of ‘modern’ economy and smart work and for better living conditions; – encouraging entrepreneurs to invest or relocate their businesses in other regions, to install new technologies and to work closely with universities by attractive and stablein-time tax policy; – training the local and regional authorities not only to be able to perform their duties but also to know their role, place and importance for decreasing inequalities and disparities between regions; – providing ‘clear’ and understandable information campaigns for all potential risks in project management; – participating in significant infrastructure projects as a member of the management bodies, which will guarantee continuity in case of election changes. the regional authorities, which in bulgaria are not elected by the citizens but conduct the state policy at nuts 3 level, should: – support and encourage the interregional and cross-border cooperation between municipalities; – restrict the manifestations of ‘local patriotism’ and the competition between the regional centre or major city and the other towns or villages in the region; 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(2004). cities, regions and competitiveness. regional studies, 38(9), 1069-1083. https://doi.org/10.1080/0034340042000292647 copyright © 2014 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2014, 12(2): 266–282 doi:10.3846/bme.2014.240 managerial competencies and innovations in the company – the case of enterprises in poland katarzyna szczepańska-woszczyna1, zdzisława dacko-pikiewicz2 1department of management, faculty of management, it and social science, university of dabrowa górnicza, cieplaka 1c, 41-300, dąbrowa górnicza, poland 2department of pedagogy, faculty of management, it and social science, university of dabrowa górnicza, cieplaka 1c, 41-300, dąbrowa górnicza, poland e-mails: 1kszczepanska@wsb.edu.pl (corresponding author); 2zdacko@wsb.edu.pl received 02 november 2014; accepted 07 november 2014 abstract. the determinants of the successful innovation implementation in the company include human capital and competencies of both managers and employees. in order for successful innovation management to occur, a manager must acquire or possess expertise in the domain at hand, as well as specific competencies. the paper has focused on the identification of the essential managerial competencies to promote and enhance innovation in companies. the study was conducted among managers of top, middle and operational management level in companies operating in poland. it seems that competencies for each of the three group of managers have not been described in detail yet. the research has identified key competencies of managers in the context of implementing innovation in the company as well as differences resulting from the level of management in the organization. the research has helped to identify discrepancies between the current level of competencies needed to achieve organizational objectives, and the expected level ensuring maximum efficiency during their implementation. keywords: competence, managerial competencies, innovation, knowledge, skills, attitudes and behaviours. jel classification: m5, o31. 1. introduction in the light of changing expectations and an employee model, currently a manager plays a variety of roles: a leader, facilitator, animator, coach, mentor or trainer, and his task is to: coordinate, diagnose and bring out human potential, moderate, stimulate, create, initiate, and to motivate. already schumpeter combined innovation with an entrepreneur (an entrepreneur as a creative innovator). in the first edition of theory of economic development from 1912, he highlighted the creativity and heroism as the basic characteristics of an entrepreneur (brouwer 2002). the entrepreneur had leadership skills, will and energy of action, dynamism, and constructivity understood as the ability to act contrary http://cbme.vgtu.lt/index.php/cbme/cbme_2014/author/submit/2?paperid=507 mailto:2email2@email.com 267 business, management and education, 2014, 12(2): 266–282 to established beliefs and current rules. the introduction of new combinations required that the entrepreneur have skills and the courage to take a huge risk. he was characterized by: the willingness to take action, the ability to subdue others, and management and leadership skills (schumpeter 2002). in recent years, the importance of human capital and competencies in the innovation process has been emphasised. competencies of managers (determining a way of managing a company), and also human capital possessed, and therefore the competencies of other employees are listed as internal factors that may directly or indirectly affect innovation activities of economic entities (ahmad et al. 2010; galende, de la fuente 2003; hsien‐tang, hsi‐peng 2010). the level of convergence of competencies possessed by managers with competency needs of the organization arising from its specific character will determine the effectiveness of the implemented strategy. a high level of organization is primarily the result of excellent management of competent managers, who effectively use the company resources by making changes (innovations), envision and create innovative products and services in organizations. a competency profile of the 21st manager includes competencies closely related to the cognitive functioning (e.g, the ability to analyze, synthesize, and solve problems) to the competencies related to the functioning in the community (interpersonal skills, communication skills, the ability to motivate others). in order for successful innovation management to occur, a manager must acquire or possess expertise in the domain at hand, creativity, ability to carry out transformational leadership behaviours, planning and sense-making, and social skills (mumford et al. 2002). managers should constantly encourage employees to cooperate creatively in solving problems, help them in demonstrating activity, motivate them to be creative, eliminate an authoritative attitude, provide psychological freedom of action, properly inform and take care of the constant improvement of their intellectual level. it can be assumed that company innovation is conditioned, among others, by managers: their mental focus on developing innovative activities, their ability to engage the appropriate resources in this activity, to identify and use external impulses, to accept many, also controversial points of view, to do experiments with calculated risk and to seek opportunities for radical breakthroughs (krawczuk-sokołowska 2008). innovation has been studied from many perspectives in academic research, including: adoption, diffusion, organizational culture, business environment, technology, and the individual. furthermore, there is very little research reported in the literature on exploring the competencies that managers have to have in innovation processes. therefore, this study explores the managerial competencies critical to the success in the process of innovation creation and implementation in the company in poland. the aim of the paper is to identify the elements (knowledge, skills and attitudes) of managerial competencies and their ranges, which are crucial for the effectiveness of the innovation implementation process in the company at different stages. knowledge of managers’ competencies in the innovation processes can lead to new perspectives for further research. managers will gain an understanding of their own competencies and how they might improve innovation in their own organization from an individualist perspective. 268 k. szczepańska-woszczyna, z. dacko-pikiewicz. managerial competencies and innovations in… 2. theoretical framework. previous research competencies, identified with skills, were recognized in the research on leadership behaviours, however, for a long time they were considered secondary in relation to personality traits (filipowicz 2004). the concept of competency-based human resources has gone from a new technique to a common practice for 40 years since mcclelland (1973) first proposed them as a critical differentiator of performance (boyatzis 2008). most subsequent publications on competency (boyatzis 1982; woodruffe 1991) present a universal approach to competency. boyatzis (1982) defines competency broadly as an essential, fundamental characteristic, which results in effective and/or better fulfillment of professional duties. in his opinion, professional competency represents the potential, an ability to perform something. an individual set of competencies reflects the capabilities of a person – competencies are identified with qualities of a manager who really does a good job. these include motives, personal qualities, skills, the image of oneself or one’s social role, knowledge which a person uses, and a person can be aware of the existence and possession of these qualities or not. woodruffe (1991) suggests that the term competency is used to refer to two factors: 1) areas of work at which the person is competent, the so-called “areas of competence” and the proven ability to perform a job competently (i.e. to the standards required in employment), and 2) the sets of behaviour the person must display in order to perform the tasks and functions of job with competence. also, armstrong (1998) distinguished between the concept of “competence” and “competency”. in his opinion, “competence” describes what people need to be able to do to perform a job well, “competency”, in contrast, is defined in terms referring to those dimensions of behaviour lying behind competent performance. these are often reffered to as behavioural competencies, because they are intended to describe how people behave when they carry out of their jobs. when competencies possessed by successful managers are discussed, the term “managerial competencies” is frequently used (abraham et al. 2001; moore et al. 2002; childs, gibson 2010; xuejun qiao, wang 2009; koenigsfeld et al. 2012). the structure of managerial competencies is widely discussed in the literature. (antonacopoulou, fitzgerald 1996; clardy 2008; oleksyn 2010; alkahtani et al. 2011). bird (1995) defined competencies as primary characteristics such as basic and specific knowledge, motives, traits, self-image, roles and skills. dubois et al. (2004) suggest that the term “competencies” refers to the characteristics such as “knowledge, skills, aspects of selfimage, social motives, feeling and acting” which is demonstrated by an individual to achieve the desired performance goal within an organization. managerial competency has been studied from many perspectives in academic research, including: the impact of competency-based methodologies on hrd (rothwell, lindholm 1999); the role which competencies play in education and training field (camuffo, gerli 2004; hansson 2001; kersh evans 2005; tovey 2006); individual and contextual factors influence competency levels (wickramasinghe, de zoyza 2008; agut et al. 2003); the competency approach to study entrepreneurial and leadership characteristics (wickramaratne et al. 2014; jena, sahoo 2014; quintana et al. 2014; jantti, http://cbme.vgtu.lt/index.php/cbme/cbme_2014/author/submit/2?paperid=507 269 business, management and education, 2014, 12(2): 266–282 greenhalgh 2012; man et al. 2002; schmitt-rodermund 2004); the specific character of managerial competencies depending on the type of company, industry or market which the company operates in. (cappellen, janssens 2008; suh et al. 2012; trivellas, drimoussis 2013; chong 2013; kożuch, szczepańska-woszczyna 2014; vila et al. 2014), evaluation of behavior, skills and commitment of managers (moradi et al. 2011). competencies are classified according to different criteria, inter alia: a source of acquiring competencies (formal and actual competencies), the substantive scope (narrow and wide competencies), availability (organization’s own competencies and acquired), the time perspective (current and anticipated competencies), a scope of impact (narrow competencies necessary for a particular position and broad ones, important in the widely understood social environment), measurability (easy or difficult to measure), ownership (individual and group competencies), content (professional, social, business, and conceptual competencies). comparison of the most popular managerial competencies was presented, among others, by bigelow (1994), while the classifications that are the result of modern research and studies were presented by königová, urbancová, fejfar (2012), rakowska (2007). managerial competencies are strategically driven by organizational core competence. employee competency and organizational core competence are similar and linked in terms of person-organization fit and person-job fit. competence is a temporary asset that must be generated in the interactive context between individual potential and core competence of organization (chen, chang 2010). decisions and choices made by senior managers influence company performance depending on how they assess the environment, what strategic decisions they take and how they support innovation (bessant, tidd 2011). according to the research, an innovative manager is competitive, constantly seeking, constantly introducing changes and improvements, communicative and has good interpersonal skills, is able to inspire subordinates, to listen to their opinions and recognize good ideas. two main factors influencing innovation competency development include: subjective factors (predispositions, traits, abilities, personality type, personal and social competencies), which are considered the most important and the working environment (nawrat 2013). an indispensable element of effective change management aiming to implement innovations is entrepreneurial skills as a kind of “package”, which consists of the following skills: highly developed understanding of the process and its various components, project planning and management, teamwork skills in uncertain conditions, leadership – having a vision and the ability to implement it, learning skills – the ability to analyze, identify positive and negative events and their causes, the ability to correct the process on their basis (bessant, tidd 2011). the research conducted among executives of five major corporations in the united states shows that managers – innovators should be characterized by: the ability to sense the needs, anticipate change and a positive attitude to them, determination (careful planning of activities and tenacity in action), the ability to combine the overall vision with attention to every detail, participative leadership style, stubbornness combined with persuasion skills and tact (oleksyn 2010). according to the 270 k. szczepańska-woszczyna, z. dacko-pikiewicz. managerial competencies and innovations in… research conducted by copp (2011), innovative managers associate competencies with: interpersonal competencies, interpersonal intelligence, interpersonal skills (motivating), experience, openness, communication skills and leadership skills. according to jones et al. (2000), in order to lead others in an innovation, managers should be trained to promote: imagination, community and the application of the innovation in the workplace. gardner and stough (2000), based on the research conducted among 250 high-level managers, suggest that managers who are more effective in innovation processes have higher levels of emotional intelligence. emotional intelligence is based on the leader’s ability to manage the employee’s emotions and stress (gliddon 2006). 3. methods the purpose of the study was to explore the perceived managerial competencies that are critical for implementing innovation. this paper also intends to present different elements of managerial competency: knowledge, skills, qualities, attitudes and behaviours. the issues which will be empirically addressed are the following: what knowledge, skills and qualities do managers need in the context of implementing innovation in the company? can you see any differences between the competencies possessed and expected of managers in the process of innovation implementation (is there is a competency gap)? does the range of management competencies depend on the level of management? the authors argues that the structure of competencies of managers in companies is not homogeneous and creates a significantly different group, moreover the expected structure of competencies depends on the level of management in the organization. the first part of the study used a content analysis based on the review of professional publications, books and scientific articles. older publications concerning managerial competencies were chosen to compare the collected information because the most current authors follow the findings made by previous authors. during the literature research, based on the findings of the research previously conducted in different types of businesses, components of managerial competencies in the following areas were identified: knowledge, conceptual and analytical skills, social skills, job-related and cognitive managerial skills, as well as the qualities, attitudes and behaviours, crucial for implementing innovation. these sets were tested in pilot studies. the study was conducted among the managers of top, middle and operational management level in companies operating in the province of silesia (poland). we eliminated the respondents who failed to answer at least 20 per cent of the questions. the quantitative sample of analysing the managerial competencies contains 101 managers. the research was conducted by means of a direct survey. the instrument of data collection was questionnaires. a questionnaire consisting of 10 questions with a mixture of likertscale and closed-ended questions with one answer was developed. in addition to demographic data, information about the type and scope of the innovation implemented by the company, scope of knowledge, skills, qualities and attitudes of managers relevant to company innovation (the expected competencies), assessment of their own competency and leadership styles was collected. the components of knowledge, skills, qualities and 271 business, management and education, 2014, 12(2): 266–282 attitudes were listed. a five-point likert scale was employed to gather responses, 5 indicating “maximum agreement” and 1 “no agreement”. the survey was sample-based. non-random sampling was applied and advantages and disadvantages specific to this method of sampling were considered. a small group of those surveyed does not authorize to make generalizations, but allows the identification of the specific mechanisms and formulation of questions and conclusions. tested on a larger sample, they will make it possible to formulate more documented and certain, useful theses on a larger scale. the data were collected in april and may 2014 and first analysed using basic statistical techniques. data analysis was accomplished using ibm spss statistics 21. 4. findings, discussion and limitations in the first part, we would like to describe the background characteristics of respondents and the profile of companies in this research. respectively, 19.8%, 36.6% and 43.6% of the respondents were top managers, middle managers and operational level managers. approximately 48.5% of the respondents were between 31 to 40 years old, 27.5% under 31 years old, 23.7% over 40 years old. an education level of the respondents indicates that 97% have university degree. 43.6% of the respondents have a degree in economic fields, 20.8% – in technology or science, 14.9% – in social and humanistic sciences, 11.9% in law and administration, 20% of the respondents have over 10-year experience on the managerial positions, 18.9% from 5 to 10 years of managerial experience, others less than 5 years of such experience. the respondents work in companies of different size, 42.6% of them in large companies (more than 250 employees), 25.7% in medium-sized companies (51–250 employees), others in small companies (less than 50 employees). in 66.6% of the companies, technological innovations have been implemented, in 58.4% of companies – product innovations, in 56.4% – organizational innovations, in 43.6% – marketing innovations. in 11.9% of the companies, the innovation was international, in 19.8% it was new in the country, in other companies the innovation was new in the region, sector or company. mean scores were computed on all 77 elements of managerial competencies from the survey in order to examine which individual competencies were the most important and most frequently used. in this paper, we examine the managerial competencies in six competency areas such as knowledge, conceptual and analytical skills, interpersonal skills, personal skills, managerial skills, qualities, attitudes and behaviours. the mean score for individual competencies ranged from 4.50 to 3.28 in the general population, in the group of top managers it ranged from 4.21 to 2.85, respectively 4.67–3.41 and 4.51–3.18 in the groups of middle managers and operational level managers. the first area of assessment was knowledge. the managers ranked applicable knowledge as the most important. knowledge of the industry is an area which had the highest mean score in the context of implementing innovation in the company, it is also an area where the managers rated their own knowledge most highly (85.1% of the respondents rate themselves highly and very highly in this respect, 12.9% on the average level, only 2.0% at a low level); in this area of knowledge, the difference between the knowledge expected and possessed 272 k. szczepańska-woszczyna, z. dacko-pikiewicz. managerial competencies and innovations in… (deficit) is observed; it is the most important area of knowledge from the perspective of middle and operational managers. the next area is practical knowledge (with knowledge of the issues of organization and management and its applications, as well as technical, production and legal issues). 80.2% of the respondents rate themselves highly and very highly in this respect, 11.9% on the average level, only 5.9% at a low level; in this area of knowledge, the significant difference between the knowledge expected and possessed is observed (0.58); it is the most important area of knowledge from the perspective of top managers. next operative knowledge (competence to use news and skills in task situations) (mean score 4.17) – 80.2% rate it highly and very highly, 17.8% on the average level, 4.0% at a low level) and knowledge of the sources of innovations and of the factors determining innovation – important for the innovation implementation, but also an area with large deficit in knowledge possessed in relation to knowledge expected. table 1 lists fields of knowledge most frequently identified by the survey respondents as critical competencies. a skill, as a component of competency, is proficiency at using relevant messages (in the normative form as a principle, rules, or – in the case of imitation – as role models), while performing specific tasks. this is application of knowledge in real company resource management and self-management. in the second part of the survey, the respondents rated their skills in several key areas. in the area of conceptual and analytical skills, skills of operational and strategic thinking were rated as the most important (mean score of 4.50; 84.2% have it on the high and very high level, 13.9% – average level, 0.0% – low level). in this area there is the biggest difference between skills expected and possessed. for 77.2% of the respondents, analytical skills are important (high and very high level), for 86.1% – observing the market, competitors. table 2 lists elements of conceptual and analytical skills most frequently identified by the survey respondents as critical competencies. table 1. assessment of managers’ knowledge, essential in the innovation implementation processes (source: created by the authors) knowledge top managers middle managers operational level managers total m mdn m mdn m mdn m mdn of the industry p ex 4.57 4.21 5.00 4.00 4.54 4.51 5.00 5.00 4.09 4.51 4.00 5.00 4.32 4.45 4.00 5.00 practical p ex 4.00 4.43 4.00 5.00 3.84 4.22 4.00 5.00 3.50 4.24 3.00 4.00 3.68 4.25 4.00 4.00 operational p ex 4.00 4.07 4.00 4.00 4.24 4.14 4.00 4.00 3.82 4.23 4.00 4.00 4.01 4.17 4.00 4.00 of the sources of innovation p ex 3.50 3.93 4.00 4.00 3.49 4.16 4.00 4.00 3.34 4.14 3.00 4.00 3.43 4.12 4.00 4.00 of the factors determining innovation p ex 3.50 3.50 3.00 3.50 3.95 4.16 4.00 4.00 3.48 4.09 3.50 4.00 3.62 4.05 4.00 4.00 general economic p ex 3.93 3.46 4.00 3.00 3.54 4.08 4.00 4.00 3.25 3.74 3.00 4.00 3.44 3.83 3.00 4.00 general humanistic and social p ex 3.57 2.85 4.00 3.00 3.41 3.43 3.00 4.00 3.41 3.60 4.00 4.00 3.41 3.47 3.00 3.00 note: p – possessed, ex – expected competencies of managers. 273 business, management and education, 2014, 12(2): 266–282 table 2. assessment of conceptual and analytical skills of managers identified as critical in innovation processes (source: created by the authors) conceptual, analytical skills top managers middle managers operational level managers total m mdn m mdn m mdn m mdn operational and strategic thinking p ex 4.36 4.21 4.50 5.00 4.11 4.67 4.00 5.00 3.86 4.37 4.00 4.00 4.03 4.50 4.00 5.00 analytical p ex 4.21 3.86 4.50 4.00 4.30 4.33 4.00 5.00 3.93 4.16 4.00 4.00 4.09 4.33 4.00 4.50 observing the market, competitors p ex 4.57 4.07 5.00 4.00 4.05 4.47 4.00 5.00 3.68 4.16 4.00 4.00 3.96 4.29 4.00 4.00 problem-solving, decision-making p ex 4.14 3.93 4.00 4.00 4.43 4.61 5.00 5.00 4.18 4.37 4.00 5.00 4.23 4.17 4.00 4.50 diagnostic p ex 4.29 3.71 4.00 4.00 4.22 4.36 4.00 5.00 3.84 4.05 4.00 4.00 4.03 4.12 4.00 4.00 proposing ideas and changes p ex 4.21 3.71 4.00 4.00 4.11 4.36 4.00 4.00 3.89 4.02 4.00 4.00 4.02 4.12 4.00 4.00 technical p ex 4.07 3.43 4.00 3.50 3.92 3.78 4.00 4.00 3.70 3.88 4.00 4.00 3.83 3.79 4.00 4.00 note: p – possessed, ex – expected competencies of managers. in the area of social skills, the respondents rated motivating others most highly (respectively: 75.1% / 10.9% / 4.0%), the ability to listen to and accept orders (72.3% / 7.9% / 5.0%), building good relationships and trust (80.2% / 16.8% / 3.0%). these three skills were rated more highly by middle and operational managers rather than by top managers. the ability to gain power and influence was rated at the lowest level in this area (table 3). table 3. interpersonal skills of managers identified as critical in innovation processes (source: created by the authors) interpersonal skills top managers middle managers operational level managers total m mdn m mdn m mdn m mdn motivating others p ex 3.86 4.00 4.00 4.00 4.19 4.35 4.00 4.00 3.93 4.30 4.00 5.00 3.99 4.28 4.00 4.00 ability to listen to and accept orders p ex 4.25 3.91 4.00 4.00 4.46 4.39 5.00 5.00 4.28 4.31 4.00 5.00 4.33 4.28 4.00 4.50 building relationships and trust p ex 4.36 4.00 4.50 4.00 4.38 4.08 4.00 4.00 4.14 4.32 4.00 5.00 4.26 4.18 4.00 4.00 delegating tasks effectively p ex 4.00 3.71 4.00 4.00 3.95 4.22 4.00 4.00 3.75 4.18 4.00 4.00 3.84 4.14 4.00 4.00 making contacts, empathy p ex 4.14 3.86 4.00 4.00 4.19 4.08 4.00 4.00 4.16 4.18 4.00 4.00 4.15 4.09 4.00 4.00 training others p ex 3.79 3.86 4.00 4.00 4.11 4.16 4.00 4.00 3.86 4.02 4.00 4.00 3.90 4.09 4.00 4.00 274 k. szczepańska-woszczyna, z. dacko-pikiewicz. managerial competencies and innovations in… interpersonal skills top managers middle managers operational level managers total m mdn m mdn m mdn m mdn cooperation in the group p ex 4.14 3.79 4.00 4.00 4.19 4.14 4.00 4.00 4.16 4.05 4.00 4.00 4.15 4.04 4.00 4.00 supporting communication p ex 4.00 3.64 4.00 4.00 4.14 4.03 4.00 4.00 3.93 4.20 4.00 4.00 4.01 4.00 4.00 4.50 managing conflicts p ex 4.07 3.50 4.00 3.50 3.84 4.14 4.00 4.00 3.66 4.02 4.00 4.00 3.76 3.98 4.00 4.00 group decision making p ex 3.93 3.64 4.00 4.00 4.14 3.62 4.00 4.00 3.91 3.80 4.00 4.00 3.96 3.68 4.00 4.00 gaining power and influence p ex 4.07 3.36 4.00 3.00 3.86 3.78 4.00 4.00 3.75 3.52 4.00 4.00 3.80 3.57 4.00 4.00 note: p – possessed, ex – expected competencies of managers. personal skills are the area where the level of the managers’ skills possessed is poorer than the level expected for the efficient innovation implementation. for the respondents, the following skills are the most important in the context of implementing innovation in company: striving to achieve results (88.1% of the respondents rated it highly or very highly), coping with change (very highly or highly rated by 80.2% of the respondents), commitment (83.2%), creative problem solving (79.2%). this group of skills was rated relatively highly and evenly – mean score is from 4.17 to 4.38. those who rated their personal skills most highly are middle managers (table 4). table 4. managers’ personal skills in innovation processes (source: created by the authors) personal skills top managers middle managers operational level managers total m mdn m mdn m mdn m mdn striving to achieve results p ex 4.29 4.14 4.00 4.50 4.43 4.57 4.00 5.00 4.20 4.28 4.00 4.00 4.29 4.38 4.00 5.00 coping with change p ex 4.07 4.14 4.00 4.00 4.38 4.49 5.00 5.00 4.14 4.27 5.00 5.00 4.21 4.32 5.00 5.00 commitment p ex 4.43 4.00 4.00 4.50 4.51 4.49 5.00 5.00 4.32 4.25 4.00 4.00 4.39 4.30 4.00 5.00 creative problem solving p ex 4.14 4.21 4.00 4.50 4.24 4.43 4.00 5.00 3.86 4.16 4.00 4.00 4.01 4.30 4.00 5.00 organization of own work p ex 4.14 3.86 4.00 4.00 4.43 4.57 5.00 5.00 4.26 4.14 4.00 4.00 4.25 4.26 4.00 4.00 dealing with stress p ex 3.86 4.00 4.00 4.00 4.22 4.38 4.00 5.00 3.86 4.26 4.00 4.00 3.96 4.26 4.00 4.00 adapting flexibly to complex and vague situations p ex 4.14 3.71 4.00 4.00 4.30 4.43 5.00 5.00 4.23 4.05 4.00 4.00 4.21 4.17 4.00 4.00 note: p – possessed, ex – expected competencies of managers. end of table 3 275 business, management and education, 2014, 12(2): 266–282 the managerial (leadership) skills that the respondents rated most highly include: strategic thinking (87.1% of the respondents rated them as important or very important in the context of implementing innovation in company), the ability to set goals (84.2%). the ratings of skills such as motivating employees and developing their commitment, which are important from the point of view of the innovation implementation, were 4.31 and 4.30 (respectively 85.1% and 87.1%). strategic thinking, vision, goal setting, managerial courage are the domain of top managers, and motivating and caring of subordinates – of middle managers. as regards almost all managerial (leadership) skills, there is a competency gap. table 5 lists fields of managerial skills most frequently identified by the survey respondents as critical competencies. table 5. management (leadership) skills in the context of implementing innovation in company (source: created by the authors) managerial (leadership) skills top managers middle managers operational level managers total m mdn m mdn m mdn m mdn strategic thinking p ex 4.50 4.04 5.00 4.00 4.27 4.57 4.00 5.00 3.93 4.37 4.00 5.00 4.12 4.41 4.00 5.00 setting goals p ex 4.36 3.93 4.00 4.00 4.27 4.46 4.00 5.00 4.11 4.32 4.00 5.00 4.15 4.31 4.00 5.00 motivating others p ex 4.00 4.07 4.00 4.00 4.27 4.57 4.00 5.00 3.86 4.20 4.00 4.00 4.02 4.31 4.00 4.00 managerial courage p ex 4.29 3.93 4.00 4.00 4.22 4.49 4.00 5.00 4.00 4.30 4.00 4.00 4.07 4.31 4.00 5.00 ability to develop employees’ commitment p ex 4.21 3.93 4.00 4.00 4.16 4.51 4.00 5.00 3.91 4.25 4.00 5.00 4.01 4.30 4.00 4.00 having the vision and implementing it p ex 4.36 4.07 5.00 4.00 4.03 4.35 4.00 5.00 3.80 4.27 4.00 4.00 3.94 4.27 4.00 4.00 plannimg and managing projects p ex 4.07 3.93 4.00 4.00 3.92 4.41 4.00 5.00 3.77 4.23 4.00 4.00 3.84 4.25 4.00 4.00 care of subordinates p ex 4.14 3.79 4.00 4.00 4.35 4.30 4.00 4.00 4.09 4.23 4.00 4.00 4.18 4.18 4.00 4.00 note: p – possessed, ex – expected competencies of managers. in the area of qualities, attitudes and behaviours in the context of implementing innovation in the company, the respondents rated the following as important: activity, openness to change, creativity, ingenuity, perseverance in pursuing the goal. behaviours that aim to build creative teams that are open to change are more important than individualistic attitudes. table 6 lists fields of qualities, attitudes and behaviours most frequently identified by the survey respondents as critical competencies. 276 k. szczepańska-woszczyna, z. dacko-pikiewicz. managerial competencies and innovations in… table 6. assessment of qualities, attitudes and behaviours in the context of implementing innovation in the company (source: created by the authors) qualities, attitudes and behaviours top managers middle managers operational level managers total m mdn m mdn m mdn m mdn activity, initiative p ex 4.14 4.31 4.00 4.00 4.41 4.46 5.00 5.00 4.12 4.23 4.00 4.00 4.20 4.32 4.00 4.50 openness to change p ex 4.14 4.57 4.50 5.00 4.38 4.38 5.00 4.00 4.23 4.14 4.00 4.00 4.27 4.29 4.00 4.00 creativity ingenuity p ex 4.00 4.21 4.00 4.00 4.32 4.32 4.00 4.00 3.82 4.23 4.00 4.50 4.04 4.26 4.00 4.00 perseverance in pursuing the goal, determination p ex 4.36 4.46 4.50 5.00 4.54 4.35 5.00 5.00 4.33 4.14 4.00 4.00 4.41 4.26 4.50 5.00 responsibility p ex 4.36 4.00 4.00 4.00 4.65 4.32 5.00 5.00 4.37 4.30 4.00 4.00 4.45 4.25 5.00 4.00 conscientiousness p ex 4.00 4.15 4.00 4.00 4.46 4.38 5.00 5.00 4.26 4.16 4.00 4.00 4.27 4.22 4.00 4.00 self-confidence, resolutness p ex 4.21 4.15 4.00 4.00 4.46 4.38 5.00 5.00 4.19 4.16 4.00 4.00 4.25 4.22 4.00 4.00 self-control in stressful situations p ex 4.00 4.15 4.00 4.00 4.43 4.22 5.00 5.00 4.09 4.30 4.00 4.50 4.17 4.21 4.00 4.00 willingness to improve one’s skills p ex 4.36 4.21 4.50 4.00 4.59 4.24 5.00 4.00 4.51 4.16 5.00 4.00 4.53 4.20 5.00 4.00 consistency in performing tasks p ex 4.29 4.31 4.00 4.00 4.49 4.30 5.00 4.00 4.02 4.11 4.00 4.00 4.21 4.20 4.00 4.00 initiating change p ex 4.21 4.46 4.00 5.00 4.16 4.22 4.00 4.00 3.81 4.02 4.00 4.00 4.00 4.17 4.00 4.00 being systematic, reliability p ex 3.93 3.92 4.00 4.00 4.38 4.38 4.00 5.00 4.09 4.11 4.00 4.00 4.14 4.15 4.00 4.00 honesty p ex 4.29 4.00 4.00 4.00 4.78 4.51 5.00 5.00 4.47 3.89 5.00 4.00 4.54 4.14 5.00 4.00 openness to the „otherness” and diversity p ex 4.00 4.15 4.00 4.00 4.24 4.08 4.00 4.00 3.88 4.16 4.00 4.00 4.04 4.11 4.00 4.00 independence p ex 4.29 4.00 4.50 4.00 4.65 4.32 5.00 5.00 4.33 4.02 4.00 4.00 4.43 4.11 5.00 4.00 assertiveness p ex 3.86 3.64 4.00 4.00 4.16 4.30 4.00 5.00 3.98 3.91 4.00 4.00 4.00 4.02 4.00 4.00 loyalty p ex 4.36 3.77 5.00 4.00 4.62 4.24 5.00 4.00 4.28 3.82 4.00 4.00 4.41 3.95 5.00 4.00 inclination to take risk p ex 3.86 3.31 4.00 3.00 3.86 3.78 4.00 4.00 3.74 4.07 4.00 4.00 3.80 3.86 4.00 4.00 competing with others p ex 4.00 3.77 4.00 4.00 3.62 3.51 4.00 4.00 3.60 3.27 4.00 3.00 3.63 3.41 4.00 4.00 striving to achieve maximum own benefits p ex 3.79 3.46 4.00 4.00 3.65 3.41 4.00 4.00 3.47 3.18 3.00 3.00 3.53 3.28 4.00 3.00 note: p – possessed, ex – expected competences of managers. 277 business, management and education, 2014, 12(2): 266–282 a manager should have the ability to motivate all stakeholders, particularly employees, to behave pro-innovatively. this motivation is based on recognition, it uses the measures of identification with the organization, and strengthens the internal motivation of employees, but is also based on rewarding for performance, mostly team performance. the essential conditions for the successful implementation of new solutions include identifying agents of change among employees and cooperating with them. 5. conclusions the structure of competencies of a manager acting in contemporary social and economic conditions must be flexible, with the ability to adapt to changes in the environment. nevertheless, even in this dynamic system such as a set of competencies of the effective 21st century manager, we can distinguish some permanent elements, which are the basis of the individual competency profile of each employee. most authors point out similar elements that build competencies: knowledge, skills, personality predispositions, attitudes and patterns of behaviour. studying managerial competencies on the basis of studies of literature and in the context of implementing innovation in the company, the following categories of competencies were distinguished: conceptual and analytical skills, interpersonal skills, personal skills, managerial (leadership) skills and qualities, attitudes and behaviours. the survey used a 5-step likert scale, where 5 meant that the competencies are very important for the innovation implementation, 4 – important, 3 – of medium importance, 2 – of little importance and 1 – of very little importance. therefore, the division of competencies into the following groups can be adopted (gliddon 2006): (a) expert (mean score 4.25 and above), (b) core (mean score 4.24–3.80), (c) supplementary (mean score below 3.80). the expert competencies include: knowledge of the industry, practical knowledge, operational, strategic and analytical thinking skills, the ability to observe the market, competitors, to motivate others, to listen to and accept orders, the ability to: strive to achieve results, cope with change, solve problems creatively, deal with stress, cope with stressful situations, commitment, good organization of own work, as well as: activity, initiative, openness to change, creativity, ingenuity, perseverance in pursuing the goal, determination, and responsibility. a group of core competencies includes: general economic and operational knowledge, knowledge of the sources of innovation and of the factors determining innovation, problem-solving, decision-making and diagnostic skills, the ability to propose ideas and changes, technical skills, the ability to build relationships and trust, to delegate tasks effectively, to make contacts, empathy, the ability to train others, support communication, manage conflicts, cooperate in the group, the ability to adapt flexibly to complex and vague situations, care of subordinates, as well as: conscientiousness, self-confidence, resoluteness, self-control in stressful situations, willingness to improve one’s skills, consistency in performing tasks, initiating change, 278 k. szczepańska-woszczyna, z. dacko-pikiewicz. managerial competencies and innovations in… being systematic, reliability, honesty, openness to the “otherness” and diversity, independence, assertiveness, loyalty, inclination to take risks. every innovation is a change in the system of the organization. it must be accepted within the social system of organization, both at the stage of its implementation and after its completion manager must be able to both manage the expectations of employees and lead by example. similarly, as jones suggested, (jones et al. 2000), the research shows that a manager has to promote creativity and commitment to work relationships and focus on innovations in specific job tasks. a manager should seek to understand the psychological profile of others and exhibit emphaty. the managers rated social skills more highly than the conceptual and analytical skills. despite the declared poorer knowledge of social relationships, the managers (in their assessment) have a much higher ability in this field. persing (1999) suggests that managers who focus creative efforts on innovating within job tasks rather than creating new ideas lead employees to higher levels of individual innovation. the findings of the research indicate similarly that the task of the manager in the innovation process is not to generate new ideas, concepts, new products, but to strengthen and increase creativity of team of employees. important skills include the ability to motivate others, to listen to and accept orders and build relationships and trust. the manager’s personal motivation has to come primarily from ambition, passion, tenacity and perseverance. the effectiveness of the innovation implementation is inextricably linked to the effectiveness of the manager. the manager should have the expert competencies of strategic thinking, setting goals and planning and managing projects. he must know and use the available resources and delegate resources and tasks to followers to ensure their ability to complete a task. according to bingham (2003), the development of strategy depends upon a manager’s ability to understand the external environment. according to the findings, managers should have knowledge of their competitor’s business and act to combat threats. they should be able to analyze the market trends and give recommendations to the organization. a three-step division of managers’ tasks and responsibilities into: the highest level (top management), medium (middle management) and the lowest (first-line management, operational management level) (penc 2007) also determines a diverse range of responsibilities in the innovation processes. thus, managerial competencies in the context of implementing innovation in the company are also different at different levels of management. knowledge that the managers surveyed possess varies depending on the level of management: general humanistic knowledge, economic knowledge, practical knowledge, knowledge of the industry and knowledge of the sources of innovation is greater at top levels of management, and middle managers have greater operational knowledge and knowledge of factors determining innovation. the higher the level of management, the higher self-assessment of managers in almost all areas of conceptual 279 business, management and education, 2014, 12(2): 266–282 and analytical skills. communication, motivation, training is a strength of middle managers, while gaining authority, conflict management, delegating tasks and impeccable manner – of top managers. the research has helped to identify discrepancies between the current level of competencies 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unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. entrepreneurship in crisis: the determinants of syrian students’ entrepreneurial intentions sulaiman mouselli1, bayan khalifa2 1department of accounting and finance, faculty of business administration, arab international university, mazzeh-high way, damascus, syria 2centre for higher education governance ghent, ghent university, ghent, belgium e-mails: 1s-mousele@aiu.edu.sy (corresponding author); 2bayan.khalifa@outlook.com received 17 november 2017; accepted 2 december 2017 abstract. this study aims at investigating the factors that affect the entrepreneurial intentions of university students in syria. the impact of three groups of factors was investigated, demographic, personal, and external factors. the questionnaire survey method was applied. data was collected from two major universities in syria: damascus university and arab international university and two faculties: business and economics, and informatics and communication engineering. we analyze 183 responses from the above-mentioned faculties to understand whether differences exist in entrepreneurial intentions between students from different universities and faculties. also, we use ordinary least squares to uncover the determinants of entrepreneurial intentions for those students. the results show higher entrepreneurial intentions for informatics and communication engineering and for male students. moreover, self-efficacy, information and communication, institutional environment come to have positive and significant impacts on entrepreneurial intentions. we recommend that more polices should be directed towards developing female entrepreneurial intents. also, entrepreneurship training courses should be offered to informatics and communication engineering to enable them turn their intentions into projects. furthermore, universities should consider establishing entrepreneurship centers, incubators and science parks that foster innovative ideas and support start-ups. keywords: entrepreneurial intentions self-efficacy, information and communication, institutional environment, business and economics, and informatics and communication engineering. jel classification: i23, l26, o31. 1. introduction the current war in syria had severe consequences on all economic and social aspects, and entrepreneurship is not an exception. according to recent figures published by the world bank in 2017, the syrian gdp declines by 63% in the period between 2011 and b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2017, 15(2): 159–173 doi:10.3846/bme.2017.386 160 s. mouselli, b. khalifa. entrepreneurship in crisis: the determinants of syrian students’ entrepreneurial intentions 2016. moreover, unemployment rate rose from 8.6 percent in 2010 to the alarming 52.9 percent in 2015. in addition, 9 million syrians of working age are not taking part in any economic value generation with 2.9 million unemployed and 6.1 million inactive. small to medium enterprises (smes) are one of the main leader engines to accelerate job creation and enhance the economic growth. in mena countries, smes are major contributors to employment, representing between 80 percent and 90 percent of all formal sector enterprises according to the world bank (2015). it is important to mention that creating smes requires enhancing employability and entrepreneurship competencies of university graduates. the above mentioned startling figures highlight the importance of understanding the determinants of entrepreneurial intentions especially in this war period. understanding the determinants of entrepreneurial intentions is essential at national, institutional, and also at the individual level to make better future plans related to introducing new entrepreneurial modules, opening new programs on entrepreneurship or establishing new entities to support entrepreneurship activities. in this vein, this study explores why students establish the intention to start up a business, especially in crisis contexts. the research on entrepreneurship intentions in syria is scarce with the exception of medyanik and al-jawni (2017) who investigate the determinants of syrian students’ social entrepreneurial intentions. however, they use a simple correlation analysis and restrict their study to social science students without explicitly considering the current war conditions in their analysis. this study, however, aims to fill this gap by not restricting the investigation to social entrepreneurial intentions but to all entrepreneurship intentions. in addition, it clearly considers the current war conditions and their impact on students’ entrepreneurial intentions in the analysis and covers informatics and telecommunication engineering students in addition to business and economics students. doing so, it implicitly considers the impact of students’ entrepreneurial education on forming their entrepreneurial intentions. we find that females have less entrepreneurial intentions than males. however, no significant differences are noticed in entrepreneurial intentions between students from public vs. private universities. surprisingly, the results confirm higher entrepreneurial intentions for informatics and communication engineering students compared to business and economics students. also, we find that self-efficacy, information and communication, institutional environment have positive and significant impacts on entrepreneurial intentions. the remaining parts of this paper is distributed as follows. section one reviews the literature on models that explain the determinants of entrepreneurial intentions. the second section defines the examined variables and discusses their potential impact of forming entrepreneurial intentions. section three highlights the sample and methodology applied in investigating the factors affecting entrepreneurial intentions. the forth section outlines the research results and is followed by conclusions and recommendations. 161 business, management and education, 2017, 15(2): 159–173 2. literature review the evolution of the models that try to explain the entrepreneurship phenomenon can be traced back to the pioneering work of shapero (1982) who proposes the entrepreneurial event model (eem). he argues that three variables only determine entrepreneurial intentions, namely, desirability, feasibility and entrepreneur’s tendency to act. ajzen (1991) builds a model based on the theory of planned behavior (tpb) and suggests three different groups of variables that formulate entrepreneurial intentions. those groups are person’s attitudes towards his/her behavior, subjective norms, and behavioral control variables. in the same year, robinson et al. (1991) propose entrepreneurial attitude orientation (eao) model. they construct an eao scale that predicts entrepreneur’s attitude using four variables (achievement, self-esteem, personal control, and innovation) and three different reactions (cognitive, conative, or affective). then, krueger and carsrud (1993) generate the basic intention model (bim) that attributes entrepreneurial intentions to both attitudes and behavior. one year later, krueger and brazeal propose entrepreneurial potential model (epm) that is built on the previous contributions of shapero (1982). krueger and brazeal (1994) argue that desirability, feasibility, propensity to act explain entrepreneurial intentions. several empirical articles have used this model and previous models such as (crant 1996; walstad, kourilsky 1998; veciana et al. 2005; guerrero et al. 2008). davidsson (1995a) suggests a model that combines a number of economic and psychological variables in a set of general attitudes and domain attitudes (ability, necessity, opportunity, values and attitudes) to determine entrepreneurial intentions. those variables are comparable to perceived self-efficacy variables included in previous models of bim and epm. davidsson (1995b) empirically examines this model and finds that attitudes act as mediators for the influence of personal background variables. lüthje and franke (2003) later suggest a modified structural model of the tpb that considers personal traits and contextual factors. a more recent strand in entrepreneurial intentions research consider socio-cultural variables as important determinant of entrepreneurial intentions. this strand of research is based on shapero and sokol (1982), aldrich and zimmer (1986), hyde (1998), scherer et al. (1989) and kolvereid’s (1996) models which try to identify factors encouraging entrepreneurial initiative, and which claim that social or environmental factors can explain entrepreneurial behavior. these factors are formal, such as laws and rules, or informal, such as ideas, beliefs, attitudes, social values and codes of conduct (thornton et al. 2011). krueger (2009) integrates the tpb model and eem into a single model called krueger’s entrepreneurial intentions (kei) model. this model combines desirability, feasibility and propensity to act from the eem with social norms and self-efficacy from tpb model in addition to collective efficacy. esfandiar et al. (2017) develop kei model to explicitly distinguishes between entrepreneurial goal intention and entrepreneurial implementation intention. the model (fig. 1), we test in this paper, is based on a combination of davidsson’s model and a number of socio-cultural factors suggested in the literature to affect entrepreneurial 162 s. mouselli, b. khalifa. entrepreneurship in crisis: the determinants of syrian students’ entrepreneurial intentions intentions. those factors are need for achievement, locus of control, self-efficacy, information and communication and institutional environment. we add to those factors another factor that is specific to the syrian content to capture the current war condition called crisis effect. 3. variables’ definition need for achievement. the first factor that we examine whether it affects entrepreneurial intentions is the motivation for achievement. it refers to performance comparison between the individual and his/her internal standards. this factor is among the most used psychological variables in entrepreneurship research (mcclelland 1961; wärneryd 1988; davidsson 1989, 1991). the general conclusion from empirical research is that achievement motivation positively affects entrepreneurial intentions, yet it is not the major determinant. however, kristiansen and indarti (2004) find that the need for achievement has no impact on entrepreneurial intentions. locus of control. another personality factor that is expected to affect entrepreneurial intentions is locus of control. it reflects how much an individual feels he/she has control over his/her life. rotter (1966) indicates that people have internal locus of control if they think they master their own fate and they are able to reach their desired outcomes. green et al. (1996) define locus of control as the degree at which individual attributes his/her success or failure to his/her personal initiatives. hence, acquiring such trait should result in better planning, self-motivation and not to wait others to tell what to do. a number of studies show that locus of control predicts entrepreneurial intentions (bygrave 1989; robinson et al. 1991). however, kristiansen and indarti (2004) find no impact for locus of control on entrepreneurial intentions. fig. 1. the study model (created by authors) entrepreneurial intentions demographic variables: gender age year of study university faculty work experience personal factors: need for achievement locus of control self-efficacy external factors: information and communication institutional environment crisis effect 163 business, management and education, 2017, 15(2): 159–173 self-efficacy. self-efficacy represents individual’s belief in his/her ability to do a certain task (bandura 1977). self-efficacy is at the core of ajzen’s (1991) tpb model as it represents the perceived feasibility of conducting a specific behavior. self-efficacy is also in the center of shapero’s (1982) eem where entrepreneurial intentions are derived from feasibility (self-efficacy), desirability, and propensity to act upon opportunities. boyd and vozikis (1994) propose that self-efficacy is an important mediator in determining both the strength of entrepreneurial intentions and their likelihood to turn into actions. kristiansen and indarti (2004) and peng et al. (2012) document a positive and significant impact of self-efficacy on entrepreneurial intention. information and communication. we mean by information and communication the set of contextual factors that affect entrepreneurial intentions. those factors are access to capital, information access and social networks. limited access to capital can be seen as restriction to individuals’ perception of entrepreneurial opportunities which might negatively affect their entrepreneurial intentions. this is a major concern not only for individuals in developing countries, with weak credit and venture capital institutions, but also in developed economies with high entry barriers. social networks reduce uncertainty and transaction costs and increase access to business ideas. kristiansen and indarti (2004) argue that contextual factors, including the availability of business information, are important to initiate a new enterprise. institutional environment. more attention has been paid recently to the impact of institutional factors on entrepreneurial intentions. the contribution of institutions as referred to “rules of the game” to entrepreneurial activities and long term economic development has been studied extensively theoretically and empirically (van de ven 1993; stephen et al. 2005). stephen et al. (2005) argue that environmental formal variables such as legal rules and government support measures and procedures (number and complexity) are critical in start-up decisions. crisis effect. crisis could be of conflicting impact of entrepreneurial intentions. on the one hand, crisis motivates individuals to defend their financial and social status through supporting their entrepreneurial intentions. on the other hand, crisis may limit the available financial resources and harm their psychological and mental conditions. 4. methodology this study aims at investigating the factors that might affect the entrepreneurial intentions of university students in syria. in order to achieve the study purpose, a questionnaire survey method was applied. the questionnaire consists of a cover letter to explain the purpose of the study and to assure the privacy of answers. then, an introductory section was displayed to explore the students’ profiles (i.e. gender, age, year of study, university, faculty, and work experience). after the introductory section, the body of the questionnaire came, which contained the scales targeting the purpose of the study. the scales of the following factors were developed by kristiansen (kristiansen, indarti 2004): need for achievement, locus of control, self-efficacy, and information and 164 s. mouselli, b. khalifa. entrepreneurship in crisis: the determinants of syrian students’ entrepreneurial intentions communication. however, the institutional environment scale was developed based on the global competitiveness report. the crisis effect scale was developed by the authors. finally, the entrepreneurial intentions item was adopted from block et al. (2013). the questionnaire was originally in english language. though, to assure students’ accurate understanding of the items, the items were translated into arabic by one of the authors and reviewed by the other. responses were assessed on a 5-point likert scale. questionnaires were distributed online through the facebook groups of the syrian universities. the responses reached 215, mainly from damascus university and arab international university. thus, the few responses that came from other universities and faculties were not included in the analyses. the remaining cases were 183. the profile of the respondents is presented in table 1. the data was treated through spss version 20. table 1. students’ profile (created by authors) variable frequency % gender female 95 51.9 male 88 48.1 age less than 20 20 10.7 20–25 139 76.3 more than 25 24 13.0 year of study 1 5 2.5 2 31 16.7 3 37 20.2 4 93 51.5 5 17 9.1 university damascus university 108 50.0 arab international university 75 34.8 faculty business and economics 141 77.1 informatics and communication engineering 42 20.0 work experience none 101 55.6 public or government sector 11 6.1 private sector 48 26.2 business owner 23 12.1 165 business, management and education, 2017, 15(2): 159–173 ta bl e 2. e xp lo ra to ry fa ct or a na ly si s an d re lia bi lit y te st (c re at ed b y au th or s) c on st ru ct it em fa ct or lo ad in g e ig en va lu e c ro nb ac h’ s al ph a f1 f2 f3 f4 f5 f6 n ee d fo r ac hi ev em en t 1. 89 5 0. 61 4 i w ill d o ve ry w el l i n fa ir ly d iffi cu lt ta sk s re la tin g to m y st ud y an d m y w or k. .6 40 i w ill tr y ha rd to im pr ov e on p as t w or k pe rf or m an ce . .6 53 i w ill s ee k ad de d re sp on si bi lit ie s in j ob s as si gn ed to m e. .6 01 c ris is m ot iv at es m e fo r f ur th er a ch ie ve m en t. .4 53 l oc us o f c on tr ol 1. 81 4 0. 64 8 a tte nt iv en es s an d ha rd w or k us ua lly l ea d to su cc es s. .6 05 if i do n ot su cc ee d on a ta sk , i d o no t g iv e up . .7 97 i d o no t r ea lly b el ie ve in lu ck . .7 64 i a m fa irl y m an ag in g m y fin an ci al s itu at io n. .6 58 i a m a g oo d tim em an ag er . .8 05 in g en er al , i am a bl e to k ee p a se lf a nd a l if e ba la nc e du ri ng th e cr is is p er io d. .4 95 se lf -e ffi ca cy 2. 40 9 0. 75 7 i h av e le ad er sh ip s ki lls th at a re n ee de d to b e an en tr ep re ne ur . .7 19 i ha ve m en ta l m at ur ity t o st ar t to b e an e nt re pr en eu r. .8 26 m y pe rs on al c om pe te nc e is a bl e to c om m er ci al iz e. .7 40 i h av e th e ex pe ri en ce to ru n a bu si ne ss . .6 09 in fo rm at io n an d c om m un ic at io n 2. 66 3 0. 75 9 i ha ve a cc es s to c ap ita l to s ta rt t o be a n en tr epr en eu r. .5 38 166 s. mouselli, b. khalifa. entrepreneurship in crisis: the determinants of syrian students’ entrepreneurial intentions c on st ru ct it em fa ct or lo ad in g e ig en va lu e c ro nb ac h’ s al ph a f1 f2 f3 f4 f5 f6 i ha ve g oo d so ci al n et w or ks ( e. g. , re la tiv es , fr ie nd s, e tc .) fr om w ho m i c an b en efi t w he n i de ci de to b e an e nt re pr en eu r. .7 89 i ha ve a cc es s to s up po rt in g in fo rm at io n (i nf or m at io n ab ou t m ar ke ts a nd s ou rc es o f in pu ts , te ch no lo gi ca l so lu tio ns , de si gn , go ve rn m en t ru le s an d re gu la tio ns , e tc .) to s ta rt to b e an e ntr ep re ne ur . .7 36 t he re qu ir ed la bo r f or m y bu si ne ss is a va ila bl e. .6 39 i ha ve a cc es s to b us in es s in cu ba to rs t ha t ca n su pp or t m e in m y bu si ne ss . .5 37 in st itu tio na l e nvi ro nm en t 1. 80 1 0. 60 7 i do n ot fi nd d iffi cu lti es ( bu re au cr ac y) i n th e pr oc ed ur es o f re gi st er in g an d ru nn in g co m pa ni es . .7 24 i d o no t h av e pr ob le m s re la te d to th e in fr as tr uc tu re ( e. g. in te rn et c on ne ct io n, e le ct ri ci ty , t ra ns po rt at io n, e tc .) .7 34 i t hi nk th at ta xe s a re w ith in a n ac ce pt ab le ra ng e. .6 76 c ri si s e ff ec t 2. 45 7 0. 76 2 m y fin an ci al s itu at io n ha s be en a ff ec te d dr am at ic al ly b y th e cr is es . .7 98 m y ps yc ho lo gi ca l si tu at io n ha s be en a ff ec te d dr am at ic al ly b y th e cr is es . .7 41 m y so ci al s itu at io n ha s be en a ff ec te d dr am at ica lly b y th e cr is es . .7 66 c ri si s re st ri ct s re so ur ce s th at a re n ec es sa ry t o st ar t u p bu si ne ss . .7 04 n ot e: e xt ra ct io n m et ho d: p ri nc ip al c om po ne nt a na ly si s. r ot at io n m et ho d: v ar im ax w ith k ai se r n or m al iz at io n. e nd o f t ab le 2 167 business, management and education, 2017, 15(2): 159–173 to explore and assess the dimensionality of the scales in the questionnaire, two analyses were conducted. firstly, an exploratory factor analysis was utilized using the principal component analysis method and the varimax rotation (table 2). each item that had a minus factor loading or a loading that is lower than 0.3 was deleted. the procedure ended up with six factors with eigen values and factor loadings that exceeded 1 and 0.3, respectively, which satisfied the minimum values suggested by creswell (2012). moreover, the minimum number of items for each factor came to be 3, which responded to the criteria of defining a factor (brown 2015). consequently, the authors named the factors based on the meaning of their items. secondly, the authors applied cronbach’s alpha to measure the internal consistency of the generated factors. the values exceeded 0.6 for all of the factors, which satisfied the minimum suggested by devellis (2012). 5. results in order to investigate the significant contributions of the demographic variables to the entrepreneurial intentions, t-test and anova were applied. first, independent sample t-test was applied for gender, university, and faculty. second, anova was utilized for the variables of age, year of study, and work experience. table 3 shows a significant impact of gender on entrepreneurial intentions. males have the average entrepreneurial intentions of 4.08 compared to 3.60 for females although it is only at 10 percent level of significance. this result gets along with yıldırım et al. (2016) who find lower entrepreneurial intent for females compared to males in two turkish universities and for two similar faculties to those examined by our research. mazzarol et al. (1999) also find that males were generally more likely to be founders of new businesses than females. it is also consistent with kolvereid (1996) who illustrates that females had significantly less entrepreneurial intention than males in a scandinavian context, also haus et al. (2013) find that men have higher average entrepreneurial intentions than women. table 3. t-test for assessing the impact of gender, university, and faculty on entrepreneurial intentions (created by authors) construct t df sig. gender –2.683 213 0.078** university 2.380 180 0.445 faculty –2.520 197 0.008* *’** indicates significance at 0.05 and 0.10 respectively however, table 3 illustrates that there are no significant differences in entrepreneurial intentions between students from private and public universities. nevertheless, there is a significant impact for faculty on the entrepreneurial intentions, with the means of 4.29 and 3.72 for the faculty of informatics and communication engineering and the 168 s. mouselli, b. khalifa. entrepreneurship in crisis: the determinants of syrian students’ entrepreneurial intentions faculty of business and economics, respectively. this result indicates that managerial skills usually taught to business and economics students have less impact on forming entrepreneurial intentions compared to technical skills taught to informatics and communication engineering students. table 4. anova for assessing the impact of age, year of study, and work experience on entrepreneurial intentions (created by authors) construct f df sig. age 1.163 2 0.315 year of study 0.963 4 0.429 work experience 5.976 3 0.001* *significant at 0.05 table 4 shows no significant impacts for age and year of study on entrepreneurial intentions. however, there is a significant impact for work experience on entrepreneurial intentions. the means were 4.62, 4.07, 3.59, and 3.38 for the groups of business owner, private sector employee, not worker, and public or government sector employee, respectively. thereafter, a multiple regression analysis was run to investigate the impact of the six extracted factors: need for achievement, locus of control, self-efficacy, information and communication, institutional environment, and crisis effect on entrepreneurial intentions. table 5 below illustrates the results from running this multiple regression. table 5. direct effects’ coefficients (created by authors) the relationship estimate p-value entrepreneurial intentions <--need for achievement 0.055 0.707 entrepreneurial intentions <--locus of control 0.127 0.440 entrepreneurial intentions <--self-efficacy 0.416 0.000* entrepreneurial intentions <--information and communication 0.441 0.000* entrepreneurial intentions <--institutional environment 0.186 0.053** entrepreneurial intentions <--crisis effect 0.026 0.763 *’** indicates significance at 0.05 and 0.10 respectively table 5 shows insignificant impacts for the need for achievement and locus of control on the entrepreneurial intentions of syrian students. this result is consistent with kristiansen and indarti (2004) for both norwegian and indonesian students. however, there are significant and positive impacts for self-efficacy and information and communication on the entrepreneurial intentions, with a greater impact for information and communication. this also consistent with kristiansen and indarti (2004), peng et al. 169 business, management and education, 2017, 15(2): 159–173 (2012) and esfandiar et al. (2017) who document a positive and significant impact of self-efficacy on entrepreneurial intention. institutional environment is only significant at 10 percent level of significance. this gets along with the argument of stephen et al. (2005) that environmental formal variables such as legal rules and government support measures and procedures (number and complexity) are critical in start-up decision. the crisis effect seems insignificant determinant of entrepreneurial intentions. crisis neither motivates students to establish their entrepreneurial intentions nor harm their entrepreneurial intentions. 6. conclusions and recommendations this paper illustrates the state of entrepreneurial intentions among a sample of syrian students in two major universities; damascus university (public) and arab international university (private). it explores the differences in entrepreneurial intentions among students from different faculties at those universities. the results clearly indicate superiority in entrepreneurial intentions for informatics and communication engineering students with no significant difference in entrepreneurial intentions between universities. the lower entrepreneurial intentions among females compared to males is a source of concern. it may reflect the result of social context (e.g., traditions and norms) that determine gender roles as suggested by welter (2011) more than a result of discrimination in market access (sullivan, meek 2012). however, investigating the causes of such differences in the syrian context deserves further investigation. this research clearly indicates the importance of self-efficacy on forming entrepreneurial intentions. the self-confidence of acquiring the necessary skills and competencies to start-up ventures seem to be crucial determinants in forming entrepreneurial intentions. hence, providing students with training on job-market skills and providing them with traineeship as part of their study programs would enhance their entrepreneurial intentions. information and communication and institutional environment affect students’ entrepreneurial intentions. this is expected given the lack of financial resources in syria during the crisis and the difficulty in obtaining information. having social networks, easy access to funds and information reduce uncertainty and provide students with the required assurance to form their entrepreneurial intentions. this research has a number of implications on individual, institutional and national levels. first, informatics and communication engineering students should develop their entrepreneurial skills to turn their intentions into enterprises. this can be achieved through following formal and informal training on different entrepreneurial skills. second, students from both faculties are advised to form teams to share and mix ideas and complement their skills. hence, universities could organize entrepreneurial activities that mix students from different genders and disciplines in major events such as start-up weekends. third, establishing university-attached incubators and science parks would 170 s. mouselli, b. khalifa. entrepreneurship in crisis: the determinants of syrian students’ entrepreneurial intentions provide students with excellent venues to develop their ideas and strengthen their relations with funding bodies and industry which are expected to enhance students’ entrepreneurial intentions. forth, the syrian government should make more efforts to reduce bureaucracy and taxes and improve infrastructure to enhance students’ entrepreneurial intentions. three caveats can be mentioned here. first, this research does not distinguish, while examining the impact of investigated factors, between faculties or universities. in other words, students from different faculties and universities may differently be affected by attributes and contexts. second, although we attempt to disentangle the impact of syrian war in forming entrepreneurial intentions from other factors, we should admit that it may still be implicit in other factors. third, other important variables that affect the forming of entrepreneurial intentions may be at work but not considered in the paper. we suggest the following possible venues of future research. first of all, a careful analysis of the factors that affect the formation and development of entrepreneurial intentions for each faculty could be performed to consider the special attributes of each discipline. then, given that entrepreneurial intentions are formed from the interaction of internal and external factors, an examination of how the syrian war affects not only the individual factors but also the interaction between those factors could reveal interesting remarks. next, the investigation of the impact of entrepreneurial education on forming entrepreneurial intentions is also a gap and an interesting topic that deserves further research in the syrian context. acknowledgments authors are thankful to the respondents who devoted their time generously to fill out the questionnaires. our appreciation is also extended to the editor and two anonymous reviewers of business, management and education. we are also thankful for dr. kinaz al 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(eds.). handbook of economic psychology. dordrecht: kluwer. wärneryd, k. e. 1988. the psychology of innovative entrepreneurship, in van w. f. raaij, g. m. van veldhoven, k. e. wärneryd (eds.). handbook of economic psychology. springer, dordrecht. 173 business, management and education, 2017, 15(2): 159–173 walstad, w. b.; kourilsky, m. l. 1998. entrepreneurial attitudes and knowledge of black youth, entrepreneurship theory and practice 23: 5–18. welter, f. 2011. contextualizing entrepreneurship – conceptual challenges and ways forward, entrepreneurship theory and practice 35(1): 165–184. https://doi.org/10.1111/j.1540–6520.2010.00427.x world bank. 2017. the toll of war: the economic and social consequences of the conflict in syria 2017. world bank working paper, report number 117331, vol. 2. world bank. 2015. small enterprises in the middle east and north africa face risks and rewards in the public market. world bank. yıldırım, n.; çakır, ö.; aşkun, o. b. 2016. ready to dare? a case study on the entrepreneurial intentions of business and engineering students in turkey, procedia-social and behavioral sciences 229: 277–288. https://doi.org/10.1016/j.sbspro.2016.07.138 sulaiman mouselli. lecturer in finance and dean of the faculty of business administration, arab international university. damascus, syria. he is also the head of the center for research and training support in business administration at aiu. he has a number of publications in high ranking journals such as the british accounting review (bar), abacus, international review of financial analysis, business: theory and practice, journal of applied accounting research, journal of risk finance and journal of the knowledge economy. research interest: stock market anomalies, asset pricing models, corporate governance, entrepreneurship, and macroeconomic risk. bayan khalifa. affiliated with the centre for higher education governance ghent, ghent university. bayan khalifa is also a volunteering qualitative data analyst at erasmus mundus student and alumni association, eu. khalifa holds ba and ma in economics and management from damascus university, syria. she was the chair of the national higher education reform experts’ team in syria, erasmus+ programme, eu. khalifa was also a lecturer at the arab international university, syria. she is also an author and reviewer to several international academic journals published by emerald and elsevier. bme_2017_15_2 maketas_spaudai.indd copyright © 2017 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. factors affecting university students intentions to use debit card services: an empirical study based on utaut philip siaw kissi1, mustapha kudirat oluwatobiloba2, amankwah yaw berko3 1, 2management information systems, school of applied sciences, cyprus international university, nicosia, northern cyprus, mersin 10, turkey 3school of business, university of cape coast, ghana e-mails: 1philip.asakomah@yahoo.com (corresponding author); 2kudiratmustapha236@yahoo.com; 3yamankwah@ymail.com received 16 october 2017; accepted 22 november 2017 abstract. despite the promising use of debit cards for e‐payment and online transactions, to the best of our knowledge, there has not been any study regarding students’ intentions to use debit card services in nigeria. this research aims to examine factors that influence university students’ decision to use debit card services in nigeria. a unified theory of acceptance and use of technology (utaut) integrated with the trust of bank and online transaction factors are used in the study. data were purposively selected from 400 students in the faculty of business administration in nigeria university using a survey questionnaire. the multiple linear regression results reveal that social influence, the trust of online transaction and performance expectancy exert significant influences on students’ behavioural intention to use a debit card. however, the insignificant results obtained for effort expectation and facilitating condition warrant for further investigation. we have confidence that the findings of this study will guide debit card services providers and professionals in the field in improving and promoting debit card services by revealing the students’ priorities regarding debit card services in africa, particularly in nigeria. keywords: behavioural intention, debit card services, university students, utaut. jel classification: c83, l86, i23. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2017, 15(2): 196–210 doi:10.3846/bme.2017.378 1. introduction the university students’ payment transaction is one of the areas which has been improved significantly by the use of technology. the use of technology to enhance the efficiency of university students’ payment services constitutes the concept of e-payment. debit card services provide easy access to e-payment through the use of online payment services such as paypal, square cash and the like. the advantage provided by the use of the debit card for e-payment is more than the traditional method of payment service. for 197 business, management and education, 2017, 15(2): 196–210 instance, the debit card offers benefits such as avoidance of keeping cash-on-hand, enabling tracking of expenses, increase quality and speed of online purchasing (atkinson, castro 2008). in addition, the development of card payment system prevents the costs of money circulation which leads to significant economic gains (goczek, witkowski 2016). the promotion of debit card transactions grew quickly in most advanced countries while usage has declined or disappeared in some countries (amromin, chakravorti 2007). in 2015, 74 percent of college students use a debit card to make daily online purchases such as entertainment tickets, gas purchase rebates, cash back among other transaction (holmes 2016). despite the great advantages provided by debit card services, there is lack of studies that examine the extent of its usage among the students, particularly in africa. moreover, in literature, there are several adaptations models which predict the acceptance of e-payment services through the use of credit or debit card (koeniglewis et al. 2015; estrella-ramon et al. 2016; goczek, witkowski 2016; razak 2016). however, to the best of our knowledge, there has not been a comprehensive examination of debit card adoption among african students, especially in nigeria. therefore, this study aims to investigate factors affecting students’ intentions to use debit card services. in the present study, unified theory of acceptance and use of technology (utaut) model was integrated with trust of online transaction and trust of bank factors to examine university students behavioural intention to debit card in nigeria. 2. the unified theory of acceptance and use of technology the unified theory of acceptance and use of technology (utaut) was introduced by venkatesh et al. (2003). this theory explained people intentions to use technology and actual user behaviour. the utaut theory suggested four major constructs, performance expectancy, effort expectancy, social influence, and facilitating conditions that predict user behavioural intention to use a certain technology as presented in figure 1. these four major factors are defined as follows: performance expectancy as “degree to which an individual believes that using the system will help him or her to attain gains in job performance” (venkatesh et al. 2003: 447), effort expectancy as “degree of ease associated with use of the system” (venkatesh et al. 2003: 450), social influence as “degree to which an individual perceives that important others believe he or she should use the new system” (venkatesh et al. 2003: 451) and facilitating conditions as “degree to which an individual believes that an organizational and technical infrastructure exists to support use of the system” (venkatesh et al. 2003: 450). they included four moderating variables consist of gender, age, experience, and voluntariness of use. despite its constraints, it has combined eight major theories and widely used as a theoretical model to explain the acceptance, adoption, deployment, and effective use of technology. therefore, utaut model was used as the theoretical background of this study. 198 p. s. kissi et al. factors affecting university students intentions to use debit card services: an empirical study based on utaut the utaut theory did not integrate trust factors. debit card services are being used in many countries and it is important to acquire a better understanding of the impact of trust on debit card services adoption. for the betterment of the context of the study, we did include some variables such as gender, age, experience, voluntariness, and usage behaviour in the model. 2.1. research hypothesis trust of online transaction and banks as stated earlier, the study introduces trust of online transaction and bank as factors that could affect the students’ behavioral intention to use a debit card. trust is considered as an important variable influencing online businesses particularly, those relating to electronic transactions (moody et al. 2017). trust promotes the success of transaction by reducing social uncertainties that would be otherwise impossible to deal with on a normal basis (luhmann 1979). for this reason, the trust of online transaction and banks could be found to be key predictors of students’ behavioral intention to use debit cards. therefore, we proposed that: h1: trust of online transaction has a positive influence on student’s behavioral intention to use debit card services. h2: trust of bank has a positive influence on behavioral intention to use debit card services. performance expectancy in this study, we defined performance expectancy as the extent to which students believes that debit card services will improve their work performance. baptista and olfig. 1. utaut model (venkatesh et al. 2003) 199 business, management and education, 2017, 15(2): 196–210 iveira (2015) examined the factors affecting the acceptation and influences individual behaviour in mobile banking. they concluded that performance expectancy is the most significant antecedents of behavioral intention. mohammadyari and singh (2015) investigated users’ intentions to continue using web 2.0 tools. the findings suggested that performance expectations significantly influenceusers’ intentions. from this premise, we hypothesized that: h3: performance expectancy has a positive influence on student’s behavioral intention to use debit card services. effort expectancy in the context of this study, effort expectancy is defined as the degree to which students perceived debit card services as easy to use. martins et al. (2014) investigated people intention to use internet banking. the findings revealed that effort expectancy is a stronger predictor of intention. in another study conducted by thakur (2013) discovered effort expectancy has a significant effect on consumer’s mobile payment services. hence, we proposed that h4: effort expectancy has a positive influence on student’s behavioral intention to use a debit card services. social influence in the context of this study, we defined social influence as the extent to which students perceive that others believe they should use a debit card. wills et al. (2008) examined registered nurses’ acceptance to use electronic medical records. they concluded that social influence is a significant determinant of behavioral intention. furthermore, escobarrodríguez and carvajal-trujillo (2014) investigated factors that positively affect purchasing of online flight ticket from low-cost carrier websites. the findings indicated that social influence has a positive impact on customer’s intention. therefore, we suggested h5: social influence has a positive impact on student’s behavioral intention to use debit card services. facilitating condition for the purpose of the study, facilitating condition is defined as the extent in which students believe that administrative and technical structures exist to support the use of debit card services. using debit card services requires some skills such as internet connectivity, mobile phone or computer usage, and knowledge of debit card online service and security. students with these skills have a greater intention to use the debit card. from this logic, we posited that: h6: facilitating condition has a positive impact on student’s behavioral intention to use a debit card. 200 p. s. kissi et al. factors affecting university students intentions to use debit card services: an empirical study based on utaut 3. methodology this study employed a survey design with quantitative data to assess factors affecting the use of the debit card in nigeria. according to fraenkel and wallen (2000), survey design research was used by administering questionnaires to find out detailed characteristics of the participants and classified as an efficient way to gather data to enable address a research question. population and sampling. the population selected for this study was students from the university of lagos in nigeria. students from the faculty of business administration were used as the target population. the faculty has a total population of four thousand, three hundred and ninety-five (4395). sample size calculation formula was adapted from yamane (1967). sample size (n) = 21 ( )+ n n e where n = sample size, n = populations and e = margin error. in substituting n = 4395 and e = 0.05 in above formula, the least sample size should be three hundred sixty-seven (367). therefore, 400 students in the university were employed for the study. purposive sampling technique was used to select the students for the study. the purposive sampling procedure which referred as judgment sampling is the deliberate selection participates who can provide the rich information base on experience or knowledge (patton 2002; etikan et al. 2016). questionnaire development. the study employed questionnaire instrument to obtained information from the participants of the study. the questionnaire items consisted of two parts. the first part drew participants’ demographic data which involved gender, and their usage of credit card. the second part consists of twenty-two (22) observed items which were used to measure 7 latent variables, namely trust of online transactions, the trust of banks, performance expectancy, effort expectancy, social influence, facilitating conditions and behavioral intention. the questionnaire items were adopted from previous studies (venkatesh et al. 2003; khasawneh et al. 2013; kurfalı et al. 2017; nurrohmah et al. 2017). data collection and analysis. the target participants of the study were given the survey questionnaire in their various lecture hall and place of residence to answer. this strategy was employed to ensure independent responses and clarify any misunderstanding associated with the questionnaire items. the research utilized spss version 24 to perform multiple linear regression to determine factors that affect behavioral intention to use a credit card. evaluation of reliability and convergent validity. the reliability of the construct was examined using cronbach’s alpha. the construct reliability should exceed 0.7 to meet the acceptance level (fraenkel, wallen 2000). the reliability of the construct of this study ranged from 0.961 to 0.961 which indicated excellent reliable construct as shown in table 1. 201 business, management and education, 2017, 15(2): 196–210 table 1. construct reliability and convergent validity construct items factorloading (ρ) ave cr cronbach’s α trust of online transactions 0.698 0872 0.964 tot1 i trust debit card and its services through the online transactions. 0.825 tot2 i think that debit card services’ technical and legal infrastructure. protects enough personal information and data. 0.834 tot3 in general, online transactions are trusted tool that can be used by debit card services. 0.844 trust of bank 0.739 0.894 0.961 tb1 i trust banks’ institutions and departments. 0.849 tb2 i trust bank institutions and departments’ ability to provide debit card services effectively and securely. 0.866 tb3 i trust that citizens and their benefits have the highest priorities at banks institutions and departments. 0.863 performance expectancy 0.710 0.880 0.964 pe1 i find the debit card services useful in my daily transactions 0.840 pe2 using the debit card enables me to accomplish tasks more quickly 0.839 pe3 using the debit card services increase my productivity 0.848 effort expectancy 0.752 0.858 0.961 ee1 my interaction with the debit card services would be clear and understandable. 0.862 202 p. s. kissi et al. factors affecting university students intentions to use debit card services: an empirical study based on utaut construct items factorloading (ρ) ave cr cronbach’s α ee2 i would find the debit card services easy to use. 0.872 social influence 0.762 0.891 0.959 si1 other users beliefs about debit card service encourage me to use it. 0.870 si2 other users’ beliefs about debit card service influence my degree of usage of it. 0.871 si3 other user’ beliefs about debit card services condition me to use it. 0.878 facilitating condition 0.761 0.864 0.961 fc1 i have the resources necessary to use the debit card. 0.867 fc2 i have the knowledge necessary to use the debit card. 0.878 behavioral intention bi1 i intend to continue to use debit card service in the future. 0.860 0.761 0.864 0.961 bi2 my intentions are to continue using debit card service in the future, at least as active as today. 0.835 bi3 i would continue using debit card service increasingly in the future. 0.850 ave: average variance extracted = 2 /∑ρ n cr: composite reliability = ( ) ( )2 2 2( / ( ( ), 1∑ ρ ∑ ρ + ∑ = − ρa a factor loadings < .500 were omitted varimax with kaiser normalization convergent validity was tested based on the acceptance guideline. the test was done using three measurement scale: factor loadings greater than 0.7; the average variance extracted (ave) exceeding 0.50; composite reliabilities (cr) more than 0.7 (fornell, larcker 1981; kissi et al. 2017). the factor loading, the ave, cr and cronbach’ s alpha values of all the constructs exceeded the recommended threshold values as demonstrated in table 1. in general, all the constructs were considered reliable and significant for the study. end of table 1 203 business, management and education, 2017, 15(2): 196–210 discriminant validity. discriminant validity was evaluated based on the relationship between the square root of ave and correlations of the construct. for discriminant validity testing, the square root of the avr average should exceed its correction value of the construct (fornell, larcker 1981). as shown in table 2, the square root of ave value in bold of the construct is consistently greater than it respective correlations values, suggesting acceptance discriminant validity among constructs. table 2. discriminant analysis of the factors tot tb pe ee si fc bi tot 0.834 tb 0.780 0.860 pe 0.791 0.796 0.843 ee 0.784 0.825 0.810 0.867 si 0.813 0.867 0.803 0.869 0.873 fc 0.789 0.844 0.780 0.824 0.870 0.872 bi 0.844 0.780 0.791 0.784 0.813 0.789 0.849 4. results demographics. out of 400 university students who took part in the study, 53.3% (n = 218) were male and 46.8% (n = 187) were female. the number of males and females were properly distributed for the study. all the participants were selected from undergraduate levels in the faculty of business administration. the majority (38.3%, n = 153) of the students were first-year students. the student in second-year were 32.0% (n = 128) and the third year were 19.3% (n = 77). only 10.5% (n = 42) of the participants were found in the fourth year. however, 95.0% (n = 380) indicated they are frequent users of a credit card, only 5.0% (n = 20) do not use it often. table 3 presents the summary of the results. table 3. sample profile of the survey item demography frequency percentage gender male 213 53.3 female 187 46.8 level yes 380 95.0 no 20 5.00 undergraduate level first year 153 38.3 second year 128 32.0 third year 77 19.3 four year 42 10.5 204 p. s. kissi et al. factors affecting university students intentions to use debit card services: an empirical study based on utaut descriptive statistics of factors: the responded survey questionnaire were measured from the seven-point likert scale items on the variables ranged from 1 = strongly disagree to 7 = strongly agree: (1) trust of online transaction, (2) trust of bank, (3) performance expectation, (4) effort expectation, (5) social influence, (6) facilitating condition, and (7) behavioral intention were measured to find the overall average score (mean) and standard deviation. trust of online transaction and trust of the bank had a mean 5.16 (sd = 1.55) and 5.10 (sd = 1.56) respectively. this indicates that participant trust of using a debit card for online transaction and banks are high. also, the participants believe that debit card is useful in their daily transactions (performance expectation (m = 5.16, sd = 1.55)), find the debit card services easy to use (effort expectation (m = 5.16, sd = 1.55), have the resources necessary to use the debit card (facilitating condition (m = 5.16, sd = 1.55)) and encourage others to use the debit card (social influence (m = 5.16, sd = 1.55)). furthermore, the participants showed high behavioral intention (m = 5.16, sd = 1.55) to the use debit card. the summary of the results is shown in table 4. table 4. descriptive statistics of variables (factors) item n mean st. deviation tot 400 5.16 1.55 tb 400 5.10 1.56 pe 400 5.19 1.50 ee 400 5.25 1.56 si 400 5.16 1.52 fc 400 5.30 1.65 bi 400 5.13 1.46 table 5 displayed the standard regression model summary of analysis of variance (anova). as shown in table 5, f = 238.988, p = .000 and p < 0.05, which shows that the test is statistically significant. this suggests that the independent factors significantly related to students’ behavioral intention to use a debit card. the summary of the standard regression model in table 6 represents multiple correlation values (r = 0.886). this show how well all the independent combine factors (tot, tb, pe, ee, si and fc) related to participants’ behavioral intention (dependent factor) to use a debit card. moreover, the adjusted r2 = 0.782 suggests that all the independent factors combine contributed 78.2% of the variances in participants’ behavioral intention to use a debit card services. table 5. anova of regression significance sum squares d mean square f sig regression 663.809 6 110.635 238.988 0.000b residual 181.931 393 0.463 total 845.740 399 a. predictors: (constant), tb, tot, pe, ee, fc, si b. dependent variable: bi 205 business, management and education, 2017, 15(2): 196–210 table 6. standard regression model summary r r square adjusted r square std. error of the estimate change statistics r square change f change df1 df2 sig. f change .886a 0.785 0.782 0.68039 0.785 238.988 6 393 .000 a. predictors: (constant), tb, tot, pe, ee, fc, si b. dependent variable: bi significance of individual factors. from table 7, trust of bank (t = 0.644, p = 0.520, p > .05), effort expectation (t = 1.098, p = 0.273, p > 0.05), and facilitating condition (t = 1.495, p = 0.136, p > 0.05) were not statistically significant. this suggests that participants’ behavioral intention to use debit card is not influence by trust of bank, effort expectancy and facilitating condition. however, trust of online transaction (t = 9.962, p = 0.000, p > 0.05), performance expectancy (t = 4.320, p = 0.000, p > 0.05), and social influence (t = 2.642, p = 0.009, p > 0.05) was statistically significant. this indicates that trust of online transaction, performance expectancy, and social influence have positive influence on participants use of debit cards. table 7. regression coefficient of the standard regression model unstandardized coefficients standardized coefficients model 1 b std. error beta t sig. constant 0.438 0.130 3.373 0.001* tot 0.404 0.041 0.430 9.962 0.000 tb 0.032 0.049 0.034 0.644 0.520 pe 0.189 0.044 0.195 4.320 0.000 ee 0.054 0.049 0.058 1.098 0.273 si 0.157 0.059 0.163 2.642 0.009 fc 0.070 0.047 0.079 1.495 0.136 4.1. comparative importance of the factors as shown in table 7 and figure 2, trust of online transaction (tot) was found to be the most significant (β = 0.430, p = .000 (< 0.05)) and influential factor that contribute to the behavioral intention to use a debit card in the study. the second most significant factor (β = 0.195, p = .000 (< 0.05)) was performance expectancy followed by social influence (beta = 0.163, p = .000(< 0.05)). however, trust of bank, effort expectancy, and facilitating condition did not make any statistically significant contribution to the behavioral intention (bi) of participants (β = 0.034, p > 0.05; β = 0.273, p > 0.05; β = 0.136, p = .967 > 0.05). 206 p. s. kissi et al. factors affecting university students intentions to use debit card services: an empirical study based on utaut fig. 2. comparative importance of the factors the above findings supported the unified theory of acceptance and use of technology (utaut) by venkatesh et al. (2003). that is, user intentions to use a particular technology is based on performance expectancy and social influence among others. 5. discussion the analysis of the participants’ responses using regression model revealed that trust of online transaction is the most significant (β = 0.430) factor that predicts the use of debit card particularly in nigeria. this suggests that people trust and accept the use of the debit card for online payment. this is in agreement with a study conducted by yang et al. (2015) when they stress that online payment has been accepted and adopted by customers particularly those who have more trust in online payment. in support, ponte, carvajal-trujillo and escobar-rodríguez (2015) point out that online purchase intention is influenced by the perceived trust. trust and risk are important factors of online transactions, particular when it comes to consumers’ electronic purchasing (bachas et al. 2016; chin et al. 2009; kim et al. 2008). trust of debit card usage could increase customer retention and improve revenue. trust-based companies have lower marketing cost and increase sales than companies without trust (hess, story 2005; berry 2002). it is important that debit card companies should improve the security features of the card and provide consumers with impartial information and recommendation concerning the online transaction. when customers are provided with truthful and honest information, their loyalty towards the company products grows. as a result, high profit is earned. also, performance expectation has a positive influence (β = 0.195) on students’ usage of the debit card. this means that (1) students (customers) find the debit card useful in their daily transactions, (2) using the debit card enable the students to accomplish tasks more quickly and (3) using the debit card increase students’ productivity in terms of the transaction that involves payment of money. these results are consistent with studies conducted by foscht et al. (2010) and anderson, fornell, lehmann (1994), when they indicated that quality and expectation influence customers’ satisfaction which leads to a higher degree of retention. on other hands, lack of ability to meet customer expectations could damage company reputation, which may lead to failure to retain and attract new customers (rackspace hosting, inc. 2009). therefore, debit card companies must 207 business, management and education, 2017, 15(2): 196–210 meet or fulfil their customers’ expectations. this would increase customers’ retention, excitement and improve competitor advantage. furthermore, social influence positively contributes (β = 0.162) to students’ usage of the debit card. that is, the encouragement from other users has an impact on students behavioural intention to use the debit card services. in support raska (2011) and khan (2012) clarify in his study that environmental factor can change the intention or action of human being. for instance, actions such as buying can be changed by individual environment. addition, kulviwat, bruner and al-shuridah (2009) stressed that social influence has a positive impact on consumer intention to use a particular product. since social influence has a positive effect on students (customers) use of debit card, companies responsible for debit card usage and awareness should advertise more on the card in a wide range of different platform or media. the advertisement could help to send more information to local, regional, national and international users which may change people’s attitudes and perceptions of its usage. this could have a strong impact on users in the society and in turns increase more usage. 6. conclusions and recommendations the key objective of the study was to examine the factors that influence university students’ behavioural intention to use debit cards in nigeria. it was revealed that university students from university of nigeria have high behaviour intention to use a debit card because of its usefulness in their daily transaction, the trust of online transactions, and encouragement from other users, therefore, debit card providers should educate african university students particularly in nigeria about the essence of using a debit card services and improve the security of the online transaction. this would encourage more student to adapt and accept the usage of debit card in their daily activities. furthermore, understanding the main factors that affect consumer (students) behaviour intention to use a debit card is necessary for effective planning, better and successful future development. since the study investigated university students’ usage of debit card in nigeria. therefore, the results of the study would be strictly applicable to university students from the university of nigeria and similar university students in africa. a survey with a large sample size that covers more than one university is recommended for future studies to shed more light on the students’ 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http://www.wikinvest.com/stock/rackspace_hosting_(rax)/unable_maintain_high_level_ customer_service_satisfaction_demand raska, d. 2011. exploring the effect of a brand’s pro-environmental behavior on consumers’ attitudes toward similar behaviors, asbbs annual conference 18(1): 703–714. razak, l. t. 2016. the effect of security and privacy perceptions on customers’ trust to accept internet banking services: an extension of tam, journal of engineering and applied sciences 11(3): 545–552. thakur, r. 2013. consumer adoption of mobile payment services by professionals across two cities in india: an empirical study using modified technology acceptance model, business perspectives & research 1(2): 17–29. https://doi.org/10.1177/2278533720130203 venkatesh, v.; morris, m.; davis, g.; davis, f. 2003. user acceptance of information technology: toward a unified view, mis quarterly 27: 425–478. https://doi.org/10.2307/30036540 wills, m. j.; el-gayar, o. f.; bennett, d. 2008. examining healthcare professionals’ acceptance of electronic medical records using utaut, issues in information systems 9(2): 396–401. yamane, t. 1967. statistics: an introductory analysis. 2nd ed. new york, ny: harper and row. 210 p. s. kissi et al. factors affecting university students intentions to use debit card services: an empirical study based on utaut yang, q.; pang, c.; liu, l.; yen, d. c.; tarn, j. m. 2015. exploring consumer perceived risk and trust for online payments: an empirical study in china’s younger generation, computers in human behavior 50: 9–24. https://doi.org/10.1016/j.chb.2015.03.058 philip siaw kissi. m.phil., research assistant in the departments of management information systems and information technology (school of applied sciences) at the cyprus international university (ciu). he is currently offering phd in management information systems in ciu. he is course advisor, article reviewer and president of management information systems club in ciu. he holds m.phil. and m.ed. in mathematics education from the university of education (uew). his research interests include business and mathematics education, educational technology, curriculum development and implementation, integration of technology in a business organization and information security. mustapha kudirat oluwatobiloba. msc., she holds msc. in management of information system and bsc. in computer science and information technology from ciu and bowen university in nigeria respectively. her research interests include information security and application of technology in business. amankwah yaw berko, holds a degree in bachelor of commerce from the university of cape coast – ghana. he currently works with the sunyani west district assembly and also holds a certificate in ghana accounting technician (gat) from the institute of chartered accountants – ghana. his research interests include business and economics education, auditing, taxation and management accounting. bme_2013_11_2 maketas.indd retracted: how to solve the moral dilemma of helping a fallen old man: an economic point of view fengsen li pbc school of finance, tsinghua university; people’s bank of china, guangzhou branch, 43 chengfu road, beijing 100083, china e-mail: lifs.12@pbcsf.tsinghua.edu.cn received 31 january 2013; accepted 12 march 2013; published on-line 13 september 2013 retraction notice it has been brought to our attention that the article by fengsen li which has been published on-line by journal business, management and education was submitted to be published by another journal, even though this article had already been published by the third journal under the identical title. due to the facts presented above this article has been retracted. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2013, 11(2): 209–223 doi:10.3846/bme.2013.12 copyright © 2013 vilnius gediminas technical university (vgtu) press technika www.bme.vgtu.lt the position of slovakia in competitiveness ranking – the causes, impacts and prospects lucia stredná1, mária zúbková2 slovak university of technology in bratislava, institute of management, vazovova 5, 812 43 bratislava, slovak republic e-mails: 1lucia.stredna@.sk (corresponding author); 2maria.zubkova@stuba.sk received 12 october 2011; accepted 17 january 2012 abstract. a country’s competitiveness could be translated as its ability to successfully compete within international comparison also as a prosperity which is expressed by productivity growth of economy and living standards. is slovakia competitive? what are its strengths and weaknesses? what are the leading countries of the european union in competitiveness ranking? in what aspects is slovakia falling behind countries of v4? strengthening of which competitive advantages is perspective for the slovak republic? we will try to find answers to these questions in an analysis of competitiveness based on the global competitiveness reports. this thesis focuses on definition of the competitiveness in general, apprises of measuring methodology based on multicriterial evaluation and summarises pros and cons of this benchmark. the main focus is on the slovak republic and its position in the international ranking. in detail we will focus on comparison of the slovak republic with countries of v4 region. it is the authors’ ambition to bring critical view on position of the slovak republic in the international comparison and to formulate recommendations for the future that could contribute to strengthening of competitiveness and success of our country. keywords: benchmark, competitiveness, competitive advantage, efficiency, globalisation, multicriterial evaluation of competitiveness, sustainable growth. reference to this paper should be made as follows: stredná, l.; zúbková, m. 2012. the position of slovakia in competitiveness ranking – the causes, impacts and prospects, business, management and education 10(1): 38–49. http://dx.doi.org/10.3846/bme.2012.04 jel classification: i25, o57. 1. introduction several years ago, the relatively young economy of the independent slovak republic exhibited the fastest economic growth in europe. in international comparisons, this trend, however, gradually waned and the economic growth was slowed down. the objective of this article is to get acquainted with the methodology of international assessment, analysis of relevant criteria and discussion of the reasons for slovak economic growth and slowdown. the reasons will be discussed in their historical and political context. this study will, therefore, analyse slovak competitiveness on the national level in the macroeconomic context. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2012, 10(1): 38–49 doi:10.3846/bme.2012.04 copyright © 2012 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt mailto:1lucia.stredna@.sk 39 business, management and education, 2012, 10(1): 38–49 the analysis itself is based on study of available literature, specialised texts and results of previous research. the author’s main goal was to provide a comprehensive picture of slovak economic competitiveness and potential for sustainable growth as well as to highlight the steps taken by the government to boost the country’s competitiveness and evaluate their impact and adequacy. the impact of the world economic crisis and its influence on the slowdown of slovak economy and its fall in the competitiveness ranking is discussed as well. the last part concentrates on the measures necessary to jump start the economy and improve its competitiveness. competitiveness is crucial for country’s prestige, as it provides a picture of its situation and information for potential investors, migrants and partners. it is important also for the citizens because it determines the growth of employment, standard of living and prosperity. 2. competitiveness – definition, methodology and ranking competitiveness of individual countries or economies has, together with globalisation theories, become one of the key criteria. it is often related to country’s economic prosperity, well-being and standard of living. nevertheless, the ability to compete and create a competitive advantage is not easily measured. competitiveness can thus be considered a comparative look on an object of study (steinmetzová 2008). for the purposes of this study, the investigated object is going to be a country or economy and its position in the international ranking. for this reason, it is necessary to define competitiveness in a broader sense so that the definition includes multicriterial methods of competitiveness assessment in various areas. competitiveness is generally defined as the ability of companies, regions, nations and supranational regions to generate a high profit and employment (skokan 2004). an international competitiveness assessment is largely determined by a growing productivity and improvement of the standard of living in the context of employment. gdp is the fundamental indicator of these determinants. the relationship between labour productivity and employment is complementary and intertwined. it is, however, simultaneously influenced by other factors such as technological advancement, more qualified labour force and etc. gdp, nevertheless, is not and cannot be the sole factor for measuring and comparing a country’s competitiveness. a broader notion of measuring competitiveness utilises multicriterial methods, which measure competitiveness from several different perspectives. these methods assess the given subject on the basis of criteria set beforehand. there are two sources of data used for the assessment – the so called hard and soft data. hard measurable data come from national and international statistics. soft data cannot be precisely measured but are gained through questionnaires and then evaluated. the respondents are chosen from top managers of companies conducting business in the country that is being assessed. one of the advantages of soft data is that they provide ground for an assessment of economic characteristics, which would not be possible using hard data. the greatest disadvantage 40 l. stredná, m. zúbková. the position of slovakia in competitiveness ranking – the causes… lies in the subjectivity of the respondents whose opinions, optimistic or pessimistic expectations and personal wishes can influence the results. the results can also be distorted by respondent’s potential inability to assess the economy from an international perspective. on the other hand, it is the international comparison of the top managers that can positively impact the economy by pointing out its strengths and weaknesses. the multicriterial methods are used for assessment of competitiveness also by the oecd through the institute of management development (imd). the imd defines competitiveness at two levels (imd 2010): – academic: competitiveness of nations is a field of economic theory, which analyses the facts and policies that shape the ability of a nation to create and maintain an environment that sustains more value creation for its enterprises and more prosperity for its people. – business: competitiveness is a means by which a country creates, develops and sustains a competitive business environment. it is, however, true, that every country has a different availability of natural resources, factors of production or socio-geographic environment, which determine the rate of development and growth of a given country. polices, created by the society itself, play an important role as well. through them, it can influence the economy according to the emphasis placed on social, cultural or environmental aspects. the fundamental aim of competitiveness is thus, according to imd, a growing prosperity of people, reflected in their income, standard of living and the quality of life. that is why competitiveness cannot be measured only by economic indicators but also the indicators of the quality of infrastructure, education, health care, and political and social stability. the multicriterial imd method is comprised of over three hundred criteria, grouped into twenty sub-factors, which are further divided into four main groups: 1. economic performance. 2. government efficiency. 3. business efficiency. 4. infrastructure. the first area – economic efficiency – assesses macroeconomic indicators such as gdp and employment as well as international trade, investments and price development. government efficiency considers management of public finance, fiscal policy, the institutional framework, i.e. the efficiency of the public sector and business and social legislation. business efficiency is measured using indicators of labour productivity, labour market characteristics, financial sector, quality of management, and new values and attitudes in the business environment. the assessment of infrastructure is complex as it considers the basic infrastructure, technological readiness, scientific base, quality of health care and environmental sphere as well as the educational system. 41 business, management and education, 2012, 10(1): 38–49 the world economic forum (wef), which annually ranks countries according to their competitiveness, also employs multicriterial methods. criteria used for the assessment evolved from tradition but incorporate current competitiveness-influencing trends as well. wef has been publishing the global competitiveness report (gcr) since 1979 and has since become the most important institution publishing a highly complex comparative assessment of competitive strengths and weaknesses of individual world economies. the methodology of assessment has been continuously adjusted in order to reflect current trends in the world economy. the quick rate of changes in the world of information technologies, technological advancement, free movement of the labour force as well as integration and globalisation trends, pre-conditioned the creation of the global competitiveness index (gci) that has been used since 2005 as the basis for the competitiveness rating. gci is a complex tool used to measure macro-and-microeconomic aspects of economic competitiveness, i.e. it integrates growth development and business competitiveness indexes, used to evaluate the competitiveness of countries before 2005. wef defines competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country. the level of productivity, in turn, sets the level of prosperity that can be earned by an economy. the productivity level also determines the rates of return obtained from investments in the economy, which in turn are the fundamental drivers of its growth rates. in other words, a more competitive economy is one that is likely to grow faster over time (gcr 2011). the wef methodology resembles imd in that both hard and soft data, gained through a questionnaire survey, are utilised in rating. the criteria are set by various components, each of which measures a different aspect of competitiveness. these components are assembled in the 12 pillars of competitiveness. 1. institutions. 2. infrastructure. 3. macroeconomic. 4. health and primary education. 5. higher education and training. 6. goods market efficiency. 7. labour market efficiency. 8. financial market sophistication. 9. technological readiness. 10. market size. 11. business sophistication. 12. innovation. the above-mentioned and other systems of multicriterial competitiveness assessment offer a certain benchmarking overview of individual countries on several relevant aspects of their relative position with regard to others, while simultaneously posing some fundamental questions (menbere 2006). 42 l. stredná, m. zúbková. the position of slovakia in competitiveness ranking – the causes… even though the determinants of success in the assessment of competitiveness are defined, there is no single recipe for all the countries. individual strategies for improving competitiveness can be successful only if economic aspects are in congruence with specific social needs formed historically or determined by tradition and citizens’ value system (steinmetzová 2008). 3. slovak position in the international ranking the world economic forum annually issues a global competitiveness report, comparing 142 countries, which are ranked on the basis of the global competitiveness index. in 2011, slovakia ranked 69th – historically the worst result since it has started to be considered in the index. the country thus recorded a drop by nine places, seriously lagging behind other v4 countries. slovakia’s greatest disadvantage in the first pillar (institutions) is a low efficiency of the legal framework in settling disputes; the country ranked 139th out of 142. other problematic areas include favouritism in decisions of government officials (135), low public trust of politicians (132) and judicial independence (116). slovakia continues to score low in the area of infrastructure due to its bad air transport infrastructure (128). high government budget deficit (130) is the greatest competitive disadvantage in the third pillar, macroeconomic framework. slovakia is falling behind also in the quality of the educational system (117) and school management (106). agricultural policy costs (120) and buyer sophistication (122) were identified as hindrances in the goods and market efficiency pillar. the most significant weaknesses of the labour market lie in inefficient hiring and firing practices (116) and a significant brain drain (111). in terms of financial market development, slovakia ranks 118th in financing through local equity markets while the business sector scores low in the control of international distribution (120.) and nature of competitive advantages (113). the last pillar, innovations, points to insufficient university-industry collaboration in r&d (104) and low government procurement of advanced technology products (129). corruption, bureaucracy, restrictive labour regulations and insufficient infrastructure were identified as the most problematic business factors and the long-standing greatest hurdles in the slovak business environment. on the other hand, the most significant competitive advantages of slovakia are prevalence of foreign ownership (4), trade tariffs (4), fdi and technology transfer (6), interest rate spread (12), pay and productivity (14), internet users (16), business costs of terrorism (20) and soundness of banks (31). the biggest positives in the area of infrastructure are the quality of railways (23) and energy infrastructure (28). 3.1. selected countries of the eu and their competitiveness factors switzerland has retained its position as the world’s most competitive economy for the third year in a row. it dominates in the institutional framework, quality of infra43 business, management and education, 2012, 10(1): 38–49 structure, education system, capacity for innovation and very sophisticated business sector, while maintaining its dominant position on the markets. there is still a room for improvement in the areas of investor protection, agricultural policy and budget deficit. other european countries that ranked in the top ten were sweden (3), finland (4), germany (5), netherlands (7), denmark (8) and great britain (10). out of these only sweden and germany ranked one place lower than last year, the other countries, most notably finland (+3), improved their positions. finland’s improved ranking is attributable to its capacity for innovation, excellent educational system and efficiency of public finance. all the countries in the top ten achieved higher scores than the last year, marked by the world economic crisis. this year’s results display a certain revitalisation (see table 1). the positions of v4 countries are marked by a moderate decline this year, with the exception of hungary, which improves its position (table 2). czech republic and poland fall two places. slovakia sinks most substantially, by 9 positions. the czech republic has been the most competitive of the v4 countries since 2005. it positively leads in the areas of innovations, education and science, which, together table 1. overview of the top ten countries in the competitiveness report created on the basis of the global competitiveness index (gci) (source: the business alliance of slovakia 2011) country gci 2011 gci 2010 change 2010–2011rank score rank switzerland 1 5.7 1 0 singapore 2 5.6 3 +1 sweden 3 5.6 2 –1 finland 4 5.5 7 +3 usa 5 5.4 4 –1 germany 6 5.4 5 –1 netherlands 7 5.4 8 +1 denmark 8 5.4 9 +1 japan 9 5.4 6 –3 united kingdom 10 5.4 12 +2 table 2. overview of the v4 countries in the competitiveness index (source: the business alliance of slovakia 2011) country gci 2011 gci 2010 change 2010–2011 rank score rank the czech republic 38 4.5 36 –2 poland 41 4.5 39 –2 hungary 48 4.4 52 +4 the slovak republic 69 4.2 60 –9 44 l. stredná, m. zúbková. the position of slovakia in competitiveness ranking – the causes… with quality infrastructure, determine its strong market position. despite of sinking by two places, the country gained a higher score than the last year. this paradox can be explained by this year’s better overall scores. poland remained the second most successful country of the v4 for the last three years. it is, however, necessary to mention that for a long time poland had been consistently the least competitive of the four countries. its rise can be attributed to increased efficiency of the institutional framework as well as launched innovations, improved education system and research in science and technology. yet, the country still exhibits major shortcomings in infrastructure and business environment while struggling from a high brain drain. hungary had been a long-standing leader in the growth competitiveness until 2005 when other v4 countries started catching up. hungary’s macroeconomy is hindered by low public administration efficiency, insufficient market sophistication and problems on the financial market. its competitive advantage against slovakia lies in a higher capacity for innovations and better health care. comparison of the v4 countries shows similar problems that can be traced back to their common history (fig. 1). the most obvious of these are the rigidness of public institutions, complicated bureaucracy, insufficient business environment and high corruption. 3.2. what influenced the development of slovak competitiveness slovakia was included in the competitiveness index for the first time in 1997 and achieved its best rankings in 2006 and 2008, thanks to reforms implemented in the 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 sk cz pl hu 80 70 60 50 40 30 20 10 0 fig. 1. overview of the v4 countries in the international assessment since 1997 (source: authors’ own, based on wef) 45 business, management and education, 2012, 10(1): 38–49 preceding years (see fig. 2). the tax reform introduced a straight tax, which served as a stimulus for both slovak entrepreneurs and foreign investors. the pension reform led to increased personal responsibility and greater social justice. the medical reform was aimed at increasing the quality of medical care, greater efficiency in the use of medical tax levy, better financing of medical institutions and gradual elimination of growing debts. lower unemployment rate and stronger motivation were the primary goals of a social benefits reform. reform of education introduced a new way of financing regional school districts and helped stabilising public universities. decentralisation of the public administration resulted in better problem solving strategies, higher transparency and public participation in the public sphere. fiscal decentralisation and shift of financial responsibility to land magistrates constituted a further important step towards consolidation. other crucial changes took place in the business sector, focusing on the tax levy decrease and facilitating business entries. change in the management of public finance as well as implementation of budget restraints and program budgeting structure also constituted important reforms. all these reforms led to a macroeconomic stabilisation and contributed to a high economic growth (mikloš 2005). today we can say that not all the introduced reforms were sufficiently thorough and complex. the school reform is still uncompleted and the quality of education is low, falling behind in both primary and higher education. this situation is most visibly manifested in slovakia’s insufficient scientific development, practical implementation of theory, capacity for innovations and technological adoption. high unemployment, low motivation and scarcity of work opportunities do not stem only from regional differences but also from underdeveloped road infrastructure, unattractive environment for foreign investors, insufficient use of the country’s geographic potential and poor presentation abroad. besides implementation of reforms, in 2004 slovakia joined the european union. the joining brought slovakia a higher political prestige but especially the free movement 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 80 70 60 50 40 30 20 10 0 fig. 2. slovakia since its inclusion in the international ranking (source: authors’ own, based on wef) 46 l. stredná, m. zúbková. the position of slovakia in competitiveness ranking – the causes… of capital, goods and labour force, new business opportunities, increased cooperation with foreign manufacturers in entering the “third markets,” higher volume of irretrievable eu financial resources and increased competitiveness in all economic spheres, which positively impacted the search for competitive advantage. accession into the monetary union and the introduction of the euro in 2009 were another milestone. the greatest advantages of a unified currency lie in a greater potential for growth of foreign trade, freedom from transaction and administrative payments, elimination of currency risk, higher transparency of prices and lower cost of raising capital (nbs 2006). the last factor that significantly influenced the slovak position in the competitiveness index was the world economic crisis, which fully stroke slovakia in 2009. it led to a slower growth of productivity, increased public budget deficit, lower exports and insufficient influx of foreign investments, which in turn led to economic recession and high unemployment. the slovak government launched activities aimed at reducing the economic impact of the crisis in the third quarter of 2008. the measures covered a very wide spectrum of activities from better drawing of eu structural funds, through support of economic activities and stable unemployment rate to crafting a new legislature (kárász 2009). 3.3. current situation – outcomes according to most experts on competitiveness related areas, the main responsibility for the current situation lies on the shoulders of the last government, which underestimated the situation and did not take necessary precautions. other experts argue that the slovak economy did not deteriorate, but other countries improved. the situation was also aggravated by late accession of the current cabinet. all these arguments are more or less true. after the 2010 elections, the new government coalition pledged to take measures to overcome the economic crisis, strengthen the slovak economy and boost the country’s competitiveness. through pension reform, budget responsibility act, tax levy system reform, labour law reform, reduction of administrative load, and anti-corruption and pro-financial transparency measures, the government focused on fiscal consolidation in an effort to improve macroeconomic stability and ensure faster economic growth, higher employment rates and the standard of living (mf sr 2011). intelligent growth is based on innovations and represents also one of the priorities of the eu in its europe 2020 strategy. slovakia identifies with all the europe 2020 strategies and with regard to country’s specifics the government stresses those priorities, which will contribute the most to slovakia’s economic growth: basic infrastructure, human resources, employment and social inclusion, science, research and innovations with an emphasis on the green growth. all the above-mentioned reforms and measures are in the state of preparation and realisation. only the future will prove or disprove their adequacy and sufficiency. 47 business, management and education, 2012, 10(1): 38–49 4. conclusion the current situation in the field of macroeconomic stability shows that slovakia is standing on the verge of a recession. it is, therefore, necessary to speed up all the planned reforms and measures, strengthen fiscal consolidation and ensure the sustainability of public finance. moreover, it is important to search for competitive advantage, focus on building knowledge economy and implementation of innovations. improving the business environment and optimizing public management should be other high priority tasks. besides the steps undertaken by the cabinet in the sphere of public finance, it is necessary to complete the judicial reform, improve the efficiency in settling disputes, and regain the trust of the people and the business sector as well as ensure political transparency and increase efficiency in handling public finance through public procurement. in the area of the school system, science and education, the government has to increase financing and establish a new system of school management, provide a link between education and practice, motivate educated young people and thus reduce the brain drain. other areas that need to be addressed are: increasing the attractiveness of the slovak business environment for both home and foreign investors, motivating especially small and medium enterprises to make innovations, implementing an active employer policy to bolster employment levels, and strengthening the agricultural policy in order to return slovakia the face of an agricultural country. last but not least, the country has to complete the basic infrastructure crucial for business and get connected to international transport corridors. slovakia falls behind also in drawing money from the eu funds, even though they represent the cheapest source, important in the search for competitive advantage. it is imperative to reduce bureaucracy involved in the mechanism, ruthlessly sanction favouritism and create such conditions that would enable drawing out the full volume planned for an individual period. references brzica, d. 2011. analýza technologického zaostávaní sr a čr vůči evropským lídrům: nekteré kritické názory, journal of competitiveness 1/2011 [online], 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http://www.alianciapas.sk/menu_ pravidelne_globalna-_konkurencieschopnost_2010.htm http://www.euractiv.sk/fileadmin/images/microsoft_word__pk__studia2.pdf http://www.euractiv.sk/fileadmin/images/microsoft_word__pk__studia2.pdf http://www.finance.gov.sk/default.aspx?cat-id=84&newsid=444 http://www.finan-ce.gov.sk/documents/1_adresar_redaktorov/halus/npr sr 2011-2014.pdf http://www.finan-ce.gov.sk/documents/1_adresar_redaktorov/halus/npr sr 2011-2014.pdf http://www.finance.gov.sk/do-cuments/ifp/sp_apr2011_sk.pdf http://www.cjournal.cz/files/32.pdf http://www.nbs.sk/_img/documents/publik/06_kol1.pdf http://www.nbs.sk/_img/documents/publik/06_kol1.pdf http://www.alianciapas.sk/menu_pravidelne_globalna-_konkurencieschopnost_2010.htm http://www.alianciapas.sk/menu_pravidelne_globalna-_konkurencieschopnost_2010.htm 49 business, management and education, 2012, 10(1): 38–49 the business alliance of slovakia, 2011. správa o globálnej konkurencieschopnosti za rok 20112012 [online], [accessed 7 september 2011]. available from internet: http://www.alianciapas.sk/ menu_pravidelne_globalna-_konkurencieschopnost_2011.htm verner, t. 2011. national competitiveness and expenditure on education, research and development, journal of competitiveness 2/2011 [online], [accessed 18 september 2011]. available from internet: http://www.cjournal.cz/files/53.pdf world economic forum, 2010. the global competitiveness report 2010-20112 [online], [accessed 8 september 2011]. available from internet: http://www3.weforum.org/docs/wef-_ globalcompetitivenessreport_2010-11.pdf. isbn 978-92-95044-87-6 world economic forum, 2011. the global competitiveness report 2011-2012 [online], [accessed 8 september 2011]. available from internet: http://www3.weforum.org/docs/wef-_gcr_ report_2011-12.pdf. isbn-13: 978-92-95044-74-6 slovakijos pozicija konkurencingumo reitinge – priežastys, įtakos ir perspektyvos l. stredna, m. zubkova santrauka šalies konkurencingumas gali būti suprantamas kaip jos gebėjimas sėkmingai konkuruoti tarptautinėje aplinkoje, taip pat kaip ekonomikos produktyvumo augimu ir gyvenimo lygiu išreikšta gerovė. ar slovakija konkurencinga? kokios jos stiprybės ir silpnybės? kurios šalys yra lyderės europos sąjungos konkurencingumo kategorijoje? kuriuos aspektus vertinant slovakija atsilieka nuo višegrado grupės (v4) šalių? į visus šiuos klausimus, remiantis globaliąja konkurencingumo ataskaita, atsakoma straipsnyje. šiose tezėse akcentuojama visuotinio konkurencingumo samprata, pateikiama matavimo metodologija, paremta multikriteriniu vertinimu, ir apibendrinami matavimo matų privalumai bei trūkumai. daugiausia akcentuojama slovakijos respublika ir jos pozicija tarptautiniu mastu. slovakijos respublika detaliai palyginama su v4 šalių regionu. autorės kritiškai apžvelgia slovakijos respublikos poziciją tarptautiniame reitinge ir suformuluoja ateičiai rekomendacijas, kurios galėtų sustiprinti konkurencingumą ir lemti šalies sėkmę. reikšminiai žodžiai: lyginamoji analizė, konkurencingumas, konkurencinis pranašumas, efektingumas, globalizacija, multikriterinis konkurencingumo vertinimas, nuoseklus augimas. lucia stredná is a phd student at institute of management of slovak university of technology and her research if focused on economy and management of construction. mária zúbková is an associate professor at the institute of management of slovak university of technology in bratislava, and at the faculty of economy and business of pan european university in bratislava. her research is focused on economy and technologies transfer from university into practice. http://www.alianciapas.sk/menu_pravidelne_globalna_konkurencieschopnost_2011.htm http://www.alianciapas.sk/menu_pravidelne_globalna_konkurencieschopnost_2011.htm http://www.cjournal.cz/files/53.pdf http://www3.weforum.org/docs/wef-_globalcompetitivenessreport_2010-11.pdf http://www3.weforum.org/docs/wef-_globalcompetitivenessreport_2010-11.pdf http://www3.weforum.org/docs/wef-_gcr_report_2011-12.pdf http://www3.weforum.org/docs/wef-_gcr_report_2011-12.pdf analysis of asset classes through the business cycle audrius dzikevičius1, jaroslav vetrov 2 using the idea of market-expected return rates on invested capital in the verification of conformity of market evaluation of stock-listed companies with their intrinsic value paweł mielcarz1, emilia roman2 personnel audit process wojciech pająk the position of slovakia in competitiveness ranking – the causes, impacts and prospects lucia stredná1, mária zúbková 2 audit committee practice in the polish listed stock companies. present situation and development perspectives piotr szczepankowski bank value: comparing customer and employee perceptions jelena titko1, natalja lace2 managing it workers katarzyna łubieńska1, jacek woźniak2 transforming leadership styles and knowledge sharing in a multicultural context rasa paulienė market behaviour: case studies of nasdaq omx baltic jelena stankevičienė1, natalija gembickaja2 spreadsheet error detection: an empirical examination in the context of greece dimitrios maditinos1, dimitrios chatzoudes2, charalampos tsairidis3 using the idea of market-expected return rates on invested capital in the verification of conformity of market evaluation of stock-listed companies with their intrinsic value paweł mielcarz1, emilia roman2 1kozminski university, jagiellonska 57/59, 03-301 warsaw, poland 2dcf consulting sp. z o.o., kochanowskiego 24, 05-071 sulejowek, poland e-mails: 1pmielcarz@alk.edu.pl (corresponding author); 2eroman@dcfconsulting.pl received 02 october 2011; accepted 07 march 2012 abstract. this article presents the concept of investor-expected rates of return on capital of listed companies and the use of these rates in the assessment of the extent to which the stock evaluation of a given entity is compatible with its intrinsic value. the article also features results of the research aimed at verification – with the use of the presented tool – of whether the market value of wse-listed companies reflects their fundamental value. the calculations presented in the empirical part of the article show that at the beginning of 2011, market evaluation of the most of the analysed entities greatly exceeded their fundamental value. keywords: dcf, eva, valuation, capital markets, fundamental analysis, roic, intrinsic value. reference to this paper should be made as follows: mielcarz, p.; roman, e. 2012. using the idea of market-expected return rates on invested capital in the verification of conformity of market evaluation of stock-listed companies with their intrinsic value, business, management and education 10(1): 11–24. http://dx.doi.org/10.3846/bme.2012.02 jel classification: g12. 1. introduction the answer to the question of whether the market share value of a given company reflects its ability to generate free cash flow is the basis for decisions taken by investors convinced that in the long term the market share value equals a given company’s intrinsic value. establishing the level of conformity of market evaluation with a given company’s intrinsic value is really difficult and virtually unverifiable (wiśniewski, skoczylas 2002). the major difficulty in the appraisal of the intrinsic value of shares using the method of discounted future cash flow (dcf) stems from the necessity to make subjective, hence questionable assumptions in the process of evaluation (firla 2008; malinowska 2001). the problem of the impact of subjective assumptions on the b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2012, 10(1): 11–24 doi:10.3846/bme.2012.02 copyright © 2012 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt mailto:pmielcarz@alk.edu.pl mailto:eroman@dcfconsulting.pl 12 p. mielcarz, e. roman. using the idea of market-expected return rates on invested capital in… outcome of evaluation is additionally compounded by the high sensitivity of income model to the changes of the planned financial parameters (szczepankowski 2007). another factor that raises the risk of evaluation performed with the use of dcf methods is the complexity and multidimensionality of the model itself. in practice, there are nine types of income methods, correct application of which lead to the same result (fernandez 2007; marciniak 2001). there are interdependences existing between particular techniques, hence the use of only one of these techniques may lead to occurrence of formal errors (słoński 2005; zarzecki 1999). the criticism of discount methods is justified for one more reason. the approach basing on future cash flow and expected return rates as the only factors affecting the share value of listed companies, although dominant in the literature, is not always reflected in the investor decisions. (fierla 2008) the mobility of capital, the short investment period of many investors, the globalization of financial markets, the liquidity of some markets and assets may cause the nonconformity of market share value of given companies with their ability to generate free cash flow to become long-term (benson 2006; graham, harvey 2001). as it was said before, this statement is at the same time more intuitive than empirically verifiable, for using the model of discounted cash flow to appraise the value does not lead to clear and unbiased results. taking into account the aforementioned facts, two conclusions can be drawn. first, the use of discounted cash flow model does not ensure an objective valuation. second, this model gives the possibility to manipulate the outcome of valuation. the aim of the article is to present the concept of the ratio of investor-expected return on the invested capital and its usage in the process of verification of market valuation of listed companies in the scope of conformity with their intrinsic value. the suggested approach considerably shortens and facilitates the process of defining the level of incompatibility of market value with its intrinsic value, thus constituting a highly useful tool, helpful in investment decision-making. the article consists of two parts and a summary. the first part introduces methodological basis for estimating the market-expected rates of return on the invested capital of listed companies. this part covers the theory of formation of roic indexes at the stages of company development and presents research results available in the dedicated literature in this scope. the material contained in this part allowed for the formulation of theoretical framework justifying the correctness of the presented line of thought. the second part illustrates the results of the authors’ own research, which were aimed at reflecting the level of incompatibility of the market value of companies listed at warsaw stock exchange with their intrinsic value calculated with the use of tools described in the theoretical sections of this article. this part contains also conclusions concerning the incompatibility of market valuation of listed companies with their ability to generate free cash flow. the last part of this report is the summary containing conclusions from the carried-out analysis. 13 business, management and education, 2012, 10(1): 11–24 2. theoretical background for estimating the market-expected roic index market value added (mva) is defined in the dedicated literature (dudycz 2005; plenborg 2002) as the excess of company market value (mv) consisting of equity (e) and interest-bearing debt (d), over the book value of the capital invested (ci)1 by the equity holders (ebv) and debtholders (d) 2 (ci = d + ebv): = −mva mv ci . (1) after excluding the interest-bearing debt from the calculation, the formula (1) looks as follows: = − bvmva e e . (2) as it can be seen, the market value added can be calculated on the basis of widely available stock exchange information and the data stemming from the current financial statement. in a situation when the market evaluates a given company according to its ability to generate free cash flow, its market value (mv) should be equal to the value arrived at on the basis of dcf valuation (v) (venazi 2010). as a result, in such conditions the market value of a given share equals its intrinsic value. this statement can be formed in the following way: =mv v . (3) in a situation of market imperfection, the market value will differ from intrinsic value, which gives grounds for taking investment decisions based on expectations that in the long term the market evaluation should approach the intrinsic value. “the model of discounted cash flow used in valuations of companies and ownership instruments is based on several equivalent methods whose correct application leads to estimation of an identical outcome of evaluation of company shares or interests” (mielcarz 2009; maćkowiak 2009). one of the methods of valuation that give the same result as in the case of application of other discount models is the method of discounted economic value added (eva) (chen, dodd 2001; fernandez 2001). the valuation of an indebted company (v) with the use of this method, assuming the invariability of structure and cost of capital, is performed on the basis of the following formula (wnuczak 2011; panfil, szablewski 2006): ( )1 , (1 ) 1= = + + + + ∑ n t n t n t eva rv v ci wacc wacc (4) where: n – the number of years of detailed projection of economic values added, rvn – the 1 in the case when a company possesses non operating assets (noa), that is assets that do not influence the company’s ability to generate free cash flow or that create flows whose amount does not cover the cost of capital (the rate of return from the assets is lower than the required), the market value of such assets should be subtracted from the value of the invested capital. the correctness of such way of calculation comes from the possibility of selling noa and handing over of the obtained excess to the owners without prejudice to the future free financial flow. 2 for further discussion, it is assumed that the market value of the interest-bearing debt equals carrying value. 14 p. mielcarz, e. roman. using the idea of market-expected return rates on invested capital in… residual value calculated as the excess of timeless stream of discounted economic values added over the value of the invested capital (ci) in the period n (martin, petty, rich 2003; nita 2007). wacca – the weighted average cost of capital of a company in the period t (wacct) is calculated as the expected return rate from equity (re) and debt (rd) capital, weighted by the shares of particular sources of capital in the capital structure (cooper, davydenko 2001; fernandez 2011). this definition can be expressed with the following formula: ( )1 1 1 1 .− − − + −  = t e t dt t e r d r t wacc ci (5) evat the economic value added that generated by the valuated company in the period t, could be calculated according to the formula (valez-pareja 2000): ( ) 1,−= −t t t teva roic wacc ci (6) where: roict – the rate of return on invested capital, calculated as the quotient of earnings before interest in the period t (ebitt) after taking taxes into account (t) and the capital invested in the beginning of the given period cit ( ) 1 1 . − − = tt t ebit t roic ci (7) assuming infinite creation of economic values added, the formula for calculating the current value of an indebted company is as follows: 1 . (1 ) ∞ = = + + ∑ t t t eva v ci wacc (8) in the conditions of conformity of market value with intrinsic value (formula 3), formula 1 can be transferred into formula 9: 1 . (1 ) ∞ = = + ∑ t t t eva mva wacc (9) making an assumption that a given company will be generating economic values added on a constant level in the future (evae) with an unchanged value of the capital invested allows for the calculation of the market-expected future average values of return on the invested capital roice. it can be calculated basing on the following formulas 10, 11 and 12: = eevamva wacc , (10) ( )− = e roic wacc ci mva wacc , (11) 15 business, management and education, 2012, 10(1): 11–24 1   = +    e mva roic wacc ci , (12) ( )− = e roic wacc ci mva wacc , (13) formula 12 can be significant for practical application. assuming that an analyst has got reliable premises for estimation of the probable level of the future return on invested capital (roic) by the valuated company, the comparison of this amount with the market-expected level of roice allows to verify if the given shares are valuated by the market according to their intrinsic value. the essence of value creation process is obtaining higher rates of return on invested capital than the cost of its raising. the rates of return on invested capital change in time, which is proved by the theory of business development, as well as by the results of empirical research. according to the research conducted by t. koller, m. goedhart and d. wessels (koller et al. 2005), in an average company, in the first phase of business development the value of attained rates of return on invested capital (roic) does not exceed the value of the weighted average cost of capital (wacc), but it remains on the increase, though. around the fifth year of operation, the value of roic becomes equal with the value of wacc index and in the tenth year it reaches its maximum value. then, due to the influence of competition, the return on invested capital generated by mature business decreases. in the long run, maintaining of advantage of roic value over the cost of capital raising is associated with the necessity of maintaining competitive advantage. the changeability of the ability of companies to create values, observed empirically, is presented in figure 1. 25 20 15 10 5 0 -5 -10 -15 5 10 15 20 years expected roic % wacc fig. 1. creating company value (sources: koller, t.; goedhart, m.; wessels, d. (2005), valuation, measuring and managing the value of companies, fourth edition, john wiley & sons inc., new jersey, p. 136) 16 p. mielcarz, e. roman. using the idea of market-expected return rates on invested capital in… in case of companies which are characterised by strong cost competitiveness or innovative companies the long term shape of the roic could differ slightly from this presented in figure 1 (sullivan 2004; rayan, servaes 1997). 3. roic behaviour in time – empirical exemplification the research sample consisted of forty eight non-financial business entities listed on warsaw stock exchange (wse) and featured in wig 203 and wig 40 indexes on the day of 31.12.2010 (source: www.gpwinfostrefa.pl; www.stockwatch.pl) (table 1). thus, the sample represents both mature businesses, as well as smaller entities which – by definition – should be distinguished by higher dynamics of result increase, as well as higher roic expected in relation to historical roic. table 1. research sample (source: www.stockwatch.pl (31.12.2010)) wig 20 asseco poland s.a., lubelski węgiel bogdanka s.a., čez a.s., globe trade centre s.a., grupa lotos s.a., kghm polska miedź s.a., pbg s.a., pge polska grupa energetyczna s.a., polski koncern naftowy orlen s.a., tauron polska energia s.a., polskie górnictwo naftowe i gazownictwo s.a., telekomunikacja polska s.a., tvn s.a. wig 40 agora s.a., amrest holdings se., bioton s.a., boryszew s.a., budimex s.a., ng2 s.a., centrozap s.a., cersanit s.a., cyfrowy polsat s.a., polski koncern mięsny duda s.a., echo investment s.a., elektrobudowa s.a., emperia holding s.a., enea s.a., eurocash s.a., giełda papierów wartościowych w warszawie s.a., dom maklerski idm s.a., impexmetal s.a., grupa kęty s.a., kogeneracja s.a., kopex s.a., lpp s.a., mci management s.a., netia s.a., narodowy fundusz inwestycyjny empik media & fashion s.a., orbis s.a., polish energy partners s.a., petrolinvest s.a., polimex-mostostal s.a., polnord s.a., zakłady azotowe puławy s.a., skotan s.a., stalprodukt s.a., mondi świecie s.a., synthos s.a. on the basis of historical statements for the period of 2006–2010 the historical values of roics have been calculated according to formula 6. the results of these calculations are presented in the tablet table: table 2. historical values of roic (source: the authors’ own study on the basis of financial statements of the companies from the research sample) roic roic average 2006 2007 2008 2009 2010 asseco poland s.a. 9.32% 4.91% 6.56% 6.59% 5.88% 6.65% lubelski węgiel bogdanka s.a. 12.68% 8.46% 9.22% 6.07% čez a.s. 9.47% 12.32% 15.22% 12.94% 9.97% 11.98% globe trade centre s.a. -0.98% –0.56% –0.32% –0.43% –0.50% –0.56% 3 20 biggest wse-listed companies characterised by biggest capitalisation and turnover http://www.gpwinfostrefa.pl http://www.stockwatch.pl 17 business, management and education, 2012, 10(1): 11–24 roic roic average 2006 2007 2008 2009 2010 grupa lotos s.a. 6.09% 5.91% -6.03% 0.00% 2.46% 1.69% kghm polska miedź s.a. 42.75% 36.45% 23.82% 20.72% 27.12% 30.17% pbg s.a. 7.61% 4.18% 5.56% 6.60% 5.82% 5.95% pge polska grupa energetyczna s.a. 0.64% 1.32% 0.61% 0.51% polski koncern naftowy orlen s.a. 8.42% 6.75% 3.11% 2.33% 8.01% 5.72% tauron polska energia s.a. 0.49% 0.04% 0.11% polskie górnictwo naftowe i gazownictwo s.a. 7.96% 8.73% 1.24% 1.59% 6.44% 5.19% telekomunikacja polska s.a. 6.29% 5.93% 5.35% 3.88% –0.99% 4.09% tvn s.a. 12.29% 16.28% 14.60% 13.86% 8.67% 13.14% agora s.a. –1.29% 3.77% 2.54% 2.98% 3.49% 2.30% amrest holdings se – –0.24% –0.22% –0.17% 0.15% –0.10% bioton s.a. 5.57% 3.63% –1.38% –8.08% 5.51% 1.05% boryszew s.a. –10.49% 2.25% –21.93% 10.97% 13.24% –1.19% budimex s.a. –4.24% 4.42% 24.78% 19.56% 26.47% 14.20% ng2 s.a. 27.07% 25.76% 35.82% 20.81% 25.55% 27.00% centrozap 3.81% –7.90% 1.26% –0.20% –4.65% –1.54% cersanit s.a –2.25% 6.92% 6.67% 8.54% 7.30% 5.43% cyfrowy polsat s.a. –54.18% 69.08% 73.98% 62.53% 67.87% 43.86% polski koncern mięsny duda s.a. 9.59% 3.21% 2.28% -12.32% 1.95% 0.94% echo investment s.a. 8.09% 3.48% 7.26% 2.93% 3.96% 5.14% elektrobudowa s.a. 17.25% 28.94% 21.25% 17.65% 12.92% 19.60% emperia holding s.a. 3.96% 2.57% 0.52% 0.40% 0.00% 1.49% enea s.a. 0.48% 0.97% 1.27% 0.81% 0.71% eurocash s.a. 17.75% 23.03% 27.69% 24.50% 13.46% 21.29% giełda papierów wartościowych w warszawie s.a. 18.36% 18.62% 7.40% dom maklerski idm s.a. 13.88% 17.18% –6.53% 2.11% 3.65% 6.06% impexmetal s.a. 2.69% 7.45% 18.30% 3.49% 5.13% 7.41% grupa kęty s.a. 5.80% 7.01% 5.23% 4.54% 0.89% 4.70% kogeneracja s.a. 3.18% 3.77% 2.99% 7.71% 5.36% 4.60% kopex s.a. 11.99% 2.36% 0.60% 0.73% –0.01% 3.13% lpp s.a. 17.84% 31.74% 17.69% 15.21% 13.83% 19.26% mci management s.a. 16.07% 27.58% 8.35% 12.19% 22.87% 17.41% netia s.a. –12.17% –3.41% –3.57% 0.63% 10.11% –1.68% narodowy fundusz inwestycyjny empik media & fashion s.a. -0.37% -0.63% 5.58% 22.07% 3.03% 5.93% continue of table 2 18 p. mielcarz, e. roman. using the idea of market-expected return rates on invested capital in… roic roic average 2006 2007 2008 2009 2010 orbis s.a. 4.04% 6.92% 2.66% 1.76% 1.40% 3.36% polish energy partners s.a. –14.03% 5.19% 2.79% 1.84% 8.43% 0.85% petrolinvest 0.34% –1.02% –5.33% –16.90% –3.20% –5.22% polimex-mostostal s.a. 8.79% 4.91% 6.57% 7.37% 10.95% 7.72% polnord s.a. –48.00% 2.45% 3.40% 4.27% 1.96% –7.18% zakłady azotowe puławy s.a. 9.89% 9.32% 18.87% 16.75% 0.70% 11.11% skotan s.a. –5.93% –8.03% –6.68% 5.71% –2.95% –3.57% stalprodukt s.a. 45.17% 40.71% 30.79% 21.15% 10.42% 29.65% mondi świecie s.a. 24.28% 22.41% 11.61% 4.10% 13.93% 15.26% synthos s.a. 6.67% 6.52% 10.70% 5.90% 7.14% 7.38% average 4.58% 9.43% 8.08% 7.68% 8.19% 7.59% average wig 20 8.40% 7.76% 6.34% 6.03% 6.37% 6.98% average wig 40 3.17% 10.05% 8.73% 8.30% 8.87% 7.82% the companies that particularly stand out concerning their results were cyfrowy polsat s.a. and kghm polska miedź s.a. it should be noticed that in the studied period, the companies of lower values of capitalization featured in wig 40 index attained higher rates of return on invested capital (7.82% on average) than the biggest companies on wse (6.98%). -10% 0% 10% 20% 30% 40% 50% 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 av er ag e ro ic 20 6 -2 01 0 market capitaliza�on (mln pln) wig 20 wig 40 fig. 2. the relation of capitalisation values and historical rates of return on committed capital (source: the authors’ own study on the basis of financial statements of the companies from the research sample) end of table 2 19 business, management and education, 2012, 10(1): 11–24 according to the reasoning presented in the first part of this work, the expectations of investors concerning future results of a company can be estimated by calculating the average expected economic values added (eva). transformation of formula 11 allows for the calculation of this value: = ×eeva mva wacc (14) the estimation of eva began with calculation of market value added (mva) according to formula 2. in order to do that, the information on balance sheet values and their capitalization on the day of 31.12.2010 of each of the companies were used. wacc values were estimated on the basis of analyses of stock exchange recommendations, issued by brokerage houses in 2010. in the case of occurrence of several recommendations in this period, the average values were accepted for the purpose of calculations. formula 12 was used in order to estimate the investor-expected average rates of return on invested capital. the results of the performed calculations are presented in table 3. table 3. estimation of the value of mva (m. pln) and roice (source: the authors’ own study on the basis of financial statements of the companies from the research sample) e ebv mva wacc ci roice ng2 s.a. 2,611 339 2,272 10.80% 375.3 76.16% eurocash s.a. 3,584 239 3,345 10.70% 579.8 72.43% giełda papierów wartościowych w warszawie s.a. 2,057 396 1,661 11.10% 400.1 57.17% cyfrowy polsat s.a. 4,427 1,059 3,368 11.00% 1,131.8 43.73% boryszew s.a. 2,257 400 1,857 9.62% 568.2 41.06% lpp s.a. 3,879 756 3,123 10.00% 1,031.0 40.29% budimex s.a. 2,540 643 1,897 9.80% 654.0 38.23% synthos s.a. 4,062 1,112 2,950 10.10% 1,112.5 36.88% cersanit s.a 2,326 586 1,740 9.00% 603.9 34.93% emperia holding s.a. 1,593 657 936 10.90% 659.4 26.37% kghm polska miedź s.a. 34,600 14,456 20,144 11.90% 16,836.8 26.14% elektrobudowa s.a. 792 322 470 10.10% 330.6 24.45% pbg s.a. 3,045 1,190 1,855 12.00% 2,100.8 22.60% mondi świecie s.a. 3,875 1,433 2,442 9.90% 1,909.9 22.56% echo investment s.a. 2,016 572 1,444 8.60% 1,057.2 20.34% lubelski węgiel bogdanka s.a. 3,741 1,958 1,783 11.40% 2,414.6 19.82% narodowy fundusz inwestycyjny empik media & fashion s.a. 2,159 860 1,299 9.62% 1,272.1 19.44% polish energy partners s.a. 661 265 396 7.84% 277.3 19.04% amrest holdings se 1,609 660 949 8.40% 809.0 18.25% 20 p. mielcarz, e. roman. using the idea of market-expected return rates on invested capital in… e ebv mva wacc ci roice skotan s.a. 151 86 65 9.62% 85.8 16.93% polimex-mostostal s.a. 1,857 918 939 10.30% 1,545.2 16.56% pge polska grupa energetyczna s.a. 43,360 28,520 14,840 10.70% 28,519.6 16.27% grupa kęty s.a. 1,173 608 565 9.00% 713.4 16.13% stalprodukt s.a. 1,857 1,360 497 11.20% 1,359.7 15.30% kogeneracja s.a. 1,638 887 751 8.20% 1,020.7 14.24% tvn s.a. 5,854 2,022 3,832 7.80% 5,135.9 13.62% polski koncern mięsny duda s.a. 507 281 226 8.60% 399.2 13.46% telekomunikacja polska s.a. 21,838 12,900 8,938 9.30% 21,197.0 13.22% čez a.s. 69,940 30,773 39,167 7.70% 59,356.6 12.78% mci management s.a. 447 499 –52 12.00% 579.4 10.92% agora s.a. 1,329 1,132 197 9.40% 1,287.7 10.84% kopex s.a. 1,397 1,347 50 10.30% 1,351.0 10.68% zakłady azotowe puławy s.a. 1,625 1,645 –20 10.40% 1,755.7 10.28% impexmetal s.a. 870 779 91 9.10% 826.1 10.10% orbis s.a. 1,889 1,732 157 9.30% 1,886.0 10.07% polskie górnictwo naftowei gazownictwo s.a. 21,063 18,664 2,399 9.00% 20,422.1 10.06% asseco poland s.a. 4,111 4,307 –196 10.40% 4,592.1 9.96% dom maklerski idm s.a. 650 654 –4 9.62% 654.4 9.56% polski koncern naftowy orlen s.a. 19,589 19,539 50 9.30% 27,889.9 9.32% grupa lotos s.a. 4,721 5,952 –1,231 10.50% 10,337.3 9.25% netia s.a. 2,025 2,296 –271 10.20% 2,323.3 9.01% globe trade centre s.a. 5,375 4,046 1,329 6.70% 5,410.3 8.35% centrozap 134 203 –69 9.62% 378.7 7.88% tauron polska energia s.a. 11,514 16,524 –5,010 10.52% 17,372.1 7.49% enea s.a. 10,462 10,027 435 7.10% 10,147.4 7.40% polnord s.a. 738 1,140 –402 9.40% 1,543.9 6.95% bioton s.a. 807 1,308 –501 9.62% 1,428.2 6.24% petrolinvest 300 1,034 –734 9.62% 1,093.8 3.16% the results of the estimations presented in table 3 prove that, on average, wse’s investors expect higher rates of return in case of companies from wig 40. the value of average positive differences between the roice value and the average-weighted capital cost wacc for wig20 index has been estimated for 4.08%, while for wig40 it is 13.15%. these expectations find no grounds for the roic attained by the studied companies in the years 2006–2010. figures 3 and 4 show the differences between the investor-expected average roic indexes and the values of return on invested capital in the years 2006–2010. end of table 3 21 business, management and education, 2012, 10(1): 11–24 fig. 3. wig 40 index companies – difference between the expected roic and the average roic attained in the period 2006–2010 (source: own work) fig. 4. wig 40 index companies: difference between the expected roic and the average roic attained in the period 2006–2010 (source: own work) 22 p. mielcarz, e. roman. using the idea of market-expected return rates on invested capital in… the presented calculations prove that in the case of both wig20 and wig40-listed companies the expectations of investors in the scope of the ability of given companies to achieve future roic were far beyond the average rates of return attained by the investors in the years 2006–2010. for the companies included in wig20, the excess of the average expected roic rate (roice) over the historical roic rates was 6.78%, while in the case of wig40-listed companies it was as much as 17.14%. the scale of differences between the investor-expectations and the historical results is depicted synthetically in figure 5. fig. 5. comparison of average historical roic and investor-expected roic in the beginning of 2010 (source: own work) 4. conclusions the presented calculations suggest that in the beginning of 2011, the market valuations of big companies on wse greatly exceeded their historical roics. taking into consideration that majority of the analysed companies are mature entities this phenomena could prove the market overvaluation. in other words, market valuations of most companies could find no confirmation in fundamental valuations performed according to the theory of business development and the results of empirical research. while the higher expectations of investors in relation to the rates of return on committed capital of 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capital in the verification of conformity of market evaluation of stock-listed companies with their intrinsic value paweł mielcarz1, emilia roman2 personnel audit process wojciech pająk the position of slovakia in competitiveness ranking – the causes, impacts and prospects lucia stredná1, mária zúbková 2 audit committee practice in the polish listed stock companies. present situation and development perspectives piotr szczepankowski bank value: comparing customer and employee perceptions jelena titko1, natalja lace2 managing it workers katarzyna łubieńska1, jacek woźniak2 transforming leadership styles and knowledge sharing in a multicultural context rasa paulienė market behaviour: case studies of nasdaq omx baltic jelena stankevičienė1, natalija gembickaja2 spreadsheet error detection: an empirical examination in the context of greece dimitrios maditinos1, dimitrios chatzoudes2, charalampos tsairidis3 copyright © 2017 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. the impact of green supply chain management practices on performance: moderating role of institutional pressure with mediating effect of green innovation muhammad nouman shafique1, muhammad shahid asghar2, haji rahman3 1department of business management, dongbei university of finance and economics, 217 jianshan st.,116025, sha he kou dist. dalian, china 2school of management, shandong university, 27 shanda nanlu, 250100, jinan, china 3department of management sciences, preston university, st. 3, sector h – 8/ 1, 44000, islamabad, pakistan e-mails: 1shafique.nouman@gmail.com (corresponding author); 2shahidasghar90@gmail.com; 3haji616@yahoo.com received 12 february 2017; accepted 04 april 2017 abstract. green supply chain management (gscm), a cross-disciplinary field has grown during recent years with increasing interest from both academia and industry. gscm considers emphasizing environmental issues in traditional supply chain management (tscm). due to the new trends in global warming, environmental sustainability has become a greater concern among the organizations and enterprises globally. this study will focus on green supply chain management practices in the presence of green innovation. green innovation will improve organizational processes as well as products, which lead to economic and environmental performance. different institutional actors are putting pressures to implement green supply chain management practices. population of this study is electronics industry in pakistan. sample size is 500 with cluster sampling technique. data has been collected through a survey method based on the adopted questionnaire. the collected data will be tested through cronbach alpha, descriptive statistics, pearson correlation, linear regression, moderated regression, multiple logistic regression and hayes’s statistical tests to analyse the suggested research model. this study will enable organizations to implement green supply chain management practices to bear institutional pressure and move towards green innovation to enhance their economic and environmental performance that were never possible before this study. keywords: green supply chain management, gscm practices, environmental performance, economic performance, green innovation, institutional pressure. jel classification: r41, q52, q53, q55, q56. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2017, 15(1): 91–108 doi:10.3846/bme.2017.354 mailto:2shafique.nouman@gmail.com https://doi.org/10.3846/bme.2017.354 92 m. n. shafique et al. the impact of green supply chain management practices on performance: moderating role of institutional pressure with mediating effect of green innovation 1. introduction balancing between environmental and economic performance getting the boost in organizations. today, every organization is trying to fulfill their corporate social responsibilities. protection of environment became the demand of every customer and regulatory authorities in every country that’s why environmental protection became the main concerned of organizations (zhu et al. 2005; jabbour et al. 2014). furthermore, every organization is getting competitive and regulatory pressure to reduce their wastage’s pressures (shultz, holbrook 1999; delmas, toffel 2003). this environmental pressure become increasing day by day and demand for organizations to make their strategies to make reduce the negative impact of their products and services on environment (chan et al. 2016; lewis, gretsakis 2001). globalization changed organizational traditional processes and activities to green or environmental policies. now, organizations trying to establish their green image through the implementations of green strategies and practices (chen 2008; hick 2000). green practices will result as the competitive advantage (hansmann, claudia 2001). confederation of british industries (cbi) had identified the main environmental factors should be implemented in marketing to reduce risks, regulatory pressures and organizational and environmental performance in 1994. the main regulatory issues, competitive pressure, marketing strategies, business performance, environmental protection and operational excellence can be achieved only the implementation of green supply chain management practices (hutchison 1998). green supply chain management is full-fledged covered the stages of the product life cycle especially focusing on green purchasing, green manufacturing, green logistics, investment recovery and cooperation with customers. through implementation of green supply chain management practices, organizations can achieve organizational performance focusing on environmental, social, economic and operational performance (albort-morant et al. 2016). now, organizations are mature enough, they make strategies to reduce their manufacturing cost through the reduction of wastage, and it is the only solution to compete in the market. that is the main motivational concept for organizations to move towards green supply chain management practices to enhance their performance (jabbour et al. 2014; van hock, erasmus 2000). the cost saving nature of environmental performance should lead to improved economic performance, and both environmental performance and economic performance should yield to improve operational efficiency. environmental, economic, and operational performance generates cost savings and reflects an organization’s ability to satisfy changing customer demands for environmentally sustainable products and services (green jr et al. 2012). the cost and marketing implications of environmental, economic, and operational performance should lead to improvement in the overall financial and marketing performance within the organization (lee, min 2015). continuous and endless innovation is the only option for organizations to invent, adopt and implement new procedures. innovation can reduce institutional pressure, es93 business, management and education, 2017, 15(1): 91–108 pecially customers and competitor’s pressure to enhance organizational performance (porter van der linde 1995). therefore, it is very important for organizations to adopt green innovations in green supply chain management to enhance their value chain. green innovation will be caused to reduce institutional pressure and enhance environmental and economic performance (lee, min 2015). green innovation has distributed into many types three of them are very famous. first, is product innovation, second is process innovation and third is managerial innovation. all of them have same importance, and all are interlinked with each other in every organization (li et al. 2017). institutional pressure is the external forces to do something or to avoid doing specific actions by external environment customers, supplier, competitors and regulatory bodies are the major players to insert pressure on organizations. the institutional pressure is actually the pressure, restrictions and expectations of these bodies towards organizations (fikru 2016). this led three strategic isomorphisms – coercive, normative and mimetic – to formulate the rules, norms and values in the institutional environment. this is only the institutional environment, which will help the organizations to build or choose effective strategies to gain competitive advantage. it may be individual strategies or set of strategies, which will be formulated by regulatory bodies to set their bench marks to achieve highest standards, which will lead to organizational performance (weerakkody et al. 2016). traditional supply chain management is the only concern in the delivery of products from buyer to customer. it does not concern with society. traditional supply chain management did not focus on the environment. most of the time damaged and outdated vehicle used to supply the products. these vehicles spoiled out carbon gas as waste from their silencers, which will cause to air pollution. in many countries, air pollution became a very serious issue. the main causes of air pollution are outdated vehicles and factories. this air pollution will cause to damage society and become the cause of many diseases and deaths for humans and animals (lee, min 2015). the second main problem in traditional supply chain management is high cost because damaged vehicles need more maintenance charges. they use more fuel because these vehicles have not been modern fuel saving technology. this fuel and maintenance cost will increase the overall expenses of organization, which will be the resultant as to increase the product cost. traditional supply chain management is the main cause of high prices. in this era, every organization is fighting with their competitors based on their cost. so, if organization faces high costs, then it is impossible to compete based on price (chiou et al. 2011). globalization created the awareness among customers, ngo’s (non – governmental organizations) and in government organizations to protect environment. therefore, everyone is putting pressure on organizations to reduce their wastages and protect the society. at the international level, different organizations have started to protect the environment. international standard organization set standards for organizations to clean and protect the environment. at the same time, one organization is competing with other organizations based on corporate social responsibilities. in addition, organizations have 94 m. n. shafique et al. the impact of green supply chain management practices on performance: moderating role of institutional pressure with mediating effect of green innovation realized that to protect the environment through fewer wastage, it is their corporate social responsibility. so, that’s why in recent days’ organizations facing a lot of pressure to protect the environment (delmas, toffel 2003). in this era, information communication technologies boost up in every field of life. these technologies provide the knowledge from all over the world. every individual, organization and government is using this knowledge to increase their performance (geffen, rothenberg 2000). now organizations feel that their traditional methods, processes and products cannot survive them in this hyper competitive market. therefore, they need to change their processes according to rest of the world. because if they do not change themselves, then their competitors will win the war. therefore, every organization must have to be focused on the latest technologies to change their traditional processes to more innovative and effective one. so, every organization is struggling to implement new and innovative ideas, activities and processes in their organizations to achieve high performance (green jr et al. 2012). this study will focus to reduce all these problems. in this study green supply chain, management practices will effect on organizational performance. when organizations implement green supply chain management practices, it will reduce organizational costs and protect the environment to protect the environment and enhance organizational performance. the main problem statement of this study is to fine “the effect of green supply chain management practices on performance; moderating role of institutional pressure with mediating role of green innovation”. every researcher tries to find the gap in previous knowledge and try his level best to minimize the gap. to minimize this knowledge gap will enable a researcher for analytical thinking and find unknown dimensions of work, which was not explored and addressed until now. in the same manner, this study also found the gap from previous knowledge and filled this gap in new dimensions. in this study, different types of the gap have been addressed. the first gap of this study is based on variable. in most of the previous study, the relationship of green supply chain management practices and performance was analyzed and ignored the other external factors associated with this relationship. in this study, these external factors have been considered. the second major big gap is based on geographical area. the studies have been analyzed in different developed countries and ignored this phenomenon in developing countries while this study is more needed in developing countries because they have fewer strict rules regarding the environmental concerns. therefore, this study was conducted in pakistan, which is a developing country. third, this study was focused in different industries in different parts around the world. in pakistan, most grooming industry is the electronic industry, especially computer and mobile industry. therefore, this study will be focused on computer industry segmented laptops. fourth, the other studies regarding green supply chain management practices and performance is based on either qualitative or economic or mathematical modeling while this study will be 95 business, management and education, 2017, 15(1): 91–108 focused on quantitative methodology based on the statistical test. therefore, this study also filled the methodological gap, which is very less addressed in previous studies. in this study, following research questions should be addressed. – rq1: what are green supply chain management practices? – rq2: how green supply chain management practices will effect on organizational performance? – rq3: what is the relationship between green supply chain management practices, institutional pressure and organizational performance? – rq4: how green innovation plays its role between green supply chain management practices and organizational performance? this study is significant for both academicians and managers at the same time. in the academic point of view, this study will fill the gap found in previous studies. furthermore, this study will also open the new horizons for the upcoming researchers to think about organizational performance in a new perspective. this study has developed the direct relationship between organizational performance and green supply chain management practices. this study is developing the indirect relationship between green supply chain management practices and organizational performance in the presence of green innovation and institutional pressure. these direct and indirect relationships in the same study had not been studied previously. this study has been also significant for managers and organizations at the same time. because if organizations implement this study in their organizations and adopt green supply chain management practices in their processes, then they can enhance environmental and economic performance. the implementation of green supply chain management practices will enable organizations to bear institutional pressures, which enable them to get the competitive advantage through corporate social responsibility of environmental protection. at the same time, organizations will encourage green innovations to enhance organizational performance. therefore, this study will change traditional supply chain to green supply chain to gain competitive advantage through innovation. the main objectives of this research are given below. – to find the effect of green supply chain management practices on organizational performance. – to explore the relationship between green supply chain management practices, institutional pressure and organizational performance. – to develop the novelty of effect among green supply chain management practices, green innovation and organizational performance. 2. literature review and theoretical foundations green supply chain management practices impose on organizations to design, implement and produce environmental friendly products those are suitable for environmental sustainability. the green concept is revolved throughout all stages of the product life 96 m. n. shafique et al. the impact of green supply chain management practices on performance: moderating role of institutional pressure with mediating effect of green innovation cycle. furthermore, previous study on xerox ltd. suggested to develop the matrix for environmental assessment in all product life cycle stages (mcintyre et al. 1998). this study suggested to implement environmental practices in the whole process of supply chain and move the traditional supply chain to green supply chain practices because the main focused of this study is environmental sustainability (jabbour et al. 2014). previous study suggests in their study that a positive correlation was found between green supply chain management and economic performance as well as environmental performance. they suggest that if organization’s moves towards green supply chain practices, then they will gain more profit by reducing their wastages. it is also caused to protect environment because low wastages will cause low damage to environment. so, green supply chain management will cause more environmental and economic performance as compared to traditional supply chain management practices implemented in organizations (zhu, sarkis 2004). if buyer and seller have strong relationship with each other, then it is easy to implement green supply chain management practices in manufacturing organizations (geffen, rothenberg 2000). another study supports this study and enhanced this effect as green multiplier effect encouraged an organization to buy raw material from second or third tie supplier who implemented green practices in their produce design. so, it will motivate organizations towards green purchasing (preuss 2001). green supply chain management policies force the organizations to towards green purchasing. these green purchasing will improve organization’s economic performance as well as these policies and green purchasing increase environmental performance (green et al. 1998). if organizations buy green products, then they also produce green products. furthermore, studies suggest that green supply chain management practices are composed on green purchasing, eco design, cooperation with customers and investment recovery are the major factors to analyze green supply chain management practices in organizations to boost up their performance (jabbour et al. 2014). environmental performance can enhance through the implementation of eco design during production (diabat, govindan 2011). eco – design does not mean to reduce the functionality or cost of product. the main purpose of this design is to investment recovery through the reuse of products repeatedly it will directly reduce remanufacturing cost as well as the cause to reduce the wastage. so, eco – design directly effect on economic and environmental performance. furthermore, eco-friendly designs are more attractive for customers to buy and use product (miroshnychenko et al. 2017). economic performance is directly effected through green supply chain practices. because the concept of green supply chain management is to protect the environment through the reduction of wastages. the reduction in wastages should lead to reduce in cost, and cost is directly interlinked with economic performance. the organizations those can produce at low cost these can enhance their economic performance (sun et al. 2017). it has been developed this positive relationship between organizational performance and green supply chain management practices. furthermore, they suggest 97 business, management and education, 2017, 15(1): 91–108 that organizations can gain competitive advantage through the implementation of green supply chain management practices in organizations (rao, holt 2005). institutional pressure is the function of institutional actors to moderate organizational characters to develop their strategies to protect environment. the major institutional actors those are customers, competitors, political, social, religious, local communities, international communities, market and regulatory organizations (wu et al. 2012). all organizational stakeholders force the organizations to do coercive actions in specific conditions for environmental sustainability. organizations perceived that they have to face institutional pressure, which will influence on their strategic decisions (tingey-holyoak 2014). organizations cannot take decisions without considering the institutional pressure. now, everyone is demanding from organizations to develop their strategies environmental friendly to enhance organizational performance (seles et al. 2016). legislation authorities and political parties in every country is putting pressure on organizations to move towards green supply chain management to protect their environment. every country has developed some rules and regulations for organizations to formulate their environmental policies according to these rules (li et al. 2017). furthermore, every organization knows that government is the key stakeholder. therefore, that is why organizations have to obey the rules and regulations of authorized organizations. these national and international organizations use their power to control and correct organizational procedure those will match with already set environmental standards. legislation and political power are the most important institutional pressures for organizational processes (majundar, marcus 2001). customers and competitors are the major factor to putting pressure on organizations. both customers and competitors are considered as institutional pressure. they can demand for organization to go towards green practices and request from political and legislator actors about environmental sustainability. now, organizations respond according to customers’ requirements because they have realized if they did not satisfy customer’s requirements, then their competitors get competitive advantage and get their customers (he et al. 2016). therefore, organizations develop their green strategies to fulfill customer’s requirements. in most of the organizations, environment management system has adopted. this system gives the guidelines according to iso 14001 standards for environmental management (christmann, taylor 2001). so, if organization did not fulfill these standards, then their competitor will gain iso 14001 certifications through the adoption of green practices and gain competitive advantage through environmental and economic performance, which will build institutional pressure on organization (khanna, anton 2002). green innovation is the same as technological innovation like software and hardware innovation. green innovation is divided into product innovation and process innovation. but the main theme of green innovation is to protect the environment through recycling energy saving, green purchasing, green production, eco design, waste and pollution reduction (chen et al. 2006). organizations can adopt green innovation through the implementation of new hard ware and software, which will lead to enhance organiza98 m. n. shafique et al. the impact of green supply chain management practices on performance: moderating role of institutional pressure with mediating effect of green innovation tional environmental and economic performance. so every organization tries to adopt green innovation based on green process innovation and green production innovation to enhance their organizational performance (chiou et al. 2011). green product innovation is the factor of green innovation. the focus of green product innovation is green purchasing, eco-design and green manufacturing of product. this will lead to reduction in the waste of raw material, environmental protection and saving in energy. the green product innovation can be measured through four factors. the first factor of green product innovation is that organizations develop the strategies for less consumption of raw material during product design and development (fei et al. 2016). the second important factor of green product innovation is that organizations must consider the consumption of energy. the product must consumer fewer amounts of energy when it is in working condition. the third important factor of green production innovation is that organizations should make strategy that product must be composed of fewer amounts of material. the fourth and most important factor of product innovation is that product should be recycled (chiou et al. 2011). it means organization can decompose the product easily and then manufactures again by using the same material. the product design should be environment friendly. so organizations should involve in green product innovation to enhance their environmental and economic performance (sun et al. 2017). green process innovation is to implement new and innovative processes in organizations to achieve organizational goals. the green process innovation is focused on the processes to save energy during production and other organizational processes (dai, zhang 2017). furthermore, green process innovation also encourages organizations to recycle their waste to prevent environment. the implementation of green process innovation will cause the reduction of toxic materials and reduce the waste. when organizations spoil less waste then it will cause to reduce environmental performance (geffen, rothenberg 2000). so, green process innovation is directly the effect on environmental and economic performance because less waste reduces production cost (jakobsen, clausen 2016). green process innovation effect on organizational performance through four major aspects. the first component of green process innovation that organizations must adopt green process during manufacturing. organization should focus to reduce the emission of toxic materials during production effectively (lee, min 2015). the second major component of green process innovation is that organizations should be focused to reuse and recycle their products to reduce waste and hazard’s emissions (chen et al. 2006). furthermore, third major factor should consider during the process innovation is that organizations should focus to reduce consumption of electricity, water and coal or oil resources during their working (jakobsen, clausen 2016). the fourth major factor should consider for green innovation is that organizations should develop their policies to reduce raw material during manufacturing process. so, by the implementation of these four factors organizations should adopt green process innovation to enhance their organizational performance (zailani et al. 2015). some theories related to this study are summarized and mentioned in the below table 1. 99 business, management and education, 2017, 15(1): 91–108 table 1. supportive theories (source: created by authors) theory description link with this study transactioncost economics (tce) transaction cost theory is based on some assumption regarding to governance those describe the effect of internal and external transactions. this theory is advancement of agency theory. because this theory is different from contractual relationship with shareholders (kaplan financial knowledge bank 2012; mcclelland, o’brien 2011). the purpose of innovation reduces cost and time to enhance performance. therefore, green innovation in this study supported this theory. social exchange theory (set) social exchange theory based on the balance between give and take among all relations. because everyone weights his benefits and costs to maintain their relationship with others. if the cost and benefit are in the equal ratio, then they can sustain their relationship. so, it is the rational choice to develop the relationship (cropanzano, mitchell 2005). in this study, green supply chain management practices will effect on the relationship between buyer and seller. both parties gain benefits from each other. therefore, it will support social exchange theory. resource-based view (rbv) resource-based view to identify and analyze organizational resources and capabilities to develop their strategies based on their assets to gain competitive advantage. when organizations know their resources and capabilities then they also realize their strengths and weaknesses. when organizations know their capabilities, then they can make good strategy to win competitive advantage (fikru 2016; business dictionary 2017; rivard et al. 2006). in this study, green supply chain management enables organizations to understand and analyze their assets effectively and make their procedure easy to gain competitive advantage. normally, organizations use software for supply chain management those can provide different required reports. systems theory system theory is actually the interlink among all the set of activities and processes to achieve a common goal. this is also interlinking among internal organizational resources like humans, machine and environment to interact with each other has and enhance organizational performance. therefore, it starts from the input resources of organization. then organizations do some processes on these inputs to produce some output under certain environmental conditions (environment and ecology 2017; bronfenbrenner 1992). in green supply chain management, all activities like inventory, purchasing, suppliers and customers are interlinked with each other to enhance organizational performance in this study. network theory network theory focuses on the relationship between buyer and seller or direct or indirect relationship between organizations. furthermore, this theory also engaged different organizational networks to do some specific tasks with the help of each other to transfer and transform their organizational resources (moliterno, mahony 2011; chaston 2015). green supply chain management practices are not isolated these are interlinked with different network actors like suppliers and customers. therefore, this study will support network theory. 100 m. n. shafique et al. the impact of green supply chain management practices on performance: moderating role of institutional pressure with mediating effect of green innovation theory description link with this study contingency theory contingency theory suggests becoming flexible according to situation. because there is no single theory, which is good every time. therefore, in this technological rapid change environment organization should be flexible enough to design, control and select their systems according to environment. and must be flexible and adopt changes (stonebraker, afifi 2004). institutional pressure and green innovation are not constant. they are rapidly changing. therefore, organizations need to align their practices with institutional pressure and innovation to enhance their performance. that is why this study will support contingency theory. institutional theory the diversity of both the institutions driving environmental pressures, including external and internal pressures to the organization and the corresponding organizational responses developed within each company (he et al. 2016; wu et al. 2012). in this study, the moderating variable institutional pressure supported this theory. gscm practices institutional pressure performance green innovation fig. 1. conceptual model (created by authors) based on literature review and conceptual model mentioned in figure 1, following hypotheses have been formulated. – h1: green supply chain management practices is positively effect on organizational performance. – h2: institutional pressure plays the moderated role between green supply chain management practices and organizational performance. – h3: green innovation plays the moderated role between green supply chain management practices and organizational performance. end of table 1. 101 business, management and education, 2017, 15(1): 91–108 3. methodology methodology is the overall process which is based on the interlinked set of activities to complete any study. the nature of study is quantitative. in this study, deductive research approach is used because in this study, hypotheses have been developed as the basis of literature review and theories. these hypotheses will direct the research model. the conceptual model develops the relationship between variables. this relationship has been tested through data by using different statistical tests. the results of these tests shows prove the relationship and then generalized these results to other industries. in this study, data has been collected through survey method based on the adopted questionnaire. population of this study is the electronic industry in pakistan. sample is the subset of population. in this study cluster, random sampling method have been used to collect data. the first cluster of this study is computer/laptop industry from electronic industry. both wholesaler and retailer have been taken in this study. the second cluster is that researcher choose five brands, i.e. dell, apple, lenovo, hp and acer among all brands of laptops. the sampling size is 500. in this study, researchers find the gap from current situation facing by society. then download different latest research papers from different data bases. these research papers provide current knowledge around the world. then researchers find some theories regarding to current research and interlink these theories to current situation. furthermore, latest research papers have provided directions for the new researchers. so, it will be checked and take a guideline from them. nvivo 11 is used for qualitative analysis part, especially in literature review part of this study. after that scale, items have been adopted to measure the phenomena. a complete questionnaire is prepared and then distributed among samples and collected responses on likert scale. then these results have been coded from 1 to 5 from strongly disagree to strongly agree. the coded data of each response have been entered in to spss 21 software for further analysis. then different statistical tests have been used through spss software. the result from these tests was interpreted in this study. furthermore, based on these results, the study will be generalized and some conclusions have been drawn. for writing the report ms word 2016 is used. furthermore, to check grammatical mistake’s white smoke software will be used in this study. reference is the most technical part of this study. researchers used endnote x7 software for automatic references. 4. results and interpretations in this study, data has been collected through survey method and analyzed with different statistical tests by using spss software. the results from these tests have been mentioned here with their interpretations. the above-mentioned table 2 shows mean, standard deviation, correlation and reliability of variable based on survey data. mean is the central value of respondent or the most favorable trend. the mean value from three shows the neutral view and more than 102 m. n. shafique et al. the impact of green supply chain management practices on performance: moderating role of institutional pressure with mediating effect of green innovation shows, the agree with phenomena. in addition, less than three shows disagree behavior. means values of green supply chain management, green innovation and performance shows agree behavior while the value of institutional pressure shows the tendency towards neutral. the standard deviation value shows the deviation from the mean point all the values are close to zero, which mean very less deviation behavior from the mean point. moreover, the values of pearson’s correlation are high and significant, which shows each variable has the correlation with other variables. furthermore, the values of crona bech alpha test showed the reliability of data. all the values are highly reliable and data is acceptable for further analysis. table 3. regression between green supply chain management practices and performance (n = 433) model r2 β t sig. green practices .860 .927 51.437 .000 dependent variable: performance the above table 3 shows the effect of green supply chain management practices on organizational performance through the regression test. the value r2 of shows the effect of independent variable on dependent variable. in the above table, value of r2 is .86. it means that the change in green practices will bring the 86% change in performance. moreover, the value β of shows the standardized coefficient. it means the effect on dependent variable is only due to the independent variable. the value of β is .927. it means that 92.7% change in performance is only due to green practices. the value of t shows the difference. in the table, value of t is 51.437. the significant or p value is .000. all the values are in the acceptable range at the significant level. therefore, the result shows green supply chain management practices effecting 86% on performance. table 4: moderated regression among gscmp, perf. and ip (n = 433) model r2 β t sig. green practices .860 .927 51.437 .000 int (perf. * ip) .896 .975 29.468 .000 dependent variable: performance table 2. means, standard deviations, correlations, and reliabilities (n = 433) variables mean s.d gscm ip gi perf. gscm practices 3.09 1.024 (.969) institutional pressure 2.87 .947 .883** (.926) green innovation 3.68 1.304 .852** .861** (.920) performance 3.04 1.013 .927** .908** .894** (.958) **. correlation is significant at the 0.01 level (2-tailed). reliability estimates in parentheses. 103 business, management and education, 2017, 15(1): 91–108 the above table 4 shows two regression models. the first model described the direct effect of independent variable of green supply chain management practices on dependent variable of organizational performance. while in the second model, the interaction effect has been analyzed. the interaction term is the combined effect of independent and moderated variable on dependent variable. the change in values of r2 of shows when moderated variable is added then dependent variable is more effected. when only green practices are effected on performance then the value of r2 is .860 after adding moderating variable through the interaction term this value increased up to .896, which showed moderation will enhance the effect on performance. in addition, the value β of shows the standardized coefficient. the value β change from .927 to .975. the change in value β of shows when moderated variable is added then de-pendent variable is the only effect due to independent and moderated is increased. the value of t shows the difference; the t value is also changed from 51.437 to 29.468. when moderated variable is effected then difference will be decreased. both models are at the highly significant level, which is shown by significant, or p value .000. so, these results show moderated variable is effecting positively on dependent variable. table 5. hayes mediation among gscmp, perf. and gi (n = 433) model coefficient standard error t sig. green innovation .2943 .0227 12.9689 .000 green practices .5979 .0289 20.6798 .000 dependent variable: performance the above table 5 shows the mediation effect of green innovation between independent variable green supply chain management practices and performance. the hayes model 4 is used to find the mediation effect through hayes’s plug-in for spss. the value of a coefficient shows the effect of independent variable of green practices and mediating variable green innovation. both variable effects are calculated separately. if it is required to find the combined effect of independent and mediating variable, then just have to sum these values. the standard error shows the value of error, and it is analyzed the mediating variable green innovation has low standard error. the value of t shows difference and the value of t is less for mediating variable. both values are at the highly significant level. therefore, these values showed that green innovation plays mediation effect between green supply chain management practices and performance. 5. conclusions this study is concluded hypothetically. because this study has developed a relationship between green supply chain management, institutional pressure, green innovation and organizational performance. this relationship has been analyzed through spearman correlation statistical test. furthermore, regression test is used to find the effect of green 104 m. n. shafique et al. the impact of green supply chain management practices on performance: moderating role of institutional pressure with mediating effect of green innovation supply chain management practices on organizational performance. the result of this regression test is in the favor of first hypothesis at the significant level. therefore, the first hypothesis of this study, “green supply chain management is positively effecting on organizational performance” have been proved and accepted. second hypothesis of this study is “institutional pressure play moderated the effect between green supply chain management and organizational performance” was tested through regression and moderated regression, and it has been proved by results from these tests at the significant level. the third and last hypothesis of this study is “green innovation plays mediating effect between green supply chain management practices and organizational performance.” this hypothesis was tested through hayes’s model 4 for mediation, and the direct and indirect effect was analyzed and proved at the significant level. so, this hypothesis is also proved. the overall model of this study is accepted and proved. limitations are the restrictions or boundaries faced by a researcher during the whole study. based on these limitations, researchers recommend some suggestion as future direction for the upcoming researchers in this field. the first limitation is variable based. this study focused only four variable green supply chain management practices, institutional pressure, green innovation and organizational performance while other variables, i.e. decision support system, organizational structure and organizational strategies effecting on performance but these variables had been ignored in this study. the second limitation in this study is based upon geographic location. this study focused only on pakistan while further studies can be workable on different geographic areas. the third limitation in this study is based on sector or industry based. this study only focused on electronic industries while further studies can do on different sectors like construction and manufacturing sector. the other limitations for data collection respondents are very busy. so, in future research take appointment before to visit to respondent and go in their free schedule. this study can implement in both academician and managerial level. in managerial point of view, this study can be implantation in organizations to strengthen their supply chain management channel through new concepts and processes to enhance innovation and performance. this study will be implemented in electronic industry in pakistan to enhance their performance. furthermore, this study can implement outside the pakistan and in different sectors like construction and health sector. in academic point of view, this study can new open doors and dimensions to the field of green supply chain management, institutional pressure, green innovation and performance for the new researchers to do more work. therefore, this study had practical implementation in both sides. 105 business, management and education, 2017, 15(1): 91–108 references albort-morant, g.; leal-millán, a.; cepeda-carrión, 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sarkis, j.; geng, y. 2005. green supply chain management in china: pressures, practices and performance, international journal of operations & production management 25: 449–468. https://doi.org/10.1108/01443570510593148 108 m. n. shafique et al. the impact of green supply chain management practices on performance: moderating role of institutional pressure with mediating effect of green innovation muhammad nouman shafique is doing his doctor of philosophy (phd) in business administration from dongbei university of finance and economics, china. previously, he did his master of philosophy (m.phil) in business administration from pakistan. he achieved distinctive accomplishments from different international institutes. furthermore, he has published many research papers in different international journals. he also participated in different conferences to present and learn new methods and techniques and trends in research. muhammad shahid asghar is doing his master of philosophy (m.phil) in project management from shandong university jinan, china. previously, he did his bachelor of technology in electronics & communication from university of engineering & technology lahore, pakistan. he also had the opportunity to study a number of subjects in the humanities and they have been both enjoyable and enlightening, providing me with a new and different perspective on the world in which we live. dr. haji rahman, a man of ambitions to take the challenges in his field. he remained a hardworking human with an excellent academic career. he did his ms in engineering management from uet, taxila, pakistan and phd in management sciences (hrm) from preston university, islamabad on hec scholarships. he is the author of a number of international and national research papers. he has also presented his research articles in a number of international research conferences. he worked as faculty member for more than 9 years at the ghulam ishaq khan institute with best result producing teacher awards. he is now associated as assistant professor with preston university, islamabad campus. preston university has awarded him the punctuality and efficiency awards for fall semester 2015, spring semester 2016 and fall 2016. he is also a visiting faculty member at the iiui, islamabad and federal urdu university of arts sciences and technology, islamabad. he also delivered trainings modules at cda training academy and pakistan manpower institute, islamabad. bme_2017_15_2 maketas_spaudai.indd copyright © 2017 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. practical application of exclusive and inclusive talent management strategy in companies asta savanevičienė1, birutė vilčiauskaitė2 school of economics and business, kaunas university of technology, gedimino str. 50, lt-44239 kaunas, lithuania e-mails: 1asta.savaneviciene@ktu.lt; 2birute.vilciauskaite@ktu.edu (corresponding author) received 1 june 2017; accepted 29 september 2017 abstract. the article deals with the practical application of exclusive and inclusive talent management strategies in order to form and maintain a competitive human resource potential of the company. the features of both exclusive and inclusive talent management strategies were defined and their practical appication in companies of various lithuaniam industries was studied. the input from the respondents suggests that major companies prefer the inclusive talent management strategy, rather than exclusive. summing up all the research results, the following conclusions were formulated: the features characteristic to inclusive talent management strategy dominate in the companies of manufacturing, banking, catering, consulting, trade, energy, transport, and agribusiness industries. in the company of technology industry, features of a mixed (having both exclusive and inclusive) talent management strategy are apparent. the company in the construction-engineering industry has the dominating features of exclusive talent management strategy. inclusive talent management strategy responds to the principles of human potential development-oriented expression and is an important message for the formulation of further insight into talent management, based on the use of internal potential. keywords: talent, talent management, human resource managment, exclusive talent management strategy, inclusive talent management strategy, organisation. jel classification: m15, m53, o15. 1. introduction “global abundance but local scarcity of talent” – describes the modern trends in the labor market al ariss (2014). the importance of human capital is emphasised due to investment in competence development, at individual, organizational, and national level, but the increasing competition in the knowledge economy forces to strive for the “best”, which implies a permanent gap between talent supply and demand. the issue is sharpened by general demographic trends. the international organisation for migration (iom) announces that due to the aging of the population age structure, labour supply and demand imbalance, talent demand b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2017, 15(2): 242–260 doi:10.3846/bme.2017.366 243 business, management and education, 2017, 15(2): 242–260 and lack of mobility within the eu by 2050, the demand for eu migrants will rise to 40 million. part of the demand will be offset by migration within the eu. thus, talent leakage is and will be inevitable in lithuanian labour market, while companies of some industries both currently and in the future will face shortages of talented staff not only locally, but also globally. talent management is the most important competence for the forward-looking companies, and such factors as demographic changes, mobility, globalisation, the economic climate, and business transformation only confirm its importance. according to van zyl et al. (2017), talent management is a strategic priority for profit organisations, especially in the private sector. objectives of the paper are to determine the features of both exclusive and inclusive talent management strategies and to identify their practical appication in companies of various lithuaniam industries. therefore, both scientific and practical recognition of this issue encourages search for solutions that would help transform these challenges into benefits and opportunities. current issues in talent management promote the formation of various scientific insights in this field. in order to transform both global challenges and existing negative factors within the context of organisation into opportunities, it is important to identify and select an appropriate strategy for talent management (exclusive, when some of the talents exist and they are “bought”, or inclusive, when anybody can be potential talents if they are developed), as well as to investigate the practical application of these strategies by evaluating the features of different industries (hartman et al. 2010; rothwell 2012; schuler, jackson 2014; dries 2013; meyers, van woerkom 2014). despite the fact that the issue of choosing a strategy is very relevant, there is very little data that analyses the choice of inclusive or exclusive talent management strategies. one of the studies, conducted by the chartered institute of personnel and development (cipd 2011), indicates that about 40% of organisations are more likely to implement inclusive talent management strategy. in part, this depends on the size of an organisation, because smaller organisations (less than 250 employees) tend to choose this strategy – 67% rather than 37% in larger organisations. but the latter are increasingly interested in inclusive strategy (summarised the data from the uk, us and india). fernández-aráoz (2014) announces that in the netherlands, for some organizations to implement inclusive talent management strategy is a necessity caused by the national labor market and work-related laws, as well as government initiatives (the so-called participation act, which came into force in 2015) encouraging to provide jobs for disabled people, allowing equal opportunities for all people in order to fulfill their potential. as an example, a small danish software testing firm is presented, where people with autism are emloyed as testers. due to their strengths caused by their disease (a special attention to details), the company was able to implement a successful business model, which helps to provide the highest quality services to customers. c. meyers (2015) says 244 a. savanevičienė, b. vilčiauskaitė. practical application of exclusive and inclusive talent management strategy in companies that the survey of human resources managers (321 participants in 49 countries) revealed that inclusive or exclusive talent management strategies are distributed almost equally. thus, this limited data begs for an empirical study with the aim to identify the existing talent management strategy (inclusive or exclusive) in an organisation, to evaluate the expression of these strategies in various industries and the peculiarities in the industry that affect the choice of a specific strategy in lithuania. according to the research aim and theoretical foundation of the research variables, the researches decided to follow an inductive approach. no theories or hypotheses would apply in inductive studies at the beginning of the research and the researcher is free in terms of altering the direction for the study after the research process had commenced. in order to achieve the objectives of empirical qualitative research was chosen. as a data collection method, in-depth interviews were used. to develop a talent management framework for the industries, the researchers formulated key research questions, which were answered by the research participants and were reflected in the themes. the research directions (questions) are listed below: 1. values that best describe your company’s culture. 2. defining “talent” and “talent management” practices in the organisations. 3. link between talent and performance management (why are talents important when implementing strategic goals?) 4. the usage of external and internal sources for talent attraction (does the company tend to attract more talent from the outside or develop talents within the company? what are the positions for which you attract talents from the outside? how do you attract new talents? what are the positions for which you attract talents from within the company? do you have talent pool/succession plans?) 5. retaining talents (what methods of talent training, development and motivation do you use? do you use a special program? what makes it different from a common retaining programme?) 6. the effectiveness of talent management system (how do you assess the efficiency of talent management? what should be changed? 2. review of theory and literature: different aspects of talent management the concept of “talent management” was first mentioned by the us consulting firm “mckinsey & company” in their article “the war for talent” (1998). reviewing scientific literature in the field of talent management, it should be noted that there are some scientific insights but the challenges of talent management are much more analyzed in popular literature which is oriented into practical activities or weblogs and social networks (iles et al. 2010; vaiman et al. 2012). although scientists have also published some articles, they are scarce. this illustrates the gap between practical and academic interest in the subject (dries 2013; arris et al. 2013) and presupposes the need for the recognition of the talent management phenomenon. lewis and heckman (2006) summed 245 business, management and education, 2017, 15(2): 242–260 up that the analysis of talent management in scientific literature was in the infancy stage, because it lacked a clear and consistent definition and opportunities for application areas, as well as conceptual framework, which was based on empirical research. in 2009, this fact was confirmed by collings and mellahi (2009). a few years later, collings, scullion and vaiman (2011) confirmed that talent management had moved from infancy to adolescence stage, especially due to the contribution from the us scientists who had used the north american way of thinking and research. furthermore, powell and lubitsh (2012) announced that there was also a strong focus on talent management in the private sector and international companies. some researchers analyse the talent management exclusively in the context of an organisation, saying that the goal of talent management is to attract, develop, motivate and retain talent (mccauley, wakefield 2006; ready, conger 2007; christensen, rog 2008; beechler, woodward 2009; davies, b., davies, b. j. 2010; meyers, van woerkom 2014) and it is a part of human resource management policy. as a result, there are several features of the way this concept is used (tansley 2011): (i) concept of talent management is not used at all in the human resources management policy; (ii) only some levels of an organisation have a common understanding of the talent management concept; (iii) talent management concept is understood and widely used in the performance of an organisation. however, especially during the economic boom in the years 2002–2007, business leaders and hr professionals understood the impact of not finding the right people or of employing people who are “below the average” who would simply fill the necessary positions (dewhurst et al. 2012). the focus on talent management represents a shift from the more traditional human resources towards strategic talent management, which is determined by corporate strategy, combined with other processes (silzer, church 2009). collings and mellahi (2009) emphasise the influence of talent management on the results of an organisation’s performance, stressing that effective talent management will have an indirect positive impact on the organisation’s activities via employee motivation and organisational commitment (collings, mellahi 2009; höglund 2012). in addition, greater employee engagement is referred to as an indirect goal of talent management (christensen, rog 2008; martin, groen-in’t-woud 2011), as fully engaged employees generate better business results than employees who are not engaged, when measuring the engagement by higher productivity, improved customer satisfaction, and better staff retention, despite the many challenges faced by organisations (odierno 2015). however, due to external factors, such as mobility, globalization, etc.; and their impact and threats to the organisation’s activities and competitive success, other authors propose to go beyond the organisational context and to look outside the organisation. therefore, boudreau and ramstad (2005) emphasise the significance of sustainability and benefits for the society, arguing that not only do organisations have to create the traditional paradigm of value to the shareholders, but to also achieve the social goal of sustainability. sustainability “includes such objectives as social responsibility, support for staff and other people’s rights, diversity, nature preservation, and contribution to 246 a. savanevičienė, b. vilčiauskaitė. practical application of exclusive and inclusive talent management strategy in companies the economy” (boudreau, ramstad 2005). the researchers point out that sustainability is rarely encountered in strategic human resource planning and talent management. talent management is associated with the results of the community (ulrich 2007). an improved social image helps organisations attract better employees (ulrich 2007; phillips, roper 2009; stahl et al. 2012; egerova 2014). in this light, it should be noted that there is no uniform definition of talent and talent management, and their objectives and scope are also lacking, while at the same time, there is a disagreement whether talent management is concerned with all employees (inclusive, or strength-based strategy to talent management) or talents are only highly potential and efficient employees (exclusive strategy to talent management). these strategies will be presented in more detail below. according to m. c. meyers (meyers, van woerkom 2014), the difference between exclusive and inclusive talent management strategies is very obvious in the papers written by practitioners and academics (meyers, van woerkom 2014). originally, there was only an exclusive talent management strategy as a tool for employees who are valuable and unique (lepak, snell 1999), demonstrate high potential and effective activity (silzer, church 2009) or occupy strategically important positions in the organization (huselid et al. 2005). this applies only to 1–15% of the employees in terms of talent selection, evaluation and recognition. in the context of today’s talent scarcity, this means aggressive search, attraction, and selection of high-potential profiles (cappelli 2008). most organizations have implemented the exclusive talent management strategy, which has identified a number of high potential employees, by appointing them consciously or as successors to leadership positions. therefore, these employees have more training and promotion opportunities, higher salaries, and better benefits than others. high-potential employees (sometimes referred to as star employees or a players) are able to create more value to an organisation than the average employees (aguinis, o’boyle 2014), and it seems justified to invest in them a large part of the human resources budget, assuming that this large investment will pay off, causing positive reactions such as increased commitment and motivation of the talents. however, when implementating the exclusive talent management strategy, transparency is particularly important in order to avoid creating false expectations from other employees that can not be implemented in the long term and that affect the psychological contract breach. the latter risk is particularly high, as reported by dries and de gieter (2014) in those organisations that have privacy policies related to talent management (by not defining openly who is included in the talent pool and who is not). to summarise, exclusive talent management strategy analyses the opportunity to attract candidates who are essential to the success of the organisation and are in short supply in the labor market. investing in these people encourages loyalty and motivation within this very important but small group of employees. organisations that attract and retain the best employees could ensure a long-term advantage over competitors (collings, mellahi 2009). an exclusive talent management strategy would perfectly 247 business, management and education, 2017, 15(2): 242–260 fit an organisation dominated by a competitive culture and where employees expect rewards for exceptional performance (meyers, van woerkom 2014). an alternative to exlusive is inclusive talent management strategy. inclusive talent management strategy is based on the assumption that all employees have valuable qualities or talents that can be productively applied to organisations. this assumption, in turn, is one of the main claims of positive psychology (seligman, csikszentmihalyi 2000), which focuses on all aspects of life that are good or functioning properly. inclusive talent management strategy can be defined as “the recognition that all employees have the talent together with constant assessment and their employment being in the positions that are most suitable and that offer the greatest potential (through participation) for employees that possess these talents” (swailes et al. 2014). the main focus of this strategy is on such talent tools as training and experience acquisition (mccall 1998). according to m. c. meyers (2015), the goal of inclusive talent management strategy is to highlight the best in all employees, allowing them to fully utilise their potential at work. it also means that the aim is to invest in a number of different talents. it is important to mention that inclusive talent management strategy also recognises the possibility that employees may have talents that are not suitable for a particular organisation. in such cases, organisations must facilitate finding another, more suitable job place (swailes et al. 2014), so that their talents are not wasted. inclusive talent management strategy promotes employee well-being, learning, and activity through the opportunity for employees to fully realise their potential (meyers 2015). according to the researcher, this strategy allows organizstions to respond adequately to the challenges of today’s labor market: a) can get the best talent in the face of a common talent scarcity; b) can potentially contribute to attracting a more diverse workforce; c) is able to deal with a very dynamic labor market by investing in a variety of talents. this strategy is particularly appropriate for organisations that seek to promote health and well-being by prioritising cooperation rather than competition. each of those strategies has advantages and disadvantages. a perfectly suitable strategy for one company will not be suitable for another. therefore, selecting a specific talent management strategy should include not only assessing the strengths and weaknesses of each strategy, but also complying with the contextual factors such as the organisation’s size, culture, values, mission, and strategy. in addition, it is important to evaluate the talent management strategy not only in the context of the organisation but also in the context of the industry, or even national context (sidani, ariss 2014; thunnissen 2016). 3. research methodology the research aims to identify the choice of exclusive or inclusive talent management strategy, the practical application of these strategies in companies of various lithuanian industries and the peculiarities within each industry that affect the choice of a specific strategy in lithuania. 248 a. savanevičienė, b. vilčiauskaitė. practical application of exclusive and inclusive talent management strategy in companies in order to reach this aim, empirical qualitative research was chosen. as a data collection method, in-depth interviews were used, because they offer the opportunity to capture rich, descriptive data about people’s behaviours, attitudes and perceptions, unfolding complex processes. one respondent (human resources management professional) from the largest companies in various industries (manufacturing, technology, banking, construction-engineering, catering services, consulting, trade, energy, and agribusiness) was interviewed. the largest companies were chosen as a research object due to the fact that the major of them have already implemented successful talent management systems and the respondents’ answers would provide useful insights for the results of this research, as well as for similar studies in the future. the information that was received from the respondents was used for data processing and analysis and encoded from hr1 to hr10 (depending on the industry). the leaders of lithuanian industries were chosen on the basis of the daily newspaper “verslo žinios” (2016) and official statistics portal (osp), which performed an analysis of the leaders of various lithuanian industries in 2015. selected criteria: sales revenue in 2015. the industries analysed: manufacturing (code: hr1), technology (hr2), banking (hr3), construction-engineering (hr4), catering services (hr5), consulting (hr6), trade (hr7), energy (hr8), transport (hr 9) agribusiness (hr10). total – 10 companies. when evaluating the nature of the capital, companies that were included were distributed in the following manner: 5 locally-owned, 4 foreign-owned and 1 state-owned enterprise. this research will have some limitations: (i) choice of data collection method(s). regardless of the choice of data collection method, integrating additional methods of data collection could have increased the scope and depth of analyses; (ii) scope of discussions. 4. research this section presents the results of empirical qualitative research, including the main research directions (questions) and exploratory opinions in accordance with industries. when analysing respondents’ opinions, there was an attempt to find out which talent management strategy (exclusive or inclusive) was dominant. it should be noted that each industry is represented only by one leading company, so the results are interpreted as exploratory rather than accurately representing all industries. however, there is no doubt that the results and conclusions will encourage further studies of each industry, using both quantitative and qualitative research in various sections (e.g.; by company size, nature of capital, etc.), identifying the chosen strategies of talent management. values that best describe your company’s culture this question has been formulated on the basis of the theory suggesting that an exclusive talent management strategy would perfectly fit the organisation where 249 business, management and education, 2017, 15(2): 242–260 competitive culture dominates and employees expect to be rewarded for exceptional performance (meyers, van woerkom 2014). and on the other hand, inclusive strategy is particularly appropriate for organizations that seek to promote health and well-being, giving priority to cooperation rather than competition. therefore, the aim was to clarify the existing values, which is a cultural basis, and, in accordance with prevailing values, to assess the prevailing talent management strategy. some of the respondents directly identified that one of the most important things were employees (“<…> one of our greatest assets – employees, and a strong focus on the people working there, their qualifications and motivation” (hr1), or human resources that are not copied and the most important asset of the company, indicating it as distinctive and contrasting over other company resources such as technology or finance (hr4). analysing the values of other respondents, they can be grouped into: customer focus and underlying factors such as customer care, professionalism, safety (hr2; hr3; hr4; hr5; hr6; hr9), the importance of each employee as well as the whole team, with the emphasis on the care, courtesy, and respect for colleagues, team unity and cooperation (hr2; hr3; hr4; hr5; hr6; hr7; hr8; hr9; hr10), and the representatives of companies hr3 and hr4 stressed the importance of simplifying not only work life but also teamwork. another group of values – openness to innovation and courage to create it (hr3; hr4; hr9), appropriate, simple, and responsible execution of work (hr2; hr3; hr4; hr5; hr7; hr8; hr9), and analyzing the values related to social responsibility, the following terms were mentioned: “ecology” (hr9), “respect for each individual and for the society” (hr8); “being a reliable and responsible employer” (hr10). the evaluation of values named by the respondents highlighted the importance of human resources in distinguishing them against other organisation’s resources (in companies that represent manufacturing and construction-engineering industries). companies that represent the remaining industries are dominated by values that promote cooperation with an emphasis on the importance of each individual, and for most (7 out of 10, with the exception of companies in manufacturing, consulting and agribusiness industries), proper, simple, and responsible execution of work is important. thus, the analysed corporate values emphasize cooperation rather than competition. according to the theoretical assumption about the distribution of values depending on the talent management strategy that exists in a company, the results lead to a conclusion that the corporate values expressed in the companies of various industries represent more inclusive rather than exclusive talent management strategy. defining “talent” and “talent management” practices in the organisations the first study direction (question) naturally led to an examination of the respondents’ perception of the “talent” and “talent management” and, with the help of their responses, a search for a further confirmation of the choice of either an inclusive or exclusive talent management strategy. given the fact that there is no consensus on the above-mentioned “talent” and “talent management” concepts in scientific literature, completely different descriptions were expected from the participants. when assessing the respondents’ opin250 a. savanevičienė, b. vilčiauskaitė. practical application of exclusive and inclusive talent management strategy in companies ions, it should be noted that in more than half of all the companies, all the employees are considered talents (hr1, hr2, hr3, hr7, hr9, hr10). however, in companies of two industries, only exceptional employees are considered to be talents. in a company which provides catering services (hr5), talents are only those who bring benefits to the company and with the length of service as a counterweight to the remaining employees, which results in a high turnover rate “<...> due to a high turnover rate of service personnel, it can be concluded that talents are still long serving employees, who are useful to the company and not only carry out their duties, but also provide added value”. in the industry of construction-engineering, talents are those, “<...> who allow us to implement construction projects, which are among the largest and most complex in the country” (hr4). the main components of talents are: competence (hr1, hr4, hr9), motivation (hr1, hr9; hr10), continuous learning (hr1, hr4, hr10) and initiative, ability to innovate, and loyalty to the company (hr1, hr7). in summary, the “talent” concept in the companies of all the industries represent more inclusive talent management strategy, except companies in the industries of catering services and construction-engineering that represent exclusive talent management strategy. by understanding the concept of “talent management”, the aim was to clarify the key function that dominates: talent attraction or retention (including training, motivation, and other tools). according to the scientific literature, one of the features of exclusive talent management strategy is “aggressive search, attraction, and selection of high-potential profiles” (cappelli 2008) and the main focus of inclusive strategy is on training and experience (mccall 1998). the analysis of the respondents’ opinions has revealed that “talent management” as a concept highlighted the following key functional parts: talent attraction and selection (hr1, hr2, hr3, hr4, hr5, hr7), talent development (hr1, hr2, hr3, hr5, hr6, hr9, hr10), talent motivation (hr1, hr2, hr5, hr6, hr9, hr10), and talent retention (hr1, hr3, hr7, hr8, hr9, hr10). thus, the answers revealed the following: talent attraction and selection dominates in one company (construction-engineering industry), and this trait (feature) is typical for exclusive strategy; talent retention (including training, development and motivation) is the most important factor for four companies (consulting, energy, transport, and agribusiness industries), and this is typical for inclusive talent management strategy; and there were five companies (manufacturing, technology, banking, energy, trade industries) that focused on all the functions of talent management, which led to a mixed talent management strategy. thus, this research direction (question) led to the conclusion that the major companies of various industries represent more inclusive rather than exclusive talent management strategy. link between talent and performance management in order to analyse the selection of talent management strategy, further research directions (questions) were linked with the causes, indicating the importance of talent when 251 business, management and education, 2017, 15(2): 242–260 achieving strategic objectives. this direction was selected based on the theoretical assumption that high-potential employees are able to create more value to an organisation than the average employees (aguinis, o’boyle 2014). therefore, companies invest in these people not only in order to recoup the investment, but also to increase their loyalty and motivation. the analysis of the respondents’ opinions emerged in two principal categories: consistency of talent management strategy and corporate strategy, as well as the importance of talents for the achievement of strategic objectives. consistency of talent management strategy and corporate strategy is very important (“when there are clear strategic goals, we align them with the talent management strategy <...>” (hr2) and there are critical positions for the achievement of these strategic goals (hr1). when the respondents assessed the importance of talents for the achievement of strategic objectives, it was emphasised that talents help ensure the organisation’s performance (hr1, hr2), competitiveness and attractiveness for their customers (hr3, hr4, hr5, hr7, hr8, hr9, hr10) and long-term business success (hr2, hr6, hr9, hr10). thus, companies in all the industries aim to align corporate strategy with talent management strategy, as well as to exploit the talents for organisation’s effectiveness, competitiveness, attractiveness for customers, and development of long-term business success. respondents’ answers expressed the idea that all the talents (as opposed to an exclusive group of them) contribute to the above mentioned strategic objectives, and it can be said that the results of the third research direction (question) indicate a link with inclusive talent management strategy for companies in all the industries. the usage of external and internal sources for talent attraction this and further research directions (questions) sought to extend and specify the results of “talent management” concept in companies of various lithuanian industries, based on the above mentioned theoretical assumption that talent attraction and selection is more important for an exclusive talent management strategy and talent training and development – for inclusive. most of the respondents said that they prefer to develop talents within the company (hr1, hr2, hr3, hr5, hr6, hr7, hr8, hr9, hr10). they emphasized that is typical for various managerial levels (“<...> first of all we try to provide opportunities for development of already existing employees. we have a lot of examples where employees of the companies start from the lowest steps and then during the decade reach solid management positions” (hr2)). and only then, if they fail to develop within the company, attracting talents from outside (hr1, hr2, hr3, hr7, hr10) one company (hr6) claimed, that tries to attract talents from the outside without any developmental opportunities inside. respondents have mentioned the causes for external attraction: absence of an internal candidate (hr2, hr3, hr4, hr7, hr10), rapid development of the organization (hr3, hr5), intentions to find the best employees (hr2). 252 a. savanevičienė, b. vilčiauskaitė. practical application of exclusive and inclusive talent management strategy in companies companies attract the candidates from outside for these positions: top and middle level managers (hr1, hr2, hr6, hr8, hr10), technical staff (hr1, hr3, hr4 hr5, hr10), specialists (hr4, hr7, hr8, hr9), workers (hr8, hr10), service staff (hr6). the means of external attraction: various job portals in the internet (hr1, hr4, hr6, hr7, hr8, hr10); corporate website with career section (hr3, hr6, hr8, hr9, hr10); newspapers (hr6); recommendations, friends (hr6, hr8, hr9); consulting companies (hr1, hr3, hr4, hr5, hr7), emphasizing that they use professional help in managerial positions (hr7) or highly experienced professionals (hr5). other possibilities: “head hunting” (hr1, hr2, hr3, hr4, hr7, hr9, hr10), universities (hr1, hr3, hr4, hr5, hr6 hr10). in summary it can be said that for attracting talents from outside, there is no dominance of one position over others. both managerial and non-managerial positions are distributed equally. 5 out of 10 companies choose to attract an external candidate because there is no internal candidate and a number of respondents identified the rapid development of the organization. the company in technology industry attracts external talents for the reason to hire the best. there are many methods for attracting from outside, however, especially dominant is “head hunting”, which means hunting the best from competitors. this method is preferable in almost all the companies (excluding the companies in catering services, consultancy, and energy industries) and refers particularly fierce battle for talent outside, if they fail to develop internally. the most common causes of internal attraction named as follows: fulfillment of managerial needs (“<...>if required, (middle and top-level managers) are prepared at any time to go to one or another management position”, hr1), motivation and development of existing talents (hr1, hr2, hr3, hr4, hr9, hr10) and image of socially responsible employer (hr2). the main level of the organization, which is approached from the inside, is high and mid-level managers (h1, hr2, hr5, hr6, hr9, hr10) or as respondents mentioned, they give priority to development inside and in the case of failure, thy attract from outside, in some cases emphasizing that such situations are most like. “<...> “even 95 percent of heads of various construction departments have started from the lower levels” (hr4). listing the ways of attracting from the inside, almost all the respondents mentioned succession plans (hr1, hr2, hr4, hr3, hr5, hr8, hr7, hr9, hr10); 4 out of 10 companies have succession plans only for managerial positions (hr1, hr2, hr3, hr5), and some – not only managerial positions (hr3, hr7, hr9, hr10), and one company (hr6) has no succession plan at all. one of the respondents mentioned a carreer plan which is related to a succession plan, as well as staff coaching for career planning (“<...>contributes career planning as well. specially for this purpose we established a career center, where we meet employees who want to discuss in which direction to move, in order to evaluate their competencies, to get an advice, and finally to move further”, hr3). some companies 253 business, management and education, 2017, 15(2): 242–260 use internal competitions as an internal source of candidates (hr1, hr2, hr3, hr4, hr9, hr10). when summarising, it should be pointed out that the majority of respondents mentioned the possibility to develop and motivate their talents as the main reason for internal candidate sourcing. accordingly, almost all the companies have succession plans, except the company in the consulting industry. some companies have succession plans not only for managerial positions, but for non-managerial positions as well. the most popular source of internal candidates is internal competitions. thus, the summary of respondents’ opinions suggests a link to inclusive talent management strategy, rather than exclusive. retaining talents in order to continue the search for attributes specific to inclusive or exclusive talent management strategies, an attempt was made to find out whether the training system for talent is different from the rest of the staff. in other words, the aim of this question was to reveal how the company’s retention (training, development, motivation, etc.) policy reflects the specific features of a particular talent management strategy. in addition, based on the assumption that high-potential employees are able to bring more value to an organization than the average employees (aguinis, o’boyle 2014), it seems justified to invest a large part of the human resources budget, assuming that this large investment will pay off, causing positive reactions such as increased talent commitment and motivation. some of the answers are related to (1) common practice in employee training, development and motivation with the main categories as follows: companies give priority to staff development and have various competence development programs (hr1, hr2, hr3, hr4, hr9, hr10), special focus on the development of professional competencies (hr2, hr4, hr5, hr7, hr8, hr9, hr10). other notable techniques used in developing staff are horizontal and vertical rotation (hr2, hr9), compensation of the studies (hr5) and sharing the “know-how” (hr5). after analysis of (2) talent management exclusivity in common developmental (training) system, it should be noted that companies create individual plans for their talents’ development (hr1, hr3, hr6, hr9), provide an opportunity to participate in internships or by the help of international career (“working for a large international group provides opportunities for talent internships and career not only in lithuania, but also abroad”, hr1, hr2), draw up specific programs (“over the years we have gained experience and knowledge and the “leadership school” was launched, hr2), carry out various coaching sessions (hr3), expand opportunities for self-development, and promote vertical and horizontal career (hr4, hr7, hr8). in summary it can be said that the retaining area is a priority for all the companies (with the exception of the company in the consulting industry), and a variety of tech254 a. savanevičienė, b. vilčiauskaitė. practical application of exclusive and inclusive talent management strategy in companies niques are used for this purpose. naming the uniqueness of talent in the common retaining system, it should be pointed out that companies often try to distinguish special ways of talent development by creating individual development plans or by using such nontraditional forms like internships, coaching sessions, promoting the development with the help of not only vertical but also horizontal career. the summary of respondents’ opinions justifies the theoretical assumption that companies invest more and a wider range of educational methods in their talents. this theoretical assumption endorses the conclusion that in the area of talent retention, major companies prefer exclusive instead of inclusive talent management strategy, despite the fact that other research areas stated otherwise. the effectiveness of talent management system the last research direction (question) was devoted to summarising respondents’ opinions as well as any potential unspoken insights that would help to identify the characteristics of inclusive or exclusive talent management strategy. the answers can be divided into 3 main categories: (1) evaluation of the current talent management systems, (2) criteria/ indicators of talent management system evaluation, (3) challenges. the analysis of (1) the current talent management system noted that two respondents evaluated their talent management system as positive (hr1, hr3), others did not mention anything. there were no negative evaluations either. 2) criteria/indicators of talent management system evaluation are: performance of a company (hr2), employee surveys (“in our opinion, the key question is a constant communication with the company’s employees, listening to their opinions. we have noticed that many good ideas are born precisely in those opinions”, hr3, hr4, hr9), measuring employee engagement and turnover rates (hr1, hr2, hr4, hr8, hr9, hr8, hr10). as (3) the challenges of improving the talent management system, respondents mentioned monitoring of innovation in the field of development (hr1, hr 9), creating succession plans (hr6), and, due to not being able to increase salaries any more, considering to source employees from foreign countries (hr5). when summarizing the respondents’ opinions, the main indicators of talent management system in major companies are the turnover rates, engagement, and various surveys (a feature of inclusive strategy). only the company in the technology industry measures its performance by effectiveness (a feature of exclusive strategy stimulating internal competition and exceptional results). and only a few companies mentioned potential challenges of improving the existing talent management system. thus, the results of this research area led to the conclusion that talent retention for major companies is much more important than attraction of new talents. in other words, the emphasis is given to inclusive rather than exclusive talent management strategy. however, attention should be drawn to the fact that the effectiveness of talent management system was positively evaluated only by the companies in the manufacturing and banking industries. 255 business, management and education, 2017, 15(2): 242–260 it seems that the remaining companies are still looking for ways to improve the system; so far the results have not been evaluated. after summing up all the research results, the following conclusions were formulated: the features characteristic to inclusive talent management strategy dominate in the companies of manufacturing (hr1), banking (hr3), catering (hr5), consulting (hr6), trade (hr7), energy (hr8), transport (hr 9), and agribusiness (hr10) industries. in the company from the technology industry (hr2), features of a mixed (having both exclusive and inclusive) talent management strategy are apparent. the company in the construction-engineering industry has the dominating features of exclusive talent management strategy. 5. summary talent management is the key competence for all the forward-facing businesses. an effective talent management system can help overcome such challenges as demographic changes, mobility, globalization, economic climate, competition, and business transformation. regardless of the above, the challenges of talent management are much more analyzed in the popular literature which is oriented towards practical activities, and scientists still recognise that the analysis of issues in the area of talent management has just shifted from infancy into adolescence stage (collings et al. 2011) the aim of qualitative research was to identify the features specific to a particular talent management strategy, as well as the practical application of these strategies in the companies of various lithuanian industries. based on the scientific literature, research directions (questions) were designed with the purpose to identify specific features of talent management strategy in the key talent management-related areas. the first direction of research has shown that the values of all the companies in various lithuanian industries prefer to emphasise cooperation, not competition, which is characteristic to the inclusive talent management strategy. the results of the second research direction (defining the concepts of “talent” and “talent management”) has revealed that companies in all the industries (except for catering services and construction-engineering industries) consider all employees talents as long as they fit certain characteristics. by defining the concept of “talent management” there was an attempt to find out which functional part dominated: talent attraction and selection or retaining (including training, development, motivation, etc.). the results show that only one company (in the construction-engineering industry) prefers talent attraction and selection (that is typical for exclusive strategy) to other functional areas; for four companies (in consulting, energy, transport and agribusiness industries) talent retention (including training, development, motivation, etc.) was most important, which is a characteristic of inclusive talent management strategy; five companies 256 a. savanevičienė, b. vilčiauskaitė. practical application of exclusive and inclusive talent management strategy in companies (in manufacturing, technology, banking, catering services, and trade industries) prefer to choose both, talent attraction and selection, as well as retaining them, which leads to a mixed talent management strategy. the third research direction (the link between talent and performance management) showed that all the talents (not excluding a specific group) contribute to the achievement of strategic objectives. this finding indicates the links with inclusive talent management strategy for companies in all the industries. the results of the fourth research direction (the usage of external and internal sources for talent attraction) revealed that all the companies (with the exception of the company in the construction-engineering industry) prefer first to develop their talent internally, and only if this fails, to attract from the outside. no position dominates over others in the case of external atrraction. but the dominant method is “head hunting”, which means that the best candiates are being headhunted from competitors. this search method is attractive in almost all companies (excluding the companies in catering services, consultancy, and energy industries) and refers to a particularly fierce battle for talent from the outside if companies fail to develop it internally. the majority of respondents mentioned the possibility to retain (train, develop and motivate) as the main reason for choosing internal candidates. almost all the companies have succession plans, except the company in the consulting industry. some of the companies have succession plans not only for managers, but also for non-managerial positions. in major companies, the most popular source of internal candidates is internal competitions. thus, the input from the respondents suggests that major companies prefer the inclusive talent management strategy, rather than exclusive. the fifth research direction (retaining talents) revealed that talent training, development and motivation are priority areas in all the companies. however, it should be noted that often companies try to distinguish talent development techniques that are specific in comparison with other employees and the results of this direction are completely different than in the previous directions. it leads to a conclusion that exclusive talent management strategy is more acceptable for major companies when there is a focus on talent retention. the sixth research direction (effectiveness of talent management system) showed that the main indicators of talent management system in major companies are turnover rates, engagement, and various surveys (a feature of inclusive strategy). only the company in the technology industry measures its performance by effectiveness (a feature of exclusive strategy stimulating internal competition and exceptional results). only a few companies mentioned potential challenges of improving the existing talent management system. thus, the results of this research area led to a conclusion that talent retention for major companies is much more important than the attraction of new talent, in other words, the emphasis is given to the inclusive rather than exclusive talent management strategy. summing up all the research results, the following conclusions were 257 business, management and education, 2017, 15(2): 242–260 formulated: the features characteristic to inclusive talent management strategy dominate in the companies of manufacturing (hr1), banking (hr3), catering (hr5), consulting (hr6), trade (hr7), energy (hr8), transport (hr 9), and agribusiness (hr10) industries. in the company of technology industry (hr2), features of a mixed (having both exclusive and inclusive) talent management strategy are apparent. the company in the construction-engineering industry has the dominating features of exclusive talent management strategy. it has been argued that any talent management approach can only ever be effective if it is aligned with an organisation’s culture, values, mission, vision, and strategy, as well as with its business and national context (sidani, ariss 2014; thunnissen 2016). consequently, decisions about talent management should never be taken in isolation without giving due consideration to the context in which it is implemented. 6. conclusions the role of human resources within the corporate structure has changed dramatically over the years. talent management is a key component to business success in the current economy as it allows companies to retain top talent while increasing productivity. talent management in organizations is not just limited to attracting the best people from the industry but it is a continuous process that involves sourcing, hiring, developing, retaining and promoting them while meeting the organization’s requirements simultaneously. when examining talent management in the context of an organisation, researchers distinguish key functional areas (to attract, develop, motivate and retain talent), emphasize the importance of consistency in talent management and corporate strategy, assess the influence of talent management on organisational performance, and suggest to look further, emphasizing the aspect of sustainability and benefits for the society. therefore, there is no uniform definition of talent and talent management, or their objectives and scope. while at the same time there are discussions among researchers whether talent management is concerned with all employees (inclusive, or strength-based talent management strategy) or talents are only employees of high potential and high efficiency (exclusive talent management strategy). the input from the respondents of the research suggests that major companies prefer the inclusive talent management strategy, rather than exclusive. the features characteristic to inclusive talent management strategy dominate in the companies of manufacturing, banking, catering services, consulting, trade, energy, transport, and agribusiness industries. in the company of technology industry, features of a mixed (having both exclusive and inclusive) talent management strategy are apparent. the company in the construction-engineering industry has the dominating features of exclusive talent management strategy. inclusive talent management strategy responds to the principles of human potential development-oriented expression and is an important message for the formulation of further insight into talent management, based on the use of internal potential. 258 a. savanevičienė, b. vilčiauskaitė. practical application of exclusive and inclusive talent management strategy in companies thus, the issue of choosing a talent management strategy is very relevant. according to the aim and results of the paper, the researchers recommend the following directions for future investigations: (i) identify how these strategies are 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http://www.workforce.com/2007/09/17/the-talent-trifecta/ vaiman, v.; scullion, h.; collings, d. 2012. talent management decision making, management decision 50(5): 930–932. van zyl, e. s.; mathafena, r. b.; ras, j. 2017. the development of a talent management framework for the private sector, sa journal of human resource management/sa tydskrif vir menslikehulpbronbestuur 15: 3–19. verslo žinios. 2016. lietuvos verslo sektorių lyderiai: išrinktos geriausios bendrovės 2016 [online], [cited 08 april 2017]. available from internet: http://vz.lt/verslo-aplinka/2016/12/29/lietuvos-verslosektoriu-lyderiai-isrinktos-geriausios-bendroves asta savanevičienė is a professor of the school of economics and business, kaunas university of technology. main field of academic interests: talent management, sustainable human resource management, and managing the generational diversity. more than 15 years of experience as a researcher and a leader of researcher groups. author of monographs, more than 40 scientific articles, co-author of 5 textbooks. birutė vilčiauskaitė is currently a phd student at kaunas university of technology. her research interests include talent management, global talent management, strategic human resource management, corporate social responsibility. owner and director at uab “ateities personalas”, with 15 years of extensive professional track record in human resource management consulting, working with the largest companies in lithuania. bank value: comparing customer and employee perceptions jelena titko1, natalja lace2 riga technical university, meza 1/7, lv-1048 riga, latvia e-mails: 1jelena.titko@rtu.lv (corresponding author); 2natalja.lace@rtu.lv received 12 october 2011; accepted 20 january 2012 abstract. in the modern competitive environment, banks create the value generally using the relational capital. thus, customer satisfaction and loyalty are the main components of bank success in a market. in turn, customer satisfaction is affected by bank service quality that determines bank’s value perceived by clients. the main goal of the research is to determine factors affecting bank value perceived by customers to examine the gaps in customers’ and employees’ perceptions of these factors. the goal of the paper is to prepare a theoretical basis for the survey and to describe and theoretically validate the design of the research instrument. to achieve the goal the brief literature review was conducted in the fields of relationship value management, service quality and customer buying behaviour. the statements of the questionnaire were developed based on kotler’s concept of a customer perceived value and different variations of the servqual model. to purify the developed questionnaires, the authors conducted focus group interview. we believe that bank performance depends directly on the bank’s ability to capture and retain clients and on customer-employee relationships. thus, it is crucial to know factors affecting customer perceived bank value. using our developed instrument it is possible to measure the level of service quality in latvian banks and to examine the difference between customers’ and employees’ viewpoints on the quality of bank services. keywords: perceptions of bank value, customers, employees. reference to this paper should be made as follows: titko, j.; lace, n. 2012. bank value: comparing customer and employee perceptions, business, management and education 10(1): 66–76. http://dx.doi.org/10.3846/bme.2012.06 jel classification: m31 1. introduction based on the opinions of many finance theorists and practitioners (sinkey 2007; ashton 2007; olsen et al. 2008), enhancement of shareholders’ value should be an integral goal of any company, including financial institutions. sustainable value creation is built on a foundation of distinctive customer value and defensible competitive advantage that allows a company to deliver superior shareholder b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2012, 10(1): 66–76 doi:10.3846/bme.2012.06 copyright © 2012 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 67 business, management and education, 2012, 10(1): 66–76 returns over the long term (olsen et al. 2009). companies who sell their goods or services at a profit enjoy a competitive advantage when customers choose to buy from them instead of their competitors (coyne et al. 2000). nowadays, intangible resources (intellectual capital) of a company can perform much greater value than tangible assets, especially in banking. one of the intellectual capital categories is a relational capital that describes an organization’s relations with customers and other stakeholders (mertins et al. 2009). relational capital keeps customers from abandoning a commercial relationship. in the post-crisis period, banks have come to rely on their retail operations as an invaluable source of funding for the asset side of the balance sheet (leichtfuss et al. 2010). to confront funding and profit challenges, retail banks must get back to the basics of the business: assets, deposits and branches. the battle for deposits will determine losers and winners in the banking sector. besides, customer relationships are critical to generating high-quality assets. in the post-crisis world, banks need to know their customers well (dayal et al. 2009). in a hyper-competitive market, all commercial banks are faced with challenges of retaining the existing and attracting new customers. thus, customer satisfaction and loyalty are essential to bank’s success. customer loyalty is a major contribution to sustainable profit growth. in turn, customer satisfaction is affected by bank service quality that determines bank’s value perceived by clients. the index to measure customer satisfaction and loyalty in european countries is epsi (european performance satisfaction index) rating. analyzing the statistics about customer satisfaction in latvian banking sector, we can conclude that customer satisfaction in latvia is at rather high level with the 75.3 scores out of 100 that is higher than the european average in the banking sector. however, the dynamics of the index demonstrate a decreasing trend compared with the previous years (epsi 2011). the main goals of the research are: (i) to determine factors affecting bank value perceived by customers, and (ii) to examine the gaps in customers’ and employees’ perceptions of these factors. the research questions are, as follow: 1. what are the factors affecting bank value perceived by customers? 2. what are the important weights of each factor from viewpoints of customers and employees? 3. how do customers and employees evaluate service quality in their banks? 4. which dimension of service quality contributes the most to the overall customer satisfaction? 5. what are the most important factors affecting customers’ decisions about suspending the relationships with a bank? 6. what stimulates customers to buy bank products? 7. what are the most important traits for ideal bank front-office employee from the viewpoints of customers and middle range managers? 68 j. titko, n. lace. bank value: comparing customer and employee perceptions the following research hypotheses were developed by the authors: h1: there is a difference in perception of value by bank customers and employees. h2: there is a difference in the vision of ideal front-office employee by bank managers and bank customers. h3: there is no difference in perceptions of bank value by customers of different banks. the goal of the current paper is to prepare a theoretical basis for the survey. the general research scheme is presented below (fig. 1). the paper is structured as follows: firstly, the authors conduct a brief literature review to examine the role of customers and employees in the value creation process. the different value creation models, such as balanced scorecard and service-profit chain are considered. second, we examine the elements of customer value and establish a list of factors determining customer perceived value of a bank (factors affecting bank service quality). to conduct the survey it is necessary to develop two questionnaires: one for customers of latvian banks and the second – for employees of latvian banks. the last chapter of the paper devoted to the description of the design of developed questionnaires. determination of the factors affecting customers’ (employees’) perceived bank value factors affecting perceived service quality factors affecting customer decisions about ceasing the relationship with a bank factors affecting customer decisions about a new purchase development of the research instruments customer questionnaire employee questionnaire data collection data analysis customer data base employee data base gap customer viewpoint: importance weight of factors assesment of factors employee viewpoint: importance weight of factors assesment of factors 5t h st ag e 4t h st ag e 3d s ta ge 2n d st ag e 1s t s ta ge expert validation of the reseach instruments (focus group interview to purify the questionnaires) fig. 1. the general research scheme 69 business, management and education, 2012, 10(1): 66–76 while developing these questionnaires, the authors used their own questionnaires prepared for the earlier conducted survey regarding satisfaction of bank customers and for the research related to the bank staff competencies (titko, lace 2009, 2010). 2. customers and employees as bank value drivers according to the relationship value management concept, there are three main stakeholder groups, which need to be managed for improved value creation and delivery: employees, customers and shareholders. by understanding the linkages between employees, customers and shareholders, value managers will be able to determine the impact on profitability of changes in employee or customer satisfaction, and have a reliable tool for leading improved business performance (payne et al. 2000). it is important to understand that all the value domains should be considered from two perspectives simultaneously: value that stakeholders deliver to a company and value that a company delivers to stakeholders. in the given research paper, we are primarily focused on two aspects of customer value: 1. value that a bank delivers to its customers. it means that we should define customer value. the key concept within the framework of the customer value is the concept of customer satisfaction. in turn, customer satisfaction is strongly influenced by service quality (rostamy 2009). so, we should define bank service quality factors. 2. value that customers deliver to the bank. we should define the factors affecting customers’ willingness to make investments into a bank. in order to prove the importance of customers and employees in the value creation process, the authors consider some models of value creation that have been proposed for supporting value-based management. value-based management focuses on defining and implementing management strategies, identifying value drivers and aligning management processes that support value creation (ittner, larcker 2001). all considered value creation models involve value drivers in three fundamental categories: people, processes and relationships. people, processes and relationships are viewed as sources of a company’s value capacity. people include employees and managers inside the company, and customers and other stakeholders outside the company (ashton 2007). quality-oriented baldrige model is often used as a model for performance improvement. it incorporates core values and concepts, performance criteria and weighting scheme for the criteria. a key measure of a company’s success is how well it meets its customers’ requirements. besides, in high-performing organisations, employees feel responsible for their actions. they are engaged. they care about the quality of their work (nist 2011). according to the efqm excellence model excellent results with respect to performance, customers, people and society are achieved through leadership driving policy 70 j. titko, n. lace. bank value: comparing customer and employee perceptions and strategy that is delivered through people, partnerships, resources, and processes (vorria, bohoris 2009). among the fundamental concepts of the model are: (i) adding value for customers, and (ii) succeeding through people (gemoets 2009). there are a lot of confirmations on existence of a relationship between employee satisfaction and customer satisfaction. the service–profit chain model establishes relationships between profitability, customer loyalty and employee satisfaction, loyalty and productivity (heskett et al. 2008). the links in the chain are as follows: profit and growth are stimulated primarily by customer loyalty. loyalty is the direct result of customer satisfaction. satisfaction is largely influenced by the value of services provided to customers. value is created by satisfied, loyal, and productive employees. value-creation model of scandia emphasises a role of intellectual capital as an intangible part of a company’s value. the scandia business navigator facilitates a holistic understanding of the organisation and its value creation along five focus areas: financial focus, customer focus, process focus, and human focus. customer focus gives an indication on how well the organisation meets the needs of its customers via services and products. human focus is the heart of the organisation. it is essential that the employees are happy with their work situation. satisfied employees lead to satisfied customers, improving the company’s sales and result (ashton 2007). the intangible assets monitor (iam), proposed by karl erik sveiby, is a method for measuring intangible assets. sveiby classifies intangibles into three parts: internal capital, external capital, and employee competence. internal capital includes organizational structure, research and development, etc. external capital includes brands, and customer and supplier relationships. employee competence includes education and training of the professional staff who are the principal generators of revenue (petty et al. 2009). the role of intangible assets is emphasized in all of the considered models. besides, the authors of these models point out at customer satisfaction and loyalty, employee competence and satisfaction with their work, and customer-employee contact as at the critically important things in value creation process. the results of many researches in the field of value management emphasise the role of customers and employees to achieve sustainable value creation. a lot of managers have a complete confidence that company’s performance depends on effective work of its front office (coveney et al. 2003). human resources determine the efficiency of the pursuing of organisational objectives (chlivickas et al. 2010). employees play a crucial role in creating value through increasing efficiency (el-bannany 2008). the researchers from mckinsey & company conducted a survey among the customers of european banks (beaujean et al. 2006). over 85% of satisfied customers increased their investments or started using more of bank’s offered products. conducting another research in the field, they found that loyal bank customers typically generate, over the life of their relationship with an institution, 30 to 70 percent more value than run-of-the-mill clients do. loyal customers not only buy more products than their counterparts but also tolerate higher banking charges (beaujean et al. 2005). 71 business, management and education, 2012, 10(1): 66–76 thus, success of a bank depends directly on the bank’s ability to capture and retain clients, as well as on intensity of relationships with clients. however, we should remember that bank employees are the key instrument to enhance value of products and services perceived by customers (croxford et al. 2005). so, it is extremely important to determine factors affecting bank value perceived by customers, and to examine the gaps in perceptions of customers and employees. 3. customer perceptions of bank value from the relationship value management point of view, concentrating on how much value (in the form of profits) and organisation can extract from its customers, without understanding what customers value from the organisation and providing it, is not sustainable in the competitive environment (payne et al. 2000). customers do not buy products and services. they buy value, the total package of product performance, access, experience, and cost. enterprises that understand how customers define value across these dimensions achieve superior long-term profitable growth. incomplete and vague value propositions do not allow the enterprise to differentiate its offering from competitor products (kothari, lackner 2006). based on kotler, the customers buy from a company, if its offering has the highest perceived value (kotler 2003). customer perceived value is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering (fig. 2). based on kotler’s concept of a customer perceived value, the authors conducted their previous research in the field of customer satisfaction and loyalty (titko, lace 2010). the key to building a competitive advantage is a bank’s ability to deliver a highquality service that meets the needs and expectations of customers (ennew, waite 2007). banks that excel in quality service can have a distinct marketing edge since improved levels of service quality are related to higher revenues and higher customer retention (abdullah 2010). product value service value staff value image value money costs time costs energy costs emotional costs service customer value total customer costs customer perceived value fig. 2. customer perceived value (source: kotler 2003) 72 j. titko, n. lace. bank value: comparing customer and employee perceptions scientific literature reveals that there is a positive relationship between quality of services and customer satisfaction. the main components which create customer satisfaction are (rostamy 2009): (1) personnel: including skills and knowledge, responsiveness, communication and collaboration and friendliness components; (2) product: including product variety, special services and cost components; (3) image: including credibility, technology excellence and ability to satisfy future needs; (4) service: including service waiting time, services processes and service information; and (5) access: including network expansion, troubles in the service system and location of service centres. all authors who conduct surveys in the field of evaluation of customer perceived bank value use questionnaires that consist of some statements. the statements should be evaluated by customers in terms of factor importance and factor assessment. each author offers his own developed system of factor combination into a number of factor dimensions. besides, authors use different number of variables. the brief review of such kind of studies in different countries is presented by ladhari (ladhari et al. 2011). 4. development of the research instrument to answer the research questions, the authors have developed two questionnaires: for bank customers and bank employees. the questionnaires consist of few sections: section a: respondent profile. we use some criteria for segmentation of customers and employees. criteria for bank customers are following: (1) gender, (2) age, (3) occupation, (4) income range, and (5) servicing bank. as for bank employees, the authors are interested primarily in their work position (front-office employee or manager) and work experience in a bank. section b: statements about service quality factors (factors affecting bank value perceived by customers) of an analysed bank. section b was designed based on the analysis of the related literature. in particular, the authors have used the statements (questions) from servqual models, designed by other researches for surveys in the banking sector (rostamy 2009; abdullah et al. 2010). section c: statements about the reasons why customers terminate their relationships with a bank. based on the theory, the reasons why customers terminate their relationships with product providers can be divided into four groups (ennew, waite 2007). in our research we are interested primarily in provider self-induced factors, because it is associated with a failure to deliver the right service experience. besides, these are factors that a bank can affect. section d: statements about the reasons to make new purchase (for instance, deposit or credit card) in a bank. statements for the section d are designed, based on the analysis of literature in the field of buying behaviour of customers (ennew, waite 2007; kotler 2003; blackwell et al. 2006). 73 business, management and education, 2012, 10(1): 66–76 section e: statements about the personal and professional qualities of bank frontoffice employees. we want to examine how bank customers and bank managers evaluate front-office employees of their banks and what employees’ qualities are the most important from their viewpoints. our task is to sketch the profile of an ideal bank frontoffice employee. the duties of bank front-office employees include activities directly related to the customer service and the activities related to the technical bank operations performance. thus, the bank customer service specialist should have both technical and social competencies to provide high quality service to customers. design of the last questionnaire section is based on previous experience of the authors in the research related to staff competencies (titko, lace 2009). to evaluate each of the statements respondents will be offered a 5-point scale. for instance, the alternatives for evaluation of the quality factor importance in the section b will be: 1 – not important, 2 – relatively important, 3 – average importance, 4 – very important and 5 – highly important. for assessment of each quality factors (each statement) will be offered 5-point scale ranging from “strongly agree” (5) to “strongly disagree” (1), with no verbal labels for scale points 2 through 4. in order to purify the developed questionnaires, the authors conducted focus group interview. the participants of the interview were middle range managers of latvian banks and researchers from the riga technical university and the university of latvia. 5. conclusions the competitive power of a bank is largely defined by the degree of its conformance to customer needs. growing customer expectations and, as a consequence, an increase in the cost of customer acquisition are the main problems in modern retail banking. it is crucially important for banks to retain profitable clients and to intensify the return from the existing customer base, i.e., to pay special attention to the issues of customer loyalty enhancing. the process improvement and investments in technologies are rather expensive methods to achieve this goal. we believe that the first step in the process of winning and retaining customer loyalty is improvement of service quality through staff development. questionnaires developed by the authors for bank customers and bank employees will allow to (1) evaluate service quality in latvian banks from the viewpoints of customers, (ii) distil the most important factors affecting bank value perceived by customers, and (iii) examine the difference between what customers value and what employees think the customers value. the next stages of the given research are as follows: 1. process of data collection (collection of perceptions from a sample of respondents – both bank customers and employees); 2. data processing with spss 19.0 as a software tool; 3. data interpretation and action plan 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customer satisfaction and loyalty in latvian retail banking, ekonomika ir vadyba [economics and management] 15: 1031–1038. vorria, e. p.; bohoris, g. a. 2009. criteria requirements of the european business excellence model: a suggested approach, the tqm journal 21(2): 116–126. http://dx.doi.org/10.1108/17542730910938128 http://dx.doi.org/10.1108/02652321111117502 http://www.bcg.com/documents/file37897.pdf http://www.nist.gov/baldrige/publications/business_nonprofit_criteria.cfm http://www.bcg.com/documents/file15314.pdf http://www.bcg.com/documents/file31738.pdf http://dx.doi.org/10.1108/02652320010358689 http://www.aabri.com/manuscripts/09177.pdf http://dx.doi.org/10.3846/1611-1699.2009.10.241-254 76 j. titko, n. lace. bank value: comparing customer and employee perceptions banko vertė: klientų ir darbuotojų požiūrio palyginimas j. titko, n. lace santrauka modernioje konkurencinėje aplinkoje bankai kuria vertę, pasitelkdami santykių kapitalą. klientų pasitenkinimas ir lojalumas yra vieni iš pagrindinių komponentų, lemiančių banko sėkmę. kita vertus, klientų pasitikėjimą lemia banko teikiamų paslaugų kokybė, kuri suformuoja klientų nuomonę apie banko vertę. pagrindinis šio tyrimo tikslas yra nustatyti klientų požiūrį apie banko vertę formuojančius elementus, kuriais remiantis būtų galima nagrinėti atsirandančius šių elementų suvokimo tarp klientų ir darbuotojų skirtumus. taip pat buvo siekiama parengti teorinį tyrimo pagrindą ir suformuoti tyrimo planą. šiems siekiams įgyvendinti buvo atlikta išsami susijusios literatūros apžvalga ir suformuotas klausimyno modelis. naudojant šį suformuotą apklausos būdą, galima nustatyti latvijos bankų paslaugų kokybės lygį bei nagrinėti klientų ir darbuotojų požiūrių skirtumus į banko teikiamų paslaugų kokybę. reikšminiai žodžiai: banko vertės suvokimas, klientai, darbuotojai. jelena titko is currently a phd student at riga technical university (rtu). she received the master’s diploma in social sciences from rtu (faculty of engineering economics) in 2004. the master’s thesis (2004) was focused on the problems of bank valuation. currently, she is a lecturer of the banking course at rtu. she has a professional experience in banking, as she held a management position in customer service centre at one of the leading latvian banks for several years. her research area focuses on drivers and factors that influence the value of a commercial bank, performance management and customer relationship management in banking. natalja lace is a professor at riga technical university. her research interests are focused on business financial management as well as critical success factors of small and medium-sized enterprises. natalja lace is the head of the master’s program “business finance” at riga technical university faculty of engineering economics and management. she is involved in execution of research project sponsored by the latvian government and scientific council of the republic of latvia and the eu. analysis of asset classes through the business cycle audrius dzikevičius1, jaroslav vetrov 2 using the idea of market-expected return rates on invested capital in the verification of conformity of market evaluation of stock-listed companies with their intrinsic value paweł mielcarz1, emilia roman2 personnel audit process wojciech pająk the position of slovakia in competitiveness ranking – the causes, impacts and prospects lucia stredná1, mária zúbková 2 audit committee practice in the polish listed stock companies. present situation and development perspectives piotr szczepankowski bank value: comparing customer and employee perceptions jelena titko1, natalja lace2 managing it workers katarzyna łubieńska1, jacek woźniak2 transforming leadership styles and knowledge sharing in a multicultural context rasa paulienė market behaviour: case studies of nasdaq omx baltic jelena stankevičienė1, natalija gembickaja2 spreadsheet error detection: an empirical examination in the context of greece dimitrios maditinos1, dimitrios chatzoudes2, charalampos tsairidis3 bme_16(1)_2018_maketas.indd copyright © 2018 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. business, management and education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 1: 65–80 https://doi.org/10.3846/bme.2018.2480 *corresponding author. e-mail: mikkel.knudsen@utu.fi introduction over the past few years, a remarkable thing has happened in southwest finland. major manufacturing sites have boomed and more than 30,000 new jobs have been created in the region (yle, 2018). this development is even more noteworthy as it has happened against a backdrop which was, in fact, rather grim. “the great recession” after the onset of the financial crisis hit finland hard (suni & vihriälä, 2016). in 2009 alone, finland lost 8.5% of gdp. finland’s manufacturing sector also experienced a decline. from 2007 to 2016 the manufacturing workforce in finland was reduced by about 90,000 jobs to a level of 307,000 employees (heikkilä, martinsuo, & nenonen, 2018). reimagining finland as a manufacturing base: the nearshoring potential of finland in an industry 4.0 perspective jari kaivo-oja1, mikkel stein knudsen1, *, theresa lauraéus1, 2 1 finland futures research centre, university of turku, turku, finland 2department of information and services, aalto university, helsinki, finland received 10 june 2018; accepted 13 june 2018 abstract. after decades of globalization and outsourcing the idea of “bringing manufacturing back home” and the twin concepts of backshoring and nearshoring have received much attention in recent years. recent positive stories from the finnish manufacturing industry suggests finland as an attractive target for nearshoring, yet little to none has hitherto been made of this connection. this article (i.) examines recent relocation literature with a focus on nearshoring and manufacturing in high-cost environments, (ii.) explores the location advantage of finland, (iii.) analyses cases of recent manufacturing developments in finland within this context as single incidents or signals of change, and (iv.) discusses this development within the perspective of industry 4.0. keywords: nearshoring, location advantage, manufacturing relocation, high-cost environments, manufacturing 4.0, industry 4.0, industrial strategies, corporate foresight. jel classification: d21, f23, l60, o25. 66 j. kaivo-oja et al. reimagining finland as a manufacturing base: the nearshoring potential ... in some ways, this followed trends visible for decades. finnish manufacturing industry had also been exposed to the “new globalization”, the world has experienced since 1990 (ali-yrkkö, lehmus, rouvinen, & vihriälä, 2017), and manufacturing work has moved abroad, as firms in global competition have sought to optimise efficiency by reconfiguring their value chains and relocating discrete value-added activities and tasks to the most appropriate locations (slepniov, brazinskas, & wæhrens, 2013). today, some 30% of finnish manufacturing firms (with more than a hundred employees) have offshored parts of their business activities, and about 40% of finnish corporations’ global employment is now located abroad (ali-yrkkö et al., 2017). the location trends of finnish manufacturing companies over the past 40 years can be noted in figure 1 which shows the gradual decline of finnish domestic employment combined with (until the latest decade) increased foreign employment of finnish manufacturing. notably, outsourcing and offshoring have been supplemented by increased productivity so that despite the decreased workforce, finnish manufacturing output has not declined. internationally, there have been signs – and much discussion on the possibility – that the offshoring-tide might be turning (stentoft, mikkelsen, & johnsen, 2015). the idea of “bringing manufacturing back home” in forms of “backshoring” (transfer of production back to the home country) or “nearshoring” (transfer of production back to a country neighbouring or close by the home country) has picked up much media and academic attention in the past half-decade (fratocchi, di mauri, barbieri, & nassimbeni, 2014; backer, menon, desnoyerjames, & moussiegt, 2016). the context of nearshoring might be particularly timely to explore. a study by miebach consulting (2017) concluded that “nearshoring is the major future shoring strategy”, and that an increasing amount of companies are producing in closer proximity to their markets rather than moving production abroad. more companies in the study believed nearshoring to be a high-impact trend than for offshoring, onshoring or local production. figure 1. foreign and domestic employment of finnish manufacturing, number of employees (source: ali-yrkkö et al., 2017) business, management and education, 2018, 16(1): 65–80 67 this article aims to explore the manufacturing boom of southwest finland in the context of this discussion. the examination builds on two main cases: the german-owned shipyard meyer turku and the automotive plant valmet automotive manufacturing cars for daimler. there are key differences between the cases in terms of e.g. ownership and functions and positions in manufacturing ecosystems, but centrally to both is western european owners and customers willing to bet big on facilities in finland. this can essentially, we will argue, be considered a form of nearshoring. in order to make this claim, we will first briefly examine the expanded strand of relocation literature related to nearshoring. within this context, our primary focus is nearshoring to small open economies and high-cost manufacturing environments, i.e. on finnish conditions or on economic conditions similar to those in finland. the second part of this article will be devoted to an exploration of the particular location advantages of finland. following this, the article will briefly present recent – and highly reported  – positive cases of manufacturing developments in finland. as mentioned these include in particular the growth of the meyer shipyard in turku and the valmet automotive factory in uusikaupinki; two engines of growth with a large effect on the regional economic situation of southwest finland. the main idea of this article is to discuss these developments within the context of theories and literature on nearshoring and then in extension within the context of industry 4.0. in identifying these cases as weak signals of a possible untapped nearshoring potential of finland, this article makes a unique contribution to the literature. hitherto, most – and to an extent, the only – focus has been directed towards manufacturing nearshoring to perceived low-cost environments, e.g. through the offshoring of manufacturing production from western europe to central and eastern europe or from scandinavia to the baltics. in fact, to the best of-of our knowledge, not a single peer-reviewed article has ever before considered finland as a possible destination for nearshoring of manufacturing. if there is nearshoring potential for finland, it has not yet been properly understood, and for this reason, the potential might be mostly untapped. the arguments presented here are therefore of high value for both practitioners and policy-makers interested in the industrial wellbeing of finland. 1. cases as weak signals the weak signal analysis is the activity of picking up scattered pieces of a puzzle before all the pieces of the puzzle fit together (mendonca, cardoso, & caraca, 2012; kaivo-oja, 2012). weak signals can be an early warning of threats, but also advanced information of opportunities, which is how we use them in this article. while the concept of weak signals is used widely in the business literature, an exact definition of the term is hard to find (mendonca, pina e cunha, kaivo-oja, & ruff, 2004). in general, it can be understood as information on potential change of a given system toward an unknown direction, or as “the early signs of possible but not confirmed changes that may later become more significant indicators of critical forces for development, threats, business and technical innovation” (saritas & smith, 2011). 68 j. kaivo-oja et al. reimagining finland as a manufacturing base: the nearshoring potential ... as weak signals often emerge in underspecified form, readers of weak signals risks superimposing their own meanings to the identified weak signal. as signs have no inherent meaning, interpreters will by default use previous knowledge and experience to decode incoming stimuli (mendonca et al., 2012). in this article, we draw on recent singular economic developments much reported in the popular press, which taken together can ever so slightly be detected from available statistics on the finnish economy. this calls for reflections of methodological risks. firstly, newspaper articles might oversell stories about local manufacturing successes. secondly, individual incidents may form a pattern primed to be repeated, or the connections between incidents might be coincidental, ie. noise rather than signals. to a certain point, further research can alleviate these concerns, as researchers can perform case studies that are more elaborate or choose to “wait-and-see” as the macroeconomic trends progress. however, the novelty and the value of contribution in describing clearly identifiable “strong signals” or “loud and late warnings” may be less significant and less relevant as calls for new actions. 2. nearshoring of production: notes from the literature from the point of view of location and distance from headquarters, companies can locate activities (slepniov et al., 2013): – in close proximity (domestically) – at a medium distance (nearshoring) – at a great distance (offshoring) this decision can be considered part of the companies’ globalisation strategies (arlbjørn, lühtje, mikkelsen, schlichter, & thoms, 2013). it should be noted that near-, backand offshoring in this article relates only to the physical location; differences in ownership are defined by inand outsourcing (foerstl, kirchoff, & bals, 2016). while certain recent studies explicitly take account of organizational boundaries (e.g. nujen, halse, damm, & gammelsæter, 2018), we are concerned here only with the location decision. there is extensive documentation in the business literature that companies are increasingly realizing that offshoring might have hidden costs (cf. larsen, manning, & pedersen, 2013), and that there is a “dark side” to global sourcing (stanczyk, cataldo, blome, & busse, 2017). the length and complexity of global value chains can expose companies to the large level of supply risk in the event of adverse shocks and make them less agile in the event of changing consumer demand (backer et al., 2016). by choosing nearshore locations organizations might enjoy the benefits of lower production costs, while at the same time benefiting from lower transaction costs in comparison with offshore locations (mcivor, 2013). with a noteworthy description from the economist (2005), this entails the activity of moving business “to countries that are quite cheap and rather close rather than very cheap and far away”. in other words, companies might purposefully be opting for medium cost savings and a medium level of risk and transaction costs, compared to both the options of domestic production (or sourcing) or of far offshore production (or sourcing). this relationship between increasing risks, increasing savings potentials and increasing distance is illustrated in figure 2. business, management and education, 2018, 16(1): 65–80 69 this follows a general important point in international business literature, namely that distance stills matters (e.g. ghemawat, 2001). in fact, the tendency of preferring nearshoring in sectors otherwise favouring virtual working has been seen as reinforcing exactly this point (carmel & abbott, 2007). nearshoring might in this sense limit some of the perceived barriers for offshoring jobs, such as lack of competences and language difficulties at the offshoring destination (cf. stentoft, olhager, heikkilä, & thoms, 2016). nearshoring might also make it possible to recalibrate a wider range of business functions. traditionally, advanced economy countries have been the preferred location for advanced business activities (jensen & pedersen, 2011). as an example, in europe, empirical studies show that firms offshore r&d to high-income countries such as germany and france rather than to low-income countries such as bulgaria and romania (tuhkuri, lööf, mohammadi, & rouvinen, 2016). however, much of the early literature on european nearshoring have focused on the movement of business activities (manufacturing, service, it) to lower-cost regions in central and eastern europe (e.g. meyer, 2006; the economist, 2005). a survey of early literature on nearshoring also showed that all identified studies treated the usa and western europe as client location rather than as a destination for nearshoring (carmel & abbott, 2007). this is still true for academic literature on nearshoring in finnish contexts. a google scholar search (7.3.2018) for “nearshoring + finland” provides 344 results, yet only one – a 2013 engineering studies bachelor thesis (!) – concerns finland as the nearshoring target (rather than e.g. finnish outsourcing to lithuania). as global value chains are reconfigured, it seems likely that studies will appear with country-specific analyses of nearshoring attractiveness and perhaps the antecedents of this. one recent example analyzed the feasibility of nearshoring european manufacturing located in china to russia (panova & hilletofht, 2017), while another study concerns nearshoring attractiveness of countries in the central eastern european (cee) region (lorincz, 2018). by placing finland as the destination target of nearshoring, this present article, therefore, provides the first such peer-reviewed contribution within this emerging literature strand with a focus on finland. figure 2. location of production with increases in risks and potential savings 70 j. kaivo-oja et al. reimagining finland as a manufacturing base: the nearshoring potential ... the very distinct lack of literature on the possibilities of reshoring to finland is supplemented by the fact that the concept of nearshoring has not quite received as much academic attention in recent years as perhaps deserved. as the literature grows on reversal of offshoring decisions (e.g. gylling, heikkilä, jussila, & saarinen, 2015; stentoft et  al., 2016; nujen et  al., 2018), and as more attention is devoted to the bi-directionality of global movements of manufacturing activities (vanchan, mulhall, & bryson, 2018) most research still focus on production either at home or far offshore. research on moving or relocating production to the near-abroad has not received the same attention, even though empirical studies show evidence of trends towards ‘regional rebalancing of value chains’ (backer et  al., 2016) and high company interest in opportunities provided by nearshoring (miebach consulting, 2017). 3. explaining location choices: why manufacture in finland? by configuring activities around the world, companies reap benefits such as gaining access to natural resources or lower wage-labour, closeness to important markets or gaining access to knowledge and other strategic resources (slepniov et al., 2013). one of the seminal works on manufacturing location decisions is john dunning’s argument for location as ‘a neglected factor’ (1998) with four main variables influencing the location of value-added activities for multinational enterprises. foreign direct investments (fdi) can be i. resource seeking ii. market-seeking iii. efficiency seeking iv. strategic asset seeking. natural resources play a considerable role in the finnish national economy, e.g. in forest and mining industries, and this factor is still seen as attracting foreign investments to the country (see e.g. helsinki sanomat, 2018). although the finnish market is small, strong coupling to it makes firms more likely to manufacture in finland (ketokivi, turkulainen, seppälä, rouvinen, & ali-yrkkä, 2017). building on previous literature, jensen and pedersen (2011) further explained relevant attributes for location choices under four headings – cost levels, human capital, business environment, and distance. these groupings of relevant attributes are shown in figure 3 below and includes the variables related to cost levels, to human capital, to the business environment, and to interaction distance. a comprehensive analysis of finland’s manufacturing attractiveness might include comparative analyses of each separate attribute indicator. for this present article, it will suffice to note that finland is a country with low political risk, well-established infrastructure, and efficient logistics. for several selected indicators of competitiveness more or less corresponding to the attributions listed by jensen and pedersen, as seen in table 1 below, finland ranks as among the best in the world, and at a comparative level with neighbouring countries or above, using the selected indicators of competitiveness adapted from vihriälä (2017) as a starting point. business, management and education, 2018, 16(1): 65–80 71 table 1. performance of finland, sweden and germany for selected indicators of competitiveness (adapted from vihriälä, 2017) finland sweden germany human capital wef – human capital report 2016 1 2 11 education oecd better life index 1 11 7 innovation world bank wgi index 3 6 5 quality of institutions wef global competitiveness report 1 3 6 network readiness wef global competitiveness report 2 3 15 digitalization eu digital economy and society index 2 3 11 proficiency in english education first (ef) 5 3 9 globalization kof index of globalization 11 8 27 there are able evidence that firms location decisions when reshoring has moved from being primarily cost-dominated to being more complex with decision drivers such as proximity, access markets, risk resilience, and supply chain flexibility (see e.g. cohen et al., 2017 for literature references). a theoretical way of framing it is to note that firms are increasingly concerned with total cost of ownership analysis instead of simple cost calculations (stentoft et al., 2015). however, cost are still clearly an important variable in manufacturing decisions. finland is considered a high-cost manufacturing country (e.g. ketokivi et al., 2017), but considering actual average wages finland might be competitive, if not with central and eastern european countries, then at least with countries in finland’s western and southwestern neighbourhood, as seen in figure 4, which based on oecd-data (2017) depicts average wages in finland and selected countries around it. all in all, with finland scoring well on indicators of competitiveness and (relatively) lower wages, finland could be an attractive country to invest in. however, finland has a relatively low level of foreign direct investments compared to other eu-countries surrounding the baltic sea, and the share of value added by foreign-controlled enterprises is similarly lower than in e.g. the baltic countries. this can be seen in figure 5. figure 3. important attributes for location decisions (based on jensen & pedersen, 2011) 1. cost levels 1.1 wages 1.2 infrastructure costs 1.3 tax and regulatory costs 2. human capital 2.1 education 2.2 availability 3. business environment 3.1 infrastructures 3.2 regulation 3.3 industrial context 3.4 country risk 4. interaction distance 4.1 geographic 4.2 language 4.3 cultural 72 j. kaivo-oja et al. reimagining finland as a manufacturing base: the nearshoring potential ... we might, therefore, conclude that despite finland being a potentially attractive manufacturing destination, the country has not previously taken full advantage of its possibilities. this conclusion would seem aligned with the noted decline of finnish manufacturing totals over the past decade. 4. manufacturing on the upswing: comeback, a new trend or just a fad? as noted, recent developments in the region of southwest finland has however been highly positive. the german-owned shipyard meyer turku oy has seen a turnaround in recent years, with revenue rising 33 pct. in 2016 alone to a yearly total of €792 million (business insider nordic, 2017), and the company has announced further planned investments of more than €185 million (meyer turku, 2017). carmaker valmet automotive has increased production volumes due to new manufacturing contracts with mercedes-benz. employment at the manufacturing plant rose from 2,300 employees in march 2017 to around 4,000 in february 2018 (valmet automotive, 2017, figure 4. average wages in us$, 2016 or latest available (own, from oecd-data, 2017) 0 10000 20000 30000 40000 50000 60000 latvia poland finland sweden germany denmark us $ 0 10 20 30 40 50 60 70 80 90 100 germany finland lithuania denmark poland latvia sweden estonia % inward fdi stocks as % of gdp value added in foreign controlled enterprises as % of total figure 5. inward foreign direct investment (fdi) stocks in % of gdp 2015 and value added in foreign controlled enterprises as % of total 2015 (own, from eurostat, 2018) business, management and education, 2018, 16(1): 65–80 73 2018). at the end of 2017, valmet automotive was the biggest private employer in the region of southwest finland; a year before it had been the third biggest (turun sanomat, 2018). in february 2017, valmet automotive was awarded a daimler supplier for partnership as “a flexible and reliable contract manufacturer who contributes to mercedes-benz cars production strategy by offering state-of-the-art technology” (daimler, 2017). both meyer turku and valmet automotive has opened 2018 with new major orders, and in total, an estimated 30,000 jobs have been created in southwest finland alone over the past few years (yle, 2018). the effects of the past few years are only beginning to show up in the economic statistics, as detailed statistics become available with a lag. as figure 5 shows, some effects can already be detected. this can be seen by comparing value added from relevant manufacturing sectors in the region of southwest finland (28 manufacture of machinery and equipment n.e.c., 29 manufacture of motor vehicles, trailers and semi-trailers, 30 manufacture of other transport) with the total value added from manufacturing in finland. the economic performance of these sectors in this single region is only a small part of the total finnish manufacturing industry; the share and the importance have increased, however, and a further rise must be expected for 2017. 1, 04 1 ,6 4 2 ,3 2 2, 45 2013 2014 2015 2016 pct. figure 6. value-added of manufacturing sectors 28–30 in southwest finland as share of total added value in finnish manufacturing industry (source: own calculations based on the statistics finland, 2018) the question, then, is whether the regional manufacturing upswing is an early sign of a possible general trend for finland, something due to unique circumstances in southwest finland, or an unsustainable fad soon likely to finish? as it is, the finnish economy, in general, has picked up speed since 2016, as output and exports are currently growing strongly. growth has been boosted by a strong revival in exports, cf. figure 6, although there are still some warning signs for the future (oecd, 2018) (figure 7). figure 7. output and exports of finnish economy (oecd, 2018) 74 j. kaivo-oja et al. reimagining finland as a manufacturing base: the nearshoring potential ... 5. the impact of industry 4.0 on nearshoring since the term was coined in germany in 2011, there has been much talk of the coming industry 4.0. as the term has come to symbolize a great many things, a precise definition of the concept might not be available. illustrating the width of the concept, lu (2017) summarizes industry 4.0 as “an integrated, adapted, optimized, service-oriented, and interoperable manufacturing process which is correlated with algorithms, big data and high technologies.” it is marked by highly developed automation and digitization processes and by the use of electronics and information technologies (it) in manufacturing and services. industry 4.0 can transform the industry in several ways (roblek, mesko, & krapez, 2016): 1. digitization of production  – information systems for management and production planning; 2. automation  – systems for data acquisition from the production lines and using machines; 3. linking manufacturing sites in a comprehensive supply chain – automatic; 4. data interchange. advanced manufacturing techniques allow radically short lifecycles and an intensified customer orientation with individualized products (brettel, klein, & friederichsen, 2016). in other words, industry 4.0 provide the framework for the ultimate focus on flexibility, customer-orientation and state-of-the-art technology, and advanced manufacturing techniques make this competitive in price (brettel, friederichsen, keller, & rosenberg, 2014). already by the year 2025, most manufacturing production processes could be almost entirely autonomous according to the oecd (backer, destefano, menon, & suh, 2018). an intimate relationship between reshoring (to the home country) and various forms of technological innovations applied to manufacture – variations of the concept of industry 4.0 – has previously been suggested in the literature (e.g. bals, kirchoff, & foerstl, 2016; barbieri, ciabuschi, fratocchi, & vignoli, 2018; moradlou, sawhney, backhouse, & mountney, 2017). beyond numerous case studies, the aggregated empirical analysis also suggests that e.g. investments in robotics have slowed down, and in some cases stopped, offshoring and helped maintain manufacturing in developed economies (backer et al., 2018). mastering new manufacturing technologies provide competitive edge due to increased operational efficiency and replacing manual work with automated processes decreases the importance of wage differentials. similarly, manufacturing firms might prefer to move the operation home in order to exert full control over the complete process without any risks to intellectual property. in finland, there is also evidence that companies engaging in manufacturing innovations have also been more likely to move previously offshored production back to finland (martinsuo & chaoji, 2017). in other words, the hypothesis that there is a link between advances in advanced manufacturing  – variations of technologies under the umbrella term industry 4.0  – and manufacturing location decisions appears to be confirmed by empirical evidence. the idea that industry 4.0 will underpin new patterns of production and new patterns of locations can therefore not easily be discarded. business, management and education, 2018, 16(1): 65–80 75 a visualisation of the perceived possible shift from offshoring-to-homeshoring and from outsourcing-to-insourcing can be seen in figure 8, which shows the direction of the outsourcing shift over recent decades, and the perceived possible reversal for the next decades (hartman, ogden, wirthlin, & hazen, 2017). even if empirical studies suggest a correlation between advanced manufacturing investments and manufacturing location decisions, this ideal-type visualization can still be considered speculation. a recent survey showed that while in germany, the inventor and frontrunner of the concept, industry 4.0 are expected to increase reshoring of german manufacturing, the general estimation of the importance of reshoring of industry 4.0 remains questionable among german practitioners (müller, dotzauer, & voigt, 2017). backer et al. (2018) similarly notes that while investing in robots seems to have a negative effect on the pace of offshoring, it cannot (yet) be seen as triggering reshoring. however, some trends seem likely to prove impactful, e.g. that increased use of automation, robotics, and artificial intelligence will put more onus on the availability of skilled labour capable of installing, adjusting and maintaining the automated production. 6. reimagining finland as a manufacturing base: elements of strength slepniov et  al. (2013) describe the strategic reasoning for why a swedish automotive company choose to nearshore manufacturing operations in the baltics. it allowed for investmentneutral growth and required lower costs to guarantee and maintain the necessary quality. this conclusion is very close to the implied value valmet automotive provides for mercedes-benz as flexible, reliable and able to provide state-of-the-art technology. in providing flexibility and reliability, a finnish manufacturer might distinguish itself from competitors located further away from the customer. a key driver for a possible figure 8. the proposed outsourcing-to-insourcing shift (source: hartman et al., 2017) 76 j. kaivo-oja et al. reimagining finland as a manufacturing base: the nearshoring potential ... ‘regional rebalancing of value chains’ is that relocation of production in countries far away increases supply risks and decreases the ability to react to adverse shocks and changing consumer demands (backer et al., 2016). customer-orientation is similarly important. the success of an industrial ecosystem will depend in large measure on its responsiveness to innovation and customer needs, and manufacturers in high-wage countries should, therefore, design their operations not only based on operational effectiveness, but on the ability to synchronize output with customer demand (de treville, ketokivi, & singhal, 2017; schonberger & brown, 2017). finally, the need for high-quality products is among the most cited reasons for reshoring production (stentoft et al., 2016). as noted, concepts of flexibility, customer-orientation and state-of-the-art technology are all intricately linked to developments of industry 4.0. possessing these dynamic capabilities might determine whether manufacturing companies in finland will thrive in the coming decades or not. using these optics, the success of meyer turku and valmet automotive can be seen as inspirational; a manufacturing development which can be replicated by other companies in finland, if the right capabilities and business model strategies are available. as automation and digitization become increasingly important in the manufacturing process, availability of other types of skills might determine advantages of manufacturing locations. finland can be well placed to take advantage of this development, as finland performs well in comparisons of human capital, education, innovation, network readiness and digitalization. these are main elements of strengths relevant when reimaging finland as a major european manufacturing base. conclusions after a very rough decade for the finnish economy and a noteworthy decline in manufacturing jobs, things have recently been looking up in the region of southwest finland. thousands of jobs have been created in the manufacturing of cars and cruise ships, and the importance of these sectors for the whole of the finnish manufacturing industry has risen, visible in the national economic statistics. in this article, the two cases have been used as examples of nearshoring. they offer an interesting value-proposition for their clients and customers with production in a country that is quite cheap (or assumingly at least cheap enough) and rather close, possible providing more reliability (fewer supply shocks) and flexibility (including the ability to handle changing customer demands) than competitors in low-cost countries far away. it appears therefore that the two cases provide examples fitting the recent academic literature on the concept of reand nearshoring. yet, the idea of finland as a possible destination target in this context has not been described prior to this article. the article therefore uniquely concludes that finland has a hitherto unarticulated, and possibly, untapped potential for improving its manufacturing base with nearshoring of manufacturing. this potential is reinforced further by the development of industry 4.0 in which new digital skills and new manufacturing techniques provide competitive edges. business, management and education, 2018, 16(1): 65–80 77 this study has some clear limitations and there are still major uncertainties regarding the extent of the impact. our conclusions could benefit both from additional and from more elaborated case studies. further conceptual refinements will also be necessary in order to take this research topic forward. we do believe, however, that this study provides and exemplifies some very fruitful areas for future research. a better understanding of driver for nearshoring and the antecedents for capabilities enforcing this can be highly valuable for finnish industrial stakeholders and policymakers. key lessons will be similarly important in other high-cost and high-skill countries. the connection between reand nearshoring, manufacturing in high-cost environments and industry 4.0-techniques will also be key elements to explore for the next decade of business research; 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(2018). lounais-suomeen syntymässä 30 000 tyäpaikkaa – alueen työttömät enää riitä. 14.2.2018. retrieved from https://yle.fi/uutiset/3-10074809. copyright © 2018 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. business, management and education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 1: 190–205 https://doi.org/10.3846/bme.2018.2852 *corresponding author. e-mail: s-dalati@aiu.edu.sy introduction the new reality of business management is based on acquiring new skills where information explosion and battle to completive talents becomes a critical requirement (dalati, 2014; rutkauskas, raudeliūnienė, & račinskaja, 2014; raudeliūnienė & meidutė-kavaliauskienė, 2016; kimpah, ibrahim, & raudeliuniene, 2017). the challenge of the new paradigm is strongly related to managing information overload and knowledge, managing people and stressful work environments, and managing technology advancement and connectivity (jia, mahdiraji, kannan, & meidutė, 2013; aggarwal, gupta, govindan, & meidute, 2014; burinskienė, 2015; merkevičius, davidavičienė, raudeliūnienė, & buleca, 2015; mačiulis, tvaronavičienė, lankauskienė, raudeliūnienė, & dzemyda, 2015; skačkauskienė, vilkaitėvaitonė, raudeliūnienė, & davidavičienė, 2016; raudeliūnienė, meidutė-kavaliauskienė, the effect of leader trust and knowledge sharing on staff satisfaction at work: investigation of universities in syria serene dalati1,*, hala alchach2 1department of management, faculty of business administration, arab international university, damascus, syria 2human resources directorate, arab international university, damascus, syria received 15 june 2018; accepted 18 june 2018 abstract. this research paper examines the effect of leader trust, organisational trust and knowledge sharing on staff attitudes and satisfaction at work at universities in syria. the research methodology employs a quantitative design of questionnaire instrument. the model predicts that if employees develop high levels of trust in their leader and organizations, this will stimulate a good quality relationship and develop satisfaction at work. leader trust, knowledge sharing behaviour and job satisfaction subscales are based on prior research measures. sampling strategy employed non-probability sampling. the size of the sample is 161. the results of the research designate that trust in leader and knowledge sharing behaviours are positively associated with employee job satisfaction. keywords: leader trust, knowledge sharing behaviour, job satisfaction, higher education sector, syria. business, management and education, 2018, 16(1): 190–205 191 & vileikis, 2016; davidavičienė, pabedinskaite, & davidavicius, 2017; f. ferreira, j. ferreira, fernandes, meidutė-kavaliauskienė, & jalali, 2017; raudeliūnienė & davidavičius, 2017; raudeliūnienė, davidavičienė, tvaronavičienė, & jonuška, 2018). the examination of knowledge sharing, organizational trust and employee attitudes across institutions of higher education is not completely a new investigation in academic and scientific research. however, the examination of the above-mentioned topics in higher education in syria is definitely new investigation as there is a literature gap in the examination of the syrian environment. in fact, the topic of employee attitudes and job satisfaction is a former subject of investigation as there is plenty of research examining employee attitudes and satisfaction in eu, asia, middle eastern examples and in syria (oshagbemi, 1997; morris, yaacob, & wood, 2004; chen, yang, shiau, & wang, 2006; alves & raposo, 2009; bolliger & wasilik, 2009; trivellas & dargenidou, 2009; tsai, 2011; bigliardi, ivo dormio, galati, & schiuma, 2012; ismail, 2012; saner & eyüpoğlu, 2012; dalati, raudeliūnienė, & davidavičienė, 2017). before 2011 higher education sector in syria was expanding as the introduction of private universities in syria through a legislation which was applied in 2001 allowed the operation of syrian private heis. before the devastating war in syria and between 2001 and early 2011 private universities in syria were growing gradually and were competing to win and recruit students primarily undergraduates. after 2011 a long-term crisis has torn syria over the past seven years, which has created a devastating situation on a social, economic, and business levels including both private and public sectors. higher education is still operating; however, it has gone through significant declination and worsening through the past seven years of struggle and devastation. many people in syria either lost their jobs, their assets and properties or in the worst cases their lives. the devastating situation in syria drove many individuals including students and academics to leave syria seeking safer and better living conditions (dalati, eddin, & hamwi, 2016). currently and after 8 years the subject of employee job attitudes and satisfaction is even more vital than previously, considering the economic background and context which characterizes syria, particularly with declining economy and inflation, lack of satisfactory salaries and bonus schemes in higher education institutions in syria. the challenge to improve employee satisfaction is more critical than before, due to the above mentioned social and economic situations. also, the subject of knowledge sharing is a critical phenomenon which is associated with organization effectiveness (teh, 2012; sohail & daud, 2009). examining organizational environment which characterizes universities in syria, it is associated with conventional management approaches with a dominating bureaucratic structure (mainly at public universities), lack of dynamic organizational cultures which advocates for flexible and organic systems, establishing organizational trust at different levels. the need for building trust at interpersonal and organizational levels is critical in the higher education sector in syria. this research examines the interaction between organizational trust, knowledge sharing behaviour and employee attitudes and satisfaction at universities in syria. organizational trust is examined at individual level investigating individual trust in the leader and direct manager. 192 s. dalati, h. alchach. the effect of leader trust and knowledge sharing on staff satisfaction... 1. prior literature 1.1. organizational trust organizational trust is examined as an attitude organization members have for their organization (nyhan & marlowe, 1997; entwistle & quick, 2006; ellonen, blomqvist, & puumalainen, 2008, shockley-zalabak & morreale, 2011). the importance of organizational trust is related to organizational areas as leadership, communication, negotiation, management by objectives, performance appraisal and implementation of self-managed teams (mayer, davis, & schoorman, 1995). according to joseph and winston (2005), the construct of trust has multidimensional approaches including interpersonal, dyadic, inter-organizational, political, social, peer trust in the workplace, trust between superiors and subordinates and organizational trust. according to mayer et  al. (1995) trust is defined as the willingness of one party to be vulnerable to the actions of another party based on the expectations that the other will comprise a specific action that is significant to the one who is trusting regardless the of their ability to monitor or control this person. mayer et al. (1995) model of dyadic trust identified two parties, namely the trustor and trustee. the construct of organizational trust comprises of perceived ability, benevolence and integrity of the trustee. it also consists of trustor propensity to trust. a previous study examined a definition of organizational trust as the individual inclination to have good intentions and have confidence in the words and actions of others. in this background, trust is considered a crucial factor in the long-term constancy of the organization and the well-being of its members (cook & wall, 1980). rousseau et al. (1998) state that “trust is a psychological state comprising the intention to accept vulnerability based upon positive expectations of the intentions or behaviour of another”. previous studies defined organizational trust as the feeling of confidence and trust in the organization, where an employee believes that the organization is fair and up-front, committed and will not act in an opportunistic approach towards its members (cummings & bromiley, 1996; mcleary & cruise, 2015). another approach to organizational trust emphasizes developing and designing hrm practices to facilitate building interpersonal trust in the organization (vanhala & ritala, 2016). 1.2. knowledge sharing behavior prior research on knowledge sharing provides different definitions on knowledge sharing including the perception of knowledge sharing as a voluntary behaviour by an individual who provides access of his /her knowledge and experience to other members of the organization (akhavan, rahimi, & mehralian, 2013). knowledge sharing is perceived as a dynamic learning process where organizations constantly interact with clients and suppliers to innovate or creatively innovate (cummings, 2003). knowledge sharing is procedure through which an employee could contribute to knowledge application, innovation, and eventually the competitive advantage of the organization (wang & noe, 2010). business, management and education, 2018, 16(1): 190–205 193 raudeliūnienė et  al. (2016) examines the determinants of efficiency of knowledge sharing in lithuanian national defence system, stating that the process of knowledge sharing is crucially associated with knowledge development and knowledge acquisition, as existence of knowledge is critical national defence systems where knowledge should be transmitted to relevant personnel or must be accessible when needed. 1.3. job satisfaction there have been considerable studies which have investigated the nature and causes of job satisfaction (locke, 1969; locke, 1970; warr, 1990; spector, 1997; tietjen & myers, 1998; stringer, didham, & theivananthampillai, 2011). one definition of job satisfaction by spector (1997) states that it is “simply how people feel about their jobs and different aspects of their jobs”. it is associated with the level to which employees like or dislike their job. the measurement of job satisfaction has been studied in two main approaches which examined the general measurement of satisfaction at work and a specific approach investigating several dimensions of job satisfaction (martins & proenca, 2012). the first approach examines respondents overall attitude on their job. the second approach examines several aspects related to job satisfaction including intrinsic and extrinsic aspects. 1.4. knowledge sharing, organizational trust and job satisfaction there has been research on the relationship between knowledge sharing, organizational trust and job satisfaction, which reports on a positive association (bontis, richards, & serenko, 2011; casimir, lee, & loon, 2012; wickramasinghe & widyaratne, 2012; pangil & moi chan, 2014). the prior literature has acknowledged relationship and interaction between trust in the organizational background and employees’ satisfaction at work (ellonen et  al., 2008; han, 2010; tekingündüz, tengilimoğlu, & karabulut, 2017). interpersonal trust has a positive effect on knowledge sharing (wickramasinghe & widyaratne, 2012). a study examined the effects of interpersonal trust, team leader support, rewards and knowledge sharing tools on voluntary knowledge sharing. the study is applied to software development project teams in sri lanka. the results of the study indicate interpersonal trust, rewards, workgroup communication and personal interactions and have a positive effect on knowledge sharing casimir et al. (2012) examined the impact of the perceived cost of knowledge sharing and effective trust in colleagues on the relationship between affective commitment and knowledge sharing. results of the study signify that employees who value social relationships and social resources perceive knowledge as a collectively owned commodity. prior research specifies a significant relationship between knowledge sharing, trust and virtual team effectiveness (pangil et al., 2014). the study examines relationship between trust and virtual team effectiveness investigating the mediating effect of knowledge sharing in a multinational corporation in malaysia. research results specifies that knowledge sharing and trust are significantly associated with virtual team effectiveness, and knowledge sharing partially mediates the relationship between trust and team effectiveness. 194 s. dalati, h. alchach. the effect of leader trust and knowledge sharing on staff satisfaction... 2. conceptual framework and hypotheses development the assumption in this research is that trust both on an individual leader level and knowledge sharing behaviour stimulates and causes job satisfaction among academics in higher education sector. the model predicts that if employees develop higher levels of trust in their leaders and line managers, this will stimulate a good quality relationship and develop satisfaction at work. figure 1 illustrates conceptual model of trust, knowledge sharing and satisfaction at work. 2.1. leader trust leader trust construct reflects organization member’s perceived tendency and predisposition to trust their line managers and team leaders. leader’s trust reflects employee’s positive perception and confidence of the technical, decision making, supervisory abilities, reliability and discretion of their leaders. leader’s trust subscale comprises of 8 items (a) confidence in line manager technical competence, (b) confidence in line manager decision making, (c) confidence in line manager follow up of assignments, (d) confidence in line manager understating of work, (e) confidence in line manager ability, (f ) confidence in line manager reliability, (g) confidence in line manager sense and insight, (h) confidence in line manager discretion. 2.2. knowledge sharing behavior knowledge sharing behaviour construct reflects organization member’s perceived tendency and predisposition to share their knowledge and expertise with their co-workers. knowledge sharing behaviour subscale comprises of 7 items (a) plan to share knowledge, (b) sharing work knowledge, (c) sharing results, (d) sharing new ideas, (e) answering questions by colleagues, (f) allocating time for sharing knowledge, (g) displaying difficult methods of work to co-workers. 2.3. job satisfaction job satisfaction construct reflects organization member’s perception and attitude of a set of dimensions indicating intrinsic and extrinsic characteristics of employee job satisfaction. job satisfaction subscale comprises of 16 items (a) physical conditions, (b) job autonomy, (c) coworkers, (d) recognition, (e) immediate supervisor, (f ) job responsibility, (g) pay, (h) using abilities, (i) relationship between management and workers, (j) promotion, (k) department management, (l) management’s attention to suggestions made, (m) hours of work, (n) job variety, (o) job security, (p) overall job satisfaction. the research develops a model which comprises of a set of independent variables and an outcome variable. the research model predicts that leader trust and knowledge sharing behaviour are predicted to have a positive effect on job satisfaction. the research hypotheses predict a positive relationship between leader trust, organisational trust and knowledge sharing behaviour and job satisfaction. h1. there is a positive effect of perceived leader’s trust on employee job satisfaction at universities in syria. h2. there is a positive effect of perceived knowledge sharing behaviour on employee job satisfaction at universities in syria. business, management and education, 2018, 16(1): 190–205 195 leader trust job satisfaction knowledge sharing behaviour + + figure 1. conceptual model of trust, knowledge sharing and satisfaction at work 3. research methodology the research methodology employs a quantitative approach, through the design and application of a questionnaire survey. quantitative approaches are feasible and efficient approaches when it serves the purpose and design of the study accurately (cooper & schindler, 2014; zikmund, carr, griffin, & babin, 2013) self-administered questionnaire is an efficient tool which can be applied to a large number of respondents. data can be collected through questionnaires and can be analyzed quickly and efficiently (cummings & worley, 2009). 3.1. measures and scales leader trust subscale is developed and based on the organizational trust inventory developed by nyhan and marlowe (1997). organizational trust inventory is employed in this research questionnaire to measure individual employee perceived level of trust in his /her supervisor and perceived levels of trust at an organizational level. the scale consists of 12 items, where items 1 to 8 measure leader trust, and items 9 to 12 measure organizational trust. the original scale employs 7 points likert scale. in this current research, the scale was modified and adapted to 5 points likert scale. in the subscale measuring leader trust, the scale was modified to 5 points likert scale ranging from 1= strongly disagree to 5 = strongly disagree. knowledge sharing behaviour scale is developed and based on zárraga and bonache (2003), hsu-hsin, tzu-shian, and ju-sung (2011) and akhavan et al. (2013). in this current study, the knowledge sharing behaviour scale was modified and adapted for the purpose and design of research. the scale comprised of 7 items to measure employee knowledge sharing behaviour and how employees transmit and share job-related knowledge and expertise with their co-workers. the knowledge sharing behaviour scale was adjusted to 5 points likert scale ranging from 1= strongly disagree to 5 = strongly agree. job satisfaction scale is based on job satisfaction scale developed by warr, cook, and wall (1979). the scale comprises of a set of 16 items measuring intrinsic and extrinsic job satisfaction. items 1, 3, 5, 7, 9, 11, 13, 15 measure extrinsic job satisfaction. items 2, 4, 6, 8, 196 s. dalati, h. alchach. the effect of leader trust and knowledge sharing on staff satisfaction... 10, 12, 14 measure intrinsic satisfaction. the last item (16) measures overall job satisfaction. the original scale employs 7 points likert scale. in this current research, the scale was modified to 5 points likert scale ranging from 1= definitely dissatisfied to 5 = definitely satisfied. 3.2. questionnaire translation the research instrument is based on self  – administered questionnaire. as discussed in the previous section, the research data collection instrument was developed based on prior researchers who developed the scales in english. the research questionnaire was translated from english to arabic. a well experienced syrian translator was employed to conduct translation from english to arabic. consequently, the arabic translation was carefully reviewed by research authors who verified translation for accuracy and precision. consequently, the questionnaire was examined by a group of expert and non-expert academics from arab international university for final enhancement and to conduct face validity. according to zikmund et al. (2013) face validity is refers to consensus among experts that a scale logically reflects the research construct or concept being measured. 3.3. sample design a non-probability sampling strategy is employed to collect data for this research. a selfadministered questionnaire was designed to collect data from private and public universities operating in damascus and the district of kalamoun which is located northeast of the syrian capital damascus. data was collected through the paper and online questionnaires employing google online questionnaire. the size of the sample is 161. the sample unit of analysis comprises academic and administrative staff working in 4 universities in syria. data were collected from september 2017 to january 2018. table 1 illustrates sample size and distribution. table 1. sample size and distribution (n = 161) (source: developed by authors) university sample size percent % aiu 134 83.2 du 14 8.7 hiba 3 1.9 uok 10 6.2 total 161 100 4. research analysis 4.1. descriptive analysis descriptive data examines the sample characteristics and respondents demographic profile. the demographic profile includes respondents’ age, gender, work experience and education level. descriptive data indicates that respondent’s average age is 39.87; work experience in the current higher education institution is 5.07. descriptive data illustrates that 55.6% of business, management and education, 2018, 16(1): 190–205 197 the sample study are male, 44.4 female. 41.9% have bachelor degree, 20.6% master degrees, 30.6% phds, and 6.9% have other certificates. descriptive data illustrates that 60.2% of the sample are academic staff, 39.8 are administrative staff. tables 2, 3 and 4 illustrate descriptive data analysis. table 2. demographical data (n = 161) (source: developed by authors) faculty f % faculty of business administration 19 11.8 faculty of civil engineering 14 8.7 faculty of pharmacy 26 16.1 faculty of informatics and communications engineering 20 12.4 faculty of fine arts 13 8.1 faculty of architecture 32 19.9 administrative departments and directories 16 9.9 faculty of science 6 3.7 language center 9 5.6 other faculties 6 3.7 table 3. demographical data (n = 161) (source: developed by authors) education level f % bachelor 67 41.9 master 33 20.6 phd 49 30.6 other 11 6.9 staff academic staff 97 60.2 administrative staff 64 39.8 academic level (academic staff only) lecturer 48 49.5 instructor 28 28.9 assistant professor 9 9.3 professor 12 12.4 administrative position (academic staff only) head of department 11 11.34 vice dean 6 6.18 dean 6 6.18 academic staff 74 76.28 administrative staff position (administrative staff only) administrative staff 48 75 head of department 15 23.4 head of directorate 1 .6 198 s. dalati, h. alchach. the effect of leader trust and knowledge sharing on staff satisfaction... table 4. descriptive data analysis of demographic profile (n = 161) (source: developed by authors) descriptive data of the demographical profile m sd age 39.875 12.763 work experience in current institution 5.071 4.915 4.2. exploratory factor analysis to explore research constructs, a principal component analysis is performed to investigate the dimensionality of variables under examination. the analysis examined three factors, which have an eigen value and factor loading that exceeded 1 and .40. the first factor examines leader trust as a construct which examines perceived trust in line manager. leader trust comprises of 8 items developed by nyhan and marlowe (1997). the second factor examines job satisfaction as a composite construct which examines intrinsic and extrinsic job satisfaction. job satisfaction comprises of 10 items which are based on and developed by warr et al. (1979). originally the scale consists of 16 item and three subscales measuring intrinsic, extrinsic and general job satisfaction. the principal component analysis combined items from intrinsic and extrinsic features of job satisfaction producing a composite construct which was defined as job satisfaction. the third factor examines knowledge sharing behaviour as a construct which examines perceived self-assessment of individual knowledge sharing behaviour. knowledge sharing behaviour comprises 7 items developed and based on zárraga and bonache (2003), hsu-hsin et  al. (2011) and akhavan et  al. (2013). table  5 illustrates principal components factor analysis. 4.3. reliability analysis to examine the reliability of research subscales a cronbach alpha test is performed. reliability analysis illustrates very well to optimal levels ranging from .86 to .93 indicating excellent levels of internal consistency and reliability of research subscales. table  6 illustrates reliability analysis. table 5. principle component analysis (n161) (source: developed by authors) factors principle component analysis eigen value % of variance factor loading factor 1 leader trust 9.285 37.140 i have confidence that my line manager will make well thought out decisions about his or her job .867 i have confidence that my line manager is technically competent at the critical elements of his or her job .841 i have confidence that my line manager will think through what he or she is doing on the job .835 i have confidence that my line manager has an acceptable level of understanding of his/her job .811 business, management and education, 2018, 16(1): 190–205 199 factors principle component analysis eigen value % of variance factor loading i have confidence that i can rely on what my manager tells me .776 i have confidence that my line manager will follow through on assignments .770 i have confidence in my line manager to do the job without causing problems .736 i have confidence that my line manager will be able to do his or her job in an acceptable manner .726 factor 2 job satisfaction 2.958 11.832 your opportunity to use your own abilities .715 your job security .712 the attention paid to suggestions you make .709 the amount of variety in your job .706 your chance for promotion .701 industrial relations between management and workers in your faculty/department .695 the freedom to choose your own method of working .688 your hours of work .682 the recognition you get or good work .641 the amount of responsibility you are given .616 factor 3: knowledge sharing behavior 2.894 11.574 i share the results of my activities with my colleagues .850 i share my working knowledge with my colleagues .793 i share my new ideas pertaining to my job with my colleagues .768 i show my co-workers how to perform the most difficult part of the work .737 i allocate some time for sharing knowledge with my colleagues .671 i always answer my colleagues questions about areas of my expertise .660 i have a plan for sharing my knowledge with my colleagues .577 extraction method: principal component analysis. rotation method: varimax with kaiser normalization. rotation converged in 5 iterations. table 6. cronbach alpha test (n 161) (source: developed by authors) research variables no. of items cronbach alpha (α) without deleting any item leader trust 8 .935 job satisfaction 10 .898 knowledge sharing behavior 7 .868 end of table 5 200 s. dalati, h. alchach. the effect of leader trust and knowledge sharing on staff satisfaction... 4.4. regression analysis to test research hypotheses a regression analysis is performed to examine the effect of perceived leader trust and knowledge sharing behaviour on employee job satisfaction. the model examines leader to trust and knowledge sharing behaviour as independent variables predicting staff satisfaction at work. as this research performed a multiple regression analysis with a stepwise approach, a number of assumptions should be considered examining the type of variables, non-zero variance, multicollinearity, homoscedasticity, independent errors, independence, predictors are uncorrelated with external variables, normally distributed errors (which is often confused with the assumption that predictor variables should be normally distributed) and linearity (field, 2013). the research performed a linear regression analysis employing a stepwise regression. in the regression analysis performed, two models are investigated. the first model examined a regression analysis which indicates an association between leader trust and job satisfaction. the multiple regression analysis produces a standardized beta .498, p  =.000, which accounts for .24.9% of the variability in job satisfaction. the first model confirms that leader trust is a predictor of staff satisfaction at work. the second model examined a regression analysis which indicates that leader trust is a predictor of job satisfaction. the multiple regression produces a standardized beta of .414, p  = .000. the second model indicates that knowledge sharing behaviour is a predictor of job satisfaction. the multiple regression produced a standardized beta of .227, p = .002. the second model indicates that overall leader trust and knowledge sharing behaviour accounts for 29.3% of the variability in job satisfaction. the results of regression analysis support the first and second hypotheses confirming leader trust and knowledge sharing behaviour are predictors of job satisfaction for academic and administrative staff. table  7 illustrate average mean score and standard deviations of predicted and outcome variables. table  7 illustrates the correlation between research variables for predictor variables and the outcome variable. the correlation analysis indicates no good multicollinearity between predictor variables, as the relationships between the predictor variables do not exceed .70. the correlation analysis also indicates a significant positive and good relationship between predictor variables and outcome variable, as the relationship is higher than .30. table  8 illustrates multiple regression model of leader trust and knowledge sharing and their effect on job satisfaction. the research findings signify a good model of the effect of trust in leader and knowledge sharing behaviours and practices on employees job satisfaction in management, peers and the organization. the first regression model predicts that for 1 unit increase of leader trust, it causes an increase in staff job satisfaction by .498 standard deviations. the second regression model predicts that for 1 unit increase in leader trust, it causes an increase in staff satisfaction by .414 standard deviation holding, knowledge sharing behaviour constant. the second model predicts that for 1 unit increase in knowledge sharing behaviour, it causes an increase in staff satisfaction by .227 standard deviation, holding leader trust constant. business, management and education, 2018, 16(1): 190–205 201 5. discussion in syria, there is no research on the effect of knowledge sharing behaviour and practices and organizational trust on employee job satisfaction. this research paper provides an empirical investigation of the significant effect of knowledge sharing behaviour and practices and organizational trust on employee satisfaction at work in syrian higher education. this research contributes to the prior research which examines the relationship between the variables under examination. the results of the study support the need for establishing organizational trust and knowledge sharing practices in higher education sector and both private and public universities in syria. this research advocates that the establishment of effective and positive attitudes among academic and administrative staff requires, higher education institutions need to encourage knowledge sharing practices and policies which would enhance a culture of knowledge sharing. in addition, establishing trust in higher education institutions is critical, specifically trust in the leader. when high levels of trust in leadership and management of organisations exist, these organisations demonstrate higher levels of performance, effectiveness, risk-taking and table 7. correlations between research variables (source: developed by authors) job satisfaction leader trust knowledge sharing behaviour pearson correlation job satisfaction 1.000 .498 .380 leader trust .498 1.000 .368 knowledge sharing behaviour .380 .368 1.000 sig. (1-tailed) job satisfaction . .000 .000 leader trust .000 . .000 knowledge sharing behaviour .000 .000 . n job satisfaction 161 161 161 leader trust 161 161 161 knowledge sharing behaviour 161 161 161 table 8. multiple regression models of leader trust and knowledge sharing on job satisfaction (source: developed by authors) m od el fi rs t variables b bse β t sig constant 1.481 .277 5.341 .000 leader trust .484 .067 .498 7.244 .000 m od el se co nd variables b bse β t sig constant .641 .379 1.689 .093 leader trust .402 .070 .414 5.758 .000 knowledge sharing behaviour .291 .092 .227 3.157 .002 note: first model multiple r = .498, r2 = .248, adjusted r2 = .243 second model multiple r = .541, r2 = .293, adjusted r2 = .284 202 s. dalati, h. alchach. the effect of leader trust and knowledge sharing on staff satisfaction... robustness. the practical application of this research is in its emphasis on building trust in heis in syria, by developing competent, high performing. trustworthy and well-informed leaders and managers, who can make effective decisions. the finding of this research is supported by previous research on the relationship between knowledge sharing behaviour and practices, organizational trust and employee job satisfaction (bontis et  al., 2011; wickramasinghe & widyaratne, 2012; holten, hancock, persson, hanson, & hogh, 2016; malik & kanwal, 2018). the research limitations are identified as mainly the size and strategy of the sample employed in this research. the research limitation also is related to the specificity of the model in the scope of higher education sector. further research could investigate additional sectors and industries. also, further research could investigate mediation analysis examining the effects of organizational trust on job satisfaction with the mediating effect of knowledge sharing. expanding the sample with the investigation of regional study including syria and lebanon could also be a research. conclusions this research paper examines the effect of leader trust and knowledge sharing behaviour on job satisfaction at higher education sector. the research results indicate a positive and significant effect of leader trust on job satisfaction among academic and administrative staff. knowledge sharing behaviour has an appositive effect on job satisfaction. the research emphasizes the importance of organizational trust in organizations through the development of leaders who can inspire and build trust within their institutions. the research emphasizes the significance of establishing a culture of knowledge sharing in higher education institutions in syria. references aggarwal, s., gupta, a., govindan, j., & meidute, i. 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(2013). business research methods (9th ed.). new york: cengage learning. copyright © 2017 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. strenthening opportunities of economic relations between lithuania and sweden within the perspective of it startup company’s development živilė tunčikienė1, gabrielė sinkevičiūtė2 1department of social economics and management, faculty of business management, vilnius gediminas technical university, saulėtekio av. 11, 10223, vilnius, lithuania 2department of international economics and management, faculty of business management, vilnius gediminas technical university, saulėtekio av. 11, 10223, vilnius, lithuania e-mails: 1zivile.tuncikiene@vgtu.lt (corresponding author); 2gabriele.sinkeviciute@stud.vgtu.lt received 20 february 2017; accepted 11 april 2017 abstract. cooperation with sweden – one of the key priorities of lithuania. economic cooperation potential is promising. one of the priority areas of economic activity, in which sweden invests in lithuania, is information and communication. in order to develop and utilize the potential for economic cooperation in the it field, it is relevant to structuralize it startup business success factors and to jointly develop base for decisions, execution of which would help ensure effective, economic co-operation development based with sweden, beginning of it startup business and such business’s continuity. to achieve the objective, following tasks were resolved: concepts of startup business and the startup company were purified, specifics inconcept’s application in the context of the parties were defined; systematized the startup business success factors and ways of strengthening them, focusing on the factors relevant for strengthening economic ties between lithuania and sweden within the perspective of it startup company’s development. systematic method of research was applied. keywords: startup, it, lithuania, sweden, business success factors, opportunities of economic relations. jel classification: o3. 1. introduction cooperation with sweden – one of the key priorities of lithuania. economic cooperation potential is promising. one of the priority areas of economic activity, in which sweden invests in lithuania is information and communication. in order to develop and utilize the potential for economic cooperation in the it field, it is relevant to structuralize it startup business success factors and to jointly develop base for decisions, execution of which would help ensure effective, economic co-operation development b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2017, 15(1): 57–76 doi:10.3846/bme.2017.357 https://doi.org/10.3846/bme.2017.357 58 ž. tunčikienė, g. sinkevičiūtė. strenthening opportunities of economic relations between lithuania and sweden within the perspective of it startup company’s development based with sweden, beginning of it startup business and such business’s continuity. to achieve the objective, following tasks were resolved: concepts of startup business and the startup company were purified, specifics in concept’s application in the context of the parties were defined; systematized the startup business success factors and ways of strengthening them, focusing on the factors relevant for strengthening economic ties between lithuania and sweden within the perspective of it startup company’s development. systematic method of research was applied. information technology (it) is regarded as the most important factor of globalization and technological progress, the base of the knowledge society. the it sector has been, is and will be one of the fastest growing businesses in the world. according to the lithuanian statistics department (lsd) records it is one of the leading sectors of the country in accordance with the growth of the added value. it sector’s added value is increasing every year, which makes up about 3% of the gross added value. the overall growth of production of it sector was and will be predominantly due to the result of newly established production companies of equipment for information and communication technology. it should be noted that lithuania has not exhausted all of the it sector’s contribution to the country’s potential of the economic growth, which encourages the search for new, more unfulfilled areas, to note the areas of neighboring countries ahead of lithuania and find ways to create competition in the global it market. the development of it sector is considered to be the general national or regional economic competitiveness determinants (ogunsola 2005). for over a decade the world’s rapidly growing demand for the use of social networks for business, the internet to receive the news, e. tools to implement knowledge and etc., allow more and more entrepreneurs to successfully find new mediums in the it sector: e-shops, business platforms, software that helps simplify daily operations and rationalize the use of limited resources, while increasing the productivity of enterprises. therefore, the number of rapidly developing high-tech startup based businesses is growing. according to public enterprise “versli lietuva” (versli lietuva 2015) statistics, over the last 5 years lithuania created a noticeable startup company ecosystem, which currently consists of over 315 startup companies. popular it products (for example, mobile public transport and journey planning application trafi, photo editing program pixelmator) are created by small it startup companies. inspired by largest it corporations like apple, microsoft, success stories, young entrepreneurs generate ideas and develop innovative products while looking for opportunities to become leading companies. some of the it startup companies, such as trafi, transfergo, mobofree, develop and grow into large, independently operating businesses. others fail to overcome the competition and are forced to retreat. obviously, the external and internal environmental factors lead to the development and destiny of it startup companies. lithuania is rapidly moving in the path of modern electronic economic development. one of the country’s most important economic activities – is striving to become a high59 business, management and education, 2017, 15(1): 57–76 tech leader in the baltic region. a noteworthy consideration of foreigner legal situation act amendments done by the lithuanian parliament (lrs), foresees a simpler immigration for demanded non-eu startup professionals to lithuania. creators of the new technologies form the east are already interested in our country, as they see lithuania as a center for the development of globally competitive products. growing foreigner startup companies’ attention to lithuania is not accidental. as in the autumn of 2016, startup company incubator, with no regional analogue, called “vilnius tech park” has been opened. the parks design concept provides the opportunity for vilnius to become the silicon valley of the eastern and central europe. the factors that determine the success of establishing a new business are widely studied by foreign scientists (roure, maidique 2002; costa 2004; sels, vanhoutte 2005; cheung et al. 2011; ries 2012, akram et al. 2011; blank, dorf 2012, etc.). studies have existing diversity of factors and their impact on succession of it startup companies. the rapidly growing interest in the startup business organization in lithuania and elsewhere, as well as the business development opportunities, our research is oriented to develop a model of it startup business development factors, based on results of analyzing successful cases of it startup business, in order to strengthen bilateral economic relations. the objective of this study – is to structurize it startup business success factors and to jointly develop the base for decisions, the implementation of which would help to ensure effective development based on economic co-operation with sweden, the start and continuity of it startup business. in order to achieve the objective, the following tasks are raised: – referencing scientific articles and results of other sources’ examination, refine the startup business and startup company’s concept, the application of mentioned concept in the context of the state. – to systemize the startup business success factors and ways to strengthen them, focusing on the factors, relevant for strengthening lithuania’s and sweden’s economic ties within the perspective of it startup company’s development. 2. concept analysis of startup business the rapidly evolving society continually generates new ideas, to implement them new models of business are created. this is one of the most important reasons of public development, propulsion of the national economy’s development. the most relevant contemporary form of business organization – the startup. discussions considering the subject of the startup business definition are noticeable, where acceptance of the different opinions can be found. according to n. patel (2011) the term startup is used to describe any newly established business. in cambridge dictionary of business startup “is a business that has just started” (cambridge business english dictionary 2011). after the greatest twentieth century success stories of high-tech companies, such as apple, google, facebook, the term startup launched in use as a unique business concept. 60 ž. tunčikienė, g. sinkevičiūtė. strenthening opportunities of economic relations between lithuania and sweden within the perspective of it startup company’s development according to p. graham (graham, spaulding 2005), the main factor that distinguishes startup from other business routine is its rapid growth. the author suggests a definition of a startup: “startup business is “modeled” for rapid growth. the mere fact that the business is newly established, does not mean that it is a startup. startup business does not have to be based on high-tech or venture capital financing. the essence of this business – explosive growth”. according to the results of empirical research done by the “nesta”, responsible for the promotion of innovation in the uk, “the startup” is “a young, innovative, growth-oriented business, that is looking for long-term sustainable business model” (dee et al. 2015). startup is an organization set up to look for unique and measurable business model (blank, dorf 2012). thus, the term startup includes business, which is based on innovative advanced technologies combined with a sharp growth in the traditional business model elements. according to e. ries (2012), startup is a newly established business, focusing on new products and services, which are based on the rapid high-tech development. in 2013 public enterprise’s “versli lietuva” annual survey (versli lietuva 2013), startup is as innovative and it based business that create products built on high-tech and life science solutions. one of the most famous entrepreneurs of silicon valley s. blank (blank, dorf 2012) as well as e. ries (2012), exploring the concept of the startup business, agree with the common view that the most general sense of the startup business model should be based on innovation, advanced technologies and their transference. from a slightly exceeded time perspective, the startup should focus on the search for a sustainable business model and its application. according to s. moon’s (2014) opinion, the startup – is a technological company that develops high added value products and realizes innovation in the market. d. norris (2014) describes the startup companies as newly established companies that have a unique business idea and their principles of operation are based on the technology and/or innovation. startup companies are defined in draft plan of lithuania’s entrepreneurship action 2014−2020 m. this is a rapidly growing, young and potentially strong, directed to a single product development, high-tech-based, business. swedish startup business as interpreted by p. graham’s (graham, spaulding 2005) suggested concept which is expanded by understanding of the necessity requirement of innovative activity. in 2015 sweden’s ministry of enterprise and innovation conducted study “european startup monitor”, startup companies are considered to be businesses that are rapidly expanding and developing innovative activities. startup companies – innovation-based initiatives. obviously, this form of business has exceptional performance characteristics. startup companies are often characterized by a concentration to the global markets. such companies’ uniqueness and competitive advantage is created by innovation. this can be an innovative process, business model or function. one of the key features that separates the startup company from the traditional one – the nature of development. a typical business model of companies is characterized by a linear expansion, when the money is invested in the company itself, to its system (income, cash and jobs) (u.s. bureau of labor... 2014). startup company grows in exponential rates: when the money is invested, positive influence is not experienced immediately. 61 business, management and education, 2017, 15(1): 57–76 it is important to note that startup companies are often attributed to venture business (jakubavičius et al. 2003). the base and driving force of such companies – the establishment of scientific ideas, their development, and finally, their conversion into new technologies and products. for the most cases these entities are represented as small group of talented scientists, engineers, managers, united by a common goal – setting up innovation, its introduction avoiding bureaucratic restrictions that are common in large corporations, whose activities are based on a detailed action plan. startup companies named advantage is flexibility, rapid change of direction when in search and application of new ideas, the ability to quickly adapt to market needs. competitive pressure is forcing developers to work efficiently and expressively reach the final result. regarding funding, these companies usually apply to large corporations, private equity, venture capital funds and also public institutions. startup companies are also treated as a way to transfer high technologies, adapting them to specific needs. methods of transferring the technology related to a present subject are distinguished (kraujelytė, petrauskas 2007): – spin-off company is a newly established company, which founding initiative came from individuals who were employees in other, major company. it arose due to the transfer of technologies. typically, a spin-off company is created together with the newly transferred technology and its provided innovation (rogers et al. 2003). – startup company is similar to a spin-off, only the name of the startup defines a newly created company rather than a part that span-off from the main organization. as a result, the term startup often characterizes an innovative, high-technologyoriented company, to establishment of which there was direct impute contributed by scientists using scientific research, knowledge and technologies generated and created in the institutions of the technological development. according to the analysis of startup concept, it can be said that the startup business model is based on high-tech transmission, therefore innovative business solutions that created products are based on, the use of which promote the development of the knowledge society; the other feature of this business model – the startup business model is based on external funding. similarities of lithuanian and swedish approaches to the startup business concept are treated as favorable assumptions (business cultures of contact points) on strengthening the bilateral economic relations through the perspective of startup company’s development. 3. the picture of lithuanian and swedish startup companies during the years of 2013−2016 in today’s society, number of people who are interested in opportunities to build a business based on high-tech and innovative solutions, is rapidly growing. according to the results of world’s entrepreneurship index, sweden is in the 5th, lithuania – in 26th place. there is no shortage of good practice examples in lithuania and sweden: the 62 ž. tunčikienė, g. sinkevičiūtė. strenthening opportunities of economic relations between lithuania and sweden within the perspective of it startup company’s development usage of swedish startup company’s spotify mobile application contributed to the music industry’s recovery and growth by reducing piracy (hammarberg et al. 2016). lithuania’s startup company transfergo has developed a new financial transaction platform to eliminate international transfers carried out at a bank, thus avoiding complicated form filling, large service fees and hidden charges. more and more attention is dedicated to the development of startup ecosystem or creation of business communities, which are united by a passion for high-technology enhanced business. sweden’s and lithuania’s startup companies refute the stereotype that the majority of startup companies are based on the mobile application development. according to public enterprise “versli lietuva” annual review of the lithuania’s startup ecosystem conducted in 2013 (versli lietuva 2013), in lithuania the startup created innovative solutions based on high technology and performed a wide range of activities: from development of the software to the world’s most popular operating systems (windows, ios), computer games to effective financial services solutions and social networking. in 2016 lithuania’s startup companies offered new products and services to aviation, biotechnology, life sciences, 3d printing, transport and logistics, fields of energetic activity (public enterprise “versli lietuva” 2016). most of the swedish startup companies offered financial, wellness, e-commerce and media services (sup46 2015). in 2013 lithuania’s startup ecosystem consisted of 191 startup companies, which in the period of 2007−2012 attracted a total of 34 million euros of investments, in 2013 the company getjar managed to attract very large investment – 31.5 million euros. in the same year, to the country’s budget more than 490 thousand euros in tax were paid. through 2014 lithuania’s startup companies attracted investments for 46.3 million euros thus, during 2014, startup companies paid taxes of 2 million euros to the countries budget. the public authorities, administered by the public enterprise “versli lietuva”, invested 260 thousand euros, 42 million euros have been collected from various venture capital funds. it is important to mention that the largest investments were attracted by two market leaders – mobile application yplan 21 million euros, and almost a million less, 20 million euros – the company vinted – platform for purchasing, selling and exchanging clothing and accessories. now the company operates not only in lithuania, but also in other major world markets – the us, great britain, germany, france, poland and the czech republic. 2015 was as successful. 4 of the country’s most successful startups – vinted, vittamed, trafi and transfergo received investments for more 41 million euros (public enterprise “versli lietuva” 2015). not as large, but also very important, up to 0.5 million euros of investments have been attracted to more than a dozen country’s startup companies. during 2016, 28.4 million euros of investments were attracted from various venture capital funds. in 2015 independent swedish enterprise “litcapital”, managing the capital funds of development, has invested 3 million euros to lithuania’s startup company “brolis semiconductors” which operates in biotechnology and life sciences. most investments in sweden are attracted by startup companies creating financial technology (eng. fintech), from 2011 to 2015 this company has attracted 621 million euros, this amounts to approximately 18 percent of the total investment, which was attracted to the startup companies in europe that are developing the same activity (skog et al. 2016). 63 business, management and education, 2017, 15(1): 57–76 interestingly, a common opinion is that the majority of startup founders – college or high-school students. in public enterprise’s “versli lietuva” study, conducted in 2014 (versli lietuva 2014), provides statistics that contradict this opinion – the startup founders average age is 31 years old. in addition, 87 percent of the founders have a university degree. swedish startup founders are not only educated, but also have accumulated a lot of job experience. in summary, the lithuanian and swedish startup companies’ picture portrays a whole spectrum of properties, which declares basic startup business/enterprise concept. when characterizing the startup company by life cycle stages, it is possible to conclude a rationally composed totality of startup company’s distinctive features. 4. life cycle of startup business: theoretical aspects, lithuania’s-sweden’s case startup company’s life cycle is widely discussed, as how this one differs from traditional organizations life cycle. according to a. salamzadeh (salamzadeh, kawamorita 2015), it is important to carefully analyze the life cycle of startup company and to identify the key factors at every stage that would lead to the further successful startup development. during the idea generation phase entrepreneur’s initiative and tools turning idea into profitable business is important. the idea-generation process is important here; for the creation of the prototype, the anticipation of funding attraction from personal, family or friend related and from other, external sources. according to j. freear et al. (2002), this step is one of the most important and often determines the success of a startup company. the goal here is related to the design of company’s primary position, supporting the markets demand for created product or service through team building and management skills (brush et al. 2006). furthermore, it is at this stage, that business angels, venture capital funds decide whether to invest in promising startup companies. during the business planning stage, very important aspects are teamwork, developing the idea of the product or service, then the prototype, entrance to the market and measurement of product’s or service’s value. in order to achieve a steady growth of startup company, various support and mentoring programs, such as business accelerators or incubators, are being searched for. a. salamzadeh (salamzadeh, kawamorita 2015) states that during this stage, the majority of startup companies face the greatest challenges and companies, incapable of controlling the risks, stop their activities and withdraw from the market. during the stage of the beginning of the business, startup companies begin to sell their products or services, includes itself into the market and develops structure of organizational management, employ staff of various areas (managers, engineers, it specialists) (salamzadeh, kawamorita 2015). at this stage, it is important to attract more investment from various venture capital funds and/or individual investors. corporate finances are usually directed to the improvement of production processes, the deployment of new and high modern technologies. along with the high-tech development; obstacles of entering the market with new products reduces. startup businesses are often faced with limited financial and human 64 ž. tunčikienė, g. sinkevičiūtė. strenthening opportunities of economic relations between lithuania and sweden within the perspective of it startup company’s development resources. it is for these reasons that the failure rate of it startup companies is growing: during the first three years of existence almost 80 percent of startup companies fail due to unduly active competition for scarce resources (feinleib 2012). from a practical perspective, it startup companies contribute to society, creating jobs and encouraging innovation. in addition, high technology affects the development of various industries. from a theoretical perspective, scientists are discussing it startup business’s growth phenomenon and tend to separate these businesses as distinctive business sectors. numerous research examines the factors that influences the company’s effective activities or factors that accompany the failure of the business, however, only a very small part of this research is dedicated to startup companies. for young companies, reasons of misfortune are often different from the ones that exist for a longer period of time. small and young companies face a high probability of bankruptcy and reasons for their failure are often related with lack of resources and capacity (thornhill, amit 2003). scientific studies have revealed the relationship between information technology and entrepreneurship. it startup companies are adaptable to the business environment due to lack of settled business model, which traditional companies are often based on. such ability to adapt to changes in the market is treated as a startup company’s competitive advantage. s. yunfei et al. (2008) provides a business growth model of it startup company (see fig. 1). according to the model, it innovation – a key factor that affects the growth of the it startup companies. the ability to adapt to the market determines the level of it innovation and the development of the company. in addition, it is important to mention the customer’s involvement in this process: respect for the needs of potential buyers allows the company to constantly remain competitive in the market. the growth of it startup company. according to stage trajectory of normal small and medium business growth, during growth stage, company reveals it’s potential to establish itself in the market and becomes competitive. company’s growth and effective action causes are different. growth stage is necessary for effective action. flexible organization management structure, continuous actual resources gain and finally its profitability are excellent identifiers of company’s operating efficiency. it startup company can be unprofitable, most important is to exhibit excellent skills in reallocating limited resources, developing products, attracting clients and retaining them. during growth phase it startup company undergoes essential changes: in this stage company’s goal is to become an effective entity. at the it innovation ability to accommodate market it innovation the growth of the it startup company drawing in of the customer fig. 1. a business growth model of it startup company (developed by the authors according to the s. yunfei et al. (2008)) 65 business, management and education, 2017, 15(1): 57–76 resources. it is for these reasons that the failure rate of it startup companies is growing: during the first three years of existence almost 80 percent of startup companies fail due to unduly active competition for scarce resources (feinleib 2012). from a practical perspective, it startup companies contribute to society, creating jobs and encouraging innovation. in addition, high technology affects the development of various industries. from a theoretical perspective, scientists are discussing it startup business’s growth phenomenon and tend to separate these businesses as distinctive business sectors. numerous research examines the factors that influences the company’s effective activities or factors that accompany the failure of the business, however, only a very small part of this research is dedicated to startup companies. for young companies, reasons of misfortune are often different from the ones that exist for a longer period of time. small and young companies face a high probability of bankruptcy and reasons for their failure are often related with lack of resources and capacity (thornhill, amit 2003). scientific studies have revealed the relationship between information technology and entrepreneurship. it startup companies are adaptable to the business environment due to lack of settled business model, which traditional companies are often based on. such ability to adapt to changes in the market is treated as a startup company’s competitive advantage. s. yunfei et al. (2008) provides a business growth model of it startup company (see fig. 1). according to the model, it innovation – a key factor that affects the growth of the it startup companies. the ability to adapt to the market determines the level of it innovation and the development of the company. in addition, it is important to mention the customer’s involvement in this process: respect for the needs of potential buyers allows the company to constantly remain competitive in the market. the growth of it startup company. according to stage trajectory of normal small and medium business growth, during growth stage, company reveals it’s potential to establish itself in the market and becomes competitive. company’s growth and effective action causes are different. growth stage is necessary for effective action. flexible organization management structure, continuous actual resources gain and finally its profitability are excellent identifiers of company’s operating efficiency. it startup company can be unprofitable, most important is to exhibit excellent skills in reallocating limited resources, developing products, attracting clients and retaining them. during growth phase it startup company undergoes essential changes: in this stage company’s goal is to become an effective entity. at the it innovation reference point, startup company is faced with a lack of resources and lack of experience in introducing new products to the market. the customer feedback is the key aspect here, because it enables company to improve and develop it innovations (cheung et al. 2011). ability to accommodate market. it startup companies operate in a competitive environment, the ability to quickly adapt to changes in the market is a very important factor affecting the company’s opportunities of sustained survival in the market (zahra et al. 2006). the field of it is mobile and still new, so the company must quickly learn and apply knowledge in daily activities. responding to market’s demand, the ability to adapt to the market, to learn and integrate resources are extremely important factors in it startup company’s development and uptake in market. it startup company’s learning culture is often based on “learning by doing” and “learning by putting effort”. the ecosystem of it startup companies is characterized by extreme conditions of uncertainty and extremely strong competition, so companies must be prepared to critically evaluate their design, marketing activities and quickly respond to customer needs, providing concrete solutions (products or services). it innovation. in a broad sense, it innovation is often interpreted as process or products/services innovation. the process in terms of it innovation is when the company adapts to new production methods for the development of product or service. in terms of product, it innovation refers to the newly created product or service. one of the ways to adapt to the constantly changing needs of customers, is to improve the development procedures of the product. in order to reduce operating costs, startup companies use open-source development tools and carry out the production work in developing countries where labor costs are lower. two different types of it innovation are not isolated from each other, they may as well be consistent with each other and thus encourage more innovative product development (mitchell, shaver 2003). drawing in of the customer. cooperation with customers and their involvement in the development of the product is a factor that bases the development of innovation. customers are able to facilitate at activities of the company and to provide an understanding of the changes in the market, providing a new product idea (debackere, veugelers 2005). collaboration with customers while developing or improving a product is an important trend of marketing communications (lagrosen 2005). when it startup companies start operating in the new market, customers become the “pillars”, helping in the establishment of the company into the market and overcome adverse changes. loyal customers can help you see the current shortcomings of the new products. startup companies often operate under conditions of high uncertainty and business success often depends on how the company is able to identify and develop strategies that could impact existing or potential risks for company. in addition, products developed in it sector are characterized by short product life cycle. in order to remain a leader, you must be very quick to react to market changes, trends and be able to introduce an innovative, high-quality product to the market at the right time. business innovations should receive the greatest possible focus, high-tech innovations should be one of the most important factors in stimulating the development of it startup company. 66 ž. tunčikienė, g. sinkevičiūtė. strenthening opportunities of economic relations between lithuania and sweden within the perspective of it startup company’s development the life cycle of the startup company can be linked to its activity’s funding cycle, which is followed when the status report of the country’s startup ecosystem is being prepared. the funding cycle of lithuania’s and sweden’s startup companies consists of six phases: idea generation phase, idea launching phase, pre-growth phase, growth phase, fixed financing phase, the withdraw phase. in each of the phases, elements, that determine successful possibilities for transitioning to the next phase, can be distinguished. it is appropriate to study such factors and use the results in order to ensure the business expansion of the company. 5. external factors that determine the startup company’s success success of modern, innovative company depends on its ability to sell in a highly competitive market more than on its ability to ensure the quality (ginevičius, čirba 2009). according r. ginevičius (2010) the main condition of the corporation survival in the market economy – their competitiveness. according to m. samoška (2011) in the scientific literature competitiveness, business environment and business conditions are usually used to describe the same object. it would be difficult to name one specific definition of business conditions, because in the most cases, the term “business conditions” is associated with a complex of factors, or a rather a vague definition, which specifies only some of the elements of the business environment. according to v. titarenko et al. (2007), the conditions of business are determined by complex factors such as business regulation, economic environment, political situation and the environmental protection. m. samoška (2011), when defining the business environment, notes that in addition to economic, political environment and the environmental protection, the cultural, technical, social and informational totality of the factors in a given geographically defined area is also very important. legal factors may also be attributed to the business environment, since the legal disputes are an integral part of modern business projects (keršulienė et al. 2010). the benevolence of business conditions, together with the success of a business depends on combination of factors mentioned above. the international labour organization’s (ilo) study of business conditions in connection with the success of a business entity that works in conjunction with the united nations organization (uno), states that the development of sustainable, innovative business is a broad, often controversial issue. it is important to realize that the success of the business entity depends not only on the form of organizing the business, its size, but is very strongly influenced by the environment in which business is conducted. both public institutions approach to certain business units and national and regional priorities, strategic directions and the legal regulation of business has a very significant impact on the development of the business. according to the study, sustainable, innovative development of the business should start from the state institutions and the latter’s improvement of the management structures. sustainable and perspective companies require a strong, competitive market, powerful state institutions that could provide effective allocation of the human, financial and natural resources to ensure maximum 67 business, management and education, 2017, 15(1): 57–76 productivity and a higher level of innovation. this, of course, requires new forms of cooperation between the authorities, business representatives and the public in order to ensure proper business conditions. from a level of macro perspective, every business is influenced by certain set of external factors that favor the business and have a major impact on the further successful development. such factors as trading and market conditions, industry’s policy and legal environment shapes the business environment. j. worthington and c. britton (2006) offer to associate business environment with certain business restrictions with the help of which economic and social relations can be regulated. for the reason that businesses subjects cannot directly control the business restrictions, they may apply not only for a short, but also for extended period of time. the researchers also said that the business environment factors which are characterized by their nature can be divided into the operatives (affect a particular company in a particular area) and the generals (affect concerning region-wide companies). according v. titarenko et al. (2007) globalization processes that take place not only in the economic but also the social sphere, not only facilitates cooperation between companies, but also significantly strengthens the environment of business. in regard to free world-wide movement of goods and services, relations of cooperation grows stronger, therefore areas of company’s activities are changing, consequently the public authorities must pay more attention to improve the country’s business environment. v. titarenko et al. (2007), m. samoška (2011) states that business conditions may be synonymous to country’s potential level which, by being strengthened, could reach for higher levels of competitiveness. therefore, business conditions show how easily and how quickly the business units are to achieve significant results. business conditions are expressed as a combination of external factors that determine the success of a business entity in a particular market. 6. business conditions and its improvement in lithuania and sweden the promotion of the new business establishment and development is one of the state’s greatest priorities of the competitiveness policy. the state acts as one of the fundamental forces that regulate the business environment of each country’s economy (smallbone, welter 2001). for that very reason it is important to understand what the main areas of the state’s activities are and how regulatory laws of business are inducing the development of small and medium business (sme) (lithuanian parlament 2007; lithuanian ministry of economy 2014). the state’s support for the development of sme can be understood as a set of tools. technical assistance and financial support – are the tools for the development strategy of sme. d. smallbone and f. welter (2001) distinguish a number of areas where the state indirectly affects small business. primarily, the macroeconomic environment and its improvement. smaller businesses, apparently, are not very sensitive to changes in the macroeconomic environment. one of the ways for the state to regulate the development 68 ž. tunčikienė, g. sinkevičiūtė. strenthening opportunities of economic relations between lithuania and sweden within the perspective of it startup company’s development of sme is to apply a different legal base accordingly to an entity’s size. according to lr’s sme law of development, in lithuania, four types of companies, regarding their employment and income, are distinguished. all companies essentially operate in different ways, therefore the law and the state’s strategy towards them differentiates. when applying uniform standards for all companies, the final result of corporate welfare may vary widely. it is only natural, that the tax burden and the respect for demand of extrude could become too severe for sme business and thus the development of the business could be indirectly decelerated. another implement for sme development is the direct application of support measures, various programs and initiatives, devoted to help solve the problems caused by lack of resources. in the long term, these companies are beneficial to the economy as they are creators of workplace and stimulates the economy; to increase their potential, direct and technical support, funding from the state or eu must be applied. according to d. smallbone and f. welter (2001), measure that affects the sme development is related to various institutions. promotion associations of young business, business incubators, banks, other financial institutions that in one way or the other contributes to support smes, must be regulated, but easily accessible. in this case, state’s aid for small economy subjects is granted indirectly, offering organized and detailed information about institutions that may be contacted for support, whilst ensuring that actions of these institutions, programs they create and their initiatives would remain transparent and provide tangible benefits to the business for which such aid is necessary. in summary, to ensure sustainable development of the sme, the state must take care of: the improvement of the macroeconomic environment, the differentiation of the legislative base for economy subjects, tools of the direct support, financial and technical support, maintenance of private institutions and business promotion programs and dissemination of information. to achieve an effective implementation of the objectives pursued by the state, longterm strategies are created. one of them – the long-term strategy of the state’s development. its main goal – to create an environment to develop the country’s material and spiritual well-being, which is generally described by the knowledge society, secured society and competitive economy. smes are an important part of realization process of a strategy and these strategic areas of smes’ development are distinguished: 1. promotion of establishment of new small and medium-sized enterprises. 2. development and improvement of financial services and conditions for sme to use them. 3. promotion of establishment of innovative enterprises. 4. improvement of employee qualifications in small and medium-sized businesses. 5. improvement of infrastructure of small and medium-sized business. one of the key aspects to ensure the growth of the sme sector is the uniformity of economic development. sme’s development in lithuania and in different regions differs due to economic conditions, infrastructure, access for education and its quality, receivable income and other regionally related actions (baležentis, vijeikis 2010). that 69 business, management and education, 2017, 15(1): 57–76 is why, following the expected trends and challenges of sme’s development, state seeks to implement on three institutional levels: at the national level through the national sme development program, at regional level to ensure the activities of institutions and the development of the local level – support and development of entrepreneurs and level of business. the economy of sweden is often seen as one of the most innovative economies in the world. business conditions there are considered to be very favorable for development of startup companies. the swedish government is actively contributing to the creation of startups in the country by establishing and facilitating the best possible conditions for the creation of investment funds, incubators that encourage high-technology transfer, innovation, dissemination and entrepreneurship (zoltan et al. 2015). one of the priority areas in sweden – the digital economy. precisely for this reason, during the last decade, public sector organizations are devoting a great measure of focus to the development of high-tech infrastructure which resulted in formation and development of more worldrenowned it startup companies such as skype, spotify, mojang, izettle, that leads to continued and promising formation of it startup companies (mitzner 2016). swedish good practice of startup business creation and development is one of the factors of our country’s business competitiveness. it should be noted here, that israel occupies a leading position in the world, when we compare the startup companies per fig. 2. the ecosystem of startup companies in israel (developed by the authors according to the d. senor, s. singer (2009)) authorities (ministry of economics, „invest in israel“, etc. ) 75 venture capital funds 9 universities: academic education, research, incubators promoting entrepreneurship 5000 startup companies (3500 it startup companies) 280 international enterprises filials, 220 research laboratories 60 business incubators accelerators (,,the time“, ,,explore“, ,,the elevator“ etc.) 70 ž. tunčikienė, g. sinkevičiūtė. strenthening opportunities of economic relations between lithuania and sweden within the perspective of it startup company’s development capita. the region of tel aviv, which houses most of the it startup companies, innovation and high-tech application in these companies when developing products or services, became an established norm (see fig. 2). state institutions of israel are successfully adapting to market changes and works closely with the business community that is encouraged to share its experiences of innovation and corporate management. this kind of close cooperation, for example, between education institutions and businesses representatives provides greater opportunities to use accumulated academic knowledge to practical development of new startup companies (senor, singer 2009; kandel et al. 2011). 7. success factors of startup companies’: external factors, lithuania’s and sweden’s case based on evaluation methodologies of favorable business conditions such as the world economic forum and the world bank’s “doing business” valuation models of business conditions, it is appropriate to distinguish external factors that are essential and had the greatest influence on successful development of it startup companies (see table 1). the evaluation of external success factors of startup companies’ activities are based upon analysis of the scientific literature, main group criteria of the world economic forum and the world bank’s “doing business” global competitiveness index’s three main sub-indexes: the sub-index of the basic requirements, the sub-index of the inducing performance factors, the sub-index of innovation and business sophistication. based on analysis of the scientific theory and valuation models of favored business conditions, the external factors that had the greatest impact on successful it startup companies development can be distinguished – these are the conditions which cannot be changed by an organization, but must be properly evaluated, otherwise, disregarding these factors may imply negative efect on the development of organization. the assurance of these environmental factors, that favors the formation of startup businesses and expansion of its activities, is the prerogative of public institutions. external environment consists of the totality of international community’s development factors that makes a consistent impact on country’s social, economic and market development to the political, economic, social efficiency, this efficiency limits the development of organization’s actions. in the context of the study’s object, analysis and evaluation of external factors are essential for the interested parties in order to: – compose the groundwork for extension of the potential in formation and development of startup companies in the context of other countries; – know and evaluate the situation in the market in which it intends to operate or already operates; – identify and explore the factors that can potentially create barriers to establish and operate a startup company; – evaluate their attractiveness and demand for the created product. 71 business, management and education, 2017, 15(1): 57–76 table 1. external factors that have the greatest impact on the success development of it startup companies (developed by the authors according to the world economic forum 2015–2016) no external factors description of external factors 1. conditions for starting a business how easy is it to start a new business, how do public institutions to contribute to creating and implementing the reforms of business regulation, which facilitate the procedures to establish a business? 2. getting permits what financial and time resources are available for getting the permits to start a business? 3. labor market efficiency is it possible to meet the needs of investors associated with the quality of the workforce? 4. getting credit domestic banks and other financial institutions’ proposed incentives to finance new business creation. 5. investor protection level of investor protection in the country, where is created business, is one of the most important criteria in order to attract as much as possible foreign individual investors. 6. tax environment what are the preferences for the new created business in the country? 7. international trade export and import conditions in the country, where is developed startup business. 8. infrastructure level logistics level, roads, ports and the other quality. 9. health protection the measures to conserve and preserve the health in the country. 10. corruption level of corruption in the country, the shadow economy impact on business development. 11. market size market size is the determining factor when there are introduced new products, from the size of the market belongs the product demand. 12. financial market development the quality of the country’s financial services, consumer protection, regulation of the activities of operators providing these services. 13. technological development using of digital technology by population, using of digital technology by the authorities. 14. innovations state policy in promoting innovative activities, in developing and implementing a variety of electronic platform, which would save society time, financial resources. 15. higher education systems and vocational education the level of education in the country. skilled and unskilled labor in the context of a newly created business. 16. startup corporate sponsorship (business incubators, accelerators, technological parks) support for new entrepreneurs, job promotion, corporate operational risk reduction, other ways to help startup companies to generate and implement innovative business ideas. 72 ž. tunčikienė, g. sinkevičiūtė. strenthening opportunities of economic relations between lithuania and sweden within the perspective of it startup company’s development – “sup46” startup center operating in sweden, notes the following key factors for startup business success: – the country’s long-standing experience in sectors of design and engineering; – growing community of startup business; – mature ecosystem of startup business; – well-developed high-tech infrastructure; – knowledge society; – the country’s high standard of living; – substantial image of the country; – products created by startup companies satisfying the needs of consumers in different countries; – organizational management structure, based on the promotion of creativity. 8. conclusions according to analysis of startup’s concept, it can be said that the model of the business is based on high-tech transition thus the innovative business solutions that are the base for product creation, the consumption of which promotes the development of the knowledge society; other attribute of the business model – startup business model is based on the external funding. the similarities of lithuania’s and sweden’s approaches of the concept of the startup business are treated as favorable assumptions (the meeting points of the countries’ business culture) for strengthen the bilateral economic relationship through the perspective of startup company’s development. in the picture of lithuanian and swedish startup companies the totality of attributes could be perceived, that is declared in the basic concept of the startup business/enterprise. when characterizing the startup company by the stages life cycle, it is possible to conclude a rationally composed totality of startup company’s distinctive features. the life cycle of startup companies are widely discussed, as it differs from traditional organizations life cycle. it is important to analyze the development of the life cycle of startup company and, at every stage, identify the key factors that would lead to the further successful development. lithuanian and swedish startup companies’ life cycles are associated with the financing of the operation cycle. this cycle consists of the beginning of idea generation phase, idea launching phase, pre-growth phase, growth phase, fixed financing phase and the withdraw phase. the success of modern, innovative company depends on their ability to sell in a highly competitive market. the business conditions are equated with the level of country’s potential, by strengthening which, a higher level of competitiveness is achieved. so the business conditions show how easily and how quickly the business units are to achieve significant results. they are expressed as a combination of external factors that, in a particular market, determine the success of a business entity. 73 business, management and education, 2017, 15(1): 57–76 the promotion and development of the new business establishment is a priority of lithuania’s and sweden’s competitiveness policy. countries act as one of the fundamental forces that regulate the business environment of each country’s economy. for this reason, it is important to understand what the main aspects of the state’s activities are and how the regulatory laws are affecting startup business. the determination of external success factors of startup companies are substantiated by the analysis of scientific literature, the main group criteria of world economic forum and the world bank’s “doing business” global competitiveness index. the most important swedish startup business success factors are: the country’s long-standing experience in the design and engineering sectors, the growing community of the startup business, the mature ecosystem of the startup business’, well-developed high-tech infrastructure, the knowledge society, the country’s high standard of living, a substantial image of the country, products created by startup companies satisfying the needs of consumers in different countries, organizational management structure based on the promotion of creativity. external factors that have an impact on successful development of it startup companies – these are the conditions, which cannot be changed by an organization, but must be properly evaluated; otherwise, disregarding these factors may have a negative impact on the development of organization. the assurance of these environmental factors, that favors the formation of startup businesses and expansion of its activities, is the prerogative of public institutions. the analysis and evaluation of external factors are essential for the interested parties in order to create conditions for increasing the formation of startup companies whilst the development potential in the context of other countries, to know and evaluate the country’s business position in the global market, to identify and explore the factors that can potentially create barriers for the formation of a startup company and its operation; evaluate 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of public sector, environmental assesment for ease of doing business. gabrielė sinkevičiūtė. masters’ student, department of international economics and business management, faculty of business management, vilnius gediminas technical university. research interests: business success factors, opportunities of economic relations. head of the swedish chamber of commerce in lithuania. http://www.bls.gov/opub/mlr/2014/beyond-bls/startups-and-older-firms.html http://www.bls.gov/opub/mlr/2014/beyond-bls/startups-and-older-firms.html http://sup46.com/wp-content/uploads/2016/03/sup46_annual_swedish_startup_infographic_2015.pdf https://doi.org/10.1287/orsc.14.5.497.16761 http://startuphighway.com/wp-content/uploads/2015/05/lithuanian_startup_ecosystem.pdf http://startuphighway.com/wp-content/uploads/2015/05/lithuanian_startup_ecosystem.pdf http://reports.weforum.org/global-competitiveness-report-2015-2016 http://reports.weforum.org/global-competitiveness-report-2015-2016 http://www.pacis-net.org/file/2014/2026.pdf https://doi.org/10.1111/j.1467-6486.2006.00616.x http://redit.skane.com/sites/default/files/media/document/gei_2015.pdf verslas_2012_10_2.indd using social network and dropbox in blended learning: an application to university education justo de jorge moreno university of alcala (madrid-spain), plaza de la victoria sn, 28804 alcalá de henares-madrid, spain e-mails: justo.dejorge@uah.es received 11 september 2012; accepted 28 november 2012 abstract. the main objective of this study is to analyze the use of the social networking and dropbox in blended learning by university students. we try identifying this method, over the student’s performance. the results show that the implementation of blended learning has a positive effect on in learning outcomes. the use of the knowledge management process has enabled captures a three-factor structure that reflected the five types of knowledge. the segmentation of the student sample analyzed using cluster technique, has established a clear typology of four groups. students with higher levels of learning are related to the increased use of resources used and more proactive in blended learning. keywords: social networking, dropbox, blended learning, student, university. reference to this paper should be made as follows: de jorge moreno, j. 2012. using social network and dropbox in blended learning: an application to university education, business, management and education 10(2): 220–231. http://dx.doi.org/10.3846/bme.2012.16 jel classification: i23. 1. introduction the entry into the xxi century has provided a new mode of social organization, linked to a technological revolution with its epicenter in the technologies of information and communication technologies (icts). the events that are occurring worldwide are proof of this revolution. social networks (sn) account for access to a large amount of educational resources which enable teaching and learning of unlimited capacity. as mention (escobar-rodriguez, monge-lozano 2012) icts acceptance in education remains a central concern of information systems research and practice. research on student learning in higher education has systematically provided evidence for the inter-relational nature of the different aspects of student learning, such as conceptions of learning, approaches to learning and learning outcomes (bliuc, ellis, goodyear, piggot 2011). icts in the educational field pose a significant transformation in the teaching methods, giving way to virtual environments, where the learning process is based on interactivity to educate b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2012, 10(2): 220–231 doi:10.3846/bme.2012.16 copyright © 2012 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 221 business, management and education, 2012, 10(2): 220–231 students, leading to the acquisition of new skills. in parallel with the increasing use of icts, the european space for higher education has led to growing concerns about a new model of teaching / learning, student-centered. concepts such as “skills or abilities” emerge as relevant and key criteria in the new approach to higher education. in line with authors such as (amhag, jakobsson 2009; so, brush 2008; wheeler, yeomans, wheeler 2008; wolff 2010; biasutti, el-deghaidy 2012) social constructivist learning theory was used as a theoretical framework with a shift from a teacher-centred methodology to a student-centred methodology. in this framework, the main objective of this paper is to analyze the use of the sn and dropbox in blended learning by university students. we try identifying this method, over the student’s performance (learning outcome). following (levy, dickerson, teague 2010) while pedagogical developments and research were largely focused on e-learning, the beginning of this century saw the emergence of the concept of blended learning. bliuc (goodyear, ellis 2007: 4) state that “blended learning” describes learning activities that involve a systematic combination of co-present (face-to-face) interactions and technologically-mediated interactions between students, teachers and learning resources’. as mention (lópez-pérez, pérez-lópez, rodríguez-ariza 2011) the success of blended learning is not only the result of the simple integration of icts with the ftf approach (de george-walker, keeffe 2010). in situations where student numbers by classroom are high, this type of resource provides greater opportunities to comprehend and extend the knowledge presented (osguthorpe, graham 2003; singh 2010). the use of blended learning resources may produce changes in learning patterns and practices. we integrate the knowledge management (km) as a design tool because of the pedagogical importance that is reaching (yeh, huang, yeh 2010). as mention this authors km involves knowledge sharing, creation, validation, presentation, distribution and application (bhatt 2001; holm 2001). recent studies have used km (yeh, huang, yeh 2011; biasutti, el-deghaidy 2012). 2. methods in this section, we present the participants, the resources and methods used to determine whether the objectives of this study have been achieved. 2.1. participants the participants were sophomores of economics and business administration, in the course of operations and business processes. table 1 shows the technical details of the survey. they had to perform work in a group. the work accounted for 50% of the note. the other 50% was the final exam with 40%, the remaining 10% of individual work. the work was involved in the manufacturing process of a product or service. 222 j. de j. moreno. using social network and dropbox in blended learning: an application to university education table 1. technical details of the survey (source: created by the author) analysis unit students enrolled in second course of economics and business administration, in the subject of operations and business processes geographical scope university of alcala (madrid) population 98 students enrolled in the 2012 course sampling type for convenience sample size 82(83,6%) students sampling error / confidence interval 4,6% (95%); p = q = 0.5 measuring instrument individual survey date embodiment may 2012 students had to incorporate the various concepts and techniques studied during the course. for example, determining the project network (cpm, pert), plant layout, production planning, etc. students studying and working also independently proposed themes and concepts. the sum of these activities was evaluated in a final mark. as mention (lópez-perez et al. 2011) learning outcomes are of a multi-dimensional nature; they may reflect acquired skills and competences, and knowledge received, or be measured by students’ experiences or by their degree of satisfaction. the final marks has been used as a measure learning by (broad et al. 2000; drennan, rohde 2002; dowling et al. 2003; lópez-perez et al. 2011) among others. demographic information was collected on participants` gender, access to the internet, hourly of daily internet usage and its purpose, in addition to previous experience with social networks and dropbox. tables 2 and 3 shows participants´ demographic data and opinion the work done, resources and support received by the teacher. table 2. demographic data for participants (source: created by the author) variable % gender male = 34.1% female = 65.8 hours of daily internet usage >1 h = 14.6% 1-2 h = 46.3% 3-4 h = 23.1% <4 h = 15.8% the purpose for internet access education = 15.8% personal = 39.0% both = 45.1% previous experience with social networks yes = 32.9% no = 67.0% previous experience with dropbox yes = 9.7% no = 90.2% 223 business, management and education, 2012, 10(2): 220–231 table 3. student´s opinion about work done, resources used and support received by the teacher (source: created by the author) item mean sd min. max. the work helps to understand the subject 4.49 0.74 2 5 the work done increases the interest in the subject 4.16 0.88 1 5 the teacher support was necessary 4.06 0.93 2 5 using dropbox we has allowed both a greater degree 3.98 1.01 1 5 of cooperation and learning. the information available on the network, i have been 3.93 1.04 1 5 helpful (links, videos, files, etc.) using dropbox with the teacher has improved the work 3.89 1.11 1 5 interaction with network messages openet has been interesting 3.59 0.98 1 5 2.2. resources 2.2.1. social network we have created a sn (http://openet.mixxt.net) to facilitate interaction between students and between them and the teacher. the sn can be used for different purposes, but have a common and important initiative of maintaining existing social ties and / or form new connections between users (cliff et al. 2006; ellison et al. 2006; boyd & ellison 2008). although students were encouraged to search for software, documentation, videos, the network has a wealth of information fostering especially the use of free software (openproject, winqsb, day, sistrat, etc.). figure 1 shows an image of the network and the evolution of interactions of the participants over time. we use software ucinet v. 6 (borgatti et al. 2002) for the representations. fig. 1. evolution of the interaction of the participants in the network (source: created by the authors) 224 j. de j. moreno. using social network and dropbox in blended learning: an application to university education 2.2.2. dropbox, web and classroom using dropbox, the working groups kept the different versions of the work. it could also access the results of the computer programs used by students. the teaching material was accessible through a website (or webct). in classroom, explaining both concepts and practical and discussed issues related to work. figure 2 shows the network structure (simplified) of the working groups and dropbox and with the classroom. fig. 2. connecting workgroups and dropbox classrom and web one closed question instrument were used to assess the results and the processes induced by the sn and dropbox in the activities. the questionnaire was structured into two blocks. one is about the demographics and opinion the work done, resources and support received by the teacher (see tables #1 and #2). the other for assessing the application of knowledge management (km) processes. this instrument has been used recently by (yeh, huang & yeh 2011; biasutti, el-deghaidy 2012). a developed description of the relationship between km and education can be found in these authors. first we apply the factor analysis; we can find five types of knowledge within km. as mention biasutti and el-deghaidy (2012: 863); knowledge acquisition refers mainly to the strategies, tools and methods that could be used in order to finding and acquiring information. knowledge internalization after information has been found and accessed, the next step is linking this information into previous mental schemata. knowledge creation considering previous knowledge, it starts from the collection of existing knowledge, ending with storage process and passing by processes of coding and classification of knowledge. knowledge sharing process is the key to enhance the externalization and dissemination of knowledge. knowledge application and innovation process represents the stage where decisions are made and is the ultimate goal of km. it refers to the process of applying what one has learned to the job at hand. second we apply cluster analysis for form groups of students with homogeneous characteristics, but different among the groups, for which a cluster analysis is appropriate. 225 business, management and education, 2012, 10(2): 220–231 3. results and discussions according (voss 2003) blended learning is a recent development in education, combining face-to-face classes with e-learning modules. some authors mention the advantages of applying this methodology in relation with didactic flexibility or reducing costs, especially compared to traditional classes a large number of students (woltering, herrler, spitzer, spreckelsen 2009). as mention (lópez-perez, perez-lópez, rodriguez ariza 2011) previous studies have reported that the quality and results of learning are affected when students utilize only such methods, possibly due to a) the lack of interaction with the teacher and other students (laurillard 1993); b) procrastination in asynchronous learning (lim 2002); c) the reduced motivation to read learning materials online (lim, kim 2003). in our case we assume that the use of blending learning will be a positive effect on to students. in particular, as a result of factors such as utility (ozkan, koseler 2009). students overcome the difficulties of the resources available and also perceive their utility. his work thus becomes something encouraging and satisfactory. the motivation to learn is one of the variables that have most often been studied in the field of education (lim, morris 2009). data collected through the questionnaire km, were analyzed using statistical analysis (factor analysis and cluster analysis). alpha coefficients ranging from 0.80 to 0.91 were all above the 0.70 standard of reliability and the total cronbach-α was 0.87. as is known, with factor analysis the aim is to obtain a new set of variables (factors), fewer in number than the original variables, which allows a clearer interpretation. determining the number of factors to retain is, as (rummel 1970) points out, in part discretionary, and is left to the researcher’s judgement. however, and as (stewart 1981) notes, we should mention that there are various criteria to help to decide the number of significant factors, such as retaining the factors with characteristic root or eigenvalue greater than 1, which is the criterion chosen in this work. the (bartlett 1950) test allows us to reject the null hypotheses of no significant correlation (c2 = 4567.7; p = 0.000), meaning that it is appropriate to carry out this analysis. likewise, the kmo test = 0.84 is also suitable. following the criteria mentioned, we obtain 3 factors with and eigenvalue grater than1 (as can be see table 4, whose explanatory power is 63.1%. the interpretation of these factors is carried out as a function of the variables with most influence in them, previously carrying out varimax rotation to help in the interpretation of the results. we use, depending on sample size, the cutoff value of 0.6 (hair et al. 1999). the first factor, which explains 46,7% of the variance, presents a high positive association with seven items in three group. first group of items #15, #14, #16 (i tried to bring out the best practices, i applied my knowledge to the activities, i have downloaded and adapted best practices to my activities) representing knowledge application. second group of items #5 and #6 (i updated the job permanently, i rated the new information in an organized), representing knowledge internalization. third group of items #2 and #3 (i have documented the type of information needed, i have summarized the results of internet searches), representing knowledge acquisition. 226 j. de j. moreno. using social network and dropbox in blended learning: an application to university education table 4. rotated factor matrix: principal components and varimax with kaiser normalized criterion (source: created by the author) item afactor_1 factor_2 factor_3 (#1) selected the appropriate information on the internet 0.477 0.202 0.318 (#2) i have documented the type of information needed 0.661 0.279 0.351 (#3) i have summarized the results of internet searches 0.645 0.182 0.181 (#4) i related the new information to prior knowledge 0.528 0.386 0.240 (#5) i updated the job permanently 0.619 0.358 -0.034 (#6) i rated the new information in an organized 0.748 0.075 0.244 (#7) i have assimilated new ideas 0.234 0.144 0.893 (#8) i have assimilated new concepts 0.281 0.257 0.875 (#10) i have developed new ways of learning 0.216 0.559 0.389 (#11) i have shared information with colleagues 0.169 0.692 0.182 (#12) i have shared the use of information with colleagues 0.219 0.854 0.034 (#13) i encouraged the idea of sharing knowledge 0.345 0.777 0.213 (#14) i applied my knowledge to the activities 0.745 0.365 0.141 (#15) i tried to bring out the best practices 0.815 0.129 0.134 (#16) i have downloaded and adapted best practices to my activities 0.693 0.232 0.236 eigenvalue 7.01 1.27 1.2 % variance explained (63.1%) 46.70 8.4 8.03 kmo 8.4 alpha de cronbach/item (0.85) 6 (0.80) 3 (0.91) 2 a factors: 1. knowledge application, internalization, adquisition, 2. knowledge sharing, 3. knowledge creation. the second factor explains 8.04% of the variance, presents a high positive association with two items, #11 and #12 (i have shared information with colleagues, i have shared the use of information with colleagues) representing knowledge sharing. the third factor explains 8.03 of the variance, presents a high positive association with two items #7 and #8 (i have assimilated new ideas, i have assimilated new concepts) representing knowledge creation. in summary the number of factors extracted in our work is three. the first factor is the more representative bringing together three of the skills included in km. this result differs somewhat from that found by biasutti and el-deghaidy (2012), they found the five knowledge, identified in five factors. however, in their work is not mention how is the number of factors choice. also, it depends of sample size. we now seek to form groups of students with homogeneous characteristics, but different among the groups, for which a cluster analysis is appropriate. the clustering method 227 business, management and education, 2012, 10(2): 220–231 used ward (1963) is adopted, which merges clusters which contribute the least to the overall sum of the squared within cluster distances. clustering proceeds by finding the closest pair of clusters, combining them into a new larger cluster, and then computing the distance between this and the other remaining cluster. the process starts with every student treated as a single cluster, so the first new cluster will be a two-student cluster, and so on. clustering ceases when the two final clusters have been combined, so that all the data are in one cluster. the final results of this analysis are reported in table 5. table 5. mean values obtained for each group (source: created by the author) cluster nº obs. factor #1 factor #2 factor #3 #1 27 mean 21.39 14.58 12.86 #2 25 mean 29.07 20.29 17.06 #3 22 mean 24.65 17.78 15.29 #4 8 mean 12.7 8.87 8.42 total 82 f(value) 132.2** 106.9** 109.8** **p<0.01 finally, the discriminant analysis verifies the classification of the groups, with 98.78% of the cases correctly classified (wilks lambda = 0.116 (p-value = 0.000)). furthermore, the anova confirms the statistically significant differences between the clusters with respect to the factors (table 3). the interpretations of the results obtained by applying the ward algorithm and the mean values obtained in table 3 allow us to characterize the four groups. cluster #2 shows the highest average values in the three factors, while the cluster #4 lowest average values . clusters #2 and #3 are positioned in an intermediate zone. to complement the analysis of the cluster. figure 3 shows the mean values of the original variables in relation to the cluster. as expected this result is the same as that carried out the factors but perhaps more clearly. fig. 3. mean values of the original variables and cluster (source: created by the authors) 228 j. de j. moreno. using social network and dropbox in blended learning: an application to university education one of the key aspects in the experiment carried out, was to determine the relation of the attitude of students to use available resources (sn, dropbox) in blended learning and learning outcomes. for this, we use an anova analysis. the results show that the cluster # 2 gets the highest academic performance (mean = 6.75, sd = 4.62 on a scale of 0–10 points) compared to the rest cluster #3(mean = 6.53, sd = 4.37); cluster #1 (mean = 5.54, sd = 5.18); cluster #4 (mean = 4.70, sd = 4.75). figure 4 provides information of the boxplot of the cluster according to academic performance. f-test = 3.03(0.034) fig. 4. academic performance by cluster (source: created by the authors) 4. conclusions the increasingly common use of innovative contexts of learning that integrate online and face-to-face learning experiences at all levels of education highlights the need to intensify our research focus on key aspects of these experiences from a student perspective, such as students’ experiences of blended learning, online discussions or internetbased research (tsai 2004). the experiment carried out in this work using the sn and dropbox in blending learning, was conducted to promoting autonomous, collaborative and proactive learning of the students. we try identifying this method, over the student’s performance (final marks). the results shows that the implementation of blended learning has a positive effect on in learning outcomes (raising exam+work pass rates) in the subject. the use of the km process has enabled capture a three-factor structure that reflected the five types of knowledge. factor # 1 (knowledge application, internalization and acquisition) seems the most relevant, as it is that most of the variance explained. knowledge sharing factor is second in importance thus indicating the importance that the sn has to get this process. factor 3 shows the creative knowledge. in this respect, teamwork, sharing of ideas and interaction with the professor has improved the learning process. as mentioned biasutti and el-deghaidy (2012) the effectiveness of km requires a continuous knowledge conversion process between tacit and explicit knowledge (nonaka, takeuchi 1995). 229 business, management and education, 2012, 10(2): 220–231 the segmentation of the student sample analyzed using cluster technique, has established a clear typology. considering the cluster and in relation to factors and original variables has been possible to identify four clusters. cluster # 2 integrated of students who have higher levels of knowledge recognized in the km process. furthermore, these students are those with the highest learning outcome. cluster # 4 composed of students from lower level of knowledge in km and lower learning outcome. clusters # 1 and # 3 whose values are in the middle tier. the need to improve the system imposed by ects in europe in general and spain in particular is in engagement when the number of students per classroom is excessive. the use of icts can help improve this process by allowing more interaction between students and the teacher and ultimately improve the necessary process of student´ learning. active use and social of sn cannot be ignored in the pacification of 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http://dx.doi.org/10.1007/s10459-009-9154-6 yeh, y. c.; huang, l. y.; yeh, y. l. 2011. knowledge management in blended learning: effects on professional development in creativity instruction, computers & education 56(1): 146–156. http://dx.doi.org/10.1016/j.compedu.2010.08.011 justo de jorge moreno. phd, professor in the department of economic and business university of alcala. he has published in entrepreneurship regional and development, journal of economic development, journal of economic studies, annals of regional, int. j. retailing and distribution management among others. he has participated in diverse projects on entrepreneurship and evaluation projects for institutions in spain (i.e. foundation rafáel del pino, city council of madrid)and international organisms (i.e. idb iberamericano of development bank). . copyright © 2014 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2014, 12(2): 213–227 doi:10.3846/bme.2014.233 the status of energy monitoring in science and industry by the example of material handling processes patrick fekete1, steve martin2, katja kuhn3, nicholas wright4 1, 2, 4faculty of engineering and computing, coventry university, priory street, coventry, west midlands cv1 5fb, united kongdom 1, 3school of engineering and architecture, srh hochschule heidelberg, bonhoefferstrasse 11, 69123 heidelberg, germany e-mails: 1feketep@uni.coventry.ac.uk (corresponding author); 2s.martin@uni.coventry.ac.uk; 3katja.kuhn@hochschule-heidelberg.de; n.wright@uni.coventry.ac.uk received 13 october 2014; accepted 06 november 2014 abstract. global mega trends attract increased resource preservation as well as system efficiency and arouse growing scientific, industrial and public attention, whereas process and technologic developments still lack realisation due to inaccurate knowledge of real process energy demand, associated possible savings and a low inducement for investment. this investigation develops a generally applicable process for energy data collection focussing on material handling systems based on a predefined target model for energy monitoring in order to generate a valid reference model. the introduction of standardised energy consuming activities (seca) model enables the development of energy based process functions as reference for its implementation to energetic investigations in various industrial applications. analysing current and target state of energy monitoring in scientific and industrial investigations for logistics shows the developmental deficit of standardisation and realisation in energy monitoring. keywords: energy monitoring, process energy, energy load profile, standardised energy consuming activity, process fragmentation, material handling process, key performance indicators. jel classification: r49, q49. 1. introduction in recent years global megatrends such as globalisation and urbanisation as well as the ongoing electrification of industry, trade and consumption, together with demographic changes, strongly influence all fields of economy and science (kartnig et al. 2012; mueller et al. 2013a). driven by constantly increasing energy prices fostered by public and political interests, while the amount of natural resources decreases, the demand for more ecologic and resource saving technologies and procedures grows (bandow et al. 2013). due to these factors of decreasing resources and resource availability as well as the demand 214 p. fekete et al. the status of energy monitoring in science and industry by the example of material handling processes for increased sustainability and availability, the traditional objectives of industry such as cost, time and quality are modified by (energy) efficiency considerations (mueller et al. 2013b). the achievement of these key objectives can be realised whether on the macro level by governments and legal authorities or on the micro level by single enterprises (humpl, starkl 2010). due to companies’ focus on global cooperation, vertical disintegration and the concentration on individual core competencies, the quantity of goods to be transported increased constantly by 1% – 2% throughout the last decade (european commission 2014), already reaching the maximum performance ability of many distribution centres (chen, paulraj 2004: 1; miodrag et al. 2012; clausen et al. 2013). according to figure 1, more than 72% of all goods that are transported on land within europe are handled by road transportation so that these significantly contribute to the congestion of logistic hubs. fig. 1. modal split eu-28 (source: european commission 2014) investigating the above mentioned phenomena, scientists highlight the importance for highly efficient tools and technologies in order to ease the bottle-necks of logistic distribution centres and transfer hubs in order to enhance the transportation and handling of goods. amongst others, efficient factory planning (mueller et al. 2013b), performance and capacity utilization maximation by resource management (miodrag et al. 2012), technical and technological improvement (bamberg et al. 2012) or process monitoring (wenzel, bandow 2011) are considered as highly potential areas to improve material handling. all the above are considered to be subject of sustainable supply chain management which has attracted growing attention and stake in the research area (teuteberg, wittstruck 2010), whereas the concepts of lean manufacturing and thinking are driving approaches to foster the avoidance of waste and losses in combination with increase in efficiency and availability. while executing these approaches, due to growing product variety, shortened product life cycles and order characteristics, handling systems and processes are required to possess high flexibility and availability whereas the general target of industry consists of an overall standardisation (kartnig et al. 2012). the result 215 business, management and education, 2014, 12(2): 213–227 of these developments is increased demand for transportation and handling distances, utilisation times of equipment and optimised process energy by trying to attain maximised efficiencies. fostered by the illustrated developments, industry will be forced to adjust and apply production and handling processes to these determining factors in order to maintain competitiveness in the near-term future. handling facilities will have to be designed in accordance and new technologies will have to enhance equipment availability and efficiency. current “lean” developments and strategies focus on the reduction of waste by increasing efficiencies and changing processes based on estimated energy consumption figures. the basis for evaluating economic reasonable reducibility of waste is a detailed knowledge of processes and process energy. this investigation develops a generally applicable process for energy data collection in material handling systems based on a predefined target state for energy monitoring in order to serve as reference standard of comparison. comparing current and target state of energy monitoring in science and industry shows the developmental deficit. 2. the role of energy in material handling processes in contrast to the definition of logistics which focuses on the supply-chain starting from the production of raw materials up to finished products and delivery to final customers (humpl, starkl 2010), intralogistics is defined as the task of organising, executing, controlling and optimising in-house material flows (bandow et al. 2013). for example, in a non-automated low-level picker-to-part system, transportation equipment has to pick the goods from different positions within a logistics facility where there is no stacking of goods on racks. in logistic distribution centres, forwarding and handling are major tasks and storage only plays a minor role (de koster et al. 2006). automated processes are often linked to highly standardised assembly lines or conveying systems for example in courier and express services. zrnic and rajkovic identified the essential components of non-automated intralogistic processes like lifting and handling equipment (cranes and forklift trucks), warehouse technology and software which play a key role while investigating intralogistics and its processes (2011). in-house material handling is responsible for a big part of the total transhipment centre’s energy consumption (humpl, starkl 2010). according to tsige this energy consumption can account for up to 55% of the total warehouse operating expenses (2013) whereas all investigations lack the identification and analysis of relevant consumers. as per approach of lean manufacturing, the target is to run material handling processes by using the most energy efficient activities in order to avoid waste (seow, rahimifard 2011). in practice, using energy efficient activities mostly refers to implementing highly efficient state of the art technologies whereas real consumption remains unknown. sullivan, mcdonald and van aken specified the biggest sources of inefficiency as excess inventory, wasted time (= cost) or unavailability of equipment (2002). 216 p. fekete et al. the status of energy monitoring in science and industry by the example of material handling processes according to the model of huan, zhu and shen (2012) breaking down process related energy consumption to its individual components such as target energy (et = exergy) and working energy consumption (ecw = anergy) including losses and auxiliary work allows to identify fixed consumption in relation to its accompanying, waste-creating side effects (see fig. 2). for energy monitoring purposes with focus on demand and supply of energy, adding a deficit factor integrates the possibility of dissatisfaction of required energy, whereas the target of energetic optimisation is to keep the deficit factor ±0. a positive deficit refers to waste due to the provision of non-usable energy whereas a negative deficit results in unavailability of equipment due to energy shortage. fig. 2. components of process energy (source: created by the authors) energy management tries to reduce waste and losses by holistically analysing process chains by monitoring, structuring and documenting energy requirements such as demand and supply, so that the importance of effective performance measurement and therefore consumption grows (mueller et al. 2013a). besides closely related key performance indicators such as machinery performance and time, overall equipment efficiency is highly influenced by fleet utilisation (mason, lalwani 2006) which is based on availability and utilisation. 3. energy management and the target state of energy monitoring energy management can be described as energetic amendment to total supply chain management which holistically investigates, analyses, structures, documents and plans all process related structures and supporting functions with focus on energetic consumption. as per figure 3, energy monitoring plays a key role throughout the total energy management process. as part of the energy management process, the results of detailed energy monitoring have a major impact on the planning and checking phase as the basis for a fundamental analysis which includes the evaluation of current and expected energy consumption. 217 business, management and education, 2014, 12(2): 213–227 the most important steps for evaluating process energy performance of material handling systems can be derived from mueller et al. (2013b): − definition of field of observation; − implementation of energy monitoring; − analysis of energy performance and energy consuming activities/functions; − forecasting of future energy demand based on reliable consumption specifications; − identification of possible energy improvements. fig. 3. energy management requirements accorging to iso 50001 energy monitoring in highly automated and therefore standardised work environments and processes such as automotive manufacturing or mechanised production processes can be implemented at the connection points of energy transfer. most of the energy considerations for these processes are based on theoretical figures based on data sheet calculations, which, in the case of high standardisation, are characterised by realistic and valid results. where there is less standardisation and high demand for 218 p. fekete et al. the status of energy monitoring in science and industry by the example of material handling processes flexibility due to less projectable process sequences, the fraction of anergy increases due to increased appearance of auxiliary work and start-up processes. the increased number of peaks in this arrangement raises energy consumption. the influence of an increased number of start-up processes and process interruptions becomes clear while investigating the progress of performance curves. the start-up processes can require more than three times the electric power consumption as constant operations (see fig. 4). detailed knowledge about process structures of flexible systems as well as interlinked energy consumption deduced from process specific load profiles are therefore an essential part of monitoring and analysing process energy. fig. 4. load profile planar handling (source: created by the authors) an important influence for energy management is highlighted by the standard deviation from notional and real consumption figures that highlights the importance of energy monitoring in order to generate a reliable calculation basis. as per figure 5, standard deviation of flexible material handling processes differs for up to 27% from calculated values in planar handling processes. when lifting is required real consumption is up to ten times higher than calculated due to increased dissipation losses and auxiliary processes of the support system. with rising mass of goods to be conveyed or lifted, the value of deviation increases due to increased inertia of mass, so that lifting processes suffer greater impact. fig. 5. deviation of process energy consumption in planar handling and lifting (source: created by the authors) 219 business, management and education, 2014, 12(2): 213–227 an important issue of energy monitoring is to determine process parameters which influence individual processes and by this to identify generalizable functions in order to make a process-based energy monitoring approach applicable to similar, comparable functions. therefore energy monitoring has to focus on processes broken down to standardised handling steps and functions that also occur in other processes or redundant in the same process in order to make it generally applicable. the target is to define standardised energy consuming activities (seca) that fulfil congruent or redundant functions. a seca therefore has to be clearly defined and as specific so that it can also be defined as “not reasonable divisible”. a seca in material handling of logistic hubs can be defined as the task of forwarding a certain weight over a certain distance by measuring the required energy. the distance can be set to one meter, as average transport distances are generally given on a metric basis. breaking it down to a smaller unit does not provide any further benefit to energy calculations. fig. 6. load profile fragmentation (source: created by the authors) figure 6 shows energy components of a material handling process including a total of six different standard functions such as: − system activation and provision; − free lift (unloaded); − material handling (planar); − free lift (loaded); − stacking 1100 mm; − stacking 2100 mm. breaking down energy monitoring to smallest material handling functions allows to defragment single steps of material processing into a comprehensive energy consumption profile of individual processes based on empirical consumption figures which includes the standard deviation for start-up processes and different process encroachments. the defragmentation of processes by using secas allows a flexible adaption to fast changing processes what enables the desired flexibility for process energy calculations and simulations. 220 p. fekete et al. the status of energy monitoring in science and industry by the example of material handling processes 4. energy monitoring in science in order to define the current status of energy monitoring in science, scientific articles and publications from sjr-ranked journals or books (69%), recognised international conferences (19%) or accredited university institutions (12%) were reviewed. the search process was performed in a backand forward keyword search focussing on energy consumption, supply and efficiency in material handling processes and its inherent environments. correspondent synonyms and alterations led to increased results, so that search results and articles were sorted and checked for relevance to the subject matter. fig. 7. distribution of literature over time (source: created by the authors) energy monitoring in (intra-) logistics, i.e. material handling, hasn’t gained much relevance in last decades’ publications or scientific considerations. according to figure 7 the number of publications considering material handling efficiency with relevance to energy management and energy monitoring increased. research focuses on technological developments in order to minimise waste and losses by material handling equipment. energy supply in material handling gained more attention starting from 2010. focus of research in this field is the balancing and monitoring of energy provision to industrial production and production lines, i.e. highly standardised processes whereas material handling processes only play an ancillary role. de koster, le-duc and roodbergen highlight maximisation of equipment usage for optimising process design and process energy demand, as well as travel distances (2006: 10). in agreement with this klumpp, clausen and ten hompel (2013) mention the growing importance of increased availability of existing handling resources as well as the approach of decreasing the size of the provided handling equipment fleet. the potential of optimisation, while trying to minimise the resources and its capacity, needs to be monitored and analysed precisely, as quality within supply chains highly depends 221 business, management and education, 2014, 12(2): 213–227 on its reliability, which is majorly dependent on negative impacts such as unplanned breakdowns and unforeseen downtimes, some of which can be a result of energy shortage (wenzel, bandow 2011). bunse et al. (2011) highlight the importance of investigations on energy usage profiles in reference to processes and machines (and associated equipment) in order to compare individual performance numbers, whereas seow and rahimifard (2011) criticise the lack of accurate data as well as scientific publications in this field (mueller et al. 2013b). available data of intralogistic processes were majorly generated by energy audits and energy balance sheets (bunse et al. 2011) so that there is a lack of comprehensive real environment data (miodrag et al. 2012). the focus of research in the field of energy monitoring is on manufacturing processes which rarely considers intralogistic activities such as handling (neugebauer et al. 2011). negative impact of designing investigations on purely statistic data, which is based on highly inexact overall consumption figures, is the negligence of inefficiencies of transmission and storage as well as real performance requirements due to the reference on average numbers, which prevents the calculation of real process relevant energy (borcherding et al. 2013). in line with the above mentioned points, asadi (2012) stresses the absence of universally applicable key performance indicators and benchmarks in intralogistics. research is investigative and therefore limited to one or a few aspects only, so that research on technological improvement neglects energy supply, whereas research on energy and process monitoring does not consider technological aspects. three major perspectives of science on the field of energy monitoring were identified such as technological, organisational and economic perspectives. criteria for categorising and assignation are shown in table 1. table 1. perspectives on energy monitoring (source: created by the authors) technological organisational economic performance calculation process optimisation energetic calculations efficiency optimisation routing efficiency calculations reduction of losses guidance systems benchmarking system requirements supply chain management key performance indicators system classification warehouse planning waste equipment implementation the technological perspective analysed handling technologies and its efficiencies for intralogistic applications such as agvs (schulze, wullner 2006) and conveying systems which bear the character of high standardisation rates (yu 2008). factors and results such as system design, machinery efficiency etc. can partially be used as basis for economic and process calculations. these and similar technological aspects play an important role for developing relevant key performance indicators for an energy process analysis. 222 p. fekete et al. the status of energy monitoring in science and industry by the example of material handling processes moreover, economic considerations of applied research should focus on benchmarking and optimisation matters in accordance to the lean approach. starting from 2008, energetic investigations and the avoidance of waste energy gained importance and attention but were considered more as a side topic in material handling processes of manufacturing and production industries. process and routing optimisations are central aspects of organisational parts of energy monitoring. he et al. (2012) introduced the combination of single process steps of a manufacturing supply chain and its inherent energy consumption in reference to a highly standardised production line. energy consumption of different operating modes are analysed in order to result in the most economic compromise of energy consumption and process velocity. this approach goes in line with mueller et al. (2013b) and the described approach of introducing seca. key aspect is to investigate the basic energy consuming activities and to define a standard for energy data preparation in order to design a generally applicable and comparable data base. existing approaches form an initial step for detailed energy analysis but still lack the process-required particularity in energy monitoring execution. material handling process energy monitoring can be based and conducted according to the following scheme by segmenting handling activities into single redundant secas (see fig. 8); its defragmentation into a periodic load profile enables detailed process analysis and evaluation. defragmentation is the first step of calculating process energy consumption and therefore needs to be based on more accurate consumption figures which include standard deviations for all considered functions. according to this approach, the basis for developing process energy analysis is a detailed energy monitoring on predefined standardised energy consuming activities. fig. 8. energy monitoring process (source: created by the authors) 223 business, management and education, 2014, 12(2): 213–227 5. energy monitoring in industry as global competition is constantly rising same as the prices for energy, producing business units strive to decrease their overall expenses. closely linked to this, material handling is required to be more and more efficient in order to lower energy consumption and cost. overall subject perspectives in this field of investigation have already been described in science and literature so that industry seems to be aware of this upcoming issue. in a representative investigation about energy consumption and efficiency in material handling facilities and logistics companies, germany-based material handling facilities were inspected and surveyed. all the surveyed distribution centres defined material handling, i.e. unloading, loading and forwarding as their core functions with 95% to 97% of all shipments to be transhipped without any storage. 72% defined their core business as road transportation. others deal with sea freight (13%), air freight (7%) or in-house logistics (7%) by operating in company owned distribution centres. in reference to energy efficiency in material handling facilities, more than 75% of all participating parties stated that energy efficiency is of high importance within their companies. the remaining parties evaluated the subject`s influence on business as medium (3%) to low (21%). german logistics companies that have put focus on energy optimisations (79%) have implemented business units that partly deal with energy issues. energy management, if existing, is majorly implemented in departments such as “environmental management”, “health safety environment” (hse), “quality management” or “technical department”, whereas the degree of subject specialisation is descending due to department’s focus. in one out of four logistics companies energy monitoring was performed, but all approaches were limited to counter reading on electricity meters. this results in cursory knowledge about general energy consumption of office buildings, warehouses or outdoor areas without gathering information about individual energy consumers and energy consumption characteristics. more specific counter reading in reference to material handling or conveying equipment and its related energy transmission applications, as performed by only 10% of the participating hubs, foster basic energy consumption understanding but still lacks particularity. overall results estimate the major functions of energy consumption in material handling facilities such as illumination (36%), handling equipment (32%), it (28%) and climate control (5%). this indicates that the results of energy monitoring according to the scientific subject understanding based on the development seca is underperformed. the cost of energy consumption accounts for up to 7% of the overall cost of material handling processes. participating companies estimated that another 2% to 10% of possible savings can be realised economically. 57% of the surveyed group took action to improve energy efficiency, e.g. to decrease energy consumption such as the installation of energy saving illumination, what accounts for 56% of all energy saving measures to be taken and which is seen as most potential source for additional economies. a small 224 p. fekete et al. the status of energy monitoring in science and industry by the example of material handling processes fraction of realised actions is based on process optimisations, staff training and/or more efficient technical equipment. by these actions, companies have realised annual financial surpluses from € 4.800 to € 70.000. while scanning material handling key performance indicators with basic relevance to energy consumption within distribution centres, reliable figures were available to only 54% (see excerpt as per fig. 9). fig. 9. key performance indicators with relevance to energy consumption (source: created by the authors) the investigations showed that the importance of energy efficiency in material handling is limited to easy accessible energy saving measures with low risk and low demand for investment, so that in a second survey reasons for the deficient realisation were investigated (see fig. 10). fig. 10. barriers to energy savings (source: created by the authors) 225 business, management and education, 2014, 12(2): 213–227 6. conclusions a scientific consideration of the focus of energy monitoring and measuring lies on warehouse-based processes of manufacturing and production (bandow et al. 2013). currently industrial application of energy efficient technologies in material handling is limited to low risk and low investment applications with short amortisation cycles. consideration of short-term economic considerations outweigh the long-term saving of resources. it is seen in the text that energy optimisations in the area of material handling focus on the minimisation of proceeding times such as picking-, travelor search times (tsige 2013). the defined target according to the lean approach is to minimise losses such as waste times and distances in order to increase the use of labour and equipment (bunse et al. 2011; tsige 2013), whereas the common ground is the utilisation of statistical and theoretical time averaged values (duflou et al. 2012; bunse et al. 2011). the development of comparable energy consumption data (seca) with validity to different applications will increase and standardise scientific results on energy issues and by this increase the understanding and implementation of energy saving measures in industry. moreover, a strong growth of energy prices and, by this, the potential to save financial resources should increase the willingness to apply specific human resources and capital investment in low margin sectors too. a strong growth of energy prices due to the higher cost of the projected green energy policy of the german government, will give a potential to save financial resources and encourage willingness to apply specific human resources and capital investment in low margin sectors too. therefore, the introduction of standardised energy consuming activities (seca) model is shown as enabling the development of energy-based process functions as references for its implementation to energy investigations in various industrial applications. disclosure statement authors herewith declare not to have any competing financial, professional, or personal interests from other parties. references asadi, n. 2012. performance indicators in internal logistic systems, 2012 international conference on innovation and information management (icim 2012), 11–13 july 2012, barcelona, spain, 36: 48–52. bamberg, b.; johann, a.; waldow, p. 2012. energy efficiency in logistics – smart kanban as an intelligent intra-logistics architecture for kanban scenarios, it – 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2002. equipment replacement decisions and lean manufacturing, robotics and computer-integrated manufacturing 18(3): 255–265. http://dx.doi.org/10.1016/s0736-5845(02)00016-9 teuteberg, f.; wittstruck, d. 2010. a systematic review of sustainable supply chain management research, in mkwi 2010 – betriebliches umweltund nachhaltigkeitsmanagement, 23–25 february 2010, goettingen, germany, 1001–1015. tsige, m. t. 2013. improving order-picking efficiency via storage assignments strategies. university of twente. wenzel, s.; bandow, g. 2011. condition monitoring in logistics – a new approach for maintenance,in iceme 2011 – 2nd international conference on engineering and meta-engineering, 27–30 march 2011, orlando, usa. yu, m. 2008. enhancing warehouse performance by efficient order picking. erasmus university rotterdam. zrnic, n.; rajkovic, m. 2011. energy efficiency in intralogistics: a new trend in research, in proceedings of the 7th triennial international conference, 13 july 2011, kraljevo, serbia, 127–132. patrick fekete. m. eng. is a researcher at coventry university and srh university heidelberg. he is an industrial engineer and lectures at srh university in the degree course of international business and engineering with focus on renewable energies. his research interests relate to the investigation of material handling process parameters in reference to energy consumption. steve martin. prof. dr. with an early career of over 10 years in the automotive industry prior to joining coventry university dr steve martin has continued to collaborate with industry in the capacity of mentor, coach, trainer, consultant and researcher. with a list of publications related to the application of lean thinking and continuous improvement, applied research in this area now extends beyond the traditional industry context to include application in the service sector including health, and higher education. formerly as head of department for engineering management within the faculty of engineering and computing steve has exercised responsibility for the development and delivery of academic and cpd training courses for industry as well as consultancy and applied research projects benefitting principally the local industry region, small to medium sized organizations and international businesses such as jaguar land rover (jlr), worcester bosch, unipart, and babcock international in the uk and infosys overseas in india and is currently programme director for the erdf funded productivity improvement initiative (pii) project. katja kuhn. prof. dr is the academic dean of the department of industrial engineering at srh university heidelberg. her scientific work relates to topics of strategic and international management, development of sustainable approaches within companies and the interdependence between the demand of energy and the economic performance of a country. she is author and co-author of various scientific articles and papers published in refereed sources and manages research projects on international level. she graduated at mannheim university and holds a doctor title form the same university with a major in international politics. nicholas wright is a senior lecturer in logistics in the faculty of engineering & computing at coventry university. his scientific work relates to topics of sustainable logistics, especially in the area of container rail freight and reverse logistics operations, the application of heuristic models for vehicle routing and scheduling. also, he specialises in enterprise information systems and how to apply digital technologies in logistics and has worked on a framework for a global logistics information management system (glims). he graduated with an msc in computing at coventry university. http://dx.doi.org/10.1016/j.cirpj.2011.03.007 http://dx.doi.org/10.1016/s0736-5845(02)00016-9 spreadsheet error detection: an empirical examination in the context of greece dimitrios maditinos1, dimitrios chatzoudes2, charalampos tsairidis3 1kavala institute of technology, agios loukas, 654 04 kavala, greece 2, 3democritus university of thrace, panagi tsaldari 1, 69100 komotini, greece e-mails: 1dmadi@teikav.edu.gr (corresponding author); 2dchatzoudes@yahoo.gr; 3xtsairid@pme.duth.gr received 10 may 2011; accepted 23 april 2012 abstract. the personal computers era made advanced programming tasks available to end users. spreadsheet models are one of the most widely used applications that can produce valuable results with minimal training and effort. however, errors contained in most spreadsheets may be catastrophic and difficult to detect. this study attempts to investigate the influence of experience and spreadsheet presentation on the error finding performance by end users. to reach the target of the study, 216 business and finance students participated in a task of finding errors in a simple free cash flow model. the findings of the study reveal that presentation of the spreadsheet is of major importance as far as the error finding performance is concerned, while experience does not seem to affect students on their performance. further research proposals and limitations of the study are, moreover, discussed. keywords: end user computing, spreadsheet error detection, spreadsheet presentation, user experience, greece. reference to this paper should be made as follows: maditinos, d.; chatzoudes, d.; tsairidis, ch. 2012. spreadsheet error detection: an empirical examination in the context of greece, business, management and education 10(1): 128–143. http://dx.doi.org/10.3846/bme.2012.10 jel classification: a22, c60. 1. introduction spreadsheet programs are widely used to analyse and manipulate advanced and complex numerical data. one can enter numbers into a spreadsheet and perform a large variety of mathematical and economical calculations, even if they incorporate a quite complicated structure. the problem of eliminating errors from software in general and spreadsheets in particular has been bothering literature since the beginning of the computer era (chan et al. 2000; kruck, sheetz 2001). with the advent of the personal computers in the 1980s and the rapid development of end-user computing, control of software development was handed over from the professionals to the end users (kreie et al. 2000; clermont 2002). as spreadsheets have diffused throughout industry, evidence has underlined that spreadsheets should not contain errors and that errors can be costly to b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2012, 10(1): 128–143 doi:10.3846/bme.2012.10 copyright © 2012 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 129 business, management and education, 2012, 10(1): 128–143 the organisations that are using spreadsheets (ayalew et al. 2000; caulkins et al. 2006; panko, halverson 1996a; panko 1998). nowadays, spreadsheets are used widely and frequently for business decisions. spreadsheet modelling is recognised as the most frequently used application in the modern industry, while it is also quite easy to use with minimum training (kruck 2006). furthermore, spreadsheets’ tabular structure and embedded formulas enable any user to start building a spreadsheet from scratch with very little experience and knowledge. spreadsheet errors, on the other hand, are common, both in complicated spreadsheets where the amount of the cells is usually large, but also in relatively simple ones. studies have shown that all spreadsheets have high error rates (panko 1998; rajalingham et al. 2001). although research have suggested that errors are prevalent in spreadsheets, there is much left to be examined about the types of errors that occur, the reasons that they occur, and the ways to avoid them. the most important issue that alarms industry is the fact that spreadsheet errors can potentially cost large amounts of money (galletta et al. 1993, 1996, 1997). errors in spreadsheets may arise due to a variety of reasons, ranging from the user’s lack of understanding about the specifications and/or spreadsheet requirements, to errors arising from incorrectly entering the formulas or values (panko 2006; powell et al. 2008). in the present study, an experiment among business and finance students of the technological educational institute (t.e.i.) of kavala, greece, is employed in order to investigate whether (a) user experience in spreadsheet modelling and (b) spreadsheet presentation affect the auditors’ error finding performance. under this framework, the error finding rates of everyday users, such as students, are investigated, while the reasons of the students’ failure are being interpreted. moreover, a categorisation of the factors that lead to students’ success in spreadsheet error detection is being attempted. the following section includes a literature review concerning the main variables of the present study. in the third and fourth section, the proposed hypotheses and the research methodology are being presented. the results, conclusions, study limitations and future research are discussed in the sections 5, 6, 7 and 8 respectively. 2. literature review several studies have dealt with error finding performance. thompson and partridge (2001) conducted an experiment to examine the rate of detection of both quantitative and qualitative errors in two domain-free spreadsheets. specifically, their study contains two experiments examining detection of both quantitative and qualitative spreadsheet errors. in both experiments, they used a domain-free spreadsheet problem in order to rule out threats to validity caused by differences in task domain knowledge among participants. they used a sample of first year business undergraduate students who were taking an introductory course on spreadsheets using microsoft excel. results showed that the ability to detect errors appears to be dependent on the error type (logical, mechanic or omission) and the error prominence, as well as prior incremental practice. 130 d. maditinos et al. spreadsheet error detection: an empirical examination in the context of greece in their research, janvrin and morrison (1996) explore the impact of different design approaches through two field experiments, evaluating the use of a structured design methodology when developing complex spreadsheets. for this purpose the authors used sixty one accounting and business administration students that were assigned several linked spreadsheets with errors to treat. their methodology is implemented in two phases, where in the first phase subjects could work together at relatively simple workbooks, while at the second phase subjects were asked to work individually at relatively more demanding workbooks. results of their study indicate that subjects using the methodology showed a significant reduction in the number of “linking errors”, that is mistakes in creating links between values that must flow from one area of the spreadsheet to another or from one worksheet to another in a common workbook. they also observed that factors such as gender, application expertise, and workgroup configuration influenced spreadsheet error rates as well. howe and simkin (2006) report the results of an experiment in which they investigated the potential determinants of spreadsheet error-detection rates in a sample of 228 participants. on average, participants identified 67 percent of the 43 errors embedded in a test spreadsheet model. in this experiment the scholars also gathered information about a number of factors that might plausibly account for differences in error-detection rates. their independent variables included gender, age, number of university credits taken, grade, years of prior programming experience, years of prior spreadsheet experience, years of prior excel experience, user confidence, and a dummy variable for school location. the most important conclusion is a lack of explanatory power for all the variables they used. such a finding implies that other, unknown, factors must be at work. howe and simkin (2006) believe that all spreadsheet errors are not the same, and that it makes sense to categorise them. therefore they propose a four error type categorisation. in their study, panko and sprague (1998) asked from a sample of a 102 undergraduate misstudents and 50 postgraduate business administration students to develop a model from a word problem that was free of domain knowledge. the scholars followed galletta et al. (1996) and tested the error finding performance of their subjects according to their development, auditing, and training experience. results revealed that inexperienced and experienced spreadsheet developers do about the same number of errors. these results are consistent with galletta et al. (1996) who found that when experienced spreadsheet developers audited models, they did not find a higher percentage of the errors in these models than did inexperienced spreadsheet developers. galletta et al. (1996) picked up a sample of 113 mba students and assigned them the task to find eight errors planted in a single-page spreadsheet. their purpose was to discover if differences in the presentation format would facilitate error-finding performance. totally, they used five presentation formats. spreadsheets were presented on the screen, both with and without formulas’ presentation. spreadsheets were also presented on paper with a list of formulas attached, or without formulas. an integrated formula paper treatment was introduced, with formulas presented in each cell directly under each calculated value. the participants found, on average, only about 50 percent of the 131 business, management and education, 2012, 10(1): 128–143 errors across all presentation formats. the on-screen treatments were clearly inferior to the paper treatments, regardless of the presentation of formulas. their study showed that users who attempt to find errors in spreadsheets are not aided by formulas, but are aided by paper copies of a spreadsheet. according to the authors (galletta et al. 1996), paper versus screen effects applies well to spreadsheet error finding. the studies of galletta et al. (1996) and panko and sprague (1998) that are presented above are used as main drivers for the present paper. 3. hypotheses development galletta and hufnagel (1992) revealed that detection of spreadsheet errors is a quite demanding task. sometimes, even experienced auditors fail to detect errors in simple spreadsheets. this incompetence is attributed to numerous factors that can hinder the error finding performance (thompson, tan 1997; simkin 2004). following the context of previews research in the field (galletta, hufnagel 1992; galletta et al. 1996; panko, sprague 1998), the present study is testing whether (a) spreadsheet presentation and (b) user’s experience affect the spreadsheet error detecting performance. spreadsheet presentation refers to whether the spreadsheet is presented on screen or on paper, as well as to whether formulas or values appear (kruck, sheetz 2001; clermont 2002; powell et al. 2008). spreadsheet experience refers to the familiarity that each respondent attributes to himself about working with spreadsheets. dillon (1992), gould et al. (1987) and oliver (1994) used two spreadsheet presentation patterns and found out that reading from the screen is generally faster than reading from the paper (printed form of the spreadsheet). thus, spreadsheet presentation (screen versus paper) can influence the error finding performance. thus, we hypothesize: hypothesis 1: more errors are found when spreadsheet is presented on screen than on paper. furthermore, besides testing the average amount of errors found, the average time that each subject spends to complete the task given is, moreover, investigated: hypothesis 2: errors are found less frequently when the spreadsheet is presented on screen rather than on paper. as said above, the second aspect of spreadsheet presentation is the appearance of spreadsheet formulas during the error finding process. although galletta et al. (1996) found no significant differences in error finding performance for subjects provided with spreadsheet formulas versus those who weren’t, there is evidence that providing formulas in an integrated manner (i.e., both formulas and values are provided in the same spreadsheet) may reduce the number of invalid errors found, compared to other treatments. the following two hypotheses refer to the appearance of formulas: hypothesis 3: more errors are found when the auditor works with formulas (added next to actual numerical values). 132 d. maditinos et al. spreadsheet error detection: an empirical examination in the context of greece hypothesis 4: errors are found more quickly when the auditor works with formulas (added next to actual numerical values). finally, following the context developed by galletta and hufnagel (1992), the present study is testing whether the subjects’ experience in spreadsheets affects the error finding performance: hypothesis 5: more errors are found when the auditor has high domain experience. hypothesis 6: errors are found more quickly by experienced auditors. hypotheses 1 and 2 study the first aspect of spreadsheet presentation (paper vs screen), while hypotheses 3 and 4 the second (values vs formulas). finally, hypotheses 5 and 6 study the relationship between spreadsheet experience and error detecting performance. 4. research methodology 4.1. variable definition and measurement 4.1.1. spreadsheet errors there are various types of errors that appear on spreadsheets and they are examined in a number of relevant studies (rajalingham et al. 2000; ayalew et al. 2000; caulkins et al. 2006). spreadsheet error detection literature mainly deals with users’ errors and not with software errors that have to do, mainly, with programming issues (rajalingham et al. 2000). the most common distinction of users’ errors is in quantitative and qualitative errors. quantitative errors, usually, have the form of numerical entry errors, while qualitative errors take the form of poor spreadsheet design and format and could potentially lead to quantitative errors. quantitative errors may immediately distort the spreadsheet result; qualitative errors, on the other hand, may lead to quantitative errors later, when the spreadsheet is in use (kruck, sheetz 2001; simkin 2004; panko 2006; kruck 2006). since the main objective of the present study is to investigate the impact of spreadsheet presentation and end user experience on spreadsheet error detecting performance, it is obvious that only quantitative errors will be accounted for. that is because qualitative errors are not, mainly, related to the end user, since they foremost concern the initial designer of the spreadsheet (rajalingham et al. 2000). panko and halverson (1996b), distinguished the three dominant types of quantitative errors (mechanical, logic and omission errors). mechanical errors are defined as simple mistakes, such as mistyping a number (salchenberger 1993). logic errors involve mistakes in reasoning that leads to wrong formula entering and are considered as quite difficult to detect and correct (allwood 1984). the most critical type of errors, however, are the omission errors that occur when something is left out; this type is considered as the most difficult to detect (allwood 1984; bagnara et al. 1987; woods 1984). in the present study, an evaluation of a free cash flow model containing eight errors is being attempted. these errors represent the three error types mentioned above. more specifically, three mechanical errors, three logic errors and two omission errors were seeded to all participants of the experiment. 133 business, management and education, 2012, 10(1): 128–143 4.1.2. spreadsheet experience user experience is a composite factor that is measured with the use of three indicators: (a) self-reported spreadsheet familiarity, (b) free cash flow concept familiarity and (c) years of experience with spreadsheets. howe and simkin (2006), moreover, used respondents’ age as an indicator of experience and investigated its impact on the error finding performance. however, age is not incorporated in the present study as an indicator of experience, since it does not represent the actual time that each respondent have spent working with spreadsheets (randolph et al. 2002). self-reported spreadsheet familiarity and free cash flow concept familiarity were measured with the use of 3 questions (items) each (the five-point likert scale was employed), while the years of spreadsheet experience were calculated as the difference between the students’ age and the age of his admittance on the department of business administration. at this point, it should be mentioned that students on the department of business administration are being taught spreadsheet modelling since the first semester of their studies. in order to verify the construct validity of the spreadsheet experience variable, (a) exploratory factor analysis and (b) reliability analysis with the use of the statistical package s.p.s.s. 14.0 was being conducted. seven items were used in the appropriate analysis and all relative indexes were within the acceptable range (kaiser-mayer-olkin, bartlett’s test of sphericity, eigenvalue, variance, cronbach alpha). after successfully completing the control for the construct validity of spreadsheet experience, the final score of the variable was calculated using the mean of the 7 items used. 4.2. data collection (experimental method) a thorough experiment was implemented in order to test the proposed hypotheses. the experiment was conducted with the use of a simple free cash flow evaluation spreadsheet and an answer sheet, where respondents were asked (a) to identify the cells containing errors and (b) to describe each error. respondents were, also, asked to include some basic demographics (age, genre, school) and answer relative questions about their spreadsheet and cash flow concept familiarity. the evaluation spreadsheet was delivered in five presentation forms. the first two forms were electronic, specifically a microsoft excel file, where only values were presented and the auditor had to point to each cell to see the formula on the formula bar and a microsoft excel file, where the respondent could see only formulas. the other three presentation patterns were printed spreadsheets; specifically a printed spreadsheet where the subject (auditor) could see values but no formulas at all, a printed spreadsheet where the subject could see only formulas and no values and, finally, a printed spreadsheet where the subject could see both formulas and values. the five forms of the test were named in a descriptive manner: (a) excel with values, (b) excel with formulas, (c) pdf with values, (d) pdf with formulas, (e) pdf with values and formulas. 134 d. maditinos et al. spreadsheet error detection: an empirical examination in the context of greece the experimental material was addressed to students of the undergraduate and the postgraduate programme of the business administration department of the technological educational institute (t.e.i.) of kavala, greece. all participants had taken at least one spreadsheet modelling course using microsoft’s excel, as well as one investment evaluation course and they were familiar with both microsoft’s excel and the free cash flow evaluation concept. the participants were 123 and they were split into five random groups. each group was given one of the five spreadsheet forms discussed above. no time constraints were set, but participants were informed that they were to detect exactly eight errors. the process allowed to record the time each student needed in order to complete the task. participants were asked not to collaborate with each other or use another kind of external help and were discretely supervised as to do so. after the completion of the task, 123 valid responses were collected. the members of the research team recorded the total number of valid errors that each student was able to identify, as well as the time each one spent in finding them. in addition, after coding the collected data into an excel spreadsheet, the errors each student found were classified according to the three error types mentioned above. furthermore, the time each student used per found error was calculated. using these data, an index of overall performance for each student was extracted. this index is expressed as the average time each student spent to find a valid error and algebraically calculated by the quotient: total time spent / valid errors found. 5. results 5.1. sample demographics fifty two percent of the students participated in the experiment (64 students) were undergraduate students in the department of business administration, while 48 percent (59 students) were postgraduate students (23.5 percent in the finance stream and 24.5 percent in the financial information systems stream). furthermore, 70.7 percent (87 students) were male and 29.3 percent (36 students) female. finally, 64.2 percent (79 students) were less than 24 years, while the rest 35.8 percent (44 students) were 25 years or older. 5.2. spreadsheet presentation and detection performance as mentioned above, the free cash flow model of the experiment was delivered in five distinct forms, each including eight errors. students were separated into five random groups and each group was provided with the spreadsheet in one of these forms. in order to conclude which of the five forms is the most efficient in terms of error detection, an examination of (a) the errors found, (b) the time spent for the completion of the experiment and (c) the error detection rate was conducted. means, standard deviation and skewness were calculated for all cases. 135 business, management and education, 2012, 10(1): 128–143 when it comes to the valid errors found by auditors (students), the empirical analysis revealed that the group that worked with “excel with values” found 70.63 percent of the errors seeded in the spreadsheet. the group that worked with “excel with formulas” found 55.5 percent of the total errors. the group that worked with the “pdf with values” found 30 percent of the total seeded errors, which is the lowest performance. the other two groups both found half of the total seeded errors (50.5 and 52 percent respectively). standard deviation in all cases is low and, therefore, acceptable, while it seems to be relatively constant for all groups of students. moreover, the skewness scores (less than 1 in all cases), show that all data follow the normal distribution. table 1. errors found in each form – mean, standard deviation, skewness errors’ mean standard deviation skewness excel with values 5.65 (70.63%) 1.22 –0,22 excel with formulas 4.44 (55.5%) 1.04 0,17 pdf with values 2.40 (30%) 1.00 0,43 pdf with formulas 4.04 (50.5%) 1.42 0,29 pdf with values and formulas 4.16 (52%) 1.24 0,65 a primary conclusion that can be drawn from the data presented in table 1 is that the students’ capability to point the cursor at each cell and see the formula is decisive in their performance to find valid errors. “excel with values” seems, therefore, to be the most efficient form of error detection. the above conclusion is, moreover, supported when the time that students spent in order to find exactly eight errors (valid or not valid) is being calculated. as shown in table 2, the “excel with values” form is the one that helps students to identify eight errors faster that any of the other forms. additionally, it seems that standard deviation is relatively high when it comes to the last two forms of the experiment (pdf with formulas, pdf with values and formulas). the dispersion of time each student spent in order to complete the task in these two cases is significant (4.43 and 3.92 respectively). this means that there were students who completed the error finding task in a very short period of time and others that spent much more time doing so. finally, skewness scores are acceptable in all cases, showing that all data follow the normal distribution. table 2. time spent in each form – mean, standard deviation, skewness time mean standard deviation skewness excel with values 21.61 min. 1.16 0.10 excel with formulas 22.4 min. 1.41 –0.31 pdf with values 30.6 min. 3.15 0.73 pdf with formulas 26.4 min. 4.43 1.05 pdf with values and formulas 29.16 min. 3.92 –0.11 136 d. maditinos et al. spreadsheet error detection: an empirical examination in the context of greece table 3. error detection rate – mean, standard deviation, skewness error rate mean standard deviation skewness excel with values 4.01 min. 0.94 0.35 excel with formulas 5.27 min. 1.16 1.40 pdf with values 15.62 min. 8.56 1.19 pdf with formulas 7.45 min. 3.29 0.31 pdf with values and formulas 7.64 min. 2.53 0.35 table 3 presents the error detection rate for each of the five spreadsheet forms (time spent in order to find a valid error). the data presented in table 3 support the claims made after observing tables 1 and 2, clearly pointing out that working with “excel with values” is the most efficient method when it comes to error detection. when students are using an excel file with values, they are able to find a valid error every 4.01 minutes, far less than with any other spreadsheet form. furthermore, the dispersion of values (0.94) shows that the above performance is consistent. finally, the skewness index (0.35) identifies a normal distribution, unlike in the case of “excel with formulas” and “pdf with values”. for the case of “pdf with values”, dispersion is extremely high (8.56 minutes), showing that students had quite contradictory performances. 5.3. error type analysis the quality of all valid errors identified in the experiment is very interesting to be analysed. as mentioned earlier, the relevant literature makes three main error distinctions (mechanical errors, logic errors and omission errors) (panko, halverson 1996). table 4 presents an analysis of the valid errors found, according to their category. the group of students that worked with the “excel with values” form performed extremely well in finding logic errors (70 percent). the other 4 groups seem to have a somewhat same performance in finding mechanical and logic errors, while none of the five groups exhibit good performance with omission errors. it is concluded that the “excel with values” form is quite convenient for finding more logic errors. table 4. error type analysis mechanic errors logic errors omission errors excel with values 26.15% 70.00% 3.85% excel with formulas 34.23% 54.95% 10.81% pdf with values 46.67% 46.67% 3.33% pdf with formulas 52.48% 42.57% 4.95% pdf with values and formulas 42.57% 55.45% 4.95% total 38.97% 55.47% 5.77% 137 business, management and education, 2012, 10(1): 128–143 5.4. hypotheses verification in order to test the four first hypotheses of the present study, (a) cross tabulation analysis, (b) mean comparison and (c) paired samples tests were conducted. the verification of hypotheses 5 and 6 was made with the use of linear correlation. the presentation of the hypotheses testing is being attempted in three steps. 5.4.1. hypotheses 1 and 2 as shown in table 5, the mean of errors found when the spreadsheet is presented on screen is 5.02, significantly higher than the case of presenting the spreadsheet on paper (3.53). more specifically, working with the on screen presented spreadsheet led students to detect 1.85 more errors than the ones they detected when working on paper. this difference is, moreover, statistically significant (t = 6.389, sig. = 0.000). furthermore, the average time for students to complete the task they were assigned is much lower when the spreadsheet is presented on screen, than when it is presented on paper. specifically, when working with on screen presentation students needed on average 22 minutes to complete their task, while when working with the paper version they needed about 29 minutes. the average difference of 6.72 minutes is, also, statistically significant (t = –10.428, sig. = 0.000). finally, when dealing with the on screen version, students needed 4.68 minutes on average in order to detect a valid error, while when dealing with the paper version they needed 10.24 minutes on average. that means that students that worked with the on screen spreadsheet used on average 7.11 minutes less to find each valid error. this mean difference is, moreover, statistically significant (t = 6.25, sig. = 0.000). thus, it is concluded that hypotheses 1 and 2 are fully supported by the empirical data. table 5. screen vs paper (hypotheses 1 and 2) screen paper mean difference t statistic sig.mean standard deviation mean standard deviation number of errors found 5.02 1.28 3.53 1.46 1.85 6.389 0.000 time 22.02 1.34 28.72 4.20 –6.72 –10.428 0.000 rate 4.68 1.24 11.79 6.64 –7.11 –6.25 0.000 5.4.2. hypotheses 3 and 4 as shown in table 6, the students that worked with spreadsheets showing formulas added next to actual values found about the same number of errors with those who worked with spreadsheets showing values only (4.21 and 4.02 respectively). however, the mean difference of 0.19 in favour of spreadsheets showing formulas is not statistically significant (t = –0.823, sig. = 0.413). thus, it is concluded that the third hypothesis is rejected by the empirical data. 138 d. maditinos et al. spreadsheet error detection: an empirical examination in the context of greece moreover, students who worked with spreadsheets showing formulas completed the task in 25.99 minutes on average, while those who worked with spreadsheet showing values only needed 1.28 minutes more. since the mean difference is not statistically significant (t = 1.332, sig. = 0.187), the fourth hypothesis is, also, rejected by the empirical data. despite the above, when taking into consideration the rate of finding each valid error, results seem to present a different point of view. more specifically, students who worked with spreadsheets showing values needed 2.43 more minutes in order to detect each valid error. the mean difference in that case is statistically significant (t = 2.74, sig. = 0.008), something that implies that working with spreadsheets showing formulas actually helps students to perform better in terms of errors found per minute. although the fourth hypothesis cannot be fully supported according to the empirical data presented above, one could suggest that it could be perceived as partially supported. table 6. values vs formulas (hypotheses 3 and 4) values formulas mean difference t statistic sig.mean standard deviation mean standard deviation number of errors found 4.02 1.75 4.21 1.24 –0.19 –0.823 0.413 time 27.27 1.75 25.99 1.24 1.28 1.332 0.187 rate 9.23 1.75 6.80 1.24 2.43 2.74 0.008 5.4.3. hypotheses 5 and 6 in order to test hypothesis 5 (more errors are found when the subject has high domain experience), a correlation between the number of valid errors detected and the experience of the user was conducted. results failed to support the hypothesis, since the correlation coefficient and the significance index were non satisfactory (0.086 and 0.342 respectively). the same case was for hypothesis 6 (errors are found more quickly by experienced auditors) (0.030 and 0.741 respectively). therefore, hypotheses 5 and 6 are rejected by the empirical data (it could be advocated that experience do not at all influence the error detection performance). 6. conclusions the present paper is based on the relevant studies conducted by galletta and hufnagel (1992), galletta et al. (1996) and panko and sprague (1998). the main objective of the study is to test whether spreadsheet presentation and overall user experience influence the error detecting performance. the tests conducted are bilateral, since they do not only check whether spreadsheet presentation and overall experience influence the number of errors found, but also the time needed for these errors to be found. the first two hypotheses are supported by the empirical data, showing that on screen spreadsheet presentation is more convenient in the error detection process. additionally, 139 business, management and education, 2012, 10(1): 128–143 students tend to find errors less frequently when they work with spreadsheets on screen rather than on paper. the second two hypotheses tested the error detection performance when working with spreadsheets containing values and spreadsheets containing values and formulas, but they were both rejected by the empirical data. more specifically, it was proved that the spreadsheet form presented with formulas failed to help students to perform better on average than using a spreadsheet showing only values or only formulas. although students working with formulas do not find significantly more errors or complete the whole task on considerable less time than those who work with values, the hypothesis can be supported when investigating the empirical data concerning the performance rate (average time in detecting each error). specifically, students working with spreadsheets showing formulas use, on average, significantly less time per valid error found. it seems that students who worked with spreadsheets showing only values, especially presented on paper, got confused and spent needless time to find errors that were not valid. thus, these students took much more time to complete the whole task. the findings regarding the second set of hypotheses are consistent with the studies of galletta and hufnagel (1992) and galleta et al. (1996). the third pair of hypotheses regarding the experience of each student is not at all supported by the empirical data. the empirical examination showed that experience is not at all related with the error detection performance. these findings contradict thompson and partridge (2001) who extended the study of galleta et al. (1996) and showed that prior incremental practice increased error detection performance. generally, it is empirically evident that on screen presentation of spreadsheets in combination with the appearance of formulas is the most useful way for error detection. additionally, the above combination presents the best results as far as the types of errors found. using this method, auditors can detect a large amount from all three prevailing types of errors; even omission ones, which are considered as the most difficult to detect (panko, sprague 1998). finally, the satisfactory performance of on screen spreadsheets with value presentation in detecting logic errors should be underlined. specifically, students of the specific group found about seventy percent of the planted logic errors. the phenomenon of higher performance in logic errors is, however, also observed, at a smaller degree, in the other four groups. this is attributed to the relatively high familiarity of the students with the free cash flow concept, intuitively leading them to find more valid errors of the specific type. 7. study limitations a limitation of the present study is the relatively small number of the participants in the experiment. this may lead in recording extreme observations that cannot be tolerable by the statistical analysis. the main reason for not extending the pool of subjects (students) 140 d. maditinos et al. spreadsheet error detection: an empirical examination in the context of greece was due to the need to maintain high domain experience. therefore, addressing only to students of business administration and financial studies was a one way road. thus, the confined student pool did not allow referring to more students and normalising possible extreme observations. another limitation of the study is the simplicity of the spreadsheet provided for evaluation in comparison with real world spreadsheets. one could argue that the seeded errors are limited in number, somewhat simplistic in scope, and do not represent the spreadsheet errors in any particular application domain. however, the low number of errors planted in the spreadsheet and the spreadsheet simplicity are necessary for the experiment, because the same domain knowledge and skills for all participants need to be preserved. with a simple spreadsheet the research team can be assured that all the participants possess the minimum required understanding, not only of the concepts of the spreadsheet but also of the use of spreadsheets’ structure. in this way, the sample is limited to a small and somewhat homogeneous population of university students who are not necessarily representative of the spreadsheet developers in the real world. finally, it is recognised that the variable referring to the experience and familiarity are self reported, therefore, potentially could be biased by the participant’s subjective judgement and possible misunderstanding of what is required. 8. further research these study extents previous surveys on spreadsheet error finding. the theoretical framework serves as a useful basis for investigating factors influencing error finding performance. future research may expand the framework to include other variables and examine more complicated factors in the model. larger sample sizes as well as more specialised respondents would enable future researchers to incorporate more variables and extract high validity of their results. unfortunately, it is quite difficult to refer to participants with more complicated and real world spreadsheets retrieved from the industry as challenging as this could be. additionally, this study highlights the attention future researchers should pay to the types of errors and their classification, since different types of errors may require different error detection strategies. finally, research on qualitative errors, which is a rather complex activity, is proposed as we believe it would lead to illuminating results on error finding 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pastangomis. tačiau daugumoje skaičiuoklių randamos klaidos, kurios gali būti katastrofiškos ir jas sunku aptikti eiliniam vartotojui. šis tyrimas siekia įvertinti ryšį tarp skaičiavimo klaidos nustatymo efektyvumo, eilinio vartotojo patirties ir skaičiuoklės rezultato pateikimo. tyrime dalyvavo 216 verslo ir finansų studentų, studijuojančių graikijos aukštosiose mokyklose. tyrimo metu buvo analizuojama laisvųjų pinigų srautų modelio finansinė skaičiuoklė. tyrimo išvados rodo, kad klaidos nustatymo efektyvumui yra svarbus skaičiuoklės pateikimas ir klaidų paieškos kokybė, o vartotojų patirtis neturi tokio stipraus poveikio. straipsnyje aptariami tyrimo apribojimai ir pateikiami tolesnių tyrimų pasiūlymai. http://dx.doi.org/10.1016/s0167-9236(97)00038-9 http://dx.doi.org/10.1109/hicss.2000.926736 http://dx.doi.org/10.1016/0378-7206(93)90046-v http://dx.doi.org/10.1016/s0305-0483(01)00037-8 143 business, management and education, 2012, 10(1): 128–143 reikšminiai žodžiai: eilinis finansinės skaičiuoklės vartotojas, skaičiuoklės klaidų aptikimas, skaičiuoklės pateikimas, vartotojo patirtis, graikija. dimitrios maditinos is associate professor of information technology, finance and financial modelling in kavala institute of technology, school of business and economics, greece. he holds degrees in business administration with specialisation in information technology from lund university, sweden, and a phd in finance from the business school, greenwich university, uk. before becoming a full academic he was working in senior position for greek productivity centre as responsible for professional training in information technology and management. his research interests are in financial modelling, performance measurement systems, investors’ behaviour, financial information systems, erps, electronic commerce and e-business. dimitrios chatzoudes holds a bachelor degree in business administration from the technological educational institute (t.e.i) of kavala, greece and a postgraduate degree in international economics from the democritus university of thrace, greece. he is currently a phd candidate at the department of production and management engineering of the democritus university of thrace, greece. his research interests include production management, operations management and research methodology. charalampos tsairidis is an assistant professor at the department of social administration of democritus university of thrace, komotini, greece. he studied mathematics and completed his phd thesis at the university of ioannina, ioannina, greece. topic of thesis: statistical information theory and censoring. his main research interests are in the area of statistical information theory, statistical data analysis and social statistics. analysis of asset classes through the business cycle audrius dzikevičius1, jaroslav vetrov 2 using the idea of market-expected return rates on invested capital in the verification of conformity of market evaluation of stock-listed companies with their intrinsic value paweł mielcarz1, emilia roman2 personnel audit process wojciech pająk the position of slovakia in competitiveness ranking – the causes, impacts and prospects lucia stredná1, mária zúbková 2 audit committee practice in the polish listed stock companies. present situation and development perspectives piotr szczepankowski bank value: comparing customer and employee perceptions jelena titko1, natalja lace2 managing it workers katarzyna łubieńska1, jacek woźniak2 transforming leadership styles and knowledge sharing in a multicultural context rasa paulienė market behaviour: case studies of nasdaq omx baltic jelena stankevičienė1, natalija gembickaja2 spreadsheet error detection: an empirical examination in the context of greece dimitrios maditinos1, dimitrios chatzoudes2, charalampos tsairidis3 bme_2014_12_1 maketas.indd copyright © 2014 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2014, 12(1): 94–108 doi:10.3846/bme.2014.07 managerial roles and functions in negotiation process andrzej w. kozina cracow university of economics, 27 rakowicka street, 31-510 cracow, poland e-mail: kozinaa@uek.krakow.pl received 30 april 2014; accepted 26 may 2014 abstract. the paper is focused on negotiation processes performed in a company and presents author’s concept of the description of the roles and functions accomplished by managers within those processes and being of significant importance from the point of view of negotiations’ outcomes. such a concept aims at providing the analysis and conducting of business negotiations with effective support. firstly (following introduction), the concept, types, and comprehensive model of such negotiations is presented as a useful methodological framework for specifying managerial roles and functions. secondly, some classic concepts of those roles are reviewed, drawing special attention to the ones that concern negotiation process. thirdly, general managerial functions within that process are described. fourthly, those functions are precised by relating them to typical hierarchical levels. fifthly, peculiar managerial functions within negotiating team are discussed. finally, specific issue of the role of manager as a mediator is addressed. summing up the paper, the crucial areas for subsequent research were pointed out. in order to elaborate the presented concept the author carried out the comparative study of negotiation literature as well as developed his original ideas. keywords: negotiations in a company, managers in negotiation process, negotiation roles and functions. reference to this paper should be made as follows: kozina, a. w. 2014. managerial roles and functions in negotiation process, business, management and education 12(1): 94–108. http://dx.doi.org/10.3846/bme.2014.07 jel classification: m19. 1. introduction within contemporary companies and their environment numerous, very dynamic, and highly complicated intraand inter-organizational relations occur, of both competitive and cooperative character. that results in sharply increasing in scope and importance of business negotiations. frequently they involve many parties at the table, which make it difficult to reach satisfactory agreement between numerous stakeholders. it is necessary to include their various objectives, either common or conflicting. creating and applying effective negotiation strategies and tactics becomes more and more complicated. 95 business, management and education, 2014, 12(1): 94–108 especially such negotiations arise while establishing strategic partnership, undertaking joint ventures, performing strategic alliances, mergers and acquisitions, creating networks and virtual or process-oriented organizations, maintaining industrial relations, and within other complex transactions, comprising numerous issues and parties as well as involving considerable risk or even uncertainty, caused by the impact of turbulent environment. taking into account presented features of contemporary business negotiations, it should be concluded that global business environment stimulated by modern information technology is highly challenging to the managers within present companies, especially from the point of view of performing negotiation processes effectively enough. therefore it is necessary to specify the roles and functions being accomplished by the managers within those processes. thus the objective of the paper is to present author’s concept of the description of those roles and functions, which is based on the original, complex model of negotiations in a company. unfortunately the issue to be discussed in the paper is not investigated thoroughly enough in the research and literature on negotiations. only very few works has discussed managerial aspects of business negotiations so far, mainly some books published many years ago, e.g. (j. brooks, e. brooks 1979), (brooks, odiorne 1984), (lax, sebenius 1986), (ramundo 1994), and (sheppard 1983). it is rather difficult to find any remarkable and worth quoting recent publications on the considered issue. therefore the author has developed and presents his own ideas. 2. concept and types of business negotiations it is assumed that business negotiations should be treated as a specific process, i.e. complex venture (project), including many activities of the parties interested in reaching agreement and resolving conflicts that may occur. those activities interact with one another in many different ways. first of all negotiations constitute interactive decision making process. at the initial stage of that process the parties on them own formulate alternative solutions to the considered problems and specify criteria for the evaluation of alternatives, reflecting solely individul parties’ goals and interests. then all negotiators must adjust both alternatives and criteria to reach common ground at the level satisfactory for all sides. the decisional dimension of negotiations is the most important for the purpose of their analysis, organizing, and leading. the other important aspects of business negotiations are as follows (lewicki et al. 2005: 17–33), (rządca 2003: 23–47), (kozina 2012: 21–24): 1) conflict resolution and search for an agreement, which creates: 2) mutual dependence between parties, 3) interpersonal communication process, 4) mutual exchange of tangible and intangible values, 5) new values creation. 96 a. w. kozina. managerial roles and functions in negotiation process as far as the types of business negotiations are considered, from the point of view of a company as either their party or environment, numerous of those types can be distinguished, applying two sets of criteria: 1) basic ones – clarifying specific features of business negotiations and 2) supportive ones reflecting their common characteristics (see table 1). table 1. types of business negotiations (source: created by the author) criteria types of negotiations according to basic criteria negotiation environment and partners. intra-organizational (internal) – between organizational posts and units within a company. inter-organizational (external) – between company representatives and external stakeholders (clients, suppliers, subcontractors and so on). areas of company performance (business functions), i.e. negotiations within: operations (core) processes, e.g. production ones. human resource management, especially collective bargaining. marketing and trade – concerning both sales and supply. accounting and finance. research and development. mixed – concerning issues from different areas, e.g. within project management or process-oriented structures. negotiations importance (significance). strategic – concerning fundamental issues, e.g. mergers or alliances. tactical – creating capabilities, e.g. material supply, production maintenance. operational – within processes performance, mainly internal and external cooperation. negotiations frequency. routine (recurrent). occasional (exceptional). according to supportive criteria negotiations scope. simple – on singular issues, e.g. price or wages. complex (multi-issued), e.g. trade or credit negotiations. negotiations goals and character of conflict. compulsory – e.g. collective bargaining, negotiating with a boss. voluntary, e.g. with suppliers, clients and other partners. alignments – mutual agreements within processes being performed. number of negotiations partners. two-party. multi-party. attitude towards negotiations. integrative (cooperative, win-win). distributive (competitive, win-loose). 97 business, management and education, 2014, 12(1): 94–108 considering the types of negotiations presented in table 1, it should be stressed that each manager in a company is usually involved in managing different types of them within his (her) area of responsibility. this is due to performing typical, universal managerial functions (planning, organizing and controlling), and is applied to the extent determined by the scope, objectives, context, etc. of particular negotiations. the issue of specific managerial activities within negotiations will be discussed later on. 3. comprehensive model of negotiations within a company as a convenient base for precising managerial roles and functions within negotiation process the comprehensive (multidimensional) model of business negotiations may be applied, elaborated by the author (kozina 2012: 46–55). that model, presented in table 2, is based on some assumptions, listed below. it is assumed that while constructing the comprehensive model of business negotiations, it is necessary to integrate the concept of such negotiations with general management theory. that will allow reflecting all specific features of those negotiations. such a synthesis is unavoidable due to the fact that none of those two theories on its own could be used to construct the model of business negotiations. negotiation theory provides us with standard (general) tools, without sufficient attempt of integrating them, from a company perspective in particular, which can be achieved in management theory. the latter one, on the contrary does not analyze the features of negotiations exhaustively enough, in order to describe, analyze and improve them, which takes place within negotiation theory, however in a very universal way. therefore the model of business negotiations must be based on complex approach to management process. from the point of view of company’s features, as both a party and an environment of negotiations, it is indispensable to see their role in a company from holistic perspective, integrating different concepts stemmed from the other works on business negotiations in literature. negotiations are strictly subordinated to establishing company’s objectives as a specific type of an organization. they are necessary for both establishing company’s interactions with environment and determining internal cooperation. moreover, regarding negotiations as an interactive decision process (see above), allows us to notice their indiscrete relation with management process. for each specific negotiation situation it is a particular manager or other employee – company representative or a member of negotiating team (subordinated to that manager due to the delegation of authority) – who is responsible for performing negotiation process. therefore we face “managing by negotiations” (brooks, odiorne 1984), “framing negotiations structure” (watkins 2005: 13), “creating negotiations infrastructure” (ertel 2005) or “substituting negotiations by institutional solutions” (rządca 2003: 171). moreover it is required that the model of business negotiations should be characterized by two features. firstly, it must be universal (general) enough, i.e. applicable to all either typical or exceptional negotiation situations, considering the activities, projects, etc. within 98 a. w. kozina. managerial roles and functions in negotiation process all functional areas in a company. secondly, that model should be of multi-dimensional (complex) character, i.e. ought to reflect their all different features, circumstances and so on of business negotiations as well as the tools (procedures, rules, techniques) for conducting them. thus it was assumed that negotiations in a company can be characterized by a number of aspects (dimensions), mirrored in table 2. table 2. the description of business negotiations model (source: created by the author) dimensions (aspects) the interpretation of particular dimensions objectives general negotiations objectives are strictly (directly) determined by the needs and requirements of particular venture, project, transaction etc., which is performed by using negotiations as a specific managerial instrument, e.g. buying or selling goods, establishing compensation systems, gaining financial resources and so on. those objectives are also depended (indirectly) on overall company’s goals, stemming from its strategy and mission, e.g. expansion on new, promising markets, investment in up-to-date technology, or alliances with other companies. such goals constitute negotiations external objectives, formed by managers supervising negotiations and expressed by general effectiveness criteria for particular ventures, such as profitability, productivity, etc. partial negotiations objectives (tasks) are determined by other dimensions, the scope in particular and concern specific issues to be negotiated. scope general problems to be solved in negotiations (like their general objectives) are affected by specific functional areas within a company. particular problems (issues) are determined by specific types of business negotiations, characterized by the parameters reflecting the parties, problems, context, etc. of negotiations, for example in trade transactions the following issues constitute the scope of negotiations: product portfolio, prices, terms of payment, period of guarantee, etc. resources human resources – organizational posts and units accomplishing particular tasks throughout negotiations processes (in internal negotiations or as company representatives – in external ones), provided with specific scopes of responsibilities as well as relevant competencies (knowledge, skills and abilities, and personal features). those posts (units) are of dual character: managerial ones – supervising negotiation processes and operational ones – responsible for conducting negotiation processes. material resources – either utilized or created in negotiations, including the following types of resources: − information – data and knowledge bases and information systems supporting negotiations, − financial ones – necessary expends on negotiations, − technical ones – hardware and software, networks, data carriers and other equipment and materials, − time and place of negotiations. processes general negotiations process (meta process) and its sub-processes: planning, performing, and recapitulating. each of those sub-processes comprises a number of phases (steps) and many particular activities. tools various, particular tools, i.e. models, principles, rules, methods, techniques, applied to perform specific activities within negotiation processes in order to solve problems occurring throughout those processes. 99 business, management and education, 2014, 12(1): 94–108 the dimensions presented in table 2 are of universal character and they must be concretized for specific negotiations. in some of them one dimension maybe more or less important than other ones. on some occasions in order to describe those dimensions, supplementary analyses are necessary, e.g. economic, legal, or marketing ones. it is also necessary to determine priorities for some dimensions, in particular objectives and resources, especially if they are limited. obviously this is managerial activity, which must follow general goals and position of a company, influencing the objectives of particular negotiations. additionally, it should be stressed that presented model is of dual character. firstly, descriptive one, allowing to identify all crucial aspects (dimensions) of business negotiations. secondly, normative one, suggesting eligible solutions for conducting negotiation processes effectively. as it can be seen in table 2, one of the crucial aspects of negotiations in a company is the personal one, considering human resources performing negotiation processes. in particular that aspect concerns managers, responsible for planning, organizing, supervising, monitoring, and evaluating those processes. therefore in order to perform them effectively it is necessary to properly specify the functions of managers involved in those processes. it is crucial throughout entire negotiations, i.e. while selecting employees and adjusting their competences to particular negotiation situations (in the process of their planning), during the process of conducting them as well as while evaluating their performance in the process of negotiations assessment. 4. negotiating as one of managerial roles for each particular negotiation in a company their principal is a manager at higher level of hierarchy or an employee to whom responsibility for supervising negotiations has been delegated. such a person is also responsible for performing negotiations, and accomplishing their goals. it is either a member of functional department or project team (usually in intra-organizational negotiations) or company representative (individual or member of negotiating team), which occurs within inter-organizational negotiations. therefore managerial functions in negotiations must be seen in the context of typical roles and competencies of executives. in particular the classic concept of such roles by h. mintzberg may be considered. he distinguished ten roles of that kind, divided into three categories, i.e. informational, interpersonal and decisional (mintzberg 1973). one of the last ones is the role of “negotiator”. playing that role manager represents the organizations in different negotiations, either intraor inter-organizational ones. focuses on searching for necessary agreements with trade unions, stakeholders, clients, suppliers, subcontractors and so on, which affect his (her) area of responsibility and utilizing the information at his (her) disposal. another decisional role by h. mintzberg, connected with negotiations, is the role of “disturbance handler”. manager takes corrective action when organization faces unexpected difficulties or disturbances, deals with threats, etc., in particular resolves conflicts among staff. similar interpretation to the above mentioned roles have the concepts by another two authors. in the frame of his taxonomy of leadership behavior, comprising nineteen categories, g. a. yukl distinguished the dimensions of „representation” and “conflict management” (yukl 1981: 73–75). among eight managerial roles r. e. quinn described the two following ones: 100 a. w. kozina. managerial roles and functions in negotiation process 1) “broker (mediator)” (resource-oriented) – in the frame of “open systems model”, including effective negotiations; 2) “group facilitator (stimulator)” (process-oriented) – in the frame of “human relations model”, comprising conflict management (quinn 1988: 86). moreover the concept of “managerial negotiations” by a. fowler may be quoted. the partners (sides) of such negotiations are different types of executives, considering their status, authority, reciprocal commitments, knowledge and expertise (fowler 2001: 142–150). 5. general managerial functions in negotiations in order to define such functions, the concept contained in the work (brooks, odiorne 1984: 172–182) can be used – see table 3. that concept is universal, i.e. it refers to any managerial functions within negotiations, performed not only at the higher levels of hierarchy, but also at medium and lower ones or even (at least partially) by functional managers. within the model presented in table 3 there may be feedback loops, combining some activities, in particular changes to the objectives and strategies as the result of the performance evaluation. in addition, higher levels of management are often also involved in the implementation of the agreements. table 3. the functions of managers within negotiations (source: created by the author using (brooks, odiorne 1984: 172–182)) basic functions detailed activities (tasks) recognizing need for negotiations in the context of overall company goals early planning (preplanning): − appointing study group to assess costs and benefits as well as major issues in negotiations, − determining general objectives for negotiations, − drawing up their tentative schedule. making decision to negotiate and calling together department managers: − communicating broad objectives, − inviting contributors, − rallying managers around company goals, − establishing oneself in leadership role. building negotiating team: − selecting complementary members, − defining their responsibilities, − stating broad objectives. facts (data) finding: − arranging communication network, − providing conceptual framework for teams gathering information, − reviewing summary report of findings. analyzing facts (data): − providing analytical framework, − participating in developing strategic objectives, − reviewing plans with long term perspective of total organization. negotiation talks: − defining team authority, − establishing guides (instructions), − being available for remedial role. ratification and announcement of agreement. assessment of results and performance review from the perspective of a company as a whole, negotiating team and its individual members. 101 business, management and education, 2014, 12(1): 94–108 for comparison, b. a. ramundo even more extensively discusses the place and role of negotiations in managerial work, i.e. in the frame of specific functions and tasks of executives, such as leadership, motivation, managing changes, information, time, etc., emphasizing their positive impact on managerial efficiency (ramundo 1994). 6. negotiation functions according to hierarchical levels the importance of negotiation as one of managerial roles and the scope of ongoing activities on this occasion, despite their relatively general character, differs however according to typical levels in organisational hierarchy, due to the nature of the management process (see table 4). table 4. specific functions in negotiations according to the levels of hierarchy (source: created by the author) level of hierarchy specific managerial functions (tasks) top (strategic one) establishing general principles of negotiation processes in the company. planning, organizing and controlling the negotiations on the middle and lower levels. appointment (setting tasks and powers) of negotiators (and team leaders), representing the company and the supervision and evaluation of their activities. participation in external negotiations of strategic importance, such as mergers and acquisitions, sale of company assets, etc., and with key internal stakeholders (owners and trade unions). middle (tactical one) contributing to the development of rules and procedures for conducting negotiations in the company. arranging the conditions for inter-organizational negotiations. chairing the negotiations. forming and supervising negotiating team members at lower levels. conducting negotiations (internal and external) necessary to ensure the conditions for achieving the objectives and strategies of the company. resolving conflicts at the operational level. reconciliation (confronting) of conflicting requirements of higher and lower levels. lower (operational one) contributing to the elaboration of specific procedures, guidelines and instructions for negotiating. participation in negotiating teams and supervising the activities of their members. conducting operational (repetitive, routine) negotiations, concerning current problems of the company on the basis of agreed procedures for negotiation. resolving conflict in teams of employees. 7. managerial functions within negotiating team the specific context of managerial functions within negotiations is created by organizing, maintaining and evaluating different negotiating teams in a company, including their size, roles, tasks and so on. 102 a. w. kozina. managerial roles and functions in negotiation process the objective of the most important activities carried out while creating a negotiating team is to clarify the tasks and powers of the company’s representatives in negotiations – the individuals or team members as well as the other employees that are engaged in negotiations, mainly from functional units. in order to achieve that objective the following actions are necessary: 1) determining and delegating tasks, 2) stating and allocating powers and responsibilities adequate to those tasks, 3) elaborating and delivering relevant negotiation guidelines (instructions). as final effect of the implementation of those activities the substantive and formal determination of the place and role of human resources (their allocation) in negotiations takes place. considering the creation of negotiating team the attention should be drawn to the two roles being usually distinguished within such a team (schoonmaker 1989: 216–228). 1. superior (principal) – manager at higher level, empowered to make decisions on the field (area, process, project, task, etc.), within which negotiations are being used as a tool for solving particular problems. that role is fundamental one from the point of view of negotiations objectives and entire company goals. it comprises supervising the full range of negotiation activities throughout their process. the particular tasks of the negotiations superior are as follows: − taking responsibility for achieving the best possible results in terms of the objectives of negotiations and the company as a whole, − making decision to initiate negotiations, − appointing (nominating) team leader and approving the composition of the team, − assigning tasks and delegating decision-making powers to the leader, − monitoring team activities and the progress of negotiations, − approving key decisions in the negotiation process, especially in terms of making major concessions and commitments, − formulating final draft of the agreement (ratified later on higher level of hierarchy), − making necessary interventions or direct involvement in conducting negotiations (if it is appropriate), − acting as team leader in the case of direct participation to negotiations, − evaluating the effectiveness of negotiations – external assessment from the point of view of general company goals. 2. leader (head) of the team (boss, chief negotiator) – responsible for controlling (managing) entire negotiation process. his (her) particular tasks are as follows: − determining partial (detailed) objectives of negotiations and their strategy and techniques, − identifying and acquiring the resources necessary to conduct negotiations, 103 business, management and education, 2014, 12(1): 94–108 − determining the time and place of negotiations, − designing the composition of negotiating team (choosing representatives), − assigning team roles and tasks as well as delegating responsibilities to other team members (spokesperson, experts, behavioral and data analysts and so on), − presenting proposals to the other side and making necessary concessions and commitments, − coordinating entire negotiating process and facilitating teamwork, − evaluating the effectiveness of negotiations – internal assessment, i.e. within negotiating team and considering particular negotiations objectives. 8. manager as a mediator finally, it is necessary to describe specific managerial role in negotiations which is mediation, usually applied to facilitate resolving internal conflicts in a company by the executives (leaders) in particular teams of employees. generally speaking, mediation is “the intervention into a dispute or negotiation by an acceptable, impartial, and neutral third party, who has no authoritative decision-making power to assist disputing parties in voluntarily reaching their own mutually acceptable settlement of issues in dispute” (moore 1993: 445). it is a “technique of staving off curbing a dispute, involving the participation of a third neutral party <...> the mediator assumes that the object of the conflict is a matter of its participants, so does not impose any solutions, but allows the parties to find a compromise” (de sttephen 1988). the objective of mediation is to implement such course of action by the “third party” that (mesjasz 1992): 1) prevents the escalation of the conflict, which may hinder or even preclude proper functioning of the organization or, in the case of a conflict between different organizations, may lead to the rupture of mutual contacts; 2) contributes to the reduction of intensity of the conflict, which is measured by the divergence of interests (goals) of the parties; 3) leads to a settlement of the conflict or solving it by such an arrangement of the situation that it is acceptable to both parties. as a rule a mediator is “<…> a person (an organization) having no relationship with the parties of the conflict”. the mediator role is to control the activities of the antagonists and creating kind atmosphere. the mediator monitors the communication, not allowing inappropriate behaviors that may contribute to the escalation of the conflict (de sttephen 1988). in table 5 the list of specific mediator’s tasks is presented. within any intra-organizational conflict manager at a suitable level of hierarchy plays the role of mediator (mesjasz 1992). helps the parties to reach solutions to the problems, which provoke the conflict. delimits or eliminates their opposition to an amicable solution. avoids his (her) own personal involvement in the conflict. subordinates 104 a. w. kozina. managerial roles and functions in negotiation process come to a compromise on their own and manager acts as arbiter, softening hostile behaviors (de sttephen 1988). does not allow the parties to use force in the conflict, personal connections and circuits, their status or position, etc. the manager as mediator: lists to the parties, analyzes and provides necessary information, searches for “common ground” to an agreement, and concludes the process. makes decisions only when the situation becomes critical (weiss 1993). table 5. the functions of mediator in negotiations (source: created by the author using the following works: (colosi 1993; folberg, taylor 1993; mesjasz 1992; moore 1993; sheppard 1983)) negotiation phase (sub process)/particular tasks of mediator 1. negotiations planning: gathering and analyzing necessary data, precising (clarifying) the parties’ interests and conflicting issues, developing negotiations plan (agenda), stating general rules (standards) of conduct and monitoring their compliance, selecting appropriate negotiating partners, promising from the point of view of actual possibilities of finding an agreement, preparing and/or providing the place (space) for negotiations. 2. negotiations conducting: inventing appropriate evaluation criteria and evaluating negotiators’ activities, transforming the conflict – the transition from distributive to integrative negotiations (promoting openness and willingness to compromise, rejecting confrontational attitudes, assuring negotiators from violent, destructive behaviors), maintaining and facilitating communication between the parties to the conflict and getting approval for the confrontation of “for and against” arguments, mediating in sharp conflicts, if the parties do not want to meet directly with each other, preventing the parties from further broadening (expanding) of the conflict, portraying adverse consequences of the conflict, if it is not resolved, preventing unnecessary broadening of the scope of negotiations, supporting decision making process by inventing the concept of conflict resolution, modifying organizational constraints and conquering circumstances, creating threats under the absence of changes in positions of conflicted parties, providing new resources enabling the parties to resolve conflict. 3. negotiations summing up (closing): determining the form and scope of the final contract, building an atmosphere of trust and strengthening the credibility, preparing a draft of compromise agreement, dispensing guarantees and sureties to the parties, assisting in the implementation and obeying the final agreement (contract). 105 business, management and education, 2014, 12(1): 94–108 general approach to mediation includes the following phases (folberg, taylor 1993): 1) introduction – creating trust and structure, 2) fact finding and isolation of issues, 3) creation of options and alternatives, 4) negotiation and decision making, 5) clarification and writing a plan, 6) legal review and processing, 7) implementation, review, and revision. the process of managerial mediation comprises the following steps (de sttephen 1988). 1. preparation – manager explains to subordinates what is expected from them and what his (her) role is. they must know that he is not a judge evaluating who is right, he only will supervise their independent way of developing solutions. 2. hearing of the parties – manager listen to the arguments of both sides in kind and sincere atmosphere, and then objectively summarizes what he has heard. 3. presentation of problems – manager helps employees to identify problems at the root of the conflict. discussion must concentrate on objective, contentious issues, not personal traits in order to make the parties perceive the problem as a common and requiring their co-operation while finding solutions to that problem. 4. generation of solutions – manager should encourage employees to find alternatives to solve the problem, preventing them from needless assessing and ejecting only their own proposals. it is necessary no to blame them for the resulting conflict, but to take care of the future. 5. achievement of approval – manager writes the solutions that have gained acceptance on both sides, helping to formulate the agreement in clear and concise way. compromise must gain the support of both parties and at the same time be consistent with the objectives of the organization. 6. approval of agreement – after reaching an agreement manager congratulates employees constructive solution to the conflict. in some situations it may be necessary to repeat some of the steps listed above, two or several times. in order to make managerial mediation effective enough it is necessary to respect relevant rules (principles), listed in table 6. the rules presented in table 6 must be followed by each manager supervising negotiations. his (her) most important role is to observe the situation carefully and facilitate the process of resolving conflict, which is the responsibility of its parties. while mediating between subordinates manager must be objective and prudent enough in order not to disrupt that process. 106 a. w. kozina. managerial roles and functions in negotiation process table 6. the rules of managerial mediation (source: created by the author on the base of three works enumerated below) (kennedy 1998: 151) (weiss 1993) (cousins, benitz 1994) 1. focus on the process of the discussion on solutions. 2. maintain objective attitudes to the solutions. 3. refrain from considering and judging substantial matters. 4. determine rules of discussion. 5. do not allow to interrupt sides’ statements. 6. release each option from a list of possible solutions. 7. refrain from negotiating until all points of view are presented. 1. maintain adequate distance to the conflict. 2. do not intervene in the situation that does not apply to you as a manager. 3. be objective – do not take sides. 4. choose the right moment of intervention – preferably at the request of the parties, necessarily when the situation comes to deadlock. 5. manage the conflict, but without taking responsibility for its solving. 1. focus on the future. 2. concentrate on the facts of the situation. 3. conduct the mediation session so that each side can present its viewpoint without interruption. 4. meet with the parties individually, if necessary. 5. focus on the relationship. 6. put the agreement in writing. 9. conclusions recapitulating, it should be stressed that the objectives of the study have been accomplished at satisfactory level. namely: 1) the basis for the analysis of managerial roles and functions in negotiations in a company has been created, in the form of complex model of such negotiations, 2) general managerial roles and functions within negotiations have been discussed, 3) those role and functions have been varied according to hierarchical levels in a company, 4) specific supervising activities within negotiation team have been distinguished, 5) special role of a manager as a mediator has been described, including the functions necessary to perform that role and rules for doing so. the suggested concept of managerial roles and functions within negotiation process, elaborated by the author and presented in the paper constitutes a very useful methodological framework for analyzing and performing numerous negotiations between business partners within contemporary global environment. by distinguishing and describing key elements of that concept, the real possibilities of their application to the analysis of various practical negotiations situation have been created. on the other hand, the presented concept must be the subject for further research in order to make it more precise and detailed one. the most urgent issue to be investigated is the search for particular techniques supporting the analysis and designing managerial 107 business, management and education, 2014, 12(1): 94–108 functions in negotiations. identifying the features and parameters of particular types of such functions also seems to be very useful and promising research matter as well as constructing the set of criteria and relevant indicators to measure the effectiveness of managers’ performance within negotiation processes in a company. references brooks, j.; brooks, e. 1979. the role of top management in negotiations, msu business topics (summer): 10–17. brooks, e.; odiorne, g. s. 1984. managing by negotiations. new york: van nostrand reinhold 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kozina is an associate professor of management at cracow university of economics, faculty of management, management process department. his major research interests are business negotiations and resolving organizational conflicts. transforming leadership styles and knowledge sharing in a multicultural context rasa paulienė vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania e-mail: rasa.pauliene@vgtu.lt received 03 december 2011; accepted 23 april 2012 abstract. despite limitations on comprehensive studies, scholars accept that transformational and transactional leadership theories will have a universal application because these models have capacity for being adapted to different cultural settings. however, more exploration is required in order to develop a strong and con sistent picture of the generalizability of culturally-linked leadership styles differently perceived, evaluated or enacted in diverse cultures because the meaning and importance given to the concept of leadership vary across cultures. by comparing and contrasting the number of cultural frameworks of leadership styles and drawing conclusions as to the relationship between leadership styles and culture, more holistic understanding can be attained. keywords: transactional leadership, transformational leadership, new paradigm leadership, leadership style, culturally-linked leadership, international management. reference to this paper should be made as follows: paulienė, r. 2012. transforming leadership styles and knowledge sharing in a multicultural context, business, management and education 10(1): 91–109. http://dx.doi.org/10.3846/bme.2012.08 jel classification: m12, m53, m54. 1. introduction leadership theories have traditionally been grounded in rational empiricism, wherein only phenomena amenable to knowledge through direct experience were considered to be within the proper purview of scientific enquiry (brown, starkey 2000; ghoshal 2005). recently, there have been calls for leadership theorists to explore the inner person of the leader (brown, starkey 2000); however, responses to those calls have resulted in an array of claims regarding the essential element of leadership. credibility has been proposed as the sine qua non of leadership (kouzes, posner 2004), having emotional intelligence (goleman 1998), character (burns 1978), ethics (ghoshal 2005) and spirituality (strack et al. 2002) among others. perhaps this confusion has arisen because there is not a single dimension that is the key to leadership; rather, all aspects of leadership may be a part of an interrelated whole. calls for leaders to strive for wholeness and practitioners’ publications depicting effective b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2012, 10(1): 91–109 doi:10.3846/bme.2012.08 copyright © 2012 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 92 r. paulienė. transforming leadership styles and knowledge sharing in a multicultural context leadership as the integration of body, emotions, mind and spirit (loehr, schwartz 2001) suggest that there is an interest in an integrative exploration of leadership. moreover, the nature of the interdependent relationship between leadership styles and cultural underpinnings cannot be ignored or underestimated. by studying culturally-linked leadership styles and drawing conclusions about the relationship between leadership and culture, scholars contribute to understanding the importance of workforce diversity and attention to other cultures and, hence, to globalization today when organisations operate in many various locations. variations in leadership styles are due to cultural influence because people have different beliefs and assumptions about characteristics that are deemed effective for leadership. therefore, it is fundamental to know what leadership skills and knowledge are valued most by managers at the global level. this information is critical as it offers insight into developing competencies in different workplaces, especially as organisations expand their geographical boundaries into worldwide markets. although the issue of organizational leadership has attracted a great deal of interest in social science literature within the last century (e. g. kaiser et al. 2008), the majority of these studies are based on conceptual models or data derived from either western or north american cultures. in recent decades, researchers have increasingly called for the re-examination of the current social science theories with the goal of detecting to what extent the theories drawing upon western as well as north american cultural values and precepts are tenable with non-western individuals (hofstede 2001; hofstede, peterson 2000; house 2004; javidan, house 2001). the aim of the article is to examine the number of scholars’ researches in regional contexts that shape the understanding of both transactional and transformational leadership styles in non-western countries. the article examines what leaders do and how the styles of leadership are perceived in different cultures as well as how cultural context facilitates causing the emergence of particular leadership styles. a methodological approach – an extensive literature review has been undertaken to explore the understanding of how leadership performance is perceived, evaluated or enacted differently in diverse cultures, because the meaning and importance given to the concept of leadership vary across cultures. logical comparison as well as a comparative method of analysis has been invoked, whereas research is conceptual in nature, and conjoint analysis is a useful research technique. further research work is needed to formalize a full path towards a perspective in the leadership theory of the culturally-linked new paradigm. the approach developed in this article is grounded in an assumption that cultural values, beliefs and expectations influence leadership styles through a complex set of behavioural processes involving culture-specific roles and responsibilities that are deemed appropriately for leadership. this assumption suggests that leadership styles exhibited by individuals who act in ways reflecting cultural nuances, sensitivities and values, establish a meaning for subordinates and the leaders themselves. 93 business, management and education, 2012, 10(1): 91–109 2. theoretical background leadership refers to encouraging the followers to track collective or at least joint objectives that symbolize the values and drive of both the leaders and followers (krishnan 2003). thus, the concern for the need and requirements of the followers is at the core of leadership principles and practices. in this connection, tichy and devanna (1986) noted that the real need of the followers was fulfilled by the leaders who did not utilize their followership to attain their own ends, but who worked towards the realization of mutual development. burns (1978) further notes that such leadership, which may be termed moral leadership could not, by itself, be a driver of need fulfilment of the followers unless it took the form of transformational leadership. according to burns (1978), transformational leadership “… occurs when one or more persons engage with others in such a way that the leaders and followers raise one another to higher levels of motivation and morality … ”. in continuation, literature reveals that transformational leadership is a significant correlation of the amount of effort exerted by the followers, leader-member satisfaction, employee performance and the overall effectiveness of individuals and by extension, of the organization. according to kirkpatrick and locke (1996), the leader’s vision and its implementation through job indications positively affect subordinates’ performance and attitudes. further, according to bass and avolio (1994), transformational leadership contributes to organization attempts at improving operations by the optimal utilization of its human resources (hr). in order to fulfil these tasks, transformational leaders must chalk out appropriate designs related to hr practices and policies that are geared towards greater autonomy and augmented individual performance. in this connection, it was observed that transformational leadership led to follower-organization value congruence, which as a result, became a significant source of various positive outcomes in organizational and hr management practices. one area where improvement is needed across the current leadership theories is the understanding of how the issues of diversity in culture play a role in moderating the theories of leadership. because gender is the key individual difference that is strongly affected by cultural background, more research on gender-specific differences that reflect the development of different cultures is also required. to this end, there is recent evidence suggesting that gender and culture may interact within specific national cultures to influence behaviour in work contexts. for example, learning regarding appropriate gender-based behaviour and gender-relevant behavioural preferences starts in early childhood through observational learning, and the images of such gender are reinforced by groups within a culture. thus, culturally-based beliefs regarding genderspecific behaviour are learned early in life, and over time can result in significant differences in constructs such as values, needs and specific attitudes, for instance, attitudes towards work. with the trend toward globalization, it is becoming even more important to understand how difference across cultures, including gender-based differences within cultures, may affect theoretical systems developed mainly in north american and 94 r. paulienė. transforming leadership styles and knowledge sharing in a multicultural context western contexts, i.e. the dominant theories of leadership in organizational literature (fein et al. 2010). evidence from extant literature on leadership indicates there are distinct differences in the leadership of respondents from different countries. moreover, scholars argue that culture provides mental programming that defines expectations for the leadership style. culture is a collective and social construct that, among other things, expresses itself through the expectations of leader behaviour. national entities are relatively stable configurations of the structure of identities and interests codified in the form of formal rules and norms that shapes collective beliefs, attitudes and culture (biswas, varma 2011). 3. international management development management development is a broad term that describes a range of activities involved in improving managerial performance. when organizations embrace a strategy of adapting to business in other cultures, creating developmental activities that increase the crosscultural communication and relational abilities of managers can become a key objective (hawrylyshyn 1985). in particular, understanding cultural determinants of behaviour is often a critical part of producing higher skills in communication and in relating to others in cross-cultural contexts. moreover, in the case of an organization venturing into different cultural markets, the degree of fitting for a particular new market may depend largely on the skills of managers in adapting their communication and other interpersonal behaviour to a new culture. scholars and practitioners consider leadership training to be the central type of management development of cross-cultural operations. specifically, leadership training is a type of management training that includes a primary focus on communication with various types of people, primarily to influence individuals to exert effort towards organizational objectives (london 1985). a key aspect of the interpersonal skill required by effective managers is to effectively modify interpersonal communication. modifying communication styles is particularly relevant when the groups of subordinates bring important differences in values, beliefs and preferences such as specific types of leadership behaviour to the work environment. thus, it makes sense to include information on preferred leadership preferences when developing and implementing managerial training for adaption within a new cultural setting. in this respect, a key aspect of intercultural competence is to develop listening, observational and communication skills so that personal values, norms and behavioural preferences can be compared to those of managers from other cultures. as noted by de bettignies (1985), if managers can be sensitive to such differences they are then able to adjust their own communication and other interpersonal behaviour to best match the preferences of people from other cultures. the managers who are effective in this process will tend to decrease perceived uncertainty during cross-cultural operations, and this type of development can be critical of long-term organizational effectiveness. 95 business, management and education, 2012, 10(1): 91–109 while leadership is a broad term, the essential aspects of leadership tend to focus on influence processes used in organizations – specifically in influencing employees to willingly contribute to the attainment of organizational goals (hackman, johnson 2004). the theories of leadership inhabit a large conceptual range and include approaches that focus on individual differences, situational characteristics or some combination of the two. most researchers agree that there has been significant progress from early trait and behaviour-based theories to present thinking that stresses the composite theories of leadership, although the consideration of specific perspectives and particular contexts still appear in literature (zaccaro 2007). in recent years, interest has been paid to a broad spectrum of leadership behaviour, such as transactional and transformational leadership, as well as to their cross-cultural applicability (de hoogh et al. 2005; tsui et al. 2006). some recent theories assert that two major types of leader behaviour – transactional and transformational – are both necessary for effective leaders and may be present in various combinations depending on situational demands (avolio, bass 2002). thus, much current work in leadership research asserts the importance of specific transactional and transformational leadership behaviour, although modifying elements such as situational demands and specific organizational contexts are still considered relevant (rubin et al. 2005; schaubroeck et al. 2007). despite limitations on scholars’ studies, there has been a view that transformational and transactional leadership theories will have a universal application because these models have the capacity to be adapted in different cultural settings. some management writers advocate that transformational leadership promotes greater participation within collectivist cultures because the followers are more likely to accept and identify with their leader’s ideology due to high power distance and acceptance for authority. given the findings from japanese organisations, as well as from sample research conducted in singapore, researchers are convinced that in collectivist cultures, the emergence of a transformational style is associated with leadership success (perrin et al. 2012). however, more exploration is required in order to develop a strong and consistent picture of the generalizability of culturallylinked leadership styles. it is likely that leadership styles are perceived, evaluated or enacted differently in diverse cultures because the meaning and importance given to the concept of leadership vary across cultures. by comparing and contrasting the number of cultural frameworks of leadership styles as well as drawing conclusions as to the relationship between leadership styles and culture, more holistic understanding can be attained. relatively few studies dealing with possible cultural influences on leadership styles, differences in the leadership approach practiced in other countries and generalisable leadership styles have taken into account. reliance and generalization based only on limited research raises significant research questions of studying differences in leadership styles across cultures. international studies are necessary to uncover new 96 r. paulienė. transforming leadership styles and knowledge sharing in a multicultural context relationships by forcing research on broadening cultural variables. from a managerial perspective, variations in leadership styles pose difficult challenges for organizations, especially when expanding their operations internationally. these corporations may often have to contend with diverse cultural values, norms and behaviour under conditions much different from the host country. hence, it is critical to examine the influence of culture-specific forces on differences in leadership models. 3.1. transactional and transformational behaviour in non-western countries transactional leadership behaviour involves structuring performance environment to assist employees in achieving organizational objectives and receiving rewards, whereas transformational behaviour focuses primarily on creating changes in the followers’ values, self-perception and psychological needs. a growing body of research suggests that both types of behaviour are associated with effective leadership. although transactional behaviour often results in successful leadership (avolio, bass 1991), it appears that transformational behaviour may make an added contribution via emphasis on intrinsic motivation that augments the extrinsic elements of the transactional approach. in present studies, scholars still measure behavioural preferences for both transactional and transformational leadership, as these categories are frequently used in leadership research (bono, judge 2004). furthermore, preferences for the types of leadership behaviour are frequently related to gender in various studies (beam et al. 2004; vecchio, boatwright 2002). in addition to gender effects, there is evidence that individual receptivity to transformational and transactional leadership may be moderated by cultural context. specifically, the positive relationship between transactional leadership behaviour and desired employee attitudes (e.g. satisfaction with supervisor, organizational citizenship) appears to be the strongest for employees from individualistic cultures while the positive relationship between transformational leadership and desired attitudes is the strongest for employees from cultures with collectivistic values (walumba et al. 2007). as pointed out in the introduction of this article, although the issue of organizational leadership has attracted a great deal of interest in social science literature within the last century (e.g., kaiser et al. 2008), the majority of these studies are based on conceptual models or data derived from either western or north american cultures. in recent decades, researchers have increasingly called for the re-examination of current social science theories with the goal of detecting to what extent theories drawing upon western or north american cultural values and precepts are tenable with non-western individuals (hofstede 2001; house 2004). for instance, peng and tjosvold (2008) suggest that the quality of leader-subordinate relationship may relate differently to conflict resolution tactics among chinese rather than among westerner individuals where regardless of salient interpersonal relationships, cultural values predispose western individuals to open-conflict management while chinese individuals are predisposed to conflict avoidance. knowledge of such differences is particularly important when addressing the issues of management development across cultures. 97 business, management and education, 2012, 10(1): 91–109 how do the leaders act to be effective in their cultures? why is culture “the software of the mind?” why do many leadership styles, attributes, traits and philosophies account for extensive literature surrounding leadership? (jogulu 2010). to answer these questions, scholars found that transactional leadership was aligned with the ratings of managers from africa, malaysia and transformational leadership scales correlated with australian and taiwanese researches. both transactional and transformational behaviour reflected leadership styles in african, indian, chinese (hong kong), malaysian, romanian, turkish, thai, united arab emirates researches (butler 2009; kemavuthanon, duberley 2009; hu et al. 2010; altintas 2010; cheung, chan 2008; fein et al. 2010; biswas, varma 2011). those findings support other research proposing a direct impact of culture on leadership styles (ayman, korabik 2010; cheung, chan 2008; jepson 2009; russette et al. 2008). in malaysia, africa and united arab emirates, high power distance is argued to have determined the leadership style because strong power distance cultures prefer an autocratic leadership approach (hofstede 1980). the culturally contingent leadership style in india, malaysia, romania and united arab emirates also suggests interesting possibilities. there appears to be a strong culturespecific influence on the nominated style of leadership. this is because in collectivist cultures, people like to pay greater attention to in group harmony and maintaining relationships. subordinates tend to avoid direct debates and get through tasks quietly because the leaders set clear expectations of how roles should be enacted. managers are viewed as authority figures in organizations and open discussions on conflicts are not encouraged. such role expectation creates a propensity for indian, malaysian and romanian managers to lead in a transactional manner, because their values and beliefs influence their behaviour and identify leadership actions that are legitimate and acceptable. the emergence of transactional leadership in the malaysian, indian and romanian context underscores the acceptance of a paternalistic style of leader-subordinate relationship which is culture-specific (biswas, varma 2011). managers feel comfortable in acting in a transactional manner, being more directive or setting clear limits and expectations to their followers because of the identified societal value of “paternalism”. this assertion supports other empirical studies (e.g. abdullah 2001) where paternalistic leadership is perceived positively. in collectivist cultures, managers are expected to act as the parents of extended family members and protect the wellbeing of their staff. organizations are managed as families where father is the head of an organisation and employees are the children. the paternalistic approach within the transactional style is “contemporary” and more considerate than directive, controlling, commanding would imply. in high “power distance” cultures such as india, malaysia and romania, the followers are expected to accept orders and directions more readily from superiors out of respect for people in power. it is the implicit leadership theory arguing that the followers have specific assumptions about what constitutes effective leadership. these followers utilize such beliefs and assumptions to recognize and distinguish their leaders 98 r. paulienė. transforming leadership styles and knowledge sharing in a multicultural context and non-leaders. therefore, in the indian, malaysian and romanian context, the leaders exercising status, power and authority are accepted and tolerated; they are not questioned or challenged because the society acknowledges the fact that inequality between people exists and such behaviour should be expected (jogulu 2008; hofstede 1980). the importance of power, status and hierarchical differences and its influence on leadership styles are reported in the scholars’ studies. however, australian, chinese (hong kong), taiwanese and turkish self-ratings showed a visible preference for a transformational leadership style suggesting there is a culturally-linked preference. this closer match between one’s leadership style and cultural profile is open to interesting interpretations. since leadership is a process of influencing others to agree about what needs to be done and how it can be completed effectively, managers’ behaviour facilitate the outcome and efforts for accomplishing shared goals. in the australian, chinese (hong kong), taiwanese, thai and turkish context, transformational characteristics serve this purpose. the australian, chinese (hong kong), taiwanese and turkish cultural context brings about harmonious and equal leader-subordinate relationship because the role of a manager is typically viewed as a co-ordinating role. in this case, leaders encourage direct disagreement and choose more open discussion procedures to resolve problems and disputes to avoid the risk of misunderstanding. cultural norms and values are internalised as managers and subordinates grow up in an egalitarian environment such as australia, suggesting that the managers in charge of other staff are only seen as someone who coordinates and delegates work. in addition, leaders in egalitarian cultures are most concerned about progress and individualism. therefore, they are mindful of being a visionary leader to provide intellectual stimulation and articulate goals to subordinates and identify with employees. australian culture shapes managers’ attitudes and behaviour into someone able to be participative, consultative and cooperative in making decisions when dealing with staff (jogulu 2010). in terms of approaches to leadership styles, researchers have found that chinese (hong kong), thai and taiwanese employees who were originally from collectivist cultures, generated more ideas and worked more effectively with a transformational leader compared to malaysian and african respondents. based on these findings, the researchers proposed that transformational leadership would be more valued in collectivist cultures because subordinates would identify with and be drawn towards the traits of transformational leadership, especially towards those emphasizing collective organizational goals and the share of a common workplace mission. thus, an important point is to recognize that different cultures maintain different sets of norms and beliefs towards leadership styles because they reflect different concepts of how reality is viewed and practiced. number of particular scientific studies of different cultures leadership styles in outside the so called western and north american leadership perception is overviewed in the table 1 (butler 2009; kemavuthanon, duberley 2009; hu et al. 2010; altintas 2010; cheung, chan 2008; fein et al. 2010; biswas, varma 2011). 99 business, management and education, 2012, 10(1): 91–109 table 1. leadership styles interpretation in number of african, asian, australian and east europe countries country leadership style leadership result research findings africa model of effective leadership practices establishment of the link between african culture and leadership practices and their implications for the economic growth on the continent. definition of the uniqueness of leadership on the continent. constraining leadership development. offering both types of impact on leadership. offering a conceptual framework that integrates different perspectives on the relationship between culture, leadership and organizational performance. australia leader behavioural flexibility (lbf) contribution to positive organizational outcomes. australian managers exhibited significant degrees of lbf. the results suggested that education level and group size might be antecedents to lbf. it appears that leader-member exchange may mediate the relationship between lbf and positive organizational outcomes, while social intelligence may moderate this relationship. china (hong kong) chinese leadership styles with reference to confucian and daoist schemata elucidation of chinese leadership styles with reference to confucian and daoist schemata. chinese leadership styles based on relationship building, virtuous practice, hierarchical and centralized organization, humility and self-effacement. these practices are conducive to trust, cooperation, competence and other achievements in staff. contributions to chinese leadership styles tend to reflect a security theory that sustaining followers’ security appears to mediate leadership practices and their outcomes. india transformational leadership and transactional leadership examination of the relationship between psychological climate and transformational leadership with employee performance. it was found that organizational psychological climate and transformational leadership predicted job satisfaction. job satisfaction, in turn, predicted employee performance and a composite measure of in-role and extra-role performance. 100 r. paulienė. transforming leadership styles and knowledge sharing in a multicultural context country leadership style leadership result research findings malaysia implicit leadership theory (ilt) ilt affects the quality of leader’s exchange within his or her followers. a distinct malaysian ilt has been recognized. it has also been found there are differences in the ilt of different ethnic groups in malaysia. romania transformational and transactional leadership examination of preferences for both transformational and transactional leadership behaviour for genderand agebased cohort difference. enhance leadership and organizational change initiatives in romania via the identification of age cohort and gender effects with respect to attitudes towards common leadership behaviour. the findings reveal that there are differences in preferences for leadership behaviour based on age cohorts that reached maturity before or after the fall of ceauşescu during the 1989 revolution. female participants displayed a greater preference for transformational leadership behaviour relative to transactional leadership behaviour. thailand leadership constructed through accounts of the leaders and their subordinates the model of leadership can potentially enable the leaders and their subordinates to have a better understanding of the qualities, structure, boundaries and processes of leadership, which can be useful for testing the application of the model in other settings and contexts. benefits to the leader oneself, to others and mutual benefits. the findings suggest that “philanthropy” and “thinking beyond self-interest” are the crucial qualities of leadership that make other people want to follow the leaders’ path. continue of table 1 101 business, management and education, 2012, 10(1): 91–109 country leadership style leadership result research findings taiwan transformational leadership positive impact on the job satisfaction of employees while job satisfaction has a significant influence on employees’ work behaviour. the findings supported the hypothesis that there was a positive and statistically significant relationship between transformational leadership and employees’ job satisfaction. turkey transformational leadership and transactional leadership investigation into differences in leadership styles and the effect of pre-managerial and managerial experience on the leadership style in a gender-based context. it was found that men and women managers had no differences in team-oriented and participative leadership styles. united arab emirates leader – member (lmx) exchanges care for personal relationships with a diverse group of people that in turn builds better leader-member exchanges, trust and organizational commitment. quality of exchanges and relations between supervisors and subordinates is related to the work experience of employees. leadership should be top-down and emphasize charisma to win employees’ admiration and increase satisfaction. commitment to the organisation is related to the quality of supervisorsubordinate relations. the introduction of a new economic policy in china, hong kong, india, taiwan, and thailand resulted in major changes in the economic behaviour of the employees therein. according to scholars, these types of socio-political upheavals lead to environmental transitions, which in turn affect organizations and their members. such changes in the business environment lead to quite a few adjustments at the individual and organizational level. at the individual level, the primary factor that is affected is individual perceptions about one’s immediate environment, also known as psychological climate. thus, it is clear that changes in the business environment impact psychological climate, which in turn affects a number of other individual behaviour and outcomes. end of table 1 102 r. paulienė. transforming leadership styles and knowledge sharing in a multicultural context 3.2. leadership conceptual transformation model aristotle (scult 1999) suggested that “all human beings by nature desire to know”. the researchers have explored the role of cognition in leadership focusing on the basic levels of cognitive ability, knowledge of self, cognitive complexity and the formation of mental models, particularly related to the perception of reality. there are explicit differences between cultures, particularly in terms of the values, attitudes and behaviour of individuals; this divergence has implications for leadership in organizations (alves et al. 2006). previous leadership studies have concentrated on the leaders themselves, including their actions, styles and philosophies and the acceptance and appropriateness thereof for various leadership styles. increasing numbers of studies also reveal that varying leader behaviour and actions are interpreted and evaluated differently depending on their cultural environment, and are due to variations in the people’s ideas of the ideal leader with some approaches being favoured and others perceived as less effective. these variations exist because the meaning and importance given to the concept of leadership appears to vary across cultures (jung, avolio 1999; jogulu 2010). leadership theories traditionally developed in individualistic societies represent effective leadership as an action of producing greater and better financial results, which encompasses the outcome from the leader’s behaviour rather than a particular type of behaviour. these theories are drawn on the manifestations of self-interest such as mentoring, networking and other personal initiatives prevailing in individualistic cultures. however, it is anticipated that the leaders in collectivist cultures will view leadership effectiveness as a long-term goal resulting from subordinate loyalty, extra effort and satisfaction with the leader. furthermore, collectivist cultures prioritize the needs of the group, family and the overall community when engaging in leadership actions. therefore, the values of mutual obligations require leaders to give the followers protection and direction in exchange for loyalty and commitment. similarly, leadership theories typically advocate a democratic view of attaining leadership roles arguing that “anyone can get to the top”. however, again, this concept draws from an individualistic perspective based on the cultural variable of low power distance (hofstede 1980). small power distance cultures believe that roles and responsibilities can be changed based on individual effort and achievement, and that someone who today is my subordinate, tomorrow could be my superior. yet, in high power distance cultures, social status, titles and positions are highly regarded because they dictate the way others treat and behave towards you, thus, leaders and their subordinates consider each other as unequal. therefore, it is anticipated that leadership styles in high power distance cultures will seek to demonstrate tolerance, respect for age, compromise and consensus in formulating rules for working together, which is acceptable to all. 103 business, management and education, 2012, 10(1): 91–109 many recent leadership theories indicate that leadership styles are transforming at a rapid pace to keep up with globalization and flattening organizational hierarchies. the leaders operating in such a turbulent environment are required to possess a specific set of skills. of the two leadership styles measured by multifactor leadership questionnaire (mlq), the transformational leadership approach has repeatedly shown the benefit of using a communal approach to new paradigm leadership (rosette, tost 2010). in particular, new paradigm leadership behaviour spread through transformational traits such as inspirational motivation and individualized consideration is increasingly regarded as effective leadership, because it is essential for developing subordinates and creating environments that encourage continuous learning (perrin et al. 2012). in consequence, the leadership conceptual transformation model is determined to illustrate a path towards achieving a more complete and accurate view of leadership styles in an expanding global environment and understanding different cultures and beliefs about new paradigm leadership perspectives (fig. 1). i stage leadersfollowers interaction leadership theories: traits theory skills theory behavior-based theory leadership styles theory situational leadership theory path-goal style theory team-work theory /usually combinations of 2 or 3 styles chosen/ ii stage leadersfollowers interaction transactional leadership cross-cultural applicability individualistic cultures neccessary for effective leaders strong power cultures prefere autocratic leadership approach paternalistic leadership perceived positively demonstrate tolerance, respect for age compromise and consensus in working out rules for working together which are acceptable to all transformational leadership cross-cultural aplicability cultures with collectivistic values neccessary for efective leaders small power distance cultures believe that roles and responsibilities can be changed based on individual effort is presented in various combinations depending on situational demands behavioral preferences, job satisfaction specific organizational contexts mentoring networking iii stage leadersfollowers interaction culturally-linked new paradigm leadership culture provides the mental programing that defines expectations on leadership culture is a collective and social construct cultural background culturally-based beliefs gender-based differences within cultures specific attitudes (towards work; relationship) new paradigm leadership results organizational objectives, employee-ralated outcomes long-term organizational effectiveness transformational traits, creativity & inovativeness inspirational motivation, individualized consideration preference (preferred leadership preferences) job satisfaction, articulate goals to subordinates identify with employees, developing subordinates team-oriented leadership practice participative leadership method, extra effort at work creating environments that encourage continuous learning fig. 1. leadership conceptual transformation model (source: created by the author) 104 r. paulienė. transforming leadership styles and knowledge sharing in a multicultural context the presented studies on scholars’ research take a cue that the perceptions of organizational members become critical data for understanding and interpreting individual behaviour and attitudes. such understanding shows that climate variables, if individually interpreted, become pointers for an employee’s level of job satisfaction. clearly, individual and behavioural factors at a group level have a significant impact on individual level outcomes. in this context, bryman (1992) found that an important predictor of individual level outcomes, such as perceived extra effort at work, organizational citizenship behaviour and job satisfaction was transformational leadership. similarly to psychological climate, transformational leadership was also found to influence employee-related outcomes during the periods of intense economic competition that required higher levels of creativity and innovativeness (howell, avolio 1993). thus, it is clear that during the periods of upheaval, there are higher expectations about goal achievement. due to the consequent role clarity provided by transformational leadership, it is expected that these enhanced goals shall be achieved and there is a general atmosphere of positive anticipation, which leads to higher levels of job satisfaction. further, transformational leaders are those who enthuse and inspire their followers and base their relationship on mutual understanding and trust, which involves fruitful non-verbal communication. such leadership behaviour inculcates a sense of self-belief and confidence in the followers. this in turn, would make employees less lackadaisical and open more meaningful interpretation of their work related roles. this is the process by which transformational leadership as a new style of paradigm leadership affects individual job satisfaction levels. in this connection, positive levels of psychological climate, transformational leadership and a new style of paradigm leadership lead to higher levels of individual employees’ job satisfaction and to higher levels of employee performance. this implies that satisfied employees who are themselves enthused enough about their work roles will display higher levels of in-role and extra-role performance. as voss et al. (2004) observe, augmented job satisfaction would result in higher levels of employee productivity in conjunction with employee group behaviour. in this context, what is posited to happen in a practical context is that an employee who is satisfied with his/her job, i.e. enjoys job satisfaction will definitely not wish to run down his/her status quo and would strategize to maintain the same (i.e. the current level of high job satisfaction) by displaying continuous improvement with regards to in-role and extra-role performance, the summation of which would reflect his/her overall job performance as an employee. 4. conclusions there has been limited empirical research on the topic of leadership, gender and learning in organisations within the social and cultural contexts of developing economies. in this regard, it has been argued that 98 per cent of the empirical evidence relating to 105 business, management and education, 2012, 10(1): 91–109 leadership is american in character (house, aditya 1997), and that even newer leadership models have been influenced by north american studies (bryman 2004). this might be the result of weaknesses in the epistemological assumptions that underpin management theories developed in western countries are based on the belief that they are universally valid and culturally free (komin 1990). however, there is increasing recognition that leadership concepts are culturally constructed (hofstede1998; house 2004). moreover, cultural, social, economic and political changes enable society to become more complex and change what is regarded as the crucial components of effective leadership. therefore, it is necessary to re-examine and re-analyze structures and relationships in leadership research to fit varying different cultural and social realities in different countries (house 1995). this study likely develops the work of greenleaf and senge, however, there has been earlier tendency to assume universal applicability and ignore the cultural dimension in the theories (tsang 1997). the article highlights the importance of social and cultural context for present expanding globalization. although this is only a small-scale study, it does put emphasis on the role of the influence of non-western countries on leadership. further studies and researches would examine the extent to which the ideas developed in this case fit in other organisations in asia, arab emirates, eastern europe and former socialist countries in other societal contexts. in conclusion, this study shows that leadership cannot be divorced from context. assuming the nature of the society of a particular country means that understanding leadership perspectives requires perceiving particular cultural dimensions of the nonwestern region. however, this research is exploratory; 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business foundations, business development; integrated marketing communication, neuromarketing. analysis of asset classes through the business cycle audrius dzikevičius1, jaroslav vetrov 2 using the idea of market-expected return rates on invested capital in the verification of conformity of market evaluation of stock-listed companies with their intrinsic value paweł mielcarz1, emilia roman2 personnel audit process wojciech pająk the position of slovakia in competitiveness ranking – the causes, impacts and prospects lucia stredná1, mária zúbková 2 audit committee practice in the polish listed stock companies. present situation and development perspectives piotr szczepankowski bank value: comparing customer and employee perceptions jelena titko1, natalja lace2 managing it workers katarzyna łubieńska1, jacek woźniak2 transforming leadership styles and knowledge sharing in a multicultural context rasa paulienė market behaviour: case studies of nasdaq omx baltic jelena stankevičienė1, natalija gembickaja2 spreadsheet error detection: an empirical examination in the context of greece dimitrios maditinos1, dimitrios chatzoudes2, charalampos tsairidis3 bme_2017_15_1 maketas_spaudai.indd copyright © 2017 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. sustainable leadership, organizational trust on job satisfaction: empirical evidence from higher education institutions in syria serene dalati1, jurgita raudeliūnienė2, vida davidavičienė3 1management department, business administration faculty, arab international university, ghabagheb daraa, syria 2,3business technologies department, business management faculty, vilnius gediminas technical university, vilnius, lithuania e-mails: 1s-dalati@aiu.edu.sy; 2jurgita.raudeliuniene@vgtu.lt; 3vida.davidaviciene@vgtu.lt (corresponding author) received 6 march 2017; accepted 26 april 2017 abstract. this research develops a theoretical model of sustainable leadership, organizational trust and satisfaction at work in higher education environment in syria. the model assesses staff perception of outstanding leadership behaviors and examines its relationship with perceived organizational trust in the field of higher education institutions in syria. this research examines a conceptual framework identifying outstanding leadership styles and behaviors which are associated with sustainable leadership, organisational trust identified by members’ trust in their coworkers, and job satisfaction at an institutional level. the research methodology applied in this research develops a quantitative approach through application of questionnaire survey. to measure the dimensionality of scale factors an exploratory factor analysis is conducted. reliability analysis is performed, cronbach alpha test indicates that the research scales are internally consistent. the sample of the study employed a convenience sample from higher education institutions. the managerial implication of the research study recommends application and adoption of sustainable leadership behaviors among functional, mid and senior levels of managers and academics in management positions in higher education institutions. the limitation of research is mainly indicated in the sample size and measurement scales of sustainable leadership, organizational trust and job satisfaction. keywords: sustainability, sustainable leadership, organisational trust, job satisfaction, higher education institution, exploratory factor analysis. jel classification: m100, m140. 1. introduction sustainable leadership aspects in higher education institution is becoming a very actual research topic of investigation that requires comprehensive examination. the need for institution leaders is increasingly growing in higher education environment which is b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2017, 15(1): 14–27 doi:10.3846/bme.2017.360 15 business, management and education, 2017, 15(1): 14–27 becoming transnational, global, virtual, and boundary-less. syria is having been going through years of crisis and war that has torn the nation and reflected massive destruction and devastation. a considerable number of talented syrian individuals left the country seeking better standards of living and secure environment. the prevalent organisational settings in higher education institutions in syria could be strongly associated with bureaucratic approaches which enforce uniformity, accountability and machiavellian style of management. the predominant styles of management overlook contemporary behavioral management approaches which would tend to emphasize teambuilding, people empowerment, collaboration and emphasis on outstanding performance. the need for establishing a model of leadership behaviors and styles exercised on institutional levels becomes evident. there is requirement for contemporary management and leadership styles which could sustain time, place, geography, and the environment becomes evident. this research develops a theoretical framework examining the effect sustainable leadership and organisational trust, on university staff satisfaction at work. in order to achieve the purpose such methods as the analysis of the scientific literature, questionnaire survey, exploratory factor analysis and application of the theoretical model are employed. the model builds on two independent variables including sustainable leadership and trust among co-workers, and an outcome variable namely university staff satisfaction at work. the model predicts that sustainable leader-ship behaviors and organisational trust will cause a positive effect on satisfaction of faculty and university staff at work. 2. theoretical aspects of sustainable leadership, organisational trust and job satisfaction in order to examine the sustainable leadership in education term, it is important to analyse such concepts as sustainability, sustainable leadership, trust in organisations and job satisfaction. discourse about sustainability started by brundtland commission of the united nations, which identified three main components of sustainable development: economic, social and environmental (brundtland 1987). the brundtland point of view of sustainability caused a lot of scientific discussions related with the responsibilities of business, economic, legal and also ethical responsibilities (wilkinson et al. 2001; rodriguez et al. 2002; wirtenberg et al. 2007; bottery et al. 2008; harris, twomey 2008; székely, knirsch 2009; ameer, othman 2012; bottery 2012; ehnert, harry 2012; kramar 2014; mccann, sweet 2014). according to scientists, sustainability is related to development of society, with balance between economic, social and ecological aspects, quality of products or services, creation of value for all the organisation’s stakeholders, economic growth and ethical business practices. 16 s. dalati et al. sustainable leadership, organizational trust on job satisfaction: empirical evidence from higher education institutions in syria sustainable leadership is a new concept in leadership approaches in organisational aspects (avery 2005; robèrt 2007; székely, knirsch 2009; avery, bergsteiner 2011; mccann, holt 2011, 2012; mccarten 2011; jing 2012; schaltegger et al. 2012; kantabutra, rungruang 2013; kramar 2014; mccann, sweet 2014; dalati et al. 2016; evans, sinclair 2016; suriyankietkaew, avery 2014, 2016). based on scientific research results, sustainable leadership involve ethical, social, and responsible business aspects, stakeholders value orientation, corporate responsibility and etc. the idea of a sustainable leadership strategy related to the development of organisation competencies that can help to create better value for stakeholders. according to suriyankietkaew, avery (2016) sustainable leadership integrates leadership and management practices and values such as competitive and motivated staff and team orientation, trust, strategic planning, vision, ethical behavior, financial independence, environmental and social responsibility, ethical behavior, culture, knowledge management aspects as knowledge sharing, innovation, quality and etc. (suriyankietkaew, avery 2016). sustainable leadership concept in education were analysed by scientists as hargreaves, fink (2004), hoyle, wallace (2005), bottery (botery et al. 2008; botery 2012), morrison (2010), lambert (2012) and others. according to lambert (2012) sustainable leadership in education sector is its infancy (lambert 2012). hargreaves, fink (2004) developed a model of sustainable leadership in education sector particularly primary, secondary and post-secondary. the model is comprised of seven dimensions including such aspects as: length, depth, justice, breadth, resourcefulness, diversity and conservation (hargreaves, fink 2004). lambert (2012) conducted a framework of sustainable leadership in education sector, which consists of six factors, including building human capacity, strategy, and partnership, developing long term goals from short term objectives, building diversified workplace and learned lessons. the prior literature indicates a significant relationship between leadership and organisational trust (joseph, winston 2005; sendjaya, pekerti 2010; rezaei et al. 2012; erkutlu, chafra 2013; chan, mak 2014). leader’s quality, transparency, resilience and optimism has a significant effect on perceived trust in leader (norman et al. 2010). gillespie and mann (2004) investigate relationship between leadership behaviours (transformational, transactional and consultative) and organisational members trust in their leader in research teams. the results of the study underline that trust is strongly correlated with leader’s effectiveness (gillespie, mann 2004). a study by joseph, winston (2005) analysed the relationship between employee perception of servant leadership, leader trust and organisational trust. results of the study indicates that organisations who are believed to be servant oriented demonstrated superior standards of leader and organisational trust (joseph, winston 2005). 17 business, management and education, 2017, 15(1): 14–27 there are considerable scientific research results reporting relationship between effective leadership and job satisfaction in organisational aspect (lok, crawford 1999, 2004; sancar 2009; braun et al. 2013). previous studies investigated the association between managerial leadership behaviors and styles and job satisfaction (kythreotis et al. 2010; aydin et al. 2012, 2013; alonderienne, majauskaite 2016). alonderienne and majauskaite (2016) examined the effect of leadership styles on work satisfaction of staff in higher education institutions in lithuania through applying quantitative approach and the design of a survey questionnaire. the sample of the study comprised 72 members and 10 supervisors from lithuanian universities. the findings of the empirical research specified and shown significant and positive impact of leadership styles on job satisfaction of staff, indicating that servant leadership style has the highest level of positive impact on job satisfaction, while autocratic leadership style has the lowest impact. 3. conceptual model of sustainable leadership, organizational trust and job satisfaction in higher education higher education environment in syria could be characterized by an old paradigm with bureaucratic structures, cultures and systems which employs traditional methodologies which emphasises uniformity, control and top – down management approaches. the organisational cultures in higher education institutions in syria are also characterised by ineffective emphasis on individual performance and excellence; limited partnership with international partner institutions, and a volatile economical environment, caused by a crisis in syria since 2011. taking into consideration the above-mentioned situation in syria, a conceptual structure of sustainable leadership and organizational trust and job satisfaction is composed (dalati 2016). the first component of the theoretical model scrutinizes the construct of sustainable leadership in higher education institutions in syria. the construct of sustainable leadership in higher education is based on prior research studies and theoretical frameworks on effective leadership in organisational aspects (tichy, devanna 1986; conger, kanungo 1998; conger 1999; bennis, biederman 2009; mittal, dorfman 2012). sustainable leadership is defined as an outstanding leadership style which comprised of effective leadership dimensions and behaviors. sustainable leadership comprises the quality of vision in organisational approach. sustainable leaders in higher education develop organisational vision which represents a sense of purpose and values shared both by leader and followers in the institution. sustainable leadership reflects leader’s ability to communicate effectively and exercise persuasive approaches demonstrating clear goals and objectives. sustainable leadership reflects capacity of establishing trust and transcending self-interest for the sake of group and organisation interest. it also advocates personal integrity and, sensitivity to stakeholder’s interest, rights and ownerships including larger society. sustainable leadership reflect capacity and skills of building 18 s. dalati et al. sustainable leadership, organizational trust on job satisfaction: empirical evidence from higher education institutions in syria teams, and social collective identity for followers. sustainable leadership reflects leader’s capability to inspire followers and built a motivated workforce by demonstrating outstanding levels of effort and energy. the second component in the theoretical model examines the construct of organisational trust in higher education environment in syria. organisational trust is developed based on prior theoretical and empirical studies mainly (cook, wall 1980). trust is conceptualised as individual intention to have good intent and have assurance in the actions and behaviour of others; where trust is the main factor in the long-term stability of the organisation and the wellbeing of its members. the third component examines the construct of job satisfaction at higher education environment. job satisfaction is developed based on prior studies examining intrinsic and extrinsic factors related to satisfaction at work (warr et al. 1979). the theoretical model examines the effect of sustainable leadership and organisational trust among co-workers, on job satisfaction for syrian university staff. sustainable leadership is manipulated as the first independent variable this model. organisational trust among coworkers is manipulated as the second independent variable. job satisfaction is examined as the outcome variable in this model (fig. 1). research hypotheses relating to sustainable leadership and organizational trust on job satisfaction are formulated: h1: sustainable leadership has a positive effect on staff job satisfaction at higher education institutions in syria. h2: organisational trust has positive effect on staff job satisfaction at higher education institutions in syria. fig. 1. model of sustainable leadership and organizational trust in higher education (source: created by the authors) sustainable leadership organisational trust job satisfaction + + 19 business, management and education, 2017, 15(1): 14–27 4. research methodology the research for empirical testing of sustainable leadership, organisational trust and job satisfaction model employs quantitative approaches. primary data is collected through self-administered questionnaire. the subject of study examined is academic and administrative staff at the target institutions under investigation. the total number of observations in this research comprise 73 cases. sustainable leadership behaviors questionnaire is developed based on previous leadership research (conger, kanungo 1998; strange, mumford 2002; kouzes, posner 2012; mittal, dorfman 2012). dalati (2015) examined, in a previous study the prior research and developed the final scale of managerial leadership. sustainable leadership scale consists of 10 questions assessing perceived sustainable leadership behaviours. sustainable leadership is developed as a composite construct. organisational trust scale was presented by scholars cook and wall (1980). the measure encompasses 12 item measuring faith in intentions and confidence in action in both peers and management. the scale was developed in great britain and its design is targeting blue-collar workers. the organizational trust scale developed by cook and wall was originally developed as a multi-dimensional construct by two dimensions. in this research, it is developed as a composite scale measuring members’ organizational trust in their co-workers. the job satisfaction scale was developed by warr et al. (1979). the instrument consists of 16 items and contains sub-scales to measure intrinsic and extrinsic features of job. the last item (item 16) measures overall job satisfaction. developing a research instrument must consider different research respects (cooper, schindler 2014). five points likert scale is employed in the questionnaire. the instrument is designed to examine participants’ perception of statements constructed in the questionnaire. likert scale has advantages including simplicity and reliability (cooper, schindler 2014). translation from english to arabic and backwards is performed. it is advisable to perform back translation when the scale is developed in different languages (brislin 1970). the original scale for organisational trust developed by cook and wall (1980) follows a 7-points likert scale. a preliminary investigation was constructed to test the validity of instrument as it is applied in a different cultural environment representing different language. the results of the pilot test recommended that the 7-point scale is to be adjusted to 5 five points, as the translation of the responses were not clearly understood in arabic. the scale for organisational trust was modified from 7 to 5 points likert scale. the research on measurement and scaling indicates that 5 and 7 points scales make little difference. an analysis of variance could be applied comparing samples applying 5 and 7 points scale and comparing frequency distribution of responses between two sample groups of 5 and 7 points of likert scale. 20 s. dalati et al. sustainable leadership, organizational trust on job satisfaction: empirical evidence from higher education institutions in syria convenience sampling strategy is selected. the research unit of analysis was academic and administrative staff. the data is collected from mainly two target universities operating in damascus. few respondents who are employed as part time academics at the first private sector institution are fulltime academic staff at a public university in syria. they were included in the sample as part time staff of the private higher education institution. the data was collected in 2016 through paper and pencil questionnaire technique. the total sample size is 73 cases. 5. results and discussion to explore sustainable leadership, organizational trust and job satisfaction dimensionality in higher education environment in syria, an exploratory factor analysis is conducted, which produced three factors with an eigen value and factor loading which exceeded 1 and 0.30. the first factor indicates sustainable leadership behaviors as a composite construct which comprises 10 items (table 1). the second factor represent organizational trust as composite construct representing members’ trust in co-workers, which comprises 6 items. the third factor indicates job satisfaction as a composite construct which comprises 5 items. originally the organizational trust scale was developed by cook and wall (1980) indicating two factors construct measuring faith of the intention and confidence of action of management and peers. the exploratory factor analysis combined both factors in composite factor producing a new factor which was defined as organisational trust among co-workers. also, originally the job satisfaction scale was developed by warr et al. (1979). the instrument consists of 16 items and contains sub-scales to measure intrinsic and extrinsic features of job and a final item measuring overall job satisfaction. the exploratory factor analysis combined both items from intrinsic and extrinsic features of job satisfaction in a composite factor producing a new factor which was defined as job satisfaction. reliability analysis of the scale is performed through the application of cronbach alpha test. the test inspects if the items in the scale measure the same construct (tavakol, dennick 2011). reliability test ranges from acceptable to optimal levels from 60 to .93 (table 2). normality tests are performed before statistical tests are performed in this research study. shapiro wilk test shows that data is normally distributed for sustainable leadership df (63) = .974, p> .05, and visual inspection of histogram, normal q-q plot, with skewness of –.130 (se = .302), and kurtosis of –.486(se = .595). shapiro wilk test indicates that data is approximately normally distributed for organisational trust df (63) = .970, p> .05, and visual inspection of histogram, normal q-q plots, with skewness of –.271 (se = .303), and kurtosis of .084 (se = .595). shapiro wilk test indicates that the data is normally distributed for job satisfaction df (63) = .980, p> .05, and visual inspection of histogram, normal q-q plot, with skewness of .034 (se = .302), and kurtosis of –.069 (se = 595). 21 business, management and education, 2017, 15(1): 14–27 table 1. exploratory factor analysis (n 73) (source: created by the authors) factors exploratory factor analysis eigen value % of variance factor loading factor 1: sustainable leadership 7.420 35.334 1. has good comprehension and listens carefully to what people are saying .855 2. has the awareness of team members’ cultural backgrounds and values .836 3. keeps all channels opened and informs the team about decisions made .830 4. is aware of any organisational factors that may impair organisational goals .797 5. works jointly with others .789 6. has the ability to interpret and use the knowledge of the sector trends .789 7. deserves trust and is believed to keep their word .781 8. has the ability to set future oriented tasks and goals .771 9. has a vision of future for the organisation .739 10. works towards one collective team identity .716 factor 2: organisational trust 3.681 17.529 1. i can trust the people i work with to lend me a hand if i needed it .830 2. i have full confidence in the skills of my workmates .819 3. most of my fellow workers would get on with their work if team and group leaders were not around .804 4. i can rely on other workers not to make my job more difficult by careless work .788 5. most of my workmates can be relied upon to do as they say they will do .756 6. if i got into difficulty at work i know my workmates would try and help me out .748 factor 3: job satisfaction 1.742 8.295 1. the amount of variety in your job .725 2. your hours of work .661 3. the freedom chooses your own method of working to .623 4. the amount of responsibility you are given .582 5. your opportunity to use your abilities .532 extraction method: principal component analysis, rotation method: varimax with kaiser normalization. rotation converged in 5 iterations. table 2. cronbach alpha test (n 73) (source: created by the authors) research variables number of items cronbach alpha (α) sustainable leadership 10 .93 organisational trust 6 .89 job satisfaction 5 .60 22 s. dalati et al. sustainable leadership, organizational trust on job satisfaction: empirical evidence from higher education institutions in syria to explore the effect of sustainable leadership and organisational trust on job satisfaction on the sample of the research study, a linear regression analysis is performed. sustainable leadership and organisational trust are manipulated as predictor variables of the study. job satisfaction is treated as outcome variable. the stepwise regression analysis produced two models. in the first model the regression analysis shows a significant relationship between organisational trust and university staff job satisfaction, where multiple regression analysis produces a standardized beta .363, p = .003, accounting for 11.7% of the variability in job satisfaction. the regression analysis confirms organisational trust is predictor of job satisfaction. in the second model the regression analysis indicates that organisational trust is a significant predictor of job satisfaction, where multiple regression produced a standardized beta of .279, p = .026. in the second model the regression analysis indicates that sustainable leadership is a predictor of job satisfaction where multiple regression model produced a standardized beta of .271, p = .030. over all organisational trust and sustainable leadership accounted for 17.1% of the variability in job satisfaction. the results of regression analysis support the first and second hypotheses confirming organisational trust and sustainable leadership are predictors of job satisfaction among academic and administrative staff in higher education institutions examined in this research (fig. 2). table 3 illustrates the results for regression analysis. the main objective of this research is to analyse the relation between sustainable leadership and staff members’ trust in co-workers in the context of higher education institutions in syria. the constructs of the study are developed for this research study. sustainable leadership is developed as a composite construct which contains 10 items sustainable leadership organisational trust job satisfaction r2 = 19.8% (β=.279*) (β=.271*) fig. 2. regression model of sustainable leadership, organisational trust and job satisfaction (significant at: *p, 0.05, n = 73) (source: created by the authors) 23 business, management and education, 2017, 15(1): 14–27 measuring perceived leadership behaviors which are examined and defined as sustainable leadership behaviors. sustainable leadership comprises a set of behaviors, abilities and skills which are examined as outstanding and effective. sustainable leadership emphasize behaviors and abilities including having vision of future for organization, being performance oriented, being communicative, collaborative, team oriented and above all ethical are behaviors and abilities associated with the term sustainable leadership. organizational trust is examined in the context of perceived trust in co-workers including considering workmates as helpful, supportive, and reliable and having faith and confidence in the skills of co-workers. the research study emphasizes on the importance of sustainable leadership and coworkers trust and its effect on job satisfaction at faculty and university levels. sustainable leader in higher education institutions is expected to apply a positive association with co-worker’s trust. the research study provides contribution to the sustainable leadership behaviors in higher education environment, by examining the effects of sustainable leadership of organizational trust. 6. conclusions this research investigated the relationship and effect of sustainable leadership behaviors on organizational trust in co-workers in higher education in syria. the empirical testing of the model finds support for the hypotheses signifying an effect of sustainable leadership and staff members’ organisational trust on job satisfaction. the research study develops specific leadership behaviors which are defined as sustainable leadership behaviors. the research study emphasizes that behaviors and abilities including the state of being visionary, communicative, collaborative, team oriented, inspirational and ethical are strongly advised to be practiced, fostered and adapted among managers and educational leaders in higher education environment. table 3. multiple regression analysis results of sustainable leadership and organisational trust to job satisfaction (source: created by the authors) variable b bse β t sig the first model constant 2.162 .502 4.310 .000 organisational trust .395 .130 .363 3.039 .003 the second model constant 1.417 .590 2.400 .019 organisational trust .303 .133 .279 2.289 .026 sustainable leadership .283 .127 .271 2.224 .030 note: for the first model, multiple r = .36,r2 = .131, adjusted r2 = .117 for the second model, multiple r= .445, r2 = .198, adjusted r2 = .171 24 s. dalati et al. sustainable leadership, organizational trust on job satisfaction: empirical evidence from higher education institutions in syria the first limitation in this research study is related to sample size. the lack of adequate sample size is a limitation for research analysis and results. whereas many early recommendations focused on the importance of absolute sample size, later research studies focused on the number of cases per variable (n/p) and recommendations range from 3:1–6:1 (winter et al. 2009). conducting an efa with sample less than 100 requires cautiousness, and the results could not be robustly generalised. obtaining an adequate sample size requires persistent process of data collection. another limitation of research could be caused by the instrument. questionnaires are efficient and require less financial cost and time. however, response bias is to be considered as one the disadvantages of this method. the third limitation is related to the scales of research study. there is a requirement to further improve the scales to produce a multidimensional scale of sustainable leadership and organisational trust. references alonderienne, r.; majauskaite, m. 2016. leadership style and job satisfaction in higher education institutions, international journal of educational management 30(1): 140–164. https://doi.org/10.1108/ijem-08–2014–0106 ameer, r.; othman, r. 2012. sustainability practices and corporate financial performance: a study based on the top global corporations, journal of business ethics 108: 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warr, p. b.; cook, j.; wall, t. d. 1979. scales for the measurement of some work attitudes and aspects of psychological well-being, journal of occupational psychology 52: 129–148. https://doi.org/10.1111/j.2044–8325.1979.tb00448.x wilkinson, a.; hill, m.; gollan, p. 2001. the sustainability debate, international journal of operations and production management 12(12): 1492–1502. https://doi.org/10.1108/01443570110410865 winter, j. c. f.; dodou, d.; wieringa, p. a. 2009. exploratory factor analysis with small sample sizes, multivariate behavioral research 44: 147–181. https://doi.org/10.1080/00273170902794206 wirtenberg, j.; harmon, j.; russell, w. g.; fairfield, k. d. 2007. hr’s role in building a sustainable enterprise: insights from some of the world’s best companies, human resource planning 30: 10–20. serene dalati is the head of management department and a senior lecturer at the faculty of business administration at the arab international university, syria. dr. dalati has obtained a phd in leadership, organizational culture and job satisfaction in 2008 which was preceded by an mba from bangor university in 2002. dr. dalati teaches for areas in organizational behaviour, leadership, culture and job satisfaction. fields of expertise of teaching also include strategic management, international management, marketing, and entrepreneurial small business. jurgita raudeliūnienė is doctor of social sciences (management), professor of business technologies department at vilnius gediminas technical university. j. raudeliūnienė is a member of editorial boards of several research journals as well as the author and co-author of more than 50 papers. her research interests are related to knowledge management, formation and evaluation of strategic decisions. vida davidavičienė is doctor of social sciences (management), professor at business technology department at vilnius gediminas technical university. her research interests are: ict development influence on business, society, and economic; e-business solutions and strategies, behavior in e-environment. western experience in the area of priority of high-quality higher education stanislavs keiss1, arkadijs grisins2 university college of economics and culture, lomonosova st. 1, lv-1019 riga, latvia e-mails: 1s.keiss@eka.edu.lv; 2arc.doc@inbox.lv (corresponding author) received 18 november 2010; accepted 15 january 2011 abstract. the paper contains research results of contemporary foreign experience of the most developed countries on providing a strategic priority of high-quality higher education, including the growth of the role of continuity and creativity elements in it. the paper deals with the nowadays tendencies that are favourable to the increase of high-quality training of higher qualification specialists. these tendencies are based on a close integration of areas of higher education and science, and include the development of regional mechanisms of scientific and educational clusters, inherent to the majority of the most developed countries. there are also formulated some recommendations favouring the development of scientific and educational potential of latvian higher education, finding itself in a situation of a deep crisis. keywords: higher education, quality, continuity of education, creativity, integration, scientific and educational cluster. reference to this paper should be made as follows: keiss, s.; grisins, a. 2011. western experience in the area of priority of high-quality higher education, business, management and education 9(1): 19–33. doi:10.3846/bme.2011.02 jel classification: a11; a12; a22; a23. 1. introduction experience of many leading post-industrial countries demonstrates that as a decisive factor of strategic competitiveness of the country, of development of high-tech and innovative production in it, there emerges the enlarged reproduction of knowledge, impossible without a constant improvement of higher education. in the contemporary world economy, the higher education is regarded as the most important area in accumulation of the human and intellectual capital, in dissemination of the knowledge that, indisputably, determines consequently the essential priority of it in a successful and effective development of the country’s economy and in the increase of export proportion of high-tech production (гришин, цауркубуле 2010: 105–107, 113; daugeliene, marcinkeviciene 2009: 49–57; melnikas 2008: 170–192). copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt b u s i n e s s, ma n ag em e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(1): 19–33 doi:10.3846/bme.2011.02 20 s. keiss, a. grisins. western experience in the area of priority of high-quality higher education it is worthwhile, perhaps, to take the results of this research into consideration as an option in the context of a vitally necessary further elaboration of the strategy for development of our country’s economy, the topicality of which has largely increased in the context of the global economic crisis, especially regarding the majority of the eastern european member states of the eu, including the baltic states. it is significant that the authoritative journal “the economist” pays an increasingly greater special attention to this topic (baltic... 2009: 38; feeling... 2009: 36). besides, attention has to be paid to the current serious quality problems of latvian higher education, and the fact that a group of the representatives of science and higher education spheres together with two former presidents of latvia (vaira vīķe-freiberga and guntis ulmanis) have addressed the present prime-minster with a request to commence with structural reforms of higher education immediately, can serve as an evidence to this fact. the achievements of scientific researches performed at latvian higher education institutions are not convincing. the number of internationally reviewed publications and registered patents is the lowest among the baltic states (коляко 2009). the need for enhancement of the quality of higher education services, that are vitally essential for the national economy of latvia, becomes even more acute with considerable reduction of budget allocations in the context of deep economic crisis. the government of latvia, following the recommendations of international creditors, has reduced the financing for higher education institutions by 48% in 2009, and yet another 18% in 2010. it should be mentioned that such dramatic reductions in the given branch have not taken place in any other eu country (коляко 2010). the eurostat data of 2009 are also illustrative – latvia is the eu country that has spent the least amount per student – 2840 euros. for the sake of comparison, it should be mentioned that on average, there are 7898 euros spent per student in the eu. therefore, it is no surprise that among the 600 top universities of the world, according to times 2009 ranking, there are vilnius university and tartu university, but none from latvia. according to the raking of webometrics, there is only one latvian higher education institution – the university of latvia – listed among the top hundred universities of eastern and central europe while there are three from lithuania and three from estonia (александрова 2009). the aim of this research, based on the generalization of contemporary foreign experience of developed countries, is to reflect the growing role of the high-quality, increasingly creative education within the framework of a close relationship with the development of scientific and educational complexes or clusters, as well as to formulate, in the form of a statement, some practical recommendations, important in the strategic development of the analysed area in latvia. methods and methodology of the research: monograph, synthesis and analysis, creative combination of systemic and situation approaches, logical-constructive method, analysis of statistical data and informative internet resource. 21 business, management and education, 2011, 9(1): 19–33 2. necessity of development of continuity and creativity in the education the widely recognised increase of the role of knowledge in the modern market economy, especially in the post-industrial, information economy, can be mentioned among the dramatic changes in higher education that have taken place since the end of the 21st century. it happens in line with the vital enhancement of the competitiveness of countries with the help of transformation of information into knowledge (вифлеемский 2002: 115–117; соловов 2009: 106). at present, the advantage in the competition does not depend so much on the size of a country, its natural resources or financial capital. it is common knowledge that the level of education and scope of accumulated knowledge by the society has an increasingly significant role (фомишин 2006: 511). besides, it is undeniable that, under the present circumstances of scientific and technical progress, the elaboration and use of rapidly changing engineering and technologies requires, constantly, the newest level of education of specialists (фомишин 2006: 512). it is significant that one of the authoritative patriarchs of the american management science, p. f. drucker, indicated wisely that the nowadays rapid technological progress makes both the mental and the physical skills outdated in a pair of years that threatens the old professions and seasoned knowledge (друкер 2008: 223). therefore, a special attention should be paid to the problem that, under the circumstances of globalisation of the world’s economy, the knowledge, obtained in the system of higher education, grows out-of-date very rapidly. according to some estimates, one half of the knowledge of an engineer grows out-of-date in five years, of a physician – in seven years (афанасьев, мясников 2005: 16–17). at the same time, it is well known that earlier, when radical technological changes in public production took place approximately in 35–40 years, the knowledge obtained in higher schools was practically enough for the entire working age of a specialist. nowadays, the average period of updating of technologies and engineering is narrowed to 4–5 years, but in the mostly developed areas – even up to 2–3 years (фомишин 2006: 329–330). in the light of such tendencies of rapid outdating of knowledge obtained in the system of higher education, there becomes more and more urgent the idea of continuous education as one of the cornerstone principles in teaching of specialists, having emerged already in the 70s–80s of the 20th century. especially on the basis of the concept officially approved by the unesco, many developed countries try to create a more elastic and less expensive effective socially oriented model of education, corresponding mostly to nowadays requirements of the post-industrial society (кольчугина 2005: 59). it is important that the leaders of the eu consider the implementation of the idea of the continuous education as a strategic element of the policy of the alliance members in the area of development of human resources. especially, it should be mentioned that one of the most effective instruments, recognized in relation to the implementation of continuous education, is the electronic distance education. besides, in the context of the bologna process related to creation of a common european educational area in the eu, there takes places the intention to achieve a situation that the continuous educational system 22 s. keiss, a. grisins. western experience in the area of priority of high-quality higher education would be able to facilitate the possibilities to obtain of qualification in framework of degrees, diplomas and other certificates of education, appropriate not only in present, but also in the future (санникова, балтере 2008: 26–27). the essence of continuous education at a changing paradigm of training of specialists is not to be sought in a traditional accumulation and appropriation of a fixed amount of knowledge and information, but in shaping the mindset of students to continue learning skills during the entire lifetime, constantly updating and seeking for necessary information, always prepared to self-educate. this is the exact reason why the modular education and different learning programmes become implemented, opening up opportunities of greater free choice to students that seek for specific learning programmes. there also takes place a principal change of the role of the lecturer: from an accustomed nowadays “translator” of knowledge he/she turns into a kind of consultant, researcher, tutor and leader of training and research projects (кольчугина 2009: 68–69). accordingly, p. f. drucker had truly underlined that in an innovative organisation, there must prevail the atmosphere of learning; in such company the learning is a continuous process and nobody is allowed to think that he/she is fully “educated” (друкер 2008: 963). he also stressed that it is especially a mental worker that must be learning on a constant basis (друкер 2001: 191). however, according to p. f. drucker, the continuous education does not replace the starting education of a specialist. for example, an engineer who starts his/her career with a good store of knowledge, necessary for good quality work, has a profession that is ageless. , there a constant improvement of the earlier obtained knowledge, skills and abilities must become an inseparable part of his/her work (друкер 2008: 338). in reality, under conditions of the current globalisation, there is to be seen the objective necessity of a pre-emptive prior development of education and operative preparation of the new generation of specialists, who must be competitive in the labour market, well prepared to active life in the rapidly changing world, possessing adaptive mobility, stimulating the carriers of working capacity to self-development and self-training, and to creative self-realisation. in addition, the fight for talented and creative individuals is growing more fierce, potential creators of new techniques and modern technologies expect a different quality from the generation of specialists of the 21st century. under such conditions, scientific and educational and intellectual capital becomes the key asset of every successful high-tech company and competitive innovative economy. accordingly, the future belongs to creative personalities able to a creative realisation that is in the context with the said by a. einstein that imagination is more important than knowledge (кольчугина 2008: 90–91; 2009: 64). in the beginning of the 21st century, the necessity to elaborate mass technologies of creation, or, more precisely, the technologies of searching and resolution of problems – a new style of innovative thinking – emerged. in japan and especially the usa, a continuous search for talents among the young people, starting with the school age is taking place. for example, in the framework of the “edison project”, there was a plan to find 23 business, management and education, 2011, 9(1): 19–33 2 million talented children in american schools until 2010. it is well-known that since the beginning of the 20th century, many western corporations were involved in an active competitive war for talents (афанасьев, мясников 2005: 17). in developed countries, the talent is regarded as a national treasure; which is constantly sought for. the western european countries employ well-elaborated university selection systems that support talented students. a vast work in this area is carried out by the international association of talented children (кольчугина 2009: 62–63). according to the experts of the authoritative harvard business review, presently under the conditions of globalisations and the following global competition, a real worldwide “head hunt” is taking place. “talented young scientists, designers and entrepreneurs are sought everywhere” (као 2009: 100). it is well-known that the creative potential or creativity reflects the aspect of intellect, characterised by innovation, by new approaches in thinking, when solving the emerging problems. the creative ability of an individual suggests also divergent thinking, requiring usually the possibly of a big number of answers to a simple situation (джерри, джерри 1999: 317; дафт 2000: 376). however, in spite of importance of the creativity, it does not per se lead to a success of an innovation, because three quarters of successful achievements in this area were related, usually, to ability of concrete persons to carry out their innovations practically (хасси 2001: 234). in reality, a creative personality is distinguished, usually, by a high comprehensive intellectual and educational level, vastness of viewpoints, abstract thinking, originality of ideas, independence of judgements, thirst for knowledge, alertness, ability to listen, strong motivation and professional attitude to work, as well as by diligence, ability to focus on a problem, demonstration of love to difficulties and ability to combine the incompatible (дафт 2000: 376; пирсон, томас 2008: 74). actually, it is also known that the scientific and faculty activity of scientific and educational institutions require a special type of creative abilities, possessed only by a small percent in every age bracket (марцинкевич 2008: 27). although in the west, the statistics of creativity are not yet accumulated, however, it is possible to evaluate, approximately, the general tendencies. so, during the period of development of the scientific and technical revolution, from the 1950 to 1999, the proportion of americans, related to creativity on one or other level, increased from 16.6% to 30.1%. however, a special role here is played by increase of the super-active core in creativity of americans, making from 4.4% to 11.7%, accordingly (ясин 2007: 9–10). especially, the deep fundamental preparation, characteristic to creative education, provides the synergic effect and is favourable, together with the rest, to continuous education that allows prognosticating and estimating, more adequately, the tendencies of development. accordingly, the creative higher education broadens the perception of problems and variances of their solution and stimulates the creative approach to their resolution. and, in different countries, especially the post-industrial ones, the specifics of creative education manifests itself through purposefulness to development of 24 s. keiss, a. grisins. western experience in the area of priority of high-quality higher education constant necessity of creation, seeking for the new, to accumulation of the intellectual potential and using it in practice. in this context, there are some interesting programmes of mba (master of business administration), focused not so largely on highly specialized knowledge than on acquisition of management skills. the teaching on the basis of case studies that favours the teaching of creative thinking and acquiring of the sets of single-handed instruments, having gained a vast dissemination in the western business schools corresponds to the aims of creative education (кольчугина 2008: 91). 3. western integration of science and education in all western countries under conditions of globalisation of the 21st century, the importance of the creative function of universities as the result of their advantageous principle of unity of education and scientific researches, integration of science and education is not questioned. today, the intellectual level of a nation, its scientific knowledge, the possession of which requires university teaching, increasingly determines the international prestige and the real power of every developed country (кольчугина 2005: 62). the alliance of education and science in the quality of an obligatory condition of building an innovative economy embodies the principle of v. g. humboldt, an outstanding representative of german humanism (the end of 18th century, the beginning of the 19th century), expressed through a simple formula that teaching on the basis of science has become especially urgent under nowadays conditions of globalisation, when the permanent, accelerated process of training of highly qualified employees is possible only by close relationship between the higher education, the progressive research, and the fundamental science (кольчугина 2008: 84). in the modern western economy, the university has not only to generate new knowledge, to provide adequate educational services and disseminate culture values, but to be also the leader in support of economic growth and regional development (барабашин et al. 2010: 46). high-quality training provided to specialists of the highest qualification based on cooperation with scientific activities is currently becoming a priority political direction in all developed countries as it is a necessary component of institutional structure of innovative economy (кольчугина 2008: 84). and, practically, the idea of necessity to increase the quality of higher education services, to bring nearer the teaching process and direct studying to scientific researchers, the carriers of the nowadays scientific information, implementing technologies of their gaining has become generally recognized. such approach allows more operatively implement necessary changes into educational process. it is typical that, in the usa and great britain, the research departments of universities involve largely, independent or controlled of external organisations, doctoral students and even master students in carrying out their thesis papers (бонюшко 2009: 389). it is important to mention that, although the western professorship actually spends less time on lectures and seminars, 25 business, management and education, 2011, 9(1): 19–33 dedicating the majority of their time to scientific researches, nevertheless, together with every of the professors there, as a rule, works a group of students, carrying out a certain task in the projects of their scientific supervisor. sometimes, the course papers, presentations and diplomas become prepared by the students in relationship with research projects under direct supervision of a professor or his/her employees, assistants and so on (ясин 2007: 17). and, as to the integration degree of higher education and science, the leader is still the usa, where the scientific researches in universities differ on the basis of scale, purposefulness, vast diversity of directions of organisational forms, sources of financing, as well as a vast spectrum of successful researchers (кольчугина 2008: 85). and, it is considered that in the usa, not only the basic bulk of fundamental researches in the sector of higher education are presently carried out, but also a great deal of practical researches (марцинкевич 2008: 21). in our opinion, in the context of indisputably growing competition, especially among the developed post-industrial countries in the complex of sectors, which include higher education and innovative development, a corresponding policy of the usa deserves a special attention. besides, the course to activation of scientific and innovative policy, together with the priority of the area of education, including the higher education, is proclaimed by american administration of the president b. obama, having declared repeatedly in favour of the growth of expenditure to science up to 3% of gdp and defined clearly the government priorities, among which there take place investments into fundamental and practical researches, improvement of mathematical and natural education, creation of new stimulus for innovative business (иванова, данилин 2010: 32). it is practically recognized that the development of scientific, technical and educational resources has a hearth character. the concentration of scientific and research discoveries and design projects in progressive, developed countries has led to that many other countries are left in the periphery of this area and of the scientific and technical progress as a whole. this situation is changed not even by the growing internationalisation and globalisation of scientific researches (мировая экономика... 2009: 198; майбуров 2005: 10–17). it is also generally known that there exists a high level of scientific researches and teaching in a rather small number of foreign countries, in which outstanding scientists are working. according to estimates of experts, more than two thirds of the most prestigious scientific and research universities of the world are concentrated in english-speaking countries. besides, the world’s super-league includes the majority of american universities with doctoral programmes (harvard, yale, chicago, california, princeton and others) and other prestigious universities of great britain. these universities have a high concentration of foreign scientists and lecturers. for example, of all foreign scientists, working in great britain, approximately 15% are concentrated in oxford and cambridge (цапенко 2007: 13; барбашин et al. 2010: 48–49). 26 s. keiss, a. grisins. western experience in the area of priority of high-quality higher education 4. regional scientific and educational clusters as it is known, competition of the 21st century has gained a general, global character in all areas of the world economy. as a rule, the countries try to succeed in the international competition not only in single branches, but in a whole group of branches, linked horizontally and vertically (гордеев 2008: 198–199). it should be mentioned that the well-known american economist m. porter in his theory about competitive advantages of the countries of worldwide economy, including also on the level of companies, attributed the greatest weight to the clusters, underlining especially that the clusters create the critical mass for unusual competitive success in certain areas of business. according to m. porter, the cluster is a group of geographically neighbouring interrelated companies and related organisations, functioning in a certain area and characterized by common activities and mutually supplementing each other. and, although setting of the borders of a cluster often turns out to be a complicated task that requires a creative process on the basis of understanding of the most important interrelations of different branches in it (портер 2000: 205–208), however, it is, simultaneously, out of the question that the development of some clusters or “bunches”, as a rule, determines the export specialisation of a certain country (международные экономические отношения... 2001: 167). strengthening of the role of innovations in the contemporary world economy has led to increased attention paid to the problem of the innovative component of regional cluster (damaskopoulos, gatautis 2008: 11–21). as a result of the carried out theoretical researches and analysis of case studies in the end of 1990s, d. odretch and i. feldman elaborated on a theory on economic development, based on the process of formation of innovative clusters. according to this theory, the clusters are defined as a number of interrelated organisations, facilitating the implementation of innovations in a certain branch or sector of economy. in its turn, the basis of innovative clusters, according to ch. carlson and other authors, is formed by the flows and outer effects of knowledge, possessing the quality of geographical concentration, and by ability of the firms to absorb them (быкова 2009: 346). the innovative factor is presently a decisive one in relation to the competitiveness of economy of the most developed countries. for them, it has to become a usual activity to form innovative clusters, to possess a high level of cooperation in the area of innovations by universities and corporations (иванов 2008: 5, 6; navickas, malakauskaite 2009: 255–259). experience of the eu in the area of formation of clusters of innovative technologies, providing the formation of competitive science-capacious branches deserves a special attention (клавдиенко 2007: 69). the topicality of it is created by the indisputable fact that, according to the level and dynamics of science-capacious and innovative development, the entire region of the eu falls behind not only the usa, but also japan. it is interesting that in some years before the current global economic crisis, in 2005, it was clear that the ambitious plan of the eu in the light of lisbon strategy on overrunning the usa during a ten year period (2000–2010) will not be fulfilled. instead of growth, the competitiveness of the european economy showed an obvious decline, 27 business, management and education, 2011, 9(1): 19–33 the gap in innovative area continued to deepen. therefore, the implementation of the strategy was postponed to 2013. nevertheless, exactly the lisbon strategy remains in the eu as one of the principal directions of integration activities, including the area of higher education and science. it is without a doubt that corresponding increase of investments into national programmes in the future although with corrected terms have to strengthen the innovative-educational development vector of the countries of alliance (афанасьев, мясников 2005: 15; дынкин, иванова 2008: 9). and although presently, the development of innovative clusters in the majority eu member-states is falling behind such countries like the usa, simultaneously, the estimates of interaction between universities and business in those countries are fully comparable with the situation in america (иванов 2008: 6). it is also known that all possible activities to increase innovations in the european industry are undertaken in the eu. the cluster policy is regarded by the eu as the key instrument for increase of competitiveness in sectors and regions of innovative potential growth and economic development in the midand long-term perspective. clusters gave an important impulse to regional development of those countries, which implemented their principles. accordingly, the cluster conception of development of entrepreneurship is focused on interrelations between corporative structures, investment, mediator, scientific, educational and public organisations of the region. it is characteristic that three of the best seven high-tech clusters proudly named the “silicon valley of the 21st century” are functioning in germany: munich, hamburg and dresden. in italy and france, the regional clusters are spreading as well in various areas, including innovations. experience of some small countries of the eu (denmark, finland) in the area of innovations is impressive. it is denmark that has become the generally recognized worldwide leader in use of clusters in economy. today, 29 leading clusters are functioning in denmark. it should be mentioned that the approach to implementation of clusters in denmark is in many ways identical to british, including innovative technologies. in its turn, under the impact of the theory by m. porter, the cluster approach in relation to high-tech clusters of information and telecommunication technologies has become very popular in finland, which presently employs 1.4 times more people than the resource oriented woodsy cluster, functioning in the maturity market. even in the case of clusterfor strategies of innovations, the finns have one of the highest levels of productivity in the world (миндлин 2009: 459–463). a distinguishing feature of a contemporary cluster, in the general model of production-cooperative and other interactions, is not only the focus according to geographical feature and its obvious innovative orientation (усик 2009: 14), but also the obligatory existence of a system-formative central element in the form of a university institute, creating obvious competitive advantages in the process of activation of innovative regional development (вахрушева 2009: 386, 387; strauf, scherer 2008: 137–151). in reality of the 21st century, in the economy of developed countries, especially the post-industrial ones, the universities are the institutions that not only have to generate the new knowl28 s. keiss, a. grisins. western experience in the area of priority of high-quality higher education edge, provide adequate educational services and hand-over the cultural values, but also be the leader in facilitating of economic growth and regional development (барбашин et al. 2010: 46). on the one hand, it becomes more and more obvious that the transfer of the focus from innovative development to regional level is created by the condition that the regional environment determines the competitiveness of national economy in the world market. it is the regions that are capable to react operatively on the changes in outer and inner conjuncture, implement a rapid adaptation on account of a bigger arsenal of instruments of national policy (вахрушева 2009: 386). on the other hand, the innovations focus on the points; where a high density of resources of the national development takes place, including highly qualified scientists, engineers, and technicians. simultaneously, it is becoming more and more important that innovative firms, the closeness of universities and other research institutions provide, as a result, the synergic advantages of the analysed regional clusters (иванов 2004: 26). we agree with those presuming that in the nearest future the competitiveness of national economies will be determined by existence of effective innovative regions in the countries, concentrating dozens of firms of one or several related branches. joint entrepreneurial activities, the state and universities must be used in capacity of a basis in development of innovative territories, but the central role in this threefold relationship is to be attributed to universities (селиванова 2006: 19). in the context of the above mentioned, and taking into consideration, especially, that the foreign researchers recognise imperfections of the maturity theory and united methodological approach to innovative clusters, including their possible variances. (быкова 2009: 346), it is fully justified that, according to the analysed clusters, the term “regional scientific and educational cluster” is used. 5. conclusions the rapid scientific and technological progress in conjunction with increasing globalisation is accompanied by rapidly outdating knowledge that has been acquired within the system of higher education, and it urges the topicality of the idea of continuous education as one of the main principles for specialist training in the modern world. the essence of continuous education is not contained in the traditional way of accumulating and acquiring a set scope of knowledge and information, but in formation of student lifelong learning skills, their guiding towards continuous enhancement of and searching for the required information in the rapidly changing world, in their acquisition of adaptive mobility, development of and readiness for independent learning and creative self-expression. in the leading countries, especially in the post-industrial ones, talent is viewed as a national treasure, and the search and selection of the most talented young people takes place regularly. and in combination with fundamental education and training that is characteristic of creative education, it gives a synergetic effect, which, in its turn, among 29 business, management and education, 2011, 9(1): 19–33 others, activates continuous learning. within the circumstances of globalisation in the 21st century, the competitiveness of a country becomes increasingly dependent on the generation of innovative knowledge that cannot exist without efficient functioning and continuous enhancement of creative higher education system, the foundation of which is based on close links with science, innovative activity, and on the focus of higher education institutions on the permanent necessity to develop and search for innovations, on the accumulation of intellectual potential and its use in practice. in the developed countries namely cluster policy is considered to be the key instrument for enhancing the innovative-educational potential and competitiveness of many branches and regions. for small countries like latvia, the positive experience of regional clusters of several smaller eu countries, including denmark and especially finland, should be taken into consideration. it is strongly recommended that in the 21st century the principle of joint entrepreneurship activities of businesses, the state and universities has to be used as the foundation for innovative development of the priority territories of a country. besides, the central role in such a cluster shall be given to a university or a regional higher education body of the same significance. the leading higher education institutions can and must generate not only new knowledge within the regional cluster mechanisms, but also take the leading role in fostering economic growth and regional development. in order to enhance the competitiveness and quality of the higher education institution services in latvia, it is necessary to encourage the cooperation among higher education institutions, science and businesses. also state-owned, not only private higher education institutions must have more rights to provide training in foreign languages (as the language of instruction), as it can offer a chance to attract talented foreign students, including students outside eu – from the countries that have been established on the base of the former post-soviet space. funding from the european funds has to be used to the extent it is possible in such regional innovative-educational clusters in the mode of much closer cooperation and flexible integration of state and private higher education institutions. references baltic brinkmanship. 2009. outsiders are wrestling with latvia’s problems. the government is one of them, the economist october 15: 38. damaskopoulos, t.; 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(1993). he was deputy director at the latvian institute of free market, (1994–1996), head of the economic and management science department of business institute “rimpak livonia” (2000–2002). his main area of scientific research is the study of foreign economic activity in the sphere of latvian industry and services, including problems of economic globalization and regionalization. in co-authorship he has participated in three research projects of the latvian council of science: “consumer confidence: economic analysis and measurement” (2001–2004); “the latvian manufactures in modern conditions of globalization and regionalization the world economy: problems, decisions, prospects” (2005–2008); “social economic centres and their role in economic development in latvia” (2009–2012). he has published about one hundred scientific and popular scientific publications, including more than ten monographs and brochures (in co-authorship and without co-authorship). his main teaching subjects are “international economic relations”, “international marketing”, “management”, “international business”, “world economy”. he has participated in erasmus exchange programs. four approaches to the creative economy: general overview rasa levickaitė vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania e-mail: rasa.levickaite@vgtu.lt received 18 november 2010; accepted 15 january 2011 abstract. the article presents the concept of the creative economy as a new economic phenomenon in the globalized environment. four approaches on the new occurrence are presented. according to john howkins theory, the fifteen creative industries (listed by the author) are the core of the creative economy. both creativity and economy aren’t new, but brand new are its interaction and scope. a wide definition of creativity has formed richard florida’s theory of the developing creative class, which is a group of professionals, researchers and artists whose presence creates socioeconomic and cultural dynamism in cities especially. richard caves characterizes creative industries on the basis of seven economic properties and presents an idea that creative industries as such aren’t unique but the sectors of creative industries driven by creativity generate new approaches to business processes, the demand-supply chain and covers both economic and social indicators of the country development. charles landry has proposed a creative city concept, which states that cities are dependent on one resource only – its people. creativity changes place, natural resources, market access, and becomes the key to dynamism of city development. a creative city defines a metropolis with variety of cultural activities glued to urban economical and social functioning. key activities highly influencing rapid growth of the creative industries worldwide are related to both technology and economy. digital revolutions and economic environments where revolutions took place, changes in technology and communications altogether have formed new conditions for development of creative economy as a new economic phenomenon. keywords: creative economy, creative industries, creative class, creative city. reference to this paper should be made as follows: levickaitė, r. 2011. four approaches to the creative economy: general overview, business, management and education 9(1): 81–92. doi:10.3846/bme.2011.06 jel classification: z00 1. introduction creative economy has emerged from economic environment of the 21st century and is based not on plain consumerism made of utilitarian demand consumption, but on sophisticated symbolic consumerism constructed of elaborate higher social demand copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt b u s i n e s s, ma n ag em e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(1): 81–92 doi:10.3846/bme.2011.06 82 r. levickaitė. four approaches to the creative economy: general overview consumption. strazdas et al. (2006: 89) accentuates that the present period is a period of major changes that take place all over the world. according to karnitis (2006: 96), economy becomes based on innovation and the creativity in jobs, on new labour methods and relations. development of a society becomes dependent on knowledge, which, according to melnikas (2010: 524), is the society characterized by values of the predominance of creativity and creative activity, and key issues that require strategic decisions are to be considered as issues of creation of the knowledge-based economy (melnikas 2005: 87). as stated by ginevičius and čirba (2009: 191), the best way to success is through adapting to constantly changing market conditions as future economic development is bound to technological progress, high level of future uncertainty, etc. (ginevičius, krivka 2009: 192). nowadays, consumers of the developed western world are constantly and surprisingly changing their characteristics, which are slowly moving from functional towards neither intellectual nor moral satisfaction in the context of everyday consumption. according to levickaitė (2010: 172), the second half of the 20th century was challenging in terms of both political environment and technological innovations. entertainment in its broadest sense and lifestyles create challenges for both – service and industrial – foundations of the economy: automation of production, decreasing demand of human resources in service industries accordingly form the new environment – the millennials become full-fledged participants of the creative economy in the consumption, supply, and observation chains. sharp market changes challenge communication, technology and invention spheres. according to ginevičius (2009: 70), nowadays, environment becomes more and more complicated, dynamic, and drowned in information. along with these transformations, specific changes – which are the core of the creative economy – in the creative industries appear. the context of the creative economy experiences constant changes in symbolic consumerism; those changes consist of sudden bursts and just as sudden sags. growing expenditure on “pleasure services” dictates new approaches to fashion, software, tourism and entertainment industries. the scope of the creative economy grows and increases creating new workplaces, forming new market requirements and, at same time, reacting to the market expectations. the creative economy is based on the capital of ideas rather than the physical capital; it is developed on the basis of information and communication technologies. the new content of information and digital technologies opens up new spaces and is flexible in lowering the costs. one of the most important qualities of the creative economy is the use of information while creating its content. another feature – the growing demand for interaction with the author of the creative product and its consumer in constant interaction with each other. fill has named this process engagement (fill 2009: 5). the greatest effect of the creative economy is represented not through traditional creative industries but rather through practice of skills, entrepreneurship and business models, and creation of organizational value, both managing intellectual property. according to alas (2008: 289), in the midst of an economic transformation, the challenge has been to internalize a new type of organizational behaviour in order to operate successfully under unfamiliar conditions. organizations become more dependent on creativity. it 83 business, management and education, 2011, 9(1): 81–92 is caused by withdrawal of traditional physical materials and integration of intangible materials and intellectual stock. 2. the creative economy: fifteen creative industries (john howkins) j. howkins (2007), in his first edition of the creative economy released in 2001, has stated that creative industries are the core of the creative economy. according to howkins, the world has been divided by digital technologies and at the same time creativity is dividing the world, though not in terms of people being creative but their talent to express creativity through marketable products. howkins has systemized creative industries into fifteen sectors and the list became one of the most popular standards of evaluating and expressing economic values in the global, national or local environments both in developed and developing countries. the creative industries – differently defined – are already significant components of advanced economies (hartley 2005). howkins (2007) qualifies each creative industry according to its input to national economy, added value, and difference from traditional industries and their businesses. table 1 represents fifteen creative industries sectors and areas listed by howkins (2007), and their description. table 1. sectors and areas of the creative industries (howkins 2007), and their description sector / area description advertising the opportunity is to widen advertising work beyond the traditional display media, press, tv and outdoor into new relationships, both high-tech and low-tech, by which organizations now reach their customers, inserting logos, brand names and slogans into areas that have been ad-free. advertising is moving from being a copyright business to both a copyright and a trademark business. national growth rates vary according to economic output. whereas changes in spending in the arts and other creative industries generally follow broader economic trends, changes to advertising spending precede them. architecture architecture is a copyright business as opposed to a patent or trademark business. it has the distinction of being the most truly international of the fifteen industries, partly because it does not rely on words and partly because it has achieved its own global iconography that is dependent on any single nation or culture. the size of a country’s construction market reflects its national economy. however, architect practices will flourish disproportionally in countries that have a flourishing private sector and private capital, and sensitivity to corporate or civil pride. art the art market is unusual as it deals only in original works that are unique or rare. whereas most industries try to multiply and sell as many new copies as possible, the art dealer’s objective is to emphasize scarcity. overlapping, these markets comprise the stately world of museums and galleries, which provide repositories and archives of high-quality or specialist art. their main business (with some exceptions) is to guard heritage and celebrate new work. crafts crafts flourish in two separate markets; in the art market, where they are exhibited in art galleries and sold in auction, and also in the much larger tourism and leisure markets. in the art market, artists work in the same way as in other media, and with the same imaginative skill. in the mass market, people make and buy crafts without much regard to authorship or formal aesthetic, and value them by price and utility as well as quality. 84 r. levickaitė. four approaches to the creative economy: general overview sector / area description design the industrial designers society of america defines industrial design as the “creation and development of concepts and specifications that optimize the function, value and appearance of products and systems for the mutual benefit of users and manufacturers” (idsa 2010). since 2000, uk industry revenues have declined further. the market for industrial design has also declined in most of other european countries and america but increased in japan and china. fashion designer fashion is a small but intensely competitive business: a volatile mix of art, crafts, design, manufacturing, retailing and publicity. it is the most visible tip, with an influence disproportionate to its size, of the global textile and clothing industry. in practice, fashion designers rely mostly on trademarks, trade secrets and other forms of protection (including tight security). fashion is often quoted as an example of an industry that is wonderfully and endlessly inventive without any need to use copyright. film the industry consists of four main sectors: american production (hollywood and independent); other national production (notably in australia, brazil, britain, canada, france, germany, italy, india, china and honk kong as well as, to a lesser degree, in some other 20 countries); american-owned global distribution companies; and thousands of local companies that own cinemas, tv channels, and dvd outlets. a film is a qualifying work, protected by copyright. most laws interpret the “author” quite widely to include the author of the screenplay, the producer, the director and others as well as giving separate protection to the costumes, the design, etc. once made, a film’s rights are sold or licensed to distributors within each territory, each medium (cinema, broadcast, etc.) and each language. music music is the most intangible of creative products. it is also, together with publishing, one of the most pervasive. the industry has four main sectors: composition; performance; publishing/licensing; and sound recordings. performing arts the performing arts include all kinds of on-stage and site-specific performances. they involve the management of some of the world’s largest and best-known landmark buildings as well as many small local venues. their activities include the skills of writing, producing, casting, directing and performing; design, lighting and sound; set-making; marketing; and administration. publishing the industry is based on a simple and universal process of direct copying; however, over time, it has evolved into numerous different formats and business processes to meet specific design needs and local cultural habits. in recent decades, while the local creative inputs of writers and editors have changed little, the technology of design and illustration have changed dramatically, as have the back-office functions of finance and marketing. as a conveyor of human achievements from the awesome to the trivial, the book has no equal. people appreciate the book not only as a package of content but for its diversity of designs and for its solidity and respectability. the number of titles and copies sold increases remorselessly, although the margins and profits on sales are ever tighter. research and development this section describes the scientific and technical r&d activities carried out by companies, universities and research organizations. it does not include academic research on non-scientific and non-technical subjects. r&d is a patent business. not all r&d leads to a patent, but almost all patents grow out of r&d or need an element of r&d to prepare a successful application. the sector can be measured in several ways: the two most commonly used are expenditure on r&d; and the number of patents granted. continued table 1 85 business, management and education, 2011, 9(1): 81–92 sector / area description software the design and writing of computer programs is clearly creative. it might make sense to include each kind of software in the relevant category; so the making and selling of software for an industrial process would be included in r&d and computer-aided design (cad) would be included in design. they certainly produce intellectual property even if many programmers prefer to make their code freely available. computer programs are recognized as a literary work of worldwide. toys and games (excluding video games) toys and games design, manufacturing and sales are affected by the growth of computer games. a toy or a game is an object of several properties of the intellectual property. its name might be a brand, but the design and artistic elements might be prevented by copyrights. tv and radio in technical terms of the object, broadcasting is a specific and somewhat simple business consisting of sound and view transmission to the audience. future development of television depends on the increase of conduit throughput, possibility to integrate traditional and internet broadcasters, and create new products that could integrate all medias. these updates are expense-intensive but on the other hand they ensure fast return on investment. computer games this industry consists of three sectors: device-based game with its software, universal cd or dvd games, and internet games. with developing game devices, increasing speed, and access to the internet, personal computer game sector has decreased. according to karnitis (2006: 98), highly qualified specialists become the strategic potential of any country, but creativity (including science, r&d, innovation, ability to suggest ideas, which can be used in commercial terms) becomes a major driving force of growth in any area of human activity. strazdas et al. (2010: 97) states, that conception of innovations has recently expanded. according to howkins (2007), some creative industries are variable, as music and design; at present, rapidly growing industries are architecture, arts, research and development. some industries have a tendency to grow faster than others, and depend on creativity of people and development of new technologies, whereas new products generate more profit. 3. seven economic properties of the creative industries (richard caves) the second approach referring to the creative economy has developed the following ideas of harvard professor economist researcher of the creative industries – richard caves (2000). according to him, creative industries can be characterized by seven economic properties (table 2). table 2. economic properties of the creative industries (caves 2000) properties characteristics nobody knows principle there exists the demand uncertainty; consumer reaction to a creative product is neither known beforehand, nor easily understood afterward. art for art’s sake creative workers are concerned about originality, technical and professional skills, harmony, promises of creative products and are willing to settle for lower wages rather than take a banal job. continued table 1 86 r. levickaitė. four approaches to the creative economy: general overview properties characteristics motley crew principle diversely skilled inputs are required for creation of relatively complex creative products. each skilled input must be present and perform at some minimum level to produce a valuable outcome. infinite variety different creative products might be differentiated by their quality and uniqueness; each product is a distinct combination of inputs leading to an infinite variety of options. a list/b list artist’s skills are differentiated; artists are ranked by their skills, originality, and proficiency in creative processes and/or products. therefore small differences in skills and talent may yield huge differences in (financial) success. time flies time is of the essence when coordinating complex projects with diversely skilled inputs. ars longa refer to the aphorism by hippocrates ars longa, vita brevis (eng. art is long, life is short). some creative products have durability aspects that invoke copyright protection, allowing a creator or performer to collect royalties. the theory of seven economic properties developed by caves was met controversially. towse (2000) has criticized and described them as too rigid as it wouldn’t be fair to describe all creative workers as purely driven by art for art’s sake. the ars longa property also encompasses certain non-creative licensed products. the time flies property, for example, also might include large construction projects. creative industries are therefore not unique, but they score generally higher on these properties relative to non-creative industries. 4. creative class (richard florida) the third approach is associated with the theory of new creative class and entrepreneurs. according to zabielavičienė (2008: 262), innovativity of employees depends on such characteristics as creativity and entrepreneurship. broad interpretation of creativity led to the theory of an evolving society by richard florida (2002), i.e. the creative class, which is a group of professional, scientific and artistic workers performing under the economic, social and cultural dynamism, especially in urban areas. more specifically, the creative class is composed of people working in science and engineering, architecture and design, education, science, music and entertainment, whose economic function is to create new ideas, technology or creative content. according to jankauskas et al. (2007: 131), the notion of social capital has gained the increased attention in the social science during the last decade. in florida’s view, the creative class consists of business, financial and legal professionals as well. artists or engineers, musicians or computer experts, writers or entrepreneurs – these people have a common creative ethos, i.e. they are valued for creativity, individuality, diversity and talent. in short, they are people who create the economic value through creativity. the creative class values are individuality, meritocracy (authority of talented), diversity and openness. florida has presented historical estimates of various classes (table 3) using u.s. data of historical statistics of the united states, colonial times to 1970 and the u.s. bureau of the census, statistical continued table 2 87 business, management and education, 2011, 9(1): 81–92 abstract of the united states. according to florida, during the past century, the u.s. creative class has increased from 10.0% in 1990 up to 30.1% in 1999; and the supercreative core grew from 2.4% in 1900 up to 11.7% in 1999. table 3. historical estimates for various classes (source: florida 2002) creative class supercreative core working class service class agriculture total workforce 1900 2,90010.0% 709 2.4% 10,402 35.8% 4,839 16.7% 10,889 37.5% 29,030 1910 4,13011.1% 1,021 2.7% 14,234 38.2% 7,388 19.8% 11,536 30.9% 37,291 1920 4,94511.7% 1,279 3.0% 16,974 40.2% 8,885 21.1% 11,396 27.0% 42,206 1930 6,78913.9% 1,847 3.8% 19,272 39.6% 12,290 25.2% 10,333 21.2% 48,686 1940 7,32614.2% 2,059 4.0% 20,596 39.8% 14,796 28.6% 9,020 17.4% 51,742 1950 9,76716.6% 2,584 4.4% 24,265 41.1% 17,973 30.5% 6,994 11.9% 58,999 1960 12,18717.9% 3,680 5.4% 25,617 37.7% 22,614 33.3% 4,134 6.1% 67,990 1970 15,72419.8% 6,007 7.5% 28,616 35.9% 30,955 38.8% 2,450 3.1% 79,802 1980 18,21518.7% 7,963 8.2% 30,779 31.7% 44,938 46.2% 2,703 2.8% 97,270 1991 29,67025.4% 10,691 9.2% 30,334 26.0% 53,391 45.7% 3,459 3.0% 116,877 1999 38,27830.1% 14,932 11.7% 33,238 26.1% 55,293 43.4% 463 0.4% 127,274 note: all data are in thousands. percentages may not add to 100 due to unreported occupations florida roughly estimated that in the beginning of the twenty-first century, the creative class represented almost one third of the u.s. labour force, and that the creative sector, was paid nearly half of all wages in this country, about usd 1.7 trillion, which is equal to the amount paid in manufacturing and services sectors together. creativity is not an intellectual talent; it is connected with the ability to synthesize. it is the selection and review of data wanting to create something new and useful (florida 2002). after several years, florida has developed the idea that we are moving into the creative age, when creativity becomes the first growth factor for our economy (florida 2005). florida’s theory is different from others, because the researcher argues that the talent manages the economic growth. the author presents his 3t (technology, talent and tolerance) economic growth theory. in a sense, he goes one step further by adding the third t (tolerance), in order to attract the necessary human resources. florida has been criticized 88 r. levickaitė. four approaches to the creative economy: general overview for his work, for example, for the range of occupational categories used in defining the creative class being too wide. despite of that, he was recognized as a researcher who significantly contributed to the public discourse on evolving creative economy. at the same time, the concept of creative entrepreneurs and creative cities emerges to describe successful and talented business people who can transform their creative ideas into products or services provided to the public. 5. creative cities (charles landry) the fourth approach is the creative city concept. in his famous work on the creative city concept, charles landry (2000) argues that cities have the single most important resource – its people. creativity substitutes location, natural resources and access to the market, becoming the key driver of the dynamic growth of the city. landry explains that “today many cities in the world are going through transition periods, which often are evoked by renewed vitality of globalization. these transitions vary from region to region. in areas such as asia, cities grow, and elsewhere, such as europe, the old industries are declining and cities added value does not depend on what is produced, but rather on the intellectual capital, that is used for products, processes and services” (landry 2006). the idea of creative economy is widely used in urban economies. it led to the concept of a creative city. this term defines a city where varied cultural activities are an integral part of the city’s economic and social functioning. these cities often are created on a strong social and cultural infrastructure; they have relatively high level of employment in the creative sectors and try to be attractive to inward investment due to its good cultural infrastructure. according to navickas et al. (2008: 249), to achieve quality improvement in the business environment, effective cooperation between enterprises, governmental, research and development institutions is essential. creative cities use their creative potential in different ways. some act as hubs, providing cultural experiences for visitors and residents of the city, presenting their cultural heritage, or cultural activities (performing and visual arts). as stated in the creative economy report (2008), some cities such as beirut, edinburgh or salzburg are creating their identity through festivals. others take care of larger cultural and media industries, which provide employment and income, thus trying to become the regional growth centres. in other cases, the important role of culture in the creative city is associated with arts and the ability of culture to promote the city’s well-being, social relationships and cultural identity. the contribution of the creative sector to the economic vibrancy of cities can be assessed by a direct sector contribution to output, added value, income and employment, as well as indirect and additional results. specialization also attracts highly qualified professionals, and is a perfect niche for innovation processes and activities (navickas, malakauskaitė 2009: 256). the latter occurs, for example, in case of visiting tourists 89 business, management and education, 2011, 9(1): 81–92 who want to experience the culture of the city and therefore incur expenses. in addition, the cities with active cultural life can attract inward investment from other industries seeking to get located in the centre. this provides a pleasant and stimulating environment for their staff. london is a unique example of a creative city, where creative industries are the second largest sector in the economy of london. in london in 1995–2001, creative industries were growing faster than other major industries (excluding the financial and business services) during this period, and employment increased from 20 to 25 percent (the creative economy report 2008). the unesco creative cities network, established in 2004, reflects the changing perception of culture and its role in society (unesco 2010). this network was based on the idea that even though many cities in the world realize that the creative industries play an increasingly important role in their local economic and social development plans, they obviously do not see how they could use this potential or recruit suitable staff for this development. the main goal of this network is to facilitate the development of cultural groups around the world – to exchange technical knowledge, experience, examples of successful activities and promote local economic and social development through creative industries. to achieve better development results, the cultural industries must be divided into separate subsectors so the creative city network has been divided into seven thematic networks. cities can choose one area, in which to focus their efforts. cities with the recognized creative products of literature, film, music, folk music, design, information technology (new media) and gastronomy can connect to the network. cities are encouraged to focus on those areas that have the greatest economic and social development potential. while working on the creative economy report (2008), montreal was chosen as the first object of study to investigate the progress of joint design and development of cultural areas, typical to the other parts of the world. design concept has become the full-fledged urban planning strategy. in montreal, design refers not only to wealth creation, but also to improve the quality of human life. canadian government invited architects and designers to recreate an open-space design (functionality), to rediscover and renew the abandoned parts of montreal in order to make them much more attractive to urban residents. the project “montreal trade design” invited designers (architects) to work with the appearance of commercial areas and the atmosphere, redesigning many shops and restaurants. the second object of study is popayan city in colombia, which was appointed as firstpopayan city in colombia, which was appointed as first city in colombia, which was appointed as first unesco city of gastronomy. the development model was completely different. while legalizing an informal urban gastronomy industry, popayan city council has made a bigpopayan city council has made a big city council has made a big step. by simplifying the space and other infrastructure, introducing mandatory standards of hygiene and publishing reviews of restaurants and meals, even the smallest food shops, city council of popayan revived the city economy, providing employment and 90 r. levickaitė. four approaches to the creative economy: general overview income for many people, consciously supporting sub-sectors of the creative industries. the newly discovered formality and openness to the world, individual, families and communities in popayan has given them the opportunity to meet and discuss different recipes, ingredients, manufacturing processes and participate in international forums. the creative cities network was initiated and developed on the basics of arts and main cultural industries such as literature, music and folklore. an economic evaluation problem has appeared and later solutions have led to the network model, which is based on more innovative and market orientated attitude rather than on elite arts and their advantages. 6. conclusions there is no sole definition of the creative economy. this is a subjective concept still under development. the united nations conference on trade and development has provided four main factors to investigate the creative economy and also offered a definition of the creative economy as an emerging concept based on creative capital, with the ability to generate economic growth and development. the term creative economy appeared in the study by john howkins on the relationship between creativity and economics. according to howkins (2007), neither the creativity nor the economy are new, but new is the nature of the relationship between them and the way the two are bound to create a special value and wealth. howkins uses the term creative economy in the broad sense, which includes fifteen creative industries, ranging from arts to wider scientific and technological spheres. however, the main creative industries are converging and the total interaction between the individual countries as well as at the international level are becoming stronger. howkins has identified fifteen creative industries (advertising, architecture, art, crafts, design, fashion, movies, music, performing arts, publishing, research and development, software, toys and games (excluding video games), tv and radio, and computer games), which, according to the author, are the basis of the creative economy. broad interpretation of creativity has led to theory by richard florida (2002) on the creative class emerging in the society. creative class is a group of professional, scientific and artistic workers performing under the economic, social and cultural dynamism, especially in urban areas. florida’s creative class and creative entrepreneurs are different from the traditional theory as it argues that the objective of the creative class is the talent management and it serves the economic growth. richard caves (2002) characterizes creative industries by seven economic properties: nobody knows, art for art’s sake, motley crew, infinite variety, a list/b list, time flies, ars longa. creative industries themselves are not unique but the creative industries sectors – which are driven by creativity – generate new approaches to business processes as well as new product supply and demand, both in terms of economic and social indicators of the national economic development. charles landry (2000) has developed the concept of a creative city. 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levickaitė santrauka straipsnyje pristatoma kūrybos ekonomikos koncepcija, kūrybos ekonomikos reiškinys analizuojamas globalioje aplinkoje. pateikiama keturių požiūrių į kūrybos ekonomiką apžvalga: johno howkinso (2007) teorija remiasi paties autoriaus suklasifikuotų penkiolika kūrybinių industrijų ir jų poveikiu nūdienos ekonomikai, nes nei kūrybingumas, nei ekonomika nėra nauji reiškiniai, tačiau nauja yra šių reiškinių dermė ir veiklos apimtis. platus kūrybingumo aiškinimas lėmė richardo floridos (2005) kūrybos klasės teoriją; kūrybos klasė yra profesionalų, mokslininkų, menininkų ir kitų kūrėjų grupė, kurių veikla kuria, ypač miestų srityse, socioekonomikos ir kultūros dinamizmą. richardas cavesas (2002) kūrybines industrijas apibūdina pagal septynias ekonomines vertes ir teigia, jog kūrybinės industrijos šiaip jau nėra ypatingos, tačiau jos kuria naujas prieigas prie verslo procesų, formuoja naują pasiūlos–paklausos grandinę bei skatina šalies ekonomikos ir socialinės gerovės augimą. charlesas landry (2006) pasiūlė kūrybinio miesto koncepciją ir teigia, jog miestai yra priklausomi nuo savo vienintelio ištekliaus – miesto gyventojų. kūrybingumas keičia vietą, natūralius išteklius ir tampa kertine kategorija, kalbant apie miesto plėtros dinamizmą, neatsiejamą nuo miesto ekonomikos ir socialinių veiklų. pagrindinės veiklos, kurioms įtaką daro greitas pasaulio kūrybinių industrijų augimas, yra tiesiogiai susijusios su technologijomis ir naująja ekonomika. skaitmeninė revoliucija ir ekonominė aplinka, kur vyko ši revoliucija, technologijų ir komunikacijų pokyčiai suformavo naujas sąlygas plėtoti kūrybos ekonomiką kaip naująjį ekonomikos reiškinį. reikšminiai žodžiai: kūrybos ekonomika, kūrybinės industrijos, kūrybos klasė, kūrybinis miestas. rasa levickaitė. m.sc. in sociology (vilnius university) and m.m. (ism international school of management and economics), junior research fellow at vilnius gediminas technical university. research interests: creative economy, creative industries, general management, sociology. http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 verslas_2013_11_1_r.indd 137 concepts of scenario methods in improvement of an enterprise edyta bielińska-dusza department of strategic analyses, cracow university of economics, ul. rakowicka 27, 31-510 kraków, poland e-mail: bielinse@uek.krakow.pl received 13 may 2013; accepted 5 june 2013 abstract. purpose of the study, principal objectives, scope of the investigation, methods employed results and principal conclusion. uncertainty makes both theoreticians and practicioners face new tasks to fulfil. enterprises, in order to win the competitive struggle must constantly improve their processes and structures. on the other hand, thinking in the categories of the future becomes really difficult nowadays. this creates particularly convenient conditions to apply scenario methods. in connection with the above, the purpose of this study is to characterize the essence of scenario methods employed in enterprise development. the article addresses the issue of factors conditioning proper selection of methods in the enterprise development process, the principles of scenario planning and the opportunities to apply other techniques and methods in scenario planning keywords: business environment, method selection conditions, method, organization improvement, scenario planning, scenarios. reference to this paper should be made as follows: bielińska-dusza, e. 2013. concepts of scenario methods in improvement of an enterprise, business, management and education 11(1): 137–152. http://dx.doi.org/10.3846/bme.2013.08 jel classification: l1. 1. introduction the analysis of enterprise environment is an important part of business management, while the environment shapes the principles of operation and affects success of an enterprise.as a result, each enterprise should make efforts aiming at identifying it as best as possible, which is intended not only to identify it and evaluate the phenomena occurring in it, but, above all, to predict future events. the turbulent character of the environment poses a number of challenges for enterpise. on the one hand, the discontinuity of changes, on the other hand their revolutionary character make before the managers new tasks. thinking in categories of the future has currently become very difficult. the crisis situation and the uncertainty of external phenomena create conditions for repeated growth of interest in macroeconomic analysis methods, in particular in the scenario methods aiming at reducing the uncertainty and evaluating potential risk. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2013, 11(1): 137–152 doi:10.3846/bme.2013.08 copyright © 2012 vilnius gediminas technical university (vgtu) press technika www.bme.vgtu.lt 138 e. bielińska-dusza. concepts of scenario methods in improvement of an enterprise since the literature on the subject presents the problem of scenarios in a diverse manner, sometimes providing contradictory definitions, characteristics, principles and methodological ideas, regulating these problems seems justified. in connection with the above, the purpose of this article is to present the essence and significance of scenarios and the use of scenario methods in enterprise improvement. the following partial objectives result from such an adopted general purpose: presentation of the origin of scenario methods and the procedure of conduct suggested by various authors, as well as the indication of factors conditioning the selection of methods. 2. notion of scenario methods the purpose of this part of the paper is to present and systematize the notion of scenarios. over the past 30 years, the methods of scenario planning were described so diversely that we may call it a “methodological chaos” (bradfield et al. 2005). when specifying the origin of scenario methods, we may state that the literature presents a wide range of various and sometimes contradictory definitions, characteristics, principles and methodological ideas concerning scenarios. additionally, as s. p. schnaars aptly notices, the information on the methods of scenario planning comes from three sources, namely: articles, using the knowledge of practitioners; articles concerning literature research and articles using a small group of research based on empirical research. it results in, e.g. the diversity of opinions, methodological approaches, or definitions in this respect (schnaars 1987). numerous authors, including, e.g. m. godet and f. roubelat (godet 1990, 1996), a. khakee (khakee 1991), d. h. mason (mason 1994), d. g. simpson (simpson 1992), a. martelli (martelli 2001), a. wright (wright 2004) believe that the notion of scenarios and methods of scenario planning is abused and it cannot be defined. taking the above into account and in order to maintain consistency of the discussed research problem, the essence and significance of scenarios and scenario methods, the origin of scenario methods and the procedure of conduct suggested by various authors will be presented in the first place. on the other hand, the principles of using scenario methods in the process of strategic planning will be discussed later. the author who used the notion scenario for the first time was h. kahn, according to whom scenarios are potential sequences of events prepared in order to expose accidental processes and the related decision-making problems. scenarios demonstrate how certain hypothetical situations will be developing step by step and what the possibilities are with regard to stopping, changing the direction or supporting the course of this situation (kahn 1967). the definitions of scenarios proposed by w. r. huss (huss 1987), h. s. becker (becker 1987, 1989) and p. j. h. schoemaker (schoemaker 1991, 1998) refer to events 139 business, management and education, 2013, 11(1): 137–152 in the future and are a credible and consistent description of future conditions for the operation of an enterprise. on the other hand, l. fahey and r. m. randall (fahey, randall 1998) claim that a scenario is a projection of the potential future. it is a special combination of possible events and assumptions regarding future events. however, scenarios are not forecasts of future events, but a certain kind of view into the future which is formed on the basis of specific information and a set of logical assumptions. p. schwartz (schwartz 1996, 2011) is also of a similar opinion. he believes that scenario methods are not used for forecasting, but increasing the level of strategic decisions. the notion of scenario according to g. johnson, k. scholes, r. whittington is slightly different than those presented earlier. it means a detailed and credible evaluation of the possible development of the business environment of an organization in the future, presented on the basis of information on major factors driving changes, whose impact on the organization’s strategy is difficult to predict (johnson et al. 2010). for the purposes of this publication, we will adopt the definitions of scenarios by m. porter, according to whom the scenario is an internally consistent picture of what the future may look like (porter 2006). to sum up, we may state that scenarios in enterprise management: stimulate managerial personnel to think about the external environment, enable a better understanding of the dynamics of changes, indicate ground-breaking future moments, facilitate the identification of opportunities and threats, make it easier for the managerial personnel to test the future and prepare appropriate response methods, make it possible to consider significant consequences of future changes for the enterprise, increase the scope of possible operation variants, increase the flexibility of strategies, support the observation of the environment and are a source of information used in current decision-making (raltson, wilson 2006). the essence of scenarios is the description of phenomena, as well as the indication of their logical and consistent consequences, and the determination of their development in the future. on the other hand, the starting point is the description of the status of phenomena of interest and preparation of a future, alternative sequence of events. the generated scenarios are thus a system of events, combined into a logical, usually chronological, sequence which should: be significant for the phenomenon for which the scenario has been drawn up; refer to a specific time and be related with one another by means of various types of relations (formal and legal, casual, time sequence, conditional probability) in such a manner that the approximation of the entire system of events may be obtained on the basis of the hypotheses derived from these relations (ducot, lubben 1980). in connection with the above, we may state that scenario methods are used for creating long-term forecasts in situations in which: the phenomenon is not continuous, namely there is a leap between the past and the present and the present and the future; we have no 140 e. bielińska-dusza. concepts of scenario methods in improvement of an enterprise sufficient knowledge on the regularities of the analyzed phenomena; the activities are of an unpredictable and non-routine character; the phenomena are of a descriptive character and we may not define a large probability of impact on the organization. later on, we would like to focus on the origin and the evolution of scenario planning methods. 3. the development of scenario planning method concepts when conducting a critical analysis of the subject matter, we notice that the notion of scenarios and scenario planning methods evolved throughout the centuries. however, it seems that certain ideas, notions, events were so significant that they strongly influenced the contemporary shape and character of scenario planning. although the literature on the subject, with regard to the origin of scenarios, dates back to remote history, the 1960s and 1970s are the most important period from the point of view of this discussion. the concept of scenarios was introduced for the first time by the company general electric and the company shell nederland (millett 2003), on the other hand, it was popularized and transferred to business ground by h. kahn and a. j. wiener (kahn, wiener 1967) who were operating in the rand corporation center along with other researchers such as, e.g. t. j. gordon, n. dalkey or o. helmer. the second significant american center for the development of scenario methods is the stanford research institute. the precursor in the field of research on scenarios in europe was the french philosopher g. berger (godet 1987) who, at the same time as the american researchers, founded the school of creating scenarios in the 1950s: la prospective. the concept of la prospective draws attention to a more critical view on and into the future as well as to the openness of this view. further work was continued by, among others, p. masse, b. de jouvenel, m. godet (see godet 2000, 2001). another important period for the development of scenario methods and their popularization were the 1970s and, along with them, changes in the organizational environment caused by economic crises. this period became the direct reason for the adaptation and use of scenario methods as one of the tools of strategic planning. research clearly indicates that the interest in and the popularization of scenario planning methods in europe appeared after the first oil crisis in 1973, and the next in the years 1976–1978 (see malaska 1985, malaska et al. 1984; meristo 1989). on the other hand, this period in the usa covers the years 1977–1981 (see linneman, klein 1979; linneman, klein 1983). however, the authors j. w. m. doorn and f. a. vught are of a different opinion on this subject and claim that between 1973 and 1980, there was a decrease in the interest in scenarios, especially in the usa. this was caused by their complicated character and the amount of time needed for their creation (doorn, vught 1983). 141 business, management and education, 2013, 11(1): 137–152 we may notice that the period of development of scenario methods is long and it was shaped by numerous factors, while their popularity is of a sinusoid character and currently they are experiencing their renaissance. it seems that the most probable reason is the global economic situation and the economic crisis as well as the continuous need to conduct systematic research in the organization’s future. when making an analysis of the literature related to scenario planning methods, we may note a distinguishing proposal to regulate the origin of scenario methods developed by the authors r. bradfield, g. wright, g. burt, g. cairns as well as k. van der heijden (bradfield et al. 2005). the authors enumerate: − the school of intuitive logics; − the probabilistic modified trends school – pmt, containing two different methods: the trend impact analysis (tia) as well as the cross impact analysis (cia). these methods generate a number of alternatives for the development of the future and not only the extrapolation of historical data. after combination with the experts’ opinions, they form scenarios; − the la prospective school, mentioned above, which was developed at the same time as the american schools of creating scenarios. the basis for the la prospective school was the preparation of long-term plans based on multi-variant visions of the future (scenarios). the scenarios were created on the basis of expected changes in the environment as well as noticeable future implications of changes and decisions made currently by the organization. m. godet (godet 2000, 2001) claimed that choices made today may shape and even create the future, and he thus summed up this proactive approach, typical of la prospective. therefore, in order to reduce the uncertainty, it is important not only to observe the external environment, but also to look closely at the internal one. it seems that the literature on the subject provides numerous interesting methodological indications characterizing the use of this group of methods in the process of creating the organization’s strategy. on the other hand, the claim of p. w. f. van notten et al., seems reasonable. they claim that each attempt to classify and regulate the techniques of creating scenarios quickly becomes outdated. this is caused mainly by the development of numerous techniques and methodologies. in addition, it seems that the attempt to classify the techniques created across more than several decades of scenario development is very difficult. such an attempt was taken by the authors p. w. f. van notten et al., in their book. when classifying scenarios, the authors took into account the following criteria: the purpose, the method of implementation and the content of scenarios (notten et al. 2003). on the other hand, the issue of creating scenarios has been well described in the literature on the subject. we may notice that scenarios differ among one another in their creation, form as well as structure. sample selected types of scenarios according to the authors have been presented in table 1. 142 e. bielińska-dusza. concepts of scenario methods in improvement of an enterprise table 1. classification of scenarios (source: created by the authors on the basis of: tyrańska, j. walas-trębacz 2010; klasik 1993; borjeson et al. 2005) no author types of scenarios characteristics 1 c. ducot, g. lubben 1. research 2. anticipation 3. descriptive 4. normative 1. research (discovery) scenarios – define what are the effects of a given set of causes; 2. anticipation scenarios – define what the causes of given effects may be; 3. descriptive scenarios – define only the ordered system of possible events, ignoring the effect; 4. normative scenarios – describe events and take into account positive or negative effects; 2 a. klasik 1. descriptive 2. normative 3. exploration 4. anticipation 1. descriptive scenarios – contain descriptive trains; 2. normative scenarios – contain normative content, namely the determination of what should be and not what may occur; 3. exploration scenarios – describe the sequence of events in a logical manner leading to a possible future (consistent with the induction approach); 4. anticipation scenarios – the starting point are images of the future which are defined as desired (consistent with the deduction approach); 3 d. faulkner, c. bosman 1. key indicators 2. main impact factors 1. key indicators – namely significant events or trends the occurrence of which may be expected in the future economy; 2. main impact factors – reflect the likely impact of key indicators on an enterprise; 4 k. van der heijden 1. induction 2. deduction 3. created by the i n c r e m e n t a l method 1. induction scenarios, created on the basis of the identification of subsequent connections between possible events; 2. deduction scenarios, created at the beginning, by the identification of the most significant statuses, then after the determination of the basic character of each scenario particular data are adjusted, forming a logical and chronologically ordered history; 3. scenarios created by the incremental method in which the starting point is the officially adopted company vision. these scenarios demonstrate certain modifications of the future and verify its internal consistency, as well as are intended to convince the organization to use scenarios; 143 business, management and education, 2013, 11(1): 137–152 no author types of scenarios characteristics 5. l. borjeson, m. hojer, k.h. dreborg, t. ekvall, g. finnveden 1. anticipation scenarios 2. exploration scenarios 3. normative scenarios 1. anticipation scenarios – answer to the questions of “what is going to happen?” in the future. the purpose of this type of scenarios is to prepare the organization for various types of events, by the identification of the probability of their development; 2. exploration scenarios – try to answer the question of “what may happen in the future?”, the main objective of which is to examine various possible options for the development of events; 3. normative scenarios – answer the question of how to implement the assumed objective. the basis for creating this type of scenarios is the definition of conditions making it possible to achieve the assumed objective in the future; 6. g. gierszewska and m. romanowska 1. scenarios of possible events 2. simulation scenarios 3. environment status scenarios 4. scenarios of processes in environment 1. scenarios of possible events which are based on intuitive logic, consist in creating lists of events possible in the future, identifying their causes, possible evolution directions, the strength and character of impact on the company and defining its ability to adapt to these phenomena; 2. simulation scenarios enabling the evaluation of the value of particular strategic choices in the organization, depending on the impact of the environment; 3. environment status scenarios have a qualitative character, which means that the evaluation of the potential impact force of particular processes occurring in the environment on the organization, and the evaluation of the probability of occurrence of these processes; 4. scenarios of processes in the environment are a specialization of methods of environment state scenarios, they focus on the most significant processes, of a potentially high impact force on the company. data in the table indicate that the approach to the problem of creating scenarios is diverse and very complex at the same time. due to the purpose of the article, we are not able to review all the typologies of scenarios. on the other hand, to recapitulate, we may clearly emphasize the fact that the diversity and richness of scenarios provide a number of possibilities of their application in practice. end of table 1 144 e. bielińska-dusza. concepts of scenario methods in improvement of an enterprise 4. the essence of improvement from the point of view of goals of the study, in this point we present the concept of improvement and its different ways of interpretation (for more information see bielińskadusza 2009). the issue of the company improvement is not a new problem. it should also be emphasized that eminent representatives of scientific school of management such as: f. w. taylor, h. l. gant, h. ford, f. b. gilbreth, h. le châtelier, k. adamiecki created a system of organizing work aimed at improvement of the company organization and management in the present study we assume that improvement is a continuous process aimed at increasing efficiency of an organization implemented in accordance with the cycle of organized actions. in reference books we can encounter the notions of improvement, streamlining or enhancement (see table 2). some authors treat them as terms of different meanings, while others use them interchangeably. table 2. basic definitions related to the essence of improvement (source: prepared by the author on the basis of: pszczołowski 1978; mikołajczyk 1995; kotarbiński 2003; romanowska et al. 2004) term characteristics improvement increasing operational efficiency of an organization (mikołajczyk 1995), it is a concept coming from the direction of research of organizational behaviours (romanowska et al 2004). streamlining* increasing efficiency; refers to repeated action or operation. the result is streamlining. in the theory of organization streamlining is performance of the principle of efficiency, it is carried out by using, among others, the cycle of organized actions (pszczołowski 1978). enhancement improvement of activities or operation in some respect. enhancement of the notion of rationalization and optimization. the final form of enhancement is achievement of excellence relative to a given place and time (pszczołowski 1978). modification t. kotarbiński t. pszczołowski z. mikołajczyk taking a mutual position in such a way with regard to the component parts of an organization, so that the whole operation efficiently leads to the goal. considering organizing more broadly, it can be stated that any streamlining of activities comes down to some modifications in an organization (kotarbiński 2003). this is also permutational action**, introducing changes in some subject, therefore it obtains higher evaluation. it is the same as streamlining, namely increasing efficiency, quality (pszczołowski 1978). changing something in such a way so that it becomes better, more useful, functional, revised, improved (mikołajczyk 1995). * the notion of streamlining originates from praxeology where any activities aimed at streamlining activities are called practical directives. they were introduced to reference books by t. kotarbiński (see: kotarbiński 2003). **permutation is an event in which within a given time the final state is different from the initial state (pszczołowski 1978). 145 business, management and education, 2013, 11(1): 137–152 on the basis of the analysis of basic terms concerning improvement (table 2) it can be stated that the definition adopted by us recognizes improvement more broadly than the other presented definitions. according to it, it is a continuous process, lasting continuously, while according to t. pszczołowski enhancement was a permutational action, namely in a given period. if we look at a company as an organized unit, then improvement can be considered in the following three aspects: scope, plane and state. the scope of improvement of a company consists of two areas (stabryła, trzcieniecki 1986): structure (statics) and processes (dynamics). from the point of view of complexity, each of them can be perceived on various planes (levels): creation and implementation. however, with regard to states it is possible to enumerate: the state of development, correct state (satisfactory), incorrect state (unsatisfactory). improvement within these states may take one of three forms: creative design of the new system; gradual, planned improvement and gradual and systematic removal of defects (kieżun 1980). analyzing improvement in the company within statics, we can distinguish streamlining of objectives and functions, subordination of components of the system and establishing organizational positions, grouping organizational positions, organizational dependencies, decision-making rights distribution, structure formalization (nalepka 2003). on the other hand, from the point of view of dynamics, we can distinguish improvement in management process and production process. it seems that the use of scenarios may be helpful within the dynamic aspect of improvement, though it is also necessary to point out that those areas may overlap. the significance of improvement understood as a process of conscious changes in an organization within static aspect applies to improvement with regard to bonds and relations between them, tasks and methods of functioning of particular parts. it leads to creation of a new organizational structure, an institution with a higher degree of organization, adapted to the current internal and external conditions. on the other hand, scenario analysis becomes an auxiliary tool for the correct adjustment of an organization to conditions in the environment. it should be emphasized that the necessary condition to initiate appropriate improving actions is to carry out research that should contribute not only to detection of their irregularities but also to learning about their essence and determining the reasons causing them. the use of scenarios to organizational improvement is significant since scenarios are used to build organization strategy in conditions of variable, and not structured, environment. they make it possible, on the one hand, to anticipate future phenomena, while on the other hand, when properly realized, they should increase effectiveness of an organization and improve its competitiveness. however, the condition is the complex nature of the changes made, which should be the basic principle of organization improvement. this complex nature of changes should take account of the system approach which indicates that the company’s improvement may apply to each selected area within it. often modifications introduced in one subsystem also affect other subsystems, causing their adaptation responses aimed at reaching balance. 146 e. bielińska-dusza. concepts of scenario methods in improvement of an enterprise as it is emphasized by z. mikołajczyk, improvement is an integral part of company operations and internal changes “for today” and predicting its operation in the future (mikołajczyk 1995). on the basis of opinions mentioned above it can be stated that introducing changes in the company as a result of adaptation reaction to the situation, is identical with the notion of improvement. it can also be said that improvement through continuous adjustment of the organization to the new conditions is intended to increase its flexibility. it has a significant meaning in today’s conditions of the turbulent character of the environment of the company and is a necessity. in addition, improvement of a company may not only have adjustment nature but it also should anticipate the appearing conditions, which are anticipated by scenario analysis with good result. 5. remarks on applying scenario methods we may then notice that the selection of appropriate methods in this process is a complex process depending on numerous factors. we will understand the notion of the method as a systematic, repeated and effective manner of conduct, based on scientific research terms and aiming at solving management problems in organizations (błaszczyk 2005). selection of appropriate methods in the enterprises improvement process should take accounts of a number of factors which will condition the effectiveness of application of a particular method. moreover, taking account of the specific nature of various detailed methods and techniques, as well as situational conditions, it is difficult to clearly identify all the significant factors. the ones presented below may greatly contribute to further discussion and analysis. when analyzing the literature on the subject, we observe that there are no methods which would solve the problem of enterprise development in a comprehensive manner. as a result, when selecting detailed methods and techniques, we should take into account the following guidelines: − competences, namely combinations of knowledge, experience and skills of persons using scenario methods; − the analysis of needs for which a given method is to be used, including the possibility of using supplementary methods and those which are already used; − the possibility to select methods from other fields of knowledge; − the analysis of requirements, conditions, terminology of use from the point of view of the organizational operation principles; − the evaluation of situation, internal and external conditions; − financial expenditures necessary for using the selected method; − opinions of other users concerning the suitability of a particular method; − the availability of required information, as well as the degree of specialization of expected results; 147 business, management and education, 2013, 11(1): 137–152 − practical indications for using the selected method; − the possibility to use assistance both from inside the organization and from the outside, e.g. by means of opinions of experts; − the degree of the organization’s preparation (e.g. organizational and technical conditions, structural solutions), time-consuming character, cost-consuming character of using a specific method as well as the enterprise’s resources, which may pose various types of obstacles; − intra-organizational environment, in particular: capabilities, skills; values (organizational culture); personnel; structure and size of enterprise; styles of leadership and management guidelines, complexity of the system. it seems that in the case of a turbulent environment, scenario methods are of particular significance. these methods are used to anticipate the future and evaluate potential risk. for this reason, scenario planning seems to be the optimum response to the intensifying turbulence of the environment and the occurrence of discontinuity periods. just like any other method, also scenario methods should meet the methodical requirements, understood as correlating the methodic principle, the used approach, languages, equipment as part of procedures used to solve specific problems. the notion of methodic principle will mean a characteristic, well thought-out and ordered set of codes of conduct (guidelines, rules, directives). on the other hand, the approach is a manner of presenting or approaching the problem’s solution. the notion language in this case is a specified and organized system of signs used to transfer information, and equipment is a set of devices used in a given method. on the other hand, the notion of procedure will mean the description of the course of actions, regulating the system and the sequence of requirements when solving the problem (antoszkiewicz 1990). the author’s set of principles for scenario planning has been presented below in alphabetical order: − principle of accuracy and objectivity – indicates the use of objective, independent and complete information, reflecting the current status of the examined problem; − principle of significance – indicates the presence of relations between scenario planning and the function of planning in an enterprise. as a result, scenario planning may be treated as an element of the planning system; − principle of research complexity – indicates the obligation to conduct research and draw conclusions in connection with all significant facts, circumstances and information; − principle of perspective thinking – indicates continuous thinking in categories of the future and its programming; − principle of system and situational thinking – uses system approaches in the process of scenarios formulation. it treats organizations as an integral part of the environment; − principle of professionalism – indicates the use of qualified and specialized employees, experts, to formulate scenarios. it is also worth emphasizing the problem 148 e. bielińska-dusza. concepts of scenario methods in improvement of an enterprise of proper personnel selection which should take appropriate competences into account; − principle of equal partnership and cooperation – takes into account the aspect of cooperation of employees across various organizational levels. the support and commitment of top management in the process of formulating scenarios should also be taken into account as part of this principle; − principle of regularity – applies to updating scenarios if changes occur in a repeated, continuous manner, which may contribute to increasing the organizational operating efficiency; − principle of using entire knowledge and experience. in view of the foregoing, we may make an assumption and suggest an original approach to treating scenario methods as a super-method. this means that it may be supplemented with other detailed methods and techniques. for example, the following groups of methods may be specified: methods and techniques of environment analysis: analysis of strategic gap, method of economic forecasting, stakeholder analysis; − integrated methods: method of complex qualifications of company activity, astra analysis or space analysis; − heuristic methods – free association techniques (brainstorm and its varieties, gordon’s technique, synectic technique, new association), techniques of forced associations (translation, transfer of concepts, the teratology method, the delphi method, the nominal group method); − information methods which are used, among others, in the decision-making process, multi-dimensional data analysis or in the implementation of the functions of particular organizational units. it seems that these methods will enjoy an ever increasing popularity, due to the fact that the second half of the 20th century is a period of intense development of information systems and changes taking place in information technologies make it possible to constantly increase the scope of their use (for more details concerning information methods, see bielińska-dusza 2011). for example r. bradfield et al. (bradfield et al. 2005) suggest the following tools: intuitive-logics models: generic brainstorming, steep analysis, clustering, matrices, system, dynamics and stakeholder analysis. in la prospective models: proprietary – structural, (micmac) and actor (mactor) analysis, morphological, analysis, delphi, smic probexpert, multipol and multicriteria evaluation. whilst in probabilistic modified trend models: proprietary trends, impact and cross impact, analysis, monte carlo simulations. we may emphasize the fact that scenario planning does not consist only in precisely forecasting values of selected variables in the future, but also in constant organizational learning. the readiness for practical use of the scenario method is an expression of the organization’s openness to changes taking place in the environment, determines its ability to continuously monitor them, draw conclusions on their basis and modify strategic assumptions. 149 business, management and education, 2013, 11(1): 137–152 an unquestionable advantage of using the scenario planning method in improving enterprise is the reduction in the uncertainty level which accompanies almost all activities carried out in the contemporary world. reducing the uncertainty level is directly associated with its prediction. however, in order for the anticipation of events to be possible, it is important to properly learn not only about the present, but also the past, despite the fact that the complexity of the environment makes it difficult, and sometimes impossible, to predict the future on the basis of the past. however, a some doubt appears as to what extent the human mind is capable to learn about the surrounding reality to an appropriate extent. two limitations may be indicated here: one is associated with the occurrence of the so-called self-agreed trap, the other on the other hand with the activity of various constraints inside the mind and the compensation of limitations in the system brain/mind. some of those compensations may lead to cognitive distortions and illusions or acquiring objective partial knowledge (wheeler 1977), which may affect the reduction in the effectiveness of predicted changes and, as a consequence, creating scenarios. the problem of concepts of scenario methods to improve an eneterprise presented above by the author should be treated only as a contribution for a broader discussion on the subject. the undertaken actions do are not supposed to be final decisions and due to the complexity of the problem, they could not be solved completely. it seems that this discussion may be an inspiration for further research. 6. conclusions scenario planning identifies environmental factors which have or may have impact on the functioning of an organization. however, it should be defined that scenario planning is a process of the organization’s continuous learning, is an expression of the organization’s openness to changes taking place in the environment and continous improvement of the organization. by using scenario methods, managers pursue the process of continuous monitoring and updating of accepted assumptions. an unquestionable advantage of using the scenario planning method is the reduction in the uncertainty level which accompanies almost all activities carried out in the contemporary world. we may venture a statement that uncertainty is the biggest challenge of the present day. on the other hand, if we expect scenario planning to have causative power to predict the future, this is a symptom of misunderstanding of the essence of planning. we should expect, first of all, increasing the quality of made decisions and facilitating the decision-making process from planning. in addition, contemporary planning of enterprise should aim at stimulating a certain kind of mistrust, pragmatism in conduct and a perspective way of thinking in managers. criticism towards scenario planning not only does not protect the company against issues related to permanent unpredictability, but it also stimulates a number of persons to state that one may equally 150 e. bielińska-dusza. concepts of scenario methods in improvement of an enterprise well resign from it. we may abandon planning, but a question arises: what may we suggest in exchange? the problem of concepts of scenario methods to improve an eneterprise presented above by the author should be treated only as a contribution for a broader discussion on the subject. the undertaken actions are not supposed to be final decisions and due to the complexity of the problem, they could not be solved completely. it seems that this discussion may be an inspiration for further research references antoszkiewicz, j. 1990. metody heurystyczne. twórcze rozwiązywanie problemów [heuristic methods. creative problem-solving]. pwe, warsaw, 29, 31–35. becker, h. s. 1987. scenarios in an organizational perspective, futures 19(6): 669–677. john wiley & sons, ltd. http://dx.doi.org/10.1016/0016-3287(87)90083-8 becker, h. s.; 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walas-trębacz, j. 2010. wykorzystanie metod analizy strategicznej w przedsiębiorstwie [application of the strategic analysis method in an enterprises]. wydawnictwo uek, cracow, 25. van doorn, j. w. m.; van vught, f. a. 1983. futures research in the netherlands 1960–1980, futures 15(6): 504–516. http://dx.doi.org/10.1016/0016-3287(83)90088-5 van notten, p. w. f.; rotmans, j.; van asselt, m. b. a.; rothman, d. s. 2003. an upted scenario typology, futures 35: 423–443. http://dx.doi.org/10.1016/s0016-3287(02)00090-3 wheeler, j. 1997. encyclopedia of ignorance. pergamon press. wright, a. 2004. a social constructionist’s deconstruction of royal dutch shell’s scenario planning process. working paper series. university of wolverhampton. edita bielińska-dusza. phd, is an assistant in the department of strategic analysis, cracow university of economics, since 2001. subject of thesis is “internal audit system in enterprise management”. the author of scientific publications focuses on issues of management, internal audit, international business and human resources. she participated in conferences on issues of internal audit and international management. research interests: strategic management, internal audit of organizations, business management and improvement methods, human resource management. civil service law and innovative paradigm of administration in governmental institutions alfonsas laurinavičius mykolas romeris university, ateities g. 20, lt-08303 vilnius, lithuania e-mail: laalfa@mruni.eu received 18 november 2010; accepted 15 january 2011 abstract. the article is prepared according to the same name author’s monographic work. under economic globalization and economic conditions, there are completely new scientific study subjects – public and private interests as well as their interaction and competition. the article reflects the new social phenomenon: to innovatively develop and reform the twenty-first century public administration (statutory) bodies. the author reveals the democratic legitimation of market mechanisms and the interoperability issues, creating preconditions for meaningful implementation of the new public administration and public management. the subject matter is wide and presents a study of a more limited objective – to define the managerial (social) public interest, its implementation measures, and recent trends. keywords: civil service law, state statutory services, socially responsible activity, public and private interests. reference to this paper should be made as follows: laurinavičius, a. 2011. civil service law and innovative paradigm of administration in governmental institutions, business, management and education 9(1): 50–66. doi:10.3846/bme.2011.04 jel classification: k42; m14; m38. 1. introduction the starting point of social processes studies is a consistent pattern of social development revealed by human theories. these are universal requirements, which are to be obeyed by state statutory services. the reform based on a social consistent pattern is the main guarantee of its success. a new public administration supposing democratic legitimacy and market mechanisms is a feature of a new administrative paradigm of state statutory services analyzed in this study. academic necessity to analyse state service and business, interaction between public and private interests in a new state services administration context was an unofficial trigger for this study to appear. the author raises a hypothesis: contrasting of public and private interests in the fields important to a society misrepresents a vision of the legal administrative state and becomes an obstacle to perform a mission entrusted by the state. the subject of the study “civil service law and innovative paradigm of administration in governmental institutions” is a solution to the problem of interaction and competition of public and private interests by creating b u s i n e s s, ma n ag em e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(1): 50–66 doi:10.3846/bme.2011.04 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 51 business, management and education, 2011, 9(1): 50–66 and reforming institutions of public administration in the xxi century. the topic is too broad; therefore, the author takes as a goal to define public interest of administrative state, tendencies of implementation means development. certain questions arise when creating and developing traditions of western culture: are there any changes and if they are – towards which direction does a way of society thinking change, can we forecast tendencies of democratic state and development of society, which would encourage absorbing traditions of old-timers european union member states how to organize and create coexistence and wellbeing. the author presumes: if attitudes towards business and enterprise are not changed, a master-key to open the door to wellbeing will not be found. process of modernisation of state statutory services by introducing methods of new public administration does not provide for a new model of public administration and cannot be evaluated as a separate paradigm as there is no “pure” data on public administration, according to which economic criteria in a public sector could be valid without any obstacles. neither there are any spheres, into which elements of such modernisation could not be introduced as the state just like enterprise is always supposed to act in an economic and efficient way (thom, ritz 2000). therefore, the study does not present any innovative theory; it only attempts to cover gaps of modernization of activity of state statutory services. the author employs schemes and pictures to make it easier for the reader to understand the content of the book, clear the shape of the issues analysed in the study, structure the research data, and establish links between the theory and practice. figs 1 and 2 cover all parts of the book and serve as a matrix. fig. 1 and its variations reveal the essence of the study, covers chapters, subchapters and research data of the monograph and unifies them into one study. it also presents the subject of the study, which is the interaction between public and private interests, which marks the reason of modernization of the public administration. it also structures the main ideas of modernisation of administration. interaction between public and private interests is defined as the reason for integration of social sciences. besides, in a wide variety of administration theories this picture helps marking the main questions, which are of importance for modernization of state statutory services. the book also alerts that the main methodological task is to properly choose concepts of development in order to reform public administration and activities of these specific state institutions. the fig. 1 attempts to draw the reader’s attention to the author’s choice of three integral spheres of the issue analysis: legal regulation (petrylaite 2008), innovative administration (grundey et al. 2008) and professional ethics (juscius, snieska 2008). they are presented in the study as instruments closely related to each other – mechanics, which help to modernize statutory service by means of securing its stability and creatively employing motivation of officers make it more flexible. variations of the fig. 2 help summarizing the problems analysed in the book taking into consideration its context. the author stresses that administration reform is a complex 52 a. laurinavičius. civil service law and innovative paradigm of administration in governmental institutions process, which covers several branches of sciences, results of interaction between elements of administration and management. therefore, new chapters of the book focus attention on different subjects, discuss with the reader the issues related to creation of different concepts. they are bound by drafting of intellectual administration model. we present the summary of the main chapters of the book by trying to focus on presumptions of creation of concepts of stability; flexibility and motivation (fig. 1 a, b, c). 2. (a) tendencies of democratic legitimacy of legal regulation of state statutory services the modern concept of the state is closely related to democracy while the content of this notion is inconstant and influenced by the development of the humanism theory and practice; it reveals human needs, which emerge from values. legal state is forming itself as a legal organizational mechanism aimed at implementing values and developing variety of human needs, starting with the lowest level – ensured guarantees for maintaining the existence like a physical life, health, etc. – up to the highest culture and intellectual needs (laurinavičius 2002). the modern science declares that perfection of positive law means a shift into the administration state. peculiarity of a new state vision is the conformity between the law and administration, transformation of administration fig. 1. new paradigm of state services (institutions) maturity of a society interaction legal remedies administration institutionalisation net of legal regulation innovative model of administration infrastructure of professional ethics stability flexibility motivation a b c private interest public interest 53 business, management and education, 2011, 9(1): 50–66 of public institutions by employing modern concepts of new public administration. from this point of view, the goal of scientific analysis is to reveal the change of law by introducing preconditions for dynamics of rights of human and social formatives in increasing their social responsibility. changes of social role of law could be established by analysis of functions of the law to regulate certain societal relations. the status of state statutory services is a legal one and a peculiarity of their administration modernisation is related to its implementation with certain reservation, which requires preserving stability of these services, while their function is to ensure the stability of the state. legal legitimacy is the most trustworthy and time-tested guarantee for stability, therefore, the necessary precondition for administration state creation is the legal state based on firm democratic legitimacy. legal means are employed in order to establish tasks to be implemented by institutions and status of officers and institutions. besides, the study presents certain functional priorities with reference to development conditions of state and society. when we analyze administration of statutory services (administrative activity) from the point of view of the legal state, it is pivotal to analyze the process by employing a shifting notion of the law and state (institutions that comprise it). it is quite a difficult task as the notion of the law and the definition of the state in general are quite comparative and determined by historical experience, way of life, national character and other conditions. therefore, there is no universally approved definition of the subject of the law while this is important argument to analyze legal functions, their compatibility with concepts of the new public administration. diversity of opinions on issues of democratic legitimacy emerges due to numerous reasons, and the first of them is complexity of its legal content. for example, e. kūris when defining the content of the subject of law, marks out several important aspects though not compatible to each other: the law is concurrent with interests of people and their group as state statutory services whose behaviour is regulated by it (kūris 2002). violation of law is one of aspects of societal life knowledge; the law is always related to certain values; the law in only social but also psychological and cultural phenomenon, which makes it universal. therefore, there are many reasons, which encourage discussion on the issue of the subject of law. there are even more reasons to analyze new tendencies of its administration modernization. it is quite problematic to find common rate when attempting to provide to the community of lawyers some unusual, unadapted in terms of consciousness study on legal issues like the one we are analyzing. one of problematic issues is that the goals or philosophy of state, society and separate social layers might differ and turn into more or less intense social tension. this scientific study reveals that state, society and different social groups have different values and their hierarchy. on the other hand, it would be erroneous to think that some unified society with homogenous way of reasoning could appear and the individual person’s consciousness would be come extinct. the point is that philosophy defines the idea in itself and its principal attitudes, or to put it in i. kant’s words, socially significant 54 a. laurinavičius. civil service law and innovative paradigm of administration in governmental institutions “maxims” without going into details. it allows achieving the balance between statics and dynamics of the categories. the counter fort of the modern philosophy or its main and incomparable value – the man, his relation with other man, relations among humans or interaction in the context of globalization and integration process of growing social responsibility of organizations. a responsible person with firm moral attitudes contributes to creating culture and progress of the humanity, with responsibility takes care of the world as the subject of his activity. the book presents a presumption that tendencies of democratic legitimacy are determined by the idea that both a person and a society need less and less imperatives such as strong legal regulation from outside. another legal aspect, which is analyzed in the monograph, is related to changes in applying a conception of the law. some time ago there was an opinion that legal order is an exceptional prerogative of the law and lawyers and an exquisite task of law enforcement institutions. nowadays, there is a different understanding that creation of legal state and organized society is a complex problem of science and practice, which requires a complex solution by employing other branches of science. new scientific theories have been created, which have broadened the concept of law as social value. therefore, while analyzing issues related to administration we encounter various specific theories, such as philosophy of law, sociology of law, theory of administration of law enforcement institutions, psychology of law, psychology of courts, deontology, professional ethics (for example, state statutory services), educology of law, etc. it means that management and administration of organizations requires high intellectual capacities and stimulates maturity of organizational culture of human coexistence. thus, law in the 21st century is not the only autonomous regulator of modern coexistence – an exclusive whole of sanctioned rules. regulation of statutory services and the staff – officers – is not an exclusion: the scientific study revealed that in their behaviour, communication with persons (clients) they employ other social norms – political, religious, ethical, corporative, socio-psychological (customs, traditions, believes, insights), etc. relations, which fall under legal regulation are influenced by the diversity of the law and other social norms. and vice versa, development of democratic legitimacy is determined by imperatives of different spheres of society life. 3. (b) instruments of state statutory services to modernize administration nowadays, while in western countries a new public administration is being elaborated, the lithuanian statutory service still pursues a strong career model the so called neoweberian concept. it is required that the state and its institutions are socially responsible, take care of technological, demographic, ecological and other phenomena and processes and change within themselves. internal responsibility of state institutions consists of bureaucratic and professional responsibility (židonis 2007). 55 business, management and education, 2011, 9(1): 50–66 state statutory services as the state guarantee for security and stability in a new administration also preserve a high authorization and power level and assume even more autonomy. a concept of new administration is based on the corporate power doctrine. the idea is to include all interested parties (social groups) into the matter of decision taking and arranging of public affairs. in their turn, all interested persons acquire a stimulus to organize and actively participate in taking care of public societal affairs. a presumption for implementation of the doctrine is new public administration. it encourages introducing into state service the principles of enterprise, contraction, privatization, deregulation, decentralization. a new public administration is defined by being more oriented to needs of society and person. it makes the subject of the research even more complex. the subject of the monograph is focused on the analysis of interaction of state and business and is based on the presumption that enterprise is a state of society; therefore, it is to be treated as a national problem. if state institutions do not assume that an enterprise creates basics for economic wellbeing might become a serious obstacle for social development. for example, there are from 50 to 100 controlling institutions under the ministry of economy and the ministry of internal affairs. 25 thousand officers are employed in state statutory services, which comprise approximately 10 percent of all state civil servants. activity reforms attempt to introduce new methods, which allow combining control and support. in an administration state, the control is treated as a security of the public interest adjusted to support provided for people and the encouragement of enterprise. the book devotes much attention to the analysis of an example of stimulation of international trade. from this point of view customs and enterprise are inseparable elements of successful economic development. according to the data provided by the united nations economic commission, coordinating role of the world trade is distributed as follows: − customs – 58%; − ports and harbours organization – 17%; − other state institutions – 17%; − private organizations – 8%. from the traditional point of view, customs is a control institution, which requires much time from business and often becomes an obstacle to international trade. the data scale of economical transactions proves that due to complex customs procedures business might face much damage. when international trade goes in low tariffs, all customs procedures might become hidden restrictions (quantitative, qualitative) or obvious obstacles for international trade.it means that customs should focus on the needs of business communities by making customs procedures less complicated, by speeding information flows and by introducing new communication technologies. there are discussions in literature on the following issues concerning simplification of customs procedures: − simplified import of goods by organizing all required formalities by “onewindow principle”; 56 a. laurinavičius. civil service law and innovative paradigm of administration in governmental institutions − an important innovation is, when information on goods is sent to customs before the goods arrive so that customs could count import tax and classify arriving goods; − random goods checking, electronic declaration of goods. the idea for customs modernization emerged in developed western countries. the initiative was supported by the world customs organization (wco) and the world trade organization (wto), which created customs support for business strategy, the so called framework of standards to secure and facilitate global trade. the wco framework to secure and facilitate global trade sets forth the principles and the standards and presents them for adoption as a minimum threshold of what must be done by the wco members. the framework aims to facilitate and secure trading, enable integrated supply chain management, strengthen cooperation among customs administrations. the kyoto international convention on simplification and harmonization of customs procedures – is the main international agreement on the issue1. therefore, simplification and coordination of customs procedures changes the role of the customs. it becomes a significant part of international trading infrastructure, which participates in different processes of international trade. the facilitation of the international trade is a defining feature of new trading, which covers methods of the modern administration: − use of information technologies for modernization of customs procedures, electronic tax payment; − customs control based on principles of auditing; − analysis-based risk management; − cooperation among customs, business and other institutions. development of the international trade requires coordination of the national eu customs activities and accurately organized services. in order to coordinate customs activities, in 1998, the first set of the so called blueprints (13 strategic tasks) was produced. these blueprints is a practical key instrument based on the best eu practice, which helps customs administrations to evaluate and improve functional effectiveness and institutional capacities. the importance of the guidelines crossed the eu borders. nowadays customs services throughout the world encounter the similar problems and challenges. administration of any customs services, which implements reforms, faces challenge to ensure necessary capacities of administrative activities. apart from the tax collecting function, customs is obliged to demonstrate a capacity to effectively manage and control external economical borders, to ensure interests of society, economic trade performing entities, ensure policy of trading facilitation. directorate general of taxation and customs union of the european commission took the initiative to review and update strategic directives. the updated set of direc1 council decision no. 2003/231/ec of march 17, 2003 concerning the accession of the european community to the protocol of amendment to the international kyoto convention. the seimas of the republic of lithuania ratified accession to the protocol of amendment to the international kyoto convention on the same conditions as the european community. 57 business, management and education, 2011, 9(1): 50–66 tives covers 22 major fields based on the best practice of eu member states customs administrations. they have been drafted by experts from the directorate general of taxation and customs union of the european commission and eu member states customs administrations experts. briefly reviewed presumptions of administration modernization reveal tendencies of democratic legitimacy, which enhance improvement of administrative capacities while strategic directives are a reliable methodological model for problem analysis. the study arrives to the conclusion that the new public administration requires a different organizational culture; i.e. obligations are to be performed by being open to external environment. it is based on competence and professional capacities of public servants, their abilities to take corporate decisions even in unusual situations. there also emerges anther conclusion in the study that administrative changes based on new public administration narrow boundaries of administrative law. management based on orders and other normative methods are substituted by methods, which allow more possibilities for management activities. a development of administrative discretion is related to new needs of state regulation and effectiveness of public administration. creators of discretional law without denial of the importance of legal norms in state administration have introduced an idea that there should be another socially (social ethics) and morally based way of regulation of social relations, i.e. discretional management. scientific analysis of the practices reveals that discretional law is a complex phenomenon with many internal contradictions. there is an opinion that science does not pay enough attention to solving these problems and due to this reason continental european administrative law is in “the stagnation period”. the concept of the discretional law is interrelated with striving for good administration. the main criterion, on which executive state administration mechanism of the legislative (law-making) law is based, is the aim to creatively implement the principle of good administration. this aim is inseparable from the development of public servants’ intellectual activity. discretion the intellectual activity of public servants is justified by philosophy of mind. it is a way to create favourable conditions for modernization of administration, crate concepts for solving unusual situations, to encourage a flexibility of public servants administrative activity. a principle of good administration might be treated as a requirement for public servants to understand administration as the intellectual activity. this conclusion is based on the special literature, decisions of the european court of justice. for example, in the case tradax versus commission2 the prosecutor general noted that he does not see any existing universally approved legal principle that what is required on the basis of the principle of good administration will become legally ensured norm (usher 2001). there is an opinion in the literature that the principle of good administration is implemented by the analysis of practical experience and by creation of innovative concepts of management administration. 2 case 64/82 tradax versus commission [1984] ecr 1359, p. 1385-6. 58 a. laurinavičius. civil service law and innovative paradigm of administration in governmental institutions an initial survey on issues of understanding of good administration has been conducted. there have been problems identified, which are to be addressed by scientists and practitioners in order to modernize administration of the lithuanian state statutory services. 4. (c) presumptions of management of ethical administrative activity of state statutory services ethical administration of institutions is one of the most important its defining features, and moral official activities – a necessary professional feature of public servants, a part of their qualification. professional ethics (state service) is one of the most efficient instruments of management (public management). literature based on scientific research suggests and encourages creation of the purposeful system of ethical institutes (an optimal and accomplished ethical infrastructure) when drafting strategies for institutional activities, their perspective plans. the stress is also put on the concept that the main tendency of the development of ethics is a shift from personal (individual) to socialprofessional ethics. for example, bearing in mind the development of discretional powers of public servants a heavier burden responsibility for qualified, ethical and socially responsible activity is supposed to be carried by the organization itself, its executives. when defining social priorities, modelling ethical public administration there is a requirement to take into consideration all conditions, which enhance the maturity of civil society. advancing to contact is being pursued by creating an efficient infrastructure of professional ethics, which allows presumptions for implementation of the ethical code of a certain profession (service) and making it more effective. a need for professional ethics is supposed by the circumstance that a tune between society, an individual and a service is very fragile due to a very delicate trust among them. a problem of trust in authorities is scientifically proved to be everlasting. the analysis of practical experience showed that in this context a particular role is attributed to the infrastructure of modern ethics, which allows for something that seems a distant dream – for institution to arrange matters itself by employing own capacities and volitional efforts. the prestige of an organization is an indication of its reliability. trust among individuals and credibility creates a system of guarantees of “social contract” which is trustful enough, starts functioning and influences public relations. this drives to a conclusion that this phenomenon, the prestige, trust in institutions basically can be managed by employing instrumental (professional) ethics. thus, the book suggests the presumption that codes of ethics could serve as a creative means for good administration of institutions, their good credit and confidence. theoretical presumptions of emerging of the instrumental ethics are reviewed in order to provide for a sequential study of the issue. the statutory states started a reform of ethics by introducing deontology. deontology is a system of norms and principles, which come from professional obligations, which regulate official behaviour of public servants of public administrative institutions. 59 business, management and education, 2011, 9(1): 50–66 besides, it is a system of science and teaching, which meets the needs for scientific knowledge on obligations of police, customs, state border guard and civil security, officer’s professional behaviour. this theory is reputed as the fundamental one in comprehension of ethical public administration, and practice ethics is treated as an instrument of a modern public management. the basic concepts of instrumental ethics are the institutionalization of ethics and the infrastructure of ethics. institutionalization of ethics is creation of the infrastructure (institutes and institutions) of ethics and the code of service behaviour is its initiation. a modelling of the infrastructure of ethics, processes of institutionalization are oriented towards broadening the institutional independency, their internal order and responsibility. the book points out that the professional ethics cannot be treated as returning back to the soviet self impeached so-called “collective responsibility”, on the contrary, the aim is to oust negatively tendentious, warp public relations in state and municipal institutions. nowadays, a public servant in performing his/her obligations is sufficiently autonomous and his/her activity is determined by his/her volitional efforts and is based on individual responsibility of serving the society. an officer by taking on his responsibilities in the service in his/her own will, as a. vaišvila felicitously argues, accepts additional obligations by which he/she can legalize and broaden own rights to protect public interests. thus, the public servant has extensive delegations of public administration. he not only acquires additional rights but also is attributed of specific obligations, which presuppose his peculiar understanding of public spirit. a citizen-officer has to assume a positive role in the name of enhancing wellbeing of the society; he has to attain the common welfare by upholding a system of basic political, civil values: − initiative participation – capacity; − political equality; − justice. thus, an individual by becoming an officer assumes a role of a citizenadministrator and becomes an interested citizen who serves the society. ethic deportment becomes the background of ethic civil spirit of public administrator (police, customs or tax institution officer). his superlative responsibility is to provide the society with services and goods in a way that the common welfare and communal life would improve. life ameliorating from the moral point of view is one of important preconditions to form societal characteristics (e.g. trust in officers), political virtues (for. ex. interest in cooperation, contribute personal time for creation of a secure life) – it all enhances a societal civil maturity. 5. improvement of new state service (in place of conclusions) how to influence state services and their employees, to aspire to their ethic, civil stand? the research carried out by the author allows certain generalisations. one of the most effective ways to prevent certain problems in service is an ethical decision taking. ethical decision depends on adequacy of the available information, 60 a. laurinavičius. civil service law and innovative paradigm of administration in governmental institutions comprehension of consequence result sequence, ability to evaluate from the point of view of morals in the ambit of the democratic legitimacy. it is highly important that before taking a decision an officer understands logic coherence between the goal and decision, i.e. the policy and the process. the content of the decision reflects the policy while methods to take the decision – the process. the content requires keeping to the legally defined goal, competently and coherently pursuing administrative policy, making sure that the decision, which is to be taken is useful for citizens, not for the organization or a separate individual, making efforts to take righteous decisions. the carried out research allow to maintain that it is quite complicated for officers to make difference between the principle of the policy and the rules which regulate implementation of the policy, and in case of a conflict they choose rules instead of the principle. having noticed a contradiction between the principle and the rules (inappropriate intended means) an officer is incapable to act freely by ignoring or otherwise interpreting illogical rules taking ethic decisions in statutory state service is complicated intellectual process. the picture presents new public management concept from the point of view of ethical evaluation (fig. 2). in order to focus readers’ attention to the essential matters analysed in the monograph, the picture shows counter fort points which are significant to modernization of administration of public institutions, creating strategies for state services, introducing management of public relations into administration, instrumental ethics. mission. the mission of state service is materialized by defining it legally and marking the basic functions – priority activity fields. when analysing administration of statutory state services in terms of development of legal democratic state it is important to analyse the process by changing concept in society of law and state (the institutions which constitute it). organizational institutional changes are evident at adherence to the mission of the service. it means that all public servants comprehend what they are supposed and expected to do for implementation of the mission of the institution (customs, police, etc.). the research data allow maintaining that understanding of the mission and functions of the service determines the responsibility of the authorities in the organization, i.e. comprehension of the role and capability to explain it to the subordinates. in other words, implementation of the mission depends a lot on delegation of functions to appropriate individuals. mission values pragmatic growth authorization, responsibility serving to society discretion boundaries fig. 2. instruments of implementation and control of new public management 61 business, management and education, 2011, 9(1): 50–66 values. organizational changes in lithuanian statutory state services are implemented not by restructuring though by creating, coordinating system of social norms according to standards of the western democracies, by developing competence of officers and forming values of serving the society, i.e. transforming values and evaluation into higher level of moral requirements. values are supposed to be clear, effective and exceptional. loyalty of the authorities of the service to these values is a capability to understand a specific status (laurinavičius 2008), of the institution and subordinates to form moral requirements for serving by enhancing positive tendencies of service activities. peculiarity of modern times is related to the idea that the moral concept of public administration provides for a changed content of the concept “of serving the society”. it means that the strategy is to change, comply with the situation (e.g. provided services, servingbenevolence, taken decisions optimal, acceptable to the society, etc.). however, despite the changed relations between state and business, distinctive values of the state have to be maintained. pragmatic augmentation. a process of searching for development possibilities is continuous. the main tendency is to make a multi-stage decision making process easier, more fluent organizational structure by ousting out unnecessary bureaucratic procedures. the duty of the authorities of service is to appropriately direct organizational processes towards the mission accomplishment. the very truth is that we achieve as much as we hope to achieve. and the less we try to look and act like others, the more we achieve, according to c. turner. it is not that we wish to stand out, it only means the courage to defend own believes. this statement is fully proved by the data of our social research. while evaluating augmentation in terms of management, the main task is to establish who the authority of the organization or of its smaller subdivision is: a controller, an administrator or a leader. all the three have different goals. the controller aspires to suppress, the administrator – to restrict, while the leader enhances team work for accomplishing the mission. according to the data of our research, problems emerge due to the remaining traditional methodology for electing the authority, which blocks larger changes. in practice, the position of the authority in some institution is the means of acknowledgement or promotion but not the means to precondition further development. a person good at implementing official duties not necessarily will become a good leader. in a modern institution the authority treats changes as natural process of development and enhances it the way it complies with the mission of the service-anxiety and interests of members and society. it is worth noting that the mission, values, tendencies of institutional development are rendered in a descriptive manner. in parallel, the author attempts to create standardized requirements, concepts of administration as management counter fort. the role of institution, tendencies of its development is evaluated in the overall context of social processes. 62 a. laurinavičius. civil service law and innovative paradigm of administration in governmental institutions authorization, responsibility, service requirements, discretion are norms and values in their nature. a descriptive aspect assists drafting comments, revealing the existent or newly emerging philosophy of social values. delegation of authorization and responsibility. all employees of the service are responsible for efficiency and quality of the activities. democratic legitimacy is an objective background. a new quality is pursued by authorization of all officers to selfdependently perform tasks and personally accept the responsibility for activity results. our research supported the business experts’ statement that organization having approved the document, which standardizes service requirements, does not lose its flexibility and does not become particularly strict if certain requirements are obeyed. – instructions define the status by establishing primary, secondary and subsidiary goals. it is not difficult to an officer to act in team and work collaboratively, and be a member even in unusual situations. − orders from higher authority established by the law are obligatory for a subordinate to execute, however, orders from above do not free of personal responsibility for consequences. − moral imperatives are perceived in a broad way that both kinds of responsibility could benot only negative3, but the positive4 as well. − acts of officers are evaluated in the context of immanently implemented mission and by deontological criteria of activity evaluation. serving the society. the peculiarity of the issue is that technical tools are not the most important matter in serving. the focus should be put on the idea that the activity is dedicated to transmitting values (legal, deontological, moral, etc.) to reality and aspire to their efficiency. an objective background is the infrastructure of professional ethics, i.e. the code of ethics and the completed (perfect) system of institutions and institutes that maintain it. in the evaluation in the light of new public administration more attention should be addressed to human relations, feeling supposed by subculture inside the service and its providing for the community which is maintained by it. the data of the research singled out the essential ethical values: − high standards of service performance; − accountability; − quality of communication. one of the most important spheres of the work is the work with citizens (clients), consideration of their complaints. the success of police or tax institution activities depends on cooperation with society. as w. olins has put it, if there is an opinion in a country that those who pay taxes are fools, the majority of individuals would elude paying taxes until the principle concept of tax institutions is changed. the major factor for creating 3 negative responsibility emerges in case a person commits a crime or some violation. such responsibility is of retrospective nature and looks back to the past. 4 positive responsibility is not related to direct guilt. it is like an alert to a person not to commit crimes, violations or even mistakes. it is of perspective nature and looks to the future, and is a form of moral responsibility. 63 business, management and education, 2011, 9(1): 50–66 moral atmosphere and enhancing the prestige of the organization is a careful consideration of serving deficiencies, speedy corrections and learning from mistakes in order to avoid their repetitions. the analysis of scientific publications and data of social researches allow making a conclusion that the analysis of complaints made by clients or the division of the work with clients has to be the essential part of the activities of (serving) organization. scope of discretion – loyalty to state service. public servants as a specific social group are singled out by the role of state services and especially statutory state services in the process of their administrative activities. the objective background is an administrative discretion. the head of the service has particular authorities to motivate subordinates (for. ex. through management of career processes) and require high morality, maintain appropriate psychological atmosphere in a collective, create favourable conditions for every servant’s personal expression. defining boundaries of discretion is a difficult task. for example, theories provided in the scientific literature encourage focussing attention on the inner motivation of state services. understanding of service goal and its significance is unquestionable basis for motivation which is noted by authors of scientific works and proved by our research data. this phenomenon has another side as well – the disposition of a public official to serve. introducing of a new public management requires not only hands, minds, and time but also creativity and untraditional imagination. by employing c. turner’s (turner 2002) model of evaluation we have carried out social research on the basis of which we provide additional preconditions for discretion to emerge: − insight to foresee tendencies of the development and future needs persons (clients); − intuition when taking decisions how to act in the context of such tendencies and new needs; − initiative to effectively maintain emerging development of possibilities; − innovation in creating benefit – feeling of community and civil spirit and making use of new possibilities; − honesty, which ensures that this possibility is meaningful and worth to be elaborated; − individuality – willingly to accept personal responsibility; − close relations among team members where tasks and initiatives are accomplished. for these characteristics to emerge, be implemented and developed there is a necessary precondition – administrative discretion, i.e. legally regulated discretional authorisation of officers. the other problem emerges from the idea that the significance of business and state service is treated differently. subsequently, development tendencies of certain unities are different, therefore, the social administration and legal regulation of these unities has to be different. in business, own interests are over evaluated, while in state service – the interests of society. it is very difficult problem of modern times bearing in mind certain processes of state functions privatization, administration based on concerted relations. many 64 a. laurinavičius. civil service law and innovative paradigm of administration in governmental institutions theoreticians and practitioners introduce radical ideas and suggest for searching for answers in social theory, postmodernism, humanistic philosophy and even in phenomenology. to sum up, a presumption can be suggested that real changes of state services could be expected only if organizations and officers realize changes of the philosophy of their own service activities. in other words, having created as comprehensive concept of modern administration as possible, which would provide for more room for civil spirit and for officers for more dedication to serve and think of common welfare. as persuasively r. bellah in his monograph “habits of the heart” put it, dedication for state service is not the essential issue; however, it might become a power unifying citizens and professionals when deciding significant problems of the state (bellah 1985). transformation of administrative state into management state has to be focused on the feeling of 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[original: wilson, w. 1887. the study of administration, political science quarterly 2]. 66 a. laurinavičius. civil service law and innovative paradigm of administration in governmental institutions valstybės tarnybos įstatymas ir inovatyvi vyriausybės institucijų administravimo paradigma a. laurinavičius santrauka straipsnis parengtas pagal autoriaus monografijoje pateiktus tyrimo rezultatus. dėl ekonominės globalizacijos ir pasikeitusių ūkio sąlygų atsirado nauja mokslo ir studijų sritis – viešieji ir privatūs interesai, jų tarpusavio sąveika ir konkurencija. straipsnis atspindi naują socialinį reiškinį – viešojo administravimo institucijų inovacinę plėtrą, reformą, atsižvelgiant į xxi a. iššūkius. autorius atskleidžia rinkos mechanizmų demokratinį įteisinimą ir sąveikos klausimus, sudarančius prielaidas prasmingai įgyvendinti naująjį viešąjį administravimą, plėtoti viešąjį valdymą. kadangi tyrimo objektas yra labai platus, straipsnyje pateikiamas siauresnio tyrimo tikslas – nustatyti valdymo (socialinį) viešąjį interesą, įgyvendinimo priemones ir dabartines tendencijas. reikšminiai žodžiai: valstybės tarnybos įstatymas, valstybės statutinės paslaugos, socialiai atsakingaįstatymas, valstybės statutinės paslaugos, socialiai atsakinga, valstybės statutinės paslaugos, socialiai atsakinga veikla, viešieji ir privatūs interesai. alfonsas laurinavičius. prof. dr (soc. sci.), head of the department of the international tradesoc. sci.), head of the department of the international trade. sci.), head of the department of the international trade and customs, faculty of economics and finance management, mykolas romeris university, member of lithuanian customs consulting committee. author of more than 100 scientific publications, including papers, monographs and books. the main research areas include: civil service law and management of organizations, protection of intellectual property, sustainable development of society and corporate social responsibility. verslas_2012_10_2.indd realities of work life balance in nigeria: perceptions of role conflict and coping beliefs babatunde akanji university of wales trinity saint david, carmarthen campus, carmarthen sa31 3ep e-mail: toyinbabs01@yahoo.com received 11 november 2012; accepted 3 december 2012 abstract. the purpose of this study is to explore the perceptions of work-life balance (wlb) practices in a developing nation of nigeria. evidently, on the threshold of widened globalization propensities, work-life research is beginning to spread outside the western context. thus, a qualitative approach was employed by conducting 61 in-depth interviews with nigerian employees (41 women and 20 men) working in frontline employments in the banking, telecommunications and insurance sectors about their perceptions of wlb. the findings showed that though conflict situations existed more than work-family enrichment, but under different circumstances due to the long legacy of national challenges facing nigeria. the apparent role conflicts have generated various coping strategies adapted by participants of study to moderate their perceived work-life conflict and this paper seeks to add to the compendium of wlb discourse on a global scale by examining key barriers detected to hinder its workable practices in nigeria. keywords: work-life balance, nigeria’s challenges, role conflict, coping strategies. reference to this paper should be made as follows: akanji, b. 2012. realities of work life balance in nigeria: perceptions of role conflict and coping beliefs, business, management and education 10(2): 248–263. http://dx.doi.org/10.3846/bme.2012.18 jel classification: y80. 1. introduction over the years, there has been growing academic repertoires in work-life research showcasing the relevance, impact and challenges of work-life balance practices in developing contexts (baral, bhargava 2010; epie 2009; fayankinnu, alo 2007) and this paper equally draws from this widened publicity in exploring the social realities of wlb experiences in nigeria. historically, work-life balance discourses were potentially high profile topical issues in most advanced economies such as u.s.a, australia and diverse european contexts and it is common theme in such western discourses that employees are required to consolidate their efforts in finding the right mix between their work and non-work roles while organizations are scrutinized to implement a variety of wlb solutions such flexible working, job sharing, telecommuting, compressed hours, part-time, maternity benefits and so on to foster workplace performance. however, it b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2012, 10(2): 248–263 doi:10.3846/bme.2012.18 copyright © 2012 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 249 business, management and education, 2012, 10(2): 248–263 is also important to state that despite the robust frameworks of wlb practices in this developed countries, there still exist growing gaps between the ideal and the real wlb situations in this advanced regions due to social, economic and labour-market pressures manifesting through long working hours culture, changing demographics and global recessions which is still rendering negative spillovers in people’s work-life integration (bond 2004; crompton, lyonette 2006; sanse´au, smith 2012). nigeria, like other nations of the world also faces economic challenges and labour market pressures. however, the wide difference causing most problems in nigeria is leadership based. for instance, some national specific issues influencing our political, economic and social status as a nation ranges from the apparent leadership failures resulting in poor social infrastructures, poverty, high unemployment and corruption (okpara, wynn 2007; okogbule 2007; ampratwum 2008). it is mind burgling to imagine how these excruciating societal externalities fustigate the work and family life of an average nigerian worker who is out to make a living and may have to strenuously develop supportive networks, as well as cognitive psychological coping behaviours that engenders desirable gratification and effective functioning at work and home (clark 2000). thus, with this high tension and disturbing circumstances found in the nation, this paper is set out to contribute to knowledge in respect to how nigerians cope with the adverse working conditions in light of the negative interactions they appear to encounter in harmonising their work and family or private life domains. thus, the aim of this paper is to investigate to what extent are wlb agenda a social reality in nigeria. this study further highlights the coping strategies that may have been adopted by nigerian workers through their perception of major sources of conflict experiences in their work-life interface. this paper also examines gender stereotypes, with reference to factors that impede nigerian female workers from effective employment participation and good management of their home affairs. however, presenting an overview of the nigerian society as a whole, the nation is regarded as one of the most populous countries in africa (okpara 2006) with an explosive population of about 146 million with diverse ethic grouping of over 250 ethnic groups (cia world factbook 2010). the official language is english but the country has over 503 indigenous languages making nigeria infused with a rich socialization heritage with multi-faceted community groupings and vastness in religious affiliations. for instance, nigeria’s religious affiliation stands at 50% muslim devotees, 40% christians and 10% of the entire population engaged in indigenous beliefs. the workforce is estimated at 47.48 million with labour force by occupation at 70% in agriculture, 10% in industry and 20% services (cia world factbook 2010). the country’s unemployment rate stands at 4.9% with a population under poverty line standing at 70% as at 2007 (cia world factbook 2010). this makes standard of living in nigeria one of the poorest in the world with a gdp of 9.5% as at 2010 (cia world factbook 2010). employment structures in nigeria are broadly divided into two types. first, is formal employment which could either be in the public sector composed of government owned institutions, or private organisations owned by wealthy nigerians or foreign investors. second, is the informal economic sector with 250 b. akanji. realities of work life balance in nigeria: perceptions of role conflict and coping beliefs enterprenuer indegins engaging in self-employed businesses mostly on small medium scale (okpara 2006). the terms and conditions of employment with exception to wages for both public and private organisations are regulated by the nigerian employment act of 1971 which has minimal provisions for family responsive policies (epie 2006). 2. previous research conceptualising work-life balance past and extant work-life research have often suggested that the effective management of the interface between work and domestic life remains a central challenge for employers and employees across various institutional contexts (greenhuas, collin, shaw 2003; valour 2007; baral, bhargava 2010). it is apparent that most wlb discussions over the decades have focused on the negative interactions often called ‘role conflict’ which mostly arises from incompatibility of activities between work and family domains (greenhaus, beutell 1985) and emphases the idea that the interface between work and family is a zero-sum and depletory in nature (edward, rothbard 2000). however, scholarly views on work-life interface are meant to present a significant social reality on how paid labour and family or private life of an individual should be classified as less competing priorities and excessively demanding but rather complementary elements of a full life (manfredi, holliday 2004: 1–4). a. felstead (2002) further suggested that wlb borders on a fair juxtaposition between “institutional and cultural times and spaces of work and non-work matters in societies where income is mainly created and distributed through labour markets” for the purposes of well-being and productivity. however, as earlier highlighted, the vast majority of research in work-life conflict seems to overshadow this salient reality as a result of some excrucaiting social encumbrance perculair to various national contexts. for instance, work-life conflict (wlc) discourses gained more prominence in the 1970s and 1980s as a result of increased women participation in employment which was marked by a period of increased market liberalisation especially in the western regions and accompanied with a surge in academic researches and public awareness of an upsurge in occupational stress and burnout experienced by this working mothers in the bid to harmonise their work-family status (lewis, cooper 1999).this resulted into role pressures whereby participation in one role was made more difficult by participation in other roles, such as work and family (roche, haar 2010; shein, chen 2011: 7–11). furthermore, the emphasis on incompatible role demands at work-family levels was historically amplified by the scarcity hypothesis by sieber (1974), which was inundated by antecedents that time and energy available within each role is finite and limited to meet the insatiable demands of both domains. in other words, the scarcity theory indicates the fact that there is a restrictive gauge on a person’s physiological and psychological resources and as a result of this, competing demands encountered between work and domestic life degenerates into a tug-of-war experience where the involvement in one domain is usually at the expense of the other (rondo, carlson, kincaid 2003; roche, haar 2010) which consequently generates negative outcomes like occupational stress, 251 business, management and education, 2012, 10(2): 248–263 burnout and health issues. however this study proposes that there are wider factors that amplify conflict experiences beyond the confines of individual circumstances and organisational work pressures which have been given narrow considerations within the work-life research which is subsequently unpacked in the next section of this paper. 2.1. transcending factors generating most wlc situations role conflict at individual levels does not exist in a vacuum. most often, external factors such as the socio-economic and cultural factors of any national context where the organisation operates seems to have influences on either the struggles or successes that workers experience in their capacity of finding a right mix in balancing their work and family life. it was found that more often than not, when making value judgments about behavioural patterns exhibited by people in respect to their social realities, researchers tend to underestimate the influence of external realities and overrate the influence of individualistic or micro factors in any given field of behavioural studies (gartner 1995). for instance, in most developing societies, where national culture emphasizes patriarchical orientations (i.e. male dominance), this may amount to gender stereotypes which most often times have a negative impact on the female gender in employment. such masculine model society relegate women to the background and in work-life matters, showcases sometimes the female gender as a perpetual home keeper and shouldered with almost all family responsibilities. it will be evident that role conflicts and pressures between roles are excruciating realities for such working mothers in these places (agbalajobi 2010). also, as earlier pointed out, the higher rates of labour market participation by women across various national contexts particularly women with family care needs have generally been the basis of role stress theories and interrole conflict discussions (eby et al. 2005). most of the stress-related outcomes such as burnout (haar 2006) and drinking, and drug habits (grunberg, moore, greenberg 1998), depression (frone, russell, cooper 1992) as well as occupational-related outcomes such as absenteeism, turnover intentions and health problems (hammer, grandley 2003) are some end factors of the harmful impact of wlc. 2.2. coping with role conflicts as employees’ face this expansive levels of stress from such surrounding factors in their environment, coping becomes inevitable. such coping abilities can be described as an individual’s approaches or methods employed to manage stressful situations encountered in role pressures from the work, family or private life (beutell, wittig-berman 2008). such coping efforts can be behavioral, cognitive or emotional levels of display (lazarus, folkman 1984). it has been suggested that the efficacy of such coping strategies is derived from one’s acquisition and judicious use of physical and mental resources such as of time-management, rational energy-disbursement and emotional coping styles spread across both domains (greenhaus, powell 2006; rotondo, kincaid 2008). for instance, lazarus, folkman (1984) are authors well known for their transactional stress 252 b. akanji. realities of work life balance in nigeria: perceptions of role conflict and coping beliefs model which conceptualises stress as the imbalances between levels of demands and resource availability. in such situations when pressures exceed an individual’s perceived ability to manage results in reactive coping behaviours after appraisal of the situations in order to reduce or remove stressors (lazarus, folkman 1984). there are various coping styles that have been theorized in research as ways people deal with stressful conditions. however, this study adopts the four well-known categories from folkman, moskowitz (2004) as follows: problem-solving approach, positive appraisal, assistance seeking and avoidance/surrender which are examined in turn. first, problem-solving approach coping occurs when efforts are geared towards resolving or proactively managing the problems that are causing distress. it may include active information gathering, planning and making decisions that proffer resolutions that deal directly with conflicts (lazarus, folkman 1984). this type of coping method may require resource consolidation that manages the underlying problem through some task-oriented decisions. second, positive thinking suggests people managing stressful circumstances in a mentally optimistic manner. this is a more emotionally based-approach which refers to one’s tendency to manage painful emotional reactions in a temperate manner especially when such conflict situations cannot be altered or changed momentarily (herman-stahl, stemmier, petersen 1995). third, assistance seeking solutions presents a person’s request for help in form of social support from friends, family and institutions in managing any potential role conflict. this kind of support may not totally eradicate the conflict affects but reduces it to a bearable state (adams, king, king 1996; rotondo, kincaid 2008). four, avoidance/surrender situation is where a person feels the need to respond to stressful circumstance by passively responding to situations with ill-feelings for purposes of immediate change the environment at cost. this coping method could be impulsive with the thinking that self-resignation to one’s faith and passive acceptance of situation solves the adverse condition (rotondo, carlson, kincaid 2003). examples of such expressed coping situations are a marriage divorce due to misgivings between couples or voluntarily withdrawal from employment because of subjective opinions about an employer. against this backdrop, this study further proceeds to investigate how nigerians in the context of our study perceives and cope with imbalances between their work-family interfaces. 3. methodology of study the integral part of this study drew epistemologically from the interpretive-constructionist perspective that emphasizes entering interactions with people in understanding the world’s realities from their point of view (saunders, lewis, thornhill 2007: 100– 131). studies of this nature is mostly qualitative which are often effective in retrieving specific information about the opinions, values, behavioral patterns, and social contexts of a given population or sampled representation in any particular field of social interest. this resonates with the suggestions of cohen, mannion, morrison (2011: 96–100) that qualitative study “gives voices to participants, and probes issues that lie beneath the 253 business, management and education, 2012, 10(2): 248–263 surface of their actions”. against this backdrop, this study made use of a judgmental sample number of 61 employees drawn across the front offices of three sectorial (i.e. banking, telecommunications and motor insurance) companies in lagos state, nigeria. all the participants were workers that deal with customer based services and were often fully engaged in constant voice to voice or face to face contact with existing or potential customers of their respective companies. the frontline business considered in this study provided richer data because of intense labour encountered on a daily basis by this workers and it was interesting to realise the impact of this job characteristics had on the private or family lives of participants. the ages of respondents ranged from 25–50 years. like most qualitative studies, interviews were the source of data collection method adopted in this study that was conducted in the lagos state which is one the largest cosmopolitan regions in nigeria and well known for the bee halve of commercial activities. majority of the interviews (53 in number) were conducted on site with respective front office workers with formal permission from their respective employers which was granted expeditiously because the study was not done at a managerial level. the other eight participants that made up the total number in study were solicited by a snowballing sample through e-mails and mobile phones given out by coparticipants. a kind request was made by them for a telephone interviews at a more convenient time off site. the face-face and telephone interviews were all english based which lasted for 40-60 minutes, in-depth in nature beginning with a formal introduction of the topic under consideration, confidentiality matters understood and the interview process conducted. during the interview process, questions were modified depending on the answers generated from participants to reflect emerging theories from the data collected (glaser, strauss 1967). the only restrictions from employers was that tape recording were not allowed as company policy but detailed notes were allowed to be taken of which a contact form was used after each interview to collate all relevant themes generated from interviews. apart from four divergent themes that emerged from four participants only, there was a large reoccurrence of similar themes of which after interviewing about 45 participants, the data did not generate any fresh insights or further distinctive themes but mere collaborations. however, for reliability of findings and ensuring that theoretical saturation was reached during the entire duration of research, all the other participants were given the same level of attention in the concurrent interviews making sure that all themes were unearthed, since analysis was carried out simultaneously and manually due to the manageable figure of participants. since the interview questions were open-ended, much qualitative data was sourced for the conceptual framework analysis of study. on the contrary, a number of limitations also exist from the study. one of them is that the study emphasized on external factors affecting wlb in the nigerian context without addressing views from the organisational perspective. this can however be justified given the overpowering conditions of the national challenges that participants vehemently blamed for the lack of workable wlb practices in nigeria. the second limitation is the relatively small sample size with participants drawn from the three important sectors in 254 b. akanji. realities of work life balance in nigeria: perceptions of role conflict and coping beliefs nigeria. also, the study was concentrated in only one state in nigeria which consists of 33 states. however, the reason for conducting the study only in lagos state was because of time and financial constraint. also, the study adopted qualitative approach which makes perceptions of participants subjective and caution placed on generalisation of findings. future studies are suggested to reach out to other states of nigeria and quantitatively conducted to confirm the validity of the subjective commentary of such qualitative research. 3.1. research design grounded theory approach was employed for data analysis processes (cresswell 2007) and the approach primarily aimed at “the discovery of theory from data systematically obtained from social research” (glaser, strauss 1967: 2). simply put, the approach unearths any explanatory logic, propositions or tentative insights intended to explain certain facts or observations emerging from data collected (cresswell 2007: 79–82). this approach has been adopted in other different topical studies conducted in the nigerian context (ituma, simpson, 2009; mordi, adedoyin, ajonbadi 2012) and proven to be a reliable method. thus, an illustrative design of grounded theory strategy employed in this study is diagrammatised in figure 1. initiating the research phenomenun choosing data selection method e.g interviews, observation & data collection with the aim of allowing substantive theories to emerge data analysis proceeds with open coding systems conclusions are generated in a narrative framework for emerging theories teased out from data fig. 1. a schematic framework of grounded theory conceptualised by glaser, strauss 1967 therefore, this current study produced 85 pages of verbatim transcribed interview data retrieved from participants. the data analysis began with coding the interview transcripts into theoretically derived categories. these focused on three dominant categories which were perceived to be factors causing imbalances between the participants work-life while variuos coping mechanisms were adapted to mediate such wlc situations. for instance, in the open coding systems adopted, the derived meaning of the above categories was distilled from a few words, sentences or paragraphs of transcribed data. for example, “the nigerian government is the cause of the problem i experience at work and home...”; by the time i get to work i am already tired due to long traffic 255 business, management and education, 2012, 10(2): 248–263 because of the deplorable state of nigerian roads...”; corruption is a big problem in the country...; this unit of data were consolidated and subsequently labelled to form a main category tagged: interconnectivity between national culture and individual wlb perception. furthermore, units of data such as “...with all my stressful call-centre job and taking care of my four young children...i am still managing...”; “thanks for my mother-in-law...she is my support when i am gone to work...” this type of units discussions were collapsed and labelled under the core category of coping strategies adopted by nigerians. thus, the open coding employed in data analysis engaged in rigorous processes of breaking down, examining, comparing, conceptualising and categorising the entire data while discoveries of the emerging theories were made below. 3.2. discussions and results of emerging theories from data one salient proposition that emerged from the data collected from participants is the interactional situations causing their wlc circumsances. there was a prevailing misfit between the participants and their working environments as theorerised by french (1973) but expounded beyond the immedaite working environment to core issues of stressors emanating from the national culture (lu, cooper, kao, zhou 2003). in a nutshell, the theoretical framework for current study is presented in figure 2. potential sources of wlc mediating mechanisms outcomes nigerian society national culture of leadership failure, problematic travel-towork, organisational insentivity to wlb, patriarchal systems physical and psychological discomforts, job satisfaction, commitment, role overload & work-life conflict coping beliefs: problemsolving approach, positive appraisal, assistance seeking and avoiance/surrender fig. 2. theoretical framework from data (source: created by the author) all the participants’ interviewed in this study expressed deep concerns regarding trends in the political, economic and social challenges facing nigeria serving as primary sources of their work-life conflict (fig. 2). one major gap in most wlb discourse is the concentration of researches at the micro (individual) and meso (organisational) levels while minimal studies relating the impact of the macro systems levels on the microsystems and mesosystems (klein, tosi, cannella 1999) remains under-theorized. theory emerging from the data of this study suggested that conditions outside an organization and an individual’s sphere of life has a sizeable impact at influencing the fundamental realities derived from an individual’s capacity of coordinating obligations 256 b. akanji. realities of work life balance in nigeria: perceptions of role conflict and coping beliefs at work and family levels with minimal conflict (clark 2000). though managing both domains for work productivity have been established to be a major challenge for employees and employers, the macro-environment factors of any national contexts are key drivers that can, to a greater or lesser extent, impact on the (in)effectiveness (johnson, scholes, whittington 2006) of wlb practices and policies at individual and organizational levels. applying the pestel framework, which theorizes that various environmental components, such as political, economic, social, technological, environmental and legal (pestel) structures of any national contexts influences people’s working patterns, standard of living and lifestyles (johnson, scholes, whittington 2006). it also impacts on each organization within the wider industry and markets in which they operate. therefore, in nigeria’s case, the participants were inclined to blame the country’s deplorable macro-environmental components for the reason of lack of workable wlb practices and policies within the nigerian organizations. for instance, one male cashiers working in the bank amplified this point as follows: work life balance will only be recognised in my workplace and my life if the economic, political and social upheavals we experience in our country are eradicated or reduced. for instance, the culture of corruption that has eaten into the fabrics of the political and economic systems... cashier in one of the first generation banks in nigeria some nigerian authors suggested that different potential reasons of the system of public sleaze and lack of decorum that feeds corrupt practices in nigeria is the love of ostentatious living and greed (tiemo 2006; okogbule 2007; ampratwum 2008; fajana 2008). the participants of this study attributed the negative impacts this failing culture has on working conditions and family as a whole. for instance, the transparency international’s (ti) reports in the past show that nigeria’s corruption perceptions index (cpi) was four places up and “ranked above chad, bangladesh and haiti showing that corruption is still a major problem” (okpara, wynn 2007). thus, it was presented by okpara and wynn (2007) that the unethical practices amongst nigerian managers which stem from the larger society impacts negatively on job satisfaction and commitment to work (fig. 2). there were collaborations from almost all participants that labour and productivity agendas are fund-strapped thus incapacitating labour initiatives for workable wlb solutions because allocation and administration of funds for such wlb practices like social support, child care facilities, and leisure subsidies are most times misappropriated at private and public levels (fajana 2008). also, interviewees in this study expressed displeasure with the poor state of social infrastructure because of leadership failures in nigeria. portable water, decent housing, constant electricity supply, good roads and functional transport systems are described to be a high profile luxury and unaffordable for an average nigerian. the country’s motorway were presented to be in a lamentable shape and participants expressed barriers of their ability to derive successful work-life balance because travel-to-work presents 257 business, management and education, 2012, 10(2): 248–263 much hassles. one of the interviewee commented thus: merely thinking of our bad roads is enough psychological stress...the bottleneck traffic, bad travel network, lack of traffic lights is worrisome… call-centre agent who is also a wife and a mother to bustress this point on the impact that problematic travel-to-work has on employee’s work-life balance, wheatley (2012), suggested in his study that time-based conflict often emanates from this situations due to unnecessary periods spent in bottleneck traffics which deprives dual families promptness to work or attending to family responsibilities such as picking up their children from school promptly. in a similar vein, most interviewees of this study narrated similar collaborative versions relating to time-based conflict they encounter because of poor motoring facilities in nigeria causing them unsatisfactory engagement in child care responsibilities (allen 2001). 3.3. role overload an insightful discovery of emerging theme from data in this study was the fact that role overload was a main source of wlc for nigerian women. it is evident that there are substantial amount of wlb studies devoted to the perception of gender differences relating to the role of men and women with regards family responsibilities and employment rights (eby et al. 2005). for instance, in patriarchal societies such as nigeria, the impact of role overload on women is challenging. this is in view of the realities of patriarchy in nigeria that puts women in a position where family commitments come into serious conflict with their occupational life (aziz, cunningham 2008; mordi, simpson, singh, okafor 2010) while men tend to assume their primary role in the workforce as ‘breadwinners’ and thereby participating less in family responsibilities. it is common knowledge that nigerian patriarchal system is essentially one of the major reasons women are subjected to serious work stress as well as family imbalances. for instance, one of the interviewee in ths study, a working mother further collaborated thus: i have three children ages 4, 7 and 9 years old. i am left to take care of family responsibilities alone because my husband works as a manager in one of our nigerian banks and comes back very late most times from work and leaves very early before anyone wakes up... interviewee working in the insurance sector role overload in this context presents an overwhelming role demands which resonates with greenhaus, beutell’s (1985) definition of work life conflict that stems from the stringent participation in both domains amounting to incompatibility outcomes. it is disheartening to see some extreme challenges that women face in managing their roles as mothers and home-maker especially in nigeria where it is found that the socialization systems and cultural orientations favor the pursuit of men above their female counterparts (mordi adedoyin, ajonbadi 2012). 258 b. akanji. realities of work life balance in nigeria: perceptions of role conflict and coping beliefs 4. coping strategies with regards to coping strategies, it was found that the primary way to eliminate stressful condition is through effective employment of coping strategies (lazarus, folkman 1984). thus, the four established types of coping strategies in literature were employed in this study to find out how the nigerian workers in the three sectors cope with the chronic nature of the stressors identified in this study. for instance, one of the male participants in this study had this to say regarding coping abilities: what we experience is perpetual conflict in our lives because of the nigerian situation and my employers have the mentality that wlb is my personal problem. but we are still surviving and living...at least my salary pays my household expenses which is ok for me… it seems as nigerians we have been trained to endure hardship from birth... nigerian male banker the expressions of the above male cashier working in one of the nigerian banks resonates with the instrumental potential pathway theorized by greenhaus, powell (2006) in their enrichment model. the narrative of the participant above stated that he still manages to derive satisfaction from the fact that his job supports his family demands and thereby makes enrichment possible for him to some extent. it can also be deduced that cognitive survival (cash, gardner 2011), and personal hardiness are traits that have been developed as psychological and physical coping resource (greenhaus, powell 2006) by nigerians because this same attitude was collaborated by another male participants of study. hardiness is commonly taken to be a personality trait in which individuals’ exercises levels of control and show enduring prowess in the face of adversity (maddi 2008) as found in the case of nigeria. this is also synonymous to the positive thinking coping theory which suggests personal decision to accommodate such stressful circumstances irrespective of the discomfort associated with it. in other words, this coping mechanism is found to be emotionally based approach of enduring abilities people develop which depicts tendencies to develop a thick skin against role pressures (lazarus, folkman 1984). another emerging theme that evolved was that assistance seeking solutions of coping were found to be used effectively by the female participants in this study. most of the married women in three sectors were found to outsource child care responsibilities to parents and relatives to help out when they are at work. also, it emerged that it was common practice in nigeria to employ the services of a house helps for household chores and general domestic labour. this house helps, mostly young females are recruited from poor rural areas where their parents may be poor and lack basic sources of livelihood to send their young female children to primary or secondary schools and would rather send them out to serve as domestic workers in the urban cities of nigeria. this are often low paid services and informal in nature. one of the married respondents expressed the following: 259 business, management and education, 2012, 10(2): 248–263 it is unfortunate that most married women in nigeria have to get poorly trained house helps for child care purposes...mostly village poor girls… female interviewee who is a bank cahier it was discovered that the nigerian structure of social support is informal in nature relying on friends, families and paid house helps. however, some concerned participants in our study confirmed the strain they go through obtaining this unstructured helps compulsorily. it emerged that some of this social support fails to moderate the effects of wlc but rather amplifies psychological stress and role overload (frone, rusell, cooper 1992; carlson, perrewe 1999). be that as it may, it was surprising to note four divergent themes that emerged from interview data of this study which represented extreme views of frustration about the excruciating wlc experiences in nigeria from four participants. one of them narrates his situation: i am not happy with my wlb situation because my salary is too small relative to my living expenses in lagos. it seems i work so hard and live so little...i am 38 years and still single because i cannot save enough money to have a decent wedding. i do not think i can ever marry with this nigerian situation. i am the only one who has a job in family...my other four siblings are still job seekers and i am the only one providing financially for my aged parents. if i have the opportunity i would leave this country even if it means seeking asylum abroad… male call-centre agent the narrative above represented feelings of total distress and rejection in response to stressors. in this case, the extreme reactions to the conflict situations of this respondent which was collaborated by three other participants were unfortunate and alarming. coping methods of avoidance/resignation has often been found to be a display of one’s abdication of control for the purposes of escaping from surrounding conflicts. this style of coping is sometimes said to magnify the problem beyond proportion because of the perception that nothing can change except one finds an exit from the situation which is often exacerbated by feelings of lack of control which results in taking irrational decisions most times which can be deduded from the narrative of this participant (rotondo et al. 2003). 5. conclusions the entire study primarily contributes to scholarly knowledge in areas of holistic factors that can be found to influence people’s perception of wlb practices and various coping strategies which can serve to buffer imbalances encountered. the nigerian experience reveals the macro-environmental factors have been major sources of work-family conflict in the country. the front office workers in the three sectors investigated did not elucidate any dissimilarity in their views of the overwhelming surrounding challenges confronting nigeria. culture of corruption, high unemployment ratios, poverty, inflation, patriarchy are some problems identified as exacerbating worker’s wlc. to buffer con260 b. akanji. realities of work life balance in nigeria: perceptions of role conflict and coping beliefs flict affects, this study further extends knowledge by presenting how nigerian workers adopt the various coping strategies as relief measures. though it is established that the behavioural and cognitive coping efforts if effectively employed, moderates distressing situations, however, the nigerian case tends to relay a salient notion that nigerians seem to accept wlc as a way of life going by the majority of the narratives from participants. coping strategies adopted seems to be used to suppress conflict rather than eradicate or reduce stressors. interestingly, the data generated from study did not reflect any adoption of the problem-solving approach which theorizes that individual takes specific and decisive action(s) to eliminate the stressors (rotondo carlson, kincaid 2003). as earlier discussed, this highlights the hardiness culture that nigerian workers have adopted to endure the adversities of wlc. this study therefore suggests the urgent need for accountable and socially responsible government which has for centuries been the real issue affecting nigeria. the well-being of a country’s manpower resource is central to effective productivity which stimulates business growth in any sector of a nation’s economy. lack of institutionalised social support systems, disregard for a culture that encourages wlb solutions and effectual enforcement of employment standards by the national government makes it possible for nigerian employers of labour to circumvent the ideals of wlb practices and policies (xiao, cooke 2012) which unfortunately serves as one of the reasons for poor economic performance that has encumbered sustainable and ethical business in nigeria for so long. references 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work stress, control beliefs and well-being in greater china, journal of managerial psychology 18(6): 479–510. http://dx.doi.org/10.1108/02683940310494359 valcour, m. 2007. work-based resources as moderators of the relationship between work hours and satisfaction with work–family balance, journal of applied psychology 92(6): 1512–1523. http://dx.doi.org/10.1037/0021-9010.92.6.1512 xiao, y.; cooke, f. l. 2012. work-life balance in china? social policy, employer strategy and individual coping mechanisms, asia pacific journal of human resources 50: 6–22. doi:10.1111/j.1744-7941.2011.00005.x babatunde akanji. i obtained my masters degress in international strategic management from university of staffordshire, uk in 2008 and currently on my doctoral degree in the university of wales. i had my first degree in law (ll.b) and a trained solicitor and barrister of the nigerian bar. my areas of research are in occupational stress, work-life balance, leadership and gender in management. copyright © 2017 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. experiential learning in management education eyal eckhaus1, galit klein2, jeffrey kantor3 department of economics & business administration, ariel university, ramat hagolan st. ariel 40700, israel e-mails: 1eyale@ariel.ac.il (corresponding author); 2galitk@ariel.ac.il; 3jeffreyk@ariel.ac.il received 13 january 2017; accepted 20 february 2017 abstract. management studies have been criticized for lagging behind the actual needs of organizations, ignoring experiential dimensions. we address this issue by applying experiential learning theory using an accountancy-oriented board game designed to help participants learn about cost management. the game was played in a pricing course with an enrolment of 104 accountancy students. we examined the impact levels of game entertainment and comprehensibility on the course material comprehension as well as the game’s impact on the final grade in the course. results show that game participants had significantly higher grades than students that did not participate in the game, and that entertainment and comprehensibility of the game predict the understanding of course material. we also found that managerial employment capability can be predicted by level of challenge participants derive from the game. this study addresses the gap between traditional management education and practice. it provides empirical evidence of the value of hands-on gameplay experience for assimilation of course concepts and strategies. the results confirmed the importance of exposing players through an entertaining game simulation to challenges that arise in the business world. in addition, we lay the ground for future studies on the novel usage of the game as a tool to assess management skills. keywords: game, simulation, experiential learning, management, education, accounting. jel classification: m10, m41, m53. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2017, 15(1): 42–56 doi:10.3846/bme.2017.345 1. introduction managers are being challenged with a greater range of problems than ever before (szarucki 2013), however, management studies have been criticized for insufficiently preparing students for the realities of professional life (pfeffer, fong 2002). as such, they are the first to be blamed for failure or poor workplace performance (taylor et al. 2002). business schools can fall short of providing adequate real-world skills for graduates to compete in the marketplace (bennis, o’toole 2005). of course, classroom management education bears little resemblance to actual organizational life (quillien 1993). while experiential pedagogies are generally preferred by managers (gold, holman mailto:eyale@ariel.ac.il mailto:2email2@email.com mailto:3jeffreyk@ariel.ac.il https://doi.org/10.3846/bme.2017.345 43 business, management and education, 2017, 15(1): 42–56 2001), ultimately, business schools have ignored this experiential dimension (mello 2006). therefore, this study addresses this issue by applying experiential learning (el) theory (1984) to accountancy management studies. according to kolb (1984: 38), “learning is the process whereby knowledge is created through the transformation of experience.” this concept is now embedded in the literature (ord, leather 2011). it has generated considerable recent interest (penger et al. 2011) and is a fixture in higher education today (gerlach, reinagel 2016). the el approach conceives of the learner as actively involved in the learning process (benecke, bezuidenhout 2011). in contrast, more traditional teaching methods (karlowicz 2009) view the student as a passive recipient of information (lopez et al. 2006). el is an increasingly common college curricular alternative (cline, kroth 2008), merging different learning styles and enhancing the ability to apply lessons to new situations (mccleery et al. 2005) often through simulation, games, and role playing (hale et al. 2002). business simulations employed in management education (cf. fawcett 1995; granitz, hugstad 2004) such as board games can be valuable pedagogical tools (cf. wyss-flamm, zandee 2001). however, research on the effectiveness of board games in management classroom scenarios is lacking in empirical evidence, especially when applied to accountancy studies. consistent with the goals of el, our research is based on evaluating students attempting to play the hitherto untested jacket factory (jf) board game (estrin et al. 1995). this game is designed to expose participants to concepts and strategies of cost management, using a simulation revolving around the manufacture of a line of goods. accordingly, this study makes several contributions. first, it addresses the gap between traditional management education and management practice. using the game simulation, we model a hands-on scenario that assimilates concepts and strategies discussed in class. second, we provide empirical evidence that the game may improve student understanding of course material, serving as a valuable tool for academic educators. third, we argue that it may prove useful to human resource management (hrm) assessment of management candidates, as well as providing a starting point for future studies in the field. 2. review 2.1. el and management management education is a skill that can be learned (lisinski, szarucki 2011). el has been described as one of the most effective instruments of management development (holman, mumford 2001), and is particularly powerful when linked to management education (bevan, kipka 2012; reynolds 2009). examples include disaster management (rijumol et al. 2010) and lean management (de zan et al. 2015). it has been compellingly argued that business education programs must include an experiential learning component (cf. clark, white 2010). gruver and miller (2011) argue that el works 44 e. eckhaus et al. experiential learning in management education especially well in management curricula, since organization and management require wisdom that can be acquired through experience. 2.2. el and accounting el theory was previously applied to accounting education, even by kolb himself between 1971 and 1999 as a means of examining learning styles (mccarthy 2010). other examples include young and warren (2011), who used an el approach based on exercises that require analyzing data to encourage developments of critical thinking in accountancy students. elijido-ten and kloot (2015) describe the positive aspects of el opportunities in the form of work-integrated learning, provided by small-to-medium enterprises (sme). chiucchi (2013) employed the el cycle in order to measure intellectual capital. fuglister, stegmoyer, and castrigano (2010) used el by analyzing bank accounting and international accounting cases. dellaportas and hassall (2013) conducted prison visits to former professional accountants, so as to bring students faceto-face with a better understanding of ethical conflicts and practice. cornell, johnson, and schwartz (2013) applied el by having accountancy students administer structuredinterviews with the goal of enhancing student confidence and reducing anxiety. laing (2009) examined the use of an experiential learning outdoor simulation activity through role-play, based on a manufacturing production line process designed to improve student comprehension of management accounting concepts. laing’s study, however, did not find any differences between the experiment and the control group. 2.3. board games and management education gaming can be an effective learning tool to drive students to maximize their learning (sprengel 1994; kelliher et al. 1996). game playing can help students develop tactical awareness and decision making skills (martin, gaskin 2004). board games are used in both business and academia to improve education and training (coakley et al. 1998), and were previously applied in management education (cf. moratis et al. 2006; marques et al. 2013). however, board games designed specifically for accounting management are not so common, and most related research has yet to show empirical evidence of their efficacy in facilitating understanding of course material. for instance, fouché and visser (2008) employed a board game in an introductory accounting course, although no statistically significant results on its effectiveness were found and they neglected to provide a detailed description of the game. fridman (2010) used the cashflow board game in the classroom as a vehicle for learning the basics of investing and enhancing financial skills, although no statistical analysis was ever carried out. 2.4. game assessment one of the most basic aspects of game playing is entertainment (day 1981; jak et al. 2013; gibson 2003; kurt 2013; hsi-peng, wang 2008). people play games for 45 business, management and education, 2017, 15(1): 42–56 enjoyment (tirakoat, lata 2011) and simply for the fun of it (kirk, harris 2011). therefore, the more entertainment provided in gameplay, the more participants will be encouraged to play, and thus achieve its goal to better assimilate the course material. however, understanding the game and wanting to improve as a player are also strong motivators (chandler 1996). the first requires full comprehension of its rules and goals (procee 2006). if a player lacks understanding of game rules, meaningful play may be impossible (ang et al. 2008). the jf game includes concepts and strategies applicable to financial accounting, and its rules are correspondingly complex. therefore, understanding the game and its informing concepts may be linked, which may determine level of student comprehension of course material. as noted, the main purpose of this study is to assess its value as a management education tool. we also propose that the jf game may assist in the evaluation of managers, and, therefore, we prepare the ground for future studies in this domain by assessing how challenging participants found the game. the need for challenge is a motivator for driving business (kakabadse et al. 1996), job satisfaction (singh et al. 2006), and is often found in entrepreneurs (caird 1993). this reflects the need for growth (at-twaijri et al. 1995) and can serve as an entrepreneurship success factor (sullivan et al. 2007). managers who express a need for challenge are viewed better in their environment (raelin 1993). the need for challenge may also affect managerial competencies (raelin 1997), impacting career move decisions (o’callaghan, fahy 2002; sullivan et al. 2007). however, this imperative does not disappear even when individuals shift their focus to family (sullivan, mainiero 2007). in the jf game, participants must continuously make strategic decisions, pivoting in new directions in order to attain ultimate goals. since challenge occurs through exposures to paradox, dilemma, and decisions (murthy et al. 2011), the complexity of player decision-making and dilemma-solving in game play may be translated into a means of predicting managerial capabilities. in the achievement of a challenging goal, some errors may occur on the way. managers need to identify their mistakes (melewar et al. 2004) and learn from them (pfeffer, sutton 2006) in order to overcome challenges and reach objectives. an important element of learning is to use self-monitoring and to deal with failure (magdalena mo ching, cheng 2001). 3. the jacket factory game jacket factory (jf) is played on a game board made up of three leaves arranged in the form of a trillium (fig. 1). a tool for learning about cost management, the objective of the game is to earn as much money as possible by managing the manufacture of goods – in this case, jackets. all finished goods are sold at fixed wholesale prices so that the focus of the game is on cost management, not selling. the winner is the team which amasses the most money over the course of the game. however, all teams not forced to leave the game due to bankruptcy may be said to end the game successfully. 46 e. eckhaus et al. experiential learning in management education fig. 1. game board game description the game is played by two to four teams of players. each team can be composed of two to four members. each member may be assigned a role: for instance, team leader, audit controller, and strategy planner, etc. there are three types of jackets: leather, denim, and nylon. nylon jackets are the most easily manufactured, made from the cheapest materials. more nylon jackets, although not a lot more, can be produced in a shorter time period than other kinds of jackets. however, selling prices and profits are relatively low. denim jackets are a little more difficult to manufacture, with material that is more expensive and fewer that can be made in a given period of time. selling prices and profits are a little better, but it takes longer to reach a profit position. leather jackets are the most expensive to manufacture, are made from the costliest materials, and are the most time-consuming to produce. it takes longer to make a profit manufacturing leather jackets, but selling prices and profits are the highest. for all kinds of jackets, period costs have to be paid. furthermore, the longer it takes to manufacture and sell a product, the higher the costs will be and therefore the lower the profits. figure 2 illustrates the building block levels to sell a final product, for each of the three materials. teams must also decide which manufacturing procedure they wish to adopt: regular manual production, fully automated production, or outsourcing; that is, subcontracting the manufacturing process. outsourcing translates into lower costs and faster turnover, but less 47 business, management and education, 2017, 15(1): 42–56 volume. as in the real world, decisions as to which mode of manufacture is most appropriate are limited by opportunities presented. in the game these are determined by rolls of the dice. again, as with real conditions, teams do not have unlimited financial resources. teams begin with initial capital of $2,000,000, and may borrow up to $3,000,000 with interest payments of 1% per turn. if a team declares bankruptcy, a further $1,000,000 may be borrowed at double the rate of interest. in addition to player decisions, risk is represented in the game both by the throw of the dice and by 45 risk cards. period costs must be paid every time the dice are picked up, so that teams are aware of the passage of game time. time management is also a factor because game time is ultimately limited. strategies requiring many turns to generate a profit may thus prove unsuccessful. calculators are useful in keeping game accounts, although cost management sheets are essential. each team must keep a running record and balance of all transactions. once a team has accumulated a stack of capacity, direct material, and conversion costs blocks on an occupancy block, all of which now represent finished goods, they may be sold on the next turn after payment of period costs. as for game endings, a number of different scenarios exist. for example, players can mutually agree on a game time limit or a given number of player turns. the game can also end when all the risk cards are used up or when one team possesses all the resources. in any event, the team with the most money at game’s end is declared the winner. at this point, direct material blocks may be cashed in at a 50% discount, and outsourced blocks at an 80% discount, but all other blocks are worthless. 4. methodology based on the literature above, the hypotheses of study are as follows. h1. entertainment and comprehensibility of the jf game predict the understanding of course material. fig. 2. the building block levels to sell a final product, for each of the three materials outsourceoutsourceoutsourceoutsource conversion material occupancy automated factory material occupancy manual factory manual factory material material conversion conversion occupancy o utsource o utsource o utsource o utsource 48 e. eckhaus et al. experiential learning in management education grade point average (gpa) was often used as a performance criteria vs. the game results in terms of earnings in the game (faria 2001). therefore, we hypothesize: h2. there will be a difference in course grades between students who won in the game, those who lost, and those who did not attend at all. h2a. students who won in the game will have a higher mean course grade than students who did not participate. h2b. students who lost in the game will have a higher mean course grade than students who did not participate. h2c. taken as a single group, students who won and students who lost in the game will have a higher mean course grade than students who did not participate. h3. the level of challenge derived from the game, along with the ability to handle failure, predict managerial capabilities. there were 104 accountancy students enrolled in the pricing course, out of which 79 participated in the game, while 25 did not. all participants were between the ages of 20 and 30 years. of them, 15 students were employed in managerial positions. players were divided into three groups of three players. rules were taught to players prior to the start of the game. 4.1. measurement of key variables in order to show a relationship between the game play and its value as a pedagogical tool, based on the review of the literature above we first needed to measure the motivation to play the game. second, the game relies on financial accounting strategies, which make its rules more complex. therefore, it was needed to measure the level of comprehensibility of the players, in order to validate the game’s contribution to the understanding of the course materials. third, in order to measure the level of the challenge that the game offers, as a key to growth and management development, we measured the level of the challenge the game offers. the forth construct is needed for the ability to measure the game’s success in terms of its educational value. the fifth construct is meant to measure the ability to self-monitor and to deal with failure, as an important element of learning and a key for successful management. therefore, the five constructs measured in this study: entertainment (ent), entertainment associated with playing the board game; comprehensibility (com), understanding of game complexity; challenge (chl), positive impact on player excitation; course material (cmt), understanding of the course material due to the game; and failure (fal), ability to self-monitor errors. the first three variables were taken from d’astous & gagnon (2007), which examined factors that impact appreciation of board games. the latter two were added by the authors. participants were also asked if they work in a managerial position. the items in the questionnaire were measured using five-point scales anchored from “strongly disagree” to “strongly agree.” 49 business, management and education, 2017, 15(1): 42–56 a reliability test of the items that measure the key variables using cronbach’s alpha yielded a standard item alpha score of 0.87 for cmt, 0.90 for ent, 0.73 for com, 0.77 for chl, 0 .88 for fal. descriptive statistics for the ten variables and their correlations to game participants are provided in table 1. no single observation was removed from the set. statistical procedure: data was analysed using a multiple regression analysis, one-way anova analysis, kruskal-wallis test, t-test, and univariate analysis. we used spss v23. table 1. correlation matrix of the variables, the means, standard deviations, and reliability ent com chl cmt fal ent – com .23 – chl .09 .01 – cmt .37** .33** –.02 – fal .22 .99*** .39** .71 – n 69 72 72 71 52 mean 12.83 6 5.64 13.90 20.56 sd 3.51 1.63 1.58 3.01 39.51 cronbach’s α .90 .73 .77 .87 .88 *significant at p < .05 **significant at p < .01 ***significant at p < .001 5. results as mentioned, h1 claims entertainment and comprehensibility of the jf game predict the understanding of course material. this hypothesis was supported by the data, while a multiple regression analysis was carried out, in which ent and com were the independent variables and cmt was the dependent variable (table 2). from table 2, we observe that r2 = 0.16, where ent and com positively affect cmt. table 2. ent and com effect on cmt coefficients (b) statistical error (se) weight (β) r2 δ r2 ent .22 .10 .26* .20 .18** com .28 .10 .31** *significant at p < .05 **significant at p < .01 50 e. eckhaus et al. experiential learning in management education h2, claiming that a difference between the three groups of students (game winners, losers, and non-participants) on the final course grade, was supported. we first performed a one-way anova test. the homogeneity of variances test showed significance, implying a difference in population variance. therefore, an a-parametric test should instead be performed. we performed the kruskal-wallis test, which showed a statistically significant difference between the three groups of students (χ2(2) = 14.71, p <.01). the highest mean rank of the grade belonged to students who won in the game (58.12), followed by students who participated in the game and lost (55.27), and finally the students who did not participated in the game at all (30.56). in order to confirm that students who won in the game will have a higher mean course grade than students who did not participate (h2a), a t-test was performed. the t-test showed a significant difference between the two groups of students (t(47) = 3.43, p < 0.01) (table 3). indeed, the mean of the students who won (m = 78.92, sd = 16.80) was higher than the mean grade of the students who did not participate in the game (m = 58.33, sd = 24.65). table 3. difference between students who won and students who did not participate n mean std.div. won 25 78.92 16.80** didn’t attend 24 58.33 24.65 **p <.01 in order to confirm that students who lost in the game will have a higher mean course grade than students who did not participate (h2b), a t-test was performed. the t-test showed a significant difference between the two groups of students (t(27.38) = 3.60, p < 0.01) (table 4). indeed, the mean of the students who lost (m = 77.26, sd = 10.87) was higher than the mean grade of the students who did not participate in the game (m = 58.33, sd = 24.65). table 4. difference between students who won and students who did not participate n mean std.div. lost 50 77.26 10.87** didn’t attend 24 58.33 24.65 **p <.01 finally, in order to confirm that students who won and lost in the game, taken together as a group, will have a higher mean course grade than students who did not participate (h2c), a univariate analysis was performed with duncan’s multiple comparison test. indeed, the test indicated statistical significance between the two groups (p <.001), as observed in figure 3. 51 business, management and education, 2017, 15(1): 42–56 fig. 3. difference between game participants and those who did not participate h3, it should be recalled, posited that the level of challenge derived from the game along with the ability to self-check causes of failure in the game predict managerial capabilities. the data supported this hypothesis as well. a binary regression analysis was used, where the independent variable is chl and the dependent variable is manager (if the respondent is employed in a managerial position). the regression was statistically significant (χ2 = 7.10. p = 0.03), with r2 (nagelkerke) = .23, and chl was statistically significant (p <.05). however, fal was not significant. 6. conclusions board games employed in management education can be valuable educational tools. however, research on their effectiveness in management teaching is lacking in empirical evidence, especially when applied to accountancy studies. we propose an el technique based on the jf board game, which offers hands-on experience using relevant strategies and techniques, challenging questions native to the business world, and an entertaining simulation. the hypotheses asserting that the game provides valuable educational experience translatable into higher gpa scores were all supported. students who participated in the games have shown a higher gpa than the ones that did not participate. furthermore, the game’s level of entertainment, along with its comprehensibility, was found to positively impact the understanding of the course material. it was also proposed that the jf game may also serve as a tool to identify management skills, laying the 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of economics & business administration at ariel university. he received his phd in management from bar-ilan university. his main research interests include management, it, new media and the digital culture. galit klein is a lecturer in the department of economics and business administration at ariel university. she received her phd in organizational sociology from the hebrew university. her research interests lie in the area of investments, decision making process and social psychology process during establishment of new ventures. jeffrey kantor is professor and head of the department of accounting at ariel university. he has published several books and over 50 peer reviewed journal articles. his current research interests include the impact of culture as it relates to the accounting profession (and the economy in general). copyright © 2014 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2014, 12(2): 159–180 doi:10.3846/bme.2014.241 quality investing in cee emerging markets adam zaremba department of investment and capital markets, poznan university of economics, al. niepodleglosci 10, 61-875 poznan, poland e-mail: adam.zaremba@ue.poznan.pl received 17 september 2014; accepted 08 november 2014 abstract. using sorting, cross-sectional tests, regression, and tests of a monotonic relation, the study examines the return patterns related to seven distinct quality characteristics: accruals, bid-ask spread, balance sheet liquidity, profitability, leverage, payout ratio and turnover. the investigation of more than 1.300 stocks from 11 central and eastern european countries for the period 2002–2014 documents a strong gross-profitability premium and an inverted liquidity premium. profitable and not heavily leveraged companies provide a partial hedge against market distress. finally, the paper proposes quality spreads as a forecasting tool and shows that they have predictive abilities over quality premiums related to leverage, profitability and bid-ask spread. keywords: cross-section of stock returns, quality investing, cee stock market, central and eastern europe, gross profitability premium, liquidity premium, leverage, bid-ask spread, accruals. jel classification: g11, g12, g14, g15. 1. introduction are good companies also good investments? this question is probably one of the most fundamental puzzles in the whole theory of investing. the concept of quality investing is not a new idea for the investment community. stock market participants have been always seeking for liquid companies in decent financial shape and with promising growth perspectives. however, contrary to value, size or momentum, the “quality” characteristic had to wait until the last few years to be introduced into asset pricing studies. what exactly is the “quality” in terms of stock market companies? the definitions set out in the literature vary. investors can take into account credit ratings, corporate governance, ethical issues or general financial strength (damodaran 2004). an interesting intellectual exercise related to this issue is performed by asness et al. 160 a. zaremba. quality investing in cee emerging markets (2014) who deconstructed the classical gordon’s growth model which can be simply rewritten as: × = − e dp p e b r g , (1) where e are earnings, b is book value, d is dividend, p is price, r is the required rate of return and g is growth. this equation could be interpreted in the following way (daniel, titman 2013): × = − − profitability payout value ( safety) growth . (2) in other words, the concept of quality can be divided into four grand areas (asness et al. 2014): 1. profitability which can be measured, for example, with gross profits, margins, earnings, accruals and cash flows, etc. 2. payout, which is the fraction of profits distributed to shareholders. the high payout ratios are sometimes positively regarded because they diminish agency problems as cash holdings are reduced with dividends and share repurchases (jensen 1986). 3. growth which expresses company’s perspectives and is usually measured as a change in some vital fundamental variables, like profits or margins. 4. safety which can be related to a wide range of market-based (e.g. turnover, bidask spread, idiosyncratic volatility, beta) or fundamental (e.g. leverage, balance sheet liquidity) variables. it seems rational to assume that, holding all else equal, investors should be willing to pay higher prices for the companies with higher quality characteristics and the higher prices should imply lower expected returns. to put it simply, the higher is the quality, the lower are the returns. in his paper of 1994 michael clayman revises the performance of excellent and “unexcellent” companies. he uses the criteria described in a popular book by tom peters (1988). he finds that unexcellent companies, which are in much worse shape measured, for example, by roa, roe, or profit margin, perform significantly better when. cooper et al. (2008) provide evidence that rapid asset growth predicts poor performance. damodaran (2004) notices that stocks with lower credit ratings usually yield higher returns. plenty of studies confirm the negative relation between stock liquidity and expected returns (liu 2006; korajczyk, sadka 2008; amihud 2002). finally, there is quite a lot of literature, dating back to bhandari (1988), which documents the positive relation between indebtedness and market returns. however, a considerable scope of recent literature shows that the quality is not fully priced. in other words, the quality stocks historically delivered positive and statistically significant risk-adjusted returns due to the limited pricing. this unintuitive phenomenon was recently confirmed by many studies and referred to many ways of understand161 business, management and education, 2014, 12(2): 159–180 ing the quality. altman (1968), ohlson (1980), and campbell et al. (2008) show the underperformance of firms with high-credit. george and hwang (2010), and penman et al. (2007) find evidence that companies with low leverage deliver high risk-adjusted returns. hahn and lee (2009) confirm these results by investigating the impact of debt capacity. mohanram (2005) finds that growing firms perform better than companies with poor growth. a large number of studies document that firms with low accruals have higher risk-adjusted returns than firms with high accruals (sloan 1996; richardson et al. 2005). finally, palazzo (2012) finds that the higher are the balance sheet cash levels, the better is the performance. nevertheless, probably the most prominent quality characteristic recently studied is the profitability. haugen and baker (1996), griffin and lemon (2002), and fama and french (2006, 2008, 2014) find that companies’ profitability is positively correlated with future returns. chen et al. (2011) form portfolios based on past roa (return on assets) and observe that high roa companies perform substantially better than other firms. they not only find significant risk-adjusted alpha to the most profitable companies, but also discover that the “roa factor” might explain a bunch of other market asset-pricing anomalies. another step further is made by novy-marx (2013), who concentrates on the gross margin ratio (gross profitability). he finds that this factor is so powerful that it might explain almost all existing asset-pricing anomalies. the profitability of the “quality strategy” is also confirmed on the country-level instead of stock-level. zaremba (2014a) finds that stock markets have quality too and that the more profitable and less indebted stock market is as a whole, the better it performs. an interesting synthesis of the studies pictured above is performed by asness et al. (2014) who integrates a wide array of quality characteristics into a single indicator. the authors show that the strategy of taking long positions in high quality companies and shorting the low quality stocks significantly outperform the market. although the quality factor is heavily explored in the recent financial literature, it is still not clear why it actually works. fama and french (2013) and cohen et al. (2002) provide the decomposition of a book to market ratio (b/m) which indicates that if two companies have equal b/m and expected book value growth rates, the company with a higher expected roe must also have a higher expected return. wang and yu (2013) link the profitability premium with option theories. they suggest that the lowprofitability companies are actually less-risky, because they can abandon their projects. consequently, as they are less risky, the returns are also lower. finally, there are some explanations that are related to theories from the field of behavioural finance. cohen et al. (2002) theorize that the quality premium may stem from investors’ underreacting to changes in expected roes and the reason why they underreact might be some institutional constraints. this paper aims to contribute to the existing literature in three ways. first, it provides fresh out of sample evidence on the quality premium. this study is the first which 162 a. zaremba. quality investing in cee emerging markets focus on the role of quality in cee stock markets and one of the first studies which investigate emerging markets in general. research was carried out on seven distinct quality characteristics: accruals, bid-ask spread, cash-to-assets ratio, profitability, leverage, payout, and turnover ratio. sizeable positive risk-adjusted returns to a gross-profitability strategy were documented. furthermore, contrary to observations of amihud and mendelson (1986), or amihud (2002), it was found that the liquidity is positively related to stock returns. the better the stock liquidity and the tighter the bid-ask spreads are, the higher are the alphas. second, it was examined whether investors following the quality-driven strategies could benefit from a “flight to quality” in times of market distress. it seems that the profitable and not heavily leveraged companies provide a partial hedge against such distress. on the contrary, the factors related to bid-ask spread, turnover ratio, and cashto-assets ratio are rather procyclical, so they appear to be a perverse hedge against variations in risk indicators. finally, the foreseeability of the quality premiums was investigated. the concept of quality spreads which are similar in construction to the value spread proposed by cohen et al. (2003) and investigated further by liu and zhang (2006), and michou (2009) was introduced. it was proved that the size of the quality spread is positively related to the future returns of portfolios from sorts on cash-to-asset ratio, profitability and bid-ask spreads, but the r2 was rather low. the findings in this paper have implications for three distinct areas. first, they might be important to international investors who pursue factor strategies with regional focus, both in terms of strategic and tactical asset allocation. second, the quality-related asset pricing factors might be implemented in testing portfolio performance. third, it seems reasonable to consider the quality factor as the component of the cost of capital for corporate investment and budgeting decisions. the rest of the paper is organized as follows. section 2 describes the data and research methods used. the findings are presented in section 4 and the last section brings the conclusions. 2. research methods and data sources the paper examines three hypothesis. first, it was tested whether the quality is a valid determinant of cross-sectional variation in cee emerging markets stock returns. the focus was placed on seven distinct quality indicators: accruals, bid-ask spread, cash-to-assets ratio, profitability, leverage, payout, and turnover ratio. precise definitions of quality characteristics are described in the appendix. second, it was investigated whether investors exhibit “flight to quality” in the sense that the quality stocks perform well in times of market distress. finally, it was researched whether it is possible to forecast the returns to quality on the basis of “quality” spread, which i defined as the dispersion of quality 163 business, management and education, 2014, 12(2): 159–180 between top and bottom quality stocks. thus, i built value-weighted portfolios from sorts of stocks’ characteristics and evaluated their performance with multifactor asset pricing models. additionally, i also built ad-hoc asset pricing factors related to quality characteristics and regressed their returns and intercepts from asset-pricing models of quality spreads and market distress proxies. 2.1. playing field this research was based on international stock returns and accounting data obtained from bloomberg. both listed and delisted companies were considered in order to avoid any form of survivorship bias. also monthly time-series were implemented as they provide the sufficient number of observations (147) to ensure the power of conducted tests and allow the avoidance of excessive exposure to micro-structure issues (de moor, sercu 2013a). i analyzed returns adjusted for corporate actions (splits, reverse splits, issuance rights etc.) and cash distributions to investors (dividends). the sample period runs from april 2002 to june 2014. the late start date in april 2002 was chosen in order to avoid a small sample bias and cover a broad range of companies. the initial sample includes 1307 stocks from 11 central and eastern european countries. however, in line with other studies on asset pricing, i screened the data with two crucial filters. first, i winsorised the return data by discarding stocks which delivered 2.5% of the highest single-month returns and 2.5% of the most extreme negative returns (both groups overlap to some extent). this method, aimed at eliminating miscalculated returns from a database, is employed for example by rouwenhorst (1999), or chui et al. (2010). second, in order to screen out any invalid data, i removed the stocks top percentile and the bottom percentile of stock with extreme quality characteristics. the elimination of observations with suspiciously extreme values is an approach taken for instance by lewellen (2011) or novy-marx (2013). the initial sample consists of companies from bulgaria (128), croatia (153), czech republic (14), estonia (16), hungary (39), latvia (24), lithuania (28), poland (648), romania (188), slovakia (25), and slovenia (44). the precise definition of cee countries may vary, so i followed the oecd glossary1. a company is included in the sample in month t as it is when it is possible to compute its size at the end of month t–1, return in month t, and an appropriate quality indicator at the end of month. the exact sample size varies slightly for the different quality indicators and its time-series average equals 526 for accruals, 695 for bid-ask spread, 694 for cash-to-assets ratio, 385 for profitability, 692 for leverage, 765 for payout and 765 for turnover. my initial computations and market data are collected in local currencies, however, i agree with liew and vassalou (2000), and bali et al. (2013), that comparisons using different currency units could be misleading. this is especially true in the cee developing countries, where inflation and risk-free rates are sometimes very high and differ significantly across markets. therefore, i follow the approach of liu et al. (2011), bekaert et al. (2007), or brown et al. (2008), and denominate all data 1 http://stats.oecd.org/glossary/detail.asp?id=303 (accessed 25 august 2014). http://stats.oecd.org/glossary/detail.asp?id=303 164 a. zaremba. quality investing in cee emerging markets in euro to obtain polled international results. in order to be consistent with the euro approach, excess returns are computed over the one month euribor rate in this study. 2.2. quality portfolios and asset pricing models in this paper the performance of portfolios of various quality was investigate. thus, in each month t–1, i ranked all stocks against their quality indicators (accruals, bidask spread, cash-to-assets ratio, profitability, leverage, payout, turnover). next, five subgroups were formed. for each indicator i defined the 20th, 40th, 60th and 80th percentiles as breakpoints and, thus, obtained five subgroups. finally, i value-weighted the stocks in the respective groups to obtain portfolios. i tested the abnormal returns of the formed portfolios against the four-factor model originally introduced by carhart (1997), of which corresponding regression equation is: ( )= α + + β − + β ⋅ + β ⋅ + β ⋅ + εi,t i f ,t rm,i m,t f ,t smb,i t hml,i t wml,i t i,tr r sbr r m hml wml , (3) where ri,t, rm,t and rf,t are returns on the analyzed asset i, market portfolio and riskfree returns at time t. β ,rm i , β ,smb i , β ,hml i , β ,wml i , and α i ere the estimated parameters of the model. β , rm i is analogous to the capm beta (sharpe 1964; lintner 1965; mossin 1966), but it is not equal to it. β ,smb i , β ,hml i , β ,wml i are exposed to smbt (small minus big) and hmlt (high minus low), and wmlt risk factors, which denote returns from zero-cost arbitrage portfolios. smbt is the difference in returns on diversified portfolios of small and large caps at time t, while hmlt is in general difference in returns on portfolios of stocks with diversified value (high b/v) and growth (low b/v). the wmlt (winners minus losers) denotes the difference between returns on diversified winner and loser portfolios over the previous year. in other words, smb, hml, and wml are returns on zero-cost long/short portfolios formed based on size, value, and momentum characteristics. the validity of the model for the cee market w tested by zaremba (2014b). also the input data on factors for current and future models come from adam zaremba’s website. finally, in order to test whether the intercepts are statistically different from zero in a group of portfolios, i evaluated them with the popular grs test statistic suggested by gibbons et al. (1989). the test statistic is defined as: ( ) ( ) − − − − − − −     = α σ α + ω        − − 1 1 1 t t n,t n k t t n l ˆˆˆ ˆgrs ' 1 e f ' e f ~ f n t l 1 , (4) where t is the length of the time-series (sample size), n is the number of portfolios to be explained in the examined group and l denotes the number of explanatory factors. ( )te f is the vector of expected returns to asset pricing factors, ω̂ is the covariance matrix of the asset pricing factors, α̂ is the vector of regression intercepts and σ̂ is a residual covariance matrix in the sample. the test’s critical values are obtained from fisher’s distribution with n and t-n-l degrees of freedom. 165 business, management and education, 2014, 12(2): 159–180 i performed the battery of robustness checks. first, some studies suggest that various market anomalies may be influenced by the january effect which is defined as the tendency of stocks to perform better in january than in the remaining months of the year. the issue is investigated for example by horowitz et al. (2000) for size, davis (1994) for value, loughran (1997) for both or yao (2012) for momentum effect. in order to test this seasonality i filtered out observations corresponding to januaries and repeated the analysis without them. second, analogously to numerous studies on asset pricing, i also computed the equally-weighted portfolios. i did not continue with analysis as this weighting scheme may distort the results (fama, french 1998, lewellen 2011) and results of implicit returns on rebalancing (willenbrock 2011). third, i also tested whether the results hold not only for eur, but for usd and jpy as well. i detected no significant differences. additionally, following the approach of waszczuk (2013), i carried out a monotonic relation (mr) test introduced by patton and timmermann (2010). the test, which should be regarded as supplementary to my basic research, investigates the complete crosssectional pattern of excess returns and examines whether they are systematically increasing along with changes in the quality characteristics2. the mr test uses a bootstrap approach in which the monthly excess returns are randomly drawn with replacements from the original time-series sample. i performed 30,000 random draws, eectively generating 30,000 time-series of excess returns for each of the investigated portfolios. next, one should calculate the mean excess returns for each drawn time-series of returns and demean them by subtracting the original portfolios’ time-series averages. finally, the null hypothesis was examined and proved that there is flat pattern across the quality-sorted portfolios (no cross-sectional differences) against the alternative hypothesis that there is an increasing monotonicity related to the dividend yields. in order to do this, one should compute the return differences between adjacent portfolios: −∆ = −, , 1i t i t ir r . the basic hypothesis is: = ∆ = ∆ >0 1 1,2..., : 0 : min 0i i n h vs h . (5) the test statistic is given by: = = ∆ 1,2..., mint i i n j , (6) for the original sample. in order to obtain the p-value, it is sufficient to simply count the number of cases in which < bt tj j , where btj is computed analogously to tj , but for the demeaned bootstrap draws, and then divided by the number of bootstraps (30.000). finally, it is important to mention that, when using the mr test, i introduced a minor innovation. the test is usually performed for the raw returns. i performed it for intercepts, so i drew the factor returns along with portfolios’ excess returns, and regressed the portfolio against the factors in order to obtain intercepts. lastly, before examining 2 the precise testing procedure is described in a paper by patton and timmerman (2010). 166 a. zaremba. quality investing in cee emerging markets the null hypothesis, i subtracted the intercepts from the initial samples. the rest of the procedure was identical with the standard mr test. in the end, i was also interested in examining whether there are any interactions between the quality and market capitalization of investigated companies. to this end, i formed double-sorted portfolios from stocks sorted on the quality characteristics and size. the computation procedure was consistent with similar studies of asset pricing (fama, french 2012). at the end of each month t–1, all stocks were sorted against size and quality. i defined the 20th, 40th, 60th and 80th percentiles as the size breakpoints. the five quality breakpoints were defined in the same way as for the single-sorted portfolios. the intersection of the independent 5×5 size sorts and quality produced 25 portfolios. finally, i value-weighted the sorts to obtain portfolios which were evaluated in a similar fashion to single sorted portfolios. an established observation in the financial literature is that results of cross-sectional asset pricing tests could be seriously impacted and distorted by anomalous behavior of tiny stocks (fama, french 2008; de moor, sercu 2013b; waszczuk 2013). this is especially true when it comes to the cee market which is heavily populated with microcaps. zaremba (2014b) notices that in june 2014 the capitalization of over 50% of stock companies in cee countries was 10 million euro or less and for almost 20% it was even smaller than 2 million euro. i tried to address this problem in two ways. first, besides the 5×5 double sorts on value, size and momentum, i additionally tested the 4×5 sort. the 5×5 results included all five size quintiles, while the 4×5 results excluded micro-cap portfolios (the quintiles of the smallest stocks). second, following the suggestions of de moor, sercu (2013a), i used the cross-sectional model which accounted for the risk of micro-cap companies. specifically, i implemented the model proposed by zaremba (2014b), which replaces the small-minus-big (smb) factor in the carhart four-factor model (1997) with the micro-minus-rest factor (mmr). the mmr factor returns are returns on a zero-cost portfolio which is long in the quintile of the smallest stocks and short in the equal-average of the remaining quintile portfolios. in other words, the additional model had the following form: ( )= α + + β − + β ⋅ + β ⋅ + β ⋅ + εi,t i f ,t rm,i m,t f ,t mmr,i t hml,i t wml,i t i,tr r mmr r r hml wml . (7) all regression models discussed in this paper are estimated using ols and tested in a parametric way. 2.3. performance under market distress in order to test the performance of quality stocks during market distress and the predictive abilities of the quality spread, i formed ad-hoc asset pricing factors in the first place. their computation procedure was consistent with similar studies of asset pricing (e.g. fama, french 1993; asness, frazzini 2013). the explanatory factor returns were 167 business, management and education, 2014, 12(2): 159–180 constructed from 2×3 sorts on size and quality at the end of each month t, all the stocks were sorted on size and quality. big stocks and small stocks were defined as those with the market value above and below median in a given month t, correspondingly. the quality breakpoints in the 2×3 sorts were the 30th and 70th percentiles of the given quality characteristics for all the stocks at time t. the intersection of the independent 2×3 sorts on size and quality produced six portfolios, sj, sn, sq, bj, bn, and bq, where s and b indicated small or big and j, n, and q indicated junk, neutral, and quality3 stocks (bottom 30%, middle 40%, and top 30% of a given quality indicator), respectively. next, the monthly value-weighted returns for all the 6 portfolios were computed. finally, the given quality factor was the difference between the equal-weighted average of returns on the quality portfolios (bq, sq) and the equal-weighted average of returns on the junk portfolios (bj, sj). in order to test the performance of quality stocks during market distress, i followed the approach of asness et al. (2014) and ran a regression of four-factor model intercepts. however, contrary to asness et al. (2014), i used five distinct distress indicators instead of the market risk only. the regression equation had the following form: ( ) −   + α = β + β + ε    , , 0, 1, , , 1 ln 1 ln j t i t i i i t j t x x , (8) where αi,t are t-month alphas from a four-factor asset pricing model described in the equation (3) of a zero-cost quality factor portfolio i, β0,i and β1,i are estimated model parameters, εi,t is a zero mean disturbance term and xj,t is a value of a proxy of market distress (a crisis proxy) j in period t. to examine the resilience of the results, beside the mkt-rf returns, i used four different crisis proxies. to be consistent with the euroconvention, all the proxies were expressed in euros and referred to the eurozone. as the representation of general financial market liquidity, i employed 3-month eur ted spread, which is the difference between the 3-month euribor rate and the yield on eurozone benchmark 3-month treasury bills. the expected market volatility was represented by the euro stoxx 50 volatility index, a popular measure of the implied volatility of index options. bbb spreads of eurozone 10-year corporate bonds over 10-year benchmark treasury bonds were proxies for the credit risk. finally, the term-spread risk was the difference between yields of 10and 2-year benchmark eurozone treasury bonds4. 2.4. predictions with quality spreads finally, i tested the predictive properties of quality spreads. i followed the methods of studies on value spread-based forecasting (e.g. liu, zhang 2006) and used the regression equation proposed by fama and french (1989): 3 i follow the names by asness et al. (2014). 4 for the credit, liquidity, term, and volatility risk, i use a following functional form of the equation (8): ( ) ( )−+ α = β + β + − + ε, 0, 1, , , 1 ,ln 1 ln 1i t i i j t j t i tx x . the difference stems from the nature of distress proxies. 168 a. zaremba. quality investing in cee emerging markets τ+ τ τ − + τ= α + β + ε1t t tr s , (9) where ts is one of the spreads at the end of month t-1, + τtr is the return on a given quality factor from t to + τt , and τ denotes different horizons including one-month and one-quarter holding period. in order to compute the quality spread, i employed the standard approach of construction of value spreads (cohen et al. 2003; liu, zhang 2006; michou 2009). i defined the quality stocks as companies with the quality characteristic above the 70th percentile and junk stocks as firms with the quality characteristic below the 30th percentile for the all the stocks at time t. next, i computed value-weighted averages of the investigated characteristics within the quality and junk subsamples. finally, i computed the quality spread defined as: ( ) ( )= −i,t , , , , s ln q ln qq j t j j t , (10) where i,ts is the spread for a quality indicator i, and , , qq j t and , , q j j t are the mean quality characteristics i for the quality and junk companies respectively. 3. results and discussion this section presents and discusses the performance of quality-sorted portfolios and reports their behaviour during market distress and predictive properties of the quality spread. the table 1 presents the basic statistics of monthly excess returns on portfolios from single-sorts on the quality indicators. not all the cases confirm the patterns reported in the literature. regarding the accruals anomaly, no specific relation between the accruals and the average returns was visible. the outcomes did not follow the results of sloan (1996) or richardson et al. (2005) from the developed markets, who show that low accruals coincide with high returns. when it comes to bid-ask spread, which basically is a typical proxy for liquidity or transaction cost, my results vividly contradicted the previous observations of amihud and mandelson (1986), or ali et al. (2003). in my sample the greater and narrower was the bid-ask spread, the higher was the return, and the difference between the top and bottom portfolios equalled 1.55 percentage points on a monthly basis. these outcomes differed also from lischewski and voronkova (2012), amihud et al. (2013), and waszczuk (2013), who observe no significant return pattern related to liquidity in the individual stock markets from the cee region which they studied. furthermore, the least liquid stocks were also the smallest in terms of stock-market capitalization, so the negative illiquidity premium could be even bigger when corrected with the size effect. the reason of the discrepancies between this and earlier research may stem from different definitions of the bid-ask spread. this research, contrary to the previous studies, is based on bid and ask prices observable after an end of a trading session. it is possible, that this measure of spread is strongly influenced by some microstructural issues and this phenomenon should be a subject of further studies. nonetheless, even if the outcomes of this study are not a result of pure illiquidity and transaction costs, they are still interesting as the spread in this paper seems to have some forecasting capabilities. 169 business, management and education, 2014, 12(2): 159–180 table 1. monthly excess returns on quintile portfolios sorted on quality indicators bottom 2 3 4 top t-b accruals mean 0.86 0.94 1.54 0.71 0.59 –0.27 standard deviation 8.23 7.72 7.17 6.79 6.69 5.89 sharpe ratio 0.10 0.12 0.22 0.10 0.09 –0.05 mean market capitalization 145 315 386 550 300 bid-ask mean –0.56 0.67 0.49 0.75 0.99 1.55 standard deviation 5.54 5.66 6.77 6.89 7.22 6.81 sharpe ratio –0.10 0.12 0.07 0.11 0.14 0.23 mean market capitalization 27 98 186 296 737 cash-to-assets mean 0.59 0.44 0.96 0.93 1.11 0.52 standard deviation 6.27 6.36 7.28 6.91 7.21 5.43 sharpe ratio 0.09 0.07 0.13 0.13 0.15 0.10 mean market capitalization 76 252 480 445 251 profitability mean 0.25 0.42 1.09 1.20 0.96 0.71 standard deviation 8.30 8.09 7.53 7.32 5.90 6.19 sharpe ratio 0.03 0.05 0.14 0.16 0.16 0.11 mean market capitalization 105 229 514 254 180 leverage mean 0.88 0.88 0.90 0.91 0.52 –0.36 standard deviation 7.95 6.91 7.00 5.73 5.66 5.43 sharpe ratio 0.11 0.13 0.13 0.16 0.09 –0.07 mean market capitalization 560 241 327 252 121 payout mean 0.87 1.00 1.71 1.07 1.24 0.37 standard deviation 6.21 9.84 8.16 8.57 8.63 6.50 sharpe ratio 0.14 0.10 0.21 0.12 0.14 0.06 mean market capitalization 232 364 357 707 541 turnover mean 0.47 0.77 0.52 0.90 1.08 0.61 standard deviation 4.82 5.85 6.77 7.65 7.01 5.90 sharpe ratio 0.10 0.13 0.08 0.12 0.15 0.10 mean market capitalization 92 138 157 286 538 “t-b” is the return on a portfolio invested long in top stocks and short in bottom stocks. means and stand. dev. are expressed in %, capitalization is expressed in million euro. 170 a. zaremba. quality investing in cee emerging markets in terms of the balance-sheet liquidity measured with the cash-to-assets ratio, my results showed slightly better returns for liquid companies. thus, the observations were generally in line with the evidence of palazzo (2012). similarly, the gross-profitability ratio revealed similar pattern, as it is reported by novy-marx (2013) for the developed countries. moreover, the companies with the high gross profit-to-assets ratio had not only higher returns, but also were characterized by lower risk measured with standard deviation. the stocks with higher payout ratio appear to deliver slightly higher returns than stocks with low payout. finally, the behaviour of portfolios from sorts on turnover ratio follow the liquidity story revealed by the bid-ask spread, but with lower magnitude. again, the higher is the trading volume in the last month, the higher are the excess returns, and again the less liquid are stocks are also the smallest ones. when the four-factor model was applied (table 2), not all the previous patterns turned out to be statistically significant. i observed no significant relation when it comes to accruals. next, the variations of intercepts from the four-factor model of portfolios from sorts on bid-ask spread was even higher than in the case of raw excess returns. the bottom portfolio had alpha of –1.76%, and the top portfolio had alpha of 0.45%. the difference between the monthly intercepts of the portfolio of stocks with the narrowest and the widest was equal to 2.21 percentage points and the grs test was rejected. the acid-test-based portfolios showed no significant return pattern. when it comes to the gross profitability ratio, the model rejected the zero hypothesis of no relation between the profitability and excess returns. the grs test was rejected and the returns table 2. monthly intercepts from the four-factor model to explain monthly excess returns on portfolios from quality indicators bottom 2 3 4 top t-b grs p-val. mr accruals 0.49 0.07 0.39 –0.14 –0.28 –0.76 0.56 72.9 63.12 (1.19) (0.22) (1.22) (–0.55) (–0.86) (–1.39) bid-ask spread –1.76 –0.37 –0.81 –0.29 0.45 2.21 4.88 0.0 55.01 (–4.09) (–1.03) (–2.79) (–1.42) (2.88) (4.63) cash-to-assets –0.60 –0.25 0.37 0.18 –0.05 0.55 1.13 34.5 21.18 (–1.56) (–1.01) (1.60) (0.89) (–0.17) (1.11) profitability –0.57 –0.36 0.31 0.36 0.58 1.15 2.71 2.3 0.67 (–1.38) (–1.14) (1.25) (1.02) (1.80) (2.11) leverage 0.44 –0.08 –0.10 0.15 –0.50 –0.94 2.23 5.5 82.28 (2.19) (–0.32) (–0.41) (0.63) (–1.61) (–2.24) payout 0.05 –0.33 –0.46 –0.19 0.22 0.17 0.68 64.1 16.25 (1.07) (–0.53) (–0.86) (–0.31) (0.35) (0.27) turnover –0.68 –0.87 –0.36 0.39 0.26 0.94 2.27 5.1 10.74 (–2.09) (–2.03) (–1.22) (1.49) (1.52) (2.40) “t-b” is the return on a portfolio invested long in top stocks and short in bottom stocks. intercepts and p-values are expressed in %. mr is the monotonic relation t-stat. numbers in brackets denote statistical significance. grs is the gibbons, ross and shanken (1989) test statistic. 171 business, management and education, 2014, 12(2): 159–180 on zero-cost long/short portfolio were positive and significant. the alphas of leveragesorted portfolios confirmed the pattern observed by bhandari (1988). the performance of zero-cost portfolio and the grs test confirmed that the less indebted firms had lower returns than the more leveraged companies. furthermore, i detected no significant relation between the payout ratio and the intercepts. finally, the performance of turnover sorted portfolios to a large extent followed the bid-ask spread pattern and the abnormal returns on zero-cost portfolio were positive and statistically significant. some interesting insight in the table 2 was also provided by the outcomes of mr tests. it turned out that the profitability was the only case in which the zero hypothesis of no monotonic relation was rejected. in all other cases the distribution of intercepts was uneven and the alpha was not growing along with the basic characteristic. in other words, the rejected grs test might have been simply the result of anomalous behaviour of a few extreme portfolios, rather than the monotonically increasing return along with greater magnitude of the underlying systematic factor. such thesis was only supported in the case of profitability. the performance of the ad-hoc asset pricing factors was depicted in the table 3. only three factors turned out to be statistically significant when the four-factor model was applied. astonishingly, one of them was the cash-to-assets ratio, which had been rejected in the previous test. the reason might be that this anomaly was strong among the small stocks (this issue is investigated later). however, the reason why the factor excess returns and alphas were not statistically significant might simply stem from the relatively short time-series investigated rather than from weaker factor performance than in other markets. for example, novy-marx (2013) reported the average excess returns and four-factor model’s intercepts for gross profitability factor in usa in years 1973–2010 of 0.27 and 0.35, respectively. in other words, in this case the mere size of the abnormal return was basically almost exactly the same, but the time-series s markedly shorter. table 3. ad-hoc asset pricing factors related to quality accruals bid-ask cash-to-assets profitability leverage payout turnover mean 0.41 0.92 0.52 0.27 0.22 –0.15 0.47 (1.49) (2.00) (1.82) (0.68) (0.63) (–0.46) (1.05) 4f intercept 0.18 1.24 0.66 0.32 0.19 –0.32 1.10 (0.58) (3.42) (2.16) (0.75) (0.51) (–0.80) (2.80) standard deviation 3.30 5.55 3.49 4.86 4.34 4.06 5.50 sharpe ratio 0.12 0.17 0.15 0.06 0.05 –0.04 0.09 corr. with qmj 0.04 –0.46 –0.29 0.30 0.31 0.13 –0.50 (0.40) (–5.82) (–3.42) (3.60) (3.62) (1.53) (–6.53) monthly intercepts and means are expressed in %. 172 a. zaremba. quality investing in cee emerging markets the table 3 reports also the correlation of excess returns on the ad-hoc factors from the cee stock market with the global quality-minus-junk (qmj) factor of asness et al. (2014)5. the profitability and leverage factors were characterized by positive and significant correlation coefficients, suggesting some market integration. however, in the cases of liquidity indicators (turnover ratio, bid-ask spread), the correlations were negative, so once again i found evidence that these factors behave significantly different in the cee than in the developed markets. the table 4 provides additional insights on the performance of the quality sorted portfolios across various size categories. the evidence on this issue in existing literature is relatively scarce (for example the flagship paper of asness et al. (2014) do not investigate this issue at all). one of the exceptions was the research of novy-marx (2013), which showed that the profitability premium was marginally higher among the small-caps. in the case below the quality indicators might be basically divided in the four groups. table 4. excess returns on portfolios from 5×5 sorts on portfolios from sorts on quality and size mean mean bottom 2 3 4 top bottom 2 3 4 top accruals bid-ask spread small 2.53 1.50 2.00 3.12 2.43 4.36 3.21 2.88 3.52 6.02 2 1.51 1.16 2.81 1.79 2.03 –0.77 2.03 1.67 1.12 1.67 3 –0.19 0.27 0.73 1.54 0.86 –0.99 0.87 1.51 1.64 1.15 4 1.75 1.02 0.94 0.97 0.96 –1.13 –0.18 1.02 1.06 1.23 big 0.56 1.04 1.57 0.65 0.65 –0.57 0.75 0.42 0.70 0.95 cash-to-assets profitability small 3.53 3.33 3.27 3.68 2.82 2.08 2.93 2.21 1.43 2.37 2 0.62 1.41 1.55 1.70 2.90 –0.34 1.65 2.66 2.74 1.17 3 0.40 1.49 1.13 1.21 1.01 0.80 1.32 1.40 1.47 1.11 4 1.17 0.20 0.72 0.91 1.04 0.73 1.25 1.46 0.33 1.43 big 0.17 0.34 1.00 0.91 1.16 0.20 0.33 1.03 1.28 0.87 leverage payout small 3.71 2.45 2.70 2.97 3.81 3.89 0.93 4.98 3.94 3.48 2 0.80 1.74 1.82 2.16 0.94 1.47 1.17 –0.33 1.86 0.31 3 0.24 1.30 1.06 0.30 0.93 1.08 1.14 –0.17 1.82 2.78 4 0.30 0.71 0.40 1.12 0.93 0.80 0.74 0.73 1.03 1.87 big 0.87 0.79 0.92 0.83 0.31 0.84 0.53 1.62 0.56 0.77 turnover small 4.05 2.43 3.92 2.80 4.38 2 1.23 0.79 1.96 1.55 1.25 3 0.94 0.22 1.15 1.28 1.35 4 0.41 0.20 0.92 1.39 0.98 big 0.40 0.36 0.43 0.88 1.06 monthly means are expressed in %. 5 the data on returns on qmj comes from lasse’s h. pedersen website: http://www.lhpedersen.com/data (accessed 25 september 2014). http://www.lhpedersen.com/data 173 business, management and education, 2014, 12(2): 159–180 first, the characteristics which revealed no significant return pattern in the table 2 (accruals, cash-to-assets and payout) still showed rather uneven and inconclusive outcomes. second, the bid-spreads and profitability effects appeared to be equally strong across all the sizes. third, the turnover ratio seemed to perform slightly better among the large-caps. finally, the leverage factor was probably the most curious case of all. the abnormal negative returns of low-leveraged companies could be largely the phenomenon of big-firms. actually, across the smaller companies the phenomenon was reverted and the least leveraged portfolios performed better than the most leveraged ones in the case of each size quintile. table 5. summary to explain excess returns on portfolios from sorts on size and quality 5x5 4x5 grs p-value |α| r2 s(α) grs p-value |α| r2 s(α) accruals 4f (smb) 1.24 22.24 0.64 55.62 0.81 0.93 55.06 0.47 60.59 0.62 4f (mmr) 1.11 33.86 0.66 50.02 0.85 1.27 21.08 0.62 54.64 0.83 bid-ask 4f (smb) 3.98 0.00 1.19 56.11 1.66 3.04 0.01 0.79 60.35 0.98 4f (mmr) 2.25 0.19 0.83 50.61 1.15 2.19 0.50 0.71 52.90 0.91 cash-to-assets 4f (smb) 2.29 0.16 0.69 60.90 0.94 1.26 21.84 0.39 66.38 0.46 4f (mmr) 1.46 9.37 0.61 53.37 0.76 1.37 14.81 0.53 58.70 0.67 profitability 4f (smb) 1.67 3.64 0.82 56.13 0.83 1.40 13.33 0.62 60.62 0.65 4f (mmr) 1.28 18.65 0.62 52.68 0.70 1.64 5.35 0.61 57.01 0.73 leverage 4f (smb) 2.40 0.09 0.70 60.44 0.91 1.26 21.70 0.45 66.34 0.51 4f (mmr) 1.40 11.89 0.57 52.97 0.75 1.33 17.29 0.51 58.71 0.57 payout 4f (smb) 2.91 0.01 1.13 39.72 1.75 0.79 72.44 0.75 44.07 1.01 4f (mmr) 1.10 35.27 1.23 36.93 1.82 0.69 82.84 0.87 40.16 1.19 turnover 4f (smb) 3.93 0.00 0.84 62.37 1.20 1.87 2.05 0.51 67.11 0.59 4f (mmr) 1.92 1.07 0.52 57.11 0.63 1.95 1.41 0.53 60.02 0.63 grs is the gibbons, ross and shanken (1989) test statistic, |α| is the average absolute intercept, r2 is the average r2 and s(α) is the standard deviation of the intercepts. the p-values, intercepts, r-squared and standard deviations of the intercepts are expressed in %. the summary explaining the excess return on the double-sorted portfolios is depicted in the table 5. basically, the standard four-factor model which employs the smb risk did not cope well with explaining the anomalous behaviour of portfolios from double sorts on size and quality. all indicators with the exception of accruals were rejected. nevertheless, this is mostly the result of anomalous behaviour of the smallest stocks. after accounting 174 a. zaremba. quality investing in cee emerging markets for their abnormal returns (either by neglecting the tiniest stocks or by using the mmrbased model), the landscape changed significantly. in almost all the cases of 5×5 portfolios the grs test statistics and the average absolute intercepts dropped significantly. actually, only two quality indicators – bid-ask spreads and turnover ratio – were not rejected. three following characteristics – cash-to-assets ratio, leverage and profitability – are at the brink of being rejected (either in 4×5 or 5×5 configuration). the remaining two cases – accruals and payout – are well explained by the asset pricing model. when analysing the information in the table 5, it was very important to remember that the distinct size quintiles were not of equal economic significance. actually, the performance of the quintile of the smallest stocks could be only marginally important for some group of individual investors. due to the illiquidity considerations, these companies might be completely beyond the scope of financial institutions. as the result, from the practical point of view, the figures reported in the table 2 were rather more important for stock market participants. the outcomes set out in the table 5 should be generally regarded as supplemental. next, i moved to the investigation of return patterns of quality-sorted stocks during market distress (table 6). the initial research in this field conducted by asness et al. (2014) suggested that the quality stocks provided some hedge against tension in financial market. however, this analysis focused only on aggregate qmj factor and its relation to mkt-rf factor. the outcomes in the table 5 are more detailed. first, it seemed that not all zero-cost portfolios were counter-cyclical. only the stocks from sorts on profitability and leverage offered some cushion against the market distress. they were characterized by negative and significant betas against market risk and positive and significant betas against changes in volatility and credit spreads. it appeared that during periods of market distress investors preferred low-leveraged stock with high gross-margins. the additional demand provided an extra cushion against stock market downturns. table 6. coefficients of regressions with market distress proxies accruals bid-ask spread cash-toassets profitability leverage payout turnover mkt-rf 0.01 0.58 0.20 –0.24 –0.29 –0.06 0.49 (0.14) (11.52) (5.02) (–4.12) (–5.51) (–1.14) (8.74) volatility –0.08 –0.37 –0.15 0.16 0.28 0.01 –0.46 (–1.66) (–4.79) (–3.01) (2.12) (4.28) (0.11) (–6.27) term spread 0.89 –6.73 –1.60 3.00 2.18 –1.91 –4.67 (0.52) (–2.41) (–0.88) (1.17) (0.93) (–0.90) (–1.65) creditspread 0.55 –6.67 –1.68 3.71 3.91 –0.17 –4.53 (0.53) (–4.02) (–1.52) (2.40) (2.78) (–0.13) (–2.64) ted 0.90 –5.54 –1.29 –0.79 0.23 –0.72 –3.97 (0.62) (–2.30) (–0.82) (–0.36) (0.12) (–0.39) (–1.63) numbers in brackets denote statistical significance. 175 business, management and education, 2014, 12(2): 159–180 on the other hand, no “flight-to-quality” behaviour was detected in the case of liquidity sorted stock. it appeared that in the tranquil periods the market winners are the most liquid stocks while the companies with the largest spreads or the lowest turnover ratios were market laggards. return on these portfolios were positively correlated with the stock market and negatively with the volatility, credit, term or liquidity indicators. the reason might be for example additional demand during bull market generated by market newcomers and funds preferring rather liquid stocks or lack of integration of the small-caps with the large-caps. nonetheless, the full explanation of this “anomaly” is beyond the scope of this paper and should be examined in further research. interestingly, the cash-to-asset ratio followed the pattern presented by liquidity indicators. the cash-rich companies delivered better returns during bull markets than during bear markets. the regression coefficient was negative and also statistically significant for the vix index. in the cases of the ted, term and credit spreads the coefficients were also negative, but not significant. there could be a few explanations why firms with a lot of cash in the balance sheet outperform during the bull market. for example, it might be due to overoptimistic reaction to prospects of new investments finance by excess cash or overreaction to potential cash distributions to investors. however, again, the further investigation is beyond the scope of this study. lastly, the table 7 shows the predictive abilities of quality spreads. the spreads based on three characteristics (bid-ask spread, cash-to-assets ratio, and profitability) seemed to have predictive properties for the monthly alphas and two of them (cashto-assets ratio and profitability) appear to be useful also for quarterly horizons. the regression coefficients were statistically significant at 95% level and their signs were consistent with economic interpretation. table 7. predictive regressions with quality spreads monthly forecasts quarterly forecasts b0 b1 f-stat r 2 b0 b1 f-stat r 2 accruals 0.01 –0.10 1.32 0.90 0.04 –0.28 1.43 2.95 (1.23) (–1.15) (1.30) (–1.20) bid-ask 0.00 0.05 4.23 2.84 0.01 0.12 2.17 4.42 (0.22) (2.06) (0.66) (1.47) cash-to-assets –0.02 0.24 3.99 2.68 –0.08 0.77 4.34 8.46 (–1.58) (2.00) (–1.68) (2.08) profitability –0.07 0.17 7.78 5.09 –0.20 0.50 5.07 9.74 (–2.68) (2.79) (–2.16) (2.25) leverage –0.25 0.06 0.88 0.60 –0.62 0.15 0.77 1.61 (–0.93) (0.94) (–0.87) (0.88) payout 0.00 0.00 0.32 0.22 0.00 –0.01 0.35 0.74 (0.07) (–0.57) (0.12) (–0.59) turnover 0.03 0.00 0.92 0.63 0.09 –0.01 0.67 1.40 (1.46) (–0.96) (1.21) (–0.82) r-squared is expressed in %. 176 a. zaremba. quality investing in cee emerging markets nonetheless, the r2 were relatively low. the quality spreads could only explain 2.68–5.09% of time-series variation in the monthly alphas. however, this value grew to 8.46–9.74% for quarterly returns. although these values were still relatively low, two issues should be considered when assessing the predictive abilities. first, these r2 were actually higher than in the case of research on similar spreads. for example, liu and zhang (2006) found out that the r2 of regressions with value spreads and book-tomarket spreads do not exceed 3% for monthly time-series and 7% for quarterly timeseries. second, the r2 usually rose with the forecasting horizon as it was in the case of the value spread investigated by liu and zhang (2006). alas, there were no long-enough time-series in the cee stock market which would be sufficient to perform a reliable study of forecasting over longer horizons6. 4. conclusions this paper is the first one that investigates the quality premium in the cee markets. it documents sizeable positive risk-adjusted returns to the gross-profitability strategy. furthermore, i find that the liquidity is positively related to stock returns. the higher is the stock liquidity and the narrower is the bid-ask spreads, the higher are the alphas. additionally, the profitable and not heavily leveraged companies provide partial hedge against distress. finally, the paper shows that it is possible to forecast the performance of quality stocks based on the quality spreads which are introduced in this paper, but r2 is rather low. the findings imply some conclusions for investors, asset managers and fund pickers. first, it seems sensible for portfolio managers to implement some quality strategies (or introduce products based on them, like etfs or index funds) in the cee markets. second, when evaluating the performance of portfolios of cee stocks, either for investment decisions or for academic research, one should consider the influence of some quality effects. ignoring their impact could seriously distort the results of the analysis. the research findings have a few important limitations. first, i do not account for limited liquidity and transaction costs which tend to be higher in emerging markets, especially across small and tiny companies. second, i do not take into account any investment and capital flow restrictions within the investigated countries. however, these are rather marginal, as all countries in my sample are eu members. third, the period i study (2002–2014) may be regarded as relatively short and additionally unique as it covers the times of the global financial crisis. nonetheless, longer time-series 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and the special role of microcaps in the cee market stock returns, ssrn working paper. http://dx.doi.org/10.2139/ssrn.2473818 appendix definitions of the quality characteristics. 1. accruals = – (change in working from t-12 to t – cumulative depreciation over 12 months (t-12 to t)/total assets at t. the higher characteristic, the better quality. 2. the bid and ask prices are retrieved at the end of trading session, after the fixing price is determined. bid-ask spread = (ask price – bid price)/(ask price + bid price). the lower characteristic, the better quality. 3. cash-to-assets ratio = cash and short term investments/assets. the higher characteristic, the better quality. 4. profitability = gross profit over 12 months (t-12 to t)/total assets. the higher characteristic, the better quality. 5. leverage = total assets/common equity. the lower characteristic, the better quality. 6. payout = dividends paid over 12 months (t-12 to t)/net income over 12 months (t-12 to t). the higher characteristic, the better quality. 7. turnover ratio = market value of shares traded over last month/company market capitalization at t. adam zaremba is a professor of finance at the department of investment and capital markets of poznan university of economics (poland). he received his phd in finance from poznan university of economics (poland). his research focuses on investments, asset pricing, commodities, and financial markets. http://dx.doi.org/10.1016/j.jacceco.2005.04.005 http://dx.doi.org/10.1111/0022-1082.00151 http://dx.doi.org/10.2139/ssrn.1711856 http://dx.doi.org/10.1016/j.ememar.2012.12.002 http://dx.doi.org/10.2469/faj.v67.n4.1 http://dx.doi.org/10.1016/j.jbankfin.2011.12.004 http://dx.doi.org/10.2139/ssrn.2372152 http://dx.doi.org/10.2139/ssrn.2473818 copyright © 2014 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2014, 12(2): 318–332 doi:10.3846/bme.2014.248 statistical evaluation of communication skills of customer care employees in banks marcela korenková faculty of natural sciences, institute of management and information technology, constantine the philosopher university in nitra, tr. a. hlinku 1, 94974 nitra, slovakia e-mail: mkorenkova@ukf.sk received 23 october 2014; accepted 18 november 2014 abstract. the effectiveness of the sale of financial products in banks is largely influenced not only by the products themselves, but also by the level of communication skills of customer care assistants. the subject of our research was to find out the level of communication skills of customer care assistants in banks. the level of communication skills of customer care assistants considerably influences a suitable selection of employees for a position of a customer care assistant in the companies providing the bank products. they are also some supporting activities that the company itself uses to invest into the development of the assistant by the means of additional education, trainings and supporting activities. the research was realized in the banks operating in slovakia and the collected data were analysed by the means of statistical methods that enabled us to identify the differences among individual banks. the results of our research prove that the communication skills of customer care assistants are at a sufficient level. banks started to focus more on the increase of the level of provided services, too, in relation to the high competitiveness and the need to bring something more to a client. keywords: bank, client, customer care assistant, communication, skill, assertiveness, active listening. jel classification: o15, m12, j24. 1. introduction communication as a skill means: “to communicate well in a written and oral form. effectively communicate information and ideas to others. actively listen and understand various expressions. to present the ideas clearly and accurately” (see kormancová 2010). nowadays, the fact is that 68% of customers stop to communicate with companies only because they experience their indifference. and each customer talks about their bad experience three times more often than about their good experience. therefore it can happen that a company quickly loses everything it has laboriously mailto:mkorenkova@ukf.sk 319 business, management and education, 2014, 12(2): 318–332 worked for – in case its people will consider a customer to be a necessary evil and they show it to them (zákaznícky servis… 2014). everybody communicates and promotes their opinions based on their experience, beliefs, intentions and own life philosophy (see wernerová 2010). the quality of provided services is a basic tool for the preservation and improvement of competitiveness for each organisation and each sector. (see korenko 2012). in the actual hard competitive environment it is not enough if banks only orientate on a product or price. a decisive factor is the way of communication a bank uses in order to attract, keep, but often lose clients, too (see kusá, bellová 2012). in order to satisfy clients as much as possible it is necessary for a company to actively approach the development of employees and provide them a detailed familiarization with the products of the company (see ftorek 2012). it is not enough. a bigger customer satisfaction can be reached by a correct (pleasant) behaviour of a customer care assistant, the correct administration of a sales interview, adequate acceptance of complaints and so on. a customer care assistant should provide professional consultancy, service and especially the sales of the company´s products. the following authors inform about the bank financial products (see urbaníková 2013; špirková, urbaníková 2012; urbaníková, maroš 2014). clients themselves can evaluate the behaviour and expressions of a customer care assistants to a great extent and especially, whether the meeting with them fulfilled its function – the need for which they visited the marketplace and whether the meeting itself happened in a positive atmosphere or they had a bad experience from the meeting and they will prefer other companies (see hammond 2012). emphasis should be place on the individual approach and understanding of the client, because building a quality relation with them means a certain barrier against their escape to competitors (see kusá, bellová 2012). our goal was to find out what level of communication skills bank clerks have. 2. previous research regarding communications skills banking houses widely use the system for the customer relations management. due to this fact, they are able to keep their client base, but expand it, too (see kusá, bellová 2012). if a customer care assistant has well-developed communication skills, they can clearly and comprehensibly formulate information so that the clients understand them properly. however, it is even more important to correctly interpret others (see vetráková, klincková 2013). it does not include only being able to listen well but also to decipher other signals such as mimics or gestures and be able to react in a corresponding way (see pöhm 2013). the sufficient knowledge and mastering of communication skills can improve the service and sales of products a lot. the insufficient knowledge of professional communication and skills brings the risks related to the effect of distrust or a 320 m. korenková. statistical evaluation of communication skills of customer care employees in banks negative experience of a client and in the worst case the failure and loss of a client and his passage to competitors (see plamínek 2012). so the basic conditions for the communication of a customer care assistant with a client are clearness, briefness, completeness and politeness. a customer care assistant should be aware of what they say but also of how they say it. therefore a customer care assistant should be able to put themselves into others’ shoes place (clients) and to build the trust. assertive behaviour, active listening and feedback, non-verbal communication and the course of interview are considered to be the basic communication skills of customer care assistants. each customer care assistant should be able to communicate in an assertive way. it means that they should be able to succeed but also to respect the opinions and needs of others (see wernerová 2010). every person has the elements of assertive, aggressive and passive behaviour and a certain way of communication. if all three types are in balance and an individual is able to react adequately, everything is all right. an unwanted situation happens when the aggressive or passive behaviour is dominant (nagyová et al. 2012). when a person behaves aggressively, he recognizes only his needs and requirements and he is able to do everything in order to fulfil them. this way of behaviour is apparently expressed by anger, hostility, discouragement and it can lead to conflicts, the loss of self-control and so on (see scharlau 2010). the contrast to the aggressive behaviour is the passive behaviour that has a typical body language (e.g. lowered eyes and so on), apologising phrases, the acceptance of guilt or the use of submissive expressions. such behaviour follows from the conviction that the needs of others go always first (see lahnerová 2009). the assertive behaviour teaches people to be themselves and reveal their strong sides step by step. therefore it wants people to learn to make decisions themselves and to be responsible for them. assertiveness is considered to be true, open and nondeploring communication (see tinková 2010). it means a sincere expression of one’s opinion or idea in a positive as well as negative way without interrupting the basic rights of the communication partners or their own (see nagyová 2011). assertiveness is the system of though and behaviour, rules and techniques that enable a man to rationally make decisions, be able to succeed and respect the rights of other people, too (see medzihorský 2013). if a person is communicatively proficient, they often use feedback during meetings, behave positively to others and can assertively express their feelings. the important skills in verbal communications also include: ability to present oneself, an excellent mastering of language and rich vocabulary (see kormancová 2010). it should be recognized that effective communication is not only about the ability to express oneself well, clearly and comprehensibly. it is also about the ability to listen to the other party (see furindová 2010). when another person talks we usually “listen” to him at one of four levels. we ignore him and we do not listen at all to what he says. 321 business, management and education, 2014, 12(2): 318–332 we pretend that we listen to him. “yes, oh. you are right”. we listen only selectively, so we listen only to something that he says. or we carefully listen to him; we pay attention and concentrate on the words he is saying. however, only few people listen emphatically (listening focused on understanding) – at the fifth level that is the highest form of listening (see covey 2010). active listening belongs to the basic communication techniques and it depends on the way of how we handle and accept the information from our communication partner. a correct mastering of the technique helps us to correctly react on provided information and also to pay respect to our partner while communicating (see carnegie 2010). a positive effect of communication with a client depends on the skills and perceptual ability of a customer care assistant. the basic attributes of the perceptual principle of verbal communication includes attention and the ability to listen to a client (see bencová 2013). listening seems to be a very simple tool, but it is not. a crucial rule is not to start officiating or criticising but only listen (see manažér, volume 74, no. 3, 2014). active listening is a specific process that includes several skills. following non-verbal signals, the art of asking questions and the art of speaking (see fülöpová 2011). to master the art of listening is a catapult that will rapidly move a customer care assistant forward. it can be hidden behind a common “eye-contact”. it can create a great connection between them and a potential client (see reháková 2014). it is necessary for customer care assistants to be able to listen actively. such a skill helps them to listen to the client’s problems, verify the condition of situations and clarify potential misunderstanding. it helps them to obtain new information, be able to analyse the needs of client better and react on their requirements better, too. active listening is considered to be the core of successful sales interview (see basu 2011). it is necessary to be able to listen actively at a high level in order to perform an effective and professional communication. it is not possible to avoid listening to a client or ignore their expression when working with clients (see hurst 1994). active listening means to be aware of a speaking person, keep an eye contact with him, pay him full attention, try to understand what he says and select obtained information, concentrate not only on spoken words but also perceive the feelings hidden behind the words, reflect on what was said and react. we talk about active listening and real understanding when we react on the obtained information in any way (see palenčárová 2014). an essential skill of each customer care assistant is the ability to clearly and comprehensibly present suggestions, ideas, opinions and standpoints, so to present them in an effective way (see thiele 2010). it requires from a customer care assistant the ability and willingness to communicate. it is also important for a customer care assistant to be able to carefully listen to what and how a client says (see miklovič 2013). the presentation skills also closely relate to the ability to persuade others (see korda 2011). each customer care assistant should be able “to sell themselves”. this 322 m. korenková. statistical evaluation of communication skills of customer care employees in banks ability closely relates to empathy, credibility, self-confidence and generally to emotional intelligence. the aim of self-presentation is to make a good impression and also present oneself and their skills practicably, but also appealingly and with confidence and so arouse interest in their personality among other people (see lojda 2011). each customer care assistant can increase their rate of persuasiveness and acceptance – even in case than their talent is only at average level (see manažér, volume 68, no. 1, 2013). 3. methods in the article we present the partial results of the research focused on the determination of the level of communication skills of customer care assistants. in this article we will deal with the answers to the following problems in communication: − the level of the ability of customer care assistants to analyse the customers’ needs. − the attitude of bank customer care assistants to clients. − whether customer care assistants are capable of active listening. − whether customer care assistants are capable of assertive communication. − whether customer care assistants are capable of clear communication. − method of customer care assistants’ communication when dealing with complaints. the customer care assistants of 7 biggest banks operating in slovakia participated in our research. the selection of banks was realized based on the amount of assets (year 2012) as stated in the following figure. fig. 1. distribution of banks in slovakia according to the amount of assets (source: own processing based on the data from the article published in trend magazine 14 march 2013 (trend 2013)) 285 respondents evaluated the communication skills of the customer care assistants in the banks. the respondents’ data were collected by the means of an electronic questionnaire. the collected data were analysed by the means of individual statistical methods. they helped to identify the weaknesses of customer care assistants and the differences among individual banks. the points were allocated according to the rule of the best and the worst chosen option for the given issue. 323 business, management and education, 2014, 12(2): 318–332 we applied a following statement while evaluating all tests: the probability value “p” reports the size of error in case of the rejection of null hypothesis. we can normally reject the null hypothesis only in case of the probability value “p” smaller than 0.05 (see markechová et al. 2011). 4. results 4.1. analysis of the client’s needs it was already above mentioned that our aim was to determine the extent to which customer care clients are able to analyse the client’s needs. a customer care assistant should be able to actively listen and assertively communicate when analysing the client’s needs. it means that is necessary for them to remember or make notes about important client’s requirements. the client should have a feeling of an adequate opportunity to express. it is appropriate to summarize and revise all requirements to the client in order to verify their correctness. based on the client’s requirements it is possible to present a concrete product or the alternative of more products that fulfill the criteria defined by the client. a professional customer care assistant dedicates enough time to the presentation of a product and its parameters. they should watch non-verbal communication of the client while presenting the product. it is also appropriate to survey whether they like the product or not by asking open questions. we tested the null hypothesis by the means of the kruskall-wallis test while detecting the answer for the question about the extent of the ability of customer care assistants to analyse the client’s needs. “the achieved level of communication skills during the analysis of the client’s needs is identical or the differences among the banks are not statistically significant”. we confirm the null hypothesis based on the probability value p = 0.9146 (p > 0.05). it means that the differences within the measured values among individual banks are not statistically significant. the best rating in the area (the analysis of client’s needs) based on the average rating (maximum value was 5 points) was achieved by the employees of poštová banka. see the following table 1. table 1. order of banks according to the average rating in the area of the analysis of client´s needs (source: created by the author) order bank average rating 1 poštová banka 4.125 2 tatra banka 3.725 3 slovenská sporiteľňa 3.659 4 unicredit bank 3.636 5 vub 3.530 6 čsob 3.150 7 prima banka 2.285 324 m. korenková. statistical evaluation of communication skills of customer care employees in banks we found out that women (customer care assistants) have achieved in average slightly better rating than men (customer care assistants) as indicated in the following table 2. table 2. the average rating of a customer care assistant considering the sex of respondents (source: created by the author) customer care assistant male female client male 17.125 17.608 female 17.117 19.085 average 17.122 18.5287 we were also interested in fact whether the sex of respondents has the impact on the rating of the communication skills of a customer care assistant. we were detecting that by the means of wilcoxon signed-rank test while applying the null hypothesis: “the sex of a respondent does not have a significant impact on the evaluation of the communication skills of a customer care assistant”. it means that the sex of a respondent is statistically significant within the evaluation of communication skills of customer care assistants. 4.2. course of interview the ideal situation is when a customer care assistant expresses themselves agreeably, patiently and kindly. it is also expected that the interview will progress without any interruptions on the part of the customer care assistant. it also follows from the research that all banks emphasize professional and kind behaviour of their employees. however, there are some differences. see the following table 3. table 3. the course of interview with a customer care assistant (source: created by the author) bank the course of interview with a customer care assistant i could not express myself he was interrupting me smooth conversation unicredit bank 9.09% 9.09% 81.82% tatra banka 5.88% 13.73% 80.39% čsob 5.00% 17.50% 77.50% slovenská sporiteľňa 3.19% 20.21% 76.60% prima banka 14.29% 14.29% 71.43% vub 9.09% 19.70% 71.21% poštová banka 0.00% 43.75% 56.25% the best rating in this area was achieved by the customer care assistants of unicredit bank. 81.82% of the respondents said that the interview with a customer care assistant had a smooth course with no interruptions. therefore the client could express himself. the worst rating was achieved by the customer care assistants of poštová banka. the clients of this bank said that only in 56.25% of the cases the interview with a customer 325 business, management and education, 2014, 12(2): 318–332 care assistant was smooth with no interruptions by the customer care assistant. 43.75% of the respondents said that the customer care assistant of the above mentioned bank interrupted them at some point. it can be considered a negative. however, the fact that 14.29% of the respondents of prima banka were not satisfied with the interview with a customer care assistant because they could not express themselves can be considered a big negative. the behaviour of the customer care assistant was also subject to our research. the area of the customer care assistant’s attitude to clients is positively evaluated. the customer care assistants try to communicate with clients in a helpful and willing way in most of the cases in all banks. the best situation within this research area is in unicredit bank as presented in the following table 4. table 4. behaviour of a customer care assistant (source: created by the author) bank arrogant and rude reluctant irritated helpful and willing unicredit bank 0.00% 0.00% 0.00% 100.00% tatra banka 1.96% 5.88% 3.92% 88.24% slovenská sporiteľňa 7.45% 3.19% 2.13% 87.23% prima banka 0.00% 14.29% 0.00% 85.71% čsob 2.50% 10.00% 2.50% 85.00% vub 1.52% 15.15% 0.00% 83.33% poštová banka 0.00% 18.75% 0.00% 81.25% 4.3. active listening the subject of our research was to find out whether the customer care assistants participating in our research are able and willing to actively listen to clients. the results are presented in the following table 5. table 5. active listening (source: created by the author) bank customer care assistant “actively listened to me” no yes čsob 15.00% 85.00% poštová banka 18.75% 81.25% prima banka 28.57% 71.43% slovenská sporiteľňa 8.51% 91.49% tatra banka 15.69% 84.31% unicredit bank 9.09% 90.91% vub 15.15% 84.85% this area may be considered positive in the majority of the banks. the best evaluation in this research area was achieved by the customer care assistants of slovenská sporitelňa. 91.49% of their customer care assistants achieved a very positive rating. it means that the customer care assistant paid attention and actively perceived their 326 m. korenková. statistical evaluation of communication skills of customer care employees in banks requests during the whole course of the interview. on the other hand, 28.75% of prima banka’s clients said that the customer care assistant did not pay them enough attention. we were trying to find out whether there is any dependence between the behaviour of a customer care assistant and the ability to actively listen to a client. we analysed the validity of the null hypothesis: “the clients’answers between the behaviour of a customer care assistant and the ability to actively listen to a client are not statistically dependant.” see the following table 6. table 6. χ2 test of independence (source: created by the author) pearson chi-square: 115.258, df = 3, p = 0.0000 helpful and willing reluctant and with no interest arrogant and rude irritated row totals i agree 213.2000 20.80000 8.66667 4.333333 247.0000 i do not agree 32.8000 3.20000 1.33333 0.666667 38.0000 all grps 246.0000 24.00000 10.00000 5.000000 285.0000 considering the probability p = 0.00 we can say that there is a statistically significant dependence on the evaluation of the behaviour of a customer care assistant and active listening on the part of the customer care assistant. the number of the respondents who said that they were given enough attention was significantly represented. the behaviour of a customer care assistant was evaluated as helpful and willing, too. 4.4. assertive approach to a client each customer care assistant should use the assertive method of communication while talking to a client. the subject of our research was also the fact whether the customer care assistants participated in our research and use the assertive approach to a client, or not. the results are presented in the following table. they are based on the average rating made by the respondents. maximum value the banks should have achieved was 3 points. the best rating in this area was achieved by unicredit bank, too. the results are presented in the following table 7. table 7. order of banks according to the average rating in the area of assertive approach to clients (source: created by the author) bank average rating unicredit bank 2.4545 poštová banka 2.3125 tatra banka 2.1765 slovenská sporiteľňa 2.1170 čsob 2.1 vub 1.9848 prima banka 1.7143 327 business, management and education, 2014, 12(2): 318–332 we were also trying to find out whether a customer care assistant got feedback from a client regarding a proposed solution. the results are presented in the following table 8. table 8. communication method (assertive behaviour and the request of feedback) (source: created by the author) bank assertive approach aggressive approach feedback poštová banka 87.50% 18.75% 62.50% tatra banka 86.27% 25.49% 56.86% unicredit bank 81.82% 9.09% 72.73% čsob 77.50% 25.00% 57.50% slovenská sporiteľňa 74.47% 15.96% 53.19% vub 65.15% 18.18% 51.52% prima banka 57.14% 14.29% 28.57% the subject of our research was also the fact whether there is any dependence between the use of assertive approach to a client and receiving the feedback from the client about the proposed solution. the test helped us to prove a significant rate of the dependence between the use of assertive formulations and receiving feedback. 4.5. clarity of language and feedback it is important for every bank that the presentation (language) of their customer care assistants be clear and comprehensible. it is also important for a customer care assistant to be able to get feedback in order to understand the information on the part of the client (in order to be able to get the information about the clarity of their language). the results show that customer care assistants try to present information to clients in a comprehensible way. this fact is positively evaluated. a total of 90.53% (258) of the respondents said that the customer care assistant talked to them in a comprehensible way (9.47% – 27 respondents – in incomprehensible way). the best results were achieved by the customer care assistants of slovenská sporitelňa and tatra banka and the worst results were achieved by the employees of unicredit bank as presented in the following table 9. table 9. clarity of language of customer care assistants (source: created by the author) bank comprehensibility of speech incomprehensible comprehensible slovenská sporiteľňa 4.26% 95.74% tatra banka 9.80% 90.20% vub 12.12% 87.88% čsob 12.50% 87.50% poštová banka 12.50% 87.50% prima banka 14.29% 85.71% unicredit bank 18.18% 81.82% 328 m. korenková. statistical evaluation of communication skills of customer care employees in banks we were trying to find out whether there is the dependence between the clarity of a customer care assistant language and the request of the client’s feedback. see the following table 10. table 10. χ2 test of independence (source: created by the author) pearson chi-square: 12.7720, df = 1, p = .000352 speech yes no row totals intelligible 132.1684 125.8316 258.0000 unintelligible 13.8316 13.1684 27.0000 all grps 146.0000 139.0000 285.0000 it follows from the achieved results that the clarity of the language of a customer care assistant is highly influenced by the fact whether the customer care assistant was continuously detecting the feedback during the interview (so whether their language is comprehensible and whether their explanation was sufficient for the client). 4.6. behaviour of a customer care assistant in case of a complaint the last area of our research was to find out the way the customer care assistants of banks behave in the case of the complaint on the part of the client. we were trying to find out whether the customer care assistant admitted a mistake, apologized, corrected it, whether he was willing or he behaved arrogantly and whether the complaint was resolved so that the client was satisfied. the results are presented in the following table 11. the maximum value the banks could have achieved in the research was 10 points. table 11. order of banks according to the average rating in the area of complaints resolving (source: created by the author) bank average rating poštová banka 6.562 slovenská sporiteľňa 6.382 unicredit bank 6.181 prima banka 6 tatra banka 5.803 vub 5.803 čsob 5.575 the best rated customer care assistants based on the average rating in the area of resolving complaints were the employees of poštová banka. 5. conclusions every company should place emphasis not only on the convenience of its products but also on the presentation of the company by its employees. the effectiveness of the sale 329 business, management and education, 2014, 12(2): 318–332 of financial products in banks is largely influenced by the level of communication skills of customer care assistants. the quality and level of communication skills depends on the selection of employees for the position of a customer care assistant, but also on the investment of a concrete bank into education process and supporting training activities. based on the collected data we can state that the communication skills of customer care assistants in all examined banks are at a sufficient level. it can be also said that there are no statistically significant differences in the rating of communication skills of customer care assistants in any banks from the selected sample of the respondents. it is caused by the quality education in all banks, not only in the area of hard skills, such as product trainings, but also in the area of soft skills that include communication or communication skills, too. this quality educational process significantly prepares a customer care assistant for the everyday work with clients. the research claimed that the banks pay a lot of attention to this issue and they continuously try to educate their employees in this area. the order of the banks was determined on the basis of the average rating, because the differences in the individual areas of the research were not statistically significant. a statistical impact on the rating of the level of the communication skills of customer care assistants in relation to the sex of the respondents was validated. the women had much better rating than men. the hypothesis about a customer care assistant paying attention and actively perceiving the client’s requests and being consequently rated as helpful and willing was statistically validated too. the hypothesis about a customer care assistant communicating assertively and using assertive words and especially getting feedback by asking questions at the same time was also validated. it was also validated that the clarity of the language of a customer care assistant significantly influences the subsequent inquiry of the feedback while verifying the understanding of clients. finally we can state that customer care assistants of all examined banks have significantly acquired communication skills that are continuously being improved by supporting training activities. based on the collected data we can claim that the customer care assistants of poštová banka have the best level of communication skills. the customer care assistants of poštová banka took up the best position in the area of the analysis of client’s needs, competence and clarity of the customer care assistant’s language and also in the area of the communication of a customer care assistant while resolving a complaint. they had the lowest average rating in the area of the course of interview. there are no big differences among the other banks. there are no differences in the supply of educational activities for customer care assistants in individual banks, either. the ability of client’s needs analysis, conducting discussion without disturbing interruptions, the ability of active listening, assertive attitude and helpful behaviour can be considered the strong sides of bank clerks. the week side of the majority of bank clerks is inability to discuss complaints and inadequate behaviour in case of complaints. 330 m. korenková. statistical evaluation of communication skills of customer care employees in banks recommendations for the improvement of the communication skills of the bank clerks: − continue the training processes that proved to be effective. to pay more attention to the area of complaints solving, where the bank clerks have deficits (positive attitude significantly influences number of complaints with the solution of which clients were satisfied). − realization of the 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http://www.ibispartner.sk/sk/komunikacia-a-motivacia/359-najslabsou-castou-komunikacie-je-pocuvanie http://firmy.etrend.sk/rebricky-firiem0/najvacsie-banky.html 332 m. korenková. statistical evaluation of communication skills of customer care employees in banks urbaníková, m.; maroš, m. 2014. finančná matematika. ukf nitra. 133 p. isbn 978-80-558-0580-1. vetráková, m.; klincková, j. 2013. efektívna komunikácia – predpoklady úspešnosti manažéra. umb: banská bystrica. 250 p. isbn 978-80-557-0602-3. wernerová, i. 2010. komunikace pro každého. computer media, s. r. o. 240 p. isbn 978-80-7402-064-3. zákaznícky servis je cesta, nie cieľ (15 spôsobov ako začať) [online] 2014 [cited 16 september 2014]. available from internet: http://www.ibispartner.sk/sk/zakaznicky-fokus-a-predaj/420-zakaznickyservis-je-cesta-nie-ciel-15-sposobov-ako-zacat marcela korenková. ing., phd, assistant professor at institute of management and information technology where i teach courses in management, marketing and economics. research areas: personal management (communication, education, motivation, leadership and so on). http://www.ibispartner.sk/sk/zakaznicky-fokus-a-predaj/420-zakaznicky-servis-je-cesta-nie-ciel-15-sposobov-ako-zacat http://www.ibispartner.sk/sk/zakaznicky-fokus-a-predaj/420-zakaznicky-servis-je-cesta-nie-ciel-15-sposobov-ako-zacat contribution of eu structural funds assistance to the development of economic environment through collaboration of business and science in latvia marta meženiece1, baiba rivža2 latvia university of agriculture, svētes iela 18, lv-3001 jelgava, latvia e-mails: 1marta.mezeniece@izm.gov.lv (corresponding author); 2baiba.rivza@llu.lv received 18 november 2010; accepted 15 january 2011 abstract. the article analyses the good practice of finland, which reconstructed the path changing towards building innovation-based economy, and denmark, where the several programmes for network building and enhancement of collaboration between entrepreneurs as well as entrepreneurs and research institutes were introduced successfully, in order to make recomendations for development of economic environment in latvia. the authors consider, that in the case of latvia, at first, the government must take action in order to establish the macro-level environment that enables conditions for innovative self-renewing systems as well as introduce schemes that would facilitate knowledge spillover and commercialization, promote business activities of academic staff and researchers, as well as formation of networks and clusters. keywords: regional development, competitive economic environment, innovation, clusters, networking. reference to this paper should be made as follows: meženiece, m.; rivža, b. 2011. contribution of eu structural funds assistance to the development of economic environment through collaboration of business and science in latvia, business, management and education 9(1): 127–139. doi:10.3846/bme.2011.09 jel classification: r11, o29, o31, o33, o38, h52, h59 1. introduction according to the global competitiveness report (2010–2011) latvia is considered to be a country in transition between efficiency-driven and innovation-driven economy. this means that soon, the development of the country would be impossible by improving productivity, adopting existing technologies or making incremental improvements in other areas. the role of country’s competitiveness will be in its ability to innovate. entrepreneurs in these countries must design and develop cutting-edge products and processes to maintain a competitive edge. this requires an environment that is conducive to innovative activity, supported by both public and private sectors. in particular, this means sufficient investment in research and development (r&d) especially by the private sector, the presence of high-quality research institutions, extensive collaboration b u s i n e s s, ma n ag em e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(1): 127–139 doi:10.3846/bme.2011.09 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 128 m. meženiece, b. rivža. contribution of eu structural funds assistance to the development of economic environment through collaboration of business and science in latvia in research between universities and industry, and the protection of intellectual property. in the period of crisis, it will be important to resist pressures to cut back on the r&d spending – both at the private and public levels – that will be so critical for sustainable growth going into the future (global competitiveness report 2009–2010 2009). several authors in latvia have been writing about innovative activities (boļšakovs 2008), innovation process and system (dimza 2003), knowledge society (karnītis 2004), the role of higher education institutions in economic development (sloka, vilciņa 2009; vīksne 2010; mazūre et al. 2009). many studies on the research policy are carried out in the world about science, technology, innovation and growth systems, and the choice between neutral and non-neutral policy instruments (aghion et al. 2009), science policy issues (beeseley 2003), learning organisation and national systems of competence building and innovation (lam, lundvall 2007), knowledge spillovers, entrepreneurship and regional development (audretsch, aldridge 2009), but there is lack of studies regarding the effect of eu structural policy instruments on economic environment of latvia as an eu region. according to the global competitiveness report (2010–2011), latvia is ranked the 70th out of 139, while estonia – 33rd, lithuania – 47th, and finland – 7th. the global competitiveness report has evaluated 12 pillars. latvia performs the worst at market size (rank 95), financial market development (rank 86), macroeconomic environment (rank 84), business sophistication pillar (rank 80), and innovation pillar (rank 77). according to the european innovation scoreboard (2009) latvia is ranked the third last, only bulgaria, turkey and romania show worse performance in the innovation index than latvia. latvia is considered to be a “catcingh-up country” with growth above the average in the european union (eu-27), finance and support below the average, and human resources performance above the average. taking into account the poor performance of latvia in the international indexes mentioned above, as the research problem of the article is the lack of economic environment for knowledge spillover and commercialization, business promotion activities of academic staff and researchers, as well as formation of networks and clusters. therefore the authors consider it important to analyse the successful practices of finland and denmark, specifically finland’s path toward an innovation-based economy and denmark’s networks of collaboration among entrepreneurs and research institutes. the aim of the research is to make recomendations for use of finnish and danish experience in development of the economic environment through collective efficiency approach in latvia. to reach the aim, the authors set the following tasks: 1. to analyse theoretical aspects of regional development and innovation theories. 2. to analyse finnish and danish experience of development of the economic environment through collective efficiency approach. 3. to make recomendations for development of economic environment using eu structural funds in latvia. 129 business, management and education, 2011, 9(1): 127–139 the following economic research methods were used for tackling the tasks: grouping, graphic illustration and the monographic descriptive method. analysis and synthesis were used in the paper to study the problem elements and synthesize coherencies. the authors studied legal framework in latvia and scientific publications in regional development, innovation economics, innovation policy, research policy, and innovation systems. the analysis of research institutes in latvia is based on statistical data obtained from the central statistical bureau of latvia, eurostat and the information included in reports on higher education in latvia (figures, data, tendencies) acquired from the ministry of education and science during the period 2003–2009 and unpublished data from the joint information system of eu funds. comparative, analytical and historical methods have been mainly used in the article, taking into consideration the large amount of scientific literature. 2. teoretical aspects of regional economic environment development the currently performed practically oriented research (tsipouri 2005; staber 2005; musyck, reid 2007; srholec 2007; fagerberg et al. 2010; hall, rosenberg 2010; prodan, drnovsek 2010) supports use of systemic approaches toward innovation policy. for example, governments or regional entities use economic tools, such as creation of self-sustaining innovative regionally located industrial clusters, building collaborative innovation networks in the region. these activities can mitigate dependency, even with unfavourable preconditions, even if the past development and the present economic structure of a given region have created unfavourable preconditions‚ and a reorientation may be successful. theoretical developments are not limited to the regional innovation system – innovation policies have also drawn on other theoretical models notably industrial clustering and learning regions. the first concept derives from scholarly work undertaken to explain the rise of industrial districts, high-tech regions or regional production clusters and other success stories, in a sense bringing together “economic geography with the evolutionary school of technological change” (hassink, shin 2005). the concept of a learning region introduced by k. morgan (1997) emphasizes the idea that actors in regional development are strongly connected to each other as well as open to learning processes between regions and from within the region. thus policy-makers in learning regions may escape path-dependency and learn from past mistakes at an institutional level (musyck, reid 2007). the innovation-oriented regional development strategy of small regions has to focus on specific roles it can play in larger innovation networks beyond its boundaries. a particular problem of less developed regions is the very small number of firms which have the capability to make effective use of the innovation support offered. furthermore, such regions usually also lack research organizations, a suportive service industry and 130 m. meženiece, b. rivža. contribution of eu structural funds assistance to the development of economic environment through collaboration of business and science in latvia qualified labour. the low density prevents the emergence of comprehensive innovation networks within the boundaries of the region, and it is therefore very important to support the establishment of links of regional firms to innovation partners outside the region. this should be an explicit objective of innovation support in less developed regions (kaufman, wagner 2005). regional change is ultimately the result of enterpreneural activity, in which innovations (new or improved products and processes, new management styles, locations) are the key factors. entrepreneurship calls for risk-taking initiatives in a competitive economic environment. it encourages innovative activity and puts a region at the forefront of economic progress. thus, entrepreneurial culture is a prerequisite for the wealth of regions. a region that hosts entrepreneurial capital and knows how to use it may be expected to be a winner in a competitive economic game (fischer, nijkamp 2009). k. g. persson (2010) in his book “an economic history of europe: knowledge, institutions and growth, 600 to the present”, corroborated two important expectations: 1. relatively poor european nations had above-average growth rates once they entered the phase of modern economic growth, and there was convergence of income levels in the long run. 2. late starters tended to grow faster the bigger the income and technology gap separating them from the leading economies. that is true for late starters like ireland and former socialist economies like the czech republic, russia and the baltic states which, unusually, missed most of the gains from technological catch-up in the golden age. to some extent, it was the cold war policies that denied the socialist bloc access to superior technology, as well as an effect of misdirected investment policies. the lesson for late starters suggested by k. g. persson (2010) is easy to state but difficult to learn: “there is almost free access to better useful knowledge, but make sure you create the institutional set up to absorb that knowledge.” the research performed by i. dzemyda and b. melnikas 2009 concludes, that there are different tendencies of r&d impacts for social and economic development issues in various european union cohesion regions. in the european union regions where cohesion is stimulated expenditure of business sector for the r&d activity statistically creates preconditions to increase the gdp per capita, labour productivity per hour worked, but the expenditure of public sector has a weak negative statistical relation with the gdp. the expenditure of the higher education institutions for the r&d activity statistically creates preconditions to increase the number of students, but we can not notice any statistical link on the economy indexes. it is notable that number of patents applied to the epo and the patents granted by the uspto has statistically creates preconditions to rise labour productivity per hour worked and the gdp per capita. (dzemyda, melnikas 2009) 131 business, management and education, 2011, 9(1): 127–139 the survey performed by adekola and colleagues (adekola et.al. 2008) indicated that competitive business environment serves as the main driving force for development of innovative activities. the necessity of suitable institutional infrastructure that allows adoption, diffusion and profitable use of innovative technologies enhances (grundey et.al. 2008).taking into consideration the statements elaborated by researchers of the theoretical approach of the regional development theories; the authors are convinced of the necessity to analyse finnish and danish experience of development of the economic activity of entrepreneurs in the economic environment through collective efficiency approach. 3. enhacement of collective efficiency in finland latvia as a region of europe has begun to work towards development of economic environment especially due to the recent crisis which underlined the necessity to change the path of development building innovation based economy. the authors consider important to analyse the example of success-story of finland that led to sophisticated competitiveness indicators and was gained by establishment of innovative environment due to success of regions. in addition to self-renewal, creative tension can be considered a key factor in innovation-based regional development. the ability of self-renewal cannot be generated or maintained by external control but is rather born spontaneously of the creative tension generated by interaction and leadership. tension refers to a state that is characterised by excitement and fascination along with anticipation of the future bringing along something new and different, and/or a state of anticipation characterised by insecurity as to the consequences of future events and action. tension is born of opposite or sufficiently diverse forces existing simultaneously and calling into question the prevalent modes of thinking and/or operation and the status quo between two or more phenomena. in the development of regions, the said phenomena may include, for example, relations between organisations or the difference between present and future development with regard to a tangible matter. creativeness entails producing unprecedented and original products, processes, ideas and modes of operation utilising information in a manner that creates new and diverse ways of observing and interpreting familiar issues and phenomena. creative tension is not generated in the programme-oriented development of regions because the means do not challenge vision and visions do not challenge means. instead of creative tension, a black hole of strategic work is born between the present and the future. visions, strategies and means have to a too great extent been considered issues involving planning techniques, leaving their inherent tension underutilised (ståhle, sotarauta 2003). 132 m. meženiece, b. rivža. contribution of eu structural funds assistance to the development of economic environment through collaboration of business and science in latvia the fig. 1 shows that only joining all forces that are available to a region the common goals can be met. fig. 1. assessing the competitiveness of a region (source: parliament of finland, committee for the future, assessing the competitiveness of a region, ståhle, sotarauta 2003) the sheme shown in the fig. 1 is used in the regions of finland. as a good example where it can be observed is aalto living lab is the t3 area – one of the real-life collaborative platforms in finland. this is based on the cooperation between the city of espoo, aalto university, and the companies and other stakeholders operating in the area. t3 development is based on the vision of the helsinki metropolitan area: “the capital region is a progressive world-class business and innovation centre bolstered by science, art, creativity, learning ability and high-quality services. the success of the area promotes the wellbeing of its inhabitants as well as that of all finland. the metropolitan area is developed as a united, functional region with its surroundings closely integrated into nature, providing a comfortable place for living, learning, working and entrepreneurship” (markkula 2010). t3 consists of three colabrative, but interdependently co-operative parts: 1. science and technology. 2. art and design. 3. business and economy. m. markkula (2010) expresses the characteristics of t3 model as an equation: i  wb = t3 + e3, where: i – innovation; wb – well-being; t3 – tiede, taide, talous; science, art, economy; e3 – eettisyys, esteettisyys, elämyksellisyys; ethics, aesthetics, experience. region competivenes factors present conditions challenges goals competitiveness 1. human capital 2. innovativeness 3. concentration 4. infrastructures attractiveness 5. enterprises 6. institutions 7. living conditions and environment self-renewal ability 8. developer networks 9. creative tensions 133 business, management and education, 2011, 9(1): 127–139 the committee for the future considers that the creation of conditions for self-renewal should be established as the central objective of regional innovation policy. focal issues in terms of self-renewal are motivating regional players, creating a shared vision, networks based on trust and mutual dependence, free and open information flows, and mastering the timing of actions (ståhle, sotarauta 2003). the finnish researchers p. ståhle and m. sotarauta (2003) have described four basic requirements for an innovative environment, i.e. self-renewing development: − players: identity, sense of belonging and charisma; − networks: links, trust and mutual dependencies; − knowledge management: information flows and communication; − mastering timing: situation awareness and the courage to act. the identity of the players in a self-renewing system, the strength of their sense of belonging and their willingness to invest time, energy and resources are of the essence. networks are the most significant mode of operation of self-renewing systems. functioning networks are created by close links between the players, trust and multilateral, positive dependencies. an innovative system must always be built on a platform of free, open flows of information and ample communications. without these factors, the system cannot be dynamic. in respect of innovations, the deciding factor between success and failure is often proper timing. windows of opportunity do not remain open forever; they must be recognised and appropriate action taken. ample, multilateral interaction is basic conditions of these principles, which are in playing at all times at the micro level in relationships between people, determining the dynamics, quality and opportunities for innovation of an environment. on the other hand, circumstances can also be created top-down, starting at the macro level with decision-makers bringing into being an environment that enables these conditions to be met. the creation of conditions for self-renewal occupies centre stage in innovative regional policy. at the core of development are learning networks of developers, innovative environments and leadership that generate creative tension and thus provides encouragement (ståhle, sotarauta 2003). 4. use of danish experience in latvia the authors find it nesesarry to look at danish experience also because denmark had similar characteristics and problems of economic environment as latvia – inter-firm cooperation of this nature is not a part of the country industrial culture (humphrey, schmitz 1995), in denmark, the capitalism model is based on the german holding model as in latvia, but the american shareholders’ model, which is centered on the stock exchange not on the bank, is in finland (boronenko 2009). there is a lack of well-developed cooperation among entrepreneurs in latvia (boronenko 2009). the swot analysis of the research institutes in the field of agriculture performed by meženiece and her colleagues (2010) showed that the main 134 m. meženiece, b. rivža. contribution of eu structural funds assistance to the development of economic environment through collaboration of business and science in latvia weaknesses are lack of cooperation with entrepreneurs, lack of experience in the project implementation, and aging of scientific personnel in the research institutes operating in the field of agriculture as well as threats – decrease in the r&d investments, low prestige of scientific activities, and unfavourable tax policy to entrepreneurs investing in r&d should be diminished using internal strength – highly qualified researchers and scientific stuff – combined with opportunity to switch orientation to applied research as well as science-intensive production and availability of eu structural funds assistance (total amount 268,55 million euro during programming period 2007–2013) (meženiece et al. 2010). the danish networking programme was triggered by the recognition that smes, i.e. the backbone of the danish economy, are ill-equipped to deal with global competition. networking was thought to be the answer and was defined as cooperation between firms aimed at raising competitiveness, in particular at creating new business opportunities, such as developing and marketing new products that deploy significant strengths within individual firms; establishing agents and distributors in new markets; pooling of individual products into complete product ranges. the network programme aimed to stimulate danish companies in large numbers to overcome their resistance to cooperation. this was why a process approach was particularly important. there are a number of hurdles in this process which need to be overcome. in order to create an interest in networking, examples need to be found of initiatives which have some relevance for and strike a cord with the local enterprises. the next critical gate is that of identifying a viable network idea. the third hurdle is that of convincing a group of firms to pursue the idea and take ownership of its progress. convincing firms that they need a feasibility study before they push ahead is also critical. these are the main challenges for the network broker. best practices are methodologies, tools and promotion material which help brokers to overcome the above mentioned barriers (humphrey, schmitz 1995). the other collective efficiency stimulating programme with yearly financing of 13 million euro is centrecontract-scheme objective of which is to intensify the corporation between universities, private companies and the authorised technological service institutes. however, the centrecontract-scheme is unique in the sense that it brings together all three parts of the innovation system, not just two of them as in the other schemes (christensen 2000). the technology incubators programme that was crried out in dermak (year 1998– 2003) offers state-financed seed-capital to entrepreneurs in combination with counselling and training, premises and administrative services. the objective was to bridge research environments, innovative entrepreneurs and finance companies in order to develop and transfer research and innovative ideas to commercially sustainable innovative projects and enterprises. technology incubators as opposed to traditional science parks or business innovation centres is that they provide both knowledge and capital for innovative entrepreneurs. thus, the overall purpose of the technology incubators is to support new, small innovative companies in denmark by securing a closer interaction 135 business, management and education, 2011, 9(1): 127–139 between innovative entrepreneurs, research and capital about the development of new products and services (christensen 2000). the danish ministry of trade and industry initiated the business-related sector programme business development in central and eastern europe in 1994. the sector programme comprises three sub-programmes. the business-to-business (b2b) programme has been the main sub-programme of the business-related sector programme. the b2b programme has been operational in the period from 1994 to 1998. the overall objective of the b2b programme is to support the development of a strong private sector in estonia, latvia, lithuania, poland and the st.petersburg region (program countries) with a focus on strengthening the sme-sector. the scheme is interesting for several reasons. first, it shows that it is possible to stimulate cross-border co-operation and networking (ccn) with positive outcomes. secondly, it shows that partners in ccn do not necessarily have to be equal in terms of development stage or competencies, unlike in r&d-co-operation where equal or high competencies are essential. this scheme shows that benefits could be complementary: the parties may have different benefits from the co-operation and networking. thirdly, although one should generally not push firms to co-operation and networking with partners they have not chosen themselves, or would have collaborated if there had been no subsidy. the scheme does show that it is possible to gain from ccn subsidy. in particular, as was the case in the two schemes described earlier in this paper, stimulating ccn with different types of partners may be efficient for long-term competence-building, but many also involve direct, positive effects (christensen 2000). new public credit registry in latvia started sharing data on loans, improving access to credit information. registering property is easier due to simplified procedures, including allowing payment of registration fees and stamp duties at the land registry in year 2009 (doing business 2010). latvia reduced the time to export and import by introducing electronic submission of customs declarations. latvia introduced a mechanism forout-of-court settlement of insolvencies to alleviate pressure on courts and tightened some procedural deadlines in year 2010 (doing business 2011). latvian economic clustering experience has begun in 2000 since the state support programme “support of industrial clusters restructuring”, as a result, formation of several clusters has been declared. although, this project did not lead to the formation of really functioning clusters, it made a great contribution to the latvian economic clustering process by spreading the idea about the necessity of cluster formation. since 2007 latvian state cluster policy is determined by state support proramme “custer programme”, which is aimed at elaboration of cluster strategy and raising financial support for the development of cluster competitiveness in the form of open competition until year 2013 (boronenko 2009). the authors suggest using eu structural funds assistance for programming period 2014–2020 to elaborate the assistance programme which would strengthen business and 136 m. meženiece, b. rivža. contribution of eu structural funds assistance to the development of economic environment through collaboration of business and science in latvia science collaboration using mentoring approach where academic staff and researchers (especially phd students and young researchers) could learn from the entrepreneurs how to start up and do business. such programme would enhace business and science cooperation as well as set the base for network building in a different and eventually more effective way because of the changed roles, where scientists are learning from entrepreneurs. 5. conclusions according to the study that is carried out, the authors conclude that regional change is ultimately the result of entrepreneurial activity in which innovations (new or improved products and process, new management style, locations) are key factors. entrepreneurship calls for risk-taking initiatives in a competitive economic environment. it encourages innovative activity and puts a region at the forefront of economic progress. thus, entrepreneurial culture is a prerequisite for the wealth of regions. a region that hosts entrepreneurial capital and knows how to use it may be expected to be a winner in a competitive economic game (fischer, nijkamp 2009). the lesson for late starters of building knowledge economy sudgested by k. g. persson (2010) is easy to state but difficult to learn: “there is almost free access to better useful knowledge, but make sure you create the institutional set up to absorb that knowledge.” in concert with regional development theories the authors are convinced of the necessity to analyse finnish and danish experience of development of the economic activity of entrepreneurs in the economic environment through collective efficiency approach. the danish expirence is more convenient for latvia than the finnish one, because in denmark, the capitalism model is based on the german holding model as in latvia, but in finland there isthe american shareholders’ model, which is centered on the stock exchange not on the bank (boronenko 2009) and inter-firm cooperation of this nature is not a part of industrial culture in denmark neither in latvia. the authors suggest using eu structural funds assistance for programming period 2014–2020 to elaborate the assistance programme, which would strengthen business and science collaboration using mentoring approach where academic staff and researchers (especially phd students and young researchers) could learn from the entrepreneurs how to start up and do business. such programme would enhace business and science cooperation as well as set the base for network building in a different and eventually more effective way because of the changed roles. the further research is needed for deeper evaluation of national innovation system and basic indicators of measuring eu structural funds assistance impact on innovativeness development in latvia, taking into account the previous research as well as good practise of denmark to create the most efficient allocation of 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(eds.). rethinking regional innovation and change path dependency or regional breakthrough. boston: springer science + business media. inc. ebook, 171–194. isbn: 0-387-23002-5. vīksne, d. 2010. assessment and development perspectives of regional higher education institutions of latvia: summary of the doctoral dissertation. latvia university of agriculture [online], [accessed 2 november 2010]. available from internet: <http://llufb.llu.lv/dissertationsummary/education/dace_viksne_promocijas_darba _kopsavilkums_2010_ llu_ef.pdf>. es struktūrinių fondų parama ekonominės aplinkos kūrimui per verslo ir mokslo bendradarbiavimą latvijoje m. meženiece, b. rivža santrauka straipsnyje analizuojama kitų šalių geroji praktika, siekiant suformuoti su latvijos ekonominės aplinkos plėtra susijusius siūlymus. analizei pasirinkta suomijos geroji praktika, pagrįsta inovacijomis ekonomika ir danijos programos, susijusios su tinklo kūrimu ir bendradarbiavimo stiprinimu tarp verslininkų ir mokslinio tyrimo institutų. autoriai mano, kad latvijos atveju vyriausybė turi imtis atitinkamų veiksmų, siekdama sukurti makrolygmens aplinką, kuri leistų taikyti įvairias sistemas, palengvinančias žinių sklaidą ir komercializaciją, skatintų mokslininkų ir tyrėjų aktyvumą verslo veikloje, taip pat formuotų tinklų ir klasterių plėtrą. reikšminiai žodžiai: žodžiai: regioninė plėtra, konkurencinė ekonominė aplinka, inovacijos, klasteriai, tinklas. marta meženiece is a master of social sciences in european studies and phd student at the latvia university of agriculture. she is the deputy head of financing and project division, structural funds department at the ministry of education and science. research interests: innovation economics, research policy, regional development, evaluation of european structural funds impact. baiba rivža is a habil doctor of economics and professor at the latvia university of agriculture. chair of the division of agriculture and forestry sciences and full member at the latvian academy of sciences. president of the latvia academy of agricultural and forestry sciences, abroad member of the lithuanian academy of sciences (lietuvos mokslų akademija). research interests: agrarian and regional economic, regional development, evaluation of european structural funds impact. personnel audit process wojciech pająk cracow university of economics, 27 rakowicka st. 31-510 cracow, poland e-mail: pajakw@uek.krakow.pl received 24 september 2011; accepted 05 january 2012 abstract. audit is one of the basic issues in organisation and management. it consists of a number of constituent problems. one of them is the problem of research methodology. on the other hand, internal audit plays an increasingly important role in improvement of the functioning of an organisation . an attempt to apply the concept of internal audit for the purposes of diagnosing human resource management is the subject matter of this paper. apart from the problems strictly related to the essence of methodology of personnel audit, an attempt was made to determine the problem range determined by this audit. keywords: audit, audit methodology, internal audit, human resource management, methods. reference to this paper should be made as follows: pająk, w. 2012. personnel audit process, business, management and education 10(1): 25–37. http://dx.doi.org/10.3846/bme.2012.03 jel classification: m12. 1. introduction the purpose of the study is to present personnel audit process at a unit on the basis of general methodology of internal audit. the study assumes that methodology is a methodologically correct set of directives, indicating the ways of action, methods leading to a particular purpose (pszczołowski 1978). therefore, methodology is a research system which covers, on the one hand, procedures associated with raising problems (tasks) and, on the other hand, a description of general and detailed methods of solving these problems (lisiński et al. 2007). hence, the essence of methodology comes down to systematising the purpose, range as well as methods and techniques of audit. the result of application of a specific methodology is an empirical study containing the diagnosis or project (stabryła 1986). audit methodology presented in subsequent items of the article is referred to the personnel function of the organisation. 2. internal audit internal audit may be understood in various ways. the broad meaning of this word is the process through which an organisation gains the assurance that the risks it is exposed to are understandable and properly managed in a dynamically changing environment b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2012, 10(1): 25–37 doi:10.3846/bme.2012.03 copyright © 2012 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 26 w. pająk. personnel audit process (sawyer et al. 2001). in a narrower sense, internal audit is an independent and objective advisory activity, the purpose of which is to increase the value and improve operational activity of the organisation (standards 2001). internal audit understood in such way aims at helping organisation members in effective performance of their tasks. therefore, the essence of internal audit is to examine savings, efficiency and effectiveness of systems and organisational units as well as evaluate management efficiency, namely the way in which the management plans their actions and then supervises and controls implementation of these plans. internal audit may also include examination of the structure of the organisation’s systems as well as of the course of processes taking place inside them. the basic criteria of evaluation are efficiency and effectiveness. this way of understanding internal audit determines the research procedure, defined as general audit methodology. this methodology may include the following phases (lisiński et al. 2011): 1. determination of purpose, object and range of audit 2. making methods of examination more specific 3. selection and definition of evaluation criteria 4. construction of measurement scales and preparation of evaluation principles 5. identification of the actual condition 6. derivation of diagnostic determinations and formulation of improving hypotheses 7. preparation of the report on the conducted audit the purpose of audit is a complete and exhaustive diagnosis. it takes place through the analysis and assessment of the existing situation, formulation of improving hypotheses (control function of audit) and identification of procedures eliminating the identified deviation phenomena (advisory function of audit) (lisiński et al. 2011). the object of audit may be organisation of the system and processes taking place within it. the range of audit results directly from a specific purpose and object of audit. it specifies research area in the institutional sense (organisational position, organisational cell, organisational unit, the whole organisation). substantiation of the audit method consists in general recognition of auditing conditions. information about the organisational unit and about the object of auditing is collected and the method of auditing is chosen or developed, and detailed audit techniques adequate to the adopted method are determined. the problem examined under the audit is perceived as a certain set of characteristics of the audit object. these characteristics constitute the basis for formulating evaluation criteria for the object of audit. the sources of criteria formulation may be the selected auditing method, principles of organisation, principles and measures of efficient action, factors determining the examined problem as well as pathologies present in the examined object. every criterion should be defined. then, the set of criteria is put in order through division of synthetic criteria into analytic ones, ranking of the analytical criteria and specification of the nature of each of them. measurement scales should be adequate for a given criterion (quantitative criteria – numeric scales, qualitative criteria – descriptive scales). 27 business, management and education, 2012, 10(1): 25–37 formulation of evaluation principles means determination of the method of evaluating the degree of importance of the occurring error from the point of view of the organisation’s objectives. identification of the actual condition is the application of the previously developed research tools to measurement of features describing the examined facility on the basis of collected and analysed information. derivation of diagnostic determinations comes down to determination of importance of the identified errors and putting them into proper order as well as presentation in a clear form. formulation of improving hypotheses consists in formulation of postulates concerning directions of changes aiming at removal of the detected deviations. at this point, it should be emphasised that it can be a detailed program of action or only recommendations forming the basis for its preparation. 3. personnel audit personnel audit may be defined in various ways. in the subject sense, it means that the object of personnel audit is the personnel employed in an organisation as well as the method of managing it (padzik, leksykon 2002). subject meaning of audit applies to basic features as well as advantages and disadvantages of personnel employed in the organisation. personnel audit can also be understood in the sense a process (pocztowski, miś 2000). in this context, personnel audit consists in systematic, independent and methodical research and, at the same time, assessment of human resources and the system of managing these resources, aiming at monitoring compliance of their condition with the adopted standards (pocztowski et al. 2004). the degree of personnel audit detail may be various. under personnel audit it is possible to conduct initial diagnosis, full diagnosis or specialised diagnosis (mikołajczyk 1998). initial diagnosis is the examination of general features of human resources in the organisation and their management. full diagnosis aims at examination of the whole structure of human resources in particular categories of employment as well as subsystems of human resources management in, in order to detect basic errors, explain reasons for their occurrence and evaluate the importance of these errors with regard to efficiency and effectiveness of an organisational functioning. on the other hand, specialised diagnosis means detailed examination in selected directions, aiming at deepened analysis of the selected human resource management functions. specialised diagnosis through reaction to the observed deviation phenomena in the sphere of human resource management aims at introduction of improving changes. personnel audit is conducted according to general internal audit methodology. such a procedure includes the following tasks at particular audit stages. 28 w. pająk. personnel audit process 1. determination of the object, purpose and range of personnel audit. on the basis of the aforementioned definition of personnel audit it can be stated that the object of personnel audit are human resources of an organisation as well as the system of managing these resources. the goals of the audit procedure shall include increase in the level of coincidence between human resources and tasks resulting from implementation of organisational objectives. the range of audit is determined with regard to the assumed audit purposes. it may cover the whole organisation, particular organisaisational units, organisational units and even single organisational posts (work management audit). 2. substantiation of audit method. during the initial identification of human resources and the system of managing, these resources and information about external and internal conditions for implementation of personnel function is collected. it is suggested that it included the personnel function environment: internal as well as closer external and further external ones. components of the internal environment of the personnel function are the remaining functions of the organisation. the relation between the personnel function and the internal environment means any actions referring to particular aspects of human resource management: functional, institutional and instrumental ones, taking into account organisational strategy, structure and culture. closer external environment is organisations and groups that may affect human resource management in a given organisation. closer external environment components include, among others: owners of the organisation, state and local administration bodies, customers, schools, personnel consulting companies, employment offices, trade unions as well as political parties. on the other hand, further external environment includes factors and processes that may have impact on implementation of the personnel function in a given organisation. structuring of further external environment means division into the following spheres: economic, technical, demographic, socio-cultural and legal (pocztowski 2003). substantiation of audit method also means determination of audit methods and techniques, which may be used with regard to particular audit areas (table 1). table 1. methods used in personnel audit (source: prepared by the author on the basis of: amstrong 2009; gierszewska, romanowska 2003; nalepka 1995; nalepka 2001; nalepka, kozina 2007; pocztowski 2003; stabryła et al. 2009; lisiński 2004; lisiński et al. 2011; lipka 2000; bieniok et al. 1997) audit areas audit methods personnel strategy analysis of the life cycle of human resources life span curve markov analysis tree of competences balance of costs and profits from employment decision tree polivalency analysis personnel portfolio matrix of four pyramids personnel swot 29 business, management and education, 2012, 10(1): 25–37 audit areas audit methods organisation of human resource management system diagnostic method of improving organisation and management systems prognostic method of designing organisation and management systems the concept of organisational structure evaluation system – a. nalepka functional procedure of diagnosing organisational structure – a. nalepka personnel: competences and motivation of employees effectiveness and labour costs condition and structure of employment internal and external mobility analysis of human resources balance of costs and profits from employment personnel portfolio personnel swot the process of human resource management: planning of human resources personnel acquisition reduction of employment employee assessment remuneration for employees development of human resources shaping conditions of work and work relations analysis method comparative analysis method expert method surveys interviews questionnaires tests work management motivating employees management styles communication shaping organisational culture 3. selection and definition of evaluation criteria selection of criteria results from audit areas and the applied methods of auditing. for the first auditing area, which is personnel strategy, it is recommended to formulate a synthetic criterion defined as personnel strategy adequacy to the strategy of the organisation. in this case, the set of analytical criteria should include the principles of personnel strategy formulation. audit of human resource management system organisation consists in assessing compliance of the applied structural solution and evaluation of compliance with the end of table 1 30 w. pająk. personnel audit process principles of building organisational structure. basic principles of building organisational structure, which may be used as evaluation criteria, can include (nalepka 1995): − classification of objectives and personnel functions, − shaping organisational positions performing personnel functions, − grouping organisational positions performing personnel functions, − shaping functional and hierarchical dependencies in the sphere of human resource management, − distribution of decision-making rights concerning human resource management, − formalisation of building human resource management system. personnel audit requires application of a number of evaluation criteria which include, among others: competences of employees, motivation of employees, work effectiveness, labour costs, number of employees in particular categories of employment as well as the volume of engagements, shifts and dismissals. the most developed set of criteria is required by the audit of human resource management process. each of the functions comprising this process is a separate research subarea (table 2). planning of human resources includes planning of basic subsystems of human resource management and planning of the condition and structure of employment. planning human resource management subsystems means preparation of the following plans: system of engaging and dismissal of employees, system of employees’ assessment, personnel reward system, personnel development system, system of improving working conditions and relations as well as planning labour costs (pocztowki 2003). planning of the condition and structure of employment contains planning of personnel needs, planning of personnel equipment and planning of personnel appointments (kossbiel 1988). basic evaluation criteria of this area include: completeness of plans, adequacy of plans, validity of plans, and feasibility of plans. acquisition of personnel can be identified as a set of purposeful and coordinated activities, related to appointing for organisational positions people with the desired professional qualifications and mental characteristics (król, ludwiczyński et al. 2006). evaluation criteria in this case should apply to particular stages of the engaging process. the most important criteria include: validity of work posts’ documentation, sources of recruitment, type of recruitment techniques of recruitment, selection models, selection techniques (cook 1993), principles of introduction to work. another function of human resource management process subject to assessment under personnel audit is reduction of employment. in the case of individual dismissals, evaluation criteria apply to reasons and undertaken corrective actions (pocztowski 2003). in the event of dismissals in the organisation resulting from the surplus of personnel in connection with organisational changes or restructuring, evaluation criteria 31 business, management and education, 2012, 10(1): 25–37 table 2. evaluation criteria in the audit of human resource management process (source: prepared on the basis of: amstorng 2009; pocztowski 2003; nalepka 1993; król, ludwiczyński et al. 2006) functions of human resource management process the suggested synthetic evaluation criteria planning human resources − completeness of plans − adequacy of plans − validity of plans − feasibility of plans acquisition of personnel − validity of work posts’ documentation − sources of recruitment − type of recruitment − techniques of recruitment − selection models − technique selection − the principles for introducing to work reduction of employment − redefined strategy of the organisation − new personnel strategy − other possible operation options − de-recruitment program − implementation of de-recruitment program − intervention model employee evaluation − goals of evaluation − functions of evaluation − evaluating entity − evaluation object − evaluation criteria − evaluation techniques − frequency of evaluation − principles of evaluation − perception errors − usefulness of evaluation results − quality of made personnel decisions remuneration for employees − remuneration functions − principles of shaping remunerations − consistency of remunerations with the organisation’s objectives, structure of remunerations − diversity of remunerations − effectiveness of remunerations − competitiveness of remunerations − administration of remunerations 32 w. pająk. personnel audit process functions of human resource management process the suggested synthetic evaluation criteria human resource development − strategy of human resource development − instruments of human resource development − selection of training techniques − training needs − plans of trainings − course of trainings − results of trainings − career planning − implementation of the program of professional careers shaping conditions of work and work relations − the content of work, collective work relations − participation of employees − conflicts − stress in the working environment should include the principles for conducting the de-recruitment process. the most important principles include: redefinition of the organisation’s strategy and personnel strategy, possible operation options other than de-recruitment, the quality of de-recruitment program and ways of its implementation. an additional evaluation criterion may also be the quality of intervention model organisation restoring organisational balance after the shock of de-recruitment, applied by the management (amstrong 2009). employee assessment audit should include the criteria related to particular elements of the assessment system. therefore, the assessment covers: goals and functions of assessment, assessing entities, object of assessment, selection of assessment methods and techniques as well as assessment frequency (anderson 1993). in the audit of the very course of the employee assessment process the object of assessments should be: the principles of evaluation (methodicalness, commonness, flexibility, openness, simplicity) (ludwiczyński 2002), perception errors made in the course of assessment (sidor-rządkowska 2000), usefulness of assessment results for the needs of making personnel decisions and the quality of these decisions (król, ludwiczyński et al. 2006). remuneration for employees, as the object of audit, requires application of the following synthetic evaluation criteria: remuneration functions (income function, cost function, motivation function, and social function), the principles of shaping remuneration (level of work difficulty, work results, competences of employees, market criteria, and degree of satisfying the needs of employees) (borkowska 2001). the audit of remuneration for employees includes also the analysis of remuneration. the suggested end of table 2 33 business, management and education, 2012, 10(1): 25–37 criteria are: consistency of remunerations with the organisation’s objectives, structure of remunerations, diversity of remunerations, effectiveness of remunerations, competitiveness of remunerations, and administration of remunerations (pocztowski 2003). development of human resources is understood as all quantitative and qualitative changes in the social system of the organisation, which lead to increasing the effectiveness of the performed work (pocztowski 2003). audit of this area requires application of the following criteria: the strategy of human resource development, instruments of human resource development (training of employees, shifts of employees, and work structuring), and selection of training techniques. the object of auditing human resource development should also be the process of training employees. assessment of this process requires the application of the following set of criteria: training needs, plans of trainings, course of trainings, and results of trainings (sloman 1997). in large organisations, evaluation should also cover professional career management. the suggested synthetic criteria are: career planning, execution of the program of professional careers (greenhaus, callanan 1994). criteria concerning the shaping of working conditions and relations include: the content of work, collective work relations, participation of employees as well as conflicts and stress in the working environment (jasiński 1999). the last area of personnel audit includes work management. this function is performed by all managers employed in a given organisation. basic audit areas as well as a set of synthetic criteria are contained in table 3. table 3. evaluation criteria in work management audit (source: pocztowski 2003; stoner et al. 2011; griffin 2008) work management process functions the suggested synthetic evaluation criteria motivating employees − remuneration motivation − non-remuneration motivation − effectiveness of motivating employees management styles − management style adequacy to the management situation communication − communication barriers − communication effectiveness shaping organisational culture − adequacy of organisational culture for the purposes of the organisation 4. determination of the principles of measurement and evaluation, as well as formulation of evaluation patterns taking account of the nature of the adopted evaluation criteria, it is necessary to suggest adequate measurement scales. this means the need to diversify the types of the 34 w. pająk. personnel audit process applied measurement scales. in relation to the qualitative criteria, it is suggested to apply descriptive measurement scales with a pattern. in this case, normative patterns can be suggested for all criteria. on the other hand, quantitative criteria require application of numeric scales. 5. identification of the actual condition and implementation of diagnostic determinations in the course of audit works, it is necessary to gather information regarding particular partial criteria, as well as to perform their measurement and evaluation, applying adequate audit techniques. in order to perform a full and reliable analysis, it is recommended to obtain any necessary information, applying, first of all, the techniques of analyzing organisational documentation as well as sociological techniques. based on this, it is possible to derive diagnostic determinations. such determinations consist in verification for discrepancy between the distinguishing mark of the model condition, its causes and effects. 6. verification and interpretation of diagnostic determinations at the beginning of this stage it is necessary to check the correctness of formulating assessments and conclusions concerning the audit object. in the case of observing that within particular audit tasks, there is no full compliance of their execution with the adopted standards and that the derived determinations do not meet the condition of consistency, it is necessary to determine the causes and repeat the questioned audit. interpretation of audit findings takes place on the basis of assessments in relation to those obtained results. evaluation may use a five-step measurement scale determining the importance of errors present in the social system of the organisation (table 4). table 4. the principles of interpreting diagnostic determinations (source: prepared by the author) evaluation level determination of the evaluation level 5 an error is not present, advantage of the organisation’s social system 4 insignificant error, possibility of slight interruptions in the functioning of the organisation’s social system 3 hardly significant error, the possibility of a problem in functioning of the organisation’s social system 2 significant error, the possibility of a significant problem in functioning of the organisation’s social system 1 highly significant error, the present problem prevents functioning of the organisation’s social system interpretation of diagnostic determinations results in identification of the importance of errors for particular synthetic criteria. 35 business, management and education, 2012, 10(1): 25–37 7. synthesis of audit findings and preparation of the report on the conducted audit at the last stage of personnel audit, a report on the conducted audit is prepared, containing also the suggested corrective actions allowing to eliminate the observed irregularities. sample structure of the report on personnel audit execution shall be presented below (table 5). table 5. structure of the report on personnel audit execution (source: prepared by the author) report on the conducted personnel audit auditors audit objectives subject of audit range of audit characteristics of the audited unit audit methods (description, criteria, measurement scales) course of the audit diagnostic determinations improving hypotheses (directions of eliminating confirmed errors) improvement design attachments 8. conclusions contemporary organisations formulate high requirements concerning staff competence and the method of human resources management. in order to meet these requirements, changes in the traditional understanding of the internal control process are necessary. in this case, internal control should be replaced with personnel audit the main purpose of which is helping the organisation members in improving its functioning. personnel audit should be regarded as a tool improving actions in the sphere of human resources of any organisation. complete and objective diagnosis of human resources and their management level is possible if several conditions are fulfilled: a proper audit implementation procedure is determined, the auditor has unlimited access to the organisation’s source documents, complete freedom of talks with employees is ensured and appropriate research methods are applied. a proper audit implementation procedure is one of the most vital elements having an impact on the effectiveness of the conducted audit. the presented personnel audit methodology gives the possibility to detect the basic dysfunctions present in the organisation’s social system. further studies concerning the methodology should relate 36 w. pająk. personnel audit process to formulating a complete set of analytical criteria for particular problematic sections. then, each criterion should be defined and a corresponding measuring scale should be prepared. the personnel audit methodology prepared in such way will be subject to empirical verification. this methodology may also be a source of inspiration to prepare a general internal audit methodology covering all functional areas of a company. in the opinion of the author, the main methodical effort associated with its improvement should be focused on the preparation of a set of diagnostic parameters in terms of preparation of a universal base plan of internal audits. the presented personnel audit methodology of a health protection unit gives the possibility to detect basic dysfunctions present in the social system of the organisation. this methodology may also be the source of inspiration for further works on the general internal audit methodology. in the opinion of the author, the main methodical effort associated with its improvement should be focused on the preparation of a set of diagnostic parameters in terms of preparation of a universal base plan of internal audits. 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ocen pracowników. cracow: oficyna ekonomiczna. sloman, m. 1997. strategia szkolenia pracowników. warsaw: wydawnictwo naukowe pwn. stabryła, a., et al. 2009. doskonalenie struktur organizacyjnych przedsiębiorstw opartych na wiedzy. warsaw: c. h. beck publishing house. isbn 978-83-255-0237-9. stoner, j. a. f.; freeman, r. e.; gilbert, d. r. jr. 2011. kierowanie. warsaw: pwe. standards of the professional practice of internal auditing. 2001. florida: the institute of internal auditors, altamonte springs. personalo audito procesas w. pająk santrauka auditas yra įvardijamas kaip viena organizacijos ir vadybos problemų, susidedanti iš sudėtinių problemų. viena iš jų – tyrimo metodologija. kita vertus, gerinant organizacijos veiklą, itin didelis vaidmuo tenka vidiniam auditui. šio straipsnio tikslas yra pritaikyti vidinio audito koncepciją žmogiškųjų išteklių valdymui ir, nepaisant personalo audito metodologijos klausimų, suformuluoti problemas, kurias lemia auditas. reikšminiai žodžiai: auditas, audito metodologija, vidinis auditas, žmogiškųjų išteklių valdymas, metodai. wojciech pająk. assistant professor at the department of strategic analyses, cracow university of economics. scientific interests: strategic management, human resources management, logistics management. analysis of asset classes through the business cycle audrius dzikevičius1, jaroslav vetrov 2 using the idea of market-expected return rates on invested capital in the verification of conformity of market evaluation of stock-listed companies with their intrinsic value paweł mielcarz1, emilia roman2 personnel audit process wojciech pająk the position of slovakia in competitiveness ranking – the causes, impacts and prospects lucia stredná1, mária zúbková 2 audit committee practice in the polish listed stock companies. present situation and development perspectives piotr szczepankowski bank value: comparing customer and employee perceptions jelena titko1, natalja lace2 managing it workers katarzyna łubieńska1, jacek woźniak2 transforming leadership styles and knowledge sharing in a multicultural context rasa paulienė market behaviour: case studies of nasdaq omx baltic jelena stankevičienė1, natalija gembickaja2 spreadsheet error detection: an empirical examination in the context of greece dimitrios maditinos1, dimitrios chatzoudes2, charalampos tsairidis3 bme_2013_11_2 maketas.indd b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2013, 11(2): 315–332 doi:10.3846/bme.2013.18 casting a resource-based view on intangible assets and export behaviour seyyed mohammad tabatabaei nasab1, mohammad ali farhangnejad2, babak naysary3 1faculty of economics, management and accounting, yazd university, safa-ieh, pajhohesh street, pob. 89195-741, yazd, iran 2faculty of management and economics, tarbiat modares university (tmu), tehran, iran 3department of accounting, international islamic university malaysia (iium), kuala lumpur, malaysia e-mails: 1tabatabaeenasab@yazd.ac.ir (corresponding author); 2mafarhang@yahoo.com; 3bnaysary@gmail.com. received 28 september 2013; accepted 05 december 2013 abstract. prosperous companies in the 21st century have come to know the necessity of intangible assets as an important factor to achieve sustainable competitive advantage and constant presence in the international markets. hence, the purpose of this paper is to examine intangible assets and evaluate its relationship with export behaviour in terms of export intensity (export-sales ratio) and export type (permanent, occasional & periodical). the population under study includes all export firms during 2002 until 2010 in yazd province, iran. research data were collected by questionnaire and in order to answer the research questions and testing hypotheses, mcdm techniques (i.e. ahp & topsis) and statistical analysis (i.e. anova) were utilized. according to the research results, human capital, relational capital, technological capital, corporate reputation, and structural capital placed as the first to the fifth significant factors respectively. findings revealed that there is a significant difference between the permanent and occasional presence in the international markets regarding intangible assets; as the mean of intangible assets in the firms with permanent export is higher than the mean of intangible assets in the firms with occasional export. however, there is no significant difference between intangible assets and the export intensity. keywords: export behaviour, intangible assets, resource-based view, sustainable competitive advantage. reference to this paper should be made as follows: tabatabaei nasab, s. m.; farhangnejad, m. a.; naysary, b. 2013. casting a resource-based view on intangible assets and export behaviour, business, management and education 11(2): 315–332. http://dx.doi.org/bme.2013.18 jel classification: m30, m31. copyright © 2013 vilnius gediminas technical university (vgtu) press technika www.bme.vgtu.lt 316 s. m. tabatabaei nasab et al. casting a resource-based view on intangible assets and export behaviour 1. introduction the competition resulted from globalization and rapid technological development has made firms change their strategy to be able to survive and grow in the market in the 21st century. international competitiveness is defined as the ability of firms to supply commodity and services with potential competitive prices with at least covering the opportunity cost of utilized resources (freebairn 1986). porter (1985) defines competitive advantage as competitive strategy, which leads to produce the products that are not producible by the competitors. competitive advantage including various kinds of competitive strategies like cost leadership, differentiation and concentration in order to achieve and sustain competitive advantage in the long-term (porter 1985). achieving competitive advantage is possible when the current strategy of the firm is value adding in a way that present and future competitors cannot follow it (barney 1991). according to wernerfelt (1984), firms could be analysed in terms of products and resources aspects (wernerfelt 1984). the first aspect is usually discussed in economic theories; however, the latest implies some of the competitive advantages obtained from strategic resources (wernerfelt 1984; barney 1991). the firm’s assets consist of tangible and intangible assets, which are used by the firm in a limited period to produce valuable commodities and services for its customers (wheelen, hunger 2000). competitive advantage in assets and resources could create competitive advantage in the market (hoffman 2000). however, not all of the resources and assets can create sustainable competitive advantage (barney 1991). resource based view (rbv) appraises some of the strategic traits of resources as competitive advantage to earn higher profit (wernerfelt 1984; barney 2001). these resources should be rare, valuable, inimitable and non-substitutable (wernerfelt 1984; barney 2001). according to rbv, a firm can succeed not only by owning tangible assets, but also by proper utilization of intangible assets, which help them achieve sustainable competitive advantage in the long-term (barney 2001; bontis et al. 2002; wade, hulland 2004). it is evident that there is a direct relation between intangible assets and its economic advantages but since the valuation of intangible assets is not easily possible, determining its amount to achieve competitive advantage and the evaluation of external and internal factors influencing its measurements has become an important issue among researchers (kozlenkova et al. 2013; kajanová 2011). the definition of intangible assets refers to recognition of the characteristics and traits that are of strategic importance; organization’s intangible assets are the subset of the firm’s strategic resources portfolio (wade, hulland 2004). by creating competitive ability, intangible assets perform as an incentive for entering the international markets and an advantage to develop successful international operations. this issue is more important in export firms which operate in a more competitive and ambiguous environment with lots of uncertainties than the local firms. hence, the present study examined the significance and ranking of the intangible assets by mcdm techniques, and then the relationship between intangible assets and export behaviour in terms of export intensity and export type was investigated. 317 business, management and education, 2013, 11(2): 315–332 2. previous researches 2.1. intellectual capital nowadays, intellectual capital is known as a valuable tool for organizations and has drawn a lot of attention of managers and researchers as it has proven to add value to the firms (levickaitė 2011). increasing attention toward development of this issue is due to the growth of macro-economic phenomenon and economic traits of intangible assets. as hoffmann and his colleagues indicated in their research, higher access to the strategic resources leads to achieving higher competitive levels through rbv while the firms outside this area are deprived of such resources (hoffmann et al. 2011). based on tovstiga and tulugurova’s study (2007) the managers’ perception of intellectual capital has a significant and positive impact on companies’ performance. this impact is particularly due to structural and human capital as the most important factors under the rvb framework (nath et al. 2010; tovstiga, tulugurova 2007). according to the literature, intellectual capital can be studied from three aspects including human capital, structural capital and relational capital. human capital which is known also as human oriented asset (brooking 1996), individual capabilities (sveiby 1997) and learning and development (kaplan, norton 1996), is in fact a unique potential of hidden knowledge and collective capabilities in the organization (bontis 1999, 2001) which exists in the form of skills, experience, capability and knowledge of the employees (edvinsson, malone 1997). davenport and prusak (1998) defined human capital as intangible capabilities of resources, the efforts made, and time spent on the operations by employees (davenport, prusak 1998). human capital is actually a composite of job experiences and general knowledge of employees like leadership abilities, level of risk taking and ability to resolve the problems. second aspect of intellectual capital is structural capital that is known as organizational asset and process asset. structural capital includes all the non-human knowledge such as databases, organizational chart, process implementation instructions, strategies and administrative plans (roos, roos 1997). structural capital should be considered as creation and innovation, operational processes, cultural capital, reconstructions, patents and educational activities (roos, roos 1997; roos et al. 1997). this capital is focused on system installation, structure and current trend of business (chen et al. 2004), and can be classified into organizational culture, organizational learning, functional processes and information systems. firms can identify the customer priorities through structural capital and by using information systems (paiva, goncalo 2008; lee, chang 2007). this capital is one of the main principles in creating learning organizations. even when employees have the sufficient and proper capabilities, a weak organizational structure that is unable to create value from these skills can hamper the achievement of desired performance. the last aspect of intellectual capital indicates the relationship between the firm and the world outside. relational capital consists of relationship with customers, shareholders, suppliers, competitors, government and society. however, one of the most important characteristics 318 s. m. tabatabaei nasab et al. casting a resource-based view on intangible assets and export behaviour of relational capital is relationship with customers but it is not considered as the only effective factor. in fact, relational capital is a reflection of organization’s activities and many researchers consider it as a strategic capital (fong reynoso, ocampo figueroa 2010). description of intellectual capital in a particular framework seems to be difficult and impossible, hence, its’ measurement is very hard. various researchers (e.g. johanson et al. 1999; miller et al. 1999; bontis, fitz-enz 2002; bozbura 2004) have studied several criteria of intellectual capital. table 1 represents the most important criteria, based on bozbura’s study (bozbura 2004). table 1. intellectual capital criteria (source: bozbura 2004) human capital criteria structural capital criteria relational capital criteria • education hour per employee and its cost • higher education rate of employee (master and doctorate) • turnover rate • the experience of managers in the firm (year) • higher skill and ability level • leadership ability of management level • successes of work results • determining their own targets • being intelligent and creative • being “the best” in their subject • satisfaction level • having ability in their subject • perform their best • sharing and reporting knowledge • to be well-grounded about strategies • risk-taking • eagerness to source sharing • freely expressing the opinions • creating results by using knowledge • the effectiveness of developing employee • eagerness to share knowledge • the strategy of promoting interoperate relation • supporting new ideas • training strategy • human resource selection strategy • effective wage system • succession planning • the cost of realizing work • the time of realizing work • cost per revenue • increase revenue per employee • revenue per employee • implement new ideas • supports development of ideas • leader in developing new ideas and product • increase productivity • quick access to information • procedures support innovation • the existence of a bureaucratic system • culture is supportive • access number of database per second • access to information without any limitation • determining quality targets • mis contains all knowledge • strategic definition • number of patents • investment in research and development • r&d investment • technology investment • updating the database • customer satisfaction • time resolve the problem • the extent of the relation • value added service • customer loyalty • preference in competition • collecting data for customer request • interoperate dispersal of customer feedback • emphasizing customer request • to draw benefit from customer request for the customer satisfaction • market share improving • leadership of market share • having market-oriented processes • market and customers to be understood by employee • having a good image in the market • to own the leader brands in the market • participating social activities that are not sponsored • being the sponsor for the social activities • analysis of rivals • supplier relations • environment consciousness • relations with shareholders 319 business, management and education, 2013, 11(2): 315–332 2.2. corporate reputation innovation in achieving competitive advantage depends on the amount of intangible assets (flatt, kowalczyk 2000) and corporate reputation is one of the most important one among these assets (low, kalafut 2002). fombrun (1996) defined the reputation as the people’s perception of a service provider (fombrun 1996). therefore, reputation represents the overall assessment of stakeholders over the time and will affect product price and the profit gained due to frequent purchases (greyser 1995; fomburn, van riel 1997). previous research findings indicate that the combination of social and economic benefits obtained from reputation is considered as competitive advantage and is one of the most important assets of the organization (fombrun 1996; hall 1993). hence, according to budworth (1989) it is rational to consider the reputation as an intangible asset (budworth 1989). reputation could be regarded as an investment (kotha et al. 2001) and because of its intangible nature, cannot be traded easily in the market (hunt, morgan 1995; caruanal 1997); so it is a resource that can create competitive advantage and superior financial productivity against competitors (hunt, morgan 1995; bennett, kottasz 2000). technology is an intangible asset with high dependency on knowledge, which is mostly implicit knowledge; therefore encoding it is associated with many challenges. high degree of specificity of these assets for the owner organizations made them valuable and prevents from transmission of these assets to outside the organization. also the complicated nature of these assets made the realization of their origin very hard (kogut, zander 1993). all these, made them valuable, rare and hard to imitate. therefore, technological capital possesses all the conditions to create and sustain competitive advantage and is a key factor to develop and globalize the organization. these assets play their role in achieving competitive advantage by reducing the costs by means of optimization and improvement of processes and on the other hand by creating distinction by means of innovation in products and taking into account customer needs or improving product’s quality. quality and distinction of products can be considered as key elements in achieving success in export (styles, ambler 1994). in fact, all of the positive effects of reputation results from the view and perception of individuals and emerges from subsequent decisions and behaviours of stakeholders (bromley 2002; fombrun et al. 2000). a strong reputation can attract and maintain employees, customers and suppliers. competition in the market could be also affected by reputation. if a firm own a weak or non-competitive reputation compared to its competitors, the possibility of being exposed to competitive attacks is more than the well-known firms, which quickly respond to any challenge. there are some general methods to examine corporate reputation. a well-known method is fortune magazine method, which regularly evaluates the superior firms in each industry by using the comment of executive managers and analysts. this method considering the criteria such as innovation, people management, use of corporate assets, social responsibility, quality of management, financial soundness, long-term investment, quality of products/services, global competitiveness (barnett, pollock 2012). 320 s. m. tabatabaei nasab et al. casting a resource-based view on intangible assets and export behaviour however, the characteristics of individuals who hold superior power in the firm, can affect the reputation (mahon, wartick 2003), accordingly popular firms have famous managers. these managers perform functions that lead to reputation (like advertisement, financial support, etc). they also rely on profit making records of firm and consider it as firm’s credibility to improve the reputation (fombrun 1996). 2.3. technological capital research and development are the most essential factors in creating and developing technology, but in the wealth-generating path, exploiting or commercialization of technology is a more important factor. in other words, technological advantage will occur by the time its results are delivered to customers. innovation has a broader concept than introducing new technological products and it includes any novelty originated from organization, market or technology in the value chain (kim, mauborgne 1997). organizations with high degree of innovation have the opportunity to develop their markets in order to gain more profit on investment (teece 1986). while technological advantage is necessary in many industries to sustain competitiveness, converting technological advantage into competitive advantage calls for a set of prerequisites. in addition to creating technology through research and endogenous development, managing and organizing the technological transfer, as one of the influential procedures to achieve required technology has become an inevitable necessity for development of technology. various studies demonstrate that firm’s ability in adjusting the products as per customer needs while entering export markets is as an important factor (cavusgil, zou 1994). furthermore, in today’s business world, globalization, market sharing and order manufacturing of products considering customer needs, have improved competitiveness in the form of distinction. therefore organizations with superior technological resources, have a better opportunity to compete not only in domestic markets but also in the international markets. 2.4. export behaviour from strategic point of view, intangible assets are the most important factor in creating competitive advantage and are introduced as the prosperity factor in the business. in addition to providing more competitiveness in international level, strategic resources motivate firms to enter foreign markets and are considered as key elements in the development of firm’s overseas operations. overall, these resources are potential factors to achieve maximum competitiveness; hence, the key role of such resources is signified in internationalization process of organizations in general and in export behaviour in particular. in recent years, study of effective variables on export behaviour has been a controversial issue among researchers and fruitful researches have been done in this area. rodrigue and rodriguez (2005) studied the impact of technological resources on export 321 business, management and education, 2013, 11(2): 315–332 behaviour of spanish firms in the form of export decision and export intensity variables. according to their findings, product innovation, patents and process innovation have a positive and significant impact on these variables in contrary to research and development expenses that have no significant impact on the aforementioned variables (rodrigue, rodriguez 2005). according to sterlacchini (1999) studies, firm’s size has a positive and significant impact on likelihood of being an exporter while the sub-contract nature of firm has a negative impact on it; also innovation activities, product design costs, and engineering and pre-production developments have a positive and significant impact on the export and total sales ratio (sterlacchini 1999). lal (2004) believes that exploiting advanced tools and active labour in organizations are the fundamental and effective factors on export operations (lal 2004). basile (2001) studies indicate the great impact of innovative capabilities on firm’s competitive status in general and on the probability of being an exporter and export intensity in particular (basile 2001). for further considerations, we proposed the following hypotheses and the conceptual model of the study as in figure 1. hypothesis 1: there is no significant difference between the mean of firm’s intangible assets in terms of quality of presence in the international markets. hypothesis 2: there is no significant difference between the mean of intangible assets in terms of export intensity in firms. human capital organizational capital relational capital corporate reputation technological capital quality of presence in the international markets export intensity intangible assets export behaviour h1 h2 fig. 1. conceptual framework of the study (source: research initiative) 3. methods 3.1. research type & data collection present study is explanatory in nature and applied a survey method of data collection. data collection is done using three questionnaires, which are prepared after studying credible scientific resources. first questionnaire is developed in six sections, considering 322 s. m. tabatabaei nasab et al. casting a resource-based view on intangible assets and export behaviour desired variables and by performing some adjustments on indices achieved by experts’ opinions. the first section includes information and study of company profile (e.g. export percentage and export types). the remaining five sections cover the assessment of intangible assets with respect to human capital, structural capital, relational capital, corporate reputation and technological capital in the form of 30 questions using the 5-point likert scale. in order to evaluate the content validity, the questionnaires were provided to some experts and lecturers in the field of management and marketing, then final modifications was applied based on their provided comments. considering that the calculated cronbach’s alpha is higher than minimum acceptable amount (according to gliem, gliem (2003)), therefore the reliability of the questionnaire dimensions is verified (table 2). second questionnaire is designed to achieve the weight for each intangible asset, in the form of paired comparisons using analytic hierarchy process technique (ahp). the third questionnaire is developed in order to rank the variables using topsis technique and eventually these two questionnaires were delivered to 4 experts in yazd chamber of commerce, 3 managers and experts in companies under study and 4 university lecturers. table 2. cronbach’s alpha coefficient of questionnaire (source: research finding) questionnaire’s dimensions cronbach’s alpha overall 0.913 human capital 0.660 structural capital 0.846 relational capital 0.737 corporate reputation 0.812 technological capital 0.838 3.2. population & sampling statistical population examined in this study includes all exporter companies during 2002 until 2010 in yazd province, iran. hence, the list of exporter companies was obtained from yazd chamber of commerce and sampling and data collection from target community was done. according to acquired information, the number of export firms during the nine-year period was about 500 cases from which 300 were active and others were closed down for some reasons. in order to achieve the sample size, initial questionnaires distributed and population parameters estimated. considering the sample size of 43 according to wor sampling, 60 questionnaires distributed among managers and experts in export firms, from which 33 questionnaires returned that represents 55% of response rate. 3.3. data analysis techniques in order to data analysis, spss, expert choice and excel software packages were used. as it is revealed from kolmogorov-smirnov test results, all dimensions of intangible assets follows normal distribution (table 3). 323 business, management and education, 2013, 11(2): 315–332 table 3. results of kolmogorov-smirnov test (source: research finding) dimensions human capital structural capital relational capital corporate reputation technological capital n 33 33 33 33 33 normal parameters mean 3.439 3.368 3.558 3.388 3.626 standard deviation 0.508 0.762 0.533 0.743 0.865 most extreme differences absolute 0.093 0.092 0.153 0.13 0.213 positive 0.089 0.083 0.076 0.106 0.09 negative –0.093 –0.092 –0.153 –0.13 –0.213 kolmogorovsmirnov z 0.533 0.531 0.88 0.749 1.221 asymp. sig (2-tailed) 0.938 0.94 0.421 0.628 0.101 to achieve the weight of each intangible asset, ahp technique used and finally each dimension ranked by topsis method. ahp is one of the most efficient multi criteria decision making (mcdm) techniques, which introduced by thomas l. saaty in 1970. this technique is based on paired comparisons and allows to evaluate different scenarios. this method providing hierarchy decision tree that shows indices and decision alternatives. then a series of paired comparison is performed which identifies weight of each factor in line with other alternatives, comparative tables are prepared from bottom to top based on the hierarchy tree. in other words, alternatives should be compared by pair wise comparison at different levels considering each factor. finally, this logic incorporates the matrixes obtained from paired comparisons in such a way that optimum decision comes out (saaty 1980). thus, four steps including developing hierarchical decision making tree, calculating weight, calculating consistency rate and choosing the best alternative can describe ahp. accordingly, different dimension of intangible assets ranking by using topsis technique. hwang and yoon (1981) introduced this technique for the first time. basic logic of this technique is to define negative and positive ideals. positive ideal is a solution that maximizes desirable indices and minimizes undesirable indices. similarly, the negative ideal maximizes undesirable indices and minimizes desirable indices. optimum strategy is the one that is closest to the positive ideal and farthest from the negative ideal. rating the solutions in the topsis technique is done based on their relative similarity to ideal solution (hwang, yoon 1981). 4. results collecting the questionnaires and review of obtained data, revealed that 22 of managers had a bachelor or master’s degree (66.6%) and the rest of them had advanced diploma. age wise study of the managers shown that 21 of them (63.6%) were 46 to 60 years old, considering that, 12 managers (36.4%) had 21 to 30 years of work experience. among 324 s. m. tabatabaei nasab et al. casting a resource-based view on intangible assets and export behaviour 33 examined companies, 93.9% are private ownership, 72.7% had more than 10 years of activity and 27.3% had between 11 to 50 employee. export-sales ratio in 15 companies (45.4%) was less than 10 percent of total sales and in one company (3%) it was between 51 to 75 percent. in addition, 17 companies (51.1%) had permanent exports, 10 companies (30.3%) had periodical exports and 6 companies (18.2%) had occasional exports. 4.1. assessing and ranking the intangible assets ahp technique was used to weight and assess the importance of intangible assets. for this purpose, the desired data was extracted through ahp questionnaires based on the priority level of each factor and considering paired comparisons performed. according to the results obtained from expert choice 2000 software, human capital, relational capital, technological capital, corporate reputation and structural capital are the most important assets, respectively. it should be mentioned that inconsistency rate of paired comparisons regarding individual comments is 0.03 which demonstrates an acceptable level of inconsistency (inco ≤ 0.1) among the respondents. table 4 represents the importance weight of each intangible asset. table 4. importance weight of intangible assets (source: research finding) no. intangible assets weight 1 human capital 0.347 2 structural capital 0.096 3 relational capital 0.259 4 corporate reputation 0.117 5 technologic capital 0.181 after considering the weight of intangible assets by ahp technique, topsis method was used in order to ranking them. according to the results and relative closeness coefficient of indices to the ideal solution, human capital ranked first and then relational and structural capital ranked second and third respectively (table 5). table 5. results of ranking the intangible assets (source: research finding) final ranking intangible assets di+ (distance from positive ideal) di(distance from negative ideal) cci (closeness coefficient) 1 human capital 0.006 0.091 0.942 2 relational capital 0.043 0.108 0.713 3 technological capital 0.060 0.115 0.658 4 corporate reputation 0.082 0.109 0.569 5 structural capital 0.091 0.091 0.499 325 business, management and education, 2013, 11(2): 315–332 4.2. review of the firms’ export behaviour according to prior studies and after reviewing the experts’ comments from chamber of commerce, export behaviour of the firms was studied considering two variables, which are quality of presence in the market and export-sales ratio. according to the quality of presence, active companies are divided into 3 categories including permanent, periodical and occasional. the second variable i.e. export-sales ratio is divided into 4 categories. the first category belongs to firms with export less than 10 percent, second one includes firms with export between 11 to 25 percent, third one includes firms with export between 26 and 50 percent and finally fourth one represents firms with export more than 50 percent. in the followings, the relationship between above mentioned variables and intangible assets is studied. 4.2.1. investigating the relationship between organization’s intangible assets and quality of presence in the international markets in order to examine the relationship between organization’s intangible assets and export behaviour in terms of presence in the market, analysis of variance (anova) test was used. in this test, h0 indicates that there is no significant difference between the mean of organization’s intangible assets regarding quality of presence in the international markets, and h1 indicates that at least one of the studied mean pairs are not equal. table 6. relationship between intangible assets and quality of presence in the international markets (source: research finding) f sig test result 4.057 0.031 rejected according to the results, there is a significant difference between intangible assets mean in terms of quality of presence in the international markets (table 6). in order to find out the difference between means of each export type, tukey test were used. in this test, h0 indicates that there is no significant difference between the means and h1 indicates the opposite. table 7. comparison of intangible assets situation in terms of quality of presence in the international markets (source: research finding) i j i-j sig test result upper limit lower limit permanent periodical 0.346 0.156 rejected 0.799 –0.106 permanent occasional 0.592 0.044 accepted 1.171 0.139 periodical occasional 0.246 0.593 rejected 0.871 –0.379 according to the information obtained from this test, a significant difference between permanent and occasional presence in the international markets and the level of intangible assets was observed. considering that the upper and lower limits obtained in this comparison are positive, therefore mean of intangible assets for the firms with 326 s. m. tabatabaei nasab et al. casting a resource-based view on intangible assets and export behaviour permanent export is higher than that of firms with occasional exports (table 7). thus regarding given information, we are able to rank each type of export firms by mean of intangible assets, using tukey test. table 8. ranking the export types in terms of intangible assets (source: research finding) export type categorizing in terms of mean 1 2 permanent 3.707 periodical 3.361 3.361 occasional 3.115 sig 0.284 0.52 based on the results, permanent presence in export market with the mean of 3.707 and periodical presence with the mean of 3.361 are placed in the first group and also periodical presence along with occasional presence with the mean of 3.115 are placed in the second group (table 8). it is worth noting that in case of the firms with periodical presence in export markets, since its mean is located between that of firms with permanent and occasional presence, in spite of having higher mean of intangible assets rather than firms with occasional presence, it is located in both groups in mentioned category. 4.2.2. investigating the relationship between organization’s intangible assets and export intensity in order to study the relationship between the level of intangible assets in organization and export behaviour in terms of export intensity, anova test was used. in this test, h0 indicates that there is no significant difference between the mean of intangible assets in terms of export intensity in organizations and h1 indicates that at least one of the mean pairs are not equal. table 9. relationship between intangible assets and export intensity (source: research finding) f sig test result 0.673 0.577 accepted according to the result, there is no significant difference between organization’s intangible assets and exports intensity among the export firms (table 9). 5. conclusions the main difference between foreign markets and domestic markets is the intense competition between companies and organizations. this difference is reflected as higher quality, lower prices and domestic and international competitors. due attention to competitive advantage can be an important factor for survival in global markets. competitive advantage can be achieved through firm’s strategic resources among which, because of 327 business, management and education, 2013, 11(2): 315–332 creating competitive advantage, intangible assets are of a great importance. some resources such as intangible assets are particularly important for firms, because of creating capacity for innovation and achieving competitive advantage, through distinction, and affecting their export behaviour in the long term. hence, if a proper understanding of these resources is provided for corporate managers, it can be expected that they improve the situation of the company, sustain the competitive advantage and develop the export market share with a clear and informed vision. given the importance of these resources, in addition to engaging the senior management in decision-making areas, the measuring of its current situation in the organization and policy making for its improvement is also necessary. in this study, which is conducted to assess the status of intangible assets in export firms’ community, the importance level and ranking of them were measured using mcdm techniques and the relationship between intangible assets and export behaviour was studied. ahp results showed that the human capital ranked first with the weight of 0.347, relational capital ranked second with the weight of 0.259, technological capital ranked third with the weight of 0.181, corporate reputation ranked fourth with the weight of 0.117 and eventually structural capital ranked fifth with the weight of 0.096. as it revealed in the ranking, human capital is introduced as the most important factor among the intangible assets and particularly among the intellectual capital. according to topsis results the relative approach degree of indices to the ideal solution, human capital placed in the first place (cci = 0.941), relational capital in the second place (cci = 0.713), technological capital in the third place (cci = 0.657), corporate reputation in the fourth place (cci = 0.568) and structural capital occupied the fifth place (cci = 0.499). these results emphasis on human resources more than other aspects; it must be considered and noted more than ever and be placed on top corporate development program priorities. in addition, given that strengthening human capital can underlie the continuous presence of firms in the international business, therefore it is essential that we change our view and attitude towards the human capital of export firms considering its undeniable importance. to improve and promote this strategic resource, we recommend the establishment of strategic human resources management in the export community. to study the behaviour of export firms, we reviewed two variables including quality of presence in the market and export intensity. according to the quality of presence in the market, active companies were divided into three categories including permanent, periodical and occasional. according to obtained results, there is a significant difference between intangible assets of the organization and the quality of presence in the market by export firms. those results revealed that there is a significant difference between permanent and occasional presence in the market and the level of intangible assets of firm in a way that mean of intangible assets of firms with permanent export in the area under study is higher than that of firms with occasional export. in addition, permanent presence in the export market with the mean of 3.707 and periodical presence with the mean of 3.361 are placed in the first group and periodical presence along 328 s. m. tabatabaei nasab et al. casting a resource-based view on intangible assets and export behaviour with occasional presence with the mean of 3.115 is placed in second group. according to these results, it can be stated that firms with periodical export are in the transition stage, which in case of strengthening their intangible assets they become permanent exporters and otherwise they may fall into the occasional export companies’ category. the second variable was export intensity i.e. export-sales ratio, according to which firms in this field are classified into four categories including less than 10 percent, between 11 to 25 percent, between 26 to 50 percent and more than 50 percent. based on the results we can conclude that there is no significant difference between organization’s intangible assets and the export intensity in the export firms. so in addition to intangible assets of the organization, probably other factors such as type of industry, export commodity and selected export markets have a great impact on export intensity and accurate comment on this issue require further careful investigations. for this purpose it is recommended that the relationship between intangible assets and intensity of exports be studied considering the type of industry and export commodity including raw material or finished good. according to the results of this study, the following practical recommendations are provided: 1. given that achievement of sustainable competitive advantage depends upon having an acceptable level of intangible assets (which according to our results were higher in firms with permanent presence) therefore, we suggest that managers and policy makers should pay due attention to strengthening strategies for these resources regarding their importance in various areas of industry and business. considering that intangible resources are not imitable by competitors, the competitive advantage obtained by them is sustainable and thus will result in stability and even export development. 2. according to inevitable importance of human capital among all types of intangible assets, it is necessary for the managers to change their view toward the human capital in the export community. hence, to optimize and improve this strategic resource we recommend that the strategic human resource management to be established in the mentioned community. in order to improve the human capital in the export firms, managers should be considered personnel empowerment (including enhancing performance and skill level, supporting innovation and intelligence, employees training and educational programs), knowledge management (including knowledge acquisition, sharing and utilization) and supportive organizational culture (including risk taking, supporting new ideas, encouragement to cooperation, efficient salary system) as their priority in strategic planning. 3. taking into account that the mean of intangible assets in the firms with permanent export is greater than that of firms with occasional export, we can infer that intangible assets play a significant role in developing weak firms into strong ones. hence, it is suggested for weak firms to first evaluate and measure the level of above mentioned resources in their unit, then considering the firm’s priorities and 329 business, management and education, 2013, 11(2): 315–332 abilities, the operational plans and quantitative objectives to be set in order to optimize the level of intangible assets. for instance benchmarking prosperous and pioneer companies can be helpful in setting the targets and taking the steps towards achieving them. 4. according to our research findings, intangible assets have a direct impact on export development; therefore, reviewing, monitoring and improving these variables must be a priority in the senior manager’s agenda. in this regard implementing intangible assets excellence models by public institutions and export councils in evaluating export firms could be helpful for supporting successful strategies. 6. further research in order to conduct further research the following suggestions are provided to researchers: 1. further study on intangible assets development procedures in industrial units based on the type of industry and then comparing the results to that of current research could bring more insight in this area. therefore, we suggest the future researchers to focus their work on comparisons among industries. 2. given that no significant difference between intangible assets of export firms and their export intensity was observed, we recommend further accurate study of this relationship in future studies. it could include study of the relationship between intangible assets and export intensity regarding type of industry and type of export commodity (raw 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wheelen, t.; hunger, d. 2000. strategic management business policy. 7th edition, prentice hall. seyyed mohammad tabatabaei nasab. is an assistant professor and the dean of faculty of economics, management and accounting at yazd university. his area of interest falls into the marketing, human resource management and intellectual capital management. mohammad ali farhangnejad. is a phd candidate in the faculty of management and economics at tarbiat modares university (tmu). his area of interest includes knowledge management, performance evaluation and science and technology policy. babak naysary. is a phd candidate in department of accounting at international islamic university malaysia (iium). his area of interest includes international business, corporate governance and intellectual capital. liability of construction participants for delays sigitas mitkus1, aurelija sekonaitė2 vilnius gediminas technical university, sauletekio al. 11, lt-10223 vilnius, lithuania e-mails: 1sigitas@mitkus.lt; 2aurelijasekonaite@gmail.com (corresponding author) received 18 november 2010; accepted 15 january 2011 abstract. date of completion is usually set forth in construction contract agreements as one of the most important provisions. also, it is the provision, which is often violated and the violation results in a dispute between the parties to the agreement. analysis of research literature has revealed that most authors analyse and identify causes of delays in construction as well as recommend delay analysis methods omitting or underemphasising the liability of the parties to construction contract agreements for violation of construction completion date. one more problem in this area is the difficulty in applying practices of different countries in a specific country due to differences in legislative frameworks. cases described in research literature are often idealised, while realistic construction projects frequently possess various specific features. this article aims at identifying problems faced when assessing the liability of construction participants for violation of completion date and suggesting ways to handle the problem. keywords: delay, bar diagram/gantt chart, cpm, damages, penalty. reference to this paper should be made as follows: mitkus, s.; sekonaitė, a. 2011. liability of construction participants for delays, business, management and education 9(1): 140–156. doi:10.3846/bme.2011.10 jel classification: m19, k12. 1. introduction construction projects are always specific, as their implementation always requires a lot of different organisational activities. construction projects (design documentation) usually require large investment and strict control of processes, finance and quality. construction operations often pose a threat to human health. in addition, even construction of small installations requires subcontractors’ involvement. therefore, very strict safety and quality control as well as precise scheduling of operations and time limits are a must (lock 2007; dilworth 1992). when the owner decides what to build, it is necessary to choose who should perform these tasks. n. banaitienė and a. banaitis (2006) investigate issues of contractors’ qualification. z. turskis (2008) proposed a multi-criteria method for selection of contractors. once the contractor is selected, we can conclude a contract for construction, with the key b u s i n e s s, ma n ag em e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(1): 140–156 doi:10.3846/bme.2011.10 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 141 business, management and education, 2011, 9(1): 140–156 aspects of cooperation between the parties. elzbieta radziszewska-zielina (2010) has conducted a research on cooperation of partners in construction industry. sigitas mitkus and eva trinkūnienė (2007, 2008) examined the possible options for construction contracts, the building process and the proposed assessment system. laura kaleininkaitė and ingrida trumpaitė (2007) proposed the integrated risk management model. various disputes between parties occur in construction. the behaviour of contractual parties resolving construction disputes was analyzed by violeta keršulienė (2007). defects of construction works and products, and liabilities arising therein, are a frequent cause of disputes in construction, investigated by sigitas mitkus (2004). litigations for construction delays often occur between construction participants. deniz türsel eliiyi, aslihan gizem korkmaz and abdullah ercüment cicek (2009) examined a problem of variable job scheduling. tomasz blaszczyk and maciej nowak (2009) analyzed the problem of project planning, alignment of the project implementation time and costs, and proposed a new methodology based on computer simulations and the interactive approach. causes of delay in construction projects have been surveyed by sadi a. assaf and sadiq al-hejji (2006). proposals on identification of causes of construction delays in traditional contracts in jordan have been outlined by abdalla m. odeh and hussien t. battaineh (2002). causes and effects of delays in malaysian construction industry have been addressed by murali sambasivan and yau wen soon (2007). they have identified 10 most important causes of delay from a list of 26 different causes and 6 different effects of delay. essam k. zaneldin (2006) has conducted a research on delay-related construction claims in the united arab emirates and presented recommendations on how to reduce/prevent claims in the construction sector. david arditi and thanat pattanakitchamroon (2006) have discussed delay analysis methods and posted recommendations on how to select a situation-specific method. chih-kuei kao and jyh-bin yang (2009) have identified the windows analysis method as the most precise delay analysis method, and recommended findings of their research as being useful for analysts addressing delays in construction. g. sweis, r. sweis, a. abu hammad and a. shboul (2008) found that the most important cause of delay is financing, while weather conditions, changes in authorities and laws, as delay factors, are ranked lower. most authors analyse and identify causes of delays in construction as well as recommend delay analysis methods omitting or underemphasising the liability of the parties to construction contract agreements for violation of the construction completion date. one more problem in this area is the difficulty in applying practices of different countries in a specific country due to differences in legislative framework. cases described in research literature are often idealised, while realistic construction projects often possess various specific features. this article aims at identifying problems faced when assessing the liability of construction participants for violation of the construction completion date and suggesting ways to handle the problem. in this research, specific problems are identified on the basis of realistic cases of delays in construction. 142 s. mitkus, a. sekonaitė. liability of construction participants for delays 2. construction scheduling methods in order to assess whether the construction completion date has been violated, the diagram/chart that demonstrates scheduling of construction works should be analysed first of all. construction works are scheduled on the basis of the deadline fixed in the contract for the completion of construction or its component, the volume of construction works and available production capacity. scheduling of construction projects is more realistic when likely hindrances are taken into account. such hindrances may be directly dependent on a client, contractor or other construction participants, or be unforeseen (zavadskas et al. 2009). the main project planning/scheduling methods used in construction projects are as follows: − bar diagram (gantt chart, linear chart); − flow diagram and − network diagram. 2.1. the use of a bar diagram for project planning a bar diagram is a textual-graphical tool presented in the form of a table. it can be divided into two parts: calculated parameters and time scale. the first part contains information on the volume of anticipated construction activities/tasks, labour costs, composition of construction team and time of activities expressed in figures. in the second part of the diagram, the duration of activities/processes is presented graphically in a time scale as a certain bar, which length is proportionate to the duration of works, i.e. the beginning of the bar indicates a calendar start date and the end of the bar indicates a calendar end date for works (fig. 1) (zavadskas et al. 2009; būda, chmieliauskas 2006). fig. 1. simplified bar diagram (model) (source: zavadskas et al. 2009) no. activity/task duration in days months days 1 first activity 1 2 second activity 2 3 third activity 4 4 fourth activity 4 5 fifth activity 3 6 sixth activity 3 bar diagrams are widely used in constructions for easy display of activities/tasks and clear linkage with certain time for their completion. being graphic and easy to understand, bar diagrams used to be the only activity scheduling method for a long time. 143 business, management and education, 2011, 9(1): 140–156 bar diagrams are still widely used in modern practices but, due to quite many defects, rather as supplementing other diagrams/charts (абрамов, манаенкова 1990). without using relevant software (which is usually the case in lithuania) for drawing bar diagrams, the main problem arises in analysis of the bar diagram as it does not allow measuring the impact of one or several delays on the subsequent construction works and the overall duration of construction. in addition, it is difficult to identify the most important activities that must be given the primary attention of a construction manager and that have effects on the overall duration of the construction; it is often impossible to identify progress of works/processes at each moment of time, i.e. the existence and span of a delay or advancement in construction. 2.2. the use of a flow diagram for project planning a flow diagram is used in construction of a number of similar buildings, floors and/or sections. in case of the flow diagram technique, each construction team is responsible for its respective portion of activities/tasks, which can be numerous. a construction team starts with its portion of tasks in the first building/floor/section (out of several identical ones) and, after finishing the task, moves to another building/floor/section to perform the same activities/tasks there. in the first building/floor/section, the first construction team is replaced by the second one, which performs operations delegated to it and, after completion thereof, moves to the second building/floor/section where the first construction team is supposed to have completed its operations (and the site is ready for the second construction team) and moved to the third building/floor/section. basing on this principle, operations are continued until the last construction team completes its operations in the last building/floor/section (абрамов, манаенкова 1990). a flow diagram enables synchronisation of several activities/tasks. likewise, it means uninterrupted work, use of building materials and technical resources (zavadskas et al. 2009). the main bottleneck of this method is occasional difficulties to ensure uninterrupted flows of materials and machinery. in addition, any delays in operations in one building/floor/section may impact on construction commencement and completion dates in all subsequent buildings/floors/sections (unless construction works are intensified). a flow diagram is convenient and easy to use when identical or similar operations of identical or similar volume are to be successively performed in all floors (sections) of a building. in this case, it is easy to identify the causes of delay in a certain construction milestone and the effects of such delay on the commencement of other milestones. however, floors or sections are not always identical or similar (the space of lower floors can be significantly bigger compared to upper floors, i.e. buildings get narrower in upper floors; floors can differ in height; some floors may have a number of partitions, while others can have none, etc.). the above-mentioned reasons may determine unsuitability of a flow diagram for the planning/scheduling of the entire construction. the flow diagram is therefore not a universal method and cannot be used for the planning/scheduling of all and any construction works. 144 s. mitkus, a. sekonaitė. liability of construction participants for delays 2.3. the use of a network diagram for project planning the use of a network diagram for project planning involves two basic methods (neverauskas et al. 2007): − pert (program evaluation and review technique). the pert method is used for a project duration analysis in order to evaluate the probability of completing a project on a given date (būda, chmieliauskas 2006). − cpm (critical path method) is used to identify the critical activities. when the computed earliest start time is less than the latest start time, the difference between them represents the slack time. the critical path is the path in which none of the activities have slack, that is, the earliest and latest start times are equal (būda, chmieliauskas 2006). graphical representations and computation of mathematical parameters are the same in both cpm and pert techniques. however, these methods differ in that the pert method is a statistical one, using a probabilistic approach to task duration and three time estimates: optimistic, most likely and pessimistic, while the critical path method is a deterministic one, using point estimates for task durations and determining the average project duration (būda, chmieliauskas 2006). a simple example of a network diagram is illustrated in figure 2. project events are depicted as nodes on the network. three arrows leading to one node means that all three precedent activities must be completed before starting the next activity. the diagram is drawn in such a way that one activity can give start to 2 (or 3 or more) subsequent activities or vice versus. fig. 2 shows that 11 activity arrows are connecting 10 event nodes (lock 2007). fig. 2. network diagram (model) (source: lock 2007) 1 2 4 7 9 10 3 6 5 8 in a network diagram, the full path is a part of the diagram from the start-event (construction start) to the end-event (construction completion). the network diagram may contain numerous of full paths from the start-event to the end-event, all full paths having a certain time slack, as compared to the critical path. accordingly, activities on the paths can have their time slacks, too. the time slacks indicate that activities may have (and do have) different start and end times. these time slacks and activity start/end times are the parameters of the network diagram. 145 business, management and education, 2011, 9(1): 140–156 taking into account the sequence of technological activities, the longest sequence of activities can be determined. the longest sequence of activities is the critical path. activities on the critical path are critical activities. the critical path impacts on the overall duration of a construction project. delay in critical activities for whatsoever reason increases the overall duration of construction (construction completion date is delayed as compared to baseline construction). comparison of a network diagram and bar diagram/flow diagram demonstrates the following differences of the latter: − clear activity linkage and technological sequence of activities; − possibility to identify activities, completion of which most of all adds up to the longest overall duration of construction; − possibility to compare several alternative sequences of activities and to choose the best one in order to utilise limited resources in the most optimal way (абрамов, манаенкова 1990). the brief overview of the main construction scheduling methods evidences that a network diagram is the most suitable method for evaluation of effects of a delay in a construction milestone/activity on the subsequent construction milestones/activities. the benefits of the network diagram, as compared to other methods, are indicated above. currently used other methods have taken over some parameters of the network diagram. therefore, the aforesaid goal may be also achieved by using bar diagrams or flow diagrams supplemented with the parameters of the network diagram. 3. liability for violations of the construction completion date date of completion is usually set forth in construction contracts and agreements as one of the most important provisions (krol 1993). also, it is the provision, which is often violated and the violation results in a dispute between the parties to the contract. 3.1. general principles of contractual liabilities liability for the violation of the construction completion date, like for any other contractual violations, should be defined in a construction contract between a client and a contractor of construction works. unless specifically defined in the agreement, liability defined in the civil law shall apply to these contractual relations. general principles of liabilities are discussed in the civil code of the republic of lithuania (cc). article 6.258 of the cc stipulates two types of liabilities, i.e. damages and penalty, which can be specified in further detail. therefore, the civil law stipulates the following types of contractual liabilities (fig. 3). 146 s. mitkus, a. sekonaitė. liability of construction participants for delays contractual liabilities damages penalty direct indirect fine default interest 3.1.1. direct and indirect damages damages represent a specific type of contractual liability, as it can be applied in all cases except for rare cases that can be prescribed by the law or stipulated in a contract. accordingly, compensation for damages is a general type of civil liability imposed for any violations of contractual obligations. in legal terms, damages are understood as negative consequences on the property-related status of an aggrieved party caused by unlawful actions. it is a characteristic of compensation for damages that the non-performing party has to pay money or transfer some assets to the creditor’s possession. compensation for damages is therefore always of a property nature. in civil law, the principle of compensation of damages in full is prevailing, except for cases when liability is limited by law or contract. article 6.251 of the cc stipulates that the court, having considered the nature of liability, the financial status of the parties and their interrelation, may reduce the amount of repairable damages if awarding full compensation would lead to unacceptable and grave consequences. however, the reduction may not exceed the amount, for which the debtor has or ought to have covered his civil liability by compulsory insurance. a liability to compensate for damages appears when a party suffers damages as a result of the violation of legal relations, i.e. suffers negative consequences on its property status. the damages may consist of two parts: − direct damages (the expenses incurred); − indirect damages (the incomes, of which a person has been deprived of). direct damages are reduction or loss of actual property. such damages include expenses incurred by an aggrieved person in order to restore his/her infringed rights or damaged/lost property. indirect damages consist of the incomes, of which a person has been deprived of, i.e. the income that would have been received if unlawful actions had not been committed. lost profits is the anticipated amount of money, which the concerned person fig. 3. types of contractual liabilities 147 business, management and education, 2011, 9(1): 140–156 has been deprived of as a result of interrupting the activities, from which the income was to be generated. lost profits shall be attributed to damages by the presence of such characteristics as reasonable probability of income to be gained if the violation had not been committed. in this context, income is understood as an amount of money that the party would have received in reality from lawful activities. the amount of direct and indirect damages must be proved by the person who sustained the damages. however, where the amount of damages cannot be proved by the party with precision, it shall be assessed by a court (article 6.249 § 1 of the cc). when assessing damages, prices are taken as a basis. for example, as a result of inflation, the amount of damages may greatly differ due to difference in prices valid on the date of contract signing and the date when the obligation falls due. to this effect, the rules of the assessment of damages are laid down in article 6.249 § 5 of the cc: damage shall be assessed according to the prices valid on the day when the court judgement was passed unless the law or the nature of the obligation requires the application of prices that were valid on the day the damage arose or on the day when the action was brought (ambrasienė et al. 2006). 3.1.2. penalty: fine and default interest penalty has a double nature. on the one hand, it is one of measures to ensure performance of obligations, i.e. to define, by law or contract, an amount of money payable by the debtor to the creditor for non-performance or defective performance of an obligation. on the other hand, it is a type of liability. penalty consists of a fine and default interest. a fine is a particular amount of money or a certain percentage of the amount of infringed obligation determined in advance by the law or contract. default interest is an amount of money fixed by the law or contract for the delay in the performance of an obligation. default interest shall be set for a certain period of time (for each overdue day, week, month and etc.). the primary objective of inserting the interest clause into contracts is to facilitate proper performance thereof. application of penalties and damages together raises, as a property liability, a problem of the relation between damages and penalty, as imposition thereof independently one from another would result in violation of the principles of civil liability. the objective of civil liability is to restore the infringed rights of the aggrieved party without constituting a source of enrichment for the aggrieved party. the relation between damages and penalty is defined in article 6.258 §2 of the civil code: in the instances where penalty is established, the creditor may not concurrently demand from the debtor the performance of the principal obligation and the payment of the sum stipulated in the penal clause (the penalty) except in the cases where the time-limit of performance of the obligation is delayed by the debtor. an agreement providing for any other stipulation shall be null and void. in the event of a claim for compensation of damages being made, the penalty shall be included in the damages (ambrasienė et al. 2006). 148 s. mitkus, a. sekonaitė. liability of construction participants for delays 3.2. exemption from contractual liabilities inflicted damage does not always involve application of civil liability. it depends on the determination of the grounds for civil liability to appear. however, if the required grounds for civil liability are determined, it is necessary to check the existence of grounds for non-application of civil liability. pursuant to article 6.253 of the cc, civil liability shall not apply and a party shall be completely or partially released from its civil liability on the following grounds: − a superior force (force majeure); − actions of state; − actions of a third party; − actions of the aggrieved party; − the state of necessity; − self-defence; − self-help. a superior force (force majeure) is unavoidable events that cannot be controlled or escaped by a party, and which were not and could not have been foreseen. a party shall be exempted from liability for non-performance of a contract if it proves that the non-performance was due to the circumstances, which were beyond its control and could not have been reasonably expected at the time of the conclusion of the contract, and the arising of such circumstances or consequences thereof could not be prevented. unforeseeability (meaning that the circumstance has not been foreseen and could have not been reasonably expected by a person) and unavoidability (meaning that arising of the circumstance was of an objective nature and prevention of such circumstance or its consequences was beyond the person’s control) are the main characteristics of force majeure. force majeure is understood as an event beyond human control, as a circumstance related to natural and/or social phenomena. actions of state are binding and unforeseen actions (acts) of public authorities, which render the performance of an obligation impossible, and which could not be disputed by the parties. activities of a third person are injurious actions committed by a person for whom neither party to the contract is liable. actions of the aggrieved person are the actions committed through the fault of the aggrieved person himself and resulting in the appearance or increase of his damages. such actions are of a dual nature: consent of the aggrieved person to suffer the damage (actions of the aggrieved person explicitly expressing his striving to suffer the damage) or assumption of the risk (understood as the assessment of a realistic threat of damage and determination to act in a way chosen at his own discretion, when a possibility for the damage to occur is foreseen but own intentions are not renounced). 149 business, management and education, 2011, 9(1): 140–156 the state of necessity is a circumstance when a person is compelled to cause damage in order to avoid imminent occurrence of greater damage to the person who has already sustained damage or to any other person. self-defence is considered to be the actions committed by a person with the purpose of defending himself or another person, property, inviolability of dwelling, other rights, and interests of the society or the state against commenced or imminent unlawful dangerous assault, providing that such actions do not exceed the limits of self-defence. self-help is an autonomous ground for releasing from civil liability. it differs from self-defence in that self-defence implies defending himself against assault or danger, but the person has no intentions to enforce his right. in case of self-help, a person is compelled to enforce his right under conditions when it is impossible to receive timely assistance from public authorities and when the implementation of that right would be rendered impossible or essentially obstructed unless such actions are taken (ambrasienė et al. 2006). 4. problems faced when determining liability for a delay in construction suppose a construction project is in progress. there appear delays in relation to the baseline construction followed by delays in the interim and the final date of completion. the client blames the contractor for all delays, terminates the contract and files a claim against the contractor for compensation of all damages indicated in the plaintiff’s claim plus penalty. the situation seems to be quite simple, but in reality there are some problems likely to be faced during the investigation of a particular case of construction delays (see fig. 4). fig. 4. problems faced when determining liability for a delay in construction problems correct qualification of circumstances present during construction works identification of the effects of a relevant increase in activity time on the overall duration of construction works problem of ascertainment of fault problem of establishing the amount of damage 150 s. mitkus, a. sekonaitė. liability of construction participants for delays 4.1. correct qualification of circumstances present during construction works1 construction often depends not only on wishes and actions of a contractor and client, but on other actions of nature, state or third persons, as well. it is namely the presence of the latter actions that may determine the exemption from civil liability. in such case, neither the contractor nor the client is liable for delays in construction. however, the same circumstances are often differently qualified by different persons (parties to a contract). first, it is necessary to find out whether there were any circumstances present during construction that caused delays in construction irrespective of the actions on the part of the contractor or client, and also irrespective of whether they could be qualified as releasing from civil liability or not. for example, a situation may occur during construction that was absent upon contract signing and thus impossible to be reasonably foreseen by the parties. such situation could result in suspension of construction works, while the parties could neither control nor prevent the situation and the contractor had not assumed the risk of occurrence of the situation, which entailed the need for additional activities not indicated in the contract (construction project). therefore, this situation could be qualified as force majeure by the above described features. yet, different cases involve different situations, and each time it is necessary to identify the features of the situation and its effects on the performance of construction works as well as resultant changes, if any, in the course of scheduled activities, etc. likewise, it is necessary to establish the duration of the situation causing faults and delays in construction. for this purpose official correspondence among the contractor, the client and the designer, construction workbooks, minutes of the meetings of persons supervising construction works and other relevant documentation are carefully analysed. once all the circumstances are determined, the time of meetings regarding the situthe situation and adoption of new design solutions must be measured along with identification of such information as the recorded end of the situation, repetition thereof, if any, and resumption of uninterrupted construction work. all of the above mentioned factors serveall of the above mentioned factors serve for the determination of the length of the situation. finally, when the length of the situation causing faults and delays in construction is established (e.g. in days), interim and final completion date is extended by a relevant number of days. 4.2. identification of the effects of a relevant increase in activity time on the overall duration of construction works currently, performance of construction works is mainly based on bar diagrams. usually the critical path method is used for planning and management of construction projects. the use of diagrams enables construction teams to plan necessary construction resources and properly distribute them so that the project would be completed on time. diagrams 1 qualification means identification of a situation defined in a contract and/or law that corresponds to the actual circumstances occurring in construction. 151 business, management and education, 2011, 9(1): 140–156 drawn on the basis of the critical path method are useful not only for project planning/ scheduling, but also for project management, i.e. monitoring of activities according to the schedule (smith et al. 2001). when investigation is conducted, the type of diagrams used for construction scheduling is to be identified first. if construction works were scheduled using a bar diagram (gantt’s chart), such diagram should be converted into a cpm-based network diagram. then, the investigation is proceeded using the network diagram to identify critical activities and those that do not lie on the critical path, but the completion of which is scheduled on the last construction date (date of construction delivery to the client), as delay in the latter activities would also add up to the overall duration of construction work. likewise, activities with a time slack, i.e. activities that can be more or less delayed without delaying the overall duration of construction works, are to be identified. however, whenever delays in the activities, which are not on the critical path, exceed the overall slack time available, this increase in duration impacts on the overall construction time. the above-described investigation eventually leads to a conclusion as to whether a delay in particular activity added up to the overall duration of construction work. 4.3. ascertainment of fault delays in construction raise a question of fault, i.e. which party is responsible and should pay for it. whenever a delay is caused by client’s actions, contractor’s delay is justifiable. likewise, the client is not entitled to claim damages for a delay caused by its own actions, and the contractor may recover damages suffered as a result of project delays caused by the client (smith et al. 2001). in case of delays in construction, it is often difficult to establish the party at fault. even if it seems that construction delays are the contractor’s fault, the delays may be actually caused by client’s delay to deliver a relevant project component or drawings to the contractor for commencement of construction works. therefore, the first thing to find out is whether the client delivers the construction permit and other documents required for the commencement of construction works on time in each particular case. whenever the client delays the delivery of the documents indicated in the contract, the contractor is entitled to postpone the start time until the date of delivery of the relevant documents and other design (project) documentation. in this case, the interim date and the final construction completion date would be proportionately postponed, and the fault for the delay would lie with the client rather than with the contractor. likewise, it is necessary to establish whether or not the contractor delays construction works without a good reason. if the contractor delays the construction project without a justifiable reason, the fault for the delay will lie with the contractor. 152 s. mitkus, a. sekonaitė. liability of construction participants for delays ascertainment of fault is therefore a complicated issue in civil relations. the party, which first breaks the contract and, at the same time, violates the date of construction fixed in the contract (as bar diagrams and other diagrams/charts can be an integral part of the contract) shall be considered as the non-performing party. in each case, it is necessary to identify the existence or non-existence of circumstances impeding on the timely completion of scheduled construction works during the contract that are likely to justify a certain delay of the interim/final construction completion date. in this case, establishment of the party at fault would not be relevant. 4.4. establishment of the amount of damages there is no uniform methodology approved for the calculation of damages caused by delays in construction. the client may think he suffered greater damages as compared to the contractor’s opinion. the first thing to establish for the investigation is the amount and grounds of damages claimed. the client may claim payment of direct damages (elimination of construction defects, finishing of uncompleted tasks, costs of materials and other costs suffered as a result of delayed and/or substandard construction works, etc.), indirect damages (profits lost from lease of the premises, depreciation of the building and/orprofits lost from lease of the premises, depreciation of the building and/or, depreciation of the building and/or unsold apartments under preliminary contracts of purchase and sale) and penalty (fine and default interest). direct damages shall include all costs and expenses claimed by the client to have suffered by the completion of construction. indirect damages are calculated on the basis of lost profits, i.e. the amount of income to be earned by the client under preliminary contracts of lease and purchase-sale, if the construction was completed on time. in addition, indirect damages include depreciation of the building, i.e. impairment of the value of the building during economic downturn, as compared to its value during economic upturn. penalty consists of fines and default interest. damages can be calculated in different ways on a case-by-case basis. in some cases, damages for delays in construction may be neglected at all if the construction time is not a principal subject matter of the contract. and on the contrary, construction completion time can be the main subject matter of the contract. yet, specific conditions present during construction works must be each time taken into account. as the case may be, there can be circumstances impeding on the timely performance of construction works, as compared to the baseline construction, and thus providing a justifiable ground for certain postponement of the interim/final completion dates, or there can be other factors determining the release from civil liability or relevant limitation of such liability. it’s worth noting that due attention should be paid to calculation of damages under the circumstances, which had the major effects on the delay in construction and whether or not such circumstances could justify the postponement of the construction completion time as compared to the baseline construction. 153 business, management and education, 2011, 9(1): 140–156 5. conclusions it is not always easy to determine the party at fault for construction delays. the fault may lie with both parties and neither of them, as the case may be. likewise, there are multiple causes of delays in construction are frequent. this article addressed the problems that arise in determination of liability of construction participants for violations of construction completion date and possible ways of problem solutions. 1. correct qualification of circumstances present during construction works. while investigating the case, each time it is necessary to identify the existence or nonexistence of the situation impacting on the performance of construction works and resultant changes, if any, in the course of scheduled activities, as well as the duration of the situation causing faults and delays in construction, etc. likewise, it is necessary to establish whether the client and the contractor are of the same opinion about the situation. solution: if the above-described situation occurs during construction works, the situation must be objectively reviewed and its real duration must be established. then interim and final construction completion dates may be extended by adding up the number of days equal to construction delay due to the aforementioned reasons. 2. identification of the effects of a relevant increase in activity time on the overall duration of construction works. while investigating the case, it is necessary to find out and identify whether delay in a relevant activity increases the overall construction duration, i.e. whether or not the activity lies on the critical path and, if it doesn’t, whether the delay in activity lasted so long as to impact on the overall construction duration. solution: first, it is necessary to identify the type of diagrams used for construction scheduling. if construction works are scheduled using a bar diagram (gantt’s chart), it is reasonable to convert it into a network diagram in order to measure how one or several delays impact on the duration of subsequent activities and overall duration of construction works. then, using the parameters of the network diagram, it is quite easy to identify whether or not one or another activity could have added up to the overall duration of construction. 3. ascertainment of fault. it is difficult to identify the non-performing party. for example, the client blames the contractor for delays, while the contractor blames the client for delayed delivery of relevant construction documentation preventing the contractor from timely commencement of construction works. solution: the party, which breaks the contract first (this fact is often difficult to establish as well) and, at the same time, violates the date of completion fixed in the contract shall be considered as the non-performing party. in addition, in each case, it is necessary to identify the existence or non-existence of circumstances impeding on the timely performance of construction works, as compared to baseline construction, and likely to justify a certain delay of the interim/final completion date. in the latter case, establishment of the non-performing party would not be relevant. 154 s. mitkus, a. sekonaitė. liability of construction participants for delays 4. establishment of the amount of damages. there is no uniform methodology approved for the calculation of damages caused by delays in construction. the client may think it suffered greater damages as compared to the contractor’s opinion. solution: specific conditions present during construction works must be each time taken into account. as the case may be, there can be circumstances impeding on the timely performance of construction works as compared to the baseline construction and thus providing a justifiable ground for certain postponement of the interim/final completion dates, or there can be other factors determining the release from the civil liability or relevant limitation of such liability. it’s worth noting that due attention should be paid to calculation of damages under the circumstances, which had the major effects on the delay in construction and 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sekonaitė santrauka paprastai statybos rangos sutartyje kaip viena iš svarbiausių sąlygų būna numatyti statybos darbų vykdymo terminai. neretai ši sąlyga pažeidžiama ir šis pažeidimas būna ginčo tarp sutarties šalių pradžia. atlikus mokslinės literatūros analizę, pastebėta, kad dauguma autorių tiria ir nustatinėja statybos termino praleidimo priežastis bei siūlo termino praleidimo analizės metodus, neskirdami arba mažai dėmesio skirdami statybos rangos sutarties šalių atsakomybei už terminų praleidimą. taip pat šioje srityje iškyla problemų dėl to, kad dėl teisinės sistemos skirtumų sunku pritaikyti savo šaliai skirtingų šalių patirtį. mokslinėje literatūroje pateikiami atvejai neretai yra idealizuoti, o realiuose statybos projektuose pasitaiko įvairių ypatybių. šiame straipsnyje nustatoma, kokios problemos iškyla vertinant statybos dalyvių atsakomybę už statybos terminų pažeidimus, ir siūlomi šių problemų sprendimo būdai. reikšminiai žodžiai: uždelsimas, gantt diagrama, cpm, nuostoliai, netesybos. sigitas mitkus is a doctor, prof., chairman of dept of law, vilnius gediminas technical university (vgtu). civil engineer (1985, vilnius civil engineering institute), lawyer (2000, vilnius university), doctor of science (1992, vilnius technical university). research interests: construction law, building contract law and management. aurelija sekonaitė is a master’s degree student of dept of construction technology and management, vilnius gediminas technical university (vgtu). research interests: construction law. copyright © 2017 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. new trends of development of beer industry in lithuania – diversification and social responsibility vladislavas petraškevičius1, zlatko nedelko2 1faculty of business management, vilnius gediminas technical university, sauletekio al. 11, lt-10223, vilnius, lithuania 2faculty of economics and business, university of maribor, razlagova 14, 2000 maribor, slovenia e-mails: 1vladislavas@vienaspasaulis.lt (corresponding author); 2zlatko.nedelko@um.si received 01 march 2017; accepted 11 june 2017 abstract. the main purpose of this article is to outline the current challenges of beer industry in lithuania and provide suggestions for future development of organizations in this industry, by focusing on diversification strategy and social responsibility. the main challenges of lithuanian beer industry are related to finding ways of future development in a constantly contracting market, as well as to find a competitive strategy of market penetration. in connection of these challenges, product differentiation creates new benefits for the consumers. however this strategy proves itself not being sufficient to reach the desired goals. diversification of portfolio, being more risky, gives opportunity to target new customer groups and increase market presence. however, both strategies are less effective without changing the culture of drinking and consumer perceptions of beer. these issues will be addressed through the lenses of social responsibility, by emphasizing the promotion of responsible alcohol consumption and responsible behaviour of beer industry. as a result, the customers have to be ready to pay higher price for new products and develop a more responsible culture of beer consumption. to overcome outlined challenges, organizations in lithuanian beer industry, must rethink their existing strategies and operations. based on proposed future directions, the paper provides suggestions for business practices, how to implement differentiation strategy and actions in order to increase the level of social responsibility of various stakeholders. keywords: beer industry, lithuania, differentiation, diversification, social responsibility, beer consumption, responsible drinking. jel classification: m31, m110, m210, m290. 1. introduction nowadays, business environment organizations are faced with different challenges every day. beer industry, however, is not an exception. in lithuania it is operating in a very bu si n e s s, man ag e m e n t a n d ed u c ati o n issn 2029-7491 / eissn 2029-6169 2017, 15(1): 140–157 doi:10.3846/bme.2017.367 file:///c:/d%20a%20r%20b%20a%20i/z%20u%20r%20n%20a%20l%20a%20i/bme/txt/../../../appdata/local/microsoft/appdata/local/microsoft/windows/inetcache/appdata/local/vladislavas/appdata/local/microsoft/windows/temporary internet files/content.outlook/ag2ozdrx/vladislavas@vienaspasaulis.lt mailto:2email2@email.com https://doi.org/10.3846/bme.2016.367 https://doi.org/10.3846/bme.2017.367 141 business, management and education, 2017, 15(1): 140–157 “unfriendly” business environment characterized by increasing competition, unstable and constantly changing legislation and government regulation. the public opinion is getting more and more negative towards the alcohol consumption due to the fact, that post-soviet lithuanian consumers have inherited the wrong habits of drinking, preferably big quantity of strong alcoholic beverages (stumbrys 2017). by focusing on beer market in lithuania we can outline that beer producers and importers are looking for new ways to penetrate market by offering new products and services and using new communication tools with the customers, like internet advertising, direct communication, articles in media and so on. taking into consideration the current characteristics of beer industry, market conditions, public opinion, existing culture of drinking and general challenges of nowadays business, we can outline the beer producers and importers have to focus not only on the production of alcoholic beverages, but also need to adopt different programs to develop a new culture of consumption and strive toward sustainable working and behavior of organizations. in other words, differentiation can be achieved by adding new values to existing brands and making them more attractive and different from competitors. therefore social responsibility refers to the balance among economic, social, and environmental sustainability (dunphy et al. 2000; elkington 2004). identified challenges represent important obstacles for organizations in beer industry, if they are going to work on current patterns of operations and behavior. in that frame, the current literature and practice do not provide a clear answer how key challenges can be addressed in organizations and what actions are most promising for future success of organizations. this paper offers organizations involved in beer industry strategies of future development and outlines possible actions in order to address above challenges. in terms of improved culture of drinking, this culture considers wider variety of new and more expensive products, based on understanding “drinking less, but better quality product”, as well as putting focus on / offering more non-alcoholic beer and ecological beer products. in terms of improved social responsibility within organizations, the main focus is on establishing sustainable operations and behavior. this may include like improving the producing technology, collaborate with partners in supply chains that are socially responsible, finding sustainable suppliers, and so on. the paper is structured as follows. first half of the paper is dedicated to the theoretical cognitions about beer market in lithuania, followed by basic starting points to understand differentiation strategies of market penetration, developing communication and social responsibility of organizations. second half of the paper is devoted to the discussion about possible ways to address outlined challenges, through the lenses of product differentiation and social responsibility. in that frame practical implications and recommendations are outlined for organizations. 142 v. petraškevičius, z. nedelko. new trends of development of beer industry in lithuania – diversification and social responsibility 2. literature review and background the development of competitive strategy. the major brewers distinguish some of the key activities of strategic directions that will be most relevant in the coming years, when the brewers market is likely to continue to operate a long-standing negative trend of tightening regulation and prohibitions. the main directions for development are considered the following: category product development and differentiation; category diversification, beer imports, craft beer renaissance; development and promotion of social responsibility, responsible beer consumption culture based on positive and open communication; energy conservation, socalled “green” solutions, application of innovations; long-term strategic objectives to invest in production and technology upgrading. smith (1956), pride (pride, ferrell 1985) and ferrell (1981) have described product differentiation and market segmentation as alternative marketing strategies due to the fact that “variations in production equipment and methods or processes, used by different manufactures of products designed for the same or similar use” (smith 1956). christensen and montgomery (1981) incorporated both diversification strategy and market structure variables in a study of corporate economic performance. rumelt (1982) has shown an association between diversification strategy and profitability. according to porter’s generic strategies model (porter 1980), there are three basic strategic options available to organizations for gaining competitive advantage. these are: cost leadership, differentiation and focus. porter called the generic strategies “cost leadership” (no frills), “differentiation” (creating uniquely desirable products and services) and “focus” (offering a specialized service in a niche market). he then subdivided the focus strategy into two parts: “cost focus” and “differentiation focus”. on the basis of lithuanian beer manufactures and importers the general strategies are very dependent on two main factors – market size and risk. generally, it can be characterized as outlined in figure 1. fig. 1. different strategies in a context of risk and market size (source: own presentation) 143 business, management and education, 2017, 15(1): 140–157 differentiation focus. picture shows, that cost leadership focus is risky and can be successful in a big market with lower income level. lithuanian beer suppliers were using this strategy in until 2012, when excise duties have started to rise and new regulations, eliminating bigger pet package were introduced together with restrictions on beer lotteries. beer importers, being flexible with volumes imported, were able to use a focus strategy. however, the big beer producers have changed their strategy to differentiation, trying to increase the assortment of lager beers and their quality. they were not able to consider the focus strategy, because it was important to keep the existing minimal production volume. the focus on very specific customers with specific requirements in a contacting market was not able to guarantee the minimal production volume and operations over the breakeven point. they put focus on the unique features of their products (especially new) promoting their taste and other specific benefits, explaining what makes them different from competitors. it has increased the costs and price, but was less risky, than to compete only with the low price. this process was described in a blue ocean strategy (kim, mauborgne 2005). based on a study of 150 strategic moves spanning more than a hundred years and thirty industries, kim and mauborgne (2005) argue that companies can succeed by creating “blue oceans” of uncontested market space, as opposed to “red oceans” where competitors fight for dominance, the analogy being that an ocean full of vicious competition turns red with blood. however, when every player is starting to use the similar approach to the market, the same number of customers, drinking beer will not suddenly start to drink more. having in mind, that the duties continued to rise and emigration was increasing, it was necessary to develop new strategies of market penetration and expansion. diversification focus. diversification is one of the four main growth strategies defined and developed by ansoff (1957). his matrix is outlined in figure 2. ansoff pointed out that a diversification strategy stands apart from the other three strategies. whereas, the first three strategies are usually pursued with the same technical, financial, and merchandising resources used for the original product line, the diversification usually requires a company to acquire new skills and knowledge in product fig. 2. ansoff matrix (ansoff 1957) 144 v. petraškevičius, z. nedelko. new trends of development of beer industry in lithuania – diversification and social responsibility development as well as new insights into market behavior simultaneously. this not only requires the acquisition of new skills and knowledge, but also requires the company to acquire new resources including new technologies and new facilities, which exposes the organization to higher levels of risk. montgomery, singh (1984) described the relationship between diversification strategy and systematic risk (beta). beta values were examined for six diversification categories, and it is found that betas for unrelated diversifiers are significantly higher than those of other firms. ducassy, prevot (2010) argues, that there is a negative relationship between the presence of a shareholder block and the level of diversification only for non-family businesses. this result emphasizes the particularity of family businesses in terms of the links between governance structure and business strategy. at the same time palepu (1985), using diversification index measures, examined corporate diversification and economic performance and failed to find any significant relationship between them. ginevičius (1998) also presented the analysis of measurements of diversification and their relation for corporate management. in his opinion, differentiation is a natural process and every company can use this option for increasing presence in the market and even share the operation risk do not “keeping all eggs in one basket”. social responsibility. over decades various initiatives to preserve the environment for future generations emerged (dunlap, mertig 1990; elkington 2004) and are examined under different names, like triple bottom line (elkington 2004), corporate social responsibility (csr) (foote et al. 2010), social responsibility (blackburn 2007; potocan et al. 2013), agenda 21 (bullard 1998), sustainable development (beckerman 1994) and sustainability (clayton, radcliffe 1996). involvement of organizations into actions related to preserve our environment for future generations has been constantly rising over last decades. there have been several discussions among academics and practitioners regarding the level of organizational involvement in sustainability activities (beckerman 1994; mitchell et al. 1997; agle et al. 2006; dima et al. 2013). major arguments for organizations to perform those activities are related to (certo, s. c., certo, s. t. 2009): (1) the fact that organizations have significant impact on such critical issues as environmental pollution, influencing quality of people in neighborhood of organizational premises, (2) the fact that organizations are open system, thus they should listen to what must be done to sustain or improve social welfare, (3) severe depletion of natural resources, increased social problems, and greed for profits, in last decades, and (4) increased role and importance of national legislation, european union legislation, activist groups, non-governmental organizations, customers, etc., for sustainable development. sustainability refers to the balance among economic, social, and environmental sustainability (dunphy et al. 2000; elkington 2004). it is a holistic concept, emphasizing that none of the development goals of economic growth, social well-being, and the wise use of natural resources can be reached without considering and affecting the 145 business, management and education, 2017, 15(1): 140–157 other two (beckerman 1994; clayton, radcliffe 1996). organizations with their actions and behavior importantly influence on natural and social environment (e.g. depletion of the resources, pollution) or often cause (or at least trigger) different misconduct. in that framework, the focus of the literature is to study/examine sustainability issues at the organizational level (beckerman 1994). in last decades, there have been several well-known examples of different kind of misconducts, in terms of natural and social environment, as well as financial abuses (valentine, fleischman 2008). sustainability encompasses much more than just balancing profit with people and planet aspects, based on the concepts and standards of sustainability, developed through last decades. according to the findings of different authors a number of key elements or principles of sustainability can be derived, namely (beckerman 1994; clayton, radcliffe 1996; munda 1997; dunphy et al. 2000; hitcock, willard 2009; baumgartner, ebner 2010): (1) sustainability is about balancing or harmonizing the social environmental and economic interests. in order to contribute to sustainable development, a company should satisfy all “three pillars” of sustainability: social, environmental and economic; (2) sustainability is about both short and long term orientation. a sustainable company should consider long-term consequences of their actions, and not only focus on short-term gains; (3) sustainability is about local and global orientation. the increasing globalization of economies affects the geographical area that organizations influence. the behavior and actions of organizations therefore have an effect on economic, social and environmental aspects, both locally and globally; and (4) sustainability is about consuming income, not capital. sustainability implies that the natural capital remains intact. this means that the extraction of renewable resources should not exceed the rate at which they are renewed, and the absorptive capacity of the environment to assimilate waste, should not be exceeded. furthermore, sustainability is about transparency and accountability (cancer, mulej 2009). the principle of transparency implies that an organization is open about its policies, decisions and actions, including the environmental and social effects of those actions and policies, to stakeholders that could be interested in or affected by these actions. the principle of accountability implies that an organization accepts responsibility for its policies (e.g. dedication to support sport; commitment to contribute to the repairing local roads, due to the activities of organization), decisions and actions, and is willing to be held accountable for these. sustainability is also about personal values and ethics. sustainable development is inevitably normative concept, reflecting values and ethical considerations of the society. thus, importance of societal values could reflect national policies; while employees also in their sustainable behavior in organizations. for instance, for those employees, for which for preservation of natural environment is highly important, will give more attention to these issues also in terms of his/her behavior in organization (potocan et al. 2013). part of the change needed for a more sustainable development, will therefore also 146 v. petraškevičius, z. nedelko. new trends of development of beer industry in lithuania – diversification and social responsibility be the implicit or explicit set of values that project management professionals, business leaders or consumers have and that influence or lead their behavior. 3. beer market in lithuania during a visit to lithuania by the world health organization (who) representative reported that the lithuanians – the most alcohol consuming nation in the world. according to who, in 2016 the average consumption of pure (100%) alcohol per capita in lithuania is close to 16 liters. this unit is designed to unify the published statistics, in order to compare different countries (zubrutė 2017). the department of statistics of lithuania announced that 2016 data is not yet systematized. however, in 2015 department declared, that everyone, who is older than 15 years, consumed more, than 14 liters of pure alcohol. the calculation has been provided according to older method and estimated 14.5 liters, which were consumed. at the same time, the who estimated 15.4 liters that were consumed in 2015. in fact, lithuanian statistics in their calculations do not include illegal alcohol, what makes a difference in calculations with who. nevertheless, who is right, it generally shows a big problem in connection of alcohol consumption in lithuania. however, during the past several years the total alcohol sales (including beer) were constantly decreasing, and it shows a positive trend in all alcohol categories. details are summarized in figure 3. the recent challenges in beer industry. global beer consumption is much higher, than consumption of any other alcoholic drink, not only in terms of volume, but also in value terms, and the gap is growing. in 2007, the value of global beer consumption was around 112 billion eur, compared to 55 billion eur for wines and 94 billion eur for spirits or other alcoholic drinks (swinnen 2011). the beer industry today is the largest in fig. 3. sales of different alcoholic beverages in lithuania in 2012–2016 (oficialiosios statistikos portalas 2016) 147 business, management and education, 2017, 15(1): 140–157 the total beverage sector in lithuania. according european economics chancery house survey lithuanian state from the beer sector through direct and indirect taxes received around 190 million eur per year. details are outlined in figure 4. lithuania beer industry is one of the most profitable industries in the country. since then, when lithuania became independent (1991), the beer industry has changed morally, technically and technologically. brewers promote competition between them to produce better quality beer, upgrade equipment and improve communication with the customers. however, since 2010, the beer industry in lithuania is facing significant decline, which is characterized by market contracting and decrease of production volume. according to nielsen lithuanian retail sales index, the country’s beer market has dropped significantly in 2012–2013, when 5.6 and 6.5 per cent loss was recorded. in 2014 the 5.3 percent growth was registered which has provided encouraging brewers, but next year the hopes again began to break. since 2014 the production volume continues to decrease. production volume of beer in lithuania between 2012 and 2016 are outlined in figure 5. fig. 4. structure of production and imports of alcoholic beverages in lithuania (oficialiosios statistikos portalas 2016) fig. 5. production of beer in lithuania between 2012–2016 (oficialiosios statistikos portalas 2016) 148 v. petraškevičius, z. nedelko. new trends of development of beer industry in lithuania – diversification and social responsibility the largest beer producers. beer market is concentrated in the 3 largest brewers, which have more, than 70% of the lithuanian beer market. the market is not a monopoly, but the leader is “švyturys – utenos alus” (sua) brewery. the production decrease was highly influenced by beer price wars in the lithuanian market, which began in 2014, when kalnapilis tauras group and volfas engelman began to compete for the bigger market share. the first one cut prices, then the other, and as the market overall, the price changes began to react all of its participants. moreover, it contributed supermarket competition. most of the production is sold in lithuania, therefore the export rate in the country is not very high. the government promotes the development of the beer industry and promotes its growth. three lithuanian breweries are owned by foreign companies. lithuanian brewers want to be competitive in the eu market, so they are trying to reach eu standards, where the most important thing is the quality of the beer. for instance, “švyturys – utenos alus” brewery net profit in 2015 amounted to 1.483 million euro and was nearly 7 times less than the year before, when it stood at 10.246-million-euro company profitability remained unchanged, while net profit was influenced by a binding carlsberg requirement executed sua holding company švyturys-utenos alus holding cessation and for the costs incurred. reducing the net profits was the result of higher excise duty, which švyturys-utenos alus has paid in 2015 – 18.9 million euro, 16.8% more than in 2014. market shares of biggest beer producers are outlined in figure 6. in 2015, sua has sold in the same volume as in 2014 – 10 800 thousand deciliters. however, the general sales volumes increased due to 12.2% – nearly 6.5 million eur increase in export volumes, as well as other categories (soft, energy drinks and cider) sales growth. general lithuanian beer export has started to increase since 2014 and became higher, than imports. details are outlined in figure 7. fig. 6. the main beer producers in lithuania (sapetkaitė 2015) 149 business, management and education, 2017, 15(1): 140–157 lithuanian beer tastes are strongly changing. there are about 400 types of beer in the world. there is a lot of new beers in the market, it becomes a matter of which interest, which delves. unfortunately, long-lithuanian beer was uniformity, a large part of producers mainly used to sell light beer. the relationship of beer sales volumes and population quantity. the major reason for decrease in consumption is emigration, which is increasing drastically. lithuania is a country of emigration, and one of the few migrants “sending” countries of the european union (eu). lithuanian department of statistics declares that totally 615 thousand left the country since 1990. in average 30 thousand people are leaving the country every year. according to international migration organization (tmo 2017), in 2010 more than 83,000 people, have declared their departure. this is almost four times more than in 2009. such a sharp rise in emigration declared is essentially related to the amended law on health insurance. according to this law, all residents registered in lithuania must pay premiums of health insurance to the state. emigrants, who have not declared their departure, also have to pay these contributions. in order to avoid such payments even those, who are only a few years away, officially declared their departure. therefore, in 2010 emigration has increased so dramatically. although these changes have become more reliable migration statistics, it is important to note, that still not all immigrants declares their departure from lithuania. details are outlined in figure 8. the main reason for emigration is that lithuania has relatively low wages and high unemployment level. however, the iom vilnius office study showed that also other socio-economic factors, such as social insecurity, justice, unsatisfactory behavior of employers with employees, as well as better career prospects abroad is highly contributing to the decision to emigrate. meanwhile, the number of arrivals to lithuania is relatively low. during the last decade in lithuania annually arrive about 6 500 people. most of them are returning lithuanian citizens (figure 9). fig. 7. exports and imports of beer in lithuania in 2012–2016 (oficialiosios statistikos portalas 2016) 150 v. petraškevičius, z. nedelko. new trends of development of beer industry in lithuania – diversification and social responsibility therefore, we can observe the relationship between the decreasing beer sales volumes in lithuania and emigration. this is bringing a negative impact for future expectations of beer producers, as well as investors. it is necessary for them to develop a clear strategy, which will allow staying in the market and increasing competitiveness. 4. discussion and practical implications in terms of differentiation versus diversification, it is often less risky to differentiate. this is because it’s an amendment on a pre-existing and an already established product or service, so there is the guarantee that it’s going to have interest. with diversification, there is the risk of too little interest or too much interest. therefore, if you add a new activity/business and interest is not sufficient, that could mean a loss of capital. ordinary businesses do like to diversify though, because market presence, brand and stature are everything. lithuanian beer manufactures since 2012 also started the diversification process. it was characterized the following way: strong shift of production towards nonalcoholic beer, mineral water and soft drinks; foreign beer imports; launching projects for craft beer production. fig. 8. the average annual population in lithuania in 2012–2016 (oficialiosios statistikos portalas 2016) fig. 9. the relation of movers and expats to the returned citizens in lithuania in 2012–2016 (oficialiosios statistikos portalas 2016) 151 business, management and education, 2017, 15(1): 140–157 beer imports. this activity was never performed by lithuanian beer manufactures, as well as the majority of other european breweries. independent european breweries are not willing to give their product for distribution to other local brewery in the target country. the reason is, that the local brewery put the main focus on the own product development. in this case imported products are considered as “competitive products”, which should be eliminated from the market. however here we have different situation. all biggest lithuanian breweries are owned by big international beer manufactures: sua is owned by “carlsberg”, denmark, “kalnapilis-tauras” – by the “royal unibrew”, denmark”, “volfas engelman” – by “olvi”, finland. therefore those lithuanian breweries have started to import beer from their “family” breweries. for instance sua started with “grimbergen” and “kronenbourg 1664”, “kalnapilis-tauras” started to import “faxe” and “heineken”, “volfas-engelman” is importing “warsteiner”, which is also distributed in other markets by its “family” breweries. this way the local breweries are taking away the market share from independent beer importers, and their production is being placed on the shelves of the supermarkets not only together with the local beer, but also with the imported. category diversification and craft beer renaissance. lithuania has used a small brewery definition much outdated and not much revealing. it seems that it is based on the abolished excise regime, under which benefits were applied to small businesses, producing up to 800 thousand deciliters of beer per year. in many eu countries this limit reaches 100–300 thousand deciliters of beer per year (for comparison, one of the european major breweries produce more, than 20 million deciliters per year). it is no secret that the new craft beer wave reached the rest of the world from the united states, and even great britain, which has exported the craft beer trend, today has mostly copies of its technology, style and even the material (the latest british american hops full of citrus). in the us this wave had more than one identity crisis and endless discussion on who is who – meaning the “growth so fast”. another salient trend – “industrial” breweries are willing to take over the pursuit of this sector (of which, until recently one of the most breweries leaders tried to smirk as the “short-term fashion”) with all of its users. everyone wants cake; similar processes are taking place all over the world. however, we have a completely different context. if the united states has a longrunning democracy, law, business, lobbying traditions have known and of prohibition fiasco, and pays the balance of short and big business interests, while in the us the small brewers gained decent rights and has become the fastest growing industry. in lithuania, the legal context is slightly different – a renewed facial combines old aggressive and semi-illegal methods – unregistered lobbying for the benefit of creating special conditions for large businesses, bars bribing, so-called “dirty cranes” (“dirty taps”) or interest-free loans to be issued on the condition marketed exclusively one company provided products, misleading information. 152 v. petraškevičius, z. nedelko. new trends of development of beer industry in lithuania – diversification and social responsibility reflecting the market changes, the biggest breweries in lithuania within the last 12 years, have considerably increased their portfolio of beer into different categories and types (see table 1). at the moment, probably no brewery in europe is producing as many types of different products as in lithuania. table 1. development of assortment of the biggest beer manufactures in 2005–2017 (source: own presentation) beer type beer producer 2005 2012 2017 šv yt ur ys -u te no s b re w er y k al na pi lis ta ur as g ro up v ol fa se ng el m an b re w er y šv yt ur ys -u te no s b re w er y k al na pi lis ta ur as g ro up v ol fa se ng el m an b re w er y šv yt ur ys -u te no s b re w er y k al na pi lis ta ur as g ro up v ol fa se ng el m an b re w er y bottom fermented pilsener lager × × × × × × × premium lager (dortmunder) × × × × × × × helles lager (munchener) × × × semidark lager × × × red beer × × dark lager × × stout lager (porter, bock) × × × × × × top fermented blond ale × dark ale × wheat beer light × × × × wheat beer dark × australian pale ale (apa) × indian pale ale (ipa) × kriek kriek beer (not lambic) × × × nonalcoholic light beer × × × × dark beer × × wheat beer × all types imported beer × × × × all types beer coctails × × × × special craft beer × × × 153 business, management and education, 2017, 15(1): 140–157 development and promotion of social responsibility, responsible beer consumption culture based on positive and open communication. empirically, most economists agree, that past consumption patterns are important factors in explaining present consumption patterns (mccluskey, sheay 2011). with beer, experiences are even more important. it is commonly understood, that beer has an acquired taste. most consumers do not like their first taste of beer. this makes beer an interesting good because preferences for it change with experience. we would expect preferences to increase to a higher level of utility with beer experience. utility for beer could be modelled with a non-decreasing, nonlinear function of past experience, unless dependence for consumption has developed. the effect of culture on consumption and preferences is an open area for research. mccluskey and sheay (2011) are using a logit model in order to analyze the international students’ preferences for the local beers with the following equation: 'y x= β + ε , where y = 1 0 if the subject prefers a local beers otherwise                 ,  β – vector of coefficients to be estimated, ε – error term, which is assumed to have a logistic distribution. the vector explanatory variables (x) includes years living in a country, an indicator of being male, whether the respondent’s homeland beers are available to purchase locally, whether the respondent’s consumption of beer has increased since coming to a new country, where peer influence is the most important factor in the subject’s choice of beer, whether price is the most important factor in the subject’s choice of beer, whether taste is the most important factor in the subject’s choice of beer and student status (graduate or undergraduate student). the result supports the arguments about culture affecting beer preferences. the intuition is that as stay in the new country increases, the respondent develops a taste for new beers. if price or taste is the most important factor in choosing which beer to purchase, then the subject is less likely to prefer the local beers. if price is most important, factor, then the subject is likely to drink the cheapest local beer. if taste is most important factor, then one can hypothesize that the subject may already have established strong preferences about taste in his home country. as we have pointed out throughout the paper, the beer producers and importers have to focus not only on the portfolio that they produce, but also need adopt different programs to development a new culture of consumption and striving toward sustainable working and behavior of organizations. here we propose some possible ways of future development and outline possible actions in order to address current challenges of lithuanian beer industry/market. 154 v. petraškevičius, z. nedelko. new trends of development of beer industry in lithuania – diversification and social responsibility tightly associated with the changes in strategies of beer organizations, is also the need to change the habit of the consumers, due to the proposed changes. in that frame, the consumers’ behavior must first be addressed, while also organizational working and behavior must be taken into the consideration. the common point, as already outlined above, will be social responsibility. the issues about raising the awareness of drinking, responsible drinking and the culture of drinking can be address in frame of social goals of social responsibility. a decisive role in improving the awareness of drinking and the culture of drinking can have organizations involved in beer industry. first step can be done with adopting the above proposed strategy of differentiation, which will increase the quality of beer and reduce the amount of beer (in terms of quantity). with production of small scale and increase the quality of beers, an important change must also occur in the culture of drinking. thus, a logical step will be to improve culture of drinking, by promoting and putting in the forefront a bigger variety of new and more expensive products, based on understanding “drinking less, but quality product”, as well as putting focus on nonalcoholic beer and ecological beer products. for that purpose organizations, need to adopt different programs to promote this culture. a detailed plan for diffusion of the ideas is needed. probably, the effect will be greater, if some key stakeholder would be involved, for instance, the state (governmental institutions). it is well known, that culture and its underlying values are very persistent and thus cannot be changed quickly. usually, one or two decades are necessary for substantial changes in the culture to take place. in case of beer industry, such change may occur later then other or eventually faster, in case if government regulations, can represent an important ground stone for improving the culture of drinking – i.e. to implement more restrictive politics about drinking, different taxations, etc. in frame on natural aspect of social responsibility phenomena, organizations involved in beer industry can improve their level of social responsible behavior by using “more natural” ingredients. in that frame, this is in line with current trend, which outlines the increase of so called “ecological beers”. thus, beer industry, in order to be social responsible, must assure that entire supply chain is social responsible. starting with supplier, this means that “all four basic ingredients” must be from sources, which can be characterized as social responsible, i.e. traceability, decent payments for producers, etc. in terms of production technology, also there can be various initiatives for greening the production of the beer. in line with three pillars of social responsibility – natural, societal and economic – we can argue that a modern enterprise involved in beer industry, try to achieve profitability, reducing the impact on the environment (e.g. investing in modern or greener technology), improving corporate reputation (e.g. donations, sponsoring) and behave ethically (to the employees and outer environment, especially to the consumers of beer). 155 business, management and education, 2017, 15(1): 140–157 5. conclusions the beer industry in lithuania is operating in a very “unfriendly” business environment characterized by increasing competition, unstable and constantly changing legislation and government regulation. beer consumption is decreasing constantly. the major cause of decrease in consumption is emigration, which is increasing drastically. lithuania is a country of emigration, and one of the few migrants “sending” countries of the european union (eu). therefore, we can see a clear relationship between emigration and decreasing beer sales volumes in lithuania. this is bringing a negative impact for future expectations of beer producers, as well as investors. it is necessary for them to develop a clear strategy, which will allow staying in the market and increasing competitiveness. in terms of differentiation versus diversification, it is often less risky to differentiate. this is because it’s an amendment on a pre-existing and an already established product or service, so there is the guarantee that it’s going to have interest. beer imports, as a new activity, was never performed by lithuanian beer manufactures, as well as the majority of other european breweries, but today is being widely used among lithuanian breweries as well as a craft beer production. these new activities show, that diversification, even 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corporate social responsibility, and the perceived role of ethics and social responsibility, journal of business ethics 82(3): 657–666. https://doi.org/10.1007/s10551–007–9584–0 zubrutė, l. 2017. kaip statistikos departamentas skaičiuoja alkoholio suvartojomą lietuvoje, “verslo žinios” 2017(19 may) [online], [cited 20 march 2017]. available from internet: http://www.vz.lt/ prekyba/2017/05/19/kaip-statistikos-departamentas-skaiciuoja-alkoholio-suvartojima-lietuvoje vladislavas petraškevičius, phd (in technology) is an associate professor in faculty of social economy and management, and lector of vilnius gediminas technical university. author of many books, articles and different reports. research interests: business management, economy, marketing. he is the owner of a private business enterprise, engaged in international import-export operations. zlatko nedelko, phd is an associate professor at the university of maribor, faculty of economics and business, department of management and organization, slovenia. his main research interests are management, leadership, business ethics, social responsibility, transitional issues and innovativeness. he was a visiting researcher at vienna university of economics and business, austria. he has published his articles in peer reviewed scholarly journals including but not limited to systems research and behavioural science, transformations in business and economics, international journal of physical distribution & logistics management, system practice and action research, and actual problems of economics. https://doi.org/10.1002/smj.4250060305 https://doi.org/10.1007/s11213-013-9299-3 https://doi.org/10.1002/smj.4250030407 http://www.delfi.lt/verslas/verslas/demografijos-spaudziama-alaus-pramone-traukiasi.d?id=69323026 http://www.delfi.lt/verslas/verslas/demografijos-spaudziama-alaus-pramone-traukiasi.d?id=69323026 http://www.bernardinai.lt/straipsnis/2017-01-23-stikliuko-gaubtas-nesaikingas-alkoholio-vartojimas-lietuvoje/154525 http://www.bernardinai.lt/straipsnis/2017-01-23-stikliuko-gaubtas-nesaikingas-alkoholio-vartojimas-lietuvoje/154525 https://doi.org/10.2307/1247695 http://www.iom.lt/images/publikacijos/failai/1427792338_7tmomigracija lietuvoje faktai ir skaiciai.pdf http://www.iom.lt/images/publikacijos/failai/1427792338_7tmomigracija lietuvoje faktai ir skaiciai.pdf https://doi.org/10.1007/s10551-007-9584-0 http://www.vz.lt/prekyba/2017/05/19/kaip-statistikos-departamentas-skaiciuoja-alkoholio-suvartojima-lietuvoje http://www.vz.lt/prekyba/2017/05/19/kaip-statistikos-departamentas-skaiciuoja-alkoholio-suvartojima-lietuvoje peculiarities in construction of segmentation models: theory and practice daiva viselgaitė1, mantas vilys2 vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania e-mails: 1viselgaite@gmail.com (corresponding author); 2mantas.vilys@vgtu.lt received 18 november 2010; accepted 15 january 2011 abstract. strategic marketing development is a major area of lithuanian manufacturing companies, which seeks to improve business. in order to develop a strategic marketing plan, companies encompassing several business models are faced with the need to adapt those models here and highlight the lack of skills to carry out marketing activities for the sharp divide in the business models in the marketing literature. in order to give the latter companies a theoretical foundation for development of strategic marketing for sustainable business, which highlights the need for business model adaptation in the process of segmentation, it is worthwhile to analyze the scientific segmentation models and prepare recommendations for model construction. the scientific article is based on marketing research in window manufacturing and mounting business that enables to create a step-by-step market segmentation model, which is based on adaptation of different business models. the main tendencies identified in the sector (high market and technological uncertainty, intense competition) makes it a very characteristic example of a business, which seeks to improve competitiveness. keywords: segmentation, segmentation model, strategic marketing, business. reference to this paper should be made as follows: viselgaitė, d.; vilys, m. 2011. peculiarities in construction of segmentation models: theory and practice, business, management and education 9(2): 171–184. http://dx.doi.org/10.3846/bme.2011.12 jel classification: m30, m31. 1. introduction competition is one of the main reasons that encourage companies to adopt new approaches strengthening their market position. design and implementation of a strategic marketing plan is required to develop the business itself as well as effective solutions that would reduce competition and reinforce its position in the market. it can be reasonably argued that the segmentation stage is the most important in strategic marketing as it allows identifying the marketing gaps in a company and finding new avenues for brand development, as well as clarifying the understanding of market trends and competition, and thus creating preconditions for increased b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(2): 171–184 http://dx.doi.org/10.3846/bme.2011.12 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 172 d. viselgaitė, m. vilys. peculiarities in construction of segmentation models: theory and practice profitability. segmentation allows users to target segments that are the most valuable. segmentation preconditions all other strategic marketing planning stages to be of greater particularity and to be more concentrated, which makes it possible to achieve a better quality in planning. the object: market segmentation process and its applicable models. key scientific issues exist in the following areas: 1. the process of segmentation. there is a lack of knowledge of how to integrate and specify the stages of the segmentation process so they would comply with the market segmentation as the latter is most often perceived as a result, while the process of segmentation analysis is often unappreciated. 2. application of segmentation models. it is noted that the limitations of this process, created by diversity of business models (business-to-business and businessto-customer), determines the need for new research that would enable to achieve efficiency in the process of segmentation. according to the scientific issues the objectives are as follow: 1. to investigate the process of segmentation in the step-by-step manner. 2. to analyse possible application of segmentation models for business-to-business and business-to-customer. 3. to prepare a segmentation model that would reflect each step and every component in the process of segmentation. to compile a segmentation model that would include different business models in every stage. research methods: scientific periodical literature and analysis of primary data collection methods (expert survey, a questionnaire survey, primary data analysis using methods of applied mathematics). marketing planning for window manufacturing and mounting business is special because it is one of those few businesses that combine both business models – business-to-business (b2b) and business-to-customer (b2c) – that are usually isolated in the marketing theory. the business of window manufacturing and mounting is unique in this aspect of the product specificity. in principle, products can be sold directly to end-users who wish to replace their home windows, or to companies operating in the construction sector. the latter buy windows depending on their product requirements, as one of the elements that contribute to the value of the proposal to be submitted to the final consumer. one way or the other, the product is unique because there is no need for modifications. under the existing conditions of market segmentation, the strategic marketing planning is faced with the need for dual marketing proposals. based on this business model, the obvious need to fill existing gaps in the theory of marketing is highlighted. 173 business, management and education, 2011, 9(2): 171–184 2. market segmentation segmentation is vital for strategic marketing planning because of its multi-phase impact on all other activities in this process. grundey, d. (2008a); martinkus, b. et al. (2009); gudonaviciene, r., alijosiene, s. (2008); alimiene, m., kuvykaite, r. (2008); jaafar, m. et al. (2008); grundey, d., zaharia, r. m. (2008) agree that the quality measurement of the strategic marketing planning consists of individual assessment of each process stage, quality of its implementation and consistent logic. the thoroughly completed segmentation stage is a significant step in this planning process. the most general sense of market segmentation is the division of consumers according to selected characteristics, which are mainly determined by differences among consumers. this is especially important in terms of the current business aiming to identify the different needs of consumers. according to these criteria, consumers are divided into homogeneous groups, which are heterogeneous in terms of one another. while segmentation is considered throughout the literature of marketing, only one author distinguishes the essential understanding of the sequence segmentation problem. baines, p. et al. (2008) expressed the view that first, it is necessary to separate concepts of market segmentation and product differentiation. product differentiation is different from market segmentation as in case of a product differentiation a manufacturer simply provides more product options, while segmentation starts with the needs of a consumer. identification of segments and the required marketing-mix are the first steps of segmentation. the provision of a new proposal follows next. while in case of a product differentiation the focus is solely on a new proposal. this perception must be followed for segmentation of the entire process: first, on the basis of the analyzed algorithms, it is necessary to identify the segments for the purpose of adapting their marketing-mix and provide a valuable offer. in retrospect, segmentation was first applied to markets with several vendors that offered identical merchandise. such market segmentation was recognized as the way to increase competitiveness. this approach is mainly suitable for any business that finds itself in the midst of intense competition. although market segmentation is a complex activity, it is an inevitable phase of the strategic marketing planning, thus it must be carried out in a high-quality manner depending on the existing conditions of competition in business. kaklauskas, a. et al. (2009); sirtautiene, d., sirtautas, v. v. (2009); jaafar, m. et al. (2008); grundey, d. (2009); jumpponen, j. et al. (2009) argued that market segmentation has a direct impact on marketing planning as well as on all further steps of the strategic marketing planning. this can be confirmed by the scientific literature analysis. literature provides various sequences of the strategic marketing planning. mcdonald, m. (2007) defines segmentation as the third of the ten planning stages of the strategic marketing planning process. this activity can only be performed subsequent to analysis of the external environment. hutt, d. m. and speh, w. th. (2007) suggest that segmentation is one of the previous works, which are conducted or supported by the 174 d. viselgaitė, m. vilys. peculiarities in construction of segmentation models: theory and practice preliminary targets or whilst reviewing an existing strategy. baines, p. et al. (2008) submits segmentation to the multiple strategic marketing planning implementation phases of market analysis and marketing analysis; however, this is still one of the preceding activities in the planning as provided in fig. 1. gilligan, c. and wilson, m. s. r. (2009) provide stages of strategic marketing planning that are significantly fewer in comparison with other authors. the latter scheme is the most susceptible to interpretation. in this case, segmentation is carried out immediately after analysis of the external environmental and next to the assessment of business opportunities. only one of the authors – fifield, p. (2007) – states that market segmentation has to be done midway through the strategic marketing plan: subsequent to analysis of the external and internal environments and prior to design of strategy. it is obvious that segmentation falls into the category of the initial activities of strategic marketing planning as it has unquestionable assets of a significant impact on all other stages. looking at segmentation as a process, it is worthwhile starting with an understanding that not all consumers are identical, and that in marketing theory and practice, there is a need for many unique cases of systematic knowledge, which enable the distribution of consumers between homogeneous groups. the effectiveness of market segmentation depends on the level of knowledge in terms of different consumer features and understanding of the customer characteristic that has the decisive influence on the product purchase decision as well as the knowledge of a marketing specialist of the characteristics within each segment. in fact, segmentation allows getting to know customers executive summary overall objectives product/market background marketing analysis marketing strategies first step – strategic market analysis second step – the definition of strategic goals marketing goals marketing programmes implementation supporting documentation third step – strategic marketing plan fig. 1. marketing planning process. a scheme (source: baines et al. 2008) 175 business, management and education, 2011, 9(2): 171–184 and their needs in order to create a precise value proposition, which allows maximizing sales. abromaityte-sereikiene, l. (2008) and banyte, j. (2008) summarize that the choice of target market segments reduces competition as competition in each segment is less than in case of the mass-marketing approach. the only drawback of segmentation (assuming that the selection of segmentation criteria has been made in a high-quality manner and the target segments have been chosen according to the applicable value proposal of the company) is that while the company focuses its marketing on one or more target segments and has a strong position with an applicable value proposal, it remains uncompetitive in other segments. however, sale results achieved in the target segment outweigh loses in other segments. financially, it is more beneficial to the company. the main measure of effectiveness of market segmentation is the ability to identify consumers with a different product demand as this enables a company to target those segments and meet the demand t; in other words, the company could use the benefits of the segment. 3. segmentation model formation segmentation is the division of buyers into smaller groups to identify the patterns of customer needs. this definition reveals only the final result of the activity of market segmentation, which has to be achieved by required actions, each with a coherent logic. criteria that can identify consumer segments are analyzed in the scientific marketing literature as the possible segmentation basis, but the concept of segmentation is usually perceived as a result, rather than the process of segmentation. in summary, mcdonald, m. (2007); paley, n. (2006); harridge-march, s. (2008) and strauss, r. (2009) listed the segmentation stages in the context of theory without obvious distinction but rather leaving the freedom for interpretation, so they could be adapted to each unique business case. however, this creates conditions for numerous errors. segmentation, as one of the most difficult activities of the strategic marketing planning is insufficiently defined in terms of the algorithm of consecutive steps. on the contrary, it is more often perceived as one and indivisible activity in stp (segmentation, targeting and positioning) process. in scientific literature, this process is called stp, often emphasizing that these activities are carried out consistently, as provided in fig. 2. kotler, ph. et al. (2003) distinguishes only two phases of segmentation, defined as the determination of the principles of market segmentation and description of each segment. in this case, the first phase can be significantly expanded and is susceptible to interpretation. baines, p. et al. (2008) identifies the stages of segmentation in terms of high marketing research impact for every of them. these authors argue that it is always important to ensure that these activities (marketing research and stp) would be carried 176 d. viselgaitė, m. vilys. peculiarities in construction of segmentation models: theory and practice out continuously. review or update of at marketing strategy always demands for a new consumer market segmentation: the perceived market information leads to market segmentation, which consists of identification of groups of similar customers. in each unique business, market segmentation criteria are based on marketing research. the segmentation model designed by baines, p. et al. (2008) is susceptible to interpretation. fig. 2. segmentation, targeting and positioning stages (source: gilligan, wilson 2009) hutt, d. m. and speh, w. th. (2007) distinguish two stages of segmentation model, recommended for business-to-business market. in particular, these stages are the macrosegmentation that includes a division of the organizations according to their characteristics, size, geographical location, organizational structure; and the micro-segmentation that requires a deeper knowledge of marketing, enabling to concentrate on criteria of customer decision-making characteristics. segmentation is the process that uses the macro-segmentation as a filter, which helps evaluating and rejecting unacceptable companies that do not meet the defined marketing goals and then move towards a deeper analysis of the acceptable ones. this saves both time and financial resources. because of the effect of all other stages of strategic marketing planning, segmentation, targeting and positioning are named to b the essence of planning (gilligan, wilson 2009). this approach shows a deeper understanding of the strategic marketing planning, where segmentation is important for the implementation of the marketing business from the very beginning. 1 identify the organization’s current position, capabilities, objectives and constraints situation analysis market segmentation market targeting product position the marketing mix 2 identify the segmentation variables and segment the markets 3 develop profiles of each segment 4 evaluate the potential and attractiveness of each segment 5 select the target segment(s) 6 identify the positioning concept within each target segment 7 select and develop the appropriate positioning concepts 8 develop the marketing mix strategy 177 business, management and education, 2011, 9(2): 171–184 gilligan, c., wilson, m. s. r. (2009) suggests that the segmentation process begins with a review of a natural segment. usually, every business has clearly visible heterogeneous groups of customers that can be referred to as natural segments even without deeper investigation. various authors attribute this activity to a process that has to be somehow performed by marketing specialist intuitively by default. when there are no clear natural segments, it is necessary to carry out a number of formal procedures that are usually comprised of three phases: study. an investigator carries out informal interviews and focus group discussions to understand the motives, attitudes and behaviours. analysis. on the basis of the findings achieved during the first phase, the investigator finds relevant segmentation criteria and determines the existing market segments. establishment. the investigator designs profiles of each segment, including defined characteristics: attitudes, behaviours, demographics, psychographic and innovation capacity. these three phases represent the most intimate view of the market segmentation process. comparison of the segmentation stages provided by gilligan, c. and wilson, m. s. r. (2009) with the segmentation model by sarabia, f. j. (1995) reveals that the latter differs by further disclosed elements that have the major impact on the process and different phases of the strategic marketing planning levels: in the view of the author, collection of information essentially depends on the availability of human resources in a given company. the next stage – the creation of segments – is implemented through quantitative marketing research in this model. subsequent to this activity, the segments are defined and evaluated. segment selection and positioning in this case is attributed to the marketing strategy and segmentation model, to the segment research level, as provided in fig. 3. search for and select information creation of segments description evaluation selection positioning decision marketing-mix development management needs quantitative method application conditions for segmenting segmentation research level marketing strategy level fig. 3. stp algorithm (source: sarabia 1995) 178 d. viselgaitė, m. vilys. peculiarities in construction of segmentation models: theory and practice analysis of scientific and periodic literature allows suggesting that the segmentation model might comprise of up to three main stages: finding of relevant segmentation criteria, identification of segments and compiling of segment profiles. 4. market segmentation in business that encompass a number of different business models in order to adapt the segmentation model in business of durable goods, particularly in window manufacturing and mounting business, market segmentation theory highlights the divide between business-to-customer and business-to-business. as per marketing literature, that a company operates through one or another model, whereas businesses that include both models is not analysed. according to strategic marketing planning approach, the combination of business models becomes important in the segmentation stage, when the operating margins and differences between customer characteristics become especially significant in order to gain further quality of planning. it should be emphasized that the use of the combination of business models is important for high quality segmentation and further stages of the stp algorithm. so far, segmentation is relevant for all phases of strategic marketing planning, as important is the understanding and extended application of business models that provides further opportunities for planning. multidisciplinarity of businesses creates a need to explore new theoretical solutions that can be adapted in business practice. the analysed case of window business has highlighted the need to create a segmentation model, which includes both business models. basically, if it is possible to combine business models, it is worthwhile to analyze the possibilities to extend and take advantage of this new approach for model extension, trying to raise the marketing of a company to a new level. whereas the issue is market segmentation in a specific business, it is worthwhile applying the approach of business model extension in precisely the segmentation stage that has a strategic planning approach. gummesson, e. and polese, f. (2009) presents a new position in this regard, arguing that it is necessary to extend traditional business-to-business and business-to-customer perception in today’s marketing. both the vendor and the customer operate in a single integrated network and because of that the connection must be mutual. gummesson, e. and polese, f. (2009) argue that roles of a seller and a customer are often misunderstood as a customer is perceived as someone who responds whole the vender is thought to be active. information technologies empower customers to be active and respond, even to contact the company and be easily accessible. there is a shift away from the one-way information transfer towards the communication that is implemented and supported by relationship marketing and customer management systems. in addition to business-to-customer, customer-to-business and customer-to-customer relationships should be underlined. these relationships emerged largely due to the 179 business, management and education, 2011, 9(2): 171–184 impact of information technologies (it) on consumers. it enables easy communication through sharing of experiences in relation to the product. such factors must be evaluated and integrated into the marketing system. on the other hand, business-to-business marketing awareness should also be extended as the initiative comes from both directions, sometimes pushing at each other and in other times – helping each other to change the course of action. the value is gained on both sides. returning to the segmentation model for business that would comprise of both business models, it is necessary to separate segmentation activities in business-to-business and business-to-customer markets because of the need for different studies and diversity of results. segmentation model is presented in fig. 4. in case of the approach of the strategic marketing planning, there is no need to separate business models if the segmentation stage business model has no impact on ongoing activities and the formation of both business goals and the mission, carrying out the analysis of external environment. in different cases, after the positioning phase, the separation of business models can be avoided. fig. 4. segmentation model (source: set up by authors, on the basis of gilligan, wilson 2009; baines et al. 2008; sarabia 1995; gummesson, polese 2009) segmentation criteria for b2c model finding segments in b2c model finding segments in b2b model the creation of b2c model segments profiles the creation of b2b model segments profiles segmentation criteria for b2b model segmentation 180 d. viselgaitė, m. vilys. peculiarities in construction of segmentation models: theory and practice 5. validity of the unique segmentation model two studies have been made in order to support and specify the segmentation model. in order to validate the first step of the segmentation model that is based on the expansion of business models, the expert interview has been used. criteria for eligibility of experts were selected on the basis to the aforementioned aim and the hypothesis of the research: activity – the window manufacturing and mounting business; position in the organizational hierarchy – higher or top-level managers; job – directly or closely related to marketing (sales, product development). eight experts were sufficient to validate the results and conclusions of the research. according to experts, the latest research showed that, it (the customer-to-customer relationship) is one of the most important criteria for segmentation. in order to justify opportunities for expansion of business models as a criterion for the first and the third segmentation model stages, the customer survey was conducted. grundey, d. (2008b) agrees that typical sector for marketing research helps to simplify the developed theoretical model. window market has been chosen as the typical example. in this case, filter questions helped identifying the currently existing customers with valuable opinion, i.e. customers that purchased windows within the four-year period. the main questions were formulated on the basis of the elements of the marketing-mix to identify the significant parameters for each of the customers when selecting a product. since it was intended to investigate consumer preferences for marketing-mix elements, it was possible to link those preferences to the various criteria of segmentation in order to take this as a different segmentation basis. the reliability of study results amounts to 90 percent. the study logic enabled to design unique criteria as the basis for segmentation. the results showed that the use of media is a relevant customer segmentation criterion with the following components: intensive use of the lean-forward media, and use of the lean-back media. use of media in general is yet another important criterion, however, due to low impact in this area, it is rather non-use of media. these criteria describe the customer’s susceptibility to the customer-to-business and customer-to-customer relationships. this study also substantiated the relevance of the criteria for the third segmentation stage. understanding the segmentation model as a process provides a possibility to reflect on each stage of the expansion of business models and translate them into appropriate criteria. while constructing the first phase of the segmentation model, it is worthwhile to carry out a selection of analyzed market segmentation criteria as well as the third stage of the segmentation model – the selection of segment evaluation criteria. in case of business-to-customer, it is useful to use the customer behaviour criterion: customer willingness to use customer-to-customer relationships. in the first phase of the segmentation model, this approach can be adapted as one of the criteria for homogeneity or heterogeneity of a segment, leading to the development of various ways of distribution, linking it to different methods of supporting communication with customers. this is the opportunity to give a customer an active role in creation of the new value, which 181 business, management and education, 2011, 9(2): 171–184 is closer to the marketing conception aimed at meeting of consumer needs. according to this view, the choice of segmentation criteria for business-to-customer market must be related to possible relationships discussed above. one of the evaluation criteria of a segment must be the expansion of communication possibilities in both cases of business models. this approach leads to higher quality of strategic marketing planning because of a deeper understanding of relationship models in company network and ability to see opportunities and threats in another dimension. 6. practical guidelines for constructing the market segmentation model: principles based on window manufacturing and mounting business with reference to scientific marketing literature and marketing research, the segmentation model for window manufacturing and mounting business was proposed. this example reflects practical application of theoretical segmentation model. recommended segmentation criteria are set out in the first stage, understanding that they must be combined with other criteria selected for each unique event. based on these criteria, the second stage is the fragmentation of the market into segments. the last step of the model includes recommended criteria, which allow creating a profile for each segment. this unique case includes the criteria that should be extended based on the first-phase. the market segmentation model of the window manufacturing and mounting business is provided in fig. 5. fig. 5. the market segmentation model for the window manufacturing and mounting business b2c model relevant segmentation criteria: behavior … media usage; … segments in b2c model profiles of segments (b2c model): response to marketing mix elements (the behavior); c2b and c2c communication development opportunities; … b2c model relevant segmentation criteria: … … … segments in b2b model profiles of segments (b2b model): link to marketing measures; b2b communication development opportunities; … 182 d. viselgaitė, m. vilys. peculiarities in construction of segmentation models: theory and practice in order to consistently describe a typical market segmentation model for the window manufacturing and mounting business, the segmentation criteria need to select. marketing research (the primary data collection methods used: a survey and expert interviews) allowed the purification of the most important criterion in this case. in addition to topical segmentation criteria, the most significant differences between groups of consumers in this business were identified. media usage criteria were based on options of the business model expansion in order to differentiate customers who use the customer-to-customer relationship. consumer survey was used for identification of segments. in essence, the businessto-business segmentation in the window manufacturing and mounting business is more complex than business-to-customer segmentation as criteria are less certain. since this market has few consumers that are very important, finding differences that identifies homogeneity within and heterogeneity outside segments is difficult. the best tool for this is macro-segmentation. in this case, the requirement of heterogeneity in segments is satisfied by the best quality. the conclusion of the evaluation segment profiles was made by using different criteria for both business models, including opportunities for development of communication in terms of consumer-to-business and customer-to-customer relationships in the first case and opportunities for the development of communication in terms of business-to-business in the second case. 7. conclusions target marketing is important as it concentrates the marketing strategy of a company and creates conditions for design of a realistic and profitable product or service proposal for a target customer. besides, it encourages company to focus on itself. all of this begins with the exterior, focusing on consumer and the market. in part, segmentation is a market fragmentation on the basis some chosen scheme. however, this scheme calls for a coherent logical choice and the adaptation of a particular business. the segmentation process has been studied and for this reason the main stages of segmentation were identified, comprising of segmentation criteria selection, market segment extraction, selection of profile criteria for segments and profile construction. the scientific marketing literature generally distinguishes market segmentation depending on different business models. although the differences between segmentation processes are insignificant: in case of business-to-customer, segmentation comprises of criteria selection, market segment extraction, selection of profile criteria for segments and profile construction; while in case of business-to-business, segmentation consists of macro-segmentation and micro-segmentation, that contain segmentation criteria selection, market segment extraction, selection of profile criteria for segments and profile construction. the segmentation model adapting two business models was established. 183 business, management and education, 2011, 9(2): 171–184 the article proposed the model of market segmentation, adapting business-to-business and business-to-customer models. the model was presented by elaborating each segmentation phase. an example is given for the window manufacturing and mounting business. the proposed segmentation criteria and segment evaluation criteria allows for evaluation of the appeal of various market segment in order to select the 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žingsnio sukurti rinkos segmentavimo modelį ir remiasi įvairių verslo modelių pritaikymu. nagrinėjamas sektorius, pasižymintis aukštu rinkos bei taikomų technologijų neapibrėžtumu ir susiduriantis su itin intensyvia konkurencija, yra vis naujų konkurencingumo stiprinimo sprendimų siekiančio verslo būdingas pavyzdys. reikšminiai žodžiai: segmentavimas, segmentavimo modelis, strateginė rinkodara, verslo modelis. daiva viselgaitė is a master of business management and administration at the department of international economics and management, faculty of business management at vilnius gediminas technical university. she gained practical experience in the field of marketing with manufacturing companies. research interests: management of business marketing, modeling of business marketing. mantas vilys. lecturer at at the department of international economics and management, faculty of business management at vilnius gediminas technical university. he has worked as a researcher for more than 5 years. research interests: innovation support services, innovation management, innovation policy, and marketing. http://dx.doi.org/10.3846/1611-1699.2008.9.115-122 http://dx.doi.org/10.3846/1611-1699.2009.10.71-84 http://dx.doi.org/10.1108/03090569610118830 copyright © 2014 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2014, 12(2): 245–265 doi:10.3846/bme.2014.235 characteristics of omega-optimized portfolios at different levels of threshold returns renaldas vilkancas vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania e-mail: renaldas.vilkancas@vgtu.lt received 31 october 2014; accepted 07 november 2014 abstract. there is little literature considering effects that the loss-gain threshold used for dividing good and bad outcomes by all downside (upside) risk measures has on portfolio optimization and performance. the purpose of this study is to assess the performance of portfolios optimized with respect to the omega function developed by keating and shadwick at different levels of the threshold returns. the most common choices of the threshold values used in various omega studies cover the risk-free rate and the average market return or simply a zero return, even though the inventors of this measure for risk warn that “using the values of the omega function at particular points can be critically misleading” and that “only the entire omega function contains information on distribution”. the obtained results demonstrate the importance of the selected values of the threshold return on portfolio performance – higher levels of the threshold lead to an increase in portfolio returns, albeit at the expense of a higher risk. in fact, within a certain threshold interval, omega-optimized portfolios achieved the highest net return, compared with all other strategies for portfolio optimization using three different test datasets. however, beyond a certain limit, high threshold values will actually start hurting portfolio performance while meta-heuristic optimizers typically are able to produce a solution at any level of the threshold, and the obtained results would most likely be financially meaningless. keywords: downside risk, omega function, portfolio optimization, threshold return, differential evolution (de). jel classification: d81, g11, c61. 1. introduction since markowitz (1952) has first introduced his portfolio theory, the search for an optimal return-risk ratio is concerned as the “holy grail” of investment management. in order to measure risk, markowitz used variance, i.e. a symmetric measure of risk that equally assesses both negative and positive risk deviations. if returns and losses were distributed according to the gaussian law, we could construct efficient portfolios based solely on a mean-variance model proposed by markowitz. the fact that 246 r. vilkancas. characteristics of omega-optimized portfolios at different levels of threshold returns variations in price are not normally distributed and asymmetric was observed long ago by mandelbrot (1967) and fama (1965). today, there is no doubt, that extreme changes in security prices are much more common than one could expect with reference to the gaussian random process, which means that the actual risk of the investment portfolio, faced by the portfolio manager, is significantly higher than that represented by variance historically widely used for risk measurement. in addition, variance, along with other symmetrical risk measures, both positive and negative risk deviations from the average rate is considered as a source of risk, i.e. “does not discriminate” the risk of losses, although investors are concerned about losses rather than about an opportunity to earn higher returns. there is no doubt that investors differently assess “downside” and “upside” risks thus claiming priority to positive asymmetry. after all, a successful investment is the one that brings in gains rather than losses. therefore, an appropriate risk measure should also differently treat downside and upside risk. one of such measures are the omega function proposed by keating and shadwick (2002a, 2002b). this indicator is a ratio of the expected excess returns over a threshold to the expected loss below the same threshold level and allowing an objective assessment of the investment when returns are characterized by asymmetry and heavy tails. unlike sortino, the upside-potential or kappa ratios, the omega ratio is the first-order ratio of upper and lower partial moments. the first order means that the investor’s preference in positive and negative deviations from the target (threshold) return is symmetrical (farinelli, tibiletti 2008), and therefore, at first glance, the use of the omega ratio may seem paradoxical: after all, undesirable negative deviations must be “severely punished” and the desired positive ones should be encouraged. however, the author of this article emphasizes that the ratio has several advantages. first, although the avoidance of loss is often equated to the avoidance of risk, the two concepts are not necessarily identical. the prospect theory proposed by kahneman and tversky (1979) hypothesized that, in order to avoid loss, investors were more inclined to take risks in the field of loss and less risk for the gain. such a conclusion seems surprising but explains the behaviour of investors when they sell securities, the price of which is going up too quickly or keep securities, the price of which is going down, for too long, experiencing higher and higher losses but believing that until securities are not sold, which is a “paper” loss only and they will still manage to “win back”. objective and “undistorted” information provided by the first-order partial moments of the omega ratio allows assessing return asymmetry without assumptions about investors’ risk preferences that are subjective, depend on the selected benchmark and may change depending on the situation. second, when selecting a threshold rate of return, the investor expresses the objectives of investment and risk tolerance. although researchers and practitioners observe this fact (e.g. the term “target return” at the beginning used by sortino was later replaced by the term “minimum acceptable return”, as investment fund managers started seeking for high returns despite the growing risk), still there is no elaborate discussion or specific recommendations on how this threshold level should be set. in practice, the threshold rate of return is gener247 business, management and education, 2014, 12(2): 245–265 ally set to the risk-free rate, the average expected return or simply a zero. the author believes that controlling investors’ “risk appetite” for changing the threshold rate of return is much “more natural” than changing the orders of partial moments. third, no less important reason is that the results of empirical studies show that the omega ratio can be successfully used for the management and optimization of investment portfolios, although these studies are not numerous. this study complements scientific literature regarding three important aspects. first, it provides theoretical and empirical investigation on the characteristics of omega-optimized portfolios at different levels of threshold returns. second, after back testing of the omega model using historical stock data on djia, euro stoxx 50 and ftse 100 indices, the main characteristics of omega-optimized stock portfolios were identified. third, the received results were directly compared with those obtained using classical portfolio optimization methods, including most widely applied modifications as well as the portfolios constructed using alternative techniques for heuristic portfolio optimization. after model backtesting with historical data, the results suggest that increasing the omega ratio threshold level leads to higher returns, and absolute net (i.e. after the deduction of turnover costs) returns of omega-optimized portfolios exceed all other tested portfolio returns. moreover, the provided results are relatively stable within a certain interval of threshold returns. above this interval, the portfolio return usually starts declining – meta-heuristic optimization algorithms allow portfolio optimization at any level of the threshold; however, financially, the achieved results are almost meaningless. 2. previous research the idea of an asymmetric risk measure is not a novelty. at the time markowitz announced his portfolio theory, roy (1952) proposed the concept of a portfolio based on the “safety first” principle, which means imposing constraints on portfolio positions of reducing probability that, within the next period, the gain will be lower than the critical level set in advance. expanding his portfolio theory, markowitz acknowledged deficiencies of variance, and alternatively, considered the use of semi-variance (markowitz 1959). according to markowitz, semi-variance is a better measure for risk, since it allows limiting undesirable losses only, as opposed to ordinary variance which, being limited, reduces both undesirable downside and desirable upside risks. although mathematical convenience has resulted into that markowitz finally gave priority to the ordinary variance, still, the search for alternative measures for risk had started to accelerate. a general downside or the loss risk theory was developed by bawa (1975) and fishburn (1977) who recommended to measure risk using a lower partial moment or lpm: ( ) ( )( )nlpm x df x τ λ −∞ τ = τ −∫ . (1) 248 r. vilkancas. characteristics of omega-optimized portfolios at different levels of threshold returns with the help of the lpm, the risk of losses is described using two parameters: a specified target return or reference point t, in respect of which the loss ratio is measured, and an order of lpm l, which expresses an investor’s risk tolerance. it is easy to understand intuitively that a higher order of the lpm means lower risk tolerance, i.e. negative deviations from the target return are “punished more severely”. the lpm allows describing not only the quadratic utility function, i.e. semi-variance, which is a special case of the lpm, when l = 2, but also the most of well-known von neumannmorgenstern utility functions. the main deficiency of the lpm recognized by fishburn (1977) himself in his thesis is that the upside deviations of returns are measured linearly, which means that investors become risk neutral as soon as the return exceeds the specified target value. due to this deficiency, the entire lpm theory was later severely criticized (kaplan, siegel 1994). the most common downside risk indicators include the sortino ratio, value-at-risk (var) proposed by jp morgan investment group in 1994, conditional value-at-risk, maximum drawdown, etc. while calculating the sortino ratio (sortino, van der meer 1991), a standard deviation included into the denominator of a widely used sharpe’s ratio is substituted with a lower partial standard deviation (i.e. second order lpm) taking into account only negative undesirable volatility. value-at-risk (var) and conditional value-at-risk (cvar) are percentile measures for downside risk. value-at-risk represents the maximum expected loss over the given period at the given confidence level and, however, underestimates the risks resulting from the excess of the selected var level. conditional value-at-risk (cvar) introduced by rockafellar and uryasev (2000) estimates losses exceeding the var level. in addition, this indicator meets the characteristics of a coherent measure (artzner et al. 1999; pflug 2000). thus, it can be easily optimized – the efficient portfolio plot is developed by taking different values of the expected return and minimizing cvar . the maximum drawdown proposed by grossman and zhou (1993) represents the difference between the minimum and maximum value of the portfolio or a position resulting over the selected period of time. since the maximum drawdown value depends on a single estimate – the highest price, this measure is not appropriate for comparing the performance of different investment strategies for different periods of time. in this case, a much more practical measure is conditional drawdown-at-risk, (cdar) that aggregates the total number and extent of drawdowns over the selected period (chekhlov et al. 2005). despite the common attitude that by limiting the risk of loss, albeit indirectly, but still the maximization of upside risk is ensured, the main criticizing aspect of the “risk of loss theory” is that these methods are too focused on the avoidance of losses and little attention is paid to the provision of returns (avouyi-dovi et al. 2004). a natural solution to this problem is measurements allowing independent modelling of investors’ behaviour in respect of both negative and positive variations in returns: a regret-reward measure (dembo, rosen 1999; dembo, mausser 2000), the upside-potential ratio, upr (sortino et al. 1999), the omega ratio (keating, shadwick 2002a, 2002b), the kappa 249 business, management and education, 2014, 12(2): 245–265 ratio (kaplan, knowles 2004), etc. while using these indicators, not only downside but also upside or excess returns are measured, i.e. they allow identifying investments characterized by a relatively large excess return ascribed per unit of drawdown risk. excess returns are generally defined as the difference between a mean and target returns, or as an upper partial moment (upm), i.e. an upside deviation from target return t: ( ) ( )( ) pnupm x df x ∞ τ τ = − τ∫ . (2) farinelli, tibiletti (2008) introduced a generalized ratio of upper and lower partial moments – f, which allows expressing the favour (disfavour) of upside (downside) deviations of various investors: ( ), , ( ) ( ) p p p q q q upm lpmτ τ = τ φ . (3) by changing parameters p and q, we respectively obtain different risk indicators: if p = 1 and q = 2, we obtain the upside-potential ratio; if p = q = 1, we obtain the omega ratio. thus, the farinelli–tibiletti f ratio allows expressing flexibly investor preferences in respect of returns and associated risks. 3. advantages and disadvantages of the omega ratio looking back at the evolution of return and risk measures, the omega ratio suggested by keating and shadwick (2002a, 2002b) is not an entirely new idea. kazemi et al. (2004) also note that the omega can be defined as a ratio of a european call option to a european put option when the threshold return is equal to an exercise price of the option. therefore, the omega is not new in this relation either. the omega ratio is equivalent to the total distribution as it evaluates all higher-order moments. thus, it is not necessary to rely on assumptions about investors’ risk tolerance and their utility functions when using it, and hence, according to researchers, this is a “universal ratio” that helps with an objective assessment of the performance of investments. fig. 1. the total distribution of returns and the omega function 250 r. vilkancas. characteristics of omega-optimized portfolios at different levels of threshold returns the omega ratio is described as: ( ) ( )( ) ( ) max max min min 1 r r r r f x dx bcu f x dx lab τ τ τ τ − ω τ = = ∫ ∫ ∫ ∫ , (4) where t – the threshold; rmin and rmax – the minimum and maximum values of returns respectively. when t is closer to the rmin value, the bcu area is larger than that of the lab and the omega value is high, and vice versa. while calculating the omega, the threshold level of return is taken into account, in respect of which the result is considered as gain or loss; thus, if t is seen as the required rate of return, the omega ratio shows at what extent the obtained result exceeds the expectations of the investor. accordingly, a higher omega ratio means higher performance, i.e. return. although keating and shadwick introduced the omega as a “universal measure of efficiency”, which fully characterizes return-risk distribution and is intuitive, easy to understand and calculate, they soon recognized themselves, that in order to get full information about return-risk distribution, the omega function should be assessed not at a single point t of the threshold return but within the whole range. later, the authors’ position has become even more critical: according to them, “a function estimated at only one point can be completely misleading”. although an interpretation of an estimate of the omega function obtained at one point of the threshold return – “more is better” – is really very simple, interpreting the estimates obtained within the range of the threshold return is far from simple. the omega function is strictly descending: where t is lower than the mean of distribution μ, the omega is higher than one (i.e. ω > 1 where t < μ); where t is higher than the mean of distribution μ, the omega is lower than one (i.e. ω < 1, where t > μ) and it is equal to one when t = μ. it is intuitively understandable that the higher is the threshold return, the lower is the opportunity to achieve it, and therefore, an increasing threshold results into the value of the omega coming to 0. furthermore, the situation becomes complicated. the level of investment risk depends on the characteristics of the omega function (plot): the steeper is the plot, the lower is the risk, i.e. a lower probability of “extreme” return variations, accordingly, the flatter is the plot, the higher is the risk. figure 2 represents omega plots for united health group (unh), exxon mobil corporation (xom) and verizon communications inc. (vz) where threshold returns ranges from 0 percent up to 5 percent. the figure shows that the unh is more attractive than the xom or vz not taking into account the selected threshold; however, the attractiveness of the xom, compared to vz, will depend on the selected marginal return. therefore, assessing the attractiveness of assets relying on a single selected threshold 251 business, management and education, 2014, 12(2): 245–265 value is dangerous – assessment within the whole range is required. the plot of the omega function obtained by changing threshold values actually allows a more efficient assessment of investment attractiveness, but there is a legitimate question in what way the omega ratio is better than a direct comparison of the distributions of returns, i.e. investment assessment using stochastic dominance criterias (frey 2009). despite the warnings of omega deficiencies while taking “point” estimates of investments with respect to this function, the issue of threshold selection is not analyzed more explicitly in literature thus often simply recognizing it is not clear how this threshold should be specified, or indicating that the threshold should be specified depending on the risk-return preferences of each investor (avouyi-dovi et al. 2004; mausser et al. 2006). in practice, the threshold value is generally equated to the rate of risk-free investments, the average expected return or simply a zero (gilli et al. 2011). 4. portfolio optimization with respect to the omega function performing the omega-optimization of a portfolio, each threshold return value is attributed with positional weight, which maximizes the ratio of the expected gain and loss. formally the problem of omega optimization can be written as: n s i l i u i=1 max (x, ); x =1; x x xω τ ≤ ≤∑ , (5) where xl and xu are lower and upper bounds on weights. when choosing an interval of the threshold return [mint, maxt], within which the omega function will be optifig. 2. omega plots for unh, xom and vz 252 r. vilkancas. characteristics of omega-optimized portfolios at different levels of threshold returns mized, the maximum threshold of return should not exceed the maximum historical or simulated yield of portfolio securities. obviously, ex post portfolio returns can never be higher than the returns of the component securities.. in case of a higher threshold of return, meta-heuristic optimization algorithms, as opposed to traditional exact optimization algorithms, can actually give the solution having no logical sense (shaw 2011). the omega ratio is easy to use in assessing prior performance, but is non-convex and may have plenty of local minimums; thus, portfolio optimization using this function table 1. review of studies on portfolio optimization with respect to the omega function (source: created by the author) authors brief description of the study, main results avouyi-dovi et al. 2004 data: index weekly returns of us, british and german stock markets over the period 1974–2003. optimization method: threshold acceptance. results: general considerations that the omega can be used for optimizing investment portfolios. kane et al. 2009 data: artificial data – three series of stock returns comprising the 50-day period. optimization method: the nelder-mead method and mcs global minimum algorithm. results: general considerations that omega portfolios differ from minimum risk and minimum loss portfolios. gilli, schumann 2010 data: one-year data covering several hundred of european companies. optimization method: threshold acceptance. results: highlights that the main objective is to evaluate the optimization algorithm rather than portfolio construction strategies. gilli et al. 2011 data: data on stock return from a few hundred largest european companies covering the period 1998–2008. optimization method: threshold acceptance. description: the optimization of the 130/30 portfolio (i.e. the portfolio allowing selling borrowed securities) and the portfolio that prohibits “borrowed positions” performing classical mean, variance and omega-optimization. results: classical and omega optimization results are not directly compared by the authors, indirectly – the omegaoptimized portfolio was not superior. gilli, schumann 2011 data: dow jones euro stoxx index companies optimization method: threshold acceptance. results: risk minimization, in contrast to return maximization, leads to good results obtained beyond the boundaries of the prediction sample. an additional parameter of the reward function makes only marginal improvements. hentati-kaffel, prigent 2012 description: omega and omega-sharpe optimization of plain vanilla structured products (stocks and the option portfolio as well as risk-free investment and the option portfolio). results: the payment function of the structured products is non-convex. 253 business, management and education, 2014, 12(2): 245–265 is quite tricky. mausser, saunders and seco (2006) proposed a method that, under certain conditions, allows solving the problem of the omega-optimized portfolio using linear programming techniques; however, generally this method is not appropriate. in other cases, the portfolio is optimized using heuristic optimization (gilli, schumann 2010) or other techniques of global optimization (kane et al. 2009). return series to be used in portfolio optimization can be obtained in two ways: by taking historical data on the previous periods or applying simulation techniques. as various studies show, relying solely on historical data leads to encountering of the so-called model over-fitting, i.e., the model perfectly fits to the period of construction or testing sampling but has little predictive power beyond this period. a theoretically better method is to “develop” returns using simulation techniques, but in fact, a process generating returns is not known (or even does not exist); thus, historical data are often used hoping that the past scenarios will remain relevant in the future or at least for some time. for the purposes of this paper, the omega-optimized portfolio has been carried out using historical data and applying a genetic algorithm for differential evolution implemented in the r package deoptim (ardia et al. 2011). despite the fact that the omega ratio has considerably interested both academic and financial sectors, there are not many studies that could answer to the question of whether this ratio is somehow better than classic techniques for portfolio optimization or other strategies based on portfolio construction methods. one of the reasons – omegaoptimization are quite complex, and is itself an object of a number of studies. to the best of author’s knowledge, there are no empirical studies determining the characteristics of omega-optimized portfolios at different levels of threshold returns. a review of the conducted studies is presented in table 1. 5. classic portfolio theory, its modifications and techniques for heuristic portfolio optimization the creation of the classic portfolio theory can be dated back to 1952 when markowitz published portfolio selection theory (markowitz 1952). based on the portfolio theory by markowitz, investors selecting a portfolio refer only to two characteristics, including the expected return and risk measured by variance, i.e. a multidimensional problem of investment selection, where due to indetermination, the investment portfolio must be composed of many differently characterized types of assets, was simplified by markowitz to two dimensions. therefore, this technique for portfolio optimization is often called a mean-variance method (mv). the portfolio is considered optimal in respect of mv, if, at given fixed average yields, risk is minimized or, at certain fixed risks, the expected returns are maximized. a set of optimal portfolios constructed taking into account different risk tolerance of investors is called an efficient frontier. 254 r. vilkancas. characteristics of omega-optimized portfolios at different levels of threshold returns despite great academic success, a practical application of this model has not been very successful, because it has been quickly noticed that mv portfolios can neither be characterized by good investment diversification nor by stability. the mv portfolio is ex ante optimal when input parameters are “known”. since in practice we do not know the “true” parameters, and their estimates used generally overestimate the “true” values, or duly underestimate them, the “optimized” portfolio can be much worse than the unoptimized portfolio constructed using “naive” risk diversification techniques, e.g. distributing portfolio funds into equal parts. while using moment estimates, in order to construct mv portfolios, we have to deal with the risk of estimates, the source of which is the difference between the estimates and the actual values of parameters. therefore, while optimizing the portfolio, we no longer deal with one but already two sources of risk: i) the risk of markets and security price volatility; ii) the risk of estimates or false expectations. the risk of parameter estimates and its significant negative impact on the optimization of the mv portfolio is quite well researched and documented. in the process of mv optimization, disproportionately large weights are assigned to securities with high expected yield, negative correlation and low variance, and disproportionately small weight coefficients are assigned to securities with low expected yield, positive correlation and high variance. such weight distribution is understandable, but it is most likely that these securities will have the biggest estimation errors. for this reason, michaud designated mv optimization as the “maximization of estimation errors” (michaud 1989). asset distribution within the portfolio is remarkably affected by the estimation errors of the expected returns (merton 1980). the mv portfolio is particularly sensitive to changes in return in case of the ban on short sale – even a very small increase in the mean of only one security returns may result into a large part of securities being “expelled” from the portfolio (best, grauer 1991). while studying the relative influence of mean, variance and covariance estimation errors on mv portfolios, chopra and ziemba (1993) found out that the errors of means were up to ten times more significant than those of variances; meanwhile, the errors of variances are up to two times more significant than those of covariances. in this context, an interest in minimum variance portfolios has greatly increased, the optimization of which does not require the prognosis of the expected returns and is limited to the covariance matrix only. unfortunately, minimum variance portfolios also do not avoid the high concentration of low variance securities (clarke et al. 2011). most of the proposed mv optimization solution techniques, in one way or another, are related to constraints on model input parameters or portfolio weights (frost, savarino 1988; jagannathan, ma 2003). it is obvious, that by limiting maximum weights, illogically, high stock concentration is prevented and better risk diversification is ensured; however, constraints on weight mean there is less reliance on optimization procedures and market “signal” reliability but more on “naive” risk management. 255 business, management and education, 2014, 12(2): 245–265 another solution to the problem was proposed by ledoit and wolf (2003, 2004). they claimed that, due to the resulting major errors of estimates, for portfolio optimization, no one should use covariance matrix s obtained from the sample of stock returns. instead, scientists have proposed the use of the covariance matrix “shrunk towards” a structured covariance matrix and obtained using a well-known capital asset pricing model (capm). their argument is that structured covariance matrix f received using the sharpe’s simplified one-factor model has far less parameters and can therefore be estimated with much less error. the proposed “shrunk” covariance matrix σ̂ is calculated as follows: ˆ ˆˆ (1 )f sς = δ + − δ , (6) where δ̂ – optimal “shrinkage” constant obtained by minimizing σ̂ mean quadratic error. using a structured covariance matrix reduces estimation error, but model specification or a “wrong” model error (if the chosen model does not or badly conforms to reality) appears. as an alternative to the structured covariance matrix, ledoit and wolf suggested the use of a uniform correlation model, in which all pair correlations of securities are replaced by a uniform correlation equal to the mean of security correlations (ledoit, wolf 2004). due to the enlisted disadvantages of the mv optimization algorithm, “precise” optimization algorithms are often generally refused instead of using the so called “heuristic optimization techniques”, i.e. various portfolio construction rules based on empirical facts of security or investor’s behaviour. one of such techniques are the portfolio of equal weights or simply a 1/n portfolio. while comparing various strategies for portfolio optimization, this portfolio is often used as a benchmark portfolio. naturally, the 1/n strategy is not based on any input assumptions but depends on a sample of stocks. the carried out studies have shown that naive 1/n portfolios often surpass mvoptimized portfolios when the results of strategies are assessed using new data outside the data sample used for optimization (demiguel et al. 2009a; duchin, levy 2009). although demiguel et al. (2009b) recognized the advantage of the ledoit and wolf’s method in their later work, the 1/n strategy still remains a favourite “standard” to which various portfolio construction and optimization techniques are compared. 6. portfolio turnover and transaction costs the portfolio of securities can be actively or passively managed. due to lower turnover, passive portfolio management costs (management costs – a broader concept that includes investment management fee and other expenses, but for this paper, only the costs associated with the purchase and sale of securities were assessed) are much lower than those of the active ones. to cover additional transaction costs and ensure their superiority, actively managed portfolios have to earn additional returns. 256 r. vilkancas. characteristics of omega-optimized portfolios at different levels of threshold returns the implementation of the portfolio strategy requires the reallocation of portfolio weights for two reasons: 1) while the parameters of the model are changing, optimal portfolio weights also vary; 2) while the prices of the stock market portfolio are changing, the actual weights deviate from the theoretical ones; and in order to eliminate this difference, we have to reallocate the positions of the portfolio. for the second reason, we must regularly reallocate weights, even when the weights of the optimal model remain unchanged, e.g. in order to maintain a portfolio of equal weights. as portfolio turnover and transaction costs directly affect the net portfolio return, portfolio optimization strategies characterized by stability and low turnovers are significantly superior compared to other strategies, e.g. the 1/n strategy characterized by low turnovers, as its weights need to be adjusted only due to changes in the price. within this paper, the portfolio turnover is calculated according to standard practice (demiguel et al. 2009a; gilli, schumann 2011). the average portfolio turnover is derived from: , , 1 1 1 1 t n n t n t t n turnover x x t −= = = −∑ ∑ , (7) where xn, t – the weight of the i-th position of the portfolio after reallocation; xn, t 1 – the weight of the i-th position of the portfolio before reallocation. as it is common to present return and risk using annual data, the turnover rate is accordingly converted multiplying it by 12. the calculation of the net portfolio return obtained following the deduction of portfolio reallocation costs is more complex. marketing securities imposes direct and indirect costs. direct costs include commissions and similar expenses while the indirect ones – the difference between purchasing and selling prices associated with the liquidity of securities and the costs associated with the “impact on the market”, i.e. impact on prices. a theoretical assumption that one can purchase or sell securities without restrictions making no impact on their prices is unlikely in the real world, especially when selling portfolios. costs can also be proportional, i.e. depending on the transaction amount and fixed, i.e. independent of the transaction amount. while modelling transaction costs, it is easier to assume that costs are proportional to the amounts of money traded. if the “rate” of proportional transaction cost is equal to c, the dynamics of the portfolio value, after deducting costs, can be described as follows: 1 1 , 1 , 1 (1 ) 1 n t t t n t n t n w w r c x x+ + + −   = + − −    ∑ , (8) where r – general portfolio returns, wt – initial wealth at time t, and wt+1 – wealth at time t+1. then, the net return of the portfolio is equal to wt /wt-1 – 1. while assessing the net result of the investigated strategies based on the study by carhart (1997), a rate of 1 percent proportional turnover was “determined”, i.e. it is modelled that a portfolio turnover of 100 percent reduces the net income of the portfolio by 1 percent, or, in 257 business, management and education, 2014, 12(2): 245–265 other words, the portfolio must achieve a 1 percent alpha to cover the turnover increased by 100 percent (a detailed review of studies relating to transaction costs was done by kasten (2007)). while the selected proportional turnover rate of 1 percent is high enough, it is two times higher than the rate of 0.5 percent used in the study by demiguel, garlappi and uppal (2009a) where actual portfolio turnover costs can be significantly higher due to an indirect “impact on the market” costs; therefore, dramatic variations in the portfolio are undesirable. 7. results, discussion and limitations the characteristics of the omega portfolio were assessed with threshold return value t varying in the range from 0 to 5 percent. range step is 0.001%. the tables of the obtained results include concise data ranging from 0 to 4 percent, the range step of 0.005 percent and the maximum value of a hypothetical portfolio. in order to objectively evaluate omega portfolios, their performance are compared with the performance of the portfolios optimized using other techniques. a total of nine benchmark portfolios are compared within this paper: the classic minimum variance portfolio, the tangency or maximum sharpe ratio portfolio (respectively c.mv and c.tg), tangency portfolios optimized using uniform correlation and “shrunk” covariance matrices proposed by ledoit and wolf (respectively lwcc.tg and lw1f.tg), minimum conditional value-at-risk and highest return-risk cvar portfolios (mincvar and maxcvar), the equal weighted portfolio (eqw), the equal risk portfolio (erc) proposed by maillard, roncalli and teïletche (2010) and the minimum correlation portfolio (mincor) suggested by varadi, kapler and rittenhouse. the study refers to three data sets of the global stock market: dow jones industrial average index composed of data on monthly industry stock returns for the period from 30/01/1998 to 31/12/2013 (a total of 30 stocks and 192 periods), ftse index composed of 30 randomly selected monthly stock returns for the period from 31/01/2001 to 30/05/2014 (in order to calculate the weights of classical mv portfolios, the inverse covariance matrix that can be obtained only when the number of observations m is greater than the number of stocks n is required; since the selected duration for one backtesting period is equal to 36 months, i.e. m = 36 (see below), to estimate the weights of the classic portfolio, it was necessary to reduce the number of stocks or use weekly or daily data on stock returns; thus, in order the ftse index portfolio could be directly compared to djia stocks, a random set of 30 stocks was selected) and euro stoxx 50 index composed of data on weekly industry stock returns for the period from 04/01/2002 to 31/12/2013 (a total of 50 stocks and 627 periods). the performance of the studied strategies for portfolio optimization, including return and other indicators, were evaluated using a moving sample window method often applied in scientific studies (demiguel et al. 2009a; gilli et al. 2011). the choice of the method is usually based on a well-known heteroskedasticity feature of financial data series. primarily, the duration of one testing period is selected; this paper accepts m = 36 months, or 104 weeks. based on the return series of the first testing period, the 258 r. vilkancas. characteristics of omega-optimized portfolios at different levels of threshold returns parameters required for implementing a particular strategy are obtained and then used for calculating optimal portfolio weights that are received and used for calculating portfolio returns for the next period, i.e. m + 1. the process is continued with an addition of a new period and the exclusion of one of the earliest periods until the end of the entire data period is reached. as a result of this backtesting using a moving window approach, a series of t-m monthly (weekly) out-of-sample portfolio returns is obtained, i.e. calculated using data that was not included into a data sample during portfolio optimization. the procedure applies to each testing strategy and each stock data set. another decision to be made in the management of investment portfolios is to choose how often the investment portfolio will be reallocated. fund managers usually reallocate portfolio positions either in accordance with a specified frequency or when portfolio weights “deviate” from the specified allowable threshold or, more commonly, over a certain period if, at that time, weights are above the specified “threshold”. such portfolio management can be called tactical, as for certain tactical objectives, e.g. reducing transaction costs it is allowed to deviate from the basic strategy – optimal weights. the frequency of portfolio reallocation can be also changed for other reasons such as reducing the taxes paid. based on the results of the author’s previous study on the omega portfolio, a half-year frequency for reallocating weights was selected for the present study, which is empirically proven as a good compromise in order not to deviate significantly from the selected strategy and the desire to reduce turnover costs (vilkancas 2014). the series of derived portfolio returns were assessed considering various aspects, including the overall return, risk and portfolio turnover required for a particular strategy, portfolio concentration and net return received after the deduction of costs and incurred in the reallocation of portfolio weights. in order to assess portfolio performance, a total of 14 different indicators were used. in addition to conventional risk indicators – standard variance (annsd) and the sharpe ratio (ann.sr), the study presents the maximum drawdown and the average drawdown rate (max.draw and avg.draw) as well as maximum and minimum annual returns received over the period. while assessing portfolio turnover, the average annual turnover and the total, i.e. covering the whole period, turnover are given (ann.turn and tot.turn). in order to assess portfolio concentration, the gini coefficient calculated according to the method and developed by the italian statistician corrado gini is employed. the coefficient ranges from 0 to 1. if the value of the gini coefficient equals to 1, this shows complete portfolio concentration (portfolio consists of only one position), and the gini coefficient for a well-diversified portfolio of equal weights equals to 0. the table of the obtained results includes the average values of the gini coefficient obtained during the entire period of study. finally, it provides the net annual returns of the portfolio and the net value (netcumret) received after the deduction of proportional turnover charges as well as the sharpe ratio estimated using net returns (netann.sr). the main obtained results are presented in tables 2–5, a net value of hypothetical $ 1 (£ or €) portfolio obtained by changing the threshold limit – in figures 3–4 (detailed results of ftse 100 and euro stoxx 50 benchmark portfolios are omitted). 259 business, management and education, 2014, 12(2): 245–265 table 2. the performance of the omega portfolios of djia index at different levels of threshold returns where weights are reallocated every six months (source: created by the author) threshold, t 0 0.005 0.01 0.014 0.015 0.02 0.025 0.03 0.04 cumret 3.370 3.068 3.794 4.340 3.948 3.143 2.008 1.633 1.090 annret 9.80 9.01 10.80 11.95 11.14 9.21 5.51 3.84 0.66 annsd 13.23 13.90 14.64 15.61 15.80 16.79 20.25 22.13 23.52 max.draw 36.23 36.49 33.08 30.62 34.29 29.89 45.59 54.51 55.78 avg.draw 6.08 6.75 7.66 7.29 7.25 11.31 15.63 17.75 55.78 maxannret 35.49 37.80 36.99 36.55 34.34 35.02 59.18 49.48 52.22 minannret –22.44 –22.09 –17.21 –13.81 –18.00 –19.14 –28.46 –37.20 –37.86 ann.sr 74.06 64.79 73.79 76.57 70.52 54.84 27.20 17.37 2.82 ann.turn 161 159 159 170 174 200 227 211 177 tot.turn 2088 2071 2072 2207 2259 2600 2947 2745 2297 gini.avg 89 90 92 92 92 90 89 88 84 netannret 8.19 7.41 9.21 10.26 9.40 7.21 3.24 1.73 –1.10 netann.sr 61.91 53.33 62.90 65.70 59.52 42.93 16.00 7.83 –4.69 netcumret 2.727 2.491 3.084 3.481 3.151 2.425 1.496 1.240 0.864 note: here and below in the tables, the indexes are shown as percentages, except cumret and netcumret, the values of which are specified in the units of currency. 0.000 0.500 1.000 1.500 2.000 2.500 3.000 3.500 4.000 0 0.01 0.02 0.03 0.04 0.05 $ omega lwcc tg-3.211 eqw-2.685 lw1f tg-2.606 eqrc-2.427 mincor-2.394 c.tg-2.219 max cvar-1.975 min cvar-1.676 c.mv-1.455 τ fig. 3. value growth of a hypothetical $1 investment in stocks from the djia index universe where weights are re-allocated every six months (source: created by the author) 260 r. vilkancas. characteristics of omega-optimized portfolios at different levels of threshold returns table 3. the performance of the benchmark portfolios of djia index where weights are reallocated every six months (source: created by the author) eqw c.mv c.tg lwcc tg lw1f tg min cvar max cvar erc mincor cumret 2.753 1.684 2.677 3.841 3.116 2.148 2.459 2.527 2.511 annret 8.10 4.09 7.87 10.91 9.14 6.06 7.17 7.39 7.34 annsd 15.27 11.99 13.33 13.25 12.85 13.23 14.25 13.84 13.55 max.draw 45.71 37.72 41.13 34.36 36.87 38.89 38.90 43.89 43.24 avg.draw 7.25 5.92 7.50 5.92 6.08 6.82 7.70 6.62 6.01 maxannret 34.32 21.96 34.81 36.06 34.39 22.40 36.23 30.24 27.76 minannret –28.52 –24.57 –29.68 –21.38 –24.94 –25.14 –26.81 –28.10 –27.45 ann.sr 53.07 34.10 59.04 82.30 71.09 45.77 50.30 53.43 54.16 ann.turn 19 111 143 138 137 189 166 31 37 tot.turn 248 1442 1857 1795 1778 2452 2155 404 478 gini.avg 4 85 90 90 87 87 91 23 32 netannret 7.91 2.98 6.44 9.53 7.77 4.17 5.51 7.08 6.97 netann.shr 51.82 24.85 48.32 71.88 60.45 31.52 38.66 51.18 51.45 netcumret 2.685 1.455 2.219 3.211 2.606 1.676 1.975 2.427 2.394 τ 0 1 2 3 4 5 6 0 0.01 0.02 0.03 0.04 0.05 £ omega maxcvar-3 .461 eqw-2.96 5 c.tg-2.9 6 lwcc.tg-2.67 eqrc-2. 554 mincor-2.45 3 mincvar-2.403 c.mv-1.78 6 fig. 4. value growth of a hypothetical 1£ investment in stocks from the ftse 100 index universe where weights are reallocated every six months (source: created by the author) 261 business, management and education, 2014, 12(2): 245–265 table 4. the performance of the omega portfolios of ftse 100 index at different levels of threshold returns where weights are reallocated every six months (source: created by the author) threshold, t 0 0.005 0.01 0.015 0.016 0.02 0.025 0.03 0.04 cumret 3.306 3.286 4.332 5.738 5.920 4.995 4.266 2.797 2.924 annret 12.06 12.00 14.98 18.10 18.46 16.55 14.82 10.29 10.76 annsd 16.40 17.04 19.96 23.44 24.36 25.79 25.94 26.00 28.31 max.draw 42.10 40.69 40.41 45.11 48.07 50.44 47.88 40.64 50.57 avg.draw 7.00 7.45 7.00 7.78 7.76 8.91 9.75 11.95 16.03 maxannret 37.11 42.54 62.23 81.09 83.44 76.46 75.69 48.17 115.57 minannret –39.55 –37.68 –34.95 –35.34 –34.21 –33.82 –29.79 –24.32 –35.96 ann.se 73.57 70.39 75.06 77.22 75.75 64.19 57.13 39.58 38.01 ann.turn 159 170 180 171 181 174 185 187 151 tot.turn 1752 1875 1982 1886 1995 1913 2036 2059 1665 gini.avg 88 88 90 91 91 91 91 91 89 netannret 10.47 10.29 13.18 16.39 16.64 14.82 12.97 8.42 9.25 netann.sr 63.85 60.38 66.03 69.91 68.31 57.45 49.99 32.38 32.67 netcumret 2.773 2.723 3.551 4.747 4.849 4.115 3.473 2.269 2.468 table 5. the performance of the omega portfolios of euro stoxx 50 at different levels of threshold returns where weights are reallocated every six months (source: created by the author) threshold, t 0 0.003 0.005 0.01 0.015 0.02 0.025 0.03 0.04 cumret 2.592 2.748 2.614 1.814 1.673 1.205 1.173 1.058 1.186 annret 9.99 10.64 10.08 6.14 5.28 1.88 1.61 0.56 1.72 annsd 14.80 15.89 18.13 21.68 24.60 25.53 26.11 26.00 25.15 max.draw 52.51 51.10 57.43 58.42 61.07 64.15 66.19 68.10 63.36 avg.draw 9.14 8.44 8.47 11.82 10.13 13.27 13.43 13.20 13.97 maxannret 33.61 31.95 33.27 36.44 38.39 35.54 37.22 35.01 34.34 minannret –41.39 –39.19 –39.85 –45.04 –44.63 –46.46 –49.58 –50.11 –46.15 ann.sr 67.52 66.96 55.61 28.30 21.47 7.37 6.17 2.16 6.84 ann.turn 177 176 184 167 168 161 156 143 143 tot.turn 1772 1762 1838 1673 1677 1608 1563 1427 1430 gini.avg 86 83 82 78 78 77 76 74 71 netannret 8.22 8.88 8.25 4.46 3.60 0.27 0.05 –0.87 0.29 netann.sr 55.55 55.87 45.47 20.59 14.65 1.07 0.18 –3.33 1.15 netcumret 2.175 2.308 2.178 1.537 1.416 1.027 1.004 0.917 1.028 262 r. vilkancas. characteristics of omega-optimized portfolios at different levels of threshold returns 0 0.5 1 1.5 2 2.5 0 0.01 0.02 0.03 0.04 0.05 € omega max cvar-2.038 lw1f tg-2.0 22 c.tg-1.9 95 lwcc tg-1 .987 mincor-1.85 c.mv-1.77 1 eqrc-1. 749 eqw-1.64 min cvar-1.356 τ fig. 5. value growth of a hypothetical 1€ investment in stocks from the euro stoxx 50 index universe where weights are reallocated every six months (source: created by the author) 8. conclusions the results presented in tables 1–6 show that the return and risk of omega-optimized portfolios depend on the threshold return selected by the investor: a growth in the threshold return leads to an increase in the performance of the net portfolio; however, at the expense of a growing portfolio risk. in fact, the result is quite impressive as omega-optimized portfolios tested applying all three sets of stocks and using data obtained at three different stock markets, managed to surpass 9 competing strategies for portfolio optimization. in addition, omega-optimized portfolios were distinguished by stability with threshold return value t varying in the range from 1 to 2%. the optimal threshold return of euro stoxx 50 stocks was lower, but in this case, weekly data were investigated – the highest portfolio return was achieved selecting a weekly threshold return of 0.003 percent, which is equivalent to 1.2 percent of monthly returns. alternative portfolio optimization strategies did not demonstrate stability: in the us market, lwcc.tg was characterized as the best one, but, when surveyed in other markets, it was not even in the top three of the best strategies. as for the eurozone and london stock markets, the max cvar 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http://dx.doi.org/10.1016/s0378-4266(02)00271-6 http://dx.doi.org/10.2307/1907413 http://dx.doi.org/10.2139/ssrn.1856476 http://dx.doi.org/10.3905/jpm.1999.319775 http://dx.doi.org/10.3905/jpm.1991.409343 http://dx.doi.org/10.3846/btp.2014.01 how to implement blue ocean strategy (bos) in b2b sector andrejs čirjevskis1, genadijs homenko2, valērija lačinova3 riga international school of economics and business administration, meža 3, lv-1048 riga, latvia e-mails: 1andrejs.cirjevskis@riseba.lv (corresponding author); 2mkatedra@riseba.lv; 3mkatedra@riseba.lv received 18 november 2010; accepted 15 january 2011 abstract. the aim of research is to confirm the hypothesis that bos is viable in the b2b sectors. the objects of research are two business entities: world’s leading suppliers of construction chemicals and manufacturer of purification equipment. authors posed first research question is bos a suitable within construction chemicals and purification equipment manufacturers’ industries? second research question was about how to evaluate acceptability of new strategic choice on bos? third research question was how to diagnosis organisational hurdles on bos implementation? research has confirmed the hypothesis and suggested application of innovation value chain to diagnosing company’s ability to implement value innovation. keywords: b2b sector, strategic canvas, blue ocean strategy idea index, value innovation chain. reference to this paper should be made as follows: čirjevskis, a.; homenko, g.; lačinova, v. 2011. how to implement blue ocean strategy (bos) in b2b sector, business, management and education 9(2): 201–215. http://dx.doi.org/10.3846/bme.2011.14 jel classification: l17, m13, o31, o32, o33. 1. introduction the challenge of implementation exists for any strategy. many successful examples about blue ocean strategies implementation focus much more on b2c (dell, yellow tail, ford t; cnn) than b2b sectors, although most sales and marketing personnel is in the b2b sector. to implement the new strategy an organization would have to overcome key organizational challenges, including the cognitive, resource, motivational and political hurdles (kim, mauborgne 2005a, 2005b). however there are no or very few examples how to diagnosis of a type or hurdle would be the most potentially serious for organisation. the aim of this research is confirm the hypothesis that blue ocean strategy can be viable and successfully implemented in the organisation of b2b sectors as well as to b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(2): 201–215 doi:10.3846/bme.2011.14 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 202 a. čirjevskis et al. how to implement blue ocean strategy (bos) in b2b sector explore how to diagnosis a type of organisation hurdles which would resist the implementation of blue ocean strategy in practice. the objects of this research are two real business entities from two different countries operating in two different fields in terms of technologies, industry life cycles and the natures of innovations, those companies working in production and distribution of construction chemicals (switzerland) and in production and distribution of industrial purification equipments (russia). as concerns the basic unit of analysis, the current research mainly concentrates on strategic move. strategic move is the set of managerial action and decision involved in making a major market-creating business offering (kim, mauborgne 2004a, 2004b). the type of research is classified as descriptive (provides a description of organizational capabilities that need to be developed for successful implementation of blue ocean strategy within b2b sector), co-relational (identify multiple factors that influence value innovation creation in b2b sector), with minimal interference of researchers, noncontrived (conducted in the natural environment where organization’s work proceeds normally). the time horizon of study is cross-sectional – data collections are done just once over short period of time (up to several months). data collection methods: interviews, questionnaire and observation. 2. description of research the objects of this research were two real business entities from two different countries operating in two different fields. first company sika ag (switzerland) is one of the world’s leading suppliers of construction chemicals presented globally in more than 70 countries. second company alexandra plus llc (russia) is the b2b provider of new innovative purification technologies in industrial sector. the companies have been chosen taking in consideration different industries development stages: sika ag runs the business many years in mature construction chemicals industry and alexandra plus llc represents business in emergent industry of innovative industrial purification technologies. accordingly, three research questions have been elaborated. having provided the hypothesis authors posed first research question is blue ocean strategy is suitable within b2b sectors like construction chemicals and industrial purification equipment sectors? suitability is concerned with whether a strategy addresses the key issues that have been identified in understanding the strategic position of the organisation. broad literature review helped authors to analyze a range of classical models and techniques to test a suitability of strategic choices, however many of them are based on the concepts of red ocean strategy. authors have decided to apply the competitive profile matrix, four actions framework, the strategy canvas and three tiers of non-customers to visualize a suitability of value innovation creation for two very different industries. accordingly, second research question was appeared: what about the most helpful 203 business, management and education, 2011, 9(2): 201–215 analytical technique to evaluate an acceptability and feasibility of blue ocean strategy? acceptability is concerned with the expected performance outcomes of a strategy. feasibility is concerned with whether an organisation has the resources and competences to deliver a strategy (boguslauskas, kvedaraviciene 2009). authors adopted a blue ocean strategy idea index to test acceptability and feasibility of new strategic canvas for two business entities. third research question was formulated as follows: how to diagnosis organisational hurdles on value innovation implementation? authors adopted innovation value chain to identify major barrier on the way of value innovation implementation. investigation stage has included: firstly, the literature reviewed on commercial viability of strategic choices in red and blue ocean strategy; secondly, the interviews and questionnaires are used in order to obtain information from the companies management, companies customers and non-customers; thirdly, the direct observations of the work environment and industry specifics are made; fourthly, the secondary data, such as statistics, publications and internal company reports are examined and finally, the data is analyzed and interpreted, on the basis of which the research question are answered. 3. data analysis and interpretation there are number of tools that can be used to assess the suitability of strategic choice. these include: ranking as method of identifying strategic options, decision trees where options are “eliminated” and preferred options emerge and also scenarios. however many of above mentioned concept are based on the concepts of red ocean strategy (kim, mauborgne 2005a, 2009), they will not be able to test suitability of creation blue ocean strategy and cannot be applied in current research. for answering first research question the object of research has been taken switzerland company “sika” operating in construction chemical industry (table 1). table 1. profile of the company “sika ag” company name “sika ag”, world’s leading suppliers of construction chemicals status of the company: joint stock company date of registration: 1910 target markets: presented globally in more than 70 countries target industries: construction industry annual turnover: 4624.5 million chr (2008) number of employees: 12900 industry development stage: maturity stage company profile: construction chemicals 204 a. čirjevskis et al. how to implement blue ocean strategy (bos) in b2b sector construction chemicals are broad array of chemicals used in construction industry to reduce costs and / or to achieve necessary quality characteristics of final product (water resistant concrete, for instance). in current research the main focus is on the chemicals used for concrete and cement production. having answered on first research question the study aim was to obtain information relevant to the group of people working within construction chemicals business and located in scandinavian and baltic countries. judgments sampling involves the choice of individuals who are in the best position to provide the information required and represent a rich data source (sekaran 2009). in order to identify critical success factors three top managers having decade’s long experience within construction chemicals were asked during the phone interview from. the interviewees were offered to list factors they think are most important to be successful within construction chemicals industry in the form of unstructured brainstorming when the ideas are given as they come to mind (brassard et al. 2002). what do you think the most critical success factors within construction chemicals industry are? please name 10–15 factors that come to your mind. 1. what additional offerings can be created for the customers that are still missing in construction chemicals industry? 2. are there any alternatives available in other industries that company may start offering instead and thus make customers trade across alternatives? 3. are there other strategic groups within construction chemicals industry that can be attracted by existing offerings? 4. are there any overlooked groups of potential customers in the chain of buyers (user, influencer, and purchaser)? 5. is there a need for complementary products and services that is still not satisfied? 6. is there a possibility to change functional appeal of construction chemicals industry into emotional one? 7. are there stable and irreversible trend that can significantly change the business? 8. what non-customers can be attracted by construction chemicals industry offerings? all the given ideas were grouped by identity as sometimes they meant the same with different wording. the final list generated served as the basic list of critical success factors for designing of questionnaire. then, altogether twelve individuals were chosen as respondents who are directly involved with construction chemicals business and technologies, are highly experienced within the field of study (in some cases decades long), and represent the countries under investigation. in addition, these experts were readily available by phone and e-mail as are personally known by one of researcher which minimized access concerns that usually accompany judgment sampling approach. to determine the importance weight of each critical success factor, first, all twelve respondents were offered, in questionnaire to simply choose value from 1 to 5 (1 – low importance in the industry and 5 – high importance) in dropdown list in appropriate cell of excel spreadsheet. only nine of twelve respondents (75%) exercised it and sent the results back to the researchers. afterwards, the absolute value chosen for each factor has 205 business, management and education, 2011, 9(2): 201–215 been divided by total sum of absolute values of all factors in the list, giving the weight of certain factor from one respondent. the average weight of certain factor was then calculated from all responses. in addition, the results obtained from questionnaire have been used in practicing four actions framework for sika ag and contribute to the suitability assessment of blue ocean strategy within construction chemicals business. further, identification of competition offering level in the market (i.e. critical success factors competitors are investing in) was made by means of questionnaire, where the respondent were able to choose the offering level of critical success factors in construction chemicals industry for sika and two main competitors in the comparative scale from 1 to 5 (1 means low, 5 means high offering level). the questionnaire served in assessing sika’s and competitors’ offering level of the most important csfs which have been identified on previous stage. each respondent was asked to estimate each factor for sika ag and for basf ag as main competitors. only ten out of twelve respondents (83%) filled in the questionnaire and delivered the answers to the researchers. all ten mentioned basf as competitor number one. during the assessment of csfs’ importance within construction chemicals market the following factors have been weighted as the least important: complementary products, commodity products, backintegration and training of customers. advanced technology, quality, technical support, complete solutions, price and ease of use of product are among highly rated factors. the rest (skilled sales force, tailor made solutions, fast delivery and geographic presence) are somewhere in the middle. to reconstruct buyer value elements in crafting a new value curve, researchers have developed the four actions framework. complementary products provided by respondent are more imitations of competitors’ moves and thus can be reduced to the minimum to lower the costs. commodity products are still cash generators and cannot be eliminated until new innovative products pioneers become profitable. anyway sooner or later sika should give up on commodities completely. tailor made solutions have middle importance weight and also stand comparatively high in the value curve. this factor is more about differentiation and focus strategies that are mainly pursued in competitive red oceans. blue ocean strategy on contrary looks for commonalities. therefore, it makes sense to significantly reduce it in order to cut costs. price is of high importance within construction chemicals industry, and has reversed influence (the higher the price the less attractive is the offering). it can be slightly reduced due to the cost reduction moves discussed above to make the offering even more attractive. training of the customers should be even raised in spite of low importance weight as it’s been concluded that some of customers in the chain of buyers have been overlooked. advanced technology is the most important csf according to the rating and is directly related with the capabilities of the company to innovate. the new value curve for sika has been built based on that information and is presented in fig. 1 along with the main competitor value curve. effective blue ocean strategy has to have three complementary qualities: focus, divergence, and a compelling tagline. now a clear divergence from competition and focus on certain factors can be observed on the new strategy canvas of sika ag. the compelling tagline of new 206 a. čirjevskis et al. how to implement blue ocean strategy (bos) in b2b sector strategy can be pronounced as follows: “more innovation to our customers with friendly and honest attitude!”. based on these three attributes in can be concluded that initial litmus test of commercial viability in terms of suitability of presented blue ocean ideas is passed. thus, it can be concluded that blue ocean ideas are suitable within construction chemicals industry, but of course more detailed investigation of each criteria is still necessary. the difference between the current and the desired industry performance level in terms of its critical success factors was representing the direction of the buyer value innovation creation in search of the blue ocean strategy and makes the strategic choice as a suitable one in b2b sectors. second research objective was russian company llc (table 2). table 2. profile of the company “alexandra plus” company name “alexandra plus” status of the company: llc date of registration: 2000 target markets: russia ukraine, kazakhstan, byelorussia, latvia, lithuania, macedonia, mongolia joint project: china, south africa target industries: real ways, metallurgy, public utilities number of employees: 36 number of clients: 300 industry development stage: growing company profile: industrial purification equipments fig. 1. new strategic canvas of sika ag versus basf group (10 respondents) c om m od ity pr od uc ts c om pl em en ta ry pr od uc ts ta ilo r m ad e so lu tio n pr ic e b ac ki nt eg ra tio n ea sy to u se pr od uc ts c om pl et e so lu tio ns g eo gr ap hi c pr es en ce q ua lit y tr ai ni ng o f cu st om er s fa st d el iv er y te ch ni ca l s up po rt sk ill ed s al es fo rc e ad va nc e te ch no lo gy fr en dl y re la tio ns tr us t n et w or k of fe llo w su ct om er s sika basf 207 business, management and education, 2011, 9(2): 201–215 the direct observations of the work environment of manufacturers of industrial purification equipments specifics are made by researchers; the secondary data, such as statistics, publications, videos and internal company reports of alexandra plus lcc are examined. having manufactured and supplied purification equipment for railway industries, company has started to produce purification equipment for metallurgy, medicine, and even for water industrial purification equipment based on ultrasonic waves technologies. company maximized the scale of his blue ocean strategy beyond existing demand to non-customers and de-segmentation opportunities for future strategies. these newer technologies based on ultrasonic ways were opening up new market opportunities for alexandra plus, also raised fresh challenges in further strategic choices. blue ocean has been created in 2004, when after careful market research; alexandra plus launched a new daughter company producer of water purification equipment, llc novotech eko. there are traditionally three kinds of impurities in water: physical, chemical and bacterial, each presenting a different challenge in terms of consequences for human health as well as technologies and feasibility of removal. although numerous technologies existed, the water purification market was dominated by ultraviolet (uv). a uv purifier irradiated water using uv rays, eliminating bacterial micro-organism. uv equipment needed reliable running water and power and seeks out after-sales service when exhausted consumables like uv lamps needed replacement. regarding ultrasonic purification equipments produced by novotech eko, the efficiency of ultrasonic clearance (us) is based on high-frequency oscillations which are the cause of strong cavitations in liquids. microscopic cavitations bubble explodes in liquid removing grease and other kinds of impurities quickly and efficiently. novotech eko llc company has created unique water purification technology in the world combining ultrasonic waves with uv rays for eliminating bacterial micro-organism till 100%! the benefits of ultrasonic waves plus uv rays technology were quite obvious e.g. minimal maintenance costs, long class life of equipments, high level of ecology and energy efficiencies and short payback period. it gave sound viable example of successful implementation of blue ocean strategy in b2b sector. strategy canvases for producers of industrial purification equipment, particularly, new strategy canvas for llc alexandra plus have been built in comparisons with russian purification equipment producers itrans llc and italian competitor madigo group s.r.l as presented in fig. 2. thus, authors applied strategy canvas to visualize value innovation creation for two very different industries. new strategy canvas has been elaborated for both industries and answer on the first research question was given in confirmation manner, namely, blue ocean strategy is suitable within b2b sectors. the concepts and frameworks already applied in current research can be especially helpful in understanding suitability of blue ocean strategy in b2b sector. accordingly, second research question was appeared: what about the most helpful analytical technique to evaluate an acceptability and feasibility of blue ocean strategy? it is very important to get strategic sequence right to insure acceptability of blue ocean 208 a. čirjevskis et al. how to implement blue ocean strategy (bos) in b2b sector idea. the assessment of viability in terms of acceptability and feasibility of blue ocean strategy within construction chemicals industry and in industrial purification equipment has been conducted based on the answers to first research questions. by addressing the problems related to the spread of new ideas throughout the company adoption hurdles raised by employees can be easily tackled. the water purification equipment that promoted novotech eko help economizes a sufficient resource that is not in interest of state-owned organizations. sustainable management of water resources is complex process often requires responsibilities of concerning institutions (dzemydiene, maskeliunas et al. 2008). at present novotech eko delivers water purification ultrasonic based technologies equipment for small cottages, sanatoriums, and private water-canal as well as for sewage tanks. bos idea index (table 3) visualizes whether each criterion throughout strategic sequence towards commercially viable blue ocean idea has been met. it can be concluded that blue ocean ideas are commercially viable within b2b sector at least in construction chemicals industry and water purification sector, but of course more detailed investigation of each criteria is still necessary. small issues, however, can be observed inside the company. the research revealed the spread activity as one of the weakest in the company sika. third research question was formulated as follows: how to diagnosis organisational hurdles on value innovation implementation? value innovation isn’t an easy task as many innovative ideas failed to become real products due to many reasons (moore 2004; bruce, birchall 2009; kanter et al. 1997; temme 1998; banyte, salickaite 2008). several authors postulate that it is not enough just to hire creative people and make organization innovative (bharadwaj, menon 2000). b ra nd d es in g pr ic e m at er ia l ec on om y c on vi ni en t q ua lit y m as s c us to m is at io n m ai nt en an ce en eg rg y ef fic ie nc y ec ol og y ef fic ie nc y u ltr as ou nd te ch no lo gy alexandra plus madigo group itrans fig. 2. strategic canvas of manufacturers of industrial purification equipment (20 respondents: 10 customers and 10 non-customers) 209 business, management and education, 2011, 9(2): 201–215 table 3. index of blue ocean ideas in construction chemical industries for sika ag and in industrial purification technologies for “alexandra plus” llc criteria questions sika ag criteria met? alexandra plus llc criteria met? utility is there exceptional utility? are there compelling reasons to buy the offerings? + + price is the price easily accessible to the mass of buyers? + + cost does the cost structure meet the target cost? + + adoption have the adoption hurdles been addressed upfront? +/– + a strong and focused organizational culture or environment, which helps to recognize the paramount importance of innovation and removes all the obstacles in its development, should be established and maintained. different organizations face different hurdles in development of new products, services or businesses (hansen, birkinshaw 2007; kazlauskaite, buciuniene 2008), thus proving that there is no universal solution for innovative process. however, by taking an end-to-end (or holistic) view on innovative efforts organizations are able to pinpoint their weaknesses and adjust their innovation practices to address existing deficiencies (hansen, birkinshaw 2007). hansen, birkinshaw (2007) have offered a comprehensive framework on end-to-end view, called the innovation value chain (ivc), which is the result of decade long research project where innovation effectiveness in 120 new product development projects was analyzed, more than 130 executives from over 30 multinational companies in north america and europe were interviewed and 4000 non-executive employees in 15 multinationals were surveyed. the idea behind the ivc is similar to porter’s value chain for transforming raw materials onto finished products. it provides a systemic approach to assessing company’s innovation performance and identifying which of the many available practices are best to apply. the ivc breaks innovation process down into three phases (hansen, birkinshaw 2007): idea generation, idea conversion (or development) and idea diffusion. there are also six critical tasks that managers should perform throughout all three phases: internal sourcing, cross-unit sourcing, external sourcing, selection, development and companywide spread of the idea. each is a link in the chain (see in table 4 “phase of ivc”). the strongest links are those in which company’s activities are excellent. the weakest ones are activities company struggles with. a company’s ability to innovate is as strong as the weakest link in the ivc. therefore it is important to focus on the weakest links to make them equivalently strong throughout the whole ivc. typically there are three broad ‘weakest link’ scenarios: idea-poor company (difficulties in idea generation phase), conversion-poor company (problems in idea development phase) and diffusion-poor company (problems with bringing good idea to market). initially raw ideas are created within a unit and often are not distributed outside it (hansen, 210 a. čirjevskis et al. how to implement blue ocean strategy (bos) in b2b sector birkinshaw 2007). these raw ideas are usually incomplete as they are lacking another point of view (by people with different experience and background). mckeown (2008) argues that there is no perfect idea and it can always be improved. therefore, companies need to build internal cross-unit networks, as well as external networks to improve generation of good new ideas (hansen, birkinshaw 2007). as supported by the study (morrison 2008) cross-functional teams (or cross-unit networks) represented by different organization departments proved to be the key element in efficient innovative problem solving. responsibility of team members for the results they promised to deliver is another crucial point. external networks are needed as a source of enough good ideas from outside the company, and even outside the industry (hansen, birkinshaw 2007). that gives the opportunity to understand real needs of customers and end users, gain knowledge from scientists, entrepreneurs, investors, suppliers and even competitors. in order to avoid conversion-poor company scenario it is suggested (hansen, birkinshaw 2007) to practice multichannel funding (to insure funding of idea development in case, for instance, boss doesn’t like a particular new idea) and safe havens (sometimes separate company’s entities that run new businesses and have high level of operating autonomy). another key element of conversion phase, except funding, is screening of new projects (hansen, birkinshaw 2007). in other sources (nieto et al. 1998) it is called portfolio management. there is always a huge amount of projects to implement in any developing organization, and resources are usually limited. therefore it’s of vital importance to choose and do the right project. companies tend to choose “natural” approach – focus on incremental innovation as its less risky (johnson et al. 2005). portfolio management can help to overcome this barrier. it works like a funneling process that removes weak projects and allows making decisions on the right number of projects for resources available (andersen, strandskov 2008; hansen, birkshaw 2007). finally, to fix diffusion problems, it is not enough for executives just order a companywide rollout of developed ideas (hansen, birkinshaw 2007). employees feel themselves safe and comfortable by dealing with known product or process, and something unknown with unclear and hardly measurable benefits like new product or service, of course creates fear and resistance (loewe, dominiquini 2006). the necessary prerequisite to overcome these barriers is committed leadership (bruce, birchall 2009). the leaders, who preach good words about emerging product or business throughout the company, can insure successful implementation of innovation diffusion phase (hansen, birkinshaw 2007). in order to succeed in innovation projects company should strengthen all the weak links in innovation value chain (ivc is as strong as the weakest link in it). valuable suggestion can be elaborated for sika and alexandra plus managers on what links of ivc to focus by finding the answers to third research question. having answered third research question researchers had chosen sika corporation as object of research because blue ocean ideas had not been implemented so far and in comparison with alexandra plus who had successfully implemented bos recently. for the purpose of finding the weakest link in the ivc of sika the questionnaire has been designed. ten of twelve respondents (83%) expressed their agreement level 211 business, management and education, 2011, 9(2): 201–215 with the statements in the questionnaire. the rating of ivc of sika is summarized in table 4. according to the measurement principle the higher the score of certain link (or activity) the weaker it is. as seen in table 2 the weakest links of sika’s ivc are cross-pollination, development of ideas and their spread across the organization. crosspollination weakness is related with low involvement of people from different units and subsidiaries in innovation projects, and with reluctance of different units and businesses to collaborate on projects. as mentioned above, cross-unit networks proved to be the key element in efficient innovative problem solving and on time project implementation. therefore, the management of sika should try to find the ways of motivating collaboration between different units. the development of innovative ideas suffers mainly from slow development of new products. this can be explained with too high amount of projects, which is mainly idea screening problem, with lack of human resources to deal with all projects or with lack of project management capabilities. the further step of sika management is to find out which is the root cause of idea development problem to address. finally, spread activity is the weakest one due to slow roll out of new products to the market and unwillingness to penetrate all possible channels, customer groups and regions with new products. according to kim, mauborgne this is happening because of fear and resistance that new products create. table 4. innovation value chain rating of sika ag (10 respondents) statement do not agree (1) partially agree (2) agree (3) total score total score of activity activity (link) phase of ivc our culture makes it hard for people to put forward novel ideas. 80% 20% 1.20 3.00 in-house idea generation i d e a g e n e r a t i n g people in our unit come up with very few good ideas on their own. 40% 40% 20% 1.80 few of our innovation projects involve team members from different units or subsidiaries. 10% 70% 20% 2.10 4.30 crosspollination our people typically don’t collaborate on projects across units, businesses, or subsidiaries. 10% 60% 30% 2.20 few good ideas for new products and businesses come from outside the company. 20% 70% 10% 1.90 3.40 external sourcing of ideas our people often exhibit a “not invented here” attitude – ideas from outside aren’t considered as valuable as those invented within. 50% 50% 1.50 212 a. čirjevskis et al. how to implement blue ocean strategy (bos) in b2b sector statement do not agree (1) partially agree (2) agree (3) total score total score of activity activity (link) phase of ivc we have tough rules for investment in new projects – it’s often too hard to get ideas funded. 30% 50% 20% 1.90 3.60 selection c o n v e r s i o n we have a risk-averse attitude toward investing in novel ideas. 30% 70% 1.70 new-product-development projects often don’t finish on time. 10% 60% 30% 2.20 4.10 development managers have a hard time getting traction developing new businesses. 10% 90% 1.90 we’re slow to roll out new products and businesses. 10% 60% 30% 2.20 6.30 spread d i f f u s i o n competitors quickly copy our product introductions and often make preemptive launches in other countries. 40% 40% 20% 1.80 we don’t penetrate all possible channels, customer groups, and regions with new products and services. 70% 30% 2.30 employees feel themselves safe and comfortable by dealing with known product and create certain adoption hurdles. therefore sika has to find the ways of overcoming this hurdle either by finding true leaders, who preach good words about emerging product or business throughout the company but may not be readily available, or by other means. in overall the ivc of sika is not that weak (the maximum total score for each statement is 3 and none of them was higher than 2.3), but in any case by addressing the issues related to mentioned weaknesses the company can improve its capabilities in value innovation activities and significantly contribute to value innovation creation and eliminate adoption barriers (cognitive and motivation hurdles) raised by employees. regarding resource and political hurdles these are not the case of sika ag. because for 100 years sika has positioned itself as innovative company always striving for introducing something new into the market. for instance, invention rate (percentage of sales with products invented within the previous five years) is 34 % (sika… 2009a). thus answering on third research question the vic (value innovation chain) has been adopted to diagnosis organization hurdles and the weakest links of sika’s innovation value chain were identified and certain suggestions to address them provided. end of table 4 213 business, management and education, 2011, 9(2): 201–215 4. conclusions research has confirmed the hypothesis that blue ocean strategy can be viable and successfully implemented in b2b sectors. the answer to the questions on the viability (suitability, acceptability and feasibility) of blue ocean within construction chemicals industry for sika ag and within industrial purification technologies for alexandra plus llc, which was the main aim of the research, was found. furthermore, the elements of blue ocean strategy in currently undertaken strategic steps of sika ag and alexandra plus llc have been revealed. when it comes to limitation of the research paper the time constraints imposed the most limiting influence on the research. additional analytical tools and strategic models would certainly provide more detailed picture on strategy formulation approaches and allow analyzing provided ideas from other points of view. the scope of research is also restricted geographically as the information was mainly collected from managers in scandinavian and baltic countries for sika ag and in russia and latvia for alexandra plus llc. next researches in this area will be connected with investigation how to re-direct limited organizational resources from cold spots to hot spots to execute blue ocean strategy to overcome diagnosed key organizational hurdles on practice? references alexandra plus corporate webpage. 2010 [online], [accessed 04 september 2010]. available from internet: <http://www.alexplus.ru>. andersen, p. h.; strandskov, j. 2008. review of the books the innovator’s dilemma: when new technologies cause great firms to fail by christensen, c. m.; leading the revolution by hamel, g.; blue ocean strategy: how to create uncontested market space and make competition irrelevant by kim, w. c.; mauborgne, r., academy of management review 33(3): 790–794. doi:10.5465/amr.2008.32465791 banyte, j.; salickaite, r. 2008. successful diffusion and adoption of innovation as a means to increase competitiveness of enterprises, inzinerine ekonomika – engineering economics (1): 48–56. bharadwaj, s.; menon, a. 2000. making innovation happen in organizations: individual creativity mechanisms, organizational creativity mechanisms or both?, journal of production innovation management 17: 424–434. doi:10.1111/1540-5885.1760424 boguslauskas, v.; kvedaraviciene, g. 2009. difficulties in identifying company’s core competencies and core processes, inzinerine ekonomika – 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(eds.). 2005. exploring corporate strategy. harlow: pearson education ltd. kanter, r. m.; kao, j.; wiersema, f. 1997. innovation. breakthrough thinking at 3m, dupont, ge, pfizer, and rubbermaid. new york: harperbusiness. kazlauskaite, r.; buciuniene, i. 2008. the role of human resources and their management in the establishment of sustainable competitive advantage, inzinerine ekonomika – engineering economics (5): 78–84. kim, w. c.; mauborgne, r. 2004a. value innovation, harvard business review 82(july–august): 172–180. kim, w. c.; mauborgne, r. 2004b. blue ocean strategy, harvard business review 82(10): 76–84. kim, w. c.; mauborgne, r. 2005a. blue ocean strategy: how to create uncontested market space and make competition irrelevant. boston: harvard business school press. kim, w. c.; mauborgne, r. 2005b. blue ocean strategy: from theory to practice, california management review 47(3): 104–121. kim, w. c.; mauborgne, r. 2009. blue ocean strategy. the official site [online], [accessed 23 november 2009]. available from internet: <http://www.blueoceanstrategy.com>. loewe, p.; dominiquini, j. 2006. overcoming the barriers to effective innovation, strategy and leadership 34(1): 24–31. doi:10.1108/10878570610637858 mckeown, m. 2008. the truth about innovation. harlow: pearson education ltd. moore, g. a. 2004. darvin and the demon: innovating within established enterprises, harvard business review 82(july–august): 86–92. morrison, m. 2008. pestle analyses. cipd [online], [accessed 21 november 2009]. available from internet: <http://www.cipd.co.uk/subjects/corpstrtgy/general/pestle-analysis.htm>. nieto, m.; lopez, f.; cruz, f. 1998. performance analysis of technology using the s curve model: the case of digital signal processing (dsp) technologies, technovation 18: 439–457. doi:10.1016/s0166-4972(98)00021-2 sekaran, u. 2009. research methods for busines: a skill-building approach (5th ed.). new york: john wiley & sons. sika corporate webpage. 2009a [online], [accessed 5 december 2009]. available from internet: <http://www.sika.com>. sika. 2009b. internal company brochures and reports. temme, t. 1998. innovation and competitive advantage [online], [accessed 26 november 2009]. available from internet: <http://www.mcl.fh-osnabrueck.de/~temme/tutor/innovate/index.htm>. http://dx.doi.org/10.1108/10878570610637858 http://dx.doi.org/10.3846/2029-0187.2008.14.64-75 215 business, management and education, 2011, 9(2): 201–215 kaip įgyvendinti žydrųjų vandenynų strategiją (žvs) sektoriuje „verslas – verslui“ a. čirjevskis, g. homenko, v. lačinova santrauka tyrimo tikslas patvirtina hipotezę, kad žvs yra gyvybinga b2b sektoriuose. tyrimo objektai yra du verslo subjektai: pasaulyje pirmaujantys statybos chemikalų tiekėjai ir valymo įrenginių gamintojai. autorių keliamas pirmasis mokslinių tyrimų klausimas – ar žvs yra tinkama statybos chemikalų ir valymo įrenginių gamintojų pramonei? antrasis mokslinių tyrimų klausimas – apie tai, kaip įvertinti naujo strateginio pasirinkimo priimtinumą žvs? trečiasis tyrimo klausimas – kaip diagnozuoti organizacines kliūtis, įgyvendinant žvs? tyrimai patvirtino hipotezę, ir buvo pasiūlyta taikyti inovacijų vertės grandinę, siekiant diagnozuoti įmonės gebėjimą įgyvendinti inovacijų vertę. reikšminiai žodžiai: b2b sektorius, žydrųjų vandenynų strategijos idėjos indeksas, inovacijų vertės grandinė. andrejs čirjevskis is a professor of riseba (latvia) as well as a business consultant, working in both the public and private sectors. he was a leader in executive finance functions within latvian and international companies for 10 years. his expertise lies in corporate strategy development and implementation, corporate financial management and project management. his international teaching experience spans lecturing in esce of paris; in normandy business school, france; university of applied science in mainz, germany; inholland university, rotterdam; estonian business school and safford business school of safford university (uk). he has spoken numerous times at international scientific conferences and forums. genadijs homenko is currently business unit concrete manager within sika baltic company (a branch of sika corporation in baltic countries). he has chemical engineering background and experience, and possesses msc degree in chemistry. recently was granted mba degree from the university of safford (uk). before sika he was working for cemex (one of the world’s leading cement and concrete manufacturers) as project manager and concrete quality manager. he’s international experience is related to velsicol chemical corporation in estonia. by operating as technical manager he was leading the team of chemical engineers and dealing with all technical projects related to the chemical’s factory. valērija lačinova is a board member of ou “sunprima” (estonia) and a sales manager of sia “dalks” (latvia). her work is connected with mechanical engineering and metalworking sector, supplying spare parts and technological equipment to railway companies of cis and eu countries. she has graduated form professional bachelor’s study programme “business administration” from banking institution of higher education (latvia). recently was granted master degree in “business management” from riga international school of economics and business administration (latvia). analysis of asset classes through the business cycle audrius dzikevičius1, jaroslav vetrov2 vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania e-mails: 1audrius.dzikevicius@vgtu.lt (corresponding author); 2jarvet@gmail.com received 27 september 2011; accepted 20 january 2012 abstract. this study was driven by the dissimilar performance characteristics displayed by asset classes over the business cycle. the authors aim to explore assets classes on the grounds of a scientific literature review and a statistical analysis. business cycles are divided into four stages to explore broad movements in returns of asset classes and a possible existence of asymmetrical effects of determinants within stages. six main asset classes were analysed: us stocks, eafe stocks, bonds, gold, real estate and commodities. monthly data from february 1976 to august 2011 were used for the study. the article combines business cycle and asset allocation theories by adding valuable information about performance of asset classes during different phases of the business cycle. using the oecd composite leading indicator as a business cycle measure, the authors demonstrate that different assets classes have different return/risk characteristics over the business cycle. the article demonstrates how to use the business cycle approach for investment decision-making. the oecd composite leading indicator can provide significant information on market expectations and the future outlook; hence, results of this study can help every investor improve his/her performance and risk management. keywords: asset classes, asset allocation, business cycle, oecd composite leading indicators. reference to this paper should be made as follows: dzikevičius, a.; vetrov, j. 2012. analysis of asset classes through the business cycle, business, management and education 10(1): 1–10. http://dx.doi.org/10.3846/bme.2012.01 jel classification: e320, g110. 1. introduction deciding where to put their money is the main challenge for investors these days. everyone wants to know which asset class will perform the best and help them meet their goals. dissimilar performance characteristics displayed by equity versus debt assets over the business cycle is an established phenomenon in financial markets. typically, total returns on equities rise during expansions while those of fixed income debt instruments do better during downturns. within this general pattern, however, there exists a wide spectrum of cyclically related return/risk characteristics as determined by unique cash flow and risk premium attributes of each asset. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2012, 10(1): 1–10 doi:10.3846/bme.2012.01 copyright © 2012 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt mailto:audrius@manoinvesticijos.lt 2 a. dzikevičius, j. vetrov. analysis of asset classes through the business cycle most asset allocation studies agree on the importance of strategic asset allocation as a determinant for investment returns. established investors practice investment diversification across market capitalizations, countries, sectors, and asset classes to enhance the risk-return tradeoff in a portfolio. brinson, hood and beebower (1986) claim that 93.6% of performance variation can be explained by strategic asset allocation decisions. this result implies that characteristics of various asset classes are a very important component of investment results. as the asset allocation decision is of significant importance, almost all asset managers and financial advisors determine an optimal portfolio for their clients – be they institutional or individual – by performing an asset allocation analysis with the help of a set of asset classes (fabozzi et al. 2002). the goal of this article is to explore asset classes using the business cycle approach. the article combines business cycle and asset allocation theories by adding valuable information about performance of asset classes in different phases of the business cycle. it demonstrates how to use the business cycle approach in investment decision-making. the authors use 6 asset classes for analysis: us stocks, eafe stocks, bonds, gold, real estate and commodities. research methods – the comparison and generalization method and statistical analysis on the basis of the oecd leading indicator approach – used in this paper resulted for logical analysis and synthesis of scientific literature. 2. literature review the thesis that stock prices mimic rises and falls in the business cycle can be strongly supported. with few exceptions, research shows that stock prices lead the level of economic activity. this phenomenon follows from the belief that current stock prices correctly impound expectations of future economic activity. moore, for example, shows that 18 of the 23 business cycle peaks (troughs) occurring between 1873 and 1970 are anticipated by the stock market, with an average lead-time of about five to six months. moreover, from 1948 through 1970 his research shows 100% of peaks and troughs being correctly anticipated (1983). more contemporary research using granger methods shows bidirectional causality between stock returns and real economic activity (tunah 2010; ali et al. 2010). adjasi and biekpe (2006) pointed out that stock exchanges can provide quick paths to capital acquisition, due to the ease with which securities are traded. stock exchange activity therefore plays an important role in helping to determine country’s macroeconomic condition. literature review contains a number of studies that examine stock price changes. probably one of the most interesting and important subjects that receives increasingly more attention from economists, financial investors and policy makers is dynamic effects of macroeconomic indicators on stock prices. ibrahim found that macroeconomic forces influence stock prices through their impact on the expected future cash flows (1999). mehr noted that the public policy impact 3 business, management and education, 2012, 10(1): 1–10 on growth can be measured by stock prices (2001). chakravarty also stated that stock prices are highly sensitive to key macroeconomic indicators (2005). frankel stated that international reserves and real exchange rate overvaluation are the top two indicators that stood out as useful leading indicators of the current financial crisis (2010). unlike equities, the empirical record shows bond prices moving inversely with the business cycle. in large part this fact is due to the cyclical movement in interest rates and the fixed income nature of bonds. between 1946 and 1970, moore (1983) shows corporate bond yields declining and bond prices rising in all but one contraction. thus, with the exception of periods of stagflation in the post-war u.s. economy, the historical record confirms the business/interest rate cycle moving in reasonably close tandem, such that the business cycle/bond price relationship is inverse (borcato, steed 1998). in numerous papers, using a variety of methodologies and databases, a recurring theme emerges from real estate research. because of its apparently low correlation with other assets, real estate offers outstanding diversification and return attributes relative to conventional portfolios (gibson 2008; black 2004; sagalyn 1990). sagalyn study also revealed that relative to the overall stock market, equity reits exhibited less volatility and higher returns. today, gold would be probably the most controversial asset class. despite it being a commodity in general, it has completely different attributes. tanzer and frick (2011) described this asset class as “the latest mania”. unlike other assets, gold doesn’t pay dividends. and unlike other commodities, gold has few industrial uses. but gold is a great hedge against political and economic upheaval. gold provides a hedge against inflation, currency weakness and financial turmoil. gold doesn’t move in sync with stocks or bonds, so it is a good diversifier (tanzer, frick 2011). diversification and inflation hedging provide the two chief motives for including commodities to a portfolio. humphreys (2006) stated that adding commodities to a diversified investment portfolio of stocks and bonds provides several benefits for an investor, including positive returns over time and negative correlation to financial assets, such as stocks and bonds. jarecki (2007) also agree that commodities should be included to every diversified portfolio. in their study, bekkers, doeswijk and lam (2009) explored asset classes that add value to a traditional asset mix. their mean-variance analysis suggests that real estate, commodities, and high yield bonds add the most value to the traditional asset mix of stocks, bonds and cash. basically, adding these three asset classes comes close to an all-asset portfolio. the portfolio with all assets shows a diversification benefit along the efficient frontier. herold et al. (2007) states what traditional balanced portfolios cannot overcome the conflict of various investment horizons. in order to generate capital gains, large allocations in risky asset classes – such as commodities, precious metals and real estate – are required. the diversification benefits of a multiple-asset-class approach rest on the dissimilarities in patterns of returns across asset classes in the short run and competitive asset class pricing in the long run. these conditions will likely hold true in the future, even file:///e:/r%20a%20s%20a/bme_vol_10_no_1_2012/txt/javascript:__dolinkpostback('','ss%7e%7ear %22sagalyn%2c lynne b%2e%22%7c%7csl%7e%7erl',''); 4 a. dzikevičius, j. vetrov. analysis of asset classes through the business cycle in the face of risks and opportunities that are unique to the times. the wisest investment strategy is to diversify portfolios broadly in order to mitigate the risks of an unknowable future (gibson 2008). 3. business cycle analysis business cycles are divided into four stages so that broad movements in stock returns and determinants across the stages can be analysed and the possible existence of asymmetrical effects of determinants within stages can be explored. based on average returns for the four business-cycle stages, returns are found to decrease throughout economic expansions and into the first half of recessionary periods. average returns are negative and reach their lowest values during the first half of recessions, yet quickly rebound to their highest levels as the recession concludes. falling expectations for future earnings and rising long-term interest rates appear to be the driving force behind the falling returns that occur during economic expansions and changes in short-term rates coupled with rising expectations are major contributing factors to the rising returns that occur during economic recessions (destefano 2004; bordo, helbling 2010). for many fundamentals-based investors, at least half of their time is spent trying to anticipate the next move in the business cycle. however, forecasting is very difficult. when the economy is in recession, the length of time it will last and the strength of recovery become overriding questions. moreover, cycles differ in their impact on the major asset classes, thus history never repeats itself. the most common mistake is to forget or to deny that the cycle exists. investors frequently start believing that the upswing must go on forever or that the recession will never end. this usually proves costly. however, trying to time the cycle precisely can also prove costly if an investor takes a wrong guess. hence, the approach taken by most investors is to alter asset class weightings, or time purchases and sales with one eye on the cycle, but not to place excessive bets upon timing the cycle correctly (calverley 2002; woodford 2010). the leading indicators approach is one of the best ways to predict a phase of the business cycle. for many years, a system of leading, coincident, and lagging economic indicators, first developed in the l930s by the national bureau of economic research (nber), has been widely used in the united states to appraise the state of the business cycle (klein, moore 1982). the oecd leading indicators approach is among the most popular and comprehensive ones used. during the 1980’s the oecd developed its system of leading indicators and business cycle analysis to provide economic analysts with early signals of turning points in economic activity. this information is of prime importance for economists, businesses and policy makers to enable correct analysis of the current economic situation and for the anticipation of economic developments. data of composite leading indicators (cli) are compiled and disseminated by the statistics directorate of the oecd (slaper, cohen 2010; ozyildirim et al. 2010). 5 business, management and education, 2012, 10(1): 1–10 the oecd clis are aggregate time series, which show a leading relationship with the growth cycles of key macro-economic indicators (the average lead is 6-months). typically, they are constructed to predict the cycles of total industrial production or gross domestic product in industry, which are chosen as proxy measures for the aggregate economy (levanon 2010). 4. data and methodology because of its popularity and data availability, we are using oecd cli as a business cycle measure. this approach focuses on turning points (peaks and troughs), hence four qualitatively different cyclical phases can be identified: expansion – cli increasing and above 100; downturn – cli decreasing and above 100; slowdown – cli decreasing and below 100; recovery – cli increasing and below 100. the research used monthly data – which was taken directly from the oecd web page (the oecd leading indicators) – for the period from february 1976 to august 2011. the hypothesis that movements in economic indicators of the cli contain useful information concerning subsequent movements in different asset classes was backtested using 6 assets: us stocks, eafe stocks, bonds, gold, real estate and commodities. in table 1, we can see data source and representing index for each of the assets. table 1. data of asset classes (source: created by authors) asset class representing index source time period us stocks s&p 500 index. finance.yahoo.com 1976.02– 2011.08 (monthly) eafe stocks (europe/japan equity) msci eafe index mscibarra.com bonds barclays capital u.s. aggregate bond index bloomberg.com gold gold world gold council real estate ftse nareit us real estate index ftse.com commodities s&p gscitm total return index bloomberg.com each time period is labelled according to a phase of the business cycle determined by cli, consequently, monthly return of each asset can be assigned to a specific phase of the business cycle. it enables us to explore assets in different phases by various criteria such as return and risk. aniūnas et al. (2009) emphasised that investors need to evaluate acceptable risk level during analysis of investment models and before making decisions. hence, in addition to return rates, standard deviation, ulcer index (negative volatility) and max 6 a. dzikevičius, j. vetrov. analysis of asset classes through the business cycle drawdown (biggest fall from the peak) are used to evaluate risk of each asset class during different phases of the business cycle. before proceeding with assets analysis through the business cycle, it is informative to consider the statistical characteristics of six assets in isolation through full time period (table 2). table 2. characteristics of assets (source: own calculations) 1976.02.01-2011.08.01 s&p 500 eafe bonds gold reit commodities pr ofi t growth per period 1181% 1265% 1580% 1171% 5127% 1262% mean monthly return 0.7% 0.7% 0.7% 0.7% 1.1% 0.8% cagr 7.4% 7.6% 8.3% 7.4% 11.8% 7.6% r is k ulcer index 15.8% 18.6% 2.0% 38.7% 14.1% 22.1% standard deviation (monthly) 4.4% 4.9% 1.6% 5.6% 4.8% 5.5% max drawdown -52.6% -58.2% -12.7% -61.8% -67.9% -67.6% average drawdown -10.3% -12.3% -0.9% -32.9% -7.4% -15.2% negative returns, % 40.1% 41.3% 30.3% 46.7% 36.2% 42.0% r at io cagr/ulcer index 0.5 0.4 4.1 0.2 0.8 0.3 cagr/standard deviation 1.7 1.5 5.1 1.3 2.5 1.4 cagr/max drawdown 0.1 0.1 0.6 0.1 0.2 0.1 cagr/average drawdown 0.7 0.6 8.8 0.2 1.6 0.5 cagr/negative returns 0.2 0.2 0.3 0.2 0.3 0.2 for the full period, bonds and real estate outperforms other assets. real estate has the greatest profitability ratios with average risk ratios, while bonds with average return ratios outperforms other assets by its low risk ratios. 5. results as we can see from the table 3, separation of full time period to oecd business cycle phases gives us interesting results. as expected, returns on equities, including us and eafe stocks and real estate are statistically better in the “recovery” phase, respectively 1.29%, 1.92% and 1.86%. stocks also show quite good performance in the “expansion” phase, while this period is the worst for real estate. for us and eafe stocks, the worst periods are the “slowdown” and the “downturn”. for bonds, the reverse is true, in the 7 business, management and education, 2012, 10(1): 1–10 “slowdown” – 0.71% monthly return, in the “downturn” – 1.14%. gold performs the best in the “slowdown” (1.74%) and commodities – in the “expansion” (1.65%). in fact, “commodities” perform much better than other assets in that period. table 3. performance of assets through business cycle (source: own calculations) s&p 500 eafe bonds gold reit commodities average monthly growth recovery 1.29% 1.92% 0.66% 0.68% 1.86% 1.16% expansion 0.62% 0.88% 0.28% 0.60% 0.49% 1.65% slowdown 0.48% 0.49% 0.71% 1.74% 1.31% 1.11% downturn 0.48% –0.25% 1.14% –0.08% 0.70% –1.03% standard deviation recovery 3.83% 4.43% 1.56% 4.82% 3.45% 4.63% expansion 4.10% 4.45% 1.10% 5.06% 4.20% 4.43% slowdown 3.85% 4.17% 1.55% 5.98% 3.87% 5.86% downturn 5.57% 6.38% 2.13% 6.17% 6.90% 6.71% ulcer index recovery 11.8% 11.4% 1.1% 41.8% 2.0% 12.8% expansion 12.6% 12.5% 1.1% 15.9% 12.1% 17.0% slowdown 11.2% 10.6% 1.3% 33.6% 6.6% 12.7% downturn 16.2% 17.7% 1.8% 44.3% 13.1% 18.8% max drawdown recovery –34.6% –32.0% –3.6% –58.7% –6.0% –42.3% expansion –32.7% –40.4% –4.5% –44.9% –42.0% –46.3% slowdown –32.3% –40.3% –7.3% –59.5% –20.9% –62.0% downturn –46.2% –47.6% –9.0% –60.6% –57.5% –63.1% return/standard deviation recovery 0.34 0.43 0.42 0.14 0.54 0.25 expansion 0.15 0.20 0.25 0.12 0.12 0.37 slowdown 0.13 0.12 0.46 0.29 0.34 0.19 downturn 0.09 –0.04 0.53 –0.01 0.10 –0.15 return/ulcer index recovery 0.11 0.17 0.62 0.02 0.93 0.09 8 a. dzikevičius, j. vetrov. analysis of asset classes through the business cycle expansion 0.05 0.07 0.24 0.04 0.04 0.10 slowdown 0.04 0.05 0.56 0.05 0.20 0.09 downturn 0.03 –0.01 0.63 –0.00 0.05 –0.05 return/max drawdown recovery 0.04 0.06 0.19 0.01 0.31 0.03 expansion 0.02 0.02 0.06 0.01 0.01 0.04 slowdown 0.01 0.01 0.10 0.03 0.06 0.02 downturn 0.01 –0.01 0.13 –0.00 0.01 –0.02 not only returns vary over the business cycle as the risk ratios move significantly as well. specifically, the standard deviations of all asset classes rise for the “downturn”. the same tendency can be observed with other risk measures. let’s take a closer look at the ulcer index, which shows negative volatility of a specific asset. the ulcer index for the real estate in “recovery” is only 2%, while in “downturn” – 13.1%. for gold, the least negative volatile period is the “expansion” with the 15.9% ulcer index, the most volatile period is the “downturn” with 44.3%. for us and eafe stocks, the most volatile period is the “downturn” as well (16.2% and 17.7%). return/risk ratios allow us comparing performance of assets over the business cycle. the bigger the numbers, the higher the returns with lower volatility are generated by a specific asset class. three best assets in the particular phase of the business cycle are marked in the table. as we can see, the “green” cells vary considerably over the business cycle. 6. conclusions the study examined the relationship between asset classes and the business cycle. in particular, the following conclusions can be made: 1. the hypothesis that asset prices rise and fall in the business cycle is strongly supported by previous researches. 2. asset classes show dissimilar performance characteristics over the oecd business cycle. the risk of all asset classes rise for the “downturn” phase. return for bonds are considerably higher than in other phases, while returns of other asset classes are poor. 3. while it is difficult to predict business cycle turning points, the oecd composite leading indicator can provide significant information on market expectations and the future outlook; hence, every investor can improve his/her performance and risk management with the help of results of this study. end of table 3 9 business, management and education, 2012, 10(1): 1–10 4. the article 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zarnowitz, v. 2010. business cycles in the euro area defined with coincident economic indicators and predicted with leading economic indicators, journal of forecasting 29(½): 6–28. sagalyn, l. b. 1990. real estate risk and the business cycle: evidence from security markets, journal of real estate research 5(2): 203–219. slaper, t. f.; cohen, a. w. 2010. the indiana leading economic index: indicators of a changing economy, indiana business review 84(3):1–4. tanze, a.; frick, r. 2011. gold: love it or leave it, kiplinger’s personal finance 65(1): 41–41. tunah, h. 2010. the analysis of relationships between macroeconomic factors and stock returns: evidence from turkey using var model, international research journal of finance & economics issue 57: 169–182. woodford, m. 2010. financial intermediation and macroeconomic analysis, journal of economic perspectives 24(4): 21–44. http://dx.doi.org/10.1257/jep.24.4.21 turto klasių analizė verslo ciklo aspektu a. dzikevičius, j. vetrov santrauka nevienodos turto klasių savybės ekonominio verslo ciklo metu lėmė šio tyrimo aktualumą, kurio pagrindinis tikslas yra ištirti turto klasių charakteristikas skirtingomis verslo ciklo fazėmis per esamos mokslinės literatūros ir statistinės analizės prizmę. verslo ciklas yra skirstomas į keturias fazes, taigi turto klasių grąža gali būti analizuojama skirtingais laiko periodais. tyrimo metu buvo analizuotos šešios pagrindinės turto klasės: jav akcijos, eafe akcijos, obligacijos, auksas ir žaliavos. analizuojant buvo naudojami mėnesių duomenys nuo 1976 m. vasario mėn. iki 2011 m. rugpjūčio mėn. straipsnyje sujungiamos verslo ciklo bei turto lokacijos teorijos ir gaunama svarbios informacijos apie turto klasių charakteristikas. naudojant tyrimui oecd aplenkiančius indikatorius kaip verslo ciklo matą, atskleidžiama, kad analizuojamosios turto klasės turi skirtingas grąžos ir rizikos charakteristikas verslo ciklo metu. oecd aplenkiantys indikatoriai gali suteikti reikšmingos informacijos apie rinkos lūkesčius, ateities perspektyvas, todėl tai yra puiki priemonė pagerinti investuotojams rizikos valdymą, o kartu ir pelningumą. reikšminiai žodžiai: turto klasės, turto lokacija, verslo ciklai, oecd aplenkiantys indikatoriai. audrius dzikevičius is an associate professor at the department of finance engineering of vgtu. he defended a doctoral dissertation on the topic of “trading portfolio risk management in banking” (2006) and was awarded the degree of doctor in social sciences (economics). in 2007, he started working as an associate professor at the department of finance engineering of vgtu. his research interests include: portfolio risk management, forecasting and modelling of financial markets, valuing a business with the help of quantitative techniques. jaroslav vetrov was awarded the bachelor’s degree in business management in 2009. at the moment, he continues his postgraduate studies on “investment management” at vilnius gediminas technical university. research is focused on investment management and business cycle analysis. file:///e:/r%20a%20s%20a/bme_vol_10_no_1_2012/txt/javascript:__dolinkpostback('','ss%7e%7ear %22sagalyn%2c lynne b%2e%22%7c%7csl%7e%7erl',''); file:///e:/r%20a%20s%20a/bme_vol_10_no_1_2012/txt/javascript:__dolinkpostback('','mdb%7e%7ebth%7c%7cjdb%7e%7ebthjnh%7c%7css%7e%7ejn %22journal of real estate research%22%7c%7csl%7e%7ejh',''); file:///e:/r%20a%20s%20a/bme_vol_10_no_1_2012/txt/javascript:__dolinkpostback('','mdb%7e%7ebth%7c%7cjdb%7e%7ebthjnh%7c%7css%7e%7ejn %22journal of real estate research%22%7c%7csl%7e%7ejh',''); file:///e:/r%20a%20s%20a/bme_vol_10_no_1_2012/txt/javascript:__dolinkpostback('','mdb%7e%7ea9h%7c%7cjdb%7e%7ea9hjnh%7c%7css%7e%7ejn %22kiplinger%5c%27s personal finance%22%7c%7csl%7e%7ejh',''); http://dx.doi.org/10.1257/jep.24.4.21 analysis of asset classes through the business cycle audrius dzikevičius1, jaroslav vetrov 2 using the idea of market-expected return rates on invested capital in the verification of conformity of market evaluation of stock-listed companies with their intrinsic value paweł mielcarz1, emilia roman2 personnel audit process wojciech pająk the position of slovakia in competitiveness ranking – the causes, impacts and prospects lucia stredná1, mária zúbková 2 audit committee practice in the polish listed stock companies. present situation and development perspectives piotr szczepankowski bank value: comparing customer and employee perceptions jelena titko1, natalja lace2 managing it workers katarzyna łubieńska1, jacek woźniak2 transforming leadership styles and knowledge sharing in a multicultural context rasa paulienė market behaviour: case studies of nasdaq omx baltic jelena stankevičienė1, natalija gembickaja2 spreadsheet error detection: an empirical examination in the context of greece dimitrios maditinos1, dimitrios chatzoudes2, charalampos tsairidis3 bme_2017_15_2 maketas_spaudai.indd copyright © 2017 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2017, 15(2): 211–226 doi:10.3846/bme.2017.375 importance of motivation and work pay of young employees in the value creation chain of a business company: assessment of changes in and formation of expectations laura pilukienė business department, faculty of economics, vilnius university, saulėtekio al. 11, lt-10223, vilnius and lithuania e-mail: laura.pilukiene@ef.vu.lt received 30 august 2017; accepted 02 october 2017 abstract. as business companies compete in the market and seek to acquire a competitive advantage, one of the most important factors is well-motivated employees who are satisfied with their job. the success of companies operating in various sectors is determined by the quality of products, while the quality is ensured by qualified employees having appropriate skills and knowledge, whose work should be appreciated by monetary work pay established based on reasonable and clear criteria as well as other means of motivation. the process of human resources management in a business company places an ever-growing importance on the development of competences of employees, strengthening of cooperation, empowerment of employees as well as their work pay and motivation in order to achieve an employee’s work quality and productivity, satisfaction of customer needs and successful operation of a company. in the process of the company’s human resources management, special focus should be given to the satisfaction of the expectations and needs of new employees (who are usually young and inexperienced) as well as their integration, which ensures the generation of new and creative ideas in the company and, at the same time, high quality of products and work productivity. keywords: wage, employee needs and expectations, motivation, value chain, student, young employee. jel classification: j30, j31. 1. introduction in the process of creation of products of business companies, one of the most important roles is played by the employee. appropriate selection of employee motivation and work payment measures, based on the satisfaction of employee needs and expectations, rests on two main aspects: 1) each employee has innate features and gifts which, in his/her interaction with the internal work environment as well as external environment, change and develop 212 l. pilukienė. importance of motivation and work pay of young employees in the value creation chain of a business company: assessment of changes in and formation of expectations while character traits have an impact on his/her actions in individual situations as he/she communicates with customers; 2) each employee is different according to many features, therefore, it is necessary to assess his/her needs and expectations as a new employee is hired (in particular, if these new employees are young and recent graduates). the problem lies in the fact that business companies, when they do not find ways to clarify what monetary pay corresponds to the needs of potential or newly hired employees or do not try to provide optimum working conditions satisfying such employees, loose the human capital of such employees accumulated during their studies, which forms the basis for long-term survival of a company in a competitive dynamic market. the purpose of this article is to assess challenges and possibilities related to motivation and work payment of potential employees of business companies (students) in the process of creation of value of products in order to highlight changes in the expectations of students’ work pay. in order to achieve the purpose of the article, the article first of all presents theoretical aspects of the importance of employee motivation and work pay in the process of creation of the value of a business company. based on theoretical attitudes, the article analyses the results of an empirical study representing the changes in work pay expectations of students as potential employees of business companies. finally, the article provides problem aspects of formation of work pay expectations of potential employees (students) as well as improvement possibilities. the subject of research is the change of student’s expectations of desirable wage. systematic analysis of scientific literature based on a comparative method and the method of synthesis, the questionnaire survey of the students (first year) of the university in 2014, the questionnaire survey of the students (fourth year) of the university in 2017, and the statistical processing, systematization and analysis of the results thereof. the statistical processing of the results of the empirical research has been carried out by means of the statistical analysis software and the data processing packages microsoft office excel, ibm spss statistics 21. the scientific article is based on continuous collection of data after 3 years. pilukiene (2015) analysed problem aspects of integration into the labour market of persons of young age (18–23 years of age) who were accepted to study at university in 2014, which were related to the expectations of a desired work pay. this article analyses the results of a survey of students who started their studies in 2014 on their work pay expectations together with the results of a follow-up survey of the students conducted in 2017 (for a second time, after three years). 2. importance of employee motivation and work pay in the process of creation of the value of a business company qualified and motivated staff, which can create high value from the point of view of a customer, becomes the main competitive factor of a business company. it is universally 213 business, management and education, 2017, 15(2): 211–226 recognised that employee motivation depends on the individual, conditions and time, it is not constant and it continuously changes. due to such complexity it is impossible to give an unambiguous answer as to how it is best to motivate staff (marcinkeviciute 2005). the place of human resources in the value creation chain shown in figure 1 illustrates the link between employee satisfaction and their productivity and quality of work, which has an impact on the growth of customer loyalty and profitability of a company. only satisfied, loyal and competent employees form the basis for ensuring work productivity and quality of products while trying to achieve the growth of a company’s income, profit and customer loyalty. this is confirmed by kerestešová (2012) who maintains that the process of value creation in a business company must be based on a thought-out employee motivation system founded on such main elements as effort – result – reward – satisfaction. according to kukreja (2017) the motivation process is based on a philosophy of internal marketing. the philosophy of internal marketing is fig. 1. importance of human resource management in the process of creation of the value of a business company (source: created by the author) 214 l. pilukienė. importance of motivation and work pay of young employees in the value creation chain of a business company: assessment of changes in and formation of expectations that employees of an organization constitute its internal market, which has customers, suppliers and creates value (a chain of value). the chain of value is formed inside the organization which must be intended to supply the needs of both the employees and customers. to sum up, it can be said that the value creation chain of a business company has the following fundamental aspects: 1) work pay and motivation system, which is conditioned by the human resources system in a company, determines employee satisfaction and loyalty; 2) employee satisfaction and loyalty have an impact on the productivity and quality of employee work; 3) quality of products determines customer satisfaction and growth in loyalty; 4) customers which are satisfied with products and loyal determine the growth of a company’s income and profit; 5) a company’s income and profit is one of the most important factors in the formation of an employee motivation and work pay system. the human resources and value creation chain shows the importance of ensuring employee work satisfaction and loyalty in order to ensure successful operation of a business company. many authors single out various factors, such as a company’s resources, culture, management style, internal communication, control system, etc.; which have an impact on the employee’s work satisfaction. koudelkova and milichovsky (2015), who analysed the importance of employee motivation in the innovation creation process in a company, have revealed the following important elements: clear setting of goals, employee motivation in the current time, usage of incentives which are valuable from the point of view of employees and fulfilment of promises made to employees. a special role is also played by such qualitative features of an employee himself/ herself as creativity, ability to work in a team, pro-activeness and enthusiasm, which are difficult to assess and measure. all the enumerated features have an impact on an employee’s productivity, which is understood as the use of his/her knowledge, experience and abilities while seeking to perform an efficient transformation of the possessed resources into products creating value for the consumer and the company. according to gupta et al. (2012) employees are not involved in knowledge (experience, abilities) sharing behavior for their individual incentives but they are more willing to share for organizational growth. it implies that organization needs to create more employee engagement activities which can build up emotional friendly for learning environment in organization (employees emotional commitment). the said features highlight the fact that, in order to ensure an employee’s productivity, in a company, special attention should be given to the employee learning process (in particular, of young employees who have been recently hired). it should also be stressed that it is important to hire employees with the necessary educational background, competence and abilities. before employees selection organisations should be aware of organisational principles, culture, 215 business, management and education, 2017, 15(2): 211–226 strategies, competences (objectives and requirements to employees) that correspond to a job (starineca 2016). according to lazauskaite-zabielske et al. (2015) in employee socialization, prosocial (positive, helpful) behaviour may be strengthened by good citizenship climate, by providing new employees with help and necessary support from mentors, co-workers and managers, and by demonstrating organizational citizenship behaviour as well. as is seen in the figure 1, if during the selection process new employees are selected properly, taking into account their relative value, personal characteristics, social standing as well as needs and expectations, it is possible to form their work satisfaction and loyalty more easily. as a new employee (young, recent graduate) is hired, he/she “brings” the attitude, features, competences, etc. shaped in the educational establishment. according to verhaest and omey (2013) higher-educated employees are more likely to acquire skills during their first jobs than lower-educated people. the authors note that overeducated employees also have lower skill acquisition probabilities than adequately educated employees with similar educational backgrounds. according to the results of studies by oganisjana and koke (2012), the development of the competence of students (potential new employees) is closely related to the growth of their entrepreneurship. based on that, according to the authors (2012), attention should be paid to the goal of contemporary higher education to develop students’ entrepreneurship, which is understood as a dynamic system and is defined using not only such elements as knowledge, skills and attitudes, but also includes the individual’s nature, features, experience, motivation and behaviour. differences between new and existing employees (in terms of education, skills, attitudes, etc.) make efficient learning process in a company more difficult. in order to become a successfully learning company, it is advisable not only to improve the learning process, but also change the entire system of human resources management, so that it would help all employees to learn (kumpikaite 2008). according to the latter author (2008), the development of human resources in a company has the potential to have a large positive impact both on separate (different) individuals in a company and on the whole company in its entirety. in order to provide conditions for employees to perform the assigned tasks in a company in the best possible manner, in the environment of business companies, employee empowerment becomes crucial. the analysis of satisfaction and empowerment of employees (in companies operating in the services sector) by ukil (2016) has shown that employee empowerment has a major positive impact on employee satisfaction and the quality of services provided. according to ukil (2016) companies need to make a participative culture and friendly atmosphere in the organization by sharing vision, values and information with employees, giving some autonomy, and allowing them to become a part in decision-making. new tendendences in the labour market impact the approach an organization takes to human resource management, particularly to its strategic role. 216 l. pilukienė. importance of motivation and work pay of young employees in the value creation chain of a business company: assessment of changes in and formation of expectations this situation requires human resources departments to change their own activities and objectives, to act in a more mature manner (cesyniene et al. 2013). according to kerestešová (2012), if the company wants to be successful, it must try to connect all the factors and principles of effective and motivating planning and to reach their synergistic effect, which can be achieved in a systematic process of creation and integration of planning and motivation in the business company. the analysis of compensation structure of sales managers proved that an evaluation and respect from the part of leader and co-workers, clear instructions, career opportunities, friendly emotional environment, work assignments linked to sales manager’s needs and capabilities make the biggest impact on job satisfaction.while financial wage have shown much lower impact (sukaite et al. 2015). the establishment of direct and indirect work pay, taking into account an employee’s needs and expectations, as well as application of measures of internal value (improvement of employees’ skills, ensuring of good working conditions and development of internal culture and cooperation) determine productive and quality work of highly qualified employees as well as low turnover of staff (see fig. 1). this is substantiated by chughtai (2013) while analysing such aspects of human resources management as the development of employee competences, the work pay structure, the recognition in a company and balanced working time. the deliberate human resource management in a business company leads to employee engagement (loyalty) which ensues in low turnover intentions. for the business companies to excel in the business environment, the best should be provided to the employees in order to get the best out of them (chughtai 2013). in spite of employee heterogeneity in terms of age, seniority, skills and level of completed education it is possible to create a united motivation and remuneration system for the business company that will suit all employees regardless of their age, seniority or education (hitka, balazova 2015). according to these authors (2015), main items of motivation and remuneration system are following factors: basic salary, job security, good work team, further financial reward and fair appraisal system in different order according to preferences of specific group of employees (by different personal features seniority, age, education, skills). bearing in mind that different things motivates different employees and that they have different needs, it is crucial for managers in organizations to identify what motivates every single employee and, in accordance with that, to develop the proper system of motivation (ristic et al. 2017). both hiring new employees and ensuring the current employees’ material welfare and the environment which is motivating and favourable to work, the role of the manager-leader is also to be stressed: it is the manager’s position, attitudes and principles which are the basis of the creation of the work pay and motivation system. the analysis (bakanauskiene et al. 2017) allowed to identify such features of manager-leader attractiveness in lithuanian business organizations, perceived by their employees, as: 217 business, management and education, 2017, 15(2): 211–226 attractive wage, friendly working atmosphere and good working conditions, interesting work, flexibility and freedom at work, timely payment of wage, organization’s social responsibility and reliability, innovation in organization, a respectful treatment of employees, etc. employees in relations with their managers-leaders seek material gain. assessing employees and managers-leaders relations, authors staniuliene and kucinskaite (2017) found employees being convicted that managers-leaders are at a higher level and in accordance with the rules they pass orders down to the management levels. therefore, the manager-leader should create a non-hierarchical management model focusing on the relationships with employees (staniuliene, kucinskaite 2017). in the everyday operation of companies, leadership-based management (ensuring mutual understanding of the management and employees) has a positive impact on the work atmosphere in a business company and has an indirect influence on work results by employees (khuong, khanh 2016). to sum up, it is possible to maintain that employee work satisfaction and their loyalty to a business company determine high productivity and quality of work, while human resources are a source of acquisition of the competitive advantage of a business company. even though the link between the retention of highly qualified employees with appropriate abilities and successful operation of a business company is obvious, however, there are a lot of discussions about the application of the most appropriate work pay and motivation measures as well as the management of the process of work payment and employee motivation, in particular, as regards young and recently hired employees. 3. young employee motivation and expectations at work: problem aspects the analysis of the impact of human resources in the value creation chain of a business company has revealed the importance of integration of new employees. in order to ensure successful operation of a company, the main aspects of socialisation and motivation of new employees (usually young and recent graduates) should be noted. according to bogodistov and lizneva (2017) managers can, e.g. choose an appropriate motivational system to increase different employees’ efficiency. based on the relational models theory (it incorporates dimensions of work, distribution, exchange, morals, values, and other important work aspects), managers-leaders can predict how relationships between employees (usually new employees) will evolve and which instruments are better suited for human resources management (bogodistov, lizneva 2017). in a business company, new employees or potential employees are characterised by their relative value, personal features, social standing as well as needs and expectations, which are different if compared with older employees having a lot of work experience (see fig. 2). young employees constitute often a disadvantaged group in the sense that they are overrepresented in low-paid, low-skills jobs (menezes et al. 2011). according kvedaraite et al. (2015) the most important reasons behind a failure of young people to establish their positions in 218 l. pilukienė. importance of motivation and work pay of young employees in the value creation chain of a business company: assessment of changes in and formation of expectations the labour market are associated with a low qualification and little work experience. the majority of them are not satisfied with the pay in lithuania, i.e. the graduates of higher education show the need for a higher wage than business organizations are ready to pay. hamaaki et al. (2012), having analysed changes in work organisation and motivation of japanese companies, have touched upon problem aspects of differences between new employees and employees who have worked in a company for a long time. the authors’ (2012) findings suggest that a growing share of educated, qualified young employees choose to leave indefinite-contract jobs due to the poor prospects for seniority-based wage progression, while older employees (they often don’t think about their qualification improvement) choose to stay in their present job despite stagnating wages, because it may be more difficult for them to find alternative employment. the aging of population affects new trends in the labour market and raises new organizational challenges. in order to ensure employees productivity, not only do organizations need to take care of the improvement of working conditions, but also focus on their health and diversity management (ciutiene, railaite 2015).young and educated employees expect to receive a higher salary not only because of a longer period of service, but also due to such factors as creativity, new ideas as well as duly and timely performed tasks at the current moment. the creation of the employee motivation and payment system in a business company must be based on satisfaction of concrete needs of employees, i.e. by providing possibilities to young employees to learn and improve, express their ideas and reveal their creativity. radical changes in the competitive conditions in the last decade require that the management of the country’s companies reevaluate the fundamental thinking, attitudes and positions as regards essential changes in employee motivation and formation of management philosophy attitudes (marcinkeviciute 2005), i.e. try to understand new needs and possibilities of the labour market as well as the peculiarities of employees of a new generation. another important aspect while analysing the work of young employees in business companies is ensuring their loyalty. due to many opportunities in the labour market, many companies usually find it very difficult to retain loyal employees, especially if they are young. according to such authors as menezes et al. (2011), young employees often choose an interesting job they like, which is, however, risky and unstable, they are not afraid of changing a job more often and they are looking for a satisfying salary, but at the same time they accumulate experience, knowledge and skills (human capital accumulation). it is necessary to take strategic decisions in the area of management of human resources. certain research suggests that various facets of job satisfaction impact employees’ commitment and motivation. some specific human resource strategic decisions can be introduced to impact different facets of job satisfaction. for example, fair appraisal and feedback can impact job satisfaction with promotion; compatible work group deeply related to satisfaction with coworkers; recognition with individual performance and caring leadership can impact satisfaction with supervision (fu 2014). safely integrat219 business, management and education, 2017, 15(2): 211–226 ing young employees in the business company necessarily puts an emphasis on the relationship between their age and experience (qualification) on the one hand and health and safety on the other (laberge, ledoux 2011). to sum up, it is possible to maintain that it is advisable for business companies to pay attention to non-material motivation factors, which are especially important to young employees who are only starting their career and are planning it. studies of ismail et al. (2016) are geared towards employees of gen-x (born in 1960–1979) and gen-y (born in 1980–2000), because these two generations currently comprise the majority of employees in many business companies around the world. the authors compared the impact of personal and cultural values of employees of these groups on career planning and achievement of career objectives. for younger employees, the improvement process and possibilities in a business company are very important (employee’s comprehensive self-improvement). compared to older employees, younger ones seek to exceed the limits of their achievements and expand their abilities. it is possible to single out a group of authors who compare the peculiarities and differences of behaviour of young and older employees in business companies in the areas of social business responsibility and business ethics, i.e. by exploring the peculiarities of responsible and right behaviour of employees and managers in business companies. like in some studies, older employees reported less ethical behaviour than younger employees (sankaran, bui 2003). according to fu (2014), it is possible to find a significant direct correlation between the employee’s age and claims made (over-claiming), i.e. older individuals more often tend to make higher, sometimes unreasonable claims with regard to the company, or even lie (seeking to ensure that their claims or wishes are implemented) than younger employees. different results of various studies demonstrate the necessity of an analysis of the peculiarities of behaviour of young and older employees in business companies. the employees’ attitude towards ethical behaviour in a business company may reveal their involvement in work, loyalty and motivation to work. the overview of the researches into the corporate social responsibility initiatives showed a positive impact on employee satisfaction, self-image, team work, loyalty, retention, trust, psychological need of belongingness, employee morale and commitment (skudiene, auruskeviciene 2012). it is also noteworthy that sometimes wrong assumptions of business companies about ethical behaviour of employees hinder the hiring of the best suited employees, for instance, such an opinion that young employees tend to behave not particularly responsibly or ethically. 4. methodology of empirical research an empirical study, which was carried out using the survey method of a questionnaire, sought to reflect the changes in the students’ opinions about work pay expectations. in september 2014, 77 respondents studying in the first year were surveyed, while in 2017 220 l. pilukienė. importance of motivation and work pay of young employees in the value creation chain of a business company: assessment of changes in and formation of expectations students (studying in their fourth year) were asked to answer the same questions (a short questionnaire of closed-type questions). the main problem aspect of the empirical study is represented in the figure 2. this follow-up study seeks to answer the following question – whether the work pay specified by fourth year students, for which they would agree to work following graduation, is lower or more in conformity with the real situation in the labour market? the results of the empirical study, based on a comparative analysis of the results of 2014 and 2017, reveal whether the educational establishment adequately forms the students’ approach to work and work pay as well as prepares them for integration into the labour market. three main questions given in the questionnaire of the survey are targeted at highlighting of the students’ opinion towards the desired wage and the minimal wage acceptable for work upon the completion of studies. the aim is also to examine the situation of the students’ attitudes towards the working time for an average remuneration in the lithuanian labour market. 5. analysis of research results the empirical study is based on the results of a survey of salary expectations of students who started their studies in 2014, which are analysed compared with the results of a student survey in 2017 (seeking to survey the students for a second time after three years, in 2017). fig. 2. model of empirical research: relation of student, higher educational institution and business company (source: created by the author) the firstyear student (2014 year) higher educational institution potential employee in business company attitude impact „brought“ attitude of first-year student (expectation of salary and work motivation ) „took“ attitude of fourth-year student (expectation of salary and work motivation ) the fourthyear student (2017 year) attitude c h a n g e s relative value expectations and needs personal qualities social state desired wage minimum wage 221 business, management and education, 2017, 15(2): 211–226 in 2014, 77 students of the first year were surveyed, while in 2017, 52 students of the fourth year were surveyed (129 respondents in total). it is important to mention the fact that while conducting the survey in 2014, respondents expressed their opinion about work pay assessing it in litas. following the introduction of the euro in lithuania in 2015, in 2017, respondents assessed their desired work pay in euros. the empirical study is based on the analysis of such problem aspects: – respondents’ opinion about the desired net work pay while working according to their speciality (nature of work related to the studies) following graduation; – respondents’ opinion about the lowest work pay following graduation (work according to their speciality, nature of work related to the studies), for which they would agree to work; – respondents’ opinion about the number of working hours if they received the average work pay in lithuania at that time; – peculiarities of work pay of working respondents. the desired wage. the comparative analysis of the students’ responses in regard to the year of studies has revealed that the desired wage of the first-year students (after the completion of studies) amounts to an average of around 724 euros, while of the fourthyear students 708 euros (see table 1). the difference (15,2 euros or 2,1%) between the answers shows that the final-year students are assessing their abilities and opportunities in the labour market more critically and realistically. table 1. the desired wage and the minimum wage for which the respondents would agree to work after the completion of studies (source: created by the author. the table is based on the data provided by questionnaire research) respondents the first-year students (in 2014) the fourth-year students (in 2017) difference (between 2014 and 2017) the desired wage mean 723.5 euros 708.3 euros 15.2 euros or 2.1% the ratio of mean to average net wage at this time* 1.37 1.1 std. deviation 268.9 209.7 the minimum wage mean 576.7 euros 545.3 euros 31.4 euros or 5.4% the ratio of mean to average net wage at this time* 1.09 0.85 std. deviation 255.8 149.8 *according to statistics lithuania net average monthly wage in 2014 was 527.2 eur, in 2017 (i qv) net average monthly wage was 644.5 eur. 222 l. pilukienė. importance of motivation and work pay of young employees in the value creation chain of a business company: assessment of changes in and formation of expectations the analysis of the ratio of the desired net work pay of the students to the average net work pay in lithuania at that time has revealed interesting results: the ratio of the desired work pay of students surveyed in 2014 to the average work pay in the country in 2014 reached 1.37 (the desired net work pay was about 27 per cent higher than the average net work pay in the country at that time), while in 2017, the ratio of the desired work pay of surveyed students to the average work pay in lithuania at that time stood at 1.1, i.e. the desired net work pay was only about 9 per cent higher than the average net work pay in the country at the time. the minimum wage. the fourth year students would agree to work for a work pay lower (eur 545.3) than the first year students (eur 576.7), i.e. the mean of the lowest work pay of the fourth year students is eur 31.4 (5.4 per cent) lower than that of the first year students. the analysis of the ratio of the net minimum work pay of students (for which they would agree to work after studies) to the net average work pay in lithuania at the time has revealed the following results: the ratio of the minimum work pay of students surveyed in 2014 to the average work pay in the country in 2014 reached 1.09 (the minimum work pay for which the students would agree to work was about 8.6 per cent higher than the average net work pay in the country at that time), while in 2017, the ratio of the minimum work pay of surveyed students to the average work pay in lithuania at the time stood at just 0.85. the reasons for the minimum work pay of fourth year students (for which they would agree to work) being 15.4 per cent lower than the average net work pay in the country in quarter 1 of 2017 could be various: one of the reasons could be the fact that, in reality, the labour market and living conditions in the country have not changed (following the introduction of the euro, employees have not felt the benefit of increase in work pay), even though the statistical official average work pay increased (as compared to 2014, at the beginning of 2017 it was as many as 18.2 per cent higher). the interesting fact is that, in 2017, the minimum wage in the country reached 380 euros, i.e. it was as many as 80 euros or 21 per cent higher than in 2014 (since 1 october 2014, the minimum wage in the country stood at 300 euros). it should be noted that, following an increase in the minimum wage in lithuania, the minimum work pay for which the students would agree to work has not increased. in 2014, the minimum work pay of first year students for which they would agree to work was almost 48 per cent higher than the minimum wage in the country at that time, while in 2017, the minimum work pay of fourth year students was only 30.3 per cent higher than the minimum wage in the country. the criterion of the t test for two independent samples has also been applied in order to establish whether the differences in means are statistically significant in both cases (analysing the desired work pay of first and fourth year students and the minimum work pay for which students would agree to work after graduation). while applying 223 business, management and education, 2017, 15(2): 211–226 the criterion of the t test for two independent samples in both cases mentioned, the received p value was higher than 0.05. it is to be concluded that neither the desired work pay, nor the minimum work pay of the first and fourth year students have statistically significant differences. the means were not assessed using paired samples t test, since the samples of respondents (surveyed in 2014 and 2017) were not the same and it is not clear whether the samples include the same respondents. the number of working hours. having analysed the students’ opinion on the desired work pay, it is advisable to explore the reverse question – on the duration of working time in case the average work pay in lithuania is received. the analysis of the indicator of the duration of working time while receiving the average work pay in lithuania has shown that the surveyed students tend to think that the working time of 40 hours per week is the most appropriate. the analysis of statistical distribution of the data of a survey-questionnaire has shown that there are grounds to believe that the opinions of first year and fourth year students regarding the duration of working time while receiving the average work pay of that time coincide: the mean is 38.3 hours (according to the answers of first year students) and the mean is 38.6 hours (according to the answers of fourth year students). to sum up, it is possible to maintain that, in the opinion of young employees (current and potential), the current weekly duration of working hours should be about 1.5 hours shorter. 6. conclusions and discussion based on the analysis of scientific literature and the research results of the questionnaire survey, the following summary conclusions and recommendations have been drawn: – representatives of various areas of science, taking into account the relevant presentday issues, present new perspectives and attitudes on the development of human resources management as well as recommendations to business companies, often combining them with the ideas of psychology, social responsibility and knowledge economy as well as stressing the influence of young and creative employees who are willing to learn and improve in the process of creation of the company’s value. – from the economic point of view, the most important driving force behind the modern economy today is creative, innovative and motivated employees (who are quite often young students or young graduates), therefore, business companies should give special focus to the search for, attraction and retention of new talents, i.e. they should seek efficient solutions of human resources management in order to satisfy needs and expectations of employees at work according to the available possibilities. – the theoretical assumption that the needs and expectations regarding work pay of students who just started their studies (first year students) and those finishing studies (fourth year students) are different has been confirmed: the students at the 224 l. pilukienė. importance of motivation and work pay of young employees in the value creation chain of a business company: assessment of changes in and formation of expectations end of their studies (potential employees) realistically assess their possibilities in the labour market, they do not overrate their competences and have a better understanding of the labour market situation in the country. – educational establishments help to form the expectations and understanding regarding work pay of young potential employees, therefore, the cooperation of various forms between business companies and educational establishments becomes especially important. this would ensure efficient integration into the labour market of young people who are just joining the labour market. – further areas of research could be related to the analysis of the behaviour in the workplace of young people (hired following graduation): how long does a new employee agree to work for the desired minimum work pay, what is the importance of non-material motivation measures while forming the behaviour in the workplace of a young employee who just graduated and has been hired in the company. – there are some limitations in this research that should be mentioned. since the research only included 129 students, findings should be confirmed through a larger sample in order to increase generalizability. the data was collected only 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https://doi.org/10.3846/btp.2016.651 verhaest, d.; omey, e. 2013. the relationships between formal education and skill aquisition in young worker’ first job, the manchester school 81(4): 638–659. https://doi.org/10.1111/j.1467–9957.2012.02305.x laura pilukienė. at present, dr. laura pilukienė works as an assistant with vilnius university, the faculty of economics, the department of business. during the period of 2010–2015, assistant has published about 20 scientific articles and teaching books for students. research interest: human resource management, work remuneration and motivation, business competitiveness, business strategy. copyright © 2017 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. taking business intelligence to business education curriculum: graduate students’ concerns philip siaw kissi1, muesser nat2, adeleye idowu3 management information systems, school of applied sciences, cyprus international university, nicosia, northern cyprus, mersin 10, turkey e-mails: 1philip.asakomah@yahoo.com (corresponding author); 2mnat@ciu.edu.tr; 3richarddw6@ gmail.com received 14 march 2017; accepted 5 may 2017 abstract. business intelligence systems are widely employed in industries. however, students concerns about business intelligence course are largely missed in the business education curriculum. to take a proper decision on business intelligence integration in business education, it is important to understand students’ concerns. this study employed a survey questionnaire to investigate 142 graduate students concerns about integrating business intelligence into business education curriculum. the survey questionnaire was adopted from previous studies to measure students’ concerns on a business intelligence job opportunity, interest and relevance in the business intelligence education. the survey items have a reliability scales of cronbach’s alpha (α) = 0.818, factor loading > 0.5, and average variance extracted (ave) ≥ 0.5, and composite reliability (cr) ≥ 0.6. descriptive statistics and independent sample t-test and analysis of variance (anova) test were performed on the survey data. students revealed that business intelligence knowledge is relevant (mean = 4.29, sd = 0.710), has several job opportunities (mean = 4.16, sd = 0.675), and should be integrated into business education curriculum (mean = 3.95.08, sd = 0.79). in addition, there was no statistically significant difference (t (140) = –0.027, p > 0.05) between the concerns of students with business intelligence lecture experience and those without. further, perceived importance and job opportunity significantly, f = 24.601 and p = .000(< .05) relates to the business intelligence integration in business education. the findings draw implications for university management and business institutions in updating curriculum so as to equip business students with the essential business intelligence knowledge and skills for the betterment of the business organizations. keywords: business intelligence, course, students’ concerns; business education, curriculum. jel classification: l86, m10, i21. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2017, 15(1): 77–90 doi:10.3846/bme.2017.351 mailto:philip.asakomah@yahoo.com mailto:2mnat@ciu.edu.tr; 3richarddw6@ gmail.com https://doi.org/10.3846/bme.2017.351 78 p. s. kissi et al. taking business intelligence to business education curriculum: graduate students’ concerns 1. introduction in recent times, business intelligence systems have become progressively prominent and essential areas in information technology (mrdalj 2011). the systems involve several methodologies, applications, and technologies, and best practices that improve the analyzing of information to make a timely business decision that lead to enhancement (chen et al. 2012; foshay et al. 2014; kasemsap 2017). business intelligence knowledge delivers require working skills, tools, and techniques to enhance business operations (wixom et al. 2011). in addition, the knowledge provides relevant insight on how to solve business challenges faster for better competitive advantage (turban et al. 2008). in support, mrdalj (2007) explained that knowledge of business intelligence may enable students to answer the following contemporary business challenges questions such as which: 1. customers are contributing to the profit of the organization 2. assortments of products produce profits rather than a reduction of sales. 3. services are the best profitable way to retain customers in the organization despite the above benefits for the students, many universities have still not integrated business intelligence course in their business education curriculum which universities in north cyprus are not different. this has resulted in a lack of experts in business intelligence (andoh-baidoo et al. 2014). the situation is likely to continue (manyika et al. 2011). to ensure proper decision about business intelligence integration in business education, it is important to understand students’ concerns (jagersma, parsons 2011; ngussa, makewa 2014; lu et al. 2015). however, there is no such research in this regard. it was this consideration which prompted this study which investigated graduate students’ concerns about taking business intelligence course to business education curriculum. the study aimed to investigate graduate students’ concerns about integrating business intelligence course in the business education curriculum. this study sought to: 4. investigate the level of graduate students’ concerns about the relevance of business intelligence knowledge and its job opportunity of learning business intelligence. 5. examine graduate students’ concerns about integrating business intelligence course in the business education curriculum? 6. determine whether graduate students business intelligence classroom experience has an influence on their concerns about integrating business intelligence course in the business education curriculum. 7. find out the extent to which students perceived business intelligence personal knowledge and job opportunity relate to business intelligence integration in the business curriculum. the following research questions guided the study: (1) what is the level of graduate students’ concerns with regards to the relevance of business intelligence knowledge and job opportunity of learning business intelligence? (2) what are graduate students’ concerns about integrating business intelligence course in the business education curricu79 business, management and education, 2017, 15(1): 77–90 lum? (3) are there differences between the mba and mis graduate students’ concern about integrating business intelligence course in the business education curriculum? (4) to what extent do students perceive the relevance of business intelligence knowledge and job opportunity relate individually to perceived integration of business intelligence in business education curriculum? null hypotheses were formulated: h1: there is no significant difference between the mba and mis students’ concerns about integrating business intelligence course in the business education curriculum? h2: perceived relevant of business intelligence knowledge and job opportunity do not relate individually to perceive integration of business intelligence in the business education curriculum following research questions guided the study. the study offers graduate students, especially those majoring in business the opportunity to voice their concerns and views regarding business intelligence course integration in their program. furthermore, findings draw implications for university management and business institutions in updating curriculum so as to equip business students with the essential business intelligence knowledge and skills for the betterment of the business organizations. 2. literature review according to barone et al. (2010), students learning business intelligence are the future executives, middle level, and operational managers. knowledge acquired in business intelligence course would enable them to make strategic planning, acquire management and operational control skills as indicated in figure 1. they stressed that these benefits would enable students to answer related business organization questions such as “what is the best that can happen”, “what exactly is the problem”, “what actions are needed”. there have been several studies related to the fig. 1. the business intelligence (bi) model (adopted from barone et al. 2010) 80 p. s. kissi et al. taking business intelligence to business education curriculum: graduate students’ concerns business intelligence education. davis and woratschek (2015) investigated the various business intelligence system and analytical tools that are used for university students in information system department and then recommended some business intelligence software for their curriculum. coleen and ceyhun (2015) suggested skills and knowledge required for successful graduate students in business school. gupta and raja (2015) in their study recommended material and methods that can best prepare students for business organizational demands. mitri and palocsay (2015) presented the current state of business intelligence education, compared its curricula and stressed the need of business intelligence specialized for industries. wang (2015) reviewed studies on business intelligence education from the academic and practical viewpoint and presented the basis for future research. sircar (2009) identified some reasons for the lack of business intelligence curricula in business schools. he associated it to low literacy rate among students combine with school’s resistance to increase the requirement of mathematics necessary for introduction of business intelligence learning. he further, attributes the reason to lack of academic disciplines that provide the major aspects of business intelligence. to summarize, there has been limited studies on business intelligence education. those few studies have suggested software tools, skills and knowledge require for business intelligence education. there are suggested reasons for the lack of business intelligence curriculum in business education. those reasons include illiteracy among student and academic indiscipline in schools. however, those studies did not consider students concerns on business intelligence course in the business curriculum. therefore, this article aims to contribute to the body of research on business intelligence by incorporating students’ concerns integration in business education curriculum. 3. research methodology this study utilized a descriptive survey research design with both qualitative and quantitative data collection approach. the population for this study was students pursuing a master degree program related to business in north cyprus universities. specifically, the target population was business administration (mba) and management information system (mis) students from the cyprus international university. the students have a total population of two hundred and fourteen (214) where students offering mba and mis are 170 and 44 respectively. sample size determination and techniques. sample size calculation formula for this study was adapted from yamane (1967). sample size (n) 21 + n n e( ) where the sample size is n; n for population size and e is the level of precision. 95% confidence level and e = 0.05 were assumed. in substituting n = 214 and other parameters in the above formula, a minimum sample size of 140 was to be recruited for the survey. 81 business, management and education, 2017, 15(1): 77–90 purposive sampling technique was used to sample one hundred and forty-two (142) students in for the study to investigate business students’ perceptions on making business intelligence course compulsory in the business education curriculum. purposive sampling can be employed in both qualitative and quantitative research. the technique has the quality of data gathered and ensured selection of reliable and competence study participants (tongco 2007). data collection and analysis. in order to investigate graduate students’ perceptions of integrating the business education curriculum, the study adopted the survey items from previous studies (hogan, li 2011; zheng et al. 2014), without confirmed validity and reliability. the survey items consist of seven closed-ended items on personal interest in business intelligence, career association of business intelligence, and perception of business intelligence with additional one closed-ended item about why business intelligence is/not important in the business education curriculum. a 5-point likert scale with responses ranges from “strongly disagree” to “strongly agree”. out of 160 questionnaires distributed, 151 were received with 9 uncompleted responses. a total of 142 valid questionnaires with sample rate (88.75%) were used for the study. spss version 23.0 software was used for analyses the responded survey items. cronbach’s alpha (α) > 0.7, factor loading > 0.5, and average variance extracted (ave) ≥ 0.5, and composite reliability (cr) ≥ 0.6 shows a good convergent validity (hair jr et al. 2010; chen, phou 2013; stylidis et al. 2016). a good convergent validity indicates that the survey items have measure what it intended to measure in the study (zainudin 2015). table 1. measurement of cronbach’s alpha reliability scale item cronbach’s alpha business intelligence is an exciting and relevant area 0.801 i am interested in learning more about business intelligence 0.786 there are plenty of job opportunities existing in the field of business intelligence 0.799 business intelligence is a fast-growing field 0.796 a business education containing business intelligence component will add value to my education 0.778 a business intelligence course specialized in business education will add value to my degree 0.777 i am interested in enrolling in a business education business intelligence track if it is available. 0.818 overall cronbach’s alpha 0.818 82 p. s. kissi et al. taking business intelligence to business education curriculum: graduate students’ concerns as shown in table 1, cronbach’s alpha reliability scale for each survey item and all items (α > 0.7) are acceptable (nunnally 1978). this indicates the high internal consistency of the survey items (streiner 2003). table 2, summarizes the factor loadings, composite reliability and average variance extracted of the measures of three factors dimensions: business intelligence important, business intelligence job opportunity, and business intelligence integration. all the measures confirm the accepted levels of convergent validity, with the average variance extracted ranges from 0.50 to 0.63 and the composite reliability ranges from 0.67 to 0.84. table 2. measurement summary scales using factor analysis item measurement factor loading 1 2 business intelligence important avr = 0.502, cr = 0.668, cronbach alpha (α) = 0.689 bi1 business intelligence is an exciting and relevant area 0.745 bi2 i am interested in learning more about business intelligence 0.670 job opportunities avr = 0.589, cr = 0.741, cronbach alpha (α) = 0.722 jo1 there are plenty of job opportunities existing in the field of business intelligence 0.824 jo2 business intelligence is a fast-growing field 0.707 business intelligence integration avr = 0.634, cr = 0.838, cronbach alpha (α) = 0.776 bii1 a business education containing business intelligence component will add value to my education 0.755 bii2 a business intelligence course specialized in business education will add value to my degree 0.750 bii3 i am interested in enrolling in a business education business intelligence track if it is available 0.878 extraction method: principal component analysis. rotation method: varimax with kaiser normalization. note: loadings < .40 are omitted 4. result and findings out of the 142 students, 31.7% (45) of them were females with the rest 68.3 % (97) male. the female students involved in the study were fewer than their male counterparts because there was a relatively fewer number of female master’s students in both departments. further, 72.5 % (103) of them were mba students and the remaining 27.5% (39) in mis. the mba students were more than mis collages since the number of master’s students in mba are comparatively larger than mis students. addition, 113 (79.6 %) have some knowledge and the rest do not have any knowledge in business intelligence. detailed information is presented in table 3. 83 business, management and education, 2017, 15(1): 77–90 table 3. gender distribution, departmental proportion, and knowledge variable n (%) total gender female, 45 (31.7) and male, 97 (68.3) 142 department mba, 103 (72.5) and mis, 39 (27.5) 142 knowledge yes, 113 (79.6) and no, 29 (20.4) 142 research question 1: what are graduates’ students’ concerns with regards to relevant of business intelligence knowledge and job opportunity of learning business intelligence? descriptive statistics were used to determine mean scores, standard deviations, frequencies and percentages which were used for the analysis. in the analysis, “strongly disagree” and “disagree” were categorized as “disagree” while “strongly agree” and “agree” were categorized as “agree”. table 4. the relevance of business intelligence item an (%) n n (%) d n (%) m sd 1. business intelligence is an exciting and relevant area 117 (82.6) 23 (16.2) 2 (1.4) 4.26 0.856 2. i am interested in learning more about business intelligence 122 (85.9) 18 (12.7) 2 (1.4) 4.30 0.790 note: d = disagree, n = neutral, a = agree, m = mean, and sd = standard deviation as shown in table 4, most graduate students 117 (82.6%) indicate that business intelligence is an exciting and relevant course (item 1), only 2 (1.4) disagree. also, 122 (85.9%) of them expressed interest in learning more about business intelligence (item 2). again, the mean scores range from 4.28 (0.856) to 4.30 (0.790). this signifies that all the items are agreed by the graduate students. the finding shows that the students understand business intelligence as relevant and an interesting field of study to support industries. in the agreement, business intelligence is an important part of businesses solution by providing vital decision-making information to build shareholder value and to ensure permanency (dawson, van belle 2013; foshay, kuziemsky 2014; brooks et al. 2015). table 5. job opportunity item an (%) n n (%) d n (%) m sd 3. there are plenty of job opportunities existing in the field of business intelligence 105 (73.9) 35 (24.6) 2 (1.4) 4.06 0.797 4. business intelligence is a fast growing field 115 (81.0) 26 (18.3) 1 (0.7) 4.11 0.716 84 p. s. kissi et al. taking business intelligence to business education curriculum: graduate students’ concerns in table 5, the vast majority of the students 105 (73.9%) agreed that there are plenty of job opportunities existing in the field of business intelligence, just 2 (1.4%) of them disagreed (item 3). further, most of the students 115 (81.0%) approved that business intelligence is a fast-growing prominence field, only 1 (0.7%) of the students disagreed (item 4). addition, the mean score ranges from 4.09 (sd = 0.797) to 4.11 (sd = 0.716). this result suggests that the students recognize business intelligence as fast growing area creating more job opportunity for business intelligence experts. in support, wixom et al. (2014) affirmed the needs for recruiting more business intelligence qualified employees in the future, predicting an increasing number of 89 percent. addition, they confirm that the students are aware of the growth of business intelligence and their confidence in the availability of job opportunities business intelligence have increased. research question 2: what are students’ concerns about integrating business intelligence course in the business education curriculum? this research question sought to determine the students’ concerns about integrating business intelligence course in the business education curriculum. the minimum and maximum frequencies of the students’ responses to the survey items in table 6 were 2 and 111 respectively and the mean scores ranged from 3.82 (sd = 1.01) to 4.08 (sd = 0.791). the majority of the students 107 (75.3%) agree that business education containing business intelligence component will add value to their education while 2 (1.4%) of the students disagreed (item 5). further, a high number of the students 111 (78.3%) agree that business intelligence course specialized in business education will add value to their disagreed while 9 (6.3%) disagreed (item 6). in addition, most students 93 (65.5%) shown interest in enrolling business education curriculum with business intelligence (item 7), only 16 (11.3%) indicated disliked. table 6. business intelligence integration in business education curriculum item an(%) n n(%) d n(%) m sd 5. a business education containing business intelligence component will add value to my education 107 (75.3) 33 (23.2) 2 (1.4) 4.08 0.791 6. a business intelligence course specialized in business education will add value to my degree 111 (78.2) 22 (15.5) 9 (6.3) 3.94 0.897 7. i am interested in enrolling in a business education business intelligence track if it is available 93 (65.5) 33 (23.2) 16 (11.3) 3.82 1.008 some students provided the following reasons for their disagreement or neutral for business intelligence integration in business education curriculum: “am not interested in learning business intelligence”; “without business, intelligence one could still engage in business”; “am not sure to take another course”. 85 business, management and education, 2017, 15(1): 77–90 some students provided the following reasons for their disagreement or neutral for business intelligence integration in business education curriculum: “am not interested in learning business intelligence”; “without business intelligence one could still engage in business”; “am not sure to take another course”. in contrast, the students also stated the following reasons for their agreement for business intelligence integration in business education curriculum: “business intelligence is fast growing field, exciting to learn, and i will be valuable for job market with its skill”; “business intelligence focus on providing information to business for them to have competitive advantage and as aspiring manager, i wish to enroll”; “today many companies are using business intelligence in order to have competitive advantage in my field, i think improving my knowledge in business intelligence will help me”; “business intelligence is important ant in business education, i can apply a lot of skills, evaluating and implementing business strategies”; “business intelligence will widen and expand my ideas in business and management”. as indicated in figure 2, a high percentage of the students perceive business intelligence as fast growing and relevant area with several job opportunities. they further express their readiness to learn business intelligence course and enrolled if is mounted in the business education curriculum. research question 3: are there differences between the mba and mis students’ perceptions of integrating business intelligence course in the business education curriculum? the question sought to find out whether there was any association between business intelligence lecture experience and students perception. a t-test was conducted to determine if there were any significant differences between the perception of mis students (department with business intelligence course) and students mba (without business intelligence course). to find out whether there were significant differences between the mba and mis students’ perceptions of integrating business intelligence course in the business curriculum, a null hypothesis was stated and tested. testing of hypothesis. h1: there is no significant difference between the mba and mis students’ perceptions of integrating business intelligence course in the business curriculum. fig. 2. students concerns of business intelligence 86 p. s. kissi et al. taking business intelligence to business education curriculum: graduate students’ concerns the independent sample t-test was used to test the hypothesis at a p = 0.05. the results are provided in table 7. table 7. t-test results on mba and mis students’ concerns about business intelligence integration in business education curriculum department n mean standard deviation t df sig mba 103 3.945 0.720 –.027 140 0.735 mis 39 3.948 0.811 *p > 0.05 the overall mean scores of mba and mis students’ concerns on business intelligence integration in business education curriculum were 3.945 (sd = 0.720) and 3.948 (sd = 0.811) respectively (table 7). this seems to indicate that the mis students had more positive concerns about business intelligence integration in business education curriculum than the mba counterparts. the t-test results, however, showed that there was no statistically significant difference (t (140) = –0.027, p > 0.05) between the concerns of mba and mis students on business intelligence integration in business education curriculum. thus the null hypothesis was accepted (baldi, long 2001). this means that students’ concerns are not influenced by their previous classroom lecture experience. research question 4: to what extent do the perceived personal interest and job opportunity relate individually to perceived integration of business intelligence in business education curriculum? the question sought to find out the extent for which graduates students’ perceived interest in business intelligence and perceived job opportunity relate to their perception of business intelligence integration in business education. analysis of variance test was conducted to determine to determine the relationship of a linear combination of perceived job opportunity and perceived job opportunity with perceived integration of business intelligence in business education using the research hypothesis h2. testing of hypothesis. h2: perceived personal interest and job opportunity; do not relate individually to perceived integration of business intelligence in business education curriculum the business curriculum. table 8 shows the analysis of variance (anova) test of statistical significance of regression model. from the anova (table 8), f = 24.601 and p = .000(<.05) which point out that the test was statistically significant. hence, the null hypothesis (h2) is rejected (kass et al. 2014). this indicates that job opportunity and personal knowledge significantly relates to the integration of business intelligence in the business education curriculum. personal knowledge and job opportunity are two main factors that influence students’ intention to offer business intelligence course. 87 business, management and education, 2017, 15(1): 77–90 table 8. anova test of significance model sum of squares df mean square f sig. 1 regression 20.912 2 10.456 24.601 .000b residual 59.077 140 .425 total 79.988 142 a. dependent variable: business intelligence integration b. predictors: (constant), job opportunity, personal knowledge the following are the main finding of the study: (1) students perceived business intelligence course as relevant area and ready to enroll in the course; (2) students had positive concerns about business intelligence and want business intelligence course should be integrated into the business education curriculum; (3) students’ concerns were not affluence by previous business intelligence classroom lessons; (4) personal knowledge and job opportunity influence students’ readiness to pursue a business intelligence course. this study investigated graduates’ concerns about integrating business intelligence course in business education. it was revealed that graduate students had positive concerns about integrating business intelligence course in the business education curriculum. they suggested that business intelligence course is relevant and should be integrated into the business education curriculum. in agreement, chen et al. (2012) recommended that business intelligence is an important area that needs to be studied in order to resolve problems of modern business organizations. in support, wixom et al. (2011) proposed that students specializing in business education should be taught business intelligence course, and not only for those pursuing a degree in business intelligence or information system engineering degree. 5. conclusions due to the urgent need of business intelligence specialist in many industries globally, it is important that students persuading business education should be taught business intelligence course. universities and other business colleges must introduce the business intelligence course in their curriculum. this would support the students in their future employment. for instance, the business intelligence skills acquire would enable them to find out: the best customers contributing to the profit of their organization, identify products that generate more profits, and the best profitable way to retain customers in the organization. the future studies should include a survey of large sample size with an accepted number of institutions. further, there should be empirical studies to ascertain challenges in integrating business intelligence course in the business education curriculum. addition, future studies should compare faculty members and students concerns 88 p. s. kissi et al. taking business intelligence to business education curriculum: graduate students’ concerns about business intelligence integration in the business education curriculum to ascertain whether there is a significant difference in their concerns. the study was limited to one institution in north cyrus. limiting the study to only one out other universities in north cyprus with a sample size of 142 graduate students affects the generalizability of the findings. however, the results could be generalized to the university sampled and contribute to literature. references andoh-baidoo, f.; 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ariyachandra, t.; douglas, d.; goul, m.; gupta, b.; iyer, l.; turetken, o. 2014. the current state of business intelligence in academia: the arrival of big data, communications of the association for information systems 34(1): 1–13. yamane, t. 1967. statistics: an introductory analysis. 2nd ed. new york, ny: harper and row. zainudin, a. 2015. sem made simple. bangi, selangor: mpws publisher. zheng, g.; zhang, c.; li, l. 2014. bringing business intelligence to health information technology curriculum, journal of information systems education 25(4): 317–325. philip siaw kissi. m.phil., research assistant in the departments of management information systems and information technology(school of applied sciences) at the cyprus international university (ciu). he is currently offering phd in management information systems in ciu. he holds m.phil. and m.ed. in mathematics education from the university of education (uew). his research interests include business and mathematics education, educational technology, curriculum development and implementation, integration of technology in a business organization. muesser nat. phd assistant professor in the departments of management information systems (head) and information technology(school of applied sciences)at the cyprus international university (ciu). she holds phd in design, development, and evaluation of technology-enhanced learning environment and msc. in ecommence technology from the university of greenwich and the university of essex respectively. her research interests include e-learning/online learning systems, adaptive/personalized learning, integration of ict and internet technologies into education, learning styles and strategies, design and development of learning environments, lms (moodle, lams, blackboard, captivate, articulate). adeleye idowu. msc., research assistant in the departments of information technology and management information systems (school of applied sciences) at the cyprus international university (ciu). he holds msc. in management information systems from the ciu. research interest: flipped classroom, education technology, virtual reality in education, learning analytics, boyd and social media at higher education. audit committee practice in the polish listed stock companies. present situation and development perspectives piotr szczepankowski university of finance and management, pawia str. 55, 01-030 warsaw, poland e-mail: szczepankowski@vizja.pl received 20 september 2011; accepted 25 february 2012 abstract. the audit committee is one of the parts of corporate governance mechanism, which is understood as the relationship between corporate managers, directors and the providers of equity, people and institutions who save and invest their capital to earn the return. this study presents survey research results of audit committee activity in polish public stock companies quoted on the warsaw stock exchange (wse). the purpose of this paper is to present the audit committee practice in poland after 2009. the paper shows that the audit committee practice is still the most problematic issue of transitional polish corporate governance rules. the survey has shown that the corporate needs and its implementation, and communication with listed companies leave a lot of room for improvement. the paper is based on the documents prepared in 2010 by pricewaterhousecoopers, the polish association of listed companies and the polish institute of directors. keywords: audit committee, corporate governance, listed companies, warsaw stock exchange, supervisory board, polish economy. reference to this paper should be made as follows: szczepankowski, p. 2012. audit committee practice in the polish listed stock companies. present situation and development perspectives, business, management and education 10(1): 50–65. http://dx.doi.org/10.3846/bme.2012.05 jel classification: g380, g390, m480. 1. introduction researches have defined audit committees in a variety of ways. according to cadbury (1992), audit committee is a formal institution used by corporate owners to discipline organisations. morrin and jarrell (2001) argued that an audit committee is a special group of experts, which controls and safeguards the interests of the capital market investors, corporate owners, managers, employees, suppliers, creditors and etc. an audit committee is not only a group of persons, but also a set of processes, policies, laws and institutions affecting the way a corporation is directed, administrated or controlled. a perfect audit committee can strengthen intra-company control and can b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2012, 10(1): 50–65 doi:10.3846/bme.2012.05 copyright © 2012 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 51 business, management and education, 2012, 10(1): 50–65 reduce opportunistic behaviours and lower the asymmetry of information, so it has a positive impact on the high quality of disclosed information (li, qi 2008). it is widely believed that good corporate governance rules and audit committee practice particularly are an important factor in improving effectiveness of the companies, especially in developing countries and during the period of the global economic crisis. however, the audit committee activities are different in the different countries due to disparate corporate governance structure resulting from dissimilar social, economic and regulatory conditions (abdurrouf et al. 2010). the relationship between corporate governance, audit committee, shareholders and board of managers is important in formulating efficient financial and operating management practice. according to black (2001), klapper and love (2004), gompers et al. (2003), and beiner and schmid (2005) corporate governance and audit committees play an important role mainly in improving the value of the companies and efficiency of their market activity. 2. literature overview and previous researches about the importance of an audit committee literature on audit committees suggests that the roles of regulatory and controlling authorities are mainly important in improving the market value of the firm. good audit committee is focused on the protection of the rights of shareholders and plays an important role in the development of capital markets by protecting investor interests (abdurrouf et al. 2010). the role of an audit committee is important also in implementing corporate governance principles. these principles suggest that audit committee should work independently and perform their duties with professional care. in case of any financial manipulation possibilities, the audit committee is held accountable for their actions as the availability of transparent financial information reduces the information asymmetry, which can be helpful for improvement of the value of the firm (bhagat, jefferis 2002). besides, an audit committee is the entity that safeguards public interest. the board usually delegates responsibility for the oversight of financial reporting to the audit committee to enhance the breadth of relevance and reliability of annual report. thus, an audit committee can be a kind of monitoring mechanism that improves the quality of information flow between firm owners (actual and potential shareholders) and managers. klein (1998) and anderson et al. (2004) reported a positive relationship between the audit committee and developmental speed of the firm. on another hand, kajola (2008) showed that there is no significant relationship between the audit committee and the development of the enterprise. in literature on audit committees we can also find interesting discussion about proper size of an audit committee, its internal structure and the level of independence. a small size of an audit committee is generally believed to improve efficiency of the firm because the benefits by larger committee of increased monitoring are outweighed by the poorer communication and decision making in larger groups. lipton and lorsch (1992) suggest 52 p. szczepankowski. audit committee practice in the polish listed stock companies… that the optimal audit committee size is between seven and nine persons. in this respect, empirical studies have shown that the value of the firms increases with relatively small sizes of audit committees (eisenberg et al. 1998). hence, as the size and activity scope of an audit committee increases, it is expected to increase the firm’s efficiency to compensate for increasing process losses. nevertheless, yermack (1996) found negative correlation between the size of an audit committee and enterprise profitability. mak and kusnadi (2005) reported that a small committee size is positively related to high firm value. sanda et al. (2005) reported that value of the company is positively correlated with small, as opposed to large audit committee size. the argument is that large committee is less effective and is more difficult to control. the cost of coordination and processing problems is also high in large committees and this makes decision-taking difficult. the empirical studies increasingly recognise that audit committees have a central role in reducing agency problems (zahra, pearce 1989). agency theory argues that the delegation of managerial responsibilities by principals (owners) and agents (managers) requires the presence of mechanisms that either align the interests of principals and agents or monitor the performance of managers to ensure that they use their delegated powers in the best interests of the principals. it has been argued that weak internal or external auditing, controlling and limited protection of minority shareholders intensify the traditional principal agent problems in transitioning economies (dharwadkar et al. 2000). in accordance with the agency theory, it is hypothesised that the independence of the audit committee, the proportion of directors with financial expertise on the audit committee, and the proportion of block shareholding are all positively associated with firm efficiency. researchers are also interested in whether there is an improvement in efficiency after implementation of audit committees because it addresses corporate governance issues including auditor independence. the audit committee serves many important corporate governance functions and provides advice on operational and regulatory matters (menon, williams 1994). it helps to alleviate agency problems by facilitating the timely release of unbiased accounting information by managers to shareholders, creditors, thus reducing information asymmetry between insiders and outsiders (klein 1998). from an agency perspective, the composition of the audit committee is an important governance mechanism because the presence of outside directors provides a way of monitoring the actions of managers and of ensuring that shareholder interests are being safeguarded. if effective monitoring leads to higher day-to-day firm performance, then firm performance will be positively related to the percentage of outside directors who are members of the audit committee (klein 1998). some studies report a positive relation between the independence of an audit committee and firm performance (weir et al. 2002; erickson et al. 2003; chan, li 2008). thus, we can say that there is a positive relation between the independence of an audit committee and firm efficiency. in december 1999 in the usa, the security and exchange commission (sec) approved proposed rule changes by the nyse, amex, and nasd to amend the listing standards regarding corporate audit committees. under the new standards, a public firm must have on its audit committee at least one member with financial expertise. one 53 business, management and education, 2012, 10(1): 50–65 provision requires public companies to disclose to the sec whether they have financial experts on the audit committee of their board of directors. these provisions represent an effort to solve an agency problem between shareholders. as managers do not always act in the best interest of shareholders, shareholders should have an effective audit committee to ensure financial reporting quality. the new provision attempts to assure audit committee financial expertise, enabling members to monitor the financial reporting process more effectively, thus mitigating agency problems between managers and shareholders (davidson et al. 2004). to the best of knowledge, there is no empirical evidence on the relation between the proportion of directors with financial expertise on the audit committee and firm performance. from an agency perspective, the inclusion of financial experts on the audit committee is expected to be associated with greater monitoring and better firm performance. in numerical research papers we can also find the following interesting conclusions about audit committee practices: 1. audit committee members place emphasis on financial statement accuracy, control effectiveness, and audit quality (gendron et al. 2004). 2. audit committee members develop their sense of audit committee effectiveness by considering member backgrounds, features of audit committee meetings, and informal activities outside of audit committee meetings (gendron, bedard 2006). 3. audit committee members investigate accounting issues more deeply when decision outcomes are more aggressive, especially if the members have accounting experience (pomeroy 2010). 4. more independent audit committees are more likely to choose higher-quality successor auditors (chen, zhou 2007). hermanson et al. (2009) find that shareholder votes for the auditor are positively related to audit committee financial expertise, suggesting that shareholders have more confidence in the elected auditor if the audit committee has more financial expertise. 5. asare et al. (2008) find that, in some cases, internal auditors’ fraud risk assessments are influenced by the quality of an audit committee, although audit scope judgments are not affected. in terms of audit opinions, bronson et al. (2009) find that completely independent audit committees, but not audit committees with only one non-independent member, are positively related to going-concern opinions issued to financially distressed companies. 6. krishnan and visvanathan (2009) find that audit fees are negatively associated with accounting expertise on the audit committee, but only in companies with strong governance. audit fees increase with board size, board meetings, audit committee meetings, and ceo duality. also, the relation between audit fees and audit committee accounting expertise is negative when earnings management risk is low, but positive when the earnings management risk is high. thus, audit committees with accounting experts appear to demand more extensive auditing when the risk is higher. 54 p. szczepankowski. audit committee practice in the polish listed stock companies… 7. carcello et al. (2005) find that the overall internal audit budget is higher if the audit committee reviews the budget, and barua et al. (2010) find that internal audit budgets are positively associated with audit committee meetings, but negatively associated with auditing expertise on the audit committee and audit committee member tenure. abbott et al. (2010) find that internal audit’s relative focus (percentage of budget) on internal control-related activities increases with audit committee oversight of internal audit (relative to management oversight of internal audit). 8. davidson et al. (2004) document that the stock price reaction to the announcement of appointing directors to audit committees is positively related to the new audit committee member having financial expertise. further, de fond et al. (2005) find that positive market reactions to the appointment of a financial expert to the audit committee occur only when the director has accounting-related expertise and only when the appointing firm has relatively strong corporate governance. 9. financial experts of the audit committee designated by companies usually do not have an accounting or finance background (corcello et al. 2006). krishnan and lee (2009) also find that the presence of accounting expertise on the audit committee is positively related to litigation risk, but only in companies with stronger corporate governance. 10. coates et al. (2007) examine changes in financial literacy of audit committees and find that companies that improved their apparent financial literacy of the audit committee had higher stock returns than those which did not. 3. practice of the audit committees in europe and in poland the literature indicates that audit committees were not present widely in europe, apart from the uk, before the 1990s. american researcher tricker (1978: 28) observed that: “they do not have audit committees in europe: perhaps they are not necessary with alternative forms of corporate governance”. van hoek (1988) noted that, while audit committees were relatively unknown in europe, there were isolated instances in companies in italy and sweden. vanasco (1994) noted that audit committees are rare in the continental europe, perhaps with the exception of france. however, audit committees gained greater acceptance in continental europe from the mid-1990s onwards. keegan and degeorge (1998) reported in a survey of 65 major companies based in eight european countries (belgium, france, germany, italy, spain, sweden, switzerland and the united kingdom) that 60% of the companies had audit committees with adoption rates the highest in the uk (100%), france and switzerland, and the lowest in sweden and italy. the change towards acceptance of the audit committee concept is in line with recommendations from governance committees set up in various countries, for example, the vienot report (1995) in france, the subsequently issued peters committee (1997) report from the amsterdam stock exchange, or the cardon report (belgium commission for corporate governance 1998) in belgium. in a review of audit committees in europe a pricewaterhouse (1997) survey noted that as leading companies in the uk, france and 55 business, management and education, 2012, 10(1): 50–65 the netherlands implement recommendations concerning audit committees, and the twin pressures of international market forces, and the interest of the authorities and regulators in governance issues expand, the significance of audit committees in europe and their inclusion in national code recommendations will grow. this has been proved correct with audit committee recommendations being made in such west european countries like germany, greece and portugal and such east european countries like slovakia, the czech republic and romania. in poland, the institute of directors in cooperation with the association of chartered certified accountants (acca) prepared a document entitled “the best practices of audit committees” dated march 2010, which reflected the best audit international models and experience of listed companies. it is not a closed list of rules, but a set of principles to be verified by the changing expectations of shareholders and market needs. the detailed principles of procedure regarding the audit committee should be defined by the supervisory board adequately to the scope of tasks delegated to the audit committee, the size of the company and the specific nature and complexity of the given business sector. the main purpose of operations of an audit committee, constituting a part of the supervisory board, is to support the board in its exercise of financial supervision over the company and to provide the board with reliable information and opinions, owing to which correct decisions on financial reporting, internal control and risk management could be taken efficiently. the delegation of certain tasks as responsibilities of the audit committee does not relieve the remaining members of the supervisory board of their accountability for the company’s financial reporting or decisions made by it. the audit committee collaborates together with the management board, the company’s staff and the certified external auditor with the aim of best appreciating the principles of corporate operations. basic tasks of the polish audit committee include supervising the following areas: 1. process of financial reporting, particularly by means of: a) issuing opinions on the accounting policy adopted by the company and the applied principles for the preparation of financial statements, in particular with respect to complex or atypical transactions, any changes made in the above principles as well as forecasts, estimates and assumptions made by the management board; b) reviewing financial statements prior to their publication and discussing the correctness and completeness of information contained therein with the management board and the certified external auditor; c) analysing the audit report on financial statements, including information about any limitations as to the scope of the audit or access to information, refusal to audit or issue an opinion, and difference of opinion, if any, between the certified external auditor and the management board; d) evaluating the process of communication of financial information, including projections and current information, addressed at the media, analysts, investors and regulatory authorities. 56 p. szczepankowski. audit committee practice in the polish listed stock companies… 2. operation of the internal control system by means of: a) assessing the effectiveness of individual components of the company’s internal control system, in particular regarding the financial reporting and safety of the information technologies in use; b) analysing the management board’s reports on any irregularities found in the internal control system with reference to the financial reporting process. 3. process of risk management to the extent of: a) assessing the effectiveness of risk management by the management board in the areas of financial, operational and strategic risks of the company; b) comprehending the impact of business risk (including that overseen by any authorities other than the audit committee) on financial statements; c) assessing the company’s policy on property insurance, directors and officers insurance and liability insurance for holders of commercial power of attorney. 4. internal audit activities, in particular by means of: a) issuing opinions on candidates for the office of internal audit head; b) reviewing and issuing opinions on the rules and regulations, work schedule, budget analysis and structure of internal audit; c) periodic assessment of the implementation of audit plans and activities undertaken by the management board in response to any issues identified by the internal audit. 5. process of auditing the financial statements, in particular by means of: a) recommending the entity to audit the financial statements; b) delivering opinions on the rate of fees for the entity authorised to audit financial statements; c) evaluating the independence of the certified external auditor ; d) communication regarding the auditor’s plan, methods and results of work; e) issuing an opinion on any additional services provided to the company by the entity authorised to audit. the audit committee submits its opinion and the results of assessments and analyses to the supervisory board, specifically regarding any irregularities found as well as any differences of opinion between the management board, internal audit, certified external auditor and the audit committee. the polish financial supervision authority (knf) also issued the recommendations on the operation of audit committees, which is a statement of good practice based on international standards, guidelines of international organisations as well as knowledge and experience of audit companies. the recommendations do not add to an audit committee’s statutory duties but are merely intended to facilitate the work of its members. for example, they include a list of several dozen example questions, to which the audit committee should seek answers as part of its supervisory process. 57 business, management and education, 2012, 10(1): 50–65 knf recommends that this should include ensuring the reliability of information and paying particular attention to methods used when settling significant or atypical transactions, especially if there are several possible methods of recording them. knf emphasises the importance of effective supervision of internal control systems and the approval of the following year’s audit plan. it also recommends that audit committees support the internal audit function, highlighting the importance of ensuring that it occupies the right place within the company’s organisational structure. the audit department should report directly to the audit committee, and be subordinate to the president of the management board within the organisational structure. knf recommends holding meetings with the external and internal auditors without any management present to discuss the audit scope and procedure and analysing unresolved comments and questions. they should also discuss the need for cooperation with management members as well as any problems in their dealings with them, such as unjustified delays in giving consent to start an audit or in handing over documents or information requested. knf recommends that the audit committee’s duties should include making recommendations to relevant authorities about organisations authorised to audit financial statements, conducting financial reviews and approving all audit and non-audit services provided by those authorised to audit financial statements and by other organisations. 4. survey results of audit committee practice in polish listed stock companies following the decision by the polish government in 2009, an obligation to appoint audit committees in public companies was introduced in poland. it was a response to the recommendation of the european commission and it overlapped with an apparent trend present in the highly developed markets for more than a decade. in the past few months, unfortunately, less than 50% of companies listed on the warsaw stock exchange decided to establish audit committees or entrust its tasks to their five-person supervisory board. pricewaterhousecoopers, the polish association of listed companies and the polish institute of directors decided to conduct the first national study of public company audit committees entitled “the audit committee in poland in 2010”, and to examine the functioning of audit committees in public listed companies in poland at the turn of 2009–2010, in particular the scope of their activities and work organisation, profile of the audit committee or supervisory board member and factors affecting the development of committees. the report authors believed that the results would allow gathering information about the current situation on audit committees in poland, as well as perceived trends, best practices and possible directions for further development. they will also allow identifying educational needs or areas, where it is necessary to introduce legislative changes. 58 p. szczepankowski. audit committee practice in the polish listed stock companies… the entrance research trial included 383 stock companies quoted at the warsaw stock exchange at the day of june 30, 2010. the questionnaire was directed to the audit committee members in these companies, which had an established committee, and to supervisory board members in these corporations, which did not have an established audit committee till the end of the first half of 2010. the number of sending questionnaires was totally equal to 550, and 200 or 36.6% of them was addressed directly to audit committee members. the number of returned questionnaires was equal to 82, and the answers came from 69 corporations. it was 35% of the total number of the stock companies quoted on the wse, which had audit committees. 4.1. the polish audit committee’s profile nearly 40% of companies quoted on the wse established their audit committee till 31 july 2010. structurally, 90% of large companies from the wig20 share index, 60% of middle companies from the mwig40 share index, and 57% of small companies from the swig80 share index established their own audit committees. most of the committees (67%) were established during last three years, but 41% of them – subsequent to law changes in june 2009. audit committees existed longer in large companies from the wig20 share index. size-wise committees are rather small. in 83% of stock companies, only three persons sit on the audit committee. five and more persons sit on 16% of audit committees. what is interesting, in these companies which have small supervisory boards (5–8 persons) we could also find a small audit committee (3 persons). only large companies with large supervisory boards have a proportionally large audit committee. professional profile of the polish audit committee members is presented in the table 1. table 1. professional profile of the polish audit committee members (source: own study based on the first national study of public company audit committees, 2010: 10) profession percentage independent advisor/financial analyst 28.0 top manager from another company 22.0 scientist 15.0 individual investors 12.0 accountant 9.0 supervisory board member 8.0 lawyer 7.0 financial director 7.0 strategic/institutional investors 5.0 note: the total does not equal to 100%, because one audit committee member can sit on different committees. 59 business, management and education, 2012, 10(1): 50–65 most of the audit committee members (78%) sit only on one committee and 22% of them sit on two or more audit committees. it can be understood as strong independence of committee members. this independence is also fulfilled in the sense of nonacquisition of the company shares. besides, 9% of pure accountants as the audit committee members, only 29% of the committee members have stated accountancy or auditing knowledge. it can be read that less than half of committees have members with expected qualifications, but it does not unambiguously mean that they do not have any auditing competencies. the recommendation of the european commission only talks about competencies rather than qualifications. it is enough to have financial or accounting experience for being the audit committee member, but a special diploma or university degree is not required. 4.2. work organisation and activity of polish audit committees activity areas of polish audit committees are based on special regulations or statutes made individually by each of company. the best practice of audit committees presented in most corporate internal regulations has to include first of all: − free access to business information, which is necessary for problems solution; − possibilities for indirect and unlimited contacts with corporation management board, employees and external financial firms; − possibilities for undertaking and funding own and independent studies or researches. by law, audit committees are also required to: − meet at least four times per (accounting) year, − operate in accordance with rules approved by the supervisory board or shareholders in a general meeting, which should cover retention of members and scope of liability, amongst other things. − draft a report dealing with their risk assessment of the areas and processes being supervised, the actions undertaken and their results. according to the presented survey results, we know that nearly 90% of the polish audit committees have indirect and non-limited access to the financial and business information or contact with top management. close to 70% of audit committees can commission independent advisors or experts to prepare business analysis, and 40% of them have issued an opinion about management activity and internal audit practice. the last point is important, because it means that 60% of audit committees have no entitlements for cooperation with internal auditors. it is not agreeable with international standards of professional internal auditors practice recommended by the institute of internal auditors (iia). independent internal audit, in close cooperation with the audit committee has to be the main tool of audit committee statutory activity. if not, it means that efficiency of audit work carried out by the audit committee can decrease as well as audit benefits for the company and its shareholders. 60 p. szczepankowski. audit committee practice in the polish listed stock companies… the average number of audit committee meetings amount to 4.5 per year, which corresponds to the quarterly financial reporting cycle of public stock companies in poland. unfortunately, 25% of audit committees met less than once per quarter and 12% of them – only ones per year, what is not agreeable with the earlier presented knf recommendations. we can also observe strong positive correlation between the age of audit committees and frequency of meetings. those audit committees that existed longer than five years meet more than six times per year, and committees that existed one year meet only three times per year. it probably depends on audit needs and committee experience. a young audit committee still tries to define its activity area. it is certain that the number of committee meetings increases during their existence period. meetings of polish audit committees last for at least 2.5 hours. more time is needed to audit committee members for analysis of received materials. they need nearly four hours to familiarise themselves with documents. 60% of audit committee members think this amount of time is sufficient. dissatisfied members would like to have more time for documents analysis rather than for direct meetings. good comparison in this subject is looking at experience of audit committees of stock companies quoted on the london stock exchange (lse). members of the lse audit committees need nearly 30 days for meetings (5–6 hours for one meeting). it is twice more than in poland. a valuation of the audit committee activity is an important factor for its efficiency improvement and has to be prepared in the appropriate way. the majority (56%) of audit committees are valuated or controlled, mainly by their supervisory board (33%). 23% of audit committees use self-control. unfortunately, as many as 28% of committees have not introduced any control standards, but plan to do so. however, 16% of audit committees do not plan to implement any control procedure. in the polish practice, the monitoring role of an audit committee has to cover four key areas: − financial reporting and accounting analysis – for this area of activity, audit committees spend nearly 30% of their meeting time; − the efficiency analysis of internal control, internal audit and risk management systems – audit committees spend 20% of meeting time for this key area; − the performance of financial reviews takes 15% of meeting time; − the external auditors and other bodies authorised to audit financial statements – less than 10% of meeting time. the audit committee invites the management board or other persons to participate in its meetings. most often (90% of cases), a committee meets with the chief financial officer (cfo), the certified external auditor and the head of internal audit in order to discuss any matters deemed confidential by the parties. 61 business, management and education, 2012, 10(1): 50–65 4.3. barriers reducing and perspectives of the audit committee development in poland more than 60% of responding audit committee members strongly believe that most important factor that limits audit committee activity is the lack of time supervisory boards give for taking into account additional work in the committees. nearly 40% of audit committee members also pointed out other reasons of slow audit practice improvement, such as: lack of financial, accounting or audit experts on supervisory boards and audit committees, independency of committee members, deficit of precision law or other regulations and lack of proper cooperation with the management board. according to opinion of the audit committee members, we can isolate several proposals for improving efficiency of committee activity. they are presented in the table 2. table 2. activities improving efficiency of audit committees (source: own study based on: the first national study of public company audit committees, 2010: 28) activities percentage of opinion selection of members that have right qualifications and competencies to supervisory boards and audit 82.0 platform for experience exchange between audit committees 61.0 promotion of audit committee independence 58.0 professional trainings program 55.0 improvement of audit committee work organisation 13.0 note: the respondents could mark more than one choice. in order to improve the situation and ensure development, surveyed members of audit committees underlined the importance of electing right committee members. it must be members with appropriate knowledge and experience. members of committees have to have sufficient time for their profession or mission. a special digital platform for exchange of information and experience between the committees and their members is an important factor as well. 5. conclusions the decision of the polish government to introduce a legal requirement for the country’s public companies to establish audit committees promises to be a crucial step forward in terms of improving corporate finances. the decision will have a major impact since, before it was made, more than half of the companies affected were operating without an audit committee. the change is timely since the uncertain situation in the global economy obliges public and private enterprises alike to take a more responsible and prudent approach to 62 p. szczepankowski. audit committee practice in the polish listed stock companies… the management of their finances. introducing audit committees to large private sector companies, and encouraging them to work closely with their external auditors, will help in this process. the main objective of the audit committee existing in polish contemporary economy is to enhance the transparency of listed companies, improve communication between companies and investors, and improve the protection of shareholders’ rights. as a result, the audit committee practice concern only those matters where their application may contribute to a rise in the market value of companies and, consequently, reduce the cost of raising capital. if audit committees are to have a positive impact in terms of enhancing the integrity of companies’ financial reporting processes, they will need to retain their independence from the executive board and management. at the same time, the executive and management will need to understand and respect the audit committee’s independence and functions. audit committees can make a positive contribution to improving corporate governance but they cannot succeed in isolation. committees and auditors should work constructively with each other while respecting each other’s independence. on a wider level all the key players involved in the process of governance, including the cfo and the company’s shareholders, should accept their responsibilities to make the process work in the interests of the company as a whole. in the light of the financial crisis, auditors must do more to demonstrate the value their services bring to business and ensure they always maintain and demonstrate their independence. in january 2011, acca and the polish institute of directors are behind the publication of a new guide for listed companies that gives advice on setting up an audit committee. the guide comprises two distinct sections: − the first sets out how an audit committee should operate, featuring a 10-point list of best practice steps to creating a committee, and identifying the key principles that will ensure that it operates effectively. − the second focuses on the typical tasks assigned to the audit committee, with references to the need for effective processes of risk management and internal control, and necessary cooperation between 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dokumentus. reikšminiai žodžiai: audito komitetas, įmonių valdymas, listinguojamosios įmonės, lenkijos akcijų birža, stebėtojų taryba, lenkijos ekonomika. piotr szczepankowski is an associate professor at the university of finance and management in warsaw. his research is focused on financial management and value based management. http://www.aercafrica.org/documents/rp149.pdf http://dx.doi.org/10.1108/02686909410071151 http://dx.doi.org/10.1111/1468-5957.00444 http://dx.doi.org/10.1016/0304-405x(95)00844-5 http://dx.doi.org/10.1177/014920638901500208 analysis of asset classes through the business cycle audrius dzikevičius1, jaroslav vetrov 2 using the idea of market-expected return rates on invested capital in the verification of conformity of market evaluation of stock-listed companies with their intrinsic value paweł mielcarz1, emilia roman2 personnel audit process wojciech pająk the position of slovakia in competitiveness ranking – the causes, impacts and prospects lucia stredná1, mária zúbková 2 audit committee practice in the polish listed stock companies. present situation and development perspectives piotr szczepankowski bank value: comparing customer and employee perceptions jelena titko1, natalja lace2 managing it workers katarzyna łubieńska1, jacek woźniak2 transforming leadership styles and knowledge sharing in a multicultural context rasa paulienė market behaviour: case studies of nasdaq omx baltic jelena stankevičienė1, natalija gembickaja2 spreadsheet error detection: an empirical examination in the context of greece dimitrios maditinos1, dimitrios chatzoudes2, charalampos tsairidis3 analysis of internal audit functioning in poland – empirical research findings edita bielińska-dusza department of strategic analysis, cracow university of economics, ul. rakowicka 16, 31-510 kraków, poland e-mail: edytadusza@gmail.com received 18 november 2010; accepted 15 january 2011 abstract. the purpose of the article was to present the research conducted in companies, concerning the functioning of internal audit in poland. during the research, the author identified a number of barriers reducing the efficiency of the cells of internal audit and audit as an instrument for company improvement. one also indicated areas which, from the point of view of internal audit efficiency as well as of the company functioning, should be improved. keywords: audit, system of internal audit, improvement, company, instrument. reference to this paper should be made as follows: bielińska-dusza, e. 2011. analysis of internal audit functioning in poland – empirical research findings, business, management and education 9(2): 236–247. http://dx.doi.org/10.3846/ bme.2011.16 jel classification: h83, m42. 1. introduction proper business management, as shown by the most recent economic events, is presently becoming one of the most significant factors not only of its competitive advantage, but even of its existence. undoubtedly, an important role may be played by internal audit. however, only its existence does not guarantee the company’s success. therefore, the author decided to carry out an empirical research, aimed at identification of the actual condition for internal audit application in a company, the principles of its functioning, indication of barriers making it difficult to use it, specification of the scope of implemented internal audit tasks, and the possibility to use it as a tool for the company improvement. the purpose of the article is to present and analyze the results of empirical research concerning the functioning of internal audit in polish companies. additionally, we will try indicating the areas of audit functioning which require improvement. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(2): 236–247 http://dx.doi.org/10.3846/bme.2011.16 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 237 business, management and education, 2011, 9(2): 236–247 2. internal audit as evaluated by empirical research the purpose of the research, as mentioned above, was to identify the functioning of internal audit in companies1. due to the differences resulting from the principles of functioning and conducting internal audit in private and public companies, one decided to conduct the research in these two sectors separately2. the entire research was conducted in the period from october 2008 to may 2009. the survey covered 137 enterprises in total (57 institutions operating in the public sector, and 80 from the private sector). the survey was sent to people who know the principles of audit functioning in the company. these were mainly managers of internal audit cells, auditors working in cells, directors, company managers, presidents or members of the management board, supervisory board3. in the research, one applied research methods, such as: survey questionnaire, personal interviewing (direct), telephone interviewing (cati, papi), document analysis technique, analysis of reference books, with particular focus on comparative analysis, diagnosis, synthesis and deduction. statistical methods, including non-parametric measures of stochastic dependence – measures of quality features association (i.e. v cramér coefficient, φ yule coefficient), pearson’s independence test χ 2. in the case of quantitative variables – measures of location, variability and asymmetry (bielińska-dusza 2009)4. 1 companies in poland, from the point of view of the ownership form, are divided into two sectors: public and private. public sector includes: the state treasury companies, companies of state legal persons, companies of local government units (municipal). on the other hand, the private sector includes: companies of national natural persons, companies of other national private entities, companies of foreign entities. 2 in the public sector the obligation of internal audit implementation is regulated by acts and regulations such as, among others: the act of 27 july 2001 on the amendment of the act on public finance, of the act on organization and operating mode of the council of ministers and the scope of operation of ministers, of the act on activities of government administration and of the act on civil service, journal of laws 102(1116): 7483–7493; the act of 30 june 2005 on public finance, journal of laws 249(2104): 27–34, with later amendments; announcement no. 1 of the minister of finance of 30 january 2003 on announcing “standards of financial control in public finance sector entities”, official journal of the minister of finance 3(13): 1–8; announcement no. 11 of the minister of finance of 26 june 2006 on standards of internal audit in public finance sector entities, official journal of the minister of finance 7(56): 1–13. announcement 16/2006 of the minister of finance of 18 july 2006 on announcing “the code of ethics of the internal auditor in public finance sector entities” and “the card of internal audit in public finance sector entities”, official journal of the minister of finance 9(70): 1–6. regulation of the minister of finance of 10 april 2008 on the detailed method and mode of internal audit performance, journal of laws 66(406): 3698–3705; regulation of the minister of finance of 24 june 2006 on the detailed method and procedure for internal audit performance, journal of laws 112(765): 5747–5754; regulation of the minister of finance of 24 june 2006 on the mode of preparation and the template of the report on internal audit plan execution, journal of laws 112(764): 5742–5746. announcement 6/kf/2004 of the minister of finance of 28 april 2004 on announcing “the code of ethics of the internal auditor in public finance sector entities” and “the card of internal audit in public finance sector entities”, official journal of the minister of finance 5(28): 1–12. regulation of the minister of finance of 4 april 2008 on the mode of preparation and the template of the report on audit plan execution for the previous year, journal of laws 61(378): 3359–3362. 3all questions set forth in the questionnaire were brought down to several key problematic areas. the scope of these questions included issues related to the functional, subject, instrumental and structural aspects of internal audit. 4 if you are interested in the details related to the whole process of research, see: bielińska-dusza 2009: 214 and further. 238 e. bielińska-dusza. analysis of internal audit functioning in poland – empirical research findings the obtained test results clearly indicate that the functioning of internal audit in the examined companies requires introduction of changes, which will make internal audit an effective instrument of the company improvement, used to a various extent and in various directions, and will contribute to further strengthening of internal audit’s role in a company (lisiński 2011; aniunas et al. 2009)5. the tradition of audit in the polish reality is relatively young. despite clear irregularities in its functioning, managers see the importance of this concept’s implementation for a company, as well as its suitability. unfortunately, in the opinion of managers, this suitability is only average6. the respondents also believe that internal audit affects to a large extent the company’s improvement, effectiveness of implemented solutions and economy for the company. however, with the great need for internal audit implementation, its effectiveness was assessed only as average. it gives grounds for stating that one should consider introduction of changes with regard to the principles of internal audit functioning. on the other hand, the impact of the effectiveness of solutions implemented during implementation of the audit task on elimination of the identified irregularities in the examined companies is moderate. what is interesting, the largest number of the examined people stated that that the large extent of irregularities elimination contributes only moderately to the growth of audit effectiveness. on the other hand, it is important that both managers and auditors evaluate effectiveness at the same level. respondents who were asked to compare the suitability of external and internal audit clearly prefer internal audit. it allows us to make a hypothesis that the effectiveness of internal audit increases when it has the form of internal rather than external audit. it results, among others, from low evaluation of the effectiveness of recommendations implemented in the case of external audit. however, the need for further performance of internal and external audit and evaluation of its suitability to the same extent is evaluated both by managers and auditors. an important thing is also the fact that the greater the need for further performance of external audit, the greater its suitability. what is interesting, the need for audit implementation is greater among company management than employees. it seems that the lack of very high or full understanding of the need and suitability of audit results, among other problematic issues, in the lack of full commitment of both the managers and employees to the implementation of recommendations. when determining the commitment of employees, more than ¾ of respondents pointed out to average and high commitment. with regard to managerial staff, such answers were given by more than a half of respondents. 5 more information concerning the concept of audit as an audit system used for improvement of institutions in lisiński, m. (ed.). 2011, pwe, warsaw. 6 the scale included the following values: full, very high, high, medium, low. 239 business, management and education, 2011, 9(2): 236–247 in addition, the commitment of managers in the examined companies does not affect the level of commitment among employees. however, the respondents see the relation between the high level of commitment of managers and employees and the effectiveness of the implemented recommendations. since this relationship is positive, this means that the higher the commitment of managers, the higher the commitment of employees and the effectiveness of audit. this conclusion raises a qualitative new aspect in relations between the managerial staff and the remaining groups of employees, which should be used in the process of internal audit improvement. another group of questions determined another problematic area. it applied to the barriers hindering efficient application of audit. the basis seems to be the respect for principles, which determine the purpose of internal audit in the convention of its description as we have adopted, namely from the point of view of seeing it as an institution improvement instrument. such research consideration imposes, in a way, the need to take into account, in the course of practical research, the rules falling within the essence of internal audit. from the conducted research it seems that the degree of compliance with the principles resulting from the nature of internal audit is varied and is primarily determined by the auditor, his or her competences, as well as situational conditions of the problem being solved and the institution itself. in addition, audit implementation should take place according to a specific procedure. in the examined companies, the auditors apply the procedure only to an average extent. on the other hand, from the analysis of answers it seems that the irregularities apply not only to the sequence of the research procedure’s phases, namely the lack of consistency of partial audit tasks being implemented in their course, but also from marginalization of the stages of this process, crucial for the final effect (this applies to the selection and definition of evaluation criteria, development of the principles for measurement and evaluation, as well as evaluation patterns). in addition, the conduct of auditors is closer to the pattern existent in institutions of the public rather than private sector. even the obvious need to become familiar with the results of the previous report before a new audit is not fulfilled either. only 64% of respondents declare that, before audit, they become familiar with these findings to a full and very large extent. another methodological factor identified in the course of empirical research was the application of auxiliary methods and techniques suitable for a given activity and its given circumstances. the research showed that a set of tools applied by auditors is poor and, unfortunately, not adjusted to the whole audit process. the instruments most commonly applied by auditors in the course of audit include: an interview, a plan of audit, a notice of audit, an analysis of source materials, a direct observation, a check list, a documentation analysis, interviewing, an analysis of control protocols, a verification and a questionnaire. another barrier for internal audit implementation is organizational factors. they comprise, first of all, of structural solutions, which should facilitate undertaking and 240 e. bielińska-dusza. analysis of internal audit functioning in poland – empirical research findings performance of internal audit. from the conducted research it seems that the set of identified structural solutions to internal audit is modest. the dominant ones are internal audit cells, as solutions functioning within the existing organizational structure, or advisory institutions, as specialized external entities. the respondents do not even indicate other, more flexible organizational forms (e.g. project teams or sector project teams), which is confirmed by their dim orientation in this area of organizational factors ensuring implementation of internal audit tasks. additionally, within this set of barriers, in the course of research, we identified a low level of cooperation between auditors and other employees of the company. also, in the case of cooperation between internal and external auditors and internal control, there is still much to do. in most companies, there is no employee dealing with contacts with the auditor on a current basis. cooperation between an internal audit cell and the audited units consist mainly in exchange of information. in addition, coordination of works between an internal and external auditor was also evaluated as low, which proves poor cooperation between them and indicates reduction in internal audit effectiveness. identification of only cooperation without investing, for instance, in it equipment, specialized software, training of employees, developing appropriate organizational culture, may also prove poorly effective. in addition, we notice that in both sectors, there are huge shortages of auditors in internal audit cells. in the private sector, this value amounts to 3 posts, while in the public sector it is only 1.45 post. additionally, one should pay attention to highly diverse number of the auditors employed in the examined companies. most companies have 0.66 posts for an auditor. during the research, one tried to identify the area concerning qualifications of auditors. the respondents, beyond any doubt, indicated that the scope of knowledge needed on an auditor’s position is very broad and includes a number of domains, among others: organization and management, finance, law, accounting, human resources, eu funds, it and statistic. however, we noticed that the degree of increasing knowledge by auditors is not satisfactory. 66% of respondents pointed out to a large and average degree, and more than 13% – low. research analysis shows that increasing qualifications result in increased effectiveness of implemented solutions. this dependence seems to be obvious but, according to the respondents, it is not high. however, when conducting further analysis of the results, one can notice that if the auditors already increase their qualifications, the main areas of improvement are the ones associated with improvement of human resource management functions, improvement of accounting-financial processes or improvement of the existing mechanisms of control. another area identified by a group of questions to managers and auditors applies to implementation of internal audit tasks, also in the context of fulfilling the objectives of an institution. the obtained results allow formulating a conclusion that internal audit is an effective instrument of the institutional improvement when contributes to implementation of the institution’s objectives, is an element of the planning system, and by eliminating the irregularities it improves the entity’s efficiency. such conclusion results from the statistical analysis of answers given by respondents to specific questions. 241 business, management and education, 2011, 9(2): 236–247 to the question about the degree of connection between internal audit and the function of planning in a company, more than half of the respondents answered that it was medium and high. only 13% of respondents answered that it was very high and full. on the other hand, when answering the question of whether audit contributes to implementation of the company objectives, only 1/3 of the respondents said it contributed to a full and very large extent, while 3/4 – to a medium and large extent. in addition, improvement of strategic planning was mentioned by only 2% of respondents. it is one of the least frequently audited areas in a company, despite the fact that this is the most important problem from the point of view of an organization’s development. the study also confirmed that taking audit into consideration during planning affects the effectiveness of implemented solutions. unfortunately, in the case of the examined companies, taking internal audit into consideration at the stage of planning is insufficient, and audit contributes to implementation of the company’s objectives to a medium extent. the question about the degree of elimination of irregularities identified in the course of the auditing process leads to surprising answers. only slightly more than 12% of respondents state that audit is a fully effective tool of elimination of the organization’s dysfunctions. still worse is the analysis of answers concerning the impact of internal audit on the organization improvement. only in the opinion of nearly 6% of respondents, can this impact be identified as direct and full, which means that for as many as than 93% of respondents internal audit is not an effective instrument of the institution improvement. the summary of the results of answers to questions concerning this problematic area of internal audit may be related to the number of implemented recommendations. it is the actual measure of internal audit effectiveness. the analysis of answers given by the respondents indicates an unsatisfactory condition of this criterion of internal audit evaluation. this is alarming, because the very demanding procedure of a recommendation acceptance for the purpose of its implementation (including the need for a positive decision of several decision-makers) should assure the effectiveness of this process. meanwhile, the research shows that only 77% of recommendations are implemented in public institutions, and 88% in private institutions. the analysis of this phenomenon over the period of the last three years allows noticing that in public sector institutions, this ratio was more than 60%, and in private sector entities – approximately 90%. however, these results have different meaning when one takes into consideration the number of the suggested recommendations. the quantity of formulated recommendations is greater in public sector institutions than in the entities of the private sector. another barrier influencing the effectiveness of audit is a number of difficulties concerning both audit planning process and the process of its implementation. the most commonly mentioned difficulty in the audit planning process was the lack of time. on the second place the respondents indicated difficulties resulting from information disturbances. organizational impediments are the next group of limitations. the fourth limitation was associated with too small number of auditors. on the other hand, the difficulties in the process of audit implementation included lack of time, resistance of 242 e. bielińska-dusza. analysis of internal audit functioning in poland – empirical research findings employees towards changes, as well as organizational difficulties, information disturbances and work overload among auditors. when preparing questions and in the course of their future analysis, one took into account the assumption that implementation of the advisory function of internal audit affects its effectiveness to a greater extent than implementation of the control function, which was confirmed in the implemented research. for verification one took into account the following parameters: the degree of connection between internal audit and planning in a company, the scope of internal audit and level of employee commitment in the implementation of recommendations, the level of managers’ commitment in the implementation of recommendations, implementation of the assumed objectives of the company and suitability of internal audit. the degree of connection between internal audit and planning in a company is higher in the case of the advisory function of audit. also, the advisory function of audit to a greater extent affects the effectiveness of internal audit. from the point of view of the scope of audit, both the control and the advisory function to a similar extent affect the effectiveness of internal audit. however, in the event of the advisory function, these are, to a greater extent, actions including basic rather than additional activity. also, the degree of commitment among employees and managers, the degree of implementation of the objectives assumed by the company, as well as suitability of internal audit is higher in the event when internal audit has the advisory function rather than the control function. it was also noticed that in the case of the advisory function managers are more involved in the implementation of recommendations than employees. it seems that this is associated, i.e. with the pejorative meaning of control. in addition, from the conducted research it also seems that in the private sector the main function of audit is nothing else but control and assessment. the advisory function was barely on the fourth place, as opposed to the public sector, where the advisory function was the most important one, though the assessment and signalling functions were selected as the next ones. at the very end the respondents indicated the inspiring and instruction-providing functions, which show that the perception of audit is not clearly related to designing new solutions. one should also emphasize the importance of external factors conditioning the efficient functioning of internal audit. one emphasizes that every entity is only relatively separated from the environment without which it cannot exist or develop. the environment shapes the conditions of the company’s functioning, but also verifies the results of its operations. internal audit takes from the environment not only the resources which are the condition for its functioning, but also one should pay attention to the need for respect for the environment’s requirements. within the environment of internal audit one distinguishes closer and further environment. a characteristic feature of the phenomena in the environment is their variability over time and space. therefore, internal audit should contribute to immediate identification of any emerging opportunities and hazards, as well as promptly use or eliminate them. 243 business, management and education, 2011, 9(2): 236–247 the spheres of further environment, by unidirectional influence on an internal audit cell, determine the conditions for its functioning. they result in e.g. faster diffusion of technical and organizational innovations, free flow of people, capital, products. they are the factors defining the tasks of internal audit system. an important component of further environment is social environment. it evaluates the functioning of audit, e.g. from the point of view of the ethics of running business operations, compliance with standards and rules of functioning established by its legislation bodies. at this point, one cannot help but notice the special role of legal environment. on the other hand, closer environment of internal audit is formed by bilateral relations between it and its stakeholders. they imply, e.g. the thematic scope of audit tasks, selection of an entity performing external audit, relations of entities with an organizational unit of the internal audit system. however, at the same time, the system of internal audit, performing its functions, affects the improvement in the institution’s competitiveness, builds its image in the environment, co-creates the market position. by shortly discussing the findings of empirical research into internal audit in terms of its assessment as a concept of management, we may notice a number of interesting and inspiring conclusions. we described the most important ones when discussing the results of surveys. we will notice here that they only confirm the not perfect condition of internal audit, identified in an overall and sometimes intuitive manner, both in the institutions of public and private sector. a number of observed inefficiencies affects its present image. on the other hand, however, the information obtained in the course of empirical research clearly indicates the need for firm changes in internal audit. the most important changes are presented in further parts of the article. 3. requirements for effective use of internal audit system as noticed before, as a result dynamic changes in the environment, companies try to create such a system of management that would provide them with sustainable competitive advantage. an important function of the internal audit system is the control function. over the years, managers were trying to find such form of control that would provide them with almost total protection against various kinds of pathology and irregularities. however, experiences in this respect clearly indicate that there is no ideal system that could protect an organization against dysfunctions. it also seems that there is no solution that would, by itself, ensure efficient functioning of the company. on the other hand, expectation of such a miraculous power would point out more to misunderstanding of the very essence of control rather than to the inefficiency of its creators. when characterizing the origin of internal audit, one noticed that, over the years, audit was constantly transforming (bielińska-dusza 2009; kuc 2008; sawyer et al. 2003; soltani 2007; winiarska 2008; moeller 2005; savčuk 2007; kiziukiewicz 2007; grundey 2008; jurkstiene et al. 2008; standards… 2001). 244 e. bielińska-dusza. analysis of internal audit functioning in poland – empirical research findings its objectives, functions, tasks were evolving and, first of all, the view on its essence was changing. one can clearly see this on the example of characteristics of the conceptual scope of internal audit. since the moment of establishing the definition of internal audit suggested by iia in 1947, in which one tried to draw attention to the fact that it should include not only financial-accounting but also operational activities, many concepts of audit’s functioning have appeared so far. the conducted empirical research, along with assessment of the present condition of internal audit in poland, create the basis for ordering and presentation of the most important indications conditioning effective use of this concept of management7. the first directive should apply to reference to the essence of internal audit and understanding it from the point of view of the present requirements and expectations. this will enable determination of internal audit tasks implemented under two functions: control and advisory ones, including all areas of the company, however, taking account of the risk and importance for the company. another guideline should be looking at internal audit through the concepts of system-based and situation-based approach. internal audit should use the existing achievements in this field, so as to effectively face the challenges of both theory and practice. such perspective gives a completely different dimension of knowledge, enabling comprehensive, static-dynamic perception of the organization management process. thanks to that, it is possible to understand the functioning of the entire system, and not only to get to know it through presentation of separated parts without comprehensive vision of their internal and external interactions. it seems that change in the way of perceiving internal audit and using it as an element of the system may be a difficult task. it requires us to notice that it has the possibility of not only affecting the remaining elements of this system, but is also continuously interacting with them. the result of this would be, as it seems, the possibility of understanding the actual dynamics of the company, taking into consideration both the external environment, internal environment, the organization’s environment and multi-directional interactions among these variables. it would enable a holistic analysis of the strategic operation of the company and its development, without the concern for losing the entire vision. therefore, internal audit should be taken into account at the stage of not only verification of the degree of the strategy execution, but also of its preparation and implementation. it is important both for theoreticians and practitioners dealing with internal audit in the polish reality to take account of the existence of specific situational conditions. this is important, i.e. because internal audit did not develop under our conditions. for this reason, one should not indiscriminately copy external patterns, but skilfully adjust them to the situation in the country. both the system-based and situation-based approach shall determine also adjustment of relevant tasks, activities, tools, structural solutions and the possessed resources to 7 more information in bielińska-dusza (2009). 245 business, management and education, 2011, 9(2): 236–247 carry out the whole process of internal audit. this means that, when performing audit, one has to realize the complexity of every situation, as well as actively aim at choosing such a solution that, in each case, will function in the best possible way. since internal audit is a concept characterized by modularity and iterativity, it is important for the whole process of auditing to proceed according to a specific methodology. it is important for it to be possible to apply under particular conditions, adequate to the needs and to lead to achieving the goal. another extremely important element of the internal audit methodology is the selection of proper methods and techniques. this is a difficult and highly responsible task. the purpose of auditors will be to select them in such a way, so that in a particular case, they contributed to achieving the assumed objectives in the best possible way. however, one should emphasize that both the purpose, subject and scope of a particular audit task will show specific tendencies concerning the selection of methods and techniques. the effectiveness of applying the internal audit system is also influenced by the use of proper structural solutions. traditional forms suggest creating an internal audit cell subordinate directly to the company director or establishing an audit committee. however, taking into account a wide thematic range of internal audit, we offer display and application of organizational forms consisting in using temporarily formed project teams, using the potential, knowledge and experience of the company’s employees. in the case of external audit implementation, it would be beneficial to create specialized teams associated with particular industries, dealing with specific research issues. another important recommendation determining the effectiveness of internal audit is support and active commitment of management in the implementation of the whole process and co-participation of all employees in implementing the improvements. one should also emphasize the importance of the role played by managers throughout the entire improvement process. possession and maintenance of high competences by auditors is a significant premise for effectiveness of the whole audit process implementation8. the level of auditors’ qualifications will guarantee not only proper selection of tasks, activities, but also detailed methods and techniques in the process of the internal audit execution. this will also allow understanding the principles of the company functioning, application of knowledge in the field of management sciences, practical and theoretical knowledge about audit, as well as will contribute to ensuring the personal credibility of an auditor in a company. 4. conclusions turbulence of the environment puts new challenges both for the theoreticians as well as practitioners who should be focused on creation and use of the company’s potential. adaptation of a company to the changing conditions, and consequently, its improvement, is becoming an inseparable action and condition for the organization’s existence. 8 on the topic of competence of quality management systems auditors: kaziliūnas (2008). 246 e. bielińska-dusza. analysis of internal audit functioning in poland – empirical research findings in addition, the turbulence of the environment generates different problems and hazards. in a way, a response to the demand for this protection of an organization against the existing and potential problems was the emergence of internal audit. since the moment it was formed until now it has come through a long evolution. in poland audit introduction was a consequence of introducing an act, which imposed the obligation to implement audit. it has been functioning for more than 10 years and, as research shows, requires improvements. we notice that examined enterpriss make use of audit to introduce improvements, however this use is not satisfactory. all of the above recommendations should be subject to a supreme rule, so that internal audit became an efficient 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rezultatai e. bielińska-dusza santrauka straipsnio tikslas – pristatyti lenkijos vidaus audito įmonių tyrimų rezultatus. tyrimo metu buvo nustatytos pagrindinės vidaus audito kliūtys ir numatytos priemonės didinti vidaus audito įmonių bei vidaus audito skyrių veiklos efektyvumą. taip pat buvo nustatytos tobulintinos įmonių valdymo sritys, atsižvelgiant į vidaus audito rezultatus ir įmonių tikslus. reikšminiai žodžiai: auditas, vidaus audito sistema, vidaus audito tobulinimo priemonės. edita bielińska-dusza. phd, is an assistant in the department of strategic analysis, cracow university of economics, since 2001. subject of thesis is “internal audit system in managing enterprise”. the author of scientific publications focusing on issues of management, internal audit, international business and human resources. participated in conferences on issues of internal audit and international management. research interests: strategic management, internal audit of organizations, business management and improvement methods, human resource management. http://dx.doi.org/10.1080/16111699.2007.9636180 managing it workers katarzyna łubieńska1, jacek woźniak2 university for finance and management, pawia 55, 01-030 warsaw, poland e-mails: 1k.lubienska@aster.pl (corresponding author); 2jkwozniak@tlen.pl received 07 october 2011; accepted 25 february 2012 abstract. the text analyses the issue of motivation in software engineers. it bases on the experiences of one of the authors, and on preliminary results of qualitative and quantitative research gathered from 300 software engineers working in the it financial service sector in poland. it reviews main approaches to software specialist motivation found in the scientific and practical literature. it critiques some approaches to motivation of software specialists for the long-term consequences of using the motivators that they focus on. it shows that research based on p. glen’s model (2003a) analyses only hygienic factors (as described by herzberg) that can hinder the state of flow (csikszentmihalyi 1975), which is characteristic of internally motivated software specialists. there are no analyses which would show how to secure long-term hygienic factors in the management of it specialist motivation. recommendations on long-term hygienic factors form a significant part of the text. keywords: motivation, it worker, software specialist/engineer, geek, software development, knowledge work, management of it team. reference to this paper should be made as follows: lubieńska, k.; woźniak, j. 2012. managing it workers, business, management and education 10(1): 77–90. http://dx.doi.org/10.3846/bme.2012.07 jel classification: l63, l86, m12, m15, m54. 1. introduction over the past 50 years, it technologies have permeated every sphere of our lives. despite the fact that computer hardware is becoming cheaper by the year, outlays for the development of it systems and technology are constantly on the increase. a persistent problem, however, is the effectiveness with which resources are used. only ⅓ of it projects are successfully concluded, and this rate has hardly changed since 1999, when only every fifth project terminated successfully. even worse, over ¼ of the resources assigned for the development of information systems each year is irretrievably lost (ongoing projects are abandoned) and does not bring investors any profit; this state has remained almost without change over the years (dominguez 2009). the causes for this are sought in the work of it specialists rather than in the quality of computer technologies. motivation is also frequently considered to be the single most b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2012, 10(1): 77–90 doi:10.3846/bme.2012.07 copyright © 2012 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 78 k. łubieńska, j. woźniak. managing it workers important factor affecting it specialists’ productivity (beecham et al. 2008: 861). the goal of this work is to briefly present the authors’ perspective on efficient ways of managing teams of software specialists. we focus on motivating, as it is in this area that we consider that both theoreticians and practitioners have a mistaken perspective on where the core of the problem may lie; in fact their perspective may even be harmful to the work of software specialists. our analyses are grounded empirically in over twenty years of experience in management of software specialist teams on the part of one of the authors; and on preliminary results of research conducted since the end of 2010 into the motivation of software specialists working in the sector of financial services. the article is organised as follows. a brief introduction describes the specifics of the profession of an it specialist, providing a specific example of a knowledge worker. next, two main trends in research on it specialist motivation described in several recent reviews of this area of management (beecham et al. 2008; sharp et al. 2009) are presented. we then differentiate between two different approaches to motivating software specialists, which are the effect of two kinds of practical analyses. the first kind are analyses of it specialists as a specific group of workers that differ from other employees (glen 2003a, 2003b; pfleging, zetlin 2006); the second – research on motivation in open source type program development (roberts et al. 2006). the fourth section presents a critique of these approaches, and shows their limitations and possible consequences. the final section presents our model, which attempts to combine the strong points of the approaches described, avoiding at the same time their weaknesses. 2. the it specialist as a knowledge worker professionalisation – the development of professional cultures along the lines of the traditional free professions – is a trend frequently described in the literature (e.g. jemielniak, koźmiński 2008; postuła 2010; sikorski 1997; woźniak 2010a, 2010b). usually, emphasis is placed on three areas of differences between traditional employees, and knowledge workers whose jobs are evolving towards professionalisation: 1. specific character of tasks. defining and resolving a client’s problems involves tasks rich in information processing, with non-standard criteria used to make decisions (drucker 1999; davenport 2007; lillrank 2003). some authors additionally draw attention to the role of information processing and communication, or emphasise the role of information-processing tools necessary for tasks defined in this way (nogalski, surowski 2008). the use of theoretical knowledge and many years of experience as a basis for solving the client’s problems are always stressed (postuła 2010; woźniak 2010a). 2. specific character of relationships between employers and knowledge workers. the latter do not link their future with the company as do traditional workers (postuła 2010), and are even referred to as “freelance hirelings” (koźmiński 2005). they are focused on their own career, its development and their place in the professional community, rather than on success within their employing company. 79 business, management and education, 2012, 10(1): 77–90 3. specific attitude towards their work, to which they apply aesthetic criteria and which is proof of their individual value. they realise their ambitions at work through the development of excellent products, and this excellence obscures other functions of the product. as an effect of this attitude, they treat tasks as exciting challenges (czarnkowska 2010; jemielniak 2008a; peters 2002; woźniak 2010b). professionalists constantly perfect their professional knowledge and skills, as this is the only way they can remain valued within their profession. their value in the eyes of colleagues and exacting clients is dependent on these skills and talents (postuła 2010; rogoziński 1999). software developers are often referred to as archetypal knowledge workers (czarnkowska 2010; davenport 2007; jemielniak 2008a; nordenflycht 2010; reich 1991; scarborough 1999). however, there is a significant differentiation in competencies within this group, which is rarely accounted for (jemielniak 2008a; postuła 2010). changes in this profession, brought about by computer companies becoming service-oriented and by offshoring of production and it services, cause some to question whether software specialists are still to be considered typical knowledge workers (marks, scholarios 2007), i.e., “white collar” workers with high prestige, high income and autonomy in their work (jemielniak 2008a). works based on research (beecham et al. 2008; sharp et al. 2009) as well as practical analyses of it specialist motivation (glen 2003a, 2003b) tend to approach most it assignments as if they were creative and non-standardisable, requiring considerable autonomy on the part of those involved. this suggests that analyses based on the concept of knowledge workers are still useful for research into this profession (enns et al. 2006). when speaking of it specialists or software engineers in this article, we refer to people who create and maintain the functionality of it systems and services. they usually have a university degree (in poland, usually in it sciences) (czarnkowska 2010; lw; postuła 2010), and usually work in teams in a project structure (which is variously placed in the hierarchic-functional structures of the organisation). they mainly communicate with other groups of employees via analysts and project managers (and sometimes managers from the hierarchic-functional structure) (lw; postuła 2010). an it specialist is required to solve complex problems – including problems of a technical nature – creatively, with the use of extremely diverse and rapidly evolving it tools (glen 2003a). developing or modifying the typical it solution requires the software specialist to cooperate with it specialists from different fields and different countries, and with other specialists who frequently represent very specialised (mainly technological) fields (lw). 3. two models of software specialist motivation frequently met within management literature is the thesis that software specialists are motivated above all internally, i.e., by the nature of the task itself (beecham et al. 2008; glen 2003a; göran, hanse 2011; sharp et al. 2009). maintaining high motivation levels requires a sense of autonomy while performing the job, which among others means that 80 k. łubieńska, j. woźniak. managing it workers the function of feedback from superiors is informational and not controlling (göran, hanse 2011). external rewards (such as remuneration or bonuses) may reinforce this kind of motivation only in the case of uninteresting tasks (gagne, deci 2005). the low effectiveness of using monetary rewards as motivators in the case of knowledge-based work is frequently emphasised. detailed research has shown that software specialists are strongly oriented towards end-product excellence, or in other words “a job well done”, with remuneration serving no more than a hygienic function (wallgren, hanse 2010). they are strongly affected by interactive motivation (alvesson 2004), which is related to social factors (group norms, reciprocity values and a sense of identity). their readiness to work long hours may be interpreted sociologically, as the result not only of a passion for the task, but also of the norms prevalent in their social environment (jemielniak 2008a; postuła 2010). specifically, software specialists are prone to succumb to organisational traditions defining how long work lasts (60 and not 80 hours a week or vice versa). internally motivated software specialists are ready to work very long hours for long stretches, taking only short breaks for pizza or a candy bar (or more often than not, they work and eat at the same time) (glen 2003a; lw). a second model very frequently used for analysing motivation in empirical research (beecham 2008: 869) is hackman and oldham’s job characteristic theory. according to this model, high job involvement, work satisfaction, internal motivation and positive behavioural effects are determined by three psychological states in the worker. these in turn can be affected by specific task structuralisation and working conditions that the job characteristic theory describes (woźniak 2010a). among five significant factors in this structure, three determine the feeling that work is meaningful (which in itself is one of these three key psychological states): diversity of skills necessary for performance, character of the task as a whole, and importance of the task. the remaining two factors – a sense of autonomy (determining the second psychological state, i.e., responsibility for work outcome) and ongoing feedback concerning task progression (determining the third psychological state, i.e., a sense of being up to date with results) – determine an appropriate context for work (woźniak 2010a). both these five factors describing work context and the three psychological states are easily operationalised. as a result, the theory forms a good point of departure for empirical analyses and possible conclusions for application. in practice, however, these factors are rarely applied for motivating software specialists in large projects (lw). access to ongoing results in it projects is frequently impossible due to their sheer size and to delays in the implementation of final solutions. sense of autonomy, comprehended as the freedom to think, is obvious in every kind of knowledge-based work. attempts to modify the behaviour of it specialists are therefore rarely undertaken. project managers have little influence over work context; on the one hand because of the specifics of the project, and on the other because of a strong software specialist subculture (jemielniak 2008a; postuła 2010). 81 business, management and education, 2012, 10(1): 77–90 naturally, the software specialist needs to feel that his/her work is meaningful. however, it is debatable whether meaningfulness can be achieved through structuralising tasks into mini-projects which make use of multiple skills, or through emphasizing the importance of these mini-projects. we may rather assume that most it problems and the work environment in it teams are of the kind described by job characteristic theory (lw), so conclusions are practically of no significance from a management point of view. in the case of normal it tasks they state: “do not interfere by bad management”. in the case of tasks which are boring for it specialists (i.e., do not depend on solving it problems but involve documentation or codifying project conclusions), they provide no insightful advice at all. 4. directives for software specialist motivation formulated by practitioners and analysts of it project practice p. glen’s (2003a, 2003b) term geek, a slang term for software specialists, has made a career because it refers especially aptly to this group’s sense of professional identity. irrespective of the work they do and their professional competence, software specialists have a sense of kinship with others who program computers, or more precisely – those who solve problems related to it systems (czarnkowska 2010; postuła 2010). the word geek also denotes a person who is totally engrossed in his/her field of interest, at the expense of other areas of life (social skills, personal looks, social status). software specialists were often outstanding students at school and at the same time outsiders, passionately absorbed by their hobby (glen 2003a), and now in their professional lives, they are easily absorbed by long hours of work into solving a specific kind of problems. software specialists link knowledge workers’ focus on developing their professional expertise, with a love of the technology with which they work. rapidly changing technologies force them to learn new tools and fundamentally restructure customary practices, and hence to be on the constant lookout for new trends. striving for successive diplomas, evidence that they have mastered numerous it instruments, has its sources in the need to constantly be abreast of new developments in it. another reason is their love for new gadgets, which alongside letting them remain among the initiated few, also allow them to construct the best of technologically possible solutions. software specialists’ loyalty to technology, as described by glen (2003b: 20) refers to their striving to deliver the best technical solutions that can create using the given technology, but also to a deep respect for the people who create such solutions. glen (2003a) postulates that managers should focus on the comfort of work of their it teams. he suggests that small teams should be isolated from anything that could disturb their long hours of work; such an arrangement also builds a sense of competitiveness vis a vis the team’s rivals. isolation at work is not the equivalent of isolation from the organisation’s goals: “one of the simple things that most of the motivational gurus get right is goal setting ... in geekwork, the best way to set a goal is to define a project to address it” (glen 2003a: 111). with the help of standard management solutions – communicating 82 k. łubieńska, j. woźniak. managing it workers significance, selection of persons interested in the project, balanced access to resources (not too many and not too few) and building competitiveness – a focus on the goals of the project is achieved, and at the same time a sense of meaningfulness of the assignment is created. once focused on it issues, the team will spontaneously apply itself to the job at hand for many hours without a break; if tasks are well allocated and an information flow is well structured, they will work towards a common goal. the manager’s job is to motivate his/her team in the most traditional (though not classic) way – show appreciation for long hours of commitment by bringing them pizzas and free drinks. acknowledging their work by satisfying physical needs so they do not need to interrupt it prolongs working hours and helps maximising the effort. glen’s works evoked a strong response among it managers, and showed the weakness of his proposal – software specialist isolation intensifies the “geek gap”, the term b. pfleging and m. zetlin (2006) gave to the difference in how geeks and a business understand each other. a second significant trend in research on the motivation of it specialists is the analysis of communities developing open source programs (roberts, hann, slaughter 2006). software specialists active in the open source field develop whole systems or small and targeted solutions, which they make available free of charge to other it workers in the internet community. these analyses differentiate between motives related to producing solutions for one’s own projects (a specific kind of internal motivation), and an internalised external motivation related to social status in the it community, as roberts, hann, slaughter (2006) term aspiring to a higher status in the informal community of it programmers. additional motivation is gambling on the chance of a remunerated career within the community, for which one worked as a volunteer. analyses of how these communities function have described not only relationships between internal and external motivation, but also the different effects of each of these categories for involvement in work (measured by scale of input into code development, and how the code evaluated). all the instruments of external motivation – such as being given higher status or remuneration for writing a code – are correlated with an increased desire to participate in the project, but are not related to any increase in internal motivation (roberts et al. 2006: 996), and even decrease interest in solving the specific, external problem (roberts et al. 2006: 995). rewards in the form of status in the community, considered to be very significant, strengthen bonds and increase involvement in future work. however, they do not focus involvement on any specific problems, nor do they modify the readiness to be interested in work itself. we can take this result to indicate that social recognition does not positively modify intensity of internal motivation or interest in solving a specific technical or algorithmic problem. appreciation within their community strengthens spontaneous activity, but does not give it a better direction. the authors of the study propose that feedback 83 business, management and education, 2012, 10(1): 77–90 accompanying appreciation should describe the elements of the significant input (roberts et al. 2006: 996). this meets management’s needs for giving specific direction to the motivation being reinforced. glen (2003a) indicates proven methods for motivating employees who spend a lot of their time at work, and describes the favourite toys of software specialists, which let them relax in their own company (table football, table tennis, etc.). open source programming researchers draw attention to the fact that project stability requires using the activity of people who improve programs to solve their own problems, however this activity needs to be focused on specific targets. the core of the open source team has to be focused on solving problems significant for developing a given program. in our opinion, the theoretical and practical motivational forces mentioned above do not address several issues specific to the management of software specialists: 1. software specialists have a strong internal motivation to perfect their solutions and once in the state of flow (csikszentmihalyi 1975) (long-term effort with breaks only for physiological purposes), do not require strong stimuli. 2. software specialists are most creative in the first years of their professional careers, and immature personalities have a significant input in this environment. 3. software specialists are very concerned about the success of their project and all factors which increase the chances of its success are motivating. the it manager’s task is not only to maintain a state of inner motivation with the use of appropriate hygienic factors and through focusing work on areas that are of fundamental importance for the success of the project. the manager also needs to handle involvement, to protect motivated it specialists against its negative consequences for themselves. this is the only way the manager can stabilise the operation of the team as a whole. 5. hygienic factors in the motivation of it specialists, or is essential changes to the it specialist motivation theory as open-source researchers emphasise, software specialists get involved in projects for many different reasons (roberts et al. 2006: 985). however, at the start of the job, one motivation dominates – that of solving a technical or algorithmic problem. the ease with which software specialists enter the state of flow has been frequently stressed (glen 2003a, 2003b). the sources of this, however, have been sought in many different areas, e.g., socialisation at school, emotional aversion to external contacts, or focus on problem-solving and the love of competitive games (especially those where you compete against yourself). for software specialists, the essence of their work lies in solving an it problem, while it is the role of people responsible for defining customer requirements to provide information about these needs in the terms of the framework and limitations of the project. software specialists get drawn into creating and 84 k. łubieńska, j. woźniak. managing it workers developing an it system not because solving the problem will be of use to the end user, but because it is a problem. as the old saying goes “mountains are there to be climbed”. the ongoing discussion on whether software specialists have stronger achievement needs than other groups of workers (beecham et al. 2008: 861) cites disparate research results), ignores a specific kind of achievement need peculiar to it specialists. solving the technical or algorithmic problem and achieving success in this area (beecham et al. 2008: 861) is a measure of the value of a person as a professional, both for him/ herself, as for his/her environment (glen 2003a). doing a job well means finding an aesthetically beautiful (“elegant”) solution to the problem, rather than meeting the end user’s needs at the lowest possible cost. the task’s meaningfulness has no relationship to its identity or importance, but to the ability to create excellent solutions, that meet parameters established in advance. if the project manager does not define the functionality to be achieved, and does not limit the freedom with which it can be redefined, the task will be modified to meet an aesthetic whole, regardless of the actual necessity of the additional functionality. if one compares the work of software specialists to that of an artists (glen 2003; jemielniak 2008b), it becomes obvious why the need for external constraints, which enable them to work effectively, i.e. use their excessive internal motivation to implement the project within its predetermined limits. like artists who, if unrestrained, never end their “endlessly imperfect” endeavour, so will an it specialist constantly succumb to the wish to do “something really cool”, and not just solve the client’s problem. just as artists in moments of doubt need external incentives to guide them back to the desire to work, so it specialists in times of depletion need external stimuli supporting their motivation. in this sense, glen is right – when software specialists are working, leave them alone and facilitate their work (e.g. by serving simple meals at the computer). in the flow phase, the software specialist does not need to be motivated, but care must be taken that the flow does threaten his/her existence. we need to differentiate between three different motivational problems. the first concerns the actual motivation. how do you help “artists” experiencing a minor “creative crisis”? they cannot start working, suffer from a writer’s block, or no longer understand what they are doing. the second concerns hygienic factors, which help get on with the work when once immersed in the flow – when involvement and internal motivation are high. p. glen discusses these kinds of hygienic factors in detail. the third concerns long-lasting hygienic factors, creating working conditions that will allow the software specialist perform in his professional role in a long-term manner. it specialists are exposed to multiple stress factors: long working hours, the need to engage in the race for technical competence, strong meritocratic competition within their professional group, and last but not least – focusing on success (solving the problem is proof of my value). 85 business, management and education, 2012, 10(1): 77–90 building identity on professional competence, and the constant need for its confirmation through solving problems, hinders the development of support-style relationships based on family life. the readiness to give oneself up to one’s work, or in other words excessive involvement, results not only in professional burnout (nahrgang et al. 2010), but in an exhaustion of deep resources, not renewable with the use of standard methods of dealing with stress (maceachen et al. 2008). research into motivating software specialists must include each of these three areas; otherwise it deals not with motivating, but with ways of “squeezing them dry”. 6. theses concerning management of software specialists among the external and internal motivators, sharp et al. (2009: 223) distinguish in their review of the literature that the role of it project management methodologies is not very clear. methodologies include how to break the project up into coherent modules (subprojects), which an employee or a group of employees can undertake, with a timetable for their implementation. even when building participation, trust, autonomy and empowerment (to mention motivators related to formulating the goals of the sub-project) (sharp et al. 2009: 223) team managers cannot forget that almost every it specialist seeks to develop excellent solutions and overestimates the speed with which the problem can be solved. setting objectives must take into account both conditions external to the team (e.g., required time limits), as those within the team, including the need to limit the software specialist’s need to pursue excellence. management by objectives requires analysts and project managers to develop schedules in a participatory manner, adapting them to external conditions and constraints in such a way that the schedules and products agreed upon are also acceptable from the professional perspective of those implementing them. thesis 0: define the project objectives. set criteria for acknowledgement of milestones, specify in detail the material products at every stage (e.g., “a functioning it system” is not a product; “results of a specific test” is a product). thesis 1: agree upon a methodology for managing the project with all participants, and adhere to it. set project milestones as required by the client, but in such way that all members of the project team would also consider them implementable. if the deadlines and scope of the project exceed pessimistic estimates of what the team is capable of, adjust the scope of the project to deadlines (omit chosen functionalities which do not have to be implemented in the first stage or can be achieved by semi-automated tools, limit items that do not belong to the main process, etc.). thesis 2: be flexible in reformulating expectations if they turn out to be unrealistic. the software engineer is frequently unsure whether the given problem is at all solvable (within the adopted framework). communication channels are usually adjusted to 86 k. łubieńska, j. woźniak. managing it workers the project methodology, but as team leader you must provide the means for quick and open informal communication, both technical as supportive in the event of difficulties. proper working conditions in the case of it professionals should ensure such relationships in which difficulties in completing tasks can be articulated in an open manner, as troubles if concealed can be a threat to the whole project. thesis 3: tend to ongoing work hygiene; avoid demotivating your subordinates. the software engineer does not need appreciation of his/her person – he/she needs to be judged on his merits, that of the product he/she creates. such “externalised internal rewards” are standard hygienic factors in his work. without them, internal motivation – the presence of which is treated as a normal state of affairs – does not function. essential work factors are almost always secured in the case of software engineers, and hackman and oldham are correct in that not meeting them would be a source of demotivation. the authors of a review article (sharp et al. 2009: 230) rightly emphasise that the “motivation (of it workers) is heavily dependent on the context ... but the literature does not shed much light on how this influence works”. our article also lays stress on the hygienic effect of the context. we consider that in a well-organised project team, software engineers are internally motivated. thesis 4: care for the hygiene of the software specialist’s day to day life. we wrote about the destructive role of permanent stress in the previous chapter. we know that the effectiveness of a mortally tired software specialist must be lower than that of the same software specialist who is rested. and this does not refer to the number of lines of code he/she writes, but to the quality of the end-product for solving the problem. maximizing problem solving efficiency requires the manager to take care that problems are tackled by it specialists who are fresh and alert. in knowledge work, advances come in irregular spurts, as problem solving is the effect of making many breakthroughs, and not just of increment resulting from hours of assiduous work. often, the results of a few good hours’ work are more significant than of hundreds of hours of persistence at the desk. thesis 5: take responsibility for the security of the project as a whole. the role of the manager is to ensure the viability of the project, even if one of the software specialists drops out. correcting others’ work is often so difficult that it is easier to start anew. the manager is responsible for pairing people up in sub-teams so that everything that is worked on is understood by more than one person. thesis 6: redefining project objectives should be a normal occurrence in the everyday life of the project. redefining project objectives or their components as a result of changes in the environment (“business changed its mind”) should be an everyday matter in the life of the project, and should be an integral part of the project management methodology. 87 business, management and education, 2012, 10(1): 77–90 change should by its very definition effect in a redefinition of timetables and project costs (regardless of the significance of the change). software specialists we interviewed claim that changes which take place while the project lasts (see lw) are the most common cause of project failure (just after “unrealistic demands and deadlines” set at the start of the project). this means that in many settings, changes are made in an uncontrolled manner. thesis 7: manage risk. the business in which you work teaches you humility, and this is the case also for the most arrogant of software engineers. name the risks to your project, check in an ongoing manner which risks begin to materialise, and be prepared to implement contingency plans. notify both clients, as those who work on the project of the risks, especially those which lie within their sphere of competence. 7. conclusions the article analyses the main trends in research into software engineer motivation. we have noted that, although it specialists are usually treated as prototypical knowledge workers, the changes that have taken place in this profession have made them increasingly dissimilar to professionals working on their own. an analysis of reviews of research into the motivation of software specialists shows that research provides no management guidelines which go beyond good practice in the sector. basing on two main trends in research on the management of it team motivation, we hypothesised that researchers describe factors which are hygienic in nature, rather than motivational, as these factors create an environment in which software specialists can be subjected without interruption to the functioning of their own internal motivation. an analysis is made of the long-term consequences of focusing inordinately on solving a problem, and eight theses are formulated concerning software team management, which will be of help in implementing projects. our deliberations focus on only a chosen aspect of the problems of it specialist management, i.e. on motivation. we have not broached the issues of communication between software specialists and their clients; of maintaining large it systems in current conditions of it team instability; of the specific counterculture they create; of disloyal software specialists; of managing multicultural and multinational projects; and many others. we only briefly mention the issue of leadership in it teams. the results of our deliberations are limited in at least two ways. firstly, the empirical basis for our analyses is the practical experience of one of the authors, and the preliminary results of a survey carried out on a group of software specialists working in the financial services sector in poland. our analyses are based on projects that are of average difficulty and low market pressure. secondly, we have not made any intercultural comparisons; indeed we have not even taken into consideration differences in level of education or the service-orientation of it workers. 88 k. łubieńska, j. woźniak. managing it workers research considering these variables are a natural next step to make. another promising area of research would be on the negative effects of over-motivating software engineers. if our thesis concerning the over motivating of it specialists is true, we should expect that the negative consequences of over motivation are partly responsible for the failure of it projects. we need to find examples of project failures caused by over motivation to broaden the standards of analysing projects. references alvesson, m. 2004. knowledge work and knowledge intensive firms. oxford. beecham, s.; 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(eds.). behawioralne determinanty rozwoju przedsiębiorczości w polsce. gdańsk, 224–239. http://dx.doi.org/10.1111/j.1468-005x.2007.00193.x http://dx.doi.org/10.1108/13673270510602818 http://dx.doi.org/10.1287/mnsc.1060.0554 http://dx.doi.org/10.1080/095373299107546 http://dx.doi.org/10.1016/j.infsof.2008.05.009 http://dx.doi.org/10.1016/j.ergon.2006.10.005 90 k. łubieńska, j. woźniak. managing it workers it sektoriaus darbuotojų vadyba k. łubieńska, j. woźniak santrauka šiame straipsnyje analizuojama programinės įrangos inžinierių motyvacija. jame remiamasi vieno iš autorių patirtimi ir preliminariais kokybinių ir kiekybinių tyrimų rezultatais, surinktais iš 300 programinės įrangos inžinierių, dirbančių lenkijos it finansinių paslaugų sektoriuje. taip pat apžvelgiami mokslinėje ir praktinėje literatūroje rasti pagrindiniai metodai, taikomi specialistų motyvacijai. programinės įrangos specialistų motyvacijai taikomi metodai kritikuojami už tai, kad buvo žiūrima pro pirštus į ilgalaikes motyvacijos veiksnių, kuriems jie skiria daugiausia dėmesio, naudojimo pasekmes. atskleidžiama, kad tyrimuose, grindžiamuose p. gleno (2003a) modeliu, analizuojami tik higieniniai veiksniai (kaip rašo herzbergas), o tai gali trukdyti progresui (csikszentmihalyi 1975), kuris būdingas specialistams su vidine motyvacija. nors straipsnyje neanalizuojama, kaip it specialistų motyvacijos valdymo srityje reikėtų išsaugoti higieninius veiksnius, gana didelę jo dalį užima su ilgalaikiais higieniniais veiksniais susijusios rekomendacijos. reikšminiai žodžiai: motyvacija, it darbuotojas, programinės įrangos specialistas (inžinierius), fanatikas, programinės įrangos kūrimas, it komandos valdymas. katarzyna łubieńska. ma in computer sciences, mba; was an it director and it team leader in many financial companies. her scientific interests focus on it management. jacek woźniak, dr habil in management, works as a professor at the university of finance and management in warsaw. his research is focused on training theory and management of professional service companies. analysis of asset classes through the business cycle audrius dzikevičius1, jaroslav vetrov 2 using the idea of market-expected return rates on invested capital in the verification of conformity of market evaluation of stock-listed companies with their intrinsic value paweł mielcarz1, emilia roman2 personnel audit process wojciech pająk the position of slovakia in competitiveness ranking – the causes, impacts and prospects lucia stredná1, mária zúbková 2 audit committee practice in the polish listed stock companies. present situation and development perspectives piotr szczepankowski bank value: comparing customer and employee perceptions jelena titko1, natalja lace2 managing it workers katarzyna łubieńska1, jacek woźniak2 transforming leadership styles and knowledge sharing in a multicultural context rasa paulienė market behaviour: case studies of nasdaq omx baltic jelena stankevičienė1, natalija gembickaja2 spreadsheet error detection: an empirical examination in the context of greece dimitrios maditinos1, dimitrios chatzoudes2, charalampos tsairidis3 bme_2017_15_2 maketas_spaudai.indd copyright © 2017 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. a conceptual model of assessment of knowledge transfer to consumer jurgita raudeliūnienė1, sigitas davidavičius2 1department of business technologies and entrepreneurship, business management faculty, vilnius gediminas technical university, vilnius, lithuania 2department of management, business management faculty, vilnius gediminas technical university, vilnius, lithuania e-mails: 1jurgita.raudeliuniene@vgtu.lt (corresponding author); 2sigitas.davidavicius@ vgtu.lt received 26 november 2017; accepted 4 december 2017 abstract. due to changing needs of knowledge consumers in the context of globalization organizations find it important to search out the way of effective application of the process of knowledge sharing and distribution in their activity in order to create and/or select proper means of communication with consumers on purpose of effective satisfaction of their knowledge needs. in order to address the problems of such nature it is important to assess the process of knowledge transfer and consumer purchase, knowledge needs, knowledge transferred to meet of consumer needs, channels and means of knowledge transfer. also, to select purposefully channels of communication with consumers and tools of e-marketing that are suitable for satisfaction of consumer needs, i.e. channels and tools that affect self-determination of consumer to take a decision to acquire a product or service of specific organization. keywords: knowledge management, knowledge transfer, conceptual model. jel classification: m1, m3, d83. 1. introduction when the society transforms from information society to knowledge society this leads to change of external environmental conditions, information and knowledge needs of consumers and this also leads to changes in communication of organizations with target consumers. in context of transformations a significance of knowledge management, as an effective tool of increase of efficiency of activity of public management institutions and business organizations in communication with target consumers is based on the fact that it is not enough to manage traditional resources by organizations seeking to develop and maintain their uniqueness that could not be quickly comprehended by other organizations. not only effective management of knowledge inside the organization becomes an b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2017, 15(2): 174–195 doi:10.3846/bme.2017.387 175 business, management and education, 2017, 15(2): 174–195 important aspect but also communication of organization with target consumers: how to choose proper tools of communication with consumers in order to meet their knowledge needs without spending much money. how to effectively manage the existing knowledge and to transfer it without spending much money when there are limited resources, how purposefully communicate and select tools of communication with consumers. the problems of such nature are systematically analysed in disciplines of knowledge management and marketing and can be implemented through procedural model of knowledge management that forms a cycle of processes and forms a chain of knowledge value development. in this case knowledge management is a purposeful and systematic management of knowledge processes, methods and tools in order to make a full use of knowledge potential for communication with target consumers. the purpose of the article is to develop a conceptual model of assessment of transfer of organization’s knowledge to consumer that makes assumptions to assess a process of knowledge transfer and consumer purchase, knowledge need, knowledge transferred to meet consumer needs, channels and tools of its transfer, to purposefully select channels of communication with consumers and tools of e-marketing that are suitable for satisfaction of consumer knowledge needs in order to meet the changing consumer knowledge needs that influence self-determination of consumer to make a decision to acquire a product or service of organization. the research methods applied for the study are as follows: analysis of scientific literature, the principles of multi-criteria assessment method. 2. importance of knowledge sharing and distribution in communication with consumers 2.1. the concept of knowledge sharing and distribution how to manage the existing knowledge effectively, to develop new knowledge and to transfer it, what obstacles and difficulties are faced, what are the managing methods, factors, assessment criteria. the problems of such character are systematically analysed by scientists (knowledge management system) and implemented through procedural model of knowledge management (knowledge management processes) that forms a cycle of processes and forms a chain of development of knowledge value. a cycle of knowledge management in the scientific literature consists of particularly different processes of knowledge management (wiig 1993; meyer, zack 1996; bukowitz, williams 2000; rollett 2003; awad, ghaziri 2004). wiig (1993) presents such processes of knowledge management as development, acquisition, selection, transformation, distribution, application of knowledge and realization of value. 176 j. raudeliūnienė, s. davidavičius. a conceptual model of assessment of knowledge transfer to consumer meyer and zack (1996) distinguish such processes of knowledge management as acquisition, improvement, preservation, distribution and presentation of knowledge. bukowitz and williams (2000) analyse such processes of knowledge management as receipt, use, training, distribution, assessment, development of knowledge and refusal from it. rollet (2003) distinguishes the following processes of knowledge management: planning, development, integration, organising, transfer, preservation and assessment of knowledge. awad and ghaziri (2004) distinguish recording, organising, improvement and transfer of knowledge. agarwal, islam (2014, 2015) who analysed and studied processes of knowledge management of different scientists (wiig 1993; meyer, zack 1996; bukowitz, williams 2000; awad, ghaziri 2004) claim that a cycle of knowledge management is the evolving process that starts from acquisition of necessary knowledge resources and lasting until their proper use. scientists who have summarized results of other researches present eight processes of knowledge management: development of knowledge; acquisition of knowledge; accumulation of knowledge; organising, perfection, transformation and storage of knowledge; dissemination, transfer of and access to knowledge; learning and application of knowledge; assessment of knowledge and realization of value; a repeated application or transfer of knowledge (agarwal, islam 2014, 2015). other scientists distinguish a complex spectrum of components of knowledge management that determines effective solutions of knowledge management: processes and sub-processes of knowledge management, systems of knowledge management, mechanisms and technologies of knowledge management, infrastructure of knowledge management (becerra-fernandez et al. 2004). the processes of knowledge management are described as those helping to find, identify, share knowledge and to apply it, and are divided into processes of new knowledge finding, identification of existing knowledge, knowledge sharing, application of knowledge. probst, raub and romhardt (2000) offer an integrated system of knowledge management designed to manage knowledge resources. such system is based on the following processes of knowledge management: determination of knowledge purposes, identification, acquisition, development, sharing of knowledge and its distribution, application, preservation, assessment (probst et al. 2000). a process of knowledge sharing and distribution is closely related to processes of knowledge development (internal knowledge) and acquisition of knowledge (external knowledge) since existence of knowledge is the essential condition in this stage as well the fact that knowledge must be timely transferred to right individuals or knowledge must be accessible when necessary. this process facilitates speeding up of performance 177 business, management and education, 2017, 15(2): 174–195 of organization’s functional activities and quality of work as not only good practice or factors of success but also lessons learned that help avoid repeating mistakes are transferred. thus, not only knowledge is shared, but it is also possible to contribute to the process of its preservation in organization. it is necessary for executives to understand what knowledge and to what individual must be distributed or restricted. financial, organisational problems, personal problems of employees, technological and legal problems are usually faced in this process. financial problems are associated with the fact that organizations do not always have sufficient financial resources for development and maintenance of infrastructure of knowledge sharing and distribution. in such case efficiency of the process depends only on motivation of employees to transfer knowledge. organisational problems are associated with the fact that the existing structures are not fully customized for satisfaction of knowledge needs or knowledge is isolated and can be accessed only by a particular group of individuals. in such way a flexibility of the process of knowledge sharing and a speed to reaction to changes are often lost. personal problems of employees are associated with the fact that employees either reluctantly share knowledge for personal aspects (e.g. because of fair to lose influence) or poor motivation aspects, or lack ability to transfer knowledge. technological problems relating to incompatibility of information technologies used in organizations (e.g. problems of data transfer due to application of different versions of software). legal problems manifest by the fact that knowledge sharing and distribution may be restricted due to confidentiality conditions for executors provided in agreements, threat due to information leak or possibilities of imitation (copying) of other organizations, etc. a process of knowledge sharing and distribution and assessment of its efficiency is applied for dealing with problems of such nature. it is important in this process not only to know what are the internal and external knowledge, where knowledge is, who possesses that knowledge, but also how to transfer the existing knowledge not only for performance of activity functions but also to meet knowledge needs of consumers. it is important for executives of organization to find ways and tools for formation of favourable culture of knowledge sharing in organization that increases trust and how to motivate employees to actively participate in this process. knowledge can be distributed in a centralized way (a fast copying of knowledge to employees of entire organization based on a hierarchical “top-down” principle) or in a decentralized way (development of infrastructures by distributing knowledge according to the need; such development is based on horizontal principle) (probst et al. 2000). maryam and denford (easterby-smith, lyles 2011) distinguish three types of knowledge sharing: exchange of knowledge between individuals; exchange of knowledge between individuals and knowledge storages (e.g. download of report from storage of 178 j. raudeliūnienė, s. davidavičius. a conceptual model of assessment of knowledge transfer to consumer documents or improvement of report and keeping in the storage of documents); exchange of knowledge through the existing storages of knowledge. o’dell and hubert (2011) suggest four ways of knowledge sharing: self-service, lessons learned, practice of communities, and transfer of the best practices. these ways are identified by two dimensions: knowledge and the level of its expression (from the expressed to not expressed) and communication, the level of interaction between employees (from low to high) (o’dell, hubert 2011). self-service is oriented to technological aspect of knowledge management and is associated with an opportunity to access information and encoded knowledge. this way is designed for performance of work activity through dialogues and discussions using a variety of tools, such as intranet, portals, email, the internal system of experts, search tools, etc. lessons learned make assumptions for employees of organization to record, share, repeatedly use knowledge that is based on the previous experience for implementation of specific processes or projects. this way is designed to avoid previous mistakes, to identify factors of success, correction of behaviour of employees and dissemination of good practice. practices of communities are designed for employees of organization having a common goal to transfer experience, insights, a good experience, to learn from each other by sharing knowledge. these communities develop in an informal way. young (2012) analyses types of virtual communities and classifies them into practices of communities, micro-communities (knowledge is developed and shared in a small group, a group consists of five to six members) and communities of wisdom (learning using a reflective thinking, dialogues, trust, respect, commitment to innovative and transforming learning in order to achieve an active process of development and sharing of knowledge is promoted), e-learning communities, knowledge communities and network communities (young 2012). winkelen and mckenzie (2011) distinguish three main reasons why individuals participate in practice of communities: intellectual reasons – development of experience, knowledge of opportunities in organization, perception of different attitudes, improvement of status, increase of influence, sharing of common interests; emotional reasons – satisfaction in helping others, mutual recognition, greater confidence, development of relations; a tool for goal achievement (winkelen, mckenzie 2011). maryam and denford (easterby-smith, lyles 2011) distinguish the following benefit of practices of communities: reduce a learning curve (new members are allowed to find experts and to find out the rules); reduce corrections (promote searching for products, to perfect and analyse them); increase innovations (develop common interests, test new ideas). transfer of the best practices encompasses dissemination of successful demonstrative examples and processes in the whole organization. a value created in this way is elimination of operational gaps of separate structural units of organization, standardiza179 business, management and education, 2017, 15(2): 174–195 tion of certain global processes and pursuance to unify the activity results of structural units to the same qualitative level. adaptation of the best practices in organization may also have certain problematic areas relating not only to a lack of motivation but also with insufficient knowledge of employees seeking to understand a value of the best practice and to use for implementation of goals. scientists suggest to apply the methods of internal and external comparison (thus conditions of competition are created) and motivation systems to solve these problems. winkelen and mckenzie (2011) distinguish three types of external knowledge sharing: suppliers, alliances, consortia. suppliers represent the connections that exist in the supply chain and that are necessary for improvement of business. alliances represent relations between two organizations in order to reduce costs of organizations for development of new knowledge. consortium represents relations between organizations in order to use an experience accumulated during supply of products (provision of services) to consumers. maryam and denford (easterby-smith, lyles 2011) suggest two ways of information technologies for distribution and share of knowledge: – a network model that is focused to process facilitation a person to a person by creating links between them; – a model of resources of knowledge that is focused to electronic exchange of encoded knowledge in computer storages of knowledge. many scientists suggest using of hybrid systems, i.e. combinations of human and technological resources and development of network of knowledge (infrastructure) for distribution of knowledge. 2.2. classification of knowledge scientists define knowledge in extremely diverse way and treat it in aspects of various sciences (psychology, management, information, etc.). in opinion of representatives of the science of psychology, when seeking to perform physical and emotional actions individuals use a memory and perceive the environment through senses. perception of stimuli of individual is associated with continuous processes of cognition in the brain. changes in the memory represent the result of cognition. a relation between cognition and action is defined as learning of individual that together with a memory is like a subsystem of cognition. thus, knowledge of individual is defined as a set of all possible conditions of a memory (possible actions) that diverts a potential of an individual to act. in opinion of scientists, knowledge can be treated as a resource of organization and must meet the principles of management of resources: presented in a required time and in a proper form, accessible in the required place, meeting the requirements of quality, obtained at the lowest cost. scientists note that compared to other resources of 180 j. raudeliūnienė, s. davidavičius. a conceptual model of assessment of knowledge transfer to consumer organization knowledge has certain attributes of exclusivity: it is intangible and difficult to measure, is characterised by inconstancy; it cannot completely used since a quantity of knowledge increases using it; it cannot be acquired at any time in the market, there is often no other choice but to wait for results; knowledge can be used at the same time for different processes (wiig et al. 1997). many scientists present various attitudes ways and aspects of classification of knowledge: by the place of existence (subjective, objective, and social), by a form of expression (expressed, not expressed), by a character (declarative, procedural), by transfer and purpose (general, specific), by the level (individual, group, organization, state), etc. according to wiig (1993), for knowledge to be used it must be systematized. the author suggests the following three forms of knowledge: public knowledge (expressed knowledge that is publicly available), a shared expertise (personal knowledge that can be patented) and personal knowledge (not expressed knowledge applied at work and in everyday activity) associated with four types of knowledge: actual (associated with data, assessments, a content of which was checked), conceptual (associated with systems, concepts, perspectives), probable (associated with hypotheses, decisions) and methodological (associated with reasons, strategies, the methods of decision making) knowledge (wiig 1993). zins (2007) states that three types of knowledge are distinguished in traditional epistemology, i.e. practical, cognitional, asserted (bases on statements). declarative knowledge can be also called an experience based knowledge. a term “experience” is often used together with knowledge and training. experience as a state (having experience) is a subset that is described by some scientists as empirical knowledge. experience that is construed as a process (acquisition of experience) is often analysed as a learning process and is identified as empirical training. knowledge based on experience is closely related to knowledge of individual (subjective feelings, emotions), individual experience of situations and procedural knowledge (“i know how to do”). employees of organization having knowledge that is based on experience can quickly assess situations, to make proper decisions and initiate actions (zins 2007). knowledge can be assessed according to subjective and objective attitude, the nature of existence and shall be divided in to subjective and objective knowledge (becerrafernandez et al. 2004, 2010; chen 2005; zins 2007; kebede 2010). subjective attitude is based on the fact that a reality is socially constructed due to interaction with individuals and knowledge is perceived as continuous winnings relating to experience of human (internal world of human, e.g. thoughts) determining a social practice. kebede (2010) suggests also to distinguish social knowledge that is socially constructed due to interaction with the social environment when individuals accept a certain perception or model of the world (kebede 2010). objective attitude differs by the fact that it does not depend on perception of individual and is focused to the primary categories and conceptions. knowledge is perceived 181 business, management and education, 2017, 15(2): 174–195 as objects or items (external world of individual, e.g. knowledge published in the book, presented to library and stored in electronic medium). zins (2007) states that when dividing knowledge into subjective (reflections that are subjective) and objective (like objects, however, this is biased knowledge) an aspect of fairness is ignored. therefore, this gives rise to many discussions. the scientist suggests to divide in a more accurate manner: to treat objective knowledge as universal (general), collective knowledge (that is present in collective area that is presented in writing or orally) (zins 2007). knowledge by the way and form of expression can be divided into expressed and not expressed knowledge (polanyi 1966; nonaka 1994; nonaka, takeuchi 1995). many scientists emphasize that a ratio of not expressed knowledge, compared to expressed knowledge, is greater. not expressed knowledge forms a basis for emergence of creativity, innovations, uniqueness because it is difficult to imitate and copy by other organizations. zander and kogut (1995), who used the results of studies performed by other scientist, i.e. the study of the aspects of dissemination of innovations performed by rogers (1980) and the study of classification of knowledge performed by winter (1987), suggested five dimensions of description of knowledge, i.e. in the level of abilities of individual, group and organization (zander, kogut 1995): – knowledge that can be encoded: related to the level and form of knowledge expression, a possibility to encode and accumulate knowledge using technologies; – a learned knowledge: acquired during learning and depend on abilities of individual; – complex knowledge: related while combining competences of different types; – knowledge belonging to a system: relating to knowledge of experienced employees of organization and its creation; – knowledge seen in the product: relating to an opportunity to perceive that knowledge, to copy or imitate it by other organizations. these five dimensions of knowledge are the ways to assess how abilities can be easily transferred and perceived not only by employees of organization but also by other organizations. knowledge can be classified as general and specific (also known as exclusive) knowledge according to a number of individuals who use knowledge and a way of transfer (maier et al. 2009; becerra-fernandez, sabherwal 2010). specific knowledge can be divided into specific technical (also known as operational) knowledge and knowledge of specific content (becerra-fernandez, sabherwal 2010). knowledge can be divided into declarative (e.g. facts) and procedural (e.g. how to work with computer) (maier et al. 2009; becerra-fernandez, sabherwal 2010). 182 j. raudeliūnienė, s. davidavičius. a conceptual model of assessment of knowledge transfer to consumer becerra-fernandez and sabherwal (2010) suggest to combine various ways of knowledge classification. for example, procedural knowledge can be expressed and not expressed, or general and specific. the latter, same as declarative knowledge, can be divided into expressed and not expressed, or general and specific knowledge. maier, hädrich and peinl (2009) have combined various combinations of knowledge classification offered by scientists and have presented four aspects. knowledge is classified taking into account these four aspects, specifically by a content, organizations, individual, and information technologies. knowledge is divided by a content into abstraction (based on facts/specific, scientific/theoretical), transfer (specific and general), and representation (declarative and procedural). knowledge is divided by organization taking into account importance, suitability (suitable, not suitable), authorization (official, unofficial), security (private, public), and ownership (internal, external). knowledge is divided by individual taking into account a value (valuable, worthless), comprehension (expressed, not expressed), support (supporting/dominant and not supporting/forming a minority), existence (knowledge, not knowledge). knowledge is divided by information technologies taking into account accessibility (accessible, not accessible), medium (electronic, not electronic), encoding (to be encoded, not to be encoded). maier, hädrich and peinl (2009) also suggest to divide knowledge of organization into types by source, accessibility, protection, formality. knowledge of higher quality can be identified as erudition, expertise that can be possessed by specialists-experts of a certain field (knowledge of different levels, abilities in professional or training area) and it can be divided into three categories (becerrafernandez et al. 2004, 2010): associative, movement skills and theoretical knowledge. knowledge can be classified by levels of management of organization and decisions made in that level (becerra-fernandez, sabherwal 2010): strategic, tactical and operational knowledge. knowledge can be classified by level into knowledge of individual, group, organization, sector, state, region, etc. knowledge can be divided by entity that possessed knowledge into knowledge of individual and organization. knowledge of individual is knowledge of one person. its control does not necessarily depend on a person and it does not necessarily must be related to a specific content. young (2012) analyses a concept of management of personal knowledge by emphasizing assumption of responsibility by individual for development of own personal knowledge. inter-disciplinary this concept can be defined as integration of a content, methods and strategies of research of existing fields of different studies. analysis of a concept of management of personal knowledge was started in 2000 by a researcher cope (2000), and this concept was analysed through the principle of “a head”, “a heart” and “a hand”: “a head” is associated with cognitive process, “a heart” is associated with 183 business, management and education, 2017, 15(2): 174–195 intuition and “a hand” is associated with actions and behaviour (cope 2000). later studies were associated with dynamic work environment of individual by motivating an employee to manage personal knowledge and to associate it with organizational needs. young (2012) connects insights of different scientists related to a concept of management of personal knowledge and presents the concept of a capital of individual’s knowledge that encompasses both internal and external aspects (young 2012). internal aspects are associated with a value of inexpressibility of different forms (“i know how to do”, it is a high level of awareness of individual, insights, ideas, emotions) that can be shares between the employees of organization. external aspects relate to technologies of internet network (development of trust networks, interactivity of communities) which facilitate creation of knowledge and help to feel a value of intangibility. the internal and external personal capital helps a knowledge employee to be more productive, creative and innovative and to share ideas and insights with others using interactive and virtual possibilities of internet technologies. knowledge of organization is related to a certain content. it is important for organization to connect knowledge of individuals and to use it for management of business processes and creation of a value. thus, a basis of knowledge of organization is formed when important aspects represent interaction with the members of organization and communication. organizational knowledge in this context is perceived as a set of all possible actions of organization by including abilities of perception of the environment and reaction to changes. a collective basis of knowledge can be defined as a subset of cognition of a social system (organization). a basis of knowledge of organization consists of knowledge of individuals and a structure of its interaction and organizational culture to share knowledge. changes in the basis of knowledge of organization are possible through training of individuals or groups, and this makes assumptions to assess environmental changes (e.g. technological) and to react duly (e.g. to improve business processes). studies of ahuj and novelli (easterby-smith, lyles 2011) that are designed for description of a basis of knowledge integrate three attitudes: cognitive, content, transactional knowledge. organisational basis is described by researchers as knowledge of organization consisting of: – knowledge of content on technologies, markets, products (services), consumers, procedures; – cognitive knowledge as beliefs, models, cognitive systems; – transactional knowledge how to access knowledge of content or to update it. a basis of knowledge can be stored in electronic or physical medium and encompass employees, procedures of organization, its well-established order, organisational structures. ahuja and novelli (easterby-smith, lyles 2011) distinguish the following six primary criteria for determination of differences of a basis of knowledge: size, content, certainty, differentiation, integration and consolidation. 184 j. raudeliūnienė, s. davidavičius. a conceptual model of assessment of knowledge transfer to consumer a size of a basis of knowledge reflects “how much” organization knows, what are the opportunities of creation of new combinations, potential of innovations, what resources are available to achieve a goal. a content reflects what organization knows. certainty shows compliance of informational environment of organization to outside and its reflection in the basis of knowledge of organization of that particular environment because decisions in organization depend on a content of information. differentiation shows division of a basis of knowledge into groups and this makes assumptions to facilitate search, specialization and expand them between each other, to divide into innovative activities and to find new ways of activity connection. integration reflects opportunities of formation of interfaces for differentiated components. consolidation of knowledge shows a degree to what extent it is formal, notable, encoded, expressed in the particular basis of knowledge compared to informal knowledge, i.e. not expressed knowledge. this criterion is associated with ability to learn, perceive or monitor knowledge, ability to copy knowledge of organization taking into account a nature of its expression. knowledge can be received and stored in various sources: in memory of a person (individual, group); in products created by a human: in practice, technologies, storages; in organizations: in all organizations (e.g. valuables, norms, culture) in a part of organization (e.g. in a certain unit of business, subdivision), in networks between organizations (e.g. keeping in touch with suppliers, consumers, improving properties of products). 2.3. the factors of assessment of effectiveness of the process of knowledge sharing and distribution in order to ensure an effective process of information sharing and distribution in organization, it important to identify the factors of assessment of effectiveness of the process of knowledge sharing and distribution. the factors that affect efficiency of the process of knowledge sharing and distribution are analysed by scientists for several decades now. however, there is no general attitude how to objectively determine the factors having the greatest impact on efficiency of this process. the process of knowledge sharing and its components represent a complex and ambiguous object of research. therefore, different attitudes of scientists regarding the way of identification of the essential factors and their assessment can be found in scientific literature. based on analysis of scientific literature, the factors that affect efficiency of the process of knowledge sharing can be divided into three main groups (grant 1996; connelly et al. 2003; lee, choi 2003; becerra-fernandez et al. 2004, 2010; taylor, wright 2004; cabrera et al. 2006; hartini et al. 2006; sun, hao 2006; claver-cortés et al. 2007; mariano, casey 2007; aujirapongpan et al. 2010; wang, noe 2010; allameh et al. 2011, 2012; ansari, 185 business, management and education, 2017, 15(2): 174–195 khadher 2011; noor, salim 2011; shafia et al. 2011; ansari et al. 2012; el-den 2012; krishnaveni, sujatha 2012; wu, zhu 2012; naaranoja, uden 2013; raudeliūnienė et al. 2016): individual, organizational and technological factors. individual factors represent a group of factors that determine efficiency of knowledge sharing. this group describes a totality of personal qualities of the employees of organization in implementation of the process of knowledge sharing. organisational factors represent a prevailing organizational policy, interpersonal interaction of employees, the peculiarities of management that make assumptions to share knowledge accumulated inside and outside the organization. technological factors represent a whole of technologies applied in organization that makes assumptions for effective execution of the process of knowledge sharing. more than 60 primary factors affecting efficiency of the process of knowledge sharing were identified in such way. in order to determine the factors that affect efficiency of the process of knowledge sharing, a multi-criteria and expert assessment was performed in 2013 (raudeliūnienė et al. 2016). experts from partial integrated groups of assessment factors have distinguished individual (0.39) and organisational factors (0.32) as the most significant group. whereas technological factors (0.29) were distinguished as those that are less significant for efficiency of a process. a level of benefit in knowledge sharing perceived by employees (0.14), practical experience of employees (0.13), communicational skills of employees (0.12), importance of the processor knowledge sharing perceived by employees (0.12) were identified by scientists as the essential primary factors of assessment in the group of individual factors. a degree of self-expression of employees (0.06), age of employees (0.06) and occupancy of employees (0.05) were identified as the least significant factors. assessment of employees (0.11), dynamics of staff turnover (0.10), a team work (0.09), control measures (0.09) were identified as the most significant primary assessment factors in the group of organisational factors. development of innovations (0.05), organising of work regime (0.05), social networks (0.05), solidarity (0.05) were the least significant primary assessment factors. adaptation of information technologies for assurance of the process of knowledge sharing (0.19), the system of registration of visit of bases of knowledge (when an administrator has an opportunity to follow a number of login of consumers to the database, the level of knowledge distribution) (0.18), accessibility of information technologies (0.17) were distinguished as the most significant primary assessment factors in the group of technological factors. administration of databases (0.12), infrastructure of organization (0.11), internet access (0.18) were less significant factors. in summary of results of the study of assessment of factors that affect efficiency of the process of knowledge sharing and distribution it can be said that individual and organisational factors are more significant for efficiency of a process compared to 186 j. raudeliūnienė, s. davidavičius. a conceptual model of assessment of knowledge transfer to consumer technological factors. such factors as a benefit perceived by employees in knowledge sharing, a practical experience and communicational abilities were important for experts in the group of individual factors. mechanisms of assessment of employees, staff turnover and its dynamics and influence on the process of knowledge sharing were the most significant factors in the group of organisational factors that affect efficiency of the process, whereas adaptation of information technologies and opportunities provided by them to share knowledge, bases of knowledge and visit in them and accessibility of information technologies were the essential factors in the group of technological factors. it is important for leaders of organization to find ways and measures how to motivate employees of organization not only to share knowledge inside organization but also how to find a proper form and ways of expression for efficient transfer of knowledge to target consumers by selecting efficient communication measures to meet ever changing knowledge needs of consumers. 3. the peculiarities of consumer life cycle and the buying process interfaces of transfer of knowledge and satisfaction of knowledge need of consumer can be assessed invoking a life cycle of consumers and a process of purchase as the ways and measures that help identify knowledge needs of consumer, goals, time and place and the needs when creating a value both for consumer and organization. scientists present different stages of state and life cycle of consumer (payne 1994; cutler, sterne 2000; chaffey, ellis-chadwick 2012; buttle, maklan 2015). payne (1994) presents “a loyalty ladder” where a partner is the top state of consumer. therefore, stages according to strength of relations with organization are set from bottom to top, i.e. a stage of the weakest relations in on the bottom whereas the stage of the strongest relations is at the top: partner is someone who has the relationship of a partner switch you; advocate is someone who actively recommends you to others, who does your marketing for you; supporter is someone who likes your organization, but only supports you passively; client is someone who has done business with you on a repeated basis but may be negative, or, at the best, neutral towards your organization; customer is someone who has done business just once with organization; prospect is someone who you believe may be persuaded to do business with you. cutler and sterne (2000) present a life cycle of five stages: reach – refers to potential to gain attention of your target audience; acquisition – customer participation is the goal; conversion – turning of consumer into purchaser or achievement of a goal established; retention – encouragement to make repeated purchases or conversions; loyalty – intellectual or emotional affection of consumer. chaffey and ellis-chadwick (2012) present a consumer life cycle of four stages in which attention is focused not on states of consumer but on sequence of actions of organization in order to achieve a lifetime value of consumer: select – selection of a 187 business, management and education, 2017, 15(2): 174–195 target group of consumers; acquire – acquisition of consumers, an activity during which relations are established with target consumers and as result conversion happens; retain – retention of consumer, assurance of repeated purchases from the same consumer; extend – expansion of the range of products acquired by a consumer. buttle and maklan (2015) describe a life cycle of consumer as transformation of states of consumer representing a course of consumer transformation from “consumer who has never purchased (suspect)” to “advocating consumer (advocate)” where an advocating consumer is the consumer state pursued by organization. a life cycle of consumer consists of stages in which the relation consumer-organization, the need for information and an effect differ: – suspect: a consumer that meets the attributes of a target audience; – prospect: a consumer that meets the attributes of a target audience and who has demonstrated intentions to acquire a product and having possibilities for that; – first time customer: a consumer who has acquired the product for the first time; – repeat customer: a consumer who has repeatedly acquired a product (a consumer not yet gets affiliated with organization in this phase and organization plays a minimum role in portfolio of a consumer); – majority customer: a consumer selects organization as a supplier that occupies an important place in the consumer mind; – loyal customer: a consumer becomes “resistant” to alternative offers and selection of other supplier and a strong positive position is formed in regard of a supplier; – advocate: in this stage a consumer is not only in the state of a complicated switch to alternative suppliers but can also recommend an organization, a product or a brand and to argue on a content. in summary of the analysed stages of consumer state and a life cycle, the following essential peculiarities of these stages could be mentioned: the stages of relations of consumers with organization dominate from unknown consumer (this is identical to absence of any relation with organization) to a strong relation with organization that is expressed by states of loyalty, advocacy and partnership. these states of consumers represent an aspiration in the context of maintenance of relations with consumers in order transfer of knowledge to consumers would be associated with development of a positive experience of consumers on purpose of achievement of as favourable states of consumers in terms of loyalty as possible. life cycles of consumers are divided into two parts, i.e. stages of a cycle prior to the first acquisition and stages of a cycle after acquisition. thus, knowledge in regard of a life cycle of consumer can be divided into knowledge that influence self-determination to buy and knowledge influencing continuity of relations with organization. and should be emphasized that knowledge influencing continuity consist of knowledge and experience obtained prior to the first purchase, obtained after purchase and during cycles of repeated purchases. 188 j. raudeliūnienė, s. davidavičius. a conceptual model of assessment of knowledge transfer to consumer the analysed life cycles of consumer make assumptions to provide the need for and purpose of information and knowledge as one of the measures during development of relations of organization and consumers. however, they do not make assumptions to identify and assess the nature of required knowledge in every stage of a life cycle of consumer and the ways of knowledge transfer. therefore, the need to form a conceptual model of assessment of knowledge transfer to consumer that would make assumptions to assess in a complex way the consumer knowledge needs, to perform a detailed analysis of consumer transformation in every stage of consumer purchase, occurs. kotler et al. (2001), laudon and traver (2013) present five stages of consumer purchase: occurrence of the need to search for information, assessment of alternatives, a decision to purchase and behaviour of consumer after acquisition of the product (service) of organization. chaffey and ellis-chadwick (2012) expand the purchase process up to six stages: problem recognition, information search, evaluation, decision, action and post-sale. laudon, traver (2013) emphasizes that consumer behaviour after acquisition of a product is identical to loyalty. it should be emphasized that the first model of consumer purchase represents purchase of high inclusion products. in the stage of occurrence of the need (identification of problem) a consumer is affected by various internal and external stimuli realises the need to change the existing (unsatisfactory) situation to a desired situation. stimuli consist of various factors of macro and micro environments. factors of macro-environment are associated with social, cultural, technological and economic stimuli. in the micro-level this can be executed through marketing activity of organization expressed through elements of a marketing complex. in the stage of search for information a consumer takes certain actions to acquire a required knowledge. in the stage of assessment of alternatives analysis and assessment of alternative decisions takes place. in the stage of decision to purchase decisions relating to selection of a place and proper ways to acquire a desired product are formed. in the stage of behaviour after purchase is experience of a consumer relating to the purchase process and post-purchase service of consumer. these aspects may lead to repeated purchases, selection of organization to be the main supplier, loyalty and patronage or advocacy of organization. in every stage of consumer purchase it is important to meet the knowledge needs of consumer in a timely manner and at the right place. knowledge acquired makes assumptions for consumer to properly assess alternatives, to compare particular parameters of products and to take a proper decision. when assessing knowledge needs in every stage 189 business, management and education, 2017, 15(2): 174–195 of purchase processes it is possible to distinguish the following stages of knowledge: knowledge that helps to recognise as problem; knowledge that helps understand alternatives of problem solving and criteria and indicators of assessment of alternatives; use of knowledge for assessment of alternatives; knowledge relating to implementation of purchase; knowledge about use of product; knowledge that is necessary for formation of behaviour after purchase. in order to assess opportunities of transfer of knowledge by internet it is expedient to analyse the existing measures of interaction with consumer or online communication. internet communication tools are classified into: website, email, instant messaging, search engines, online forums, online chats, streaming media, social networks, blogs, rss, podcasting, wikis, music and video services, internet telephony, video conferencing and telepresence, intelligent personal assistants and other (chaffey, ellis-chadwick 2012; laudon, traver 2013; davidavičienė et al. 2017; oze 2017; radu et al. 2017; luo et al. 2017). analysis of measures and their properties make assumptions to state that measures of online communication can be selected depending on information transferred and a type of knowledge, a form of information and the selected way of transfer. it is also important to have regard to consumer priorities in terms of use of measures for communication. since there exist many and various measures of online communication and this requires a complex assessment by selecting the most suitable measure for a specific case, for this reason, the ways and models of their selection can serve as objects of further studies. 4. assumptions of assessment of knowledge transfer to consumer based on results of scientific studies completed a conceptual model of assessment of effective knowledge transfer to consumer consisting of the following main stages was prepared: (1) assessment of consumer need for knowledge and evaluation in which process of purchase a consumer is; (2) assessment of a type of knowledge required by consumer; (3) assessment of channels of knowledge transfer; (4) assessment of target e-market measures of communication with consumers (fig. 1). in the stage of assessment of knowledge needs of consumer organization assesses what are knowledge needs of consumer in every stage of a purchase process, i.e. what knowledge is required by consumer in every stage of a purchase process in order a consumer could move to the next stage of a purchase process. the determined knowledge need of consumer in every stage of a purchase process is the result of this process. knowledge needed by consumer and it types are assessed during the process of assessment of a type of knowledge needed by consumer in order to meet his needs. the determined type of knowledge needed by consumer is the result of this process. 190 j. raudeliūnienė, s. davidavičius. a conceptual model of assessment of knowledge transfer to consumer in the stage of assessment of the channels of knowledge transfer organization, having regard to preferences expressed by consumer, assesses channels of knowledge transfer and selects a channel that is the most suitable for transfer of the identified type of knowledge. in the stage of assessment of e-marketing measures of communication with consumers’ organization, having regard to peculiarities of communication measures and adaptability for different channels of knowledge transfer and for satisfaction of knowledge needs of consumer, selects purposeful e-marketing measures for transfer of knowledge. after selection of purposeful e-marketing measures of communication with consumer a plan is prepared and organization moves to the stage of implementation of the plan. since assessment of knowledge need of consumer, assessment of knowledge needed by consumer, assessment of channels of knowledge transfer, assessment of e-marketing measures of communication with consumers are characterised by complexity of assessment and a variety of factors, it is suggested to apply multi-criteria assessment methods for assessments, i.e. the methods that form a part of a group of decisions making and make assumptions for a complex assessment of processes of knowledge transfer to consumer and to take decisions relating to improvement of this process. the offered effective conceptual model of assessment of knowledge transfer to consumer makes assumptions to take the following steps when applying the methods of decision taking: to assess in a complex manner knowledge needs, knowledge transferred to meet consumer needs, channels and measures of its transfer; to select purposefully channels and e-marketing measures of communication with consumers that are suitable for satisfaction of knowledge needs of consumer; after effective satisfaction of knowledge needs by consumer he should move to the next purchase process. assessment of knowledge need of consumer the determined knowledge need of consumer in every stage of a purchase process knowledge types the determined type of knowledge needed by consumer channels of knowledge transfer assessment of channels of knowledge transfer selection of a channel of assessment of e-marketing measures of communication with consumers selection of e-marketing measures plan implementation e-marketing measures of communication with consumers knowledge needs of consumer assessment of knowledge needed by consumer fig. 1. a conceptual model of assessment of knowledge transfer to consumer (created by authors) 191 business, management and education, 2017, 15(2): 174–195 5. conclusions in order to effectively meet changing knowledge needs of consumers in different stages of consumer purchase, it becomes important to analyse a process of knowledge sharing and distribution, types of knowledge and factors affecting efficiency of a process of knowledge sharing and distribution. when an effective process of knowledge sharing and distribution exists in organization, it is assumed that employees will be motivated to transfer the required knowledge to consumers of organization in order to meet their knowledge needs and to create conditions for consumers to move from one purchase process to another and finally to motivate a consumer to acquire a product (service) of organization. existence of knowledge and the fact that knowledge must be timely transferred to required individuals or that knowledge must be accessed when necessary from the essential condition in the process of knowledge sharing and distribution. this process forms conditions for increase of a speed of execution of functional activity of organization and a quality of work. in order a process of knowledge sharing and distribution would be effective in organization, it is important to identify the factors of assessment of efficiency of a process of knowledge sharing and distribution. based on analysis of scientific literature, the factors affecting efficiency of a process of knowledge sharing can be divided into three main groups: individual, organizational and technological factors. a benefit of knowledge sharing perceived by employees, a practical experience and communicational skills are the essential factors distinguished in the group of individual factors. mechanisms of assessment of employees, staff turnover and its dynamics and influence on a process of knowledge sharing are the most significant factors in the group of organisational factors. whereas adaptation of information technologies and opportunities provided by them in knowledge sharing, bases of knowledge and visits in the bases of knowledge as well accessibility of information technologies are important factors in the group of technological factors. a completed theoretical analysis of a life cycle of consumers revealed that a life cycle of consumers can be divided into consumer relations with organization prior to the first purchase and after it. it was also determined that loyalty, advocacy and partnership are to be achieved states of relations of organization with consumers. in order to analyse in more detail transfer of consumer to first time customer in the life cycle of consumer, the analysis of a purchase process of consumer was performed. this analysis revealed that knowledge distributed to consumer can be conditionally divided into knowledge that influences the first purchase and knowledge that influences continuity of relations. the latter also encompasses knowledge received from the first purchase. after having assessed abundance and variety of measures of communication that are available online and their properties, it was concluded that the following factors must be considered when selecting the measures for transfer of knowledge: a type of knowledge transferred and a form of information provision, the way of knowledge transfer, 192 j. raudeliūnienė, s. davidavičius. a conceptual model of assessment of knowledge transfer to consumer consumer preference and needs. selection of measures of knowledge transfer by internet serves as an object of further studies in order to create models and ways of selection of measures for knowledge transfer. a model of knowledge transfer to consumer that makes assumptions to assess knowledge needs in a complex way by applying the methods of decision taking, knowledge transferred to meet consumer needs, channels and measures of its transfer was formed; 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zhu, w. 2012. an integrated theoretical model for determinants of knowledge sharing behaviours, kybernetes 41(10): 1462–1482. https://doi.org/10.1108/03684921211276675 young, j. 2012. personal knowledge capital: the inner and outer path of knowledge creation in a web world. oxford: chandos publishing. zander, u.; kogut, b. 1995. knowledge and the speed of the transfer and imitation of organizational capabilities: an empirical test, organization science 6: 76–92. zins, c. 2007. conceptual approaches for defining data, information and knowledge, journal of american society for information science and technology 58(4): 479–493. https://doi.org/10.1002/asi.20508 jurgita raudeliūnienė is a doctor of social sciences (management), professor at vilnius gediminas technical university (vgtu), faculty of business management. her research interests are related to knowledge management, formation and evaluation of strategic decisions, sustainable development. she has developed several monographs and textbooks in knowledge management area, published more than 50 research papers in scientific journals, actively involved in studies and research projects (head of vgtu part in projects “design lab” (2017–2019), tempus iv matre (2013–2017) and researcher in horizon 2020 (h2020-msca-rise-2014) cluster development med and etc.), member of the scientific and organising committee in international scientific conferences, editorial board member of international scientific journals. she is an expert of lithuania and poland research councils. sigitas davidavičius is a master of social sciences, lecturer at vilnius gediminas technical university, faculty of business management. his research interests are related to marketing, internet marketing, mass customization. bme_16(1)_2018_maketas.indd copyright © 2018 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: matuzeviciute@gmail.com business, management and education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 1: 1–12 https://doi.org/10.3846/bme.2018.66 introduction the growing economic integration, globalization, international openness in the context of regionalization, more and more enhances the competitiveness of countries and regions. one of the most important economic policy goals in european union is the development of national competitiveness. social and economic development of a country and its standard of living depend on the ability to identify competitiveness problems, to anticipate problem solving approaches and to anticipate the extent to which such problems are solved. low labour productivity is one of the indicators which negatively affects competitiveness of the eu countries. so, this encourages increasing interest in analysing a productivity and its impact factors. the importance of human capital for labour productivity growth has been discussed very intensively during the last two decades. authors emphasize that productivity growth can be achieved improving labours skills and knowledge, together with physical and mental health. the impact of human capital development on country productivity level is theoretically justified, but the results of empirical research vary. differences in results may occur, as the impact of human capital development on productivity growth in eu member states alma mačiulytė-šniukienė1, kristina matuzevičiūtė2, * 1vilnius gediminas technical university, department of business technologies, sauletekio ave. 11, vilnius, lithuania 2 siauliai university, social innovation research centre of siauliai university research institute, visinskio str. 25, siauliai, lithuania received 12 january 2018; accepted 06 may 2018 abstract. in this research, we investigate the impact of human capital on labour productivity in european union member states using panel data analysis. results of the paper are estimated using the pooled ordinary least squares (ols) and fixed effects model (fem). the results show that human capital is positively significant in improving the growth of labour productivity in the eu. our estimates also suggest that the impact occurs after three times lags in case of education expenditure. keywords: human capital, productivity, health care expenditure, education expenditure. jel classification: j24, e24, i15, i25. 2 a. mačiulytė-šniukienė, k. matuzevičiūtė. impact of human capital development on productivity ... effect may depend on the level of productivity already achieved by the country, as well as on the analysis period. the effect may not be determined due to the fact that the possible lagged effects are often not evaluated. therefore, in order to eliminate these limitations of the previous research, we will seek to determine the effects of time lags and the achieved level of productivity. the rest of the paper is organized as follows: section 1 presents literature review on relationship between human capital and labour productivity. section 2 describes research variables, hypotheses and model. section 3 presents the estimation results and summarises research findings. the last section concludes the paper. 1. impact of human capital on labour productivity: theoretical background the concept of human capital was shaped by a change in the composition of the capital involved in the product development process. potelienė and tamašauskienė (2014) define human capital as a personal knowledge, acquired skills, education, innate abilities, experience, attitudes, behaviour, intellect, creativity, entrepreneurship, motivation, innovation, insights, accumulated experience, physical, emotional and mental condition of health, energy, orientation in the environment, the ability to properly and timely use the knowledge and skills, and other personal characteristics that increase the productivity and income in the form of wages. it is the most developed concept of human capital, covering both human capital components and the goals and result of its development (increasing labour productivity and labour income). based on this definition, it can be said that the concept of human capital is multidimensional and includes elements of human capital and the impact of accumulation and utilization of its resources on individual income and can be analysed in a micro and macro level. as many authors note (drucker, 1999, delsen & schonewille, 1999; chani & shahid, 2012; whalley & xiliang, 2013; and others) human capital influences the country’s economic growth, labour productivity and increases national competitiveness. in the model (see figure 1), human capital is treated as the complex of two main elements: education and health, which are developed through investment in education and in the form of additional training and investment in health care. it should be noted that in all analysed researches, human capital is related to formal education and training in work (timebased learning, education level, or investment in education). meanwhile, health as an element of human capital is ignored. according to bloom, canning, and sevilla (2004), pocas (2014) it can be stated that the impact of investment in health improvement on productivity can occur directly because a healthier person is working more productively, and also through life expectancy changes, increased population learning abilities and creativity, reduced income inequality, which makes it possible to accumulate more human capital resources due to higher investment in education and through active increase in the share of labour force in the population. the impact of human capital components on labour productivity occurs both directly and indirectly. the direct relationship between investment in employee training (in all forms) and experience also investment in employee health, which are measured at macro level by public and private investment in the education system and healthcare system, as well as private training costs, generates increasing labour productivity. figure 1 presents channels of human capital impact on labour productivity. business, management and education, 2018, 16(1): 1–12 3 the macro level researches on the effect of human capital on productivity can be divided into two groups: single country (afrooz, rahim, noor, & chin, 2010; umoru & yaqub, 2013; backman, 2014; arshad & ab malik, 2015) and cross-country (bloom et al., 2004; rivera & currais, 2003; belorgey, lecat, & maury, 2006; chansarn, 2010; jajri & ismail, 2010; qu & cai, 2011; fleisher, hu, li, & kim, 2011; goos, konings, & vandeweyer, 2015). some of the recent studies (ucbasaran, westhead, & wright, 2008; chansarn, 2010; afrooz et  al., 2010; jajri & ismail, 2010; forbes, barker, & turner, 2010; qadri & waheed, 2014; goos, konings, & vandeweyer, 2015; chang, wang, & liu, 2016; benos & karagiannis, 2016; goldin, 2016) have identified that human capital in terms of education has positive impact on labour productivity growth. while other researches by bloom et al. (2004), rivera and currais (2003), lopez-casasnovas, rivera, & currais (2005), howitt (2005), becker (2007), umoru and yaqub (2013), dillender (2016) included health aspects as well in measuring the magnitude of human capital influence on labour productivity. de la escosura and rosés (2010), ganotakis (2012), slaper, hart, hall, & thompson (2011), mcguirk, lenihan, & hart (2015) pay attention to the innovations as a key driver of productivity. the investment in higher education enhances productivity in country (annabi, harvey, & lan, 2011; annabi, 2017). bartel (1995) explored the impact of training of skilled workers on productivity and wage levels and found that the number of days spent in training did not have statistically significant impact on productivity. black and lynch (1996) found that formal education has a positive impact development of human capital investing in education, training and experience development of innovation physical capital accumulation resource allocation e�ectiveness capital to labour ratio in di re ct im pa ct indirect im pact investing in health care labour productivity growth d ir ec t i m pa ct d irect im pact longer life expectancy higher learning abilities growing creativity decreasing income inequality figure 1. the model of human capital development impact on labour productivity (made by authors) 4 a. mačiulytė-šniukienė, k. matuzevičiūtė. impact of human capital development on productivity ... on productivity, while other types of training, such as computer training, have no statistically significant impact. in many researches (appleton, hoddinott & mackinnon, 1996; nielsen & westergard-nielsen, 2001; teal, 2001; whaba, 2000; keswell & poswell 2004; burger & teal, 2014) it was stated that education has a significant direct positive effect. other authors (delsen & schonewille, 1999; polasek & schwarz-bauer, 2011; yunus, said, & hook, 2014) found that the level of education does not have statistically significant effect on productivity. after analysing empirical research on the impact of human capital on productivity, it can be stated that the results of the research depend on the research sample, the analysis period, the level of research, the methods, the measurement of human capital and other parameters. the impact of human capital on productivity has a significant impact not in all countries. 2. research methodology and data in various scientific works, the development of human capital is measured by different indicators. in our research we have used education expenditure and health care expenditure to measure the development of human capital. the health expenditure, as an indicator of the human capital development, was used in the studies tompa (2002), reino, kiander, and matti (2006), panopoulou and pantelidis (2012), razmi, abbasian, and mohammadi (2012), eneji, dickson, and onabe (2013), hartwig (2015), etc. education expenditure as an indicator of human capital development used annabi et  al. (2011), farzanegan (2011), olimpia (2012), panopoulou and pantelidis (2012), hartwig (2015), annabi (2017), etc. this confirms the acceptability of the use of selected indicators. in the paper, we used added value per employee as a standard indicator to reflect the productivity. multiple regression analysis was used to investigate the effect of human capital development on productivity. regression analysis may use time series, cross sectional and panel data (asteriou, 2009). in this study we used panel data. according hsiao (2003), because of the higher degrees of freedom, the higher volatility and the lower amount of collaterals, the panel data models are more reliable than time series or cross sections. they enable to include in model a larger number of independent variables at a relatively short time; to include fictitious (pseudo) variables; allows to control the heterogeneity of variables, as well as check lagged effects. using panel data, three regressive models are essentially applied: pooled ordinary least squares (ols), fixed effects model (fem) and random effects model (rem). because of the high number of variables used and the small number of objects, the regression analysis of random effects methods cannot be applied, so the analysis is done using two methods: fixed effects and least squares. gwartney et  al. (2006) recommends use data of the longest possible period in order to minimize the impact of business cycles, the impact of various external shocks on economic indicators. we used the data of eu member states (except luxembourg and croatia) for 1995–2015 period from world bank data base. the beginning of the period was determined by the fact that the world bank (and other) database published statistics of new eu member states (joining in 2004) only since 1995. data for 2016 is not yet published. luxembourg was eliminated from the sample due to the excessive gap from other countries, croatia – due to the lack of data. business, management and education, 2018, 16(1): 1–12 5 in the first stage eu member states were assigned to clusters characterised by relatively high (rhp) and relatively low (rlp) productivity. referring to everitt, landau, leese, and stahl (2001), for this assignment we used cluster analysis. we assigned countries in a way that differences in terms of productivity among them would be smaller within the cluster than between the clusters. in the second stage, we aim to identify when, if any, the impact of human capital development on productivity occurs and for how long it lasts. here we are testing the first hypothesis: h1 – development of human capital positively affects productivity in countries with relatively low, as well as with relatively high level of productivity, but it takes time for this effect to occur. on the basis of initial testing, the six-year period chosen to examine the impact of human capital on productivity. model realizing fe method: ln(vapei,t)=α+δ8td2002t+…+δ21td2015t+βln(helthexptoti,t)+ β1ln(helthexptoti,t-1)+β2ln(helthexptoti,t-2)+β3ln(helthexptoti,t-3)+ β4ln(helthexptoti,t-4)+β5ln(helthexptoti,t-5)+β6ln(helthexptoti,t-6)+ λln(educexptoti,t)+λ1ln(educexptoti,t-1)+λ2ln(educexptoti,t-2)+ λ3ln(educexptoti,t-3)+λ4ln(educexptoti,t-4)+λ5ln(educexptoti,t-5)+ λ6ln(educexptoti,t-6)+vi,t. (1) model realizing ols method: δln(vapei,t)=α+δ9td2003t+…+δ21td2015t+βδln(helthexptoti,t)+ β1δln(helthexptoti,t-1)+β2δln(helthexptoti,t-2)+β3δln(helthexptoti,t-3)+ β4δln(helthexptoti,t-4)+β5δln(helthexptoti,t-5)+β6δln(helthexptoti,t-6)+ λδln(educexptoti,t)+λ1δln(educexptoti,t-1)+λ2δln(educexptoti,t-2)+ λ3δln(educexptoti,t-3)+λ4δln(educexptoti,t-4)+λ5δln(educexptoti,t-5)+ λ6δln(educexptoti,t-6)+vi,t, (2) where: – dependent variable vapei,t – value added per employee in the country i in the period t; – independed variable: helthexptoti,t – total health expenditure (usd) in the country i in the period t; educexptoti,t – total education expenditure (usd) in the country i in the period t; –– β – the coefficient, which reflect impact of health expenditure on productivity in current time; –– β1 ... β6 – the coefficients, which reflect impact of health expenditure on productivity after one to six years; –– λ – the coefficient, which reflect impact of education expenditure on productivity in current time; –– λ 1 ... λ 6 – the coefficients, which reflect impact of health expenditure on productivity after one to six year. h1 hypothesis approval conditions: β>0, p>0,05; λ>0, p>0,05; at least one β1...6>0, p<0,05; at least one λ1...6>0, p<0,05. 6 a. mačiulytė-šniukienė, k. matuzevičiūtė. impact of human capital development on productivity ... in the third step we explore the impact of human capital development on productivity growth through productivity level. based on theoretical assumptions and retrospective studies, we are testing hypothesis: h2  – the quantitatively higher human capital impact on productivity is manifested in the countries with relatively low productivity. two econometric models were conducted for hypothesis testing. in econometric models we used cluster of rlp countries as the base category that will be the starting point for impact assessments. in this group, the estimated impact coefficient will be evaluated directly, and for the rhp countries cluster, the coefficients determined will show the difference from the base category. it should be noted that, we have chosen a time lags taking into account the results obtained in the second stage of the research. model realizing fe method: ln(vapei,t)=α+δ6td2000t+…+δ21td2015t+β21ln(helthexptoti,t-2)+ β22ln(helthexptoti,t-2)·rhpi,t+β31ln(helthexptoti,t-3)+ β32ln(helthexptoti,t-3)·rhpi,t+λ31ln(educexptoti,t-3)+ λ32ln(educexptoti,t-3)·rhpi,t+λ41ln(educexptoti,t-4)+ λ42ln(educexptoti,t-4)· rhpi,t+vi,t. (3) model realizing ols method: δln(vapei,t)=α+δ7td2001t+…+δ21td2015t+β21δln(helthexptoti,t-2)+ β22δln(helthexptoti,t-2)·rhpi,t+β31δln(helthexptoti,t-3)+ +β32δln(helthexptoti,t-3)·rh pi,t+λ31δln(educexptoti,t-3)+ λ32δln(educexptoti,t-3)·rhpi,t+λ41δln(educexptoti,t-4)+ λ42δln(educexptoti,t-4)·rhpi,t+vi,t, (4) where: – dependent variable vapei,t – value added per employee in the country i in the period t; – independed variable: helthexptoti,t – total health expenditure (usd) in the country i in the period t; educexptoti,t – total education expenditure (usd) in the country i in the period t; – β21 – the coefficient reflecting the impact of health expenditure on productivity in the base group of countries (rlp) in the second year after the costs incurred; – β22 – the coefficient reflecting the difference between the impact of health expenditure on productivity in the rhp countries relative to the rlp countries, in the second year after the costs incurred; – β31 – the coefficient reflecting the impact of health expenditure on productivity in the base group of countries (rlp) in the third year after the costs incurred; – β32 – the coefficient reflecting the difference between the impact of health expenditure on productivity in the rhp countries relative to the rlp countries, in the third year after the costs incurred; – λ31 – the coefficient reflecting the impact of education expenditure on productivity in the base group of countries (rlp) in the third year after the costs incurred; – λ32 – the coefficient reflecting the difference between the impact of education expenditure on productivity in the rhp countries relative to the rlp countries, in the third year after the costs incurred; – λ41 – the coefficient reflecting the impact of education expenditure on productivity in the base group of countries (rlp) in the fourth year after the costs incurred; business, management and education, 2018, 16(1): 1–12 7 – λ42 – he coefficient reflecting the difference between the impact of education expenditure on productivity in the rhp countries relative to the rlp countries, in the fourth year after the costs incurred. hypothesis approval conditions: β21, β31, λ31, λ41 >0, p<0,05; β22, β32, λ32, λ42 >0 or <0, p<0,05. 3. estimation results and discussion as it was explained above, in the first stage of estimation eu member states (except luxembourg and croatia) were divided into relative high productivity (rhp) and relative low productivity (rlp) clusters (see table 1). table 1. eu member states by productivity level (results of cluster analysis) rhp cluster ireland, austria, belgium, denmark, spain, finland, france, united kingdom, italy, netherlands, sweden, germany. rlp cluster bulgaria, cyprus, czech republic, estonia, greece, latvia, lithuania, poland, malta, portugal, romania, slovakia, slovenia, hungary. in the second study stage, effect of all countries education and health expenditures on productivity were examined in order to determine the duration of impact and confirm or deny h1 hypothesis. to achieve this goal regression analysis was used: fixed effects and ordinary least squares models (equations 1 and 2). the results of the research indicate that statistically significant positive effect of health expenditure on productivity is manifested in the second and third years after the costs incurred. statistically significant positive effect of education expenditure on productivity is manifested in the third and fourth years after the costs incurred. this result was obtained by using both regression analysis methods (fe and ols), which confirms the reliability of the results obtained. these estimation results are in line to prove first hypothesis. it is not surprising, that it takes time for health and education expenditures to transit into higher productivity. according to the results of estimation, it can be argued that 1% increase the total health expenditure, in two statistically significant years of impact, productivity would increase on average by 0.26% (based on the fe model) to 0.31%. (based on the ols model). the 1% increase in education expenditure, over a period of statistically significant impact, would result an increase in productivity by an average of 0.18%. (based on the fe model) to 0.23% (based on the fe model). therefore, estimations additionally disclosed that increase of health expenditure influences productivity more comparing with increase of education expenditure. these results are surprising. in traditional point of view education is more important for productivity improvement comparing with society health. nevertheless, such result could occur due to the high level of education achieved by eu countries. in the third study stage, we have investigated differences in human capital impact on productivity in eu relatively high and relatively low productivity clusters. the estimation was conducted taking into account that, statistically significant positive impact of human capital on productivity is manifested after time lag. estimation results are presented in table 2 (3 ir 4 equations). 8 a. mačiulytė-šniukienė, k. matuzevičiūtė. impact of human capital development on productivity ... before discussing the results of the research, first of all it should be noted that realized fe and ols models differ in reliability. this conclusion is based on information criteria. the lower value of schwarz, akaike and hannan-quinn criteria means higher reliability (konishi & kitagawa, 2008). so, based on the obtained values, it is concluded that the results of the realization of ols models are more reliable. for this reason, when assessing the impact of human capital development on productivity in rhp and rlp clusters, discussion of findings are based on the ols model results. table 2. research findings on the impact of the human capital development on labour productivity in european union countries clusters coefficients 1 and 2 equations coefficients 3 and 4 equations fe ols fe ols α 0,724* 0,030*** α –0,365 –0,053*** δ8 0,049*** δ6 –0,079*** – δ9 0,103*** 0,036*** δ7 –0,060** 0,074*** … … δ20 0,009 –0,076*** δ20 0,236*** –0,002*** δ21 0,067*** –0,017 δ21 0,262*** 0,104*** β –0,008 0,039 β21 0,148*** 0,181** β1 0,013 0,033 β22 –0,122** –0,190** β2 0,135*** 0,181*** β31 0,131** 0,159** β3 0,127*** 0,130*** β32 –0,135** –0,133** β4 0,048 0,025 λ31 0,110** 0,093** β5 0,016 0,045 λ32 –0,125*** –0,051** β6 0,025 0,029 λ41 0,102*** 0,082*** λ 0,001 0,003 λ42 –0,089** –0,091** λ1 0,050 0,019 λ2 0,022 0,008 λ3 0,108*** 0,093*** λ4 0,121*** 0,083** λ5 0,055 –0,007 λ6 0,009 0,012 n 390 364 n 442 416 r2kor. 0,793 0,682 r2kor. 0,488 0,579 dw 1,771 1,867 dw 0,403 1,825 information criteria schwarz akaike hannan-quinn –1137 –1334 –1257 –1113 –1210 –1171 schwarz akaike hannan-quinn –556 –762 –680 –1075 –1176 –1136 note: * indicates significance at the 10 percent level; ** indicates significance at the 5 percent level; *** indicates significance at the 1 percent level. business, management and education, 2018, 16(1): 1–12 9 results of regression analysis show, that higher education and health expenditure positively correlate with productivity in both clusters. however, differences of human capital impact on productivity between clusters are statistically significant. it is seen that impact of education and health expenditure on productivity is bigger in countries with relatively low productivity level compared with countries that have relatively high productivity level. this evidence is in line with h2 hypothesis. estimation results show that the increase in total health expenditure by 1% determines the average increase in productivity by 0.34% in relatively low productivity countries and 0.17% in relatively high productivity countries during a statistically significant period of impact. after increase in total education expenditure by 1%, productivity increases by 0.18% in relatively low productivity countries and 0.03% in relatively high productivity countries in two years of a statistically significant period of impact. it is likely that eu countries with relatively low productivity can increase productivity investing in education and health care more comparing with relatively low productivity countries because rhp countries have exhausted their productivity potential. over 1995–2015 period, productivity in rlp countries on average increased by 52%, while in rhp countries – by 237%. over the analysis period, the value added per employee increased in lithuania (489%), latvia (435%) and romania (426%). at the same time, it has grown in germany (15%), uk (30%) and finland (34%). conclusions theoretical analysis reveals that results of empirical research vary according to analysis period and primary productivity level. low labour productivity is one of the main indicators decreasing eu competitiveness. so it is important to analyse the factors influencing labour productivity. as it was show in theoretical analysis human capital is treated as education and health and it influences country’s economic growth productivity and national competitiveness. results of examining the impact of human capital development, expressed by health and education expenditure, on eu member states productivity revealed positive and significant impact. this effect occurs with two years lag and lasts for two years in case of health expenditure, and after three times lag and also lasts for two years in case of education expenditure. this allows us to argue that human capital is one of source of productivity growth. it was also found that impact of human capital development on productivity is bigger in countries with relatively low productivity level compared with countries that have relatively high productivity level. it can be assumed that this result is influenced by the high level of productivity achieved by rhp countries, i.e. there is probable that these countries have exhausted their productivity potential. references afrooz, a., rahim, k. b. a., noor, z. b. m., & chin, l. 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(2014). do cost of training, education level and r&d investment matter towards influencing labour productivity?. journal economic of malaysia, 48(1), 133-142. https://doi.org/10.17576/jem-2014-4801-11 copyright © 2017 the authors. published by vgtu press. this is an open-access article distributed under the terms of the creative commons attribution-noncommercial 4.0 (cc by-nc 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. creative industries: development processes under contemporary conditions of globalization valerija kontrimienė1, borisas melnikas2 1faculty of creative industries, vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania 2faculty of business management, vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania e-mails: 1valerija.kontrimiene@vgtu.lt (corresponding author); 2borisas.melnikas@vgtu.lt received 21 november 2016; accepted 4 april 2017 abstract. the article deals with the processes of developing creative industries under conditions of a growth in the worldwide economy and globalization, discloses the role of the sector of creative industries and shows its place in the system of the modern global economy. the paper presents a comparative analysis of theories and theoretical approaches intended for the sector of creative industries and its development as well as defines regularities and specificities characteristic of the development of creative industries. particular attention is shifted on the growth and development of creative industries considering the current challenges of globalization and on the most important specificities of the developing sector in the context of the challenges of economic globalization. the paper examines the trends reflecting the place of the sector of creative industries in the economy of the modern world, including the tendencies indicating changes in the export of the products created in this sector. the article considers the issues of developing creative industries and reveals priorities of future research. keywords: creative industries, development processes, globalization, developed countries, developing countries, transition economy countries. jel classification: f01, f60, o31, z10. 1. introduction under conditions of modern globalization, numerous changes covering mainly all areas of socio-economic life are taking place worldwide. the occurring changes may involve alterations classified as highly significant and aimed at forming new-type economic activity and sectors of cultural and technological progress, at promoting a rapid growth of similar sectors and at causing an increase in consumption volumes and in the role of the products produced in these sectors. in turn, the sector of creative industries can be mentioned as having crucial importance among the sectors of new-type economic activity, culture and technological progress: this sector in particular representatively b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2017, 15(1): 109–126 doi:10.3846/bme.2017.340 mailto:valerija.kontrimiene@vgtu.lt https://doi.org/10.3846/bme.2017.340 110 v. kontrimienė, b. melnikas. creative industries: development processes under contemporary conditions of globalization characterizes the dynamism of the modern era of globalization and focuses on radical outbursts, tendencies towards innovation and creativity. the sector of creative industries and the processes of its development reflect challenges and innovations inherent in the contemporary public life and become a unique symbol of both new values and aspirations as well as a completely new concept of future prospects. the sector of creative industries noticeably turns into an enormously important part of a modern economy. creative industries appear among the most dynamic sectors of modern economies playing an increasing role for economic growth and social welfare. as a sector of economy, creative industries can be accepted as an area marking the traditions of long-term historical development and as a brand new field, the progress of which has recently started. the traditions of long-term historical development reflect the fact that different creative, industrial and service-providing activities forming the sector of contemporary creative industries and attributed to this particular area have existed and historically developed for a long time. some of the above introduced activities were known and stimulated by the oldest civilizations: in this case, further emerging, historically formed and multiply experienced long lasting traditions and trends characteristic of creative industries can be properly examined. on the other hand, a modern sector of creative industries can be seen as a completely new evolving area under the living conditions of contemporary society: creative industries, as a new sector of economy, is characterized and becomes unique by the fact that, under the living conditions of contemporary society, this sector combines creative, industrial and service-providing activities that were not connected to a common unified system within the previous practical activity and did not form a uniformly considered phenomenon of socio-economic development as well as cultural, scientific and technological progress. thus, it is clear that “creative industries can be defined and explored both as certain wholeness characterized by a broad variety of creative, industrial and service-providing activities typical of historically determined long lasting traditions and trends and as a contemporary formed and an extremely rapidly evolving sector of a modern economy” (melnikas 2016). in addition, it should also be noted that both, creative industries as a whole and the sector of creative industries as a part of the modern economy, are specific about new and evident integrity and require fairly deep and broad scientific knowledge and testing. an area crucially important for scientific research on creative industries covers progress in creative industries and further development considering the current challenges of globalization: the evident orientation of the growth and development of creative industries to global markets is one of the most important attributes of the industries. as for research on creative industries, the above introduced circumstance determines the need to primarily focus on investigating the impact of globalization factors on creative industries, their growth and development. at the same time, this factor clarifies the purpose of this publication and the contents of the material provided in the paper. 111 business, management and education, 2017, 15(1): 109–126 in view of the fact that the sector of creative industries is growing to be a more and more important part of the modern economy, the ability to prepare, propose and implement highly effective and efficient measures for developing and improving this sector is of crucial importance. sequentially, this requires serious and profound scientific knowledge and research taking into account various fields of the development of creative industries strongly considering challenges for modern globalization and progress in the worldwide economy. it should be noted that a scientific problem that requires serious attention may occur due to the fact that the present practice of developing creative industries does not extensively consider a number of specific circumstances characteristic of creative industries and their growth, no advantage in using knowledge about the patterns typical of the development of creative industries can be observed and the advanced practical experience of developing creative industries accumulated in different countries is not adequately summarized. in general, the available scientific knowledge and research intended for creative industries and their development are clearly insufficient and inadequate for up-to-date needs and challenges: this circumstance also reflects the necessity and relevance of research on creative industries and their development. the publication is aimed at disclosing the main point of creative industries and their development thus highly focusing on the challenges faced under conditions of globalization and on highlighting the role of creative industries in the modern economy. the article presents a detailed research description that mainly focuses on the specificities and regularities of developing the sector of creative industries. the conducted research concentrates on highlighting, identifying and describing the specificities and regularities of developing creative industries as an exceptionally significant and specific sector of economy, paying particular attention on various circumstances of globalization. research methodology involves a comparative analysis of different theories and theoretical approaches as well as an economic statistical analysis of the development processes of creative industries. 2. creative industries and their development: main theoretical approaches creative industries and their development, including globalization conditions, is a completely new area of both practical activity and scientific knowledge and research. it is clear that this area can be characterized by a variety of identified and investigated issues as well as by ongoing and upcoming research and practices. an evident point is that the currently existing theoretical approaches to creative industries and their development also preserve diversity and focus on different aspects and priorities of developing creative industries. 112 v. kontrimienė, b. melnikas. creative industries: development processes under contemporary conditions of globalization a broad variety of scientists and experts working in different fields diversely define creative industries and their development and very differently understand, accept and assess the issues of a growth in creative industries. “economists, regional development agencies, historians, government policymakers, business strategists, lawyers and educationalists have a different take on the topic, but they all have something to contribute to the analysis. as a result, there are important insights scattered across many domains, using different definitions, conceptual frameworks and methodologies for different instrumental purposes” (hartley et al. 2013). however, as a number of well-known researchers in the field of creative industries claim “creative industries studies now has a robust conceptual toolkit to analyze and solve real problems in cultural life, business strategy, public policy, critical understanding and intellectual advancement alike” (hartley et al. 2013). creative industries, as a concept, emerged not a long time ago, in the late 1990s, as a model of post-industrial development linked to rapid urban reproduction in the uk. however, it seems that there is a contradiction in terms creative industries for the term creative is hardly could be combined with the term industries. according to the common definition, being creative means having the skill and ability to produce something new, specially a work of art; showing this ability and involving the use of skill and imagination to produce something new or a work of art. in other words, creativity is a part of human identity, something which most people consider as a part of their nature. describing the term industry, we deal with the concept from a totally different sphere, such as economy. thus, industry is the production of goods from raw materials, especially in factories as well as the people and activities involved in producing a particular thing. the question is, how do these two dramatically different areas could be combined and whether do achievements in one sphere contribute to another and vice versa? at this point, the saying “creativity is the power to connect the seemingly unconnected” explains a lot. going back to the formal origins of the concept of creative industries, it is important to mention the creative industries mapping document, produced by department of culture, media and sport (dcms) which was established by british labor government. the newly elected british labor government, headed by tony blair, was ready to invest in creativity in 1990s because, as tony blair claimed “our aim must be to create a nation where the creative talents of all the people are used to build a true enterprise economy for the 21st century – where we compete on brains, not on brawn” (blair 1999). it was the first attempt to identify creative industries, and “as we witness it at present, the term ‘creative industries’ it was a very successful british export” (flew 2012). thus, despite the fact that there is, on the one hand, a contradiction in the term ‘creative industries, on the other hand, the concept of creative industries was increasingly important not only for the uk national prosperity but for all economically advanced and developing countries. the concept of creative industries, first of all, “put creativity and culture at the center of british national life in unconventional way, by bringing together arts, media, software and other sectors with more integrated, not 113 business, management and education, 2017, 15(1): 109–126 fragmental, approaches to cultural policy” (flew 2012). next, the creative industries mapping document (cimd) produced in 1998, underlined the growing economic importance of creative industries, identified as 13 sectors in terms of the main economic variables, such as value added, employment, national income. besides this, the cimd played “a critical formative role in establishing an international policy discourse towards a productive engagement with digital technologies, to develop new possibilities for alignment of creativity and intellectual capital with these new engines of economic growth” (flew 2012).therefore, one of the main issues of this article is to draw attention to the contribution of the sector of creative industries to exports and job creation in wider economic context, in the context of globalization. the context of globalization was chosen with intention to take the holistic approach to creative sector. in terms of the modern concept of globalization, we consider this process as the fact that different cultural and economic systems around the world are becoming connected and similar to each other. joshi defines globalization as “the process of integration and convergence of economic, financial, cultural, and political systems across the world brought about by breakthroughs in information and communication technology (lct) and means of transport and the breaking down of artificial barriers to the flow of goods and services, capital, knowledge, and (to a lesser extent) people across the borders” (joshi 2014). nowadays, the main role in the process of globalization acts new technology and innovation. as davis and sigthorsson claim, “cultural change, aesthetic change, and technological change are not easily separated; they come along all at once, wrapped up in one another” (davis, sigthorsson 2013). at this point, we could speak about synergy, one of the attributes of globalization processes, which is very positive in the sector of creative industries. however, any change brings uncertainty and risk. “making something new, commercially, is an inherently risky business (…). it is this inherit risk that puts pressure on business in creative industries” (davis, sigthorsson 2013). people, in the era of globalization, especially in the field of creative industries, in order to be needed at work, sometimes have to switch sectors; have to be extremely self-confident in trying new ways of working; have not to be afraid of changing place, environment or adapting new skills, and, of course, they should accept existence of tough competition, along with emerging of new, previously not existing jobs. thus, on the one hand artistic personalities, being a part of creative industries, have to be spontaneous, creative, open to new ideas and risks, flexible and innovative. on the other hand, creative staff could be limited by time, funds, formal rules and other objective restrictions which are essential to manage and control creative process as a part of business. therefore, it could be claimed, that the expression of duality, as one more important characteristic of globalization, which directly influences the field of creative industries, appears. the driving force for the creative industries is “the search for new goods and services in the modern market, as well as the formation of the new consumer society” (lash, urry 1994). the term creative industries forms a new economical sphere where the commodification of culture, talent, ideas is used for expression and improvement 114 v. kontrimienė, b. melnikas. creative industries: development processes under contemporary conditions of globalization of communication and socializing, as well as bringing considerable benefits to the area of traditional industries, in terms of implementation innovation and new technologies (bakhshi, throsby 2010; lankauskienė 2016; lapinskienė et al. 2015; bakhshi, throsby 2012; peleckis 2016) the cimd defined the creative industries as “those activities which have their origin in individual creativity, skill and talent and which have the potential for wealth and job creation through the generation and exploitation of intellectual property” (dcms 1998). obviously, there was a number of critiques of the dcms mapping document. in the uk, there were released two alternative approaches of creative industries, developed by nesta (national endowment for science, technology and the arts) and by the work foundation. both analytical frameworks developed more thorough approach and classification of creative industries. on the other hand, the object of critique was the very idea of encompassing a different set of industries and practices was highly odd for a number of scientists (pratt 2005; garnham 2005; howkins 2001; warren, jones 2015; eisenberg, gestrich 2012). researchers in the field of creative industries are still arguing that the definition of dcms of creative industries is simultaneously too broad and too narrow. after the cimd was released by the uk government, a number of countries carried out the study on creative industries as well. as a result, there is a variety of definitions of creative industries defined by a number of countries, international agencies and authoritative researches (hartley et al. 2013; potts 2011; cunningham 2002; howkins 2001; garnham 2005; florida 2002; lash, urry 1994). according to terry flew, there are five cases which have to be considered: the eu, north america, east asia, australia, new zealand and strategies proposed by unesco and unctad (flew 2012). however, this article here only lists a series of definitions and models of creative industries which have significant worldwide effect. it is difficult to decide which definition of creative industries is more appropriate or attractive. the attractiveness of each model may be different, depending on the analytical purpose, economic policy discursive views and shifts and the history of the country. however, over the time a number of standardized models and classification systems of creative industries that apply across the whole creative economy were formed. among the ones there are: symbolic texts model, the work foundation concentric cycles model, and unesco institute for statistics model, uk dcms model, unctad model, wipo model, china model and americans for the arts model. in this paper the authors are going to evaluate four, the most prominent, models of creative industries such as: uk dcms model, unctad (united nations conference on trade and development) model, wipo (world intellectual property organization) copyright model, china model and americans for the arts model. the reason behind this preference is the following: the other models, symbolic texts model and the work foundation concentric cycles model, provide too complicated, multi-layered, internally differentiated approach of creative industries, as an alternative analytical framework for the dcms. unesco institute for statistics model emphasizes and promotes the cultural sector with growing importance attached to the contribution of culture to economic and social progress and refers to creative industries as expanded cultural domains. wipo model 115 business, management and education, 2017, 15(1): 109–126 will be briefly discussed in the following evaluation of the most adapted models of creative industries. the uk dcms model consists of 13 sectors. the classification of creative industries, set in this model, played a critical role in establishing an international policy discourse for what the creative industries are. despite the fact, that some sectors, which are included in creative industries, are laborintensive with comparatively low economic performance (art, music, performing arts, crafts) and some are capital-intensive and commercially-oriented, (tv, radio, filming) the main consideration behind the uk dcms model was that “creative industries drew upon the new concept of convergence to argue that the future of arts and media in britain lay in transformation of dominant policy discourses towards a productive engagement with digital technologies to develop new possibilities for alignment of british creativity and intellectual capital with these new engines of economic growth” (flew 2012). the concept of creative industries in developing countries was promoted by unesco and unctad (the united nations commission on trade, aid and development). however, unesco has preferred to refer to the cultural industries rather than creative industries. unesco has defined the cultural industries as “industries which combine the creation, production and commercialization of creative contents which are intangible and cultural in nature, including printing, multimedia, audiovisual, photographic and cinematographic productions, crafts and design” (unesco 2006). the creative industries, according to unesco, include the cultural industries, activities such as architecture and advertising and the industries in which the product or service contains an element of artistic or creative endeavor. unesco in its released document “understanding creative industries: cultural statistics for public policy making” has argued that exports of cultural goods were rising from 1994 to 2002, at fast growth rates in low-income and middle-income countries, while in high-income countries the growth rates were low. in 2009, unesco published another document which was aimed to outline the growing importance of culture to economic and social developments and the impact of globalization and significant growth in international cultural trade (unesco 2009). in 2008, unctad released “creative economy report” in which the following concept of creative industries was framed: the creative industries: – are the cycles of creation, production and distribution of goods and services that use creativity and intellectual capital as primary inputs; – constitute a set of knowledge-based activities, focused on but not limited to arts, potentially generating revenues from trade and intellectual property rights; – comprise tangible products and intangible intellectual or artistic services with creative content, economic value and market objectives; – are at the cross-road among the artisan, services and industrial sectors and constitute a new dynamic sector in world trade. 116 v. kontrimienė, b. melnikas. creative industries: development processes under contemporary conditions of globalization the unctad model is based on the distribution of all the activities of the creative industries into four main areas: heritage, the arts, media and functional products and identifies creative industries as a number of interconnected sectors that operate across these four areas. unctad has more explicitly championed the role of creative industries as a new engine of economic growth in developing countries (flew 2012). from the wipo perspective, the creative industries may be divided into four groups according to the degree of use of copyright material. the most important are core industries, which are generally regarded as synonymous with copyright industries. the core industries are wholly engaged in the creation, production and manufacturing, performance, broadcast, communication and exhibition, or distribution and sales of protected works. a second group, the interdependent industries, comprises those industries that are engaged in the production, manufacture and sale of equipment whose function is to facilitate the creation, production or use of works and other protected subject matter. a further group, the partial industries, includes those in which a portion of the activities is related to works and other protected subject matter, such as architecture and design. the last category comprises the non-dedicated industries. they include general wholesale and retailing, general transportation, and the internet (unctad 2008). according to the beijing (china) model, the culture creative industries were divided into nine categories: culture and arts, press and publication, radio, television, film, software, network and computer services, advertising exhibition, art trade, design services, travel and entertainment, other support services (unctad 2008). however, “in asia city-states such as singapore and hong kong, with their historic affinities with british culture, developed uk dcms model, whereas countries such as china, taiwan and south korea developed different policies” (flew 2012). as for americans for the arts model, “it adopted a very narrow approach to define the creative industries and only include those industries which are related to the creation and distribution of the arts” (unctad 2008). in the americans for the arts model, such industry-oriented sectors as software and computer games are excluded in order not to overestimate the economic contribution of creative industries. moreover, they think “although the development of those industries requires creativity, they are not arts-centric and do not meet the u.s. understanding of the creative industries” (unctad 2008). the following conclusions have to be made: first, different definitions of creative industries have a different understanding on what creative industries are and what content should be included in the sector of creative industries. second, dcms model is industries-based model. the framework of this model is quite broad but it does not include all activities and industries that are related to the sector of creative industries (as it excludes cultural heritage and tourism). as cunningham critically argues, “the logic of creative industries extends its trajectory outwards to sectors such as sport and entertainment to knowledge-intensive service industries” (cunningham 2002). third, the wipo copyright model is copyright-based model and has the distinct characters 117 business, management and education, 2017, 15(1): 109–126 compared with other models. copyright, according wipo model, is the core of all the content of creative industries. fourth, the unctad model is a fuse of cultural-based, industries-based and copyright-based model and emphasizes the role of creative industries as a new engine of economic growth in the age of globalization. fifth, china creative model looks similar with the dcms model and also is the industries-based model. sixth, the americans for the arts model is different from the rest of the models because the main reason in this classification system, differently from the dcms, is not no overestimate the economic contribution of creative industries. for this reason such industry-oriented creative industries sectors as software and others are excluded from this model. many authors argue that all models of creative industries could be reduced, enlarged or modified, but the essence of the models, above all, proves a very important idea. the idea is, that creativity eventually was publicly recognized as an economic value and the profound importance of creative industries, as a new engine of economic growth and wealth creation, was proved (hartley et al. 2013; howkins 2001). besides this, bringing together different cultural and creative activities in the era of digital technologies allowed to identify new, mutually reinforcing relationships between different sectors of creative industries which transformed production and distribution platforms for totally new ones and provided opportunity for further scientific research and future interferences. moreover, a standardized set of definitions and a common classification system of creative industries are important as a basis for the formation of coherent integrated economic policies that include relations between creativity, culture and international trade policies. in addition, as a number of scientists point out, it should be noted that the development of creative industries, to a large extent, is determined by various factors reflecting innovation processes and synergy manifestations (vilys et al. 2015; moeran, christensen 2013; goldenberg, mazursky 2002). it is clear that the main idea of creative industries as the development of the economy sector reflects priority orientations towards the generation, dissemination and use of innovations. in turn, the fundamental requirement for innovations and their initiation is the creation of preconditions for synergy: the fact that creative industries cover a wide range of creative activities, including artistic, technical, commercial and other forms of art, shows that this sector is inherently and ingenuously focused on synergy activation and innovation promotion. thus, it can be proposed that the specificities and regularities expressing priorities to innovation activity and synergy activation are apparently inherent in creative industries and their development: the latter condition is highly relevant to understanding the importance and viability of the sector of creative industries, including the global environment. 118 v. kontrimienė, b. melnikas. creative industries: development processes under contemporary conditions of globalization 3. creative industries in the context of the contemporary global economic development: main tendencies creative industries act as a fundamental part of the modern economy. contemporary researchers discuss a number of growth accounting methods and models, for the different high-tech creative industries (lankauskienė 2016; tvrdikova 2016; yih-chang 2016). however, the most important attribute of creative industries, which proves an increasing role of creative industries for economic growth in general, considering the current challenges of globalization, is the dynamic growth of exports of creative goods and services. under modern globalization conditions, an increasing role of the sector of creative industries is visibly reflected in the scientific articles, reports and programmes (nogueira, prutsch 2015; pruskus 2013; černevičiūtė, žilinskaitė 2009; eacea 2014; eur-lex 2012; kūrybiška europa 2014; teisės aktų registras 2015; eu 2014; europos sąjunga 2014; lkt 2014; kkb 2007; lietuvos kino sąjunga 2014; km 2011; dcms 2015b; dcms 2001). with reference to the data suggested by various international organizations, different statistical tables can be compiled which allow analyzing and comparing the dynamics of the export and import of the sector of creative industries on a global scale or taking into account different regions of the world, different countries or groups of countries (unctad 2015; unctad 2013; unctad 2010; dcms 2015a; dcms 2006; lsd 2016). however, appropriate data and comments can be found in the publication by v. kontrimienė (kontrimienė 2016). particular attention is shifted on the common trend reflecting the fact that in both, developed and developing countries, the growth rates of exports of creative goods and services are higher than the growth rates of total exports. moreover, the proportion of exports of creative goods to total exports of goods is substantial, especially in developing countries. according to the figures published in creative economy report 2013, developed countries demonstrate considerably small increase in exports of creative products comparing to developing countries and transition economy countries. thus, the world exports of creative goods more than doubled between 2002 and 2011 years. figures on exports of creative goods in developing countries and transition economy countries, between the same years, even tripled. however, developed countries, according the data, are behind developing and transition economy countries (see table 1). the situation could be explained by a number of different reasons, but the most sufficient explanation is that the countries with rapidly growing economy, such as developing and transition economy countries, are more open to modern ideas, technologies and innovations. however, the situation could be also explained by the fact that a large number of firms have set up their manufacturing activities in developing countries and transition economy countries as the most competitive locations. the foreign trade of creative industries is comprised by trade flows of creative goods and creative services. 119 business, management and education, 2017, 15(1): 109–126 according to creative economy report 2013, world exports of creative goods almost two times exceeded exports of creative services in 2011. however, not all statistical data are available on the volume of creative services. on the other hand, having in mind that creative sector is a driving force of many other industries, the true extend of foreign trade of creative industries could hardly be evaluated. therefore, in the further comparative and structural analysis by developed, developing and transition economies the present research will take in account only flows of exports of creative goods. in order to conduct structural analysis of exports of creative goods as contribution to total exports, there is a need for data on total exports of goods. table 2 displays the data on total exports by economic group from 2005 to 2012 years. as it is seen from the data, total world exports of goods in 2012 reached over us$18 trillion, meanwhile total exports volume of developed economies was over us$9trillion, developing economies us$8trillion, transition economies only us$764 billion. it is remarkable, that total exports volume of developing economies increasing constantly at a fast pace (table 2). the data on exports of creative goods, during the same period, is presented in table 3. world exports of creative goods in 2012 were us$473 billion. the analysis of growth rates of creative goods exports shows the following tendency: from year 2008 to 2012, world evolution of creative goods exports was positive and constituted 5.34 table 1. exports of creative goods by economic group, 2002 and 2011 ($us million) (source: unctad 2013) aspects/ years world developing developed transition economy 2002 2011 2002 2011 2002 2011 2002 2011 total: all creative goods 198 240 454 019 73 890 227 867 123 169 222 597 1 181 3 555 art crafts 17 503 34 209 9 201 23 383 8 256 10 653 45 172 audio visuals 455 492 35 90 417 400 3 2 design 114 694 301 262 53 362 172 223 60 970 127 239 362 1 800 new media 17 506 43 744 4 412 14 607 13 071 28 918 23 219 performing arts 2 754 – 250 – 2 478 – 26 – publishing 29 908 43 077 3 157 8 106 26 061 33 650 690 1 321 visual arts 15 421 31 127 3 474 9 456 11 916 21 631 31 40 120 v. kontrimienė, b. melnikas. creative industries: development processes under contemporary conditions of globalization table 3. exports of creative goods, $us million (source: unctad 2015) year world developed economies developing economies transition economies 2005 287517 164209 121217 2091 2006 313108 178294 132521 2293 2007 364423 225954 136407 2061 2008 417285 242012 172296 2977 2009 375306 196216 176692 2398 2010 416323 206485 207536 2302 2011 489814 231821 254525 3468 2012 473791 197264 272763 3764 2008–2012 growth rates 5.34 –2.39 13.7 8.74 table 2. total exports of goods, $us million (source: unctad 2015) year world developed economies developing economies transition economies 2005 10502488 6340660 3807957 353871 2006 12127771 7130196 4552887 444688 2007 14020775 8179913 5302110 538751 2008 16148864 9121710 6302658 724496 2009 12555778 7082819 5006161 466798 2010 15302138 8254560 6438434 609145 2011 18338967 9628860 7899470 810637 2012 18497485 9445839 8228992 822654 2013 18949351 9707259 8434017 808075 2014 18996581 9754594 8477574 764413 percent. developing countries had on average 13.7 percent of creative goods exports growth rate, which was almost two times higher than the growth rate demonstrated by transition economy countries. however, the lowest growth rate of creative goods exports, which was –2.39 percent, had developed countries (table 3). 121 business, management and education, 2017, 15(1): 109–126 as the structural analysis of creative goods exports by economic group shows, the value of exports of creative goods was ranging from 0.46 percent to 3.31 per cent of total exports of goods in 2012. the highest contribution of creative goods exports to total goods exports show developing countries, 3.31 percent. the lowest contribution of creative goods exports to total goods exports, which is only 0.46 percent, show transition economies (see table 4). table 4. creative goods % of total goods (exports) (source: created by authors) aspects/year 2005 2006 2007 2008 2009 2010 2011 2012 world 2.74 2.58 2.60 2.58 2.99 2.72 2.67 2.56 developed economies 2.59 2.50 2.76 2.65 2.77 2.50 2.41 2.09 developing economies 3.18 2.91 2.57 2.73 3.53 3.22 3.22 3.31 transition economies 0.59 0.52 0.38 0.41 0.51 0.38 0.43 0.46 more information provides table 5, which shows the size of the share of creative goods exports by economic group to total world exports of creative goods. creative goods exports of developing countries constitute more than half of the total creative goods exports. developed countries tried to save their leading position on the market, but as it is seen from the data, in 2011, developing countries significantly outran developed countries with 51.96% of total exports volume. the reason of the difference in the size of the share of the exports of creative goods by economic group lies in their different structure: developed countries have mostly production of higher-value-added creative goods which are produced in comparatively small volumes comparing with low-value-added goods manufactured in huge volume in developing countries. table 5. creative goods % of total world creative goods (exports) (source: created by authors) aspects/year 2005 2006 2007 2008 2009 2010 2011 2012 world 100 100 100 100 100 100 100 100 developed economies 57.11 56.94 62.00 58.00 52.28 49.60 47.33 41.64 developing economies 42.16 42.32 37.43 41.29 47.08 49.85 51.96 57.57 transition economies 0.73 0.73 0.57 0.71 0.64 0.55 0.71 0.79 to sum up, during the analysis of flows of exports of creative goods, the following interferences have to be made: first, total exports of all goods worldwide, from 2005 to 2012 years, more than doubled and accounted for over us$18 trillion in 2014. exports of creative goods worldwide doubled as well, and accounted for us$473 billion in 2012, accounting for 2.74 percent of total exports of goods. second, growth rate of the world exports of creative goods was positive during the same period, with an average growth rate of 5.34 percent. third, the situation was very different in different economies. the 122 v. kontrimienė, b. melnikas. creative industries: development processes under contemporary conditions of globalization developed countries demonstrated negative average growth rate of –2.39 percent during the same period, while exports of creative goods in developing countries grew by 13.7 percent during the same period. transition economies, respectively, showed rather high average growth rate of 8.74 per cent. fourth, developing countries accounted for more than half of total exports of creative goods, 57.57 percent, while developed countries accounted for 41.64 per cent of total exports of creative goods in 2012. developing countries outran developed countries and occupied the leading position in the creative goods exports. this situation suggests that nowadays developing countries play a dominant role in creative industries worldwide. moreover, according to flew, it is anticipated that “international trade in creative goods and services will continue to grow over the coming years, both as a proportion of total world trade and relative to the growth in creative industries production and consumption overall” (flew 2012). as a number of reasons for this statement, flew proposes globalization, as a stimulus to growing consumption of cultural and creative goods and new media, as “the internet makes it easier to access an intangible format through digital downloads” (flew 2012). 4. conclusions the full-scale recognition and development of creative industries are extremely important for both, the global economy and the economic growth worldwide. however, in order to understand the effects creative sector has on the global economy, there is a need for centralized and standardised creative industries approach. in this context, it is important to be focused on the following issues: (1) to clarify the structure of the creative sector, (2) to emphasize the effects creative industries have on working class and its structure, (3) to present precise data on the size of creative sector and its cumulative impact on global economy, (4) to analyse a number of consequences which creative industries have on town and region planning and new economic policy. additionally, it is important to identify the set the most important attributes of creative sector. this article identifies some of these attributes as the following: first, creative industries can be defined and explored both as a broad variety of creative activities of historically determined long lasting traditions and as a contemporary formed sector of a modern economy. second, there is no agreement on one common definition of creative industries: different definitions of creative industries have a different understanding on what creative industries are and what content should be included in the sector of creative industries. third, the era of digital technologies identified new, mutually reinforcing relationships between different sectors of creative industries which transformed production and distribution platforms for totally new ones and allowed to recognize an economic value of creative industries as an engine of economic growth and wealth creation. fourth, as the empiric study shows, the increase of exports of creative goods and services is significant but insufficient condition for the creative industries growth and development. there is a need for the formation of coherent international trade policy and further scientific research in the field of creative sector. 123 business, management and education, 2017, 15(1): 109–126 all statistical data, which are available nowadays, have to be taken with a certain caution. often, it is not full and reliable, especially in the service sector. however, as it was argued above, the service sector nowadays is of special interest and dominates the overall economy. moreover, as the comparative and structural analysis of the present research revealed, in order to increase the effectiveness and competitive advantage of developed countries in the area of creative industries, it is very important to initiate practical measures to foster creativity through education, as well as to attract creative class to the service industries. the progress in creative industries and the further development of the sector of creative industries influence the current challenges of globalization. under globalization conditions, the development of creative industries is characterized by a number of specificities and regularities among which particularly distinctive features and patterns reflect, first of all, priorities of creative activity and creativity; second, the complexity of creative activity and creativity expressed through the inclinations and strengths of artistic, scientific, technical, commercial, etc. creativity in different areas; third, the continuous stimulation of different types of synergies and initiation of innovations take place; fourth, plenty of new opportunities for making the self-fulfillment process of creative people more activate are offered; fifth, new opportunities for economic growth and international cooperation are opened up. in this context, it’s important to highlight that the process of globalization acts as a strong stimulus to growing consumption of cultural and creative goods and new media. besides this, creative industries role needs to be seen as a driving force of new job generation. here, the statistics suggest that for the eu the creative sector accounts for up to 4.5 percent of gdp and nearly 6 percent of total employment. however, this is a case when a substantial contribution of creative industries to total employment show developed countries, whereas developing countries, such as china, account only for 2 per cent of total employment. the situation could be explained by the different structure of cultural creative sector in different economies. developed countries have mostly production of higher-value-added creative goods and services, which is highly laborintensive. developing countries, on the contrary, produce vast of mass, low-value-added manufactured goods, such as toys or cheap imitation jewelry. as authors have suggested, the nature of creative industries gives them their particular character. creative industries embody aspects of different industries, cultures, regions, customs, believes and ethics in particular ways. however, at the same time, creative sector has a significant part to play in new business models, consumption and politics. despite the fact that a wide range of research and theoretical studies were conducted on the subject of creative industries development, further exploration of this sector, as a leading sector in generating international trade, economic growth, employment and social welfare worldwide, is needed due to the limited opportunities to assess its progress. therefore, the sector of creative 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http://www.europarl.europa.eu/atyourservice/lt/displayftu.html?ftuid=ftu_5.13.1.html 126 v. kontrimienė, b. melnikas. creative industries: development processes under contemporary conditions of globalization peleckis, k. 2016. international business negotiation strategies based on bargaining power assessment: the case of attracting investments, journal of business economics and management 17(6): 882–900. https://doi.org/10.3846/16111699.2016.1233511 potts, j. 2011. creative industries and economic evolution. edvard elgar publishing. 199 p. pratt, a. 2005. cultural industries and public policy, international journal of cultural policy 11(1): 31–44. https://doi.org/10.1080/10286630500067739 pruskus, v. 2013. kultūros samprata ir inkultūrizacijos procesas tarpkultūrinės komunikacijos kontekste, filosofija. sociologija 3: 121–130. teisės aktų registras. 2015. įsakymas dėl kultūros ir kūrybinių industrijų politikos 2015–2020 metų plėtros krypčių patvirtinimo [online], [cited 10 july 2016]. 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http://unctadstat.unctad.org/wds/reportfolders/reportfolders.aspx unesco. 2009. creative industries – unesco culture [online], [cited 30 may 2016]. available from internet: http://www.uis.unesco.org/culture/documents/framework-cultural-statistics-culture-2009-en.pdf unesco. 2006. understanding creative industries: cultural statistics for public policy making [online], [cited 28 september 2016]. available from internet: http://portal.unesco.org/culture/en/files/ 30297/11942616973cultural_stat_en.pdf/cultural_stat_en.pdf vilys, m.; jakubavičius, a.; žemaitis, e. 2015. impact assessment of public innovation support in european economic area, business, management and education 13(2): 203–2019. warren, s.; jones, ph. 2015. creative economies, creative communities. ashgate publishing company. 199 p. valerija kontrimienė. in 1995 she graduated from vilnius university, (vu), the faculty of economics, acquired bachelor’s degree in economics. in 2011 she completed master studies at vilnius university, (vu), and the faculty of english philology, acquired master’s degree in philology, english language and english language teaching. in 2017 she completed master studies at the vilnius gediminas technical university, department of international economics and business management. her scholarly interests covers areas such as analysis of creative industries development and modeling of creative industries markets under conditions of globalization. borisas melnikas. dr. habil., professor at the vilnius gediminas technical university, head of the department of international economics and management. author of 400 scientific publications. his scholarly and scientific interests covers areas such as international economics, international management, international business, globalization processes, european economy and european integration, innovations and innovation theory, transformation processes, especially – transformations and transitions in the east – and central european countries. https://doi.org/10.3846/16111699.2016.1233511 https://doi.org/10.1080/10286630500067739 https://www.e-tar.lt/portal/lt/legalact/4a213850378411e5aee6f3ae4a9cfa2d https://www.e-tar.lt/portal/lt/legalact/4a213850378411e5aee6f3ae4a9cfa2d https://doi.org/10.3846/16111699.2013.839475 http://www.unctad.org/en/docs/ditc20082cer_en.pdf http://www.unctad.org/en/docs/ditc20082cer_en.pdf http://www.unctad.org/en/docs/ditc20082cer_en.pdf http://portal.unesco.org/culture/en/ev.php-url_id=35024&url_do=do_topic&url_section=201.html http://portal.unesco.org/culture/en/ev.php-url_id=35024&url_do=do_topic&url_section=201.html verslas_2012_10_2.indd liquidity analysis of innovative and traditional businesses in poland monika bolek1, bartosz grosicki2 university of lodz, faculty of economics and sociology, department of industry and capital market, ul. rewolucji 1905r., nr 41, 90-214 lodz, poland e-mails: 1mbolek@ki.uni.lodz.pl (corresponding author); 2bgrosicki@uni.lodz.pl received 7 november 2012; accepted 3 december 2012 abstract. this paper analyzes the liquidity of polish non-financial companies listed on the warsaw stock exchange, dividing them into two groups: companies with the intangible to fixed assets ratio higher than the median, deemed to be innovative businesses, and companies with the intangible to fixed assets ratio lower than the median, deemed to be traditional businesses. our results show that liquidity management is different in these two groups when analyzing the cash conversion cycle, the current and quick ratios, and liquid assets. the authors use data representing the polish economy on the assumption that it can be considered a model one for other developing countries. poland is at the beginning of this road, completing its systemic transformation after 20 years of efforts, as society has been building an innovation-based economy. skills in the field of financial management will have to be developed as data analysis described in this paper reveals poor liquidity management. the authors will follow the development of the polish economy (called a european tiger) to show how it has changed over time. keywords: liquidity, cash conversion cycle, innovations. reference to this paper should be made as follows: bolek, m.; grosicki, b. 2012. liquidity analysis of innovative and traditional businesses in poland, business, management and education 10(2): 232–247. http://dx.doi.org/10.3846/bme.2012.17 jel classification: g3, m2. 1. introduction over the last twenty years, the most developed countries have shifted from productbased to technology-based economies. poland’s economy has just started changing and it may also be interesting while observing such a change. innovation-based companies have more competitive advantages and the ability to grow in the future, globalized market. innovation and technology can be measured in terms of a company’s intangibles relative to other assets. countries with low levels of intangibles are those with cheap labor and traditional economies, based exclusively on production. the developed economies of the world, especially the usa, have transferred their production processes to china. europe has decided not to give up production process, in contrast to what the americans b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2012, 10(2): 232–247 doi:10.3846/bme.2012.17 copyright © 2012 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 233 business, management and education, 2012, 10(2): 232–247 did. such a situation is connected with social structure and employment management provided by political governments. at the beginning of its integration with the european union, poland was a place of production for the developed countries thanks to low costs and a large labor force. now the situation is different, as an education-based transition has caused society to change from a labor-based to knowledge-based economy. this change will be realized very soon since more and more capital is provided to research and technology transfer based on business-science cooperation. it should be added that poland is following the western model right now, being at the second stage of development after overturning communism. the third one will be connected with catching up with the western economies and joining them in influencing the world. the business situation right now is connected with the european union funds that are influencing poland’s economy positively. as it was mentioned, there is little cooperation between business and science in poland and technology transfer does not exist on a large scale. the european operating program called innovative economy (2007–2013) is to change this situation and support the creation of a transfer mechanism. larger companies listed on the warsaw stock exchange are not innovative in the sense of internal r&d or the use of new technologies. poland’s economy is called a european tiger, but this may change if businesses do not start investing in technology transfer. more and more young people who graduate from universities look for attractive jobs in the fields they are educated in. technology transfer may change both the job market and the financial market. mauboussin and kawaja (1999), who conducted detailed analysis of profitability ratios such as return on invested capital for the s&p 500 companies, found that the source of value creation for companies was shifting from physical to intellectual capital. this statement is helpful in forecasting how the polish market will change if intellectual property plays a more important role in business. the question is how the country, having undergone transformation, will use this knowledge and how this will speed up the process of catching up with the western economy. intangible assets are those assets that are called intellectual property and include: patents, copyrights, trademarks, trade secrets, design rights and design patents, as well as research and development know-how, production/ process information know-how, sales and marketing information, licenses, assembled work force/management, leasehold rights and other assets not having tangible or physical substance (lyroudi, rychter (bolek) 2012). the higher the level of intangible assets the more different the innovation-based business becomes from a traditional one. tim cook, the president of apple corp., one of the leading technology-based companies in the world, states that it products are similar to dairy products: when fresh they are premium class but their value drops very fast within one week, and after two weeks the fridge will stink. thus, inventory in the warehouse may become the main problem for innovative (also technology-based) companies. for traditional businesses inventory may not be a problem. clients and products, invested capital and resources determine the character of a business in a competitive world. these characteristics are specific to innovation-based entities and liquidity will be affected by these phenomena in a special way. clients of 234 m. bolek, b. grosicki. liquidity analysis of innovative and traditional businesses in poland innovation-based companies are always looking for more new products, so companies have to carry out a lot of projects and must have high levels of intangible assets. the capital invested in companies with an innovation profile will be more costly since such projects are more risky and investors will look for higher returns. we can expect intangibles to impact the capital structure, too. resources will contain know-how represented in high levels of intangible assets. liquidity management will be connected with low levels of receivables and inventory, but high levels of cash ready for new challenges. roe and roa will be higher than average. dividends will not be paid, but reinvested. analyzing the problem of developing countries one can consider a business model connecting technical potential with economic value, as it is described in the paper by chesbrough and rosenbloom (2002) concerning the case of xerox. we can analyze this model and try to apply it in an economy without a specific transfer mechanism established yet. at the beginning of transfer, technology does not have a specific value, which will not be determined until after commercialization. this model is the so-called architecture of revenues (chesbrough, rosenbloom 2002) that the company will realize. if there is not enough value created by a new technology, then it can be reduced (rosenbloom, spencer 1996). the business model concept has been developed in many works, e.g. by chandler (1962), who observed diversification connected with imaginative response in the administration of enterprises. developing or transforming countries (the latter name better fits post-communist eastern europe) are spoiled by a bureaucratic frame of mind. ansoff (1965) presented a conscious plan to align the firm to perform in its environment. another problem of developing businesses is linked to excessively self-confident managers who assess the environment without consulting or professional market research. in 1959, e. penrose identified managers as a source of growth arising from the ability to manage additional business. this problem should be also considered as one that occurred a long time ago but is relevant to the current situation of eastern european companies. the position of a company on the market in the technological field helps it launch a new technology (teece et al. 1993; silverman 1999). developing companies should take it into consideration and start building an advantage on the market with one technology first, and then diversify, rather than start with many different ones. adaptation can be a better strategy than goal-focused planning (mintzberg 1979, 1994) in such countries where limited information problem is surrounding the managers (burgelman 1983a, b described a similar problem). the dominance of logic in decisionmaking based on specific rules can be considered when analyzing the question of actions and decisions in business (prahald, bettis 1986) and looking for new opportunities. logic-based behavior is described in many works of abernathy et al. (1983), henderson and clark (1990), christiansen (1997 – semiconductor equipment, disk drives), and tripsas (1997 – typesetting). there is also a problem of spin-offs as technologies not suited to the mainstream production in the parent company. the causes of the difficulty are identified in such areas as the technology itself, the management process, or access to special resources, as it is shown in the following works: henderson (1994 – 235 business, management and education, 2012, 10(2): 232–247 integrative capability investment), tushman and o’relly (1997 – ambidextrous internal process), and christiansen (1997 – complementary assets). a work by chesbrough and rosenbloom (2002) offers a business model for technology-based companies considering such inputs as technological characteristics and potentials, and converts them through customers and market into economic outputs. chesbrough and rosenbloom emphasize a lack of understanding of the meaning of the business model and claim that it is not only about making money, contrary to many books on the subject. recently, there has been an increased interest in liquidity and working capital management both in business and research. the polish market, being a developing one, is affected by managers’ lack of knowledge and experience and many companies are troubled by inadequate liquidity. companies prefer more conservative working capital management to maintain liquidity ratios at higher levels even if investors prefer profitability over liquidity (bolek, wolski 2012). the proper management of a firm’s liquidity may not only protect the firm from financial distress, but it can also offer it a competitive advantage, especially in innovation-based businesses, where products have shorter life cycles. the current and quick ratios have been recognized as the traditional measures of a firm’s liquidity, but both are characterized as static and their appropriateness has been questioned by largay and stickney (1980) and aziz and lawson (1989). other researchers have recommended more dynamic liquidity measures such as the cash conversion cycle (hager 1976; richards, laughlin 1980), the net trade cycle (bernstein 1983), the lambda (emery 1984), and the net liquid balance (shulman, cox 1985). polish market research into liquidity has been presented in several papers; for example, bieniasz and czerwińska-kayzer (2008) reported that the shorter the cash conversion cycle (ccc) the better the metrics of business performance as measured by the current ratio (cr) and quick ratio (qr), their study being based on the polish market. bolek and wolski (2010) found that there is no relationship between the liquidity ratios cr, qr, at and the ccc in the non-financial companies listed on the warsaw stock exchange in poland. according to bolek and wolski (2011), there is a positive relationship between liquidity (cr, qr, and at) and profitability (roa and roe), but not between the ccc and roe in the non-financial companies listed on the wse. lyroudi and rychter (bolek 2012) found that profitability affected the ccc negatively, company size was negatively related to liquidity, and cash flows were not related in a linear manner with the three liquidity measures (ccc, cr, and qr), but revealed a positive relationship with the most liquid assets (the variable c). the objective of this paper is to determine for the non-financial companies listed on the warsaw stock exchange if it is true that the higher the levels of their intangible assets, the shorter their cash conversion cycle, and the better their liquidity. 2. model the main indicators of liquidity are the current ratio (cr) and the quick ratio (qr). the 236 m. bolek, b. grosicki. liquidity analysis of innovative and traditional businesses in poland latter does not take into account inventories (i). high current and quick ratios indicate a firm with a good liquidity position, but if they are too high the company will be overliquid. a high cr or qr can be achieved by having either high levels of current assets (ca) or low levels of current liabilities (cl). they can be defined as: cr = ca / cl, (1) qr = (ca – i) / cl. (2) the liquidity ratios represent the strategy of companies and the higher they are the more conservative the working capital management policy is. the cash conversion cycle (ccc) has been considered a more appropriate liquidity measure, because it has dynamic features as compared to the traditional static measures (cr and qr), as it has been stated by many researchers, such as richards and laughlin (1980), kamath (1989), moss and stine (1993), lyroudi and mccarty (1993), gallinger (1997), lyroudi (2006), and others. the ccc is a dynamic measure of corporate liquidity indicating the number of days it takes a firm to recover the cash it has spent in an operating cycle. a low ccc shows that the firm can recapture its cash from the sales of its products faster. the more cash the firm has, the more liquid it will be in the dynamic sense of liquidity. a high ccc shows that it takes the company longer to recover cash from operating processes, which indicates liquidity problems. a low ccc is connected to reducing inventories, faster receivables collection, and extended payment terms. a negative ccc shows that the firm’s suppliers are financing its growth in sales, usually at zero cost, and that is why payables are included in the cost of goods sold and have no financing cost. innovationbased companies should be characterized by a short ccc if they want to be successful with their products: they should shorten the time their money is invested in the sales cycle to have it available for r&d or promotion. the ccc as a dynamic measure of liquidity can be a very helpful indicator for investors to assess the stocks they are considering investing in, as mauboussin and kawaja (1999) have shown. according to them, the ccc can be used as a measure to identify those companies that are replacing their tangibles with intellectual capital. their analysis regarding s&p 500 companies has revealed that the ccc is lower in those companies that place more value on their intangible assets. based on the model developed by richards-laughlin (1980), the ccc is defined as the sum of the receivables conversion period (rcp) plus the inventory conversion period (icp) minus the payment deferral period (pdp), that is: ccc = rcp + icp pdp , (3) where: rcp = receivables conversion period = 360 / accounts receivable turnover; icp = inventory conversion period = 360 / inventory turnover; pdp = payment deferral period = 360 / payables turnover, 237 business, management and education, 2012, 10(2): 232–247 latter does not take into account inventories (i). high current and quick ratios indicate a firm with a good liquidity position, but if they are too high the company will be overliquid. a high cr or qr can be achieved by having either high levels of current assets (ca) or low levels of current liabilities (cl). they can be defined as: cr = ca / cl, (1) qr = (ca – i) / cl. (2) the liquidity ratios represent the strategy of companies and the higher they are the more conservative the working capital management policy is. the cash conversion cycle (ccc) has been considered a more appropriate liquidity measure, because it has dynamic features as compared to the traditional static measures (cr and qr), as it has been stated by many researchers, such as richards and laughlin (1980), kamath (1989), moss and stine (1993), lyroudi and mccarty (1993), gallinger (1997), lyroudi (2006), and others. the ccc is a dynamic measure of corporate liquidity indicating the number of days it takes a firm to recover the cash it has spent in an operating cycle. a low ccc shows that the firm can recapture its cash from the sales of its products faster. the more cash the firm has, the more liquid it will be in the dynamic sense of liquidity. a high ccc shows that it takes the company longer to recover cash from operating processes, which indicates liquidity problems. a low ccc is connected to reducing inventories, faster receivables collection, and extended payment terms. a negative ccc shows that the firm’s suppliers are financing its growth in sales, usually at zero cost, and that is why payables are included in the cost of goods sold and have no financing cost. innovationbased companies should be characterized by a short ccc if they want to be successful with their products: they should shorten the time their money is invested in the sales cycle to have it available for r&d or promotion. the ccc as a dynamic measure of liquidity can be a very helpful indicator for investors to assess the stocks they are considering investing in, as mauboussin and kawaja (1999) have shown. according to them, the ccc can be used as a measure to identify those companies that are replacing their tangibles with intellectual capital. their analysis regarding s&p 500 companies has revealed that the ccc is lower in those companies that place more value on their intangible assets. based on the model developed by richards-laughlin (1980), the ccc is defined as the sum of the receivables conversion period (rcp) plus the inventory conversion period (icp) minus the payment deferral period (pdp), that is: ccc = rcp + icp pdp , (3) where: rcp = receivables conversion period = 360 / accounts receivable turnover; icp = inventory conversion period = 360 / inventory turnover; pdp = payment deferral period = 360 / payables turnover, hence: ccc = (360ar / sales) + (360inv. / cgs) – (360cl / x), (4) where: x = costs of goods sold + other expenses connected to sales – depreciation. as it was stated, the lower the cash conversion cycle, the sooner the firm can recover its cash from the sales of its products and the more cash the firm will have, hence the more liquid the firm will be. if the ccc is long, it takes the company longer to recover cash. thus, a long ccc would indicate a liquidity problem. the shorter the ccc in innovation-based companies, the faster they rotate their products and are able to sell their inventories and launch new products. it is also important to remember that there must be a relationship between the current and quick ratios and the cash conversion cycle, but it may either be positive as richardslaughlin (1980) argue, or negative, as lyroudi-mccarty (1993) have found. a shorter ccc can be obtained by decreasing the collection period of receivables or the average inventory, or by increasing the accounts payable period. if accounts receivable, which appear in the numerator of the cr, qr, and ccc, decrease, then all three should fall, as the inventory will. furthermore, a reduction in both inventory and receivables may also suggest a reduction in working capital and short-term financing. if short-term financing drops, then the liquidity ratios and the ccc may or may not fall. any change must depend on the relative magnitudes of change in short-term asset and liability changes. as suggested by richards-laughlin (1980), a change could occur only if receivables and inventories were totally financed with long-term funds. according to lyroudi and mccarty (1993), the relationship of the ccc with the cr is negative, while it is positive only with the qr. on the other hand, a higher ccc can be achieved by increasing the receivables conversion period or the inventory conversion period, or by decreasing the payment deferral period. so, if inventories are about to increase, and because they appear in the numerator of the cr, qr, and ccc, all three measures should rise (suggesting that the cr and qr indicate an improvement in a firm’s liquidity position, while the ccc indicates exactly the opposite). in the case of an increase in accounts receivable, the same results would occur. also, if payables decrease, because they appear in the denominator of the cr and qr, the two liquidity indicators would increase (suggesting an improvement in liquidity), while the ccc would also increase, due to a drop in the payment deferral period (suggesting a deterioration in liquidity), as it is stated by lyroudi and rychter (bolek) (2012). 3. hypotheses the first hypothesis investigates the relationship (r) between the ccc and the current and quick ratios. it tests for a negative relationship between the current and quick ratios and the ccc of the firm. if this hypothesis is not accepted, then there is a contradiction between the traditional current and quick ratio view and the ccc, since a high cr and qr and a low ccc indicate a good liquidity position of the firm. the authors examine 238 m. bolek, b. grosicki. liquidity analysis of innovative and traditional businesses in poland this problem on two groups of companies representing innovation-based and traditional businesses to compare the way they behave. a negative relationship is expected to hold between the cr and the ccc and between the qr and the ccc. that is: rccc,cr < 0 and rccc,qr < 0. the second hypothesis examines the relationship between the ccc and each of its component variables to see how changes in accounts receivable or in accounts payable or in inventory levels affect the liquidity of the firm. it requires the ccc to be positively related to the receivables and inventory conversion period and negatively related to the payables deferral period. this analysis is also done for two groups of companies. a positive relationship is expected to hold between the receivables conversion period (rcp), the inventory conversion period (icp) and the ccc and a negative relationship between the payables deferral period (pdp) and the ccc. that is: rccc,rcp > 0, rccc,icp > 0 and rpdp,ccc < 0. the third hypothesis examines the relationship between a firm’s liquidity and its liquid assets. according to deloof (2001), a firm should keep a low level of cash and marketable securities; hence there should be a negative relationship between the ccc and cash. a negative relationship is expected to hold between the ccc and cash and a positive one between the cr, qr and cash. that is: rccc, cash < 0, rcr,cash > 0, rqr,cash > 0. the fourth hypothesis states that technology-based companies are more liquid in the dynamic sense and less liquid in the static sense if they manage the working capital more efficiently than traditional business, which indicates an aggressive approach in working capital management. that is: rcccinnov < rccctrad , r crinnov < r crinnov , rqr,cashinnov < rqr,cashtrad. the sample of observations in this study represents non-financial companies listed on the warsaw stock exchange in the years 1997–2010. 4. results the median has been chosen as an appropriate measure to divide the sample into innovative and traditional businesses using the intangible assets/fixed assets (ia/fa) ratio as an indicator of business type. first, the sample was divided based on the median ia/ fa ratio. innovation-based companies are those for which the ia/fa ratio is higher than the median for all data (0.036 or 3.6% for all 2930 observations). the authors expect to find a difference in liquidity management between these two groups of companies. they will verify the hypothesis using a division into innovative and traditional businesses based on the median ia/fa ratio. the first hypothesis investigates the relationship between the ccc and the liquidity ratios cr and qr. analysis is conducted on both nominal change, denoted as t, and 239 business, management and education, 2012, 10(2): 232–247 percentage change, denoted as tp. in the case of the ccc, changes of variables are calculated as percentages (tpccc), while in the case of cr and qr, being standardized ratios, changes are calculated in the nominal way (tcr, tqr). to verify the hypothesis, correlation analysis was conducted, whose results are presented in table 1. table 1. correlation between the ccc, cr, and qr for innovative businesses (source: created by the authors) no ccc cr qr 1 pearson 0.037 0.033 2 stat. significance (t-stat. value) 0.160 0.208 3 n 1465 1465 the results are not significant and we have to reject hypothesis one for innovative businesses because there is no negative correlation between the ccc and cr, qr, and the positive correlation is not statistically significant. based on the results presented in table 2, the authors reject hypothesis one because a positive correlation is observed between change in the ccc and change in the cr and qr. table 2. correlation between changes in the ccc, cr, and qr for innovative businesses (source: created by the authors) no tpccc tcr tqr 1 pearson 0.068(sign. 95%) 0.068(sign. 95%) 2 stat. significance (t-stat. value) 0.014 0.014 3 n 1307 1307 the more liquid the company is in the static sense the less liquid it is in the dynamic sense. this may be connected to the working capital level in a company and to the conservative approach affecting the ccc by too high inventory, receivables and cash. excessively high levels of current assets may be the result of a conscious policy or a lack of integrated working capital management in innovative companies. in the group of companies representing the traditional business model, with the ia/ fa ratio lower than the median, the results are as follows. comparing the statistical results of the liquidity ratios for traditional business, the ccc is lower, indicating that innovative companies are less liquid in the dynamic sense. on the other hand, the cr and qr are smaller with a higher standard deviation, which shows that in the static sense innovative companies are less liquid. traditional businesses are characterized by a lack of the relevant correlation when we analyze the levels of ccc, cr and qr. the results are presented in table 3. 240 m. bolek, b. grosicki. liquidity analysis of innovative and traditional businesses in poland table 3. correlation between the ccc, cr, and qr for traditional businesses (source: created by the authors) no ccc cr qr 1 pearson 0.000 0.000 2 stat. significance (t-stat. value) 0.999 0.999 3 n 1465 1465 rejecting hypothesis one for traditional businesses, it should be pointed out that in this group of companies there is no correlation whatsoever between the ccc, cr, and qr, while for the innovative sector this correlation is slightly positive, which shows that innovative companies manage liquidity with an understanding of the market needs. the results of correlation analysis of changes in the ratios for traditional business are presented in table 4. table 4. correlation between changes in the ccc, cr, and qr for traditional businesses (source: created by the authors) no tpccc tcr tqr 1 pearson –0.006 –0.006 2 stat. significance (t-stat. value) 0.811 0.812 3 n 1387 1387 comparing the results for the innovative sector (with the ia/fa ratio higher than the median) we can observe lower averages, a negative rate of change, and higher standard deviations. based on these data, we can expect different results for the group of traditional businesses. the correlation is negative, as it was expected, but the significance of these results is at a very low level and thus hypothesis one for traditional businesses should be rejected. hypothesis one is rejected for every scenario indicating a lack of negative correlation between the ccc, cr, and qr. a positive correlation was fund for innovative companies, indicating a preference for higher liquidity both in the dynamic and static sence. the second hypothesis is connected with the ccc and its components. the authors looked for the influence of every component of the measure expecting a positive relationship between the ccc and rcp and icp, and a negative relationship with pdp. correlation analysis was conducted, with the results presented in table 5. table 5. correlation between the ccc and its components for innovative businesses (source: created by the authors) no ccc rcp idp pdp 1 pearson 0.114(sign. 99%) 0.993(sign. 99%) –0.010 2 stat. significance (t-stat. value) 0.000 0.000 0.710 3 n 1465 1465 1465 241 business, management and education, 2012, 10(2): 232–247 the ccc is positively correlated with the rcp and icp. the influence of receivables decisions on the ccc is low, while inventory management influences the ccc at a level of 99%. the correlation with pdp is slightly negative (as was expected), but not significant from the statistical point of view. to confirm the above results, analysis based on changes in levels of ratios was conducted and is presented in table 6. table 6. correlation between changes in ccc components for innovative businesses (source: created by the authors) no tpccc tprcp tpidp tppdp 1 pearson 0.167(sign. 99%) 0.211(sign. 99%) 0.133(sign. 99%) 2 stat. significance (t-stat. value) 0.000 0.000 0.000 3 n 1307 1307 1307 all indicators are positively correlated with the ccc and the results are significant. it is interesting that changes in the pdp indicator positively influence the ccc, even though we expected the opposite result. in the group of companies representing the innovative sector on the warsaw stock exchange we can partially verify the hypothesis positively since a positive correlation was found, as expected, for the rcp and idp, while for the pdp the negative influence was not significant. liquidity management in innovative businesses can be discerned but not at a level sufficient to compete with international corporations. if some money that could be invested in r&d or promotion is tied up in the sales cycle, then some equity must be invested to finance working capital and the return is lower, since the invested capital is higher. such companies may have trouble finding capital on the market to finance their investments. for the group of companies representing traditional business the average values of the rcp, icp, and pdp are lower for traditional businesses as compared with the innovative sector, while the standard deviation is higher. the results of correlation analysis can be different for companies with the ia/fa ratio lower than the median, and the results are presented in table 7. table 7. correlation between ccc components for traditional businesses (source: created by the authors) no ccc rcp idp pdp 1 pearson 0.997(sign. 99%) 0.060(sign. 95%) –0.010 2 stat. significance (t-stat. value) 0.000 0.021 0.696 3 n 1465 1465 1465 receivables and inventory management are positively correlated with the ccc and the results are significant, while the payables deferral period is, as expected, negatively correlated, but the result is not significant. comparing this result with that for the innovative sector, one can see that traditional businesses focus on receivables management while the innovative sector pays more attention to inventory management, because inventory management in the technological sector is connected with the product cycle 242 m. bolek, b. grosicki. liquidity analysis of innovative and traditional businesses in poland and is very short as new innovations are constantly being brought to the market. even so, receivables management is also important and should be integrated with the liquidity and working capital management policy. to confirm the above results the authors conducted analysis based on changes in ratios, with the results presented in table 8. table 8. correlation between changes in ccc components for traditional businesses (source: created by the authors) no tpccc tprcp tpidp tppdp 1 pearson –0.002 0.006 –0.019 2 stat. significance (t-stat. value) 0.955 0.833 0.490 3 n 1387 1387 1387 the average rates of changes are lower as compared with the innovation sector despite the rcp, and the standard deviation factors are higher with the icp being lower. these results confirm that innovative businesses focus on inventory management as the standard deviation ratio is lower in this case. the results are not significant, which indicates a lack of correlation between changes in ccc components. the cash conversion cycle is positively correlated with the receivables conversion cycle and the inventory conversion cycle. a negative correlation between the ccc and the payables deferral period was found, albeit the result is not significant. these results hold for both the innovative and traditional sectors, but the correlation is higher for inventories in the innovative sector and for receivables in the traditional sector. the analysis based on changes in components was irrelevant, suggesting that the methodology based on ratio levels is better in this case. hypothesis two can be partially confirmed indicating a difference in management of ccc components between innovative and traditional businesses. the third hypothesis is connected with the relationship between the liquidity of a company and its liquid assets. as it was suggested by deloof (2001), a company should keep a low level of cash and short-term investments and a negative correlation between the ccc and cash should be recognized as well as a positive relationship between cr, qr, and cash. correlation for innovative companies is presented in table 9. table 9. correlation between liquidity factors for innovative businesses (source: created by the authors) no ratio statistic cash 1 ccc pearson –0.015 2 stat. significance (t-stat. value) 0.579 3 n 1438 4 cr pearson –0.009 5 stat. significance (t-stat. value) 0.726 6 n 1438 7 qr pearson –0.005 8 stat. significance (t-stat. value) 0.862 9 n 1438 243 business, management and education, 2012, 10(2): 232–247 none of the results are statistically significant. to confirm the results, analysis based on changes of factors was conducted. the results are presented in table 10. table 10. correlation between changes in liquidity factors for innovative businesses (source: created by the authors) no ratio statistic tpcash 1 tpccc pearson 0.022 2 stat. significance (t-stat. value) 0.422 3 n 1307 4 tcr pearson 0.026 5 stat. significance (t-stat. value) 0.343 6 n 1307 7 tqr pearson 0.027 8 stat. significance (t-stat. value) 0.333 9 n 1307 none of the results are statistically significant. for innovative businesses, no relationship was found between liquid assets and liquidity ratios, which indicates a lack of liquidity management in this sector of companies. to compare the results with traditional businesses, next analysis was conducted. correlation analysis for the liquidity factors are presented in table 11. table 11. correlation between liquidity factors for innovative businesses (source: created by the authors) no ratio statistic cash 1 ccc pearson 0.082*(sign. 95%) 2 stat. significance (t-stat. value) 0.013 3 n 929 4 cr pearson 0.037 5 stat. significance (t-stat. value) 0.254 6 n 929 7 qr pearson 0.038 8 stat. significance (t-stat. value) 0.247 9 n 929 there is a significant and positive relationship between the cash level and ccc for traditional businesses, which means that an increase in cash and short-term investments is positively related to the ccc. this result is in contrast to deloof’s findings indicating a lack of appropriate liquidity management in companies representing traditional business in poland. 244 m. bolek, b. grosicki. liquidity analysis of innovative and traditional businesses in poland to confirm the above results, analysis based on changes in factors was conducted, and the results are presented in table 12. table 12. correlation between changes in liquidity factors for traditional businesses (source: created by the authors) no ratio statistic tpcash 1 tpccc pearson 0.000 2 stat. significance (t-stat. value) 0.994 3 n 1387 4 tcr pearson 0.006 5 stat. significance (t-stat. value) 0.834 6 n 1387 7 tqr pearson 0.005 8 stat. significance (t-stat. value) 0.840 9 n 1387 none of the results are statistically significant. unfortunately, statistical analysis of both the innovative and traditional sectors reveals unsatisfactory results since the only statistically significant result concerns the positive relationship between cash and the ccc for traditional businesses. thus the third hypothesis should be rejected. the fourth hypothesis states that technology-based companies are more liquid in the dynamic sense and less liquid in the static sense than traditional business, which is indicative of an aggressive approach to working capital management. the results of analysis based on descriptive statistics are presented in table 13. table 13. the average values of liquidity ratios (source: created by the authors) no ratio innovative business traditional business 1 ccc 8583.13 7471.26 2 cr 2.72 4.49 3 qr 2.11 4.20 the ccc for innovative businesses is higher than for traditional ones, which means that, contrary to expectations, traditional businesses have a lower ccc and higher liquidity in the dynamic sense. the static liquidity indicators are lower for innovative businesses than for the traditional sector, as it was expected. the fourth hypothesis should be rejected, which confirms the results of hypothesis one. 5. conclusions this paper presents the results of a study on liquidity of polish companies. transformation from a social-based system to a capital-based one can be considered complete 20 years after the shift took place. now it is time to move from a business model based on cheap labor to one based on technology if the country is to catch up with the western world. such a change is irrevocable since poland participates in strategic eu programs. 245 business, management and education, 2012, 10(2): 232–247 liquidity management is expected to be different for technology-based and traditional businesses, but it is problematic for both groups of companies as is shown in this paper and many other analyses. at an early stage of development it is very difficult to manage liquidity in an integrated system, so managers should realize this skill as one of the more important ones if they want to develop and compete with international corporations, raising their companies’ rates of return and value. poland, being an example of a country in transition, shows a lack of fundamental knowledge in the field of liquidity management both in the innovative and traditional sectors. if the country is to be an european economic tiger, a change in this field is necessary as more aggressive working capital management is crucial for innovation-based companies. the significance of statistical analysis in some areas of liquidity management of companies listed on the stock exchange in warsaw, allows to formulate the following conclusions: 1. leading technology companies better manage liquidity than traditional business companies, 2. technology based companies manage inventory better than the traditional businesses, 3. businesses based on new technologies lead a more dynamic management policy on legal and intellectual assets, 4. management of liquidity among companies listed on the wse requires improvements in all areas if they are to be more competitive. in addition, it can be concluded that the differences related to the management of inventory is related to the 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permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the material cannot be used for commercial purposes. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 / eissn 2029-6169 2014, 12(2): 283–302 doi:10.3846/bme.2014.242 the use of a modification of the hurwicz’s decision rule in multicriteria decision making under complete uncertainty helena gaspars-wieloch department of operations research, faculty of informatics and electronic economy, poznań university of economics, al. niepodległości 10, 61-875 poznań, poland e-mail:helena.gaspars@ue.poznan.pl received 18 october 2014; accepted 08 november 2014 abstract. the paper concerns multicriteria decision making under uncertainty with scenario planning. this topic is explored by many researchers because almost all real-world decision problems have multiple conflicting criteria and a deterministic criteria evaluation is often impossible (e.g. mergers and acquisitions, new product development). we propose two procedures for uncertain multi-objective optimization (for dependent and independent criteria matrices) which are based on the sapo method – a modification of the hurwicz’s rule for one-criterion problems, recently presented in another paper. the new approaches take into account the decision maker’s preference structure and attitude towards risk. it considers the frequency and the level of extreme evaluations and generates logic rankings for symmetric and asymmetric distributions. the application of the suggested tool is illustrated with an example of marketing strategies selection. keywords: multicriteria decision making, optimization, uncertainty, scenario planning, one-shot decision, attitude towards risk, criteria weights, normalization technique, sapo method, marketing strategies selection, business objectives. jel classification: c44, c61, d81, l21, l25, m31. 1. introduction the paper deals with multiple criteria decision making for cases where attribute (criterion) evaluations are uncertain. this topic is investigated by many researchers. (durbach, stewart 2012) provide an impressive review of possible models, methods and tools used to support uncertain multicriteria decision making (e.g. models using probabilities or probability-like quantities, models with explicit risk measures, models with fuzzy numbers, models with scenarios). the number of various contributions devoted to uncertain multiobjective optimization is evidence of the theoretical (dominiak 2009; eiselt, marianov 2014; janjic et al. 2013; michnik 2013b) and practical (aghdaie et al. 2013; ginevičius, zubrecovas 2009; hopfe et al. 2013; korhonen 2001; lee 2012; mailto:helena.gaspars@ue.poznan.pl 284 h. gaspars-wieloch. the use of a modification of the hurwicz’s decision rule in multicriteria decision... michnik 2013b; mikhaidov, tsvetinov 2004; montibeller et al. 2006; ram et al. 2010; suo et al. 2012; tsaur et al. 2002; wang, elhag 2006; watkins et al. 2000) importance of this topic. in this contribution two new procedures (for dependent and independent criteria matrices) designed for multicriteria decision making with scenario planning are presented. the goal of these approaches is to select optimal decisions and generate rankings of alternatives for one-shot decision problems. the proposed methods take into consideration decision makers’ preferences and attitude towards risk. the paper is organized as follows. section 2 deals with the main features of dmu (decision making under uncertainty) with scenario planning. section 3 briefly describes the essence of multiobjective decision making (mdm) and its discrete version (dmdm). section 4 is devoted to methods applied to multicriteria decision making under uncertainty with scenario planning (mdmu+sp). section 5 demonstrates how the sapo method, a modification of the hurwicz’s decision rule which is presented in (gaspars-wieloch 2014d), can be used as a tool in multicriteria optimization under uncertainty. section 6 provides a case study related to the choice of an optimal marketing strategy. conclusions are gathered in the last part. 2. decision making under uncertainty with scenarios according to the knightian definition (knight 1921), decision making under uncertainty (dmu), in contrast to decision making under certainty (dmc) or risk (dmr), is characterized by a situation where future factors (quantitative and qualitative) are neither deterministic nor probabilistic at the time of the decision (complete uncertainty, uncertainty without probabilities). actually the decision maker (dm) has to choose the appropriate alternative (decision, act, project, strategy) on the basis of some scenarios (events, states of nature) whose probabilities are not known (chronopoulos et al. 2011; dominiak 2006; groenewald, pretorius 2011; render et al. 2006; sikora 2008; trzaskalik 2008; von neumann, morgenstern 1944). apart from dmu, dmr and dmc, there is a forth category – decision making with partial information (dmpi) – characterized by probability distributions not known completely (cannon, kmietowicz 1974; dubois, prade 1988; guo 2011; kapsos et al. 2014; klir, folger 1988; kmietowicz, pearman 1984; kofler, zwiefel 1993; michalska 2014; weber 1987). there are many classical decision rules designed for dmu, such as the wald’s criterion (wald 1950), the maximax criterion presented e.g. in (pazek, rozman 2009), the hurwicz’s criterion (hurwicz 1952), the savage’s criterion (savage 1961), the maximin joy criterion (hayashi 2008), the bayes (laplace’s) criterion presented e.g. in (render et al. 2006). the literature also offers many diverse extensions or hybrids of those methods, e.g. (basili 2006; basili et al. 2008; basili, chateauneuf 2011; ellsberg 2001; etner et al. 2012; gaspars 2007; gaspars-wieloch 2012, 2013, 2014a, 2014c, 2014d, 2014e, 2015; ghirardato et al. 2004; gilboa 2009; gilboa, schmeidler 1989; marinacci 2002; piasecki 1990; schmeidler 1986; tversky, kahneman 1992). nevertheless, the 285 business, management and education, 2014, 12(2): 283–302 majority of the extended rules refer to the probability calculus (for instance expected utility maximization, maximin expected utility, α-maximin expected utility, restricted bayes/hurwicz, prospect theory, cumulative prospect theory, choquet expected utility), which is rather characteristic of dmr (or dmu with probabilities). let us remind that according to the knight’s definition the uncertainty occurs when we do not know (i.e. we can not measure) the probabilities of particular scenarios: “when the uncertainty may be measured, it is called “risk” (knight 1921). as it was mentioned before, scenario planning (sp) can be used within the framework of dmu (dominiak 2006; pomerol 2001). sp is a popular and comprehensive decision support tool for considering future uncertainties. it is a technique for facilitating the process of identifying uncertain and uncontrollable factors which may influence the effects of decisions in the strategic management context. the way how scenarios should be constructed is described e.g. in (dominiak 2006; van der heijden 1996). the result of the choice made under uncertainty with scenario planning depends on two factors: which decision will be selected and which scenario will occur. dmu can be presented by means of a payoff matrix where m (the number of rows) denotes the number of mutually exclusive scenarios (s1, …, si, … sm), n (the number of columns) stands for the number of decisions (d1, …, dj, …, dn) and aij is the profit connected with scenario si and alternative dj. we assume in this paper that the distribution of payoffs related to a given decision is discrete and that the set of those profits can be a multiset (a bag). the contribution concerns searching an optimal pure strategy. a pure strategy is a solution assuming that the dm chooses and completely executes only one alternative. meanwhile the mixed strategy allows him or her to select and perform a weighted combination of several accessible alternatives (gaspars-wieloch 2014b; officer, anderson 1968; puppe, schlag 2009; sikora 2008). we recognize both uncertainties: internal (related to dm’s values and judgments) and external (related to imperfect knowledge concerning consequences of action), but in this paper we focus on the latter (durbach, stewart 2012; stewart 2005). existing decision rules differ one from another with respect to the dm’s attitude towards risk which can be measured, for instance, by means of the coefficient of pessimism (α) or the coefficient of optimism (β). note that in this context we do not treat risk as a situation where the probability distribution of each parameter of the decision problem is known, but we mean the possibility that some bad circumstances will happen (dominiak 2006, 2009; fishburn 1984). it is worth emphasizing that some rules find application when the dm intends to perform the selected strategy only once, i.e. the decision is experienced only once (e.g. wald’s criterion, hurwicz’s criterion, savage’s criterion, maximax criterion, maximin joy criterion). others are recommended for people contemplating realization of the chosen variant many times (laplace’s criterion). in the first case, alternatives are called one-shot (one-time) decisions. in the second case, one deals with multi-shot decisions. 286 h. gaspars-wieloch. the use of a modification of the hurwicz’s decision rule in multicriteria decision... this paper focuses on one-shot decision problems which are commonly encountered in business, economics and social systems and have been receiving increasing research interest because of the growing dominance of service industries for which such problems are particularly applicable. typical examples of one-shot decisions include mergers and acquisitions (m&a), emergency management for irregular events, supply chain management of products with short life cycles, new product development and private real-estate investment (guo 2010, 2011, 2013, 2014; liu, zhao 2009). 3. multiobjective (multicriteria) decision making the multiobjective optimization or multiple objective decision making (mdm) is a topic discussed in many contributions because decision making is a part of our life and almost all real-world decision problems have multiple conflicting criteria. usually those problems do not have a single global solution. theoretical issues concerning multigoal optimization are comprehensively treated for instance in (ehrgott 2005; jahn 2004; marler, arora 2004; michnik 2013b; sawaragi et al.1985; trzaskalik 2014). mdm has diverse goals, such as selecting a preferred alternative, ranking alternatives from the best to the worst, sorting the alternatives into ordered classes such as “good” and “bad” (durbach, stewart 2012). there are various methods enabling one to find the set of satisfactory solutions and the compromise solution (i.e. the final choice among efficient solutions) for multiobjective problems, such as ahp – analytic hierarchy process (saaty 1980; podvezko 2009), anp – analytic network process (saaty 1996; azimi et al. 2011), copras-g method (zavadskas, kaklauskas 1996), topsis (hwang, yoon 1981; azimi et al. 2011), saw – simple additive weighting method (churchman, ackoff 1954), goal programming (charnes et al. 1955), e-constraint method (chankong, haimes 1983), lexicographic method (khorram et al. 2010), vikor-s (michnik 2013b), wings (michnik 2013a) and diverse hybrids (e.g. haeri, tavakkolimoghaddam 2012; hsu 2014; wu et al. 2013). multicriteria methods differ according to how they (a) evaluate performances on each attribute and (b) aggregate evaluations across attributes to arrive at an overall global evaluation (durbach, stewart 2012; greco et al. 2010). (marler, arora 2004) divide multi-objective optimization concepts and methods into three categories: (a) methods with a priori articulation of preferences (mpap), (b) methods with a posteriori articulation of preferences (mpsap) and (c) methods with no articulation of preferences (mnap). in mpap the user indicates the relative importance of the objective functions or desired goals (by means of parameters which are coefficients, exponents, constraint limits) before running the optimization algorithm. the preference structure can be defined, among other things, on the basis of aspirations levels (lotfi et al. 1997), utility functions (chang 2011) and weights representing the importance of each criterion (e.g. gaspars-wieloch 2011). mpsap entail selecting a single solution 287 business, management and education, 2014, 12(2): 283–302 from a set of mathematically equivalent solutions. it means that the dm imposes preferences directly on a set of potential final solutions. within mdm, the set of alternatives may be either explicitly defined and discrete in number or implicitly defined via constraints in a mathematical programming formulation (ehrgott 2005). in the first case the problem is discrete (dmdm), in the second one – we deal with the continuous version of multicriteria decision making (cmdm). this contribution is devoted to dmdm. the discrete problem consists of n decisions (d1, …, dj, …, dn), each evaluated on p criteria denoted by: c1, …, ck, …, cp. there are also n×p evaluations of alternatives (dj) in terms of particular criteria (ck), according to some suitable performance measures. let us denote them by aj k. the multi-objective optimization may be analyzed for the deterministic (mdmc – multi-criteria decision making under certainty) or non-deterministic (mdmu, mdmr, mdmpi) case. in the second situation the evaluation of alternatives is complicated by their performance on at least some attributes not being known with certainty (durbach, stewart 2012). in this paper we consider the case of mdmu. 4. multicriteria decision making with scenario planning many mdm models and methods are based on essentially deterministic evaluations of the consequences of each action in terms of each criterion, possibly subjecting final results and recommendations to a degree of sensitivity analysis. in many situations, such an approach can be justified when the primary source of complexity in decision making relates to the multicriteria nature of the problem rather than to the stochastic nature of individual consequences. nevertheless, situations do arise, especially in strategic planning problems, when uncertainty is as critical as the issue of conflicting management goals. in such cases, approaches designed for mdmu become necessary, for instance (a) the multi-attribute utility theory, (b) pairwise comparisons of probability distributions, (c) the use of surrogate risk measures (quantiles, variances) as additional decision criteria, (d) models combining fuzzy numbers with the analytic hierarchy process, (e) fuzzy topsis, and (f) the integration of mdmu and scenario planning (sp) (ben amor et al. 2007; dominiak 2009; durbach 2014; durbach, stewart 2012; keeney, raiffa 1993; liu et al. 2011; michnik 2013b; stewart 2005; triantaphyllou, lin 1996; urli, nadeau 2004; watkins et al. 2000; xu 2000; yu 2002; zaras 2004). (durbach, stewart 2012) state that uncertainties become increasingly so complex that the elicitation of measures such as probabilities, belief functions or fuzzy membership functions becomes operationally difficult for dms to comprehend and virtually impossible to validate. therefore, in such contexts it is useful to construct scenarios which describe possible ways in which the future might unfold. hence, the last example mentioned in the previous paragraph (mdmu+sp: multicriteria decision making under uncertainty with scenario planning) will be considered in this paper. when mdmu+sp is taken into account, the problem can be discrete (the number of possible decisions is finite and 288 h. gaspars-wieloch. the use of a modification of the hurwicz’s decision rule in multicriteria decision... countable) or continuous (the set of decisions is given through constraints), but here, as already mentioned, we only discuss the discrete type. the discrete version of mdmu+sp (dmdmu+sp) consists of n decisions (d1, …, dj, …, dn), each evaluated on p criteria denoted by: c1, …, ck, …, cp and on m, scenarios (s1, …si, … sm). hence, the problem can be presented by means of p payoff matrices (one for each criterion) and p×n×m evaluations. each payoff matrix contains n×m evaluations, say aij k, which signify the performance of criterion ck resulting from the choice of decision dj and the occurrence of scenario si . according to (durbach, stewart 2012; michnik 2013b) mdmu+sp models can be divided into two classes. the first one (a) includes two-stage models in which evaluations of particular alternatives are estimated in respect of scenarios and criteria in two separate stages. class a contains two subclasses: a-cs and a-sc. subclass a-cs denotes the set of approaches considering decisions separately in each scenario before and setting a n×m table giving the aggregated (over attributes/criteria) performance of alternative dj under scenario si. these evaluations are then aggregated over scenarios. in subclass a-sc the order of aggregation is reversed – performances are generated across scenarios and then measures are calculated over criteria. the second class (b) consists of one-stage procedures considering combinations of scenarios and attributes (scenario-criterion pairs) as distinct meta-criteria. there is currently no consensus on the best way to solve uncertain multigoal problems. within the framework of the discrete multicriteria optimization with scenarios, researchers have already proposed, among others, the following techniques: 1. additive aggregation giving a scenario-based utility (stewart 2005); 2. multiattribute value modelling (goodwin, wright 2001); 3. results aggregation over scenarios using a relative likelihood (korhonen 2001); 4. maximization of the worst performance across scenarios (montibeller et al. 2006; ram et al. 2010); 5. dominance relation based on wald’s rule (dominiak 2006); 6. hierarchy and quasi-hierarchy approach – when the dm is able to formulate his preferences in the form of order of criteria (dominiak 2006); 7. distance function between alternatives and different reference points, such as the ideal pessimistic or ideal optimistic point – when the dm can describe weights of criteria (dominiak 2006; michnik 2013b); 8. interactive approach based on the interactive multiple goal programming and potency matrices with criteria evaluation of the ideal optimistic (max-max), ideal pessimistic (max-min) and current pessimistic (min-min) solution (dominiak 2006); 9. interactive approach applying monte carlo simulation (dominiak 2009); 10. combination of hurwicz’s rule with mdm (ravindran 2008; michnik 2013b). 289 business, management and education, 2014, 12(2): 283–302 some of these methods are a little criticized – for instance the approach used by (korhonen 2001) due to the fact that the set of scenarios does not constitute a complete probability space. according to (durbach, stewart 2012), one should not aggregate scenario “probabilities”. in the case of dominance relation, hierarchy, quasi-hierarchy and distance function described in (dominiak 2006) only the worst evaluations of particular alternatives are taken into account, which means that those procedures are rather devoted to a radical pessimist and that they do not fit the solution to the dm’s attitude towards risk (understood as the possibility that some bad circumstances will happen). furthermore, some rules assume that the occurrence of a given scenario with respect to criterion ck does not mean that this state of nature will be the true one in terms of another criterion (ravindran 2008). in such approaches, evaluations from one payoff matrix do not depend on evaluations from other matrices (payoff matrices are totally independent), which is rather rarely found in real decision problems. on the other hand, interactive approaches proposed by (dominiak 2006, 2009) are much desired since they are very flexible – they can be used without any a priori knowledge about dm’s preferences and can also be applied when criteria are on the ordinal scale. in section 5, a new approach for generating rankings of decisions under uncertainty will be presented. we will notice that this procedure has many advantages. firstly, it adjust the recommended solution not only to the dm’s preference structure concerning particular criteria, but also to the dm’s attitude towards risk (measured by the coefficient of pessimism). secondly, if necessary, it allows to treat matrices related to particular attributes as dependent. thirdly, it enables to make a multi-criteria analysis even in problems with objectives defined in different dimensions and scales. fourthly, the new method copes with asymmetric distributions of (aggregated) evaluations. 5. the sapo method for multicriteria decision making under uncertainty the procedure proposed in this section refers to a two-stage model (see section 4). we will consider two cases (i and ii). in the first case (section 5.1.) we assume that payoff matrices related to particular attributes are dependent. thus, for instance, evaluation aij k can be only connected with evaluations aij 1, …, aij k-1, aij k+1, …, aij p-1 and aij p. those values describe the performance of each criterion by decision dj provided that scenario si happens. there is no possibility that, for a given alternative, evaluations concerning particular criteria, come from different scenarios. this assumption implies the necessity of using a-cs model. in the second case (section 5.2) we treat values related to one criterion as independent of evaluations of other criteria. that means that evaluation aij k may be connected with any evaluation aij 1 (i = 1, …, m), any evaluation aij 2 (i = 1, …, m), … and any evaluation aij p (i = 1, …, m). those values describe the performance of each criterion by decision dj assuming that any scenario occurs for criteria c1, …, ck-1, ck+1, …, cp. the second case (ii) allows us to apply a-sc model. 290 h. gaspars-wieloch. the use of a modification of the hurwicz’s decision rule in multicriteria decision... in both approaches, we will take advantage of an aggregate objective function (see saw, section 3) and a modification of the hurwicz’s decision rule, which is described and justified in (gaspars-wieloch 2014d). this modification is called “sapo method”. in contrast to the original version of the hurwicz’s criterion, the sapo method copes with asymmetric distribution of payoffs. even in that case, it recommends logic rankings and provides answers reflecting the dm’s preferences. the procedure aforementioned is designed for one-criterion decision problems and its goal is to find an optimal pure strategy. the essence of the sapo method is to multiply the coefficient of optimism by all payoffs belonging to a suitably defined range of good results (not only the highest payoff) and to multiply the coefficient of pessimism by all values belonging to a properly set range of bad results (not only the worst payoff), according to the level of risk aversion and on the basis of some additional bounds or deviation degrees. the sapo rule takes into account both the level and the frequency of extreme values. the first steps of the procedure combining saw with sapo are common in both cases (a-cs and a-sc): 1. present the multicriteria problem by means of p tables containing n×m evaluations aij k (where i = 1, …, m and j = 1, …, n). 2. if criteria are defined in different scale or/and different units, use a normalization technique for each attribute separately (equation 1 for maximized targets, equation 2. for minimized targets), (gaspars-wieloch 2012, 2015). otherwise, go to step 3. { } { } { } 1,..., 1,..., 1,...,1,..., 1,...,1,..., min ( ) max min k k ij ij i m j nk ij k k ij ij i mi m j nj n a a a n a a = = == == − = − 1,..., ; 1,..., ; 1,...,k p i m j n= = = ; (1) { } { } { } 1,..., 1,..., 1,...,1,..., 1,...,1,..., max ( ) max min k k ij ij i m j nk ij k k ij ij i mi m j nj n a a a n a a = = == == − = − 1,..., ; 1,..., ; 1,...,k p i m j n= = = . (2) 3. define weights for each target (criterion): wk (k = 1, …, p) and declare the coefficient of pessimism (α). 5.1. the sapo procedure based on a-cs model (case i) let us analyze further steps of the sapo(cs) approach – in the first place, criteria are aggregated within scenarios and then obtained values are calculated over scenarios: 4. compute an aggregated measure for each pair of decision dj and scenario si (for each combination (dj,si)) and generate a table with n×m aggregated measures aij or a(n)ij (equation 3 for problems that do not require normalization, equation 4 for problems with normalized evaluations): 291 business, management and education, 2014, 12(2): 283–302 1 p k k ij ij k a w a = = ⋅∑ 1,..., ; 1,...,i m j n= = ; (3) 1 ( ) ( ) p k k ij ij k a n w a n = = ⋅∑ 1,..., ; 1,...,i m j n= = . (4) 5. present the aggregated measures as a non-increasing sequence 1( ,..., ,..., )j j sj mjsq a a a= containing m terms (where m still denotes the number of scenarios, s is the number of the term in the sequence and a1j > amj) for each alternative dj. if the normalization technique was applied in step 2, then, instead of values asj, use measures a(n)sj in step 5 and all further steps. 6. generate the subsequence of good results (ssqj max) and the subsequence of bad results (ssqj min) for each alternative: max max 1 1 1{ : ( ( ) )sj j j j mj sj jjssq a sq a d a a a a= ∈ − − ≤ ≤ ( )max ( max)}sjjssq c a∧ ≤ ∧ → 1,...,j n= , (5) min min 1{ : ( ( ))j sj j mj sj mj j mjssq a sq a a a d a a= ∈ ≤ ≤ + − ( )min ( min)}j sjssq c a∧ ≤ ∧ → 1,...,j n= , (6) where d max and d min signify the allowable degrees of deviation from the highest (a1j) and the lowest (amj) aggregated measure, respectively. the deviation degrees can be set separately for each decision and then, instead of d max and d min, parameters dj max and dj min are applied. the deviation degrees are set arbitrarily by the dm. these parameters ought to satisfy the following conditions: max min 1d d+ < , (7) max min, 0d d ≥ . (8) |ssqj max| and |ssqj min| denote final cardinalities of both subsequences. c is the maximal number of good and bad results computed according to constraint (9): max{1, min{ ,1 } }c m= ⋅ α − α   . (9) equation (5) allows the dm to include in subsequence ssqj max only the elements of the whole sequence which belong to the range determined by d max. for example, if d max = 0.2, a1j = 20, amj = 5, then the elements of ssqj max should satisfy the following constraint [20 0.2 (20 5);20] [17;20]sja ∈ − ⋅ − = . note that the final cardinality of ssqj max is additionally limited by c which depends on the pessimism and optimism indices. closer to 0 and 1 they are, fewer elements subsequence ssqj max can contain. such a relation may be explained by the fact that more radical the decision maker is, more likely, in his or her opinion, one of the extreme values is. if m = 10 and α = 0.2, ssqj max may constist of at the most two elements which, due to the last part of equation (5), must 292 h. gaspars-wieloch. the use of a modification of the hurwicz’s decision rule in multicriteria decision... be the highest. thanks to parameters dmax and α the dm is able to set a subsequence ssqj max which, from his or her point of view, is composed of appropriate values, because formula (5) considers both the subjective evaluation of good values and the dm’s risk aversion. equation (6) has an analogical interpretation. 7. compute averages of good and bad results for each decision: max max max 1 sj j sjj a ssqj av a ssq ∈ = ∑ 1,...,j n= , (10) min min min 1 sj j j sj a ssqj av a ssq ∈ = ∑ 1,...,j n= . (11) 8. calculate the sapo(cs) measure (scsj) for each alternative: maxmin min max 11 (1 ) j jcs jj j m ssqm ssq s av av m m − ++ − = α ⋅ + − α ⋅ 1,...,j n= . (12) parameters min max, ,j jm ssq ssq inserted in condition (12) enable one to take into consideration the size of both subsequences, i.e. the frequency of extreme aggregated measures. scsj is proportional to the number of good values, i.e. the final cardinality of ssqj max, and inversely proportional to the number of bad values, i.e. the final cardinality of ssqj min, because a given alternative is more attractive when it contains many high aggregated measures and few low results. fractions min1 jm ssq m + − and max1 jm ssq m − + are equal to 1 when particular subsequences consist of one term. if |ssqj min| increases, then the first fraction is less than 1, but greater than 0.5. weight min1 jm ssq m + − is a kind of punishment for the alternative whose number of bad results is high because such a distribution of measures is not desirable for the decision maker. on the other hand, if |ssqj max| increases, then the second fraction is greater than 1, but less than 1.5. weight max1 jm ssq m − + is a bonus for the alternative whose number of good results is high since such a value distribution is much desired. 9. select the decision according to equation (13): * arg maxcs csj j j d s= . (13) 5.2. the sapo procedure based on a-sc model (case ii) now, let us check how the remaining steps of the sapo(sc) procedure should be formulated. we assume that evaluations from particular matrices are independent. 4. present evaluations as a non-increasing sequence 1( ,..., ,..., ) k k k k j j sj mjsq a a a= containing m terms (where m denotes the number of scenarios, s is the number of the term in the sequence and ak1j > a k mj) for each alternative dj and within each crite293 business, management and education, 2014, 12(2): 283–302 rion. if the normalization technique was applied in step 2, then, instead of values aksj, use measures a(n) k sj in step 4 and all further steps. 5. generate the subsequence of good results (ssqj k,max) and the subsequence of bad results (ssqj k,min) for each alternative and within each criterion: ( ),max ,maxmax1 1 1{ : ( ( ) )k kk k k k k k kj sj j j j mj sj j jssq a sq a d a a a a ssq c= ∈ − − ≤ ≤ ∧ ≤ ( max)}ksja∧ → 1,..., ; 1,...,k p j n= = , (14) ( ),min ,minmin 1{ : ( ( ))k kk k k k k k kj sj j mj sj mj j mj jssq a sq a a a d a a ssq c= ∈ ≤ ≤ + − ∧ ≤ ( min)}ksja∧ → 1,..., ; 1,...,k p j n= = , (15) where dmax and dmin signify the allowable degrees of deviation from the highest (ak1j) and the lowest (akmj) evaluation, respectively. the deviation degrees can be set separately for each decision (or for each criterion / and for each criterion) and then, instead of dmax and dmin, parameters dj max and dj min (d k,max and dk,min / dj k,max and dj k,min) are applied. as in case i, the deviation degrees are set arbitrarily by the dm and satisfy equations (7)–(8). |ssqj k,max| and |ssqj k,min| denote final cardinalities of both subsequences and c is calculated following equation (9). 6. compute averages of good and bad results for each decision within each attribute: ,max ,max ,max 1 kk sj j k k j sjk a ssqj av a ssq ∈ = ∑ 1,..., ; 1,...,k p j n= = , (16) ,min ,min ,min 1 kk sj j k k j sjk a ssqj av a ssq ∈ = ∑ 1,..., ; 1,...,k p j n= = . (17) 7. calculate the criterion-dependent sapo measure for each alternative: ,min ,max ,min ,max 1 1 (1 ) k k j jk kk j j j m ssq m ssq s av av m m + − − + = α ⋅ + − α ⋅ 1,..., ; 1,...,k p j n= = . (18) skj is proportional to the number of good evaluations connected with dj, and inversely proportional to the number of bad evaluations related to dj. fractions ,min1 kjm ssq m + − and ,max1 kjm ssq m − + have a similar interpretation as in case i. 8. compute an aggregated measure, the sapo(sc) measure, for each decision dj: 1 p sc k k j j k s w s = = ⋅∑ 1,...,j n= . (19) 9. select the decision according to equation (20): * arg maxsc scj j j d s= . (20) note that the number of scenarios considered for particular attributes can be different in case ii, since events from each matrix are totally independent. if such a situation 294 h. gaspars-wieloch. the use of a modification of the hurwicz’s decision rule in multicriteria decision... takes place, it is recommended to apply separate notation for each set of scenarios. for instance, m(k) may denote the number of states of nature assigned to attribute ck and {sk1, …, s k i, …, s k m(k))} may be the set of scenarios connected with this criterion. sapo(cs) and sapo(sc) are methods with a priori articulation of preferences. 6. case study we will illustrate the use of the approach described in the previous section on the basis of a case of marketing strategies (activities) selection and by referring to a very interesting paper concerning the so-called 4p marketing model including product, price, promotion and place (ginevičius et al. 2013). results gathered by (ginevičius et al. 2013) enable one to assess the effectiveness of marketing strategies thanks to a multicriteria evalutation procedure based on the sum of products of criteria values and their weights properly estimated. authors of that contribution develop a hierarchical structure of criteria describing enterprise marketing system. they distinguish 8 criteria of product (e.g. innovations, product design, quality, brand), 7 criteria of price (e.g. initial price, terms of payment, price differentiation), 7 criteria of promotion (e.g. advertising, increase of sales, corporate identity) and 5 criteria of place (e.g. place of sale, sales online). all those criteria are integrated into one generalized quantity and are applied in order to quantitatively evaluate marketing activities. note that if a company is trying to choose the best strategy among a set o potential activities, all criteria values are known before the choice made by the enterprise, since this data constitutes initial parameters of particular strategies. this set of criteria describes factors which are planned and controlled by the company. now, let us analyze possible further steps performed by a fictitious enterprise, say enterprise “e”, which has already evaluated potential marketing activities (connected with a new product development) and selected 4 strategies with the highest measures proposed in (ginevičius et al. 2013). assume that enterprise “e” contemplates realization of one of these activities, but it aims to choose the strategy which will maximize the future annual profit and the market share. increasing these criteria is one of the most important objectives of business. hence, we have two new criteria (apart from 27 initial attributes enumerated by the authors mentioned), but, this time, they are a little beyond the control of the company. they depend not only on the decisions made by the company, but also on some macroeconomic, microeconomic and environmental factors (demand, fashion, population structure, tax mechanism, competitors’ strategies, misfortune, weather and so on). for such criteria (profit and market share) the exact estimation is rather complicated. therefore, instead of using deterministic parameters, possible states of nature may be predicted, for instance by experts. in our example we assume that there are 5 possible scenarios. forecasted (step 1) and normalized (step 2, equation 1) criteria values for each pair (dj,si) are given in table 1. enterprise “e” declares attribute weights, e.g. w1 = 0.4, w1 = 0.6, and the level of pessimism, e.g. 295 business, management and education, 2014, 12(2): 283–302 α = 0.43 (step 3). now, one should choose the appropriate procedure: sapo(cs) or sapo(sc). profits and market shares certainly depend on each other, thus one cannot consider scenario evaluations independently, which means that the first approach is correct. we calculate aggregated measures (step 4, equation 4, table 2, rows 1–5), which are very similar to formulas applied by (ginevičius et al. 2013). then, non-increasing sequences of normalized synthetic values can be generated (step 5, table 2, row 6). in order to define subsequences of good and bad values (step 6), we have to calculate { }{ }max 1, 5 min 0.43,0.57 3c  = ⋅ =  and set deviation degrees, e.g. d max = d min = 0.3. the use of equations 5–6 enables us to find the elements of both subsequences (table 2, rows 7–8). for instance, { }max1 0.600,0.554,0.532ssq = since max1 3ssq c≤ = and ( )0.600 0.3 0.600 0.326 0.600,0.554,0.532 0.600.− ⋅ − ≤ ≤ table 1. annual profit (mln euro) and market share (%): initial (akij) and normalized (a(n) k ij) values (source: created by the author) no annual profit (c1) market share (c2) d1 d2 d3 d4 d1 d2 d3 d4 s1 2.5/0.38 4.0/0.84 4.5/1.00 3.0/0.53 20/0.29 22/0.41 15/0.00 21/0.35 s2 1.3/0.00 2.5/0.38 3.5/0.69 3.0/0.53 32/1.00 18/0.18 19/0.24 17/0.12 s3 1.6/0.09 3.0/0.53 4.3/0.94 2.0/0.22 29/0.82 19/0.24 16/0.06 18/0.18 s4 1.7/0.13 3.0/0.53 2.0/0.22 2.5/0.38 28/0.76 15/0.00 23/0.47 24/0.53 s5 1.5/0.06 3.5/0.69 4.2/0.91 4.0/0.84 30/0.88 17/0.12 16/0.06 24/0.53 table 2. aggregated measures a(n)ij (source: created by the author) no d1 d2 d3 d4 s1 0.326 0.585 0.400 0.424 s2 0.600 0.256 0.416 0.283 s3 0.532 0.354 0.410 0.193 s4 0.509 0.213 0.370 0.468 s5 0.554 0.346 0.398 0.655 sqj 0.60;0.55;0.53;0.51;0.33 0.58;0.35;0.35;0.26;0.21 0.42;0.41;0.40;0.40;0.37 0.66;0.47;0.42;0.28;0.19 ssqmaxj 0.600; 0.554; 0.532 0.585 0.416; 0.410 0.655 ssqminj 0.326 0.256; 0.213 0.370 0.283; 0.193 avmaxj 0.562 0.585 0.413 0.655 avminj 0.326 0.234 0.370 0.238 scsj 0.589 0.414 0.442 0.445 296 h. gaspars-wieloch. the use of a modification of the hurwicz’s decision rule in multicriteria decision... now, let us compute the averages of good and bad results (step 7, equations 10–11, table 2, rows 9–10) and the sapo(cs) measure (step 8, equations 12, table 2, row 11). for instance: 1 5 1 1 5 1 3 0.43 0.326 0.57 0.562 0.589. 5 5 css + − − +    = ⋅ ⋅ + ⋅ ⋅ =       according to equation 13 (step 9) the first marketing strategy (d1) should be selected. the ranking is: d1, d4, d3, d2. note that the coefficient of pessimism has a significant impact on the final decision. if α = 0.90, the ranking is as follows: d3, d1, d4, d2. of course, the change of criteria weights also influences the order of activities (when w1 = 0.6, w1 = 0.4, the order is d3, d4, d2, d1 for α = 0.43 and d3, d1, d2, d4 for α = 0.90). 7. conclusions many rules for the discrete version of uncertain multicriteria decision making with sp have been already developed. methods proposed in this paper: sapo(cs) and sapo(sc) for dependent and independent criteria matrices respectively – are based on the concept presented in (ravindran 2008), i.e. they consider the dm’s risk aversion and they refer to saw and the hurwicz’s rule. nevertheless, in the new approaches the additive weighting method is combined with a modification of the hurwicz’s criterion – the sapo method, which leads to 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http://dx.doi.org/10.1016/j.eswa.2005.09.040 http://dx.doi.org/10.1111/j.1475-3995.2000.tb00195.x http://dx.doi.org/10.1016/0377-2217(87)90168-8 http://dx.doi.org/10.1155/2013/324283 http://dx.doi.org/10.1016/s0165-0114(97)00376-x http://dx.doi.org/10.1016/s0305-0548(01)00068-5 http://dx.doi.org/10.1016/s0377-2217(03)00391-6 creative ecologies: developing and managing new concepts of creative economy jelena stankevičienė1, rasa levickaitė2, monika braškutė3, elinga noreikaitė4 vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania e-mails: 1jelena.stankeviciene@vgtu.lt (corresponding author); 2rasa.levickaite@vgtu.lt; 3monika.braskute@vgtu.lt; 4elinga.noreikaite@vgtu.lt received 10 may 2011; accepted 15 july 2011 abstract. the idea of creativity is becoming more and more relevant and is observed in various fields, such as contemporary economics, technology and science. this article is based on the creative ecology theory which has emerged from the creative economy theory developed by economist john howkins. according to him, it is fundamental to understand the current crisis in the natural environment and economy, and the balance of creativity and control required in our response. the article is based on three research questions: 1) what are the fundamental principles of creativity and the process of sustainable creation; 2) how can one develop high quality ideas and turn them into reality; 3) is it possible for the reckless consuming society to share sustainable creative products and how could this be achieved. creative economy is a rapidly growing sector of world market. howkins (2010) uses the creative ecologies theory to analyse human creativity and abilities to create. creative ecology is presented as “a niche where diverse individuals express themselves in a systemic and adaptive way, using ideas to produce new ideas; and where others support this endeavour even if they don’t understand it”. four aspects (diversity, change, learning, adaptation) of ecological thinking are presented as directly related to creativity and innovations, thus extremely important to any contemporary organisation seeking leadership in the creative economy. looking into the new concept of creativity, authors of the article came to the conclusion that a sustainable relationship between creativity and science is a necessary tool for change, development and management of new concepts of creative economy. the article is based on the project creative ecologies: creating, developing and sharing sustainable ideas presented by the authors in the euroweek 2011 conference water4world. the project received two awards – the 1st prize in the project section and the best project of the euroweek 2011. keywords: creative ecologies, creative economy, new concepts. reference to this paper should be made as follows: stankevičienė, j.; levickai ­ tė, r.; braškutė, m.; noreikaitė, e. 2011. creative ecologies: developing and managing new concepts of creative economy, business, management and education 9(2): 277–294. http://dx.doi.org/10.3846/bme.2011.19 jel classification: b5, l00, z00, z13. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(2): 277–294 http://dx.doi.org/10.3846/bme.2011.19 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 278 j. stankevičienė et al. creative ecologies: developing and managing new concepts of creative economy 1. introduction the concept of creativity is present everywhere and can be observed in various fields, such as contemporary economics, technology and science. surpassing mere technological creation, one should note the creative ecology theory, which is based on creative economy theory developed by john howkins (2007). according to howkins (2010), it is fundamental to understand the current crisis in the natural environment and economy, and the balance of creativity and control required in our response. according to levickaitė and reimeris (2011: 90), creative economy is based on complex of five constituents: creative industries (howkins 2007), creative class (florida 2002), economic values (caves 2002), creative identities (hartley 2008), and creative cities (landry 2006). in this paper, three research questions are put forward: 1) what are the fundamental principles of creativity and the process of sustainable creation; 2) how can one develop high quality ideas and turn them into reality; 3) is it possible for the reckless consuming society to share sustainable creative products and how could this be achieved. according to augustinaitis (2010: 189), the concept of creativity in globalized society is essentially changing. creativity can hardly be taught, although it can be learned. it cannot be separated from talent that gives birth to something out of nothing or adds new features to that something. happily, most of products of the creative industries are ecology­minded, however, very few ideas are proposed on this issue. thus, the theory of creative ecologies is a pioneering attempt. 2. creativity: a brief overview on a postmodern approach as traditional raw materials are being swapped for intellectual resources, individuals, organisations, countries and even the world are becoming more and more dependent on creativity . most researchers of creativity describe this concept as the ability to generate something new. charles leadbeater, the expert of creativity and innovation (2005: 7) sees the creativity as a sublime activity within the reach of understanding and explains it as “novel combinations among diverse ingredients: a new interpretation of an existing work, the use of new materials, style or perspective”. john howkins (2010: 8), another leading authority of creativity, innovation and media, uses a very simple definition, saying that “creativity is the use of ideas to produce new ideas”. however, he adds that creativity “can be described but not defined and indeed has always been conditional” (howkins 2010: 9). as most of the times the resources are aligned to corporate goals through structures by managers, leadbeater (2005: 7) highlights that “creativity, in contrast, often emerges unplanned, from unlikely sources, and from people who feel their role is to be non­ aligned”. howkins (2007: 9) underlines the importance of three essential conditions for creative ideas and inventions, which are: personality, originality and meaning. based on these three prerequisites of creativity, we can contemplate whether our idea is creative or not, i.e. think if it was created by a person (howkins (2007: 6) explained this condi279 business, management and education, 2011, 9(2): 277–294 tion as the presence of an individual person because it is people, not things, that are creative), consider its originality and reflect on its meaning for everybody. in howkins’ (2007: 9) words, creativity “occurs whenever a person says, does or makes something that is new, either in the sense of something from nothing or in the sense of giving a new character to something. creativity occurs whether or not this process leads anywhere; it is present both in the thought and in the action”. leadbeater (2005: 7) points to this elusory idea as the reason why creativity is so valuable. howkins (2007: 9) remarks that creative ideas can be produced not only by one person, but by a group of people as well. being creative is not only a personal experience. despite of the fact that creativity is “a talent and aptitude” (howkins 2007: 9), which is considered to be a personal rather than a group quality, “some kinds of creativity <…> require and flourish in a group” (howkins 2007: 7). however, some kinds of creativity still tend to be exercised privately or even in solitude. according to howkins (2007: 7), “both situations can be equally creative”. however, it is important to keep in mind that every individual comprehends creativity differently and depending on many aspects. experience, education, the level of socialisation, entrepreneurship, even the age can be the criteria. howkins (2007: 8) represents the ideas on distinguishing the creativity as psychological and historical, developed by psychologist margaret boden (2003), of the university of sussex. the first, which she calls “p–creativity” (psychological creativity), is related “only to the mind of the individual concern (howkins 2007: 8). the second kind of creativity, which according to boden (2003) is called “h­creativity” (historical creativity), means that an idea is “novel to the whole of the human history” (howkins 2007: 8). as creativity becomes a tangible product, one approaches the borderline between creativity and innovations. is one the part of the other? or is creativity equal to innovations? according to levickaitė (2010: 205), although creativity is mostly thought to be related to the arts and literature, the contemporary science more frequently acknowledges creativity as the essential condition for innovations and inventions. although howkins (2010: 10) concurs, he underlines that “creativity is not the same as innovation”. he explains that “creativity is internal, personal and subjective, whereas innovation is external and objective. creativity often leads to innovation, but innovation seldom leads to creativity. <…> where success depends on personal expression, people want to be creative; if it depends on calculation and implementation they aim for innovation” (howkins 2010: 10). to summarize these propositions, one can infer that creativity is a precondition for innovations. at this stage of creativity, an idea turns into a creative product. when does it happen? when an idea becomes a creative product? howkins (2007: 10) explains that it happens “whenever an idea is identified, named and made practicable and may, as a result, be owned or traded”. it means that it is the process of an idea taking a tangible form. as parrish (2007: 7) said, “creativity is in and around us all”. creativity is a tool that helps reaching the most varied aims. 280 j. stankevičienė et al. creative ecologies: developing and managing new concepts of creative economy 3. basic principles of creative economy for a long time the conundrum of economy was claimed to be the question of how to satisfy ones infinite or at least indefinitely extensive desires and needs with limited resources. this tension between what people want and what they can get was presented by economist john stuart mill (1806–1873) (stanford encyclopedia of philosophy 2011) and approached by economics and business for the past fifty years as a focus on one­off innovation implemented in mass production with ever lower costs and prices (howkins 2010: 10). this is what howkins (2010: 10) called the repetitive economy. it is today that we are observing a shift to the creative economy, which, as flew (2004) mentions, has been proposed by charles leadbeater (2008), john howkins (2007, 2010) and richard florida (2002). this process is based on the change of creative and repetitive systems which, according to howkins (2010: 5), have the following characteristics: creativity repetition diverse/variegated unified implicit explicit unstable (challenges/questions) stable (safety/answers) fluid/emerging rigid/settled feedback little feedback learning education networks hierarchies desired beauty desired order access control high autonomy/low dependence high dependence/low autonomy complex simple self­organising closed, shielded quality quantity systemic/whole fragmented/parts analogue digital (especially binary) cyclical linear process/collaboration event/competition mind body the majority of people still perceive a creative product as a work of art. however, leadbeater (2005) claims that “working creatively is no longer the preserve of artists. we live in an economy in which imagination and innovation are increasingly critical, across many walks of life”. creative economy is penetrating into different domains of economics, not only into the world of culture or art, to which many people would attribute the word creation according to its current perception. however, the concept “creation” carries a much broader meaning that includes industries managing intellectual property – media, telecommunications, software, biology, medicine, education, industrial production, and even agriculture. every individual is creative, although only few can transform this quality into a personal or – moreover – a commercial activity (levickaitė 2010: 203). 281 business, management and education, 2011, 9(2): 277–294 parrish (2007: 7), while attending conferences on the topic of creativity, claims he is both a published poet and an mba, which usually alarms some people for a moment. he says that “his best creativity is not his poetry but his inventiveness within the business world, adapting ideas and methods to new circumstances across the boundaries of industries, sectors and cultures internationally”. this is a great example of how an individual consciously perceives the quality one possesses and uses it in practice. as howkins (2007: 17) explains, “creativity on its own has no economic value. it needs to take shape, to be embodied in a tradable product, if it is to accrue commercial value”. according to levickaitė (2010: 209), inherently, ideas are completely different from tangible products that are made from those ideas; therefore, plenty of ideas are not as limited as the tangible products. creativity becomes an economic activity when an idea is transformed into substance, i.e. something that is abstract receives a practical guise. the result of creativity is a creative product, which can be both a good and a service. nowadays, it is difficult to distinguish the difference between a good and a service as a greater part of a product’s value depends on such intangible assets as an idea, a design, and the trademark value. howkins (2010: 11) noticed, that “the value of what i create is what it means to me and, possibly, what it means to others; and meanings are unstable”. most of creative products qualify as intellectual property, which, as howkins (2007: 11) notices, “has the same defining characteristic as physical property: it belongs to someone”. however, howkins (2007: 11) also highlights some differences between intellectual and physical properties: intellectual property is intangible as it is an artificial construct that did not exist until governments invented it. therefore, intellectual property is not some idea or any bit of knowledge that we may happen to have; it is solely something that we know or have, which fits the definition provided in the law. organisations are changing somewhat rapidly – competition can get ruthless, technologies continue developing, and the internet penetrates into every day­to­day aspect of organisations demanding them to be smart and watchful. leadbeater (2005: 11) points out the consumer trends to be forcing all organisations to rethink their ways. as “manufacturers are increasingly focused on rapid product development, branding and mass customisation to add value” and “new sales and distribution channels over the telephone, digital television and online give people more flexible access to services” these are the reasons for novel models of organisations to appear and take the lead (e.g. ebay with advantages of being low cost, easy to use, self­service, built around communities of interest) (leadbeater 2005: 11). according to howkins (2007: 11), “creativity is possible in every organisation where novelty and inventions are possible”. in the end of the 20th century, both the concept of working and the attitude towards enterprises changed. strazdas and zabielavičienė (2006: 89) accentuate the fact that the present period is the time of major changes taking part all over the world. according to karnitis (2006: 96), economy becomes based on innovation and the creativity in jobs, on new labour methods and relations. development of the society is becoming dependent on knowledge, which, according to melnikas (2010: 524), is the society that 282 j. stankevičienė et al. creative ecologies: developing and managing new concepts of creative economy is characterised by values of the predominance of creativity and creative activity, and the key issues that require strategic decisions are to be considered as issues of creation of the knowledge­based economy (melnikas 2005: 87). levickaitė (2010: 210), referring to howkins, claims that there are four the most popular forms of intellectual property: copyright, patents, trademarks and designs. howkins (2007: 13) names these four elements creative industries and the creative economy, and considers this definition as a contentious one. the biggest disagreement on the term occurs when some countries restrict creative industries to the arts and cultural industries, excluding science. as howkins (2007: 13) notes, “this is regrettable extension of the historical tendency to keep arts and science too far apart”. authors will return to this issue later in this article. the fundament of the creative economy is the economic value. howkins (2007: 14) defines the creative equation as ce = сp × t, where creative economy (ce) is equivalent to the value of creative products (cp) multiplied by the number of transactions (t). each transaction may have two complementary values: the value of the intangible intellectual property and the value of the physical carrier or platform (howkins 2007: 14). which value is higher depends on industries (e.g. software – the intellectual property value is higher, art – a unit of cost of a physical object is higher). creative economy is conformation of the 21st century economy development, based not on simple, utilitarian consumption driven by satisfaction of needs, but on complicated use of symbolic values and fulfilment of higher social needs. manufacturing was automated; the demand of human resources in service industries was decreasing and finally the 21st century generation is becoming fully­fledged participants of creative industries, which means – consumers, suppliers and observers of the creative economy. 4. creative ecologies: a deep and a shallow pattern the author of the term “deep/shallow ecology” is norwegian philosopher arne naess (1973) (kumar 2011). he developed his theory on the basis of environmental thoughts of early 1970s, but, to tell the truth, the main topic has not lost its relevance ever since. the underlying assumption of the concept is that humanity cannot be separated from its environment and nature. since naess, many authors have written and talked on this subject, which finally lead to warwick fox, who named all of that intellectual work the “deep ecology movement” (fox 2003: 252). now, deep ecology has turned into a very ultimate movement, basically opposing the contemporary political, economic and social systems. surely, authors of this article do not want to campaign for such opposition; however, some aspects of this radical movement concerning waste of resources and lack of creativity could be considered. besides, on the one hand, the roots of deep ecology gave rise to the present theory of creative ecologies. 283 business, management and education, 2011, 9(2): 277–294 deep ecology supporters first of all turn to societies of the orient, which live in great respect for the environment because of deep cultural and religious traditions. philosopher naess was also influenced by india, gandhi and spinoza. in naess’ words (1973), shallow ecology fights against pollution and resource depletion, but it has one object – the convenience and health of people. “shallow ecology views humans as separate from their environment. figure/ground boundaries are sharply drawn such that humans are perceived as the significant figures against a ground that only assumes significance in so far as it enhances humans’ images of themselves qua important figures” (fox 2003: 252). in other words, when people say they want to reduce water pollution not for the sake of the environment but rather because of the value of clean water, we deal with a shallow, anthropocentric thinking. deep ecology, on the other hand, rejects “the human­in­environment image in favour of the relation, total­field image” and organisms are seen “as knots in the biospherical net or field of intrinsic relations” (naess 1973: 95). deep ecology is anti­anthropocentric thinking, where the human race doesn’t have any right to be “above” the environment. activists of the deep ecology movement would say that a river has its own right to be clean and unpolluted, and that this issue is important not just because polluted water is dangerous to the human race. in this way, human beings should stop thinking what is best for them and turn to nature. the second very important difference noted by fox is the approach to the dominant ideology (political and economical). shallow ecology partly adapts to economical growth and rising consumption by simply trying to control it. thus, according to fox (2003: 253), it is often referred to as the resource management or resource conservation and development approach. deep ecology, in contrast, tries to change the dominant ideology and position ecological sustainability in the first place. this way, economical and political values must be generally reconsidered to reach not a ‘fake green peace’, but rather a very important aim, namely societies living voluntarily and consciously in the ecologically sustainable world. 5. creative ecologies: a human as an eco-system the german biologist ernst haeckel was the first person to use the term ecology “oekologie”, which he has created from the greek language root “oikos” to refer to the relationship between an animal and its organic and inorganic environment (hindes 2004: 1). howkins (2010: 11) defines ecology as “the study of relationships between organisms and their environment, which probably includes other organisms”. we can analyse biological evolution which, in howkins’ (2010: 46) opinion, is a testable and proven theory; we can study eco­ systems which are about ecology of several different species living together; we can explore habitats or niches; but we have to remember that human ecologies exist in parallel. they are analogous to biological eco­systems and serve as the background to howkins’ (2010: 11) proposition that “cultivated eco­systems are the best model for human ecologies”. 284 j. stankevičienė et al. creative ecologies: developing and managing new concepts of creative economy according to howkins (2010: 11), “a creative ecology is a niche where diverse individuals express themselves in a systemic and adaptive way, using ideas to produce new ideas; and where others support this endeavour even if they don’t understand it”. we can evaluate an importance of ‘using ideas to produce new ideas’ from this definition and presume creativity to be indistinguishable from human ecologies. there are relationships between individuals in creative ecology which are characterised by howkins (2010: 11) as energy­expressive and claimed to be found in both physical places and intangible communities. also, howkins (2010: 11) notices that in these relationships it is not the infrastructure but relationships and actions that count. we can measure the strength of a creative ecology; dimensions, which are needed, are described by howkins (2010: 11) as flows of energy and the continuous learning and creation of meaning. howkins (2010: 45) proposed four aspects of ecological thinking that are relevant to creativity and innovation: diversity, change, learning and adaptation. elements of this quartet mutually enhance each other and apply to human behaviour and still more to human belief. howkins (2010: 46) claims that “evolution of ideas is a social construct that works best as a metaphor” and asks to tread carefully: most of modern science is considered as a metaphor whereas sometimes – e.g. for artists – abstraction is reality. here some ideas on proposed four elements (see fig. 1). four aspects of creative ecologies diversity change learning adaptation imitation communities collaboration competition fig. 1. four aspects of creative ecologies (according to howkins 2010) 5.1. diversity when discovering and learning about the world, the diversity of species, genera, organisms and environments in nature is the reason for excitement and joy. as howkins (2010: 46) says, “variety is the spice of our life”. also – as inspired by ecologists – he reminds us that “we measure diversity by taking into account not only the number of species but the variety of their relationships with others above and below them in the energy chain” (howkins 2010: 46). the eminent biologist julian huxley believed that cultural diversity plays the same role for humans as variations do for other species. every day, cultural diversity opens our eyes to the fact of difference, and stimulates us to imagine possible and even impos285 business, management and education, 2011, 9(2): 277–294 sible features (howkins 2010: 48). if we consider ourselves (human society) as our own species, we can then think of a range of diverse cultures. at the broadest level, howkins (2010: 47) pointed out such categories as races, nationalities, tribes and ethnic groups. most of the time, diversity is the reason for odds in different levels: from an individual to states, from a family to nations. diversity of values, attitudes or ideas means that “we are not distinctive only because of our brains and other evolved physical attributes, most of which are more fully developed in other organisms. we are chiefly distinctive for our minds, our inner life” (howkins 2010: 51). the baseline is a tolerant society which, as howkins (2010: 48) puts it, “welcomes (or at least tolerates) different histories, cultures, perspectives, beliefs, styles and languages, and accepts different ways of thinking and imagining”. leadbeater (2005: 7) agrees with this attitude claiming that “were a climate of fear and racism to make people less open and more defensive that might damage our creative culture”. also, he takes a stand that major influences on the creative environment has a public policy, for example, laws that encourage freedom of expression or tolerance of diversity and promote the international flow of ideas and people (leadbeater 2005: 7). diversity is claimed by howkins (2010: 48) to be “the source of change and one of the chief regulators of how fast change happens”. 5.2. change to begin with, there is a very good case about the need of change given by leadbeater (2005: 15). he analyses situation of arts organisations in uk showing that cultural experience is still hugely unequal: “employment in cultural and creative industries is heavily concentrated in london and the south­east and amongst white graduates” (e.g. there are very few black performers in ballet. when the arts agency push staged a black ballet at sadler’s wells theatre, it had to recruit dancers from portugal) (leadbeater 2005: 15). however, “successful leading black arts organisations point towards the kind of changes that are needed“, like “building up minority ethnic performers” and “audiences for their work”, “creating a cluster of successful minority ethnic arts organisations that can sustain themselves”, etc. when howkins (2010) talks about biological change, he references to the theory of evolution proposed by charles darwin (1859), alfred russel wallace (1860) and evolutionary biologist richard dawkins, a professor at oxford university. howkins (2010: 49) marks several important achievements made by darwin and wallace: they had independently observed nature’s profligate variety (by seeing that children born to the same parents have different characteristics), they also saw that more offspring were born than survived (the struggle for existence) and finally deduced that an organism that is more fit for a task is more likely to survive. these observations bring us to the statement that “by being inherited, this non­random selection of random change would lead to new varieties and even new species” (howkins 2010: 49). 286 j. stankevičienė et al. creative ecologies: developing and managing new concepts of creative economy another theory of change considered to be important by howkins was one promoted by dawkins who claimed that “the gene, not the organism, is the motor of evolution; that the gene (the replicator) uses the organism (the vehicle) rather than the other way around” (howkins 2010: 49). this right away brings us to a natural question: is there a gene for creativity? howkins’ (2010: 50) answer to this is simple: “‘no’ in the sense of a single gene causing a single characteristic that we would call creativity, because of the complexity of the process”. one more interesting point of view was explained by wilson (1998), who suggested that evolution takes place at the population level and affects social position (e.g. human generosity cannot be explained by darwin’s principle of “survival of the fittest”) (howkins 2010:50). as howkins (2010: 51) said, “what we do best is culture: creating it and expressing it”, but we have to appreciate that culture is learned. learned characteristics do not affect our genes and cannot be genetically inherited, but learned ability to create and understand visual images changes rapidly and within individual lives (howkins 2010: 51). however, what howkins (2010: 51) reminded us of, is a bit shocking yet absolutely normal: “in evolutionary terms we were in the savannah only yesterday”. darwinian evolution gave us large brains in relation to our bodies and a capacity for speech, probably both at about the same time, which are fundamental to our ability to think for ourselves, and to create and invent (howkins 2010: 50). processes of creation and invention are both in progress, generating better adaptive fitness to a particular way of life. what we can do is to manage this while attempting to progress constantly and learning is the tool to seek it. 5.3. learning the greatest truth about human creativity, according to howkins (2010: 53), is that “it doesn’t matter where we get ideas from; it matters what we do with them”. the toughest task is to learn how to handle ideas, information and knowledge. it includes both us and other people. this can be achieved through education, training and learning. howkins (2010: 53) clarifies that there are some differences between education, training and learning. according to him, education is the government­led system for teaching children and young people up to college levels. all education systems teach some creativity, but after primary school, most restrict to art and story­telling (howkins 2010: 53). however, leadbeater (2005: 7) disagrees while saying that a major influence on the creative environment has a public policy, for example, the way education promotes creativity. another form is training that teaches specific skills, usually vocational and ranging from language to life skills and professional qualifications (howkins 2010: 54). only then there is learning and it is what howkins (2010: 54) characterises as “personal, diverse and endless, <…> self­motivated, self­managed and often self­ financed” process. 287 business, management and education, 2011, 9(2): 277–294 people generally agree that most of their knowledge was gained in full­time academics. but if we frankly think of how we discover what we are good at, we would agree that we gain this knowledge from experience, friends and colleagues, and from reading, talking and doing. this is what howkins (2010: 54) calls “the real learning”; people need to learn, not to be taught. the process of learning has to be permanent. we can change in bursts, like american biologist stephen jay gould (1941–2002) suggested that evolution happens not in a continual development but in bursts of punctuated equilibrium (howkins 2010: 49), but learning has to be continuous. according to howkins (2010: 54), “the creative mind that does not learn from others or from itself will wither away as certainly as an animal will die without food or an engine without fuel will stop”. there is a need for some change in people’s attitude to the process of working with others. most of people want to work with less creative and less successful people as they see it as an opportunity to win a competition. howkins (2010: 6) highlighted this struggle and explained that “with some activities, you want other people to be less talented or successful so you can get ahead; in the creative ecology, you want to work with people who are better than you so you get ahead”. through conversation and dialogue we need to share our knowledge with as many people as we are able to. as howkins (2010: 56) predicts, “group’s learning capacity will increase as it has a wider variety of people to learn from”. 5.4. adaptation in human ecologies, people are interconnected with each other and their environment at all times just as organisms in eco­systems. it is a very rare to find a neutral relationship with others; individuals set a series of relations and this reveals the process of how they adapt. they improve both themselves and the environment they are a part of. according to howkins (2010: 59), relationship spectrums can vary from conscious to unconscious or from friendly to unfriendly, but they all are attributable to one of four kinds: imitation, communities, collaboration and competition. 1. imitation: howkins (2010: 59) describes imitation as one of the easiest and quickest forms of adaptation. imitation is more like copying: as howkins (2010: 59) notices, people imitate how to do or not to do something, copying their family members (e.g. children from parents), colleagues, rivals and indeed anyone with a high status in their peer group. 2. communities: we are more likely to imitate if we feel we belong to the same community as the person we are copying (howkins 2010: 61). it means that our belonging to some communities is a presumption of adaptation. individual benefits from being in a community – it is a result of mutualism or symbiosis (which are also relevant to nature eco­systems). as howkins (2010: 61) claims, “large populations can satisfy more of an individual’s needs on a more regular basis”. 288 j. stankevičienė et al. creative ecologies: developing and managing new concepts of creative economy there is a great variety of examples how individuals adapt through being a part of communities. an impressive example could be a community of termites. as howkins (2010: 61) puts it “when a few (termites) gather together they are literally useless and soon dye. but when thousands gather they make wonderful nests with air­conditioning systems more efficient and ecologically sound than any human has yet achieved”. another great example is given by leadbeater and miller (2004: 10) with linux, the computer operating system. it started life in 1991, when linus torvalds, then a student, “posted the source code for his new operating system on the internet and asked his fellow software enthusiasts to make criticisms, propose improvements, take it away and tamper with it <…>. by 2004, about 20 million people around the world were using a version of linux. there were 430 user communities in more than 72 countries and more than 120 000 registered linux users, many of whom helped with its development” (leadbeater, miller 2004: 10). howkins (2010: 61) calls these processes in examples “acting unconsciously as one”. people, like animals, are not only adapting while belonging to communities, but also can make exclusive achievements and create something surpassing separate individual’s potential. 3. collaboration: howkins (2010: 64) defines the term collaboration in a creative ecology as a relationship “when two or more organisms or species deliberately cohabit and share for a specific, known benefit”. it is noteworthy that collaboration is learned and explicit and the participants are conscious of the deal (howkins 2010: 65). however, howkins (2010: 65) claims there is something more interesting (and it seems, something more opposite): “people born in the last twenty years are <…> instinctively collaborative”. people’s achievements through collaboration could be much more amazing than ones produced in the competitive environment. in leadbeater’s (2005: 17) opinion, “partnerships between public sector organisations are commonplace as public service organisations explore new, more collaborative models. in education, for example, federations, clusters and networks are increasingly common as a route to school improvement”. people need to work together to produce ideas and nourish them; more people means more attitudes, opinions, views, to sum up, – more ideas. when leadbeater (2008) argues for collaboration, he claims that “most creativity is collaborative. it combines different views, disciplines and insights in new ways <…>. the number of people who could be participants in the creative conversations is going up <…>. we are developing new ways to be innovative and creative at mass scale. we can be organised without having an organisation” (howkins 2010: 66). while sifting arts organisations, leadbeater (2005: 18) found several various aspects of networking, which should be encouraged and which also are relevant to any physical subject in human eco­systems: collaboration to share facilities, back office infrastructure and even aspects of creative production, such as set design and production; using networks to access a variety of talents as sources of creativity; developing partnerships to access global markets, pursuing education and outreach programs via partnerships, etc. 289 business, management and education, 2011, 9(2): 277–294 collaborating does not mean losing individuality. as howkins (2010: 66) assures, “collaboration doesn’t obviate individual talent or ignore the light bulb’ moment”. collaboration also means a personal bonanza. 4. competition: we now that today’s world is in a battle for limited natural resources. as darwin (1859) indicates in his book on the origin of species, there is competition, struggles, enemies, battles and even wars (howkins 2010: 66); everyone who can is engaged in a fight: people, companies and even countries. howkins (2010: 67) wants to point out that “ecology’s understanding of competition is more subtle and more interesting”. as he explains, in a creative ecology “two organisms might compete for the same resource but the competition might be peaceful and might occur without the participants knowing they are competitors, which takes the edge off any real sense of conflict” (howkins 2010: 67). parrish (2007) is an upholder of a different attitude to competition suggested by brandenburger and nalebuff (1996) as he prefers the word “co­opetiton”. parrish (2007: 48) claims the “co­opetition to be the result of bringing together competition and cooperation to form <...> a new partnership”. this kind of “co­opetition” is possible when specialties, strengths and other characteristics of several competing objects are not exactly the same – they are different in their competitive positioning. no­one fails for others to succeed and each gets more than it had before (parrish 2007: 48). in creative ecology, howkins (2010: 67) distinguishes two levels of competition: the internal and the external. an individual experiences internal competition when striving to launch the best idea of all possible ones; the idea needs to meet internal standards of aesthetics and style that are particular to that individual. howkins (2010: 67) suggests this is time “to find people collaborating at this stage in order to enable them to compete with their own notion”. external requirements for our idea are novelty, meaning and utility; an idea has to fight for itself in the marketplace, i.e. “creative freedom needs markets if it is to develop” (howkins 2010: 68). 6. science splits the monopoly on creativity – ideas can be developed and managed into new concepts of creative economy for many years science was kept a separate sector of human activity, probably least connected to creativity, which gratuitously belonged only to artists. according to howkins (2007: 10), it happened because creative products were seen most publicly and obviously in the arts. it made a wrong impression that only art can be creative (arts and creativity were treated as synonyms). it was only in the beginning of the twentieth century that first ideas on a possible relationship between creativity and science emerged. however, the main conceptions of creativity were borrowed from the arts. scientists who were the first to analyse the meaning of creativity to science, were representatives of natural sciences and formal disciplines (helmholtz, atkinson 1885; poincaré 1902, 1905, 1908; wallas 1926; wertheimer 1924). 290 j. stankevičienė et al. creative ecologies: developing and managing new concepts of creative economy new theories on the concept of creativity proved that “artists have no monopoly on creativity, nor are they only workers in the creative economy” (howkins 2007: 10). howkins claims that “difference between creativity in the arts and elsewhere is not that artists are more creative, or more successfully creative, but that because they deal in a specific range of ideas and aesthetics, they create specific kinds of works and work according to identifiable business models with their own patters of supply, demand, values and pricing” (howkins 2007: 10). nowadays, it is agreed that creativity is a big part of scientific work, especially research and development (r&d). according to levickaitė (2010: 205), scientists use a specific method for creating new scientific theories: first of all ideas are generated, and then they are filtered refusing the wrong ones. this way, creativity becomes the process of accepting or denying assumptions. levickaitė (2010) claims that creativity, because of its multiplicity, penetrates into various industries, where, starting with new ideas, scientific research is developed. another new scientific tendency based on creative ideas is communication and development scientific research. we must admit that all technological innovations belong to creative science as well. actually, contemporary science increasingly agrees that creativity is the essence of inventions and innovations. however howkins (2010) does not forget that there is some difference between the creativity of a scientist and that of an artist. historian of science colin ronan says “to engage in science requires a vivid creative imagination, tampered by firm discipline based on a hard core of observational experience” (ronan 1983: 85). biologist wilson, the inventor of “consilience”, which he described as the “interlocking of causal explanations across different intellectual disciplines”, says creativity is “the ability of the brain to generate novel scenarios and settle on the most effective” (wilson 1998: 124). on the other hand, while talking about science, we must mention another relevant question. john howkins, in his book creative ecologies: where thinking is a proper job shares the idea that as nowadays science has advanced more than ever and scientific developments in knowledge and technologies are countless, there are other aspects to be taken into consideration. with this tremendous development of last centuries “mainstream science shaped by galileo, bacon, descartes and newton is too reductionist and too much in love with facts and quantities” (howkins 2010: 68). here howkins gives an assumption that eco­creativity is, probably, the new renaissance. human beings have already wasted too much of what they had discovered through the years with the help of science. now it is the time to use eco­creativity and start treating all natural resources differently: not mechanically consuming, but creatively saving. howkins (2010: 70) emphasizes that “creative ecology does not have to be sustainable in the sense of operating at a minimal level of energy or work <…>. rather, sustainability is using today’s potential to the maximum without limiting future generations from doing the same <…>. in creative ecology resources are infinite”. here we come to the conclusion that creative science (with the reference to creative ecologies) is not a possible option but the obligatory choice for contemporary scientists. 291 business, management and education, 2011, 9(2): 277–294 creative solutions can replace the tradition of “facts and quantities”, mentioned by john howkins (2010: 68) and help human beings to start saving our natural resources. otherwise science will turn into overkill instead of a stimulus for future development. 7. conclusions summarising theories on creative ecologies and development and management of new concepts of creative economy, the following conclusions are made: 1. as creativity is the use of ideas to produce new ideas, it works for different fields: from arts to science, from philosophy to economics or politics. although ideas as such are not limited, such are creative products that are tangible and have a form. every individual is creative and can use its creativity to make a profit. 2. creative economy is the most rapidly growing sector in the market. priorities changed during the previous decade: there is a shift from the physical to the intellectual property, which in general has the same characteristics but is suitably unlimited. creativity is possible in every organisation and tends to lead to innovations, which are to satisfy changing and complicated human needs. 3. creative ecologies stem from the roots of deep ecology. though creative ecologies contemplate human ecosystems, they are generally based on ecosystems in natural environment. this way, participants of the contemporary creative economy cannot distance themselves from the idea that the welfare of the human race is inseparable from the welfare of nature. 4. every organisation is an eco­system, for which the best examples can be borrowed from nature. in these organisational eco­systems, the four aspects of creative ecologies thinking can ensure their proper functioning. diversity, change, learning and adaptation (that includes imitation, communities, collaboration and competition) can help an organisation to take the lead in the creative economy. 5. looking into the new concept of creativity, authors of the article came to the conclusion that a sustainable relationship between creativity and science is a necessary tool for change. the aim of creative science is to leave an opportunity for future generations to be able to lead a proper life. 6. with the help of 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abacus. kūrybos ekologijos: naujų kūrybos ekonomikos koncepcijų plėtojimas ir valdymas j. stankevičienė, r. levickaitė, m. braškutė, e. noreikaitė santrauka kūrybingumo sąvoką šiandien aptinkame pačiose įvairiausiose srityse, įskaitant šiuolaikinę ekonomiką, naujausias technologijas ir mokslą. svarbu atkreipti dėmesį ne tik į naujų technologijų kūrimą, bet ir suvokti kūrybos ekologijų (howkinsas 2010) esmę, kuri remiasi johno howkinso (2007) išplėtota kūrybos ekonomikos teorija. anot howkinso (2010), nūdienos ekologinės ir ekonominės krizės gilumo suvokimas reikalauja iš mūsų adekvačių veiksmų – kūrybingumo ir kontrolės balanso. šio straipsnio autorės savo darbe kelia tris pagrindinius klausimus: 1) kokie yra fundamentalūs kūrybingumo ir nuoseklaus kūrybos proceso elementai; 2) kokiu būdu žmogus gali plėtoti aukštos kokybės idėjas ir paversti jas realybe; 3) ar įmanoma ir kaip įmanoma dalytis tvariais kūrybiniais produktais nūdienos nerūpestingai vartojančioje visuomenėje. individai, organizacijos, šalys ir visas pasaulis šiandien tampa vis labiau priklausomas nuo kūrybingumo – tradicinės žaliavos vis dažniau yra keičiamos intelektualiniais ištekliais. pačių idėjų skaičius neturi ribų, tačiau apčiuopiamų kūrybos produktų skaičius yra limituotas. todėl kiekvienas individas, būdamas kūrybingas, turi galimybę savo idėjas paversti kūrybos produktu ir siekti pelno. tuomet toks individas tampa kūrybos ekonomikos dalimi. kūrybos ekonomika yra sparčiausiai augantis pasaulinės rinkos sektorius. xxi a. ekonomikos plėtra grindžiama jau nebe paprastu vartojimu praktiškiems poreikiams tenkinti, bet sudėtingu simbolinių vertybių ir aukštesnių socialinių poreikių tenkinimu. paskutinis dešimtmetis pakeitė prioritetus žmonių sąmonėje: nuo fizinės nuosavybės pereinama prie intelektualiosios, kuri, turėdama daugumą tų pačių charakteristikų, turi ir vieną išskirtinę – yra neribota. šiais laikais vis sunkiau atskirti prekę nuo paslaugos, nes, anot howkinso (2010), didesnė produkto vertės dalis priklauso nuo tokių neapčiuopiamų dalykų kaip idėja, dizainas ar prekės ženklas. visi išvardyti elementai priklauso ir nuo žmogaus suvokimo, o tai nėra pastovu. per kūrybos ekologijų teoriją (howkinsas 2010) nagrinėjamos aplinkai ir bendruomenei atsakingo žmogaus kūrybinės galimybės. kūrybos ekologijų teorija kilo iš vadinamosios giliosios ekologijos (naessas 1973) šaknų, kuri, priešingai nei seklioji ekologija, neišskiria žmogaus iš jį supančios gamtos. taigi, kūrybos ekologijos, nagrinėdamos žmonių ekosistemas, iš esmės remiasi natūralios gamtos ekosistemų pavyzdžiu. šis požiūris skatina visuomenes savanoriškai, sąmoningai ir kūrybiškai spręsti http://dx.doi.org/10.3846/173 294 j. stankevičienė et al. creative ecologies: developing and managing new concepts of creative economy tiek globalias, tiek ir vietinio pobūdžio problemas. todėl šiandieninės kūrybos ekonomikos dalyviai negali nutolti nuo minties, kad žmonijos gerovė neatskiriama nuo natūralios gamtos gerovės. howkinsas (2010) kūrybos ekologiją įvardija kaip „nišą, kurioje skirtingi individai išreiškia save sisteminiu ir pritaikomu būdu, senas idėjas naudodami naujoms kurti; o kiti individai šias pastangas palaiko, net jei ir nevisiškai jas supranta“. keturi howkinso (2010) pasiūlyti ekologinio mąstymo principai (įvairovė, kaita, mokymasis, adaptacija), tiesiogiai susiję su kūrybingumu ir inovacijomis, yra neįkainojamai vertingi bet kuriai organizacijai, siekiančiai kūrybos ekonomikoje lyderystės. remiantis nauju pastarajame dešimtmetyje išplėtotu požiūriu į kūrybingumą, straipsnyje prieita prie išvados, kad tvarus ryšys tarp kūrybingumo ir mokslo yra viena svarbiausių šiandienos priemonių, siekiant pasaulyje esminių pokyčių. kūrybingo mokslo esmė – palikti galimybę ateities kartoms gyventi visavertį gyvenimą. pasikeitęs požiūris į mokslą lemia tai, kad kūrybos ekologijos tampa modernia išliekamumo forma – naujų kūrybos ekonomikos koncepcijų plėtojimas ir valdymas nutiesia kelią į kitokį, socialiai atsakingą ateities pasaulį. straipsnis paremtas projektu „creative ecologies: creating, developing and sharing sustainable ideas“, kuris darbo autorių buvo pristatytas gegužės 2–6 d. septynioliktą kartą vykusioje europos savaitės konferencijoje portugalijoje, koimbros mieste. projektas buvo pripažintas geriausiu savo grupėje bei geriausiu europos savaitės 2011 projektu. reikšminiai žodžiai: kūrybos ekologija, kūrybos ekonomika, naujų koncepcijų valdymas. jelena stankevičienė is phd in social science (economics), an associate professor at vilnius gediminas technical university and dean of faculty of business administration. her research is focused on integrated assets and liability managements, decisions making under risk and uncertainty, balanced scorecard systems, risk, liquidity and value management of financial institutions, and value creation strategies. rasa levickaitė is m. sc. in sociology (vilnius university) and m. m. (ism international school of management and economics), junior research fellow and doctoral student at vilnius gediminas technical university. research interests: creative economy, creative industries, general management, sociology. monika braškutė and elinga noreikaitė are undergraduate students of creative industries bachelor program, participants and the best project co­winners of the 17th euroweek 2011 held in coimbra, portugal. changes in retail industry in the eu blazenka knezevic1, sanda renko2, nikola knego3 university of zagreb, trg. j. f. kennedy 6, hr-10000 zagreb, croatia e-mails: 1bknezevic@efzg.hr (corresponding author); 2srenko@efzg.hr; 3nknego@efzg.hr received 18 november 2010; accepted 15 january 2011 abstract. retail is an important industry of each national economy. in the eu, it is an important source of employment and significantly contributes to the gdp creation. moreover, almost one fifth of all companies are registered in retail industry. in the past decade, retail industry is changing from applying domestically oriented towards internationally oriented business strategies. the importance of large companies is this industry is growing, too. retail trade concentration process is recognized in all eu countries. in this paper, some of prevailing trends in retail industry are analyzed and explained. the analysis includes eu countries and croatia as eu candidate country. keywords: retail, distributive trade, eu, concentration, internationalization. reference to this paper should be made as follows: knezevic, b.; renko, s.; knego, n. 2011. changes in retail industry in the eu, business, management and education 9(1): 34–49. doi:10.3846/bme.2011.03 jel classification: f14; l81; o52 1. introduction the retail industry comprehends all of the business activities relating to selling goods and services directly to ultimate consumers (kent, omar 2003: 8). it occupies a preeminent position in the economies of all modern societies. namely, the competitive advantage of the enterprise; which is obtained at the level of goods distribution, determines the future success in the market (gudonaviciene, alijosiene 2008). retail companies use different channels such as: store outlets, supermarkets, web shops and door-to-door selling to sell goods and services for personal or household use, i.e. not to be resold to others. retail industry is specialized in intermediating between producers, wholesalers and consumers in order to add value to consumers by offering right merchandise, creating a good shopping atmosphere, decreasing the risk of shopping, making shopping convenient and by reducing prices throughout cost control (kent, omar 2003: 14–17). b u s i n e s s, ma n ag em e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(1): 34–49 doi:10.3846/bme.2011.03 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 35 business, management and education, 2011, 9(1): 34–49 while in history, retailing started as a market and workshop, today there is a variety of retail formats from outdoor market selling, supermarkets, chain stores to the selling via automates or internet. gilbert (2003: 2) points out that “even as recently as the 1960s, retailing was predominantly seen as having a smaller and significantly less important role than other industries such as manufacturing.” however, he states that the retail sector is increasingly being viewed as an important activity in the economy which has got great impact on the society due to a large proportion of the workforce and its contribution to gdp. since 1990s, retailing is rapidly changing form domestic oriented towards international oriented industry. bernatonyte and normantiene (2009) talk about global trade environment, which has changed in three major ways in recent decades: (1) international trade which has grown rapidly in value and volume; (2) the composition of trade which has altered significantly; and (3) trade flows which have been extensively liberalized. while alexander (1996) pointed out intra and interregional aspects of the retail development, dawson (2001) and sandberg (2010) pointed out the accelerating trend of the retail internationalization, they stressed out that there is a rapid increase in various international activities of eu retailers. mentioned changes consequently affected several trends taking place in the retail industry. dawson (2006) suggests that there are several key restructuring processes, those are: 1. the large firms are growing faster than the retail industry. 2. there is a more strategic approach applied to managerial decision making. 3. organizational structures are growing in their complexity. 4. value chains are more and more controlled by retailers (not producers as it used to be before). moreover, dawson (2006) stresses out implications of those processes on overall retail industry. he claims that there is an obvious increase in the retail market concentration, that the number of small and micro firms is in the rapid decline, that retailers are getting more power comparing to their suppliers, and that there is increase in international activities among retailers. the retail trade has been characterized by a consolidation of outlets, while at the same time the square footage of the average outlet has been increasing dramatically. during the 1980s, large retailers were expanding their number of locations through takeovers and internal expansion, whereas many smaller retailers were leaving the marketplace. concurrently, retailers were rediscovering the benefits of large stores in terms of the economies of scope they offered to the customer (one-stop shopping, enhanced assortments of products), as well as economies of scale (lower labor costs, licensing fees per square foot). these factors led to fewer retail firms that in turn command a larger share of the market (zerrillo, iacobucci 1995). tordjman (1995) analyzed differences between eu countries and concluded that there are different levels of concentration and internationalization among countries. 36 b. knezevic et al. changes in retail industry in eu he divided eu countries into four groups according to the reached retailing development measured throughout the company size, retail density and reached productivity level. those groups are countries with: (1) traditional retail structure such as greece and portugal; (2) intermediary retail structure such as italy and spain; (2) structured retailing such as denmark, netherlands and france, and (4) countries with advanced retail structure such as: germany and united kingdom. countries with traditional retail structure have predominant micro and small enterprises with low turnover rates per employee; while countries with advanced retail structure have predominantly larger retail companies, which have high productivity measured as turnover per employee and the density of a retail network is also high (measured in number of enterprises per 10 000 inhabitants). similarly to dawson (2006), tjordman (1995) observed several trends in the retail industry that are to be continued for a longer time period, those are: 1. less growth, more segmentation of retail formats. 2. fewer national, more international operators. 3. fewer shops, more sales area. 4. less stock, more customer service. 5. fewer independent retailers, more affiliations. 6. lower turnover per square meter, greater margin differentials. in order to see if mentioned trends of the retail restructuring are continuing, in this paper we will analyze data given in official european statistical databases and compare the situation in the retail industry among eu countries. in addition, croatian official statistics will be analyzed in order to make statement on reached level of the retail development in comparison to eu averages and chosen eu transitional economies. in order to make a conclusion on current trends, data for 2003 and 2007 will be taken into account. 2. retail industry as a segment of the distributive trades in eu official statistics, retail is observed as an industry within a distributive trades sector; field g (nace rev. 1.1, nace rev. 2). therefore, firstly, we will give some data on distributive trades, and after that on the retail industry. according to data of 2007, distributive trade employs almost one quarter of total employee number in nonfinancial business sector in the eu. trade enterprises comprise more than 30% of total enterprise number and they generate almost 20% of total gross value added in nonfinancial sector in the eu (key figures on european business 2010: 33; eu-27 data). in comparison, before the global recession, developed countries had the distributive trade share of gdp between 15–20% (renko 2004). the retail industry is the most important part of the distributive trades sector in the eu because 60% of all trade enterprises are retail enterprises and 60% of all employees in distributive trades are employed within the retail companies. but, according to 37 business, management and education, 2011, 9(1): 34–49 distributive trades turnover, the retail industry is at the second place and generating almost 30% of distributive trades turnover (table 1). table 1. distributive trades’ structure (eu-27; 2004) (source: knezevic 2007) industry employees enterprises turnover trade and repair of motor vehicles and motorcycles 13% 13% 17% wholesale 27% 27 % 55% retail 60% 60% 28% total % 100% 100% 100% total number eu-27 distributive trades (g) 30526200 persons 6199404 enterprises 7133796.80 mil. eur enterprises in distributive trades sectors are mostly small and medium enterprises (smes), but in the retail industry there is a polarization on micro and large enterprises (fig. 1), which is not the case in other industries in distributive trades sector. fig. 1. structure of distributive trades industries according to the enterprise size (%), eu-27, 2006 (source: own graph according to data in european business – facts and figures, 2010, eurostat, p. 47) 50 45 40 35 30 25 20 15 10 5 0 micro small medium large trade and repair of motor vehicles and motocycles wholesale retail in the following chapters, we discuss the importance of retail in employment in national economies in the eu. moreover, the contribution of retail industry to the creation of gdp on the example of eu countries is presented. in order to investigate the 38 b. knezevic et al. changes in retail industry in eu difference in retail industry between some eu countries, the retail productivity and the structure of distributive trade industry according to average size of enterprises is discussed. 3. importance of retail as the source of employment the important role that retailers play in today’s society is reflected through their status as employers. they employ a significant proportion of the overall workforce, and they are particular important employers of some groups as in the case of female employers because it is estimated that more than two-thirds of the retail labour force are female (gilbert 2003: 3) there are great differences when we measure the ratio of retail industry in the overall number of employed persons in european countries. figure 2 shows the percentage of the retail in total employees among eu countries. fig. 2. percentage of retail industry in total number of employees (source: own calculation according to data in eurostat database extracts: sbs_sc_3ctrn and nama_aux_pem; csyb 2006 and 2008, tables 22-3; notes: for: austria, luxembourg, malta and netherlands data is not available, for croatia only data on legal entities, i.e. enterprises is used) in slovakia, the retail industry has the lowest importance in total employment (it employs less than 5% of the total workforce), but there is a significant growth rate comparing to other eu member countries. on the other hand, in greece, the retail industry employs more than 17% of the total workforce, but as there is no significant growth rate of the proportion, we can conclude that the retail industry in greece reached a mature phase according to this indicator. on the average, in the given period, the retail industry in the eu grew for 0.45% and reached 9.41% of the total workforce in 2007. only in six analyzed countries, the importance of the retail is in decline, those are: czech republic, bulgaria, spain, uk, hungary 19,00% 17,00% 15,00% 13,00% 11,00% 9,00% 7,00% 5,00% 3,00% 2003 2007 b el gi um b ul ga ria c ze ch r ep ub lic d en m ar k g er m an y es to ni a ire la nd g re ec e sp ai n fr an ce ita ly c yp ru s la tv ia li th ua ni a h un ga ry po la nd po rt ug al r om an ia sl ov en ia sl ov ak ia fi nl an d sw ed en u ni te d ki ng do m n or w ay c ro at ia * eu a ve ra ge 39 business, management and education, 2011, 9(1): 34–49 and norway. but there are several countries to be indicated examples of the above average growth of the retail importance in the total employment, those are: lithuania, portugal, slovakia and a candidate country croatia. however, large socio-economic inequalities between some eu countries (ciegis et. al. 2008) should be considered because that can lead to completely different explanation of the market situation. for example, for lithuania, export is substantial in sustaining growth and vitality (saboniene 2009) and has contributed significantly in terms of capital inflows, employment, expansion of industry and widening the production base. in such a way, export has allowed domestic industries to achieve some economies of scale, which otherwise would not have been possible due to the limited domestic market size. moreover, export is increasing business and household incomes despite a substantial number of workers leaving the country (brock, urbonavicius 2008). on the other hand, a candidate country croatia has experienced the decline in export, but its existence of defined strategy is the most important economic problem. negative gdp, inflation growth and the decreasing of household consumption are the key problems, which will affect the situation in retailing consequently. nevertheless, vojinovic and oplotnik (2008) observed that the poorer new eu members grew faster than the richer new eu members in terms of gdp per capita in the period 1995–2006, which to some extent shrunk the observed inequality gap between the new eu member states. if we analyze countries that have this indicator above the eu average, we can conclude that there are three types of countries with great importance of the retail industry measured by its impact on employment: (1) northern developed economies with advanced retail network such as uk and ireland; (2) northern transitional economies such as: poland, latvia and lithuania; (3) mediterranean countries with traditional retailing, such as: greece, spain, cyprus, italy and portugal. on one hand, the great importance of the retail in the national economy can be the result of a high development of the retail network, but, on the other hand, it can be the outcome of the underdeveloped national economy. in the later case, the countries can have low employment rate in other sectors of national economies and in that case the higher importance of the retail is (measured by percentage in the total workforce), the retail is more developed comparing to the other industries. therefore, it is necessary to analyze this indicator towards the average employment rate or towards achieved gdp per capita in order to be sure if there is unproportional development of retail in comparison to the overall economy. for illustration, figure 3 shows importance of retail in the total number of employees in comparison to employment rate in eu countries in 2007. we can observe that, according to this relation, there are five eu countries, in which high importance in employment is the result of developed retail network, which is developed in accordance to total economy, those are: portugal, latvia, cyprus, ireland and united kingdom (see upper right part of the graph). but this finding should be approved by analyzing the level of manufacturing and other industries development. also, in further studies it is necessary to relate it to the gdp per capita. 40 b. knezevic et al. changes in retail industry in eu 4. importance of retail in gdp creation in table 2, the share of retail in gdp among eu countries and croatia is shown. this indicator shows that retail was forming 4.09% of the gdp in eu-27 in 2003 and that the indicator dropped to 3.77% in 2007. the largest proportion of the gdp is created by retail in latvia and lithuania, while in finland and luxembourg, retail created less than 3% of the gdp in 2007. it is obvious that the ratio is lowering in the majority of countries, but the decline is not dramatic. table 2. percentage of gdp created by retail industry (source: own calculation according to eurostat database, extract: nama_nace60; for several eu countries data is not available for given years; for croatia own estimation according to data on legal entities in csyb, 2009, table. 11-3; statistical information 2010, p. 44; cbs first release 4.1.2/4., 25th march 2008 and cbs first release 4.1.2/4, 25th march 2005) country 2003 2007 change ireland 3.72% n/a n/a latvia 7.15% 7.05% –0.11% lithuania 6.46% 6.16% –0.29% slovakia 5.54% 5.56% 0.02% cyprus 4.91% 5.28% 0.37% fig. 3. importance of the retail in employment comparing to employment rate, 2007 (source: own calculation and presentation according to data in eurostat database extracts: sbs_sc_3ctrn, tsiem110 and nama_aux_pem; csyb 2008, table 22-3; notes: for: austria, luxembourg, malta and netherlands data is not available, for croatia only data on legal entities, i.e. enterprises is used) em pl oy m en tr at e percentage of retail in total employees eu average 4,00% 6,00% 8,00% 10,00% 12,00% 14,00% 16,00% 1 8 , 0 0 % 80,0 75,0 70,0 65,0 60,0 55,0 denmark norway sweden finland slovenia estonia germany czech republic france slovakia belgium romania bulgaria italy croatia hungary poland greece lithuania spain portugal latvia ireland cyprus united kingdom 41 business, management and education, 2011, 9(1): 34–49 country 2003 2007 change greece 6.40% 5.09% –1.31% croatia* 3.05% 4.38% 1.33% estonia 4.02% 4.27% 0.25% romania 3.72% 4.04% 0.32% hungary 4.07% 4.02% –0.05% slovenia 3.94% 3.84% –0.10% austria 4.12% 3.79% –0.33% eu-27 4.09% 3.77% –0.32% italy 4.18 % 3.76% –0.41% belgium 3.78% 3.75% –0.03% malta n/a 3.67% n/a czech republic 4.09% 3.67% –0.42% france 4.04% 3.63% –0.41% germany 3.86% 3.38% –0.47% denmark 3.20% 3.29% 0.09% netherlands 3.54% 3.04% –0.50% finland 3.02% 2.95% –0.07% luxembourg 3.16% 2.82% –0.34% in only four countries this indicator grew in the given period, those are: romania, estonia, slovakia and cyprus. in croatia, there was also the increase in retail share in the gdp (for 1.33%). at figure 4, the indicator of retail contribution to the gdp is related to gdp per capita in 2007. according to the graph, three clusters of eu countries have to be pointed out: 1. northern transitional eu members with the gdp per capita below the eu average and contribution of retail to gdp creation significantly above the eu average (see: latvia, slovakia, and lithuania). in the political sense, those countries have already exited from the transitional status, but will stay for a while in this status because of transitioning in values and because of the low value-added industries domination (according to the example of lithuania at abromaityte-sereikiene 2008 and saboniene 2009). 2. other transitional eu countries (and croatia) with the gdp per capita below the eu average and contribution of retail to gdp creation near the eu average (see: czech republic and slovenia). 3. developed economies with the gdp per capita above or near the eu average and contribution of retail to the gdp near the eu average (see: italy, france, germany, austria, belgium). continued table 2 42 b. knezevic et al. changes in retail industry in eu fig. 4. importance of retail in gdp creation comparing to the gdp per capita, 2007 (source: same as table 2) on the basis of figure 4, one can assume that the higher is the gdp per capita, the lower is importance of retail in gdp creation. but this hypothesis has to be tested by using statistical tools. 5. the average size of retail companies in the study about distributive trade in the eu for the period of 1999 (hubertus 2002), the difference between the southern and northern eu member states was found. the study showed that the northern members had high concentration of trade companies (the average number of companies per 1000 inhabitants was higher than the eu average). however, he also concluded that trade companies in the south were smaller than companies in the north (the average number of employees in distributive trade was smaller than the eu average number). accordingly, there were more than 20 trade companies per 1000 inhabitants and, on the average, companies had three or less than three employees in italy, portugal and spain in 1999. at the same time, uk, germany, denmark austria and ireland had approximately five companies per 1000 inhabitants and, on the average; companies had 9 or more employees per company (hubertus 2002). also, the study concluded that in all distributive trade industries there are predominantly small companies. in order to summarize the importance of trade in the eu economy and to position the republic of croatia among other members, we conducted an analysis of the available pe rc en ta ge o f r et ai l i n g pd gdp per capita eu average 0 10000 20000 30000 40000 50000 60000 70000 80000 0,08 0,07 0,06 0,05 0,04 0,03 0,02 denmark austria malta finland slovenia estonia germany czech republic france slovakia belgium romania italy croatia hungary netherlands greece lithuania latvia cyprus luxembourg 43 business, management and education, 2011, 9(1): 34–49 eurostat data and calculated the indicator on the basis of data in official statistics in croatia. table 3 shows data about average size of trade companies for the whole distributive sector, and for the retail industry particularly. comparing the situation in 2004 with the situation in 2007, it is obvious that the 2004’s trend with smaller average size of southern eu member states companies (in comparison with the northern member states) continued in 2007. however, there are extreme examples of italy (with 2.8 employees per enterprise), and uk (with 13.2 employees per enterprise). moreover, micro enterprises (with less than 10 employees) are still dominating in all distributive trade sectors. we can also find exceptions in some northern eu countries where companies have more than 10 employees on average. however, there is no country and no distributive trade sector where companies exceed 20 employees per company on the average. however, we have to point out the increase of the company size in the majority of european countries, with exception of lithuania, slovakia, france and portugal. also, we have to stress out that in the uk, ireland, norway and estonia there is significant growth of the average size of retail companies. the growth of the average size is indicating ongoing trend of concentration in retail industry. table 3. structure of distributive trades industries according to average enterprise size (source: eurostat database, extract: sbs_sc_3ctrn_tr and csyb 2005 and 2008, tables 22-6 and 22-7) 2004 2007 country distributivetrade retail distributive trade retail belgium 4.5 4.0 4.7 4.3 bulgaria 4.0 3.0 4.0 3.0 czech republic 3.0 3.0 3.0 3.0 denmark 8.8 8.4 9.5 9.3 germany 10.0 9.4 10.3 9.7 estonia 7.0 10.0 7.0 12.0 ireland 9.1 9.1 10.8 11.8 greece 2.9 2.4 3.2 2.8 spain 4.0 3.2 4.2 3.5 france 4.7 4.1 4.6 3.9 italy 2.6 2.5 2.8 2.8 cyprus 3.0 3.0 4.0 3.0 latvia 8.0 8.0 8.0 8.0 lithuania 9.0 9.0 5.0 4.0 hungary 4.0 3.0 4.0 3.0 austria 7.8 7.7 7.8 7.8 44 b. knezevic et al. changes in retail industry in eu 2004 2007 country distributivetrade retail distributive trade retail poland : : 4.0 3.0 portugal 3.4 2.7 2.9 2.5 romania 4.0 3.0 5.0 4.0 slovenia 5.0 7.0 5.0 8.0 slovakia 12.0 16.0 9.0 11.0 finland 5.5 5.9 5.5 6.3 sweden 4.7 4.6 5.0 5.0 uk 13.2 15.8 13.2 16.2 norway 6.1 6.3 6.7 7.2 croatia * 9.6 13.3 11.5 18.0 croatia ** 5.3 4.8 6.5 5.7 eu-27 6.1 6.3 6.0 6.6 eu-15 6.2 6.1 6.5 6.6 notes: * data for legal entities; ** data for legal entities and tradesmen (craftsmen); own calculation according to data in csyb distributive trade holds a significant place in the croatian economy (croatian chamber of commerce 2010) with the special attention paid to retail sector due to its share in the workforce and to the number of business entities and outlets (segetlija 2005). in the case of croatia, data differs a lot if we take legal entities into account comparing to data with tradespeople included. in the first case (with legal entities only), average size of a retail company in croatia can be compared to uk, only. it is interesting to know that the croatian retail average is higher than uk average size. however, taking craftspeople (tradespeople) into consideration, the structure will be considerably different (table 3). comparing to other eu member states, the average size of retail companies in croatia had the largest increase in the period 2004–2007. in such a way, we can conclude that intense concentration process in the croatian retailing is an ongoing trend. 6. change in retail productivity retail productivity in this paper is measured as turnover per employee. previous studies (knego 2009; higon et al. 2010; leung et al. 2008) have showed that the productivity in retail industry is correlated with the size of the retail company. in figure 5, european countries are ranked according to achieved retail productivity in 2007, starting from country with the highest productivity (belgium) to the country with the lowest retail productivity (bulgaria). continued table 3 45 business, management and education, 2011, 9(1): 34–49 fig. 5. retail productivity (turnover per employee, 000 eur) (source: own presentation according to data in eurostat database, extract: scc_sc_3ctrn_tr and csyb 2008 and 2005, tables 22-3 and 22-5) in all european countries in given period, there was a growth of the retail productivity. the largest growth rates are achieved in transitional countries (slovenia, slovakia, estonia, and latvia) and norway. on the other hand, in several countries, there was a slower productivity growth (portugal, italy, cyprus, germany and others). in the previous part, we concluded that, on the average, companies are growing in size. there is a question if there is a correlation between the size and retail productivity. one can assume that there is a positive correlation. in order to make the statement on this problem, pearson coefficient of correlation is calculated. on the given data, it showed that there is no correlation between productivity and the average company’s size (pearson coefficient = 0.19). but, here is necessary to mention that there are several obstacles that have to be reconsidered prior to final decision whether to accept the finding or not, for instance there is a lack of data for several eu member countries, and, in table 3, there are rounded data and therefore not precise. 7. conclusive remarks as gilbert (2003) pointed out, retail industry has a great socio-economic impact on a national economy, which is confirmed with its share in the workforce and in the gdp created by a national economy. in the given period (2003–2007), the retail share in the total number of employees was around 9% and retail formed around 4% of the gdp 250,0 200,0 150,0 100,0 50,0 0 2004 2007 b el gi um fr an ce fi nl an d n or w ay sw ed en eu a ve ra ge d en m ar k ire la nd au st ria ita ly sl ov en ia g er m an y u ni te d ki ng do m c yp ru s sp ai n sl ov ak ia g re ec e es to ni a po rt ug al c ro at ia c ze ch r ep ub lic h un ga ry po la nd la tv ia r om an ia li th ua ni a b ul ga ria 46 b. knezevic et al. changes in retail industry in eu in the eu. however, two slight changes were observed in the majority of eu member countries: 1. growth of retail importance in the structure of employees. 2. decrease of retail importance in gdp creation. dawson (2006), zerrillo, iacobucci (1995) suggested that there is an ongoing process of the accelerated growth of large enterprises within the retail industry. in the analyzed period, the average size of companies in the eu reached 6.6, which means that smes are dominant in the structure of european retailing. but, scrutinized analysis shows that, in fact, there is a polarization of the retail structure on micro and large enterprises. in addition, there is a growth of the average size of enterprises, which means that large enterprises are, indeed, growing faster than others in the industry. this can be further explained by analyzing the level of retail concentration in eu member countries. also, there is a growth in retail productivity observed in all eu countries in the given period. but, the further research should be done to explain if larger companies are more productive than others as some previous studies suggested. tjordman (1995) and hubertus (2002) stated that there are significant differences in retail structure development in different countries and they classified countries according to the retail structure and reached level of retail development. in given period (2003–2007), we can observe that there are several groups of countries that have to be pointed out, those are: 1. southern, mediterranean, countries with the lowest average company’s size (for instance: italy, cyprus, portugal and greece). 2. northern transitional countries with retail industry that is more developed than the national economy (for instance: latvia, lithuania and slovakia). 3. other transitional countries where there is a necessity of further growth of retail importance in overall national economy (such as: romania and bulgaria). 4. developed countries with advanced retail structure (such as uk, norway, germany and austria). in croatia, share of retail in the total number of employee increased in the given period with the growth rate above the eu average. also, as the opposite to the decline of the eu average, retail share in the gdp increased significantly. also, the average size of retail companies grew rapidly and legal entities (i.e. enterprises) reached the size similar to the developed northern european countries. but, data is significantly different when tradespeople (craftspeople) are taken into account. therefore, we can say that due to the emphasized concentration process, croatian retailing has become similar to the northern eu member states in the given period. however, the cultural and historical tradition where croatian retailing is more like retailing of some southern eu member 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findarticles.com/p/articles/mi_m1038/is_n4_v38/ai_17105363/>. 49 business, management and education, 2011, 9(1): 34–49 mažmeninės prekybos sektoriaus pokyčiai europos sąjungoje b. knezevic, s. renko, n. knego santrauka mažmeninė prekyba yra svarbi pramonės šaka kiekvienos šalies ekonomikoje. es tai yra svarbus darbo vietų šaltinis ir daug prisideda prie bvp kūrimo. beveik penktadalis visų įmonių registruotos mažmeninės prekybos sektoriuje. per pastarąjį dešimtmetį mažmeninės prekybos sektoriuje keitėsi iš vidaus į tarptautinę rinką orientuotos verslo strategijos. šiame sektoriuje taip pat didėja ir didelių įmonių svarba. mažmeninės prekybos koncentracijos procesas pripažįstamas visose es šalyse. šiame straipsnyje yra analizuojamos ir pateikiamos vyraujančios mažmeninės prekybos tendencijos, įtraukiant es šalis ir kroatiją kaip es šalį kandidatę. reikšminiai žodžiai: mažmeninė prekyba, paskirstymas, es, koncentracija, internacionalizavimas. blazenka knezevic is an assistant professor at the department of trade of the faculty of economics and business at the university of zagreb, croatia. her research interests are: distributive trade, retail information systems, procurement management and e-commerce. she is a coauthor of several books and she published papers in academic journals such as british food journal, journal of cases on information technology, business excellence, wseas transactions on systems etc. she has actively participated at more than 20 scientific conferences and she is a member of the scientific or organizational committee at several conferences. she has participated at several scientific research projects funded by croatian ministry of science. sanda renko is an associate professor at the department of trade of the faculty of economics and associate professor at the department of trade of the faculty of economics and business at the university of zagreb, croatia. she has carried out research on topics such as retailing and wholesaling, category management, logistics, channels of distribution, etc. she was the guest editor in journals such as the british food journal, journal of food products marketing, world journal of retailworld journal of retail business management. she has presented papers at several conferences such as circle, euromed,she has presented papers at several conferences such as circle, euromed, international retailing conference, etc. she is involved in fp7 eu project “focus balkans”. nikola knego is a full professor at the department of trade of the faculty of economics and business at the university of zagreb, croatia. his research interests are: distributive trade trends and strategies, relationship between trade and tourism, procurement and supply chain management. he is a coauthor of several books and he published papers in several international academic journals. he is the editor of the business excellence (poslovna izvrsnost) academic journal. he has actively participated at a lot of international scientific conferences in croatia, see region and worldwide. he was a researcher at several scientific and professional research projects. verslas_2012_10_2.indd bank liquidity risk: analysis and estimates meilė jasienė1, jonas martinavičius2, filomena jasevičienė3, gražina krivkienė4 vilnius university, saulėtekio al. 9, lt-10222 vilnius, lithuania e-mails: 1meilute.jasiene@ef.vu.lt; 2jonas.martinavicius@ef.vu.lt; 3filomenaak@gmail.com (coresponding author); 4grazina.krivkiene@gmail.com received 31 october 2012; accepted 21 november 2012 abstract. in today’s banking business, liquidity risk and its management are some of the most critical elements that underlie the stability and security of the bank’s operations, profit-making and clients confidence as well as many of the decisions that the bank makes. managing liquidity risk in a commercial bank is not something new, yet scientific literature has not focused enough on different approaches to liquidity risk management and assessment. furthermore, models, methodologies or policies of managing liquidity risk in a commercial bank have never been examined in detail either. the goal of this article is to analyse the liquidity risk of commercial banks as well as the possibilities of managing it and to build a liquidity risk management model for a commercial bank. the development, assessment and application of the commercial bank liquidity risk management was based on an analysis of scientific resources, a comparative analysis and mathematical calculations. keywords: liquidity risk, bank risks, commercial banks, liquidity ratios, obligatory reserves, liquidity risk mamagement. reference to this paper should be made as follows: jasienė, m.; martinavičius, j.; jasevičienė, f.; krivkienė, g. 2012. bank liquidity risk: analysis and estimates, business, management and education 10(2): 186–204. http://dx.doi.org/10.3846/bme.2012.14 jel classification: g21. 1. introduction liquidity risk is a critical component of all risks that affect the activities of a bank. banks must assess their liquidity risk at all times and during periods of economical recession in particular. the article appraises the importance of risk to economy, its influence on the banking sector and identifies the risks that commercial banks face. moreover, it assesses the significance of liquidity risk, analyses ways to manage it as well as the development of the liquidity ratio and the obligatory reserves requirement in lithuania. a model to manage the liquidity risk in a commercial bank has been designed and used to assess the liquidity in one commercial bank controlled by a foreign bank. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2012, 10(2): 186–204 doi:10.3846/bme.2012.14 copyright © 2012 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 187 business, management and education, 2012, 10(2): 186–204 different authors demonstrate varying understanding of risk in a commercial bank. some sources state that risk is the probability of losses resulting from the unforeseen impact of both external and internal factors affecting the bank. by rendering financial services to the public, a commercial bank creates added value for its shareholders. to attain this goal, the resources available and the risks arising have to be managed in the most effective way possible. banks handle financial resources entrusted to them by deposit-holders and invest the moneys striving to earn the maximum profit obtainable at an acceptable level of risk. when it comes to managing its risks, a commercial bank has to consolidate risk management, creating a uniform process since all risks and methods to manage it are interrelated. one of the main objectives of a bank is to choose the best ratio of risk level and profitability. in banking, risk usually implies a threat that the bank might lose some of its resources, income, run higher costs whilst performing some of its financial operations. however, taking risks in the business of a bank does not always entail losses. efficient risk management in a bank could provide the backbone for a successful business of the bank. every bank faces a whole of different risks in the process of its operations, (cooper 2007). liquidity risk is one of the most important risks that banks face, since problems with liquidity may eventually lead to insolvency issues. the commercial bank liquidity risk management model that the authors introduce in this article permits assessing how successful a commercial bank manages its liquidity risk. an assessment of a commercial bank’s liquidity risk creates a possibility to see the gaps in managing such a risk and to improve the way the liquidity risk that the bank faces is managed. 2. conception and meaning of liquidity risk why is liquidity risk management so important? during the recent financial crisis, although many banks had posted adequate levels of capital, they still experienced difficulties because they failed to manage their liquidity properly. post-crisis, the higher cost of liquidity, larger funding spreads, higher volatility and reduced market confidence are driving financial institutions to allocate more resources to improving their liquidity risk management capabilities (bol 2011). one should begin analysing risks with the conception of risk in its broadest sense. even though a lot of authors provide slightly varying definitions of risk, generally risk can be assumed to be an expression of a probable event as a value. risk is the perceived loss that is often measured by the possibility of unfavourable choice, which is expressed as probability. an economist may see this probability as a ratio that indicates a possible loss of profit and the occurrence of losses (bis 2009). g. kancerevyčius (2009) notes that risk occurs when the probabilities of potential results are known, uncertainty arises when the probabilities of different possible results are not known. this is what distinguishes risk from uncertainty. 188 m. jasienė et al. bank liquidity risk: analysis and estimates so, based on a literary analysis, one can infer that risk is a probability, which shows that actual profitability will differ from the one that has been planned. the higher this probability is, the higher risk is faced. however, we cannot see risk only as an indicator of substantial losses. accepting additional risks may lead to extra profit, and the higher the risk, the higher profit can be expected. in conclusion, the meaning of risk in economy can be perceived both as a probability of losses and an opportunity to operate under uncertain conditions and make higher income by accepting a higher degree of risk. by rendering its services to the public, a commercial bank generates added value for its shareholders. this requires managing the resources available and any risks that may arise in the most effective way possible. banks handle financial resources entrusted to them by deposit-holders and invest the moneys striving to earn the maximum profit obtainable at an acceptable level of risk valvonis (2009)many different methods exist to manage every type of risk. when it comes to managing its risks, a commercial bank has to consolidate risk management, creating a uniform process since all risks and methods to manage it are interrelated. there are three main types of risks that can be identified: market risk, credit risk ir and operational risk (crouhy, galai, mark 2007). this classification of bank risks sum up the risks that banks incur, yet it does not embrace one of the key types of risks that a bank faces, which is liquidity risk. a. gaulia and i. mačerinskienė (2006) further expand the classification of risk as established in the basel rules of capital adequacy by adding liquidity risk. fig. 1. banking risk (source: created by authors) j. bessis (2008) identified six principal types of risk such as credit risk, interest rate risk, market risk, liquidity risk, operational risk ir foreign exchange risk. authors of the current banks risk is reflected in fig. 1. the scientist has added other types of risks to the ones mentioned above. other risks may concern country risk, regulation risk and so on. 189 business, management and education, 2012, 10(2): 186–204 according to the classification of banking risks introduced by foreign economists timothy w. koch and s. scott macdonald (2006), market risk can be generally said to consist of three lesser risks: stock price risk, interest rate risk and foreign exchange risk. timothy w. koch and s. scott macdonald (2010) identified six types of risks. these are credit risk, liquidity risk, market risk, operational risk, reputation risk and legality risk. these risks go hand in hand with capital risk, which is perceived as a risk that the investor will lose all or part of their funds. so, a commercial bank is affected by a plenitude of different risks. many authors identify various risks that commercial banks face, yet the differences among them are not essential. liquidity risk is one of the most critical risks that banks run. adequate management of liquidity may minimise the probability that serious problems will arise in future. in fact, the issue of liquidity is not limited to just one bank. a low liquidity ratio in one financial institution could affect the entire system. it is liquidity risk that may play the definitive role in the case of a bankruptcy of a bank. at a time of economic recession, the liquidity of a bank is a guarantee for the bank’s financial stability (brunnermeier, lasse 2009). liquidity is the ability of a bank to fund increases in assets and meet obligations as they come due, without incurring unacceptable losses (bis 2008). the fundamental role of banks in the maturity transformation of short-term deposits into long-term loans makes banks inherently vulnerable to liquidity risk, both of an institution-specific nature and that which affects markets as a whole. virtually every financial transaction or commitment has implications for a bank’s liquidity. effective liquidity risk management helps ensure a bank’s ability to meet cash flow obligations, which are uncertain as they are affected by external events and other agents’ behaviour (cebs 2009). the european central bank (ecb 2009) defines liquidity risk as the ability of a bank to finance increases in assets and meet payment obligations when due. however, this definition does not reflect the extent of liquidity quite correctly. this extent is important when it comes to unforeseen utilisation of credit facilities, withdrawal of deposits, premature repayments of loans and/or payments of interest. the rules for estimating the liquidity ratio as approved by the bank of lithuania describe the liquidity of a bank as the bank’s ability to honour its obligations on time, fully and without interruptions. t. p. fitch (2006) defined liquidity in his dictionary of banking terms as the ability of an institution to meet its obligations. in banking, this term stands to include the ability of a bank to meet the demands of deposit holders who wish to withdraw their funds and to satisfy the needs of willing borrowers. banks are a vital part of the global economy, and the essence of banking is assetliability management, liquidity, gap and funding risk management as well (choudry 2007, 2009, 2010, 2012). liquidity risk is the risk that a banking business will have 190 m. jasienė et al. bank liquidity risk: analysis and estimates insufficient funds to meet its financial commitments in a timely manner. the too key elements of liquidity risk are short-term cash flow risk and long-term funding risk the long-term funding risk includes the risk that loans may be available when the business requires them or at acceptable cost. all banking businesses need to manage liquidity risk to ensure that they remain solvent. market and funding liquidity risks compound each other as it is difficult to sell when other investors face funding problems and it is difficult to get funding when the collateral is hard to sell. liquidity risk also tends to compound other risks. if a trading organization has a position in an illiquid asset, its limited ability to liquidate that position at short notice will compound its market risk. suppose a firm has offsetting cash flows with two different counterparties on a given day. if the counterparty that owes it a payment defaults, the firm will have to raise cash from other sources to make its payment. should it be unable to do so, it too will default. here, liquidity risk is compounding credit risk. accordingly, liquidity risk has to be managed in addition to market, credit and other risks. because of its tendency to compound other risks, it is difficult or impossible to isolate liquidity risk. in all but the most simple of circumstances, comprehensive metrics of liquidity risk do not exist. certain techniques of asset-liability management can be applied to assessing liquidity risk. a simple test for liquidity risk is to look at future net cash flows on a day-by-day basis. any day that has a sizeable negative net cash flow is of concern. such an analysis can be supplemented with stress testing. look at net cash flows on a day-to-day basis assuming that an important counterparty defaults. 3. management of liquidity risk in lithuanian banks to achieve better management of liquidity risk, the bank of lithuania has set a liquidity ratio for lithuanian commercial banks to comply with. the liquidity ratio: the relationship between the liquid assets and current liabilities of a bank may not be lower than 30 per cent. l = la: cl × 100%, l ≥ 30%, where: l is the liquidity ratio, la is the liquid assets, cl is the current liabilities. the bank of lithuania has also established the following concepts: liquidity buffer is liquid assets sufficient to meet an additional need for liquid assets that may arise during the designated survival period of a bank under unfavourable conditions according the most probable scenario. the liquidity buffer is a short-term component of the liquidity counterbalance capacity. 191 business, management and education, 2012, 10(2): 186–204 survival period is a short-term period established by a bank, when the bank can ensure continuity of its business and meet all of its obligations when they are due according to the established worst-case scenarios, without attracting additional cash flows and avoiding the necessity to sell its assets at a loss. net funding gap is the negative difference, which results from subtracting the expected monetary disbursements amount from the anticipated monetary revenues amount. banks must manage their liquidity buffers by making sure that it will be available to them should unfavourable circumstances arise, with no legal, regulatory or operating restrictions imposed on the application of such assets. banks should steer clear of high concentrations of securities and other liquid assets. obligatory reserves are another important requirement that facilitates managing and safeguarding the liquidity of commercial banks. requirements for obligatory reserves are the requirements of the central bank for commercial banks to have a particular amount of their identified liabilities covered with liquid assets. said portion is known as the obligatory reserve ratio. the obligatory reserve requirement applies to maintain the liquidity of the banking system as well as a higher degree of stability in the interest rates on the monetary market. currently, obligatory reserves of the bank of lithuania must total 4 per cent of the bank’s existing liabilities (bol 2008. considered the most liquid form of assets, obligatory reserves clearly assure a higher degree of liquidity and shock-resistance of the banking system, however they do nothing to protect deposits held with commercial banks due to the simple fact that the amount of such deposits normally exceeds the extent of the reserves by a dozen or so times. the recent international financial crisis has underlined the importance of managing liquidity risk. the requirements for liquidity risk management have never been standardised on an international scale before (jasevičienė 2012). that in mind, both the requirements of the crd iv directive and basel iii set forth new standards for liquidity risk management as well. the standards shall consist of two indicators. the liquidity coverage ratio (lcr) is estimated as the ratio between the liquidity buffer and the net funding gap. the minimum required lcr is expected to be that of 100 per cent. the lithuanian banking system is currently aligned with this ratio. the net stable funding ratio (nsfr) is the ratio between the existing long-term liabilities and the required long-term liabilities, the latter amount established on the basis of the available longterm assets. the nsfr’s function is to harmonise the structure of long-term assets and liabilities. so far, banks do not completely comply with this requirement but are planning to achieve full compliance by the time the crd iv directive is in place. during the second quarter of 2012 the amount of banks’ liquid assets – balances of accounts, debt securities, cash – dropped, yet the liquidity ratio of the banking system remained unchanged and still stood at 39.8 per cent (fig. 2). 192 m. jasienė et al. bank liquidity risk: analysis and estimates fig. 2. dynamic liquidity ratio percentage (source: bank of lithuania 2012 (created by authors)) this ratio remained intact because the maturities of financial resources held with banks were growing shorter and, according to the rules for calculating the liquidity ratio, these resources were recorded as liquid assets. bearing in mind that the possibilities for the banks operating in lithuania to attract funds during the crisis varied, and so did their strategies to manage liquidity as well as the structures of their liquid assets, for the purposes of analysis of banks’ liquidity we can identify two groups of banks: subsidiary banks and branches of foreign banks, and banks that do not have a parent bank. during the second quarter, the liquidity ratio of the group of banks that do not have a parent bank and are more vulnerable to liquidity shocks continued to decline and was lower than that of the subsidiary banks’ group. banks that do not have a parent bank manage their liquidity and comply with the requirements by making their own liquidity buffers and harmonising the maturities of assets and liabilities, and their liquidity is largely affected by fluctuations of the deposit volume. most (54.3 per cent) of the liquid assets of these banks are investments into debt securities, whereas liquid balances of bank accounts make up slightly over 11 per cent of the liquid assets. the liquidity of subsidiary banks is becoming increasingly centralised, and as a result the formation of their liquidity buffers is formed and compliance to ratios is enforced by coordinating decisions and actions with the parent bank, considering the entire parent bank group. liquidity risk management holds a certain amount of relevance for banks due to an absence of balance between the maturities of assets and liabilities within the banking system (fig. 3). since the main type of business of banks operating in lithuania is lending operations, the majority (59.5 per cent) of their assets is invested for periods extending beyond one year. stable long-term sources of financing account for nearly half of the (32.4 per cent) amidst banks’ liabilities, and therefore banks finance their long-term investments with short-term liabilities, which are being constantly renewed. as mentioned above, considering the risk of liquidity that stems out of the misbalance between assets and liabilities, the eu is planning to introduce a net stable funding ratio (nsfr), 193 business, management and education, 2012, 10(2): 186–204 which shall be used to determine the minimum amount of long-term liabilities required to cover the amount of long-term assets of a bank. even though this ratio is scheduled to appear in the eu in 2018, banks should start looking for financial resources with extended maturities and strive for a better balance between their assets and liabilities in terms of their maturities already. still, banks that do not have a parent bank will be facing challenges in prolonging the maturities of their liabilities, as such banks have difficulties in attracting long-term funds on the local market even at higher interest rates, however this prolongation of liability maturities may have a negative impact on the profitability figures of subsidiary banks as well. fig. 3. assets and liabilities by maturity dynamics (source: bank of lithuania 2012 (created by authors)) according to the data available for july 1, 2012, most banks have an adequate liquidity buffer to compensate for the net funding gap. as estimated by the banks, the liquidity buffer totalled ltl 16.9 billion compared to the net funding gap of ltl 7.1 billion, which means that the banks’ liquidity buffer was 2.4 times bigger than the required floor value. the sufficient coverage of the net funding gap in the banking system is driven by parent banks, which include unused loans from foreign holding institutions into their liquidity buffer. the liquidity buffer of banks that do not have a parent bank on july 1, 2012 was just slightly bigger than their net funding gap. the liquidity buffer required to secure short-term liquidity of banks under unfavourable conditions can be estimated, and the ratio can be compared for different banks with a higher degree of precision by using the liquidity coverage ratio (lcr), which by definition approximates liquidity buffer, yet is uniform for all financial institutions. although the eu is planning to introduce this ratio in 2015, voluntary pilot calculation of the lcr across all eight banks doing business in lithuania began in early 2012. according to the information available for july 1, 2012, judging by the new requirements to be implemented (some of them are more rigid than those applied to estimating the liquidity buffer, for instance, defining financial instruments that can comprise the buffer in a very conservative fashion), the lcr of banks is a little lower and compliance 194 m. jasienė et al. bank liquidity risk: analysis and estimates to it would entail a lower liquidity buffer than the ratio estimated on the basis of banks’ reports. during the second quarter, the pilot lcr of banks improved slightly and, as of july 1, 2012, stood at 143 per cent (bol). the european banking authority (eba 2012) is also actively involved in analysing and appraising the liquidity status of eu banks. according to the eba (which has divided banks into two groups), at end of december 2011, the average lcr of group 1 was 72.1%, with country results ranging from 25.6% to 122.9%. the shortfall is estimated at €1066.8 bn, of which 77.1% is represented by 3 countries. only 9 banks, accounting for 20.5% of the group 1, have an lcr ratio above 100%. fig. 4. lcr and nsfr ratio (sourse: eba 2012) more than 80% of the holdings of lcr eligible liquid assets are level 1 assets, which implies that on average the 40% cap on level 2 assets has a limited impact, while some countries are significantly affected. in total, 24 banks face a reduction in level 2 assets of about €53 bn due to the cap on liquid assets. group 2 lcr has significantly improved, now at 90.9%, on average. about 44% of the group 2 banks (i.e. 49 of 111 banks) already meet the regulatory minimum requirement, with little difference between large and small banks. the shortfall of liquid assets is also reduced, to €101.7 bn. concerning the nsfr, group 1 banks report an average ratio of 93.4%, resulting in a shortfall of available stable funding of €1.1 trillion. group 2 banks show very similar results, with an average nsfr of 93.6%. (fig. 4). 4. liquidity risk management model of a commercial bank following the analysis of scientific literature and the legislation of the republic of lithuania and the bank of lithuania that was presented in the theory part, we designed a model for managing liquidity risk in commercial banks (fig. 5). this liquidity management model is based on theoretical ways to manage liquidity risk and the contemporary banking practice. 195 business, management and education, 2012, 10(2): 186–204 liquidity risk management of a bank short-term liquidity plannig long-term liquidity plannig liquidity ra�o of the bank of lithuania assurance of obligatory reserve shot-term liquidity limits realiza�on analyses of liquidity gap deposits and loans forecast forecast of liquidity need long-term liquidity limits realiza�on fig. 5. liquidity risk management model of a commercial bank (source: compiled by the authors based on bessis 2008; kancerevyčius 2009) assessment of liquidity risk in a commercial bank can be split into management of shortand long-term liquidity. the management of short-term liquidity of a bank covers a period of one month. short-term liquidity of a bank can be managed in line with the liquidity ratio prescribed by the bank of lithuania as well as the internal short-term liquidity indicators of the bank. long-term liquidity management consists of managing a bank’s liquidity over a period of one year (kancerevyčius 2009). management of long-term liquidity can be based on forecasting and satisfying the need for liquidity. analysing the liquidity gap and assessing long-term liquidity ratios is equally important.gap analysis allows you to see the differences between assets and debt liabilities both at present and at any given moment in future (bessis 2008). a positive difference indicates that assets will exceed liabilities and shareholders’ equity over the period of analysis. that means that the amount of assets during a respective period will be higher than that of liabilities. whereas a negative difference will mean that, over the period of analysis, liabilities will exceed assets. this means that there will be a deficit of assets during a particular period. a zero difference indicates that the amount of assets precisely covers the amount of liabilities. so, this model of managing a commercial bank’s liquidity risk allows judging the success with which the commercial bank handles its liquidity risk. assessment of the 196 m. jasienė et al. bank liquidity risk: analysis and estimates liquidity risk of a commercial bank creates a possibility to pinpoint weaknesses in liquidity risk management and to manage the liquidity risk of the commercial bank with more efficiency. fig. 6. assets of a bank controlled by a foreign bank by maturity as of the 31st of december, 2011 (%) (source: compiled by the authors based on a bank`s controlled by a foreign bank financial year 2011 report) 5. the valuation of the liquidity risk of a bank controlled by a foreign bank for the purposes of this analysis, we have chosen a universal commercial bank controlled by a foreign bank, which offers the entire range of banking services to private and business clients. before applying the liquidity risk management model to analyse the management of shortand long-term liquidity risk of the bank, we should carry out an analysis of the bank’s assets and liabilities by maturity. notably, as of december 31, 2011 the majority of the subject bank’s assets were long-term assets with maturity of 1 to 3 years (16.27 per cent) and over 3 years (37.23 per cent). the bank’s short-term assets with maturity of under 1 month accounted for 16.41 per cent of all assets, and assets with maturity of up to 3 month made 19.13 per cent of the bank’s assets (fig. 6). the largest portion (36.52 per cent) of the liabilities of the bank controlled by a foreign bank consists of liabilities with maturity of 1 to 3 years. the subject bank’s shortterm liabilities with maturity of under 1 month amounted to 33.39 per cent of its total liabilities, and liabilities with maturity of under 3 months accounted for 39.62 per cent of the liabilities (fig. 7). the liabilities of the bank controlled by a foreign bank with maturity of up to 1 year amounted to one-half (50.26 per cent) of the bank’s liabilities. therefore, considering the structure of the assets and liabilities of the bank controlled by a foreign bank by maturity, we can conclude that the short-term assets of the bank account for 37.65 per cent of its total assets, and short-term liabilities with maturity of under 1 year make up one-half (50.26 per cent) of its total liabilities. 197 business, management and education, 2012, 10(2): 186–204 fig. 7. liabilities of a bank controlled by a foreign bank by maturity as of the 31st of december, 2011 (%) (source: compiled by the authors based on a bank`s controlled by a foreign bank financial year 2011 report) 5.1. valuation of short-term liquidity risk as we have already mentioned, liquidity risk management can be classified as shortterm liquidity management and long-term liquidity management. the liquidity risk management model presented in the methodology if this work will be applied and appraised on the basis of an example of one currently operating bank controlled by a foreign bank. the application of the liquidity risk management model should begin with an analysis of short-term liquidity management. according to the methodology of the research, short-term liquidity management should be based on compliance to the liquidity ratio established by the bank of lithuania and the internal liquidity limits of the bank. to make sure it maintains its liquidity, every bank must first of all comply with the liquidity ratio prescribed by the bank of lithuania. according to the information provided in the financial statements of the bank controlled by a foreign bank, the bank fully complied with the liquidity ratio established by the bank of lithuania (fig. 8). the bank has to compute this ratio following the rules for calculating the liquidity ratio as approved by the bank of lithuania. the liquidity ratio of a bank, i.e. the ratio between the bank’s liquid assets and current liabilities may not be below 30 per cent (bol 2008). during the period covered by our analysis (2003–2011), the liquidity ratio of the bank controlled by a foreign bank was above the 30 per cent requirement. the higherthan-required liquidity ratio of the bank controlled by a foreign bank is evidence to the fact that the bank had sufficient reserves of liquid assets and was financially stable as far as liquidity risk is concerned. the liquidity increase in 2011 was the product of the increase in the amount of the bank’s current liabilities driven by the bankruptcy of another bank. as a result, the subject bank reported surplus liquidity at the end if 2011. 198 m. jasienė et al. bank liquidity risk: analysis and estimates fig. 8. change of liquidity values 2003–2011 of a bank which is under control of the foreign bank (%) (source: compiled by the authors based on a bank`s controlled by a foreign bank financial year 2003–2011 reports) another important facet of managing and assessing short-term liquidity is the liquidity limits set by the bank. the short-term liquidity of the bank controlled by a foreign bank was appraised on the basis of the short-term liquidity indicators suggested within the framework of our liquidity management model. the immediate liquidity limit, which shows the amount of demand deposits held in cash in this case is 10.53 per cent. the amount of cash within the total of deposits held with the bank controlled by a foreign bank is 6.26 per cent. the ratio between the aggregate amount of liquid financial resources and the deposits held with the bank indicates that the bank holds 41.11 per cent of the deposits in liquid form. this ratio has probably increased as a result of the growth of the deposits portfolio. in theory, the recommended value under economic recession should be between 30 and 40 per cent (table 1). it should be noted that the difference between the liquid assets and short-term liabilities of the bank controlled by a foreign bank is negative. that means that the short-term liabilities of the bank are completely covered with long-term assets. the overall liquidity ratio shows that 18.82 per cent of the assets of the bank controlled by a foreign bank are liquid assets. in our particular case, the ratio is below the recommended threshold. it is difficult to interpret the value of this ratio explicitly, because it is estimated only with reference to the bank’s assets and does not reflect the demand for liquidity in the bank controlled by a foreign bank. the deposit sensitivity ratio indicates that demand deposits account for 59.44 per cent of all deposits held with the bank controlled by a foreign bank (table 1). in this case, this ratio is relatively high, making the bank sensitive to deposit withdrawals. 199 business, management and education, 2012, 10(2): 186–204 table 1. the valuation of the short-term liquidity indicators of a bank controlled by a foreign bank (source: compiled by the authors based on a bank`s controlled by a foreign bank financial year 2011 report; koch, macdonald 2006) short-term liquidity indicators calculated ratios and values recommended limits in the period of economic recession 1 immediate liquidity limit 322 421 / 3 060 599 = 0.1053 × 100% = 10.53% 11–15% 2 share of cash in bank’s deposits 322 421 / 5 149 173 = 0.0626 × 100% = 6.26% till 5% 3 share of all liquid funds in bank’s deposits 2 117 000 / 5 149 173 = 0.4111 × 100% = 41.11% 30–40% 4 overall liquidity ratio 2 117 000 / 11 242 806 = 0.1882 × 100% = 18.82% 30–40% 5 deposit sensitivity ratio 3 060 599 / 5 149 173 = 0.5944 × 100% = 59.44% 30–40% 6 bank’s liquidity 2 117 000 – 4 727 680 = –2 610 680 positive, negative 7 shall of all liquid funds in demand deposits 2 117 000 / 3 060 599 = 0.6917 × 100% = 69.17% 30–50% in our case, the share of all liquid funds in demand deposits is 69.17 per cent. this ratio indicates the extent to which the amount of liquid assets of the bank controlled by a foreign bank secures demand liabilities. in this case, the indicator exceeds the established floor of the ratio by quite a margin. so, considering the short-term liquidity indicators depicted in the 2011 financial statements of the bank controlled by a foreign bank, we can conclude that not every ratio is within the recommended limits. notably, the bank in question has a parent company and therefore commands an excellent opportunity to attract financing resources at a minimum price. this means that in the event of a liquidity crisis the bank could look forward to support from the parent institution. this opportunity minimises the bank’s sensitivity to liquidity risk. as a result, we can say that liquidity risk management in the bank controlled by a foreign bank is less conservative. considering the short-term liquidity ratios of the bank controlled by a foreign bank, we would suggest that, at the time of economic recession, the bank should increase the share of liquid assets within its total assets base. 5.2. valuation of long-term liquidity risk after we have finished our analysis of the short-term liquidity of the bank controlled by a foreign bank, we should move on to examining its long-term liquidity. the type of analysis that is relevant for the purposes of managing and assessing the liquidity risk of a commercial bank is gap analysis. 200 m. jasienė et al. bank liquidity risk: analysis and estimates the aggregate liquidity gap of the bank controlled by a foreign bank as of december 31, 2011 can be compared with the aggregate gap of the bank’s liquidity as of december 31, 2010. as you can see from the table, the overall liquidity gap over a 1–3 period was negative and stood at ltl 3,695,669 thousand (table 3). as of december 31, 2010, the aggregate liquidity gap of the bank was also negative and amounted to ltl 4,014,408 thousand (table 2). for periods of over 3 years, just like the net liquidity gap, this gap became positive and on december 31, 2011 amounted to ltl 313,470 thousand (table 3). as of december 31, 2010, the aggregate liquidity gap of the bank controlled by a foreign gap over a period longer than 3 years was negative and stood at ltl 371,751 thousand (table 2). the positive liquidity gap shows that, during the period under investigation, the bank controlled by a foreign bank had more assets than liabilities and shareholders’ equity. when it comes to analysing the total liquidity gap of the bank controlled by a foreign bank, we can state that for all periods covered in our study the liquidity gap in the bank controlled by a foreign bank was negative (table 2). this means that the bank had more liabilities than assets during all of the periods covered in our analysis. table 2. the liquidity gap analyses of a bank controlled by a foreign bank by the 31st of december, 2010 (thousand litas) (source: compiled by the authors based on a bank`s controlled by a foreign bank financial year 2010 report) on demand under 1 month 1-3 months 3-6 months 6-12 months 1-3 years over 3 years undefined term total total assets 610 768 676 922 496 800 629 849 981 691 2 480 740 4 188 539 1 234 275 11 299 584 total liabilities and equity 2 583 548 1 992 329 1 367 711 514 311 1 061 224 2 372 055 545 882 862 524 11 299 584 liquidity gap (1 972 780) (1 315 407) (870 911) 115 538 (79 533) 108 685 3 642 657 371 751 cumulative liquidity gap (1 972 780) (3 288 187) (4 159 098) (4 043 560) (4 123 093) (4 014 408) (371 751) 0 table 3. the liquidity gap analyses of a bank controlled by a foreign bank by the 31st of december, 2011 (thousand litas) (source: compiled by the authors based on a bank`s controlled by a foreign bank financial year 2011 report) on demand under 1 month 1-3 months 3-6 months 6-12 months 1-3 years over 3 year undefined terms total total assets 825 033 1 021 899 306 742 620 712 1 465 009 1821 986 4 185 502 995 923 11 242 806 total liabilities and equity 3 082 107 672 059 700 863 650 885 544 912 4 106 191 173 363 1 309 393 33 242 806 liquidity gap (2 257 107) 349 840 (394 121) (30 173) 920 097 (2 284 205) 4 009 139 (313 470) cumulative liquidity gap (2 257 107) (1 907 267) (2 301 388) (2 331 561) (1 411 464) (3 695 669) 313 470 0 201 business, management and education, 2012, 10(2): 186–204 additional liquidity indicators are relevant for the purposes of managing long-term liquidity risk in a commercial bank as well. the additional long-term liquidity ratios that we suggest in our liquidity risk management model are used to assess the long-term liquidity of the bank controlled by a foreign bank (table 4). table 4. the valuation of the long-term liquidity indicators of a bank controlled by a foreign bank (source: compiled by the authors based on a banks` which is under control of the foreign bank 2011 year financial report; koch, macdonald 2006) long-term liquidity indicators calculated ratios and values recommended limits 1 loans to deposits 8 882 706/ 5 149 173 = 1.72 about 1 2 ratio for the stable portion of liabilities 4 659 592 / 11 242 806 = 0.4144 × 100% = 41.44% the higher the value 3 ratio of liabilities equity coverage 1 308 552/ 9 94 2543 = 0.13170 × 100% = 13.17% 1/10–1/25 4 long-term liquidity ratio 6 007 488 / 4 282 554 = 1.40 not less than 1 the ratio between loans and deposits in the subject bank shows that the bank has issued loans 1.72 times more than it has attracted deposits. we can say that deposits are not the only and principal source of finance for the bank controlled by a foreign bank. the bank procures its funding from the parent bank, through issues of debt securities or from loans on the banking market. in our particular case, the ratio for the stable portion is 41.11 per cent. this indicator reflects the stable part of the liabilities. since for the bank controlled by a foreign bank this ratio is quite high, we are safe to say that the liquidity of the bank is good. the ratio of liabilities equity coverage displays the bank’s ability to cover its liabilities with equity. in this case, the ratio is 13.17 per cent, meaning that only a small portion of the liabilities of the bank controlled by a foreign bank is covered with the bank’s equity. the long-term liquidity ratio shows that the amount of the bank’s long-term assets is 1.4 times the amount of its equity and long-term liabilities. so, considering the long-term liquidity ratios that we found in the financial statements of the bank controlled by a foreign bank, we can conclude that the bank manages its long-term liquidity. the liquidity risk management model that we developed was successfully applied in the case of the bank controlled by a foreign bank. the commercial bank liquidity risk management model allows appraising the shortand long-term liquidity of a bank, identify weaknesses in liquidity risk management and develop recommendations. on the basis of the hands-on application of this model, we can say that the bank in question manages its liquidity risk however at the end of 2011 it was faced with surplus liquidity. after we conducted our analysis of the development of the requirements of the liquidity ratio and obligatory reserves for commercial banks, we are now able to see that at the time of economic recession banks, and especially those that do not have any parent bank, should increase the share of liquid assets across their asset base by 202 m. jasienė et al. bank liquidity risk: analysis and estimates acquiring t-bills or other liquid assets. should a bank feel the need for liquid resources, the author of this article should suggest raising funds through selling liquid assets or by attracting liabilities. the bank should uphold competitive interest rates on time deposits and organise ad campaigns to attract deposits. 6. conclusions after we have discussed and analysed the importance and management of liquidity risk that commercial banks incur, developed a commercial bank liquidity management model, and analysed how this model can be applied in practice by drawing on the case of one commercial bank controlled by a foreign bank, we can conclude that risk is defined by the notion of duality. risk is a probability that reflects the chance to lose profit and run losses against earning additional profits. the concept of risk is integral to uncertainty. scientists diverge on this relationship. there are two identifiable stances on the relationship between risk and uncertainty. one of them defines those two concepts as being identical, whilst the other one draws a distinct line between them. commercial banks face different risks. the main types of risk that banks run, such as liquidity risk, credit risk and market risk are distinguished by all authors. it should also be said that all risks are mutually interrelated, regardless of the number of identifiable risks. liquidity risk is a principal type of risks that banks face. having analysed the notions of risk that different authors present, we can sum up that the liquidity risk of a bank is risk that the bank will be unable to meet its obligations when due as a result of shortage of liquid funds and will therefore suffer losses after a sharp decline in the amount of financial resources and an increase in the price of new funding to cover up previous debts. the main goal of managing liquidity risk is to ensure as profitable operation of the bank as possible, by maintaining a sufficient level of liquidity buffer to safeguard stable business of the bank. effective management of liquidity provides a backbone for earning maximum profit at a certain liquidity risk level. having discussed the methods to manage liquidity, we can conclude that the diversity of ways to manage liquidity is immense. the underlying liquidity management methods are based on managing the bank’s assets and liabilities at a certain moment in time. liquidity demands can be identified using methods of deposit structure and cash flow reporting. the method of deposit structure and the method of cash flow reporting augment one another. the first method embraces a thorough analysis of the structure of deposits accepted by the bank. the second method supplements the first one and covers the possibilities to withdraw deposits as well as the demand for credit. assessment of liquidity risks in the bank is based on managing short-term (up to one month) and long-term (one-year) liquidity. short-term liquidity of the bank is managed in line with the liquidity ratio requirement prescribed by the bank of lithuania by securing a required amount of obligatory reserves and complying with short-term liquidity ratios as well as the limits that apply to them. long-term liquidity management relies on forecasting the need for liquidity, deposit and loan flows, meeting the need for liquidity, liquidity gap analysis and assessment of long-term liquidity 203 business, management and education, 2012, 10(2): 186–204 indicators. liquidity gap analysis has revealed a mismatch between the bank’s assets and liabilities by maturity. the bank of lithuania has placed an exclusive focus on managing liquidity risk as well. the stress testing analysis has shown that banks are rather successful in managing their liquidity. having conducted analysis of the liquidity gap in one bank we can state that the net liquidity gap for each demand at the close of 2011 was ltl 2,257,107 thousand in the negative. the total liquidity gap for a period of one to three years was minus ltl 3,695,669 thousand. for periods longer than 3 years, the net liquidity gap of the bank was ltl 4,009,139 thousand, whilst the aggregate liquidity gap was ltl 313,470 thousand. during the economic recession, the bank that we analysed ensures coverage of loans outstanding with long-term 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b u s i n e s s, ma n ag em e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(1): 5–18 doi:10.3846/bme.2011.01 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt material flow cost accounting (mfca) – tool for the optimization of corporate production processes jaroslava hyršlová1, miroslav vágner2, jiří palásek3 institute of chemical technology, technická 5, cz-166 28 prague 6, czech republic e-mails: 1jaroslava.hyrslova@gmail.com (corresponding author); 2miroslav.vagner@cz.lasselsberger.com; 3palasekj@gmail.com received 18 november 2010; accepted 15 january 2011 abstract. the paper focuses on the material flow cost accounting method (hereinafter the “mfca”). it presents an application of the mfca within a manufacturing plant of the largest manufacturer of ceramic tiles in the czech republic – the company lasselsberger. it shows the importance of data acquired from the mfca system as well as their application for an optimization of manufacturing processes for specific conditions of a manufacturing plant of the company. keywords: material flow, cost accounting, material flow cost accounting, production, material costs. reference to this paper should be made as follows: hyršlová, j.; vágner, m.; palásek, j. 2011. material flow cost accounting (mfca) – tool for the optimization of corporate production processes, business, management and education 9(1): 5–18. doi:10.3846/bme.2011.01 jel classification: m11, m41. 1. introduction the mfca represents the key tool of the management approach referred to as the flow management, the objective of which is, in particular, to manage manufacturing processes with regard to the flows of materials, energy, and data so that a manufacturing process can proceed efficiently and in compliance with any set targets (fichter et al. 1999; jasch 2001, 2009). in flow management, enterprise is understood as a system of material flows. on the one hand, this system contains material flow relating with value added generation (from purchase of input materials through particular processing stages to distribution of products to the customers). on the other hand, inseparable part of material flows is formed by material losses that occurred in the course of corporate processes (for example, defective products of poor quality, scrap, waste, damaged products, products with expired term of consumption, etc.). this means that materials leave enterprise in the form of undesirable residues – undesirable from both economic and environmental � j. hyršlová et al. material flow cost accounting (mfca) – tool for the optimization of corporate production processes viewpoints. as a matter of fact, these are waste flows of all states (solid waste, waste water and emissions to the air). within mfca, emphasis is primarily laid on transparency of material flows and on the relating costs. thus, there are created basic conditions for proposing measures that are connected with significant material and cost savings. measures aiming to reduce consumption of materials are associated also with cost savings in the area of handling the materials as well as in the area of waste disposal. the paper focuses on mfca. it characterizes mfca as material flow management tools and points out the significance of mfca information for the optimization of production processes. the aim is to present mfca system outputs on example of a company manufacturing ceramic tiles and show the importance of data acquired from the mfca system for the optimization of manufacturing processes. 2. mfca – a tool of material flow management the principal concept of the mfca is based on the chart shown in fig. 1. any and all inputs (materials, energy, water, and other inputs) and outputs (primary products / byproducts, wastes, wastewaters, emissions) are determined within a quantity centre, and a calculation is carried out in respect of material, energy, and system costs incurred for products and material losses. the term product refers to any product transferred to the next manufacturing stage (a quantity centre) as suitable and/or leaving the company as a final product. in terms of the mfca, the term material loss is not only seen in the narrow sense, but it refers to any and all invested materials, energy, and other economic resources, which were not transformed into products and leave unused as wastes. the mfca concentrates on material flows and associated costs. not only does the system provide data in physical units, it also shows the value of individual materials flows. material costs are an important part of the material flow costs; these costs represent an important cost item in manufacturing companies. the usage of materials is monitored in physical units and it is also shown in monetary units (material costs) within the mfca. the material flows are reconstructed within a quantity centre, and data are ascertained in order to determine which part of the materials is flowed to products and which part of the materials leaves as material losses. the mfca also monitors energy costs, i.e. costs of all energy sources used within the respective quantity centre. furthermore, system costs are allocated to products and material losses. the system costs are defined as any and all costs, which are incurred when handling material flows within a company (e.g. personnel costs, depreciation costs). each material flow of a company may be treated as a carrier of system costs – whether it concerns raw materials, work in progress, products, or material losses. the system costs are always allocated to output flows, and they are retransferred to subsequent flows and stock of materials. material losses, which leave a quantity centre, must also be allocated waste disposal costs. � business, management and education, 2011, 9(1): 5–18 fig. 1. mfca chart (source: palásek 2009) the mfca represents an accounting method that provides the management as well as other stakeholders with absolutely new data, which can be used in support of the decision-making – see e.g. (hyršlová et al. 2008; hyršlová, kubáňková 2009; kokubu, nakajima 2004; kokubu, nashioka 2005; strobel, redmann 2001; strobel 2000; wagner, enzler 2006). using the mfca data, it is possible to seek “corrective actions” for material flows and to propose measures that might lead to a higher efficiency of manufacturing processes. mfca belongs to very important methods of environmental cost accounting and thus also of environmental management accounting (schaltegger, burritt 2000; nakajima 2006). in the recent years, various approaches to the conception of environmental accounting were gradually developing (bennett, james 1998; burritt et al. 2002; epa 1995; gray 1993; gray et al. 1996; gray, bebbington 2001; jasch 2002; schaltegger, burritt 2000; schaltegger, stinson 1994; schaltegger et al. 1996). environmental cost accounting is defined as the identification and assessment of environmental costs and their allocation to the processes, operations, products or centres (ifac 1998). a very important category of environmental cost accounting is formed by environmental costs. the basic definition specifies corporate environmental costs as environmental protection costs (fichter et al. 1997). nevertheless, to specify corporate environmental costs, also material and energy flows can be taken as a basis. environmental costs then can be defined as a sum of all costs relating, directly or indirectly, with the use (consumption) of materials and energies and with environmental impacts resulting therefrom (fichter et al. 1997). the difference between both conceptions is shown on fig. 2. methods used within environmental cost accounting can be divided into groups which stem from the inputs quantity centre e.g. production process or individual activities outputs products outputs material losses � j. hyršlová et al. material flow cost accounting (mfca) – tool for the optimization of corporate production processes definition of environmental costs and from methods used in cost accounting. the cost analysis applied always depends on the problem which is to be addressed; for different purposes it is necessary to start from different approaches to classification of costs. of high significance for corporate processes management is primarily the application of material and energy flow-based methods. mfca so belongs to very important methods of environmental and economic performance management. corporate environmental costs traditional material and energy flows costs of environmental protection costs relating with use of materials and energy and with induced environmental impacts examples: waste water treatment rectification of breakdowns pollution prevention administration resulting from the legislation potential recultivation of landfills examples: material and energy costs of product outputs material and energy costs of material losses waste water treatment rectification of breakdowns pollution prevention administration resulting from the legislation potential recultivation of landfills approach orientation 3. case study: application of the mfca method in a company manufacturing ceramic tiles the company lasselsberger currently presents the largest manufacturer of ceramic tiling in the czech republic, and it is one of the major players on the european markets. the company has been maintaining and developing the historical traditions of the ceramic manufacturing. the brand rako represents comprehensive sets of wall and floor tiles, including extensive range of bathroom, kitchen, and house interior floor accessories. from the perspective of lifestyle, the company targets end users with high demands in the area of design and utility value of offered materials. the mfca method has been applied in the manufacturing plant rako iii, which is part of the company lasselsberger. this plant manufactures interior ceramic tiles, which are mainly characterized by a variety of sizes and designs. application of the mfca fig. 2. corporate environmental costs (source: prepared by authors) � business, management and education, 2011, 9(1): 5–18 method took places in three stages: preparation, data collection, and calculation. the costs of products and material losses were monitored for the period of 12 months (the 2008 calendar year). 3.1. description of the manufacturing process the flow of materials throughout the manufacturing process starts with the delivery of inputs (several types of ceramic clays and raw kaolin) into covered storage boxes, where the materials are accepted and their parameters are checked. the manufacturing process itself involves several stages. the initial stage is the pulverization and homogenization of inputs, using the wet grinding process. the homogenized ceramic deposits are pumped from drum mills into storage tanks, from which they are subsequently piped to spray driers. the drying process results in granulate of about 5.5% humidity, with defined granulometry. from the drying plant, granulate is transferred to a reservoir via a belt conveyor. the next manufacturing stage involves the pressing process. granulate is transformed into the final product – tile – with the required shape and size. after passing through a tray drier, the semi-finished tiles – pressings – are transferred to another manufacturing process stage via conveyors. this next stage involves glazing, which is performed on the so-called glazing lines. engobe as well as a layer of glaze are applied onto the pressings. this manufacturing stage mainly requires a high level of cleanliness of input semi-finished products, because any dust applied together with the glaze results in defect products during the next (fifth in total) manufacturing stage – i.e. burning process. overall, the aforementioned manufacturing stages (pressing and glazing) result in wastes of approximately 2% area of the total production. the production is monitored in both m2 and tons, specifically for the plant producing such wastes. the glaze and engobe applied on glazing lines are prepared during a separate manufacturing stage called the glaze preparation. the inputs (frit and washed kaolin) are first grinded and then transformed into a suspension, which is applied onto a face side of tiles during the glazing process. the amount of wastes is not monitored during the process of glaze preparation. it is estimated at about 9.5% of glazes and engobes input in mills and subsequently 5% of suspensions produced in a glaze preparation plant. another manufacturing stage, which follows after the glazing stage, is the above mentioned burning process. it takes place in gas roller kilns and it is characteristic by high energy consumption. the time of burning and the firing curve depend on the tile size and the applied glaze type. the whole burning process lasts for about 40–50 minutes. the whole manufacturing process is completed by a checkout and sorting of manufactured products. products are divided into three categories, in line with en csn 14411 – i.e. quality class i, quality class ii, and wastes. according to the company, the inspection process results in losses of approximately 5% of the total area of final production. the sorting process is followed by packaging and transfer into the final products storage. 10 j. hyršlová et al. material flow cost accounting (mfca) – tool for the optimization of corporate production processes the ceramic manufacturing is characteristic of a nonexistence of material losses. the entire solid component of material losses is recycled and used as input in the first production stage. due to this, the costs associated with material losses in traditional management accounting methods only refer to disposal costs of the packaging used to transfer the glazes. the whole manufacturing process is divided into three cost centres (fig. 3) within the existing company management accounting system: − preparation of materials. the costs associated with this centre are incurred in connection with grinding and homogenization of inputs, their subsequent drying and the production of granulate. this cost centre uses the basic materials; however, not the most important expensive materials; − preparation of glazes. the centre handles the preparation of glazes, which are applied using glazing lines during the manufacturing process. the important cost items include energy costs and costs of inputs (raw materials). since different types of glazes are required for various tiles, the preparation of glazes takes places discontinuously – a special type of glaze is prepared for each tile type. estimated losses of materials associated with this cost centre amount to approximately 9.5% of the materials used in mills. other material losses result from the need to wash out mills, filter presses, and tanks before each batch of glaze; − manufacturing. this centre ensures the pressing of materials arriving from the cost centre preparation of materials, glazing performed on glazing lines, burning of tiles, and subsequent sorting and packaging. the mfca method has been applied to the complete manufacturing process of the rako iii plant. six manufacturing formats were selected for the purpose of monitoring; each in both matte and glossy glaze. the whole manufacturing process was subdivided into four quantity centres: − preparation of materials. this quantity centre corresponds to the cost centre preparation of materials; therefore, the identification and allocation of energy and system costs will be based on the profit and loss statement of this centre. almost all material losses consist of water evaporated during the drying process; − preparation of glazes. this centre, similarly as the previous quantity centre, also fully corresponds to the cost centre preparation of glazes. the centre is not too large, and it is thus suitable for the monitoring of material flows within the mfca method. the identification and allocation of energy and system costs will be based on the profit and loss statement of the cost centre as well; − pressing and glazing. this quantity centre does not correspond to the cost centres created within the existing management accounting. the reason for its formation is the need to acquire a more realistic view of the material flow corresponding to the assessment of arising material losses; 11 business, management and education, 2011, 9(1): 5–18 − burning, sorting, and packaging. the reason for the formation of this quantity centre is the need to specify the monitoring of material flows. the only material loss of the burning process is the water evaporated from the pressings; other material losses result from the sorting process on sorting lines. cost centre no. 1: preparation of materials manufacturing stages: grinding homogenization drying cost centre no. 3: manufacturing stages: pressing glazing burning sorting and packaging wastes – approx. 2% of the pressed area wastes – approx. 5% of the burnt area cost centre no. 2: preparation of glazes manufacturing stages: preparation of glazes shipment fig. 4 shows a simplified chart of material flows in the rako iii manufacturing plant. quantity centre no. 1 preparation of materials quantity centre no. 3 pressing and glazing quantity centre no. 4 burning, sorting, and packaging quantity centre no. 2 preparation of glazes material losses product flows material loss flows fig. 4. basic chart of material flows (source: palásek 2009) fig. 3. manufacturing process chart (including individual cost centres) (source: palásek 2009) 12 j. hyršlová et al. material flow cost accounting (mfca) – tool for the optimization of corporate production processes 3.2. data collection during the data collection process, it was necessary to perform the reconstruction of material flows by individual quantity centres (weight units). some data required for the mfca method had to be calculated based on the knowledge of the manufacturing process and using the company formulas. however, the reconstruction of material flows on the part of individual quantity centres in the units of weight only represented the first stage of the data collection process that had to be performed. the knowledge of the material flows and the prices of raw / other materials were then used to determine the material costs of products and material losses – i.e. the prices of materials, which leave for other quantity centres (or to customers) as part of products or as part of material losses – waste flows. it applies than the material costs of products equal to the material costs of products produced in the last quantity centre. the material costs of material losses were obtained as the sum of costs of material losses throughout the whole manufacturing process (i.e. for all quantity centres). during the data collection stage, it was also necessary to identify and determine energy and system costs incurred by individual quantity centres during the period in question. the second stage of the mfca method application resulted in the material balances of all quantity centres and the whole manufacturing process – both in the units of weight and in czk (see tables 1–3) – and in the data on energy and system costs for individual quantity centres (see table 4). table 1. materials within the mfca method (source: company data and own calculations) item quantity centre no. 1 quantity centre no. 2 quantity centre no. 3 quantity centre no. 4 products (total materials in t) 85 838 11 464 95356 86 803 share in the total usage of materials in the centre 66% 90% 98% 91% material losses (total materials in t) 44 282 1 292 1 946 8 553 share in the total usage of materials in the centre 34% 10% 2% 9% the overall balance of material flows of the rako iii plant is based on the following logical assumption: products of the rako iii plant (i.e. the whole manufacturing process, for which material flows were monitored, and to which the mfca method was applied) correspond to the products of the last quantity centre (i.e. the centre burning, sorting, and packaging). material losses amount to the sum of the material losses incurred in all quantity centres (see table 3). 13 business, management and education, 2011, 9(1): 5–18 table 2. material costs within the mfca method (source: company data and own calculations) item quantity centre no. 1 quantity centre no. 2 quantity centre no. 3 quantity centre no. 4 products (material costs in czk) 48 376 652 82 838 388 128 590 739 137 265 624 share in the total material costs of the centre 92% 87% 98% 92% material losses (material costs in czk) 4 064 707 12 671 519 2 624 301 11 533 808 share in the total material costs of the centre 8% 13% 2% 8% table 3. materials and material costs within the mfca method (the rako iii plant) (source: own calculation) item total materials (t) share in the total usage of materials material costs (czk) share in the total material costs products 86 803 61% 137 265 624 82% material losses 56 073 39% 30 894 335 18% the data about energy and system costs were obtained from the profit and loss statements of individual cost centres. the system costs did not reflect all the costs items that were reported in the statements of individual cost centres, but only the costs immediately relating to the material flows. table 4 summarizes the data on energy and system costs for individual quantity centres during the period under review. table 4. energy and system costs (in czk) (source: company data and own calculations) item quantity centre no. 1 quantity centre no. 2 quantity centre no. 3 quantity centre no. 4 total energy costs 50 442 411 1 347 688 27 618 558 81 386 446 160 795 103 system costs 30 799 108 6 493 541 49 955 013 49 357 003 136 604 665 total 81 241 519 7 841 229 77 573 571 130 743 449 297 399 768 3.3. mfca calculation during this stage, it is necessary to allocate the material, energy, and system costs to products and material losses, and to determine the total costs associated with individual material flows. the allocation must be performed within each quantity centre based on the ratio of the material content in products and material losses. the mfca calculation is easier for the first two quantity centres (preparation of materials / preparation of glazes). these centres do not use the input in the form of products of other centres – the 14 j. hyršlová et al. material flow cost accounting (mfca) – tool for the optimization of corporate production processes energy and system costs of the previous manufacturing stages do not have to be considered in the calculation. on the other hand, the calculation of the other two centres must consider the energy and system costs incurred in connection with the products in the previous quantity centres. the material flows, which result from the previous manufacturing stage (i.e. the output of the preceding quantity centre), are the carriers of the energy and system costs allocated to them based on the ratio of the material content in products and material losses making up the output of such preceding quantity centre. the energy and system costs, which were incurred during the following manufacturing stage (quantity centre), must be allocated based on the ratio of the material content in products and material losses making up the output of the given manufacturing stage. table 5 shows the allocation of energy and system costs to products and material losses leaving from individual quantity centres as well as the determination of their total costs. table 5. costs of products and material losses (in czk) (source: own calculation) item quantity centre no. 1 quantity centre no. 2 quantity centre no. 3 quantity centre no. 4 products: share in the total usage of materials in the centre 66% 90% 98% 91% material costs 48 376 652 82 838 388 128 590 739 137 265 624 energy costs 33 276 091 1 211 204 60 863 736 129 491 204 system costs 20 317 703 5 835 923 74 586 466 112 826 493 total costs 101 970 446 89 885 515 264 040 941 379 583 321 material losses: share in the total usage of materials in the centre 34% 10% 2% 9% material costs 4 064 707 12 671 519 2 624 301 11 533 808 energy costs 17 166 321 136 484 1 242 117 12 758 977 system costs 10 481 405 657 618 1 522 173 11 116 976 total costs 31 712 433 13 465 621 5 388 591 35 409 761 3.4. findings resulting from the mfca method application in the rako iii plant economic results achieved by the rako iii plant in 2008 are mainly attributable to the technology used for the manufacturing of tiles. in total, the plant produced 86 803 tons of products and 56 073 tons of material losses during the period under review; the costs associated with the material losses amounted to approximately czk 86 million. based on the mfca calculation, it is possible to recommend to the company to mainly concentrate on the processes taking place within the quantity centre preparation of materials, which produced the majority of material losses. material losses mainly 15 business, management and education, 2011, 9(1): 5–18 occur during the manufacturing process of drying, and they result from the method of processing raw materials at the beginning of the material flow. in 2008, the existing initial stages of the manufacturing process resulted in 44 282 tons of material losses; the production of the material losses is directly associated with costs of approximately czk 32 million. the recommendation relates to the method of processing raw materials, i.e. the method of grinding of raw materials. one solution would be to replace the discontinuous mills with continuous mills. the use of continuous mills should lead to a lower consumption of water, which is the main component of the material losses. even though the material losses are recycled within the company, the energy and system costs incurred in connection with their production are irrecoverably lost. the remaining quantity centres work very well, with only a small potential for improvement. specifically the quantity centre pressing and glazing is highly effective. the manufacturing of ceramic tiles represents a traditional production with a familiar manufacturing process. in general, it is very difficult to propose any improvements for these technologies, because they tend to be very sophisticated from the perspective of technology. the mfca method could contribute to the development of new technologies, which would eliminate or mitigate deficiencies of traditional technological processes. it is apparent that it is not possible, for various reasons, to completely prevent the production of material losses. however, it is useful to try reducing the value of material losses as much as possible while preserving the product quality desired by customers. 4. conclusions the mfca method represents one of the management accounting methods. unlike traditional methods, the mfca monitors materials flows and costs associated with products and material losses. in case of material losses, it does not only target the disposal costs of such “negative” products, but any and all economic resources, which were expended (used) in connection with material losses. the data acquired during the process contribute to the fact that management is able to propose such measures, which would lead to more effective production and lower volume of material losses. such measures increase the economic effectiveness of production and, at the same time, positively affect the environment. mfca improves the current accounting approaches in two levels: 1. economic level. mfca primarily focuses on material costs. in manufacturing enterprises they represent a very significant cost item; in comparison with them, costs relating with, for example, waste management, are insignificant. traditional accounting systems do not provide sufficient information on material costs, in enterprises there is not available detailed information on how particular materials pass through enterprise. within mfca, the data in physical units are interconnected with the data expressed in monetary units. the progress of materials through enterprise is identified, it is evident what part of materials is put in a product and what part of materials leaves enterprise in waste flows (and the system provides not only information in physical units, but also the value of particular material flows is expressed). 1� j. hyršlová et al. material flow cost accounting (mfca) – tool for the optimization of corporate production processes the acquired information can be used to support decision-making processes. ways are searched to “rectify” material flows and measures are proposed, leading to a reduction of consumption of materials and to increased efficiency of production processes – for example, material handling is improving to avoid their damage and wastage, waste quantities (volumes) are being reduced (for example, through new techniques within production process, and also through avoidance of completion of poor quality products), improvements are being achieved in the area of material productivity, etc. 2. environmental approach level. mfca focuses on reducing the costs through a reduction in quantities (volumes) of consumed materials and energies. this has also positive environmental impacts. materials and energies are better used and waste flows burdening the environment are being reduced. mfca so represents a very important tool for environment-oriented management and for improvements of ecoefficiency. environmental benefits are realized even if it is not a willful intention of enterprise. when applying the mfca method within a plant manufacturing ceramic tiles of different sizes, colors, and glazes, the reconstruction of material flows was mainly based on the detailed knowledge of the manufacturing process and its individual stages. at the same time, data from the company information system and company formulas were used. in spite of this, the identification of the material flows in physical units did not present a simple task, especially in those manufacturing stages, which use materials already preprocessed in other centres. the application of the mfca method revealed that the quality of information output is mainly affected by the selection of quantity centres. for this reason, it is necessary to specify an optimum size of each quantity centre, in order to prevent losses of important data and time/money-consuming collection of the relevant data. furthermore, the quality of obtained data is greatly affected by an identification of energy and system costs and, above all, their correct allocation to individual quantity centres. during the application of the mfca method, it is useful – see e.g. (ministry of economy, trade and industry, japan 2005) – to proceed from relatively simpler processes and productions – with relatively easier improvements – to more complex processes and productions, which require more difficult implementation. in this matter, it is possible to gradually acquire experience, which is especially necessary for the correct execution of the first two stages (preparation and data collection) in case of more complex manufacturing processes. acknowledgements this work was supported by the ministry of education, youth and sports of the czech republic under project no. msm 6046137306. 1� business, management and education, 2011, 9(1): 5–18 references bennett, m.; james, p. 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research opportunities in environmental accounting (discussion paper 9124). basel: wirtschafts-wissenschaftliches zentrum wwz. strobel, m. 2000. systemisches flussmanagement. flussorientierte kommunikation als perspektive für eine ökologische unternehmensentwicklung. augsburg: universität augsburg. strobel, m.; redmann, c. 2001. flow cost accounting. augsburg: institute für management und umwelt. united states environmental protection agency (epa). 1995. an introduction to environmental accounting as a business management tool: key concepts and terms (epa 742-r-95-001). washington: united states environmental protection agency, office of pollution prevention and toxics (mc 7409). wagner, b.; enzler, s. 2006. material flow management: improving cost efficiency and environmental performance. heidelberg, new york: phsica-verlag. materialiųjų srautų sąnaudų apskaita (mssa): įrankis bendriesiems gamybos procesams optimizuoti j. hyršlová, m. vágner, j. palásek santrauka straipsnyje nagrinėjamas materialiųjų srautų sąnaudų apskaitos metodas (toliau „mssa“). šiam metodui praktiškai pritaikyti pasirinkta didžiausia čekijos keraminių plytelių gamintoja „lasselsberger“. tyrimo rezultatai parodė tiek taikomo mssa metodo specifiką, tiek šio metodo praktinį pritaikomumą, remiantis konkrečios įmonės pavyzdžiu, gamybos procesams optimizuoti. reikšminiai žodžiai: materialieji srautai, sąnaudų apskaita, materialiųjų srautų sąnaudų apskaita, gamyba, materialinės išlaidos. jaroslava hyršlová is an associate professor at the institute of chemical technology in prague,an associate professor at the institute of chemical technology in prague, and at the college of economics and management in prague. her research is focused on management accounting and environmental management. miroslav vágner works as the production director at the lasselsberger company. he col-orks as the production director at the lasselsberger company. he collaborates closely with the institute of chemical technology in prague where he teaches innovation management. jiří palásek is a graduate of the institute of chemical technology in prague. he worked in corpo-raduate of the institute of chemical technology in prague. he worked in corporate planning at the danone company. currently he runs a company engaged in e-business. exploring management development programmes in mncs. example of eads group marek lisiński1, marek szarucki2 cracow university of economics, rakowicka str. 27, 31-510 krakow, poland e-mails: 1lisinski@uek.krakow.pl; 2saruckim@uek.krakow.pl (corresponding author) received 18 november 2010; accepted 15 january 2011 abstract. the purpose of this paper is to discover management development programmes in mncs on the example of the eads group. the paper discusses the role of education in management development as well as the goals of managers’ training. the paper provides the latest information regarding the use of various management development methods. further, it concentrates on the exemplifying of the selected management development programmes at eads. it also tries to evaluate the perceived efficiency of the programmes based on several opinions of the trainees. finally, some suggestions for future research are provided. keywords: multinational firms, management development, management education, training methods. reference to this paper should be made as follows: lisiński, m.; szarucki, m. 2011. exploring management development programmes in mncs. example of eads group, journal of business, management and education 9(1): 93–108. doi:10.3846/bme.2011.07 jel classification: f23, m10, m50, m53, m59. 1. introduction management skills are of high importance for modern organizations that have faced crucial changes over the past decade caused by such tendencies as globalization or technological innovations. management learning and development help companies to react better to new competitive challenges. management development programmes are especially important for companies involved in international business (auruskeviciene et al. 2008; grundey 2008) such as multinational companies (mncs). the main purpose of the paper is to explore management development programmes in mncs on the example of the eads group. at the beginning, the concept of modern managers’ education is discussed. then, the paper concentrates on the goals of management development. next part is devoted to management development approaches and methods. the empirical part of the paper focuses on the description and analysis of the selected management development programmes at eads. finally, the conclusions and future research goals are presented in the last part of the paper. b u s i n e s s, ma n ag em e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(1): 93–108 doi:10.3846/bme.2011.07 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 94 m. lisiński, m. szarucki. exploring management development programmes in mncs. example of eads group 2. education of modern managers what is the role of education in manager development? before presenting the framework, it is necessary to explain a set of terms whose meanings are similar and which overlap to some extent, generating puzzlement in the literature. at the beginning, it is important to understand the meaning and differences between “learning”, “training” and “development” – the terms widely used in the education process. learning can be seen in two ways – from the behaviourist and gestalt psychology traditions. according to vosniadou, brewer (1987), from the tradition of phenomenology and gestalt psychology perspective, “learning is equivalent to building new or enhanced mental models” (hogan, warrenfeltz 2003: 76). it means that one form of management education could be understood as forming mental models that challenge unexamined assumptions and unconscious worldviews. on the other hand, the tradition of behaviourism, which is strong in american psychology, provides a definition of learning as “a change in behaviour after an experience” (hogan, warrenfeltz 2003: 76). therefore, the representatives of the behavioural model of learning consider management education as a process of gaining skills, with no emphasis on deeper understanding. from a gestalt model of learning, management education is seen as a process of constructing mental models suitable for interpreting organizational phenomenon without emphasising the importance of concrete skills. without getting deeper into the differences of the notions of learning and for the purposes of the paper, education will be regarded as a final product of this process. therefore, managers’ education is about shaping mental models and acquiring skills (elmuti 2004). the other two terms related to learning and management education are training and development. these expressions might be considered very similar, but they are slightly different in practice. for buhler (2002: 143), training focuses on “learning the necessary skills and acquiring the knowledge required to perform a job”, while development concentrates on “the preparation needed for future jobs; it should be considered an investment in the work force since its benefits are long-term”. on the other hand, according to kleiman (2007: 174), training concentrates on current jobs, whereas development prepares employees for future ones. and while training is related to planned learning experience that teaches employees how to efficiently perform their current jobs, development relates to planned learning experience that prepares employees to perform possible future jobs efficiently. both training and development seek to prevent human resources from becoming obsolete, as the workforce is considered an important organizational resource. employees have to update their skills to remain efficient and competitive. as jobs are constantly evolving, people also have to adapt to the new job market requirements. as defined by mailick (1998: 12), management development is “an organized effort to develop, increase, and improve managerial competencies, either in an individual manager or in a group of managers”. based on the above considerations related to the terms used in the process of managers’ education, management development will be regarded as the sum of training, education and learning practices that are intended to help man95 business, management and education, 2011, 9(1): 93–108 agers realise their potential, either for personal or organizational profit. management development is influenced by both organizational and external environments, including institutional frameworks and political activities (doyle 2000). historically, it has been a discussion “whether being a good manager is a skill, trait, or inherent behavior” (elmuti 2004: 443). initially, the dominating concept was that the efficiency of a manager is shaped by his or her inborn qualities that can not be passed to others. nowadays, some theorists have reached a common conclusion that management can be learned and taught1. the main assumption lying behind the idea of management education is that the skill of management can be learned via classroom teaching and other academic techniques applied in diploma-granting institutions. raelin (1995) argued that management education highlights a broadening of knowledge through exposure to academic content and networking with fellow program participants. holman (2000) presents four models of management education such as academic and experiential liberalism, experiential vocationalism, and the experiential / critical school. these four models cover the current views on nature, value, and objective of management education being discussed. there are plenty of benefits of management education (longenecker, ariss 2002) for companies, since efficient management education programmes can create or strengthen companies’ competitive advantage through: − exposing managers to new or better thoughts and business actions that are required in quickly changing environments; − providing incentives to managers to help them improve the performance of their operations; − helping managers develop and improve their professional skills; − giving opportunities for reflection, self-examination, and self-evaluation; − helping managers recognize specific performance problems and deficiencies; − raising managers’ confidence, reducing their stress level and challenging them to think in a new way about themselves and their business situation; − encouraging managers to look upon their career development. holman (2000) argues that educating modern managers is also important from the social point of view due to its several roles: indirect cultural role, vocational role, academic role and critical role. therefore, it could be said that management education is very important since it gains companies and the society. the question to be answered is whether it can be taught, and if so, what should be taught and how. brown and mccracken (2010) have recently presented a critical insight into this topic with a special emphasis on understanding how goal-setting interventions aimed to improve a transfer or application of skills and knowledge from the educational programme back to the workplace, are designed. 1 the first one who discovered that was henri fayol a french mining engineer, who originated the theory of business administration and presented it in his book entitled “administration industrielle et générale; prévoyance, organisation, commandement, coordination, controle” in 1916 (fayol 1916). 96 m. lisiński, m. szarucki. exploring management development programmes in mncs. example of eads group 3. goals of management development management development represents a strategic element of any organization (auruskeviciene et al. 2008; luoma 2005; savanevicienesavaneviciene et al. 2008), both to develop), both to develop the skills of the managers and to enable the company to reach its goals. recent decades have witnessed an extraordinary increase in management and executive education which, in contradiction, has been accompanied by a crisis of confidence manifested in discussions about its direction, relevance, and value (armstrong, sadler-smith 2008). management development is recognized as a necessary tool in any kind of organization, whether it is a small or multinational, commercial or non-profit company. organizations can compete in a today’s environment only by updating the skills of their workforce. management development aims at training new managers, but also at developing present managers. one of the most important of its objectives is to increase managers’ competencies by letting them know what is expected from them now and in the future and to provide them with all the tools necessary to reach the defined goals. managers have an important place in the modern world of business. mintzberg (1973) highlighted that managers carry out ten various, very interrelated roles that could be separated into three groups of roles: interpersonal roles, informational roles and decisional roles. according to robbins (2001), in order to perform these roles efficiently, managers require specific sets of skills, which are as follows: technical, human and conceptual. the important qualities being possessed by modern managers are broadly discussed (hogan, warrenfeltz 2003), and generally they can be divided into four competency domains such as: intrapersonal skills, interpersonal skills, leadership skills, and business skills. another model for management development concentrates on such dimensions of collaborative managers’ characteristics as (mintzberg, gosling 2002): managing self, managing relationship, managing organizations, managing context and managing change (table 1). table 1. dimensions of management development (source: adapted from elmuti 2004) dimension of development characteristics goal of development managing self deals with intrapersonal skills that include: core self-esteem, attitudes toward authority and self-control foundation for career building managing relationship deals with interpersonal or collaborative skills that involve: initiating, building, and maintaining relationships with people who differ from themselves in terms of age, culture, and gender efficient management over relationships within an organization managing organizations deals with analytic skills used by managers in making rational decisions improvement of decisionmaking skills 97 business, management and education, 2011, 9(1): 93–108 dimension of development characteristics goal of development managing context deals with international development of managers that improves the understanding of global trends need for managers with balanced international experience managing change deals with personal and organizational change improvement of the way a manager reacts to the change the goals of management development can be seen as twofold – from an individual manager’s and organization’s perspective. for an individual manager it is important to develop his or her managerial competencies that will lead to a better performance and possible career development opportunities (zakarevicius, zukauskas 2008). a management talent of an employee is very important in every kind of organization. employees have to design their own career development plan. in the past, the hr department or direct supervisors were responsible for programming the career of their employees, but it is no longer possible in today’s working environment. buhler (2002: 153) explains that “part of an employee’s career development is to recognize what skills he or she has and what skills may be required in the future”. indeed, employees have to analyse their needs and know in what direction they want to go. a very important aspect of management development refers to developing leadership skills among managers. the meaning of leadership varies according to the activities a leader has to do in an organization. it also depends on the person who leads and the workers being led. as described by clark-epstein (2002: 11), leadership can mean “teaching, coaching, assigning, cheerleading, counselling, guiding, correcting, protecting, explaining, and observing. leadership asks you to fill out forms, chair meetings, hold hands, explain decisions, think about the future, and resolve conflict”. indeed, leaders are those people who can take actions and be responsible for what they do. they have to demonstrate a good ability in problem solving and transmitting their ideas to others. management development is of high importance also for an organization itself. the impact of executive development is not only the improvement of the managers’ behaviour but also it is linked with a change of an organization’s performance and results. as explained by buhler (2002: 142), management development “improves individual performance, which ultimately improves corporate performance”. organizations should employ highly skilled people capable of anticipating and responding successfully to changes at work. for this reason, companies have to develop and improve the knowledge, skills and abilities of their workforce. the part of budget allocated to management development keeps growing, and a general trend indicates that year after year companies should invest in the development of their employees. often the goals of managers’ development are to conform managers to the objectives of the company. they also aim at developing the managerial styles of an individual that respect the organizational culture. many organizations are trying to implement core competencies. instead of just developing skills which are required continued table 1 98 m. lisiński, m. szarucki. exploring management development programmes in mncs. example of eads group for one specific job, companies focus on core competencies for a group of jobs or even for an entire organization. managers’ skills development is especially crucial when a company operates internationally (kleiman 2007: 409). international managers face a dilemma related to intercultural and international competence. there is evidence that the u.s. companies that lack an appropriate language and international business skills have had a lead in failed contracts, poor negotiations, and inefficient management (czinkota, ronkainen 2004: 82). for multinational corporations, defined as firms that have “operations in more than one country, international sales and a nationality mix of managers and owners” (hodgetts et al. 2006: 6), it is extremely important to train their international managers in order to improve the overall company performance. 4. management development approaches and methods the goals of management development can be achieved through applying different methods and techniques. mumford (1993) based on an empirical study distinguishes three general approaches that companies utilize when adopting management development practices: “informal managerial”, “integrated managerial” and “formalised development”. informal managerial approach consists of accidental learning processes that occur naturally together with other main managerial activities. integrated managerial approach includes “opportunistic processes where natural managerial activities are structured in such a way to make use of the already available learning opportunities” (luoma 2005). the third approach, which is called the formalised development, refers to planned learning processes that take place away from regular managerial activities. it means that the approaches of planned and unplanned development may be: wholly unplanned accidental learning, planned on-the-job learning, and planned and programmed development outside every-day work. similarly, yukl (2002: 370) categorises management development into three general types: formal training (and education), developmental activities, and self-help activities. woodall and winstanley (1998) distinguish between on-the-job and off-the-job management development methods. among on-the-job methods for management development it is worth to mention, for example, challenging job assignments, action learning, and job rotation or mentoring. off-the-job methods include, for instance, educational programmes, seminars, short courses, readings, outdoor development and customized approaches. there is evidence that managers can improve their management skills by getting experience on-the-job or off-the-job separately. nevertheless, this experience is not enough to create highly capable managers. they also need to receive guidance and theoretical knowledge to exercise their activities efficiently. management development programmes can provide both theoretical and empirical knowledge to the managers. such programmes seem to be one of the most traditional forms of management development and they can be organised internally and externally (suutari, viitala 2008). internally organised programmes provide the possibility to connect learning and development with an organization’s specific strategic goals (neary, o’grady 2000). during 99 business, management and education, 2011, 9(1): 93–108 the learning process within a company, it is possible to originate a systematic and integrating approach to managers’ development. externally developed programmes are necessary when a company lacks up-to-date information about some problem. mailick (1998: 12) identifies three related approaches to management development programmes. the first one tends to meet an individual’s needs and focuses on his or her characteristics, behaviour, knowledge and experience. the second one tries to improve managers as members of a class or individuals in similar roles within an organization. the last one focuses on a specific organization and tends to improve its functioning. the different tasks of management development programmes include: rotating assignments, performance evaluation and feedback, on-the-job training, mentoring, formal training, and education in management roles and tasks (suutari, viitala 2008). two kinds of learning illustrate the different possibilities offered to managers to develop their skills: passive and experiential learning. according to mailick (1998: 32), passive learning is “any learning activity that does not require the participants to gather data, implement decisions in a physical sense, and deal with the consequences”. a candidate is only asked to listen to new information during lectures and meetings and there is no possibility to test the impact of the amount learned. passive learning is used to increase skills that do not involve interaction with others. on the contrary, experiential learning is “derived from experiences in taking an action, observing, and learning from the consequences of the action” (mailick 1998: 32). this technique enables the participants to fully express their new skills in different working situations. management must also be learned by experience, performing and taking the responsibility as a manager. action is considered as the key characteristic for managers. action learning puts together formal management training with learning from experience (suutari, viitala 2008). this way of learning is recommended by managers and trainers. they consider active participation the best way to assimilate new techniques and to put them into practice in the daily activities. although passive learning is easier to understand, new information is more difficult to integrate and remember. on-thejob activities can be seen as efficient experiential learning. nevertheless, they are not sufficient since the participants also need a framework to learn and apply the learned knowledge. management development methods include different techniques which vary in terms of objectives and use (kleiman 2007: 182–183; suutari, viitala 2008). all the methods have their own benefits and drawbacks. therefore, it is crucial to determine whether management development programmes are efficient. an organization that fails to assess its training programmes properly will not recognize whether the programmes have met their goals. suutari and viitala (2008) investigated the effectiveness as well as the strengths and weaknesses of the management development methods used for training of the senior management level in finland. the findings indicate that international assignments have been perceived as the most efficient management development tool. in the second place of the most efficient methods were personal career planning and job 100 m. lisiński, m. szarucki. exploring management development programmes in mncs. example of eads group rotation. the next methods in the rating have been mentoring, special job assignments, and regular performance evaluation and self-help activities. the above mentioned methods of management development are also present in mncs. nevertheless, some modifications regarding an international context are needed. there are a lot of various types of multinational management training programmes. some of them last only several hours and others last for months, some are pretty superficial and others are broad in coverage. among such methods it is worth mentioning management development programmes consisting of area studies programmes, cultural orientation, cultural assimilator, language training, sensitivity training, or field experience (czinkota, ronkainen 2004: 82; grundey 2008; hodgetts et al. 2006: 465; zakarevicius, zuperkiene 2008).). 5. analysing management development programmes at eads group 5.1. characteristics of eads group as a research object european aeronautic defence and space company (eads) is the global leader in the fields of aerospace, defence and related services (eads 2010a). the group comprises of the aircraft manufacturer airbus, the world’s largest helicopter supplier eurocopter and eads astrium, the european leader in space programmes from ariane to galileo. the defence & security division provides comprehensive systems solutions and makes eads a major partner in the eurofighter consortium as well as a stakeholder in the missile systems provider mbda. eads also develops the a400m through the military transport aircraft division. the group was created in july 2000, after the fusion of three european companies, which are dasa from germany, aérospatiale matra from france and casa from spain. this measure came from the willingness of european people to create a world leader able to compete with other main organizations in that field, especially with the american boeing. the company is divided into five divisions, which correspond to the different products offered: airbus, eurocopter, astrium, military transport aircraft, defence & security. around 120,000 people work at eads in more than 70 production sites, mainly in france, germany, great britain and spain as well as in the u.s. and australia, making it a really multinational corporation. more than 30 representative offices maintain contact with different customers. the company generated revenues of € 42.8 billion in 2009 (eads 2010a). in order to maintain its highly competitive position on the market, eads invests in its employee competence development. in order to guarantee competencies and foresee future workforce needs, the company has invested in competency management across the group during the last three years (eads 2010a: 53). to better hr processes such as employment, mobility and training, specific tools and processes have been implemented. company core competencies – for instance, systems engineering and programme 101 business, management and education, 2011, 9(1): 93–108 management – have been distinguished and regular development programmes have been launched. these programmes contain actions as defined career paths, training programmes and external certification. training investments have been concentrated on divisional main core competencies in all company divisions. eads is utilising intensive talent management processes to identify future generations of managers. it has corporate business academy that is responsible for management training for executives and promising employees. to guarantee succession planning for top management positions, the eads executive committee went over the most talented employees and talked about their individual development in 2009 (eads 2010a: 53). such reviewing provides a better vision of the capabilities of eads’ potential future leaders across the group and increases mobility between the businesses. 5.2. management development programmes at eads eads is a multinational company with a worldwide presence and a large diversity among its employees. the group deals with different activities and has a long term vision in order to be successful and become the no. 1 in terms of revenues and firm orders. for this reason, eads promotes internal actions to form people who will help the company reach its goals, and a high importance is given to management development programmes. below there will be described and analysed the selected employee development programmes aimed at improving managerial skills of talented professionals within the eads group. in our investigation we focus on three training programmes: 1. professional and graduate entry support scheme (progress) programme. 2. advanced marketing and sales (ams) programme. 3. financial management development (fmd) programme. the professional and graduate entry support scheme programme is a two-year-long programme for young graduates and young professionals (fig. 1). the programme was designed to simplify young high potentials’ management at eads and to create a unique programme for all the divisions. the name “progress” emphasizes the possibility for the candidates to start a career and develop their skills during the whole programme. the programme is composed of two streams, depending on the qualification and background of the participants (eads 2010b). one is for engineers and it covers the fields of engineering, programmes and manufacturing. the other stream is for young businessmen and it includes the fields of procurement, finance, human resources or marketing and sales which are called support functions (fig. 1). the participants realize various assignments across different eads divisions and business units to gain a general knowledge of the group and its activities. at the end of the programme, participants will move to another location and different function within eads worldwide. during the programme, the candidates participate in different network events and tailor-made workshops that also include topics such as communication and management 102 m. lisiński, m. szarucki. exploring management development programmes in mncs. example of eads group aimed at improving their leadership and working skills. furthermore, a personal mentor assists the participants during and after the completion of the programme to give them regular guidance, support and feedback. at the end of the programme, the participants will have developed an important network among eads with colleagues and senior management and they will be able to grow quickly within the company (eads 2010b). the second listed-above programme, the ams programme, is a development programme for professionals with four to six years of working experience in the fields of marketing and sales (eads 2010b). it aims at providing a high standard of marketing and sales mangers within the group on a long term basis. the goal of the programme is to provide the internal and external participants with a large vision of the world of eads and its different industries and markets in a relatively short period of time. fig. 1. progress programme scheme (source: eads 2010b) this is a two-year management programme composed of three to four projects. each project lasts six months (fig. 2). the participants gain exposure to international issues and work in multinational teams. this job rotation enables them to create an important network within eads and to be in permanent contact with the key marketing and sales managers and executives. furthermore, the participants benefit from the advices of a personal mentor and take part in many network events that will help them in their career at eads. during the programme, participants work with eads international and other business units on present marketing and sales operations. they accomplish three or four different assignments at eads international, eads main offices and other off the job… network events on the job… international communication interpersonal effectiveness 2 weeks blue collar experience project management development centre individual training technical stream 1st position support functions stream 1st position mentoring final placement in another country and/or division 24 36 monts kick-off closing 103 business, management and education, 2011, 9(1): 93–108 business units worldwide. the projects can be linked and they are all related to a marketing and sales issue of the aeronautic and space industries. moreover, participants will take part in tailor-made trainings to strengthen their professional and personal competencies (eads 2010b). for example, those trainings will develop their communication skills and relations with clients through the “communication workshop” and “customer relationship workshop”. an additional personal budget is offered to the participants to reinforce their personal skills. this budget can be used to take additional language or working skills courses. fig. 2. ams programme scheme (source: eads 2010b) the mentor and programme coordinators will guide the participants through the whole programme and provide regular feedbacks. at the end of the programme, the participants will have expanded their understanding of the eads group and all its industries and services. the participants will then be ready to take part in a new position within the group. the last analyzed here, the financial management development programme, is the second development programme for specialists and experts at eads (see fig. 3). its goal is to develop experts in the field of finance and to train them to take on key projects in the future (eads 2010b). eads is looking for highly qualified international finance managers in order to train them and to create a link between them and financial executives within the group. on the job off the job project 1 project 2 project 3 project 4 project 1 project 2 project 3 6 months 6 months 6 months 6 months 8 months 8 months 8 months kick-off team building communication workshop development center customer relationship workshop leadership workshop closing development talk development talk development talkmentoring alumni network or 104 m. lisiński, m. szarucki. exploring management development programmes in mncs. example of eads group fig. 3. fmd programme scheme (source: eads 2010b) during the programme, participants work on present eads financial subjects. the programme lasts 18 months and is composed of three six-month projects in different business units and the headquarters in order to offer the participants a general view of the group. besides the on-the-job trainings, participants also benefit from the off-the-job activities. these workshops and trainings help develop personal and management competencies among the candidates (eads 2010b). the latter also take part in individually tailored trainings according to the suggestions of the selection days and a development centre. 5.3. evaluation of the management development programmes the format of a management development programme is essential for its success and forming the managers in their best conditions. it is also critical to ensure a successful career to the managers after its completion. a well structured programme will prepare the managers efficiently and offer them the opportunity to gain rapid knowledge in their field of expertise. when designing the programmes, hr managers have to take several aspects into account: the format, the duration and the location of the projects. indeed, those features constitute the major assets of a development programme and are responsible for both its attractiveness and interest. project 1 project 2 project 3 6 months 6 months 6 months project 1 project 2 or 9 months 9 months team projekt fmd forum on the job off the job kick-off team building leadership workshop project management negotiation workshop finance module closing development talk development talk development talkmentoring alumni network job shadowing 105 business, management and education, 2011, 9(1): 93–108 in the opinion of the participants of the described management development programmes, they highly rank the efficiency of the programmes in terms of achieving personal development goals (eads 2010b). the progress programme was extremely valuable for gaining experience and training for young professionals. as jeremie states: “the progress programme represents an opportunity to gain international experience and build up a network of people within eads. this process starts with everyone getting to know each other within the group of progress participants. i am happy to be part of a group of skilled, highly motivated and very nice people” (eads 2010b). netra, who participated in the programme, said: “i thoroughly enjoy the multi-cultural flavor of eads. its wide range of business units gives me immense variety as lateral movement is encouraged and supported. the working culture is more informal and relaxed than i had initially expected. the openness and support of the managers is excellent. with its mentorship philosophy, progress has given me the perfect platform to realize my aspirations and growth!” (eads 2010b). according to ludwig who participated in the ams programme “the programme is a real boost in getting to know the eads group per se”. he continues, “the people i met, the relations i developed and the experience i gained over these two years were incredible. combined with the various training courses undertaken as well as further educational possibilities such as language courses, the ams programme clearly gave me a quantum leap forward in my career development” (eads 2010b). sylvie is also was very happy to take part in ams programme: “i particularly appreciated being involved by my different mentors in most of their activities, benefitting from their experience and having open access to a high level of information. moreover, to be part of the eads international team and to attend all the events organised by them (such as the annual seminars) was a great experience for me and a very interesting source of information. it was also complementary to my previous experience, giving me an overall vision of the different businesses of eads as well as a better understanding of eads’ global strategy and main challenges. being part of ams, i also had the opportunity to increase my network within the whole eads group” (eads 2010b). the participants also highly appreciated the fmd programme. according to thomas, “the fmd programme is first of all an opportunity – to grow professionally and personally, to experience the diversity of eads’ aerospace activities and, finally, to make yourself known in the finance community of the group. beyond that, fmd is also a challenge: the continuous change of locations, teams, business cultures, work contents, etc. demands a great deal of personal and professional commitment to always assert yourself throughout the course of the programme” (eads 2010b). on the other hand, maud is delighted with a unique experience she received during the programme, “the outstanding fmd experience i gained allows me as head of performance and improvement to better handle complex issues and understand the big picture. i am now in charge of the performance (financial, quality, resources, etc) and the improvement of the centre of excellence empennage & aft fuselage in airbus, over four plants based in spain and germany with about 3,700 people. this job ideally combines financial 106 m. lisiński, m. szarucki. exploring management development programmes in mncs. example of eads group and operational aspects, and is the new challenge i have decided to take up” (eads 2010b). the programme is highly appreciated in terms of gaining unique international experience according to fernando who said: “as i said, i wanted an international experience and the opportunity to work in different units and functions. i think i have achieved my goal, and i think that the fmd programme was the suitable platform to get it” (eads 2010b). eads has implemented several successful management development programmes in different fields. one programme aims at young graduates and young professionals in the business and engineering fields: the professional and graduate entry support scheme. two programmes are intended for confirmed managers in the fields of marketing and sales and finance: the advanced marketing and sales, and the financial management development programmes. each programme proposes several projects and workshops during a particular period in different divisions / business units to form top managers. to sum up, there is clear evidence from the above testimonials of the persons who took part in the management development programmes that the programmes implemented in eads group are very well suited for personal skills development. however, the results should be treated cautiously at least for two reasons. firstly, there is a small sample of the persons who took part in the development programmes. secondly, the evaluation is based on qualitative data and from a personal perspective. therefore, the question is whether the company achieved its goals while training these persons. 6. conclusions the main goal of this paper was to explore management development programmes in multinational corporations on the example of the selected training programmes at eads. the results of the programmes’ evaluation presented by several trainees were very positive. nevertheless, they should not be generalised for the whole population of mncs. the described programmes provide interesting insights into management programmes development goals, structure, or training methods employed. based on this research, several conclusions can be drawn that may address future research. first, it would be useful to explore the impact of management development programmes on the company’s activities and performance. in this case we have concentrated on personal development and a perceived impact on their skills’ development. second, more in-depth and longitudinal qualitative studies of the methods developing international managers’ skills are needed. the results should be complemented 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comparative study of managers’ career factors in selected eu countries, transformations in business & economics 7(2): 84–97. zakarevicius, p.; zuperkiene, e. 2008. improving the development of managers’ personal and professional skills, inzinerine ekonomika – engineering economics (5): 104–113. mncs valdymo plėtros programos eads grupės pavyzdžiu m. lisiński, m. szarucki santrauka šio straipsnio tikslas yra išsiaiškinti valdymo plėtros programas mncs (eads grupės pavyzdžiu). straipsnyje nagrinėjamas valdymo plėtrai svarbus ugdymo vaidmuo, vadovų mokymas ir tikslai, pateikiama naujausia informacija apie įvairius valdymo plėtros būdus. daugiausia dėmesio skiriama pasirinktoms valdymo plėtros programoms ir jų pritaikymui eads. taip pat įvertinamas programų efektyvumas, kuris grindžiamas mokomų asmenų nuomonėmis, o straipsnio išvadose pateikiami pasiūlymai tolesniems tyrimams atlikti. reikšminiai žodžiai: vadovai, valdymo plėtra, valdymo ugdymas, mokymo metodai. marek lisiński is a prof. dr hab. of management, head of the department of strategic analysis at cracow university of economics. his current primary areas of research interest are management methodology research, strategic management and internal auditing. he has published about 150 scientific papers, books, book chapters, reviews and didactic materials. marek szarucki is an assistant professor in the department of strategic analysis. his scientific interests concentrate on methodology of management science, strategic management, and business start up motivations. he is the author and co-author of more than 40 scientific papers and book chapters that have been published in refereed journals and books. he holds a phd in economics with major in management from cracow university of economics. http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 theoretical aspects of competitiveness in construction enterprises laura lielgaidina1, ineta geipele2 riga technical university, meza str. 1/7, lv-1048 riga, latvia e-mails: 1laura.lielgaidina@rtu.lv (corresponding author); 2ineta.geipele@rtu.lv received 18 november 2010; accepted 15 january 2011 abstract. in this paper, the authors present a short review of statistics in european counstruction market and describe literature on management in construction – concept and definitions of competitiveness, including parts checklist and project values, and suggestions for successful marketing as well. the enhancement of the competitiveness of construction enterprises is one of the most important strategic objectives in the construction industry. the company’s loss of competitiveness is its greatest threat. the focus of this paper is on improving quality and safety in construction enterprises – the research was done in order to obtain more information about quality performance measures used by building materials producers in latvia. at the end of this paper, the authors shortly describe the results of the research. keywords: construction, competitiveness, quality management, promotional strategies. reference to this paper should be made as follows: lielgaidina, l.; geipele, i. 2011. theoretical aspects of competitiveness in construction enterprises, business, management and education 9(1): 67–80. doi:10.3846/bme.2011.05 jel classification: m31, l19, l74. 1. introduction as for the rest of the world, the economic situation in the europe changed drastically towards the end of 2008. in 2008, the volume of the european residential construction was € 676 billion. 73% of that volume was achieved in the 5 large western european countries: germany (21%), france (15%), italy (14%), spain (12%) and the united kingdom (11%). a further 17% can be attributed to the 6 smaller western european countries. 7% of the volume was achieved in the 4 scandinavian countries and 3% in the 4 eastern european countries. after years of fantastic growth rates, residential construction is now stagnant. if we look at the forecast, there are only few countries in which the volume of residential construction will be larger in 2012 than it was in 2008. while residential construction in norway and poland will probably have a two-figure growth rate, germany, for example, is expected to have a moderate revival of approximately 4%. in contrast, the volume of residential construction in france will decrease by about 5% and in italy by nearly 9%. in five countries, the investments are likely to drop by a b u s i n e s s, ma n ag em e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(1): 67–80 doi:10.3846/bme.2011.05 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 68 l. lielgaidina, i. geipele. theoretical aspects of competitiveness in construction enterprises two-figure rate. the decline will no doubt be particularly dramatic in portugal (–37%), spain (–42%) and ireland (54%). in the 16 years from 1991 to 2007, investments in residential buildings climbed from around € 530 billion to around € 729 billion. this corresponds to an annual increase of around 2% p.a. fig. 1. european construction market structure 2009 (source: euroconstruct) the five biggest non-residential markets in europe remain france, germany, italy, spain and the uk, although their share of the total output in the sector fell to 69% in 2009 from 71% in 2006. the recovery in industrial construction is still some way off and is likely to be slow. overall industrial construction output is forecasted to be over 11% lower in 2012 than it was in 2009. civil engineering 24% new residential construction 18% residential renovation 26% new non-residential construction 14% non-residential renovation 14% fig. 2. predicted construction volume in europe 2012 (source: euroconstruct) non-residential construction 31% civil engineering 25% residential construction 44% 69 business, management and education, 2011, 9(1): 67–80 civil engineering works represent just over 20% of the european construction market. this makes civil engineering the third largest market in the western europe (21% in 2008). however, in the eastern europe, the civil engineering market exceeds the housing market. the current trend in both regions, though responding to different requirements, is towards a strengthening of the civil engineering sector: between 2000 and 2008, together with the non-residential sector, civil engineering sector partly absorbed the contraction due to the residential market crisis in the western europe, but above all in 2012, it will absorb the reduction in the role of the whole building sector. competitiveness in construction industry in latvia increased rapidly till 2008. a large number of high-quality products were produced using the latest technologies. demand for building materials have reduced during last 3 years, so it is very important to use mostly domestic products and services to support producers in construction sector in latvia. the construction share of the gross domestic product (gdp) was 6.5% in 2009. specialists predict reduction of gdp in 2010 due to reduction in construction industry. however, the growth of gdp in all sectors is forecasted starting the year 2011 (construction industry for an average of 5% per year). in the construction sector competitiveness has become one of the most actual topics. in this paper, the authors describe concepts and definitions of competitiveness and sugestions for successful marketing as well. the focus of this paper is on improving quality in construction enterprises – the research was done in order to obtain more information about quality performance measures used by building materials producers in latvia. at the end of this paper, results of the research are shortly described. 2. competitiveness – concept and definitions, the five forces model, parts checklist competitiveness is adopted as a management or economics idea that is superior to the traditional economic indicators such as profitability, productivity or market share, which are seen as being insufficient to enable continuous improvement of performance. the increasing emphasis on the importance of competitiveness stems not only from its ability to enable sustainable growth, but also from dynamic competition in today’s world. it is generally accepted that globalization accounts for the increased importance of competitiveness. globalization has created an interconnected and interdependent world; it converts the world into a complex and multifaceted dynamic place with free competition and free trade. development of competitiveness is the major strategy for competing in this context. competitiveness as a subject comprises different levels of analysis. investigations of competitiveness can be conducted from the perspective of a nation, industry or enterprise, each level being significantly different. figure 3 is a framework for analysing competitiveness research in the construction sector. four levels of analysis can be observed, namely, nation, industry, organization and the project level. 70 l. lielgaidina, i. geipele. theoretical aspects of competitiveness in construction enterprises fig. 3. a framework for analysing competitiveness research in the construction sector (source: r. flanagan 2007) the analysis relates itself to the management and economics sciences. the following sections will review competitiveness research from three perspectives: the construction industry level, the construction firm level, and the construction project level. within each perspective, there will be a summary of general issues, measuring competitiveness, challenges, and research questions. many firms work hard to encourage competitiveness from an industry perspective. these efforts may include regulating market competition, promoting best practice in the whole industry, benchmarking the competitiveness of the construction industry in different countries. there are some essential research questions: what is the competitiveness at the construction industry level? is it meaningful to use a composite index to indicate the competitiveness of a given construction industry? what is a healthy construction industry, for example, with good business environment, reasonable intensity of competition, or proper economic policy? how can the construction industry as a community foster the development of competitiveness of its firms? porter’s theory for firm’s competitiveness is characterized as the industrial organization view of competitive advantage. major components in porter’s theory are the five competitive forces model; the three generic competitive strategies; and the value chain (flanagan 2007). the five forces model was developed by porter as a summary of the main forces, which determine how attractive an industry will be. this is a well-known model, frequently used by management consultants when analysing the state of an industry and its main companies. each force has a number of components and can have a positive or negative effect on the industry. the combination of the forces and the balances between them, allows us to summate how great the competitive forces are likely to be. the central force, the intensity of rivalry or competition within the immediate market, provides the platform for gauging the intensity of competition. porter’s research nation construction industry developers other industry other companies project suppliers other industry subcontractors general contractor other industry economics/management science macroscope microscope analysis of competitiveness at nation level analysis of competitiveness at industry level analysis of competitiveness at firm level analysis of competitiveness at project level 71 business, management and education, 2011, 9(1): 67–80 has shown that there are a number of tell-tale signs which can be analysed to build up a picture from which it can be deduced if the industry is a highly competitive low profit market or if competition is low intensity and profits are fat. the tell-tale signs include: (1) industry growth – there is an implicit assumption that growing businesses are the only type of healthy business. all the companies in one sector can grow only if the market itself grows. thus, a growing market is viewed as a sign of good prospects for the companies in the sector. (2) balance of copetitors – many markets or sectors will have two or three main rivals and a number of smaller players in the market. more intense markets will have larger numbers of equally sized players, seen as an indication of an unprofitable sector. (3) exit barriers – the barriers to entering and leaving the market are significant factors in the health of a sector. industries which have high levels of investment or specialist knowledge bases make it difficult for new companies to establish a presence, or for existing companies to leave duing bad times. (4) expected retaliation – the strength of a response to, for example, price cuts by one competitor is another important parameter. a slow or negligible response as a norm may indicate an industry where all players have a comfort margin or, alternatively, may show complacency. (5) the bargaining power of buyers gauges whether the buyers dominate the market and dictate the pattern and prices within the market. likewise, the bargaining power of suppliers can be assessed in a similar manner. likely tell-tale signs include: volume of purchases – buyers or suppliers to the main players who control large volumes can have a very influential role since the flow of material or service provides them with a key lever. market share – buyers or suppliers to the main players who control a large percentage of the market can have a very influential role since they have a dominant position which can translate into a control of priing. switching costs – low costs in switching from one supplier to another can be influential in reducing the power of suppliers. profitability – strong buyers or suppliers can, to a certain extent, impose a level of profitability on the main players. the threat of substitution implies that there may be substitute products which could replace the traditional products in this particular market. the threat of substitution may also imply that there may be new players available to join or about to join the market and increase the competition, and again an assessment is necessary. again likely tell-tale signs include: economies of scale – industries where there is a strong economy of scale factor (i.e. the size and location of plants, offices or suppliers) tend to have a limited number of players who can play the game. this can preclude new players. existence of close substitutes – products in particular have developed through the years as one product has replaced another, sometimes in a revolutionary manner. the potential for replacement products can decide how attractive an industry remains. switching costs – the actual cost for buyers of switching from one product to another is a factor in the speed of turnover from one state to the other. access to distribution – contractual binding, location or other factors which preclude competitors from sharing suppliers can be a factor in reducing threats. the importance of these factors is in the degree of control a company can lever in determining its stance and price within this particular market or for a particular project. 72 l. lielgaidina, i. geipele. theoretical aspects of competitiveness in construction enterprises the bottom line is in establishing how attractive a market or a particular situation will be and whether it is worth competing or ignoring it. the difficulty in assessment is that there is no right or wrong. all markets are different combinations of conditions can determine whether one or a small number of key players control the market. thus, the analysis is subjective, and there is a degree of expertise in judging whether a particular market is attractive and competition is not too fierce. the parts checklist (brandenburger, nalebuff 1996) provides another framework for structuring information and checking that all vital information is included. it has, to date, provided less scope for quantification methods. its theme is excellent since it seeks to identify competitors as both competition and potential cooperating bodies, trying to redefine all aspects of the market or an opportunity as having both positive and negative potential. the framework revolves around the five terms whose initial letters form the acronym parts – players, added values, rules, tactics and scope. it is possible to improve the business by asking the right questions. players. which players do you work with? can you co-operate and compete with them all? who gains and loses when you enter a market? who gains and loses if the rules change? who are the players and can they be made to play together rather than against each other? added values. what is the firm’s competitive edge? can it be increased? what is the added value of other players? can the supply chain add more value than the company itself for a particular situation? rules. what are the ground rules for the market and, rather than accepting them, can they be changed? what rules help and which ones hinder? who changes the rules? tactics. what are the tactics for competing? is the game transparent or opaque? scope. what is the current scope of work accepted by the main players and, rather than accepting it, can it be changed? is the game linked to others? all of these are very useful questions, although they generally get lost in the heat of competition (mawhinney 2008). technical specialists do not always think in terms of benefits; they think in terms of product features – for example, this contract will take a certain number of months, involve a certain number of people, cost a certain amount of money, require certain construction techniques, and result in a building of a certain shape and so on. customers, however, tend to be more interested in benefits. for example, this company was quicker than others; which meant i got ahead of schedule; this company was more cost-effective than others, which meant customer saved money on his budget; this company itemized everything, which meant customer was confident that he knew where the expenditure was going; this company kept him informed throughout, which meant that he was reassured that the activity was on schedule; this company helped him build a better reputation within his own company. it is necessary to ask the following sets of questions: what do competitors do better? can you go one step ahead of them? what simple value-added addition will make your company more attractive than theirs? what constitutes best practice? what do the really admired companies do? even if you are not in their league, how can you adapt and tailor what they do so that your customers appreciate the difference? what do successful 73 business, management and education, 2011, 9(1): 67–80 companies from other industries do that you could adapt and tailor to your company or could stimulate ideas that could be used in your company to set you apart from your competitors? (gillen 2005). these are just a few questions which should be answered and analysing to understand needs. 3. cost, time, quality, safety, scope, and function in construction in 1996, a group of owners, architects, contractors, and engineers gathered in san francisco to discuss common goals and opportunities for collaboration in the building industry. during their discussions, they came up with the factors that need to be managed and controlled on a construction project in order to produce a successful outcome for the owner and all parties involved. they referred to these factors as the six dials of project value: cost, time, quality, safety, scope, and function. it is essential to predict and control what the construction project will cost. costs are established, targeted, and controlled by means of an estimate or budget. as the work progresses, expenditures for materials, labor, equipment, and subcontracts are tracked and measured against the estimates. the fundamental goal is to maintain costs within or below budget parameters. the construction manager who can minimize cost while maximizing overall value to the owner will optimize the cost dial. time is money. for many projects, the speed with which the building can be brought on line is more important than almost any other factor. time is monitored and controlled by a detailed schedule, breaking each item of work down into its component parts. once all of the purchasing, fabrication, installation, and construction steps are identified, a time element is assigned to each step. the goal is to complete each of the work items within the time frame assigned. the construction management team that can guarantee the schedule and actually beat it is invaluable to the owner. quality is the grab bag that covers all the aspects of the building not addressed by the other five values, such as aesthetic impact, user perceptions, and appropriateness of building materials, and so on. quality is monitored and controlled by a variety of means, including specifications, punch lists, inspections, tests, and user surveys. special care must be taken to establish appropriate measures early in the project to focus attention and effort on the quality expectations of the team. no matter how valuable a facility or structure may be, it is never more valuable than the health and welfare of the people who build and use the building. care must always be taken to ensure that the building process, and the building itself, do not create unacceptable hazards to workers or users. these hazards range from risks during the building process (for example, falls, accidents, injury, and death) to risks from the completed buildings (for example, structural failure). safety is best monitored and controlled proactively, by identifying potential risks and taking prudent steps to mitigate those risks. scope is monitored and controlled by means of an architectural program, which identifies the space needs and tracks compliance of the building design with those 74 l. lielgaidina, i. geipele. theoretical aspects of competitiveness in construction enterprises needs. an optimal scope outcome would match the end user’s needs to the facility design over the life of the building with no gaps in between. the ultimate goal is high end-user satisfaction. the best project teams try to meet all of the functional requirements of the end-user group. an optimal outcome would satisfy their short and long-term needs, allowing for sufficient flexibility to adapt to changes in the market. function is monitored and controlled by means of process flow diagrams and utilization analyses, which document the efficiency of the processes that will be performed in the completed facility (jackson 2004). 4. questionnaire surveys seven key elements of quality management are used as criteria for the malcolm baldridge award: leadership, human resources, customer focus and satisfaction, strategic planning, process management, measurement and analysis, and business results. we must understand importance of above mentioned factors and use them to improve quality and competitiveness as well. by using questionnaires we can understand, measure, and analyse the performance of very significant factors for competitiveness in each business unit: strategic planning (setting goals to improve service, developing a long term strategy and a plan to improve quality), process management and measurement and analysis (collecting and using a wide range of data and information about the quality of products and services), business results (examining the organization’s performance and improvement in its key business areas: customer satisfaction, financial and marketplace performance, human resources, supplier and partner performance, operational performance). in this paper we focus on problems connected with quality management in the construction industry and presenting examples of key questions in surveys for problem identification. questionnaire survey we can use to indicate measures of quality performance (table 1). table 1. what do you consider the best measure of quality in construction industry? no indicator score* 1. overall customer satisfaction 0–10 2. management commitment to quality 0–10 3. being asked to come back to do more work 0–10 4. skilled work force 0–10 5. training and education 0–10 6. the amount of call backs 0–10 7. regular inspections 0–10 8. the length of warranty (in years) companies can give on their work 0–10 9. general construction standards 0–10 10. quality awards 0–10 11. certified quality programmes such as iso 0–10 note: *please score from 0 (least important) to 10 (most important). 75 business, management and education, 2011, 9(1): 67–80 we can also include different aspects of quality in questionnaire for determining which of them is considered as most / least important for improving quality (see table 2). table 2. what aspects are important for improving quality? no indicator rank* 1. employee involvement 1–15 2. management commitment 1–15 3. comunication between managers and employees 1–15 4. skilled work force 1–15 5. training and education 1–15 6. subcontractors involvement 1–15 7. organisational culture 1–15 8. well-defined roles and responsibilities 1–15 9. clearly defined goals and objectives 1–15 10. review / analysis used to improve performance 1–15 11. regular inspections and audits 1–15 12. regular meetings 1–15 13. criteria used in pre-qualification in bidding process 1–15 14. written programme or policy 1–15 15. certified programme or award 1–15 note: *please rank from 1 (most important) to 15 (less important). after collecting respondent’s answers we can sort characteristics by importance and rank them – the results will show us the elements considered the most important and effective for quality improvement. is is very important to show the most effective not only important elements. there you can see (table 3) few elements, which cotractors may consider as effective for impoving quality. table 3. which elements are effective for quality work performance? no element %* 1. training and education of both management and employees 0–100 2. clearly defined guidelines for customer satisfaction 0–100 3. means and methods for ensuring continuous improvement 0–100 4. clearly defined goals relating to quality work performance 0–100 5. systems for collecting and tracking data for ensuring quality objectives 0–100 6. a review / analysis process for identifying errors in the system 0–100 note: *please score from 1 (least important) to 100 (most important). the total sum of elements values must be 100. 76 l. lielgaidina, i. geipele. theoretical aspects of competitiveness in construction enterprises the construction industry’s clients demand improved service quality, faster building and innovations in technology. lean production (just-in-time) and quality management are being adopted and integrated into the industry to improve competitiveness. succesful implementation depends on different factors, firstly on teamwork and cooperation at organizational levels. quality management gives us an opportunity to meet the needs of the final cutomer by solving quality problems and improving customer satisfaction level, and reducing employee injuries as well (hoonakker et al. 2010). it is difficult to define quality in construction industry. contractors often have an attitude of ‘looks good, feels good’. if construction contractors would use a standartised customer satisfaction survey, it would be possible to compare the quality records of contractors (benchmarking) and analyse which factors contribute to high customer satisfaction and high quality. unfortunately, even when contractors collect data on customer satisfaction, they often fail to analyse them. 5. succesful promotional strategies it is important to plan marketing so that it contributes to business plan and business cycle. concerted and mutually supportive activity always produces better results than random uncoordinated activities. firstly there is necessary to create a marketing plan on a rolling 12-month cycle. this way, it is always ‘live’ and flexible and facilitates financial decisions. below you can find suggestions how to make marketing plan succesful. the name of the company must be easy to spell and pronounce, and descriptive of what you do, that it does not prohibit future expansion and under no circumstances reminds customers of your competitors. use a logo that helps you stand out from the crowd and, if possible, one that illustrates what you do or what you stand for. the vast majority of people are visual thinkers (that’s why road signs are images and not sentences), so a good logo is a quick route into their memories. it is also important to have a clear, illustrative and truthful strap line. a strap line is a set of words that summarizes what you stand for or offer. letters, e-mails, proposals, business cards, gifts, promotional literature, websites, vans and trucks and so on must carry the same logo and strap line. be seen in the relevant journals and newspapers. write letters to the editors responding to articles or other people’s letters, write articles or columns that establish your company as a leader, issue press releases, let journalists know that you are available to comment on ‘community’ issues. showcase successes in premises, in brochures, on website and so on. ensure that your website is regularly reviewed. it needs to be designed for ease of use, quick download, relevant information and maximum ‘stickability’. a website is often the first and prime information source for prospective customers gathering information about company. when a prospective customer needs a company like yours, it is amazing how many people like to recommend ‘someone who might be able to help’. adopt a cause, such as a charity. the charity benefits and so does your company’s image. 77 business, management and education, 2011, 9(1): 67–80 just a few but important suggestions – become an educator, provide free seminars or speak at conferences (many of the attendees will be prospective customers), and make free factsheets available. many of the people who request them will be prospective customers and, if you offer them through website, you minimize administration. train all staff that has contact with customers in customer care attitudes and skills. if you use subcontrators, insist that they are similarly trained. establish such long-term relationships that you can train them yourself. follow up customers after a contract ends to check that they are still happy. if they aren’t, you have an opportunity to do something about it before they tell their family, friends, neighbours and colleagues. if you advertise in magazines and journals, choose carefully. is the magazine or journal read by your prospective customers? it may have a huge circulation, but is it a relevant circulation? will advertising in it add to, or reduce, your company’s credibility? mail existing and prospective customers with something interesting or useful to them, not just you’re advertising. ensure that all mailshots are 75 percent useful to customers and only 25 percent advertising. all marketing contains two messages – the conscious one and the subconscious one. the conscious one is the stated message ‘we sell x’. the subconscious message creates feelings in customers (gillen 2005). as a result of your marketing, you should understand if customers feel that you are superficial, too slick and unimaginative or professional, good value, reliable, reassuring. 6. conclusions research into competitiveness has been conducted from different perspectives such as a construction industry, a firm or a construction project. specialists include promoting best practices in construction industry, helping companies to develop competitive strategies. research is suggested to move forward from understanding competitiveness to improving it. researchers have been trying to understand competitiveness by measuring it. in this research the authors focus on developing quality in construction enterprises and thereby competitive advantages. the authors collected data during interviews with contractors from companies, which mostly produce cement, ready-mix and aggregates such as sand, granite and gravel. questionnaire surveys were used to address quality issues in enterprises in construction industry. 32 contractors took part in this research. results show, that contractors understand benefits of quality improvement in their enterprises. results show that overall customer satisfaction (9 points from 10), skilled work force (8.5/10), and management commitment to quality (8/10) are the best measures of quality, but quality awards (2/10), and certified quality programs (1.5/10) are less important to them. according to contractors’ answers, the customer satisfaction is the most important factor, but they indicate that it is difficult to measure quality in their enterprises. the risk level of changes in projects is high. producers often can’t predict deliveries in time – many changes like weather conditions and schedule delays can lead 78 l. lielgaidina, i. geipele. theoretical aspects of competitiveness in construction enterprises to delays in deliveries and in completion of project as well, it can lead to complaints about quality and so forth. there is the task to improve supply chain as well. the authors of the paper asked contractors about aspects, which are important to them for improving quality. then they ranked them – results show that communication between managers and employees (1th rank) is considered most important characteristic for improving quality. skilled workforce (2), training and education (3), employee / subcontractors involvement (4/5), management commitment (6), and regular meetings (7) are considered important characteristic, but like in first survey certified quality programs and awards are less important. results show that the most effective element which is considered the most important and effective for quality improvement is training and education of both management and employees (47%) whilst systems for collecting and tracking data for ensuring quality objectives (2%) and review/analysis process for identifying errors in the system (2%) are less effective. porter (1998) suggests that it is up to enterprises to develop and maintain competitive advantages. the company’s loss of competitiveness is its greatest threat. today the pressure for speedy delivery, cost efficiency, and high quality is immense. the success of any construction project depends on the people who plan, organize, and perform the work that transforms someone’s idea into a reality. the process of constructing a building does not happen in a factory under controlled conditions. it occurs in a dynamic environment where risk is inherent and the decisionmaking and 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vishnevskaja, a.; ashikhmin, i. v. 2009. multicriteria verbal analysis for the decision of construction problems, technological and economic development of economy 15(2): 326–340. doi:10.3846/1392-8619.2009.15.326-340 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 80 l. lielgaidina, i. geipele. theoretical aspects of competitiveness in construction enterprises zavadskas, e. k. 2008. methods and models of research in construction project engineering, journal of business economics and management 9(3): 240–243. doi:10.3846/1611-1699.2008.9.240-243 zavadskas, e. k.; turskis, z.; tamosaitiene, j. 2008. contractor selection of construction in a competitive environment, journal of business economics and management 9(3): 181–187. doi:10.3846/1611-1699.2008.9.181-187 statybos įmonių konkurencingumo teoriniai aspektai l. lielgaidina, i. geipele santrauka šiame straipsnyje autoriai analizuoja statybos rinkos europoje statistiką, pateikia statybos valdymo teorinę analizę – konkurencingumo koncepciją ir apibrėžtis, įtraukiant parts sąrašą ir projekto vertes bei siūlymus sėkmingos rinkodaros veiklai. statybos įmonių konkurencingumo stiprinimas yra vienas iš svarbiausių strateginių tikslų statybos sektoriuje, todėl įmonei konkurencingumo praradimas yra didžiausia grėsmė. šiame straipsnyje pagrindinis dėmesys skiriamas statybos įmonių darbo kokybei ir saugai gerinti. tyrimas skirtas ištirti latvijos statybinių medžiagų gamintojų kokybės įgyvendinimo priemones. reikšminiai žodžiai: statyba, konkurencingumas, kokybės vadyba, rėmimo strategijos. laura lielgaidina is a doctoral student at riga technical university, faculty of engineering economics and management, institute of the building entrepreneurship and real estate economics, latvia. work experience in international company, which produces building materials. more than 3 years experience in construction sector as a sales, business and financial analyst. research interests are related to construction and real estate management, development possibilities of latvian construction industry and production of building materials as well. ineta geipele is a professor at riga technical university, faculty of engineering economics and management, latvia. riga technical university engineer degree (1988). riga technical university master degree in engineering economics (1995), riga technical university doctor degree in economics (management science) (1998). a head / participant in many research projects. author of about 100 scientific articles and author/co-author of 5 scientific and training books. research interests: strategic management, construction and real estate management, sustainable development concept, sustainable building, environmental management, integrated management systems. http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2012, 10(1): 110–127 doi:10.3846/bme.2012.09 copyright © 2012 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt market behaviour: case studies of nasdaq omx baltic jelena stankevičienė1, natalija gembickaja2 vilnius gediminas technical university, saulėtekio al. 11, lt-10223 vilnius, lithuania e-mails: 1jelena.stankeviciene@vgtu.lt (corresponding author); 2natalija.gembickaja@vgtu.lt; received 10 may 2011; accepted 15 april 2012 abstract. the paper examines market behaviour, defines the concept of behavioural finance and exhaustively analyzes the varying behaviour of market participants and occurring examples. the article deals with the issues of possible anomalies describing their main features. the conducted research is aimed at investigating two anomalies in the baltic stock exchanges, including branches in tallinn, riga and vilnius. the publication selects specific stocks listed in the equity market and analyzes their features. the obtained results are compared to discuss differences and characteristics of the markets. the paper also presents an original examination of the practical aspects of momentum and contrarian anomalies, underlies recommendations and helps financial market participants with a better understanding of the influence of anomalies from an economic perspective and with improving their competitiveness thus helping them to make appropriate decisions. keywords: market behaviour, behavioural finance, financial market anomalies, momentum and contrarian anomalies. reference to this paper should be made as follows: stankevičienė, j.; gembickaja, n. 2012. market behaviour: case studies from nasdaq omx baltic, business, management and education 10(1): 110–127. http://dx.doi.org/10.3846/bme.2012.09 jel classification: d53, g02, g11, o16. 1. introduction over the past few years, equity markets have been characterized by a rise in volatility and fluctuations. the ever more integrated financial markets are increasingly exposed to macroeconomic shocks affecting the markets on a global scale. from the investor’s point of view, the vulnerability of the markets has lead to increased uncertainty and unpredictability, as market conditions cannot always be judged with the help of standard financial measures and tools. for a long time, when making financial decisions, market participants have relied on the notion of efficient markets and the rational behaviour of the investor. however, the idea of fully rational investors always maximizing their utility and demonstrating perfect self-control is becoming inadequate. despite strong evidence that the stock market is highly efficient, i.e. one cannot earn abnormal profits by trading on publicly available information, there have been a number of studies documenting 111 business, management and education, 2012, 10(1): 110–127 long-term historical anomalies in the stock market that seem to contradict the efficient market hypothesis. during the recent years, the examples of market inefficiency in the form of anomalies and the irrational behaviour of the investor have been observed more frequently (johnsson et al. 2002). the existing phenomenon can in part be attributed to the less-than-rational aspects of investor behaviour and human judgment. due to a growth in uncertainty in financial markets, the approaches based on perfect predictions, completely flexible prices and a complete knowledge of investment decisions made by other players in the market are increasingly unrealistic in today’s global financial markets. behavioural finance is a new paradigm of the finance theory that seeks to understand and predict systematic financial market implications of psychological decision-making (abarbanell, bernard 1992). by understanding human behaviour and a psychological mechanism involved in financial decision-making, standard finance models may be improved to better reflect and explain the reality faced in today’s evolving markets. moreover, this understanding should help with avoiding the occurrence of an anomaly phenomenon and enhance the efficiency of the present global financial markets (johnsson et al. 2002). the goal of research is to examine and analyze two anomalies in nasdaq omx baltic stock exchanges in tallinn, riga and vilnius forming the baltic market. market efficiency, in the sense that market prices reflect fundamental market characteristics and that excess returns on the average are levelled out in the long run, has been challenged by behavioural finance. there have been a number of studies pointing to market anomalies that cannot be explained with the help of a standard financial theory such as abnormal price movements in connection with ipos, mergers, stock splits and spin-offs. this contradicts the efficient market hypothesis and implies that investors believe they can beat the market and overestimate their talents while underestimating the likelihood of bad outcomes. throughout the years, statistical anomalies have been continued to appear which suggests that the existing models of standard finance are, if not wrong, probably, incomplete. investors have been shown not to react “logically” to new information but to be overconfident and to alter their choices when given superficial changes in the presentation of investment information (olsen 1998). the existing anomalies suggest that the fundamental principles of rational behaviour underlying the efficient market hypothesis are not entirely correct and that we need to look, as well, at other models of human behaviour, as studied in other social sciences (shiller 1998). the presence of regularly occurring anomalies in the conventional economic theory was a big contributor to the formation of behavioural finance. these so-called anomalies, and their continued existence, directly violate modern financial and economic theories, which assume rational and logical behaviour. the paper describes and analyzes the momentum and contrarian anomaly, i.e. size effect, momentum and contrarian anomalies. these anomalies were not randomly selected as by some extent they could cause or be related. some researchers argue that large positive abnormal returns generated by the contrarian strategy can be attributable to this well known size effect (zarowin 1990; clare, 112 j. stankevičienė, n. gembickaja. market behaviour: case studies of nasdaq omx baltic thomas 1995 respectively for u.s. and u.k. evidence). for this reason, there is a tendency among many momentum/contrarian studies to examine whether the returns earned are attenuated by small firm effect. however, gunasekarage, wan kot (2007) published their empirical findings providing some evidence that momentum profits were available across all liquidity groups but excluding possibilities that these returns were influenced by the well known size effect or january effect. moreover, chopra et al. (1992) shows that having controlled size or beta, overreaction in momentum and contrarian anomalies though gets reduced but still remains. on the basis of evidence reported in these studies, it is important to examine if profits generated by contrarian and momentum anomalies are also driven by size effects. 2. momentum and contrarian anomaly two recent approaches to investment that have challenged the weak form of the emh are the contrarian strategy and the momentum strategy. the contrarian strategy, suggested by the overreaction hypothesis, ranks shares on the basis of their past performance and recommends buying past losers and selling past winners. in contrast, the momentum strategy also ranks shares according to their prior performance but recommends the purchase of the past winners and the sale of the past losers. haj youssef et al. (2010) pointed that the best (poorly) performing stocks would continue their upward (downward) trend, momentum strategies, to be profitable in the medium run. in the long run, the trend will reverse and the contrarian strategy, implying a long position in the past losers and a short position in the winners, will be profitable. prior findings of jegadeesh and titman (1993) suggest that the length of the holding period is relevant. momentum strategies were found to generate significant positive abnormal returns in three-to-twelve month holding periods, but not for very short (weekly or monthly) or very long (in excess of one year) holding periods. many studies provide evidence for the profitability of both above introduced strategies. table 1 provides information on researchers investigating a certain investment strategy at certain markets. the first formal investigation into the momentum effect was conducted by jegadeesh and titman (1993). they measured the performance of the strategy for buying the winner’s portfolio and shorting the loser portfolio over various holding periods. the momentum strategy has also been examined in the markets outside the us. for example, the uk market has been investigated by liu et al. (1999) and hon and tonks (2003). chan et al. (2000) has examined the momentum effect based on individual stock market indices in 23 countries. they have also found statistically significant evidence of momentum profits. drew et al. (2007) investigated the profitability of momentum strategies in australian setting and discovered a substantial momentum in monthly stock returns for the period 1988–2002. gunasekarage and wan kot (2007) studied the profitability of such strategy in the new zealand stock market and proved the existence of the 113 business, management and education, 2012, 10(1): 110–127 momentum effect in the new zealand market. their empirical findings provide some evidence that momentum profits are available across all liquidity groups but exclude possibilities that these returns were influenced by the well known size effect or january effect. rastogi et al. (2009) found strong support for the existence of momentum strategy profits in indian markets, while evidence for overreaction was present only in stocks referred to be mid-size. table 1. investigation into momentum and contrarian strategies in international markets. (source: created by authors) momentum effect jegadeesh and titman (1993) usa liu et al. (1999) uk hon and tonks (2003) uk chan et al. (2000) 23 countries (australia; austria; belgium; canada; denmark; france; germany; hong kong; s. korea; italy; japan; netherlands; norway; s. africa; spain; singapore; switzerland; u.k.; u.s.; thailand; taiwan; malaysia; indonesia drew et al. (2007) australia gunasekarage and wan kot (2007) new zealand rastogi et al. (2009) india contrarian effect de bondt and thaler (1984) usa power et al. (1991) uk wang et al. (1999) japan, hong kong, taiwan zamri and hussain (2001) malaysia alonso and rubio (1990) spain da costa (1994) brazil gunasekarage and power (2005) sri lanka no evidence of either effect kryzanowski and zhang (1992) canada brailsford (1992) australia hameed and kusnadi (2002) asia de bondt and thaler (1984) were the first to prove the contrarian effect in the usa; they performed research using data on new york exchange (nyse) common stocks, which resulted in loser portfolios outperforming the market, while winner portfolios, on the other hand, earned less than the market. moreover, it was found that “the overreaction effect was asymmetric; it is much larger for losers than for winners.” de bondt and thaler’s proposition is based on evidence that individuals tend to overweight recent information and underweight prior information when revising beliefs. market overreaction 114 j. stankevičienė, n. gembickaja. market behaviour: case studies of nasdaq omx baltic has also been examined outside the us market. for example, power et al. (1991) tested mean-reverting tendencies towards share returns of ‘excellent’ and ‘non-excellent’ uk companies for the period from 1973 to 1987 and documented results consistent with the winner-loser effect; during the five-year period following portfolio formation, the loser portfolio yielded a cumulative abnormal return of 86 per cent, while the winners generated a cumulative abnormal return of 47 per cent. further evidence for the profitability of the contrarian strategy has been documented for the markets in japan, hong kong and taiwan (wang et al. 1999), malaysia (zamri, hussain 2001), spain (alonso, rubio 1990), brazil (da costa 1994) and sri lanka (gunasekarage, power 2005). all these studies report a long-run reversal of fortune for the winner and loser portfolios; an investment strategy of buying past losers and selling past winners generates statistically significant returns to investors. there are some studies that have failed to find evidence of either overreaction or momentum. kryzanowski and zhang (1992) found no evidence of mean reversion behaviour in the canadian market; over the 24-month post-ranking period, the winner’s portfolio outperformed the loser portfolio by 7.42 per cent. brailsford (1992) analyzed australian data and discovered that, even though the winner’s portfolio in his study experienced a price reversal during the 36-month testing period, the loser portfolio continued to accumulate negative abnormal returns; at the end of the post-ranking period, both the winner and loser portfolios realized negative abnormal returns of 69.58 per cent and 52.59 per cent respectively. hameed and kusnadi (2002), who analyzed monthly returns of 1,008 securities, traded on six asian markets and found no evidence of this anomaly. on the other hand, chan et al. (2000) proved that in 23 countries, including canada, australia and some asian countries, the momentum strategy could be applied in stock markets. moreover, other researchers such as drew et al. (2007) and wang et al. (1999) made investigations into australian and asian countries respectively and got reverse results. the only reasons for such contrary findings could be the time period analyzed or different methods of methodology and interpretation. haj youssef et al. suggests the behavioural approach as the advanced one to explain the profitability of these trading strategies. this approach explains strategy profits by means of judgment biases inducing investors’ over-reaction or under-reaction to information and as a result producing the continuation and reversals of stock returns. one of the earliest observations about overreaction in markets was made by j. m. keynes (1964): “…day to day fluctuations in profits in the existing investments, which are obviously of an ephemeral and non-significant character, tend to have altogether excessive, and even an absurd, influence on the market”. advocates for the behavioural approach propose a number of theoretical models of investor behaviour to explain these serial correlation properties in stock prices. the underpinning of daniel et al. (1998) is investor overconfidence. they consider that stock prices are determined by the informed investors who are subject to two biases: overconfidence and self-attribution. overconfidence in their signals causes overreaction to their private information, and self-attribution causes under-reaction to public infor115 business, management and education, 2012, 10(1): 110–127 mation. over-reaction to private information leads them to push up the prices of the winners above their fundamental values. this trend will be reversed, in the long run, when public information is confirmed. specifically, when a positive earnings surprise is followed by another positive (negative) surprise, the investor raises the likelihood that he is in the trending regime and tends to become too optimistic (pessimistic) about the future profitability of the firm. as a result, the firms realizing a rapid growth in earnings tend to become overvalued, and those realizing a slow growth in earnings tend to become undervalued. (barberis et al. 1998, 2003) the behavioural models also suggest that such anomaly is affected by information asymmetry. specifically, they argue that the momentum (and contrarian) effect is attributed to inefficient stock price reaction to the specific information about the firm. empirical evidence supports it is related to various proxies for the quality and type of information about the firm, the relative amounts of information disclosed publicly and being generated privately (haj youssef et al. 2010). 3. momentum and contrarian strategy in nasdaq omx baltic market momentum strategies will be profitable if stock returns display a positive serial correlation, whereas contrarian strategies will be profitable in case of a negative serial correlation of stock returns. in order to examine the profits of these trading strategies, the stocks listed on nasdaq omx baltic were classified into four quintiles based on average returns (sorted from the lowest to the highest) in the one month period. the lowest and highest quintiles of stocks are termed as the loser and the winner portfolio respectively, while the second and third quintiles are not considered in investigation. this paper provides data on the market collected from three baltic regions – nasdaq omx vilnius, nasdaq omx tallinn and nasdaq omx riga for the period 2000.01–2009.12. thereafter, the results of the lithuanian market will be compared with those obtained in estonia and latvia, as these countries are more or less similar in respect of economy and financial situation. however, the speed of the strategy reversal in lithuania is much slower than that in the usa or other developed countries, and as a result, would be a disparate comparison. further empirical evidences from nasdaq omx baltic show a graphical representation of winners and losers’ performance in vilnius, tallinn and riga thereafter. as a result, it will provide a better view on comparing results. 3.1. evidence of the momentum and contrarian strategy in nasdaq omx vilnius the performance of the winner and loser portfolios is evaluated in the next 24 months, i.e. for the period from 2000.01 to 2009.12. the study has looked at the momentum results by getting these portfolios with reference to the performance at the intervals of 1, 3, 6 and 12 months. we also evaluate the over-reaction phenomenon in the lithuanian market looking at the intervals of 15 and 18 and 24 months. the difference between the average winner and the average loser portfolio was also computed testing its significance. this is done to evaluate whether the momentum strategy of buying winners and 116 j. stankevičienė, n. gembickaja. market behaviour: case studies of nasdaq omx baltic selling losers (or vice versa) would earn a positive difference in return for investors. table 2 below shows the returns and standard deviation (risk taken) of the winner and loser portfolios in nasdaq omx vilnius. table 2. returns of the winner-loser and winner minus loser portfolios received from nasdaq omx vilnius (2000 – end of 2009 end). (source: created by authors using data obtained from nasdaq omx vilnius) interval (in months) winner loser winner-loser returns standard deviation returns standard deviation returns standard deviation 2000– 2001 1 8.81% 44.73% –1.21% 1.65% 10.02% 43.08% 3 –2.66% 12.51% 0.18% 2.79% –2.84% 9.72% 6 –8.19% 15.44% –0.02% 2.02% –8.17% 13.42% 12 –9.39% 16.85% 0.15% 2.75% –9.54% 14.10% 15 –6.05% 13.57% 0.03% 3.48% –6.08% 10.09% 18 –16.15% 17.53% 1.53% 14.49% –17.68% 3.04% 24 –19.09% 12.18% 0.09% 1.64% –19.18% 10.54% 2002– 2003 1 1.11% 3.38% –0.32% 3.17% 1.43% 0.21% 3 0.17% 2.33% 0.22% 2.79% –0.05% –0.46% 6 0.13% 2.40% –0.23% 2.50% 0.36% –0.10% 12 0.21% 2.34% 0.03% 1.83% 0.18% 0.51% 15 0.14% 1.72% 0.16% 2.55% –0.02% –0.83% 18 0.59% 2.35% 0.09% 1.85% 0.50% 0.50% 24 0.29% 2.29% 0.00% 2.76% 0.29% –0.47% 2004– 2005 1 0.47% 1.73% 0.13% 1.33% 0.34% 0.40% 3 0.51% 2.17% 0.29% 1.95% 0.22% 0.22% 6 0.00% 1.57% 0.07% 2.22% –0.07% –0.65% 12 0.06% 2.27% 0.27% 2.43% –0.21% –0.16% 15 0.04% 2.18% 0.60% 2.99% –0.56% –0.81% 18 –0.21% 1.65% 0.14% 2.55% –0.35% –0.90% 24 0.00% 1.73% 0.09% 3.08% –0.09% –1.35% 2006– 2007 1 –0.03% 5.93% –0.43% 1.61% 0.40% 4.32% 3 –1.89% 6.58% –0.31% 3.18% –1.58% 3.40% 6 –6.55% 7.40% –0.24% 2.32% –6.31% 5.08% 12 –4.68% 8.63% 0.18% 2.09% –4.86% 6.54% 15 –4.21% 8.06% –0.13% 3.39% –4.08% 4.67% 18 –3.22% 7.58% 0.02% 1.88% –3.24% 5.70% 24 –4.56% 7.65% –0.07% 2.21% –4.49% 5.44% 117 business, management and education, 2012, 10(1): 110–127 interval (in months) winner loser winner-loser returns standard deviation returns standard deviation returns standard deviation 2008– 2009 1 –0.09% 2.60% –0.92% 2.82% 0.83% –0.22% 3 –0.31% 3.21% 0.07% 2.59% –0.38% 0.62% 6 –0.16% 2.99% –0.22% 2.56% 0.06% 0.43% 12 –0.49% 4.41% –0.84% 4.94% 0.35% –0.53% 15 –0.13% 3.73% 0.13% 4.60% –0.26% –0.87% 18 0.28% 3.55% 0.13% 3.87% 0.15% –0.32% 24 0.21% 3.81% 0.35% 3.67% –0.14% 0.14% several results arise from our experimental analysis. considering the obtained empirical evidences, we can make a conclusion that the momentum strategy of buying past winners and selling past losers in nasdaq omx vilnius would result in significant positive return for the investor only in the first month considered in this study. the strategy for buying losers and selling winners would result in positive significant returns at the interval of 3 to 24 months. the momentum strategy could be used by the investor in the first month and within the period from 18 to 24 months. moreover, the contrarian strategy takes place in the period from 3 to 15 months. the results of analysis have suggested that the momentum strategy of buying past winners and selling past losers in nasdaq omx vilnius in the specified period would result in significant positive return for the investor only for the first three months considered in this study. the strategy for buying losers and selling winners would result in positive significant returns at the interval of 6 to 24 months. the investor will get profit from buying winners and selling loosing shares only in the first months. however, in the next months, while losers are stable in their returns, winners represent a spiral drop. this completely contradicts the scientific findings of this particular strategy. the momentum strategy of buying past winners and selling past losers would result in significant positive return for the investor for the first months at the intervals of 6 to 12 and for 18 months. moreover, the strategy for buying losers and selling winners would result in positive significant returns for the remaining third, 15 and 24 months. therefore, it could be concluded that those strategies do not take place in the lithuanian stock market as stated in the strategy statement, because at least in the period from the beginning of 2000 to the end of 2009, no precious tendency for this anomaly was noticed. in the period from the beginning of 2000 to the end of 2001 and for the period 2006–2007, losers started earning higher returns from the third month. later, it was hard to envisage any consistency, as both losers and winners slogged on for the returns. however, the period of 2004–2005 could definitely show some momentum and contrarian strategy in the lithuanian stock market. still, we can conclude that though this strategy could take place in the market in the short term period, it disappears in the long term. end of table 2 118 j. stankevičienė, n. gembickaja. market behaviour: case studies of nasdaq omx baltic fig. 1. graphical representation of returns received from nasdaq omx vilnius using momentum and contrarian strategies (2000–end of 2009). (source: created by authors using data obtained from nasdaq omx vilnius) 3.2. evidence of the momentum and contrarian strategy in nasdaq omx tallinn the momentum strategy of buying past winners and selling past losers in nasdaq omx tallinn would result in significant positive return for the investor for the first and 24 months at the intervals of 6 to 12 months considered in this study (table 3). the strategy of buying losers and selling winners would result in positive significant returns in the third month and in the period of 15 to 18 months. –30.00% –20.00% –10.00% 0.00% 10.00% 20.00% 1 3 6 12 15 18 24r et ur ns intervals (in months) 2000 – 2001 end – 0.50% 0.00% 0.50% 1.00% 1.50% 1 3 6 12 15 18 24 2002 –2003 end – 0.40% – 0.20% 0.00% 0.20% 0.40% 0.60% 0.80% 1 3 6 12 15 18 24 2004 –2005 end – 8.00% – 6.00% – 4.00% – 2.00% 0.00% 2.00% 1 3 6 12 15 18 24 2006–2007 end – 1.00% – 0.50% 0.00% 0.50% 1 3 6 12 15 18 24 2008–2009 end 119 business, management and education, 2012, 10(1): 110–127 table 3. returns of the winner-loser and winner minus loser portfolios received from nasdaq omx tallinn (2000–end of 2009). (source: made by authors using data obtained from nasdaq omx tallinn) interval (in months) winner loser winner-loser returns standard deviation returns standard deviation returns standard deviation 2000– 2001 1 2.33% 8.59% –0.15% 0.85% 2.48% 7.74% 3 0.41% 5.72% 0.84% 2.71% –0.43% 3.01% 6 –0.26% 4.97% –0.40% 4.90% 0.14% 0.07% 12 0.42% 6.36% 0.17% 4.97% 0.25% 1.39% 15 –0.07% 3.72% 0.15% 4.53% –0.22% –0.81% 18 0.09% 2.58% 1.44% 4.90% –1.35% –2.32% 24 0.16% 4.58% 0.11% 3.29% 0.05% 1.29% 2002– 2003 1 0.63% 2.03% –8.70% 16.11% 9.33% –14.08% 3 –2.24% 15.20% –4.62% 22.86% 2.38% –7.66% 6 –0.45% 4.34% –10.15% 17.86% 9.70% –13.52% 12 0.05% 1.24% –12.14% 17.92% 12.19% –16.68% 15 0.04% 0.97% –9.80% 17.27% 9.84% –16.30% 18 0.06% 1.80% –16.12% 19.32% 16.18% –17.52% 24 –0.11% 4.44% –16.81% 18.49% 16.70% –14.05% 2004– 2005 1 0.69% 2.71% –0.30% 5.15% 0.99% –2.44% 3 0.23% 2.12% 0.12% 3.21% 0.11% –1.09% 6 –0.08% 2.20% 0.06% 3.19% –0.14% –0.99% 12 0.08% 1.19% 0.02% 4.21% 0.06% –3.02% 15 0.76% 2.86% 0.54% 3.54% 0.22% –0.68% 18 –0.11% 2.26% 0.29% 4.09% –0.40% –1.83% 24 0.16% 1.77% 0.39% 3.26% –0.23% –1.49% 2006– 2007 1 0.06% 1.14% –0.07% 3.60% 0.13% –2.46% 3 0.04% 1.37% –0.14% 2.35% 0.18% –0.98% 6 –0.23% 1.39% –0.05% 2.54% –0.18% –1.15% 12 0.25% 1.34% 0.38% 3.23% –0.13% –1.89% 15 0.09% 2.13% 0.16% 1.62% –0.07% 0.51% 18 –0.27% 3.31% 0.54% 3.41% –0.81% –0.10% 24 –0.29% 1.57% –0.43% 4.50% 0.14% –2.93% 120 j. stankevičienė, n. gembickaja. market behaviour: case studies of nasdaq omx baltic interval (in months) winner loser winner-loser returns standard deviation returns standard deviation returns standard deviation 2008– 2009 1 –0.98% 2.72% –0.52% 2.17% –0.46% 0.55% 3 –0.27% 1.97% 0.07% 2.78% –0.34% –0.81% 6 –0.45% 1.90% –0.17% 2.76% –0.28% –0.86% 12 –0.73% 4.69% –0.54% 4.44% –0.19% 0.25% 15 –0.56% 5.62% 0.05% 4.80% –0.61% 0.82% 18 0.20% 4.38% 0.04% 3.38% 0.16% 1.00% 24 0.42% 4.60% 0.32% 3.41% 0.10% 1.19% based on the obtained results and aforementioned conclusions, the strategy could not be used within the period of two years. fig. 2 shows that winners all along the analyzed intervals are operating better than losers. the momentum strategy of buying past winners and selling past losers in nasdaq omx tallinn in the specified period would result in significant positive return for the investor over the period of 1 to 3 months and for 12 to 15 months considered in this study. the strategy of buying losers and selling winners would result in positive significant returns at the interval of 6 months and at the interval of 18 to 24 months. for the interval analyzed, the conclusion that the investor will get profit from buying winners and selling loosing shares only in the first three months and at the end of the two-year period could be made. however, in the remaining months, losers were stable in their returns while winners represented a spiral drop. this completely confirms the scientific findings of this particular strategy. in addition to the previous results, analysis showed that the momentum strategy of buying past winners and selling past losers would result in significant positive return for the investor at the interval of 1 to 15 months. the strategy of buying losers and selling winners would result in positive significant returns for the remaining period of 18 to 24 months. as a result, momentum and contrarian strategies do not take place in the estonian stock market as stated in the strategy statement because at least in the period from the beginning of 2000 to the end of 2009, no precious tendency for this anomaly was noticed. in the period from the beginning of 2002 to the end of 2003, winners were operating better than losers at the interval of two years. however, for the period 2008-2009, losers started earning higher returns than winners at the interval of 15 months, which totally contradicts specific strategy peculiarities. in the following periods, it was hard to envisage any consistency as both losers and winners slogged on for returns, as can be seen from the periods 2000–2001 and 2004–2005. however, the period of 2006–2007 could definitely show some momentum and contrarian strategy in the estonian stock market. still, we can conclude that though this strategy could take place in the market in the short term period, it disappears in the long term end of table 3 121 business, management and education, 2012, 10(1): 110–127 fig. 2. graphical representation of returns received from nasdaq omx tallinn using momentum and contrarian strategies (2000–end of 2009). (source: created by authors using data obtained from nasdaq omx tallinn) 3.3. evidence of the momentum and contrarian strategy in nasdaq omx riga in respect of a more in-depth analysis of data obtained from nasdaq omx riga, it should be concluded that the momentum strategy of buying past winners and selling past losers in nasdaq omx riga would result in significant higher return for the investor at the interval of 24 months considered in this study (table 4). the strategy of buying losers and selling winners would result in higher significant returns almost during the whole analyzed period, to be more precise, during first 18 months. –1.00% 0.00% 1.00% 2.00% 3.00% 1 3 6 12 15 18 24 r et ur ns interval (in months) 2000 –2001 end winner loser – 0.50% 0.00% 0.50% 1.00% 1.50% 1 3 6 12 15 18 24 2002 –2003 end – 0.40% – 0.20% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1 3 6 12 15 18 24 2004 – 2005 end – 0.60% – 0.40% – 0.20% 0.00% 0.20% 0.40% 0.60% 1 3 6 12 15 18 24 2006 – 2007 end –1.50% –1.00% –0.50% 0.00% 0.50% 1 3 6 12 15 18 24 2008 –2009 end 122 j. stankevičienė, n. gembickaja. market behaviour: case studies of nasdaq omx baltic table 4. returns of the winner-loser and winner minus loser portfolios received from nasdaq omx riga (2000–end of 2001). (source: made by the authors using data obtained from nasdaq omx riga) interval (in months) winner loser winner-loser returns standard deviation returns standard deviation returns standard deviation 2000– 2001 1 2.33% 8.59% –0.15% 0.85% 2.48% 7.74% 3 0.41% 5.72% 0.84% 2.71% –0.43% 3.01% 6 –0.26% 4.97% –0.40% 4.90% 0.14% 0.07% 12 0.42% 6.36% 0.17% 4.97% 0.25% 1.39% 15 –0.07% 3.72% 0.15% 4.53% –0.22% –0.81% 18 0.09% 2.58% 1.44% 4.90% –1.35% –2.32% 24 0.16% 4.58% 0.11% 3.29% 0.05% 1.29% 2002– 2003 1 0.63% 2.03% –8.70% 16.11% 9.33% –14.08% 3 –2.24% 15.20% –4.62% 22.86% 2.38% –7.66% 6 –0.45% 4.34% –10.15% 17.86% 9.70% –13.52% 12 0.05% 1.24% –12.14% 17.92% 12.19% –16.68% 15 0.04% 0.97% –9.80% 17.27% 9.84% –16.30% 18 0.06% 1.80% –16.12% 19.32% 16.18% –17.52% 24 –0.11% 4.44% –16.81% 18.49% 16.70% –14.05% 2004– 2005 1 0.69% 2.71% –0.30% 5.15% 0.99% –2.44% 3 0.23% 2.12% 0.12% 3.21% 0.11% –1.09% 6 –0.08% 2.20% 0.06% 3.19% –0.14% –0.99% 12 0.08% 1.19% 0.02% 4.21% 0.06% –3.02% 15 0.76% 2.86% 0.54% 3.54% 0.22% –0.68% 18 –0.11% 2.26% 0.29% 4.09% –0.40% –1.83% 24 0.16% 1.77% 0.39% 3.26% –0.23% –1.49% 2006– 2007 1 0.06% 1.14% –0.07% 3.60% 0.13% –2.46% 3 0.04% 1.37% –0.14% 2.35% 0.18% –0.98% 6 –0.23% 1.39% –0.05% 2.54% –0.18% –1.15% 12 0.25% 1.34% 0.38% 3.23% –0.13% –1.89% 15 0.09% 2.13% 0.16% 1.62% –0.07% 0.51% 18 –0.27% 3.31% 0.54% 3.41% –0.81% –0.10% 24 –0.29% 1.57% –0.43% 4.50% 0.14% –2.93% 123 business, management and education, 2012, 10(1): 110–127 interval (in months) winner loser winner-loser returns standard deviation returns standard deviation returns standard deviation 2008– 2009 1 –0.98% 2.72% –0.52% 2.17% –0.46% 0.55% 3 –0.27% 1.97% 0.07% 2.78% –0.34% –0.81% 6 –0.45% 1.90% –0.17% 2.76% –0.28% –0.86% 12 –0.73% 4.69% –0.54% 4.44% –0.19% 0.25% 15 –0.56% 5.62% 0.05% 4.80% –0.61% 0.82% 18 0.20% 4.38% 0.04% 3.38% 0.16% 1.00% 24 0.42% 4.60% 0.32% 3.41% 0.10% 1.19% analysis shows that the contrarian strategy should be used within this two-year period so that not to lose a higher amount of the invested money. the table shows that all along the analyzed intervals losers are operating better than winners. the prior results indicate that the momentum strategy of buying past winners and selling past losers in nasdaq omx riga within the specified period would result in significant higher return for the investor in the period of 1 to 6 months at the interval of 15 months considered in this study. the strategy of buying losers and selling winners would result in significantly higher returns at the interval of 12 months and at the interval of 18 to 24 months. for the interval analyzed, the investor will get profit from buying winners and selling loosing shares only in the first three months. however, in the remaining months, losers were stable in their returns while winners represented a spiral drop. this completely confirms the scientific findings of this particular strategy. the momentum strategy of buying past winners and selling past losers would result in significant positive return for the investor at the first and 18–24 month interval. the strategy of buying losers and selling winners would also result in positive significant returns for the remaining interval of 3 to 15 months. in general, the findings have revealed that those strategies do not take place in the latvian stock market as stated in the strategy statement, because at least in the period from the beginning of 2000 to the end of 2009, no precious tendency for this anomaly was noticed. in the first four years, losers were operating better than winners all the time; therefore, no evidence for momentum features to emerge was found. thus, this totally contradicts specific strategy peculiarities. later, in the next period (2004–end of 2005), it was hard to investigate any consistency, as both losers and winners slogged on for the returns. however, there are two periods (2006–2007 and 2008–2009) that could definitely or likewise show some momentum and contrarian strategy in the latvian stock market. still, we can conclude that though this strategy could take place in the market in the short term period, it disappears in the long term. end of table 4 124 j. stankevičienė, n. gembickaja. market behaviour: case studies of nasdaq omx baltic fig. 3. graphical representation of returns received from nasdaq omx riga using momentum and contrarian strategies (2000–2009 end). (source: created by authors using data obtained from nasdaq omx riga) 4. conclusions for a long time, when making financial decisions, market participants have relied on the notion of efficient markets and the behaviour of a rational investor. however, academics in both finance and economics gradually started discovering anomalies and types of behaviour that could not be explained by the theories available at the time. while these theories could explain certain “idealized” events, the real world proved to be a very messy place where market participants often behaved very unpredictably. as a result, the notion that such irrational behaviour exists has become controversial. there is extensive literature on psychology documenting that people make systematic errors in a way they think: they are overconfident, put too much weight on recent experience, etc. their preferences may also distort reality. – 1.00% 0.00% 1.00% 2.00% 3.00% 1 3 6 12 15 18 24 r et ur ns interval (in months) 2000 –2001 end winner loser – 20.00% – 15.00% – 10.00% – 5.00% 0.00% 5.00% 1 3 6 12 15 18 24 2002 –2003 end – 0.40% – 0.20% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1 3 6 12 15 18 24 2004–2005 end – 0.60% – 0.40% – 0.20% 0.00% 0.20% 0.40% 0.60% 1 3 6 12 15 18 24 2006– 2007 end –1.50% –1.00% –0.50% 0.00% 0.50% 1 3 6 12 15 18 24 2008–2009 end 125 business, management and education, 2012, 10(1): 110–127 the prospect theory and heuristics may further help with explaining other psychological factors affecting the process of investment decision-making and how such processes can lead to speculative bubbles. the prospect theory offers an alternative to the theory of the expected utility maximization according to which investors are risk averse at all levels of wealth. heuristics, a process by which people find things out for themselves usually by trial and error, may help with an explanation why the market sometimes acts in an irrational manner, which is opposite to the model of perfectly informed markets. the prospect theory and heuristics help with understanding some of the possible factors underlying the phenomenon of speculative bubbles, even though they cannot alone give exhaustive answers to all the matters surrounding the anomaly of this market (johnsson et al. 2002). however, a more common understanding of these factors and the way psychological factors may affect our decision-making should help with avoiding the occurrence of such anomalies and assist in better understanding of the periodic unpredictability of the markets. momentum strategies will be profitable if stock returns display a positive serial correlation, whereas contrarian strategies will be profitable in case of a negative serial correlation of stock returns. according to the obtained results, it could be concluded that those strategies do not take place in nasdaq omx baltic as stated in the strategy statement, because at least in the period from the beginning of 2000 to the end of 2009, no precious tendency for this anomaly was noticed. the studies on lithuanian, estonian and latvian markets show that though these strategies could take place in the short term period, they disappear in the long term. an important point is that at some intervals it was hard to investigate any consistency, as both losers and winners slogged on for the returns. many researchers have uncovered empirical regularities in the returns of the stock market. the strategy might benefit from the theory. then again, the tests on the strategy do not always confirm the theory. if these regularities persist, investors can expect to achieve superior performance. unfortunately, nature can be perverse. once an apparent anomaly is published, often it disappears or goes into reverse. empirical studies are required for testing the model regarding a large representative sample. we limit our conclusions to those firms and exchanges studied and the time period covered. future research could extend this work thus investigating other types of anomalies. references abarbanell, j.; 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accepted 28 january 2019 abstract. purpose – the purpose of the article is to describe the transformations in the perceptions of the consequences of the use of psychoactive substances between 9-12’th grades pupils in the context of the implementation of the psychoactive substances abuse prevention program “my way”. research methodology – the authors performed a quasi-experiment and according to the methodological requirements related to the use of such scientific method in the educology studies, used an unequal control group and the primary/initial (pre-test) as well as final (post-test) measurements to achieve the aim of the research/article. findings – the data of the quasi-experiment research showed that as the whole after intervention the pupil’s perceptions about the use of psychoactive substances in the experimental group has changed; the pupils who were assigned to the control group assessed the effects of the use of psychoactive substances better than those who were assigned to the control group. research limitations – during the implementation of the program and the experiment, the activities related to the quasi-experiment were held only by social pedagogues in certain selected schools and classes (considering various factors such as the behaviour of children or their attributability to the families at social risk). accordingly, in the next similar studies, children can be sampled evenly, without differentiating them based on their behavioural problems. practical implications – the results of the research could be used in practice in the following ways: (i) by motivating the schools of general education in the republic of lithuania to choose prevention programs as the purposeful and meaningful instrument to develop healthy life skills; (ii) to develop and expand the range of new prevention programs based on the experience of the program “my way” which is presented and evaluated in this article. originality/value – there are no similar previous educological and other educational science studies (in lithuania) how the pupils’ attitudes change during the pre-planned and systematically implemented preventive activities in general education schools; the article presents and outlines the experience and practice of the first such lithuanian program for the prevention of psychoactive substance abuse (“my way”). keywords: psychoactive substances, effectiveness, prevention, pupils, general education. jel classification: i21, i28, i29. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bme.2019.6985 https://orcid.org/0000-0002-1676-7236 https://orcid.org/0000-0002-1676-72361 https://orcid.org/0000-0002-5372-9255 https://orcid.org/0000-0002-5372-92552 22 s. valantiejienė, r. saveljeva. evaluation of effectiveness of psychoactive substance abuse prevention... introduction the prevention of psychoactive substances abuse is directed towards certain target groups to which it is designed and, accordingly, the prevention activities are traditionally divided into general, selective and targeted prevention (gordon, 1987). measures of general prevention are usually directed towards all pupils who are attending schools, and they are aimed at avoiding the occurrence of a certain social problem. in the context of psychoactive substances abuse prevention such general prevention measures are commonly perceived as the providing of knowledge about the harm and effects of the use of psychoactive substances, the formation of negative attitudes toward them and the development of certain life skills (bulotaitė, 2004; fong, hammond, & hitchman, 2009). meanwhile, selective prevention is applied to vulnerable people who, because of poor social relations, may be more likely to start using or may become dependent on psychoactive substances (bankauskienė, 2013). finally, targeted prevention usually applies to those who already have shown manifestations of problematic behaviour but do not yet have signs of addiction (ennsc, 2009; brotherhood & sumnall, 2011). the united nations convention on the rights of the child, the european union’s (eu’s) documents and national law of eu member states recognize that the school is at the forefront of the general prevention directed towards all children. therefore, this is the reason why preventive activities, as well as special prevention programs, are being developed for use in the school environment, organized and implemented in schools. various studies which were carried out among the population in the republic of lithuania, including school children, indicate that the use of psychoactive substances among school-age children is slightly decreasing (the prevalence of psychoactive substances in lithuania in years, 2004, 2008 and 2012; espad report, 2015). the report which was issued by the department of drugs, tobacco and alcohol control under the government of the republic of lithuania (2013) states that the consumption of tobacco in the age group of 15–17 years-olds during the period of 2004–2012 years was decreasing, for example, the percentage of children which used tobacco at least once the lifetime has decreased from 60.7%. (in 2004) to 37.7%. (in 2012); the percentage of children which used tobacco at least once during the last 12 months – declined from 21.5% (in 2004) to 11.9% (in 2012) and percentage of children which used tobacco at least once during the last 30 days fell from 17.3% (in 2004) to 11.9% (in 2012). the consumption of alcoholic beverages in this age group is also decreasing, for example, the percentage of children which consumed alcohol at least once during the last 12 months has decreased from 65.8% (in 2004) to 38.6% (in 2012), during the last 30 days  – decreased from 43.6%. (in 2004) to 27.1% (in 2012). consumption of drugs is also slightly decreasing, for example, the percentage of children which used drugs at least once during their lifetime decreased from 9.5% (in 2004) to 5.9 percent (in 2012), during the last 12 months – fell from 5.7% (in 2004) to 5.3% (in 2012), however, the percentage of children who used drugs during the period of the last 30 days has insignificantly increased – from 1.5% (2004) to 2.1% (in 2012). according to the data provided in the european schools project on alcohol and other drugs study, which was carried out in 2015 (espad report, 2015), in the republic of lithuania, 35 per cent of school children of 9’th grade were non-smokers (i.e., they never tried business, management and education, 2019, 17: 21–35 23 to smoke in their whole life). however, about 45 per cent of schoolchildren aged 13 and younger have tried to smoke cigarettes for the first time in their life. in this age cohort, 9 per cent of boys and 5 per cent of girls started to smoke regularly. besides, only 13% per cent of respondents, which participated in the study, have never used alcohol in their life. 34% of the respondents also indicated that they used alcohol at least once during 30 days before the survey. thirty per cent of respondents also stated that they have been under the influence of alcohol for the first time after they reached the age of 14 or even higher age groups. 19.2 per cent of the pupils surveyed have indicated that they tried some illicit drugs at least 1–2 times in their lives. the data from this study also suggests that the pupils have tried to use a majority of both legal and illegal drugs for the first time in their life at the age of 14–15 years. as it follows from the circumstances discussed above, indicators which are describing the use of psychoactive substances and its transformations show that the overall direction of these processes is positive and indicates the decline in the numbers of substance abuse among children. however, it must be emphasized that the perception of the risk of use of psychoactive substances has changed negatively. for example, a comparison of the espad 2007, 2011, and 2015 survey data shows a negative trend – a decrease in the assessment of the dangers of risks associated with drug abuse and smoking. it should be emphasized that the assessment of risks associated with the use of cannabis has decreased, for example, the fact that “people are at a high risk” when they sometimes smoke cannabis was stated by 50.5% respondents in 2007, while in 2011 such number was 52% and in 2015 such number was only 37.4% of 9’th grade students. the assessment of risks associated with irregular smoking has not changed much while the risk assessment of intensive smoking (smoking one or two packages per day and the related risks of self-harm) has changed a little (the percentage of pupils which stated that the risk of such smoking is very significant was 66% in 2011 and 55% in 2015). the facts mentioned above confirm the necessity of further prevention of the use of psychoactive substances in general education schools. the need to evaluate the effectiveness of the program “my way” can be justified by the following circumstances. firstly, psychoactive substance abuse prevention program “my way” is the first such specific lithuanian program which is being implemented from 2014 (bankauskienė, dragūnevičius, gedminienė, sirtautaitė, & valantiejienė, 2015). secondly, formal evaluation of other already mentioned studies (espad report, 2015; department of drugs, tobacco and alcohol control, 2013) leads to the primary conclusion that the assessment of risks related to the use of psychoactive substances is in lithuania decreasing. therefore, in the context of this research, such an evaluation will focus on the impact of the prevention program on the perceptions (understandings) of the psychoactive substance use consequences among the pupils. respectively, the object of the research presented in this article was chosen and can be formulated as the perception of the consequences of the use of psychoactive substances among 9-12’th grade pupils. the chosen object of the research also determines the goal of this article – to describe the transformations in the perceptions of the consequences of the use of psychoactive substances between 9-12’th grades pupils in the context of the implementation of the psychoactive substances abuse prevention program “my way”. to achieve the above-mentioned goal, the following research objectives were formulated”: 1. to evaluate the effectiveness of the program “my way” on the basis of perceptions of the consequences of the use of psychoactive 24 s. valantiejienė, r. saveljeva. evaluation of effectiveness of psychoactive substance abuse prevention... substances between pupils studying in general education schools in the republic of lithuania; 2. to perform the pedagogical quasi-experiment to describe the transformations of perceptions about the use of psychoactive substances in the control (cg) and experimental (eg) group of pupils, which participated in the prevention program “my way”, and to compare the differences of between these two groups. the problematic research question was chosen as follows: what is the impact of the prevention programme to the perceptions of psychoactive substance use between pupils of 9th and 12th grades? quantitative research methods were selected to analyse the problematic question of the study. it was also decided to perform a quasi-experiment using an unequal control group and the primary/initial (pre-test) as well as final (post-test) measurements to achieve the goal of the research. 1. theoretical framework according to liepinytė-medeikė (2008), implementation of the prevention of the use of psychoactive substances between the pupils of 13–15 years-old must include such elements as providing enough information which could enable them to choose the right decisions. based on these theoretical assumptions, the authors would like to emphasize that adolescents must understand why smoking is prohibited or restricted, they also should receive help to choose meaningful forms of leisure, develop a critical attitude to harmful behaviours. besides, adolescents of this age must understand how tobacco affects the body, what are the harms of long-term smoking, what the physical and mental dependence from tobacco means, how its consumption affects certain human behaviour. therefore, it is possible to distinguish the criteria of an effective prevention program by taking into account such factors as its proper scientific theoretical justification, the validity of its goals and objectives, the purposefulness of the program content, the directionality, consistency and impact assessment of the program results (see nation et al., 2003; haddix, teutsch, & corso, 2003; springer et al., 2004; small, cooney, & o’connor, 2009; brotherhood & sumnall, 2011). consequently, the first lithuanian program for the prevention of psychoactive substance abuse (“my way”) was prepared to ensure purposeful and consistent work of preventing the use of psychoactive substances (bankauskienė et  al., 2015). it was started to be implemented in 2014 at panevėžys (one of the largest towns in lithuania) city and district schools. the program for the prevention of the abuse of the psychoactive substances “my way” has been based on research studies that indicate that prevention programs for psychoactive substances must strengthen “protective factors” and weaken “risk factors” (sloboda, 2012). scientific literature indicates that such programs which are implemented in schools also must develop common life skills, including those that help to resist suggestions related to the use of psychoactive substances, also helps to formulate negative attitudes towards the use of such substances, increases self-confidence, develop social competencies to communicate with peers (bulotaitė, 2004; sharma, 2007). according to the above-mentioned studies, the program “my way” considers theoretical suggestions that prevention programs for children and adolescents must be based on interactive methods that promote their development, combine information about psychoactive substances with methods of forming certain behaviour and system of thinking (so-called “real values system”) and should use active educational business, management and education, 2019, 17: 21–35 25 methods (flay, 2000; sloboda, 2012). the use of active learning methods in the educational process enables to develop the cognitive abilities of children, as well as to ensure the change of attitudes, values, and expectations about learning. consequently, the use of active learning methods helps to form the understanding that learning is a process and not simply memorizing of facts or knowledge and that the knowledge and attitudes which are acquired gradually, in a systematic way remain in one’s memory for a longer period. besides, such learning methods improve the motivation of pupils for independent, self-regulating learning at the same time they also increase confidence in oneself and the negative provisions about the use of psychoactive substances as well as perceptions of its consequences (wilke, 2003). also, according to uhl and ives (2010), proper selection of appropriate psychoactive substance abuse prevention methods enables the children and young people to postpone the use of psychoactive substances for the elder age. it also helps them to assess the risks associated with the use of psychoactive substances, perceive the consequences of using psychoactive substances. besides, it gives the opportunity to learn to decide and be responsible for their choices as well as to know where to get help when they encounter problems and to have skills how to help others. 2. methodology 2.1. research design as it was mentioned in the introduction, the authors performed a quasi-experiment and according to the methodological requirements related to the use of such scientific method in the educology studies (green, camilli, & elmore, 2006; wiersma & jurs, 2009), used an unequal control group and the primary/initial (pre-test) as well as final (post-test) measurements to achieve the goal of the research. the essential features of this type of quasi-experiment are as follows: the study takes place using two non-random groups (experimental and control group); manipulation with the independent variable takes place only in the experimental group; measurements are performed in the experimental and control groups before and after the manipulation of the independent variable. the group is evaluated as inequivalent if the attribution of the investigated subjects to the group is not accidental (rupšienė & rutkienė, 2016; rupšienė, 2015); since the assignment to the control group of this quasi-experiment was accidental, this group can be evaluated as inequivalent. the program of quasi-experiment was implemented in the school years from 2014 to 2018 at eight general education schools in the panevėžys region (situated in the republic of lithuania). the control group consisted of 8 pupils selected from 9-12 grades of general education schools in panevėžys region. initial measurement took place in october of 2014 while the final measurement took place in may of 2015 (in control and experimental groups). additional data was collected in may and october of 2017 in experimental groups. 2.2. research instrument the post-experimental measurement instrument was developed and based on the results of the theoretical analysis of the effects of the psychoactive substances use on the behaviour 26 s. valantiejienė, r. saveljeva. evaluation of effectiveness of psychoactive substance abuse prevention... of pupils studying in 9’th-12’th grades (bankauskienė et al., 2015) and the “model for drug use prevention in european secondary schools” created by dobson and wright (1995). a closed-ended questionnaire consisting of three parts: instruction, a section of demographic variables, and the main section of diagnostic (constructive) variables – was also prepared. the likert-type “perception of psychoactive substance use” scale was designed to determine the respondents’ opinion about the effects and consequences of the use of psychoactive substances on their peers. the scale consisted of 3 sub-scales – the sub-scale of perceptions about the consequences of smoking, sub-scale of perceptions about the consequences of alcohol use and sub-scale of perceptions about the consequences of drug use. while answering the questionnaire respondents had to use a 4-point scale to assess the consequences of smoking, alcohol and drug use for their peers (1 – not possible, 2 – unlikely, 3 – probable, 4 – very likely). after the assessment of the reliability of the scale it was found that cronbach’s alpha coefficient was 0.943 (slightly lower in individual sub-scales but sufficiently high (rupšienė & rutkienė, 2016; rupšienė, 2015): 0.869 in the sub-scale of perceptions about consequences of smoking, 0.890 in the sub-scale of perceptions about consequences of alcohol and 0.928 in the sub-scale of perceptions about consequences of drug use. it was calculated that premovement of one variable from any sub-scales would increase the cronbach’s alpha coefficients slightly. also, there was not a single variable which resolution of r/iit was less than 0.2. considering what was mentioned above, it can be argued that the scale and all sub-scales are characterized by internal coherence and are suitable measurement instruments. 2.3. research sample certain methodological recommendations were considered as a basis for the creation of a research sample. sources or the methodological literature set a strict requirement for the sample of a real experiment: experimental and control groups must be formed randomly (bitinas, 2006; cohen, manion, & morrison, 2008; rupšienė & rutkienė, 2016). the main difference between the quasi-experiment and the actual experiment is that the study sample and its distribution into groups are not random, i.e., the distribution to the groups is not coincidental but is carried out in other ways (cohen et al., 2008). in education practice, preformed groups (creswell, 2012), such as classes, teams, schools, are commonly used for such purpose and this fact was considered by forming eg and cg groups which participated in the quasi-experiment. the pupils of 9’th-12’th grades, attending general education schools in panevėžys region, have been selected as the participants of the quasi-experiment. the selection of participants was based on an analysis of the education management information system data about the implementation of preventive programs. during the selection process, the authors also considered the fact, that the analysis of this data leads to the conclusion that in this region, compared with other regions of lithuania, very few prevention programs are being implemented. in this context, only those schools that have never implemented any prevention program have been selected for a quasi-experiment. besides, the choice of schools for the quasi-experiment was also based on the condition that these schools also must use a certain provision in the learning agreements with pupils and/or their legal reprebusiness, management and education, 2019, 17: 21–35 27 sentatives according to which it is possible to implement prevention programs and complete research related to the implementation of these programs in the school. the selection of the sample was subject to several rules. firstly, the choice of experimental and control groups considered the requirement (kardelis, 2007) that the minimum number of cases in the control and experimental group should not be less than 30. secondly, after having selected the control group in a convenient way, the conditions for all pupils in this group to participate in the initial and final measurement were created. finally, in total, 269 pupils participated in the experimental and control groups: eg included 172 students and cg – 97 pupils. one of the requirements, which were applied to this research, was to ensure that pupil participation in the research and the information provided by them should not be used against them or passed on to other, third parties. to implement the principle of voluntary participation, before conducting the research, firstly, the agreements of the school leaders to interview 9-12 class pupils and their parents’ (guardians) written permission to participate in the research were acquired. besides, in order to implement the anonymity principle, the questionnaires indicated that the participant does not need to write his or her first name or surname. the same circumstance was also indicated during the submission of questionnaires. the questionnaires were also filled out by the investigators themselves and collected back not by the researcher himself; the questionnaires were not forwarded to the representatives of the school administrations. 2.4. the program of the quasi-experiment the program of quasi-experiment was based on the results of the theoretical analysis of the effects of the use of psychoactive substances on the behaviour of pupils in general education schools. participants of the experimental group were given the opportunity to acquire knowledge about the consequences of the use of psychoactive substances in the learning process. one of the authors of the article (sandra valantiejienė) introduced and trained the social pedagogues of the schools which participated in the experiment how to implement the psychoactive substance use prevention program “my way” and to prevent the use of psychoactive substances. during the process of implementation of the psychoactive substance use prevention program “my way” 12 sessions for 9’th, 10’th, 11’th and 12’th grade pupils were organized. ten sessions were completed during the special classroom hours (as separate activities), and two sessions were integrated into the lessons of ethics and biology. the program was implemented by the general ethical principles and requirements of the educational process. sessions for pupils were organized by the social pedagogues who were working in the participating schools. the program was implemented in 8 schools which participated in the experiment and only in the 9’th-12’th grades. the experimental group consisted of 172 pupils, while the control group consisted of 97 pupils. 2.5. data analysis methods firstly, a set of several derived variables was formed: 1) the derived variable of the scale of perceptions about the use of psychoactive substances; 2) the derived variable of the first sub-scale belonging to the above-mentioned scale (the perceptions about consequences of smoking); 3) the derived variable of the second sub-scale belonging to the above-mentioned 28 s. valantiejienė, r. saveljeva. evaluation of effectiveness of psychoactive substance abuse prevention... scale (the perceptions about the consequences of alcohol consumption); 4) the derived variable of the third sub-scale belonging to the above-mentioned scale (the perceptions about the consequences of drug use). since the objective of the research was to compare the differences between eg and cg, the statistical assumptions were checked to determine the methodology which was used for calculating the differences. the kolmogorov-smirnov criteria have been used to verify the normality of distributions. since all the derived variables were distributed according to the normal law (p > α  = 0.05), the independent group t criterion was used to determine the intergroup differences (rupšienė & rutkienė, 2016). 2.6. research limitations the implementation of the quasi-experimental program was related to certain conditions and limitations of the pedagogical experiment, among which, firstly, it is necessary to mention the limitations related to the management of the experiment’s system. the education of pupils in general education schools depends on the activities of many teachers, which are not always mutually compatible. during the implementation of the program and the experiment, the activities of all the teachers were not combined and not all of them were included in the scope of the study. the sessions related to the quasi-experiment were held only by social pedagogues in certain selected schools. also, the consequences of capturing the accuracy of an experiment result should also be mentioned. firstly, it is not possible to isolate the result of the experiment in question from the other experiments and to determine if the desired result is the result of the quasi-experimental program which was applied. secondly, this result may have been influenced by the factors which are uncontrollable to the experimenter (e.g., by other supplementary general education programs which were implemented in general education schools; experience outside the school; family-related factors). attention must be drawn to the fact that in some cases the eg and cg group differed in the primary/initial (pre-test) measurement, as social pedagogues, who organized sessions for children, selected such classes for eg which had more children with behavioural problems, and which grew up in social risk families. the results of the research must be interpreted with caution because the respondents have evaluated the consequences of the use of psychoactive substances themselves, therefore, the results of the research mostly reflect their perceptions and can be regarded as subjective in this aspect. it is also necessary to mention that the empirical study included only schools of general education in the panevėžys region. 3. results of the research and their interpretation 3.1. the authors’ assessment of the perceptions about the consequences of psychoactive substance uses in experimental and control groups the statistically significant differences were detected after the researchers completed the analysis of the changes of indicators belonging to the scale of perceptions about the use of psychoactive substances in the experimental and control groups before and after the quasi-experiment (see table  1). by applying the independent criteria t, it was found that business, management and education, 2019, 17: 21–35 29 after the intervention, the pupils belonging to the eg segment evaluated the effects of the use of psychoactive substances more adequately than pupils belonging to the cg segment. 3.2. the authors’ assessment of perceptions about the consequences of smoking in experimental and control groups after the analysis of the changes of indicators describing experimental and control groups, statistically, significant differences were also detected in the sub-scale of the perceptions about the consequences of smoking (both before and after the quasi-experiment; see table 2). by applying the independent t criterion, it was found that before the intervention, the pupils belonging to the eg segment assessed the effects of smoking better than pupils belonging to the cg group. table 2. changes of indicators describing the sub-scale of perceptions about the consequences of smoking during the time of quasi-experiment (source: author’s compilation) group cg eg avg. differences t df p before the experiment 2.46 2.33 0.13 2.386 215 0.018 after the experiment 2.48 2.37 0.11 1.467 192 0.144 after the comparison how the variables of the analyzed sub-scale changed both in the experimental and control groups, it was found that in the experimental group before the quasi-experiment there were statistically significant differences between cg and eg regarding two variables (see table 3): will suffer from a shortage of money; will acquire more friends. table 3. changes of the variables belonging to the sub-scale of perceptions about the consequences of smoking during the time of quasi-experiment (source: author’s compilation) sub-scale variables group/segment cg eg mean differences (differences of averages) t df p will have troubles with the police before the experiment 2.41 2.39 0.02 0.199 215 0.842 after the experiment 2.61 2.47 0.14 1.037 192 0.301 will succeed worse at school before the experiment 2.40 2.32 0.08 0.721 215 0.472 after the experiment 2.49 2.27 0.22 1.785 192 0.760 the relations with parents will become worse before the experiment 2.82 2.66 0.16 1.508 215 0.133 after the experiment 2.76 2.67 0.09 0.717 192 0.474 table 1. changes in the perceptions about the effects of psychoactive substance use during the time of quasi-experiment (source: author’s compilation) group cg eg avg. differences t df p before the experiment 2.66 2.55 0.11 2.021 215 0.045 after the experiment 2.69 2.52 0.17 2.095 90.673 0.039 30 s. valantiejienė, r. saveljeva. evaluation of effectiveness of psychoactive substance abuse prevention... sub-scale variables group/segment cg eg mean differences (differences of averages) t df p will be removed from school before the experiment 2.08 1.93 0.15 1.444 215 0.150 after the experiment 2.24 2.01 0.23 1.892 192 0.600 the relationships with friends will become worse before the experiment 2.13 1.94 0.19 1.929 215 0.055 after the experiment 2.08 2.03 0.05 0.507 192 0.615 addiction will develop before the experiment 3.14 3.03 0.11 1.023 215 0.308 after the experiment 2.97 3.10 –0.13 –1.142 192 0.255 will suffer from a shortage of money before the experiment 3.27 3.06 0.21 1.980 215 0.049 after the experiment 3.08 3.10 –0.12 –0.101 192 0.919 will acquire more friends before the experiment 2.44 2.21 0.23 2.367 215 0.019 after the experiment 2.39 2.29 0.10 0.826 192 0.410 will feel better before the experiment 2.38 2.27 0.11 1.015 215 0.311 after the experiment 2.46 2.21 0.25 1.917 92.801 0.058 will become more popular before the experiment 2.03 1.97 0.06 0.544 215 0.587 after the experiment 2.15 2.03 0.12 1.033 192 0.303 will forget his/her troubles before the experiment 2.23 2.10 0.13 1.301 215 0.195 after the experiment 2.29 2.08 0.21 1.660 192 0.099 will be more communicative and more confident before the experiment 2.18 2.03 0.15 1.423 215 0.156 after the experiment 2.20 2.14 0.06 0.512 192 0.609 after the quasi-experiment, in all other cases, the indicators of perception of smoking describing the sub-scale of the perceptions about consequences of smoking has changed (in the experimental group), but the changes were statistically insignificant. 3.3. the author’s assessment of the perceptions of alcohol consumption consequences in experimental and control groups statistically significant differences were detected after the analysis of the changes of indicators describing both the perceptions in experimental and control groups (considering the subscale of perceptions about the consequences of alcohol consumption) both before and after the quasi-experiment (see table  4). by applying the independent t criterion, it was found that after the intervention, pupils belonging to the eg segment understood and estimated the consequences of alcohol consumption better than cg students. after the quasi-experiment, the authors discovered and detected statistically significant differences of indicators which describe the variables “will feel better”; “will become more popular”; “will forget his/her troubles” (both in the cg and eg segments). end of table 3 business, management and education, 2019, 17: 21–35 31 table 4. changes of indicators describing the sub-scale of perceptions about the consequences of drug use during the time of quasi-experiment (source: author’s compilation) group cg eg avg. differences t df p before the experiment 2.57 2.53 0.04 0.691 215 0.490 after the experiment 2.61 2.42 0.19 2.312 192 0.022 table 5. changes of indicators describing the sub-scale of perceptions about the consequences of alcohol consumption during the time of quasi-experiment (source: author’s compilation) sub-scale variables group/segment cg eg mean differences (differences of averages) t df p will have troubles with the police before the experiment 2.89 2.87 0.02 0.205 215 0.838 after the experiment 2.93 2.99 –0.06 –0.459 151 0.647 will succeed worse at school before the experiment 2.87 2.88 –0.01 –0.134 215 0.894 after the experiment 2.93 2.71 0.22 1.725 192 0.086 the relations with parents will become worse before the experiment 2.99 3.00 –0.01 –0.093 215 0.926 after the experiment 3.00 2.87 0.13 1.024 192 0.307 will be removed from school before the experiment 2.54 2.64 –0.10 –0.776 215 0.439 after the experiment 2.63 2.43 0.20 1.391 192 0.166 the relationships with friends will become worse before the experiment 2.42 2.49 –0.07 –0.603 215 0.547 after the experiment 2.51 2.32 0.19 1.552 192 0.122 addiction will develop before the experiment 2.81 2.85 –0.04 –0.357 215 0.721 after the experiment 2.83 2.84 –0.01 –0.051 192 0.959 will suffer from a shortage of money before the experiment 3.18 3.10 0.08 0.795 215 0.428 after the experiment 3.10 3.00 0.10 0.763 92,327 0.448 will acquire more friends before the experiment 2.42 2.24 0.18 1.656 215 0.099 after the experiment 2.36 2.24 0.12 1.007 192 0.315 will feel better before the experiment 2.31 2.18 0.13 1.137 215 0.257 after the experiment 2.37 2.07 0.30 2.501 192 0.013 will become more popular before the experiment 2,20 2.07 0.13 1.229 215 0.221 after the experiment 2.22 1.96 0.26 1.997 192 0.047 will forget his/her troubles before the experiment 2.31 2.22 0.09 0.738 215 0.462 after the experiment 2.42 2.10 0.32 2.410 192 0.017 will be more communicative and more confident before the experiment 2.24 2.13 0.12 1.053 215 0.294 after the experiment 2.31 2.06 0.25 1.899 192 0.059 in all other cases, the indicators of the sub-scale of perceptions about consequences of alcohol use has changed in the experimental group after the quasi-experiment, but the changes were statistically insignificant (see table 5). 32 s. valantiejienė, r. saveljeva. evaluation of effectiveness of psychoactive substance abuse prevention... 3.4. the author’s evaluation of the perceptions about the use of drugs in experimental and control groups statistically, significant differences were detected during the investigation on how the indicators of the sub-scale of drug use perception consequences in the experimental and control groups have changed before and after quasi-experiment (see table  6). by applying the “t” criterion of independent groups, it was found that before the intervention, the pupils who were assigned to the eg segment, assessed and understood the consequences of drug use better than the pupils who were assigned to the cg segment. after the intervention, evaluations of the pupils assigned to the cg and eg segments did not change in a statistically significant way. table 6. changes of the indicators assigned to the sub-scale of perceptions about drug use during the time of quasi-experiment (source: author’s compilation) group cg eg avg. differences t df p before the experiment 2.95 2.79 0.16 2.034 215 0.043 after the experiment 2.98 2.77 0.21 1.913 194 0.057 by comparing the variables of the discussed sub-scales in the experimental and control groups, it was found that before the quasi-experiment in the cg and eg segments there were statistically significant differences of the indicators of following variables (see table 7): will succeed worse at school; the relationships with friends will become worse. table 7. changes of the variables (belonging to different sub-scales) which describe perceptions about the effects of drug use during the time of quasi-experiment (source: author’s compilation) sub-scale variables group/segment cg eg mean differences (differences of averages) t df p will have troubles with the police before the experiment 3.34 3.29 0.05 0.436 215 0.663 after the experiment 3.42 3.28 0.14 1.021 194 0.309 will succeed worse at school before the experiment 3.38 3.09 0.29 2.278 215 0.024 after the experiment 3.38 3.16 0.22 1.644 194 0.102 the relations with parents will become worse before the experiment 3.41 3.25 0.16 1.343 215 0.181 after the experiment 3.47 3.21 0.26 1.585 194 0,115 will be removed from school before the experiment 3.24 3.03 0.21 1.614 215 0.108 after the experiment 3.25 2.99 0.26 1.787 194 0.075 the relationships with friends will become worse before the experiment 3.11 2.82 0.29 2.260 215 0.025 after the experiment 3.07 2.83 0.24 1.585 194 0.115 addiction will develop before the experiment 3.44 3.31 0.13 1.155 215 0.249 after the experiment 3.45 3.34 0.11 0.857 194 0.392 business, management and education, 2019, 17: 21–35 33 sub-scale variables group/segment cg eg mean differences (differences of averages) t df p will suffer from a shortage of money before the experiment 3.55 3.42 0.13 1.247 215 0.214 after the experiment 3.43 3.33 0.10 0.740 194 0.460 will acquire more friends before the experiment 2.36 2.19 0,17 1.281 215 0.202 after the experiment 2.50 2.22 0.28 1.740 194 0.084 will feel better before the experiment 2.58 2.36 0.22 1.621 215 0.106 after the experiment 2.48 2.33 0.15 0.886 194 0.377 will become more popular before the experiment 2.27 2.11 0.16 1.178 215 0.240 after the experiment 2.33 2.07 0.26 1.624 194 0.106 will forget his/her troubles before the experiment 2.49 2.41 0.08 0.547 215 0.585 after the experiment 2.67 2.35 0.32 1.850 194 0.066 will be more communicative and more confident before the experiment 2.27 2.18 0.09 0.629 215 0.530 after the experiment 2.28 2.12 0.16 1.003 194 0.317 in all other cases, the indicators of the sub-scale of perceptions about the consequences of drug use has changed in the experimental group after the quasi-experiment, but the changes were statistically insignificant. conclusions the data of the quasi-experiment research showed that as the whole after intervention the pupil’s perceptions about the use of psychoactive substances in the experimental group has changed. by applying the independent t criterion, statistically significant differences were detected regarding the assessment of the consequences of using the psychoactive substances before and after the quasi-experiment: the pupils who were assigned to the experimental group assessed the consequences of the use of psychoactive substances better than those who were assigned to the control group. the investigation of changes in the perceptions of the consequences of smoking, alcohol and drug use shows that in the experimental and control groups after the quasi-experiment statistically significant differences of such perceptions were established only in a segment related to the assessment of the consequences of alcohol use. the pupils belonging to the experimental group more adequately assessed the effects of alcohol consumption such as feeling better, becoming more popular and forgetting troubles and this confirms a better understanding of the effects of the use of psychoactive substances among them. data from the analogous quasi-experimental which was completed in the 7’th and 8’th grades showed that after the intervention in the experimental group the perception of the consequences of the use of psychoactive substances has improved. the results of the previous study (see saveljeva & valantiejienė, 2017) indicate that the experimental group’s pupils assessed the consequences of alcohol and drug use more objectively than before the end of table 7 34 s. valantiejienė, r. saveljeva. evaluation of effectiveness of psychoactive substance abuse prevention... intervention. therefore, the results of the research, presented in this article, coincide with the results of other similar surveys and, accordingly, can be interpreted as confirmation of a better understanding of the consequences of alcohol and drug use among the pupils, participating in the prevention programs. based on the results of the empirical research and its analysis, it can be 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(2003). the effect of active learning on student characteristics in a human physiology course for nonmajors. advances in physiology education, 27, 207-223. https://doi.org/10.1152/advan.00003.2002 https://doi.org/10.1037/0003-066x.58.6-7.449 https://www.smm.lt/uploads/lawacts/docs/1353_de5b33329928d007b51efdbf9f98ab90.pdf https://www.smm.lt/uploads/lawacts/docs/1353_de5b33329928d007b51efdbf9f98ab90.pdf https://doi.org/10.1111/j.1741-3729.2008.00530.x https://doi.org/10.1023/b:jopp.0000042388.63695.3f https://doi.org/10.1152/advan.00003.2002 verslas, vadyba ir studijos 2009 201 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s elektroninio ir mobiliojo verslo lyginamoji analizė giedrius čyras gcyras@vgtu.lt vilniaus gedimino technikos universitetas, verslo technologijų katedra laura uturytė-vrubliauskienė vlaura@vgtu.lt vilniaus gedimino technikos universiteto doktorantė, verslo technologijų katedra 1. įvadas informacinės technologijos daro vis didesnę įtaką ekonominių santykių kaitai. tai matoma pasaulyje, europoje ir lietuvoje. atsiranda tokios sąvokos ir reiškiniai kaip skaitmeninė ekonomika, elektroninė prekyba, darbas virtualiame kolektyve. auga elektroninėje erdvėje aktyviai dirbančių asmenų ir įmonių skaičius. visuotinai pripažįstama, kad elektroninio verslo plėtra šalies ekonomikai yra labai svarbi – elektroninis verslas padeda pasiekti platesnes rinkas ir platesnį vartotojų ratą. todėl kiekvienos šalies ekonomikos augimas siejamas su tuo, kiek efektyviai verslas įvaldys elektroninę erdvę. taip pat sparčiai tobulėjant informacinėms technologijoms ir telekomunikacijoms itin svarbūs globalūs informacinių technologijų iššūkiai – mobilumas ir saugumas. vartotojų gyvenimo būdas tampa vis labiau mobilus. visa tai lemia naujų poreikių formavimąsi – turėti galimybę gauti ir perduoti informaciją, vykdyti verslo funkcijas ne tik iš stacionarių darbo vietų ar namų, bet ir kelionėje, esant toli nuo darbo ar gyvenamosios vietos. tai paskatino mobiliųjų informacinių technologijų ir telekomunikacijų (mitt) atsiradimą. vis labiau greitėjantys pasaulio pokyčiai lemia, kad jau neužtenka tik mobilaus garso žinios perdavimo, yra poreikis atlikti ir verslo funkcijas iš bet kurios vietos. tai lėmė mobiliojo verslo kaip atskiros elektroninio verslo krypties atsiradimą ir plėtrą. straipsnio tikslas – atlikti elektroninio ir mobiliojo verslo lyginamąją analizę. tyrimo objektas – elektroninis ir mobilusis verslas. tyrimo metodai – mokslinės literatūros analizė ir apibendrinimas. © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai 202 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s 2. elektroninio ir mobiliojo verslo sampratų analizė informacinių technologijų ir telekomunikacijų (itt) atsiradimas labai pakeitė ne tik žmonių gyvenimo būdą, kultūrą, bet ir įmones, jų funkcionavimą. technologinis išsivystymas tampa vis greitesnis ir laiko tarpas tarp naujai atsirandančių revoliucinių atradimų vis trumpėja (davidavičienė 2008). dabar informacinė sistema tampa bet kurios įmonės organine dalimi (paliulis et al. 2003). xx-ojo amžiaus antroje pusėje, o ypač devintajame dešimtmetyje, spartus itt vystymasis ir šių technologijų vis didėjantis skverbimasis į kasdieninę organizacijų veiklą bei individų asmeninį gyvenimą, kartu vykstantys organizacijų valdymo struktūrų plokštėjimas ir tinklėjimas nemažai daliai mokslininkų, tyrinėjančių organizacijas, leido suvokti, kad itt tapo viena iš pagrindinių priežasčių, nulėmusių elektroninio verslo atsiradimą (damaskopoulos et al. 2008; davidavičienė 2008; gatautis 2008). informacinės technologijos sudarė sąlygas elektroniniam verslui tapti daug atviresniam, jame lengviau prieinama prie informacijos. internetas yra šaltinis, kurio naudojimas įmonėje gali pagerinti efektyvumą visuose padaliniuose. jis gali padėti surasti naujus klientus, testuoti produktus, rasti darbuotojus, sudaryti geriausius sandorius, surasti įrangą, tiekėjus ir pan. elektroninio verslo (e. verslo) sąvoka pasaulyje atsirado neseniai, tačiau susilaukė labai didelio pripažinimo, tapdama visuotinai vartojamu terminu informacinių technologijų, kultūros ir verslo žodynuose. bet nėra vieno visuotinai pripažinto elektroninio verslo apibrėžimo. elektroninis verslas remiasi interneto technologijomis, kurios leidžia pertvarkyti vidinių ir išorinių sąveikų pobūdį. galima paminėti kad e. verslas apima tokias sritis kaip elektroninė komercija, verslo tyrimai (informacijos rinkimas apie konkurentus, rinkas, vartotojus ir t. t.), ryšių su vartotojais, tiekimo grandinės, įmonės išteklių valdymas (gerasymchuk, sakalosh 2007). ši nauja verslo rūšis pasižymi sparčiai besiplečiančiomis galimybėmis, didėjančia konkurencija ir dideliais vartotojų lūkesčiais. visame pasaulyje verslas keičia savo organizacines struktūras bei formas. daugelis autorių skirtingai apibūdina e. verslą. r. kalakota (kalakota, robinson 2002) teigia, kad elektroninis verslas apima e. komerciją, vidines ir išorines organizacijos aplikacijas, kurios formuoja modernų verslą. jo nuomone, e. verslas – tai ne vien tik e. komercijos transakcijos, tai – naujas senų verslo modelių sukūrimas, pasitelkiant technologijas, kad būtų maksimizuota verslo vertė. e. turban (turban et al. 2000) elektroninį verslą traktuoja ne tik kaip aplinką, palankią prekėms ar paslaugoms pirkti, bet ir apimančią klientų aptarnavimą, bendradarbiavimą su verslo partneriais, elektroninių transakcijų organizacijos viduje valdymą. dar e. verslas apibūdinamas kaip verslas, kuriame itt infrastruktūra verslas, vadyba ir studijos 2009 203 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s naudojama didinti verslo efektyvumui ir sukurti pagrindui naujiems produktams ir paslaugoms atsirasti (karjalainen 1999). pavyzdžiui, l. sodžiūtė ir v. sūdžius e. verslą apibrėžia kaip verslą, kuris, siekdamas naudos sau ir vartotojams bei naudodamasis informacine valdymo ir kita verslo struktūra, kuria, platina ar sudaro sąlygas naudoti produktus ar paslaugas, pirmiausia tam pasitelkiant elektroninio ryšio ir kitas priemones (sodžiūtė, sūdžius 2006). atlikus mokslinės literatūros analizę galima išskirti pagrindines priežastis, kurios skatina įmones įgyvendinti e. verslo modelius: globalizacija – išnyksta geografinės ribos tarp rinkų, gausėja konkurentų ir – didėja įvairovė; laiku pagrįsta konkurencija – galimybė stebėti konkurentus, greitai reaguoti – į nuolat besikeičiančią situaciją; mobilumu grįsti vartotojų poreikiai – nors vartotojų poreikiai nuolatos kei– čiasi, atsiranda galimybės greitai reaguoti į jų pokyčius ir pasiūlyti naujus sprendimus. įmonė, naudodamasi itt sprendimais, įgauna konkurencinį pranašumą. inovatyvūs itt sprendimai užtikrina efektyvesnę rinkodarą, geresnius pardavimo rezultatus, spartesnį klientų aptarnavimą, efektyvesnį veiklos planavimą, išlaidų sumažinimą, darbuotojų ir klientų bendravimo puoselėjimą, klientų personalizavimą, intensyvesnę personalo bei platesnę naujų technologijų ir tiekėjų paiešką (toločka 2007). straipsnio autoriai 1 pav. pateikia e. verslo struktūrą, kuri rodo, kaip įmonė bendrauja su klientais, vartotojais, įmonėmis, institucijomis ir vyriausybe naudodamasi itt. apibendrinant, galima išskirti tris e. verslo sudedamąsias dalis: tinklai (tai fizinė terpė, jungianti e. verslo dalyvius, kurioje vyksta tam tikri, tik e. verslui būdingi, procesai; tinklai gali būti įvairių rūšių: internetas, intranetas, ekstranetas); technologijos ir procesai (tai mainai, vykstantys tarp e. verslo dalyvių specialiuose tinkluose; galima paminėti tokius procesus: rinkos tyrimai, skaičiavimai, užsakymų atlikimas, pardavimas, palaikymas po pardavimo ir pan.) ir dalyviai (tai asmenys ar institucijos, dalyvaujančios e. verslo procese, pvz., valstybė, paslaugų tiekėjai, tarpininkai, vartotojai, gamintojai). išskyrus pagrindines sudedamąsias e. verslo dalis siūlomas koncepcinis e. verslo struktūros modelis, kuriame taip pat išryškinami ryšiai tarp tų dalių. naudojantis e. verslo struktūra galima išskirti e. verslo modelius pagal dalyvaujančius subjektus: verslas vartotojui, verslas verslui, vartotojas vartotojui, visuomenės valdžia verslui, visuomenės valdžia vartotojui, verslas darbuotojui ir pan. atsiradę nauji verslo modeliai pakeitė kompanijų tarpusavio santykius, apvertė aukštyn kojomis 204 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s tradicines verslo vadybos formas (korsakienė 2009). elektroniniai verslo modeliai – raktas kompanijos konkurencingumui didinti. būtinybė verslo funkcijas atlikti iš bet kurios vietos lėmė mobiliojo verslo (m. verslo) atsiradimą ir plėtrą. globalaus verslo sąlygomis m. verslas atsirado kaip nauja verslo platforma, lemianti naujų produktų ir paslaugų sukūrimo galimybę. 1 pav. e. verslo struktūra fig. 1. e-business framework m. verslui būdinga daugelis e. verslo įsitvirtinimo rinkoje tendencijų, kurias akivaizdžiai parodo m. verslo ir e. verslo gyvavimo ciklai (2 pav.). 1999 m. pradėtas diegti gsm ryšys paskatino spartų m. verslo dalyvių lūkesčių augimą. wap (wireless application protocol) technologijų atsiradimas paskatino prielaidas apie 3g galimybių diegimą. didžiausios pasaulinės ryšio tiekėjų kompanijos, investavusios į 3g licencijas, tikėjosi, kad spartaus vaizdo ir multimedijos duomenų perdavimo technologijos turės didelę ateitį. tačiau kaip parodė 2001 m. situacija, lūkesčiai, susiję su 3g, nepasiteisino. tolesnės investicijos į mobiliąsias technologijas, tokias kaip gprs (general packet radio service) ir mms (multimedia messaging service), negalėjo kompensuoti išlaidų, kurios buvo patirtos dėl 3g lūkesčių nepasiteisinimo. 2004 m. buvo manoma, kad m. verslą verslas, vadyba ir studijos 2009 205 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s galėtų išgelbėti tik ilgai laukti, bet vis dar lėtai diegiami 3g nauji technologijos sprendimai. m. verslo sprendimų diegimo aplinkos, analogiškai kaip ir e. versle, skirstomos į keturis pagrindines grupes pagal m. verslo santykiuose dalyvaujančius subjektus: verslas vartotojui (business to consumer – b2c), verslas verslui (business to business – b2b), verslas darbuotojui (business to employee – b2e) ir verslas valdžiai (business to government – b2g). m. verslo sprendimai daug kuo panašūs į tradicinio e. verslo sprendimus, bet nauja yra tai, kad atsiranda galimybė vartotojams pateikti platesnio spektro personalizuotus ir „prie vietos nepririštus“ sprendimus. m. verslo santykiuose dalyvaujantys subjektai skirtingai interpretuoja m. verslo sprendimų naudą. vartotojui m. verslo sprendimai reiškia patogumą, prekybininkai m. verslą sieja su dideliu pajamų šaltiniu, paslaugų tiekėjai į m. verslą žiūri kaip į neužpildytą rinką, valstybės požiūriu – tai produktyvus ryšys su visuomene. mitt pagalba galima gauti beveik visas paslaugas, kaip ir itt, tik konkrečioms paslaugoms gauti labai svarbūs yra mobilieji įrenginiai ir jų galimybės, naudojami duomenų perdavimo protokolai ir tinklo sprendimai. m. verslo samprata yra gana plati ir negali būti perteikta vienu apibrėžimu. technologijų galimybės ir mastas laikui bėgant nuolatos keičiasi, todėl sudėtinga būtų sukurti apibrėžimą, kuris pilnai apimtų besiplėtojantį m. verslą. d. chaffey (2002) nuomone, m. verslas yra e. verslo dalis. tačiau, nors daugelis šio verslo procesų vykdymo būdų yra panašūs į e. verslo, mitt dėka atsiranda galimybė tuos verslo procesus vykdyti bet kur ir bet kada. mobiliajai komercijai yra būdingos prekių įsigijimo funkcijos mobiliojo ryšio telefonais, o m. verslas gali būti apibūdintas plačiau, apimant vidaus verslo procesų ir sandorių valdymą bet kur ir bet kada, kaip teigia j. zobel (2001). mobilioji komercija, remiantis durlacher (1999), apibrėžiama kaip piniginės operacijos, atliekamos naudojantis mobiliosiomis telekomunikacijomis. pagal šį apibrėžimą, daugumos autorių nuomone, mobilioji prekyba yra m. verslo poaibis, paremtas bevieliu ryšiu. m. verslo aplinka pasižymi keliomis savybėmis, kurios skiriasi nuo e. verslo (may 2001; durlacher 1999). visų pirma, jai būdingas didesnis patogumas (mobilioji priemonė lengvai naudojama, gali būti prieinama keliems vartotojams tuo pačiu metu ir talpinti daug informacijos) ir prieinamumas (vartotojas gauna informaciją realiu laiku ir gali bendrauti būdamas bet kurioje pasaulio vietoje). m. verslas gali būti apibūdinamas kaip mitt panaudojimas siekiant išlikti, gerinti ir plėtoti egzistuojančius verslo procesus ir ryšius arba vystyti naujus verslo segmentus (kalakota 2002). 206 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s m. verslas gali aprėpti visus veiksnius, procesus ir veiksmus, kurie yra įgyvendinami remiantis mitt. įvertinant šį aspektą, m. verslas gali būti apibrėžtas kaip visų tipų verslo veiksmai, atliekami naudojant mitt. todėl atlikus e. verslo ir m. verslo sampratų analizę galima daryti išvadą, kad m. verslas gali būti apibrėžtas kaip e. verslo dalis. 2 pav. mobiliojo verslo lūkesčių gyvavimo ciklas (čyras 2007) fig. 2. the life cycle of mobile business opportunities expectations (čyras 2007) taip pat galima tiksliai apibrėžti mobiliąsias informacines technologijas ir telekomunikacijas. itt apibrėžiamos kaip informacijos surinkimo, apdorojimo, saugojimo, skleidimo būdai ir metodai, o mobiliosios informacinės technologijos ir telekomunikacijos – kaip informacijos surinkimo, apdorojimo, saugojimo, skleidimo būdai ir metodai esant bet kuriame erdvės taške. remiantis e. verslo struktūra (1 pav.), galima struktūrizuoti ir m. verslą. daugelis autorių m. verslo struktūrą analizuoja klasifikuodami ją į tris pagrindines klases: technologijų, turinio ir tinklo (camponovo 2003). tačiau atlikus detalią analizę matyti, kad šių trijų klasių neužtenka. siekiant apibrėžti visą m. verslo žemėlapį tikslinga pridėti tokias klases kaip reguliavimas, socialinė aplinka ir verslo vartotojų poreikiai (čyras 2007). reguliavimo ir socialinių aplinkų dydžiai atliekant tyrimus yra laikomi konstantomis. verslas, vadyba ir studijos 2009 207 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s m. verslo centre atsiranda verslo vartotojų poreikiai, susiję su mobilumu. siekiant patenkinti šiuos poreikius, reikalingi trys būtini ir vienas kitą papildantys elementai: tinklas (sudarytas iš skirtingų potinklių), technologijos (jas sudaro visa reikalinga tinklinė įranga, mobilieji prietaisai ir platformos) ir turinys (susidedantis iš mitt sprendimų verslui, turinio ir palaikymo paslaugų). daugelio m. verslo pritaikymo sprendimų teikimui yra naudojamos mobilusis ryšys, kuriam sklisti reikalingas tinklas ir skirtingos technologijos. naudodamiesi tinklų galimybėmis ir įvairiomis technologijomis, mitt sprendimų kūrėjai pateikia verslo vartotojams įvairaus turinio paslaugas. kadangi egzistuoja daug tinklų, technologijų ir platus jų turinys, verslo vartotojui reikia priimti strateginį sprendimą įvertinant visų šių elementų būsenas ir plėtros perspektyvas, nustatyti, kaip jas naudojant galima toliau plėtoti savo verslą. 3. mobiliojo verslo ypatybės m. verslas nėra tik e. verslo galimybių išplėtimas į mobiliojo ryšio įrangos terpę, nes tokiu atveju jo vaidmuo būtų gana ribotas. atlikus detalesnę analizę galima išskirti šiuos skirtumus tarp abiejų aplikacijų (1 lentelė). elektroninės komercijos sprendimai yra vykdomi web tinkle. naudojant internetą vykdoma prekyba ir bendraujama su klientais. naudojant mitt realizuojama galimybė visas šias funkcijas vykdyti nepriklausomai nuo stacionarios darbo vietos. tiekėjo teikiamomis paslaugomis vartotojas gali naudotis lanksčiau nei elektroninės komercijos aplinkoje. analizuojant e. verslo ir m. verslo skirtumus, reikėtų pabrėžti, kad e. verslo sėkmės pagrindas buvo naujai atsiradusi galimybė verslo funkcijas įgyvendinti naudojant itt (kalakota 2002). naujos galimybės ne tik leido tobulinti senus verslo modelius, tačiau buvo kuriami nauji, pagrįsti itt galimybėmis. atsiradus mitt tapo įmanoma minėtais privalumais naudotis neprisirišant prie konkretaus erdvės taško. mitt sprendimai sudarė prielaidas naujiems verslo modeliams atsirasti. pabrėžtina, kad praktiškai visas e. verslo funkcijas galima perkelti į mobiliąją terpę, tačiau tik nedaug naujai atsirandančių m. verslo funkcijų galima perkelti į stacionarią elektroninę terpę. detalizuojant kai kurias mitt galimybėmis grindžiamas funkcijas ir m. verslo aplinkos aspektus galima konkretizuoti m. verslo ir jo terpės ypatybes (3 pav.). m. verslo sprendimų galimybė teikti naujas verslo funkcijas yra vienas iš jo pranašumų. vartotojo aspektas. didžiausias skirtumas tarp e. verslo ir m. verslo yra vartotojo geografinė padėtis. e. verslo vartotojas dažniausiai turi būti stacionarioje darbo vietoje, prie asmeninio kompiuterio ir naudotis įvesties priemonėmis. 208 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s 1 lentelė. baziniai skirtumai tarp elektroninės ir mobiliosios komercijos bei e. ir m. verslo table 1. basic difference between eand mobile commerce, and eand mobile business elektroninė komercija mobilioji komercija elektroninis verslas mobilusis verslas web tinklu paremti sprendimai prekybai bei bendravimui su vartotojais – naudojant mobiliojo ryšio įrangą vykdoma prekyba ir bendraujama su vartotojais – paslaugos vartotojams teikiamos naudojant mobiliuosius telefonus ir nešiojamuosius prietaisus – verslo funkcijų perkėlimas į web terpę – web ir kompiuteriniai sprendimai verslo efektyvumui ir produktyvumui didinti – web ir kompiuteriniai sprendimai, skatinantys naujų verslo modelių kūrimą – verslo funkcijų virtimas mobiliosiomis – mitt sprendimai verslo efektyvumui ir produktyvumui didinti – mitt sprendimai, skatinantys naujų verslo modelių kūrimą 3 pav. mobiliojo verslo išskirtinumų funkcinė struktūra (čyras 2007) fig. 3. the functional framework for particularities of mobile business applications (cyras 2007) verslas, vadyba ir studijos 2009 209 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s m. versle visi šie aspektai pakeičiami visišku mobilumu, naudotis technologijomis ir sprendimais galima bet kurioje vietoje, bet kuriuo metu. skirtumas tarp įrangos. radikaliausia šį aspektą būtų galima apibūdinti skirtingų laikmačių įrangos dydžio transformacija. 1990 m. niekas nebūtų galėjęs pagalvoti, kaip atrodys kompiuteris mūsų dienomis. šiuolaikinių technologijų srityje pagal 1964 m. g. moore’o sukurtą dėsnį (gordon moore – vienas iš „intel“ kompanijos įsteigėjų, pirmasis empiriniais tyrimais nustatęs, kad tranzistorių skaičius kristale didės dvigubai kas 24 mėnesius) mikroschemos išrandamos kas 18–24 mėnesius. tai leidžia daryti prielaidą apie nuolat didėjantį skirtumą tarp naujai atsirandančių įrangų (paliulis, dagienė 2009). daugiafunkcės paslaugos. novatoriški mobiliojo verslo sprendimai gali būti susieti ir pritaikyti egzistuojantiems verslo procesams. verslo vartotojui atsiranda galimybė pasirinkti laiką ir vietą, kada jis pageidauja naudotis tam tikromis paslaugomis. naujos mobiliųjų informacinių technologijų ir telekomunikacijų galimybės ir sėkmingi mitt taikymo pavyzdžiai padeda įvertinti, kokios paslaugos yra reikalingos vartotojui. jais remiantis konkrečiam vartotojui gali būti pasiūlytas atitinkamas sprendimas (brodie, perry 2001). mitt sprendimų integravimas į organizacijose jau įdiegtas sistemas. dėl mobiliųjų informacinių technologijų ir telekomunikacijų sprendimų organizacijos gali daugelį veiklos funkcijų perkelti į mobiliąją terpę. daugelį verslo funkcijų prieš mitt atsiradimą buvo galima atlikti tik naudojant fizinį kontaktą. sparčiai tobulėjant mitt atsiranda galimybių atlikti funkcijas efektyviau ir greičiau. geografinė padėtis. m. verslo sprendimai tampa prieinami bet kurioje pasaulio vietoje. realios vartotojo buvimo vietos nustatymo paslauga leistų siūlyti vartotojams personalizuotas paslaugas, kurios jiems gali būti naudingos būnant nustatytoje vietoje. taip atsiranda nauja paslaugų terpė ir mobiliųjų informacinių technologijų bei telekomunikacijų sprendimų teikėjams, ir vartotojams. lankstūs nustatymai realiu laiko momentu. e. verslo ir m. verslo vartotojams sukurti įrenginių ir technologijų nustatymai, skirti vykdyti konkrečioms užduotims, yra lankstūs ir gana lengvai pritaikomi bei keičiami pagal tam tikrus personalizuotus vartotojų poreikius. daugumoje e. verslo sprendimų pats vartotojas rankiniu būdu turi koreguoti technologijų nustatymus, o m. verslo sprendimų personalizuoti nustatymai ateityje turėtų būti įdiegiami automatiškai. kintant aplinkybėms, jie yra atitinkamai nustatomi pagal konkrečius vartotojų poreikius realiu laiko momentu, pvz., vartotojui palikus savo darbo vietą, paslaugų, kurios jam yra pasiekiamos realiu laiku ir realioje vietoje, nustatymai turėtų automatiškai susikonfigūruoti konkrečioje vartotojo naudojamos įrangos terpėje. 210 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s jeigu vartotojas pageidautų pakeisti nustatymus, turėtų būti galimybė, naudojant atitinkamas parinktis, nesudėtingai tai atlikti (pedersen, ling 2002). srities trečiųjų šalių dalyvių aplikacijos. mitt sprendimai verslui remiasi techniniais reikalavimais. trečiųjų šalių dalyviai – tai, pvz., tinklo paslaugų tiekėjai, kurie visiems m. verslo dalyviams suteikia tiek naudojimosi tinklu galimybes ar adresus, tiek saugo jų informaciją, iki kol ši yra persisiunčiama į konkrečių dalyvių terminalus (gulati, jason 2000). third party integration – galimybė integruoti programas, technologijas ir darbalaukio įrankius, kurie jau egzistuoja organizacijoje, į naujai taikomus m. verslo sprendimus. lanksčios paslaugos. esant paprastesnei paslaugų integracijai, vartotojai turės didesnę galimybę išnaudoti vis platesnį tarpusavyje susijusių paslaugų ir technologijų spektrą (chlivickas et al. 2009). kai kurios m. verslo sistemos siūlys visą paslaugų paketą, iš kurio vartotojas turės galimybę pasirinkti jam reikalingas paslaugas ir nuolatos tuos pasirinkimus keisti. daugelį naujų m. verslo sprendimų bus lengva integruoti į mobiliojo ryšio tinklus ir įrangą. pvz., m. verslo sprendimai gali būti vykdomi daugybe duomenų perdavimo būdų, tokių kaip sms ar mobilusis paštas. jiems įgyvendinti gali būti pasitelkti konferencijų tiltai, skambučiai tinkle, balso pašto ir daug kitų paslaugų, pvz., multimedijos žinutės ir informacijos paslaugos. lanksti vartotojo buvimo vieta. mobiliojo verslo savybės padės vartotojui dirbti, atlikti kasdienes funkcijas neprisirišant prie nuolatinės buvimo vietos. ateinanti m. verslo era suteiks daugiau galimybių ir skatins socialinius pokyčius. atsiras daugiau galimybių dirbti virtualiai, bus kuriami nauji tokio darbo kontroliavimo būdai. darbo funkcijas bus galima atlikti nuolatos: kelionės metu, įstrigus oro uoste ir t. t. dauguma darbo galimybių kliūčių laikui bėgant turėtų išnykti. atlikus detalesnę m. verslo aplinkos išskirtinumo analizę, galima teigti, kad ekstrapoliuojant jau egzistuojančius verslo požiūrius ir paradigmas naujų sferų link tampa įmanoma realiai vertinti verslo perspektyvas ateityje. nors galima teigti, kad šiandienos verslo vartotojas jau yra patenkintas egzistuojančiomis technologijų galimybėmis, tačiau visada reikia mąstyti, kaip tas galimybes bus galima panaudoti ir išplėsti ateityje. jei m. verslo sprendimus traktuosime ne tik kaip e. verslo galimybių išplėtimą, bus galima išskirti daugybės jo savybių skirtumo teikiamą naudą. pagrindinių technologijų, naudojamų e. versle, „sudedamosios dalys“ gali skirtis nuo naudojamų m. verslą palaikančiose technologijose. verslas, vadyba ir studijos 2009 211 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s 4. išvados atlikta e. verslo ir m. verslo lyginamoji analizė atskleidė pagrindinius šių verslo rūšių struktūros elementus ir sudarė prielaidas efektyviau ištirti bei palyginti e. verslo ir m. verslo skirtumus bei panašumus. išanalizavus e. verslo sudedamąsias dalis ir jų ryšius, siūlomas koncepcinis e. verslo struktūros modelis, kurio pagrindu galėtų būti tarpusavio ryšiai tarp visų e. verslo dalyvių, ir galima išskirti dalyvaujančių subjektų tarpusavio sąveikos modelius. išskyrus e. verslo sudedamąsias dalis, struktūrizuota ir m. verslo aplinka. be daugelio autorių išskiriamų trijų m. verslo pagrindinių klasių, siūloma pridėti reguliavimo, socialinės aplinkos ir verslo vartotojų poreikių klases. m. verslo ir e. verslo gyvavimo ciklų analizė parodė, kad m. verslui yra būdinga daugelis e. verslo įsitvirtinimo rinkoje tendencijų. atlikta e. verslo ir m. verslo lyginamoji analizė išryškino mobiliojo verslo ypatybes. nustatyta, kad m. verslas nėra tik e. verslo techninių galimybių išplėtimas. atlikus detalesnę analizę prieita prie išvados, kad praktiškai visas e. verslo funkcijas galima perkelti į mobiliąją terpę, tačiau tik nedaug naujai atsirandančių m. verslo funkcijų galima perkelti į stacionarią elektroninę terpę. siūloma įvairius aspektus apimanti m. verslo išskirtinumų funkcinė struktūra. m. verslo sprendimų galimybė teikti naujas verslo aspektu funkcijas yra vienas iš jo pranašumų. detalizuojant kai kurias mobiliųjų informacinių technologijų ir telekomunikacijų galimybėmis grindžiamas funkcijas ir m. verslo aplinkos aspektus, galima detalizuoti m. verslo ir jo terpės skirtumą nuo e. verslo. nors dauguma verslo vartotojų yra patenkinti egzistuojančiais e. verslo sprendimais, tačiau neatsižvelgiant į naujas m. verslo sprendimų galimybes taps neįmanoma konkuruoti versle. vykstant technologiniam progresui, vis daugiau naujų technologijų taikoma būtent m. versle, o e. verslui naudojamos technologijos lieka tos pačios. literatūra brodie, j.; perry, m. 2001. designing for mobility, collaboration and information use by blue-collar workers, slggroup 22(3): 22–27. camponovo, g. 2003. business model analysis applied to mobile business. angers: iceis. chaffey, d. 2002. e-business and e-commerce management. new jersey: prentice hall. chlivickas, e.; petrauskaitė, n.; ambrusevič, n. 2009. leading priorities for development of the high technologies market, journal of business economics and management 10(4): 321–328. 212 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s damaskopoulos, t.; gatautis, r.; vitkauskaite, e. 2008. extended and dynamic clustering of smes, inzinerine ekonomika – engineering economics (1): 11–21. čyras, g. 2007. mobiliojo verslo plėtros aspektai, iš verslas, vadyba ir studijos’ 2006: mokslo darbai [business, management and education’ 2006: research papers]. vilnius: technika, 169–178. davidavičienė, v. 2008. change management decisions in the information age, journal of business economics and management 9(4): 299–307. durlacher [interaktyvus].1999. mobile commerce report. november, durlacher research ltd [žiūrėta 2009 m. spalio 19 d.]. prieiga per internetą: <www.durlacher. 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cambridge university press. paliulis, n.; elskytė, v.; merkevičius, j.; trasauskas, e. 2003. information technology development in lithuania: new tendencies and perspectives, journal of business economics and management 4(2): 97–104. paliulis, n.; dagienė, e. 2009. akademinė elektroninė leidyba lietuvoje: požymiai, galimybės, problemos, verslas: teorija ir praktika [business: theory and practice] 10(2): 159–171. pedersen, p. e.; ling, r. 2002. mobile end-user service adoption studies: a selective review. grimstad/oslo: agder university college and telenor r&d. sodžiutė l., sūdžius v. 2006. elektroninis verslas: pardavimai ir finansinės priemonės. vilnius: kronta. toločka, e. 2005. įmonių technologinio inovatyvumo potencialo nustatymas, verslas: teorija ir praktika [business: theory and practice] 6(3): 180–186. turban, e.; mclean, e.; wetherbe, j. 2000. information technology for management: making connection for strategic advantage. 2nd ed. new york: john wiley & sons inc. zobel, j. 2001. mobile business und m-commerce, muenchen/wien: hansa. verslas, vadyba ir studijos 2009 213 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s differentiation of electronic and mobile business aspects g. čyras, l. uturytė-vrubliauskienė summary rapid developments in mobile networks and wireless information systems nowadays are researched and adopted. innovative business models are continually performing and could become a major benchmark in the electronic business field. understanding them and attempting to design them are important issues. the differentiation of mobile business aspects from electronic business dimensions are a set of the parameters that set mobile business services to leading positions. one of the biggest partitive attributes between electronic mobile business applications is the working options of the user. electronic business environment constrains the user work at the stationary position. mobile business applications allow the user work in total mobility conditions. also new network-based options can handle many of the services features, which can add value to mobile business services. mobile business is the result of the electronic business and information technologies evolution. for the value adding, mobile business services should take real advantage of electronic business services, with the opportunities of creating, configuring, integrating, upgrading, troubleshooting, and maintaining new business models. a variety of mobile business service offerings that could take advantage of electronic business are presented. a treatment is suggested to add value and differentiate mobile business services, so that they continue to remain profitable. keywords: electronic business, mobile business, mobile business applications. verslas, vadyba ir studijos 2009 51 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s žmogiškieji ištekliai: strateginio valdymo aspektai eugenijus chlivickas eugenijus.chlivickas@vgtu.lt vilniaus gedimino technikos universitetas, tarptautinės ekonomikos ir vadybos katedra palmira papšienė palmira.papsiene@gmail.com vilniaus gedimino technikos universitetas, tarptautinės ekonomikos ir vadybos katedra arnas papšys arnas.papsys@gmail.com kauno technologijos universiteto panevėžio institutas 1. įvadas siekis įsitvirtinti rinkos ekonomikoje, restruktūrizacija, globalizacija, technikos ir technologijų tobulėjimas, informacinės visuomenės formavimasis, žinių ekonomikos kūrimas, visuomenės ekonominės padėties kaita, demokratiniai procesai kelia naujų iššūkių organizacijoms. nuolat kintančioje aplinkoje formuojasi naujas požiūris į organizaciją kaip veiklos sistemą, kurioje darbuotojai, t. y. žmogiškieji ištekliai, tampa svarbiausia ir aktyviąja sistemos dalimi, lemiančia organizacijos veiklos efektyvumą. žmogiškųjų išteklių efektyvus valdymas yra gyvybiškai svarbus veiksnys, siekiant organizacijos tikslų bei naudos kiekvienam individui, organizacijai ir visuomenei. mokslinėje literatūroje pateiktos teorinės nuostatos apie žmogiškųjų išteklių valdymą patvirtina šios funkcinės valdymo srities įtaką bendriems organizacijos veiklos rezultatams. aktyvi konkurencija šiandieninėje rinkoje lemia sparčią ir įvairiapusę organizacijų plėtrą, siejamą su žmogiškųjų išteklių valdymo tikslų įgyvendinimu. organizacijai, veikiančiai globalioje rinkoje, yra itin svarbu efektyviai valdyti turimus arba potencialiai prieinamus darbo išteklius. © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai 52 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s problemos ištyrimo mastas. žmogiškųjų išteklių valdymo procesas plačiai nagrinėjamas mokslinėje literatūroje. g. r. ferris (ferris, judge 1991) išskiria keturias personalo valdymo funkcijas; r. ginevičius (1998) personalo valdymui priskiria penkias funkcijas; j. a. f. stoner, r. e. freeman ir d. r. gilbert (1999) nurodo, kad žmogiškųjų išteklių valdymo procesas susideda iš septynių pagrindinių funkcijų; m. hanada (2000) žmogiškųjų išteklių valdymą, kaip tam tikro proceso modelį, suskaido į sudėtines dalis, atitinkančias svarbiausias devynias proceso funkcijas; g. dessler (2001) taip pat nurodo devynias personalo valdymo funkcijas; g. strauss (2001) bei a. jenkins ir a. klarsfeld (2002) teigimu, tradicinės personalo valdymo funkcijos yra šešios; i. bakanauskienė (2002) išskiria devynias, o r. j. lavigna (2002) įvardija šešias personalo valdymo funkcijas; s. f. butkus (2003), nagrinėdamas darbuotojo veiklos valdymo klausimus, vartoja žodžių junginį personalo valdymas, kuris apima trylika valdymo veiklų; j. s. bae ir c. rowley (2003), analizuodami žmogiškųjų išteklių valdymo veiklas, sudarė „keturių r“ (angl. 4rs) modelį; a. stankevičienė ir l. lobanova (2006) savo darbuose nagrinėjo dvylika žmogiškųjų išteklių valdymo funkcijų. straipsnio tikslas – atskleisti žmogiškųjų išteklių valdymo proceso teorinius aspektus, atliekant mokslinės literatūros pirminių šaltinių ir kitų publikacijų studiją. 2. žmogiškųjų išteklių valdymo samprata žmonės dirbdami organizacijoje įgyja specialiųjų gebėjimų, atsiskleidžia jų talentai ir požiūriai, jie daro įtaką produktyvumui, kokybei bei pelningumui. organizacijos darbuotojai nustato visuotinas strategijas ir tikslus, sukuria projektavimo darbų sistemas, gamina prekes ir jas parduoda, dalyvauja kontroliuojant kokybę, paskirstant finansinius išteklius, rinkos produktus ir paslaugas. žmonės tampa „žmogiškaisiais ištekliais“ su savo vaidmenimis (veiklomis), kuriuos jie atlieka organizacijoje. kiekvieno darbuotojo vaidmuo tikslingai apibrėžtas, svarbu maksimalus asmeninis įnašas siekiant strateginių organizacijos tikslų. mokslinėje literatūroje (daugėlienė, marcinkevičienė 2009) pažymima, kad norėdami konkuruoti pasaulinėje ekonomikoje, besivystančių ir išsivysčiusių šalių ekonomikos dalyviai privalo turėti galimybę pritaikyti naujas žinias ir naujus darbo metodus. pripažįstama, jog šalių ekonomikos vystymąsi lemia šie reiškiniai: mokymasis, tyrimai, inovacijos, taip pat bendradarbiavimas su kitomis valstybėmis. verslas, vadyba ir studijos 2009 53 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o steoriškai žmogiškųjų išteklių vadyba nesiskiria nuo kitų išteklių organizacijoje valdymo, o praktiškai – skiriasi. egzistuoja du skirtingi požiūriai į žmogiškųjų išteklių vadybą. perspektyvų komplektas vertina žmones kaip potencialiai kūrybingus ir sudėtingus išteklius, kurių elgesys priklauso nuo skirtingų veiksnių: asmeninių savybių bei aplinkos įtakos. organizacinio elgesio teoretikai mano, kad žmogaus elgesį ir jo funkcijų (vaidmenų) organizacijoje atlikimą lemia keturios kintamos funkcijos: gebėjimas, motyvacija, vaidmens suvokimas ir situaciniai atsitiktinumai (mcshane 1995). žmogiškieji ištekliai nuo kitų darbdavio naudojamų išteklių skiriasi įvairiais gebėjimų lygmenimis (gabumais, įgūdžiais ir žiniomis), individualiais asmenybės bruožais, vaidmens suvokimu ir darbo patirties skirtumais dėl skirtingai suvokiamos motyvacijos ir įsipareigojimo bei lojalumo darbdaviui supratimo. kitaip tariant, žmogiškieji ištekliai nuo kitų skiriasi gebėjimu įvertinti ir suabejoti vadybos veiksmingumu. be to, šie ištekliai turi teisę burtis į atskiras grupes ir profesines sąjungas, ginančias jų ekonominius ir socialinius interesus. žmogiškųjų išteklių apibrėžimas neatsiejamas nuo sąvokos „valdymas“. ši sąvoka gali būti taikoma tiek socialinei grupei, tiek procesui. valdymas gali būti vertinamas kaip mokslas ar menas. klasikinio valdymo teoretikai šią sąvoką apibrėžia kaip „planavimą, organizavimą, vadovavimą, koordinavimą ir kontrolę“. šioje koncepcijoje valdymas visų pirma susijęs su organizacijos vidaus reikalais. vadybos perspektyvų koncepcija, akcentuojanti vaidmenų svarbą, pabrėžia, kad organizacija yra tikslinė visuomenės dalis, turinti savitą valdymo autonomiją. organizacinė vadyba nurodo tokias veiklas, kurioms nereikia formalaus vadybininko vaidmens, tačiau kurios bando ir daro įtaką, paskirstant išteklius, siekiant skatinti asmeninius tikslus. s. p. robbins (1991) tvirtina, kad „organizacijos veikla yra tiesiog gyvenimo faktas. tie, kurie nepajėgia pripažinti šio fakto, ignoruoja tikrovę, įrodančią, kad organizacija yra visuomenės dalis“. m. alvesson ir h. willmott (1996) teigia, kad vadovai gali jausti darbuotojų moralinę vertę ir turėti savo santykių su darbuotojais sistemą. neabejotina, kad daug valdymo energijos ir veiklos sujungiama su politine arena, kurioje asmenys valdo, konkuruoja ir bendradarbiauja (mintzberg 1983). žmogiškųjų išteklių vadybos diskusija pirmiausia buvo nukreipta į istorinę esminių personalo vadybos pokyčių raidą. žmogiškųjų išteklių vadybos debatai didžia dalimi susitelkė ties fundamentaliu klausimu, ar vyksta personalo 54 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s vadybos kaita, ar tai tik kitas personalo vadybos raidos etapas. žmogiškųjų išteklių vadybos evoliucija turėjo įtakos personalo valdymo aplinkai ir socialiniams veiksniams. buvo teigiama, kad personalo funkcija visada buvo lanksti, patikima istoriškai ir keičianti pagrindines vertes kaip makro aplinkybes, o žmogiškųjų išteklių vadyba atsirado kaip tam tikrų istorinių hipotezių rezultatas (bratton, gold 2001). šiuo požiūriu žmogiškųjų išteklių vadyba gali būti laikoma istoriniu personalo valdymo kaip gerovės etapu, darbo valdymo ar gamybos santykių produktu. a. sakalo (2008) teigimu, žmogiškųjų išteklių vadyba yra viena iš tų sričių, kurioje, derinant mokslinius tyrimus ir studijas, pasiekta reikšmingų rezultatų. anot r. čiutienės ir r. adamonienės (2009), svarbu, kad kiekvienas darbuotojas maksimaliai atskleistų savo potencialą ir asmenines bei profesines kompetencijas, efektyviai jas panaudotų organizacijos tikslams pasiekti. tik tinkamai motyvuotas ir galėdamas patenkinti savo interesus darbuotojas siekia geresnių darbo rezultatų. kuriantis žiniomis grindžiamai visuomenei ir ekonomikai, ypatingą svarbą įgauna žmogiškųjų išteklių vadybos vertė ir žmogiškųjų išteklių valdymo specialistų kompetencija (lobanova 2009). žmogiškųjų išteklių vadyba kreipiama į žmogiškųjų išteklių poreikių tenkinimą, veiklos planavimą, priežiūrą ir kontrolę. pasak j. bratton ir j. gold (2003), žmogiškųjų išteklių vadyba yra strateginė darbo santykių sritis, akcentuojanti žmonių gebėjimų naudojimą siekiant konkurencinio pranašumo. tai gali būti gera žinia tiems, kurie aktyviai dalyvauja žmogiškųjų išteklių valdymo procese, nes tai reiškia vis didesnį susidomėjimą efektyvia organizacijos veiklos plėtra, orientuota į žmones. 3. žmogiškųjų išteklių valdymo procesas žmogiškųjų išteklių valdymas – tai koordinuotas požiūris į žmonių valdymą, kuriuo siekiama integruoti ir suderinti įvairias personalo veiklas. j. a. f stoner ir kiti (1999) teigia, kad žmogiškųjų išteklių procesas – besitęsianti procedūra, ir jos paskirtis aprūpinti organizaciją reikiamais žmogiškaisiais ištekliais numatytoms pareigoms reikiamu laiku vykdyti. žmogiškųjų išteklių valdymą kaip tam tikro proceso modelį galima skaidyti į sudėtines dalis, atitinkančias svarbiausias šio proceso funkcijas: personalo priėmimą, atlyginimą, karjeros realizavimą, ugdymą, vertinimą, karjeros planavimą, diversifikavimą, skatinimą ir motyvaciją. būtent šios struktūrinės dalys išskiriamos tradiciniame personalo valdymo modelyje (1 pav.). verslas, vadyba ir studijos 2009 55 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o satlyginimas (materialiosios bei nematerialiosios jo formos) karjeros realizavimas įvertinimas ugdymas personalo priėmimas skatinimas diversifikavimas karjeros planavimas motyvacija 1 pav. tradicinis žmogiškųjų išteklių valdymo modelis (hanada 2000 ) fig. 1. traditional hrm model (hanada 2000 ) s. f. butkus (2003), nagrinėdamas darbuotojo veiklos valdymo klausimus, vartoja sąvoką personalo valdymas, kuri apima šias valdymo veiklas: būtinų organizacijos rezultatyviai ir efektyviai veiklai darbų analizę; darbuotojų telkimą; darbuotojų atranką; organizacijos ir būsimo jos nario santykių įteisinimą sudarant su juo darbo sutartį; darbuotojų rengimą eiti tam tikras pareigas; darbuotojų darbo saugą; priimto į darbą ir parengto konkrečiai organizacijos veiklai žmogaus darbo bei jo pastangų dirbti našiai ir gerai skatinimą; darbo vertinimą, kurio tikslas teisingai atsiskaityti su darbuotoju, parodyti tolesnio jo profesinio tobulinimosi kryptis; darbuotojų kvalifikacijos ugdymą; drausminimą esant nepatenkinamiems darbuotojų darbo rezultatams, priklausantiems nuo kai kurių darbuotojo charakterio bei temperamento ypatybių arba nuostatų, neatitinkančių organizacijoje galiojančių; darbo ginčų sprendimą, kai organizacijos tikslai nesutampa su žmonių tikslais, esant interesų susidūrimams, galintiems atnešti žalos tiek organizacijai, tiek jos nariams; darbuotojo atleidimą; kolektyvinės sutarties tarp organizacijos vadovybės ir samdomų darbuotojų atstovų sudarymą. r. ginevičius (1998) personalo valdymui priskiria darbuotojų planavimo, parinkimo, atlygio nustatymo, kvalifikacijos kėlimo, socialinės kultūrinės integracijos, didelėje organizacijoje centriniam personalo skyriui pavestas bendros personalo politikos užtikrinimo funkcijas. pasak r. ginevičiaus ir kitų (2006), personalo valdymas apibūdinamas kaip sprendimų parengimo, priėmimo ir jų įgyvendinimo veiksmų eiga reguliuojant šiuos procesus (zakarevičius 56 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s 2003): personalo verbavimo, parinkimo ir paskyrimo; darbo turinio nustatymo ir reglamentavimo; personalo vertinimo; motyvavimo (atlyginimas už darbą, papildomos paslaugos ir kt.); ugdymo ir saugaus darbo užtikrinimo. a. stankevičienė ir l. lobanova (2006) išskiria tokias personalo valdymo veiklas: darbų analizę, darbuotojų poreikio planavimą, darbuotojų paiešką, darbuotojų atranką ir samdą, darbuotojų adaptaciją, darbuotojų vertinimą, darbuotojų ugdymą ir tobulinimą, karjeros planavimą, vadovavimą darbuotojams ir jų motyvavimą. j. a. f. stoner ir kiti (1999) nurodo, jog žmogiškųjų išteklių valdymo procesas susideda iš septynių pagrindinių veiklų (2 pav.). žmogiškųjų išteklių planavimas mokymas ir tobulinimas socializacija veiklos vertinimas pareigų paaukštinimas, perkėlimas, pareigų pažeminimas ir atleidimas verbavimas atranka 2 pav. žmogiškųjų išteklių valdymo procesas organizacijoje (stoner et al. 1999) fig. 2. process of hrm in the organization (stoner et al. 1999) g. dessler (2001) nurodo šias personalo valdymo veiklas: lygių galimybių ir įvairovės valdymą; personalo planavimą ir verbavimą; darbuotojų testavimą ir atranką; darbuotojų mokymą ir tobulinimą; darbuotojų vertinimą; kompensavimą už darbą; darbo santykių valdymą ir kolektyvinę sutartį; karjeros valdymą ir teisingą elgesį su darbuotojais; darbo saugą ir darbuotojų sveikatos apsaugą. r. j. lavigna (2002) įvardija tokias personalo valdymo veiklas: darbuotojų verbavimą, darbuotojų atranką, darbuotojų paskirstymą, darbo apmokėjimą, įvairovės bei darbuotojų santykių valdymą. g. r. ferris (1991) išskiria keturias personalo valdymo veiklas: personalo atranką; personalo vertinimą; karjeros valdymą; darbo apmokėjimą. a. jenkins ir a. klarsfeld (2002) nurodo, jog tradicinės personalo valdymo veiklos apima personalo verbavimą, darbuotojų vertinimą, darbo apmokėjimą, darbuotojų mokymą bei kvalifikacijos kėlimą. g. strauss (2001) teigimu, tradicinės personalo valdymo funkcijos yra tokios: darbuotojų verbavimas, atranka, mokymas, darbo sauga, darbo vertinimas bei apmokėjimas. i. bakanauskienė (2002) išskiria devynias personalo valdymo verslas, vadyba ir studijos 2009 57 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o sveiklas: darbų analizę, personalo planavimą, verbavimą, atranką, adaptavimą (orientavimą), vertinimą, mokymą ir tobulinimą, personalo judėjimo valdymą, personalo kompensavimą ir apsaugą. j. s. bae ir c. rowley (2003), analizuodami žmogiškųjų išteklių valdymo veiklas, sudarė „keturių r“ (angl. 4rs) modelį, apimantį pagrindinių funkcijų kategorijas: darbuotojų verbavimo, stiprinimo, išsaugojimo bei judėjimo kompetencijas (angl. recruiting, reinforcing, retaining ir replacing) (3 pav.). darbuotojų judėjimo kompetencijos: įdarbinimo lankstumas, atleidimas darbuotojų išsaugojimo kompetencijos: mokymas, lavinimas, darbo formavimas darbuotojų stiprinimo kompetencijos: įvertinimas, skatinimas darbuotojų verbavimo kompetencijos: atranka 3 pav. žmogiškųjų išteklių valdymo veiklos kryptys (bae, rowley 2003) fig. 3. hrm activities (bae, rowley 2003) dauguma autorių: g. strauss (2001), g. dessler (2001), r. j. lavigna (2002), s. f. butkus (2003), j. a. f. stoner, r. e. freeman, d. r. gilbert (1999), r. ginevičius (1998) ir kiti įvardija tokias pat žmogiškųjų išteklių valdymo veiklas, tik skiriasi jų (veiklų) nuoseklumas. nenuoseklus veiklų nagrinėjimas trukdo nustatyti jų ryšius ir tarpusavio priklausomybę. atrinkus dažniausiai minimas žmogiškųjų išteklių valdymo funkcijos veiklas, galima nustatyti jų nuoseklumą: darbuotojų planavimas, atranka, verbavimas, darbo santykių įteisinimas ir valdymas, vertinimas, ugdymas, skatinimas, atlygis už darbą, karjeros planavimas ir valdymas, atleidimas iš darbo. žmogiškųjų išteklių valdymo sudedamosios dalys ir procesai yra tarpusavyje glaudžiai susiję, planuojami ir koordinuojami. visos veiklos turi jungiamąją grandį – darbuotoją, t. y. žmogiškuosius išteklius su jiems skirtomis funkcijomis, įteisintomis pareigybių nuostatuose, bei struktūroje apibrėžta darbo vieta. j. a. f. stoner ir kiti (1999) pasiūlė išsamų žmogiškųjų išteklių valdymo supratimo būdą, kai žmogiškųjų išteklių valdymas apibūdinamas ne vien kaip planavimas, atranka, mokymas ir vertinimas (4 pav.). išorinės aplinkos veiksniai (profsąjungos, interesai) bei situaciniai veiksniai (darbo birža) gali išplėsti žmogiškųjų išteklių valdymo žemėlapį, daryti įtaką žmogiškųjų išteklių valdymo politikai (4 pav.). 58 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s 4 pav. žmogiškųjų išteklių valdymo teritorijos žemėlapis (stoner et al. 1999) fig. 4. hrm area map (stoner et al. 1999 ) įtaką darantys veiksniai akcininkai vadovai darbuotojų grupės vyriausybė bendruomenė profsąjungos situaciniai veiksniai darbo jėgos charakteristikos verslo strategija ir sąlygos valdymo filosofija darbo rinka profsąjungos užduoties technologija įstatymai ir visuomenės vertybės žmogiškųjų išteklių valdymo politikos pasirinkimas darbuotojų sistemos žmogiškųjų išteklių judėjimas atlyginimo sistemos darbo organizavimo sistemos žmogiškųjų išteklių valdymo rezultatai įsipareigojimai kompetencijos atitiktis organizacijos tikslams sąnaudų efektyvumas ilgalaikės pasekmės individo gerovė organizacijos efektyvumas visuomenės gerovė 4. strateginis žmogiškųjų išteklių valdymas žmogiškųjų išteklių valdymo proceso negalima atskirti nuo strategijos organizacijos krypties. strateginis žmogiškųjų išteklių valdymas yra strateginio valdymo koncepcijos dalis organizacijoje. f. analoui ir a. karami (2003) teigia, kad žmogiškųjų išteklių vadybai skiriama daug dėmesio, tačiau taip pat dažnai ir nepaisoma jos vidinės sandaros organizacijoje. a. stankevičienė, r. korsakienė ir a. liučvaitienė (2009) teigia, kad žmogiškųjų išteklių valdymo strategijos rengimą riboja aukščiausio lygio valdovų požiūris ir darbuotojų elgsena. strateginio valdymo literatūroje pateikiamas strateginių sprendimų priėmimo procesas, grindžiamas žmogiškaisiais ištekliais. šio požiūrio šalininkai teigia, jog esminį vaidmenį kuriant konkurencinį pranašumą vaidina ne konkurencinė pozicija rinkoje, o organizacijos ištekliai ir gebėjimai, t. y. žmogiškieji ištekliai sunkiai konkurentų identifikuojami ir nukopijuojami (kazlauskaitė, bučiūnienė 2008). strateginė žmogiškųjų išteklių vadybos koncepcija yra charakterizuojama reikšmingumu, kuris pirmiausia priskiriamas aukščiausiajai vadovybei, po to žmogiškųjų išteklių strateginės politikos ir planavimo veiklai (mabey verslas, vadyba ir studijos 2009 59 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o set al. 1998; analoui et al. 2003). vienas iš pagrindinių skirtumų tarp tradicinių žmogiškųjų išteklių vadybos koncepcijų ir strateginio žmogiškųjų išteklių valdymo – tai laipsnis, kuriuo žmogiškųjų išteklių vadyba yra integruojama į strateginių sprendimų priėmimo procesus, savo ruožtu turinčius tendenciją nukreipti organizacijos pastangas išorinės aplinkos poveikiui įvertinti (guest 1990; analoui et al. 2003). strateginis žmogiškųjų išteklių valdymas yra apibūdinamas kaip darbuotojų valdymas organizacijoje, nukreiptas į konkurencinio pranašumo kūrimą ir išlaikymą (miller 1989). c. j. fombrun ir kiti (1984) apibūdino strateginį žmogiškųjų išteklių valdymą kaip techninę sistemą, kuri leidžia atlikti intervencijas didinant darbo našumą organizacijoje. strateginis žmogiškųjų išteklių valdymas yra sprendimų priėmimo procesas organizacijoje (armstrong 2006). jis apibūdina ryšį tarp žmogiškųjų išteklių vadybos ir strateginio valdymo organizacijoje siekiant bendrų tikslų. manoma (armstrong 2006), kad strateginę žmogiškųjų išteklių valdymo koncepciją pirmą kartą suformulavo c. j. fombrun, n. m. tichy ir m. a. devanna (1984), kurie rašė, kad yra šie esminiai elementai, būtini organizacijos efektyviam funkcionavimui: misija ir strategija, organizacijos struktūra ir žmogiškųjų išteklių vadyba. anot r. ginevičiaus ir bendraautorių (2006), daug dėmesio turi būti skiriama strateginiam situacijos apibūdinimui: vizijai, misijai, tikslų sistemai. tiek vizijos, tiek misijos kūrimo etape ryškūs išorinės ir vidinės aplinkos lygmenys. renkantis strategiją siūloma atsižvelgti į organizacijos stipriąsias ir silpnąsias ypatybes, jos tikslus ir finansinius išteklius, darbuotojo kvalifikaciją ir kt. dabartiniu žmogiškųjų išteklių vadybos požiūriu, organizacijos ir žmogiškųjų išteklių strategijos turi sudaryti nedalomą visumą, nes žmonės yra lemiamas organizacijos klestėjimo veiksnys. pasak l. yaping ir j. jingfang (2007), strateginiai bet kokios organizacijos tikslai kinta kartu su išoriniais veiksniais, technologine pažanga ir laiko tėkme. taip pat kinta ir darbuotojų unikalumas bei vertė. todėl strateginiai organizacijos tikslai turi būti suderinti su išorine aplinka. mokslinė diskusija apie strateginį valdymą ir žmogiškųjų išteklių vadybą nukreipta į organizacinę sėkmę ir efektyvumą (guest 1990; lahteenmaki et al. 1998; analoui et al. 2003). l. dyer (1984) apibūdino žmogiškųjų išteklių strategiją kaip modelį, kuris atsiranda iš svarbių sprendimų, ypač nurodančių valdymo tikslus ir būdus, kurie yra ir bus naudojami tiems tikslams pasiekti. yra žinoma, kad siekiant organizacijos veiklos efektyvumo ir našumo susiformavo teorijos, kurios padėjo efektyviau valdyti žmogiškuosius išteklius. 60 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s kaip teigia j. a. f. stoner ir kiti (2006), svarbūs yra įvairių autorių nagrinėti žmogiškųjų išteklių vadybos aspektai: follett propagavo komandinį darbą, ir remiantis jos pasiūlytu holistiniu – kontrolės metodu įvertinti ne tik individai ar grupės, bet ir socialinės aplinkos veiksniai; barnard suformulavo teiginį, kad organizacija gali efektyviai veikti ir iš– gyventi tik tuo atveju, jei jos tikslai yra suderinti su darbuotojų tikslais ir poreikiais, autorius pripažino „neformalios organizacijos“ svarbą ir universalumą, tikėjo abejingumo zona (savarankiška pavaldinio veikla); maslow klasifikavo žmonių veiklą skatinančius poreikius pagal tam tikrą – hierarchiją: fiziologiniai, saugumo, socialiniai, pagarbos, saviraiškos; herzberg empiriniais tyrimais nustatė, kad pasitenkinimą darbu lemia dviejų – rūšių veiksniai: aktualizacijos ir higieniniai; mayo ir kiti, remdamiesi atliktais eksperimentais, įrodė, kad darbo našumo – augimą lemia sudėtinga motyvacijų seka. darbuotojai dirbtų geriau, jei tikėtų, kad vadovybė rūpinasi jų gerove, o jų tiesioginiai vadovai skiria jiems daugiau dėmesio. šis reiškinys pavadintas hawthorne efektu; mcgregor išskyrė dvi pagrindines alternatyvias prielaidas apie žmones ir jų – požiūrį į darbą. „teorija x“, pasak mcgregor, išryškina tradicinį motyvacijos požiūrį – darbas nėra malonus darbuotojams, todėl jų motyvaciją būtina skatinti jėga, pinigais ar pagyrimais. „teorija y“ daro priešingą prielaidą, kad žmonės iš prigimties yra motyvuoti dirbti ir gerai atlikti darbą. e. chlivickas ir j. raudeliūnienė (2007) pažymi, kad vienas iš pagrindinių personalo vertinimo kriterijų yra personalo valdymo efektyvumas, t. y. reikia nustatyti, ar efektyviai įgyvendinami tikslai ir koks yra individualus pasitenkinimas dalyvaujant grupės veikloje. personalo valdymo efektyvumui vertinti siūloma taikyti tokius kriterijus: karjeros galimybių, personalo kompetencijos, darbuotojų ir darbo vietų suderinamumo, kvalifikacijos tobulinimo galimybių, komandinio darbo kokybės ir skatinimo galimybių, darbo rezultatų pripažinimo ir įvertinimo, aktyvumo skatinimo, darbuotojų dalyvavimo priimant svarbius sprendimus, darbuotojų socialinės apsaugos. siekiant, kad darbuotojų kompetencijos taptų esminėmis organizacijos kompetencijomis, jos turi būti ugdomos ir išlaikomos organizacijoje remiantis efektyviu žmogiškųjų išteklių valdymu (kazlauskaitė, bučiūnienė 2008). žmogiškųjų išteklių sėkmė, integruojantis daugiakultūrėje europos darbo jėgos rinkoje, turinčioje skirtingas mokymo ir švietimo sistemas bei tradicijas žmogiškųjų išteklių valdymo srityje, visų pirma priklauso nuo individo kompetencijų (savanevičienė verslas, vadyba ir studijos 2009 61 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o set al. 2008). e. chlivickas (2006) teigia, kad es direktyvos reguliuoja socialinę ekonominę plėtrą ir technologinę pažangą visose gyvenimo srityse, todėl turi būti adekvačiai ugdomi ir žmogiškieji ištekliai. žmogiškųjų išteklių ugdymas grindžiamas strateginiais sprendimais, iš kurių matomas siekis realizuoti es plėtrai būdingus standartus ir nuostatas. j. bivainis ir r. morkvėnas (2008) siūlo žmogiškųjų išteklių žinių potencialo vertinimo modelį atsižvelgdami į tokius veiksnius: išsimokslinimą, profesinę patirtį, pareigų lygį, sprendimų priėmimo mastą ir atsakomybę, savarankiškumą darbe, darbo kultūrą, technologijų naudojimą, darbo sudėtingumą, motyvaciją dirbti, darbuotojo indėlį įgyvendinant organizacijos tikslus. j. a. f. stoner ir bendraautoriai (1999) teigia, kad žmogiškųjų išteklių valdymo proceso efektyvumui organizacijoje vertinti harvardo tyrinėtojai pasiūlė „keturių c“ modelį, parodantį žmogiškųjų išteklių valdymo rezultatus: įsipareigojimai (angl. commitment), kompetencija (angl. competence), atitikimas (angl. congruence) ir sąnaudų efektyvumas (angl. cost effectiveness). dideli įsipareigojimai reiškia geresnį darbuotojų ir vadovų ryšį, aukšta kompetencija – kad darbuotojai turi visapusiškų įgūdžių ir, kai reikia, gali imtis naujų vaidmenų bei darbų. sąnaudų efektyvumas reiškia, kad žmogiškųjų išteklių sąnaudų atlyginimas, apdovanojimai yra tokie pat ar mažesni nei konkurentų, geresnis atitikimas – kad visos organizacijos tikslas yra bendras ir darbuotojai bendradarbiauja spręsdami problemas, kylančias dėl išorės aplinkos pokyčių. formuodama žmogiškųjų išteklių valdymo politiką, stiprinančią įsipareigojimus, kompetenciją, atitikimą ir sąnaudų efektyvumą, organizacija didina savo galimybes prisitaikyti prie aplinkos pokyčių. 5. išvados žmogiškųjų išteklių valdymas – tai koordinuotas požiūris į žmonių valdymą, kuriuo siekiama integruoti ir suderinti įvairias personalo funkcijas. žmogiškųjų išteklių valdymo sistemos elementai aptariami daugelio mokslininkų darbuose, tačiau skiriasi nuoseklumas. nenuoseklus žmogiškųjų išteklių valdymo sistemos elementų nagrinėjimas trukdo nustatyti jų ryšius ir tarpusavio priklausomybę. įvertinus sistemos elementų turinį, galima nustatyti jų nuoseklumą: planavimas, atranka, verbavimas, darbo santykių įteisinimas ir valdymas, vertinimas, ugdymas, skatinimas, atlygis už darbą, karjeros planavimas ir valdymas, atleidimas iš darbo. žmogiškųjų išteklių valdymo sudedamosios dalys ir procesai yra tarpusavyje glaudžiai susiję, planuojami ir koordinuojami. visos veiklos turi 62 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s jungiamąją grandį – darbuotoją, t. y. žmogiškuosius išteklius su jiems priskirtomis funkcijomis, įteisintomis pareigybių aprašymuose, bei organizacijos valdymo struktūroje apibrėžiama darbo vieta. naujos tendencijos skatina glaudžiau sieti žmogiškųjų išteklių valdymą ir organizacijos strategiją. „keturių c“ modelis: kompetencija, įsipareigojimai, atitiktis organizacijos tikslams ir sąnaudų efektyvumas, naudingas 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e.; gilbert, d. r. 2006. vadyba. kaunas: poligrafija ir informatika. 662 p. isbn 9986-850-30-4. strauss, g. 2001. hrm in the usa: correcting some british impressions, international journal of human resource management 12(6): 873–897. zakarevičius, p. 2003. pokyčiai organizacijose: priežastys, valdymas, pasekmės: monografija. kaunas: vdu leidykla, 176 p. verslas, vadyba ir studijos 2009 65 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o shuman resources: strategic management aspects e. chlivickas, p. papšienė, a. papšys summary the following processes pose challenges for the organization: self-establishment in the market economy, restructuring, globalization, development of techniques and technology, formation of information society, development of a knowledge economy, change of the society economic situation and democratic processes. in the organization which is constantly changing a new approach to the organization is formed. it is viewed as an operating system where company employees, i.e., human resources, become the most important and the most active part of the system, determining the efficiency of the pursuing of organizational goals. in the constantly changing organization a new approach to the organization is formed. it is viewed as an operating system where company employees, i. e., human resources, become the most important and the most active part of the system, determining the efficiency of the pursuing of organization objectives. human resource management process cannot be separated from the strategy. strategic human resource management is a part of strategic management concept in the organization. theoretical provisions for the management of human resources, presented in the academic literature, confirm the influence of this functional area of management on the overall organization performance results. for the organization, which is operating in the global market, it is essential to manage existing or potential labor resources effectively. one of the main staff evaluation criteria is the effectiveness of personnel management. new tendencies encourage closer association of human resource management with organization strategy. “four-c” model competence, commitment, compliance and cost efficiency is helpful in assessing the effectiveness of organization human resources policies conformity with its strategy. keywords: human resource, human resource management, strategic management. verslas, vadyba ir studijos 2009 139 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai verslo etikos elementų įtakos paslaugų įmonės veiklos rezultatams analizė kristina luebcke k.luebcke@gmail.com vilniaus gedimino technikos universitetas, socialinės ekonomikos ir vadybos katedra 1. įvadas verslo ir rinkodaros etikos problemas lietuvoje nagrinėjo šie autoriai: socialinės etinės rinkodaros koncepcijos raidą ekologinių kriterijų požiūriu analizavo v. tamulienė (2002), verslo etiką kaip reiškinį tyrė a. paulavičiūtė (2004), r. razauskas (1994), verslo ir rinkodaros etiką lietuvoje tyrinėjo n. vasiljevienė (2004), l. abromaitytė-sereikienė (2008), g. beržinskas (2002), v. pruskus (1997, 2003) ir kiti. ryškiausiais verslo etikos tyrinėtojais galima laikyti t. kuhn (1970), r. t. de george (1995), f. kotler (котлер 2001), a. milts (2001), l. trevino ir k. nelson (2006), j. a. f. stoner, e. r. freeman, d. r. j. gilbert (2006), verslo etiką tyrinėjo c. ogrean (ogrean et al. 2008), j. saee (2005), z. dvořáková (2005). nepaisant to, nėra vienos nuomonės dėl atskirų etikos elementų įtakos įmonės veiklos rezultatams. šis tyrimas yra skirtas nustatyti, ar atskiri verslo etikos elementai daro įtaką paslaugų įmonės veiklos rezultatams. buvo tikrinama prielaida, kad yra galimybė įvertinti atskirų etikos elementų įtakos dydį. tyrimo metu nustatyta kad, verslo etikos normų laikymasis daro didelę įtaką įmonės veiklos rezultatams. nustačius atskirų verslo etikos ir paslaugų įmonės veiklos rezultatų tarpusavio koreliacinį priklausomumą, išryškėjo didžiausia atskirų verslo etikos elementų įtaka atskiriems įmonės konkurencingumo elementams. išanalizavus metinės paslaugų įmonių veiklos rezultatus, atspindėtus verslo masinėse informacijos priemonėse, nustatyta tiesioginė verslo etikos įtaka įmonės pelnui ir pardavimų rezultatams. straipsnyje pateikiamas svarbiausių verslo etikos elementų įtakos paslaugų įmonės veiklos rezultatams modelis, kuris tinka visoms paslaugų sektoriaus 140 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a įmonėms. temos naujumas pasireiškia tuo, kad iki šiol nebuvo nustatyta tiesioginė verslo etikos įtaka įmonės pelnui ir pardavimų rezultatams. 2. verslo etikos esmės traktuotės mokslinėje literatūroje v. kučinsko (2007) nuomone, verslas susijęs ir su visuomenės poreikių tenkinimu ir, žinoma, siekiu gauti pelną, tenkinant tą poreikį. verslas pats savaime nėra nei blogis, nei gėris, nei taurus, nei žemas. jis tik atspindi žmogaus pastangą nesitenkinti tuo, koks yra pasaulis, ir tuo, kas jis pats yra. apibendrinant galima teigti, jog verslas – tai aktyvi žmonių veikla, siekiant pelno. verslininkas, kaip rinkos subjektas, yra šio fenomeno dalis. jo elgesys, moralės principai, normos, vertybės yra verslo etikos objektas. jauni verslininkai, norėdami pasiekti visuomeninės ir asmeninės gerovės, pirmiausiai privalo išsiugdyti netoleranciją neetiškam elgesiui, pripažinti kito žmogaus svarbą ir pagarbą jam bei suprasti moralinio vystymosi naudą. v. pruskus (2003) teigia, kad mes visi esame verslo dalyviai (vieni kaip darbdaviai, kiti kaip samdomi darbuotojai), todėl neišvengiamai esame priversti egzistuojančių santykių tikrovę suvokti ir atitinkamai vertinti. žinoma, tie vertinimai bus skirtingi, nes skirtingi ir mūsų statusai. nepaisant to, savo vertinimais ir konkrečiu elgesiu mes kuriame ir įtvirtiname tam tikrą verslo etiką. verslo etika turi gausybę apibrėžimų. šio straipsnio autorės nuomone, v. j. bakštanovskij, v. kundrotas, j. v. sogomonov, n. vasiljevienė ir d. vyšniauskienė verslo etiką apibūdino išsamiausiai (1 lentelė). 1 lentelė. verslo etikos apibrėžimai table 1. definitions of business ethics autorius verslo etikos apibrėžimas v. j. bakštanovskij, j. v. sogomonov (2001) tai specifinė visuomeninė gerovė, socialinės bei ūkinės etikos posistemis, iš dalies sutampantis su darbo morale bei ypatingu profesinės moralės sektoriumi d. vyšniauskienė, v. kundrotas (2002) tai etikos sritis, kuri atsiranda verslui ir etikai sąveikaujant, moralės principų, normų, taisyklių, padedančių elgtis verslo pasaulyje, visuma n. vasiljevienė (2001) tai integruotų mokslinių žinių visuma, tarpdisciplininis mokslas, paremtas ne tik praktinės etikos teorija, bet ir konkrečių praktikos sferų žiniomis n. vasiljevienė (2006) tai mokslinio pažinimo ir taikomoji disciplina, nagrinėjanti moralinių principų ir moralinių standartų, darančių įtaką elgsenai verslo pasaulyje, taikymą konkrečiose situacijose verslas, vadyba ir studijos 2009 141 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a galima teigti, kad verslo etikos kilmė neabejotinai filosofinė. jau neįsivaizduojame kasdienio gyvenimo be tam tikrų normų bei taisyklių. taip pat yra ir su verslu. verslo etika verslininko reikmėms adaptuoja duomenis apie pagrindines etikos sąvokas, dėsningumus, kolektyvinių santykių formavimą, dorovinių vertybių poveikį visuomenei ir darbo stiliaus moralinius reikalavimus. etika ne tik padeda užmegzti ir išlaikyti naujus ryšius (tapo vadybos disciplina), bet ir laimėti konkurencinėje kovoje. nuo įmonės vadovo sugebėjimo vadovautis verslo etikos taisyklėmis didžiąja dalimi priklauso jo vadovaujamos įmonės darbuotojų pasitenkinimas darbu, kolektyvo psichologinis klimatas, didesnis darbo efektyvumas ir produktyvumas. konkurencinės rinkos sąlygomis ilgalaikių santykių su vartotojais kūrimas, palaikymas ir stiprinimas suprantamas kaip bet kurios įmonės sėkmingos veiklos pagrindas (dovalienė et al. 2007). specialistų nuomone, išlaikyti senus klientus yra lengviau negu pritraukti naujų. todėl visa įmonės, nuo viršaus iki apačios, veikla turi būti nukreipta į klientą. 2. verslo etikos įtakos paslaugų įmonės konkurencingumui analizė didelė teorinės laisvosios rinkos dalis pagrįsta vadinamuoju teisingos konkurencijos modeliu. daugelyje šalių sąžininga konkurencija reglamentuojama įstatymų. konkurencija yra viena iš laisvosios rinkos sistemos dalių, kuri nulemia rinkos efektyvumą ir teikia naudą vartotojui, tačiau konkurencinė rinka veikia pirkėjo labui tik tuo atveju, jei konkuruojama sąžiningai. paslaugas teikianti įmonė yra arčiausiai vartotojo, tad jai ypač svarbu išlaikyti gerą įvaizdį konkurencinėje kovoje, net jei kyla pagunda pažeisti garbingumo, sąžiningumo principus, siekiant asmeninės naudos savo įmonei. paslaugos teikimas yra procesas, kuris egzistuoja tol, kol yra teikiama ir vartojama. tai neišvengiamai skatina vartotoją ir paslaugos teikėją dalyvauti paslaugos teikimo procese, sudaro kokybės nepastovumą (bivainis, drejeris 2006). jei verslo etikos normų laikymasis prisideda prie paslaugų įmonės įvaizdžio formavimo, kyla klausimas, ar sąžininga, civilizuota konkurencija prisideda prie paslaugų įmonės veiklos efektyvumo padidinimo? jei taip, kurie verslo etikos elementai daro didžiausią įtaką tam tikriems įmonės veiklos efektyvumo elementams? siekiant išsiaiškinti respondentų pastebėjimus apie verslo etikos įtaką paslaugų įmonės konkurencingumui, 2008 m. buvo atliktas tyrimas. apklausoje dalyvavo skirtingą darbo stažą ir išsilavinimą turintys 133 respondentai, dirbantys lietuvos paslaugų įmonėse. tyrimo imtis buvo formuojama tikimybinės 142 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a atrankos būdu, vadovaujantis atsitiktinės ir patogios atrankos principais. demografiniu požiūriu, apklausoje dalyvavo maždaug tiek pat vyrų (49,6 %) ir moterų (50,4 %), 11 % vadovų, 34 % administracijos atstovų ir 55 % kitų darbuotojų. apklausoje dalyvavusių respondentų išsilavinimas: nebaigtas vidurinis – 3 %, vidurinis/specialusis vidurinis – 11 %, nebaigtas aukštesnysis/aukštesnysis – 22 %, nebaigtas aukštasis/aukštasis – 64 %. daugiausia apklausta iki 24 metų (39 %) ir nuo 25 iki 34 metų amžiaus (30 %) respondentų. taip pat tyrime dalyvavo ir 35–44 (14 %), 45 ir daugiau metų (17 %) turintys specialistai. iš jų daugiau nei 20 metų darbo stažą turėjo 17 %, nuo 11 iki 20 metų –12 %, nuo 5 iki 10 metų –12 % respondentų. su etikos dalykais savo įmonėse labai dažnai (20 %), dažnai (24 %) ir kartais (40 %) susiduria beveik visi respondentai. 5 % pažymėjo, kad nepastebėjo etikos reikalavimų būtinumo darbo vietoje ir 12 % apklaustųjų net nesusimąstė apie tai. administracijos atstovai (18 %) bei kiti darbuotojai (20 %) mažiausiai kreipia dėmesį į verslo etiką ir jos būtinumą paslaugas teikiančioje įmonėje. peršasi dar viena mintis, kad paminėti darbuotojai nežino verslo etikos apibrėžimo ir kaip ji pasireiškia verslo aplinkoje. bendra paslaugų kokybė daro didelę įtaką rinkos pasiskirstymui, pelningumui, pardavimų rezultatams, klientų pasitenkinimui ir lojalumui (urban 2009). vadybininkas, parduodamas paslaugą, komunikuoja su klientu. šiame kontekste dar aktualesnis tampa etiško elgesio darbe mokymo poreikis ir tokiuose mokymuose įgytų žinių įtakos įmonės veiklos rezultatams tyrimai. tyrime dalyvavę specialistai (39 %) pažymėjo, kad jų atstovaujamose įmonėse buvo organizuojamas etiško elgesio darbe mokymas. nors labai retai nurodoma, jog tokie kursai yra privalomi (6 %), tačiau pripažįstama, kad neretai jie – tiesiog darbuotojų mokymo fragmentas (21 %). etinio mokymo labiausiai pasigenda didelį darbo stažą turintys darbuotojai (57 %). dalyvavusieji įvairiuose etinio mokymo kursuose buvo prašomi atsakyti į klausimą, ar ten įgytos žinios padeda jiems pagerinti pardavimų rezultatus. kadangi didelė dalis nurodė, jog visai nesinaudoja tokio pobūdžio informacija, o 20 % dalyvavusiųjų nepajuto jų teikiamos naudos, manoma, kad etiniu mokymu lietuvoje labai dažnai užsiima neprofesionalūs etikos mokytojai, todėl šie mokymai nepasiekia tikslo. šiais laikais bendra socialinė atsakomybė yra neatskiriama verslo veiklos savybė, daranti didelę įtaką organizacijos valdymo procesams (übius, alas 2009). efektyvi vadyba neatsiejama nuo etikos. organizuojant etinį mokymą įmonėje galima ne tik pažadinti etinį sąmoningumą, bet ir kryptingai formuoti individų nuostatas jų dalykinės veiklos etiniam pagrindimui, o šiuolaikinės verslo etikos principai gali būti diegiami ne tik etiniu darbuotojų mokymu, bet verslas, vadyba ir studijos 2009 143 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a ir įtraukiant juos į įmonės etikos kodekso kūrimą. tyrimas parodė, kad lietuvoje kol kas labai mažai įmonių turi savo etikos kodeksus (20 %), o darbuotojai ne tik nedalyvauja juos rengiant, bet ir menkai nutuokia apie jų paskirtį. 23 % respondentų net nežinojo, jog įmonėse gali būti taikomi etikos kodeksai. į klausimą ar etikos kodekso taikymas, jeigu jis yra, prisidėjo prie jūsų įmonės veiklos pelningumo rodiklių didinimo? 42 % respondentų atsakė teigiamai: 26 % – prisidėjo, 6 % – mažai prisidėjo ir 10 % – labai prisidėjo. paslaugų įmonių, kurioms gresia bankrotas, darbuotojai, respondentų nuomone, mažiausiai rūpinasi verslo etikos kodeksais. modernioje visuomenėje teigiamo požiūrio ir palaikymo gali sulaukti tik tos įmonės, kurios savo tikslų siekia nepažeisdamos visuotinai pripažįstamų socialinių ir etinių elgesio normų (juščius, snieška 2008). etikos normų laikymąsi kaip sėkmės garantą pripažįsta dauguma labai skirtingai savo įmonės ekonominę būklę įvertinusių respondentų. tačiau įmonės veiklos stabilumas ir etiška elgsena jo siekiant vertinama skirtingai (1 pav.). 1 pav. įmonės veiklos rezultatų priklausomybės nuo etikos normų laikymosi vertinimas, % fig. 1. dependence evaluation of enterprise performance results and compliance with ethical assessment of standards, % daugelis respondentų (73 %) pritarė nuomonei, jog etikos normų laikymasis daro įtaką įmonės įvaizdžiui ir formuoja visuomenės požiūrį į šią įmonę. 57 % respondentų paminėjo, kad tai lemia ir įmonės augimą rinkoje, inovacijų diegimo tempus, pardavimų rezultatus bei pelną (66 %). norint atskirti, kas gali daryti (ir daro) įtaką įmonės veiklos efektyvumui ir daro netiesioginę įtaką konkurenciniam pranašumui, verta panagrinėti 2 paveiksle pateiktus duomenis. remiantis tyrime dalyvavusių specialistų atsakymais, prie paslaugų įmonės veiklos rezultatų didinimo labiausiai prisideda darbuotojų teisių nepažeidimai – 75 %, informacijos saugumo užtikrinimas – 73 %, paslaugų saugumas – 68 %. 144 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a greita reakcija į klientų pageidavimus (49 %), patikimos informacijos apie teikiamas paslaugas garantavimas ir dora konkurencija (50 %), respondentų pastebėjimu, mažiau prisideda prie paslaugų įmonės veiklos rezultatų didinimo. 2 pav. verslo etikos veiksnių įtakos įmonių konkurencingumui vertinimas, % fig. 2. the rating of enterprises competitiveness affected by business ethics, % ekonomikos nuosmukio metu verslininkas priverstas apeiti kai kuriuos įstatymus, vengti didelių mokesčių, ieškoti spragų pasirašytose sutartyse su įmonės tiekėjais, paslaugų gavėjais, darbuotojais. kyšiais siekiama greičiau sutvarkyti reikalus, padidinti įmonės pelną atsisakant tarpininkų, išleidžiant pinigus neva reprezentatyviam įmonės įvaizdžiui palaikyti, užuot panaudojus juos bendram įmonės etiškam elgesiui ugdyti. siekdami veiklos efektyvumo, jauni verslininkai priversti pasikliauti abejotina praktika, nes, nesant rinkos stimulų, kyšiai bei manipuliacija tampa lengviausiu būdu sėkmingai pirkti ir parduoti. tokių verslininkų nuomone, nustačius etišką elgesį, pelnas taptų auka. etiško elgesio nauda labiausiai vertinama tarp didžiausią darbo stažą turinčių respondentų. šie rodikliai parodo, jog vyresnio amžiaus respondentai visai kitaip vertina verslo aplinką, jų požiūris į darbo santykius kitoks nei jaunesnių respondentų. daugeliu atvejų verslo etika traktuojama kaip vaistas, kaip kertinis filosofinis akmuo, tinkantis viskam, arba kaip dar viena vadybos technika (gasparski 2001), o įvaizdis rinkodaros instrumentais kuriamas ir keičiamas daug lengviau verslas, vadyba ir studijos 2009 145 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a nei reputacija, kuriai poveikį daro ne tik komunikacinės programos, bet ir visi jos veiksmai (smaižienė, jucevičius 2009). pateikti duomenys rodo esminius vertybių skirtumus, suvokiant verslo etikos diegimo paslaugų įmonėje būtinybę ir numanant teigiamas veiklos pasekmes. siekiant nustatyti atskirų verslo etikos elementų įtaką paslaugų įmonės veiklos rezultatams buvo nustatytas atitinkamų etikos elementų koreliacinis priklausomumas įmonės veiklos rezultatams. koreliaciniam ryšiui neparametriniu įvertinimo metodu tarp dviejų alternatyvių požymių išmatuoti dažniausiai naudojami du rodikliai: asociacijos ir kontingencijos (bartosevičienė 2001). šiems rodikliams apskaičiuoti sudaroma 2 lentelė. kiekvienas langelis atitinka vieno ar kito požymio žinomą alternatyvą. 2 lentelė. koreliacinio ryšio rodiklių taikant neparametrinį įvertinimo metodą skaičiavimo lentelė (bartosevičienė 2001) table 2. communication correlation indicators calculated by using non-parametrical method (bartosevičienė 2001) įverčiai taip ne suma taip a b a + b ne c d c + d suma a + c b + d n = a + b + c + d asociacijos koeficiento dydis skaičiuojamas pagal (1) formulę: k ad bc ad bcasociacijos = − + . (1) tais atvejais, kai iš lentelėje esančių 4 rodiklių vieno nėra, asociacijos koeficiento dydis bus lygus vienetui, tada pirmenybė teikiama kontingencijos koeficientui. kontingencijos koeficiento dydis skaičiuojamas pagal (2) formulę: k ad bc a b b d a c c d asociacijos = − + + + =( )( )( )( ) . (2) pagal šias dvi formules buvo nustatytas atskirų verslo etikos elementų ir paslaugų įmonės veiklos rezultatų tarpusavio koreliacinis priklausomumas (3 lentelė). jam nustatyti buvo panaudoti apklausos duomenys. 146 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a 3 lentelė. atskirų verslo etikos elementų ir paslaugų įmonės veiklos rezultatų tarpusavio koreliacinis priklausomumas table 3. the dependency correlation between separate business ethics elements and service companies performance results verslo etikos elementai pa sl au gų įm on ės ve ik lo s re zu lta ta i n ep až ei dž ia m os d ar bu ot oj ų te is ės d or a ko nk ur en ci ja e ko lo gi ni ų re ik al av im ų la ik ym as is g re ita re ak ci ja į kl ie nt ų pa ge id av im us in fo rm ac ijo s sa ug um o už tik ri ni m as in ov ac ijų s ka tin im as įs ip ar ei go jim ų la ik ym as is k om un ik av im o et ik a m ok es tin ių re ik al av im ų la ik ym as is pa sl au gų s au gu m as pa tik im os in fo rm ac ijo s ap ie te ik ia m as pa sl au ga s ga ra nt av im as r ūp in im as is d ar bo s ąl yg om is te is ės au go s re ik al av im ų la ik ym as is v ad ov av im o st ili us pardavimo rezultatai –0,17 –0,63 –0,56 –0,31 0,20 0,66 –0,30 –0,37 0,44 0,14 0,21 0,04 –0,19 –0,25 pelnas 0,15 –0,07 0,12 –0,39 –0,09 –0,19 0,58 0,43 0,63 –0,39 0,35 –0,30 0,26 0,08 jei asociacijos koeficientas yra didesnis arba lygus 0,5, tai ryšys tarp tiriamų duomenų yra esminis. taigi, didžiausią įtaką paslaugų įmonės veiklos efektyvumui, specialistų pastebėjimu, daro pelnui patikimos informacijos apie teikiamas paslaugas garantavimas (0,58) ir mokestinių reikalavimų laikymasis (0,63), o pardavimų rezultatams – įsipareigojimų laikymasis (0,66). sėkmingai dirbančios įmonės dažnai teikia pranešimus spaudai apie pasiektus savo įmonės veiklos rezultatus ir novatoriškas idėjas ateities planams įgyvendinti. ištyrus 12 skirtingų paslaugas teikiančių įmonių metinės veiklos ataskaitas išanalizuota verslo etikos elementų įtaka jų pasiektam veiklos efektyvumui. verslininkai labiausiai tikisi, kad verslo etika padės padidinti įmonės pelną ir pardavimų rezultatus. siekiant išsiaiškinti, kiek realiai verslo etika prisidėjo prie kiekvienos iš nagrinėjamos paslaugas teikiančios įmonės veiklos rezultatų buvo nustatyta, kuris iš panaudotų verslo etikos elementų turėjo didžiausią įtaką paslaugų įmonės pardavimams (4 lentelė) ir pelnui (5 lentelė). verslas, vadyba ir studijos 2009 147 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a 4 lentelė. tiesioginė atskirų etikos elementų įtaka įmonės pardavimų rezultatams table 4. direct influence of separate ethical elements on the results of sales enterprises situacijos nr. elementas lt suma, lt 8 greita reakcija į klientų pageidavimus –58 822,5 44 175 įsipareigojimų laikymasis 125 235 paslaugų saugumas 26 565 patikimos informacijos apie teikiamas paslaugas garantavimas –56 925 9 greita reakcija į klientų pageidavimus –146 320 89 680 įsipareigojimų laikymasis 311 520 paslaugų saugumas 66 080 patikimos informacijos apie teikiamas paslaugas garantavimas –141 600 10 greita reakcija į klientų pageidavimus –993 033 –2 979 100inovacijų skatinimas –800 833 komunikavimo etika –1 185 233 11 inovacijų skatinimas –750 000 1 650 000įsipareigojimų laikymasis 1 980 000 paslaugų saugumas 420 000 12 greita reakcija į klientų pageidavimus –643 250 1 452 500 įsipareigojimų laikymasis 1 369 500 paslaugų saugumas 290 500 vadovavimo stilius 435 750 gauti rezultatai rodo, kad verslo etika prisideda prie pardavimų rezultatų padidėjimo. padidinti pardavimus padėjo vadovavimo stilius, nuolatinis veiklos tobulinimas ir paslaugų saugumas, klientų pasitikėjimo didėjimas, nes buvo laikomasi įsipareigojimų. matyti, kad etiškas elgesys teikia įmonei realią naudą. verslas yra paremtas santykiais su klientais, darbuotojais, tiekėjais, šių santykių pagrindas – pasitikėjimas. 148 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a 5 lentelė. tiesioginė atskirų etikos elementų įtaka įmonės pelnui table 5. direct influence of separate ethical elements on the profit of enterprises situacijos nr. elementas lt suma, lt 1 paslaugų saugumas –90 675 44 175patikimos informacijos apie teikiamas paslaugas garantavimas 134 850 2 greita reakcija į klientų pageidavimus –6 526 000 –5 856 666,67komunikavimo etika 7 195 333,33 paslaugų saugumas –6 526 000 3 greita reakcija į klientų pageidavimus –8 762 000 –20 894 000 informacijos saugumo užtikrinimas –2 022 000 įsipareigojimų laikymasis –4 268 666,67 komunikavimo etika 9 660 666,67 paslaugų saugumas –8 762 000 rūpinimasis darbo sąlygomis –6 740 000 4 greita reakcija į klientų pageidavimus –12 298 000 –29 326 000 informacijos saugumo užtikrinimas –2 838 000 įsipareigojimų laikymasis –5 991 333,33 komunikavimo etika 13 559 333,33 paslaugų saugumas –12 298 000 rūpinimasis darbo sąlygomis –9 460 000 5 dora konkurencija –4 837 000 –29 713 000 greita reakcija į klientų pageidavimus –26 949 000 informacijos saugumo užtikrinimas –6 219 000 inovacijų skatinimas 5 528 000 komunikavimo etika 29 713 000 paslaugų saugumas –26 949 000 6 greita reakcija į klientų pageidavimus –10 249 668 –9 461 232 informacijos saugumo užtikrinimas –2 365 308 inovacijų skatinimas 2 102 496 komunikavimo etika 11 300 916 paslaugų saugumas –10 249 668 7 greita reakcija į klientų pageidavimus –11 518 104 –10 632 096 informacijos saugumo užtikrinimas –2 658 024 inovacijų skatinimas 2 362 688 komunikavimo etika 12 699 448 paslaugų saugumas –11 518 104 verslas, vadyba ir studijos 2009 149 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a apskaičiavus tiesioginę verslo etikos įtaką įmonių pelnui, matyti, kad etika yra tik pagalbinė priemonė siekiant užsibrėžto tikslo – pelno. nors bendras įmonės pelnas per metus gerokai padidėjo, etiškas elgesys pats savaime gali būti nuostolingas. tačiau, tokie verslo etikos elementai kaip komunikavimo etika ir inovacijų skatinimas, kai kuriais atvejais ir patikimos informacijos apie teikiamas paslaugas garantavimas, prisidėjo prie nagrinėjamų įmonių pelno. nuspręsti, kuris etikos elementas įmonei atneš daugiau pelno, yra labai sunku, net tuomet, kai vadovai sutinka, kad reikia elgtis etiškai, toks elgesys gali būti pernelyg brangus – ypač dabar, ekonomikos nuosmukio metu. siekiant padidinti paslaugų įmonės veiklos efektyvumą siūlomas svarbiausių verslo etikos elementų įtakos įmonės veiklos rezultatams modelis (3 pav.). pelnas pardavimo rezultatai paslaugų įmonės veiklos efektyvumas komunikavimo etika 0,43 mokestinių reikalavimų laikymasis 0,63 patikimos informacijos apie teikiamas paslaugas garantavimas 0,58 teisėsaugos reikalavimų laikymasis 0,26 vadovavimo stilius 0,35 informacijos saugumo užtikrinimas 0,20 įsipareigojimų laikymasis 0,66 mokestinių reikalavimų laikymasis 0,44 teikiamų paslaugų saugumas 0,14 vadovavimo stilius 0,21 3 pav. svarbiausių verslo etikos elementų įtakos paslaugų įmonės veiklos rezultatams modelis fig. 3. the model of the most important business ethics elements influencing the performance of services business results remiantis atliktų tyrimų rezultatais, siūloma daugiau dėmesio skirti mokestinių reikalavimų bei įsipareigojimų laikymuisi, vadovavimo stiliui bei patikimos informacijos apie teikiamas paslaugas garantavimui, nes šie verslo etikos elementai daro didžiausią įtaką paslaugų įmonės veiklos rezultatams didinti. 150 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a 4. išvados atlikus lietuvos ir užsienio darbų autorių literatūros šaltinių analizę, nustatyta, kad per paskutiniuosius metus atsirado nemažai autorių, nagrinėjančių verslo etiką. tokie pasikeitimai mokslo pasaulyje labai vertingi įmonėms, nes verslo etika vadyboje ypač svarbi, tai – viena iš įmonės ilgo gyvavimo sąlygų. ji būtina norint išlaikyti aukštą įmonės moralės lygį ir labai reikalinga šiuolaikinėje konkurencinėje kovoje. etiški sprendimai skatina didesnį visuomenės pasitikėjimą įmone ir jos teikiama produkcija ar siūlomomis paslaugomis, padeda sukurti palankesnį įmonės įvaizdį, išlaikyti gerus santykius su rinkos dalyviais bei didina konkurencingumą. tyrimu nustatyta, kad, nors autoriai verslo etiką suvokia skirtingai, amžinos vertybės suprantamos ir priimtinos visiems. verslo etika verslininko reikmėms adaptuoja duomenis apie pagrindines etikos sąvokas, dėsningumus, kolektyvinių santykių formavimą, dorovinių vertybių poveikį visuomenei ir darbo stiliaus moralinius reikalavimus. etika ne tik padeda užmegzti ir išlaikyti naujus ryšius, bet ir, kaip parodo tyrimai, laimėti konkurencinėje kovoje. etikos normų laikymąsi, kaip sėkmės garantą, pripažįsta dauguma labai skirtingai savo įmonės ekonominę būklę įvertinusių respondentų. tačiau įmonės veiklos stabilumas ir etiška elgsena jo siekiant vertinama skirtingai. daugelis respondentų pritarė nuomonei, kad etikos normų laikymasis daro įtaką įmonės įvaizdžiui, kartu formuoja visuomenės požiūrį į šią įmonę, nuo kurio priklauso jos pelnas, bei suteikia konkurencinio pranašumo. tyrimo pradžioje buvo iškeltos prielaidos, kurios, atlikus du tyrimus (apklausą ir metinę paslaugų įmonių veiklos rezultatų, atspindėtų masinėse informacijos priemonėse, analizę) visiškai pasitvirtino. verslo etika kartu su bendra įmonės strategija daro didelę įtaką paslaugų įmonės konkurencingumui, be to, galima paskaičiuoti atskirų verslo etikos elementų įtakos dydį paslaugų įmonės veiklos rezultatams. literatūra abromaitytė-sereikianė, l. 2008. factors influencing ethics of marketing decisions in lithuanian media, inzinerine ekonomika – engineering economics (1): 29–36. bakštanovskij, v. j.; sogomonov, j. v. 2001. didžioji viltis ar naujoji utopija? bandymas suprasti verslo etikos ypatumus rusijoje, iš n. vasiljevienė. dalykinė etika: pasaulinės tendencijos ir postsocialistinių šalių aktualijos. kaunas: vilniaus universiteto kauno humanitarinis fakultetas, 20–28. isbn 9955-03-094-1. verslas, vadyba ir studijos 2009 151 so c 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санкт-петербург: питер. 752 c. isbn 658-8-011. verslas, vadyba ir studijos 2009 153 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a investigation of segregated business ethics elements influence on results of service enterprises activity k. luebcke summary the article deals with interaction of segregated business ethics elements with service enterprises activity. to discover the interaction, business ethics has been differentiated to segregated elements and the influence of the segregated elements for main indexes of enterprises competitiveness discovered by correlation coefficients. effective management is inseparable from ethics. the organization of ethical training in the company cannot just “wake” ethical awareness, and also of targeted individuals to shape their activities on matter-of-fact ethical justification, as modern ethics code object principles can be implemented not only for ethical training for staff, but also involving them in the company’s code of ethics for development. the study showed that in lithuania, so far, very few companies have their own ethic codes and employees not only do not participate in the production, but also little wise twig about their purpose. calculations showed, that business ethics have direct impact on the corporate profits, it is clear that ethics is only an aid in order to achieve its goal. although the overall company’s revenue per year has increased substantially, ethical behavior may in itself be evocative. the strongest influence discovered was: commitment compliance with sales results, profit growth, and installation rates of innovations; guarantee of the reliable service information about earnings; information security assurance and leadership style for company’s image. also, some problems of implementation of business ethics at service enterprises were discovered. keywords: business ethics, business ethics elements, profit, the service company. copyright © 2018 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (http://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: vaida.zemlickiene@vgtu.lt business, management and education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 2: 206–221 https://doi.org/10.3846/bme.2018.5402 introduction the commercialization of technologies while creating new technology-based products is a source of a competitive advantage ensuring company’s prosperity and, at the same time, represents risk full activity. most of the attempts to commercialize technologies end in failure, and thus the ability to timely and objectively assess the experience of technology adaptation set of factors for assessing the commercial potential of technologies in different technology manufacturing branches vaida zemlickienė * institute of sustainable construction, vilnius gediminas technical university, vilnius, lithuania received 20 june 2018; accepted 12 october 2018 abstract. in the course of previous research, it has been revealed, that specifics of different technology manufacturing branches are important for assessing the commercial potential. several technology manufacturing branches already had big input from past and now cover the most promising part of the national economy. for these reasons, it was decided to customize the model for assessing the commercial potential to biotechnology, mechatronics, laser technology, information technology, nanoelectronics. development of a set of factors for assessing commercial potential for different technology manufacturing branches is the first stage of the model’s customization process and the main purpose of this article. the next steps will include an expert study aimed at clarifying a set of factors based on the literature analysis, identifying the significance and the meanings of factor values. the literature of technology management did not take into account the specifics of the different technology manufacturing branches, therefore sources analysing the problems of intellectual property law, problems of different engineering sciences was used. with the help of the aforementioned literature in order to adapt the set of factors to each technology manufacturing branch aims to identify the challenges and problems are faced by representatives of different technology manufacturing branches in the process commercialization. keywords: adaptation set of factors, specifics of different technology manufacturing branches, assessment of the commercial potential, multiple criteria decision making (mcdm), biotechnology, mechatronics, laser technology, information technology, nanoelectronics. jel classification: o32. https://doi.org/10.3846/bme.2018.5402 https://orcid.org/0000-0002-0882-2864 business, management and education, 2018, 16(1): 206–221 207 commercialization, in order to avoid non-productive investments is a crucial step for the institutions engaged in scientific research and r&d. when the owner of technology, the potential investor or buyer must make a decision on the future of technology and to answer questions such as if it is worth developing the technology, investing in it or buying it? in order to answer these questions and to make the right decision, tools for assessing the commercial potential of technologies are in use. previously developed model for assessing the commercial potential of technologies (zemlickienė, 2015; zemlickienė, bublienė, & jakubavičius, 2018) is universal  – dedicated for assessment of technologies in all manufacturing branches. until this moment in the scientific space proposed tools for assessment commercial potential of technologies (cho & lee, 2013; price, huston, & meyers, 2008; dereli & altun, 2013; wipo, 2005; epo, 2012; nasa, 2017; venturequest ltd., 2015; international islamic university malaysia, 2017) was fragmented, difficult quantitatively to apply in practice. the development of this model was a significant contribution to the quantitative methodological work of the commercial potential, however, in the course of research it has been revealed, that specifics of different technology manufacturing branches are important for assessing the commercial potential. both the dissertation and the scientific literature of the last year did not take into account the specifics of different technology manufacturing branches. customization model for assessing the commercial potential of technologies for different technology manufacturing branches would allow achieving a more objective assessment of the commercial potential and a more rational use of resources. this article presents the first stage of the model’s customization process  – development a set of factors for assessment commercial potential of technologies in different technology manufacturing branches. based on multiple criteria decision making (mcdm) methods, the set of factors is the basis for determining the significance of the factors and the meanings of factor values. afterwards, sets of factors will be revised based on an expert survey, will be used as the research tool for determination meanings of factors value and the significance of factors for every manufacturing branch. 1. adaptation set of factors for assessing the commercial potential of technologies for different technology manufacturing branches previously proposed set of factors (table 1) have been developed referring to the analysis of scientific literature (cho & lee, 2013; price et al., 2008; dereli & altun, 2013), information sources provided by different organizations (wipo, 2005; epo, 2012; nasa, 2017; venturequest ltd., 2015; international islamic university malaysia, 2017), expert survey and the principles suggested by v. belton and t. j. stewart (2002). a set of factors for the assessment of the commercial potential of technologies is universal for all technology manufacturing branches but takes into account different technological levels. selected technology manufacturing branches belong to the high tech category, for this reason, all the factors presented in table 1 are appropriate for this analysis. this set of factors will be used as a guideline in the analysis of the specifics of the different manufacturing branches. 208 v. zemlickienė. adaptation set of factors for assessing the commercial potential of technologies... se t o f f ac to rs fo r a ss es sm en t o f t he c om m er ci al p ot en tia l o f h ig h te ch no lo gi es se t o f f ac to rs fo r a ss es sm en t o f t he c om m er ci al p ot en tia l o f t ra di tio na l t ec hn ol og ie s in te rn al p ol ic y of in st itu tio n (i ) co m pl ia nc e of th e pr oj ec t o n te ch . co m m er c. w ith a c tiv ity o f i ns tit ut io na l st ra te gy (i 1) a cc ep ta nc e of th e st ra te gy o f t he c om m er c. o f i ns tit ut io n by th e in ve nt or (i 2) im ag e of th e in st itu tio n in th e ar ea o f te ch . c om m er c. (i 3) ci rc um st an ce s re la tin g to in ve nt or s (h ) in ve nt or ’s ex pe ri en ce in te ch . co m m er c. (h 1) in ve nt or ’s ac ad em ic re co gn iti on (h 2) in ve nt or ’s pr ed ic ted le ve l o f i nv ol ve m en t a s a te am m em be r i n te ch . co m m er c. (h 3) in ve nt or ’s fin an ci al co nt ri bu tio n to te ch . c om m er c. (h 4) le ga l e nv ir on m en t ( g ) fo r l eg al ly p ro te ct ed te ch . be ne vo le nc e of na tio na l l eg is la tio n fo r t ec h. c om m er c. (g 11 ) st re ng th o f l eg al pr ot ec tio n (g 12 ) g eo gr ap hi c ba rr ie rs fo r t ec hn ol og y pr o te ct io n (g 13 ) fo r l eg al ly un pr ot ec te d be ne vo le nc e of na tio na l l eg is la tio n fo r t ec h. c om m er c. (g 1) u til ity /u se le ve l o f te ch no lo gy (g 2) co nfi de nt ia lit y of te ch no lo gy (g 3) d iff er en ce c om pa ri ng to si m ila r an al og ue (g 4) pr ic e of le ga l pr ot ec tio n (g 5) co m pe te nc e of te ch no lo gy de ve lo pe rs (f ) co m pe te nc e of sc ie nt ifi c pe rs on ne l i n te ch . c om m er c. (f 1) co m pe te nc e of m ar ke tin g de pa rt m en t’s pe rs on ne l i n te ch . co m m . ( f2 ) co m pe te nc e of th e pe rs on ne l o f t he te ch no lo gy tr an sf er bu re au in te ch . c om m er c. (f 3) co m pe te nc e of th e pe rs on ne l o f t he s al es de pa rt m en t i n th e te ch . c om m . ( f4 ) co m pe te nc e of th e pe rs on ne l o f t he p ro du ct io n de pa rt m en t in te ch . c om m . ( f5 ) te ch no lo gy fe at ur es (e ) co m pl ex ity o f t ec h no lo gy (e 1) d ep en de nc e of te ch no lo gy fu nc tio n in g on g eo gr ap hi ca l / cl im at ic c ir cu m st an c es (e 2) a da pt ab ili ty o f t he po te nt ia l p ro du ct fo r t he e xi st in g pr od uc ts (e 3) n ov el ty o f t ec hn ol og y (e 4) co m pe tit iv e en vi ro nm en t (d ) d ur at io n of th e ex is te nc e of th e pr ed ic te d te ch no l og y (d 1) a bi lit y to c op y te ch no lo gy (d 2) in te ns ity o f c om pe tit io n (d 3) fi na nc ia l e nv ir on m en t (c ) fi na nc ia l p ot en tia l ( c1 ) co m pe tit iv e pr ic in g of th e pr od uc t u ni t ( c2 ) pr ed ic te d co nt ri bu tio n of te ch no lo gy to th e pr ofi t o f t he c om pa ny (c 3) pr ed ic ta bl e pe ri od fo r co ve ri ng c os t o f t he pr oj ec t ( c4 ) ev al ua tio n of th e du ra bi lit y of th e po te nt ia l p ro du ct a nd it s im po rt an ce fo r c re at in g a re cr ud es ce nt fl ow o f in co m e (c 5) pr ed ic te d pe ri od o f pr od uc t d ev el op m en t (c 6) va lu e fo r c on su m er (b ) pr ed ic te d off er ed va lu e fo r t he fi na l co ns um er (b 1) fe ed ba ck o f t ar ge t cu st om er s re ga rd in g pr od uc ts c on ce pt (b 2) le ve l o f t he u ni qu ene ss o f t he v al ue p ro vi de d to th e po te nt ia l us er (b 3) le ve l o f d iffi cu lty to u se o f t he p ot en tia l p ro du ct (b 4) re la tiv e ad va nt ag es o f t he p ot en tia l pr od uc t ( b5 ) si tu at io n on th e m ar ke t (a ) sh ar e of th e ta rg et m ar ke t o f t he p ot en tia l p ro du ct a t t he m om en t o f e va lu at io n (a 1) pr ed ic te d sh ar e of th e ta rg et m ar ke t a t th e m om en t w he n a pr od uc t i s pr ep ar ed fo r l au nc hi ng (a 2) le ve l o f n ee ds re ga rd in g th e po te nt ia l pr od uc t ( a 3) le ve l o f t he re ad in es s of th e m ar ke t f or th e pr od uc t ( a 4) ta bl e  1. s et o f f ac to rs fo r as se ss m en t co m m er ci al p ot en tia l o f t ec hn ol og ie s (z em lic ki en ė, 2 01 5; z em lic ki en ė, m ač iu lis , & t va ro na vi či en ė, 2 01 7; z em lic ki en ė et  a l., 2 01 8) business, management and education, 2018, 16(1): 206–221 209 analysing the expediency of existing factors and the need to add additional factors that will be used to develop tools for measuring the commercial potential of technology in different technology manufacturing branches it is important to take into account the specifics of the intended use method and the prospects for using the complex of factors. in recent years, multiple criteria decision-making (mcdm) techniques and approaches have been suggested to choosing the optimal probable options. the main idea of the mcdm methods is to combine the values and significance of factors into a single criterion of multi-criteria evaluation (hwang & yoon, 1981). the significance of factors and factors groups are determined on the basis of the set factors and expert survey. the formation of the meanings of factor values covers the preparation of the assessment scale for every factor indicated in the set, which is a measure for an evaluator of technology in the process of technology assessment. to achieve the goal, the values of the factors have to be identified, i. e. have to be selected a value in every scale, by applying a set of the meanings of factor values. the literature on the assessment of the commercial potential of technology did not take into account the specifics of the different technology manufacturing branches, therefore sources analysing the problems of technologies development, of intellectual property law and the problems of different engineering sciences was used. with the help of the aforementioned literature, the author seeks to find out challenges and problems are faced representatives of different technology manufacturing branches in the process commercialization and realization of technologies. in order to adapt the set of factors to each technology manufacturing branch, at the end of each subsection proposals will be presented. 2. challenges and problems of biotechnology in the process commercialization industrial biotechnology is one of the most promising technologies around; it has the potential to address some of the world’s greatest challenges, such as feeding a growing population and offering new alternatives to our scarce natural resources. although there is a long way to go, if industrial biotechnology reaches its full potential it has the potential to impact the world. the biotechnology pathway in the market in the human and animal health field is very complex limited by the need for comprehensive safety tests, multi-level clinical trials and regulatory approvals. for example, genetic material and microorganism development validation process is one of the longest and most bureaucratically complicated. in the field of biotechnology, the development of the product from conception to material product creation and realization is considerably longer than in other technology fields. the normal duration of a product development in the field of biotechnology is usually at least 7–10 years, in some cases, the launch of a new drug into the market takes up to 12–15 years. in general, the following steps can be identified in the development of biotechnological innovations: 1 phase: the discovery phase, during which the target and the particular molecule are identified without basic fundamental research (2–6 months); 2 phase: initial validation of the molecule of the target (12–24 months); 3 phase: secondary validation of the molecule of the target (24–36 months); 210 v. zemlickienė. adaptation set of factors for assessing the commercial potential of technologies... 4 phase: clinical phase during which the final validation of the molecule of the target is performed (5–7 years); 5 phase: an introduction to the market (typically 1–3 years). the biotechnology development model described above supposes that the essential parts of the invention are known at an early phase and the subsequent steps are necessary to obtain the experimental data necessary for the verification and justification of the invention. generally, modern biotechnology is characterized by rapid developmental trends in the pre-clinical 4 phase but is limited in the phases of slow and bureaucratic processes in the clinical and market entry phases (kiškis & limba, 2016). the process of patenting in biotechnology projects interfere with development processes. in biotechnology projects, the most valuable part of the technology (genetic sequence, protein structure etc.) is known years before the experimental data that enables the patent to be obtained. at best, a patent application may be submitted at the end of 2 phase if the experimental data justify the technology. after the submission of a patent application, the further long development process of technology and launch to the market awaits. these further steps while the technology reaches the market usually takes up a significant part of the useful period of patent protection (vu, lee, chan, & oh, 2018). a slow cycle in the development of biotechnology means that the ability to generate revenue in the future depends on the term of protection of intellectual property. large expenditure and risk causes difficult attraction of investments. biotechnology research is very expensive and requires adequate infrastructure, reagents and specialized staff or open access to public (university and research institutes) infrastructure (mamzer, sophie duboisb, & saoutc, 2018). based on the empirical research conducted by the us biotechnology industry, the cost of drug development, testing and launch to market is between 250 million and 1 billion usd. this determines that basic biotechnology costs are fixed and do not show a quick return on investment. risks in biotechnology projects manifests itself in two aspects: 1) enormous costs are often unsuccessful if technology is not validated at one of the validation phases; a large proportion of biotechnology is already failing in animal models (phase 3), and only a few reach clinical trials where success is also rare; 2) confidentiality is essential for biotechnology projects and should be maintained for a long period of time. during such a long time, the risk of disclosure of technology is high. these reasons mean that external investment in biotechnology projects is usually attracted at the beginning of the clinical phase after the pre-clinical phases. in addition, in the field of biotechnology, the patent portfolio is usually a prerequisite for attracting external investment (volpatti & yetisen, 2014). based on the specificity of the commercialization of biotechnology discussed above and the proposed set of factors for evaluating the commercial potential of technologies, it can be stated that the factors most relevant to the commercialization of biotechnology are (table 2). it is important to emphasize that the factors which reflect a need of infrastructures need of specialized staff and the consequences of patenting for the development of technology was not included in the complex of factors, therefore this possibility should be considered. business, management and education, 2018, 16(1): 206–221 211 table 2. essential factors for the set of factors of biotechnology factors included in previously set of factors for assessing the commercial potential of biotechnology factors are recommended to be included in the set of factors for assessing the commercial potential of biotechnology factors group factors factors group factors financial environment (c) financing potential (c1) financial environment (c) accessibility of the infrastructureevaluation of the durability of the product and its importance for creating a recrudescent flow of income (c5) predicted period of product development (c6) competencies of technology developers and related opportunities (f) accessibility of specialized staff competitive environment (d) ability to copy technology (d2) competence of technology developers competence of the personnel of the technology transfer bureau in technology commercialization (f3) legal environment (g) the consequences of patenting for the development of technology legal environment (g) benevolence of national legislation for commercialization (g1) 3. challenges and problems of mechatronic technology in the process commercialization mechatronics is the engineering discipline concerned with the construction of systems incorporating mechanical, electrical, automation and information technology components. the word mechatronics as a blend of mechanics and electronic has already been invented 40 years ago by a japanese company. then, mechatronics just meant complementing mechanical parts with some electronic units, a typical representant being a photo camera, with an autofocus function. all shooting settings focusing, aperture, exposure time, etc. are automatically selected by the machine itself. today, mechatronics is an area combining a large number of advanced techniques from engineering, in particular, sensor and actuator technology, with computer science methods (neumann, 2015). the smart devices of today’s mechatronic systems will turn into “populations” of smart devices, exchanging information for optimising their global behaviour as well as possibly competing for limited resources. this movement imposes in particular new challenges on the computer science side in mechatronics. the mechatronic systems of the future will be characterised by the following properties: a high degree of concurrency: systems will consist of a large number of autonomous components, exchanging information while running in parallel. components may form cluster to collaborate on a common goal but may also compete as to optimise their own aims; decentralisation: due to the high degree of concurrency and distribution systems cannot be centrally observed and as a consequence not centrally controlled; 212 v. zemlickienė. adaptation set of factors for assessing the commercial potential of technologies... self-coordination: as a result of the previous two points, advanced mechatronic systems will largely have to rely on principles of self-coordination (schafer & wehrheim, 2007). the development and operation of modern mechatronics facilities require specialists who not only have advanced knowledge in mechanics but also are well acquainted with electronics and computer science. in recent years, the development of communication and medical devices requiring a highly skilled multi-level workforce and modern technological equipment is being expanded. companies of mechatronics develop and manufacture products for both mass use and manufacturing companies that facilitate and automate production processes. when it comes to the factors influencing commercial potential, the user’s access to the product is also an opportunity to realize the product. in the literature of mechatronic technology development, many authors emphasize the problems arising from the increased complexity of mechatronic products, a variety of different disciplines and highlight the consequences of these problems (neumann, 2015): – in the mechatronic product development systems, it is apparent that time-lines are very different in different disciplines. the synchronization of the different disciplines is consequently a major challenge for project management mechatronic products. the highest chances for success are in the project if regular cross-discipline synchronization meetings are attended by the project managers, were launched early, were carried out throughout the process; – the main objective of process management (or systems engineering) is to provide a guidance concerning the logical relationship within complex systems. it is a major challenge during the development of mechatronic products to keep the over the functional and physical relationship between modules of different disciplines. the consequence for process management is twofold: on the one hand, it gets more and more difficult for process management to keep the overview, on the other hand, the necessity for an effective process management is stronger than ever (stetter & pulm, 2009); – current mechatronic products are usually realized by means of a combination of modules. this strategy allows a large number of product variants with a relatively small number of modules which can be combined in different ways. further modules allow a reduction of complexity. the main problems concerning modules are to define binding and stable interfaces, which often go beyond the borders of disciplines, and the fact that a modular design (due to variants, production etc.) is suboptimal compared to an integrated design. very often these modules are developed by electronics departments but have to measure physical phenomena which are the core competency of mechatronic engineering. such modules are mechatronic systems and require appropriate procedures and tools; such modules have to be identified and treated as mechatronic systems themselves; – the notion “testing” summarize virtual and physical analyses of the product and process performance. due to the comparably high expenditures for mechatronic product tests, a small amount of test represented a large product variety. in electronic engineering, elaborate testing procedures were applied which included most of the probable situations. regarding research, the communication between the testing departments was less frequent than design departments. this phenomenon may be caused one the on hand by the difference in testing philosophy, on the other hand, because communication between these departments was considered less valuable (stetter & pulm, 2009). business, management and education, 2018, 16(1): 206–221 213 based on previously discussed the specifics of the commercialization of mechatronics technologies and the proposed set of factors for evaluating the commercial potential of technologies, it can be stated that the most relevant factor in the commercialization of mechatronics technologies are (table 3): table 3. essential factors for the set of factors of mechatronics technology  factors included in previously set of factors for assessing the commercial potential of mechatronics technology factors are recommended to be included in the set of factors for assessing the commercial potential of mechatronics technology factors group factors factors group factors technology features (e) the complexity of technology (e1), competence of technology developers (f) competence of the project manager’s competence of technology developers (f) competence of scientific personnel in the technology commercialization (f1) competence of mechanics specialists competence of electronics specialists competence of the personnel of the production department in the technology commercialization (f5) competence of informatics specialists however, in assessing the competencies of mechatronics technology developers, it is necessary to take into account the competence of mechanics, electronics and informatics specialists and the experience of the project manager. 4. challenges and problems of lasers technology in the process commercialization the letters in the word laser stand for light amplification by stimulated emission of radiation. a laser is an unusual light source. it is quite different from a light bulb or a flashlight. lasers produce a very narrow beam of light. this type of light is useful for lots of technologies and instruments. – lasers in comparison with other technologies are characterized by adjustment in different fields, different problems. lasers are a versatile and flexible production tool: – most of the lasers are used in the metalworking industry to cut metal sheets. these are powerful systems in kilowatts with a power output of up to 6 kw and can quickly and accurately cut sheets of 20–30 mm thick steel; – lower power (100–500 w) co2-lasers are installed in the sewing and upholstered furniture industry. they are used for the fabric, artificial leather. similar laser cutting systems are increasingly used for the production of advertising; – laser welding technologies have not yet entered the major machinery industry but dotted welding is widely used in pulsed solid-state lasers, for example, in the manufacture of telecommunication devices (tsai et al., 2017); – the technology of laser marking and engraving is quickly spreading in lithuania. laser equipment records personal information in passports, driving licenses, other 214 v. zemlickienė. adaptation set of factors for assessing the commercial potential of technologies... personal or discount cards thus protecting them from fraud. stamps are also made using laser engraving. medical lasers are applicable to: – ophthalmology (excimer lasers); – vascular reconstructions (semiconductor lasers); – dentistry (semiconductor lasers); – dermatology (co2, er-yag, nd-yag, semiconductor lasers). in the defence industry lasers have a lot of potentials. for example, various laser radars, otherwise known as the leaders, are used for both the targeting of various weapons, the targeting of extremely precise missile launchers, and precision mapping. recently boeing introduced its own mobile laser system “compact laser weapon system” designed to knock down drones. increasingly gaining polarity drones are dangerous to planes. this weapon is capable of aiming in a few seconds and destroying such an aircraft. other application: lasers are also used in electronic equipment: cd players, computers, and the production of electronics are also unimaginable without lasers. microchips, flat panel tv’s, solar panels all of these devices would not work without the help of lasers. the automotive conveyor contains dozens of laser robotic operations. the precise positioning of earth-bound satellites is determined only by lasers. it would be possible to name a lot of industries that would not survive without lasers (vasantha, roy, & corney, 2014). comparing the use of lasers with the use of other technological products, it is important to understand that this is not a mass-market product, and laser technology product developers use the business-to-business (b2b), model. this means that their users will be specialists in specific fields with specific competencies in the field, so in this case, a ease of use of the new product is important i. e. the product must be designed in such a way that its users have sufficient competence to use it. in the development of technology, there are a lot of investments for research. on average 5 to 10 years passes from the beginning of the technology development to the first profits. high-tech laser technology is particularly used in the war industry. in order to prevent illegal use of laser technology in the military industry, there are sufficiently strict regulations on the export of optical components outside the eu. laser development is not possible without special equipment. precise mechanisms, electronics, optics manufacturers are required. these components have to be pre-ordered. lithuanian lasers are niche products that occupy more than 50 per cent scientific picosecond laser market. in lithuania, high added-value products are being developed and produced, the added value contains two-thirds of the production price. using the technology available in lithuania, several complex devices are being developed, which only 10 per year are ordered globally. this is a total frequency spectrometer that allows exploring the surface of a substance in a single molecule layer. 5 to 7 units per year are sold, but it yields a sufficient profit (lithuanian laser association, 2017). highly skilled professionals are important for increasing business competitiveness. intellectual capital the knowledge-based resources of an organization (soo, tian, teo, & cordery, 2017), has been found to have a strong and positive relationship with strong firm performance (ferreira & franco, 2017; khalique, bontis, shaari, & isa, 2015). laser companies face shortages of highly skilled professionals and tend to hire people without work experience business, management and education, 2018, 16(1): 206–221 215 and educate skilled professionals themselves. universities train highly qualified specialists, and later they have learned how to work with laser technologies for 1–1,5 years because this is a very narrow area. the laser technology sector is changing very rapidly, which requires continuous improvement beyond national capabilities. based on the presented set of factors for assessing the commercial potential of technologies and the specifics of laser technologies, the factors reflecting the specifics of these technologies and included in the complex of factors are (table 4): table 4. essential factors for the set of factors of laser technology factors included in previously set of factors for assessing the commercial potential of laser technology factors are recommended to be included in the set of factors for assessing the commercial potential of laser technology factors group factors factors group factors value for the consumer (b) level of experiencing difficulty in the use of the potential product (b4) financial environment (c) accessibility of the infrastructure (c7) group financial environment (c) predicted period of product development (c6) competencies of technology developers and related opportunities (f) accessibility of specialized staff (f6)technology features (e) dependence of technology functioning on geographical/climatic circumstances (e2) it is important to emphasize that the factor reflecting the infrastructure needs and the possibility to find the necessary specialists in the complex of factors has not been included, therefore this possibility should be considered. 5. challenges and problems of information technology in the process commercialization information technology (it) is the use of any computers, storage, networking and other physical devices, infrastructure and processes to create, process, store, secure and exchange all forms of electronic data. typically, it is used in the context of enterprise operations as opposed to personal or entertainment technologies. the commercial use of it encompasses both computer technology and telephony. the term it was coined by the harvard business review, in order to make a distinction between purpose-built machines designed to perform a limited scope of functions and general-purpose computing machines that could be programmed for various tasks. it includes several layers of physical equipment (hardware), virtualization and management or automation tools, operating systems and applications (software) used to perform essential functions. user devices, peripherals and software, such as laptops, smartphones or even recording equipment, can be included in the it domain. it can also refer to the architectures, methodologies and regulations governing the use and storage of data. 216 v. zemlickienė. adaptation set of factors for assessing the commercial potential of technologies... in the field of it, here the development of the product from idea to material product creation and sale is much shorter than in the field of biotechnology, where product development terms are extremely short and rarely exceed 18 months. in the area of it, an enterprise that has not been able to deliver a competitive product over a period of more than 3 years is generally considered to be unsuccessful (park, y.  b.  kim, & m.  k.  kim, 2017). for it companies, key costs are variable and fully expected from human resources available – actually human resource costs are the main expenses of developing it. it workers can specialize in fields like software development, application management, hardware  – desktop support, server or storage administrator – and network architecture. many businesses seek it professionals with mixed or overlapping skill sets (searchdatacenter, 2018). laser companies face shortages of highly skilled professionals. impact of the patent process for the development: software technologies are being introduced so quickly that the patent becomes inexpedient. the mere receipt of international patent protection in accordance with the statutory deadlines takes more than 2 years. in the case of software, this is an unacceptably long period. in many cases, a technology that was patented for protection 2 or 3 years ago would be outdated at the time of obtaining the patent. patent protection becomes inexpedient for a long time to receive patent protection and short time for product development. for these reasons, many software innovators provide patent applications only at a later stage in their evolution, when the original technology is validated and the start-up has attracted enough external capital (for example, venture capital). this also means that patenting does not interfere with the development of original technology, i.e. it does not use the financial resources and time that can be allocated to the development and validation of the technology. in addition, rapidly changing technologies, such as software, are still stuck in legal dilemmas regarding the patentability of an object. the biotechnology situation is very different from software technology, where the patenting process complements a well-established development process and only takes place after the necessary additional resources are acquired for patenting (kiškis & limba, 2016). based on previously set of factors for assessing the commercial potential of technologies and the specificity of informational technologies, the factors reflecting the specifics of these technologies and included in the set of factors are (table 5): table 5. essential factors for the set of factors of information technology factors included in previously set of factors for assessing the commercial potential of it factors are recommended to be included in the set of factors for assessing the commercial potential of it factors group factors factors group factors group financial environment (c) predicted period of product development (c6) legal environment (g) the consequences of patenting for the development of technology (g6)legal environment (g) benevolence of national legislation for commercialization (g1) business, management and education, 2018, 16(1): 206–221 217 the consequences of patenting for the development of technology (g6) would be expedient to include in the legal environment (g) group of factors for not legally protected technologies. 6. challenges and problems of nanoelectronic technology in the process commercialization this science explores the ways in which any material is shredded into ultra-small particles or structures – the so-called nanoparticles. they are extremely small – on average the diameter can reach several nanometres (one millimetre is a million nanometres). extremely popular use of nanotechnology in the development of various cleaning products, cosmetics, as well as in medicine. nanotechnology has also become the subject of the study of mechanics and electronics, in particular, trying to make ever smaller articles and so close to nanoparticles that are just above the size of an atom. microelectronics is a field of electronics that includes the research, design, manufacture and application of microelectronic devices. at the beginning of this century, microelectronics has moved into the era of nanoelectronics. in the history of mankind, there is no other industry such make so huge and rapid changes in the world economy and society. currently, the most important issue for europe and lithuania is preparing new creative designers in the field of nanoelectronics. according to forecasts of european scientists, nanotechnology sector will need 500 times more designers over the next ten years. in the nanoelectronics sector, the mere receipt of international patent protection in accordance with the statutory deadlines takes more than 2 years. in the case of the computer and communications technology, this is an unacceptably long period. in many cases, a technology that was patented for protection 2 or 3 years ago would be outdated at the time of obtaining the patent. patent protection becomes inexpedient because of a long time required to receive patent protection and short time for product development. for these reasons, many computers, and communications innovators provide patent applications only at a later stage in their evolution, when the original technology is validated and the start-up has attracted enough external capital (for example, venture capital) (kiškis & limba, 2016). along with the technology development, the business trends of micro/nanoelectronics are mainly represented by cost reduction, shorter-time-to-market and outsourcing. the combination of technology and business trends drives micro/nanoelectronics into an unknown level of complexity. as the consequences, industries are confronted with ever increased design complexity, dramatically decreased design margins, increased chances and consequences of failures, decreased product development and qualification times, increased the gap between technological advance and availability of fundamental knowledge, and increased difficulties to meet quality, robustness and reliability requirements (ozcan & islam, 2017). based on a set of factors for assessing the commercial potential of technical factors that reflect the specifics of nanoelectronics technologies and included in complex factors are (table 6): 218 v. zemlickienė. adaptation set of factors for assessing the commercial potential of technologies... table 6. essential factors for the set of factors of nanoelectronics technology factors included in previously set of factors for assessing the commercial potential of nanoelectronics technology factors are recommended to be included in the set of factors for assessing the commercial potential of nanoelectronics technology factors group factors factors group factors financial environment (c) predicted period of product development (c6) competencies of technology developers and related opportunities (f) accessibility of specialized staff (f6) technology features (e) the complexity of technology (e1), legal environment (g) the consequences of patenting for the development of technology (g6) the factor the consequences of patenting for the development of technology (g6) it is expedient to include in the factors group legal environment (g) for legally not protected technologies and factor accessibility of specialized staff (f6) include in factors group competencies of technology developers and related opportunities (f). conclusions the current study is based on the mcdm methods the selection of which has been determined by the motive related to the goal of assessment  – to apply quantitative methods for assessing and ranking the compared objects in terms of the aim of the conducted research. development a sets of factors for assessing commercial potential for different technology manufacturing branches is the first stage of the model’s customization process and the main purpose of this article. the next steps will include an expert study aimed at clarifying a set of factors based on the literature analysis, identifying the significance and the meanings of factor values. summing up what has been mentioned about specifics of commercialization of different technology manufacturing branches: slow biological and bureaucratic processes restrict commercialization of biotechnology. duration of a product development is from 7 up to 15 years. steps while the technology reaches the market usually takes up a significant part of the useful period of patent protection. biotechnology research requires expensive infrastructure and reagents. high cost and risk cause difficult attraction of investments. confidentiality is essential for biotechnology projects and should be maintained for a long period, during such time, the risk of disclosure is high. mechatronics technology is an area combining a large number of advanced techniques from engineering, in particular, sensor and actuator technology, with computer science methods. companies of mechatronics develop products for both mass use and manufacturing companies. the development of mechatronics facilities requires specialists who not only have advanced knowledge of mechanics but also are well acquainted with electronics and computer science. many authors emphasize the problems arising from the increased complexity of mechatronic products, a variety of different disciplines and highlights the consequences of these problems: the synchronization of the different disciplines; control problems; problems to define binding and stable interfaces; the synchronization of the testing process. business, management and education, 2018, 16(1): 206–221 219 lasers are characterized by adjustment in different problems: lasers are a flexible production tool; a surgical tool in medicine and instrument in the defence industry. specific aspects only to the laser industry are very high added-value of product and very small quantity produced products. the development of laser takes a long time, on average 5 to 10 years. in order to prevent illegal use of lasers in the military, there are strict regulations on the export of components outside the eu. laser development is not possible without special equipment: precise mechanisms, electronics, optics. in order to buy this equipment, the manufacturers are needed. laser companies face shortages of highly skilled professionals. in the field of it the development of the product is much shorter than in the field of biotechnology, rarely it exceeds 18 months. for it company’s human resource costs are the main expenses of development; patent protection becomes inexpedient for a long time patenting process and short time for product development; patenting does not use the financial resources and time that can be allocated to the development and validation of the technology. the software is still stuck in legal dilemmas regarding the patentability of an object. in history is no other industry such make so huge and rapid changes in the world economy like electronic. the business trends of nanoelectronics are mainly represented by cost reduction, shorter-time-to-market. currently, the most important issue for europe becoming preparation a new designer in the field of nanoelectronics. this sector will need 500 times more designers over the next ten years. for short time for development patent protection becomes inexpedient. the combination of technology and business trends drives nanoelectronics into a high level of complexity. summarizing the issues of research, it is safe to say that the commercialization of technology manufacturing branches is unique; therefore, in assessing the commercial potential of technology, it is necessary to take into account the specifics of each of them. based on previously discussed specifics of biotechnology, mechatronics, laser technology, information technology, nanoelectronics technology, relevant factors for these branches was detected. some of them are already included in the set of factors, others are proposed to be included. in many cases, the same factors are relevant to different technology manufacturing branches, which means that the set of factors to different branches will change slightly. factors in the universal factor complex correspond to the common trends in the evaluation of the commercial potential of technology. it is possible to expect that the significance of the factors and the meanings of the factors values will be markedly different, for example, because of different duration of time for technology development, the scale of the meanings of factor values will be completely different due to time differences in technology development. a similar situation is with other factors: costs, legal regulation and other differences existing in branches and etc. disclosure statement the paper is part of the project „customization model for assessing the commercial potential of technologies to different technology manufacturing branches“ no. 09.3.3-lmtk-712-02-0201. project co-funded from the eu structural funds. 220 v. zemlickienė. adaptation set of factors for assessing the commercial potential of technologies... acknowledgments this research is/was funded by the european social fund under the no 09.3.3-lmt-k-712 “development of competences of scientists, other researchers and students through practical research activities” measure. references belton, v., & stewart, t. 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(2017). factors impacting the commercial potential of technologies: expert approach. technological and economic development of economy, 23(2), 410427. https://doi.org/10.3846/20294913.2016.1271061 https://doi.org/10.1057/palgrave.jcb.3050086 https://searchdatacenter.techtarget.com/definition/it http://www.venturequestltd.com/tools.html http://www.venturequestltd.com/tools.html http://www.wipo.int/edocs/pubdocs/en/licensing/906/wipo_pub_906.pdf http://www.wipo.int/edocs/pubdocs/en/licensing/906/wipo_pub_906.pdf verslas, vadyba ir studijos 2009 21 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s investicinių projektų optimalios atrankos metodas vytautas jonas žilinskas zilinskas.vytautas@gmail.com klaipėdos universitetas, vadybos katedra 1. įvadas šiuolaikinės pasaulinės rinkos sąlygomis ypač suaktyvėjo įmonių investicinė veikla. todėl vienas iš pagrindinių šios veiklos garanto aspektų – pagrindinių investicijų valdymo principų bei įvairių investicinių instrumentų naudojimo galimybių atrinkimas bei suvokimas. esant rinkos ekonomikai investicinė įmonės veikla glaudžiai susijusi su veiksmingu projekto sudarymu, numatytų išteklių optimaliu paskirstymu bei galutinio produkto kokybės užtikrinimu. pasaulinės konkurencijos sąlygomis įmonė gali sėkmingai plėtoti savo investicinę veiklą tik objektyviai sudarydama, atrinkdama bei valdydama investicijų projektą, naudodama jo tikslams pasiekti šiuolaikinius vertinimo, atrankos ir valdymo metodus. pastaruoju metu lietuvai tenka spręsti daugelį netradicinių uždavinių, susijusių su inovacijų procesu. inovacijų diegimas ir plėtojimas suteikia galimybę modernizuoti gamybos ir paslaugų teikimo struktūras, tobulinti produktus bei technologijas, didinti jų kokybę ir tarptautinį konkurencingumą. svarbus inovacijų veiksmingumo (efektyvumo) užtikrinimo būdas yra investicijų projektų vertinimas, atranka ir įgyvendinimo valdymas. projektų atrankos vertinimas leidžia nustatyti inovacijų investavimo variantų veiksmingumą pagal tam tikrus kriterijus, kurie turi būti grindžiami tiek investicijų projektą įgyvendinančio subjekto, tiek valstybės interesais. rinkos ekonomikos sąlygomis inovacijų investicinė veikla glaudžiai susijusi su investicijų projekto sudarymu ir įgyvendinimu, siekiant projekte numatytų tikslų. taip įmonės gali sėkmingai plėtoti savo investicinę veiklą šiuolaikinėje konkurencinėje kovoje. racionaliam investicijų atrankos tikslingumui nustatyti © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai 22 verslas, vadyba ir studijos 2009 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s reikia projektų kompleksinės vertinimo metodikos, užtikrinančios valstybės ir investuotojo tikslus. viena svarbiausių įmonių veiklos tobulinimo laidavimo prielaidų yra jų investicijų projektų optimalus vertinimas, neatsiejamas nuo valdymo funkcijos, nes valdyti galima tik tai, ką galima įvertinti. jeigu vertinami tik finansiniai rodikliai, tai jų rezultatai nerodo tikrosios projekto padėties, todėl siekiant racionalios investicijų projekto atrankos bei valdymo būtina vertinti ir kitus – ilgalaikės sėkmės, rizikos bei konkurencingumo – veiksnius. tyrimo objektas – investicijų projektų atranka, vykdant kompleksinį vertinimą. tyrimo tikslas – išanalizuoti investicinių projektų atrankos vertinimą ir pateikti optimalios atrankos metodą. tyrimo metodai: sisteminė mokslinės literatūros analizė ir sintezė, sisteminė analizė ir formalizuotas ekspertinis prioritetų skirstymo ir parinkimo metodas, loginės išvados. 2. investicijų projektų atrankos metodų analizė investicijų projektas – tai kūrybos arba projektavimo rezultato dokumentas, kuriame techniškai, ekonomiškai (finansiškai) ir socialiai grindžiami investavimo tikslai, įvertinama investicijų grąža bei kiti veiksmingumo (efektyvumo) rodikliai, nurodomos projektui įgyvendinti reikalingos lėšos bei finansavimo šaltiniai. investicijų projektus galima skirstyti labai įvairiai, tačiau savo esme jie visi yra panašūs. įvairūs autoriai skirtingai traktuoja verslo projektus ir jų atrankos metodus (ginevičius et al. 2008; ginevičius, zubrecovas 2009; schieg 2009; zeng et al. 2009; neverauskas, stankevicius 2008; sarka et al. 2008). kaip pažymi k. ališauskas ir ž. kazlauskienė (2005), galima išskirti tris pagrindines projekto sudėtines dalis, būdingas bet kuriam projektui: ištekliai, įgyvendinimo trukmė ir kokybė, kuri nusakoma specifiniais rodikliais. kiekviena įmonė privalo identifikuoti ir įvertinti investicijų alternatyvas ateities atžvilgiu, nes dabartinės investicijų išlaidos teiks įmonei pinigines pajamas. todėl egzistuojant rizikos ir pageidaujamai pelningumo pusiausvyrai, kaip pažymi g. kancerevyčius (2004), ilgalaikių investicijų sudarymo tikslas – parinkti naudingiausią įmonės turtui projektą. sudarant ir atrenkant investicijų projektą susiduriama su vertinimo problema, kai reikalaujama numatyti (prognozuoti) pinigų srautus, pageidaujamą pelningumą arba kapitalo sąnaudas atitinkančią verslas, vadyba ir studijos 2009 23 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s projekto diskonto normą, siekiant atrinkti ir nuspręsti projekto tinkamumą, identifikuoti sprendimų metodus, nustatyti riziką. sudarant investicijų projektą svarbiausias ir sudėtingiausias momentas yra pinigų srautų prognozavimas. sudarant ilgalaikių investicijų projektą naudojami pinigų srautai, o ne apskaitos fiksuojamos pajamos, nes pinigų srautas teoriškai yra geresnis grynosios ekonominės naudos ar su projektu susijusių išlaidų matas. be to, pinigų srautų naudojimas minimizuoja apskaitos dviprasmybes, nes yra vienareikšmis. kadangi investicijų sudarymo procese reikalaujama prognozuoti projekto pinigų srautus, dominuoja ne apskaitos fiksuojamas pelnas, bet patys pinigų srautai. pagrindiniai pinigų srautų tipai yra šie: pradinės investicijos, susijusios su investicijų projektu; veiklos pinigų srautai, susiję su projekto normalia veikla (pinigų srautai po pradinių investicijų nuo t = 1 iki projekto pabaigos t = n); pabaigos pinigų srautai, gaunami t = n momentu. vykdant ilgalaikius investicijų projektus galimi trys sprendimų tipai: 1. priimta–atmesta arba tinkamas–netinkamas (sprendžiama apie konkretų projektą – investuoti ar ne). 2. veiksmingiausias projektas – iš keleto alternatyvių pasirinktas tinkamiausias. 3. kapitalo normavimo sprendimai, kai yra keli alternatyvūs priimtini projektai, bet trūksta lėšų jiems įgyvendinti. tuomet sprendžiama, kuriuos projektus pasirinkti investicijoms, o kuriuos atidėti vėlesniam laikui. kaip teigia g. kancerevyčius (2004), minėtų trijų sprendimų atveju atrankos kriterijai yra įvertinimo metodai, kuriais remiantis analizuojamas investicijų projekto patrauklumas ir veiksmingumas. projekto vertinimo ir atrankos kriterijų yra gana daug, bet juos galima sąlygiškai išskirti į dvi grupes pagal diskontuotų pinigų srautų (discounted cash flow – dsf) naudojimą: dsf kriterijai (metodai) ir ne dsf kriterijai (metodai). kurie iš jų yra veiksmingesni, priklauso nuo atskiros įmonės tikslų, nuo to, kaip minėti kriterijai (metodai) gerai juos atspindi. ne dsf kriterijai (metodai) yra populiarūs, nes lengvai suprantami ir plačiai taikomi, tačiau jie nėra labai tikslūs. bet kuriuo atveju juos reikia derinti. be to, investicijų projektų sprendimai gali būti daromi atsižvelgiant į visus įmonės investuotojus ir atsižvelgiant tik į akcininkus. pirmu atveju pageidaujamas pelningumas atitinka visas įmonės kapitalo sąnaudas, o antru – tik nuosavybės. investicijų projekto atrankai įvertinti mokslinėje literatūroje išskiriamos dvi metodų grupės: statiniai ir dinaminiai metodai (norvaišienė 2004). taikant ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s 24 verslas, vadyba ir studijos 2008 statinius investicijų projekto veiksmingumo vertinimo metodus neįvertinama pinigų laiko vertė, o taikant dinaminius metodus – tai būtina sąlyga. statiniams metodams priskiriamas investicijų atsipirkimo laikas ir investuoto kapitalo grąža. dinaminiai investicijų projekto veiksmingumo vertinimo metodai yra šie: modifikuotas investicijų atsipirkimo laikas, grynoji esamoji vertė, vidinė grąžos (pelno) norma, modifikuota vidinė grąžos (pelno) norma, pelningumo indeksas. kiekvienam investicijų projektui reikalinga analizė ir, priklausomai nuo projekto priskyrimo kuriai nors vienai klasifikacijai, projektai įvertinami pagal skirtingus kriterijus: vieniems sprendimams priimti pakanka paprastų skaičiavimų, o kitiems reikia sudėtingesnių, reikalaujančių didesnės analizės (rutkauskas 2007). projekto atsipirkimo laiko metodas (payback period – pp method) – tai atsipirkimo trukmė, metų skaičius, reikalingas investicijoms į projektą atsipirkti. kuo trumpesnis apmokėjimo terminas, tuo geriau. remdamasi atsipirkimo trukmės principu, įmonė gali nustatyti maksimalų apmokėjimo terminą ir priimti pasiūlytą projektą tik tuo atveju, jei jo apmokėjimo terminas yra trumpesnis nei nustatyta. nors atsipirkimo trukmės kriterijus (parodantis, kiek laiko lėšos yra susietos su projektu) lengvai apskaičiuojamas bei patogu ir lengva juo naudotis, jis turi du pagrindinius trūkumus. pirma, ignoruoja pinigų laiko vertę, nes daroma prielaida, kad piniginis vienetas ir šiandien, ir ateityje turės tą pačią vertę, nors ji ilgainiui mažėja. antra, jis yra palankus greito atsipirkimo termino projektams ir ignoruoja pinigų srautus, gaunamus pasibaigus maksimaliam atsipirkimo terminui. todėl galima atmesti tuos projektus, kurie per ilgesnį laiką galėtų būti pelningesni nei projektai, atrenkami remdamiesi atsipirkimo trukmės kriterijumi. taip pat reikia pastebėti, kad kuo laikotarpis yra ilgesnis, tuo mažiau patikimos prognozės. todėl sutelkiamas dėmesys tik į trumpą atsipirkimo laikotarpį, nes, kai kitos sąlygos yra pastovios, kuo trumpesnis atsipirkimo laikas, tuo didesnis projekto likvidumas. yra keletas vidutinės (apskaitomosios) grąžos normos metodo (average accounting rate of return – aarr) variantų. aarr metodas – tai vidutinių grynųjų pajamų (pelno po apmokestinimo) ir pradinių investicijų santykis. kuo jis didesnis, tuo geresnis investicijų projektas. įmonė gali nustatyti kritinę normą, priimdama ir atmesdama pasiūlytą projektą. jei projekto aarr yra didesnis nei nustatyta norma, tai projektas priimamas, priešingu atveju – atmetamas. šiuo metodu lengva naudotis, tačiau reikalingos grynosios pajamos visam projekto laikotarpiui, taip pat ignoruojama pinigų laiko vertė ir grynųjų pajamų gavimo verslas, vadyba ir studijos 2009 25 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s laikas. be to, naudojamos tik grynosios pajamos, o ne pinigų srautai. šis metodas gali būti taikomas kaip papildomas kriterijus greta kurio nors iš diskontuotų pinigų srautų metodo (rutkauskas 2007). dėl anksčiau minėtų atsipirkimo laiko kriterijaus trūkumų buvo sukurta diskontuoto pinigų srauto (discounted cash flow – dcf) metodika, pagal kurią įvertinama laiko veiksnio įtaka pinigų srautams (rutkauskas 2007; valakevičius 2008). vienas iš pagrindinių jos metodų – grynoji dabartinė (esamoji) vertė (net present value – npv). diskontuotų pinigų modifikuotas investicijų atsipirkimo laiko metodas iš dalies pašalina atsipirkimo laiko metodo trūkumus. šiuo atveju pradinės investicijos lyginamos su diskontuotais pagal rinkos palūkanų normą arba finansavimo išlaidas pinigų srautais. grynoji dabartinė vertė (net present value – npv) yra skirtumas tarp diskontuotų investicijų projekto išlaidų ir įplaukų pinigų srautų. tai viena pagrindinių finansų mokslo sąvokų, atspindinčių pradinės investicijos dabartinės vertės (neigiamosios) ir pinigų srautų dabartinės vertės (paprastai teigiamosios) palyginimą. npv matuojama pinigine išraiška. investuotojų pageidaujamas minimalus pelningumas dar vadinamas diskonto arba barjero norma ir žymimas i – tai tokia pelningumo norma, kurią turi gauti projektas, kad įmonės rinkos vertė liktų nepakitusi. pageidaujamas pelningumas taip pat gali būti laikomas įmonės ribinėmis nuosavybės arba projekto finansavimo šaltinių išlaidomis, pavyzdžiui, išlaidos gali būti banko paskolos palūkanos. kad rinkos vertė nepakistų, projektas turi padengti paskolos palūkanas – jo pageidaujamas pelningumas turi būti lygus banko palūkanų normai. pageidaujamu pelningumu į dabartinę vertę diskontuojami visi projekto pinigų srautai. atėmus projekto pradines investicijas gaunama grynoji dabartinė vertė. šis metodas naudojamas ilgalaikių investicijų projektams vertinti. sprendimo priėmimo taisyklė: jei npv > 0, tai projektą galima priimti, o jei npv < 0, tai projektą reikia atmesti. jeigu reikia pasirinkti iš keleto alternatyvių projektų, tai reikia rinktis tą, kurio npv didesnė. teigiama, kad tai tinkamiausias kapitalo išlaidų įvertinimo metodas. vidinės grąžos (pelno) norma (internal rate of return – irr) yra diskonto norma, pagal kurią nustatomas ekvivalentiškumas tarp dabartinės būsimų pinigų srautų vertės ir pradinių projekto sąnaudų, taip pat grynoji dabartinė vertė prilyginama nuliui. irr – plačiai naudojamas rodiklis pasirenkant investicijų projektą, nes juo remiantis įvertinama pinigų laiko vertė, visi siūlomo projekto pinigų srautai. tačiau jis turi kelis svarbius trūkumus: pirma, daroma prielaida, 26 verslas, vadyba ir studijos 2009 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s kad reinvestavimo norma yra lygi irr ir pinigų srautai yra reinvestuojami norma, lygia irr. tačiau praktiškai ne visuomet taip būna. antra, irr gali būti ne vienintelis, kitaip tariant, galimi keli irr variantai, jei pinigų srautuose yra keletas ženklų pasikeitimų. pagal dekarto ženklų taisyklę irr reikšmė gali būti lygi ženklų pasikeitimų skaičiui, todėl, kai tai atsitinka, irr rodiklio negalima naudoti. trečia, irr gali neegzistuoti, nes nesant galimybės rasti diskonto normą, padarančią npv lygią nuliui, irr rodiklis visiškai nenaudingas. ketvirta, kai kelių svarstomų alternatyvių projektų dydžiai yra skirtingi, irr metodo pasirinkimas gali prieštarauti npv rodikliui, todėl šiuo ir visais kitais atvejais, kai yra prieštaravimas tarp irr ir npv metodų, turi būti naudojamas npv metodas. pasiūlytas investicijų projektas yra priimamas, jei jo irr viršija reikalaujamą grąžos normą. kuo didesnis irr, tuo geriau. pasiūlytas projektas atmetamas, jei irr mažesnis nei reikalaujama grąžos norma. svarstant kapitalo įdėjimo investicijų projektus, irr yra naudojamas kaip nenuostolingumo kriterijus. projekto modifikuota vidinė grąžos (pelno) norma (modify internal rate of return – mirr) – tai tokia diskonto norma, kuriai esant projekto investicijų dabartinė vertė lygi jo galutinės vertės esamajai vertei. mirr pranašesnis nei irr metodas, nes mirr atveju daroma prielaida, kad visi projekto pinigų srautai yra reinvestuojami pagal vidutines įmonės kapitalo sąnaudas, o pasirinkus irr metodą daroma prielaida, kad kiekvieno projekto pinigų srautai reinvestuojami pagal to paties projekto irr. kadangi reinvesticijos pagal kapitalo sąnaudas yra dažniausiai korektiškesnės, todėl mirr yra patikimesnis investicijų projekto pelningumo rodiklis. be to, juo remiantis išsprendžiama irr daugiavariantiškumo problema. remiantis šiuo rodikliu galima apibūdinti projekto likvidumą, atvirkščiai proporcingą rodiklio reikšmei. kuo reikšmė mažesnė, tuo likvidumas didesnis ir projektas priimtinesnis. tačiau taikant šį metodą neįvertinamos įplaukos, gaunamos pasibaigus projekto atsipirkimo laikui, ir neatsispindi projekto rezultatyvumas, todėl jis taikytinas tik trumpalaikei orientacijai. projekto pelningumo indeksas (profitablity index – pi) yra santykis tarp dabartinės teigiamųjų ir dabartinės neigiamųjų piniginių srautų vertės. šis metodas yra panašus į npv metodą, nes, kai pi = 1, tai npv = 0. pi metodo siūlomas sprendimas dažniausiai sutinka su npv metodo siūlomu sprendimu. pi metodu matuojama dabartinė kiekvienos pradinės investicijos piniginio vieneto pelningumo vertė. projektas priimamas, jei pi yra didesnis už vienetą, ir atmetamas, jei pi mažesnis už vienetą. kuo didesnis pi, tuo geriau, nes jis parodo santykinį projekto pelningumą arba dabartinę pelno vertę, tenkančią dabartinių išlaidų vienam piniginiam vienetui. verslas, vadyba ir studijos 2009 27 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai panaudojus vieną ar kitą dinaminį investicijų projekto veiksmingumo atrankos metodą, matematiškai privaloma gauti tą patį sprendimą, jei projektai yra savarankiški, t. y. arba jie priimtini, arba atmestini. jei projekto npv yra teigiamas, jo irr privalo viršyti palūkanų normą, o pi turi būti didesnis už vienetą. tačiau pagal npv, irr, mirr ir pi metodus gaunami ir priešingi vienas kitą eliminuojančių (alternatyvių) investicijų projektų įvertinimai. taikant apžvelgtus pagrindinius investicijų projekto veiksmingumo įvertinimo metodus, susiduriama su pinigų srautų skaičiavimo, sprendimų priėmimo bei rizikos įvertinimo investicijų projektų atrankos problemomis. analizuojant investicijų projektą, pagrindinis ir sunkiausias momentas yra jo pinigų srautų įvertinimas. pinigų srautas – tai grynoji pinigų suma, kurią, priešingai nei buhalterijoje apskaitomas grynasis pelnas, įmonė gauna (arba praranda) per nustatytą laikotarpį. įvertinant investicijų projektą svarbūs yra ne tik pinigų srautai, kurie tiesiogiai siejami su projekto realizavimu ir valdymu. šie pinigų srautai atspindi visų įmonės pinigų srautų pokyčius priimant ar atmetant projektą. tenka pažymėti, kad čia atsiranda nemažai specifinių problemų. pirmiausia tai ankstesnės piniginės išlaidos, t. y. neatsiperkančios išlaidos, kurių atstatymas nepriklauso nuo to, ar projektas priimtas ar atmestas. antra, išorinis poveikis, t. y. projekto poveikis kitų įmonės padalinių pinigų srautams, nes jį sunku kiekybiškai įvertinti, tačiau būtina atsižvelgti. trečia, alternatyviosios sąnaudos – tai išteklių sąnaudos arba pelno norma, gaunama pasirinkus geriausią turto panaudojimo būdą. jos yra svarbios investicijų projektui, nes tai didžiausia pelno norma, kurios neįmanoma gauti, jei lėšos investuotos į konkretų projektą. visos kapitalo investavimo formos neišvengiamai susijusios su rizika, todėl jos analizė taip pat yra svarbi visiems investiciniams sprendimams. investicijų projekto rizika apibūdinama kaip projekto rezultatų nuokrypio nuo laukiamo rezultato galimybė. investicijų projektai, apimantys visą kompleksą techninių, technologinių, organizacinių, finansinių, personalo ir kt. projektinių sprendimų, priimamų neapibrėžtumo sąlygomis, yra ypatinga veiklos sritis. todėl investicijų projekto rizikai yra būdinga nemažai specifinių savybių: 1) kompleksinis pobūdis, integruojantis įvairialypes investicines rizikos rūšis (bendrą projekto rizikos lygį galima įvertinti tik įvertinus atskiras rizikos rūšis); 2) vertinimo subjektyvumas (nors projekto rizikos prigimtis yra objektyvi, tačiau jo vertinimo matas – projekto rizikos lygis – yra subjektyvaus pobūdžio); jį, t. y. reiškinio vertinimo neadekvatumą, lemia naudojamos informacijos patikimumas, vertinančių asmenų kvalifikacija bei patirtis. 28 verslas, vadyba ir studijos 2009 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s kai įmonės renkasi investicijų projektus, visų pirma jos turi nustatyti, ar projektas yra nepriklausomas, ar susijęs su kitais projektais. dažnai pasitaiko, kad įmonė turi keletą alternatyvų, o kartais vieno projekto pasirinkimas reiškia, kad savaime pasirenkamas kitas. tokiais atvejais įmonė turi ranguoti turimus projektus pagal prioritetų eiliškumą. tačiau ranguojant pagal npv ir irr dydžius, kartais gaunami nevienodi rezultatai, nes čia yra skirtumas, palyginti su atskiro projekto sprendimu, kai irr ir npv rezultatai dažniausiai sutapdavo. pagal npv kriterijus reikia rinktis didžiausius npv turinčius projektus, pagal irr – kuo didesnes normas. dažnai pasitaiko, kad investicijų projektų gyvavimo trukmė skiriasi, todėl juos ne taip paprasta iš karto palyginti. jei projektai nepriklausomi, tai skirtinga gyvavimo trukmė neturi reikšmės. jei projektai priklausomi, tai nė vienas iš diskontuotų pinigų srautų metodų netinka. todėl tokiems projektams įvertinti, kaip pažymi v. darškuvienė (įmonės ... 1997), galima rinktis vieną iš būdų: bendrosios gyvavimo trukmės ( – common life) metodą arba atnaujinimo grandinės (pakeitimų sekos – replacement chain approach) metodą; ekvivalentiškos metinės periodinių mokėjimų eilės ( – equivalent annual annuity – eaa) metodą. naudojant paprastą gyvavimo trukmės metodą trumpesnis projektas kartojamas tol, kol jo gyvavimo trukmė susilygina su ilgalaikiu projektu. šis metodas yra patogus, jei projektų gyvavimo trukmė skiriasi bendru kartotiniu. jei skirtumas mažas, tarkime 1–2 metai arba vieną iš projektų numatoma vykdyti ateityje, tai jo galima ir nepaisyti. naudojant eaa metodą, reikia suskaičiuoti atskirų projektų npv ir nustatyti metinį periodinį pinigų srautą, kurio dabartinė vertė būtų lygi projekto npv. tai daroma dalijant kiekvieno projekto npv iš jo gyvavimo laiką atitinkančio dabartinės vertės palūkanų veiksnio arba dabartinės vertės perskaičiavimo koeficiento. parenkamas projektas, kurio eaa yra didesnis. taikant šį metodą daroma prielaida, kad kiekvienas projektas tęsiamas, t. y. atnaujinamas kaip besitęsiantis procesas ir kartojamas jam pasibaigus. šiuo atveju eaa tampa begaline eile. pinigų srautai, gaunami realizuojant projektą, yra ekvivalentiški apskaičiuotai periodinių mokėjimų eilės vertei. tuomet, kai horizontas yra begalinis, šios begalinės periodinių mokėjimų eilės dabartinė vertė yra projekto npv (kancerevyčius 2004). investicijų projekto finansinė analizė grindžiama projekto veiksmingumo (efektyvumo) nustatymu remiantis numatomais pinigų srautais, kurie rodo būsimas investicijas bei veiklos pajamas ir išlaidas. investicijų projektų finansiniam įvertinimui, kaip teigia e. valakevičius (2001), daugiausia taikoma sudėtinių verslas, vadyba ir studijos 2009 29 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s palūkanų teorija, kad galima būtų nustatyti investicijos tikslingumą (pelningumą). kiekvienam investicijų projektui reikia pradinių ir vėlesnių išlaidų, po kurių bus gaunamos pajamos. kai kuriais atvejais išlaidų ir pajamų modelis yra pakankamai sudėtingas, nes pinigų srautai turi būti tiksliai apibrėžti (fiksuoti) arba įvertinti. pinigų srautams įvertinti reikia didelio patyrimo, nuovokos, be to, būtina atsižvelgti į tokius veiksnius kaip infliacija, dotacijos, mokesčiai ir pan. paprastai būna trys investicijų pasekmių prognozės: optimistinė, vidutinė bei pesimistinė. projektų finansinė analizė gali būti papildyta ir kitais analizėje naudojamais metodais, kurie padėtų geriau įvertinti ir atrinkti specifinius projektus. kadangi didelę įtaką bendram investicijų veiksmingumui turi atskirų projekto veiksnių rizika, kurią būtina įvertinti, tikslinga panaudoti kompleksinį projektų vertinimą įtraukiant ir rizikos įvertinimo veiksnius. investicinių projektų vertinimo būdai ir metodai apibendrinti įvairiose vertinimo metodikose, kurias išanalizavus pastebima, kad jos turi keletą trūkumų: pasigendama nuoseklaus veiksmingumo vertinimo pagal atskirus kriterijų blokus ir hierarchijos lygmenis, kitaip tariant, nėra parengto projekto vertinimo algoritmo, kuriuo būtų galima sistemiškai ir nuosekliai įvertinti bei išrinkti racionaliausią projekto variantą, nes praktiškai tai neįmanoma be kompleksinio rodiklio vertinimo. dažnai reikia ne tik išrinkti geriausią variantą, bet ir kitus variantus išdėstyti didėjimo ar mažėjimo tvarka pagal pirmumo laipsnį. pagrindinė priežastis, dėl kurios kompleksinis įvertinimas sunkiai nustatomas, yra ta, kad jo atskiri rodikliai (kriterijai) yra skirtingos kilmės, kokybiškai skirtingi ir daugeliu atveju turi skirtingus neapibrėžtus matus, todėl juos sujungti į vieną bendrą integralinį rodiklį yra sudėtinga. prioritetų skirstymo ir parinkimo (psp) metodu (блюмберг, глyщенко 1982) galima spręsti panašius daugiakriterius valdymo uždavinius tokiu tikslumu ir pagrindimo laipsniu, kurie reikalingi racionaliems valdymo sprendimams priimti. investicijų projektų analizei, įvertinimui ir galutinei atrankai tikslinga būtų panaudoti formalizuotą ekspertinį straipsnio autoriaus (жилинскас 1988) modifikuotą prioritetų skirstymo ir parinkimo (mpsp) metodą, kurį taikant galima įvertinti projektą pagal atskirus dalinius rodiklius bei jų svarbumo reikšmę ir gauti atrenkamo projekto kompleksinį įvertinimą. šį mpsp metodą tikslinga naudoti, kai reikia vienu metu įvertinti kiekybinių ir kokybinių rodiklių (kriterijų) įtaką. vertinimo metodika ir ekspertinio įvertinimo formos parinkimas turi įtakos ekspertizės rezultatų tikslumui, todėl būtina pagrįsti ekspertinį įvertinimą ir jo formą. šis mpsp metodas, skirtingai nuo prioritetų skirstymo ir parinkimo (psp) 30 verslas, vadyba ir studijos 2009 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s metodo (блюмберг, глyщенко 1982), paremtas labiau pagrįsta ir argumentuota logine procedūra, paverčiant kokybines charakteristikas, naudojamas atliekant porinį sulyginimą, į kiekybinius įvertinimus, gaunamus santykinėje skalėje. kadangi valdymo sprendimo priėmimas (šiuo atveju – investicijų projekto) susijęs su vienu iš daugelio sprendimo parinkimo variantų, įvertinimo ir atrankos procese būtina kompleksinio įvertinimo sąlyga, esant skirtingų veiksnių (rodiklių) kilmei ir matmenims, yra jų reikšmių pavertimas santykiniais dydžiais, kurie normuojami vienodai ir vienu matu (išreiškiamu vieneto dalimis). kita būtina sąlyga – kiekvieno dalinio rodiklio reikšmingumo (svarbumo) įvertinimas. tuomet, jei daliniai rodikliai yra matuojami vienoje mato skalėje ir įvertinamas jų reikšmingumas, tenkinamas kompleksinio įvertinimo sudarymas ir kompleksinis (suminis) rodiklis užrašomas kaip šių rodiklių įvertinta suma, iš kurios matyti, kad šis rodiklis yra dalinių rodiklių funkcija. kompleksinio vertinimo procedūra turi prasidėti nuo vertinimo tikslo nustatymo, vertinimo objekto apibūdinimo ir ekspertų komisijos sudarymo. ekspertų komisijos svarbiausia užduotis – nustatyti dalinius vertinimo rodiklius (kriterijus) ir jų svarbumą bei atlikti ekspertizę taikant netranzityvinę porinio lyginimo sistemą. investicijų projektai (nagrinėjami objektai) vertinami taip: remiantis sistemine analize sudaromi grafai („rodiklių medis“ (1 pav.) ir „sprendimų medis“ (2 pav.)). po to pagal siūlomus vertinimo rodiklius atliekama ekspertizė. as) 1 j n daliniai rodikliai (kriterijai) kompleksinis rodikli s (suminis prioritetas) 1 pav. grafas „rodiklių medis“ fig. 1. graph “index tree” kiekvienas ekspertas, atlikdamas ekspertinį vertinimą, nesuteikia nagrinėjamiems objektams (variantams) kokio nors kiekybinio įvertinimo, o tik poromis lygina objektus vieną su kitu pagal kiekvieną iš rodiklių, pranašumo santykį tarp jų nustatydamas pirmumo ženklais, išreikštais kokybine forma: daug geresnis (daug daugiau >>), geresnis (daugiau >), truputį geresnis (nedaug daugiau ≥), lygus (lygu =), truputį blogesnis (nedaug mažiau ≤ ), blogesnis (mažiau <), verslas, vadyba ir studijos 2009 31 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s daug blogesnis (daug mažiau << ). ekspertinio palyginimo sistema pateikiama lentelėje. remiantis ekspertų pateiktais porinių palyginimų sistemos pagal atskirus rodiklius įvertinimais, sudaromos pirmumo matricos a = || aij dif . ||. kadangi gaunami ne visiškai identiški ekspertų įvertinimai, todėl pagal jų parodymus apskaičiuojami diferencijuoti pirmumo koeficientai aij dif . , kurių pagrindas yra pagal atitinkamus dalinius rodiklius nustatyti santykiniai prioritetai pij s. psi(1) p s i(j) p s y1 yj y5 ∑ == ×= nm ji j s ji kompl i ypp , 1;1 . i(n) čia: pi kompl. – i-tojo objekto kompleksinis rodiklis (suminis prioritetas); pij s – i-tojo objekto pagal j-ąjį dalinį rodiklį santykinis įvertinimas (prioritetas); yj – j-ojo dalinio rodiklio svarbumo reikšmė. 2 pav. grafas „sprendimų medis“ fig. 2. graph “decision tree” pirmumo matricos a elementas aij dif . – tai diferencijuotas pirmumo koeficientas, kuris nėra eksperto balinis įvertinimas, o tik skaitinis matas – vieno i-tojo objekto palyginimo su kitu j-uoju objektu, remiantis kokiu nors požymiu (kriterijum), pranašumo (pirmumo) suvokimo analogas. diferencijuotas pirmumo koeficientas aij dif ., kuris kiekvienai lyginamai objektų i ir j porai pagal atskirą dalinį rodiklį įvertina visų ekspertų subjektyvią nuomonę apie šios lyginamos poros pranašumo santykį, apskaičiuojamas pagal formulę: . ( ) 1 1 , q dif ij ij k k a a q = = ∑ 32 verslas, vadyba ir studijos 2009 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s čia: aij dif . – pirmumo matricos diferencijuotas pirmumo koeficientas; k = 1, 2, …, q; q – ekspertų skaičius; aij(k) – k-tojo eksperto duotas i-tojo objekto prieš j-tąjį objektą požymio reiškimo pranašumo laipsnio kiekybinis įvertinimas (žr. lentelę). lentelė. pirmumo koeficiento aij(k) reikšmių skalė table. meanings scale’s of priority coefficient aij(k) p r a n a š u m o (pirmumo) p o ž y m i s daug daugiau >> daugiau > nedaug daugiau ≥ lygu = nedaug mažiau ≤ mažiau < daug mažiau << 23 = 8,0 22 = 4,0 21 = 2,0 20 = 1,0 2–1 = 0,5 2–2 = 0,25 2–3 = 0,125 mpsp metodas paremtas sudėtingesne sistema, pagal kurią įvertinamas pirmumo koeficientas aij (aij = 2 n, čia –3 ≤ n ≤ 3) įvedant septynis pirmumo ženklus (>>, >, ≥ , =, ≤ , <, <<), negu psp metodas (aij + aji = 2, kai koeficiento reikšmės išdėstomos simetriškai vieneto atžvilgiu) naudojant tris pirmumo ženklus (>, =, <) santykiniam objektų (variantų) palyginimui pagal atskirus rodiklius (kriterijus). todėl naudojant mpsp metodą gaunami tikslesni rezultatai negu naudojant psp metodą. dalinių vertinimo rodiklių (kriterijų) svarbumo reikšmė yj nustatoma mpsp metodu analogiškai kaip ir nagrinėjamų objektų, naudojant ekspertinio vertinimo palyginimo sistemą, sudarant pirmumo matricą. sprendimo būdu gauti santykiniai prioritetai pij s ir yra dalinių rodiklių (kriterijų) yj reikšmingumo (svarbumo) reikšmės. kompleksinio rodiklio (suminio prioriteto) pi kompl. apskaičiavimas ir pirmenybę turinčio objekto (projekto varianto) išrinkimas atliekamas pagal kiekvieną dalinį rodiklį, atsižvelgiant į vertinimo rodiklio reikšmingumą. kiekvienas variantas vertinamas atskirai, nurodant vietas, ir kiekvienam iš jų apskaičiuojamas įvertinimo kompleksinis rodiklis (suminis prioritetas), pagal kurį skirstomos galutinės vietos (ranguojama) bei atrenkamas prioritetinis investicijų projektas. kompleksinio įvertinimo reikšmė pi kompl. (2 pav.) yra integralinis rodiklis, rodantis, kad projektas yra pranašesnis už kitus, vertinamus pagal pasirinktus kriterijus. investicijų projektą vertinanti institucija arba ekspertų komisija pasirenka tą projektą, kuris turi didžiausią suminį įvertinimą, ir pateikia išvadą, kurioje nurodo pasirinkimo metodiką ir vertinimą. verslas, vadyba ir studijos 2009 33 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s kadangi racionalūs atrankos matematiniai metodai gali būti vienakriteriai ir daugiakriteriai, racionaliai vertinant investicijų projektus ir atrenkant metodus, kaip pažymi e. valakevičius (2001), tikslinga vadovautis šiais principais: 1. adekvatumo. metodas tinkamas, jei jį naudodamas investuotojas tiki, kad dirbama tikslingai ir turima informacija naudojama racionaliai. 2. naudojimo paprastumo. metodas paprastas, jei be didelio teorinio, matematinio pasiruošimo galima jį naudoti ir gauti objektyvų galutinį rezultatą. 3. veiksmingumo (efektyvumo). metodas veiksmingas, jei juo remiantis galima gauti geresnius arba ekvivalentiškesnius projekto variantus negu naudojant kitus metodus. vienakriterių atrankos metodų naudojimas nėra labai sudėtingas, todėl ekonomiškai tikslinga kuo dažniau juos naudoti. tačiau dėl to, kad projektų vertinimas pagal vieną kriterijų nėra labai patikimas, tikslinga naudoti daugiakriterius atrankos metodus. gauti matematiniai rezultatai leidžia išrinkti racionalų projekto sprendinį. apibendrinant matematinių metodų naudojimą, išrenkant racionalius investicijų projektus, tikslinga pabrėžti, kad nereikia šių metodų laikyti panacėja ir taikyti ten, kur reikia ir kur nereikia. visuomet būtina logiškai įvertinti jų taikymo galimybes, būtinumą ir parinkti siekiamiems tikslams įgyvendinti tinkamą racionalų vieną ar kitą matematinį metodą. kuriamas bei įgyvendinamas investicijų projektas gali apimti visus arba atskirus investicijų proceso etapus: mokslinį tyrimą, projektavimo ir konstravimo darbus, esamos gamybos plėtrą ar reorganizavimą, naujos gamybos ar naujo produkto kūrimą. apibendrinant įvairių autorių darbus, kaip teigia v. z. černiak (черняк 1998), projektus galima klasifikuoti, atsižvelgiant į svarbiausių veiksnių įtaką. įvairių rūšių investicijų projektai gali būti reitinguojami pagal jų įgyvendinimo būtinumą, skubumą ir tarpusavio priklausomybės laipsnį (alternatyvieji arba konkuruojantieji, nepriklausomi arba tarpusavyje susiję). atsižvelgiant į investicijų projekto tipą, jam parengti ir įgyvendinti skiriamas projekto vadovas, kuris formuoja komandą. jos narių skaičius priklauso nuo investicijų projekto apimties, etapo, apibrėžtų tikslų, metodų, taikomų šiems tikslams pasiekti. tai ir sudaro organizacinę valdymo struktūrą. investicijų projektų valdymas – tai tikslo siekimas, apimantis tam tikrus valdymo proceso etapus. todėl norint veiksmingai valdyti šį procesą, būtina planuoti, organizuoti, vykdyti, stebėti ir koordinuoti bei kontroliuoti atsižvelgiant į esamą padėtį ir siekiant galutinio tikslo. racionaliam ir veiksmingam atrinkto 34 verslas, vadyba ir studijos 2009 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s investicinio projekto įgyvendinimui tikslinga naudoti jav sukurtą tinklinio planavimo ir valdymo metodą pert (programme evalution and review technique) (griškevičius, silickas 1998). 3. išvados investicijų projektų atrankos veiksmingumo (efektyvumo) įvertinimas yra aktuali problema, kuri šiuo metu nėra pakankamai nagrinėta. vertinant ir atrenkant optimalius investicijų projektus, nepakanka vien finansinės analizės, bet reikia visapusiškai įvertinti šiuos projektus ir jų pasekmes šalies, regiono ar įmonės ūkio plėtrai. investicijų projekto optimaliai atrankai vertinti siūlomas formalizuotas ekspertinis straipsnio autoriaus modifikuotas psp metodas, kurį taikant galima objektyviai atlikti ir pagrįsti investicinių projektų veiksmingumą naudojant kompleksinį (suminį) įvertinimą pagal atskirus dalinius kiekybinius ir kokybinius rodiklius bei jų svarbumo reikšmę. dėl savo universalumo, tikslumo ir pagrindimo laipsnio, kuris reikalingas racionaliems valdymo sprendimams priimti, siūloma investicinių projektų atrankos kompleksinio vertinimo metodika. tai gali būti svarus pagrindas gaunant es struktūrinių fondų paramą arba atrenkant ir ranguojant projektus, padedančius tiksliau įgyvendinti valstybinę investicinę programą. literatūra ališauskas, k.; kazlauskienė, ž. 2005. investicinių projektų rengimas, valdymas ir vertinimas. šiauliai: všį šu. 161 p. isbn 9986-38-572-5. bivainis, j., et al. 1997. investicinių projektų vertinimas. vilnius: lii. 40 p. isbn 9986-13-541-9. ginevičius, r.; podvezko, v.; bruzgė, š. 2008. evaluating the effect of state aid to business by multicriteria methods, journal of business economics and management 9(3): 167–180. ginevičius, r.; zubrecovas, v. 2009. selection of the optimal real estate investment project basing on multiple criteria evaluation using stochastic dimensions, journal of business economics and management 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verslas, vadyba ir studijos 2009 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s optimal selection method for investment project v. j. žilinskas summary under the modern world market conditions the investment activity of enterprises is increasing. therefore, one of the main aspects of the investment activity guarantee is a selection and apprehension of the main principles of the investment control and possibilities of different uses of the investment instruments. for the optimum selection of the investment projects it is suggested to use a formalistic experimental author’s modified method of priority allocation and selection, which gives an opportunity to evaluate the investment project according to different partial criteria and their meaning of importance. working out this way a complex evaluation of each chosen investment project is obtained. using the suggested mpsp (modified method of priority allocation and selection) the investment projects are evaluated with qualitative and quantitative criteria. so this method can be used when qualitative criteria of evaluation are predominated. formalistic methods of analysis cannot be used to establish quantitative criteria and those small projects when it is relatively too expensive to apply other usual methods of the financial economic analysis. method mpsp selection is universal and ordinary so it can be used to establish the efficiency of different projects, to classify projects, to model the strategy of the state economy. if you like to control the realization of the chosen investment project more effectively and rationally it is suggested to use pert (program evaluation and review technique). the main control elements of the investment project are reviewed in the article using pert which is useful to draw up an optimistic reticular schedule of the investment work implementation. keywords: evaluation and selection of the investment project, formalistic experimental modified method of priority allocation and selection, complex evaluation, pert (program evaluation and review technique). the competitive advantage in the global labour market jana kajanová slovak university of technology in bratislava, vazovova 5, 812 43 bratislava, slovakia e-mail: jana.kajanova@stuba.sk received 18 november 2010; accepted 15 january 2011 abstract. the main subject of this paper is to present and submit the basis of both internal and external factors determining the competitive advantages in the global labour market and to assess the possibilities and changes occurring in the current labour market due to the present-day requirements of this sphere. today, it is necessary to take into account a certain advantage in comparison to other applicants in the market place. it follows that the matter in question is the creation of the competitive advantage, which will strengthen the position of an applicant, point out to the causes of his preference and will provide interesting conditions. keywords: globalization, labour market, competitive advantage, qualification. reference to this paper should be made as follows: kajanová, j. 2011. the competitive advantage in the global labour market, business, management and education 9(2): 157–170. http://dx.doi.org/10.3846/bme.2011.11 jel classification: j24, e24. 1. introduction the recent years typical by a change in the orientation and transition of the market economics to the knowledge economics offer the new opportunities in building modern pillars, principles and trends, which lead to the development and modernization of individual economics. the important and current task is to deal with the influences and impacts of the economic crisis, which afflicts, to a larger or smaller extent, the individual economics or states. all these external influences affect also the internal environment of entrepreneurial subjects and consequently the economy, its development and a number of macroand microeconomic indicators. the main objectives of the contribution are: 1. to create and submit the basis of both internal and external factors determining the competitive advantages in the global labour market. 2. to assess possibilities and changes occurring in the current labour market due to the present-day requirements of this sphere. 3. to create a model of the successful applicant’s profile needed in the labour market. b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(2): 157–170 http://dx.doi.org/10.3846/bme.2011.11 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 158 j. kajanová. the competitive advantage in the global labour market methodology: on the basis of the change occurring in the society’s attitude to the knowledge, skills and human potential, the labour environment, in which the aplicants are employed, is analyzed. the acquired information enabled us to have the present-day view of the labour market in slovakia. a set of external and internal factors determining the competitive advantages was compiled by assessing and comparing the accepted criteria. the selection of possibilities for creating competitive advantages was a basis for modelling the successful applicant’s profile needed in the labour market. within the research, the following scientific methods were employed: analysis, synthesis, deduction, comparison and observation. in the following parts of this paper, attention will be paid to a number of internal and external factors, which are the condition for successful handling of the situation in the global market. the contribution was written within the frame of a research project vega 1/0447/10 on “creation of the architecture of selected key factors of the performance of manufacturing enterprises influencing the permanently sustainable development from the aspect of causes and minimum inpacts on the economic crisis”. as a basis for solving the issues in question, the basic data of the above-mentioned project are presented. short characteristics and scientific goals suggest the harmonization of the contribution and the project. 2. basic aspects of the knowledge management interconnection of abilities, knowledge and capabilities with the information and / or with the information and communication technologies has become a modern trend (kajanová 2009). its utilization and implementation into the company management and decision processes provide the first competitive advantages in this area. therefore we have chosen the knowledge management, which covers in certain way also these factors. the knowledge management is a topic for the discussion of a broad forum of economists, specialists and entrepreneurs publishing and providing their observations, opinions, findings, conclusions and definitions for the public, which more and more appreciates its benefits, utilization and alternatives (truneček 2004). our attention was directed towards selected authors explaining the basic terms of knowledge management, namely, the definition of the knowledge itself and the knowledge management as well. l. mládková (2004) considers the knowledge as a changing system including interactions among the experience, skills, facts, relations, values, thinking processes and significance. to explain the knowledge l. mládková (2004) uses the following formula: knowledge = information + x, where: x – equivalent for the previous knowledge and skills, experience, mental models, relations, values and principles, according to which we live and in what we believe (mládková 2004). 159 business, management and education, 2011, 9(2): 157–170 the knowledge management can be understood as a systematic process of search, choice, organization, concentration and presentation of the information (knowledge) in such a way that it helps companies increase the level, at which employees understand the specific areas. in this way, the knowledge management enables companies to gain a deeper insight into its problems and also understanding, especially on the basis of using their own experience and their own intellectual property (kelemen 2007). the knowledge is created by a complicated system of the individually adopted experience, facts, relations, thinking processes and values. it is a system with a changeable structure, which is constantly developing in the process of learning, and therefore it cannot be separated from the human thinking. in addition, there exists in it a logical thinking but also the intuition and a certain degree of uncertainty, which can be found in this context. therefore it can be deducted that the relation between the knowledge and information is mutually interconnected. the knowledge is used in the process of a choice and interpretation of data and decision making. at the same time, the knowledge is changed and developed in the learning process (alexy 2007). according to b. bergeron (2003) the knowledge management is a deliberate and systematic optimization strategy of business, which chooses, extracts, saves, organizes, connects and communicates the fundamental information for company business, and this is done in such a way that it increases the the company’s performance and competitiveness (bergeron 2003). an interesting view offers the interpretation of f. lipták and b. paulen (2009), according to which the following actors come to the fore in the knowledge management process: knowledge creators, knowledge drivers, knowledge mediators, development knowledge donors, knowledge managers whose activities are ongoing in the specific environment (lipták, paulen 2009). globalization poses new challenges to higher education institutions. the main concern for educators is to provide their graduates with an extensive assortment of skills required for the new knowledge-based economy (stukalina 2008). the ability to take advantage of the information in the company management and decision-making is a key factor of the success of each entrepreneurial subject. however, to transform the casual, often unsystematic and chaotic information into the form of the knowledge is a systematic, purposeful and coordinated process, which can become the company’s competitive advantage. already the data collection, classification, selection, sorting and evaluation as well as the utilization of information and communication technologies is the first step towards the new trend of adequate and correct reactions of successful entrepreneurs. work with information or data requires not only reliable and high-quality software but also the assistance of qualified and skilled personnel. in this way, we can pass to the other part of the contribution dealing with possibilities, requirements and situations arising from current conditions in the labour market. more information about knowledge economy and knowledge management can be found in articles of c. k. chen (2008), l. mládková (2004, 2008), r. petříková et al. (2010), etc. 160 j. kajanová. the competitive advantage in the global labour market 3. the current situation in the labour market the situation in the labour markets is influenced by many external and internal factors, which directly or indirectly affect the development of the number of vacancies in labour markets, the level of unemployment, attractiveness of selected positions or branches, development of the average wage, legal duties of employers, barriers preventing the creation of new job opportunities, etc. human resources are and will be a decisive factor of the social, economic and cultural development and an indicator of the positive company image. the employees equipped with abilities and skills are a pillar of the strategic success of a company (kajanová 2005). in connection with the new tasks and aims of the entrepreneurial subjects, the recent practise requires managers and employees to be able to react quickly and correctly to new conditions and impulses. of course, it is very important to think strategically, handle critical situations, develop leadership skills, manage the working time purposefully and also to be flexible, adaptable, communicative and creative and have the language and computer skills. labour relations have been strongly individualised recently. this was influenced by the processes of globalisation, technological revolution, new types of employment, business transfer, information technologies, etc. (petrylaite 2008). at present the main emphasis is laid on the new educational contexts, mainly in the areas of: − flexibility; − adaptability; − mobility; − learning in the rapidly changeable environment. 3.1. external factors determining the competitive advantages a change in the demand and supply existing in the labour market, employment level, efforts for maintaining the job positions, pressure on decreasing the payment burden of entrepreneurs and other factors have been a stimulus for the identification of external factors determining the competitive advantage. prospects of economic development are getting more heavily dependent on the ability to initiate, disseminate and implement innovations in all spheres of life (melnikas 2008). competition plays a crucial role in sustainable development of economy, welfare and technological progress. it fosters companies to be better than competitors, to minimize production costs and to maximally satisfy customers (bogdanova, orlovska 2008). external factors include: political stability, development of the gross domestic product, development of the average wage, inflation, impacts of the economic crisis, currency stability, development of the currencies in neighbouring countries, legislative measures, development of the entrepreneurial environment, competitive environment, development of foreign investments, etc. (table 1). 161 business, management and education, 2011, 9(2): 157–170 17000 16500 16000 15500 15000 14500 14000 13500 1q 2009 2q 2009 3q 2009 4q 2009 1q 2010 2q 2009 development of gdp, bill. c table 1. external factors influencing the labour market no. external factors influencing the labour market 1 political stability 2 development of the gross domestic product 3 development of the average wage 4 inflation 5 impacts of the economic crisis 6 currency stability 7 development of currencies in the neighbouring countries 8 legislative measures 9 development of the entrepreneurial environment 10 competitive environment 11 development of foreign investments political stability is important for the feeling of safety, stability of opinion, promises, agreements and protection of deposited investments. a change in the political atmosphere and governmental groupings has a negative effect on the inflow of the foreign capital, which is the basis for the development and increase of labour positions. frequent changes can cause the stagnation or even a decline of reforms and legislative adjustments leading to the improvement of the entrepreneurial and competitive environment having a direct impact on the labour market. the development of the gross domestic product (table 2, fig. 1) is a macroeconomic indicator showing the ability and strength of the economy. in recent years, the slovak economics has been significantly affected by a decrease of the foreign demand as a result of the global economic crisis. table 2. development of the gdp, year 2009, 2010 (source: statistical office of the slovak republic) period 1 st quarter 2009 2nd quarter 2009 3rd quarter 2009 4th quarter 2009 1st quarter 2010 2nd quarter 2010 gdp (in mld. eur) 14 647.6 15 639.5 16 567.5 16 521.7 15 072.4 16 355.3 fig. 1. development of the gdp in the years 2009 and 2010 (source: statistical office of the slovak republic) 162 j. kajanová. the competitive advantage in the global labour market official prognoses of the ministry of finance predict for the slovak republic the wholeyear production decline by 5.7%; the similar values are also anticipated by the slovak national bank (snb) and the european commission (ec). however, after the economic revival expected in the next year, slovakia should become one of the most quickly developing countries of the european union (eu) with its growth representing nearly 2%. the development of the average-month wage in slovakia (table 3) reflects the change in employees’ conditions. their income decreases or increases and in this way has an indirect influence on their purchasing power. we continue observing the reduction of the middle class and the expansion of the lower one (i.e. the socially weaker group) in the society. table 3. development of the average-month wage in slovakia (source: statistical office of the slovak republic) period 2004 2005 2006 2007 2008 2009 the average-month wage (in euro) 525.29 573.39 622.75 668.72 723.03 743.12 the development of the average monthly wage (fig. 2) has a slightly rising tendency. it can be assumed that the following period will be marked by a stagnation of the average wage or only by its minimum growth. the consequence of the economic crisis is the shortening of the working time, the forced unpaid time-off, or the forced plant standoff, which are the factors affecting a wage decrease of the employees. however, in the frame of the slovak labour market it is one of the less popular measures, such as the dismissal and reduction of employees in the company. fig. 2. development of the average month wage (source: statistical office of the slovak republic) 2004 2005 2006 2007 2008 2009 800 700 600 500 400 300 200 100 0 average wage an increase of the average wage is a positive phenomenon from the point of view of the employees for whom it is easier to face the increase of items necessary for their existence. from the aspect of the competitive advantage it is, on the contrary a negative 163 business, management and education, 2011, 9(2): 157–170 2004 2005 2006 2007 2008 2009 unempl. rate 20 18 16 14 12 10 8 6 4 2 0 trend manifested in low wages in comparison with the neighbouring countries. both centralization and allocation of new investments, being conditioned by low wages, are shifting towards the east and south-east (for example, to bulgaria or romania). inflation is associated with the price increase of products, goods and services, which causes a decrease in the power purchase of the population. the development of inflation in between the years of 2009–2010 (table 4) reached the negative value for the first time in the period of last years, which means that the prices of the company’s outputs did not increase but, on the contrary, decreased. table 4. the development of inflation in between the years of 2009–2010 (source: statistical office of the slovak republic) i ii iii iv v vi vii viii ix x inflation (%) 0.1 0 0.1 0.4 0.1 0 0.1 –0.1 0 0 in the period of a price decrease, the revenues of sellers fall down and therefore the proper environment for an increase of the number of new work opportunities or work positions cannot be created. impacts of the economic crisis are another factor influencing negatively the labour market in slovakia. both a failure and an inability to sell products, goods and services are the first step to the reduction of the number of job posts. in the last year, the number of plants and companies were closed down in slovakia as a consequence of the global economic crisis. the development of the unemployment rate (table 5) in slovakia is positively oriented (fig. 3) but the manifestation of the economic crisis has radically changed the original positive trend (table 6). table 5. development of the unemployment rate (source: statistical office of the slovak republic) 2004 2005 2006 2007 2008 2009 unemployment rate (%) 18.1 16.2 13.3 11.0 9.6 12.1 fig. 3. development of the unemployment rate (source: statistical office of the slovak republic) 164 j. kajanová. the competitive advantage in the global labour market table 6. development of the unemployment rate, 2010 (source: statistical office of the slovak republic) 2010 jan feb mar apr may jun jul aug sep oct unemployment rate (%) 9.0 9.7 10.3 10.9 11.4 11.8 12.1 12.1 12.5 12.4 the stability of currency is an advantage considered from the aspect of tying the financial sources into projects and investments; however, the development of currencies in the neighbouring countries presents a threat of decreasing the competitiveness of our products abroad. the common people take advantage of the so-called “shopping tourism” by travelling to neighbouring countries, for example, to hungary, poland and ukraine where a fall of the national currencies enables the more advantageous shoppings in comparison with the stable euro. legislative measures are another factor having a direct influence on the labour market. adjustments carried out in the form of the increase of already high obligatory payments are a negative signal for the employers who would be interested in the increase of the number of job positions. an increase of the tax burden also belongs to the less popular measures but it is certain that the slovak government will have to make some steps to decrease the state deficit and increase the income item of the state budget. the development of the business environment and the formation of the competitive environment create new opportunities for employees, and offer new job posts, which motivate applicants for certain positions to further their education and competitiveness. the favourable development enables the expansion of various kinds of products, goods and services, the increase of production capacity, and the expansion of production programmes, all of which represent a future growth in the need of the human potential. on the contrary, uncertainty, production decline or a decline in the sale act negatively on the working performance, on the decrease of interest as well as on the motivation of employees. the development of foreign investments is one of the external factors, which have a direct impact on the increase of the job posts. projects on the “greenfield” are beginning to raise hopes and expectations of unemployed people in the respective region. however, the selection of future employees depends on their education, skills and abilities to succeed in the labour market. 3.2. internal factors determining the competitive advantage internal factors (table 7) include: skills, qualification of employees, the number of graduates from colleges and universities, development and diversification of production programmes, research and development, creation of he company culture, etc. skills and the qualification of employees determine their utilization and readiness for the performance in practise. this factor proceeds from the overall educational system 165 business, management and education, 2011, 9(2): 157–170 in slovakia, from the educational programmes and readiness of the educational institutions. it is responsible for opportunities, which are offered by the human potential. however, the success of applicants in the labour market is limited by their own effort, talent and personal characteristics predetermining their orientation or interest. table 7. internal factors influencing the labour market no. internal factors influencing the labour market 1 skills and qualification of employees 2 number of graduates from colleges and universities 3 development and diversification of the production programmes 4 research and development 5 creation of the company culture the number of graduates finishing studies at colleges and universities, the level of their education and the personal development during the studies are the factors, which systematically and continually complete the vacancies. the common problem is the preference of certain specializations and branches, and a lack of the skilled labour force in some craftsman positions. unfortunately, the admission system for young people and students applying for the study at apprentice schools, vocational schools, colleges, and universities is not suitably coordinated and therefore the demand for certain professions is not often met. here exists the possibility for foreign or retrained employees to take advantage of this opportunity. the development and diversification of production programmes support the performance of individual companies or entrepreneurial subjects. new technologies and the modern understanding of clients’ values permit the sellers to react in the form of modern services and goods, produced on the new machinery with the help of new technologies supervised by a skilled labour force. the never ending process of self-education, as well as the coordinated and life-long education is the necessary steps for an increase of the competitiveness in the labour market. the research and development support innovations in the area of science and technology, which can be exploited to increase the productivity, quality and competitiveness. the achievements in the field of science and technology are the driving force of development and of the wide offer to customers who will appreciate an effort of producers and / or sellers by a higher consumption. the creation of the company culture is a factor, which can positively or negatively affect the performance and implementation of the employee’s activity. in this way,it becomes one of the opportunities enabling the non-financial motivation of employees for a better and higher quality performance, creative team work and a collective creation of the higher added value. from the above mentioned facts, it is obvious that those companies, which want to succeed in the global market, need to create and exploit the certain competitive 166 j. kajanová. the competitive advantage in the global labour market advantages, which would enable them to react to changes and needs of the market and also to the consumer in a faster and more adequate way. through identification and analysis of the external and internal factors determining the creation of competitive advantages in the area of managing the human potential, they are able to take up the proper strategic attitudes ensuring a better position in the market, an improvement of the quality, and a higher profitability or satisfaction not only for employers but also for customers. 4. the creation of the competitive advantage contemporary trends in the development of business environment, globalization processes and the effort of business subjects to become competitive give rise to a new environment characterized by identification, acquisition and maintenance of competitive advantages. the latter advantages are a decisive factor permitting companies to maintain and extend their market positions. a successful company needs a successful management paying attention to positive trends in development, fulfillment of defined goals and maximization of the company’s market value. readiness, knowledge, skills and abilities represent a guiding principle of each business subject. the mechanism of the creation of competitive advantage can be shown in a scheme (fig. 4) demonstrating the individual stages leading to creation of acompetitive advantage. fig. 4. mechanism of the creation of competitive advantage analysis of the external environment analysis of the internal environment selection of the area for creation of the competitive advantage suggestions for competitive advantages evaluation and selection of the optimum advantage creation of the competitive advantage analysis of the success of the competitive advantage f e e d b a c k f e e d b a c k 167 business, management and education, 2011, 9(2): 157–170 based on the analysis of the external and internal environment, the business subjects will select areas, in which they would be able to create some competitive advantage. from among the suggested possibilities, they will choose the one, which is difficult to imitate, which is real and viable in a relatively short scope of time. they will devise a strategy of how such an advantage would be exploited, i.e. a plan of steps is necessary for the implementation of this process. if the competitive advantage has been created and the company has achieved the desirable changes initiated by the competitive advantage, the company can consider it to be successful and to look for other possibilities to create another competitive advantage. feedback enables one to modify the competitive advantage, or after the successful creation, to search for a new area and a new competitive advantage, the creation of which is a wish of every business subject. in the area of the human resources, the following competitive advantages can be created: − highly qualified and skilled human potential; − professional coordination of the team work; − unique company culture; − motivating company climate; − system of work motivation; − support of innovation and improvements; − ability to communicate; − system of a carrier growth, etc. the competitive ability is most efficiently increased upon prompting basic research and knowledge spread obtained as the result of this research. such promotion is indirect business promotion, since usually functions of basic research and knowledge spread are performed by scientific institutes (jasinskas, simanaviciene 2008). the applicant’s profile in the labour market. the present situation has changed also the requirements laid on applicants for a job. out of these requirements constituting a basic pillar of most advertisements, questionnaires and news offering the information on vacancies the profile of graduates or applicants for a job can be determined. in connection with the new tasks and objectives of business subjects and from the aspect of the present practice, the employees are required to show the ability to quickly and correctly react to new conditions and stimuli, to think strategically and to cope with critical situations. as for the work with people, it is necessary for them to show the ability to lead a team, employ the working time rationally, carry out the duties flexibly, to be communicative, creative, and of course, to have the language knowledge, computer skills, etc. the need for computer skills arises from the need to work with internet providing the relevant information, from the need to communicate through e-mail and master various softwares in the specific working area of the employee. certain advantages are considered to be inherited abilities, which modify and form the applicant’s character. the characteristic features such as, for example, openness, 168 j. kajanová. the competitive advantage in the global labour market flexibility, self-control, intelligence, ambition, vigour, empathy, team work, collaboration and communication should be attributed to the natural qualities of each emplyee. the constant scientific and technological development, personnel migration and requirements for the flexibility and adaptability in individual posts require the life-long education and the continual improvement of qualification. the new knowledge and information, ability to adapt to changing environment, analytical thinking and a practical experience are the prerequisite of interesting competitive advantages in the labour market. with regard to the economic crisis, the current labour market is offering less job opportunities for applicants, which can give an implulse to seek for a personal competitive advantage and win recognition in the labour market. however, success in a strongly competitive environment can be achieved only by a person who is able to see objectively his or her weaknesses and strengths. presentation, development and improvement of strength and, on the contrary, the awareness of weaknesses followed by their repression are a positive step towards the proper employee behaviour. 5. conclusions the topic on creation of a competitive advantage in the area of human resources is the natural reaction to a change in the business subjects which is influenced by the globalization and a support of the knowledge economics. the term of globalization is discussed also by j. niedvaras (2008), m. r. markovic (2008), h. y. gronskas, d. streimikiene et al. (2008), p. staněk (2001), g. soros (2002), etc. the frequently discussed and investigated problems show themselves also in the preparation of graduates for a real performance of their work, in the adaptation to new conditions, in the definition of the profile of an applicant for his job position, and finally in the competitive advantage. on the basis of the analysis made about the present market situation in the slovak republic and in virtue of the external and internal environment of business subjects, a set of factors and areas, which permit the companies to create some competitive advantages, is formed. the factors incorporated in tables 1 and 4 represent the relevant factors influencing the behaviour and management in business subjects. the analyzed indicators are a basis for the creation and implementation of competitive advantages. the assessment of individual factors gives rise to many chances for the company to take decisions about the creation of competitive advantages. after evaluating the political stability, volume of foreign investments and development of the gross domestic product it is possible to estimate the situation in a particular market, its prospects and an appraisal of its future development. the development of the average wage shows indirectly the development of the buying capacity of inhabitants. the inflation provides data for the evaluation of the price levels that have effect on the amount of 169 business, management and education, 2011, 9(2): 157–170 wages required for the applicants for job. the impacts of the economic crisis manifested in a decrease of labour opportunities, in a come-back of employees from abroad, and in a stability of the local currency have influence on the development of requirements laid on applicants in the labour market. it is necessary to indicate that the development of the business and competitive environment has simultaneously a share in the formation of the number and composition of job opportunities in the labour market. on the other hand, the business subjects react not only to external factors but also to the external environment as a whole. as for internal factors, their influence produces the new environment for applicants as well as for employees. this, of course, affects also the profile formation of the applicant for job who represents, due to his characteristics, the fulfillment of demands laid on him in the contemporary labour market. a wide spectrum of the supplied factors and ideas should serve as a basis for the discussions and solutions of questions concerned with the creation of competitive advantages associated with the area of human resources. references alexy, j. 2007. progressive management trends in the knowledge economics. bratislava: publishing house sut. 258 p. bergeron, b. 2003. essentials of knowledge management. new jersey: john wiley and sons. 208 p. bogdanova, o.; orlovska, a. 2008. competition – the key factor for effective business development, in 49th international scientific conference “the problems of development of national economy and entrepreneurship”, riga, latvia, 9–13 october. riga: rtu publishing house, 10. isbn 978-9984-32-567-5. chen, c. k. 2008. construct model of the knowledge-based economy indicators, transformations in business and economics 7(2): 21–31. gronskas, h. y.; streimikiene, d., et al. 2008. economy, anti-economy and globalisation, transformations in business and economics 7(2): 166–168. jasinskas, e.; simanaviciene, z. 2008. government’s support for farmers’ knowledge dissemination and its improvement, inzinerine ekonomika – engineering economics (3): 67–72. kajanová, j. 2005. costs and prices. bratislava: iris. 150 p. kajanová, j. 2009. analysis of the knowledge portfolio and factors influencing the preferences of its choise, maneko management and economics of the company 2(2/2): 181–189. kelemen, j. 2007. invitation to the knowledge society. bratislava: iura edition. 265 p. lipták, f.; paulen, b. 2009. to the starting points of the knowledge management, maneko management and economics of the company 1(1/2): 87–96. markovic, m. r. 2008. managing the organizational change and culture in the age of globalization, journal of business economics and management 9(1): 3–11. doi:10.3846/1611-1699.2008.9.3-11 melnikas, b. 2008. the knowledge-based economy in the european union: innovations, networking and transformation strategies, transformations in business and economics 7(3): 170–192. http://dx.doi.org/10.3846/1611-1699.2008.9.3-11 170 j. kajanová. the competitive advantage in the global labour market mládková, l. 2004. knowledge management in practice. praha: professional publishing. 155 p. mládková, l. 2008. management of knowledge workers. praha: c. h. beck. 129 p. niedvaras, j. 2008. on the phenomenon of globalisation, transformations in business and economics 7(3): 18. petříková, r., et al. 2010. modern knowledge management. praha: professional publishing. 324 p. petrylaite, d. 2008. new challenges for collective labour relations in lithuania: labour law vs. business relationship, transformations in business and economics 7(3): 254–263. soros, g. 2002. about globalization. bratislava: kalligram. 128 p. staněk, p. 2001. world economics globalizaion. bratislava: epos. 224 p. statistical office of the slovak republic [online], [cited 17 november 2009]. available from internet: <http://www.statistics.sk.html>. stukalina, y. 2008. how to prepare students for productive and satisfying careers in the knowledge-based economy: creating a more efficient educational environment, technological and economic development of economy 14(2): 197–207. doi:10.3846/1392-8619.2008.14.197-207 truneček, j. 2004. knowledge company in the knowledge society. praha: professional publishing. 312 p. konkurencinis pranašumas pasaulinėje darbo rinkoje j. kajanová santrauka dabartinėje aplinkoje būtina atsižvelgti ir įvertinti konkurencinių rinkų pranašumus, nes tai tiesiogiai susiję su dalyvių pozicijų stiprinimu ir konkurencingumo veiksnio atsiradimu, kas formuoja tam tikrus pokyčius, prioritetus ir naujas sąlygas. pagrindinis šio tyrimo tikslas – pasiūlyti vidinius ir išorinius veiksnius, turinčius įtakos konkurenciniams pranašumams pasaulinėje darbo rinkoje, ir įvertinti galimybes bei pokyčius joje. reikšminiai žodžiai: globalizacija, darbo rinka, konkurencinis pranašumas, kvalifikacija. jana kajanová is an author and co-author of more than 75 publications incorporating the monograph, university textbooks, scientific and specialized papers. she has many years of practical experience as a pedagogical and scientific-research worker. her pedagogical and research activity is oriented towards up-to-date economic and managerial problems requiring the solution of individual tasks and situations based on the impulses of business subjects being associated with internal as well as external environmental conditions. she works as associate professor at the slovak university of technology, (slovak republic), and co-operates with other universities and educational institutions. http://dx.doi.org/10.3846/1392-8619.2008.14.197-207 verslas, vadyba ir studijos 2009 79 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s importuojamų prekių muitinės vertės nustatymo metodų taikymas besivystančiose šalyse vida menciūnienė vida.menciuniene@ktu.lt kauno technologijos universiteto magistrantė, ekonomikos ir tarptautinės prekybos katedra daiva rugenytė rugenyte@gmail.com kauno technologijos universiteto magistrantė, apskaitos ir audito katedra žaneta simanavičienė zaneta.simanaviciene@ktu.lt kauno technologijos universitetas, įmonių ekonomikos katedra 1. įvadas šalies muitinė – viena iš valstybės institucijų, kuriai tenka ypač didelė atsakomybė už ekonominę valstybės sienų apsaugą, kartu ir šalies biudžeto formavimą. vienas pagrindinių muitinės uždavinių – užtikrinti importo ir eksporto muitų bei mokesčių surinkimą. tinkamas prekių klasifikavimas, teisingas prekių vertės ir kilmės nustatymas – reikšmingiausi dalykai tiksliai apskaičiuojant muitus ir mokesčius. muitinei taip pat pavesta išskirtinė funkcija – užtikrinti, kad būtų laikomasi tarptautinę prekybą reglamentuojančių įstatymų ir kitų teisės aktų, kuriuos priima vyriausybė, ministerijos ir kitos valstybės institucijos, surinkti nustatytus importo muitus bei mokesčius ir tuo pat metu kuo efektyviau taikyti muitinės priežiūros priemones. nors muitinės funkcijos vienodos visose pasaulio šalyse, būtų klaidinga manyti, jog muitinės reikšmė ir jos veiklos vertinimas visur vienodas. © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai 80 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s prekės muitinė vertė yra svarbiausias šiuolaikinės muitų tarifų sistemos elementas. tarifinio reguliavimo priemonių efektyvumas, realus prekių apmokestinimo lygis, t. y. tikroji muitų, mokesčių ir rinkliavų suma tiesiogiai priklauso nuo prekių muitinės vertės. muitinė prekės vertė yra ne tik visų mokesčių ir muitų apskaičiavimo pagrindas, bet ja remiamasi, nustatant importo kvotas, išduodant licencijas, taikant baudas už muitinės procedūrų pažeidimus (bernatonytė 2007). problema. anot pasaulio banko (2004), dažnai prekių muitinės vertės nesuvokimas ir jos nustatymo procedūrų rėmimo trūkumas yra du svarbiausi veiksniai, minimizuojantys muitinės veiklos efektyvumą daugumoje besivystančių šalių. nesant efektyvios muitinio įvertinimo sistemos, neigiamai veikiami šalies muitinės ir prekybos politikos rezultatai, į pavojų statomas valstybės biudžeto pajamų mobilizavimas bei apsunkinamas integracijos klausimų sprendimas. muitinio įvertinimo sistema tapo tarptautinių susitarimų objektu, kad būtų mažinami prekybos barjerai. straipsnio tikslas – išanalizuoti importuojamų prekių muitinės vertės nustatymo metodų taikymo kliūtis besivystančiose pasaulio šalyse. naudoti metodai: mokslinės literatūros analizė, lyginamoji analizė, statistinių duomenų sisteminimas ir analizė. 2. prekių muitinio įvertinimo reglamentavimas pasaulyje globalizacijos ir integracijos procesai turėjo didelės įtakos tarptautinės prekybos vystymuisi. tarptautinė prekyba šiuo metu yra dinamiškai besivystanti pasaulinės ekonomikos dalis, kurios pastoviam augimui įtakos turėjo šie veiksniai: tarptautinis darbo pasidalijimas, gamybos globalizacija ir internacionalizacija; tarptautinės prekybos liberalizacija dėl pasaulio prekybos organizacijos reguliavimo ir pan. (bernatonytė, normantienė 2009). todėl muitinio įvertinimo sistemos kūrimas buvo itin opus klausimas muitinių funkcijų harmonizavimo ir standartizavimo procesuose. tarptautinės pastangos harmonizavimo link pradėtos dėti xx a. pirmoje pusėje, bet reikšmingų rezultatų nebuvo pasiekta iki 1947 m., kai buvo priimtas bendrasis susitarimas dėl muitų tarifų ir prekybos. šį susitarimą sekė 1950 m. konvencija dėl prekių vertinimo apmuitinimo tikslais, pagal kurią buvo sukurtas briuselio vertės apibrėžimas (angl. brussels definition of value (bdv)) bei 1979 m. priimtas susitarimas dėl vii straipsnio įgyvendinimo. bdv yra grindžiama „normalios kainos“ koncepcija – tai kaina, kurią prekės pasiektų esant atviros rinkos sąlygoms, kai tarpusavyje prekiauja nepriklausomi verslas, vadyba ir studijos 2009 81 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o spirkėjai ir pardavėjai tiksliai apibrėžtomis laiko ir vietos aplinkybėmis (customs valuation 2009). bdv rekomenduoja, kaip galima daugiau naudoti sąskaitoje faktūroje nurodytą kainą, tačiau, kai pastaroji yra netinkama, muitinės, kad būtų įvertinama „normali kaina“, gali pasikliauti kitais būdais. toks lankstumas yra griežtai draudžiamas įgyvendinus muitinio įvertinimo susitarimą. nepaisant to, bdv sukūrimas davė postūmį progresui tarptautinio vertinimo standartizacijos link. 1970 m. apie 100 šalių bei kelios ekonominės asociacijos taikė bdv. tačiau daug tarptautinei prekybai svarbių šalių (jav, naujoji zelandija, australija, kanada ir kt.) nepasirinko šio metodo ir tęsė savos sistemos, daugiausia grindžiamos pozityvios vertės koncepcija (ribojančia muitinės administracijos veiksmų laisvę nustatant vertę (forrester, odarda 2007)), taikymą. reikėtų pažymėti, kad bdv ne visada buvo taikomas vienodai, tai sukėlė eksportuotojų nepasitenkinimą dėl muitinės darbuotojų veikimo savo nuožiūra, nepagrįsto sąskaitoje faktūroje nurodytos kainos atmetimo bei dirbtinai keliamos deklaruojamosios vertės. dėl šių priežasčių muitinio įvertinimo klausimas buvo įtrauktas į tokijuje 1973–1979 m. vykusias derybas dėl netarifinių barjerų. tokijo raundo tikslas buvo pasiekti pasaulio prekybos plėtros ir didesnės liberalizacijos išardant visas esančias kliūtis. šių derybų metu kai kurie bdv principai ir aiškinimai buvo pataisyti, siekiant įtikinti kitas šalis prisijungti. tačiau europos bendrija, prieš tai intensyviai palaikiusi bdv, nusprendė labiau paremti pozityvios vertės koncepciją. pagal šią koncepciją su keliomis išimtimis siūloma vertę apibrėžti remiantis faktiškai mokamos ar mokėtinos kainos už importuojamas prekes pagrindu. išimtis sudarė penki metodai, kurie turėjo būti taikomi griežta hierarchine tvarka. vėliau urugvajuje vykusiame raunde buvo priimtas sprendimas dėl atvejų, kada muitinės administracija turi priežasčių abejoti deklaruotos vertės teisėtumu ir tikslumu. be to, šiame raunde 1995 m. buvo įkurta ppo. taigi pagrindines muitinio įvertinimo nuostatas tarptautiniu lygmeniu įteisinantis dokumentas yra pasaulio prekybos organizacijos muitinio įvertinimo susitarimas (angl. agreement on customs valuation (acv)) (1994 m. gatt vii straipsnis), kuriuo nustatytos taisyklės privalo būti integruotos į kiekvienos valstybės ppo narės nacionalinę muitų teisę (taip buvo nuspręsta urugvajaus raunde). ppo muitinio įvertinimo susitarimą (toliau – susitarimas) sudaro: bendrasis įžanginis komentaras. – i dalis. muitinio įvertinimo taisyklės (1–17 straipsniai). – ii dalis. administravimas, konsultavimas ir ginčų sprendimas (18–19 straips– niai). 82 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s iii dalis. specialus ir diferencinis režimas (20 straipsnis). – iv dalis. baigiamosios nuostatos (21–24 straipsniai). – i priedas. aiškinamosios pastabos. – ii priedas. muitinio įvertinimo techninis komitetas. – kiekviena valstybė ppo narė ar jų muitų sąjunga tarptautinėje prekyboje vadovaujasi ppo priimtais susitarimais ir šalies narės prisiimtais įsipareigojimais šioje organizacijoje. ppo sprendimai dėl muitinio įvertinimo, pasaulio muitinių organizacijos (pmo) muitinio įvertinimo komentarai, patarimai, aiškinamosios pastabos ir kita yra publikuojami pmo muitinio įvertinimo kompendiume, kuriame skelbiami ppo muitinio įvertinimo komiteto sprendimai ir pmo parengti dokumentai, aiškinantys įvairius muitinio įvertinimo klausimus. ppo muitinio įvertinimo komitetas yra priėmęs septynis sprendimus įvairiais muitinio įvertinimo klausimais. sprendimai yra privalomi visoms ppo valstybėms narėms ir turi atsispindėti jų nacionaliniuose teisės aktuose. pmo muitinio įvertinimo techninis komitetas rengia įvairių formų rekomendacinio pobūdžio dokumentus (komentarus, patarimus, aiškinamąsias pastabas, atvejų nagrinėjimo pavyzdžius ir kt.), kurie detaliau išaiškina susitarimo nuostatas, remiantis komercinių sandorių faktais, pateikia susitarimo praktinio taikymo atvejus. nors šio komiteto rengiami dokumentai neturi teisinės galios, tačiau jie gali būti taikomi šalių narių muitinėms priimant konkrečius sprendimus dėl prekių muitinės vertės nustatymo, rengiant aiškinamojo pobūdžio dokumentus (instrukcijas, tvarkas ir kt.). pabrėžtina, kad visos industrinės šalys taiko acv. 3. importuojamų prekių muitinės vertės nustatymo metodai ppo muitinio įvertinimo susitarime prekių muitinei vertei nustatyti numatyti šeši skirtingi metodai, kurie gali būti sėkmingai taikomi bet kokioms importuojamoms prekėms esant įvairioms komercinėms situacijoms tarptautinėje prekyboje (1 pav.). visi šie metodai taikomi griežtai hierarchine tvarka. pirmasis metodas yra sandorio vertė. jeigu jį taikant negalima nustatyti importuojamos prekės muitinės vertės, tada taikoma tapačių prekių, parduotų eksportui į tą pačią importo šalį, sandorio vertė, arba, laikantis tų pačių nuostatų, panašių prekių sandorio vertė. jeigu taikant pirmuosius tris metodus prekės muitinė vertė negali būti nustatyta, vertės nustatymas grindžiamas prekės vieneto pardavimo kaina importuojančioje šalyje, atėmus pelną, mokesčius ir tam tikras kitas išlaidas, kurias patyrė verslas, vadyba ir studijos 2009 83 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o simportuotojas importo šalyje. jeigu nėra galimybių ir duomenų taikyti dedukcinį metodą, tada importuojamų prekių muitinė vertė nustatoma sumavimo metodu, apskaičiuojant jų vertę pagal gamybos išlaidas eksportuojančioje šalyje. importuotojui pageidaujant sumavimo metodas gali būti taikomas prieš dedukcinį metodą. paskutinis metodas (rezervinis) yra kiti priimtini būdai muitinei vertei nustatyti. jį taikant numatoma lanksčiau taikyti pirmiau nurodytus muitinio įvertinimo metodus. 1 pav. importuojamų prekių muitinės vertės nustatymo metodai fig. 1. customs valuation methods 1 lentelė. vertinimo metodų taikymas kai kuriose šalyse (%) (alburo 2006) table 1. application of customs valuation methods in various countries (%) (alburo 2006) metodai šalis sandorio vertės metodas tapačių prekių sandorio vertė panašių prekių sandorio vertė dedukcinis metodas sumavimo metodas priimtini būdai es 95,4 0,3 0,2 2,1 – 2 suomija 93,1 0,3 0,1 – – 6,5 vengrija 86,8 10,9 2,3 – – – japonija 96,6 1,4 0,1 0,3 0,5 1,1 rumunija 100 – – – – – švedija 99+ – – – – – jav 94 1 0,5 1 2 1,5 norvegija 98,5 0,4 – – – 1 84 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s sandorio vertės metodas yra įprastinis vertinimo būdas, kuris europos sąjungos valstybėse narėse taikomas daugiau kaip 95 %, japonijoje – 96,6 %, jav – 94 % (1 lentelė). lietuvos muitinėje sandorio vertės metodas taikomas apie 95 % visų importo atvejų (radžiukynas, belzus 2008). 4. importuojamų prekių muitinės vertės nustatymo metodų taikymas besivystančiose šalyse prieš pradedant analizuoti importuojamų prekių muitinės vertės nustatymo metodų taikymą besivystančiose šalyse, reikėtų išsiaiškinti, kokios šalys patenka į šią kategoriją. terminas „besivystančios šalys“ dažniausiai naudojamas siekiant apibūdinti tas šalis, kurios pasižymi žemu materialinės gerovės lygiu. visuotinai nėra bendro apibrėžimo, kas yra išsivysčiusi šalis, todėl šalių vystymosi lygiai gali gerokai svyruoti apibūdinant besivystančias šalis. kartais į šią grupę gali patekti valstybės, turinčios aukštus vidutinius pragyvenimo lygius (sullivan, sheffrin 2003). tačiau pasaulio bankas griežtai naudoja skaitmenines klasifikacijas. laikoma, kad visos žemas ir vidutines pajamas gaunančios šalys yra besivystančios. atitinkamai 2008 m. šalys, kurių bendrosios pajamos vienam žmogui neviršijo 11 905 jav dolerių, buvo priskiriamos besivystančiųjų grupei (customs valuation 2009). besivystančios šalys sudaro daugumą pasaulio prekybos organizacijoje. besivystančios šalies statusas ppo suteikia teisę į ilgesnį pereinamąjį laikotarpį ir techninę pagalbą. šiame straipsnyje didžiausias dėmesys skiriamas aštuonioms besivystančioms pasaulio šalims – bolivijai, ganai, marokui, mozambikui, peru, filipinams, turkijai ir ugandai. šios valstybės buvo pasirinktos neatsitiktinai – jos atstovauja skirtingiems žemynams, kiekvienai jų būdingas tam tikras požiūris į reformas, kas leidžia daryti įdomias įžvalgas. 4.1. pagrindinės tiriamų šalių charakteristikos ir pokyčiai didžiųjų muitinės reformų projektas, jo patvirtinimas ir įgyvendinimas bolivijoje, ganoje, maroke, mozambike, peru, filipinuose, turkijoje ir ugandoje buvo nulemtas kylančio susirūpinimo dėl būtinybės šiose valstybėse pagerinti ekonominių reikalų valdymą, padidinti šių šalių gyventojų pajamas, vykstančių ekonominių reformų efektyvumą bei galimybes išplėsti prekybą su kitomis šalimis. teigiama, kad mažiau korumpuota, teisinga, nuspėjama ir efektyvi biurokratija besivystančiose šalyse padėtų pritraukti tiesioginių užsienio investicijų (hyun 2006). jos padėtų atnaujinti technologijas, keltų darbo jėgos kvalifikaciją, padidintų produktų/paslaugų kokybę vietos įmonėse bei jų pačių konkurencingumą tarptautinėse rinkose. verslas, vadyba ir studijos 2009 85 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s 2 lentelė. svarbiausi analizuojamų šalių ekonominiai duomenys 2007 m. (pasaulio prekybos organizacijos statistikos duomenų bazė) table 2. basic economic data of countries being analyzed 2007 (world trade organization database) šalis bvp (mlrd. jav dol.) bvp metinis augimas (%) gyventojų skaičius (mln.) eksportuotų prekių vertė (mln. jav dol.) importuotų prekių vertė (mln. jav dol.)1990– 1995 m. 1996– 2001 m. bolivija 13,12 4,2 3,1 9,52 4490 3444 gana 15,25 4,3 4,2 23,46 4214 8043 marokas 73,28 1,6 4,1 30,86 14 656 31 695 mozambikas 7,75 3,1 9,0 21,37 2700 3300 peru 109,09 3,8 2,2 27,90 27 956 20 180 filipinai 144,13 2,8 3,5 87,89 50 466 57 985 turkija 657,09 4,3 2,2 73,89 107 215 170 057 uganda 11,21 7,0 5,8 30,93 1623 3466 analizuojant minėtų šalių ekonomiką, jos plėtrą bei gyventojų skaičių, buvo pastebėta nemažų skirtumų (žr. 2 lentelę). iki šiol šie veiksniai neturėjo didesnės įtakos valstybių prisiimtiems įsipareigojimams reformuotis. 2 lentelėje galima matyti, kad aptariamų šalių bvp svyruoja nuo 657 mlrd. jav dolerių turkijoje iki beveik 8 mlrd. jav dolerių mozambike. turintys 87 mln. gyventojų filipinai užima aukščiausią vietą iš visų 8 šalių, po jų seka turkija (73 mln. gyventojų). pagal gyventojų skaičių bolivija yra mažiausia šalis, tačiau akcentuotina, kad lotynų amerikoje didžiausias oficialiai neapskaitytos ekonomikos mastas buvo apskaičiuotas būtent bolivijoje (67 % nuo bvp) (startienė, trimonis 2009). taip pat buvo užfiksuota plati ir bvp augimo tempų variacija. kai kuriose šalyse reformos prisidėjo esant aukštesniems augimo tempams 1996–2001 m., palyginti su atitinkamais 1990–1995 m. rodikliais. mozambike metinis bvp augimas siekė vidutiniškai 9 %, ugandoje – 5,8 %, maroke – 4,1 %, mažiausias peru ir turkijoje – 2,2 %. 1999 m. turkijoje, marmaroje, įvykęs žemės drebėjimas sukėlė gamybos stygių (eksporto stagnaciją taip pat), dėl kurio nacionalinės pajamos sumažėjo nuo 205 mlrd. jav dolerių 1998 m. iki 187 mlrd. jav dolerių 1999 m. (kosekahyaoglu 2006), todėl šiuo atveju negalima teisingai įvertinti reformų įtakos turkijos bvp atitinkamu laikotarpiu. analizuojamame valstybių aštuonetuke turkija yra tiek didžiausia eksportuotoja, tiek importuotoja. mažiausiai eksportuoja uganda, o mažiausiai importuoja bolivija. 86 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s pasikliovimas importo mokesčiais kaip pajamų šaltiniu daugumoje šalių tapo santykinai aukštesnis įvykdžius reformas (žr. 3 lentelę), importo mokesčių dalis mokestinėse pajamose siekė daugiau nei 30 % penkiose ir apie 20 % dviejose valstybėse. muitai mokestinėse pajamose skirtingais atvejais užima nuo 4 % iki 27 %. mokestinės pajamos nuo bvp patenka į intervalą nuo 8 % iki 22 %. 3 lentelė. pajamų surinkimas prieš ir po muitinių reformų (de wulf, sokol 2004)1 table 3. revenue performance before and after customs reforms (de wulf, sokol 2004)2 bolivija gana marokas mozambikas peru filipinai turkija uganda procentas nuo mokestinių pajamų muito mokesčiai prieš reformas 10,5 16,9 17,0 22,5 10,7 26,9 3,7 10,0 po reformų (2001 m.) 8,2 14,1 14,2 17,2 11,6 10,9 1,0 12,9 importo mokesčiai prieš reformas 39,8 38,4 45,4 31,6 20,6 35,3 15,3 22,3 po reformų (2001 m.) 34,4 35,2 42,2 45,4 37,2 20,5 14,0 33,7 procentas nuo bvp mokestinės įplaukos prieš reformas 11,5 16,3 21,6 9,8 10,8 14,7 15,2 7,8 po reformų (2001 m.) 13,2 20,2 22,7 11,5 12,3 14,0 22,3 12,3 muito mokesčiai prieš reformas 1,2 2,8 3,7 2,2 1,2 4,0 0,6 0,8 po reformų (2001 m.) 1,1 2,9 3,2 2,0 1,4 1,5 0,2 1,6 importo mokesčiai prieš reformas 4,6 6,2 9,8 3,1 2,6 5,2 2,3 1,7 po reformų (2001 m.) 4,5 7,1 9,6 5,3 4,4 2,9 3,1 4,1 1 periodu prieš reformas laikomi šie metai: bolivija – 1996 m., gana – 2000 m., marokas – 1996 m., mozambikas – 1996 m., peru – 1990 m., filipinai – 1991 m., turkija – 1994 m. ir uganda – 1990– 1991 m. 2 period before reform refers to following years: bolivia – 1996, ghana – 2000, morocco – 1996, mozambique – 1996, peru – 1990, the philippines – 1991; turkey – 1994, uganda – 1990–91. verslas, vadyba ir studijos 2009 87 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o sreformų pradžioje mokestinės pajamos buvo gana žemos, tai rodo mažiau nei 10 % siekianti mokesčių nuo bvp dalis ugandoje ir mozambike, o kitose šalyse šis rodiklis didesnis (žr. 3 lentelę). vadovaujantis reformų siūlomomis priemonėmis, mokestinių pajamų dalis nuo bvp padidėjo visose šalyse, išskyrus filipinus. be to, muitai tapo svarbiu mokesčių įrankiu daugumoje šalių. nuo reformų pradžios iki 2001 m. muitų dalis mokestinėse pajamose gerokai išaugo dėl pridėtinės vertės mokesčio įvedimo: iki 34 % ugandoje, 45 % mozambike ir 37 % peru. šio rodiklio sumažėjimą bolivijoje iki 34 % ir filipinuose iki 21 % nulėmė muitų mokesčių tarifų sumažinimas. taigi išanalizavus besivystančių šalių ekonominius rodiklius, paaiškėjo, kad aptariamoms valstybėms yra būtinas muitinių reformavimo ir modernizavimo procesų įgyvendinimas. 4.2. muitinės vertės nustatymo problemos besivystančiose šalyse teisingas vertės nustatymas yra būtinas, kad būtų galima iš anksto numatyti ir užtikrinti muitinės sandorių skaidrumą. visos šiame straipsnyje analizuojamos šalys yra pasaulio prekybos organizacijos narės, todėl jos įsipareigojo įgyvendinti ppo susitarimą dėl bendrojo susitarimo dėl tarifų ir prekybos vii straipsnio taikymo. didžioji dalis iš aptariamų šalių oficialiai priėmė minėtą susitarimą, kai buvo vykdomos muitinės reformos. filipinai acv įgyvendinti pradėjo 2000 m. vadovaudamiesi reformų programos išvadomis. acv reikalauja muitinės pareigūnų pakeisti muitinio įvertinimo procedūras ir kainas sąskaitose faktūrose padaro keblesnėmis nei jos buvo esant ankstesnei vertinimo praktikai. dėl šios priežasties reformų programos reikalauja stiprinti muitinių gebėjimus vertės nustatymo srityje. taigi žinant, kad acv pirmenybę teikia sandorio vertės metodui, muitinių pareigūnai turi surinkti daugiau įrodymų ar pateisinančių aplinkybių, jei jie abejoja deklaruota ar sąskaitoje nurodyta verte. susitarimo dėl bendrojo susitarimo dėl tarifų ir prekybos vii straipsnio taikymo įgyvendinimas tapo sudėtingas daugybėje besivystančių šalių. problemų sukelia dažnas klaidingų sąskaitų, kurios šiurkščiai ir per mažai įvertina prekes, naudojimas bei nepakankamas personalo apmokymas užginčyti sąskaitas. auganti prekyba nenaujomis prekėmis, kaip ir prekyba apskritai, vykdoma neformalaus sektoriaus, kur menkai ar visai nedaroma jokių įrašų, tai taip pat komplikuoja atsiskaitymų tikrinimą. visų analizuojamų šalių atvejais reformų programos daugiausia dėmesio kreipė į vertės nustatymo funkciją. kad būtų lengviau nustatyti importuojamų 88 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s prekių muitinę vertę, bolivija, mozambikas, peru ir filipinai ėmėsi kompanijų, tikrinančių prekių iš užjūrio krovinių kainas, paslaugų kiekį ir kokybę (angl. preshipment inspection (psi)). uganda buvo pirmoji iš nagrinėjamų šalių, kurios naudojosi psi kompanijų paslaugomis, tačiau vėliau nutraukė tokią praktiką dėl įvairių priežasčių: pretenzijų, kad psi kompanijos neapmoko personalo, nors tai buvo nurodyta sutartyje, ir ypač dėl importuojamų prekių muitinio įvertinimo duomenų bazės plėtojimo nevykdymo. besivystančioms šalims, kurios dar nėra prisijungusios prie acv, buvo suteiktas penkerių metų pereinamasis laikotarpis – iki 2000 m. sausio 1 d. pasaulio banko duomenimis (the world bank 2004), 58 besivystančioms šalims buvo suteiktas pereinamasis laikotarpis, tačiau tik dvi iš šių valstybių įgyvendino acv iki 2000 m. atidėtasis periodas 2000 m. sausio 1 d. baigėsi 29 šalims, o nuo 2000 iki 2001 m. – daugiau nei 25 šalys neįgyvendino muitinio įvertinimo susitarimo. 22 valstybėms buvo arba suteiktas penkerių metų pratęsimo laikotarpis, arba jų prašymas dar svarstomas. 13 šalių įgyvendino acv (su sąlyga, kad bus naudojamos minimalios vertės). be to, reikėtų paminėti, kad 23 vargingesnės besivystančios šalys nei taikė acv, nei pranešė ppo apie priimtą sprendimą nepaisyti įstatymo. šie duomenys rodo, kad daug besivystančių šalių, nepaisant gautos techninės pagalbos, susiduria su problemomis įgyvendindamos acv metodus. pasaulio banko išleistoje apžvalgoje (the world bank 2004) išskiriamos šios pagrindinės kliūtys: nuosavybės teisių stoka – . pasaulio banko atliktas tyrimas parodė, kad besivystančios šalys buvo nelabai rimtai susirūpinusios dėl ppo parengtos įvertinimo sistemos perėmimo ir dauguma jų šiuos metodus tiesiog ignoravo. pavyzdžiui, prekybos ministrų (atstovaujančių savo šalims ppo) įsipareigojimai buvo vargiai suderinti su finansų ministrų, atsakingų už acv įgyvendinimą savo šalyse, įsipareigojimais. dėl šios priežasties acv buvo sunkiai įgyti kultūrine prasme. speciali diferencinė priežiūra (angl. special differential treatment (sdt)) suteikė tam tikro lankstumo acv įvedimo planui, tačiau tai daugelio buvo pripažinta netinkama priemone, nes kiekvienai besivystančiai šaliai būdingos skirtingos kliūtys ir priežastys. be to, menkas internalizacijos lygis dažnai atsispindi klaidingame ar neužbaigtame acv ir šalies įstatymų susivienijime, kuris dažniausiai baigiamas atsisakymu paklusti ppo valiai. kaip pavyzdį galima pateikti atvejį, kai ppo nurodymas, kad importuotojai turi teisę į skundus, yra nepaisomas. verslas, vadyba ir studijos 2009 89 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o sbiudžeto įplaukų praradimas. – pasaulio banko apžvalgoje (the world bank 2004) teigiama, kad besivystančios šalys yra labai susirūpinusios dėl biudžeto įplaukų praradimo. mažas mokesčių mokėtojų paklusnumas ir administraciniai neatitikimai muitinėse kliudo efektyviai patikrinti sąskaitų faktūravimą sumažintomis kainomis. sąskaitų faktūravimas sumažintomis kainomis dėl aukšto apmokestinimo lygio importo etape veikia importuotojus tarsi masalas. tačiau aptariamoje apžvalgoje pripažįstama, kad nėra empirinių įrodymų, liudijančių, kad tokia problema egzistuoja, o viską gerai žinantys stebėtojai kaip pavyzdį pateikia tas šalis, kurios įgyvendino acv nepatirdamos biudžeto įplaukų sumažėjimo. knygos „customs modernization handbook“ autoriai pabrėžia, kad sunku nustatyti pajamų praradimus net ir įgyvendinus acv, nes tos šalys, kurios oficialiai prisijungė prie vertinimo sistemos įgyvendinimo, taiko arba visiškai gryną acv, arba tokią jo atmainą, kai būtent taip yra apsaugomos valstybės biudžeto pajamos. šis klausimas dažnai svarstomas acv diskusijose, nepamirštant muitinės darbuotojų, kurių pagrindinė atsakomybė ir yra atitinkamų pajamų užtikrinimas. aukšti tarifai. – nors taikomų tarifų dydis daugumoje šalių buvo sumažintas dėl daugiašalių ir regioninių susitarimų, jų vidutinis lygis išlieka žymiai aukštesnis besivystančiose šalyse nei išsivysčiusiose. remiantis 2001 m. duomenimis, ekonominio bendradarbiavimo ir plėtros organizacijai (oecd) priklausančiose šalyse vidutinis importo muitas siekė 1,1 % nuo importo vertės, o šalyse, kurios nėra šios organizacijos narės, – 11,8 %. besivystančiose šalyse renkami tarifai vidutiniškai pateko į atkarpą tarp 7 % ir 17 %. netgi, kai analizuojamos šalies tarifas yra santykinai žemas, didžiausios tarifų reikšmės skatina kiek galima mažiau įvertinti importuojamas prekes. aukštų muitų vengimo mastai turi tendenciją prisidėti prie vengimo mokėti mokesčius, taigi sąskaitų faktūravimas sumažintomis kainomis tampa vis labiau patrauklus importui į besivystančias šalis nei į kitas valstybes. nuolaidesnė prekybos aplinka. – dažnai didelę importo dalį apskaito neformalus sektorius, kuris naudoja nepatikimas sąskaitas faktūras, vargiai laikosi apskaitos standartų arba visai neveda buhalterijos, neturi pastovaus įmonės adreso, dažnai keičia įmonių pavadinimus. esant tokioms aplinkybėms, vertinimo kontrolė, paremta auditu po įvežimo, yra beveik netinkama. muitinės pareigūnai daugelyje šalių supranta, kaip lengvai sąskaitos faktūros gali būti suklastotos eksporto metu arba netgi padarytos tikslinėje šalyje. kai kurias suklastotas sąskaitas faktūras yra lengva susekti, tačiau 90 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s dažnai demonstruojamas aukšto lygio išmanymas, nes jas paruošia vidutinio ar didelio masto importuotojai. tik gerai išvystytos muitinių organizacijos turi visas galimybes atskleisti tokias apgavystes. perdėtas pasitikėjimas sąskaitomis faktūromis dažnai komplikuoja pastangas išspręsti sąskaitų faktūravimo sumažintomis kainomis problemą. administraciniai apribojimai. – daugelyje besivystančių šalių trūksta administracinės kompetencijos efektyviai įgyvendinti acv sistemą. didžiulė prekių įvairovė, žymiai besiskiriančios panašių prekių ir be perstojo kintančios kainos, skirtingi sandorių lygiai ir prekybos sąlygos apsunkina teisingą importuotų prekių įvertinimą. didžioji dalis sandorio vertei nustatyti reikalingos informacijos nėra lengvai prieinama, nes ji lieka pas užsienio tiekėją. pavyzdžiui, kryžminė kontrolė, kai tikrinamos iš pardavėjo „išeinančios“ ir pas pirkėją patenkančios sąskaitos faktūros, arba nesudėtingos patikros, tokios kaip eksportuotojo egzistavimo patvirtinimas, paprastai yra neįmanomos dėl perdėto sudėtingumo. tai, kad sukčiavimas vertinant turėtų būti nagrinėjamas ne kaip vertinimo klausimas, bet kaip apgavystės tyrimo veikla, taip pat sukelia problemų. be to, šiuolaikiniame globaliame pasaulyje galimybės pasireikšti korupcijai visuose lygmenyse padidėjo ne tik besivystančiose šalyse (ogrean et al. 2008). acv metodų taikymas griežta tvarka yra griozdiška, brangi ir daug laiko atimanti procedūra. tai reikalauja atnaujintos informacijos apie identiškų ar panašių produktų vertes – informacijos, kuri nėra lengvai gaunama arba reikalauja sudėtingų skaičiavimų. kad būtų galima taikyti apskaičiuotą vertę, reikia atlikti tyrimus šalyse eksportuotojose. tokia procedūra nėra įmanoma ar prieinama daugeliui besivystančių šalių dėl biudžetinių išteklių ir atitinkamo personalo stokos. taigi dėl šių priežasčių, didžioji dalis besivystančių šalių griebiasi atsarginių priemonių, kurias taiko didžiajai daliai importo įvertinti. žinoma, šios priemonės toli gražu neatspindi idealaus vertinimo situacijos, kuri turėtų palengvinti prekybą (finger, schuler 1999). pasaulio banko parengtoje knygoje-apžvalgoje (customs ... 2004) išskirtos priežastys, lemiančios acv sistemos įgyvendinimo apribojimus besivystančiose šalyse: nepakankami duomenys, varganos informacijos surinkimo priemonės bei – komunikacijos nulemia menką muitinių priėjimą prie kainų informacijos ir mažas galimybes patikrinti deklaruotas vertes. dideli administraciniai suvaržymai (pavyzdžiui, kvalifikuoto persona– lo trūkumas). pastebima, kad besivystančios šalys susiduria su masiniu verslas, vadyba ir studijos 2009 91 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o skvalifikuotos darbo jėgos išvykimu, sukeliančiu „protų nutekėjimo“ grėsmę bei neigiamą poveikį tų šalių augimui ir plėtrai (bhorat et al. 2002), čia menkos arba net neegzistuoja mokymo priemonės, valstybinio sektoriaus algos yra gerokai žemesnės nei privataus. esant tokioms aplinkybėms sunku pritraukti geriausius darbuotojus. taigi žinant, kad žmonės šiuo atveju yra svarbiausias kapitalas, iškyla rimta aukštos kvalifikacijos specialistų išsaugojimo problema. tikėtina, kad reikės didesnių investicijų ne tik personalui ugdyti, bet ir atlyginimams didinti, kitaip tariant, teks mažinti ekonominę diferenciaciją. tai lems geresnius darbo rezultatus, nes didės darbuotojų pasitenkinimas darbu (seilius 2004). ribota ir dažnai prastai valdoma kompiuterizacija, atliekanti tik statistines – funkcijas, taip pat neautomatizuoti atsiskaitymų procesai, kuriems būdinga per daug fizinių funkcijų ir neribotos galimybės veikti savo nuožiūra. nepakankamas organizavimas ir prastas valdymas lemia darbo vadovų ne– buvimą. būdinga menka hierarchinė priežiūra, silpni ar neegzistuojantys vidiniai auditai bei netinkamos valdymo informacinės sistemos ir svarbiausios įrangos neturėjimas. vadovai, siekiantys veiksmingo vadovavimo, turėtų naudotis trimis valdymo instrumentais: valdymo funkcijomis, vadovavimo žingsniais ir organizacine kultūra (seilius, šimanskienė 2006). straipsnio autorių nuomone, šiame kontekste svarbu paminėti ir globalizacijos daromą įtaką. besivystančių šalių muitinių darbuotojai turėtų būti nuolat informuojami apie įvykius, vykstančius tarptautinėje prekyboje, ir globalizacijos keliamus reikalavimus. anot r. m. markovic (2008), šiandien globalizacijos poveikis daugiausiai pasireiškia per technologijas, kai kompiuteris tampa ne tik informacijos srautų valdymo įrankiu, bet ir bendravimo, patirties dalijimosi tarptautiniu mastu priemone. s. ghazinoory ir r. ghazinouri (2009) teigia, kad keičiantis šalies technologiniam pajėgumui, kai nuo tradiciškumo pereinama prie modernumo, atitinkamai turėtų keistis ir socialinę valstybės padėtį apibūdinantys rodikliai. remiantis šiomis įžvalgomis, galima daryti prielaidą, kad pasaulio prekybos organizacijos teikiama techninė pagalba besivystančioms šalims yra nepakankama – reikėtų labiau kreipti dėmesį į muitinių darbuotojų besivystančiose šalyse mokymus ir daugiau išnaudoti globalizacijos teikiamus privalumus aptariamoje srityje. natūralu, kad atskiroms, izoliuotoms organizacinėms kompetencijoms šiuolaikinėje rinkoje yra suteikiamos minimalios galimybės užtikrinti organizacijos konkurencinį pranašumą (keršienė, savanevičienė 2009). žinoma, svarbus čia ir pačios valstybės vaidmuo, kai atskiri ūkio subjektai, o kartu ir visa šalies ekonomika, yra išsivystę menkiau, palyginti su kitomis pasaulio valstybėmis (čiburienė, zaharieva 2006). 92 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s svarbu paminėti, kad visgi buvo parengti tam tikri pasiūlymai acv pataisymams, supaprastinantiems šios sistemos pritaikymą besivystančių šalių prekybos aplinkoje. administraciniai duomenys buvo pateikti 2001 m. dohoje vykusioje ministrų konferencijoje (data & statistics 2009). apibendrinant galima teigti, kad importuojamų prekių muitinės vertės nustatymo metodų taikymas besivystančiose šalyse yra komplikuotas, daug piniginių ir kvalifikuoto darbo išteklių reikalaujantis procesas. 5. išvados ppo muitinio įvertinimo susitarime prekių muitinei vertei nustatyti numatyti šeši skirtingi metodai, kurie gali būti taikomi bet kokioms importuojamoms prekėms esant įvairioms komercinėms situacijoms tarptautinėje prekyboje: sandorio vertės, tapačių prekių sandorio vertės, panašių prekių sandorio vertės, dedukcinis, sumavimo bei kiti priimtini metodai muitinei vertei nustatyti. visi šie būdai taikomi griežtai hierarchine tvarka. sandorio vertės metodas yra įprastinis vertinimo būdas, kuris europos sąjungos valstybėse narėse taikomas daugiau kaip 95 %. išnagrinėjus importuojamų prekių muitinės vertės nustatymo metodų taikymą besivystančiose šalyse, būtina pabrėžti, kad šioms šalims būtina reformuoti ir modernizuoti savo muitinių sistemą. susitarimo dėl bendrojo susitarimo dėl tarifų ir prekybos vii straipsnio taikymo įgyvendinimo besivystančiose šalyse problemų sukelia dažnas klaidingų sąskaitų, šiurkščiai ir per mažai įvertinančių prekes, naudojimas ir nepakankamas personalo apmokymas užginčyti sąskaitas. auganti prekyba nenaujomis prekėmis, kaip ir prekyba apskritai, vykdoma neformalaus sektoriaus, kur menkai daromi įrašai arba visai jų nedaroma, taip pat komplikuoja atsiskaitymų tikrinimą analizuojamose šalyse. dauguma besivystančių šalių, nepaisant gautos techninės pagalbos iš ppo, susiduria su problemomis įgyvendinant acv metodus. pasaulio banko išleistoje apžvalgoje išskiriamos šios pagrindinės kliūtys: nuosavybės teisių stoka, biudžeto įplaukų praradimas, aukšti tarifai, nuolaidesnė prekybos aplinka, administraciniai apribojimai. acv sistemos įgyvendinimo apribojimus besivystančiose šalyse lemia: nepakankami duomenys, varganos informacijos surinkimo priemonės, dideli administraciniai suvaržymai, ribota ir dažnai prastai valdoma kompiuterizacija, biudžetinių išteklių trūkumas, nepakankamas organizavimas ir prastas valdymas. verslas, vadyba ir studijos 2009 93 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o sliteratūra alburo, a. f. 2006. customs valuation issues and research methodologies [interaktyvus] undp/escap artnet trade facilitation research team meeting, march 15, 2006, bangkok, thailand [žiūrėta 2009 m. kovo 4 d.]. prieiga per internetą: <http://www.unescap.org/tid/artnet/mtg/tf_alburo.pdf>. bernatonytė, d. 2007. tarptautinė prekyba. kaunas: technologija. 324 p. isbn 9955-25-175-1. bernatonytė, d.; normantienė, a. 2009. estimation of trade specialization: the case of the baltic states, inzinerine ekonomika – engineering economics (2): 7–17. bhorat, h.; mever, j. b.; mlatsheni, c. 2002. skilled labour migration from 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n o m in ės in te g r a c ij o s pr o b le m o sthe practice of customs valuation methods in developing countries v. menciūnienė, d. rugenytė, ž. simanavičienė summary for importers, the process of estimating the value of a product at customs presents problems that can be just as serious as the actual duty rate charged. the wto agreement on customs valuation aims for a fair, uniform and neutral system for the valuation of goods for customs purposes – a system that conforms to commercial realities, and which outlaws the use of arbitrary or fictitious customs values. according to the world bank, the lack of understanding of customs valuation and of its supporting procedures are two of the principal factors minimizing the efficiency of the customs administrations in many developing countries. in this context, the aim of this paper is to analyse the problems of customs valuation methods practice in developing countries. many developing countries face serious difficulties in implementing the acv. keywords: customs valuation methods, developing countries, world trade organization, agreement on customs valuation, regulation. verslas, vadyba ir studijos 2009 109 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s požiūrio į užsienio produktus formavimo ypatumai vaidotas paukštė vdt.paukste@gmail.com kauno klubas „ekonomistai“, finansų ir investicijų skyriaus vadovas mantas normantas manteliuks@gmail.com kauno klubas „ekonomistai“, rinkodaros skyriaus vadovas lina normantienė lina.norm@gmail.com kauno klubo „ekonomistai“ pirmininkė 1. įvadas požiūrio formavimo paradigma yra vienas iš kertinių rinkodaros objektų. tai daro įtakos vartotojų elgsenai, priimamos informacijos bei prekės ženklų ir produktų atrankai. būtent suformuotas požiūris nulemia atitinkamų produktų vertinimą ir vartotojų sąmonėje jiems priskiriamų savybių rinkinius. vartotojų požiūris į produktus priklauso nuo įvairiausių veiksnių. vienas iš požiūrį formuojančių veiksnių – produkto kilmės šalis. ilgus metus vykdytos protekcionistinės politikos, etnocentrizmo kaip kultūrinio fenomeno populiarinimas skirtingose kultūrose suformavo unikalius ir skirtingus požiūrius į užsienio produktus. vis dėlto moksliniu lygmeniu nėra prieita prie vienos nuomonės, kuri išreikštų požiūrio į užsienio produktus formavimo ypatumus. nepaisant to, kad mokslinėje literatūroje produkto kilmės šalies poveikis produkto vertinimui yra mažai nagrinėjamas, lietuvoje yra paskelbta i. pikturnienės ir d. treigytės (2009) mokslinė publikacija apie prekės ženklo kilmės poveikį prekės vertinimui. nors kilmės šalis darbe daugiausiai nagrinėjama prekės ir prekės ženklo kontekste, atskleidžiama, kokią įtaką kilmės šalis daro prekės suvokimui. © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai 110 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s atsižvelgiant į mokslinį ir praktinį darbo temos aktualumą, šios publikacijos mokslinė problema yra ta, kad nesama vienos požiūrio į užsienio produktus formavimo ypatumų koncepcijos. siekiant atskleisti darbo problemą ir ją išanalizuoti, iškeltas darbo tikslas: identifikuoti požiūrio į užsienio produktus formavimo ypatumus. siekiant atskleisti tikslą, išsikelti publikacijos uždaviniai: 1. identifikuoti vartotojų požiūrį formuojančius veiksnius. 2. nustatyti galimas požiūrio reikšmes. 3. identifikuoti veiksnius, darančius įtaką požiūrio į užsienio produktus formavimui. darbo objektas – požiūrio į užsienio produktus formavimo ypatumai. publikacija susideda iš keturių pagrindinių dalių. pirmoji dalis – įvadas. antrojoje dalyje nagrinėjama požiūrio formavimo koncepcija, formavimo būdai ir ypatumai, įvertinami ir lyginami atlikti moksliniai požiūrio formavimo tyrimai. trečiojoje publikacijos dalyje nagrinėjami požiūrio į užsienio produktus formavimo ypatumai, išskiriami mokslinėse publikacijose nagrinėti svarbiausi akcentai bei atributai, turintys įtakos požiūriui į užsienio produktus. ketvirtojoje dalyje pateikiamos darbo išvados. siekiant atskleisti publikacijos tikslą, buvo atlikta mokslinės literatūros gilinamoji ir lyginamoji analizė. 2. požiūrio formavimo paradigma siekiamo vartotojų požiūrio formavimas yra vienas iš svarbiausių šiuolaikinės rinkodaros uždavinių. atitinkamo požiūrio suformavimas dažnai reiškia, kad, naudojant komunikacijos instrumentus, vartotojui įdiegiamas atitinkamas vertinimo algoritmas, kuriuo remdamasis jis žvelgia į aplinką ir ją vertina. rinkodaros moksle dažniausiai diskutuojama apie požiūrio į produktus, įvykius, žmones formavimą (kotler et al. 2003) neskiriant dėmesio tam, kad rinkodara siekia suformuoti požiūrį ne tik į produktus, tačiau ir į daugumą socialinių reiškinių, įvykių, šeimą, vertybes. vienas iš praktinės rinkodaros uždavinių yra suformuoti vartotojų požiūrį į aplinką tokį, kad jis užtikrintų įmonei gaunamą naudą. todėl dažnai praktinėje rinkodaroje požiūrio formavimas neapsiriboja tik vartojamais objektais, tačiau integruoja ir visus socialinius elementus. kaip bebūtų, pati požiūrio formavimo paradigma skirtingų autorių yra apibrėžiama pakankamai įvairiai. dažnai skirtingų mokslo krypčių atstovai požiūrį vertina kontraversiškai. p. kotler ir kiti (2003) teigia, kad vartotojų požiūris yra verslas, vadyba ir studijos 2009 111 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o ssvarbus, nes jis yra vienas iš vartotojų elgseną inspiruojančių ir formuojančių veiksnių. tačiau socialinės psichologijos atstovai w. d. crano ir r. prislin (2008) teigia, kad požiūris yra svarbus, nes taip vyksta atskirų objektų konceptualizacija sąmonėje. tai reiškia, kad požiūris savo fundamentaliąja prigimtimi yra žmogaus mąstymo atributas. vieni iš požiūrio tyrimų pradininkų m. fishbein ir i. ajzen (1974) požiūriu laiko išmoktą polinkį teigiamai ar neigiamai reaguoti į objektus. jau minėti autoriai w. d. crano ir r. prislin (2006) požiūrį apibrėžia kaip vertinimo aktą, kuris integruoja patirtį ir emocijas. ifla (tarptautinė bibliotekų asociacijų ir institutų federacija) internetiniame puslapyje (ifla 2009) požiūris apibūdinamas ne tik kaip vertinimas, bet ir kaip ilgalaikiai vartotojo pomėgiai ir preferencijos atitinkamiems objektams. įvertinus autorių apibrėžimus, išplaukia išvada, kad požiūris yra atitinkamas vartotojo vertinimas atitinkamų objektų atžvilgiu. šis vertiniams atsiranda dėl tam tikrų vidinių nuostatų, kurios yra nusistovėję vartotojo sąmonėje ir pasąmonėje per visą ligtolinį potyrį (žmogaus santykį su aplinka). kitaip tariant, patirtis yra svarbiausia ašis, nulemianti atitinkamos vertinimo strategijos, kuri galiausiai panaudojant atskirus komunikacijos elementus yra išnaudojama kaip terpė suformuoti vartotojo sąmonėje atitinkamą požiūrį, atsiradimą. vis dėlto požiūrio formavimo fundamentalių pagrindų skirtumai skirtingose filosofijose lemia ir paties požiūrio skirtingą interpretavimą skirtingų mokslininkų ir, be abejo, skirtingų instrumentų naudojimą požiūriui formuoti. vienas iš fundamentaliųjų atributų, kuris mokslininkų vertinamas skirtingai, – požiūrio poliai. anot d. albarracin, b. t. johnson, m. p. zanna ir g. t. kumkale (2005) bei m. p. zanna ir j. k. rempel (1988), požiūris gali turėtų tik du polius: gerą ir blogą. o l. r. fabrigar, t. k. macdonald, ir d. t. wegener (2005) išskiria iš viso tris galimas požiūrio reikšmes ir į dvipolę sistemą įveda trečiąjį narį: gero ir blogo požiūrio konstruktą – ambivalentiškąjį požiūrį. autoriai pažymi, kad kiekvienas požiūris, kad ir koks jis būtų, gali turėti ir paslėptų ar užslopintų momentų, kas reiškia, kad nepaisant išreikšto vieno požiūrio, asmuo viduje turi visiškai kitą. vis dėlto mokslinėje literatūroje kai kurie autoriai dar išskiria, kad galima požiūrio reikšmė yra jo nebuvimas. d. jokubauskas (2003) galimų požiūrio reikšmių sistemą pateikia taip: teigiamas; – neigiamas; – indiferentiškas. – 112 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s apibendrinus mokslininkų atliktų tyrimų rezultatus, išplaukia išvada, kad įmanomos keturios požiūrio reikšmės: teigiamas; – neigiamas; – ambivalentiškas; – indiferentiškas. – svarbiausias uždavinys atskleidžiant požiūrio formavimo galimybes – požiūrį formuojančių veiksnių identifikavimas. mokslinėje literatūroje dažniausiai yra išskiriamos trys požiūrio formavimo veiksnių grupės: kognityvinė bazė; – emocijos; – elgesys. – n. h. anderson (1981) pastebėjo, kad kiekviena naujai gauta informacija yra vertinama jau turimos informacijos kontekste. požiūris susiformuoja kaip atitinkamas naujai gautos informacijos arba įvykusio potyrio vertinimas jau sukauptos patirties kontekste. dėl šios priežasties vienas iš svarbiausių objektų, formuojant vartotojų požiūrį, yra kognityvinės psichologijos atradimai. iš esmės kognityvinė bazė reiškia atitinkamą vartotojo asmeninės ir kultūrinės patirties poveikį žmogui ir galiausiai praktinėse situacijose nulemia žmogaus elgseną aplinkoje. mokslinėje literatūroje yra nemažai publikacijų, kuriose išskiriama, kad kognityvinė bazė yra svarbiausias veiksnys formuojant požiūrį. m. fishbein ir i. ajzen (1974) suformuotas modelis atskleidžia kognityvizmo svarbą požiūriui. informacijos integracijos teorija (anderson, 1981) iš esmės pagrįsta kognityvinės bazės poveikio vartotojų požiūriui principu. pagal w. j. mcguire (1972) suformuotą modelį kognityvinė bazė vertinama kaip svarbiausias požiūrio susiformavimo kriterijus. žinoma taip pat reikia nepamiršti ir kitų autorių, kurie atskirus kognityvinės bazės elementus yra įtraukę į savo sukurtas ir pasiūlytas požiūrio formavimo filosofijas bei modelius. r. e. petty ir j. t. cacioppo (1986) bei m. fishbein ir i. ajzen (1974) darbuose kognityvizmui, formuojant vartotojų požiūrį į produktus, skiriama ypatingai daug dėmesio. mokslinėse publikacijose taip pat diskutuojama apie emocijų reikšmę formuojant požiūrį. vertinant mokslinėse publikacijose nagrinėjamus pavyzdžius, išplaukia išvada, kad emocijų poveikis, formuojant vartotojų požiūrį, yra kontraversiškas. dauguma autorių išskiria, kad emocijos yra svarbus kriterijus, tačiau daugelis jų emocijas priskiria kognityvinei bazei ir nagrinėja kognityvizmo verslas, vadyba ir studijos 2009 113 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o skontekste. publikacijų apie emocijų poveikį gausu. pavyzdžiui r. b. zajonc (1968) pateikė tyrimo rezultatus, kuriais atskleidė, jog objektai, tampantys familiarūs, dažniausiai yra vertinami kur kas palankiau nei kiti. kitaip tariant, pažįstami produktai tampa artimesni ir sukelia tokias emocijas, kurios turi teigiamą poveikį formuojant palankų požiūrį į objektą. a. p. field (2000) nustatė, kad emocijos tiesiogiai veikia vartotojų požiūrį be jokio įsisąmoninimo. remiantis j. t. cacioppo, w. l. gardner ir g. g. berntson (1997) atliktu tyrimu, manoma, kad neigiama informacija turi didesnį poveikį vartotojo požiūriui nei teigiama. h. ohira, w. m. winton ir m. oyama (1998) nustatė, kad įvairūs neigiami potyriai (pvz., neigiama informacija, neigiamos frazės) žmonių yra geriau atsimenami nei teigiami. lygiai taip pat neigiami aspektai, net ir ambivalentiškojo požiūrio, turi didesnės įtakos žmogaus elgsenai nei teigiami. r. ahluwalia (2002) rašo, kad teigiama informacija turi didesnės įtakos požiūriui, kai vartotojas tikisi ateityje patirti kažką bloga, ir neigiama informacija turi didesnės įtakos, kai yra tikimasi, kad ateitis bus pozityvi. šis fenomenas gali būti siejamas su žmogaus asmenine logika ir paaiškinamas tuo, jog natūraliai žmogus privalo įsidėmėti labiau tą informaciją, kuri kelia grėsmę jo susikurtos ateities realybei. šis veiksnys atskleidžia, kad antropologiniai ir kultūriniai vartotojo bruožai yra svarbūs praktinei rinkodarai. dar vienas mokslinėje literatūroje dažnai analizuojamas veiksnys, turintis įtakos vartotojų požiūrio formavimui, yra elgsena. mokslininkų požiūriai gali būti suskirstyti į dvi grupes. vienu požiūriu teigiama, kad elgsenos veiksnys svarbus, nes tai iš esmės yra potyris, kas, be abejo, suformuoja tam tikrą kognityvinį impulsą. kitu požiūriu teigiama, kad elgsena yra svarbi tik tada, kai tai yra vienintelis veiksnys, pagal kurį gali būti atliktas savęs vertinimas ir identifikuotas savo paties požiūris. remiantis r. h. fazio (1987), situacijose, kai trūksta kognityvinės ar emocijų bazės, vartotojas dažniausiai naudoja elgsenos bazę. ši požiūrio suformavimo strategija dažniausiai naudojama, kai siekiama suprasti pačiam save. f. strack, l. l. martin, ir s. stepper (1988) atlikę tyrimą nustatė, kad atitinkamų aplinkybių poveikis vartotojų elgsenos suvaržymams arba nesuvaržymams turi įtakos ir požiūrio susiformavimui. jų tyrimo rezultatai puikiai iliustruoja r. h. fazio (1987) teiginius ir pagrindžia mintį, kad įvykęs elgesys yra svarbus veiksnys, lemiantis požiūrio susiformavimą. kognityvinė bazė, emocijos, elgsena yra išskiriami kaip svarbiausi ir neabejotini požiūrio formavimo elementai. nepaisant to, moksliniu lygmeniu yra atlikta tyrimų, nagrinėjusių atskirus požiūrio formavimo veiksnius, kurių negalima priskirti nei vienam iš trijų įvardintų grupių. m. fishbein ir s. middlestadt 114 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s (1995), atlikę tyrimą, priėjo prie išvados, kad vartotojo požiūris yra nulemtas išankstinių įsitikinimų. žinoma, vertinant racionaliai, išankstiniai įsitikinimai atsiranda tam tikros patirties kontekste ir esminis skirtumas nuo daugumos autorių minimo elgsenos veiksnio yra tik tas, kad sukaupta patirtis jau yra įgavusį atitinkamą požiūrio pradą. panašios nuomonės yra w. d. crano ir r. pirslin (2008), kurie išskiria faktinių lūkesčių veiksnį ir teigia, kad jis yra labai svarbus formuojantis požiūriui. pasak autorių, visuomenėje vyraujanti nuomonė atskiro objekto atžvilgiu kai kurių vartotojų gali būti suvokiama kaip faktas. kaip bebūtų, vertinant objektyviai, tai nėra atitinkama patirtis, bet tik pasikliovimas kitų žmonių vertinimais ir susidariusia nuomone. vertinant racionaliai, faktinių lūkesčių poveikis yra stiprus tik tada, kai jie yra tvirti toje kultūroje arba subkultūroje, kuriai priklauso ir vartotojas. požiūrio formavimo paradigma yra glaudžiai susijusi su psichologijos mokslu, todėl yra mokslininkų, tyrusių, kaip veikia atitinkami psichologijos mokslo objektai. pavyzdžiui, h. aarts ir a. dijksterhuis (2003) požiūrį vertina kaip tam tikrą automatinį procesą, kas savo ontologija yra siejama su pasąmone. kitą įdomų veiksnį (veikiau idėją, nes moksliniu lygmeniu ji vis dėlto nebuvo itin plačiai išplėtota) aptaria f. heider (1958 m.), teigdamas, kad požiūris į atitinkamus produktus priklauso ne nuo vartotojo asmeninės patirties, bet nuo to, kokią patirtį su tais produktais įgavo jo teigiamai ir neigiamai vertinami asmenys. dar įdomesnę idėją pasiūlė a. g. greenwald ir m. r. banaji (1995 m.), kurie teigia, kad vartotojo požiūris į produktus priklauso nuo savęs vertinimo. tiesa, šis veiksnys yra glaudžiai susijęs su elgsenos veiksniu, kai kurių mokslininkų pristatomu kaip savęs suvokimo instrumentas. remiantis mokslinės literatūros analize, požiūrio formavimas yra įmanomas keliais esminiais būdais. mokslinėje literatūroje aptariama sistema, kai išskiriamos trys požiūrio formavimo veiksnių grupės bei trys požiūrio reikšmės. vis dėlto, įvertinus atliktus mokslinius tyrimus, išplaukia išvada, kad požiūrio formavimo veiksnių skirstymas į tris ar dvi grupes yra daugiau sisteminimo klausimas, kuris iš esmės atskleidžia tik atitinkamų veiksnių grupes ir leidžia lengviau susipažinti su šia mokslo šaka. tiriamoje rinkodaros literatūroje visos veiksnių grupės yra vertinamos tik kaip pagalbinės. dėl šios priežasties, remiantis atlikta mokslinės literatūros analize, kaip požiūrio formavimo instrumentai gali būti vertinami visi veiksniai, kurie buvo analizuojami šiame publikacijos skyriuje. nepaisant to, kad skirtingose situacijose skirtingi požiūrį formuojantys veiksniai gali turėti skirtingo stiprio poveikį požiūriui, paties poveikio fakto, remiantis atlikta analize, negalima atmesti nei vienu atveju. verslas, vadyba ir studijos 2009 115 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s3. požiūrio į užsienio produktus formavimo ypatumai remiantis atlikta požiūrio formavimo analize, išplaukia išvada, kad požiūrio formavimui gali būti naudojami pakankamai įvairūs veiksniai, kurių dauguma gali būti priskirti trims grupėms: elgesio, kognityvizmo ir emocijų veiksniai. vis dėlto požiūris į užsienio produktus tam tikroje šalyje yra siejamas su etnocentrizmo laipsniu šalyje. etnocentrizmo sąvoka pirmą kartą atsirado kultūrologijos moksle (etno – tauta, kultūra; centrum – centras). savo originaliąja prasme etnocentrizmas reiškia savos kultūros garbinimą. šią koncepciją puikiai atskleidžia m. harris (1998), teigiantis, kad etnocentrizmas yra tikėjimas, jog savi elgesio modeliai visada esą normalūs, natūralūs, puikūs ir reikšmingi, o svetimi, nes kitokie, – laukiniai, nežmoniški, bjaurūs ir iracionalūs. autoriaus teiginio branduolys gali būti pritaikomas ir produktų atvejui. požiūrio į užsienio produktus formavimas prasideda nuo šalies specifikos įvertinimo. i. vida ir a. fairhurst (1999) bei g. balabanis ir kitų (2001) atlikti tyrimai atskleidžia, kad skirtingose šalyse etnocentrizmo poveikis yra skirtingas. tai reiškia, kad šalyje susiformavusi kultūra, subkultūros ir visuotinė patirtis yra svarbūs veiksniai, kurie privalo būti įvertinti požiūrio formuotojų. fundamentaliai vertinant, požiūris į užsienio produktus susiformuoja kaip atitinkamas asmeninės ir visuomenės patirties atsakas į užsienio produktus. mokslinėje literatūroje, nagrinėjant etnocentrizmą, dažniausiai yra vertinami užsienio produktai dviem būdais: coo (produkto kilmės šalis); – coi (produkto kilmės šalies įvaizdis). – jeigu vartotojui yra svarbu, kurioje šalyje pagamintas produktas (arba iš kurios yra kildinamas), dažniausiai tai reiškia, kad vartotojas jaučia palankumą tam tikrai šaliai. šis palankumas gali būti siejamas su keliais galimais veiksniais: turima patirtis su kilmės šalimi panašių produktų srityje; – vartotojui šalis yra žinoma (teko joje lankytis, patraukli kultūra, patraukli – jos vykdoma politika ir pan.); faktiniai lūkesčiai dėl produkto ypatybių; – emocinis šalies patrauklumas; – išankstinis nusistatymas. – matyti, kad poveikį požiūriui į užsienio produktą jo kilmės šalis turi tiek per emocijų, tiek per elgsenos, tiek per patirties veiksnius. atlikti mokslininkų tyrimai patvirtina šį faktą: pavyzdžiui, m. supphellen ir t. rittenburg (2001) tyrimas su lenkų vartotojais atskleidė, kad lenkai, matydami užsienio produktų 116 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s reklamas, jas vertina skeptiškai, nes mano, kad užsienio produktai yra prastesnės kokybės. tyrimas net atskleidė, kad etnocentriški vartotojai neturi motyvacijos gilintis į reklamą ir jos poveikis yra nedidelis. šis autorių tyrimas įrodo išankstinio nusistatymo įtaką. dėl šios priežasties praktikoje dažnai užsienio prekės ženklai įžengia į rinką pirmiausia per viešuosius ryšius, o tik po to pradeda naudoti agresyvią rinkodaros komunikaciją. taip užsienio prekės ženklai susilaukia mažesnio pasipriešinimo. vertinant racionaliai, patirties veiksnys yra pats svarbiausias, nes dažniausiai požiūris į užsienio produktus yra kildinamas iš tam tikros patirties, susijusios su produktų kilmės šalimi arba kitais šalies produktais. emocinis veiksnys dažniausiai veikia kaip jau turimos tam tikros patirties rezultatas, nesiekiant įsisąmoninti ar kitaip sąmonės lygmenyje suvokti produkto pasirinkimo priežastingumo. be to, jis, remiantis a. endriulaitienės ir v. martišiaus (2007) monografijoje sprendimų priėmimą lemiančių veiksnių analize, atlieka svarbų vaidmenį priimant kasdienius sprendimus bei susidarant požiūrį. autoriai taip pat teigia, kad emocinių veiksnių poveikio stiprumas bei bruožai priklauso nuo kultūros ir visų vidinių vartotojų charakteristikų (pvz., sociodemografinės padėties). vienas svarbiausių kriterijų, lemiančių požiūrį į užsienio produktus, yra vartotojų požiūris į kultūrą bei jų priklausymas atitinkamai kultūrai ir subkultūrai. o. kucukemiroglu (1999) nustatė, kad neetnocentriški vartotojai turi palankesnį požiūrį į užsienio produktus nei etnocentriški. dėl šios priežasties, formuojant požiūrį į užsienio produktus, tikslinga įvertinti etnocentrizmo lygį bei etnocentrizmą lemiančius veiksnius. anot etnocentrizmą plėtojančių populiariausių autorių t. a. shimp ir s. sharma (1987), etnocentrizmas yra keturių dimensijų koncepcija, kur visų dėmenų sąveika nulemia atitinkamą etnocentrizmo lygį (1 pav.). keturias dimensijas išskiriantis etnocentrizmo modelis (1 pav.) yra tikslus, nes jis akcentuoja visus galimus motyvus, kodėl gali būti teikiamos itin didelės preferencijos savo šalyje pagamintiems produktams. tai: ekonominiai veiksniai; – psichologiniai veiksniai; – politiniai veiksniai; – demografiniai veiksniai. – įvertinus šalies vartotojų etnocentrizmo laipsnį, tikslinga pritaikyti tinkamą komunikacijos strategiją, kurią taikant būtų formuojamas palankus požiūris į užsienio produktus. jeigu šalis pasižymi aukštu etnocentrizmo lygiu, tada, remiantis j. reardon ir kitų (2005) atlikto tyrimo rezultatais, tikslinga plėtoti verslas, vadyba ir studijos 2009 117 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o sprekės ženklus be masinių reklaminių kompanijų, nes natūraliai, per kokybę ir teigiamą patirtį, susiformuojančiam užsienio prekės ženklui etnocentrizmu pasižymintys vartotojai nėra nusiteikę priešiškai. tai įrodo, kad požiūrio į užsienio produktus formavimui didžiausią poveikį turi vartotojų patirtis bei išankstiniai nusistatymai. 1 pav. etnocentrizmo sudedamosios dalys (shimp, sharma, 1987) fig. 1. the concept of ethnocentrism (shimp ir sharma, 1987) vertinant praktinį publikacijos indėlį ir publikacijos temos plėtojimą tolesniuose tyrimuose galimybės neribotos. sėkmingai įgyvendinti rinkodaros planus šalyje yra įmanoma tik tinkamai įvertinus ir išnaudojus publikacijoje pateikiamus požiūrio formavimo elementus. vis dėlto praktinis viso to panaudojimas turi būti integruotas daugiakriterių sprendimų priėmimo modeliuose, kurie yra išnagrinėti mokslinėse publikacijose (ginevičius 2006; peldschus 2009; liu 2009). užsienio produktų pateikimas rinkoms taip pat turėtų būti nagrinėjamas daugiakriteriais produktų kokybės algoritmais (pabedinskaitė, vitkauskas 2009). požiūrį formuojantys veiksniai bei etnocentrizmas, siekiant užtikrinti projektų sėkmingumą, turėtų būti įtraukti į matematinių daugiakriterių algoritmų modelius. vertinant straipsnyje nagrinėjamos temos galimybes plėtoti teorinėje plotmėje, visų pirma vertinant lietuvos rinkodaros mokslo įdirbį, kurio pagrindiniai atributai ir specifika atsiskleidžia v. p. pranulio (2008) publikacijoje, lietuvos mokslininkų moksliniai darbai bei atlikti tyrimai, integruoti su šioje publikacijoje nagrinėjama tema, sukeltų sinergijos efektą ir atsirastų galimybių toliau 118 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s plėtoti mokslines temas integruotai. mokslininkų parengtos publikacijos apie įmonių rinkodaros sprendimus veikiant užsienio rinkose (alimienė, kuvykaitė 2008), apie pakuotės poveikį vartotojo sprendimui (butkevičienė et al. 2008) bei apie produktų pozicionavimą rinkoje (ostasevičiūtė, šliburytė 2008). galimos publikacijos temos plėtojimo kryptys – jungti aptariamas problemas su kitais rinkodaros mokslo tiriamais objektais. 4. išvados remiantis atlikta mokslinės literatūros analize, požiūrį formuojančių veiksnių yra daug, ir skirtingi autoriai juos išskiria skirtingus. didžioji dalis visų šių veiksnių yra skirstoma į tris grupes: 1) kognityvinė bazė; 2) emocijos; 3) elgsena. vis dėlto visi svarbiausi veiksniai negali būti suskirstyti į pagrindines grupes. remiantis atlikta mokslinės literatūros analize, didelės įtakos požiūriui turi tokie veiksniai kaip išankstinis nusistatymas bei faktiniai lūkesčiai. vertinant fundamentaliai, dauguma nagrinėjamų veiksnių persipina, todėl jų skirstymas į grupes yra netikslingas. atlikus galimų požiūrio reikšmių analizę, nustatyta, kad klasikinėje požiūrio formavimo literatūroje yra naudojamos dvi reikšmės požiūriui apibūdinti: gera ir bloga. vėlesni atradimai ir mokslininkų atlikti tyrimai praplėtė klasikinį požiūrį, todėl remiantis atlikta analize, yra galimos keturios požiūrio reikšmės: 1) teigiama; 2) neigiama; 3) indiferentiška; 4) ambivalentiška. pirmosios dvi reikšmės yra klasikinės, trečioji rodo abejingumą, o ketvirtoji yra pirmųjų dviejų reikšmių samplaika, kai deklaruojamas vienas požiūris, o realybėje vyrauja priešingas. atlikus mokslinės literatūros analizę, nustatyta, kad požiūris į užsienio produktus yra veikiamas visų požiūriui įtakos turinčių veiksnių. tačiau atskleista, kad didelės įtakos turi ir kultūriniai aspektai: požiūris į užsienio produktus yra nulemtas ne tik įprastų jį formuojančių veiksnių, bet ir etnocentrizmo poveikio. vartotojų etnocentrizmas gali būti priežastis, kodėl vartotojai, net neturintys su produktu susijusios tiesioginės patirties, turi išankstinius nusistatymus bei faktinius lūkesčius jo atžvilgiu. požiūris į užsienio produktus dar priklauso ir nuo coo bei coi, kas dažnai yra paremta tik kultūrine patirtimi bei komunikacija. remiantis atliktais tyrimais, palankų požiūrį į užsienio produktus etnocentrizmu pasižymintiems vartotojams geriausia formuoti suteikiant jiems geros patirties. verslas, vadyba ir studijos 2009 119 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o sliteratūra aarts, h.; dijksterhuis, a. 2003. the silence of the library: environment, situational norm and social behavior, journal of personality and social psychology 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psychology 9: 1–27. zanna, m. p.; rempel, j. k. 1988. attitudes: a new look at an old concept, in the social psychology of knowledge. ed. by d. bar-tal, a. kruglanski. cambridge: university press, 315–334. the peculiarities of attitude formation to foreign products v. paukštė, m. normantas, l. normantienė summary nowadays the attitude formation is one of the most popular topics in marketing literature. however, in the scientific literature there are many publications, which exclude different factors. despite this fact, in scientific literature there are not a lot of publications about attitude formation to foreign products. in this publication scientific literature analysis of attitude, attitude formation and ethnocentrism is accomplished. this publication discloses the main attributes of attitude formation to foreign products. according to the results, the customers‘ experience has the biggest influence on attitudes to foreign products. also, it was found, that other attitude formation factors have an influence on attitude, but the influence is small when customers are ethnocentric. keywords: attitude, ethnocentrism, attitude formation, foreign products. 168 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai lietuvos mokesčių sistemos vertinimas remiantis j. gill diagnostiniais rodikliais ilona skačkauskienė ilona.skackauskiene@vgtu.lt vilniaus gedimino technikos universitetas, socialinės ekonomikos ir vadybos katedra 1. įvadas kiekviena valstybė siekia sukurti veiksmingą mokesčių sistemą, kuri atitiktų mokesčių mokėtojų lūkesčius ir užtikrintų biudžeto pajamų surinkimą. tuo tikslu teoretikai ir praktikai siūlo įvairius sprendimus mokesčių sistemai tobulinti (sepper, alas 2008; tampere et al. 2009; gryko, kluzek 2008; arslan, karan 2009). tačiau mokesčių sistema – sudėtingas darinys, reikalaujantis sisteminio požiūrio ir kompleksinio vertinimo. specialioje literatūroje randami įvairūs metodinio pobūdžio mokesčių sistemų vertinimo siūlymai, tačiau kompleksiškai mokesčių sistemą nagrinėja tik keletas autorių, vienas jų – j. gill (2000). tyrimo tikslas – įvertinti lietuvos mokesčių sistemą, naudojant j. gill diagnostinius rodiklius bei patikrinti metodo tinkamumą mokesčių sistemoms vertinti. atliekant tyrimą naudoti loginės analizės ir sintezės metodai, mokesčių administratorių apklausa telefonu ir elektroniniu paštu, mokesčių mokėtojų anketinė apklausa, ekspertinis vertinimas, taikytas sisteminis požiūris. 2. j. gill mokesčių sistemos vertinimo metodas mokestinių pajamų surinkimo sisteminė analizė suteikia galimybę įvertinti visos mokesčių sistemos efektyvumą. j. gill (2000) tokią analizę siūlo atlikti detaliai nagrinėjant pajamų surinkimą pagal jo sukurtą rodiklių rinkinį. pagrindinė metodo mintis – taikant suderinamumo modelį (didžiausias efektyvumas pasiekiamas, kai atskiros sistemos dalys suderintos tarpusavyje), mokesčių sistemą analizuoti sisteminiu požiūriu per mokestinių pajamų surinkimo prizmę. tokiu verslas, vadyba ir studijos 2009 169 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a aspektu nagrinėjant mokesčių sistemos komponentus, atskleidžiama jų įtaka sistemai, kurios efektyvumas savo ruožtu priklauso nuo komponentų tarpusavio dermės. j. gill išskiria tris rodiklių, apibūdinančių mokestinių pajamų surinkimą, grupes – prigimtinių mokesčių sistemos savybių, efektyvumo ir produktyvumo, kuriems vertinti siūlo kiekybinių ir kokybinių (išskyrus produktyvumo grupę) rodiklių rinkinį (1 lentelė). 1 lentelė. j. gill mokestinių pajamų surinkimo diagnostiniai rodikliai (gill 2000) table 1. gill‘s diagnostic indicators of tax revenue collection (gill 2000) vertinamas pajamų surinkimo aspektas kiekybiniai rodikliai kokybiniai rodikliai 1. prigimtinės mokesčių sistemos savybės 1. mokesčių rūšių įvairovė. 2. mokesčių mokėtojų skaičius pagal atskirus mokesčius. 3. mokesčių mokėtojų, iš kurių surenkama 80 % mokestinių pajamų, skaičius. 4. kasmet pateikiamų deklaracijų skaičius. 5. surenkamų mokesčių pagal mokesčių rinkimo šaltinį suma. 6. mokesčių įsiskolinimų per metus suma. 7. kasmet grąžinamų mokesčių suma. 8. darbuotojų, dirbančių mokesčių administravimo institucijose (vadovų, specialistų, techninio, aptarnaujančiojo personalo), skaičius. 1. mokesčių administratorių veiklos organizavimo tipas (pagrįstas administruojamų mokesčių rūšimis ar funkcijomis). 2. bendra mokesčių administravimo organizacinė struktūra. 3. padalinių regionuose ir savivaldybėse išdėstymas. 2. efektyvumas 1. surinktų iš mokesčių ir planuotų surinkti per metus pajamų santykis. 2. mokestinių pajamų ir bvp santykis. 3. mokesčių atotrūkis. 4. užpildytų mokesčių deklaracijų ir mokesčių mokėtojų skaičiaus santykis. 5. savanoriškai sumokėtų ir mokėtinų pagal deklaracijas mokesčių sumų santykis. 6. papildomai po patikrinimo ir audito surinktų mokesčių ir deklaruotų mokestinių prievolių santykis. 7. išnagrinėjus apeliacijas papildomai surinktų ir užginčytų apeliacijose mokesčių sumų santykis. 8. papildomai surinktų ir papildomai apskaičiuotų mokesčių santykis. 9. likviduotų mokesčių įsiskolinimų sumos ir bendro mokesčių įsiskolinimo metų pradžioje santykis. 10. išsisukinėjimo nuo mokesčių, muitinės apgavysčių ar kontrabandos atvejų skaičius per metus. 1. mokesčių mokėtojų suvokimas mokesčių nemokėjimo pasekmių, mokesčių administratorių teikiamos pagalbos kokybės, mokesčių administratorių darbo veiksmingumo sprendžiant mokesčių mokėtojų problemas. 2. visuomenės požiūris į korupciją mokesčių administravimo srityje. 3. mokesčių administratorių moralė. 170 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a 1 lentelės tęsinys 3. produktyvumas 1. vidutinis žmogaus darbo dienų skaičius, sugaištamas nustatant mokesčių nemokėjimo atvejus. 2. mokesčių mokėtojų ir mokesčių administravimo įstaigų darbuotojų santykis. 3. mokesčių administravimo išlaidų ir mokestinių pajamų santykis. 4. mokesčių mokėtojų išlaidos vykdant mokestines prievoles. tokių diagnostinių rodiklių analizė atskleidžia pajamų administravimo proceso spragas bei pozicijas, kuriose pajamų administravimas neatitinka valstybės ir mokesčių mokėtojų lūkesčių. atsižvelgiant į iškeltus tyrimo tikslus, metodas taip pat suteikia galimybę atlikti ir tarpvalstybinę lyginamąją analizę, pvz., siekiant nustatyti sritis, kuriose pajamų administravimas yra žemiau vidutinio lygio. mokesčių sistemos vertinimo metodų taikymo įvairių šalių mokesčių sistemoms galimybes riboja keletas veiksnių, iš kurių svarbiausias – duomenų prieinamumas. ši problema aktuali vertinant mokesčių sistemą ir pagal j. gill diagnostinių rodiklių rinkinį. kliūčiai šalinti j. gill naudojo tokius duomenų šaltinius: nacionalines sąskaitas, mokesčių įstatymus ir taisykles, nuolat mokesčių administratorių rengiamas statistines ataskaitas, mokesčių administratorių neskelbiamą, tačiau prieinamą informaciją, interviu su mokesčių administratoriais ir reprezentatyviais mokesčių mokėtojų atstovais. pastebima, kad surenkamų duomenų kiekis ir kokybė paprastai priklauso nuo mokesčių administravimo sistemos išvystymo lygio ir mokesčių administratorių naudojamų informacinių technologijų modernumo. 3. tyrimo metodika mokesčių sistemą, vertinamą per mokestinių pajamų surinkimo prizmę, apibūdina kiekybinių ir kokybinių rodiklių rinkinys. siekiant visapusiškai įvertinti mokesčių sistemą, rodiklių rinkinys analizuotas 3 etapais. pirmajame, nagrinėjant prigimtines mokesčių sistemos savybes, vertintas mokestinių pajamų surinkimo sudėtingumas, antrajame, nagrinėjant mokestinių pajamų surinkimo efektyvumo rodiklius, – mokesčių administratorių vykdomų funkcijų veiksmingumas, trečiajame, analizuojant mokesčių administratorių vykdomų funkcijų produktyvumą, – mokesčių administratorių vykdomų funkcijų našumas. verslas, vadyba ir studijos 2009 171 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a pirmąjį ir antrąjį tyrimo etapus sudarė 2 dedamosios: kiekybinis ir kokybinis tyrimai, trečiąjį etapą – tik kiekybinis tyrimas. toks tyrimo etapų dedamųjų pasiskirstymas siejamas su j. gill pateikta rodiklių klasifikacija. kiekybinio tyrimo (i–iii etapų) nuoseklumas yra toks: 1) susistemintų statistinių duomenų analizė; 2) rodiklių tendencijų nustatymas ir analizė; 3) rodiklių reikšmingumų nustatymas; 4) ekspertų nuomonių suderinamumo nustatymas. 1. statistinių duomenų analizės pagrindą sudarė finansų ministerijos, statistikos departamento, valstybinės mokesčių inspekcijos, muitinės departamento, valstybinio socialinio draudimo fondo valdybos duomenų analizė. nagrinėtų duomenų bazė papildyta mokesčių administratorių apklausa telefonu ir el. paštu bei viešai mokesčių administratorių neskelbiama, tačiau prieinama informacija. taip atlikta 2002–2006 m. susistemintų duomenų dinaminė analizė. be to, trečiuoju tyrimo etapu statistinių duomenų dinaminė analizė papildyta mokesčių mokėtojų anketine apklausa ir pasaulio banko tyrimo duomenimis. mokesčių mokėtojų anketinė apklausa atlikta siekiant nustatyti vidutinį žmogaus darbo dienų, sugaištamų nustatant mokesčių nemokėjimo atvejus, skaičių. apklausoje, vykdytoje individualiu būdu, dalyvavo vyriausieji įmonių finansininkai. pasaulio banko tyrimo duomenys naudoti mokesčių mokėtojų išlaidų, vykdant mokestines prievoles, rodikliui įvertinti. nuo 2005 m. į savo tyrimų sritį pasaulio bankas įtraukė ir mokesčius, kaip vieną iš verslo aplinką veikiančių veiksnių. daugelyje pasaulio šalių (2005 m. – 155, 2006 m. – 175, o 2008 m. – 181) tiriama, kiek valandų mokesčių mokėtojai per metus sugaišta vykdydami savo mokestinius įsipareigojimus. tyrimas apima tris pagrindinius mokesčius – pelno, pridėtinės vertės ir socialinio draudimo įmokas. 2. mokslinės ir specializuotos literatūros mokesčių, finansų temomis (taxation ... 2002; vitek et al. 2004) analizė leido įvertinti pageidautinas rodiklių kitimo (didėjimo ar mažėjimo) tendencijas. šios tendencijos lygintos su analizuoto periodo realiomis rodiklių kitimo tendencijomis lietuvoje. 3. statistinių duomenų dinaminė analizė iliustruoja tik bendras pajamų surinkimo sistemos tendencijas, todėl tyrimas papildytas 3 veiksniu – rodiklių reikšmingumo nustatymu, kuris leido nustatyti rodiklių prioritetiškumą ir pagal tai įvertinti atitinkamus mokestinių pajamų surinkimo sistemos parametrus. kadangi rodiklių reikšmingumo neįmanoma išreikšti skaičiais (dėl jo prigimties), pasirinktas ekspertinis vertinimas. šis vertinimas vykdytas tokia tvarka: suformuota ekspertų grupė; – atlikta ekspertų anketinė apklausa; – nustatyti vertinamų rodiklių reikšmingumai ir atliktas jų normalizavimas; – atliktas rodiklių rangavimas. – 172 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a ekspertų grupės formavimas ir ekspertinio vertinimo patikimumo nustatymas. kaip pagrindinis ekspertų atrankos kriterijus pasirinkta kompetencija. kadangi mažose ir vidutinėse įmonėse mokesčių klausimai analizuojami siaurai, ekspertai pasirinkti išimtinai iš didelių bendrovių (minimalus reikalavimas – įmonių vidutinė metinė apyvarta turi būti ne mažesnė nei 10 mln. lt). be to, ekspertams nustatytas darbo patirties limitas – ne mažiau nei 7 metai darbo finansų srityje. tokiu būdu atrinkti 5 ekspertai iš skirtingų verslo įmonių, kurių vidutinė metinė apyvarta – 10–170 mln. lt, o pačių ekspertų darbo patirtis – 9–20 metų. ekspertų anketinė apklausa. ši apklausa vykdyta individualiu asmeniniu būdu. ekspertams pateikta iš anksto paruošta kiekybinių rodiklių vertinimo anketa. ekspertai paprašyti įvertinti kiekybinių rodiklių svarbą pajamų surinkimo požiūriu. kiekvienam rodikliui suteikiamas įvertinimas nuo 0 iki 10 balų, svarbesniam suteikiant aukštesnį įvertinimą. vertinamų rodiklių reikšmingumų nustatymas ir normalizavimas. ekspertai i etapo kiekybinio tyrimo metu vertino 8 prigimtines mokesčių sistemos savybes apibūdinančius kiekybinius rodiklius, ii etapo metu – 10 kiekybinių rodiklių ir iii etapo metu – 4 kiekybinius rodiklius. ekspertų užduotis – kiekvieną analizuojamą rodiklį įvertinti tam tikru balu pajamų surinkimo svarbumo požiūriu. be to, leista vienodą vertinimo balą suteikti dviems (ar daugiau) kokybiškai skirtingiems rodikliams, savo vertinimą argumentuojant. rodiklių reikšmingumų nustatymas ir normalizavimas vykdytas tokiu nuoseklumu (бешелев, гурвич 1980): a) sudaryta matrica „ekspertai–rodikliai“, į kurią suvesti rodiklių įvertinimai balais; b) apskaičiuotas kiekvieno rodiklio santykinis reikšmingumas pagal formulę: 1 ,ijij n ij j x w x = = ∑ (1) čia: ijx – i-tojo rodiklio j-ojo eksperto įvertinimas, n – rodiklių skaičius; apskaičiuojamas kiekvieno rodiklio reikšmingumas. tuo tikslu normalizuotos rodiklių reikšmės (b veiksmas) sumuojamos ir apskaičiuojamas aritmetinis vidurkis kiekvienam rodikliui: 1 1 , n r ij i j i x x r = = = ∑ ∑ (2) čia r – ekspertų skaičius. verslas, vadyba ir studijos 2009 173 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a rodiklių rangavimas. rangavimas atliktas taip, kad didžiausią reikšmingumą įgijusiam rodikliui suteiktas 1 rangas, antram pagal reikšmingumą – 2 rangas ir t. t. tokiu būdu nustatytas rodiklių prioritetiškumas kiekviename ekspertinio įvertinimo kiekybinio tyrimo etape. 4. ekspertų vertinimų suderinamumas. kai ekspertų skaičius didesnis už du, grupės ekspertų suderinamumo lygį rodo konkordancijos koeficientas (podvezko 2005). šio koeficiento idėja susieta su kiekvieno rodiklio rangų suma visų ekspertų atžvilgiu, tiksliau su dydžių ix nuokrypiu nuo bendro aritmetinio vidurkio x kvadratų suma. ekspertų vertinimų suderinamumui nustatyti atlikti skaičiavimai tokiu nuoseklumu: ekspertų rodiklių reikšmingumų vertinimas pertvarkytas į rangus. kadangi – vertindami rodiklius ekspertai svarbesniajam suteikė aukštesnį įvertinimą, tai rodiklių rangavimas kiekvieno eksperto atžvilgiu atliktas analogiškai rodiklių reikšmių rangavimui, t. y. aukščiausią įvertinimą įgijusiam rodikliui suteiktas 1 rangas, antram pagal reikšmingumą – 2 rangas ir t. t. vienodą įvertinimą turintiems rodikliams priskirtas vienodas rangas – eilinių rangų aritmetinis vidurkis; apskaičiuota kiekvieno rodiklio ix rangų suma visų ekspertų atžvilgiu: 1 , r i ij j x x = = ∑ (i = 1, ..., n); (3) apskaičiuota – ix nuokrypio nuo bendro aritmetinio vidurkio x kvadratų suma: 2 1 ( ) ; n i i s x x = = −∑ (4) apskaičiuotas konkordancijos koeficientas pagal formulę: – 2 2 1 12 , ( 1) r j j s w r n n r t = = − − ∑ (5) čia jt – susietų rangų rodiklis, kuris apskaičiuojamas pagal formulę: 3 1 ( ), jh j k k k t t t = = −∑ (6) čia: jh – lygių rangų j-ojo eksperto skaičius, kt – lygių rangų k-tasis grupės skaičius; nustatytas konkordancijos koeficiento reikšmingumas. m. kendall (po– dvezko 2005) įrodė: jeigu analizuojamų rodiklių skaičius didesnis nei 7, 174 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a konkordancijos koeficiento reikšmingumas nustatomas naudojant 2χ kriterijų, apskaičiuojamą pagal formulę: 2 ( 1).wr nχ = − (7) iš 2χ skirstinio lentelės su v = n – 1 laisvės laipsniu ir pasirinktu reikšmingumo lygmeniu 0, 05α = randama kritinė reikšmė 2 .krχ jei apskaičiuota pagal (7) formulę 2χ reikšmė didesnė už 2 ,krχ teigiama, kad ekspertų vertinimai suderinti. kai lyginamų rodiklių skaičius yra nuo trijų iki septynių, 2χ skirstinį reikia taikyti atsargiai – skirstinio kritinė reikšmė 2krχ gali būti didesnė už apskaičiuotą, nors ekspertų nuomonių suderinamumo lygis dar pakankamas. tokiu atveju galima taikyti konkordancijos koeficiento tikimybines lenteles arba kritinių reikšmių s lenteles (su 3 7)m≤ ≤ (eвланов, кутузов 1978). pirmo ir antro tyrimo etapo metu paraleliai kiekybiniam tyrimui atliktas ir kokybinis tyrimas, suteikęs papildomos informacijos apie tiriamą reiškinį ir sudaręs galimybę įžvelgti naujas mokesčių sistemos vertinimo perspektyvas. kokybinis tyrimas atliktas naudojant ekspertinį vertinimą, kuris vykdytas tokia seka: kokybinių rodiklių turinio apibūdinimas ir preliminari analizė; – ekspertų vertinimo anketos sudarymas; – ekspertų grupės formavimas; – rodiklių reikšmingumų nustatymas ir normalizavimas; – rodiklių rangavimas; – nuomonių suderinamumo nustatymas; – rodiklių reikšmių nustatymas. – j. gill metode pateikti kokybiniai rodikliai buvo konkretizuoti atlikus jų turinio analizę. pirmojo etapo kokybiniu tyrimu, išanalizavus mokesčių administravimą, t. y. mokesčių administratorių veiklos organizavimo tipą, bendrą mokesčių administravimo organizacinę struktūrą, padalinių išsidėstymą regionuose ir savivaldybėse, siekta įvertinti mokesčių administravimo sistemos funkcionalumą. antrojo etapo kokybiniu tyrimu išanalizavus, kaip mokesčių mokėtojai vertina riziką būti išaiškinti nemokant mokesčių ir to pasekmių griežtumą, mokesčių administratorių teikiamos pagalbos kokybę bei jų darbo efektyvumą, sprendžiant mokesčių mokėtojų problemas, siekta įvertinti mokesčių administratorių vykdomų funkcijų efektyvumą. tuo tikslu atlikta išsami mokesčių įstatymų ir kitų teisės aktų bei statistinių duomenų analizė, mokesčių administratorių apklausa telefonu ir elektroniniu paštu. taip pat naudoti ankstesnių bei kitų organizacijų atliktų tyrimų rezultatai kaip papildanti ir pagrindžianti informacija. verslas, vadyba ir studijos 2009 175 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a kokybinių rodiklių turinys: i etapo kokybiniai rodikliai. mokesčių administratorių veiklos organizavimo tipas. mokesčių administratorių veikla gali būti organizuojama pagal jų vykdomas funkcijas (pvz., mokesčių mokėtojų konsultavimas, mokesčių deklaravimo ir mokėjimo kontrolė, mokestinių ginčų nagrinėjimas ir pan.) arba pagal administruojamų mokesčių rūšis (pvz., vienas mokesčių administratorius atlieka visas turto grupės mokesčių administravimo funkcijas). šio rodiklio preliminariai analizei naudoti ankstesnių tyrimų rezultatai, gauti atlikus detalią mokesčių administravimą reglamentuojančių teisės aktų analizę. bendra mokesčių administravimo organizacinė struktūra. mokesčių administratorių organizacinės struktūros analizė apėmė už mokesčių administravimą atsakingų institucijų ir įstaigų, turinčių įstatymu suteiktus įgaliojimus veikti mokesčių administravimo srityje, tarpusavio ryšių nustatymą, atliekamų funkcijų detalizavimą, hierarchijos nustatymą. šiai analizei atlikti naudoti ankstesnių tyrimų rezultatai, gauti išsamiai nagrinėjant lietuvos mokesčių administravimą reglamentuojančius teisės aktus, atlikus mokesčių administratorių apklausą telefonu. padalinių išsidėstymas regionuose ir savivaldybėse. tam tikroje geografinėje teritorijoje esantis mokesčių administratorių padalinių skaičius daro įtaką mokestinių pajamų surinkimui – neracionalus mokesčių administratorių padalinių išsidėstymas gali sumažinti mokesčių administratorių gebėjimą vykdyti apmokestinamos veiklos priežiūrą ar padidinti mokesčių mokėtojų išlaidas, susijusias su mokestinių įsipareigojimų vykdymu. ši analizė atlikta naudojant statistikos departamento duomenis apie lietuvoje veikiančius ūkio subjektus ir mokesčių administratorių tinklalapiuose skelbiamus duomenis apie jų padalinių buvimo vietą bei juose dirbančių darbuotojų skaičių. ii etapo kokybiniai rodikliai. mokesčių nemokėjimo atvejų išaiškinimo rizika ir to pasekmių griežtumas. mokesčių administravimo įstatyme (lietuvos respublikos ... 2004) įteisinta bendra sankcijų sistema už visus mokesčių įstatymų pažeidimus – neteisėtą asmenų elgesį, kuriuo yra pažeidžiami mokesčių įstatymų reikalavimai. išskiriamos dviejų rūšių sankcijos – baudos ir delspinigiai. mokesčių mokėtojui (tam tikrais atvejais – mokestį išskaičiuojančiam asmeniui) ekonominė sankcija (bauda) skiriama, jei patikrinimo metu mokesčių administratorius nustato, kad mokesčių mokėtojas neapskaičiavo nedeklaruojamo ar nedeklaravo deklaruojamo mokesčio arba neteisėtai pritaikė mažesnį mokesčio tarifą ir dėl šių priežasčių mokėtiną mokestį neteisėtai sumažino (vmi ... 2007a). mokesčių mokėtojui priskaičiuojama trūkstama mokesčio suma ir skiriama nuo 10 iki 50 procentų minėtos mokesčio sumos dydžio bauda, jei atitinkamo mokesčio įstatymas nenustato kitaip (2 lentelė). 176 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a 2 lentelė. lietuvoje nustatyti baudų dydžiai table 2. penalty system set out in lithuania teisės aktas baudos dydis mokesčių administravimo įstatymo 139 str. nuo 10 iki 50 % trūkstamos mokesčio sumos pridėtinės vertės mokesčio įstatymo 123 str. nuo 10 iki 50 % apskaičiuotos pvm sumos valstybinio socialinio draudimo įstatymo 16 str. 50 % apskaičiuotos trūkstamos įmokos sumos naftos ir dujų išteklių mokesčio įstatymo 7 str. dešimteriopa nesumokėto mokesčio dydžio bauda delspinigių dydį ir jo apskaičiavimo tvarką nustato finansų ministras, atsižvelgdamas į vidutinę praėjusio kalendorinio ketvirčio aukciono būdu išleistų litais lietuvos respublikos valstybės iždo vekselių metinės palūkanų normos svertinį vidurkį. delspinigių dydis nustatomas minėtąją palūkanų normą padidinus 10 procentinių punktų. mokesčių nemokėjimo atveju išaiškinamos rizikos ir to pasekmių griežtumą iš dalies atskleidžia nustatytas finansų ministro delspinigių dydžio kitimas. mokesčių administratorių pagalbos sprendžiant mokesčių mokėtojų problemas kokybė. mokesčių mokėtojui sudaryta galimybė kreiptis pagalbos į mokesčių administratorių tokiais būdais (vmi ... 2007b): atvykus konsultuotis žodžiu, paskambinti paskelbtais konsultavimo telefonais, pateikti klausimą raštu. pastarasis būdas apima klausimus, pateikiamus tiesiogiai mokesčių administratoriaus padaliniui, kuris registruoja gautus klausimus, atsiųstus paštu, elektroniniu paštu ar faksu. mokesčių administratorių pagalbos sprendžiant mokesčių mokėtojų problemas kokybės analizei naudoti visuomenės nuomonės ir rinkos tyrimų centro „vilmorus“ tyrimo duomenys. 2004 m. valstybinės mokesčių inspekcijos užsakymu „vilmorus“ atliko valstybinės mokesčių inspekcijos įvaizdžio tyrimą (valstybinės … 2004). vykdant šį tyrimą, siekta nustatyti, kaip didžiųjų įmonių vadovai ir smulkieji verslininkai vertina valstybinės mokesčių inspekcijos darbą, jiems teikiamas paslaugas. apklausta 400 lietuvos įmonių (daugiausia tai buvo uždarosios akcinės bendrovės arba individualios įmonės, kuriose dirba iki 49 darbuotojų, o metinė apyvarta siekia iki 100 tūkstančių litų) vadovų ir smulkiųjų verslininkų. mokesčių administratorių darbo veiksmingumas. pagrindinė mokesčių mokėtojo pareiga – teisingai apskaičiuoti ir laiku sumokėti mokestį bei su juo susijusias sumas į valstybės iždą, laiku pateikti mokesčių deklaracijas, t. y. vykdyti mokesčių įstatymuose numatytas prievoles. tačiau mokesčių verslas, vadyba ir studijos 2009 177 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a mokėtojas gali nesuprasti ar neteisingai suprasti savo mokestines pareigas. tai gali sąlygoti mokesčių deklaravimo ir mokėjimo klaidas. mokesčių administratorių darbo veiksmingumo preliminariai analizei naudoti finansų ministerijos pateikti duomenys apie baudų ir konfiskacijos sumas. visuomenės požiūris į korupciją mokesčių administravimo srityje. daugelis tyrinėtojų linkę teigti, kad neįmanoma išmatuoti korupcijos lygio dėl šio reiškinio latentiškumo ir nesant universalaus korupcijos apibrėžimo (palidauskaitė 2006), vis dėlto yra du tarptautiniu mastu tuo tikslu naudojami tyrimo metodai: korupcijos suvokimo indeksas (corruption perception index) ir polinkio į korupciją (corruption–proxy) vertinimas. lietuvoje korupcijos tyrimai atliekami nuo 1999 m. naudojantis tarptautinės nevyriausybinės organizacijos „transparency international“ metodologija, pagrįsta korupcijos suvokimo indeksu. tai mišrus indeksas, sukurtas remiantis verslininkų (rezidentų ir ne rezidentų) bei tarptautinių ekspertų apklausomis. be „transparency international“, korupcijos tyrimus lietuvoje atlieka lietuvos laisvosios rinkos institutas, pvz. 2001 m. atlikto tyrimo metu nustatyta, kad valdininkų atsakomybė neadekvati jų turimai galiai, o teisėsaugos struktūrų nepajėgumą kovoti su šiuo reiškiniu lemia silpna teisinė bazė. taip pat korupcijos analizė papildyta valstybinės kovos su korupcija institucijos – specialiųjų tyrimų tarnybos (stt), tiriančios korupcijos atvejus viešojo administravimo sektoriuje, taip pat ir mokesčių administravimo srityje, statistine informacija. 2004 m. valstybinės mokesčių inspekcijos užsakymu visuomenės nuomonės ir rinkos tyrimų centras „vilmorus“ atliko pasitikėjimo valstybine mokesčių inspekcija tyrimą (pasitikėjimas ... 2004). pasitikėjimo valstybine mokesčių inspekcija apklausoje dalyvavo 1003 kovo mėn. ir 1001 birželio mėn. 18 metų bei vyresnis lietuvos gyventojas. naudota daugiapakopė, tikimybinė atranka, apklausa vykdyta respondento namuose. mokesčių administratorių moralė. iš dalies mokesčių administratorių moralės – žmonių elgesį reglamentuojančių normų ir principų – vertinimą atskleidžia specialiųjų tyrimų tarnybos duomenys apie išaiškintus valstybės tarnautojų ir pareigūnų nusižengimus. konkrečiai mokesčius administruojančių institucijų darbuotojų moralę galima vertinti pagal tų institucijų pateikiamus duomenis apie tarnybinius nusižengimus. tačiau tokią informaciją viešai skelbia tik muitinės departamentas, kitos įstaigos tokią informaciją traktuoja kaip konfidencialią ir naudoja tik savo vidiniams poreikiams. susisteminus kokybinių rodiklių preliminarios analizės rezultatus, detalizuotas jų turinys. taip sudaryta vertinimo anketa (3 lentelė), kurioje įterpta skiltis, sukonkretinanti vertinamo rodiklio turinį. 178 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a 3 lentelė. kokybinių rodiklių vertinimo anketa table 3. the evaluation form of qualitative indicators vertinamas aspektas rodiklis turinys įvertinimas (svarbumo aspektu) prigimtinės mokesčių sistemos savybės mokesčių administratorių veiklos organizavimas mokesčių administratorių veikla gali būti organizuojama pagal vykdomas funkcijas arba pagal administruojamų mokesčių rūšis. vertinamas mokesčių administravimo tipo patogumas mokesčių mokėtojui. bendra mokesčių administravimo struktūra lietuvoje išskiriami 5 mokesčių administratoriai, kurie vykdo tam tikras funkcijas arba administruoja tam tikrus mokesčius. vertinamas organizacinės struktūros paprastumas. padalinių išsidėstymas regionuose ir savivaldybėse neracionali mokesčių administratorių veiklos koncentracija gali sumažinti mokesčių administratorių gebėjimą vykdyti apmokestinamos veiklos priežiūrą ar padidinti mokesčių mokėtojų išlaidas, susijusias su mokestinių įsipareigojimų vykdymu. vertinama, kaip mokesčių administratorių padalinių išdėstymo struktūra atitinka mokesčių mokėtojų tankumo, gyvenamosios vietos pasiskirstymą. efektyvumas mokesčių nemokėjimo atvejų išaiškinimo rizika ir to pasekmių griežtumas vertinama, kaip mokesčių mokėtojas suvokia riziką būti susektas nemokant mokesčių ir to veiksmo pasekmes tolimesnei veiklai, t. y. vertinamas mokesčių nemokėjimo atveju gaunamos naudos ir rizikos būti identifikuotam pasekmių griežtumo adekvatumas. mokesčių administratorių teikiamos pagalbos sprendžiant mokesčių mokėtojų problemas kokybė iškilus problemoms, mokesčių mokėtojai kreipiasi raštu, telefonu ar žodžiu į darbuotojus, dirbančius mokesčių administravimo įstaigose. vertinamas teikiamos mokesčių administratorių pagalbos operatyvumas, išsamumas. mokesčių administratorių darbo veiksmingumas mokesčių mokėtojas gali nesuprasti ar neteisingai suprasti savo mokestines pareigas. tai gali sąlygoti mokesčių deklaravimo ir mokėjimo klaidas. vertinamas tokių klaidų išaiškinimo ir koregavimo veiksmingumas. mokesčių administratorių korupcija korupcija – tai tarnybinės padėties naudojimas pasipelnymo tikslais, pareigūno papirkimas. vertinamas mokesčių administratorių korupcijos lygis. mokesčių administratorių moralė moralė – tai dorovė, žmonių elgesį reglamentuojančios normos ir principai. vertinamas mokesčių administratorių principingumas ir atsidavimas darbui. verslas, vadyba ir studijos 2009 179 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a ekspertų grupei formuoti, nuomonių suderinamumui bei rodiklių reikšmingumui nustatyti ir normalizuoti, rodikliams ranguoti naudota analogiška metodika kaip ir kiekybinių rodiklių reikšmingumams nustatyti. rodiklių reikšmėms nustatyti atlikta ekspertų anketinė apklausa individualiu būdu. ekspertams pateikta iš anksto paruošta anketa, kurioje jie įrašė savo vertinimus 10-balėje skalėje (10 – rodiklis vertinamas labai gerai, 0 – labai blogai). rodiklių reikšmės nustatytos pagal (2) formulę. 4. tyrimo rezultatai prigimtinės mokesčių sistemos savybės. lyginamoji pageidautinų ir nustatytų rodiklių reikšmių kitimo tendencijų analizė leido daryti tokius apibendrinimus: 1) didėjantis mokesčių mokėtojų ir kasmet pateikiamų deklaracijų skaičius, mažėjanti mokestinių įsiskolinimų per metus suma bei sąlyginai pastovus darbuotojų, dirbančių mokesčių administravimo įstaigose, skaičius rodo teigiamus pokyčius mokesčių administravimo srityje; 2) mokesčių skaičiaus nepastovumas, mokesčių mokėtojų, iš kurių surenkama 80 proc. mokestinių pajamų, santykinis mažėjimas, informacijos apie atskirus mokestinių pajamų šaltinius nebuvimas bei didėjanti kasmet grąžinamų mokesčių suma byloja apie mokestinių pajamų surinkimo sistemos spragas. reikšmingiausias pajamų surinkimo požiūriu rodiklis – mokesčių mokėtojų, iš kurių surenkama 80 proc. mokestinių pajamų, skaičius. nustatyta šio rodiklio neigiama kitimo tendencija. apskritai rodikliai, kurių kitimo tendencijos neatitinka pageidautinų arba nėra apie juos informacijos, sudaro 52 proc. visos grupės reikšmingumo, t. y. mokesčių sistemoje pajamų surinkimo požiūriu yra rimtų problemų, kurias reikėtų spręsti koreguojant mokesčių politiką. 2χ reikšmė, apskaičiuota pagal (7) formulę 2 19, 51,χ = didesnė už kritinę reikšmę 2 16, 7krχ =. = 14,07 su 8 1 7v = − = laisvės laipsniu ir 0, 05α = reikšmingumo lygmeniu, t. y. ekspertų nuomonės gerai suderintos. ekspertai taip pat atliko kokybinių rodiklių reikšmių įvertinimą, pagal kurį mokesčių administratorių veiklos organizavimo įvertinimo vidurkis 8,4 balo, t. y. mokesčių administravimo organizavimą pagal funkcijas įvertino kaip patogų mokesčių mokėtojui. bendros mokesčių administravimo organizacinės struktūros įvertinimo vidurkis yra 7,2 balo, t. y. struktūra įvertinta kaip pakankamai nesudėtinga, tačiau ekspertai pažymėjo, kad būtina vengti veiksmų dubliavimo (pvz., deklaracijų pateikimo dviems mokesčių administratoriams). padalinių regionuose ir savivaldybėse išsidėstymo įvertinimo vidurkis yra 7,6 balo, t. y. ekspertai padalinių išsidėstymą regionuose ir savivaldybėse vertino kaip iš dalies atitinkantį mokesčių mokėtojų poreikius. 180 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a efektyvumas. daryti konstruktyvius pageidautinų ir nustatytų efektyvumo rodiklių reikšmių kitimo tendencijų analizės apibendrinimus sudėtinga, nes trūksta dalies informacijos: 4 rodiklių duomenų iš 10 nebuvo galimybės surinkti. mokesčių administratorių veikla efektyvi vykdant planavimo procesą, išaiškinant išsisukinėjimo nuo mokesčių, muitinės apgavysčių ir kontrabandos atvejus, vykdant mokesčių politiką mokesčių naštos požiūriu. tačiau mokesčių administratorių veikla turėtų būti efektyvesnė mokesčių deklaravimo srityje – panaudojant šią priemonę mokesčių mokėtojų stebėsenai, išieškant papildomai priskaičiuotas mokesčių sumas, atstovaujant valstybės interesams teisminiuose procesuose. mokesčių administratorių darbo efektyvumas labai priklauso nuo mokesčių naštos rodiklio – jis ekspertų įvertintas kaip reikšmingiausias. lietuvoje mokesčių našta yra viena mažesnių es (iki 2008 m. gruodžio pakeitimų), todėl galima teigti, kad mokesčių administratoriams sudaryta palanki terpė dirbti efektyviai. antro pagal reikšmingumą rodiklio – išsisukinėjimo nuo mokesčių, muitinės apgavysčių ar kontrabandos išaiškintų atvejų skaičius per metus – kitimo tendencijos skaitine išraiška taip pat teigiamos, tačiau šio rodiklio didėjimas vertine išraiška kelia susirūpinimą. atlikus kokybinių rodiklių pageidautinų ir nustatytų kitimo tendencijų analizę ir sugretinus su rodiklių reikšmingumų rezultatais, galima teigti, kad pajamų surinkimas efektyvumo aspektu tobulintinas tokiose srityse: mokesčių deklaravimo, mokesčių mokėtojų patikrinimo procedūrų, atstovavimo valstybės interesams mokestiniuose ginčuose ir teismų procesuose. 2χ reikšmė, apskaičiuota pagal (7) formulę 2 18,χ = didesnė už kritinę reikšmę 2 16, 7krχ =. = 16,7 su 10 1 9v = − = laisvės laipsniu ir 0, 05α = reikšmingumo lygmeniu, t. y. ekspertų nuomonės suderintos. atlikus rodiklių reikšmingumų ir rangų pasiskirstymo įvertinimą, kaip svarbiausias rodiklis išskirtas mokesčių administratorių korupcija – esant korumpuotai sistemai pajamų į iždą surenkama mažiau, galimi mokesčių mokėjimo vengimo atvejai. didelę įtaką efektyvumo grupės kokybinių rodiklių vertinimui mokesčių nemokėjimo atveju taip pat turi išaiškinimo rizikos ir to pasekmių griežtumo bei mokesčių administratorių darbo veiksmingumo rodikliai. svarbiausių trijų rodiklių reikšmingumas procentine išraiška bendroje struktūroje – 65,95 proc. 2χ reikšmė, apskaičiuota pagal (7) formulę 2 9, 8,χ = didesnė už kritinę reikšmę 2 16, 7krχ =.= 9,5 su 5 1 4v = − = laisvės laipsniu ir 0, 05α = reikšmingumo lygmeniu, t. y. ekspertų nuomonės suderintos. ekspertų atlikto rodiklių reikšmių įvertinimo rezultatai tokie: 1) lietuvos mokesčių administratoriai efektyviai išaiškina mokesčių nemokėjimo atvejus – ekspertų vertinimo vidurkis 8,4 balo; 2) mokesčių administratorių teikiama pagalba mokesčių mokėtojams operatyvi, išsami – vidurkis 8 balai; 3) mokesčių verslas, vadyba ir studijos 2009 181 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a administratoriai pakankamai veiksmingai nustato mokesčių deklaravimo ir mokėjimo klaidas – vidurkis 7,8 balo (pildant deklaracijas el. būdu apie įsivėlusias klaidas pranešama elektroniniu laišku); 4) mokesčių administratorių principingumas įvertintas pakankamai – vidurkis 7 balai (ekspertai atkreipė dėmesį į tai, kad kai kuriais atvejais principingumas būna per didelis, pvz., pareigūnui sąmoningai demonstruojant jam įstatymu suteiktą galią); 5) lietuvos mokesčių sistemoje yra korupcijos apraiškų – vidurkis 6,6 balo, t. y. mokesčių administratoriai linkę naudotis savo tarnybine padėtimi pasipelnymo tikslais. produktyvumas. rodiklių dinaminė ir kitimo tendencijų analizė sudaro prielaidas teigti, kad mokesčių administratoriai dirba produktyviai – tai patvirtina ir mokesčių administravimo išlaidų ir mokestinių pajamų rodiklio bei vidutinio žmogaus darbo dienų, sugaištamų nustatant mokesčių nemokėjimo atvejus, rodiklio kitimo tendencijos. kitų dviejų šios grupės rodiklių kitimo tendencijos taip pat vertintinos daugiau teigiamai nei neigiamai. ekspertų vertinimu svarbiausias produktyvumo grupės rodiklis – mokesčių administravimo išlaidų ir surenkamų mokestinių pajamų. pirmųjų dviejų pagal reikšmingumą rodiklių įtaka grupei didelė – 59,54 proc., o jų dinaminė ir kitimo tendencijų analizė atskleidė našų mokesčių administratorių darbą šių rodiklių vertinimo aspektu. 2χ reikšmė, apskaičiuota pagal (7) formulę 2 7, 95,χ = didesnė už kritinę reikšmę 2 16, 7krχ =.= 7,8 su 4 1 3v = − = laisvės laipsniu ir 0, 05α = reikšmingumo lygmeniu, t. y. ekspertų nuomonės gerai suderintos. 5. išvados mokesčių sistema, taikant j. gill metodą, vertinta per pajamų surinkimo prizmę 3 pjūviais: prigimtinių mokesčių sistemos savybių, efektyvumo ir produktyvumo. atliktas empirinis kiekybinis ir kokybinis tyrimas su išlygomis patvirtino metodo tinkamumą taikymo mokesčių sistemoms vertinti. esminė metodo spraga – neapibrėžti rodiklių apskaičiavimo principai. ši spraga iš dalies užpildyta sukonkretinus rodiklių turinį, t. y. koreguojant ne pačius rodiklius, o detalizuojant jų turinį ir taip adaptuojant metodą konkrečiam atvejui. lietuvos mokesčių sistemos vertinimo rezultatai tokie: a) pajamų surinkimo sistema, vertinant ją pagal prigimtines mokesčių sistemos savybes apibūdinančius rodiklius, sudėtinga – didėja mokesčių rūšių, mokesčių mokėtojų, pateikiamų deklaracijų skaičius, grąžinamų mokesčių sumų kiekis (mokesčių sistema tobulintina didžiųjų mokesčių mokėtojų segmento formavimo, padalinių išsidėstymo ir mokesčių administratorių organizacinės struktūros srityse); b) silpniausia 182 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a lietuvos mokesčių sistemos grandis – vykdomų funkcijų efektyvumas. mokesčių administravimo kokybė įvertinta silpnai, o surenkamų pajamų iš baudų ir konfiskacijos didėjimas byloja ir apie vengimą mokėti mokesčius. korupcijos apraiškos mokesčių administravimo sektoriuje tik gilina egzistuojančias problemas. tobulintinas ir papildomai apskaičiuotų mokesčių sumų surinkimas. siekiant stiprinti šią grandį siūloma: 1) kelti šioje srityje dirbančių darbuotojų kvalifikaciją, ugdyti jų atsakomybę; 2) įstatymu apibrėžti mokesčių administratorių teises ir pareigas bei mokesčių mokėtojų teises ir prievoles patikrinimų metu; 3) sukurti/įdiegti informacinę sistemą, informuojančią mokesčių mokėtojus įvykdyti mokestinius įsiskolinimus laiku, o mokesčių administratorių atsakingus darbuotojus – apie nedisciplinuotus mokesčių mokėtojus; c) įdiegtos naujausios informacinės sistemos sudarė prielaidas mokesčių administravimo įstaigų darbuotojams našiai vykdyti jiems pavestas funkcijas. mokesčių administravimo išlaidoms didėjant nežymiai, surenkamų mokestinių pajamų kiekis didėjo sparčiai – analizuojamu periodu surenkamos mokestinės pajamos padidėjo 61 proc. be to, sąlygiškai pastoviam dirbančiųjų mokesčių administravimo įstaigose darbuotojų skaičiui teko vis didesnis mokesčių mokėtojų skaičius. vertinant lietuvos mokesčių sistemą j. gill metodu, iškilo duomenų surinkimo (neprieinamumo) problema. analizuojamu 2002–2006 m. periodu lietuvoje vyko esminės mokesčių sistemos permainos: įsigaliojo nauji mokesčių įstatymai, naujai apibrėžę mokesčio objektus, mokėtojus, tarifus, lengvatas, keistos pelno, gyventojų pajamų, pridėtinės vertės, akcizų, žemės ir kitų mokesčių bei privalomų įmokų įstatymų nuostatos, sukurtos ir tobulinamos mokesčių administravimo sistemos, mokesčių mokėtojų registrai (juridinių asmenų, gyventojų). esant tokiai naujovių gausai, duomenų surinkimas tampa sudėtingesniu, o kai kuriais atvejais duomenys apskritai nesurenkami. dėl minėtos problemos nepavyko išanalizuoti 5 kiekybinių rodiklių iš 22. j. gill metodas tobulintinas tokiomis kryptimis: a) absoliutinius rodiklius keičiant į santykinius. absoliutiniai rodikliai paprastai tinka tik konkrečios valstybės rodiklių dinamikai nagrinėti. be to, tokius rodiklius sudėtinga lyginti ir atskleisti reiškinio ar proceso kitimo priežastis. santykiniai rodikliai – palyginami, sudaro galimybę įvertinti reiškinio (proceso) įtaką analizuojamai aplinkai. pavyzdžiui, mokesčių mokėtojų skaičius absoliutine išraiška mažai informatyvus, tačiau tas pats mokesčių mokėtojų skaičius, tenkantis gyventojams ar veikiantiems ūkio subjektams, atskleistų mokesčių mokėtojų tankumą, būtų lengvai palyginamas su kitose valstybėse apskaičiuotu analogišku rodikliu; b) apibrėžiant rodiklių apskaičiavimo principus. nustatyti rodiklių apskaičiavimo principai sudarytų verslas, vadyba ir studijos 2009 183 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a prielaidas vienareikšmiškai situacijos analizei ir vertinimui; c) nustatant rodiklių kitimo ribas. apibrėžus rodiklių kitimo ribas, situacijos vertinimas būtų standartizuotas, o lyginimas su kitų valstybių mokesčių sistemomis – paprastesnis. literatūra arslan, ö.; karan, m. b. 2009. credit risks and internationalization of smes, journal of business economics and management 10(4): 361–368. gill, j. 2000. a diagnostic framework for revenue administration, world bank technical paper 472: 53. gryko, j. m.; kluzek, m. 2008. the influence of the tax factor on 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simon. london: routledge. 424 p. valstybinės mokesčių inspekcijos įvaizdžio tyrimas. 2004. lietuvos įmonių apklausa. „vilmorus“ tyrimo medžiaga. vmi prie lietuvos respublikos finansų ministerijos viršininko 2007 m. kovo 28 d. įsakymas nr. va-25 „dėl baudų skyrimo ir delspinigių skaičiavimo metodikos patvirtinimo“. 2007a, valstybės žinios 38–1433. vmi prie lietuvos respublikos finansų ministerijos viršininko 2007 m. spalio 9 d. įsakymas nr. va66 „dėl konsultacijų ir atsakymų į paklausimus teikimo valstybinėje mokesčių inspekcijoje taisyklių patvirtinimo“. 2007b, valstybės žinios 106–4364. vitek, l.; pavel, j.; krbova, j. 2004. effectiveness of the czech tax system, baltic journal of economics 2: 55–71. eвланов, л. г.; кутузов, в. а. 1978. экспертные оценки в управлении. москва: экономика. 133 c. бешелев, с. д.; гурвич, ф. г. 1980. математико-статистические методы экспертных оценок. москва: статистика. 263 c. 184 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a estimation of the lithuanian tax system according to j. gill‘s diagnostic indices i. skačkauskienė summary theorists and practicians have various solutions on offer for estimating and improving the tax system. however, the tax system is a complicated combination, which calls for a systematic attitude and combined evaluation. in a specialized literature there can be found various offers of methodical nature for estimating tax systems, however, only few of the authors examine the tax system in a combined (complex) way. one of such authors is j. gill. the aim of this examination is to evaluate the lithuanian tax system by making use of j. gill‘s diagnostic indices as well as to prove the suitability of the method for such a task. the tax system – by making use of j. gill‘s method – has been evaluated, basing on the collection of revenues, under three aspects: natural qualities of tax system, efficiency and productivity. the qualitative and quantitative empiric examination disclosed merits and shortcomings of the lithuanian tax system, and – with some exceptions – had proved the suitability of the method for evaluating tax systems. in the article there are also suggestions for improving of j. gill‘s method. keywords: tax, indices, evaluation, method. verslas, vadyba ir studijos 2009 271 įm o n ių e k o n o m ik a ir v a d yb a darbo rinka lietuvoje: moterų ir vyrų padėtis jūratė guščinskienė jurate.guscinskiene@ktu.lt kauno technologijos universitetas, sociologijos katedra jadvyga čiburienė jadvyga.ciburiene@ktu.lt kauno technologijos universitetas, ekonomikos ir tarptautinės prekybos katedra 1. įvadas reguliuojant europos sąjungos (es) plėtros tolesnę ekonominę politiką daugiausia dėmesio skiriama darbo rinkai ir pirmiausia – moterų ir vyrų lygioms galimybėms joje. lyčių lygybė, taip pat ir darbo rinkoje, nusako principą, kuriuo vadovaujantis skirtingas moterų bei vyrų elgesys, siekiai, poreikiai ir rezultatai yra lygiaverčiai ir neskatina nelygybės. straipsnyje atskleidžiama, kad lyčių lygybė šiandieninėmis sąlygomis tiek visuomeniniame gyvenime, tiek politikoje ir ekonomikoje tampa politikos prioritetu. tyrimo problema. globalizacijos ir europinės ekonominės integracijos procesai skatina ekonomikos plėtrą, o tai tiesiogiai susiję su darbo rinka. ekonomikos atvirumo didėjimas lemia visų ūkio veiklos rūšių, tarp jų ir darbo jėgos, judumą, ypač tuomet, kai nepatenkinami darbuotojų lūkesčiai turėti lygias darbo užmokesčio, darbo sąlygų, lanksčių darbo organizavimo formų taikymo ir pan. galimybes. straipsnio tikslas – išanalizuoti moterų ir vyrų padėtį lietuvos darbo rinkoje. tyrimo uždaviniai: charakterizuoti moterų ir vyrų galimybių situaciją darbo rinkoje ir jos reguliavimą, apibūdinti lygių galimybių esmę rinkos ekonomikos sąlygomis, ištirti respondentų požiūrį į moterų ir vyrų padėtį darbo rinkoje. © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai 272 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a tyrimo metodai: mokslinės literatūros, dokumentų ir statistinių duomenų analizė, anketinė apklausa. moterų ir vyrų lygybės problemas mokslinėje literatūroje analizuoja įvairių sričių specialistai – psichologai, sociologai, ekonomistai ir kt. ekonominę diskriminacijos analizę išsamiai atliko g. s. becker (jav, čikagos universitetas), 1992 m. už šiuos tyrimus įvertintas nobelio ekonomikos premija. diskriminacija vertinama kaip pajamų skirtumai, nulemti individų asmeninių savybių skirtumų, nesusijusių su gebėjimais (samuelson, nordhaus 1985), kaip nelygūs santykiai su lygiais, vertinant asmenines darbuotojo savybes, nesusijusias su darbine veikla. šios savybės yra lytis, tautybė, tikėjimas ir pan. užsienio autoriai, pavyzdžiui, d. sainsbury (1996 m.), charakterizavo moterų ir vyrų socialines teises; lyčių klausimus gerovės ekonomikos valstybėje tyrė j. bussemaker ir k. van kersberger (1996 m.), m. daly ir k. rake (2003 m.), d. sainsbury (2003 m.); amžiaus ir lyties įtaką socialinei atskirčiai, lyties ir ilgojo laikotarpio nedarbo klausimus (aktyvumo lygį darbo rinkoje, skurdo riziką) analizavo c. fagan, p. urwin ir k. melling; vyrų ir moterų darbo problemas gvildeno a. lee (2007 m.). lyčių lygių galimybių problema yra aktuali ir lietuvoje, todėl tiriami įvairūs jos aspektai. pavyzdžiui, demografinių veiksnių įtaką verslininkystės ir nedarbo tarpusavio sąveikai analizuoja g. startienė ir r. remeikienė (2009); lygių galimybių strategijos problemas gvildena j. reingardienė; darbo rinkos segmentacijos klausimus tyrinėja b. martinkus, s. stoškus ir d. beržinskienė (2009). ekonominėje analizėje atsispindi šiandieninės aktualios problemos: naujus lygių galimybių principo realizavimo iššūkius charakterizuoja b. melnikas (2007); lyčių asimetrijos grėsmę įsisavinant es struktūrinių fondų lėšas akcentuoja o. g. rakauskienė, r. chvilickas (2007), kvalifikuotos darbo jėgos pasiūlos, įgyvendinant lisabonos strategiją ir siekiant subalansuotos ekonomikos plėtros, svarbą nagrinėja r. tamošiūnienė, s. šidlauskas ir i. trumpaitė (2007), lyčių ekonomikos metodologinius požiūrius gvildena v. grybaitė (2005), lyčių nelygybės ir profesinės segregacijos aspektus tiria r. brazienė (2005), moterų padėtį lietuvos visuomenėje – g. purvaneckienė ir a. purvaneckas (2001), vertikalią ir horizontalią veiklos segregaciją pagal lytį darbo rinkoje – r. brazienė ir j. guščinskienė (brazienė et al. 2008) ir t. t. darbo rinkos struktūros pokyčius analizavo j. čiburienė ir j. guščinskienė (2008), g. startienė ir r. remeikienė (startiene, remeikiene 2008). ūkio subjektų veikla, kaip teigia z. lydeka (2001), o. g. rakauskienė (2006) ir kt., ekonominėje sistemoje neatsiejama nuo pačios sistemos ir yra jos dalis. verslas, vadyba ir studijos 2009 273 įm o n ių e k o n o m ik a ir v a d yb a 2. užimtumo kitimo tendencijos ir jo reguliavimas šiuolaikinėmis sąlygomis 2004 m. europos komisija (ek) patvirtino, kad ekonominis ūkinės sistemos plėtros aspektas ypač svarbus, palyginti su socialiniu ir aplinkosauginiu aspektais, todėl darbo rinkos ir užimtumo problemų (visiško užimtumo, darbo kokybės ir našumo) sprendimas yra viena pagrindinių lisabonos strategijos (2000 m.), siekiančios suaktyvinti es ekonominį augimą ir suteikti naują impulsą jos konkurencingumui pasauliniu mastu didinti, įgyvendinimo priemonių. darbo rinkos, taip pat ir užimtumo, problemos vertinamos kaip bendrų es šalių interesų sritis. kita vertus, nors kiekviena es šalis narė yra pati atsakinga už savo vykdomą politiką, tačiau turi atitikti bendrą es strategiją. užimtumas kiekvienoje šalyje glaudžiai susijęs su šalies darbo ištekliais ir šalies plėtros ypatybėmis (ūkio restruktūrizacija, privatizacija ir pan.). vienas iš mažai analizuotų darbo išteklių veiksnių, darančių įtaką situacijai darbo rinkoje, – lyčių lygios galimybės. 2008 m. kovą europos vadovų taryba (evt) pradėjo naują 3 metų (2008– 2010 m.) lisabonos strategijos įgyvendinimo etapą, kurio esmę apibūdina spartesnis reformų, siekiant es ekonomikos augimo ir konkurencingumo didinimo, vykdymas. atitinkamai lietuvos respublikos vyriausybė (penkioliktosios ... 2008) patvirtino nacionalinės lisabonos strategijos vykdymo 2008–2010 m. programą, kurioje išskirti ekonomikos augimo ir užimtumo skatinimo uždaviniai ir priemonės jiems įgyvendinti. iškelti šie strateginiai tikslai: įveikti neigiamus struktūrinės ūkio reformos ir išorės poveikio padarinius gyventojų užimtumui ir darbo rinkai; didinti gyventojų užimtumą, mažinti nedarbą ir subalansuoti darbo rinką; pasirengti prisidėti prie es užimtumo strategijos koordinavimo. svarbus dėmesys skiriamas įvairiems moterų ir vyrų lygių galimybių darbo rinkoje aspektams (1 lentelė). 1 lentelė. moterų ir vyrų lygių galimybių politikos aspektai (medaiskis et al. 2002) table 1. the policy of women and men equal opportunities (medaiskis et al. 2002) lygių galimybių politikos aspektai charakteristika lygių galimybių įgyvendinimo sritys horizontaliai įgyvendinama visose ūkinės veiklos ir politikos srityse sąlygų sudarymas teisinių, socialinių ir ekonominių sąlygų lygioms galimybėms įgyvendinti sudarymas lygių galimybių politikos aspektai pagal moterų gyvenamąją vietą miestas, kaimas lygių galimybių politikos aspektai pagal moterų amžiaus grupes jaunuolės (mergaitės), jaunos moterys, brandaus amžiaus moterys 274 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a siekiant sudaryti lygias moterų ir vyrų galimybes darbo rinkoje ypač svarbu (medaiskis et al. 2002): užtikrinti, kad aktyvios darbo rinkos politikos priemonės būtų prieinamos moterims, atsižvelgiant į jų šeimyninę padėtį; siekti, kad moterys ir vyrai vienodai dalyvautų ekonominėje veikloje; įgyvendinti vienodo darbo apmokėjimo už tą patį ar tos pačios vertės darbą principą; sudaryti sąlygas moterims savanoriškai naudotis lanksčiomis darbo organizavimo formomis, kad nenukentėtų jų užimtumo kokybė; sudaryti palankias sąlygas tobulinti kvalifikacijai, dalyvauti profesinio rengimo programose, naudotis nuolatinio mokymosi sistemos teikiamomis galimybėmis, lavinti įgūdžiams informacinių technologijų, vadybos, kalbų bei kitų pagrindinių žinių ir gebėjimų srityse. finansinės ekonominės krizės metu, 2009 m., ypač aktualios buvo šios problemos (metinė ... 2009): mažėjant vartojimo ir paslaugų poreikiui darbdaviams buvo sunku išlaikyti – esamas darbo vietas, mažėjo laisvų darbo vietų skaičius, nes naujų darbo vietų buvo sukuriama žymiai mažiau negu jų likviduojama; darbo rinkoje susiformavo darbo pasiūlos perteklius; – sumažėjo jaunimo ir kitų socialinės rizikos asmenų, tarp jų jaunų ir vyresnio – amžiaus moterų, įsidarbinimo galimybės. 2 lentelė. lisabonos strategijos užimtumo politikos uždavinių įgyvendinimo vertinimo rodikliai, % (metinė ... 2009) table 2. employment policy objectives of the lisbon strategy implementation indicators, % (metinė ... 2009) rodiklis 2007 m. 2008 m. 2009 m.ii ketv. lietuvoje tikslas 2010 m. es-27 vidurkis 2008 m. 15–64 metų gyventojų užimtumo lygis 64,9 64,3 60,3 68,8 65,9 15–64 metų moterų užimtumo lygis 62,2 61,8 60,4 63,5 59,1 15–24 metų gyventojų užimtumo lygis 25,2 26,7 21,9 30,0 37,6 55–64 metų gyventojų užimtumo lygis 53,4 53,1 52,7 54,5 45,6 55–64 metų moterų užimtumo lygis 47,9 47,7 48,3 48,0 36,9 15–64 metų gyventojų aktyvumo lygis 67,9 68,4 70,0 70,0 70,9 15–64 metų moterų aktyvumo lygis 65,0 65,5 67,5 66,0 63,9 verslas, vadyba ir studijos 2009 275 įm o n ių e k o n o m ik a ir v a d yb a 2 lentelėje pateikti lisabonos strategijos užimtumo politikos uždavinių įgyvendinimo vertinimo rodikliai rodo, kad 15–64 metų gyventojų užimtumo lygis 2009 m. ii ketv., palyginti su 2007 m., sumažėjo nuo 64,9 % iki 30,3 %. moterų užimtumo lygis tuo pačiu laikotarpiu sumažėjo nuo 62,2 % iki 60,4 %, nors išliko aukštesnis negu es-27 vidurkis 2008 m. 15–64 metų gyventojų aktyvumo lygis nuo 2007 m. didėjo ir pasiekė 70 % lygį 2008 m., tačiau atsiliko nuo es-27 vidurkio 2008 m., kuris siekė 70,9 %. 15–64 metų moterų aktyvumo lygis lietuvoje 2008 m. buvo 67,5 % ir viršijo es-27 vidurkį 2008 m., kuris buvo 63,9 %. dabar, finansinės ekonominės krizės sąlygomis, svarbiausi darbo rinkoje sprendžiami užimtumo politikos uždaviniai yra šie: užimtumo situacijos darbo rinkoje stabilizavimas; – įsidarbinimo galimybių, siekiant užtikrinti atleistų darbuotojų reintegraciją – į darbo rinką ir išvengti ilgalaikio nedarbo, paieška. lietuvoje, palyginti su es, tik labai nedidelė darbuotojų dalis dirba ne visą darbo laiką, todėl ypač rekomenduojamas lanksčių darbo organizavimo formų taikymas (darbas ne visą darbo dieną, terminuotas darbas, nuotolinis darbas ir pan.) (penkioliktosios ... 2008). pasaulinė praktika rodo, kad svarbios priemonės, užtikrinančios efektyvesnį migracijos ir emigracijos procesų valdymą bei siekimą susigrąžinti bent dalį emigravusių šalies gyventojų. kita vertus, svarbios ir ekonominės paskatos vyresnio amžiaus gyventojams, ypač moterims, ilgiau likti darbo rinkoje – tai mažintų darbo jėgos paklausą iš trečiųjų šalių. 3. lygių galimybių esmė rinkos sąlygomis darbo rinkoje iškylančios moterų ir vyrų padėties problemos siejamos su visuomenėje nusistovėjusiais stereotipais, moterų diskriminacija ir pan. akivaizdu, kad reikalingas išsamus darbo rinkos pokyčių tyrimas ir vertinimas. lyčių lygybė šiandieninėmis sąlygomis tiek gyvenime, visuomenėje, tiek politikoje ir ekonomikoje, įskaitant verslą, tampa politikos prioritetu. moterys sudaro daugiau negu pusę pasaulio, ir lietuvos, gyventojų (51,3 %). todėl, nepanaudojant jų gebėjimų ir talentų, nuostoliai yra didžiuliai. ekonomika laimi mažinant apribojimus moterims įsijungti į darbo rinką. apskaičiuota, kad azijos ir ramiojo vandenyno regiono šalys dėl moterų darbo galimybių nepanaudojimo kiekvienais metais patiria 42–46 mln. usd nuostolių (hausman et al. 2007: 20). pasaulio banko vertinimais, vidurio ir rytų europos šalys taip pat patiria didelius nuostolius, nes tik trečdalis moterų įsijungusios į darbo rinką. charakterizuojant vyrų ir moterų 276 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a galimybes darbo rinkoje būtina atkreipti dėmesį į lyčių vaidmens (stereotipų) koncepciją, kuri, viena vertus, apima: 1) racionalaus išteklių naudojimo ir jų kontrolės klausimus; 2) dalyvavimo gamybos ir reprodukcijos procesuose bei jų skatinimo problemas ir 3) pareigų pasiskirstymo namų ūkių veikloje klausimus, tačiau dažniausiai ji apsiriboja namų ūkių veiklos analize (rakauskienė 2006). asimetriškumo principas, ekonominių galimybių darbo rinkoje požiūriu vertinant vyrų ir moterų galimybes, ryškus, tradiciškai nusistovėjęs vyro vadovo, verslininko stereotipas. kita vertus, g. startienė ir r. remeikienė (2008) teigia, kad lyčių skirtumai pradedant ir plėtojant verslą yra globalinė problema, nes lygios galimybės nėra iki galo įgyvendintos nei lietuvoje, nei daugelyje kitų šalių. tai rodo, kad stereotipai apie moterų vaidmenį įsitvirtinę ne tik šeimoje, bet ir darbo rinkoje, ypač saviužimtumo srityje. pavyzdžiui, dažniausiai moterų smulkaus ir vidutinio verslo (svv) tiek pradžiai, tiek plėtrai reikalinga parama, kurios viena pagrindinių formų yra valstybinė parama (ginevicius et al. 2008). mokslinėje literatūroje (adamonienė, trifonova 2007) nurodoma, kad net 15 % svv niekada nesinaudojo valstybine parama. lietuvos darbo rinkai būdingas susiskirstymas į vyriškus ir moteriškus darbus: moterys dominuoja aptarnavimo, socialinių paslaugų (švietimo, sveikatos apsaugos ir kt.) sferose, vyrai – industriniame sektoriuje (statyboje, transporte, kai kuriose pramonės šakose). nors moterų daugiau valstybiniame sektoriuje (švietimo, sveikatos priežiūros ir kt. veikloje), tačiau šios lyginamosios dalies mažėjimas rodo, kad jos vis sparčiau žengia į „vyriškąsias“ veiklos sritis, tokias kaip finansinis tarpininkavimas, elektros, dujų ir vandens tiekimas ir kt. r. brazienė, j. guščinskienė ir m. jankauskaitė (brazienė et al. 2008), analizuodamos paskutiniųjų 10 metų moterų ir vyrų užimtumo duomenis pagal ekonomines veiklos rūšis, nustatė, kad faktiškai išliko tokio pat lygmens ar net pagilėjo horizontali darbo rinkos segregacija. pagrindine moterų veiklos sritimi išlieka sveikatos priežiūra ir socialinis darbas (2007 m. jos sudarė 85,5 %, 2002 m. – 85,1 %, 1998 m. – 82,3 %) bei švietimas (2007 m. moterys sudarė 81,9 %, 2002 m. – 78,6 %, 1998 m. – 76,2 %). kasybos, elektros, dujų ir vandens tiekimo, statybos, transporto ir sandėliavimo bei ryšių veiklos srityse daugumą darbuotojų sudaro vyrai. moterys sudaro daugiau nei 67 % valstybinio sektoriaus darbuotojų. lėtesnės privataus sektoriaus feminizacijos priežastys susijusios su tuo, kad vadinamosios „moteriškosios“ ūkio šakos (švietimas, sveikata ir pan.) išlieka valstybinio sektoriaus dalimi, o „vyriškosios“ ūkio šakos, vykdant ūkio restruktūrizaciją, privatizuojamos. vienas pagrindinių lyčių nelygybės aspektų verslas, vadyba ir studijos 2009 277 įm o n ių e k o n o m ik a ir v a d yb a yra profesinė lyčių segregacija, lemianti vyrų ir moterų atlyginimų skirtumą, veikianti individų karjerą ir lyčių nelygybę. lyčių segregacija ypač reiškiasi rinkos ekonomikos sąlygomis. horizontali darbo rinkos segregacija formuoja nemažus moterų ir vyrų atlyginimų skirtumus, parodytus 3 lentelėje. 3 lentelė. vidutinis mėnesinis bruto darbo užmokestis pagal ekonomikos sektorius, lt* (statistikos departamento duomenys) table 3. average monthly gross earnings by economic sectors, lt* (data from department of statistics) metai šalies ūkis valstybės sektorius privatus sektorius moterys vyrai moterys vyrai moterys vyrai 2000 956 1170 980 1272 918 1087 2005 1230 1493 1290 1654 1168 1421 2006 1432 1743 1510 1913 1356 1677 2007 1677 2115 1740 2193 1621 2087 *be individualių įmonių. 3 lentelės duomenys rodo, kad nuo 2000 m. didėja atotrūkis tarp vyrų ir moterų vidutinio mėnesinio darbo užmokesčio. moterų vidutinis mėnesinis bruto darbo užmokestis 2006 m. šalies ūkyje buvo 17,9 % mažesnis negu vyrų, sudarė 1431,8 lt ir, palyginti su 2005 m., padidėjo 16,4 %; valstybės sektoriuje – 1509,8 lt ir, palyginti su 2005 m., padidėjo 17,1 %, o privačiame sektoriuje – 1356,4 lt ir buvo 16,2 % didesnis negu 2005 m. vyrų vidutinis mėnesinis bruto darbo užmokestis šalies ūkyje 2006 m. sudarė 1743,3 lt ir, palyginti su 2005 m., padidėjo 16,8 %. privačiame sektoriuje vidutinio moterų ir vyrų atlyginimo skirtumas sudarė 19,1 %, o valstybiniame sektoriuje – 22,1 %. didžiausias skirtumas 2006 m. buvo finansinio tarpininkavimo srityje (vyrų – 4502 lt, moterų – 2618 lt) ir sudarė 41,8 %. šie duomenys rodo, kad vyrų vidutinis darbo užmokestis yra ne tik didesnis už moterų, bet ir didėja sparčiau. r. brazienės, j. guščinskienės ir m. jankauskaitės (brazienė et al. 2008) atliktas tyrimas rodo, kad kai kuriose srityse moterų vidutinis mėnesinis darbo užmokestis yra mažesnis daugiau nei minimalus darbo užmokesčio dydis už vyrų vidutinį mėnesinį darbo užmokestį ir kad lietuvoje nėra nei vienos, net ir stipriai feminizuotos, ekonominės veiklos srities, kur moterys ir vyrai turėtų vienodas galimybes. išskiriamos šios tendencijos (brazienė et al. 2008): visose ūkio šakose moterys 278 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a uždirba mažiau nei vyrai; dažniausiai atlyginimai yra didesni tose ūkio šakose, kur daugumą darbuotojų sudaro vyrai; aukščiausi atlyginimai yra finansinio tarpininkavimo srityje. ypač didelis skirtumas tarp vyrų ir moterų atlyginimų yra dėl to, kad moterys atlieka menkai apmokamas technines užduotis, o vyrai – gerai apmokamą ekspertinį darbą. pasak r. brazienės (2005), rinkos ekonomikos ir privatizacijos plėtra iš esmės pakeitė profesinę lyčių segregaciją lietuvoje. profesinės segregacijos lygis čia yra daug aukštesnis nei daugelyje išsivysčiusių vakarų šalių, bet panašus kaip rusijoje ir kitose rytų ir vidurio europos šalyse. profesinės segregacijos lygis aukščiausias rusijoje (47 %), lenkijoje (45 %), ukrainoje (39 %), vengrijoje (37 %) bei kazachstane (34 %). g. purvaneckienės (purvaneckienė, purvaneckas 2001) teigimu, lietuvos moterų dalyvavimą darbo rinkoje dažnai lemia tradiciniu požiūriu į moterų ir vyrų vaidmenis šeimoje ir visuomenėje grindžiama darbdavių elgsena. iš atlikto tyrimo paaiškėjo, kad vyksta konkurencija profesinės veiklos srityje dėl darbo vietų, pareigų, atlyginimų ir pan. socialiniai bei demografiniai veiksniai (lytis, amžius, šeimyninė padėtis ir vaidmenys joje) dažnai neatrodo akivaizdūs, matomi, tačiau iš tikrųjų yra labai svarbūs. išnagrinėjus moterų ir vyrų padėtį darbo rinkoje, galima teigti, kad vyrų galimybės darbo rinkoje dėl įvairių priežasčių yra geresnės. nepaisant aukštesnio moterų išsilavinimo, vyrai greičiau kyla profesinės karjeros laiptais, užima aukštesnes pareigas ir gauna didesnius atlyginimus. iki šių dienų išlikęs stereotipinis požiūris į moters vaidmenį šeimoje, kuris trukdo moterims integruotis į darbo rinką. 4. tyrimo metodika ir jo rezultatų aptarimas siekiant išsiaiškinti moterų ir vyrų padėtį darbo rinkoje buvo atliktas tyrimas, kuriame dalyvavo 103 respondentai, užpildę jiems pateiktus klausimynus. tiriamųjų imtį sudarė įvairių kauno miesto organizacijų esami ir buvę darbuotojai bei atsitiktiniai, gatvėje sutikti, žmonės. tyrimas buvo atliktas 2009 m. gegužės mėnesį. socialinė demografinė respondentų charakteristika: tyrime dalyvavo 103 respondentai, kurių amžius – 22–65 metai, 55,3 % moterų, 44,7 % vyrų (1, 2 pav.). tiriamųjų pasiskirstymas pagal išsimokslinimą: 41,3 % moterų turėjo aukštąjį, 17,4 % – aukštesnįjį, 8,7 % – nebaigtą aukštąjį, 13,0 % – vidurinį su profesiniu mokymu, 4,3 % – vidurinį, 6,5 % – pagrindinį su profesiniu mokymu ir 2,2 % – pagrindinį išsilavinimą. verslas, vadyba ir studijos 2009 279 įm o n ių e k o n o m ik a ir v a d yb a 7,8 % 1,9 % 1,0 % 31,1 % 12,6 % 45,6 % vedę (ištekėjusios) nevedę (netekėjusios) išsiskyrę (išsiskyrsios) gyvena nesusituokę našliai (našlės) kita 1 pav. tiriamųjų pasiskirstymas pagal šeimyninę padėtį fig. 1. the distribution of questioned people by marital status 23,1 % 9,0 % 11,5 % 56,4 % 0 10 20 30 40 50 60 privačiame sektoriuje valstybiniame sektoriuje turi nuosavą verslą kita kita turi nuosavą verslą valstybiniame sektoriuje privačiame sektoriuje 2 pav. dirbančių tiriamųjų pasiskirstymas pagal tai, kokiame sektoriuje dirba fig. 2. the distribution of questioned employed persons according to their dependance to the sector of their activity analizuojant moterų ir vyrų padėtį darbo rinkoje (4 lentelė), buvo klausiama darbuotojų nuomonės, dėl ko jie neteko darbo paskutinėje darbovietėje. 28,1 % apklaustų moterų nurodė, kad jų netenkino darbo sąlygos. šią priežastį nurodė mažiau vyrų – 26,1 %. 280 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a 4 lentelė. moterų ir vyrų atsakymų į klausimą „jūsų nuomone, dėl ko jūs netekote darbo paskutinėje darbovietėje?“ pasiskirstymas table 4. the distribution of women and men by answer to the question: “according to your opinion, why have you lost a job in your last work place?” respondentų nurodytos priežastys moterys (n) vyrai (n) netenkino darbo sąlygos (atlyginimas ir pan.) 28,1 % (16) 26,1 % (12) įmonės restruktūrizavimas 1,8 % (1) 8,7 % (4) įmonės bankrotas 10,5 % (6) 23,9 % (11) sveikatos problemos 5,3 % (3) 2,2 % (1) vaikų ir ligonių priežiūra 5,3 % (3) 0,0 % (0) neteko susidurti su tokia problema 42,1 % (24) 26,1 % (12) kita (reikėjo įrašyti savo nuomonę) 7,1 % (4) 13,0 % (6) iš viso 100,0 % (57) 100,0 % (46) tiriant respondentų nuomonę apie jų padėtį darbo rinkoje (5 lentelė), buvo klausiama darbuotojų nuomonės apie jų pastebėtus dažniausius nelygybės (diskriminacijos) atvejus. apklaustos moterys nurodė, kad svarbiausia nelygybės forma yra diskriminacija dėl lyties (61,4 %), vyrai taip pat įvardijo lyties problemą, tik jos svarba, jų vertinimu, yra menkesnė (32,6 %). 5 lentelė. moterų ir vyrų atsakymų į klausimą „jūsų nuomone, kokie lietuvoje dažniausi nelygybės (diskriminacijos) atvejai?“ pasiskirstymas table 5. the distribution of women’s and men’s responses to the question: “what do you consider to be the most common cases of inequality?” in lithuania moterų nurodytos nelygybės formos pagal svarbą (n) vyrų nurodytos nelygybės formos pagal svarbą (n) lyties 61,4 % (35) lyties 32,6 % (15) amžiaus 19,3 % (11) negalios 21,7 % (10) seksualinės orientacijos 7,3 % (4) amžiaus 19,6 % (9) rasės (tautybės) 5,3 % (3) seksualinės orientacijos 19,6 % (9) negalios 5,3 % (3) rasės (tautybės) 6,5 % (3) religijos 0,0 % religijos 0,0 % iš viso 100 % (57) iš viso 100,0 % (46) verslas, vadyba ir studijos 2009 281 įm o n ių e k o n o m ik a ir v a d yb a apibendrinant atsakymus į klausimą „ar jūs asmeniškai buvote susidū ręs (-usi) su nelygybės (diskriminacijos) atveju darbo rinkoje dėl lyties?“ (6 lentelė), 19,3 % moterų ir 19,6 % vyrų nurodė, kad susidūrė su šia problema. 6 lentelė. moterų ir vyrų atsakymų į klausimą „ar jūs asmeniškai buvote susidūręs (-usi) su nelygybės (diskriminacijos) atveju darbo rinkoje dėl lyties?“ palyginimas table 6. the distribution of women’s and men’s responses to the question: “have you personally been confronted with inequality (discrimination) cases based on sex in employment?” atsakymai moterys (n) vyrai (n) iš viso (n) taip 19,3 % (11) 19,6 % (9) 19,4 % (20) ne 80,7 % (46) 80,4 % (37) 80,6 % (83) iš viso 100,0 % (57) 100,0 % (46) 100,0 % (103) apklaustos privačiame sektoriuje dirbančios moterys dažniau (63,6 %) negu dirbančios valstybiniame sektoriuje (18,21 %) nurodė, kad buvo susidūrusios su nelygybės (diskriminacijos) dėl lyties atveju darbo rinkoje. apklausti dirbantys tuose pačiuose sektoriuose vyrai nurodė, kad buvo susidūrę su šia nelygybės forma, atitinkamai 44,5 % ir 33,3 %. taigi privačiame sektoriuje dirbančios moterys dažniau susidūrė su nelygybės dėl lyties forma negu vyrai. tačiau šią formą moterys ir vyrai patiria tiek valstybiniame sektoriuje, tiek turintys savo verslą ar dirbantys savarankiškai (7 lentelė). 7 lentelė. moterų ir vyrų atsakymų į klausimą „ar jūs asmeniškai buvote susidūręs (-usi) su nelygybės (diskriminacijos) dėl lyties atveju darbo rinkoje“ palyginimas pagal veiklos sektorius table 7. the distribution of women’s and men’s responses to the question: “have you personally been confronted (busy) with inequality (discrimination) cases based on sex in employment?” sektorius moterys, (n) vyrai, (n) valstybės sektorius 18,2 % (2) 33,3 % (1) privatus sektorius 63,6 % (7) 44,5 % (2) savo verslas 9,0 % (1) 22,2 % (1) kita (įrašyti) 9,0 % (1) 0 iš viso 100,0 % (11) 100,0 % (9) 282 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a 5. išvados darbo rinkos, taip pat ir užimtumo pagal lytį problemos vertinamos kaip bendrų es šalių interesų sritis, todėl lietuvai įstojus į europos sąjungą nuolat derinami teisiniai dokumentai, susiję su moterų ir vyrų lygiomis galimybėmis darbo rinkoje. dažniausiai išskiriami moterų diskriminacijos tipai darbo rinkoje pasireiškia tuo, jog moterys dirba mažiau prestižinėse darbo vietose, jų darbo užmokestis už tą patį darbą yra mažesnis. šiame procese, anot tyrinėtojų, neigiamą įtaką daro šalyje vis dar gajūs lyčių stereotipai. 2008 m. atlikto empirinio žvalgomojo tyrimo rezultatai rodo, jog tyrime dalyvavę respondentai – įvairių kauno miesto organizacijų esami ir buvę darbuotojai bei atsitiktiniai gatvėje sutikti žmonės. apklaustos darbo netekę moterys ir vyrai nurodė jo praradimo priežastis. atlikto tyrimo rezultatai rodo, kad 42 % moterų ir 26 % vyrų nebuvo praradę darbo, o darbo netekę respondentai nurodo priežastis: dėl netinkamų darbo sąlygų (28,1 % moterų ir 26,1 % vyrų ) ir dėl įmonės bankroto (10,5 % moterų ir 23,9 % vyrų). moterų ir vyrų nuomonė apie nelygybės (diskriminacijos) patirtį skiriasi. anot tyrime dalyvavusių moterų, lietuvoje dažniausiai patiriama diskriminacija dėl lyties (61,4 %) ir amžiaus (19,3 %). vyrai mano, kad šalyje dažniausiai diskriminuojama dėl lyties (32,6 %), negalios (21,7 %) ir amžiaus (19,6%). 19 % respondentų yra patys asmeniškai patyrę diskriminaciją. analizuojant atlikto tyrimo rezultatus buvo pastebėta, kad privačiame sektoriuje dažniau negu valstybiniame susiduriama su nelygybe darbo rinkoje dėl lyties. tai nurodė 63,6 % moterų ir 44,5 % vyrų. literatūra adamoniene, r.; trifonova, j. 2007. the state support for small and medium sized companies: general and practical aspects of lithuania, inzinerine ekonomika – engineering economics (1): 16–21. brazienė, r. 2005. socialinės stratifikacijos skaitiniai. kaunas: ktu. 80 p. brazienė, r.; guščinskienė, j.; jankauskaitė, m.; pečiūrienė, j.; purvaneckienė, g.; 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w. 1985. economics. new york: mcgraw-hill. startiene, g.; remeikiene, r. 2008. gender gap in entrepreneurship, inzinerine ekonomika – engineering economics (5): 95–103. startienė, g., remeikienė, r. 2009. the influence of demographical factors on the interaction between entrepreneurship and unemployment, inzinerine ekonomika – engineering economics (4): 60–71. tamošiūnienė r.; šidlauskas, s.; trumpaitė, i. 2007. eu structural support and its impact on lithuania‘s progress, journal of business economics and management 8(3): 177–187. 284 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a labour market in lithuania: gender situation j. guščinskienė, j. čiburienė summary the article analyses the situation of men and women in the labour market in the globalization and economic integration into the european union conditions and demonstrates that gender equality under the current conditions and social life, politics and economy is becoming a political priority. the aim of the paper is: to analyze the situation of men and women in the labour market and its regulation; to study the respondents’ view on the situation of men and women in the labour market. empirical study showed that 42% of women and 26% of men have never lost their jobs and the people who have, have mentioned several reasons for this. respondents, both women and men, generally lose work because of inadequate working conditions and the company’s bankruptcy. meanwhile, the response of men’s and women’s opinion on the inequality/discrimination experience is different. according to women, involved in the study, in lithuania they mostly experienced discrimination based on sex and age, while men consider to be most discriminated on grounds of sex, disability and age. almost one fifth of the respondents have personally experienced discrimination themselves in the labour market because of sex. keywords: labour market, equal opportunities, discrimination, employment, entrepreneurship. university reserves management: international practices and opportunities for lithuania gediminas černiauskas1, jusif seiranov2 mykolas romeris university, ateities g. 20, lt-08303 vilnius, lithuania e-mails: 1gcerniauskas@sec.lt; 2j.seiranov@mruni.eu (corresponding author) received 18 november 2010; accepted 15 january 2011 abstract. the article considers the new opportunities for university reserves management arising in the process of transition to non-profit institution model in lithuania. authors review historical background of university funding and significance of endowments. the role of endowments in leading usa and uk universities is analyzed. structural differences and common trends in the mix of public and private funding of higher education in different countries are showed. authors analyse the transition from budgetary to non-profit institution in higher education in lithuania since 2009 and suggest practical approach to university reserve creation, funds management and financial endowment build-up in the new institutional framework of higher education in lithuania. keywords: higher education economics and finances, university fund management, endowment, non-profit institutions. reference to this paper should be made as follows: černiauskas, g.; seiranov, j. 2011. university reserves management: international practices and opportunities for lithuania, business, management and education 9(2): 185–200. http://dx.doi.org/10.3846/bme.2011.13 jel classification: g320; h520; i220; i280. 1. introduction since the beginning of the global recession in 2008 the scenery of financial landscape has been radically changed. bankers became much more modest after banking institutions recorded billions and billions in losses and some begged government bureaucrats for the rescue. nice images of real estate developers gaining big moneys on cash borrowed from banks under “childish” assumption about permanently growing real estate prices lost charm. certain gloomy developments are unfolding on certain governments and public institutions which during boom years have developed no reserves for “rainy day”. the recession of 2008–2009 has highlighted the importance of sound economic fundamentals for private and public institutions alike. majority of forecasters do predict recovery in year 2011. the goal of the article is to look for recovery based opportunities what regards creation of solid background to assure less volatile future for public institutions in general and universities b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(2): 185–200 http://dx.doi.org/10.3846/bme.2011.13 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 186 g. černiauskas, j. seiranov. university reserves management: international practices… in particular. the authors are arguing that current conditions are right for at least lithuanian universities to start creation of financial reserves and real assets build-up with a purpose to mitigate future financial risks. the perception is that transformation of lithuanian universities from the form of “budgetary institutions” to the form of “non-profit institutions” provides legal grounds for creation and proper management of these reserves. the object of the study is the economics of higher education and university finance management. the objectives of the authors are to show valuable historical evidence in university’s finances, to analyse modern models of higher education funding, to reveal new opportunities for lithuanian universities. the structure of the article reflects these tasks. in the section 2 of the article authors shortly review the historical background of university funding from medieval period to modern times. section 3 considers different models of higher education finance: experience of leading universities shows major role of endowments in united states and united kingdom. profiles of public and private financing of higher education reveal structural differences throughout the world but together demonstrate common global trends. section 4 takes a closer look on developments in educational system of lithuania since 2009. authors consider the impact of transition from budgetary to non-profit institution in higher education and conclude that new financial framework allows universities to implement fund management, create financial reserves and start to build-up financial endowments. 2. university funding: historical evidence throughout the history there was understanding that education and higher education inter alia have the features of a public good and need privileged financing grounds compared to an ordinary commercial enterprise. since medieval time universities in europe were established within the framework of legal privileges provided by sovereigns and on financial foundations provided by endowments and donations of benefactors. the idea of close connection with state authority as well as benefactors lives on in the rhymes of gaudeamus igitur: vivat et respublica et qui illam regit. vivat nostra civitas, maecenatum caritas quae nos hic protegit. foundation of the first university in lithuania confirms the pattern. universitas vilnensis was established in 1579 on privilege provided by king of poland and grand duke of lithuania stephen batory. university professors were granted tax exemption. the founder and major benefactor of the university bishop valerijonas protasevičius made the principal endowment, including the houses, land and hostels for students. it is worth to mention that earlier bishop protasevičius acquired future university houses from mikalojus jasinskis for jesuit college, which preceded universitas vilnensis. jasinskis 187 business, management and education, 2011, 9(2): 185–200 sold property on conditions of restricted endowment, ensuring that they are purposed not for personal bishop’s use, but for science and education (vaišvilaitė 2006). government aid and privileges for universities lie not only in european tradition. the establishment of universities in united states is marked by kind of competition among the states driven by ambition to have state university of their own. throughout 19th century states were including provisions to found a university in their constitutions. financing was provided by land grants. congress supported this practice by morrill act in 1864 (stiglitz 1988: 381). in certain cases land grants could have miraculous consequences for university finances. thus in 1876 state of texas established permanent university fund for the future university of texas. initially 1 million acres of land were provided with later addition of 1 million acres more. the land seemed to be worthless for long, but texas oil fever pushed exploration. finally in 1923 santa rita well fountained with oil coming from 3000 feet depth. the incomes from oil extraction soon made university of texas one of the best endowed in the u.s. (utimco 2010). together with understanding that grants, privileges and public financing are extremely important for robust functioning of a university, academic institutions were developing various forms of inflows providing alternative sources to cover current and capital expenditures. alongside with traditional tuition fees, payment collection for campus services, incomes from publishing, incomes from land and real estate, commercial use of scientific research universities were paying increasing attention to proper management of cash flows and financial funds. classical example of such activity is john m. keynes’ career of a fund manager in king’s college of cambridge. in 1924 keynes, then already famous economist took responsibility to manage the money assets of king’s college. he decided to unite the funds of the college into one chest fund. at the start keynes followed rather aggressive speculative strategies with stock assets. though criticized by his more conservative fellows finally he managed to reach impressive results for the chest fund. starting from initial amount of £30000 in 1924 by the time of keynes’ death in 1946 the chest fund reached £380000 with annual compound rate of 12%. it is noteworthy that dividends on stocks were not reinvested and were used for financing the needs of the college, so the growth was a net capital accrual. the chest fund accrued more than 12 times and outperformed british market index, which fell during the same period by 15% depressed by shocks of great depression and world war ii (maynardkeynes.org 2010). during his life keynes changed his attitude turning from speculative to long-term investment strategy. his matured approach can be characterized as concentrated portfolio with balanced risks: careful selection of few investments, patience during turmoil, combination of opposed risks. the university fund management, initially based on benefactors’ initiative and personal authority of prominent fund managers nowadays is structured professional activity. 188 g. černiauskas, j. seiranov. university reserves management: international practices… 3. university funds in united states and united kingdom and global structural changes in higher education finance most of contemporary expertise what regards investment based co-financing of higher education is accumulated in anglo-saxon world. two us (yale and harvard) and one uk (oxford) universities had been chosen as examples. endowment will be used as a term of university linked investment funds. 3.1. us experience the specificity of the structure of major us universities assets is an enormous amount of recourses accumulated in endowment funds. the table 1 presents dynamics of assets for yale university (yale… 2009). table 1. assets of yale university in billions of usd (source: yale university financial report 2008–2009) 2005 2006 2007 2008 2009 total assets 22.506 27.712 32.165 33.865 25.938 endowment 15.091 17.949 22.365 22.686 17.395 land, buildings and equipment, net 2.263 2.487 2.746 3.200 3.666 other assets 5.152 7.276 7.054 7.979 4.877 total liabilities 6.005 8.214 8.079 9.587 8.543 total net assets 16.501 19.498 24.086 24.278 17.395 the endowment of the yale university even being hit by the recession in 2008–2009 comprises 67% of total assets. these assets have assured 45.7% of revenues (table 2) being by far the most important source of revenues. student fees are generating less than 20% of revenues. specificity of american private universities is relatively low level of public financing. mainly publicly covered so-called sponsored agreement income generated less then quarter of yale revenues in year 2009. table 2. yale university operating budget revenue for the year ended june 30, 2009 (source: yale university financial report 2008–2009) total in billion usd in percent of total revenues 2.560 100.0 tuition, room and board 0.424 16.6 funded scholarships –0.193 –7.5 net tuition, room and board 0.231 9.0 sponsored agreement income 0.589 23.0 medical services income 0.417 16.3 allocation of endowment spending 1.169 45.7 other income 0.154 6.0 189 business, management and education, 2011, 9(2): 185–200 allocation of endowment presets a rich variety of financial instruments including investments in to bonds, stock and equity (fig. 1). fig. 1. proportions of assets in yale university endowment (source: yale… 2009) figures of harvard university are somehow similar to these of yale. the endowment of harvard reached 26 billion in 2009 and covers 57.9% of total assets (harvard university… 2009) as well as 37.7% of total revenues (table 3). table 3. harvard university operating budget revenue for the year ended june 30, 2009 (source: harvard university… 2009) total in billion usd in percent of total revenues 3.828 100.0 tuition, room and board 0.98 25.6 funded scholarships –0.302 –7.9 net tuition, room and board 0.678 17.7 sponsored agreement income 0.714 18.7 allocation of endowment spending 1.443 37.7 other income 0.993 25.9 the main allocation of endowment spending in harvard ‘reflects expectations about long-term returns, inflation rates, and the university’s ongoing spending needs’. majority american universities had accounted losses on investment in 2008–2009 but during last decade, the endowment of yale earned an annualised 11.8% return. 3.2. uk experience traditionally european universities rely more on public financing and less on investment related earnings. oxford university endowment is reaching 653 million pounds in 2008 and covers 39% of total assets as well as about 4% of total revenues (tables 4 and 5). 14.9% 60.2% 1.9% 16.7% 1.8% 4.4% cash bonds common stock equity investment other investments consolidated investment company assets 190 g. černiauskas, j. seiranov. university reserves management: international practices… majority of funding for oxford comes from public grants and contracts (university of oxford… 2009). table 4. assets of oxford university in 2008 in million pounds (source: university of oxford… 2009) fixed assets 844.0 endowment 653.5 other assets 180.4 total liabilities 99.7 total net assets 1578.2 table 5. oxford university operating budget revenue for the year 2009 (source: university of oxford… 2009) total in million pounds in percent of total revenues 862.5 100.0 tuition 122.7 14.2 grants and contracts 535.8 62.1 endowment and investment income 37.1 4.3 other income 166.9 19.4 3.3. lessons to be learned from anglo-saxon countries investment related revenues present main source of income for major us universities and play an essential role in uk. university investments are not immune from turbulences but they provide a good service in reducing financial stress for teaching and research. decision making authority of universities is strengthen by the opportunity to manage investment funds. in none of countries student fees are considered as the main source of university income. 3.4. different patterns of higher education financing and global structural changes world top list universities statistics certainly would not represent average profile of financing in higher education. generally public institutions and public financing prevails, varying by regions and by countries. it is common to divide educational institutions by categories of governance / management and funding. unesco classification sets three major types: public, independent private and government dependent private institutions (financing education… 2002). public educational institutions are managed by government (or the government has decisive voice in formation of the management) and get most of the funds from public sector. iindependent private institutions are managed independently from the state and public financing provides less than half of their current expenditure. government dependent private institutions occupy intermediate position with more than half of current expenditure coming from government. normally both 191 business, management and education, 2011, 9(2): 185–200 independent and dependent privates are related to private (non-public) sector. latest developments show that the borders between the types become less rigid. generally all over the world private financing has smaller share in total expenditures on education, but the share of private financing in tertiary (higher) education normally is larger. there is different pattern of expenditure distribution in prosperous and emerging countries, and within prosperous countries there are clusters of countries with larger private share. in 1999 oecd countries average level of private expenditures on education was 12.0%, while in tertiary sector same indicator was 20.8% (table 6). notably, within oecd group anglo-saxon countries and asian countries (japan, korea) have high private sector share. in the group of emerging countries both total private expenditure on education (28.3%) as well as private expenditures on tertiary education (37.2%) were higher than in oecd, with remarkable exception of india. table 6. proportions of expenditure on education by sectors and countries. 1999 (source: financing education… 2002) countries total public expenditures on education (%) total private expenditures on education, including public subsidies (%) total public expenditures on tertiary education (%) total private expenditures on tertiary education, including public subsidies (%) group of selected emerging countries* 71.7 28.3 62.8 37.2 china 55.8 44.2 56.8 43.2 india 96.2 3.8 99.7 0.3 oecd countries, average 88.0 12.0 79.2 20.8 some selected oecd countries australia 76.5 23.5 52.4 47.6 canada 79.8 20.2 59.3 40.7 united kingdom 83.7 16.3 63.2 36.8 united states 75.0 25.0 46.9 53.1 japan 75.6 24.4 44.5 55.5 korea 58.7 41.3 20.7 79.3 france 91.9 8.1 85.7 14.3 germany 77.9 22.1 91.5 8.5 italy 90.3 9.7 80.3 19.7 * argentina, chile, china, india, indonesia, jamaica, jordan, malaysia, paraguay, peru, philippines, thailand, uruguay. in the european union public sector traditionally has larger weight. in 2003 in eu-27 public sources provided 79.9% of expenditures on tertiary education (compared to 88.9% provided to all levels of education). as noted before u.k. model stands apart 192 g. černiauskas, j. seiranov. university reserves management: international practices… from eu pattern. however there is a general trend to diversify the financing sources and to increase the share of private sources, including increase of tuition fees, extension of loans to students, searching incomes from scientific research and joint projects with private companies, attraction of private donations (key data… 2007). as eurydice agency reports, since 1999 to 2004 the share of private spending for higher education in eu-27 was rising (higher education… 2008). the most dynamic element was households’ expenditures, mostly represented in tuition fees, which during the period increased from 7% to 13%. this trend is confirmed also by oecd statistics: in the period from 2000 to 2006 share of public funding in tertiary education in 19 eu countries-members of oecd diminished from 85.5% to 81.1% (table 7). public funding decreased in 15 eu countries, opposite trend was fixed only in 4 countries (education at a glance 2009). table 7. proportions of public and private expenditure on educational institutions in tertiary education (source: education at a glance 2009) countries public expenditures on tertiary education, 2006 (%) private expenditures on tertiary education, 2006 (%) public expenditures on tertiary education, 2000 (%) private expenditures on tertiary education, 2000 (%) oecd average 72.6 27.4 77.8 22.2 eu-19 average 81.1 18.9 85.2 14.8 eu countries, oecd members austria 84.5 15.5 96.3 3.7 belgium 90.6 9.4 91.5 8.5 czech republic 82.1 17.9 85.4 14.6 denmark 96.4 3.6 97.6 2.4 finland 95.5 4.5 97.2 2.8 france 83.7 16.3 84.4 15.6 germany 85.0 15.0 88.2 11.8 greece * * 99.7 0.3 hungary 77.9 22.1 76.7 23.3 ireland 85.1 14.9 79.2 20.8 italy 73.0 27.0 77.5 22.5 luxembourg * * * * netherlands 73.4 26.6 76.5 23.5 poland 70.4 29.6 66.6 33.4 portugal 66.7 33.3 92.5 7.5 slovak republic 82.1 17.9 91.2 8.8 spain 78.2 21.8 74.4 25.6 sweden 89.1 10.9 91.3 8.7 united kingdom 64.8 35.2 67.7 32.3 * no data available. 193 business, management and education, 2011, 9(2): 185–200 studies confirm certain positive effect of financing diversification in higher education, in research and development (dzemyda, melnikas 2009). still the process of creation knowledge economy is complicated, especially in the countries under transition from centralized to market economy (rudzkienė, burinskienė 2007). liberal reforms, which were launched in uk, latvia, lithuania and other countries promise more financial autonomy to universities, but also reschedule public financing. in combination with fiscal restraint since 2009 this may result in budget cuts. thus in lithuania central government budget expenditure for education, including higher education, decreased about 10% from 2213 mln. litas in year 2009 to 2005 mln. litas in year 2010 (finansų ministerija 2010). liberal reforms, fiscal restraints and increasing competition among higher education institutions open the way to the processes of universities marketisation. academic institutions accept the marketing approach in selling education services in exchange for public and private funds, and there is certain trade-off between market values and quest for knowledge. critics of neo-liberal discourse are concerned with negative effects of massification, simplification, formal unification of education, surrender of autonomy to top-down management (kim 2008). the issue of academic values under the impact of globalisation were discussed at the conference of international association of universities held in mykolas romeris university in vilnius in june 2010 (mykolas romeris university 2010). while academic community continues discussions, at organizational level institutions should response to uncertainties and new risks. one of possible ways is proper management of financial resources in changing environment. 4. university institutional model changes and reserve management prospects in lithuania to highlight the opportunities arising from new developments in higher education in lithuania and to show the tasks which can be solved by fund management at the level of an institution it is necessary to analyse how legal and institutional framework has changed and what impact they make on finances of institution. 4.1. transformation of lithuanian universities from the form of “budgetary institutions” to the form of “non-profit institutions” public university as a non-profit organisation is a new development in lithuania. line budgeting as the main system of financing high schools was one of the main pillars of old soviet scheme. all public services had been financed according to budget lines in former ussr. under this model, providers of services in education, health, culture and public order were bargaining for resources with respective line ministries. the bargaining results were being fixed in annual line budgets. financial reserves were not foreseen, all savings were taken back to the treasury. health sector was the 194 g. černiauskas, j. seiranov. university reserves management: international practices… first to brake from the budgetary system in majority of post soviet countries. in early nineties czech and slovak republics, hungary, slovenia and estonia have introduced health insurance and performance based financing. the reform has created room for non-profit health care providers to become the main actor in the field. lithuania and poland have joint ranks of health sector reformers in mid nineties (černiauskas, panovas 2010). legacy of budgetary financing has lasted in education a decade longer. budget financing until recently has remained the main form for public educational institutions paralleled by increase of academic autonomy, growing competition created by newly established private universities, introduction of tuition fees. in a budgetary establishment all incomes of institution, including tuition fees, income from scientific research and services are integrated into budget account. lithuania hospitals were legislated as non-profit organisations in 1997. universities are receiving the same status starting from 2009, when law on higher education and research (2009) redefined the status of state higher education institutions and ruled to restructure them from budgetary establishments into public establishments. whatever are reasons of long lasting debates what regards financing of higher education the political decision to provide non-profit status have been undertaken. the decision provides legal grounds for creation of financial reserves. the international experience how to create and manage these reserves is important. some peculiarities of cash flows in higher education are supportive for the emergence of reserve funds: 1. tuition fees are paid twice per year and these funds may be safely used for shortterm investments in term deposits or treasury bills. 2. performance based financing provides an opportunity to consider investments in to projects outside the campus or even education as a reasonable alternative. loans for students are gaining popularity in lithuania and other regional economies. should universities use endowment resources to compete with banks in the market of student loans learning from us experiences? or alternatively use their funds for interest burden reduction on such loans? some recent developments may be risky for the future of investments by universities. proponents of highly centralized asset management’s including lithuanian ministry of economy are talking about special agency for management of all public assets. such agency (if established) may reduce opportunities of decentralised decision making in general and development of reserve funds in particular. as it was stated in the introduction the recession of 2008–2009 has highlighted the importance of sound economic fundamentals for private and public institutions alike. the international experience provides arguments supporting the need to create certain reserves. in higher education and in other sectors of economy it is up to research and open public debating to forge the consensus what type of reserves have to be created and what is the proper form of these reserves management. 195 business, management and education, 2011, 9(2): 185–200 4.2. prospects of reserves management in university chartered as non-profit public establishment in lithuania legal framework of higher education finances was reshaped after passing the law on higher education and research (2009). as noted above state budgetary universities, which constitute absolutely prevailing majority, have to re-charter as public establishments. mykolas romeris university was the first to acquire new status in july 2009. thus universities also become subject to 1996 law on public establishments (last amended in 2009) which defines a public establishment as a non-profit public legal person of limited civil liability serving to satisfy public interests by carrying out the educational, training and scientific and other activities useful to the public (law on public establishments… 1996). these provisions increase financial autonomy as well as responsibility of the university and have important consequences. the division of ownership on assets and ownership on incomes is implemented. generally real estate assets and other important long-term assets, which were owned by state, are transferred to university by terminated trust agreement. university acts as trustee in relations to these assets, and the assets get the highest level of protection and together restriction in use. other long-term assets and inventories, which were in state ownership, are invested in public establishment as contribution. the ownership passes to a newly chartered university. thus the state becomes largest stakeholder at the starting point. both classes of assets can be regarded as endowments. operational incomes are divided into own incomes and budgetary incomes. use of budgetary incomes is restricted; the assets created by budgetary inflows do not automatically become ownership of the university. differently, incomes from tuition fees and services are considered as own incomes and accordingly assets created from own incomes are regarded as own assets. organizationally the highest authority in financial affairs belongs to university council formed by representatives of stakeholders. university academic community, students and administration representatives get same number of chairs as independents approved by ministry of education and science, and one more member should be approved both by ministry and university senate. executive powers are given to rector who appoints administration. division of current revenues into own and budgetary revenues provides substantial ground for introduction of short-term fund management elements. cash flow analysis, management and general applications in lithuania are well studied by researchers (mackevičius, senkus 2006). at initial stage cash flows planning and short-term investment could be implemented practically at once under supervision of council. as mentioned above, tuition fees are collected unevenly during the year, so substantial part of these revenues creates temporary reserves. as these assets are directly connected with short-term liabilities in the form of educational expenditures they should be invested with minimal risk and highest liquidity, probably in the form of term deposits 196 g. černiauskas, j. seiranov. university reserves management: international practices… or treasury bills or bonds, depending on expected yield and costs. the process may be organised through public purchase of financial services as terminated (1 year seems to be proper term) contract with a bank. as these assets are generated by certain stakeholders (students) it would be fair to direct part of earnings on assets to short-term students’ needs involving students in the decision-making. long-term assets management shall require more profound preparations. theoretical approaches suggested by international (ziemba, mulvey 1998) and lithuanian researchers (bikas, laurinavičius 2009; bivainis, volodzkienė 2008; mackevičius 2008; kucko 2007) are applicable for universities fund management as well. also the managerial experience of international companies specializing in universities fund management such as common fund is valuable. as already noted, own and entrusted long-term assets can be treated as endowments. by the nature of endowment the purpose is to preserve and accrue the endowed funds within perpetual time horizon. well-managed endowments are both the source of operational income and safety cushion during turmoil. however initial endowments are mostly fixed in real assets and this limits their engagement in fund management. the structure, objectives and optimisation of endowments management are formed in the process of interest coordination between benefactors, trustee, fund managers and beneficiary. this process can be viewed as part of integrated strategic planning of institution (bivainis, tunčikienė 2007). long-term time horizon of investment suggests that best results could be achieved by balanced portfolio investment in which common stocks have substantial weight. however this type of assets is associated with higher risks, which is in contradiction with preservation priority of endowment. time should be given to discuss and provide strategy of long-term investment suiting the unique profile of certain university. the possible way is to form a task team formed from fellow academicians and independents, reporting to council. after approval of concept formal guidelines should be adopted. depending on required yield, risk, size of funds council may choose to outsource the service to external professional fund managers, including alumni or delegate operations to certain university specialized body. as a part of strategy it is worth to develop attraction of new endowment from university’s actual and potential stakeholders, including academic staff, students, alumni, business partners, international organizations. cooperation between public institution and business communities may be arranged as public private partnerships (karlavičius et al. 2006). it is worth to mention that universities specializing in social sciences or universities having social sciences faculties and departments may get additional positive side-effect engaging researchers and students in idea generation and fund management practice. however there should be certain rules preventing conflict of interests, syndrome of risk and responsibility avoidance in decision-making which may arise in a close social community. 197 business, management and education, 2011, 9(2): 185–200 5. conclusions as probably no other institutions universities depend on specific forms of funding in the form of endowments, which minimize uncertainty and puts basis for academic freedoms. while medieval universities enjoyed the grace of individual benefactors, in modern times the state policy often plays more significant role. the use of endowment in university financing remains extremely important in united states and united kingdom, in particular among such top-list universities as harvard, yale and oxford. the strong correlation between education progress and national wealth allows regarding education as a public good. but there is also clear dependence between individual’s education and income. this gives the grounds for commercialisation of education. last decade demonstrates that proportions between public and private sector in education are changing in the favour of the last, especially in higher education. the patterns of financing previously typical for anglo-saxon countries are implemented all over the world. bold market-oriented massification and market-oriented approach are widely criticized. still liberal reforms go on, propelled by ideas of fiscal restriction in public spending. in lithuania important changes in institutional and financing system of education have been effected since 2009. together with certain negative effects some new opportunities including implementation of fund and reserve management arise. transition from budgetary to non-profit public establishment gives way for optimisation of short-term and long-term asset management and potential for universities to build-up financial endowments. opportunities for lithuania provided by implementation of good international practise in university reserves management may be summarised as follows: − law on higher education and research (2009) in combination with law on public establishments (1996) has created a legal framework for enhanced reserves management by autonomous universities. − the need to develop sound reserves management system had been enhanced by twinkling public financing on the one hand and volatile flow of private financing, on the other. − vast international experiences in the field of reserve management have been developed and the know-how is easily available for academic community. − some peculiarities of cash flows in higher education are supportive for the emergence of reserve funds: 1. tuition fees are paid twice per year and these funds may be safely used for shortterm investments; 2. performance based financing introduced according the law on higher education and research provides an opportunity to consider investments in to projects outside the campus. − universities are already mature to use some instruments of short-term investments like term deposits and treasury bills. 198 g. černiauskas, j. seiranov. university reserves management: international practices… − theoretical approaches by international and lithuanian 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liability modelling. cambridge university press, u. k. http://dx.doi.org/10.3846/1648-0627.2008.9.237-244 200 g. černiauskas, j. seiranov. university reserves management: international practices… universiteto išteklių valdymas: tarptautinė patirtis ir lietuvos galimybės g. černiauskas, j. seiranov santrauka straipsnyje aptariamos naujos universiteto išteklių valdymo galimybės, pereinant prie ne pelno siekiančių organizacijų modelių lietuvoje. autoriai analizuoja universitetų finansavimo istoriją ir skiriamas dotacijas. straipsnyje nagrinėjami finansavimo modeliai pirmaujančiose jav ir jungtinės karalystės universitetuose, struktūriniai skirtumai ir bendros tendencijos, derinant aukštųjų mokyklų finansavimą iš viešojo ir privataus sektoriaus skirtingose šalyse. autoriai analizuoja lietuvos universitetų perėjimą 2009 m. nuo biudžetinės įstaigos prie ne pelno organizacijos ir siūlo praktinį požiūrį į universiteto išteklių sudarymą, lėšų ir dotacijų valdymą, formuojant naują aukštojo mokslo institucinę sistemą lietuvoje. reikšminiai žodžiai: aukštojo mokslo ekonomika ir finansavimas, universitetų fondų valdymas, dotaci jos, ne pelno organizacijos. gediminas černiauskas is an associate professor at mykolas romeris university, faculty of economics and financial management, department of economics. research interests: social economics, health care economics. jusif seiranov is an associate professor at mykolas romeris university, faculty of economics and financial management, department of economics. research interests: fiscal and monetary policies, forms of government regulation, globalisation and bric economies. verslas, vadyba ir studijos 2009 285 įm o n ių e k o n o m ik a ir v a d yb a klientų įsitraukimo bendrai kuriant baldų projektavimo paslaugas laipsnis rigita tijūnaitienė rigita@smf.su.lt šiaulių universitetas, vadybos katedra jelena šidlauskienė jelena.sidlauskiene@gmail.com šiaulių universitetas, vadybos katedra evandželina petukienė eva@smf.su.lt šiaulių universitetas, vadybos katedra 1. įvadas šiuo metu dauguma gamybinių įmonių, siekdamos efektyvios veiklos, stengiasi gaminti produktus, atitinkančius individualius vartotojų poreikius. pasikeitusi gamybinių įmonių aplinka lemia tai, jog jų veikloje aktualizuojasi paslaugų paradigma, orientaciją į prekę keičia orientacija į vartotoją. siekiant prisitaikyti prie dinamiškos verslo aplinkos ir nuolat kintančių joje verslo sąlygų, būtina taikyti tokias veiklos vykdymo (valdymo) priemones, kad įmonių konkurencingumas būtų ne tik palaikomas, bet ir būtų sudaromos sąlygos įgyti konkurenciniam pranašumui (ar bent išlaikyti turimus konkurencinius privalumus) (snieška, drakšaitė 2007). organizacija privalo optimizuoti savo gaminio ar paslaugos kokybę vartotojui (susnienė, vanagas 2006). siekiant patenkinti kliento, norinčio individualaus ir kokybiško gaminio, poreikius tradicinė gamyba netinka. produktas, koks jis bebūtų, yra geriausias, kai yra pagamintas dalyvaujant abiem pusėms, naudojant tiek gamintojo, tiek vartotojo pastangas. šiuo atveju kalbama apie klientų įsitraukimą kuriant jiems patiems skirtą produktą. įsitraukęs į tokį procesą klientas pripažįstamas kaip ekspertas, išteklių naudingų paslaugų kūrimui teikėjas, kas, be abejo, susiję su kliento emociniu pasitenkinimu. empiriniais © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai 286 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a tyrimais įrodyta, kad vartotojams dažnai būdingos tam tikros emocijos prekių ar paslaugų atžvilgiu ir kad prekės kaina bei praktinė jos nauda nebėra vieninteliai prekės pasirinkimo veiksniai (banytė et al. 2007a). taigi, didesnės galimybės atsiveria toms įmonėms, kurios suvokia klientų emocinio įsitraukimo prasmę. dažną gaminį lydi tam tikros paslaugos, o paslaugos sėkmė iš dalies priklauso nuo kliento įsitraukimo ir dalyvavimo ją kuriant (chua, sweeney 2003). kliento dalyvavimo kuriant paslaugą koncepcija nėra nauja. dar 1978 m. von hippel aiškino, kaip klientai galėtų dalyvauti tobulinant prekės dizainą (plé et al. 2008). tačiau bendro sutarimo, kas yra klientų dalyvavimas bendrai kuriant paslaugas (bendras paslaugos kūrimas), mokslinėje literatūroje nėra. daugiau ar mažiau sutariama, kaip mano e. ostrom (2002), kad bendras paslaugos kūrimas suprantamas kaip procesas, kai kuriama ne tik paslaugos teikėjų, bet ir organizacijai nepriklausančių žmonių, t. y. klientų, nauda. kliento dalyvavimas bendrai kuriant paslaugas yra koncepcija, numatanti tiesioginį klientų įtraukimą į projektus kartu su profesionaliais paslaugų teikėjais. taip dalyvavimas kuriant paslaugą yra susijęs su paslaugos individualizavimu konkrečiam klientui. taip pat mokslinėje literatūroje akcentuojama daugelis kitų naudų, kurios sukuriamos bendromis pastangomis. nepaisant pripažintos ir moksliniais tyrimais įrodytos klientų dalyvavimo kuriant paslaugas naudos, mokslinių darbų šia tema nėra daug. b. dong, k. r. evans ir s. zou (2007), apibendrinę klientų dalyvavimo nuo 1979 iki 2000 m. literatūros apžvalgą, nurodo, kad iš 23 tyrimų tik 3 yra empiriniai. apie 2000 m. užsienio rinkodaros mokslininkai pradėjo daugiau dėmesio skirti aktyviam klientų dalyvavimui kuriant paslaugą. kaip mano m. etgar (2007), kliento dalyvavimas kuriant paslaugą visiškai neseniai tapo viena iš pagrindinių rinkodaros literatūros diskusijų temų. svarbu paminėti, kad tai yra koncepcija, peržengianti verslo sektoriaus paslaugų atvejus analizuojančias ribas. 2008 m. spalio mėnesį paryžiuje buvo surengta penktoji kokybės europos sąjungos viešajame administravime konferencija, kurioje buvo aptartas klientų kaip bedrakūrėjų dalyvavimas ne tik viešajame, bet ir verslo paslaugų sektoriuje (plačiau žr. konferencijos puslapyje http://www.5qualiconference. eu/en/conference/themegb/ 29.html). problematika lietuvos viešajame sektoriuje domisi vos keletas tyrėjų, pvz., j. dvorak (2006), a. raipa ir e. petukienė (2009). lietuvos verslo sektoriaus paslaugų studijų dar mažiau. tačiau pastebėta, jog rinkodaros mokslininkai pritaria požiūriui, jog paslaugos būdingos ne tik įmonėms, tradiciškai priskiriamoms paslaugų sektoriui, bet ir gamybinėms prekybinėms įmonėms. sutariama, jog šiuolaikinėje rinkoje grynų, paslaugų nelydimų, prekių nėra daug, o „klientai šiandien turi būti traktuojami tam tikra prasme ir kaip gamintojai, ir kaip vartotojai, kurie nustato tai, kas turi vertę“ verslas, vadyba ir studijos 2009 287 įm o n ių e k o n o m ik a ir v a d yb a (ballantyne, varey 2008). išaiškinti klientui vertę, jos veiksnius ir jų svarbą yra aktualus mokslinių diskusijų objektas (dovaliene, virvilaite 2008). klientų aktyvumas tampa svarbiu veiksniu, siekiant efektyvios paslaugos kūrimo eigos ir rezultato, turint omenyje, kad klientų įsitraukimo laipsnis yra svarbi pirkėjo elgsenos charakteristika (maikštėnienė, auruškevičienė 2008) bei esminis veiksnys bendrai kuriant paslaugą. vartotojų elgsenos tyrimai leidžia įmonių vadovams suprasti vienokius ar kitokius vartotojo poelgius, numatyti jų elgseną ateityje (skrudupaitė et al. 2006). atskleisdama, suprasdama ir tinkamai valdydama kliento įsitraukimą, įmonė gali geriau patenkinti kliento poreikius, gauti tiek materialios, tiek ir nematerialios naudos. todėl organizacijoms turi būti aktualu identifikuoti realų klientų įsitraukimo (dalyvaujant kuriant konkrečią paslaugą) laipsnį. išanalizavus klientų įsitraukimo laipsnio ribas galima taip valdyti klientų dalyvavimą, kad būtų galima pasiekti konkrečiai situacijai reikalingą kliento įsitraukimo laipsnį. apibendrinant galima teigti, jog pasirinkta tyrimo problema pakankamai nauja ir aktuali. straipsnyje keliama mokslinė problema gali būti išreikšta tokiais klausimais: kokiam įsitraukimo laipsniui esant klientas dalyvauja bendrai kuriant paslaugą ir kokią tai daro įtaką paslaugos kūrimui. tyrimo objektas: kliento įsitraukimo laipsnis dalyvaujant bendrai kuriant paslaugą gamybinės prekybinės įmonės pavyzdžiu. tyrimo tikslas: identifikuoti kliento įsitraukimo laipsnį bei nustatyti, kokią įtaką skirtingo laipsnio kliento įsitraukimas daro bendram paslaugos kūrimui. tyrimo tikslui pasiekti suformuluoti tokie uždaviniai: 1. išanalizuoti klientų įsitraukimo laipsnį teoriniu aspektu. 2. identifikuoti klientų įsitraukimo laipsnį bendrai kuriant baldų projektavimo paslaugas. 3. nustatyti klientų skirtingo laipsnio įsitraukimo įtaką paslaugos kūrimui. tyrime taikyti šie metodai: mokslinės literatūros analizė, sintezė. siekiant tyrimo tikslo buvo atliktas empirinis tyrimas naudojant du (stebėjimo ir interviu) kokybinius metodus, kurie buvo atlikti baldų projektavimo paslaugas teikiančioje gamybinėje prekybinėje įmonėje. tyrimo metu buvo atlikta 30 stebėjimų ir 10 interviu sesijų. 2. klientų įsitraukimo dalyvaujant paslaugos kūrime laipsnio teorinis aspektas remiantis b. dong (dong et al. 2007), klientai nebėra „pasyvi auditorija“, jie yra aktyvūs bendrakūrėjai, kartu su paslaugų teikėjais kuriantys vertę. šiuolaikinis vartotojas yra aktyvus, besidomintis siūlomos paslaugos kokybe, dalyvis. šių 288 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a dienų vartotojai yra įvairesni ir individualesni, išsiskiriantys ir reiklesni. dabar jie yra protingesni, pedantiškesni ir daugiau tikisi (fisk 2007). žmogus dažnai negalėtų paaiškinti, kodėl perka tą, o ne kitą daiktą, kaip jį pasirinko ir ko iš jo tikisi. jam viso to ir nereikia – jis, pirkėjas, visuomet teisus. pardavėjui – kitaip, jis turi pažinti ir suprasti pirkėją, įtikti jam. kitaip pirkėjas nueis pas konkurentą (urbonavičiaus 1997). todėl vartotojų elgsenos tyrimų kontekste išryškėja vartotojo suvokimo, kontroliuojančio ryšį tarp asmenybės ir jo aplinkinio pasaulio pažinimo reikšmė (banytė et al. 2007b). kadangi kiekvienas klientas yra unikalus, reikia stengtis geriau pažinti juos, jų poreikius ir galimybes bei panaudoti tai kuriant individualią paslaugą. toks darbas su klientais gali praturtinti įmonę ne tik finansine, bet ir psichologine bei informacine prasme. kliento dalyvavimas yra elgsenos konceptas, kuris siejasi su klientų veiksmais ir ištekliais, reikalingais paslaugai kurti ir (arba) pristatyti (rodie, kleine 2000). kliento dalyvavimas kuriant paslaugą priklauso nuo kiekvieno asmens patirties, nes kiekvieno asmens unikalumas paveikia kūrimo procesą (etgar 2007), ir nuo kliento poreikio bei suvokimo, kiek įsitraukti į paslaugos kūrimą (good 1990). vartotojo įsitraukimo laipsnis – tai funkcija, priklausanti nuo individo, stimulo ir situacijos. įsitraukimas (asmens santykio su pirkiniu laipsnis) priklauso nuo vartotojo santykio su perkamu produktu ir nuo to, kaip šis daiktas atspindi asmenį. įsitraukimas parodo, kiek individas skiria dėmesio ir svarbos produktui ir kiek yra linkęs išnaudoti energijos (bakanauskas 2006). išanalizavus ir apibendrinus vartotojo elgsenos tyrinėjimus nustatyta, kad dauguma autorių (михайлова 2006; claycomb et al. 2001; graf 2007) sutaria, kad daugelio paslaugų pasiūloje egzistuoja trys vartotojo dalyvavimo procese įsitraukimo laipsniai. kliento įsitraukimo laipsnis varijuoja nuo: žemo laipsnio, kai kliento dalyvavimas būtinas tik tam, kad suteiktų paslau– gą. viskas, ko reikia, yra kliento fizinis buvimas ar kontaktas su organizacijos tarnautojais, kurie atlieka visus paslaugos gamybos ir pristatymo darbus. a. bakanauskas, analizuodamas įsitraukimo laipsnį, teigia, kad žemo įsitraukimo situacijoje vartotojas nėra motyvuotas kaupti mokymosi procesui reikalingą informaciją (bakanauskas 2006). vidutinio laipsnio, kai kliento dalyvavimas, suteikiant paslaugą, yra konkre– tus. čia klientas suteikia informaciją kaip konsultantas ir kokybės vertintojas, siūlo novatoriškas idėjas organizacijai ir dalijasi teigiama ar neigiama informacija su kitais klientais (plymire 1991; claycomb et al. 2001). čia svarbi t. palaimos ir v. auruškevičienės (2006) įžvalga, kad vartotojų pasitenkinimas yra dimensija, turinti didžiausią poveikį vartotojų lojalumui ir ketinimui rekomenduoti. verslas, vadyba ir studijos 2009 289 įm o n ių e k o n o m ik a ir v a d yb a aukšto laipsnio, kai klientas aktyviai dalyvauja kuriant paslaugą. renka – mokymuisi reikalingą informaciją (bakanauskas 2006), skiria pastangų, laiko ir kitų išteklių tam, kad suprojektuotų paslaugą ir įvykdytų kai kurias paslaugos kūrimo funkcijas (lengnick-hall 1996), pasidalijant atsakomybę (bendapudi, leone 2003). šis dalyvavimo lygmuo apima kliento ir paslaugos organizacijos bendrą paslaugos kūrimą. tai padeda pritaikyti paslaugą ir produktą individualiam klientui (claycomb et al. 2001). šiuo atveju įmonės negali efektyviai teikti paslaugų be klientų dalyvavimo (graf 2007). kliento dalyvavimas kuriant paslaugą dažniausiai yra neišvengiamas, todėl bet koks paslaugų planavimas turi būti atliekamas atsižvelgiant į būtiną kliento įsitraukimo į paslaugos kūrimą laipsnį (claycomb et al. 2001). e. mihailova (михайлова 2004) pastebi, kad esant žemam įsitraukimui neįmanoma pagaminti individualaus produkto. kliento įtraukimu į paslaugos kūrimo procesą siekiama palengvinti prekių pirkimą, padaryti prekę patrauklesnę ir labiau atitinkančią vartotojo individualius poreikius. m. j. bitner (bitner et al. 1997) mano, kad organizacinis produktyvumas gali būti didesnis, jei klientai išmoksta efektyviai vykdyti veiksmus, susijusius su paslauga. iš tikrųjų tai galėtų būti kombinacija tarp klientų ir paslaugos teikėjų, kurie pasidalija atsakomybę ir taip padidina abipusį pasitenkinimą (hsieh et al. 2004). šiuo atveju klientai yra sudedamoji paslaugų teikimo sistemos dalis, taip pat pirminiai „produktai“ ar „priemonės“, demonstruojant įgyvendintus paslaugų rezultatus (lengnick-hall et al. 2000). taigi, kliento įsitraukimas įvairiuose prekybos ar paslaugų teikimo objektuose gali labai skirtis, nes skirtingas dalyvavimo būtinumas. tačiau, kad aktyvus dalyvavimas būtų naudingas įmonei ir klientui (kokybė, vertė, pasitenkinimas, lojalumas, grįžtamasis ryšys, išlaidų mažinimas ir t. t.), paslaugų, kurioms atlikti reikalingas aktyvus klientų įsitraukimas, ypač tų, kurie yra tiesioginiai paslaugų naudos gavėjai, teikėjai turėtų atitinkamai valdyti klientų dalyvavimą paslaugose, o ne tenkintis elementariomis aptarnavimo procedūromis (raipa, petukienė 2009), vadinasi, išmanyti, kaip įtraukti vartotoją į paslaugos teikimo procesą, išmokti valdyti darbuotojų ir vartotojų sąveiką ir santykius (bagdonienė 2008). 3. klientų įsitraukimo į baldų projektavimo paslaugos kūrimą laipsnio tyrimo rezultatų analizė pagrindinis tyrimo empirinės informacijos šaltinis – kliento dalyvavimas kuriant paslaugą. stebėjimo metodas pasirinktas remiantis požiūriu, kad nauji, dar nenagrinėtomis savybėmis pasižymintys procesai visų pirma diagnozuojami stebėjimu (bitinas 2006), ir šis metodas ypač tinka duomenims rinkti, atliekant žmonių 290 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a elgesio tyrimus (bitinas et al. 2008). pasak v. p. pranulio (2007), tyrimas, kai žmonės yra stebimi, palyginti su tyrimu, kai pastarieji yra klausiami, ką padarė, turi vieną esminį ir svarbų pranašumą: užuot prašius atsakymo, kaip žmonės vertina savo elgesį ir veiksmus, matoma, kaip jie elgiasi ir ką daro. tai padeda išvengti subjektyvaus jų aiškinimo. toks būdas gali pašalinti daugelį vienaip ar kitaip tikrovę iškreipiančių veiksnių, susijusių su apklausos tyrimų metodu, ir leidžia matuoti tikrus įvykius ir elgesį vietoje sakomų ketinimų. klientų įsitraukimo laipsniai minėtu būdu buvo tiriami baldų projektavimo paslaugas teikiančioje įmonėje. įmonės pavadinimas nebus atskleistas dėl etinių sumetimų. tyrimui pasirinkta įmonė gamina, parduoda baldus, teikia baldų projektavimo paslaugas, turi filialus penkiuose didžiausiuose lietuvos miestuose. empirinis tyrimas atliktas 3 iš 5 filialų. remiantis straipsnio autorių konceptualia analize, buvo išskirti trys klientų, dalyvaujančių bendrai kuriant paslaugą, įsitraukimo laipsniai: žemas, vidutinis ir aukštas. stebėjimo metu įsitraukimo į baldų projektavimo paslaugos kūrimą laipsniai buvo identifikuojami pagal teorinėse studijose skirtingus laipsnius išreiškiančius kriterijus. tyrime identifikuoti įsitraukimo laipsniai buvo suskirstyti pagal šių kriterijų atitikimą. pasiskirstymas pagal aiškius įsitraukimo laipsnius pateiktas 1 paveiksle. 13 %7 % 53 % 27 % žemas vidutinis aukštas mišrus 1 pav. klientų, dalyvaujančių kuriant paslaugą, įsitraukimo laipsniai (n = 30. sudaryta straipsnio autorių) fig. 1. level of clients participation in creation of service (n = 30. composed by authors) atlikus tyrimą pastebėta, kad baldų projektavimo paslaugos kūrimo metu aukštas klientų įsitraukimo laipsnis sudarė 53 %. žemo įsitraukimo laipsnio užfiksuota 13 %. kadangi, esant žemam įsitraukimo laipsniui, bendrai kuriant baldų projektavimo paslaugą kliento įsitraukimas pasireiškia tik fiziniu buvimu, toliau šie atvejai neanalizuojami. vidutinio laipsnio kriterijus atitiko tik du atvejai ir tai sudarė 7 %. iš tyrimo metu gautų rezultatų nustatyta, kad tarp vidutinio ir aukšto įsitraukimo laipsnių atsiranda dar vienas tarpinis įsitraukimo laipsnis – mišrus (vidutiniškai aukštas), tai sudarė 27 % visų atvejų. gauti rezultatai parodo, kad verslas, vadyba ir studijos 2009 291 įm o n ių e k o n o m ik a ir v a d yb a kliento dalyvavimas bendrame baldų projektavimo paslaugos kūrime yra žemo, vidutinio, vidutiniškai aukšto ir aukšto įsitraukimo laipsnių. gauti rezultatai papildo rikodaros teorijoje pateiktus tris įsitraukimo laipsnius ir parodo šios paslaugos kūrimo ypatumus. dalyvavimas yra elgsenos konceptas, todėl valdant klientų dalyvavimą paslaugose svarbios tampa kliento charakteristikos. analizuojant klientų įsitraukimą pagal lytį pastebėta, kad moterų, dalyvaujančių kuriant baldų projektavimo paslaugą, įsitraukimo laipsnis yra aukštas, tai sudaro 40 % visų atvejų, vidutiniškai aukštas – 20 % ir vidutinis – 13 %. taip pat užfiksuotas ir žemas įsitraukimo laipsnis, tai sudaro 27 %. vyrų, dalyvaujančių bendrai kuriant baldų projektavimo paslaugą, įsitraukimo laipsnis dažniausiai yra aukštas, tai sudaro 60 % visų atvejų, ir vidutiniškai aukštas – 40 %. apibendrinus tyrimo rezultatus galima teigti, jog vyrų įsitraukimo laipsnis į bendrą baldų projektavimo paslaugos kūrimą aukštesnis nei moterų. taip pat pastebėti skirtingo amžiaus klientų įsitraukimo skirtumai. klientai iki 30 metų dažniausiai būna aukšto (67 %) ir vidutiniškai aukšto (33 %) įsitraukimo laipsnio. žemo ir vidutinio šio amžiaus segmento įsitraukimo laipsnio tiriant kuriamą paslaugą užfiksuota nebuvo. analizuojant grupę nuo 30 iki 50 metų, užfiksuotas žemas įsitraukimo laipsnis, kuris sudarė 22 %, vidutiniškai aukštas – 33 % ir aukštas – daugiausiai 45 %. vidutinio įsitraukimo laipsnio atvejų, analizuojant šį amžiaus segmentą, užfiksuota nebuvo. grupėje per 50 metų užfiksuotas vidutinis įsitraukimo laipsnis, tai sudarė 22 %, vidutiniškai aukštas – 11 % ir aukštas – daugiausiai 67 %. žemo įsitraukimo laipsnio atvejų, analizuojant šį segmentą, užfiksuota nebuvo. apibendrinant galima teigti, kad kuriant bendrą baldų projektavimo paslaugą, klientai, priklausantys segmentui iki 30 metų, yra aktyvesni ir todėl labiau įsitraukia į paslaugos kūrimą. klientai, kurių amžiaus kategorija nuo 30 iki 50 ir per 50 metų, dažnai būna aukšto įsitraukimo laipsnio, nors pasitaiko ir žemesnio įsitraukimo atvejų. kadangi tyrimo metu buvo užfiksuotas vidutiniškai aukštas įsitraukimo laipsnis, verta smulkiau išanalizuoti laipsnių kriterijus. taigi, tyrimo metu pastebėta, kad aukšto įsitraukimo laipsnio išskirti kriterijai (dalyvauja kuriant paslaugą; deda pastangas; skiria laiko) pasireiškia ir esant vidutiniam įsitraukimo laipsniui, nes klientas ir vienu, ir kitu atveju dalyvauja kuriant paslaugą, stengiasi ir skiria tam savo laiką. todėl, tiriant vidutinį įsitraukimo laipsnį, šie kriterijai jam taip pat buvo priskirti. analizuojant galimus klientų įsitraukimo laipsnius teoriniu aspektu, buvo išskirta, kad, esant aukštam kliento įsitraukimo laipsniui, vyksta kliento mokymas, o esant vidutiniam įsitraukimo laipsniui klientas tik suteikia informaciją. tyrimo metu užfiksuoti mokymosi ir informacijos suteikimo rezultatai pateikti 1 lentelėje. 292 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a 1 lentelė. mokymosi ir informacijos suteikimo stebėjimo kriterijai (sudaryta straipsnio autorių) table 1. observation criteria of learning and providing information (made by authors) vidutiniškai aukštas įsitraukimo laipsnis vidutinis įsitraukimo laipsnis aukštas įsitraukimo laipsnis suteikia informaciją 8 suteikia informaciją 2 suteikia informaciją 16 renka informaciją, reikalingą mokymuisi 6 renka informaciją, reikalingą mokymuisi 0 renka informaciją, reikalingą mokymuisi 16 iš gautų rezultatų matyti, kad iš užfiksuotų 8 vidutiniškai aukšto įsitraukimo laipsnio atvejų informacijos suteikimas vyko visus 8 kartus, o informacijos rinkimas – tik 6 kartus. esant vidutiniam įsitraukimo laipsniui 2 atvejais pasireiškė tik informacijos suteikimas. esant aukštam įsitraukimo laipsniui užfiksuotas informacijos rinkimas, reikalingas mokymuisi, bei informacijos suteikimas visais 16 atvejų. taigi, nagrinėjant stebėjimo metu užfiksuotus rezultatus, nustatyta, kad esant aukštam įsitraukimo laipsniui klientas, aktyviai dalyvaudamas kuriant paslaugą, demonstruoja ir vidutinio įsitraukimo laipsnio kriterijus. taip pat tyrimo metu nustatyta, kad esant tik aukštam įsitraukimo laipsniui (iš 16 atvejų užfiksuotas visais atvejais), klientas dėdamas pastangas atlieka kai kurias darbuotojo funkcijas. toliau pristatomi kokybinio tyrimo (interviu su įmonės ekspertais) rezultatai, apibūdinantys kliento įsitraukimo bendrai kuriant baldų projektavimo paslaugą laipsnių specifiškumą, išryškinant priežastis ir įtaką šiam procesui. ekspertų nuomonė apie priežastis klientų įsitraukimo/neįsitraukimo į bendrą baldų projektavimo paslaugos kūrimą pateikta 2 lentelėje. 2 lentelė. kliento įsitraukimo/neįsitraukimo priežastys table 2. causes of client’s involvement/devolvement įsitraukimo priežastys neįsitraukimo priežastys kliento asmenybė, būdas kliento asmenybė, būdas parodžius jam dėmesį, pasijunta ypatingas įtampa, dėmesio stoka darbuotojų pastangos, draugiškas su humoru bendravimas kai klientas neturi konkrečios nuomonės, mažiau įsitraukia ilgiau pabendravus su klientu mažos vertės prekės (kėdės) būna priėmę sprendimą ir tik nori pasitikslinti kainas verslas, vadyba ir studijos 2009 293 įm o n ių e k o n o m ik a ir v a d yb a ištyrus ekspertų nuomonę nustatyta, kad, jų manymu, kliento įsitraukimo/ neįsitraukimo priežastį nulemia kliento asmenybė, būdas, įtampa, projektuotojo dėmesio stoka, išankstinis nusistatymas, prekės ypatumai. pastebėta, kad baldų projektavimo paslaugos kūrimo metu aptarnaujantis personalas gali daryti įtaką kliento įsitraukimo laipsniui ir, esant žemam įsitraukimo laipsniui, paveikti klientą taip, kad jis labiau įsitrauktų į bendrą baldų projekto kūrimą. galima daryti prielaidą, kad bendro baldų projektavimo paslaugos kūrimo rezultatas iš esmės priklauso nuo kliento įsitraukimo laipsnio. įmonės ekspertų nuomonė apie kliento įsitraukimo įtaką baldų projektavimo paslaugos kūrimo rezultatui pateikta 3 lentelėje. 3 lentelė. kliento įsitraukimo įtaka paslaugos kūrimui table 3. influence of client’s involvement on creation of service teigiama neigiama rezultatas yra geresnis, kai vyksta bendradarbiavimas. tada klientas gauna maksimumą jam reikalingos informacijos, labiau supranta patį procesą, gaunami geresni proceso rezultatai ir taip labiau patenkinami kliento poreikiai su mažai įsitraukusiu ir nebendradarbiaujančiu klientu yra didesnis pavojus, kad jis „pabėgs“ ir užsisakys pas kitus, nes bus nepavykę atskleisti ir patenkinti jo poreikių bendradarbiaudamas proceso metu, klientas gali susikurti tai, ko jam labiausiai reikia nepatenkinami kliento poreikiai atsiranda mažiau nesusipratimų ir nepasitenkinimo dėl mažo kliento susidomėjimo negalima pakeisti jo susiformavusios, galbūt klaidingos nuomonės labiau atskleidžiami ir patenkinami kliento poreikiai iškyla daugiau nesusipratimų ir nepasitenkinimo bendraujant galima labiau sudominti klientą ir jį įtraukti, pakeisti jau susiformavusią nuomonę nevyksta bendradarbiavimas tyrimo rezultatai rodo, kad baldų projektavimo paslaugos kūrimo metu, esant žemam įsitraukimo laipsniui, sunku išsiaiškinti ir atskleisti kliento poreikius, norus ir motyvus, dėl to gaunamas blogesnis paslaugos rezultatas. taip pat pastebėta, kad, esant žemam įsitraukimo laipsniui, labai žemas kliento bendravimo (komunikacijos) lygis. nustatyta, kad tai apsunkina baldų projektavimo paslaugos kūrimą, nes projektuotojas negauna atgalinio ryšio iš kliento, o tai 294 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a svarbu, suvokiant vartotojų lūkesčius ir vertinant jų pasitenkinimą. nustatyta, kad esant vidutiniškam ir vidutiniškai aukštam įsitraukimo laipsniui toks aktyvus dalyvavimas (klientas atlieka kai kurias darbuotojų funkcijas, prisiima atsakomybę už rezultatą), kuris būtinas bendram paslaugos kūrimui, dar nevyksta. tačiau pastebėta, kad, palaikant tinkamą bendravimą, aptarnaujantis personalas gali paskatinti klientą pereiti į aukštesnį įsitraukimo laipsnį ir kartu kurti bendrą baldų projektavimo paslaugą, kas padidina paslaugos efektyvumą. atlikto tyrimo rezultatai rodo, kad, esant aktyviam ir aukšto įsitraukimo laipsnio kliento dalyvavimui baldų projektavimo paslaugos kūrime, labiau patenkinami jo poreikiai, lūkesčiai, iškyla mažiau nesusipratimų, taupomas laikas, vyksta bendras paslaugos kūrimas, kurio metu pasiekiamas pageidaujamas paslaugos ir jos rezultato efektyvumas. apibendrinus tyrimo rezultatus galima teigti, kad aukštas įsitraukimo laipsnis ir aktyvus kliento dalyvavimas sukuria sąlygas sėkmingam ir efektyviam paslaugos kūrimo procesui. tačiau pastebėta, kad ne visi klientai noriai ir aktyviai įsitraukia į paslaugos kūrimą, todėl reikalingas ir darbuotojų aktyvumas motyvuojant klientą. paslaugos teikėjai, kurie paslaugos kūrimo metu tiesiogiai kontaktuoja su klientais, turi stengtis paveikti klientą, kad jo įsitraukimo laipsnis būtų kuo aukštesnis. 3. išvados teorinių studijų analizė parodė, kad bendrai kuriant paslaugą dažniausiai išskiriami trys apibendrinti klientų įsitraukimo laipsniai: žemas, vidutinis ir aukštas. empirinis tyrimas atskleidė, jog bendrai kuriant baldų projektavimo paslaugas kliento dalyvavimas yra žemo, vidutinio, vidutiniškai aukšto ir aukšto įsitraukimo laipsnių. taip pat tyrimas parodė, jog „grynus“ įsitraukimo laipsnius bendrai kuriant baldų projektavimo paslaugas sunku identifikuoti, dažniau galima stebėti tarpinius („negrynus“) kliento įsitraukimo laipsnius, kai atliekami kliento vaidmenys yra persipynę arba nestabilūs. pastebėta, kad klientų iki 30 metų segmentas yra aktyvesnis, dėl to įsitraukimo bendrai kuriant baldų projektavimo paslaugas laipsnis yra aukštesnis. klientų segmentas nuo 30 iki 50 metų ir per 50 metų, nors yra pakankamai aktyvus bendrai kuriant baldų projektavimo paslaugas, tačiau dažnai jo įsitraukimo laipsnis yra žemas. lyginant stebėjimo rezultatus pagal lytį pastebėta, jog vyrų dalyvavimas bendrai kuriant baldų projektavimo paslaugą yra aktyvesnis nei moterų, t. y. jų įsitraukimo laipsnis aukštas arba vidutiniškai aukštas. verslas, vadyba ir studijos 2009 295 įm o n ių e k o n o m ik a ir v a d yb a nustatyta, kad kliento įsitraukimo/neįsitraukimo priežastį nulemia kliento asmenybė, būdas, įtampa, projektuotojo dėmesio stoka, išankstinis nusistatymas, prekės ypatumai. nustatyta, kad esant žemam įsitraukimo bendrai kuriant baldų projektavimo paslaugas laipsniui sunku išsiaiškinti ir atskleisti kliento poreikius, jo norus ir motyvus, dėl to didėja tikimybė, jog paslaugos rezultatas gali neatitikti kliento lūkesčių. nustatyta, kad esant vidutiniam ir vidutiniškai aukštam įsitraukimo laipsniui bendras baldų projektavimo paslaugos kūrimas yra sąlygiškai efektyvus, nes nepastebėtas produktyvus kliento aktyvumas. empirinio tyrimo rezultatai patvirtino, jog tirtoje (baldų projektavimo) paslaugoje aukštas kliento įsitraukimo laipsnis sąlygoja bendrą ir efektyvų paslaugos kūrimą, o gautas rezultatas visiškai atitinka vartotojo norus ir poreikius. apibendrinus tyrimo rezultatus, galima teigti, jog tinkamai valdant kliento dalyvavimą paslaugoje galima tikėtis aukštesnio jo įsitraukimo laipsnio, tačiau konkrečioms rekomendacijoms reikalingas papildomas tyrimas. literatūra alinaitwe, h. m. 2008. an assessment of clients’ performance in having an efficient building process in uganda, journal of civil engineering and management 14(2): 73–78. bagdonienė, l. 2008. santykių marketingo raiška paslaugų versle [interaktyvus] [žiūrėta 2009 m. balandžio 27 d.]. prieiga per inter netą: < http://www.ktu.lt/habilitacija/bagdoniene/bagdonienes%20apzvalga.pdf>. bakanauskas, a. 2006. vartotojų elgsena: mokomoji knyga. kaunas: vdu leidykla. 210 p. isbn 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ryšių su suinteresuotosiomis šalimis tobulinimas integruojant jų poreikius į organizacijos veiklos tikslus ir uždavinius, inzinerine ekonomika – engineering economics (3): 83–87. михайлова, e. 2006. oбслуживание покупателей в розничном бизнесе, mаркетинг 6(91): 114–127. 298 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a the level of customer participation in coproduction of planning the furniture services r. tijūnaitienė, j. šidlauskienė, e. petukienė summary this article analyses customer’s level of participation in co-production of service. a client’s, known as a co-producer’s involvement is a pretty new conception of participation in creation of service where customers participate in projects, in direct, all-round and not only physical ways, together with professional representatives of service providers. a customer’s activity is becoming an important factor in order to achieve the results of effective creation of service, considering that client’s level while participating plays an essential role in the creation of service. to accomplish an empirical investigation, two quality methods were selected (observation and interview), which were performed in the company, which provides the services of furniture design. theoretical literature analyses showed that there are three levels of customer’s participation: low, average and high, which usually appear in creation of co-productive service. empirical investigation revealed that while co-producing services of furniture design customer’s level of participation can be: low, average, average high and high. this shows that “pure” level of participation in co-production of furniture design service appears rarely, while intermediate (“impure”) level of participation can be observed more frequently. it is established that customer’s personality, temper, stress, lack of designer’s attention, preliminary decisions, and goods peculiarities determine causes of customer’s involvement/ devolvement. it is established that it is hard to elucidate and reveal customer’s needs, wishes and motives when the level of participation in co-production of furniture design service is low, and, as a result of that, a chance that the results of a service could not correspond to all customers expectations, rises. it is established that co-production of furniture design service is effective when the level of participation in co-production of furniture design service is average and average high, because high-desired customer’s level of activity has not been noticed. results of empirical investigation confirmed that in investigated (furniture design) service, high level of participation results in creation of co-productive and effective service, and received result absolutely corresponds to customer’s needs and wishes. after summarizing the results of an investigation, it was noticed that it is possible to expect higher customer’s level of participation if customer’s participation is properly managed. keywords: co-production of service, customer participation, creator of service, the level of customer participation. the evaluation of social capital benefits: enterprise level irena mačerinskienė1, giedrė aleknavičiūtė2 mykolas romeris university, ateities g. 20, lt-12230 vilnius, lithuania e-mails: 1irena.macerinskiene@mruni.eu (corresponding author); 2giedre.aleknaviciute@gmail.com received 18 november 2010; accepted 15 january 2011 abstract. this paper aims to present how social capital can benefit business processes of an enterprise, which uses its social networks for business purposes, and which of those benefits are the most important in this context. the first part of this article represents the theory of social capital. the main conceptual approaches to social capital were investigated. according to this, the conception of social capital and its dimensions were introduced. the second part of this paper seeks to evaluate the benefits of social capital to enterprise’s business activities by mentioning not only benefits, which create social capital but also risks, which can occur if social capital is used improperly. the last part of this essay introduced the model of social capital’s benefits to enterprise’s business processes and evaluated, which of them are the most relevant. keywords: social capital, structural dimension, cognitive dimension, relational dimension, benefits of social capital, enterprise, enterprise’s business processes. reference to this paper should be made as follows: mačerinskienė, i.; aleknavičiūtė, g. 2011. the evaluation of social capital benefits: enterprise level, business, management and education 9(1): 109–126. doi:10.3846/bme.2011.08 jel classification: m12, m14, m21. 1. introduction the scale of current economic and social change, the process of globalization, the rapid transition to a knowledge-based society are all challenges, which demand a new approach to organizational recourses existing in that enterprise in a form of capital (kumpikaitė 2008; kazlauskaitė and bučiūnienė 2008). in recent years, traditionally there were three main types of capital, which together constituted the basis for economic development and performance such as natural, physical and human capitals. but nowadays, scholars have started to understand that those capitals can only partly determine the process of economic growth (zhang, fung 2006). that is why they started to talk about social capital as a missing link in the development of economical life. the concept of social capital has been widely used by academics from different scientific backgrounds. economists, political scientists and sociologists agree that this b u s i n e s s, ma n ag em e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(1): 109–126 doi:10.3846/bme.2011.08 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 110 i. mačerinskienė, g. aleknavičiūtė. the evaluation of social capital benefits: enterprise level conception is ambiguous and has many different connotations. for this reason it is very difficult to create one appropriate definition of social capital. according to r. d. putnam (2000), social capital builds and maintains networks, which are underpinned by the norms of behaviour. s. p. adler and s. w. kwon (2002), on the other hand, stress that social capital is the goodwill that is engendered by the fabric of social relations and that can be mobilized to facilitate an action. so, according to those definitions, scholars have realized that social capital has a big impact on economic outcomes (burt 1992; putnam 1994; coleman 1990) and enterprise activities (nahapiet, ghoshal 1998; knoke 1999). most scientists agree that social capital is a potentially productive factor that has significant influence on the efficiency of enterprise’s activity but also can transform into liability if not properly constructed or used (mačerinskienė, vasiliauskaitė 2007). that is why the scientific problem of this paper is how social capital can benefit the performance of an enterprise, which uses its social networks for business purposes. the aim of the article is to evaluate social capital’s benefits to enterprise’s business processes and distinguish the most relevant of them. the object of this research is benefits of social capital. main objectives: to introduce the social capital theory in modern economy; to analyze benefits of social capital and its influence on enterprise’s business processes; to create the model of social capital’s benefits to enterprise’s business activities and find the most relevant of them. in this paper, the scientific literature and statistical data were analyzed. in the first part of this work, we investigated the conception of social capital theory, in the second part – the benefits of social capital to enterprise’s business processes were analyzed and the model of social capital’s benefits to business processes of enterprise was created. in order to distinguish the most important benefits, which social capital can make to enterprise’s business activities, the survey was performed. 2. social capital theory 2.1. the main conceptual approaches to social capital as it is obvious, the conception of social capital became the most popular during the last decades. scholars started to emphasise the wideness and applicability of this concept and its ability to be appreciated in several fields. that is why social capital has a multidimensional nature (koka, prescott 2002). this feature of social capital is analysed by different scholars; thus it is called differently. j. coleman (1990) addresses that conception of social capital has so-called clear “appropriateness”, f. m. lappe and p. m. du bois (1997) consider that it is “surprisingly elastic”, others – that this conception simply can be meaningful for many people and generally accepted (narayan, pritchett 1997; bueno et al. 2004). when talking about the concept of social capital, we can consider that it makes a lot of confusion about its meaning to economical and organizational life, its measurement and effect on social welfare. so it is stated that nowadays social capital is only on its 111 business, management and education, 2011, 9(1): 109–126 first step of its life cycle (hirsch and levin, 1999). according to this, different scholars maintain different approaches to social capital. e. bueno (2002) in his work “el capital social en el nuevo enfoque del capital intelectual de las organizaciones”, gives four main theoretical approaches to social capital: 1. the economic development theories. 2. the social responsibility and ethics approach. 3. the corporate governance code. 4. the intellectual capital approach. 5. those four approaches and their main ideas are presented in the table below (table 1). table 1. main conceptual approaches of social capital (source: bueno et al. 2004) social capital approach main ideas relevant contributions economic development confidence, civic behaviour and associativity strengthen the social networks, contributing to the sustainable economic development. putnam (1994); knack and keefer (1997); stiglitz (1998) social responsibility and ethics social capital expresses the degree of social integration and responsibility with respect to the whole society and its agents and groups. it is based on values and attitudes, such as confidence, cooperation, safety, principles of ethics and compromises. coleman (1990); newton (1997); chang (1997); kawachi et al. (1997); bullen and onyx (1998); joseph (1998); cortina (2000); baron (2001) corporate governance ethics and corporate governance codes make positive impact on the creation of social capital, stimulating the solidarity and overcoming market imperfections. baas (1997); sen (1997); zingales (2000); rajan and zingales (2000) intellectual capital social capital is a component of intellectual capital. it is based on a set of values and the subsequent indicators such as confidence, loyalty, sincerity, compromise, transparency, solidarity, responsibility, honesty and ethics. nahapiet and ghoshal (1996); koening (1998); prusak (1998); lesser and prusak (1999); lesser (2000); cohen and prusak (2001); kenmore (2001); lesser and cothrel (2001); mcelroy (2001) after the review of different approaches to social capital, we decided to adopt intellectual capital approach because, as it is stated by eurostat analysts (2000), knowledge society is characterized by the relevant growing of intangible assets and social activities. moreover many scholars try to reinforce the inclusion of social activities in the set of intangibles that compose intellectual capital (bueno et al. 2004). so, it is acceptable to investigate social capital as a part of multidimensional phenomena – intellectual capital as it can increase the value of intangible assets by using its innovativeness. 112 i. mačerinskienė, g. aleknavičiūtė. the evaluation of social capital benefits: enterprise level 2.2. the conception of social capital in this turbulent time when the development of the new markets and technologies is rapidly increasing all over the world, every organization and every manager has to know that business is run better when people who work in a company know and trust each other. this leads to productiveness of team working, faster learning and creativity within an organization. as l. prusak and d. cohen (2001) claimed, strong relationships between companies’ workers are vital in organizations. so, it is obvious that in recent years, the concept of social capital has been widely promoted in different tasks of business activities. the essence of social capital is that network relationships, including family, friends, casual relationships and even contact with strangers, provide a rich resource in terms of knowledge, information and support in individual, organizational and public levels (taylor et al. 2004). thus social capital can be analyzed in three different levels – micro (individuals), mezzo (organizations) and macro (state). in this study we will consider on mezzo level so the analysis of corporate social capital will be the core aim of this paper. the concept of social capital is related to “citizen engagement” and describes “features of social life-networks, norms, and trust that enable participants to act together more effectively to pursue shared objectives” (putnam 1994). moreover, it can be understood as a collective resource in organization, which helps to achieve macro outcomes on the state level. social capital theory has its main three “godfathers” who formulated the basics to this conception and tried to investigate the main points of social capital and its importance to economics and organizational life. they are p. bourdieu, j. coleman and r. putnam. so, during last 25 years, their works on social capital created the most important foundations in this area. the first was p. bourdieu (1986) who in his work “the forms of capital” (1986) tried to explain the relevance of social capital and its importance in economic affairs. he considers that social capital can be divided into two elements. it is social relationships that allow individuals to claim access to resources and the amount and quality of those resources (ferri et al. 2009). that is why p. bourdieu (1986) defines social capital as […] the aggregate of the actual or potential resources, which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance or recognition. despite the fact that p. bourdieu was the first who tried to write about social capital in economic context j. coleman’s work “social capital in the creation of human capital” was the first to receive widespread attention. he tried to explain social capital with reference to its function as […] a variety of entities with two elements in common: they all consist of some aspect of social structures, and they facilitate certain action of actors – whether persons or corporate actors – within the structure (coleman 1988). so referring to those two scholars and their conceptions of social capital, we can stress that p. bourdieu’s definition includes the material conditions 113 business, management and education, 2011, 9(1): 109–126 that can drive the formation of social process while j. coleman’s approach considers only motivation in individual level. the third “godfather” of social capital and usually called as the guru of social capital is r. putnam. he differently from p. bourdier and j. coleman has concentrated on national civic association and the general well-being of communities in his understanding of social capital (ferri et al. 2009). putnam investigated collective social capital of the population and defined it as […] features of social organizations, such as trust, norms and networks that can improve the efficiency of society by facilitating coordinated actions (putnam 2000). according to those three conceptions of social capital, we can find one and the main common feature – that social capital consists of social relationships that allow members of those networks to access additional recourses via them because they cannot be find in a different way. when talking about a variety of social capital conceptions, p. s. adler and s-w. kwon (2002) assumed that definitions of social capital can be divided by whether they: 1. focus on the relations an actor maintains with other actors (internal). 2. focus on the structure of the relations among actors within a collectivity (external). 3. focus on both types of linkages (both). in literature, usually external type of social capital is called “bridging” (describes more distant connections between people and is characterized by weaker but more cross-cutting ties, e.g. with business associates, acquaintances, friends of friends, and is good for “getting ahead” in life (webb 2008)). in this view, the scientists focus on social capital as a resource build on individual’s external social ties and used for the individual’s private benefit. it can help to explain success of individuals and organizations’ in their competitive rivalry and reflects the egocentric network analysis. the internal type of social capital is called “bonding” (describes closer connections between people and is characterized by strong bonds, e.g. among family members or close friends, and is good for “getting by” in life (webb 2008)). this view focuses on collective actors’ internal characteristics (adler and kwon 2002). it is about the linkages between individuals or groups within the collectivity and it refers to socio-centric network analysis. the third group of definitions is neutral according to this internal / external dimension. it has both elements. for example, the relations between an employee and colleagues within a firm are external to the employee but internal to the firm (adler and kwon 2002). in order to put more clarity to this view, the definitions of social capital by different scholars were divided into internal, external and both groups as it is shown in table 2. 114 i. mačerinskienė, g. aleknavičiūtė. the evaluation of social capital benefits: enterprise level table 2. definitions of social capital (source: adler and kwon 2002) group of sc author definition of sc external baker (1990) “a resource that actors derive from specific social structures and then use to pursue their interests; it is created by changes in the relationship among actors.” belliveau, o’reilly, wade (1996) “an individual’s personal network and elite institutional affiliations.” bourdieu (1985) “the aggregate of the actual or potential resources, which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance or recognition.” “made up of social obligations, which are convertible, in certain conditions, into economic capital and may be institutionalized in the form of a title of nobility.” bourdieu and wacquant (1992) “the sum of the resources, actual or virtual, that accrues to an individual or a group by virtue of possessing a durable network of more or less institutionalized relationships of mutual acquaintance or recognition.” boxman, de graaf, flap (1991) “the number of people who can be expected to provide support and the resources those people have at their disposal.” burt (1992; 1997) “friends, colleagues and more general contacts through which you receive opportunities to use your financial and human capital.” “the brokerage opportunities in a network.” knoke (1999) “the process by which social actors create and mobilize their network connections within and between organizations to gain access to other social actors’ resources.” portes (1998) “the ability of actors to secure benefits by virtue of membership in social networks or other social structures.” internal brehm and rahn (1997) “the web of cooperative relationships between citizens that facilitate resolution of collective action problems.” coleman (1990) “social capital is defined by its function. it is not a single entity, but a variety of different entities having two characteristics in common: they all consist of social structure, and they facilitate certain actions of individuals who are within the structure.” fukuyama (1995) “the ability of people to work together for common purposes in groups and organizations.” “social capital can be defined simply as the existence of a certain set of informal values or norms shared among members of a group that permit cooperation among them.” 115 business, management and education, 2011, 9(1): 109–126 group of sc author definition of sc inglehart (1997) “a culture of trust and tolerance in which extensive networks of voluntary associations emerge.” portes and sensenbrenner (1993) “those expectations for action within a collectivity that affect the economic goals and goal-seeking behaviour of its members, even if these expectations are not orientated toward the economic sphere.” putnam (1995) “features of social organization such as networks, norms and social trust that facilitate coordination and cooperation of mutual benefit.” thomas (1996) “those voluntary means and processes developed within civil society, which promotes development for the collective whole.” both loury (1992) “naturally occurring social relationships among persons, which promote or assist the acquisition of skills and traits valued in the marketplace […] an asset, which may be as significant as financial bequest in accounting for the maintenance of inequality in our society.” nahapiet and ghoshal (1998) “the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit. social capital thus comprises both the network and the assets that may be mobilized through that network.” pennar (1997) “the web of social relationships that influences individual behaviour and thereby affects economic growth.” schiff (1992) “the set of elements of social structure that affects relations among people and is inputs or arguments of the production and/or utility function.” woolcock (1998) “the information, trust and norms or reciprocity inhering in one’s social networks.” adler and kwon (2002) “social capital is the goodwill available to individuals or groups. its source lies in the structure and content of the actor’s social relations. its effects flow from information, influence, and solidarity it makes available to the actor.” so, after reviewing those definitions, we relied on the p. s. adler and s-w. kwon (2002) social capital conception and also tried to define it by encompassing internal and external ties, which allowed us to attribute both individual and collective actors. thus social capital is the goodwill available to individuals or enterprises (groups), which lies in the structure of actor’s social relationships. it creates value by using those relationships, which are based on social trust, shared values / beliefs and acceptable norms between the members of those networks. continued table 2 116 i. mačerinskienė, g. aleknavičiūtė. the evaluation of social capital benefits: enterprise level 2.3. social capital dimensions as we have noted, earlier social capital was analysed as a one-dimensional concept (coleman 1988; bourdieu 1986), but after the works of j. nahapiet and s. ghoshal (1998), m. w. mcelroy et al. (2006), j. j. hoffman et al. (2005) and others, social capital became a multidimensional phenomenon with different amount of dimensions. in order to make some clarity about different dimensions of social capital, which are divided by different scientists, we drew a table (table 3) with some examples how social capital was divided in literature table 3. the variety of social capital dimensions author social capital dimensions nahapiet and ghoshal (1998) structural dimension (social network); relational dimension (trust, norms); cognitive dimension (codes, beliefs). mcelroy et al. (2006) trust; beliefs; norms; rules; network. hoffman et al. (2005) information channels; social norms; obligations and expectations; identity; moral infrastructure. evangelinos and jones (2009) social networks; social norms; institutional trust; social trust. no matter that in literature social capital is divided differently (table 3), usually in most conceptions ,we can find the main three common elements of social capital. it is social network, which in mcelroy’s et al. (2006) work is called “network” and in hoffman’s et al. (2005) theory it is “information channels”. also in all those conceptions we can see social norms and trust, which in different conceptions can be divided into smaller groups. that is why in this paper we decided to use j. nahapiet and s. ghoshal (1998) conception because those three dimensions encompass all other dimensions mentioned by other scholars (fig. 1). structural dimension. the structural dimension of social capital describes the physical structure or links between people in networks. in other words, as burt (1992) explained, it refers to whom you reach and how you reach those social relationships. moreover, nahapiet and ghoshal (1998) in their fundamental proposition of social capital addressed that network ties provided access to resources, which provided the enterprise with not only a wide range of opportunities but also constraints. thus social 117 business, management and education, 2011, 9(1): 109–126 capital can be analyzed from two different points: how social capital can improve the performance of enterprises (benefit) and how much risk enterprise should take in order to maintain and support its social capital (risk). in this paper, we will pay more attention to social capital’s benefits for enterprise performance, and risks will be briefly mentioned in order to have a comprehensive view. finally, it is important to know that social relations are information channels, which reduce the amount of time and investment required for collecting necessary information (nahapiet, ghoshal 1998); also they encompass individual ties as well as formal and informal relationships, strategic and spontaneous action, and, moreover, rationalities and irrationalities (coleman 1990). cognitive dimension. the cognitive dimension of social capital refers to those resources that represent shared understanding of common goals and the proper ways of acting — for example, shared language and codes (yli-renko 1999). n. llewellyn and c. armistead (2000) noticed that cognitive dimension differs from relational one because it captures the extent, to which shared ways of thinking and interpreting events support the generation of social capital, while relational dimension’s of social capital purpose is to access the emotional bonds that hold those networks together. the cognitive dimension of social capital is important because through its standards and unified codes, it helps to understand other network members and leads them to act accordingly to their expectations. according to l. prusak and d. cohen (2001), the main element, which builds social capital, is a conversation between members of social network, which binds those people into communities. but this element could not be implemented if there were no unique languages and understandable codes, which are the main factors of cognitive dimension of social capital. those conversations in this point of view consist of gossip, stories, mutual discovery of meanings, negotiation of norms and aims and expressions of sympathy, disapproval, bewilderment and understanding (totterman, sten 2005). moreover, those conversations can be analyzed not only through ability to give verbal information but also taking into account the tone of voice and nonverbal expressions when conversation occurs face-to-face. fig. 1. the three dimensions of social capital based upon j. nahapiet and s. ghoshal (source: totterman, sten 2005) structural cognitive relational network ties network configuration appropriable organisation (devoted to its purpose) shared language and codes shared narratives trust norms obligations and expectations identification 118 i. mačerinskienė, g. aleknavičiūtė. the evaluation of social capital benefits: enterprise level relational dimension. the relational dimension of social capital is defined as the behavioural assets rooted in a relationship such as trust and trustworthiness (yli-renko 1999). trust is a very rich concept, covering a wide range of relationships, conjoining a variety of objects (colesca 2009). that is why trust is usually analyzed as the fundamental element to social capital’s existence and growth because trust and friendship are vital in development of social network ties. because of this tight connection between trust and social capital, there is some confusion about whether social capital is the result of trust or they are virtually interchangeable. this was analyzed by different scholars but no common opinion was obtained. furthermore, if we want that relational dimension of social capital properly supported social network, it should be based on social norms and sanctions. norms are the informal rules that the members of a network must follow (berggrer, silver 2009). if they are broken, some sanctions should be taken in order to keep the balance of obligations and expectations in those networks. this conception helps to maintain and support trust as it is obvious that norms applied in an organization should primarily focus on generating trust but not competition between parties (totterman, sten 2005). to sum up, in literature, we can find many different authors who try to explain social capital conception and its importance for an enterprise. thus it is very important to define this phenomenon in order to have a comprehensive view of social capital in this paper. so, we decided to rely on adler and kwon conception of social capital and also distinguish three social capital dimensions as it was done by nahapiet and ghoshal. so, in this paper, social capital is the goodwill available to individuals or enterprises (groups), which lies in the structure of actor’s social relationships. it consists of structural, relational and cognitive dimensions and creates value by using social relationships, which are based on social trust, shared values/beliefs and acceptable norms between the members of those networks. 3. benefits of social capital and its influence on business processes of an enterprise during the last year, social capital has become one of the most important scientific phenomena in different social sciences, such as sociology, politics, economy, business management, etc. scholars have used social capital conception in order to face different problems in their fields. they tried to explain how social capital could influence the problems of the 21st century, emerging from such elements as family and youth role in community life, democracy and government importance in economic development process and others. at the same time, social capital also has been started to analyze in the enterprise level. as r. s. burt (1992) stated, social capital conception has spread to corporate level because different organizations can be considered as social agents, which have common social networks, norms and trust that is equal for every member of that organization. 119 business, management and education, 2011, 9(1): 109–126 according to this, an enterprise has become one social unit, which can be analyzed fromfrom the perspective of social capital. that is why different scholars started to investigate how. that is why different scholars started to investigate how social capital could benefit from the performance of the particular enterprise, which uses its social networks for business purposes and there is no risk of using them. benefits of social capital. according to f. sabatini (2006), social capital can benefit enterprise performance by fostering the diffusion of information and knowledge, lowering uncertainty and transaction costs and enhancing economic development dependent on the level of trust within networks. moreover, in literature we can find many different benefits of social capital, which help to encourage performance of an enterprise. f. sabatini (2006) and e. bueno et al. (2004) in their works state that social capital can: − improve economic capabilities of consumers and producers; − strengthen relations with suppliers, also promote regional network production and inter-organizational learning; − stimulate participation opportunities in social environment, which allow people to meet frequently, as fertile ground for nurturing shared values and social norms of trust and reciprocity; − increase likelihood of repeated interactions among agents as it can increase reputation of an enterprise; − foster better diffusion of information that makes behaviour more foreseeable and reduces uncertainty; − influence professional success; − help workers in the job search process and create a better portfolio of employees for the enterprise; − reduce the rotation of employees; − stimulate innovation, intellectual capital creation and the efficiency of multidisciplinary teams in enterprise; − facilitate the exchange of resources between units; − reduce the average cost of transactions due to the increase of trust-based relations, just as an increase in physical capital reduces the average cost of production. those listed statements show only some social capital’s benefits, which can occur in enterprises when social capital is used properly. there are much more of them. thus, it is very important to investigate those benefits and evaluate whether they are really beneficial. risks of social capital. there is a tendency that the majority of scholars identify social capital as a resource with only positive outcomes, but, after deeper investigation of this phenomenon, we can also find a different opinion. some scientists oppose that considering social capital simply from the positive view shows only one side of this multidimensional conception. as adler and kwon (2002) stressed, there are three main considerations why we have to refer to social capital from more balanced view. firstly, investments in social capital are not costless reversible or convertible differently 120 i. mačerinskienė, g. aleknavičiūtė. the evaluation of social capital benefits: enterprise level from investments in physical capital. moreover, unbalanced investments or over-investments in social capital can cause unplanned constraints and liabilities. secondly, there can be situations when no matter that social capital is beneficial to a focal actor, it can have negative consequences for the broader aggregates of which that actor is a part of. according to adler and kwon (2002), these multilevel issues are inescapable when the lens of social capital is used to analyze complex enterprises. finally, it is obvious that a given set of social capital benefits and risks can have a different ultimate value for an actor depending on a number of moderating factors, which can occur in economic life. i. mačerinskienė and j. vasiliauskaitė (2007) in their work “the model of evaluation of the impact of corporate social capital on the operation of enterprise” distinguished six main risks, which can occur in an enterprise when it is using social capital. they are as follows: − restrictions on individual freedom, flexibility and innovation; − excess claims on group members; − outflow of vital information attendant by negative outcomes for information owner; − redundant information; − exclusion of outsiders; − costs of social capital / irrational or over investment. so, according to those statements, it is necessary to consider social capital from two-sided opinion because sometimes the risk, which occurs on the enterprise level, can outweigh those benefits, which are created by using social capital. however, in this article, we exclude the dimension of the risk and mostly concentrate on the benefits of social capital. in order to better understand the quality of social capital’s benefits and how they influence different business processes in the particular enterprise, the model, which explains what kind of benefits social capital creates to enterprise’s business activities, has been created. 4. the model of social capital’s benefits to enterprise’s business processes as we have mentioned earlier, it is very important to evaluate social capital’s relevance to different business activities of an enterprise. this evaluation can be done by revealing how appropriate usage of social capital can benefit the performance of an enterprise. thus, it is useful to overview what kind of benefits social capital can create to business processes in a company. for this reason, the model – which shows the structure of social capital, discussed in this article, and illustrates those benefits that social capital can create in an enterprise – has been created (fig. 2). so, as it is shown in the model (fig. 2), in our point of view, social capital is a part of intellectual capital as social activities and intangible assets in nowadays economic life are very closely related and maintain each other. as we all know, in modern economy, intangibles have become even more important than financial opportunities of an organi121 business, management and education, 2011, 9(1): 109–126 zation because good usage of nonmaterial elements of an enterprise can create all those financial facilities and even more. so, according to this, we want to stress that social capital as other dimensions of intellectual capital such as human or structural capitals are very important in creation of enterprises’ goodwill. moreover, the model of social capital’s benefits to enterprise’s business processes tries to illustrate how social capital is composed. so we can see (fig. 2) that social capital has three dimensions – structural, cognitive and relational. elements of those dimensions, such as social networks, norms and codes of behaviour and cooperation and trust format that social capital created in an enterprise. as it is known, social capital can be internal or external; so in this model we assume social capital as both internal and external in order to better illustrate those benefits for an enterprise, which are created from both internal and externalsocial capital. fig. 2. model of social capital’s benefits to enterprise’s business processes intellectual capital structural dimension (social networks) cognitive dimension (codes and norms) relational dimension (trust) social capital internal and external benefits of social capital business processes of enterprise • less time consumption; • reduced transaction costs and increased amount of then; • strengthened relations with suppliers and customers ; • reduced business risk; • easier to reach company goals; • improved manufacturing processes; • renewed production and expanded its distribution; • increased sales and profits of the enterprise • increased flexibility of a company; • better communication between companies and reduced uncertainty, • strengthened personal relations; • ensured permanent business development; • easier access to new markets • ensured better portfolio of employees for the enterprise; • effective relationships between employees and employers, • high efficiency of the company; • reduced the rotation of employees; • fostered better diffusion of information within a company; • stimulate innovation and intellectual capital creation in enterprise; • increased reputation of enterprise 122 i. mačerinskienė, g. aleknavičiūtė. the evaluation of social capital benefits: enterprise level the discussed conception of social capital creates benefits to business activities of an enterprise. as it is shown in the model (fig. 2), there are many different business processes, which can be improved if an enterprise properly uses its social capital. those benefits can encompass both internal and external activities of the company; can create a better image of the enterprise, strengthen relations with third parties of the company; it also ensures the increase in sales and profits or better portfolio of employees, which will create goodwill for that company, etc. thus, it is very important to evaluate those social capital’s benefits to the enterprise. according to this model, the survey in order to investigate which of those benefits mentioned in our model have the biggest possibility to occur in the enterprise using and promoting its social capital, has been performed. the questionnaire involving 409 respondents from lithuanian companies was constructed. the main objective of the respondents was to agree or disagree with the statements about benefits created by social capital to the enterprise. they had to measure those statements from 1 to 5 (where 1 – completely disagree, 5 – absolutely agree) according to the likert scale. the results are shown in the picture below (fig. 3). fig. 3. the empirical evaluation of social capital’s benefits to enterprise business processes as this empirical investigation showed (fig. 3), the majority of the respondents, who were participating in this survey, believed that good usage and promotion of enterprise’s social capital more likely could benefit enterprise’s business processes by reducing the rotation of employees (3.97), increasing reputation (3.95) and building high efficiency (3.95) of the company and also could help to ensure better portfolio of employees working in the enterprise (3.93). on the other hand, they stated that social capital was not benefits of social capital renewed production and expanded its distribution increased flexibility of a company easier access to new markets better communication between companies and.. effectiverelationships between employees and.. high efficiency of the company fostered better diffusion of information within a.. reduced business risk reduced transaction costs and increased amount.. increasedreputation of enterprise 3.30 3.40 3.50 3.60 3.70 3.80 3.90 4.00 3.66 3.64 3.67 3.75 3.68 3.75 3.86 3.80 3.76 3.88 3.97 3.95 3.74 3.84 3.93 3.58 3.82 3.83 3.88 3.95 123 business, management and education, 2011, 9(1): 109–126 so strong to help the enterprise reduce its business risk, increase its sales and profits or renew its products and expand their distribution channels. to sum up, we can state that this small investigation showed that people working in different organizations assume that social capital could benefit business activities of enterprise connected with work force problems and the prestige of that enterprise but in order to reduce business risk of the company, improve its sales and profit or create new products an enterprise needs much more resources than only social capital. they agree that social capital is important in those fields, but it has to cooperate with other capitals of that enterprise in order to achieve the best results. 5. conclusions as it is obvious, the conception of social capital has become the most popular during the last decades. scholars started to emphasise the wideness and applicability of this concept and its ability to be appreciated in several fields. thus social capital has a multidimensional nature and in this paper is investigated as a part of intellectual capital as it can increase the value of intangible assets by using its innovativeness. referring to the scientific literature we can find many different authors who try to explain social capital conception and its importance for an enterprise; as well as we integrate some scholars’ definitions and state that social capital is the goodwill available to individuals or enterprises (groups), which lies in the structure of actor’s social relationships. it consists of structural, relational and cognitive dimensions and creates value by using social relationships, which are based on social trust, shared values / believes and acceptable norms between the members of those networks. most scientists agree that social capital is the potentially productive factor that makes significant influence on the efficiency of enterprise’s activity. moreover, its proper usage creates many benefits for enterprise’s business processes. so, different scholars have started to investigate the ways social capital can benefit the performance of a particular enterprise, which uses its social networks for business purposes, and are there any risks of using them. in such analyses it is recommended to consider social capital from two-sided opinion because sometimes that risk, which occurs in enterprise level, can overweight those benefits, which are created by using social capital. however in this paper, we concentrate on the benefits of social capital and how they can improve the particular business activities of a company. in order to better understand the quality of social capital’s benefits and how they influence different business processes in a particular enterprise, the model, which explains the types of benefits social capital creates to enterprise’s business activities, has been created. according to this model, the survey in order to investigate which of those benefits mentioned in our model have the biggest possibility to occur in an enterprise using and promoting its social capital, has been carried out. the results of the survey showed that social capital could benefit business activities of the enterprise connected with work 124 i. mačerinskienė, g. aleknavičiūtė. the evaluation of social capital benefits: enterprise level force problems or the prestige of that enterprise but in order to reduce business risk of the company, improve its sales and profits or create new products the enterprise need much more resources than only social capital. only the good combination of different tangible and intangible recourses can properly benefit all business processes of an enterprise. references adler, s. p.; 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(eds). social capital, lifelong learning regions and the management of place: an international perspective. london and new york: routledge, 76–94. taylor, d. w.; jones, o.; boles, k. 2004. building social capital through action learning: an insight into the entrepreneur, education + training 46(5): 226–235. issn 0040-0912. totterman, h.; sten, j. 2005. start-ups: business incubation and social capital, international small business journal 23(5): 487–511. doi:10.1177/0266242605055909 webb, c. 2008. measuring social capital and knowledge networks, journal of knowledge management 12(5): 65–78. doi:10.1108/13673270810902948 zhang, q.; fung, h-g. 2006. china’s social capital and financial performance of private enterprises, journal of small business and enterprise development 13(2): 198–201. doi:10.1108/14626000610665908 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 http://dx.doi.org/10.1016/j.ijproman.2006.02.006 126 i. mačerinskienė, g. aleknavičiūtė. the evaluation of social capital benefits: enterprise level socialinio kapitalo naudos vertinimas: įmonės lygmuo i. mačerinskienė, g. aleknavičiūtė santrauka straipsnyje siekiama pateikti, kaip socialinis kapitalas gali gerinti įmonės verslo procesus, kaip naudojamas verslo tikslais socialiniuose tinkluose ir kurie veiksniai naudos aspektu yra vertingiausi. pirmojoje šio straipsnio dalyje buvo nagrinėjama socialinio kapitalo teorija ir pagrindiniai koncepciniai požiūriai. remiantis teorine analize, buvo identifikuota socialinio kapitalo koncepcija ir veiksniai. antrojoje straipsnio dalyje buvo tiriama socialinio kapitalo vertė įmonių verslo procesams, pabrėžiant ne tik socialinio kapitalo sukuriamą vertę, bet ir riziką, kuri gali atsirasti, jei socialinis kapitalas netinkamai naudojamas. paskutinėje straipsnio dalyje pateiktas socialinio kapitalo įmonės verslo procesų naudos modelis ir įvertinti tiesiogiai su šiuo procesu susiję veiksniai. reikšminiai žodžiai: socialinis kapitalas, struktūrinė dimensija, kognityvinė dimensija, santykių dimensija, socialinio kapitalo nauda, įmonė, įmonės verslo procesai. irena mačerinskienė. professor, head of the department of banking and investments at mykolas romeris university, faculty of economics and finance management. her research interests include financial markets, social capital, intellectual capital, business performance, sme’s, entrepreneurship. giedrė aleknavičiūtė. mykolas romeris university, faculty of economics and finance management. now she is studying at a first year of master degree of financial markets. research interests: social capital, entrepreneurship, sme’s. verslas, vadyba ir studijos 2009 229 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s virtualiosios organizacijos personalo motyvavimas laura uturytė-vrubliauskienė vlaura@vgtu.lt vilniaus gedimino technikos universitetas, verslo technologijų katedra juozas merkevičius juozasm@vgtu.lt vilniaus gedimino technikos universitetas, verslo technologijų katedra 1. įvadas tyrimo problema ir aktualumas. pastarųjų metų mokslinė literatūra pateikia tyrimų, nagrinėjančių virtualiąsias organizacijas įvairiais vadybos aspektais, tačiau personalo motyvacijos tema, palyginti su tradicinėmis organizacijų formomis, nėra pakankamai ištirta. šiandieninėje visuomenėje, vykstant sparčiai technologijų kaitai ir globalizacijos procesui, darbuotojų iniciatyva, žinios, įgūdžiai ir kūrybiškumas iškyla kaip vienas iš svarbiausių įmonės ilgalaikio konkurencingumo veiksnių. žmogiškasis kapitalas įgauna vis daugiau svarbos, nes būtent jis lemia įmonės pranašumus konkurencinėje kovoje. įmonės vadovai turėtų daugiau dėmesio skirti veiksniams, skatinantiems darbuotojus geriau atlikti darbą ir taip prisidėti prie visos organizacijos veiklos produktyvumo. norint užtikrinti sėkmingą įmonės veiklą ilgalaikėje perspektyvoje, svarbu ieškoti ir taikyti priemones, skatinančias darbuotojus imtis iniciatyvos ir siekti kuo geresnių darbo rezultatų. pastarųjų metų mokslinėje literatūroje galima rasti tyrimų, nagrinėjančių virtualiąsias organizacijas kaip kokybiškai naują organizacijos struktūrą, tačiau personalo motyvacijos tema, palyginti su tradicinėmis organizacijų formomis, nėra pakankamai ištirta. daugėjant organizacijų, dirbančių naujomis verslo © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai 230 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s sąlygomis, o kartu didėjant šių organizacijų darbuotojų skaičiui, darbuotojų valdymo ir motyvavimo klausimai tampa aktualūs plėtojant verslą. tyrimo tikslas – ištirti ir palyginti virtualiai ir tradiciškai dirbančių darbuotojų požiūrį į pagrindinius motyvaciją lemiančius veiksnius. siekiant įgyvendinti šį tikslą, buvo iškelti tokie tyrimo uždaviniai: išanalizuoti naujos organizacijos formos kilmę, privalumus ir trūkumus, minimus mokslinėje literatūroje, pateikti atlikto personalo motyvavimo tyrimo rezultatus: virtualiųjų organizacijų darbuotojų motyvavimo veiksnius, siekiant įgyvendinti organizacijos tikslus ir planus. tyrimo objektas – virtualiosios organizacijos personalas. tyrimo metodai – mokslinės literatūros analizė ir apibendrinimas, anketinė apklausa ir statistinis duomenų sisteminimas bei apdorojimas. 2. virtualiosios organizacijos personalo motyvacijos tyrimo problematika xx-ojo amžiaus antroje pusėje, ypač paskutinįjį dešimtmetį, spartus itt vystymasis (damaskopoulos et al. 2008; davidavičienė 2008; gatautis 2008) ir šių technologijų vis didėjantis skverbimasis į kasdieninę organizacijų veiklą bei individų asmeninį gyvenimą, organizacijų valdymo struktūrų plokštėjimas ir tinklėjimas nemažai daliai mokslininkų, tyrinėjančių organizacijų formas, leido suvokti, kad itt tapo viena iš pagrindinių priežasčių atsirasti virtualiosioms organizacijoms. dabar informacinė sistema tampa bet kurios įmonės organine dalimi (paliulis et al. 2003). nagrinėjant virtualiosios organizacijos prigimtį, pirmiausia būtina apibrėžti virtualumo sąvoką. e. c. kasper-fuehrera ir n. m. ashkanasy (2003) bei s. klein (1994) teigia, jog virtualioji organizacija yra analogiška virtualiajai kompiuterių atminčiai. j. a. byrne (1993) teigia, kad kompiuteriai naudoja laikiną, lanksčią ir persijungiančią tarp kietojo disko ir fizinės atminties atmintį, ir tai leidžia padidinti kompiuterio virtualiosios atminties apimtį, čia virtualioji atmintis „optimizuoja“ fizinę atmintį, panašiai kaip virtualioji organizacija „optimizuoja“ „realią“ organizaciją. s. goldman ir kiti (1995) teigia, kad virtualioji organizacija geba paskirstyti išteklius tarp narių dinamiškai bei lanksčiai ir taip padidinti partnerystės veiksmingumą bei našumą. be to, klientas gali fiziškai apčiuopti ar pajusti virtualiosios organizacijos darbo išdavą produkto ar paslaugos forma. s. klein (1994) aiškina, kad struktūra, sukūrusi produktą ar paslaugą, visgi nėra organizacija tradicine prasme. daugeliu atvejų virtualioji organizacija sudaro didelės išteklių bazės įspūdį, tačiau tikrovėje, galbūt, du trys žmonės iš skirtingų pasaulio kraštų kartu dirba verslas, vadyba ir studijos 2009 231 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s tinkle ir sukuria didelės organizacijos iliuziją. p. sieber ir j. griese (1997) bei c. c. snow ir bendraautoriai (snow et al. 1999) tvirtina, jog sąvoka virtualus analogiška žodžiui beveik. todėl virtualioji organizacija yra beveik organizacija, nes trūksta tam tikrų esminių tradicinės organizacijos savybių. akivaizdu, kad terminas virtualus suprantamas skirtingai, todėl neabejotinai daro įtaką ir skirtingiems autorių požiūriams į virtualiąsias organizacijas ir literatūroje nėra bendro virtualiosios organizacijos apibrėžimo. d. e. o’leary ir bendraautoriai (o’leary et al. 1997) apibrėžia virtualiąją organizaciją kaip „papildomus išteklius, egzistuojančius bendradarbiaujančiose kompanijose, integruotus (skirtus) tam tikram produktui sukurti ir pateikti tol, kol tikslinga tai daryti“. h. voss (1996) vardija tokias virtualiosios organizacijos charakteristikas: „bendra vizija ir tikslai, veiklos bei komandos sutelktos prie pagrindinių kompetencijų, informacija perduodama ir apdorojama realiame laike iš apačios į viršų“. a. m. townsend ir bendraautoriai (townsend et al. 1998) charakterizuoja virtualiąsias komandas kaip vartojančias informacines technologijas kaip komunikavimo priemones vietoj tiesioginio (angl. face to face) bendravimo. „tradicinė verslo organizacija fiziškai turi įmonę, įskaitant pastatus, biurus ir t. t., nuolatinę darbo jėgą, darbo jėgos ištekliai dirba įmonės patalpose. mums atrodo, jog virtualiosios organizacijos neturi vieno ar kelių iš šių komponentų“, – pažymi a. m. townsend. visiška virtualioji organizacija gali būti apibūdinama kaip organizacija, neturinti fizinės įmonės ir nuolatinės darbo jėgos. t. ishaya ir l. macaulay (1999), taip pat r. korsakienė ir bendraautoriai (korsakienė et al. 2006) teigia, kad viena iš virtualiųjų organizacijų atsiradimo priežasčių – tai pasikeitusios organizacijų veiklos sąlygos, vykstant globalizacijos procesams. atsiradusi globali virtualioji rinka, veikianti daugiausiai naudojant kompiuterinius tinklus, virtualioje erdvėje panaikino ribas tarp skirtingų valstybių rinkų, nes vykdant produktų ir paslaugų prekybą fiziškai neegzistuojančioje erdvėje, galimybę prie jos prisijungti turi skirtingų geografinių taškų vartotojai, kartu ir tiekėjai, ir gamintojai. konkurencijos globalizacija vyksta ne tik virtualioje erdvėje – vis labiau besiplečiančios europos sąjungos sienos, besikeičiantys tarptautinės prekybos įstatymai ir panašūs politiniai sprendimai sudaro terpę bendradarbiauti skirtingų šalių, skirtingų kultūrų ir įvairius išteklius turinčioms bei galinčioms kooperuotis įmonėms. šiuo atveju virtualios grupės sukūrimas – viena iš strategijų, užtikrinančių organizacijos sėkmę. apibendrinant galima teigti, kad mokslininkų požiūriai į virtualiųjų organizacijų atsiradimą, užuomazgas ir jų veikimo mechanizmą yra skirtingi. vieni mokslininkai teigia, kad pirminis impulsas virtualiosios organizacijos susikūrimui 232 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s yra rinkos užsakymo atsiradimas, kuriam įgyvendinti suformuojamas virtualus tinklas, kurį sudaro paslaugas teikiantys bei prekes parduodantys partneriai. kitų mokslininkų teigimu, virtualiosios organizacijos gali susikurti ne tik tam tikram komerciniam tikslui siekti ir ne tik tuo metu, kai išauga toks komercinis poreikis, tačiau daugelis autorių sutinka, kad reikšmingas šios organizacijos atsiradimo veiksnys yra sparti informacinių technologijų plėtra. virtualiosios organizacijos privalumai ir trūkumai. kai kurie autoriai, tokie kaip w. h. davidow ir m. s. malone (1993), s. l. goldman (goldman et al. 1995) pažymi, kad pagrindinis virtualiosios organizacijos privalumas – tai žinių, patirties bei kompetencijos pasidalinimas. skirtingai nuo tradicinių grupių, virtualiosios komandos dirba, nepaisydamos erdvės, laiko ir organizacinių ribų, naudodamos ryšius, kuriuos stiprina komunikacinės technologijos tinklai (lipnack, stamps 1997). virtualiosios organizacijos padeda išnaudoti tarptautinio darbo pasidalijimo privalumus ir naudą, ir tai yra vienas iš jų pranašumų, palyginti su įprastomis klasikinėmis organizacijomis. tradicinėse gamybinėse ar paslaugų teikimo organizacijose, norint turėti pranašumų prieš konkurentus, komunikacijai tarp skirtingų organizacijos padalinių užtikrinti skiriama daug lėšų ir panaudojama didžioji organizacijos išteklių dalis. darbuotojų nuvykimas iš vienos vietos į kitą ar važiavimas iš vieno organizacijos padalinio į kitą eikvoja ir darbuotojų laiką, kas dar labiau didina organizacijos išlaidas bei atima galimybę tam tikrais atvejais pasinaudoti naudingomis rinkoje pasitaikančiomis progomis. todėl praktikoje vis dažniau taikomas distancinis darbas, t. y. darbuotojų buvimas ne konkrečioje fizinėje darbo vietoje, o bet kur kitur (nors ir darbuotojo namuose), kai užtikrinamas susisiekimas su juo naudojant modernias technologijas. taip organizacija gali sutaupyti daug lėšų, kurios būtų išleistos biuro patalpų išlaikymui, kompensacijoms už transportą, apmokėjimui už būtinas pertraukas darbo metu ir pan. pagrindinis virtualiųjų organizacijų akcentas – papildyti ir dalintis ištekliais, siekiant padidinti konkurencingumą. palyginti su tradicine organizacija ar atskiro asmens galimybėmis, toks požiūris žymiai praplečia partnerystės galimybes konkuruoti dideliu mastu. esant tokiai sąlygai, virtualiosios organizacijos modelis ypač patrauklus mažo ir vidutinio dydžio bendrovėms (scholz 1997), nes jis suteikia galimybę išlaikyti nepriklausomybę ar netgi sumažinti esamą priklausomybę nuo didelių verslo organizacijų. n. strausak (1998) nurodo, kad pagrindinis virtualiosios organizacijos privalumas tas, kad joje sujungiamas visų jos narių talentas arba žinios, kas sukuria labai stiprias konkurencines galimybes rinkoje. virtualiosios komandos nariai labai lengvai prisitaiko prie rinkos pokyčių. verslas, vadyba ir studijos 2009 233 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s a. kupper (2002) nurodo, kad galimybė dislokuoti biurą skirtingose vietose yra naudinga tiek darbuotojui, tiek darbdaviui. darbuotojams tai leidžia išvengti transporto spūsčių ir laiką, skirtą kelionėms į darbą ir iš jo, panaudoti daug efektyviau. šio autoriaus nuomone, dirbant namuose patiriama mažiau streso. u. j. franke (2001) nuomone, nepaisant virtualiosios organizacijos koncepcijos, charakterizuojančios svarbius privalumus, visgi egzistuoja pagrindinės kliūtys, į kurias būtina atkreipti dėmesį: veiklos koordinavimo trūkumas; geografinis organizacijos narių pasiskirstymas (dėl atstumo ir laiko skirtumų tarpusavyje bendradarbiaujama naudojant informacines technologijas, todėl sumažėja pasitenkinimas savo darbu dėl fizinės izoliacijos ir tradicinei darbo vietai būdingos socialinės aplinkos nebuvimo); priklausomybė nuo technologijų; sudėtinga personalo skatinimo sistema; lojalumo stoka; aiškios struktūros nebuvimas; riboto laiko faktorius (galegher et al. 1990). iš įvardytų problemų akivaizdu, jog virtualiosios organizacijos susiduria su ta pačia problema kaip ir tradicinės – kuriamos organizacinės struktūros dalyvių (virtualiosios organizacijos narių) tinkamumu jų užimamai vietai struktūroje. kita svarbi problema, į kurią būtina atsižvelgti, ta, kad virtualiosiose organizacijose yra atrinktų jų narių tarpusavio suderinamumas. kadangi ši organizacinė forma neturi savo fizinio pagrindo, o yra paremta veikimu virtualioje erdvėje naudojant informacines komunikacijos priemones, svarbu, jog visi organizacijos nariai turėtų technologines galimybes tarpusavio ryšiams palaikyti ir siekti bendrų užsibrėžtų tikslų. kaip technologijos pagrindas įvardijamas tų pačių komunikacijos priemonių, kuriomis virtualiosios organizacijos nariai gali susisiekti vienas su kitu, turėjimas bei techninis informacinių komunikacijos priemonių tinkamumas ryšiui palaikyti (eggert 2001). dėl atstumo ir laiko skirtumų tarpusavyje bendradarbiaujama informacinėmis technologijomis. organizacijos nariai susitinka nereguliariai, todėl bendraujant vien tik informacinėmis technologijomis prarandama didelė dalis neformalių, asmeninių bei taktinių bendravimo aspektų (hinds, kiesler 1995), kurie dažnai reikalingi norint pasiekti bendrus vardiklius, susitarimus ar mokantis organizacijos viduje. iš tiesų, geografinis organizacijos narių pasiskirstymas padidina pasitenkinimą savo darbu dėl darbo grafiko lankstumo. tačiau sumažėja pasitenkinimas savo darbu dėl fizinės izoliacijos ir socialinės aplinkos nebuvimo, kuri būdinga tradicinei darbo vietai. j. galegher (galegher et al. 1990) nuomone, neformalus bendravimas yra labai svarbus sprendžiant neapibrėžtus ir dviprasmiškus klausimus, reikalaujančius tam tikro ryžtingumo priimant sprendimus. kiekvienoje organizacijoje yra naujovių, netikėtų situacijų, neapibrėžtumų, kurie iškyla 234 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s netgi rutininių procedūrų metu. be to, išnykus tradicinei darbo vietai išnyksta ir prisirišimas bei tam tikras atsidavimas organizacijai. tam, kad būtų užtikrintas efektyvus grupinis darbas ir kad būtų siekiama tų pačių tikslų, kaip teigia l. sproull (1991), j. galegher (galegher 1990), tiesiog būtina, kad žmonės susitiktų ir aptartų įvairius dalykus kartu. minėti autoriai tvirtina, kad, be formalių kontaktų, ypatingai svarbu bendrauti neformaliai ir kad šiame bendravime reikšmės turi ne tik verbalinis, bet ir neverbalinis kontaktas. kūno kalba gali parodyti žmogaus motyvaciją ir kaip jis supranta vieną ar kitą klausimą, kas vyksta organizacijoje. šis neverbalinis kontaktas gana apribojamas bendraujant informacinėmis technologijomis, esant geografiniam bendraujančių žmonių pasiskirstymui. t. ishaya (ishaya, macaulay 1999), įvardydamas virtualiosios organizacijos skirtumus nuo tradicinės, pastebi, kad jos nariai neturi bendros darbo vietos, visų pirma bendrauja naudodami informacines technologijas, labai dažnai fiziškai nėra vienas kito matę, gali kalbėti skirtinga kalba, turėti skirtingą kultūrinį pagrindą, gali turėti individualių charakterio savybių, apie kurias nežino kiti organizacijos nariai. dėl minėtų skirtumų virtualiojoje organizacijoje gali būti pastebima lojalumo stoka pačiai organizacijai. virtualiosios organizacijos nariai yra pasamdyti tam tikram laikui, tam tikram tikslui pasiekti ar užduočiai įvykdyti. dažnai šios organizacijos nariai gali būti pasamdomi iš kitos darbo vietos, savo darbovietės ar partnerių organizacijos. tai reiškia, kad jie užima tam tikrą laikiną poziciją virtualiojoje organizacijoje ir kartu eina pareigas kur nors kitur. todėl gali iškilti prioritetų ar lojalumo savo darbui problema. gali būti sunku suderinti du skirtingus darbus, projektus ar tikslus. taip pat virtualiosios organizacijos tikslas gali nesiderinti su asmeniniu ar firmos, kurioje dirba organizacijos narys, tikslu. iš identifikuotų problemų akivaizdu, jog virtualioji organizacija susiduria su ta pačia problema kaip ir tradicinė. kaip teigia a. sakalas (1995), tai – kuriamos organizacinės struktūros personalo (virtualios organizacijos narių) tinkamumas jų užimamai vietai struktūroje. todėl yra aktualus versle kylančių problemų sprendimas, personalo motyvavimas, jungiant juos bendram tikslui pasiekti ir įgyvendinti. dėl minėtų priežasčių svarbu atlikti tyrimus, kurie padėtų išsiaiškinti veiksnius, kurie labiausiai motyvuotų virtualiai dirbančius darbuotojus. 3. virtualiosios organizacijos personalo motyvavimo veiksnių tyrimo rezultatai kalbant apie motyvaciją dirbti ir dirbti gerai, įvertinami skatinamieji veiksniai, pvz., darbo užmokestis, savęs įtvirtinimas, pagarba, savęs kaip priklausančio verslas, vadyba ir studijos 2009 235 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s tam tikrai organizacijai ar komandai suvokimas, karjera, kūrybinė atmosfera, premijos ir vadovybės pasitikėjimas. šie veiksniai nevienodai motyvuoja žmones (kumpikaitė 2007; marcinkevičiūtė 2005). pasak s. k. srivastava ir d. n. kakkar (2008), tai, kas yra svarbu vadovui, nebūtinai svarbu jo pavaldiniui. todėl norėdami motyvuoti savo darbuotojus įgyvendinti iškeltus planus, darbdaviai turėtų periodiškai su jais bendrauti ir išsiaiškinti, ar darbuotojai patenkinti savo darbu ir ko jiems trūksta. pagrindinis tyrimo tikslas – ištirti ir palyginti virtualiai ir tradiciškai dirbančių darbuotojų požiūrį į pagrindinius motyvaciją lemiančius veiksnius, kurie skatina gerai atlikti darbą ir siekti užsibrėžtų darbo tikslų įgyvendinant verslo organizacijos planus. tyrimui atlikti buvo pasirinkta anketinė apklausa, nes tai yra efektyvus tyrimo metodas, naudojamas siekiant surinkti tam tikro pobūdžio informaciją apie tiriamąją problemą (malhotra 2001). tyrimo anketoje buvo pateikti 45 klausimai. jie suskirstyti į tokius blokus: pasitenkinimas darbu, darbo sąlygos, streso įvertinimas, darbuotojų mokymai, kolektyviškumo įvertinimas, komandinis darbas, vadovavimo efektyvumas, darbuotojų vertinimas, teisingumo problemos, karjeros galimybė, komunikavimo funkcijos, darbo su klientais politika, darbo apmokėjimo sistemos efektyvumas. klausimai buvo graduojami dešimtbalėje skalėje, kur reikėjo pasirinkti vieną skaičių iš dešimties, išskyrus 1 ir 2 klausimus, kur pateiktus parametrus reikėjo suranguoti. virtualiųjų įmonių lietuvoje yra palyginti mažai. virtualiosios įmonės bruožus turi virtualiosios projektų komandos, suburtos konkrečiam projektui įgyvendinti. daug iš dalies virtualiai veikiančių organizacijų yra kvalifikuotų paslaugų srityje – informacinių sistemų ir e. verslo kūrimo paslaugos, verslo konsultacijos, reklama, viešieji ryšiai ir kt. elektroninis verslas, ypač mažmeninis, nėra toli pažengęs. dėl šių priežasčių turima patirtis yra negausi. atsakiusių respondentų buvo 121. anketų duomenys buvo suvesti ir apdoroti naudojant excel programą ir spss 15 statistinį paketą. naudojant spss paketą buvo apskaičiuotas spearman’s rho ranginės koreliacijos koeficientas. atlikus koreliacinę analizę atlikta tyrimo instrumento patikimumo analizė. patikimumo vertinimą galime priskirti prie objektyvių vertinimo būdų, nes naudojami griežti statistiniai skaičiavimo metodai. tyrimo patikimumo vertinimui buvo naudojamas cronbach’s alpha koeficiento skaičiavimo metodas. atlikto tyrimo visų apibendrintų veiksnių cronbach’o alpha yra 0,898, t. y. testo vidinis konsistencijos patikimumas labai aukštas. 1 lentelėje pateikti duomenys, kurie atspindi, kokie veiksniai motyvuoja tradicinių ir virtualiųjų organizacijų darbuotojus. 236 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s virtualiuosius darbuotojus labiausiai motyvuotų įdomus ir stimuliuojantis darbas, papildoma materialinė paskata ir galimybė tobulėti. tradicinių organizacijų darbuotojai pirmenybę duotų materialinei paskatai, o antroje vietoje lieka įdomus ir stimuliuojantis darbas bei galimybė tobulėti, kelti kvalifikaciją. savarankiškas sprendimo priėmimas yra svarbesnis motyvacijos veiksnys virtualiai dirbantiems darbuotojams (4), tradiciškai dirbantys šį veiksnį nustumia į septintą vietą iš dešimties. tarp virtualiai ir tradiciškai dirbančių darbuotojų tokie veiksniai kaip atsakomybė už savo atliekamą darbą (vo – 5 ir to – 4), paaukštinimo galimybė (vo – 10 ir to – 9) ir bendradarbių, vadovybės pripažinimas (vo – 6–7 ir to – 8) vertinami panašiai, nes jie yra labai svarbūs siekiant karjeros aukštumų. 1 lentelė. motyvacijos veiksniai, skatinantys darbuotojus dirbti table 1. motivation factors encouraging employees to work motyvacijos veiksniai virtualiosios organizacijos darbuotojų atsakymų vidurkiai tradicinės organizacijos darbuotojų atsakymų vidurkiai atsakomybė už savo atliekamą darbą 6,95 (5) 6,61 (4) savarankiškas sprendimo priėmimas 7,24 (4) 5,84 (7) įdomus ir stimuliuojantis darbas 7,81 (1) 6,79 (2) jaučiuosi motyvuotas, kai turiu tikslą 5,76 (9) 6,14 (5) paaukštinimo galimybė 5,24 (10) 5,22 (9) papildoma materialinė paskata 7,52 (2) 6,96 (1) galimybė tobulėti, kelti kvalifikaciją 7,43 (3) 6,67 (3) bendravimas su kitais 6,43 (6–7) 4,05 (10) bendradarbių, vadovybės pripažinimas 6,43 (6–7) 5,54 (8) geros darbo sąlygos 6,24 (8) 5,91 (6) verslas, vadyba ir studijos 2009 237 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s virtuliai dirbančius darbuotojus, palyginti su tradiciškai dirbančiaisiais, labiau motyvuoja bendravimas su kitais, o tradiciniai darbuotojai jaučiasi motyvuoti, kai turi tikslą, kurį reikia pasiekti, ir kai yra sudarytos geros darbo sąlygos, nes jiems tai padeda siekti užsibrėžtų tikslų. taigi, kaip matome, skirtingi motyvacijos veiksniai skirtingai skatina virtualiosios ir tradicinės organizacijos darbuotojus. visų atsakiusių darbuotojų požiūriu, tradicinėse ir virtualiosiose organizacijose labiausiai vertinamas rezultatų siekimas (1), nes kiekviena organizacija siekia, kad joje dirbantys darbuotojai siektų bendrų visos organizacijos iškeltų tikslų. pasitikėjimu (2) ir nuolatiniu tobulėjimu (3) labiau pasižymi naujos formos organizacijos, nes būtent be pasitikėjimo virtualioji organizacija negalėtų ilgai gyvuoti, nes tai viena iš sąlygų, lemiančių sėkmingą organizacijos veiklą, o tradicinėse šios vertybės užima 5 ir 6 vietas pagal svarbumą. virtualiai dirbantys darbuotojai mano, kad dėmesys klientui ir atvirumas naujovėms yra taip pat svarbios vertybės, nes būtent dirbant virtualiai yra ypač svarbu diegti naujausias technologijas, nes jų padedama virtualioji organizacija gali išlikti ir konkuruoti rinkoje, o turimi klientai tai užtikrina. tradicinės organizacijos labai vertina skiriamą dėmesį klientui, ši vertybė pagal svarbą eina iš karto po rezultatų siekimo. savarankiškas darbas daugiau yra vertinamas naujo tipo organizacijose, nes jų darbo pobūdis įpareigoja visus darbus atlikti savarankiškai. tačiau ir tradicinės organizacijos vertina savo darbuotojų nepriklausomumą. komandinis darbas ir pagarba žmonėms kaip vertybės yra vertinamos labiau tradicinio tipo organizacijose, šiems veiksniams čia skiriamas didelis dėmesys, o naujo tipo organizacijos tai priskyrė prie mažiau svarbių vertybių. konkuravimas ir noras nugalėti pasireiškia tiek tradicinėse organizacijose, tiek virtualiosiose ir pagal svarbą užima 9 vietą. visi anketoje pateikti klausimai buvo sugrupuoti, kad galėtumėme lengviau atskirti, kokie motyvacijos veiksniai daro didžiausią įtaką darbuotojams atliekant savo darbą. gauti anketos apklausos rezultatai rodo, kad svarbiausi bei reikšmingiausi virtualiesiems darbuotojams yra šie anketos blokai – motyvacijos veiksnių grupės: darbo su klientais politika (aritmetinis vidurkis – 8,70), vadovavimo efektyvumas (aritmetinis vidurkis – 8,59), kolektyviškumo įvertinimas (aritmetinis vidurkis – 8,52), vadovybė vertina darbuotojus (aritmetinis vidurkis – 8,38), pasitenkinimas darbu (aritmetinis vidurkis – 8,15), bendravimo (komunikavimo) funkcijos (aritmetinis vidurkis – 8,00), darbo sąlygos (aritmetinis vidurkis – 7,90), darbuotojų mokymai (aritmetinis vidurkis – 7,84), komandinis darbas (aritmetinis vidurkis – 7,05). 238 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s tradiciškai dirbančių darbuotojų tyrimo rezultatai rodo, kad svarbiausi yra šie anketos blokai: pirmoje vietoje kaip ir virtualiai dirbantys vertina darbo su klientais politiką – 8,73 (sd 0,59), darbo sąlygas – 8,52 (sd 0,17), darbuotojų mokymus – 7,93 (sd 0,70), pasitenkinimą darbu – 7,60 (sd 0,28), kolektyviškumo įvertinimą – 7,49 (sd 0,40) bei vadovavimo efektyvumą – 7,01 (sd 0,46). tiek virtualiai, tiek tradiciškai dirbantiems darbuotojams svarbiausia yra darbo su klientais politika (8,70), o darbo sąlygas labiau vertina tradiciškai dirbantys darbuotojai (8,52), nes virtualiesiems darbuotojams tai nėra reikšmingas dalykas – jie neturi realios darbo vietos. vadovavimo efektyvumo svarbą labiau vertina virtualiai dirbantys darbuotojai (8,59), o tradiciniai darbuotojai skiria paskutiniąją vietą pagal reikšmingumą (7,01). remiantis tyrimo rezultatais, toliau visi blokai nagrinėjami išsamiau. darbuotojų mokymasis, kolektyviškumas ir komandinio darbo klausimai. virtualieji darbuotojai teigia, kad turi pakankamai žinių savo darbui atlikti ir mano, kad tas žinias reiktų pritaikyti gerų santykių su klientais išlaikymui. įgūdžius darbuotojai tobulina mokydamiesi – bendraudami, iš bendradarbių ir kolegų. mokytis bei atlikti geriau darbus jiems padeda draugiškas kolektyvas, susirinkimai su bendradarbiais ir vadovais bei žinojimas, kad visos pastangos, sutelktos tikslui siekti, padės ateityje kilti karjeros laiptais. tradicinių darbuotojų tyrimo rezultatai rodo, jog ir jie turi pakankamai žinių (8 balai), o žinojimas, kad įmonėje yra ir pakankamai galimybių atlikti užduotis geriausiai, leidžia organizacijos vadovybei būti patenkintai darbo rezultatais. tyrimai rodo, kad virtualiųjų darbuotojų nuomonės išklausomos virtualiuosiuose susirinkimuose (8,16), ir teigiama, kad būtent bendravimas su kolektyvu padeda geriau atlikti darbus. jie jaučiasi pripažinti savo bendradarbių (8,14), o tai lemia geresnius darbo rezultatus. kolektyvas yra labai draugiškas (8,86), kaip teigia dauguma virtualiai dirbančių darbuotojų, todėl kiekvienas turi galimybę mokytis iš kolegų, bendradarbių, o gerus darbo rezultatus visada pastebi vadovai. nors kolektyvas ir draugiškas, tačiau vis tiek yra virtualiųjų darbuotojų, kurie žino tuos, kurie neatlieka savo darbo. tradiciniai darbuotojai taip pat mano, jog jų kolektyvas yra draugiškas, todėl teigia, kad vien dėl jo jie nepaliktų savo organizacijos, nors ir būtų pasiūlytas analogiškas darbas kitoje, tokio paties tipo įmonėje, o ir tai, kad susirinkimuose kolektyvas išklauso kiekvieno nuomonę apie konkrečią sprendžiamą problemą, juos skatina bendradarbiauti. esant geram kolektyvui ir karjeros siekimas tampa malonus darbinės veiklos tikslas, kuris yra pasiekiamas be streso. verslas, vadyba ir studijos 2009 239 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s tyrimas rodo, kad pusė tradiciškai dirbančių apklaustųjų mano, jog jie darbą galėtų atlikti vieni. kita pusė teigia, kad rezultatai, kuriuos gali pasiekti dirbdami komandoje, būtų geresni nei dirbant vienam. tačiau žinojimas, kad kai kurie neatlieka savo darbo, mažina pasitikėjimą, tačiau vis tiek apsiimama užduotis atlikti drauge, organizuojami susirinkimai, kur pasidalijama nuomone, ir stengiamasi mokytis iš savo kolegų siekiant bendro tikslo. vadovavimo efektyvumas, teisingumas ir darbuotojų vertinimo klausimai. virtualiai dirbantys darbuotojai patenkinti esama įmonės vadovybe: ji skatina savarankiškumą, visada pastebi gerus rezultatus, įtraukia darbuotojus į problemų ir klausimų sprendimą, efektyviai paskirsto darbus, į ją galima visuomet kreiptis, kai reikia pagalbos ar patarimo. šiuos veiksnius darbuotojai laiko pripažinimu darbe. o tradiciniai darbuotojai netgi siektų tolimesnės karjeros toje įmonėje, kurioje dirba, vien todėl, kad jie yra pakankamai patenkinti esama vadovybe, jie mano, jog gali daug ko pasiekti ateityje, nes vadovybė skatina jų savarankiškumą bei stengiasi informuoti apie įvykius įmonėje. darbuotojai gali kreiptis pagalbos į savo vadovus, tuomet kai jiems kyla su darbu susijusių klausimų, tarkime, kaip išlaikyti aptarnavimo kokybę, kuri turėtų būti viena iš pagrindinių organizacijos strategijos dalių. tradiciškai dirbantys darbuotojai teigia, kad vadovybė stengiasi gerai paskirstyti darbus, visus informuoti ir sukurti darbingą aplinką, kurioje darbuotojai galėtų gerai dirbti. vadovybės darbo vertinimą ir pripažinimą virtualusis darbuotojas supranta kaip jo įtraukimą į problemų ir klausimų sprendimą bei pasiūlymų priėmimą. darbuotojui darbo vertinimas susietas su pasitenkinimu savo atliekamu darbu. vadovybė skatina darbuotojų savarankiškumą, o tai yra labai svarbus veiksnys darbuotojams, nes jų darbo pobūdis juos įpareigoja visus darbus atlikti savarankiškai. teisingumą darbuotojai suvokia, kai atlyginimas atitinka funkcijas, atsakomybę, lūkesčius, poreikius, atlyginama už gerai atliekamą darbą, tenkina gaunamas darbo užmokestis. taip pat gana aukštas rodiklis (8,00 balai), rodantis, kad įmonės politika ir procedūros dažniausiai taikomos vienodai visiems virtualiesiems darbuotojams. vadovybė darbuotojų savarankiškumą skatina per įmonėje esančią rezultatinę darbo apmokėjimo sistemą. egzistuojantis teisingumas organizacijose – tai vienas iš kriterijų, kuriuo remiantis virtualiai dirbantys darbuotojai pasiliktų dirbti toliau, net jeigu būtų pasiūlytas analogiškas darbas kitoje įmonėje. tradiciniai darbuotojai, kalbant apie teisingumą įmonėje, teigia, kad visgi žino, kas ir kada neatlieka savų darbų, tačiau vadovybės apie tai neinformuoja, 240 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s bet mano, jog tai yra neteisinga. procedūros ir politika dažniausiai būna taikoma visiems be išimties, todėl su tuo sutinka visi darbuotojai ir vertina tai kaip teigiamą dalyką. darbuotojų karjera, bendravimo funkcijos ir darbas su klienais. dauguma virtualiai dirbančių darbuotojų mano, kad yra sudarytos galimybės siekti karjeros įmonėje ir ateityje to sieks, ir žino, kad kilus kokiems nors klausimams jie visada galės pasikliauti vadovybe. apklausti respondentai nemano, kad tik kitoje organizacijoje jiems pavyks kilti karjeros laiptais, jeigu jie nori, gali to pasiekti ir dabartinėje savo darbovietėje. dabar esantis atlyginimas ne visai atitinka šių darbuotojų turimą kvalifikaciją, bet jie mano, kad vėliau, kildami karjeros laiptais, gaus daugiau. siekdama karjeros, didžiulė dalis darbuotojų drąsiai imasi mokytis naujų dalykų ir siekia įgūdžių, kurių jiems gali prireikti ateityje. susirinkimai ir bendradarbiai padeda geriau paskirstyti darbus bei juos atlikti, kad būtų gauti geriausi rezultatai. jaunesnius tradicinius darbuotojus domintų karjeros galimybė, tačiau vyresnio amžiaus žmonės jau yra pasiekę tai, ko norėjo, todėl rodiklis į šį pateiktą klausimą yra apie 6,81 balo iš 10. tačiau paklausus, ar, jų nuomone, sudarytos galimybės siekti karjeros, jie atsakinėjo įvairiai, tačiau neteigė, kad labai geros. dalies darbuotojų pagrindinis darbinės veiklos tikslas šiuo metu yra būtent karjeros siekimas, o draugiškas kolektyvas – puikus pagalbininkas siekti užsibrėžto tikslo. visi darbuotojai drąsiai mokytųsi naujų dalykų ir įgytų įgūdžių, kuriuos galėtų panaudoti savo darbe, susidorojant su paskirta užduotimi. dauguma virtualiųjų darbuotojų teigia, jog jiems patinka dirbti su klientais, kai vadovai gerai paskirsto darbus ir kai juos įvertina gerai atlikus darbą, o tai yra svarbiausia norint skatinti darbuotoją gerai dirbti. taip pat svarbu išlaikyti gerą aptarnavimo kokybę ir gerus santykius su klientais. virtualieji darbuotojai, mano, kad jie turi pakankamai žinių gerai atlikti savo darbą, tai yra išlaikyti gerą aptarnavimo lygį ir santykius su klientais. siekiant išlaikyti ne tik gerą aptarnavimą, bet ir palaikyti gerus santykius su klientais, tradiciniai darbuotojai mano, jog svarbu jaustis saugiam darbe, tai yra turėti pakankamai priemonių, kad būtų atliktas darbas. darbo apmokėjimo sistemos efektyvumas ir teisingumas. virtualiosiose organizacijose esanti darbo apmokėjimo sistema tenkina ne visus. tačiau visų respondentų atsakymų aritmetinis vidurkis lygus 8,14 balo, bet keisčiausia tai, jog tradiciškai dirbantys darbuotojai teigia, kad juos nepakankamai tenkina esanti darbo apmokėjimo sistema (6,67 balo), palyginti su virtualiųjų verslas, vadyba ir studijos 2009 241 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s organizacijų darbuotojų nuomone. virtualiesiems respondentams pateikus klausimą, ar atlyginimo stoka juos verčia ieškoti kito darbo, visi atsakiusieji teigia, kad tai yra netiesa, kad jiems atlyginama pakankamai. taip pat ir tradiciniai darbuotojai nemano, jog atlyginimo stoka juos verstų ieškotis kito darbo, nes jie didžiuojasi dirbantys čia, prireikus susilaukia pagalbos, visada būna informuoti bei pastebėti. remiantis tyrimu, galima teigti, jog labai nevienodai pasiskirstė atsakymai į klausimą, ar virtualieji darbuotojai pageidautų nefinansinių skatinimo priemonių (kelionių, bilietų į renginius, sporto klubus ir t. t.). vieni mano, kad tai jų neskatintų, ir skyrė mažiausiai balų, o kiti teigė, kad būtų labai gera skatinimo priemonė, ir skyrė didžiausią balų skaičių. tradiciniai darbuotojai daugiau norėtų, kad juos skatintų nefinansiniais būdais (6,65 balo), o virtualiųjų darbuotojų vidurkis buvo lygus vos 5 balams. virtualiai dirbantys darbuotojai teigia, kad atlyginimas atitinka turimą patirtį, jie taip pat yra patenkinti užimamomis pareigomis, yra pripažinti darbe bei visuomet informuoti, jų gaunamas atlyginimas už turimą patirtį neverčia ieškoti kito darbo, bet įpareigoja pasilikti organizacijoje, kurioje dabar dirba. tradiciniai darbuotojai mano, kad jų gaunamas atlyginimas nelabai atitinka jų turimą darbinę patirtį (6,44 balo) ir norėtų gauti šiek tiek daugiau, kad būtų labiau motyvuoti dirbti ir kelti kvalifikaciją. 4. išvados 1. virtualioji organizacija mokslinėje literatūroje suvokiama kaip nauja, informacinių technologijų plėtros nulemta struktūra, pasireiškianti kaip tinklas, aljansas, kooperacijos forma, esminių kompetencijų susibūrimo bei apibrėžtų veiksmų kombinacija. kai kurie mokslininkai siūlo vertinti šią organizacinę formą kaip pasikartojančių ar institucionalizuotų pokyčių, strateginio bei vadybinio požiūrio ar veiksmų ir gebėjimų procesą. mokslinėje literatūroje įvardijamos pagrindinės priežastys, jungiančios virtualiosios organizacijos narius, yra bendras verslo supratimas, tarpusavio pasitikėjimas, informacinės technologijos. 2. pagrindinės problemos, kylančios virtualiojoje organizacijoje, yra: organizacijos narių tarpusavio nesuderinamumas, informacinių komunikacijos priemonių netinkamumas ryšiui palaikyti, veiklos koordinavimo bei neformalaus bendravimo trūkumas, lojalumo pačiai organizacijai stoka, organizacijoje dalyvaujančių partnerių neatvirumo problema. 242 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s 3. remiantis tyrimo rezultatais nustatyta, kad svarbiausios bei reikšmingiausios virtualiesiems darbuotojams yra šios motyvacijos veiksnių grupės: darbo su klientais politika, vadovavimo efektyvumas, kolektyviškumo įvertinimas, tai, kad vadovybė vertina darbuotojus, pasitenkinimas darbu, bendravimo (komunikavimo) funkcijos, darbo sąlygos, darbuotojų mokymai, komandinis darbas. todėl virtualiosios įmonės vadovai, siekdami produktyvesnio darbuotojų darbo, pirmiausia turėtų atkreipti dėmesį į šiuos motyvacijos veiksnius ir remiantis jais ieškoti adekvačių motyvavimo priemonių. savaime suprantama, kad darbdaviai negali pakeisti jų atliekamo darbo pobūdžio, kad jų dirbamas darbas būtų įdomesnis, tačiau gali ieškoti būdų, kaip pagerinti esamas darbo sąlygas (tiek materialines, tiek tarpusavio bendravimo) ir kaip įvertinti darbuotojus už jų pasiektus darbo rezultatus. tradiciškai dirbantys darbuotojai, kaip ir virtualiai dirbantieji, pirmiausia vertina darbo su klientais politiką, darbo sąlygas, darbuotojų mokymus, pasitenkinimą darbu, kolektyviškumo įvertinimą ir vadovavimo efektyvumą. 4. tyrimo metu nustatyta, jog darbuotojus, dirbančius naujo tipo organizacijose, labiausiai motyvuotų įdomus ir stimuliuojantis darbas, papildoma materialinė paskata ir galimybė tobulėti. tradicinių organizacijų darbuotojams svarbiausia materialinė paskata, o tik po to įdomus ir stimuliuojantis darbas, galimybė tobulėti ir kelti kvalifikaciją. savarankiškas sprendimo priėmimas yra svarbesnis motyvacijos veiksnys virtualiesiems darbuotojams, o tradiciniams svarbiau atsakomybė už savo atliekamą darbą. paaukštinimo galimybė ir bendradarbių, vadovybės pripažinimas vertinami panašiai abiejų tipų organizacijose. virtuliai dirbančius darbuotojus labiau motyvuoja bendravimas su kitais, palyginti su tradiciškai dirbančiaisiais, kurie jaučiasi motyvuoti, kai turi tikslą. 5. būtini tolesni tyrimai virtualiosiose organizacijose kylančių problemų sprendimų paieškai. sėkmingas vo problemų sprendimas sudarytų galimybę platesniam virtualiųjų organizacijų panaudojimui sprendžiant globalizacijos sąlygomis kylančias verslo problemas. literatūra byrne, j. a. 1993. the virtual corporation, business week 31(6): 36–39. damaskopoulos, t.; gatautis, r.; vitkauskaite, e. 2008. extended and dynamic clustering of smes, inzinerine ekonomika – 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organizations, communications of the acm 40(1): 52–59. paliulis, n.; elskytė, v.; merkevičius, j.; trasauskas, e. 2003. information technology development in lithuania: new tendencies and perspectives, journal of business economics and management 4(2): 97–104. sakalas, a. 1995. personalo poreikio planavimo metodai pereinant į rinkos ekonomiką, inzinerine ekonomika – engineering economics (6): 124–133. scholz, c. 1997. das virtuelle unternehmen – schlagwort oder echte vision? bilanz manager 1: 12–19. sieber, p.; griese, j. 1997. virtuelle unternehmen in der dv-branche (virtual corporations in the data-processing branch), information management 6(2): 17–27. snow, c. c.; lipnack, j.; stamps j. 1999. the virtual organization: promises and payoffs, large and small, journal of organizational behaviour 6: 15–30. sproull, l. 1991. connections. new ways of working in the networked organization. cambridge: mit press. isbn 0-262-69158-2. strausak, n. 1998. resumee of votalk. organization virtualness, in proc. of the vonet-workshop, april 27–28, 1998. bern: simowa verlag. srivastava, s. k.; kakkar, d. n. 2008. estimation of motivation using entropy, journal of business economics and management, 9(1): 53–56. townsend, a. m.; demarie, s. m.; hendrickson, a. r. 1998. virtual teams: technology and the workplace of the future, academy of management executive 12(3): 17–29. voss, h. 1996. virtual organizations: the future is now, strategy & leadership 24(4): 12–16. verslas, vadyba ir studijos 2009 245 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s personnel motivation of virtual organization l. uturytė-vrubliauskienė, j. merkevičius summary virtual organization is chosen as the analytical object. in order to develop organizations performance successfully, it is important to identify what type of factors motivate virtual employees. the research can be one of the ways to obtain detailed and reliable information necessary to identify means that motivate the employees in virtual organizations. the results of the research can help to develop good personnel motivation system of virtual organizations. the goal of this paper is to investigate the motivation tools that exist in virtual organizations. in order to achieve this goal, the first part of the paper addresses for the analysis of the concepts of virtual organization, assumptions and circumstances for its development. advantages and disadvantages of virtual organizations are described. the second part of the paper focuses on the research of personnel motivation in virtual organizations. first of all it describes the stages of research planning: formulation of research problem, objectives and tasks. later the results of the research are presented and interpreted. keywords: virtual organizations, traditional organizations, personnel motivation. social capital as the factor of the state configuration of the market of the republic of belarus viktor ostroga1, olga zhukovskaya2 the belarusian state university, akademicheskaya str. 25, 220072 minsk, belarus e-mails: 1ostroga.v@mail.ru (corresponding author); 2a.s.888@mail.ru received 18 november 2010; accepted 15 january 2011 abstract. in the article social capital as the factor of social and economic exchange optimization (transactional costs decrease), configuration of the market and system of economic interests of the republic of belarus in the context of the history of this social and economic phenomenon research, the place and role of state regulation in economic processes and modern understanding of the market in correlation with economic growth and national safety is considered. also the influence of social capital on the market system of belarus and mechanisms of this social and economic phenomenon usage with the view of market functioning perfection is analyzed under the conditions of national and global imperatives. keywords: social capital, market system, state regulation, economic growth, transactional costs, economic interests. reference to this paper should be made as follows: ostroga, v.; zhukovskaya, o. 2011. social capital as the factor of the state configuration of the market of the republic of belarus, business, management and education 9(2): 248–259. http://dx.doi.org/10.3846/bme.2011.17 jel classification: p21, a14, o43, b25, b5. 1. introduction under the conditions of carrying out social and economic, political and ideological, scientific and technological transformations, national economy involvement in global processes and ever-increasing dependence of a state from the world market tendencies, each country, including such a young state as the republic of belarus, needs internal sources of cohesion, stability and trust, which are constituents part of social capital. therefore it can become the tool in competitive struggle of the states under the condition of its orientation on stabilization and development of the economic system of society. at the same time science is facing a large quantity of pending fundamental problems such as: social capital structure disclosure and detection of the directions of its efficiency in society increase, the questions of social capital optimal accumulation, beneficial effects appropriation and avoiding negative aspects during the usage of this form of capital, the identification of the system interaction of social and other humanitarian capitals, b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(2): 248–259 http://dx.doi.org/10.3846/bme.2011.17 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt mailto:1ostroga.v@mail.ru 249 business, management and education, 2011, 9(2): 248–259 innovation and efficiency of human capital in economy increase, social capital in interaction with other social and economic phenomena within the limits of economic system complex research. it is necessary to give a special attention to the development of the mechanisms of the increase of the production effect of usage and strengthening social capital role during the anti-recessionary strategy of economic development building. 2. social capital as a social and economic phenomenon as consumption first of all in the developed countries is constantly increasing, while resources deficit is growing, the competitive struggle in the world markets is becoming aggravated, scientists’ (including economists) interest is concentrated on the researches directed to the renewable resources and sources of economic growth and development search. for some reasons of gnosiological and historical character only by the end of the xxth century the paradigm of the phenomenon of social capital was formulated, which can be explained by the fact that under the modern conditions with the view of sustainable development achievement the mobilization of all the resources already available in this or that territory, and the search of the new, first of all social sources of economic system functioning perfection are especially important. 2.1. the history of the social and economic phenomenon of social capital research the social resource (or potential) capitalized under certain conditions, emerged together with labour relations development, labour division appearance and deepening and individuals’ social-class differentiation generated by it. the population of the earth increase in mainly for the last ten thousand years and social labour productivity growth occurs as the result of people’s innovative abilities increase and labour division deepening, and also due to the perfection of the various public mechanisms of social and economic subjects’ interests coordination, including social capital development. the first mention of the concept “social capital” dates back to 1916 when an american scientist l. j. hanifan used this term “social capital” for the description “such real values which are of great importance in people’s daily life” (hanifan 1916). the further development of this concept is connected with such foreign researchers as p. bourdieu, j. coleman, r. putnam, v. v. radaev, f. fukuyama, l. j. hanifan, k. arrow, m. granovetter and others. the phenomenon of social capital became actively investigated since 1990th (baron et al. 2000; lin 2000). r. putnam, one of the scientists who have birth to the discussion about social capital, defined this concept as: “…characteristics of social life – networks, norms and trust, – which impel participants to a more effective joint action on achievement of common aims” (1996). coleman’s article “social capital in the creation of human capital” (2001) is considered to be the first conceptual study of the category of social capital. the russian economist i. e. diskin has expressed an opinion that “without the acquaintance with this 250 v. ostroga, o. zhukovskaya. social capital as the factor of the state configuration of the market… article … it is pretty difficult to clear up the answer to what problems and challenges of the economic theory the working out of the concept of “social capital” became” (diskin 2001: 121). j. coleman developed social capital paradigm as traditional economic concepts with sociological and political science constructions integration. so, social capital phenomenon became a research question not only for economy, but also for sociology and political science. m. granovetter (1973) was one of the first sociologists who have addressed to this phenomenon and put forward one of the initial points of social capital theory according to which the economic activities are understood as an “embeddedness” in social structures. francis fukuyama (2004), expanding j. coleman’s ideas, wrote that social capital is capability which arises from the prevalence of trust in a society, or in certain parts of it. it can be embodied in the smallest and most basic social group, the family, as well as the largest of all groups, the nation, and in all other groups in between... widespread distrust in a society … imposes a kind of tax on all forms of economic activity that high-trust societies do not have to pay. social capital is not distributed uniformly across societies. 2.2. modern evolution of the category “social capital” as a rule, the majority of contemporary researchers investigate only some major aspects of the theory of social capital studying, such as: the role of social networks in external mechanisms of compulsion (also the role of human emotions in the context of social interaction is mentioned); the potential role of religion as the bases of trust and the catalyst of economic development; the increasing importance of the role of a person in economic and social behaviour; the gender and ecological range of problems, the questions of social inequality, etc. b. wydick’s (2008), e. marelli and m. signorelli’s (2010) and m. l. small’s (2009) works serve as the examples of similar researches. so, b. wydick (2008) in the work “games in economic development” expressed the opinion that in such countries as france, spain, the peoples republic of china, the countries of latin america, close family ties and the strong government exist, however people have very few in common, and therefore the social capital level is rather low. to counterbalance it strong enterprise structures exist in the usa, germany and japan. the special attention in this work is given to the problem of social capital and social networks formation (wydick 2008: 197–223), based on the various kinds of resources and connections exchange which can’t exist without trust between individuals (“trust game” as b. wydick defines). in particular, the question what allows people to trust is brought up. psychologists ken magid and carole mckelvey (1988) claim that human beings learn a basic level of trust in the first two years of life. subsequently, in their opinion, the trust is generated by long-time relations with fair people. the nobel laureate k. j. arrow asserts that every commercial transaction has within itself an element of trust and many economic backwardness in the world can be explained by a lack of mutual trust (arrow, hurwicz 1972: 357). the analysis of game theory models application to identify duopoly market equilibrium, description and comparison of main 251 business, management and education, 2011, 9(2): 248–259 game theory models to artificial duopoly market situations, comparative analysis of the models’ weaknesses and problems related to their practical application are also provided by some other authors (ginevičius, krivka 2008). b. wydick’s work defines three principal reasons why “parties of the agreement will behave honestly: 1) the presence of formal institutions enforce the agreement; 2) a system of rewards and penalties within the network, penalties may be either social, pecuniary, or both; 3) presence of nobleness, religious beliefs, moral upbringing, identity and consciousness. the social capital, helping to establish trust which promotes an exchange and, at the same time, economic development, relates, broadly defined, to the second and third mechanisms. some researchers define last (third) mechanism as the spiritual capital. it is natural that societies rich in social capital are less dependent on formal institutions to check malfeasance and opportunism. in developing countries, formal institutions are often too weak to establish and enforce the rules of the economic game, so the role of social capital becomes magnified” (wydick 2008: 198). thus, the author marks a potential role of a religion as the trust basis and economic development catalyst; the ever-increasing importance of an individual in economic and social behaviour role. post-socialist society is often characterized by rather low societal trust, whereas the trust standard at micro level might be considerable. some authors (pucetaite et al. 2010) assume that fair and just human resource management practices, open communication and employees’ participation are the strongest predictors of organizational trust, while an ethics code and ethics auditing had a weaker effect on organizational trust and only in a small number of cases. the linkage between human resource management and organisational performance exists (kazlauskaite, buciuniene 2010), thus it is important to raise social potential level between the workers in enterprises. there are connections between organizational culture, learning, organizational development and image (šimanskiene 2009). at present in the economic theory the approach to the social capital treatment “as the sums of the benefits received by subjects from mutual certain information actions (as the complex of interpersonal relations reducing transactional costs) for the purpose of mutually advantageous cooperation, which can be reached by means of information exchange and allow to receive tangible social and economic benefit” (solodovnikov, zhukovskaya 2009b: 275) is developed. in such a quality this social and economic phenomenon acts as the major factor of anti-recessionary development, economic growth and safety of a state. 3. the influence of social capital on economic growth interrelations of “the social capital”, on the one hand, and institutional and evolutionary economy, on the other hand, are quite distinctly distinguished. in various works devoted to development of the concept of “social capital”, these interrelations had their development. in essence, “today “social capital” is strongly embedded in the structure of institutional approach” (diskin 2001: 121). 252 v. ostroga, o. zhukovskaya. social capital as the factor of the state configuration of the market… nevertheless, modern researchers often find out institutional approach disadvantages. for example, t. natkhov, having analysed the basic researches connected with the institutional range of problems, in the context of education and social capital influence on economic development (natkhov 2010) noticed that “the institutional hypothesis has serious gnosiological competitors” (natkhov 2010: 112). really, the free markets and strong institutions (easterly 2001) (the latter in this case are understood as long-term rules of interaction of the people, which are supplemented with the mechanisms of compulsion (north 1990) are necessary for sustainable economic growth. the main role of institutions is proved in many contemporary empirical researches (acemoglu 2005), however according to e. glaser’s, r. la porta’s, f. lopez-de-silanes’s and other’s works the human capital acts as a more important reason of economic growth, and the perfection of institutions (including political ones) occurs after the country overcomes poverty thanks to the right economic policy (glaeser et al. 2004). human and social capitals are more steady and objective factors than traditional indexes of institutions quality since the latter don’t reflect power restrictions, long-term characteristics of political environment as well as qualitative characteristics of social environment. the analysis of dependence between institutions and development only proves that “institutes function better in rich societies” (natkhov 2010: 113). thus, the basic variable defining production potential of a society is the level of human and social capital, whereas institutions have the second order impact and improve together with the well-being growth. social capital “… exists only in mutual relations of individuals” (coleman 2001: 126) and it appears only in a close connection with human capital and on its basis. economists s. knack and p. keefer showed that because of the growth of the level of trust in the country by one point economic growth increases by more than on 0.5 points (knack, keefer 1997). post-war economic development of the countries of south east asia, in particular, the peoples republic of china proves these conclusions. 4. social capital in the market economy social capital accumulation and its subsequent capitalization don’t occur equally in each society, and they are the results of simultaneous purposeful action of the complex of factors, whereas the state configuration of the conditions of social and economic interactions optimization is the factor of major importance and its success is determined of the degree and mechanisms of such configuration. the creation of the preconditions of the production effect of social capital increase became a priority for building long-term strategies of the development of societies. “under the conditions of the modern globalized world any country can’t provide the steady social, ecological and economic development without the continuous growth of social potential of the society as a whole, groups, classes and separate individuals that are members of it” (solodovnikov, zhukovskaya 2009a). market is a social tool which 253 business, management and education, 2011, 9(2): 248–259 helps to coordinate the coherence of the activities of sellers and buyers, provide an information exchange between them and but also under certain conditions the market helps to create the preconditions of social potential accumulation. 4.1. social and economic character of market today, despite the centuries-old history of the research of market relations, social studies as a whole and economic theory in particular haven’t developed the uniform understanding of the market. “approaches to its definition strongly differ, as v. v. radaev marks, – and as a result practically each of us depending on a context can name as «market» phenomena that differ in essence” (radaev 2003: 19). it is necessary to try to understand the market definitions used today, taking as a basis the representative of french school r. boyer’s (1999) classification which allocates five basic concepts of market (boyer’s 1999: 62–65). 1. market is a place where sellers and buyers are met on the regular basis and where trade process is organized. this is the oldest, spatially determined concept of market. it was generated in xiith century, but it exists today as well. for example, in everyday speech we still name in such a way “open markets”, meaning the places of so-called “out-of shop trade” organization. it can be added that such places can be constant and temporary, regulated and spontaneously organized. 2. market is a certain territory on which the acts of purchase and sale take place. this is a wider, “geographical” definition which connects the concept of market to certain cities, countries, territories and continents. for example, we speak: “belarusian market”, “european market”, etc. 3. market is the total solvent demand shown which present on certain kinds of products and services. this understanding of market designates not a territory but set of the consumers of these or those goods (kotler 1998: 28). in this case, speaking about those or other markets, we mean the demand for work, shares, consumer goods, etc. 4. market acts as the self-regulated mechanism of supply and demand. here economic players decide themselves what to produce and at what price to sell. in other words, market is characterized as a sphere where a competition between independent agents and free pricing dominate (swedberg 1994: 257–260). in this definition any spatial, time or object localization disappears and their place is occupied by the model that fixes the conditions with the help of which market balance is reached. 5. market is an economic system in which the self-regulated market mechanism is a dominating entity. in this case the market principles of economic organization are imposed upon the whole communities called “market societies” (radaev 2003: 19–20). according to the neoclassical economic concept of “ideal market”, market appears as the mechanism of supply and demand operating in any territorial or branch circuits, and an exchange is carried out automatically, without any forces of friction. and it is a question of not only the aggregated set of the individual actions of exchange, but about 254 v. ostroga, o. zhukovskaya. social capital as the factor of the state configuration of the market… rather independent from other parts of a society and self-sufficient system with the builtin mechanism of self-control” (radaev 2003: 20–21). in this model … “social conditions play the unenviable role of external factors and are taken away or, what is worse, social factors are considered to be those forces of friction which reduce the efficiency of self-regulation” (radaev 2003: 21). thus, an abstract “economic person” with primitive enough demands and motivations which can be easily explained by mathematical language comes to change live people. at the beginning of the ххth century b. struve distinguished some features which are ignored by the marginal theory of economic balance: “… incomplete rationality of economic behaviour, nonsymmetrical distribution of the information among the participants of a market, variability of their subjective estimates and, as a consequence, market prices” (ippolitov 2008: 49). 4.2. belarusian state as a market configurator it is important to notice that theoretical and methodological approaches, for example, reducing the economic functions of the state to the role of the “night watchman”, lower trust to the belarusian model of development and cause the decrease of the belarusian society social potential, i.e. reduce the production effect from the social capital that has been saved up at the society level, which all lead to the threatens of economic safety of the country as a whole. however the state acts as the public configurator of market, which degree of influence varies, but anyway it is not only a question of influential state influence but of constituting impact on the set of the markets by means of the creation of conditions for their appearance and development (frye 1997: 354–358; shleifer 1998: 39), establishment of official rules and ways of their maintenance and realization of redistributive functions and participation in economic processes (block 1994: 696). now market, including the belarusian one, represents a complicated system of social and economic, political and other institutions personified in social and economic subjects (individuals and different social groups). the economic efficiency of the interaction of the named subjects is predetermined in many aspects by the social potential saved up in a society and institutional forms of its capitalization. social capital, ways and forms of its appropriation, distribution optimality etc. act as the basis for the reduction (or increase) of the transactional costs of subjects’ interaction in the course of their economic activities, which besides other things, is the condition of the economic safety of society maintenance. one of the forms of state intervention in market development is state aid (subsidies) to private sector enterprises. over the period of 2004–2006, a great part of the eu aid was granted to business in lithuania through the eu structural funds. state aid is a complicated phenomenon. the most influencing factor is aid intensity (the more intensive the aid, the greater the effect), while the best ratios of investments to the effect obtained was found in the area of educational projects, followed by research, experimental and production projects. the aid to enterprises providing services was the least effective (ginevičius et al. 2008). 255 business, management and education, 2011, 9(2): 248–259 “the accumulation of social capital (as an attribute of societies with the marked social differentiation) by the private aggregated subjects focused on the optimization of their individual social and economic interests, can’t but cause in the long-term prospect harm (including economic one) to the society, since a specific property of this form of the capital is that its cumulative quantity in a society isn’t the sum of all its subjects’ “social capitals”. it occurs not only because there are some demonstrations of this phenomenon only at the society level, but also for the reason that this capital can be used by social and economic subjects (and it is actually used) not only for the society welfare (or in production purposes), but also with the purpose of the individual social and economic vitality optimization that conflicts the interests of other classes and groups, leads to considerable decrease in the production action of social capital at society level, lowers the production effect from the use of this form of capital in the state and in general lower the efficiency of national economic system functioning” (solodovnikov, zhukovskaya 2009b: 210). 5. the peculiarities of economic interests realization in market economy first of all, for any society the achievement of economic interests’ co-ordination as the tool providing a sustainable development and stability of social interactions is necessary. “the existence of unsatisfied demands and the activity that is not connected with their satisfaction means irreplaceable loss of vital forces of the subject… the reason of the orientation of a subject’s activity on other subjects’ usage for the satisfaction of subject’s own demands … consists in the contradiction of its demands and activity” (vasiuchenok et al. 1992: 113). this conflict of the wished and possible impels the subject (among other things) to create special relations with other subjects which will be the steadiest and most perspective if the same subject acts and as the carrier of demands that can be satisfied by means of another subject and as the carrier of activity that can satisfy another subject’s demand. among the number of subjects already entering into the system of interests, there are not always those who can constantly find social and economic mechanisms of public conditions creation (modelling) for the satisfaction of escalating demands (as a result of already saved up satisfied demands there is a change in subjects’ place in property, labour, etc. relations). thus, the coherence is formed that brings benefits to both subjects entering in it and that have a tendency to constant deepening and expansion because its successful functioning will impulse further interaction. 6. social capital as the co-ordination of economic subjects’ interests tool it is necessary to underline the following important point. there can be the problem of incomplete subjects’ informing about possible behaviour of others and, as a consequence, the growth of mistrust in a social network, problems of organizational character 256 v. ostroga, o. zhukovskaya. social capital as the factor of the state configuration of the market… (system management, hierarchy and subjects’ communication in it). the positive role in this case might be played by social capital in which accumulation the successful realization of subjects’ interests results. all these factors serve to the transactional costs decrease and to more and more mutually advantageous interaction, including one in the sphere of economic activities. thus, the more various and difficult the subjects’ interests are (as certain models of interaction, prompting to creation of such subjects’ behaviour which would lead to the satisfaction of demands of others), the more various social relations will be constructed and, as a consequence, these subjects will accumulate more social capital. here the orientation of interests is a factor of crucial importance. for example, at the equating form of distribution the acquisition of welfares by subjects (satisfaction of their requirements) will occur irrespective of the creation of social networks and will be guaranteed by governing bodies (accumulation of the social capital will occur in the class of managers); at the monopolistic orientation of interests the social capital is accumulated in the class of monopolists and at the social (system) orientation of interests there can be the accumulation of social capital at the level of all society. “in the modern socially-focused market economy there are mechanisms of the coordination of the results of various forms of social capital functioning for the purpose of the creation of optimum conditions for strengthening the economic vitality of society and social equality maintenance that is possible for the existing level of social development” (solodovnikov, zhukovskaya 2010: 25). the impossibility of economic (optimum) co-ordination of the interests of the various subjects of similar and various degree of integration without the usage of social capital is realized. interests are unique impulses impelling people to act, i.e. (megrelidze 2007: 385). changes of these or those social subjects’ interests lead to the alterations of basic social institutions and economic system of society, which can become an intensity factor, therefore it is obviously possible to use social capital resource with the view of the system of interests configuration and achievement of the economic (optimum) various subjects’ interests coordination as sustainable development preconditions. 7. conclusions scientists’ interest to the working out “social capital” concept proves to be true not only due to the significant amount of works on the given range of problems, but also on the assumption of the fact that researches of this social and economic phenomenon date back to 1990th. financial and economic, but in reality political and economic crises in contemporary environment are possible first of all due to anti-humane and environmentally unsafe activities. the political generator of crises might be explained by the fact that the economy and vital ability of almost each state are based on the international cooperation, labour and manufacture division, i.e. the uniform interconnected and interdependent planetary system 257 business, management and education, 2011, 9(2): 248–259 has been created. during the management of this system mutual relations between the states, regions and their economic complexes should be taken into consideration. current crisis has convincingly shown that planetary system demands responsible and competent scientifically well-founded state regulation and active usage of social factors in economy. under the conditions of global imperatives social capital along with human one is the major factor of the economic growth and safety of any state. the state acts as the market public configuration. market system is developed under the conditions of relative balance and stability establishment by means of state regulation economic tools. social capital as a social and economic phenomenon is the transactional costs decrease tool which allows the society to optimize economic processes and receive benefits. social capital resource is possible to use with the view of the system of interests configuration and achievement of the economic (optimum) various subjects’ interests coordination as sustainable development preconditions. social capital of the republic of belarus preservation and development should be a priority the country’s social and economic development at all levels, considering that in belarus the level of social potential accumulation is high. the belarusian experience of social capital usage of as the factor of the market system configuration is the thing of great importance for the post-soviet countries. social capital preservation and development should be a priority in social and economic development of each of these states at all levels. in the given group of countries the accumulation of social potential is high enough, however, as a rule, the capitalization of this resource occurs inefficiently and use is uneconomical. in the long term overcoming of the social potential uneconomical usage in belarus and the search of new mechanisms of already accumulated social potential capitalization and increase production effect from this social and economic 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accepted 13 march 2019 abstract. purpose: as the globalization has changed the working environment, organizations need more adaptable individuals who have the abilities to work effectively, deal with unpredictable work situations, and adapt to diverse social contexts. individuals’ international experience such as being enrolled in a study exchange program has been extensively examined as predictors of adaptive performance. in contrast, the role of cultural intelligence in promoting adaptive performance and the quality of experience itself has been overlooked. this study examined the moderating role of host university support in terms of the relationship between intercultural interactions and cultural intelligence towards adaptive performance. research methodology: this study tested its hypothesis with primary data from a sample of 123 university students who have the experience of going abroad as student exchange participants. the primary data was gathered through the structured questionnaires which were sent to the respondents through e-mail, messenger, and social media. the statistical package for social science (spss) 20 for windows was used to analyze the data. findings: the regression analysis demonstrated that cultural intelligence, together with intercultural interactions and host university support, was an important predictor of adaptive performance. research limitations: all of the data in this study were collected through internet or e-mail which has limited control towards the respondents’ answers. further, this study did not really consider the respondents’ scope as we welcome everyone who has the experience of joining a study exchange program to participate in this research. practical implications: the findings suggested the importance of cultural intelligence as a critical predictor of adaptive performance in multicultural contexts, as well as the host university support and intercultural interaction roles for the development of an individual’s cultural intelligence. originality/value: this study complemented the previous assumption on universities’ crucial role in educating and preparing the students to be a part of the global citizens. keywords: cultural intelligence, adaptive performance, student exchange, intercultural interactions, host university support. jel classification: j24, m14. business, management and education issn 2029-7491 / eissn 2029-6169 2019 volume 17: 36–48 https://doi.org/10.3846/bme.2019.8831 *corresponding author. e-mail: lieli.suharti@uksw.edu https://orcid.org/0000-0003-4538-9569 http://orcid.org/0000-0001-7004-8913 https://orcid.org/0000-0001-7676-5294 https://doi.org/10.3846/bme.2019.8831 business, management and education, 2019, 17: 36–48 37 introduction going global for a firm means that the need to deal with a new environment and culture emerges. dealing with this condition has also increased the need of the firm to appoint individuals who have the abilities to deftly work across multiple cultures to achieve organizational objectives (lovvorn & chen, 2011). therefore, it forces organizations to look for individuals who have done a series of international assignments with extensive cross-cultural interactions as they are assumed to have a strong rationale for dealing with culturally different others (yordanova, 2011). this makes the internationally experienced graduates become highly demanded by firms to fulfil these positions and carry on a wide range of responsibilities in their respective subsidiaries (elenkov & manev, 2009). going through programs such as student exchange is believed to help to prepare individuals to work effectively in a culturally diverse environment. this kind of activity can be considered as a cross-cultural training activity for students to prepare them to become global leaders (azevedo, 2018). through the student exchange program, students are trained to develop themselves more holistically by getting exposed to the challenges of living and working in a foreign environment (leung, maddux, galinsky, & chiu, 2008). joining the student exchange program will benefit a student with knowledge and experiences in managing cross-cultural differences by getting exposed to the social contexts and authentic activities (lave & wenger, 1991; sharma & mulka, 1993). being sent abroad does not simply mean that individuals could easily get the maximum benefit from it. according to ang, rockstuhl, and tan (2015), it is critical to understand why some people may success in intercultural contexts whereas others do not. instead, the quality of experience itself which can be measured from the individuals’ intensity to interact with people from another culture is the most important factor that can determine whether an individual really takes the benefit from studying abroad. according to ng, dyne, and ang (2012); solomon and steyn (2017) approach and method: the research was qualitative in nature, comprising a systematic literature review. the period covered was from 01 january 2002 to 31 may 2015. the final number of included studies was 76, representing 48 different journals. cultural intelligence hypotheses were identified and thematically categorised. validated hypotheses constituted truths (i.e. truth statements, the amount of time spent interacting with people from other cultures during the program is critical for the development of the individuals’ cultural intelligence. simultaneously, cultural intelligence (cq), defined as an individual’s capability to function effectively in culturally diverse contexts (ang, dyne, & koh, 2006; ng, dyne, & ang, 2009b), will play a central role for individuals to help them settle and work effectively in cross-cultural contexts. ott and michailova (2018) conducted a meta-analysis of a number of 73 published articles from 2002 to 2015 related to cq and showed that research interests in cultural intelligent were growing from time to time. simultaneously, cultural intelligence (cq), defined as an individual’s capability to function effectively in culturally diverse contexts (ang & van dyne, 2008; earley & ang, 2003), will play a central role for individuals to help them settle and work effectively in cross-cultural contexts. cultural intelligence is an important skill of effective leadership within the intercultural environment (ziyatdinova, 2017). based on the 38 l. suharti et al. linking cultural intelligence and adaptive performance: do intercultural interactions... results of a literature review, azevedo (2018) concluded that cq provides many benefits to both individuals and teams in the form of psychological outcomes, behavioural outcomes and performance outcomes. in consequence of the effort of developing cq, the desired outcome of an individual’s ability to adapt well with any kind of work environment is expected to be displayed during their real practice at the workplace. with the significant changes in today’s organization, the importance of an individual’s adaptive performance in the work environments has been significantly increased (pulakos, plamodon, & donovan, 2000). this kind of ability is necessary and required by global firms as they need more adaptable employees who can work creatively, learn new skills, and adapt to diverse social and work environments. the cq itself has been viewed as a critical predictor of an individual’s adaptive performance in multicultural contexts (shain & gürbüz, 2014). therefore, the role of university becomes critical for supporting and preparing the individuals to be able to make positive contributions in the culturally diverse contexts (crossman & clarke, 2010). the existence of student exchange programs provided by the universities has received growing attention from the students. according to solomon and steyn (2017) approach and method: the research was qualitative in nature, comprising a systematic literature review. the period covered was from 01 january 2002 to 31 may 2015. the final number of included studies was 76, representing 48 different journals. cultural intelligence hypotheses were identified and thematically categorised. validated hypotheses constituted truths (i.e. truth statements, the individual opportunity to obtain international experience such as a student exchange will result in cultural intelligence on these individuals. however, while many streams of research offer the developmental perspective of international experience, only a few have directly addressed and treated the intercultural interactions as one of the most important aspects of it (ng, dyne, & ang, 2012). responding to the gap, this study addresses a question on whether or not the individual’s interactions during study abroad program have an impact on the development of individual’s cq. moreover, there is no particular research that has assured the role of university in supporting and moderating the impact of individuals’ intercultural interactions during studying abroad on their level of cq, even though university has long been seen as a bridge for individuals to engage with the international and cultural exposures (albach & teichler, 2001; williams, 2005). besides that, this research is aimed at complementing the existing researches on exploring the ways that cq predicts the adaptive performance. in a study done by shain and gürbüz (2014), researchers have examined the interactive effect of cq and self-efficacy on adaptive performance. based on the background above, this study has several objectives that should be fulfilled, including: (1) to find out the impact of individual’s intercultural interactions when studying abroad on the development of their cq, (2) to discover the impact of cq on the level of individual’s adaptive performance, and (3) to test the role of host university support in moderating the relationship between intercultural interactions and cq. business, management and education, 2019, 17: 36–48 39 1. literature review 1.1. intercultural interactions and cq cultural intelligence (cq) is defined as a specific form of intelligence focused on the individual’s capabilities to grasp, reason, and behave effectively in situations characterized by cultural diversity (ang et al., 2007; thomas, 2006; triandis, 2006). it has largely been argued that individuals with a bunch of international experience are more likely to acquire greater cq (ng, dyne, & ang, 2012). however, it is also important to note that the amount of time spent interacting with people from other cultures during the programs affected the rate of cq development (ng et al., 2012). without a doubt, having frequent interactions with people from a different culture is the best method to enhance one’s overall level of cq (yordanova, 2011). recently, there are some researchers who have already examined the impact of intercultural contact or interactions on an individual’s development of cq. one of them, crowne (2008) found in her study that individuals who stayed in hostels and ate with local residents developed greater cq than those who stayed in expatriate compounds, where opportunities for contact with locals were significantly lower. jyoti and kour (2017) the role played by experience and perceived social support between cq and cca has also been assessed. design/methodology/approach data were collected from 342 managers working in nationalized banks in j&k (india, found that cross-cultural adjustment mediates the relationships between cultural intelligence and job performance of the sample studied. therefore, this study suggests that by interacting with someone from a different culture, a person can become familiar with another culture. the intercultural interaction is needed by individuals as their tool to get engaged to the other cultures. as a result, the intercultural interactions will function as a bridge to develop their ability on obtaining a new cultural understanding which will eventually lead to a higher or greater level of cq (crowne, 2008). therefore, based on prior studies, this study proposed a hypothesis as follows: h1: intercultural interactions will positively influence the individual’s cultural intelligence. 1.2. adaptive performance and cq using cq as the primary variable in this study, we can expect some explanations on why some individuals are more capable of coping with, adapting to and performing more effectively than others (chen, wallace, & brian, 2005). cultural intelligence is believed related with performance outcomes such as job performance (azevedo, 2018; barakat, lorenz, ramsey, & cretoiu, 2017; diemer, 2016; jyoti & kour, 2017; nunes, felix, & prates, 2017), and job satisfaction (barakat et  al., 2017; diemer, 2016), effective intercultural negotiations (azevedo, 2018), individual creativity (yunlu, clapp-smith, & shaffer, 2017). adaptive performance, which is measured by the capability of individuals to display appropriate behaviours in dealing with a variety of complex and novel environments, seems conceptually relevant to cq (williams, 2005). a study conducted by chen, wallace, and brian (2005) found that there is a positive link between cq and adaptive performance. another 40 l. suharti et al. linking cultural intelligence and adaptive performance: do intercultural interactions... study conducted by oolders et al. (2008) also found that there is a positive relation between cq and adaptive performance. recently, a study conducted by shain and gürbüz (2014) had demonstrated a result that cq offers additional explanatory power in the prediction of individuals’ adaptive performance in a multicultural environment. al shdaifat, ramalu, and subramaniam (2016) found that cultural intelligence is a cross-culture competence that has an influence on the adaptive performance of military leaders. moreover, according to azevedo (2018), individuals with high cq are more capable because they have a proficiency in changing one’s behaviour to fit the demands of the environment or the specific situation, or in other words they have high adaptive performance. in line with the statement above, this study proposed a hypothesis as follows: h2: cultural intelligence will positively influence the level of individual’s adaptive performance. 1.3. host university support as a moderating variable as the globalization has promoted the importance of university’s role in preparing students to be a part of the global citizens, universities have responded to this issue clearly by providing students with chances to get their international experience (crossman & clarke, 2010). universities mobilize their students to get the international experience as a means of increasing knowledge transfer and graduate “competencies” or “skills” required by the 21st century’s global firms (chan & dimmock, 2008). with the reported impacts of international education (overseas study) as one of the best ways for individuals to get such an international experience which can develop and improve their cultural intelligence, social support such as host university support is crucial in facilitating students with the experience of being exposed to the cultural differences (anderson, lawton, rexeisen, & hubbard, 2005). jyoti and kour (2017) found that social support plays an important role in affecting cultural intelligence and then will impact on job performance conceptual model. therefore, this makes the mediating role of student buddies and international lecturers in the host university become important to help initiate the intercultural interactions with the students, as well as the existence of courses provided in english and local language which acts as the media for students to interact with each other. accordingly, this study argues that host university support is important to help initiate the intercultural interactions among the students participating in such activities like student exchange or volunteering program which as a result will help strengthen the influence of intercultural interaction in developing the individual’s cq. therefore, this study proposed a hypothesis as follows: h3: host university support will moderate and strengthen the relationship between intercultural interactions and the individual’s cq. the three hypotheses developed for this study can be described in the conceptual model figure 1 below. the research model above proposed that intercultural interaction will significantly be related to cultural intelligence (h1), and then cultural intelligence will influence adaptive performance (h2). in this research model, host university support is proposed as a moderating variable in the relationship between cultural interactions and cultural intelligence. business, management and education, 2019, 17: 36–48 41 host university intercultural interaction cultural intelligence adaptive performance h1 h  2   h3  figure 1. conceptual research model 2. methodology as this study tends to be associated with analyses and to examine the relationship of each variable in terms of statistic procedure, quantitative studies with causal research design were used in this research. according to the international association of students in economic and commercial sciences indonesia, there are around 70.000 indonesian students were estimated to have studied or currently studying abroad. those indonesian students were then chosen as this research’s population. more specifically, the respondents are individuals who have the experience of joining at least one student exchange program in many countries within the last 5 years (2011–2016). therefore, the judgmental sampling technique is used in the study. during a month of research, there were 123 respondents participated in the study. the respondents were dominated by females (68.3%) and most respondents were currently in the age of 21–23 (69.1%), and the research was dominated by those who were still pursuing their bachelor degree on the undergraduate level (66.7%). about 79 of them (64.2%) claimed that they do their exchange programs in countries such as south korea, japan, china, and taiwan. this figure was then followed by universities in the region of south east asia (21.1%), universities in the region of europe, northern america and australia (14.7 %). there were several scales used to measure variables in this study, as described in table 1 below. table 1. variable measurement (source: pulakos et al. (2000), anderson et al. (2005), ang et al. (2007), crowne (2008)) number variable scale ∑ items cronbach α 1 cq ang et al. (2007), 20-item of cq scale 20 0.72–0.86 2 intercultural interactions crowne (2008) 8 0.82 3 adaptive performance pulakos et al. (2000), 8-dimension taxonomy of adaptive performance 8 0.92–0.97 4 host university support anderson et al. (2005) 8 0.78 42 l. suharti et al. linking cultural intelligence and adaptive performance: do intercultural interactions... this study used the primary data gathered through the questionnaires which consisting of 44 structured question items with answer choices using a likert scale (1 = strongly disagree to 5 = strongly agree). the questionnaires were sent to the respondents through e-mail, messenger (line, kakao talk, and whatsapp), and social media (facebook and instagram) with the attachment of an application called google form. the statistical package for social science (spss) 20 for windows was used to analyze the data. several tests are conducted in an effort to analyze the data. those tests comprise of (1) data validity test which including validity and reliability test, (2) classic assumption test that aims to test the normality of data, and (3) hypothesis test which including individual significant parameter test or t-test and simultaneous significant test or f-test. 3. results the result of the testing of hypothesis 1 and hypothesis 2 are presented in table 2 below. according to table 2 above, variable x (intercultural interactions) has a significance level of 0.000 and t-value 14.033. the result shows that there is a positive and significant impact on intercultural interactions to cq. based on the f-test, it can be identified that f-value has a score of 196.93 while f-table with a probability level of 10 per cent is valued at 6.85. it means f-value is greater than f-table (196.93 > 6.85). then, it can be seen from the table above that coefficient ß which represents the simple correlation is valued at 0.787, and it indicates a high degree of correlation. then, the value of adj. r square in this model summary is 0.616 or 61.9%, which means that 61.9% of the total variables in the dependent variable (cq) can be explained by the independent variable (intercultural interactions). the measurement proves that intercultural interactions has a positive and significant impact on cq, which indicates that the hypotheses 1 is supported in this study. the test of hypothesis 2 shows that coefficient ß which represents the simple correlation is valued at 0.736, and it indicates a high degree of correlation with the significance level of 0.000 and t-value of 11.968. the f-test results in f-value with a score of 143.23, which shows f-value is greater than f-table (143.23 > 6.85). the value of adj. r square in this model summary is 0.542 or 54.2%, which means that 54.2% of the total variables in the dependent variable (adaptive performance) can be explained by the independent variable (cq). the result proves that there is a positive and significant impact between cq towards adaptive performance. it supports the second hypothesis (h2) in this research which argued that cq will positively influence the level of individual’s adaptive performance. hypothesis testing for intercultural interactions to cq moderated by host university support shows the result as follows. table 2. t-test result for hypothesis 1 and hypothesis 2 hypothesis coeff ß tvalue sig. adjusted r square f sig. h1: intercul int à cq .787 14.033 .000 .616 196.93 .000 h2: cq à adapt. performance .736 11.968 .000 .538 143.23 .000 business, management and education, 2019, 17: 36–48 43 table 3. t-test result for intercultural interactions to cq moderated by host university support model unstandardized coefficients standardized coefficients t value sig. b std. error beta intercultural int .436 .196 .567 6.033 .000 intcult x host university support .531 .100 .607 9.327 .000 adjusted r square: 0.623 f test: 101.947 sig. .000 according to table 3 above, the result proves that there is a positive and significant impact between intercultural interactions to cq moderated by host university support. it supports the third hypothesis (h3) in this research which argued that host university support helps moderate and strengthen the relationship between intercultural interactions and the individual’s cq. 4. discussion being sent abroad for study means that individuals have to deal and engage in a culture that they are unfamiliar with, both in college and their daily life. therefore, building good relations with local or foreign people is a must for them in order to survive as they are living far away from home. as time passed, they will become familiar with the products, norms, values, and assumptions of other cultures. the findings of this study indicated that intercultural interactions give a positive impact on the development of individual’s cq. it means by having frequent interaction with someone across cultures, individuals could understand better and become familiar with other cultures. moreover, according to solomon and steyn (2017), experiential learning such as student exchange abroad will stimulate cultural intelligence, which based on the experiential theory, and contact theory (kurpis & hunter, 2016). the international experiences such as student exchange will lead to a perceived increase in cultural knowledge, motivation, and confidence in the students’ ability to communicate with people from other cultures. in short, being consistent with the existing literatures (ng, dyne, & ang, 2009a; ng, dyne, & ang, 2009b; yordanova, 2011), the findings of this study provided support for an argument that proposes frequent interaction with people from different cultures as one of the best methods to enhance one’s overall level of cq. in a theory developed by crowne (2008), intercultural interaction is believed to be needed by individuals as their tool to get engaged with other cultures. the higher level of cq is found to have a greater impact on the level of percentage for an individual’s capability to meet the demands in the new environment. the results of this study show that an individual’s level of cq will define their ability to adapt and settle with a new working environment. that is because students who have studied abroad are believed to have a higher level of cq which allows them to demonstrate the expertise in handling stress as they are getting used to being placed in a culturally novel environment. exposure 44 l. suharti et al. linking cultural intelligence and adaptive performance: do intercultural interactions... to these kinds of the condition will give the chance for individuals to develop a set of skills and knowledge on how to display an appropriate behaviour when dealing with uncertainties. this finding is then proven to be consistent with the result demonstrated by shain and gürbüz (2014), in which they discovered a positive link in the relationship between cq and adaptive performance. the results of this study also support what azevedo (2018) said, that cq has an effect on performance outcomes. this is because someone who has cq is able to adapt to a new culture and atmosphere that can ultimately improve their performance (nunes et al., 2017). it is discovered that individuals with high cq are able to adjust their behaviour appropriately when working with different people. the significant impact of cq on the individual’s ability to adapt effectively in the new environment that has been found out in this study also gives a strong empirical support to shain and gürbüz (2014), in which they mentioned that cq offers additional explanatory power in the prediction of individuals’ adaptive performance in a multicultural environment. on the earlier part of this study, it is assumed that universities play a crucial role in helping to prepare the individuals to be ready to compete in today’s diversified workforce. this assumption is then proved to be extremely true as the study participants admitted the moderating roles of host university support in helping to strengthen the relationship between intercultural interactions and the individual’s level of cq. it can be explained from the findings that strong support from the host university will increase the students’ intention to build the interactions with people from a different culture as it brings them closer with the experience of being exposed to the cultural differences. host university support is crucial in facilitating students with the experience of being exposed to the cultural differences (anderson et  al., 2005) and this finding is in line with the results of a study by jyoti and kour (2017) which concluded that social support plays important roles in affecting cultural intelligence. conclusions this study has discovered some important findings which suggest a new direction for another research in this field. first, like ng, dyne, and ang (2012) pointed out that the quality of experience could be as important, if not more critical than quantity. this study offers another perspective as it emphasizes more on the quality of experience which is described as the individuals’ intensity to interact with people from another culture. it complements the previous perspective on the importance of international experience by focusing on the individual’s intercultural interactions during the overseas study as one way to increase the level of cq. in addition, the results of this study show that maximizing the quality of experience when studying abroad through constant interactions with the other groups of people is proven to be beneficial for the individuals’ adaptive performance. more importantly, this study also found out that host university support moderated the relationship between intercultural interactions and cq, on how the relationship was stronger for those who were given maximum support by their host university, and weaker for those who were given minimum support by their host university. business, management and education, 2019, 17: 36–48 45 the findings of this study complemented the previous assumption on universities’ crucial role in educating and ‘preparing the students to be a part of the global citizens (ng, dyne, & ang, 2009b; williams, 2005). also, since there were only a few studies which have examined the issue, this study has suggested exciting opportunities for further research to take a look further on this issue. limitations and future research despite the strength of the model used in this study and support for the predictions, this study has limitations that should help guide future research. first, given the fact that there is only a limited amount of research which proposes and tests an integrated model of host university support that moderated the relationship of intercultural interactions with cq, the model is necessarily incomplete. this study may not consider other elements in host university support that might be as important, if not more critical than the other elements mentioned in this study. some elements, such as the opportunity to join in any student organizations at the host university, are considered as not influential by the respondents. the researcher recommends future studies to take a deeper examination on each element that is going to be used in the questionnaire, in order to reduce the response biases. second, this study did not really consider the respondents’ scope as we welcome everyone who has the experience of joining a study exchange program to participate in this research. there are 5 major locations of the host university which were mentioned by the respondents in this study. looking at the study’s results, we understand that each location has its own uniqueness and characteristic which made the answers given by the respondents were too varied and it potentially decreased the answers’ validity. for instance, those who studied in the south east asian countries gave a relatively poor appraisal rate towards the element of student buddies, while those who studied in the other regions did the opposite. due to this problem, the researcher recommends a future study to narrow the respondents’ scope and take the sample from only one specific region. third, all of the data in this study were collected through internet or e-mail which has limited control towards the respondents’ answers. while using this kind of method to collect the data was viewed to be effective in reducing the time, unfortunately, it is found out to be vulnerable towards the response biases. because of the response biases, it is possible that some study results are due to a systematic response bias rather than the hypothesized effect. that is why for further study, the researcher recommends using a more conventional way to collect the data such as paper-based questionnaire and develop some proper screening questions which are believed to be able to reduce the tendency of respondents answering the questions untruthfully. in addition, the number of respondents is small compared to the relatively large population. as a result, there is a possibility that the hypothesis test as well as the research model, have not yet produced strong results. future research is suggested to test the same model with a larger number of samples. finally, adaptive performance is a multidimensional concept that includes a number of different dimensions such as creatively solving problems, dealing with uncertain workable situations, earning new tasks, technologies, and procedures, interpersonal adaptability 46 l. suharti et al. linking cultural intelligence and adaptive performance: do intercultural interactions... demonstrating, demonstrating cultural adaptability, and demonstrating physically oriented adaptability. therefore, in measuring adaptive performance, the concept should be adjusted with clear contexts and boundaries, in order to determine the right measurement indicators (pulakos, plamodon, & donovan, 2000). in this study, the intended adaptive performance of students who have participated in the overseas student exchange program is actually the ability to demonstrate cultural adaptability, which in more detail can be interpreted as simply learning about a new culture or environment. according to pulakos, 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(2017). the role of cultural intelligence from the perspective of leader. arcada degreen thesis, 1-58. retrieved from https://www.theseus.fi/bitstream/handle/10024/130322/elvira ziyatdinova thesis may2017 arcada.pdf ?sequence=1 312 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai vadovų gebėjimas valdyti darbe kylantį stresą erika župerkienė erikazuperkiene@gmail.com klaipėdos universitetas, vadybos katedra 1. įvadas stresas neatsiejamas šių laikų įmonės vadovo profesinės veiklos komponentas. streso darbe tyrimams daugiau dėmesio pradėta skirti xx a. pab. ir jiems skiriama vis daugiau dėmesio dėl įvairių priežasčių: darbas, kaip ir šeima, sveikata, visuomeninis gyvenimas bei laisvalaikis, yra neatsiejama gyvenimo kokybės dalis; be fizinio ir psichologinio poveikio žmonių sveikatai, stresas darbe padidina organizacijos sąnaudas: nukenčia darbo ir sprendimų kokybė, pervertinamas vykstančių pokyčių greitis, todėl nuolat skubama, atsisakoma ilgalaikių perspektyvų analizės pasitenkinant trumpalaikiais sprendimais, nukenčia bendradarbiavimas sprendžiant organizacijoje kylančias problemas, trūksta originalių sprendimo būdų. šiame straipsnyje nagrinėjamas gebėjimas valdyti darbe kylantį stresą siekiant sumažinti vadovų streso darbe lygį, panaikinat stresą sukeliančius veiksnius arba sumažinant jų poveikį. nuo to, kaip vadovai geba valdyti stresą – įveikti darbe ar asmeniniame gyvenime kylančias stresines situacijas, – priklauso tiek jo fizinės, tiek psichologinės sveikatos būklė. problema: kaip vadovai geba valdyti darbe kylantį stresą. tyrimo objektas – vadovų įgūdžiai valdyti darbe kylantį stresą. tikslas – nustatyti lietuvos smulkių ir vidutinių verslo įmonių vadovų gebėjimo valdyti stresą darbe problemas. uždaviniai: apibendrinti streso darbe problemos ištyrimo laipsnį; – įvardyti darbe kylančio streso poveikį įmonių vadovams; – apibendrinti vadovų gebėjimo valdyti darbe kylantį stresą tyrimo rezultatus; – verslas, vadyba ir studijos 2009 313 įm o n ių e k o n o m ik a ir v a d yb a pateikti gebėjimo valdyti stresą darbe rekomendacijas įmonių vadovams. – tyrimo metodai: mokslinės literatūros analizė ir apibendrinimas. apibendrinant apklausos tyrimo duomenis taikyti kiekybiniai duomenų apdorojimo metodai. 2. streso darbe problemos ištyrimo laipsnis šiuolaikinė streso samprata suformuota psichologų, tačiau stresą sukeliančius veiksnius bei jo atsiradimo priežastis tyrinėja daug skirtingų mokslų (pvz., biologija, psichologija, sociologija, vadyba, profesinė medicina, epidemiologija). šiuolaikinė streso samprata yra kildinama iš lot. žodžio stringere – užtempti. tarptautinių žodžių žodyne (1999) randamas toks streso apibūdinimas: įtampos būsena – visuma apsauginių fiziologinių reakcijų, atsirandančių žmogaus arba gyvūno organizme kaip atsakas į nepalankių veiksnių poveikį. lietuviškoje medicinos enciklopedijoje (1993) streso sąvoka (angl. stress – įtampa) nusakoma kaip psichinės ir fiziologinės įtampos būsena, organizmo apsauginės reakcijos, kurias sukelia žalingi aplinkos ir vidaus veiksniai – stresoriai. streso teorija pradėta kurti praėjusiame šimtmetyje. 1936 m. monrealio universiteto (kanada) mokslininkas h. selye, pristatydamas atliktų tyrimo rezultatus, pirmą kartą pavartojo terminą „stresas“, o vėliau sukūrė ir streso teoriją, kurioje jį apibūdino, kaip žmogaus psichinės ir fiziologinės įtampos būseną, atsirandančią dėl išorės bei vidaus dirgiklių. streso samprata analizuota ir apibrėžta įvairių mokslo sričių užsienio mokslininkų (kogan 1981; lazarus 1984, 1988; hobfoll 1989; thoits 1994; furst 1998; vollmer 1998; o’hanlon 1999; westman 2001; payne 2001; chmiel 2005 ir kt.) darbuose. taip pat stresą nagrinėjo ir lietuvių autoriai (žukauskas 1998; kasiulis, barvydienė 2001; pikūnas, palujanskienė 2005; valackienė 2002; petkevičiūtė, saudargaitė 2006 ir kt.). mokslininkai (clark, cooper 2004; chmiel 2005) išskiria tris streso termino prasmes: stresas kaip reakcija, stresas kaip stimulas ir stresas kaip tarpinis procesas tarp stresoriaus ir reakcijos. taip pat stresas kaip reakcija minima j. pikūno ir a. palujanskienės (2005), kurių teigimu, stresinės situacijos atsiranda, kai žmogui iškeliami dideli reikalavimai. didesnis dėmesys streso sukėlėjams, pasak ž. grakausko (2004), pradėtas skirti t. holmes ir r. rahe darbuose – jie atliko gilesnę stresorių analizę ir 314 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a pabandė nustatyti universalius jų vertinimo požymius. tačiau ž. grakausko (2004) teigimu, šios paradigmos negalėjo atsakyti į klausimą, kodėl įvairiems žmonėms tas pats stresorius, esant toms pačioms sąlygoms, turi nevienodą poveikį. r. s. lazarus (2000) kognityvinės psichologijos tyrimai naujai leido pažvelgti į streso kilmę: tas pats stresinis įvykis gali skirtingai paveikti įvairius žmones dėl jų kognityvinės veiklos bei motyvacijos skirtumų. r. s. lazarus stresą apibūdina „kaip ypatingą asmens ir aplinkos santykį, kuris asmens yra įvertintas kaip apsunkinantis arba viršijantis jo turimus išteklius ir keliantis grėsmę jo gerovei“ (lazarus, folkman 1984). d. bartlett (1998) (cituoja n. galdikienė (2007)) analizuodamas teigiamą streso pobūdį naudoja „eustreso“ (džiugesio) terminą, o terminas „distresas“ (sielvartas) atitinkamai apibūdina neigiamą pobūdį. tad, pasak n. galdikienės (2007), stresas turi būti traktuojamas kaip tęstinumas nuo džiugesio iki lengvo sielvarto ir galiausiai iki stipraus sielvarto, kuriuos žmogus gali patirti. galima atpažinti sielvarto rodiklius, bet lengvo sielvarto galima nepastebėti bendroje visumoje arba jis gali turėti skirtingą aštrumo laipsnį, tad šio lygmens sielvarto požymiai kiekvienam žmogui gali būti skirtingi. priešingai, stiprus ir ilgai trunkantis sielvartas gali įgauti net tokio stiprumo simptomus kaip emocinis „perdegimas“ (burnout) ir rimtas psichologinis išsiderinimas (mcvicar 2003). streso sąvokos naudojimas įvairiuose moksluose (biomedicinos, psichologijos, vadybos ir kt.) nulėmė streso sąvokų įvairovę, nes kiekvienas mokslas stresą analizuoja iš savo perspektyvos. stresas apibrėžiamas ir kaip stimulas, jėga, veikianti asmenį, sukelianti diskomfortą, ir kaip atsakas į neigiamus išorinius veiksnius, ir kaip procesas. psichoanalitikas h. freudenbergeris pastebėjo, kad ypač atsidavę ir pareigingi savo srities darbuotojai dažnai pervargsta, praranda pusiausvyrą, ima neigiamai bei ciniškai vertinti savo darbą ir klientus, tampa nervingi, irzlūs, nepatiklūs, juos pačius gali apimti depresija. būtent tokias pasekmes sukelia „perdegimo“ sindromas (payne 2001), kuris atsiranda dėl emocinio išsekimo, savo identiškumo nesuvokimo, asmeninio pajėgumo sumažėjimo. h. vollmer (1998) profesinio „perdegimo“ procese įžvelgia tokias stadijas: 1. sutrinka pusiausvyra tarp reikalavimų ir galimybių – patiriamas stresas. 2. ūmi, trumpalaikė emocinė reakcija į šios pusiausvyros sutrikimą: atsiranda baimė, įtampa, išsekimas. 3. keičiasi požiūris ir elgesys, atsiranda tendencija su klientais elgtis šaltai, dirbti mechaniškai ar net ciniškai, su išankstine neigiama nuostata, taip stengiamasi patenkinti savo paties poreikius – gintis puolant. verslas, vadyba ir studijos 2009 315 įm o n ių e k o n o m ik a ir v a d yb a stresas įsigali, kai situacijos tampa nevaldomos ir kai trukdo organizacijai siekti užsibrėžtų tikslų. viena dažniausių streso darbe priežasčių yra darbuotojų perkrovimas darbu arba laikymas be darbo. kai darbas neįdomus, taip pat išgyvenama streso būsena, ją sukelia ir tai, kad per trumpą laiką reikia apdoroti daug informacijos (pikūnas, palujanskienė 2005). vadovų streso priežastys darbe (statt 2000): atsakomybės jausmas, kontrolė, persitempimas/perkrova, nepakankamas krūvis, emocinis darbas ir konflikto vaidmuo, išsekimas, darbo sąlygos. autoriai (chmiel 2005; bernardin 2003; pikūnas, palujanskienė 2005 ir kt.), nagrinėjantys stresą darbe, jį apibūdina kaip organizavimo būseną, kylančią dėl netikėtų nepalankių aplinkybių, dezorganizuojančių darbinę veiklą. n. chmiel (2005) darbinį stresą apibrėžia kaip patirtą aplinkos reikalavimų ir individualių situacijos išteklių neatitikimą, kurį lydi protiniai, fiziniai ir elgsenos simptomai. taip pat šis autorius stresinius stimulus pavadino stresoriais, o jų pasekmes – stresinėmis reakcijomis arba įtampa. n. chmiel (2005) darbinį stresą suskirstė į keturias kategorijas bei pateikė svarbiausius visų šių kategorijų stresorius: 1. fiziniai streso rodikliai (padidėjęs kraujospūdis, padažnėjęs širdies plakimas, labiau nei įprasta įsitempę raumenys). 2. psichologiniai streso rodikliai (padidėjęs nerimas, depresija, agresija, pasimetimas). 3. elgesio pokyčio streso rodikliai (padažnėjęs rūkymas, alkoholio vartojimas). 4. dirglumas, perdėtas susirūpinimas smulkmenomis, sumažėjęs darbo našumas). h. j. bernardin (2006) išskyrė tokius darbinėje aplinkoje patiriamo streso požymius: vis dažnesnės darbuotojų klaidos bei didesni patiriami nuostoliai; dažni ginčai, konfliktai, apkalbos, intrigos tarp darbuotojų; tvyranti įtampa darbo atmosferoje; pastebimas darbuotojų irzlumas; vėlavimas užbaigti darbus laiku, nes per lėtai priimami sprendimai; nepakankamas bendradarbiavimas, menka motyvacija; nenoras dalyvauti bendruose poilsio renginiuose; sumažėjęs darbo našumas; padidėjęs darbuotojų sergamumas; vėlavimai, ankstyvi išėjimai iš darbo, padažnėjusios pertraukos darbo metu; daugiau pretenzijų dėl netikslumų darbo instrukcijose, pareiginiuose nuostatuose; darbuotojų ir administracijos tarpusavio santykių priešiškumas, šaltumas. 316 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a 3. darbe kylančio streso poveikis įmonių vadovams stresas darbe, pasak d. akranavičiūtės ir j. ruževičiaus (2007), yra vienas iš veiksnių, lemiančių žmogaus gyvenimo kokybę, kuri taip pat priklauso ir nuo šių aplinkybių: būsto, užimtumo, pajamų ir materialinės gerovės, moralinių nuostatų, asmeninio ir šeimyninio gyvenimo, socialinės paramos, krizių darbe, asmeniniame gyvenime ir socialinėje aplinkoje, sveikatos kokybės, sveikatos priežiūros galimybių, darbo sąlygų, mitybos, išsilavinimo galimybių, santykių su aplinka, ekologinių veiksnių ir kt. tyrėjai (staw et al. 1981; auerbach, gramling 1998) nustatė, jog stresas neigiamai veikia ne tik darbuotojus, bet ir vadovus – jų stresas mažiau pastebimas, bet ne mažiau destruktyvus. visų lygmenų vadovai kenčia nuo stresų dažniau nei profesionalūs specialistai, kurių statusas organizacijoje beveik toks pat, tačiau jų neslegia atsakomybė už kitų darbuotojų veiksmus. organizacijų vadovai nuolat patiria vis naujų iššūkių, reikalaujančių naujų minčių bei idėjų: kaip valdyti organizaciją, bendrauti ir numatyti greitų permainų, visuotinės konkurencijos, darbo jėgos įvairovės, greitų rinkos pokyčių, organizacinės struktūros permainų, kintančios ekonomikos bei rinkos organizacinės veiklos ateitį (zakarevičius, župerkienė 2008). šiuo metu vadovai turi gebėti dirbti nuolat besikeičiančioje aplinkoje, mąstyti globaliau, vadovauti didesniam personalo kiekiui tam skirdami daug mažiau laiko, įkvėpti ir palaikyti savo darbuotojus nesumenkindami jų atsakomybės už veiklos rezultatus, nuolat ieškoti galimybių, kaip panaudoti novatoriškas priemones organizacijos veikloje, bei skatinti tai daryti ir savo darbuotojus, prisitaikyti prie kultūrinių skirtumų, juos panaudoti organizacijos galimybių plėtrai, sugebėti taikyti skirtingus vadovavimo stilius (župerkienė, žilinskas 2008). būtinybė valdyti organizacinius pokyčius (korsakienė 2006), rinkų ir visuomenės transformacija (smaliukienė et al. 2005) bei naujai keliami reikalavimai vadovams neabejotinai sukelia stresines situacijas vadovų darbo aplinkoje. išgyvenančių stresą vadovų elgsena kinta (whetten, cameron 2002): jie atsirenka tik tą informaciją ir mato tik tai, kas atitinka jų ankstesnius požiūrius, aistras, nepakenčia neapibrėžtumo ir reikalauja tikslių atsakymų, fiksuoja tik vieną vienintelį problemos sprendimo būdą, pervertina vykstančių procesų greitį (todėl skuba), sprendžia trumpalaikės perspektyvos atžvilgiu arba remdamiesi krizine nuotaika ir atsisako ilgalaikių perspektyvų analizės, praranda gebėjimą giliai analizuoti problemą ir todėl ją tirdami neatsižvelgia į visą jos sudėtingumą bei niuansus, nenori tartis, klausytis kitų, stengiasi išeiti iš susidariusios situacijos įprastu būdu, praranda gebėjimą kūrybiškai mąstyti ir rasti originalius problemų sprendimo būdus. vadovui siekiančiam gerai vadovauti ir vykdyti savo pareigas tenka sąmoningai keisti arba koreguoti savo mąstymą, tobulinti ir ugdyti verslas, vadyba ir studijos 2009 317 įm o n ių e k o n o m ik a ir v a d yb a asmenines bei dalykines savybes, siekiant gerovės savo organizacijai ir žmonėms, kurie joje dirba (žilinskas, župerkienė 2008). stresas, kylantis dėl laiko sukeliamos įtampos, neigiamai veikia žmogų (roxburgh 2004; gunthorpe, lyons 2004). pasak nurodytų autorių, nuolatinė laiko sukeliama įtampa, siejama su nuovargiu, miego sutrikimais, jausmu, kad „viskas slysta iš rankų“, sukelia apatiją, nuovargį, sveikatos problemas (garhammer 2002), padidina kaulų ir raumenų ligų riziką (carayon et al. 1999). stresas darbe sukelia daugiau kaip ketvirtadalį (28 proc.) visų su darbu susijusių sveikatos sutrikimų, dėl kurių netenkama darbingumo dviem ar daugiau savaičių. statistika rodo, kad es valstybėms kasmet stresas darbe kainuoja mažiausiai 20 milijardų eurų. stresas darbe gali sukelti depresiją, nerimą, padidėjusį lėtinį nuovargį ir širdies ligas, jis turi didelės įtakos darbo našumui, kūrybingumui ir konkurencingumui. stresas, kaip kenksmingas darbo aplinkos veiksnys, būdingas daugelio profesijų atstovams, ypač aukščiausių grandžių operatoriams, pramonės, verslo bei gamybos įmonių vadovams, pedagogams, gydytojams. šių profesijų veiklai būdinga didelė profesinė ir socialinė atsakomybė, sudėtingų užduočių ir nežinomų algoritmų sprendimas, dideli informaciniai krūviai, laiko trūkumas, konfliktinės situacijos ir kiti stresoriai (obelenis, malinauskienė 2007). ūminis stresas sukelia didelį nuovargį, nervų sistemos išsekimą, galvos skausmą, atsiranda bendras silpnumas, hiperhidrozė, parausta arba išblykšta veidas, šąla galūnės, pasireiškia ir kitos vegetacinės reakcijos. psichofiziologiniai pokyčiai, kuriuos sukelia ilgalaikis streso poveikis kumuliacijos pagrindu, ilgainiui sukelia pastovius patologinius pokyčius centrinėje nervų, širdies ir kraujagyslių, endokrininės bei kitose organizmo sistemose. stresas tampa globalia problema ir yra aktualus tiek išsivysčiusioms, tiek besivystančioms šalims, visų profesijų ir kategorijų darbuotojams – tiek darbininkams, tiek administracijos darbuotojams. todėl stresas ir streso valdymo priemonės svarbios moksliniuose tyrimuose bei organizacijų valdymo praktikoje (kang, singh 2004). 4. vadovų gebėjimo valdyti darbe kylantį stresą tyrimo rezultatai darbe kylančio streso ir jo valdymo priemonių empiriniams tyrimams dažniausiai pasitelkiami kiekybiniai tyrimo metodai (kang, singh 2004; spector et al. 2001; edwards et al. 2007; kulvinskienė, bandzienė, 2008). tiriant vadovų gebėjimą valdyti darbe kylantį stresą pasinaudota patikimu ir išbandytu tokių gebėjimų tyrimo instrumentu – d. whetten ir k. s. cameron (2002) pateikiamu standartizuotu testu, atskleidžiančiu turimus streso valdymo įgūdžius: stresorių pašalinimą, atsparumą, laikinų priemonių taikymą. 318 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a taip pat atskira klausimų grupe siekta išsiaiškinti, kokios šiuo metu būdingiausios lietuvos įmonių vadovų streso priežastys. trečias klausimų blokas skirtas demografiniams respondentų duomenims. per 2009 m. rugsėjo–spalio mėn. apklausti vakarų lietuvos regiono įvairių verslo įmonių vadovai (102 respondentai), užimantys įvairias vadovaujamąsias pareigas. apklaustųjų amžius svyravo nuo 23 iki 62 metų. didžioji dalis apklaustųjų (62 %) turi aukštąjį išsilavinimą, kita – aukštąjį neuniversitetinį arba aukštesnįjį (45 %). bendras darbo stažas taip pat labai įvairus – nuo 1 iki 49 metų. apklaustųjų darbo patirtis užimamose pareigose svyravo tarp 3 ir 17 metų, tačiau daugiau kaip 32 % apklaustųjų darbo stažas buvo iki 10 metų. didžioji dalis respondentų dirba įmonėse, turinčiose iki 50 žmonių, kita – smulkaus ir vidutinio dydžio įmonėse (nuo keliolikos iki 100 žmonių). vertinant vadovų gebėjimą valdyti darbe kylantį stresą nustatyta, jog daugumos apklaustųjų rezultatas yra 40–44 arba 39 ir mažiau balų (didžiausias įmanomas vertinimas – 60 balų). tai žemiausi rezultatai, palyginti su kontrolinės tokio testo grupės rezultatais. geriausiai iš streso valdymo įgūdžių tarp respondentų išugdytas gebėjimas pašalinti stresorius (17–19 balų iš galimų 24) – 83 %. atsparumas stresams perpus mažesnis nei įmanomas didžiausias šio įgūdžio vertinimas (tik 12–14 iš galimų 24 balų) – 76 %, laikinų priemonių taikymo įgūdis išugdytas geriau (8–9 balai iš galimų 12) – 87 % (1 pav.). 19 14 8 24 24 12 0 5 10 15 20 25 30 stresorių pašalinimas atsparumas stresams laikinų priemonių taikymas vadovų rezultatai didžiausias rezultatas 1 pav. smulkių ir vidutinių lietuvos verslo įmonių vadovų streso valdymo įgūdžiai (balais) fig. 1. stress management skills of managers of lithuanian small and medium-size business companies (points) verslas, vadyba ir studijos 2009 319 įm o n ių e k o n o m ik a ir v a d yb a priežastys, dėl kurių respondentai patiria stresą darbe (1 lentelė) visose amžiaus grupėse pasiskirstė panašiai, svarbiausios streso priežastys – atsakomybė už darbuotojų likimą organizacijoje (52 %), kiekvieną dieną naujai atsirandančių problemų sukeliama įtampa (64 %) ir pernelyg daug darbų vienu metu (68 %). 1 lentelė. priežastys, dėl kurių vadovai patiria stresą darbe (%) table 1. reasons, which cause managers’ stress at work (%) teiginys 3 šis teiginys ypač būdingas man 2 šis teiginys iš dalies būdingas man 1 šis teiginys visai nebūdingas man atsakomybė už kitų darbuotojų veiksmus 52 % 31 % 17 % atsakomybė už darbuotojų likimą organizacijoje 77 % 19 % 4 % įtemptas darbo monotoniškumas 3 % 12 % 85 % kiekvieną dieną naujai atsirandančių problemų sukeliama įtampa 64 % 31 % 5 % pernelyg daug darbų vienu metu 68 % 28 % 4 % nerealizuojami darbe asmeninai įgūdžiai ir gebėjimai 34 % 50 % 16 % būtinybė slopinti savo tikrąsias emocijas, neparodyti tikrų jausmų 42 % 30 % 28 % kita 11 % – – dalis respondentų (11 %) nurodė kitas stresą darbe sukeliančias priežastis: samdomi vadovai nurodė pavojų netekti darbo, kai kas nurodė sudėtingos situacijos šeimoje įtaką, užsakymų trūkumą, užsakovų skolas, skolas tiekėjams, bankroto galimybę. tyrimo rezultatai atskleidžia, kad valdant stresą darbe neišnaudojamos visos galimos priemonės. nors dauguma vadovų turi aukštąjį išsilavinimą ir jiems neabejotinai žinomos neigiamos streso pasekmės bei streso įveikimo būdai, tačiau gebėjimas valdyti darbe kylantį stresą išugdytas nepakankamai. ypač menkas vadovų individualus atsparumas stresams. būtina stiprinti fiziologinį atsparumą, reguliariai treniruojant širdies ir kraujagyslių sistemą bei laikantis sveikos dietos. 320 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a psichologinio atsparumo ugdymui rekomenduojama mažų pergalių strategija ir gilios relaksacijos metodai. socialinis atsparumas auga skatinant bendravimą ir darbą komandoje su bendradarbiais. šios strategijos duoda ilgalaikius rezultatus, bet jų įgyvendinimui reikia nemaža laiko. 5. gebėjimo valdyti stresą darbe ugdymo rekomendacijos įmonių vadovams nors stresinės situacijos kartais būna neišvengiamos ir nuo žmogaus nepriklausomos, vis dėlto yra keletas būdų įtampai sumažinti. organizacinės streso darbe valdymo strategijos pagal jų taikymo lygį skirstomos į pirmines, antrines ir tretines (kulvinskienė, bandzienė 2008): pirminės strategijos mažina atsiradusį stresą, keičiant darbo aplinkoje esan– čius stresorius arba siekiant juos apskritai panaikinti. tai – ergonominės, darbo ir aplinkos projektavimo, vadovavimo tobulinimo strategijos; antrinės strategijos identifikuoja ankstyvuosius streso darbe požymius ir – padeda individams veiksmingiau įveikti spaudimą darbe. paprastai tai būna darbuotojų mokymai; tretinės strategijos skirtos jautresnei ir labiau reaguojančiai vadovavimo sis– temai kurti, rūpinimuisi darbuotojų sauga ir sveikata stiprinti, jau kenčiančių nuo streso darbuotojų darbingumui atkurti. tai – pagalbos darbuotojams programos. kadangi, pasak m. le fevre, j. matheny ir g. s. kolt (2006) pirminės strategijos orientuotos į organizacijos ar grupės lygį, o antrinės ir tretinės – į individualų darbuotoją (kulvinskienė, bandzienė 2008), tai pastarosioms ir skiriamas didžiausias dėmesys ugdant vadovų gebėjimą valdyti darbe kylantį stresą. pasitelkiant personalo ugdymo priemones (stankevičienė et al. 2008) vadovams sudaromos galimybės ugdyti gebėjimą valdyti darbe kylantį stresą. d. whetten ir k. s. cameron (2002) išskiria tokius streso įveikimo būdus: stresorių pašalinimas planuojant laiką, deleguojant įgaliojimus, bendradarbiaujant, ugdant komunikacines kompetencijas, reorganizuojant veiklą, išskiriant prioritetus, sudarant tikslus ir naudojant „mažų pergalių“ strategiją. stresui darbe įveikti vadovai gali taikyti stresorių pašalinimo strategiją (2 lentelė). verslas, vadyba ir studijos 2009 321 įm o n ių e k o n o m ik a ir v a d yb a 2 lentelė. stresoriai ir jų pašalinimo priemonės (whetten, cameron 2002) table 2. stressors and their removal tools (whetten, cameron 2002) stresorius pašalinimo strategija laikas veiksmingas laiko valdymas – racionalus laiko valdymas – įgaliojimų perdavimas atsparumas bendradarbiavimas, komandos kūrimas emocinės kompetencijos ugdymas situacija darbo reorganizavimas laukimas tikslų sudarymas kuklių pergalių strategija streso valdymo strategijai taikyti reikia tam tikrų vadybinių įgūdžių: laiko planavimo, emocinio intelekto ugdymo stiprinant atsparumą stresams darbe, darbo organizavimo (praturtinimo) įgūdžių. šie stresorių pašalinimo ir atsparumo jiems įgūdžiai yra nuolatinio, ilgalaikio poveikio priemonės. tačiau kai kurie stresoriai yra už vadovų kontrolės ribų, tad jų atsikratyti asmeninio poveikio priemonėmis neįmanoma. be to, atsparumo stresui ugdymas reikalauja laiko išteklių, kurie leistų išsaugoti pusiausvyrą krizinėse situacijose. nors įgytas atsparumas gali sumažinti neigiamą streso poveikį, kai kuriais atvejais prireikia greitų priemonių. šių priemonių poveikis trumpalaikis, bet jos gali būti naudojamos iš karto, tik atsiradus poreikiui, ir esant reikalui pakartojamos. rekomenduojamos trumpalaikės streso įveikimo priemonės (meška, juozulynas 1996) yra šios: reguliarus poilsis – trumpos poilsio pertraukėlės padeda sumažinti įtampą ir atsigauti po intensyvaus protinio ir fizinio darbo arba nesėkmės (darbas be pertraukėlių mažina produktyvumą); ateinančios dienos planavimas – tai padeda jaustis tvirčiau, neužsikrauti per daug darbų; bendravimas su žmonėmis; atsipalaidavimas – tai mažina galvos, raumenų, skausmus, miego sutrikimus; reguliari mankšta. stresui malšinti taip pat tinka meditacija, biblioterapija, muzikos, juoko, fizinio, protinio, kūrybinio darbo terapija, ekskursijos, teatro lankymas. rekomenduojami gilios relaksacijos bei kvėpavimo pratimai. m. garhammer (2002) pastebi, kad susidomėjimas įvairiomis relaksacijų technikomis siejamas su šiomis dienomis aktualia laiko keliama įtampa, būdami įsitempę, žmonės yra linkę ieškoti kokybiškesnių atsipalaidavimo metodų. 322 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a 7. išvados stresas, pradėtas tirti nuo praėjusio amžiaus ketvirtojo dešimtmečio, šiuo metu yra įvairių mokslo sričių užsienio ir lietuvos mokslininkų tyrinėjimo objektas. stresas darbe gali būti apibūdinamas kaip organizmo būsena, kylanti dėl netikėtų nepalankių aplinkybių, dezorganizuojančių darbinę veiklą, poveikio. streso darbe analizei naudojami „eustreso“ (džiugesio), o neigiamo pobūdžio streso analizei – „distreso“ (sielvarto) ir emocinio „perdegimo“ (burnout) terminai. ilgalaikio darbe kylančio streso poveikis pasireiškia vadovų elgsenos pokyčiais, mažinančiais vadovavimo veiksmingumą, sveikatos sutrikimais ir patologiniais pokyčiais organizmo sistemose. tyrimo rezultatai atskleidė, jog vadovų gebėjimas valdyti darbe kylantį stresą nepakankamas: geriausiai iš streso valdymo įgūdžių tarp respondentų išugdytas gebėjimas pašalinti stresorius, menkai išugdytas atsparumas stresams, taip pat tobulintinas laikinų relaksacijos priemonių taikymo įgūdis. streso valdymo gebėjimams ugdyti vadovams rekomenduojama pasitelkti stresorių šalinimo strategiją: planuoti laiką, stiprinti atsparumą stresams ugdant emocinį intelektą, kuriant bendradarbiaujančias darbuotojų komandas, deleguojant įgaliojimus, ugdant komunikavimo kompetencijas ir reorganizuojant darbą. individualaus atsparumo stresams ugdymui rekomenduojama nepamiršti sveiko 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2001. stress and strain crossover, human relations 54: 557–591. zakarevičius, p.; župerkienė, e. 2008. improving the development of managers’ personal and professional skilęs, inzinerine ekonomika – engineering economics (5): 104–113. žukauskas, g. 1998. abilitacija, stresas, reabilitacija. vilnius. 53 p. isbn 9986-518-65-2. župerkienė, e.; žilinskas, v. j. 2008. analysis of factors motivating the managers’ career, inzinerine ekonomika – engineering economics (2): 85–91. verslas, vadyba ir studijos 2009 325 įm o n ių e k o n o m ik a ir v a d yb a managers’ ability to cope with stress in the work settings e. župerkienė summary the article analyses the type of expression of manager professional stress. the main features of professional stress are discussed taking into consideration the problems, which can arise due to stress at work. impact of long-lasting stress suffered at work is displayed through the changes in managers‘ behaviour, which reduces management effectiveness, causes health problems and pathological changes in the organism systems. by means of a standardized test, stress management skills of managers of lithuanian small and medium-size business companies are disclosed: elimination of stress factors, resistance to stress, temporary means of coping with stress. the most relevant reasons, which cause managers’ stress at work, are identified. the results of survey show that managers’ ability to cope with stress in the work settings is insufficient: the best developed stress management skill amongst the respondents is ability to eliminate stress factors; while resistance to stress is poorly developed, the skill in applying temporary means of relaxation is also subject to improving. in order to develop stress management skills, managers are recommended to use a strategy for elimination of stress factors: to plan time, strengthen resistance to stress by developing emotional intellect, by creating cooperating teams of employees, delegating authority, developing competencies of communication and work reorganization. for individual development of resistance to stress it is recommended to maintain healthy lifestyle and apply temporary means of relaxation when the need arises. keywords: manager, managers’ ability, stress at work. hoshin kanri: policy management in japanese subsidiaries based in poland marek ćwiklicki1, hubert obora2 cracow university of economics, ul. rakowicka 27, 31-510 kraków, poland e-mails: 1marek.cwiklicki@uek.krakow.pl (corresponding author); 2hubert.obora@uek.krakow.pl received 18 november 2010; accepted 15 january 2011 abstract. this article presents the findings from a research project on the polish model of hoshin kanri identified in japanese subsidiaries operating in poland. it begins with an overview of the basic models of the method described in literature. next, the findings of the project are presented. they were established on the basis of the first, quantitative stage of research conducted in over 50 enterprises of this kind and focusing on the awareness and practical application of japanese management methods. the case studies permitted to develop a meta-model of the method typical of japanese companies operating in poland. keywords: hoshin kanri, policy management, strategy, total quality management. reference to this paper should be made as follows: ćwiklicki, m.; obora, h. 2011. hoshin kanri: policy management in japanese subsidiaries based in poland, business, management and education 9(2): 216–235. http://dx.doi.org/10.3846/bme.2011.15 jel classification: m19, m21. 1. introduction the hoshin kanri method developed in japan in the late 1960s has now become an integral component in numerous organizations implementing new management concepts, such as tqm, lean management or six sigma. it is perceived as a main source of successful managemenent although not the one (kazlauskaite, buciuniene 2008; nita 2008; ogrean et al. 2008). yet it was not until the publication of an english translation of a seminal book edited by y. akao titled hoshin kanri: policy deployment for successful tqm (akao 1991) that it actually gained popularity among the methodologists and practitioners of management. the book extensively discusses a wide range of issues related to the method. two years before it, a work by b. king (1989) also devoted to hoshin kanri had been published, but it is akao’s book that has gained the status of the bible of this method. since then, more and more analytical publications presenting this method have appeared, though the process is slow and occurs on an irregular basis (jolayemi 2008: 296). b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(2): 216–235 http://dx.doi.org/10.3846/bme.2011.15 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 217 business, management and education, 2011, 9(2): 216–235 hoshin kanri has no unequivocally accepted interpretation or definition. the analysis of case studies offered by literature permits us to isolate several, partly convergent models that differ depending on the country origin of their authors or the enterprise studied. besides, the question arises whether japanese enterprises operating in poland also apply this method, and if so, whether it makes sense to talk about the polish model of hoshin kanri. the question posed above has become one of the reasons why the authors of the present paper decided to start research into this area. the main aim of the article is to present the framework of the hoshin kanri model as applied in poland. 2. hoshin kanri models reviewed a presentation of all the details of all the existing hoshin kanri models falls outside the scope of the present study; hence the authors have decided to introduce only their origin and typical characteristics, supplementing them, where necessary, with references to original studies that contain more detailed accounts. the hoshin kanri method originates from japan. its development is linked with the shaping of comprehensive quality management, which was initially defined there as company-wide quality control, and later total quality management. the first description of this method is to be found in a report of 1965 concerning the best practices in the area of planning which were awarded the deming prize (akao 1991: 46). problems inherent in the translation of this term into other languages resulted in the use of its original formulation, sometimes using only the word hoshin. the most complete definition of hoshin kanri based on the analysis of approaches by k. nayatani, s. mizuno, s. miura and t. sugimoti, was proposed by y. akao, who characterized it as a system for strengthening the overall capacity of an organization focused on improving its operation. this improvement occurs through the deployment of a standardized policy and plan (implement, check, improve) established as an annual management program based on the motto of the organization understood as the main concept of management adopted by it. strategic management derives from the longand medium-term management plan and the annual management plan implemented by way of combining quality, magnitude, cost and time (of delivery) as well as rational utilization of key organizational resources. y. akao supplements the above definition with the need to apply the concept of quality control and relevant methods (akao 1991: 17). the first descriptions of the concept in the english-language literature are based on japanese source texts. the model by b. king of 1989 is considered as one of the earliest. king (1989) applies the hoshin kanri model to a broader approach to strategic management in quality management systems. achievement of excellence in this area is, in his opinion, analogous to that contained in maslow’s hierarchy of needs, i.e. the achievement of a higher-order goal is possible only once the lower-order needs have been met. phases (or steps) in the hierarchy are reflected by individual stages of hoshin kanri, all of which occur only in the last phase. 218 m. ćwiklicki, h. obora. hoshin kanri: policy management in japanese subsidiaries based in poland increased worldwide interest in this method coincided with the translation of the book edited by y. akao into english in 1991, which came to be called the bible of hoshin kanri. the model described there can be synthetically presented as follows. the first task implemented within the hoshin kanri framework is a decision by the top management as to the basic principles of the business activity. this occurs through formulating a vision for the organization (company) and the key objectives to be achieved. then, in cooperation with middle management (responsible for this stage of activity), ways to achieve the objectives set are developed and appropriate means and resources are designated to that end. subsequent measures include negotiations among the middle management and implementation teams whose responsibility is to achieve the targets formulated at the previous stage. first of all, they apply to the ways of measuring the extent to which the adopted strategy has advanced. on completion of the negotiations, implementation teams execute the agreed-upon responsibilities and adopt a timeframe for their completion. additionally, higher-level management reviews the performance of implementing teams and evaluates the planning system itself. the first implementation of hoshin kanri outside japan was presented in model form by g. r. wood and k. f. munshi in 1991. they described the case of florida power & light (the largest american energy company), whose solution in the area of strategic quality management was awarded the deming prize in 1989. the hoshin kanri model applied by the company is not, in general terms, different from that proposed by y. akao. however, its authors supplemented it with details, which mean that this method can be essentially described as a quality management system. another model was presented by p. babich (1998). he based it on his experiences derived from his work in the san diego division of hewlett-packard. his description showed the hoshin kanri method as a formalized procedure accompanied by specific documents. likewise, in the definition of the method adopted by the author as a system of forms and rules to structure the planning process (babich 1998: 21), the significance of documentation is underscored. this caused a shift in the perception of the method as a bureaucratized mode of management. s. shiba is the author of the most popular version of the hoshin kanri method in polish specialist literature. this dissemination is the consequence of z. martyniak’s efforts, who in his publications (1998, 1999) was the first to characterize it in detail. his works were based on the publication by s. shiba of 1995 titled le management of par percée: méthode hoshin. s. shiba (1995) in its own model does not mention details of specific enterprises. the author focuses more on demonstrating that the method constitutes a sequence of activities implemented on an annual basis, which contribute to a better understanding and implementation of quality management. a similar model to that described by s. shiba was presented by d. hutchins. his approach is one of the more recent models of hoshin kanri. in his introduction, d. hutchins (2008) explains that his proposal derives from its implementation in the industry and indirectly, from the experiences from his cooperation with m. juran, k. ishikawa and 219 business, management and education, 2011, 9(2): 216–235 n. kano. a characteristic feature of hutchins’ model is the large number of references to auxiliary methods that support the implementation of hoshin kanri. for this reason, the model can also be treated as the compendium of knowledge concerning hoshin kanri that includes current concepts in management. unfortunately, they are not always supported by examples from specific enterprises. the works of b. witcher and r. butterworh (witcher 2002, 2003; witcher, butterwoth 1997, 1999, 2000, 2001a, 2001b), showing the british model, deserve special attention. the pair from norwich business school, university of east england, conducted research in 1997–1998 among japanese divisions of companies working in england: calsonic (producer of automobile air-conditioning units), nissan yamato engineering (at present, unipress, the producer of presses) and nsk bearings (producer of ball bearings). they developed a synthesis of hoshin kanri, presenting its as a british model. the model developed by english researchers shows somewhat different characteristics of hoshin kanri to the ones presented above, but it remains well within the conventions of the pdca cycle. witcher and butterworth’s model shows that the fundamental stages of procedure in the hoshin kanri method are common to all the cases studied. however, its implementation in individual enterprises differs in terms of detail. this results from different management styles and the organizational cultures. still, regardless of these differences, the main methodical train of hoshin kanri thought remains unchanged. b. witcher and r. butterworth quote y. akao: “pull together the forces within a company and to unite the minds internally, to perpetually improve its performance by adjusting quickly to change” (akao 1991: 174). to conclude the review of hoshin kanri models, it is worth mentioning t. jackson’s work. this author conducted the most extensive study of combined approaches hoshin kanri – lean management in his book hoshin kanri for the lean enterprise of 2006, which was awarded the shingo prize. t. l. jackson (2006: 12) claims that “at heart lean, six sigma and lean-six sigma is the same exceptional business operating system: hoshin kanri”. this means that hoshin kanri, usually treated as a method of strategic management, finds its use not only in quality management systems, but also in other ones, in this instance, in lean management. 3. research methodology1 identification of the application of hoshin kanri in japanese enterprises operating in poland was a two-stage process. first, it was established by means of a telephone survey which management methods linked with quality management are used in these organizations. in order to eliminate the errors due to possible variants of translation of relevant 1 this study was made possible thanks to the financial support of the polish ministry of science and higher education and the consent of staff of companies studied to provide detailed explanations of their management systems, for which we would like to extend special thanks to them. 220 m. ćwiklicki, h. obora. hoshin kanri: policy management in japanese subsidiaries based in poland terminology and to minimize the risk of lip service, the survey included questions that helped to establish whether the enterprises surveyed do, in fact, show the characteristics features of hoshin kanri. in this way, five enterprises were chosen for detailed study. in stage two, only three companies agreed to in-depth interviews, which made it possible to identify the hoshin kanri model applied by them. none of these companies, however, agreed to make their names public. consequently, the authors had to remove from the study all the references that would make possible their identification. this was to the detriment of the study, since one of these companies applies an interesting production system based on toyota production system, the second corporation that owns another enterprise is considered to be the mysterious source of success of one of largest japanese companies, and the last one constitutes a good example of what h. fayol described as esprit de corps throughout the entire organization. characteristics of these organizations are presented below. 4. characteristics of research subjects interviews were carried out with authorized representatives responsible for quality management systems of three enterprises: company a, company b and company c between april and june 2010. the organizations mentioned differ in respect of the time they started operating in poland, the number of employees, the profile of activity and the scope of involvement of japanese managers in day-to-day management. their synthetic comparison is shown in table 1. table 1. characteristics of enterprises that apply hoshin kanri in practice (source: data collected by the authors) company a company b company c year operation started in poland before 2010 late 1990s 2000 number of staff 150 over 200 85 % of japanese management 50% 0% 50% management systems iso 9000, iso 14000, ohsas 18000 iso 9000 and trade iso 9000, iso 14000 business profile manufacturing, assembly manufacturing services trade electronics – commerce, logistics based on the interviews, the authors reconstructed the hoshin kanri models characteristic of each organization, which were subsequently generalized. thanks to such an inductive approach, it was possible to reconstruct a model of this method as applied by japanese companies operating in poland. 221 business, management and education, 2011, 9(2): 216–235 in each company, strategy is linked with the company vision and mission. called in english philosophies, the performance guidelines usually reflect the three principles that should constitute the basis for everyday work. even though these sets of principles differ by organization, they do have several elements in common. it is from these principles that the strategy ensues, which, once translated into local strategies, and constitutes the beginning of the hoshin kanri process. the achievement of a vision is related to a dream (yume in japanese), usually associated with the client or more broadly, the environment in which the organisation operates. the achievement of such a dream and vision can be aided by the spirit that means both the belief (shinnen in japanese) in the company’s capacity to meet the challenges and perseverance in pursuing its goals by individuals and company staff as a whole. it is explained that staff members should independently set targets for themselves and achieve them, while at the same time attempting to develop their skills, whereas the team should create trust and undertake joint activities to provide positive stimuli. this indomitable spirit, never giving up and acting with a passion to achieve a goal, is related to a challenge (shokon in japanese). it should constitute both the spirit of progress that manifests itself as ongoing improvement in offering services to customers by developing new functions and new areas of activity. these two elements are supplemented by a reference to reality. therefore the need to act is underscored (kōdō in japanese) in such a way as to achieve it. the rule genchi genbutsu genjitsu is familiar especially with respect to the concept of lean management developed by toyota. the words genchi genbutsu literally mean the actual location and the actual materials or products, which is interpreted as ‘visiting the actual places, seeing the actual things in order to understand it (liker 2005: 344), or ‘go and see’ for short. the word genjitsu, which does not appear in j. k. liker’s work, means the reality or facts, and explains what needs to be observed. these three words are also called for short 3-gen shugi, which literally means ‘philosophy of three facts’, also called management by facts (miller 2007). 4.1. the model of hoshin kanri at company a deployment of strategic objectives the corporate strategy of company a comprises both the objectives set by its head office in japan and the objectives developed by the staff of the factory. in the first instance, the authors of these objectives are japanese, with the staff of the polish factory obliged only to achieve them. the objectives dictated by the corporate head office in japan are usually set at a very high level and are linked with the implementation of the fundamental principles of the philosophy of the corporation. the staff indicates that often it is impossible to achieve them within the designated period of time, but the fact that they are set so high is supposed to show that all the workers need to persist in trying to achieve them. one can conclude that the quality of operation in this corporation is identical with excellence in operation. 222 m. ćwiklicki, h. obora. hoshin kanri: policy management in japanese subsidiaries based in poland in the second instance, the objectives are worked out by the staff of company a based on the analyses of performance to date. division managers coming from japan are responsible for specifying and presenting their proposals, but they are compiled by deputy division managers (who are polish). in this instance, deputy division managers can be substituted by a specialist appointed by him. the list of objectives for individual divisions is worked out once a year by the division manager along with his deputy or appointed specialist2. employees working in a given division have the right to express their opinion about the objectives as the list is being drafted. the extent of staff involvement in defining the objectives to be achieved is different in individual divisions and depends on the management style of their manager. once the list has been approved by the head of the division, the workers no longer have the possibility to influence its contents. the list is then submitted to the company management, where it is analyzed, possible changes are introduced and the official version is approved. company a broadly applies the lean management approach. in the case of planning strategic objectives, there are no written rules, documents, forms etc. the planning of objectives is more like the process of adapting the company to the changing circumstances based on an ongoing evaluation of its performance to date and various relevant analyses, which is reminiscent of an emergent strategy. deployment of objectives the president of the company approves the list of objectives to be implemented in a given year. objectives for the entire company are then transformed into targets for individual divisions, which are subsequently changed into particular measures to bring about their accomplishment. the deployment of objectives occurs through cascading. the staff of individual divisions has a limited power to influence their contents at this stage. of course, objectives at every level are discussed with a view to analyzing the ways and means of their accomplishment. at this stage, there is no feedback component, only the communication of targets to be achieved. performance check the extent to which company a has achieved its targets is controlled against three timeframes. the first one consists in daily verification of task performance by individual divisions combined with the evaluation of strictly operational activities (i.e. productionoriented) by way of briefings and working meetings. once a month, a meeting of the so-called process leaders is held (process leaders are deputy division managers), at which the extent to which the adopted targets have been achieved is discussed. in the event that it is judged unsatisfactory, proposed and under2 such a system has been in operation for only two years, but in the staff opinion, works in practice. 223 business, management and education, 2011, 9(2): 216–235 taken are appropriate corrective or preventive actions. targets and the extent to which they have been achieved are discussed by process leaders. such a joint analysis helps the participants in the meeting to better understand the targets of other units and the extent to which they interrelate with their own targets. in order that this type of meetings proceeds effectively, their participants must possess a broad knowledge regarding the targets and processes implemented throughout the company. japanese managers expect their staff not only to know the specifics of their own division, process etc., but also look from a broader perspective, in order to understand the relationships amongst different processes and operations in different parts of the organization. given the fact that company a runs an integrated system of managing quality, the environment and industrial safety, special reviews of this system are conducted twice a year. these reviews consist in checking the extent of target achievement by the enterprise with respect to their division into individual divisions. during such reviews, division managers report results achieved by their subordinates, present possible reasons for failures in this area and propose possible actions geared at improving the situation. very often, in the event of failure to achieve a specific target, the president of the enterprise expects the manager of the relevant division to report on the fact. company a acts on the assumption that the reasons for inadequate performance are sought once the extent to which the target has been achieved drops to below 95%. the company underscores the importance of appropriate graphic visualization of performance using a number of types of graphs and diagrams (such as bar charts / histograms, linear or pie charts). corrective actions checking performance is closely linked with the approach to measures that correct the extent to which company targets have been achieved. first of all, they are realized in day-to-day work on the basis of ongoing analyses (e.g. index-based process analysis) and thanks to communicating the extent of their achievement among the staff of the division. corrective actions in the area of target achievement also constitute a topic of monthly meetings of process leaders. however, decisions made at these meetings have a broader dimension linked with the opportunity to analyze the extent to which different interrelated targets have been achieved. however, the corrective actions that originate in the reviews of the integrated management system are the most formal in character (owing to the requirements of iso standards) (kaziliunas 2008). based on the reports submitted division managers, undertaken are the most serious corrective operations related to the achievement of adopted targets, which are re-checked after six months during a subsequent review. owing to the relatively short time of operation of the polish division, no mechanism has been worked out so far to reward workers for achieving the set targets. this occurs indirectly thanks to a series of competitions (e.g. competitions of quality circles, 224 m. ćwiklicki, h. obora. hoshin kanri: policy management in japanese subsidiaries based in poland evaluation of kaizen projects, ideas for saving energy). the extent to which company a has achieved its goals is also reviewed by its japanese head office. the goals proposed and achieved by this factory, if they are evaluated positively in the head office, can be recommended for achievement to sister enterprises worldwide. a general model of hoshin kanri at company a the shape of the hoshin kanri model applied at company a is influenced by two specific conditions. the first one is the operation of an integrated system of managing quality, the environment and industrial safety based on the requirements of the iso families of industrial standards: series 9000, 14000 and 18000, respectively. mechanisms of planning, implementation, checking performance and correction of strategic objectives are partly conditioned by the operation of this system (e.g. checking the extent to which targets have been achieved during system reviews). the other factor that influences the shape of the hoshin kanri model at company a’s polish factory is the approach to management characteristic of its japanese managers, which includes the following: − the setting of very ambitious goals or “tuning up” the goals proposed by the workers; − the deployment of objectives on the basis of a consistent scrutiny of facts (management by facts), in-depth analyses of proposed goals on the basis of data obtained from the company, the environment, sister companies (benchmarking), etc.; − decision-making concerning the adoption of specific goals based on in-depth analyses supported by possible discussions with workers; − increased commitment and initiative required from polish workers; − focus on very young workers whose attitudes and behaviors can be shaped by the company in a way consistent with its corporate philosophy; − teaching staff to make decisions using the coaching technique instead of workshops. japanese managers inform their staff about certain tasks without necessarily explaining the course of action, just the targets to be achieved. this teaches the workers to be more independent in getting to know the organization and all that it represents). the shape of hoshin kanri at company a is crucially influenced by the fact that the japanese plan to leave this factory in the hands of polish managers once they have been appropriately trained. hence the high expectations of staff, who are assigned an ever increasing range of responsibilities and powers. at the moment, one of the divisions of the company is run by a polish manager. 4.2. the model of hoshin kanri at company b setting strategic objectives at company a, strategic objectives expressed in financial terms are set during the meetings of presidents of individual subsidiaries at the italian head office of the corporation. the polish subsidiary is also represented by the finance director. as a result of discus225 business, management and education, 2011, 9(2): 216–235 sions, an annual budget is drafted, which becomes the basis for the activities of the subsidiary. the process of its preparation is informed by external data connected with the analysis of global economic trends. financial objectives are supplemented at the local level with determined independently qualitative objectives. objectives formulated in this way are linked with performance indicators together with target values. some of them (especially those concerning financial objectives) are set by the head office, whereas others – by division managers. managers select the objectives and indicators based on their experiences from earlier years, fitting them into the adopted annual objective. they are based only on the information from within the company. the objectives are ultimately accepted by the president. in the event these objectives are not accepted, refusal to accept them is explained and an attempt is made to select other indicators. the list of indicators is contained in the document titled “performance evaluation”. this is one of the elements of the motivational system adopted by company b, which, combined with management via objectives, constitutes the basis for determining annual bonuses. this solution is also sometimes called ‘payment by results’, which shall be commented upon further. from this set, managers select the indicators that fit best their divisions, taking into account their annual financial objectives. for example, the production manager’s indicator can apply to the achievement of the expected level of exports, whereas the process engineers – the cost level of faulty items. deployment of objectives based on selected performance indicators, managers define plans of action and submit them to the president for approval. the manager, in the process of determining the indicator levels (and simultaneously the target), takes into account the opinions of his own subordinates, suggesting appropriate values based on the analyses of results achieved to date. co-ordinations of this kind are not formalized. the final decision as regards the indicators is made by the division manager. the formulated goals and performance indicators should ensure a certain level of efficiency, but in some cases, higher target values are acceptable related to a new situation, such as the implementation of a newly developed product. all the targets agreed upon within the divisions are recorded in forms developed by their staff and passed on to the president. at the meeting with managers, the president approves individual targets. finally, the approved targets become the focus of activities geared at achieving them. the choice of the manner in which the manager co-ordinates objectives and indicators is left at his discretion. usually, the proposed goals are e-mailed to workers, and they are subsequently discussed at meetings devoted to the review of the quality management system. consequently, the range of the utilization of staff opinion varies: some managers treat them as the source of information about the situation inside the organization, whereas other encourage them to be more involved in defining the objectives. in general, company b formulates its objectives in a collective manner. 226 m. ćwiklicki, h. obora. hoshin kanri: policy management in japanese subsidiaries based in poland performance check company b has a well-developed performance check system. from the strategic point of view, the most important are the monthly meetings of upper management with the president and representatives of the head office via videoconferences. every manager reports on what has been achieved as regards a specific target and explains the present state of affairs. in the wake of such a meeting, the annual objective can be adjusted due to the existing situation, though, as a rule, it does not happen often. usually, the company attempts to uphold the adopted annual objectives despite the risk of not achieving them. additionally, a meeting is held once a month devoted to analyzing the costs of faulty items attended by all the managers and representatives of individual divisions (foremen, team leaders). the meeting is devoted not only to reporting, but is also to analysis. annual objectives are discussed and ways to improve the situation or solve problems are sought. this means that the performance check component involves an element related to corrective action. the costing of faulty items is linked with the adopted method of problem solving. it starts with pareto analysis, which constitutes the basis for selecting root causes for further analysis performed using a relationship diagram. a global performance review occurs twice a year. then the achievements of qualitative and financial objectives of a strategic character are combined. such a timeframe results from the integrated management system based on iso 9000 and 14000 standards adopted by the company. a final performance evaluation occurs at the end of each turnover year (end of march). this review is attended by upper-level managers with its results influencing the volume of bonuses. this form of control is supplemented by daily management visits to the division, which may refer to the idea of ‘management by walking around’. additionally, company b used to have yet another element of control, which has been suspended at present due to the financial crisis. the presentation of performance and strategies for the future, including a discussion, was held in the presence of representatives of management from the japanese head office, who talked with selected workers from all levels. this kind of review took place once a year, usually at the weekend, outside the workplace. corrective actions the corrective action plan derives from the results of completed control activities (daily and monthly). an essential supplement to the meetings of senior executives and management system reviews is constituted by daily operational meetings at which current problems are analyzed. the manager with his staff evaluates what has been done so far and what the problems are, and, although they usually are operational character, still they offer an opportunity to modify the targets or propose new ones. 227 business, management and education, 2011, 9(2): 216–235 likewise, test sessions with the key customer are also held every day. their scope and procedure is similar to that presented above. one should also mention the individual improvement program implemented by company b. it consists in improvements being suggested by individual workers, whose activity in this respect is taken into account in their annual performance appraisals, which constitutes the basis for salary rises. the proposed solutions are mainly of an operational (technical) nature and are related to the tasks performed at the worksite (e.g. in the area of ecology, ergonomics, etc.). the notification occurs by means of a special form in which the worker presents the current situation, explains what should be changed, the impact of the solution, etc. this solution is similar to linking the kaizen principle at the level of the worksite (so-called quick kaizen) and the system of workers’ suggestions. suggestions for improvement filed by workers proposals are evaluated. if the results are positive (i.e. the improvement can be beneficial to the company), the solutions are implemented. the achievement of adopted targets is linked with remuneration. in literature, this is called ‘payment by results’, but it is not typical of the japanese version of the method, in which an attempt is made to separate the evaluation and the ensuing remuneration level. a general model of hoshin kanri at company b in the light of our research, hoshin kanri appears to be an integral component of the quality management system based on standards iso 9000 series. individual phases characteristic of this method are built into the general management structure, which causes the blurring of the boundaries between it and the system that results from these standards. at the same time, this permits us to conclude that hoshin kanri is integrated with such system, which is best expressed by the fact that the formulation of policy of quality (sic!) is mandatory. the term ‘policy’ may be considered as not so distant an echo of the english translation of the japanese word hoshin. opportunities for an independent formulation of objectives by the polish subsidiary of the company are limited because of its subordination to the company’s pan-european strategy. the company studied adjusts its own actions to the objectives set, most often in the area of quality. the deployment of objectives and designation of activities occurs in a collective manner subject to final approval by top management. strongly developed is the control mechanisms operating in different time frames based both on the adopted system of monthly reporting and guidelines for organizational management are resulting from the iso 9000 standard. 4.3. the model of hoshin kanri at company c setting strategic objectives strategic objectives for company c are formulated in the japanese corporate head office. the adjustment to the specifics of the european market occurs at the brussels 228 m. ćwiklicki, h. obora. hoshin kanri: policy management in japanese subsidiaries based in poland head office. top managements of individual divisions, including poland, have no the influence on globally established objectives, but can modify them drawing on their knowledge of economic realities in europe. the objectives, once set and approved during visits in brussels, are directed for implementation in local divisions. therefore it can be said that the objectives for individual divisions are imposed, because workers do not participate in their formulation. only the japanese president of the domestic department can influence them at head office meetings. such an approach causes that sometimes programs for implementation that originate abroad are not compatible with requirements of the polish law. this entails an adaptation of the documentation that defines the operation of management systems. strategic objectives complete with a timeframe set by the head office underlie the preparation of specific business targets for individual divisions, which, at the same time, initiates the implementation of hoshin kanri at the division level. details of setting objectives targets for the division constitute the responsibility of the process leader, who discusses them both with the workers and with the president, who has the casting vote. the objectives are defined once a year, however, depending on the needs resulting from changes in the environment, they can be supplemented with new ones. business objectives are accompanied by objectives resulting from the implementation of the policies concerning quality and the environment, where the company c staff enjoys a greater freedom. some workers do not perceive opportunities for submitting their own objectives, whereas other treats it as their duty. the discussions of objectives with workers begin a separate phase of hoshin kanri. deployment of objectives on receipt of objectives to be achieved, the manager adjusts them to the specifics of his division, but can also propose his own objectives for the president’s approval. the manager sets the deadlines for the preparation of plans of action and the timeframe of action as well as general tasks to be executed. the manager has a week to prepare an outline of deployment of objectives. it should be underscored that when formulating the objectives, the manager does not perform it from his personal point of view, but the division for which he is responsible. then the manager conveys these objectives to his staff (middle management) who have seven days to come up with feedback concerning possible changes, but first of all, to set their own objectives. possibilities to change certain elements of strategic objectives conveyed from the head office are limited (e.g. the deadlines), but the way the tasks are accomplished remains at the discretion of staff of individual divisions acting on the basis of their superiors’ guidelines. consequently, in this phase the objectives are translated into targets for lower management levels and mark the points at which more detailed implementation occurs, which constitutes part of the general management system consistent with hoshin kanri. 229 business, management and education, 2011, 9(2): 216–235 this deployment of objectives and their achievement by lower level staff is called at company c ‘management by objectives’ (mbo). what is interesting is that mbo is treated by the company not so much as a comprehensive and general method, but as a detailed one, involving individual staff members. what is also interesting is the translation of hoshin kanri into polish at company c, which is tantamount to ‘management by objectives’ (sic!). such terminology may cause confusion, but in the enterprise studied, the meanings of hoshin kanri and mbo are clearly perceived as distinct. mbo translates directly from japanese as mokuhyou kanri seido, which literally means a ‘system for managing objectives’. the former refers to managing objectives across the entire organization, while the latter – to the achievement of goals of individual staff members that constitutes both a portion of hoshin kanri and, at the same time, its integral part. what makes them different is their level in the hierarchy of goals in question. accordingly, this phase marks the coupling between hoshin kanri and mbo. the latter constitutes a mechanism for detailed accomplishment of goals and, as jointly executed by individual staff members, combines to form the general shape of hoshin kanri. during the interviews, it was graphically represented in the following way: “the pyramid must consist of inputs of individuals”. mbo at company c uses evaluation forms and competencies assessment forms. the implementation of mbo at company c in the shape described below took place in 2007 and consisted in the training of company managers by the human resources staff from the head office in the way the method should be applied, which was then conveyed by managers to their subordinates. performance check performance checks occur twice a year and are combined with management system reviews. the first one occurs in september, apart from evaluating the results (an ex post evaluation) to make it possible to design corrective actions as needed for the subsequent six-month period. the six-month evaluation constitutes a general recapitulation of company activity, whereas the final performance review takes place in february–march3 and concerns the extent to which annual objectives have been achieved. however, ongoing checks takes place on a monthly basis and involves formalized reports. as part of the mbo method, individually prepared managerial reports, usually focusing on financial matters, are submitted to superiors, which enable them to be wellinformed and ready to act. their presentation is the responsibility of relevant managers or individuals appointed by them. it is at those monthly meetings that proposals of supplementary goals resulting from ongoing needs related to business activity can be made. the company employs no uniform report forms. each division has its own standards of reporting performance, which results from the specifics of their activities. 3 company c’s financial year starts in april. 230 m. ćwiklicki, h. obora. hoshin kanri: policy management in japanese subsidiaries based in poland the level of detail of individual reports varies by division manager and his management style. some require very detailed reports, which also contain a diagnosis and an analysis of performance (e.g. in the form of complete answers to the question ‘why?’ asked five times), whereas others require only a synthetic presentation of results. sometimes, during the execution of certain tasks and as new ones begin, reports are compiled with a certain delay, which causes problems in the retracing of actually undertaken actions. such a reporting system is called hōrensō, which is an acronym of japanese words hōkoku – meaning report, renraku – contact, and sodan – consultation4. j. k. liker (2005: 356) describes this technique as the way to “obtain information and communicate feedback and suggestions” that consists in a daily reporting by workers to their superiors. it should be added that company c also utilizes horizontal transmission of information (japanese yokoten). j. miller (2007) defines yokoten as the total sum of copies and kaizen, which means the copying of effective solutions developed in the process of kaizen. it is pursued in an arrangement that is interfunctional, horizontal, and does not require the observation of formal hierarchical communication. interestingly, traditional forms of communication during the description of hoshin kanri, such as ringi (ringiseido), catchball, and the accompanying nemawashi, are not utilized by the company. the company emphasizes the importance of visualization of results, which impacts on the auxiliary methods applied. usually, relationship diagrams are used to that effect, as are line charts, histograms and bar charts contained within a report on a3 sheet of paper. the extent to which visualization is employed depends on the preferences of division manager. corrective actions reports contribute to the evaluation of performance, which forms the basis for possible corrective actions. once it has been ascertained that a goal has not been achieved, the president decides to implement such a course of action. upward communication of information permits the top managers to find out about such problems before the president does. therefore, they can ask for explanations of reasons why a given goal has not been achieved. these analyses can vary in their level of detail. if they result in a suggestion to change the goal, a decision to that effect is made by the president. if the president does not agree, the manager is obliged to undertake appropriate corrective actions in the course of the subsequent month. such a decision also depends on the significance of a given goal for the operation of the entire organization. if the goal is related to the execution of tasks at a certain unvarying level, its non-achievement causes no negative consequences and business continues as usual. however, in the case of high-priority organizational goals, corrective actions are undertaken without delay. 4 the polish edition of j. k. liker’s book (2005: 356) contains a different transcription of hourensou, with individual japanese words being spelled together with the following translations: hou koku – to present a report, renraku – present updated information, and sou dan – advise / consult. 231 business, management and education, 2011, 9(2): 216–235 on the other hand, if the goal has been achieved, the president recognizes the fact by publicizing information to that effect in the company newsletter and offers the opportunity to obtain the corporate award. in 2009, the company decided to introduce a motivational performance-related system. when making decisions regarding human resources in which the behaviors and attitudes staff is taken into account, their efficiency in accomplishing goals will also be taken into consideration. a general model of hoshin kanri at company c individual phases of the process have been laid out against the pdca cycle phases. what clearly differentiates the hoshin kanri variant applied at company c is less prominence accorded to planning. this results from the place of the division in the overall corporate structure. the phase of deployment of objectives has more to do with co-ordination and explanation. however, the check phase, applied first of all in compliance with the mbo method, usually involves the actual accomplishment of goals by individual staff members. checking also involves reporting, which constitutes the basis for appropriate decisions concerning goals for the subsequent period of operation. 5. a meta-model of hoshin kanri in japanese enterprises in poland the four phases of the model universally apply to all variants of hoshin kanri. they also correspond to individual stages of the pdca cycle, which permits their comparison with models proposed by international authors. in the light of the three case studies presented above, their variants of hoshin kanri can be characterized as follows. subsidiaries of japanese enterprises operating in poland have limited opportunity to influence their strategic objectives. the president of the subsidiary may consult with the company’s european head office, but the participation of staff in the shaping of the global strategy to the extent seen in international models is very limited. consequently, the respondents, when describing objectives, often used the word ‘imposed’. this applies first of all to business and financial objectives. they enjoy a greater freedom in setting supporting goals, mainly those related to the issues of quality. the participation of staff and managers in suggesting such goals varies by enterprise. nonetheless, the annual objectives are the resultant of these of two kinds of goals, with corporate goals being the dominant ones. the extent of consultation and goal setting also varies. based on the interviews, this usually occurs along the president–division managers’ line. consultations with lower management (e.g. within divisions) depend on individual management styles. as a result of these consultations, the list of goals, which underlies actions, is produced. the next, check phase, occurs at four levels, with three of them judged to be the most important for hoshin kanri: monthly, semiannual and annual ones. daily checks 232 m. ćwiklicki, h. obora. hoshin kanri: policy management in japanese subsidiaries based in poland constitute part of operational management. monthly checks are more important for the accomplishment of strategic objectives, because in this phase references are made both to the current situation and the strategic objectives. semiannual and annual checks are linked with the iso 9000 quality management standard implemented by every enterprise. this causes that hoshin kanri is built into this mechanism, and often not perceived as a separate part. the semiannual and annual evaluations not only concern retrospective evaluations of adopted annual objectives, but also serve as the basis for organizational learning, which, with previous year’s results and experiences as input, permits the company to undertake corrective actions. they, in turn, find their final reflection in the objectives set for the following year. exceptional achievements in the accomplishment of objectives, especially those set in subsidiaries of the company, are communicated to corporate head offices and can become benchmarks for other subsidiaries in the network. in this indirect way, the staff of the polish subsidiary may influence the goals of the entire corporation. such a synthetic model is shown in fig. 1. the content of individual phases has been shown against the phases of the pdca cycle, which lets us more clearly perceive the links among these cycles that appear at different management levels. in this way, a nested system of loops is created, forming a transmission belt of sorts, an arrangement of cogwheels that communicate general strategic formulations to the level of operational management. corporate objectives plan do deployment of objectives setting annual objectives senior management junior management consultations on objectives and plans act check corrective actions business objectives proposed changes goal accomplishment control everyday monthly semiannual annual proposed quality objectives fig. 1. the meta-model of hoshin kanri in poland (source: authors’ own research) 233 business, management and education, 2011, 9(2): 216–235 the above view can also be presented graphically in a different way, with more emphasis on the influence on the part of the head office on the setting of objectives and emphasizing the role of checks based on the pdca cycle. at the level of daily and monthly checks, respondents mentioned the problem-solving process that in general complies with the pdca cycle. 6. conclusions despite the limited extent of formalization and certain simplifications with respect to the classical hoshin kanri model, one may clearly perceive the polish model of this method is crystallizing, whose fundamental principles are adjusted to the business conditions in poland. in comparison with the models described in international literature, the following differences appear to be of primary importance: 1. limited staff participation in the formulation of company vision and mission. 2. proposals of annual objectives that supplement corporate objectives. 3. consultations regarding objectives and action plans occurs mainly along the line president–division managers. 4. the dominant mode of reviewing the achievement of strategic objectives is monthly and semiannual. 5. the linkage of the hoshin kanri mechanism with the quality management system based on the iso 9000 standard. the limited staff contribution to the formulation of company mission and vision stems from the fact that all three enterprises studied are subsidiaries of large global corporations with head offices outside poland. strategies in this type of organizations are formulated at the level of the head office; as a result the staff employed outside does not have a significant impact on the process of strategy formulation (at corporate level). in the companies studied, staff participation in the process of formulating annual objectives is usually limited to proposals in such areas as quality, industrial safety or environmental care. they usually complement the objectives imposed by the head office. consultations regarding objectives usually occur between the presidents and division managers owing to the mechanism of cascading objectives adopted by the organizations. the president constitutes a link between the head office and the polish subsidiary of the company. the president brings the objectives from the head office to be accomplished by the polish subsidiary and communicates them to division managers. these objectives are then discussed and the best ways to accomplish them are worked out. the timeframe in which the accomplishment of strategic objectives is done in poland stems from two premises. on the one hand, this derives from a certain tradition rooted in domestic enterprises of monthly meetings devoted to reporting and analyzing adopted business objectives in the form of briefings. on the other hand, it is a consequence of 234 m. ćwiklicki, h. obora. hoshin kanri: policy management in japanese subsidiaries based in poland formalized quality management systems adopted by companies. such systems require semiannual evaluations. integrated management systems used by the companies (developed based on families of iso 9000, 14000, 18000 standards) help to implementing hoshin kanri by meeting 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įmonių metamodelio metodą. reikšminiai žodžiai: hoshin kanri, valdymo politika, strategija, visuotinės kokybės vadyba. marek ćwiklicki is an associate professor at the department of organisation and management methods, cracow university of economics (poland). his areas of interest are the methodology of management science, evolution, adaptation, development and implementation of contemporary management concepts and methods / tools. he has published over 130 papers on various organisation and management theory topics. he also works as a trainer and consultant for profit and non-profit organisations. hubert obora is an associate professor at the department of organisation and management methods, cracow university of economics (poland). his areas of interest are total quality management, tqm methods and economics of information. he also works as a trainer and consultant in the field of total quality management and technology management. http://dx.doi.org/10.1016/s0024-6301%2899%2900036-9 http://dx.doi.org/10.1111/1467-6486.00253 http://dx.doi.org/10.1080/09544129100000026 technique for assessing reliability of insurance companies irina voronova rigas technical university, kalku str. 1, lv-1658 riga, latvia e-mail: irina.voronova@rtu.lv received 18 november 2010; accepted 15 january 2011 abstract. the purpose of this study is to improve the research technique for assessing the reliability of non-life insurance companies’ position. in this study, the author considers problems of assessment of reliability of insurance companies’ position. the author analyses indicators enabling to make complex assessment of insurance companies’ reliability. a technique of creating an integral indicator by using different methods of determining weighting rates of ratios validity is offered. practical example of using an integral indicator of reliability of latvian non-life insurance companies on the basis of public information is introduced. rating is a risk indicator for potential consumers of insurance services. the offered technique may serve as an instrument for analysis of the reserves for enhancing reliability and competitiveness of insurance companies. keywords: composite indices method, methods of reliability, insurance company, fuzzy set. reference to this paper should be made as follows: voronova, i. 2011. technique for assessing reliability of insurance companies, business, management and education 9(2): 295–309. http://dx.doi.org/10.3846/bme.2011.20 jel classification: g22, g24. 1. introduction at present, there exist a number of various techniques for assessing the reliability of institutions (insurance companies, banks, enterprises): rating assessment, point assessment of reliability and financial state, techniques of bankruptcy probability. as a rule, most techniques of rating assessment rely on public and internal information. special agencies are granting ratings. in her works (voronova, pettere 2008, 2010), the author studied the development of rating approach to the assessment of reliability of latvian insurance companies. the author investigates the possibility to use the technique of creating integral indicator of reliability in order to assess reliability of insurance companies. this technique has a scientific and practical interest. the conducted research was based on information comprised of indicators that describe activities of non-life insurance companies in latvia. these indicators can be defined only by availability of b u s i n e s s, ma n ag e m e n t a n d e d u c at i o n issn 2029-7491 print / issn 2029-6169 online 2011, 9(2): 295–309 http://dx.doi.org/10.3846/bme.2011.20 copyright © 2011 vilniaus gediminas technical university (vgtu) press technika www.bme.vgtu.lt 296 i. voronova. technique for assessing reliability of insurance companies public information. in 2010, there were 9 companies in the non-life insurance market, which conformed to solvency i criteria by 31 december 2009. unlike other participants of the financial market, assessment reliability of insurance companies is connected with the probability character of activities undertaken by insurance companies. discussion on the criteria of insurance companies’ comparison is combined with the problem of determing the ability of an insurance company to meet all of the obligations to indemnify the insured. rating is the function of risk management for service users. in its turn, insurance companies’ rating is a marketing function. 2. methods of determining weighting ratios referring to the assessment of economic objects methods of determining weighting ratios referring to the assessment of economic object has a history of development dating back more than a century. the method of creating “a formula of comparative assessment of projects” as one of the first variants of the technique of composite indicators was mentioned in 1908, when krilov stated his “considerations about drawing up a formula of comparative assessment” for a battleship project taking part in an international competition (hovanov 2005). long years of history of practical application of the composite indices method demonstrated its universality. universality of composite indices method is connected with the widespread general idea of scalar and vector assessment of complex objects in different branches of science. the composite indices method (cim) (hovanov 2009) demonstrated its universality. universality of composite indices method is connected with the widespread general idea of scalarizations of vectorial criterion of complex objects in different branches of science. cim method is also used to assess consumers’ interest in benefits. cim and randomize aggregative indices method (mikhaylov 2007) are applied in the theory of economic indices enabling to conduct multi-parametric assessment of different objects. for instance, in realization of the project sustainability index methodology in latvia indices method is applied (avena 2010). sustainability index methodology is the latvian research product, however, it is based on corporate social responsibility theory as well as on the most notable global indices – dow jones sustainability index and business in the community made of corporate responsibility index. sustainability index used in calculating the 93 questions in 5 sections – profile and strategy ( 1k ), the work environment ( 2k ), market relations ( 3k ), society ( 4k ) and the environment ( 5k ). each section and each item have its own weight in the question section and a number of the criteria of sustainability, the role of the company overall assessment. for example, the criteria weights are the following: 1 2 30.1 , 0.35, 0.14,= = =k k k 4 0.15=k and 5 0.25k = . among the techniques of developing integral indicators stand out applied studies, based on the method of composite indicators or randomized composite indicators (hovanov 2005, 2009; mikoni 2009), which enable to develop scales of integral assessment of properties upon a greater number of criteria on the basis of existing 297 business, management and education, 2011, 9(2): 295–309 classifications and common features. multicriteria evaluation differs from the criteria and normalization technique of the initial data and has a very broad scope – from assessing the effectiveness of integrated financial-economic activities of enterprises in various industries (ginevičius, podvezko 2009, 2008a; ginevičius, zubrecovas 2009), the reliability of the credit institutions to measure the quality of training specialists in higher education (mikhajlov 2007) to the evaluation of social phenomena (ginevičius, podvezko 2008b). the method of analytic hierarchy process (ahp) developed by t. saaty (2005, 2008) can be used for calculations of integral indicator. the method presents information processing received by means of couple comparison of each level indicator fulfilled by experts. according to the method of hierarchies’ analysis it is sufficient to have range preference (priorities) assessments (better, worse, approximately, equal). there are various examples of the ahp method for assessing the risks of investment projects, such as construction (ustinovichius et al. 2009). determination of integral indicator may be produced by using the method of range correlation, allowing lying out objects of study in the increasing or decreasing order of any of their appropriate feature. to do this, it is necessary to correctly make receipt and processing of expert assessments. complex assessment may be made on the basis of fuzzy descriptions (doumpos, zopounidis 2002; nedosekin 2003a; ahrameiko et al. 2004; demidova 2009). for example, in the study by a. nedosekin (2003b) for aggregating it is offered to use owa-operator jager (owa – ordered weighted averaging) (yager 1993), moreover, fushbern’s ratios serve as weights in convolution. there exist methods of calculating ratings which are based on the comparison of rated object on every financial-economic indicator with a standard object. in this case, the initial point for obtaining rating assessment is not subjective expert opinion, but established best results out of all combination of compared objects. such methods as method of sums, method of sum places, method of geometrical average, method of distance (taxometric method) and many other are used in different sources. application of taxometric method for forming the reliability rating of insurance companies is considered by the author (voronova, pettere 2010). each of the mentioned methods has its advantages and disadvantages. therefore there may exist many methods and it is not possible to determine, which is better and more objective than others as the used method is related to the aim of its user. 3. choice of indicators for assessing reliability of insurance companies there exist a number of indicators characterizing the activities of insurance companies. the choice of indicators depends on the purposes of assessment. to select indicators it is necessary to meet the following two requirements: to calculate indicators only public information must be used and there should be absence of linear interdependence of ratios. the first requirement refers to the fact that many specialized indicators on the state of an insurance 298 i. voronova. technique for assessing reliability of insurance companies company require information not available in public. if the latter requirement is not met, assessment of reliability based on adequate convolution provides an incorrect result. analysing 120 literary sources in latvian and english the author selected 64 financial indicators and drew up a table of the frequency. in conducting analysis financial indicators were divided into 9 groups: solvency indices, operative activity indices, profitability indices, leverage, liquidity indices, coverage ratio, cash flow ratio, different assets indices and other indices. identified top 20 financial indicators used by insurance companies’ activities analysis are shown in fig. 1. 80 70 60 50 40 30 20 10 0 ca pit al ad eq ua cy co mb ine d r ati o lo ss ra tio ex pe nc e r ati o fin an cia l le ve ra ge liq uid ity re tur n o n e qu ity ris k b as ed ca pit al ra tio inv es tm en t r etu rn so lve nc y r ati o ea rn ing s c ov er ag e r ati o op er ati on al lev er ag e ca sh flo w co ve ra ge ra tio re tur n o n a ss ets de bt to tot al ca pit al ra tio do ub le lev er ag e un de rw rit ing le ve ra ge ca pit ali za tio n r ati o la ps e r ati o re tur n o n r ev en ue 67 58 54 49 36 36 33 29 23 23 17 16 13 11 10 10 8 7 6 6 n um be r of s ou rc e fig. 1. identified financial indicators of top 20 insurance companies’ activities analysis1 the author singled out the first group of indicators – solvency (f1), where were selected the most popular financial indicators characterizing operational efficiency (loss ratio and expense ratio), which occupy the third and the fourth place in popularity in the system of financial indicators as well as the indicator of investment efficiency (gross return rate of investments) (the ninth place in popularity), liquidity index (the sixth place) and reinsurance indicator (fig. 1). the author refused to include combined ratio in the first group as there exists linear dependence between combined ratio and loss and expense ratios. in selecting indicators it is necessary to take into account the problem of determining probability of an insurance company to meet all its obligations in insurance premiums that is why the author offered to single out the second group of indicators connected with insurance company ability to undertake risks (f2). this group contains indicators characterizing sufficiency of capital and reserve leverage. the third group of indicators characterizes insurance company competitiveness and commercial potential (f3). this group incorporates 4 indicators. thus, the total number of indicators amounts to 13 and these indicators were grouped into 3 base groups. key indicators of the tree of criteria of assessment of non life insurance companies’ reliability are given in the fig. 2. 1 the study was conducted jointly with i. gregore. the study materials used by international rating agencies – standard & poor’s (asv), fitch ratings (asv), moody’s investors service (asv), am best (asv) and other materials. 299 business, management and education, 2011, 9(2): 295–309 f f1 f2 f3 f11 f12 f13 f14 f15 f21 f22 f23 f24 f31 f32 f33 f34 fig. 2. structure of indicators of assessment of non-life insurance companies’ reliability: f – selected factors of non-life insurance company reliability assessment; 1f – solvency; 2f – ability to undertake risks; 3f – competitiveness and commercial potential; 11f – loss ratio; 12f – expense ratio; 13f – liquidity ratio; 14f – rinsurance indicator; 15f – gross return rate of investments; 21f – company own capital over the minimum capital requirements by law; 22f – own capital over technical reserves; 23f – own capital over earned premiums; 24f – own capital over incurred claims; 31f – market share; 32f – gross premium growth rate; 33f – gross premium growth rate; 34f – reserve adequacy ratio if any two predictors are perfectly correlated (correlation coefficient between any two predictors is greater than or equal 0.75), then there a multicollinearity problem may arise between predictors. hence, it is not feasible to use closely correlated indicators in one model. correlation analysis was done to see which factors are highly correlated to avoid multicollinearity problem. table 1 shows obtained correlation matrix which is determined by using pearson’s method. given indicator, besides company own capital over incurred claims ( 24f ) refers to independent or poorly dependent indicators that are proved by conducted correlated analysis (table 1). thus, to draw up complex indicator of reliability the author left only 12 indicators (table 2). table 1. correlation matrix 11f 12f 13f 14f 15f 21f 22f 23f 24f 31f 32f 33f 34f 11f 1.00 12f 0.68 1.00 13f –0.45 –0.83 1.00 14f –0.17 0.513 –0.684 1.00 15f 0.60 0.76 –0.77 0.43 1.00 21f –0.31 –0.64 0.62 –0.62 –0.55 1.00 300 i. voronova. technique for assessing reliability of insurance companies 11f 12f 13f 14f 15f 21f 22f 23f 24f 31f 32f 33f 34f 22f –0.27 –0.173 –0.186 0.166 0.06 –0.06 1.00 23f –0.61 –0.52 0.58 –0.01 –0.61 0.040 0.16 1.00 24f –0.71 –0.49 0.54 0.10 –0.59 0.04 0.16 0.98 1.00 31f –0.23 –0.41 0.34 –0.39 –0.29 0.18 –0.08 –0.04 0.00 1.00 32f 0.42 0.13 –0.031 –0.37 0.49 0.36 0.029 –0.47 –0.475 0.01 1.00 33f –0.55 –0.57 0.182 0.10 –0.52 0.34 0.26 0.21 0.20 0.21 –0.445 1.00 34f –0.33 –0.65 0.64 –0.42 –0.78 0.14 0.06 0.73 0.61 0.21 –0.553 0.38 1.00 4. defining weighting ratios of complex assessment of non life insurance companies reliability complex indicator (ci) of insurance company reliability assessment is found by double convolution according to the formula 1 1 , = = = β α∑ ∑ n m i ij j i j ci r (1) where: – indicator; βi – weight i of the group of base indicators; αij – weight j of indicators within the framework of the group of base indicators. each group of base indicators and each indicator within the group are assessed according to their usefulness, then a system of weights for base n group indicators and every indicator ( jr ) within the framework of base groups is drawn up so that 1 1, 0, 1,..., , =  β =  β ≥ = ∑ n i j i i n and 1 1, 0, 1,..., , =  α =  α ≥ = ∑ m ij j ij j m (2) where: n – a number of base groups ( 3)=n (fig. 2), m – a number indicator within the group. a calculation of complex assessment according to the groups of base indicators, in the author’s option, enables to arrange insurance company not only on the aggregate of indicators, but also on each of the groups of base indicators. such an approach of complex assessment is likely to find out reserves of increasing reliability and competitiveness as well as direct management decisions on improving those parameters, where competitors have advantages. continued table 1 301 business, management and education, 2011, 9(2): 295–309 let us consider different ways of finding weighting ratios, received by ranging groups and indicators within the framework of groups. if all base groups and indicators in groups have equal usefulness, then weights of base groups and indicators within the framework of the group of base indicators are determined according to the formulae: 1 , β =i n and 1 , α =ij m (3) where: n – a number of base groups indicators; m – a number of indicators in each of base groups indicators. in the case when there exists a system of preferences base groups and indicators in a group are ranged according to the descending of usefulness. in this case to determine base group weights and indicators in a group it is recommended to use fishburn’s scale (baron, barrett 1996; potapov, evstafjeva 2008): 2( 1) , ( 1)j n i n n − + β = + and 2( 1) ( 1) − + α = +ij m j m m , (4) where: i, j – the number of current base group and the number of indicators within the framework of every base groups. to determine weighting ratios may be principle of fuzzy descriptions. the function [ ]j : 0,1] [0,1]→ meets j(0) 0= and j(1) 1= . weighting ratios are determined by the formula 1 1 j( ) j( ), 1,..., , − α = − =i i i n n n (5) where: i – the number of indicator; n – a number of indicators. one may choose any function, for example polynomial of second order: 2j( ) = + +x ax bx c. as j(0) 0= , then 0=c . 5. sample evaluation reliability of non life insurance companies the study was carried out based on 10 latvian non life insurance companies. in her research the author used the available data for 2009 year. initial data for assessing reliability of insurance companies are given in table 2. to create weighting systems 3 experts were enquired. to avoid overloading the study with mathematic calculations, let us suppose that expert opinions are agreed upon to a certain degree. the study introduces calculations of weighting rations only by 2 methods: by using fishburn’s technique and fuzzy cluster. if the significance of both basic groups of indicators and indices in the groups are equivalent, then the formula (3) weights of basic groups ( βi ) in this case is – 0.333, but weighting ratios of the first core group 1 0.2α =j , for the second performance 302 i. voronova. technique for assessing reliability of insurance companies 2 1 3α =j and third groups are 3 0.25α =i . using formula (4), for example, basic groups 1 2 3> >f f f we have weights for each of the basic groups 1 1 2 2 3 3 2(3 1 1) : 0.5, 3(3 1) 2(3 2 1) 1 : 0.333, 3(3 1) 3 2(3 3 1) : 0.167. 3(3 1) f f f − + β = = + − + β = = = + − + β = = + system of weighting ratio for the first base group indicators having preferences 11 12 13 14 15> > > >f f f f f is 11 12 13 140.333; 0.267; 0.2; 0.133α = α = α = α = and 15 0.067α = . system of weighting ratio for the second base group indicators having preferences 21 22 23f f f> > is 22 230.333; 0.1667.α = α = system of weighting ratio for the third base group indicators having preferences 31 32 33 34f f f f> > > is 31 32 33 340.4; 0.3; 0.2; 0.1α = α = α = α = . table 2. investigated insurances’ companies 2009 indicator matrix (example)* factors insurance company code 1 2 3 4 5 6 7 8 9 10 f1 insurance company solvency f11 0.534 0.459 0.574 0.711 0.637 0.547 0.612 0.537 1.092 0.610 f12 0.402 0.515 0.434 0.526 0.322 0.328 0.315 0.324 0.672 0.347 f13 1.284 0.854 0.530 0.331 1.535 1.394 1.377 1.732 0.552 1.384 f14 0.015 0.500 0.304 0.361 0.029 0.021 0.007 0.079 0.087 0.059 f15 3.865 8.681 8.547 7.486 4.487 5.350 7.274 2.186 11.441 7.195 f2 insurance company ability to undertake risks f21 11.100 1.513 2.699 1.190 10.194 4.034 12.166 4.947 0.666 2.977 f22 0.727 0.473 2.699 0.348 0.533 0.681 0.736 0.835 0.320 0.762 f23 0.484 0.649 0.546 0.391 0.426 0.563 0.554 1.082 0.262 0.601 f24 ** 0.905 1.412 0.950 0.550 0.669 1.029 0.906 2.016 0.240 0.986 f3 insurance company competitiveness and commercial potential f31 0.205 0.040 0.064 0.043 0.236 1.029 0.224 0.051 0.025 0.045 f32 –0.315 –0.388 –0.312 –0.589 –0.339 –0.388 –0.003 –0.579 –0.086 –0.362 f33 11.000 11.000 14.000 15.000 16.000 13.000 13.000 13.000 6.000 10.000 f34 1.27 0.98 1.26 1.34 1.38 1.53 1.26 1.98 1.03 1.47 *calculated by the author on the basis of the given financial statements on 2009 available on the home page of insurance companies – balta, ban, rsk, balticums, bta, if, ergolatvija, gjensidiga and seesam **excluded from drawing up complex indicator of insurance companies reliability 303 business, management and education, 2011, 9(2): 295–309 to draw up a system of weighting ratios 3 experts are used. total weighting ratio is calculated as a mean arithmetic of weights, determined by experts. there were no difference in opinions on ranging indicators of base groups and indicators of the first and third groups. as for preferences of the third group of indicators, there were distinctions, which are summed up in table 3. table 3. meaning of weighting ratios and their mean values for third base group indicators expert 31 f – market share 32f – gross premium growth rate 33f – portfolio diversification 34f – reserve adequacy ratio first 0.4 0.3 0.2 0.1 second 0.4 0.3 0.1 0.2 third 0.4 0.2 0.1 0.3 mean value 0.4 0.267 0.133 0.2 as for preferences, let us consider determination of weighting ratios by using the principle fuzzy cluster for base groups of indicators. by formula (5) we have: 1 2 3 1j( ),3 2 1j( ) j( ),3 3 3 2j( ) ( ).3 3 β =  β = −  β = − ϕ (6) let us take that 1( ) 0, 53φ = , which corresponds to the firts weight ratio calculated on the fishburn’s formula. as a 2( )φ = + +x ax bx c and 0=c , we have ( ) 21 11j( ) ( ) 0.5,33 3 9 3 1 1. a b a b a b  = ⋅ + ⋅ = + =  ϕ = + + (7) from (7) find 0.75, 1.75= − =a b . thus, as a result 1( ) 0.5.3φ = let us calculate weighting ratios for the rest base groups 2 3 2 1 4 2( ) ( ) 0.75 1.75 0.5 0.83334 0.5 0.33334,3 3 9 3 1(1) ( ) 1 0.83334 0.16666.3 β = φ − φ = − ⋅ + ⋅ − = − = β = φ − φ = − = a determined quantity of weight ratios coincided with the meanings calculated according to fishburn’s technique. weights of each base group determined by the four methods are presented in table 4, column “weight of base groups of indicators”, which is divided into four parts: on the left – all base groups have equal meaning, in the middle – base groups are strictly ranged, weights are determined by fishburn’s technique, on the right – weights of base groups are assessed with a view to expert opinions, and on the last – on the basis of fuzzy cluster principle. 304 i. voronova. technique for assessing reliability of insurance companies table 4. comparison of weighting ratios of base groups c od e name of base groups weight of base groups of indicatorsβi f1 insurance company solvency 0.334 0.5 0.5 0.5 f2 insurance company liability to undertake risks 0.333 0.333 0.333 0.333 f3 insurance company competitiveness and commercial potential 0.333 0.167 0.167 0.167 similarly, we define weights for each of the basic groups. the results are the following: 11 12 13 14 150.334; 0.266; 0.2; 0.134; 0.066,α = α = α = α = α = 21 22 230.416; 0.334; 0.25.α = α = α = the calculations provide evidence of some difference in the weights only in the second subgroup. based on these weights and the initial data (table 2), a comprehensive indicator of reliability of the insurance company is determined according to the formula (2). example of calculating the complex index of reliability for the insurance companies’ initial data for 2009 is given in table 5. table 5. example of calculating the complex index of reliability of non life insurance companies (2009, fishburn’s technique) factors weight inindicator insurance company code 1 2 3 4 5 6 7 8 9 10 f1 0.500 0.401 0.553 0.525 0.495 0.454 0.454 0.524 0.384 0.714 0.530 f11 0.333 0.178 0.153 0.191 0.237 0.212 0.182 0.204 0.179 0.364 0.203 f12 0.267 0.107 0.137 0.141 0.140 0.086 0.087 0.084 0.086 0.179 0.092 f13 0.200 0.257 0.171 0.106 0.066 0.307 0.279 0.275 0.346 0.110 0.277 f14 0.133 0.002 0.067 0.041 0.048 0.004 0.003 0.001 0.010 0.012 0.008 f15 0.067 0.258 0.579 0.570 0.499 0.299 0.357 0.485 0.146 0.763 0.480 total f1 1.000 0.802 1.107 1.049 0.991 0.908 0.908 1.049 0.768 1.428 1.060 f2 0.333 1.958 0.341 0.541 0.258 1.782 0.779 2.140 0.977 0.161 0.614 f21 0.500 5.551 0.757 1.350 0.593 5.097 2.017 6.083 2.473 0.333 1.489 f22 0.333 0.242 0.158 0.182 0.116 0.178 0.227 0.245 0.278 0.107 0.254 f23 0.167 0.081 0.108 0.091 0.065 0.071 0.094 0.092 0.180 0.044 0.100 total f2 1.000 5.874 1.023 1.622 0.774 5.346 2.338 6.420 2.932 0.483 1.843 f3 0.167 0.224 0.199 0.264 0.268 0.312 0.253 0.274 0.257 0.132 0.201 f31 0.400 0.082 0.016 0.026 0.017 0.094 0.026 0.089 0.020 0.010 0.018 f32 0.300 –0.094 –0.117 –0.094 –0.177 –0.102 –0.116 –0.001 –0.174 –0.026 –0.11 f33 0.100 1.100 1.100 1.400 1.500 1.600 1.300 1.300 1.300 0.600 1.000 f34 0.200 0.255 0.195 0.251 0.268 0.277 0.306 0.253 0.397 0.206 0.294 total f3 1.000 1.342 1.195 1.583 1.609 1.870 1.516 1.641 1.543 0.791 1.204 ci total 2.583 1.093 1.329 1.021 2.547 1.486 2.938 1.619 1.007 1.345 305 business, management and education, 2011, 9(2): 295–309 in order to divide insurance categories according to a certain scale (table 6), the author investigates mathematical approach, taking into account that all insurance companies, which have obtained points over the first quartile, could be considered as high reliability company, between the first quartile and the third quartile could be considered as a moderate reliability company, but which are below the third quartile – as low reliability company (voronova, pettere 2010). the results of determining the complex index of the reliability of insurance companies using the weights found on the basis of fishburn’s technique and based on the fuzzy description shows full match results. in the dynamics of a composite index of insurance companies shows that they belong to the stable grade. table 6. insurance company reliability assessment scale 2008 2009 weights determined using weights determined using fishburn’s technique fuzzy description fishburn’s technique fuzzy description code obtained assessment code obtained assessment code obtained assessment code obtained assessment 7 2.709 7 2.361 7 2.938 7 2.616 5 2.421 5 2.117 1 2.583 1 2.288 1 2.342 1 2.031 5 2.547 5 2.276 8 1.693 8 1.530 8 1.619 8 1.511 3 1.360 3 1.251 6 1.486 6 1.389 6 1.312 6 1.189 10 1.345 10 1.279 10 1.177 10 1.071 3 1.329 3 1.269 2 1.140 2 1.067 2 1.093 2 1.069 4 1.091 4 0.993 4 1.021 4 0.999 9 0.942 9 0.846 9 1.007 9 0.996 – high reliability; – moderate reliability; – low reliability available movement of insurance companies in the second group of reliability is associated with a change in the group of indicators of their solvency. having done a lot of research in the field of assessing insurance companies’ reliability the author considers that the results of the study fully conform to the obtained ranging of insurance companies according to complex indicator. 6. conclusions conducted analisis of some methods of integrated assessment of complex objects showed their versatility. the methods are not ideal, and the choice of this or that method depends on the purpose of study, availability of information and competence of specialists. there is an extensive use of multicriteria evaluation in decision-making in economic and financial sphere and ratings of economic entities. the quality of drawing up the technique of integrated assessment of reliability to a great extent is largely determined by a quality selection of indicators included in the complex indicator. 306 i. voronova. technique for assessing reliability of insurance companies the selection of indicators was carried out using frequency analysis of the popularity of performance in financial analysis, insurance companies and the experience of international rating agencies including restrictions on publicity of information sources and the absence of a linear mutual dependence. selected indicators (except indicators of 2f ) are independent. as for indicators of the group “insurance company solvency” it is necessary to carry out additional research in order to find the best combination of indicators with weakly dependent parameters. let us consider two methods of calculating the weighting ratios to assess reliability of insurance companies – on a fishbur’s technique and using the principle of a fuzzy description. calculated ratios for methods have some drawbacks. fishburn’s technique has dependence on the number of indicators for whose weighting ratios are determined and the character of indicators is not taken into account. if exspert opinions are used for creating fishburn’s technique the competence of the experts should be up to standards. by using the method of fuzzy descriptions, the results fully depend on a selected function. though 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http://dx.doi.org/10/3846/1392-8619.2009.15.326-34 http://www.ica http://www.ica http://www.sciencedirect.com/science?ob=mimg&_imagekey=b6v05-48myjpv -f9-1&cdi http://www.sciencedirect.com/science?ob=mimg&_imagekey=b6v05-48myjpv -f9-1&cdi 309 business, management and education, 2011, 9(2): 295–309 draudimo kompanijų patikimumo įvertinimo metodika i. voronova santrauka šio tyrimo tikslas yra pagerinti ne gyvybės draudimo kompanijų pozicijos patikimumo vertinimo tyrimų metodiką. nagrinėjamos šių kompanijų pozicijos patikimumo vertinimo problemos, analizuojami rodikliai, sudarantys prielaidas atlikti kompleksinį draudimo kompanijų patikimumo vertinimą. straipsnyje siūlomas sukurto integruotojo rodiklio metodas, naudojant skirtingus reikšmingumo nustatymo būdus, pateikiama latvijos ne gyvybės draudimo kompanijų praktinių pavyzdžių ir remiamasi viešąja informacija. reitingas yra draudimo paslaugų potencialių vartotojų rizikos rodiklis. siūloma metodika gali būti naudinga priemonė draudimo kompanijų konkurencingumui didinti. reikšminiai žodžiai: sudėtinių indeksų metodas, patikimumo metodai, draudimo kompanija, fuzzy metodas. irina voronova is associated professor of investment and financial management at faculty of engineering economics and management of riga technical university. she holds a doctor degree in economy of latvian academy of sciences. she has thirty-five years of teaching practice in entrepreneurship and finance. her academic publications include articles in the journal of business economics and management (vilnius), scientific proceedings of riga technical university, international congress of actuaries and others. she is the co-author of the first textbook of risk management in latvian language. she is member of boarder of latvian actuarial association. 96 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai perspektyvūs moksliniai tyrimai, skirti tarptautiniam prekybos automobiliais verslui plėtoti aurelija mickonytė aurelija.mickonyte@gmail.com vilniaus gedimino technikos universitetas, tarptautinės ekonomikos ir vadybos katedra borisas melnikas melnikas@vgtu.lt vilniaus gedimino technikos universitetas, tarptautinės ekonomikos ir vadybos katedra 1. įvadas automobilių gamyba ir prekyba jais yra išskirtinai svarbūs elementai šiuolaikinės visuomenės ekonomikai. šalys, kurios užsiima automobilių gamyba, gerokai padidino eksportą, kuris yra susijęs su bendro vidaus produkto ir bendro nacionalinio produkto augimu. automobilių gamybos sektorius yra jautrus pasauliniams ekonominiams svyravimams, todėl jam 2008–2009 m. finansinė krizė turėjo daug neigiamų pasekmių. šio darbo tikslas – remiantis mokslinės literatūros šaltiniais bei statistinių duomenų analize pasiūlyti naujausių perspektyvių mokslinių tyrimų kryptis, skirtas tarptautinės prekybos automobiliais verslui plėtoti, leisiančias nustatyti strategines priemones, kurių reikia imtis, norit automobilių gamintojams susigrąžinti rinkos dalį ir buvusių pardavimų apimtį. straipsnyje pagrindinis dėmesys skiriamas tokiems klausimams: automobilių rinkos situacijos analizė remiantis statistiniais duomenimis ir – moksliniais literatūros šaltiniais; automobilių pardavimų mažėjimo priežastys remiantis skirtingų autorių – nuomonėmis; verslas, vadyba ir studijos 2009 97 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o snaujausių mokslinių tyrimų, skirtų plėtoti tarptautinės prekybos automobi– liais verslui, analizė; mokslinių tyrimų prioritetų, skirtų plėtoti tarptautinės prekybos automobi– liais verslui, pagrindimas. šie klausimai atspindi automobilių pramonę nagrinėjančių autorių nuomonę. atliekant tyrimus remiamasi teorinių šaltinių, europos sąjungos statistinių duomenų analize, jų palyginimu bei sinteze. darbo rezultatai automobilių gamintojams turi padėti surasti veiklos tobulinimo kryptis, skirtas naujų lengvųjų automobilių gamybos bei pardavimo apimčiai didinti. 2. aktuali situacija tarptautinėje prekybos automobiliais rinkoje ir nauji iššūkiai automobilių gamintojams šiuo metu tarptautinėje prekybos automobiliais rinkoje pasireiškianti tendencija – ryškus automobilių pardavimų apimties mažėjimas. 2008 m. spalio–gruodžio mėnesiais parduota tik pusė automobilių, palyginti su tuo pačiu 2007 m. laikotarpiu. paklausos kilimas artimiausiu metu nenumatomas. planuojamas naujai užregistruotų automobilių skaičius 2009 m. yra mažesnis ir už 2008 m. skaičių (1 pav.). 10 000 000 11 000 000 12 000 000 13 000 000 14 000 000 15 000 000 16 000 000 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 2 00 9 m . 1– 9 m ėn . 1 pav. užregistruotų naujų automobilių vakarų europoje kiekis (sudaryta autorių pagal eu economic ... 2009) fig. 1. amount of newly registered automobiles in western europe (based on eu economic ... 2009) remiantis užregistruotų naujų automobilių vakarų europoje santykiu vertinant automobilių klasifikaciją (2 pav.) mažėjant pardavimams pastebima kita tendencija: santykinai daugiau perkama mažų ir kompaktinės klasės automobilių. 98 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s 2006 m. vakarų europoje mažų automobilių užregistruota 35,2 % iš visų registruotų automobilių, 2007 m. – 37,1 %, 2008 m. – 38,8 %, o nagrinėjamu 2009 m. laikotarpiu – jau 44,7 %. remiantis atliktais automobilių tyrimais (autotyrimai 2009), lietuvoje 2009 m. lapkričio mėn. populiariausi buvo hečbekai (44 %), vienatūriai (22 %) bei universalai (21 %). taigi maži automobiliai vis labiau darosi paklausūs. 2 pav. užregistruotų naujų automobilių vakarų europoje1 santykis (%) vertinant automobilių klasifikaciją (sudaryta autoriaus pagal eu economic ... 2009) fig. 2. structure of newly registered automobiles in western europe by their clasification (based on eu economic ... 2009) m. yoshida (2009) automobilių pramonės sąjungos metiniame pranešime iškėlė šiuos automobilių gamintojų pelningai veiklai neigiamos įtakos turinčius veiksnius: neramumai politiniame gyvenime; – globali besitraukianti rinka; – kreditavimo sunkumai; – išlaidų spaudimas; – 1 vakarų europos šalys – tai austrija, belgija, danija, suomija, prancūzija, vokietija, graikija, airija, italija, liuksemburgas, olandija, portugalija, ispanija, švedija, didžioji britanija, islandija, norvegija, šveicarija. verslas, vadyba ir studijos 2009 99 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o sįstatyminis reguliavimas; – klimato pasikeitimai; – sustabarėjimas; – per didelis biurokratizmas; – finansų rinkos krizė; – nemokumas; – kylantys komforto ir saugumo reikalavimai. – w. diez (2006) teigia, kad pagrindinės trys priemonės, skatinančios automobilių pardavimų augimą, yra šios: produktų diferencijavimas; – produktų kokybės augimas; – klientų aptarnavimo kokybės gerinimas. – j. c. vessillier (2009) teigia, kad yra trys pagrindinės priežastys, dėl kurių kilo automobilių pramonės krizė. visų pirma tai klasikinė priežastis – kaina. gamintojus spaudžia pirkėjai, norėdami žemesnių kainų, todėl gamintojai privalo mažinti savo išlaidas. antra – automobilio modelis ir techninės savybės. vis daugiau vartotojų nori mažesnių, saugesnių, ekonomiškesnių automobilių. trečia priežastis – aplinkos apsauga. j. c. vessillier nuomonė visiškai sutampa su statistinių duomenų analizės rezultatais, todėl galima išskirti tris pagrindines orientacines kryptis, kurios turėtų būti šiuo metu aktualiausias automobilių prekybą nagrinėjančių mokslinių tyrimų objektas: naujų lengvųjų automobilių kainos mažinimas; – inovatyvaus, ekonomiško, mažo ir paklausaus automobilio techninių savybių – tobulinimas ir pritaikymas prie besikeičiančių vartotojų poreikių; neigiamo poveikio aplinkai mažinimas automobilių gamybos procese, juos – realizuojant, eksploatuojant bei utilizuojant. 3. perspektyvūs moksliniai tyrimai, skirti naujų lengvųjų automobilių gamybos bei pardavimo apimčiai didinti globalizacijos, naujų technologijų, intensyvios konkurencijos, kintančios vartotojų paklausos ir ekonominių bei politinių sistemų pokyčiai kelia naujų iššūkių verslo įmonėms. įmonės, norinčios pasiekti geresnių rezultatų rinkoje nei konkurentai, turi įgyti ir išlaikyti unikalumą, kurio negalima imituoti ir kuris suteiktų konkurencinį pranašumą (janonis et al. 2007). pasak a. pabedinskaitės ir r. vitkausko (2009), konkurencingumu, įgyvendinant įvairius kokybės vadybos modelius, metodus ir priemones, siekiama užtikrinti kokybišką produktą 100 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s vartotojui. konkurencinės rinkos sąlygomis ilgalaikių santykių su vartotojais kūrimas, palaikymas ir stiprinimas suprantamas kaip bet kurios įmonės sėkmingos veiklos pagrindas. nustatyta, kad, padidėjus vartotojų išlaikymui, didėja įmonės pelningumas. taigi veiksnių, lemiančių vartotojų santykių su įmone ilgalaikiškumą, išaiškinimas tampa prioritetiniu tikslu (dovalienė et al. 2007). pasaulio ekonomikos globalizacijos procesai ir tarptautinės prekybos plėtojimas lemia sparčius kokybės kaip esminio firmų ir jų produktų konkurencingumo elemento internacionalizavimo procesus. jų metu įvairiose šalyse vis plačiau naudojami bendri standartai, techniniai reglamentai, kokybės ir aplinkosaugos vadybos sistemos, kokybės atitikties įvertinimo ir sertifikavimo procedūros (ruževičius 2008). šiame skyriuje nagrinėjamos mokslinių tyrimų, skirtų naujų automobilių gamybai ir pardavimams aktyvinti, kryptys: moksliniai tyrimai, skirti naujų lengvųjų automobilių kainoms mažinti; moksliniai tyrimai, skirti naujų automobilių techninėms savybėms, atitinkančioms aktualiausius vartotojų reikalavimus, tobulinti; moksliniai tyrimai, skirti neigiamam poveikiui aplinkai mažinti. vieni iš perspektyvių mokslinių tyrimų, skirtų tarptautiniam prekybos automobiliais verslui plėtoti, yra automobilių kainos mažinimo galimybės. anot r. virvilaitės, v. saladienės bei d. skindaro (2009), kaina yra svarbiausias veiksnys, lemiantis klientų pasitenkinimą. klientai, vertindami suteiktos paslaugos vertę, dažniausia galvoja apie kainą. tirdami kainos ryšį su klientų pasitenkinimu ir jų lojalumu, rinkodaros teoretikai teigia, kad pasitenkinimas priklauso nuo paslaugos kokybės, kainos ir kitų veiksnių. 3 paveiksle pavaizduotas kainos nustatymo mechanizmas, kurio elementų sąnaudas galima mažinti. 3 pav. automobilių kainos nustatymo mechanizmas (ebel et al. 2004) fig. 3. the pricing mechanism for automobiles (ebel et al. 2004) verslas, vadyba ir studijos 2009 101 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o spagal šį automobilių kainos nustatymo mechanizmą (3 pav.), nustatant kainą svarbu susikurti kainos strategiją, atlikti jos monitoringą ir įdiegti ją nuolatos stebint ir analizuojant situaciją – klientus, konkurentus, rinkos svyravimus. pasak b. ebel, m. b. hofer ir j. al-sibai (2004), kainos strategija – tai vienas iš rinkodaros komplekso elementų, nurodančių kainos nustatymo metodą. dažniausiai naudojami trys metodai: į sąnaudas orientuota kainodara, į konkurentus orientuota kainodara ir į vartotoją (paklausą) orientuota kainodara. a. valuckaitė ir a. snieška (2007) teigia, kad pagrindiniai veiksniai, galintys sumažinti produkcijos kainas ir padidinti konkurencingumą, yra: mažesnės darbo jėgos sąnaudos; – laisva rinka – tai tarifinių ir netarifinių prekybos barjerų pašalinimas; – darbo rinkos suformavimas – darbuotojų mobilumo tarp sektorių ir regionų – didinimas, investavimas į mokslą bei darbuotojų kvalifikacijos kėlimą. svarbu nusistatyti, koks yra kainodaros tikslas bei kokiu būdu bus valdomas prekės gyvavimo ciklas. nustatant kainą reikia atsižvelgti į produkto pozicionavimą, įvertinti optimalią įmanomą kainą ir įvairius nuolaidų bei komplektacijų variantus. nustačius kainą svarbu atlikti jos monitoringą – tai yra sistemingai stebėti ir rinkti informaciją apie sąnaudas ir išlaidas, jas palyginti su prognozuojamomis sąnaudomis; nustatyti su kaina susijusius pelno ar nuostolio atsiradimo priežastinius elementus. svarbu atsižvelgti į galiojančią kainos nustatymo naujiems automobiliams strategiją tiek savoje, tiek konkurentų įmonėse, reikia atkreipti dėmesį į komplektacijos galimybes, naujų automobilių serviso, garantinio laikotarpio išlaidas. kainas taip pat nulemia kainų lygis pasaulinėje rinkoje, finansavimo sąlygos bei sandėrių įkainiai (ebel et al. 2004). būtina įvertinti tai, kad automobiliai yra eksportuojamoji prekė. pasak g. snieškienės (2009), kainodaros problemos tiek vietinėje, tiek eksporto rinkoje panašios: nustatyti naujos prekės kainą, keisti ją, atsižvelgiant į konkurentų veiksmus ir kt. tačiau eksporto kainodaros klausimus apsunkina papildomi aplinkos veiksniai, tokie kaip vyriausybės poveikis (pvz., muitų politika), skirtingų rinkų vartotojų elgsenos skirtumai, skirtingos valiutos, jų kursų svyravimai, eksporto kainos nustatymą komplikuojantys kultūriniai, teisiniai ir instituciniai barjerai. be to, įmonė negali (arba gali tik labai nedaug) paveikti ir keisti tokių užsienio rinkos veiksnių kaip politika, įstatymai, technologijų lygis, tačiau, nepaisant to, privalo juos pripažinti ir prie jų prisiderinti taip, kad pasiektų norimą galutinį rezultatą. 102 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s moksliniai šios srities tyrimai turi būti skirti sąnaudų mažinimo galimybėms analizuoti bei įgyvendinimui planuoti visose produkto vertės kūrimo grandinės dalyse. jas išskyrė ir aprašė f. stahl (2005): naujo produkto vystymo procesas; – medžiagų bei dalių tiekimas; – logistiniai procesai; – pardavimo organizavimas; – realizacija; – klientų aptarnavimo sfera; – seno produkto pašalinimo iš rinkos procesas. – nemažiau svarbus elementas nei kainos mažinimo galimybės naujų lengvųjų automobilių gamybos bei pardavimo apimčiai didinti yra technologinės naujovės. a. bieniek, j. jantos bei j. mamala (2007) teigia, kad tinkamas energijos perdavimo sistemos veikimas automobiliui judant, kuro sąnaudos ir kenksmingų išleidžiamųjų medžiagų kiekis priklauso nuo tinkamos variklio kontrolės ir energijos perdavimo sistemos. todėl šią sistemą autoriai siūlo nagrinėti modernizuojant automobilio gamybą. u. jürgens ir h. r. meißner (2005) teigia, kad inovacijos yra vienas iš svarbiausių veiksnių modernizuojant lengvųjų automobilių gamybą ir skatinant prekybą jais. jis siūlo koncentruotis į tris sritis, kuriose radikalios inovacijos buvo pastebimos arba numatomos netolimoje ateityje: sritis – x-by-wire; variklio sistema; – kėbulo gamyba. – 4 paveiksle pavaizduotos technologinės sritys, kurioms turi būti pritaikomi naujausi moksliniai tyrimai. į jas atsižvelgiant naujuose automobiliuose turi būti diegiamos kuro sąnaudų, išmetamųjų dujų kiekio mažinimą, saugumo didinimą užtikrinančios technologijos. x-by-wire – tai technologijos (pavyzdžiui, stabdžiai ir vairavimo sistema), leidžiančios varomąsias sistemas valdyti elektroniniais signalais, pakeičiančiais vairą ir kitas mechanines jungtis. tobulinant variklio sistemą, vystomos konkuruojančios technologijos dyzeliniams, benzininiams ar hibridiniams varikliams, tobulinami vandeniliu biologiniu kuru varomi varikliai, naujovėms pritaikomas kuras ir jo sudėtis. transporto priemonės vienokį arba kitokį kurą naudoja neefektyviai. į aplinką patenka daug kenksmingų medžiagų – deginių. pasak á. török (2009), pastebėta ir nustatyta verslas, vadyba ir studijos 2009 103 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o sdidelė co2 emisijos ir klimato pokyčių koreliacija. vienas iš europos sąjungos politikos tikslų – ekologiškai saugus visuomenės mobilumas. todėl transporto sektoriui skiriama itin daug dėmesio – jis turi būti tinkamai išplėtotas, standartizuotas ir efektyviai naudojamas, ekologinis užterštumas turi būti mažinamas arba jo apskritai neturi būti. taigi pastaruoju metu transporto sektoriuje vis dažniau naudojamas vienoks arba kitoks biokuras. stabdžių sistema vairavimo sistema elektronika elementai starteris, generatorius jutikliai ■ ■ ■ ■ ■ ■ variklio sistema kėbulo gamybax-by-wire įpurškimo technologija – dyzeliniai varikliai – benzininiai varikliai ■ hibridinės transporto priemonės ■ vandenilio varikliai ■ biologinio kuro varikliai ■ kuras ■ aliuminis plieno apdirbimas medžiagų junginiai plastmasė ■ ■ ■ ■ ryšys ir priklausomybė dėl konkurencijos inovacijų srityse techninė raida kuro sąnaudų mažinimas/išmetamųjų dujų kiekio mažinimas, saugumo didinimas 4 pav. automobilių gamybos inovacijų mokslinių tyrimų kryptys (jürgens, meißner 2005) fig. 4. the scientific research trends in automobile production (jürgens, meißner 2005) naujų medžiagų panaudojimas automobilio kėbulo gamybai iš lengvųjų konstrukcijų yra taip pat svarbus automobilių techninės raidos elementas. pasak d. gruden (2008), su naujomis technologijomis automobilių gamyboje yra glaudžiai susijusi aplinkos apsauga. kyoto protokolas (obertühr, ott 2000) reikalauja, kad transporto, statybos, žemės ūkio bei miškininkystės srityse būtų naudojamos modernios technologijos, leisiančios sumažinti teršalų, sukeliančių šiltnamio efektą, kiekį atmosferoje. siekdamos aukščiausios gaminamų prekių ir teikiamų paslaugų kokybės, įmonės, valdydamos savo veiklą, turi remtis tausojančios plėtros principais (ruževičius, serafinas 2007). klimato kaita dabar yra viena iš svarbiausių aplinkos apsaugos problemų, su kuria susiduria tarptautinė bendruomenė, verslo pasaulis bei pavieniai piliečiai. siekis mažinti taršą ir užtikrinti visuomenei priimtiną 104 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s aplinkos kokybę yra sunkiai įgyvendinamas pasikliaujant vien valstybiniu aplinkos apsaugos reguliavimu (žičkienė 2007). reaguojant į šį iššūkį reikalingos visuotinės pastangos bei neatidėliotini veiksmai. nesvarbu, ar įmonė gamina automobilius, ar yra viena iš daugelio automobilių pramonę aprūpinančių įmonių, reikia sekti daugybę specifinių kokybės, sveikatos ir darbo saugos, aplinkosaugos ir socialinės atsakomybės klausimų. didėjantis poreikis pasauliniu mastu išsaugoti aplinką – orą, vandenį, žmonijos gyvenimą, gyvūnų ir augalų pasaulį, gamtos išteklius ir ekosistemas – lemia esminius visų veiklos sričių – gamybos, paslaugų, rinkodaros, vartojimo, valstybės valdymo bei tarptautinių ekonominių ir politinių organizacijų – politikos pokyčius. ekologinėms problemoms spręsti reikalingos tiek suvienytos ir koordinuotos visų šalių bei tarptautinių organizacijų pastangos, tiek ir sisteminiai moksliniai tyrinėjimai (ruževičius 2009). kyoto protokole taip pat reikalaujama, kad būtų naudojamos modernios technologijos, leisiančios sumažinti teršalų, sukeliančių šiltnamio efektą, kiekį atmosferoje. 5 paveiksle pavaizduotas transporto sektoriaus į atmosferą išmesto anglies dvideginio emisijos kiekis milijonais tonų per metus 27 europos sąjungos šalyse. nuo 1996 iki 2007 m. jis išaugo 14 %. augantis automobilių skaičius lemia pasaulyje vis didėjantį aplinkos taršos mastą. automobilių gamintojai privalo atkreipti dėmesį į naujas technologijas, sumažinsiančias taršą tiek gaminant, tiek eksploatuojant automobilius. todėl aplinkos apsauga automobilių gamybos srityje šiuo metu vaidina svarbų vaidmenį. aplinkos apsaugos įstatymai ir normos gaminant bei naudojant automobilius turi lemiamą reikšmę. transportas yra dinaminis aplinkos taršos šaltinis. be transporto neįmanoma išsiversti visose miesto ar šalies teritorijose. skirtingai nei stacionarieji triukšmo ar išmetamųjų dujų šaltiniai (pramonės įmonės, energetikos, komunalinio ūkio objektai), transportas miestuose negali būti atskirtas sanitarinėmis apsaugos zonomis (klibavičius 2008). aplinkai tausoti yra taikomos direktyvinės (privalomosios) ir savanoriškosios organizacijų iniciatyva taikomos aplinkosaugos priemonės. prie savanoriškųjų priemonių priskiriamos aplinkosaugos vadybos sistemos iso 14001 ir emas (angl. eco-management and audit scheme) bei produktų ir paslaugų aplinkosauginis sertifikavimas ir ženklinimas (angl. ecolabelling) (ruževičius 2009). automobilių gamyba ir prekyba užsiimančios įmonės privalo laikytis įstatymų ir turėti aplinkos apsaugos vadybos sistemas. d. gruden (gruden 2008) savo knygoje pateikia automobilių pramonės sukeliamas problemas: kelių infrastruktūros plėtra; – eismo saugumas; – verslas, vadyba ir studijos 2009 105 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o striukšmas; – energijos sunaudojimas; – žaliavų sunaudojimas; – išmetamųjų dujų žala; – senų automobilių utilizavimas. – šių problemų sprendimo paieškos kartu su kainos mažinimo bei techninio tobulinimo galimybių paieškomis yra prioritetinės kryptys didinant naujų lengvųjų automobilių gamybos bei pardavimo apimtį. 5 pav. transporto sektoriaus į atmosferą išmesto anglies dvideginio emisijos kiekis milijonais tonų per metus 27 europos sąjungos šalyse (sudaryta autorių pagal eurostat (treibhausgasemissionen ... 2009)) fig. 5. carbon dioxide emissions (millions of tones) created by transport sector over one year in 27 eu member countries (based on eurostat data (treibhausgasemissionen ... 2009)) išvados statistinės informacijos analizė padėjo nustatyti, kad, nepaisant mažėjančio lengvųjų automobilių pardavimo, santykinai auga mažų ir kompaktinės klasės automobilių pardavimas. palyginus statistinių duomenų analizės rezultatus su teorinėmis įvairių autorių nuomonėmis, galima daryti išvadą, jog pagrindinės trys sritys, kurias reikėtų tobulinti, yra technologijos, kaina bei aplinkos apsauga. norint sumažinti naujų automobilių kainą, būtina atsižvelgti į visą vertės kūrimo grandinę. tik taip galima atrasti sritis, kuriose kainos mažinimas yra įmanomas nepakenkiant kokybei. 106 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s viena iš svarbiausių mokslinių tyrimų krypčių yra techninis automobilių tobulinimas. svarbiausios šios srities tobulinimo kryptys yra: x-by-wire, variklio sistema, kėbulo gamyba. aplinkos apsaugos vadybos sistemos automobilių gamybos srityje privalo būti įdiegtos visose vertės kūrimo grandyse, nes tik taip atsižvelgiama į vartotojų ir valstybinius reikalavimus. literatūra eu economic report [interaktyvus]. 2009. acea. european automobile manufacturers’ association [žiūrėta 2010 m. sausio 9 d.]. prieiga per internetą: <http://www. acea.be/index.php/collection/publications>. autotyrimai [interaktyvus]. 2009. specializuota verslo informacija [žiūrėta 2010 m. sausio 10 d.]. prieiga per internetą: <http://www.autotyrimai.lt/>. bienek, a.; jantos, j.; mamala, j. 2007. possibilities of driveability and consumption improvement by advanced control power transmission system in passenger car, transport 22(4): 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ekonomika – engineering economics (4): 103–109. vessillier, j. c. 2009. automobilindustrie – ein zyklus geht zu ende [interaktyvus]. inprekorr 450/45. büsum: inprekorr [žiūrėta 2009 m. lapkričio 2 d.]. prieiga per inter netą: <http://www.cl-netz.de/read.php?id=53728>. virvilaitė, r.; saladienė, v.; skindaras d. 2009. the relationship between price and loyalty in services industry, inzinerine ekonomika – engineering economics (3): 96–104. žičkienė, s. 2007. cooperation in environmental governance – a new tool for environment protection progress, inzinerine ekonomika – engineering economics (3): 42–50. 108 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s r&d importance in improving automobile trading market a. mickonytė, b. melnikas summary production and sales of automobiles are significant parts of the 21st century economy. the aim of this study is to reveal the latest and most perspective scientific research directions in improving international automobile trading business by using scientific sources and official statistics. scientific researchers are focused on strategic means that have to be taken in order to recover the market share and past sales volumes. this study reveals that even though sales volumes of automobiles in general are decreasing rapidly, sales of compact class automobiles are improving. three main reasons for this fact are stated. first is price, second is the model of automobile and its technical characteristics, third reason is growing environmentalism. regarding the mentioned reasons for automobile market over grouping by segments, three main scientific research directions are discussed: those that are due to price reduction, technical appearance focused and environment focused scientific researches. keywords: scientific research, international automobile trading, automobile production improvement. 66 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s lietuvos jūrų ūkio klasteris – darnios regiono plėtros instrumentas violeta grublienė violeta_grubliene@yahoo.com klaipėdos universitetas, vadybos katedra 1. įvadas aktualumas ir pagrindinė problema. pasaulio ir lietuvos ekonomikoje vyksta gilūs ir fundamentalūs pokyčiai, iš esmės keičiantys nusistovėjusias tarptautinės konkurencijos žaidimo taisykles. per pastarąjį dešimtmetį klasteriai tapo bene universaliausiu skirtingų pasaulio šalių ekonominės plėtros politikos prioritetu. klasterių reiškinys nagrinėjamas, klasteriai sąmoningai formuojami jau beveik du dešimtmečius. jų politika tampa patrauklia alternatyva tradicinei ir iš esmės nepasiteisinusiai pramonės politikai, orientuotai į prioritetinių ūkio sektorių ir įmonių rėmimą. klasterių politika pagrįsta bazine prielaida, kad šalies (regiono) gerovę lemia ne specifinių, bet produktyviais ryšiais susijusių įmonių grupių veikimas regione. todėl pagrindinis klasterių politikos objektas yra ne pavienės įmonės, bet visos regiono pramonės sistemos, palaikančios produktyvius veikėjų ryšius, sukūrimas. klasterių kūrimu pirmiausia suinteresuotos verslo įmonės, nes jos klasteriuose įžvelgia galimybę gerinti savo veiklos rezultatus. tačiau klasteriai yra nacionalinio ir regioninio konkurencingumo bei ekonomikos efektyvumo ir našumo didinimo priemonė. todėl skatinti klasterių kūrimą ir padėti jiems tapti sėkmingiems yra valstybės ir vietos valdžios institucijų interesas. pasaulinė patirtis rodo, kad klasterių požiūriu grindžiama politika atspindi besikeičiantį valstybės vaidmenį pramonės politikoje iš tiesioginės intervencijos į netiesioginę įtaką. tokios šalys kaip lietuva, įgyvendindamos klasterių politiką, susiduria su papildomomis problemomis. klasterių politika reikalauja visiškai kitokios viešojo administravimo kompetencijos kokybės nei buvo įprasta pastaraisiais 50 metų. klasterizacijos svarbą lemia pati ekonominės veiklos ir bendrųjų pramonės ir verslo raidos tendencijų logika. lietuvoje šiuo metu egzistuojanti ūkio struktūra lemia tai, kad įmonėms neišvengiamai teks © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai verslas, vadyba ir studijos 2009 67 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o ssuderinti dvi kokybes: gebėjimą konkuruoti žemesne kaina ir novatoriškumą. šiuo metu lietuvos ūkis yra tokiame raidos etape, kuriame sėkmę visų pirma lemia efektyvumas ir valdymo kokybė. straipsnio tikslas. aptarti lietuvos jūrų žuvininkystės sektoriaus būklę, įvertinti klasterio suformavimo galimybę darnios regiono plėtros kontekste. tyrimo metodai. sisteminė mokslinės literatūros, mokslinių studijų, žuvininkystės sektoriaus norminių dokumentų ir statistinių duomenų analizė bei apibendrinimas. problemos ištyrimo laipsnis. klasterizacijos procesams lietuvoje skiriama nepakankamai dėmesio. patys ryškiausi yra r. jucevičiaus darbai. taip pat galima paminėti šiuos autorius: j. čiburienė, r. keršienė, j. činčikaitė, v. kavaliauskienė, b. neverauskas bei v. snieška. 2. klasterių kūrimosi problemos lietuvoje lietuvoje galima matyti gana daug iniciatyvų ar net formaliai įformintų klasterių, tačiau daugelio jų rimtai vertinti nereikėtų, nes „įsiforminimo“ tikslas daugeliu atveju buvo vienas – turėti formalų instrumentą es paramai gauti. daug painiavos atsirado ir įsikūrus technologinėms platformoms, nes pastarosios neretai painiojamos su klasteriais arba šalia platformų „įkuriami“ dar ir klasteriai. toks neprofesionalus masinis klasterių steigimasis gali sukompromituoti pačią idėją (gečas et al. 2007). klasterių sąvoka traktuojama skirtingai, nes iki šiol nėra bendro teorinio pagrindo klasterių analizei. r. kazlauskaitė (2003) teigia, kad nėra bendros klasterių teorijos, egzistuoja tik daugybė skirtingų teorijų bei samprotavimų, kuriais mėginama pagrįsti klasterių logiką. atsargesnieji mano, kad tokia situacija gali lemti netikėtus ir neigiamus padarinius, nes šalys, bandydamos paskubomis kurti klasterius, gali ignoruoti ar nepakankamai įvertinti tokius esminius veiksnius kaip klasterių tyrimo metodai ir formavimosi principai. neįvertinus klasterio privalumų ir trūkumų galima sulaukti neigiamų pasekmių, o klasteris, vos spėjęs susiformuoti, gali žlugti, taip padarydamas įmonėms žalos. šios problemos atsiradimą iš dalies galima paaiškinti skirtingų klasterio apibrėžimų įvairove. nepaisant skirtingų pozicijų, absoliuti klasterių tyrinėtojų ir praktikų dauguma linkusi laikytis požiūrio, suformuluoto porter’io: klasteris – tai geografinė tarpusavyje susietų įmonių, specializuotų tiekėjų, paslaugų teikėjų, susietų pramonės šakų įmonių ir tam tikros krypties asocijuotų institucijų (universitetų, standartų ir prekybinių asociacijų), kurios konkuruoja, taip pat ir bendradarbiauja, koncentracija (jucevičius 2008). 68 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s r. jucevičius (2006) (1 pav.) išskyrė tokius pagrindinius klasterių veikėjus: įmones, apimančias tiekėjus, verslo paslaugas bei galutinį gaminį; mokslą ir švietimą, kuriam priskiriama švietimo sistema bei specialistų rengimas; finansines institucijas ir nacionalinę bei vietos valdžią. 1 pav. klasterio veikėjai (jucevičius 2006) fig. 1. participants of the cluster (jucevičius 2006) klasterio specifiką geriausiai apibūdina a. sabonienės (2007) pateiktas klasterio organizacijos modelis (2 pav.). r. jucevičius (2009) pažymi, kad tokios šalys kaip lietuva, įgyvendindamos klasterių politiką, susiduria su papildomomis problemomis. klasterių politika reikalauja visiškai kitokios viešojo administravimo kompetencijos kokybės nei buvo įprasta pastaraisiais 50 metų. įmonių klasteriai yra subtilūs, save reguliuojantys dariniai, kur tiesioginė ir ypač fragmentinė valstybės intervencija gali padaryti daugiau žalos nei naudos. antra vertus, sumanūs sisteminiai veiksmai, atliekami glaudžiai bendradarbiaujant su esamais ir potencialiais klasterio veikėjais, turi neribotą sėkmės potencialą. anot r. jucevičiaus, pasaulinė patirtis rodo, jog yra trys esminės problemos, su kuriomis susiduria klasterių iniciatyvos: tikslų nustatymas ir veiklos stebėsena; – klasterizacijos proceso organizavimas ir planavimas; – klasterių politikos integravimas į bendrą konkurencingumo politiką. – g. lapinskienė ir m. tvaronavičienė (2009) pažymi, kad šiuo metu darnusis vystymasis yra pagrindinė ilgalaikė visuomenės raidos ideologija. autorės akcentuoja, kad tam tikrame regione turėtų būti išskirtiniai darniojo vystymosi verslas, vadyba ir studijos 2009 69 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s 2 pa v. k la st er io o rg an iz ac ijo s m od el is (s ab on ie nė 2 00 7) f ig . 2 . c lu st er o rg an iz at io n m od el (s ab on ie nė 2 00 7) h o r iz o n t a l io ji k o o pe r a c ij a k on ku re nt ai ko nk ur en ci jo s vi et in ėj e ri nk oj e sk at in im as , va dy bo s pa tir tis , pa st an go s už ka ri au ti už si en io ri nk as , pa si da lij im as in ov ac ijo m is , v er sl o id ėj om is p ra m on ės įm on ės /š ak os ti ek ėj ai ža lia vo s, m ed ži ag os , ko m pl ek tu oj am ie ji ga m in ia i: iš la id ų m až in im as , ko ky bė s di di ni m as pr od uk ta i, įr en gi ni ai ir te ch no lo gi ja : in ov ac ijo s, to bu lin im ai , na uj i d ar bo m et od ai pr a m o n ė s įm o n ė s/ ša k a sp ec ia lis ta i: kv al if ik ac ijo s kė lim as , ku rs ai , se m in ar ai , ta rp ta ut in ia i pr oj ek ta i m ok sl o ty ri m ai : ri nk os , te ch no lo gi ni am s, so ci ol og in ia m s ty ri m am s sk ir tų lė šų ko op er av im as v al st yb ės in st it uc ij os st an da rt iz ac ija , te is in ė ap lin ka , ve rs lo a pl in ka pr ek yb os ta rp in in ka i: pa te ik im o pa sl au go s, m ar ke tin go p as la ug os , in fo rm ac ija a pi e ri nk os p or ei ki us ga m yb in ia i va rt ot oj ai ga lu tin ia i va rt ot oj ai va ls ty bė s už sa ky m ai v e r t ik a l io ji k o o pe r a c ij a 70 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s rodikliai, darantys didžiausią poveikį ekonominiam augimui. klasteriai priskiriami universaliausiems skirtingų pasaulio šalių ekonominės plėtros politikos instrumentams. v. navickas ir a. malakauskaitė (2008) teigia, kad valstybės įtaka makroekonominiams procesams yra gana reikšminga. ji pasireiškia įvairių reguliavimo ir valdymo funkcijų įgyvendinimu. esminė valdžios institucijų paskirtis – užtikrinti ekonominį ir politinį stabilumą. valstybė taip pat privalo gerinti mikroekonominį įmonių pajėgumą, užtikrindama efektyvų išteklius tiekiančių institucijų darbą, skatindama išteklių kokybės didinimą ir produktyvų naudojimą. šiuolaikinė ekonominė politika remiasi klasterių koncepcija. 2007–2013 m. ekonominio augimo veiksmų programoje (2006) išskiriamos šios pagrindinės priežastys, dėl kurių klasteriai lietuvoje kuriasi lėtai: pasitikėjimo tarp klasterio subjektų stoka; – netolygus skirtingų verslo subjektų technologinis ir vadybinis lygis; – menkai išvystytos verslo informacinės sistemos; – patirties ir kompetencijos veiklos partnerystėje stoka; – verslumo stoka; – neefektyvios profesinės ir šakinės asociacijos; – neefektyvi inovacijų sistema. – būtina pažymėti, kad klasterio kūrimosi procesai yra labai įvairūs. požiūrių įvairovę lemia daug aplinkybių: kultūrinė šalių įvairovė, skirtinga ūkio struktūra, verslo tradicijos, iniciatorių tikslai ir interesai bei daugelis kitų veiksnių. pastarųjų dviejų dešimtmečių tarptautinė klasterių kūrimosi skirtingose šalyse patirtis bei atlikti tyrimai atskleidžia svarbiausius principus ir etapus, kurie būdingi beveik visoms klasterių iniciatyvoms. atsižvelgiant į menką klasterių kūrimosi patirtį lietuvoje ir nepakankamai pramonės ir verslo įmonių suvoktą klasterio mechanizmą, siūloma vadovautis tokia klasterio kūrimo logika (3 pav.): tai nereiškia, jog atskiri etapai negali būti sukeisti vietomis ar vykdomi lygiagrečiai, bet kiek įmanoma reikėtų laikytis nuoseklumo. tai padės išvengti klaidų ir praradimų, nes nė viena klasterio iniciatyva, kaip ir bet kuri inovacija, nėra atsieta nuo nesėkmių rizikos. klasterio kūrimo procese visuomet yra daug neapibrėžtumo, sunkiai valdomų ar net visai nevaldomų aplinkybių. siekiant paspartinti klasterių kūrimosi procesus, lietuvos klasterių politikos principai turi įvertinti specifines lietuvos sąlygas, teigiamą užsienio patirtį bei strateginius konkurencingumo tikslus. verslas, vadyba ir studijos 2009 71 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s 3 pav. klasterio kūrimo proceso loginė seka (jucevičius 2009) fig. 3. a logical sequence of cluster development process (jucevičius 2009) poreikio bendradarbiauti išryškinimas prioritetinių veiksmų planas lyderių grupės suformavimas klasterio strategijos parengimas klasterio institucionavimas ir valdymas klasterio plėtra klasterio inicijavimas potencialaus klasterio ir jo ribų išryškinimas 3. lietuvos jūrų žuvininkystės sektoriaus būklė, klasterio suformavimo galimybė darnios regiono plėtros kontekste žuvininkystė yra specifinė ūkio šaka, daugiausia naudojanti natūralius gyvuosius gamtos išteklius – žuvis. žuvininkystės verslo poreikiai turi atitikti verslo galimybes, kurias lemia išteklių būklė. žuvų ištekliai – lengvai pažeidžiami gyvieji gamtos ištekliai, todėl jų naudojimo reguliavimas ir apsauga turi būti vykdoma ypač atsakingai, remiantis moksliniais tyrimais bei ilgalaikėmis tikslinėmis programomis (green paper ... 2001). žuvininkystė apibrėžiama kaip su žuvų išteklių valdymu, išsaugojimu ir atkūrimu, žvejyba, akvakultūra, žuvų perdirbimu, pirminiu žuvininkystės produktų pardavimu ir supirkimu susijusi veikla (2008 m. žuvininkystės ... 2008). lietuvos žuvininkystė – tai su žuvų išteklių valdymu, išsaugojimu ir atkūrimu, žvejyba, akvakultūra, žuvų perdirbimu, pirminiu žuvininkystės produktų pardavimu ir supirkimu susijusi veikla. šalyje plėtojamos 4 pagrindinės žuvininkystės sektoriaus šakos: jūrų žuvininkystė (žvejyba tolimuosiuose rajonuose, atviroje baltijos jūroje – ir jos priekrantėje), žvejyba vidaus vandenyse, – akvakultūra, – žuvų perdirbimas ir rinkodara (lietuvos žuvininkystės ... 2006). – nors lietuvos žuvininkystės sektoriaus produkcija sudaro labai mažą bendrojo vidaus produkto dalį, žuvininkystės sektorius lietuvoje yra labai svarbus (ypač vakarų lietuvoje). 72 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s žuvininkystės sektorių lietuvos respublikoje administruoja: žemės ūkio ministerija (toliau – žūm), – žuvininkystės departamentas prie žūm, – aplinkos ministerija. – taikomuosius biologinius žuvininkystės tyrimus atlieka: žuvininkystės tyrimų laboratorija, – vilniaus universiteto ekologijos institutas, – klaipėdos universitetas (grublienė 2003). – žuvininkystės tyrimų laboratorija nuolat stebi ir tiria baltijos jūros žuvų išteklių būklę, vilniaus universiteto ekologijos instituto jūros ekologijos laboratorija tiria žuvų išteklius baltijos jūros priekrantėje, kuršių ir kauno mariose. lietuvos valstybinio žuvivaisos ir žuvininkystės tyrimų centro (toliau – lvžžtc) vidaus vandenų ir ichtiopatologijos laboratorija atlieka ichtiopatologinius, vandens bei pašarų kokybinius tyrimus, šilavoto filiale vykdomi karpių selekcijos, žeimenos – lašišinių žuvų genetinės kontrolės darbai. žuvininkystės sektoriaus ekonominius ir socialinius tyrimus atlieka lietuvos agrarinės ekonomikos institutas (grublienė 2004). pateikta informacija akivaizdžiai iliustruoja žuvininkystės sektoriaus valdymo sudėtingumą. visos įstaigos, administruojančios žuvininkystės sektoriaus veiklą, yra išsibarstę po lietuvą, jų veiksmų koordinavimas labai sudėtingas, todėl veiklos rezultatyvumo logika diktuoja žuvininkystės sektoriaus klasterio formavimo, atsižvelgiant į darniosios plėtros principus, būtinybę (grublienė 2006a). kita akivaizdi žuvininkystės sektoriaus problema yra nuolatos mažėjančios žvejybos kvotos. 2008 metams lietuvai buvo suteiktos 2631 t menkių, 4456 t strimelių, 24 773 t šprotų ir 5646 vnt. lašišų žvejybos baltijos jūroje kvotos. palyginti su 2007 m., menkių ir lašišų žvejybos kvotos sumažėjo atitinkamai 12 ir 15 proc., o strimelių ir šprotų padidėjo 15 ir 12 proc. (motova 2008). taip pat nuolat trumpinamas menkių žvejybos sezonas. 2006 m. buvo leidžiama žvejoti 246 dienas per metus, 2007-aisiais žvejybos laikotarpis sumažėjo iki 222 dienų, o 2008 m. buvo leista žvejoti tik 178 dienas, t. y. beveik 28 proc. mažiau nei 2006-aisiais (grublienė 2009). žuvininkystės sektorius susiduria su ekonominėmis problemomis, kurios apima žvejybos organizavimą ir žaliavinio produkto realizavimą (grublienė 2009). įvertinus visas sektoriaus problemas svarbu išlaikyti žvejybos kaip verslo šakos pelningumą. tai galima pasiekti panaudojus europos žuvininkystės fondo paramą, skirtą ilgalaikėms priemonėms įgyvendinti: žvejybos pajėgumui tolimuosiuose vandenyse, baltijos jūros priekrantėje ir kuršių mariose mažinti, laivams verslas, vadyba ir studijos 2009 73 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o smodernizuoti, kokybiškesnei ir brangesnei žuvų produkcijai gaminti, naujų rinkų paieškai. lietuvai, kaip ir kitoms es valstybėms narėms, žuvininkystės plėtrai teikiama es finansinė parama. ji iki 2008 m. pabaigos turėjo būti teikiama pagal lietuvos 2004–2006 m. bendrąjį programavimo dokumentą (bpd). vadovaujant ir dalyvaujant žuvininkystės departamentui prie žūm, lietuvoje parengti du strateginiai programiniai dokumentai: lietuvos žuvininkystės sektoriaus 2007–2013 m. nacionalinis strateginis planas ir veiksmų programa. šiuose dokumentuose galimi klasterizacijos procesai neįvertinti. tačiau nacionaliniame strateginiame plane (2006) pateikta sektoriaus ssgg analizė akivaizdžiai parodo silpnąsias puses (1 lentelė). 1 lentelė. bendra žuvininkystės sektoriaus ssgg analizė (lietuvos žuvininkystės sektoriaus 2007–2013 metų nacionalinis ... 2006) table 1. general swot analysis of fisheries sector (lietuvos žuvininkystės sektoriaus 2007–2013 metų nacionalinis ... 2006) stipriosios pusės silpnosios pusės • pakankamas žvejybos, akvakultūros ir žuvų perdirbimo pajėgumas, leidžiantis plėsti gamybą. • šviežioms žuvims ir jų produktams imli vidaus rinka. • daugiametės šalies žuvininkystės sektoriaus tradicijos. • pakankamai aktyvi žuvininkystės sektoriaus bendruomenė. • nepakankama pažangių technologijų ir geriausios gamybos praktikos sklaida žuvininkystės sektoriuje. • nesukurta mokymo ir kvalifikacijos kėlimo sistema žuvininkystės specialistams rengti ir ugdyti. • kvalifikuotos darbo jėgos trūkumas. • nepakankamai išplėtota tikslinė taikomųjų mokslinių tyrimų sistema. • mažesnis, palyginti su es vidurkiu, žuvų produktų suvartojimas galimybės grėsmės • bendras šalies ekonomikos augimas, žuvų ir jų produktų gamybos ir vartojimo didėjimas. • narystės es teikiamos naujos galimybės veikti išsiplėtusioje es rinkoje. • verslo įmonių patirties ir gebėjimų reaguoti į rinkos poreikius ugdymas. • galimybės plėsti gamybą ir diegti pažangias technologijas, pasinaudojant es parama. • galimybės teikti paramą mokymui ir darbuotojų kvalifikacijos kėlimui. • taikomojo mokslo plėtra. • vietinių bendruomenių įsitraukimas į sektoriaus valdymą ir bendrų gėrybių kūrimą. • žuvų išteklių būklės nestabilumas. • žvejybos laivyno nusidėvėjimas ir senėjimas. • specialistų ir kvalifikuotų darbuotojų migracija į užsienį. • didėjanti verslo įmonių veiklos priklausomybė nuo sparčiai brangstančių energetinių išteklių. 74 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s galima daryti prielaidą, kad klasterizacijos procesai užtikrina darnesnę sektoriaus plėtrą, naują veiklos kokybę derinant gebėjimą konkuruoti žemesne kaina ir novatoriškumą. sektoriaus klasterizacijos procesai turi įvertinti tokius veiksnius: sektoriaus kultūrą, konkurencines galimybes, darnią regiono plėtrą (grublienė 2005, 2006b). formuojant šį klasterį, rekomenduojama jį vertinti, kaip lietuvos jūrų ūkio sudedamąją dalį. atsižvelgiant į bendruosius klasteriams būdingus bruožus, įvertinant sektoriaus darniosios plėtros principus lietuvoje turi būti formuojamas lietuvos jūrų ūkio klasteris, kuris apjungtų ne tik žuvininkystės sektoriui, bet ir lietuvos jūrų ūkiui būdingas veiklas. a. v. rutkauskas (2008) akcentuoja, kad šiandien plėtros ir tvarumo sąvokos dažnai eina kartu analizuojant tiek globalinius, tiek regioninius, tiek vietinius procesus. iš tikrųjų šiuo atveju konkurencingumo, kaip ir plėtros tvarumo, sąvoka reikalauja adekvačios interpretacijos ir kiekybinio įvertinimo. r. čiegis (2009) pažymi, kad kaip bendra sąvoka darni plėtra apjungia tris esminius požiūrius: ekonominę, aplinkos ir socialinę plėtrą. šie teiginiai patvirtina, kad darnios plėtros principai svarbūs ir lietuvai, ir atskiriems regionams. 2000 m. rengiant „jūrų ūkio plėtros programą“ ši idėja buvo akcentuota. programoje pažymėta, kad būtina suformuoti bendrą regioninio tipo jūrų ūkio kompleksą – jūrų ūkio klasterį – ir plėtoti jį pagal europos sąjungos toleruojamus darniosios plėtros principus (paulauskas 2000). programoje akcentuota, kad svarbu suformuoti tokį jūrų ūkio klasterį, kuris esant minimalioms investicijoms kurtų palankiausias galimybes harmoningai plėtotis lietuvos ir pajūrio žmonių poreikiams. rengiant programą, nustatyta, kad atskiros jūrų ūkio veiklos yra plėtojamos netolygiai. prie prioritetiškai vystomų priskirtos laivų pramonės, krovinių ekspedijavimo, laivybos, krovos ir agentavimo veiklos. prie iš dalies vystomų – žuvininkystė, jūrų vandenų priežiūra ir tyrimai, mokymai, socialinės infrastruktūros kūrimas. prie neišvystytų – mokslinių tyrimų, jūrų gavybos ir energetikos, rekreacinės žuvininkystės ir keleivių aptarnavimo veiklos. 2000 m. akcentuota idėja išlieka ypatingai aktuali, nes lietuvos žuvininkystės sektorius 2007–2013 m. nacionaliniame strateginiame plane interpretuojamas kaip nacionalinė strateginė veikla, puoselėjama ir plėtojama įvertinant tolydumo principus. tolydžiosios plėtros principai reikalauja įteisinti jūrų ūkio klasterį ir plėtoti jį kaip visumą, atsižvelgiant ir nuosekliai derinant visas neatsiejamas dalis (4 pav.). verslas, vadyba ir studijos 2009 75 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s laivynas žuvininkystės sektorius jūrų ūkio paslaugos jūrų ūkio įrenginių tiekimas laivų statybalaivų savininkai laivų tarpininkai ir agentai bankai ir finansų institucijos jūrų ūkio teisė jūrų ūkio draudimas jūrų ūkio ištekliai ir plėtra jūrų ūkio konsultantai laivų priežiūra jūrų ūkio bendruomenė/ asociacijos jūrų ūkio švietimas jūrų ūkio vadovybė jūros vandenų tyrimai ir vėjo energetika energijos gavyba ir vėjo jėgainių pramonė vėjo jėgainių rekreacinė žuvininkystė priežiūra priežiūra 4 pav. lietuvos jūrų ūkio klasteris fig. 4. lithuanian maritime economy cluster jūrų ūkio klasteris turi būti modeliuojamas kaip mokslinio tyrimo objektas, įvertinant darnios plėtros principus. pagal m. e. porter (2000) pasiūlyto klasterio analogą susiformavusios lietuvos jūrų ūkio produkto kūrimo sistemos pavienės gamybos sritys palaikys viena kitą. jūrų ūkio klasteris bus pajėgus pasiekti rezultatą, didesnį nei pavienių įmonių veiklos rezultatų suma. 4. išvados nuo to, kokiu būdu gamtiniai ir kiti baziniai ištekliai yra kuriami ir panaudojami, labai priklauso visuomenės gerovė. regionų ekonominis vystymasis glaudžiai susijęs su sektoriuose esančiais baziniais ištekliais. ekonomika, grindžiama gamtiniais ištekliais, dažnai būna mažiau dinamiška ir silpnesnė. ilgalaikę sėkmę daugiau lemia ne baziniai ištekliai, bet vertę didinantys produktai ir paslaugos. teisingai parinkta baziniais ištekliais grindžiamų klasterių strategija gali padėti sukurti konkurencinį pranašumą beveik visose ūkio šakose. 76 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s klasterizacijos politikoje turi būti numatyti klasterizacijos spartinimo procesai ir jų efektyvaus valdymo kryptys. šie procesai turi būti susieti su moksline, technologine, edukacine, verslo infrastruktūra ir remtis šalies istorija, kultūra, tradicijomis, žinių pobūdžiu bei veiklos partnerystėje patirtimi. klasteriai turi skatinti inovacijas pramonėje ir versle. žuvininkystės sektorius susiduria su valdymo ir ekonominėmis problemos. klasterizacijos procesai užtikrintų darnesnę sektoriaus plėtrą, naują veiklos kokybę derinant gebėjimą konkuruoti žemesne kaina ir novatoriškumą. lietuvos žuvininkystės sektoriaus 2007–2013 m. nacionaliniame strateginiame plane interpretuojamas kaip nacionalinė strateginė veikla, puoselėjama ir plėtojama įvertinant tolydumo principus. lietuvos žuvininkystės sektorių rekomenduojama vertinti kaip lietuvos jūrų ūkio dedamąją. suformuotas regioninio tipo jūrų ūkio kompleksas – jūrų ūkio klasteris – esant minimalioms investicijoms kurtų palankiausias galimybes harmoningai plėtotis lietuvos ir pajūrio žmonių poreikiams. literatūra 2007–2013 m. ekonomikos augimo veiksmų programa [interaktyvus]. 2006. vilnius: lrv [žiūrėta 2010 m. balandžio 29 d.]. prieiga per internetą: 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a. 2008. nauji makroekonominės politikos svertai: klasterių fenomenas, verslas: teorija ir praktika [business: theory and practice] 4: 245–252. paulauskas, s. 2000. demokratinė savivalda: kaip patobulinti lietuvos valstybės valdymą. klaipėda, 15–27. porter, m. e. 2000. locations, clusters, and company strategy, in the oxford handbook of economic geography. ed. by l. gordon et al. oxford: oxford university press, 253–274. rutkauskas, a. v. 2008. apie regiono konkurencingumo plėtros tvarumą atsižvelgiant į riziką, technological and economic development of economy 14(1): 89–99. sabonienė, a. 2007. pramonės restruktūrizacija ir konkurencingumas: metodinė priemonė. kaunas: technologija. 44 p. isbn 978-9955-25-273-3. 78 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s lithuanian cluster of sea economics – instrument of sustainable regional development v. grublienė summary the article analyses problems of cluster’s formation in lithuania. the reasons why clusters in lithuania are evolving slowly are described in this article. also cluster’s development process in a logical sequence is submitted. the article accented that the lithuanian cluster’s policy principles should assess the specific lithuanian conditions, the positive foreign experience and strategic objectives of competitiveness. lithuanian status of fisheries sector is estimated. also the main problems in this sector are named: complexity of management, decreasing of fishing quota, shorter season of cod fishing, economic problems. the article made assumptions that the clustering process should ensure more sustainable development of the sector, a new operational quality creating the ability to compete at lower prices and innovation. also it was emphasized that clustering processes should assess such factors as: sector’s culture, competitive opportunities and sustainable development of the region. during formation of this cluster it is recommended to assess the fisheries sector as the component of lithuanian maritime economy. lithuanian maritime cluster should be developed allowing for common features inherent in clusters, assessing sustainable development principles of the sector. in this way lithuanian maritime cluster combines not only the fisheries sector but also the activities characterized by lithuanian maritime economy. keywords: cluster, sea economics, regional development, fisheries sector. verslas, vadyba ir studijos 2009 7 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai mokėjimų rizikos įvertinimas lietuvos, latvijos ir estijos rinkose ingrida grigonytė vidurzeme@yahoo.com vilniaus gedimino technikos universiteto magistrantė, finansų inžinerijos katedra vytautas sūdžius vytautas.sudzius@vgtu.lt vilniaus gedimino technikos universitetas, finansų inžinerijos katedra 1. įvadas industrinį pasaulį veikia didžiausias ekonominis nuosmukis nuo didžiosios depresijos laikų. grynųjų pinigų srautų išlaikymas ir stiprinimas šiuo metu yra gyvybiškai svarbus verslui, tiek stambiajam, tiek smulkiajam. bankai europoje ir kitur riboja kreditus ar tiesiog atsisako finansuoti apyvartinį kapitalą (intrum justitia oy 2009b). tai verčia įmones pasikliauti tik savo pačių jėgomis ir apsiriboti grynųjų pinigų srautų reguliavimu. rezultatas toks, kad dauguma verslo įmonių dabar kovoja už savo išlikimą mažėjant įvairios produkcijos paklausai bei investicijoms. įmonių, jų akcininkų ir darbuotojų ateitis priklauso nuo įmonių gebėjimo tvirtai valdyti išlaidas ir pajamas. įmonių skolos klientams, partneriams, tiekėjams nuolat auga didindamos ir taip aukštą kredito riziką. tai tampa rimta mokumo problema, ribojančia verslo išlikimo ir plėtros galimybes tiek lietuvoje, tiek kitose baltijos regiono valstybėse. straipsnio tikslas – apžvelgus esamą verslo mokumo rinkos dalyviams padėtį trijose baltijos regiono valstybėse, pasiūlyti įmonėms galimus sprendimus, kurie padėtų mažinti verslo vienetų debitorinio įsiskolinimo keliamą riziką, neretai grėsmingą įmonių išlikimui. šiame straipsnyje naudojami didžiausios europoje kreditų valdymo kompanijos intrum justitia oy, turinčios padalinius dvidešimt penkiose europos valstybėse (taip pat ir lietuvoje), atliktos kasmetinės epi (angl. european payment 8 verslas, vadyba ir studijos 2009 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s index – europos atsiskaitymų indekso) apklausos duomenys. epi indeksas verslo mokumo rinkos dalyviams parodo, kokia yra įsiskolinimo rizika kiekvienoje į apklausą įtrauktoje šalyje. apklausa atlikta 2009 m. sausio–balandžio mėn., ja siekta nustatyti tiriamų verslo įmonių mokėjimų padėtį ir įtaką kitiems rinkos dalyviams kiekvienoje į apklausą įtrauktoje šalyje. tarp apklaustųjų buvo 41 % teikiančių paslaugas, 25 % gamybos, 15 % didmeninės prekybos, 15 % mažmeninės prekybos, 4 % viešojo sektoriaus įmonių. iš jų buvo 42 % įmonių, kuriose dirba iki 19 darbuotojų, 25 % – kuriose dirba nuo 20 iki 49 darbuotojų, 20 % – kuriose dirba nuo 50 iki 249 darbuotojų ir 13 % respondentų sudarė įmonės, kuriose dirba 250 ir daugiau darbuotojų. apklausa atlikta respondentams pateikiant elektroninę anketą arba telefonu. anonimiškai užpildytos anketos skaičiuojant rezultatus nebuvo įtrauktos. surinkti duomenys analizuojami statistikos metodais. straipsnyje pabrėžiama literatūroje iškelta mokumo svarba įmonėms. taikant lyginamąją analizę išnagrinėti intrum justitia oy surinkti duomenys leido nustatyti debitorinių įsiskolinimų mokėjimo uždelsimo kitiems verslo vienetams mastą ir pasekmes lietuvoje, latvijoje ir estijoje. remiantis esama verslo mokumo situacija ir ištirtomis pagrindinėmis skolų didėjimo priežastimis galima pasiūlyti verslo vienetams priemones mokumo rizikai mažinti. 2. įmonių mokumo būklės ir didėjančios rizikos pasireiškimo ypatumai kiekvienai įmonei svarbiausia yra sugebėti vykdyti savo įsipareigojimus. priešingu atveju ji praranda autoritetą, sugebėjimą konkuruoti rinkoje. mokumas rodo įmonės sugebėjimą vykdyti savo trumpalaikius įsipareigojimus (kancerevyčius 2006). nuo jo priklauso įmonės finansinė būklė ir veiklos rezultatai, tolesnė jos veikla, perspektyvos, taktika, strategija, investiciniai sprendimai ir kt. nemoki įmonė negali palaikyti normalių santykių su kitais rinkos dalyviais. todėl reikia sutikti su nuomone, kad mokumas yra būtina įmonės egzistavimo sąlyga (jagminas, kalčinskas 1999). atliekant mokumo analizę susiduriama su kai kuriais sunkumais, nes literatūroje ir praktikoje nėra vienos nuomonės dėl mokumo apibūdinimo ir bendro mokumo rodiklių pavadinimo bei tam tikrų reikšmių vertinimo (mackevičius 2007: 148–149). bendriausia prasme mokumas apibūdinamas kaip įmonės potencialus gebėjimas turimomis priemonėmis likviduoti įsipareigojimus (juozaitienė 2000) arba kaip mokamasis pajėgumas, sugebėjimas mokėti, galimybė, pajėgumas įvykdyti mokestinius reikalavimus (įsipareigojimus) (buračas, verslas, vadyba ir studijos 2009 9 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s svecevičius 1994; buračas 1997; rutkauskas et al. 2009). toks mokumo apibrėžimas yra gana netikslus, nes nenurodoma, kokius įsipareigojimus įmonė turėtų padengti ir kokiomis lėšomis. tiksliau mokumą reikėtų apibūdinti kaip įmonės sugebėjimą turimomis mokėjimo priemonėmis apmokėti trumpalaikius ir ilgalaikius įsipareigojimus (skolas) partneriams, bankams, mokesčių inspekcijoms ir kitoms institucijoms (gronskas 2005). įmonės mokėjimo priemonės yra pinigai ir jų ekvivalentai, per vienerius metus gautinos sumos (pirkėjų, antrinių ir asocijuotų įmonių skolos ir kt.), atsargos ir komplektavimo gaminiai, nebaigta gamyba, pagaminta produkcija, pirktos perparduoti skirtos prekės, nebaigtos vykdyti sutartys, išankstiniai apmokėjimai, kitas trumpalaikis turtas (trumpalaikės investicijos, terminuotieji indėliai ir kt.). šiomis mokėjimo priemonėmis galima apmokėti trumpalaikius ir ilgalaikius įsipareigojimus (mackevičius 2007: 148–149). įmonės mokumo valdymas yra labai svarbus norint užtikrinti sėkmingą jos veiklą ir gerą reputaciją. įmonę pagal jos reputaciją ir finansines ataskaitas vertina ne tik rinkos dalyviai, bankai, kitos finansinės institucijos, bet ir akcininkai priimdami sprendimus. tai ypač svarbu, jei planuojama išleisti naują akcijų emisiją. taigi šiandien reputacija atlieka esminį vaidmenį ir atstoja informaciją apie įmonę, ji tampa tarsi kertiniu akmeniu nežinomybių pilname pasaulyje (šmaižienė, jucevičius 2009). reputacija yra subjektas, generuojantis įmonės patikimumo, pasitikėjimo ja vertinimą, pagrįstą tos įmonės veiksmais praeityje (šmaižienė, jucevičius 2009). organizacija, siekianti aukštų rezultatų, stengiasi vadovautis strategijomis ir tikslais, kurie užtikrintų akcininkų pasitenkinimą įmonės veikla (susnienė, sargūnas 2009). reikia taip pat atkreipti dėmesį, jog vertindami įmonę kiti rinkos dalyviai labiausiai domisi trumpalaikiais pinigų srautais, todėl susidariusi nepalanki situacija, kai neapmokamos sąskaitos, gali suklaidinti kitus rinkos dalyvius ir lemti nepasitikėjimo įmone priežastis. svarbu, jog įmonė turėtų numačiusi strategiją, kaip elgtis su klientais ar partneriais, kurie neatsiskaito už prekes ar paslaugas pasibaigus atsiskaitymo terminui. mokslinėje literatūroje teigiama, jog įmonės vertės maksimizavimas yra vienas iš svarbiausių jos tikslų. įmonės vertė, taip dominanti tyrėjus ir ekonomistus, mokslinėje literatūroje apibrėžiama kaip geriausias įmonės veiklos rezultatų rodiklis, apimantis veiksnius, atspindinčius tiek įmonės vidinę situaciją, tiek išorinę aplinką (kazlauskienė, christauskas 2008). taigi įmonės vertė glaudžiai susijusi su jos mokumu bei reputacija. mokslinėje literatūroje aprašomi empiriniai tyrimai patvirtina, jog finansiniai rodikliai, ypač likvidumas ir mokumas, yra labai informatyvios priemonės, nuspėjančios įmonės žlugimą (ponikvar, tajnikar, pušnik 2009). vienas iš įmonės 10 verslas, vadyba ir studijos 2009 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s mokumo užtikrinimo būdų – kai įmonės klientai laiku atsiskaito už prekes ar paslaugas. jei su įmone klientai laiku neatsiskaito, ji negali atsiskaityti su savo tiekėjais, blogiausiu atveju įmonei gali grėsti nemokumas, kuris dažnai baigiasi bankrotu (jasienė, laurinavičius 2009; bryan et al. 2002). iš tiesų atsiskaitymo vėlavimas sukelia dvejopo pobūdžio problemas. pirmiausia tai likvidumo problema. vėluojantys atsiskaitymai sumažina grynųjų pinigų kiekį įmonėje ir sukelia likvidumo riziką, dėl kurios net pelningai dirbančios įmonės gali bankrutuoti. kitas likvidumo problemos aspektas – finansavimo problema, t. y. papildomų išteklių poreikis finansuoti pirkėjų skolas (jasienė, laurinavičius 2009). todėl įmonės mokumą reikia valdyti imantis efektyvių veiksmų vėluojančių mokėjimų atžvilgiu. tokį valdymą bei kontrolę galima priskirti rizikos valdymui, kuris gali būti suprantamas kaip planavimo, organizavimo, vadovavimo ir veiklos kontrolės procesas, kuriuo siekiama sumažinti rizikos efektą organizacijos kapitalui ir pajamoms (tamošiūnienė, savčiuk 2007). įmonės, parengusios rizikos valdymo strategiją, išanalizavusios savo pagrindinius veiklos rezultatus, identifikavusios rizikos rūšis ir parengusios planus, kaip jas valdyti, pajėgs gerokai sumažinti galimų nuostolių tikimybę (kaleininkaitė, trumpaitė 2007). esant objektyviai finansinei rizikai kyla poreikis sukurti „mechanizmą“, kuris pakeistų nuolatinį sprendimų priėmimą (vlasenko, kozlov 2009). toks mechanizmas padėtų išvengti dalies nemokių klientų ir taip pagerintų įmonės mokumo rodiklį. taigi įmonės turi siekti sukurti savo strategiją, mechanizmą, padedantį valdyti gaunamas pajamas ir užtikrinantį, kad jos būtų gaunamos laiku. kyla klausimas, kodėl tiekėjai neatsisako atidėti mokėjimo terminų, jei susiduria su tokia didele rizika. vienos iš pagrindinių priežasčių yra tos, kad toks atsiskaitymo būdas leidžia pirkėjams apmokėti prekes po to, kai jie jau būna jas pardavę mažmeninėje rinkoje. be to, daug įtakos turi ir konkurencija tarp tiekėjų: įmonės įsipareigoja ne tik tiekti kokybiškas prekes (ar paslaugas), bet ir suteikti palankias mokėjimo sąlygas – mokėjimo terminus (jasienė, laurinavičius 2009). yra būdų šią atidėtų mokėjimų riziką sumažinti. mokslinėje literatūroje išskiriamos šios riziką mažinančios priemonės: atsiskaitymas grynaisiais pinigais ir mokėjimas iš karto, išankstinis prekių apmokėjimas, avansinis mokėjimas, akredityvai, čekiai, vekseliai, dokumentų inkasavimas, skolų apmokėjimas prekėmis ir paslaugomis, vidiniai kredito limitai (jasienė, laurinavičius 2009). šios priemonės padeda užkirsti kelią ilgai nemokamai pirkėjo skolai. tačiau šiai susidarius, rekomenduotinos kitokios priemonės, kurios, remiantis skolų išieškojimo įmonių patirtimi bei atliktu tyrimu, aptariamos šiame straipsnyje. verslas, vadyba ir studijos 2009 11 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s skolų išieškojimo įmonių patirtis rodo, jog neretai, atsirandant uždelstiems terminams, įmonės yra linkę pratęsti mokėjimo terminus savo skolininkams, tikėdamos, jog šie sumokės. vienas iš mokslinėje literatūroje aprašytų tyrimų paneigia šį įsitikinimą. mokslinėje literatūroje pabrėžiama išvada, prieštaraujanti praktikoje paplitusiam požiūriui, kad vėluoti linkusiems pirkėjams suteikus ilgesnius mokėjimo atidėjimo terminus jie pradės atsiskaitinėti tvarkingiau ir vėluoti mažiau, kitaip sakant, mokės praėjus tam pačiam terminui, tik tas terminas bus sudarytas iš ilgesnio atidėjimo ir trumpesnio vėlavimo laikotarpio, o idealiu atveju vėlavimas sumažės tiek, kad visiškai kompensuos pailgėjusį atidėjimo terminą (jasienė, laurinavičius 2009). skolų išieškojimo įmonių darbo praktika taip pat rodo, jog mokėjimo terminų atidėjimas nepadeda išeiti iš susidariusios problemiškos situacijos, pirkėjai nepradeda mokėti laiku. mokslinėje literatūroje taip pat patvirtinama, jog pailginus mokėjimo atidėjimo terminą, vėlavimai ne sutrumpėja, o, priešingai, pailgėja. taip įvyksta, todėl, kad pirkėjų įpročiai nesikeičia ne atsiskaitymo termino ilgio (t. y. per kiek laiko jie atsiskaito), bet to termino struktūros atžvilgiu (t. y., jei pirkėjas buvo linkęs uždelsti atsiskaitymą pusę suteikto mokėjimo atidėjimo termino, jis ir toliau, net ir pailginus atidėjimo terminą, uždels pusę to termino, tik jau ilgesnio) (jasienė, laurinavičius 2009). taigi būtina išanalizuoti dabartinę situaciją rinkoje ir nustatyti būdus, kaip įmonės pačios galėtų užkirsti kelią vėluojančių mokėjimų atsiradimui. susidarius skolai reikia kiek galima greičiau imtis veiksmų, kad ji būtų panaikinta. neretai įmonės vengia skolų išieškojimo įmonių, nes bijo sugadinti savo ir kliento santykius. į skolų išieškojimo įmones kreipiamasi tik tuo atveju, kai kitos išeities nebelieka (mortensen 2009). deja, neretai tokiais atvejais dėl per ilgo uždelsto termino skolos išieškoti beveik neįmanoma. neretai skolininkas jau būna tapęs visiškai nemokus. 3. mokėjimai – elgesys ir rizika pozityvi tendencija gerėjant atsiskaitymams sparčiai krinta, atsiskaitymo terminai pailgėjo visuose segmentuose, ypač susijusiuose su viešuoju sektoriumi (intrum justitia oy 2009a). gautinų pajamų dalis padidėjo, taip pat pailgėjo mokėjimo terminai. atliekant epi apklausą 94 % respondentų teigė, kad jų skolininkai patiria finansinių sunkumų, taip toliau stabdydami mokėjimo ciklą. didėjant uždelstiems atsiskaitymams lietuvos versle sumažėjo pardavimų ir mokumas. 12 verslas, vadyba ir studijos 2009 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s 2007–2009 m. europos atsiskaitymų indekso (epi), rodančio riziką verslo mokumo rinkos dalyviams, padėtis trijose pabaltijo valstybėse kito panašiai, kiek mažesni pokyčiai tik estijoje (žr. 1 pav.). šis indeksas rodo, kad lietuvoje yra didžiausia mokėjimo rizika. tačiau ir estijos atsiskaitymų indeksas rodo, jog jau būtinas įsikišimas į mokėjimo procesus ir reikalingos priemonės rizikai sumažinti, kad būtų išvengta negrąžinamų skolų. 140 145 150 155 160 165 lietuva latvija estija europos atsiskaitym� indekso koeficientas 2009 2008 2007 1 pav. europos atsiskaitymų indeksas (epi) baltijos šalyse (sudaryta autorių, remiantis intrum justitia oy (2009a) fig. 1. european payment index (epi) in the baltic states (made by the authors, based on intrum justitia oy (2009a) indekso reikšmės (remiantis intrum justitia oy duomenų baze): 100 – jokios mokėjimo rizikos; 101–129 – būtinas budrumas, norint išsaugoti esamą situaciją; 130–149 – būtinas įsikišimas į mokėjimo procesus; 150–169 – įsikišimas į mokėjimo procesus neišvengiamas, būtinos rizikos sumažinimo priemonės; 170–200 – būtinas skubus įsikišimas. 1 paveiksle matyti, jog lietuvoje mokėjimai per pastaruosius trejus metus būdavo uždelsiami labiausiai iš visų trijų baltijos regiono valstybių, o 2009 m. padidėjo daug labiau nei kaimyninėse šalyse – latvijoje ir estijoje. šie duomenys rodo, kad lietuvoje verslo vienetai ilgiausiai delsia atsiskaityti už prekes ir verslas, vadyba ir studijos 2009 13 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s paslaugas su kitais rinkos dalyviais, taip dar labiau blogindami bendrą verslo įmonių mokumo situaciją. negaudami mokėjimų kiti rinkos dalyviai taip pat negali sumokėti savo debitorinių įsiskolinimų tiekėjams, klientams, verslo partneriams, taip kyla grandininė reakcija, kuri apsunkina verslo vienetų finansinę padėtį. ilgiausias mokėjimų uždelsimas tarp kitų pabaltijo valstybių taip pat rodo, jog lietuvos įmonės išleidžia daugiausia lėšų norėdamos susigrąžinti prarastus mokėjimus. 2009 m. intrum justitia oy atlikta epi apklausa parodė, jog atsiskaitymai iš klientų, verslo partnerių ir valstybinių institucijų pablogėjo per pastaruosius mėnesius. pasak daugelio respondentų, tikimasi, jog situacija dar blogės. kol ekonomika bando susidoroti su didžiausiu per kelis dešimtmečius nuosmukiu, gauti mokėjimus laiku už suteiktas paslaugas ar pristatytas prekes tampa vis sunkiau ir sudėtingiau nei iki šiol. epi apklausa rodo, kad 2009 m. atsiskaitymų atidėjimai visoje europoje pailgėjo nuo 17 iki 19 dienų, palyginti su 2008 m. (intrum justitia oy 2009a). prarastos mokėjimo dienos ir didėjantys debitoriniai įsiskolinimai lėtina lėšų apyvartumą, mažina investicijų grąžą, apriboja galimybes gauti kreditą, taip pat mažina trumpalaikį ir ilgalaikį įmonių mokumą. reaguodamos į tai, dauguma kompanijų bando dirbtinai sutrumpinti atsiskaitymo su kitais rinkos dalyviais laikotarpį. tuomet dar labiau apsunkinamas rinkos dalyvių veiklumas. vykdant apklausą buvo nustatyta, kokio nuoseklumo laikantis kompanijos numato apmokėti savo sąskaitas, kai mokumas tampa mažas. daugumoje šalių, įskaitant lietuvą, latviją ir estiją, buvo laikomasi panašaus nuoseklumo: mokėjimai viešajam sektoriui (mokesčiai, rinkliavos, reikalavimai); – mokėjimai bankams ir kitoms finansinėms institucijoms; – mokėjimai darbuotojų socialinėms garantijoms (pensijos, draudimas) už– tikrinti. nors kompanijos pirmenybę teikia mokėdamos mokesčius ir kitus įsipareigojimus valstybinėms institucijoms, tačiau valstybinės institucijos savo ruožtu labiausiai vėluoja apmokėti savo įsipareigojimus. bendras laiko, sugaištamo siekiant susigrąžinti atidėtus mokėjimus iš kitų rinkos dalyvių, vidurkis kinta nuo 55,5 dienų 2008 m. iki 57 dienų 2009 m. (intrum justitia oy 2009). apklausa taip pat atskleidžia, kad apie 65 % kompanijų laukia vidutiniškai beveik 85 dienas, kol kreipiasi dėl profesionalaus skolų išieškojimo iš nemokių klientų. tačiau praktika rodo, jog kuo ilgesnis skolos uždelsimas, tuo mažesnė jos išieškojimo tikimybė. jei klientas ar partneris negrąžina skolos, patartina kreiptis į skolų išieškojimo įmonę praėjus mėnesiui po termino, kada turėjo būti sumokėta už prekes ar paslaugas. skolos išieškojimo paslaugas 14 verslas, vadyba ir studijos 2009 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s teikiančios įmonės dažniausiai užsiima ikiteismine skolų išieška, tai reiškia, jog jei klientas neturi trumpalaikio turto, kuriuo gali padengti įsipareigojimus, skolą susigrąžinti tampa nebeįmanoma. taigi kuo daugiau laiko praeina vėluojant sumokėti skolas, tuo didesnė tikimybė, kad nemokaus kliento padėtis tik blogės, todėl patartina kuo greičiau imtis aktyvių veiksmų skolai susigrąžinti. iš epi indekso rodiklių (1 pav.) matyti, jog 2009 m. visose trijose valstybėse išorinis įsikišimas į mokėjimo procesus yra neišvengiamas. tai reiškia, kad visose įmonėse yra skolų, kurios išieškomos įmonės pajėgomis arba patikimos profesionaliai skolų išieškojimo įmonei. atlikus tyrimą paaiškėjo, jog taip pat padidėjo nurašomų debitorinių įsiskolinimų, t. y. skolų, kurių neįmanoma atgauti jas išieškant, dalis. vidutinis nurašytų skolų procentas nuo visos įmonės apyvartos europoje padidėjo nuo 1,9 % iki 2 % 2008 m. ir iki 2,4 % 2009 m. estijoje 2009 m. šis rodiklis padidėjo nuo 1,1 % iki 2,5 %, latvijoje – nuo 2,8 % iki 3,3 %, lietuvoje – nuo 3,0 % iki 3,3 % (intrum justitia oy 2008, 2009a). iš pirmo žvilgsnio tai nėra aukštas nuostolių lygmuo, tačiau patiriama daug išlaidų ir sugaištama laiko bandant susigrąžinti skolas, kurios, nepaisant pastangų, tampa beviltiškos (žr. lentelę, kiek vidutiniškai prarandama lėšų esant atitinkamam nurašomų skolų lygmeniui). lentelė. vidutinis prarastų mokėjimų poveikis įmonėms es valstybėse (sudaryta autorių, remiantis intrum justitia oy (2009b)) table. average influence of lost payments on enperprises in eu states (made by the authors, based on intrum justitia oy (2009b)) skolų nurašymo lygmuo (marža), % nurašyta suma, eurais reikalingos papildomos pajamos, eurais 2 500 12 500 10 000 250 000 3 500 16 667 10 000 333 333 4 500 25 000 10 000 500 000 iš lentelės matyti, kad papildomų pajamų poreikis yra nepalyginamai didesnis nei atgautinos lėšos siekiant susigrąžinti prarastą skolą. marža rodo, kokia įmonės apyvartos dalis buvo nurašyta (prarasta), o nurašyta suma, eurais, apytiksliai rodo absoliutų skolos dydį. reikalingos papildomos pajamos aprėpia ir atgautinas prarastas lėšas, ir pačią skolą bei negautas pajamas. duomenys lentelėje pateikiami vidutiniškai europos mastu. kadangi į šią apklausą buvo įtrauktos ir verslas, vadyba ir studijos 2009 15 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s visos pabaltijo šalys, o atskiro panašaus tyrimo, atlikto tik lietuvos mastu, nėra, vadovaujantis šia lentele galima pamatyti, kokią maždaug žalą verslo įmonei gali padaryti pernelyg ilgai uždelstos skolos, kai jas tenka nurašyti. taigi lietuvoje ir latvijoje 2009 m., esant 3,3 % nurašomam debitorinių įsiskolinimų nuo įmonių apyvartos dydžiui, prarandamų lėšų dydis apytiksliai gali siekti iki 16 667 eurų (kai nurašyta skola yra 500 eurų) ir 333 333 eurų (kai nurašyta skola yra 10 000 eurų). tokie praradimai ekonominiu sunkmečiu gali padaryti didelės žalos verslo vienetams. taip pat nereikia pamiršti, jog siekiant susigrąžinti vėluojančius mokėjimus prarandama ir daug laiko, patiriama daugiau išlaidų mokant komisinius skolų išieškojimo įmonėms, ypač tada, kai esant ilgesniam uždelsimo terminui išieškojimas užtrunka, o kartais tampa ir visai neįmanomas. debitorinių įsiskolinimų susidarymo priežastys, remiantis atliktu epi tyrimu, pateiktos 2 paveiksle. beveik 80 % skolų yra nesumokama dėl skolininko finansinių sunkumų, per 60 % skolų nemokama dėl vėluojančio tarptautinių įsipareigojimų vykdymo. valdymo neefektyvumas bei ginčai dėl prekių pristatymo taip pat turi didelę įtaką. tai patvirtina, jog didžiausia debitorinių įsiskolinimų priežastis yra ekonominis sunkmetis, kuris lemia finansinius įmonių sunkumus bei vėluojančius tarptautinius mokėjimus, įmonėms sukeliančius daugiausia problemų. 0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % kita vėluojantys tarptautiniai mokėjimai ginčai dėl pristatytų prekių/paslaugų valdymo neefektyvumas skolininko finansiniai sunkumai 2 pav. vėluojančių mokėjimų priežastys (intrum justitia oy 2009b) fig. 2. reasons for late payments (intrum justitia oy 2009b) vėluojant mokėjimams įšaldyti pinigai negali būti panaudoti ekonominiam augimui. tik greitesni ir saugesni mokėjimai gali skatinti naujas investicijas ir verslo plėtrą. mokėti vėluojantys klientai įtraukia savo tiekėją į rizikingą padėtį, 16 verslas, vadyba ir studijos 2009 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s galbūt net sukelia bankroto riziką. tai labiausiai trukdo tarptautinei prekybai, kuri yra ekonominės plėtros ir klestėjimo pagrindas. 4. priemonės, mažinančios debitorinių įsiskolinimų keliamą riziką remiantis skolų išieškojimo įmonių patirtimi, autorių atliktu stebėjimu vienoje iš didžiausių skolų išieškojimo įmonių uab intrum justitia bei vieno iš straipsnio autorių darbo šioje įmonėje patirtimi, galima pasiūlyti priemones, kurių verslo vienetai, siekdami išvengti uždelstų mokėjimų, gali imtis patys. jos efektyvios ir naudojant kitas apsidraudimo nuo vėluojančių mokėjimų rizikos priemones, tokias kaip vekseliai. siūlomi veiksmai padėtų greičiau susigrąžinti vėluojančius mokėjimus bei atgauti skolą tuomet, kai ją ketinama perduoti skolų išieškojimo įmonei. taip būtų taupomos lėšos, išleidžiamos vėluojančiam mokėjimui susigrąžinti, bei mažiau prarandama potencialių pajamų, nes, kaip minėta, kuo ilgiau užtrunka skolos išieškojimas, tuo daugiau tai kainuoja ir mažėja tikimybė atgauti skolą. uab gelvoros saugos konsultacijos statistika rodo, kad vėluojančių pinigų apyvartos pagreitėjimas 30–čia dienų padidintų įmonės pelningumą 1,5 %, o beviltiškų skolų susidarymo tikimybę sumažintų iki 30 % (lukšas 2004). norint išvengti kylančių problemų, kai debitoriniai įsiskolinimai pernelyg ilgai uždelsiami ar apskritai negrąžinami, rekomenduojama įmonėms peržiūrėti savo veiksmus skolininkų atžvilgiu. jie turėtų būti skaidrūs ir nuosekliai vykdomi, nukreipti į individualias įmonės rizikas ir finansines stiprybes. debitorinių įsiskolinimų politikos pagrindą turėtų sudaryti: išankstiniai pristatymai; mokumo tikrinimas prieš priimant sprendimus tiekti prekes ir teikti paslaugas; mokėjimo pirmumas; numatomos priemonės ir pasekmės, jei mokėjimas būtų uždelstas (palūkanų skaičiavimas vėluojantiems mokėjimams, kompensaciniai mokėjimai, pristatymo sulaikymas, bendradarbiavimas su profesionalia kreditų vadybos kompanija); vidinės materialinės padėties reguliavimas. kad įgyvendintų atitinkamą debitorinių įsiskolinimų valdymo politiką, klientai ir visas įmonės personalas, dirbantis su klientais, turi būti informuotas apie debitorinių įsiskolinimų politiką, taikomą įmonėje. taip pat turėtų būti taikomi debitorinių įsiskolinimų apribojimai. pavyzdžiui, nustatomos dvi įsiskolinimo limito ribos kiekvienam klientui. peržengus žemutinę ribą, išsiunčiamas perspėjimas, surenkama papildoma informacija ir imamasi atitinkamų priemonių. peržengus viršutinę ribą, automatiškai sustabdomas prekių tiekimas ir paslaugų teikimas. verslas, vadyba ir studijos 2009 17 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai nesusipratimų dėl ilgai neapmokėtų sąskaitų padėtų išvengti ir nuolatinis įmonės, kuriai išrašoma sąskaita už prekes ar paslaugas, adreso tikrinimas. skolų išieškojimo įmonių patirtis rodo, kad skolų išieškojimo sunkumai dažniausiai kyla dėl klaidingų arba senų kliento adresų, paviršutiniško tiekėjo ir kliento bendravimo. adreso tikrinimas turėtų būti nuolatinis procesas, rutininių patikrinimų dalis, o bendravimas ir ryšių palaikymas su klientu turi būti įmonės prioritetas. mokslinėje literatūroje teigiama, jog tinkamai valdant bendravimą su klientais galima optimizuoti įmonės pelningumą ir kartu patenkinti klientų poreikius (urbanskienė et al. 2008; ginevičius 2007). taip pat labai svarbi ekonominė informacija – nuolatinis mokumo tikrinimas prieš priimant sprendimus dėl prekių ar paslaugų tiekimo. jei mokumas nepakankamas, prekės turėtų būti pristatomos arba paslaugos suteikiamos tik atlikus mokėjimą arba pritaikius alternatyvias mokėjimo formas (atsiskaitoma prekėmis ar paslaugomis už suteiktas paslaugas). būtina nuolatos tikrinti ir pagrindinių klientų mokumą. remiantis skolų išieškojimo įmonių duomenimis, dauguma mokėjimų praradimų susidaro dėl prekių tiekimo ir paslaugų teikimo keliems pagrindiniams klientams. pagrindinių sąskaitų neapmokėjimas padaro daugiausiai žalos įmonėms. nuolatos tikrinamas mokumas, nuosekliai integruotas į operacines procedūras, yra labai svarbus sėkmingo įsiskolinimų valdymo proceso elementas. vienas iš uždelstų mokėjimų prevencijos būdų galėtų būti ir lanksčių atsiskaitymo sąlygų siūlymas, paremtas lengvatų principu. naujiems klientams būtų nustatomas trumpesnis laikotarpis negu nuolatiniams, mokantiems pagal sutartą grafiką. užsakymą kartojantiems naujiems klientams pasiūloma ilgesnio mokėjimo termino lengvata, jei ankstesnis jų užsakymas buvo apmokėtas laiku. tačiau nuolatiniai klientai gali prarasti ilgesnio mokėjimo termino privilegiją, jei vėluoja atsiskaityti. siekiant išvengti vėluojančių mokėjimų susidarymo taip pat gali būti naudojamas prevencinis spaudas, gaunamas iš skolų išieškojimo įmonės, su kuria bendradarbiaujama. jame nurodoma, jog vėluojant apmokėti sąskaitą skolos išieškojimą vykdys atitinkama skolų išieškojimo įmonė. šiuo spaudu antspauduojamos įmonės sąskaitos, pateikiamos kitiems verslo vienetams už pristatytas prekes ar suteiktas paslaugas. esant bent kiek uždelstiems mokėjimams svarbu klientams priminti apie susidariusias skolas. priminimai turėtų būti siunčiami nuosekliai ir, jei reikia, pakartotinai. praktikoje sėkmingiausia yra vadinamoji 2–2–2 formulė: 18 verslas, vadyba ir studijos 2009 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s pirmo priminimo išsiuntimas praėjus vėliausiai dviems savaitėms po sutartos – įsipareigojimo įvykdymo datos; tik dviejų priminimų išsiuntimas prieš imantis teisinių priemonių ar atiduo– dant skolą kreditų valdymo įmonei; tarp pirmo ir antro priminimo turėtų būti ne ilgesnis kaip dviejų savaičių – laiko tarpas. taip pat reikėtų mažinti priklausomumą nuo vieno ar kelių didelių klientų bei nuolatos bendradarbiauti su profesionalia skolų išieškojimo kompanija ir laiku jai perduoti turimas pretenzijas. tai padėtų sutaupyti skoloms susigrąžinti naudojamų lėšų. 5. išvados įmonių gebėjimas padengti savo debitorinius įsipareigojimus labai svarbus įmonių sėkmingai egzistencijai ir plėtrai. atliktas tyrimas ir gautų duomenų analizė atskleidžia įmonių lietuvoje, latvijoje ir estijoje padėtį atsiskaitant už suteiktas paslaugas ar pristatytas prekes, vėluojančių mokėjimų riziką, priežastis ir galimas pasekmes. remiantis lietuvos ir kaimyninių valstybių verslo įmonių debitorinių įsiskolinimų valdymo apžvalga galima geriau suprasti esamą verslo padėtį bei surasti problemų sprendimo būdus. 1. lietuvos padėtis mokėjimo indekso atžvilgiu yra blogiausia, palyginti su kitomis dviem baltijos regiono valstybėmis – latvija ir estija. tai rodo, kad beveik visose įmonėse yra neapmokėtų skolų. 2. nurašomų skolų dalis lietuvoje yra viena didžiausių iš trijų baltijos regiono valstybių, dėl to didelės lėšos yra naudojamos skoloms susigrąžinti, o tai stabdo verslo galimybes. 3. nepadengiant debitorinių įsiskolinimų stabdomas mokėjimų ciklas, nes įmonė, negavusi užmokesčio už suteiktas paslaugas ar pristatytas prekes, negali atsiskaityti su savo tiekėjais ir partneriais. taip kyla grandininė reakcija, didinanti rinkos dalyvių nemokumą. 4. atliktas tyrimas rodo, jog mokėjimų delsimą labiausiai lemia skolininkų finansiniai sunkumai ir vėluojantys tarptautiniai mokėjimai. 5. siekiant išvengti pinigų įšaldymo dėl nemokių klientų, įmonėms reikėtų dažniau analizuoti rizikos portfelį ir nuolatos skirstyti savo klientus pagal jų mokėjimo galimybes; prieš mokant už prekes ir paslaugas, tiesiogiai nustatyti mokėjimo terminus ar datą, kitas mokėjimo ir pristatymo sąlygas; pasibaigus mokėjimo terminams, nelaukiant 85 dienų imtis priemonių bei reikšti preverslas, vadyba ir studijos 2009 19 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s tenzijas, pasitelkiant profesionalius tarpininkus; pasirinkti tinkamus klientus atsižvelgiant į jų ekonominius rodiklius. literatūra bryan, d. m.; tiras, l. s.; wheatley, m. c. 2002. the interaction of solvency with liquidity and its association with bankruptcy emergence, journal of business 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ir jų sprendimo būdai, verslas: teorija ir praktika [business: theory and practice] 1(10): 17–20. juozaitienė, l. 2000. įmonės finansai: analizė ir valdymas. šiauliai: šu leidykla. 178 p. kaleininkaitė, l.; trumpaitė, i. 2007. verslo rizikos valdymas ir jo tobulinimas, verslas: teorija ir praktika [business: theory and practice] 3(8): 176–181. kancerevyčius g. 2006. finansai ir investicijos. kaunas: smaltija. 133 p. kazlauskienė, v.; christauskas, č. 2008. business valuation model based on the analysis of business value drivers, inzinerine ekonomika – engineering economics (2): 23–31. lukšas, a. 2004. vadovas ir pasaulis [interaktyvus]. vilnius: pačiolis [žiūrėta 2009 m. lapkričio 26 d.]. prieiga per internetą: <http://www.verslobanga.lt/lt/patark. full/41af72b41748b>. mackevičius, j. 2007. įmonių veiklos analizė. vilnius: tev. mortensen, t. 2009. getting cash in, chartered accountants journal 88(10): 56. ponikvar, n.; tajnikar, m.; pušnik, k. 2009. performace ratios for managerial decision making in a growing firm, journal of business economics and management 2(10): 109–120. doi:10.3846/1611-1699.2009.10.109-120 20 verslas, vadyba ir studijos 2009 ve r sl o p lė tr o s fi n a n si n ės p r o b le m o s rutkauskas, v. a.; sūdžius, v.; mackevičius, v. 2009. verslo finansų principai ir praktika. vilnius: technika. 285 p. susnienė, d.; sargūnas, g. 2009. suinteresuotųjų šalių vadybos prielaidos organizacijoje, inzinerine ekonomika – engineering economics (2): 58–64. šmaižienė, i.; jucevičius, r. 2009. corporate reputation: multidisciplinary richness and search for a relevant definition. inzinerine ekonomika – engineering economics (2): 91–100. tamošiūnienė, r.; savčuk, o. 2007. rizikos valdymas lietuvos organizacijose – sąsajos su vidaus auditu ir finansinių ataskaitų kokybe, verslas: teorija ir praktika [business: theory and practice] 4 (8): 204–213. urbanskienė, r.; žostautienė, d.; chreptavičienė, v. 2008. the model of creation of customer relationship management (crm) system. inzinerine ekonomika – engineering economics (3): 51–59. vlasenko, o.; kozlov, s. 2009. choosing the risk curve type, technological and economic development of economy 2(15): 341–351. doi:10.3846/1392-8619.2009.15.341-351 payment risk estimation in the markets of lithuania, latvia and estonia i. grigonytė, v. sūdžius summary according to difficult business situation, payments to business partners, clients or suppliers are delayed more than usual. that could be a serious threat to enterprises. in this article solvency importance to all business units as well as company‘s ability to pay their debts to other market units (partners, suppliers, etc.) in lithuania, latvia and estonia are discussed. the data used in this article are taken from intrum justitia oy epi (european payment index) research. payment index in three baltic region countries, harm that can be done to enterprises, and company‘s behaviour according to payment delays are analysed. at the end of the article there are recommendations of actions needed to be taken in order to prevent company‘s solvency. keywords: paying capacity, payment risk, payment index. verslas, vadyba ir studijos 2009 261 įm o n ių e k o n o m ik a ir v a d yb a įmonių socialinė atsakomybė ir jos iniciatyvų diegimo kliūtys smulkiojo ir vidutinio verslo įmonėse rima česynienė rima.cesyniene@ef.vu.lt vilniaus universitetas, vadybos katedra marina neverkevič marina.neverkevic@ef.vu.lt vilniaus universiteto magistrantė, personalo vadybos magistrantūros programa 1. įvadas įmonių socialinės atsakomybės (toliau – įsa) idėja, kuria grindžiamas 1999 m. pasaulinis susitarimas, dar tik skinasi kelią lietuvos įmonėse, o klestinčios vakarų šalių įmonės kasdien demonstruoja naujas socialiai atsakingo verslo iniciatyvas, savo veiklą grįsdamos aplinkosaugos, skaidrumo, personalo ugdymo ir kitais naujojo bendrabūvio kūrimo principais. įsa didina įmonių vertę įvairiais aspektais: padeda sumažinti išlaidas, pritraukti daugiau investicijų, veiksmingiau spręsti restruktūrizavimo klausimus, pritraukti ir išlaikyti geriausius darbuotojus. nuoseklus įsa skatinimas gali padėti spręsti tokias problemas kaip masinė emigracija, aplinkos užterštumas, geresnio šalies įvaizdžio formavimas. nors dažnai teigiama, kad įsa koncepcija yra stambiųjų įmonių varomoji jėga, socialinės atsakomybės praktika egzistuoja ir smulkiojo bei vidutinio verslo (toliau – svv) įmonėse, susidurdama čia, iš vienos pusės, su augančiu objektyviu poreikiu, iš kitos pusės, su subjektyviu jos svarbos nesuvokimu. esant tokiai situacijai išryškėja mokslinė problema: šių objektyvių poreikių ir subjektyvių vadovų nuostatų, jog įsa iniciatyvų diegimas – tai „prabanga“, kurią gali sau leisti tik didelės įmonės, nesutapimas. pagrindinis šio straipsnio tikslas – išanalizuoti įmonių socialinės atsakomybės iniciatyvų diegimo kliūtis smulkiojo bei vidutinio verslo įmonėse. © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai 262 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a tyrimo metodai: mokslinės literatūros analizė ir sintezė, empirinis tyrimas, matematinė statistinė tyrimo rezultatų analizė. įsa idėjos lietuvoje kol kas menkai atsispindėjo sisteminiuose moksliniuose tyrimuose, nors pastaruoju metu publikacijų skaičius šiais klausimais yra išaugęs. įsa problemas nagrinėja: n. vasiljevienė (gruževskis et al. 2006), a. vasiljevas (vasiljevas, pučėtaitė 2005), v. juščius ir v. snieška (2008), d. bernatonytė, r. vilkė ir e. keizerienė (2009). įvairiais aspektais įmonių socialinės atsakomybės problemos minimos moksliniuose darbuose: r. čiegio (2003; čiegis et al. 2009), r. čiegio ir d. gineitienės (ciegis, gineitiene 2008), v. grybaitės ir m. tvaronavičienės (2008), k. kriščiūno ir j. grėblikaitės (2007), g. lapinskienės ir m. tvaronavičienės (2009), j. ruževičiaus ir d. serafino (2006), m. schieg (2009), k. tafel-viia ir r. alas (2009). 2. įmonių socialinė atsakomybė: samprata ir jos iniciatyvų diegimo teigiami bei neigiami aspektai mokslinių publikacijų analizė rodo, kad dar nesutarta dėl vieno visuotinai pripažintino įsa apibrėžimo, be to, įvairių autorių pateikiamuose apibrėžimuose dažnai akcentuojami skirtingi aspektai: santykiai su darbuotojais, verslo ir valdžios atstovais, aplinkosaugos, finansinės, etinės problemos. tokią situaciją iš dalies paaiškina aplinkybė, kad daugelyje užsienio ir lietuvos aukštųjų mokyklų vadybos programose dėstomi dalykai, kurių pavadinimai traktuojami kaip sinonimai: „verslas ir visuomenė“, „įsa ir verslo etika“ (corporate social responsibility & business ethics), „verslo etika“, „socialinė verslininkystė“ (social entrepreneurship), „vertybėmis grįsta vadyba“ (values aware management), „vertybių vadyba“, „korporatyvinės vertybės“ (corporate values), „atsakinga lyderystė“ (responsible leadership) ir pan. lietuvių autorių darbuose galima rasti vienas kitą papildančių šios sąvokos apibrėžimų: įmonių socialinė atsakomybė – tai savanoriškos verslo įmonių pastangos įtraukti socialines ir aplinkos problemas į jų bendras veiklas ir ryšius su suinteresuotomis šalimis (gruževskis et al. 2006). įmonių socialinė atsakomybė yra darnaus vystymosi principų praktinis taikymas savo veikloje (kleinaitė 2007). įmonių socialinė atsakomybė yra savanoriškas, įstatymų nenulemtas verslo organizacijų įsipareigojimas visose savo veiklos srityse atsižvelgti ir derinti savo interesus su vartotojų, darbuotojų, visų akcininkų, aplinkos, savo bendruomenės ir kitų susijusių asmenų interesais (grundey 2008). verslas, vadyba ir studijos 2009 263 įm o n ių e k o n o m ik a ir v a d yb a socialiai atsakingas verslas yra įmonės indėlis į darnią plėtrą, t. y. ekonomikos augimą, socialinį vystymąsi ir aplinkosaugą (bernatonytė et al. 2009). įsa apibrėžimo požymių galima pastebėti teisiniuose dokumentuose. sutartyje dėl europos sąjungos konstitucijos (2004 m.) atkreipiamas dėmesys, kad es siekia užtikrinti valstybėse narėse darnią plėtrą, pagrįstą konkurencinga socialine rinkos ekonomika, siekiant visiško užimtumo ir socialinės pažangos. pateiktos įsa sampratos leidžia teigti, kad požiūriai į įsa skirtingi, tačiau yra sąlyčio taškų. įmonių socialinę atsakomybę būtų galima traktuoti kaip elgseną, kai jos į savo veiklą savanoriškai įtraukia socialinius ir aplinkosaugos klausimus, o santykiuose su visais suinteresuotais visuomenės, verslo ir valdžios atstovais vadovaujasi pagarbos žmogui, visuomenei bei gamtai vertybiniais principais. įsa iniciatyvų taikymo aktualumą šiuolaikiniame verslo pasaulyje pagrindžia i. kleinaitė (2007) teigdama, jog verslo socialinės atsakomybės klausimai vakarų europoje yra gvildenami ne vieną dešimtmetį, tačiau šiuo metu jie yra itin aktualūs, ir permainos, kurios užtikrintų perėjimą prie darnios plėtros, tapo neginčijama būtinybe. lyginant užsienio šalių ir lietuvos patirtį įsa sferoje, galima pastebėti svarbių skirtumų. pagrindinis veiksnys, skatinantis užsienio verslininkų atsakingą požiūrį, – vartotojų/visuomenės spaudimas. lietuvos įmonėse tokio pobūdžio iniciatyvos dažniausiai yra skatinamos užsienio partnerių/motininių įmonių. tai rodo, jog lietuvoje dar neveikia įsa koncepcijose aprašytas pagrindinis jos skatinimo mechanizmas – atsakas į atsakingų vartotojų reikalavimus (gruževskis et al. 2006). literatūroje galima rasti pakankamai argumentų „už“, pagrindžiančių, kodėl verta į įmonės veiklą integruoti socialinės atsakomybės principus. įsa nauda yra vertinama kaip daugialypė, aktuali visoms suinteresuotųjų grupėms: padeda mažinti išlaidas, taupiau naudojant išteklius; – padeda pritraukti ir išlaikyti geriausius darbuotojus; – padeda gerinti įmonės įvaizdį visuomenėje; – leidžia kurti naujus produktus; – lengviau atveria naujas rinkas; – mažina teisinę riziką ir draudimo išlaidas; – padeda užtikrinti geresnę gyvenimo kokybę. – v. juščius (2007) išskiria šiuos įsa privalumus: užtikrina grįžtamąjį ryšį tarp įmonės ir aplinkos; – su suinteresuotomis grupėmis aptariant kylančius prieštaravimus, skatina – ieškoti problemų sprendimo kelių; ilgam padidina įmonės darnios plėtros galimybes. – 264 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a be autorių, įvardijančių įsa iniciatyvų teikiamą naudą, yra ir kitaip galvojančių mokslininkų, kurie akcentuoja, kad šalia teigiamų egzistuoja ir neigiami šios iniciatyvos įgyvendinimo aspektai. pavyzdžiui, d. m. vyšniauskienė ir v. kundrotas (1999) išsako tokius argumentus „prieš“ įmonės socialinę atsakomybę: organizacija turi siekti pelno, o vyriausybė spręsti socialines problemas; – socialinė organizacijos veikla negali būti pamatuota; – organizacija atsakinga už pelno maksimizavimą; – socialinės atsakomybės sąnaudos yra per didelės ir pernelyg didina kai– nas; organizacijai trūksta įgūdžių, sprendžiant visuomenės socialines proble– mas; organizacija neturi pakankamo ryšio su visuomene, todėl negali spręsti – jos problemų; visuomenė nepakankamai remia organizaciją, vykdančią socialinės atsa– komybės programas. autoriai, pasisakantys „prieš“ įsa iniciatyvų diegimą, dažnai nurodo, jog jų įgyvendinimas didina įmonės sąnaudas, iškreipia pirminę verslo logiką – pelno siekimą, perduoda verslui per daug įsipareigojimų ir pan. tačiau jie pamiršta, kad įsa teikiama nauda ne visada yra pastebima trumpuoju laikotarpiu ir įsa – tai investicija, kuri gali suteikti įmonei konkurencinį pranašumą ilguoju laikotarpiu. nagrinėjant mokslinę literatūrą apie įsa, pastebėtas diskutuotinas klausimas dėl įsa įgyvendinimo skirtingo dydžio, tipo bei kilmės įmonėse. dažnai minima, jog įsa iniciatyvių diegimas būdingesnis didelėms įmonėms, kurių lietuvoje nėra labai daug. o svv įmonės dažniai sumenkina savo poveikį aplinkai, bendruomenei, kitoms įmonėms. tyrimai rodo, kad jos socialinę atsakomybę vis dar sieja su labdara arba laiko viešųjų ryšių priemone, bet ne savo verslo strategijos dalimi. užsienio patirtis rodo, kad įsa iniciatyvų taikymas smulkiose ir vidutinėse įmonėse yra tiek pat svarbus kaip ir didelėse, tik gali skirtis veiksmų mastas. 3. įsa iniciatyvų diegimo smulkiojo ir vidutinio verslo įmonėse tyrimai įsa iniciatyvų įgyvendinimas lietuvoje yra atsidūręs situacijoje, kai visuomenė nėra pakankamai organizuota ginti savo interesus, valstybė neapsisprendusi, verslas, vadyba ir studijos 2009 265 įm o n ių e k o n o m ik a ir v a d yb a organizuotos interesų grupės dalyvauja žaidime, kur „vienas laimi, kitas pralaimi“, o įmonės dėl besikeičiančių tarptautinių tendencijų imasi pavienių iniciatyvų. tai patvirtina ir keletas tyrimų, atliktų lietuvoje. 2007 m. buvo įgyvendintas europos komisijos finansuotas projektas „bendros socialinės atsakomybės tendencijos tarp smulkių ir vidutinių įmonių baltijos šalyse“. tyrimą atliko konsultacinė įmonė „ekt grupė“. tyrimo duomenimis, 47 % smulkių ir vidutinių įmonių vadovų nebuvo žinomas socialinės atsakomybės terminas. įmonės socialinės atsakomybės programas įgyvendino beveik 28 % svv įmonių, o 63 % vadovų nurodė, kad iki šiol nėra įgyvendinę jokių įmonių socialinės atsakomybės programų. tie, kurie vykdo savo veiklą pagal socialinės atsakomybės principus, nurodė, jog tai daro ilgiau nei trejus metus (tokių vadovų buvo 55 %). 2005 m. pasaulio banko atliktas panašus tyrimas leidžia spręsti apie įmonių vadovų įsa suvokimo lygį. šio tyrimo duomenys parodė, jog vadovų įsa suvokimas skiriasi netgi priklausomai nuo šalies. lietuvoje vadovai linkę manyti, jog pagrindinė įsa idėja yra veiklos skaidrumas, latvijoje – suinteresuotų asmenų interesai, aplinkos apsauga, estijoje – etiškas elgesys. atlikti tyrimai atskleidė ir įsa iniciatyvų įgyvendinimo kliūtis: ne visai sutvarkytas įsa teisinis reguliavimas (tai nurodė 42 % vadovų), socialiai atsakingos veiklos kaina (38 %), tai, kad įsa iniciatyvų įgyvendinimas neužtikrina finansinės sėkmės (33 %). šio straipsnio autoriai tyrimo objektu neatsitiktinai pasirinko svv įmones, nes remiantis lr statistikos departamento duomenimis jų lietuvoje yra 26 %. siekiant išsiaiškinti socialinės atsakomybės iniciatyvų diegimo kliūtis, šių įmonių vadovams buvo išsiųsta 350 elektroninių anoniminių anketų, gauta užpildytų – 90. apklausa parodė, kad dauguma respondentų (87 %) jau yra susidūrę su socialinės atsakomybės reiškiniu, tačiau traktuoja jį skirtingai: 25 % respondentų mano, kad tai – savarankiška verslo įmonės iniciatyva; 23 % galvoja, jog įsa yra įstatymais reglamentuojama veikla; 22 % teigia, kad tai – verslo investicijos į visuomeninius projektus ir tik maža dalis respondentų (5 %) mano, kad tai – labdara. tyrimas parodė, kad vyravusi nuostata, jog įsa yra filantropinė veikla, pamažu nyksta, ją keičia adekvatus šio reiškinio suvokimas. nurodydami veiksnius, skatinančius elgtis socialiai atsakingai (1 pav.), respondentai akcentavo dėl to padidėjusį darbuotojų lojalumą ir pasitenkinimą darbu (4,3 balo iš 5 galimų), geresnio įmonės įvaizdžio kūrimą bei verslo konkurencinio pranašumo didinimą (abu veiksniai įvertinti 4,2 balo), išaugusius vartotojų reikalavimus (4 balai). mažiausią įvertinimą gavęs veiksnys – didesnis patrauklumas investuotojams (3,1 balo). 266 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a 0 1 2 3 4 5 pagerėję įmonės finansiniai rodikliai išaugę klientų, vartotojų reikalavimai siekis turėti gerus santykius su vietos bendruomene ilgalaikis verslo konkurencinis pranašumas geresnė įmonės reputacija, įvaizdis didesnis darbuotojų lojalumas ir pasitenkinimas darbu didesnis patrauklumas investuotojams, ypač užsienio vidurkis 1 pav. respondentų nuomonės apie įsa skatinančius veiksnius pasiskirstymas fig. 1. distribution of respondents‘opinion concerning factors stimulating social responsibility implementation in small and medium-size firms tarp pagrindinių kliūčių įgyvendinant įsa įmonėse (2 pav.) buvo nurodytas nesugebėjimas suvokti įsa kaip potencialiai didinančios įmonės vertę ir skatinančios ilgalaikį pelną svarbos (4,3 balo iš 5 galimų), nenuoseklus požiūris į įsa (3,9 balo), ilgalaikės vizijos ir strateginio požiūrio nebuvimas (3,7 balo). 3,2 3,4 3,6 3,8 4 4,2 nesugebėjim as suvokti socialinės atsakomybės kaip didinančios įmonės vertę ir skatinančios ilgalaikį pelną nenuos eklus požiūris į socialinę atsakomybę strateginio požiūrio nebuvimas permainų būtinumo ir inovacijų nesuvokimas ilgalaikės vizijos nebuvimas vidurkis 2 pav. respondentų nuomonės apie kliūtis įgyvendinant įsa pasiskirstymas fig. 2. distribution of respondents‘ opinion concerning the main obstacles to social responsibility implementation in small and medium-size firms verslas, vadyba ir studijos 2009 267 įm o n ių e k o n o m ik a ir v a d yb a siekiant didinti įsa iniciatyvų plėtrą tarp smulkių ir vidutinių įmonių, siūlomas modelis, kuris apima ir suvienija visuomenės, verslo ir valstybės pastangas bei interesus (3 pav.). įsa plėtros galimybių didinimas i. valstybės politikos tobulinimas ii. visuomeninių organizacijų suaktyvėjimas iv. įsa integravimas į švietimą iii. tyrimų skatinimas ir rėmimas v. kryptingumas (pagal įmonių specifiką) vi. svv sąmoningumo kėlimas vii. koncepcijos „žingsnis po žingsnio“ įgyvendinimas 3 pav. įsa plėtrą skatinančių priemonių modelis fig. 3. model of tools stimulating social responsibility initiatives development in small and medium-size firms apibendrinant reikėtų pabrėžti, kad vyrauja nuomonė, jog įsa iniciatyvų plėtrą gali pristabdyti šalį užklupęs sunkmetis. smulkusis verslas pirmiausia privalės spręsti išlikimo problemą, todėl tai stabdys įsa diegimą. tačiau verta pastebėti, jog ekonominio pakilimo laikotarpiu įsa iniciatyvos taip pat nebuvo dėmesio centre. ekonominio nuosmukio laikotarpiu problemos, susijusios su socialinės atsakomybės stoka, tarsi „išgryninamos“ ir atsiranda vis daugiau įmonių, pradedančių diegti nuolatinius, ilgalaikius socialiai atsakingo verslo principus. 4. išvados 1. tyrimas parodė, kad socialinės atsakomybės iniciatyvų taikymas smulkiose ir vidutinėse įmonėse yra taip pat svarbus kaip ir didelėse įmonėse, tik gali skirtis įgyvendinamų iniciatyvų mastas. 2. tiek teorinių šaltinių autoriai, tiek tyrime dalyvavę respondentai pritaria, jog įsa įgyvendinimas priklauso nuo vadovų nuostatų (taip mano 43 % respondentų). tačiau tyrimai byloja, kad 47 % smulkiųjų ir vidutinių įmonių vadovų yra nežinomas socialinės atsakomybės terminas. 268 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a 3. tarp pagrindinių kliūčių įgyvendinant įsa įmonėse akcentuotos šios: nesugebėjimas suvokti įsa kaip potencialiai didinančios įmonės vertę ir skatinančios ilgalaikius pelnus svarbos (4,3 balo iš 5 galimų); nenuoseklus požiūris į įsa (3,9 balo); ilgalaikės vizijos ir strateginio požiūrio nebuvimas (3,7). 4. respondentai pažymėjo, jog labiausiai įsa iniciatyvų diegimą galėtų paskatinti valstybės palaikymas ir iniciatyvų rėmimas (45 %), mokymai (19 %), gerosios praktikos pavyzdžių sklaida (19 %). 5. siekiant šalinti kliūtis bei didinti įsa iniciatyvų plėtros galimybes lietuvos svv įmonėse, rekomenduotina imtis kompleksinių veiksmų, kurie iš dalies atsispindi autorių sudarytame įsa plėtrą skatinančių priemonių modelyje. jame numatytos priemonės suvienytų visuomenės, verslo, valstybės pastangas ir interesus tobulinant valstybės politiką, aktyvinant visuomenines organizacijas, skatinant ir remiant tyrimus, integruojant įsa į švietimą, keliant svv vadovų sąmoningumą, įgyvendinant „žingsnis po žingsnio“ koncepciją. 6. vyrauja nuomonė, jog įsa iniciatyvų plėtrą gali pristabdyti šalį užklupęs sunkmetis, nes smulkusis verslas pirmiausia privalės spręsti išlikimo problemą, tai stabdys įsa diegimą. tačiau verta pastebėti, jog sunkmečio laikotarpiu problemos, susijusios su socialinės atsakomybės stoka, tarsi „išgryninamos“ ir atsiranda vis daugiau įmonių, pradedančių diegti nuolatinius, ilgalaikius socialiai atsakingo verslo principus. literatūra bernatonytė, d; vilkė, r.; keizerienė, e. 2009. ekonominės krizės poveikio lietuvos smulkių ir vidutinių įmonių socialinei atsakomybei 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verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a obstacles to implementing initiatives of social responsibility in small and medium-size firms r. česyniene, j. m. neverkevič summary the purpose of the paper is to analyse the obstacles to implementing social responsibility initiatives in small and medium-size business firms. the implementing fields and the importance of corporate social responsibility (csr) initiatives in small and medium-size business firms are stressed in the paper. the current situation of csr in lithuanian small and medium-size firms is presented. the research data allowed discovering that the main obstacle to implement social responsibility in the small and medium-size firms is the managers’ attitude that social responsibility is a matter of great concern only to large companies. 43% of respondents indicated this obstacle. on the other hand, the research data allowed finding out that in our turbulent environment social responsibility in small and medium-size business firms is not a random phenomenon (71 %), and it is constant concern to managers, which provides for the budget (54 %). the understanding that social responsibility initiatives are only charity or philanthropy is also declined, only 5% of the respondents think so, however, 32 % of firms are supporting charitable initiatives. the most stimulating factors in the implementation of csr are: staff loyalty and job satisfaction, a better image of the company, long-term competitiveness of the business advantage, the increased consumers requirements. socially responsible behaviour disincentives are: the lack of human resources (51 %), lack of information about gain from socially responsible activities (50 %), lack of financial resources (28 %). both theory and practice agree that the implementation of csr issues is most dependent on the leader’s attitude. the managers of small and medium-size business firms mostly are coordinating the implementation of csr initiatives (70% of respondents). the results of the empirical research of csr initiatives implementation in business practices were presented in the possible model of tools which stimulates social responsibility initiatives in small and medium-size business firms. this integrated model includes public, government and business efforts and interests: 1) improvement of public policy, 2) revitalization of public organizations; 3) encourage and support research, 4) integration of csr into education, 5) singleness of purpose (depending on companies’ specifics), 6) increase of managers’ consciousness, 7) implementation of a step-by-step approach. keywords: corporate social responsibility, small and medium-size enterprise, sustainable development. verslas, vadyba ir studijos 2009 37 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s tarptautinė prekyba įmonių veiklos praktikoje aurelija burinskienė aurelija.burinskiene@vgtu.lt vilniaus gedimino technikos universiteto doktorantė, tarptautinės ekonomikos ir vadybos katedra 1. įvadas tarptautinė prekyba – sudėtingas socialinės ekonominės raidos reiškinys, pasižymintis dinamiškumu, besireiškiančiais daugialypiais pokyčiais. šį reiškinį veikia tokie procesai kaip globalizacija, žinių taikymas ekonomikoje, europos sąjungos raida ir plėtra: vis labiau intensyvėjantys globalizacijos procesai sudaro prielaidas globa– lioms rinkoms atsirasti, technologijoms išplisti; išaugęs žinių taikymo mastas skatina kurti produktus, turinčius didesnę – intelektinę vertę, taikyti technologijas įvairiose veiklos srityse; europos sąjungos raidos ir plėtros procesai padeda įsitvirtinti laisviems – prekių, paslaugų, kapitalo ir darbo jėgos judėjimo principams, sudaro sąlygas didinti europos sąjungos įmonių konkurencingumą pasaulyje. verta pažymėti, kad tarptautinę prekybą būtina nagrinėti kaip labai sudėtingą pažinimo objektą. atlikus literatūros analizę pastebima, kad, nagrinėjant tarptautinę prekybą, turėtų būti suvokiama ir analizuojama įmonių veiklos praktika. tačiau tokioms studijoms mokslo darbuose skiriama ypač mažai dėmesio. todėl straipsnyje siekiama atskleisti įmonių sugebėjimą plėtoti tarptautinę prekybą dabartinių iššūkių sąlygomis, palyginti skirtingose šalyse veikiančius ūkio subjektus, įvertinti, ar įmonės, atsižvelgdamos į naujas aplinkybes, sugeba adekvačiai reaguoti ir prisitaikyti. tyrimo metodai: daugiakriteris kompleksinis proporcingasis vertinimas, apibendrinimas, konkretizavimas, palyginimas. © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai 38 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai 2. tarptautinės prekybos ir jos plėtojimo samprata tarptautinės prekybos sąvoka suprantama plačiai. pasaulio prekybos organizacija tarptautinę prekybą apibrėžia kaip „prekių srautus, prekes gabenant per teritorines valstybių sienas“. jungtinių tautų organizacija – kaip „tarptautinį prekių pirkimą ir pardavimą“. ekonominio bendradarbiavimo ir plėtros organizacija (oecd) tarptautinę prekybą įvardija kaip importo ir eksporto veiklą (oecd 2007). nagrinėjant tarptautinės prekybos plėtojimo perspektyvas išskirtinis dėmesys turi būti teikiamas prekių pardavimui tarptautinėse rinkose. j. e. stiglitz ir kiti mano, kad plėtojant tarptautinę prekybą turėtų būti siekiama padidinti pardavimų apimtį, išplėsti prekių asortimentą, sukurti pridėtinę vertę (stiglitz, charlton 2006). s. kuznets akcentuoja, kad tarptautinės prekybos apimties augimas turi būti grindžiamas „einančia į priekį technologija“ (economics ... 1992). literatūroje teigiama, kad apskritai kalbėdami apie plėtojimą autoriai vartoja terminus modernizacija ir plėtra. nors sąvoka plėtojimas dažnai painiojama su augimu, ji yra kur kas platesnė. augimas apibrėžiamas kaip tradicinių technologijų taikymas siekiant parduoti daugiau to paties, o plėtojimas siejamas su kokybiniais pokyčiais, kuriuos lemia pažangesnių technologijų naudojimas (grabowski, self 2007). pastebima, kad autoriai skirtinguose šaltiniuose plėtojimo sąvoką apibrėžia įvairiai. mokslo darbuose, paskelbtuose xx a. pradžioje, teigiama, kad plėtrą lemia esamų technologijų sujungimas naujam naudojimui. vėlesniuose mokslo darbuose, paskelbtuose xx a. antroje pusėje, vyrauja požiūris, kad plėtrą skatina naujų (pirmą kartą taikomų) technologijų įgyvendinimas. j. e. stiglitz nuomone, plėtrą skatina nemaži pokyčiai, kurie kartu atveria įmonėms galimybes, leidžiančias praplėsti dabartinio žinojimo akiratį, sumažinti izoliaciją (stiglitz 2001). 3. tarptautinės prekybos plėtojimo aspektai globalizacijos, žinių taikymo ekonomikoje europos sąjungos raidos ir plėtros sąlygomis įmonėms iš esmės atsiveria naujos galimybės plėtoti tarptautinę prekybą: sudaromos palankesnės sąlygos aktyviau taikyti tradicinius tarptautinės – prekybos plėtojimo būdus (čiburienė, zaharieva 2006), pavyzdžiui: • įmonėms vykdyti tarptautinę prekybą ir naudotis masto ekonomijos privalumais (brooks et al. 2004), verslas, vadyba ir studijos 2009 39 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s• gamykloms pirkti į gaminio sudėtį įtraukiamas sudedamąsias dalis iš specializuotų tiekėjų užsienio šalyse (abele et al. 2008), • tarptautinėms įmonėms plėtoti prekybą tarp padalinių, esančių skirtingose šalyse (bartkus, jurevičius 2007; grimwade 2000); atsiranda poreikis taikyti naujus tarptautinės prekybos plėtojimo būdus, – nes: • produktai keičia savo materialųjį pavidalą į nematerialųjį, • naujos technologijos, taikomos įvairiose srityse, sparčiai plinta tarp įmonių ir gyventojų; jų taikymas sudaro sąlygas sumažinti prekybos sąnaudoms, padidinti pardavimų apimčiai (kraemer 2006). taikant naujus tarptautinės prekybos plėtojimo būdus, tiek materialiosios, tiek ir nematerialiosios kilmės prekės dažniausiai realizuojamos per internetą naudojant elektroninės komercijos technologijas. elektroninės komercijos technologijų taikymo sąlygomis pirkėjai ir pardavėjai tampa mažiau priklausomi nuo laiko ir vietos: pirkėjai, neišeidami iš namų, gali įsigyti prekių bet kuriuo paros metu, bet kurioje pasaulio šalyje; pardavėjai gali konkuruoti dėl pirkėjų ne tik nacionalinėje, bet ir tarptautinėse rinkose. nepriklausomai nuo to, kokius tarptautinės prekybos plėtojimo būdus taiko įmonės, jų tarptautinės prekybos apimtis taip pat priklauso nuo bendro pasaulio prekybos lygmens (polak 2003) ir nuo specifinių veiksnių, tokių kaip šalies turimų gamtinių išteklių gausa, vidaus rinkos dydis (archives ... 2009). pavyzdžiui, šalies su didele vidaus rinka ūkio subjektai apskritai perka daugiau. šalių, gerai apsirūpinusių gamtiniais ištekliais, pavyzdžiui, nafta, ūkio subjektai yra linkę parduoti daugiau. o vadinamųjų sausumos apsuptų šalių, t. y. šalių, kurios neturi tiesioginės prieigos prie jūrų uostų, ūkio subjektai dėl daug aukštesnių transportavimo kainų susiduria su prekių gabenimo sunkumais plėtojant užsienio prekybą (archives ... 2009). literatūroje teigiama, kad įmonės, vykdančios tarptautinę prekybą, ne tik susiduria su prekių gabenimo sunkumais, bet ir su muitų mokesčiais, kalbiniais bei kultūriniais skirtumais, valiutos konvertavimo rizika (bishop 2004). todėl apskritai ūkio subjektai, vykdantys tarptautinę prekybą, turėtų būti labiau pasirengę negu subjektai, realizuojantys prekes tik nacionalinėse rinkose. nagrinėjant įmonių aktyvumą ir pasirengimą plėtoti tarptautinę prekybą, didesnis dėmesys turi būti skiriamas europos sąjungos įmonėms. pasaulio prekybos apimties struktūroje didžiausią dalį sudaro europos sąjungos įmonių tarptautinės prekybos apimtis. 40 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s nagrinėjant europos sąjungos įmonių tarptautinės prekybos apimtį, pastebima, kad aktyviausiai tarptautinę prekybą vykdo gamybos ir prekybos įmonės. europos sąjungos tarptautinės prekybos apimties struktūroje gamybos ir prekybos įmonių tarptautinės prekybos apimtis yra didžiausia ir sudaro 82,4 % visos europos sąjungos tarptautinės prekybos apimties (eurostat ... 2009). akivaizdu, kad europos sąjungos įmonės (ypač gamybos ir prekybos), reaguodamos į vykstančius pokyčius, kuriuos lemia globalizacija, žinių taikymas ekonomikoje, europos sąjungos raida ir plėtra, turėtų stengtis aktyviai taikyti tradicinius ir įsisavinti naujus tarptautinės prekybos plėtojimo būdus. remiantis eurostat duomenimis, atskleidžiama, kad 23 % gamybos ir 9,4 % prekybos įmonių vykdo tarptautinę prekybą: 13,5 % gamybos ir 5,8 % prekybos įmonių parduoda prekes kitose europos sąjungos šalyse, 9,4 % gamybos ir 3,7 % prekybos įmonių – už europos sąjungos teritorinių ribų (eurostat ... 2009). pastebima, kad iš visų gamybos įmonių pajamų 23,7 % ir iš visų prekybos įmonių pajamų 6 % sudaro pajamos, gautos realizuojant prekes tarptautinėse rinkose (eurostat ... 2009). taip pat atskleidžiama, kad kiekvienais metais didėja tiek gamybos, tiek prekybos įmonių, vykdančių tarptautinę prekybą, kiekis. nepriklausomai nuo to, kokius tarptautinės prekybos plėtojimo būdus taiko europos sąjungos prekybos įmonės, aktyviausiai tarptautinę prekybą vykdo didmeninės prekybos įmonės (jos sudaro ketvirtadalį visų prekybos įmonių). 11,9 % didmeninės prekybos įmonių parduoda prekes kitose europos sąjungos šalyse, 9,8 % – už europos sąjungos teritorinių ribų (eurostat ... 2009). iš visų didmeninės prekybos įmonių pajamų 10,7 % sudaro pajamos, gautos realizuojant prekes tarptautinėse rinkose (apie tris ketvirtadalius – pajamos, gautos realizuojant prekes kitose europos sąjungos šalyse) (eurostat ... 2009). tarptautinę prekybą ypač aktyviai vykdo daugiau nei 9 darbuotojus turinčios didmeninės prekybos įmonės: 44 % jų parduoda prekes kitose europos sąjungos šalyse, 33,6 % – už europos sąjungos teritorinių ribų (eurostat ... 2009). tačiau atkreiptinas dėmesys, kad tarp visų prekybos įmonių (taip pat ir tarp didmeninės prekybos) daugiau nei 9 darbuotojus turinčių įmonių yra nedaug (mažiau negu 10 %) (eurostat ... 2009). atskleidžiama, kad europos sąjungos gamybos ir prekybos įmonėse nauji tarptautinės prekybos plėtojimo būdai nėra taikomi plačiai. lyginant europos sąjungos prekybos ir gamybos įmones su kitų pasaulio valstybių atitinkamomis įmonėmis, pastebėta, kad vis daugiau prekybos ir gamybos įmonių, esančių kitose pasaulio valstybėse, taiko naujus tarptautinės prekybos plėtojimo būdus. pavyzdžiui, kanados prekybos įmonės surenka 56 % arba islandijos gamybos verslas, vadyba ir studijos 2009 41 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o sįmonės – 59 % prekybos internetu pajamų parduodamos prekes tarptautinėse rinkose (oecd 2007; statistics iceland ... 2007). aktyviausiai naujus tarptautinės prekybos plėtojimo būdus taiko tik europos sąjungos prekybos automobiliais įmonės, parduodamos automobilius internetu kitose europos sąjungos šalyse. taip pat pastebima, kad prekybos įmonės dažniausia taiko tradicinius tarptautinės prekybos plėtojimo būdus, todėl daugiausia prekybos internetu pajamų surenkama nacionalinėse rinkose. pavyzdžiui, ispanijos ir vokietijos prekybos įmonės surenka tik 10 %, jungtinės karalystės – 11 %, lietuvos – 14 % prekybos internetu pajamų parduodamos prekes kitose šalyse; bendrai europos sąjungos prekybos įmonės, vykdydamos tarptautinę prekybą, surenka 13 % prekybos internetu pajamų (eurostat ... 2009; duomenų ... 2009). dažniausiai europos sąjungos įmonės prekes internetu parduoda keliose europos sąjungos šalyse ir tik 4 % – dešimtyje ir daugiau šalių narių (report ... 2009). taip pat pastebima, kad europos sąjungos įmonės, vykdydamos prekybą, taip pat ir tarptautinę, taiko teritorinius apribojimus. pavyzdžiui, 59 % interneto parduotuvių veikia tik viena kalba, dažnai prekių pardavėjai stabdo pirkimo internetu procesą, kai prekes perkantis asmuo suveda kreditinės kortelės duomenis ir paaiškėja, kad nurodytas adresas yra už pardavėjo tikslinės rinkos ribų arba pardavėjai neleidžia peržiūrėti prekių pasiūlymų, jeigu jie yra skirti kitose europos sąjungos šalyse gyvenantiems elektroninės parduotuvės lankytojams, arba atsisako parduoti ir pristatyti prekes pirkėjams, gyvenantiems šalyse, kuriose pardavėjai neturi įsteigę savo padalinio (commission ... 2009). manoma, kad europos sąjungos įmonių negebėjimas ar nenoras surasti platintojus, galinčius aptarnauti vartotojus, esančius kitose šalyse, gali būti laikomas svarbiausiu veiksniu, stabdančiu tarptautinės prekybos plėtojimą (commission ... 2009). taip pat pastebima, kad visoje europos sąjungos erdvėje susiformavo viena poerdvė, funkcionuojanti pagal bendrus standartus. minėtoje poerdvėje plėtojant tarptautinę prekybą nėra aktyviai taikomos elektroninės komercijos technologijos. 4. gamybos ir prekybos įmonių palyginimas remiantis eurostat duomenimis, buvo palygintos europos sąjungos gamybos ir prekybos įmonės, veikiančios įvairiose šalyse. siekta nustatyti, kaip minėtos įmonės vykdo tarptautinę prekybą bei sugeba suderinti tradicinius ir naujus tarptautinės prekybos plėtojimo būdus. šiuo atveju buvo susidurta su daugiakriterio sprendimo problema (peldschus 2009). 42 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s dažniausiai mokslinėje literatūroje tokie uždaviniai sprendžiami matricine forma. pirmiausia sudaroma uždavinio sprendimo priėmimo matrica, turinti tiek stulpelių, kiek yra kriterijų, ir tiek eilučių, kiek yra lyginamų objektų. taikant daugiakriterius metodus labai svarbu nustatyti kriterijų (rodiklių) svorius (reikšmingumus) (podvezko 2005). vėliau sprendimų priėmimo matrica yra normalizuojama – paverčiama tokia, kurioje kriterijų skaitinės reikšmės neturi jokių matavimo vienetų. toliau normalizuota sprendimų priėmimo matrica yra pasveriama: kiekvieno kriterijaus reikšmės yra dauginamos iš atitinkamo kriterijaus reikšmingumo; bendra minėtų kriterijų reikšmingumų suma būna lygi vienetui (turskis et al. 2009). normalizavimo būdo parinkimas ir sprendimo metodo pritaikymas yra kiekvieno sprendimą priimančio asmens reikalas (turskis et al. 2009). dažnai autoriai iš daugelio iki šiol sukurtų ir mums žinomų metodų pasirinkdavo ir taikydavo copras (angl. the multi-attribute complex proportional assessment of alternatives) metodą. šiame straipsnyje uždaviniui spręsti bus irgi naudojamas copras metodas. lietuvoje šis metodas gerai žinomas ir yra taikomas nuo 1994 m. sprendžiant įvairius uždavinius (andriuškevičius 2005; bivainis, drejeris 2009; ginevičius, podvezko 2006, 2008, 2009; kaklauskas et al. 2007 ir kt.). siekiant palyginti europos sąjungos gamybos ir prekybos įmones pagal jas apibūdinančią kriterijų sistemą, buvo taikomas kompleksinis vertinimas. jis suteikė galimybę: naudotis apibendrintu įmones charakterizuojančiu rodikliu; – įvertinti skirtingus ir net tarpusavyje prieštaringus kriterijus; – atsižvelgti į įvairių kriterijų svarbą vertinimo rezultatams. – lyginant prekybos ir gamybos įmones, buvo remtasi e. k. zavadsko, l. simanausko ir a. kaklausko pasiūlyta daugiakriterio kompleksinio proporcingo įvertinimo metodika (zavadskas et al. 1998). ją taikant normalizuoti įvairaus pobūdžio kriterijai (t. y. kriterijai, nusakantys gamybos ir prekybos įmonių aktyvumą ir pasirengimą plėtoti tarptautinę prekybą bei gebėjimus įveikti sunkumus), kuriais remiantis buvo priimtas galutinis sprendimas. taip pat buvo naudojami įmones apibūdinantys kriterijai, padedantys identifikuoti įmones: a) vykdančias prekybą europos sąjungoje rinkoje; b) vykdančias prekybą rinkose, esančiose už europos sąjungos ribų; c) taikančias prekyboje elektroninės komercijos technologijas; d) susiduriančias su informacinių technologijų efektyvaus taikymo problema įmonės įsikūrimo momentu; verslas, vadyba ir studijos 2009 43 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o se) susiduriančias su verslo plėtros partnerių stoka; f) susiduriančias su įnirtinga konkurencija; g) plėtojančias prekių ir paslaugų įvairovę; h) siekiančias pardavimų augimo; i) siekiančias tarptautinių rinkų. atliekant tyrimą išvardyti kriterijai buvo suskirstyti į tris grupes. pirmai grupei priklausė kriterijai, apibūdinantys įmonių aktyvumą plėtojant tarptautinę prekybą (a–c), antrai – kriterijai, apibūdinantys įmonių gebėjimus įveikti sunkumus (d–f), trečiai – kriterijai, apibūdinantys įmonių strateginius tikslus (g–i). kriterijų sistema sudaryta atsižvelgiant į visus galimus kiekybinius kriterijus, apibūdinančius vertinamas įmones. kiekybinių kriterijų reikšmingumas nustatytas ekspertiniu būdu. pirmai grupei priskirti kriterijai ekspertų įvertinti geriausiai, o antros grupės kriterijai susilaukė mažesnio jų dėmesio negu trečios grupės. ekspertų nuomonių suderinamumas buvo vertinamas konkordacijos koeficientu. šiuo atveju jis buvo lygus 0,8 ir parodė, kad ekspertų vertinimai buvo suderinti. palyginus gamybos įmones nustatyta, kad danijos ir liuksemburgo įmonės geriausiai sugeba plėtoti tarptautinę prekybą (1 lentelė). 24 % jų vykdo prekybą europos sąjungos rinkoje ir 20 % – teritorijose, esančiose už europos sąjungos ribų. 34 % įmonių realizuodamos prekes taiko elektroninės komercijos technologijas, 45 % įmonių siekia pardavimų augimo (beveik trečdalis jų – tarptautinėse rinkose). taip pat nustatyta, kad iš visų nagrinėjamų europos sąjungos gamybos įmonių 15 % vykdo prekybą europos sąjungos rinkoje ir 13 % įmonių – teritorijose, esančiose už europos sąjungos ribų, 8 % įmonių taiko prekyboje elektroninės komercijos technologijas, 36 % įmonių siekia pardavimų augimo (beveik pusė jų – tarptautinėse rinkose). taip pat nustatyta, kad danijos ir liuksemburgo įmonės yra aktyviausios plėtojant tarptautinę prekybą (2 lentelė). 9 % jų vykdo prekybą europos sąjungos rinkoje ir 15 % – teritorijose, esančiose už europos sąjungos ribų. 40 % įmonių realizuodamos prekes taiko elektroninės komercijos technologijas, 41 % įmonių siekia pardavimų augimo (beveik trečdalis jų – tarptautinėse rinkose). 6 % visų nagrinėjamų europos sąjungos prekybos įmonių vykdo prekybą europos sąjungos rinkoje ir 6 % – teritorijose, esančiose už europos sąjungos ribų. 13 % įmonių taiko elektroninės komercijos technologijas prekyboje, 25 % įmonių siekia pardavimų augimo (šiek tiek daugiau nei trečdalis jų – tarptautinėse rinkose). 44 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s gamybos įmonės vykdo prekybą es rinkoje, % vykdo prekybą už es ribų, % taiko prekyboje elektroninės komercijos technologijas, % susiduria su it efektyvaus taikymo problema įmonės įsikūrimo momentu, % susiduria su verslo plėtros partnerių stoka, % susiduria su įnirtinga konkurencija, % plėtoja prekių ir paslaugų įvairovę, % siekia pardavimų augimo, % siekia tarptautinių rinkų, % reikšmingumų matricos suma maksimizuojančių reikšmių suma minimizuojančių reikšmių suma minimizuojančios reikšmės mažiausią minimizuojančią reikšmę turinčios šalies atžvilgiu lyginamųjų variantų santykinis reikšmingumas prioritetiškumas pradinis kriterijaus reikšmingumas 0,170 0,120 0,150 0,080 0,090 0,100 0,095 0,085 0,110 danija 24 20 34 16 18 40 26 45 16 0,072 0,0532 0,019 1,00 9,68% 1 portugalija 12 6 7 39 11 84 22 43 27 0,068 0,0339 0,034 0,55 5,79% 13 čekija 9 3 8 22 23 62 23 22 8 0,049 0,0219 0,027 0,69 5,19% 14 estija 14 16 15 28 33 52 40 50 31 0,077 0,0488 0,028 0,66 7,78% 5 italija 15 14 2 18 10 64 22 31 14 0,053 0,0293 0,024 0,79 6,36% 12 latvija 23 10 2 27 43 50 31 39 18 0,067 0,0372 0,030 0,62 6,44% 10 lietuva 14 8 13 19 50 65 38 42 29 0,078 0,0434 0,034 0,55 6,74% 8 bulgarija 10 4 1 16 26 50 37 47 19 0,056 0,0322 0,024 0,80 6,71% 9 austrija 30 16 14 21 23 59 41 30 21 0,075 0,0486 0,026 0,72 7,99% 4 liuksemburgas 47 13 16 56 78 100 44 78 33 0,131 0,0723 0,059 0,32 8,63% 2 rumunija 7 14 2 13 37 50 30 38 19 0,057 0,0313 0,025 0,75 6,39% 11 slovėnija 8 15 11 16 34 54 31 45 29 0,067 0,0402 0,027 0,71 7,11% 7 slovakija 45 16 7 25 46 59 19 27 22 0,080 0,0469 0,033 0,57 7,18% 6 švedija 15 15 26 20 22 53 31 46 16 0,070 0,0460 0,024 0,78 8,00% 3 suma 273 169 158 336 453 844 435 583 303 1,000 0,5852 0,415 9,52 suma, padauginta iš pradinio kriterijaus reikšmingumo 46 20 24 27 41 84 41 50 33 366 bendra suma lygi 366 bendra suma lygi 366 kriterijaus realus reikšmingumas 0,126 0,055 0,064 0,073 0,111 0,230 0,113 0,135 0,091 bendra kriterijų realių reikšmingumų suma lygi 1,000 bendra kriterijų realių reikšmingumų suma lygi 1,000 1 lentelė. gamybos įmonių palyginimas table 1. comparison of manufacturing enterprises verslas, vadyba ir studijos 2009 45 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s gamybos įmonės vykdo prekybą es rinkoje, % vykdo prekybą už es ribų, % taiko prekyboje elektroninės komercijos technologijas, % susiduria su it efektyvaus taikymo problema įmonės įsikūrimo momentu, % susiduria su verslo plėtros partnerių stoka, % susiduria su įnirtinga konkurencija, % plėtoja prekių ir paslaugų įvairovę, % siekia pardavimų augimo, % siekia tarptautinių rinkų, % reikšmingumų matricos suma maksimizuojančių reikšmių suma minimizuojančių reikšmių suma minimizuojančios reikšmės mažiausią minimizuojančią reikšmę turinčios šalies atžvilgiu lyginamųjų variantų santykinis reikšmingumas prioritetiškumas pradinis kriterijaus reikšmingumas 0,170 0,120 0,150 0,080 0,090 0,100 0,095 0,085 0,110 danija 24 20 34 16 18 40 26 45 16 0,072 0,0532 0,019 1,00 9,68% 1 portugalija 12 6 7 39 11 84 22 43 27 0,068 0,0339 0,034 0,55 5,79% 13 čekija 9 3 8 22 23 62 23 22 8 0,049 0,0219 0,027 0,69 5,19% 14 estija 14 16 15 28 33 52 40 50 31 0,077 0,0488 0,028 0,66 7,78% 5 italija 15 14 2 18 10 64 22 31 14 0,053 0,0293 0,024 0,79 6,36% 12 latvija 23 10 2 27 43 50 31 39 18 0,067 0,0372 0,030 0,62 6,44% 10 lietuva 14 8 13 19 50 65 38 42 29 0,078 0,0434 0,034 0,55 6,74% 8 bulgarija 10 4 1 16 26 50 37 47 19 0,056 0,0322 0,024 0,80 6,71% 9 austrija 30 16 14 21 23 59 41 30 21 0,075 0,0486 0,026 0,72 7,99% 4 liuksemburgas 47 13 16 56 78 100 44 78 33 0,131 0,0723 0,059 0,32 8,63% 2 rumunija 7 14 2 13 37 50 30 38 19 0,057 0,0313 0,025 0,75 6,39% 11 slovėnija 8 15 11 16 34 54 31 45 29 0,067 0,0402 0,027 0,71 7,11% 7 slovakija 45 16 7 25 46 59 19 27 22 0,080 0,0469 0,033 0,57 7,18% 6 švedija 15 15 26 20 22 53 31 46 16 0,070 0,0460 0,024 0,78 8,00% 3 suma 273 169 158 336 453 844 435 583 303 1,000 0,5852 0,415 9,52 suma, padauginta iš pradinio kriterijaus reikšmingumo 46 20 24 27 41 84 41 50 33 366 bendra suma lygi 366 bendra suma lygi 366 kriterijaus realus reikšmingumas 0,126 0,055 0,064 0,073 0,111 0,230 0,113 0,135 0,091 bendra kriterijų realių reikšmingumų suma lygi 1,000 bendra kriterijų realių reikšmingumų suma lygi 1,000 1 lentelės tęsinys 46 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s prekybos įmonės vykdo prekybą es rinkoje, % vykdo prekybą už es ribų, % taiko prekyboje elektroninės komercijos technologijas, % susiduria su it efektyvaus taikymo problema įmonės įsikūrimo momentu, % susiduria su verslo plėtros partnerių stoka, % susiduria su įnirtinga konkurencija, % plėtoja prekių ir paslaugų įvairovę, % siekia pardavimų augimo, % siekia tarptautinių rinkų, % reikšmingumų matricos suma maksimizuojančių reikšmių suma minimizuojančių reikšmių suma minimizuojančios reikšmės mažiausią minimizuojančią reikšmę turinčios šalies atžvilgiu lyginamųjų variantų santykinis reikšmingumas prioritetiškumas pradinis kriterijaus reikšmingumas 0,170 0,120 0,150 0,080 0,090 0,100 0,095 0,085 0,110 portugalija 3 3 15 13 2 23 8 9 7 0,030 0,0181 0,012 1,00 7,97 % 5 čekija 10 2 9 12 18 39 20 18 6 0,048 0,0257 0,022 0,54 5,89 % 12 danija 9 15 40 13 12 41 29 41 12 0,080 0,0586 0,022 0,56 9,31 % 1 estija 20 6 15 32 32 58 36 50 26 0,097 0,0584 0,039 0,31 7,75 % 6 italija 4 4 3 11 6 44 16 19 6 0,039 0,0185 0,020 0,60 5,56 % 13 latvija 14 4 3 25 38 57 35 42 15 0,080 0,0412 0,038 0,31 6,05 % 10 lietuva 8 6 16 20 52 62 41 41 19 0,091 0,0477 0,043 0,28 6,48 % 8 bulgarija 2 1 2 10 13 46 36 34 8 0,050 0,0270 0,023 0,53 5,97 % 11 austrija 22 11 18 16 18 54 35 41 24 0,089 0,0599 0,029 0,42 8,58 % 3 liuksemburgas 39 6 12 33 47 75 31 43 54 0,125 0,0752 0,049 0,24 9,02 % 2 rumunija 1 1 2 9 18 36 22 22 7 0,039 0,0183 0,020 0,59 5,46 % 14 slovėnija 3 13 13 14 27 64 34 34 21 0,077 0,0427 0,034 0,35 6,44 % 9 slovakija 38 8 4 14 30 44 22 23 10 0,073 0,0451 0,028 0,43 7,15 % 7 švedija 9 9 30 18 17 49 36 43 18 0,083 0,0563 0,027 0,45 8,37 % 4 suma 182 90 182 239 330 692 400 462 233 1,000 0,5927 0,407 6,62 suma, padauginta iš pradinio kriterijaus reikšmingumo 31 11 27 19 30 69 38 39 26 366 bendra suma lygi 366 bendra suma lygi 366 kriterijaus realus reikšmingumas 0,107 0,037 0,094 0,066 0,103 0,239 0,131 0,135 0,089 bendra kriterijų realių reikšmingumų suma lygi 1,000 bendra kriterijų realių reikšmingumų suma lygi 1,000 2 lentelė. prekybos įmonių palyginimas table 2. comparison of trade enterprises verslas, vadyba ir studijos 2009 47 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s prekybos įmonės vykdo prekybą es rinkoje, % vykdo prekybą už es ribų, % taiko prekyboje elektroninės komercijos technologijas, % susiduria su it efektyvaus taikymo problema įmonės įsikūrimo momentu, % susiduria su verslo plėtros partnerių stoka, % susiduria su įnirtinga konkurencija, % plėtoja prekių ir paslaugų įvairovę, % siekia pardavimų augimo, % siekia tarptautinių rinkų, % reikšmingumų matricos suma maksimizuojančių reikšmių suma minimizuojančių reikšmių suma minimizuojančios reikšmės mažiausią minimizuojančią reikšmę turinčios šalies atžvilgiu lyginamųjų variantų santykinis reikšmingumas prioritetiškumas pradinis kriterijaus reikšmingumas 0,170 0,120 0,150 0,080 0,090 0,100 0,095 0,085 0,110 portugalija 3 3 15 13 2 23 8 9 7 0,030 0,0181 0,012 1,00 7,97 % 5 čekija 10 2 9 12 18 39 20 18 6 0,048 0,0257 0,022 0,54 5,89 % 12 danija 9 15 40 13 12 41 29 41 12 0,080 0,0586 0,022 0,56 9,31 % 1 estija 20 6 15 32 32 58 36 50 26 0,097 0,0584 0,039 0,31 7,75 % 6 italija 4 4 3 11 6 44 16 19 6 0,039 0,0185 0,020 0,60 5,56 % 13 latvija 14 4 3 25 38 57 35 42 15 0,080 0,0412 0,038 0,31 6,05 % 10 lietuva 8 6 16 20 52 62 41 41 19 0,091 0,0477 0,043 0,28 6,48 % 8 bulgarija 2 1 2 10 13 46 36 34 8 0,050 0,0270 0,023 0,53 5,97 % 11 austrija 22 11 18 16 18 54 35 41 24 0,089 0,0599 0,029 0,42 8,58 % 3 liuksemburgas 39 6 12 33 47 75 31 43 54 0,125 0,0752 0,049 0,24 9,02 % 2 rumunija 1 1 2 9 18 36 22 22 7 0,039 0,0183 0,020 0,59 5,46 % 14 slovėnija 3 13 13 14 27 64 34 34 21 0,077 0,0427 0,034 0,35 6,44 % 9 slovakija 38 8 4 14 30 44 22 23 10 0,073 0,0451 0,028 0,43 7,15 % 7 švedija 9 9 30 18 17 49 36 43 18 0,083 0,0563 0,027 0,45 8,37 % 4 suma 182 90 182 239 330 692 400 462 233 1,000 0,5927 0,407 6,62 suma, padauginta iš pradinio kriterijaus reikšmingumo 31 11 27 19 30 69 38 39 26 366 bendra suma lygi 366 bendra suma lygi 366 kriterijaus realus reikšmingumas 0,107 0,037 0,094 0,066 0,103 0,239 0,131 0,135 0,089 bendra kriterijų realių reikšmingumų suma lygi 1,000 bendra kriterijų realių reikšmingumų suma lygi 1,000 2 lentelės tęsinys 48 verslas, vadyba ir studijos 2009 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s palyginus gamybos ir prekybos įmones nustatyta, kad europos sąjungos gamybos įmonės yra aktyvesnės parduodant prekes užsienio rinkose, tačiau taip pat pastebėta, kad jos yra inertiškos ir dažniausiai taiko tradicinius tarptautinės prekybos plėtojimo būdus. prekybos įmonės turi daugiau galimybių taikyti naujus tarptautinės prekybos plėtros būdus, tačiau yra pasyvesnės plėtojant tarptautinę prekybą. taip pat nustatyta, kad danijos ir liuksemburgo gamybos įmonių aktyvumas yra išskirtinai reikšmingas ir svarbus vertinant tarptautinės prekybos plėtojimo galimybes. šios įmonės aktyviausiai plėtoja tarptautinę prekybą bei geriausiai suderina įvairius tarptautinės prekybos plėtojimo būdus. 5. išvados pastebima, kad visoje europos sąjungos erdvėje susiformavo viena poerdvė, funkcionuojanti pagal bendrus standartus. minėtoje poerdvėje, plėtojant tarptautinę prekybą, nėra aktyviai taikomos elektroninės komercijos technologijos. palyginus gamybos ir prekybos įmones, nustatyta, kad europos sąjungos gamybos įmonės yra aktyvesnės parduodamos prekes užsienio rinkose, tačiau taip pat pastebėta, kad šios įmonės yra inertiškos ir dažniausiai taiko tradicinius tarptautinės prekybos plėtojimo būdus. nustatyta, kad, nepriklausomai nuo to, kokie tarptautinės prekybos plėtojimo būdai yra taikomi, iš prekybos įmonių aktyviausiai tarptautinę prekybą vykdo didmeninės prekybos įmonės. taip pat pastebėta, kad tarptautinei prekybai dėmesio stokojama prekybos įmonėse, turinčiose iki 9 darbuotojų bei nepriklausančiose didmeninės prekybos įmonėms. tyrimo rezultatai rodo, kad danijos ir liuksemburgo gamybos įmonių aktyvumas yra išskirtinai reikšmingas ir svarbus vertinant tarptautinės prekybos plėtojimo perspektyvas. šios įmonės aktyviausiai plėtoja tarptautinę prekybą bei geriausiai suderina įvairius tarptautinės prekybos plėtojimo būdus. literatūra abele, e.; naher, u.; strube, g.; meyer, t.; sykes, r. 2008. global production – a handbook for strategy and implementation. berlin: springer, 45–319. andruškevičius, a. 2005. evaluation of contractors by using copras – the multiple criteria method, technological and economic development of economy 3(11): 158–169. archives catalogue [online]. 2009. the world bank [cited 12 june 2009]. available from internet: <http://www.worldbank.org>. verslas, vadyba ir studijos 2009 49 ta r pt a u ti n ės e k o n o m in ės in te g r a c ij o s pr o b le m o s bartkus, e. v.; jurevičius, v. 2007. production outsourcing in the international market, inzinerine ekonomika – engineering economics (1): 59–68. bishop, e. 2004. finance of international trade. oxford: butterworth-heinemann. 224 p. bivainis, j.; drejeris, r. 2009. naujų paslaugų technologijos 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trade, international journal of development issues 5 (2): 1–41. stiglitz, j. e. 2001. towards a new paradigm for development: strategies, policies and processes (chapter 2), in the rebel within. london: wimbledon publishing company, 57–93. turskis, z.; zavadskas, e. k.; peldschus, f. 2009. multi-criteria optimization system for decision making in construction design and management, inzinerine ekonomika – engineering economics (1): 7–17. zavadskas, e. k.; simanauskas, l.; kaklauskas, a. 1998. sprendimų paramos sistemos statyboje. vilnius: technika, 121–156. international trade in practice of enterprises activity a. burinskienė summary nowadays importance of international trade is rising; new perspectives for enterprises to sell products at international markets are more significant.in the article theoretical and practical aspects of international trade development are analysed; european union manufacturing and trade enterprises are compared; practice of manufacturing and trade enterprises activity for development of international trade are presented. the study results show that european union manufacturing enterprises are more active in international trade than trade enterprises. also research shows that within manufacturing enterprises denmark and luxembourg enterprises are the most active in selling products abroad and in using traditional and online international trade development methods. keywords: international trade, trade enterprises, manufacturing enterprises, comparison. 154 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai socialinės ekonominės verslo aplinkos įtaka termovizinių tyrimų verslui rūta poželaitė rutasak@gmail.com šiaulių kolegija, administravimo studijų katedra erika jonuškienė erika@repas.lt šiaulių kolegija, finansų ir buhalterinės apskaitos studijų katedra 1. įvadas lietuvos ekonomikai patyrus recesiją, verslo padėtis šalies rinkoje tapo sunki. vienas pirmųjų ekonomikos recesijos pasekmes patyrė statybų verslas, paskui save į keblią padėtį įstumdamas ir su šiuo verslu susijusias įmones bei gyventojus. dėl ekonomikos nuosmukio pigo statybinių paslaugų kainos, tačiau mažėjo ir gyventojų perkamoji galia, todėl dar labiau sumažėjo statybinių paslaugų rinka. ekonomikos augimo metu pakito gyventojų požiūris į šiltą būstą, kokybiškai atliktus statybos darbus. nors termoviziniai tyrimai, naudojami statybos pramonėje, leidžia statybinėms įmonėms užtikrinti savo darbų kokybę, gyventojams atrasti jų būstų blogos šilumos izoliacijos, drėgmės kaupimosi vietas ir efektyviau suplanuoti remonto darbus, patikrinti statybininkų atliktų darbų kokybę ir, pašalinus problemas, sutaupyti šilumos energiją bei sumažinti šildymo sąnaudas, tačiau termovizinių tyrimų paslaugos paklausa nėra didelė. todėl svarbu išsiaiškinti, kaip socialinė ekonominė aplinka veikia termovizinių tyrimų verslą, ar sudaro galimybę jam vystytis, ar, priešingai, tampa grėsme, mažinančia paklausą. tyrimo tikslas – ištirti socialinės ekonominės verslo aplinkos įtaką termovizinių tyrimų verslui. tyrimo metu naudoti metodai: mokslinės literatūros analizė, antrinių duomenų analizė, anketinė apklausa, lyginimo, grupavimo metodai, pestle analizė. verslas, vadyba ir studijos 2009 155 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a verslo aplinką ir jos problemas verslui bendru požiūriu analizavo j. a. pearce ii ir r. b. robinson (1991), g. johnson ir k. scholes (1993), a. vasiliauskas (2005) g. t. palubinskas (1997), p. kotler ir k. l. keller (2007), v. pranulis, a. pajuodis, s. urbonavičius ir r. virvilaitė (2008), s. vaitkevičius (2006), t. vilutienė ir p. malinauskas (2005), m. alimienė ir r. kuvykaitė (2008), j. bivainis ir v. zinkevičiūtė (2006), e. buškevičiūtė ir r. poželaitė (2001), r. ginevičius ir v. podvezko (2009), r. keršienė (2009), g. snieškienė (snieskiene 2009). mokslininkai neturi bendros nuomonės dėl verslo aplinkos sudedamųjų dalių. skiriasi jų nuomonės ir dėl socialinės ekonominės aplinkos veiksnių. mokslininkai nevienodai interpretuoja socialinės ekonominės verslo aplinkos veiksnius ir pateikia skirtingus šiuos komponentus apibrėžiančius veiksnių multikompleksus bei jų tyrimo būdus. tam tikrų veiksnių priskyrimas priklauso nuo tyrimo tikslo ir mokslininkų pozicijos. verslo aplinkos tyrimui dažniausiai mokslinėje literatūroje taikomi kokybinės analizės metodai pest, pestle, a. žvirblis (2007; žvirblis et al. 2008a, b) naudoja kiekybinį pįseta analizės metodą. darbo mokslinį ir praktinį naujumą sudaro termovizinių tyrimų verslo aplinkos modelio sudarymas ir socialinės ekonominės aplinkos įtakos termovizinių tyrimų verslui nustatymas. 2. termovizinių tyrimų verslo aplinka mokslinėje literatūroje nėra vienos nuomonės apie verslo aplinką, nes autoriai į ją žiūri iš skirtingų pozicijų. aplinka – tai veiksnių, esančių už organizacijos ribų – šalies ekonomikos, socialinės ir politinės raidos tendencijų, technologinių galimybių ir konkurencijos, – visuma (palubinskas 1997). verslo aplinka yra komplektas politinių, ekonominių, socialinių ir technologinių jėgų, kurios dažniausiai yra už verslo įtakos ir kontrolės ribų, ir kurios potencialiai gali daryti tiek teigiamą, tiek ir neigiamą įtaką verslui (wood 2009). a. vasiliauskas plačiąja prasme firmos aplinka laiko visus išorinius jos atžvilgiu objektus, t. y. visą išorinį pasaulį. siaurąja prasme aplinką sudaro tik tie išoriniai objektai, kurie daro ryškią įtaką firmos veiklai ir jos rezultatams. strateginio valdymo požiūriu aplinka skirstoma į makroaplinką ir šakos aplinką (vasiliauskas 2005). tokį aplinkos skirstymą naudoja ir lietuvos mokslininkai – v. pranulis, a. pajuodis, s. urbonavičius, r. virvilaitė. tik jie makroaplinkos ir mikroaplinkos komplektą įvardija kaip rinkodaros, o ne verslo aplinką. šio straipsnio autorių nuomone, apibrėžiant termovizinių tyrimų verslo aplinką, apsiriboti vien makroaplinka ir mikroaplinka negalima, nes termovizinių tyrimų verslas labai priklauso ir nuo 156 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a pasaulinės ekonomikos bei globalinės aplinkos. todėl, autorių nuomone, termovizinių tyrimų verslo aplinką sudaro trijų viena kitą gaubiančių aplinkų komplektas: globalinė aplinka, makroaplinka ir mikroaplinka (1 pav.). termovizinių tyrimų verslo aplinka apima tuos globalinės aplinkos ir makroaplinkos veiksnius, kurie veikia visą verslą, turi įtakos jo sėkmei ar nesėkmei ir kurių verslo dalyvis negali kontroliuoti, bei mikroaplinkos veiksnius, kurie tiesiogiai veikia termovizinių tyrimų dalyvį ir kuriems šio verslo dalyvis gali daryti įtaką. tiriant socialinės ekonominės verslo aplinkos įtaką termovizinių tyrimų verslui, į termovizinių tyrimų verslo aplinką reikia žiūrėti kaip į bendrą termovizinių tyrimų verslą veikiančių jėgų visumą, kurioje susipina tiesioginį ir netiesioginį poveikį turinčių veiksnių poveikis. įvairių autorių nuomonės dėl veiksnio priskyrimo makroaplinkai ir mikroaplinkai nesutampa. makroaplinka – tai visuma išorinių jėgų, kurios tam tikroje teritorijoje veikia įmonės sprendimus ir kurioms ji tiesiogiai negali daryti įtakos (pranulis et al. 2008). makroaplinką sudaro ekonominė, socialinė ir kultūrinė, politinė ir teisinė, technologinė (šliogerienė et al. 2009), mokslinė ir technologinė, gamtinė (pranulis et al. 2008), kultūrinė ir religinė (šarapovas, cvilikas 2006) aplinkos. p. kotler ir k. l. keller makroaplinkai priskiria šešias jėgas – demografinę, ekonominę, socialinę ir kultūrinę, gamtos, technologijų bei politinę ir teisinę aplinkas, kurias reikia stebėti ir kurių sąveika kuria naujas galimybes ir grėsmes. straipsnio autorių nuomone, termovizinių tyrimų makroaplinką sudaro politinė, ekonominė, socialinė, technologinė, teisinė bei gamtinė ir ekologinė aplinkos, kurios yra veikiamos globalinės aplinkos jėgų. globalinė aplinka – visuma išorinių jėgų, veikiančių makroaplinką, mikroaplinką bei veiklos vykdytojo sprendimus ir kurių veiklos vykdytojas paveikti negali. globalinės aplinkos jėgos yra globalinė ekonominė, globalinė politinė, globalinė mokslinė ir technologinė, globalinė teisinė, globalinė ekologinė, globalinė gamtinė aplinkos (1 pav.). globalinės aplinkos jėgos veikia šalies, kurioje vykdomas termovizinių tyrimų verslas, makroaplinką. pavyzdžiui, globalinis ekonomikos nuosmukis turėjo įtakos lietuvos ekonomikos lėtėjimui ir nuosmukiui. dėl nedidelės šio darbo apimties plačiau globalinės aplinkos jėgos nenagrinėjamos. tik pažymima, kad ši aplinka tiesiogiai veikia makroaplinkos jėgas, o per jas ir mikroaplinką bei termovizinių tyrimų veiklos vykdytoją. mikroaplinka – tai visuma išorinių jėgų, veikiančių įmonės sprendimus, kurioms įmonė gali daryti tam tikrą įtaką (pranulis et al. 2008). mokslinių darbų analizė parodė, kad mokslininkai neturi vienos nuomonės dėl mikroaplinką sudarančių komponentų. priklausomai nuo verslo, mikroaplinką sudaro konkurentai, verslas, vadyba ir studijos 2009 157 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a tiekėjai, vartotojai (pilinkiene 2009), rinkodaros tarpininkai (kotler et al. 2003), pardavimo tarpininkai, pardavimo pagalbininkai (pajuodis 2005). atsižvelgiant į termovizinių tyrimų specifiką, šio verslo mikroaplinką sudaro pirkėjai, tiekėjai, konkurentai ir pagalbininkai. termovizinių tyrimų paslaugų pirkėjai yra fiziniai ir juridiniai asmenys. konkurentai – tai visos termovizinių tyrimų paslaugas teikiančios įmonės ir verslininkai (t. y. fiziniai asmenys), tarp jų ir statybinės organizacijos, kurių pagrindinė veikla yra statyba, o ne termoviziniai tyrimai. tiekėjai – tai lietuvos ir užsienio šalių įmonės, termovizinių tyrimų veiklos vykdytojui tiekiančios termoviziniams tyrimams atlikti reikalingą produkciją. prie pagalbininkų yra priskiriamos įmonės, padedančios vykdyti termovizinių tyrimų verslą. tai gali būti reklamos agentūros, lizingo kompanijos, it įmonės ir pan. dėl nedidelės šio darbo apimties plačiau teoriniu aspektu 1 paveiksle pateikti veiksniai taip pat nenagrinėjami, tik trumpai aptariamos makroaplinkos socialinė ir ekonominė aplinkos. globalinė ekonominė globalinė gamtinė globalinė politinė globalinė mokslinė ir technologinė globalinė teisinė globalinė ekologinė termovizinių tyrimų veiklos vykdytojas pagalbininkai konkurentai teisinė aplinka gamtinėekologinė aplinka politinė aplinka socialinė aplinka ekonominė aplinka technologinė aplinka globalinė aplinka makroaplinka mikroaplinka pirkėjai tiekėjai 1 pav. termovizinių tyrimų verslo aplinka fig. 1. the business environment of thermography business 158 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a 2.1. ekonominė aplinka ekonominė aplinka – tai makroaplinkos elementas, pasireiškiantis tam tikrais ūkio raidos dėsningumais ir tendencijomis, darančiomis įtaką įmonės sprendimams ir veiksmams (pranulis et al. 2008). ši aplinka yra susijusi su šalies ir tarptautinio ūkio raida ir jo kryptimi. ji apima visuomenės struktūrų ekonominę veiklą bei kinta pagal tam tikrus dėsnius (urbonavičius 1991). termovizinių tyrimų verslą ši aplinka daugiausia veikia perkamosios galios svyravimu, ekonomikos vystymosi cikliškumu, infliacija ir nedarbu. vertinant socialinės ekonominės aplinkos įtaką termovizinių tyrimų verslui, labai svarbu nustatyti, kokiame etape yra šalies ekonomika ir kokios jos vystymosi perspektyvos. didžiausias noras pirkti ir investuoti finansinius išteklius yra ekonomikos pakilimo metu, kituose etapuose pirkėjai linkę taupyti ir atsisakyti ne ypač būtinų prekių ir paslaugų. kylant kaupimo lygiui, mažesnė pajamų dalis lieka pirkimui ir todėl mažėja perkamoji galia. tačiau įvertinus tai, kad termovizinių tyrimų paslaugos leidžia efektyviau suplanuoti renovacijos, rekonstrukcijos, remonto darbus, išspręsti pastato šilumos izoliacijos problemas ir taip sutaupyti ne tik remontui ar renovacijai skirtų lėšų, bet ir energinių išteklių, skirtų pastato šildymui. tai taip pat leidžia sutaupyti ir finansinių išteklių. todėl protingai valdant verslą, galima sėkmingai išnaudoti ir ekonomikos nuosmukį. tačiau tam labai svarbus yra šalies finansinių institucijų patikimumas. išanalizavus mokslinę literatūrą pastebima, kad nėra ne tik bendros nuomonės dėl makroaplinkos sudedamųjų dalių, bet ir dėl ekonominės aplinkos veiksnių analizės. įvairūs autoriai ekonominės aplinkos tyrimui pateikia skirtingus tyrimo kriterijus. visas termovizinių tyrimų verslas labiausiai priklauso būtent nuo šalies ir globalinės ekonominės situacijos. todėl, tiriant termovizinio tyrimo verslo aplinką, yra būtina įvertini ekonominius šalies rodiklius. ekonominę aplinką apibūdina tokie svarbiausi rodikliai: šalies bendrasis vidaus produktas (bvp), pirkėjų pajamos, kaupimo lygis, prekių kainų lygis, kredito gavimo galimybės (pearce ii, robinson 1991). g. johnson ir k. scholes prie šių rodiklių prideda infliaciją ir nedarbą (johnson, scholes 1993), a. žvirblis (2007) – investicijų klimatą, laisvųjų ekonominių zonų plėtrą, mokesčių dydį ir kaitą. infliacija pasireiškia kainų lygių kilimu, perkamosios galios mažėjimu. infliacijos poveikis perkamosios galios mažėjimui ir pirkėjų elgsenai reiškiasi subjektyviu situacijos vertinimu. mažėjant pinigų vertei, nominalusis pajamų augimas gali nedidinti perkamosios galios. pirkėjų elgsena priklauso nuo to, kokio infliacijos lygio jie laukia. jeigu laukiamas infliacijos mažėjimas, brangių ir ilgo naudojimo prekių pirkimas tikriausiai bus atidėtas ateičiai. jei tikimasi infliacijos padidėjimo – vartotojai stengsis kaupti vertingus daiktus, o ne pinigus verslas, vadyba ir studijos 2009 159 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a (pranulis et al. 2008). nedarbas taip pat turi įtakos vartotojų perkamajai galiai. tačiau tai priklauso nuo nedarbo rūšies. pavyzdžiui, nedarbas būna trumpalaikis, atsirandantis ne dėl darbo paklausos nebuvimo, o dėl darbuotojų išėjimo iš darbo, ieškant geresnių darbo vietų. kitas atvejis, kai darbuotojai dėl vienokių ar kitokių priežasčių yra atleisti iš darbo, baigę mokyklas ar kursus pirmą kartą ieškantys darbo ar laikinai netekę sezoninio darbo. šiuo atveju bedarbiai be darbo būna neilgai, jų pajamos išlieka nepakitusios, kaip ir vartojimo elgesys. struktūrinis nedarbas pasireiškia tada, kai darbo paklausos struktūra neatitinka darbo pasiūlos struktūros. asmenys dėl atitinkamos kvalifikacijos neturėjimo negali užimti laisvų darbo vietų, o jų kvalifikaciją atitinkančių darbo vietų nėra. jei darbo rasti nepavyksta, tokių asmenų perkamoji galia smarkiai sumažėja. todėl daugėja kainai jautrių vartotojų. ciklinis nedarbas susijęs su cikline ekonomikos plėtra ir dėl menkos darbo paklausos pasireiškia ūkio nuosmukio bei krizės (depresijos) metu (pranulis et al. 2008). g. startienė ir r. remeikienė (2009) nustatė, kad nedarbas, jeigu jis trunka neilgai, skatina žmones pradėti savo verslą. todėl, analizuojant ekonominę aplinką, būtina įvertinti nedarbo lygį ir trukmę. šie termovizinių tyrimų verslo ekonominės aplinkos tyrimo rodikliai leidžia geriau pagrįsti verslo dalyvių priimamus sprendimus. toks skirtingas autorių požiūris į tyrimo elementus priklauso nuo paties tyrimo objekto, paskirties ir analizuojamo verslo aplinkos suskirstymo. 2.2. socialinė aplinka socialinė aplinka atspindi visuomenės charakteristikų poveikį termovizinių tyrimų verslui. demografinė šalies situacija, visuomenės sluoksnių vertybinės orientacijos, kultūrinės charakteristikos nulemia vartotojų poreikius ir jų patenkinimo būdus (urbonavičius 1991). socialinę aplinką pirmiausiai apibūdina demografiniai rodikliai. jų tyrimas leidžia nustatyti potencialių termovizinių tyrimų paslaugų pirkėjų skaičių, pasiskirstymą tarp miesto ir kaimo, migracijos mastą ir kryptį. šių rodiklių dinamika yra labai svarbi įmonei todėl, kad dėl gyventojų skaičiaus pasikeitimo šalyje ar tam tikroje gyvenamojoje vietovėje termovizinių tyrimų rinka gali plėstis arba siaurėti. mokslinėje literatūroje nėra vienos nuomonės išskiriant socialinės aplinkos rodiklius. šių rodiklių skyrimas priklauso ir nuo to, ar mokslininkai socialinę aplinką analizuoja vieną, ar prie jos jungia kultūrinę aplinką. analizuojant socialinę aplinką, galima išskirti tokius rodiklius kaip gyventojų skaičius, gimstamumas, šeimos struktūros pokyčiai (santuokos sudarymo amžius, vaikų, skyrybų, šeimų, kuriose žmonos dirba, ne šeimos pobūdžio namų ūkių skaičius), gyventojų migracija, išsilavinimo lygis, 160 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a profesija ir kvalifikacija, etniniai gyventojų struktūros pokyčiai, gyventojų požiūrių kaita, darbo jėgos judėjimas. šių rodiklių pokyčiai atsiliepia paklausos dydžiui ir struktūrai. tiriant socialinės aplinkos įtaką termovizinių tyrimų verslui, reikia turėti omenyje, kad šio verslo paslaugų pirkėjai yra ne tik fiziniai, bet ir juridiniai asmenys. be to, socialinės aplinkos pokyčiai yra veikiami šalies ekonominės, teisinės, politinės ir kartu globalinės aplinkų. socialinės aplinkos sąveika su kitomis aplinkomis keičia šalies gyventojų įpročius, vertybes, poreikius, o kartu ir tiriamo verslo rinką. šalies socialinei ekonominei aplinkai įtakos turi ir globali aplinka, pasaulinė ekonomika, laisvas darbo jėgos judėjimas. užsienio šalyse pakitęs požiūris į energijos vartojimą, klimato kaitą, daro poveikį lietuvos politinei, teisinei ir socialinei aplinkai, o šios – visam verslui. socialinė aplinka taip pat kinta priklausomai nuo šalies ekonominės, politinės ir teisinės aplinkos pokyčių, turinčių įtakos gyventojų emigracijai ar remigracijai bei imigracijai, gyventojų vertybėms, verslumui, verslo kultūrai. 2.3. socialinės ekonominės verslo aplinkos analizė siekiant įvertinti socialinės ekonominės aplinkos įtaką termovizinių tyrimų verslui, buvo atlikta dalis pestle analizės. pestle yra akronimas, sudarytas iš angliškų makroaplinkos jėgų pavadinimų: p – politinė aplinka, e – ekonominė aplinka, s – socialinė aplinka, t – technologinė aplinka, l – teisinė aplinka, e – ekologinė aplinka. tyrimui buvo pasirinkta pestle analizė, nes ji leidžia analizuoti kiekvieną makroaplinkos jėgą atskirai. šios analizės metu buvo analizuojamos šalies ekonominė ir socialinė aplinkos. tyrimui pasirinktos tik šios dvi aplinkos, nes lietuvoje per 2008–2009 metus jos labiausiai kito, be to, šios aplinkos labiausiai turi įtakos paklausai. todėl tyrimu buvo siekiama išsiaiškinti, kaip šie pokyčiai veikia termovizinių tyrimų verslą. taip pat buvo atlikta anketinė apklausa, kuria buvo siekiama išsiaiškinti vartotojų nuomonę apie veiksnius, turinčius įtakos sprendimui dėl termovizinių tyrimo paslaugų pirkimo priimti. lietuvos ekonominės aplinkos analizė atlikta, remiantis lietuvos respublikos ūkio ministerijos paskelbtais duomenimis, parodė, kad lietuvoje, smunkant ekonomikai, 2009 m. antrąjį ketvirtį buvo fiksuoti neigiami visų verslo veiklų rezultatai. sparčiausiai krito statybos pramonės rezultatai – 46,1 %, finansinio tarpininkavimo, nekilnojamojo turto ir kito verslo paslaugų pridėtinė vertė – 17,8 %. beveik per pusę sumažėję statybos sektoriaus rezultatai, sumažino termovizinių tyrimų paslaugos paklausą. statybos įmonės, siekdamos sumažinti savo išlaidas ir paslaugų savikainą, linkusios atsisakyti kai kurių paslaugų. dėl šios priežasties statybos įmonės naudojasi termovizinių tyrimų paslaugomis tik verslas, vadyba ir studijos 2009 161 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a tada, kai susiduria su akivaizdžiu statybos darbų atlikimo broku, ieškodamos probleminės pastato vietos ar priežasčių. termovizinių tyrimų paslaugų, kaip efektyvaus darbų kokybės užtikrinimo mechanizmo, šiuo laikotarpiu jos atsisako. 2009 m. i pusmetį bvp sumažėjo 17 %, palyginti su 2008 m. i pusmečiu. metinė infliacija 2009 m. birželį sudarė 4,2 %, palyginti su 2008 m. birželio mėn. vidutinis darbo užmokestis, palyginti su 2008 m. ii ketvirčiu, smuko 0,9 %. 2007 m. vidutinis mėnesinis bruto darbo užmokestis sudarė 1802,4 lt, 2008 m. – 2151,7 lt, 2009 m. i ketv. – 2193,1 lt, 2009 m. ii ketv. – 2172,6 lt. nedarbo lygis nuo 2009 m. pradžios išaugo 2 kartus. 2007 m. nedarbo lygis buvo 4,3 %, 2008 m. – 5,8 %, 2009 m. i ketv. – 11,9 %. šie rodikliai rodo, kad šalies ekonomika patiria nuosmukį. didelė infliacija, mažėjantis darbo užmokestis ir dvigubai išaugęs nedarbo lygis smarkiai mažina termovizinių tyrimų paslaugų paklausą fiziniams asmenims. esant tokioms ekonomikos sąlygoms, žmonės linkę taupyti ir atsisakyti tų prekių bei paslaugų, kurios nėra būtinos. vartojimo išlaidos 2009 m. i pusmetį, palyginti su 2008 m. atitinkamu laikotarpiu, žymiai sumažėjo. namų ūkių vartojimo išlaidos sumažėjo 5,1 mlrd. lt. 2009 m. balandį vartojimo išlaidos, skirtos maisto produktams ir nealkoholiniams gėrimams, sudarė 25,6 % visų išlaidų. būstui, vandeniui, elektrai, dujoms ir kitam kurui – 12,5 %. būsto apstatymui, namų apyvokos įrangai ir kasdienei būsto priežiūrai – 6,8 %, o įvairioms prekėms ir paslaugoms – 5,5 %. tai reiškia, kad termovizinių tyrimų paslaugai vartotojai gali skirti labai nedidelę lėšų dalį. per metus pastatytų pastatų skaičius gali būti vienas iš rodiklių termovizinių tyrimų paslaugų rinkos dydžiui nustatyti. remiantis statistikos departamento duomenimis, 2008 m. buvo pastatyta 723 gyvenamaisiais pastatais daugiau nei 2007 m. ir 104 negyvenamaisiais pastatais daugiau nei 2007 m. tačiau per pirmąjį 2009 m. pusmetį statybos įmonės atliko 45,6 % mažiau darbų nei per 2008 m. i pusmetį. taip pat 2009 m. i pusmetį išduota statybos leidimų 27 % mažiau, leistų statyti butų skaičius sumažėjo 54 %, palyginti su 2008 m. i pusmečiu. šie faktai rodo, kad nepaisant to, jog 2008 m. buvo pastatyti 4027 gyvenamieji ir 5354 negyvenamieji pastatai, termovizinių tyrimų paklausa ir rinka mažėja, nes 2009 m. pastatų bus pastatoma mažiau. 2009 m. išliko mažėjanti nekilnojamojo turto prekybos tendencija. prie nekilnojamojo turto prekybos mažėjimo prisideda ir griežtos bankų kreditavimo sąlygos. lėtėjanti prekyba nekilnojamuoju turtu mažina termovizinių tyrimų paklausą. nuo 2008 m. pradžios įmonių bankrotų skaičius pradėjo augti. bankrotas buvo inicijuojamas vidutiniškai 80 įmonių per mėnesį. 2009 m. i pusmetį pradėtų bankroto procesų mėnesio skaičiaus vidurkis buvo du kartus didesnis – 162 įmonės. per 2009 m. i pusmetį daugiausiai 162 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a bankrutavo statybos (230), prekybos (210) ir apdirbamosios gamybos (195) įmonių. lyginant 2009 m. i pusmetį su 2008 m. i pusmečiu, statybos įmonių bankrutavo tris kartus daugiau. didėjantis statybos sektoriaus bankrotų skaičius tiesiogiai mažina potencialių termovizinių tyrimų paslaugų klientų skaičių. sumažėjęs išduodamų statybos leidimų skaičius taip pat yra svarbus rodiklis potencialiam termovizinių tyrimų paslaugų mažėjimui, nes mažėja statomų pastatų, kurių statybos darbų kokybės užtikrinimui galėtų būti naudojami termoviziniai tyrimai, skaičius. visi šie rodikliai rodo, kad lietuvos ekonominė aplinka sudaro nemažai grėsmių, stabdančių termovizinių tyrimų verslo plėtrą. gyventojai, norėdami pasinaudoti šio verslo teikiamomis paslaugomis, gali skirti tik dalį lėšų iš 5 procentų, skirtų įvairioms prekėms ir paslaugoms pirkti. didėjantis statybinių įmonių bankrotų skaičius, mažėjantis leidimų statyboms išdavimas parodo mažėjančią termovizinių tyrimų rinką, nes pagrindiniai šių paslaugų vartotojai yra fiziniai asmenys, turintys nekilnojamojo turto, organizacijos, siekiančios renovuoti nuosavybės teise priklausančius pastatus, ir statybinės organizacijos, norinčios užtikrinti savo paslaugų kokybę. socialinės aplinkos analizė buvo atlikta, remiantis lietuvos respublikos ūkio ministerijos ir statistikos departamento paskelbtais duomenimis (2009 m. i pusmečio ... 2009). analizė parodė, kad lietuvoje gyventojų skaičius mažėja. 2007 m. lietuvoje gyveno 3 384 900, o 2009 m. ii ketv. – 3 343 300 gyventojų. gyventojų skaičių mažina ir didėjanti emigracija. 2006 m. emigrantų skaičius buvo 12 602, 2007 m. – 13 853, 2008 m. – 17 015. tačiau imigrantų skaičius taip pat augo. 2006 m. imigravo 7745, 2007 m. – 8609, 2008 m. – 9297. tačiau migracijos saldo sudarė 7718. gyventojų mažėjimas ir didėjanti emigracija rodo termovizinių tyrimų rinkos traukimąsi. 2009 m. i pusmetį sparčiai augo bedarbių srautas ir mažėjo galimybės įsidarbinti. 2009 m. liepos 1 d. teritorinėse darbo biržose įregistruoti bedarbiai sudarė 9,3 % šalies darbingo amžiaus gyventojų. šis skaičius nuo 2009 m. pradžios išaugo daugiau kaip 2 kartus (2009 m. sausio 1 d. buvo 4,4 %). nedarbo augimui įtakos turėjo ekonomikos nuosmukis, darbuotojų skaičiaus mažinimas dėl sumažėjusios gaminamos produkcijos paklausos, įmonių struktūriniai pertvarkymai bei įmonių bankrotai. 2009 m. liepos 1 d. teritorinėse darbo biržose buvo įregistruota 199,3 tūkst. bedarbių. moterys sudarė 41,8 %, vyrai – 58,2 %. jauni, iki 25 m. amžiaus, bedarbiai sudarė 13,2 %, vyresni kaip 50 metų – 26,2 %. ilgalaikiai bedarbiai sudarė 5,6 % visų bedarbių. gilėjant ekonominei krizei, darbo jėgos paklausa stipriai sumažėjo. per 2009 m. i pusmetį buvo įregistruota 42,5 tūkst. laisvų darbo vietų, iš jų apie 72,6 % skirtos neterminuotam įdarbinimui. didėjantis nedarbas dėl įmonių verslas, vadyba ir studijos 2009 163 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a struktūrinių pertvarkymų ir bankrotų, lemia gyventojų polinkį taupyti ir pinigus leisti tik būtinoms prekėms bei paslaugoms įsigyti. termoviziniai tyrimai nėra priskiriami prie būtiniausių paslaugų, todėl šis nedarbas mažina termovizinių tyrimų paklausą. darbo jėgos paklausa, palyginti su praėjusių metų tuo pačiu laikotarpiu, sumažėjo per 27 %. bedarbių, turinčių aukštąjį išsilavinimą, dalis sumažėjo nuo 10,2 % iki 9,9 %, o bedarbių, turinčių aukštesnįjį išsilavinimą, – nuo 13,9 % iki 12,6 %. bedarbiai, turintys vidurinį išsilavinimą, sudarė 54,2 %. nors g. startienė ir r. remeikienė (2009) nustatė, kad, esant trumpalaikiam nedarbui, aukštąjį išsilavinimą turintys asmenys yra linkę steigti savo verslą, tačiau dėl užsitęsusio ekonomikos nuosmukio ir didėjančio nedarbo net ir aukštąjį išsilavinimą turintys asmenys negali susirasti darbo. didėjantis jaunimo nedarbas sąlygoja gyventojų emigraciją. šiandieninė lietuvos ekonomika ir socialinė aplinka negarantuoja, kad aukštąjį išsilavinimą įgijęs žmogus turės darbą ir jo atlyginimas priklausys nuo išsilavinimo lygio, taip pat išsilavinimas ir profesionalumas negarantuoja aukšto materialinio ir socialinio statuso. todėl dalis jaunų žmonių siekia išsilavinimo užsienyje ir ten lieka dirbti arba, įgiję aukštąjį išsilavinimą lietuvoje, išvyksta gyventi ir dirbti į užsienį. termovizinių tyrimų paslauga yra intelektuali. anketinė apklausa parodė, kad tik 41,5 % respondentų apie šią paslaugą žino ir tik 7,6 % ja naudojasi, daugiausiai siekdami surasti šilumos izoliacijos broko, drėgmės kaupimosi vietas, prieš atlikdami remontą ar pastato renovaciją. tai reiškia, kad lietuvos visuomenė nėra susipažinusi su šia technologija ir jos teikiama nauda. todėl išsilavinusių žmonių išvykimas į užsienį ir nedarbo problemos gilėjimas – tiesiogiai veikia termovizinių tyrimų paslaugos paklausą. rinkdamiesi šią paslaugą, 53 % respondentų nurodė, kad jiems aktuali kaina, 24 % – atliekamo tyrimo kokybė, 18 % – tyrimą atliekančio specialisto kompetencija. o termovizijos specialisto turima tarptautinė termovizijos specialisto atestacija svarbi tik 5 % respondentų. todėl, esant ekonomikos nuosmukiui, svarbiausiu veiksniu, pasirenkant termovizinių paslaugų teikėją, vartotojui yra paslaugos kaina, o ne paslaugos teikėjo kompetencija ar tarptautinė atestacija. toks vartotojo požiūris parodo, kad pagrindinis konkuravimo ginklas, esant šiandieninei socialinei ekonominei verslo aplinkai, yra žema paslaugos kaina. globalinėje aplinkoje pasikeitęs požiūris į klimato kaitą skatina es šalis taupyti energiją. šis globalinės aplinkos pasikeitimas tiesiogiai turėjo įtakos lietuvos politinės aplinkos pokyčiui, o kartu paskatino keistis ir socialinę aplinką. vyriausybė ragina taupyti energiją, iš es struktūrinių fondų remiami su tuo susiję projektai. tokie veiksmai sąlygoja ir gyventojų požiūrį į energijos 164 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a naudojimą ir taupymą. termoviziniai tyrimai sudaro sąlygas taupyti energiją sutvarkant nekokybišką pastatų šilumos izoliaciją, taip leidžiant sumažinti energijos naudojimą, ir prisidėti prie klimato kaitos problemų sprendimo. vartotojų požiūrio kaita į energijos išteklių naudojimą gali padidinti termovizinių tyrimų paslaugos paklausą. lietuvos socialinės ir ekonominės aplinkų sąveika sudaro galimybes ir grėsmes termovizinių tyrimų verslui. dėl prastos ekonominės padėties didėja nedarbas, mažinantis gyventojų perkamąją galią, skatinantis emigraciją ir taip smukdantis termovizinių tyrimų paslaugos rinką. taip pat ekonominė šalies padėtis nulemia statybos sektoriaus įmonių pagaminamos produkcijos mažėjimą, bankrotų didėjimą ir statybos įmonių išlaidų mažinimo būdų ieškojimą. tai daro neigiamą įtaką termovizinių tyrimų rinkai. tačiau poreikis taupyti energiją, siekis gyventi šiltuose būstuose sudaro kol kas nedidelę galimybę tiriamo verslo rinkos augimui net ir sunkmečio sąlygomis. 3. išvados 1. mokslinėje literatūroje nėra vienos nuomonės, apibrėžiant verslo aplinką. sąvokos apibrėžimas priklauso nuo mokslininko požiūrio ir pozicijų. termovizinių tyrimų verslo aplinką galima apibrėžti kaip verslo aplinką, apimančią tuos globalinės aplinkos ir makroaplinkos veiksnius, kurie veikia visą verslą, turi įtakos jo sėkmei ar nesėkmei, kurių verslo dalyvis negali kontroliuoti, bei tuos mikroaplinkos veiksnius, kurie tiesiogiai veikia termovizinių tyrimų dalyvį ir kuriems šio verslo dalyvis gali daryti įtaką. 2. analizuodami socialinę ekonominę verslo aplinką, mokslininkai aplinkos veiksnius skiria skirtingai. vieno ar kito veiksnio priskyrimas priklauso nuo tyrimo tikslo ir mokslininko pozicijos. atsižvelgiant į termovizinių tyrimų paslaugos specifiką, svarbūs ekonominės aplinkos veiksniai yra šalies bendrasis vidaus produktas (bvp), pirkėjų pajamos, kaupimo lygis, prekių kainų lygis, kredito gavimo galimybės, infliacija, nedarbas, statybos sektoriaus pagamintos produkcijos dydis, nekilnojamojo turto prekybos aktyvumas. socialinės aplinkos veiksniai: gyventojų skaičius, gyventojų migracija, išsilavinimo lygis, profesija ir kvalifikacija, etniniai gyventojų struktūros pokyčiai, gyventojų požiūrių kaita, darbo jėgos judėjimas. 3. socialinės ekonominės aplinkos analizė parodė, kad šalies ekonomikos nuosmukis, didelė infliacija, mažėjantis darbo užmokestis ir dvigubai išaugęs nedarbo lygis, fizinių asmenų skiriamos lėšos ne pirmo būtinumo verslas, vadyba ir studijos 2009 165 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a prekėms, sudarančios tik 5,5 % gyventojo pajamų, smarkiai mažina fizinių asmenų paklausą termovizinių tyrimų paslaugoms. statybos sektoriaus įmonių atliktų darbų sumažėjimas 45,6 %, taip pat jų bankrotų spartus augimas sumažina ir juridinių asmenų rinkos dydį. gilėjant ekonominei krizei, darbo jėgos paklausa kritiškai sumažėjo. dėl didėjančio nedarbo – darbo negali susirasti ir aukštąjį išsilavinimą turintys asmenys, jaunimas. šios sąlygos skatina gyventojų emigraciją, mažina jų perkamąją galią. griežtos bankų kreditavimo sąlygos stabdo nekilnojamojo turto prekybą. visos šios priežastys tiesiogiai veikia termovizinių tyrimų verslą ir mažina šių tyrimų rinką. esant dabartinei socialinei ekonominei aplinkai, renkantis termovizinių tyrimų paslaugą, gyventojams aktuali kaina ir paslaugų kokybė. specialistų kvalifikacija nėra labai svarbi. anketinė apklausa parodė, kad tik 41,5 % respondentų žino apie termovizinių tyrimų paslaugą, o ja naudojosi tik 7,6 % respondentų tačiau socialinės ekonominės aplinkos analizė parodė kintantį gyventojų 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construction companies, verslo ir teisės aktualijos 2: 183–198. žvirblis, a.; zinkevičiūtė, v. 2008b. įmonės aplinkos komponentų daugiakriterio kiekybinio vertinimo principai ir modeliai, verslo ir teisės aktualijos 1: 183–191. verslas, vadyba ir studijos 2009 167 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a the influence of social economic business environment on thermography business r. poželaitė, e. jonuškienė summary lithuanian economy survives a recession, business is increasingly difficult to operate in the lithuanian market. one of the first who suffered the consequences of the economic recession is construction business pushing into difficulties business-related businesses and residents. due to economic downturn the prices of the construction decreased, consumer spending power diminished, bank lending conditions became tighter, which further undercut the market for construction services. economic growth has changed the attitude of the population to a warm home, quality of the construction. although thermography used in the construction industry allows construction companies to ensure their quality of work, people find their homes of poor thermal insulation, moisture retention and more effective to plan for repairs, to check the quality of work carried out by builders and troubleshooting to save heat energy and reduce heating costs, but demand for thermography was not great. it is therefore important to find out how the socio-economic environment influences the business of thermography, whether the socio-economic environment allows it to develop, or, otherwise, whether it is becoming a threat, reducing the demand for thermography. the aim of this paper is to explore the socio-economic impact on the business environment of thermography business. the methods used in the study were: scientific literature review, secondary data analysis, questionnaire, interview, comparison, clustering methods, pestle analysis. the business environment of thermography business can be defined as the business environment including the global environment and macro environmental factors which affect the entire business, affect success or failure of a business and which the company could not control, and micro-factors that directly affect the company and which the company could influence. the interaction of lithuanian social and economic environments makes opportunities and threats for thermography business. the poor economic situation influences increasing unemployment, therefore the consumer purchasing power reduces and the incentive to emigrate increases, thus reducing the market of thermography business. as well as the economic situation of the country results in the construction sector in its production decline and increase in bankruptcies of construction companies seeking ways to cost reduction, which reduces the market of thermography business. but the need to save energy, the desire to live in warm housing is still a small possibility of market growth, even in crisis conditions. keywords: business environment, social environment, economic environment, pestle. copyright © 2019 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: deresmersha@gmail.com business, management and education issn 2029-7491 / eissn 2029-6169 2019 volume 17: 1–20 https://doi.org/10.3846/bme.2019.6921 evaluation of outcome-based accounting education and training in selected colleges in west oromia, ethiopia deresse mersha lakew*, mohammed getahun musa department of accounting and finance, jimma university received 04 december 2018; accepted 18 december 2018 abstract. purpose: the demand for accountants is increasing from time to time because of the increase in the complexity of the business environment. higher education institutions are responsible for producing well qualified and ethical accountant required by different organisations. specifically, technical and vocational education and training (tvet) colleges play a great role in training middle and lower level accountant in ethiopia. however, academicians, practitioner and employers are raising concern on the excellence and significance of training given in tvet colleges. the objective of this research is to evaluate the education and training in accounting offered by public and private colleges in west oromia region, ethiopia. research methodology: this study used the cross-sectional survey to obtain the opinion of the trainee, trainers and college deans on how tvet in accounting program is performing about each of the components of cipp model and identify the knowledge and skill gap as compared to the actual work environment. both descriptive and inferential statistical tools were used in the analysis. findings: examination of the existing tvet in accounting curriculum found that it has a limitation concerning relevance and content. the study further found that there is a lack of sufficient inputs such as an adequate number of qualified trainers, computers and reference books. trainers mainly use lecture methods, and there are various problems associated with continuous and summative evaluation. therefore, it is recommended that the existing curriculum should be revisited, sufficient training inputs should be availed and cooperative training should be strengthened. research limitations: this research is based on the respondent’s opinion from a limited part of the country. the nationwide survey is required to conclude at the country level. practical implication: the finding and recommendation given in this study can be used in strengthening tvet in accounting education and training in ethiopia. originality / value: previous studies investigated the challenges of tvet education and training in general terms, and this specific study which focuses on tvet in accounting is the first attempt in ethiopia. keywords: accounting, cipp model, outcome-based education and training, west oromia, ethiopia. jel classification: a20, a29. http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ mailto:deresmersha@gmail.com https://doi.org/10.3846/bme.2019.6921 2 d. m. lakew, m. g. musa. evaluation of outcome-based accounting education and training in selected... introduction competence is the use of knowledge, skills and attitudes obtained from training to perform work to the level expected in the actual work environment. ethiopian education sector strategic development program explains that competence-based education and training approach facilitates the learning process in a way that students can acquire set of competencies required at the workplace as defined in the ethiopian occupational standards (eos) (ministry of education [moe], 2011). since the introduction of competency-based training in 2008, tvet education sector has implemented two eos. the new eos, which has been effective since 2012, commenced in six broad sectors including economic infrastructure; health; agriculture; industry development; culture, sport and tourism; labour and social affairs sectors. among the available tvet sectors, economic infrastructure is the main focus of this study. economic infrastructure sector incorporates business and finance sub-sector. one of the programs in business and finance subsector is the field of accounting which can be described as training students about identifying, recording, summarizing, reporting, analyzing, and auditing financial data that will steer the decisions in business. basic clerical work (level i) is one of the occupational standards that every trainee has to go through before they start to study their area of specialization. all economic infrastructure sectors should pass through this level. basic accounts work (level ii), account and budget support (level iii), account and budget service (level iv) and financial accounts management (level v) occupational standard are the area in which trainees will specialize in the accounting area. starting from level iii to level v, trainees are expected to have specialities’ in their level and expected to work without much supervision in the workplace (edukans foundation, 2012). at the end of each level, the trainee is offered certificates, diploma or advanced diploma program that is provided for one, two and three years training respectively. the program has career development opportunity for those who deserve it after giving service in the world of work. these pieces of training in certificate and diploma are believed to meet the demands for skilled middle-level accountants in the country. however, academicians and employers complain that the program is not preparing graduates well for middle-level accounting profession because of several reasons. the authors have conducted a study by taking evidence from tvet colleges in west oromia, ethiopia. the main objective is to scrutinise the present status of tvet in accounting in ethiopia in general and west oromia in particular in order to draw attention to issues that should be taken in to account in the process of implementing the various initiatives the country is undertaking to lift the profile of accounting profession. specifically, the present study examines the challenges of accounting education and training at tvet colleges. the motivation for this comes because tvet in accounting which is aimed at producing a middle-level professional accountant is relatively ignored. 1. statement of the problem the accounting profession has been changing for several years as a result of rapid technological progress and increasing globalisation (lin, xiaoyan, & min, 2005). the function of today’s accountant has changed from mere record keeper to the provider and interpreter of business, management and education, 2019, 17: 1–20 3 financial information to various internal and external users (albrecht & sack, 2000). this development requires enhancing the knowledge, skills and attitude of accountants to meet the changing demands of the current business environment. jeacle (2008) have pointed out the changing nature of accounting work overtime, and he calls for changes in the accounting curricula. in the current turbulent world, technical accounting competencies are not sufficient for educating professional accountants and needs to be complemented by other competencies. colleges should incorporate the employer’s expectations into their accounting curriculum in order to make sure that graduates are equipped with the knowledge, skills and attitude required by the market. however, there are increasing criticisms that the current accounting education and training are not in line with developments in the business environment (madawaki, 2015). the same is true in ethiopia, where employers usually complain that tvet accounting education and training has lagged and failed to prepare graduates for discharging their professional responsibilities adequately and they are spending too much resource to train newly recruited accountants. on the other hand, previous experience has indicated that tvet institutions have been facing many challenges while implementing competency-based instructions because of limited competent instructors, lack of understandings about outcome-based methods of instruction and assessment, lack of instructional materials and financial constraints. so the research conducted in this area would have a great contribution for tvet institutions to see the challenges against their objectives (mekonnen, 2012). there are indications that the current tvet training in general and accounting, in particular, lacks effectiveness and efficiency. ministry of education (moe) has confessed that tvet graduates remain unemployed even in those occupational fields that show a high demand for skilled human resources. problems in the curriculum, inadequate training of instructors and lack of up-to-date teaching materials are some of the factors that lessen the usefulness of outcome-based tvet program in meeting the required knowledge, skills and attitude by employers (moe, 2008). assessment of the existing tvet curriculum recommended that the existing curriculum should be improved in order to prepare graduates for enhanced requirements in the actual accounting practice. for instance, the currently working curriculum does not embrace the international financial reporting standard (ifrs). professional ethics are not properly incorporated and the textbooks used are not up to date with recent trends both at the international and national level. specifically, the tvet accounting curriculum was mainly adopted from australia and lacks local relevance in most of the competencies. the adequacy of the training is also low with much emphasis on theory rather than on the acquisition of skills (report on the observance… [rosc], 2007). brain drain and low qualification of teachers is another big challenge. tvet colleges are losing better-qualified trainers because of low salary and lack of job security as a result of the frequent change in the programs. further, the existing trainers lack appropriate skills and are not competent to provide training per the occupational standards. many of the teachers are said to be old-timers and lack the creativity and practical skills to competently give the desired training using the new curriculum available at tvet colleges (solomon, 2011). the problem is more critical in private tvet colleges which work mainly for profit generation. therefore, they usually search for alternatives that maximize the profit from their business. as a result, they accept candidates that do not qualify the minimum requirement 4 d. m. lakew, m. g. musa. evaluation of outcome-based accounting education and training in selected... for the program and hire less skilled teachers. the class size in most of the cases is beyond the standard and many of the students are not passing the coc exam. they usually start their program without having adequate need assessment, manpower and training facility because of the weak financial capacity and poor government supervision. the major problem observed in curriculum development for tvet accounting training was the frequent and unpredicted change made in it. some tvet trainers complain that the change was not based on detail study of the limitations of the former curriculum instead; it is based on the grant and support coming from aboard. research in accounting education in africa in general and in ethiopian in particular were relatively ignored (lubbe & coetzee, 2018) though there are some researchers who studied the challenges in undergraduate accounting education at university level in ethiopia (mihret & bobe, 2014; kidane, 2012; rosc, 2007; belete & dessalegn, 2011). also, the challenges of the existing tvet system were studied in general terms to some extent (dadi, 2014; solomon, 2011). but tvet accounting education and training, in particular, were relatively ignored. hence, there is increasing recognition by all stakeholders such as teachers, students, employers, governments and society the need and utility of researching within tvet colleges in order to prepare such institutions for the challenges of the 21stcentury. the main research question for this study is, therefore, what are the challenges in the current tvet accounting training system and how do trainers and trainees perceive tvet in accounting education and training? hence, the main objective of this study is to evaluate accounting education and training offered by public and private colleges in west oromia as compared to the demands of the middle-level accounting profession. the study will try to elicit the perceptions of the respondents on how tvet accounting program had performed concerning each of the components of cipp model (context, input, process and product) and identified the main limitations. specifically, this study is aimed: 1. to scrutinise the context of existing outcome based tvet in accounting program in west oromia region. 2. to investigate the adequacy of human power, material and physical facilities to undertake the tvet in accounting programs. 3. to study how current students, teachers, and college deans perceive the implementation of teaching and learning of the accounting program. 2. literature review formal accounting education at university is a recent development even in developed countries such as usa, uk, australia and canada (maatoug, 2014). in developing countries, the accounting education and accounting practice have been shaped by western countries accounting systems. however, the status of their current accounting system differs from one country to another. for instance, earlier uk colonies modelled their accounting education and practices around the british systems. after independence, though some continued to follow their former coloniser‘s, others moved away from it. in most former colonies that continue to follow their former coloniser’s accounting systems, their accounting education and practice are modelled from a single source after their colonisers. in such situations, accounting education and practice are aligned to one system (kidane, 2012). business, management and education, 2019, 17: 1–20 5 in regards to foreign influence on the development of accounting, ethiopia possesses a unique heritage. although it has never been colonized, it has had open relationships with the outside world. this means that the country was open to the influences of different countries ‘education systems and practices. in particular, uk and usa played significant roles in connection to the growth of ethiopian accounting education and profession. the accounting curriculum used at university is based on usa textbooks, but practising accountant and auditor are still getting certification from uk based acca (mihret, james, & mula, 2009). researchers in accounting advice the importance of aligning accounting practices and education for the growth of the profession in the country since accounting education serves as an input for accounting practice by providing theoretical and practical ground to students entering the profession (mihret & bobe, 2014). accounting education helps to shape the behaviour of a future accountant regarding knowledge, skill and attitude required by profession (romanus & arowoshegbe, 2014). as a result, every nation has introduced accounting education system in which ethiopia is a part. the start of accounting education in ethiopia is traced to the developments in the1940s that created a demand for skilled personnel in accounting and auditing. in 1943, addis ababa junior college of commerce started offering diploma in accounting. the objectives of the college at that time is to produce middle-level accountants that are required for the then accounting profession. college of commerce has continued training professionals in accounting at diploma level till the responsibility to train middle-level professionals in the field is transferred to tvet colleges. in addition to the college of commerce, other governments and private higher institutions have been training accountants to produce middle-level accounting practitioners (belete & dessalegn, 2011). when tvet program was started in 2002, moe of ethiopia was responsible for determining the general areas and the specific programs to be opened. that time, all tvet colleges were using similar training materials for the same program and the curriculum used was the traditional knowledge-based curriculum. traditional education and training are characterised by disciplinary knowledge, and it is subject-based. its curriculum consists mainly of courses dealing with conceptual knowledge with limited practical works. also, in traditional education and training, there is little attention to the application of theory, and as a result, the graduates’ skills do not coincide with the demands of trade and industry in the country (ministry of education (moe), 2011). after a while, it was believed that taking existing experiences of other countries would help ethiopian tvet system. thus, the experiences of australia and philippines was adapted and used as a benchmark to develop new outcome-based curriculum starting from 2008. outcome-based tvet curriculum is becoming popular nowadays in the world. training based on outcome-based curriculum enables trainees to acquire knowledge, skills and attitude of defined standards corresponding to relevant workplace requirement and to reflect the realities of the workplace. outcome-based training focuses on what is expected of the learners in applying what they have acquired to new situations and environments and emphasizes practical experiences (dadi, 2014). several research findings have revealed the challenges to accounting education. for example, singh (2004) evaluated the accounting courses offered by professional bodies and col6 d. m. lakew, m. g. musa. evaluation of outcome-based accounting education and training in selected... leges in india and found that accounting education in india had failed to meet the changing nature of the business. this is because accounting education in india lacked coordination between academics and industry and remained fragmented. he concluded there was a need to update colleges’ course curricula by current business’ requirements. yucel, sarac, and cabuk (2012) researched 245 students of economics and administrative faculty of uludag university in turkey. they found the major problem faced by students as future accountant candidates are lack of accounting course content and practices, which lead to estrange students from accounting professions. they further argued that creating “fully furnished” students with a lot of theoretical knowledge was not effective. in connection to this palm and bisman (2010) concluded that the current accounting education has a limitation in equipping students with the required generic skills since most teachers use the conventional subject-based curriculum. lack of computer facilities and other supporting equipment and resources are also critical problems in most training institutions in developing countries. for instance, nassar, alkhadash, and mah’d (2013) found that underfunding of computers and laptops and large class sizes at jordanian training institutions negatively affects the learning process of accounting students. accounting education should provide students with basic accounting knowledge and ensure they can create measure and analyse information for decision making. in this regard, allison (2007) surveyed 310 graduates from two universities in victoria australia and revealed they lack most of the generic skills desired by the professions, particularly interpersonal, communication and information technology skills. to broaden graduates’ generic skills, the researcher suggested that course opportunities should be given to students to enhance their communication and problem-solving competencies (allison, 2007). researcher in earlier studies has identified the following additional challenges affecting accounting education and training: the continuous changing business world, the lack of skills of the trainee, problems related to accounting trainers, the new generation of learners, improper adaptation of accounting education from developed world, biases of accounting education towards private sector, severe shortage of books and various other inputs, large number of students, political intervention (founch, 2013). turner et al. (2011) suggest that accounting professionals and educators should be aware of the need to revise the curricula in order to reduce the negative effect of the above factors. in designing the syllabus, turner et al. (2011) further advised accounting educators have to choose what to cover and how it aligns with the needs of the specific cultural and business environment. founch (2013) also calls for change in the current accounting education system since it remained stagnant for the last 50 years. the curriculum is described as an academic plan which consists of purpose, content, sequence, learners, instructional process, resources, evaluation mechanisms of a certain program (o’neill, 2015). many education specialists recommend that curriculum should be revised periodically after making detail evaluation of its strength and weakness. there are several methods of evaluation education programs including; tyler’s model, cipp model, stack’s model, roger’s model, scriver’s model, krikpatricks model. among these, the study used the cipp model to evaluate tvet in the accounting program. it is a comprehensive business, management and education, 2019, 17: 1–20 7 framework for making both formative and summative appraisal of the educational program (stufflebeam, 2003). also, the guidelines set by the international accounting education standard board are used in the evaluation. international accounting education standards are guidelines that are set to strengthen the competence of current and future accountants (international federation of accountants, 2017). 3. research methodology this study used descriptive research approach. the rationale for the choice of the descriptive design is to collect factual information that would explain existing situations; make comparisons and evaluations; identify special problems or justify existing conditions or practices, and to determine what other people are doing about similar problems and to make suggestions for future courses of action. descriptive research uses people and other written sources of information to describe, clarify, and interpret aspects of education as they presently exist. the choice of data collection method mainly depends on the objective of the study. to achieve the research objective, the study used different methods of data collection including a survey questionnaire and interview with key informants. in addition to survey questionnaire and semi-structured interview, the existing tvet curriculum at each level, statistical data from oromia tvet agency, policy documents and other pertinent secondary sources were intensively used in the study. primary data was collected from trainee, trainers, college deans and an expert from oromia tvet agency who are expected to implement the findings as well as those who are responsible for guiding the implementation effort. the respondents were selected from six tvet colleges in west oromia including jimma, agaro, mettu, nekemte, rift valley and dandi boru tvet colleges. accordingly, data for this study were collected from 271 trainees, 21 trainers, 4 tvet college deans and one expert from oromia tvet agency selected using multistage sampling. the following table 1 and table 2 shows the characteristics of the respondents among the six colleges. table 1. characteristics of a trainee who participated in the study a) sample colleges frequency % b) college ownership frequency % jimma tvet college 58 21 government owned 155 57 rift valley tvet college 58 21 privet owned 116 43 dandi boru tvet college 58 21 total 271 100 agaro tvet college 21 8 c) respondents’ training level mettu tvet college 36 14 level iii trainee 65 24 nekemte tvet college 40 15 level iv trainee 206 76 total 271 100 total 271 100 8 d. m. lakew, m. g. musa. evaluation of outcome-based accounting education and training in selected... table 2. characteristics of trainers who participated in the study a) name of college frequency % b) educational level frequency % jimma tvet college 3 14 masters degree 4 19 rift valley tvet college 6 29 ba degree 12 57 dandi boru tvet college 4 19 tvet diploma 5 24 agaro tvet college 2 10 c) specialization mettu tvet college 2 10 accounting & finance 13 62 nekemte tvet college 4 19 management 5 24 total 21 100 others fields 3 14 the study was guided by stufflebeam’s (2007) four-stage model (context, input, process, and product) which proposes a straightforward, systematic, and practical approach to evaluate educational programs. there are numerous instances where the cipp model has been employed to evaluate educational programs in business fields. for instance, adaboh (2014) has used cipp in assessing the effectiveness of undergraduate accounting degree program in ghana, hsieh (1999) used cipp model in evaluating banking and insurance technology programs in taiwan; onyefulu (2001) to evaluate the business education programs in jamaica. while evaluating the tvet in accounting program in tvet colleges in oromia regional state which is the purpose of this study, four key dependent variables were used to frame the survey items that were employed in the survey instruments. these variables constitute the four main components of the cipp (context-inputs-process-product) evaluation model. the context questions are aimed to find out if the goals and the objectives of the program were in line with national and professional standards as well as the mission of the tvet colleges. the input evaluation variables assess alternative approaches, action plans, budgets and resource allocation for the achievement of targeted goals. the process evaluation variables examine the training and evaluation process in the achievement of the identified goals. the product evaluation variables identify and assess the outcomes of the tvet in accounting as compared to the actual work environment. descriptive statistical tools are the main methods of data analysis that are suitable for this study. however, inferential statistics for differences such as t-test was also employed to find out differences in responses between the respondent groups whenever appropriate. 4. result and discussion ethiopia is dedicated to participating in the highly competitive market economy in the world which requires middle-level technical professionals trained in the specific field of study. hence, tvet is at the centre of ethiopia’s education strategy, which is aimed at the development of employable entrepreneurial skills. this section evaluates the tvet in accounting program using stufflebeam’s (2007) four-stage cipp model. business, management and education, 2019, 17: 1–20 9 4.1. context evaluation the different stakeholders who are implementing tvet in accounting program were requested to give their opinion on the deficiencies of the existing curriculum. with this respect, trainers were requested to give an opinion on the limitation of the current accounting curriculum and their response is summarised in table 3 below. table  3 above vivid that shortage of training budget, lack of labour market information and absence of training need assessment are the top three challenges in accounting program respectively. these are critical in the sense that they do have a negative effect on the quality of training as summarised in the figure 1 below. further, as can be seen from table 4 above, trainers complain that in the currently working curriculum, professional experts did not participate sufficiently, it is directly copied from another country, other stakeholders’ didn’t participate, irrelevant to our countries context and it is too bulky to cover in the given period. specifically, concerning relevance, when we see the competencies at each level, most of them are directly copied from australia. for instance, some tvet trainers who are interviewed for this study complained that there are terminologies that are not popularly used in ethiopia which were directly copied from australian curriculum. the two countries are different regarding the legal, economic and figure 1. negative effects of the three critical problems e�ect of shortage of training budget e�ect of absence of labour market information e�ect of absence of training need assessment • inadquate number of trainers • inadquate number of administrative sta�s • shortage of computers • shortage of reference books • lack of other training inputs • increase unemployment of trained citizens • additional cost to empoyers • burdent to the country economy • bring political instability • irrelevant comptences may be included • duplication of e�ort • wastage of trainee time • cost to trainee • duplication of programs table 3. limitations of the current tvet in accounting program which of the followings do you believe are major challenges of tvet in the accounting program % what deficiencies have you seen in the current tvet in accounting curriculum? % shortage of training budget 62% professional experts did not participate 67% lack of labour market information 43% it is directly copied from another country 57% the absence of need assessment 24% other stakeholders did not participate 43% theoretical method of instruction 19% it is not relevant to our country 33% law quality students 14% time shortage to cover all competencies 33% total 100% total 100% 10 d. m. lakew, m. g. musa. evaluation of outcome-based accounting education and training in selected... cultural setting which will need different knowledge and skill in the training area. taking experiences of developed countries might be good, but it should be customised to our countries context. with this respect, bennett, bouma, and ciccozzi (2004), and enthoven (1981) advice that any accounting education and training should take into account the country’s context. copying the educational system from abroad is not helpful if it is not in line with the requirement of the country. further, the tvet deans interviewed mentioned the following problems about the curriculum. relevant professional did not prepare the curriculum, aged trainers have difficulty adapting to the new curriculum. although c level trainers can be assigned as a teacher, they are usually unable to prepare teaching material for their trainees, some of the competencies required facilities and the colleges have no sufficient budget, due to the temporary nature of the program, senior trainers will leave college and there is brain drain. the perceptions of the trainee were sought with five closely linked context related questions. the objective of these questions was to evaluate whether the program goals, objectives and competencies were properly prepared, communicated and implemented in the tvet colleges in west oromia region. the evaluation result is summarised in table 4 below. according to table 4 of context question, except for item number 2, the mean score for all the others is greater than 3.00. this indicates that respondents tend to agree concerning the provision of information about accounting program, effort on customisation of the contents to ethiopian practice by the trainers, flexibility and relevance of the current curriculum. however, the respondents disagree on the provision of written goal, objectives and reading material for each competency at the beginning of the training. concerning relevance, the evaluation by the trainees is different from that of the trainers. trainers argue that significant numbers of competences in tvet accounting curriculum are irrelevant to our context. on the other hand, a significant number of trainees evaluated the competencies as relevant. this might be because trainers are trying to customize some of the competences to table 4. context appraisal of tvet in accounting program items for context appraisal n mean std. deviation my tvet college provides me with relevant, accurate, and timely information about the accounting program i am attending 264 3.4848 1.26962 written goals, objectives and reading materials for each competency in the program are provided to me at the beginning of each level 259 2.8571 1.32319 the training contents of each competency are customized to reflect the current needs of middle-level accounting practices in ethiopia 269 3.7249 1.23633 the curriculum at each level is flexible in adapting the latest national and international developments in the middle-level accounting profession 266 3.3459 1.22271 the curriculums at each level have clear and relevant goals and objectives 254 3.7362 1.18176 average result 238 3.4420 .80016 business, management and education, 2019, 17: 1–20 11 ethiopian context and they look relevant in the eye of the trainee. the overall context evaluation is only slightly higher than three which indicates that though respondents tend to agree on average, there are still problems that need the attention of concerned parties. independent sample t-test was used to see whether there is a significant difference regarding context evaluation between government and private colleges. the result showed that there was significant difference in scores for government colleges (m = 3.5401, sd = 0.81543) and private colleges [m = 3.3089, sd = .76290]; t(236) = 2.222, p =.027]. this means government and private colleges are significantly different concerning context measurement of tvet in accounting. according to cohen (1988) the magnitude of the differences in the means was moderate (eta squared = .02). this implies that government and private college trainees have a different opinion for context evaluation variables which includes the provision of information about the program, goals and objectives and the curriculum. private colleges are running for profit, and they do not bother about this kind of issues. further, a significant number of trainees in private colleges complained that they are not using the current curriculum consistently. 4.2. input evaluation in creating a new product, the quality of inputs used plays a vital role. the same is true in a given education and training system. the input in a given training system can include trainers, budgets and other facilities like books, laboratories, computers, classrooms etc. this section identifies challenges associated with these inputs and evaluates the adequacy of the inputs. highly competent trainers are the backbone of any education and training. in this connection, trainees were requested to mention limitations of their accounting trainers and the result is summarised in table 5 below. the analysis in table 5 shows that the major problems were lack of skill in pedagogy and information technology. the challenges are relatively different between government and private colleges. in government-owned colleges, lack of information technology skill is critical whereas, in private colleges, the top limitation of teachers is lack of pedagogical skill and it skill is the second critical problem. table  5 above further revealed that the majority of respondents rated trainer’s talent in practical teaching and it skills as low. this implies trainers were not in a position to offer the required skills for the level. the open-ended questionnaire also indicates that the existing trainers are small in number and they are busy with their duty. the college dean interviewed further added that b – level trainers who are certified and have table 5. limitations of current accounting trainers in which of the following aspect your trainers are deficient? government private total pedagogy/method of teaching skills 10% 66% 34% information technology skills 23% 34% 27% generic skills 11% 28% 18% subject matter knowledge 4% 27% 14% practical accounting skills 3% 18% 10% 12 d. m. lakew, m. g. musa. evaluation of outcome-based accounting education and training in selected... industry experience are not found in the market sufficiently. in addition to the competence of the teachers, other inputs in the training process have an impact on the quality of training. both trainers and trainees were requested about the criticality of these additional inputs, and the result is summarised in table 6 below. as can be seen from table 6 above, the top five problems identified are the same both by trainers and trainees. the critical problems identified both by the trainers and trainee include; lack of access to the internet, lack of training aids and facilities, lack of the adequate number of computers and software, lack of library and up-to-date books and lack of an adequate number of qualified trainers. in this age of technology where everything is in the process of being digitalised, students should be acquainted with it skills. for this purpose, our training institutions should have an adequate number of computers, software and internet connection. specifically, accounting trainee should be introduced with common software such as peachtree accounting for their day to day accounting job. our tvet colleges must have access to ict to help them access online resources and use the internet for their study. but as seen from the result, there are critical problems of an adequate number of computers and software in the sampled tvet colleges. another important constraint mentioned by the respondents was connected to the absence of a library and relevant reference books. trainers and trainees highly complain that no relevant reference book is in line with the curriculum. the adequacy and relevancy of books, up to date learning resources and research materials are determinant for the quality of outputs in tvet training. this is a serious problem even in the universities in the country. mihret and bobe (2014) found that there is a lack of locally written textbooks at addis ababa university and most of the teaching materials used are imported from abroad. in addition to the inputs mentioned above, both trainers and trainees are complaining about the absence of an adequate number of class, chairs and other facilities. they further added that there is no conducive environment for training. specifically, for evening class stutable 6. additional challenges in the training process challenges identified by trainers % challenges identified by trainees % lack of access to the internet 62% inadequate computers and software 48% lack of teaching supplies and facilities 52% lack reference books 39% inadequate computers and software 43% lack of access to the internet 38% lack of reference books 43% inadequate number of qualified trainers 33% inadequate number of qualified trainers 33% lack of teaching supplies and facilities 27% lack of a conducive learning environment 29% lack of conducive learning environment 15% inadequate classrooms, offices and equipment 24% number of students too large 15% diversified learners background 24% diversified learners background 14% lack of lcds projectors 10% inadequate classrooms, chairs and tables 11% business, management and education, 2019, 17: 1–20 13 dent frequent power cut is affecting the quality of training. also, they complain that there are no adequate cafeteria and restrooms for both trainers and trainees. about this, moe (2008) also confessed that as a result of these physical and financial constraints, training provided by tvet institutions had been mismatched with the demands of skilled human resources in the economy. finally, the perceptions of the trainee were sought using closely related input evaluation likert scale items. the objectives of these items were to determine the perceptions of students on the overall quality and quantity of human and material resources committed to the program. summary of the result is given in the table 7 below. the items in table 7 above are believed to measure the extent of inputs to the program. from the result, one can see that except item 1 and 2, respondents are dissatisfied with the remaining three items. according to data for item number 2, respondents have agreed about trainees’ overall readiness for class every day. concerning the availability of adequate academic staffs and their level of helpfulness, respondents tend to agree slightly. for item 3, which sought responses on the availability of relevant course books at the library, respondents tend to disagree. a similar response was obtained using open-ended questions in the previous section. the same dissatisfaction was reported concerning the availability of classrooms, computer laboratories, software and access to the internet. the overall input evaluation also indicates that there is dissatisfaction among students. further, independent sample t-test was conducted in order to see whether there is a significant difference regarding input, between government and private colleges. for input variable, the result shows that there was no significant difference in scores for government colleges (m = 2.8446, sd = .72633) and private colleges (m = 2.9918, sd = .85333]; t (235) = –1.390, p = .166]. this is to say, government and private colleges are not significantly different regarding input measurement which implies the input problems such as sufficiency and quality of trainers, availability of reference books, computers and other training facilities are equally a problem for both private and government tvet colleges. table 7. input appraisal of tvet in accounting program appraisal items n mean std. deviation trainees are coming well prepared for the training into class including me 261 3.3870 1.17329 academic staffs and the program support staffs are available in sufficient number and helpful to trainees all the time 265 3.0491 1.23147 there are relevant course books and teaching materials available in the library, and i can easily access them for reference 258 2.8798 1.36561 the classrooms are not overcrowded, and the facilities are adequate for the training 257 2.9105 1.37350 the computer laboratories have up-to-date software related to accounting such as peachtree software, and there is internet access to get up to date information 267 2.2135 1.31623 average result 237 2.9055 .78298 14 d. m. lakew, m. g. musa. evaluation of outcome-based accounting education and training in selected... 4.3. process evaluation the training methods used are important to instil students’ understanding of a particular subject and technical competency. in a comparative study in south africa and uk, mecrewe, mcchlery, and visser (2014) found that teaching methodology was affected by the requirement of a professional association in the two countries. in south africa, where the professional association have a stringent requirement, teachers focus on the requirement of the profession whereas, in the uk, there is relatively better freedom for the teacher to choose their teaching methodology. project-based and case study approach is believed to be the best to develop critical thinking and problem solving, stimulate students’ interests and link course material to practice. not only advantageous for students, projects and case studies also can respond to the academic challenge on its practical relevance and contribute to the development of the knowledge (abrahams & witbooi, 2016). specifically, the tvet strategy document states that tvet training should be undertaken 30% theoretical and 70% practical using cooperative training. in connection with this, trainers were asked about the training methods adopted at their tvet college, and the result is summarised in table 8 below. effective teaching requires an understanding of the subject matter very well as well as the use of appropriate teaching methodology. as seen in table 8 above, the lecture method is the most common training method and project and practical training are next in the respective order. the result further revealed that cooperative training and group work are less popular within the tvet in accounting. this is against killen (2000) who suggested that learner-centred approaches are required to be used by the instructor in order to implement outcome-based instruction effectively. educational assessment involves collecting evidence and making judgments on whether the trainee has acquired required competence. especially, summative assessment is made at the end of each unit of competence or by grouping unit of competence according to their similarity. both trainers and trainees were requested to mention challenges related to summative assessment which is commonly termed as coc (certificate of competence) and the result is summarised in table 9 presented below. as can be seen from table 9 above, lack of clear guideline on coc, shortage of qualified assessors and the use of the same assessment tool repeatedly are major challenges identified by trainers. on the other hand, trainee identified; the assessment tools are out of content, lack of clear guideline on coc, the use of same assessment tool repeatedly, the subjectivity table 8. teaching method adopted by trainers which of the following teaching methods do you use in your training frequently? frequency % lecture method 14 67% project-based training 13 62% cooperative training method 7 33% group work method 7 33% business, management and education, 2019, 17: 1–20 15 of assessors and confidentiality of the assessment tools are critical problems affecting their performance. shortage of time in coc exam, lack of support for coc exam preparation, lack of confidentiality of the exam, not being professionally prepared are some more challenges mentioned. trainee further complained that tvet colleges do not arrange coc exam regularly and frequent change of mode of delivery of coc are additional problems mentioned. previously, students will take the theory part first, and if successful, they will proceed to practice. this was reversed, and students start taking practice first and then proceed to theory next. after a while, this was changed, and they started taking both at the same time. recently students take the practice part and then proceed to the theory online. the perceptions of the trainee were sought with five associated process evaluation likert scale questions. the objective of these questions was to examine how trainee perceives the implementation of teaching and learning in the program and perceptions on the extent to which the various components of the program were being carried out. the response for process evaluation questions is resented in table 10. from table 10 above, one can see that respondents tend to agree on the use of a variety of training methodology, facilitation of cooperative training, and undertaking both formative table 9. challenges related to summative assessment challenges identified by trainers % challenges identified by trainees % lack of clear guideline on coc 43% the assessment tools are out of content 44% shortage of qualified assessors 33% lack of clear guideline on coc 30% repeated use of an assessment tool 33% repeated use of an assessment tool 20% tools not prepared professionally 29% subjectivity of assessors 20% lack of confidentiality in tools 24% lack of confidentiality in tools 20% assessment tools are out of content 19% the absence of orientation about coc 17% the absence of orientation about coc 14% shortage of qualified assessors 13% table 10. process appraisal of tvet in accounting training appraisal items n mean std. deviation the trainers use a variety of teaching methods to facilitate learning 262 3.6489 1.15751 trainers facilitate cooperative learning in the classroom (through activities such as group formation, class discussions etc.) 253 3.4822 1.25542 the balance between theory and practice in the training is 30:70 respectively 254 2.9055 1.19903 the trainers employ information technology (such as the use of internet resources–online videos, etc.) in their training. 261 2.8468 1.26775 trainers undertake formative and summative assessment and give feedback for each competence on time 263 3.3346 1.27895 average result 227 3.2361 .85968 16 d. m. lakew, m. g. musa. evaluation of outcome-based accounting education and training in selected... and summative assessment and give the feedback immediately. on the other hand, respondents tend to disagree on the balance between theory and practice in the training is 30:70 respectively and the trainers’ use of information technology (such as the use of internet resources–online videos, etc.) in their training. specifically, students complain that trainers are not prepared, the relationship between trainee and trainers is not good, trainers are not willing to show the exam result, providing too much material to be copied, they do have a language problem and they usually use amharic language, focusing only on the theory part, not supporting needy students etc. independent sample t-test was used to see whether there is a significant difference regarding process measurement, between government and private colleges. the result shows that there was significant difference in scores for government colleges (m = 3.4105, sd = .79673) and private colleges [m  = 2.9849, sd  = .88869]; t(225)  = 3.773, p  = .000]. this means government and private colleges are significantly different regarding process measurement. this implies government and private college trainers use significantly different training methodology, cooperative training and assessment method. according to cohen (1988) the magnitude of the differences in the means was moderate (eta squared  = .0595). this seems logical as most private colleges do not have permanent staffs and most of the training are undertaken by part-timers. staffs that are not permanently employed are not encouraged to make use of cooperative training and conduct assessment per the curriculum. 4.4. product evaluation the main objective tvet training is to produce highly competent professionals who will undertake their duties in the work environment. hence, the contribution of the training obtained at tvet level to the professional practice will be known by conducting a study on a graduate. however, for this study purpose, respondents were requested to give their opinion on how the program and the training are influencing or have influenced their professional knowledge, skill and values. the result of the evaluation is presented in the table below (see table 11). table 11. product appraisal of tvet in accounting program appraisal items n mean std. deviation the program has helped me to acquire adequate knowledge in accounting including financial & managerial accounting, finance, taxation and auditing 263 3.8403 1.16451 the program has helped me to develop communication and quantitative skills 263 3.6920 1.25408 the program has helped me to develop effective use of information technology skill such as the use of application software like excel, peachtree, internet, and email. 264 2.9356 1.38144 the training has helped me to develop effective self-management and interpersonal skills 263 3.9163 1.11574 i am confident that i will successfully pass coc exam at level iii or level iv 265 4.3849 3.30904 average result 240 3.7017 .87647 business, management and education, 2019, 17: 1–20 17 from table 11, it can be seen that except item number 3, which sought whether the program has helped the trainee to develop effective use of information technology skill such as the use of application software like excel, peachtree, internet, and email, in all others, they tend to agree. the respondents agree that they have acquired adequate knowledge in accounting, the program has developed their communication and quantitative skill, the program has helped to develop their self-management and interpersonal skill. they are also confident that they will pass the coc exam. this result contradicts with the earlier finding, and it might be as a result of the positive attitude of the trainers towards themselves. independent sample t-test was conducted to see whether there is a significant difference regarding product between government and private colleges. with respect to product, the result shows that there was no significant difference in scores for government and private colleges (m = 3.7486, sd = .86810) and private colleges [m = 3.6360, sd = .88825]; t(238) = .981, p  = .328]. this means government and private colleges are not significantly different regarding product measurement. this result is not in line with the overall belief that trainee in government is better than those in private college. conclusions and recommendation the study found that tvet colleges are suffering from a shortage of computers, software and access to the internet. the study further revealed the shortcomings of competency-based tvet in the accounting curriculum and lack of training material and up-to-date textbooks. well developed accounting training materials are lacking in the tvet centres. this is due to the trainers’ inability to prepare their training materials. as a result, it becomes advisable if tvet agencies and tvet institutions jointly engage stakeholders with profound knowledge of occupational standards, different educators, curriculum experts and industry experts in the preparation of competency-based tvet curriculum materials. in this regard, jimma university accounting and finance department should take the leading role and other stakeholders should provide support in arranging training on how to prepare training material especially on the technical aspect. the ethiopian economy is mainly based on agriculture. especially, west oromia region is known with the production of coffee, and there are significant numbers of investors engaged in coffee production. however, the curriculum at all levels lacks some relevant competencies such as agricultural accounting. therefore, it plays a vital role to incorporate agricultural accounting competencies in the curriculum. further, professional ethics, language and quantitative method competences should be incorporated in any of the five levels to increase the generic skill of the trainee. also, it is better to arrange all the competences in a logical order. customising all of the competences to ethiopian context is also required. cooperative training is negatively affected by lack of support from relevant organisations such as financial institutions, revenue offices, and other business organisations. getting their support requires awareness creation, making appropriate advocacy work and giving incentives. especially, financial institutions like banks should be contacted to get real experience on competencies related to maintenance of atm. trainees are highly frustrated by the absence of job opportunities. the economic growth and the expansion of tvet colleges should be closely monitored. especially, private colleges 18 d. m. lakew, m. g. musa. evaluation of outcome-based accounting education and training in selected... are expanding to every region without having adequate input. the regional tvet agency should give due attention to private colleges. politicians in the ruling party argue that graduate will create their job once they have obtained access to training through aggressive expansion of training institutions. the idea of self-employment sounds good, but many practical problems affect its realisation. trainers available at tvet centres are lacking practical competency. alleviating the situation requires serious practical training for existing trainers. care also has to be taken in the recruitment and deployment of trainers and coc assessors. trainers should also try to upgrade their educational level. in this regard, the government should consider for promotion those trainers who improved their education at their own expense. further, equal emphasis should be given to private college trainers. the tvet deans should strengthen the monitoring and controlling so that trainers will complete all the competencies in the curriculum on time. the tvet colleges should also support those trainees who did not succeed in their first coc exam. the college should arrange orientation on coc exam and provide coc model questions. they should try to make the colleges conducive for training by fulfilling the necessary facilities, arranging graduation, and create linkage with potential employers. jimma university should support tvet colleges in west oromia by giving reference books, computers and other facilities in this regard. performance of trainee will be assessed during the training process by the trainer in the form of formative assessment. if trainee succeeded the assessment, they would be evaluated as “satisfactory” and otherwise “not satisfactory”. in the same way, in the coc summative assessment, if the students succeeded, they will be evaluated as “competent” and otherwise, “not yet competent”. this method of evaluating students’ performance has its own problem, especially during job recruitment. therefore, it is recommended that either letter grade or actual mark scored in the exams should be written on the certificate awarded. association of accounting professionals influences the curriculum of accounting training in south africa (verhoef & samkin, 2017). in ethiopia, there is no as such strong professional association that can influence the education system. therefore, strengthening the accounting association in ethiopia plays a vital role in supporting the accounting education system in the country. the last recommendation is that; employers themselves are advised to arrange periodic short-term training program at the organisation level. further, they need to encourage employees to upgrade their educational level by sponsoring them to join regular or continuing and distance education program at the university. further, they need to encourage those who join university for further education by covering tuition fee, provide study leave and exam leave. reference abrahams, m. a., & witbooi, s. 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lietuvoje aktuali kaip ir visoje europoje. tačiau vis dar susiduria su techninėmis, teisinėmis ir metodologinėmis problemomis, kurios nesudaro prielaidų užtikrinti e. valdžios veiksmingumui. e. valdžios plėtros būtinybę bei aktualumą rodo ir tai, jog šalys, neplėtojančios e. valdžios, investuotojų vertinamos vis nepalankiau, nes tokio pobūdžio paslaugos kitose šalyse yra nuolat ir aktyviai plėtojamos. esminis lietuvos ekonominės politikos uždavinys šiandien yra padidinti šalies konkurencingumą. kaip rodo įvairūs nacionaliniai ir tarptautiniai tyrimai, žemas viešojo administravimo veiksmingumo lygis (įskaitant korupciją) yra stiprus veiksnys, mažinantis įmonių konkurencingumą ir šalies patrauklumą joje investuoti bei gyventi. e. valdžios plėtra lietuvoje yra tęstinis procesas, įgyvendinamas etapais. e. valdžios koncepcijoje (patvirtintoje 2002 m.) numatyta įgyvendinti daugelį projektų. reikia pažymėti, kad iki šio laikotarpio atlikta nemažai darbų ir įgyvendinta e. valdžios koncepcijos projektų. tačiau pastebima dar gana daug e. valdžios plėtros planuose numatytų, bet neįgyvendintų uždavinių, neišspręstų problemų. reikia pažymėti, kad pagrindinės e. valdžios plėtrą stabdančios kliūtys nesudaro prielaidų pasiekti viešojo administravimo sektoriaus strateginio tikslo – sukurti skaidrią, veiksmingą, nukreiptą į rezultatus ir tinkamą asmenų bei verslo aptarnavimą viešojo administravimo sistemą, pagrįstą itt. didelis vaidmuo įgyvendinant efektyvią e. valdžią tenka ir savivaldos institucijoms. verslas, vadyba ir studijos 2009 215 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s tyrimo tikslas – ištirti ir įvertinti savivaldos lygmeniu teikiamų elektroninių paslaugų kokybę. siekiant įgyvendinti šį tikslą buvo iškelti tokie tyrimo uždaviniai: išanalizuoti elektroninės valdžios plėtros problemas, atlikti lietuvos savivaldybių internetinių svetainių vertinimus, ištirti savivaldybių darbuotojų kompiuterinio raštingumo lygį ir remiantis tyrimų rezultatais išnagrinėti priežastis, ribojančias naudojimosi elektroninėmis paslaugomis galimybes. tyrimo objektas – elektroninės valdžios paslaugos savivaldos lygmeniu. tyrimo metodai – mokslinės literatūros analizė ir apibendrinimas, anketinė apklausa ir statistinis duomenų sisteminimas bei apdorojimas. 2. elektroninės valdžios plėtros problemos piliečiai iš valstybės (viešojo sektoriaus) nori analogiško aptarnavimo lygio kaip ir iš verslo sektoriaus. deja, valstybės institucijos vis dar atsilieka nuo verslo ir negali visiškai teikti savo paslaugų elektroniniu būdu. tai reiškia, kad ne visai išspręsti vidiniai informacinių, finansinių, žmogiškųjų išteklių panaudojimo ir veiksmingo klausimai. lietuvos skirtingų valstybės institucijų informacinės sistemos sudaro kliūčių bendrauti tarpusavyje ir bendradarbiauti. siekiant teikti efektyvias viešąsias paslaugas, būtina sukurti saugias ir tarpusavyje suderintas svarbiausių veiklos sričių valstybines informacines sistemas bei registrus, skatinti elektroninius atsiskaitymus už paslaugas, pirkimus. gartner consulting organizacijos požiūriu, elektroninė valdžia apima informacinių ir komunikacinių technologijų naudojimą teikiant viešojo administravimo ir valdžios institucijų paslaugas (fraga 2003). elektroninė valdžia gerina komunikaciją tarp skirtingų valdžios institucijų, todėl piliečiams ar organizacijoms nereikia pakartotinai kreiptis dėl tos pačios informacijos į skirtingus paslaugos teikėjus (tyndale 2002). kaip teigia c. leitner (2003), elektroninės valdžios tikslas – fundamentaliai transformuoti viešojo sektoriaus procesus, drauge transformuojant ir daugelį santykių tarp valdžios institucijų, valdžios institucijų ir piliečių bei valdžios institucijų ir verslo subjektų. analizuojant suformuotus lietuvos e. valdžios tikslus (lietuvos respublikos vyriausybės ... 2002) bei esamą įgyvendinimo situaciją, pastebima, jog didžioji dalis iškeltų tikslų liko neįgyvendinti arba įgyvendinti iš dalies. kol kas viešųjų e. paslaugų teikimo lygis svyruoja nuo informacijos ir paraiškų formų pateikimo internete iki interaktyvių, integruotų bei pritaikytų kiekvienam vartotojui pagal jo asmeninius poreikius viešųjų paslaugų teikimo. pagrindinis viešųjų e. paslaugų teikimo tikslas paprastai yra siekis pagerinti trijų pagrindinių šalių – gyventojų, verslo įmonių ir vyriausybės – poreikių tenkinimą ir lengvinti jų tarpusavio 216 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s komunikaciją. todėl kiekviena valstybės institucija turi būti suinteresuota diegti, modernizuoti ir tobulinti savo vidinę informacinę sistemą, atsižvelgiant į būtinus visoms valstybės institucijoms ir standartizuotus reikalavimus bei perkelti visas įmanomas teikti elektroniniu būdu viešąsias paslaugas į elektroninę erdvę. elektroninės valdžios koncepcijoje (lietuvos respublikos vyriausybės ... 2002), patvirtintoje 2003 m., išdėstytas požiūris į e. valdžios reiškinius lietuvoje ir siekis gerinti (panaudojant skaitmenines technologijas) viešųjų paslaugų teikimą valstybės ir savivaldybių institucijoms, lietuvos gyventojams, verslo subjektams. koncepcijoje atsižvelgta į specifines lietuvos sąlygas ir europos politines iniciatyvas dėl e. valdžios, iš esmės aprašomi valstybės paslaugų teikimo elektroninėmis priemonėmis verslui ir gyventojams projektų numatymo, kūrimo, įgyvendinimo ir suderinamumo principai. šis dokumentas suteikia galimybes e. valdžios plėtrai: siekiama apibrėžti specifinį e. valdžios projekto turinį, procesus ar sprendimus. pagrindinis e. valdžios koncepcijos tikslas – teikti viešąsias paslaugas internetu. dokumente pabrėžiama, jog tai pareikalaus pakeisti įstatyminę aplinką: įgyvendinti e. valdžios įstatymą, pakeisti tam tikrus teisės aktus ir t. t. nuo e. valdžios koncepcijos patvirtinimo praėjo gana daug laiko. įgyvendinami su tuo susiję įvairūs projektai, pastebimi pirmieji teigiami rezultatai, tačiau vis dar egzistuoja nemažai kliūčių, stabdančių e. valdžios plėtrą, ir todėl e. valdžios koncepcinis modelis funkcionuoja tik iš dalies. koncepcijos įgyvendinimo plane numatyta, kad iki 2004 m. pabaigos pagrindinės viešosios paslaugos (20 paslaugų) turi būti interaktyvios ir prieinamos visiems (bet to dar nėra). visiems piliečiams turi būti užtikrinta viešoji internetinė prieiga. įgyvendinus daugelį projektų, viešųjų interneto prieigos taškų tankis yra vienas didžiausių es. pagal pasaulio ekonomikos forumo ataskaitą lietuva pagal itt naudojimo indeksą (angl. networked readness index) užima 35 vietą iš 134 šalių. pagrindinės kliūtys – valstybės institucijų vidinės problemos, informacinių sistemų heterogeniškumas, e. valdžios strateginio plano nebuvimas (čiegis, gineitienė 2008) ir vietos bendruomenės neįtraukimas (nefas 2008; neverauskas, tijūnaitienė 2007), taip pat psichologinio pasirengimo naudotis elektroninėmis paslaugomis stoka (butkevičienė, rutkauskienė 2008). siekiant aukštesnio e. viešųjų paslaugų teikimo lygio, būtina šalinti esamus trukdžius, susijusius su institucijų vidinėmis problemomis: interneto svetainių neatitiktis vyriausybės patvirtintiems bendriesiem reikalavimams, valstybės institucijų informacinių sistemų bei technologinių išteklių diegimo ir efektyvaus paskirstymo trūkumai, negatyvus valstybės tarnautojų požiūris į viešųjų paslaugų teikimą elektroniniu būdu, interoperabilumo problema (gatautis et al. 2009; dzemydienė et al. 2008). verslas, vadyba ir studijos 2009 217 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s atsižvelgiant į elektroninės valdžios paslaugų pobūdį, specifiką ir raidos etapus, efektyvu elektroninės valdžios paslaugų kokybės matavimo kriterijus klasifikuoti į dvi grupes: informacijos/turinio kokybės vertinimo kriterijus ir sistemos/proceso kokybės vertinimo kriterijus. šie kriterijai vertinant paslaugas įvairiose brandos stadijose skirsis priklausomai nuo paslaugų išvystymo lygio (kašubienė, vanagas 2007). administravimas, nukreiptas į vartotoją (pilietį), yra vienas iš tobulumo siekimo elektroninėje valdžioje tikslų (saxena 2005). daugelis autorių (donnelly 1999; hazlett, hill 2003; limba 2007; ir kt.) pabrėžia piliečio kaip vartotojo išskyrimo svarbą. bendras viešųjų paslaugų pasiekiamumo rodiklis lietuvoje siekia 68,7 %, verslui teikiamų paslaugų vidurkis vis dar lenkia piliečiams teikiamų paslaugų vidurkį, o 4 lygio viešųjų e. paslaugų perkėlimo į internetą lygis išliko toks pats (40 %) ir per pastaruosius metus keičiasi nežymiai. reikia paminėti, kad lietuvoje valstybinė mokesčių inspekcija jau pradėjo teikti personalizuotas (5 lygio) viešąsias e. paslaugas. 3. elektroninė valdžia savivaldos lygmeniu lietuvos respublikos vidaus reikalų ministro 2004 m. balandžio 30 d. įsakymu nr. 1v-148 yra patvirtintas „pavyzdinis savivaldybių institucijų ir įstaigų teiktinų naudojant skaitmenines technologijas viešųjų paslaugų sąrašas“ (lietuvos respublikos vidaus ... 2004). reikia pažymėti, jog pateiktas sąrašas yra labai išsamus – jame išskiriamos net 27 paslaugų grupės, kai kurios jų susideda iš 36 paslaugų. taip pat pabrėžtina, jog minėtame įsakyme nurodomos paslaugos yra siejamos su atskiromis savivaldybei priklausančioms institucijoms. kitokių dokumentų, reglamentuojančių savivaldybių teikiamų viešųjų paslaugų klasifikavimą ir sąrašą, nėra. galima paminėti tik europos sąjungos norminiuose dokumentuose įteisintą 20 paslaugų sąrašą, kuris daugiau yra nukreiptas į nacionalinio pobūdžio paslaugas. lisabonos strategijoje (the lisbon ... 2000) numatyta paversti europos sąjungą konkurencingiausia ir dinamiškiausia žinių ekonomikos bendrija pasaulyje, užtikrinančia darnų ekonomikos augimą, daugiau ir geresnių darbo vietų bei didesnę socialinę sanglaudą. vienintelis būdas savivaldos lygmeniu įgyvendinti lisabonos strategijos keliamus tikslus yra strateginio savivaldos plano parengimas pagal savivaldai keliamus strateginius elektroninių paslaugų teikimo tikslus (paulauskas, paulauskas 2008). taip pat daug dėmesio reikia skirti irt plėtrai, lemiančiai pokyčius valstybiniame sektoriuje. nacionaliniu lygmeniu irt siejamas su nacionalinių paslaugų efektyvumo didinimu perkeliant 218 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s jas į virtualią erdvę. atitinkamai regioniniu ir municipaliniu lygmeniu tai siejama su e. regiono ir e. miesto koncepcijoms, apibrėžiančiomis irt taikymą miestui ar regionui aktualiose srityse. irt plėtra turi būti numatyta kuriant elektroninių paslaugų teikimo savivaldose strateginius planus (gatautis 2008). e. miesto koncepcija yra grindžiama ne tik informacijos perdavimu, tačiau ir piliečių įtraukimu sprendžiant miesto problemas dažniau nei įprasta (gatautis 2004). atliktas lietuvos savivaldybių svetainių vertinimas parodė, jog savivaldybės labai diversifikuoja perkeliamas paslaugas ir ne visada laikosi pateiktos klasifikacijos. analizės metu nustatytos pagrindinės problemos: savivaldybių institucijų tinklalapiuose tos pačios teikiamos viešosios paslau– gos yra įvardijamos bei pateikiamos skirtingai: pvz., vienuose tinklalapiuose yra pateikiamas viešųjų paslaugų sąrašas, kituose – skyrių pavadinimai ir jiems priskirtos viešosios paslaugos; daugumos savivaldybių tinklalapiuose informacija apie teikiamas viešąsias – paslaugas pateikiama nestruktūruotai, nesuskirstant į gyventojams ir verslo subjektams teikiamas paslaugas; savivaldybių institucijų paieškos sistemos arba neveikia, arba nėra pritaiky– tos teikiamoms viešosioms paslaugoms surasti, todėl užtrunkama pakankamai daug laiko atliekant paiešką; daugumoje savivaldybių institucijų tinklalapiuose nėra išsamaus teikiamų – viešųjų paslaugų sąrašo arba sąrašas nėra detalizuojamas. nors bendrame kontekste savivaldybės bendruosius reikalavimus tenkina neblogai, tačiau daugelyje savivaldybių dar tik pradedama teikti elektronines viešąsias paslaugas. kaip parodė atliktas stebėjimas, lietuvos savivaldybėse dominuoja i ir ii viešųjų paslaugų perkėlimo lygis. įvertinus savivaldybių teikiamas viešąsias paslaugas tenka konstatuoti, jog paslaugų perkėlimas yra dar pakankamai žemas – identifikuota vienoje savivaldybėje tik vienintelė siūloma iv lygiu perkelta viešoji paslauga – pažymų apie gyventojų gaunamas socialines pajamas išdavimas. atlikus savivaldybių interneto svetainių analizę paaiškėjo, kad: tinklalapių struktūros yra nepatogios, nefunkcionalios, vartotojas ne visa– da gali pastebėti, jog e. paslaugos ar su jomis susijusi informacija yra tam tikroje skiltyje; pradžios puslapyje tikslinga būtų išskirti konkrečias elektroninių paslaugų – skiltis („e. paslaugos“), kad vartotojas nesiblaškydamas ir taupydamas savo laiką iš karto matytų, kur galima rasti informacijos apie teikiamas e. paslaugas; verslas, vadyba ir studijos 2009 219 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s tik mažiau negu pusės „e. paslaugų“ skiltį turinčių savivaldybių interneto – tinklalapių elektroninių paslaugų teikimo struktūra yra tinkama. ji patogi ir informatyvi vartotojui, nes pateikiamas išsamus teikiamų e. paslaugų sąrašas, kiekviena paslauga detaliai aprašyta, pateikiama e. paslaugos tikslinė grupė, kategorija, paskirtis, nurodyta, kas ją teikia, aprašyta viešosios paslaugos gavimo procedūra, nurodyti kontaktai, pateikiamos formos (prašymų, paraiškų, deklaracijų blankai, dokumentų pavyzdžiai), kurias galima parsisiųsti, užpildyti ir išsispausdinti arba užpildyti elektroniniu būdu. kitų savivaldybių interneto tinklalapiuose pateikiamos e. paslaugos iki pirminio lygio, tai yra teikiama tik informacija apie viešąsias paslaugas; teiktinų viešųjų paslaugų sąrašas skirtingų savivaldybių interneto tinklala– piuose nevienodas: kai kuriuose aprašytos vos kelios viešosios paslaugos, kituose – jų daugiau. be to, skiriasi viešųjų paslaugų informacijos teikimo fiziniams ir juridiniams asmenims pobūdis; savivaldybių interneto tinklalapius įvertinus pagal elektroninių paslaugų – reklamavimo kriterijų galima teigti, jog e. paslaugos juose beveik nereklamuojamos ir išskirtinai nepristatomos. galima išskirti tik keletą savivaldybių interneto tinklalapių, kuriuose yra reklaminės juostos, savotiškai reklamuojančios keletą viešųjų e. paslaugų. atlikta apklausa parodė, kad savivaldybės pagrindinėmis kliūtimis plėtojant elektronines paslaugas įvardija nepakankamą teisinės bazės pritaikymą (21 %) ir savivaldybės tarnautojų nepakankamą suinteresuotumą keisti savo veiklą, prisitaikant prie naujų veiklos būdų (23 %). beje, palyginti su kitomis valstybės institucijų grupėmis, savivaldybėse ir apskrityse susiduriama itt trūkumu, nepakankamu tarnautojų kompiuteriniu raštingumu. bet savivaldybės pačios turėtų šalinti šias kliūtis, supažindinti ir įtraukti savo tarnautojus į e. valdžios projektų įgyvendinimą, taip siekdamos pačių tarnautojų suinteresuotumo. atlikta savivaldybių tarnautojų apklausa parodė, kad savivaldybės personalo kompiuterinis raštingumas yra bent vidutiniškas (58 % savivaldybių) arba aukštas (42 % savivaldybių). remiantis apklausos rezultatais matyti, kad vidutinis personalo kompiuterinio raštingumo vertinimas yra aukštesnis negu vidutinis. interviu metu keli respondentai teigė, kad jų savivaldybės darbuotojai pastaraisiais metais aktyviai ir noriai dalyvauja ecdl (european computer driving licence) kursuose, ir dėl šios priežasties personalo kompiuterinis raštingumas gerėja. savivaldybių personalo priešinimasis technologiniams pokyčiams vertinamas mažiau negu vidutiniškai. tokie duomenys rodo, kad savivaldybių institucijų tarnautojai nėra labai linkę priešintis technologiniams pokyčiams. bet tik penktadalis darbuotojų teigiamai vertina galimybę perkelti veiklą į internetą. 220 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s ne geresnė respondentų nuomonė ir apie e. paslaugų teikimą. tik ketvirtadalis respondentų teigiamai vertina galimybę teikti viešąsias paslaugas elektroniniu būdu. matyt, neigiamam požiūriui į darbą virtualioje erdvėje didelę įtaką daro žemas specialistų kompiuterinio raštingumo lygis. nors respondentai vertindami sistemas šiek tiek pagerina atsakymus, bet jų požiūris į veiklos perkėlimą į internetą kelia pagrįstų abejonių dėl sklandžios ir efektyvios e. paslaugų plėtros savivaldos lygmeniu. reikėtų atkreipti dėmesį į padalinių vadovų ir specialistų neigiamą požiūrį į veiklos perkėlimą į virtualią erdvę ir elektroninių viešųjų paslaugų teikimo plėtrą. tokį požiūrį gali lemti kelios priežastys, pvz., žemas kompiuterinio raštingumo lygis, paliekamos piktnaudžiavimo galimybės. tačiau ir es direktyvose, ir lietuvos vyriausybės patvirtintose strategijose numatoma, siekiant demokratijos didėjimo, viešųjų paslaugų kokybės gerinimo, korupcijos apraiškų mažinimo, kuo plačiau vykdyti valdžios (vyriausybės ir savivaldos) institucijų veiklos perkėlimą į internetą. visų apklaustų savivaldybių atstovų nuomone, paslaugų perkėlimas į virtualią aplinką padėtų padaryti jas labiau prieinamas. jie įvardijo keletą naudojimąsi viešomis elektroninėmis paslaugomis ribojančių priežasčių: tai, kad dar gana didelė dalis viešųjų paslaugų neteikiama virtualioje aplin– koje; informacijos, reklamos apie šias paslaugas stoka; – viešųjų paslaugų nesuderinamumas tarp lietuvos biudžetinių įstaigų; – nėra bendro plano, vizijos kuriant e. paslaugas virtualioje erdvėje; – nepatogi vartotojams ir administratoriui e. paslaugų sistema; – menkas elektroninių dokumentų, pasirašytų kvalifikuotu elektroniniu parašu, – kiekis ir nepakankamas jų naudojimas; dalis dokumentų apskritai neegzistuoja elektronine forma (pvz., seni archyviniai dokumentai); teisinė bazė, reglamentuojanti paslaugų teikimą, nėra pritaikyta joms perkelti – į elektroninę erdvę; tarpinstitucinio integruoto tinklo nebuvimas ir per didelės kai kurių institu– cijų paslaugų kainos (pvz., registrų centro). atliktais tyrimais nustatyta, kad pačios paklausiausios lietuvos savivaldybėse e. viešosios paslaugos yra: socialinių išmokų skaičiavimas ir mokėjimas bei socialinių paslaugų ir kitos – socialinės paramos teikimas; statinių naudojimo priežiūra, statinio projektavimo sąlygų sąvado bei sta– tybos leidimų išdavimas įstatymų nustatyta tvarka; verslas, vadyba ir studijos 2009 221 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s valstybės paramos būstui įsigyti tvarkymas, socialinių būstų suteikimas; – prekybos ir kitų paslaugų teikimo tvarkos turgavietėse bei viešosiose vietose nustatymas, leidimų (licencijų) išdavimas įstatymų nustatytais atvejais ir tvarka; keleivių vežimo vietiniais maršrutais organizavimas; – archyvinių dokumentų tvarkymas. – pakankamai išvystytos elektroninės viešosios paslaugos, kurios sudaro galimybę mokesčių mokėtojams pasinaudoti elektroninės valdžios teikiamomis galimybėmis yra: gyventojams: – pajamų mokesčio deklaravimas, viešosios bibliotekos, darbo paieška, su sveikatos apsauga susijusios paslaugos; verslui: – pvm deklaracija, pelno mokesčio deklaravimas, socialinės įmokos darbuotojams, muitinės deklaracijos, statistiniai duomenys, viešieji pirkimai. tik vienoje iš savivaldybių buvo atlikti vartotojų nuomonės ir pasitenkinimo savivaldybės teikiamomis viešosiomis elektroninėmis paslaugomis tyrimai. atliktų tyrimų pagrindu suformuotas viešųjų paslaugų, kurios turėtų būti kuo greičiau perkeltos į virtualią aplinką, sąrašas. taip pat nustatytas paslaugų perkėlimo į virtualią aplinką lygis. suformuotas sąrašas apima 12 paslaugų gyventojams, 7 paslaugas verslui ir 12 paslaugų tiek gyventojams, tiek verslui. rengiant šį elektroninių paslaugų sąrašą buvo įvertinta galimybė teikti paslaugas elektroniniu būdu ir labiausiai naudojamos gyventojų bei įmonių paslaugos. vertinant pirmuoju aspektu, vadovautasi prielaida, kad paslaugos gali būti teikiamos virtualioje erdvėje, tik gali būti skirtingas jų perkėlimo lygis. minėtina, kad sudarant sąrašą daugiausia įtakos turėjo savivaldybių institucijų tarnautojų nuomonė, jog daugelis paslaugų turi būti perkelta. bet tenka pažymėti, kad nemažai savivaldybių teigia, jog būtinas betarpiškas bendravimas ir tiesioginis ryšys su klientu. dalis savivaldybių teigia, jog veiklos perkėlimą labai stabdo neįteisinti įstatymai, todėl dauguma veiklos sričių negali pasiekti virtualios erdvės. 4. elektroninių viešųjų paslaugų plėtra aplinkosaugos srityje aplinkosaugos srityje viena didžiausių problemų, su kuriomis susiduria visuomenė, yra atliekų tvarkymas. aplinkosaugos ministerijos teikiamuose teisės aktuose nėra apibrėžta, kokios viešosios paslaugos turi būti teikiamos atliekų tvarkymo srityje. šiuo metu lietuvoje nėra suformuotos koncepcijos, kokios 222 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s paslaugos, kartu išskiriant ir viešąsias elektronines, turėtų būti teikiamos atliekų tvarkymo srityje. aplinkosaugos srityje teikiamų viešųjų paslaugų išvystymo lygis, remiantis geriausiai ir blogiausiai įvertintų elektroninių viešųjų paslaugų duomenimis, yra žemas (elektroninės ... 2007). elektroninės valdžios koncepcijoje viešosios paslaugos atliekų srauto tvarkymo srityje nėra apibrėžiamos bei išskiriamos kaip aktualios. šiuo metu daugelyje regionų ir savivaldybių atliekų tvarkymo sistemos yra sparčiai plėtojamos, taigi šiuo metu yra tinkamas laikas atidžiau pažvelgti į šią sistemą iš viešųjų paslaugų, teikiamų mokesčių mokėtojams, pusės. šiuolaikiškos atliekų tvarkymo sistemos sukūrimas – viena iš sudėtingiausių dabartinių lietuvos problemų, kuriai nacionalinėje darnaus vystymosi strategijoje skiriama daug dėmesio (gavėnienė et al. 2006). įvertinus bendradarbiavimo tarp valdžios institucijų ir verslo įmonių privalumus bei trūkumus, nustatyta, kad susitarimus tikslinga naudoti kaip papildomą dabartinio aplinkos apsaugos mechanizmo priemonę, tačiau jie negali pakeisti šiuo metu naudojamų tiesioginio bei ekonominio poveikio priemonių. bendradarbiavimo efektyvumas priklauso nuo abipusio šalių pasitikėjimo (žičkienė 2007). verta paanalizuoti atliekų tvarkymo sistemos sritį, kuri yra aktualiausia gyventojams ir didžiajai daliai įmonių, – komunalinių atliekų tvarkymo sistemą. atliekų tvarkymo srityje šiuo metu yra teikiamos tik pirmo lygio elektroninės viešosios paslaugos. kritiniai komunalinių atliekų tvarkymo sistemos, analizuojant ją viešųjų paslaugų teikimo aspektu, elementai yra šie (boer et al. 2005): atliekų turėtojai, savivaldybės, regioniniai atliekų tvarkymo centrai (atc), atliekų surinkimo operatoriai (aso), sąvartynų operatoriai. minėti elementai sudaro komunalinių atliekų tvarkymo sistemą ir sąveikauja tarpusavyje. savivaldybės yra institucijos, atsakingos už atliekų tvarkymo sistemos sukūrimą. regioniniai arba apskrities atliekų tvarkymo centrai yra apskrities savivaldybių įsteigtos įmonės atliekų tvarkymo klausimams spręsti. atliekų tvarkytojai, arba operatoriai, yra atsakingi už komunalinių atliekų surinkimą iš konteinerių. regioninių sąvartynų operatoriai atsakingi už komunalinių atliekų priėmimą, šalinimą ir apskaitą. remiantis atlikta atliekų tvarkymo sistemos elementų analize, sistemos elementų sąveikos tyrimu ir duomenų srautų tarp elementų analize, taikytini viešųjų paslaugų atliekų tvarkymo srityje teikimo modeliai: „valdžia–valdžiai“, „valdžia–verslui“, „valdžia–piliečiams“. verslas, vadyba ir studijos 2009 223 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s viešųjų paslaugų atliekų tvarkymo srityje teikimo modelyje „valdžia – valdžiai“ išskiriami šie kuriamo modelio sistemos elementai: savivaldybės ir atliekų tvarkymo centrai. kadangi atliekų tvarkymo centrai yra atsakingi už atliekų tvarkymo srities funkcijų įgyvendinimą, jie taip pat turi ir administruoti elektronines viešąsias paslaugas. siūlomos elektroninės viešosios atliekų tvarkymo centrų paslaugos savivaldybėms arba savivaldybių teikiamos paslaugų atliekų tvarkymo centrams aprašomos 1 lentelėje. 1 lentelė. modelio „valdžia–valdžiai“ elektroninės paslaugos table 1. model of “government – government” e-services paslaugos pavadinimas paslaugos aprašymas aktualių duomenų, ataskaitų peržiūra atliekų tvarkymo centras turi teikti informaciją atskiroms savivaldybėms apie rinkliavos administravimą. siūloma teikti paslaugą, kuri padėtų atsakingiems savivaldybės darbuotojams, būnant savo darbo vietoje, internetu prisijungti prie atliekų tvarkymo centro duomenų bazių bei peržiūrėti aktualias kiekvienos dienos ataskaitas reikiamai informacijai gauti. lengvatų prašymų perdavimas atliekų turėtojai elektroniniu būdu teikia prašymus atliekų tvarkymo centui lengvatoms už rinkliavą gauti. siūloma teikti paslaugą, kuri padėtų atsakingiems savivaldybės darbuotojams, būnant savo darbo vietoje, internetu prisijungti prie atliekų tvarkymo centro duomenų bazių, peržiūrėti pateiktus prašymus bei priimti sprendimus dėl prašymų patenkinimo. kompensacinių mokėjimų atlikimas atliekų tvarkymo centras turi pateikti informaciją atskiroms savivaldybėms apie rinkliavos lengvatų administravimą. siūloma teikti elektroninę paslaugą, kuri padėtų savivaldybėms teikti pranešimus apie reikiamus atlikti kompensacinius mokėjimus. lengvatų prašymų patvirtinimų perdavimas savivaldybės turi teikti informaciją atliekų tvarkymo centrams apie patenkintus gyventojų prašymus lengvatoms pritaikyti. siūloma teikti paslaugą, kuri padėtų atsakingiems savivaldybės darbuotojams, būnant savo darbo vietoje, internetu prisijungti prie atliekų tvarkymo centro duomenų bazių ir įvesti duomenis apie turimas pritaikyti lengvatas. viešųjų paslaugų atliekų tvarkymo srityje teikimo modelyje „valdžia – verslui“ išskiriami šie kuriamo modelio sistemos elementai: atliekų tvarkymo centrai, atliekų surinkimo operatoriai, sąvartyno operatoriai, atliekų turėtojai juridiniai asmenys. valdžios siūlomos elektroninės viešosios paslaugos verslui aprašomos 2 lentelėje. 224 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s 2 lentelė. modelio „valdžia–verslui“ elektroninės paslaugos table 2. model of “government – business” e-services paslaugos pavadinimas paslaugos aprašymas informacijos apie konteinerių išdėstymą pateikimas atliekų tvarkymo centrai turi teikti informaciją operatoriams apie reikiamų pastatyti konteinerių kiekį bei vietas, kad atliekų tvarkymo paslaugos atliekų turėtojams būtų teikiamos tinkamai. siūloma elektroninė paslauga atliekų surinkimo operatoriams padėtų prisijungti prie atliekų tvarkymo centro administruojamos gis duomenų bazės ir gauti visą reikiamą informaciją konteineriams pastatyti. konteinerių išvežimo fakto fiksavimas atliekų surinkimo operatorius gauna mokėjimus iš atliekų tvarkymo centro priklausomai nuo atliktų paslaugų, t. y. išvežtų konteinerių kiekio. siūloma elektroninė paslauga atliekų surinkimo operatoriams padėtų naudojantis rfid technologija perduoti informaciją atliekų tvarkymo centrui ir taip automatiškai apskaityti atliktas konteinerių išvežimo paslaugas bei tiksliai nustatyti, kada buvo suteikta konkreti paslauga. apmokėjimų administravimas atliekų surinkimo operatorius gauna mokėjimus iš atliekų tvarkymo centro ir už papildomai atliktas paslaugas, t. y. išvežtas gamybines atliekas, kurių neįmanoma perdirbti arba panaudoti. siūloma elektroninė paslauga atliekų surinkimo operatoriams padėtų teikti duomenis apie papildomai suteiktas paslaugas internetu. įvesti duomenys apie teiktas paslaugas būtų automatiškai apskaitomi ir atliekų surinkimo operatoriai gautų jiems priklausančius mokėjimus. atliekų turėtojų skundų informacijos perdavimas atliekų surinkimo operatorius turi gauti informaciją iš atliekų tvarkymo centro apie pateiktus atliekų turėtojų skundus ir, atsižvelgdamas į gautą informaciją, suteikti laiku neatliktas paslaugas. siūloma elektroninė paslauga padėtų atliekų surinkimo operatoriams internetu peržiūrėti atliekų turėtojų teikiamus skundus. atliekų apskaitos tvarkymas sąvartyno operatoriai turi teikti informaciją atliekų tvarkymo centrui apie atliekų surinkimo operatorių atvežtų atliekų kiekį. turi būti teikiama informacija tiek apie atvežtų komunalinių, tiek apie gamybinių atliekų kiekį. siūloma elektroninė paslauga suteiktų galimybę sąvartyno operatoriams elektriniu būdu užpildyti ir pateikti ataskaitas atliekų tvarkymo centrams. viešųjų paslaugų atliekų tvarkymo srityje teikimo modelyje „valdžia–piliečiams“ išskiriami šie kuriamo modelio sistemos elementai: atliekų tvarkymo centrai, gyventojai, atliekų turėtojai. taip pat šiame modelyje atsispindi ir dalis elektroninių paslaugų „valdžia–verslui“, nes dalis atliekų turėtojų, mokančių verslas, vadyba ir studijos 2009 225 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s rinkliavos mokestį, yra įmonės. siūlomos elektroninės viešosios paslaugos, teikiamos valdžios piliečiams arba atliekų tvarkymo centrų atliekų turėtojams, aprašomos 3 lentelėje. 3 lentelė. modelio „valdžia–piliečiams“ elektroninės paslaugos table 3. model of “government – citizens” e-services paslaugos pavadinimas paslaugos aprašymas atliekų tvarkymo taisyklių informacijos pateikimas atliekų turėtojai turi gauti informaciją apie atliekų tvarkymo taisykles. teikiama elektroninė paslauga, kuri leidžia atliekų turėtojams atliekų tvarkymo centro interneto svetainėje peržiūrėti atliekų tvarkymo taisykles. paslaugų suteikimo faktų peržiūra atliekų turėtojai turi gauti detalią informaciją, kokiais duomenimis remiantis, jiems apskaičiuotas rinkliavos mokestis, peržiūrėti pateiktų mokėjimo pranešimų istoriją, teikiamas lengvatas, konteinerių išvežimo dažnumo informaciją, atliktų papildomų paslaugų kiekį. siūloma teikti elektroninę paslaugą, kuri suteiktų atliekų turėtojams galimybę prisijungti prie konkrečiam mokėtojui skirto modelio, kuriame atliekų turėtojas galėtų gauti informaciją apie tai, kokiais duomenimis remiantis jam apskaičiuotas rinkliavos mokestis, peržiūrėti pateiktų mokėjimo pranešimų istoriją, teikiamas lengvatas, konteinerių išvežimo dažnumo informaciją, atliktų papildomų paslaugų kiekį. prašymų pateikimas atliekų turėtojas turi pateikti informaciją apie pasikeitusius dydžius, kurias remiantis skaičiuojama rinkliava, pateikti prašymus lengvatai gauti, teikti skundus dėl neįvykdytų paslaugų, t. y. neišvežtų konteinerių, ir turėti galimybę už suteiktas paslaugas sumokėti internetu. siūloma teikti elektroninę paslaugą, kuri suteiktų atliekų turėtojams galimybę prisijungti prie konkrečiam mokėtojui skirto modelio, kuriame atliekų turėtojas galėtų pateikti informaciją apie pasikeitusius dydžius, kuriais remiantis skaičiuojama rinkliava, pateikti prašymus lengvatai gauti, teikti skundus dėl neišvežtų konteinerių ir turėti galimybę suformuotą sąskaitą apmokėti internetu. elektroninės sąskaitos ir pranešimai atliekų turėtojas turi gauti informaciją apie turimą sumokėti mokestį jam patogiu būdu. turi būti galimybė gauti informaciją apie reikiamą sumokėti mokestį elektroniniu paštu ir trumposiomis žinutėmis, atsiunčiamomis į mobilųjį telefoną. siūloma teikti paslaugas, kurios padėtų suformuoti elektroniniu paštu ir trumposiomis žinutėmis pateikiamus mokėjimo pranešimus. tiesioginis debetas atliekų turėtojai turi turėti galimybę pasirašyti tiesioginio debeto sutartį. siūloma paslauga, leidžianti atlikti tiesioginius nuskaitymus už rinkliavą. 226 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s 4. išvados 1. lietuvoje elektroninių viešųjų paslaugų teikimo lygis savivaldų lygmeniu atsilieka nuo centrinių institucijų. tai lemia daugelis veiksnių, kurių ignoravimas sukuria nepakankami gerą padėtį. didelė dalis savivaldos institucijų neturi nei e. paslaugų plėtojimo strategijų, nei veiklą virtualioje erdvėje reglamentuojančių dokumentų. minėtina, kad tokia padėtis yra ir dalies centrinių institucijų. tai lemia ne visai realizuoti strategijose nustatyti tikslai, nors atskiros valstybės institucijos sėkmingai ir rezultatyviai plėtoja e. paslaugas, pvz., valstybinė mokesčių inspekcija paslaugas teikia 5 lygiu. 2. siekiant pagerinti visuomenės ir piliečių poreikių patenkinimą yra suformuotas viešųjų paslaugų, kurios turėtų būti kuo greičiau perkeltos į virtualią erdvę, sąrašas ir numatyti paslaugų teikimo lygiai. įgyvendinus suformuotus tikslus galima tikėtis pagerėjimo šioje srityje. 3. svarbi, bet vis dar vangiai perkeliama į virtualią erdvę, viešųjų paslaugų sritis yra aplinkosauga. lietuvoje kol kas nėra šios srities elektroninių viešųjų paslaugų plėtros koncepcijos. straipsnyje pasiūlyti elektroninių viešųjų paslaugų atliekų tvarkymo srityje modeliai. literatūra boer, e.; boer, j.; jager, j. 2005. waste management planning and optimisation. stuttgart: ibidem-verlag. butkevičienė, e.; rutkauskienė, d. 2008. valdžios, verslo ir piliečių elektroninės sąveikos plėtra lietuvoje: viešųjų elektroninių paslaugų poreikis kaimiškuose regionuose, viešoji politika ir administravimas 23(53): 68–77. čiegis, r.; gineitienė d. 2008. participatory aspects of strategic sustainable development planning in local communities: experience of lithuania. technological and economic development, baltic journal on sustainability 14(2): 107–117. donnelly, m. 1999. making the difference: quality strategy in the public sector, managing service quality 9(1): 47–52. dzemydienė, d.; maskeliūnas, s.; dzemyda, i. 2008. interoperability of information system components for monitoring of sewage and intelligent analysis of water resources, technological and economic development of economy 14(3): 260–278. doi: 10.3846/1392-8619.2008.14.260-278 elektroninės valdžios rodikliai [interaktyvus]. 2007. vilnius: ivpk [žiūrėta 2009 m. lapkričio 2 d.]. prieiga per internetą: <http://www.ivpk.lt>. fraga, e. 2002. trends in e-government: how to plan, design, and measure e-government, in proc. of the government management information science (gmis) conference, santa fe, new mexico, 2002. santa fe. gatautis, r.; kulvietis, g.; vitkauskaitė, e. 2009. lithuanian egovernment interoperability model, inzinerine ekonomika – engineering economics (2): 38–48. verslas, 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lietuvos respublikos vidaus reikalų ministro 2004 m. balandžio 30 d. įsakymas nr. 1v-148 „dėl pavyzdinio savivaldybių institucijų ir įstaigų teiktinų naudojant skaitmenines technologijas viešųjų paslaugų sąrašo tvirtinimo“ [interaktyvus]. 2004 [žiūrėta 2009 m. lapkričio 2 d.]. prieiga per internetą: <http://tar.tic.lt/default.aspx ?id=2&item=results&aktoid=b9fcc221-1df7-426d-a168-190b95764e21>. lietuvos respublikos vyriausybės nutarimas nr. 2115. 2002-12-31 „dėl elektroninės valdžios koncepcijos patvirtinimo“ [interaktyvus]. 2002 [žiūrėta 2009 m. lapkričio 2 d.]. prieiga per internetą: <http://www3.lrs.lt/pls/inter3/dokpaieska. showdoc_l?p_id=198184>. limba, t. 2007. implementation of electronic governance: the case of society interaction with public administration in lithuania, transformations in business & economics 6(2) 235–249. neverauskas n., tijūnaitinienė r. 2007. public participation in city governance decision-making: theoretical approach, inzinerine ekonomika – engineering 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environment protection progress, inzinerine ekonomika – engineering economics (3): 42–50. 228 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s e-government in lithuania – local self-government layer e. raginytė, n. k. paliulis summary lithuanian public e-services at the level of municipalities are lagging behind the level of the central authorities. this is due to many factors, which leads to a slight lack of good position. a large proportion of the municipal authorities do not have e-service development strategies, or governing documents by the activities of the virtual space. it should be noted that this situation is in the part of central authorities too. this leads to the situation that the strategy aims are not fully realized. although individual government institutions have been successful and effectively developing e-services, e.g. the state tax inspectorate is at the fifth level of public service. in order to improve the needs of society and citizens, a public service list was formed, whose services should be transferred as soon as possible to the virtual space, and provided with the levels of public e-services. the implementation of established goals can expect significant improvement in this area. important, but still weak-moved to the virtual space of the public service areas is the environmental area. there has been no public e-service concept of environmental area in lithuania yet. the article describes models of public e-services in the field of waste management. keywords: e-government, self-government, e-services, environmental area. verslas, vadyba ir studijos 2009 299 įm o n ių e k o n o m ik a ir v a d yb a moksleivių verslumo ugdymo tobulinimo kryptys lietuvoje aurimas župerka aurimas_zuperka@hotmail.com vytauto didžiojo universitetas, vadybos katedra 1. įvadas šiuolaikinėje lietuvos visuomenėje problemų kelia jaunimo gebėjimų panaudojimas didinant lietuvos visuomenės kuriamą pridėtinę vertę. pridėtinės vertės kūrimo galimybių sklaida sietina su verslumo idėjų skatinimu lietuvos visuomenėje. viena iš pridėtinės vertės didinimo galimų plėtros krypčių galėtų tapti verslumo ugdymo plėtra lietuvos švietimo įstaigose. europos sąjungoje verslumas yra prioritetinis šalies narės sėkmingo vystymosi veiksnys (commission ... 2002). smulkios ir vidutinės verslo įmonės pasauliniu mastu teikia ekonominę ir socialinę naudą. lietuvoje smulkių ir vidutinių verslo įmonių indėlis didinant lietuvos visuomenės gerovę lieka neišnaudotas. fiksuojamas neigiamas lietuvos visuomenės narių nusistatymas verslininkų atžvilgiu. lietuvoje dirbantys verslininkai charakterizuojami kaip asmenys, kuriems priskiriamos neigiamos savybės ir vertybės. pastaruosius du dešimtmečius tęsiasi aktyvios diskusijos apie verslumo ugdymo svarbą. europos sąjungos šalys skiria dėmesį verslumo ugdymo integravimui į švietimo įstaigų programas. lietuvos švietimo sistemoje verslumo ugdymo dalykas pradėtas integruoti visiškai neseniai. ilgai verslumo ugdymas buvo siejamas tik su individo asmeniniu suvokimu ir supratimu, koks turi būti verslus asmuo, ir jo individualiomis pastangomis siekti verslininko karjeros. padėtis lietuvoje verslumo ugdymo srityje pradėjo keistis paskutiniu dešimtmečiu. parengta nacionalinė jaunimo verslumo skatinimo 2008–2012 m. programa. parengtos programos paskirtis – padėti prisitaikyti mokyklas baigusiems jaunuoliams prie ekonominės, socialinės ir politinės aplinkos. šiame straipsnyje analizuojamos moksleivių verslumo ugdymo tobulinimo kryptys. © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai 300 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a mokslinė problema – kokios moksleivių verslumo ugdymo kryptys pagerintų esamą situaciją mokyklinėje švietimo sistemoje? straipsnio tikslas – įvardyti verslumo ugdymo tobulinimo kryptis švietimo sistemoje. siekiant tikslo, numatyti šie uždaviniai: 1. išanalizuoti verslumo ugdymo sampratą. 2. išskirti verslumo ugdymo svarbą mokykloje, verslumo ugdymo metodus. 3. ištirti verslumo ugdymo ypatumus švietimo organizacijoje. 4. identifikuoti verslumo ugdymo problemas bei galimybes švietimo organizacijoje. 5. pateikti galimus mokinių verslumo ugdymo tobulinimo būdus. tyrimo metodai – mokslinės literatūros analizė, apibendrinimas ir apklausa. 2. moksleivių verslumo ugdymo problemos pagrindimas mokslininkų atliktuose tyrimuose verslumo ugdymas nagrinėtas skirtingais aspektais. analizuota verslumo sąvoka (drucker 1985; hisrich, peters 1989; timmons 2003; kirby 2004), identifikuotos verslaus asmens savybės ir bruožai, kuriuos individas turi ugdyti švietimo įstaigose (robinson, haynes 1991; caird 1993; utsch et al. 1999; cromie, 2000; henry ir et al. 2003), atskleisti gebėjimai, kuriais pasižymi verslus asmuo (gartner 1988; garavan, o’cinneide 1994; raffo et al. 2000), bei tie gebėjimai, kurie reikalingi verslo įmonei kurti ar darbui organizacijoje (gibb 1996; rae 1997; galloway, brown 2002). verslumo procesas siejamas su verslumo ugdymu, išlaikant holistiškumą (mcmullan, long 1987; kirby, 2004; timmons, spinelli 2003). taip pat verslumo problemas nagrinėjo d. grundey ir kt. (2008), d. kopycinska ir kt. (2009), g. startienė ir r. remeikienė (2008), r. m. zaharia (2009). lietuvoje analizuotos verslininko, verslumo ir verslininkystės sąvokos, nagrinėta moksleivių verslumo kaip asmenybės savybės raiška, analizuota verslo rūšis ir verslininkystė kaip ūkinės veiklos forma (jakutis, kazlovas 2006), verslumo ugdymo vaidmuo mokymo procese ir besimokančiųjų įgyjami gebėjimai (garalis, strazdienė 2006; savanevičienė et al. 2008; raguseo, 2009). tačiau gilesnių studijų, nagrinėjančių moksleivių verslumo ugdymo temas, lietuvoje nėra atlikta. užsienio tyrėjų indėlis, analizuojant verslumo ugdymo programas, pasireiškia: 1. įvairių filosofinių požiūrių pagrindimu (garavan, o’cinneide 1994a). verslas, vadyba ir studijos 2009 301 įm o n ių e k o n o m ik a ir v a d yb a 2. moksleivių verslumo lygio diferencijavimu (gartner 1988; gorman et al, 1997; cope 2005). 3. ugdytinių verslumo gebėjimų bei savybių identifikavimu (hills 1988; scott et al. 1998). 4. programų tikslų nustatymu (gibb 1999; solomon et al. 2002; henry et al. 2003). 5. palaikomųjų metodų analize (gibb 1993; garavan, o’cinneide 1994;). siekiant verslumo ugdymo rezultatyvumo tikslinga pereiti nuo mokymo prie mokymosi paradigmos ir sukurti tokią mokymosi aplinką, kuri atitiktų šiuolaikinį verslo pasaulį (garavan, o’cinneide 1994). pasiekti šį tikslą galima taikant netradicinius mokymosi metodus, ypač tokius kaip vaidmeniniai žaidimai, verslo imitavimas, darbas komandose, ir kitas naujas mokymosi strategijas (gibb 1993), kurios sudaro galimybes moksleiviams praktiškai atlikti įvairias verslumo užduotis. 2008 m. jaunimo reikalų departamentas prie socialinės apsaugos ir darbo ministerijos analizavo norinčių imtis verslo ir bandžiusių jį kurti moksleivių problemas. atlikti moksliniai tyrimai tiek lietuvoje, tiek užsienyje leidžia teigti, jog didėja dėmesys moksleivių verslumo ugdymo problemai. 3. moksleivių verslumą lemiančių veiksnių analizė ikimokyklinio ir pagrindinio ugdymo sistemos užima reikšmingiausią vietą formuojant ir stiprinant jaunų žmonių vertybes, žinias, įgūdžius ir požiūrį. jaunystėje sukaupta individo patirtis lemia jo tikėjimą, kuris tęsiasi visą žmogaus gyvenimą. verslo žinios ir įgūdžiai gali būti įgyjami vėlesniuose gyvenimo perioduose (studijų metu, darbinėje veikloje). tačiau polinkis į verslą bei verslininkui būdingas elgesys ir požiūris suformuojamas prieš universitetinių studijų laikotarpį. mokinio–mokytojo–tėvų triada svarbi vystant individo asmenines savybes (coleman 1998). pagrindinių įgūdžių – skaitymo ir skaičiavimo – lavinimas yra pagrindinis švietimo ugdymo sistemos tikslas. šalia šių mokiniai mokykloje turi įgyti ir kitokių – bendravimo, klausymo, kitų nuomonės gerbimo – įgūdžių. ugdymo sistema, vertinanti žmonių įgūdžius, demonstruojamus fundamentalių dalykų srityje, o ne jų gebėjimą studijuoti ateityje ir konstruktyviai bendradarbiauti, turi būti pripažinta kaip neracionali (ferguson 2003). ugdant verslumą mokyklų programose dėmesys turi būti skiriamas tiek procesui, tiek ir turiniui. subalansuota ugdymo sistema jungia žinių įgijimą ir jų analizę. 302 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a mokyklų ugdymo programos turi lavinti individo kūrybinius, užduočių formulavimo bei įgyvendinimo ir kasdieninių problemų, su kuriomis susidorojama bendradarbiaujant su kitais žmonėmis, sprendimo gebėjimus (wheatley 1999). verslumo reiškinį nagrinėjančių autorių nuomone, svarbu skatinti verslininko, išsiskiriančio iš kitų visuomenės individų savo aktyviu elgesiu, teigiamą požiūrį į verslo karjerą (gibb 2005). mokslininkai charakterizuoja verslininkus šiems būdingu elgesiu, savybėmis ir įgūdžiais (blieck 2005). verslumo ugdymas neatsiejamas nuo kompetencijos tobulinimo ir praktinio mokymo, formuojančio įpročius ir įgūdžius mokantis iš praeities veiklos bei siekiant ateities rezultatų. jaunuoliams, pradedantiems verslo dalykų studijas universitete, mokslininko l. r. dale (1997) manymu, yra svarbios keturios asmeninės savybės: vaizduotė, apdairumas, delegavimo ir organizavimo gebėjimai. šios savybės skatina juos ieškoti naujų veiklos galimybių, sustiprina pasitikėjimą, padeda realizuoti savo idėjas. šiandieninė ir ateities verslo aplinka reikalauja mokymo procesą koncentruoti į šių individualių gebėjimų ugdymą (golff 2004; wilde 2004): savikontrolę; – klausymo gebėjimus; – drąsą prisiimant pastangas; – susidorojimą su nesėkmėmis; – kritinius analizavimo gebėjimus; – problemų sprendimo gebėjimus; – sisteminį mąstymą; – planavimą; – organizavimą; – sprendimo priėmimo gebėjimus; – pokyčių valdymo gebėjimus; – toleranciją; – kantrumą; – prieštaravimų įveikimo gebėjimus; – komandinio darbo gebėjimus; – bendradarbiavimo gebėjimus; – pristatymo gebėjimus. – verslas, vadyba ir studijos 2009 303 įm o n ių e k o n o m ik a ir v a d yb a ateities visuomenėje elgesio gebėjimai kels daugiau problemų nei intelektiniai (goffee, jones 2000). šiuolaikinio jaunimo ateities harmoningo gyvenimo kūrimas, grindžiamas laisvu mąstymu ir vertybėmis, mokytojams, šalia akademinių žinių teikimo, tampa profesine pareiga. mokytojo užduotis ugdymo sistemoje pasireiškia mokinio talento aptikimu. mokinio elgesio ir bendravimo kultūrą formuoja kasdienis abipusis bendradarbiavimas. mokiniui nerandant problemos sprendimo, mokytojas kaip ekspertas padeda nustatyti nesėkmės priežastis. taip išvengiama kritikos, sukeliančios nuolatinę įtampą. asmeninės savybės ir dorybės sistemiškai ugdomos visą gyvenimą, o mokinių verslumo ugdymas sudaro tik vieną viso gyvenimo mokymosi etapą. 4. verslumo ugdymo situacija lietuvos švietimo sistemoje jaunimo reikalų departamentas prie socialinės apsaugos ir darbo ministerijos 2008 m. identifikavo dvi jaunimo ugdymo problemas, susijusias su verslumo ugdymo situacija lietuvoje. institucija parengtoje ataskaitoje pabrėžia žemą norinčių imtis nuosavo verslo ir bandžiusių dirbti nuosavame versle lygį. lietuvoje jaunimo, norinčio pradėti organizuoti nuosavą verslą, rodiklis siekia tik 16 %, kai jav – 61 %. atitinkamai bandžiusių pradėti dirbti nuosavame versle rodiklis lietuvoje yra 14 %, o jav – 45 % (jaunimo reikalų departamento prie socialinės apsaugos ir darbo ministerijos duomenys, 2008 m.). nacionalinė 2008–2012 metų jaunimo verslumo ugdymo ir skatinimo programa grindžiama: suvokimo ir žinių apie verslo galimybes sklaida; – pagalba jaunimui verslo organizavimo pradžioje; – valstybės veiksmais, skatinančiais nuosavo verslo organizavimą. – mykolo romerio, kauno technologijos ir vilniaus gedimino technikos universitetų dėstytojų nuomonių tyrimas verslumo mokymo poreikiui išsiaiškinti (2007 m.) parodė, jog 59,5 % respondentų pritaria pozicijai pradėti ugdyti verslumą mokyklose. remiantis lietuvos junior achievement surengta apklausa nustatyta, kad daugelyje mokyklų domimasi ekonomikos ir verslumo pagrindų mokymu, įvedamas ekonomikos mokymo dalykas. matomas mokinių, besimokančių ekonomikos ir verslumo pagrindų, skaičiaus augimas. 1993–2008 m. ekonomikos ir verslumo pagrindų besimokančių mokinių skaičius pasiekė 150 000. 2008–2009 mokslo metais pagal lietuvos junior acievement programas mokėsi apie 20 000 mokinių daugiau nei 250 mokyklų (http://www.lja.lt/naujas/about/lja.htm). 304 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a pateikti skaičiai rodo, kad mokyklų bendruomenės pritaria ekonominio švietimo reikalingumui. analizuojant verslumo ugdymo situaciją, pastebimas atotrūkis tarp ugdymo poreikio ir galimybių įgyvendinimo: nustatytas mokomosios medžiagos, vadovėlių trūkumas; – identifikuotas specialistų, galinčių dėstyti verslumo dalyką, stygius. – tyrimo rezultatai atskleidė, jog verslumo ugdymo poreikiui patenkinti reikia: mokymo programų, planų (standartų); – mokytojų paruošimo ir atestacijos sistemos; – vadovėlių, metodinės medžiagos. – verslumo ugdymo svarba akcentuojama lietuvos respublikos strateginiuose dokumentuose. lr seimo 2002 m. lapkričio 12 d. nutarime nr. ix-1187 ,,dėl valstybės ilgalaikės raidos strategijos“ numatoma „parengti ir įtraukti į vidurinio mokslo bei kolegijų ir universitetų mokymo programas žinių apie verslą ir verslininkystę modulius“. ekonominio švietimo ir verslumo ugdymo svarba pabrėžiama ,,lietuvos švietimo plėtotės strateginės nuostatose 2003–2012“. dėmesys verslumo ir ekonominio švietimo ugdymui stiprinamas visuose švietimo lygmenyse, numatoma, kad ekonominio raštingumo pradmenis įgytų visi pagrindinės mokyklos mokiniai, kad šio verslumo raštingumo pagrindai būtų suteikti visiems pageidaujantiems gimnazistams“ (jevsejevienė et al. 2002). pastaruoju dešimtmečiu vykusios permainos pakeitė krašto švietimą: atnaujintas švietimo turinys, atsirado naujų mokymosi galimybių. vis dėlto švietimas neįstengė prisitaikyti prie pilietinės visuomenės kūrimosi, rinkos poreikių, atsižvelgti į žinių visuomenės, žiniomis grindžiamos ekonomikos ir mokymosi visą gyvenimą reikmes. perėjimas iš uždaros visuomenės į atvirą, iš komandinės į rinkos ekonomiką, įsijungimas į dinamišką vakarų demokratijos pasaulį, pasistūmėjimas nuo pramonės prie žinių visuomenės, globalizacija, informacijos sprogimas nulemia ypač sparčią šiuolaikinio gyvenimo kaitą. šiandien visuomenei atsiveriančios naujos galimybės reikalauja ir naujų švietimo pokyčių. 5. verslumo ugdymo švietimo organizacijoje tyrimas verslumo ugdymo tyrimas buvo atliekamas individo lygmeniu, siekiant išanalizuoti verslumo ugdymo sampratą pedagogų požiūriu, ištirti pedagogų mokymo metodus ir darbo formas pamokose. anketinėje apklausoje dalyvavo 31 gimnazijos pedagogas. verslas, vadyba ir studijos 2009 305 įm o n ių e k o n o m ik a ir v a d yb a apklausos rezultatai parodė, jog daugelis respondentų verslumą apibrėžia kaip asmens mąstymo būdą ir asmenines, socialines bei vadybines kompetencijas, leidžiančias turimas žinias pritaikyti kasdieniame gyvenime (58,10 %). 41,90 % respondentų verslumą traktuoja kaip unikalią vientisą sistemą, kuri suvokiama ne kaip išankstinė susiformavusi duotybė, bet kaip nuolat kintanti atvira sistema. apklausos metodu nustatyta, jog didžioji pedagogų dalis yra nepakankamai pasirengusi ugdyti mokinių verslumą (67,70 %), gerai pasirengę sudarė 25,80 %, o labai gerai pasirengę buvo 6,50 % visų apklaustų pedagogų. buvo siekiama išsiaiškinti, į kuriuos mokomuosius dalykus būtų galima integruoti verslumo ugdymą. tyrimo rezultatai parodė, jog verslumas yra labiausiai susijęs su ekonomika, technologijomis, matematika, informacinėmis technologijomis. respondentų atsakymų rezultatai atskleidė, jog verslumas taip pat susijęs su doroviniu ugdymu, gamtos bei socialiniais mokslais. paaiškėjo, jog pedagogai mažiausiai verslumą sieja su tokiais dalykais kaip gimtoji kalba, kūno kultūra, meniniu ugdymu (1 pav.). 16,10 % 61,30 % 12,90 % 19,40 % 90,30 % 38,60 % 54,50 % 77,30 % 61,30 % 41,90 % 32,30 % 48,40 % 48,40 % 9,70 % 35,50 % 40,90 % 22,70 % 40,90 % 22,60 % 58,10 % 6,50 % 38,70 % 32,20 % 25,80 % 4,50 % 59,10 % 0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 % dorovinis ugdymas gimtoji kalba matematika gamtos mokslai socialiniai mokslai ekonomika meninis ugdymas informacinės tecgnologijos technologijos kūno kultūra labai susiję susijęs nesusiję 1 pav. verslumo sąsajos su kitais mokomais dalykais fig. 1. entrepreneurship‘s links with other educational subjects tyrimu analizuota, kokius gebėjimus ir savybes mokiniams padeda įgyti kiekvieno apklausto pedagogo dėstomas dalykas. nustatyta, jog dėstomuose 306 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a dalykuose mokiniai išmoksta dirbti komandoje, tampa atsakingesni, išmoksta priimti sprendimus, pradeda pasitikėti savo jėgomis, sužino daugiau apie verslą, mokosi planuoti savo veiklą bei gerina asmeninį pažinimą (2 pav.). 50 % 68,20 % 59,10 % 68,20 % 59,10 % 27,30 % 27,30 % 77,30 % 68,20 % 40,90 % 27,30 % 40,90 % 59,10 % 36,40 % 59,10 % 54,50 % 31,80 % 50 % 59,10 % 13,60 % 9,10 % 13,60 % 31,80 % 22,70 % 31,80 % 31,80 % 50 % 18,20 % 4,50 % 9,10% 0 % 20 % 40 % 60 % 80 % 100 % geriau pažinti save pasitikėti savo jegomis mokytis planuoti savo veiklą mokytis priimti sprendimus ugdyti lyderio savybes spręsti problemas daugiau sužinoti apie verslą sužinoti apie šalies ūkio tendencijas mokytis dirbti komandoje mokytis būti atsakingam daugiau sužinoti apie socialinę aplinką daugiau sužinoti apie ekonominę aplinką padeda iš dalies nepadedapadeda 2 pav. pedagogų dėstomo dalyko ugdomi gebėjimai ir savybės fig. 2. developed skills and traits through taught subjects tyrimu išsiaiškinta, kokius metodus mokytojai naudoja ugdydami mokinių verslumą. apklausos rezultatai parodė, jog pedagogai ugdymo procese dažniausiai naudoja mokymosi bendradarbiaujant, „smegenų šturmo“, testų, apklausų metodus (3 pav.). tobulinant verslumo ugdymą švietimo organizacijoje, išskiriamos šios verslumo ugdymo kryptis: 1) verslumo ugdymo aiškus vaidmens apibrėžimas; 2) turimo potencialo, kvalifikacijos, gebėjimų įvertinimas; 3) metodinis pedagogų kompetencijų tobulinimo ir verslumo gebėjimu ugdymas; 4) mokinių asmeninių savybių ir vertybių ugdymas; 5) praktinės patirties verslo pradžioje jaunimui teikimas; 6) bendradarbiavimo su kitomis organizacijomis tobulinimas. verslas, vadyba ir studijos 2009 307 įm o n ių e k o n o m ik a ir v a d yb a 63,60 % 45,50 % 13,60 % 50 % 54,50 % 22,70 % 40,90 % 18,20 % 13,60 % 4,50 % 36,40 % 54,50 % 50 % 36,40 % 36,40 % 54,50 % 50 % 63,60 % 59,10 % 36,40 % 36,40 % 13,60 % 9,10 % 22,70 % 9,10 % 18,20 % 27,30 % 59,10 % 0 % 20 % 40 % 60 % 80 % mokymasis bendradarbiaujant grupinis darbas debatai testai, anketos „smegenų šturmas“ situacijų modeliavimas diskusija situacijų žaidimas inscenizavimas interviu dažnai kartais retai 3 pav. mokymo metodai ugdant mokinių verslumą fig. 3. teaching methods developing students entrepreneurship 6. išvados verslumo ugdymo padėčiai gerinti lietuvoje yra sukurta jaunimo verslumo skatinimo strategija. pedagogai verslumo sampratą sieja su asmens mąstymo būdu ir socialinėmis, vadybinėmis bei asmeninėmis kompetencijomis. išreikšdami tokią nuomonę pedagogai suvokia, jog mokinių verslumą galimą veikti ugdymo metodais. nustatyta, jog mokinių verslumą lavinantys pedagogai stokoja kompetencijos. verslumo ugdymo padėčiai gerinti lietuvoje reikia pradėti rengti verslumo ugdymo specialistus, galinčius dirbti pedagoginį darbą švietimo įstaigose. verslumo ugdymui mokyklose neparengta metodinių priemonių, vadovėlių. mokyklose trūksta bendros verslumo ugdymo programos. verslumo ugdymą integruojant į kitus mokymo dalykus, jis labiausiai siejamas su ekonomikos mokymu. tačiau asmens verslumas ugdomas ne tik 308 verslas, vadyba ir studijos 2009 įm o n ių e k o n o m ik a ir v a d yb a suteikiant individui ekonominių žinių, bet ir skatinant jaunuolių teigiamą požiūrį į verslininko karjeros pasirinkimą. švietimo įstaigose ugdomas mokinių verslumas ateityje keistų neigiamą visuomenės požiūrį į verslininkus. teigiamos visuomeninės nuostatos taptų pagrindu, skatinančiu individo norą atrasti naujas veiklos 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entrepreneurship development improvement tendencies in lithuania a. župerka summary the current entrepreneurship development situation in educational institutions of the republic of lithuania is analysed in this article. main students’ characteristics, necessary in order to become a successful entrepreneur, are presented in the theory of enterprise. the analysis, helping to realize how the educators understand the concept of entrepreneurship, is carried out. the evaluation of entrepreneurship development integration into other learning subjects is carried out as well. entrepreneurship development methods used in the enterprise development program are identified in the article. a study covers the problems, which educators of educational institutions face while developing the entrepreneurship of the students. while summarizing the analysis of the study, the development tendencies of students’ entrepreneurship in lithuanian schools are presented in the article. keywords: entrepreneurship, entrepreneurship education, entrepreneurship skills and traits. copyright © 2018 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. *corresponding author. e-mail: nogag@uek.krakow.pl business, management and education issn 2029-7491 / eissn 2029-6169 2018 volume 16 issue 2: 222–238 https://doi.org/10.3846/bme.2018.6261 problems of adapting enterprises in the strategy implementation process. case of poland gracjana noga * department of strategic analyses, cracow university of economics, cracow, poland received 29 october; accepted 05 december 2018 abstract. purpose – the purpose of the article was to analyse the impact of the enterprise adaptation stage on implemented strategy effectiveness. research methodology – in the theoretical part the method of analysis and critical review of the literature was used. the technique used in the empirical study was paper-and-pencil interviewing (papi). in order to investigate relationships, the χ2 pearson test and the yule’s coefficient of association ϕ were employed. findings – the article resulting underline the importance of the stage of adapting the enterprise in the strategy implementation process. the organisational structure, skills and knowledge, as well as organisational culture, have a particularly strong impact on the effectiveness of the strategy. research has not confirmed any relationship between management style and resources. research limitations – the empirical research was carried out on business organisations from a ranking of 500 innovative businesses of the institute of economics of the polish academy of sciences list, what does not ensure that the indicated problems are characteristic for the average companies active in poland. practical implications – the obtained results became the basis for defining recommendations, which are practical guidelines for those trying to implement a strategy. it should be noted that the presented practical guidelines are not static research indications and will develop as the organisation and its environment change. originality/value – there is a lack of research in poland, which is focused on the problem of adjusting enterprise in the strategy implementation. keywords: strategy, strategy implementation, adjustment of the enterprise. jel classification: l210. introduction effective implementation of the strategy is pivotal for the development of the company. it is one of the most important challenges faced by managers by solving any evolving organisational problems (szarucki, 2015). the economic practice still provides examples of companies that have failed in this difficult process. to a large extent, this is due to the improper implemailto:nogag@uek.krakow.pl https://doi.org/10.3846/bme.2018.6261 https://orcid.org/0000-0002-7411-5260 business, management and education, 2018, 16(2): 222–238 223 mentation of the strategy implementation in enterprises. factors influencing the process of effective strategy implementation were discussed by various authors (ranganathan & dhaliwal, 2001; čatera & pučko, 2010; ahearne, lam, & kraus, 2014; obeidat, al-hadidi, tarhini, & masa’deh, 2017). however, the state of knowledge in this area is still limited. the essence of the implementation is to transform the strategy included in the strategic plan as a set of actions carried out in individual departments and organisational units and also to organise hierarchical, functional, technical and information relationships between these departments and units (szarucki, 2013). the problem with strategy implementation relates to the fact that it covers a wide range of issues. their full appreciation is often impossible for entrepreneurs. they concentrate only on selected aspects, omitting the others, which unfortunately fails the strategy implementation process and discouragement of the managers. the strategy implementation has to be a holistic system (segatto, de padua, & martinelli, 2013), concentrating on the integration of its components. one of them is enterprises adopting process. nowadays (h. norreklit, l. norreklit, mitchell, & bjornenak, 2012; chaola, pratoon, & raksong, 2015), it is to be noted that the adaptation of an enterprise in the strategy implementation process is one of the organisational performance benchmarks but is associated with the undertaking of status quo questioning activities (lowy, 2015) and with unpopular decisions, while being often linked with the involvement of large resources and considerable time commitments. the article is of a theoretical and empirical nature, and the research problem is located in the management sciences in the subdiscipline of strategic management and the methodology of management sciences (lisiński, 2013). using the method of analysis and critical review of the literature, the place and role of adapting the enterprise, as part of the strategy implementation process, will be discussed, together with areas that should be included in each implementation process. the empirical part will present its own research on the implementation of strategies in enterprises in the area of adapting individual areas of the company to the implemented strategy as an important part of the implementation process. the technique used in this study was paper-and-pencil interviewing (papi). in order to investigate relationships, the pearson test and the yule’s coefficient of association ϕ were employed. the research results will become the basis for developing practical guidelines for enterprises. 1. enterprise adjustment stage as part of the strategy implementation process the strategy implementation is a complex process, covering many areas of the enterprise, but also taking into account the external context. it consists of putting the strategic plan into action. it is a sequence of activities in which their substantive scope will be combined with activities regarding the instantiation, implementation and satisfaction1. when indicating the stages of the strategy implementation process, it is necessary to specify the sequences of actions through which the functions of this process are implemented. in practice, the functions are called tasks, which results from giving them the obligatory nature in the formalised pragmatics of company management (stabryła, 2000). 1 extensive reflections on the process of strategy implementation can be found in the works on strategic management, see: (cândido & santos, 2015; schaap, 2012; čatera & pučko, 2010; hrebiniak, 2005; okumus, 2003; olson, slater, & hull, 2005; allio, 2005; noga, 2007). 224 g. noga. problems of adapting enterprises in the strategy implementation process. case of poland m. moszkowicz (2005) claims that the main task of the implementation is to answer the question: how to change from the current state to the expected state in certain company conditions? the author points out, that the essence of the actions must be: gaining management and crew to implement the adopted strategy (to want!), proper distribution of resources (to be able to!), skills development  – training (to know how!) and appropriate organisation of the company’s activity in time (manage it!, be ahead!). so, the implementation includes the task which requires entrepreneurial skills, whose evaluation criterion is effectiveness, i.e. the company’s ability to implement projects approved in the strategy formulation process. h. piekarz (2008) marks, that implementation must be a rational action; therefore it should proceed according to specific time and space-ordering rules, taking into account the boundary criteria and conditions. she mentions three functions which are important for the implementation: planning, organising and controlling. regarding strategic planning, she claims that the flexibility of actions must be ensured in the implementation area. in the case organizing the author focuses mainly on the question of adjusting the structure. hover, control, similarly to planning, must refer to the strategy and operational level. here, the autonomy and knowledge of workers will determine the effectiveness. f. alashloo, p. castka, j. sharp (2005), understand the tasks of implementation in a similar way. they claim that implementation must include the task of preparation, organisation and motivation of different complex activities to ensure smooth implementation of the strategy, its control and verification, and its exploitation. m. srinivasan also refers to the main management functions (2014), demonstrating the following stages in the implementation process: – framing goals  – a stage which requires precision, ensuring its transparency and no problems with interpretation; – implementation process control – where the implementation concentrates on operational management; – the management of changes – with particular consideration is being given to the effect of the changing environment; – the involvement of staff – including the selection of change leaders, delegating decision-making powers to them, as well as providing them with an appropriate incentivebased system; – an ongoing analysis of process sequences and measuring performance. based on the presented points of view of different authors, it can be assumed that the tasks of management strategy implementation include: preparatory tasks, adjustment tasks, proper tasks and controlling tasks. the preparatory tasks include the development of framework guidelines for the entire implementation process and an indication of procedures for the entire company and its parts. h. steinmann and g. schreyögg (2001) indicate that preparation in the implementation process must include people, strategic programs and organisational initiatives. the adjustment tasks are intended to indicate the areas of the enterprise in which changes should be made. adjustment tasks as part of strategy implementation, relating to the conditions of ensuring the company’s readiness to achieve the goal. these functions are realised by creating conditions: economic, technical and social for implementing the established strategies with the help of its employees. proper tasks focus on the realization of strategic activities by the division of the tasks, resources and choosing the persons responsible for them. in the implementation of these tasks, attention should be paid to ensuring business, management and education, 2018, 16(2): 222–238 225 proper communication. controlling tasks include monitoring and correcting activities in the strategy implementation process. moving forward to specifying particular activities included in the implementation process one should bear in mind the tasks mentioned above. kazmi (2008) shows the strategy implementation process in the form of a constant process; its goal is to achieve effectiveness through change management by the activation of strategies. he shows three phases: active strategy, changes management, achieving effectiveness. the first phase is to prepare the ground for tasks and managerial activities related to strategy implementation. the next phase, being the core of strategy implementation, is change management in complex situations. the last phase, or effectiveness, is the result of the implementation process. in his proposition c. noble (1999 shows implementation in a structured way. the author depicts four stages of the implementation process: – the stage preceding the implementation (engagement in the formation of strategy, the concentration of the implementation efforts, selection of representatives for individual functions, education). – organisation of implementation (gathering resources, solving functional conflicts an indication of leadership in the implementation, development of the implementation plan, building partnerships understanding the possibilities and concerns of other functional areas). – management of the implementation process (physical barriers, barriers resulting from the so-called “plots” barriers related to the lack of knowledge, communication barriers, personality issues, different goals, resistance in the organisation, subversives). – maximising inter-functional performance (informal networks, instilling a “sense of haste”, achieving “buying” strategies. the author pays particular attention to the inter-functional connections, in which he finds the key to successful implementation. he presents the problem of implementation as a network. he thinks that in order to understand the process and obstacles, which can be met during its realisation, one should look at the implementation network from the managers’ point of view and find the keys to the successful management of this network. a. srivastava and sushil (2014) perceive the process of implementation as an interaction of four types of activities: ensuring consistency between management functions and strategy; the actions which are to ensure correct functioning of processes; automation, understood as the standardisation of the monitoring system and of measured performance results, as well as adaptation. in his approach, m. lisiński (2004) presents, the implementation process in a coherent way and indicates two phases of this process: – phase i. initiation of strategies: diagnostic analysis of the organisation, undertaking improvement measures, adjusting the organisation to the adopted strategy. – phase ii. implementation and evaluation of the strategy: implementation of the strategic plan, evaluation of the implementation of the strategic plan. h. witczak (2004) doesn’t point out stages of the process but claims that implementation consists of three classes of actions. these are preliminary activities (warm-up), main activities and final activities. they characterise in the following stages: – the preliminary activities include all the actions which are achieved by an organisation of full implementation capacity. the author doesn’t describe the stages in detail. 226 g. noga. problems of adapting enterprises in the strategy implementation process. case of poland he only marks that they must cover activities connected with the identification of the organisational elements which require adjustment. – the main activities are connected with taking actions. the strategy must be put into practice by performing subsequent assumptions of the strategic plan, it covers all areas of the organisation’s functioning. the author pays attention to the fact that this issue covers all the activities that can be called working. – the final activities are connected with controlling the execution. managers must check that the actions taken by the organisation are consistent with the chosen policy option and bring the expected results. the key is the appropriate selection of indicators. the aspect of adjusting organisation to the requirements of a new strategy is also exposed in the authorship model by ch. w. l. hill (1989). the author also notes that the lack of such a match or becoming aware of this need too late may lead to serious difficulties and inhibitions. taking the presented views in the strategy implementation process under consideration, we can distinguish three phases: preparation and organisation of implementation, implementation management and control of strategy implementation. the proposal for a detailed strategy implementation procedure can be found in table 1. table 1. the procedure of implementing management strategy in an enterprise (source: own study) phases stages research steps pr ep ar at io n an d or ga ni sa tio n of th e st ra te gy im pl em en ta tio n pr oc es s i. introductory actions 1. adoption of the key assumptions concerning the new strategy, identification of milestones, time range, amount of budget  al.ocated for this purpose, identification of risk. 2. establishment of principles for observing the environment to capture opportunities or threats appearing there. 3. establishment of a team for the strategy implementation or the person conducting the process and indicating its place in the structure. 4. communicating the main strategy assumptions to the employees. 5. selection of implementation methods. ii. enterprise adjustment 6. specification of the elements to be verified. 7. diagnostic analysis of the specified elements. 8. evaluation of consistency with the strategy. 9. indication of necessary changes to be adapted to the strategy. 10. conduct of actions. 11. checking the results. iii. operationalisation of strategy 12. preparation of strategic programs and allocation of resources. 13. development of performance indicators within individual programs. 14. indication of the persons responsible for the implementation of the programs. m an ag em en t o f t he im pl em en ta tio n pr oc es s iv. conducting activities 15. planning detailed operations and deadlines for their implementation. 16. sharing tasks between particular employees. 17. piloting activities and overcoming psychological barriers. v. controlling conducted activities 18. setting standards and designing control systems. 19. indication of people or cells to monitor implementation of the strategy. 20. systematic review of conducted activities. 21. undertaking corrective actions. vi. caring for good communication 22. establishing communication procedures in case of problems while conducting activities aimed at applying the new strategy. 23. establishing deadlines for regular meetings on the strategy implementation. 24. reporting results to people responsible for the programs. business, management and education, 2018, 16(2): 222–238 227 phases stages research steps ev al ua tio n of th e st ra te gy im pl em en ta tio n pr oc es s vii. measurement of strategy 25. indication of people responsible for the process of selection and measurement of assessment indicators. 26. selection of the most important criteria to carry out the measurement. 27. measuring the effectiveness of the selected criteria. viii. strategy evaluation 28. analysis of the gathered results. 29. evaluation of the implementation process and formulating conclusions. 30. submission of applications to the management of the enterprise. adjusting the enterprise is the stage of phase preparation and organisation of the strategy implementation process. as the first step, the enterprises which implement the strategy  – should individually indicate key elements for this process, especially of the internal context, but also specify the most important conditions shaping the relations between them. the next step is an assessment of the indicated elements regarding consistency and adjustment to the implemented strategy as well as identification of any deviations. adaptation projects are being prepared for them. the changes should be made based on clear criteria for the strategic match, and these are: – consistency with the competitive advantage, – consistency with workflow-facilitating and strategy-supporting processes, – support for the functions of primary importance regarding the geographical nature of the business, – adaptation to basic product variables and market segmentation variables – transferring decision-making power to persons in the positions closest regarding belonging to a given decision, and thus having the greatest possibilities to implement this decision, – cooperation of enterprise elements (drazin & howard, 2004). in the next step, all the projects should be implemented. control over the introduced changes and their compliance with the strategy is the last action within the adaptation phase. the proposed structuring of the strategy implementation process in a detailed way indicates the stages and research steps in individual stages. it can serve as support for the enterprises which have no experience in strategy implementation. it also underlines the importance of the enterprise adaptation phase. given these considerations, it seems advisable and appropriate to link the degree of the strategy fulfilment with adjusting of the enterprise components to the implemented strategy. it is important to note that both the strategy and the enterprise components must not be based on rigid premises which, in volatile conditions, do not adequately represent the specific characteristics of the organisation activity, thus creating some confusion (dandira, 2012). end of table 1 228 g. noga. problems of adapting enterprises in the strategy implementation process. case of poland 2. elements of the enterprise that need to be adjusted during strategy implementation in the literature, there are many propositions indicating elements of the enterprise which are important for the strategy implementation process. a. pettigrew and r. whipp (2007) do not specify in detail the areas which the strategy implementation should be concerned with, but they point out that it must combine three related aspects: – analytical – implementation must cover many organisational areas, – educational  – new strategic knowledge which is derived from its implementation, must be captured and spread across the entire organisation, which is why implementation cannot be treated as constant and unchangeable; organisation learns about its strategies through implementation, – political  – implementation must be flexible and react to pressure from outside and inside the organisation. ch. w.  l.  hill (1989) lists the organisational structure, the appropriate system for measuring and evaluating the achieved results, and the rewarding system for these results, the information and control system, organisational culture and performance potential. all these factors describe the internal potential of an enterprise, and according to the model’s author, they play an important role in strategy implementation, regardless of the type of industry in which the company operates. one of the most widely recognised models dealing with the implementation factors is the 7s model by r. h. waterman jr., t. j. peters and j. r. phillips (1980). it indicates seven elements that are interrelated, and a change in one of them causes a change in the other: strategy, organisational structure, systems (all formal and informal procedures enabling the functioning of the organisation), management style (actions taken by the top management), staff, value system (organisational culture), skills (competences, dominant features possessed by the enterprise). j.  m.  higgins (2005) is the author of the 8s model, in which factors from the 7s model have been slightly modified. they include strategy, structure, systems and processes, management style/leadership, staff, resources, organisational culture and additionally the “results” factor. by adding the “results” factor, the author justifies the need to control the obtained results. fewer, as only four important factors, are indicated by g. yip (1992). these are the following factors: organisational structure, culture, people, management processes. the author claims that these four factors determine necessary forces in the organisation, which influence its capacity to formulate and implement strategies. another example is the proposition of the authors m.  a.  carpenter and w.  g.  sanders (2007), who pointed to organisational structure, systems and processes, people and prizes, strategic leadership, resources, communication. according to this approach, attention is paid to the communication factor, which according to the authors is particularly important. the models mentioned above differ in the number and nature of the factors which determine strategy implementation. an attempt to include all the factors (dimensions) in strategy business, management and education, 2018, 16(2): 222–238 229 implementation that could constitute important areas of managers’ intervention during strategy implementation was undertaken by c. j. f. candido and d. s. morris (2001). according to them, the basic dimensions of strategy implementation are: the paradigm / model of the world, attitudes, skills, roles and styles of managers, the content of strategy, structure, facilities, equipment along with technological characteristics and potential, information and communication systems, decision-making processes, service analysis systems, design, external communication and delivery, rules, policies and task descriptions, systems: evaluation, control and remuneration, organisational competencies, people, power structures (formal and informal), commitment, values and norms, stories, symbols, rituals, routine procedures and ceremonies, financial resources, time (schedule, coordination, programming, urgency). the twenty dimensions included in this model are elements that simultaneously: – can be changed and should be controlled and consistently adjusted, – should be monitored and made the subject of collected and distributed information, – could be within reach of a difficult organisational debate due to their interests, basics of power, approach and belief, – are co-dependent and when certain dimensions are changed – affect all others; some of these influences will prove helpful and compensatory, others will be harmful or retaliatory. the model’s authors claim that 20 dimensions and their connections can determine the success or failure of any strategic change which is why they were grouped into one instrument that can be used for: improving and enriching the diagnosis, stimulating thinking, assessing the necessary scope of change in relation to each dimension, and supporting change planning. according to f. okumus (2003), jiang and carpenter (2013), the factors closely related to implementation are divided into external and internal ones. the external ones include organisational structure (a division of power, decision-making practices), organisational culture (traditions, values, standards), leadership (management support), resources (distribution of means, information, time limits). for the process of implementing the strategy, a role will be played by the elements of the external context, which macro-environment and micro-insecurity belong to. macro-environment contains processes and phenomena, which must directly affect the tasks being achieved by the enterprise, however, they create the necessary conditions for running a business. micro-environment consists of two specific organisation subjects or their groups which may influence the enterprise. it includes competitors, customers, suppliers, trade unions, owners and strategic allies (pearce & robinson, 2015). both the micro and macro environment do not have spatial boundaries; everything depends on the strength and directions of connections between the enterprise and the surrounding phenomena, processes and entities. for the strategy implementation process, the internal context is particularly important, defining the elements inside the company that are in mutual relations with each other and with the elements that create the external context. the internal context is composed of organisational structure, organisational culture, resources, management style, skills and knowledge, and systems that comprise: the motivational system, information and communication system. 230 g. noga. problems of adapting enterprises in the strategy implementation process. case of poland 3. methodology of conducted research in the empirical sciences, which include management science and strategic management, as its sub-discipline, the basis for conclusions is practical research. the value of any theory is determined by observation. about the scientific problem being analysed in this article, empirical research aimed to verify whether the adaptation of enterprise, constituting a stage in the strategy implementation process, has an impact on the effectiveness of the implementation process2. the results of research on adopting a company to a strategy, as introduced in this article are part of a wider research on the strategy implementation in enterprises. the study involved 693 business entities, from poland, listed in the ranking of 500 innovative businesses of the institute of economics of the polish academy of sciences (baczko & puchała-krzywina, 2013). a crucial reason for using this ranking is the fact that innovation occupies a leading position on the list of postulates formulated towards strategic management. since the assumption was to reach out to the enterprises putting strategic management into practice, it was recognised that companies are trying to be innovative in a special way also focus on formulating and implementing strategies. the research technique used in the research was a direct questionnaire interview (papi). the interview questionnaire contained 59 proper questions and eight metrics questions. the study was conducted in 2015. the problems discussed in the article were addressed by the following research problems: – determining whether business subjects pay attention to the adjustment of the company in connection with strategy implementation, – determining whether, in connection with strategy implementation, they have made changes in one of the areas of the company. – determining the level of difficulty in making changes in the indicated areas, – determining the impact of adjusting enterprise elements to the implemented strategy on the effectiveness of the entire implementation process, – determining whether the environment is perceived as a source of problems when implementing the strategy. 20.6% of small enterprises, 41.2% of medium enterprises and 38.2% of large enterprises employing over 250 employees took part in the conducted research, of which 17.6% were enterprises employing 501–1000 employees and 14.7% enterprises employing over 1000 people. among the most important tasks in strategy implementation, the respondents indicated: determining the priorities, assigning responsibility, assessing the results, supervising the implementation and adaptation of the enterprise. they confirmed that they pay attention to the adjustment of the company strategy implementation. the enterprises indicated, in order to implement a new strategy, it is necessary to make changes in the following enterprise areas: skills and knowledge (76.50%), resources (76.50%), 2 research was carried out by the author of article as a part of her doctoral thesis (noga, 2017): methodology of implementation of the management strategy in enterprise, prepared in the department of strategic analysis at the cracow university of economics. 3 for the sake of the character of the discussed issue, micro-enterprises were excluded from the study, and thus 278 small and medium-sized enterprises and 197 large companies were included in it. business, management and education, 2018, 16(2): 222–238 231 organisational structure (75%), management style (75%), management systems (67.50%), organisational culture (55.90%). enterprises assessed the difficulty of making changes in particular areas. their opinions are illustrated in the picture below (figure 1). the analysis of the presented graph shows that: – organisational structure – the introduction of changes in this area of the company is relatively smooth. there were no indications for any difficulties that would make the changes impossible, 29.4% of the respondents marked value 1  – little difficulty and 27.5% of enterprises chose value 3 – medium difficulty. – organisational culture  – an area difficult for changes to be carried out. difficulties which made changes in the enterprise impossible appeared in 2.6% of the cases. the highest percentage of the respondents, 42.1%, indicated emergence of very serious difficulties. – management style – answer 3 dominates in this area – medium difficulties, 37.3% of the enterprises. despite a general impression that in this case, the changes proceeded rather smoothly, 5.9% of the respondents indicated that they had difficulties making changes impossible. – skills and knowledge  – in this area the difficulties appeared rather often. however they were not particularly cumbersome. this area should be ranked second, after organisational structure, as one where changes went rather smoothly. – resources  – in this area more than 20% of the enterprises indicated the presence of particularly big difficulties, also 3.8% of respondents indicated difficulties are preventing the changes. – management systems  – this one, like organisational culture, turned out to be problematic for changes to proceed. the most common answer was the value of 5  – the difficulties preventing implementation, accounting for6.5% of the indications here. at the high level, there is also answer 4 – very big difficulties, indicated by 28.3% of the respondents. 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 0 1 2 3 4 5 organiza�onal structure organiza�anal culture management style skils and knowledge resources management systems note: 0 – no changes were made, 1 – minor difficulties, 2 – small difficulties, 3 – medium difficulties, 4 – large difficulties, 5 difficulties preventing strategy implementation. figure 1. difficulties in making changes adapting the organisation to the new strategy (research results) 232 g. noga. problems of adapting enterprises in the strategy implementation process. case of poland the enterprises were also asked to indicate whether they had to make changes in their assumptions during the implementation. the answers of the respondents were referred to the environment in which the examined entities were functioning. the results are as follows: – enterprises operating in a very stable environment: no changes were made in the plan of 50% of the enterprises, slight changes took place in 50% of the entities. – enterprises operating in a moderately stable environment: there were no changes in the plan of 23.5% of the enterprises, minor changes were made in 58.8% of the enterprises and large changes – in 17.6% of the enterprises. – enterprises working in a dynamic environment: 10.7% of the enterprises made no changes in the plan, minor changes were made by 60.7% of the respondents, and large changes were made in 28.6% of the enterprises previously envisaged in the strategic plan. the presented results indicate that that enterprise try to stick to the assumptions adopted in the strategic plan. nevertheless, operating in a very dynamic environment requires them to demonstrate high flexibility and adjustment methods. innovative enterprises, which were included in the study, can react and adapt their companies’ policies to changing conditions. to establish relations between the enterprise’s elements and the effectiveness of strategy implementation, respective statistical calculations were made. all tests were carried out with the significance level of 0.05. the significance of the relation of nominal features was calculated using pearson’s χ2 test. in order to measure the strength of relations between variables, yule’s correlation coefficient ϕ was determined. in particular, the following was examined: – relationship between adjustment of the organisational structure and effective strategy implementation, – relationship between adjustment of the organisational culture and effective strategy implementation, – relationship between adjustment of the management style and effective strategy implementation, – relationship between adjustment of the skills and knowledge and effective strategy implementation, – relationship between adjustment of the resources and effective strategy implementation, – relationship between adjustment of the management systems and successful strategy implementation. the relationships between individual elements of the enterprise and the effectiveness of strategy implementation are presented in table 2. by the conducted test, a significant relationship was observed between changes in the following elements of the enterprise and the effectiveness of strategy implementation: organisational structure, organisational culture, management systems, skills and knowledge. enterprises, which adopted the areas mentioned above to the implemented strategy, have achieved their strategic goals to a greater extent. by the conducted test, there was no significant relationship between changes in the following elements of an enterprise and the effectiveness of strategy implementation: management style, resources. business, management and education, 2018, 16(2): 222–238 233 the correlation test shows that the following have the most important impact on the effectiveness of implementation measures: organisational structure 0.3623, skills and knowledge – 0.3228 and organisational culture – 0.2997. the tests confirmed that adjustment of such areas as organisational structure, organisational culture, skills and knowledge and management systems has a direct influence on the success of strategy implementation. according to the opinions of the respondents, less significant factors were resources and management style. it should be noted, however, that the respondents pointed to resources as a particularly important factor in the strategy formulation phase, thereby emphasising that it plays an important role in the strategy implementation process. however, it is rather perceived as an element conditioning the selection of a given strategy, and not as an element requiring adaptation. 4. proposals for enterprises resulting from the research the research confirmed that the adaptation of areas such as organisational culture, organisational structure, knowledge and skills, and management systems contributes to success in strategy implementation. respondents paid particular attention to the organisational culture, which they indicated as particularly difficult to adapt. to implement a strategy, proper organisational culture is necessary, being characterised by the will of achievement, engagement, discipline and the employees’ sense of strategy ownership. organisational culture bridges the gap between what the formal procedures and instructions describe and what is going on, so it is a powerful engine during strategy implementation. regarding organisational structures, solutions should be sought that promote the exchange of information, coordination of activities and clear assignment of tasks and responsibilities. the organisational structure must meet the company’s pursuit of flexibility and adaptability to changed conditions. regarding knowledge, the employees’ knowledge should be expanded so that they can carry out the tasks properly assigned to them. table 2. the relationship between the enterprise’s elements and effectiveness of strategy implementation (source: research results, n = 69) enterprise area p pearson’s correlation coefficient correlation coefficient ϕ organisational structure 0.0131 8.6646 0.3623 organisational culture 0.0040 5.9291 0.2997 management style 0.5424 1.2234 0.1362 skills and knowledge 0.0321 6.8790 0.3228 resources 0.6383 0.8978 0.1166 management systems 0.2721 4.8855 0.0026 234 g. noga. problems of adapting enterprises in the strategy implementation process. case of poland the systems must be fully concentrated on the implemented strategy. the task of the information system is to acquire, process, store, protect and transfer information. such a system should not only provide relevant strategic information but also properly convey information about the strategy both within and outside the company. the matrix of m. freedman (2003) may be useful, where those strategy elements are indicated that should be communicated to individual stakeholder groups in the enterprise. the strategic communication system should focus on informing the employees about the assumptions and strategic goals, explain the doubts and ambiguities, and convince them about the validity of long-term development directions. both systems form an inseparable body and should support one another. the motivational system should also provide additional support. the situation that the employees receive respective remuneration, regardless of whether the implementation is success or failure, should be avoided. when it comes to the management style, in the chosen solutions, it is not only the managers but all the employees who should be engaged in the implementation processes. changes in this new strategy are associated with the emergence of employee resistance. it is a natural reaction, reflecting a certain mental state of the employees, which is an expression of the fear of the unknown. that is why it is very important to make employees aware of the upcoming changes and the team’s commitment to introduce them. participation will be possible after making employees aware that the changes are necessary in order to maintain a competitive position on the market. for smooth implementation, it is also crucial to inform the employees about the current basis on the progress in implementing the strategy, but also about any problems that have arisen throughout the performance of the specific tasks. the leader must, therefore, communicate perfectly, making everyone focus their attention on the company’s strategic priorities. w. chan kim and r. mauborgne (2005) indicate that during the operation, it reveals whether employees were provided with intellectual and emotional recognition. the authors write, that in a situation of vivid and honest trust, appreciation of particular entities and deep belief in their knowledge, skills and talents it will be easier to be successful in achieving the company’s goals. the resources are a particularly important area for formulating and implementing the strategy. the problem of resources limits small and medium-sized enterprises to a larger extent than the big ones especially in the aspect of financial resources, but also all others. it is different in large enterprises where it is easier to obtain funds, more often they also have qualified staff. human resources play a significant role in smooth strategy implementation. people play an important role because they will ultimately decide on the successful (or unsuccessful) strategy implementation. like in business functioning in general, effective strategy implementation requires compliance of the company’s goals and activities with the goals and personal actions of its employees. it is easy to engage all of them in the strategic management process. a strategic instrument proposed by o. gadiesh and j.  l.  gilbert (2001) may be a helpful instrument in this respect. the principle is to provide employees with a signpost and motivation to act, show the direction in the constantly changing business environment and help quickly respond to emerging opportunities. it is important to extract the quintessence of the strategy and formulate it in the form of one short sentence because even the greatest strategy gives little unless people understand and use it in their everyday work. business, management and education, 2018, 16(2): 222–238 235 the enterprises also paid attention to the limits of the environment where the company operates  – its stability, type, complexity. changes occurring in the environment that cause risk and uncertainty are an inseparable element related to the functioning of the enterprise. strategy implementation requires constant monitoring of the activities carried out inside the company, as well as in its environment. also, it is important to identify even weak signals, then to properly assess their meaning and anticipate which of them may affect the functioning of the company. exceptionally unexpected and fundamental changes in the environment may even result in complete obsolescence of the assumptions which the strategy was based, on, potentially leading to its redefinition. the adjustment of an enterprise is a demanding task. therefore the choice of the proper methods is important. the following instruments may be useful: project management, balanced scorecard, strategy map, general management navigator, internal audit, change management, diagnostic method prognostic method, critical evaluation and analysis method. certainly, the chosen method depends on many factors, including the level of the company’s preparation for the application of the given method, cost, and time-consumption. the company must select the tools that it uses, and it is impossible to propose a perfect solution for use in any enterprise (noga, 2016). concerning adapting business areas, one of the important aspects affecting the process is the period of business activity. enterprises that operate longer and have experience in the field of implementation can be identified. the second group is made up of companies with a short operating period, having less experience in strategy implementation. in the case of a well-established enterprise, adaptation to the company’s strategy becomes a particular problem. in these cases, the communication and motivation system plays an extremely important role. it must be well designed to give employees incentives to engage in new projects related to the implemented strategy, requiring them to learn something new and new responsibilities often. for an enterprise being on the market for a short time and not having experience in strategy implementation, any good practices that it can use and develop further are generally missing. in these cases, the knowledge and competencies of the personnel are particularly important. conclusions the reflections presented in the article resulting from the author’s research on strategy implementation underline the importance of the stage of adapting the enterprise in the strategy implementation process. the organisational structure, skills and knowledge as well as organisational culture have a particularly strong impact on the effectiveness of the strategy. research has not confirmed any relationship between management style and resources. the obtained results became the basis for defining recommendations, which are practical guidelines for those trying to implement a strategy. it should be noted that the presented practical guidelines are not static research indications and will develop as the organisation and its environment change. in this context, attention should be drawn to the research limitations, associated with the character of undertaken practical investigations. one of the limitations is the fact that the 236 g. noga. problems of adapting enterprises in the strategy implementation process. case of poland group of respondents consisted of business organisations from a ranking list, what does not ensure that the indicated problems are characteristic for the economic operators active in poland. in addition, a certain dose of subjectivism in such studies is simply unavoidable for the practical absence of real possibilities to verify the answers provided by respondents. it, therefore, opens up the field for even more detailed empirical studies. the article also indicates the problem of selecting methods in the process of adjusting the enterprise to the strategy. the enterprise itself has to select the tools that it will use to implement the strategy, depending on its assumptions, its resources or the economic and social situation. in agreement with m.  szarucki’s opinion (2016), who, analyzing the issue of the choice of a suitable method for solving a particular task, points out that “lack of classification of management methods hinders the possibility of choosing the proper one”, attempts should be made to reorganize the methods used in the process of strategy implementation. the classification criteria should include many factors such as the level of preparedness of the company, its resources, costs of the method used, or the area of its application. this will make it easier for the 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(1992). total global strategy (p. 34). london: prentice-hall. https://doi.org/10.1016/s0378-7206(01)00087-8 https://doi.org/10.1108/bpmj-jun-2012-0064 https://doi.org/10.1108/tlo-08-2013-0038 https://doi.org/10.3846/btp.2015.684 https://doi.org/10.1016/0007-6813(80)90027-0 122 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a šešėlinės ekonomikos veiksnių ir priežasčių tyrimas ekspertinio vertinimo metodu: lietuvos atvejis jolita krumplytė jolitakrumplyte@gmail.com vilniaus gedimino technikos universiteto doktorantė, socialinės ekonomikos ir vadybos katedra 1. įvadas pastaraisiais metais daugelyje šalių susiformavusi sudėtinga makroekonominė situacija – sparčiai mažėjantis bendrasis vidaus produktas, didėjantis nedarbo lygis, žymus šalies biudžeto pajamų sumažėjimas – sutrikdė šalies ekonominės ir socialinės politikos įgyvendinimo galimybes. šalia šių problemų dažnai akcentuojama šešėlinė ekonomika, apibrėžiama kaip fenomenas, kurio egzistavimas neišvengiamas ekonomikos pakilimo laikotarpiu ir matomas spartus vystymasis ekonomikos recesijos ir nuosmukio etapuose. mokslinėje literatūroje šešėlinė ekonomika apibūdinama kaip sudėtinga daugialypė reiškinių visuma. pažymėtina, kad nėra bendros šešėlinės ekonomikos koncepcijos, neretai tapatinami terminai „šešėlinė ekonomika“ ir „oficialiai neapskaityta ekonomika“ arba vartojami kiti terminai ir apibrėžimai. autorės pasirinktas šešėlinės ekonomikos konceptas apima ekonominę veiklą, kuri vykdoma nesilaikant teisės aktų reikalavimų ir apribojimų, kai tokia veikla yra griežtai reglamentuojama ir reguliuojama. kitaip tariant, tyrimo objektas apima tas ekonominės veiklos apraiškas, kurių rezultatai nėra įtraukti į oficialią apskaitą siekiant išvengti mokesčių arba juos nuslėpti (krumplytė 2008a, b). literatūroje pateikiama daug skirtingų veiksnių, lemiančių šešėlinės ekonomikos atsiradimą, ir priežasčių, turinčių įtakos jos vystymuisi. siekiant sumažinti šešėlinės ekonomikos mastą ir sustabdyti jos sparčią raidą, svarbu identifikuoti šį procesą lemiančius veiksnius ir priežastis. vieni autoriai (schneider 2000, 2005; tanzi 2002, 2006; thomas 1992, 2000; fleming et al. 2002; dell’anno, © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai verslas, vadyba ir studijos 2009 123 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a solomon 2007; feige, urban 2007) svarbiausiais laiko ekonominius veiksnius, kiti (torgler 2003a, b, c; uslaner 2003; alm, torgler 2006; frey, torgler 2007) akcentuoja mokesčių moralės (visumos psichologinių socialinių ir kultūrinių ypatumų, lemiančių ekonomikos dalyvių elgseną) svarbą šešėlinės ekonomikos mastui. taikant įvairius šešėlinės ekonomikos skaičiavimo metodus atsižvelgiama į skirtingus šešėlinės ekonomikos veiksnius ir priežastis, o kai kuriais atvejais dėl duomenų (kai kurių reiškinių patikimų kiekybinių tyrimų) nebuvimo tam tikrų veiksnių įtaka šešėlinės ekonomikos vystymuisi lieka neįvertinta. mokslinėje literatūroje pateikiamų tyrimų rezultatų analizė leido susisteminti šešėlinės ekonomikos veiksnius ir priežastis juos suklasifikuojant į tris grupes: ekonominius, teisinius administracinius ir socialinius psichologinius. tokia klasifikacija nesudaro galimybių įvertinti, kurie šešėlinės ekonomikos veiksniai ir priežastys yra svarbiausi šešėlinei ekonomikai atsirasti, taip pat neatskleidžia kiekvieno iš jų svarbos šešėlinės ekonomikos kaitai. visi šie veiksniai ir priežastys kompleksiškai veikia šalies šešėlinės ekonomikos tendencijas. be to, įvairiose šalyse tam tikrų veiksnių ir priežasčių svarba šešėlinės ekonomikos egzistavimui ir plitimui gali būti skirtinga (krumplytė 2008b). straipsnyje nagrinėjama problema – kokie veiksniai ir priežastys daro didžiausią įtaką šešėlinės ekonomikos vystymuisi lietuvoje. straipsnio tikslas – remiantis atlikto ekspertinio vertinimo rezultatais nustatyti svarbiausius lietuvos šešėlinės ekonomikos veiksnius ir priežastis bei pateikti galimus šešėlinės ekonomikos mažinimo būdus. tyrimo metodai: loginė lyginamoji analizė ir sintezė, ekspertinis vertinimas, statistinis duomenų sisteminimas ir apibendrinimas. teoriniai tyrimo pagrindai. dauguma mokslinėje literatūroje pateikiamų šešėlinės ekonomikos veiksnių ir priežasčių tyrimų pasižymi tam tikra specifika – siekiama nustatyti tam tikro pasirinkto šešėlinės ekonomikos veiksnio įtaką šešėlinei ekonomikai. toliau pateikiama dažniausiai mokslinėje literatūroje nagrinėjamų šešėlinės ekonomikos veiksnių ir priežasčių tyrimų rezultatų apžvalga. kelis dešimtmečius pagrindiniu šešėlinės ekonomikos formavimosi veiksniu buvo laikoma per didelė mokesčių našta. šio veiksnio įtaka šešėlinės ekonomikos vystymuisi grindžiama lafero kreive, kuri parodo, kad esant santykinai nedidelei mokesčių naštai šešėlinės ekonomikos mastas yra mažas, o mokesčių naštai viršijus optimalią ribą šešėlinė ekonomika didėja, todėl mažėja į šalies biudžetą surenkamos mokestinės pajamos (misiūnas 1999; schneider, klinglmair 2004; schneider, enste 2002a; 2002b; rosser 2006). pažymėtina, 124 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a kad sudėtinga įvertinti, kokia mokesčių našta šalies rinkos dalyviams gali būti priimtina ir laikoma teisinga, nes skiriasi įvairių mokesčių tarifai ir subjektai. vėliau mokslinėje ir specialiojoje literatūroje bandyta paneigti mokesčių naštos kaip šešėlinės ekonomikos veiksnio itin didelę svarbą. užsienio šalių praktika rodo, kad tos šalys, kuriose didelė mokesčių našta, apie 52–55 % (pvz., švedija, danija, suomija), įtrauktos į pasaulyje pirmaujančių šalių dešimtuką, laikomos konkurencingiausiomis ir jose nėra išplitusi šešėlinė ekonomika. priešinga situacija, kai šalyse, kuriose mokesčių našta yra santykinai maža, iki 20 % bvp, (pvz., gruzija, meksika), šešėlinė ekonomika sudaro daugiau nei 60 % bvp (krumplytė 2008b). m. e. sharpe (2007) teigimu, šalies biudžeto mokestinių pajamų sumažėjimas padidėjus mokesčių tarifams rodo ne tik oficialiai apskaitomos ekonomikos lėtėjimą, bet kartu yra ekonomikos dalyvių nepasitenkinimo aukštais mokesčių tarifais pasekmė. nepasitenkinimas mokesčių tarifų padidinimu lemia ekonomikos dalyvių sprendimus „pereiti“ į šešėlinę ekonomiką ir išvengti mokesčių. dauguma autorių (schneider 2000, 2005; schneider, enste 2000, 2002a, 2002b; thomas 1992, 2000; lippert, walker 1997; johnson et al. 1997; tanzi 2002, 2006; giles 1997a, 1997b, 1999a, 1999b; giles, tedds 2002; mummert, schneider 2001 ir kt.), tyrinėjusių mokesčių naštos ir šešėlinės ekonomikos priežastingumą, pažymi, kad nagrinėjant šešėlinės ekonomikos priežastis reikia vertinti ne visą mokesčių naštą, bet atskirai tiesioginių mokesčių (įskaitant socialinio draudimo įmokas) ir netiesioginių mokesčių tarifų įtaką skirtingų ekonomikos dalyvių grupių elgsenos pokyčiams. prie svarbiausių šešėlinės ekonomikos veiksnių priskiriama pajamų nelygybė (ji vertinama skaičiuojant gini koeficientą, grafiškai vaizduojamą lorenzo kreive). įvairių autorių (j. b. rosser, m. v. rosser, e. ahmed, f. schneider) tyrimais nustatyta, kad yra stiprus ryšys tarp pajamų nelygybės ir šešėlinės ekonomikos. taip pat pažymima, kad nėra tiesioginio ryšio tarp mokesčių tarifų ir šešėlinės ekonomikos, tačiau nustatytas stiprus ryšys tarp mokesčių tarifų ir pajamų lygybės (rosser et al. 2000; schneider 2000, 2005). e. valentini (2007) pažymi, kad pajamų nelygybė gali padidinti socialinį „susvetimėjimą“ (atitolimą nuo socialinės sistemos) ir paskatinti pasitraukimą iš oficialios ekonomikos. toks „susvetimėjimas“ skatina norą vengti mokesčių ir nefinansuoti viešosios politikos. tyrimuose akcentuojama, kad šešėlinės ekonomikos augimas rodo tam tikrą pajamų slėpimą (jų nedeklaruojant valdžios institucijoms), tačiau nėra jokių priežasčių manyti, kad šis pajamų slėpimas yra proporcingas visose asmenų, gaunančių skirtingas pajamas, grupėse (chong, gradstein 2007). verslas, vadyba ir studijos 2009 125 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a e. valentini tai vadina vengimo efektu, kurio kryptis nežinoma: jei pajamų slėpimas yra didesnis neturtingesnių asmenų, gaunama teigiama šešėlinės ekonomikos ir pajamų nelygybės priklausomybė, ir atvirkščiai. be to, gebėjimas išvengti mokesčių (nuslėpti pajamas) įvairių žmonių kategorijų (tarnautojų, individualią veiklą vykdančių asmenų, samdomų darbuotojų) yra skirtingas, o tai komplikuoja bet kokį spėjimą apie pajamų slėpimo ir apskaičiuotos pajamų nelygybės priklausomybę. kita vertus, tam tikras šešėlinės ekonomikos mastas, rodantis tam tikrą pajamų (darbo užmokesčio) slėpimo lygį, gali pakoreguoti pajamų nelygybės indeksus (valentini 2007). pajamų nelygybės veiksnys, „veikiantis“ per socialinius ir psichologinius veiksnius, daro įtaką mokesčių moralei ir yra svarbesnis motyvas pereiti į šešėlinę ekonomiką negu aukšti mokesčių tarifai (torgler 2003b; schneider 2006, 2007). mokesčių moralė apibrėžiama kaip piliečių požiūris į šalies socialinę politiką (socialinę apsaugą, visuomeninių poreikių patenkinimo lygio kilimą, sveikatos apsaugos kokybę), vertinant šiai sričiai skiriamą šalies biudžeto pajamų dalį (torgler 2003b; tsakumis at al. 2007). kai didelė mokesčių našta yra psichologiškai kompensuojama mokesčių mokėtojų požiūriu, teisingomis socialinės politikos priemonėmis, tuomet kyla mokesčių moralės lygis (krumplytė 2008a). tyrimais nustatyta, kad mokesčių moralės lygis priklauso nuo mokesčių administravimo sistemos ir mokesčių administratorių elgsenos modelio: esant stipresnei kontrolei ir taikant priverstines mokesčių išieškojimo priemones, formuojasi žemesnė mokesčių moralė nei tais atvejais, kai kontrolės intensyvumas yra mažesnis bei mokesčių mokėtojų ir mokesčių administratorių bendradarbiavimas yra glaudesnis (uslaner 2003; torgler 2003b, 2003c; frey, torgler 2007). taip pat pažymima, kad silpna mokesčių kontrolė ir glaudus mokesčių administratorių ir mokesčių mokėtojų bendradarbiavimas sudaro galimybes vengti mokesčių ir juos slėpti (alm, torgler 2006; torgler, schneider 2007, 2009). mokesčių moralės lygis priklauso ne tik nuo vyriausybės ir mokesčių mokėtojų bendradarbiavimo glaudumo, mokesčių mokėtojų požiūrio į jų sumokėtų mokesčių teisingą panaudojimą šalies piliečių gerovės didinimui, bet ir valdžios institucijų darbo kokybės, kuri daugeliu atvejų yra glaudžiai susieta su korupcijos lygiu šalyje ir jos tendencijomis. nustatyta, kad egzistuoja stiprus ryšys tarp korupcijos lygio ir šešėlinės ekonomikos masto (gillman, kejak 2005; tanzi 2006). šis teigiamas ryšys gali būti grindžiamas tuo, kad abu reiškiniai (korupcija ir šešėlinė veikla) yra sąlygoti bendro veiksnio – silpnos teisminės sistemos (eilat, zinnes 2002; ahmed et al. 2007; bose, echazu 2007; buehn, schneider 2009; schneider 2006, 2007). teigiama, kad šalyse, kuriose valstybinės įstaigos efektyviai vykdo 126 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a savo funkcijas, yra mažesnė šešėlinė ekonomika, o šalyse, kuriose vyriausybė neužtikrina efektyvaus ir sąžiningo teisėtvarkos bei mokesčių administravimo funkcijų vykdymo, jos vystymasis yra spartesnis (choi, thum 2002, 2005; uslaner 2008). reguliavimo intensyvumas (dažnai vertinamas įstatymų ir įvairių ekonominės veiklos taisyklių, kuriomis licencijuojama ekonominė veikla, įvedami darbo rinkos apribojimai ir pan., kiekiu) taip pat laikomas vienu svarbiausių šešėlinės ekonomikos veiksnių (bouev 2002; dreher et al. 2009). nustatyta, kad šalyse, kuriose ekonomika stipriau reguliuojama, yra didesnis šešėlinės ekonomikos mastas. vyriausybės reguliavimas, pasireiškiantis reikalavimais įsigyti licencijas ekonominei veiklai, darbo rinkos reguliavimu, tam tikrais prekybos barjerais, lemia darbo jėgos sąnaudų didėjimą, mažina ekonomikos dalyvių laisvę ir priverčia tam tikrą dalį žmonių „pereiti“ į šešėlinę ekonomiką (johnson et al. 1997; enste 2003). tiriant 76 išsivysčiusių, pereinamojo laikotarpio ir besivystančių šalių ekonomiką nustatyta, kad reguliavimo indekso padidėjimas vienu punktu (jis vertinamas nuo 1 iki 5, čia 5 – aukščiausias reguliavimo lygis šalyje) lemia šešėlinės ekonomikos padidėjimą 10 procentų. šie rezultatai rodo, kad šalies vyriausybė turi padėti labiau išryškinti sumažėjusį reguliavimo intensyvumą arba bent jau esamų reguliavimo priemonių (įstatymų, taisyklių, reglamentų) patobulinimus, užuot didinusios teisės aktų skaičių. tačiau kai kurios vyriausybės, bandydamos sumažinti šešėlinę ekonomiką, teikia pirmenybę pastarajai politikai (daugiau taisyklių ir įstatymų) dažniausiai todėl, kad padidintų valdžios biurokratų skaičių ir pademonstruotų „kovą už teisėtvarką“, kuri gali būti naudinga tik biurokratiniam aparatui, tačiau iš esmės nerodo mokesčių ir socialinės apsaugos sistemos reformų (schneider 2000, 2005). be to, bandymai sumažinti šešėlinės ekonomikos mastą gali būti nerezultatyvūs, jei pasirinktos teisinio reguliavimo ar kitokio pobūdžio priemonės, nukreiptos tik į tam tikras atskiras ekonomikos dalyvių grupes. bet koks šešėlinei ekonomikai priskirtinas reiškinys (pvz., nelegalus darbas, pardavimo pajamų neįtraukimas į oficialią apskaitą ir kt.) vyksta dalyvaujant mažiausiai dviems ekonomikos subjektams. dažniausiai šešėliniais ekonominiais santykiais susijusių asmenų tinklas yra labai platus – šešėlinės ekonomikos dalyviai sukuria sudėtingas veiksmų schemas, įtraukdami kelis ekonomikos subjektus, siekdami įvairiais būdais paslėpti oficialiai neapskaitytas pajamas nuo kontroliuojančių institucijų, vengdami akivaizdžių buhalterinės apskaitos taisyklių pažeidimų (lippert, walker 1997; boeri, garibaldi 2006). verslas, vadyba ir studijos 2009 127 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a be jau nagrinėtų, mokslinėje ir specialiojoje literatūroje išskiriami tokie šešėlinės ekonomikos veiksniai ir priežastys: 1) darbo paklausos ir pasiūlos nesuderinamumas; 2) žymus vidutinio ir minimalaus šalies darbo užmokesčių atotrūkis; 3) legalių darbo santykių ribojimas; 4) konkurencinių sąlygų iškreipimas, įvedant mokesčių lengvatas ir apribojimus; 5) teisės aktų spragos, dažna teisės aktų kaita; 6) mokesčių administravimo sudėtingumas, nelankstumas ir neefektyvumas; 7) nepasitikėjimas šalies vyriausybe, nepasitenkinimas valdžios institucijų darbo kokybe; 8) socialinės politikos neefektyvumas ir neadekvatus socialinių paslaugų paskirstymas; 9) nepakankamas švietimas ir informavimas mokesčių klausimais, neadekvati šešėlinės ekonomikos prevencija; 10) šešėlinių neekonominių santykių plėtra (lobizmas), šešėlinės visuomenės formavimasis; 11) neigiami gyventojų lūkesčiai dėl šešėlinės ekonomikos sumažėjimo; 12) transformacijų įtaka, gyventojų mentalitetas, kultūriniai ypatumai. išsami šešėlinės ekonomikos veiksnių ir priežasčių analizė pateikta kito autorės tyrimo apžvalgoje (krumplytė 2008b). remiantis šešėlinės ekonomikos veiksnių ir priežasčių klasifikacija, buvo sudarytas apklausos klausimynas, kuris naudotas atliekant lietuvos šešėlinės ekonomikos veiksnių ir priežasčių empirinį tyrimą. 2. lietuvos šešėlinės ekonomikos veiksnių ir priežasčių tyrimo rezultatai siekiant nustatyti, kurie mokslinėje literatūroje nagrinėjami šešėlinės ekonomikos veiksniai ir priežastys yra svarbiausi lietuvos atveju, atliktas ekspertinis vertinimas. jis buvo vykdomas 2009 m. rugpjūčio–rugsėjo mėn. anoniminio anketavimo būdu, taikant nuotolinį principą (naudojant specialiai sukurtą taikomąją programinę priemonę). tyrimo metu apklausti ekspertai – valstybinės mokesčių inspekcijos (centrinio mokesčių administratoriaus ir apskričių valstybinių mokesčių inspekcijų) darbuotojai, turintys patirtį atliekant mokesčių mokėtojų patikrinimus ir mokestinius tyrimus (apimančius vizitavimą ir nuolatinės veiklos kontrolės veiksmus). tyrime dalyvavo 702 ekspertai (93 % potencialių ekspertų). daugumos apklaustų ekspertų (73 %) darbo patirtis mokesčių mokėtojų kontrolės srityje – ne mažesnė nei penkeri metai. siekiant identifikuoti dalyvavimo šešėlinėje ekonomikoje motyvus ekspertams buvo pateikti du klausimai, išskiriant tokias grupes: ekonomikos subjektus, kurie pradeda dalyvauti šešėlinėje ekonomikoje, ir ekonomikos subjektus, kurie jau seniai dalyvauja šešėlinėje ekonomikoje ir jų šešėlinė ekonominė veikla yra santykinai didelio masto. 128 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a kitais klausimais siekta įvertinti tam tikrų šešėlinės ekonomikos veiksnių ir priežasčių svarbą. ekspertai turėjo nurodyti pateiktų šešėlinės ekonomikos veiksnių (lemiančių šešėlinės ekonomikos atsiradimą) ir priežasčių (lemiančių šešėlinės ekonomikos reiškinių plitimą) santykinį įtakos stiprumą (naudota atsakymų stiprumo skalė nuo 1 iki 5: 1 – veiksnys (priežastis) nedaro jokios įtakos, 5 – daro labai didelę įtaką). siekiant išvengti itin reikšmingų veiksnių ir priežasčių praleidimo rizikos, buvo pateiktas atviro tipo klausimas, ekspertams suteikiant galimybę nurodyti svarbius ankstesniuose atsakymuose į klausimus nepaminėtus veiksnius ir priežastis. kitoje apklausos klausimyno dalyje buvo pateikti klausimai apie šešėlinės ekonomikos mažinimo būdus ir priemones. ekspertų buvo prašoma įvertinti, kokie kovos su šešėline ekonomika lietuvoje būdai ir priemonės būtų efektyviausi. iš anksto numatyta, kad viena iš dažniausiai ekspertų nurodytų priemonių gali būti mokesčių naštos mažinimas. todėl atskiru klausimu siekta išsiaiškinti, kokių mokesčių rūšių sumažinimas daugiausiai lemtų šalies šešėlinės ekonomikos masto mažėjimą. tyrimo hipotezė – šešėlinės ekonomikos vystymuisi lietuvoje didžiausią įtaką daro nuo 2009 m. pradžios padidėjusi mokesčių našta ir žema mokesčių moralė (šalies piliečių pakantumas šešėlinės ekonomikos reiškiniams). dalyvavimo šešėlinėje ekonomikoje motyvai. remiantis atlikto tyrimo rezultatais, ekspertų nuomone, lietuvoje ekonomikos dalyviai pradeda vykdyti šešėlinę ekonominę veiklą dažniausiai dėl to, kad neturi kitos išeities (neatlaikytų konkurencijos, fiziniai asmenys neturėtų lėšų pragyvenimui ir pan.) (nurodė 41,9 % ekspertų). šis motyvas svarbiausias ir tiems, kurių dalyvavimas šešėlinėje ekonomikoje yra santykinai didelio masto (nurodė 41,2 % ekspertų). tai leidžia daryti prielaidą, kad šešėlinė ekonomika lietuvoje gali būti santykinai didelio masto, nes ekonomikos subjektai dalyvavimą šešėlinėje ekonomikoje sieja su vienodų konkurencinių sąlygų išlaikymu ir išlikimo rinkoje galimybėmis. jei tam tikra dalis rinkos dalyvių į šešėlinę ekonomiką pereina būtent dėl šios priežasties, tikėtina, kad ekonomikos sunkmečio sąlygomis šešėlinės ekonomikos vystymasis gali būti itin spartus. kitas itin reikšmingas dalyvavimo šešėlinėje ekonomikoje motyvas – piktybiškos paskatos, siekiant didesnio pelno. atsakyme į klausimą apie ekonomikos subjektus, pradedančius dalyvauti šešėlinėje ekonomikoje, svarbiausiu motyvu tai nurodė 27,5 % ekspertų, o atsakyme į klausimą apie anksčiau šešėlinę veiklą pradėjusius ekonomikos dalyvius – 29,3 % ekspertų. verslas, vadyba ir studijos 2009 129 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a dar vienas svarbus dalyvavimo šešėlinėje ekonomikoje motyvas – šešėlinės ekonomikos dalyvių veiksmai, kuriais skatinamas kitų ūkio subjektų įtraukimas į šešėlinę ekonomiką (pavyzdžiui, siūlant neįtraukti tam tikro sandorio rezultatų į oficialią apskaitą ir pan.). šį motyvą kaip svarbiausią nagrinėjamoms ekonomikos subjektų grupėms nurodė šiek tiek daugiau nei penktadalis ekspertų (atitinkamai 21,5 % ir 20,5 %). abu dalyvavimo šešėlinėje ekonomikoje motyvai iš dalies reprezentuoja šalies mokesčių moralės lygį – siekimą gauti didesnį pelną išvengiant mokesčių ir tam tikrą šalies socialinės ir ekonominės politikos interesų ignoravimą. svarbiausi lietuvos šešėlinės ekonomikos veiksniai ir priežastys. tyrimo rezultatai atskleidė, kad didelę ir labai didelę įtaką (naudota atsakymų stiprumo skalė, reikšmių intervalas – nuo 1 iki 5) šešėlinės ekonomikos atsiradimui turi: per didelė mokesčių našta (nelegalaus darbo atveju – žymus bruto ir neto darbo užmokesčio skirtumas) (įvertinimus „4“ arba „5“ pasirinko 72,8 % ekspertų, svertinis reikšmių vidurkis – 4,07), teisės aktų spragos, dažna teisės aktų kaita (atitinkamai 68,4 % ir 3,93), pajamų nelygybė ir augantis skurdo lygis (atitinkamai 60,4 % ir 3,73), nepasitikėjimas šalies vyriausybe, nepasitenkinimas valdžios institucijų darbo kokybe (58,7 % ir 3,66), korupcijos lygis ir palankus visuomenės požiūris į korupciją (atitinkamai 55,6 % ir 3,58), žema moralė mokesčių mokėjimo srityje ir jos plitimas (atitinkamai 54 % ir 3,49). santykinai nedidelės ekspertų dalies (nuo 4,8 % iki 11,4 % vertinant pagal šešėlinės ekonomikos veiksnius) teigimu, išvardyti veiksniai nedaro įtakos šešėlinės ekonomikos atsiradimui. ekspertų vertinimais, lietuvoje šešėlinės ekonomikos atsiradimui nedaro įtakos (atsakymų stiprumo skalėje pasirinkta reikšmė „1“) tokie veiksniai: legalių darbo santykių ribojimas (nurodė 35,9 % ekspertų, svertinis atsakymų reikšmių vidurkis – 2,32), per griežtas (arba nepakankamas) teisinis ir administracinis reguliavimas (28,9 % ekspertų, vidurkis – 2,56), tarpžinybinės duomenų bazės apie teisės pažeidimus nebuvimas, nepakankama duomenų ir informacijos sklaida (28,1 %, vidurkis – 2,57), nepakankamas švietimas ir informavimas mokesčių klausimais bei neadekvati šešėlinės ekonomikos prevencija (27,9 %, vidurkis – 2,59). kita vertus, šiuos veiksnius kaip itin svarbius (darančius labai didelę įtaką) nurodė nuo 12,5 % iki 15,1 %. tai rodo, kad ekspertų nuomonė apie šių veiksnių įtaką šešėlinės ekonomikos atsiradimui yra gana skirtinga. tyrimo rezultatus vertinant struktūriniu požiūriu, nustatyta, kad didžiausią įtaką šešėlinės ekonomikos atsiradimui daro socialiniai psichologiniai veiksniai (bendras vidurkis – 3,41, reikšmių vidurkiai kinta nuo 2,9 iki 3,66), šiek tiek mažesnę 130 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a įtaką – ekonominiai veiksniai (bendras vidurkis – 3,2, reikšmių vidurkiai kinta nuo 2,32 iki 4,07), o teisiniai ir administraciniai veiksniai daro mažiausią įtaką (bendras vidurkis – 2,94, reikšmės kinta nuo 2,56 iki 3,93). tyrimo rezultatų analizė atskleidė, kad šešėlinės ekonomikos vystymuisi labai didelę įtaką daro (naudota atsakymų stiprumo skalė, reikšmių intervalas – nuo 1 iki 5) tokios priežastys: įmonės akcininkų, savininkų nuostatos, siekis gauti kuo didesnį pelną (nurodė 70,1 % ekspertų, reikšmių vidurkis – 3,98), darbuotojai sutinka gauti neoficialius mokėjimus (atitinkamai – 69,8 % ir 3,99). taigi šešėlinės ekonomikos vystymuisi itin svarbios yra socialinės ir psichologinės priežastys. tai patvirtina tokias teorines įžvalgas: pasitraukimas iš šešėlinės ekonomikos siekiant pereiti į skaidrų verslą gali būti sudėtingas dėl šešėlinės ekonomikos dalyvių tinklo – skirtingo statuso asmenų tarpusavio ryšių, susiformavusių per tam tikrą laiką. taigi, jei įmonės vadovas pasiryžtų atsisakyti šešėlinės ekonominės veiklos, jo ryžtas gali būti nuslopintas tiek aukštesnio rango vadovų (įmonės akcininkų, savininkų), tiek jiems pavaldžių asmenų (įmonės darbuotojų). ekspertų vertinimais, ekonominės priežastys (per dideli mokesčiai, per daug mokesčių rūšių) taip pat yra labai reikšmingos šešėlinės ekonomikos vystymuisi (atsakymų reikšmių vidurkiai – 3,8 ir 3,63). tačiau šios priežastys daro mažesnę įtaką ekonomikos dalyviams, kurie seniai pradėjo vykdyti šešėlinę ekonominę veiklą, negu naujiesiems šešėlinės ekonomikos dalyviams (klausiant apie šešėlinės ekonomikos atsiradimą, per didelė mokesčių našta atsakymų reikšmių vidurkis žymiai didesnis – 4,07). tai galima pagrįsti tokia logine išvada: ekonomikos dalyviai, kurie seniai pradėjo vykdyti šešėlinę ekonominę veiklą, yra mažiau jautrūs mokesčių naštos pasikeitimams, nes jie mokesčių nemokėjo nei tuomet, kai mokesčių tarifai buvo mažesni, nei tuomet, kai mokesčių našta padidėjo. teisinio ir administracinio pobūdžio priežastys daro santykinai mažesnę įtaką (pavyzdžiui, priežasties dviprasmiški įstatymai, leidžiantys juos interpretuoti sau palankiu būdu atsakymų vidurkis – 3,69, kad ši priežastis daro didelę ir labai didelę įtaką nurodė 58,1 % ekspertų, lengvai apeinami įstatymai – atitinkamai 3,65 ir 55,4 %). ekspertų vertinimais, lietuvoje šešėlinės ekonomikos vystymuisi nedaro įtakos arba daro nedidelę įtaką (atsakymų stiprumo skalėje pasirinktos reikšmės „1“ arba „2“) tokios priežastys: komplikuota buhalterinė apskaita (nurodė 49,9 % ekspertų, atsakymų reikšmių vidurkis – 2,65), nelankstus darbo kodeksas (darbo laiko, darbo užmokesčio, atleidimo iš darbo ir kitos sąlygos) (41 % ekspertų, vidurkis – 2,96). verslas, vadyba ir studijos 2009 131 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a apibendrinus ekspertų pateiktus veiksnius ir priežastis (atviro tipo klausimas), nustatyta, kad dažniausiai ekspertai akcentuoja teisinio ir administracinio pobūdžio priežastis: nepakankamai efektyvi mokesčių mokėtojų kontrolė – ; pernelyg sudėtinga mokesčių sistema – , dažna teisės aktų kaita; teisės aktų spragos, sudarančios sąlygas mokesčių nemokėjimui ir sukčia– vimui, neteisėtam mokesčių skirtumo susigrąžinimui iš biudžeto; visuotinio pajamų ir turto deklaravimo nebuvimas; – lengvai apeinami įstatymai, tuo naudojasi tam tikros ekonomikos subjektų – grupės, kurios įtraukia kitus rinkos dalyvius į šešėlinius sandėrius. kaip itin svarbi šešėlinės ekonomikos vystymosi priežastis nurodoma sudėtinga šalies ekonomikos situacija: didelis nedarbas, žemas pragyvenimo lygis, padidėjusi mokesčių našta, mokesčių lengvatų nebuvimas pradedantiesiems verslininkams. dažniausiai minimos socialinės ir psichologinės šešėlinės ekonomikos priežastys – ekonomikos dalyvių noras greitai praturtėti, visuomenės tolerancija šešėlinės ekonomikos reiškiniams, susiformavusi nebaudžiamumo iliuzija dėl sudėtingos mokestinių ginčų praktikos (šešėlinės veiklos įrodymo ir apmokestinimo proceso). dauguma ekspertų pažymi, kad šešėlinės ekonomikos vystymąsi lemia ne viena priežastis, o jų visuma. kovos su šešėline ekonomika lietuvoje būdai ir priemonės. siekiant sustabdyti šešėlinės ekonomikos vystymąsi, būtina numatyti adekvačius kovos su ja būdus ir priemones, nukreiptas į šešėlinės ekonomikos veiksnių ir priežasčių šalinimą ar jų poveikio mažinimą. 1 paveiksle pateikiamos galimos lietuvos šešėlinės ekonomikos masto mažinimo priemonės (nurodoma ekspertų, pasirinkusių tam tikrą atsakymą (galimi trys atsakymų variantai), dalis, proc.). tyrimo rezultatų analizė atskleidė, kad veiksmingiausi galėtų būti ekonominiai bei teisiniai ir administraciniai kovos su šešėline ekonomika būdai: mokesčių mažinimas (nurodė 66,2 % ekspertų), mokesčių įstatymų pastovumas (46,8 %), teisės aktų aiškumas, galimybės įvairiai interpretuoti teisės aktų nuostatas panaikinimas (38,1 %), bausmės už teisės pažeidimus neišvengiamumas (30,8 %). mokesčių mažinimo priemonės populiarumą galima paaiškinti taip: sudėtingomis ekonomikos sąlygomis (itin sumažėjus įmonių pardavimo pajamoms ir pelnui) nuo 2009 m. pradžios lietuvoje padidėjusi mokesčių našta tiek finansiškai, tiek psichologiškai tapo nepakeliama tam tikrai daliai ekonomikos dalyvių ir paskatino užsiimti šešėline veikla, siekiant išvengti mokesčių. tokią prielaidą patvirtina anksčiau minėti tyrimo rezultatai – svarbiausias motyvas 132 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a pereiti į šešėlinę ekonomiką, ekspertų vertinimais, yra siekimas išlikti rinkoje (atlaikyti konkurenciją, užsidirbti lėšų pragyvenimui). ekspertų vertinimais, didžiausią efektą, siekiant sumažinti šešėlinės ekonomikos mastą, duotų tokių mokesčių sumažinimas (remiantis nuo 2009 m. galiojančiais mokesčių tarifais): pridėtinės vertės mokesčio (nurodė 74,4 % ekspertų), akcizo (42,9 %), gyventojų pajamų mokesčio (37,5 %) ir darbdavio mokamų valstybinio socialinio draudimo įmokų (33,2 %). mažiau nei trečdalis (28,3 %) ekspertų vienu iš trijų svarbiausių mokesčių, kuriuos reikėtų sumažinti, nurodė pelno mokestį, šiek tiek daugiau nei penktadalis (20,9 %) ekspertų – valstybinio socialinio draudimo įmokas (tiek asmenims, dirbantiems pagal darbo sutartis, tiek savarankiškai ekonomine veikla užsiimantiems). tik 2,7 % ekspertų nurodė, kad mokesčių mažinimas neturės įtakos šešėlinės ekonomikos masto mažėjimui. kas galėtų paskatinti lietuvos ekonomikos subjektus atsisakyti šešėlinės ekonomikos? 23,7 % 12,2 % 17,9 % 30,8 % 15,3 % 38,1 % 46,8 % 12,6 % 16,0 % 13,0 % 1,7 % 66,2 % a b c d e f g h i j k l žymėjimai: a – viešas nesąžiningų (šešėlinę ekonomiką propaguojančių) įmonių skelbimas; b – mokesčių mažinimas; c – paprastesnės buhalterinės apskaitos tvarkos reglamentavimas; d – griežtesnės bausmės už teisės pažeidimus; e – bausmės už teisės pažeidimus neišvengiamumas; f – kontrolės funkcijas vykdančių institucijų kontrolės darbo išplėtimas (dažnesni įmonių patikrinimai ir pan.); g – teisės aktų aiškumo didinimas, galimybės įvairiai interpretuoti teisės aktų nuostatas panaikinimas; h – mokesčių įstatymų pastovumas; i – mokesčių lengvatų, išimčių sumažinimas; j – visuotinio gyventojų pajamų deklaravimo įteisinimas; k – visuotinio turto deklaravimo įteisinimas; l – kita. 1 pav. galimos lietuvos šešėlinės ekonomikos masto mažinimo priemonės fig. 1. the possible reduction measures of lithuanian shadow economy verslas, vadyba ir studijos 2009 133 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a ekspertų vertinimais, pakankamai veiksminga priemonė, siekiant sumažinti šešėlinės ekonomikos mastą, yra viešas nesąžiningų (šešėlinėje ekonomikoje dalyvaujančių) įmonių skelbimas (nurodė 23,7 % ekspertų). mažiau svarbioms šešėlinės ekonomikos mažinimo priemonėms priskiriamos šios: griežtesnės bausmės už teisės pažeidimus įteisinimas (nurodė 17,9 % ekspertų), visuotinio gyventojų pajamų deklaravimo įteisinimas (16 %), kontrolės funkcijas vykdančių institucijų darbo išplėtimas (dažnesni įmonių patikrinimai ir pan.) (15,3 %), visuotinio turto deklaravimo įteisinimas (13 %). apibendrinant pažymėtina, kad tyrimo hipotezė pasitvirtino. nuo 2009 m. pradžios padidėjusi mokesčių našta esant sudėtingoms šalies ekonomikos sąlygoms ekspertų vertinimais yra viena svarbiausių šešėlinės ekonomikos vystymosi lietuvoje priežasčių. šešėlinės ekonomikos atsiradimui didžiausią įtaką daro socialiniai ir psichologiniai veiksniai (nepasitikėjimas šalies vyriausybe, nepasitenkinimas valdžios institucijų darbo kokybe, didelė korupcija ir palankus visuomenės požiūris į ją, žema mokesčių moralė bei jos plitimas). 3. išvados atlikus mokslinio potencialo analizę, identifikuoti tokie svarbiausi šešėlinės ekonomikos veiksniai ir priežastys: pajamų nelygybė, šalies ekonominės tvarkos neracionalumas, korupcija, per griežtas (arba nepakankamas) teisinis ir administracinis reguliavimas, teisės aktų spragos, mokesčių administravimo sistemos trūkumai, nepakankamas valdžios dėmesys socialinei politikai arba neracionalus jos plėtojimas. šešėlinės ekonomikos veiksniai ir priežastys įvairiose šalyse gali daryti skirtingą įtaką šešėlinės ekonomikos atsiradimui ir vystymuisi. negalima išskirti vieno veiksnio ar priežasties, turėjusios didžiausią įtaką šešėlinei ekonomikai, nes šešėlinių ekonominių santykių raidą lemia kompleksiškai susijusių ekonominių, teisinių ir administracinių bei socialinių ir psichologinių veiksnių bei priežasčių visuma. atlikto ekspertinio vertinimo rezultatai parodė, kad lietuvoje šešėlinės ekonomikos atsiradimui (mikro lygiu vertinant – ekonomikos dalyvių perėjimo į šešėlinę ekonomiką sprendimams) ir šešėlinės ekonomikos vystymuisi (mikro lygiu vertinant – ekonomikos dalyvių, kurie santykinai ilgai dalyvauja šešėlinėje ekonomikoje, elgsenos pokyčiams) didžiausią įtaką daro socialiniai ir psichologiniai, šiek tiek mažesnę – ekonominiai veiksniai. nustatyta, kad lietuvoje svarbiausias dalyvavimo šešėlinėje ekonomikoje motyvas – siekimas išlikti rinkoje (įmonėms – atlaikyti konkurenciją, fiziniams 134 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a asmenimis – užsidirbti pragyvenimui būtinų lėšų ir pan.). senųjų šešėlinės ekonomikos dalyvių (kurie seniai pradėjo vykdyti šešėlinę ekonominę veiklą ir tokia jų veikla yra santykinai didelio masto) elgsenai daugiau įtakos daro piktybiškos paskatos, siekiant didesnio pelno, o naujųjų šešėlinės ekonomikos dalyvių (kurie pradeda vykdyti šešėlinę ekonominę veiklą) veiksmus labiau lemia šie motyvai: siekimas išlikti rinkoje bei kitų šešėlinės ekonomikos dalyvių veiksmai, kurie skatina įsitraukti į šešėlinę ekonomiką. ekspertų vertinimais, svarbiausi lietuvos šešėlinės ekonomikos atsiradimo veiksniai – per didelė mokesčių našta (nelegalaus darbo atveju – žymus bruto ir neto darbo užmokesčio skirtumas), teisės aktų spragos, dažna teisės aktų kaita, nepasitikėjimas šalies vyriausybe, nepasitenkinimas valdžios institucijų darbo kokybe. pagrindinės šešėlinės ekonomikos vystymosi lietuvoje priežastys – įmonės akcininkų, savininkų nuostatos ir siekis gauti kuo didesnį pelną, darbuotojų sutikimas gauti neoficialius mokėjimus, padidėjusi mokesčių našta. siekiant sustabdyti lietuvos šešėlinės ekonomikos vystymąsi, veiksmingiausiais laikomi ekonominiai bei teisiniai ir administraciniai kovos su šešėlinės ekonomika būdai: mokesčių mažinimas, mokesčių įstatymų pastovumo siekimas, teisės aktų aiškumo didinimas, galimybės įvairiai interpretuoti teisės aktų nuostatas panaikinimas, bausmės už teisės pažeidimus neišvengiamumo užtikrinimas. literatūra ahmed, e.; 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schneider, f. 2007. shadow economy, tax morale, governance and institutional quality: a panel analysis [interaktyvus]. iza discussion paper. no. 2563. cesifo working paper series. no. 1923 [žiūrėta 2009 m. spalio 27 d.]. prieiga per internetą: <http://ssrn.com/abstract=960012>. torgler, b; schneider, f. 2009. the impact of tax morale and institutional quality on the shadow economy, journal of economic psychology 30(2): 228–245. tsakumis, g. t.; curatola, a. p.; porcano, t. m. 2007. the relation between national cultural dimensions and tax evasion, journal of international accounting, auditing and taxation 16(2): 131–147. uslaner, e. m. 2003. trust and corruption in transition [interaktyvus] [žiūrėta 2009 m. spalio 27 d.]. prieiga per internetą: <http://www.bsos.umd.edu/gvpt/uslaner/ uslanertrustandcorruptiontransition.ppt>. uslaner, e. m. 2008. corruption and inequality [interaktyvus]. research paper. no. 2006/34 [žiūrėta 2009 m. spalio 27 d.]. prieiga per internetą: <http://www. wider.unu.edu/stc/ repec/pdfs/rp2006/rp2006-34.pdf>. valentini, e. 2007. inequality and underground economy: a not so easy relationship. marche: università politecnica delle marche. 138 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a the shadow economy factors and causes analysis by expert evaluation method: case of lithuania j. krumplytė summary in the scientific literature the shadow economy is defined as a complex multifaceted set of phenomena, whose existence is determined by various factors and causes. the article examines the shadow economy through tax administration perspective. the author’s chosen object of the research encompasses economic activities, results of which such as tax evasion or concealment are not included in the official records. the shadow economy factors and reasons are economic, legal-administrative and socialpsychological. most of the time scientific research analyses the following shadow economy factors and causes: ▪ burden and rise of direct and indirect taxes and compulsory social insurance contribution; ▪ too stringent (or insufficient) legal and administrative regulation; ▪ weak government and a high level of corruption in the governmental sector; ▪ the income inequality (a high poverty level); ▪ the legislative gaps; ▪ the tax administration system deficiencies; ▪ irrational country’s economic policy; ▪ tax morale; ▪ insufficient government attention to social policy or irrational its development. the article presents the empirical study results about lithuanian shadow economy factors and causes. the survey was carried out by experts – lithuanian state tax inspection staff which has experience in inspecting taxpayers and conducting tax investigations. 702 experts took part in the research. according to experts’ estimations, companies and individuals enter into shadow economic activity mainly because they do not have any other way out (otherwise they won’t be able to stand up to competition, individuals won’t be able to make a living, etc.) as well as because other economy players pull them in. experts also estimate that the most important lithuanian shadow economy causes are the following: too big tax burden (in the case of illegal work – significant gross and net wage gap), gaps in legislation, frequent law changes, distrust of country’s government, dissatisfaction with the quality of work of governmental institutions. the main causes of the sprawl of the shadow economy – the inability to compete without being involved in the shadow economy, the lack of unified declaration of income and insufficient control of state institutions. keywords: shadow economy, tax, lithuania, factor, cause, expert evaluation method. verslas, vadyba ir studijos 2009 185 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a funkcinė analizė viešajame sektoriuje živilė tunčikienė zivile.tuncikiene@vgtu.lt vilniaus gedimino technikos universitetas, socialinės ekonomikos ir vadybos katedra giedrė buzaitė g.buzaite@gmail.com vilniaus gedimino technikos universitetas, finansų inžinerijos katedra 1. įvadas akivaizdu, kad visuomenei reikalingos demokratiškos, efektyviai naudojančios biudžetines lėšas, teikiančios kokybiškas viešąsias paslaugas, kartu stiprios, sugebančios atlaikyti globalinių jėgų spaudimą, valstybinės institucijos. piliečiai reikalauja, kad viešasis sektorius iš esmės atliktų socialinės ekonominės šalies plėtros iniciatoriaus vaidmenį. tokių visuomenės vis didėjančių reikalavimų viešajam sektoriui kontekste viešojo valdymo (administravimo) reformų uždaviniai yra sisteminis institucijų veiklos valdymo modernizavimas, viešojo ir privataus sektorių bendradarbiavimo gerinimas, kartu jų socialinės atsakomybės didinimas ir t. t. (domarkas 2005; backūnaitė 2006; timoshenko 2008). visuomenei itin aktuali per didelių viešojo sektoriaus išlaidų bei nepakankamai kokybiškų viešųjų paslaugų problema. siekiant mažinti viešojo sektoriaus išlaidas ir kartu gerinti viešųjų paslaugų kokybę, būtina grįsti institucijų veiklos būtinumą ir kartu adekvatumą besikeičiantiems aplinkos reikalavimams. siekiant išspręsti tokio pobūdžio uždavinius, viešajame sektoriuje vis tvirčiau įsigali tendencija taikyti verslo praktikoje patikrintas ir teigiamai pasitvirtinusias valdymo priemones (kaziliūnas 2004; staponkienė 2005; vienažindienė, čiarnienė 2007; ginevičius, bruzgė 2008; bivainis, tunčikienė 2009; jakaitis et al. 2009). viena svarbiausių iš privataus sektoriaus „pasiskolintų“ ir viešajam sektoriui pritaikytų efektyvaus valdymo priemonių yra strateginis planavimas (bivainis, tunčikienė 2007, 2009; karnitis, kucinskis 2009). © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai 186 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a rengiant viešojo sektoriaus institucijų strateginius veiklos planus ir jų įgyvendinimo priemones, būtina vadovautis valstybės plėtros prioriteto, rinkos kaip institucijų veiklos reguliatoriaus pagrįstumo ir kitais principais (bivainis, tunčikienė 2009; butkevičius, bivainis 2009; čiegis, ramanauskienė, martinkus 2009). siekiant įgyvendinti tokius principus, tikslinga taikyti funkcinės analizės metodą. funkcinė analizė viešajame sektoriuje – tai priemonė nustatyti viešojo sektoriaus veiklos efektyvumo didinimo galimybes. funkcinės analizės rezultatai − pagrindas rengti ir priimti racionalius viešojo sektoriaus institucijų sprendimus, tokios analizės rezultatų taikymas yra esminis veiksnys įgyvendinti galimybes pagrįstai naudoti visuomenės materialinius išteklius ir kartu maksimaliai tenkinti visuomenės poreikius. tyrimo tikslas – atskleisti funkcinės analizės esmę viešajame sektoriuje. tokio tikslo pasirinkimą lėmė aktuali viešojo sektoriaus veiklos neefektyvumo problema. tikslui pasiekti straipsnyje nagrinėjami įvairių mokslininkų bei praktikų pateikti funkcinės analizės tikslai ir uždaviniai, funkcinės analizės technologija, siūloma taikyti viešajam sektoriui. naudojamas kokybinis tyrimo metodas – mokslinės literatūros analizė, vertinimas ir apibendrinimas. 2. funkcinės analizės tikslai ir uždaviniai įvairiuose mokslinės literatūros šaltiniuose funkcinė analizė traktuojama kaip nevienalytis, kompleksinis metodas. jį sudaro visuma analizių, kurių tikslus priklauso nuo skirtingų probleminių sričių valstybinėse institucijose ir orientuojami į skirtingus siektinus viešojo administravimo reformos rezultatus. n. manning ir n. parison (2001) teigia, kad kiekvienos šalies vyriausybė nusistato funkcinės analizės uždavinius pagal biurokratiniam aparatui būdingas problemas. tam pritaria a. dudina ir m. sprindzuks (2006). funkcinė analizė gali būti suvokiama kaip viešosios politikos bei programų neefektyvumo analizė, neatsižvelgiant į struktūrinius viešojo sektoriaus aspektus, ir, atvirkščiai, kaip išsami viešojo sektoriaus organizacinės struktūros analizė, siekiant išsiaiškinti, kaip struktūros elementai galėtų efektyviau vykdyti funkcijas. pagal šalies valstybinėms institucijoms būdingų problemų specifiką išskiriami tokie funkcinės analizės akcentai (1 lentelė): viešosios politikos bei programų analizė. čia programos klasifikuojamos prioritetine tvarka pagal svarbą, sprendžiama, kurios veiklos nėra reikalingos, t. y. gali būti sustabdytos, be to, kurių veiklų efektyvus vykdymas reikalauja didžiausių pastangų. verslas, vadyba ir studijos 2009 187 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a produktyvumo analizė. šis tyrimas nėra orientuotas į viešosios politikos bei programų keitimą, o atliekamas pagal principą, kad aukštą produktyvumą gali užtikrinti ir viešojo sektoriaus institucijų organizacinės struktūros pokyčiai. bendresnio pobūdžio viešųjų programų ir efektyvumo analizė. dėmesys perkeliamas iš programų visumos nagrinėjimo į svarbiausių pagal prioritetą programų analizę ir restruktūrizavimo galimybių nagrinėjimą. tarpinė funkcinė ir institucinė analizė. šiuo atveju svarstomas kai kurių viešųjų programų performavimo, kai kurių veiklų eliminavimo, kai kurių administracinių vienetų restruktūrizavimo klausimai, iš esmės nekeičiant biurokratinio aparato. konkretesnio pobūdžio organizacinė analizė ir veiklos proceso reorganizavimas. šis tyrimas orientuotas į specifinių veiklų, paslaugų keitimą, eliminavimą ir detalų institucijų restruktūrizavimą. 1 lentelė. funkcinės analizės ir vyriausybės siekiamų tikslų sąsaja (manning, parison 2001) table 1. coherence of functional analysis and goals set by the government (manning, parison 2001) funkcinės analizės orientacija į organizacinę struktūrą nesiekiama organizacinio produktyvumo pagerinimo siekiama pagerinti visos vyriausybės produktyvumą siekiama pagerinti departamento ar institucijos produktyvumą siekiama pagerinti organizacijos dalies produktyvumą funkcinės analizės orientacija į viešąją politiką bei programas nesiekiama efektyvumo pagerinimo produktyvumo analizė efektyvumo pagerinimo siekiama apskritai arba konkrečiose programų grupėse viešosios politikos ir programų analizė bendresnio lygmens programų efektyvumo ir vyriausybės produktyvumo analizė individualios programos, vyriausybinio masto veikla tarpinė funkcinė ir institucinė analizė specifinė veikla ir paslaugos konkretesnio lygmens veiklos ir institucijų analizė 188 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a a. m. medvedev (медведев 2002) išskiria horizontaliąją ir vertikaliąją funkcines analizes, jų tikslus. horizontalioji funkcinė analizė apibūdinama kaip vykdomosios valdžios institucijų veiklos analizės priemonė, naudojama vertinant valdžios kišimąsi į institucijų veiklą bei institucijų veiklos dubliavimą įvairiose ekonomikos, visuomenės, jos grupių gyvenimo sferose. horizontalioji funkcinė analizė leidžia atsakyti į klausimą: „ar funkcija apskritai gali ir turi būti vykdoma, iš esmės nevertinant jos realizavimo kokybės ir efektyvumo?“. vertikalioji funkcinė analizė leidžia atsakyti į klausimą: „kokiu būdu galima padidinti funkcijos vykdymo kokybę ir efektyvumą, iš esmės nevertinant funkcijos tikslingumo ir reikalingumo?“. horizontaliosios funkcinės analizės rezultatas – nustatyti vykdomosios valdžios institucijų pertekliniai ar dubliuojantys įgaliojimai, kuriems panaikinti reikalingi pakeitimai normatyviniuose ir teisiniuose aktuose. vertikaliosios funkcinės analizės rezultatas yra numatomi struktūriniai institucijos pokyčiai ir kartu perėjimas prie efektyvesnių administracinių procesų. a. m. medvedev ir kitų darbų autoriai teigia, kad horizontalioji analizė taikoma ne kaip atskiras metodas, bet kaip priemonė surinkti duomenims, reikalingiems vertikaliajai analizei atlikti. v. p. petrov (петров 2002) šalia horizontaliosios ir vertikaliosios funkcinių analizių išskiria sisteminę funkcinę analizę. anot autoriaus, horizontalioji funkcinė analizė nagrinėja funkcijų pasiskirstymą tarp institucijų. tiriama, ar racionaliai paskirstyta kompetencija tarp valdžios lygmenų, ar nėra dubliavimo atvejų. vertikalioji funkcinė analizė leidžia nustatyti pagrindinių institucijos funkcijų įvykdymo laipsnį, išsiaiškinti, kaip nagrinėjamos institucijos organizacinė struktūra atitinka nustatytus funkcijų vykdymo reikalavimus. sisteminė funkcinė analizė − lyginamasis analitinis tyrimas. čia dėmesys sutelkiamas į skirtingų institucijų panašių funkcijų vykdymo kokybės lyginimą tarpusavyje. remiantis sisteminės funkcinės analizės rezultatais, rengiami ir priimami sprendimai, kurių įgyvendinimas leidžia išnaudoti kuo geresnio funkcijos įgyvendinimo galimybes. daugumos darbų autoriai (manning, parison 2001; medvedev 2002; petrov 2002; zabolotnic 2007) sutinka, kad funkcinės analizės tikslas yra esminių priemonių, reikalingų administracinėms reformoms įgyvendinti, numatymas. n. manning ir n. parison (2001) viešojo sektoriaus sąnaudų mažinimo galimybių nustatymą laiko esminiu funkcinės analizės uždaviniu. anot a. m. medvedev (2002), funkcinės analizės tikslas ir uždaviniai pagrįsti horizontaliosios ir vertikaliosios funkcinės analizės tikslų ir uždavinių sinteze. v. p. petrov (2002) pateikia ne tokį visapusišką funkcinės analizės uždavinių rinkinį, palyginti su n. manning, n. parison ir a. m. medvedev siūlomais funkcinės analizės uždavinių rinkiniais. taigi funkcinė analizė orientuojama į funkcijos poreikio ir kuo geresnio jo patenkinimo galimybių nustatymą (2 lentelė). verslas, vadyba ir studijos 2009 189 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a 2 lentelė. funkcinės analizės tikslų ir uždavinių lyginamoji lentelė (sudaryta autorių) table 2. comparative table of aims and tasks of functional analysis (composed by authors) autorius n. manning, n. parison (2001) a. m. medvedev (2002) v. p. petrov (2002) funkcinės analizės tikslai viešojo sektoriaus veiklos gerinimo būdų numatymas, siekiant užtikrinti reformų įgyvendinimą. valstybės institucijų orientavimas į pagrindinius tikslus. viešųjų paslaugų teikimo produktyvumo, efektyvumo didinimas. viešojo sektoriaus funkcijų efektyvaus vykdymo priemonių rengimas, įvertinant institucijų veiklos tikslingumą visuose vykdomosios valdžios lygmenyse. visapusiška parama institucijų vadovams, kad institucija efektyviai vykdytų būtiniausias funkcijas ir kolektyviniu, ir individualiu lygmeniu. funkcinės analizės uždaviniai išlaidų mažinimo galimybių nustatymas. veiklos apimčių sumažinimo galimybių nustatymas. veiklos produktyvumo užtikrinimo galimybių nustatymas. veiklos efektyvumo didinimo galimybių nustatymas. institucijų reorganizavimo ar restruktūrizavimo galimybių analizė. institucijų funkcijoms vykdyti reikalingų išteklių paskirstymo ir naudojimo vertinimas. nereikalingų funkcijų pašalinimas. dubliuojančios veiklos institucijos viduje ir tarp institucijų mažinimas. reikalingų funkcijų kūrimas. funkcijų paskirstymo racionalizavimas. apibendrinant funkcinės analizės tikslų ir uždavinių nagrinėjimo rezultatus, galima teigti, kad funkcinės analizės tikslas viešajame sektoriuje – leisti nustatyti realius viešojo sektoriaus institucijų veiklos gerinimo būdus t. y. suformuoti rekomendacijų rinkinį, kur link nukreipti veiklą, kaip plėtoti žmogiškuosius, organizacinius, finansinius, materialinius, informacinius ir kitus išteklius, kad būtų galima iš esmės pagerinti veiklą, taigi ir užtikrinti aukštos kokybės visuomeninių paslaugų teikimą minimaliomis sąnaudomis. šiam tikslui pasiekti sprendžiami uždaviniai pasitelkiant atitinkamas metodines priemones. 3. funkcinės analizės procesas funkcinė analizė yra itin gerai suplanuotas, analitinis bei diagnostinis procesas, kurio etapuose nagrinėjamos viešojo sektoriaus institucijų funkcijos, organizacinė struktūra ir institucijų atliekamos operacijos. anot a. v. samarucha (2008) (1 pav.), funkcinė analizė prasideda nuo teisinių aktų, reglamentuojančių institucijos vykdomas funkcijas, analizės. nustatoma, ar dokumentai atitinka valstybinės plėtros strategijos tikslus bei prioritetus. išsiaiškinama, kiek funkcijų realizavimo formos ir metodai yra adekvatūs vyriausybinės politikos tikslams ir uždaviniams. patikrinamas dokumentų teisinis pagrįstumas. nustatoma, ar funkcija vykdoma reikiamame institucijų valdžios lygmenyje. 190 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a 1 pa v. f un kc in ės a na liz ės p ro ce sa s (s ud ar yt a au to ri ų pa ga l a . v . s am ar uc ha (с ам ар ух а 20 08 ) f ig . 1 . p ro ce ss o f f un ct io na l a na ly si s (c om po se d by a ut ho rs w ith re fe re nc e to a . v . s am ar uc ha (с ам ар ух а 20 08 ) ne ne n or m at yv in ių ir te is in ių d ok um en tų a na liz ė d ok um en to a tit ik tis v al st yb in ės po lit ik os s uf or m uo to s st ra te gi jo s tik sl am s ir u žd uo tim s so ci al in ių ir ek on om in ių s an ty ki ų sf er oj e fu nk ci jų r ea liz av im o fo rm ų ir m et od ik ų ad ek va tu m as v yr ia us yb ės v yk do m os po lit ik os ti ks la m s ir už da vi ni am s so ci al in ių ir e ko no m in ių s an ty ki ų sf er oj e d ok um en to le gi ti m um as a tit ik tis m in im al ia m (p ak an ka m am ) bū tin am v al dž io s ly gm en iu i fu nk ci jų lik vi da ci ja fu nk ci jų ap im tie s su m až in im as fu nk ci jų pe rd av im as ri nk os da ly vi am s fu nk ci jų v yk dy m o pe rd av im as ž em ia us ia m ga lim am in st itu ci jų fu nk ci jų v yk dy m o pe rd av im as r an go s įm on ėm s fu nk ci jų v yk dy m o pe rd av im as sa vi re gu lia ci nė m s įm on ėm s r eg la m en tu oj am os , ta či au p ra kt ik oj e ne vy kd om os fu nk ci jo s pr oc es ua lin io ch ar ak te ri o fu nk ci ja i su te ik im as t ei si ni ų ak tų ne re gl am en tu oj am os fu nk ci jo s fu nk ci jo s, re gl am en tu oj am os a kt ų, pr ie št ar au ja nč ių d id es nė s te is in ės g al io s ak ta m s fu nk ci jo s, re gl am en tu oj am os ne pa ka nk am os te is in ės ga lio s ak tų su ve st in io fu nk ci jų s ąr aš o su da ry m as pa na ik in us a r p er da vu s fu nk ci jo s vy kd ym ą bu s pa že is ta s ki tų v al st yb in ių fu nk ci jų v yk dy m as pa na ši ų fo rm ul uo či ų fu nk ci jų ta ik ym o sr ity s ir tu rin ys s ki rt in gi fu nk ci jo s du bl iu oj as i pa tik sl in ti fu nk ci jų fo rm ul uo te s iš sa ug ot i f un kc ijo s vy kd ym ą vi en oj e in st itu ci jo je ir pa na ik in ti ki to se pa lik ti fu nk ci jo s vy kd ym ą na gr in ėj am ai in st itu ci ja i ne ta ip ta ip ta ip va ld ži os ly gm en iu i verslas, vadyba ir studijos 2009 191 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a remiantis teisinių dokumentų analizės rezultatais, sudaromas suvestinis funkcijų sąrašas. po to nustatoma, ar panaikinus funkciją nepablogės kitų valstybinių institucijų funkcijų vykdymas. jei funkcijos panaikinimas turi neigiamą įtaką, tuomet jos vykdymas paliekamas nagrinėjamai institucijai. kitu atveju funkcija „iškeliama“ iš viešojo sektoriaus. be to, būtina išskirti funkcijas, kurios panašios pagal formuluotę, ir nustatyti jų taikymo sritį bei turinį. jei funkcijos pagal tokius požymius skiriasi, teikiama rekomendacija funkcijų vykdytojams patikslinti pačias formuluotes, jei vienodos – pripažinti funkcijas dubliuojančiomis. tokiu atveju teikiamos rekomendacijos panaikinti funkciją vienoje iš institucijų. nusprendus, kad funkcijas reikia iškelti iš viešojo sektoriaus, pateikiami septyni būdai, kur link nukreipti funkcijų vykdymą. autorius pateikia gana platų rekomendacijų rinkinį, kaip funkciją pašalinti iš institucijų veiklos. jis nesigilina į vidinių veiksnių, lemiančių funkcijos vykdymo kokybę, analizę ir vertinimą. pasaulio banko atstovai (manning et al. 2001) siūlo klausimais ir atsakymais pagrįstą funkcinės analizės proceso schemą, pagal kurią nuo funkcijų poreikio tyrimo pereinama prie jų vykdymo sąlygų analizės, nuo funkcinio programinio nagrinėjimo – prie organizacinės struktūros pakeitimų galimybių tyrimo. apibendrintas funkcinės analizės procesas pateikiamas 2 paveiksle. pirmame etape funkcijos suskirstomos pagal veiklos rūšis. atsakymai į pateiktus klausimus leidžia nustatyti reikalingas, likviduotinas funkcijas ir tas, kurių vykdymo ypatybės keistinos. čia neakcentuojamas funkcijų panaikinamas, o detaliau nagrinėjamos reikalingų funkcijų paskirstymo potencialiems vykdytojams galimybės. antrame etape nagrinėjamos reikalingos funkcijos ir jų paskirstymas. potencialūs funkcijos perėmėjai suskirstyti pagal priklausomybę centrinei valdžiai ir kontroliavimo laipsnį. trečiame etape valstybinės funkcijos skirstomos po valstybines ir valstybės kontroliuojamas institucijas, atsižvelgiant į funkcijų sričių specifiką. ketvirtame etape tiriama valstybinės institucijos organizacinė struktūra, nustatomos restruktūrizavimo, reorganizavimo galimybės. anot pasaulio banko atstovų (manning et al. 2001), analizuojant turi būti orientuojamasi ne į funkcijų likvidavimą, o į reikalingų funkcijų vykdymo gerinimą. platesnį požiūrį į viešajame sektoriuje taikomą funkcinę analizę pateikia a. m. medvedev (2002). pasak autoriaus, ir horizontalioji, ir vertikalioji funkcinė analizė susideda iš trijų veiklos blokų. pirmas horizontalios funkcinės analizės blokas susijęs su vykdomosios valdžios institucijų funkcijų nustatymu. 192 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a tęsinys 193 p. ne taip taip ne ne ne ne taip funkcija, reikalinga visuomeniniam saugumui užtikrinti egzistuoja stiprus poreikis funkcijai vykdyti sumažinamos savybės ar apimtis funkcija yra reikalinga funkcijos vykdymo apimtis gali būti sumažinta funkcija panaikinama nacionalinei, tarptautinei teisei, konstitucijai vykdyti reikalinga funkcija, funkcija, reikalinga kitai valstybinei veiklai atlikti valstybiniai tikslai gali būti pasiekti ir perduodant funkcijas žemesnio lygmens institucijoms taip ne taip taip ministerijų ir departamentų atliekamų funkcijų analizė išskaidytos funkcijos: � politikos formavimas � koordinavimas � paslaugų teikimas � parama � reglamentavimas laikyti natūraliai valstybine – palikti vykdymą centriniam aparatui taip taip taip taip vyriausybė toleruoja funkcijos nevykdymo riziką funkcijos vykdymą gali perimti žemesnio lygmens valstybinė institucija ne ne ne taip taip taip funkcija yra reikalinga perduoti veiklą privačiam sektoriui ar ne pelno organizacijoms perduoti vykdymą ar decentralizuoti piliečiai ar verslo vienetai gali ir sutinka mokėti visą kainą už paslaugą sudaryti rangos sutartis su privačiu sektoriumi ar ne pelno organizacijomis paslauga gali būti teikiama pagal rangos sutartį išskaidytos funkcijos: � politikos formavimas � koordinavimas � paslaugų teikimas � parama � reglamentavimas funkcija yra natūraliai valstybinė dėl jos sudėtingumo ir politinio jautrumo ne ne ne bus sutrikdytas susijusios veiklos vykdymas egzistuoja ar gali susikurti rinka ne ne ne ne ne taip funkcija yra apibūdinama kaip ministerijos atsakomybė ne taip taip taip taip funkciją itin sunku specifikuoti funkcija yra politiškai jautri, todėl reikia sukurti apsaugą ar garantą priskirti funkcijos vykdymą valstybiniam prekybiniam vienetui funkcija yra specifinė prisikirti funkcijos vykdymą kontroliuojamai organizacijai arba vykdomajai institucijai funkcijos vykdymą perduoti statutinei komisijai arba nepriklausomam reguliuotojui priskirti funkcijos vykdymą pagrindinei ministerijai funkcija yra reguliacinė, reikalauja oficialių audito ir balanso ataskaitų funkciją laikyti natūraliai valstybine – palikti vykdymą centriniam aparatui taip taip taip ne ne ne yra galimybė gauti didesnes pajamas iš mokesčių taip ateityje galima privatizacija veiklos sritis nepastovi – dažni reikšmingi politiniai pokyčiai veiklos sritis dažnai techniškai tobulinama taip taip taip taip taip ne ne ne ne ne ne nuspręsta funkcijos vykdymą palikti viešojo sektoriaus institucijai yra kitų tokio paties tipo funkcijų funkcijos gali būti sujungtos funkcijų sujungimas užtikrina vienodą vadovų atsakomybę departamentai ir padaliniai gali būti reorganizuoti sutrumpinant atskaitomybės liniją kontrolės apimtis vadovams yra tinkama restruktūrizuoti ir reorganizuoti departamentus ir padalinius palikti funkcijos vykdymą esamam departamentui departamentai ir padaliniai yra tinkamo dydžio perskirstyti vadovų atsakomybę verslas, vadyba ir studijos 2009 193 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a 2 pav. funkcinės analizės procesas (manning, parison 2001) fig. 2. process of functional analysis (manning, parison 2001) ne taip taip ne ne ne ne taip funkcija, reikalinga visuomeniniam saugumui užtikrinti egzistuoja stiprus poreikis funkcijai vykdyti sumažinamos savybės ar apimtis funkcija yra reikalinga funkcijos vykdymo apimtis gali būti sumažinta funkcija panaikinama nacionalinei, tarptautinei teisei, konstitucijai vykdyti reikalinga funkcija, funkcija, reikalinga kitai valstybinei veiklai atlikti valstybiniai tikslai gali būti pasiekti ir perduodant funkcijas žemesnio lygmens institucijoms taip ne taip taip ministerijų ir departamentų atliekamų funkcijų analizė išskaidytos funkcijos: � politikos formavimas � koordinavimas � paslaugų teikimas � parama � reglamentavimas laikyti natūraliai valstybine – palikti vykdymą centriniam aparatui taip taip taip taip vyriausybė toleruoja funkcijos nevykdymo riziką funkcijos vykdymą gali perimti žemesnio lygmens valstybinė institucija ne ne ne taip taip taip funkcija yra reikalinga perduoti veiklą privačiam sektoriui ar ne pelno organizacijoms perduoti vykdymą ar decentralizuoti piliečiai ar verslo vienetai gali ir sutinka mokėti visą kainą už paslaugą sudaryti rangos sutartis su privačiu sektoriumi ar ne pelno organizacijomis paslauga gali būti teikiama pagal rangos sutartį išskaidytos funkcijos: � politikos formavimas � koordinavimas � paslaugų teikimas � parama � reglamentavimas funkcija yra natūraliai valstybinė dėl jos sudėtingumo ir politinio jautrumo ne ne ne bus sutrikdytas susijusios veiklos vykdymas egzistuoja ar gali susikurti rinka ne ne ne ne ne taip funkcija yra apibūdinama kaip ministerijos atsakomybė ne taip taip taip taip funkciją itin sunku specifikuoti funkcija yra politiškai jautri, todėl reikia sukurti apsaugą ar garantą priskirti funkcijos vykdymą valstybiniam prekybiniam vienetui funkcija yra specifinė prisikirti funkcijos vykdymą kontroliuojamai organizacijai arba vykdomajai institucijai funkcijos vykdymą perduoti statutinei komisijai arba nepriklausomam reguliuotojui priskirti funkcijos vykdymą pagrindinei ministerijai funkcija yra reguliacinė, reikalauja oficialių audito ir balanso ataskaitų funkciją laikyti natūraliai valstybine – palikti vykdymą centriniam aparatui taip taip taip ne ne ne yra galimybė gauti didesnes pajamas iš mokesčių taip ateityje galima privatizacija veiklos sritis nepastovi – dažni reikšmingi politiniai pokyčiai veiklos sritis dažnai techniškai tobulinama taip taip taip taip taip ne ne ne ne ne ne nuspręsta funkcijos vykdymą palikti viešojo sektoriaus institucijai yra kitų tokio paties tipo funkcijų funkcijos gali būti sujungtos funkcijų sujungimas užtikrina vienodą vadovų atsakomybę departamentai ir padaliniai gali būti reorganizuoti sutrumpinant atskaitomybės liniją kontrolės apimtis vadovams yra tinkama restruktūrizuoti ir reorganizuoti departamentus ir padalinius palikti funkcijos vykdymą esamam departamentui departamentai ir padaliniai yra tinkamo dydžio perskirstyti vadovų atsakomybę 194 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a antrasis blokas analizuoja funkcijų formuluočių sandarą. galiausiai trečiame bloke patikrinama galimybė išsaugoti funkciją. šių veiksmų rezultatas turi būti galutinis sąrašas funkcijų, kurios betarpiškai vykdomos valdžios institucijų, taip pat funkcijų, kurios gali būti išsklaidytos tarp valdžios institucijų, perduotos visuomeninėms organizacijoms, rangos įmonėms arba likviduotos. mokslinėje rusų literatūroje (медведев 2002; здравомыслов 2009) funkcija suvokiama nevienareikšmiškai. pasak a. m. medvedev, funkcija – tai reguliari vykdomosios valdžios institucijos (vvi) veikla, nukreipta į visapusišką įstatymiškai priskirtų valdžios įgaliojimų vykdymą. siekiant nustatyti vvi funkcijas, analizuojami funkcijų vykdymą reglamentuojantys teisės aktai. pagrindiniu dokumentu laikomi institucijos įstatai. čia nagrinėjamos dokumento sąsajos su institucijos veikla, dokumentai išdėstomi prioritetine tvarka pagal jų teisinę galią. svarbu paminėti, kad kiekvienas tarpinis funkcinės analizės rezultatas turi būti suderinamas su vykdomosios valdžios institucijos vadovybe, tokiu būdu užtikrinant naudojamos informacijos adekvatumą ir institucijos, ir suvestinės informacijos atžvilgiu. suformavus dokumentų bazę, iš turimų duomenų išskiriamos funkcijos ir sudaromas pirminis jų sąrašas. šioje vietoje autoriai, siekdami išsiaiškinti dokumentais nereglamentuojamas, tačiau praktikoje vykdomas funkcijas ir nustatyti tų funkcijų rezultatus (išeigą) bei jos naudos gavėjus, šalia funkcijas reglamentuojančių dokumentų rinkinio kaip duomenų bazės nurodo ir institucijos vadovybės atstovų bei vidurinės grandies vadovų apklausą. toliau analizuojamos funkcijų formuluotės ir tikrinama jų atitiktis semantikos reikalavimams. palyginus esamą funkcijos formuluotę su standartu, išryškėja besidubliuojančios funkcijos. standartinė funkcijos išreiškimo formulė sudaroma, remiantis tam tikromis taisyklėmis. funkcijos formuluotėje vienareikšmiškai turi būti išskiriamas funkcijos rezultatas (išeiga), išorinis naudos gavėjas ir konkreti funkcijos taikymo sfera. standartinės funkcijų formuluotės pateikiamos vvi vadovybei ir apibendrinamos. funkcijos formuluotės struktūrą pateikia ir amerikiečių teoretikai. jų siūloma formuluotė iš esmės paremta tuo pačiu principu: veiksmažodis + objektas + sąlygos (the inter-american ... 2004). taikant tokią formuluotės sandarą, pasak mokslininkų, sudaroma pagrindinė organizacijos funkcija (tikslas). jav praktikas m. modell (1996) teigia, kad turi būti standartinė formuluotė ir ryšiams tarp pačių funkcijų apibūdinti. toks teiginys turi būti ekspresyvus, tačiau paprastas. kiekvienas teiginys turi apimti subjektą (pirmąją funkciją), veiksmažodį (ryšį tarp pirmos ir antros funkcijų) ir objektą (antrąją funkciją). formuluočių rengimas pagal galiojančius standartus ne tik leidžia nustatyti funkcijas, kurios apskritai negali būti priskiriamos institucijos verslas, vadyba ir studijos 2009 195 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a funkcijoms, bet ir sumažinti dubliuojančių funkcijų skaičių. funkcijų šalinimas remiasi principu „viena veikla – vienas rezultatas“. patikrinama, ar suvestiniame funkcijų sąraše esančios funkcijos vykdomos praktikoje. funkcijų rezultatų ir išorinių naudos gavėjų analizė leidžia nustatyti, kurios funkcijos yra esminės, o kurios – institucijos vidinė veikla. po to funkcijos analizuojamos įgaliojimų atžvilgiu. toliau tiriamas funkcijų teisinis pagrindas, patikrinama galimybė funkcijos vykdymą perduoti nevalstybiniam subjektui. atliekamas kitų tyrimų, patvirtinančių alternatyvių priemonių taikymo tikslingumą, vertinimas. su įgaliojimais nesusijusios funkcijos nagrinėjamos tikrinant, ar funkcijos panaikinimas ar perdavimas nevalstybinėms organizacijoms nesutrikdytų kitų valstybinių funkcijų vykdymo. išsiaiškinama, ar funkcijai vykdyti nėra naudojama slapta informacija, vertinamos galimybės perduoti funkcijos vykdymą nevalstybinėms organizacijoms, tikrinamas tokių funkcijų teisinis pagrindas. galiausiai išskiriamos likviduotinos dubliuojančios funkcijos, sudaromas galutinis funkcijų sąrašas. skirtingai nei a. v. samarucha (2008) ir panašiai kaip n. manning su kolega (2001), a. m. medvedev (2002) funkcinę analizę papildo vertikaliąja vvi analize. apibendrinta analizės schema pateikiama 3 paveiksle. šalia aptartų autoriaus siūlomų funkcinės analizės uždavinių nagrinėjamas atsakomybės už funkcijos vykdymą pasiskirstymas tarp institucijų ar jų padalinių. išsiaiškinama, kokios vadovaujančios pareigybės ir struktūriniai padalinai dalyvauja vykdant kiekvieną funkciją ir kokį vaidmenį jie atlieka. po to analizuojama informacija apie funkcijos išeigą, procesus, procesams vykdyti reikalingas priemones, procesų vykdymo kontrolės rodiklius ir t. t. remiantis tokios analizės rezultatais, sudaromas institucijos veiklos modelis. tuomet nustatoma, ar institucijų veikla atitinka joms priskirtus įgaliojimus. remiantis institucijų įgaliojimų ir atliekamų funkcijų sąrašais, sudaromas pirminis institucijos teikiamų paslaugų rinkinys. sukuriami paslaugų teikimo technologijos modeliai. nustatomi instituciniai padaliniai, kurių veikla prisideda prie paslaugos teikimo. suformuojamas suvestinis vvi funkcijų sąrašas. ištiriama funkcijų, reikalingų paslaugai suteikti, seka ir tarpusavio ryšiai. atrenkamos tam tikro vykdomosios valdžios lygmens teikiamos paslaugos, kurioms nagrinėjama institucija gali turėti efektyvų poveikį. atmetamos tos paslaugos, kurių kokybei nagrinėjama institucija neturi jokio ar turi nežymų poveikį. įvertinama, ar paslauga gali būti efektyviai teikiama nevyriausybinių organizacijų. be to, įvertinama, ar tikslinga perduoti paslaugos teikimą žemesnio valdžios lygmens institucijoms. panaši institucijų funkcijų nagrinėjimo logika pateikta ir straipsnyje human resource management: functional review (2003). 196 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a penktas etapas. vyriausybinės (regioninės) institucijos teikiamų baigtinių paslaugų reikalingumo įvertinimas ketvirtas etapas. vyriausybinio (regioninio) lygmens institucijų teikiamų paslaugų atrinkimas pagal tos institucijos sukuriamą efektyvų poveikį paslaugų kokybei trečias etapas. paslaugų teikimo technologiją apibūdinančių modelių sudarymas pirmas etapas. dokumentų, reglamentuojančių institucijos veiklą, analizė antras etapas. pirminio funkcijų sąrašo sudarymas, remiantis turimais duomenimis trečias etapas. išskirtų funkcijų formuluočių pertvarkymas pagal sintaksės reikalavimus ketvirtas etapas. suvestinio valdžios institucijos funkcijų sąrašo sudarymas penktas etapas. išankstinis institucijos funkcijų rinkinio struktūrizavimas septintas etapas. trūkumų nustatymas ir pagrindinių optimizacijos krypčių išskyrimas pirmas etapas. konkrečių tam tikro valdžios lygmens institucijų veiklos atitiktis to lygmens institucijoms priskirtiems įgaliojimams antras etapas. nagrinėjamos institucijos teikiamų paslaugų nustatymas atitinkamo valdžios lygmens įgaliojimų sferos ribose trečias etapas. institucijos veiklų struktūrinio funkcinio modelio sudarymas pirmas etapas. atsakomybės už funkcijų vykdymą pasiskirstymo nustatymas antras etapas. funkcijų išskaidymas šeštas etapas. institucinės sferos, kurioje teikiama baigtinė paslauga, probleminių sričių ir optimizacijos tikslų nustatymas pirmas blokas vykdomosios valdžios institucijų funkcijų nustatymas antras blokas vvi struktūrinė analizė trečias blokas funkcijų vykdymo optimizacijos krypties nustatymas 3 pav. vertikalios funkcinės analizės procesas (sudaryta autorių pagal a. m. medvedev (медведев 2002) fig. 3. process of vertical functional analysis (composed by authors with reference to a. m. medvedev (медведев 2002) paslaugos teikimo probleminių sričių nustatymas leidžia suprasti paslaugos svarbą ir pagrįsti išlaidas, skirtas organizaciniams pakeitimams atlikti. išsiaiškinamos institucijų funkcijų vykdymo gerinimo galimybės, siekiant didinti viešosios paslaugos kokybę ir mažinti paslaugos kainą (stanhope 2006). nustatomi konkretūs organizacinės veiklos trūkumai funkcijoms įgyvendinti ir gautų rezultatų pagrindu suformuojamos pagrindinės funkcijų atlikimo gerinimo kryptys. tobulinti galima pavienes institucijos funkcijas, jų visumą. tobulinimo krypčių nustatymas grindžiamas kiekvieno proceso įeigos ir išeigos santykio verslas, vadyba ir studijos 2009 197 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a lyginimu, išeigos vertinimu, jos skirtumo nuo siektinos, piliečių lūkesčiais ar ekspertų rekomendacijomis numatytos ribos nustatymu. autorių nuomonės apie funkcinės analizės technologiją skiriasi dėl viešajame sektoriuje sprendžiamų problemų įvairovės. pasak a. v. samarucha (2008), funkcinė analizė iš esmės skirta tirti tik funkcijų rinkiniams, nesigilinant į organizacijos restruktūrizavimo galimybių nustatymą. n. manning ir n. parison (2001) siūlo išsamų klausimų ir atsakymų principu pagrįstą funkcinės analizės procesą, nuo funkcijų paskirstymo efektyviausiai juos atliksiantiems subjektams pereinama prie restruktūrizavimo ir reorganizavimo galimybių tyrimo. a. v. samarucha (2008) pateiktas funkcinės analizės procesas atitinka tik vieną iš keturių n. manning ir n. parison (2001) siūlomų funkcinės analizės proceso etapų. galiausiai a. m. medvedev (2002) pateikia išsamiausią funkcinės analizės technologiją. jis detalizuoja funkcinės analizės proceso elementus, o n. manning su kolega, priešingai, palieka pasirinkimo laisvę, kokiais metodais vykdyti funkcinę analizę, jiems svarbu, kad būtų atsakyta į orientacinius funkcinės analizės klausimus. a. m. medvedev pateiktas funkcinės analizės detalizavimas mažina analizės lankstumą, tačiau turėdami galimybę laisvai kurti metodus funkcinei analizei atlikti, ekspertai gali per daug įsigilinti į vienus procesus, nepalikdami laiko ir išteklių kitiems procesams. tai gali lemti nepakankamai gerus funkcinės analizės rezultatus. funkcinė analizė orientuojasi į funkcijų būtinumo problemas bei galimas funkcijų ar jų vykdymo alternatyvas (абушенко 2003). 4. išvados išnagrinėjus funkcinės analizės tikslus, uždavinius, procesą, galima daryti išvadas. funkcinė analizė yra metodinė priemonė, neatsiejama nuo viešojo administravimo reformos. ji skirta pagrįstai, analitinei duomenų bazei parengti, efektyvių viešojo sektoriaus pokyčių rekomendacijų rinkiniui suformuoti, taip pat būdų, kaip racionaliai tuos pokyčius įgyvendinti, sąrašui sudaryti. funkcinės analizės metodas pagrįstas visuma analizių, kurių tikslai sąlygojami skirtingų probleminių sričių valstybinėse institucijose ir nukreipti į skirtingus siektinus viešojo administravimo reformos rezultatus. funkcinės analizės akcentai išskiriami pagal šalies valstybinėms institucijoms būdingų problemų specifiką. pagrindinis funkcinės analizės tikslas yra sudaryti prielaidas suformuoti institucijų vykdytinų funkcijų rinkiniui, kurio taikymas leistų užtikrinti kuo aukštesnę viešųjų paslaugų kokybę ir optimalias jų teikimo sąnaudas visuose 198 verslas, vadyba ir studijos 2009 so c ia li n ė ek o n o m in ė ve r sl o a pl in k a hierarchiniuose vykdomosios valdžios lygmenyse. funkcinės analizės tikslams pasiekti dažniausiai siūlomi uždaviniai yra vykdomų funkcijų būtinumo grindimas, funkcijų paskirstymo tarp institucijų racionalizavimo ir restruktūrizavimo galimybių nustatymas. uždaviniai papildomi institucijų funkcijoms vykdyti reikalingų išlaidų mažinimo galimybių nustatymu. siekiant įgyvendinti funkcinės analizės tikslus bei uždavinius, nagrinėjamos institucijų vykdomos funkcijos, nustatomos nereikalingos likviduotinos, dubliuojančios mažintinos, reikalingos kurtinos, perduotinos privačiam sektoriui ar valstybės kontroliuojamoms organizacijoms funkcijos. įvertinama organizacinė institucijos struktūra, vadovų atsakomybė. taip pat akcentuojamas funkcijos taikymo srities, funkcijos rezultatų gavėjo, funkcijos įeigos ir išeigos nustatymas, funkcijos įeigos ir išeigos lyginimas. taigi tikslinga taikyti ir horizontaliąją, ir vertikaliąją funkcines analizes. horizontaliosios funkcinės analizės rezultatas – nustatyti vykdomosios valdžios institucijų pertekliniai ar dubliuojantys įgaliojimai, kuriems panaikinti reikalingi pakeitimai teisiniuose aktuose. vertikaliosios funkcinės analizės rezultatas yra numatomi struktūriniai institucijos pokyčiai ir kartu perėjimas prie efektyvesnių administracinių 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files/structure/izd/izvestiya-urgeu_2%2821%29_2008.pdf>. functional analysis in public sector ž. tunčikienė, g. buzaitė summary the main aim of the paper is to explore the theoretical aspects of functional analysis on purpose to identify the essence of functional analysis in public sector. this objective was chosen in reference to relevant problem of modern-day, i.e. inefficiency and ineffectiveness of public sector activities. the article contains functional analysis goals, tasks formed by different sources of literature; also, interpretations of the process of functional analysis are introduced. the conclusions were made that the main goal of functional analysis is to suggest an optimal set of functions that have to be performed in order to assure high quality of public services and minimal possible costs throughout all the hierarchical levels of government. keywords: public sector, public administration reform, public institutions, functional analysis, effectiveness. 246 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s elektroninės sveikatos paslaugos ir jų poreikio vertinimas rimantas stašys rimantas.stasys@ku.lt klaipėdos universitetas, vadybos katedra 1. įvadas praėjusio amžiaus pabaigoje vienos iš sparčiausiai besivystančių technologijų buvo susijusios su informacijos rinkimu, saugojimu ir sklaida. šių technologijų plėtrai ir taikomumui didžiausią įtaką turėjo internetas. nors ekonomistai skelbia, kad informacinė visuomenė lietuvoje ir pasaulyje susiformavo jau praėjusio amžiaus pabaigoje, informacinių technologijų taikymas kai kuriose srityse, tokiose kaip sveikatos priežiūra, pradėtas ne taip jau ir seniai. elektroninio verslo (e. verslo) poveikį galima įvardyti trimis dimensijomis: verslo funkcijomis, sektorių struktūra ir sandara, regioninių ar erdvinių ekonominių bei verslo procesų aspektais. es vyraujančios tendencijos rodo, kad kliūtys įmonėms ir rinkoms, kurias sukels irt pažanga, artimiausiais metais bus trejopos: „daiktų interneto“ atsiradimas, kuriame galės „bendrauti“ kasdieniai daiktai, – padėsiantys laiku sužinoti detalią informaciją apie produkto vietą ir gyvavimo ciklus ir nustatyti individualias ir kintančias prekių ar paslaugų kainas. „inovacijų ekosistemos“, pavyzdžiui, svį tinklų, per kuriuos galima bendra– darbiauti pasauliniu mastu, sukūrimas, dinaminiai išteklių, paslaugų mainai ir žinių pritaikymo galimybės. remiantis kompiuteriniais pasaulio ekonomikų ir su jomis susijusių verslo galimybių pristatymais, tokios ekosistemos radikaliai parems naujas verslo veiklos formas, sparčiai prisitaikančias prie rinkos pokyčių. naujos lankstaus ir mobilaus komandinio darbo formos; dinamiškos ir – energingos žmonių, dirbančių naujose bendradarbiaujančiose aplinkose, kurias remia internetas, bendruomenės. norint įveikti šiuos iššūkius, © vilniaus gedimino technikos universitetas http://www.vgtu.lt/leidiniai verslas, vadyba ir studijos 2009 247 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s bendrovės turi pasiekti pagrindinius tikslus: padidėjusį lankstumą, masto ir apimties ekonomiką, kainų mažinimą, galimybę naudotis technologijomis, pagerėjusią kokybę ir padidėjusį veiklos efektyvumą. didžiausių pastangų reikės siekiant bendrovių sąveikumo, ypač tais atvejais, kai rinka nepasiūlo sprendimo (gatautis, vitkauskaitė 2009). a. juodaitė-račkauskienė (2007) rašo, kad sveikatos priežiūra internete yra kur kas mažiau išplėtota nei tradicinė, kurios raida vyko pastaruosius kelis amžius. sveikatos priežiūros internete plėtros atžvilgiu buvo pareikšta daug skeptiškų minčių, pirmiausia dėl permainų baimės, sveikatos priežiūros darbuotojų pasipriešinimo, pacientų rūpesčių, susijusių su duomenų privatumu ir saugumu. nepaisant to, sunku būtų įsivaizduoti šiuolaikinę sveikatos priežiūrą be modernių informacinių ir komunikacinių technologijų. pagrindinė tyrimo problema: mokslinėje literatūroje pakanka informacijos apie elektroninės sveikatos (e. sveikatos) paslaugų teigiamą poveikį teikiamų paslaugų kokybei, prieinamumui, konkurencijos tarp paslaugų teikėjų didinimui, tačiau lietuvoje dar niekas nemėgino įvertinti e. paslaugų (tiksliau, to, ką mes galėtume joms priskirti) realios apimties ir jų poreikio. tyrimo tikslas – įvertinti informacinių technologijų naudojimą lietuvos sveikatos priežiūros paslaugų rinkoje ir įvertinti e. sveikatos paslaugų poreikį. tyrimo metodai: sisteminė mokslinės literatūros analizė, bendroji ir loginė analizė, statistinis duomenų apdorojimas, lyginimas ir apibendrinimas. internetinė sveikatos priežiūra, besiremianti informacijos ir komunikacijos technologijomis, apima visą sveikatos priežiūros funkcijų diapazoną. nuo elektroninio recepto iki kompiuterizuotų medicininių įrašų, naudojamų naujų sistemų ir paslaugų, sumažinančių laukimo laiką ir klaidų skaičių. manoma, kad internetas sumažins darbo sąnaudas, padidins pasirinkimą ir kontrolę. internetinio tinklo plėtra ir internetinės sveikatos paslaugos yra ypatingai svarbios kuriant šioje rinkoje konkurencinę aplinką. manoma, kad pridėtinė vertė, kurią pacientas gauna didėjant informacijos ir išteklių prieinamumui, pagerins paslaugų kokybę, gydymo efektyvumą ir racionalizuos administracinius procesus (gonzalez et al. 2006). mokslinėje literatūroje atsirado nauja sąvoka – elektroninė sveikata (e. sveikata). tai – medicininės informacijos, visuomeninės sveikatos ir verslo tarpusavio ryšiai, susiję su sveikatos paslaugų ir informacijos teikimu arba apsikeitimu per internetą arba naudojant kitas panašias technologijas. a. rawabdeh rašo, kad e. sveikatos sąvokoje „e“ turi labai daug prasmių. visų pirma „e“ suvokiama kaip elektroninės paslaugos, bet apima ir kitas reikšmes, tokias kaip efektyvumas 248 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s (efficiency), kokybės gerinimas (enhancing quality), įrodymais pagrįsta praktika (evidence based), įgaliojimai (empowerment), skatinimas (encouragement), mokymas (education), leidimas (enabling), tęstinumas (extending), etika (ethics) ir teisingumas (equity) (rawabdeh 2007). sveikatos priežiūros paslaugų kokybės vertinimas turi apimti šias kokybės dimensijas: 1) tarpasmeninius santykius (sąveiką tarp paslaugų teikėjų ir gavėjų, įtraukiant tokius aspektus kaip pasitikėjimo kūrimas, pagarba, konfidencialumas, paslaugumas, reagavimas, empatija, išklausymas ir komunikacija); 2) apčiuopiamumą (paslaugų savybes, kurios nėra tiesiogiai susijusios su klinikiniu paslaugų efektyvumu, tačiau gali padidinti pacientų pasitenkinimą ir ateities ketinimus organizacijos atžvilgiu; tai – fiziniai patogumai, personalo ir informacinės medžiagos buvimas ir išvaizda, komfortas, švara ir pan.); 3) techninę kompetenciją (sveikatos priežiūros paslaugų teikėjų įgūdžius, žinias, kompetenciją, kuri būtina teikiant sveikatos priežiūros paslaugas); 4) prieinamumą (patogias organizacijos darbo valandas, laukimo trukmę ir pan.); 5) saugumą (sveikatos priežiūros procesų apsaugą nuo galimų neigiamų pašalinių efektų ir rizikos susižeisti, užsikrėsti ar kaip kitaip pakenkti visiems, susijusiems su sveikatos priežiūros teikimu ir gavimu); 6) efektyvumą (trokštamų sveikatos rezultatų pasiekimą); 7) produktyvumą (optimalios paslaugos teikimą, t. y. didžiausios naudos su mažiausiomis sąnaudomis pasiekimo laipsnį); 8) rezultatus (paciento sveikatos pokytį, kuris gali būti priskirtas suteiktoms sveikatos priežiūros paslaugoms) (piligrimienė, bučiūnienė 2008). e. sveikatos ekonominė reikšmė detaliai analizuojama ehealth impact projekte, naudojantis dešimties es šalių realiai įvykdytų projektų investicijų ir gauto ekonominio efekto duomenis. impact projekto ataskaitoje pateikiama apibendrinta išlaidų ir pelno dinamika nuo 1994 iki 2008 m., rodanti, kad investicijos į e. sveikatą duoda vis didėjantį pelną, o po dešimties metų – ekonominę naudą, tris kartus viršijančią įdėtas lėšas (study ... 2004). europos sąjungos darnios plėtros strategijos pagrindą sudaro aplinkosauga, ekonominis ir socialinis vystymasis. siekiama sukurti sveiką aplinką ir geresnę gyvenimo kokybę dabarties ir ateities kartoms. pereinant prie informacinės visuomenės, gausi informacija tampa prieinama naujomis, įvairiomis formomis ir gali būti pateikta nepriklausomai nuo vietos ir laiko bei pritaikoma pagal atskirų asmenų poreikius ir reikalavimus. informacinės visuomenės kūrimas yra pirmasis iš trijų lietuvos valstybės prioritetų, išskirtų valstybės ilgalaikės raidos strategijoje ir atitinkančių europos sąjungos siekius. lietuvos informacinės visuomenės plėtros tikslai yra suderinti su lisabonos strategija bei iniciatyvos verslas, vadyba ir studijos 2009 249 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s „e-europe – informacinė visuomenė visiems“ nuostatomis ir reikalavimais. tobulinant e. valdžią, svarbu skatinti paslaugų teikimą elektroniniais būdais, užtikrinti gyventojams galimybę naudotis šiomis paslaugomis. sprendžiant šį uždavinį, svarbu užtikrinti prieigą prie šiuolaikinių technologijų visiems norintiesiems. lygių galimybių principo įgyvendinimas socialinės atskirties gyventojų grupėms turi užtikrinti galimybę rinktis ir paveikti svarbiausius gyvenimo sprendimus (kažemikaitienė, bilevičienė 2008). e. sveikatos sąvoką nagrinėjusi a. juodaitė-račkauskienė rašo, kad e. sveikata yra šiuolaikinių informacinių technologijų naudojimas sveikatos priežiūros įstaigose, siekiant patenkinti pacientų, medicinos personalo ir administratorių lūkesčius bei poreikius (juodaitė-račkauskienė 2007). j. bivainis ir r. drejeris (2008) teigia, kad verslas stokoja naujų metodinės bazės produktų, ypač paslaugų, idėjoms vertinti. tyrėjai skirtingai traktuoja naujų produktų (ir paslaugų) idėjų vertinimo kriterijus. minėti autoriai siūlo naujų paslaugų idėjų vertinimo modelį, sudarytą iš 5 komponentų. pagal siūlomą metodiką idėjos būtų diferencijuojamos, paskui vertinamos pagal dviejų skirtingo pobūdžio grupių kriterijus, pagal jų sintezės rezultatus priimamas sprendimas dėl naujų paslaugų įgyvendinimo. vienas pagrindinių e. sveikatos komponentų yra klinikinis taikymas, t. y. elektroninių medicinos įrašų perdavimas, nuotolinis konsultavimas, modernios medicinos enciklopedijos, gyvybinių signalų bei namų slaugos stebėsenos sistemos, sveikatos priežiūros paslaugų modernizavimas (išsamių sveikatos įrašų kaupimas ir pažangus, automatizuotas panaudojimas, išankstinės registracijos, elektroninės vaistų išrašymo, automatizuotos pažymų išrašymo bei išdavimo sistemos). taip pat gana svarbus e. sveikatos komponentas – visuomenės žinių apie sveikatą gerinimas, atsakomybės už savo sveikatą didinimas, sveikatos apsaugos profesinių žinių, gebėjimų, kompetencijos lygio kėlimas (juodaitė-račkauskienė 2007). e. sveikatos naudojimo ir taikymo sritys pateiktos 1 paveiksle. bendra sveikatos priežiūros įstaigų pasirengimo e. sveikatos paslaugų plėtrai situacija, atskleista sveikatos apsaugos ministerijos iniciatyva išanalizavus 727 gydytojų bei slaugytojų, 173 įstaigų vadovų bei 66 it specialistų, dirbančių sveikatos apsaugos srityje, apklausos duomenis (nausėda 2009), rodo, kad 74 % apklaustųjų naudojasi kompiuteriais, 72 % naudojasi kompiuteriais darbo vietose, 59 % žino apie e. sveikatą. 77 % apklaustųjų mano, kad galimybė internetu sekti einamosios veiklos situaciją būtų naudinga, 32 % turi susikūrę nedidelę duomenų bazę ligonių apskaitai vesti (lietuvos e. sveikatos ... 2007). 250 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s infrastruktūros sudaromoms prielaidoms panaudoti sveikatos apsaugai vykdomi nacionalinės e. sveikatos sistemos plėtros projektai: įvykdytas projektas ness 1, kuris sukūrė sistemos koncepciją, branduolio struktūrą bei pateikė pilotiniam eksploatavimui keturias branduolio funkcijas: 1. paciento apsilankymų pas gydytoją registravimas, apsikeitimas klinikiniais, administraciniais duomenimis. 2. siuntimų konsultacijai/gydymui sukūrimas ir išsiuntimas, atsakymų išrašymas ir gavimas. 3. siuntimų diagnostikai (laboratorija, medicininiai vaizdai, kardiologija) formavimas ir išsiuntimas, rezultatų gavimas ir saugojimas. 4. registracijos konsultacijai/gydymui/tyrimui vykdymas (lietuvos e. sveikatos ... 2007). 1 pav. e. sveikatos naudojimo ir taikymo sritys fig. 1. e-health use and application areas verslas, vadyba ir studijos 2009 251 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s 2. elektroninių priemonių naudojimas lietuvos sveikatos priežiūros rinkoje norint įvertinti lietuvoje veikiančių asmens sveikatos priežiūros įstaigų teikiamas e. paslaugas arba, tiksliau, internetinius puslapius, pirmiausiai reikėjo sudaryti šių organizacijų sąrašą. remiantis lietuvos sveikatos informacijos centro duomenimis, 2007 m. pabaigoje lietuvoje veikė 103 sveikatos apsaugos ministerijos (sam) sistemai priklausančios ligoninės ir 191 ambulatorinė įstaiga. naudojant informacijos internete paieškos sistemą google, taip pat lietuvos įmonių internetinį katalogą bei lietuvos medicinos sveikatos priežiūros įstaigų paieškos svetainę, buvo surinkti nagrinėjamų įmonių internetinių svetainių adresai. prieš vertinant lietuvos sveikatos priežiūros įstaigų internetinius puslapius buvo atliktas bandomasis tyrimas, kurio tikslas – paruošti vertinimo kriterijų sąrašą. bandomojo tyrimo metu buvo apžvelgta 20 atsitiktinai pasirinktų lietuvos sveikatos priežiūros įstaigų tinklalapių. visus sudarytus vertinimo kriterijus galima suskirstyti į keturias grupes. pirmoji kriterijų grupė susijusi su informacija apie sveikatos priežiūros organizaciją, antroji – su teikiamomis įstaigos paslaugomis, trečioji – su informacija apie organizacijoje dirbančius specialistus, o ketvirtoji – su daugumai internetinių tinklalapių būdingais elementais. sudarius tiriamųjų sąrašą ir atlikus internete sveikatos priežiūros organizacijų paiešką nustatyta, kad internetinius puslapius 2008 m. gruodžio mėnesį turėjo tik 39 ligoninės iš 103, tai sudaro tik 38 % lietuvoje veikiančių ligoninių (1 lentelė). internetinio puslapio dar neturi dauguma rajonui pavaldžių ligoninių, neskuba savo tinklalapių atverti ir slaugos, kai kurios specializuotos ligoninės. pažvelgus į internetinį tinklalapį turinčių įstaigų sąrašą, akivaizdu, kad jį turi tik didesnės arba didesniuose lietuvos miestuose įsikūrusios ligoninės. blogesnė padėtis lietuvos ambulatorinių paslaugų rinkoje. iš paslaugas teikiančios 191 įstaigos tik 22 turi savo internetinį puslapį (2 lentelė). nepatenkinamai vertinama pirminių sveikatos priežiūros centrų ir ambulatorijų (čia nagrinėjamos tik juridinį statusą turinčios ambulatorijos) situacija. internetinius puslapius turi tik apskrities centruose įsikūrę pirminiai sveikatos priežiūros centrai. išanalizavus 39 sveikatos priežiūros įstaigų internetinius puslapius pastebėta, kad daugelyje svetainių ligoninės pateikia įstaigos kontaktus, adresą, aprašo sveikatos priežiūros įstaigos veiklą, teikiamas paslaugas, pateikia informaciją apie paslaugas teikiančius gydytojus ir nurodo jų kontaktus. ne visos ligoninės savo tinklalapyje pateikia žemėlapį ir aprašymą, kaip atvažiuoti į ligoninę. 252 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s 1 lentelė. 2008 m. pabaigoje lietuvoje veikiančios ir internetinį puslapį turinčios ligoninės table 1. hospitals operating and having a web page at the end of 2008 in lithuania ligoninės tipas sam sistemoje esančios įstaigos internetinį puslapį turinčios įstaigos vnt. % bendrojo pobūdžio ligoninės rajoninės 39 4 10 apskričių 11 8 73 miestų 9 6 67 sam 5 5 100 slaugos ligoninės 11 1 9 specializuotos ligoninės psichiatrinės 9 6 67 tuberkuliozės 6 2 33 priklausomybės ligų centrai 5 3 60 infekcinių ligų 1 0 0 onkologijos 1 1 100 reabilitacijos ligoninės 3 3 100 iš viso 103 39 38 nepakankamai dėmesio skiriama gydytojų patarimams interneto svetainėse ir nuorodoms į kitus internetinius puslapius. daugelyje tinklalapių nėra informacijos apie karjeros ligoninėje galimybes. trūksta informacijos apie įstaigos teikiamų paslaugų kainas, ligoninių dalyvavimą įgyvendinant įvairius projektus. tik nedaugelis ligonių turi įdiegusios registracijos pas gydytoją internetinę funkciją. labai mažai ligoninių nurodo administracijos darbo ir gydytojų konsultacijų laiką. tik 4 iš 39 ligoninių internete pateikia savo veiklos ataskaitą. stacionarios sveikatos priežiūros įstaigos pateikia 2007 m. veiklos ataskaitą. vienuolika iš 39 ligoninių, įvertinus internetinius puslapius, surinko daugiau nei 30 balų iš 40 galimų. į šią grupę pakliuvo daugiausiai universitetinės ir kai kurios apskričiai pavaldžios ligoninės. jų internetiniai puslapiai vartotojams pateikia gausiausią informaciją. dešimt iš 39 tyrinėtų ligoninių internete pateikia tik minimalią informaciją. jos surinko 10 ir mažiau balų. ambulatorinės sveikatos priežiūros įstaigos internetinėje svetainėje pateikia įstaigos adresą, kontaktus, darbo laiką. daugelis ambulatorinių sveikatos priežiūros įstaigų taip pat aprašo arba įvardija teikiamas paslaugas, jas teikiančius verslas, vadyba ir studijos 2009 253 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s gydytojus, jų darbo laiką ir kontaktus. tinklalapiuose nepakankamai atsispindi įstaigos veikla. nei viena ambulatorinė sveikatos priežiūros įstaiga nepateikia veiklos ataskaitos, nėra informacijos apie sveikatos priežiūros organizacijų dalyvavimą tarptautiniuose projektuose. tik keturiuose tinklalapiuose yra skiltis, kurioje aprašomos karjeros įstaigoje galimybės, skelbiamas naujų gydytojų paieškos konkursas. lyginant poliklinikų ir sveikatos priežiūros tinklalapius, galima pastebėti, kad išsamesnius juos turi poliklinikos. 2 lentelė. 2008 m. pabaigoje lietuvoje veikiančios ir internetinį puslapį turinčios ambulatorinės įstaigos table 2. non-hospital institutions operating and having a web page at the end of 2008 in lithuania ligoninės tipas sam sistemoje esančios įstaigos internetinį puslapį turinčios įstaigos vnt. % poliklinikos 22 8 36 pirminės sveikatos priežiūros centrai 90 9 10 ambulatorijos 52 0 0 šeimos (bendrosios praktikos) gydytojų kabinetai 4 0 0 specializuotos poliklinikos psichikos sveikatos 12 3 25 sporto medicinos centrai 5 0 0 odos ir veneros ligų centras 1 0 0 aids centras 1 1 100 odontologijos poliklinikos 4 1 25 iš viso 191 22 12 lyginant stacionaro ir ambulatorinių sveikatos priežiūros įstaigų tinklalapius, pastebėta, kad stacionarai pateikia daugiau informacijos apie pačią sveikatos priežiūros įstaigą. tačiau ambulatorinės sveikatos priežiūros įstaigos, palyginti su stacionarais, pateikia daugiau informacijos apie organizacijos ir gydytojų darbo laiką. tai galima aiškinti ir šių įstaigų veiklos skirtumais. 3. e. sveikatos paslaugų poreikis lietuvoje kadangi e. sveikatos plėtros strategija lietuvoje dar tik pradedama įgyvendinti, o daugelis sveikatos priežiūros įstaigų visiškai neteikia jokių elektroninių paslaugų, svarbu išsiaiškinti šių paslaugų poreikį lietuvoje. norint sukonkretinti tyrimą, 254 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s atsisakyta nagrinėti visas galimas e. sveikatos paslaugas, susikoncentruota į vartotojams galimas teikti internetines sveikatos priežiūros paslaugas. vertinant internetinių sveikatos priežiūros paslaugų poreikį lietuvoje buvo pasirinkti vartotojų apklausos tyrimo ir statistinio duomenų apdorojimo metodai. visuose didžiuosiuose lietuvos miestuose sveikatos priežiūros institucijų teikiamos e. paslaugos yra panašios, todėl tyrimui pasirinktas klaipėdos miestas ir jame esantys sveikatos priežiūros vartotojai. anketinė apklausa atlikta didžiausioje ir plačiausią paslaugų spektrą klaipėdos mieste teikiančioje klaipėdos universitetinėje ligoninėje. joje per metus vidutiniškai apsilanko 250 tūkstančių ambulatorinių ir 44 tūkstančiai stacionaro paslaugų vartotojų. vartotojų nuomonės anoniminė apklausa buvo atlikta 2009 m. sausio–vasario mėnesiais. iš viso buvo išdalinta 400 anketų: 340 anketų skirta ambulatoriniams paslaugų ir 60 anketų – stacionaro paslaugų vartotojams. jos buvo padalintos remiantis ambulatorinių ir stacionarinių paslaugų vartotojų, apsilankančių klaipėdos universitetinėje ligoninėje, santykį (85:15). respondentai parinkti atsitiktiniu atrankos būdu. iš 400 išdalintų anketų grįžo 366 (atsako dažnis – 92 %), 40 anketų užpildytos neteisingai, todėl analizuojamos 326. anketos duomenys buvo apdoroti microsoft office excel programa. apklausoje dalyvavo 74 % moterų ir tik 26 % vyrų, todėl galima daryti prielaidą, kad klaipėdos universitetinę ligoninę dažniau lanko moterys. pagal amžių iki 20 metų dalyvavo 6 %, nuo 20 iki 39 metų – 58 %, nuo 40 iki 59 metų – 31 %, o nuo 70 metų ir vyresni – 4 % respondentų. pagal išsilavinimą 26 % respondentų baigę aukštąsias universitetines, 40 % – aukštąsias neuniversitetines ir aukštesniąsias, 24 % – vidurines mokyklas. daugelis respondentų (83 %) sveikatos priežiūros įstaigose lankosi rečiau nei vieną kartą per mėnesį. tyrimas rodo, kad 86 % respondentų naudojasi interneto paslaugomis, ir tai sudaro realias galimybes e. sveikatos paslaugų poreikiui atsirasti. informacijos, susijusios su sveikatos priežiūra ir medikamentais, internete ieškojo net 77 % apklaustųjų. sveikatos priežiūros informacijos internete paklausa priklauso nuo amžiaus bei gaunamų pajamų: šios informacijos dažniausiai ieško jaunesni ir vidutinio amžiaus, vidutines pajamas gaunantys respondentai, rečiau – mažesnes pajamas gaunantys ir vyresnio amžiaus respondentai. taip pat sveikatos priežiūros informacijos paklausa priklauso nuo respondentų išsilavinimo: šios informacijos internete ieškojo 92 % universitetinį išsilavinimą, 80 % – aukštąjį neuniversitetinį ir aukštesnįjį išsilavinimą ir tik 50 % – vidurinį išsilavinimą turinčių respondentų. verslas, vadyba ir studijos 2009 255 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s nors prieš tai atliktas tyrimas rodo, kad tik stambiausios sveikatos priežiūros įstaigos lietuvoje turi internetinius puslapius, remiantis anketiniais duomenimis akivaizdu, kad 94 % respondentų, internete ieškojusių informacijos apie sveikatos priežiūrą, ją rado. šie rezultatai gali būti susiję su neteisingu pastarojo anketos klausimo interpretavimu. apklausoje dalyvavę vartotojai, galėjo turėti omenyje klaipėdos universitetinės ligoninės tinklalapį, kuriame pakanka informacijos apie sveikatos priežiūros organizaciją ir jos teikiamas paslaugas. vartotojų pasitenkinimo svarba santykių ilgalaikiškumui gali būti išaiškinama nustatant jo ryšį su vartotojo ketinimais palaikyti šiuos santykius. atsižvelgiant į tai, kad vartotojo ketinimai gali būti traktuojami kaip vienos dimensijos arba kaip daugiadimensis konstruktas, straipsnyje pirmumas teikiamas antrajam, įvertinant pastaraisiais metais atliktus mokslinius tyrimus, kurie pagrindžia būtinybę šiems tyrimams naudoti daugiaelementę skalę (dovalienė et al. 2007). klaipėdos universitetinės ligoninės lankytojai nurodė, kad su sveikatos priežiūra susijusios informacijos mažiausiai jie ieško knygose ir kitoje mokslinėje literatūroje. periodinėje spaudoje tokio pobūdžio informacijos ieško tik 14 % respondentų. apklausoje dalyvavę vartotojai kaip informacijos šaltinius daugiausiai rinkosi draugus ir pažįstamus, taip pat internetą (2 pav.). 2 pav. sveikatos informacijos paieškos pagrindiniai šaltiniai fig. 2. the main sources of health information search nacionalinės e. sveikatos infrastruktūros ir funkcijų plėtra yra tikslinga dėl to, kad ji gali sutaupyti lėšų, padeda vykdomai sveikatos reformai, integruoja esamas ir kuriamas is į funkcionalią paslaugų sistemą, sudaro prielaidas lietuvai integruotis į es e. sveikatos erdvę, leidžia pagerinti sveikatos paslaugų kokybę ir prieinamumą gyventojams. su pastaruoju teiginiu sutinka ir daugelis 256 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s respondentų. kad didesnis informacijos internete kiekis turės teigiamą įtaką sveikatos priežiūros paslaugų prieinamumui, pasisakė 70 % respondentų, o paslaugų kokybei – 59 % respondentų. vartotojai mano, kad internetiniame tinklalapyje sveikatos priežiūros organizacija turi nurodyti adresą, pateikti informaciją apie teikiamas paslaugas ir dirbančius gydytojus. vartotojams taip pat svarbi informacija apie kainas, kontaktai ir darbo laikas. respondentai mažiausiai balų skyrė informacijai apie organizacijos istoriją, veiklos ataskaitai, darbo pasiūlymų skilčiai ir nuorodoms į kitus tinklalapius (3 lentelė). 3 lentelė. sveikatos priežiūros organizacijos teikiamos informacijos internete svarba table 3. importantce of information on the internet provide by health care organizations informacijos svarba informacija balai 1 organizacijos adresas 174 2 teikiamos paslaugos 123 3 dirbantys gydytojai 108 4 paslaugų kainos 77 5 organizacijos kontaktai 73 6 organizacijos darbo laikas 63 7 gydytojų darbo laikas 58 8 organizacijos vieta (žemėlapis) 48 9 sveikatos patarimai 40 10 organizacijos vykdomi projektai 32 11 pacientų atsiliepimai 32 12 organizacijos istorija 17 13 organizacijos veiklos ataskaita 11 14 darbo pasiūlymai 5 15 nuorodos į kitus tinklalapius 3 į klausimą, kokios papildomos informacijos ieškotumėte sveikatos priežiūros įstaigos internetiniame puslapyje, atsakė ne visi respondentai, tai reiškia, kad paslaugų vartotojus visiškai tenkintų informacija, suklasifikuota septintame anketos klausime. tarp pasiūlymų, ko dar trūksta sveikatos priežiūros internetiniuose puslapiuose, daugiausiai buvo minima registracija pas specialistą internetu, informacija apie gydytojo kvalifikaciją ir darbo patirtį, apie pagrindines ligas ir verslas, vadyba ir studijos 2009 257 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s jų simptomus, apie medikamentus ir jų poveikį, sveikos gyvensenos patarimai. apklausoje dalyvavę respondentai taip pat nurodė, kad reikėtų daugiau informacijos apie teikiamas paslaugas ir jų kainas, siūlė pateikti informaciją apie įstaigos turimą medicininę įrangą ir aparatūrą, gydymo metodus. internetiniame puslapyje turėtų atsirasti skiltis, kurioje paslaugų vartotojai galėtų rašyti apie sveikatos įstaigoje dirbančius specialistus (atsiliepimai). respondentai taip pat siūlė pateikti informaciją apie privalomas ir rekomenduojamas vakcinacijas, ligos gydymo būdus, slaugytojų darbą, įstaigos teikiamų paslaugų palyginimą su kitų įstaigų teikiamomis paslaugomis, apie galimybę gydytoją išsikvieti į namus. pasigesta internete daugiau vaizdinės informacijos: gydytojų nuotraukų ir pan. paslaugų vartotojai taip pat mano, kad tobulinant sveikatos priežiūros paslaugų kokybę reikėtų organizuoti specialistų konsultacijas telefonu. nuo 2004 m. lietuvoje įgyvendinamas europos sąjungos struktūrinių fondų finansuojamas išankstinės pacientų registracijos projektas. tačiau 48 % respondentų nežino apie išankstinės registracijos internete galimybę. į klausimą, ar pageidautumėte gydytojo konsultacijai registruotis internete, teigiamai atsakė 74 % respondentų. šios paslaugos mažiau pageidauja vyresnio amžiaus žmonės. e. sveikata apima ne tik išankstinės registracijos internetu sistemą, bet ir kitas galimybes. apklausos duomenys rodo, kad pastarųjų pacientai beveik nežino. apie elektroninius vaistų receptus žinojo tik 13 % respondentų, o apie elektronines gydytojo pažymas – tik 10 % respondentų. visa tai leidžia daryti išvadą, kad e. sveikatos galimybės visuomenei aiškinamos nepakankamai. paslaugų vartotojams trūksta informacijos. panašias problemas, tyrinėdami akademinę elektroninę leidybą lietuvoje, išskyrė ir n. k. paliulis bei e. dagienė (2009). 4. išvados e. sveikata – šiuolaikinių informacinių technologijų panaudojimas sveikatos priežiūros įstaigose, siekiant patenkinti pacientų, medicinos personalo ir administratorių lūkesčius bei poreikius. tyrimai rodo, kad investicijos į e. sveikatą po dešimties metų duoda ekonominę naudą, tris kartus viršijančią įdėtas lėšas. atliktas tyrimas lietuvoje rodo, kad internetinius puslapius 2008 m. gruodžio mėnesį turėjo tik 38 % lietuvoje dirbančių ligoninių. internetinį tinklalapį turi tik didesnės arba didesniuose lietuvos miestuose įsikūrusios ligoninės. ambulatorines paslaugas teikiančių įmonių padėtis dar blogesnė. 2008 m. pabaigoje internetinį puslapį turėjo tik 12 % lietuvoje ambulatorines paslaugas teikiančių sveikatos priežiūros įstaigų. 258 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s nepakankamai ligoninės dėmesio skiria gydytojų patarimams interneto svetainėse ir nuorodoms į kitus internetinius puslapius. daugelyje tinklalapių nėra informacijos apie karjeros ligoninėje galimybes. nepatenkinama padėtis arba trūksta informacijos apie įstaigos teikiamų paslaugų kainas, ligoninių dalyvavimą įgyvendinant įvairius projektus. tik nedaugelis ligonių turi įdiegusios registracijos pas gydytoją internetinę funkciją. labai mažai ligoninių nurodo administracijos darbo ir gydytojų konsultacijų laiką. ambulatorines paslaugas teikiančių įstaigų tinklalapiuose nepakankamai atsispindi įstaigos veikla. nei viena ambulatorinė sveikatos priežiūros įstaiga nepateikia veiklos ataskaitos, nėra informacijos apie sveikatos priežiūros organizacijų dalyvavimą tarptautiniuose projektuose. tik keturiuose tinklalapiuose yra skiltis, kurioje aprašomos karjeros įstaigoje galimybės, skelbiamas naujų gydytojų paieškos konkursas. lyginant poliklinikų ir sveikatos priežiūros įstaigų tinklalapius galima pastebėti, kad išsamesnius juos turi poliklinikos. 86 % respondentų naudojasi interneto paslaugomis, o tai sudaro realias galimybes e. sveikatos paslaugų poreikiui atsirasti. informacijos, susijusios su sveikatos priežiūra ir medikamentais, internete ieškojo 77 % apklaustųjų, o internetą kaip populiariausią sveikatos priežiūros informacijos šaltinį įvardijo 49 % apklaustųjų. 70 % respondentų mano, kad didesnis elektroninių sveikatos paslaugų skaičius turėtų teigiamą įtaką sveikatos priežiūros paslaugų prieinamumui. kad e. sveikatos paslaugos pagerintų paslaugų kokybę, pasisakė 59 % respondentų. informacija arba paslaugos, kurių vartotojai pageidautų, yra šios: registracija pas specialistą internetu, informacija apie gydytojo kvalifikaciją ir darbo patirtį, apie pagrindines ligas ir jų simptomus, apie medikamentus ir jų poveikį, sveikos gyvensenos patarimai. apklausoje dalyvavę respondentai taip pat nurodė, kad reikėtų daugiau informacijos apie teikiamas paslaugas ir jų kainas, siūlė pateikti informaciją apie įstaigos turimą medicininę įrangą ir aparatūrą, gydymo metodus. sveikatos priežiūros įstaigos internetiniame puslapyje informaciją rekomenduojama klasifikuoti į keturias grupes: informaciją apie sveikatos priežiūros įstaigą, informaciją apie teikiamas paslaugas, informaciją apie įstaigoje dirbančius medicinos darbuotojus ir kitą informaciją. apie išankstinės registracijos internete galimybę nežino 48 % respondentų, šios galimybės pageidauja 74 % apklaustųjų. apie elektroninius vaistų receptus žinojo tik 13 % respondentų, o apie elektronines gydytojo pažymas – tik 10 % respondentų. visa tai leidžia daryti išvadą, kad e. sveikatos galimybės visuomenei aiškinamos nepakankamai. verslas, vadyba ir studijos 2009 259 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s literatūra bivainis, j.; drejeris, r. 2008. naujų paslaugų idėjų vertinimas, verslas: teorija ir praktika [business: theory and practice] 9(1): 5–16. dovalienė, a.; gadeikienė, a.; piligrimienė, ž. 2007. customer satisfaction and its importance for long-term relationships with service provider: the case of odontology services, inzinerine ekonomika – engineering economics (5): 59–67. gatautis, r.; vitkauskaitė, e. 2009. e-verslo plėtros paramos strateginės gairės, inzinerine ekonomika – engineering economics (5): 35–47. gonzalez, m. e.; quesada, g.; urrutia, i.; gavidia, j. v. 2006. conceptual design of an e-health strategy for the spanish health care system, international journal of health care quality assurance 19(2): 146–157. juodaitė-račkauskienė, a. 2007. kai kurie e. sveikatos aspektai, sveikatos mokslai 57(3): 1615–1620. kažemikaitienė, e.; bilevičienė, t. 2008. dalyvavimo elektroninėje valdžioje problemos, technological and economic development of economy 14(2): 184–196. lietuvos e. sveikatos strategija: kontekstas, argumentacija ir įgyvendinimo rekomendacijos [interaktyvus]. 2007. lr sveikatos apsaugos ministerija [žiūrėta 2009 m. kovo 9 d.]. prieiga per internetą: <http://esp.sam.lt/naudinga-informacija/>. nausėda, m. 2009. apklausos dėl sveikatos priežiūros įstaigų pasirengimo e. sveikatos paslaugų plėtrai ataskaita [interaktyvus] [žiūrėta 2009 m. kovo 3 d.]. prieiga per internetą: <http://www.sam.lt/repository/dokumentai/el_sveikata/apklausa1%20 pristatymas.ppt#260>. paliulis, n. k.; dagienė, e. 2009. akademinė elektroninė leidyba lietuvoje: požymiai, galimybės, problemos, verslas: teorija ir praktika [business: theory and practice] 10(2): 159–171. piligrimienė, ž.; bučiūnienė, i. 2008. different perspectives on health care quality: is the consensus possible? inzinerine ekonomika – engineering economics (1): 104–111. rawabdeh, a. 2007. an e-health trend plan for the jordanian health care system: a review, international journal of health care quality assurance 20(6): 516–531. study on economic impact of ehealth: developing an evidence-based context-adaptive method of evaluation for ehealth [interaktyvus]. 2004. ehealth impact [žiūrėta 2009 m. vasario 20 d.]. prieiga per internetą: <http://www.ehealth-impact. org/download/documents/d6_2_final_report_ext.pdf>. 260 verslas, vadyba ir studijos 2009 in fo r m a c in ės v is u o m en ės r a id o s pr o b le m o s e-health services and their requirements evaluation r. stašys summary e-health could be defined as the use of modern information technologies within the health care facilities in order to better satisfy expectations and needs of the patients, medical staff and administration. as the research shows economic profits exceed investments in the e-health three times. studies in lithuania in december of 2008 show that only 38 % of the country hospitals have online webpages. only large hospitals located in the major lithuanian cities have internet sites. situation within the outpatient facilities is even worse. only 12 % of these health care facilities had online services offered to the public according to the survey completed at the end of 2008. there is insufficient focus for doctors’ advices and not enough links to other websites. additionally, many sites do not contain information about career opportunities within a facility. finally, online sites lack such information as the institution’s service charges or their implementation for various projects. only a few hospitals have an online registration feature and very few provide work hours. outpatient service facilities do not reflect the institution’s activities adequately. none of the outpatient service facilities provide business reports; there is no information about their participation in the international projects. only four webpages contain sections providing the career opportunities for the office and a list of new doctor positions available. by the comparison of the webpages of polyclinics and health care facilities one can indicate that polyclinic facilities have better online pages. most of the health care consumers would use the internet to find out such information as the doctor’s qualifications and work experience, information about main diseases and their symptoms, the medications and their side effects, tips on healthy lifestyle, as well as utilize registration to a specialist feature. most of the respondents surveyed also indicated that there should be more information about health care services and their prices, institution’s medical equipment and devices as well as their methods of treatment. the best practice for the e-health website is classifying it into four groups: information on the health care institution, information relating to the services provided, information on the medical staff working in the office, other information. 48 % of the respondents were not familiar with the online registration possibility, and 74 % of survey participants would like to use the feature. only 13 % of the respondents knew that they could fill prescription online and only 10 % were aware of the electronic medical record. all of this leads to the conclusion that lithuanian consumers lack information about the e-health. keywords: e-health, health care, services. copyright © 2019 the author(s). published by vgtu press this is an open access article distributed under the terms of the creative commons attribution license (https://creativecommons. org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. the relationship between e-learning service and student satisfaction a case study at the syrian virtual university (svu) salma ghassan al azmeh * department of marketing, faculty of business administration, arab international university, mazzeh-high way, damascus, syria received 09 january 2019; accepted 09 april 2019 abstract. purpose – this study aims at exploring the impact of electronic services provided by the syrian virtual university (svu) on student satisfaction. besides, this study seeks to determine the dimensions of both electronic services and customer satisfaction at the svu, and to what extent these dimensions may vary in accordance with different personal characteristics among students. research methodology – a quantitative research method was adopted using an online questionnaire to collect data from students registering in different svu programs. findings – overall, results were analysed using the spss: 18. the results indicated that the relationship between all electronic services dimensions and student satisfaction at the svu were positively significant except for the bulk sms dimension. electronic service dimensions are also all applied throughout the svu (smsweb requestfacebookemailelectronic library websitelearning management system) respectively. besides, results show that neither electronic services dimensions nor satisfaction dimensions vary with regards to gender, speciality and age. furthermore, satisfaction dimensions such as privacy and security – ease of use – order fulfilment – customer service – electronic service portfolio are all applied in the svu. research limitations –the study in this paper is limited to only one university since the syrian virtual university is the only virtual university in syria. also, the study focused only on university’s students, and not it is administrative staff. practical implications – the results of this paper are beneficial for the svu future and other universities attempting to provide online services. thus, results from advice the svu to keep their services up-to-date with the latest technological improvements, especially the university’s website. this could be achieved by making it more users friendly and ultimately improve students’ satisfaction. moreover, the svu should highlight the bulk sms service weaknesses and try to use it more efficiently. furthermore, the svu employees could use the results of this paper to segment their current and future services provided in the future correctly taking into account the differences between gender and other demographical factors. originality/value – this study is one of the first studies to investigate the relationships between e-learning services and student satisfaction in virtual environments, especially the syrian virtual universities svu. moreover, this study investigates specific dimensions regarding both e-services and student satisfaction and brings up a reliable model for further research. keywords: e-learning service, student satisfaction, syrian virtual university (svu). jel classification: i2, i23, m3, m31, m39. business, management and education issn 2029-7491 / eissn 2029-6169 2019 volume 17: 49–71 https://doi.org/10.3846/bme.2019.7451 *corresponding author. e-mail: puritysalma@gmail.com; s-alazmah@aiu.edu.sy http://creativecommons.org/licenses/by/4.0/ http://creativecommons.org/licenses/by/4.0/ https://doi.org/10.3846/bme.2019.7451 50 s. ghassan al azmeh. the relationship between e-learning service and student satisfaction a case study... introduction nowadays, online educational systems are witnessing a significant growth which has been encouraged by the development of the internet and information technology that has modified the nature of education around the world (adwan & smedley, 2012). the world wide web (www) is becoming a valuable educational means that provides a unique educational experience for students. online learning has developed as an alternative provider to traditional teaching methods specifically in the higher education. thus, online learning has become an opportunity for providing online educational services (ali & ahmad, 2011). service quality is becoming an essential demand for students around the globe. students are looking for a great learning experience, suitability, availability and flexible education programs in order to support their future career and lifelong learning. all these factors would ultimately leads to overall student satisfaction. in the higher education system, student satisfaction can be determined according to various criteria e.g. the instructor level of pleasure and the effectiveness of the whole educational experience student have come along with. the study of (adwan & smedley, 2012) concluded that the students who are highly satisfied with numerous aspects of e-learning courses are reported to show significantly higher levels of achievement than students with low level of satisfaction. in this essence, tutors of online learning courses can enhance their students’ satisfaction by taking into account the primary factors of student satisfaction. researchers have advocated students’ satisfaction to ensure virtual universities survival and growth (adwan & smedley, 2012). virtual universities integrate technology in order to deliver it is services into the whole university processes (ali & ahmad, 2011). hence, student satisfaction must be considered as a key factor to be concentrated on by online universities management (askar et  al., 2008). students should be treated as universities customers. hence, their needs should therefore be fulfilled properly especially in the rapid technological development. in this vein, virtual universities should look for the best way to deliver the optimal e-service portfolio for students in order to attain their satisfaction (naaj, nachouki, & ankit, 2012; croxton, 2014). electronic services provided by virtual universities have a key role in attaining student satisfaction (askar et al., 2008; ali & ahmad, 2011; naaj et al., 2012; cheawjindakarn et al., 2013). the svu has faced critical challenges since the start of syrian crisis in 2011. the turbulence of electricity has become a major obstacle at svu for staff, students and tutors. in addition, the internet is another critical problem. too many students traveled abroad with an ambition to continue their degrees. moreover, students inside syria are now facing difficulties regarding travelling from all syrian provinces to the capital damascus to follow up their university online requests readiness. consequently, the svu has established a new service to deliver proper e-services to their students. virtual universities advocators around the world are increasingly facing radical technological changes when competing for e-services provided by an online university. in syria, little focus has been given to online learning. this is mainly due to the fact that the svu is the only one virtual university in syria since 2001which, has been considered to be part of the ministry of higher education. although efforts are continually gathered in order to enhance it is services, private syrian universities are not usually permitted to offer e-learning and thus competition is not effective. according to the above discussion, the study aims at business, management and education, 2019, 17: 49–71 51 assessing the impact of electronic services provided by the syrian virtual university (svu) on student satisfaction and to respond to the questions below: 1. what is the impact of e-services on student satisfaction in the (svu)? 2. how e-service at the (svu) vary according to different demographical characteristics between students? 3. how does student’s satisfaction at the svu vary according to different demographical characteristics between students? moreover, hypothesis should be formulated in order to answer the above questions as follow: 1. there is a significant impact of e-services dimensions and student satisfaction. 2. e-service dimensions vary significantly according to different demographical characteristics between students. 3. student satisfaction dimensions vary significantly according to different demographical characteristics between students. this paper is considered important because it will provide a great contribution to the relationship between e-services and satisfaction. on one hand, although this topic has been thoroughly investigated in previous literature, there is a significant theoretical argument. previous literatures that have tested this relationship show contradictory results, and barely exist in the middle east. in this essence, this paper would add a necessary extension to the existing knowledge about the relationship between e-services and satisfaction. on the other hand, previous studies on student satisfaction at virtual universities are conducted only on industrial organizations, but not educational ones. however, the studies should shed the light on the higher education sector, which gives it an additional value to this paper. this research starts by overviewing the previous studied on e-services, student satisfaction and the association between them, and tries to bridge the gap that is tested in the study. the research methodology is fully discussed, and statistical analysis for the results is also clarified, and ultimately, the research provides a discussion, contribution and recommendations for future studies. 1. literature review 1.1. electronic services (e-service) in online learning the primary purpose of higher education is creating and disseminating of knowledge to the development of the world through innovation and creativity, thus the higher education is aiming at meeting the needs of students (ali & ahmad, 2011; dalati & al hamwi, 2016; weerasinghe, lalitha, & fernando, 2017). this aim could be achieved by providing high quality services. the hetqm model for higher education total quality is a metric that it should be used to formulate the mission statement for the services provided by higher education institutions; a generic mission statement could be “to provide quality education, research and related services to continuously satisfy stakeholders” needs and achieve excellence through tqm” (ho & wearn, 1996; prasad & jha, 2013). online learning consists of a huge range of applications and processes e.g. web-based learning, computer-based learning, virtual classrooms, and digital collaboration. this consists of the 52 s. ghassan al azmeh. the relationship between e-learning service and student satisfaction a case study... process of delivering content via the internet, intranet/extranet (lan/wan), audioand videotape, satellite broadcast, interactive tv, and cd-rom (paulsen, 2002; moore, deane, & galyen, 2011). virtual learning provides various environments for learners with main characteristics of being dynamic, interactive, and having nonlinear access to a wide range of information (text, graphics, and animation, as well as including self-directed learning and online communication e.g. e-mail and forums (kotzer & elran, 2012; paulsen, 2002; moore et al., 2011; nfila, 2005). at the svu different e-services were noted to be employed after reviewing the svu services official website1.the following section will provide a brief explanation about e-services applied at the svu (learning management system (lms), moodle2, learning management content system (lcms), sms, website, e-libraries, request system, social media). lms facilitates student interaction in the classroom and its online activities, thus connecting students to other students and their tutors; empowering web-based sharing of paper materials, library resources, and even textbooks; while integrating learning activities with administrative systems (monaliz,  hans, & ana, 2014; niwaz & khan, 2013). also, the sms system is very effective to provide communication and administrative support. for instance, students can receive their final marks, news, exam schedule via sms messages (brooks, 2011; premadasa & meegama, 2013). social media such as facebook and twitter are used to notify students with up to date issues (rashid & raj, 2006; brooks, 2011). virtual universities should also provide an official website with a private account for both tutors and students moreover; each student has access to his online sessions and exams grades (khattab & fraij, 2005). in addition the website should therefore be up to date with regard to news and important announcements (booth & clark, 2009). an e-mail list is an important service that allows both students and tutors to communicate easily. mail lists are usually used to facilitate discussions among a group of people or information exchanges on a certain subject (naidu, 2003). the svu has used the (horde) email system.3 the svu official web site is known as (svuis) which includes a new service giving students the ability to submit an online objection request on their assignments or final exam grades, they can also submit requests for any formal document from the university e.g., grades, transcript, course descriptions, exam grade rejection, assignment grade rejection etc. 4. students follow the instructions provided by the user guide to submit any request needed. this system offers students with chart flow of the request which they can track until their request is fulfilled. finally, the elibrary is a vital e-service which includes various digital materials such as text, images, and videos. moreover, it includes a set of techniques and services that help to collect, organize, retrieve, and preserve those digital objects for a community of users (roy & elfner, 2002; nfila, 2005; wang & hwang, 2004). the svu provides access to electronic libraries e.g., emerald5, springer6 on it is official website where students have an access to any article using their personal accounts (he, mao, & peng, 2006). 1 http://svuonline.org 2 http://moodle.svuonline.org 3 https://mail.svuonline.org/login.php 4 https://requestsystem.svuonline.org 5 springer link. (2019). retrieved from http://link.springer.com 6 emerald insight. (2019). retrieved from http://www.emeraldinsight.com http://svuonline.org http://moodle.svuonline.org https://mail.svuonline.org/login.php https://requestsystem.svuonline.org http://link.springer.com business, management and education, 2019, 17: 49–71 53 1.2. student satisfaction satisfaction concept have been discussed and measured by many scholars over the years and in numerous fields (dalati, raudeliūnienė, & davidavičienė, 2017; dalati & alchasch, 2018). student satisfaction however is defined as students’ disposition by subjective evaluation of educational outcomes and experiences. thus, student satisfaction can be defined as a function of relative level of experiences and perceived performance about educational services (weerasinghe et  al., 2017). in general, customer satisfaction components include different dimensions, which are suitable for most studies and especially this research because it suits virtual universities nature (saha & zhao, 2005; yang & peterson, 2004). to begin with, customer service is a key factor for student satisfaction. therefore, virtual universities should enhances staff expertise to provide the right service at the time needed, also training for service providers should be of a special priority (ganjinia, gilaninia, & tajani, 2013; dalati & alchash, 2018). accuracy and order fulfillment of service promises, delivering the service on time required, and the ability to provide appropriate information to students in order to solve any problem, willingness to help students and provide prompt service (naik, gantasala, & prabhakar, 2010; dhman, 2011; kumbhar, 2012). in addition, students’ ability to use the official university website easily and to find their desired service and the information associated with it is considered as a key satisfaction dimension (mehrabi, javadi, & samangoei, 2011). moreover, e-service portfolio is a crucial dimension in e-learning experience which improves three main aspects for research students: academic development, research profile and social networking. an e-portfolio empowers research students to take full control of their own learning and research journey (le, 2012). finally, privacy and security is essential to prevent the inappropriate use or sharing of personal information such as student user name and passwords, students email, personal information (mehrabi et al., 2011; kumbhar, 2012). 1.3. electronic services (e-service) in online learning and student satisfaction a review of e-services provided in previous studies of online learning literature upon student satisfaction concluded that there is a significant role for e-services and student satisfaction. most of the recent work investigated key factors that affect student satisfaction (askar et al. 2008; kuo, 2010; ali & ahmad, 2011; naaj et al., 2012; cheawjindakarn et al., 2013). these studies focused on a number of specific factors that affect student satisfaction which include learner to learner interaction – leaner teacher interaction – online environmenttechnical support – printing material – face to face environment. in general, most of the studies revealed a positively significant relationship between e-services provided by virtual universities and student satisfaction (askar et al., 2008); mellema, smart, & shull, 2009; kuo, 2010; ali & ahmad, 2011; banerjee, 2011; giannousi, vernadakis, derri, michalopoulos, & kioumourtzoglou, 2009; naaj et al., 2012; kistow, 2011; kuo, walker, belland, & schroder, 2013; croxton, 2014; min & khoon, 2014; king, 2013). in contrast, some studies revealed a moderate relationship between e-services and student satisfaction. karimi and ahmad (2013) showed a positive, moderate correlation between perceived learning and satisfaction. 54 s. ghassan al azmeh. the relationship between e-learning service and student satisfaction a case study... with regard to the leaning management system (lms), sabir, akhtar, bahadur, and sajjad (2014) indicated that lms has a positive significant impact on student satisfaction. while ramayah and lee (2012) concluded that “system quality, information quality and service quality have a positive significant effect on user satisfaction in an e-learning system”. in addition; shahin et al. (2007) results showed that technical support, learner interface, e-content and personalization have a significant positive effect on student satisfaction. these results are related to (wang, 2003; tarigan, 2011). in this essence (mellema et  al., 2009) indicated that “there were positive correlations between satisfaction with the discussion board, the posting of resources (web sites and links) and other course-related information and the use of online quizzes or assessments with overall satisfaction with the online units completed”. he also added that students who are satisfied with one element of online learning, will likely be satisfied with other online learning elements. with regard to student interaction in the e-learning environment, on one hand, literature revealed that there is a significant positive relationship. giannousi et al. (2009) indicated that 54% of the students were looking forward to join a second blended course. also, perceived e-learner satisfaction was higher than the average indicating students’ high satisfaction with the overall learning experience. this result is related to (croxton, 2014). on the other hand, other studies, revealed a negative relationship between student interaction and student satisfaction. kistow (2011) and banerjee (2011) showed that students have stated that not all courses interesting when blended with technology. also, there is a general perception across the institution, that not all courses require the same level of face-to-face interaction that is common at small liberal arts and sciences colleges. this result is related to (kuo et al., 2013). with regard to social interaction and online discussion, irwin, ball, desbrow, and leveritt (2012) showed that “students are receptive to incorporating facebook into their academic lives and perceive benefits through enhanced communication, interaction, and flexibility in course content delivery and therefore improves student satisfaction”. in this essence, alhamad et  al. (2014) revealed that students get advantages from online discussions through taking the chance to see how others understand a specific subject and compare it to their own understanding. in regard to e-guidance, wang and hwang (2004) found that “skillful guidance and tactical presentation from insightful involvement is required for designing the e-learning library”. while nevg (2001) added that the tutorial guidance seemed to have positive effect on students’ motivational strategies in learning and helping them to develop more cognitive learning strategies. based on the aforementioned review, the relationship between student satisfaction factors in online learning that have been discussed by researchers, it has still largely a theoretical argument because online learning is a new experience in the syrian education system. moreover, there is a shortage of research on this field in the middle east not to mention syria. 2. research methodology the key goal of the current research is to test the impact of electronic services provided by the (svu) on student satisfaction in the higher education sector. thus, the paper used the quantitative research method to estimate causal relationships (mack, woodsong, macqween, guest, & business, management and education, 2019, 17: 49–71 55 namey, 2005). various statistics were used in order to generalize findings to the whole research sample, such as explanatory factor analysis, reliability test using alpha chrnbach, regression models, independent sample t-test, anova and levene test (sarantakos, 2004). to determine the electronic services dimension, which is the independent variable, the multifactor electronic services questionnaire was developed by author (33 items) based on scanning the syrian virtual university official web site (www.svuonline.org). although the study of weerasinghe et al. (2017) has highlighted various models for student satisfaction the researcher has adopted customer satisfaction dimensions (19 items) from yang and peterson (2004) because those dimensions are suitable for the nature of virtual universities and the researcher did not find a holistic framework to be adopted. the questionnaire items were tested using a five-point likert scale ranging from 5 (strongly agree) to 1 (strongly disagree). the researcher added some factors that might affect student satisfaction and e-services dimensions (age, gender, degree) and which are mentioned in various studies (askar et  al., 2008; naaj et  al., 2012; kistow, 2011; kuo et  al., 2013; min & khoon, 2014; weerasinghe et al., 2017). the questionnaire was originally in english, and then the researcher translated it into arabic, and then it was peer reviewed by four syrian academics to test whether the items were understandable and not ambiguous. also, reliability was tested, the questionnaire was piloted creswell (2012) on 25 students at the (svu) using a random sample. the respondent data was coded and entered into spss 18.0 to be analyzed. some answers were left blank, so they were not included in the calculation. the test revealed that all of the scales’ dimensions of cronbach’s alpha scored more than 0.6. at this point the questionnaire was then reliable and ready to be distributed. data was collected from all undergraduate and postgraduate students enrolled at the svu. of 600 students enrolled at the svu, 384 participants have completed an online questionnaire sent to them via a special mail list after attaining an official approval from the university presidency. also, research respondents were contacted three times via; e-mail and the social media (facebook7 and twitter8) respectively. the demographic data of the sample used in the analysis is shown in table 1. as shown in table 1, 32 percent of the svu students are aged under 20, 35.9 percent are aged between 20 and under 30, and 32 are aged above 30. also, table the researcher shows that 46.6 percent are male and 53.4 are female. finally, 52.1 percent are registered in bachelor programs and the rest 47.9 are registered in master programs. explanatory factor analysis (efa) was performed to test the electronic service scale components and student satisfaction variables and to test the degree to which the items are tapping the same concept. firstly, in order to test the instrument reliability the researcher conducted the reliability test using the spss: 18 and results in (table  2) revealed alpha chronbach value for all the instrument component for both electronic services and student satisfaction were very high and above the recommended cut off 0.6, it means that, present date suitable to factor analysis (iacobucci & duhachek, 2003). 7 facebook. (2019). retrieved from https://www.facebook.com/svuonline.org 8 twitter. (2019). retrieved from https://twitter.com/svu_syria http://www.svuonline.org 56 s. ghassan al azmeh. the relationship between e-learning service and student satisfaction a case study... table 1. research sample characteristics (source: created by the author) demographic variables frequency percentage gender male 179 %46.6 female 205 %53.4 student age > 20 123 %32.0 between 20 and under 30 138 %35.9 more than 30 123 %32.0 student degree bachelor 200 %52.1 master 184 %47.9 table 2. composite reliability for the research constructs (source: created by the author) research constructs no. of items composite reliability alpha chronbach electronic services components wrs 6 0.635 sms 5 0.859 e-mail 5 0.692 lms 4 0.862 face book 5 0.703 el 4 0.773 web site 4 0.815 student satisfaction components customer service 4 0.839 order fulfillment 5 0.770 ease of use 4 0.791 service portfolio 3 0.811 privacy and security 3 0.695 after that, to assess the efa and sampling adequacy, the researcher use the spss.18 statistical package. first, the researcher applied the sampling adequacy test using (kmo), and table 3 showed research sample size was adequate because (kmo) value was above the recommended cutoff (0.5). then the researcher has conducted the (efa) in order to investigate the validity of the research instrument, and results revealed that all factor loadings (communalities) for all variables were high and above the recommended cutoff (0.3) and were statistically significant. also, the extraction sums of squared loading were high and above the recommended cutoff (0.6) business, management and education, 2019, 17: 49–71 57 table 3. exploratory factor analysis results for electronic services and student satisfaction components (communalities, extraction sums of squared loading and kmo test). note: extraction method: principal component analysis (source: created by the author) items no electronic services implementation com-ponents communalities extraction sums of squared loading kmo and bartlett’s test web request system (wrs) # 66.279 0.792 wrs1 the web request system is considered as a modern electronic service 0.449 wrs 2 the web request system helps students to submit their request any time they want. 0.578 wrs 3 the web request system facilitates students transactions. 0.696 wrs 4 the web request system helps students to know at which step their request has arrived. 0.517 wrs 5 students can obtain their request completely via the internet 0.450 wrs 6 i face a lot of problems when submitting an e-request because of the complicated procedures. 0.087 short messaging system (sms) # 65.682 0.809 sms 1 the svu uses sms service to contact students on timely manner 0.645 sms 2 the svu uses sms service to inform students with registration schedules. 0.834 sms 3 the svu uses sms service to inform students with exam dates. 0.848 sms 4 students always receive sms properly without any problems 0.710 sms 5 the svu sends students user-name & passwords via sms service 0.247 e-mail # 65.244 0.620 e-mail 1 the svu e-mail is considered as an official channel to contact with stakeholders 0.516 e-mail 2 the svu e-mail design is no easy to use 0.697 e-mail 3 i face many problems when using the svu email (e-mail becomes over quota easily) 0.717 e-mail 4 the svu uses the e-mail to advertise any new news 0.686 e-mail 5 students receives e-mails clearly without any technical problems 0.647 58 s. ghassan al azmeh. the relationship between e-learning service and student satisfaction a case study... items no electronic services implementation com-ponents communalities extraction sums of squared loading kmo and bartlett’s test moodle (learning management system) # 70.922 0.762 ems 1 the moodle (learning management system) facilitates the learning process. 0.584 ems 2 moodle design is not complicated 0.712 ems 3 the moodle is clear and easy to use. 0.813 ems 4 the moodle helps categorizing and classifying the e-content properly. 0.728 social media (facebook) # 72.812 0.610 facebook 1 social media usage is considered as an important communication tool. 0.664 facebook 2 social media usage facilitates students with quick answer upon any queries 0.788 facebook 3 the svu uses social media to inform students with any new news 0.835 facebook 4 the svu social media page is always up to dated 0.845 facebook 5 the svu social media is considered as the most flexible e-service compared to other e-services 0.509 electronic libraries (eg, emerald, springer) # 76.374 0.566 el 1 the university registers in international electronic libraries (eg, emerald, springer) each year. 0.852 el 2 electronic libraries help students preparing their seminars & homework 0.856 el 3 the svu should register in arabic e-libraries in addition to english e-libraries 0.788 el 4 the svu registration in international e-libraries is not compromised to the level of e-content and learning process provided by the svu 0.599 web site (isis) # 64.730% 0.719 web site 1 the svu official website design is clear 0.698 web site 2 the svu official website facilitates reaching any information 0.731 web site 3 the svu official website provides a separate section for advertising news 0.603 web site 4 the svu official website is always up to date 0.558 continue of table 7 business, management and education, 2019, 17: 49–71 59 items no electronic services implementation com-ponents communalities extraction sums of squared loading kmo and bartlett’s test items no student satisfaction implementation components # 67.770 0.793 customer service # cs1 the svu provides technical support in order to provide the best e-services for students 0.593 cs2 the svu compensate students if they face any technical problem using any e-service 0.600 cs3 the svu concentrated on problems student faces all the time when using e-services 0.738 cs4 the svu tries to solve any problem students face when using the e-services promptly 0.781 order fulfillment # 62.587 0.764 of 1 the company performs the service correctly the first time. 0.613 of 2 my online transactions are always accurate. 0.578 of 3 the company keeps my records accurately 0.475 of 4 all web requests i ordered were delivered to me within the time and to the provision i have submitted 0.517 of 5 the svu coordinator replies to my emails quickly and clearly 0.447 ease of use # 61.533 0.788 eou 1 the svu web site provides all kind of requests student wants to submit 0.650 eou 2 the svu website & e-content are easy to use 0.571 eou 3 the svu provides all options in order to complete any e-request or a process via the website 0.675 eou 4 the svu provides electronic guides to facilitates using any e-service 0.566 service portfolio # 73.431 0.634% sp 1 the svu develops new services according to students needs and expectations 0.832 sp 2 the svu e-services are related to my needs and expectations 0.843 sp 3 the svu e-services facilitates completing any process without contacting any employee at the university 0.528 privacy and security # 62.235 0.666 p&s 1 there is no risk associated with my electronic transactions with the university 0.650 p&s 2 the svu will not use my personal data inappropriately 0.570 p&s 3 i feel safe during any electronic financial transaction with the university 0.646 end of table 7 60 s. ghassan al azmeh. the relationship between e-learning service and student satisfaction a case study... the above analysis provides an important overview regarding the descriptive statistics needed to start testing any hypothesis. moreover, sample adequacy test, reliability test and factor analysis tests are crucial to answer the research questions and finally discuss findings. in the following section hypotheses will be tested, research questions will be answered and results will be revealed and discussed. 3. data analysis and empirical findings to answer question number 1 and testing the hypothesis number 1, which tests the impact of electronic services on customer satisfaction, multiple regression analysis was conducted. the regression model for the e-services was stated as: student satisfaction 0 1 web request system 2 bulk sms 3 email 4 moodle 5 social network 6 electronic library 7 site . = β + β + β + β + β + β + β + β the study model is shown in figure 1. where: b0 is the constant; β1, β2, β3, β4, and β5; are the sensitivity of research environment to changes in research courses, facilities, industry linkage, networking, and skills respectively; ε is the error term. for the e-services dimensions, the results revealed a significant impact of e-mail, facebook, moodle, web request system, website, e-libraries on student satisfaction (p-value = 0.000, 0.000, 0.003, 0.000, 0.02, 0.006 < 0.05 respectively), with a beta weight of 3.859. however, no significant impact was found for bulk-sms (p-value  = 0.552 and 0.06 > 0.05, respectively) on student satisfaction (see table 4). in order to answer question number 2 and testing hypothesis number 2, whether e-services dimensions varies according to demographic variables (age, gender, degree) is identified, both one sample t-test and independent sample t-test were applied. first of all, one x12: bulk sms: 0.596 x13: email: 5.198 x15: web site: 3.174 x16: (svu) social network: 2.782 x17: electronic libraries: 3.929 y: student satisfaction demographic variables gender age degree x: electronic services x11: web request system: 3.859 x14: moodle: 2.973 figure 1. the study model developed by author note: dashed lines indicate non-significant paths at 0.05. business, management and education, 2019, 17: 49–71 61 sample t-test was conducted to examine the level of e-services application at the svu, and weather each component of e-services are above the cut off (3.4). as shown in table 5 results revealed that all e-services components are applicable at the svu properly since all of them exceeded the recommended cut off (3.4). however, the best dimensions applied at the svu are sms, wrs, facebook, e-mail, el, web site, and moodle respectively. then, independent sample t-test was used to compare male and female in term of e-services. findings revealed that the mean of (web request system – e-mail) for male was a bit greater than its counterpart for female. the differences between the two means was not statistically significant as assessed by independent samples t-test (p-value  = 0.500, 0.621 > 0.05). consequently, there are no significant differences in these dimensions between male and female. while the mean of (sms, lms, face book, el, website) for female was a bit greater than the mean of male. the differences between the two means was not statistically significant as assessed by independent samples t-test (p-value  = 0.736, 0.058, 0.854, 0.382, 0.325 > 0.05). hence, there are no significant differences in these dimensions between male and female. findings are presented in table 6. table 4. the impact of e-services dimensions on student satisfaction: (model summary) f-anova analysis (source: created by the author) e-services dimensions probability β web request system 0.000* 3.859 bulk sms 0.552 .596 e-mail 0.000* 5.198 moodle (lms) 0.003 2.973 electronic library 0.006 2.782 face book 0.000 3.929 website 0.02 3.174 *indicates significance at 0.05. table 5. one sample t-test for e-services according to student’s demographic characteristics (source: created by the author) one sample t-test independent variables e-services sigtmean .00048.3494.4453wrs .00039.3644.6068sms .00038.3594.3724e-mail .00039.4144.2813lms .00038.8504.3750facebook .00039.3644.3411el .00041.1614.3724web site .00041.1614.9387total e-services components 62 s. ghassan al azmeh. the relationship between e-learning service and student satisfaction a case study... table  6. independent sample t-test (levenes test of equality of variances) between e-services and student gender (source: created by the author) t-test for equity meansmean gender sigtmalefemale 0.5000.6764.46374.4293wrs 0.7360.3374.59784.6146sms 0.6210.4944.38554.3610e-mail 0.0581.9024.23464.3220lms 0.8540.1844.37994.3707facebook 0.3820.8764.31844.3610el 0.3250.9844.34644.3951web site for e-services dimensions, the findings showed that the mean of (web request system – e-mail) for bachelor was a little greater than its counterpart for master. the differences between the two means was not statistically significant as assessed by independent samples t-test (p-value = 0.223, 0.913 > 0.05). so, there is no significant difference in these dimensions between male and female. while the mean of (sms – lms – face book – el – website) for master was a bit greater than bachelor. the differences between the two means was not statistically significant as assessed by independent samples t-test (p-value = 0.778, 0.156, 1.000, 0.261, 0.602 > 0.05). hence, there is no significant difference in these dimensions between bachelor and master. results are presented in table 7. table  7. independent sample t-test (levenes test of equality of variances) between e-services and student degree (source: created by the author) t-test for equity meansmean degree sigtbachelormasters 0.2231.2204.47504.4130wrs 0.7780.2824.60004.6141sms 0.9130.1104.37504.3696e-mail 0.1561.4204.25004.3152lms 1.0000.0004.37504.3750facebook 0.2611.1264.31504.3696el 0.6020.5234.36004.3859web site for e-services dimensions, one-way anova were conducted to test if there is a significant difference for e-services according to age. the findings revealed that there is no significant difference for electronic services according to students age since (p-value  = 0.695 > 0.05). results are presented in table 8. business, management and education, 2019, 17: 49–71 63 table  8. anova -test of homogeneity of variance for total e-service and student age (source: created by the author) anova age sigf 0.6950.364total e-services components responding to the study question number 3 and testing hypothesis number 3, whether student satisfaction dimensions varies according to demographic variables (age – gender – degree) is identified, both one sample t-test and independent sample t-test were conducted to compare male and female in term of student satisfaction. first of all (one sample t-test) will be conducted in order to examine the level student satisfaction application at the svu, and weather each component of e-services are above the cut off (3.4). as shown in table 9, it can be concluded that all student satisfaction components are applicable at the svu properly since all of them exceeded the recommended cut off (3.4). however, the best dimensions applied at the svu are ease of use, privacy and security, order fulfillment, customer service, and e-service portfolio respectively. table  9. one sample t-test for student satisfaction components according to student’s demographic characteristics (source: created by the author) one sample t-test dependent variables: student satisfaction sigtmean .00038.4174.2969customer service .00038.9634.3490order fulfillment .00040.7804.4323ease of use .00039.4144.2813service portfolio .00041.1614.3724privacy and security .00038.3814.2891total student satisfaction components then independent sample t-test was conducted to compare male and female in term of student satisfaction. results showed that the mean of (order fulfillment  – service portfolio  – privacy & security) for male was a little greater than its counterpart for female. the differences between the two means was not statistically significant as assessed by independent samples t-test (p-value = 0.099, 0.168, 0.057 >0.05). hence, there is no significant difference in these dimensions between male and female. while the mean of (customer service – ease of use) for female was a bit greater than male the differences between the two means was not statistically significant as assessed by independent samples t-test (p-value = 0.288, 0.078 > 0.05). hence, there is no significant difference in these dimensions between bachelor and master. results are presented in table 7 and table 10. 64 s. ghassan al azmeh. the relationship between e-learning service and student satisfaction a case study... table 10. independent sample t-test (levenes test of equality of variances) between student satisfaction components and student gender (source: created by the author) t-test for equity meansmean gender sigtmalefemale .2880.4784.28494.3073customer service .0990.3294.35754.3415order fulfillment .0780.2844.42464.4390ease of use .1683.3593.22162.8439service portfolio .0572.5633.04282.6976privacy and security for student satisfaction dimensions, the results also showed that the mean of (customer service  – ease of use  – service portfolio) for master was a little greater than its counterpart for bachelor. the differences between the two means was not statistically significant as assessed by independent samples t-test (p-value = 0.452, 0.493, 0.764 > 0.05). hence, there is no significant difference in these dimensions between bachelor and master. while the mean of (order fulfillment – privacy & security) for bachelor was a bit greater than a master. the differences between the two means was not statistically significant as assessed by independent samples t-test (p-value = 0.452, 0.030 > 0.05). hence, there is no significant difference in these dimensions between bachelor and master. results are presented in table 11. table 11. independent sample t-test (levenes test of equality of variances) between student satisfaction components and student degree (source: created by the author) t-test for equity meansmeandegree sigtbachelormasters 0.4520.7534.28004.3152customer service 0.4520.6864.36504.3315order fulfillment 0.4930.3004.42504.4402ease of use 0.7642.1813.13832.8913service portfolio 0.0300.9212.91832.7935privacy and security for e-services dimensions, (one-way anova) were conducted in order to investigate whether there are significant differences for student satisfaction according to age. the results showed that there is no significant difference for student satisfaction according to students age since (p-value = 0.356 > 0.05). results are presented in table 12. table 12. anova -test of homogeneity of variance for total student satisfaction and student age (source: created by the author) test of homogeneity of varianceanovaage siglevenesigftotal student satisfaction .0243.7640.3561.035– business, management and education, 2019, 17: 49–71 65 4. discussion of results the aim of this paper is to test the impact of electronic services provided by the svu on student satisfaction. this study was implemented at the svu in order to determine the level of electronic services and student satisfaction. in addition, this study aims to determine electronic services dimensions and customer satisfaction dimensions implemented at the svu and the extent these dimensions vary according to students’ personal characteristics. the findings suggest that there is a positive significant relationship between all electronic services dimensions and customer satisfaction from students’ perspective at the syrian virtual university except for the sms dimension which had no significant relationship with student satisfaction. this result reflects the efficient usage of all e-services provided by the svu which meet students’ needs and facilitate their online experience. also, this result correspond with prior research (askar et al., 2008; mellema et al., 2009; kuo, 2010; ali & ahmad, 2011; banerjee, 2011; giannousi et al., 2009; naaj et al., 2012; kistow, 2011; kuo et al., 2013; croxton, 2014; min & khoon, 2014; king, 2013) which have revealed that e-services affect satisfaction significantly. however, bulk sms service present that students are not satisfied with such service and thus the svu should investigate it is weaknesses from students’ feedback. electronic service dimensions seem to be the most influential components applied at the svu including (sms  – web request  – facebook  – email-electronic library-website  – learning management system) respectively. this result is consistent with what (so, 2009) and (premadasa & meegama, 2013) have indicated in their studies concerning the importance of sms in improving student satisfaction. results also stressed the fact that the svu should concentrate on improving its website. these results correspond with prior researches (ba & johnsson, 2005; kumbhar, 2012; booth & clark, 2009) which revealed that improving the website process improves customers’ perception of the websites ease of use increases, service value and perceived control over the process which ultimately increase customer satisfaction. moreover, results showed that technological capabilities embedded in the website are considered as critical factors to determine service quality and consequently customer satisfaction in an online environment. also, the svu administration should be committed to monitor its e-services and pay more attention to students opinion and feedback with each service (rashid & raj, 2006, o’driscoll, 2012; ann, martin, & clive, 2014; fernandes, ross, & meraj, 2013; ali et al., 2014; peng & samah, 2006). however, results showed that electronic services dimensions don’t vary according to the effect of (gender, degree and age) from student’s perspective. this results is not concurrent with the general pattern found in the previous studies where e-services dimensions varied according the effect of personal characteristics (askar et al., 2008; naaj et al., 2012; kistow, 2011; kuo et al., 2013; min & khoon, 2014). this highlights the conclusion that the svu needs to pay more attention to apply all electronic services properly and at the same quality level in order to meet student’s expectations (ali & ahmad, 2011; kumbhar, 2012). finally, results show that satisfaction dimensions are all applied at the svu (privacy and security  – ease of use  – order fulfillment  – customer service  – electronic service portfolio) respectively from students’ perspective. this result corresponds with previous literature which revealed that all satisfaction dimensions undertaken in this study plays a vital role in 66 s. ghassan al azmeh. the relationship between e-learning service and student satisfaction a case study... assessing service quality of e-service and customer satisfaction in e-service settings (hermans, haytko, & stenerson, 2009; ba & johnsson, 2005; sawang, newton, & jamieson, 2013; corrall & keates, 2011; sánchez, hueros, & ordaz, 2013; roca, chiu, & martinez, 2006). however, satisfaction dimensions do not vary because of the effect of (gender, age and degree) for students. this result differs from the general pattern found in the previous studies (askar et al., 2008; naaj et al., 2012; kistow, 2011; kuo et al., 2013; min & khoon, 2014). this echoes one of the findings reached earlier, that the svu should concentrate more on investigating student’s needs, try to keep in touch with students and spread regular questionnaires in order to gain a holistic perspective on their needs and fulfill these needs accordingly. also, the svu should monitor electronic services provided temporarily by distinguishing students’ needs variation according to their demographic and personal characteristics. finally, as the svu is an emerging market of onlinelearning, the top management should keep improving and creating new electronic services to keep up to date because of online learning continuous improvement nature. conclusions, limitations and recommendations this article investigates the relationship between e-services and student satisfaction at the svu. the researcher find that there is a positive significant relationship between all electronic services dimensions and customer satisfaction from students’ perspective at the syrian virtual university except for the sms dimension which had no significant relationship with student satisfaction. moreover, electronic service dimensions seem to be the most influential components applied at the svu including (sms – web request – facebook – email-electronic library-website – learning management system) respectively. however, results showed that electronic services dimensions don’t vary according to the effect of (gender, degree and age) from student’s perspective. finally, results show that satisfaction dimensions are all applied at the svu (privacy and security – ease of use – order fulfillment – customer service – electronic service portfolio) respectively from students’ perspective. however, satisfaction dimensions do not vary because of the effect of (gender, age and degree) for students. obviously, the results of this paper are beneficial for the svu future and other universities attempting to provide online services. thus, results advice the svu to keep their services up-to-date with the latest technological improvements especially the university’s website. this could be achieved by making it more users friendly and ultimately improve students’ satisfaction. moreover, the svu should highlight the bulk sms service weaknesses and try to use it more efficiently. furthermore, the svu employees could use the results of this paper to segment their current and future services provided in the future correctly taking into account the differences between gender and other demographical factors. the study in this paper is limited to only one university since the syrian virtual university is the only virtual university in syria. therefore, further studies may investigate more on comparing the svu e-services to other e-services provided at other virtual universities among the arab world and around the world. in addition, the study focused only on university’s students, and not it is administrative staff. consequently, future research could concentrate on other university members including administrative staff and academic staff business, management and education, 2019, 17: 49–71 67 in order to attain holistic and more reliable results. moreover, this study concentrates on the current services provided at the svu. thus, additional electronic services such as the electronic signature and the ability to receive any electronic request promptly via the internet from anywhere around the world could be new services to be added to the current study by further researcher because of the dynamic university nature and continues technological improvements applied at the svu system (svuis). finally, further studies should take into account an emerging demographic dimension which is students’ location especially after the syrian crisis where students used to travel abroad and thus, current e-services should be adopted and fulfilled differently. acknowledgements this research has benefited in questionnaire development from the feedback of mohannad n arnaout and mohamad alkhedr. funding this work was financially supported by the author. disclosure statement the authors declare that they do not have any competing 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